Equity and trusts in Australia [Seventh edition.] 9780455241739, 0455241732

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EQUITY AND TRUSTS IN AUSTRALIA

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

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Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

EQUITY AND TRUSTS IN AUSTRALIA G E DAL PONT Professor Faculty of Law, University of Tasmania

Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

SEVENTH EDITION

LAWBOOK CO. 2019

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW 2009 First edition (Dal Pont and Chalmers) .....................................  1996 Second edition (Dal Pont and Chalmers)................................. 2000 Third edition (Dal Pont and Chalmers)..................................... 2004 Fourth edition (Dal Pont and Chalmers)................................... 2007 Fifth edition (Dal Pont)............................................................ 2011 Sixth edition (Dal Pont)........................................................... 2015 ISBN: 9780455241722

Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

© 2019 Thomson Reuters (Professional) Australia Limited This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers. All legislative material herein is reproduced by permission but does not purport to be the official or authorised version. It is subject to Commonwealth of Australia copyright. The Copyright Act 1968 permits certain reproduction and publication of Commonwealth legislation. In particular, s 182A of the Act enables a complete copy to be made by or on behalf of a particular person. For reproduction or publication beyond that permitted by the Act, permission should be sought in writing. Requests should be submitted online at www.ag.gov. au/​cca, faxed to (02) 6250 5989 or mailed to Commonwealth Copyright Administration, Attorney-​General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600. Product Developer: Lucas Frederick Edited and typeset by Newgen KnowledgeWorks Pvt. Ltd., Chennai, India Printed by Ligare Pty Ltd, Riverwood, NSW

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Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

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PREFACE The sixth edition of this work saw release in 2015. Some four years later, a new edition is called for, if for no other reason than to take into account many intervening cases and statutory changes, coupled with the most recent academic and practitioner commentaries. Again the focus has extended beyond Australia, with reference made to recent cases, statutes and commentaries from other common law jurisdictions, the United Kingdom, Canada and New Zealand in particular. The elapsing of four years has witnessed a fine tuning of the law in some contexts, and more substantial incursions into the orthodoxy in others. In the Preface to the sixth edition, the prospect of doctrinal changes was foreshadowed by reason of remarks in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd1 on the relationship between the defence of change of position and the law of estoppel. Yet the intervening time frame has been largely silent in this space. But at least so far as estoppel is concerned, the High Court in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd2 took the opportunity to probe the parameters of a representation. And while in Kakavas v Crown Melbourne Ltd,3 the High Court had ostensibly sought to constrain the scope of the doctrine of unconscionable dealing, four years later it proved willing to invoke the doctrine in the face of a plaintiff who ignored legal advice to avoid the dealing in question.4 The prospect of attitudinal fluidity at the highest level also surfaced in the penalties sphere. Whereas the High Court in 2012 rejected the need for a breach of contract as a trigger for characterising a clause as a penalty,5 making it an outlier in the common law world, 2016 saw it (arguably severely) constrain the scope for triggering the penalty doctrine,6 in line with developments in England7 and (subsequently) in New Zealand.8 In another context, namely when it comes to the effects of illegality in trusts (and contracts too), English law has redirected itself in line with the Australian trajectory.9 The same may ensue from remarks of the English Supreme Court vis-​à-​vis parameters for compensation for breach of trust.10 While Australian law has resisted recognition of a privacy tort, following in the footsteps of the Victorian Court of Appeal in Giller v Procopets,11 a Western Australian judge in 2015 utilised the equitable doctrine of breach of confidence to provide monetary relief for the unauthorised publication on social media of sexual relations between the parties.12

1

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560.

2

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1.

3

Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392.

4

Thorne v Kennedy (2017) 91 ALJR 1260.

5

Andrews v Australian and New Zealand Banking Group Ltd (2012) 247 CLR 205.

6

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525.

7

Cavendish Square Holdings BV v Makdessi [2016] AC 1172.

8

Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293.

9

Patel v Mirza [2017] AC 467, in this regard broadly endorsing the High Court’s approach in Nelson v Nelson (1995) 184 CLR 538.

10

AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503.

11

Giller v Procopets (2008) 24 VR 1.

12

Wilson v Ferguson [2015] WASC 15.

v Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Equity and Trusts in Australia

The recognition and incidents of trusts in the commercial sphere continue to present challenges for the courts. In 2015, the High Court refused to allow a trust to infiltrate a commercial dealing even though it was couched in trust language.13 The ensuing year saw it investigate the concept of a “unit trust” under statute.14 And in 2018, the Full Federal Court and the Victorian Court of Appeal were each asked to address the distribution of the proceeds of the trustee’s right to indemnity but did not see entirely eye to eye.15 The foregoing is hardly exhaustive of judicial developments and should not been seen as a licence to overlook the manifold useful judicial remarks on equity and trusts in both Australian and non-​Australian courts since 2015, which find expression in this edition. Too late to translate to the text, note should nonetheless be made of the High Court’s decision in Pipikos v Trayans,16 maintaining a strict approach to the doctrine of past performance. As with the sixth (and indeed preceding) editions, I wish to acknowledge and thank Dr Lisa Butler Beatty, General Manager, Head of the Wealth Management Office of the Trustee, and Special Counsel (WM Legal), Commonwealth Bank of Australia, for contributing and updating Chapter 28 (Trusts for Investment). As always, the staff of the University of Tasmania Law Library very much deserve credit for their untiring assistance in securing access to relevant material. I have sought to include developments up to 1 August 2018. G E DAL PONT

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Hobart 28 September 2018

13

Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62.

14

Elecnet (Aust) Pty Ltd v Commissioner of Taxation (2016) 259 CLR 73.

15

Jones (liquidator) v Matrix Partners Pty Ltd (2018) 354 ALR 436; Commonwealth v Byrnes (2018) 354 ALR 789

16

Pipikos v Trayans HCA 39 (12 September 2018).

vi Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

TABLE OF CONTENTS Preface .........................................................................................................................................  v Table of Cases ...........................................................................................................................  xxv Table of Statutes ........................................................................................................................  clxi List of Abbreviations ............................................................................................................. clxxxvii

Prologue –​Nature of Equity ..............................................................................................  1

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[P.05]

HISTORICAL BACKGROUND ................................................................................  1 [P.10] Early development of equity .....................................................................  1 [P.30] Transformation of equity ..........................................................................  3 [P.35] Equity in Australian courts .......................................................................  5 [P.40] THE FUSION DEBATE .............................................................................................  6 [P.40] What is meant by “fusion”? .....................................................................  6 [P.45] Remedial fusion .......................................................................................  8 [P.70] MAXIMS OF EQUITY ...........................................................................................  14 [P.75] A person who seeks equity must do equity .............................................  15 [P.80] A person who comes to equity must come with clean hands ...................  16 [P.85] Equity will not suffer a wrong without a remedy ....................................  16 [P.90] Equity will not allow statute to be used as an instrument of fraud .........  16 [P.95] Equity looks to intent rather than form ..................................................  17 [P.100] Equity assists the diligent and not the tardy ............................................  18 [P.105] Equity acts in personam .........................................................................  18 [P.110] Equity is equality ....................................................................................  18 [P.115] Equity will not perfect an imperfect gift .................................................  19 [P.120] Equity will not assist a volunteer ............................................................  20 [P.125] Equity considers as done that which ought to have been done ................  20 [P.130] THEMES .................................................................................................................  21 [P.135] Equity’s role in preventing or rectifying abuses of trust ..........................  21 [P.150] Equity’s role in preventing or rectifying unconscionable conduct ............  23 [P.165] Equity’s role in preventing or rectifying unfair outcomes ........................  26 [P.170] Equity’s approach to remedies ................................................................  26

PART I: EQUITABLE INTERESTS Chapter 1: Nature and Creation of Equitable Interests ..........................................  33 [1.05]

[1.35]

NATURE OF AN EQUITABLE INTEREST ............................................................  33 [1.05] Hallmarks of an equitable interest in property .......................................  33 [1.20] Scope of an equitable interest in property ...............................................  36 [1.25] Equitable interests compared to legal interests ........................................  37 CREATION OF EQUITABLE INTERESTS IN PROPERTY ....................................  38 [1.45] Equitable interests created pursuant to intention ....................................  39 [1.85] Equitable interests arising by implication of law .....................................  44 [1.120] Equitable interests arising by operation of law .......................................  48

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Equity and Trusts in Australia

[1.145]

TYPES OF EQUITABLE INTERESTS IN PROPERTY ............................................  50 [1.145] Trust .......................................................................................................  50 [1.150] Equitable charge or mortgage .................................................................  50 [1.160] Equitable lien .........................................................................................  51 [1.165] Equitable lease .......................................................................................  53

Chapter 2: Equitable Priorities .......................................................................................  55 [2.10]

[2.125]

[2.140]

COMPETING EQUITABLE INTERESTS ...............................................................  55 [2.10] General principle ....................................................................................  55 [2.20] Relevant factors in ascertaining the better equity ....................................  57 [2.75] Priorities in relation to trusts ..................................................................  64 [2.80] Tacking ..................................................................................................  64 [2.105] Equitable priorities and mere equities .....................................................  66 EQUITABLE ESTATE AND SUBSEQUENT LEGAL ESTATE .................................  70 [2.125] General principle ....................................................................................  70 [2.135] Qualifications to the general principle ....................................................  70 LEGAL ESTATE AND SUBSEQUENT EQUITABLE ESTATE .................................  71

Chapter 3: Assignments in Equity .................................................................................  73 [3.05]

[3.25]

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[3.40]

[3.120]

[3.155]

CONCEPT OF AN ASSIGNMENT ........................................................................  73 [3.10] Historical background to assignments of choses in action ......................  73 [3.20] Disposal and transfer of equitable interests outside of an assignment .....  75 STATUTORY ASSIGNMENTS ...............................................................................  75 [3.25] Statutory scheme ....................................................................................  75 [3.35] Principal requirements ............................................................................  76 EQUITABLE ASSIGNMENTS .................................................................................  79 [3.45] Requirement of an intention to assign ....................................................  80 [3.55] Relevance of notice ................................................................................  82 [3.80] Equitable assignment of legal choses ......................................................  84 [3.95] Equitable assignment of equitable choses ...............................................  86 ENTITLEMENTS OF AN EQUITABLE ASSIGNEE ...............................................  88 [3.120] Standing .................................................................................................  88 [3.140] Assignor as trustee .................................................................................  90 IMPACT OF CONTRACTUAL NON-​ASSIGNABILITY CLAUSES .......................  92

PART II: RELATIONSHIPS OF TRUST Chapter 4: Fiduciary Relations ........................................................................................  97 [4.05]

[4.50]

FIDUCIARY DUTIES ..............................................................................................  97 [4.10] Nature of fiduciary duties .......................................................................  97 [4.35] Strictness of fiduciary duties .................................................................  102 [4.40] Reasons for seeking to establish breach of fiduciary duty .....................  103 [4.45] Duration of fiduciary duties .................................................................  104 CHARACTERISTICS OF RELATIONSHIPS THAT ATTRACT FIDUCIARY DUTIES ............................................................................................  105 [4.50] A fiduciary principle? ...........................................................................  105 viii

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

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Table of Contents

[4.55] Trust and confidence? ...........................................................................  105 [4.60] Undertaking to act in the interests of another? .....................................  106 [4.65] Disadvantage, vulnerability and unequal bargaining power? ................  107 [4.70] Synthesis ..............................................................................................  108 [4.75] Categorising relationships that give rise to fiduciary duties ...................  110 [4.80] TRUSTEE AND BENEFICIARY ............................................................................  110 [4.85] DIRECTOR AND COMPANY .............................................................................  111 [4.90] Corporate business opportunities .........................................................  112 [4.120] Multiple directorships ..........................................................................  117 [4.130] Director having an interest in, and transacting with, the company .........................................................................................  119 [4.135] LAWYER AND CLIENT .......................................................................................  120 [4.140] Application of the “no-​conflict” duty ...................................................  120 [4.160] Application of the “no-​profit” duty ......................................................  122 [4.170] AGENT AND PRINCIPAL ....................................................................................  124 [4.175] Real estate agents .................................................................................  124 [4.190] PARTNERS ...........................................................................................................  127 [4.190] Nature of partnership duties ................................................................  127 [4.200] Fiduciary duties prior to the execution of a partnership agreement ......  127 [4.205] Fiduciary duties following dissolution of partnership ...........................  128 [4.210] Fiduciary duties following death of a partner .......................................  129 [4.215] JOINT VENTURERS ............................................................................................  129 [4.235] FINANCIAL ADVISER AND CLIENT .................................................................  133 [4.250] BANKER AND CUSTOMER ................................................................................  135 [4.265] COMMERCIAL TRANSACTIONS GENERALLY ...............................................  136 [4.285] EMPLOYER AND EMPLOYEE ............................................................................  139 [4.285] Employees’ contractual duty of fidelity compared to fiduciary duties ...................................................................................................  139 [4.290] Employees’ duty of confidentiality compared to fiduciary duties ..........  140 [4.295] Employers’ duty ...................................................................................  141 [4.300] DOCTOR AND PATIENT ....................................................................................  142 [4.305] SOCIAL AND FAMILIAL RELATIONSHIPS .......................................................  143 [4.305] Child abuse and fiduciary duties ...........................................................  143 [4.315] Guardian and ward ..............................................................................  145 [4.320] DEFENCES TO BREACH OF FIDUCIARY DUTY ...............................................  146 [4.325] REMEDIES FOR BREACH OF FIDUCIARY DUTY .............................................  146

Chapter 5: Government and the Public Trust ..........................................................  149 [5.05]

[5.20]

CONCEPTS OF TRUST IN PUBLIC LAW ............................................................  149 [5.10] Fiduciary theory and the government–​citizen relationship ....................  150 [5.15] Trust analogy .......................................................................................  150 IMPACT OF TRUST CONCEPTS ON PUBLIC LAW ...........................................  151 [5.25] Trust at an individual level ...................................................................  152 [5.30] Trust on a collective level .....................................................................  153 [5.35] Curial application of trust concepts in public law —​ fiduciary duties to indigenous persons ..................................................  153 ix

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Equity and Trusts in Australia

Chapter 6: Confidential Information ..........................................................................  159

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[6.05]

NATURE AND JURISDICTIONAL BASIS ...........................................................  159 [6.10] Jurisdiction ...........................................................................................  159 [6.20] Elements ...............................................................................................  160 [6.25] CONFIDENTIALITY ............................................................................................  161 [6.30] Commercial or technical information ...................................................  162 [6.90] Personal confidences .............................................................................  171 [6.155] Governmental information ...................................................................  180 [6.170] CONFIDENTIAL CIRCUMSTANCES ..................................................................  183 [6.170] Relevance of confidential circumstances ...............................................  183 [6.175] Objective test .......................................................................................  183 [6.180] Information communicated within a contractual relationship ..............  184 [6.190] Information disclosed to a governmental body .....................................  186 [6.195] Information collected by law enforcement officers ................................  187 [6.205] BREACH OF DUTY ..............................................................................................  188 [6.205] Standing to enforce confidentiality .......................................................  188 [6.215] Need for specificity in identifying confidential information ..................  190 [6.220] Inferring a breach of confidence ...........................................................  191 [6.230] Need for proof of detriment? ................................................................  192 [6.240] Receipt of confidential information by third parties .............................  193 [6.265] INFORMATION GAINED BY REPREHENSIBLE MEANS .................................  197 [6.280] PUBLIC INTEREST DEFENCE ............................................................................  199 [6.285] Public interest and governmental information ......................................  200 [6.290] Disclosure of iniquity ...........................................................................  201 [6.315] REMEDIES FOR BREACH OF CONFIDENCE ...................................................  204 [6.320] Injunction .............................................................................................  205 [6.330] Account of profits ................................................................................  206 [6.340] Equitable damages ...............................................................................  207 [6.370] Delivery up ...........................................................................................  212 [6.375] Constructive trust .................................................................................  213

Chapter 7: Undue Influence ...........................................................................................  217 [7.05]

[7.20]

[7.50]

NATURE OF UNDUE INFLUENCE .....................................................................  217 [7.05] Definition .............................................................................................  217 [7.10] Distinguished from unconscionable dealing ..........................................  218 [7.15] Compared to undue influence at law (“testamentary undue influence”) ............................................................................................  218 TYPES OF UNDUE INFLUENCE .........................................................................  219 [7.25] Presumed undue influence ....................................................................  219 [7.45] Actual undue influence .........................................................................  223 RELEVANT EVIDENCE .......................................................................................  224 [7.55] Independent advice ...............................................................................  225 [7.70] Clear intention to enter transaction sought to be impugned .................  228 [7.75] Improvidence of transaction .................................................................  229 [7.85] Transaction not the proximate result of the influence ...........................  231

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Table of Contents

[7.90]

UNDUE INFLUENCE AND PARTICULAR RELATIONSHIPS ............................  232 [7.90] Undue influence by husband over wife .................................................  232 [7.100] The relationship between man and woman to whom he is affianced (?) ..........................................................................................  234 [7.105] Other personal relationships ................................................................  234 [7.110] Intra-​family undue influence .................................................................  235 [7.140] Undue influence and commercial relationships .....................................  239 [7.160] UNDUE INFLUENCE AND THIRD PARTIES .....................................................  240 [7.165] Agency .................................................................................................  242 [7.170] Notice ..................................................................................................  243 [7.210] Unconscionable conduct by creditor .....................................................  251 [7.270] DEFENCES ...........................................................................................................  262 [7.280] REMEDIES ...........................................................................................................  263

PART III: UNCONSCIONABLE CONDUCT Chapter 8: Fraud and Mistake ......................................................................................  269

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[8.05] [8.10]

FRAUD IN EQUITY .............................................................................................  269 PRESSURE IN EQUITY ........................................................................................  270 [8.10] Common law duress distinguished from pressure in equity ..................  270 [8.15] Scope of the pressure doctrine in equity ................................................  270 [8.25] Onus of proof and relief .......................................................................  272 [8.30] A modern substantive doctrine of duress? ............................................  273 [8.35] EQUITABLE FRAUD AND STATUTE ..................................................................  273 [8.50] FRAUD ON A POWER .........................................................................................  275 [8.55] Relevance of intention ..........................................................................  275 [8.70] Anticipation or knowledge of the conduct of object(s) as intention ..........................................................................................  276 [8.75] Severance of an excessive exercise of a power .......................................  277 [8.85] Default, revocation and release of powers ............................................  277 [8.90] INNOCENT MISREPRESENTATION .................................................................  278 [8.90] Equitable relief .....................................................................................  278 [8.95] Statutory intervention —​misleading and deceptive conduct .................  279 [8.100] MISTAKE ..............................................................................................................  280 [8.105] Recovery of amounts paid under mistake .............................................  280 [8.145] Contracts contaminated by mistake ......................................................  286

Chapter 9: Unconscionable Dealing ............................................................................  295 [9.05]

[9.25]

NATURE OF THE DOCTRINE ............................................................................  295 [9.05] Elements of the doctrine .......................................................................  295 [9.10] Focus on “procedural” rather than “substantive” unconscionability .....  296 [9.15] Unconscionable dealing distinguished from undue influence .................  296 SPECIAL DISADVANTAGE ..................................................................................  297 [9.25] Nature of “special” disadvantage .........................................................  297 [9.30] Factors indicating special disadvantage ................................................  298

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Equity and Trusts in Australia

[9.80]

KNOWLEDGE OF SPECIAL DISADVANTAGE ...................................................  306 [9.85] Statements of weaker party revealing misunderstanding .......................  307 [9.90] Knowledge of improvidence of transaction ...........................................  308 [9.100] Knowledge stemming from longstanding relationship ..........................  308 [9.105] Knowledge of relationship between guarantor and debtor ....................  309 [9.115] EXPLOITATION OF SPECIAL DISADVANTAGE ................................................  310 [9.115] Protection by independent advice .........................................................  310 [9.120] Need for proof of subjective intention to exploit? ................................  311 [9.150] DEFENCES ...........................................................................................................  315 [9.155] REMEDIES ...........................................................................................................  316 [9.160] STATUTORY INITIATIVES ..................................................................................  316 [9.165] Australian Consumer Law, Pt 2-​2 .........................................................  317

Chapter 10: Estoppel .......................................................................................................  325

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[10.10]

COMMON LAW ESTOPPEL ...............................................................................  325 [10.10] Estoppel by deed (or estoppel in writing) .............................................  325 [10.15] Estoppel by judgment (or estoppel by record) .......................................  325 [10.35] Estoppel by conduct .............................................................................  327 [10.50] EQUITABLE ESTOPPEL .......................................................................................  329 [10.50] Distinctions between common law and equitable estoppel by conduct ...........................................................................................  329 [10.55] Forms of estoppel by conduct in equity ................................................  330 [10.80] Attempts to fuse estoppel by conduct into a substantive doctrine .........  333 [10.105] REPRESENTATION .............................................................................................  336 [10.110] Clarity of the representation .................................................................  336 [10.140] Assumptions are not restricted to factual matters .................................  341 [10.145] Conduct or dealings as a representation ...............................................  342 [10.155] Silence as a representation ....................................................................  343 [10.160] RELIANCE ...........................................................................................................  343 [10.165] Reliance must be reasonable .................................................................  344 [10.200] Written contract inconsistent with extra-​contractual representations .....................................................................................  348 [10.220] DETRIMENT ........................................................................................................  350 [10.220] Rationale ..............................................................................................  350 [10.230] Calculation of detriment ......................................................................  351 [10.270] Remedies to rectify detriment ...............................................................  359 [10.275] Detriment compensated or remedied by other means ...........................  360 [10.290] Opportunities foregone as detriment ....................................................  362 [10.300] Emotional distress as detriment ............................................................  363 [10.305] Detriment sustained by third parties .....................................................  364 [10.310] UNCONSCIONABILITY ......................................................................................  364 [10.310] Role of unconscionability .....................................................................  364 [10.315] Parameters of unconscionable conduct .................................................  366 [10.355] ESTOPPEL AND THIRD PARTIES .......................................................................  371 [10.360] ESTOPPEL AND STATUTE ..................................................................................  372 [10.360] Inconsistency between estoppel and statute ..........................................  372 [10.395] Estoppel and the discretion of statutory authorities ..............................  376 xii

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Table of Contents

Chapter 11: Relief Against Forfeiture ........................................................................  379 [11.05]

BASIS FOR RELIEF AGAINST FORFEITURE .....................................................  379 [11.05] Unconscionable conduct .......................................................................  379 [11.10] Proprietary rights in applicant ..............................................................  380 [11.15] FORFEITURE AND CONTRACTS FOR THE SALE OF LAND ..........................  381 [11.15] Scope of jurisdiction .............................................................................  381 [11.20] Forfeiture of payments made under a contract of sale ..........................  382 [11.25] Forfeiture of other interests under a contract of sale .............................  383 [11.50] Forfeiture of moneys paid as a deposit .................................................  387 [11.85] FORFEITURE AND CONTRACTS FOR THE LEASE OF LAND .......................  394 [11.90] Relief against forfeiture for breach of covenant to pay rent ..................  395 [11.105] Relief against forfeiture for breach of covenants other than to pay rent ............................................................................................  397 [11.125] NATURE OF RELIEF AGAINST FORFEITURE ...................................................  401 [11.125] Forms of relief ......................................................................................  401 [11.135] Standing to seek relief ..........................................................................  402

PART IV: UNFAIR OUTCOMES Chapter 12: Part Performance .....................................................................................  407

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[12.05]

[12.45]

DOCTRINE OF PART PERFORMANCE ............................................................  407 [12.05] Relationship to statutory writing requirements .....................................  407 [12.15] Historically strict approach ..................................................................  408 [12.20] Loosening of the strict approach in England ........................................  409 [12.25] Current legal position —​confluence with constructive trusts, estoppel and statute? ..................................................................  410 EVIDENCE OF PART PERFORMANCE .............................................................  412 [12.45] What constitutes relevant evidence .......................................................  412 [12.60] Taking possession .................................................................................  414 [12.80] Payment of money ................................................................................  416

Chapter 13: Penalty Clauses ..........................................................................................  419 [13.05] [13.20] [13.55] [13.60]

[13.80] [13.95]

BACKDROP AND CONTEXT .............................................................................  419 FOUNDATION FOR RELIEF ...............................................................................  420 DISTINGUISHED FROM RELIEF AGAINST FORFEITURE ...............................  426 DEALINGS OUTSIDE THE PENALTY NET ........................................................  426 [13.60] Legitimate deposits ...............................................................................  426 [13.65] Acceleration clauses .............................................................................  427 [13.70] Grants of indulgence ............................................................................  427 TRIGGERING EVENT NOT CONFINED TO BREACH OF CONTRACT ...................................................................................................  428 ACTION FOR DAMAGES IF PENALTY UNENFORCEABLE .............................  431

Chapter 14: Subrogation, Contribution and Marshalling ....................................  433 [14.05] SUBROGATION ...................................................................................................  433 [14.05] The nature of subrogation ....................................................................  433 xiii

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Equity and Trusts in Australia

[14.30] Insured and insurer ..............................................................................  436 [14.70] Principal and surety .............................................................................  441 [14.85] Debtor and creditor ..............................................................................  443 [14.125] CONTRIBUTION .................................................................................................  449 [14.125] Nature of contribution .........................................................................  449 [14.145] Measure of contribution .......................................................................  453 [14.170] Principal areas of operation ..................................................................  457 [14.180] Contribution between sureties ..............................................................  458 [14.190] Contribution between insurers .............................................................  459 [14.215] MARSHALLING ..................................................................................................  463 [14.215] Nature and purpose of marshalling ......................................................  463 [14.240] Circumstances where marshalling is not available ................................  465

Chapter 15: Deceased Estates .......................................................................................  467 SATISFACTION IN EQUITY ................................................................................  467 [15.10] Presumption as between testators and creditors ....................................  467 [15.40] Presumption in respect of persons in loco parentis ...............................  470 [15.55] EQUITABLE ADEMPTION ..................................................................................  471 [15.55] Nature of equitable ademption .............................................................  471 [15.65] Presumption of ademption ...................................................................  472 [15.80] Subsequent advance by parent (or person in loco parentis) ...................  474 [15.95] Subsequent advance for a specific purpose ............................................  476 [15.100] ELECTION IN EQUITY .......................................................................................  478 [15.100] Nature of election in equity ..................................................................  478 [15.105] Dual gifts .............................................................................................  478 [15.120] Mutual obligations ...............................................................................  481

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[15.05]

PART V: TRUSTS Chapter 16: Nature of A  Trust .....................................................................................  485 [16.05] [16.15]

[16.25]

[16.45] [16.50]

DEFINITION AND CHARACTERISTICS ............................................................  485 CLASSIFICATION OF TRUSTS ............................................................................  486 [16.15] Express trusts .......................................................................................  486 [16.20] Non-​express trusts ...............................................................................  488 HISTORY OF THE TRUST ...................................................................................  488 [16.25] The “use” .............................................................................................  488 [16.40] Movement to the modern trust .............................................................  490 MODERN FUNCTIONS OF TRUSTS ..................................................................  490 TRUSTS AND OTHER LEGAL RELATIONSHIPS ..............................................  492 [16.55] Trust and bailment ...............................................................................  492 [16.90] Trust and agency ..................................................................................  497 [16.110] Trust and debt ......................................................................................  498 [16.120] Trust and contract ................................................................................  500 [16.150] Trust, condition, charge and equitable personal obligation ...................  504 [16.175] Trusts and powers ................................................................................  506 [16.195] Trustee and executor ............................................................................  510 xiv

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Table of Contents

Chapter 17: The Requisite Certainties .......................................................................  513 [17.10]

[17.60]

[17.95]

CERTAINTY OF INTENTION ............................................................................  513 [17.15] Process of construction .........................................................................  513 [17.25] Admissibility of extrinsic evidence ........................................................  516 [17.40] Intention stemming from statute ...........................................................  518 [17.45] Inferring an intention to create a trust ..................................................  518 CERTAINTY OF SUBJECT MATTER ..................................................................  520 [17.65] Nature of the property .........................................................................  521 [17.80] Quantum of interest .............................................................................  522 CERTAINTY OF OBJECT ....................................................................................  524 [17.95] “Beneficiary principle” .........................................................................  524 [17.100] Application of the beneficiary principle to fixed trusts ..........................  525 [17.115] Application of the beneficiary principle to discretionary trusts .............  526 [17.140] Purpose trusts .......................................................................................  529 [17.170] Gifts to unincorporated associations ....................................................  534

Chapter 18: Formalities and Complete Constitution .............................................  539 [18.05]

[18.40]

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[18.90]

FORMALITIES FOR ESTABLISHING AN INTER VIVOS TRUST ......................  539 [18.05] Statutory writing requirements .............................................................  539 [18.15] Enforcement of trust where formalities not fulfilled ..............................  542 FORMALITIES FOR ESTABLISHING A TESTAMENTARY TRUST ...................  546 [18.40] Formality requirements for a valid will .................................................  546 [18.45] Secret trusts ..........................................................................................  547 COMPLETE CONSTITUTION OF TRUSTS ........................................................  552 [18.90] Complete constitution by full legal transfer of trust property ...............  552 [18.110] Enforceability of an incompletely constituted trust by way of contract ....................................................................................  557 [18.125] Exceptions to the rule that equity will not assist a volunteer ................  558

Chapter 19: Legality of Trusts ......................................................................................  563 [19.05]

FORMS OF ILLEGALITY ....................................................................................  563 [19.10] Public policy illegality ..........................................................................  563 [19.15] Statutory illegality ................................................................................  564 [19.20] TRUSTS FOR ILLEGAL PURPOSES ....................................................................  564 [19.30] Disclosure of illegal purpose .................................................................  565 [19.55] Doctrine of locus poenitentiae  —​carrying out the illegal purpose .......  569 [19.60] TRUSTS THAT DISTURB THE SANCTITY OF MARRIAGE OR THE FAMILY .................................................................................................  570 [19.75] TRUSTS IN RESTRAINT OF ALIENATION OF PROPERTY .............................  572 [19.75] Conditional dispositions and deprivation clauses .................................  572 [19.80] Trusts that infringe the rule against perpetuities ...................................  574 [19.95] Rule against indestructibility ................................................................  577 [19.100] TRUSTS TO AVOID CREDITORS ........................................................................  577 [19.105] Setting aside where settlor is a natural person ......................................  578 [19.135] Setting aside where settlor is a company ...............................................  581 [19.140] Voidable dispositions outside of insolvency ..........................................  583 xv

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Equity and Trusts in Australia

[19.150] TRUSTS TO EVADE TAXATION .........................................................................  584 [19.155] FAMILY COURT POWERS TO SET ASIDE FAMILY TRUSTS .............................  586 [19.155] Setting aside dispositions ......................................................................  586 [19.170] Setting aside marriage settlements ........................................................  588

Chapter 20: Beneficiaries ...............................................................................................  591 [20.10]

[20.95]

RIGHTS OF BENEFICIARIES ..............................................................................  591 [20.10] Beneficiaries’ rights generally ................................................................  591 [20.30] Beneficiaries’ access to trust information ..............................................  593 [20.75] Beneficiaries’ right to disclaim ..............................................................  603 NATURE OF BENEFICIARIES’ INTERESTS UNDER A TRUST .........................  606 [20.100] Unit trusts ............................................................................................  606 [20.120] Discretionary trusts ..............................................................................  609 [20.155] Default beneficiaries .............................................................................  615

Chapter 21: Trustees ........................................................................................................  617

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[21.05]

WHO MAY ACT AS TRUSTEE ............................................................................  617 [21.05] Capacity to act as trustee .....................................................................  617 [21.10] Company as trustee ..............................................................................  618 [21.15] Statutory trustee companies ..................................................................  618 [21.20] Public trustee ........................................................................................  619 [21.25] Advisory trustees ..................................................................................  619 [21.30] Custodian trustees ................................................................................  620 [21.45] Bare trustees .........................................................................................  621 [21.50] APPOINTMENT OF TRUSTEES ..........................................................................  622 [21.55] Appointment pursuant to the trust instrument .....................................  622 [21.60] Appointment under statutory power ....................................................  623 [21.65] Appointment by the court ....................................................................  624 [21.85] Number of trustees ...............................................................................  628 [21.90] DISCLAIMER BY TRUSTEE ................................................................................  628 [21.95] RETIREMENT OF TRUSTEES .............................................................................  629 [21.100] REMOVAL OF TRUSTEES ...................................................................................  630 [21.105] Removal by the court  —​welfare of the beneficiaries ...........................  630 [21.130] Costs of a proceeding for removal ........................................................  634 [21.135] DEATH OF TRUSTEE ..........................................................................................  634 [21.140] ORDERS VESTING TRUST PROPERTY IN NEW TRUSTEES ............................  635

Chapter 22: Duties of Trustees .....................................................................................  637 [22.05]

[22.30] [22.40]

NATURE OF DUTIES ...........................................................................................  637 [22.10] Initial duties .........................................................................................  637 [22.15] Fundamental duty to obey the terms of the trust ..................................  637 [22.20] Standard of care ...................................................................................  638 DUTY TO ACCOUNT ..........................................................................................  639 DUTY TO ADMINISTER THE TRUST PERSONALLY ........................................  640 [22.40] Fettering discretion ...............................................................................  640 [22.45] Duty not to delegate and its exceptions ................................................  641

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Table of Contents

[22.50] Engagement of agents by trustees .........................................................  642 [22.65] Unanimity in trustee decision-​making ...................................................  644 [22.70] FIDUCIARY DUTIES ............................................................................................  645 [22.75] Trustees’ remuneration .........................................................................  645 [22.95] Purchase of trust property by trustee (“purchase rule” or “self-​dealing rule”) ...............................................................................  648 [22.115] Purchase of a beneficiary’s interest (“fair dealing rule”) ........................  651 [22.120] DUTY TO ACT IMPARTIALLY ............................................................................  651 [22.120] Nature of the duty ................................................................................  651 [22.130] Apportionment required by the duty of impartiality .............................  652 [22.155] Residuary personalty of a wasting, hazardous or reversionary nature ..............................................................................  654 [22.160] Allocation of revenue and costs ............................................................  655 [22.175] DUTY TO INVEST ...............................................................................................  656 [22.180] Investments authorised by the trust instrument ....................................  657 [22.185] Investments authorised by statute .........................................................  658 [22.200] Investments authorised by the court pursuant to its “expediency” jurisdiction .....................................................................  660 [22.205] Investment for the financial advantage to the trust ...............................  660 [22.225] DUTY TO PAY CORRECT BENEFICIARIES .......................................................  663 [22.225] Duty of trustee in the event of overpayment .........................................  663 [22.230] Action by underpaid beneficiary ...........................................................  664

Chapter 23: Powers and Rights of Trustees .............................................................  665

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[23.05]

POWERS OF TRUSTEES ......................................................................................  665 [23.10] Sources of trustees’ powers ...................................................................  665 [23.30] Exercise of trustees’ discretion ..............................................................  667 [23.80] Powers of sale ......................................................................................  674 [23.115] Powers of maintenance and advancement .............................................  677 [23.120] RIGHTS OF TRUSTEES .......................................................................................  679 [23.120] Right to indemnity (and exoneration) ...................................................  679 [23.160] Right to contribution from co-​trustees .................................................  687 [23.165] Right to impound the interest of a beneficiary ......................................  688 [23.170] Right to seek advice and directions from the court ...............................  688

Chapter 24: Breach of Trust ..........................................................................................  695 [24.10]

[24.25]

STANDING TO SUE .............................................................................................  695 [24.10] Identity of persons with standing .........................................................  695 [24.15] Beneficiaries’ standing to sue third parties ............................................  696 REMEDIES FOR BREACH OF TRUST ................................................................  698 [24.30] Compensation ......................................................................................  698 [24.60] Interest .................................................................................................  702 [24.75] Account of profits ................................................................................  704 [24.95] Liability for co-​trustee’s breaches of trust  —​“wilful default” ..............  706 [24.105] Account on the basis of wilful default ..................................................  708

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Equity and Trusts in Australia

[24.110] Options apart from action for breach of trust ......................................  708 [24.130] Personal action against third-​party recipients of trust property  —​ Re Diplock .......................................................................  711 [24.140] DEFENCES TO BREACH OF TRUST ..................................................................  713 [24.140] Trustee exemption clauses ....................................................................  713 [24.160] Consent, acquiescence or release by the beneficiaries ............................  716 [24.175] Delay ....................................................................................................  718 [24.200] Court’s statutory power to excuse breach .............................................  721

Chapter 25: Variation, Resettlement and Termination of Trusts .......................  725 VARIATION OF TRUST .......................................................................................  725 [25.10] Power of variation in the trust instrument ............................................  725 [25.25] Inherent jurisdiction of the court to vary trusts ....................................  727 [25.30] Variation by the court under its “expediency” jurisdiction ....................  728 [25.60] Variation by the court on behalf of infants, unborn and incompetent persons .............................................................................  735 [25.80] Western Australia  —​statutory jurisdiction to vary the quantum paid to a beneficiary ..............................................................  738 [25.85] RESETTLEMENT OF TRUSTS ............................................................................  738 [25.90] Sources of the power to resettle a trust .................................................  738 [25.105] Resettlement for revenue law purposes .................................................  740 [25.120] TERMINATION OF TRUST ................................................................................  741 [25.125] Termination by revocation ...................................................................  742 [25.135] Termination by beneficiaries .................................................................  743 [25.155] Termination by distribution of trust property .......................................  746

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[25.05]

Chapter 26: Resulting Trusts .........................................................................................  749 [26.05]

NATURE OF THE RESULTING TRUST ..............................................................  749 [26.05] Definition and terminology ..................................................................  749 [26.10] “Institutional” nature of the resulting trust ..........................................  750 [26.15] FAILURE TO EXHAUST BENEFICIAL INTEREST .............................................  751 [26.20] Failure of express trust .........................................................................  751 [26.25] Failure to set out the trust or disclose the entire beneficial interest .......  751 [26.30] Property conveyed on trust for a specific purpose that fails ..................  751 [26.35] Property conveyed on trust for purposes exceeds that required ............  752 [26.40] Resulting trust over stolen property .....................................................  753 [26.45] RESULTING TRUSTS FORM CONTRIBUTIONS TO PROPERTY .....................  753 [26.45] Circumstances giving rise to the presumption of resulting trust ............  753 [26.55] Voluntary transfer situation ..................................................................  755 [26.60] Purchase money situation .....................................................................  755 [26.90] Constructive trust relief ........................................................................  760 [26.95] DISPLACING THE PRESUMPTION BY CONTRARY EVIDENCE ....................  760 [26.100] Relevant evidence of intention ..............................................................  760 [26.110] Relevant evidence in rebuttal ................................................................  762 [26.120] PRESUMPTION OF ADVANCEMENT ................................................................  763 [26.120] Nature and operation ...........................................................................  763 [26.145] Rebuttal of the presumption of advancement .......................................  768 xviii

Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Table of Contents

[26.155] FUTURE OF THE PRESUMPTIONS ....................................................................  770

Chapter 27: Trusts for Commercial Purposes ...........................................................  773 [27.10] [27.20]

TRUSTS AS VEHICLES TO CONDUCT BUSINESS .............................................  773 INSOLVENCY AND TRUSTS ...............................................................................  775 [27.25] Liability on insolvency of trustee ..........................................................  775 [27.65] Property given for a specific purpose  —​trust or debt? .........................  782 [27.75] Property given for a specific purpose  —​co-​existence of loan and trust (“Quistclose Trust”) ..................................................  784 [27.110] Insolvency of beneficiary ......................................................................  793 [27.125] TAXATION OF TRUSTS ......................................................................................  795 [27.130] Scheme of trust taxation .......................................................................  795 [27.185] Capital gains tax and trusts ..................................................................  802 [27.200] Taxation of minors’ income: Part III, Division 6AA ..............................  803

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Chapter 28: Trusts for Investment ..............................................................................  805 [28.05] BACKGROUND ...................................................................................................  805 [28.10] Superannuation ....................................................................................  805 [28.15] Managed investments ...........................................................................  806 [28.20] STATUTORY REGULATION OF SUPERANNUATION ......................................  806 [28.25] MySuper ..............................................................................................  807 [28.30] Regulators ............................................................................................  808 [28.35] Regulated entities .................................................................................  809 [28.40] Compliance ..........................................................................................  810 [28.45] Financial services regime ......................................................................  810 [28.50] SUPERANNUATION TRUSTS .............................................................................  810 [28.55] Provisions of a superannuation fund deed ............................................  811 [28.60] Trustees ................................................................................................  812 [28.75] Duties of trustees and directors ............................................................  814 [28.105] Trust property ......................................................................................  821 [28.130] Beneficiaries .........................................................................................  824 [28.145] SUPERANNUATION TRUSTS AND THE CONTRACT OF EMPLOYMENT ....  826 [28.150] Construction of trust documents ..........................................................  826 [28.155] Employer’s implied obligation of trust and confidence ..........................  828 [28.160] OTHER TRUST RELATED SUPERANNUATION ISSUES ...................................  829 [28.160] Exercise of discretion and the formation of opinions ............................  829 [28.170] Amendment and rectification of trust deeds ..........................................  831 [28.190] Surpluses ..............................................................................................  833 [28.210] Conflicts of interest ..............................................................................  836 [28.220] Duty of impartiality .............................................................................  838 [28.225] DISPUTE RESOLUTION IN SUPERANNUATION TRUSTS ...............................  838 [28.230] Internal review .....................................................................................  838 [28.235] External review: SCT (and forthcoming Australian Financial Complaints Authority) .........................................................................  838 [28.240] MANAGED INVESTMENT SCHEMES ...............................................................  840 [28.240] Meaning of “managed investment scheme” ..........................................  840

xix Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

Equity and Trusts in Australia

[28.245] [28.250] [28.255] [28.260]

Responsible entity ................................................................................  841 Duties of the responsible entity ............................................................  842 Scheme constitution .............................................................................  842 Other investor protection avenues ........................................................  843

Chapter 29: Charitable Trusts .......................................................................................  845 [29.05]

[29.55]

[29.110]

[29.140]

[29.165]

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[29.210]

[29.275]

[29.310]

NATURE OF A  CHARITABLE TRUST ...............................................................  845 [29.05] Purpose trust ........................................................................................  845 [29.10] Differences between private and charitable trusts .................................  845 [29.30] Meaning of “charitable” at law ............................................................  847 PUBLIC BENEFIT REQUIREMENT ....................................................................  852 [29.60] The “public” requirement .....................................................................  852 [29.90] The “benefit” requirement ....................................................................  858 RELIEF OF THE POOR, AGED AND IMPOTENT ..............................................  862 [29.115] Relief of poverty ...................................................................................  863 [29.125] Relief of the aged .................................................................................  864 [29.130] Relief of impotence ..............................................................................  865 ADVANCEMENT OF EDUCATION ....................................................................  866 [29.145] Valid educational purposes ...................................................................  866 [29.155] Public benefit in educational purposes ..................................................  869 [29.160] The “benefit” element ...........................................................................  870 ADVANCEMENT OF RELIGION ........................................................................  871 [29.165] Religious purposes ...............................................................................  871 [29.190] Advancing religion ...............................................................................  874 [29.195] Public benefit in religious purposes .......................................................  875 OTHER PURPOSES BENEFICIAL TO THE COMMUNITY ...............................  877 [29.215] Two-​stage analogy approach ................................................................  877 [29.220] Protection of animals ...........................................................................  878 [29.225] Locality cases .......................................................................................  879 [29.230] Preservation or protection of the environment ......................................  880 [29.235] Promotion of industry and commerce ...................................................  880 [29.240] Relief of distress ...................................................................................  881 [29.245] Promotion of safety and protection of the country ...............................  882 [29.250] Assistance for immigration and emigration ..........................................  883 [29.255] Recreation and sport ............................................................................  884 MIXED CHARITABLE AND NON-​CHARITABLE PURPOSES ..........................  888 [29.275] Requirement that a trust be exclusively charitable ................................  888 [29.280] Gifts for the purposes of associations ...................................................  888 [29.290] Alternative and cumulative expressions ................................................  891 [29.295] Saving legislation ..................................................................................  892 CY-​PRÈS SCHEMES .............................................................................................  894 [29.310] Impossibility, impracticability or illegality ............................................  894 [29.315] “Initial” failure .....................................................................................  894 [29.320] Non-​existent institutions ......................................................................  896 [29.345] Cy-​près and public appeals ...................................................................  898

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Table of Contents

[29.355] Statutory cy-​près ..................................................................................  899 [29.375] Power to settle cy-​près schemes ............................................................  902 [29.380] ADMINISTRATIVE SCHEMES ............................................................................  903

PART VI: Equitable Defences Chapter 30: Equitable Defences ...................................................................................  907

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[30.10] DELAY ..................................................................................................................  907 [30.10] Delay and equitable relief .....................................................................  907 [30.25] Relationship between laches and acquiescence .....................................  910 [30.35] Laches and limitation legislation ..........................................................  911 [30.45] Nature of the claim ..............................................................................  913 [30.75] Subject matter of the claim ...................................................................  916 [30.80] Identity of the party seeking to rely on the defence ...............................  917 [30.85] SET-​OFF ................................................................................................................  917 [30.85] Nature of set-​off ...................................................................................  917 [30.95] Legal set-​off .........................................................................................  918 [30.105] Equitable set-​off ...................................................................................  919 [30.140] WAIVER IN EQUITY ...........................................................................................  924 [30.145] Release .................................................................................................  925 [30.160] Estoppel ...............................................................................................  926 [30.170] UNCLEAN HANDS ..............................................................................................  928 [30.170] Nature of and limitations on the defence ..............................................  928 [30.180] Case illustrations ..................................................................................  930

PART VII: EQUITABLE REMEDIES Chapter 31: Injunctions ..................................................................................................  935 [31.05]

[31.90]

GENERAL PRINCIPLES .......................................................................................  935 [31.05] Nature and jurisdiction ........................................................................  935 [31.10] Classification ........................................................................................  936 [31.15] Effect of non-​compliance ......................................................................  936 [31.20] Standing to seek an injunction ..............................................................  937 [31.40] Scope of injunctive relief ......................................................................  941 [31.50] Considerations relevant to the exercise of the court’s discretion ...........  942 [31.75] Injunctions in criminal law ...................................................................  945 [31.80] Ex parte applications ............................................................................  946 INTERLOCUTORY INJUNCTIONS ....................................................................  948 [31.90] Nature of interlocutory injunctions ......................................................  948 [31.95] Serious question to be tried /​prima facie test ........................................  949 [31.105] Damages not an adequate remedy (irreparable harm) ...........................  951 [31.125] Balance of convenience .........................................................................  953 [31.175] Interlocutory injunctions to prevent alleged defamation .......................  962 [31.185] Appellate review of interlocutory determinations .................................  966

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Equity and Trusts in Australia

[31.190] QUIA TIMET INJUNCTIONS ..............................................................................  966 [31.195] ANTI-​SUIT INJUNCTIONS .................................................................................  967

Chapter 32: Mareva and Anton Piller Orders ...........................................................  969 [32.05]

MAREVA ORDERS ..............................................................................................  969 [32.05] Nature and jurisdiction ........................................................................  969 [32.40] Preconditions to Mareva relief .............................................................  973 [32.75] Scope and variation of Mareva orders ..................................................  978 [32.90] Post-judgment Mareva orders ..............................................................  980 [32.100] Mareva orders and third parties ...........................................................  981 [32.110] Extra-jurisdictional and worldwide Mareva orders ..............................  984 [32.120] Orders in aid of Mareva relief (“ancillary orders”) ...............................  986 [32.135] Abuses of process in seeking Mareva relief ...........................................  988 [32.140] ANTON PILLER ORDERS ...................................................................................  989 [32.145] The Anton Piller case ............................................................................  990 [32.150] Nature of Anton Piller relief .................................................................  990 [32.155] Preconditions to Anton Piller relief .......................................................  991 [32.160] Application for and execution of Anton Piller orders ...........................  992 [32.200] Principal uses of Anton Piller orders .....................................................  998

Chapter 33: Specific Performance .............................................................................  1001 [33.05]

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[33.20]

[33.90]

NATURE OF SPECIFIC PERFORMANCE .........................................................  1001 [33.05] Definition ...........................................................................................  1001 [33.10] Basic requirements .............................................................................  1002 SPECIFIC PERFORMANCE OF PARTICULAR CONTRACTS .........................  1003 [33.20] Contracts for the sale of land .............................................................  1003 [33.35] Building contracts ..............................................................................  1006 [33.40] Repairing covenants in leases .............................................................  1006 [33.45] Contracts for the sale of personalty ....................................................  1007 [33.65] Contracts to pay or lend money .........................................................  1010 [33.80] Contracts for personal services ...........................................................  1011 DEFENCES TO AN ACTION FOR SPECIFIC PERFORMANCE ......................  1012 [33.90] Defences arising from the nature of the contract ................................  1012 [33.130] Defences arising from the conduct of the parties ................................  1017

Chapter 34: Compensation, Damages and Account of Profits .........................  1025 [34.05]

EQUITABLE COMPENSATION .........................................................................  1025 [34.05] Nature of equitable compensation ......................................................  1025 [34.20] Relevance of causation .......................................................................  1027 [34.55] Flexible nature of equitable compensation ..........................................  1032 [34.60] Award of interest ................................................................................  1033 [34.65] EQUITABLE DAMAGES .....................................................................................  1033 [34.70] Prerequisites for the award of equitable damages ...............................  1034 [34.105] Assessment of equitable damages .......................................................  1038 [34.125] Exemplary and aggravated damages ...................................................  1041 [34.140] ACCOUNT OF PROFITS ...................................................................................  1045 [34.140] Nature of an account .........................................................................  1045 xxii

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Table of Contents

[34.155] Jurisdiction .........................................................................................  1047 [34.160] Calculation of profit ...........................................................................  1048

Chapter 35: Rescission ..................................................................................................  1051 [35.05]

[35.45]

[35.75]

NATURE OF RESCISSION .................................................................................  1051 [35.10] Rescission at common law .................................................................  1051 [35.15] Rescission in equity ............................................................................  1052 [35.40] Need for assistance of the court ..........................................................  1055 GROUNDS FOR RESCISSION ...........................................................................  1055 [35.50] Misrepresentation ..............................................................................  1055 [35.65] Breach of fiduciary duty .....................................................................  1058 [35.70] Mistake ..............................................................................................  1058 BARS TO RESCISSION .......................................................................................  1059 [35.75] Third party interests ...........................................................................  1059 [35.85] Affirmation ........................................................................................  1059 [35.100] Delay ..................................................................................................  1062 [35.105] Express exclusion of the right to rescind ............................................  1062 [35.110] Executed contract ...............................................................................  1062

Chapter 36: Receivership ..............................................................................................  1065

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[36.05] [36.20]

NATURE OF RECEIVERSHIP ............................................................................  1065 OUT-​OF-​COURT (“PRIVATE”) APPOINTMENT .............................................  1066 [36.25] Agency relationship ............................................................................  1067 [36.45] Duties of privately-​appointed receivers ...............................................  1070 [36.80] APPOINTMENT BY THE COURT ....................................................................  1076 [36.85] Officer of the court .............................................................................  1076 [36.90] Jurisdiction not to be exercised liberally .............................................  1077 [36.100] Standing .............................................................................................  1078 [36.105] Pre-​existing contracts of the debtor ....................................................  1078 [36.110] Undertaking as to damages ................................................................  1079 [36.115] Ex parte appointment .........................................................................  1079 [36.125] Indemnity for remuneration and expenses ..........................................  1080 [36.130] Receivers and equitable execution ......................................................  1081 [36.150] STATUTE GOVERNING RECEIVERS ...............................................................  1083 [36.150] Corporations Act 2001 .......................................................................  1083 [36.165] Receivers appointed under property legislation ..................................  1085

Chapter 37: D  eclarations, Rectification, Specific Restitution and Delivery up ................................................................................................  1087 [37.05] DECLARATIONS ...............................................................................................  1087 [37.05] Source of jurisdiction to grant declaratory relief .................................  1087 [37.10] Use of declaratory relief .....................................................................  1088 [37.15] Discretion to grant declaratory relief ..................................................  1088 [37.20] Inconsistency with alternative remedy or statute ................................  1090 [37.30] Theoretical or academic issues ............................................................  1091 [37.40] Standing .............................................................................................  1092 [37.50] No practical relevance or utility .........................................................  1094 xxiii

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Equity and Trusts in Australia

[37.65] RECTIFICATION ...............................................................................................  1095 [37.65] Nature of rectification ........................................................................  1095 [37.80] Instruments equity will not rectify ......................................................  1098 [37.90] Rectification for common mistake ......................................................  1099 [37.125] Rectification for unilateral mistake .....................................................  1105 [37.140] SPECIFIC RESTITUTION ...................................................................................  1109 [37.155] DELIVERY UP AND CANCELLATION OF DOCUMENTS ..............................  1110 [37.155] Nature of jurisdiction .........................................................................  1110 [37.165] Terms of relief ....................................................................................  1111

Chapter 38: Constructive Trusts .................................................................................  1115

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[38.05]

DEFINITION AND CLASSIFICATION ..............................................................  1115 [38.10] Institutional constructive trusts ..........................................................  1115 [38.15] “Remedial” constructive trusts ...........................................................  1117 [38.20] Constructive trusts distinguished from other trusts .............................  1117 [38.25] INSTITUTIONAL CONSTRUCTIVE TRUSTS ...................................................  1118 [38.25] Accountability as principal for breach of fiduciary duty .....................  1118 [38.55] Accountability of persons who act as trustees without appointment .......................................................................................  1125 [38.65] Liability as an “accessory” to a fiduciary or trust breach ....................  1126 [38.100] Accountability as a recipient of trust property ....................................  1135 [38.130] Constructive trusts arising out of agreements to deal with property .............................................................................................  1141 [38.165] REMEDIAL CONSTRUCTIVE TRUSTS ............................................................  1147 [38.165] Nature and incidents ..........................................................................  1147 [38.175] General principle:  unconscionable denial of or assertion to beneficial interest in property .........................................................  1149 [38.215] Common intention constructive trust .................................................  1155 [38.250] Backdating the remedial constructive trust .........................................  1162 [38.270] Alternative remedies ...........................................................................  1168 [38.275] Charitable trust as remedy? ................................................................  1169

Chapter 39: Tracing .......................................................................................................  1171 [39.05]

[39.55]

NATURE OF TRACING .....................................................................................  1171 [39.10] Tracing at common law ......................................................................  1171 [39.15] Tracing in equity ................................................................................  1172 [39.50] Coalescence between common law and equitable tracing ...................  1176 PROCESS OF TRACING ....................................................................................  1177 [39.55] Mixing of trust and non-​trust property:  the tracing step ....................  1177 [39.85] Mixing of property from more than one trust:  the “allocation step” ................................................................................  1183

Index .....................................................................................................................................  1189

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TABLE OF CASES

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A A (C) v Critchley (1999) 166 DLR (4th) 475 ................................................................................ 5.50 A E Goodwin Ltd v AG Healing Ltd (1983) 7 ACLR 481 ............................................................. 24.65 A H McDonald & Co Pty Ltd v Wells (1931) 45 CLR 506 ........................ 33.145, 35.15, 35.30, 35.40 A J Bekhor & Co Ltd v Bilton [1981] QB 923 ........................................................................... 32.120 A Local Authority v W [2006] 1 FLR 1 ........................................................................................ 6.205 A M Spicer and Son Pty Ltd (in liq) v Spicer (1931) 47 CLR 151 ................................................ 14.80 A Roberts & Co Ltd v Leicestershire County Council [1961] Ch 555 ........................................ 37.125 A v B plc [2003] QB 195 ....................................................................................... 6.95, 6.100, 6.105 A v C (No 2) [1981] QB 956 ..................................................................................................... 32.80 A v Hayden (No 1) (1984) 56 ALR 73 ....................................................................................... 31.95 A v Hayden (No 2) (1984) 156 CLR 532 ................................................................................... 6.295 A V Jennings Ltd v First Provincial Building Society Ltd (1996) ATPR ¶41–​494 ......................... 31.165 A v Law Society of Tasmania (2001) 10 Tas R 152 ..................................................................... 4.155 AA and Australian Prudential Regulation Authority, Re (2002) 66 ALD 443 ................................ 28.60 Aas v Benham [1891] 2 Ch 244 ................................................................................................ 4.190 AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 .................... 6.10, 6.15, 6.40, P.145 AB Hassle v Pharmacia (Australia) Pty Ltd (1995) 33 IPR 63 ....................................................... 31.90 AB v CD [2015] 1 WLR 771 ....................................................................................................... 31.50 Abacus Trust Company (Isle of Man) Ltd v NSPCC [2001] WTLR 953 ........................................ 23.45 Abacus Trust Company (Isle of Man) v Barr [2003] Ch 409 ....................................................... 23.50 Abbey National Building Society v Maybeech Ltd [1985] Ch 190 ................................. 11.95, 11.100 Abdulla v Shah [1959] AC 124 ................................................................................................ 38.150 A'Beckett, Re [1941] VLR 283 ..................................................................................... 29.180, 29.200 Abella v Anderson [1987] 2 Qd R 1 .............................................................................. 32.75, 32.110 Aberdeen Railway Co v Blaikie (1854) 1 Macq 461 ................................................................... 22.95 Abigail v Lapin (1934) 51 CLR 58; [1934] AC 491 .................................................. 1.110, 2.10, 2.25, 2.35, 2.130 Abigroup Ltd v Abignano (1992) 39 FCR 74 ........................................................................... 14.140 Able Demolitions and Excavations Pty Ltd v BHP Billiton Direct Reduced Iron Pty Ltd [2008] WASC 136 .............................................................................................................. 31.145 Aboody v Ryan (2012) 17 BPR 32,359 ........................................................................... 9.115, 9.120 Aboriginal Hostels Ltd v Darwin City Council (1985) 55 LGRA 414 ......................................... 29.240 Abou-​Rahmah v Al-​Haji Abdul Kadir Abacha [2007] 1 Lloyd's Rep 115 ...................................... 38.85 Abraham v Johns [2010] VSC 33 ............................................................................................... 33.25 Abrahams v Biggs [2011] FCA 1475 ............................................................................................ 6.35 Abram Steamship Co Ltd v Westville Shipping Co Ltd [1923] AC 773 ............................ 35.40, 35.90 Absolute Analogue Inc v Sundance Resources Ltd (No 3) [2014] WASC 283 ............................. 34.75 Academy of Health and Fitness Pty Ltd v Power [1973] VR 254 ...................................... 35.55, 35.90 Accom Finance Pty Ltd v Mars Pty Ltd (2007) 13 BPR 24,729 ................................................... 13.55 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 114 ALR 355 .......................................................................................................................... 8.95 Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 ........ 10.115, 10.120, 10.125, 10.135 ACE Insurance Ltd v Trifunovski (2011) 200 FCR 532 .............................................................. 10.360 Acland v Gaisford (1816) 2 Mad 28; 56 ER 245 ...................................................................... 24.100 Acmnet Pty Ltd v AI Tel Pty Ltd [2007] SASC 96 ...................................................................... 31.100

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Equity and Trusts in Australia

ACN 074 971 109 (as Trustee for Argot Unit Trust) v National Mutual Life Association of Australasia Ltd (2008) 21 VR 351 ................................................................................... 10.260 ACN 077 991 890 Pty Ltd v National Australia Bank Ltd (2007) 13 BPR 24,299 ...................... 14.225 Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 144 ALR 528 ...................................... 14.165 Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514 ........................................................... 13.70 Across Australia Finance Pty Ltd v Kalls (2008) 3 BFRA 205 ..................................................... 14.225 Actionstrength Ltd v International Glass Engineering SpA [2003] 2 AC 541 .............................. 18.35 Active Leisure (Sports) Pty Ltd v Sportsman's Australia Ltd [1991] 1 Qd R 301 .............. 31.15, 31.50, 31.60, 31.120, 31.145 Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 ........................ 31.185 Adams and Kensington Vestry, Re (1884) 27 Ch D 394 ............................................................. 17.20 Adams v Broke (1842) 1 Y & C 627; 62 ER 1146 ..................................................................... 33.105 Adams v Executive Director, Fisheries WA [2000] WASC 34 ..................................................... 10.395 Adams v Zen 28 Pty Ltd [2010] QSC 36 ................................................................................... 27.55 Adamson, Ex parte (1878) 8 Ch D 807 ..................................................................................... 24.35 Adamson v Hayes (1973) 130 CLR 276 ..................................................................................... 18.10 Adamson v Melbourne and Metropolitan Board of Works [1929] AC 142 ............................... 29.220 Adamson v Reid (1880) 6 VLR (E) 164 ......................................................................... 22.175, 24.65 Adderley v Dixon (1824) 1 Sim & St 607; 57 ER 239 ................................................................ 33.20 Addison Wesley Longman Australia Pty Ltd v Kopystop Pty Ltd [2004] FCA 1518 .................... 32.155 Addstead Pty Ltd v Liddan Pty Ltd (1997) 25 ACSR 175 ................................................. 38.70, 16.15 Adenan v Buise [1984] WAR 61 ................................................................................................. 9.150 Admar Computers Pty Ltd v Ezy Systems Pty Ltd (1997) 38 IPR 659 ........................................... 6.15 Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd [2017] VSCA 326 ................................................................................................................. 4.265 Aectra Refining and Manufacturing Inc v Exmar NV [1994] 1 WLR 1634 ...................... 30.95, 30.110 Aequitas v AEFC (2001) 19 ACLC 1006 .................................................... 4.235, 35.15, 38.75, 38.85 Affiliated FM Insurance Co v Quintette Coal Ltd (1998) 156 DLR (4th) 307 .............................. 14.30 AFG Insurances Ltd v City of Brighton (1972) 126 CLR 655 ........................................... 14.35, 14.40 AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464 ................................ 4.155, 6.290, 6.295, 6.370, 37.175 Agar, Re [1981] 2 NZLR 684 .......................................................................................... 25.40, 25.50 AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2011] 1 Qd R 306 ................................................... 2.30 Aged Care Services Pty Ltd v Kanning Services Pty Ltd [2013] NSWCA 393 ................................ 1.65 Agip (Africa) Ltd v Jackson [1990] Ch 265 ................................................................. 38.100, 38.110 Agip (Africa) Ltd v Jackson [1991] Ch 547 ........................................... 38.100, 38.110, 39.10, 39.25 Agip SpA v Navigazione Alta Italia SpA (the “Nai Genova”) [1984] 1 Lloyd's Rep 353 .................................................................................... 37.105, 37.125, 37.135 AGL Victoria Pty Ltd v Lockwood (2003) 10 VR 596 .................................................................. 36.35 Agricultural & Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 ...................................... 30.140 Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 ........................................................ 7.220, 7.255, 7.260 Agusta Pty Ltd v Provident Capital Ltd (2012) 16 BPR 30,397 ...................................... 2.130, 23.155 Ah Chung, Re (1915) 11 Tas LR 173 ......................................................................................... 17.15 Ahmad v Secret Garden (Cheshire) Ltd [2013] 3 EGLR 42 .......................................... 37.100, 37.110 Ahmed & Co, Re (2006) 8 ITELR 779 ............................................................................. 17.40, 39.90 AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 .......... 24.30, 24.35, 24.40, 34.15 Aid/​Watch Incorporated v Federal Commissioner of Taxation (2010) 241 CLR 539 ............................................................................................... 29.30, 29.40, 29.105 AIK Corporation Pty Ltd (admin apptd) v 119 Nicholson Road Pty Ltd [2015] WASC 391 ......... 25.45 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 ................................................. 37.15 Air Canada v British Columbia (1989) 59 DLR (4th) 161 ................................................ 8.105, 8.130 Air Canada v M & L Travel Ltd (1993) 108 DLR (4th) 592 ......................................................... 38.55 Air Express Ltd v Ansett Ltd v Sportsman's Australia Ltd [1991] 1 Qd R 301 ............................ 31.130 Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 ......................................................................................................... 31.130, 31.140, 34.105 xxvi

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Table of Cases

Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 ................................................. 19.85, 26.45, 28.195 Air New Zealand Ltd v Leibler (unreported, SC(Vic), 19 November 1996) ............................... 37.130 Airbus Industrie GIE v Patel [1999] 1 AC 119 .......................................................................... 31.195 AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Ltd [2015] NSWSC 216 ...... 20.35 Aitken's Trust, Re [1964] NZLR 838 ........................................................................................... 25.70 Akai Pty Ltd v People's Insurance Co Ltd [1998] 1 Lloyd's Rep 90 ............................................ 31.195 Akers v Samba Financial Group [2017] AC 424 ......................................................................... 39.20 Akins v National Australia Bank (1994) 34 NSWLR 155 ............................................ 7.95, 9.20, 9.80, 9.105, P.150 Akita Holdings Ltd v Attorney-​General of the Turks and Caicos Islands [2017] AC 590 ............ 38.100 Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 ......................................................... 8.95, 35.110 Aktiebolaget Hässle v Biochemie Australia Pty Ltd (2003) 57 IPR 1 .......................................... 31.165 Alacoque v Roache [1998] 2 NZLR 250 ................................................................................... 29.370 Alati v Kruger (1955) 94 CLR 216 ............................................................ 35.10, 35.15, 35.40, 35.50 Alati v Wei Sheung (2000) 34 ACSR 489 ................................................................................. 19.140 Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 .......................................................................................... 14.125, 14.130, 14.140, 14.185, 14.190, 14.195 Alcoa of Australia Retirement Plan Pty Ltd v Frost (2012) 36 VR 618 ....................................... 28.165 Alcorn v Canada (Commissioner of Corrections) (1997) 153 DLR (4th) 175 .............................. 31.50 Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435 ...................... 7.10, 7.165, 7.180, 7.280, 9.15, 9.155 Aldrich v Cooper (1803) 8 Ves 382; 32 ER 402 ....................... 14.50, 14.55, 14.215, 14.230, 14.240 Alec Finlayson Pty Ltd v Royal Freemason Benevolent Institution of New South Wales Nominees Ltd [2013] NSWSC 1168 ......................................................... 30.40 Alexander v Alexander [2011] WTLR 187 .................................................................................. 25.50 Alexander v Perpetual Trustees WA Ltd [2001] NSWCA 240 ....................................... 24.140, 24.150 Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109 ........................... 24.15, 24.140, 24.150 Alexander v Tse [1988] 1 NZLR 318 .......................................................................................... 33.30 ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2012) 245 CLR 338 ......................................................................................................................... 3.10 Alice Springs Town Council v Mpweteyerre Aboriginal Corporation (1997) 139 FLR 236 ........ 29.240 Allan v Allan (No 2) (2012) 49 Fam LR 461 ............................................................................. 20.125 Allan v Rea Brothers Trustees Ltd [2002] EWCA Civ 85 .................................................. 24.160, P.185 Allcard v Skinner (1887) 36 Ch D 145 ........................................................... 7.30, 7.45, 7.55, 7.270 Allen-​Meyrick's Will Trusts, Re [1966] 1 WLR 499 ....................................................... 16.185, 23.175 Allen v Distillers Co (Biochemicals) Ltd [1974] 2 WLR 481 ......................................................... 25.65 Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 .............................................................. 25.15 Allen v Jambo Holdings Ltd [1980] 1 WLR 1252 ........................................................................ 32.45 Allen v Snyder [1977] 2 NSWLR 685 ............................................ 17.50, 18.25, 18.30, 26.05, 26.60, 26.130, 38.215, 38.220 Allen's Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202 ................................................. 1.65 Allhusen v Whittell (1867) LR 4 Eq 295 ................................................................................... 22.150 Allied Arab Bank v Hajjar [1988] QB 787 ................................................................................. 32.130 Allied Irish Bank v Ashford Hotels Ltd [1997] 3 All ER 309 .......................................... 31.130, 36.135 Allied Irish Bank v Byrne [1995] 2 FLR 325 ................................................................................ 7.180 Allinson v Permanent Trustee Australia Ltd (unreported, SC(NSW), Powell J, 8 September 1988) .............................................................................................................. 21.100 Allnutt v Wilding [2007] BTC 8003 ........................................................................................... 37.65 Alma Hill Constructions Pty Ltd v Onal (2007) 16 VR 190 ......................................................... 3.135 Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd (2008) 66 ACSR 594 ....................................................................................................................... 8.115 Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 .............................................................. 22.120 Alternative Investment Solutions (General) Ltd v Valle de Uco Resort and Spa SA [2013] EWHC 333 (QB) ....................................................................................................... 32.60 xxvii

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Equity and Trusts in Australia

Altson, Re [1955] VLR 281 .................................................................................. 17.15, 17.20, 23.95 Altson v Equity Trustees, Executors and Agency Co (1912) 14 CLR 341 ..................................... 23.85 Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676 .............. 16.70, 16.75 Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1981] 3 All ER 577 ......................................................................................... 10.160, 10.310 Amaltal Corporation Ltd v Maruha Corporation [2007] 3 NZLR 192 ................... 4.265, 4.275, 34.45 Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2003] 2 NZLR 92 .................. 11.40, 13.95 Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2004] 2 NZLR 615 ................ 11.40, 13.95 Ambridge Investments Pty Ltd (in liq) v Baker [2010] VSC 59 ...................................... 37.15, 38.200 American Cyanamid Co v Ethicon Ltd [1975] AC 396 ............................. 6.320, 31.50, 31.90, 31.95, 31.100, 31.105, 31.120, 31.125, 31.130, 31.165 American Express International Banking Corp v Hurley [1985] 3 All ER 564 ............................... 36.30 American Surety Co of New York v Wrightson (1910) 103 LT 663 ........................................... 14.180 Amertek Inc v Canadian Commercial Corp (2005) 256 DLR (4th) 287 ...................................... 4.265 AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 ..................... 13.55 AMEV-​UDC Finance Ltd v Austin (1986) 162 CLR 170 .................................................... 13.80, 13.95 AMI Australia Holdings Pty Ltd v Fairfax Media Publications Pty Ltd (2011) Aust Torts Rep 82-​077 .............................................................................................. 6.240, 6.305 Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 ........................................................ 26.80, 26.140 AMKMK v Chettiar [1955] AC 230 .......................................................................................... 39.100 AMM v HXW [2010] EWHC 2457 ............................................................................................... 6.95 Ammon v Consolidated Minerals Ltd (No 3) [2007] WASC 232 ....................................... 4.65, 6.235 AMP Society v Specialist Funding Consultants Pty Ltd (1991) 24 NSWLR 326 ......................... 30.110 AMP (UK) plc v Barker [2001] PLR 77 ........................................................................... 23.50, 28.185 AMP Workers' Compensation Services (NSW) Ltd v QBE Insurance Ltd (2001) 53 NSWLR 35 ....................................................................................................... 14.125, 14.200 Ampelite Fibreglass Pty Ltd v Alsynite Roofing Products Pty Ltd (2000) 49 IPR 271 ................. 31.155 Ampol Ltd v Calaby Pty Ltd (1991) 109 ALR 343 .................................................................... 10.320 Amtel Pty Ltd v Ah Chee [2015] WASC 341 ........................................................ 7.235, 7.250, 7.260 Amway Corporation v Eurway International Ltd [1974] RPC 82 ....................................... 6.50, 6.215 Anachuna Nwakobi v Eugene Nzekwu [1964] 1 WLR 1019 ....................................................... 30.80 Anaconda Nickel Ltd v Edensor Nominees Pty Ltd (2004) 50 ACSR 679 .................................. 10.310 Anderson v McPherson (No 2) (2012) 8 ASTLR 321 ........................................ 26.75, 26.120, 26.135 Andrabell Ltd, Re [1984] 3 All ER 407 ....................................................................................... 16.85 Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (No 7) (2005) 227 ALR 113 ........................................................................................................................ 17.40 Andrew Garrett Wines Resorts Pty Ltd v National Australia Bank Ltd [2006] SASC 381 ............ 21.125 Andrew Knox Holdings Pty Ltd v ANZ Banking Group Ltd [1997] ANZ Conv R 102 .................. 35.95 Andrew v Zant Pty Ltd [2004] FCA 1716 ................................................................................ 19.140 Andrews Advertising Pty Ltd v Andrews (2014) 99 ACSR 164 .................................................... 38.70 Andrews v Australia and New Zealand Banking Group Ltd (2011) 211 FCR 53 ......................... 13.15 Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 ................................................................. 11.80, 13.05, 13.55, 13.95, 13.100, P.40 Androma Pty Ltd, Re [1987] 2 Qd R 134 ........................................................................ 3.105, 3.150 Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365 ........................................................ 37.115 Ange v First East Auction Holdings Pty Ltd (2011) 284 ALR 638 ................................................ 13.80 Angelides v James Steadman Hendersons Sweets Ltd (1927) 40 CLR 43 ................................. 30.175 Anglican Trusts Corporation of the Diocese of Gippsland v Attorney-​General [2008] VSC 352 ............................................................................................................................ 29.260 Anglo-​Italian Bank v Davies (1878) 9 Ch D 275 ...................................................................... 36.130 ANI Corporation Ltd v Celtite Australia Pty Ltd (1991) AIPC ¶90–​728 ......................................... 6.80 Annandale, Re [1986] 1 Qd R 353 .......................................................................................... 29.315 Anning v Anning (1907) 4 CLR 1049 .................................................................. 3.80, 18.95, 18.105

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Table of Cases

Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 ............... 6.30, 6.55, 6.370 Ansett Australia Ground Staff Superannuation Fund Pty Ltd v Ansett Australia Ltd (2003) 176 FLR 393 ............................................................................................................. 37.35 Ansett Australia Ground Staff Superannuation Plan Pty Ltd (ACN 065 590 178) v Ansett Australia Ltd (ACN 004 209 410) (2004) 49 ACSR 1 ............................................... 23.170 Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd (2002) 174 FLR 1 ............................................................................................................... 28.150 Anson v Anson (2004) 12 BPR 22,303 .......................... 26.90, 38.15, 38.190, 38.205, 38.250, P.110 Anson v Potter (1879) 13 Ch D 141 ........................................................................................ 25.140 Antill v Mostyn [2010] NSWSC 587 ................................................................ 22.30, 22.180, 22.220 Anton Piller KG v Manufacturing Processes Ltd [1976] 1 Ch 55 .................................. 32.145, 32.155 Antoni v Antoni [2007] UKPC 10 ............................................................................................ 26.145 Anvil Jewellery Ltd v Riva Ridge Holdings Ltd [1987] 1 NZLR 35 .................................. 31.50, 32.185 ANZ Banking Group Ltd v Widin (1990) 26 FCR 21 ............................................ 12.25, 12.35, 12.80 ANZ Executors and Trustees Ltd v Humes Ltd [1990] VR 615 ..................................... 33.135, 33.145 ANZ Trustees Ltd v Attorney-​General [2008] NSWSC 1081 ..................................................... 29.180 Apand Pty Ltd v Kettle Chip Company Pty Ltd (1999) 43 IPR 225 ........................................... 34.160 APM Wood Products Pty Ltd v Kimberley Homes Pty Ltd (unreported, SC(NSW), 17 February 1989) ............................................................................................................. 30.110 Apostolou v VA Corporation Aust Pty Ltd (2010) 77 ACSR 84 ................................................. 23.130 Apostolovski v Total Risk Management Pty Ltd (2010) 79 NSWLR 432 ...................................... 28.85 Apotex Fermentation Inc v Novopharm Ltd (1998) 162 DLR (4th) 111 ..................................... 6.345 Apple Fields Ltd v Damesh Holdings Ltd [2001] 1 NZLR 194 .................................................... 34.50 Applegate v Moss [1971] 1 QB 406 ........................................................................................ 24.185 Aquaculture Corporation v NZ Green Mussel Co Ltd [1990] 3 NZLR 299 .................... 6.360, 34.125, P.45, P.50 Aquasun Pty Ltd v Coverdale Ram Pty Ltd [2000] NSWSC 1146 ......................... 32.40, 32.65, 32.70 Aquilina Holdings Pty Ltd v Lynndell Pty Ltd [2008] QSC 57 ..................................................... 14.70 Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231 ......................... 13.50 Arakella Pty Ltd v Paton (2004) 60 NSWLR 334 ............................................................. 25.35, 25.45 Arakella Pty Ltd v Paton (No 2) (2004) 49 ACSR 706 ......................... 22.10, 24.200, 24.205, 24.210 Ararimu Holdings Ltd, Re [1989] 3 NZLR 487 ......................................................................... 39.100 Arcadia Holdings Pty Ltd v Brown (1997) 18 WAR 350 ........................................................... 10.155 Archbishop of Melbourne v Council of Trustees of National Gallery (Vic) [1998] 2 VR 391 ........ 31.75 Archer v Archer [2000] NSWCA 314 ........................................................................................... 7.10 Ari v Decevic [2013] NSWSC 1967 ........................................................................................... 11.75 Ariaans v Hastings (1996) 36 IPR 211 ........................................................................................ 30.10 Ariell (No 2), Re [1974] Qd R 293 ........................................................................................... 18.130 Aries Tanker Corp v Total Transport Ltd (“The Aries”) [1977] 1 Lloyd's Rep 334 ...................... 30.125 Aristoc Industries Pty Ltd v R A Wenham (Builders) Pty Ltd [1965] NSWR 581 ................................................................................................... 31.50, 33.45, 37.145 Aristrocrat Techologies Australia Pty Ltd v Allam (2016) 327 ALR 595 ....................................... 31.80 Arjon Pty Ltd v Commissioner of State Revenue (2003) 8 VR 502 ............................................ 23.125 Arklow Investments Ltd v MacLean [2000] 1 WLR 594 .................................. 4.45, 4.55, 4.290, P.145 Armitage v Nurse [1998] Ch 241 ................................................................. 24.105, 24.145, 24.150, 24.185, 24.190 Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 ............................................................. 16.75 Armstrong, Re [1960] VR 202 ................................................................................................... 17.10 Armstrong v Armstrong (2004) FLC ¶93–​190 ......................................................................... 38.250 Armstrong v Attorney-​General (NSW) (1934) 34 SR (NSW) 54 ................................................. 29.75 Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 ........................ 14.170, 14.180 Armstrong v Commonwealth Bank of Australia (1999) 9 BPR 17,035 ........................................ 7.235 Armstrong World Industries (Australia) Pty Ltd v Parma (2014) 101 ACSR 150 ......................................................................................... 31.100, 31.145, 31.165

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Equity and Trusts in Australia

Arnot v Hill-​Douglas [2006] NSWSC 429 ................................................................................ 10.205 Arrowcrest Group Pty Ltd v Ford Motor Company of Australia Ltd [2002] FCA 1450 ................. 9.175 Artcraft Pty Ltd v Dickson [2014] SASC 108 ............................................................................ 38.100 Arthur Andersen & Co v Gibson [2002] BCL 715 ...................................................................... 4.245 Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874 ....... 14.20, 14.30, 14.35, 14.45 Arthur Brady Family Trust, Re [2015] 2 Qd R 172 ...................................................................... 25.45 Arthur v Public Trustee (1988) 90 FLR 203 ................................................................... 26.80, 38.195 ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512 .............................. 34.75, 34.115, 34.120 ASB Bank Ltd v Harlick [1996] 1 NZLR 655 ........................................................... 7.45, 7.125, 7.180 ASB Securities Ltd v Guerts [2005] 1 NZLR 484 ......................................................................... 8.140 Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 ........................................................ 20.135 Asea Brown Boveri Superannuation Fund No 1 Pty Ltd v Asea Brown Boveri Pty Ltd [1999] 1 VR 144 ..................................................................................................... 23.35, 28.170 Ash v Ash (No 2) [2017] VSC 569 ............................................................................................. 24.70 Ashfield Municipal Council v Joyce [1978] AC 122 .................................................................. 29.200 Ashrafinia v Ashrafinia (No 4) [2014] NSWSC 676 .................................................................. 21.115 Ashton (deceased), Re [1955] NZLR 192 .......................................... 29.180, 29.185, 29.295, 29.300 Ashton v Ashton (1986) FLC ¶91–​777 .................................................................................... 20.135 Ashworth v Royal National Theatre [2014] 4 All ER 238 ............................................................ 33.80 Asia Pacific International Pty Ltd v Dalrymple [2000] 2 Qd R 229 ..................................... 9.45, 9.140 Aslan v Kopf (unreported, CA(NSW), 16 May 1995) ............................................................... 38.135 Aspermont Ltd v Lechmere Financial Corporation (2002) 27 WAR 1 .............................. 32.25, 32.45 Aspinall, Re (1913) 30 WN (NSW) 215 ................................................................................... 22.225 Assicurazioni Generali de Trieste v Empress Assurance Corporation Ltd [1907] 2 KB 814 ........... 14.45 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 ................................................................................. 16.80, 16.85, 16.115, 16.165, 17.15, 17.90, 27.90 Associated Alloys Pty Ltd v Metropolitan Engineering and Fabrications Pty Ltd (1996) 20 ACSR 205 ....................................................................................................................... 16.80 Associated Japanese Bank (International) Ltd v Credit du Nord SA [1988] 3 All ER 902 .............................................................................................................. 8.145, 8.160 Associated Minerals Consolidated Ltd v Wyong Shire Council [1975] AC 538 ................ 30.55, 30.80 Associated Newspapers Ltd v His Royal Highness The Prince of Wales [2008] Ch 57 ................. 6.120 Associated Securities Ltd and the Companies Act, Re [1981] 1 NSWLR 742 ................. 27.65, 27.100 Association of Franciscan Order of Friars Minor v City of Kew [1967] VR 732 ............ 29.175, 29.195, 29.200 Astley v Austrust Ltd (1999) 197 CLR 1 ..................................................................................... 34.50 Astor's Settlement Trusts, Re [1952] Ch 534 ............................................................... 17.150, 17.155 Astram Financial Services Pty Ltd v Bank of Queensland Ltd [2010] FCA 1010 .......................... 27.25 Atilgan v Atilgan [1999] NSWSC 324 ........................................................................................ 26.75 Atkins v Godfrey [2006] WASC 83 ............................................................................................ 22.90 Atkinson (deceased), Re [1971] VR 612 ..................................................................................... 22.10 Atkinson's Will Trusts, Re [1956] 3 All ER 738 ............................................................................ 26.20 Atlantis Holdings Pty Ltd, Re [2012] NSWSC 112 .................................................................... 23.180 Attenborough v Solomon [1913] AC 76 ................................................................................. 16.205 Attorney-​General for England and Wales v R [2002] 2 NZLR 91 ........................................ 7.190, P.55 Attorney-​General for England and Wales v R [2004] 2 NZLR 577 ................................................ 7.55 Attorney-​General for England and Wales v Television New Zealand Ltd (1998) 44 IPR 123 ........................................................................................................................... 6.160 Attorney-​General (Hong Kong) v Reid [1994] 1 AC 324 ................................................. 38.35, 38.40 Attorney-​General (NSW) v Eagar (1864) 3 SCR (NSW) 234 ..................................................... 29.190 Attorney-​General (NSW) v Elliott (1868) 6 SCR (NSW) Eq 85 .................................................. 21.110 Attorney-​General (NSW) v Metcalfe (1904) 1 CLR 421 ............................................................ 29.290 Attorney-​General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209 .................... 29.155, 29.315 xxx

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Table of Cases

Attorney-​General (NSW) v Quin (1990) 170 CLR 1 ................................................................. 10.395 Attorney-​General (NSW) v Sawtell [1978] 2 NSWLR 200 ......................................................... 29.220 Attorney-​General (NSW) v Walker (1914) 31 WN (NSW) 59 ................................................... 29.240 Attorney-​General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 .................... 9.190, P.155 Attorney-​General of Manitoba and Metropolitan Stores (MTS) Ltd, Re (1987) 38 DLR (4th) 321 ............................................................................................................... 31.125 Attorney-​General of Ontario v Ballard Estate (1995) 119 DLR (4th) 750 .................................... 20.60 Attorney-​General of the Cayman Islands v Wahr-​Hansen [2001] 1 AC 75 ................................ 29.290 Attorney-​General (SA) v Bray (1964) 111 CLR 402 .................................................................. 29.220 Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 8 NSWLR 341 ........... 30.175 Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 ................................................................................................... 5.10, 6.80, 6.155, 6.160, 6.230, 6.285 Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 .............................................................................................................. 6.160, 6.285 Attorney-​General (UK) v Wellington Newspapers Ltd [1988] 1 NZLR 129 ............................................................................................ 6.10, 6.80, 6.160, 6.285 Attorney-​General v Alford (1855) 4 De GM & G 843; 43 ER 737 .............................................. 24.65 Attorney-​General v Blake [1998] 1 All ER 833 .................................................................. 4.45, 4.290, P.60, P.145 Attorney-​General v Blake [2001] 1 AC 268 ................................................ 4.45, 4.290, 6.75, 34.115, 39.80, P.60, P.65, P.145 Attorney-​General v Cahill [1969] 1 NSWLR 85 ........................................................................ 29.260 Attorney-​General v Forestry Corporation of New Zealand Ltd [2001] 1 NZLR 172 .................. 16.140 Attorney-​General v Fulham [2002] NSWSC 629 ......................................................... 29.340, 29.365 Attorney-​General v Gray [1977] 1 NSWLR 406 ....................................................................... 10.360 Attorney-​General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 ........................................................................................... 6.155, 6.160, 6.230, 6.240, 6.255, 6.295, 6.325, 6.345 Attorney-​General v Guardian Newspapers (No 2) [1990] 1 AC 109 ............................... 6.160, 6.255 Attorney-​General v Jacobs Smith [1895] 2 QB 341 ....................................................... 2.125, 18.115 Attorney-​General v Jonathan Cape Ltd [1976] 1 QB 752 ........................................................... 6.155 Attorney-​General v Marchant (1866) LR 3 Eq 424 ................................................................... 29.145 Attorney-​General v Murdoch (1856) 2 K & J 571; 69 ER 910 .................................................. 21.130 Attorney-​General v New South Wales Henry George Foundation Ltd [2002] NSWSC 1128 ..................................................................................................................... 29.105 Attorney-​General v Punch Ltd [2003] 1 AC 1046 ................................................ 6.245, 6.325, 31.15 Attorney-​General v Schonfield [1980] 3 All ER 1 ...................................................................... 24.125 Attorney-​General v Sheffield Gas Consumers Co (1853) 3 De GM & G 304; 43 ER 119 ............ 31.75 Atwell v Atwell [2002] TASSC 119 ............................................................................................. 17.20 Atwell v Roberts (2012) 43 WAR 507 ........................................................................................ 1.115 Atwood v Maude (1868) LR 3 Ch App 369 ............................................................................. 38.175 Auag Resources Ltd v Waihi Mines Ltd [1994] 3 NZLR 571 .............................................. 4.65, 4.215 Auckland Area Health Board v Television New Zealand Ltd [1992] 3 NZLR 406 ....................... 31.175 Auckland Medical Aid Trust v Commissioner of Inland Revenue [1979] 1 NZLR 382 ............................................................................................. 29.135, 29.145, 29.280 Audio Visual Copyright Society Ltd v Australian Record Industry Association Ltd (1999) 152 FLR 142 ........................................................................................................................ 25.45 Ausbro Forex Pty Ltd v Mare (1986) 4 NSWLR 419 ................................................................... 32.40 Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637 ................. 27.65, 27.95, 27.100 Aussie Invest Corporation Pty Ltd v Pulcesia Pty Ltd (2005) 13 VR 168 ................ 11.30, 11.55, 11.75 Aussiegolfa Pty Ltd v Commissioner of Taxation [2018] FCAFC 122 .......................................... 28.20 Austec Wagga Wagga Pty Ltd v Rarebreed Wagga Pty Ltd [2012] NSWSC 343 ....................... 21.125 Austin v Austin (1906) 3 CLR 516 ............................................................................................. 22.20 Austin v Keele (1987) 61 ALJR 605 .................................................................. 26.80, 26.100, 38.225 xxxi

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Equity and Trusts in Australia

Austin v Royal (1999) 47 NSWLR 27 ......................................................................................... 14.70 Austino Wentworthville Pty Ltd v Metroland Australia Ltd (2013) 93 ACSR 297 .......................... 3.35 Austin's Settlement, Re [1960] VR 532 ...................................................................................... 23.95 Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 .............. 10.75, 10.165, 10.195, 10.270, 10.310, 10.345 Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524 .................................................................................................................. 10.295 Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302 ........... 24.65 Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 ................................................................................................ 14.50, 14.55, 14.70, 27.95 Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467 ....................................................................... 30.15, 37.90, 37.100 Australia and New Zealand Banking Group Ltd v Alirezai (2002) Q ConvR ¶54–​574 .................................................................................................... 7.165, 9.115 Australia and New Zealand Banking Group Ltd v Alirezai (2004) Q ConvR ¶54–​601 .............................................................................. 7.165, 7.180, 7.255, 9.115 Australia and New Zealand Banking Group Ltd v Barry [1992] 2 Qd R 12 ................................... 9.80 Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 ....................................................................................................... 7.235, 9.25, 9.155 Australia and New Zealand Banking Group Ltd v Karam (2006) 64 NSWLR 149 ......................... 8.15 Australia and New Zealand Banking Group Ltd v National Mutual Life Nominees Ltd (1977) 15 ALR 287 ................................................................................................................ 2.60 Australia and New Zealand Banking Group Ltd v Petrik [1996] 2 VR 638 ............ 7.280, 9.155, 35.25 Australia Asia Pacific Hotels Ltd v Australian Frontier Holiday Operations Pty Ltd [2000] NSWSC 340 ............................................................................................................. 31.65 Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683 ....................................................................................... 1.140, 2.60, 2.70 Australia Estates Pty Ltd v Cairns City Council [2005] QCA 328 ...................................... 8.185, 8.190 Australian Boot Traders Employees' Federation v Commonwealth (1954) 90 CLR 24 ................................................................................................................ 37.15, 37.30 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 .............................................................................. 6.10, 6.25, 6.120, 6.265, 6.270, 6.275, 6.375, 31.05, 31.30, 31.35, 31.175, P.140, P.160 Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 ................... 31.90, 31.95, 31.100, 31.105, 31.175, 31.180 Australian Building & Technical Solutions Pty Ltd v Boumelhem (2009) 2 ASTLR 336 ......................................................................................................... 38.195, 38.210 Australian Capital Television Pty Ltd v Commonwealth (No 2) (1992) 177 CLR 106 ................................................................................................................ 5.10, 5.30 Australian Capital Territory Commissioner for Revenue v Slaven (2009) 178 FCR 334 ............. 23.130 Australian Co-​operative Foods Ltd v Norco Co-​operative Ltd (1999) 46 NSWLR 267 ..................................................................................................... 10.200, 10.205 Australian Coal and Shale Employees' Federation v Commonwealth (1953) 94 CLR 621 .......................................................................................................................... P.180 Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 157 CLR 605 ..................................................................................................................... 31.160 Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 ............................................................................................................. 9.175, 31.05 Australian Competition and Consumer Commission v Albert (2005) 223 ALR 467 .................... 31.15 Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2000) 96 FCR 491; 169 ALR 324 .............................................................................. 9.170, P.150 Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 ....................................................................... 8.15, 9.25, 9.170, 9.175, P.160

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Table of Cases

Australian Competition and Consumer Commission v Chaste Corporation Pty Ltd (in liq) (2003) 44 ACSR 668 ......................................................................................... 32.135 Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 22 ACSR 539 ...................................................................................................... 9.170 Australian Competition and Consumer Commission v Danoz Direct Pty Ltd (2003) 60 IPR 296 ........................................................................................................................... 37.30 Australian Competition and Consumer Commission v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506 ...................................................................................................... 37.60 Australian Competition and Consumer Commission v Lee Lee Pty Ltd (2000) ATPR ¶41–​742  ..................................................................................................................... 9.185 Australian Competition and Consumer Commission v Lux Distributors Pty Ltd [2013] FCAFC 90 ............................................................................................................................ 9.190 Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 ................... 9.185 Australian Competition and Consumer Commission v MSY Technology Pty Ltd (2012) 201 FCR 378 ............................................................................................................ 37.05 Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301; 189 ALR 76 ................................................................................ 9.25, 9.45, 9.170, P.150 Australian Competition and Consumer Commission v Simply No-​Knead (Franchising) Pty Ltd (2000) 178 ALR 304 ................................................................................................. 9.180 Australian Competition and Consumer Commission v Z-​Tek Computer Pty Ltd (1997) 78 FCR 197 ......................................................................................................................... 31.05 Australian Competition and Consumer Commission v Zanok Technologies Pty Ltd [2009] FCA 1124 ................................................................................................................. 31.05 Australian Conservation Foundation Inc v Commissioner of State Revenue [2002] VCAT 1491 .29.230 Australian Conservation Foundation Inc v Commonwealth (1980) 146 CLR 493 ....................... 37.45 Australian Conservation Services Pty Ltd v Liladel Holdings Pty Ltd (2017) 12 ACTLR 124 ......... 21.55 Australian Consolidated Investments Ltd v England (1995) 183 LSJS 408 .................................. 9.170 Australian Crime Commission v Gray [2003] NSWCA 318 ......................................... 10.115, 10.130, 10.135, 10.270 Australian Eagle Insurance Co Ltd v Mutual Acceptance (Insurance) Pty Ltd [1983] 3 NSWLR 59 ...................................................................................................................... 14.190 Australian Elizabethan Theatre Trust, Re (1991) 102 ALR 681 ............... 16.110, 27.80, 27.95, 27.100 Australian Executor Trustees Ltd v Attorney-​General (WA) [2015] WASC 439 .......................... 23.170 Australian Executor Trustees Ltd v Ceduna District Health Services Inc (2006) 245 LSJS 371 ..................................................................................................................... 29.330 Australian Executor Trustees Ltd v Provident Capital Ltd (recs and mgrs apptd) (in liq) [2013] FCA 1461 ...................................................................................................... 36.85 Australian Federal Police, Commissioner of v Cornwell (1990) 98 ALR 677 .............................. 23.125 Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 .......................................................................................................... 6.260, 14.105 Australian Football League v The Age Company Ltd (2006) 15 VR 419 ........................... 6.80, 6.295, 6.305, 6.320 Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 ................................................................................................ 2.10, 2.25, 2.40, 2.70 Australian Gypsum Ltd and Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54 ......................................................................................................................... 37.105 Australian Hardwoods Pty Ltd v Commissioner for Railways [1961] 1 WLR 425 ................................................................................................. 33.05, 33.150, 33.160 Australian Home Finance Pty Ltd, Re [1956] VLR 1 ................................. 27.20, 27.65, 39.90, 39.110 Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463 .............................. 10.220 Australian Iron and Steel Pty Ltd v Buck [1982] 2 NSWLR 889 ........................................ 32.65, 32.80 Australian Mutual Provident Society v Gregory (1908) 5 CLR 615 ............................................... 2.60 Australian National Airlines v Commonwealth of Australia (1986) 66 ALR 545 ........................ 31.145

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Equity and Trusts in Australia

Australian Olympic Committee Inc v Big Fights Inc (1999) 46 IPR 53 ...................................... 10.320 Australian Olympic Committee Inc v Big Fights Inc (No 2) (2000) 176 ALR 124 ........... 21.80, 25.150 Australian Postal Corporation v Gray (1989) 98 FLR 468 ......................................................... 31.185 Australian Postal Corporation v Lutak (1991) 21 NSWLR 584 ............................. 24.80, 26.40, 38.10, 39.75, 39.80 Australian Regional Credit Pty Ltd v Mula (2009) 14 BPR 26,779 .............................................. 7.255 Australian Securities and Investments Commission v Adler (No 3) (2002) 20 ACLC 576 ....................................................................................................................... 34.25 Australian Securities and Investments Commission v Arafura Equities Pty Ltd (2005) 56 ACSR 429 .............................................................................. 31.05, 36.05, 36.160 Australian Securities and Investments Commission v Atlantic 3–​Financial (Aust) Pty Ltd [2004] 1 Qd R 591 ...................................................................................................... 36.125 Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (2003) 44 ACSR 503 ...................................................................................................... 36.85 Australian Securities and Investments Commission v Australian Lending Centre Pty Ltd (No 3) (2012) 213 FCR 380 .................................................................................. 9.35, 9.195 Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (recs and mgrs apptd) (in liq) (controllers appt) (No 3) [2013] FCA 1342 ...................................................................................................... 22.25 Australian Securities and Investments Commission v Burke [2000] NSWSC 694 ...................... 32.125 Australian Securities and Investments Commission v Burnard (2007) 64 ACSR 360 ................... 38.15 Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509 ........................................................................................... 20.125, 20.135, 25.145 Australian Securities and Investments Commission v Chase Capital Management Pty Ltd (2001) 36 ACSR 778 .................................................................................................... 28.240 Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35 ........................................................................... 4.30 Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240 ...................................................................................... 23.170 Australian Securities and Investments Commission v Drake (No 2) (2016) 340 ALR 75 ................................................................................................ 22.25, 22.190, 24.150 Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd [2003] 1 Qd R 135 ............................................................................................................ 28.240 Australian Securities and Investments Commission v HLP Financial Planning (Aust) Pty Ltd (2007) 164 FCR 487 ...................................................................................................... 37.10 Australian Securities and Investments Commission v John McKenney Consulting Pty Ltd (2002) 43 ACSR 458 ...................................................................................................... 1.105 Australian Securities and Investments Commission v Koala Quality Produce Ltd (2002) 41 ACSR 628 .......................................................................................................... 28.240 Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 158 FLR 307 .......................................................... 1.160, 36.125, 36.160 Australian Securities and Investments Commission v Letten (No 7) (2010) 190 FCR 59 ....................................................................................................................... 39.115 Australian Securities and Investments Commission v Mapstone (2006) 59 ACSR 214 ....................................................................................................................... 31.05 Australian Securities and Investments Commission v Marshall Bell Hawkins Ltd (2002) 43 ACSR 340 ........................................................................................................ 32.125, 36.160 Australian Securities and Investments Commission v Mauer-​Swisse Securities Ltd (2002) 42 ACSR 605 ............................................................................................................ 31.05 Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132 ............................................................................................................ 9.180 Australian Securities and Investments Commission v Nelson (2003) 44 ACSR 719 ................... 39.115 Australian Securities and Investments Commission v Storm Financial Ltd (recs and mgrs apptd) (in liq) (No 5) (2012) 91 ACSR 122 ................................................................. 31.05 Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd (No 2) [2006] NSWSC 1264 ..................................................................... 24.125 xxxiv

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Table of Cases

Australian Securities and Investments Commission v Takaran Pty Ltd (2002) 170 FLR 388 ...................................................................................................................... 28.240 Australian Securities and Investments Commission v Takaran Pty Ltd (No 2) (2002) 194 ALR 743 ............................................................................................................. 36.05, 36.85 Australian Securities and Investments Commission v Triton Underwriting Insurance Agency (2004) 48 ACSR 249 ............................................................................................... 31.05 Australian Securities and Investments Commission v Young (2003) 173 FLR 441 .................... 36.160 Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1 ............ 22.25, 28.90, 28.250 Australian Securities Commission v Cooke (1996) 22 ACSR 580 .............................................. 36.160 Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 ........... 10.165 Australian Softwood Forests Pty Ltd v Attorney-​General (NSW) (1981) 148 CLR 121 ............... 28.240 Australian Steel & Mining Corporation Pty Ltd v Corben [1974] 2 NSWLR 202 ........................... 8.90 Australian Trade Commission v Film Funding & Management Pty Ltd (1989) 24 FCR 595 ....................................................................................................................... 19.140 Australian Workers' Union v Yallourn Energy Pty Ltd (2000) 95 IR 207 .................................... 31.195 Authorson v Canada (Attorney General) (2002) 215 DLR (4th) 496 ...................... 5.35, 16.15, 16.45 Autocaps (Aust) Pty Ltd v Pro-​Kit Pty Ltd (1999) AIPC ¶91–​516 ........................................ 30.35, P.40 Autodesk Inc v Dyason (1992) 173 CLR 331 ............................................................................... 6.15 Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 ......................................................... 6.15, 10.30 Automobile and General Finance Co Ltd v Hoskins Investments Ltd (1934) 34 SR (NSW) 375 .....................................................................................................................P.70, P.75 Auzcare Pty Ltd v Idameneo (No 123) Pty Ltd (2015) 91 NSWLR 581 ....................................... 13.70 Avanes v Marshall (2007) 68 NSWLR 595 ...................................................................... 20.35, 20.60 Avard v Harrison (1986) ASC ¶55–​525 .................................................................................... 37.145 Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 ............. 1.150 Avco Financial Services Ltd v White [1977] VR 561 .......................................................... 1.150, 2.55 Aveling v Knipe (1815) 19 Ves 441; 34 ER 580 ........................................................................ 26.110 Avon County Council v Howlett [1983] 1 WLR 605 ................................................................... 8.115 Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 ................................................ 8.40 AWA Ltd v Exicom Australia Pty Ltd (1990) 19 NSWLR 705 .......................................... 30.85, 30.110 AWB Ltd v Cole (No 2) (2006) 233 ALR 453 ............................................................................. 37.05 AXA Trustees Ltd v Attorney-​General [2000] VSC 530 ................................................ 22.190, 22.200 Axelsen v O'Brien (1949) 80 CLR 219 ..................................................................................... 33.145 Axxess Australia Pty Ltd v Primus Telecommunications (Aust) Pty Ltd [2000] VSC 64 ................ 31.55 Ayerst (Inspector of Taxes) v C & K (Construction) Ltd [1976] AC 167 ........................................ 1.10 Ayerst v C& K (Construction) Ltd [1976] AC 167 ...................................................................... 17.40 Ayerst v Jenkins (1873) LR 16 Eq 275 ........................................................................................ 19.30 AYSA Amateur Youth Soccer Association v Canada (Revenue Agency) [2007] 3 SCR 217 ......... 29.255

B B Johnson & Co (Builders) Ltd, Re [1955] Ch 634 ............................................... 36.20, 36.25, 36.45 B (KL) v British Columbia [2003] 2 SCR 403 .............................................................................. 4.310 B Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 KB 48 .................................................... 14.85 B v R (1996) 10 PRNZ 73 .......................................................................................................... 4.310 B v X [2011] 2 NZLR 405 .......................................................................................................... 16.05 Babanaft International Co SA v Bassante [1989] 1 All ER 433 .................................................. 32.110 Babsari Pty Ltd v Wong [2000] 2 Qd R 576 ............................................................................... 8.150 Baburin v Baburin [1990] 2 Qd R 101 ................................................................... 7.80, 30.15, 30.20 Baburin v Baburin (No 2) [1991] 2 Qd R 240 ...................................................... 7.270, 30.15, 30.20 Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan & Co Ltd (1918) 26 CLR 410 ......................................................................................................................... 37.65 Bacich v Australian Broadcasting Corporation (1992) 29 NSWLR 1 ............................................. 6.80 Bacon, Re [1907] 1 Ch 475 ..................................................................................................... 21.135 Bacon v O'Dea (1989) 88 ALR 486 .......................................................................................... 17.170 xxxv

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Equity and Trusts in Australia

Bacon v Pianta (1966) 114 CLR 634 ....................................................................................... 17.175 Baden v Societe Generale pour Favoriser le Developpement du Commerce et de L'Industrie en France SA [1992] 4 All ER 161 ........................................................................ 38.80 Baden's Deed Trusts (No 2), Re [1973] Ch 9 .............................................................. 17.115, 17.120 Badman v Drake [2008] NSWSC 1366 ...................................................................................... 7.130 Baglioni v Cavalli (1900) 83 LT 500 ........................................................................................ 14.245 Bahin v Hughes (1886) 31 Ch D 390 ...................................................................................... 23.160 Bahr v Nicolay (No 2) (1988) 164 CLR 604 .................... 1.05, 14.60, 16.125, 16.145, 17.50, 38.130 Bailey v Bailey [2009] NSWSC 1018 ........................................................................................ 21.110 Bailey v Barnes [1894] 1 Ch 25 ...................................................................................... 2.100, 2.130 Bailey v Cassaniti (1991) 5 BPR 11,683 ..................................................................................... 30.50 Baillie, Re [1928] VLR 171 ............................................................................................ 22.135, 23.40 Baillieu v Australian Electoral Commission (1996) 33 IPR 494 ..................................... 10.195, 10.230 Bain, Re [1939] 1 Ch 224 ....................................................................................................... 29.185 Baird v BCE Holdings Pty Ltd (1996) 40 NSWLR 374 ............... 30.150, 35.05, 35.40, 35.110, 37.120 Baird v Chambers (2010) 15 BPR 28,337 .................................................................................. 11.75 Baird v Smee [2000] NSWCA 253 .............................................................................. 38.135, 38.140 Baker (deceased), Re [1961] VR 641 ......................................................................................... 25.35 Baker v Affoo [2014] QSC 46 ...................................................................................................... 7.30 Baker v Local Government Superannuation Schemes Pty Ltd [2007] NSWSC 1173 ................. 28.160 Bakewell v Holme (1943) 44 SR (NSW) 150 ............................................................................ 22.165 Baldwin v Greenland [2005] QSC 386 ...................................................................................... 21.20 Baldwin v Greenland [2007] 1 Qd R 117 ..................................................................... 21.20, 21.110 Balfour, Re [1916] VLR 397 ....................................................................................................... 21.10 Balkanbank v Taher [1995] 2 All ER 904 .................................................................................. 31.140 Balkin v Peck (1998) 43 NSWLR 706 .......................................................................... 23.140, 23.145 Ball v Fawcett [1997] 1 NZLR 743 ........................................................................................... 38.195 Ballabil Holdings Pty Ltd v Hospital Products Ltd (1985) 1 NSWLR 155 ........................ 32.30, 32.115 Ballarat Trustees Executors and Agency Co v Federal Commissioner of Taxation (1950) 80 CLR 350 ............................................................................................................ 29.115 Ballard Estate v Ballard Estate (1991) 79 DLR (4th) 142 .................................................. 22.65, 22.95 Ballard v Attorney-​General (2010) 30 VR 397 .......................................................................... 23.170 Ballenden v Bryant [2012] NSWSC 1471 ..................................................................... 21.135, 22.45 Ballman, Re (1804) 10 Ves Jun 110; 32 ER 786 ....................................................................... 23.155 Ball's Settlement Trusts, Re [1968] 1 WLR 899 ................................................................ 25.45, 25.65 Balnaves v Balnaves (1988) 12 Fam LR 488 ............................................................................. 19.160 Baloglow v Konstanidis (2001) 11 BPR 20,721 .................................................... 1.140, 18.10, 18.25 Balston Ltd v Headline Filters Ltd [1987] FSR ............................................................................... 6.55 Baltic Shipping Co v Translink Shipping Ltd [1995] 1 Lloyd's Rep 673 ..................................... 32.110 Bamford v Federal Commissioner of Taxation (2009) 176 FCR 250 ......................................... 22.135 Banco Exterior Internacional SA v Thomas [1997] 1 WLR 221 ................................................... 7.180 Banicevic v Gunson [2006] 2 NZLR 11 ........................................................................... 25.35, 25.45 Bank Mellat v Nikpour [1985] FSR 87 ...................................................................................... 32.155 Bank of China v NBM LLC [2002] 1 WLR 844 ......................................................................... 32.110 Bank of Connecticut v European Grain and Shipping Ltd [1989] 1 AC 1056 ........................... 30.110 Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923 ........................ 7.45, 7.55, 7.80, 7.85 Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch 437 ............ 38.105 Bank of Credit and Commerce International SA (in liq) v Ali [2000] 3 All ER 51 ....................... 30.155 Bank of Credit and Commerce International SA (in liq) v Ali [2002] 1 AC 251 ......................... 30.155 Bank of Credit and Commerce International SA (No 8), Re [1998] AC 214 ................... 1.150, 14.215 Bank of Credit and Commerce International SA (No 9), Re [1994] 3 All ER 764 ....................... 32.110 Bank of Cyprus (London) Ltd v Markou [1999] 2 All ER 707 ...................................................... 7.235 Bank of Montreal v Stuart [1911] AC 120 ................................................................................... 7.75 Bank of New South Wales v City Mutual Life Assurance Society Ltd [1969] VR 556 ................. 14.245 xxxvi

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Table of Cases

Bank of New South Wales v O'Connor (1889) 14 App Cas 273 ................................................... 1.75 Bank of New South Wales v Rogers (1941) 65 CLR 42 ............................................ 7.55, 7.60, 7.120, 7.170, 7.180 Bank of New Zealand v Harry M Miller & Co Ltd (1992) 26 NSWLR 48 .................................... 3.130 Bank of New Zealand v Jones [1982] Qd R 466 ......................................................................... 32.30 Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 ..................................................................................................... 4.10, 24.40, 34.10 Bank of Queensland Ltd v Banjamin [2017] QSC 209 ............................................................... 9.195 Bank of Queensland Ltd v Grant (1984) 54 ALR 306 ............................................................... 32.100 Bank of Queensland v Edwards [2017] QSC 191 ............................................................ 7.235, 9.195 Bank of Scotland v Wright [1991] BCLC 244 ............................................................................. 18.35 Bank of Victoria Ltd v Mueller [1925] VLR 642 .......................................................................... 35.20 Bank of Western Australia Ltd v Abdul [2012] VSC 222 .................................................. 7.235, 36.30 Bank of Western Australia v Connell (1996) 16 WAR 483 ............................... 2.80, 2.85, 2.90, 2.100 Banks v Grey District Council [2004] 2 NZLR 19 ....................................................................... 37.30 Bankstown City Council v Alamdo Holdings Pty Ltd (2004) 135 LGERA 312 ............................. 31.15 Bankstown City Council v Alamdo Holdings Pty Ltd (2005) 223 CLR 660 ...................... 31.15, 31.50 Bannatyne v D & C MacIver [1906] 1 KB 103 ......................................................................... 14.115 Bannister v Bannister [1948] 2 All ER 133 .................................................................................. 18.30 Banque Belge pour L'Etranger v Hambrouck [1921] 1 KB 321 ................................................... 39.10 Banque Commerciale SA (en liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 .......................... 24.185 Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 ...... 14.15, 14.25, 14.50, 14.55, 14.85, 14.95, 14.100 Baptist Union of New Zealand v Attorney-​General [1973] 1 NZLR 42 ..................................... 29.130 Bar-​Mordecai v Hillston [2004] NSWCA 65 ................................................................................. 7.30 Barba v Gas & Fuel Corporation (Vic) (1976) 136 CLR 120 ..................................................... 38.160 Barbados Trust Company Ltd v Bank of Zambia [2007] 1 Lloyd's Rep 495 ................................. 3.160 Barbagallo v J & F Catelan Pty Ltd [1986] 1 Qd R 245 ................................................... 31.55, 34.65, 34.75, 34.115 Barby v Perpetual Trustee Co Ltd (1937) 58 CLR 316 ...................................... 29.50, 29.210, 29.245 Barclay-​Johnson v Yuill [1980] 3 All ER 190 ............................................................................... 32.65 Barclay, Re [1899] 1 Ch 674 ............................................................................... 24.60, 24.65, 24.70 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 ........................ 16.120, 27.20, 27.75, 38.125, 39.100 Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677 ............................. 8.105 Barclays Bank plc v Coleman [2001] QB 20 ................................................................................. 7.80 Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415 ................................................ 1.95 Barclays Bank plc v Holmes [2000] PLR 339 ............................................................... 28.170, 28.200 Barclays Bank plc v O'Brien [1994] 1 AC 180 ....................................... 7.35, 7.40, 7.45, 7.95, 7.160, 7.165, 7.170, 7.180, 7.190 Barisic v Topic (1981) 58 FLR 262 ............................................................................................. 32.30 Barker v Cox (1876) 4 Ch D 464 ............................................................................................... 33.25 Barker v Duke Group Ltd (in liq) (2005) 91 SASR 167 ............................................................... 30.40 Barker v Linklaker [2008] 1 Qd R 405 ...................................................................................... 38.185 Barker's Will Trusts, Re (1948) 64 TLR 273 ............................................................................... 29.190 Barkier, Re (1898) 77 LT 712 ................................................................................................... 24.215 Barkley v Barkley-​Brown [2009] NSWSC 76 ............................................................................... 7.130 Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2006] 1 WLR 1476 ......................................................................................................................... 38.90 Barlow Clowes International Ltd (in liq) v Vaughan [1992] 4 All ER 22 .................................... 39.110 Barlow v Neville Jeffress Advertising Pty Ltd (1994) 4 Tas R 391 .............................................. 31.190 Barlow's Will Trusts, Re [1979] 1 WLR 278 ............................................................................... 17.120 Barnes v Addy (1874) LR 9 Ch App 244 .............................................................. 38.55, 38.60, 38.65 Barnes v Racster (1842) 1 Y & CCC 401; 62 ER 944 ................................................................ 14.245 Barney, Re [1892] 2 Ch 265 ...................................................................................................... 38.55 xxxvii

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Equity and Trusts in Australia

Barneys Blue-​Crete Pty Ltd v Australian Workers' Union (1979) 43 FLR 463 ............................... 31.80 Barnhart v Greenshiels (1853) 9 Moo PCC 18; 14 ER 204 ......................................................... 2.130 Barns v Barns (2003) 214 CLR 169 .......................................................................................... 38.145 Barns v Queensland National Bank (1906) 3 CLR 925 ............................................................... 36.50 Barnsley v Noble [2017] Ch 191 ............................................................................................. 24.150 Barron v Ward Kellner Pty Ltd (2006) 17 NTLR 195 .................................................................. 4.155 Barr's Settlement Trusts, Re [2003] Ch 409 ............................................................................... 23.50 Barry (deceased), Re [1971] VR 395 ........................................................................................ 29.315 Barry, Re [1936] QWN 12 ....................................................................................................... 23.175 Barry v Borlas Pty Ltd [2012] NSWSC 831 ................................................................................. 25.50 Barry v Heider (1914) 19 CLR 197 .......................................................................... 1.110, 2.15, 2.25 Barrymore v News Group Newspapers Ltd [1997] FSR 600 ....................................................... 6.105 Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515 .............................. 22.25, 24.90, 24.210 Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 .................... 22.25, 24.35, 24.65, 24.90, 24.100, 24.105, 24.210, 34.05 Barton Insurance Brokers Ltd v Irwin (1999) 170 DLR (4th) 69 .................................................... 6.55 Barton v Armstrong ........................................................................................................... 8.20, 8.25 Barton v Armstrong [1973] 2 NSWLR 598; (1973) 47 ALJR 781 ................................ 8.10, 8.20, 8.25 Bashir v Commissioner of Lands [1960] AC 44 .......................................................................... 11.85 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 .............................................................. 37.30 Bassett, Re [1935] NZLR 95 .................................................................................................... 24.210 Bassi and K D Sales Force Specialists Pty Ltd, Re (1999) 25 Fam LR 678 ..................... 19.155, 19.160 Bassola v Bassola (1985) 10 Fam LR 413 ................................................................................. 19.155 Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 ......................................... 24.125 Bastion v Gideon Investments Pty Ltd (in liq) (No 2) (2000) 35 ACSR 466 ............................................................................................... 24.125, 27.35, 36.85 Bateman Television Ltd v Bateman [1971] NZLR 453 ................................................... 26.60, 26.110 Bateman's Bay Local Aboriginal Land Council v Aboriginal Community Benefit Fund Pty Ltd (1998) 194 CLR 247 ..................................................................................... 31.25, 37.40 Bater v Kare [1964] SCR 206 ................................................................................................... 14.155 Bates & Partners Pty Ltd v Law Book Co Ltd (1994) 29 IPR 11 ................................... 31.145, 31.165 Bath and North Eastern Somerset District Council v Mowlem plc [2015] 1 WLR 785n ......................................................................................................................... 31.50 Bathgate v National Hockey League Pension Society (1994) 110 DLR (4th) 609 ..................... 28.200 Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 ............................ 16.45, 17.40, 18.75, 38.275 Bathurst (Earl) v Fine [1974] 1 WLR 905 .................................................................................. 11.105 Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 ......................................... 30.10 Batiste v Lenin (2002) 10 BPR 19,441 ..................................................................................... 30.130 Batiste v Lenin (2002) 11 BPR 20,403 ........................................................................ 11.115, 30.130 Batt v Clipse (Caloundra) Pty Ltd (2011) 7 ASTLR 441 ............................................................ 20.115 Battishill v Reed (1856) 18 CB 696; 139 ER 1544 .................................................................... 34.115 Battye v Shammall (2005) 91 SASR 315 ......................................................................... 4.190, 4.200 Baumgartner v Baumgartner (1987) 164 CLR 137 ....................................... 38.170, 38.175, 38.180, 38.190, 38.220, 38.250, P.110 Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538 .................................................. 32.120 Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251 ................................................ 13.55 Bay of Plenty Electricity Ltd v Natural Gas Corporation Energy Ltd [2002] 1 NZLR 173 ........... 10.355 Bayer AG v Winter [1986] 1 WLR 497 ..................................................................................... 32.130 Bayer v Balkin (1995) 31 ATR 295 .............................................................................. 23.140, 23.145 Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2012] FCA 746 ......................................... 32.50 Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 ....................................... 4.285 Bayley v Gibsons Ltd (1993) 1 Tas R 385 ........................................................................ 14.70, 14.75

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Table of Cases

Bayliss v Public Trustee (1988) 12 NSWLR 540 ........................................................................ 18.135 Baynard v Woolley (1855) 20 Beav 583; 52 ER 729 ................................................................. 23.160 Baytur SA v Finagro Holding SA [1991] 4 All ER 129 ................................................................. 3.125 BB Australia Pty Ltd v Danset Pty Ltd [2017] NSWSC 1307 ....................................................... 4.265 BB Australia Pty Ltd v Danset Pty Ltd [2018] NSWCA 101 .......................................... 38.155, 38.160 BBC Hardware Ltd v GT Homes Pty Ltd [1997] 2 Qd R 123 ............................................. 1.65, 1.150 Beach Petroleum NL v Abbott Tout Russell Kennedy (1997) 26 ACSR 114 ...................... 34.20, 34.50 Beach Petroleum NL v Johnson (1992) 9 ACSR 404 ........................................ 32.60, 32.125, 36.160 Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 .................................................... 34.20, 34.25, 34.40, 34.45 Beachquest Pty Ltd v Interstate Mortgage And Investments Pty Ltd [2003] 2 Qd R 586 ............................................................................................................................ 2.95 Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 ................................................................................................................. 11.90, 11.105 Beath v Kousal [2010] VSC 24 ..................................................................................... 22.65, 23.150 Beaumont v Oliveira (1869) 4 Ch App 309 ............................................................................. 29.145 Beavan, Re [1912] 1 Ch 196 ................................................................................................... 14.120 Beck, Re [1967] 2 NSWR 91 .................................................................................................... 29.175 Beck v Henley (2014) 11 ASTLR 457 .......................................................................... 25.135, 25.150 Beckbessinger, Re [1993] 2 NZLR 362 ............................................... 16.190, 17.15, 17.100, 17.120, 17.130, 18.65, 29.295, 29.300 Becker v Anderson [2014] NZHC 2037 ..................................................................................... 4.250 Beckford Nominees v Shell Company of Australia Ltd (1986) 73 ALR 373 ............................... 10.375 Beddoe, Re [1893] 1 Ch 547 .................................................................................................. 23.135 Beddow v Beddow (1878) 9 Ch D 89 ....................................................................................... 31.05 Beecham (Australia) Pty Ltd v Roque Pty Ltd (1987) 11 NSWLR 1 ........................................... 31.195 Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 ............ 6.320, 31.95, 31.165 Beese v Woodhouse [1970] 1 WLR 586 ..................................................................................... 32.20 Begbie v State Bank of New South Wales Ltd (1994) ATPR ¶41-​288 ........................ 7.10, 7.165, 9.40 Beggs v Kirkpatrick [1961] VR 764 .................................................................. 26.35, 29.340, 29.345 Behman v Behman [2015] NSWSC 1787 ................................................................................ 38.165 Bela v Beehag (1984) 3 BPR 9402 ................................................................... 22.100, 24.165, 30.50 Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 ................................................... 23.130, 23.140 Belcher (deceased), Re [1950] VLR 11 ..................................................................................... 29.245 Belgrave Nominees Pty Ltd v Barlin-​Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 ............................................................................................................. 31.110 Bell Bros Pty Ltd v Shire of Serpentine-​Jarrahdale [1969] WAR 155 ............................................ 8.140 Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 ......................... 4.85 Bell v Amberlay Pty Ltd (2001) 19 ACLC 1439 ........................................................................ 36.125 Bell v Lever Bros Ltd [1932] AC 161 ................................................................................ 8.90, 8.145, 8.160, 8.175 Bellasis v Uthwatt (1737) 1 Atk 426; 26 ER 271 ........................................................................ 15.85 Bellis v Challinor [2015] WTLR 43 ............................................................................................. 17.30 Bell's Indenture, Re [1980] 1 WLR 1217 ......................................................................... 24.30, 24.50 Belmont Finance Corporation Ltd v Williams Furniture Ltd [1979] Ch 250 .............................. 38.105 Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 ............................................................................................. 38.100, 38.105, 38.125 Beloved Wilkes's Charity, Re (1851) 3 Mac & G 440; 42 ER 330 ..................................... 20.45, 23.35 Bendigo & County Districts Trustees & Executors Co Ltd v Sandhurst & Northern District Trustees, Executors & Agency Co Ltd (1909) 9 CLR 474 ......................................... 31.190 Benham, Re [1939] SASR 450 ...................................................................................... 17.20, 29.145 Benjamin, Re Will of [1920] VLR 393 ......................................................................................... 21.80 Benjamin v Leicher (1998) 45 NSWLR 389 ................................................................... 18.10, 18.130

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Equity and Trusts in Australia

Benjamin v Sanders (1891) 17 VLR 68 .................................................................................... 23.105 Bennell v Westlawn Finance Ltd [2010] FCA 658 ......................................................................... 3.35 Bennet v Bennet (1879) 10 Ch D 474 ........................................................................ 26.120, 26.135 Bennett v Horgan (unreported, SC(NSW), 3 June 1994) ......................................................... 38.210 Bennett v L & W Whitehead Ltd [1926] 2 KB 380 ..................................................................... 35.95 Bennett v Minister of Community Welfare (1992) 176 CLR 408 ................................................ 34.10 Benson v Benson [2008] WASC 13 .......................................................................................... 38.250 Bentley v Nelson [1963] WAR 89 .............................................................................................. 31.80 Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545 ................................... 21.105, 21.110, 25.75 Berdoe v Dawson (1865) 34 Beav 603; 55 ER 768 .................................................................... 7.115 Berger v Lysteron Pty Ltd [2012] VSC 95 ................................................................................... 21.55 Berk v Permanent Trustee Co of New South Wales Ltd (1947) 47 SR (NSW) 459 ......................... 7.85 Berkeley Applegate (Investment Consultants) Ltd (in liq), Re [1989] Ch 32 ....................... 27.35, P.75 Bernard v Josephs [1982] Ch 391 ............................................................................................. 26.85 Bernard v Weingarth (1997) 8 BPR 15,651 ............................................................................... 11.80 Berry, Re [1962] Ch 97 ........................................................................................................... 22.155 Berry v St Marylebone Corporation [1958] Ch 406 ................................................................. 29.190 Berryman v Solicitor-​General [2005] 3 NZLR 121 ........................................................... 6.320, 31.60 Bertei v Feher [2000] WASCA 165 ................................................................................ 26.80, 26.125 Bertling, Re [1956] QSR 379 ................................................................................................... 29.245 Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 ......................................................... 7.60, 7.75 Beswick v Beswick [1968] AC 58 .................................................................................. 33.75, 33.110 Better Business Bureau of Washington DC, Inc v United States (1945) 326 US 279 ................. 29.235 Bevin v Smith [1994] 3 NZLR 648 ........................................................................................... 38.155 Bhana v Bhana (2002) 10 BPR 19,545 ...................................................................................... 26.55 BHLSPF Pty Ltd v Brashs Pty Ltd (2001) 8 VR 602 .................................................................... 28.195 BHP Iron Ore Pty Ltd v Australian Workers' Union (2000) 171 ALR 680 ................................... 31.165 Bhullar v Bhullar [2003] 2 BCLC 241 ........................................................................................... 4.90 Bialkower v Acohs Pty Ltd (1998) 83 FCR 1; 41 IPR 33 ........................ 14.130, 14.140, 14.165, P.110 BICC plc v Burndy Corporation [1985] Ch 232 ............................................................ 11.10, 30.110 Bidjara Aboriginal Housing & Land Co Ltd v Commonwealth of Australia [2005] 2 Qd R 468 .......................................................................................................................... 36.15 Bigg v Queensland Trustees Ltd [1990] 2 Qd R 11 ........................................ 38.135, 38.140, 38.145 Bignold's Settlement Trusts, Re (1872) 7 Ch App 223 ............................................................... 21.60 Bilbie v Lumley (1802) 2 East 469; 102 ER 448 ......................................................................... 8.105 Billage v Southee (1852) 9 Hare 532; 68 ER 623 ......................................................................... 7.30 Billington (deceased), Re [1949] QSR 102 ................................................................................. 22.65 Binder, Re [1942] SASR 251 ....................................................................................... 29.130, 29.245 Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14 ................................ 20.110 Birch, Re [1924] VLR 510 .......................................................................................................... 22.80 Birch v Curtis [2002] 2 FLR 847 .................................................................................. 38.135, 38.140 Birchall, Re (1889) 40 Ch D 436 ............................................................................................... 21.90 Biritz v National Australia Bank Ltd (2001) 187 ALR 757 ............................................................. 8.05 Birmingham and District Land Co v London and North Western Railway Co (1888) 40 Ch D 268 ....................................................................................................................... 10.75 Birmingham v Kirwan (1805) 2 Sch & Lef 444 ........................................................................ 15.100 Birmingham v Renfrew (1937) 57 CLR 666 ................................................................ 38.135, 38.145 Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384 ................................................................................................... 4.190, 4.195, 4.210 Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874, P.60 Bishop, Re [1965] Ch 450 ....................................................................................................... 26.125 Bishopsgate Insurance Australia Ltd v Commonwealth Engineering (NSW) Pty Ltd [1981] 1 NSWLR 429 ..................................................................... 37.95, 37.100, 37.105 Bishopsgate Investment Management Ltd (in liq) v Homan [1995] Ch 211 .............................. 39.20

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Table of Cases

Bishopsgate Investment Management Ltd (in liq) v Maxwell (No 2) [1994] 1 All ER 261 ............. 4.85 Black Uhlans Inc v New South Wales Crime Commission (2002) 12 BPR 22,421 .............................................................................. 26.75, 26.100, 30.170, 30.175 Black v Black (1991) 15 Fam LR 109 ....................................................................................... 38.185 Black v S Freedman & Co (1910) 12 CLR 105 ..................................................... 26.40, 38.10, 39.30 Blackburn Building Society v Cunliffe, Brooks, & Co (1882) 22 Ch D 61 ................................. 14.115 Blackburn v McCallum (1902) 33 SCR 65 ................................................................................. 19.75 Blackburn v Smith (1848) 2 Ex 783; 154 ER 707 ....................................................................... 35.10 Blackburn v Yarra Vale Properties Pty Ltd [1980] VR 290 ........................................................... 19.35 Blackett v Blackett (1871) 24 LT 276 ....................................................................................... 36.115 Blackett v Darcy (2005) 62 NSWLR 392 ..................................................................... 18.130, 18.145 Blackley Investments Pty Ltd v Burnie City Council (No 2) (2011) 21 Tas R 98 ............. 8.200, 10.155 Blackmagic Design Pty Ltd v Overliese (2010) 84 IPR 505 ........................................................... 4.20 Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1 ................................................. 4.20, 4.285 Blackwell v Blackwell [1929] AC 318 ........................................................ 18.45, 18.50, 18.65, 18.80 Blackwood v London Chartered Bank (1874) LR 5 PC 92 .......................................................... 2.130 Blair v Curran (1939) 62 CLR 464 .................................................................................. 10.20, 10.25 Blair v Duncan [1902] AC 37 .................................................................................................. 29.290 Blair v Martin [1929] NZLR 225 .............................................................................................. 22.100 Bland v Ingrams Estates Ltd [2001] Ch 767 .................................................................. 1.150, 11.135 Bland v Ingrams Estates Ltd (No 2) [2002] 2 WLR 361 ...................................... 11.90, 11.95, 11.100 Blathwayt v Baron Cawley [1976] AC 397 ...................................................................... 19.10, 19.70 Blazely v Whiley (1995) 5 Tas R 254 ........................................................................... 10.230, 10.270 BLB Corporation of Australia v Jacobsen (1974) 48 ALJR 372 ................................. 4.20, 4.105, 4.120 Blenkinsop v Herbert (2017) 51 WAR 264 ................................................................................. 23.15 Bli Bli No 1 Pty Ltd v Kimlin Investments Pty Ltd [2008] QSC 289 ........................................... 38.115 Blindley Heath Investments Ltd v Bass [2017] Ch 389 ............................................................... 10.35 Blinkco v Blinkco [1964–​65] NSWR 20 .................................................................................... 26.125 Bloch v Bloch (1981) 180 CLR 390 ................................................................................ 26.65, 26.80 Blocksidge, Re [1997] 1 Qd R 234 ............................................................................................ 25.65 Blomley v Ryan (1956) 99 CLR 362 ................................................................. 7.75, 9.30, 9.50, 9.60, 9.115, 33.145, P.180 Bloomer v Spittle (1872) LR 13 Eq 427 ..................................................................................... 8.200 Blue Seas Investments Pty Ltd v Mitchell (1999) 25 Fam LR 65 ............................................... 31.135 Blueberry River Indian Band v Canada (1995) 130 DLR (4th) 193 ............................................... 4.65 Blueberry River Indian Band v Canada (Department of Indian Affairs and Northern Development) (2001) 201 DLR (4th) 35 ............................................................................ 15.100 Bluebottle UK Ltd v Deputy Commissioner of Taxation (2007) 232 CLR 598 ............................. 3.155 Blum v ANZ Bank New Zealand Ltd [2015] NZCA 335 .................................................. 6.280, 6.295 Blundell, Re [1906] 2 Ch 222 .................................................................................................... 15.40 Blyth, Re [1997] 2 Qd R 567 ........................................................................ 17.115, 17.125, 29.215, 29.295, 29.300 BNY Trust Co of Australia Ltd v Glambedakis [2009] NSWSC 815 ............................................. 7.235 Boardman v Phipps [1967] 2 AC 46 ............................................................ 4.15, 4.35, 4.165, 6.375, 24.80, 39.80 Bobko v Commonwealth (unreported, SC(Vic), Fullagar J, 22 April 1988) ............................... 10.310 Bodalla Aboriginal Housing Co Ltd v Eurobodalla Shire Council (2012) 195 LGERA 114 .......... 29.295 Bodney v Westralia Airports Corporation Pty Ltd (2000) 109 FCR 178 ......................................... 5.60 Body Corporate No 1/​PS40911511E St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41 ............................................................................................................ 17.15 Boe v Alexander (1987) 41 DLR (4th) 520 ................................................................................ 23.40 Boehm v Goodall [1911] 1 Ch 155 ......................................................................................... 36.125 Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 ........................................... 14.10, 14.105, P.75 Bogg v Raper (1998/​99) 1 IETLR 267 ......................................................................... 24.145, 24.155

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Equity and Trusts in Australia

Bojczuk v Gregorcewicz [1961] SASR 128 ............................................................................... 14.120 Bolton v Curre [1895] 1 Ch 544 ............................................................................................. 23.165 Bond, Re [1929] VLR 333 ........................................................................................... 29.130, 29.300 Bond, Re (1940) 35 Tas LR 96 ................................................................................. 3.45, 3.80, 3.150 Bond, Re (1992) 25 ATR 61 ........................................................................................... 10.10, 19.75 Bond v Larobi Pty Ltd (1992) 6 WAR 489 ................................................................................ 14.140 Bond Worth Ltd, Re [1979] 3 All ER 919 ................................................................................... 16.75 Bones, Re [1930] VLR 346 ....................................................................................................... 29.225 Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258 ................... 20.110, 20.115 Bonnard v Perryman [1891] 2 Ch 269 .................................................................................... 31.175 Booker McConnell plc v Plascow [1985] RPC 425 ...................................................... 32.155, 32.185 Booth Macdonald & Co Ltd v Hallmond (Official Assignee of) (1913) 33 NZLR 110 ................. 16.55 Booth v Federal Commissioner of Taxation (1987) 164 CLR 159 .................................... 3.115, 3.150 Boranga v Flintoff (1997) 19 WAR 1 .......................................................................................... 17.25 Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25 .................................................. 16.75 Borg v Howlett (No 2) (1996) 8 BPR 15,535 ............................................................................. 33.45 Borg Warner (Aust) Ltd v Switzerland General Insurance Co Ltd (1989) 16 NSWLR 421 ..................................................................................................... 14.190, 14.195 Borough of Burwood v Freehill (1906) 23 WN (NSW) 243 ...................................................... 21.145 Borthwick-​Norton v Romney Warwick Estates Ltd [1950] 1 All ER 798 ...................................... 11.90 Bosaid v Andry [1963] VR 465 .......................................................... 33.130, 34.75, 34.105, 34.110, 34.120, 37.110 Boscawen v Bajwa [1996] 1 WLR 328 ................................................................ 14.15, 14.25, 14.85, 14.95, 39.05, 39.55 Bouch v Sproule (1887) 12 App Cas 385 ................................................................................ 22.165 Boulter, Re [1922] 1 Ch 75 ....................................................................................................... 19.70 Boulter v Boulter (1898) 19 LR (NSW) Eq 135 .............................................................................. P.75 Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 ........................................................................................................... 4.20, 4.35, 4.130 Bourne v Colodense Ltd [1985] ICR 291 .................................................................... 36.130, 36.135 Boutique Balmoral Ltd v Retail Holdings Ltd [1976] 2 NZLR 222 ............................................... 12.45 Bowkett v Action Finance Ltd [1992] 1 NZLR 449 ..................................................................... 4.255 Bowles, Re [1902] 2 Ch 650 ................................................................................................... 17.100 Bowman (deceased), Re [1955] SASR 98 ................................................................................... 22.20 Bowman v Secular Society Ltd [1917] AC 406 ........................................................... 17.170, 29.100 Bowmil Nominees Pty Ltd, Re [2004] NSWSC 161 ......................................................... 25.45, 25.60 Boyarsky v Taylor (2008) 14 BPR 26,553 ......................................................... 11.70, 33.125, 33.135 Boyce v Boyce (1849) 16 Sim 476; 60 ER 959 ........................................................................... 17.80 Boyce v Paddington Borough Council [1903] 1 Ch 109 ............................................................ 37.40 Boyd & Forrest v Glasgow Railway Co [1915] SC (HL) 20 ....................................................... 35.105 Boyd v Cowell [1952] VLR 288 ............................................................................................... 22.200 Boyes, Re (1884) 26 Ch D 531 ....................................................................................... 18.60, 18.65 Boyns v Lackey [1958] SR (NSW) 395 ............................................................................ 30.10, 30.75 Boyse v Rossborough (1857) 6 HLC 1; 10 ER 1192 ..................................................................... 7.15 BPA Industries Ltd v Black (1987) 11 NSWLR 609 .................................................................... 32.180 Bradley v Commonwealth (1973) 128 CLR 557 ........................................................................ 31.25 Bradley v Wingnut Films Ltd [1993] 1 NZLR 415 ....................................................................... 6.130 Bradto Pty Ltd v State of Victoria (2006) 15 VR 65 ..................................................... 31.145, 31.165 Brady v Stapleton (1952) 88 CLR 322 .................................................... 19.115, 39.20, 39.55, 39.60 Brags Electrics Pty Ltd v Gregory [2010] NSWSC 1205 ........................................................... 32.155 Brandeis Brokers Ltd v Black [2001] 2 Lloyd's Rep 359 ................................................................ 4.30 Brandling v Weir [2003] NSWSC 723 ...................................................................................... 38.230 Brandon v Robinson (1811) 18 Ves 429; 34 ER 379 .................................................................. 19.75 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 .................................. 10.205

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Table of Cases

Bratovic v SBM Argentinian Bar and Grill Pty Ltd (2005) 242 LSJS 445 .................................... 21.115 Brayson Motors Pty Ltd v Federal Commissioner of Taxation (1983) 57 ALJR 288 ....................................................................................................................... 31.165 Breadner v Granville-​Grossman [2001] Ch 523 .............................................. 16.185, 16.190, 22.40, 23.45, 23.50 Break Fast Investments Pty Ltd v PCH Melbourne Pty Ltd (2007) 20 VR 311 .......................................................................................... 34.80, 34.85, 34.90, 34.95 Breakspear v Ackland [2009] Ch 32 .......................................................................................... 20.70 Brede, The [1974] QB 233 ........................................................................................................ 30.95 Breen v Williams (1996) 186 CLR 71 .................................................... 4.10, 4.15, 4.25, 4.35, 4.300, 4.305, 4.315, 20.30, 36.70 Bremer, Re [1986] 2 NZLR 53 ................................................................................................. 23.115 Brennan v Bolt Burdon (a firm) [2005] QB 303 .............................................................. 8.125, 8.155 Brennan v Duncan [2006] NSWSC 674 ................................................ 14.170, 26.80, 26.85, 26.110 Brenner, Re [1986] 2 NZLR 53 ................................................................................................ 23.115 Brentwood Brick and Coal Co, Re (1876) 4 Ch D 562 ................................................................. 1.95 Brereton v Milstein [1988] VR 508 .................................................................... 32.35, 32.45, 32.115 Brewer (deceased), Re [1933] NZLR 1221 ............................................................................... 29.190 Brice v Mackay [1983] 2 Qd R 543 ......................................................................................... 21.140 Brickenden v London Loan & Saving [1934] 3 DLR 465 ............................................................ 34.25 Brickles v Snell [1916] 2 AC 599 ............................................................................................... 11.25 Brickworks Ltd v Warringah Shire Council (1963) 108 CLR 568 ............................................... 10.395 Bride v Freehill Hollingdale & Page [1996] ANZ Conv R 594 ..................................................... 36.30 Bridge v Campbell Discount Co Ltd [1962] AC 600 .................................................................... 9.05 Bridge Wholesale Acceptance Corp (Aust) Ltd v Burnard (1992) 27 NSWLR 415 ....................... 33.05 Bridgetown/​Greenbushes Friends of the Forest Inc v Executive Director of Conservation and Land Management (1997) 18 WAR 102 ................................................ 31.165 Bridgewater v Leahy (1998) 194 CLR 457 ....................................................... 7.05, 7.10, 7.15, 7.70, 7.280, 8.15, 9.15, 9.20, 9.25, 9.55, 9.90, 9.130, 9.135 Brien v Graspas (2004) 207 ALR 275 ....................................................................................... 21.125 Briggs and Secretary, Department of Employment and Workplace Relations, Re (2007) 93 ALD 762 ....................................................................................................... 20.150 Briggs v Gleeds (Head Office) (a firm) [2015] Ch 212 .................................................. 10.40, 10.390 Brink's MAT Ltd v Elcombe [1988] 3 All ER 188 ......................................................................... 31.85 Brisbane City Council v Attorney-​General (Qld) [1979] AC 411 .................................... 17.15, 29.225 Brisbane Unit Development Corp v Robertson [1983] 2 Qd R 105 .......................................... 35.105 Bristol and West Building Society v May May & Merrimans (a firm) [1996] 2 All ER 801 ......................................................................................................................... 4.150 Bristol and West Building Society v Mothew [1996] 4 All ER 698 .................. 4.10, 4.60, 24.40, 34.10 British Airways Pension Trustees Ltd v British Airways plc [2002] PLR 247 ................... 28.150, 28.200 British Anzani (Felixstowe) Ltd v International Marine Management (UK) Ltd [1980] QB 137 .............................................................................................................................. 30.110 British Broadcasting Corporation v Harpercollins Publishers Ltd [2011] EMLR 6 ........................... 6.80 British Coal Corp v British Coal Staff Superannuation Scheme Trustees Ltd [1995] 1 All ER 912 .......................................................................................................................... 28.155 British Columbia v National Bank of Canada (1995) 119 DLR (4th) 669 .................................... 39.65 British Franco Electric Pty Ltd v Dowling Plastics Pty Ltd [1981] 1 NSWLR 448 ................... 6.80, 6.85 British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523 .......... 4.100, 4.120, 4.285 British Railways Board v Pickin [1974] AC 765 .................................................................... 8.35, 8.40 British Red Cross Balkan Fund, Re [1914] 2 Ch 419 ...................................................... 26.35, 39.105 British School of Egyptian Archaeology, Re [1954] 1 All ER 887 ............................................... 29.345 BRK (Bris) Pty Ltd v Federal Commissioner of Taxation (2001) 46 ATR 347 ................... 20.155, 23.35

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Equity and Trusts in Australia

Broadlands International Finance Ltd v Sly (1987) 4 BPR 9420 .................................................... 7.95 Broadmoor Special Hospital Authority v Robinson [2000] QB 775 ....................... 6.205, 31.25, 31.60 Brockbank, Re [1948] Ch 206 ........................................................................... 16.185, 22.40, 23.65 Brooke Bond & Co Ltd's Trust Deed, Re [1963] 1 Ch 357 ......................................................... 21.40 Brooke v Brooke (1911) 3 OWN 52 ........................................................................................ 23.115 Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11 ....................................................................................................................... 28.240 Brooks, Re (1969) 4 DLR (3d) 694 .......................................................................................... 29.190 Brooks v Saylor (2007) 279 DLR (4th) 547 .............................................................................. 26.135 Brooks v Wyatt (1994) 99 NTR 12 ............................................................................................ 34.65 Brophy v Brophy (1974) 3 ACTR 57 ........................................................................................ 26.135 Brott v Drew (1993) 112 FLR 269 ............................................................................................. 32.40 Brott v Maher (No 2) [2004] VSCA 220 .................................................................................... 4.160 Broughton v Snook [1938] Ch 505 ........................................................................................... 12.45 Broulee Developments Pty Ltd v Mackay [2008] NSWSC 32 ........................... 30.50, 33.130, 33.175 Brown (deceased), Re [1954] 1 Ch 39 ...................................................................................... 19.75 Brown, Re (1901) 11 QLJ 133 ................................................................................................. 29.190 Brown-​Sarre v Waddingham [2012] VSC 116 .......................................................................... 23.175 Brown v Brown [1931] 4 DLR 420 .......................................................................................... 24.165 Brown v Brown (1993) 31 NSWLR 582 ........................................................... 26.60, 26.120, 26.135 Brown v George (1998) 24 Fam LR 58 .................................................................................... 38.185 Brown v Gregson [1920] AC 860 ............................................................................................ 15.100 Brown v Heffer (1967) 116 CLR 344 ............................................................................ 15.60, 38.155 Brown v Pourau [1995] 1 NZLR 352 ........................................................ 18.45, 18.50, 18.60, 18.75 Brown v Smitt (1924) 34 CLR 160 ............................................................................................ 35.15 Brown v Wylie (1980) 6 Fam LR 519 ......................................................................................... 18.30 Browning v Fidelity Trust Co (1918) 250 F 321 ....................................................................... 24.145 Bruce v Cobcroft [2017] NSWSC 1464 ..................................................................................... 25.45 Bruce v Presbytery of Deer (1867) LR 1 Sc & Div 96 ................................................................. 29.45 Brueckner v Satellite Group (Ultimo) Pty Ltd (2002) 15 BPR 28,885 .......................................... 7.235 Brumm, Re [1942] QSR 52 ........................................................................................................ 16.60 Brunette (deceased), Re [1922] NZLR 490 .............................................................................. 22.145 Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 ....................................... 7.45, 18.95, 38.155 Brunninghausen v Glavanics (1999) 46 NSWLR 538 ................................................................. 4.115 Brusewitz v Brown [1923] NZLR 1106 ............................................................. 7.35, 7.45, 7.60, 7.75 Brutan Investments Pty Ltd v Underwriting and Insurance Ltd (1980) 58 FLR 289 .......................................................................................................................... 36.50 Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation (2011) 193 FCR 442 .................... 21.45 Bruynius, Re [1995] 1 Qd R 492 .................................................................................................. 3.50 Bryant (deceased), Re [1964] NZLR 846 ................................................................................... 25.70 Bryning (deceased), Re [1976] VR 100 ....................................................................... 29.240, 29.380 Bryson v Bryant (1992) 29 NSWLR 188 ...................................................................... 38.180, 38.195 BSH Holdings Pty Ltd v Commissioner of State Revenue (2000) 2 VR 454 ................................. 29.05 Buchan v Ayre [1915] 2 Ch 474 ................................................................................... 23.140, 27.50 Buckenara v Hawthorn Football Club Ltd [1988] VR 39 ............................................................. 31.55 Buckland v Ibbotson (1902) 28 VLR 688 ................................................................................. 24.180 Buckley, Re [1928] NZLR 148 .................................................................................................. 29.220 Budge, Re [1942] NZLR 350 ................................................................................................... 17.150 Bufalo Corporation Pty Ltd v Leone (2001) 40 ACSR 327 .......................................................... 36.40 Bukowski (deceased), Re [1954] QSR 286 ............................................................................... 20.120 Bulankoff, Re [1986] 1 Qd R 366 ............................................................................... 26.110, 26.135 Bullas v Public Trustee [1981] 1 NSWLR 641 .............................................................. 23.175, 25.165 Bullock v Federated Furnishing Trades Society of Australasia (No 1) (1985) 5 FCR 464 ......................................................................................................................... 31.165 Bullock-​Webster (deceased), Re [1936] NZLR 814 ................................................................... 29.370 xliv

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Table of Cases

Bulun Bulun v R & T Textiles Pty Ltd (1997) 157 ALR 193 ......................................................... 38.25 Bunn v British Broadcasting Corporation [1998] 3 All ER 552 ............................. 6.150, 6.195, 6.300, 6.320, 31.135 Bunnings Group Ltd v Hanson Construction Materials Pty Ltd [2017] WASC 132 ........................ 1.65 Bunny Industries Pty Ltd v FSW Enterprises Ltd [1982] Qd R 712 ............................................ 38.130 Bupa Australia Pty Ltd v Shaw [2013] VSC 507 .............................................................. 14.20, 14.35 Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 ............................................... 4.295 Burger King Corp v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558 .............................................. 38.75 Burke & Riversdale Road Pty Ltd v Gemini Investments Pty Ltd (No 2) [2003] VSC 48 ............................................................................................... 11.35, 11.60 Burke v Hudson's Bay Co [2010] 2 SCR 273 ............................................................................ 28.200 Burke v LFOT Pty Ltd (2002) 209 CLR 282 ....................................... 14.125, 14.130, 14.160, 14.165 Burke v State Bank of New South Wales (1994) 37 NSWLR 53 ........................... 7.165, 7.180, 7.280, 9.155, 35.25 Burley, Re [1910] 1 Ch 215 ....................................................................................................... 17.20 Burlinson v Hall (1884) 12 QBD 347 ........................................................................................... 3.35 Burmeister v O'Brien [2010] 2 NZLR 395 ...................................................................... 30.175, P.190 Burnand v Rodocanachi Sons & Co (1882) 7 App Cas 333 ............................................ 14.20, 14.45 Burney's Settlement Trusts, Re [1961] 1 All ER 856 .................................................................... 25.60 Burnley Borough Council v England (1977) 76 LGR 393 ........................................................... 31.75 Burns Philp Trust Co Pty Ltd v Kwikasair Freightlines Ltd (1963) 63 SR (NSW) 492 .................... 33.05 Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 ............................................................ 1.20 Burns v Bayliss [2006] WASC 102 ............................................................................................ 16.205 Burns v Burns [2008] QSC 173 ...................................................................................... 21.80, 23.75 Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 .................................................... 22.225, 23.125, 23.130, 24.135 Burns v Steel [2006] 1 NZLR 559 ................................................................................... 21.45, 23.65 Burnside City Council v Attorney-​General (SA) (1992) 75 LGRA 145 ....................................... 29.265 Burrow v Scammell (1881) 19 Ch D 175 .................................................................................. 33.25 Burston Finance Ltd v Speirway [1974] 1 WLR 1648 ...................................................... 14.05, 14.85 Burt, Boulton & Hayward v Bull [1895] 1 QB 276 ..................................................................... 36.85 Burt v Australia and New Zealand Banking Group Ltd (1994) ATPR (Digest) ¶46–​123 ............................................................................................... 9.05, 9.110 Burton, Re [1938] NZLR 637 ................................................................................................... 10.375 Burton, Re (1994) 126 ALR 557 ............................................................................ 8.50, 21.55, 27.60 Burton v Arcus (2006) 200 FLR 1 ............................................................................................ 28.240 Burton's Settlements, Re [1955] 1 Ch 82 .................................................................................... 8.80 Busby v Thorn EMI Video Programmes Ltd [1984] 1 NZLR 461 ............................................... 32.160 Buschau v Rogers Cablesystems Inc (1999) 165 DLR (4th) 668 ............................................... 28.200 Bush v Minister for Local Government (2002) 124 LGERA 256 ................................................ 31.155 Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 ...................................................... 37.115 Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 ...................................................................................... 31.15, 31.90, 31.145 Butler v Board of Trade [1971] Ch 680 ........................................................................... 6.240, 6.250 Butler v Countrywide Finance Ltd [1993] 3 NZLR 623 ................................................. 37.95, 37.105 Butler v Craine [1986] VR 274 .......................................................................... 12.25, 12.45, 38.215 Butler v Fairclough (1917) 23 CLR 78 .......................................................... 2.10, 2.15, 2.35, 34.130 Butler v Rice [1910] 2 Ch 277 ................................................................................................... 14.90 Butler v Vavladelis [2012] VSC 186 ........................................................................................... 9.195 Butlin's Settlement Trusts, Re [1976] Ch 251 ..................................................... 37.65, 37.75, 37.115 Butt v Kelson [1952] Ch 197 ..................................................................................................... 20.30 Butterworth v Purnell [1919] VLR 375 ..................................................................................... 24.205 Buttle v Saunders [1950] 2 All ER 193 .......................................................................... 22.205, 28.85 Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2007) 214 FLR 48 ........................................................................................................................ 14.125 xlv

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Equity and Trusts in Australia

Byers v Dorotea Pty Ltd (1986) 69 ALR 715 .............................................................................. 35.90 Byland Nominees Pty Ltd (in liq) v Maclean [1985] WAR 352 ..................................................... 1.95 Bylander International Consortium (Australia) Pty Ltd v Multilink Investments Pty Ltd [2001] NSWCA 53 ............................................................................................................... 7.235 Byrne Australia Ltd, Re [1981] 1 NSWLR 394 ............................................................................ 27.30 Byrne, Re (1906) 6 SR (NSW) 532 ................................................................................................ P.75 Byrne v Mortyn [2008] TASSC 83 ............................................................................................. 12.30 Byrnes v Byrnes [2012] NSWSC 1600 ..................................................................................... 10.270 Byrnes v Kendle (2011) 243 CLR 253 ................................................................ 17.30, 21.45, 22.175 Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123 ........................ 11.105

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C C & K A Flanagan Sailmakers Pty Ltd v Walker [2002] NSWSC 1125 ......................................... 4.285 C G Berbatis Holdings Pty Ltd v Australian Competition and Consumer Commission (2001) 185 ALR 555 ............................................................................................................ 9.175 C H Giles & Co Ltd v Morris [1972] 1 WLR 307 ........................................................................ 33.85 C Inc plc v L [2001] 2 All ER (Comm) 446 ............................................................................... 32.100 C J Belmore Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507 .................................... 13.80 C-​Shirt Pty Ltd v Barnett Marketing and Management Pty Ltd (1997) 37 IPR 315 ....................... 4.65 C v B [2007] 1 Qd R 212 ........................................................................................................ 20.135 C v Holland [2012] 3 NZLR 672 ................................................................................................ 6.135 C v W (No 2) [2016] NSWSC 945 ............................................................................................. 4.315 CA Inc v ISI Pty Ltd (2012) 201 FCR 23 ............................................................................ 6.25, 6.215 Caborne, Re [1943] Ch 224 ...................................................................................................... 19.60 Cabot Corp v Minnesota Mining & Manufacturing Ltd (1987) 11 NSWLR 697 ......................... 30.55 Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65 ........................................... 25.10, 25.20 Cachia v Westpac Financial Services Ltd [2000] FCA 1576 ............................................. 25.10, 25.20 Cadbury Schweppes Inc v FBI Foods Ltd (1996) 138 DLR (4th) 682 .......................................... 31.65 Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 ................ 4.35, 4.55, 6.10, 6.25, 6.250, 6.325, 6.375, P.50, P.145 Cadd v Cadd (1909) 9 CLR 171 ................................................................................................ 18.30 Cadman v Horner (1810) 18 Ves 10; 34 ER 221 ...................................................................... 30.180 Cadogan Petroleum Holdings Ltd v Global Process Systems LLC [2013] 2 Lloyd’s Rep 26 .................................................................................................................. 13.55 Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 ........... 1.55, 1.130, 10.60 Cadura Investments Ltd v Rototek Pty Ltd [2004] WASC 150 .................................................. 32.125 Cadwallader v Bajco Pty Ltd [2002] NSWCA 328 .................................................................... 30.175 Caffoor v Commissioner of Income Tax, Colombo [1961] AC 584 .......................................... 29.155 Cain (deceased), Re [1950] VLR 382 ............................................................. 17.170, 29.130, 29.325 Cain v Moon [1896] 2 QB 283 ............................................................................................... 18.135 Cain v Watson [1910] VLR 256 ............................................................................................... 23.105 Cairns Festival Faire Pty Ltd v AEFC Ltd (unreported, FCA, Heerey J, 3 September 1993) ......... 10.305 Calaby Pty Ltd v Ampol Pty Ltd (1990) 102 FLR 186 ............................................................... 10.320 Calcorp (Australia) Pty Ltd v 271 Collins Pty Ltd (2010) 29 VR 462 ........................................... 13.70 Caledonia North Sea Ltd v British Telecommunications plc [2002] Lloyd's Rep 261 ................. 14.135 Callaghan v Callaghan (1995) 64 SASR 396 ............................................................... 26.140, 26.145 Callaghan v Merivale CBD Pty Ltd (2006) NSW ConvR ¶56–​155 ............................................. 30.140 Calverley v Green (1984) 155 CLR 242 ........................................ 1.130, 24.80, 26.60, 26.70, 26.75, 26.80, 26.85, 26.100, 26.120, 26.125, 26.130, 26.150, 26.160, 38.265, 39.80 Calvo v Sweeney [2009] NSWSC 719 ................................................................. 4.235, 7.155, 22.95 Cam-​Net Communications v Vancouver Telephone Co (1999) 182 DLR (4th) 436 .................. 30.110 Cambridge Nutrition Ltd v British Broadcasting Corp [1990] 3 All ER 523 ............................... 31.165 Camdex International Ltd v Bank of Zambia (No 2) [1997] 1 All ER 728 ...................... 32.90, 32.135 xlvi Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

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Table of Cases

Cameron (deceased), Re [1999] Ch 386 .......................... 15.55, 15.65, 15.70, 15.80, 15.85, 26.160 Cameron v Hogan (1934) 51 CLR 358 ...................................................................................... 31.20 Cameron v McMahon [2009] VSC 277 ..................................................................................... 4.235 Cameron v Murdoch (1986) 63 ALR 575 .................................................................................. 4.210 Cameron v Qantas Airways Ltd (1995) 55 FCR 147 ........................................................ 9.190, 31.65 Cameron v Qantas Airways Ltd (1996) 66 FCR 246 ................................................................... 9.190 Cameron v UBS AG (2000) 2 VR 108. ....................................................................................... 13.75 Campbell, Re (1875) 1 VLR (IP & M) 32 .................................................................................... 21.55 Campbell, Re (1883) 9 VLR (E) 138 ......................................................................................... 23.175 Campbell, Re [1973] 2 NSWLR 146 ........................................................................... 22.120, 22.140 Campbell v Campbell [2015] NSWSC 784 .............................................................................. 38.140 Campbell v MGN [2003] QB 633 ............................................................................................. 6.240 Campbell v MGN Ltd [2004] 2 AC 457 ...................................................... 6.25, 6.110, 6.120, 6.125 Canada (Human Rights Commission) v Canadian Liberty Net (1998) 157 DLR (4th) 385 ............................................................................................................. 31.175 Canada Trust Co and Cantol Ltd, Re (1979) 103 DLR (3d) 109 ............................................... 28.195 Canada Trustco Mortgage Co v Sugarman (1999) 179 DLR (4th) 548 ....................... 30.105, 30.110 Canadian Aero Service Ltd v O'Malley (1973) 40 DLR (3d) 371 .......................................... 4.85, 4.95 Canadian Imperial Bank of Commerce v Ohlson (1997) 154 DLR (4th) 33 ......................... 7.55, 9.15 Canadian Imperial Bank of Commerce v Twin Richfield Oils (1992) 88 DLR (4th) 596 ............... 39.55 Canberra International Airport Pty Ltd v Ansett Australia Ltd (2002) 41 ACSR 309 ...... 11.95, 11.105, 11.110 Cancer Council of Western Australia v Attorney-​General (WA) (2016) 15 ASTLR 422 ............... 29.370 Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 ............................................................................................................ 1.115 Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 ............ 4.35, 4.60, 24.40, 34.05, 34.20, 34.45, 34.50 Canterbury Development Corporation v Charities Commission [2010] 2 NZLR 707 ................ 29.235 Cape v Redarb Pty Ltd (1992) 107 FLR 362 .................................................................... 36.75, 36.85 Capell v Winter [1907] 2 Ch 376 ................................................................................................ 2.30 Capewell v Revenue and Customs Commissioners [2007] 1 WLR 387 ............... 36.05, 36.85, 36.125 Capgemini US LLC v Case [2004] NSWSC 674 ....................................................................... 31.155 Capita Financial Group Ltd v Rothwells Ltd (1993) 30 NSWLR 619 ............... 14.125, 14.130, 14.180 Capitanescu v Universal Weld Overlays Inc (1996) 141 DLR (4th) 751 .................................... 32.155 Capral Fiduciary Ltd v Ladd (1999) 1 NZSC 40,455 ................................................................ 28.200 Carbery v Cox (1852) 3 Ir Ch R 231n ..................................................................................... 29.155 Cardigan v Moore [2012] WTLR 931 ........................................................................................ 22.95 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 ...................... 31.05, 31.25, 32.05, 32.20, 32.35, 32.40, 32.75, 32.80, 32.100 Carey v Norton [1998] 1 NZLR 661 ................................................................................... 7.05, 7.45 Carkeek v Tate-​Jones [1971] VR 691 ........................................................................... 26.100, 26.130 Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 ............................................ 10.25 Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing New South Wales Ltd (1987) 76 ALR 633 ............................................................................................................ 31.155 Carlton v Goodman [2002] 2 FLR 259 ...................................................................................... 26.80 Carmine v Ritchie [2012] NZHC 1514 ...................................................................................... 21.55 Carnac, Re (1885) 16 QBD 308 ................................................................................................ 8.135 Carob Industries Pty Ltd (in liq) v Simto Pty Ltd (2000) 23 WAR 515 .......................................... 3.25 Carpentaria Investments Pty Ltd v Airs [1972] Qd R 436 ........................................................... 33.10 Carpenter v McGrath (1996) 40 NSWLR 39 .............................................................................. 11.50 Carr v McDonald's Australia Ltd (1994) 63 FCR 358 ..................................................... 10.385, 34.75 Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 ......................... 1.65, 1.150 Carruthers v Manning [2001] NSWSC 1130 ........................................................................... 38.230 Carson, Re [1956] QSR 466 .................................................................................................... 29.175 Carson v Wood (1994) 34 NSWLR 9 ....................................................................................... 38.195 xlvii

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Equity and Trusts in Australia

Carter Holt Harvey Woodproducts (Australia) Pty Ltd (No 1) [2017] VSC 499 ............................. 1.65 Carter Sumitomo Bank Ltd v Kartika Ratna Thahir [1993] 1 SLR 735 ......................................... 38.45 Carydis v Merrag Pty Ltd (2007) 13 BPR 24,773 ..................................................................... 33.150 Cash Converters Pty Ltd v Hila Pty Ltd (1993) 9 WAR 471 .......................................... 31.145, 31.165 Cash Management Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576 ....................... 2.10 Cashman v 7 North Golden Gate Gold Mining Co (1897) 7 QLJ 152 ........................................ 30.25 Casper Corp Pty Ltd v Gorman (2011) 5 BFRA 166 ................................................................. 33.150 Cassidy, Re [1979] VR 369 ......................................................................................... 23.175, 25.165 Cassis v Kalfus (No 2) [2004] NSWCA 315 ................................................................................ 34.55 Castellain v Preston (1883) 11 QBD 380 ................................................................................... 14.30 Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 ................................... 31.70, 31.95, 31.105, 31.165 Castrol Australia Pty Ltd v EmTech Associates Pty Ltd (1980) 33 ALR 31 ................ 6.80, 6.155, 6.190 Catanzariti v Romano [2011] ACTSC 106 ..................................................................... 7.130, 18.105 Caton v Caton (1866) LR 1 Ch App 137 ................................................................................... 12.05 Cattley v Pollard [2007] Ch 353 .............................................................................................. 24.195 Causley v Countryside (No 3) Pty Ltd (unreported, CA(NSW), 2 September 1996) ................... 27.55 Cave-​Brown-​Cave, Estate of [1906] VLR 283 ........................................................................... 23.175 Cave v Cave (1880) 15 Ch D 639 ............................................................................................. 2.105 Cavendish Square Holdings BV v Makdessi [2016] AC 1172 ......... 13.10, 13.15, 13.20, 13.25, 13.30, 13.35, 13.40, 13.50, 13.90, 13.95, 33.10 Cayne v Global Natural Resources plc [1984] 1 All ER 225 ......................................... 31.125, 31.165 CBS Records Australia Ltd v Telmak Teleproducts (Australia) Pty Ltd (1987) 72 ALR 270 ........................................................................................................... 31.155, 31.165 CBS United Kingdom Ltd v Lambert [1983] Ch 37 ........................................ 32.130, 32.190, 32.195 Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79 ....................................... 13.50 Celestial Aviation Trading 71 Ltd v Paramount Airways Private Ltd [2010] 1 CLC 165 ............... 11.10 Celtic Resources Holdings plc v Arduina Holding BV (2006) 32 WAR 276 ................................ 32.115 Centaur Mining & Exploration Ltd v Anaconda Nickel Ltd (2001) 19 ACLC 1375 ..................... 6.210 Centofanti v Eekimitor Pty Ltd (1995) 65 SASR 31 .................................................................... 4.115 Central Bayside Division of General Practice Ltd v Commissioner of State Revenue (2005) 60 ATR 151 .............................................................................................................. 29.85 Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 228 CLR 168 ................................................................................................. 29.35, 29.85 Central Commodities Services Pty Ltd, Re Application of [1984] 1 NSWLR 25 ......................... 36.125 Central Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 1 WLR 1048 ........................................ 11.90 Central Insurance Co Ltd v Seacalf Shipping Corporation (The “Aiolos”) [1983] 2 Lloyd's Rep 25 ..................................................................................................................... 3.125 Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130 ..................... 10.75, P.45 Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 ..... 2.90, 2.100 Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371 .................................... 2.25 Central Trust and Safe Deposit Co v Snider [1916] 1 AC 266 .................................................. 38.155 Centrepoint Community Growth Trust, Re [2000] 2 NZLR 325 .................................. 29.115, 29.230 Centrepoint Community Growth Trust v Commissioner of Inland Revenue [1985] 1 NZLR 673 ............................................................................................................. 29.170, 29.280 CF Partners (UK) LLP v Barclays Bank plc [2014] EWHC 3049 .................................. 6.25, 6.80, 6.185 CGM Investments Pty Ltd v Chelliah (No 2) [2003] FCA 305 .................................................. 31.190 CGU Insurance Ltd v Chacmol Holdings Pty Ltd [2003] VSC 493 .............................................. 32.40 CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174 ....................................... 21.45, 22.10 Chacos v Dijan Pty Ltd [2003] NSWSC 821 ............................................................................... 32.75 Chaffey v Mount Cook Air Services Ltd [1969] NZLR 25 ........................................................... 37.20 Chahwan v Euphoric Pty Ltd (2009) 73 ACSR 252 .................................................................... 24.15 Chaine-​Nickson v Bank of Ireland [1976] IR 393 ....................................................................... 20.55 Challenge Bank Ltd v Pandya (1993) 60 SASR 330 .................................................................... 7.165

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Table of Cases

Challenger Managed Investment Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452 ....................................................................................................................... 14.105 Chalmers v Pardoe [1963] 1 WLR 677 ................................................................. 1.55, 10.60, 38.270 Chamber of Commerce and Industry of Western Australia (Inc) v Commissioner of State Revenue (2012) 89 ATR 797 ...................................................................................... 29.235 Chambers v Jones (1902) 2 SR (NSW) Eq 177 .............................................................. 21.60, 21.125 Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZAR 882 ............................. 22.40, 23.170 Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 ............... 1.65, 2.40 Chan v Cresdon Pty Ltd (1989) 168 CLR 242 ...................................................... 1.20, 1.165, 38.155 Chan v Zacharia (1984) 154 CLR 178 ............................................... 4.30, 4.80, 4.190, 4.205, 38.25 Chandran v Narayan [2006] NSWSC 104 ................................................................................. 7.235 Chang v Registrar of Titles (1976) 137 CLR 177 ...................................................................... 38.155 Chanter, Re [1952] SASR 299 ....................................................................................... 17.20, 29.310 Chapman, Re [1896] 2 Ch 763 ............................................................................................... 24.100 Chapman v Browne [1902] 1 Ch 785 ..................................................................................... 24.215 Chapman v Chapman [1954] AC 429 ............................................................................ 25.25, 25.60 Chappell v TCN Channel Nine Pty Ltd (1988) 14 NSWLR 153 ................................................ 31.180 Chappell v Times Newspapers Ltd [1975] 1 WLR 482 ............................................................... 33.80 Charge Card Services Ltd, Re [1987] Ch 150 .............................................................................. 1.65 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 ................................. 26.55, 26.100, 26.115, 26.120, 26.135, 26.145 Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 ................................ 20.100, 20.105 Charles v Fraser [2010] WTLR 1489 ........................................................................................ 38.135 Charlesworth Nominees Pty Ltd v Charlesworth [2017] VSC 445 .............................................. 21.05 Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101 at [59] ............................................. 37.95 Chartered Insurance Institute v Corporation of London [1957] 2 All ER 638 ....................................................................................................................... 29.155 Charteris, Re [1917] 2 Ch 379 ...................................................................... 22.120, 22.125, 23.105 Chase Corp (Aust) Py Ltd v North Sydney Brick & Tile Co Ltd (1994) 35 NSWLR 1 ............................................................................................................. 2.80,14.220, 14.225, 14.245 Chase Manhattan Bank NA v Israel-​British Bank (London) Ltd [1981] 1 Ch 105 ........................ 8.105 Chattey v Farndale Holdings Inc (1998) 75 P & CR 298 ............................................................ 1.100 Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (receiver appointed) (in liq) (1992) 28 NSWLR 338 ....................................... 16.75, 16.80, 16.85 Cheese v Thomas [1994] 1 All ER 35 ................................................................................ 7.80, 7.280 Chellaram v Chellaram [1985] Ch 409 ...................................................................................... 21.65 Chellew v Excell [2009] 1 NZLR 711 ......................................................................................... 22.95 Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 ................. 31.130, 31.140 Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291 ........................................... 14.105 Chen v Song [2005] ANZ ConvR 130 ....................................................................................... 9.115 Cherokee Nation v Georgia (1831) 30 US 1 ................................................................................ 5.40 Chesterman v Federal Commissioner of Taxation (1923) 32 CLR 362 ...................................... 29.380 Chesterman v Federal Commissioner of Taxation [1926] AC 128 ............................................ 29.290 Chesterman v Mitchell (1923) 24 SR (NSW) 108 ....................................................... 29.175, 29.245 Chettiar v Chettiar [1962] AC 294 ................................................................................. 19.30, 19.35 Chichester Diocesan Fund and Board of Finance (Incorporated) v Simpson [1944] AC 341 .............................................................................................................................. 29.290 Chichester v Coventry (1867) LR 2 HL 71 .......................................................... 15.40, 15.45, 15.55, 15.65, 15.70, 15.75, 15.85 Chick v Grosfeld (No 3) [2012] NSWSC 1536 ........................................................................... 22.80 Chidiak v Maatouk [2010] NSWSC 386 .................................................................................. 14.130 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 ................................................................. 20.120, 23.125, 23.130, 25.105, 25.160

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Equity and Trusts in Australia

Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 41 ATR 29 ..................................................................................................... 1.165, 16.05, 17.70, 21.45, 23.125, 27.10 Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd [2014] NSWCA 4 ............................................................................................................... 23.140, 27.55 Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd (2017) 106 ATR 151 ........................................................................................................................ 20.75 Child v Dynes [1985] 2 NZLR 554 ............................................................................................ 2.110 Chillingworth v Chambers [1896] 1 Ch 685 ................................................. 23.160, 23.165, 24.165 China Light & Power Company Ltd v Ford [1996] 1 HKLR 57 ................................................... 6.360 Chint Australasia Pty Ltd v Cosmoluce Pty Ltd (2008) 14 BPR 26,279 ........................ 10.200, 10.205 Chioggia, The [1898] P 1 ........................................................................................................ 14.245 Chipper v Perpetual Executors Trustee and Agency Co (WA) Ltd [1973] WAR 136 .................... 25.80 Chirnside, Re (1903) 29 VLR 4 ....................................................................................... 15.70, 15.85 Chirnside, Re [1956] VLR 295 ...................................................................................... 16.195, 22.80 Chirnside v Fay [2004] 3 NZLR 637 ...................................................................... 4.30, 4.215, 34.05 Chirnside v Fay [2007] 1 NZLR 433 .............................................................. 4.30, 4.60, 4.70, 4.215, 4.220, 34.05, 34.145 Chiro v Linton (No 2) [2009] SASC 197 .................................................................................... 22.90 Chittick v Galea [2007] NSWSC 38 ........................................................................................... 11.95 Chittick v Maxwell (1993) 118 ALR 728 .......................................................................... 34.55, P.175 Choi v Kim [2013] NSWSC 1774 ............................................................................................ 38.250 Chomley, Re (2014) 10 ASTLR 338 ......................................................................................... 22.110 Chow Cho-Poon, Re Estate of (2013) 10 ASTLR 251 ............................................................... 23.170 Christensen v Christensen [1954] QWN 37 ............................................................................... 22.30 Christmas' Settlement Trusts, Re [1986] 1 Qd R 372 ................................................................. 25.65 Christodoulou v Christodoulou [2009] VSC 583 .............................................................. 7.130, 9.50 Christ's Hospital v Grainger (1849) 1 Mac & G 460; 41 ER 1343 ............................................... 29.25 Christy v Courtenay (1850) 13 Beav 96; 51 ER 38 ................................................................... 26.145 Chrysalis Records Ltd v Vere (1982) 43 ALR 440 ..................................................................... 32.155 Church of England Property Trust, Diocese of Canberra and Goulburn v Imlay Shire Council [1971] 2 NSWLR 216 ............................................................................................ 29.125 Church of England Property Trust Diocese of Goulburn v Rossi (1893) 14 LR (NSW) Eq 186 ............................................................................................................ 21.05 Church of Jesus Christ of Latter Day Saints, Canadian Trust v King (1998) 165 DLR (4th) 227 ............................................................................................................. 31.140 Church of Scientology of California Inc v Reader's Digest Services Pty Ltd [1980] 1 NSWLR 344 ....................................................................................................................... 31.180 Church of Scientology of California v Kaufman [1973] RPC 635 ................................................ 6.305 Church of Scientology v Woodward (1982) 154 CLR 25 ........................................................... 37.55 Church of the New Faith v Commissioner for Pay-​roll Tax (Vic) (1983) 154 CLR 120 ............... 29.170 Church v Arnold (1902) 2 SR (NSW) 127 ................................................................................ 36.130 Church v Talbot (1901) 1 SR (NSW) Eq 13 .............................................................................. 22.225 Churchill v Churchill (1867) LR 5 Eq 44 ...................................................................................... 8.75 Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502 ................................... 8.190, 8.200 Cia de Seguros Imperio v Heath (REBX) Ltd [2001] 1 WLR 112 ...................................... 30.35, 30.40 Ciaglia v Ciaglia (2010) 269 ALR 175 ............................................................................. 12.85, 18.10 Ciavarella v Balmer (1983) 153 CLR 438 ........................................................................ 11.25, 11.35 CIBC Mortgages plc v Pitt [1994] 1 AC 200 ....................................................................... 7.45, 7.80 Ciccarello, Re [2008] FCA 141 ................................................................................................ 24.125 Cicinave Pty Ltd v Jasco Pty Ltd (1989) 5 BPR 11,139 ............................................................... 11.95 Cid v Cortes (1987) 4 BPR 9391 ............................................................................................... 14.85 Cierpiatka, Marriage of (2000) 25 Fam LR 548 ............................................................. 17.20, 38.270 Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513 ...................................................................................................................... 1.65 l

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Table of Cases

Circuit Finance Australia Ltd (recs and mgrs apptd) (in liq) v Panella (2011) 16 BPR 30,347 ....................................................................................................................... 2.20 Circuit Finance Australia Ltd v Registrar of Titles [2006] 1 Qd R 204 .......................................... 1.150 Cirillo v Citicorp Australia Ltd (2004) 2 ABC (NS) 525 ................................................ 31.130, 31.140 Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960 ...................................................... 25.35, 25.45 CIT Credit Pty Ltd v Keable (2006) Aust Contract R ¶90-​243 ............................................ 9.45, 9.190 Citadel General Assurance Co v Lloyds Bank Canada (1998) 152 DLR (4th) 411 ........ 38.110, 38.125 Citibank Pty Ltd v Simon Fredericks Pty Ltd [1993] 2 VR 168 .................................................. 30.130 Citibank Savings Ltd v Nicholson (1997) 70 SASR 206 ..................................................... 7.65, 7.165 City Equitable Fire Insurance Co Ltd, Re [1925] 1 Ch 407 ......................................................... 24.95 City of Mandurah v Australian Flying Corps & Royal Australian Air Force Association (WA Division) Inc (2016) 50 WAR 466 .................................................................... 29.80, 29.125 City of Sydney Real Estate Co Ltd, Re (1928) 29 SR (NSW) 80 .................................................. 22.95 Civil Service Co-​operative Society v Blyth (1914) 17 CLR 601 ................................................. 35.110 CL, Re [1969] 1 Ch 587 ............................................................................................................ 25.65 Clancy v Salienta Pty Ltd (2000) 11 BPR 20,425 ........................................................... 8.120, 11.35, 11.45, 38.205 Clark Auto Body Ltd v Integra Custom Collision Ltd (2007) 28 BLR (4th) 17 ............................. 11.10 Clark (deceased), Re Will of [1957] VR 171 ............................................................................. 29.125 Clark Drummie & Co v Ryan (1997) 148 DLR (4th) 311 ........................................................... 26.10 Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 ............................................................................................ 32.75, 32.80, 36.125 Clark v Corporation of the Trustees of the Roman Catholic Archdiocese of Brisbane [1998] 1 Qd R 26 .................................................................................................................. 7.30 Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790 ................................................ 1.65, 2.10 Clark v Rowell Consulting Services Pty Ltd [2003] WASC 178 ................................................... 31.65 Clark v Sewell (1744) 3 Atk 96 .................................................................................................. 15.25 Clarke, Re (1881) 18 Ch D 160 ............................................................................................... 22.140 Clarke, Re (1887) 36 Ch D 348 ................................................................................................... 1.65 Clarke, Re [1901] 2 Ch 110 .................................................................................................... 17.170 Clarke v Australian Labor Party (South Australian Branch) (1999) 74 SASR 109 ......................... 37.40 Clarke v Clarke [2002] WASC 73 ............................................................................................... 23.20 Clarke v Dickson (1858) EB & E 148; 120 ER 463 ...................................................................... 35.10 Clarke v Dilberovic (1982) NSW ConvR ¶55–​083 ...................................................................... 11.80 Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 Qd R 404 ............................................... 31.150 Clarke v Meadus [2013] WTLR 199 ......................................................................................... 10.215 Clarke v Ramuz [1891] 2 QB 456 ............................................................................................ 38.150 Clarke v Terry (1859) 1 Legge 753 ............................................................................................ 26.30 Clasic International Pty Ltd v Lagos (2002) 60 NSWLR 241 ............................................ 8.155, 8.170 Clay v Clay (1999) 20 WAR 427 ........................................................................ 23.85, 23.115, 24.50 Clay v Clay (2001) 202 CLR 410 ...................................................................... 4.315, 16.15, 16.170, 22.115, 24.195 Clay v Karlson (No 2) (1998) 19 WAR 287 ................................................................................ 19.80 Clayhope Properties Ltd v Evans [1986] 1 WLR 1223 .............................................................. 36.145 Clayton v Clayton [2015] 3 NZLR 293 ......................................................................... 16.175, 17.35 Clayton v Clayton [2016] 1 NZLR 551 ............................................................ 17.35, 20.135, 20.140 Clayton v Montgomery (1897) 18 LR (NSW) Eq 171 .............................................................. 22.160 Clayton's Case (1816) 1 Merc 572; 35 ER 781 ........................................................................ 39.100 CLC Corporation v Cambridge Gulf Holdings NL (1997) 25 ACSR 296 ..................................... 33.60 Cleadon Trust Ltd, Re [1939] 1 Ch 286 ........................................................................ 14.20, 14.115 Cleaver (deceased), Re [1981] 2 All ER 1018 ........................................................................... 38.135 Clegg v Edmondson (1857) 8 De GM & G 787; 44 ER 593 ....................................................... 30.75 Clement v Cheesman (1884) 27 Ch D 631 ............................................................................. 18.135 Clements and Marshall Pty Ltd v Field Peas Marketing Board (Tas) (1947) 76 CLR 401 ........... 31.160 Clifford, Re [1912] 1 Ch 29 ..................................................................................................... 29.255 li

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Equity and Trusts in Australia

Clitheroe's Settlement Trusts, Re [1959] 3 All ER 789 ................................................................ 25.60 Clone Pty Ltd v Players Pty Ltd (in liq) (2018) 353 ALR 24 ........................................................... 8.05 Cloud Top Pty Ltd v Toma Services Pty Ltd [2008] NSWSC 568 ................................................ 11.70 Clough Mill Ltd v Martin [1985] 1 WLR 111 ............................................................................. 16.75 Clough v London and North Western Railway Co (1871) LR 7 Ex 26 ......................................... 35.85 Clout and Frewer's Contract, Re [1924] 2 Ch 230 ..................................................................... 21.90 Clout (Trustee) v Anscor Pty Ltd [2001] FCA 174 ...................................................................... 32.80 Clout v Markwell [2001] QSC 91 ............................................................................... 38.230, 38.255 Clout v Stoddart (SE Queensland) Pty Ltd (2016) 115 ACSR 459 .............................................. 1.105 Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526 ................... 37.120 Club of the Clubs Pty Ltd v King Network Group Pty Ltd (No 2) [2007] NSWSC 574 .............. 34.150 Clurstock Pty Ltd v Timanu Pty Ltd (1988) NSW ConvR ¶55–​419 .............................................. 11.75 Clyne v Commissioner of Taxation (1981) 150 CLR 1 .................................................................. 3.35 CM Group Pty Ltd's Caveat, Re [1986] 1 Qd R 381 ................................................................... 2.105 CMG Equity Investments Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 65 ACSR 650 ............................................................................................................ 37.75 Co-​operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1996] 3 WLR 27 .................. 33.95 Co-​operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1 ............. 31.65, 33.90, 33.105 Co-​ordinated Industries Pty Ltd v Elliott (1998) 43 NSWLR 282 ................................................ 4.290 Coad v Wellness Pursuit Pty Ltd (in liq) (2009) 226 FLR 91 ........................................................ 1.105 Coastal Estates Pty Ltd v Melevende [1965] VR 433 ...................................................... 35.85, 35.90, 35.95, 35.100 Coates (deceased), Re [1955] 1 Ch 495 .................................................................................. 17.120 Coates v McInerney (1992) 7 WAR 537 .................................................................................. 23.130 Coates v Sarich [1964] WAR 2 ........................................................................................ 11.20, 11.60 Coats' Trusts, Re [1948] Ch 340 .............................................................................................. 29.200 Cobbe v Yeoman's Row Management Ltd [2008] 1 WLR 1752 ....................... 10.60, 10.120, 10.310, 10.390, P.160 Cobcroft, Re [2015] NSWSC 346 ............................................................................................ 38.140 Cobra Golf Inc v Rata [1998] Ch 109 ...................................................................................... 32.180 Coca-​Cola Financial Corp v Finsat International Ltd [1998] QB 43 .......................................... 30.130 Cochrane v Cochrane (1985) 3 NSWLR 403 ................................................................. 14.05, 14.15, 14.85, 14.90 Cock v Smith (1909) 9 CLR 773 ................................................................................................ 23.35 Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 ....................................... 14.125, 14.140 Cockburn's Will Trusts, Re [1957] 1 Ch 438 ............................................................................. 16.205 Cocks v Manners (1871) LR 12 Eq 574 ................................................................................... 29.200 Coco v A N Clark (Engineers) Ltd [1969] RPC 41 .............................................................. 6.20, 6.40, 6.225, 6.235 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 ..................................................................................................................... 10.200 Codot Developments Ltd v Potter [1981] 1 NZLR 729 ................................................... 11.60, 11.80 Codrington v Codrington (1875) LR 7 HL 854 ........................................................................ 15.100 Cody v Cody [2013] VSC 274 ................................................................................................. 23.175 Cogent Nominees Pty Ltd v Anthony [2003] NSWSC 804 .............................................. 32.80, 32.85 Coghlan v Pyoanee Pty Ltd [2003] 2 Qd R 636 ....................................................................... 33.145 Coghlan v SH Lock (Australia) Ltd (1985) 4 NSWLR 158 ........................................................... 10.45 Cohen, Re [1911] 1 Ch 37 .......................................................................................................... 8.80 Cohen v Bayley-​Worthington [1908] AC 97 .............................................................................. 21.85 Cohen v City of Perth (2000) 112 LGERA 234 ................................................................ 31.70, 31.75 Cohen v Cohen (1929) 42 CLR 91 ............................................................................... 16.95, 16.110 Cohen v Peko-​Wallsend (1986) 68 ALR 394 ............................................................................ 31.165 Cohen v Sellar [1926] 1 KB 536 .............................................................................................. 26.125 Colbart Pty Ltd v Parsons (2017) 120 ACSR 377 ..................................................................... 18.105 lii

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Table of Cases

Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1970) 122 CLR 25 ................ 34.140, 34.150, 34.155, 34.165, 34.175, P.55 Colburn v Simms (1843) 2 Hare 543; 67 ER 224 ..................................................................... 34.160 Cole, Re Estate of (1980) 25 SASR 489 .................................................................................... 29.300 Cole v Miles [2002] NSWCA 150 .............................................................................................. 34.55 Coleman, Re (1888) 39 Ch D 443 ............................................................................................ 20.20 Coleman Taymar Ltd v Oakes [2001] 2 BCLC 749 ..................................................................... 4.125 Coleman v Holecek (1976) 542 F (2d) 532 ............................................................................... 8.200 Coleman v Myers [1977] 2 NZLR 225 ....................................................................................... 4.115 Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915 .............................................. 6.180 Coles v Trecothick (1804) 9 Ves 234; 32 ER 592 ...................................................................... 22.100 Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd (2017) 251 FCR 404 ................... 9.190, 24.15 Collard v State of Western Australia (No 4) [2013] WASC 455 ................................ 4.20, 4.45, 4.315, 5.55, 5.60 College of Law (Properties) Pty Ltd v Willoughby Municipal Council (1978) 38 LGRA 81 ........ 29.145 Collie v Merlaw Nominees Pty Ltd (in liq) (2001) 37 ACSR 361 ............................................... 23.130 Collier (deceased), Re [1998] 1 NZLR 81 ......................................... 29.105, 29.160, 29.295, 29.370 Collin v Holden [1989] VR 510 ..................................................................... 10.310, 10.345, 10.370 Collings v Lee [2001] 2 All ER 332 ................................................................................. 35.65, 38.50 Collins, Re (1886) 32 Ch D 229 ................................................................................................ 25.25 Collins v Collins (1759) 2 Burr 820; 97 ER 579 .......................................................................... 30.95 Collman v Druitt (1881) 2 LR (NSW) Eq 74 ............................................................................. 24.105 Colonial Bank of Australasia v Kerr (1889) 15 VLR 314 ................................................................ 7.90 Colonial Bank v European Grain & Shipping Ltd (The “Dominique”) [1989] 1 Lloyd's Rep 431 .............................................................................................................. 30.125 Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995] 3 NZLR 1 ........................................................................................................... 3.60, 3.70 Colquhoun v Dronpane Pty Ltd [2011] NSWSC 1500 .................................................... 37.65, 37.75 Columbia Picture Industries Inc v Robinson [1987] Ch 38 ............... 32.140, 32.160, 32.165, 32.170, 32.175, 32.185, 32.190, 32.210 Colvin v Hartwell (1837) 5 Cl & F 484; 7 ER 488 ....................................................................... P.180 Colyear v Lady Mulgrave (1836) 2 Keen 81; 48 ER 559 ........................................................... 18.120 Cominos v Rekes (1979) 2 BPR 9619 ...................................................................................... 33.130 Comiskey v Bowring-​Hanbury [1915] AC 84 ............................................................................. 17.20 Comlin Holdings Pty Ltd v Metlej Developments Pty Ltd [2018] NSWSC 761 ........................... 30.15 Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374 ..................................................................... 14.145, 14.190, 14.210 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 ................. 8.190, 9.05, 9.20, 9.25, 9.30, 9.40, 9.60, 9.80, 9.85, 9.90, 9.100, 9.110, 9.115, 9.125, 9.155, 9.170, P.150 Commercial Credit Corp v Newall Agencies (1982) 126 DLR (3d) 728 ...................................... 8.200 Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 ..................... 3.35, 3.125, 3.150, 30.90, 30.110 Commercial Union Assurance Co v Hayden [1977] QB 804 .................................................... 14.210 Commercial Union Assurance Co v Lister (1874) LR 9 Ch App 483 ........................................... 14.45 Commission Car Sales (Hastings) Ltd v Saul [1957] NZLR 144 .................................................. 11.50 Commission for the New Towns v Cooper (Great Britain) Ltd [1995] 2 WLR 677 .................... 37.125 Common Equity Housing Ltd v Commissioner of State Revenue (1996) 33 ATR 77 ................. 29.115 Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 .................................. 4.295, 28.155 Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64 ........................................... 1.105 Commonwealth Bank of Australia v Cohen (1988) ASC ¶55–​681 ................................................ 7.85 Commonwealth Bank of Australia v Crowe [2004] NSWSC 330 ................................................ 7.235 Commonwealth Bank of Australia v Finding [2001] 1 Qd R 168 ................................................ 4.255 Commonwealth Bank of Australia v Green (unreported, CA(NSW), 24 September 1997) ............ 2.15 liii

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Equity and Trusts in Australia

Commonwealth Bank of Australia v Horkings [2000] VSCA 244 ................................................ 7.235 Commonwealth Bank of Australia v Khouri [1998] VSC 128 ........................................... 7.205, 7.235 Commonwealth Bank of Australia v MLD Financial Services & Management Pty Ltd [2015] NSWSC 1476 ......................................................................................................... 30.135 Commonwealth Bank of Australia v Muirhead [1997] 1 Qd R 567 .......................................... 36.165 Commonwealth Bank of Australia v Psevdos [2015] SASC 66 ............................................. 2.35, 2.60 Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37 ............ 7.115, 7.170, 7.235, 9.45 Commonwealth Bank of Australia v Saleh [2007] NSWSC 903 .................................................. 39.35 Commonwealth Bank of Australia v Smith (1991) 102 ALR 453 .......................... 4.250, 34.25, 34.40 Commonwealth Bank of Australia v Spira (2002) 174 FLR 274 .................................................... 9.35 Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Beck (2016) 334 ALR 692 ........................................................................................................................ 28.80 Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292 ........................ 17.55 Commonwealth of Australia v Clark [1994] 2 VR 333 .............................................................. 10.310 Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 ................................................................................................... 6.10, 6.20, 6.80, 6.155, 6.230, 6.320, P.145 Commonwealth Oil & Gas Company Ltd v Baxter [2009] SLT 1123 .................... 4.85, 4.120, 38.100 Commonwealth Oil Refineries Ltd v Hollins [1956] VLR 169 .............................. 12.05, 12.75, 33.150 Commonwealth Refineries Ltd v Hollins [1956] VLR 169 ......................................................... 33.150 Commonwealth Reserves I v Chodar [2001] 2 NZLR 374 .......................................................... 38.20 Commonwealth Superannuation Scheme Board v Dexter (2004) 142 FCR 151 ...................... 28.235 Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 ........................................................................................................... 14.220, 14.225, 14.240, 14.245 Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 .................................................... P.60 Commonwealth v Byrnes (2018) 354 ALR 789 .......................................................................... 27.30 Commonwealth v Clark [1994] 2 VR 333 ..................................................... 10.230, 10.235, 10.265, 10.300, 10.310, 10.340, 10.370 Commonwealth v Colonial Combing, Spinning and Weaving Co Ltd (1922) 31 CLR 421 .............................................................................................................. 21.95, 23.15 Commonwealth v Hamilton [1992] 2 Qd R 257 ......................................................... 10.360, 10.380 Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 ................................................. 6.265 Commonwealth v Progress Advertising & Press Agency Co Pty Ltd (1910) 10 CLR 457 .......... 31.190 Commonwealth v Scituate Savings Bank (1884) 137 Mass 301 .............................................. 10.345 Commonwealth v South East Queensland Aboriginal Corporation for Legal Services (2005) 219 ALR 180 ............................................................................................................ 1.100 Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297 .............................. 37.35 Commonwealth v Verwayen (1990) 170 CLR 394 ......... 10.50, 10.80, 10.85, 10.95, 10.140, 10.165, 10.195, 10.220, 10.230, 10.235, 10.240, 10.265, 10.275, 10.285, 10.300, 10.310, 10.315, 10.320, 10.340, 10.350, 10.355, 10.370, 10.395, 30.140, 30.150, 30.160 Commonwealth v VL Investments Pty Ltd (1988) V ConvR ¶54–​305 ....................................... 37.125 Community Housing Ltd v Clarence Valley Council (2015) 90 NSWLR 292 ............................. 29.115 Como v Helmers [2011] WASC 179 ........................................................................... 10.240, 10.245 Compania Colombiana De Seguros v Pacific Steam Navigation Co [1964] 1 All ER 216 ............ 3.135 Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 ............................................... 38.75 Compass Resources Ltd v Sherman (2010) 42 WAR 1 ............................................................. 27.100 Competitive Funerals Pty Ltd v Gurmit Singh Rai [2005] NSWSC 1171 ..................................... 12.75 Complex Scaffolding Solutions Pty Ltd v Doueihi [2014] NSWSC 230 ......................................... 1.65 Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 ............................................................. 1.150 Compton, Re [1945] Ch 123 .................................................................................................. 29.155 Comptroller of Stamps (Vic) v Howard-​Smith (1936) 54 CLR 614 ............ 3.20, 17.05, 17.65, 25.135

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Table of Cases

Con-​Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 ...................................................................................................... 10.45 Congregational Union of New South Wales v Thistlethwayte (1952) 87 CLR 375 ......... 19.95, 29.280 Conlan v Connolly [2011] WASC 160 ....................................................................................... 39.20 Conlan v Registrar of Titles (2001) 24 WAR 299 ......................................................................... P.120 Connaught Restaurants v Indoor Leisure [1994] 1 WLR 505 .................................................... 30.130 Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352 ............................................... 1.115, 16.205 Connolly, Re [1910] 1 Ch 219 .................................................................................................. 17.20 Connor, Re (1970) 10 DLR (3d) 5 ........................................................................................... 17.120 Conquest v Ebbetts [1896] AC 490 ........................................................................................... 33.40 Conroy v Lowndes [1958] Qd R 375 ......................................................................................... 34.75 Considine v Citicorp Australia Ltd [1981] 1 NSWLR 657 .......................................................... 10.375 Consiglio's Settlement, Re (1973) 36 DLR (3d) 658 ................................................................. 21.115 Consolidated Paper Industries Pty Ltd v Matthews [2004] WASC 161 ....................................... 4.285 Consolidated Traders Ltd v Downes [1981] 2 NZLR 247 ........................................................... 31.95 Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 .............................................................. 3.35 Constantine v Sanders [2007] NSWSC 250 ............................................................................... 11.95 Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 ......................... 16.100 Construction Industry Training Board v Attorney-​General [1971] 1 WLR 1303 ........................ 29.155 Construction Industry Training Board v Attorney-​General [1973] Ch 73 .................................. 29.155 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 ........... 38.65, 38.70, 38.80, 38.105, 38.120 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 ...................................... 7.45, 7.60, 7.80, 7.165 Contradictors v Attorney-​General [1999] 2 NZLR 523 ............................................................... 24.85 Contradictors v Attorney-​General [2001] 3 NZLR 301 ............................................................... 24.85 Conveyor Co of Australia Pty Ltd v Cameron Bros Engineering Co Ltd [1973] 2 NZLR 38 ........................................................................................................................... 6.220 Cook Inc v World Medical Manufacturing Corp [1999] FCA 1333 ........................................... 31.195 Cook, Re [1948] Ch 212 ........................................................................................................... 16.05 Cook v Evatt (No 2) [1992] 1 NZLR 676 ................................................................ 4.70, 4.90, 4.235, 34.50, 34.125 Cook v Italiano Family Fruit Company Pty Ltd (in liq) (2010) 80 ACSR 680 ............................... 14.70 Cook v Rodgers (1946) 46 SR (NSW) 229 .................................................................... 33.45, 37.145 Cooke v Cooke [1987] VR 625 ................................................................................................ 38.215 Cook's Settlement Trust, Re [1965] Ch 902 ................................................................ 18.115, 18.120 Coolbrew Pty Ltd v Westpac Banking Corporation (2014) 14 ASTLR 135 ................................ 27.100 Coolbrew Pty Ltd v Westpac Banking Corporation [2015] NSWCA 135 .................................. 27.100 Coombes v Smith [1986] 1 WLR 808 ...................................................................................... 10.160 Cooney v Burns (1922) 30 CLR 216 ................................................................... 12.05, 12.15, 12.45, 12.60, 12.70 Cooney v Council of the Municipality of Ku-​ring-​gai (1963) 114 CLR 582 ................................ 31.25 Cooper & Allen's Contract for Sale to Harlech, Re (1876) 4 Ch D 802 ....................................... 23.85 Cooper, Re [1939] Ch 811 ........................................................................................................ 18.50 Cooper Street Property Trust (No 2), Re [2017] VSC 291 .......................................................... 21.70 Cooper v Cooper (1874) LR 7 HL 53 ....................................................................................... 15.105 Cooper v Phibbs (1867) LR 2 HL 149 ........................................................................................ 8.175 Cooper's Conveyance Trusts, Re [1956] 1 WLR 1096 ............................................................... 29.340 Coote v Clark [2007] WASC 97 ................................................................................................. 25.60 Coote v Warren [2013] NZHC 3210 ............................................................................ 21.75, 21.105 Cope v Keene (1968) 118 CLR 1 .................................................................................. 18.95, 18.130 Coppel, Re [1950] VLR 328 ........................................................................................ 25.140, 27.115 Coral Vista Pty Ltd v Halkeas [2010] QSC 449 ........................................................................... 21.30 Coram, Re (1992) 109 ALR 353 ................................................................................. 27.120, 28.130 Corbiere v Dulley [2016] QSC 134 .......................................................................................... 23.185

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Equity and Trusts in Australia

Corbun, Re [1941] Ch 400 ..................................................................................................... 29.245 Corelli, Re [1943] 1 Ch 332 ...................................................................................................... 29.50 Corin v Patton (1990) 169 CLR 540 ............................................... 1.60, 18.95, 18.100, 18.105, P.70 Cornelius v De Taranto [2001] EMLR 12 .................................................................................... 6.365 Cornerstone Property & Development Pty Ltd v Suellen Properties Pty Ltd [2015] 1 Qd R 75 ............................................................................................................... 38.85, 38.100 Cornfoot v Holdenson [1932] VLR 4 .......................................................................... 14.135, 14.150 Coromandel Place Pty Ltd v CL Custodians Pty Ltd (in liq) (1999) 30 ACSR 377 .......... 36.85, 36.125 Coronation Syndicate v Lilienfeld [1903] TS 489 ....................................................................... 22.40 Corozo Pty Ltd v Total Australia Ltd [1987] 2 Qd R 11 ............................................................ 23.130 Corozo Pty Ltd v Total Australia Ltd [1988] 2 Qd R 366 ............................................................ 27.25 Corpers (No 664) Pty Ltd v NZI Securities Australia Ltd (1989) ASC ¶55–​714 ........................... 33.65 Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547 ............................................. 36.130 Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158 ....................................... 24.135 Corporate Systems Publishing Pty Ltd v Lingard (No 4) (2008) 2 ASTLR 431 .......................... 24.135 Corporate Transport Services v Toll (2005) 214 ALR 644 .............................................. 31.65, 31.135 Corporation of the City of Port Adelaide v South Australian Railways Commissioner [1927] SASR 197 ................................................................................................................. 34.80 Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 .............. 6.280, 6.290 Corsellis, Re (1887) 34 Ch D 675 .............................................................................................. 22.75 Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 .................................................. 21.45 Cory v Gertcken (1816) 2 Madd 40; 56 ER 250 ...................................................................... 24.160 Cosser v Collinge (1832) 3 My & K 283; 40 ER 108 .................................................................. 2.130 Cossey v Bach [1992] 3 NZLR 612 .......................................... 26.45, 26.95, 26.100, 26.125, 26.130 Cosslett (Contractors) Ltd, Re [1998] 2 WLR 131 ............................................................. 1.80, 1.150 Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90 ....................................................... 20.110 Costin v Costin [1997] ANZ Conv R 401 ................................................................................. 18.105 Cotton v Dempster (1918) 20 WAR 14 ................................................................................... 24.205 Couch v Branch Investments (1969) Ltd [1980] 2 NZLR 314 ...................................................... 8.20 Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460 .............................. 14.150, 33.75 Coulthard v Disco Mix Club Ltd [1999] 2 All ER 457 .................................................... 24.105, 30.40 Coulthurst, Re [1951] Ch 661 ................................................................................................. 29.115 Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 ................ 1.45, 16.150,  16.170 Counties Manukau Pacific Trust v Manukau City Council [2009] 2 NZLR 260 .............................. 4.30 Countryside (No 3) Pty Ltd v Best [2001] NSWSC 1152 .......................................................... 23.140 Countrywide Finance Ltd v State Insurance Ltd [1993] 3 NZLR 745 .......................................... 37.15 Coupe v J M Coupe Publishing Ltd [1981] 1 NZLR 275 ........................................................... 30.140 Courage Group's Pension Schemes, Re [1987] 1 All ER 528 ........................................ 28.150, 28.170 Court Line Ltd v Aktiebolaget v Gotaverken [1984] 1 Lloyd's Rep 283 ......................................... 3.35 Courtenay House Capital Trading Group Pty Ltd (in liq), In the Matter of (2018) 125 ACSR 149 ........................................................................................................ 16.115, 17.15 Courtenay v Austin [1962] NSWR 296 ........................................................................................ 2.60 Courtney v Powell [2012] NSWSC 460 ............................................................................ 7.55, 7.130 Couzens v Negri [1981] VR 824 .............................................................................................. 23.175 Coventry v Smith (2004) 181 FLR 220 ....................................................................... 16.190, 20.155 Covino v Bandag Manufacturing Pty Ltd [1983] 1 NSWLR 237 ............................................... 30.110 Cowan de Groot Properties Ltd v Eagle Trust plc [1992] 4 All ER 700 ...................................... 38.105 Cowan v Scargill [1985] Ch 270 ......................................................... 22.20, 22.205, 22.210, 28.85, 28.120, 28.170, 28.175, 28.220 Cowcher v Cowcher [1972] 1 All ER 943 .................................................................................. 26.85 Cowell v British American Tobacco Australia Services Ltd [2007] VSCA 301 ............................... 6.295 Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 ........................................................... 31.20 Cowen v Piggott [1989] 1 Qd R 41 ........................................................................................... 7.155

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Table of Cases

Cowichan Native Heritage Society (Trustee of) v TD Bank (1993) 106 DLR (4th) 126 .................. 3.50 Cox v Archer (1964) 110 CLR 1 .............................................................................................. 25.135 Coxen, Re [1948] Ch 747 ....................................................................................................... 29.275 CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 ..................................................................................... 1.15, 16.05, 20.100, 20.115, 23.125, 25.135, 25.145 Crabb v Arun District Council [1976] Ch 179 ............................................................... 10.60, 10.310 Crabb v Crabb (1834) 1 My & K 511; 39 ER 774 .................................................................... 26.135 Craddock Bros v Hunt [1923] 2 Ch 136 ................................................. 2.125, 37.65, 37.95, 37.105 Cradock v Scottish Provident Institution (1893) 69 LT 380 .......................................................... 1.65 Craig, Re (1952) 52 SR (NSW) 265 ................................................................................ 22.30, 22.90 Craine v Colonial Mutual Fire Insurance Co (1920) 28 CLR 305 .............................................. 30.160 Cram Foundation v Corbett-​Jones [2006] NSWSC 495 ................................... 29.50, 29.340, 29.365 Crampton v French [1996] ANZ Conv R 156 ............................................................................ 1.155 Crane v Hegeman-​Harris Co Inc [1939] 1 All ER 662 .................................................... 37.95, 37.105 Crane v Hegeman-​Harris Co Inc [1939] 4 All ER 68 ................................................................... 37.95 Cranfield Pty Ltd v Commonwealth Bank of Australia [1998] VSC 140 .................. 7.235, 9.60, 9.115 Cranston v CBFC Ltd (unreported, SC(NSW), Bryson J, 11 June 1993) ........................................ 2.10 Craven-​Sands v Koch (2000) 34 ACSR 341 .................................................. 21.105, 21.110, 24.200, 24.205, 24.210 Craven’s Estate, Re [1937] Ch 431 ............................................................................................ 25.45 Crawley v Short (2009) 262 ALR 654 ........................................................................................ 4.115 Crawshay, Re [1948] 1 All ER 107 ...................................................................................... 8.65, 8.70 Creamoata Ltd v Rice Equalisation Association Ltd (1953) 89 CLR 286 ....................... 30.145, 30.150 Creation Records Ltd v News Group Newspapers Ltd (1997) 39 IPR 1 ...................................... 6.270 Creative Brands Pty Ltd v Franklin [2001] VSC 338 ................................................................... 6.215 Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 .................. 7.35, 7.60, 7.80, 7.170, 7.180, 9.15, 9.85 Creditors Trust of Jackgreen (International) Pty Ltd, Re [2011] NSWSC 748 .............................. 25.35 Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 ............................................................................................. 8.10, 8.15, 8.20, 8.25 Cressy v Johnson [2009] VSC 52 ................................................................................ 38.180, 38.195 Crest Homes plc v Marks [1987] AC 829 ................................................................................. 32.140 Crest Realty Pty Ltd (in liq), Re [1977] 1 NSWLR 664 ................................................................ 24.25 Crestline Pty Ltd v Graham [2004] WASC 183 ........................................................................ 31.195 Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966 ............................ 1.80 Crichton v Crichton (1930) 43 CLR 536 .................................................................................... 18.10 Cripps, Re [1941] Tas SR 19 .................................................................................................... 29.100 Cripps v Lakeview Farm Fresh Ltd (in rec) [2006] 1 NZLR 238 ....................................... 35.65, 35.75 Crisp v Fairfax Media Ltd (2012) 38 VR 544 ............................................................................ 31.175 Criterion Properties plc v Stratford UK Properties LLC [2004] 1 WLR 1846 .............................. 38.100 Crook v Smart (1872) 11 SCR (NSW) Eq 121 .......................................................................... 22.180 Croome v Tasmania (1997) 191 CLR 119 .................................................................................. 37.30 Cropley v Cropley (2002) 11 BPR 20,171 .................................................................................. 3.100 Crossco No 4 Unlimited v Jolan Ltd [2012] 2 All ER 754 .......................................................... 38.220 Crossingham v Crossingham [2012] NSWSC 95 ....................................................................... 4.315 Crossman v Sheahan (2016) 115 ACSR 130 ............................................................................ 24.150 Crothers, Re [1930] VLR 49 ...................................................................................... 3.15, 3.55, 3.60, 3.70, 14.215, 14.245 Crouch Developments Pty Ltd v D & M (Australia) Pty Ltd [2008] WASC 151 ......................... 31.165 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1. ............................................................................................... 10.95, 10.115, 10.120, 10.125, 10.135, 10.170 Crowther v Brophy [1992] 2 VR 97 ......................................................................................... 29.200

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Equity and Trusts in Australia

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Crunden and Meux's Contract, Re [1909] 1 Ch 690 ............................................................... 21.135 Crystal Palace Trustees v Minister of Town and Country Planning [1950] 2 Ch 857 ................. 29.235 CSR Ltd v Amaca Pty Ltd [2016] VSCA 320 ............................................................................... 30.35 CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 ................................................. 31.195 Cubillo v Commonwealth of Australia (2001) 183 ALR 249 ......................................................... 4.40 Cuckmere Brick Co Ltd Mutual Finance Ltd [1971] Ch 949 ....................................................... 36.55 Cuesuper Pty Ltd, Re [2009] NSWSC 981 ........................................................... 22.90, 25.35, 25.50 Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (Nos 3 to 5) [2016] AC 923 ................................................................................................. 11.10 Cullen v Pension Holdings Ltd (1993) 1 NZSC 40,293 ............................................... 28.155, 28.200 Cully v Parsons [1923] 2 Ch 512 ............................................................................................... 36.25 Cumming v Austin (No 2) (1902) 28 VLR 347 ........................................................................ 23.160 Cumming v Sands (2001) NSW ConvR ¶55–​989 .................................................................... 38.270 Cummings v Lewis (1993) 41 FCR 559 ..................................................................... 14.125, 14.140, 14.170, 14.180 Cummins, Re (1951) 15 ABC 185 ........................................................................................... 19.140 Cummins, Re Estate of [1964] SASR 236 ........................................................... 22.110, 23.90, 23.95 Cummins v Pathline Australia Pty Ltd [2004] SASC 95 .............................................................. 32.75 Cummins v Perkins [1899] 1 Ch 16 ........................................................................................ 23.130 Cummins v Trustees of the Property of Cummins (2004) 209 ALR 521 ................................... 19.120 Cunliffe Brooks & Co v Blackburn and District Benefit Building Society (1884) 9 App Cas 857 ................................................................................................................... 14.115 Cunningham and Frayling, Re [1891] 2 Ch 567 ........................................................................ 21.45 Cunningham's Settled Estates, Re (1909) 27 WN (NSW) 28 ...................................................... 21.80 Currie v Hamilton [1984] 1 NSWLR 687 ........................................................................ 26.75, 26.80 Curtis v NID Pty Ltd [2010] FCA 1072 ...................................................................................... 32.50 Curtis v Sheffield (1882) 21 Ch D 1 .......................................................................................... 37.35 Custodial Ltd v Greig [2005] 2 Qd R 115 .................................................................................. 21.95 Customs and Excise Commissioners v Barclays Bank plc [2005] 1 WLR 2082 ........................... 32.105 Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 ............................... 32.105 Cuthbert v Roberts (2004) 13 Tas R 83 ..................................................................................... 37.95

D D & J Fowler (Aust) Ltd v Bank of New South Wales [1982] 2 NSWLR 879 ................................ 14.70 D Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10 .......................................... 30.110, 30.115 D V Bryant Trust Board v Hamilton City Council [1997] 3 NZLR 342 ............. 29.110, 29.125, 29.215 D V Bryant Trust Board v Hamilton City Council [1999] 1 NZLR 41 ............... 29.110, 29.125, 29.215 D v National Society for the Prevention of Cruelty to Children [1978] AC 171 .......................... 6.145 Dabbs v Seaman (1925) 36 CLR 538 ........................................................................................ 10.10 Dadourian Group International Inc v Simms [2006] 1 WLR 2499 ............................................ 32.110 Dagle v Dagle Estate (1990) 70 DLR (4th) 201 ............................................................. 22.30, 26.145 Dale (deceased), Re [1993] 4 All ER 129 ................................................................................. 38.135 Dalgety Ltd v Commercial Bank of Australia Ltd [1981] 2 NSWLR 211 ...................................... 14.80 Dalgety Wine Estates Pty Ltd v Rizzon (1979) 141 CLR 552 ....................................................... 31.55 Dalma No 1 Pty Ltd (in liq), Re (2013) 279 FLR 80 ............................................ 14.20, 14.70, 14.105 Dalrymple v Melville (1932) 32 SR (NSW) 596 ........................................................................ 24.100 Dalton v Christofis [1978] WAR 42 ............................................................................................ 18.30 Dalton v Ellis (2005) 65 NSWLR 134 .......................................................................... 16.125, 25.125 Daly v Sydney Stock Exchange Ltd [1982] 2 NSWLR 421 .......................................................... 34.55 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 .......................... 4.235, 35.65, 38.50, 39.40 Dalziel, Re [1943] Ch 277 ....................................................................................................... 29.175 Dance v Goldingham (1873) LR 8 Ch App 902 .......................................................... 23.100, 24.115 Daniel v Tee [2016] 4 WLR 115 ............................................................................................... 22.215 Daniell v Paradiso (1991) 55 SASR 359 ....................................................................................... 2.25 lviii

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Table of Cases

Daniels (deceased), Re [1970] VR 72 ....................................................................................... 29.325 Daniels v Anderson (1995) 37 NSWLR 438 ............................................................................. 28.250 Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 ...................... 4.170, 4.275, 38.35 Darjan Estate Co plc v Hurley [2012] 1 WLR 1782 ..................................................................... 7.245 Darling, Re [1925] SASR 262 .................................................................................................... 22.90 Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 ................................................................................................ 6.40, 6.220, 6.250, 6.320, 31.85, 32.180, 32.185 Dart Industries Inc v Decor Corporation Pty Ltd (1993) 179 CLR 101 ........... 34.140, 34.150, 34.160, 34.165, 34.175 Darter Pty Ltd v Malloy [1993] 2 Qd R 615 ............................................ 12.45, 12.60, 12.75, 33.150 Darvall McCutcheon v H K Frost Holdings Pty Ltd (2002) 4 VR 570 .......................................... 6.345 Darwin Cyclone Tracy Relief Trust Fund, Re (1979) 39 FLR 260 ............................................... 29.240 Dataforce Pty Ltd v Brambles Holdings Ltd [1988] VR 771 ...................................................... 31.145 Daventry District Council v Daventry & District Housing Ltd [2012] 1 WLR 1333 ......... 37.70, 37.135 Davey v Challenger Managed Investments Ltd [2003] NSWCA 172 ................................... 9.50, 9.55 David, Re (1889) 41 Ch D 168 ............................................................................................... 29.240 David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1 ........................... 13.55 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 ................................................................ 8.105, 8.110, 8.115, 8.125, 8.130, 8.185 David Syme & Co Ltd v GMH Ltd [1984] 2 NSWLR 294 .................................................. 6.10, 6.280 Davidson, Re [1909] 1 Ch 567 ................................................................................................ 29.185 Davidson v Chirnside (1908) 7 CLR 324 .................................................................................. 25.105 Davidson v Davidson (1991) FLC ¶92–​197 ............................................................................. 20.135 Davidson v O'Halloran [1913] VLR 367 ..................................................................................... 2.140 Davies v AIB Group (UK) plc [2012] 2 P & CR 19 ............................................................. 7.95, 7.115 Davies v Davies (1887) 36 Ch D 359 .......................................................................................... 3.40 Davies v Messner (1975) 12 SASR 333 .................................................................................... 26.125 Davies v National Trustees Executors & Agency Co of Australasia Ltd [1912] VLR 397 ............. 22.225 Davies v Perpetual Trustee Co Ltd [1959] AC 439 ...................................................... 29.155, 29.195 Davies v Thomas [1900] 2 Ch 462 .............................................................................................. 1.95 Davis (deceased), Re [1953] VLR 639 ...................................................................................... 22.135 Davis, Re [1902] 1 Ch 876 ...................................................................................................... 29.325 Davis v Federal Commissioner of Taxation (1989) 86 ALR 195 ................................................ 27.135 Davis v Hueber (1923) 31 CLR 583 ........................................................................................... 16.65 Davis v Richards & Wallington Industries Ltd [1991] 2 All ER 563 .................... 16.15, 28.150, 28.195 Davis v Turning Properties Pty Ltd (2005) 222 ALR 676 ................................... 31.135, 32.20, 32.40, 32.75, 32.80 Davis v Vale [1971] 2 All ER 1021 .............................................................................................. 26.80 Davisons Solicitors (a firm) v Nationwide Building Society [2013] PNLR 188 ........................... 24.205 Davron Estates Ltd v Turnshire Ltd (1982) 133 NLJ Rep 937 .................................................... 38.150 Dawson (deceased), Re [1966] 2 NSWR 211 ...................................................... 24.30, 24.35, 24.60, 24.65, 34.05, 34.60 Dawson, Re [1959] NZLR 1360 ................................................................................................. 25.45 Dawson v Dawson [1945] VLR 99 .................................................................................. 22.10, 22.65 Dawson v Paul [2014] 2 NZLR 689 ......................................................................................... 21.125 Day & Dent Constructions Pty Ltd v North Australian Properties Pty Ltd (1981) 34 ALR 595 ........................................................................................................................ 30.100 Day Ford Pty Ltd v Sciacca [1990] 2 Qd R 209 ........................................................................ 10.365 Day Neilson v Matthey (1997) 15 ACLC 168 ................................................................. 6.320, 6.325 Day v Brownrigg (1878) 10 Ch D 294 ...................................................................................... 31.05 Day v Day [2014] Ch 114 ......................................................................................................... 37.65 Day v Mead [1987] 2 NZLR 443 .................................................................................... 34.05, 34.50 DC Payments Pty Ltd v Next Payments Pty Ltd [2016] VSC 315 .................................................. 6.55 De Bruyne v De Bruyne [2010] WTLR 1525 ............................................................................. 38.230 lix

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Equity and Trusts in Australia

De Francesco v Barnum (1890) 45 Ch D 430 ............................................................................ 33.80 De Lacey v James [2003] QSC 94 ............................................................................... 38.185, 38.200 De Little v Byrne (1951) 84 CLR 532 ....................................................................................... 22.155 De Maudsley v Palumbo [1996] FSR 447 .................................................................................... 6.35 De Santis v Aravanis (2014) 227 FCR 404 ............................................................................... 23.120 De Vedas (deceased), Re [1971] SASR 169 .............................................................................. 17.175 De Visme, Re (1848) 2 De G J & S 17; 46 ER 280 .................................................................... 26.135 De Wind v Wedge [2010] WTLR 795 ......................................................................................... 7.130 Dean, Re (1889) 41 Ch D 552 ................................................................................................ 17.150 Dean v Cole (1921) 30 CLR 1 ................................................................................................... 17.15 Dean v McDowell (1878) 8 Ch D 345 ....................................................................................... 4.190 Dean-​Willcocks v Nothintoohard Pty Ltd (in liq) (2005) 53 ACSR 587 ....................................... 36.25 Deancrest Nominees Pty Ltd v Nixon (2007) 25 ACLC 1681 ................................................... 23.130 Deane v Attorney-​General [1997] 2 NZLR 180 ........................................................................ 10.195 Deangrove Pty Ltd v Commonwealth Bank of Australia (2001) 37 ACSR 465 ............................ 36.15 Dearle v Hall (1828) 3 Russ 1; 38 ER 475 .................................................................................... 3.70 Death v Railway Commissioners for NSW (1927) 27 SR (NSW) 187 .......................................... 31.60 Decor Corporation Pty Ltd v Dart Industries Inc (1991) 104 ALR 621 ...................................... 34.175 Deemcope Pty Ltd v Cantown Pty Ltd [1995] 2 VR 44 ................................................................ 8.15 Degan v Lee (1939) 39 SR (NSW) 234 ...................................................................................... 25.45 Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 ....................................... 6.50, 6.55, 6.180 Delaforce v Simpson-​Cook (2010) 78 NSWLR 483 ..................................................... 10.240, 10.245 Delany, Re [1902] 2 Ch 642 .................................................................................................... 29.200 Delehunt v Carmody (1986) 161 CLR 464 ................................................................................ 26.70 Delgado v Walker Developments Pty Ltd (1989) NSW ConvR ¶55–​497 ..................................... 11.75 Delius (deceased), Re [1957] 1 Ch 299 ............................................................. 29.50, 29.80, 29.145 Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 ................................ 34.55 Dempsey, Re [1914] QSR 200 ................................................................................................... 17.20 Dempster v Mallina Holdings Ltd (1994) 15 ACSR 1 .................................. 4.30, 4.225, 4.265, 34.05 Dendy v Evans [1910] 1 KB 263 .............................................................................................. 11.100 Denhert, Re [1973] VR 449 ....................................................................................................... 19.95 Denley's Trust Deed, Re [1969] 1 Ch 373 ................................................................................ 17.155 Denning v Tri-​Star Customs and Forwarding Ltd [1996] 3 NZLR 630 ........................................ 37.95 Densham, Re [1975] 3 All ER 726 ............................................................................................. 26.80 Dent v Bennett (1839) 4 My & Cr 269; 41 ER 105 ...................................................................... 7.30 Depew v Wilkes (2002) 216 DLR (4th) 487 ............................................................................. 10.310 Derby & Co Ltd v Weldon (No 1) [1989] 2 WLR 276 .............................................................. 32.110 Derby & Co Ltd v Weldon (Nos 3 and 4) [1989] 2 WLR 412 ................................................... 32.110 Derby-​West Kimberley, Shire of v Yungngora Association Inc (2007) 157 LGERA 238 .............. 29.240 Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184 ............. 14.125, 14.130, 14.150, 30.175 Derry v Peek (1889) 14 App Cas 337 ............................................................................... 8.90, 35.50 Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 ......... 6.95, 6.215, 14.215, 34.155, P.55 Deutsch v Deutsch (2012) 6 ASTLR 386 .................................................................................... 24.15 Deutsch v Trimble [2016] VSC 263 ........................................................................................... 20.35 Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2007] 1 AC 558 ......... 8.105 Deutsche Schachtbau und Tiefbohrgesellschaft mbH v Ras Al Khaimah National Oil Co [1990] 1 AC 295 ............................................................................................................ 32.90 Devlin v Collins (1984) 37 SASR 98 ........................................................................................... 32.30 DFC New Zealand Ltd v Goddard [1992] 2 NZLR 445 .............................................................. 38.55 DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728 .......................................... 10.315 Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 ......................................... 18.10, 18.30 Diagnostic X-​Ray Services Pty Ltd v Jewel Food Stores Pty Ltd (2001) 4 VR 632 ...................... 33.100

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Table of Cases

Dick, Re [1953] All ER 559 ................................................................................................. 8.50, 8.55 Dickey v Driscoll (1905) 22 WN (NSW) 197 ............................................................................ 20.120 Diera Pty Ltd v Grover (1990) ASC ¶55–​974 ...................................................................... 9.35, 9.45 Dies v British and International Mining and Finance Corporation Ltd [1939] 1 KB 724 .................................................................................................................. 11.20, 11.50 Digital Equipment Corporation v Darkcrest Ltd [1984] Ch 512 ............................................... 32.140 Digital Pulse Pty Ltd v Harris (2002) 40 ACSR 487 ............................ 4.85, 6.55, 34.125, 34.130, P.50 Dillon v Macdonald (1902) 21 NZLR 45 ................................................................................... 30.50 Dillon v Parker (1818) 1 Swans 359; 36 ER 422 ...................................................................... 15.105 Dillwyn v Llewelyn (1862) 4 De GF & J 517; 45 ER 1285 .......................................................... 10.60 Dilworth v Commissioner of Stamps [1899] AC 99 ................................................................. 29.155 Dimdore v Leventhal (1936) 36 SR (NSW) 378 ....................................................................... 14.125 Dimella v Rudaks (2008) 102 SASR 582 ......................................................................... 14.05, 14.10 Dimes v Scott (1828) 4 Russ 195; 38 ER 778 ................................................................ 22.155, 24.90 Dimksal Shipping Co SA v International Transport Workers Federation [1991] 3 WLR 875 ........... 8.15 Dimond, Re Estate of (1891) 13 ALT 18 .................................................................................... 21.55 Dimond v Moore (1931) 45 CLR 159 ........................................................................................ 1.165 Dimos v Dikeakos Nominees Pty Ltd (1996) 149 ALR 113 ....................................................... 23.130 Dimos v Skaftouros (2004) 9 VR 584 ........................................................................................ 21.60 Dingle v Turner [1972] AC 601 ...................................................................................... 29.65, 29.75 Dinh v Dang [2007] QSC 3 ....................................................................................................... 12.85 Dinn v Grant (1852) 5 De G & Sm 451; 64 ER 1194 ................................................................. 1.100 Dinsdale v Arthur (2006) 12 BPR 23,509 ...................................................................... 14.170, 26.85 Diocesan Trustees of the Church of England in Western Australia v Solicitor-​General (1909) 9 CLR 757 ................................................................................................. 29.130, 29.135 Dion Investments Pty Ltd, Re [2013] NSWSC 1941 ...................................................... 25.45, 25.125 Dion Investments Pty Ltd, Re (2014) 87 NSWLR 753 ............................... 25.05, 25.30, 25.40, 25.45 Diplock, Re [1948] Ch 465 ................................................................. 24.130, 24.135, 39.10, 39.20, 39.25, 39.100, 39.105, P.85 Direct Food Supplies (Victoria) Pty Ltd v DLV Pty Ltd [1975] VR 358 ......................................... 11.90 Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168 ................................. 9.120, 9.175 Director of Consumer Affairs Victoria v Scully (No 3) [2012] VSC 444 ....................................... 9.175 Director of Public Prosecutions (Cth) v Kane (1997) 140 FLR 468 .................................. 6.235, 6.250 Director of Public Prosecutions for Northern Ireland v Lynch [1975] AC 653 ............................... 8.10 Director of Public Prosecutions (WA) v Bennett & Co (a firm) (2005) 151 A Crim R 516 ......... 31.155 Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR (NSW) 598 ............................ 10.10 Disher v Farnworth [1993] 3 NZLR 390 ....................................................................... 20.105, 21.55 Distinctive FX Pty Ltd v Van Der Slot [2015] VSCA 328 ............................................................. 39.80 Dive, Re [1909] 1 Ch 328 ....................................................................................................... 24.215 Dixon Projects Pty Ltd v Masterton Homes Pty Ltd (1996) 36 IPR 136 ..................................... 10.355 Dixon v Muckleston (1872) LR 8 Ch App 155 .................................................................... 2.25, 2.30 Dixon v White (unreported, SC(NSW), Holland J, 14 April 1982) ............................................ 38.130 Dixon v Wieselmann (2013) 93 ACSR 576 ................................................................................ 1.105 Dixon v Williams (1875) 13 SCR Eq 7 ..................................................................................... 23.185 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 .............................................................................................................. 16.10, 26.45 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 ............................................................................................................. 1.25, 16.05, 26.10, 26.45 Dobinson, Re [1911] VLR 300 ................................................................................................... 29.10 Dobson v Salvation Army (unreported, SC(Tas), Neasey J, 31 March 1983), 23.170 Dobson's Settlement, Re [1946] VLR 83 .................................................................................. 16.175 Docker v Somes (1834) 2 My & K 655; 39 ER 1095 .......................................... 24.80, 34.140, 39.75

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Equity and Trusts in Australia

Dodds v Tuke (1884) 25 Ch D 617 ......................................................................................... 23.125 Dodson, Re [1931] SASR 387 ..................................................................................... 29.130, 29.135 Dodson v Sandhurst & Northern District Trustees Executors and Agency Co Ltd [1955] VLR 100 ................................................................................................................. 25.150 Doe d Lockwood v Clarke and Brown (1807) 8 East 185; 103 ER 313 ....................................... 11.85 Doe v Australian Broadcasting Corporation [2007] VCC 281 .......................................... 6.120, 6.365 Doering v Doering (1889) 42 Ch D 20 ................................................................................... 23.150 Doherty v Federal Commissioner of Taxation (1933) 48 CLR 1 ................................................ 27.135 Doiron v Caisse Populaire D'Inkerman Ltée (1985) 17 DLR (4th) 660 ........................................ 34.50 Dolan v Macdermot (1868) 3 Ch App 676 ............................................................................... 29.45 Dollars & Sense Finance Ltd v Nathan [2008] 2 NZLR 557 ........................................................ 7.165 Dolphin v Aylward (1870) LR 4 HL 486 ...................................................................... 14.215, 14.245 Domazet v Jure Investments Pty Ltd [2016] ACTSC 33 ............................................................ 37.115 Don King Productions Inc v Warren [1998] 2 All ER 608 ......................................................... 25.135 Don King Productions Inc v Warren [1999] 3 WLR 276 ................................................ 4.205, 25.135 Don Lodge Motel Ltd v Invercargill Licensing Trust [1970] NZLR 1105 ..................................... 35.40 Donaldson v Freeson (1934) 51 CLR 598 .................................................................................. 19.55 Doneley v Doneley [1998] 1 Qd R 602 ................................................................................... 38.125 Donis v Donis (2007) 19 VR 577 ............................................................................... 10.240, 10.250, 10.255, 38.195 Donis v Donis [2007] HCATrans 609 ....................................................................................... 10.250 Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570 ................. 6.195, 31.50, 31.135 Doohan v Nelson [1973] 2 NSWLR 320 .................................................................................. 26.125 Door of Hope, Re (1905) 26 NZLR 96 ..................................................................................... 29.370 Dopf v Royal Bank of Canada (1998) 156 DLR (4th) 56 ............................................................ 4.295 Dormeuil Fréres SA v Nicolian Ltd [1988] 1 WLR 1362 ............................................................ 32.185 Dorney v Federal Commissioner of Taxation [1980] 1 NSWLR 404 ................................. 37.10, 37.25 Dorotea Pty Ltd v Christos Doufas Nominees Ltd [1986] 2 Qd R 91 ........................................ 35.105 Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 ................................................................................................... 1.65, 2.35, 2.40, 2.105, 2.110, 2.115 Doubtless Bay Water Supply Company Ltd v Robinson [1999] ANZ Conv R 272 ....................................................................................................... 2.60, 2.105, 2.110, 37.75 Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247 ........................ 10.320 Dougan v Ley (1946) 71 CLR 142 ..................................................................... 33.20, 33.45, 33.110 Dougan v Macpherson [1902] AC 197 ................................................................................... 22.115 Douglas-​Menzies v Umphelby [1908] AC 224 ......................................................................... 15.100 Douglas, Re (1885) 28 Ch D 327 .............................................................................................. 16.05 Douglas, Re (1887) 35 Ch D 472 ............................................................................................ 29.220 Douglas, Re (1928) 29 SR (NSW) 48 ....................................................................................... 22.100 Douglas v Hello! Ltd [2001] 2 WLR 992 ..................................................................................... P.140 Douglas v Hello! Ltd [2003] 3 All ER 996 ................................................................................. 34.125 Douglas v Hello! Ltd (No 3) [2006] QB 125 ..................................................................... 6.25, 6.110 Doulton Potteries Ltd v Bronotte [1971] 1 NSWLR 591 ........................................................... 37.145 Dover, Re (1981) 6 ACLR 307 ................................................................................................... 36.75 Dow Securities Pty Ltd v Manufacturing Investments Ltd (1981) 5 ACLR 501 .......................... 30.175 Dowdle v Pay Now For Business Pty Ltd [2012] QSC 272 ......................................................... 7.255 Dowling, Re [1961] VLR 615 ..................................................................................................... 22.80 Downderry Construction Ltd v Secretary of State for Transport, Local Government, and the Regions (2002) 152 NLJ Rep 108 .......................................................................... 10.165 Downer Enterprises Ltd, Re [1974] 2 All ER 1074 ........................................................... 14.80, 14.85 Downes v Bullock (1858) 25 Beav 54; 53 ER 556 .................................................................... 22.225 Downing v Federal Commissioner of Taxation (1971) 125 CLR 185 ........................... 29.120, 29.245 lxii

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Table of Cases

Downshire's Settled Estates, Re [1953] Ch 218 ......................................................................... 25.35 Downsview Ltd v First City Corporation Ltd [1993] AC 295 ................................ 36.25, 36.50, 36.55 Downtown King West Development Corp v Massey Ferguson Industries Ltd (1996) 133 DLR (4th) 550 ............................................................................................................. 37.125 Dowse v Gorton [1891] AC 190 .............................................................................................. 23.125 Dowsett v Reid (1912) 15 CLR 695 ......................................................................................... 33.130 Dowson & Mason Ltd v Potter [1986] 2 All ER 418 ................................................................... 6.345 Doyle v Doyle [2001] BCL 578 .................................................................................................. 21.80 Doyley v Attorney-​General (1735) 2 Eq Ca Abr 195 ........................................................ 17.85, P.110 DPC Estates Pty Ltd v Grey [1974] 1 NSWLR 443 ....................................................... 38.100, 38.105 Drake Personnel Ltd v Beddison [1979] VR 13 .................................................................... 6.30, 6.55 Drakeford v Bromhead [2003] NSWSC 296 ............................................................................ 27.105 Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53 ..................................................... 26.160 Dreger, Re (1994) 97 Man R (2d) 39 ...................................................................................... 26.145 Dreiberg v Bettles [2007] NSWSC 1204 .................................................................................. 21.125 Drexel Burnham Lambert UK Pension Plan, Re [1995] 1 WLR 32, 28.210 Driffill, Re [1950] Ch 92 .......................................................................................................... 29.245 Driscoll (deceased), Re [1918] 1 IR 152 ..................................................................................... 14.45 Driscoll v Church Commissioners for England [1957] 1 QB 330 .............................................. 11.100 Driver v Broad [1893] 1 QB 744 ................................................................................................. 1.80 Drozd v Vaskas [1960] SASR 88 ................................................................................................. 35.95 Drummond's Trusts, Re (1907) 4 Tas LR 9 ............................................................................... 29.180 Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 ......................................... 24.195, 38.60, 38.70 Dubai Islamic Bank PJSC v PSI Energy Holding Co BSC [2011] EWCA Civ 761 ........................... 32.65 Duchess of Argyll v Duke of Argyll [1967] 1 Ch 302 .................................................................... 6.95 Duckwari plc (No 2), Re [1999] Ch 268 .................................................................................... 24.65 Duckworth v Water Corporation (No 2) [2015] WASC 411 ....................................................... 27.25 Dudgeon, Re (1896) 74 LT 613 ................................................................................. 29.120, 29.125 Duffy v Super Centre Development Corporation Ltd [1967] 1 NSWR 382 .................... 36.85, 36.100 Duggan v Governor of Full Sutton Prison [2004] 1 WLR 1010 ........................................ 16.45, 26.05 Duggan v White [2018] NSWSC 364 ........................................................................................ 18.45 Duke Group Ltd (in liq) v Pilmer (1998) 27 ACSR 1 ................................................................. 14.165 Duke Group Ltd (in liq) v Pilmer (1999) 73 SASR 64 ............................................................... 24.175 Duke of Norfolk's Settlement Trusts, Re [1982] Ch 61 ............................................................... 22.90 Dulhunty v Dulhunty [2010] NSWSC 1465 ............................................................................... 22.65 Dullow v Dullow (1985) 3 NSWLR 531 ......................................................... 26.115, 26.135, 26.160 Dumbel, Re (1802) 6 Ves 617; 31 ER 1223 ............................................................................... 22.15 Dummer v Pitcher (1833) 2 My & K 262; 39 ER 944 .............................................................. 15.105 Dunbar Bank plc v Nadeem [1998] 3 All ER 876 ............................................ 7.05, 7.10, 7.80, 7.280 Dunbar Sloane Ltd v Gall [1996] 3 NZLR 252 ................................................................ 32.30, 32.65 Duncan, Fox & Co and Robinson & Co v North and South Wales Bank (1880) 6 App Cas 1 ................................................................................................. 14.70, 14.80, 14.125 Duncan v Cathels (1956) 98 CLR 625 ....................................................................................... 26.20 Duncan v Equity Trustees Executors and Agency Co Ltd (1958) 99 CLR 513 ............................. 26.20 Duncan v McDonald [1997] 3 NZLR 669 .................................................................................. 19.40 Duncuft v Albrecht (1841) 12 Sim 189; 59 ER 1104 ................................................................. 33.60 Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896 ........................ 20.45 Dundee Magistrates v Dundee Presbytery (1861) 4 Macq 228 ................................................ 29.180 Dunford & Elliott Ltd v Johnstone & Firth Brown Ltd [1975] FSR 143 ........................................ 6.235 Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 87 .............. 13.20 Dunlop, Re (1925) 26 SR (NSW) 126 ...................................................................................... 20.120 Dunlop, Re [1984] NI 408 ...................................................................................................... 29.125 Dunn, Re Estate of [1963] VR 165 ........................................................................................... 16.205 Dunn v Flood (1885) 28 Ch D 586 ........................................................................................... 24.05 Dunne v Byrne (1912) 16 CLR 500 ......................................................................................... 29.185 lxiii

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Equity and Trusts in Australia

Durham Bros v Robertson [1898] 1 QB 765 ............................................................ 3.35, 3.50, 3.120 Duthie v Nixon (2015) 47 VR 355 ........................................................................................... 31.175 Dwight v Federal Commissioner of Taxation (1992) 107 ALR 407 .............................. 27.150, 27.155 Dwyer v Ross (1992) 34 FCR 463 ........................................................................ 8.50, 27.60, 27.110 Dykes v Archer (1906) 2 Tas LR 1 .............................................................................................. 23.95

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E E I du Pont de Nemours & Co Inc v Christopher (1970) 431 F 2d 1012 .................................... 6.270 E Johnson & Co (Barbados) Ltd v NSR Ltd [1996] 3 WLR 583 ................................................. 33.110 E M Bowden's Patents Syndicate Ltd v Herbert Smith & Co [1904] 2 Ch 86 .............................. 3.125 E Pfeiffer Weinkellerei-​Weineinkauf GmbH & Co v Arbuthnot Factors Ltd [1988] 1 WLR 150 ............................................................................................................................. 3.70 Eads v Williams (1854) 4 De GM & G 674; 43 ER 671 ............................................................. 33.175 Eagle Star Nominees v Merril [1982] VR 557 ........................................................................... 30.115 Earl of Aylesford v Morris (1873) LR 8 Ch App 484 ...................................................................... 9.05 Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82 ..................................................... 9.05 Earl of Oxford's Case (1615) 1 Ch Rep 1; 21 ER 485 ............................................................P.15, P.25 Earl of Radnor's Will Trusts, Re (1890) 45 Ch D 402 ................................................................ 23.170 Earl of Stafford, Re [1980] Ch 28 .............................................................................................. 25.45 Earl of Winchelsea v Norcliffe (1686) 1 Vern 435; 23 ER 569 ..................................................... 25.25 Earl v Hector Whaling Ltd [1961] 1 Lloyd's Rep 459 .................................................................. 37.95 Earthquake Commission v Insurance Council of New Zealand Inc [2015] 2 NZLR 381 .............. 37.30 Earthquake Commission v Krieger [2014] 2 NZLR 547 .............................................................. 6.155 East, Re (1873) 8 Ch App 735 ................................................................................................... 21.60 Eastern Nitrogen Ltd v Federal Commissioner of Taxation (2001) 108 FCR 27 ........................ 19.150 Eastern Services Ltd v No 68 Ltd [2006] 3 NZLR 335 .............................. 30.10, 30.15, 30.20, 30.40, 30.50, 30.80, 33.175 Eastes, Re [1948] Ch 257 ........................................................................................................ 29.185 Eastwood v Lever (1863) 4 De GJ & S 114; 46 ER 859 .............................................................. 34.75 Eaton v LDC Finance Ltd [2013] NZHC 1242 ............................................................................ 25.45 Ebbett (deceased), Re [1974] 1 NZLR 392 ..................................................................... 25.25, 25.45 Ebner, Re (2003) 196 ALR 533 ................................................................................................ 26.125 Eckford v Eckford (1924) 25 SR (NSW) 78 ............................................................................... 15.115 Ecrosteel Pty Ltd v Perfor Printing Pty Ltd (1996) 37 IPR 22 ............................................. 6.55, 6.235 Ede v Ede [2007] 2 Qd R 323 .................................................................................................. 24.205 Edelsten v John Fairfax & Sons Ltd [1978] 1 NSWLR 685 ........................................................ 31.175 Eden Refuge v Hohepa [2011] 3 NZLR 273 .................................................................. 24.70, 34.125 Edenwest Ltd v CMS Cameron McKenna (a firm) [2013] BCC 152 ........................................... 36.25 Edge v Pensions Ombudsman [1998] Ch 512 .................................................. 22.125, 23.30, 23.35, 28.210, 28.220 Edge v Pensions Ombudsman [2000] Ch 602 .................................................. 22.125, 23.30, 23.35, 28.210, 28.220 Edington v Board of Trustees of the State Public Sector Superannuation Scheme [2015] QSC 245 .................................................................................................................. 23.75 Edlington Properties Ltd v J H Fenner & Co Ltd [2006] 1 WLR 1583 ........................................ 30.130 Edmonds v Donovan (2005) 12 VR 513 ................................................................. 4.45, 4.90, 30.10, 34.140, 38.250 Edmunds v Pickering (1999) 75 SASR 407 ........................................... 19.20, 19.40, 22.115, 24.170 Edmunds v Pickering (No 4) (2000) 77 SASR 381 .................................. 24.60, 24.70, 34.145, 38.10 Education, Director-​General of v Public Service Association of NSW (1984) 79 FLR 15 ............................................................................................................................ 6.230 Educational Resources Pty Ltd (in liq) v Poteri (1996) 20 ACSR 628 ........................................... 27.95 Edward Young & Co Ltd v Holt (1948) 65 RPC 25 .................................................................. 34.155

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Table of Cases

Edwards & Co v Picard [1909] 2 KB 903 ................................................................................. 36.130 Edwards (deceased), Re [1958] Ch 168 ....................................................................... 15.55, 15.105 Edwards, Re Will of (1926) 22 Tas LR 1 ..................................................................................... 23.85 Edwards v Attorney-​General (2004) 60 NSWLR 667 ..................................................... 24.200, 27.40 Egerton v Jones [1939] 2 KB 702 .............................................................................................. 11.95 Egg v Devey (1847) 10 Beav 444; 50 ER 653 .......................................................................... 24.170 Egmont v Smith (1877) 6 Ch D 469 ....................................................................................... 38.150 Ehrenfeld v Crosscity Enterprises Pty Ltd (2008) ANZ ConvR ¶8–​01 ........................................ 38.155 869163 Ontario Ltd v Torrey Springs II Associates Limited Partnership (2005) 256 DLR (4th) 490 ...................................................................................................................... 13.55 Eiszele v Hurburgh [2011] TASSC 65 ......................................................................................... 34.40 EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 ................................................. 10.110 El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 ............................. 26.40, 39.15, 39.25, 39.30 El Sayed v El Hawach (2015) 88 NSWLR 214 ............................................................................ 24.15 Eldamos Investments Ltd v Force Location Ltd [1996] ANZ Conv R 36 .............. 37.75, 37.95, 37.125 Elder Advocates of Alberta Society v Alberta [2011] 2 SCR 261 .......................................... 5.45, 5.50 Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 ........................... 1.95, 1.100, 2.35, 2.40, 2.45, 2.55 Elders Pastoral Ltd v Bank of New Zealand [1989] 2 NZLR 180 ........................................ 4.60, 4.250 Elders Pastoral Ltd v Bank of New Zealand (No 2) [1990] 1 WLR 1478 ...................................... 3.150 Elders Trustee & Executor Co Ltd v Eastoe [1963] WAR 36 ............................................. 15.55, 15.80 Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 ................................................................................................ 27.25, 37.100, 37.105 Elder's Trustee and Executor Co Ltd v Higgins (1963) 113 CLR 426 .................... 21.15, 24.30, 24.50 Elder's Trustee and Executor Co Ltd v Symon [1934] SASR 435 ............................................... 25.125 Elecnet (Aust) Pty Ltd v Commissioner of Taxation (2016) 259 CLR 73 ........................ 20.95, 20.105 Electoral Commission v Tate [1999] 3 NZLR 174 ....................................................................... 37.15 Electrical Enterprises Retail Pty Ltd v Rodgers (1988) 15 NSWLR 473 ............................. 33.50, 35.60 Electronic Industries Ltd v Harrisons & Crosfield (ANZ) Ltd [1966] 2 NSWR 336 ..................... 33.145 Elite Promotions & Management Pty Ltd v 5A Investments Pty Ltd (2011) 80 NSWLR 686 .................................................................................................................. 30.130 Elkington v Moore Business Systems Australia Ltd (1994) 13 ACSR 342 .................................. 20.100 Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 ............................... 7.240, 7.245, 7.280, 7.290, 9.90, 9.155 Ellaway v Lawson [2006] QSC 170 ............................................................................................ 19.60 Ellenborough, Re [1903] 1 Ch 697 ........................................................................................... 3.105 Ellesmere Brewery Co v Cooper [1896] 1 QB 75 ........................................... 14.130, 14.180, 14.185 Elliot & Tuthill (Mortgages) Pty Ltd v Farrell & Anderson Pty Ltd [2002] FCA 965 ................... 14.160 Ellis, Re (2015) 14 ASTLR 475 ................................................................................................. 24.105 Ellis v Barker (1871) LR 7 Ch App 104 ......................................................................................... 7.30 Ellison v Lutre Pty Ltd (1999) 30 ACSR 615 ............................................................................... 35.95 Elliston v Reacher [1908] 2 Ch 374 ........................................................................................... 34.80 Elmore (deceased), Re [1968] VR 390 ..................................................................................... 29.160 Elovalis v Elovalis [2008] WASCA 141 ........................................................................... 21.105, 23.30 Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130 .......................................... 11.60, 13.15 Emanuel Management Pty Ltd (in liq) v Emanuele (2002) 83 SASR 501 ......................... 1.160, 4.115 Emanuel Management Pty Ltd (in liq) v Foster's Brewing Group Ltd (2003) 178 FLR 1 ................ 8.15 Emap Elan Ltd v Pacific Publications Pty Ltd (1997) 37 IPR 1 ................................................... 31.165 Emilco Pty Ltd, Re (2002) 20 ACLC 388 ....................................................................... 3.140, 16.135 Emmet's Estate, Re (1879) 17 Ch D 142 ................................................................................... 24.60 Employers First v Tolhurst Capital Ltd (2005) 143 FCR 356 ..................................................... 28.235 Endacott (deceased), Re [1960] 1 Ch 232 ............................................................................... 17.150 Endeavour Lodge Motel Ltd v Langford and Gavin [1998] BCL 820 .......................................... 11.95 English & American Insurance Co Ltd v Herbert Smith [1988] FSR 232 ..................................... 6.240

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Equity and Trusts in Australia

English and American Insurance Company Ltd, Re [2014] WTLR 57 .......................................... 25.35 Engwirda v Engwirda (2004) DFC ¶95–​285 ............................................................................ 38.180 Enhill Pty Ltd, Re [1983] 1 VR 561 ............................................................................ 23.120, 23.125, 23.130, 27.30 Enoka v Shire of Northhampton (1996) 15 WAR 483 .............................................................. 10.395 ENT Pty Ltd v McVeigh (1996) 6 Tas R 202 ............................................................................... 36.55 Environment East Gippsland Inc v VicForests (2010) 30 VR 1 .................................................... 31.25 Environment East Gippsland Inc v VicForests (No 2) [2009] VSC 421 ...................................... 31.135 EPAS Ltd v James [2007] QSC 127 .......................................................................................... 22.195 Epic Feast Ltd v Mawson KLM Holdings Pty Ltd (in liq) (1998) 71 SASR 161 ....... 2.35, 12.25, 38.160 Epitoma Pty Ltd v Australasian Meat Industry Employees' Union (No 2) (1984) 54 ALR 730 ........................................................................................................................ 31.185 EPP Australia Pty Ltd v Levy [2001] NSWSC 482 ......................................................................... 6.80 Equitable Group Ltd v Pendal Nominees Pty Ltd (1984) 3 ACLC 546 ...................................... 21.100 Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 ........................... 38.105 Equiticorp Industries Group Ltd (in statutory management) v The Crown [1998] 2 NZLR 481 .......................................................................................................... 10.175, 38.110 Equiticorp Industries Ltd v Hawkins [1991] 3 NZLR 700 .......................................................... 38.110 Equititrust Ltd v Franks (2009) 258 ALR 388 ........................................................................... 10.105 Equity Trustees Executors and Agency Co Ltd v Fenwick [1905] VLR 154 ................... 24.200, 24.205 Equity Trustees Executors and Agency Co Ltd v NZ Loan & Mercantile Agency Co Ltd [1940] VLR 201 ................................................................................................................... 14.70 Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 ......................................................... 18.10, 18.30 Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) (2007) 18 VR 250 ...................................... 10.375 Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) (No 4) [2006] VSC 28 ................................ 10.375 Erceg v Erceg [2015] NZAR 1227 .............................................................................................. 20.55 Erceg v Erceg [2017] 1 NZLR 320 ................................................................................. 20.35, 20.40, 20.55, 20.65 Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218 ............................................. 35.15 Ermayne, Re (1998) 30 ACSR 330 ........................................................................................... 19.135 Ernst & Young Inc v Central Guaranty Trust Co (2004) 29 Alta LR (4th) 269 ........................... 17.160 Ernst & Young v Tynski Pty Ltd (recs and mgrs apptd) (2003) 47 ACSR 433 ............................. 36.15 Eroc Pty Ltd v Amalg Resources NL [2003] QSC 74 ......................................... 8.200, 37.120, 37.125 Erwin v Shannon's Brick, Tile and Pottery Co Ltd (1938) 38 SR (NSW) 555 ............................... 16.15 Esquire Nominees Ltd v Federal Commissioner of Taxation (1972) 129 CLR 177 ....................... 23.30 Essex v Essex (No 2) [2007] FamCA 639 ................................................................................. 20.140 Esso Australia Ltd v Australian Petroleum Agents' and Distributors' Association [1999] 3 VR 642 ...................................................................................................... 20.45, 23.30, 23.35, 23.70, 28.150 Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 ...................................................... 6.180 Esso Petroleum Co Ltd v Milton [1997] 2 All ER 593 ............................................................... 30.130 Esso Petroleum Ltd v Hall Russell & Co Ltd [1989] 1 AC 643 ..................................................... 14.40 Estate Realties Ltd v Wignall [1992] 2 NZLR 615 ....................................................................... 38.30 Estephan v Estephan (2012) 6 BFRA 567 .................................................................... 10.245, 10.270 Esther Investments Pty Ltd v Cherrywood Park Pty Ltd [1986] WAR 279 ................................. 11.105 Etchison v ANZ Executors and Trustee Company Ltd [2005] QSC 363 ....................... 10.275, 10.340 Ethel Pedley Memorial Travelling Scholarship Trust, Re (1949) 49 SR (NSW) 329 .................... 29.145 Ettershank v Zeal (1882) 8 VLR (E) 333 ............................................................................ 2.25, 2.140 Europa International Pty Ltd v Child [2016] NSWSC 923 ................................................... 6.55, 6.60 European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 ...................................... 7.95, 7.255 European Asian of Australia Ltd v Lazich (1987) ASC ¶55–​564 ........................................... 7.75, 7.95 European Bank Ltd v Evans (2010) 240 CLR 432 ........................................................ 31.130, 31.140 European Pacific Banking Corporation v Fourth Estate Publications Ltd [1993] 1 NZLR 559 ........................................................................................................................... 6.80 Evandale Estates Pty Ltd v Keck [1963] VR 647 .......................................................................... 14.90 lxvi

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Table of Cases

Evans & Associates v Citibank Ltd [2003] NSWSC 204 ............................................................ 38.125 Evans & Associates v European Bank Ltd (2009) 255 ALR 171 ................................................. 31.130 Evans (deceased), Re [1999] 2 All ER 777 ..................................................................... 24.65, 24.200 Evans, Re [1957] QSR 345 ...................................................................................................... 29.145 Evans v Clayhope Properties Ltd [1988] 1 All ER 444 ............................................................... 36.125 Evans v Evans (1910) 10 SR (NSW) 594 .................................................................................. 24.120 Evans v McLean (No 2) (1985) 9 ACLR 796 ..................................................................... 1.95, 1.160 Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 ..................................................................... 1.80 Everett, Re [1917] SALR 52 ................................................................................. 15.65, 15.75, 15.95 Everist v McEvedy [1996] 3 NZLR 348 ........................................................................... 34.40, 34.50 Evindon Pty Ltd v Ambasax Pty Ltd [1996] ANZ Conv R 398 ................................................... 20.110 Exagym Pty Ltd v Professional Gymnasium Equipment Company Pty Ltd (No 2) [1994] 2 Qd R 129 ........................................................................................................ 32.185 Exception Holdings Pty Ltd (in liq) v Albarran (2005) 223 ALR 487 ......................................... 16.205 Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxation (SA) (1940) 64 CLR 413 .............................................................. 17.15 Executor Trustee and Agency Co of South Australia Ltd v Warbey (No 2) (1973) 6 SASR 336 ................................................................................................. 29.315 Experience Hendrix LLC v PPX Enterprises Inc [2003] EMLR 515 .................................................. P.60 Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 .................................... 36.45, 36.50, 36.55 Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399 .............. 13.80 ExxonMobil Superannuation Plan Pty Ltd v Esso Australia Pty Ltd (2010) 29 VR 356 ............... 28.185 Ezystay Systems Pty Ltd v Link 2 Pty Ltd [2015] NSWSC 1105 .................................................... 6.40 Ezystay Systems Pty Ltd v Link 2 Pty Ltd (No 2) [2015] NSWSC 1594 ..................................... 31.125

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F F Hoffmann-​La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 ........................................................................................... 31.90, 31.130, 31.140 Faccenda Chicken Ltd v Fowler [1984] ICR 589 .......................................................................... 6.55 Faccenda Chicken Ltd v Fowler [1987] Ch 117 ........................................................................... 6.55 Fada (Australia) Ltd, Re [1927] SASR 590 .................................................................................. 27.70 FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552 ..................... 2.30, 30.170 Fairbairn (deceased), Re [1967] VR 633 .............................................................. 20.30, 20.45, 20.55 Fairey Australasia v Commissioner of Stamp Duties (1998) 72 SASR 1 ..................................... 38.160 Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 .................................................... 14.20 Falconer v Australian Broadcasting Corporation [1992] 1 VR 662 .............................................. 6.145 Falconer v Falconer [1970] 1 WLR 1333 ....................................................................... 26.80, 26.160 Fales v Canada Permanent Trust Co (1976) 70 DLR (3d) 257 .................................................. 24.210 Falkingham v Harbison (1899) 21 ALT 116 ............................................................................. 21.110 Fall, Re [1944] Tas SR 41 ......................................................................................................... 29.180 Falls' Will Trusts, Re (1874) 12 SCR Eq 89 ................................................................................ 23.175 Familiar Pty Ltd v Samarkos (1994) 115 FLR 443 ................................................................ 9.05, 9.35 Family Insurance Corp v Lombard Canada Ltd [2002] 2 SCR 695 ................. 14.195, 14.200, 14.210 Farah Constructions Pty Ltd v Say-​Dee Pty Ltd (2007) 230 CLR 89 .......... 4.220, 38.30, 38.65, 38.80, 38.85, 38.100, 38.115, 38.120 Faraker, Re [1912] 2 Ch 488 ................................................................................................... 29.335 Farley v Skinner [2002] 2 AC 732 ................................................................................................. P.65 Farley v Westminster Bank Ltd [1939] AC 430 ......................................................................... 29.185 Farmers' Co-​operative Executors & Trustees Ltd v Perks (1989) 52 SASR 399 ............ 7.35, 7.45, 7.80 Farmers' Mutual Insurance Ltd v QBE Insurance International Ltd [1993] 3 NZLR 305 .............................................................................................................. 8.140, 37.90 Farmers' Produce Co of Australia Ltd (in liq), Re (1894) 20 VLR 62 ............................................ 39.20 Farnell v Cox (1898) 19 LR (NSW) Eq 142 ................................................................................ 24.65 Farrant v Blanchford (1863) 1 De GJ & S 107 ......................................................................... 24.170 lxvii Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:27:59.

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Equity and Trusts in Australia

Farrant v Blanchford (1863) 1 De GJ & S 107; 46 ER 42 ............................................. 24.170, 30.150 Farrell v Cox (1898) 19 LR (NSW) Eq 103 ................................................................................. 22.95 Farrier-​Waimak Ltd v Bank of New Zealand [1965] NZLR 426 ................................................... 1.110 Farrington v Rowe McBride & Partners [1985] 1 NZLR 83 ......................................................... 34.40 Farrow Finance Co Ltd (in liq) v Farrow Properties Pty Ltd (in liq) (1997) 26 ACSR 544 ............. 38.75 Farrow Mortgage Services Pty Ltd (in liq) v Edgar (1993) 114 ALR 1 ........................................... 8.95 Farrow Mortgage Services Pty Ltd (in liq) v Peto [1997] ANZ Conv R 226 ...................... 7.165, 9.105 Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450 ................................................ 10.45 Fast v Rockman [2015] VSCA 61 ............................................................................................... 22.30 Faucher v Tucker (1994) 109 DLR (4th) 699 ............................................................................. 19.75 Faulkner, Re [1999] 2 Qd R 49 .................................................................................................. 23.75 Faulks v Chief Commissioner of State Revenue [2010] NSWADT 205 ........................................ 26.10 Fauntleroy, Re (1839) 10 Sim 252; 59 ER 610 ........................................................................... 21.70 Faye v Faye [1973] WAR 66 ........................................................................................... 25.35, 25.60 Fazari v Cosentino [2008] WASC 149 ...................................................................................... 38.145 Fazari v Cosentino [2010] WASC 40 ........................................................................................ 38.140 F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2012] Ch 613 ........................ 4.30 Fearns v Anglo-​Dutch Paint & Chemical Company Ltd [2011] 1 WLR 366 ................................ 30.95 Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 ................ 11.05 Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1978] QB 927 .......................... 30.105 Federal Republic of Brazil v Durant International Corpn [2016] AC 297 ......................... 39.20, 39.65 Feiglin v Ainsworth [2011] VSC 454 ........................................................................................ 34.150 Felt and Textiles of New Zealand Ltd v R Hubric Ltd (in rec) [1968] NZLR 716 ........................ 30.105 Fender v St John-​Mildmay [1938] AC 1 ..................................................................................... 19.10 Fenton v Kenny [1969] NZLR 552 .......................................................... 35.75, 35.85, 35.90, 35.100 Ferdinando, Re (1993) 42 FCR 243 ......................................................................................... 10.220 Ferguson v Wilson (1866) LR 2 Ch App 77 .............................................................................. 33.125 Ferrari Investment (Townsville) Pty Ltd (in liq) v Ferrari [2000] 2 Qd R 359 ............................... 34.55 Ferrett's Trusts, Re (1894) 6 QLJ 183 ......................................................................................... 21.80 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 ................... 4.35, 4.90, 4.115, 38.30 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 .............................. 4.35, 4.90, 4.115 FHR European Ventures LLP v Cedar Capital Partners LLC [2015] AC 250 ............. 38.40, 38.45, P.105 FHR European Ventures LLP v Mankarious [2014] Ch 1 ............................................................. 38.40 Field v Battye [1939] SASR 235 ................................................................................................... 3.40 Field v Field [1894] 1 Ch 425 .................................................................................................... 22.10 Films Rover International Ltd v Cannon Film Sales Ltd [1986] 3 All ER 772 .................... 31.50, 31.60, 31.90, 31.145 Filshie, Re [1939] NZLR 91 ...................................................................................................... 17.150 Financial Integrity Group Pty Ltd v Farmer (No 2) [2013] ACTSC 166 ........................ 31.130, 31.135 Financial Services Authority v Sinaloa Gold plc [2013] 2 AC 28 .................................. 31.130, 31.135 Finch v Telstra Super Pty Ltd [2008] VSC 481 .......................................................................... 28.165 Finch v Telstra Super Pty Ltd (2010) 242 CLR 254 .............................. 23.30, 28.130, 28.145, 28.165 Finch v Telstra Super Pty Ltd (No 2) [2008] VSC 527 .............................................................. 28.165 Findlay's Estate, Re (1995) 5 Tas R 333 .................................................................................... 29.340 Finn v Carelli [2007] NSWSC 261 .................................................................................. 32.50, 32.60 Fiona Trust & Holding Corporation v Privalov (No 2) [2017] 2 All ER 570 ............................... 31.140 Fiona Trust and Holding Corporation v Privalov [2010] EWHC 3199 ......................................... 38.70 Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257 ........................ 11.50 Fire Nymph Products Pty Ltd v Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365 ...................... 1.80 First City Capital Ltd v British Columbia Building Corp (1989) 43 BLR 29 ......................... 8.05, 8.200 First East Auction Holdings Pty Ltd v Ange [2010] VSC 72 ......................................................... 13.80 First National Bank of Boston v Proctor (1930) 40 F 2d 841 .................................................... 14.225 First National Bank v Thompson [1996] Ch 231 ...................................................................... 10.100 First National Reinsurance Co Ltd v Greenfield [1921] 2 KB 260 ............................................. 35.110

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Table of Cases

First Netcom Pty Ltd v Telstra Corporation Ltd (2000) 101 FCR 77 ............................ 31.135, 32.135 Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567 ................................................................... 12.20 Fischer v Nemeske Pty Ltd (2016) 257 CLR 615 ........................................................................ 20.20 Fisher v Brooker [2009] 1 WLR 1764 .............................................................................. 30.10, 30.20 Fisher v Mansfield [1997] 2 NZLR 230 ...................................................................................... 39.05 Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732 ............... 26.40, 38.100, 39.15, 39.30 Fitzgerald v Masters (1956) 95 CLR 420 ......................................................................... 30.50, 37.70 Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 .................................................................................. 4.20, 10.220, 10.235, 20.105, 21.55, 22.40, 23.135, 23.150 Flanagan v Pioneer Permanent Building Society Ltd [2002] QSC 346 ........................................ 4.155 Flat Rock Forests Trust, Re [2000] 3 NZLR 207 ........................................................................ 20.100 Flatman, Re [1953] VLR 33 ................................................................ 29.45, 29.170, 29.190, 29.380 Flavelle, Re [1969] 1 NSWR 361 .............................................................................................. 24.180 Fleetwood, Re (1880) 15 Ch D 594 .......................................................................................... 18.65 Fleming v Beevers [1994] 1 NZLR 385 ...................................................................................... 12.30 Fleming v State of New South Wales (unreported, SC(NSW), Young J, 10 November 1997) .......................................................................................................... 10.165 Fletcher, Re [1947] QWN 11 ................................................................................................... 23.175 Fletcher, Re [2012] FCA 803 ..................................................................................................... 21.45 Fletcher v Bealey (1885) 28 Ch D 688 .................................................................................... 31.190 Fletcher v Burns (1997) 12 BPR 22,937 ..................................................................................... 12.25 Fletcher v Eden Refuge Trust [2012] 2 NZLR 227 ...................................................................... 38.90 Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564 ..................................................................... 18.120 Fletcher v Minister for Environment & Heritage (1999) 73 SASR 474 ...................................... 10.340 Flight v Booth (1834) 1 Bing (NC) 370; 131 ER 1160 ............................................................... 33.25 Flightline Ltd v Edwards [2003] 1 WLR 1200 ............................................................................... 3.50 Flinn v Flinn [1999] 3 VR 712 .......................................................................... 10.70, 10.110, 10.270 Flint v Howard [1893] 2 Ch 54 .................................................................................. 14.225, 14.245 Flocas v Carlson (2015) 15 ASTLR 192 ....................................................................... 38.135, 38.140 Flocast Australia Pty Ltd v Purcell (No 3) (2000) 176 ALR 354 .................................... 32.160, 32.170 Florgale Uniforms Pty Ltd v Orders (2004) 187 FLR 142 ............................................................ 36.60 Floriston Nominees Pty Ltd v Kingsley Brown Finance Pty Ltd [2005] VSC 467 ........................ 20.110 Flower & Hart (a firm) v White Industries (Qld) Pty Ltd (2001) 109 FCR 280 .............................. P.180 Foley v Hill (1848) 2 HL Cas 28 ............................................................................................... 38.125 Fonu v Merrill Lynch Bank and Trust Company (Cayman) Ltd [2012] 1 WLR 1721 .......................................................................................................... 16.175, 36.135 Foodco Group Pty Ltd v Northgan Pty Ltd (1998) 41 IPR 138 ................................................... 10.15 Foran v Wight (1989) 168 CLR 385 ............................................................... 10.80, 10.140, 10.145, 10.295, 30.165 Forbes v Australian Yachting Federation Inc (1996) 131 FLR 241 ............................................. 10.105 Force India Formula One Team Ltd v 1 Malaysia Racing Team Sdn Bhd [2012] RPC 29 ..................................................................................................................... 6.215, 6.240 Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486 ................................................................... 38.155 Foreman v Hazard [1984] 1 NZLR 586 ...................................................................................... 27.65 Foreman v Kingstone [2004] 1 NZLR 841 ..................................................................... 20.40, 20.45, 20.55, 20.65 Forest of Dean Coal Mining Company, Re (1878) 10 Ch D 450 ................................................ 24.10 Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507 ............................ 13.55 Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154 ........................ 37.30 Forgeard v Shanahan (1994) 35 NSWLR 206 .......................................................................... 14.170 Forkserve Pty Ltd v Jack and Aussie Forklift Repairs Pty Ltd (2001) 19 ACLC 299 ................ 6.40, 6.55 Forkserve Pty Ltd v Pacchiarotta (2000) 50 IPR 74 ....................................................................... 6.60

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Equity and Trusts in Australia

Formosa v Secretary, Department of Social Security (1988) 46 FCR 117 ..................... 10.375, 10.395 Forrest v Attorney-​General [1986] VR 190 ............................................................................... 29.360 Forster v Abraham (1874) LR 17 Eq 351 ................................................................................... 21.05 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 ..................................... 37.05, 37.15, 37.25 Forster v Williams Deacon's Bank Ltd [1935] Ch 359 ................................................................. 21.40 Forsyth v Blundell (1973) 129 CLR 477 ..................................................................................... 36.50 Forsyth v Gibbs [2009] 1 Qd R 403 ......................................................................................... 30.115 Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171 .................. 17.60, 38.165, 38.265 Fortuity Pty Ltd v Barcza (1995) 32 IPR 517 ........................................... 4.290, 34.170, 38.10, 38.30 Foskett v McKeown [1998] Ch 265 ........................................................................................... 39.75 Foskett v McKeown [2001] 1 AC 102 ................................................................. 39.20, 39.25, 39.45, 39.50, 39.75, 39.80 Foster Bryant Surveying Ltd v Bryant [2007] 2 BCLC 239 ...................................... 4.95, 4.120, 4.125 Foster Clark Ltd's Indenture Trusts [1966] 1 WLR 125 ............................................................... 36.35 Foster, Re (1877) 6 Ch D 87 ................................................................................................... 18.115 Foster v Mountford and Rigby Ltd (1976) 14 ALR 71 ................................. 6.10, 6.140, 6.240, 6.320 Fouche v Superannuation Fund Board (1952) 88 CLR 609 ...................................................... 24.215 Foundation for Anti-​Aging Research, Re (2016) 4 NZTR ¶26-​027 ............................................ 29.150 Fourie v Le Roux [2007] 1 WLR 320 .......................................................................................... 32.40 Foveaux, Re [1895] 2 Ch 501 ................................................................................................... 29.45 Fowkes v Pascoe (1875) LR 10 Ch App 343 .............................................................................. 26.55 Fowler v Barron [2008] 2 FCR 1 .............................................................................................. 38.240 Fowler v Fowler (1735) 3 P Wms 353 ....................................................................................... 15.10 Fox Entertainment Precinct Pty Ltd v Centennial Park & Moore Park Trust (2004) 11 BPR 21,629 ...................................................................................................... 37.105, 37.125 Fox v Fox (1870) LR 11 Eq 142 ............................................................................................... 24.115 Foxhall, Re (1847) 2 Ph 281; 41 ER 951 .................................................................................... 21.70 Fractionated Cane Technology Ltd v Ruiz-​Avila [1988] 1 Qd R 51 ........................... 6.10, 6.35, 6.175 Fragomeni v Fogliani (1968) 42 ALJR 263 .................................................................... 8.200, 33.170 Frame, Re [1939] Ch 700 ........................................................................................................ 16.170 Frame v Smith (1987) 42 DLR (4th) 81 ....................................................................................... 4.65 Franchi v Franchi [1967] RPC 149 ............................................................................................... 6.85 Francis v Francis [1952] VLR 321 ........................................................................ 12.15, 12.25, 12.45, 12.60, 12.70, 12.85 Francis v Municipal Councillors of Kuala Lumpur [1962] 1 WLR 1411 ....................................... 33.80 Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 ......................................................................................................... 4.30, 4.60, 4.295, 10.175, 10.225 Francome v Mirror Newspapers Ltd [1984] 2 All ER 408 ........................................................... 6.310 Franklin v Giddins [1978] Qd R 72 ................................................................................. 6.265, 6.275 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 ......................... 37.65, 37.70, 37.75, 37.90, 37.105 Franknelly Nominees Pty Ltd v Abrugiato (2013) 10 ASTLR 558 ................................... 23.155, 27.55 Franks v Equitiloan Securities Pty Ltd [2007] NSWSC 812 ........................................................... 3.35 Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1 ........................................ 4.200, 34.55 Fraser, Re [1941] QWN 18 ...................................................................................................... 21.145 Fraser River Pile & Dredge Ltd v Can-​Dive Services Ltd (1999) 176 DLR .................................... 14.60 Fraser v Evans [1969] 1 QB 349 ...................................................................................... 6.10, 6.205, 6.240, 31.175 Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1953] 2 QB 450 ........... 37.100, 37.115 Frederick v State of South Australia (2006) 94 SASR 545 ........................................... 7.45, 7.55, 9.55 Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Dobrijevic (2017) 94 NSWLR 340 ................................................................................... 29.365 Freedom Motors Australia Pty Ltd v Vaupotic [2003] NSWSC 506 ............................................... 6.55

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Table of Cases

Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59 ................................................ 11.80, 12.15 Freehouse Pty Ltd, Re (1997) 26 ACSR 662 .................................................................. 37.65, 37.125 Freelance Global Ltd (in liq) v Bensted [2016] VSC 181 ............................................................ 1.105 Freeland, Re [1952] Ch 110 .................................................................................................... 18.130 Freeman v Attorney-​General (NSW) [1973] 1 NSWLR 729 ........................................... 25.55, 29.150 Freeman v Perlman (1999) 169 DLR (4th) 133 .......................................................................... 4.300 Freeston's Charity, Re [1978] 1 WLR 741 ................................................................................. 24.160 Freifeld v West Kensington Court Ltd [2016] 1 P & CR 5 ......................................................... 11.105 French Caledonia Travel Service Pty Ltd (in liq), Re (2003) 59 NSWLR 361 ......... 17.15, 39.55, 39.65, 39.75, 39.90, 39.105, 39.115 Frevcourt Pty Ltd v Wingecarribee Shire Council (2005) 139 LGERA 140 ................................... 16.45 Fried v National Australia Bank Ltd (2001) 111 FCR 322 ................................................ 24.15, 24.20 Friend v Brien [2014] NSWSC 613 .......................................................................................... 16.165 Friend v Brooker (2009) 239 CLR 129 ............................................................. 4.265, 14.125, 14.130 Friends of Elliston –​Environment and Conservation Inc v State of South Australia (2007) 96 SASR 246 ............................................................................................................ 37.45 Friend's Trust, Re (1904) 21 WN (NSW) 166 ............................................................................. 21.80 Frigo v Culhaci (unreported, CA(NSW), 17 July 1998) ......................................... 32.20, 32.75, 32.80 Frontier Touring Co Pty Ltd v Rodgers (2005) 223 ALR 433 ......................................... 27.105, 39.20 Fry v Densham-​Smith [2011] WTLR 387 ................................................................................. 38.135 Fry v Lane (1888) 40 Ch D 312 .................................................................................................. 9.05 Fry v Tapson (1884) 28 Ch D 268 ............................................................................................. 22.55 FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd (2006) 12 BPR 23,517 ..................................................................................................................... 1.130 FTV Holdings Cairns Pty Ltd v Smith [2014] QCA 217 ........................................... 3.50, 3.105, 3.150 Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd [2008] FCAFC 53 ................ 4.265 Fuller v Happy Shopper Markets Ltd [2001] 1 WLR 1681 ............................................ 30.95, 30.105, 30.110, 30.120 Fung Ping Shan v Tong Shun [1918] AC 403 .............................................................................. 2.60 Furness, Re [1901] 2 Ch 346 ............................................................................... 15.65, 15.70, 15.95 Furness v Adrium Industries Pty Ltd [1996] 1 VR 668 .............................................................. 10.155 Furphy v Nixon (1925) 37 CLR 161 ............................................................................................ 8.10 Furs Ltd v Tomkies (1936) 54 CLR 583 ............................................................................. 4.85, 4.115 Fysh v Coote [2000] VSCA 150 .................................................................................... 21.60, 21.120 Fysh v Page (1956) 96 CLR 233 ................................................................................... 22.105, 30.10

G G & M Aldridge Pty Ltd v Walsh (1999) 33 ACSR 546 ........................................... 1.80, 3.50, 16.110 G & M Aldridge Pty Ltd v Walsh (2001) 203 CLR 662 ........................................................ 1.80, 3.50 G B Nathan & Co Pty Ltd, Re (1991) 24 NSWLR 674 ................................................................ 27.35 G E Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd (2003) 11 BPR 21,253 .............................................................................P.175, P.190 G E Capital Australia v Davis (2002) 180 FLR 250 ...................................................................... 36.60 G E Crane Pty Ltd v Federal Commissioner of Taxation (1971) 126 CLR 177 ............................... 3.50 G (ED) v Hammer [2003] 2 SCR 459 ......................................................................................... 4.310 G M & A M Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113 ..................... 4.215 G R Mailman and Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 ................... P.45 G v Day [1982] 1 NSWLR 24 ................................................................................. 6.10, 6.80, 6.145, 6.240, 6.250 Gabriel v Lobban [1976] VR 689 ............................................................................................. 31.175 Gadsden v Commissioner of Probate Duties [1978] VR 653 ....................................... 14.125, 14.170 Gadsdon v Gadsdon [2003] WASC 48 .................................................................................... 27.160 Gailey v Gordon [2003] 2 NZLR 192 ............................................................................ 23.35, 23.170

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Equity and Trusts in Australia

Galaxia Maritime SA v Mineralimportexport (The Eleftherios) [1982] 1 All ER 796 ................... 32.100 Galaxidis v Galaxidis [2004] NSWCA 111 ................. 10.115, 10.135, 10.230, 10.235, 10.270, 30.25 Galaxy Media Pty Ltd (in liq), Re (2001) 167 FLR 149 .................................................. 12.10, 33.105 Gall v Mitchell (1924) 35 CLR 222 .................................................................... 33.05, 33.25, 33.140 Gallagher (Valuation Officer) v Church of Jesus Christ of Latter-​Day Saints [2008] 1 WLR 1852 ....................................................................................................................... 29.175 Gallinar Holdings Pty Ltd v Riedel (2014) 17 BPR 32,977 .......................................................... 8.200 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 .............. 7.95, 7.160, 7.170, 7.180, 7.185, 7.190, 7.215, 7.235, 7.250, 7.255, 7.260, 7.265, 9.20, 9.105, P.140 Garden-​Mews-​St Leonards Pty Ltd v Butler Pollnow Pty Ltd (No 2) (1984) 9 ACLR 117 ........... 36.150 Gardiner, Re [1971] 2 NSWLR 494 .......................................................................................... 16.160 Gardiner v Fitzgerald [1962] Qd R 29 ..................................................................................... 21.145 Gardiner v Westpac New Zealand Ltd [2015] 3 NZLR 1 ................................................. 7.185, 7.200 Gardner, Re [1920] 2 Ch 523 .................................................................................................... 18.65 Gardner v Dairy Industry Authority of NSW (1977) 52 ALJR 180 ............................................... 37.55 Gardner v London Chatham and Dover Railway Co (1867) LR 2 Ch App 201 ........................... 36.85 Garland, Ex parte (1803) 10 Ves 110; 32 ER 786 ..................................................................... 23.135 Garland v Minister of Stamp Duties [1919] NZLR 792 ............................................................. 29.185 Garland v Ralph Pay & Ransom [1984] 2 EGLR 147 .................................................................. 36.55 Garra Water Investments Pty Ltd (in liq) v Ourback Yard Nursery Pty Ltd (2012) 279 LSJS 582 ..................................................................................................................... 23.120 Garrard v Frankel (1862) 30 Beav 445; 54 ER 961 ..................................................................... 8.200 Garratt v Ikeda [2002] 1 NZLR 577 ........................................................................................... 11.50 Garthwaite v Garthwaite [1964] P 356 ...................................................................................... 37.15 Gartside v Inland Revenue Commissioners [1968] AC 553 ............... 20.120, 20.125, 20.130, 20.150 Gartside v Outram (1856) 26 LJ Ch 113 .................................................................................... 6.290 Garwoli v Garwoli [2015] SASC 1 ............................................................................................. 2.105 Gas & Fuel Corporation of Victoria v Barba [1976] VR 755 ........................................................ 34.80 Gaskell v Gosling [1896] 1 QB 669 ........................................................................................... 36.25 Gates v Swift [1982] RPC 339 ................................................................................................. 32.175 Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) (2002) ATPR ¶41–​864 ..................................................................................................... 23.135, 24.140 GE Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd (2003) 11 BPR 21,253 .................................................................................... 37.145 GE Capital Australia v Davis [2001] NSWSC 933 ............................................................ 32.65, 32.75 GE Capital Australia v Davis (2002) 180 FLR 250 ....................................................................... 36.60 GE Custodians v Bartle [2011] 2 NZLR 31 ...................................................................... 9.115, 9.195 Gedbury Pty Ltd v Michael David Kennedy Autos [1986] 1 Qd R 103 .......................... 31.50, 31.150 Gedeon v Commissioner of the New South Wales Crime Commission (2008) 236 CLR 120 ....................................................................................................................... 37.10 Geelong Building Society (in liq) v Thomas (1996) V Conv R ¶54–​545 ........ 7.10, 7.95, 7.180, 7.265, 7.280, 9.85, 9.155 Geelong Waterworks and Sewerage Trust, Re [1955] VLR 302 ................................................... 21.60 Geffen v Goodman Estate (1991) 81 DLR (4th) 212 ........................................................... 7.35, 7.80 Geldof Metaalconstructie NV v Simon Carves Ltd [2010] 4 All ER 847 ........................ 30.110, 30.130 Gellibrand's Will, Re (1939) 34 Tas LR 1 .................................................................................. 22.150 Gemstone Corporation v Grasso (1994) 62 SASR 239 ............................................................... 34.25 General Communications Ltd v Development Finance Corporation of New Zealand Ltd [1990] 3 NZLR 406 .......................................................... 25.125, 27.90, 27.95 General Credits (Finance) Pty Ltd v Stoyakovich [1975] Qd R 352 ........................................... 30.110 General Finance Agency and Guarantee Co of Australia Ltd (in liq) v Perpetual Executor and Trustees Association of Australia Ltd (1902) 27 VLR 739 .................................... 2.10 General Investment Pty Ltd v Tyson [1967] Tas SR 96 ............................................................... 21.95

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Table of Cases

General Nursing Council for England and Wales v St Marylebone Borough Council [1959] AC 540 ................................................................................................................... 29.285 Geneva Finance Ltd (receiver and manager appointed), Re (1992) 10 ACLC 668 ...................... 36.15 George Barker (Transport) Ltd v Eynon [1974] 1 All ER 900 ....................................................... 36.20 George Sinnamon, Re [1940] QWN 67 ................................................................................... 23.180 George v Kollias [2007] VSC 46 ..................................................................................... 25.60, 25.65 George v McDonald (1992) 5 BPR 11,659 ........................................................ 21.105, 22.65, 23.95 George v Rockett (1990) 170 CLR 104 .................................................................................... 32.145 George v Webb [2011] NSWSC 1608 ....................................................................................... 38.95 George Whitechurch, Ltd v Cavanagh [1902] AC 117 ............................................................. 10.350 George Wimpey UK Ltd v VI Construction Ltd [2005] BLR 135 ................................... 37.130, 37.135 Georges v Seaborn International Pty Ltd (2012) 206 FCR 408 ................................................. 39.100 Georges v Wieland [2009] NSWSC 733 .................................................................................... 33.65 George's Will Trusts, Re [1949] Ch 154 ..................................................................................... 15.90 Georgiadis v Australian and Overseas Telecommunications Corp (1994) 179 CLR 297 ................ 1.05 Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435 .............................................. 30.10, 30.40 Geraghty v Minter (1979) 142 CLR 177 ....................................................................................... P.75 Gerbich, Re [2002] 2 NZLR 791 .............................................................................................. 23.115 Gerloff v Edwards [1917] SASR 93 .......................................................................................... 10.360 Germanotta v Germanotta [2012] QSC 116 ........................................................................... 10.240 Gertsch v Atsas (1999) 10 BPR 18,431 ......................................................................... 38.80, 38.110 Gertsman (deceased), Re [1966] VR 45 ........................................................................ 23.20, 23.115 Gestetner Settlement, Re [1953] Ch 672 ................................................................... 16.180, 17.130 Geys v Société Générale, London Branch [2013] 1 AC 523 ....................................................... 33.80 Ghana Commercial Bank v Chandiram [1960] AC 732 .............................................................. 14.90 Giannarelli v Wraith (1988) 165 CLR 543 ................................................................................ 19.120 Gibb Australia Pty Ltd v Cremor Pty Ltd (1992) 108 FLR 129 .................................................. 30.110 Gibb, Marriage of (1979) 5 Fam LR 694 ...................................................................................... 6.95 Gibb v MacDonnell [1992] 3 NZLR 475 ................................................................ 1.55, 2.110, 10.60 Gibbard's Will Trusts, Re [1967] 1 WLR 42 ............................................................................... 17.120 Gibbs v Gibbs [2004] WASC 132 ............................................................................... 16.200, 21.115 Gibbs v Gibbs [2006] WASCA 224 .......................................................................................... 21.115 Gibbston Valley Estate Ltd v Owen [2000] ANZ Conv R 295 ....................................................... 3.35 Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 ................. 4.15, 4.55, 4.200, 4.215, 4.230 Gibson v South American Stores (Gath & Chaves) Ltd [1950] Ch 177 ...................................... 29.75 Gidrxslme Shipping Co Ltd v Tantomar-​Transportes Maritimos Lda [1994] 4 All ER 507 .......... 32.120 Gilbert v Stanton (1905) 2 CLR 447 ........................................................................................ 16.180 Gilbey v Cossey (1912) 106 LT 607 ........................................................................................ 33.120 Gilchrist, Ex Parte (1886) LR 17 QBD 521 ............................................................................... 16.175 Gilchrist, Re Will of (1867) 6 SCR (NSW) Eq 74 ....................................................................... 23.180 Gilfoyle Shipping Services Ltd v Binosi Pty Ltd [1984] 2 NZLR 742 .......................................... 32.100 Gilhespie v Burdis (1943) 169 LT 91 ....................................................................................... 37.105 Gill v Gill (1921) 21 SR (NSW) 400 ............................................................................ 16.150, 16.160 Gill v Lewis [1956] 2 QB 1 ............................................................................................. 11.05, 11.90 Giller v Procopets (2008) 24 VR 1 ............................................................. 6.95, 6.350, 6.360, 6.365, 34.75, 34.135, P.50 Gillespie, Re [1969] QWN 32 .................................................................................................. 15.105 Gillespie v Whiteoak [1989] 1 Qd R 284 ...................................................................... 31.145, 33.90 Gillett v Holt [2001] Ch 210 ............................................... 10.220, 10.225, 10.235, 10.270, 10.340 Gillies v Keogh [1989] 2 NZLR 327 ............................................................................ 26.100, 38.165 Gillingham Bus Disaster Fund, Re [1958] Ch 300 ......................................................... 26.35, 29.345 Gilltrap v Autopromos Pty Ltd (1995) ATPR ¶41–​395 .............................................................. 31.150

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Equity and Trusts in Australia

Gilmore v Uniting Church of Australia Property Trust (SA) (1984) 36 SASR 475 ....................... 29.315 Gilmour v Coats [1949] AC 426 .............................................................................................. 29.200 Gissing v Gissing [1971] AC 886 ................................................................................... 26.80, 26.90, 26.100, 26.160, 38.215 Giumelli v Giumelli (1999) 196 CLR 101 ..................... 6.375, 10.70, 10.90, 10.100, 10.240, 10.270, 12.30, 38.10, 38.20, 38.70, 38.255 Gladstone v Canada (Attorney-​General) [2005] 1 SCR 325 ......................................................... 4.40 Glasbrook v Richardson (1874) 23 WR 51 ................................................................................. 30.50 Glasse v Woolgar and Roberts (No 2) (1897) 41 Sol Jo 573 ..................................................... 33.120 Glasson v Fuller [1922] SASR 148 ................................................................................. 24.165, 30.25 Glatt v Sinclair [2013] 1 WLR 3602 ......................................................................................... 36.125 Gleeson v Fitzpatrick (1920) 29 CLR 29 .................................................................................. 23.185 Glegg v Bromley [1912] 3 KB 474 ............................................................................................ 17.75 Glenister v Glenister [2001] WASC 133 ..................................................................................... 25.60 Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 ................................................ 16.10 Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 .................................... 32.60, 32.80 Glev Pty Ltd v Kentucky Fried Chicken Pty Ltd (1994) ATPR ¶41–​299 ...................................... 30.175 Gliderol International Pty Ltd v Hall (2001) 80 SASR 541 ............................................. 17.15, 27.100 Global Constructions Ltd v Mesh [2002] NSWSC 47 ................................ 20.20, 20.30, 20.55, 25.20 Global Finance Group Pty Ltd (in liq), Re (2002) 26 WAR 385 ...... 39.05, 39.20, 39.25, 39.50, 39.55, 39.60, 39.65, 39.90, 39.95, 39.100 Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 ..................................................................... 21.75, 21.80, 36.90 Global Minerals Australia Pty Ltd v Valerica Pty Ltd (2000) 10 BPR 18,463 ................................ 2.105 Globe and Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659 ............................................ 14.45 Glynn v Commissioner of Stamp Duties (NSW) [1977] 2 NSWLR 673 ............. 26.60, 26.120, 26.145 GM & AM Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113 ..................... 34.150 GMS Syndicate Ltd v Gary Elliott Ltd [1981] 1 All ER 619 ........................................................ 11.105 Goater v Commonwealth Bank of Australia [2014] NSWCA 265 ............................................. 31.100 Goddard v Nationwide Building Society [1987] QB 670 ........................................................... 6.250 Godfrey v Scottish Pacific Business Finance Pty Ltd (2004) 51 ACSR 272 ................................... 36.20 Godin v London Assurance Co (1758) 1 Burr 498; 97 ER 419 ................................................. 14.190 Golay's Will Trusts, Re [1965] 1 WLR 969 .................................................................................. 17.85 Golby v Commonwealth Bank of Australia (1996) 72 FCR 134 .................................................. 4.250 Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd [2013] NSWSC 281 ......... 6.180, 6.185 Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers [2003] 1 Qd R 683 .................................... 31.85 Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 ........................................................... 10.335 Gold v Primary Developments Ltd (1998) 152 DLR (4th) 385 .................................... 38.100, 38.125 Goldcorp Exchange Ltd (in receivership), Re [1995] 1 AC 74 ................ 4.265, 4.275, 10.355, 16.65, 17.90, 27.70, 35.65, 38.15, 39.50 Golden Bread Co v Hemmings [1922] 1 Ch 162 ..................................................................... 38.150 Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd (2015) 89 NSWLR 237 ....................................................................................................... 38.155 Golden Oceans (NSW) Pty Ltd v Evewall Pty Ltd [2009] NSWSC 674 ........................................ 11.70 Golding v Vella (2003) NSW ConvR ¶56–​044 ........................................................................... 11.75 Goldsbro v Walker [1993] 1 NZLR 394 ........................................................................................ 8.95 Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674 ........................................................ 34.75 Goldschmidt v Oberrheinische Metallwerke [1906] 1 KB 373 .................................................. 36.130 Goldstraw v Goldstraw (2006) V ConvR ¶54–​712 ..................................................................... 32.50 Goldsworthy (deceased), Re [1969] VR 843 ............................................................................ 20.125 Goldsworthy v Brickell [1987] Ch 378 ................................................... 7.30, 7.35, 7.75, 7.80, 7.270 Goldwater, Re [1967] NZLR 754 ............................................................................................. 29.370 Golf Lynx v Golf Scene Pty Ltd (1984) 59 ALR 343 .................................................... 31.135, 32.140, 32.145, 32.210 Gollel Holdings Pty Ltd v Kenneth Maurer Funerals Pty Ltd (1987) 9 IPR 109 .......................... 31.155 lxxiv

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Table of Cases

Gomba Holdings UK Ltd v Minories Finance Ltd [1988] 1 WLR 1231 ........................................ 36.25 Gomez v State Bank of New South Wales Ltd [2001] FCA 1059 ................................................ 36.50 Gonder v Evans [2010] WTLR 41 .............................................................................................. 21.65 Goodchild (deceased), Re [1996] 1 WLR 694 .......................................................................... 38.145 Goodchild (deceased), Re [1997] 1 WLR 1216 ........................................................... 38.135, 38.145 Goode (deceased), Re [1960] VR 117 ............................................................... 17.180, 19.75, 29.25 Goodridge v Macquarie Bank Ltd (2010) 265 ALR 170 .................................................... 3.35, 4.250 Goodright v Moses (1774) 2 Wm Bl 1019; 96 ER 599 ............................................................... 2.125 Good's Will Trusts, Re [1950] 2 All ER 653 ............................................................................... 29.315 Goodson (deceased), Re [1971] VR 801 ........................................................ 17.170, 17.180, 29.220 Goodwin v Duggan (1996) 41 NSWLR 158 ................................................................. 23.160, 24.95 Goodwin v NGN Ltd [2011] EMLR 27 ....................................................................................... 6.105 Gordon, Re (1877) 6 Ch D 531 ................................................................................................ 21.90 Gordon v Campbell (1842) 1 Bell App 428 ............................................................................... 27.25 Gordon v Gonda [1955] 1 WLR 885 ......................................................................................... 24.70 Gordon's Will Trusts, Re [1978] 1 Ch 145 ...................................................... 15.105, 15.110, 15.120 Gors v Henderson (unreported, SC(WA), Steytler J, 7 September 1998) .................................. 10.275 Gosling v Gaskell [1897] AC 575 ........................................................................ 36.25, 36.30, 36.35 Goss v Chilcott [1996] 3 NZLR 385 ........................................................................................... 8.140 Gott, Re [1944] Ch 193 .......................................................................................................... 29.380 Gouder, Re [2005] NSWSC 1116 .............................................................................................. 37.65 Gough v Strahl [2013] NZHC 3184 ........................................................................................ 25.150 Gould v O'Carroll [1964] NSWR 803 ....................................................................................... 22.105 Goulding v James [1997] 2 All ER 239 .......................................................................... 25.60, 25.135 Goumas v McIntosh [2002] NSWSC 713 .................................................................................. 32.80 Government Employees Superannuation Board v Martin (1997) 19 WAR 224 ................ 10.45, 22.20 Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78 ............ 14.125, 14.185, 14.210 Governments Stock and Other Securities Investment Co Ltd v Manila Railway Co [1897] AC 81 ......................................................................................................................... 1.80 Gowans v Watkins (unreported, SC(Vic), Teague J, 21 February 1996), 21.120 Gower's Settlement, Re [1934] Ch 365 ................................................................................... 21.140 GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 191 ALR 342 .................... 9.170 GPI Leisure Corporation Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461 .......................................................................................................... 37.90, 37.100 GPS Power Pty Ltd v Gardiner Willis & Associates Pty Ltd [2001] 1 Qd R 586 ............................ 14.25 Gra-​Ham Australia Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65 ................................. 25.15 Grace, Re [1955] QWN 81 ........................................................................................................ 21.80 Grace v Beaulieu of Australia Ltd (2004) 60 IPR 540 ................................................................ 31.165 Grace v Hamilton Island Enterprises Ltd (unreported, SC(Qld), Thomas J, 17 March 1998) ................................................................................................ 10.355 Gradfan, Re (1996) 20 ACSR 689 ............................................................................................ 24.125 Graeme Webb Investments Pty Ltd v St George Partnership Banking Ltd (2001) 38 ACSR 282 ............................................................................................................ 36.30, 36.40 Graham (deceased), Re Estate of (2009) 105 SASR 95 ................................................ 22.180, 22.190 Graham, Re (1938) 55 WN (NSW) 168 ................................................................................... 21.125 Graham, Re Estate of [1910] VLR 466 ..................................................................................... 16.205 Graham v Freer (1980) 35 SASR 424 ......................................................................................... 35.60 Graham v Gibson (1882) 8 VLR (Eq) 43 .................................................................................... 22.55 Grain Growers Ltd v Chief Commissioner of State Revenue (NSW) (2016) 93 NSWLR 415 ........ 29.35 Grand Lodge of Ancient Free and Accepted Masons in New Zealand, Re [2011] 1 NZLR 277 ....................................................................................................................... 29.190 Granot v Hersen (1999) 173 DLR (4th) 227 .................................................. 15.105, 15.110, 15.115 Grant, Re [1933] VLR 263 ....................................................................................................... 22.155 Grant, Re (2013) 10 ASTLR 149 ................................................................................................ 25.45 Grant v Attorney-​General [2009] NSWSC 51 ............................................................. 29.260, 29.345 lxxv

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Equity and Trusts in Australia

Grant v Dawkins [1973] 3 All ER 897 ...................................................................................... 34.120 Grant v Edwards [1986] Ch 638 ........................................................ 26.90, 38.195, 38.215, 38.225 Grant v Grant (1914) 14 SR (NSW) 271 .................................................................................... 23.85 Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 .............................................. 30.150, 30.155 Grant v NZMC Ltd [1989] 1 NZLR 8 .................................................. 30.90, 30.105, 30.110, 30.130 Grant v Yarra Glen and Lilydale Hunt Club Ltd [2006] VSC 482 .............................................. 29.255 Grant's Will Trusts, Re [1979] 3 All ER 359 ............................................................................... 17.170 Grantwell Pty Ltd v Franks (1993) 61 SASR 390 ........................................................................ 4.235 Graphicshoppe Ltd, Re (2005) 260 DLR (4th) 713 ......................................................... 39.20, 39.65 Grasso v Love [1980] VR 163 .................................................................................................. 31.190 Gray, Re [1956] NZLR 764 ........................................................................................................ 25.25 Gray v Guardian Trust Australia Ltd [2003] NSWSC 704 ...................................... 20.40, 20.55, 20.60 Gray v Motor Accident Commission (1998) 196 CLR 1 ........................................................... 34.130 Gray v Perpetual Trustee Co Ltd [1928] AC 391 ...................................................................... 38.135 Gray v Spyer [1921] 2 Ch 549 .................................................................................................. 37.05 Grayson v Grayson [1922] QSR 155 .......................................................................................... 19.75 Grazing & Export Meat Co Ltd v Anderson [1976] 1 NZLR 187 ................................................ 31.90 Greasley v Cooke [1980] 1 WLR 1306 ............................................................... 2.105, 10.160, 26.90 Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 ............ 8.160, 8.165, 8.175, 8.180, 8.185 Great Southern Loans Pty Ltd v Locator Group Pty Ltd [2005] NSWSC 438 ............................ 31.195 Great Southern Managers Australia Ltd, Re (2009) 77 ACSR 9 .................................................. 36.25 Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 ......................................................................................................... 35.65, 38.50 Greaves, Re [1954] Ch 434 ......................................................................................................... 8.85 Greek Macedonian Club Ltd v Pan Macedonian Greek Brotherhood NSW Ltd [2007] NSWSC 92 ........................................................................................................................... 11.95 Green and Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 ............................... 4.35, 4.285 Green Corns Ltd v Claverley Group Ltd [2005] EMLR 31 ........................................................... 6.205 Green, Re [1942] VLR 210 ........................................................................................... 16.190, 29.10 Green, Re [1951] Ch 148 ........................................................................................... 38.135, 38.145 Green, Re [1970] VR 442 ........................................................................................................ 29.220 Green v Cobham [2000] WTLR 1101 ............................................................................. 23.45, 23.50 Green v Commonwealth Bank of Australia (No 2) (1994) 29 ATR 599 ......................................... 2.15 Green v Green (1989) 17 NSWLR 343 ........................................................... 19.10, 38.180, 38.195, 38.215, 38.220 Green v Green [2017] 2 NZLR 321 ............................................................................................. 7.05 Green v Meltzer (1993) 6 NZCLC 68,393 ................................................................................... 2.10 Green v Nicholson (1869) 6 EE & A'B (E) 147 ........................................................................... 21.55 Green v Page [1957] Tas SR 66 ................................................................................................. 31.20 Green v Russell [1959] 2 QB 226 ............................................................................................ 16.125 Green v Schneller (2001) 164 FLR 82 ...................................................................................... 19.140 Green v Sommerville (1979) 141 CLR 594 .............................................................................. 33.150 Greene v Associated Newspapers Ltd [2005] QB 972 .............................................................. 31.175 Greene v West Cheshire Railway Co (1871) LR 13 Eq 44 ......................................................... 33.165 Greenfield (No 2), Re (1909) 12 GLR 22 ................................................................................... 21.80 Greenpeace of New Zealand Inc, Re [2015] 1 NZLR 169 ........................................... 29.105, 29.215 Greenshell MZ Ltd (in receivership) v Kennedy Bay Mussel Co (NZ) Ltd [2016] 2 NZLR 44 ....... 11.05 Greenwood, Re [1988] 1 NZLR 197 ............................................................................... 25.50, 25.60 Greenwood v Martins Bank Ltd [1933] AC 51 ........................................................................... 10.40 Greer, Re Will of (1911) 11 SR (NSW) 21 .................................................................................. 22.90 Greer v Kettle [1937] 4 All ER 396 ............................................................................................. 10.10 Greetings Oxford Koala Hotel Pty Ltd v Oxford Square Investments Pty Ltd (1989) 18 NSWLR 33 ...................................................................................................................... 33.40 Gregg v Coates (1856) 23 Beav 33; 53 ER 13 ......................................................................... 16.160 lxxvi

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Table of Cases

Gregg v Kidd [1956] IR 183 ...................................................................................................... 7.115 Gregg v Perpetual Trustee Co (1918) 18 SR (NSW) 252 .......................................................... 15.100 Gregory v Hudson (1997) 41 NSWLR 573 ................................................................. 16.175, 20.120 Gregory v Hudson (1998) 45 NSWLR 300 ................................................................. 16.175, 20.120 Greinert v Jarrett [2004] NSWSC 209 ...................................................................................... 31.195 Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 ...................... 3.35 Grey v Inland Revenue Commissioners [1960] AC 1 .................................................................. 18.10 Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 ......................... 2.105 Grierson v National Provincial Bank [1913] 2 Ch 18 .................................................................. 2.140 Griffiths, Re [1926] VLR 212 .......................................................................... 16.190, 17.120, 29.300 Griffiths v Commonwealth Bank of Australia (1994) 123 ALR 111 ............................................. 8.110 Griffiths v Porter (1858) 25 Beav 236; 53 ER 627 ...................................................................... 22.15 Griffiths v Secretary of State for Social Services [1974] QB 468 ................................................. 36.35 Griffon Shipping LLC v Firodi Shipping Ltd [2013] 2 Lloyd's Rep 50 .......................................... 11.50 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 ............................ 4.15, 38.10, 38.45, 38.80, 38.110 Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158 ......................................................................................................... 23.120, 27.30 Grist v Bailey [1967] 1 Ch 532 .................................................................................................. 8.170 Grizonic v Suttor [2011] NSWSC 471 ..................................................................................... 23.145 Grocers of Wyong Pty Ltd v Retech Global Pty Ltd [2004] NSWSC 488 ..................................... 39.20 Grocon Constructions (Qld) Pty Ltd v Juniper Development No 2 Pty Ltd [2015] QCA 291. ............................................................................................................................ 13.45 Grocott v Ayson [1975] 2 NZLR 586 ............................................................................ 31.60, 34.120 Groeneveld Australia Pty Ltd v Nolsten Vastgoed BV [2011] VSC 18 .......................................... 32.45 Grogan v “The Astor” Ltd (1925) 25 SR (NSW) 409 ................................................................ 35.110 Grollo Nominees Pty Ltd v Commissioner of Taxation (1997) 73 FCR 452 .............................. 19.150 Groote Eylandt Aboriginal Trust Inc v Deloitte, Touche & Tohmatsu (No 2) [2017] NTSC 4 ................................................................................................................... 29.65, 29.265 Grose (deceased), Re [1949] SASR 55 ..................................................................................... 23.170 Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd (2004) 213 ALR 373 ........................ 22.90 Grosvenor (deceased), Re [1965] NSWR 723 .......................................................................... 17.175 Grove-​Grady, Re [1929] 1 Ch 557 ........................................................................................... 29.220 Groves v Groves [2004] WASC 79 ............................................................................................. 36.95 Groves v Groves [2013] QSC 277 .................................................................................. 7.220, 7.255 Grummitt v Natalisio [1968] VR 156 ................................................................... 12.15, 12.45, 12.80 Grundel v Registrar General (1990) 5 BPR 11,217 ..................................................................... 18.55 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 ..................... 10.35, 10.230, 30.160 Guaranty Trust Co of New York v Hannay & Co [1915] 2 KB 536 .............................................. 37.15 Guazzini v Pateson (1918) 18 SR (NSW) 275 ............................................... 21.105, 21.115, 21.130, 22.55, 22.90, 23.35 Guerin v The Queen (1984) 13 DLR (4th) 321 ................................................................... 5.45, 5.50 Guest v Guest [2015] VSC 761 ................................................................................................. 20.55 Guest v Webb [1965] VR 427 ......................................................................................... 18.45, 18.65 Guidi (deceased), Re [1948] SASR 207 .......................................................... 29.325, 29.330, 29.340 Guild v Inland Revenue Commissioners [1992] 2 WLR 397 ..................................................... 29.270 Guinness v Gardiner (1992) 9 WAR 107 .................................................................................... 1.150 Gulbenkian's Settlements, Re [1970] AC 508 ............................................... 16.185, 16.190, 17.115, 17.120, 17.130 Gunther v Commissioner of Stamp Duties (1932) 33 SR (NSW) 95 ........................................... 17.20 Gurney v Gurney (No 2) [1967] NZLR 922 ..................................................... 33.05, 33.150, 33.155 Gustav & Co Ltd v Macfield Ltd [2008] 2 NZLR 735 ................................................................... 9.45 Gutnick v Indian Farmers Fertiliser Cooperative Ltd (2016) 49 VR 732 ...................................... 35.15 Gwilym (deceased), Re [1952] VLR 282 ..................................................................... 29.145, 29.315 Gwyon, Re [1930] 1 Ch 255 ................................................................................................... 29.120 lxxvii

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Equity and Trusts in Australia

Gye v Davies (1995) 37 NSWLR 421 .......................................................................... 14.140, 14.170 Gye v McIntyre (1991) 171 CLR 609 ...................................................................................... 30.100

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H H E Blaxland (deceased), Re [1964–​5] NSWR 124 ................................................................... 29.135 H G & R Nominees Pty Ltd v Fava [1997] 2 VR 368 ....................................................... 7.125, 7.165 H Stanke & Sons Pty Ltd v O'Meara (2007) 98 SASR 450 .......................................................... 37.05 H Stanke & Sons Pty Ltd v Von Stanke (2007) 250 LSJS 149 ...................................... 16.200, 16.205 Haas Timber & Trading Co Pty Ltd v Wade (1954) 94 CLR 593 ................................................. 30.15 Habib Bank Ltd v Habib Bank AG Zurich [1981] 1 WLR 1265 ....................................................... P.40 Hackett v Hackett [1922] NZLR 242 ........................................................................................ 21.125 Hadaway v Hadaway [1955] 1 WLR 16 ..................................................................................... 29.45 Hadid v Lenfest Communications Inc (1996) 67 FCR 446 ......................................................... 32.65 Hadlee v Commissioner of Inland Revenue [1991] 3 NZLR 517 ................................................. 3.150 Hadlee v Commissioner of Inland Revenue [1993] 2 NZLR 385 ................................................. 3.150 Hagan v Waterhouse (1991) 34 NSWLR 308 ........................................... 18.10, 24.65, 24.80, 24.90, 24.205, 34.145, 38.30, 39.20, 39.70, 39.80, 39.90, 39.110 Hagger, Re [1930] 2 Ch 190 ................................................................................................... 38.145 Hain's Settlement, Re [1961] 1 WLR 440 ................................................................................. 17.100 Haira v Burbery Mortgage Finance & Savings Ltd (in rec) [1995] 3 NZLR 396 ........................... 34.40 Halabi v Artillaga (1993) 17 Fam LR 675 ................................................................................. 19.155 Hale (a bankrupt), Re [1989] 2 NZLR 503n ............................................................................. 19.145 Half Court Tennis Pty Ltd v Seymour (1980) 53 FLR 240 ............................................................. 6.55 Halifax plc v Omar (2002) 16 EGCS 180 ...................................................................... 14.85, 14.100 Hall, Re [1941] 2 All ER 358 .................................................................................................... 24.170 Hall v Poolman (2007) 215 FLR 243 ........................................................................................ 19.140 Hall v Sherman (2001) 165 FLR 1 ............................................................................................. 36.25 Hallett's Estate, Re (1880) 13 Ch D 696 .............................................................. 39.20, 39.45, 39.55 Halley, Re (1959) 43 MPR 79 .................................................................................................. 18.130 Halley v Law Society [2003] EWCA Civ 97 ................................................................................. 35.75 Halliday & Nicholas Insurance Brokers Pty Ltd v Corsiatto (2001) 11 ANZ Ins Cas ¶61–​505  ................................................................................................................... 6.55, 34.145 Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 229 CLR 545 ....................................................................................................................... 18.10 Hallows v Lloyd (1888) 39 Ch D 686 ........................................................................................ 22.10 Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (in liq) (recs & mgrs apptd) (2017) 52 WAR 90 ............................................................................................................. 30.100 Hamilton Ice Arena Ltd v Perry Developments Ltd [2002] 1 NZLR 309 ........................ 30.90, 30.105, 30.110, 30.120 Hamilton, Re [1895] 2 Ch 370 .................................................................................................. 17.20 Hamilton v Donovan Oates Hannaford Mortgage Corp Ltd (2007) 207 FLR 163 ....................... 1.105 Hammat v Chapman (1914) 14 SR (NSW) 416 ......................................................................... 17.15 Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd (2003) 12 ANZ Ins Cas ¶61–​553 ...................................................................................14.35, P.70, P.125 Hammond v Hammond (2007) 13 BPR 24,619 ...................................................................... 16.160 Hammond v Osborn [2002] EWCA Civ 885 ................................................................................ 7.75 Hampton, Re [1922] SASR 286 ............................................................................................... 26.110 Hanak v Green [1958] 2 All ER 141 ........................................................................................... 30.95 Hanbey's Will Trusts, Re [1956] 1 Ch 264 ................................................................................ 29.380 Hanchett-​Stamford v Attorney General [2009] Ch 173 ................................. 17.170, 17.175, 29.100 Hancock Family Memorial Foundation Ltd v Porteous (2000) 22 WAR 198 .................... 35.65, 38.10 Hancock v Reinhart (2015) 13 ASTLR 1 ......................................... 20.55, 20.60, 21.80, 22.30, 25.45

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Table of Cases

Hancock v Watson [1902] AC 14 .............................................................................................. 26.20 Handberg v MIG Property Services Pty Ltd (2010) 79 ACSR 595 ................................................. 2.40 Hanel v O'Neill (2003) 180 FLR 360 .......................................................................................... 27.40 Hann v Linton (1967) 42 ALT 317 .............................................................................. 26.115, 26.145 Hannah's Will, Re (1939) 34 Tas LR 45 .................................................................................... 29.185 Hannan v Zindilis [2016] VSC 723 ............................................................................................ 39.90 Hannover Life Re of Australasia Ltd v Sayseng (2005) 13 ANZ Ins Cas ¶90–​123 ...................... 28.160 Hansard v Hansard [2015] 2 NZLR 158 ..................................................................................... 22.65 Hansen v Macro Engineering (Aust) Pty Ltd [1948] VLR 198 ................................................... 10.290 Hanson Construction Materials Pty Ltd v Davey (2010) 79 ACSR 668 ....................................... 1.155 Hanson Construction Materials Pty Ltd v Norlis Pty Ltd [2010] QSC 34 ..................................... 1.155 Hanson v Keating (1844) 4 Hare 1; 67 ER 537 ............................................................................. P.75 Haque v Haque (No 2) (1965) 114 CLR 98 ............................................................................. 38.155 Harari's Settlement Trusts, Re [1949] 1 All ER 430 ................................................................... 22.180 Harcourt v White (1860) 28 Beav 303; 54 ER 382 ..................................................................... 30.35 Hardey v Tory (1923) 32 CLR 592 ........................................................................................... 29.185 Harding (deceased), Re [2007] 1 All ER 747 .............................................................................. 17.20 Hardman v Hobman [2002] QSC 112 ........................................................................ 38.180, 38.200 Hardman v Hobman (2004) DFC ¶95–​281 ................................................... 38.180, 38.190, 38.200 Hardoon v Belilios [1901] AC 118 ................................................................... 23.140, 27.50, 36.125 Hardy v Whitcombe [2017] NZHC 2382 ................................................................................... 18.50 Hargreaves, Re [1973] Qd R 448 ............................................................................................. 17.175 Hargrove, Re [1915] 1 Ch 398 ................................................................................................ 15.110 Harlow v Mitchell [1970] QWN 27 ........................................................................................... 12.80 Harmer v Pearson (1993) 16 Fam LR 596 ................................................................................ 38.205 Harneiss v Public Trustee (1940) 40 SR (NSW) 414 ................................................................. 18.135 Harper v Whitby [1978] 1 NSWLR 35 ...................................................................................... 31.175 Harpley Nominees Pty Ltd v Jeans [2006] NSWCA 176 ........................................................... 14.140 Harpur v Levy (2007) 16 VR 587 ............................................................................................... 18.90 Harpur v Levy (2013) 9 ASTLR 496 ......................................................................................... 23.120 Harries v Church Commissioners for England [1992] 1 WLR 1241 .............................. 22.205, 22.210 Harris, Re [1909] 2 Ch 206 ..................................................................................................... 15.115 Harris v Anais Holdings Ltd [2002] 3 NZLR 511 .................................................................. 2.45, 2.65 Harris v Beauchamp Brothers [1894] 1 QB 801 ....................................................................... 36.130 Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 .................................. 4.85, 4.285, 6.55, 34.130, P.40, P.45, P.50 Harris v Harris (1919) 20 SR (NSW) 61 .................................................................................... 22.225 Harris v Jenkins (1922) 31 CLR 341 ................................................................................ 7.70, 22.115 Harris v Lord Shuttleworth [1993] PLR 39 ............................................................................... 28.150 Harris v Pepperell (1867) LR 5 Eq 1 ........................................................................................... 8.200 Harris v Rothery (2013) 10 ASTLR 108 ........................................................................................ 7.55 Harris v Smith (2008) 14 BPR 26,223 .................................................................. 2.110, 37.70, 37.75 Harris v Truman (1882) 9 QBD 264 ........................................................................................ 16.110 Harrison, Jones & Devlin Ltd v Union Bank of Australia Ltd (1909) 10 SR (NSW) 266 .......................................................................... 23.95, 23.175, 23.180, 24.215 Harrison Partners Construction Pty Ltd v Jevena Pty Ltd (2005) 225 ALR 369 ................. 32.60, 32.65 Harrison Partners Construction Pty Ltd v Jevena Pty Ltd [2006] NSWSC 317 ............................. 32.80 Harrison v Harrison [2013] VSCA 170 ........................................................... 10.240, 10.245, 10.295 Harrison v Mills [1976] 1 NSWLR 42 ....................................................................................... 23.180 Harrison v Project & Design Co (Redcar) Ltd [1978] FSR 81 ........................................................ 6.85 Harrison v Southhampton Corporation (1854) 2 Sm & G 387; 65 ER 448 ............................... 29.145 Harstedt Pty Ltd v Tomanek [2018] VSCA 84 ............................................................................ 38.65 Hart (deceased), Re [1954] VLR 239 .......................................................................................... 25.35 Hart v Brewer (1595) Cro Eliz 449; 78 ER 688 ......................................................................... 29.175

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Equity and Trusts in Australia

Hart v Burbidge [2013] WTLR 1191 ............................................................................................ 7.05 Hart v Denham [1871] WN 2 .................................................................................................. 24.125 Harter v Harter (1873) LR 3 P & D 11 ....................................................................................... 37.80 Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 ......... 20.30, 20.35, 20.40, 20.45, 20.60, 20.65, 20.120, 23.65, 23.180, 28.80 Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 ............................................................................................. 7.30, 7.55, 7.70, 7.270, 7.275, 7.285, P.160 Hartigan v O'Shanassy (1872) 3 VR (E) 41 ................................................................................. 24.95 Hartlepool Gas and Water Co v West Hartlepool Harbour and Rail Co (1865) 12 LT 366 ......... 31.150 Hartleys Ltd v Yukich (2002) 115 IR 275 ................................................................................... 6.320 Harvard Securities Ltd, Re [1997] BCLC 369 ............................................................................. 17.90 Harvell v Foster [1954] 2 QB 367 ............................................................................................ 16.205 Harvey v Olliver (1887) 57 LT 239 ............................................................................................ 22.10 Harwood-​Smart v Caws [2000] PLR 101 ................................................................................. 28.150 Haskew v Equity Trustees, Executors & Agency Co Ltd (1919) 27 CLR 231 ................................. 7.55 Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609 .................................................. 38.85, 38.110 Hassell v Perpetual Executors Trustees and Agency Co (WA) Ltd (1952) 86 CLR 513 .......................................................................................................... 22.150, 22.155 Hastings-​Bass (deceased), Re [1975] Ch 25 ....................................................... 23.45, 23.50, 25.100 Hatton Developments (Aust) Pty Ltd and The Companies Act, Re (1978) 3 ACLR 484 ......................................................................................................................... 24.65 Havelock v Havelock (1881) 17 Ch D 807 ................................................................................. 25.25 Havill (deceased), Re [1968] NZLR 1116 ...................................................................... 23.20, 23.175 Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 ........................................................................ 11.75 Hawes v Dean [2014] NSWCA 380 ............................................................................ 30.105, 30.115 Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 ........ 8.25, 10.85, 10.100, 10.220, 10.225, 10.275 Hawkes, Re (1900) 3 GLR 33 .................................................................................................... 21.80 Hawkesbury Development Pty Ltd v Landmark Finance Pty Ltd [1969] 2 NSWR 782 ................. 36.15 Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1995) NSW ConvR ¶55–​731 .......................................................................................................... 36.50 Hawkesley v May [1956] 1 QB 304 ........................................................................................... 20.75 Hawkins v Barkley-​Brown [2010] NSWSC 48 ............................................................................. 22.90 Hawkins v Butcher (2002) 55 NSWLR 558 ................................................................................ 11.75 Hawkins v Hawkins (1920) 20 SR (NSW) 550 .......................................................................... 22.165 Hawthorn, City of v Victorian Welfare Association [1970] VR 205 ............................................ 29.125 Haxton v Equuscorp Pty Ltd (2010) 265 ALR 336 ....................................................................... 3.05 Hay v Total Risk Management Pty Ltd [2004] NSWSC 94 ........................................................ 28.160 Hayden v Mitchell (1986) 60 LGRA 123 .................................................................................. 10.110 Hayden v Teplitzky (1997) 74 FCR 7 ............................................. 31.80, 31.85, 32.35, 32.60, 32.85 Hayes, Re (1996) 138 ALR 54 .................................................................................................. 14.140 Hayes v National Heart Foundation of Australia, NSW Division [1976] 1 NSWLR 29 .................. 17.20 Hayim v Citibank NA [1987] AC 730 ........................................................................................ 24.15 Hayne v Hayne (1994) FLC ¶92–​512 ....................................................................................... 23.115 Haynes v Mico (1781) 1 Bro CC 129; 28 ER 1031 ..................................................................... 15.25 Hay's Settlement Trusts, Re [1982] 1 WLR 202 ................................. 16.190, 17.115, 17.135, 20.130 Haythorpe v Rae [1972] VR 633 .............................................................................................. 18.105 Hayward, Re [1934] SASR 364 ................................................................................................ 22.150 Hazelton Air Charter Pty Ltd, Re (2002) 41 ACSR 472 ................................................................ P.110 Heale v Phillips [1959] Qd R 489 .............................................................................................. 31.20 Healey v Healey [1915] 1 KB 938 ................................................................................................ 1.05 Health Services for Men Pty Ltd v D'Souza (2000) 48 NSWLR 448 ............................................ 31.15 Heath, Marriage of (1983) FLC ¶91–​362 ................................................................................. 19.160

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Table of Cases

Heath (No 2), Marriage of (1984) FLC ¶91–​517 ..................................................................... 19.160 Heath v Hall (1812) 4 Taunt 326; 128 ER 355 ............................................................................. 3.15 Heath v Heath [2010] 1 FLR 610 ............................................................................................. 33.170 Heathcote v Hulme (1819) 1 Jac & W 122; 37 ER 322 .............................................................. 24.75 Heavener v Loomes (1924) 34 CLR 306 .................................................................................... 31.50 Heberley (deceased), Re [1971] NZLR 325 .............................................................................. 16.205 Heery v Criminal Justice Commission [2001] 2 Qd R 610 .......................................................... 37.25 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 ........................... 2.10, 2.20, 2.25, 2.30, 2.40, 2.55 Heinl v Jyske Bank [1999] Lloyd's Rep (Banking) 511 ................................................................. 38.85 Helena Partnerships Ltd v Revenue and Customs Commissioners [2012] 4 All ER 111 .......................................................................................................... 29.115, 29.215 Helmet Integrated Systems Ltd v Tunnard [2007] FSR 16 .......................................................... 4.285 Helmich and Taylor v Thorp and Strathdee [1997] 3 NZLR 86 .................................................. 10.10 Helmore v Smith (1887) 35 Ch D 436 ...................................................................................... 4.190 Helvetic Investment Corporation Pty Ltd v Knight (1982) 7 ACLR 225 ...................................... 27.25 Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773 ......................... 23.155, 27.25 Henchley v Thompson [2018] WTLR 1289 .............................................................................. 24.110 Henderson v Miles (No 2) (2005) 12 BPR 23,579 .................................................................... 10.235 Henderson v Woodruffe [1921] NZLR 411 .............................................................................. 22.100 Henderson's Caveat, Re [1998] 1 Qd R 632 ............................................................................ 38.155 Heneker v Heneker [1954] SASR 181 ........................................................................................ 26.60 Henley, Re (2013) 10 ASTLR 1 ................................................................................................. 25.150 Henry Bull & Co v Murphy (1900) 21 LR (NSW) Eq 1 ............................................................. 36.130 Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 ......................... 31.100 Henry v Hammond [1913] 2 KB 515 ....................................................................................... 16.110 Henry v Henry [2010] 1 All ER 988 ............................................................................... 10.160, 12.20 Henville v Walker (2001) 206 CLR 459 ........................................................................................ 8.95 Heperu Pty Ltd v Belle (2009) 76 NSWLR 230 ........................................................................... 26.40 Hepworth v Hepworth (1963) 110 CLR 309 .............................................................. 26.125, 26.130 Herbert Morris Ltd v Saxelby [1916] 1 AC 688 ............................................................................ 6.55 Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 ........ 16.15, 17.115, 21.45, 27.90 Herskope v Perpetual Trustees (WA) Ltd (2002) 41 ACSR 707 ...................................... 17.15, 28.150 Hespe v Surfers Paradise Forests Ltd (1985) 10 ACLR 182 ......................................................... 23.65 Hester v Commissioner of Inland Revenue [2005] 2 NZLR 172 ................................................ 29.180 Hester v Commissioner of Inland Revenue [2005] 2 NZLR 473 ................................................ 29.180 Hetherington (deceased), Re [1989] 2 WLR 1094 ................................................................... 29.195 Hewett v Court (1983) 149 CLR 639 ............................................ 1.95, 1.160, 33.05, 33.35, 38.155 Hewett v First Plus Financial Group plc [2010] 2 FLR 177 ............................................................ 7.95 Hewitt (deceased), Re (unreported, HC(NZ), Fisher J, 19 May 1998) ...................................... 23.185 Hewitt v Gardner [2009] NSWSC 1107 ................................................................... 7.60, 7.130, 9.50 Hewson v Sydney Stock Exchange Ltd [1968] 2 NSWR 224 ....................................... 30.170, 30.180 Hexal Australia Pty Ltd v Roche Therapeutics Inc (2005) 66 IPR 325 ........................................ 31.165 Heydon v Perpetual Executors Trustees and Agency Co (WA) Ltd (1930) 45 CLR 111 ............... 26.55 Heywood v Pryor (1905) 23 WN (NSW) 44 ............................................................... 22.100, 22.110 Heyworth's Settlement, Re [1956] 2 All ER 21 ......................................................................... 21.140 Hibberson v George (1989) 12 Fam LR 725 .............................................................. 38.180, 38.185, 38.190, 38.195 Hicks v Trustees Executors and Agency Co Ltd (1901) 27 VLR 389 ............................... 24.50, 24.180 Hiero Pty Ltd v Somers (1983) 47 ALR 605 ............................................................................... 32.65 Higashida v Sato [2014] NSWSC 1291 ...................................................................................... 26.60 Higgins v Potter (1949) 50 SR (NSW) 77 ................................................................................ 31.190 Higgins v Statewide Developments Pty Ltd (2010) 14 BPR 27,293 ............................................ 11.75 Higgins v Wingfield [1987] VR 689 ................................................................. 26.90, 38.215, 38.225

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Equity and Trusts in Australia

Highbury Pension Fund Management Co v Zirfin Investments Management Ltd [2014] Ch 359 ................................................................................................................... 14.215 Highland v Exception Holdings Pty Ltd (in liq) (2006) 60 ACSR 223 .............................. 14.10, 14.70 Highland v Labraga (No 2) [2005] NSWSC 1212 ...................................................................... 24.15 HIH Casualty & General Insurance Ltd v Building Insurers' Guarantee Corporation (2004) 13 ANZ Ins Cas ¶61–​597 ............................................................................... 14.05, 14.20 HIH Casualty & General Insurance Ltd v Territory Insurance Office (1998) 10 ANZ Ins Cas ¶61–​392  ........................................................................................................ 14.125, 14.200 HIH Claims Support Ltd v Insurance Australia Ltd (2011) 244 CLR 72 ..................................... 14.130 HIH Superannuation Pty Ltd, Re [2003] NSWSC 65 ................................................... 28.160, 28.200 Hilder v Church of England Deaconess' Institution Sydney Ltd [1973] 1 NSWLR 506 .............. 29.125 Hilditch (deceased), Re (1985) 39 SASR 469 ............................................................................. 29.75 Hill v Barclay (1810) 16 Ves 402; 33 ER 1037 ............................................................................ 33.40 Hill v Crook (1873) LR 6 HL 265 ............................................................................................... 19.10 Hill v Gomme (1839) 1 Beav 540; 48 ER 1050 ........................................................................ 30.150 Hill v Hill [2005] NSWSC 863 .................................................................................................. 38.200 Hill v Permanent Trustee Co of NSW Ltd [1930] AC 720 ......................................................... 22.165 Hill v Rose [1990] VR 129 .................................................................................... 34.05, 34.55, P.140 Hill v Ziymack (1908) 7 CLR 352 ............................................................................................. 30.110 Hillcrest (Ilford) Pty Ltd v Kingsford (Ilford) Pty Ltd (No 2) (2010) 4 ASTLR 233 ........................ 21.55 Hillier, Re [1954] 2 All ER 59 ................................................................................................... 29.345 Hillsdown Holdings plc v Pensions Ombudsman [1997] 1 All ER 862 ...................................... 28.155 Hilton v Barker Booth & Eastwood [2002] Lloyd's Rep PN 500 .................................................. 4.150 Hilton v Barker Booth & Eastwood (a firm) [2005] 1 WLR 567 .................................................. 4.150 Hince, Re [1946] SASR 323 ..................................................................................................... 18.130 Hinson v Buenaventura (1994) 17 Fam LR 40 ......................................................................... 38.215 Hislop v Paltar Petroleum Ltd (No 2) (2017) 122 ACSR 358 ...................................................... 31.85 HKRUK II (CHC) Ltd v Heaney (2010) 44 EG 126 ...................................................................... 34.95 Hobbs v Federal Commissioner of Taxation (1957) 98 CLR 151 .............................................. 27.160 Hobbs v Marlowe [1978] AC 16 ................................................................................................ 14.55 Hobkirk v Ritchie (1934) 29 Tas LR 14 ........................................................................ 21.110, 21.120 Hockin v Bank of British Columbia (1990) 71 DLR (4th) 11 ..................................................... 28.170 Hodge, Re [1940] Ch 260 ...................................................................... 16.160, 20.75, 20.80, 20.85 Hodge, Re [1960] SASR 237 ................................................................................................... 29.220 Hodges v Kovacs Estate Agency Pty Ltd [1961] WAR 19 .......................................................... 39.100 Hodgins v Duke Nominees Pty Ltd (2000) 77 SASR 74 ............................................................ 10.160 Hodgkinson v Simms (1995) 117 DLR (4th) 161 ................................. 4.60, 4.65, 4.70, 4.235, 4.265 Hodgson v Amcor Ltd (2012) 264 FLR 1 ..................................................................................... 4.20 Hoey, Re [1994] 2 Qd R 510 ...................................................................................... 29.255, 29.270 Hoffman, Re (1989) 85 ALR 145 .................................................................................... 35.85, 35.95 Hogan v Commercial Factors Ltd [2006] 3 NZLR 618 ..................................................... 7.40, 7.185, 7.190, 7.205 Hogden v Hogden (1956) 57 SR (NSW) 269 ........................................................................... 16.165 Hogg v Hogg [2008] WTLR 35 ................................................................................................. 7.130 Hohol v Hohol [1981] VR 221 ................................................................................................. 38.215 Holder v Holder [1968] Ch 353 ............................................................. 22.95, 24.160, 30.15, 30.25 Holland, Re [1914] 2 Ch 595 ...................................................................................................... 8.80 Holland, Re (1928) 28 SR (NSW) 369 ........................................................................ 14.215, 14.240 Holland, Re Will of (1891) 17 VLR 1 ........................................................................................ 16.205 Holland v Goltrans Pty Ltd [1984] 1 Qd R 18 .......................................................................... 33.125 Holland v Roperti [2009] VSC 378 .......................................................................................... 33.175 Holley v Holley (1982) FLC ¶91–​257 ....................................................................................... 19.155 Holley v Smyth [1998] QB 726 ............................................................................................... 31.175 Holli Managed Investments Pty Ltd v Australian Securities Commission (1998) 30 ACSR 113 ........................................................................................................ 23.125, 23.150 lxxxii

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Table of Cases

Hollier v Australian Maritime Safety Authority (1998) V ConvR ¶54–​581 ................................. 10.235 Hollingsworth v Commissioner of Police (1998) 47 NSWLR 151 ............................................... 4.295 Hollinrake v Truswell [1894] 3 Ch 420 ........................................................................................ 6.15 Hollister v Medik Ostomy Supplies Ltd [2013] Bus LR 428 ....................................................... 34.175 Hollole (deceased), Re [1945] VLR 295 ........................................................... 17.15, 29.275, 29.300 Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 ........................................... 19.30, 19.40, 19.45 Holmden's Settlement Trusts, Re [1968] AC 685 ....................................................................... 25.60 Holmes v Kiriwai Conulstants Ltd [2015] NZCA 149 ................................................................. 4.115 Holmes v Millage [1893] 1 QB 551 ......................................................................................... 36.130 Holmes v Walton [1961] WAR 96 .............................................................................................. 34.55 Holroyd v Marshall (1862) 10 HLC 191; 11 ER 999 ................................................................... 33.45 Holyoake v Candy [2018] Ch 297 .................................................................................. 32.50, 32.55 Hone v Abbey Forwarding Ltd (in liq) [2015] Ch 309 ..................................... 31.135, 31.140, 32.20 Honey v McLennan (1997) 18 WAR 384 ................................................................................. 24.185 Hongkong & Shanghai Banking Corp v Kloeckner & Co AG [1990] 2 QB 514 ........................ 30.130 Hons v Hons [2010] NSWSC 247 .............................................................................................. 30.10 Hoobin (deceased), Re [1957] VR 341 ........................................................................... 11.60, 11.75 Hood, Re (1940) 40 SR (NSW) 449 ......................................................................................... 22.140 Hooke v Robson [1962] NSWR 606 ...................................................................... 8.60, 8.75, 16.180 Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320 ....................................................................................................................... 37.100 Hooper, Re [1932] 1 Ch 38 ..................................................................................................... 17.150 Hooper v Australia and New Zealand Banking Group Ltd [1996] ANZ Conv R 400 ................. 38.250 Hooper v Rogers [1975] Ch 43 .................................................................................... 31.55, 31.190 Hoover plc v George Hulme (Stockport) Ltd [1982] FSR 565 ........................................................ P.40 Hope v Hope [1977] 1 NZLR 582 ............................................................................................. 1.150 Hopkins v Worcester & Birmingham Canal Proprietors (1868) LR 6 Eq 437 ............................... 36.80 Hopkins' Will Trusts, Re [1964] 3 All ER 46 .............................................................................. 29.150 Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829 .......................................................................... 2.90 Horan v James [1982] 2 NSWLR 376 .......................................................................... 16.175, 17.115 Horlock, Re [1895] 1 Ch 516 ......................................................................................... 15.15, 15.25 Horne v Barber (1920) 27 CLR 494 ............................................................................................. 5.25 Hornsby v Military Superannuation & Benefits Board of Trustees No 1 (2003) 126 FCR 484 ..................................................................................................................... 28.235 Hornsby v Playoust (2005) 11 VR 522 ....................................................................................... 25.45 Horrobin v Australian and New Zealand Banking Group Ltd (1996) 40 NSWLR 89 .................. 30.110 Horrocks (deceased), Re [1944] NZLR 314 ......................................................... 15.45, 15.55, 15.65, 15.70, 15.95 Horsley v Fawcett (1847) 11 Beav 565; 50 ER 935 .................................................................... 24.10 Hortico (Aust) Pty Ltd v Energy Equipment Co (Aust) Pty Ltd (1985) 1 NSWLR 545 .... 31.165, 32.35, 32.50 Hosken v Danahar [1911] VLR 214 ......................................................................................... 16.205 Hosking v Runting [2005] 1 NZLR 1 .............................................................................. 6.125, 6.130 Hospital Products Ltd v Ballabil Holdings Pty Ltd [1984] 2 NSWLR 662 ................................... 32.115 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 ....................................................... 4.15, 4.30, 4.50, 4.55, 4.60, 4.65, 4.265, 4.270, 4.275, 4.285, 4.325, 16.60, 38.10, 38.30, P.55 Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157 .............................. P.60 Hospitals of Ontario Pension Plan v Ontario Hospital Association [1991] PLR 125 .................... 28.200 Hotchin v New Zealand Guardian Trust Company Ltd [2016] 1 NZLR 906 ................. 14.130, 14.165 Hotline Communications Ltd v Hinkley (1999) 44 IPR 445 ...................................................... 31.135 Hotung v Ho [2002] 3 HKLRD 641 ............................................................................................ 21.45 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 ............................................. 1.55, 10.60 Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619 ..................... 16.190, 20.120, 24.175, 30.15, 30.65 lxxxiii

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Equity and Trusts in Australia

House v Caffyn [1922] VLR 67 .................................................................................................. 26.55 Houston, Re [1954] QSR 130 .................................................................................................... 26.25 Hoverd Industries Ltd v Supercool Refrigeration and Air Conditioning (1991) Ltd (in rec and liq) [1995] 3 NZLR 577 .............................................................................. 30.105 Howard E Perry & Co Ltd v British Railways Board [1980] 1 WLR 1375 ........................ 33.45, 37.145 Howard v Commissioner of Taxation (2014) 253 CLR 83 ............................... 4.15, 4.30, 4.40, 4.130 Howard v Fanshawe [1895] 2 Ch 581 ....................................................................................... 11.95 Howard v Pickford Tools Co Ltd [1951] 1 KB 417 ...................................................................... 37.55 Howe v Dartmouth (1802) 7 Ves 137; 32 ER 56 ...................................................................... 22.155 Howell v Hyde (2003) 47 ACSR 230 .............................................................................. 18.45, 18.55 Howey, Re [1991] 2 NZLR 16 .................................................................................................. 29.220 Howey v Federal Commissioner of Taxation (1930) 44 CLR 289 .............................................. 27.130 Howlett, Re [1949] Ch 767 ....................................................................................................... 30.15 Hoystead v Federal Commissioner of Taxation (1920) 27 CLR 400 .......................................... 38.155 Hoystead v Federal Commissioner of Taxation (1921) 29 CLR 537 ............................................ 10.20 HP Mercantile Pty Ltd v Dierickx (2013) 306 ALR 53 ............................................................... 30.115 H's Estate, Re (1875) 1 Ch D 276 ............................................................................................ 36.115 Hubbard v Vosper [1972] 2 QB 84 ............................................................................................ 6.295 Hudson v Gray (1927) 39 CLR 473 ......................................................................................... 38.145 Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 ........................... 4.15 Hughes v Fripp (1922) 30 CLR 508 ......................................................................................... 22.145 Hughes v Huppert [1991] 1 NZLR 474 ...................................................................................... 35.95 Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 ........................................................ 10.75 Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653 .................................................. 24.10 Hughmans Solicitors v Central Stream Services Ltd [2013] WTLR 239 ......................................... 1.65 Huish, Re (1889) 43 Ch D 260 .................................................................................................. 15.30 Hume v Munro (No 2) (1943) 67 CLR 461 ............................................................................. 33.110 Hummeltenberg, Re [1923] 1 Ch 237 ....................................................................................... 29.60 Humphreys v Humphreys [2004] WTLR 1425 ........................................................................... 7.270 Humphris v Jenshol (1997) 160 ALR 107 ............................................................. 4.120, 32.65, 38.70 Hung v Warner [2013] FCAFC 48 .............................................................................................. 18.10 Hungerfords v Walker (1989) 171 CLR 125 .................................................................... 4.325, 34.60 Hungry Jacks Pty Ltd v Burger King Corp (1999) 30 ACSR 551 ............................................... 31.100 Hunt v A [2008] 1 NZLR 368 .................................................................................................... 6.255 Hunt v Kallinicos (2009) 14 BPR 27,001 .................................................................................... 13.65 Hunt v Silk (1804) 5 East 449; 102 ER 1142 .............................................................................. 35.10 Hunter BNZ Finance Ltd v C G Maloney Pty Ltd (1988) 18 NSWLR 420 .............. 35.75, 35.90, 35.95 Hunter (deceased), Re Estate of [1957] SASR 194 ................................................................... 23.170 Hunter Engineering Co v Syracuse Canada Ltd (1989) 57 DLR (4th) 321 ................................ 38.265 Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney-​General (2013) 9 ASTLR 308 ...................................................................................................................... 29.365 Hunter v Attorney-​General [1899] AC 309 ................................................................... 29.45, 29.275 Hunter v Hunter [1938] NZLR 520 ................................................... 21.105, 21.115, 21.120, 21.130 Hunter v Moss [1994] 1 WLR 452 ............................................................................................. 17.90 Hunters Beach Investments Pty Ltd v Braams (2001) 38 ACSR 701 ........................................... 24.55 Hurley v McDonald's Australia Ltd (2000) ATPR ¶41–​741 .......................................................... 9.185 Huszar, Re Estate of [1999] NSWSC 388 ................................................................................... 37.80 Hutchison v Turnbull [2006] NSWSC 686 ............................................................................... 38.195 Huxtable, Re [1902] 2 Ch 793 .................................................................................................. 18.80 Huyton SA v Distribuidora Internacional De Productos Agricolas SA de CV [2003] 2 Lloyd's Rep 780 ................................................................................................................... 8.175 Hydro Electric Commission of Nepean v Ontario Hydro (1982) 132 DLR (3d) 193 .................... 8.110 Hyett v Stanley [2004] 1 FLR 394 ............................................................................................ 38.225 Hylton v Hylton (1754) 2 Ves Sen 547; 28 ER 349 ....................................................................... 7.30

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Table of Cases

Hyman v Permanent Trustee Company of New South Wales Ltd (1914) 14 SR (NSW) 348 ............................................................................................................... 25.150 Hyman v Rose [1912] AC 623 ...................................................................................... 11.05, 11.105

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I I F Asia Pacific Pty Ltd v Galbally (2003) 59 IPR 43 ...................................................................... 6.55 IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 ..................................................... 2.30, 2.55 IAC (Leasing) Ltd v Humphrey (1972) 126 CLR 131 .................................................................. 13.80 Iambic Pty Ltd v Northwind Holdings Pty Ltd [2001] WASC 44 ............................................... 33.130 Iannello v Sharpe (2007) 69 NSWLR 452 .................................................................................. 11.70 Ibeneweka v Egbuna [1964] 1 WLR 219 .................................................................................... 37.15 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 .................... 31.05 ICI New Zealand Ltd v Agnew [1998] 2 NZLR 129 .................................................................... 16.75 Ide v Ide (2004) 184 FLR 44 .................................................................................................... 36.125 Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157 .................................................................... 37.155 Idlecroft Pty Ltd v Federal Commissioner of Taxation (2004) 56 ATR 699 ................................ 20.155 Idlecroft Pty Ltd v Federal Commissioner of Taxation (2005) 144 FCR 501 .............................. 20.155 Iffla v Beany (1861) 1 W & W (E) 110 ............................................................................ 21.55, 21.60 Igloo Homes Pty Ltd v Sammut Constructions Pty Ltd (2005) 61 ATR 593 .............................. 37.130 Ikbal v Sterling Law [2014] PNLR 9 ......................................................................................... 24.205 Ikeuchi v Liu (2001) 160 FLR 94 .................................................................................. 19.40, 30.175, 38.205, 38.250 Illingworth v Houldsworth [1904] AC 355 .................................................................................. 1.80 Illinois Central Railroad v Illinois (1892) 146 US 387 ................................................................... 5.05 Illuzzi v Edwards (1997) Q ConvR ¶54–​490 ................................................................................ 7.30 Imac Security Services Pty Ltd v Tyco Australia Pty Ltd [2002] VSC 592 ......... 31.105, 31.145, 31.155 Imerman v Tchenguiz [2011] Fam 116 ............................................................................ 6.95, 6.370 Immigration and Ethnic Affairs, Minister for v Kurtovic (1990) 21 FCR 193 ............................. 10.395 Immigration and Ethnic Affairs, Minister for v Polat (1995) 57 FCR 98 .................................... 10.395 Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41 ...................................... 38.105 Imperial Brothers Pty Ltd v Ronim [1999] 2 Qd R 172 ............................................................... 11.55 Imperial Foods Pension Scheme, Re [1986] 2 All ER 802 ......................................................... 28.200 Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd [1991] 2 All ER 597 ............................................................................................. 28.145, 28.150, 28.155 Imperial Oil Ltd v Westlake Fuel Ltd (2001) 203 DLR (4th) 604 ................................................. 4.225 in de Braekt v Powell (2007) 33 WAR 389 ............................................................................... 38.255 Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 ...................................................... 8.05 Income Tax Acts (No 1), Re [1930] VLR 211 .............................................................................. 29.60 Income Tax Special Purposes Commissioners v Pemsel [1891] AC 531 .................................... 29.185 Incorporated Council of Law Reporting (Qld) v Federal Commissioner of Taxation (1971) 125 CLR 659 ............................................................................................. 29.215, 29.280 Independent Newspapers Ltd v Australian Consolidated Press NZ Ltd [1996] 3 NZLR 722 ......................................................................................................................... 31.10 Independent Trustee Services Ltd v GP Noble Trustees Ltd [2013] Ch 91 ....................... 2.135, 39.20 Indopal Pty Ltd, Re (1987) 12 ACLR 54 ................................................................................... 23.130 Indrisie v General Credits Ltd [1985] VR 251 ........................................................................... 30.110 Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162 ........................................ 4.90 Industrial Furnaces Ltd v Reaves [1970] RPC 605 ...................................................................... 6.370 Inetstore Corporation Pty Ltd (in liq) v Southern Matrix International Pty Ltd (2005) 221 ALR 179 ........................................................................................................... 1.105, 31.135 ING Bank (Australia) Ltd v O'Shea (2010) 14 BPR 27,317 .......................................................... 11.05 Inglis v Moore (1979) 24 ALR 411 ............................................................................................ 37.10 Ingram (deceased), Re [1951] VLR 424 ...................................................................... 29.220, 29.300

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Equity and Trusts in Australia

Ingram v Ingram [1941] VLR 95 ................................................................................... 14.170, 26.85 Initial Services Ltd v Putterill [1968] 1 QB 396 ............................................................... 6.280, 6.300 Inkhorn Pty Ltd v Herbert [2000] WASCA 333 ................................................................ 36.60, 36.70 Inland Revenue, Commissioner of v Medical Council of New Zealand [1997] 2 NZLR 297 ....................................................................................................................... 29.285 Inland Revenue, Commissioner of v New Zealand Council of Law Reporting [1981] 1 NZLR 682 ....................................................................................................................... 29.280 Inland Revenue, Commissioner of v Newmarket Trustees Ltd [2012] 3 NZLR 207 ................... 21.125 Inland Revenue, Commissioners of v Yorkshire Agricultural Society [1928] 1 KB 611 ............... 29.235 Inland Revenue Commissioners v Baddeley [1955] AC 572 ........................... 29.115, 29.260, 29.265 Inland Revenue Commissioners v Bernstein [1961] 1 All ER 320 ................................................ 23.20 Inland Revenue Commissioners v Broadway Cottages Trust [1950] Ch 20 ............................... 17.100 Inland Revenue Commissioners v City of Glasgow Police Athletic Association [1953] AC 380 ................................................................................................................... 29.50, 29.280 Inland Revenue Commissioners v McMullen [1981] AC 1 ............................. 29.140, 29.145, 29.260 Inland Revenue Commissioners v Morris [1958] NZLR 1126 ................................................... 30.145 Inland Revenue Commissioners v Silverts Ltd [1951] 1 All ER 703 ............................................. 21.40 Inman (deceased), Re [1965] VR 238 ............................................................... 19.95, 29.25, 29.130, 29.220, 29.300 Instant Rewards Pty Ltd v Baker Motors Pty Ltd [2003] NSWSC 312 ....................................... 31.145 Instyle Contract Textiles Pty Ltd v Good Environmental Choice Services Pty Ltd (No 2) [2010] FCA 38 .......................................................................................................... 31.90 Insurance Commission of Western Australia v Kightly (2005) 30 WAR 380 ..................... 14.30, 14.35 Insurance Corporation of British Columbia v Lo (2006) 278 DLR (4th) 148 ............................... 38.45 Intagro Projects Pty Ltd v Australia and New Zealand Banking Group Ltd (2004) 183 FLR 462 ........................................................................................................................ 27.40 Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (2007) Aust Contract Rep 90-​261 ........................................................................................................... 13.55 Intellectual Property Development Corp Pty Ltd v Primary Distributors New Zealand Ltd (2008) 77 IPR 215 ....................................................................................................... 34.155 Interest Research Bureau Pty Ltd v Interest Recount Pty Ltd (1997) 38 IPR 468 ....................... 32.150 Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104 .................................................................................................................. 6.10, 6.80 International Advisor Systems Pty Ltd v XYYX Pty Ltd [2008] NSWSC 2 ................................... 33.170 International Brotherhood of Electrical Workers, Local Union 2085 v Winnipeg Builders' Exchange (1967) 65 DLR (2d) 242 ......................................................................... 31.45 International Business College Pty Ltd v Alphacrucis College Ltd [2009] NSWSC 1088 .......................................................................................................... 11.95, 11.120 International Entertainment New Zealand (No 2) Ltd v Lewis (1998) 42 IPR 162 ........................................................................................ 6.55, 6.180, 32.155, 32.160 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 ....................................................................................................................... 31.80 International Harvester Export Co v International Harvester Australia Ltd [1983] 1 VR 539 ........................................................................................................................... 36.105 International Investment Unit Trust, Re [2005] 1 NZLR 270 ......................................... 39.90, 39.110 International Leasing Corp (Vic) Ltd v Aiken [1967] 2 NSWR 427 ................................................ 3.35 International Tools Ltd v Kollar (1968) 67 DLR (2d) 386 .............................................................. 6.85 Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292 .................................................................................................. 13.15, 13.55, 13.95 Interstate Investment Company Ltd v Mobbs (1928) 28 SR (NSW) 572 ...................................... 3.35 Interview Holdings Pty Ltd v Registrar of Titles [2008] WASC 144 ........................................... 20.110 Interwest Hotels Pty Ltd (in liq), Re (1993) 12 ACSR 78 ............................................................ 27.25 Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd (2006) 15 VR 87 ................................................................................................... 28.80, 28.175, 28.205 Investa Properties Ltd, Re (2001) 187 ALR 462 ............................................................ 22.25, 24.200, 24.210, 24.215 lxxxvi

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Table of Cases

Investec Bank (Australia) Ltd v Glodale Pty Ltd (2009) 24 VR 617 ............................................. 36.60 Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 ............... 8.120 IOOF Australia Trustee Ltd v Oxenham [1999] ANZ Conv R 113 ............................................... 7.180 IOOF Australia Trustees Ltd, Re (1999) 75 SASR 290 ............................................................... 23.180 IPC Global Pty Ltd v Pavetest Pty Ltd (2017) 122 IPR 445 ........................................................... 6.25 Iraqi Ministry of Defence v Arcepey Shipping Co SA [1981] QB 65 ................................ 32.35, 32.85 Ireland v Retallack (2012) 8 ASTLR 431 ................................................................................... 23.175 Irvine v Australian Sharetrading and Underwriting Ltd (in liq) (1996) 22 ACSR 765 ................ 24.125 Irvine v Scaysbrook [2005] NSWSC 565 ..................................................................... 38.215, 38.230 Irving v Emu & Prospect Gravel & Road Metal Co Ltd (1909) 26 WN (NSW) 137 ..................... 31.50 Irving v Irving (1901) 18 WN (NSW) 63 .................................................................................. 22.110 Iscorp Investments Pty Ltd v Yohana [2011] NSWSC 1387 ...................................................... 23.120 Island Records Ltd v Tring International plc [1996] 1 WLR 1256 .............................................. 34.150 ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue (2003) 12 BPR 22,941 ............................................................................................................. 21.45, P.90 Israel v Foreshore Properties Pty Ltd (in liq) (1980) 54 ALJR 421 ................................................ 14.70 Issa v Berisha [1981] 1 NSWLR 261 ........................................................................................... 37.65 Item Software (UK) Ltd v Fassihi [2005] 2 BCLC 91 ..................................................................... 4.20 Ivan v Rusec [2016] WASC 70 ................................................................................................. 30.150 Ivanfy, Marriage of (1978) FLC ¶90–​512 ................................................................................. 19.160

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J J & F Stone Lighting and Radio Ltd v Levitt [1947] AC 209 ..................................................... 10.365 J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 ........................... 2.40 J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539 ................... 30.85, 30.110, 30.115 J Aron & Co v Newmont Yandal Operations Pty Ltd (2003) 47 ACSR 243 ............................... 31.135 J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 ......................... 12.05, 12.15, 31.55, 33.05, 33.90, 33.110 J D & K J Zohs Properties Pty Ltd v Ferme [2015] SASC 55 ........................................................ 24.55 J S Mitchell's Trusts, Re (1900) 17 WN (NSW) 164 .................................................................... 21.80 J v J [2013] NZHC 1512 ............................................................................................................ 4.310 J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891 ............... 20.75, 20.85, 21.90, 23.140, 27.50 JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 ........................................... 23.135, 23.155 Jackson, Re [1930] 2 Ch 389 ................................................................................................... 29.185 Jackson, Re [1944] SASR 82 .................................................................................................... 23.170 Jackson, Re Will of [1964–​65] NSWR 1279 .............................................................................. 22.110 Jackson v Crosby (No 2) (1979) 21 SASR 280 ................................................................ 1.130, 10.60 Jackson v Finance Corporation of Washington (1930) 41 F 2d 103 ......................................... 14.225 Jackson v Phillips (1867) 96 Mass 539 ..................................................................................... 29.100 Jackson v Richards (2005) 12 BPR 23,091 ................................................................................... 1.65 Jackson v Rowe (1826) 2 Sim & St 472; 57 ER 427 ................................................................... 2.125 Jackson v Sterling Industries Ltd (1987) 162 CLR 612 ............................ 32.30, 32.40, 32.50, 32.135 Jacobs v Platt Nominees Pty Ltd [1990] VR 146 ................................................................. 2.40, 2.50 JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 ......................................................................................................................... 35.40 Jaggard v Sawyer [1995] 1 WLR 269 .................................................................. 34.65, 34.75, 34.80, 34.105, 34.115 Jahnsen v Jahnsen [2002] NSWSC 995 ......................................................................... 18.30, 38.220 Jakudo Pty Ltd v South Australian Telecasters Ltd (1997) 69 SASR 440 .................................... 31.180 Jalmoon Pty Ltd (in liq) v Bow [1997] 2 Qd R 62 ............................................. 17.40, 24.200, 24.205 Jam Factory Ltd v Sunny Paradise Pty Ltd [1989] VR 584 .......................................................... 11.90 James (deceased), Re [1949] SASR 143 ...................................................................... 22.100, 22.110 James, Ex parte (1803) 8 Ves 337; 32 ER 385 .......................................................................... 22.100 lxxxvii Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:14.

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Equity and Trusts in Australia

James Miller Holdings Ltd v Graham (1978) 3 ACLR 604 ......................................................... 36.105 James N Kirby Foundation Ltd v Attorney-​General (NSW) (2004) 62 NSWLR 276 .......... 25.45, 25.55 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62 ................................................................. 39.65 James Talcott Ltd v John Lewis & Co Ltd [1940] 3 All ER 592 ...................................................... 3.50 James v ANZ Banking Group Ltd (1986) 64 ALR 347 ................................................................ 7.150 James v Bank of Western Australia Ltd (2004) 51 ACSR 325 ...................................................... 36.40 James v Commercial Bank of Australia (1992) 37 FCR 445 ...................................................... 30.110 James v Douglas [2016] NSWCA 178 ........................................................................................ 21.55 James v Hill [2004] NSWCA 301 ............................................................................................... 11.60 James v James [2018] WTLR 1313 ................................................................................ 10.70, 10.235 Janesland Holdings Pty Ltd v Simon [2000] ANZ Conv R 111 ......................................... 9.110, 9.115 Jankowski v Pelek Estate (1996) 131 DLR (4th) 717 ........................................................ 18.55, 18.65 Janney v Steller Works Pty Ltd [2017] VSC 363 ......................................................................... 34.95 Jansen v Thornton (1996) 132 FLR 255 ...................................................................... 14.190, 14.200 Janson v Janson [2007] NSWSC 1344 ....................................................................................... 7.130 Jarvis (deceased), Re [1958] 1 WLR 815 ......................................................................... 30.75, 38.30 JC Techforce Pty Ltd v Pearce (1996) 138 ALR 522 ..................................................... 32.165, 32.185 Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 ..................... 10.220, 10.230, 10.290, 10.295 Jeffery and Corrections Victoria, Re (2004) 21 VAR 196 ............................................................... 6.80 Jeffery, Re [1951] SASR 237 ....................................................................................................... 18.65 Jenkin, Re [1932] VLR 314 ....................................................................................................... 21.145 Jenkins v Brahe & Gair (1902) 27 VLR 643 ................................................................. 14.215, 14.225 Jenkins v Ellett [2007] QSC 154 ................................................................................................ 25.20 Jenkins v Wynen [1992] 1 Qd R 40 ................................................................. 26.55, 26.125, 26.130 Jenner v Turner (1880) 16 Ch D 188 ......................................................................................... 19.65 Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709 ..................................... 3.125, 3.135 Jennings v Rice [2003] 1 P & CR 100 ................................................... 10.60, 10.235, 10.270, 12.20 Jensen, Re [1992] 2 NZLR 506 .................................................................................................. 37.80 Jensen v Brisbane City Council [2006] 2 Qd R 20 .................................................................... 29.175 Jenyns v Public Curator (Qld) (1953) 90 CLR 113 .................................................... 7.35, 7.70, P.145 Jeogla Pty Ltd v Australia & New Zealand Banking Group Ltd (1999) 150 FLR 359 .................................................................................................. 36.25, 36.50, 36.60 Jeppesons Road Pty Ltd v Di Domenico (2005) Q ConvR ¶54–​620 .................... 11.15, 11.55, 33.150 Jeppesons Road Pty Ltd v Di Domenico [2005] QCA 391 ........................................................ 33.150 Jerambak Holdings Pty Ltd v Austral-​Asean Pty Ltd (2005) 147 NTR 1 ..................................... 38.250 Jericho v Guglielmin [1938] SASR 292 .................................................................................... 33.145 Jerome v Kelly [2004] 1 WLR 1409 .......................................................................................... 38.155 Jessica Estates Pty Ltd v Lennard (2007) 13 BPR 25,297 ............................................................ 31.70 Jessica Holdings Pty Ltd v Anglican Property Trust Diocese of Sydney (1992) 27 NSWLR 140 .................................................................................................................. 38.155 Jessup v Lawyers Private Mortgages Ltd [2006] QCA 432 .......................................................... 21.45 Jessup v Lawyers Private Mortgages Ltd [2006] QSC 3 .............................................................. 21.45 Jessup v Queensland Housing Commission [2002] 2 Qd R 270 ....................... 16.110, 23.155, 27.95 Jeune v Queens Cross Properties Ltd [1974] Ch 97 ................................................................... 33.40 Jirna Ltd v Mister Donut of Canada Ltd (1973) 40 DLR (3d) 303 ............................................... 4.270 JJedda Investments Pty Ltd v Krambousanos (1997) 72 FCR 138 ................................................. 9.90 J(LA) v J(H) (1993) 102 DLR (4th) 177 ...................................................................................... 4.305 JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432 ....................................................... 37.15 Joachimson v Swiss Bank Corporation [1921] 3 KB 110 ............................................................ 4.250 Joaquin v Hall [1976] VR 788 .................................................................................................... 26.55 Jobson v Beckingham (1983) 9 Fam LR 169 ............................................................... 26.115, 26.125 Jobson v Johnson [1989] 1 WLR 1026 ................................................................. 11.10, 13.05, 13.95 Jockey Club v Buffham [2003] QB 462 ................................................................ 6.240, 6.245, 6.300 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 ......................................................................................... 4.265, 10.250, 38.10, P.190 lxxxviii

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Table of Cases

John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 .............. 14.20, 14.30, 14.35, 14.40, 14.50, 14.55 John R Ring Pty Ltd v Commissioner of Office of Consumer and Business Affairs (2009) 104 SASR 145 .......................................................................................................... 37.10 John XXIII College v Commissioner for ACT Revenue [2016] ACAT 152 .................................. 29.145 John Zink & Co Ltd v Wilkinson [1973] RPC 717 ....................................................................... 6.215 Johnco Nominees Pty Ltd v Albury-​Wodonga (New South Wales) Corporation [1977] 1 NSWLR 43 ............................................. 37.10, 37.15, 37.25, 37.50, 37.55 Johns v Australian Securities Commission (1993) 178 CLR 408 ...................... 6.05, 6.25, 6.80, 6.250 Johns v Johns [2004] 3 NZLR 202 ................................................................... 20.125, 24.190, 30.40 Johnson, Marriage of (2000) 155 FLR 44 ................................................................................. 19.155 Johnson Matthey Ltd v A C Rochester Overseas Corporation (1990) 23 NSWLR 190 ............... 10.200 Johnson, Re (1880) 15 Ch D 548 ............................................................................................ 23.130 Johnson v Agnew [1980] AC 367 ............................................................................... 34.105, 34.120 Johnson v Australian Guarantee Corporation Ltd (1992) 59 SASR 382 ........................... 14.70, 14.75 Johnson v Buttress (1936) 56 CLR 113 ..................................................................... 7.30, 7.35, 7.45, 7.55, 7.70, P.145 Johnson v Gore Wood [2002] 2 AC 1 ...................................................................................... 10.100 Johnson v Perez (1988) 166 CLR 351 ...................................................................................... 34.120 Johnson v Salvage Association (1887) 19 QBD 458 ................................................................. 23.120 Johnson v Smith [2010] NSWCA 306 ............................................................................. 9.120, 9.125 Johnson v Trotter (2006) 12 BPR 23,339 .................................................................... 16.200, 16.205 Johnson's Will Trusts, Re [1967] 1 All ER 553 ............................................................................. 19.60 Johnston v Johnston (1903) 4 SR (NSW) 8 ................................................................................ 22.90 Johnston v Maclarn [2002] NSWSC 97 ..................................................................................... 15.60 Johnstone v Commerce Consolidated Pty Ltd [1976] VR 463 .......................... 37.95, 37.100, 37.125 Johnstone v Haviland [1896] AC 95 .......................................................................................... 15.10 Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90 ...................................................................... 21.80 Joliffe v Baker (1883) 11 QBD 255 .......................................................................................... 24.185 Jolly v Palmer [1985] 1 NZLR 658 ............................................................................................. 35.85 Jones (liquidator) v Matrix Partners Pty Ltd (2018) 124 ACSR 568; 354 ALR 436 ............ 16.05, 27.30 Jones, Re [1893] 2 Ch 461 ........................................................................................................... P.75 Jones, Re [1907] SALR 190 ......................................................................................... 29.170, 29.330 Jones, Re [1917] QSR 74 ........................................................................................................... 23.85 Jones v AMP Perpetual Trustee Company NZ Ltd [1994] 1 NZLR 690 ................ 22.25, 22.55, 22.70, 24.205, 24.210 Jones v Baker (2002) 10 BPR 19,115 ......................................................................................... 12.05 Jones v Daniel (2004) 141 FCR 148 .......................................................................................... 1.130 Jones v Humphreys [1902] 1 KB 10 ............................................................................................. 3.35 Jones v IOS (RUK) Ltd (in members’ vol liq) [2012] EWHC 348 ................................................. 6.210 Jones v Kernott [2010] 1 All ER 947 ........................................................................................ 38.245 Jones v Kernott [2010] 1 WLR 2401 ........................................................................... 38.230, 38.245 Jones v Kernott [2012] 1 AC 776 ............................................................................... 38.235, 38.245 Jones v Krawczyk (2011) 7 ASTLR 104 ...................................................................................... 19.60 Jones v Lock (1865) 1 Ch App 25 ............................................................................................ 18.105 Jones v Maynard [1951] Ch 572 ............................................................................................. 26.125 Jones v McQuilkin [2006] NSWSC 628 .................................................................................... 38.250 Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418 ............................................ 14.165 Jones v Narrogin Beef Producers Pty Ltd (receivers and managers appointed) [2010] WASC 365 ........................................................................................................................... 36.75 Jones v Parkinson [1952] NZLR 89 ............................................................................................ 26.60 Jones v Peters [1948] VLR 331 ................................................................................................... 12.80 Jones v Southall & Bourke Pty Ltd (2004) 3 ABC (NS) 1 ................................................. 39.20, 39.30 Jones v Tsige (2012) 108 OR (3d) 241 ...................................................................................... 6.135 Jonsue Investments Pty Ltd v Balweb Pty Ltd (2013) 9 ASTLR 460 ........................................... 20.110 lxxxix

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Equity and Trusts in Australia

Jonton Pty Ltd, Re [1992] 2 Qd R 105 ..................................................................................... 38.250 Jorden v Money (1854) 5 HLC 185; 10 ER 868 ......................................................................... 10.50 Joscelyne, Re [1963] Tas SR 4 ....................................................................................... 39.65, 39.100 Joscelyne v Nissen [1970] 2 QB 86 ....................................................... 37.90, 37.95, 37.100, 37.105 Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 .................................................... 10.20, 10.25 Joseph Rowntree Memorial Trust Housing Association Ltd v Attorney-​General [1983] 1 Ch 159 ........................................................................................................................... 29.115 Joseph v Lyons (1884) 15 QBD 280 .......................................................................................... 3.105 Jostens Canada Ltd v Gibsons Studios Ltd (1999) 174 DLR (4th) 351 ........................................ 34.55 Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570 ........................................... 36.60 Joy, Re (1888) 60 LT 175 ........................................................................................................ 29.200 Joyce v Ashfield Municipal Council [1975] 1 NSWLR 744 ........................................................ 29.200 JSC BTA Bank v Ablyazov (No 10) [2014] 1 WLR 1414 .............................................................. 32.75 JSC BTA Bank v Solodchenko [2011] 1 WLR 888 ..................................................................... 32.105 JTA Le Roux Pty Ltd v Lawson (No 2) [2013] WASC 373 .......................................................... 31.145 Judicial Advice Re Estate Late Chow Cho-​Poon, Re Application for [2013] NSWSC 844 ....................................................................................................................... 23.170 Just Juice Corporation Pty Ltd, Re (1992) 109 ALR 334 .............................................. 30.105, 30.110 Juul v Northey [2010] NSWCA 211 ......................................................................................... 16.195

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K K & S Corporation Ltd v Sportingbet Australia (2003) 86 SASR 312 .......................................... 38.80 K B Docker, Re (1938) 10 ABC 198 ............................................................................................. 3.45 K v K [1976] 2 NZLR 31 ................................................................................................. 7.75, 33.145 Kaikoura County v Boyd [1949] NZLR 233 .............................................................................. 29.230 Kain v Hutton [2001] BCL 304 ................................................................................................ 21.100 Kain v Hutton [2002] BCL 813 ................................................................................................ 21.100 Kain v Hutton [2008] 3 NZLR 589 .................................................................. 8.50, 8.55, 8.65, 8.70, 16.175, 20.155, 23.115 Kais v Turvey (1994) 11 WAR 357; 17 Fam LR 498 ........................................ 26.125, 38.185, 38.270 Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 ............................................ 9.05, 9.80, 9.145 Kallinicos v Hunt (2005) 64 NSWLR 561 ................................................................................... 4.155 Kalmac Property Consultants Ltd v Delicious Foods Ltd [1974] 2 NZLR 631 .............................. 31.20 Kalnenas v Kovacevich [1961] WAR 188 ................................................................................... 12.75 Kambouris v Tahmazis [2012] VSC 432 ................................................................................... 20.125 Kane v Radley-​Kane [1998] 3 WLR 617 ........................................................................ 22.95, 22.110 Kapoor v National Westminster Bank plc [2012] 1 All ER 1201 .................................................. 3.125 Karadimas v H & P Solopitias Pty Ltd (2001) V ConvR ¶54–​638 ..................................... 32.50, 32.65 Karafotias v Karafotias (2003) 84 SASR 578 ............................................................................. 30.155 Karaguleski v Vasil Bros & Co Pty Ltd [1981] 1 NSWLR 267 ..................................................... 31.165 Karam v ANZ Banking Group Ltd [2001] NSWSC 709 ............................................................ 30.155 Karastamatis v Tzanavaras [2013] SASC 163 ........................................................................... 16.160 Karfoal Pty Ltd v Lorence (2002) 11 BPR 20,129 ....................................................................... 11.75 Karger v Paul [1984] VR 161 .......................................................................... 20.120, 20.130, 23.30, 23.35, 23.40, 23.70, 28.160 Karingal 2 Holdings Pty Ltd v Commissioner of State Revenue (2002) 51 ATR 190 .................. 23.125 Karl Suleman Enterprizes Pty Ltd (in liq) v Babanour (2004) 49 ACSR 612 ............................... 30.175 Karsten (deceased), Re [1953] NZLR 456 ....................................................................... 18.65, 18.80 Kasumu v Baba-​Egbe [1956] AC 539 ...................................................................................... 37.170 Katingal Pty Ltd v Amor (1999) 30 ACSR 545 ......................................................................... 38.265 Kation Pty Ltd v Lamru Pty Ltd (2009) 257 ALR 336 ............................................................... 30.175 Kauter v Hilton (1953) 90 CLR 86 ........................................................ 17.15, 18.10, 18.105, 26.115 Kay, Re [1927] VLR 66 ............................................................................................................... 21.80 Kay v Australian Securities and Investments Commission (2002) 43 ACSR 229 ........................ 28.240 xc Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:14.

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Table of Cases

Kayford Ltd (in liq), Re [1975] 1 WLR 279 ......................................................... 16.115, 27.20, 27.70 Kazar v Filaria Pty Ltd [2004] ACTSC 124 .................................................................................. 22.90 KCA Super Pty Ltd (No 2), Re [2011] NSWSC 1301 ................................................................ 28.155 Kearins v Kearins (1957) 57 SR (NSW) 286 ............................................................................. 29.260 Kearney, Re (1908) 8 SR (NSW) 87 ........................................................................................... 24.65 Kearns v Hill (1990) 21 NSWLR 107 .......................................................................................... 25.10 Kearns v Leaf (1864) 1 Hem & M 681; 71 ER 299 ..................................................................... 36.90 Keech v Sandford (1726) Sel Cas T King 61; 25 ER 223 .................................................... 4.80, 4.205 Keefe v Law Society of New South Wales (1998) 44 NSWLR 451 ............................................ 39.105 Keeler's Settlement Trusts, Re [1981] Ch 156 ............................................................................ 22.90 Keen, Re [1937] Ch 236 ................................................................................................ 18.65, 18.80 Keewatin Tribal Council Inc v Thompson (City) (1989) 61 Man R 241 .................................... 17.160 Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 ................... 4.80, 4.265 Kelcey, Re [1899] 2 Ch 530 ........................................................................................................ 1.65 Kell & Rigby Pty Ltd v Flurrie Pty Ltd (2006) 67 NSWLR 113 ................................................... 10.370 Kellas-​Sharpe v PSAL Ltd [2012] QCA 371 ............................................... 9.140, 9.195, 13.55, 13.80 Kelly v Bruce [1907] SALR 174 .................................................................................................. 20.30 Kelly v C A & L Bell Commodities Corp (1989) 18 NSWLR 248 ........................................ 4.30, 4.275 Kelly v Commissioner of Inland Revenue [1970] NZLR 161 ....................................................... 3.150 Kelly v Commissioner of Taxation (2012) 88 ATR 409 ............................................................... 18.10 Kelly v Commissioner of Taxation (2013) 213 FCR 460 ............................................................. 18.10 Kelly v Cooper [1993] AC 205 .................................................................................................. 4.185 Kelly v Kelly [2007] NSWSC 1076 ........................................................................................... 16.205 Kelly v Ollis (2003) 11 BPR 21,267 .......................................................................................... 37.135 Kelly v Price-​Williams (1982) 8 Fam LR 665 ............................................................................. 38.215 Kemtron Industries Pty Ltd v Commissioner of Stamp Duties (Qld) [1984] 1 Qd R 576 .............................................................................................. 23.125, 23.130, 23.155 Kendall, Ex parte (1811) 17 Ves 514; 34 ER 199 ..................................................................... 14.245 Kennaway v Thompson [1981] QB 88 ...................................................................................... 34.80 Kennedy v De Trafford [1897] AC 180 ...................................................................................... 36.50 Kennedy v Green (1834) 3 My & K 699; 40 ER 266 .................................................................. 2.130 Kennedy v Kennedy [2011] NSWSC 1619 ................................................................................. 21.80 Kennon v Spry (2008) 238 CLR 366 .............................................................. 19.170, 20.135, 20.140 Kenny, Re (1907) 97 LT 130 ................................................................................................... 29.190 Kenny v Fenton [1971] NZLR 1 ......................................................................... 35.15, 35.90, 35.100 Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 .......................................... 1.10, 20.100, 20.105, 20.115, 25.135 Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164 ................................ 38.155 Kerr, Re (1904) 24 NZLR 1 ...................................................................................................... 24.165 Kerr v Baranow [2011] 1 SCR 269 ........................................................................................... 38.230 Kerr v British Leyland (Staff) Trustees Ltd [2001] WTLR 1071 ..................................................... 23.50 Kerr v West Australian Trustee Executor & Agency Co Ltd (1937) 39 WALR 34 .......................... 7.115 Kerrigan, Re (1946) 47 SR (NSW) 76 ...................................................................................... 26.115 Kestrel Coal Pty Ltd v Construction, Forestry, Mining and Energy Union [2001] 1 Qd R 634 ........................................................................................................................ 31.190 Ketchum International Plc v Group Public Relations Holdings Ltd [1996] 4 All ER 374 ............... 32.45 Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd (1934) 35 SR (NSW) 108 ............................................................................................................... 30.180 Kettlewell v Watson (1882) 21 Ch D 685 ........................................................................... 8.35, 8.45 Kettlewell v Watson (1884) 26 Ch D 501 ........................................................................... 1.95, 8.45 Keys v Keys (1898) 20 ALT 7 ................................................................................................... 22.180 Keysborough Blue Danube Soccer Club, Re [2003] VSC 119 .......................................... 25.60, 25.65 KGL Health Pty Ltd v Mechtler [2007] FCA 1410 ...................................................................... 32.40 Khan v Khan (2004) 62 NSWLR 229 ..................................................................... 7.30, 7.160, 12.60 Khoo Tek Keong v Ch'ng Joo Tuan Neoh [1934] AC 529 ......................................................... 24.215 xci

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Equity and Trusts in Australia

Khoury v Khouri (2006) 66 NSWLR 241 ................................................... 12.05, 12.25, 12.80, 18.10 Khyentse v Hope [2007] 1 NZLR 645 ...................................................................................... 21.100 Kidner v Secretary, Department of Social Security (1993) 31 ALD 63 ...................................... 38.250 Kidney v Coussmaker (1806) 12 Ves 136; 33 ER 53 ................................................................. 15.105 Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319 .................................................... 11.20 Kilmore, Shire of v Dally [1989] VR 314 .................................................................................. 10.395 Kilpin v Kilpin (1834) 1 My & K 520; 39 ER 777 ..................................................................... 26.135 King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441 ................... 1.155, 13.55, 13.80 King, Re (1902) 29 VLR 793 ...................................................................................................... 22.40 King, Re [1923] 1 Ch 243 ....................................................................................................... 29.340 King v Berndt (1902) 27 VLR 519 ............................................................................................. 23.95 King v Poggioli (1923) 32 CLR 222 .............................................................................. 33.150, 34.75 King v Victoria Insurance Co Ltd [1896] AC 250 ............................................................ 14.35, 14.40 Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 .................................................. 12.45, 12.75 Kinloch v Secretary of State for India in Council (1882) 7 App Cas 619 ............................ 5.35, 16.45 Kinsela v Caldwell (1975) 132 CLR 458 ................................................................................... 17.100 Kintominas v Secretary, Department of Social Security (1991) 103 ALR 82 ..................... 1.130, 10.60 Kirby v Wilkins [1929] 2 Ch 444 ............................................................................................... 21.45 Kiriri Cotton Co Ltd v Dewani [1960] AC 192 ........................................................................... 8.105 Kirk v Ashdown [1998] ANZ Conv R 57 .................................................................................... 11.50 Kirk v Eddowes (1844) 3 Hare 509; 67 ER 482 .......................................................................... 15.75 Kirwan v Kirwan (1836) Donnelly 71; 47 ER 233 ....................................................................... 36.90 Kissock, Re (1910) 7 Tas LR 21 .................................................................................................. 21.80 Kiwi Packaging Ltd v Isaac (2000) 6 NZBLC 102,985 ................................................................ 16.75 K(K) v G(KW) (2008) 90 OR (3d) 481 ....................................................................................... 4.305 KL Tractors Ltd, Re [1954] VLR 505 .............................................................................. 30.85, 30.105 KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 ................. 35.155, 38.155 Klein v Botsman [2003] TASSC 106 ........................................................................................... 32.65 Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 ........................... 8.105, 8.110, 8.115, 8.125, 8.130, 8.140 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 ............................... 31.95 Klug v Klug [1918] 2 Ch 67 .................................................................................................... 23.115 KMA Corporation Pty Ltd v G & F Productions Pty Ltd (1997) 38 IPR 243 ............................... 10.155 Kneipp v Annunaka Pty Ltd [2015] QSC 359 ............................................................................. 21.55 Knight v Biss [1954] NZLR 535 ............................................................................................... 26.135 Knight v Knight (1840) 3 Beav 148; 49 ER 58 ........................................................................... 17.05 Knight v Knight (1987) 90 FLR 313 ......................................................................................... 19.170 Knocker v Youle [1986] 1 WLR 934 ........................................................................................... 25.65 Knowles v John Bennett (1895) 12 RPC 137 ........................................................................... 37.175 Knox v Gye (1872) LR 5 HL 656 ................................................................................................ 30.40 Knox v Mackinnon (1888) 13 App Cas 753 ............................................................................ 24.145 Koadlow v Park [2004] VSC 471 ............................................................................................. 31.145 Koczorowski, Re [1974] Qd R 177 ............................................................................................. 23.75 Koeppler Will Trusts, Re [1986] 1 Ch 423 ................................................................................ 17.170 Koettgen's Will Trusts, Re [1954] Ch 252 ..................................................................... 29.70, 29.155 Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd (2014) 17 BPR 33,147 ............................... 11.95 Koh v Chan (1997) 139 FLR 410 .................................................................................... 19.40, 26.45 Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 ............................................... 10.360 Kokotovich Constructions Pty Ltd v Wallington (1995) 17 ACSR 478 ...................................... 38.195 Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 ............................................. 31.165 Kolb's Will Trusts, Re [1962] Ch 531 .......................................................................................... 17.80 Koo v Hing (1992) 23 IPR 607 .................................................................................................. 6.265 Koompahtoo v Local Aboriginal Land Council v KLALC Property & Investment Pty Ltd [2009] NSWSC 502 ........................................................................................................... 25.140

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Table of Cases

Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 ............................................................................................... 2.75, 2.140, 38.80, 38.105, 38.110, 38.120, 38.265 Koppamurra Wines Pty Ltd v Mildara Blass Ltd (1998) AIPC ¶91–​400 ..................................... 31.135 Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 .................................. 17.45, 17.55 Korda v Silkchime Pty Ltd (2010) 243 FLR 269 ............................................................. 36.85, 36.155 Kostka v Ukrainian Council of NSW Inc [2013] NSWSC 222 .................................................... 29.250 Kostopoulos v G E Commercial Finance Pty Ltd (2005) Q ConvR ¶54–​634 .............................. 30.140 Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 ...................................................... 13.55 Kowalski v MMAL Staff Superannuation Fund Pty Ltd (No 3) [2009] FCA 53 ............................. 23.65 Krakaowski v Eurolynx Properties Ltd (1995) 183 CLR 563 ...................................................... 35.110 Kramer v Duggan (1955) 55 SR (NSW) 385 ............................................................................ 35.110 Kramer v McMahon [1970] 1 NSWR 194 ....................................................................... 35.40, 35.55 Kranz v National Australia Bank Ltd (2003) 8 VR 310 ..................................................... 7.190, 7.255 Kriezis v Kriezis [2004] NSWSC 167 .............................................................. 38.190, 38.210, 38.270 Krishell Pty Ltd v Nilant (2006) 32 WAR 540 ............................................................................... 3.05 Krok v Szaintop Homes Pty Ltd [2011] VSC 16 .......................................................................... 20.60 Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (2008) 78 IPR 262 ............................................................................................... 6.15, 6.25, 6.35 Ku-​ring-​gai Municipal Council v Attorney-​General (1954) 55 SR (NSW) 65 .................... 25.35, 25.45 Kubik Inc v Hull (1974) 224 NW 2d 80 ..................................................................................... 6.345 Kuligowski v Metrobus (2004) 220 CLR 363 ............................................................................. 10.20 Kung v Country Section NZ Indian Association Inc [1996] 1 NZLR 663 ..................................... 37.15 Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 ..................................................... 38.155 Kurt Keller Pty Ltd v BMW Australia Ltd [1984] 1 NSWLR 353 ................................................. 31.165 Kurth v McGavin [2007] 3 NZLR 614 ...................................................................................... 33.145 KVE Homes Pty Ltd, Re (1979) 4 ACLR 47 ................................................................................. 36.40 Kwok v Thang [1999] NSWSC 1034 ......................................................................... 6.25, 6.80, 6.95 Kymbo Pty Ltd v Paxton Management Pty Ltd (2001) 10 BPR 18,897 ....................................... 12.30 Kyriacou v Manakis [2006] NSWSC 804 .................................................................................... 11.95 Kytherian Association of Queensland v Sklavos (1958) 101 CLR 56 ............... 17.170, 29.135, 29.380 Kyuss Express Pty Ltd v Sellers (2001) 37 ACSR 62 .................................................................... 36.60

L L T King Pty Ltd v Besser (2002) 172 FLR 140 ........................................................................... 4.235 L v K (Freezing Orders: Principles and Safeguards) [2014] Fam 35 ........... 32.30, 32.50, 32.55, 32.60 La Housse v Counsel [2008] WASCA 207 .................................................................................. 17.15 La Rosa, Re (1991) 31 FCR 83 ................................................................................................. 14.130 Labelmakers Group Pty Ltd v LL Force Pty Ltd [2012] FCA 512 ................................................. 4.285 Labracon Pty Ltd v Cuturich (2013) 17 BPR 32,497 ....................................................... 10.05, 10.45 LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 ...................................................................................... 4.65, 4.225, 6.40, 6.375 Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198 ............................................................ 13.70 Lady Naas v Westminster Bank Ltd [1940] AC 366 ......................................................... 20.85, 21.90 Lagunas Nitrate Co v Lagunas Syndicate [1899] 2 Ch 392 ........................................................ 35.15 Lai v Tiao (No 2) [2009] WASC 22 .............................................................................................. 4.85 Laing v Commissioner of Stamp Duties [1948] NZLR 154 ....................................................... 29.255 Lake v Quinton [1973] 1 NSWLR 111 ........................................... 15.55, 15.70, 15.80, 15.85, 15.90 Lakic v Prior [2016] VSC 293 ..................................................................................................... 30.85 Lallemand v Brown (2014) 9 ACTLR 313 .................................................................................. 30.35 Lambert v Waters [1954] QSR 212 ...................................................................... 15.10, 15.20, 15.30 Lamotte v Lamotte (1942) 42 SR (NSW) 99 .............................................................................. 7.115 Lampet's Case (1612) 10 Co Rep 46; 77 ER 994 ......................................................................... 3.10

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Equity and Trusts in Australia

Lamplugh v Lamplugh (1709) 1 P Wms 111; 24 ER 316 ......................................................... 26.135 Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432 ................................................... 24.15, 24.20 Lamshed, Re [1970] SASR 224 .................................................................................................. 39.65 Lamshed v Lamshed (1963) 109 CLR 440 .................................................................... 30.20, 33.175 Lan v Hao (No 2) (2017) 325 FLR 1 ........................................................................................ 31.195 Lancashire Fires v S A Lyons & Company Ltd [1996] FSR 629 ...................................................... 6.60 Lancashire Loans Ltd v Black [1934] 1 KB 380 ........................................................................... 7.115 Lancet Pty Ltd v Olholm Developments Pty Ltd [2001] 1 Qd R 22 ............................................ 36.85 Landall Holdings Ltd v Caratti [1979] WAR 97 ............................................................................ 1.80 Lander v Whitbread [1982] 2 NSWLR 530 ................................................................................ 29.95 Landmark Operations Ltd v J Tiver Nominees Pty Ltd [2008] SASC 322 .................................... 9.190 Landmark Underwriting Agency Pty Ltd v Kilborn (2006) 59 AILR 200-​284 ................................. 6.85 Landrow Properties Pty Ltd v Commissioner of State Revenue (2008) 73 ATR 901 ...................... 1.10 Lands and Forests, Minister for v McPherson (1990) 22 NSWLR 687 ....................................... 11.110 Lane v Bushby (2000) 50 NSWLR 404 ..................................................................................... 14.125 Langdon v Korff (1885) 2 WN (NSW) 47 .................................................................................. 23.95 Langlands, Re (1901) 21 NZLR 100 ........................................................................................ 24.165 Langley v Foster (1909) 10 SR (NSW) 54 ................................................................................ 11.120 Langman v Handover (1929) 43 CLR 334 .......................................................... 37.155, 37.165, P.75 Lankow v Rose [1995] 1 NZLR 277 ........................................................................... 26.130, 38.165, 38.185, 38.230 Lankshear v ANZ Banking Group (New Zealand) Ltd [1993] 1 NZLR 481 .................................. 27.95 Lansat Shipping Co Ltd v Glencore Grain BV [2009] 1 CLC 379 ................................................ 13.15 Lansing Linde Ltd v Kerr [1991] 1 All ER 418 ......................................................... 6.30, 6.35, 31.165 Lansing Linde v Alber [2000] PLR 15 ....................................................................................... 28.185 Larnach v Alleyne (1862) 1 W & W (E) 342 .................................................................. 22.100, 24.95 Laserbem Pty Ltd v Gainsville Investments Pty Ltd [2004] VSC 62 ............................................. 12.75 Laskar v Laskar [2008] 1 WLR 2695 ............................................................................ 26.140, 38.240 Lassence v Tierney (1849) 1 Mac & G 551; 41 ER 1379 ............................................................ 26.20 Last v Rosenfeld [1972] 2 NSWLR 923 ...................................................................................... 18.30 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 ..................... 2.10, 2.105, 2.115, 35.65 Latimer v Commissioner of Inland Revenue [2002] 3 NZLR 195 ........... 26.35, 29.65, 29.215, 29.240 Latimer v Commissioner of Inland Revenue [2004] 1 WLR 1466 .................................. 29.65, 29.240 Latitude Fisheries Pty Ltd v Australian Fisheries Management Authority (2002) 68 ALD 365 ....................................................................................................................... 10.395 Lau Siew Kim v Yeo Guan Chye Terence [2008] 2 SLR(R) 108 ....................... 26.130, 26.135, 26.140 Laughton, Re [1962] Tas SR 300 ................................................................................ 39.100, 39.105 Lavelle v Lavelle [2004] EWCA Civ 223 ................................................................................... 26.145 Lavery v Pursell (1888) 39 Ch D 508 ....................................................................................... 33.120 Lavin v Toppi (2015) 254 CLR 459 ............................................................................. 14.130, 14.140 Law Guarantee Trust and Accident Society v Munich Re-​insurance Co [1912] 1 Ch 138 ........................................................................................................................... 23.170 Law Institute of Victoria v Commissioner of State Revenue (2015) 101 ATR 899 ...................... 29.285 Law Society of Upper Canada v Toronto-​Dominion Bank (1999) 169 DLR (4th) 353 ................................................................................................................ 39.65, 39.105 Law v Mo [2009] NSWSC 639 .................................................................................................. 7.135 Lawless v MacKendrick [2007] WASC 114 ................................................................................... 3.35 Lawn, Re Will of [1911] VLR 318 ............................................................................................... 17.15 Lawrence David Ltd v Ashton (1988) 20 IPR 244 ...................................................................... 6.215 Lawrence v Fen Tigers Ltd [2014] AC 822 ...................................................................... 34.85, 34.90 Lawrence v Morris (2002) 120 FCR 440 .................................................................................... 28.65 Lawrence v Poorah [2008] UKPC 21 ........................................................................................... 9.15 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 ............................................................ 38.160

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Table of Cases

Layton v Stewart [1994] ANZ Conv R 283 ................................................................................ 4.150 LCY Pty Ltd v Ma [2017] VSCA 383. ......................................................................................... 10.45 LDJ Investments Pty Ltd v Howard (1981) 3 BPR 9614 .............................................................. 34.80 Le Cren Clarke (deceased), Re [1996] 1 All ER 715 ..................................................... 29.190, 29.195 Le Neve v Le Neve (1747) Amb 436; 27 ER 291 .......................................................................... 8.45 Lea, Re (1887) 34 Ch D 528 ................................................................................................... 29.190 Leach v Ross [2013] QSC 333 ................................................................................................... 4.200 Leading Synthetics Pty Ltd v Adroit Insurance Group Pty Ltd [2011] VSC 467 ......................... 10.320 Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18,085 ........................................................................................... 11.10, 31.100, 31.165 Leaf v International Galleries (a firm) [1950] 2 KB 86 ................................................... 35.55, 35.100 Leahy v Attorney-​General (NSW) [1959] AC 457 ................ 17.160, 17.175, 29.245, 29.300, 29.305 Learoyd v Whiteley (1887) 12 App Cas 727 ................................................................... 22.20, 22.55 Leason Pty Ltd v Princes Farm Pty Ltd [1983] 2 NSWLR 381 ......................................... 35.60, 35.110 Leawell Pty Ltd v Watershed Premium Wines Ltd [2009] FCA 26 ............................................... 31.05 Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 .......................... 18.65, 18.70, 18.80 Lee, Re Estate of (1986) 84 FLR 268 ........................................................................................ 25.140 Lee v Chai [2013] QSC 136 ........................................................................................... 7.100, 7.115 Lee v Damesh Holdings Ltd [2003] 2 NZLR 422 ........................................................................ 7.190 Lee v Lee (1876) 4 Ch D 175 .................................................................................................. 18.115 Lee v Mavaddat [2007] WASC 18 ........................................................................................... 38.250 Lee v Sankey (1873) LR 15 Eq 204 ............................................................................................ 38.60 Lee v Torrey [2015] NZHC 2135 ............................................................................................. 22.125 Leedale v Lewis [1982] 1 WLR 1319 ........................................................................................ 20.150 Leeder v Stevens [2005] EWCA Civ 50 ............................................................................. 7.70, 7.100 Leeds and Hanley Theatres of Varieties Ltd, Re [1902] 2 Ch 809 ............................................. 17.100 Leeds v Industrial Co-​operative Society Ltd v Slack [1924] AC 851 .......................................... 34.115 Leek (deceased), Re [1967] Ch 1061 ....................................................................................... 16.190 Leek (deceased), Re [1969] 1 Ch 563 ...................................................................................... 16.190 Leerac Pty Ltd v Fay [2008] NSWSC 1082 .................................................................... 20.25, 24.150 Legal Practice Management (Vic) Pty Ltd (in liq) v Simms Corp Hotels & Leisure Pty Ltd [2013] VSC 734 ............................................................................................................... 1.70 Legg v Inner London Education Authority [1972] 3 All ER 177 ................................................ 31.155 Legione v Hateley (1983) 152 CLR 406 .......... 7.260, 8.190, 9.185, 10.110, 10.125, 10.145, 10.155, 10.175, 10.185, 10.220, 10.230, 11.15, 11.20, 11.25, 11.30, 13.10, 13.55, 33.145, 33.160, 38.155, P.150 Leibler v Air New Zealand Ltd (No 2) [1999] 1 VR 1 ....................................... 37.95, 37.105, 37.125 Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785 ..................................... 1.05, P.40 Leighton v Federal Commissioner of Taxation (2011) 84 ATR 547 ........................................... 27.130 Leighton v Parton [1976] 1 NZLR 165 ...................................................................................... 8.200 Leisure Co Pty Ltd v City of Bunbury [2006] WASC 209 ............................................................ 31.65 Lemann's Trusts, Re (1883) 22 Ch D 663 .................................................................................. 21.75 Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550 ............. 23.130 Lemnos v Lemnos (2007) 38 Fam LR 594 ............................................................................... 38.260 Lempens v Reid (2009) 2 ASTLR 373 ...................................................................................... 17.120 Lennard v Jessica Estates Pty Ltd (2008) 71 NSWLR 306 ............................................................ 31.70 Lennon v News Group Ltd [1978] FSR 573 ................................................................................. 6.95 Lennox v Cameron (1997) 8 BPR 15,939 ........................................................ 10.310, 33.30, 38.160 Lensen v Lensen (1984) 14 DLR (4th) 611 ..................................................................... 12.45, 12.50 Lepine, Re [1892] 1 Ch 210 .................................................................................................... 22.120 Lerinda Pty Ltd v Laertes Investments Pty Ltd [2010] 2 Qd R 312 .............................................. 14.10 Leslie Homes (Aust) Pty Ltd, Re (1984) 8 ACLR 1020 ................................................................ 36.40 Leslie v Midgate Center Inc (1967) 436 P 2d 201 ................................................................... 17.100 Lesser (deceased), Re [1947] VLR 366 ..................................................................................... 23.115

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Equity and Trusts in Australia

Lesser, Re [1954] VLR 435 ............................................................................................ 23.20, 23.115 Lester, Re [1942] Ch 324 ........................................................................................................ 16.170 Letterstedt v Broers (1884) 9 App Cas 371 ........................................... 21.75, 21.80, 21.105, 21.115 Levasseur v Mason and Barry [1891] 2 QB 73 ......................................................................... 36.130 Lever Brothers, Port Sunlight, Ltd v Sunniwite Products, Ltd (1949) 66 RPC 84 ....................... 34.140 Levermore v Levermore [1980] 1 All ER 1 ................................................................................ 36.130 Levin & Co Ltd, Re [1936] NZLR 558 ........................................................................................ 21.10 Levin v Ikiua [2010] 1 NZLR 400 ............................................................................................... 27.25 Levin v Ikiua [2011] 1 NZLR 678 ............................................................................................... 27.25 Levine, Re [1955] 3 All ER 35 .................................................................................................. 29.145 Levy v Bablis [2007] NSWSC 565 ................................................................................................ 4.20 Lewis, Re [1955] Ch 104 ......................................................................................................... 29.130 Lewis Securities Ltd (in liq) v Carter [2018] 355 ALR 703 .......................................................... 30.40 Lewis v Allenby (1870) LR 10 Eq 668 ...................................................................................... 20.120 Lewis v Cotton [2001] 2 NZLR 21 .............................................................................. 38.135, 38.140 Lewis v Great Western Railway Co (1877) 3 QBD 195 ............................................................... 24.95 Lewis v Lohse [2003] QCA 199 ................................................................................................. 20.85 Lewis v Nortex Pty Ltd (in liq) (2004) 214 ALR 634 ...................................................... 4.130, 30.175 Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 ......................................................... 24.65, 24.70 Lewski v Australian Securities and Investments Commission (2016) 246 FCR 200 ................... 28.255 Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446 ............................................................... 11.45 LGSS Pty Ltd v Egan [2002] NSWSC 1171 ................................................................. 28.150, 28.160 LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 .............................................. 35.65, 38.75, 38.115, 38.250 Liangis Investments Pty Ltd v Daplyn Pty Ltd (1994) 117 FLR 28 ............................................. 10.205 Libertarian Investments Ltd v Hall [2015] WTLR 241 ................................................................. 24.40 Liberty Financial Pty Ltd v Scott (No 3) (2004) 11 VR 621 ................................................ 6.70, 6.215 Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629 ................................................ 6.70, 6.215 Liberty International Underwriters v Salisbury Group Pty Ltd (in liq) (2014) 13 ASTLR 206 ...... 20.125 Liberty Trust v Charities Commission [2011] 3 NZLR 68 .......................................................... 29.190 Liddell's Settlement Trusts, Re [1936] 1 Ch 365 ...................................................................... 32.115 Lidden v Composite Buyers Ltd (1996) 139 ALR 549 ..................................................... 24.15, 24.20 Lieschke v Lieschke [2003] NSWSC 743 .................................................................................... 10.70 Life Association of Scotland v Siddal (1861) 3 De GF & J 58; 45 ER 800 .......... 24.160, 24.165, 38.60 Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520 ............................................................................................................. 12.25, 12.75 Lim v Permanent Trustee Co Ltd (unreported, SC(NSW), McLelland J, 26 March 1981) ............ 18.70 Lind, Re [1915] 2 Ch 345 ................................................................................... 3.105, 3.150, 17.75 Lindaning Pty Ltd (recs and mgrs apptd) v Goodlock [2011] QSC 266 .......................... 33.15, 33.20 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 ................................. 3.155 Linderstam v Barnett (1915) 19 CLR 528 .................................................................................... 7.55 Lindon v Commonwealth (No 2) (1996) 136 ALR 251 .............................................................. 37.30 Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 .................................................................... 30.10 Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1 ............................................................. 4.120 Linsley, Re [1904] 2 Ch 785 .................................................................................................... 23.160 Lintrose Nominees Pty Ltd v King [1995] 1 VR 574 ..................................................................... 4.70 Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd (2007) 62 ACSR 522 ....................................................................................................................... 33.60 Lipinski's Will Trusts, Re [1976] 1 Ch 235 ................................................................... 17.155, 17.170 Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 ................................................ 8.115, 39.10 Lipkin Gorman (a firm) v Karpnale Ltd [1992] 4 All ER 331 ........................................ 38.105, 38.125 Liptak v Commonwealth Bank of Australia [1999] ANZ Conv R 119 ................................. 7.05, 7.215 Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41–​436 ....................................... 9.20, 9.40 Lister & Co Ltd v Stubbs (1890) 45 Ch D 1 ............................................................................... 38.35 Little v Little (1988) 15 NSWLR 43 ............................................................................................ 26.75 xcvi

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Table of Cases

Littlewood, Re [1954] QWN 41 .............................................................................................. 23.175 Littlewoods Organisation Ltd v Harris [1978] 1 All ER 1026 ......................................................... 6.70 Litwin Construction (1973) Ltd v Pan (1988) 52 DLR (4th) 459 ................................................ 4.275 Liu v Adamson (2003) 12 BPR 22,205 ............................................................................ 7.235, 7.255 Liverpool & London & Globe Insurance Co Ltd v J W Deaves [1971] 2 NSWLR 131 .................. 37.20 Llandudno Urban District Council v Woods [1899] 2 Ch 705 .................................................. 31.150 Llewellyn v Derrick (1999) 33 ACSR 213 ................................................................................... 38.30 Lloyd (deceased), Re [1958] VR 523 .......................................................................... 29.145, 29.305 Lloyd, Re [1960] NZLR 947 ..................................................................................................... 26.135 Lloyd v Banks (1868) LR 3 Ch App 488 ............................................................................ 2.130, 3.70 Lloyd v Federal Commissioner of Taxation (1955) 93 CLR 645 ................................................ 29.245 Lloyd v Lloyd (1852) 2 Sim (NS) 255; 61 ER 338 ...................................................................... 19.60 Lloyd v Tedesco (2002) 25 WAR 360 ....................................................................................... 38.180 Lloyds Bank Ltd v Bundy [1975] 1 QB 326 ......................................................................... 7.35, 7.55 Lloyds Bank Pension Trust Corporation Ltd v Lloyds [1996] PLR 263 ....................................... 28.150 Lloyds Bank plc v Duker [1987] 3 All ER 193 ........................................................................... 25.150 Lloyds Bank plc v Rosset [1991] 1 AC 107 ............................................................................... 38.215 Lo Giudice v Biviano (No 2) [1962] VR 420 ............................................................................... 11.90 Loan Investment Corp of Australasia v Bonner [1970] NZLR 724 .................................... 33.05, 33.65 Lock International plc v Beswick [1989] 3 All ER 373 ........................................... 6.70, 6.315, 32.150 Lock v Commissioner of Taxation (2003) 129 FCR 1 ............................................................... 20.110 Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 .......................... 25.20, 28.150, 28.170 Locker's Settlement Trusts, Re [1977] 1 WLR 1323 .................................................................. 16.185 Lockwood v White (2005) 23 ACLC 379 ................................................................................... 1.105 Lodge v National Union Investment Co Ltd [1907] 1 Ch 300 ..................................37.165, P.70, P.75 Loftus (deceased), Re [2007] 1 WLR 591 ................................................................................... 30.35 Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 .......................................... 8.05, 8.35, 8.40 Lohia v Lohia [2001] EWCA Civ 1691 ........................................................................................ 26.55 Loizou v Derrimut Enterprise Pty Ltd [2004] VSC 176 ............................................................... 30.75 Lombardo v Bahnan [2014] VSC 410 ...................................................................................... 38.250 Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387 ................................. 16.105, 17.15, 23.170 Lomman, Re [1934] SASR 222 .................................................................................................. 29.25 London & County Banking v Ratcliffe (1881) 6 App Cas 722 ...................................................... 2.90 London and Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165 ............................................................................................................. 4.120 London, City of v Nash (1747) 1 Ves Sen 11; 27 ER 859 ......................................................... 33.130 London Hospital Medical College v Inland Revenue Commissioners [1976] 2 All ER 113 ......... 29.260 London Pressed Hinge, Re (1905) 74 LJ Ch 321 ........................................................................ 36.80 London Weekend Television Ltd v Paris and Griffith (1969) 113 Sol J 222 ............................... 37.115 London Wine Shippers, Re [1986] PCC 121 .............................................................................. 17.90 Londonderry's Settlement, Re [1965] Ch 918 ............................... 20.30, 20.45, 20.55, 20.60, 28.80 Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 .................................................... 3.125 Long v Specifier Publications Pty Ltd (1998) 44 NSWLR 545 ..................................... 32.140, 32.145, 32.150, 32.155, 32.160 Longhurst v Waite [1920] SALR 407 .......................................................................................... 22.10 Longley v Longley (1871) LR 13 Eq 133 .................................................................................... 26.25 Longtom Pty Ltd v Oberon Shire Council (1996) 7 BPR 14,799 ...................... 2.110, 33.130, 33.165 Longworth, Re [1965] NSWR 481 ........................................................................................... 23.110 Longworth v Allen [2005] SASC 469 ............................................................. 21.110, 21.115, 21.130 Lonsdale Sand and Metal Pty Ltd v Federal Commissioner of Taxation (1998) 162 ALR 220 .......................................................................................................................... 3.35 Lontav Pty Ltd v Pineross Custodial Services Pty Ltd (2011) V ConvR ¶54–​805 ........................ 11.105 Loone v Tasmanian Trustees Ltd [1987] Tas R 146 ................................................................... 38.215 Lopes, Re [1931] 2 Ch 130 ..................................................................................................... 29.145 Lopwell Pty Ltd v Clarke (2009) 3 BFRA 807 .................................................................... 7.155, 9.75 xcvii

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Equity and Trusts in Australia

Lord and Fullerton's Contract, Re [1896] 1 Ch 228 ................................................................... 21.90 Lord Ashburton v Lady Ashburton (1801) 6 Ves 6; 31 ER 910 ................................................... 25.25 Lord Ashburton v Pape [1913] 2 Ch 469 ................................................................................... 6.265 Lord Browne of Madingley v Associated Newspapers Ltd [2008] QB 103 .................................. 6.120 Lord Chesham, Re (1885) 31 Ch D 466 ..................................................................... 15.100, 15.105 Lord Dudley and Ward v Lady Dudley (1705) Prec Ch 241; 24 ER 118 ......................................... P.30 Lord, Ex parte [1985] 2 Qd R 198 ................................................................................ 1.100, 38.155 Lord Provost of Edinburgh v Lord Advocate (1879) 4 App Cas 823 ........................................... 39.90 Lord, Re [1910] VLR 477 ........................................................................................................... 17.20 Lord v Direct Acceptance Corporation Ltd (rec and mgr apptd) (in liq) (1993) 32 NSWLR 362 ....................................................................................................................... 30.105 Lord v Spinelly (1991) 4 WAR 158 .......................................................................................... 38.105 Lord Whiteley v Hilt [1918] 2 KB 808 ...................................................................................... 37.145 Lordsvale Finance plc v Bank of Zambia [1996] QB 752 ............................................................ 13.05 Lornho plc v Fayed (No 2) [1992] 1 WLR 1 ............................................................................... 35.65 Lory, Re (1996) 14 FRNZ 456 ................................................................................................... 18.45 Loughran v Loughran (1934) 292 US 216 ............................................................................... 30.175 Louth v Diprose (1992) 175 CLR 621 ..................................................................... 7.30, 7.75, 7.100, 9.05, 9.30, 9.65, 9.70 Lovell and Christmas Ltd v Wall (1911) 104 LT 85 .......................................................... 37.65, 37.95 Lovell, Re [1985] 1 Qd R 209 .................................................................................................. 17.185 Lovell v Lewandowski [1987] WAR 81 ..................................................................................... 31.175 Low Gim Siah v Low Geok Khim [2007] 1 SLR(R) 795 ............................................................. 26.155 Low v Bouverie [1891] 3 Ch 82 .............................................................................................. 10.115 Low v Perpetual Trustees WA Ltd (1995) 14 WAR 35 .................................................. 38.135, 38.145 Lowe v Harrington (1997) 21 Fam LR 583 ................................................................................ 8.200 Lowin (deceased), Re [1967] 2 NSWR 140 ...................................................... 29.95, 29.145, 29.380 Lowson v Coombes [1999] 2 WLR 720 ..................................................................................... 19.50 Lowther v Bentinck (1874) LR 19 Eq 166 ................................................................................ 23.115 Lowther v Kim [2003] 1 NZLR 327 ........................................................................................... 18.10 LRT Pension Fund Trustee Co Ltd v Hatt [1993] PLR 227 ............................................ 28.150, 28.190 Lucantonio v Ciofuli (2003) 11 BPR 21,181 ................................................................... 11.75, 11.80 Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268 ...................... 11.75 Lucas, Re [1922] 2 Ch 52 ........................................................................................................ 29.125 Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 ....................... 31.50, 31.100 Lucas v Harris (1886) 18 QBD 127 .......................................................................................... 36.115 Lucking's Will Trusts, Re [1968] 1 WLR 866 .................................................................. 22.55, 24.100 Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 50 ALJR 309 ............................................. 1.80 Luhan v Micallef [2017] VSC 246 ............................................................................................ 33.170 Luke v South Kensington Hotel Company (1879) 11 Ch D 121 ................................................ 22.65 Lumsden v Long (1998) 16 ACLC 1743 .................................................................................. 36.155 Lunn v Thornton (1845) 1 CB 379; 135 ER 587 ........................................................................ 3.105 Lushington (deceased), Re [1964] NZLR 161 ............................................................. 25.135, 29.315 Lutheran Church of Australia SA District Inc v Farmers' Co-​operative Executors and Trustees Ltd (1970) 121 CLR 628 ......................................................................... 16.190, 20.120, 23.30, 29.125 Luu v Sovereign Developments Ltd (2006) 12 BPR 23,629 .................................. 11.50, 11.60, 11.70 Lydon v Ryding [2002] WASC 308 ............................................................................... 12.25, 38.250 Lyell (deceased), Re [1977] 1 NZLR 713 .................................................................................... 25.45 Lyell v Kennedy (1889) 14 App Cas 437 ................................................................................... 38.60 Lyford v Commonwealth Bank of Australia (1995) 130 ALR 267 .................................................. 1.80 Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2005) 60 ATR 135 ..................................................................................... 1.10, 20.115, 20.155, 25.145

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Table of Cases

Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2007) 23 VR 474 .................................................................................................. 1.10, 20.115, 20.150, 20.155, 25.145 Lykogiannis v Retail Employees Superannuation Pty Ltd (2000) 61 ALD 197 ........................... 28.235 Lynch v Brisbane City Council (1961) 104 CLR 353 .................................................................. 31.05 Lysaght (deceased), Re [1966] 1 Ch 191 .................................................................... 29.315, 29.340 Lysaght v Edwards (1876) 2 Ch D 499 ......................................................................... 21.45, 38.155 Lysons v Commissioner of Stamp Duties [1945] NZLR 738 ..................................................... 29.225

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M M v M (2006) 203 FLR 122 ..................................................................................................... 28.135 Mabo v State of Queensland (No 2) (1992) 175 CLR 1 .................................... 4.30, 5.45, 5.50, 5.60 MacarthurCook Fund Management Ltd v TFML Ltd (2014) 254 CLR 168 ............................... 28.255 Macartney v Macartney [1909] VLR 183 ................................................................................... 22.55 Macary Manufacturing Pty Ltd v Chief Commissioner of Land Tax (1998) 39 ATR 255 .............. 18.10 Macaulay v O'Donnell [1943] 1 Ch 435 .................................................................................. 17.170 Macauley v Greater Paramount Theatres Ltd (1921) 22 SR (NSW) 66 ..................................... 33.105 Macclesfield Corporation v Great Central Railway [1911] 2 KB 528 ........................................... 14.20 Macdonald (deceased), Re [1951] NZLR 502 .......................................................................... 29.185 MacDonald v Frost [2009] WTLR 1815 ................................................................................... 10.120 MacDonald v MacDonald (No 2) [1956] QWN 25 .................................................................. 21.145 MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152 ......................................................... 37.65 Macduff, Re [1896] 2 Ch 451 ................................................................................................. 29.150 Macedonian Orthodox Community Church St Petka Inc (No 2), Re (2005) 63 NSWLR 441 .................................................................................................................. 23.170 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 ............................................................ 23.175, 23.180, 24.215 MacGregor, Re (1932) 32 SR (NSW) 483 ................................................................... 29.180, 29.185 Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 ............................... 20.45, 20.130, 23.70 Maciejewski v Telstra Super Pty Ltd (No 2) [1999] NSWSC 341 ............................................... 28.160 MacIntosh v Fortex Group Ltd [1997] 1 NZLR 711 ..................................................................... 4.30 Mackay v Wilson (1947) 47 SR (NSW) 315 .................................................................. 1.140, 38.160 Mackenzie (deceased), Re [1962] 2 All ER 890 ............................................................. 29.45, 29.145 Mackenzie v Coulson (1869) LR 8 Eq 368 ...................................................................... 37.65, 37.95 Mackintosh v Johnson (2013) 37 VR 301 .................................................................................... 9.70 Mackreth v Symmons (1808) 15 Ves 329; 33 ER 778 .................................................................. 1.95 Maclaine Watson & Co Ltd v International Tin Council [1988] Ch 1 ........................................ 36.135 Maclean Shire Council v Nungera Co-​operative Society Ltd (1994) 84 LGERA 139 .................. 29.240 MacLean v Arklow Investments Ltd [1998] 3 NZLR 680 ........................................... 4.40, 4.45, 4.55, 4.290, P.145 Macleay, Re (1875) LR 20 Eq 186 ............................................................................................. 19.75 MacMillan Bloedel Ltd v Simpson (1996) 109 CCC (3d) 259 .................................................... 31.45 MacPherson, Re [1913] SALR 207 ........................................................................................... 22.155 Macphillamy v Fox (1932) 32 SR (NSW) 427 .......................................................................... 22.225 Macquarie Bank Ltd v Sixty-​Fourth Throne Pty Ltd [1998] 3 VR 133 ............... 38.80, 38.105, 38.115 Macquarie Bank v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 .................................................................................................................... 10.30 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 15 BPR 28,563 ........................................................................................... 11.120 Macrae v Walsh (1927) 27 SR (NSW) 290 ............................................................................... 25.165 Madden v Kevereski [1983] 1 NSWLR 305 .............................................................................. 34.120

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Equity and Trusts in Australia

Maddison v Alderson (1883) 8 App Cas 467 ................................. 12.05, 12.15, 12.45, 12.60, 12.80 Maddock, Re [1902] 2 Ch 220 .................................................................................................. 18.70 Magadi Soda Co Ltd, Re (1925) 41 TLR 297 ............................................................................. 36.25 Magarey Farlam Lawyers Trust Accounts (No 3), Re (2007) 96 SASR 337 .................................................................................. 23.170, 23.180, 39.05, 39.50, 39.65, 39.95, 39.115 Magee v UDC Finance Ltd [1983] NZLR 438 .............................................................................. 3.65 Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 142 ALR 198 ........................... 31.190 Magna-​Alloys & Research Pty Ltd v Ten-​Haaf [1978] Tas SR 136 ................................................. 6.55 Maguire (deceased), Re [2010] 2 NZLR 845 ............................................................. 16.200, 16.205, 20.30, 20.35 Maguire v Makaronis (1997) 188 CLR 449 ................................................ 4.20, 4.145, 24.40, 34.10, 34.20, 34.25, 35.15, P.75 Maher v Millennium Markets Pty Ltd [2004] VSC 174 ........................................... 4.35, 4.160, 38.75 Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 .................................... 12.30, 12.75 Mahoney, Re [1918] VLR 580 ...................................................................................................... 8.75 Mahoney v McManus (1981) 55 ALJR 673 ............................ 14.70, 14.125, 14.140, 14.180, 14.185 Mahoney v Purnell [1996] 3 All ER 61 ....................................................................................... 7.285 Maiden v Maiden (1908) 7 CLR 727 .............................................................................. 12.60, 33.80 Mainbridge Industries Pty Ltd v Whitewood (1984) 73 FLR 117 ................................................ 6.175 Mainieri v Cirillo (2014) 47 VR 127 ......................................................................................... 38.270 Mainzeal Property and Construction Ltd v Facility Finance Ltd [2000] 3 NZLR 594 ................. 10.145 Mair (deceased), Re [1964] VR 529 ............................................................................ 29.225, 29.265 Makdessi v Cavendish Square Holdings BV [2014] BLR 246 ....................................................... 13.15 Makhoul v Barnes (1995) 60 FCR 572 ....................................................................................... 10.20 Makin v Gallagher [1974] 2 NSWLR 559 ................................................................................... 31.20 Malhotra v Choudhury [1979] 1 All ER 186 ............................................................................. 34.120 Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 .............. 4.295, 28.155 Mallett v Jones [1959] VR 122 ................................................................................................... 11.75 Mallory Technologies Pty Ltd v 3D Global Ltd [2002] NSWSC 1035 ........................... 10.145, 10.180 Mallott v Wilson [1903] 2 Ch 494 ................................................................................ 21.90, 25.125 Malone v Metropolitan Police Commissioner [1979] Ch 344 .................................................... 6.250 Malsbury v Malsbury [1982] 1 NSWLR 226 ............................................................................... 17.45 Management of the Bank of New Zealand Officers' Provident Association, Board of v Bank of New Zealand [1999] PLR 117 ................................................................... 28.150, 28.200 Manchester & Liverpool District Banking Co v Parkinson (1888) 22 QBD 173 ......................... 36.130 Manchester and Milford Railway Co, Re (1880) 14 Ch D 645 ........................................ 36.05, 36.15 Mander Pty Ltd v Clements (2005) 30 WAR 46 ............................................................ 37.65, 37.105 Mander v Evans [2001] 1 WLR 2378 ........................................................................................... 8.05 Manderson v Wright (No 2) [2018] VSC 162 ................................................................. 34.85, 34.95 Mandie v Memart Nominees Pty Ltd (2014) 42 VR 325 ................................................. 20.45, 20.60 Mandie v Memart Nominees Pty Ltd [2014] VSCA 181 .................................................. 20.45, 20.60 Manfred v Maddrell (1950) 51 SR (NSW) 95 ........................................................................... 25.150 Manglicmot v Commonwealth Bank Officers  ........................................................................... 28.80 Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2016] QCA 148 ...................................................... 3.35 Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd (2010) 239 FLR 159 .................................................................................................. 20.45, 28.80 Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd (2011) 282 ALR 167 ............................................................................................................ 28.80 Manifold Settlements, Re [1965] VR 197 ................................................................................. 25.125 Manisty's Settlement, Re [1974] Ch 17 ............................... 16.175, 16.180, 17.135, 20.120, 20.130 Manks v Whiteley [1911] 2 Ch 448 ......................................................................................... 14.225 Mann v Able Tours Pty Ltd [2010] WASCA 59 ............................................................................. 4.85 Mann v Capital Territory Health Commission (1982) 148 CLR 97 ............................................ 34.115 Manners, Re [1949] 1 Ch 613 ........................................................................................ 15.15, 15.30 c

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Table of Cases

Manning v Federal Commissioner of Taxation (1928) 40 CLR 506 ............................... 20.30, 27.130 Manor Electronics Ltd v Dickson [1988] RPC 618 .................................................................... 32.175 Manser, Re [1905] 1 Ch 58 ..................................................................................................... 29.175 Mansour v Mansour (2009) 24 VR 498 ................................................................................... 21.110 Manufacturers House Pty Ltd v Ashington No 147 Pty Ltd (2005) 12 BPR 23,913 ..................... 11.80 Manufacturers Mutual Insurance Ltd v Government Insurance Office (1993) 7 ANZ Ins Cases ¶61–​158 .................................................................................................... 30.40 Manukau City Council v Lawson [2001] 1 NZLR 599 .................................... 22.125, 22.165, 28.150 Maple Leaf Foods Inc v Markland Seafoods Inc (2007) 279 DLR (4th) 682 ................................ 36.75 Mara v Browne [1896] 1 Ch 199 ................................................................................. 38.55, 38.100 Marac Financial Services Ltd v Stewart [1993] 1 NZLR 86 ......................................................... 13.80 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 ........ 37.65, 37.90, 37.95, 37.105 Marathon Asset Management LLP v Seddon [2017] ICR 791 ..................................................... 4.285 Marcel v Commissioner of Police of the Metropolis [1992] Ch 225 ................................ 6.195, 6.200 March v March (1945) 62 WN (NSW) 111 ............................................................................. 26.125 Marchant v Morton, Down & Co [1901] 2 KB 829 ..................................................................... 3.70 Marchesi v Apostolou [2007] FCA 986 ............................................................ 1.140, 18.105, 38.160 Marcolongo v Chen (2011) 242 CLR 546 ............................................................................... 19.145 Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd's Rep 509 ..................................................................................................... 32.05, 32.15 Marginson v Potter (1976) 11 ALR 64 ..................................................................................... 23.130 Margulies v Margulies [2008] WTLR 1853 ................................................................................. 17.60 Mariconte v Batiste (2000) 48 NSWLR 724 ............................................................................... 36.85 Mariette, Re [1915] 2 Ch 284 ................................................................................................. 29.260 Maritime Electric Co Ltd v General Dairies Ltd [1937] 1 All ER 748 .......................................... 10.365 Maritime Union of Australia v Patrick Stevedores Operations Pty Ltd [1998] 4 VR 143 .................................................................................................................. 31.15, 31.45 Markham v Markham [2010] FamCA 460 ............................................................................... 19.155 Markle v Toronto (City) (2002) 213 DLR (4th) 362 ................................................................. 25.125 Marks v CCH Australia Ltd [1999] 3 VR 513 ............................................................................ 16.130 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 ............................................................ 8.95 Marley New Zealand Ltd v Icon Plastics Pty Ltd [2007] FCA 851 ............................................... 31.90 Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 ...................... 23.170 Marlow v Pitfield (1719) 1 P Wms 558; 24 ER 516 .................................................................. 14.120 Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404 ......................... 38.105 Marr v Collie [2017] 3 WLR 1507 ............................................................................................ 38.240 Mars UK Ltd v Teknowledge Ltd (1999) 46 IPR 248 .................................................................... 6.45 Marsden v Amalgamated Television Services Pty Ltd (unreported, CA(NSW), 2 May 1996) ...................................................................................................................... 31.180 Marsden's Trusts, Re (1859) 28 LJ Ch 906 .......................................................................... 8.65, 8.70 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 ................................................... 30.175, 38.110 Marshall, Re [1914] 1 Ch 192 ................................................................................................. 25.150 Martech Energy Systems Pty Ltd (in liq) v Bell [2005] VSC 198 ................................................. 26.75 Martin (deceased), Re [1968] NZLR 289 ................................................................................. 29.370 Martin, Re (1996) 62 FCR 438 .................................................................................................. 10.20 Martin v City of Edinburgh District Council [1988] SLT 329 .................................................... 22.205 Martin v Hayward [1908] SALR 187 ........................................................................................ 23.170 Martin v Martin (1959) 110 CLR 297 ........................................................................... 19.55, 26.100 Martindale Estate v Martindale (1998) 162 DLR (4th) 475 ........................................................ 38.05 Martyniuk v King [2000] VSC 319 ........................................................................................... 24.125 Marvon Pty Ltd v Yulara Development Co Ltd (1989) 98 FLR 348 ................. 10.270, 10.315, 10.385 Maryland Casualty Co v Pacific Coal and Oil Co (1941) 312 US 270 ......................................... 37.30 Mason (deceased), Re [1971] NZLR 714 ................................................................................. 29.155 Mason, Re [1954] QWN 60 .................................................................................................... 20.120 Mason v New South Wales (1959) 102 CLR 108 ......................................................................... 8.10 ci

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Equity and Trusts in Australia

Mason v Wagonga Local Aboriginal Land Council [2002] NSWSC 351 ...................... 10.220, 10.300 Masri v Consolidated Contractors International (UK) Ltd (No 2) [2009] QB 450 ........ 36.135, 36.145 Masterton Homes Pty Ltd v LED Builders Pty Ltd (1996) 33 IPR 417 .......................................... 30.10 Matai Industries Ltd v Jensen [1989] 1 NZLR 525 ................................................ 30.40, 36.15, 36.75 Matheson, Re (1994) 121 ALR 605 ................................................................. 21.125, 23.125, 27.75 Mathew (deceased), Re [1951] VLR 226 ................................................................................. 29.240 Mathieson Nominees Pty Ltd v Aero Developments Pty Ltd [2016] VSC 131 ............................. 1.155 Matthews v Clifton [2014] FCA 415 ................................................................................. 6.10, 6.175 Matthews v Doctrieve Corporation Pty Ltd (2003) 59 IPR 155 ................................................ 10.100 Matthews v Ruggles-​Brise [1911] 1 Ch 194 ................................................................. 23.140, 27.50 Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 .................................................................. 2.90 Mavaddat v HSBC Bank Australia Ltd (No 2) [2016] WASCA 94 ................................................ 7.235 Mavaddat v Lee (2007) 34 WAR 67 ............................................................................... 39.45, 39.75 Mavromates (deceased), Re [1964] VR 612 ............................................................................... 19.75 Mawson, Re [1939] 4 DLR 801 ............................................................................................... 15.105 Maxal Nominees Pty Ltd v Dalgety Ltd [1985] 1 Qd R 51 ............................................ 14.70, 14.130 Maxwell-​Smith v S & E Hall Pty Ltd (2014) 308 ALR 149 ........................................................... 4.155 Mayfair Trading Co Pty Ltd v Dreyer (1958) 100 CLR 428 ............................................ 37.05, 37.170 Mayne, Re (1928) 28 SR (NSW) 157 ................................................................... 17.20, 21.55, 21.85 Mayor of Sebastopol v Murray [1920] VLR 211 ....................................................................... 29.130 Mayor of Wolverhampton v Emmons [1901] 1 QB 515 ............................................................. 33.35 Mayson v Clouet [1924] AC 980 ............................................................................................... 11.20 Mazzuchelli v Mazzuchelli [2006] WASC 124 ................................................................. 1.130, 2.105 McAuliffe (deceased), Re [1944] St R Qd 167 ......................................................................... 17.170 McBride v Sandland (1918) 25 CLR 69 ......................................................................... 12.05, 12.15, 12.45, 12.50 MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 .......... 1.05, 16.65, P.40 McCallum v McCallum [2017] NZHC 1218 at [23]–​[29] per Woodhouse J. ............................... 21.55 McCathie v McCathie [1971] NZLR 58 ..................................................................................... 10.10 McCaughey v Commissioner of Stamp Duties (1946) 46 SR (NSW) 192 ................................. 16.205 McCaul v Fraser (1915) 34 NZLR 680 ..................................................................................... 24.170 McClaren v News Group Newspapers Ltd [2012] EMLR 33 ....................................................... 6.105 McClymont v Critchley [2011] NSWSC 493 .............................................................................. 4.240 McColl's Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365 .................. 24.65 McCormack v Stevens [1978] 2 NSWLR 517 ........................................................................... 29.325 McCormick v Grogan (1869) LR 4 HL 82 ...................................................... 8.35, 18.45, 18.60, P.90 McCracken v Attorney-​General [1995] 1 VR 67 ............................................. 17.115, 29.295, 29.305 McCraith v Fraser (1991) 6 ANZ Ins Cases ¶61–​061 ......................... 10.100, 10.235, 10.265, 10.290 McCready, Re (2004) 12 BPR 22,327 ...................................................................................... 21.140 McCutcheon, Re Will and Estate of [1960] VR 289 .................................................................. 22.140 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 .................................................... 1.100, 11.20 McDonald v Ellis (2007) 72 NSWLR 605 ............................................................. 20.30, 20.35, 20.45 McDonald v Hanselmann (1998) 144 FLR 463 ........................................................................ 19.135 McDonald v Isaac Construction Co Ltd [1995] 3 NZLR 612 .................................................... 38.155 McDonald's Australia Ltd v Bendigo and Adelaide Bank Ltd [2013] VSC 639 ............................. 37.75 McDonnell and East Ltd v McGregor (1936) 56 CLR 50 ............................................................ 30.90 McElroy Trust, Re [2002] 3 NZLR 99 .......................................................................... 29.310, 29.370 McElroy Trust, Re [2003] 2 NZLR 289 ........................................................................ 29.310, 29.370 McEnery, Re [1941] IR 323 ..................................................................................................... 29.155 McEvoy v Incat Tasmania Pty Ltd (2003) 46 ACSR 392 .............................................. 36.105, 36.155 McEwan v Crombie (1883) 25 Ch D 175 ................................................................................ 23.150 McEwen v Combined Coast Cranes Pty Ltd (2002) 44 ACSR 244 .............................................. 23.70 McFadden v Public Trustee for Victoria [1981] 1 NSWLR 15 .................................................... 17.120 McGarry v 14 Hiscock Street Pty Ltd [2012] VSC 573 ............................................. 1.65, 1.70, 1.155

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Table of Cases

McGaw, Re (1904) 4 SR (NSW) 591 ............................................................................. 22.80, 22.225 McGovern v Attorney-​General [1982] Ch 321 ........................................................................ 29.100 McGrath v Cohen [1978] 1 NSWLR 621 ................................................................................... 29.50 McHattan v Australian Specialised Vehicle Systems Pty Ltd (1996) 34 IPR 537 ......................... 31.105 McInerney v MacDonald (1992) 93 DLR (4th) 415 ................................................................... 4.300 McInnes, Re [1925] VLR 496 ..................................................................................................... 23.85 McIntosh (deceased), Re [1976] 1 NZLR 308 .......................................................................... 29.110 McIntosh v Dalwood (No 4) (1930) 30 SR (NSW) 415 ................................................... 33.15, 33.70 McIntyre v Perkes (1990) 22 FCR 260 ..................................................................................... 30.100 McIvor v Westpac Banking Corporation [2012] QSC 404 ...................................... 7.65, 7.130, 7.250 McKay v McKay [2008] NSWSC 177 ....................................................................................... 10.240 McKeagg v Cortland [2004] WASC 130 .................................................................................... 36.95 McKean's Caveat, Re [1988] 1 Qd R 524 ................................................................................... 2.120 McKee v Ballarat Trustees Executors and Agency Co Ltd [1910] VLR 358 ................................ 22.160 McKennitt v Ash [2008] QB 73 ...................................................................................... 6.120, 6.185 McKenzie v McDonald [1927] VLR 134 ............................................................... 4.180, 34.05, 34.55 McKenzie v Storer (2007) 1 ACTLR 183 .................................................................................. 38.165 McKeown v Byron (1903) 4 SR (NSW) 13 ............................................................................... 15.100 McKie v McKie (1898) 23 VLR 489 .......................................................................................... 26.150 McLaren v McLaren [2017] NZHC 161 ................................................................................... 22.125 McLauchlan v Prince [2002] WASC 274 .................................................................................... 21.80 McLean, Re [1930] VLR 85 ...................................................................................................... 16.180 McLean v Attorney-​General [2002] NSWSC 377 ........................................................ 29.145, 29.300 McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 ................................... 24.120, 27.55 McLean v Discount and Finance Ltd (1939) 64 CLR 312 ............................... 14.125, 14.140, 14.180 McLean v McKinlay [2004] WASC 2 .......................................................................................... 36.05 McLeish v Faure (1979) 25 ALR 403 .......................................................................................... 37.25 McMahon v Ambrose [1987] VR 817 ............................................ 12.25, 12.45, 12.75, 33.05, 34.75 McMahon v Cooper (1904) 4 SR (NSW) 433 .......................................................................... 24.200 McManus v Cooke (1887) 35 Ch D 681 ............................................................. 12.05, 12.60, 12.75 McMillan v Dunoon [2005] VSC 440 .......................................................................................... 1.65 McMillan v McMillan (1891) 17 VLR 33 .................................................................................... 22.45 McNab v Graham [2017] VSCA 352 ................................................................. 10.70, 38.10, 38.250 McNair Anderson Association Pty Ltd v Hinch [1985] VR 309 .................................................... 31.15 McNally (deceased), Re [1967] NZLR 521 ............................................................................... 22.100 McNamara v Commonwealth Trading Bank of Australia (1984) 37 SASR 232 ................................................................................................ 7.65, 14.180, 14.185 MCP Muswellbrook Pty Ltd v Deutsche Bank (Asia) AG (1988) 12 NSWLR 16 ......................... 31.165 MCP Pension Trustees Ltd v Aon Pension Trustees Ltd [2012] Ch 1 ......................................... 25.160 McPhail v Doulton [1971] AC 424 .................................................. 16.180, 16.185, 17.115, 17.120, 17.130, 17.135, 29.65 McPherson v Moiler (1920) 20 SR (NSW) 535 ............................................................................ 6.55 McPhillamy's Trusts, Re (1909) 10 SR (NSW) 42 .................................................. 21.10, 21.55, 21.80 McQuade v Morgan (1927) 39 CLR 222 ................................................................................. 27.115 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 ........................................ 8.160 McWilliam v McWilliams Wines Pty Ltd (1964) 114 CLR 656 ................................................... 38.155 Mecca, The [1897] AC 286 ..................................................................................................... 39.100 Mechenex Pacific Services Ltd v TCA Airconditioning (New Zealand) Ltd [1991] 2 NZLR 393 ......................................................................................................................... 8.180 Medforth v Blake [2000] Ch 86 ............................................................... 36.30, 36.50, 36.65, 36.70 Media Works NZ Ltd v Sky Television Ltd (2007) 74 IPR 205 ..................................................... 31.90 Media World Communications Ltd (Administrator Appointed) v Clark [2004] FCA 1609 ........... 32.55 Medrad Inc v Alpine Pty Ltd (2009) 82 IPR 101 ........................................................................ 31.90 Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 ..................................................... 24.105

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Equity and Trusts in Australia

Meek v Bennie [1940] NZLR 1 .................................................................................................. 22.40 Meerkin & Apel v Rossett Pty Ltd (No 2) [1999] 2 VR 31 ................................................ 4.325, 34.60 Meeseena v Carr (1870) LR 9 Eq 260 ........................................................................................ 22.65 Meftah v Lloyds TSB Bank plc [2001] 2 All ER (Comm) 741 ....................................................... 36.55 Mehmet v Benson (1963) 81 WN (Pt 1) (NSW) 188 ................................................................. 11.80 Mehmet v Benson (1965) 113 CLR 295 .......................................................... 11.80, 33.150, 33.160 Meinck, Re [1944] SASR 202 ................................................................................................... 22.155 Meinhard v Salmon (1928) 164 NE 545 ..................................................................................... 4.10 MEK Nominees Pty Ltd v Billboard Entertainments Pty Ltd (1993) V Conv R ¶54–​468 ............... 30.90 Melacare Industries of Australia Pty Ltd v Daley Investments Pty Ltd (1995) 9 BPR 17,079 .................................................................................. 11.10, 11.90, 11.105, 38.160 Melacare International Ltd (in receivership) v Daley Investments Pty Ltd (1999) 9 BPR 17,095 .......................................................................................................... 11.90, 11.105 Melbourne Anglican Trust Corporation v Attorney-​General [2005] VSC 481 ........................... 29.360 Melbourne, City of v Hamas Pty Ltd (1987) 62 LGRA 250 ....................................................... 31.110 Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161 ............................. 13.55 Melbourne Orthopaedic Group Pty Ltd v Stamford Aus-​Trade & Press Pty Ltd [2015] VSCA 150 .......................................................................................................................... 26.110 Melbourne Tramways Trust v Melbourne Tramway & Omnibus Co Ltd (1887) 13 VLR 487 .......................................................................................................................... 1.150 Mellody, Re [1918] 1 Ch 228 .................................................................................................. 29.260 Mellor v Mellor [1992] 4 All ER 10 .......................................................................................... 36.125 Melton, Re [1918] 1 Ch 37 ..................................................................................................... 25.150 Melverton v Commonwealth Development Bank of Australia (1989) ASC ¶55–​921 .................... 9.40 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1 .............................. 31.15, 31.65 Memory Corporation plc v Sidhu (No 2) [2000] 1 WLR 1443 ...................................... 30.175, 31.85 Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 .......... 21.05, 21.20, 21.80 Menelaou v Bank of Cyprus UK Ltd [2016] AC 176 ........................................................ 14.15, 14.95 Mengel's Will Trusts, Re [1962] Ch 791 ...................................................................... 15.100, 15.105 Mense v Milenkovic [1973] VR 784 .................................................................................. 6.25, 6.175 Mentech Resources Pty Ltd v MCG Resources Pty Ltd (in liq) (2012) 188 LGERA 140 .................. 2.60 MEPC Australia Ltd v Commonwealth [1973] 2 NSWLR 848 ..................................................... 22.65 Mercanti v Mercanti [2014] WASC 64 ....................................................................................... 20.35 Mercanti v Mercanti (2016) 50 WAR 495 .................................................................... 20.130, 21.55, 23.70, 25.10, 25.20 Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407 .......................................................................................................................... 2.90 Mercantile Credits Ltd v Jarden Morgan Australia Ltd (1990) 1 ACSR 805 ........................ 1.160, 2.15 Mercantile Mutual Insurance (Australia) Ltd v Farrington (1996) 44 NSWLR 634 ....................... 27.80 Mercantile Mutual Insurance (Australia) Ltd v QBE Workers Compensation (NSW) Ltd (2004) 61 NSWLR 655 ....................................................................................................... 14.190 Mercedes-​Benz AG v Leiduck [1996] AC 284 ........................................... 31.25, 32.05, 32.15, 32.35 Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450 .............................................. 24.20 Mercer, Ex parte (1886) 17 QBD 290 ...................................................................................... 19.140 Mercer Superannuation (Australia) Ltd v Billinghurst [2016] FCA 1274 ................................... 25.253 Mercer Superannuation (Australia) Ltd v Billinghurst (2017) 255 FCR 144 .............................. 28.235 Mercer v Petroleum Drilling Services (Australia) Pty Ltd (1985) 39 SASR 277 .......................... 14.210 Mercier Rouse Street Pty Ltd v Burness [2015] VSCA 8 ................................................. 16.15, 38.155 Mercier v Mercier [1903] 2 Ch 98 ........................................................................................... 26.125 Mergenthaler Linotype Company v Intertype Ltd (1926) 43 RPC 381 ..................................... 37.175 Merkel v Superannuation Complaints Tribunal [2010] FCA 564 .............................................. 28.235 Merriman v Perpetual Trustee Co Ltd (1896) 17 LR (NSW) Eq 325 .......................................... 22.225 Meshumar v Otmy [2018] NSWSC 125 ......................................................................... 12.50, 12.80 Messenger v Andrews (1828) 4 Russ 478; 38 ER 885 .............................................................. 16.160

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Table of Cases

Metal Manufacturers Ltd v Federal Commissioner of Taxation (1999) 43 ATR 375 .................. 19.150 Meth & Co (Australia) Pty Ltd v Commercial Banking Company of Sydney Ltd (1977–​78) ACLC ¶40–​302  ........................................................................... 2.125, 2.130, 16.115 Metlife Insurance Ltd v Visy Board Pty Ltd (2008) 15 ANZ Ins Cas ¶61–​750 ................... 37.70, 37.75 Metropolitan Petar v Mitreski [2001] NSWSC 976 .................................................................... 29.15 Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181 ................................................................................................. 10.150, 10.235, 10.280 Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 ................................ 23.50, 28.150, 28.155 Mexfield Housing Co-​operative Ltd v Berrisford [2011] Ch 244 ................................................ 1.165 Meyers, Re [1951] 1 Ch 534 ................................................................................................... 29.245 Meyers v Casey (1913) 17 CLR 90 .......................................................................................... 30.170 Meynert v Leafdale Pty Ltd [2005] WASC 102 ......................................................................... 16.205 MGM Bailey Enterprises v Austin Australia (2002) 20 ACLC 765 .............................................. 10.380 MI Design Pty Ltd v Dunecar Pty Ltd (2001) NSW ConvR ¶55–​969 ......................................... 11.120 Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 ..................................................................... 7.45, 7.165, 9.05, 9.35, 9.80, 9.85, 9.90, 9.110, 9.120, 9.155, 35.15, 35.25 Michael Malouf, Re [1934] QSR 82 ......................................................................................... 21.125 Michael v Callil (1945) 72 CLR 509 ......................................................................................... 22.155 Michael v Equity Trustees, Executors & Agency Co Ltd [1964] VR 688 .................................... 25.165 Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427 .................................................. 38.70 Michalopoulos v Perpetual Trustees Victoria Ltd [2010] NSWSC 1450 ....................................... 9.195 Michel's Trusts, Re (1860) 28 Beav 39; 54 ER 280 ................................................................... 29.155 Microsoft Corporation v Goodview Electronics Pty Ltd (1999) 46 IPR 159 .................. 32.155, 32.165 Midill (97PL) Ltd v Park Lane Estates Ltd [2009] 2 All ER 1067 .................................................. 11.75 Midland Bank plc v Cooke [1995] 4 All ER 562 ......................................................................... 26.75 Midland Bank plc v Massey [1995] 1 All ER 929 ........................................................................ 7.180 Midland Bank plc v Shephard [1988] 3 All ER 17 ........................................................................ 7.80 Midland Bank Trust Co Ltd v Green [1981] AC 513 ........................................................ 2.125, 2.130 Midleton's Will Trusts, Re [1969] 1 Ch 600 ................................................................................ 17.75 Mihalopous, Re (1956) 5 DLR (2d) 628 ..................................................................................... 18.65 Mikaelian v Commonwealth Scientific and Industrial Research Organisation (1999) 163 ALR 172 .......................................................................................................................... 8.95 Milankov, Marriage of (2002) 28 Fam LR 514 ......................................................................... 20.135 Milcap Publishing Group AB v Coranto Corporation Pty Ltd (1995) 32 IPR 34 ............... 31.80, 31.85 Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464 ........................................... 10.235, 10.305, 10.325, 10.345 Miles v Official Receiver in Bankruptcy (1963) 109 CLR 501 ....................................... 14.215, 14.240 Miles v Shell Company of Australia (1998) 156 ALR 133 ........................................................... 9.105 Millard v Lucas [1936] SASR 166 ............................................................................................. 26.150 Miller & Aldworth Ltd v Sharp [1899] 1 Ch 622 ....................................................................... 12.75 Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500 .......................... 10.45, 10.95 Miller Paving Ltd v B Gottardo Construction Ltd (2007) 86 OR (3d) 161 .................................. 8.190 Miller v Cameron (1936) 54 CLR 572 .............................................................. 21.75, 21.80, 21.105, 21.125, 21.130 Miller v Dudman (2002) DFC ¶95–​256 ................................................................................... 26.100 Miller v Evans [2010] WASC 127 ............................................................................................... 34.95 Miller v Jackson [1977] QB 966 ............................................................................................... 31.150 Miller v Miller (1995) 16 ACSR 73 ............................................................................................. 4.115 Miller v Sutherland (1990) 14 Fam LR 416 .............................................................................. 38.180 Miller v Thurgood (1864) 33 Beav 496; 55 ER 461 ................................................................. 15.115 Millett v Regent [1975] 1 NSWLR 62 .................................................................. 12.05, 12.15, 12.25 Milling v Hardie [2014] NSWCA 163 ........................................................................ 10.110, 10.170, 10.240, 10.245, 10.275

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Equity and Trusts in Australia

Mills (deceased), Re [1952] SASR 274 ........................................... 15.70, 15.75, 15.80, 15.85, 15.90 Mills (deceased), Re (1981) 27 SASR 200 ................................................................................ 29.155 Mills, Re [1934] VLR 158 ......................................................................................................... 29.330 Mills v Farmer (1815) 1 Mer 55; 35 ER 597 ............................................................................. 29.380 Mills v Haywood (1877) 6 Ch D 196 ......................................................................................... 30.50 Mills v Mills (1938) 60 CLR 150 ................................................................................................ 4.130 Mills v Mills [2015] WTLR 1631 ............................................................................................... 22.110 Mills v Ruthol Pty Ltd (2002) 10 BPR 19,381 ............................................................................. 2.110 Mills v Ruthol Pty Ltd (2004) 61 NSWLR 1 ................................................................... 34.75, 34.120 Mills v Sportsdirect.com Retail Ltd [2010] 2 BCLC 143 ............................................................. 33.60 Millstream Pty Ltd v Schultz [1980] 1 NSWLR 547 .................................................................... 34.75 Milne v James (1910) 13 CLR 168 ............................................................................................. 2.130 Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185 ................................................................... 18.90 Milward v Earl Thanet (1801) 5 Ves 720n ............................................................................... 33.175 Mimi v Millennium Developments Ltd (2004) V ConvR ¶54–​687 ................................................ 2.50 Minchin v Gabbett [1896] 1 IR 1 ............................................................................................ 15.105 Mincode Pty Ltd v ISA Pty Ltd (1996) 17 WAR 245 ................................................................. 37.115 Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2007] ANZ Conv R 123 ................................................ 11.95 Minehan v AGL Employees Superannuation Pty Ltd (1998) 134 ACTR 1 ................................... 23.40 Mineral Resources, Minister for v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 ...................................................................................................... 6.30, 6.155, 6.240, 6.250, 6.265, 6.320 Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 ..................................................... 31.145 Minister for Mineral Resources v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 ............................................................................... 6.155, 6.245, 6.255, 6.265, 6.320 Ministry of Defence v Ashman [1993] 2 EGLR 102 ....................................................................... P.60 Ministry of Health v Simpson [1951] AC 251 .................................................. 8.135, 24.130, 24.135 MINMXT Holdings Pty Ltd (in liq), Re [2017] NSWSC 156 ...................................................... 23.125 Minter v Minter (2000) 10 BPR 18,133 ...................................................................................... P.110 Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 6) [2015] QSC 116 ........................................... 3.35 Miorada v Miorada [2005] WASC 105 .......................................................... 21.120, 22.115, 23.160 Mir Bros Projects Pty Ltd v Lyons [1977] 2 NSWLR 192 .............................................. 14.225, 14.245 Mirvac (Docklands) Pty Ltd v La Rocca [2006] VSC 48 ................................................................ 9.45 Mirvac Homes (NSW) Pty Ltd v Airservices Australia (No 1) [2004] FCA 109 ............................. 37.15 Mirvac Ltd, Re (1999) 32 ACSR 107 ........................................................................................ 23.170 Misiaris v Saydels Pty Ltd (1989) NSW ConvR ¶55–​474 .......................................................... 37.125 Misner v Australian Capital Territory (2000) 146 ACTR 1 ................................... 37.75, 37.90, 37.100 Mitchell (deceased), Re (1913) 30 WN (NSW) 137 .................................................... 23.170, 23.175 Mitchell (deceased), Re [1955] VLR 120 ..................................................................... 22.120, 22.135 Mitchell v Hart (1914) 19 CLR 33 ........................................................................................... 22.165 Mitchell v Homfray (1891) 8 QBD 587 ....................................................................................... 7.55 Mitchell v Pacific Dawn Pty Ltd [2006] QSC 198 ......................................................................... 8.15 Mitchell v Saengjan (1994) 117 FLR 273 ................................................................................... 32.65 Mitchell's Trust Estate, Re (1879) 5 VLR (E) 42 ........................................................................... 21.80 Mitchner (deceased), Re [1922] QSR 39 .................................................................... 29.155, 29.175 Mitford v Reynolds (1848) 16 Sim 105; 60 ER 812 .................................................................. 17.150 Miwa Pty Ltd v Siantan Properties Pte Ltd (2011) 15 BPR 29,545 ............................................ 30.130 Miwa Pty Ltd v Siantan Properties Pty Ltd (2010) 15 BPR 28,621 ............................................ 30.130 MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 ......................................... 10.100 M(K) v M(H) (1992) 96 DLR (4th) 289 ........................................................................... 4.305, 30.15 MLW Technology Pty Ltd v May [2005] VSCA 29 ...................................................................... 30.25 Moate v Moate [1948] 2 All ER 486 ............................................................................. 26.80, 26.125 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 ................................................................................ 10.110, 10.190, 10.235, 10.280

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Table of Cases

Mobileworld Operating Pty Ltd v Telstra Corporation Ltd [2005] FCA 1365 .................................................................................................. 31.90, 31.100, 31.165 Modern Engineering (Bristol) Ltd v Gilbert-​Ash (Northern) Ltd [1974] AC 589 ........................ 30.130 Modern Transport Co Ltd v Duneric Steamship Co [1917] 1 KB 370 ....................................... 31.140 Moffat v Wetstein (1996) 135 DLR (4th) 298 .............................................................................. 4.10 Moffett v Dillon [1999] 2 VR 480 ..................................................................... 2.10, 2.15, 2.60, 2.65 Moffitt, Re (1910) 11 SR (NSW) 202 ......................................................................................... 23.85 Moggridge v Thackwell (1792) 1 Ves 464 ................................................................................. 15.70 Mohedo v Mohedo [2002] WASC 240 .......................................................... 10.230, 10.235, 38.270 Molestina v Ponton [2002] 1 Lloyd's Rep 271 ........................................................................... 35.25 Molloy v Commissioner of Inland Revenue [1981] 1 NZLR 688 ..................... 29.100, 29.220, 29.280 Moloney v Piachniarski (2004) 51 ACSR 564 .................................................................. 36.05, 36.95 Monds v Stackhouse (1948) 77 CLR 232 ..................................................................... 29.25, 29.265 Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 .............................................................................................................. 19.75 Money v Money (No 2) [1966] 1 NSWR 348 ................................................ 30.175, 37.155, 37.160 Money's Will Trusts, Re (1965) 109 Sol Jo 68 ............................................................................. 29.45 Monsanto Co v Stauffer Chemical Co (NZ) [1984] FSR 559 ...................................................... 30.55 Montagu v Earl of Sandwich (1886) 32 Ch D 525 ..................................................................... 15.55 Montagu's Settlement Trusts, Re [1987] Ch 264 ..................................................................... 38.105 Montaigne Pty Ltd v Nerana at Nicholson Pty Ltd [2004] VSC 116 ........................................... 1.150 Montgomerie's Brewery Co Ltd v Blyth (1901) 27 VLR 175 ..................................................... 24.205 Montgomery v Continental Bags (NZ) Ltd [1972] NZLR 884 .................................................. 35.110 Monty Financial Services Ltd v Delmo [1996] 1 VR 65 ......................... 16.200, 21.60, 21.80, 21.120 Moodemere Pty Ltd (in liq) v Waters [1988] VR 215 ........................................... 1.80, 36.25, 36.125 Moody v Cox and Hatt [1917] 2 Ch 71 .................................................................................. 30.175 Moody v Simpson (1895) 21 VLR 244 .................................................................................... 22.225 Moon v Australian Securities and Investments Commission (2002) 43 ACSR 125 .................... 36.115 Moon's Will Trusts, Re [1948] 1 All ER 300 .................................................... 29.185, 29.190, 29.340 Moore, Re (1888) 39 Ch D 116 ................................................................................................ 19.60 Moore, Re [1956] VLR 132 ........................................................................................... 22.90, 22.145 Moore, Re Will of (1896) 17 LR (NSW) B & P 78 ....................................................................... 22.90 Moore v Dimond (1929) 43 CLR 105 ........................................................................................ 1.165 Moore v Whyte (No 2) (1922) 22 SR (NSW) 570 ......................................................... 26.55, 26.125 Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 ........................................................ 10.80 Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 ......................................................... 10.60 Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 ..................... 4.270, 6.215 Moran (deceased), Re [1950] SASR 209 .................................................................................. 16.200 Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713 ...................................................................... 10.45 Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467 ........................................... 14.45, 14.145, 14.150, 14.180 Morgan v Hart [1914] 2 KB 183 ............................................................................................. 36.130 Morgan v Wellington City Corporation [1975] 1 NZLR 416 .................................................... 29.225 Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 ........................................................................ 14.05, 14.30, 14.35, 14.50, 14.55 Morice v Bishop of Durham (1804) 9 Ves 399; 32 ER 656 ...................... 17.95, 20.10, 29.10, 29.275 Morish, Re [1939] SASR 305 ............................................................ 23.105, 24.105, 24.165, 24.205 Morison v Mouat (1851) 9 Hare 241; 68 ER 492 ....................................................................... 6.255 Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) (1999) 34 ACSR 371 .......................................................................................................... 24.15, 24.180 Morlend Finance Corporation (Vic) Pty Ltd v Luke (1991) ASC ¶56–​095 ..................................... 9.35 Morley v Rennoldson (1843) 2 Hare 570; 67 ER 235 ................................................................. 19.60 Morling v Morling (1992) 16 Fam LR 161 ................................................................................. 26.10 Moroney, Re (1939) 39 SR (NSW) 249 .................................................................................... 29.185

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Equity and Trusts in Australia

Morrell v Morrell (1882) 7 PD 68 .............................................................................................. 37.80 Morris, Re [1971] P 62 .............................................................................................................. 37.80 Morris v Ford Motor Co Ltd [1973] 1 QB 792 ......................................... 14.05, 14.20, 14.30, 14.40, 14.50, 14.55, 14.70, 14.180 Morris v Hanley (2003) 173 FLR 83 ....................................................................... 4.30, 4.285, 4.290 Morris v Morris [1982] 1 NSWLR 61 ....................................................................................... 38.270 Morris v Morris (1993) 9 WAR 150 ..................................................................... 20.30, 20.55, 20.65 Morrison-​Conway, Re [2018] NSWSC 685 .............................................................................. 29.225 Morrison v Russo [2012] VSC 372 ........................................................................................... 23.175 Morse v Royal (1806) 12 Ves 355; 33 ER 134 ............................................................................ 22.95 Mort v Woolf [2002] VSC 503 ................................................................................................... 32.65 Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 .................................................................. 10.220, 10.230, 10.295, 10.310, 10.315, 10.320, 10.335, 10.340 Mortimer v Bailey [2005] 1 EGLR 75 ......................................................................................... 34.95 Mortlock v Buller (1804) 10 Ves 292; 32 ER 857 ....................................................................... 33.25 Mosley v News Group Newspapers Ltd [2008] EMLR 20 .................................................. 6.95, 6.295 Moss Steamship Co Ltd v Whinney [1912] AC 254 ................................................................. 36.105 Moss v Insurance Australia Ltd [2004] FCA 1636 ....................................................................... 9.115 Moss v Moss (1898) 19 LR (NSW) Eq 146 ................................................................................. 24.70 Moss v Moss (No 2) (1900) 21 LR (NSW) Eq 253 ........................................................................ 4.15 Motor Auction Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 138 FLR 118 ..................... 18.105 Motor Terms Co Pty Ltd v Liberty Insurance Ltd (in liq) (1967) 116 CLR 177 ............................ 30.40 Motor Vehicle Dealers Inst Inc v UDC Finance (1991) [1994] 1 NZLR 659 ................................. 21.45 Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd (2014) 290 FLR 285 ....................... 24.150 Motorola Credit Corp v Uzan (No 2) [2004] 1 WLR 113 ......................................................... 32.120 Mouat v Clark Boyce [1992] 2 NZLR 559 .................................................................................. 34.50 Mould v Canale [2017] VSC] .......................................................................... 10.70, 10.270, 38.250 Moulton v Roberts [1977] Qd R 135 ....................................................................................... 14.140 Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 ............................................................................................ 3.35, 3.60, 3.120, 3.135 Mountney v Treharne [2003] Ch 135 ........................................................................................ 1.140 Moyes v J & L Developments Pty Ltd (No 2) (2007) 250 LSJS 61 ............................................ 23.155 Mraz v The Queen (No 2) (1956) 96 CLR 62 ............................................................................ 10.20 MSP Nominees Pty Ltd v Commissioner of Stamps (1996) 34 ATR 360 ..................................... 27.50 MSP Nominees Pty Ltd v Commissioner of Stamps (South Australia) (1999) 198 CLR 494 ..................................................................................................................... 20.125 MTM Funds Management Ltd v Cavalane Holdings Pty Ltd (2000) 35 ACSR 440 ........................................................................................................ 23.170, 23.180 Muckleston v Brown (1801) 6 Ves 52; 31 ER 934 ...................................................................... 19.20 Muir v Archdall (1918) 19 SR (NSW) 10 .................................................................................. 17.150 Muir v City of Glasgow Bank and Liquidators (1879) 4 App Cas 337 ......................................... 27.25 Muir v Open Brethren (1956) 96 CLR 166 ................................................................. 29.120, 29.240 Mulcahy (deceased), Re [1969] VR 545 ................................................................................... 29.315 Mulkearns v Chandos Developments Pty Ltd (2003) 11 BPR 21,277 ......................................... 11.05 Mulkearns v Chandos Developments Pty Ltd (No 3) (2005) 12 BPR 22,985 .............................. 11.45 Mulkearns v Chandos Developments Pty Ltd (No 4) (2005) 12 BPR 22,993 ........ 11.45, 11.75, 11.80 Mullen v De Bry (2006) 36 Fam LR 454 .................................................................................... 32.60 Mulleneux v Brennan [2002] WASC 43 ..................................................................................... 24.70 Mulligan (deceased), Re [1998] 1 NZLR 481 .......................... 22.20, 22.45, 22.120, 22.195, 22.215, 22.220, 23.160, 24.30, 24.215, 28.120 Mumford v Stohwasser (1874) LR 18 Eq 556 ................................................................. 2.100, 2.130 Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 .................................................... 8.90 Munt v Beasley [2006] EWCA Civ 370 .................................................................................... 37.100 Murad v Al-​Saraj [2005] WTLR 1573 ....................................................................... 4.35, 4.90, 34.25 cviii

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Table of Cases

Murdoch v Attorney-​General (Tas) (1992) 1 Tas R 117 ................................................. 29.10, 29.220 Muriti v Prendergast [2005] NSWSC 281 .......................................................... 37.65, 37.95, 37.100 Murphy v Abi-​Saab (1995) 37 NSWLR 280 ............................................................................... 10.20 Murphy v Burrows [2004] EWHC 1900 ................................................................................... 10.340 Murphy v Murphy [1999] 1 WLR 282 ................................................................. 20.30, 20.40, 20.55 Murphy v Overton Investments Pty Ltd (2001) 182 ALR 138 .................................... 10.110, 10.310, 10.330, 10.350 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 ........................... 8.95, 10.110, 10.285, 10.310, 10.330, 10.350 Murphy v Wright (1992) 5 BPR 11,734 ....................................................................................... 1.65 Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 557 ................................................................ 30.110 Murray v Schreuder (2009) 1 ASTLR 340 .................................................................................. 20.35 Murray v Yorkshire Fund Managers Ltd [1998] 1 WLR 951 ........................................................ 6.210 Murray's Trusts, Re [1967] NZLR 341 ........................................................................................ 25.50 Murtagh v Murtagh [2013] NSWSC 926 ................................................................................... 26.75 Muscat v Smith [2003] 1 WLR 2853 .......................................................................... 30.105, 30.110 Muschinski v Dodds (1985) 160 CLR 583 ................. 1.130, 8.190, 14.125, 14.150, 14.170, 16.160, 26.45, 26.60, 26.85, 26.100, 26.105, 38.10, 38.175, 38.195, 38.210, 38.255, 38.270, P.170 Mussoorie Bank, Ltd v Raynor (1882) 7 App Cas 321 ................................................................ 17.20 Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 .............................................................. 10.285 Mutton v Peat [1899] 2 Ch 556 .............................................................................................. 39.100 Mutual Finance Ltd v John Wetton & Sons Ltd [1937] 2 KB 389 ................................................. 8.15 My Kinda Town Ltd v Soll [1982] FSR 147 .............................................................................. 34.140 Myers v Smith (1992) 5 BPR 11,494 ......................................................................................... 2.130

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N N A Kratzmann Pty Ltd v Tucker (No 1) (1969) 123 CLR 257 .................................................. 19.110 N B Hunt & Sons Ltd v Maori Trustee [1986] 2 NZLR 641 ............................................ 10.40, 10.165 N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 ............................... 6.55, 6.65, 6.230, 6.235 Nadinic v Drinkwater (2017) 94 NSWLR 518 ............................................................................ 35.15 Nanwa Goldmines Ltd, Re [1955] 1 WLR 1080 ......................................................................... 27.65 Napier v Hunter [1993] AC 713 ............................................................... 14.05, 14.40, 14.45, 14.55 Napier v Public Trustee (WA) (1980) 32 ALR 153 ................................. 26.55, 26.60, 26.115, 26.130 Narain v Euroasia (Pacific) Pty Ltd (2009) 26 VR 387 ................................................................. 7.245 Nardell Coal Corporation (in liq) v Hunter Valley Coal Processing (2003) 178 FLR 400 .............. 36.35 Narumon Pty Ltd, Re [2018] QSC 185. ................................................................................... 28.160 Nash v Barnes [1922] NZLR 303 ................................................................................ 37.140, 37.150 Nasr v Vihervaara (2005) 91 SASR 222 ...................................................................................... 4.155 Nassif v Caminer (2009) 74 NSWLR 276 ................................................................................... 11.75 Nathan, Re [1938] VLR 72 ...................................................................................................... 23.115 Nathan v Dollars & Sense Finance Ltd [2007] 2 NZLR 747 ........................................................ 7.165 Nathan v Leonard [2003] 1 WLR 827 ...................................................................................... 16.160 National Anti-​Vivisection Society v Inland Revenue Commissioners [1948] AC 31 ........................................................................................................ 29.60, 29.100, 29.215 National Australia Bank Ltd v Blacker (2000) 104 FCR 288 ........................................................ 32.80 National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 ............................................................... 31.25, 31.40, 31.85, 31.130, 31.135, 32.125, 36.90, 36.110, 36.115, 36.120, P.75, P.170, P.175 National Australia Bank Ltd v Clowes [2013] NSWCA 179 ........................................................... 1.75 National Australia Bank Ltd v Dessau [1988] VR 521 .................................................... 32.30, 32.115 National Australia Bank Ltd v Garcia (1996) 39 NSWLR 577 ............................................. 7.255, 9.20 National Australia Bank Ltd v Golden Sea Dragon (Hobart) Pty Ltd (1992) 4 Tas R 250 .................................................................................................... 31.80, 32.20, 32.50 cix Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:14.

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Equity and Trusts in Australia

National Australia Bank Ltd v Idoport Pty Ltd [1999] NSWSC 964 ............................................. 31.85 National Australia Bank Ltd v Maher [1995] 1 VR 318 ............................................................. 38.270 National Australia Bank Ltd v Nobile (1988) 100 ALR 227 ....................................... 9.40, 9.90, 9.100 National Australia Bank Ltd v Rusu [2001] NSWSC 32 .................................................. 38.75, 38.120 National Australia Bank Ltd v Satchithanantham [2009] NSWSC 21 .......................................... 7.240 National Australia Bank Ltd v Savage [2013] NSWSC 1718 ............................................ 7.220, 7.245 National Australia Bank Ltd v Starbronze Pty Ltd (2001) V ConvR ¶54–​640 ............................... 7.255 National Australia Bank Ltd v Wehbeh [2014] VSC 431 ............................................................. 7.235 National Bank of New Zealand Ltd v Murland [1991] 3 NZLR 86 .............................................. 8.180 National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1997] 1 NZLR 724 ......................................................................................................................... 8.140 National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211 ......................................................................................................................... 8.140 National Commercial Bank (Jamaica) Ltd v Hew [2003] UKPC 51 ........................... 7.05, 7.10, 7.280 National Commercial Bank Jamaica Ltd v Olint Corporation Ltd [2009] 1 WLR 1405 ............................................................................................................ 31.90, 31.145 National Crime Agency v Robb [2015] Ch 520 ......................................................................... 35.65 National Crime Agency v Szepietowski [2014] AC 338 ............................................... 14.215, 14.240 National Education Advancement Programs (NEAP) Pty Ltd v Ashton (1995) 128 FLR 334 ........................................................................................................................ 6.175 National Grid Co plc v Laws [1997] PLR 174 ........................................................................... 28.150 National Grid Co plc v Mayes [1997] PLR 157 ........................................................................ 28.155 National Grid Co plc v Mayes [2001] 1 WLR 864 .......................................... 28.150, 28.155, 28.200 National Mutual Holdings Pty Ltd v Sentry Corp (1989) 87 ALR 539 ....................................... 31.195 National Mutual Life Association of Australasia Ltd v GTV Corporation Pty Ltd [1989] VR 747 ............................................................................................................. 31.180 National Mutual Life Association of Australia Ltd v Campbell (2000) 99 FCR 562 .................... 28.165 National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 37 FLR 404 ...................................................................................................... 3.35, 3.125 National Provincial and Union Bank of England v Charnley [1924] 1 KB 431 ............................... 1.65 National Roads and Motorists' Association Ltd v Geeson (2001) 40 ACSR 1 ................................ 6.80 National Tourism Development Authority v Coughlan [2009] 3 IR 549 ................................... 29.235 National Trust of Australia v Minister for Lands, Planning and Environment (1997) 142 FLR 125 ...................................................................................................................... 31.135 National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373 .............................................................................................. 24.165, 24.205, 24.210, 24.215 National Trustees Executors & Agency Co of Australasia Ltd v Biffin [1940] VLR 395 .................................................................................................................. 24.175, 38.55 National Trustees Executors & Agency Co of Australasia Ltd v Fenn [1924] SASR 470 .............................................................................................................. 26.110, 26.135 National Trustees Executors & Agency Co of Australasia Ltd v Trainor [1974] VR 49 ................ 16.175 National Trustees, Executors & Agency Co of Australia v McGuigan (1900) 28 VLR 273 ............ 23.90 National Trustees Executors and Agency Co Ltd v Johnson (1892) 18 VLR 386 ......................... 23.95 National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 ....................................................................................................................... 23.120 National Trustees Executors and Agency Co of Australasia v Federal Commissioner of Taxation (1954) 91 CLR 540 .................................................................................................. 1.05 National Trustees Executors and Agency Co of Australia Ltd v Dwyer (1940) 63 CLR 1 .............. 22.10 National Westminster Bank plc v Breeds (2001) 151 NLJ Rep 170 ............................................. 7.200 National Westminster Bank plc v Lucas [2014] WTLR 637 ....................................................... 21.115 National Westminster Bank plc v Morgan [1985] 1 AC 686 ..................................... 7.35, 7.80, 7.150 National Westminster Bank plc v Somer International (UK) Ltd [2002] QB 1286 .......... 8.120, 10.100 National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548n .......................................................................................................... 10.45, 10.310

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Table of Cases

Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (No 2) (1986) 5 NSWLR 227 ......................................................................................................... 1.105, 36.125 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 .................................................................... 5.05 Nattrass v Nattrass [1999] WASC 77 .............................................................................. 4.325, 34.60 Natural Extracts Pty Ltd v Shotter (1997) 24 ACSR 110 .................................................... 4.95, 38.30 Naumovski v Naumovski [2015] NSWSC 2 .................................................................. 1.130, 38.250 Navy Health Ltd v Deputy Commissioner of Taxation (2007) 163 FCR 1 .................... 29.245, 29.280 Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 207 FCR 502 ..................................... 2.90, 14.225 ND v BM (2003) 31 Fam LR 22 ............................................................................................... 10.365 Neagle v Rimmington [2002] 3 NZLR 826 ................................................................... 23.75, 23.170 Neal, Re (1993) 114 ALR 659 ........................................................................ 10.235, 10.275, 10.295 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 8 WAR 183 ........................................ 32.60 Neazor v Hoyle (1962) 32 DLR (2d) 131 ................................................................................. 26.145 Neeve, Re [1956] QWN 21 ....................................................................................................... 21.80 Neill v Public Trustee [1978] 2 NSWLR 65 .................................................................. 16.190, 20.155 Nelan v Downes (1917) 23 CLR 546 .................................................. 29.25, 29.170, 29.195, 29.200 Nelson, Re [1928] Ch 920n .................................................................................................... 27.115 Nelson v Bellamy (2000) 10 BPR 19,011 ................................................................................... 11.75 Nelson v Nelson (1995) 184 CLR 538 .................................... 19.40, 19.45, 26.135, 26.140, 26.155, 26.160, 30.175, P.70, P.75, P.190 Nemesis Australia Pty Ltd v Commissioner of Taxation (2005) 150 FCR 152 ........ 19.80, 19.85, 20.75 Neste Oy v Lloyds Bank plc [1983] 2 Lloyd's Rep 658 ............................................................. 38.125 Nestle v National Westminster Bank plc [1993] 1 WLR 1260 ........................... 22.20, 22.215, 28.120 Netline Pty Ltd v QAV Pty Ltd (No 2) [2015] WASC 113 ........................................................... 33.80 Network Finances Ltd v Deposit and Investment Co Ltd [1972] QWN 10 ................................... 2.90 Network Foods International Pty Ltd v Cadbury Schweppes Pty Ltd (1988) 83 ALR 134 .......... 31.145 Neville Estates Ltd v Madden [1962] Ch 832 ................................................ 17.170, 29.170, 29.195 Neville Jeffress Advertising Pty Ltd v Barlow (No 2) (unreported, SC(Tas), Zeeman J, 15 October 1993) .............................................................................................................. 31.190 Neville v Wilson [1997] Ch 144 ................................................................................................ 18.25 Nevin v Beneficiaries of the Peppermint Beach Estate Trust [2002] WASC 300 .......................... 24.45 New Brunswick & Canada Railway & Land Co v Muggeridge (1859) 4 Drew 686; 62 ER 263 ...................................................................................................... 33.120 New Cap Reinsurance Corporation Ltd v General Cologne Re Australia Ltd [2004] NSWSC 781 ......................................................................................................................... 38.80 New Galaxy Investments Pty Ltd v Thomson (2017) 18 BPR 36,811 ......................................... 1.100 New, Re [1901] 2 Ch 534 ......................................................................................................... 25.25 New South Wales Nursing Service and Welfare Association for Christian Scientists v Willoughby Municipal Council [1968] NSWR 791 .............................................................. 29.125 New South Wales Women's Aboriginal Corporation (in liq) v Commissioner of Dormant Funds (2004) 12 BPR 22,381 .............................................................................. 29.350 New York Taxicab Co, Re [1913] 1 Ch 1 ................................................................................... 36.80 New Zealand Baking Trades Employees' Industrial Union v General Foods Corp (NZ) Ltd [1985] 2 NZLR 110 ........................................................................................................ 31.95 New Zealand Computer Society Inc, Re (2011) 25 NZTC 20-​033 ........................................... 29.285 New Zealand Factors Ltd v Farmers Trading Co Ltd [1992] 3 NZLR 703 .................................. 30.130 New Zealand Guardian Trust Company Ltd v Presbyterian Support [2015] NZAR 922 ............ 29.370 New Zealand Insurance Co Ltd v Prudential Assurance Co Ltd [1976] 1 NZLR 84 ..................... 37.10 New Zealand Loan and Mercantile Agency Co (Ltd) v Loach (1912) 31 NZLR 292 ........................................................................................................ 14.220, 14.245 New Zealand Mäori Council v Attorney-​General [1987] 1 NZLR 641 .......................................... 5.55 New Zealand Mäori Council v Attorney-​General [2008] 1 NZLR 318 ................................. 5.45, 5.55 New Zealand Maori Council v Foulkes [2016] 2 NZLR 337 ....................................................... 21.55 New Zealand Midland Railway Co, Re (1897) 13 TLR 212 ......................................................... 36.90

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Equity and Trusts in Australia

New Zealand Mortgage Guarantee Co Ltd v Wellington Newspapers Ltd [1989] 1 NZLR 4 ........................................................................................................................... 31.175 New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 2 All ER 1222 .............................. 4.20 New Zealand Payroll Software Systems Ltd v Advanced Management Systems Ltd [2003] 3 NZLR 1 .................................................................................................................. 3.155 New Zealand Pelt Export Company Ltd v Trade Indemnity New Zealand Ltd (2004) 13 ANZ Ins Cas ¶61–​626 ...................................................................................... 10.155, 10.320 New Zealand Society of Accountants v ANZ Banking Group (New Zealand) Ltd [1996] 1 NZLR 283 .............................................................................................................. 14.60 New Zealand Society of Accountants v Commissioner of Inland Revenue [1986] 1 NZLR 147 ................................................................................................. 29.60, 29.90, 29.215 Newbigging v Adam (1886) 34 Ch D 582 ..................................................................... 35.05, 35.50 Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 ......................... 10.40, 10.220 Newby v Harrison (1861) 3 De GF & J 287; 45 ER 889 ........................................................... 31.130 Newcastle Airport Pty Ltd v Chief Commissioner of State Revenue (2014) 99 ATR 748 ........................................................................................................... 23.125, 23.130 Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 .................. 2.140, 26.55, 26.110 Newey (deceased), Re [1994] 2 NZLR 590 .............................................................................. 38.135 Newjur Pty Ltd v Pangas (1993) 17 Fam LR 245 ................................................................ 7.80, 7.90 Newjur Pty Ltd v Pangas (1997) 140 FLR 194 ......................................................................... 19.155 Newman v Clarke [2017] 4 WLR 26 ............................................................................. 22.65, 22.105 Newman v Newman (1885) 28 Ch D 674 ................................................................................ 2.130 Newman v Phillips Fox (1999) 21 WAR 309 .............................................................................. 4.155 Newport Association Football Club Ltd v Football Association of Wales Ltd [1995] 2 All ER 87 ......................................................................................................................... 31.155 News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 ................... 4.30, 4.70, 4.230 Newton, Re (1936) 53 WN (NSW) 117 ................................................................................... 21.140 Nexus Mortgage Securities Pty Ltd v Ecto Pty Ltd [1998] 4 VR 220 ........................................... 31.15 Neylon v Dickens [1987] 1 NZLR 402 ........................................................................... 30.10, 34.80, 34.115, 34.120 Ng v Ashley King (Developments) Ltd [2011] Ch 115 .................................................... 11.50, 13.60 Nguyen v Scheiff (2003) DFC ¶95–​726 ................................................................................... 26.125 Niak v Macdonald [2001] 3 NZLR 334 ........................................................................... 22.45, 22.60 Nicholas' Trusts, Re (1986) 85 FLR 188 ...................................................................... 16.175, 23.175 Nicholas v Equity Trustees & Executors Agency Co Ltd (SC(Vic), Harper J, 27 March 1996, unreported) ............................................................................................... 25.65 Nicholas v Thompson [1924] VLR 554 ........................................................................................ 8.90 Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383 .................................................... 4.95 Nicholls v Nelson [2006] NSWSC 813 ............................................................................ 21.20, 21.80 Nichols v Jessup [1985] ANZ Conv R 246 ................................................................................... 9.40 Nichols v Jessup [1986] 1 NZLR 226 ................................................................................ 9.40, 9.125 Nichols v Jessup (No 2) [1986] 1 NZLR 237 ................................................................................ 9.55 Nichols v Nichols (1986) 4 BPR 9240 ...................................................................................... 38.175 Nicholson Street Pty Ltd (recs & mgrs apptd) (in liq) v Letten [2016] VSCA 157 ....................... 24.10 Nichrotherm Electrical v Percy [1956] RPC 272 ......................................................................... 6.235 Nick Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd (2001) 38 ACSR 57 ............ 24.140 Nicoll v Cutts [1985] BCLC 322 ................................................................................................ 36.35 Nigel Watts Fashion Agencies Pty Ltd v GIO General Ltd (1995) 8 ANZ Ins Cases ¶61–​235 ..................................................................................... 10.165, 10.295 Nilant, Ex parte (2004) 28 WAR 81 ......................................................................................... 23.170 NIML Ltd v Man Financial Australia Ltd [2004] VSC 449 ......................................................... 38.120 Ninemia Maritime Corporation v Trave Schiffahrtgesellschaft mbH Und Co KG [1983] 1 WLR 1412 ......................................................................................................................... 32.45 Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 ....................... 24.60, 24.70

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Table of Cases

Nintendo Co Ltd v Care (2000) 52 IPR 34 ............................................................................... 31.155 Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985 ........................ 8.120, 8.130 Nishi v Rascal Trucking Ltd [2013] 2 SCR 438 ......................................................................... 26.100 Nissen v Grunden (1912) 14 CLR 297 .......................................................................... 21.120, 22.90 Nixon v Furphy (1926) 26 SR (NSW) 409 ...................................................................... 24.60, 24.65 Niyazi's Will Trusts, Re [1978] 1 WLR 910 ................................................................................ 29.120 No 68 Ltd v Eastern Services Ltd [2006] 2 NZLR 43 ................................ 30.10, 30.15, 30.20, 30.40, 30.50, 30.80, 33.175 Noack v Noack [1959] VR 137 ................................................................................................ 26.140 Noakes v J Harvy Holmes & Son (1979) 26 ALR 297 ............................................................... 19.145 Noble v Meynott (1851) 14 Beav 471; 51 ER 367 ..................................................................... 24.10 Nocton v Lord Ashburton [1914] AC 932 .............................................8.05, 8.90, 34.05P.155, P.155 Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 ................................................. 3.40 Nolan v Collie (2003) 7 VR 287 ................................................................................. 23.130, 23.135 Nolan v Nolan (2003) 10 VR 626 ................................................................................. 18.105, 24.15 Nolan v Nolan [2004] VSCA 109 ............................................................................................ 24.195 Nolan v Nolan [2014] QSC 218 .............................................................................................. 10.135 Nolan v Nolan [2015] QCA 199 .............................................................................................. 38.205 Noon v Bondi Beach Astra Retirement Village Pty Ltd (2010) 15 BPR 28,221 .......................... 10.205 Noordennen v Rofe [2006] VSCA 253 ..................................................................................... 38.230 Noosa Shire Council v T M Burke Estates Pty Ltd [2000] 1 Qd R 398 ......................................... 37.25 Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 ........................ 4.30, 4.60, 4.215 Norberg v Wynrib (1992) 92 DLR (4th) 449 ................................................................ 4.300, 34.125 Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2004] 3 NZLR 49 ................................... 6.225 Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2006] UKPC 25 ...................................... 6.225 Norgard v Abco Holdings Pty Ltd [2001] WASC 324 ............................................................... 33.175 Norilya Minerals Pty Ltd v Ireland (1994) 12 WAR 485 .............................................................. 32.35 Norman v FEA Plantations Ltd (2011) 195 FCR 97 .................................................................. 30.130 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 ..................... 3.05, 3.35, 3.40, 3.45, 3.80, 3.100, 3.105, 3.110, 3.150, 17.75, 18.95, P.95 Normanby v Devonshire (1697) 2 Freeman 216; 22 ER 1169 ................................................... 12.05 Norris, Re (1884) 27 Ch D 333 ................................................................................................. 21.55 Norsemeter Holdings v Boele [2004] NSWSC 139 .................................................................... 32.25 North British and Mercantile Insurance Co v London, Liverpool and Globe Insurance Co (1877) 5 Ch D 569 ....................................................................................................... 14.190 North-​Eastern Railway Company v Martin (1848) 2 Ph 758; 41 ER 1136 ................................. 34.140 North of England Zoological Society v Chester Rural District Council [1959] 3 All ER 116 ....... 29.145 North Queensland Conservation Council Inc v Executive Director Queensland Parks and Wildlife Service [2000] QSC 172 ................................................................................... 37.45 North West County District Council v J I Case (Australia) Pty Ltd [1974] 2 NSWLR 511 ....................................................................................................... 10.360, 10.365 Northcorp Ltd v Allman Properties (Aust) Pty Ltd [1994] 2 Qd R 405 ........................................ 32.60 Northern Counties of England Fire Insurance Company v Whipp (1884) 26 Ch D 482 ............. 2.140 Northern Developments Holdings Ltd, Re (unreported, 6 October 1978) ................................. 27.85 Northern Drivers Union v Kawau Island Ferries Ltd [1974] 2 NZLR 617 ..................................... 31.90 Northern Star Agriculture Pty Ltd v Morgan and Banks Developments Pty Ltd (2007) 13 BPR 24,163 .................................................................................. 1.65, 31.90, 31.100, 31.165 Northey v Juul [2014] NSWSC 464 ............................................................................ 23.130, 23.175 Norway v Rowe (1812) 19 Ves 144; 34 ER 472 ......................................................................... 36.90 Norwegian American Cruises A/​S v Paul Mundy Ltd (The “Vistafjord”) [1988] 2 Lloyd's Rep 343 ........................................................................................................ 10.35, 10.45 Norwich Charities, Re (1837) 2 My & Cr 275; 40 ER 645 .......................................................... 21.05

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Equity and Trusts in Australia

Nottage, Re [1895] 2 Ch 649 ................................................................................................. 29.255 Notter v Girault [2004] ANZ Conv R 503 .................................................................................. 11.75 Novasource Consulting Pty Ltd v Primelife Property Holdings Pty Ltd (2003) V ConvR ¶54–​671 ................................................................................................................ 11.95 Novoship (UK) Ltd v Mikhaylyuk [2015] QB 499 .................................. 24.40, 24.195, 38.70, 38.100 Nowell v Palmer (1993) 32 NSWLR 574 .................................................................................... 30.15 Noyes v Pollock (1886) 32 Ch D 53 ........................................................................................ 14.225 NSFT Pty Ltd, Re Application of (2010) 5 ASTLR 310 ..................................................... 25.35, 25.45 NSW Masonic Youth Property Trust v Attorney-​General (NSW) (2010) 5 ASTLR 211 ................. 21.70 NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd (1986) 6 NSWLR 740 .......................................................................................................... 37.100, 37.115 NSW Trustee and Guardian, Re Application of (2014) 12 ASTLR 513 ....................................... 23.170 NT Power Generation Pty Ltd v Trevor (2000) 23 WAR 482 ............................................... 3.35, 3.45 Nudd v Official Trustee in Bankruptcy (2002) 11 BPR 20,163 ...................................................... 1.65 Num-​Hoi, Pon-​Yu, Soon-​Duc Society Inc v Num Pon Soon Inc (2001) 4 VR 527 ....................... 29.15 Nunn v Fabian (1865) 1 LR Ch App 35 ..................................................................................... 12.75 Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141 ....................................... 33.60 Nwai Pty Ltd v Johnson (2005) 12 BPR 23,939 ......................................................................... 11.75 NWL Ltd v Woods [1979] 1 WLR 1294 ....................................................................... 31.125, 31.165 NZ Netherlands Society v Kuys [1973] 2 All ER 1222 .................................................................. 4.05 NZI Capital Corporation Ltd v Poignand (1997) ATPR ¶41–​586 ..................................... 9.155, 35.20 NZI Insurance Australia Ltd v Baryzcka (2003) 85 SASR 497 ...................................................... 1.165

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O Oakacre Ltd v Claire Cleaners (Holdings) Ltd [1982] Ch 197 ...................................... 34.100, 34.115 Oakes v Turquand (1867) LR 2 HL 325 ..................................................................................... 35.75 Oates Properties Pty Ltd v Commissioner of State Revenue (2003) 53 ATR 596 ....................... 37.115 Oatway, Re [1903] 2 Ch 356 .................................................................................................... 39.70 OBG Ltd v Allan [2008] 1 AC 1 ............................................................................. 6.25, 6.110, 6.115 O'Brien, Re [1929] SASR 420 .................................................................................................. 16.190 O'Brien, Re (1971) 2 SASR 9 ..................................................................................................... 23.90 O'Brien, Re [1974] 1 NZLR 58 ..................................................................................................... 8.55 O'Brien v Australia and New Zealand Bank Ltd (1971) 5 SASR 347 ............................................ 30.10 O'Brien v Komesaroff (1982) 150 CLR 310 ..................................................... 6.25, 6.50, 6.80, 6.215 O'Brien v Sheahan [2002] FCA 1292 ....................................................................................... 10.155 O'Brien v Smith [2013] 1 Qd R 223 .......................................................................................... 26.25 O'Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 ......................................... 10.30 O'Brien v Walker (1981) 5 ACLR 564 ......................................................................................... 26.60 Occidental Life Insurance Co of Australia Ltd v Bank of Melbourne (1991) 7 ANZ Ins Cases ¶61–​201  .................................................................................................................... 24.10 Ocean Dynamics Charter Pty Ltd v Hamilton Island Enterprises Ltd [2015] FCA 460 ............... 31.145 Oceanic Steam Navigation Co v Sutherberry (1880) 16 Ch D 236 ............................................ 22.40 Oceanica Castelana Armadora SA v Mineralimportexport [1983] 2 All ER 65 ........................... 32.100 O'Connor v Hart [1985] AC 1000 ............................................................................................. 9.125 O'Connor v S P Bray Ltd (1936) 36 SR (NSW) 248 ..................................................... 15.100, 15.105 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 ................. 23.120, 23.125, 23.130, 27.30 Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 ............ 6.40, 6.55, 6.85, 6.215, 6.220, 6.320, 6.370, 6.375, 37.175 OD Transport Pty Ltd v Western Australian Government Railways Commission (1986) 71 ALR 190 ........................................................................................................................ 31.165 O'Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 .................................................. 14.70 Odgers v Bacich Investments Pty Ltd (2007) 35 WAR 320 ......................................................... 33.25 O'Donoghue, Re [1998] 1 NZLR 116 ......................................................................... 23.135, 23.150

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Table of Cases

Officer v Haynes (1877) 3 VLR (E) 115 .................................................................................... 21.120 Official Assignee v 15 Insoll Avenue Ltd [2001] 1 NZLR 492 .................................................... 38.250 Official Assignee v NZI Life Superannuation Nominees Ltd [1995] 1 NZLR 684 ............................................................................................... 19.75, 27.115, 28.130 Official Assignee v Wilson [2006] 2 NZLR 841 ......................................................................... 20.140 Official Assignee v Wilson [2008] 3 NZLR 45 ............................................................................. 17.35 Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 ................................................. 16.205 Official Receiver of the State of Israel v Raveh (2001) 24 WAR 53 ................................. 32.25, 32.115 Official Receiver v Feldman (1972) 4 SASR 246 ......................................................................... 35.95 Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 ....................................................................................... 14.125, 14.135, 14.145, 14.150, 14.155, P.110 Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217 ..................................................... 1.130 Official Trustee in Bankruptcy v Tooheys Ltd (1993) 29 NSWLR 641 ........................................ 10.350 Official Trustee v Marchiori (1983) 69 FLR 290 ........................................................................ 19.145 Official Trustee v Mitchell (1992) 38 FCR 364 ......................................................................... 19.145 Offshore Oil NL v Southern Cross Exploration NL (1985) 3 NSWLR 337 .................................... 10.10 Ogden, Re [1933] Ch 678 ......................................................................................... 17.170, 17.175 Ogden v Trustees of the RHS Griffiths 2003 Settlement [2009] Ch 162 ..................................... 23.50 Oggi Advertising Ltd v McKenzie [1999] 1 NZLR 631 ............................................................. 31.145 Ogilvie v Ryan [1976] 2 NSWLR 504 ................................................................... 12.15, 12.25, 12.30 O'Halloran v R T Thomas & Family Pty Ltd (1998) 29 ACSR 148 ...................................... 4.85, 34.05 Oil Basins Ltd v Commonwealth (1993) 178 CLR 643 ............................................................... 37.30 OJSC Oil Company Yugraneft v Abramovich [2008] EWHC 2613 .............................................. 38.70 O'Kane v ANZ Banking Group (NZ) Ltd (1992) NZ ConvC 91,234 ......................................... 31.135 O'Keefe Nominees Pty Ltd v BP Australia Ltd (1990) ATPR ¶41–​057 ........................................ 31.150 Old Grovebury Manor Farm Plant Sales & Hire Ltd v W Seymour Ltd (No 2) [1979] 3 All ER 504 ....................................................................................................................... 11.135 Old Papa's Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 ................ 21.45 Oldham, Re [1925] Ch 75 ...................................................................................................... 38.140 O'Leary, Re (1985) 61 ALR 674 ............................................................................................... 14.215 Olex Focas Pty Ltd v Skodaexport Co Ltd [1998] 3 VR 380 ....................................................... 9.170 Olga Investments Pty Ltd v Citipower Ltd [1998] 3 VR 485 ..................................................... 10.145 Oliver Brown Pty Ltd (No 2), Re (2012) 17 BPR 32,253 ............................................................. 12.25 Oliver, Re (1890) 62 LT 533 .................................................................................................... 16.165 Oliver v Hinton [1899] 2 Ch 264 .............................................................................................. 2.140 Oliveri v Oliveri (unreported, SC(NSW), Powell J, 29 March 1993) .......................................... 26.135 Olliver v Colonial Bank (1886) 5 NZLR 239 ............................................................................. 14.245 Olsson v Dyson (1969) 120 CLR 365 .............................................................. 3.10, 3.35, 3.70, 3.80, 18.95, 18.140, P.115 Olympic Holdings Pty Ltd v Windslow Corp Pty Ltd (in liq) (2008) 36 WAR 342 .............. 2.90, 2.100 Omar v El-​Wakil [2001] NPC 114 ................................................................................... 11.60, 11.75 On Demand Information plc v Michael Gerson (Finance) plc [2003] 1 AC 368 ............ 11.10, 11.130 One Spencer Street Pty Ltd v Maryland International Pty Ltd (2005) 12 BPR 23,113 ................. 11.75 O’Neill v Robertson-​Staton (2015) 18 BPR 35,689 .................................................................. 38.165 One.Tel Ltd (in liq) v Watson [2009] NSWCA 282 ....................................................................... 3.35 One.Tel Networks Holdings Pty Ltd, Re (2001) 40 ACSR 83 ...................................................... 36.85 Ontario Securities Commission and Greymac Credit Corp, Re (1986) 30 DLR (4th) 1 ........................................................................................................ 39.90, 39.105 Ontario Securities Commission and Greymac Credit Corp, Re (1989) 52 DLR (4th) 767 .................................................................................................... 39.90, 39.105 Ontario (Training, Colleges and Universities) v Two Feathers Forest Products LP (2013) 117 OR (3d) 227 ...................................................................................................... 27.90 Onus v Alcoa of Australia Ltd (1981) 149 CLR 27 ...................................................................... 37.45

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Equity and Trusts in Australia

Opal Maritime Agencies Pty Ltd v Baltic Shipping Co (1998) 158 ALR 416 ............................. 30.125 Opal Maritime Agencies Pty Ltd v Proceeds of Sale of Vessel MV Skulptor Konenkov (2000) 98 FCR 519 ............................................................................................................ 30.125 Oppenheim v Tobacco Securities Trust Co Ltd [1951] AC 297 ............... 29.60, 29.65, 29.75, 29.155 Optus Networks Ltd v Telstra Corp Ltd (No 3) [2009] FCA 728 ................................................. 6.180 Optus Networks Pty Ltd v City of Boroondara [1997] 2 VR 318 ...................................... 31.15, 31.40 Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281 .................................... 6.180 Opus Productions Pty Ltd v Popwing Pty Ltd (unreported, SC(NSW), Santow J, 28 February 1995) .................................................................................................................... 8.110 Orakpo v Manson Investments Ltd [1978] AC 95 .......................... 14.05, 14.15, 14.20, 14.55, 14.85 Ord Forrest Pty Ltd v Federal Commissioner of Taxation (1974) 130 CLR 124 ......................... 19.140 O'Regan v Iambic Productions Ltd (1989) 139 NLJ Rep 1378 .................................................. 32.155 Organ v Sandwell [1921] VLR 622 ................................................................................... 8.40, 18.30 Oriental Inland Steam Co, Re (1874) 9 Ch App 577 ................................................................ 16.105 Orix Australia Corporation Ltd v M Wright Hotel Refrigeration Pty Ltd (2000) 155 FLR 267 ...... 35.75 Orme, Re (1883) 50 LT 51 ...................................................................................................... 26.135 Ormonoid Roofing & Asphalts Ltd v Bitumenoids Ltd (1930) 31 SR (NSW) 347 ............... 4.290, 6.60 O'Rorke v Bolingbroke (1877) 2 App Cas 814 ........................................................... 8.10, 8.15, 9.05 O'Rourke, Re Will of [1920] VLR 546 ....................................................................................... 20.120 O'Rourke v Darbishire [1920] AC 581 ....................................................................................... 20.30 O'Rourke v Hoeven [1974] 1 NSWLR 622 ................................................................................. 12.45 Orr v Ford (1989) 167 CLR 316 .............................................................. 30.10, 30.15, 30.25, 30.30, 30.65, 30.70, 30.165 Orr v Wendt [2005] WASCA 199 ..................................................................... 21.115, 22.165, 23.75 Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd [1985] 3 All ER 747 ......................................................................................................................... 32.90 Osborne Park Co-​operative Society Ltd v Wilden Pty Ltd (1989) 2 WAR 77 ............................. 10.160 Osborne, Re (1989) 91 ALR 135 ............................................................................................. 38.250 Osborne v Amalgamated Society of Railway Servants [1909] 1 Ch 163 ..................................... 22.40 Osborne v Estate of Osborne [2001] VSCA 228 .......................................................... 38.135, 38.140 Osborne v Smith (1960) 105 CLR 153 ...................................................................................... 37.80 O'Shea, Re [1957] VR 352 ............................................................................................ 22.95, 22.100 O'Sullivan Partners (Advisory) Pty Ltd v Foggo (2012) 218 IR 331 ........................................... 16.160 O'Sullivan v Management Agency and Music Ltd [1985] 1 QB 428 ...................... 7.45, 7.290, 35.15 Oswal v Burrup Fertilisers Pty Ltd (2013) 295 ALR 708 .............................................................. 36.15 OT Computers Ltd (in administration) v First National Tricity Finance Ltd [2007] WTLR 165 ............................................................................................................................ 27.70 Ottaway v Norman [1972] Ch 698 ........................................................................................... 18.50 Otto Maletz, Re [1948] QWN 30 ............................................................................................ 23.175 Otway Coal Co Ltd, Re [1953] VLR 557 .................................................................................... 1.150 Oughtred v Inland Revenue Commissioners [1960] AC 206 ...................................................... 18.25 Overland, Re [1960] QWN 25 ................................................................................................. 22.110 Overlook Management BV v Foxtel Management Pty Ltd (2002) Aust Contract Rep ¶90–​143  ................................................................................................................... 9.45, 10.205 Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd (2003) ATPR (Digest) ¶46–​242  .................................................................................................................... P.90 Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd (2004) Aust Contract Rep ¶90–​181 ....................................................................................................... 10.385 Oversea Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd [2003] VSC 495 ..................................................................................................................... 2.90 Owen v Tate [1976] 1 QB 402 .................................................................................................. 14.20 Owens, Re [1963] NSWR 1160 ............................................................................................... 22.155 Owners —​Strata Plan 74602 v Eastmark Holdings Pty Ltd [2015] NSWSC 1981 ......................... 4.35 Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322 ................................................................................... 30.150, 30.155 cxvi

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Table of Cases

Oxer v Astec Paints Australia Pty Ltd (2005) 240 LSJS 109 ......................................................... 22.30 Oxley v Hiscock [2005] Fam 211 ............................................................................................ 38.225 Ozden v Commonwealth Bank of Australia [2014] VSCA 127 ................................................. 30.115

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P P & O Nedlloyd BV v Arab Metals Co (No 2) [2007] 1 WLR 2288 ..................... 30.35, 30.40, 33.175 P & V Industries Pty Ltd v Porto (2006) 14 VR 1 .......................................................................... 4.20 P & V Industries Pty Ltd v Porto (No 2) [2007] VSC 64 ............................................................... 4.20 P A Thomas & Co v Mould [1968] 2 QB 913 ............................................................................ 6.215 P G Rogan v Rushton (NSW) Pty Ltd [2003] QSC 9 ................................................................. 30.170 P v D [2000] 2 NZLR 591 .......................................................................................................... 6.130 Pacella v Sherborne (No 2) [2010] WASC 186 ........................................................... 22.180, 22.195 Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996) .................................................................................. 8.150, 8.160, 8.165, 8.190 Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 ................................................................................................. 3.35, 3.155, 30.160 Pacific Coal Pty Ltd v Idemitsu (Qld) Pty Ltd (unreported, SC(Qld), Ryan J, 21 February 1992) ............................................................................................................... 4.215 Pacific Homes Ltd v Consolidated Joineries Ltd [1996] 2 NZLR 652 ............................................. 1.65 Pacific Hotels Pty Ltd v Asian Pacific International Ltd (1986) 7 IPR 239 .................................... 31.50 Pacific Industrial Corp SA v Bank of New Zealand [1991] 1 NZLR 368 ....................................... 33.65 Pacific Rim Developments Pty Ltd v Anketell [1999] NSWSC 304 ............................................ 10.380 Pacifica Shipping Co Ltd v Andersen [1986] 2 NZLR 328 ................................................. 4.85, 4.325 Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 ....................... 9.190 Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 ............ 13.25, 13.35 Padbury v Clark (1850) 2 Mac & G 298; 42 ER 115 ................................................... 15.100, 15.105 Padkohe Pty Ltd v Fletcher [2006] NSWSC 102 ........................................................................ 31.50 Page v Horne (1848) 11 Beav 227; 50 ER 804 ........................................................................... 7.100 Page v Page [2002] BCL 570 ..................................................................................................... 18.45 Pagels v MacDonald (1936) 54 CLR 519 ...................................................................... 16.205, 23.85 Paget v Marshall (1884) 28 Ch D 255 ....................................................................................... 8.200 Pain, Re [1919] 1 Ch 38 .............................................................................................................. 3.35 Pakenham Upper Fruit Co Ltd v Crosby (1924) 35 CLR 386 ......................................... 33.05, 33.105 Paki v Attorney-​General [2009] 1 NZLR 72 ......................................................................... 5.45, 5.55 Paki v Attorney-​General [2011] 1 NZLR 125 ....................................................................... 5.45, 5.55 Paki v Attorney-​General [2015] 1 NZLR 67 ................................................................ 5.45, 5.55, 5.60 Palaniappan v Westpac Banking Corporation [2016] WASCA 72 ............................................. 30.130 Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 .......................................... 3.50, 3.105, 3.150 Palinkas v Palinkas [2009] NSWSC 92 ..................................................................................... 38.270 Palk v Mortgage Services Funding plc [1993] Ch 330 ............................................................... 36.25 Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd (2009) 266 LSJS 25 ........ 10.200, 10.205 Palmer v Blue Circle Southern Cement Ltd (1999) 48 NSWLR 318 ............................................ 8.115 Palmer v Carey (1924) 34 CLR 380 ............................................................................................. 3.50 Palmer v Carey [1926] AC 703 .................................................................................................... 3.50 Palmer v Goren (1856) 25 LJ Ch 841 ...................................................................................... 38.150 Palmer v McAllister (1991) 4 WAR 206 ..................................................... 25.40, 25.50, 25.65, 25.70 Palmer v Permanent Trustee Co (1915) 16 SR (NSW) 162 ......................................................... 24.55 Palmer v Simmonds (1854) 2 Drew 221; 61 ER 704 .................................................................. 17.80 Paloto Pty Ltd v Herro (2015) 15 ASTLR 308 ............................................................................. 25.25 Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd (2000) 170 ALR 579 .............................................................................. 36.20 Pan Macedonian Greek Brotherhood NSW Ltd v Greek Macedonian Club Ltd [2008] NSWCA 7 ............................................................................................................................ 11.95 Pandolfi v Carlsund (2012) 32 NTLR 60 .................................................................................. 31.195 cxvii Gino, Dal Pont. 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Equity and Trusts in Australia

Pankhurst v Howell (1870) LR 6 Ch App 136 ............................................................................ 15.95 Papamichael v National Westminster Bank plc [2003] 1 Lloyd's Rep 341 ........................ 8.105, 8.110 Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188 ........................................ 34.130 Paper Reclaim Ltd v Aotearoa International Ltd [2007] 3 NZLR 169 .......................................... 4.215 Paradise Motor Co Ltd, Re [1968] 1 WLR 1125 ................................................. 18.10, 20.85, 26.120 Paramasivam v Flynn (1998) 90 FCR 489; 160 ALR 203 ............................. 4.25, 4.305, 4.315, 30.35 Pardoe, Re [1906] 2 Ch 184 ................................................................................................... 29.175 Parente v Parente [2006] NSWSC 1154 ..................................................................................... P.150 Parfitt v Lawless (1872) LR 2 PD 462 ........................................................................................... 7.15 Parianos v Melluish (Trustee) (2003) 30 Fam LR 524 .................................................. 38.195, 38.230 Parij v Parij (1997) 72 SASR 153 ................................................................................. 38.180, 38.185 Park & Muller (liquidators of LM Investment Management Ltd) v Whyte [2015] QSC 287 ........................................................................................................................... 23.130 Park v Dawson [1965] NSWR 298 ........................................................................................... 24.115 Park v Dunn [1916] NZLR 761 .................................................................................................. 2.125 Parker v Glenninda Pty Ltd (1998) Q ConvR ¶54–​499 ............................................................... 18.30 Parker v McKenna (1874) 10 Ch App 96 ................................................................................. 22.100 Parkes Management Ltd v Perpetual Trustee Co Ltd (1977) 3 ACLR 303 ........................ 23.30, 23.40 Park’s of Hamilton (Holdings) Ltd v Campbell [2014] SC 726 ...................................................... 4.35 Parkview Qld Pty Ltd v Commonwealth Bank of Australia (2013) 11 ASTLR 19 ................................................................................................... 38.55, 38.60, P.125 Parmalat Australia Pty Ltd v VIP Plastic Packaging Pty Ltd (2013) 210 FCR 1 ........................... 31.145 Paroz, Re [1956] QWN 37 ........................................................................................................ 21.80 Paroz v Paroz (2010) 5 ASTLR 452 ............................................................................................ 9.155 Parsons, Re [1940] 1 Ch 973 .................................................................................................... 21.80 Parsons v McBain (2001) 109 FCR 120 ................................................................................... 38.255 Parsram Brothers (Australia) Pty Ltd v Australian Foods Company Pty Ltd [2001] NSWSC 436 ......................................................................................................................... 32.65 Partington, Re (1887) 57 LT 654 ............................................................................................. 23.160 Partington v Reynolds (1858) 4 Drew 253; 62 ER 98 .............................................................. 24.105 Partnership Pacific Securities Ltd, Re [1994] 1 Qd R 410 ......................................................... 30.130 Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149 ................................................................................................ 22.10, 23.10, 24.180, 24.200, 24.205, 24.210 Pascoe v Boensch (2008) 250 ALR 24 ............................................................................. 17.85, P.110 Pasedina (Holdings) Pty Ltd v Khouri (1977) 1 BPR 9460 ........................................... 33.125, 33.130 Pasquarella v National Australia Finance Ltd [1987] 1 NZLR 312 ............................................... 31.95 Patane, Re [1957] QSR 529 ....................................................................................................... 23.90 Patel v Ali [1984] Ch 283 ........................................................................................................ 33.130 Patel v Mirza [2017] AC 467 .......................................................................................... 19.50, 19.55 Pateman v Heyen (1993) 33 NSWLR 188 ................................................................................ 24.210 Patmore v Upton (2004) 13 Tas R 95 ........................................................................................ 2.120 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 ................................................................................................... 31.50, 31.65, 31.150 Patrick Stevedores Operations (No 2) Pty Ltd v Port of Melbourne Corporation [2016] VSC 528 .............................................................................................................................. 37.95 Patros v Patros (2007) 16 VR 182 ................................................................................. 22.110, 25.35 Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 ...................................... 32.40, 32.55 Paul A Davies (Australia) Pty Ltd v Davies [1983] 1 NSWLR 440 .................................... 24.80, 26.85, 39.75, 39.80 Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 94 ALR 225 ................................................................................................................. 4.65, 4.265 Paul v Constance [1977] 1 WLR 527 ......................................................................................... 18.10 Paul v Speirway Ltd (in liq) [1976] 1 Ch 220 ............................................................................. 14.85 Paulger v Butland Industries Ltd [1989] 3 NZLR 549 ................................................................. 8.180 cxviii

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Table of Cases

Pauling's Settlement Trusts, Re [1962] 1 WLR 86 ............................................... 24.160, 30.15, 30.35 Pauling's Settlement Trusts, Re [1964] Ch 303 ....................................... 7.115, 24.210, 30.15, 30.35 Pavan v Ratnam (1996) 23 ACSR 214 .............................................................................. 4.70, 4.240 Payne v McDonald (1908) 6 CLR 208 ............................................................................ 19.20, 19.55 Payne v Rowe (2012) 16 BPR 30,869 ...................................................................................... 38.250 Pazta Co Pty Ltd v Idelake Pty Ltd [2008] NSWSC 941 ............................................................ 10.115 PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 ................................... 11.05, 11.45, 13.95 Peace Hills Trust Co v Canada Deposit Insurance Corp (2007) 288 DLR (4th) 237 ................... 17.160 Peachdart Ltd, Re [1984] Ch 131 .............................................................................................. 16.75 Peachy v Duke of Somerset (1720) 1 Str 447 ............................................................................ 11.20 Pearce, Re [1936] SASR 137 ...................................................................................................... 24.60 Pearce v Bulteel [1916] 2 Ch 544 .............................................................................................. 2.125 Pearce v Public Trustee [1916] GLR 125 .................................................................................... 18.30 Pearce v Waterhouse [1986] VR 603 ......................................................................................... 32.45 Pearce v Wright (1926) 39 CLR 16 .......................................................................................... 16.165 Pearl Maintenance Services Ltd, Re [1995] 1 BCLC 449 .......................................................... 36.155 Pearson v Commissioner of Taxation (2001) 116 FCR 357 ............................................. 24.15, 24.20 Pearson v Commissioner of Taxation (2005) 218 ALR 101 ......................................................... 20.85 Pearson v Commissioner of Taxation (2006) 232 ALR 55 ........................................................... 20.85 Pearson v Inland Revenue Commissioners [1981] AC 753 ....................................................... 20.125 Peconic Industrial Development Ltd v Law Kwok Fai [2009] WTLR 999 ................................... 24.195 Pecore v Pecore [2007] 1 SCR 795 ................................................................. 26.60, 26.135, 26.140, 26.145, 26.155 Pedersen v Larcombe [2008] NSWSC 1362 .............................................................................. 4.180 Pedley-​Smith v Pedley-​Smith (1953) 88 CLR 177 ....................................................... 16.175, 16.180 Pedulla v Nasti (1990) 20 NSWLR 720 .................................................................................... 17.150 Peek v New South Wales Egg Corporation (1986) 6 NSWLR 1 .................................................. 31.75 Pegasus Securities Ltd, Re (1999) 74 SASR 396 ....................................................................... 23.180 Pejovic v Malinic [1960] SR (NSW) 184 ..................................................................................... 12.50 Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435 ............................ 32.05, 32.15, 32.20 Pelenoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4 ........................ 2.110 Pelham v Pelham [1955] SASR 53 ............................................................................................. 22.65 Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd's Rep 359 ......................................... P.60 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 ............................ 36.50 Penn v Lord Baltimore (1750) 1 Ves Sen 444; 27 ER 1132 ....................................................... 32.115 Pennell, Re [1945] VLR 302 ....................................................................................................... 20.30 Pennie v Pennie [2010] NSWSC 1070 ..................................................................................... 21.140 Pennington v Waine [2002] 1 WLR 2075 .................................................... 1.60, 3.45, 3.85, 18.105, 18.145, P.115, P.120 Pennsylvania Shipping Co v Compagnie Nationale de Navigation [1936] 2 All ER 1167 ............ 35.55 Penny v Cancer and Pathological Research Institute of Western Australia (1994) 13 WAR 314 ...................................................................................................................... 29.370 Penrith Whitewater Stadium Ltd v Lesvos Enterprises Pty Ltd (2007) 13 BPR 24,799 ................. 12.05 Pentagold Investments Pty Ltd v Romanos (2002) NSW ConvR ¶56–​014 .................................. 11.75 People's Prudential Assurance Co Ltd v Australian Federal Life and General Assurance Co Ltd (1935) 35 SR (NSW) 253 .......................................................................................... 22.95 Perfection Finance Co Pty Ltd v Bar Services Pty Ltd (1975) 5 BPR 11,132 ................................ 33.45 Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd (2010) NSW ConvR ¶56–​263 .......................................................................................... 1.65, 2.40, 2.45 Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 .................................................................................... 3.15, 3.120, 3.125, 17.75 Perkins v Permanent Trustee Co Ltd (1923) 23 SR (NSW) 358 ................................................... 23.15 Perkins v Williams (1905) 22 WN (NSW) 107 .......................................................................... 21.130 Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 ......... 7.255, 9.125, 9.185, 9.195 Permanent Trustee Australia Ltd, Re (1994) 33 NSWLR 547 .................................................... 23.170 cxix

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Equity and Trusts in Australia

Permanent Trustee Australia Ltd, Re (1997) 137 FLR 190 .......................................................... 22.70 Permanent Trustee Australia Ltd v Perpetual Trustee Co Ltd (1994) 15 ACSR 722 ...................... 24.10 Permanent Trustee Co Ltd v Bernera Holdings Pty Ltd (2004) 11 BPR 21,505 ........................... 30.25 Permanent Trustee Co Ltd v University of Sydney [1983] 1 NSWLR 578 .................................. 27.120 Permanent Trustee Co of NSW Ltd v Presbyterian Church (NSW) Property Trust (1946) 64 WN (NSW) 8 ..................................................................................................... 29.155 Permanent Trustee Co v Angus (1917) 17 SR (NSW) 364 .......................................................... 23.85 Permanent Trustee Co v Dougall (1931) 34 SR (NSW) 83 ......................................................... 19.10 Permanent Trustee Co v Redman (1916) 17 SR (NSW) 60 ....................................................... 16.190 Perpetual Executor & Trustee Association of Australia Ltd v Adams [1975] VR 462 .................. 16.175 Perpetual Executors & Trustees Association v Simpson (1906) 27 ALT 179 .............................. 22.225 Perpetual Executors and Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185 ....... 19.55 Perpetual Executors, Trustees and Agency Co (WA) Ltd v Western Australian Trustee, Executor and Agency Co Ltd (1942) 44 WALR 29 ................................................... 24.50, 24.105 Perpetual Investment Management Ltd, Re [2011] NSWSC 133 ............................................. 23.180 Perpetual Investment Management Ltd, Re [2014] NSWSC 784 ................................ 23.170, 23.175 Perpetual Trust Ltd v Roman Catholic Bishop of Christchurch [2006] 1 NZLR 282 ................... 29.185 Perpetual Trustee Co Ltd, Application by [2003] NSWSC 1185 .................................. 23.170, 23.180 Perpetual Trustee Co Ltd v Aspley Specialist Centre Pty Ltd [2010] QSC 232 ............................. 13.70 Perpetual Trustee Co Ltd v Cheyne (2011) 42 WAR 209 .......................................................... 22.180 Perpetual Trustee Co Ltd v Cowan (No 2) (1900) LR (NSW) Eq 278 .......................................... 23.15 Perpetual Trustee Co Ltd v Godsall [1979] 2 NSWLR 785 ............................................... 25.35, 25.45 Perpetual Trustee Co Ltd v Groth (1985) 2 NSWLR 278 ............................................. 29.145, 29.210 Perpetual Trustee Co (Ltd) v Jefferson (1938) 56 WN (NSW) 18 ................................................ 22.90 Perpetual Trustee Co Ltd v John Fairfax & Sons Pty Ltd (1959) 76 WN (NSW) 226 ............................................................................................... 17.150, 29.300 Perpetual Trustee Co Ltd v Noyes (1925) 25 SR (NSW) 226 ....................................... 22.155, 23.105 Perpetual Trustee Co Ltd v Smith (1906) 6 SR (NSW) 542 ....................................................... 23.115 Perpetual Trustee Co Ltd v Smith (1938) 39 SR (NSW) 19 .................................................. 3.50, 3.80 Perpetual Trustee Co Ltd v Smith (2010) 186 FCR 566 ................................................................ 2.60 Perpetual Trustee Co (Ltd) v St Luke's Hospital (1939) 39 SR (NSW) 408 ................................. 29.185 Perpetual Trustee Co (Ltd) v Tindal (1940) 63 CLR 232 .............................................. 16.185, 16.190 Perpetual Trustee Co (Ltd) v Waddell (1949) 49 SR (NSW) 266 .................................................... P.95 Perpetual Trustee Co Ltd v Watson (No 2) (1927) 28 SR (NSW) 43 ......................................... 24.215 Perpetual Trustee Co (Ltd) v Wittscheibe (1940) 40 SR (NSW) 501 ......................................... 29.200 Perpetual Trustees Australia Ltd v Bank of Western Australia Ltd (2004) 185 FLR 163 ................ 36.40 Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 ......................................................... 9.195 Perpetual Trustees Queensland Ltd, Re [2000] 2 Qd R 647 ......................................... 29.145, 29.270 Perpetual Trustees Tasmania Ltd v Attorney-​General [2002] TASSC 16 .................................... 29.320 Perpetual Trustees Victoria Ltd v Burns [2015] WASC 234 ......................................................... 9.195 Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 ................................................. 23.125, 23.135 Perpetual Trustees WA Ltd v Riverwest Pty Ltd [2004] WASC 81 ................................................ 17.80 Perrey v Mordiesel Co Pty Ltd [1976] VR 569 .......................................................................... 31.150 Perrot Mill Pty Ltd (No 1), Re (2013) 11 ASTLR 125 ................................................................ 23.170 Perry Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895 .......................................................... 2.30 Perry v Dusty Hotel Pty Ltd [2003] NSWSC 1215 .................................................................... 37.125 Perry v Perry (1870) 18 WR 482 .............................................................................................. 23.115 Perry v Shipway (1859) 1 Giff 1; 65 ER 799 .............................................................................. 22.65 Person-​to-​Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 ........................ 2.40, 2.55 Perth Mint v Mickelberg (No 2) [1985] WAR 117 ........................................................... 32.30, 32.40 Peruvian Railway Construction Co Ltd, Re [1915] 2 Ch 144 .................................................... 25.150 Peskin v Anderson [2001] 1 BCLC 372 ...................................................................................... 4.115 Peso Silver Mines Ltd v Cropper (1966) 58 DLR (2d) 1 .............................................................. 4.110 Pesticcio v Huet [2004] EWCA Civ 372 .............................................................................. 7.05, 7.60

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Table of Cases

Peter Cox Investments Pty Ltd (in liq) v International Air Transport Association (1999) 161 ALR 105 ...................................................................................................................... 27.100 Peter Pan Manufacturing Corporation v Corsets Silhouette Ltd [1964] 1 WLR 96 ..................................................................................................... 6.185, 6.330, 34.150 Peter v Beblow (1993) 101 DLR (4th) 621 .............................................................................. 38.265 Peterborough Royal Foxhound Show Society v Commissioners of Inland Revenue [1936] 2 KB 497 ................................................................................................................ 29.255 Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457 ................................................... 25.15 Peters v Lithgow Forge Pty Ltd (2011) 15 BPR 29,611 ................................................... 1.65, 26.120 Petronijevic v Milojkovic [2014] NSWSC 1337 ........................................................................ 10.275 Pettingall v Pettingall (1842) 11 LJ Ch 176 .............................................................................. 17.150 Pettit, Re [1988] 2 NZLR 513 ................................. 29.120, 29.295, 29.315, 29.325, 29.340, 29.370 Pettitt v Pettitt [1970] AC 777 ........................ 26.60, 26.75, 26.90, 26.100, 26.140, 26.160, 38.215 Pettkus v Becker (1980) 117 DLR (3d) 257 .............................................................................. 38.170 Pflugradt v Pflugradt (1981) FLC ¶91–​052 .............................................................................. 19.155 Pham v Doan (2005) 63 NSWLR 370 ........................................................................................ 26.75 Philegan & Co Pty Ltd v Blacktown Municipal Council (1974) 29 LGRA 231 ........................... 33.145 Philip Collins Ltd v Davis [2000] 3 All ER 808 ............................................................................ 8.115 Philip Morris (New Zealand) Ltd v Liggett & Myers Tobacco Co (New Zealand) Ltd [1977] 2 NZLR 35 ................................................................................................. 31.100, 31.125 Philips Electronics NV v Remington Products Australia Pty Ltd (1997) 39 IPR 283 .................... 31.155 Phillips, Re Will of (1879) 5 VLR (E) 274 .................................................................................... 21.95 Phillips v Hutchinson [1946] VLR 270 ........................................................................................ 7.115 Phillips v McCabe [2016] SASC 27 .......................................................................................... 17.150 Phillips v Mineral Resources Developments Pty Ltd [1983] 2 Qd R 138 ..................................... 30.95 Phillips v Phillips (1862) De GF & J 208; 45 ER 1164 ................................................................. 2.115 Phillips v Phillips [1993] 3 NZLR 159 ....................................................................................... 38.165 Phillips v Roberts [1975] 2 NSWLR 207 ................................................................................... 29.380 Phillips v Ten Voorde [2004] SASC 17 ..................................................................................... 38.250 Philos Pty Ltd v National Bank of Australasia Ltd (1976) 5 BPR 11,810 ........................................ 2.90 Philpott v St George's Hospital (1859) 27 Beav 107; 54 ER 42 ................................................ 29.380 Phipps v Boardman [1965] Ch 992 .............................................................................. 4.170, 34.140 Phoenix Assurance Company v Spooner [1905] 2 KB 753 ......................................................... 14.45 Phoenix Vision Coal Pty Ltd v Southern Cross Exploration NL [2012] NSWSC 461 ...................... 2.40 Phosphate Resources Ltd v Western Stevedores Pty Ltd [2003] WASC 84 .................................. 4.215 Photocure ASA v Queen's University at Kingston (2002) 56 IPR 86 ............................................ 4.155 Photosprint Australia Pty Ltd (rec & mgr appt) (in liq) (2004) 212 ALR 517 .............................. 36.45 Pianta v National Finance & Trustees Ltd (1964) 180 CLR 146 .................................................. 33.20 Pickens v Metcalf [1932] NZLR 1278 ...................................................................................... 26.135 Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 ....................... 19.20, 19.40, 22.115 Pico Holdings Inc v Voss [2002] VSC 319 .................................................................................. 31.15 Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 79 ALJR 825 ....................................................... 1.75 Pieper (deceased), Re [1951] VLR 42 ............................................................................ 29.95, 29.240 Piercy, Re [1898] 1 Ch 565 ..................................................................................................... 20.120 Pike, Re [1932] SASR 264 .......................................................................................................... 17.20 Pilbright v Salwey [1896] WN 86 ............................................................................................ 17.150 Pilcher v Rawlins (1872) LR 7 Ch App 259 ..................................................................... 2.125, 2.130 Pilkington v Inland Revenue Commissioners [1964] AC 612 ............................ 23.115, 25.95, 25.100 Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 ..................................... 4.15, 4.20, 4.45, 4.65, 4.245, 34.50, 36.70, P.40 Pineport Ltd v Grangeglen Ltd [2016] EWHC 1318 (Ch) ......................................................... 11.105 Pinion (deceased), Re [1964] 1 All ER 890 ............................................................................... 29.160 Pink, Re [1912] 2 Ch 528 ........................................................................................................ 18.130 Pioneer Concrete Services Ltd v Galli [1985] VR 675 ........................................................ 6.55, 6.215

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Equity and Trusts in Australia

Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562 ........................................................................................................................ 11.115 Piper, Re [1946] 2 All ER 503 .................................................................................................... 19.70 Pitblado & Hoskin v Swerid (2003) 233 DLR (4th) .................................................................. 33.175 Pitt Cobbett, Re (1923) 19 Tas LR 43 ...................................................................................... 29.220 Pitt (deceased), Re Estate of (2002) 84 SASR 109 .......................................... 29.310, 29.315, 29.360 Pitt v Holt [2012] Ch 132 ................................................................................... 23.50, 23.55, 23.60 Pitt v Holt [2013] 2 AC 108 ..................................................................... 8.120, 23.50, 23.60, 24.05 Pittari, Re [1967] VR 800 ........................................................................................................... 25.65 Pittorino v Pittorino [2005] WASC 97 ...................................................................................... 24.125 PJS v News Group Newspapers Ltd [2016] AC 1081 ................................................................. 6.120 Plan B Trustees Ltd v Parker (2013) 11 ASTLR 242 ................................................................... 23.170 Planet International Ltd (in liq) v Garcia [1989] 2 Qd R 427 .................................................... 32.115 Plator Nominees Pty Ltd, Re [2012] VSC 284 ............................................................................ 25.65 Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 .................... 2.40, 2.60, 22.10, 26.10 Playoust v Hornsby [2005] VSCA 73 .......................................................................................... 19.95 Pleasants, Re (1923) 39 TLR 675 ............................................................................................. 29.235 Plimmer v Wellington City Council (1884) 9 App Cas 699 ........................................................ 2.105 Plimsoll v Drake (1995) 4 Tas R 334 ............................................................................. 22.15, 24.160 Plowright v Lambert (1885) 52 LT 646 ..................................................................................... 4.315 Plumbers, Gasfitters and Drainlayers Board v Charities Registration Board [2014] 2 NZLR 489 ....................................................................................................................... 29.285 Plus Group Ltd v Pyke [2002] 2 BCLC 201 ................................................................................ 4.125 PNC Lifestyle Investments Pty Ltd v REW08 Projects Pty Ltd (No 2) [2017] NSWSC 993 ......... 34.120 Poche, Re (1984) 6 DLR (4th) 40 ............................................................................................ 24.145 Pollard, Re (1991) 33 FCR 284 ................................................................................................ 10.365 Pollard v Clayton (1855) 1 K & J 462; 69 ER 540 ...................................................................... 30.50 Pollnow v Garden Mews-​St Leonards Pty Ltd (1984) 9 ACLR 82 ................................... 36.55, 36.110 Pollock, Re (1885) 28 Ch D 552 .................................................................................... 15.65, 15.95 Polly Peck International plc v Nadir (No 2) [1992] 4 All ER 769 ............................................... 38.105 Polygram Records Pty Ltd v Monash Records (Australia) Pty Ltd (1987) 72 ALR 35 .................. 32.155 Polymer Systems (1999) Ltd v Montgomerie [2002] 3 NZLR 383 .............................................. 16.80 Ponder, Re [1921] 2 Ch 59 ..................................................................................................... 16.205 Ponniah v Palmer [2012] NZCA 490 ......................................................................................... 22.45 Pooley v Royal Alexandra Hospital for Children (1932) 32 SR (NSW) 459 ................................ 29.135 Poort v Development Underwriting (Vic) Pty Ltd [1976] VR 779 .................................... 11.75, 11.80 Poort v Development Underwriting (Vic) Pty Ltd (No 2) [1977] VR 454 .................................... 11.80 Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78 ......................................................... 21.70, 21.75 Pope v Madsen [2016] 1 Qd R 201 ........................................................................................... 4.305 Pope v Pope [2001] SASC 26 .................................................................................................. 21.130 Popovic v Tanasijevic (No 5) (2000) 34 ACSR 1 ......................................................................... 37.85 Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642 ....................................... 30.115 Port Ballidu Pty Ltd v Frews Lawyers [2017] QSC 19 ............................................................... 24.195 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 .............................. 10.25, 10.30 Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd [2012] VSC 147 .................... 32.50 Porteous v Rinehart (1998) 19 WAR 495 ...................................................... 16.195, 16.200, 16.205, 21.100, 21.105, 21.120 Porter, Re [1925] Ch 746 ........................................................................................................ 17.150 Portland Downs Pastoral Co Pty Ltd v Great Northern Developments Pty Ltd [2012] QCA 18 .10.320 Posner v Scott-​Lewis [1987] Ch 25 ................................................................... 33.40, 33.90, 33.135 Potter v Potter [2003] 3 NZLR 145 .......................................................................................... 26.110 Potter v Potter [2005] 2 NZLR 1 .............................................................................................. 26.110 Potters-​Ballotini Ltd v Weston-​Baker [1977] RPC 202 .................................................................. 6.85 Potters Oils Ltd, Re [1986] 1 WLR 201 ...................................................................................... 36.50 Potts, Re [1893] 1 QB 648 ......................................................................................... 36.115, 36.145 cxxii

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Table of Cases

Potts v Westpac Banking Corporation [1993] 1 Qd R 135 ......................................................... 4.250 Poulos v Svoboda (2005) 33 Fam LR 458 ................................................................................ 33.150 Poulton v Commonwealth (1953) 89 CLR 540 ........................................................................... 3.40 Pountain, Re (1888) 37 Ch 609 .............................................................................................. 36.115 Pourzand v Home Building Society Ltd [2004] WASC 127 ........................................................... 2.90 Powell, Re (1907) 7 SR (NSW) 874 ......................................................................................... 22.225 Powell v Benney [2007] EWCA Civ 1283 ................................................................................. 10.275 Powell v Brent London Borough Council [1988] ICR 176 .......................................................... 33.80 Powell v in de Braekt [2006] WASC 264 .................................................................................. 38.250 Powell v Powell [1900] 1 Ch 243 ..................................................................................... 7.30, 7.115 Powell v Powell [2002] WASC 105 ............................................................................................ 7.115 Powell v Powell [2014] NZHC 476 .......................................................................................... 21.105 Powell v State of Tasmania (2001) 10 Tas R 283 ...................................................................... 10.355 Powell v Thompson [1991] 1 NZLR 597 ................................................................................... 38.75 Power v Tabain [2006] WASC 59 ............................................................................................ 29.175 Powercell Pty Ltd v Cuzeno Pty Ltd (2004) 11 BPR 21,429 ........................................................ 18.35 Powercor Australia Ltd v Pacific Power [1999] VSC 110 ...................... 10.165, 10.330, 37.90, 37.105 Pratt v Hawkins (1991) 32 NSWLR 319 ............................................................... 11.75, 11.80, 33.05 Pratten v Warringah Shire Council [1969] 2 NSWR 161 ............................................. 10.360, 10.365 Premium Real Estate Ltd v Stevens [2009] 2 NZLR 384 .......................................... 4.185, 34.45, P.50 Prendergast v Joyce [2009] 3 IR 519 .................................................................................. 7.60, 7.80 Prentice v Cummins (2002) 124 FCR 67 ................................................................................. 19.120 Presbyterian Church (New South Wales) Property Trust v Ryde Municipal Council [1978] 2 NSWLR 387 ............................................................................... 29.175, 29.180, 29.280 Price, Re (1935) 35 SR (NSW) 444 .......................................................................................... 23.185 Price, Re [1943] 1 Ch 422 ....................................................................................................... 17.180 Price v Powers [2005] WASC 154 ................................................................................. 20.105, 21.55 Price v Powers [2006] WASCA 262 ............................................................................... 20.105, 21.55 Price v Strange [1978] Ch 337 ............................................................. 33.35, 33.45, 33.110, 34.110 Pridham v Pridham (2010) 270 LSJS 433 ................................................................................ 38.135 Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458 .................................................. 15.100 Priestley v Priestley [2017] NSWCA 155 ..................................................................... 10.160, 10.245 Primary Securities Ltd v Willmott Forests Ltd (recs and mgrs appt) (in liq) (2016) 50 VR 752 ........................................................................................................................... 1.105 Prime Sight Ltd v Lavarello [2014] AC 436 ................................................................................ 10.45 Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 ..................................................... 4.150, 4.155 Prince v Attorney-​General [1996] 3 NZLR 733 .......................................................................... 4.315 Princess Ann of Hesse v Field [1963] NSWR 998 ......................................................... 21.110, 22.150 Principal Financial Group Pty Ltd v Vella [2011] NSWSC 327 .................................................. 32.185 Printers and Finishers Ltd v Holloway [1965] RPC 239 ........................................................ 6.15, 6.70 Prior v Simeon (No 2) [2011] WASC 61 .................................................................................. 23.130 Pritchard v Briggs [1980] Ch 338 ............................................................................................ 38.160 Probert v Commissioner of State Taxation (1998) 72 SASR 48 ............................. 1.25, 16.205, 20.75 Producers' Defence Fund, Re [1954] VLR 246 ............................................................................ 26.35 Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASC 30 .................. 37.95 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 ...................................... 1.165 Property Force Consultancy Pty Ltd (in liq), Re [1997] 1 Qd R 300 .............................................. 4.35 Property Ventures Investments Ltd v Regalwood Holdings Ltd [2010] 3 NZLR 231 .................... 33.25 Propestate Pty Ltd (in liq), Re [2009] NSWSC 859 ..................................................................... 22.90 Proprietors of Wakatu v Attorney-​General [2017] 1 NZLR 423 ......................................... 5.55, 24.05 Proprietors Portman Place Building Units Plan No 4313, Re [1995] 1 Qd 525 ........................... 37.25 Prospect County Council v Australian Blue Metal Ltd (1965) 11 LGRA 331 ............................. 10.365 Prosper v Wojtowicz [2005] QSC 177 ........................................................................ 17.110, 17.120 Prout v British Gas plc [1992] FSR 478 ...................................................................................... 4.295 Provident Capital Ltd v Papa (2013) 84 NSWLR 231 ................................................................. 9.195 cxxiii

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Equity and Trusts in Australia

Provincial Plasterers' Benefit Trust Fund (Board of Trustees) v Provincial Plasterers' Benefit Trust Fund (1990) 65 DLR (4th) 723 ...................................................................... 28.195 Prudential Building and Investment Society of Canterbury v Hankins [1997] 1 NZLR 114 ....... 10.280 Pryce, Re [1917] 1 Ch 234 ...................................................................................................... 18.120 PSAL Ltd v Kellas-​Sharpe (2012) 7 BFRA 337 ............................................ 9.140, 9.195, 13.55, 13.80 Psevdos v Commonwealth Bank of Australia (No 2) [2017] FCA 19 ........................................... 27.25 PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1 ...................................... 32.25 PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 ......................................................... 18.10 PTY Homes Ltd v Shand [1968] NZLR 105 .............................................................................. 31.190 Public Trust v Ottow [2009] NZHC 2904 ....................................................................... 7.205, 7.270 Public Trustee (Qld) v Opus Capital Ltd (2013) 9 ASTLR 555 ..................................................... 21.40 Public Trustee v Attorney-​General [1923] NZLR 433 ............................................................... 29.370 Public Trustee v Attorney-​General (1997) 42 NSWLR 600 ............................ 29.105, 29.195, 29.280, 29.305, 29.365 Public Trustee v Attorney-​General [2005] NSWSC 1267 ............................................. 29.325, 29.365 Public Trustee v Australian Conservation Foundation Inc [2015] WASC 29 .............................. 29.220 Public Trustee v Beckman (1914) 15 SR (NSW) 6 ....................................................... 15.100, 15.110 Public Trustee v Butler [2012] WTLR 1043 .............................................................................. 17.125 Public Trustee v Cerebral Palsy Association of Western Australia Ltd (2004) 28 WAR 496 ...................................................................................................................... 29.335 Public Trustee v Clayton (1985) 38 SASR 1 ............................................................................. 29.220 Public Trustee v Commonwealth Bank of Australia [2018] SASC 25 ......................................... 30.105 Public Trustee v Federal Commissioner of Taxation (1934) 51 CLR 75 ..................................... 29.290 Public Trustee v Gray-​Masters [1977] VR 154 .......................................................................... 26.110 Public Trustee v Jones (2007) 251 LSJS 364 ............................................................................. 18.130 Public Trustee v Kukula (1990) 14 Fam LR 97 .................................................. 1.130, 10.110, 10.375 Public Trustee v Larkham (1999) 21 WAR 295 ............................................................ 23.115, 24.160 Public Trustee v Nolan (1943) 43 SR (NSW) 169 ........................................................ 17.150, 29.145 Public Trustee v O'Donnell (2008) 101 SASR 228 .................................................................... 23.170 Public Trustee v Queensland [2004] QSC 360 ......................................................................... 29.325 Public Trustee v Regan (1933) 33 SR (NSW) 361 ....................................................................... 15.85 Public Trustee v Smith (2008) 1 ASTLR 488 ................................................................ 16.175, 20.115 Public Trustee v Taylor [1978] VR 289 ..................................................................................... 33.145 Public Trustee v Young (1980) 24 SASR 407 ............................................................... 29.145, 29.155 Pughe v Brodribb [1921] St R Qd 163 .................................................................................... 21.105 Pukallus v Cameron (1982) 180 CLR 447 ............................................. 37.90, 37.95, 37.100, 37.105 Pullan v Koe [1913] 1 Ch 9 ..................................................................................................... 18.115 Puma Australia Pty Ltd v Sportsman's Australia Ltd (No 2) [1994] 2 Qd R 159 ............... 16.80, 39.10 Puntoriero, Re (1991) 104 ALR 523 .......................................................................................... 3.150 Purcell v Deputy Federal Commissioner of Taxation (1920) 28 CLR 77 ...................................... 16.10 Purdon, Re Estate of (1935) 53 WN (NSW) 148 ............................................................. 22.55, 22.60 Purkiss, Re [1999] 3 VR 223 .................................................................................................... 21.140 PW & Co v Milton Gate Investments Ltd [2004] Ch 142 ........................................................... 10.45 Pym v Lockyer (1841) 5 My & Cr 29; 41 ER 283 .......................................................... 15.55, 26.160 Pyx Granite Co Ltd v Ministry of Housing and Local Government [1960] AC 260 ..................... 37.25

Q QBE Mercantile Mutual Ltd v Hammer Waste Pty Ltd (2004) 13 ANZ Ins Cas ¶61–​586 ............. 14.35 Quality Assurance Management Asia Pte Ltd v Zhang Qing [2013] 3 SLR 631 ................. 4.20, 24.30 Quartz Hill Gold Consolidated Mining Ltd v Beall (1882) 20 Ch D 501 ................................... 31.175 Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd, Re [1999] 2 Qd R 524 .................................................................................................... 22.75, 22.90, 25.35 Queensland Industrial Steel Pty Ltd v Jensen [1987] 2 Qd R 572 .................................. 31.50, 31.125 Queensland Mines Ltd v Hudson (1978) 18 ALR 1 .................................................................... 4.110 cxxiv

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Table of Cases

Queensland Trustees Ltd v Commissioner of Stamp Duties (Qld) (1952) 88 CLR 54 ................ 20.125 Queensland Trustees Ltd v Halse [1949] QSR 278 ................................................................... 29.185 Queensland Trustees Ltd v Woodward [1912] QSR 291 .......................................................... 29.130 Queensland University of Technology v Project Constructions (Aust) Pty Ltd (in liq) [2003] 1 Qd R 259 ............................................................................................................ 30.130 Queensland v Australian Telecommunications Commission (1985) 59 ALJR 562 ............................................................................................... 31.95, 31.115, 31.145 Queensland v Commonwealth (1988) 62 ALJR 143 .................................................................. 31.70 Queenstown Lakes Community Housing Trust, Re [2011] 3 NZLR 502 .................................................................................... 29.50, 29.75, 29.115, 29.235 Quek v Beggs (1990) 5 BPR 11,761 ............................................................... 7.30, 7.60, 7.75, 7.270 Quick, Re Estate of (unreported, SC(SA), Williams J, 12 February 1996) .................................... 37.80 Quindo Pty Ltd v Queensland Drilling Ltd (unreported, SC(WA), Commnr Hasluck QC, 26 September 1989) .................................................................................................. 23.140 Quinton v Proctor [1998] 4 VR 469 ........................... 21.105, 21.110, 22.40, 23.65, 25.140, 25.150

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R R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 ............................................................................ 20.20, 20.130, 32.30, 32.35, 32.60 R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd (1993) 11 WAR 536 ........ 2.90 R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd (2008) 13 BPR 25,161 ................................................................................................................... 30.130 R A Price Securities Ltd v Henderson [1989] 2 NZLR 257 .......................................................... 36.55 R D McKinnon Holdings Pty Ltd v Hind [1984] 2 NSWLR 121 ................................................. 33.130 R (Hodkin) v Registrar-​General of Births, Deaths and Marriages [2014] AC 610 ....................... 29.170 R (Ingenious Media Holdings plc) v Revenue and Customs Commissioners [2016] 1 WLR 4164 ......................................................................................................................... 6.155 R L Crain Inc v Hendry (1988) 48 DLR (4th) 228 ..................................................................... 31.120 R v Biggin [1955] VLR 36 .......................................................................................................... 2.130 R v Board of Trade [1965] 1 QB 603 ......................................................................................... 36.25 R v Boston (1923) 33 CLR 386 .................................................................................................... 5.25 R v Byrnes (1995) 183 CLR 501 ................................................................................................ 4.120 R v Chief Constable of the North Wales Police [1997] 3 WLR 724 ............................................. 6.200 R v Chief Constable of the North Wales Police [1999] QB 396 .................................................. 6.200 R v Consolidated Fastfrate Transport Inc (1995) 125 DLR (4th) 1 .............................................. 31.75 R v Deputy Commissioner of Taxation (1987) 72 ALR 365 ...................................................... 30.175 R v East Sussex County Council [2002] 4 All ER 58 .................................................................. 10.395 R v Hopkins (1915) 20 CLR 446 ................................................................................................ 16.95 R v Jackson (2005) 194 FLR 215 ....................................................................................... 1.80, 36.05 R v Macfarlane (1923) 32 CLR 518 ......................................................................................... 31.160 R v McNeil (1922) 31 CLR 76 ................................................................................................... 30.40 R v Sparrow (1990) 70 DLR (4th) 385 ......................................................................................... 5.45 Rabone v Shannon (1913) 30 WN (NSW) 50 .......................................................................... 24.105 Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 ................................................................ 17.170 Rae v Meek (1889) 14 App Cas 558 ........................................................................................ 24.145 Raffaele v Raffaele [1962] WAR 238 ............................................................................................. 1.55 Raftland Pty Ltd v Commissioner of Taxation (2006) 227 ALR 598 ............................................ 21.95 Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 ...................................................................................................... 3.25, 3.35, 3.100, 3.105, 3.125, 3.150 Rail Corporation New South Wales v Leduva Pty Ltd [2007] NSWSC 571 ................................ 31.140 Rail Plus Australasia Pty Ltd v Ng [2013] VSC 429 ..................................................................... 32.65 Rainbow Estates Ltd v Tokenhold Ltd [1999] Ch 64 ............................... 33.35, 33.40, 33.90, 33.110 Ramage v Waclaw (1988) 12 NSWLR 84 ................................................................................... 24.15 Ramsay v Lowther (1912) 16 CLR 1 ........................................................................................ 14.235 cxxv Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:14.

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Equity and Trusts in Australia

Ramsay v Pigram (1968) 118 CLR 271 ...................................................................................... 10.20 Ramsay v Trustee Executors and Agency Co Ltd (1948) 77 CLR 321 ......................................... 19.60 Ramsden v Dyson (1866) LR 1 HL 129 ...................................................................................... 10.60 Rana v Dalla Costa (2014) 17 BPR 33,253 ................................................................................. 11.70 Randa Lee Investments Pty Ltd v Ballan [2015] VSC 178 ........................................................... 24.15 Rank Film Distributors Ltd v Video Information Centre (a firm) [1982] AC 380 ........... 32.180, 32.210 Ranson v Customer Systems plc [2012] EWCA Civ 841 ............................................................. 4.285 Rapa v Patience (unreported, SC(NSW), McLelland J, 14 April 1985), 23.35 Raphael, Re (1903) 3 SR (NSW) 196 ......................................................................................... 23.90 Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [2005] WASC 255 ..................................................................................................... 6.170, 6.175, 6.235 Rasmussen v Rasmussen [1995] 1 VR 613 ............................................................................... 24.185 Ratford v Northavon District Council [1987] QB 357 ................................................................ 36.35 Rathbone Brothers plc v Novae Corporate Underwriting Ltd [2015] Lloyd’s Rep IR 95 .............. 14.55 Ratiu v Conway [2006] 1 All ER 571 ................................................................................... 4.30, 4.45 Rattenberry, Re [1906] 1 Ch 667 ................................................................................... 15.15, 15.25 Rattrays Wholesale Ltd v Meredyth-​Young & A'Court Ltd [1997] 2 NZLR 363 ......................... 16.140 Raukura Moana Fisheries Ltd v The Ship 'Irina Zharkikh” [2001] 2 NZLR 801 ............................ 32.65 Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 ................................... 16.110, 27.95, 27.105, 38.175 Ravenscroft v Jones (1863) 32 Beav 669; 55 ER 263 .................................................................. 15.80 Rawcliffe v Johnstone and Morton [1921] NZLR 470 ................................................................. 22.40 Rawlings v Hislop (1883) 9 VLR (E) 25 .................................................................................... 33.145 Rawson v Samuel (1841) Cr & Ph 161; 41 ER 451 .................................................................. 30.110 Rayner v N J Sheaffe Pty Ltd [2010] NSWSC 810 ...................................................................... 21.55 Rea v Omana Ranch Ltd [2013] 1 NZLR 587 ................................................................ 36.85, 36.125 Read v Brown (1888) 22 QBD 128 .............................................................................................. 3.25 Read v Chang (2010) 44 Fam LR 198 ....................................................................................... 20.70 Read v Cohen (1929) 46 WN (NSW) 154 ............................................................................... 23.185 Read v Commonwealth of Australia (1989) 167 CLR 57 .......................................................... 20.100 Read v Nicholls (2004) DFC ¶95–​307 ..................................................................................... 38.180 Reader v Fried [2001] VSC 495 .................................. 24.140, 24.150, 24.185, 24.205, 30.15, 30.20 Reading v Attorney-​General [1951] AC 507 .............................................................................. 4.285 Ready Construction Pty Ltd v Jenno [1984] 2 Qd R 78 ............................................................ 33.130 Ready's Estate, Re [1920] QSR 87 ............................................................................................ 23.175 Real Estate Securities Ltd v Kew Golf Links Estate Pty Ltd [1935] VLR 114 .................................. 11.45 Recher's Will Trusts, Re [1972] Ch 526 ....................................................................... 17.140, 17.170 Reches Pty Ltd v Tadiran Ltd (1998) 155 ALR 478 ..................................................................... 32.65 Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 ................................................... 4.65 Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Council (2004) 12 BPR 22,319 ........................................................................................................ 1.140, 38.160 Redgrave v Hurd (1881) 20 Ch D 1 ............................................................................................ 8.90 Rediffusion (Hong Kong) Ltd v Attorney-​General (Hong Kong) [1970] AC 1136 ............ 37.15, 37.35 Redland Bricks Ltd v Morris [1970] AC 652 .................................................................. 31.15, 31.145 Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 ............................................................................................. 3.120, 3.130, 8.60, 8.65, 8.75, 8.80, 38.155, P.120 Redville Holdings Pty Ltd v Four Fingers Pty Ltd (2007) 50 SR(WA) 218 .................................... 32.60 Reed v Sheehan (1982) 39 ALR 257 .......................................................................................... 10.05 Reef & Rainforest Travel Pty Ltd v Commissioner of Stamp Duties [2002] 1 Qd R 683 ............. 20.100 Rees, Re [1920] 2 Ch 59 ............................................................................................ 29.185, 29.190 Rees, Re [1950] Ch 204 ............................................................................................................ 18.80 Rees v De Bernardy [1896] 2 Ch 437 ........................................................................... 35.50, 35.100 Rees v Dominion Insurance Co of Australia Ltd (in liq) (1981) 6 ACLR 71 ................................ 28.195 Reeves v Poole [1914] 2 KB 284 ................................................................................................ 2.125 Regal Castings Ltd v Lightbody [2009] 2 NZLR 433 ................................................................ 19.145 cxxvi

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Table of Cases

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 .................... 4.35, 4.90, 4.115, 4.120, 6.375, 39.80 Regan v Paul Properties DPF No 1 Ltd [2007] Ch 135 ............................................................... 34.80 Regent v Millett (1976) 133 CLR 679 ....................................................... 12.05, 12.15, 12.50, 12.60 Registered Securities Ltd, Re [1991] 1 NZLR 545 ..................................................................... 39.110 Registrar General v Gill (unreported, CA(NSW), 16 August 1994) ............................................. 14.15 Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 ............................................................................................................ 16.15 Reid v Deane [1906] VLR 138 ................................................................................................. 22.225 Reid v Explosives Co Ltd (1887) 19 QBD 264 .......................................................................... 36.105 Reid v Howard (1995) 184 CLR 1 ............................................................................................ 32.120 Reid v Hubbard [2003] VSC 387 .................................................................................. 24.70, 24.205 Reilly McKay Pty Ltd v McKay [1982] 1 NSWLR 264 .................................................................. 32.50 Reinhold v New South Wales Lotteries Corporation [2008] NSWSC 5 ....................................... 37.85 Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 .................................... 1.95, 2.55 Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197 ....................................... 1.80 Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd (1991) 56 SASR 515 ...................... 31.130 Remnant's Settlement Trusts, Re [1970] Ch 560 ........................................................................ 25.65 Renshaw's Trust Deed, Re [1928] NZLR 460 .............................................................................. 21.80 Repatriation Commission v Tsourounakis (2007) 158 FCR 214 ................................................... P.110 Republic of Haiti v Duvalier [1989] 2 WLR 261 ........................................................................ 32.110 Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878 .......................................... 10.100 Resch's Will Trusts, Re [1969] 1 AC 514 ........................................................................ 29.80, 29.135 Residential Housing Corporation v Esber (2011) 80 NSWLR 69 ................................................. 4.255 Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359 .................................. 28.235 Retail Employees Superannuation Pty Ltd v Pain (2016) 115 ACSR 1 ............................ 25.75, 28.160 Retractable Technologies Inc v Occupational & Medical Innovations Ltd (2007) 72 IPR 58 ....... 6.255 Revenue and Customs Commissioners v Egleton [2007] 1 All ER 606 ...................................... 32.100 Rexstraw v Johnson [2003] NSWCA 287 ..................................................................................... 4.10 Reynolds v Bonnici [2017] NSWSC 828 .................................................................................... 15.65 RFD Ltd v Harris [2007] WASC 180 ........................................................................................... 32.50 RFD Ltd v Harris [2008] WASCA 87 ........................................................................................... 32.50 RHG Mortgage Securities Pty Ltd v BNY Trust Company of Australia Ltd [2009] NSWSC 1432 ....................................................................................................................... 11.10 Rhino Systems International Pty Ltd v Canon Standish (Australia) Pty Ltd (1997) 41 IPR 367 .................................................................................................................. 4.95, 6.215 Rhodes v Rhodes [2017] QSC 21 .............................................................................................. 17.15 Rhodesia Goldfields Ltd, Re [1910] 1 Ch 239 ............................................................................ 24.55 Rice v Rice (1853) 2 Drew 73; 61 ER 646 ........................................................................... 2.10, 2.25 Rice v Rice (2015) 52 Fam LR 618 ........................................................................................... 19.170 Richard Walter Pty Ltd v Federal Commissioner of Taxation (1995) 31 ATR 95 ........................ 27.135 Richards v Delbridge (1874) LR 18 Eq 11 ................................................................................ 18.105 Richards v Dove [1974] 1 All ER 888 ....................................................................................... 26.110 Richards v Kadian (2005) 64 NSWLR 204 .................................................................................. 6.305 Richardson v Federal Commissioner of Taxation (1997) 80 FCR 58 ......................................... 27.135 Richardson v Federal Commissioner of Taxation (2001) 46 ATR 285 ....................................... 27.135 Richardson v Forestry Commission (1988) 164 CLR 261 ................................... 31.35, 31.95, 31.105 Richardson v Hough (1998) 24 Fam LR 94 .............................................................................. 38.190 Richardson v Otto [1938] QWN 15 ......................................................................................... 33.145 Richardson's Will Trusts, Re [1958] 1 Ch 504 ........................................................................... 27.120 Riches v Hogben [1985] 2 Qd R 292 ........................................................ 12.25, 12.60, 12.65, 12.80 Rickard v Swenrick Building & Construction Pty Ltd [2006] VSC 382 ...................................... 32.155 Rico Pty Ltd, Re (1999) 17 ACLC 16 .......................................................................................... 36.40 Riddle v Riddle (1952) 85 CLR 202 ................................................................................ 25.35, 25.45 Riddoch (deceased), Re [1965] SASR 399 ............................................................................... 25.165 Ridout v Fowler [1904] 1 Ch 658 .............................................................................................. 1.100 cxxvii

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Equity and Trusts in Australia

Riggall v Thompson [2010] QCA 144 ....................................................................................... 13.95 Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 .................................................................. 32.30 Riley v Osborne [1986] VR 193 ...................................................................................... 12.45, 12.50 Rimmer v Webster [1902] 2 Ch 163 ................................................................................... 2.25, 2.30 Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 ...................................................... 13.05 Riseda Nominees Pty Ltd v St Vincent’s Hospital (Melbourne) Ltd [1998] 2 VR 70 ..................... 10.45 Rishmont Pty Ltd v Tweed City Medical Centre Pty Ltd [2002] 2 Qd R 222 ............................... 4.100 Rita Joan Dairies Ltd v Thomson [1974] 1 NZLR 285 ................................................................. 27.25 Riteway Express Pty Ltd v Clayton (1987) 10 NSWLR 238 ........................................................... 6.55 Riverlate Properties Ltd v Paul [1975] Ch 133 ................................................................ 8.150, 8.200 Rivers v Bondi Junction-​Waverley RSL Sub-​branch Ltd (1986) 5 NSWLR 362 .................. 37.15, 37.50 Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd (2013) 120 SASR 450 ......................................... 11.95 Rizos v Rizos [1970] VR 150 .................................................................................................... 21.140 Rizoto Kaihatsu Gumi Ltd v Capital and Coastal Ltd (1998) Q Conv R ¶54–​511 ........................ 1.100 RJK Enterprises Pty Ltd v Webb [2006] 2 Qd R 593 ................................................................... 27.40 RJR-​Macdonald Inc v Canada (Attorney-​General) (1994) 111 DLR (4th) 385 ............... 31.95, 31.100, 31.105, 31.120, 31.160, 31.165 RLA Polymers Pty Ltd v Nexus Adhesives Pty Ltd (2011) 280 ALR 125 ......................................... 6.40 Roach v Bickle (1915) 20 CLR 663 .......................................................................................... 10.360 Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327 ........................... 38.155 Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (1997) 42 NSWLR 462 ............ 30.95 Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75 ...................................................................................... 38.105, 39.05, 39.30, P.15 Robb v Green [1895] 2 QB 1 ...................................................................................................... 6.55 Robbie & Co Ltd v Witney Warehouse Co Ltd [1963] 3 All ER 613 ............................................ 36.25 Roberts, Re (1983) 70 FLR 158 ............................................................. 21.75, 21.80, 21.105, 21.110 Roberts v Gill & Co [2011] 1 AC 240 ................................................................ 16.205, 24.15, 24.20 Roberts v University of Sydney [1960] NSWR 702 ..................................................................... 19.95 Robertson, Re [1930] 2 Ch 71 ................................................................................................ 29.175 Robertson, Re [1953] VLR 685 ................................................................................................ 22.225 Robertson v Robertson [1924] NZLR 552 ................................................................................ 22.100 Robins v Incentive Dynamics Pty Ltd (in liq) (2003) 175 FLR 286 ...................... 35.65, 38.10, 38.125 Robinson & Aballa Pty Ltd v Gollan [2012] NSWSC 51 ........................................................... 10.110 Robinson, Re [1931] 2 Ch 122 ................................................................................................ 29.380 Robinson, Re [1951] Ch 198 ................................................................................................... 29.125 Robinson v Pett (1734) 3 P Wms 249; 24 ER 1049 .................................................................... 22.75 Robinson v Robinson [1961] WAR 56 ........................................................................... 26.75, 26.125 Robinson v Rouse [2005] TASSC 48 ........................................................................................ 38.210 Robinson v Western Australian Museum (1977) 138 CLR 283 ................................................... 37.45 Robinson's Settlement, Re [1912] 1 Ch 717 .............................................................................. 27.25 Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd [2007] VSC 165 ............................... 31.135 Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 ................................................................ 13.15 Robson v Flight (1865) 4 De GJ & S 608; 46 ER 1054 ............................................................. 21.135 Rochefoucauld v Boustead [1897] 1 Ch 196 .................................................................. 18.10, 18.30 Rochwerg v Truster (2002) 212 DLR (4th) 498 .......................................................................... 4.190 Rodick v Gandell (1852) 1 De GM & G 763; 42 ER 749 .............................................................. 3.50 Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 ....................................................... 22.45, 22.65 Roger Bullivant Ltd v Ellis [1987] ICR 464 .................................................................................. 6.320 Rogers, Re [1921] NZLR 245 ........................................................................................ 21.75, 21.125 Rogers v Jones (1877) 3 Ch D 688 .......................................................................................... 15.105 Rogers v Rice [1892] 2 Ch 170 ............................................................................................... 11.100 Rogers v The Queen (1994) 181 CLR 251 ................................................................................. 10.20 Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] Ch 246 ...................... 38.105 Romaine Estate v Romaine (2001) 205 DLR (4th) 320 ............................................................. 26.145 cxxviii

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Table of Cases

Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1 ..................................... 29.300 Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367 ......................... 11.40, 11.55, 11.75 Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 ............. 23.120, 23.140, 24.135, 27.55 Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 ...................................... 16.85 Ronori Pty Ltd v ACN 101 071 998 Pty Ltd [2008] NSWSC 246 .............................................. 23.130 Root v Bradley [1960] NZLR 756 ......................................................................... 35.15, 35.50, 35.60 Rosanove v O'Rourke [1987] 1 Qd R 275 ................................................................................ 36.125 Rose, Re [1952] Ch 499 .......................................................................................................... 18.105 Rose, Re Estate of [1999] NSWSC 365 ...................................................................................... 37.80 Rose v Spicer [1911] 2 KB 234 ................................................................................................ 11.110 Roseneath Holdings Ltd v Grieve [2004] 2 NZLR 168 ..................................................... 31.25, 31.95 Rosenthal (deceased), Re [1972] 3 All ER 552 ......................................................................... 24.200 Roses Only & Lush Pty Ltd v Mark Lyons Pty Ltd (1999) 47 IPR 593 ........................................ 31.155 Rosetex Company Pty Ltd v Licata (1994) 12 ACSR 779 ............................................................ 4.120 Rosher, Re (1884) 26 Ch D 801 ................................................................................................ 19.75 Ross (deceased), Re [1964] Qd R 132 ........................................................................ 17.150, 29.175 Ross v Gippsreal Ltd (2016) 122 ACSR 1 ................................................................................... 36.25 Ross v Internet Wines Pty Ltd (1999) 47 NSWLR 538 .............................................................. 32.120 Ross v Smith, Timms & Co [1909] SALR 128 ........................................................................... 10.365 Ross v State Rail Authority of New South Wales (1987) 70 LGRA 91 ........................................ 31.135 Rossetti Marketing Ltd v Diamond Sofa Co Ltd [2013] Bus LR 543 ............................................ 4.185 Rothmore Farms Pty Ltd v Belgravia Pty Ltd [1999] FCA 745 ................................................... 23.130 Round v Round [2017] NZHC 428 ............................................................................................ 7.130 Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 ......................... 20.30, 20.40, 20.65, 22.30 Roussel Uclaf v Pan Laboratories Pty Ltd (1994) 29 IPR 556 .................................................... 37.175 Rousset v Antunovich [1963] WAR 52 ....................................................................................... 22.40 Routestone Ltd v Minories Finance Ltd [1997] BCC 180 ............................................................ 36.55 Routledge v Dorril (1794) 2 Ves 356; 30 ER 671 ..................................................................... 17.100 Rowbotham v Dunnett (1878) 8 Ch D 430 ............................................................................... 18.50 Rowell v Keats (1885) 19 SALR 8 ............................................................................................. 22.105 Rowena Nominees Pty Ltd, Re (2006) 199 FLR 415 ................................................................... 39.20 Rowlands v Macdonald [2002] NSWSC 282 ............................................................................. 36.95 Rowley v Ginnever [1897] 2 Ch 503 ............................................................................................ P.75 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 .................................... 8.120 Royal Agricultural Society of England v Wilson (1924) 9 TC 62 ............................................... 29.235 Royal Automobile Club of Victoria v Paterson [1968] VR 508 .................................................. 31.175 Royal Bank of Australia, Re (1856) 6 De GM & G 572; 43 ER 1356 ......................................... 14.170 Royal Bank of Canada v Fogler, Rubinoff (1991) 84 DLR (4th) 724 .......................................... 24.165 Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705 ................................... 7.10, 7.80, 7.195 Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 .................. 7.40, 7.80, 7.95, 7.160, 7.185, 7.190, 7.195, 7.200, 8.30, P.145 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 ................. 38.65, 38.70, 38.75, 38.85, 38.110 Royal Choral Society v Inland Revenue Commissioners [1943] 2 All ER 101 ................ 29.145, 29.255 Royal College of Nursing v St Marylebone Corporation [1959] 3 All ER 663 ............................ 29.155 Royal College of Surgeons of England v National Provincial Bank Ltd [1952] AC 631 . 29.145, 29.155 Royal Mail Group Ltd v Evans [2013] EWHC 1572 .................................................................. 28.150 Royal Melbourne Hospital v Equity Trustees Ltd (2007) 18 VR 442 ...................... 25.35, 25.45, 25.50 Royal National Agricultural and Industrial Association v Chester (1974) 48 ALJR 304 ............... 29.255 Royal North Shore Hospital of Sydney v Attorney-​General (NSW) (1938) 60 CLR 396 ............................................................................................. 29.100, 29.145, 29.315 Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 ...................... 15.10, 15.15, 15.20, 15.25, 15.35 Royal Society for the Prevention of Cruelty to Animals (NSW) v Benevolent Society of New South Wales (1960) 102 CLR 629 .............................................................................. 29.220 Royal Society of London and Thompson (1881) 17 Ch D 407 ................................................. 29.145 cxxix

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Equity and Trusts in Australia

RSL Veterans' Retirement Villages Ltd v NSW Minister for Lands [2006] NSWSC 1161 .......................................................................................................... 25.55, 29.365 Ruabon Steamship Company Ltd v London Assurance [1900] AC 6 ........................... 14.125, 14.130 Rubery v Rubery [2003] WASC 164 ......................................................................................... 21.140 Rudd v Lascelles [1900] 1 Ch 815 ............................................................................................. 33.25 Ruffy Investments Pty Ltd v Payless Superbarn (Vic) Pty Ltd (2000) V ConvR ¶54–​617 ............ 33.100 Rugby School (Governors) v Tannahill [1935] 1 KB 87 .............................................................. 11.90 Ruhe v Patel [2015] ACTSC 169 ................................................................................................ 26.10 Rule's Settlement, Re [1915] VLR 670 ........................................................................................ 17.75 Rumball, Re [1956] Ch 105 ..................................................................................................... 29.185 Rummer, Re Estate of (2017) 12 ACTLR 258 ............................................................................. 17.80 Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd (No 2) (2017) 18 BPR 37 ..................................................................................................... 11.75 Russell-​Cooke Trust Co v Prentis [2003] 2 All ER 478 .................................................... 39.95, 39.115 Russell Gould Pty Ltd v Ramangkura (2014) 87 NSWLR 552 .......................................... 39.10, 39.20 Russell v RCR Tomlinson Ltd [2012] WASC 405 ......................................................................... 37.95 Russell v Russell (1891) 17 VLR 729 ......................................................................................... 24.105 Russell v Scott (1936) 55 CLR 440 ....................................................... 26.60, 26.95, 26.110, 26.115 Russell v White (1895) 16 LR (NSW) Eq 158 ........................................................ 15.10, 15.40, 15.50 Rutherford v Acton-​Adams [1915] AC 866 ................................................................................ 33.25 Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 ................................................................ 2.115, 38.160 Rutledge v Sheridan [2010] QSC 257 ..................................................................................... 18.130 RWG Management Ltd v Commissioner for Corporate Affairs (Vic) [1985] VR 385 ...................................................................................................... 23.135, 23.150, 27.55 Ryan v Aboody [2012] NSWSC 136 ................................................................................... 7.60, 7.65 Ryan v Dries (2003) 10 BPR 19,497 .......................................................................................... 26.75 Ryan v Hopkinson (1990) 14 Fam LR 151 ................................................................................. 26.55 Ryan v Mutual Tontine Westminster Chambers Association [1893] 1 Ch 116 ................. 33.35, 33.90 Ryan v Public Trustee of Queensland [1998] 1 Qd R 679 ................................. 23.170, 23.175, 25.45 Ryan v Ryan [2012] NSWSC 636 ............................................................................................. 26.130 Ryan v Ryan [2016] TASSC 4 ................................................................................................... 10.270 Rybak v Langbar International Ltd [2011] PNLR 16 ................................................................... 31.80 Ryde Holdings Ltd v Rainbow Corporation Ltd Co (New Zealand) (unreported, PC, 15 November 1993) .......................................................................................................... 34.145 Ryder v Frohlich (No 2) [2006] NSWSC 1325 ........................................................................... 32.65 Ryder v Taylor (1935) 36 SR (NSW) 31 ..................................................................................... 18.10 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 ................................. 37.90, 37.95, 37.100 Rymer, Re [1895] 1 Ch 19 ...................................................................................................... 29.330

S S & D International Pty Ltd (No 4), Re (2010) 79 ACSR 595 ................................................... 20.100 S v Attorney-​General [2003] 3 NZLR 450 .................................................................................. 4.310 S v P (2006) 198 FLR 1 ............................................................................................................. 18.10 S v S [1997] 1 WLR 1621 .......................................................................................................... 6.300 Sabri, Re (1996) 21 Fam LR 213 .................................................................... 38.180, 38.195, 38.250 Sacks v Gridiger (1990) 22 NSWLR 502 ....................................................................... 17.15, 20.120 Saffron Sun Pty Ltd v Perma-​Fit Finance Pty Ltd (in liq) (2005) 65 NSWLR 603 ............ 14.105, 27.40 Sahade v BP Australia Pty Ltd (2004) 12 BPR 22,149 .................................................... 1.140, 38.160 Sainsbury's Settlement, Re [1967] 1 All ER 878 ......................................................................... 25.60 Saitta Pty Ltd v Commonwealth of Australia (2003) Aust Torts Rep ¶81–​717 ........................... 10.395 Saleh v Romanous (2010) 79 NSWLR 453 .................................................................. 10.205, 10.215 Salkeld v Vernon (1758) 1 Eden 64; 28 ER 608 ....................................................................... 30.155 Salmar Holdings Pty Ltd v Hornsby Shire Council [1971] 1 NSWLR 192 .................................... 37.25 Salsbury Laboratories Inc v Merieux Laboratories Inc (1990) 908 F 2d 706 ............................... 6.345 cxxx

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Table of Cases

Salt v Cooper (1880) 16 Ch D 544 .............................................................................................. P.40 Salt v Stratstone Specialist Ltd [2015] CTLC 206 ..................................................................... 35.100 Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 ..................................................................................... 6.10, 6.25, 6.40, 6.55, 6.265 Salvation Army (Vic) Property Trust v Shire of Fern Tree Gully (1952) 85 CLR 159 ................... 29.130 Salvo v New Tel Ltd [2005] NSWCA 281 .................................................................... 16.115, 27.105 Salway v Snowden (1888) 14 VLR 669 ...................................................................................... 15.95 Sambach v Dalston (1634) Tot 188; 21 ER 164 ......................................................................... 16.35 Samford Hall Trust, Re [1995] 1 Qd R 60 ................................................................................ 29.270 Samimi v Seyedabadi [2013] NSWCA 279 ................................................................................ 32.60 Samsung Electronics Co Ltd v Apple Inc (2011) 217 FCR 238 ...................................... 31.90, 31.165 Sande v Medsara Pty Ltd [2004] NSWSC 147 ......................................................................... 37.125 Sandeman's Will Trusts, Re [1937] 1 All ER 368 ....................................................................... 25.150 Sanderson Computers Pty Ltd v Urica Library Systems BV (1998) 44 NSWLR 73 ....................... 37.30 Sanderson Motors (Sales) Pty Ltd v Yorkstar Motors Pty Ltd [1983] 1 NSWLR 513 ........ 31.55, 31.110 Sandford v D V Building & Constructions Co Pty Ltd [1963] VR 137 ........................................... 3.35 Sandri v O'Driscoll [2014] VSCA 88 ......................................................................................... 10.205 Sandwich West (Township) v Bubu Estates Ltd (1986) 30 DLR (4th) 477 ................................... 31.45 Sankey v Whitlam (1978) 142 CLR 1 ................................................................... 31.75, 37.10, 37.20 Sanko Steamship Co Ltd v DC Commodities (Australasia) Pty Ltd [1980] WAR 51 ..................... 32.30 Sanofi-​Aventis Australia Pty Ltd v Kartono [2006] NSWSC 1284 ................................................ 21.05 Santander UK plc v R A Legal Solicitors [2014] EWCA Civ 183 ................................... 24.200, 24.205 Santos Ltd v American Home Assurance Co (1987) 4 ANZ Ins Cas ¶60–​795 ....... 14.05, 14.35, 14.55 Santos Ltd v Pettingell (1979) 4 ACLR 110 ................................................................................ 37.85 Sapio v Carter [1959] NZLR 848 ............................................................................................... 21.80 Sara Properties Pty Ltd (in liq), Re [1982] 2 NSWLR 277 ..................................... 14.05, 14.20, 14.90 Saraceni v Mentha (No 2) (2012) 269 FLR 12 ........................................................................... 14.05 Saratoga v Canjs (2010) 78 ACSR 600 .................................................................................... 30.130 Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658 ........................................... 14.225 Sargent v ASL Developments Ltd (1974) 131 CLR 634 ................................................. 15.100, 35.95 Sargent v National Westminster Bank plc (1990) 61 P & CR 518 ............................................ 28.210 Sartoris' Estate, Re [1892] 1 Ch 11 .......................................................................................... 27.120 SAS Trustee Corporation v Cox (2011) 285 ALR 623 ................................................................. 20.75 Satchithanantham v National Australia Bank Ltd [2009] NSWCA 268 ....................................... 7.240 Saul v Lin (No 2) (2004) 60 NSWLR 275 ........................................................................ 21.20, 21.80 Saunders & Co (a firm) v Hague [2004] 2 NZLR 475 ................................................................ 8.140 Saunders v Leonardi (1976) 1 BPR 9409 ................................................................................... 11.60 Saunders v Vautier (1841) Cr & Ph 240; 41 ER 482 ...................................................... 25.05, 25.135 Savage, Re [1918] 2 Ch 146 ................................................................................................... 25.150 Savage v Carruthers [1958] QWN 21 ...................................................................................... 22.110 Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170 ........................................... 23.120, 23.135 Save the Ridge Inc v Australian Capital Territory (2004) 182 FLR 155 ........................................ 37.45 Savill v NZI Finance Ltd [1990] 3 NZLR 135 ................................................................................ 8.90 Savings & Loan Corporation v Bear (1930) 75 ALR 980 .......................................................... 14.225 Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2015] 1 NZLR 281 ............................................... 3.10 Saxby Soft Drinks Pty Ltd v George Saxby Beverages Pty Ltd (2009) 14 BPR 27,213 ................. 37.70 Say-​Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 ................................................................................... 4.220, 34.145, 38.30, 38.120 Saylor v Madsen Estate (2005) 261 DLR (4th) 597 ..................................................... 26.135, 26.160 Sayseng v Kellogg Superannuation Pty Ltd [2003] NSWSC 945 .............................................. 28.160 SB v State of New South Wales (2004) 13 VR 527 ..................................................................... 4.315 Scales (deceased), Re Will of [1972] 2 NSWLR 108 .................................................................... 29.25 Scammell & Co v WorkCover Corporation (2006) 95 SASR 278 ................................................ 1.160 Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana [1983] 2 AC 694 ....... 11.10, 13.95 Scarfe v Matthews [2012] WTLR 1579 .................................................................................... 15.105 cxxxi

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Equity and Trusts in Australia

Scarisbrick, Re [1951] Ch 622 ................................................................................................... 29.75 Schalit v Joseph Nadler Ltd [1933] 2 KB 79 ............................................................................... 21.45 Schebsman, Re [1944] Ch 83 ................................................................................................... 17.45 Schellenberger v Trustees Executors & Agency Co Ltd (1952) 86 CLR 454 .............................. 29.265 Schering Chemicals Ltd v Falkman Ltd [1982] 1 QB 1 ................................................................. 6.10 Schering Pty Ltd v Forrest Pharmaceutical Co Pty Ltd [1982] 1 NSWLR 286 .............................. 31.50 Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275 ................................................... 31.15 Schindler v Pigault (1975) 30 P & CR 328 ................................................................................ 11.75 Schlieske v Minister for Immigration and Ethnic Affairs (1987) 79 ALR 554 ............................... 10.20 Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 ............................................................. 20.110 Schmidt v Air Products of Canada Ltd (1994) 115 DLR (4th) 631 .............................. 25.125, 28.200 Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 .............................................. 17.130, 20.30, 20.35, 20.40, 20.70, 25.145 Scholefield Goodman & Sons Ltd v Zyngier [1984] VR 445 ........................... 14.125, 14.130, 14.135 Scholefield Goodman & Sons Ltd v Zyngier [1986] 1 AC 562 .......... 14.125, 14.145, 14.150, 14.180 Schreuder v Murray (No 2) (2009) 41 WAR 169 ............................................................ 20.35, 20.60 Schroder's Wills Trusts, Re [2004] 1 NZLR 695 ........................................................................ 22.120 Schuhmacher v Emmerson [2013] QSC 205 ............................................................................. 21.55 Schultz, Re Estate of [1961] SASR 377 ..................................................................................... 29.150 Schultz v Bank of Queensland Ltd [2016] 2 Qd R 86 ................................................................. 7.215 Schultz v Corwill Properties Pty Ltd (1969) 90 WN (Pt 1) (NSW) 529 ........................................ 2.130 Schwabacher, Re (1908) 98 LT 127 ........................................................................................... 33.60 Scientific Investment Pension Plan Trusts, Re [1999] Ch 53 .......................................... 19.75, 27.115 Scoones v Galvin [1934] NZLR 1004 ............................................................................ 18.95, 18.105 Scott & Associates Engineering Ltd v Finavera Renewables Inc (2013) 79 Alta LR (5th) 172 ............................................................................................................ 6.210 Scott, Re [1948] SASR 193 ...................................................................................................... 23.170 Scott v Brown, Doering, McNab & Co [1891–​4] All ER Rep 654 ............................................... 19.30 Scott v Frank F Scott (London) Ltd [1940] Ch 794 .................................................................... 37.85 Scott v Murray (1887) 13 VLR 425 ............................................................................................ 22.75 Scott v Murray (1888) 14 VLR 708 .......................................................................................... 22.110 Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 ................................................................................................ 20.45, 20.130, 22.50, 23.30, 23.35, 23.70 Scott v Pauly (1917) 24 CLR 274 ............................................................................................ 26.135 Scott v Scott (1963) 109 CLR 649 .................................................................................. 24.75, 39.75 Scott v Scott [2009] NSWSC 567 .................................................................... 26.75, 26.110, 26.125 Scottish Equitable plc v Derby [2001] 3 All ER 818 .................................................................... 8.120 Scottish Properties Pty Ltd, Re (1977) 2 ACLR 264 ......................................................... 36.05, 36.15 SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 .............................................. 4.95, 4.110 Seaborn v Marsden (1926) 26 SR (NSW) 485 ..................................................... 15.65, 15.75, 15.80 Seager v Copydex Ltd [1967] 1 WLR 923 .............................................................. 6.10, 6.35, 6.215, 6.220, 6.355, P.50 Seale's Marriage Settlement, Re [1961] Ch 574 .............................................................. 21.80, 25.65 Searose Ltd v Seatrain UK Ltd [1981] 1 WLR 894 ...................................................................... 32.75 Seawell v Webster (1859) 29 LJ Ch 71 .................................................................................... 33.115 Secretary, Department of Families, Housing, Community Services and Indigenous Affairs v Elliott (2009) 174 FCR 387 ................................................................................... 20.150 Secretary, Department of Social Security v Agnew (2000) 96 FCR 357 ....................... 38.225, 38.255 Secretary, Department of Social Security v James (1990) 95 ALR 615 ........................................ 18.10 Secton Pty Ltd v Delawood Pty Ltd (1991) 21 IPR 136 ....................................................... 6.30, 6.35 Secureland Mortgage Investments Nominees Ltd v Harman & Co Solicitor Nominee Co Ltd [1991] 2 NZLR 399 ...................................................................... 2.10, 2.60, 17.85, P.110 Seddon v North Eastern Salt Co Ltd [1905] 1 Ch 326 ................................................ 35.100, 35.110 Seelander v Rechner (1884) 18 SALR 82 ................................................................................... 23.85 cxxxii

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Table of Cases

Seeley v Mercantile Bank of Australia (in liq) (1892) 18 VLR 485 .................................... 16.95, 39.15 Segelman (deceased), Re [1996] Ch 171 ..................................................................... 17.140, 29.75 Segelov v Ernst and Young Services Pty Ltd (2014) 10 ASTLR 390 ............................................. 20.75 Segelov v Ernst and Young Services Pty Ltd (2015) 89 NSWLR 431 .............................. 20.75, 24.150 Selangor United Rubber Estates Ltd v Craddock (No 3) [1968] 2 All ER 1073 ............................ 38.55 Seldon v Davidson [1968] 1 WLR 1083 ..................................................................................... 26.55 Selkirk v McIntyre [2013] 3 NZLR 265 ......................................................................... 22.45, 23.160 Selous, Re [1901] 1 Ch 921 ...................................................................................................... 16.05 Semelhago v Paramadevan (1996) 136 DLR (4th) 1 ..................................................... 33.20, 34.120 Sen v Headley [1991] 2 All ER 636 .......................................................................................... 18.135 Series 5 Software Ltd v Philip Clarke [1996] FSR 273 .................................................. 31.120, 31.165 Seton v Dawson (1841) IV Court Sess Cas 2nd series 310 ....................................................... 24.145 Seton v Slade (1802) 7 Ves 265; 32 ER 108 ............................................................................... 13.55 Severn and Wye and Severn Bridge Railway Co, Re [1896] 1 Ch 559 ........................................ 27.75 Sew Hoy v Sew Hoy [2001] 1 NZLR 391 ................................................................................... 4.205 Seymour CBD Pty Ltd v Noosa Shire Council (2002) 123 LGERA 113 ...................................... 10.395 Seymour v Seymour (1996) 40 NSWLR 358 ............................................................................ 24.185 Shah v Shah [2001] 3 WLR 31 ................................................................................................ 10.390 Shakespeare Memorial Trusts, Re [1923] 2 Ch 398 .................................................................. 29.145 Shalson v Russo [2005] Ch 281 ................................................................ 35.65, 39.20, 39.25, 39.30 Shannon, Re Will of [1977] 1 NSWLR 210 ................................................................................. 22.80 Shannon v Hughes & Co (1937) 109 SW (2d) 1174 ................................................................. 8.130 Shardlow v Cotterell (1881) 20 Ch D 90 ................................................................................. 33.105 Sharma v Magistrates' Court of Victoria (unreported, SC(Vic), Beach J, 18 December 1995) .......................................................................................................... 11.105 Sharp v Attorney-​General of New South Wales [2015] NSWSC 1580 ...................................... 29.160 Sharrment v Official Trustee (1988) 82 ALR 530 ...................................................................... 26.120 Shaw v Foster (1872) LR 5 HL 321 .......................................................................................... 38.155 Shaw v Gates [1909] 1 Ch 389 ............................................................................................... 24.215 Shaw v Harris (No 2) (1992) 3 Tas R 167 .................................................................................. 33.20 Shaw v Narain [1992] 2 NZLR 544 ........................................................................................... 32.40 Shaw v Shaw (1989) FLC ¶92–​030 ......................................................................................... 20.145 Shaw's Will Trusts, Re [1957] 1 WLR 729 ................................................................................. 29.150 Shawyer v Amberday Pty Ltd (in liq) (2001) 10 BPR 18,869 ............................................ 2.15, 2.105, 12.80, 36.125 Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 ...................................... 3.50, 36.25 Sheehy v Edwards, Dunlop and Co (1899) 13 WN (NSW) 166 ............................................... 31.150 Sheffield v Sheffield [2014] WTLR 1039 ...................................................................................... 3.20 Sheldon, Re Will of [1972] 1 NSWLR 196 .................................................................................. 22.90 Shelfer v City of London Electric Lighting Company [1895] 1 Ch 287 ............................ 34.80, 34.85 Shell (Petroleum Mining) Co Ltd v Todd Petroleum Mining Co Ltd [2008] 2 NZLR 418 ............ 31.10 Shellenberger v Trustees Executors and Agency Co Ltd (1952) 86 CLR 454 ............................. 29.225 Shelley Films Ltd v Rex Features Ltd [1994] EMLR 134 .............................................................. 6.270 Shelmerdine, Re (1864) 33 LJ Ch 474 ....................................................................................... 21.75 Shephard, Re (1889) 43 Ch D 131 .......................................................................................... 36.145 Shephard v Cartwright [1955] AC 431 ......................................................................... 26.60, 26.145 Shepherd Homes Ltd v Sandham [1971] 1 Ch 340 ................................................................. 31.145 Shepherd v Doolan [2005] NSWSC 42 ............................................................ 26.75, 38.215, 38.230 Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 ............. 3.45, 3.50, 3.80, 3.100, 3.105, 3.110, P.115 Shepherd's Trusts, Re [1955] NZLR 585 ......................................................................... 21.75, 21.80 Sheppard, Re Will of [1972] 2 NSWLR 714 ................................................................................ 22.90 Sheppard v Oxenford (1855) 1 K & J 491; 69 ER 552 ............................................................. 24.125 Sherriff, Re Will of [1971] 2 NSWLR 438 .................................................................................. 22.180 Sherringham, Re Will of (1901) 1 SR (NSW) B & P 48 ............................................................... 22.90 cxxxiii

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Equity and Trusts in Australia

Sherry, Re (1884) Ch D 692 .................................................................................................... 39.100 Sheslow v Kostin (1997) 11 BPR 21,043 at 21,048 per Young J ............................................... 38.135 Shiel v Transmedia Productions Pty Ltd [1987] 1 Qd R 199 ..................................................... 31.175 Shiloh Spinners Ltd v Harding [1973] AC 691 ................................................. 11.15, 11.105, 11.110 Shipley Urban District Council v Bradford Corporation [1936] Ch 375 ...................................... 37.95 Shirlaw v Taylor (1991) 31 FCR 222 ............................................................................... 1.105, 1.160 Shivas v Bank of New Zealand [1990] 2 NZLR 327 .................................................................... 8.180 Shivas v BTR Nylex Holdings NZ Ltd [1997] 1 NZLR 318 ........................................................ 31.150 Shoreline Homes Ltd, Re [1982] 1 NZLR 663 ............................................................................ 1.110 Short v Short [1961] NZLR 516 .............................................................................................. 24.190 Shortall v White (2008) DFC ¶95–​411 ............................................................................ 17.90, P.170 Shotter v Westpac Banking Corporation [1988] 2 NZLR 316 .................................. 7.35, 7.150, P.145 Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 ................... 3.55, 3.60, 3.70, 3.120, 3.135 Shropshire Union Railways and Canal Company v The Queen (1875) LR 7 HL 496 ..................... 2.75 Sidaway v Board of Governors of Bethlehem Royal Hospital [1985] 1 AC 871 ........................... 4.300 Siddell v Vickers (1892) 9 RPC 152 ......................................................................................... 34.165 Sidey v Huntly (1900) 21 LR (NSW) Eq 104 ............................................................................ 22.180 Sidhu v Van Dyke (2014) 251 CLR 505 ...................................................................... 10.160, 10.245 Sidney Raper Pty Ltd v Commonwealth Trading Bank of Australia [1975] 2 NSWLR 227 ...................................................................................................................... 30.90 Sidney, Re [1908] 1 Ch 488 .................................................................................................... 29.250 Sieff v Fox [2005] 1 WLR 3811 ....................................................................................... 23.45, 23.50 Silkman v Shakespeare Haney Securities Ltd (2011) 8 ASTLR 117 .............................................. 20.35 Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 .......... 31.05, 31.50, 31.90, 31.125, 31.150, 31.165, 31.185 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 ................................................. 2.105, 10.50, 10.235 Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997 ............................. 36.50, 36.55 Silver v Silver [1958] 1 WLR 259 ............................................................................................. 26.125 Silverwood v Silverwood (1997) 74 P & CR 453 ....................................................................... 19.50 Silvester v Sands [2004] WASC 266 .................................................................... 26.75, 26.80, 26.85, 26.130, 38.200, 38.270 Simcevski v Dixon (No 2) [2017] VSC 531 ..................................................................... 11.70, 11.75 Simersall, Re (1992) 108 ALR 375 ....................................................................... 20.40, 20.55, 22.30 Simes & Martin Pty Ltd (in liq) v Dupree (1990) 55 SASR 278 ................................................ 28.195 Simic v New South Wales Land and Housing Corp (2016) 260 CLR 85 ............... 37.70, 37.75, 37.95 Simm v Anglo-​American Telegraph Co (1879) 5 QBD 188 ...................................................... 10.355 Simmonds, Re [1954] QWN 3 .................................................................................................. 21.80 Simpson & Co v Thompson (1877) 3 App Cas 279 ................................................................... 14.40 Simpson (deceased), Re [1961] QWN 50 ................................................................... 29.150, 29.380 Simpson, Re (1906) 7 SR (NSW) 78 .......................................................................................... 15.80 Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229 ...................................... 4.240, 4.245 Simpson v Lord Howden (1837) 3 My & Cr 97; 40 ER 862 ..................................................... 37.155 Simpson v Norfolk and Norwich University Hospital NHS Trust [2012] QB 640 ........................... 3.40 Simpson v Sax [2015] NZAR 1210 ............................................................................................ 24.15 Sims v Craig Bell & Bond [1991] 3 NZLR 535 ........................................................................... 4.135 Simsek v Minister for Immigration and Ethnic Affairs (1982) 148 CLR 636 .............................. 32.150 Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] 1 BCLC 202 ........................ 38.35 Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2012] Ch 453 ............................... 38.35 Sinclair v Brougham [1914] AC 398 .......................................................................................... 39.25 Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 ......................................................... 2.120 Singh (deceased), Re [1995] 2 NZLR 487 .................................................................................. 17.15 Singh v Ali [1960] AC 167 ........................................................................................................ 19.20 Singh v Nazeer [1979] Ch 474 ................................................................................................. 33.05

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Table of Cases

Singh v Singh (2004) 31 Fam LR 242 ........................................................................................ 26.55 Sinnott v Hockin (1882) 8 VLR (E) 205 ...................................................................................... 21.05 Sino Iron Pty Ltd v Palmer (No 3) [2015] 2 Qd R 574 ............................................................... 17.55 Sipad Holding DDPO v Popovic (1995) 14 ACLC 307 ................................................ 36.105, 36.155 Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyd's Rep 428 ......................... 31.80, 31.85 Sir Moses Montefiore Jewish Home v Howell & Co (No 7) Pty Ltd [1984] 2 NSWLR 406 .......................................................................................... 25.135, 25.145, 29.335 Siskina v Distos Compania Naviera SA [1979] AC 210 ............................................................... 31.25 Sivewright v Casey (1949) 49 SR (NSW) 294 ............................................................................ 23.85 Sivritas v Sivritas (2008) 23 VR 349 ..................................................................... 26.75, 26.90, 38.15 Skeats' Settlement, Re (1889) 42 Ch D 522 .............................................................................. 21.55 Skids Programme Management Ltd v McNeill [2013] 1 NZLR 1 ....................................... 6.30, 6.360 Skinner v Alfonso-​Skinner [2010] FamCA 329 ......................................................................... 31.195 Skinner v James Symphonic Visible Measures Ltd (1927) 28 SR (NSW) 20 ................................. 24.65 Skinner v Trustees Executors and Agency Co Ltd (1901) 26 VLR 670 ....................................... 24.180 Skouloudis Group Pty Ltd (in liq) v Planet Enterprizes Pty Ltd (2002) 41 ACSR 369 ................. 19.135 Sky Channel Pty Ltd v Tszyu (No 2) [2000] NSWSC 1150 .......................................... 14.150, 14.165 Sky Petroleum Ltd v VIP Petroleum Ltd [1974] 1 WLR 576 ........................................................ 33.45 Sky v Body (1970) 92 WN (NSW) 934 ...................................................................................... 22.65 Skywest Airlines Pty Ltd v Northern Territory of Australia (1987) 45 NTR 29 .............................. 33.90 Skywest Aviation Pty Ltd v Commonwealth of Australia (1995) 126 FLR 61 ............................. 10.200 Slan v Edgerly (2008) 14 BPR 26,369 ........................................................................................ 1.100 Slater v Global Finance Group Pty Ltd (1999) 150 FLR 264 ............................... 20.55, 21.20, 36.150 Slazenger v Feltham (No 2) (1889) 6 RPC 531 ........................................................................ 37.175 Sledmore v Dalby (1996) 72 P & CR 196 ................................................................................ 10.275 Slee v Warke (1949) 86 CLR 271 ....................................................................... 33.170, 37.15, 37.95 Sleight v Lawson (1857) 3 K & J 292; 69 ER 1119 ................................................................... 24.105 Slevin, Re [1891] 2 Ch 236 ..................................................................................................... 29.340 “Slogger” Automatic Feeder Co Ltd, Re [1915] 1 Ch 478 ......................................................... 36.80 Small v Gray (2004) 1 BFRA 249 ................................................................................................. 9.90 Smilie Pty Ltd v Bruce (1998) NSW ConvR ¶55–​841 ................................................................. 11.55 Smith (deceased), Re [1954] SASR 151 ................................................................................... 29.325 Smith (deceased), Re [1967] VR 341 ....................................................................................... 29.225 Smith (deceased), Re [2015] 4 All ER 329 ................................................................................. 7.130 Smith Kline & French Laboratories (Australia) Ltd v Commonwealth (1991) 173 CLR 194 ........ 6.290 Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 ....................................... 6.155, 6.175, 6.235, 6.255, 6.290, 6.295, 6.305 Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679 ....................................... 6.10, 6.155, 6.170, 6.175, 6.235, 6.290 Smith Kline & French Laboratories Ltd, Re [1990] 1 AC 64 ............................................ 6.175, 6.190 Smith Kline & French Laboratories Ltd v Attorney-​General [1991] 2 NZLR 560 ......................... 6.175 Smith, Re [1914] 1 Ch 937 ..................................................................................................... 17.170 Smith, Re [1928] Ch 915 ........................................................................................................ 27.115 Smith, Re [1950] Ch 915 ........................................................................................................ 25.140 Smith, Re [1967] VR 341 ........................................................................................................ 29.265 Smith v Chadwick (1882) 20 Ch D 27 ........................................................................................ 8.90 Smith v Cock [1911] AC 317 .................................................................................................. 14.130 Smith v Day (1882) 21 Ch D 421 .............................................................................. 31.130, 31.140 Smith v Glegg [2005] 1 Qd R 561 ....................................................................... 1.130, 4.170, 7.30, 7.280, 7.285, 16.180 Smith v Green (1903) 22 NZLR 976 ........................................................................................ 22.110 Smith v Hughes (1871) LR 6 QB 597 ............................................................................. 8.150, 8.200

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Equity and Trusts in Australia

Smith v Matthews (1861) 3 De GF & J 138; 45 ER 831 ............................................................. 18.10 Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 .................................................................. 3.45 Smith v Smith (1861) 1 Drew & Sm 384; 62 ER 426 ............................................................... 23.170 Smith v Smith (2004) 12 BPR 23,051 ............................................................ 8.200, 9.50, 9.65, 9.70, 9.90, 9.115, 9.155 Smith v Smith [2006] WASC 166 .............................................................................................. 21.70 Smith v Smith [2007] NTSC 31 .................................................................................. 26.140, 26.150 Smith v West Australian Trustee Executor & Agency Co Ltd (1950) 81 CLR 320 ........... 29.10, 29.290 Smith v William Charlick Ltd (1924) 34 CLR 38 ........................................................................... 8.10 SmithKline Beecham plc v Apotex Europe Ltd [2006] 1 WLR 872 ............................................ 31.130 SmithKline Beecham plc v Apotex Europe Ltd [2007] Ch 71 ................................................... 31.130 Smiths Ltd v Middleton [1979] 3 All ER 842 .............................................................................. 36.45 Smith's Will Trusts, Re [1962] 2 All ER 563 ............................................................................... 29.135 Smithson v Hamilton [2008] 1 WLR 1453 ................................................................................. 23.50 Smyth, Re [1970] ALR 919 ............................................................................................... 3.35, 3.100 Smyth v Jessep [1956] VLR 230 ...................................................................................... 11.60, 11.80 Smythe v Thomas (2007) 71 NSWLR 537 ................................................................................. 33.45 Snowden (deceased), Re [1979] Ch 528 ........................................................................ 18.45, 18.80 Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198 ............................................ 16.145, 17.50, 38.130 Sobey v Sainsbury [1913] 2 Ch 513 ........................................................................................ 33.130 Societe Generale de Paris Tramways Union Co Ltd (1884) 14 QBD 424 .................................... 2.130 Societe Nationale Industrielle Aerospatiale v Lee Kiu Jak [1987] AC 871 .................................. 31.195 Soia v Bennett (2014) 46 WAR 301 ............................................................................................. 4.20 Soinco SACI v Novokuznetsk Aluminium Plant [1998] QB 406 ................................... 36.130, 36.135 Solle v Butcher [1950] 1 KB 671 ................................................................................... 8.160, 8.170, 8.200, 35.110 Somerville v Attorney-​General (1921) 21 SR (NSW) 450 ......................................................... 29.380 Somes, Re [1896] 1 Ch 250 ........................................................................................................ 8.85 Somodaj v Australian Iron & Steel Ltd (1963) 109 CLR 285 ...................................................... 10.20 Sony Corp v Anand [1981] FSR 398 ........................................................................................ 32.200 Sony Music Australia Ltd v Tansing (1993) 27 IPR 649 ............................................................ 31.100 Sood v Christianos (2008) 14 BPR 26,101 ................................................................................. 1.155 Sorna Pty Ltd v Flint (2000) 21 WAR 563 ....................................................................... 26.45, 38.10 Soulos v Korkontzilas (1997) 146 DLR (4th) 214 ............................................... 35.65, 38.50, 38.170 Souster v Epsom Plumbing Contractors Ltd [1974] 2 NZLR 515 .............................................. 34.120 South Australia v ATSA Pty Ltd (1980) 24 SASR 66 .................................................................. 10.395 South Australian Employers’ Chamber of Commerce & Industry Inc v Commissioner of State Taxation [2017] SASC 127 ......................................................................... 29.05, 29.235 South Bucks District Council v Porter [2003] 2 AC 558 ............................................................. 31.15 South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien” NV [1987] 1 AC 24 ....................................................................................... 31.25, 31.195, P.155 South Coast Oils Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qd R 680 ..................................... 12.25 South Eastern Sydney Area Health Service v Wallace (2003) 59 NSWLR 259 .............. 17.150, 29.175 South v Bloxham (1865) 2 Hem & M 457; 71 ER 541 ............................................................. 14.220 Southend-​on-​Sea Corporation v Hodgson (Wickford) Ltd [1962] QB 416 ............................... 10.395 Southern Cross Commodities Pty Ltd (in liq) v Ewing (1987) 11 ACLR 818 .................... 24.65, 24.70 Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd [2005] QSC 233 .................................................................................................................. 30.15, 30.25 Southern Equities Corporation Ltd (in liq) v Bond (No 4) [2000] SASC 358 ............................. 32.120 Southern Properties (WA) Pty Ltd v Department of Conservation and Land Management [2006] WASC 40 ............................................................................. 31.125, 31.160 Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1 ..................................... 4.95, 4.100, 34.120 Southern Tableland Insurance Brokers Pty Ltd (in liq) v Schomberg (1986) 11 ACLR 337 ........ 31.135

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Table of Cases

Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162 ................................................................................................ 1.65, 23.130, 23.135 Southgate v Sutton [2011] WTLR 1235 ..................................................................................... 25.35 Southwood v Attorney-​General [2000] WTLR 1199 ................................................................. 29.100 Spalla v St George Wholesale Finance Pty Ltd (1999) 95 FCR 359 ........................................... 10.145 Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285 ........................................................................................................ 38.100, 38.105 Sparrow (deceased), Re [1967] VR 739 .................................................... 15.65, 15.70, 15.80, 15.95 Special Purposes of Income Tax, Commissioners for v Pemsel [1891] AC 531 ............................................................................................. 29.25, 29.30, 29.35, 29.155 Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2010] VSC 443 .................................. 17.50 Spedding (deceased), Re [1966] NZLR 447 .............................................. 22.75, 22.80, 22.90, 24.05 Spedley Securities Ltd (in liq) v Greater Pacific Investments Pty Ltd (in liq) (1992) 30 NSWLR 185 .............................................................................................................P.45, P.170 Spehr (deceased), Re [1965] VR 770 .......................................................................... 29.175, 29.300 Speight, Re (1883) 22 Ch D 727 .................................................................................... 22.20, 22.55 Speight v Gaunt (1883) 9 App Cas 1 ............................................................................. 22.20, 22.55 Spellson v George (1987) 11 NSWLR 300 ................................................................................. 20.30 Spellson v George (1992) 26 NSWLR 666 ............................................................................... 24.160 Spellson v Spellson (1989) FLC ¶92–​044 ................................................................................. 19.170 Spence, Re [1938] 1 Ch 96 ..................................................................................................... 29.160 Spence, Re [1949] WN 237 ...................................................................................................... 18.80 Spence v Crawford [1939] 3 All ER 271 .......................................................................... 35.05, 35.15 Spencer v Spencer [2014] 2 NZLR 190 ............................................................. 22.80, 24.10, 24.150 Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd (2000) 23 WAR 291 ......... 14.135 Speno Rail Maintenance Australia Pty Ltd v Metals and Minerals Insurance Pte Ltd (2009) 226 FLR 306 ..................................................................................... 14.30, 14.35, 14.195 Spensley's Will Trusts, Re [1954] Ch 233 ................................................................................. 29.185 Spika Trading Pty Ltd v Harrison (1990) 19 NSWLR 211 ............................................. 14.140, 14.170 Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 ....................................................... 4.155 Spira v Commonwealth Bank of Australia (2003) 57 NSWLR 544 ................................................ 9.35 Spong v Spong (1914) 18 CLR 544 ................................................................................... 7.55, 7.70 Spooner v British Telecommunications [2000] PLR 65 ............................................................. 28.150 Sports Data Pty Ltd v Prozone Sports Australia Pty Ltd (2014) 316 ALR 475 ................................ 6.30 Sprange v Bernard (1789) 2 Bro CC 585; 29 ER 320 ................................................................. 17.80 Spread Trustee Co Ltd v Hutcheson [2012] 2 AC 194 ................................... 24.140, 24.145, 24.150 Spread v Morgan (1865) 11 HLC 588; 11 ER 1461 ................................................................. 15.105 Springfield Acres Ltd (in liq) v Abacus (Hong Kong) Ltd [1994] 3 NZLR 502 ........................... 38.110 Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142 ........................................................... 3.60 SSC & B: Lintas New Zealand Ltd v Murphy [1986] 2 NZLR 436 ................................................. 6.60 St George v Burnett (1871) 5 SALR 77 ...................................................................................... 24.95 St John (Lord) v St John (Lady) (1803) 11 Ves 526; 32 ER 1192 ............................................... 37.160 St Kilda Road Pty Ltd v Parker Simmonds Securities Ltd (2002) V ConvR ¶54–​652 .................. 18.100 Stable (deceased), Re [1957] QSR 90 ................................................. 17.20, 29.130, 29.245, 29.315 Stacey v Stacey [2010] WASC 85 ............................................................................................ 16.205 Stack v Dowden [2007] 2 AC 432 .................................................................... 26.75, 26.80, 38.165, 38.225, 38.235, 38.240 Staff Benefits Pty Ltd, Re [1979] 1 NSWLR 207 ................................... 23.125, 23.130, 23.150, 27.20 Stafford v Stafford (1857) 1 De G & J 193; 44 ER 697 ............................................................... 30.15 Stambulich v Ekamper (1998) 41 ATR 169 ................................................................................ 24.70 Stambulich v Ekamper (2001) 48 ATR 159 ................................................................................ 24.70 Stamp Duties for the State of NSW, Commissioner of v Bone (1976) 135 CLR 223 ................. 30.145 Stamp Duties (NSW), Commissioner of v Carlenka Pty Ltd (1995) 41 NSWLR 329 ...... 37.65, 37.105, 37.115, 37.120

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Equity and Trusts in Australia

Stamp Duties (NSW), Commissioner of v Pendal Nominees Pty Ltd (1989) 167 CLR 1 .............. 26.15 Stamp Duties (NSW), Commissioner of v Perpetual Trustee Co Ltd (1926) 38 CLR 272 ........... 25.105 Stamp Duties (NSW), Commissioner of v Sprague (1960) 101 CLR 184 ..................... 16.190, 20.155 Stamp Duties (NSW), Commissioner of v Way (1951) 83 CLR 570 .......................................... 29.225 Stamp Duties (Qld), Commissioner of v Jolliffe (1920) 28 CLR 178 ................................ 17.15, 17.30 Stamp Duties (Qld), Commissioner of v Livingston [1965] AC 694 ................................ 1.25, 16.205 Standard Chartered Bank Australia Ltd v Bank of China (1991) 23 NSWLR 164 ....................... 10.165 Standard Chartered Bank v Walker [1982] 1 WLR 1410 ............................................................. 36.30 Standard Insurance Co Ltd (in liq) v Sidey [1967] NZLR 86 ..................................................... 24.205 Standing v Bowring (1885) 31 Ch D 282 .................................................................................. 20.75 Stannard v Fisons Pension Trust Ltd [1991] 1 PLR 225 ............................................................... 23.50 Stansfield DIY Wealth Pty Ltd (in liq), Re (2014) 291 FLR 17 .................................................... 23.125 Staples v Baker [1999] 1 Qd R 317 .................................................................................. 14.125, P.75 State Bank of New South Wales Ltd v Burke (1997) 8 BPR 15,511 ...................... 7.165, 7.180, 7.280, 9.155, 35.25 State Bank of New South Wales Ltd v Chia (2000) 50 NSWLR 587 ........... 7.220, 36.30, 36.50, 36.85 State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543 .......................................... 7.255 State Bank of New South Wales Ltd v Vecchio (unreported, SC(NSW), Kirby J, 10 November 1998) ................................................................................................................... 9.30 State Bank of New South Wales Ltd v Watt [2002] ACTSC 74 ..................................................... 9.55 State Bank of South Australia v Rothschild Australia Ltd (1990) 8 ACLC 925 ........ 14.20, 14.85, 14.90 State Bank of Victoria v Parry [1989] WAR 240 .......................................................................... 32.90 State Government Insurance Commission v Switzerland Insurance Australia Ltd (1995) 64 SASR 537 ................................................................................ 14.190, 14.195, 14.210 State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 ................................................................................................. 14.30, 14.35, 14.55 State of Minnesota v Delano Community Development Corporation (1997) 571 NW 2d 233 ................................................................................................................ 29.235 State of South Australia v Lampard-​Trevorrow (2010) 106 SASR 331 ......................................... 4.315 State of South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231 .............................................................................................. 4.30, 4.40, 4.55, 4.70 State of Victoria v Nine Network (2007) 19 VR 476 .................................................................. 6.155 State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 .............. 10.175, 10.185, 10.205, 10.220 State Revenue, Commissioner of v Lam & Kym Pty Ltd (2004) 10 VR 420 .................... 16.180, 17.05 State Revenue, Commissioner of v Landrow Properties Pty Ltd (2010) 79 ATR 800 ..................... 1.10 State Revenue, Commissioner of v Serana Pty Ltd (2008) 36 WAR 251 ....................................... 1.10 State Revenue, Commissioner of v Viewbank Properties Pty Ltd (2004) 55 ATR 501 ........................................................................................................... 17.100, 17.115 State Revenue (Victoria), Commissioner of v Royal Insurance Australia Ltd (1994) 182 CLR 51 ......................................................................................................................... 8.130 State Savings Bank of Victoria, Commissioners of v Patrick Intermarine Acceptances Ltd (in liq) [1981] 1 NSWLR 175 .................................................................. 14.70, 14.80, 14.180 State Transport Authority v Apex Quarries Ltd [1988] VR 187 ...................................... 31.55, 31.110 State Trustees Ltd v Attorney-​General (Vic) (2013) 301 ALR 798 ............................................. 29.220 Statewide Developments Pty Ltd v Higgins (2011) 15 BPR 29,195 ............................................ 11.75 Statoil ASA v Louis Dreyfus Energy Services LP [2008] 2 Lloyd's Rep 685 ........................ 8.175, 8.200 Stavrianakos v State of Western Australia [2016] WASC 64 ......................................... 38.165, 38.255 Stead, Re [1900] 1 Ch 237 ....................................................................................................... 18.50 Steadman v Steadman [1976] AC 536 ............................................................... 12.05, 12.20, 12.30, 12.45, 12.80, P.90 Steakhouse v Barnston (1805) 10 Ves 453; 32 ER 921 ............................................................. 30.150 Steedman v Drinkle [1916] 1 AC 275 ........................................................................................ 11.25 Steed's Will Trusts, Re [1960] Ch 407 ........................................................................................ 25.60

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Table of Cases

Steel, Re [1979] Ch 218 ............................................................................................................. P.110 Steel Wing Co Ltd, Re [1921] 1 Ch 349 ...................................................................................... 3.35 Steele, Re [1925] SASR 272 ..................................................................................................... 29.125 Stefanovic v Petrovic (unreported, CA(NSW), 30 October 1989) ............................................. 18.105 Stehar Knitting Mills Pty Ltd v Southern Textile Converters Pty Ltd [1980] 2 NSWLR 514 .......... 30.95 Stein v Sybmore Holdings Pty Ltd (2006) 64 ATR 325 .................................................... 25.45, 25.50 Stenhouse Australia Ltd v Phillips [1974] AC 391 ........................................................................ 6.55 Stenning, Re [1895] 2 Ch 433 ..................................................................................... 39.65, 39.100 Stephens, Ex parte (1808) 11 Ves 24; 32 ER 996 ..................................................................... 30.105 Stephens Travel Service International Pty Ltd (receivers and managers appointed) v Qantas Airways Ltd (1988) 13 NSWLR 331 ..................................... 16.115, 17.15, 38.125, 39.55 Stephens v Avery [1988] Ch 449 ............................................................................ 6.10, 6.95, 6.100 Stephens v Ell (2002) Q ConvR ¶54–​568 ................................................................................ 20.145 Stephenson Jordan & Harrison Ltd v MacDonald & Evans (1951) 69 RPC 10 .............................. 6.50 Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 ........................................ 23.65, 25.150 Stephenson's Settled Estates, Re (1906) 6 SR (NSW) 420 .......................................................... 22.40 Stepping Stones Nursery Ltd v Attorney-​General [2002] 3 NZLR 414 .................. 6.130, 6.195, 6.200 Stepps Investments Ltd v Security Capital Corp Ltd (1976) 33 DLR (3d) 351 ............................ 8.200 Steria Ltd v Hutchison [2007] ICR 445 .................................................................................... 10.160 Sterling Winthrop Pty Ltd v Boots Company (Australia) Pty Ltd (1996) ATPR ¶41–​452 ............ 30.175 Stern v McArthur (1988) 165 CLR 489 ................................ 1.20, 9.185, 11.05, 11.10, 11.15, 11.25, 11.30, 33.160, 38.155, P.150, P.160 Sterns Trading Pty Ltd v Steinman (1988) NSW ConvR ¶55–​414 ................................ 10.190, 38.160 Stevens & Cutting Ltd v Anderson [1990] 1 EGLR 95 .............................................................. 10.160 Stevens, Re [1898] 1 Ch 162 .................................................................................................. 24.105 Stevens v Hutchinson [1953] 1 Ch 299 ................................................................................... 36.145 Stevens v Standard Chartered Bank Australia Ltd (1988) 53 SASR 323 .................................... 10.335 Stevenson v Brand [1917] NZLR 902 ...................................................................................... 24.170 Stewart Chartering Ltd v C & O Managements SA [1980] 1 All ER 718 ..................................... 32.90 Stewart Dawson & Co (Vict) Pty Ltd v Federal Commissioner of Taxation (1933) 48 CLR 683 ....................................................................................................................... 26.100 Stewart Gill Ltd v Horatio Myer & Co Ltd [1992] 2 All ER 257 ................................................. 30.130 Stewart, Re [1908] 2 Ch 251 .................................................................................................. 18.130 Stewart, Re [2003] 1 NZLR 809 ................................................................................. 16.200, 22.120 Stewart, Re [2004] 1 NZLR 354 ................................................................................... 16.200, 30.40 Stewart v Atco Controls Pty Ltd (in liq) (2014) 252 CLR 307 ..................................................... 1.105 Stewart v Layton (1992) 111 ALR 687 ....................................................................................... 4.150 Stewart's Will Trusts, Re [1962] QWN 24 ................................................................................. 29.175 Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 .............................................................................. 11.90 Stilbo Pty Ltd v MCC Pty Ltd (in liq) (2003) 11 Tas R 63 ......................................................... 24.195 Stillman and Wilson, Re (1950) 15 ABC 68 ............................................................................... 24.65 Stimpson v Smith [1999] Ch 340 .................................................................. 14.130, 14.140, 14.180 Stininato v Auckland Boxing Association (Inc) [1978] 1 NZLR 1 ................................................ 34.75 Stirling House (Guildford) Pty Ltd v Coghlan [2005] FCA 1623 ............................................... 32.155 Stirling v Forrester (1821) 3 Bli 575; 4 ER 712 ............................................................ 14.125, 14.130 Stocker v McElhinney (No 2) [1961] NSWR 1043 ................................................................... 31.175 Stockloser v Johnson [1954] 1 QB 476 ...................................................................................... 11.20 Stoke-​on-​Trent City Council v B & Q (Retail) Ltd [1984] AC 754 ............................................... 31.75 Stone (deceased), Re (1970) 91 WN (NSW) 704 ............................................. 17.180, 29.95, 29.250 Stone v Glendyc Pty Ltd [2003] WASC 80 ............................................................................... 10.280 Stone v Hoskins [1905] P 194 ................................................................................................. 38.145 Stone v Leonardis (2011) 110 SASR 503 ................................................................................... 2.120 Stone v Owen [2001] 1 Qd R 419 ........................................................................................... 38.200 Stone v Registrar of Titles [2012] WASC 21 ................................................................ 18.105, 18.130

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Equity and Trusts in Australia

Stooke v Taylor (1880) 5 QBD 569 ........................................................................................... 30.95 Stormriders Pty Ltd v Copperart Pty Ltd (2005) NSW ConvR ¶56–​110 .................................... 37.130 Stowe v Stowe (1995) 15 WAR 363; 127 FLR 25 .................... 10.65, 10.110, 10.375, 33.80, 38.170, 38.180, 38.185, 38.195, 38.270 Strachan & Co Ltd v Lyall & Sons Pty Ltd [1953] VLR 81 ........................................................... 12.75 Strakosch, Re [1949] Ch 529 .................................................................................................. 29.100 Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246 ............... P.60 Strang, Re (1941) 41 SR (NSW) 114 ............................................................................ 22.200, 25.35 Stratford Racing Club Inc v Adlam [2008] NZAR 329 .................................................................. 4.85 Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 ................... 17.140, 17.160, 29.60, 29.265, 29.270 Stratten, Re Will of [1981] WAR 58 ........................................................................................... 22.90 Stratton v Simpson (1971) 125 CLR 138 .................................................................... 29.300, 29.305 Stratton's Disclaimer, Re [1958] Ch 42 ...................................................................................... 20.75 Stratulatos v Stratulatos [1988] 2 NZLR 424 ................................................................ 38.20, 38.230 Strauss v Wykes [1916] VLR 200 ......................................................................... 20.55, 22.30, 22.90 Streamline Fashions Pty Ltd, Re [1965] VR 418 ............................................................ 37.95, 37.100 Streeter, Re Will of (1905) 11 ALR 99 ...................................................................................... 21.125 Streetscape Projects (Aust) Pty Ltd v City of Sydney (2013) 85 NSWLR 196 ................................ 4.30 Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) 295 ALR 760 ........ 4.30, 6.180, 6.215 Strickland v Weldon (1885) 28 Ch D 426 ................................................................................. 29.15 Strong v Bird (1874) LR 18 Eq 315 ......................................................................................... 18.130 Stuart, Re [1897] 2 Ch 583 ..................................................................................................... 24.215 Stuart v Armourguard Security Ltd [1996] 1 NZLR 484 ................................................ 20.130, 23.70 Stuart v Clemons [1951] Tas SR 23 ........................................................................................... 17.20 Stubbings v Jams 2 Pty Ltd [2017] VSC 404; (2015) 23 CCLJ 123; (2017) 91 ALJ 809 ................................................................................................................ 9.190, 9.195 Stuckey v Trustees, Executors & Agency Co Ltd [1910] VLR 55 ............................................... 26.150 Stucley, Re [1906] 1 Ch 67 ......................................................................................................... 1.95 Stump v Gaby (1852) De GM & G 623; 42 ER 1015 ............................................................... 24.170 Succession Duties (SA), Commissioner of v Isbister (1941) 64 CLR 375 ...................... 16.190, 20.155 Suco Gold Pty Ltd (in liq), Re (1983) 33 SASR 99 .................................................................... 23.120 Sue Dwyer Real Estate Pty Ltd v Histcote Pty Ltd (2001) 161 FLR 413 ....................................... 36.20 Sugar Australia Pty Ltd v Lend Lease Services Pty Ltd [2015] VSCA 98 ..................................... 31.100 Suggitt v Suggitt [2012] WTLR 1607 ...................................................................................... 10.235 Suhrer & Co AG v Transradio Ltd [1967] RPC 329 .................................................................... 6.215 Sui Mei Huen v Official Receiver (2008) 248 ALR 1 ................................................................. 38.195 Sullivan v Sclanders (2000) 77 SASR 419 ........................................ 6.10, 6.265, 6.275, 6.290, 6.295 Sullivan v Sullivan (2006) 13 BPR 24,755 .................................................................. 10.135, 10.170, 10.240, 10.255 Sullivan v Trilogy Funds Management Ltd [2017] FCAFC 153 ................................................. 28.250 Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 ............................................................................................. 10.145, 10.155, 10.195 Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 149 ............................................................................................ 10.145, 10.155, 10.195 Summers v Cocks (1927) 40 CLR 321 ........................................................................... 33.145, P.180 Sumner v Sumner (1884) 10 VLR (E) 261 ..................................................................... 29.10, 29.275 Suncorp Insurance and Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285 ............................................................................................................... 1.20, 20.100 Sundance Spas NZ Ltd v Sundance Spas Inc [2001] 1 NZLR 111 .............................................. 31.30 Sundt Wrigley & Co Ltd v Wrigley (unreported, CA(UK), Sir Thomas Bingham MR, 23 June 1993) ..................................................................................................................... 32.85 Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214 ..................................................................... 11.05

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Table of Cases

Super 1000 Pty Ltd v Pacific General Securities Pty Ltd (2008) 221 FLR 427 ............................ 38.105 Super Chem Products Ltd v American Life and General Insurance Co Ltd [2004] 2 All ER 358 .......................................................................................................... 10.145, 30.165 Sutherland, Re Application of (2004) 50 ACSR 297 ................................................................... 22.90 Sutherland Shire Council v Leyendekkers [1970] 1 NSWR 356 ...................................... 37.15, 37.20, 37.25, 37.50 Sutton v House of Running Ltd [1979] 2 NZLR 750 ................................................... 31.100, 31.120 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 ...................................................................... 33.130 Svanosio v McNamara (1956) 96 CLR 186 ........................................................ 8.185, 8.195, 35.110 Swain v Law Society [1982] 1 WLR 17 .................................................................................... 24.165 Swain v Law Society [1983] 1 AC 598 ..................................................................................... 24.165 Swaine, Re [1939] SASR 25 ..................................................................................................... 29.340 Swale v Swale (1856) 22 Beav 584; 52 ER 1233 ...................................................................... 24.125 Swan, Re (2014) 120 SASR 149 .............................................................................................. 29.135 Swan v Perpetual Executors and Trustees Association of Australia Ltd (1897) 23 VLR 293 ........ 24.160 Swaney v Austin Health (2013) 11 ASTLR 654 ........................................................................ 29.160 Swanson v Dungey (1892) 25 SALR 87 ...................................................................... 21.110, 21.130 Swanson v Emmerton [1909] VLR 387 ...................................................................................... 22.55 Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 .............................. 2.120 Swift v Dairywise Farms Ltd [2000] 1 WLR 1177 ....................................................................... 17.65 Swift v Westpac Banking Corporation (1995) ATPR ¶41–​401 ............................................. 9.45, 9.55 Swimsure (Laboratories) Pty Ltd v McDonald [1979] 2 NSWLR 796 ........................................ 31.175 Swinburne v Federal Commissioner of Taxation (1920) 27 CLR 377 .......................................... 29.30 Swindle v Harrison [1997] 4 All ER 705 .......................................................................... 34.20, 34.35 Swiss Bank Corporation v Lloyds Bank Ltd [1979] Ch 548 ......................................................... 1.140 Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 ................................... 1.110, 1.140, 1.155 Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289 .................................... 30.115 Sydney Appliances Pty Ltd v Eurolinx Pty Ltd (2001) 19 ACLC 633 ......................................... 19.135 Sydney Consumers' Milk and Ice Co Ltd v Hawkesbury Dairy & Ice Society Ltd (1931) 31 SR (NSW) 458 ................................................................................................................. 33.05 Sydney Consumers' Milk and Ice Co Ltd v Hawkesbury Dairy and Ice Society Ltd (1931) 31 SR (NSW) 458 ........................................................................................ 33.05, 33.145 Sydney Homoeopathic Hospital v Turner (1959) 102 CLR 188 .......................... 19.95, 29.25, 29.325 Sydney Municipal Council v Kelly (1920) 20 SR (NSW) 107 .................................................... 29.175 Sydney Turf Club v Crowley [1971] 1 NSWLR 724 .................................................................... 14.40 Sykes (deceased), Re [1974] 1 NSWLR 597 ............................................................................... 25.35 Sykes v Stratton [1972] 1 NSWLR 145 ...................................................................................... 19.55 Sylvan Lake Golf & Tennis Club Ltd v Performance Industries Ltd (2002) 209 DLR (4th) 318 .................................................................................................. 37.65, 37.135 Symes v Hughes (1870) LR 9 Eq 475 ........................................................................................ 19.10 Symes v Weedow (1893) 14 ALT 197 ...................................................................................... 21.110 Symmons Plains Pastoral Holdings Pty Ltd v Tasmanian Motor Racing Co Pty Ltd (1996) 6 Tas R 284 ...................................................................................... 11.90, 11.95, 11.100 Symon, Re [1944] SASR 102 ................................................................................................... 19.140 Symonds v Raphael (1998) 24 Fam LR 20 ................................................................................. 10.30 Symons, Re [1949] SASR 289 .................................................................................................. 23.175 Synman Family Trust, Re [2013] VSC 364 ................................................................................. 25.60 Synod of the Anglican Catholic Church in Australia v Tee (2012) 7 ASTLR 365 ........................ 29.185 Sze Tu v Lowe (2014) 89 NSWLR 317 .............................................................. 1.105, 24.195, 26.40, 26.140, 38.10 Szelley, Marriage of (1977) FLC ¶90–​323 ................................................................................ 19.160 Szep v Blanken [1969] SASR 65 ................................................................................................ 35.95 Szozda v NSW Trustee and Guardian (2012) 17 BPR 32,223 ................................................... 20.125

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Equity and Trusts in Australia

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T T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 .................................................. 12.30, 12.50 T Choithram International SA v Pagarini [2001] 1 WLR 1 ..................................... 3.85, 18.145, P.120 Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 52 ALR 651 ..................... 31.95, 31.160 Tabone (deceased), Re [1968] VR 168 ......................................................................... 22.95, 22.110 Taddeo v Taddeo (1978) 19 SASR 347 ....................................................................... 26.125, 26.145 Taddeo v Taddeo (2010) 6 ASTLR 508 .................................................................................... 38.165 Tailby v Official Receiver (1888) 13 App Cas 523 ................................................ 3.105, 3.150, 17.75 Tait-​Jamieson v Cardrona Ski Resort Ltd [2012] 1 NZLR 105 ..................................................... 18.35 Talacko v Talacko [2009] VSC 349 ........................................................................................... 32.130 Talacko v Talacko (No 2) (2009) 25 VR 613 ............................................................... 32.130, 32.135 Talbot, Earl v Hope-​Scott (1858) 4 K & J; 70 ER 58 ................................................................. 24.125 Talbot, Marriage of (1994) 18 Fam LR 685 .............................................................................. 32.155 Talbot v General Television Corporation Pty Ltd [1980] VR 224 ........................................ 6.35, 6.345 Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489 ................................................ 1.65, 2.35 Tamplin v James (1880) 15 Ch D 215 ..................................................................................... 33.170 Tancred v Delagoa Bay and East Africa Railway Co (1889) 23 QBD 239 ...................................... 3.35 Tannous v Cipolla Bros Holdings Pty Ltd (2001) 10 BPR 18,563 ..................................... 11.90, 11.95 Tantau v MacFarlane [2010] NSWSC 224 ................................................................................. 20.90 Tanti v Carlson [1948] VLR 401 .................................................................................... 22.95, 22.100 Tanumihardjo v Federal Commissioner of Taxation (1997) 36 ATR 400 ................................... 26.135 Tanwar Enterprises Pty Ltd v Cauchi (2002) 10 BPR 19,107 ...................................................... 11.35 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 .................................. 11.05, 11.25, 11.30, 11.35, 11.40, 14.15, P.160 Tara Shire Council v Garner [2003] 1 Qd R 556 ......................................................... 38.105, 38.115 Tarasiewicz v Titford [2013] NZHC 3466 .................................................................................. 25.35 Target Holdings Ltd v Redferns (a firm) [1996] AC 421 ....................................... 24.30, 24.40, 24.45 Tartsinis v Navona Management Co [2015] EWHC 57 (Comm) ........................ 37.75, 37.95, 37.105 Tasmanian Electronic Commerce Centre Pty Ltd v Federal Commissioner of Taxation (2005) 142 FCR 371 .......................................................................................................... 29.235 Tate Access Floors Inc v Boswell [1991] Ch 512 ...................................................................... 32.180 Tate v Williamson (1866) LR 7 Ch App 55 .................................................................................. P.135 Tatham v Huxtable (1950) 81 CLR 639 ...................................................................... 16.175, 17.125 Tavitian v Commissioner of Highways (2010) 270 LSJS 453 ...................................................... 37.05 Taxation, Commissioner of v Bargwanna (2012) 244 CLR 655 ................................................ 24.140 Taxation, Commissioner of v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 ................. 1.10 Taxation, Deputy Commissioner of v Assaad (2000) 45 ATR 466 ............................................... 32.65 Taxation, Deputy Commissioner of v Bollands [2012] FCA 1050 ............................................... 32.80 Taxation, Deputy Commissioner of v Gashi (2010) 27 VR 127 .................................................. 32.65 Taxation, Deputy Commissioner of v Gashi (2011) 84 ATR 175 ................................................. 32.35 Taxation, Deputy Commissioner of v Haritos [2013] VSC 12 ..................................................... 32.80 Taxation, Deputy Commissioner of v Hickey (1996) 33 ATR 453 ................................ 32.115, 32.120 Taxation, Deputy Commissioner of v Hua Wang Bank Berhad (2010) 273 ALR 194 ........ 32.60, 32.65 Taxation, Deputy Commissioner of v Kliman (2002) 29 Fam LR 301 ......................................... 32.30 Taxation, Deputy Commissioner of v Rettke (1995) 31 IPR 457 ................................................. 6.155 Taxation, Deputy Commissioner of v Robertson (2000) 44 ATR 1 ................................... 32.60, 32.65 Taxation, Deputy Commissioner of v Uysal (2004) 56 ATR 278 ................................................. 32.35 Taxation, Federal Commissioner for v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342 ............. 11.50 Taxation, Federal Commissioner of v Aid/​Watch Incorporated (2009) 178 FCR 423 ................ 29.105 Taxation, Federal Commissioner of v Bamford (2010) 240 CLR 481 ........................................ 27.135 Taxation, Federal Commissioner of v Betro Harrison Constructions Pty Ltd (1978) 20 ALR 647 ................................................................................................................... 3.45, 3.50 Taxation, Federal Commissioner of v Card (1963) 109 CLR 177 ................................................ 36.25 Taxation, Federal Commissioner of v Clark (2011) 190 FCR 206 ............................................. 25.115 cxlii Gino, Dal Pont. 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Table of Cases

Taxation, Federal Commissioner of v Clarke (1927) 40 CLR 246 ................................... 17.60, 18.110 Taxation, Federal Commissioner of v Commercial Nominees of Australia Ltd (2001) 75 ALJR 1172 ..................................................................................................................... 25.115 Taxation, Federal Commissioner of v Consolidated Press Holdings Ltd (2001) 207 CLR 235 .... 19.150 Taxation, Federal Commissioner of v Cornell (1946) 73 CLR 394 .............................................. 20.80 Taxation, Federal Commissioner of v Everett (1980) 143 CLR 440 ........................ 3.35, 3.100, 3.115, 3.140, 3.145, 3.150 Taxation, Federal Commissioner of v Harmer (1990) 94 ALR 541 ............................................ 27.150 Taxation, Federal Commissioner of v Harmer (1991) 173 CLR 264 .......................................... 27.150 Taxation, Federal Commissioner of v Hart (2004) 217 CLR 216 ............................................... 19.150 Taxation, Federal Commissioner of v Karageorge (1996) 34 ATR 196 ...................................... 32.115 Taxation, Federal Commissioner of v Linter Textiles Australia Ltd (in liq) (2003) 129 FCR 42 ....... 1.10 Taxation, Federal Commissioner of v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 ......................................................................................................................... 1.10 Taxation, Federal Commissioner of v Marbray Nominees Pty Ltd 85 ATC 4750 ....................... 20.155 Taxation, Federal Commissioner of v Peabody (1994) 181 CLR 359 ........................................ 19.150 Taxation, Federal Commissioner of v Ramsden (2005) 58 ATR 485 .................... 20.75, 20.80, 20.85, 20.125, 20.155, 27.155 Taxation, Federal Commissioner of v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342 .............. 35.05 Taxation, Federal Commissioner of v Spotless Services Ltd (1996) 186 CLR 404 ...................... 19.150 Taxation, Federal Commissioner of v Triton Foundation (2005) 147 FCR 362 .......................... 29.235 Taxation, Federal Commissioner of v Vegners (1991) 21 ATR 1347 ........................................... 20.75 Taxation, Federal Commissioner of v Whiting (1943) 68 CLR 199 ........................................... 27.145 Taxation, Federal Commissioner of v Word Investments Ltd (2008) 236 CLR 204 ........ 29.80, 29.280 Taxation, Federal Commissioner of v Zoffanies Pty Ltd (2003) 54 ATR 280 .............................. 19.150 Taxes (Qld), Commissioner of v Camphin (1937) 57 CLR 127 ................................................. 38.160 Tayles v Davis (2009) 3 ASTLR 222 .......................................................................................... 26.125 Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 1 All ER 897 ............................ 10.310 Taylor, Re [1950] VLR 476 ....................................................................................................... 22.105 Taylor v Bowers (1876) 1 QBD 291 ........................................................................................... 19.55 Taylor v Deputy Federal Commissioner of Taxation (1969) 123 CLR 206 ................................... 18.95 Taylor v Dickens [1998] 3 FCR 455 ............................................................................ 10.110, 10.310 Taylor v Federal Commissioner of Taxation (1970) 119 CLR 444 ................................ 27.140, 27.145 Taylor v Johnson (1983) 151 CLR 422 ............................................................... 8.190, 8.200, 37.125 Taylor v Marmaras [1954] VLR 476 .................................................................................. 1.55, 1.150 Taylor v McGillivray (1994) 110 DLR (4th) 64 ........................................................................... 4.300 Taylor v Plumer (1815) 3 M & S 562; 105 ER 721 ..................................................................... 39.10 Taylor v Princess Margaret Hospital for Children Foundation Inc (2012) 42 WAR 259 .............. 29.310 Taylor v Schofield Peterson [1999] 3 NZLR 434 ......................................................................... 34.50 Taylor v Taylor (1875) LR 20 Eq 155 .......................................................................................... 15.40 Taylor v Taylor (1910) 10 CLR 218 ..................................................... 29.25, 29.130, 29.135, 29.150 Taylor v Taylor [2017] 4 WLR 83 ............................................................................................... 18.10 Taylor v Van Dutch Marine Holding Ltd [2017] 1 WLR 2571 ..................................................... 32.35 Taylor v Watson [2002] NZCA 189 ......................................................................................... 38.180 Tchenguiz v Imerman [2011] Fam 116 ..................................................................................... 6.255 TCT Logistics Inc v Nordeen (1999) 181 DLR (4th) 74 ............................................................... P.190 Te Huango, Re [1993] 3 NZLR 77 ........................................................................................... 24.215 Te Runanga o Wharekauri Rekohu Inc v Attorney-​General [1993] 2 NZLR 301 ............................ 5.55 Teague v Trustees Executors and Agency Co Ltd (1923) 32 CLR 252 ....................................... 25.165 Teasdale v Braithwaite (1877) 5 Ch D 630 .............................................................................. 18.115 Tebbs (deceased), Re [1976] 2 All ER 858 ............................................................................... 24.105 Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd (2014) 48 WAR 261 ........................................................................................................................ 37.70 Tegra (NSW) Pty Ltd v Gundagai Shire Council (2007) 160 LGERA 1 ............... 31.50, 31.90, 31.145, 31.160, 31.170 cxliii

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Equity and Trusts in Australia

Telecom New Zealand Ltd v Sintel-​Com Ltd [2008] 1 NZLR 780 ......................................P.100, P.175 Telecommunications Industry Ombudsman Ltd v Commissioner of State Revenue (2017) 105 ATR 822 ............................................................................................................ 29.85 Telephonic Communicators International Pty Ltd v Motor Solutions Australia Pty Ltd (2004) 62 IPR 323 ...................................................................................................... 6.55, 6.235 Television Broadcasts Ltd v Nguyen (1988) 21 FCR 34 ............................................................ 32.155 Telford v Telford [2003] VSC 8 .................................................................................................. 21.80 Telstra Corporation Ltd v Australian Telecommunications Authority (1995) 133 ALR 417 .......... 37.25 Telstra Corporation Ltd v First Netcom Pty Ltd (1997) 148 ALR 202 ............................................ 6.55 Telstra Super Pty Ltd v Finch [2009] VSCA 318 ....................................................................... 28.165 Telstra Super Pty Ltd v Flegeltaub (2000) 2 VR 276 ................................................................. 28.160 Tempest, Re (1866) LR 1 Ch App 485 ....................................................................................... 21.80 Tempest v Lord Camoys (1882) 21 Ch D 571 ........................................................................... 23.35 Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 .......................................................... 2.135, 39.20 Tennant, Re (1942) 65 CLR 473 ................................................................................................ 24.65 Tennant, Re [1996] 2 NZLR 633 ................................................................................ 29.215, 29.235 Tennant v Trenchard (1869) LR 4 Ch App 537 .......................................................................... 1.155 Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2012] VSCA 103 ............................... P.160 Terceiro v First Mitmac Pty Ltd (1997) 8 BPR 15,733 ............................................................... 37.125 Terrapin Ltd v Builders' Supply Co (Hayes) Ltd [1967] RPC 375 ................................................... 6.85 Tessman v Costello [1987] 1 Qd R 283 ............................................................................ 9.90, 9.110 Tetley, Re [1923] 1 Ch 258 ..................................................................................................... 29.220 Thai-​Lao Lignite (Thailand) Co Ltd v Laos [2013] 2 All ER (Comm) 883 ..................................... 31.85 Tharp v Tharp [1916] 1 Ch 142 ................................................................................................ 18.30 Theakston v MGN Ltd [2002] EMLR 22 ..................................................................................... 6.100 Theodore v Mistford Pty Ltd [2003] QCA 580 .................................................................. 1.75, 18.10 Theodore v Mistford Pty Ltd (2005) 221 CLR 612 ........................................ 1.70, 1.75, 12.70, 18.10 Thermax Ltd v Schott Industrial Glass Ltd [1981] FSR 289 ....................................................... 32.160 Thexton v Thexton [2001] 1 NZLR 237 .................................................................................... 4.115 Thiess Pty Ltd v Arup Pty Ltd [2012] QSC 185 ............................................................. 37.95, 37.105 Third Chandris Shipping Corporation v Unimarine SA [1979] 2 All ER 972 ................................ 32.50 Thomas & Co v Brown (1899) 4 Com Cas 186 ......................................................................... 14.60 Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 ................................................................... 31.85 Thomas and Agnes Carvel Foundation v Carvel [2008] Ch 395 ............................................... 38.145 Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 ................... 37.105, 37.125 Thomas Borthwick & Son (Australasia) Ltd v South Otago Freezing Co Ltd [1978] 1 NZLR 538 ......................................................................................................................... 31.55 Thomas Developments Pty Ltd v Setlee Pty Ltd (2002) 11 BPR 20,495 ....................................... P.160 Thomas Marshall (Exports) Ltd v Guinle [1979] Ch 227 ................................................... 6.30, 6.325 Thomas v Atherton (1878) 10 Ch D 185 ................................................................................. 14.125 Thomas v Harper (1935) 36 SR (NSW) 142 .................................................................. 33.35, 33.110 Thomas v Howell (1874) LR 18 Eq 198 ................................................................................... 29.145 Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 ..................................... 3.55, 3.125, 3.135 Thomas v Nottingham Incorporated Football Club Ltd [1972] Ch 596 ................................... 14.140 Thomas v Pearce [2000] FSR 718 .............................................................................................. 6.240 Thomas v Perpetual Trustee Co (Ltd) (1955) 94 CLR 537 .......................................................... 17.15 Thomas v SMP (International) Pty Ltd (No 6) [2010] NSWSC 1311 ............................... 24.65, 24.70 Thomas v Thomas [1954] 2 All ER 462 ...................................................................................... 25.35 Thompson, Re Will of [1910] VLR 251 ..................................................................................... 24.215 Thompson v Federal Commission of Taxation (1959) 102 CLR 315 ........................................... 29.60 Thompson v Foy [2010] 1 P & CR 16 ................................................................................ 7.15, 7.50 Thompson v Guaranty Trust Co of Canada (1973) 39 DLR (3d) 408 ......................................... 12.45 Thompson v Palmer (1933) 49 CLR 507 .............................................. 10.35, 10.45, 10.220, 10.230 Thompson v White (2006) 13 BPR 24,537 ................................................................................ 18.10 Thompson's Settlement, Re [1985] 2 All ER 720 ........................................................................ 22.95 cxliv

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Table of Cases

Thompson's Trustee in Bankruptcy v Heaton [1974] 1 All ER 1239 ............................................ 4.205 Thomson Australia Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 ........... 31.05 Thomson v Anderson (1870) LR 9 Eq 523 ................................................................................. 36.90 Thomson v Nicholson [1939] VLR 157 .................................................................................... 19.140 Thorn v Bettens [2006] SASC 59 ............................................................................................... 21.65 Thorne Developments Pty Ltd v Thorne (2015) 296 FLR 334 .................................................... 21.60 Thorne Developments Pty Ltd v Thorne [2017] 1 Qd R 156 ...................................................... 21.60 Thorne v Heard & Marsh [1895] AC 495 ................................................................................ 24.185 Thorne v Heard [1894] 1 Ch 599 ............................................................................... 24.185, 24.190 Thorne v Kennedy (2017) 91 ALJR 1260 .................................... 7.55, 7.105, 8.15, 9.20, 9.70, 9.115 Thorner v Major [2009] 1 WLR 776 ............................................................. 10.110, 10.115, 10.120, x10.165, 10.170, 10.310, 12.20 Thornley v Boyd (1925) 36 CLR 526 ......................................................................................... 22.20 Thornton v Howe (1862) 31 Beav 14; 54 ER 1042 .................................................................. 29.170 Thorp v Owen (1843) 2 Hare 607; 67 ER 250 ........................................................................... 17.85 Thorpe v Bristile Ltd (1996) 16 WAR 500 .................................................................................. 21.45 Three Rivers District Council v Governor and Company of the Bank of England [1996] QB 292 .......................................................................................................... 3.125, 3.135, 3.140 360 Capital RE Ltd v Watts (2012) 36 VR 507 ......................................................................... 28.255 3464920 Canada Inc v Strother (2005) 256 DLR (4th) 319 ..................................................... 34.140 Throp v Trustees Executors and Agency Co of NZ Ltd [1945] NZLR 483 ................................. 22.110 Thrupp v Collett (No 1) (1858) 26 Beav 125; 43 ER 844 ........................................................... 19.20 Thureau, Re [1948] ALR 487 ................................................................................................... 29.300 Thurston v Thurston [2013] NZHC 1886 .................................................................................. 21.80 Thwaites v Ryan [1984] VR 65 ............................................................... 12.25, 12.45, 18.30, 38.215 Thynne v Earl of Glengall (1848) 2 HLC 131; 9 ER 1042 ................................................ 15.35, 15.45 Tickle v Tickle (1987) 10 NSWLR 581 ........................................................................................ 25.25 Tierney v King [1983] 2 Qd R 580 ................................................................................. 20.45, 20.65 Tierney v Wood (1854) 19 Beav 330; 52 ER 377 ....................................................................... 18.10 Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040 .............................................................. 7.115 Tilley's Will Trusts, Re [1967] Ch 1179 ....................................................................................... 39.75 Tilling Ltd v Blythe [1899] 1 QB 557 ....................................................................................... 36.115 Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 42 FLR 331 ........................................................................................................................ 31.190 Tillott, Re [1892] 1 Ch 86 ......................................................................................................... 20.55 Tilt Cove, Re (1913) 82 LJ Ch 545 ............................................................................................. 36.80 Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 ....................... 4.285, 6.375, 38.30 Timber Top Realty Pty Ltd v Mullens [1974] VR 312 ................................................................ 38.130 Times Newspapers Ltd v Attorney-​General (1991) 20 IPR 609 ................................................... 31.15 Timms v Commonwealth Bank of Australia [2004] NSWSC 76 .................................................. 4.250 Tindal v Federal Commissioner of Taxation (1946) 72 CLR 608 ............................................... 27.130 Tindon Pty Ltd v Adams [2006] VSC 172 ..................................................................... 25.160, 27.55 Tinker v Tinker [1970] 1 All ER 540 ........................................................................................... 19.35 Tinsley v Milligan [1994] 1 AC 340 .......................................................... 19.30, 19.35, 19.50, 19.55 Tipperary Developments Pty Ltd v State of Western Australia [2006] WASC 137 ....................... 18.35 Tipperary Developments Pty Ltd v State of Western Australia (2009) 38 WAR 488 .................... 18.35 Titan Group Pty Ltd v Steriline Manufacturing Pty Ltd (1990) 19 IPR 353 .............. 6.10, 6.75, 6.100, 6.170, 6.345 Tito v Waddell (No 2) [1977] Ch 106 .................................................... 5.35, 22.95, 22.100, 22.115, 24.185, 33.95, 33.105, 33.120 Titterton v Oates (1998) 143 FLR 467 .............................................................. 21.20, 21.80, 21.115, 21.120, 21.130 TMSF v Merrill Lynch Bank and Trust Company (Cayman) Ltd [2011] 4 All ER 704 ................. 25.125 Tobin v Ezekiel [2009] NSWSC 1313 ....................................................................................... 16.205 Todd v Novotny [2001] WASC 171 ..................................................................... 32.20, 32.45, 32.65 cxlv

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Equity and Trusts in Australia

Toksoz v Westpac Banking Corporation (2012) 289 ALR 577 .................................................... 39.20 Toll (FCGT) Pty Ltd v Alphafarm Pty Ltd (2004) 219 CLR 165 .................................................. 37.105 Tollemache, Re [1903] 1 Ch 955 ............................................................................................... 25.25 Tolley (deceased), Re (1972) 5 SASR 466 .................................................................................. 24.55 Tomasevic v Jovetic [2011] VSC 131 ......................................................................................... 29.15 Tombs v Roch (1846) 2 Coll 490; 63 ER 828 ........................................................................... 14.235 Tomkins, Re [1958] VR 310 ........................................................................................ 29.185, 29.300 Tomlins, Re [1961] VR 552 ...................................................................................................... 25.165 Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699 ....................................... 9.175 Tony Blain Pty Ltd v Splain [1993] 3 NZLR 185 ............................................................ 31.45, 32.140 Toohey, Marriage of (1991) 14 Fam LR 843 ............................................................... 19.155, 19.170 Tooth & Co Ltd, Re (1978) 2 ATPR ¶40–​065 ............................................................................. 37.30 Tooth & Co Ltd v Smith (unreported, SC(NSW), 7 June 1985) ................................................ 30.115 Torkington v Magee [1902] 2 KB 427 ................................................................................ 3.05, 3.35 Toronto Dominion Bank v Forsythe (2000) 183 DLR (4th) 616 .................................................. 4.250 Torrance v Bolton (1872) LR 8 Ch App 118 ............................................................................... 8.200 Toubia v Schwenke (2002) 54 NSWLR 46 ................................................................................... 8.05 Town & Country Property Management Services Pty Ltd v Kaltoum [2002] NSWSC 166 ....................................................................................................................P.55, P.60 Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540 ......................................................................................................................... 31.85 Townsend v Coyne (1995) 6 BPR 13,935 ................................................................................ 38.155 Townsend v Townsend [2006] NTSC 7 ............................................................. 12.45, 26.135, 34.65 Toyama Pty Ltd v Landmark Building Developments Pty Ltd (No 2) [2007] NSWSC 55 ........................................................................................................................... 22.90 Tracy v Bifield (1998) 23 Fam LR 260 .............................................................. 26.75, 38.195, 38.200 Trade Practices Commission v Glo Juice Co Pty Ltd (1987) 9 IPR 63 .......................................... 31.15 Tradegro (UK) Ltd v Wigmore Street Investments Ltd [2011] BCLC 616 ...................................... 1.65 Trafford's Settlement, Re [1985] Ch 32 ...................................................................... 20.125, 27.115 Tram Lease Ltd v Croad [2003] 1 NZLR 73 ................................................................................ 10.60 Tram Lease Ltd v Croad [2003] 2 NZLR 461 .............................................................................. 10.60 Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265 ................................ 7.55, 9.45, 9.55, 9.120 Trans Realties Pty Ltd v Grbac [1975] 1 NSWLR 170 .................................................................. 37.15 Transphere Pty Ltd, Re (1986) 10 ACLR 776 ................................................................................ 1.25 Trautwein v Richardson [1946] ALR 129 .................................................................................. 23.120 Travis, Re [1947] NZLR 382 .................................................................................................... 29.150 Travis Trust v Charities Commission (2009) 24 NZTC 23,273 ....................................... 29.60, 29.255 Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 ..................... 37.75 Treadwell v Hickey [2009] NSWSC 1395 ................................................................................... 3.125 Tree, Re [1945] 2 All ER 65 ...................................................................................................... 29.250 Tremain (deceased), Re [1934] NZLR 369 ............................................................................... 14.240 Trenchard, Re [1902] 1 Ch 378 ................................................................................................. 25.25 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 ...................................................... 3.40 Trevenar v Ussfeller [2005] NSWSC 582 ...................................................................................... 7.35 Trevisan v Commissioner of Taxation (1991) 29 FCR 157 ........................................................ 20.100 Trevorrow v South Australia (No 3) (2005) 94 SASR 44 ............................................................. 6.170 Trevorrow v State of South Australia (No 4) (2006) 94 SASR 64 ..................................... 6.175, 6.320 Tribe v Tribe [1995] 4 All ER 236 ............................................................................................... 19.50 Tricontinental Corp Ltd v Commissioner of Taxation [1988] 1 Qd R 474 ..................................... 1.80 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 ........... 14.60, 16.125, 16.130, 16.140, 17.45 Triffitt's Settlement, Re [1958] Ch 852 .................................................................................... 16.175 Trifid Pty Ltd v Ratto [1985] WAR 19 ......................................................................................... 12.25 Trilogy Funds Management Ltd v Sullivan (No 2) (2015) 331 ALR 185 .................................... 28.250 Trim Perfect Australia Pty Ltd (in liq) v Albrook Constructions Pty Ltd [2006] NSWSC 153 ...... 23.130 cxlvi

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Table of Cases

Trimble v Kirkland (1913) 13 SR (NSW) 417 ........................................................................... 23.185 Trimmer v Bayne (1803) 9 Ves 209; 32 ER 582 ....................................................................... 14.215 Triple Seven Msn 27251 Ltd v Azman Air Services Ltd [2018] EWHC 1348 (Comm) ....... 8.145, 8.185 Trippe Investments Pty Ltd v Henderson Investments Pty Ltd (1992) 106 FLR 214 .................. 10.350 Trivan Pty Ltd, Re (1996) 14 ACLC 1,654 ....................................................................... 14.05, 14.25 Trojan v Nest Egg Nominees Pty Ltd [2004] SASC 182 ............................................................ 21.115 Troncone v Aliperti (1994) 6 BPR 13,291 .................................................................................... 1.65 Tropical Traders Ltd v R & H Goonan (No 2) [1965] WAR 174 ....................................... 11.20, 11.60 Trotter v Franklin [1991] 2 NZLR 93 ................................................. 14.145, 14.150, 14.180, 14.185 Truesdale v Federal Commissioner of Taxation (1971) 120 CLR 353 ........................................ 27.160 Truran v Cortorillo [2011] VSC 488 .................................................................................. 9.70, 9.155 Trust Co Fiduciary Services Ltd v Challenger Managed Investments Ltd (2008) 68 ACSR 356 ............................................................................................................ 25.35, 25.45 Trust Company of Australia Ltd v Commissioner of State Revenue (2007) 19 VR 111 ................................................................................................................ 1.10, 38.155 Trustee of the Property of F C Jones & Sons (a firm) v Jones [1997] Ch 159 .............................. 39.50 Trustees Executors & Agency Co Ltd v Margottini [1960] VR 417 ................. 16.175, 16.185, 25.165 Trustees, Executors and Agency Co Ltd v Acting Federal Commissioner of Taxation (1917) 23 CLR 576 ................................................................................................................ 1.20 Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 ................................................................................................. 19.10, 19.65, 37.35 Trustees of Church Property of the Diocese of Newcastle v Lake Macquarie Shire Council [1975] 1 NSWLR 521 ............................................................................................ 29.125 Trustees of Estate Mortgage Fighting Fund Trust v Federal Commissioner of Taxation (2000) 175 ALR 482 ............................................................................................. 25.140, 25.150 Trustees of the Christian Brothers in Western Australia (Inc) v Attorney General (WA) [2006] WASC 191 ................................................................................................... 17.20, 29.325 Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 ......... 19.120, 26.120, 26.125 Trustees of the Roman Catholic Church, Archdiocese of Sydney v Baulkham Hills Shire Council (1941) 15 LGR (NSW) 2 ........................................................................................ 29.130 Trustees of the State Public Sector Superannuation Scheme, Board of v Edington (2011) 119 ALD 472 .......................................................................................................... 28.235 Trustek Australia Pty Ltd v Burke (1998) 40 IPR 455 .................................................................. 6.215 Trusts of Kean Memorial Trust Fund, Re (2003) 86 SASR 449 ......................................... 22.45, 25.55 Trusts of the Abbott Fund, Re [1900] 2 Ch 326 ......................................................................... 26.35 Trusts of the Will of Osborne, Re (1863) 2 SCR (NSW) Eq 89 .................................................. 23.170 Trytel, Re [1952] 2 TLR 32 ........................................................................................................ 17.75 TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (2003) 57 IPR 530 ................ 30.10, 32.155, 32.200 T's Settlement Trusts, Re [1964] Ch 158 .................................................................................... 25.65 Tsang Chuen v Li Po Kwai [1932] AC 715 ................................................................................... 2.30 TSB Bank plc v Camfield [1995] 1 WLR 430 .............................................................................. 35.25 TSB Private Bank International SA v Chabra [1992] 1 WLR 231 ............................................... 32.100 Tsimidopoulos v Mulson Holdings Pty Ltd (1989) 1 WAR 359 ................................................. 31.145 Tucker v News Media Ownership Ltd [1986] 2 NZLR 716 ........................ 6.130, 31.35, 31.60, 31.85 Tuck's Settlement Trusts, Re [1978] 2 WLR 411 ....................................................................... 17.130 Tudor Developments Pty Ltd v Makeig (2008) 72 NSWLR 624 ................................... 10.360, 10.380 Tui Foods Ltd v New Zealand Milk Corporation Ltd [1997] 2 NZLR 214 ....................... 31.50, 31.165 Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143 ............................................................................... P.30 Tulloch (decd) v Braybon (No 2) [2010] NSWSC 650 ...................................................... 7.35, 7.135 Tuna Tasmania Pty Ltd v Allison [2003] TASSC 4 ....................................................................... 4.200 Turner, Re [1897] 1 Ch 536 ............................................................. 23.160, 24.200, 24.205, 24.215 Turner v Bladin (1951) 82 CLR 463 ................................................................... 33.10, 33.65, 34.115 Turner v Burkinshaw (1867) LR 2 Ch App 488 ........................................................................... 36.45 Turner v Coombe [2018] NZHC 315 ....................................................................................... 17.135 Turner v Dunne [1996] QCA 272 ............................................................................... 38.190, 38.195 cxlvii

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Equity and Trusts in Australia

Turner v Grovit [1999] 3 WLR 794 .......................................................................................... 31.195 Turner v Hancock (1882) 20 Ch D 303 ................................................................................... 23.135 Turner v Pickering [1976] 1 NZLR 129 ...................................................................................... 37.50 Turner v Turner [1984] Ch 100 ................................................................................................. 23.35 Turner v Universal Home Loans Pty Ltd [2004] NSWSC 200 .................................................... 32.120 Turner v Universal Home Loans Pty Ltd [2004] NSWSC 936 ........................................... 32.55, 32.65 Turner v Windever [2003] NSWSC 1147 .......................................................................... 9.05, 9.115 Turner v Windever [2005] ANZ ConvR 214 ........................................................................ 9.10, 9.25 Turton v Turton [1988] Ch 542 ................................................................................................. 26.75 Tusyn v State of Tasmania (2004) 13 Tas R 51 ........................................................................... 4.315 Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635 ................................................................. 11.115 Tutt v Doyle (1997) 42 NSWLR 10 ............................................................................................ 8.200 TV Shopping Network Ltd v Scutt (1998) 43 IPR 451 .................................................................. 6.55 TV3 Network Ltd v Eveready New Zealand Ltd [1993] 3 NZLR 435 ................................ 31.05, 31.25 TV3 Network Services Ltd v Broadcasting Standards Authority [1995] 2 NZLR 720 ................... 6.130 TV3 Network Services Ltd v Fahey [1999] 2 NZLR 129 ............................................................ 31.175 Twigger, Re [1989] 3 NZLR 329 .......................................... 29.115, 29.130, 29.240, 29.280, 29.370 Twinsectra Ltd v Yardley [2002] 2 AC 164 ............................................... 16.80, 17.45, 26.45, 27.85, 27.105, 38.90, 38.105, 38.120 Two Solicitors, Re (1911) 7 Tas LR 78 ........................................................................................ 4.160 Tyndall Superannuation Ltd v Commercial Nominees of Australia Ltd (2001) 37 ACSR 167 ..................................................................................................................... 31.165 Tyrell v Bank of London (1862) 10 HLC 26; 11 ER 934 .............................................................. 4.135 Tyrie (deceased), Re [1970] VR 264 ........................................................................... 29.130, 29.175 Tyrie (No 1), Re [1972] VR 168 ............................................................................................... 29.335 Tyrrel's Case (1557) 2 Dy 155a; 73 ER 336 ............................................................................... 16.35 Tyson v Tyson (1901) 1 SR (NSW) Eq 18 ................................................................................. 24.165 TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196 ............................................................. 32.45

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U UDC Finance Ltd v Down (2009) 9 NZBLC 102,705 ................................................................. 7.205 UEB Industries Ltd Pension Plan, Re [1990] 3 NZLR 347 .............................................................. 8.50 UEB Industries Ltd Pension Plan, Re [1992] 1 NZLR 294 ............................................. 28.150, 28.170 UK Housing Alliance (North West) Ltd v Francis [2010] 3 All ER 519 ......................................... 11.10 Ulrich v Treasury Solicitor [2006] 1 WLR 33 ............................................................................. 29.295 Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646 ..................................... 36.50, 36.60 Ultraframe (UK) Ltd v Fielding [2007] WTLR 835 ...................................................................... 38.70 Ulverston and District New Hospital Building Trusts, Re [1956] Ch 622 ................................... 29.345 Umphelby v Grey (1898) 24 VLR 979 ....................................................................................... 22.90 Umpherston, Re (1990) 53 SASR 293 ........................................................................ 29.145, 29.155 Uncle v Parker (1994) 55 IR 120 ............................................................................................. 28.150 Uncle’s Joint Pty Ltd, Re Application of (2014) 12 ASTLR 487 .................................................. 23.170 Uniflex (Australia) Pty Ltd v Hanneybel (unreported, SC(WA), White J, 17 August 1998) ........... 32.65 Unilever plc v Cussons (New Zealand) Pty Ltd [1997] 1 NZLR 433 ............................... 30.175, 31.50 Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 .............................................................. 7.05 Union Bank of Scotland v National Bank of Scotland (1886) 12 App Cas 53 ............................. 2.100 Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 ........................................... 11.40, 11.55 Union Fidelity Trustee Co Ltd v Federal Commissioner of Taxation (1969) 119 CLR 177 ..................................................................................................................... 27.130 Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573 ................. 7.30, 7.35, 7.55, 7.115 Union Trustee Co Ltd v Church of England Property Trust, Diocese of Sydney (1946) 46 SR (NSW) 298 ............................................................................................................... 29.300 Union Trustee Co of Australia Ltd, Re [1936] QWN 6 ................................................. 23.170, 23.175

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Table of Cases

Union Trustee Co of Australia Ltd v Bartlam (1948) 76 CLR 492 ................................................ 21.15 Union Trustee Co of Australia Ltd v Gorrie [1962] Qd R 605 ........................................ 22.95, 22.110 United Bank of Kuwait plc v Sahib [1996] 3 All ER 215 ................................................................ 1.75 United Bank of Kuwait plc v Sahib [1997] Ch 107 ....................................................................... 1.65 United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 ...................................... 1.115 United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 ........................................................................................ 4.190, 4.200, 4.215, 38.175 United Grand Lodge of Ancient Free and Accepted Masons of England v Holborn Borough Council [1957] 1 WLR 1080 ................................................................................ 29.190 United Mizrahi Bank Ltd v Doherty [1998] 1 WLR 435 .............................................................. 32.85 United Pacific Industries Pty Ltd v Madison Sports Pty Ltd (1998) 41 IPR 546 ......................... 31.135 United Scientific Holdings Ltd v Bornley Borough Council [1978] AC 904 .................................... P.45 United States of America v Motor Trucks Ltd [1924] AC 196 ..................................................... 37.95 United States of America v Yemec (2003) 67 OR (3d) 394 ........................................................ 31.85 United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 ............................................................................................................... 4.30, 4.35 United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 ........................................................................................................... 4.325, 38.30 United States v Carter (1909) 217 US 286 .................................................................................. 5.25 United States v Kagama (1886) 118 US 375 ............................................................................... 5.40 United States v Kuch (1968) 288 F Supp 439 .......................................................................... 29.170 United States v Mitchell (1983) 103 S Ct 2961 ........................................................................... 5.40 Uniting Church in Australia Property Trust (NSW) v Monsen [1978] 1 NSWLR 575 ................... 29.15 Universal Corporation v Five Ways Properties Ltd [1979] 1 All ER 552 ....................................... 11.75 Universal Distributing Co Ltd (in liq), Re (1933) 48 CLR 171 .......................................... 1.105, 27.35 Universal Management Ltd, Re [1983] NZLR 462 ........................................................ 1.110, 38.155 Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2004) 205 ALR 319 ........................................................................................................... 31.85, 32.185 Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (2005) 228 ALR 174 ...................................................................................................................... 32.120 Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840 ......................................... 32.165, 32.175 University Computing Co v Lykes-​Youngstown Corp (1974) F 2d 518 ...................................... 6.345 University of New South Wales International House Ltd v University of New South Wales [2016] NSWSC 1709 ............................................................................................... 29.145 University of New South Wales v Moorhouse (1975) 133 CLR 1 ................................................ 37.30 University of Nottingham v Fishel [2000] ICR 1462 ................................................................... 4.285 Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 ............ 10.335 Urane v Whipper (2002) NSW ConvR ¶55–​992 ........................................................................ 7.125 US International Marketing Ltd v National Bank of New Zealand Ltd [2004] 1 NZLR 589 ................................................................................................... 38.70, 38.75, 38.90 UTC Ltd v NZI Securities Australia Ltd (1991) 4 WAR 349 ........................................................... 1.75

V V-​Flow Pty Ltd v Holyoake Industries (Vic) Pty Ltd (2013) 296 ALR 418 ................................... 34.140 Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 ....................... 16.205, 23.120, 23.135, 30.25 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 ........ 6.375, 7.280, 9.155, 35.15, 35.25 Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295 ............................................................. 10.160 Valeo Vision Société Anonyme v Flexible Lamps Ltd [1995] RPC 205 ......................................... 6.255 Valofo Pty Ltd v PILT Nominees Pty Ltd [2011] NSWSC 134 ...................................................... 16.05 Valoutin Pty Ltd v Furst (1998) 154 ALR 119 ................................................. 25.125, 25.130, 26.110 Van Dyke v Sidhu (2013) 301 ALR 769 ................................................................................... 10.160 Van Dyke v Sidhu [2014] NSWSC 1341 .................................................................................. 10.245 Van Gruisen's Will Trusts, Re [1964] 1 All ER 843 ....................................................................... 25.60

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Equity and Trusts in Australia

Van Kessel v Human Rights Commission [1986] 1 NZLR 628 .................................................... 37.20 Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 607 ................................ 3.35 Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue (1999) 169 DLR (4th) 34 ........................................................................ 29.145, 29.250 Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 .............................. 1.25, 18.10, 26.55 Vandervell's Trusts (No 2), Re [1974] Ch 269 ............................................................................ 26.05 Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd (2015) 47 WAR 547 ............................. 37.125 Vardon's Trusts, Re (1885) 31 Ch D 275 .................................................................................. 15.110 Varley v Varley [2006] NSWSC 1025 .................................................... 31.05, 31.50, 31.130, 31.135 Varsani v Jesani [1999] Ch 219 ................................................................................... 29.170, 29.360 Varthalis v Commonwealth Bank of Australia (1996) 7 BPR 14,766 ........................................... 9.155 Vasiliou, Re (2006) 235 ALR 136 ............................................................................................. 18.100 Vasiliou v Marchesi (2006) 157 FCR 252 ................................................................................. 18.100 Vasiliou v Marchesi [2008] FCAFC 129 .................................................................................... 18.105 Vatcher v Paull [1915] AC 372 ................................................................ 8.50, 8.55, 8.70, 8.75, 8.85 Vaudeville Electric Cinema, Ltd v Muriset [1923] 2 Ch 74 ......................................................... 37.90 Vaughan, Re (1886) 33 Ch D 187 ........................................................................................... 29.175 Vauxhall Bridge Co v Spencer (Earl) (1821) Jac 64; 37 ER 774 ................................................. 37.160 Vauxhall Motors Ltd v Manchester Ship Canal Co Ltd [2018] EWCA Civ 1100 .......................... 11.10 Vavasseur v Krupp (1878) 9 Ch D 351 .................................................................................... 37.175 Vedejs v Public Trustee [1985] VR 569 ....................................................................................... 26.80 Venables v Hornby [2002] PLR 377 ......................................................................................... 28.150 Venables v News Group Newspapers Ltd [2001] 2 WLR 1038 ........................................ 6.145, 6.170 Venture, The [1908] P 218 ........................................................................................................ 26.60 Vercoe v Rutland Fund Management Ltd [2010] EWHC 424 ............................................. 4.265, P.60 Verduci v Golotta (2010) 15 BPR 28,865 ............................................................................ 7.30, 9.30 Verge v Somerville [1924] AC 496 ............................................................................................ 29.60 Vero Liability Insurance Ltd v Heartland Bank Ltd [2015] NZCA 288 ....................................... 39.105 Verrall v Great Yarmouth Borough Council [1981] QB 202 ...................................................... 33.120 Vervoort v Forrest [2016] 3 NZLR 897 ....................................................................................... 17.35 Vestergaard Frandsen A/​S v Bestnet Europe Ltd [2013] ICR 981 ................................................ 6.215 Vestey's Settlement, Re [1951] 1 Ch 209 ................................................................................. 20.125 Vickery, Re [1931] 1 Ch 572 ..................................................................................................... 24.95 Victoria Gardens Developments Pty Ltd v Commissioner of State Revenue (1998) 41 ATR 187 ........................................................................................................................ 37.120 Victoria Steamboats Ltd, Re [1897] 1 Ch 158 ............................................................................ 36.80 Victoria University of Technology v Wilson [2003] VSC 299 ....................................................... 32.55 Victoria University of Technology v Wilson (2004) 60 IPR 392 ................................................. 34.145 Victoria University of Technology v Wilson (2006) 68 IPR 597 ................................................. 34.145 Victoria v Sutton (1998) 195 CLR 291 ....................................................................................... 16.15 Victorian Women Lawyers' Association Inc v Federal Commissioner of Taxation (2008) 170 FCR 318 ..................................................................................................................... 29.280 Vimig Pty Ltd v Contract Tooling Pty Ltd (1986) 9 NSWLR 731 ............................................... 35.110 Vincent v Peacock [1973] 1 NSWLR 466 ................................................................................... 31.60 Vines v Australian Securities and Investments Commission (2007) 73 NSWLR 451 .................. 24.200 Vinogradoff, Re [1935] WN 68 .................................................................................................. 26.55 Violet Home Loans Pty Ltd v Schmidt (2013) 44 VR 202 ........................................................... 9.195 Virgin Enterprises Ltd v Virgin Star Pty Ltd (2005) 67 IPR 557 ...................................... 31.50, 31.165 Virtu Fast Ferries Ltd v Ship Cape Leveque (2015) 232 FCR 9 .................................................... 33.35 Visagie v TVX Gold Inc (2000) 187 DLR (4th) 193 ..................................................................... 4.225 Visbord v Federal Commissioner of Taxation (1943) 68 CLR 354 ........................ 36.15, 36.25, 36.45, 36.50, 36.75 Vision Super Pty Ltd v Poulter (2006) 154 FCR 185 ................................................................. 28.235 Visnic v Sywak [2008] NSWSC 427 ........................................................................................... 34.20 Visnic v Sywak (2009) 257 ALR 517 .......................................................................................... 34.20 cl

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Table of Cases

Vita Health Co (1985) Ltd v Toronto-​Dominion Bank (1995) 118 DLR (4th) 289 ....................... 4.250 Vital Finance Corporation Pty Ltd v Taylor (1991) ASC ¶56–​099 ................................................. 9.55 Viveash, Re [1971] WAR 62 ....................................................................................................... 25.80 Vivendi SA v Richards [2013] BCC 771 ........................................................................................ 4.85 Vockensohm v Zeven (1893) 3 WW & A'B 122 ......................................................................... 2.130 Voges v Monaghan (1954) 94 CLR 231 .............................................................. 18.45, 18.50, 18.55 Vosz, Re [1926] SASR 218 ....................................................................................................... 29.130 Voukidis v C & O Voukidis Pty Ltd (in liq) [2018] VSC 267 ........................................................ 26.55 Vrkic v Otta International Pty Ltd (2003) 12 BPR 22,535 ........................................................... 2.105 Vyse v Foster (1872) LR 8 Ch App 309 .......................................... 24.30, 24.35, 24.65, 24.75, 24.90 Vyse v Foster (1874) LR 7 HL 318 .............................................................................................. 24.90

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W W D & H O Wills (New Zealand) Ltd Pensions Fund, Re [1974] 2 NZLR 27 ............................... 25.35 W F Harrison and Co Ltd v Burke [1956] 1 WLR 419 ................................................................... 3.35 W Higgins Ltd v Northampton Corp [1927] 1 Ch 128 .............................................................. 37.95 W Pope and Co Pty Ltd v Edward Souery and Co Pty Ltd [1983] WAR 117 ............................. 30.110 W v Egdell [1990] 2 WLR 471 ................................................................................................... 6.305 W v G (1996) 20 Fam LR 49 .......................................................................... 10.65, 10.105, 10.270, 38.180, 38.185, 38.195 W v H [2001] 1 All ER 300 ............................................................................................. 31.80, 31.85 WA Fork Truck Distributors Pty Ltd v Jones [2003] WASC 102 ................................................... 4.100 Waff Bros Inc v Bank of North Carolina (1976) 221 SE 2d 273 ................................................ 14.225 Wagdy Hanna & Associates Pty Ltd v National Library of Australia (2012) 7 ACTLR 70 .............. 30.35 Wagstaff, Marriage of (1990) 14 Fam LR 78 ................................................................... 24.80, 39.80 Waikato (Pty) Ltd v Kaplan [2002] VSC 310 .............................................................................. 31.90 Waimor Holdings Ltd v Dean [1981] 2 NZLR 416 ..................................................................... 33.20 Waine v King (SC(NSW), Hodgson J, 5 October 1994, unreported) ............................. 22.110, 25.35 Waipara Pty Ltd v Police Association (1998) V ConvR ¶54–​583 .................................. 10.110, 10.210 Wait, Re [1927] 1 Ch 606 .................................................................................... 1.95, 3.150, 33.45, 33.50, 35.60, 37.140 Waitemata Electric Power Board v King Builders Ltd [1993] 1 NZLR 312 .................... 10.365, 10.375 Wakeling v Wade [2011] FCA 1292 ............................................................................................. 3.40 Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 .............. 4.170, 34.155, P.55 Wales v Vrsecky [2015] VSC 223 ............................................................................................... 24.10 Wales v Wales (2013) 10 ASTLR 41 ......................................................................................... 21.115 Wales v Wales (No 2) (2014) 12 ASTLR 98 .............................................................................. 21.130 Walker, Re [1901] 1 Ch 259 ...................................................................................................... 21.60 Walker, Re [1901] 1 Ch 879 ...................................................................................................... 25.25 Walker, Re (1901) 1 SR (NSW) Eq 237 .................................................................................... 22.155 Walker v Corboy (1990) 19 NSWLR 382 ...................................................................... 16.95, 16.110 Walker v Department of Social Security (1995) 56 FCR 354 .................................................... 30.115 Walker v Linom [1907] 2 Ch 104 .............................................................................................. 2.140 Walker v Melham [2007] NSWSC 264 ...................................................................................... 30.35 Walker v Secretary, Department of Social Security (1995) 56 FCR 354 ......................... 30.95, 30.110 Walker v Stones [2001] QB 902 ................................................................................. 24.140, 24.150 Walker v Willis [1969] VR 778 ........................................................................................ 22.40, 23.65 Wall, Re (1889) 42 Ch D 510 .................................................................................................. 29.125 Wall v Stubbs (1815) 1 Madd 80; 56 ER 31 ............................................................................. 30.180 Wallace, Re [1908] VLR 636 .................................................................................................... 29.250 Wallace v Evershed [1899] 1 Ch 891 ................................................................................ 1.80, 1.150 Wallace v Wallace (No 2) (1899) 24 VLR 893 ............................................................................ 21.80 Waller v Davies [2005] 3 NZLR 814 ........................................................................................... 2.115 Waller v Davies [2007] 2 NZLR 508 ........................................................................................... 2.115 cli Gino, Dal Pont. 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Equity and Trusts in Australia

Waller v Waller [1967] 1 All ER 305 ......................................................................................... 24.115 Wallersteiner v Moir (No 2) [1975] QB 373 .................................................................... 24.60, 24.70 Wallingford v Mutual Society (1880) 5 App Cas 685 ................................................................. 13.70 Wallis v Solicitor-​General for New Zealand [1903] AC 173 ........................................... 29.25, 29.145 Walmsley v Christchurch City Council [1990] 1 NZLR 199 ........................................................ 7.140 Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1994) 29 ATR 311 ................................................................................................ 16.110, 16.120, 17.15 Walsh, Re (1911) 30 NZLR 1166 ............................................................................................... 18.65 Walsh v Commercial Travellers' Association of Victoria [1940] VLR 259 .................................... 10.360 Walsh v Lonsdale (1882) 21 Ch D 9 .......................................................................................... 1.165 Walter Developments Pty Ltd v Roberts (1995) 16 ACSR 280 .................................................... 32.30 Walter J Schmidt & Co, Re (1923) 298 F 314 .......................................................................... 39.105 Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd [2005] FCA 399 .................... 32.115 Walter v Handberg [2003] VSCA 122 ......................................................................... 20.125, 38.250 Waltons Stores (Interstate) Ltd v Maher (1987) 164 CLR 387 ....... 8.190, 10.35, 10.40, 10.50, 10.75, 10.80, 10.140, 10.155, 10.230, 10.235, 10.270, 10.310, 10.315, 10.320, 10.335, 10.340, 10.345, 10.385, 12.25, 33.10, P.90 Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429 ..................................... 8.105, 8.110, 26.40, 38.10 Wambo Coal Pty Ltd v Sumiseki Materials Co Ltd (2014) 88 NSWLR 689 .................................. 37.85 Wan v McDonald (1992) 105 ALR 473 ........................................................................... 34.25, 34.60 Wang v Minister for Immigration and Multicultural Affairs (1997) 45 ALD 104 ....................... 10.365 Warburton v Whiteley (1989) 5 BPR 11,628 ....................................................................... 7.95, 9.20 Ward v Trustees, Executors & Agency Co Ltd (1893) 14 ALT 274 ............................................ 23.105 Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 ............................................................... 7.145 Ware v Johnson [1984] 2 NZLR 518 ............................................................................... 8.160, 8.180 Waring v Ellis (2005) 13 BPR 24,459 ....................................................................................... 10.335 Warman International Ltd v Dwyer (1995) 182 CLR 544 ............................................................... 4.15, 4.35, 4.115, 24.60, 34.140, 34.165, 34.170, 38.10, 38.25, 38.30, P.45, P.170 Warmington v Miller [1973] 1 QB 877 ...................................................................................... 1.165 Warmstrey v Tanfield (1628) 1 Rep Ch 29; 21 ER 498 ................................................................. 3.15 Warner Bros Records Inc v Rollgreen Ltd [1976] QB 430 ........................................................... 3.135 Warner v Andrews [2011] NSWSC 956 ..................................................................................... 26.10 Warner v Hung (No 2) (2011) 297 ALR 56 ................................................................................ 18.10 Warner v Ulysius International Trading Pty Ltd (2011) 91 IPR 570 ............................................. 1.160 Warnocks (1992) Ltd v Queensgate Centre Ltd [1993] 2 NZLR 236 ........................................ 11.110 Warren, Re [1918] VLR 209 ..................................................................................................... 24.170 Warren, Re Will of [1907] VLR 325 ............................................................................... 16.155, 17.20 Warrington v Miller [1973] 1 QB 877 ...................................................................................... 33.115 Warwick Cinema Syndicate Pty Ltd v Kan (2011) 6 ASTLR 282 .................................................. 37.70 Warwick Tyre Company v New Motor & General Rubber Company (1910) 27 RPC 161 ......... 37.175 Warwickshire County Council v Matalia [2017] ECC 25 ............................................................ 6.175 Washband v Buck (1997) Q Conv R ¶54–​491 ......................................................... 7.75, 7.125, 9.30 Waste Recycling & Processing Corporation v Global Renewables (Eastern Creek) Pty Ltd [2009] NSWSC 453 ..................................................................................................... 10.200 Watch Tower Bible and Tract Society v Huntly Borough [1959] NZLR 821 .............................. 33.120 Watch Tower Bible and Tract Society v Mount Roskill Borough [1959] NZLR 1236 .................. 29.170 Water Wine & Juice Pty Ltd v Konstantopoulos [2010] NSWSC 312 ........................................ 11.120 Waterhouse v Power [2003] QCA 155 .................................................................................... 38.205 Waterhouse v Waterhouse (1998) 46 NSWLR 449 .......................................... 20.30, 21.110, 21.120, 22.30, 24.205, 24.215 Waterman v Gerling Australia Insurance Company Pty Ltd (2005) 65 NSWLR 300 ..................................................................................................... 10.115, 10.215

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Table of Cases

Waterways Authority of New South Wales v Coal & Allied (Operations) Pty Ltd (2008) Aust Contract R ¶90–​278 ..................................................................................................... 33.05 Watkins v Combes (1922) 30 CLR 180 .................................................. 7.35, 7.45, 7.55, 7.75, 7.200 Watson (deceased), Re [1973] 3 All ER 678 ................................................................ 29.170, 29.195 Watson v Delaney (1991) 22 NSWLR 358 ................................................................................. 12.15 Watson v Dolmark Industries Ltd [1992] 3 NZLR 311 ........................................... 4.65, 4.275, 4.325, 16.120, 34.125 Watson v Ebsworth & Ebsworth (a firm) [2010] VSCA 335 ........................................................ 34.45 Watson v Foxman (1995) 49 NSWLR 315 ............................................................................... 10.110 Watson v Holland (Inspector of Taxes) [1985] 1 All ER 290 ........................................................ 26.20 Watson v Reid (1830) 1 Russ & M 236; 39 ER 91 ...................................................................... 30.50 Watson v Vaughan [2011] TASSC 17 ......................................................................................... 21.75 Watson v Watson (1864) 33 Beav 574; 55 ER 491 .......................................................... 15.80, 15.90 Watson's Bay & South Shore Ferry Co Ltd v Whitfeld (1919) 27 CLR 268 .................................. 22.40 Watt v State Bank of New South Wales Ltd [2003] ACTCA 7 ........... 7.180, 7.235, 7.250, 7.255, 9.55 Watt v Westhoven [1933] VLR 458 ............................................................................................ 35.60 Watts, Re (1909) 9 SR (NSW) 567 ........................................................................................... 20.120 Watts, Re [1949] VLR 64 ......................................................................................................... 23.115 Waugh, Marriage of (2000) 158 FLR 152 .................................................................................. 32.30 Wayling v Jones (1993) 69 P & CR 170 ................................................................................... 10.160 WD & HO Wills (Aust) Pty Ltd v Commissioner of Taxation (1996) 65 FCR 298 ....................... 19.150 Weal v Bathurst City Council (2000) 107 LGERA 396 ........................................ 32.50, 32.90, 32.135 Weall v Rice (1831) 2 Russ & My 251; 39 ER 390 ...................................................................... 15.40 Weaver, Re [1916] SALR 167 ................................................................................................... 18.130 Weaver, Re [1963] VR 257 ........................................................................................... 19.95, 29.220 Webb, Re [1941] 1 Ch 225 ..................................................................................................... 16.125 Webb, Re Estate of (1992) 57 SASR 193 .................................................................................... 22.30 Webb v Direct London and Portsmouth Railway Co (1852) 1 De GM & G 521; 42 ER 654 .......................................................................................................................... 33.130 Webb v Hooper [1953] NZLR 111 ............................................................................................ 2.135 Webb v McCracken (1906) 3 CLR 1018 .................................................................................. 16.175 Webb v Smith (1885) 30 Ch D 192 .......................................................................... 14.215, 14.225, 14.240, 14.245 Webb v Stenton (1883) 11 QBD 518 ........................................................................................ 24.35 Webb v Webb (1900) 21 LR (NSW) Eq 245 .................................................................... 15.15, 15.20 Webber v New South Wales (2004) 31 Fam LR 425 .................................................................. 4.315 Webster, Marriage of (1998) 24 Fam LR 198 ........................................................................... 20.135 Webster v Bread Carters' Union of NSW (1930) 30 SR (NSW) 267 .......................................... 30.135 Weddell v J A Pearce & Major [1988] Ch 26 ................................................................... 3.125, 3.135 Wedgwood, Re [1915] 1 Ch 113 ............................................................................................ 29.220 Wedgwood v Adams (1843) 6 Beav 600; 49 ER 958 ............................................................... 33.135 Weekes' Settlement, Re [1897] 1 Ch 289 ................................................................................ 16.190 Weiner (deceased), Re [1956] 1 WLR 579 ............................................................................... 25.150 Weir v Crum-​Brown [1908] AC 162 .......................................................................................... 29.45 Weiss, Re [1934] VLR 269 ....................................................................................................... 29.330 Weiss, Re Will of (1946) 48 WALR 37 ........................................................................................ 15.10 Welch, Re (1854) 23 LJ Ch 344 ............................................................................................... 23.115 Weld-​Blundell v Stephens [1920] AC 956 .................................................................................. 6.280 Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272 .................................................. 6.60 Weller v Associated Newspapers Ltd [2016] 1 WLR 1541. ......................................................... 6.130 Wellington Capital Ltd v Australian Securities and Investments Commission (2014) 254 CLR 288 ..................................................................................................................... 28.245 Wellington Harness Racing Club Inc v Hutt City Council [2004] 1 NZLR 82 ................... 16.45, 17.40 Wells, Re (1930) 30 SR (NSW) 150 ................................................................................. 15.55, 15.80

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Equity and Trusts in Australia

Wells v Wily (2004) 183 FLR 284 .................................................................................. 21.80, 21.125 Welsh v Gatchell [2009] 1 NZLR 241 ............................................................................. 12.30, 12.80 Wenczel v Commonwealth Bank of Australia [2006] VSC 324 ................... 7.55, 7.165, 7.220, 7.225, 7.235, 7.255, 8.10 Wendt v Orr [2004] WASC 28 ......................................................................... 21.115, 22.165, 23.75 Wenham v Ella (1972) 127 CLR 454 .......................................................................... 33.125, 34.105 Weninger Estate v Canadian Diabetes Association (1993) 109 DLR (4th) 232 .......................... 29.315 Wentworth Partners Estate Agents Pty Ltd v Gordony (2007) 60 AILR 200-​348 ........................... 6.60 Wentworth v de Montford (1988) 15 NSWLR 348 .................................................................... 20.40 Wentworth v Tompson (1859) 2 Legge 1238 .............................................................. 23.160, 24.10 Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 .................................... 34.65, 34.75 Wenzel v Australian Stock Exchange Ltd (2002) 40 ACSR 557 ................................................... 9.175 Werner v Boehm (1890) 16 VLR 73 ......................................................................................... 21.100 Wesley v Wesley (1998) 71 SASR 1 ............................................................................................ 37.80 Wessex Dairies Ltd v Smith [1935] 2 KB 80 ............................................................................... 4.290 West Australian Baptist Hospital & Homes Trust Inc v City of South Perth [1978] WAR 65 ....... 29.110 West End Networks Ltd (in liq), Re [2004] 2 AC 506 ................................................................. 16.45 West of England Fire Insurance Co v Isaacs [1897] 1 QB 226 .................................................... 14.45 West Sussex Constabulary's Widows Children & Benevolent (1930) Fund Trusts, Re [1971] Ch 1 ......................................................................................................................... 26.35 West Sussex Properties Ltd v Chichester District Council [2000] NPC 74 ................................... 8.185 West v Federal Commissioner of Taxation (1949) 79 CLR 319 ................................................... 17.20 West v Mead (2003) 13 BPR 24,431 .......................................................................... 38.205, 38.250 West v Public Trustee [1942] SASR 109 ..................................................................................... 7.115 West v West [2017] NZHC 3110 ................................................................................................. 9.50 West v Weston (1998) 44 NSWLR 657 .................................................................................... 17.105 West v Williams [1899] 1 Ch 132 ..................................................................................... 2.90, 2.100 Westbourne Grammar School v Sanget Pty Ltd [2007] VSCA 39 ...................................... 3.35, 3.125 Westchester Financial Services Pty Ltd v Acclaim Exploration NL (1999) 32 ACSR 499 ............ 31.135 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 ............................................................... 1.25, 8.105, 8.110, 16.10, 17.60, 26.05, 26.10, 26.40, 26.45, 38.10, 38.70, 38.85, 39.30 Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265 ........................ 4.85, 4.120, 23.160, 24.95, 34.145 Westfield Queensland No 1 Pty Ltd v Lend Lease Real Estate Investments Ltd (2008) 1 ASTLR 525 ........................................................................................................................ 25.45 Westgem Investments Pty Ltd (recs and mgrs) (admin apptd) v Saracen Project Management Pty Ltd (No 2) (2012) 8 ASTLR 578 .............................................................. 27.105 Westgold Resources NL v St George Bank Ltd (1998) 29 ACSR 396 ................................. 3.35, 3.105 Westland Savings Bank v Hancock [1987] 2 NZLR 21 ......................... 10.310, 37.95, 37.100, 37.105 Westmeath v Westmeath (1830) 1 Dow & Cl 519; 6 ER 619 ..................................................... 19.60 Westmelton (Vic) Pty Ltd (receiver and manager appointed) v Archer [1982] VR 305 .................. 7.30 Westminster Bank Ltd v Lee [1956] 1 Ch 7 ................................................................................ 2.105 Westminster Chemical NZ Ltd v McKinley [1973] 1 NZLR 659 .................................................... 6.70 Westminster Properties Pty Ltd v Comco Constructions Pty Ltd (1991) 5 WAR 191 ................... 11.10 Weston v Beaufils (1994) 122 ALR 240 ........................................................................... 19.35, 19.55 Weston v Carling Constructions Pty Ltd (in prov liq) (2000) 175 ALR 202 ................................. 1.105 Weston v Weston [1933] QSR 7 ................................................................................................ 22.65 Weston's Settlements, Re [1969] 1 Ch 223 .................................................................... 25.35, 25.65 Weston's Trusts, Re (1898) 43 Sol Jo 29 .................................................................................... 21.60 Westpac Banking Corp v ITS Taxation Services Pty Ltd (2004) 183 FLR 273 ............................ 36.125 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 ......................................................................................... 4.20, 38.85, 38.100, 38.110 Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 .......................................... 8.10, 8.15 Westpac Banking Corporation v Cronin (1990) 6 BPR 13,105 ..................................................... 1.75 cliv

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Table of Cases

Westpac Banking Corporation v Daydream Island Pty Ltd [1985] 2 Qd R 330 ......................... 14.215 Westpac Banking Corporation v Hilliard [2001] VSC 187 .......................................................... 32.20 Westpac Banking Corporation v John Fairfax Group Pty Ltd (1991) 19 IPR 513 ....................................................................................................... 6.75, 6.295, 6.320 Westpac Banking Corporation v McArthur [2007] NSWSC 1347 ............................................... 32.80 Westpac Banking Corporation v Ollis [2007] NSWSC 956 .............................................. 8.105, 8.110 Westpac Banking Corporation v Paterson (2001) 187 ALR 168 ................................................. 7.235 Westpac Banking Corporation v Rae [1992] 1 NZLR 338 ........................................................... 8.140 Westpac Banking Corporation v Savin [1985] 2 NZLR 41 ........................................................ 38.125 Westpac New Zealand Ltd v MAP & Associates Ltd [2011] 3 NZLR 751 ......................... 38.70, 38.90 Westpoint Corp Pty Ltd v Coles Supermarket Australia Pty Ltd (1996) 71 FCR 584 .................... 10.15 Westwill Pty Ltd v Heath (1989) 52 SASR 461 ............................................................................. 9.80 Westwind Air Charter Pty Ltd v Hawker de Havilland Ltd (1990) 3 WAR 71 .................................................................................................. 30.105, 30.110, 31.85 Wethers, Re Will of (1878) 12 SALR 32 ...................................................................................... 21.90 Wewaykum Indian Band v Canada [2002] 4 SCR 245 ...................................................... 5.45, 30.35 Whakatane Paper Mills Ltd v Public Trustee (1939) 39 SR (NSW) 426 ..................................... 25.150 Wharton v Masterman [1895] AC 186 ...................................................................................... 22.15 Wheatley v Bell [1982] 2 NSWLR 544 ............................................................................ 6.240, 6.250 Wheeler and De Rochow, Re [1896] 1 Ch 315 .......................................................................... 21.60 Wheelwright v Walker (1883) 23 Ch D 752 ............................................................................ 24.115 Whereat v Duff [1972] 2 NSWLR 147 .................................................. 7.35, 7.55, 7.70, 7.270, 30.15 Whitaker v Whitaker (1980) FLC ¶90–​813 ............................................................................... 19.155 Whitbread & Co Ltd v Watt [1901] 1 Ch 911 ........................................................................... 1.100 Whitbread, Ex parte (1812) 19 Ves Jun 209; 34 ER 496 ............................................................. 12.70 Whitbread v Brockhurst (1784) 1 Bro CC 404; 28 ER 1205 ....................................................... 12.45 White, Re [1893] 2 Ch 41 ....................................................................................................... 29.200 White, Re [1901] 1 Ch 570 ..................................................................................................... 25.140 White, Re (1910) 10 SR (NSW) 295 .......................................................................................... 22.95 White, Re [1959] VR 661 ............................................................................................. 21.140, 25.25 White, Re [1963] NZLR 788 .................................................................................................... 29.300 White, Re (2003) 7 VR 219 ....................................................................................................... 22.90 White v Cabanas Pty Ltd (No 2) [1970] Qd R 395 ..................................................................... 18.30 White v Huxtable (2006) 232 ALR 388 ...................................................................................... 36.85 White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164 ............................................ 34.40 White v Ormsby (1988) ASC ¶55–​665 ............................................................................... 9.55, 9.60 White v Principal and Councillors of St Andrew's College (1886) 17 LR (NSW) Eq 40 .............. 29.155 White v Shortall (2006) 68 NSWLR 650 .......................................................................... 17.90, P.170 Whitehead, Marriage of (1979) 37 FLR 302 ............................................................................ 20.145 Whitehead, Re [1958] VR 143 ........................................................................................ 22.75, 22.90 Whitehead's Will Trusts, Re [1971] 2 All ER 1334 ....................................................................... 21.80 Whitehouse, Re [1982] Qd R 196 .................................................................. 21.80, 21.105, 21.110, 21.115, 23.35, 23.75 Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 ........................................................ 22.120 Whiteleigh Holdings (New Zealand) Ltd v Whiteleigh Pacific Resources Ltd [1987] ANZ Conv R 480 ............................................................................................................... 38.155 Whiteley, Re (1886) 33 Ch D 347 ............................................................................................. 22.20 Whiteley, Re [1910] 1 Ch 600 ................................................................................................... 22.65 Whiteside v Whiteside [1950] Ch 65 ......................................................................................... 37.75 Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71 ................................................................... 34.130 Whiting v Diver Plumbing & Heating Ltd [1992] 1 NZLR 560 ................................................... 37.65 Whitlam v Australian Securities and Investments Commission (2003) 57 NSWLR 559 ............... 4.130 Whittet v State Bank of New South Wales (1991) 24 NSWLR 146 ........................................... 10.205 Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421 ................................................. 10.110, 10.345 Whittome's Trust, Re [1962] NZLR 773 ..................................................................................... 25.60 clv

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Equity and Trusts in Australia

Whitton v ACN 003 266 886 Pty Ltd (1996) 42 NSWLR 123 ....................................... 21.110, 36.35 Whitwam v Westminster Brymbo Coal Co [1892] 2 Ch 538 ......................................................... P.60 Whung v Whung (2011) 258 FLR 452 .................................................................................... 31.195 Whywait Pty Ltd v Davison [1997] 1 Qd R 225 ......................................................................... 4.215 Wickstead v Browne (1992) 30 NSWLR 1 .......................................................... 16.120, 22.20, 24.35 Wight v Foran (1987) 11 NSWLR 470 ....................................................................................... 11.75 Wight v Haberdan Pty Ltd [1984] 2 NSWLR 280 ............................................................ 33.15, 33.65 Wik Peoples v Queensland (1996) 187 CLR 1 ..................................................................... 4.70, 5.55 Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 ............................................................................. 13.20, 13.25, 13.30, 13.35, 13.40 Wilby v St George Bank (2001) 80 SASR 404 ....................................7.125, 7.280, 9.155, P.75, P.190 Wilcox, Re [1940] SASR 217 ................................................................................................... 22.155 Wilcox, Re [1978] Tas SR 82 .................................................................................................... 27.120 Wilcox v Poole [1974] 2 NSWLR 693 ...................................................................................... 25.165 Wilcox v Wilcox [2012] NSWSC 1138 ..................................................................................... 10.110 Wilde v Gibson (1848) 1 HLC 605; 9 ER 897 ........................................................................... 35.110 Wilden Pty Ltd v Green (2009) 38 WAR 429 ..................................................... 4.20, 22.120, 24.145 Wilding v Boulder (1855) 21 Beav 222; 52 ER 845 .................................................................... 21.80 Wiley v Commonwealth Bank of Australia (1995) 18 ACSR 299 .......................... 36.25, 36.30, 36.40 Wilkes v Spooner [1911] 2 KB 473 ...................................................................... 2.125, 2.130, 2.135 Wilkie v Equity Trustees Executors and Agency Co Ltd [1909] VLR 277 .................................... 22.170 Wilkie v McCalla [1905] VLR 278 ............................................................................................ 24.205 Wilkins v Wilkins [2007] VSC 100 ................................................................................. 26.10, 26.145 Wilkinson (deceased), Re [1941] NZLR 1065 ........................................................................... 17.170 Wilkinson (No 2), Re [1924] SASR 156 ...................................................................................... 23.85 Wilkinson, Re [1924] SASR 47 ................................................................................................. 23.105 Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 ......................................... 7.160, 7.170, 7.175, 7.180, 7.190, 7.195, 7.235, 7.265 Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 ................ 22.25, 22.55, 22.60, 24.65, 24.70, 24.100 Wilkinson v Parry (1828) 4 Russ 272; 38 ER 808 ........................................................................ 22.15 Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685 ............................................................. 11.95 Willets v Marks (unreported, CA(Qld), 14 February 1994) ....................................................... 38.205 Willhart Ltd v Samimi (2000) 49 IPR 593 .................................................................................. 31.85 William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 ...................... 3.45, 3.60, 3.120 William H Parsons v Sovereign Bank of Canada [1913] AC 160 ............................................... 36.105 William Just (No 1), Re Estate of (1973) 7 SASR 508 ..................................................... 22.65, 24.125 William Sindall plc v Cambridgeshire County Council [1994] 3 All ER 932 ................................ 35.55 Williams-​Ashman v Price & Williams [1942] Ch 219 ................................................................ 38.100 Williams, Re [1923] VLR 609 ..................................................................................................... 19.75 Williams, Re [1933] Ch 244 ...................................................................................................... 18.50 Williams, Re [1955] VLR 65 ....................................................................................................... 19.95 Williams' Trustees v Inland Revenue Commissioners [1947] AC 447 ........................... 29.215, 29.255 Williams' Trusts, Re (1887) 36 Ch D 231 ................................................................................... 21.75 Williams v Atlantic Assurance Co [1933] 1 KB 81 ........................................................................ 3.35 Williams v Bayley (1866) LR 1 HL 200 ......................................................................................... 8.10 Williams v Central Bank of Nigeria [2014] AC 1189 .......................................... 24.195, 38.10, 38.60 Williams v Commissioner of Inland Revenue [1965] NZLR 395 .................................................. 17.75 Williams v Contovasilis (2007) 13 BPR 24,785 ............................................................................. 1.95 Williams v Hathaway (1877) 6 Ch D 544 ................................................................................ 23.130 Williams v Legg (1993) 29 NSWLR 687 ................................................................................... 16.150 Williams v Lloyd (1934) 50 CLR 341 ....................................................................................... 19.145 Williams v Maalouf [2005] VSC 346 ............................................................. 9.60, 9.90, 9.120, 9.125 Williams v Minister, Aboriginal Land Rights Act 1983 (1999) 25 Fam LR 86 .................... 4.40, 4.315, 30.20, 30.35 clvi

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Table of Cases

Williams v Minister, Aboriginal Land Rights Act 1983 [2000] NSWCA 255 ................................ 4.315 Williams v Papworth [1900] AC 563 ....................................................................................... 20.120 Williams v Peters [2010] 1 Qd R 475 .............................................................................. 17.60, 39.20 Williams v Scott [1900] AC 499 .................................................................... 22.100, 22.110, 22.115 Williams v Williams [2005] 1 Qd R 105 ........................................................... 16.200, 21.80, 21.110 Williamson v Bors (1900) 21 LR (NSW) Eq 302 ......................................................................... 2.130 Williamson v Smalley (1887) 13 VLR 428 .................................................................................. 23.95 Willis, Re [1921] 1 Ch 44 ........................................................................................................ 29.315 Willis v State of Western Australia (No 3) (2010) 4 ASTLR 359 .................................... 38.180, 38.185 Willis v Stephens [1934] VLR 19 ................................................................................................ 21.60 Willis v Thompson [2017] NZHC 1645 ....................................................................................... 9.05 Willison v Van Ryswyk [1961] WAR 87 ....................................................................................... 34.75 Willmott v Barber (1880) 15 Ch D 96 ....................................................................................... 10.60 Willoughby City Council, Re [2016] NSWSC 1717 .................................................................. 23.180 Wills v Abram (unreported, FCA, Heerey J, 12 May 1993) .......................................... 10.140, 10.355 Wills v Luff (1888) 38 Ch D 197 .............................................................................................. 36.130 Wills v Stradling (1797) 3 Ves Jun 378; 30 ER 1963 ................................................................... 12.75 Wilson (deceased), Re [1923] VLR 277 ...................................................................................... 21.80 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLR 567 ............................................................................................. 10.100, 10.240, 10.245 Wilson, Re (1905) 5 SR (NSW) 345 ......................................................................................... 20.120 Wilson, Re [1942] VLR 177 ...................................................................................................... 23.130 Wilson v Attorney-​General (Vic) (1882) 8 VLR (E) 215 ............................................................. 29.290 Wilson v Commissioner of Probate Duties (Vic) (1978) 8 ATR 799 ............................................... 3.40 Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43 .............. 16.125, 16.130 Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1956) 95 CLR 43 ........................ 16.125 Wilson v Duguid (1883) 24 Ch D 244 ..................................................................................... 16.190 Wilson v Ferguson [2015] WASC 15 ......................................................... 6.95, 6.360, 6.365, 34.135 Wilson v Graham (1997) 10 BPR 19,051 ..................................................................................... 1.65 Wilson v Holland [1915] VLR 46 .................................................................................................. 2.90 Wilson v Law Debenture Trust Corp plc [1995] 2 All ER 337 .................................................... 28.145 Wilson v Metro-​Goldwyn-​Mayer (1980) 18 NSWLR 730 ................................................ 23.10, 25.10 Wilson v Paniani [1996] 3 NZLR 378 ......................................................................................... 38.05 Wilson v Parry (1937) 54 WN (NSW) 167 ............................................................................... 31.175 Wilson v West Hartlepool Railway Co (1865) 2 De GJ & S 475; 46 ER 459 ................................. 12.60 Wilson v Wilson (1848) 1 HLC 538; 9 ER 870 ............................................................................ 19.60 Wilson v Wilson (1854) 5 HL Cas 40; 10 ER 811 ........................................................................ 37.70 Wilson v Wilson (1950) 51 SR (NSW) 91 ...................................................................... 22.40, 25.150 Wilson v Wilson [1963] 2 All ER 447 ........................................................................................ 26.125 Wilson's Grant, Re [1960] VR 514 ........................................................................................... 17.175 Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 ............................................ 1.05, 1.80 Wimmera Industrial Minerals Pty Ltd v Iluka Midwest Ltd [2002] FCA 653 ................................ 4.290 Wimpole Properties Pty Ltd v Beloti Pty Ltd [2011] VSC 7 ......................................................... 36.05 Windsor Mortgage Nominees Pty Ltd v Raymond Griffith Cardwell (1979) ACLC ¶40–​540  .................................................................................................................... 39.90 Windt v Carabelas (2002) 224 LSJS 124 .................................................................................. 38.205 Winefield v Clarke [2008] NSWSC 882 ...................................................................................... 7.130 Wingecarribee Shire Council v Concrite Quarries Pty Ltd (2001) 114 LGERA 82 ......... 10.110, 10.220 Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1 ................................................................................................................... 4.20, 4.235 Wingrove v Wingrove (1885) LR 11 PD 81 .................................................................................. 7.15 Winks v W H Heck & Sons Pty Ltd [1986] 1 Qd 226 ................................................................ 37.115 Winter v Crichton (1991) 23 NSWLR 116 ................................................................................... 7.15 Winter v Marac Australia Ltd (1986) 6 NSWLR 11 ................................................................... 32.100 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1991) 101 ALR 363 ....................... 16.130 clvii

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Equity and Trusts in Australia

Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 .............. 10.315, 10.325 Wirth v Wirth (1956) 98 CLR 228 ............................................................................... 26.55, 26.120, 26.125, 26.130 Wise v Perpetual Trustee Co [1903] AC 139 .............................................................................. 27.55 Witham v Holloway (1995) 183 CLR 525 .................................................................................. 31.15 Witten-​Hannah v Davis [1995] 2 NZLR 141 .............................................................................. 34.40 Wokingham Fire Brigade Trusts, Re [1951] Ch 373 ................................................................. 29.240 Wollington v State Electricity Commission of Victoria (No 2) [1980] VR 91 ............................... 14.30 Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 ............. 13.05, 33.130 Wolmershausen v Gullick [1893] 2 Ch 514 ................................................................ 14.140, 14.180 Wolseley Investments Pty Ltd v Gillespie (2008) 13 BPR 24,813 ................................................ 33.10 Wolverhampton and Walsall Railway Co v London and North Western Railway Co (1873) LR 16 Eq 433 ............................................................................................................ 33.05 Wong v Burt [2003] 3 NZLR 526 ............................................................................................ 22.165 Wong v Burt [2005] 1 NZLR 91 ........................................................................... 8.50, 8.55, 22.165, 24.150, 24.215 Wong v Van Vlymen [2016] NSWSC 161 .................................................................................. 33.60 Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13,527 ..................................... 37.65 Wood (deceased), Re [1949] 1 Ch 498 ................................................................................... 17.150 Wood (deceased), Re [1961] Qd R 375 ........................................................................ 24.05, 24.105 Wood v Browne [1984] 2 Qd R 593 ............................................................................... 1.130, 10.60 Woodcock, Marriage of (1997) 21 Fam LR 393 ....................................................................... 10.365 Woodhams (deceased), Re [1981] 1 WLR 493 ......................................................................... 29.315 Woodhead v Elbourne [2001] 1 Qd R 220 ................................................................................ 4.305 Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 ..................................................................................................................... 10.80 Woodland-​Ferrari v UCL Group Retirement Benefits Scheme [2003] Ch 115 .............. 24.100, 24.185 Woodside Hospital Consulting Pty Ltd v Stockton Nominees Pty Ltd [1998] VSC 121 .............................................................................................................................. 32.70 Woodside Petroleum Development Pty Ltd v H & R-​E & W Pty Ltd (1999) 10 ANZ Ins Cas ¶61–​430  ................................................................................................. 14.40, 14.55, 14.60 Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685 .......................................................................................... 4.05, 4.40, 4.70, 10.230 Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 ................ 4.40, 10.230 Woodward v Johnson (1991) 14 Fam LR 828 .......................................................................... 38.180 Woolgar v Chief Constable of Sussex Police [2000] 1 WLR 25 ................................................... 6.310 Woollnough, Re [1953] Tas SR 25 ........................................................................................... 29.340 Woolworths Ltd v Kelly (1991) 22 NSWLR 189 ....................................................... 4.85, 4.95, 4.115 Woolworths Ltd v Olson (2004) 184 FLR 121 ................................................................. 4.285, 6.320 Worcester v Georgia (1832) 31 US 350 ....................................................................................... 5.40 Workcover Queensland v Royal & Sun Alliance Insurance Australia Ltd (2001) 11 ANZ Ins Cas ¶61–​489 ................................................................................................... 14.200 Workcover Queensland v Suncorp Metway Insurance Ltd (2000) 33 MVR 113 ........................ 14.205 Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 .......................................................................................................... 11.50, 11.60, 11.80 World by Nite Pty Ltd v Michael [2004] 1 Qd R 338 ................................................................. 11.95 World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2008] 1 WLR 445 ......................................................................................................................P.60, P.65 Worrall v Harford (1802) 8 Ves 4; 32 ER 250 ........................................................................... 23.120 Worsdale v Polglase [1981] 1 NZLR 722 ................................................................................... 11.80 Wort v Whitsunday Shire Council (2001) 116 LGERA 179 ....................................................... 10.395 Wossildo v Catt (1934) 52 CLR 301 ................................................................................. 1.95, 1.160 Wragg, Re [1919] 2 Ch 58 ...................................................................................................... 22.180 Wrexham, Re [1899] 1 Ch 440 ................................................................................................. 14.85 Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [2007] WASC 118 ......................... 24.185 clviii

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Table of Cases

Wright, Re [1920] 1 Ch 108 ........................................................................................................ 8.65 Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 ............................................................... 6.30, 6.55 Wright v Gater [2012] 1 WLR 802 ............................................................................................. 25.65 Wright v Hamilton Island Enterprises Ltd (2003) Q ConvR ¶54–​588 ........................................ 10.205 Wright v Stevens [2018] NSWSC 548 ......................................................................... 20.35, 20.125, 29.225, 29.275 Wright v Vanderplank (1855) 2 K & J 1; 69 ER 669 ................................................................... 7.115 Wright v Vanderplank (1856) 8 De GM & G 133; 44 ER 340 ................................................... 30.150 Wright v Wright and Adams (1997) 22 Fam LR 89 .................................................................. 38.270 Wrightson Ltd v Fletcher Challenge Nominees Ltd [2002] 2 NZLR 1 ....................................... 28.200 Wrightson, Re [1908] 1 Ch 789 ......................................................... 21.80, 21.105, 21.110, 24.105 Wroe v Seed (1863) 4 Giff 425; 66 ER 773 ................................................................................ 22.30 Wroth v Tyler [1974] Ch 30 .................................................................................................... 34.120 Wrotham Park Estate Co v Parkside Homes Ltd [1974] 1 WLR 798 ............................................... P.65 Wu v Body Corporate 366611 [2011] 2 NZLR 837 .................................................................... 37.40 Wu v Ling [2016] NSWCA 322 .......................................................................................... 9.60, 9.90 Wykes v Samilk Pty Ltd (1999) Aust Contract Rep ¶90–​097 ...................................................... 10.40 Wyld, Re [1912] SALR 190 ...................................................................................................... 29.130 Wylie v Carlyon [1922] 1 Ch 51 ..................................................................................... 14.85, 14.90 Wyllie v Pollen (1863) 3 De G J & S 596; 46 ER 767 .................................................................. 2.130 Wynne v Tempest [1897] 1 Ch 110 ........................................................................................ 24.215

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X X v A [2000] 1 All ER 490 ............................................................................................. 23.65, 23.125 X v Twitter, Inc (2017) 95 NSWLR 301 ...................................................................................... 31.60 X v Y [1988] 2 All ER 648 .......................................................................................................... 6.305 XCB Pty Ltd v Creative Brands Pty Ltd (2006) Aust Contract R ¶90–​223 ................................. 37.130 Xenou v Katsaras (2002) 7 VR 335 ............................................................................................. P.110 Xiao v Perpetual Trustee Co Ltd [2008] VSC 412 ....................................................................... 11.10 Xu v Lin (2005) 12 BPR 23,131 .................................................................... 7.100, 9.05, 9.70, 9.120

Y Yablonski v Cawood (1997) 143 DLR (4th) 65 ............................................................................ 3.40 Yagerphone Ltd, Re [1935] 1 Ch 392 ...................................................................................... 16.105 Yamabuta v Tay (No 1) (1995) 16 WAR 254 .............................................................................. 4.170 Yamabuta v Tay (No 2) (1995) 16 WAR 262 .............................................................................. 32.90 Yanner v Eaton (1999) 201 CLR 351 ........................................................................................... 1.05 Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 ......................................... 1.25, 3.05, 3.10 Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 17 .................................................. 1.65 Yard v Yardoo Pty Ltd [2007] VSCA 35 .................................................................................... 26.110 Yardley v Saunders [1982] WAR 231 .............................................................................. 11.50, 11.60 Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 .................................................. 13.50 Yates v University College, London (1873) 8 Ch App 454 ....................................................... 29.145 Yates v University College, London (1875) LR 7 HL 438 .......................................................... 29.145 Yaxley v Gotts [2000] 1 All ER 711 .................................................................. 10.390, 12.20, 38.225 Yeap Cheah Neo v Ong Cheng Neo (1875) LR 6 PC 381 ............................................. 29.25, 29.200 Yeomans v Yeomans [2006] 1 Qd R 390 ................................................................................. 17.115 Yerkey v Jones (1939) 63 CLR 649 ......................................................................... 7.90, 7.95, 7.100, 7.210, 7.220, 9.20 Yeshiva Properties No 1 Pty Ltd v Marshall (2005) 219 ALR 112 ..................................... 38.85, 38.95 Ying v Song [2010] NSWSC 1500 ............................................................................................. 26.40 York Bros (Trading) Pty Ltd v Commissioner of Main Roads [1983] 1 NSWLR 391 ..................... 31.70

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Equity and Trusts in Australia

York House Pty Ltd v Federal Commissioner of Taxation (1930) 43 CLR 427 ............................. 33.35 York v Fraser (1894) 11 WN (NSW) 12 .................................................................................... 21.125 Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 .......................... 14.40, 14.55 Yorkshire Woolcombers Association Ltd, Re [1903] 2 Ch 284 ...................................................... 1.80 Yoshino v Niddrie [2003] NSWSC 57 ...................................................................................... 26.135 Young, Re [1951] Ch 344 ......................................................................................................... 18.80 Young v Lalic (2006) 197 FLR 27 ................................................................................. 38.270, 39.35 Young v Murphy [1996] 1 VR 279 ...................................................................... 22.10, 24.10, 27.30 Young v Young [2011] VSC 188 .............................................................................................. 38.250 Young v Young (2014) 23 Tas R 76 ........................................................................................... 18.30 Yousif v Salama [1980] 3 All ER 405 ........................................................................................ 32.205 Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 ................ 24.40, 34.15, 36.70 Yule Inc v Atlantic Pizza Delight Franchise (1968) Ltd (1977) 80 DLR (3d) 725 ......................... 33.80 Yule v Irwin (No 2) [2016] SASC 178 ........................................................................................ 22.65 Yung v Yung [2013] NSWSC 1089 .......................................................................................... 26.140 Yunghanns v Candoora No 19 Pty Ltd (No 2) (2000) 35 ACSR 34 .......................................... 24.125

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Z Z Ltd v A-​Z and AA-​LL [1982] QB 558 .......................... 32.45, 32.50, 32.75, 32.105, 32.135, 32.195 Z v Z (2005) 34 Fam LR 296 ................................................................................................... 26.135 Zanet v Hyman [1961] 3 All ER 933 .......................................................................................... 7.100 Zen Ridgeway Pty Ltd v Adams [2009] 2 Qd R 298 ................................................................. 23.130 Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2001] 1 Qd R 114  ......................................................................................................................... 13.70 Zeta Force Pty Ltd v Federal Commissioner of Taxation (1998) 84 FCR 70 .............................. 27.135 Zevering v Callaghan [2012] 1 Qd R 194 .................................................................................. 22.90 Zhang v Zhai [2014] 3 NZLR 69 ..................................................................... 30.40, 33.130, 33.175 Zhong v Wang [2006] NZCA 242 ........................................................................................... 27.100 Zhu v Treasurer of the State of New South Wales (2004) 218 CLR 530 ................................... 38.110 Zimpel, Re [1963] WAR 171 .................................................................................................... 22.120 Zobory v Federal Commissioner of Taxation (1995) 64 FCR 86 ...................................... 26.40, 38.10 Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621 .................................................................... 6.40 Zoneff v Elcom Credit Union Ltd (1990) ATPR ¶41–​009 ............................................................ 9.180 Zsadony v Pizer [1955] VLR 496 ............................................................................................... 11.75 Zucchiatti v Ferrara (1976) 1 BPR 9199 ........................................................................ 33.10, 33.105 Zuks v Jackson McDonald (a firm) (1996) 132 FLR 317 ............................................................... 3.55 Zurich Australian Insurance Ltd, Re [1999] 2 Qd R 203 ........................................................... 10.295 Zurich Australian Insurance Ltd v CSR Ltd (2001) 52 NSWLR 193 ........................................... 14.135 Zurich Australian Insurance Ltd v Metals and Minerals Insurance Pte Ltd (2009) 240 CLR 391] .................................................................................................................... 14.195

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TABLE OF STATUTES Australian Securities and Investments Commission Act 2001 ss 12A(2) to 12A(4): 28.30 s 12CA: 9.170 s 12CB: 9.180

COMMONWEALTH

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Australian Charities and Not-​for-​profits Commission Act 2012 s 15-​5(3): 29.20 s 20-​5(2): 29.20 Australian Consumer Law: 4.280, 7.300, 8.25, 8.95, 9.160, 9.165, 9.190, 11.125, 35.60, 35.110 s 18: 31.155, 32.135 s 18(1): 8.95 s 20: 6.315, 8.25, 10.270, 11.125 s 20(1): 7.300, 8.205, 9.170, 9.175, 13.100 s 20(2): 9.175 ss 20 to 22: 9.165 s 21: 9.45, 9.165, 9.170, 9.175, 9.180, 9.185 s 21(1): 9.180 s 21(2): 9.165, 9.180 s 21(3): 9.180 s 21(4): 9.180 s 22: 9.45, 9.165, 9.175, 9.185, 11.125, 13.100 s 22(1): 9.185 s 22(1)(d): 7.300, 8.25 s 22(2): 9.165, 9.185 s 22(2)(d): 7.300, 8.25 s 22(3): 9.165 s 29: 8.95 s 32(1): 8.95 s 34: 8.95 s 50(1): 8.25 s 50(1)(c): 8.25 s 50(1)(d): 8.25 s 58: 35.60 s 59(1): 35.60 s 232: 8.95, 9.165, 30.175, 31.05 s 236: 8.95, 9.165 ss 237 to 245: 8.95 s 243: 9.165 s 259: 35.60 s 259(3): 35.60 s 260: 35.60 s 262: 35.60 Ch 5: 8.95 Pt 2-​2: 8.15, 9.160 Pt 2-​3: 9.160 Pt 3-​2, Div 1, subdiv A: 35.60

Bankruptcy Act 1966: 19.100, 19.105, 19.125 s 5(1): 19.110 s 5(2): 19.110 s 40(1)(b)(i): 19.105 s 52(1): 10.365 s 58: 38.260 s 59: 38.260 s 59A: 38.260 s 82: 24.25 s 86: 30.100 s 115: 19.105 s 116(1)(a): 27.110 s 116(1)(b): 25.125, 27.60 s 116(2)(a): 27.20 s 120: 19.110, 19.115, 19.125, 19.130, 38.255 s 120(1): 19.110 s 120(3): 19.110 s 120(3A): 19.110 s 120(4): 19.110 s 120(5): 19.110 s 120(6): 19.110 s 120(7): 19.110 s 121: 19.115, 19.120, 19.125, 19.130, 19.140, 38.255 s 121(1): 19.115, 19.140 s 121(2): 19.115 s 121(3): 19.115 s 121(4): 19.115 s 121(4A): 19.115 s 121(5): 19.115 s 121(6): 19.115 s 121(7): 19.115 s 121(8): 19.115 s 121A: 19.125 s 122: 27.70 s 123(1): 19.130 ss 123(1)(a) to 123(1)(d): 19.130 s 123(3): 19.130 ss 124 to 128: 19.130 s 302B: 19.75, 27.115, 27.120 Pt IX: 19.115

Australian Prudential Regulation Authority Act 2001 s 8(1): 28.30

Bankruptcy Legislation Amendment (Anti-​ avoidance) Act 2006: 19.110, 19.115, 19.125

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Equity and Trusts in Australia

s 22: 9.45, 9.165, 9.175, 9.185, 11.125, 13.100 s 22(1): 9.185 s 22(1)(d): 7.300, 8.25 s 22(2): 9.165, 9.185 s 22(2)(d): 7.300, 8.25 s 22(3): 9.165 s 29: 8.95 s 32(1): 8.95 s 34: 8.95 s 50(1): 8.25 s 50(1)(c): 8.25 s 50(1)(d): 8.25 s 58: 35.60 s 59(1): 35.60 s 232: 8.95, 9.165, 30.175, 31.05 s 236: 8.95, 9.165 ss 237 to 245: 8.95 s 243: 9.165 s 259: 35.60 s 259(3): 35.60 s 260: 35.60 s 262: 35.60 Ch 5: 8.95 Pt 2-​2: 8.15, 9.160 Pt 2-​3: 9.160 Pt 3-​2, Div 1, subdiv A: 35.60 Pt VIA: 14.175 Sch 2 (Australian Consumer Law): 8.25, 8.95, 9.160, 30.175, 31.155, 32.135, 35.60, 4.280, 7.300, 8.25, 8.95, 9.160, 9.165, 9.190, 11.125, 30.175, 31.155, 32.135, 35.60, 35.110

Bankruptcy and Family Law Legislation Amendment Act 2005: 38.260 Sch 1: 19.165 Sch 5: 19.165 Bills of Exchange Act 1909 s 8(1): 14.80 s 64(2): 14.80

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Charities Act 2013: 29.40, 29.60, 29.75, 29.105, 29.110, 29.140, 29.165, 29.215, 29.220, 29.230, 29.240, 29.245 s 5: 29.80, 29.280 s 6(1): 29.60, 29.90 s 6(2): 29.90 s 6(4): 29.60 s 7: 29.90 s 8: 29.75 s 10: 29.205 s 11(b): 29.105 s 12(1): 29.20, 29.40 s 12(1)(a): 29.110, 29.270 s 12(1)(c): 29.110 s 12(1)(d): 29.165 s 12(1)(i): 29.220 s 12(1)(k): 29.215 s 12(1)(l): 29.105 s 14: 29.110, 29.270 s 15(1): 29.110 s 15(2): 29.110 s 15(4): 29.240 s 17: 29.245 Cheques Act 1986 s 87(1): 14.80 Circuit Layouts Act 1989 s 27(2): 34.155

Competition and Consumer Legislation Amendment Act 2011: 9.165, 9.180

Commonwealth of Australia Constitution Act 1901 s 51(xx): 21.15, 28.35 s 51(xxiii): 28.35 s 92: 31.160

Competition and Consumer Legislation Amendment Bill 2011: 9.180 Consumer Credit Code: 13.05, 13.65 s 42(1): 1.75 s 42(3): 1.75 s 42(4): 1.75 ss 76 to 78: 9.160

Companies Code s 229A: 27.40 s 556(1): 14.170

Copyright Act 1968 s 8: 3.155 s 115(2): 34.155 s 116: 37.175 s 196: 3.30, 3.155

Competition and Consumer Act 2010: 28.20 s 18: 31.155, 32.135 s 18(1): 8.95 s 20: 6.315, 8.25, 10.270, 11.125 s 20(1): 7.300, 8.205, 9.170, 9.175, 13.100 s 20(2): 9.175 ss 20 to 22: 9.165 s 21: 9.45, 9.165, 9.170, 9.175, 9.180, 9.185 s 21(1): 9.180 s 21(2): 9.165, 9.180 s 21(3): 9.180 s 21(4): 9.180

Corporations Act 2001: 4.85, 19.100, 21.15, 27.45, 28.15, 28.45, 28.80, 28.140, 28.255, 36.150, 36.165 s 9: 4.85, 19.135, 28.240, 36.150 s 85: 36.140 s 87(1): 36.140 s 90: 36.15 s 95A(1): 27.45 s 95A(2): 27.45 clxii

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Table of Statutes

Corporations Act 2001 — cont s 180: 36.70 s 180(1): 28.250 s 182(1): 4.85, 34.125 s 191(1): 4.130 s 191(2)(a)(i): 4.130 s 191(2)(a)(iv): 4.130 s 197: 27.40 s 197(1): 27.40 s 197(1)(b): 27.40 s 197(2): 27.40 s 262: 16.80, 27.90 s 262(2): 23.125 s 418(1): 36.150 s 419: 36.35 s 419(1): 36.35 s 419A: 36.35 s 420: 36.15, 36.20, 36.85, 36.155 s 420A: 36.60 s 420B(1): 36.155 s 420B(2): 36.155 s 420C: 36.40 ss 421 to 422: 36.150 s 423: 36.150 s 424: 23.170, 36.85 s 425: 36.150 s 429(2)(b): 36.155 s 430: 36.155 s 431: 36.155 s 432: 36.150 s 433: 36.155 s 434: 36.150 s 443F: 1.105 s 477(2)(a): 36.85 s 459G: 10.380 s 553: 24.25 s 553C: 30.100 s 560: 14.20 s 588G: 14.170 s 588G(2): 27.45 s 588H: 27.45 s 588J(1): 27.45 s 588FA: 27.70 s 588FB: 19.135 s 588FC: 19.135 s 588FD: 19.135 s 588FE: 27.70 s 588FE(6A): 19.135 s 588FE(2): 19.135 s 588FE(3): 19.135 s 588FE(4): 19.135 s 588FE(5): 19.135 s 588FE(6): 19.135 s 588FF: 19.135 s 588FG: 19.135 s 588FDA: 19.135 s 601EA(4): 28.255 s 601ED: 28.240 s 601EE: 25.120, 28.240 s 601FA: 28.245

s 601FB(1): 28.245 s 601FB(2): 28.245 s 601FC(1): 28.250 s 601FC(1)(h): 28.260 s 601FC(1)(m): 28.255 s 601FC(2): 28.245 s 601FD: 28.250 s 601FD(1)(c): 28.85 s 601FD(2): 28.250 s 601FE: 28.250 s 601FE(2): 28.250 s 601FL(1): 28.245 s 601FM(1): 28.245 s 601GA: 28.255 s 601GB: 28.255 s 601GC(1): 28.255 s 601GC(1)(b): 28.255 s 601HA: 28.260 s 601HE(1): 28.260 s 601HG: 28.260 s 601JA(1): 28.260 s 601JA(2): 28.260 s 601KA(1): 28.260 s 601KA(4): 28.260 s 601KA(6): 28.260 ss 601KB to 601KE: 28.260 s 601MA(1): 28.250 s 601RAB(1): 21.15 s 601RAE(2): 21.15 ss 601SBA to 601SBC: 21.15 ss 601SCA to 601SCC: 21.15 ss 601TAA to 601TEB: 21.15 s 601UAA: 21.15 s 601UAB: 21.15 ss 601VAA to 601VBI: 21.15 s 991A(1): 9.170 s 1017C: 28.80 s 1017C(4): 28.80 s 1317E: 34.125 s 1317E(1)(f): 28.250 s 1317G: 28.250 ss 1317AA to 1317AE: 6.300 s 1317DA: 28.250 s 1318: 4.125, 4.320, 24.200 s 1323(1)(h): 20.135, 36.160 s 1324: 31.05 s 1324(1): 31.05 s 1324(4): 31.05 s 1324(10): 36.60 Ch 2E: 28.260 Ch 5C: 28.240, 28.245, 28.260 Ch 5D: 21.15 Ch 7: 28.45 Pt 2D.1: 28.90, 28.250 Pt 2G.4: 28.260 Pt 5.2: 36.05, 36.150 Pt 5.3A: 36.40 Pt 5.6, Div 1A: 19.135 Pt 5.7B: 19.135 Pt 5C.6: 28.260 clxiii

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Equity and Trusts in Australia

Corporations Act 2001 — cont Pt 5C.7: 28.260 Pt 5C.9: 25.120 Pt 7.7A: 28.45 Pt 7.10, Div 2A: 14.175 Pt 7.12, Div 5: 28.260 Pt 9.4AAA: 6.300

s 106B(1): 19.155, 19.160 s 106B(3): 19.160 s 114(3): 31.05, 32.30 Family Law Amendment Act 2005: 19.155, 38.260 Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008: 19.155, 20.135, 20.145, 26.50, 38.165 s 4AA: 26.50, 38.165

Corporations Amendment Act (No 1) 2005: 27.40 Corporations Law s 223: 27.40 s 1069: 28.15 s 1069(1)(c): 28.260 Ch 5C: 28.15 Pt 7.12, Div 5: 28.15, 28.245

Federal Circuit Court of Australia Act 1999 s 15: 32.30 Federal Court Rules 2011 r 7.35(5): 32.100 r 7.43: 32.155 r 7.45(1)(d): 32.175 r 7.46: 32.165 Div 7.4: 32.05 Div 7.5: 32.140

Corporations Legislation Amendment (Financial Services Modernisation) Act 2009: 21.15

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Corporations Regulations 2001: 21.15 regs 5D.2.03 to 5D.2.09: 21.15 reg 7.9.48C: 28.100 Sch 8AA: 21.15 Defence Service Homes Act 1918: 19.40

Federal Court of Australia Act 1976 s 21: 37.05 s 23: 31.05, 32.30, 36.10

Designs Act 2003 s 75(1)(b): 34.155

Financial Sector (Collection of Data) Act 2001: 28.100

Extension of Charitable Purpose Act 2004: 29.40 s 5(1): 29.205

Foreign Judgments Act 1991: 32.25 Freedom of Information Act 1982: 6.165 s 33: 6.165 s 37: 6.165 s 43: 6.165 s 45: 6.165

Family Law Act 1975: 19.110, 19.155, 20.135, 20.145, 26.50, 38.260 s 4: 38.260 s 4AA: 19.155, 20.135, 20.145 s 34(1): 31.05, 32.30 s 75(2)(b): 20.145 s 75(2)(ha): 38.260 s 79: 1.130, 19.170, 20.135, 20.140, 26.50, 26.125, 28.135, 38.185, 38.260 s 79(1): 38.260 s 79(4): 26.50, 38.165 s 79(4)(e): 20.145, 38.260 s 79(10): 38.260 s 79(10A): 38.260 s 85A: 19.170 s 85A(1): 19.170 s 90MD: 28.135 s 90MS: 28.135 s 90MT: 28.135 s 90MU: 28.135 s 90SF(3)(b): 20.145 s 90SF(3)(i): 38.260 s 90SM: 20.135, 26.50, 28.135, 38.165, 38.260 s 90SM(4)(e): 20.145, 38.260 s 106(1A): 19.165 s 106(1B): 19.165 s 106B: 19.155, 19.165 s 106B(4AA): 19.165

Income Tax Assessment Act 1936: 17.10, 19.150, 27.130, 28.40 s 6(1): 27.130 s 23(e): 29.215 s 25(1): 27.130 s 80A(1): 1.10 s 95(1): 27.135 s 95A(2): 27.155, 27.165, 27.175 ss 95 to 102: 27.130 s 97: 20.75, 27.130, 27.165, 27.180 s 98: 27.130, 27.145, 27.170, 27.175, 27.180 s 98(3): 27.175 s 98(4): 27.175 s 98A: 27.165 s 98A(1): 27.175 s 98A(2): 27.175 s 99: 27.130, 27.170, 27.180 s 99(1): 27.180 s 99A: 20.155, 27.130, 27.150, 27.170, 27.180 s 99A(2): 27.180 s 99A(3): 27.180 s 99A(4): 27.180 clxiv

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Table of Statutes

Pt 3-​6: 27.125 Div 149: 27.195 subdiv 30-​BA: 29.20 subdiv 50-​B: 29.20

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Income Tax Assessment Act 1936 — cont s 100: 27.165 s 100(1): 27.175 s 100(1)(a): 27.175 s 100(2): 27.175 s 100A: 19.150 s 101: 27.155 s 102: 25.125, 27.160 s 102AC: 27.200 s 102AG(1): 27.200 s 102AG(2): 27.200 s 160L: 27.185 s 175: 37.25 s 177A(1): 19.150 s 177A(5): 19.150 s 177D: 19.150 s 177D(2): 19.150 s 177F: 19.150 Pt III: 27.200 Pt III, Div 6: 27.130 Pt III, Div 6AA: 19.150, 20.120, 27.15 Pt IIIA: 27.185 Pt IIIAA: 27.125 Pt IVA: 19.150, 27.15 Pt IX: 28.40 Div 6: 27.130, 27.135 Div 6AA: 27.200 Div 104: 27.185 Divs 265 to 272: 27.15, 27.125, 27.135 Sch 2F: 27.15, 27.125, 27.135 Sch 2F, Divs 265 to 272: 20.120, 25.115

Insurance Contracts Act 1984: 14.65 s 9: 14.65 s 65: 14.20, 14.65 s 66: 14.20, 14.65 s 67: 14.35 Judiciary Act 1903 s 32: P.35 Life Insurance Act 1995: 28.240 Managed Investments Act 1998: 16.45, 28.15 Marine Insurance Act 1909 s 85(1): 14.05 Marriage Act 1961 s 11A: 10.375 s 111A: 10.110, 33.80 National Consumer Credit Protection Act 2009 s 76(2)(l): 9.195 s 92: 13.05, 13.65 s 93: 13.05, 13.65 s 118: 9.195 s 119: 9.195 s 131: 9.195 Sch 1: 1.75, 9.160, 9.195

Income Tax Assessment Act 1997: 25.55 s 6-​5: 27.130 s 30-​15: 29.20 s 30-​17: 29.20 s 30-​45: 29.20 s 35-​10: 29.20 s 50-​5: 29.20, 29.80, 29.215 s 50-​50: 29.20, 29.215 s 50-​52: 29.20 s 50-​60: 29.20, 29.215 s 50-​75: 29.20 s 102-​5: 27.185 s 102-​10: 27.185 s 102-​15: 27.185 s 104-​70: 27.190 s 104-​75: 27.190 s 104-​80: 27.190 s 104-​90: 27.190 s 104-​230: 27.195 s 104 to 55: 25.110 s 106-​50: 27.190 s 115-​10(c): 27.125, 27.185 s 115-​100: 27.125, 27.185 s 165-​12: 1.10, 27.10 s 177C: 19.150 Pt 2-​42: 27.15 Pt 3-​1: 27.185 Pt 3-​3: 27.185

Occupational Superannuation Standards Amendment Act 1993: 28.20 Patents Act 1990 s 13: 3.30 s 14: 3.30 s 122(1): 34.155 Personal Property Securities Act 2009: 1.80, 1.85, 16.75, 16.80, 27.90 s 8(1)(c): 1.85, 23.125 s 8(1)(f)(x): 16.80, 27.90 s 8(1)(h): 16.80, 27.90 s 339(5): 1.80 s 340: 1.80 Pt 2.6: 2.05 Plant Breeder's Rights Act 1994 s 56(3): 34.155 Privacy Act 1988: 6.120 Public Interest Disclosure Act 2013: 6.300 Public Service Act 1999 s 13(6): 5.25 Public Service Regulations 1999 reg 2.1: 5.25 clxv

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Equity and Trusts in Australia

s 29WA(3): 28.110 s 29SAA: 28.60, 28.110 s 29SAB: 28.60 s 31: 28.130, 28.180 s 34C: 28.20, 28.30 s 42(1): 28.40 s 42(1A): 28.40 s 52: 28.75, 28.85 s 52(2): 28.65, 28.95 s 52(2)((i): 28.85 s 52(4): 28.160 s 52(6): 28.75 s 52(6)(a): 28.85 s 52(6)(b): 28.85 s 52(6)(c): 28.85 s 52(7): 28.75, 28.85 s 52(8): 28.75, 28.85 s 52A(2): 28.90 s 52A(2)(b): 28.90 s 52A(2)(f): 28.90 s 52A(3): 28.90 s 52A(5): 28.90 s 52A(6): 28.90 s 52B(2): 28.95 s 52C: 28.95 s 55(4A): 28.90 s 55(4C): 28.90 s 58: 28.55, 28.160 s 58(1): 28.160 s 58(2): 28.160 s 58A: 28.215 s 58B: 28.215 s 59: 28.55, 28.160 s 59(1): 28.160 s 59(1A): 28.160 s 60: 28.180 s 60(2): 28.55 s 62: 28.35, 28.100, 28.160 s 62(1)(a): 28.55 s 62(1)(b): 28.55 s 65: 28.20 s 68AA(1): 28.100 s 68AA(2): 28.100 s 68AA(3): 28.100 s 68AA(5): 28.100 s 68AA(6): 28.100 s 68AA(7): 28.100 s 68AA(8): 28.100 s 89: 28.210 s 89(1): 28.65 s 89(2): 28.70 ss 89 to 93: 28.65 s 92: 28.65 s 93: 28.65 ss 99A to 99F: 28.60, 28.100 s 101: 28.100, 28.230 ss 101(c) to (e): 28.100 s 102: 28.100 s 103: 28.100 s 104: 28.100 s 105: 28.100

Retirement Savings Accounts Act 1997: 28.50 Social Security Act 1991: 20.150 Pt 3.18: 20.150 Superannuation (Financial Assistance Funding) Levy Act 1993: 28.20 Superannuation Guarantee (Administration) Act 1992: 28.110 ss 19(2A) to 19(2E): 28.110 s 32C: 28.110 s 32D: 28.110 s 32P(1): 28.110

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Superannuation Guarantee Charge Act 1992: 28.110 s 17: 28.110 Pt 3: 28.110 Superannuation Industry (Supervision) Act 1993: 28.20 s 3: 28.20 s 4AA(1): 28.135 s 6: 28.30 s 10: 28.160 s 10(1): 28.35, 28.50, 28.60, 28.65, 28.90 s 10A: 28.160 s 16(1): 28.35 s 16(2): 28.35 s 16(3): 28.35 s 16(4): 28.35 s 17A: 28.30 s 18(1): 28.35 s 18(1)(a)(iii): 28.35 s 18(1)(aa): 28.35 s 18(2): 28.35 s 19: 28.20, 28.35 s 19(2): 28.50 s 20SAC: 28.60 s 29B(4): 28.60 s 29C: 28.60 s 29D: 28.60 s 29E: 28.60 s 29EA: 28.60 ss 29F to 29GB: 28.30 s 29G: 28.60 s 29G(3): 28.60 s 29J: 28.60 s 29N: 28.30 s 29S: 28.60 s 29T: 28.60 s 29U: 28.30 ss 29V to 29E: 28.100 ss 29V to 29VB: 28.60 s 29W: 28.55, 28.60 s 29TC: 28.25, 28.55 s 29VN: 28.90 s 29VO: 28.90 s 29VO(2): 28.90 s 29VO(3): 28.90 s 29WA: 28.25, 28.60, 28.110 clxvi

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Table of Statutes

Superannuation Industry (Supervision) Act 1993—cont s 106: 28.100 s 107: 28.100 s 107(2): 28.70 s 108: 28.70, 28.100 s 109: 28.100 s 111: 28.100 s 117: 28.205 s 120(1): 28.60 s 120(2): 28.60 s 126A: 28.60 s 126B: 28.60 s 126H: 28.60 s 126K: 28.60 s 126K(4): 28.60 ss 128 to 131C: 28.20 s 133: 28.70 s 134: 28.70 ss 254 to 275: 28.30 ss 326 to 332: 28.30 s 343: 19.85, 28.50 s 387: 28.110 s 388: 28.110 Pt 3: 28.20 Pt 5: 28.20 Pt 7: 28.20 Pt 8: 28.20 Pt 9: 28.20 Sch 1: 28.165

Superannuation (Rolled-​Over Benefits) Levy Act 1993: 28.20 Superannuation Supervisory Levy Amendment Act 1993: 28.20 Taxation Administration Act 1953 Sch 1, Div 426: 29.20 Trade Marks Act 1955 s 65: 34.155 Trade Marks Act 1995 s 126: 34.155 Pt 10: 3.30 Trade Practices Act 1974: P.160, 6.190, 8.95, 9.165, 28.20, 34.55, 37.60 s 45D: 31.115 s 47(9): 37.30 s 51AA: 8.205, 9.165, 9.170 s 51AA(1): 9.170 s 51AB: 9.165, 9.185 s 51AC: 9.45, 9.165 s 52: 31.15, 31.155, 32.135 s 52(1): 8.95 s 75A: 35.60 s 80: 31.05 Pt IVA: 8.15, 9.160, 9.165

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Superannuation Industry (Supervision) Consequential Amendments Act 1993: 28.20 Superannuation Industry (Supervision) Regulations 1994: 28.20 reg 1.03(1): 28.110 reg 1.03C: 28.165 regs 3A.01 to 3A.03A: 28.60 reg 4.01: 28.80, 28.180 reg 5.01: 28.110 regs 5.04 to 5.08: 28.130 reg 6.02(2): 28.165 regs 6.02 to 6.17: 28.125 reg 6.17A: 28.160 reg 6.18(1): 28.125 reg 6.19(1): 28.125 reg 6.20: 28.125 reg 7.04: 28.110 reg 13.16: 28.130, 28.180 Pt 2: 28.140 Pt 6: 28.125 Sch 1: 28.125 Superannuation (Resolution of Complaints) Act 1993: 28.20, 28.235 s 3(2): 28.235 s 4: 28.235 s 14: 28.235 s 14(6): 28.235 s 37(1)(a): 28.235 s 37(3): 28.235

Administration and Probate Act 1929 s 41D: 22.150 s 70: 22.90 Adoption Act 1993 s 43: 25.165 Associations Incorporation Act 1991: 17.190 Civil Law (Property) Act 2006 ss 201(1) to 201(3): 18.05 s 201(4)(a): 18.25 s 203(1)(d): 18.20 s 204: 12.05, 18.10, 18.105 s 205: 3.25 s 210: 26.70 s 239: 19.140 s 240: 19.140 s 250: 22.140 s 308: 36.165 s 309: 36.165 s 310: 36.165 s 314: 36.165 s 425: 11.105 ss 426(1) to 426(4): 11.105 s 426(5)(e): 11.105 Dictionary: 18.10, 20.80 Civil Law (Wrongs) Act 2002 s 173: 35.55, 35.110 Ch 7A: 14.175 Pt 2.5: 14.175

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Equity and Trusts in Australia

Court Procedures Act 2004 s 61: 30.90 s 62(1): 31.05, 32.30 s 63: 36.10 s 122: 30.95 Court Procedures (Consequential Amendments) Act 2004: 30.95 Court Procedures Rules 2006 rr 740 –​ 745: 32.05 r 456: 30.90 r 700: 31.130 r 732: 32.20 r 743(5): 32.100 rr 750 to 755: 32.140 r 752: 32.155 r 753(1)(d): 32.175 r 754: 32.165 r 1616: 34.60 r 2700: 24.120 r 2701: 24.120 r 2900: 37.05 subdiv 2.9.4.2: 32.05 subdiv 2.9.4.3: 32.140

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Domestic Relationships Act 1994 s 3(1): 12.40, 38.165 s 15: 26.50, 38.165 s 19: 20.135 s 19(2)(a): 20.145 s 29: 19.155 Evidence Act 2011 s 128A: 32.180 Family Provision Act 1969: 15.80 Health Records (Access and Privacy) Act 1997 Pt 3: 4.300 Human Rights Act 2004 s 12(a): 6.120 Justice and Community Safety Legislation Amendment Act 2003: 23.75 Land Titles Act 1925 s 59: 2.135, 8.45, 38.115, 39.20 s 73: 18.105 s 75: 18.105 s 120(1)(d): 11.85 Limitation Act 1985 Dictionary 1962: 24.190 s 6: 24.195 s 27(1): 24.180 s 27(1)(c): 24.180 s 27(1)(d): 24.180 s 27(1)(e): 24.180 s 28: 24.190 s 30(d): 24.190 s 32: 24.190 s 33: 24.190

Mercantile Law Act 1962 s 13: 14.75 Parentage Act 2004: 25.165 s 28: 22.75 Partnership Act 1963 s 29(10): 14.115 s 35(1): 4.190 s 50: 14.170 Perpetuities and Accumulations Act 1985 s 3: 19.85 s 8: 19.85 s 9: 19.85 s 10(1): 19.85 s 15(3): 29.25 s 19: 19.90 Public Interest Disclosure Act 2012: 6.300 Public Trustee Act 1985: 21.20 Sale of Goods Act 1954 s 4(1): 16.200 s 6(14): 16.200 s 11(1): 16.205 s 22: 16.70 s 55: 33.50 s 62(1): 35.60 s 62(1A): 35.60 s 70(7): 16.200 Supreme Court Act 1933 s 22: 31.175 ss 25 to 34: P.35 s 34: 34.65 s 34(1): 32.30 Trustee Act 1925 s 5A(2): 17.185 s 6: 21.60, 30.35 s 6(2)(b): 21.60 s 6(2)(c): 21.60 s 6(2)(g): 21.60 s 6(5)(b): 21.60 s 6(6)(b): 21.85 s 6(12): 21.60 s 7A: 21.05 s 8: 21.95 s 8(1): 30.35 s 10: 21.90 s 11(1): 24.180, 30.35 s 14A(2)(a): 22.190 s 14A(2)(b): 22.190 s 14A(3): 22.190 s 14B(1): 22.190 s 14C(1): 22.190 s 14C(2): 22.190 s 14E: 22.180 s 26: 23.100 s 27B(1): 23.105 s 27B(2): 23.105 clxviii

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Table of Statutes

s 16: 21.15 s 17: 21.15

Trustee Act 1925—cont s 28: 23.100 s 30: 23.100 s 36(3)(b): 22.40 s 38(1): 23.100 s 38(2): 23.100 s 38(3): 23.100 s 43: 23.115 ss 43(7) to 43(9): 23.115 s 43(11): 23.115 s 44: 23.115, 25.95 s 44(1): 23.115 s 44(7): 23.115 s 45: 27.120 s 45(6): 27.120 s 49(1): 22.65 s 50: 22.10, 22.60 s 51: 22.30, 22.60 s 52: 22.60 s 53: 22.60 s 54: 22.60 s 54A: 22.60 s 57(1): 21.135 s 58: 22.230 s 59(2): 24.95 s 59(4): 23.120 s 60: 22.230, 25.160 s 61A: 22.230 s 63: 23.170 s 63(2): 23.170 s 64: 22.45 s 70: 21.100 s 70(1) to (3): 21.65 s 70(4): 21.65 s 70(5)(a) to (c): 21.65 s 70(5)(d): 21.65 s 70(5)(e): 21.65 s 71: 21.140 s 72: 21.140 s 76: 21.140 s 77: 21.140 s 78(1): 21.145 s 78(2): 21.145 s 79: 21.145 s 81: 25.30 s 85: 24.200 s 86(1): 23.165 s 86(2): 23.165 s 89: 22.195 s 89A: 22.195, 24.90 ss 94A to 94E: 29.15 s 95: 17.130 s 102: 22.30, 24.110 s 106: 23.75

Wills Act 1968 s 9: 18.40 s 11A: 18.40 s 12A: 37.80

NEW SOUTH WALES Adoption Act 2000 s 95: 25.165 Associations Incorporation Act 2009: 17.190 Charitable Trusts Act 1993 ss 5 to 7: 29.15 s 9: 29.365 s 9(1): 25.55, 29.365 ss 9 to 11: 29.355 s 10(1): 29.365 s 10(2): 29.365 ss 12 to 22: 29.375, 29.380 s 23: 29.295 Civil Liability Act 2002 Pt 4: 14.175 Civil Procedure Act 2005: 30.95 s 21: 30.95 s 21(1): 30.95 s 21(6): 30.95 s 22: 30.90 s 87: 32.120 s 100: 34.60 Compensation to Relatives Act 1897: 16.15 Contracts Review Act 1980: 9.115, 9.155 Conveyancing Act 1919 s 7(1): 18.10, 20.80 s 12: 3.25 s 23B: 18.105 s 23C: 18.10 s 23C(1): 18.05, 18.10 s 23C(2): 18.25 s 23E(d): 18.20 s 26: 26.70 s 37A: 19.140 s 37B: 19.140 s 37D: 29.295 s 44(1): 26.55 s 54A: 10.385, 12.05, 18.10 s 55(2A): 11.75 s 66ZG: 10.380 s 85(1)(d): 11.85 s 109(1)(c): 36.165 s 109(2): 36.165 s 111A: 36.60 s 115(2): 36.165 s 115(3): 36.165 s 115(8): 36.165

Trustee (Amendment) Act 1999: 22.190 Trustee Companies Act 1947: 21.15 ss 4 to 14: 21.15 s 6: 21.60 clxix

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Equity and Trusts in Australia

Conveyancing Act 1919—cont s 129(1): 11.105 s 129(2): 11.105 s 129(8): 11.105 s 129(10): 11.105 s 144(1): 22.140 s 151A: 21.05

NSW Trustee and Guardian Act 2009: 21.20 s 112: 22.75 Partnership Act 1892 s 24: 14.115 s 30(1): 4.190 s 44: 14.170 Perpetuities Act 1984 s 4: 19.85 s 7: 19.85 s 8: 19.85 s 8(1): 19.85 s 9(1): 19.85 s 14(4): 29.25 s 18: 19.90

Conveyancing and Law of Property Act 1898 Pt 4: 23.95 Crimes Act 1900 s 176A: 34.125 Defamation Act 2005 s 21(1): 31.175

Probate and Administration Act 1898 s 46D: 22.150 s 86: 22.90

Dormant Funds Act 1942: 29.350 Environmental Planning and Assessment Act 1979: 31.50

Property (Relationships) Act 1984 s 5(1): 12.40, 38.165 s 20: 20.135, 26.50, 38.165 s 20(1)(a): 20.145 s 42: 19.155

Evidence Act 1995 s 128A: 32.180 Health Records and Information Privacy Act 2002 ss 26 to 32: 4.300

Public Interest Disclosures Act 1994: 6.300 Real Property Act 1900 s 43: 2.135, 8.45, 38.115, 39.20 s 46: 18.105

Imperial Acts Application Act 1969 s 8: 30.95

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Landlord and Tenant Act 1899 ss 8 to 10: 11.95

Sale of Goods Act 1923 s 4(2): 35.60 s 4(2A): 35.60 s 4(2A)(b): 35.110 s 5: 16.200 s 6(12): 16.200 s 11(1): 16.205 s 22: 16.70 s 38(2): 35.110 s 56: 33.50 s 70(9): 16.200

Law Reform (Law and Equity) Act 1972 s 5: P.35 Law Reform (Miscellaneous Provisions) Act 1946 Pt 3: 14.175 Law Reform (Miscellaneous Provisions) Act 1965 s 3: 14.75 Limitation Act 1969 s 11(1): 24.190, 24.195 s 27(2): 24.190 s 47(1)(c): 24.180 s 47(1)(d): 24.180 s 47(1)(e): 24.180 s 48(a): 24.180 s 49: 24.190 s 52: 24.190 s 55: 24.190

Stamp Duties Act 1920: 25.105 Status of Children Act 1996: 25.165 Succession Act 2006 s 6: 18.40 s 8: 18.40 s 27: 37.80 s 43: 17.185 Ch 3: 15.80

Limitation Amendment (Child Abuse) Act 2016: 4.305

Supreme Court Act 1970: 24.65 s 23: 32.30 ss 57 to 63: P.35 s 66(4): 31.05 s 67: 36.10 s 68: 34.65 s 74: 37.145 s 75: 37.05

Mining Act 1906: 37.25 Minors (Property and Contracts) Act 1970 s 10(1)(b): 21.05 s 10(2): 21.05 s 50: 25.25 clxx

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Table of Statutes

s 78(1): 21.145 s 78(2): 21.145 s 79: 21.145 s 81: 25.30 s 85: 24.200 s 86(1): 23.165 s 86(2): 23.165 s 90: 22.195 s 90A(1): 22.195, 24.90 ss 94A to 94E: 29.15 s 93: 23.185 s 95: 17.130 s 102: 22.30, 24.110

Trustee Act 1925 s 6: 21.60 s 6(2)(b): 21.60 s 6(2)(c): 21.60 s 6(2)(g): 21.60 s 6(5)(b): 21.85 s 6(11): 21.60 s 8: 21.95 s 7A: 21.05 s 9: 30.35 s 10: 21.90 s 12: 21.135 s 14A(2)(a): 22.190 s 14A(2)(b): 22.190 s 14A(3): 22.190 s 14B(1): 22.190 s 14C(1): 22.190 s 14C(2): 22.190 s 14DA: 22.180 s 23: 30.35 s 26: 23.100 s 26(2): 23.100 s 27B(1): 23.105 s 27B(2): 23.105 s 28: 23.100 s 30: 23.100 s 36(2): 30.35 s 36(3)(b): 22.40 s 38(1): 23.100 s 38(1A): 23.100 s 38(2): 23.100 s 43: 23.115 ss 43(6) to 43(8): 23.115 s 43(10): 23.115 s 44: 23.115, 25.95 s 44(1): 23.115 s 44(7): 23.115 s 45: 27.120 s 45(6): 27.120 s 50: 22.10, 22.60 s 51: 22.30, 22.60 s 52: 22.60 s 53: 22.60 s 54: 22.60 s 54A: 22.60 s 57(1): 21.135 s 58: 22.230 s 59(2): 24.95 s 59(4): 23.120 s 60: 22.230, 25.160 s 61A: 22.230 s 63: 23.170 s 63(2): 23.170 s 64: 22.45 s 70: 21.65, 21.100 s 71: 21.140 s 72: 21.140 s 74: 21.140 s 76: 21.140 s 77: 21.140

Trustee Amendment (Discretionary Investments) Act 1997: 22.190 Trustee Companies Act 1964: 21.15 ss 4 to 15C: 21.15 s 31: 21.15 Trustee Regulation 2015 cl 4: 22.190 Uniform Civil Procedure Rules 2005 r 25.8: 31.130 r 25.14(5): 32.100 r 25.20: 32.155 r 25.22(1)(d): 32.175 r 25.23: 32.165 r 54.3: 24.120 Pt 9: 30.90 Pt 25, Div 2: 32.05 Pt 25, Div 3: 32.140 Sch 5: 24.65

NORTHERN TERRITORY Administration and Probate Act 1969 s 58: 22.150 s 102: 22.90 Adoption of Children Act 1994 s 45: 25.165 Associations Act 2003: 17.190 Companies (Trustees and Personal Representatives) Act 1981: 21.15 ss 14 to 20: 21.15 s 50: 21.15 De Facto Relationships Act 1991 s 18: 20.135, 26.50, 38.165 s 18(1)(a): 20.145 s 41: 19.155 Evidence (National Uniform Legislation) Act 2011 s 128A: 32.180 Family Provision Act 1970: 15.80 clxxi

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Equity and Trusts in Australia

Juries Act 1962 s 6A: 31.175 Land Title Act 2000 s 61: 18.105 s 62: 18.105 s 77: 1.75 s 188(2): 2.135, 8.45, 38.115, 39.20 s 188(3): 2.135, 8.45, 38.115, 39.20 s 197: 1.95

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Law Reform (Miscellaneous Provisions) Act 1956 Pt IV: 14.175 Law of Property Act 2000 s 4: 18.10, 20.80 s 5(b): 18.20 s 6(3): 26.55 s 9: 18.105 s 10(1): 18.05 s 10(2): 18.25 s 35: 26.70 s 56: 16.140 s 58: 12.05, 18.35 s 62: 12.05, 18.10 s 82(2)(b): 18.100, 18.105 s 85: 2.95 s 86(c): 36.165 s 96(2): 36.165 s 119(1)(d): 11.85 s 137: 11.95 ss 137(1) to 137(3): 11.105 s 137(7)(c): 11.105 s 138: 11.95 ss 138(1) to 138(3): 11.105 s 138(5): 11.95, 11.105 s 138(5)(b): 11.105 s 182: 3.25 s 184: 19.85 s 187(1): 19.85 s 190: 19.85 s 191(1): 19.85 s 196(5): 29.25 s 202: 19.90 s 208: 19.140 s 209: 19.140 s 212: 22.140 Limitation Act 1981 s 4: 24.190, 24.195 s 32(1)(c): 24.180 s 32(1)(d): 24.180 s 32(1)(e): 24.180 s 33(a): 24.180 s 34: 24.190 s 36: 24.190 s 41: 24.190 s 42: 24.190 Limitation Amendment (Child Abuse) Act 2017: 4.305

Partnership Act 1997 s 28: 14.115 s 34(1): 4.190 s 48: 14.170 Proportionate Liability Act 2005: 14.175 Public Interest Disclosure Act 2008: 6.300 Public Trustee Act 1979: 21.20 s 74: 22.75 Sale of Goods Act 1972 s 4(2): 35.60 s 21: 16.70 s 27(3): 16.200 s 56: 33.50 s 82: 16.200 Status of Children Act 1978: 25.165 Supreme Court Act 1979 s 18: 37.05 ss 61 to 70: P.35 s 62: 34.65 s 64: 30.90 s 69: 36.10 s 69(1): 31.05, 32.30 s 84: 34.60 Supreme Court Rules 1987 r 13.14: 30.90 r 23.05: 37.05 r 37A.05(5): 32.100 r 37B.03: 32.155 r 37B.05(1)(d): 32.175 r 37B.06: 32.165 r 54.02: 23.170, 24.120 O 37A: 32.05 O 37B: 32.140 Trustee Act 1893: 16.15 s 3: 22.45 s 4(1): 30.35 s 5: 22.60 s 6(1)(a): 22.190 s 6(1)(b): 22.190 s 6(2): 22.190 s 7: 30.35 s 7(1): 22.190 s 8: 22.30, 24.110 s 8(1): 22.190 s 8(2): 22.190 s 10A: 22.180 s 10E: 22.195 s 10F(1): 22.195, 24.90 s 11: 21.60 s 11(4): 21.60 s 12: 21.95 s 17: 22.60 s 21: 30.35 s 22: 22.230, 25.160 s 23(1): 21.135 clxxii

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Table of Statutes

Trustee Act 1893—cont s 24: 23.115 s 24(2): 23.115 s 24(3): 23.115 s 24A: 23.115, 25.95 s 24A(1): 23.115 s 24A(2): 23.115 s 26: 23.120, 23.155, 24.95 s 27: 21.65, 21.100 s 28: 21.140 s 29: 21.140 s 30: 21.140 s 33: 27.120 s 34: 21.140 s 35: 21.145 s 36: 21.145, 24.190 s 37: 21.140 s 44: 17.130, 21.140 s 49A: 24.200 s 50: 23.165 s 50A: 25.30 s 50A(3): 25.30 s 50A(4): 25.30 s 50A(5): 25.30 s 50A(7): 25.30 s 50A(8): 25.30 s 51: 21.140 s 57: 25.30 s 81(1): 25.30

Imperial Acts Application Act 1984: 30.95 s 7: 30.95

Trustee Act 1907 s 7: 22.110

Partnership Act 1891 s 27: 14.115 s 33(1): 4.190 s 47: 14.170

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Trustee Amendment Act (No 2) 1995: 22.190 Wills Act 2000 s 8: 18.40 s 10: 18.40 s 27: 37.80 s 42: 17.185

QUEENSLAND Adoption Act 2009 ss 214 to 218: 25.165 Associations Incorporation Act 1981: 17.190 Charitable Funds Act 1958: 29.350 Civil Liability Act 2003 Pt 2: 14.175 Civil Proceedings Act 2011 s 9: 31.05, 32.30 s 10: 37.05 s 12: 36.10 s 58: 34.60 Pt 2: P.35 Defamation Act 2005 s 21(1): 31.175

Land Title Act 1994 s 61: 18.105 s 62: 18.105 s 75: 1.75 s 184(2): 2.135, 8.45, 38.115, 39.20 s 184(3): 2.135, 8.45, 38.115, 39.20 s 191: 1.95 Law Reform Act 1995 Pt 3, Div 2: 14.175 Limitation of Actions Act 1974 s 5: 24.190, 24.195 s 13: 24.190 s 27(1): 24.180 s 27(2): 24.180, 24.190 s 27(2A): 24.190 s 28: 24.190 s 29(1): 24.190 s 37: 24.190 s 38: 24.190 Limitation of Actions (Child Sexual Abuse) and Other Legislation Amendment Act 2016: 4.305 Mercantile Law Act 1867 s 4: 14.75

Powers of Attorney Act 1998 s 87: 7.30 Property Law Act 1974 s 6(d): 18.20 s 7(3): 26.55 s 10: 18.105 s 11: 18.05 s 11(2): 18.25 s 35: 26.70 s 55: 16.140 s 56: 12.05, 18.35 s 59: 12.05, 18.10 s 82: 2.95 s 83(1)(c): 36.165 s 83(3): 36.165 s 85(1): 36.60 s 92(2): 36.165 s 92(3): 36.165 s 92(8): 36.165 s 107(d): 11.85 s 124: 11.95 s 124(1): 11.105 s 124(2): 11.105 s 124(7): 11.95, 11.105

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Equity and Trusts in Australia

Property Law Act 1974—cont s 124(9): 11.105 s 199: 3.25 s 200: 3.80 s 207: 19.85 s 209: 19.85 s 210: 19.85 s 213(1): 19.85 s 219(2): 29.25 s 222: 19.90 s 228: 19.140 s 229: 19.140 s 232(1): 22.140 s 286: 26.50, 38.165 s 298: 20.135 s 298(a): 20.145 s 335: 19.155 Pt 19: 20.135 Sch 6: 18.10, 20.80

s 10(6)(b): 30.35 s 11: 21.85 s 12: 21.60 s 12(1)(b): 21.60 s 12(1)(h): 21.60 s 12(7): 21.60 s 14: 21.95 s 16(1): 21.135, 30.35 s 16(2): 21.135 ss 16(3) to 16(8): 21.135 s 13: 24.190 s 16(1): 30.35 s 18: 21.190 s 19: 21.30 s 19(1): 21.30 s 19(2)(a): 21.35 s 19(2)(c): 21.35 s 19(2)(f): 21.35 s 19(2)(h): 21.35 s 20: 23.20 ss 21 to 28: 23.20 s 22(1)(a): 22.190 s 22(1)(b): 22.190 s 22(2): 22.190 s 23(1): 22.190 s 24(1): 22.190 s 24(2): 22.190 s 25: 22.135 s 26(2): 23.100 s 28: 22.180, 24.190 s 30B: 22.195 s 30C(1): 22.195, 24.90 s 31(1): 22.45, 23.20 s 32: 23.100 s 32(1)(c): 23.105 s 32(3)(a): 22.40 s 32(3)(b): 22.40 s 32(4): 23.105 s 33: 23.100 s 34(1): 23.100 s 35: 23.100 s 37: 23.100 s 39: 21.135 s 43: 30.35 s 45: 23.100 s 49: 22.10, 22.60 s 51: 22.60 s 52: 22.30, 22.60 s 54: 22.60 s 54(3): 22.60 s 55: 22.60 s 56: 22.45 s 60: 23.20, 23.115, 25.95, 27.120 s 61: 23.115 s 61(2): 23.115 s 61(7): 23.115 s 62: 23.115, 25.95 s 62(1): 23.115 s 64: 27.120 s 64(1)(b): 27.120

Public Interest Disclosure Act 2010: 6.300

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Public Trustee Act 1978: 21.20 s 17: 22.75 s 41: 21.25 s 41(2): 21.25 s 41(3): 21.25 s 41(8): 22.90 Sale of Goods Act 1896 s 5: 16.200 s 12(9): 16.200 s 20: 16.70 s 28: 16.205 s 53: 33.50 s 61(2): 35.60 s 80(4): 16.200 Status of Children Act 1978: 25.165 Succession Act 1981 s 10: 18.40 s 18: 18.40 s 31: 37.80 s 33: 37.80 s 33Q(1): 17.185 s 33Q(2): 17.185 s 33Q(6): 17.185 s 63: 17.185 s 68: 22.90 Pt 4: 15.80 Trustee Companies Act 1968: 21.15 ss 5 to 12: 21.15 s 48: 21.15 Trusts Act 1973 s 4(4): 23.20, 23.100 s 5: 23.95 s 5(1): 24.195 s 7A: 23.20 s 8(1): 23.75 s 10: 21.55, 21.135, 23.20 clxxiv

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Table of Statutes

Trusts Act 1973—cont s 65: 23.20, 23.155 ss 66 to 68: 22.230 s 67: 25.160 s 70: 22.230 s 71: 24.95 s 72: 23.120 s 75: 22.230 s 76: 24.200 s 77: 23.165 s 78: 22.150 s 79: 23.20 s 80: 21.65, 21.100 s 82: 21.140 s 84: 21.140 s 85: 21.140 s 87: 21.140 s 88: 21.140 s 89: 21.140 s 90: 21.145 s 92: 21.145 s 94: 25.30 s 95: 25.60 s 96: 23.170 s 96(1): 23.170 s 97: 23.170 s 100: 23.185 s 101: 22.90 s 101(3): 22.90 s 102: 17.130 s 103: 29.270 s 104: 29.295 s 105: 29.355, 29.375 s 106: 29.15 s 109: 24.135 s 111: 23.20 s 113: 24.135 s 113(3): 24.135 Trusts (Investments) Amendment Act 1999: 22.190 Uniform Civil Procedure Rules 1999 r 11(a): 24.120 r 173: 30.90 r 260D(4): 32.100 r 261B: 32.155 r 261D(1)(d): 32.175 r 261E: 32.165 r 264(1): 32.20 r 264(5): 31.130 Ch 8, Pt 2, Div 2: 32.05 Ch 8, Pt 2, Div 3: 32.140

SOUTH AUSTRALIA Administration and Probate Act 1919 s 69: 23.170 s 69(1): 23.170 s 70: 23.170 s 70(1): 22.90

Adoption Act 1988 s 9: 25.165 Associations Incorporation Act 1985: 17.190 Collections for Charitable Purposes Act 1939 s 16: 29.350 s 17: 29.350 Domestic Partners Property Act 1996: 38.165 s 3(1): 38.165 s 11: 20.135, 26.50, 38.165 s 11(1)(a)(ii): 20.145 s 14: 19.155 Enforcement of Judgments Act 1991 s 9: 36.140 Family Relationships Act 1975: 25.165 Inheritance (Family Provision) Act 1972: 15.80 Juries Act 1927 s 5: 31.175 Landlord and Tenant Act 1936 s 4: 11.95 s 5: 11.95 s 7: 11.95 s 9: 11.95 s 10: 11.105 s 11: 11.105 s 12(5): 11.105 s 12(6): 11.105 Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 s 6: 14.175 Pt 3: 14.175 Law of Property Act 1936 s 7: 18.10 s 15: 3.25 s 26: 12.05, 18.10 s 28: 18.105 s 29(1): 18.05 s 29(2): 18.25 s 31(d): 18.20 s 47(1)(c): 36.165 s 47(3): 36.165 s 53(2): 36.165 s 53(3): 36.165 s 53(8): 36.165 s 61: 19.85 s 61(1)(c): 19.90 s 62(1): 19.85 s 62(2): 19.85 s 62(3): 19.90 s 62(4): 19.85 s 62(5): 19.85 s 62(6): 19.85 clxxv

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Equity and Trusts in Australia

Law of Property Act 1936—cont s 64: 22.140 s 86: 19.140 s 87: 19.140 Limitation of Actions Act 1936 s 3(1): 24.190 s 4: 24.190 s 9: 24.190 s 21: 24.190 s 25: 24.190 s 32(1): 24.180 s 32(1)(a): 24.180 s 33: 24.190 s 42: 24.190 s 45(3): 24.190 Mercantile Law Act 1936 s 17: 14.75 Mercantile Law Amendment Act 1861 s 3: 14.75 Misrepresentation Act 1971 s 6(1)(a): 35.55 s 6(1)(b): 35.110

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Partnership Act 1891 s 24: 14.115 s 30(1): 4.190 s 44: 14.170 Public Trustee Act 1995: 21.20 s 17: 21.30 s 17(1): 21.30, 21.35 s 17(3)(a): 21.35 s 17(3)(c): 21.35 s 17(4): 21.35 s 17(6): 21.35 s 44: 22.75 s 45: 22.75 Real Property Act 1886 s 96: 18.105 s 125(3): 11.85 s 149: 1.75 s 186: 2.135, 8.45, 38.115, 39.20 s 187: 2.135, 8.45, 39.20 Pt 187: 38.115 Sale of Goods Act 1895 s 4: 16.200 s 14(7): 16.200 s 22: 16.70 s 33(1): 16.205 s 36: 16.200 s 36(3): 16.200 s 51: 33.50 s 59(2): 35.60 Settled Estates Act 1880: 23.95 Statutes Amendment (Trusts) Act 1999: 23.75

Supreme Court Act 1935 ss 20 to 28: P.35 s 23: 30.90 s 29(1): 31.05, 32.30, 36.10 s 30: 34.65 s 30C: 34.60 s 31: 37.05 Supreme Court Civil Rules 2006 r 100(4): 30.90 r 148: 32.140 r 148(3): 32.155 r 148(5)(a)(iv): 32.175 r 148(6): 32.165 r 206: 24.120 r 246(4): 31.130 r 247: 32.05 r 247(5)(e): 32.100 Trustee Act 1893 s 30: 21.140 s 32: 21.140 s 34: 21.140 s 38: 21.140 Trustee Act 1936: 23.155 s 3(1): 30.35 s 4(3): 17.185 s 7(1)(a): 22.190 s 7(1)(b): 22.190 s 7(2): 22.190 s 8(1): 22.190 s 9(1): 22.190 s 9(2): 22.190 s 9A: 23.75 s 12: 22.180 s 13C: 22.195 s 13D(1): 22.195, 24.90 s 14: 21.60 s 14(4): 21.60 s 15: 21.95 s 15: 21.95 s 15B(1): 20.45 s 17: 22.45 s 19: 22.60 s 19A: 22.60 s 20(1): 23.100 s 21: 23.100 s 23A: 23.100 s 24: 22.60 s 25C(3)(b): 22.40 s 26: 30.35 s 28B(1): 23.100 s 28B(3): 23.100 s 29: 25.160 ss 29 to 31: 22.230 s 32(1): 21.135 s 33: 23.115 ss 33(4) to 33(6): 23.115 s 33(8): 23.115 s 33A: 23.115, 25.95 clxxvi

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Table of Statutes

Trustee Act 1936—cont s 33A(1): 23.115 s 33A(6): 23.115 s 35(1): 24.95 s 35(1A): 24.95 s 35(2): 23.120, 23.155 s 36: 21.100 s 36(1): 21.165 s 36(1a): 21.165 s 36(1b): 21.165 s 36(1C)(d): 21.165 ss 36(1C)(a) to (c): 21.165 s 36(1C)(e): 21.165 s 37: 21.140 s 38: 21.140 s 39: 21.145 s 40: 21.145 s 41: 21.140 s 47: 17.130 s 49: 22.110 s 56: 24.200 s 57: 23.165 s 59(1): 23.155 s 59(2): 23.155 s 59(3): 23.155 s 59B: 25.30 s 59C: 25.60, 25.75 s s 59C(3)(b)–(d): 25.75 s s 59C(5)(b): 25.75 ss 60 to 69: 29.15 s 69A: 29.295 s 69B: 29.355, 29.375 s 69B(3)(a): 29.375 s 69C: 29.270 s 69D: 29.85 s 84B: 22.30 ss 84B to 84E: 22.60 s 84C: 22.30 s 84D: 22.30 s 84E: 22.30 s 91: 23.170 Trustee (Charitable Trusts) Amendment Act 2010: 29.85 Trustee Companies Act 1988: 21.15 ss 4 to 6: 21.15 s 23: 21.15 Trustee (Investment Powers) Amendment Act 1995: 22.190 Trustee Regulations 2011 reg 5: 22.30 Whistleblowers Protection Act 1993: 6.300 Wills Act 1936 s 8: 18.40 s 12(2): 18.40 s 25AA: 37.80

TASMANIA Administration and Probate Act 1935 s 64: 22.90 Adoption Act 1988 s 50: 25.165 Apportionment Act 1871 s 2: 22.140 Associations Incorporation Act 1964: 17.190 Civil Liability Act 2002 Pt 9A: 14.175 Civil Process Act 1839 s 1: 36.140 Conveyancing and Law of Property Act 1884 s 15(1): 11.105 s 15(2): 11.105 s 15(6): 11.110 s 15(7): 11.105 s 15(8): 11.105 s 21(1)(c): 36.165 s 21(2): 36.165 s 26(2): 36.165 s 26(3): 36.165 s 26(8): 36.165 s 34(1): 21.135 s 34(2): 21.135 s 36: 12.05, 18.10 s 38: 2.95 s 40: 19.140 s 41: 19.140 s 60: 18.105 s 60(2): 18.05, 18.25 s 60(5)(d): 18.20 s 86: 3.25 Defamation Act 2005 s 21(1): 31.175 Evidence Act 2001 s 128A: 32.180 Land Titles Act 1980 s 41: 2.135, 8.45, 38.115, 39.20 s 58: 18.105 s 67(b): 11.85 s 78(1): 36.60 Limitation Act 1974: 4.305 s 2: 24.195 s 10(2): 24.190 s 24(1): 24.180 s 24(2): 24.180 s 24(3): 24.190 s 25: 24.190 s 26(1): 24.190 s 29: 24.190 s 32: 24.190 clxxvii

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Equity and Trusts in Australia

s 57(2): 29.15 s 165: 34.60

Limitation Amendment Act 2017: 4.305 Mercantile Law Act 1935 s 6: 12.05, 18.35 s 13: 14.75 Partnership Act 1891 s 29: 14.115 s 35(1): 4.190 s 49: 14.170 Perpetuities and Accumulations Act 1992 s 4: 19.85 s 6: 19.85 s 9: 19.85 s 11(1): 19.85 s 16(5): 29.25 s 22: 19.90 Public Interest Disclosures Act 2002: 6.300

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Public Trustee Act 1930: 21.20 s 11: 22.75 s 22: 21.25 s 22(2): 21.25 s 22(3): 21.25 s 22(8): 22.90 s 23: 21.30, 21.35 s 24: 21.30 s 24(a): 21.35 s 24(c): 21.35 s 24(d): 21.35 s 24(g): 21.35 s 24(i): 21.35 s 24(m): 22.90 Relationships Act 2003 s 5(1): 12.40, 38.165 s 40: 20.135, 26.50, 38.165 s 40(1)(b): 20.145 s 58: 19.155 Sale of Goods Act 1896 s 4: 16.200 s 5(2): 35.60 s 9: 12.05 s 13(6): 16.200 s 22: 16.70 s 25: 16.205 s 32(3): 16.200 s 56: 33.50 Settled Land Act 1884: 23.95 Status of Children Act 1974: 25.165 Supreme Court Civil Procedure Act 1932 s 10: P.35, 30.90 s 11: P.35 s 11(12): 31.05, 32.30, 36.10 s 11(13)(a): 34.65 s 11(13)(b): 34.115 s 11(14): 11.95 s 11(14A): 11.95

Supreme Court Rules 2000 r 103: 37.05 r 192: 30.90 r 604: 24.120 r 605: 24.120 r 937E(5): 32.100 r 937K: 32.155 r 937M(1)(d): 32.175 r 937N: 32.165 Pt 36, Div 1A: 32.05 Pt 36, Div 1B: 32.140 Testator's Family Maintenance Act 1912: 15.80 Trustee Act 1898 s 4: 24.195 s 7(1)(a): 22.190 s 7(1)(b): 22.190 s 7(2): 22.190 s 8(1): 22.190 s 8(2): 22.190 s 9: 30.35 s 9(1): 22.190 s 12: 22.180 s 12D: 22.195 s 12E(1): 22.195, 24.90 s 13: 21.60 s 13(1): 30.35 s 13(4): 21.60 s 14: 21.95 s 16(1): 23.100 s 17: 23.100 s 20: 22.60 s 25A: 25.160 s 25AA: 22.45 s 25(1): 21.135 s 26: 22.230 s 27(1): 24.95 s 27(2): 23.120 s 28: 22.30, 24.110 s 29: 23.115, 25.95 s 29(1)(a): 23.115 s 30: 27.120 s 30(1)(b): 27.120 s 32: 21.65, 21.100 s 33: 21.140 s 34: 21.140 s 35: 21.140 s 36: 30.35 s 37: 21.140 s 38: 21.140 s 39: 21.140 s 40: 21.145 s 41: 21.145 s 44: 23.185 s 47: 25.30 s 47(5): 25.50, 25.55 s 48: 17.130 s 50: 24.200 clxxviii

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Table of Statutes

Trustee Act 1898—cont s 53: 23.165 s 58: 22.90 s 64: 23.20 s 64(2): 23.155 Trustee Amendment (Investment Powers) Act 1997: 22.190

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Trustee Companies Act 1953: 21.15 ss 5 to 10A: 21.15 s 17: 21.15 s 18B(c): 21.30

Charter of Human Rights and Responsibilities Act 2006 s 13(a): 6.120 Defamation Act 2005 s 21(1): 31.175 Duties Act 2000 s 10(1): 1.105 s 77(1): 1.10 Evidence Act 2008 s 128A: 32.180

Variation of Trusts Act 1994 s 4(1): 29.270 s 4(2): 29.295 s 4(3): 29.295 s 5: 29.355 s 6: 29.375 s 6(1): 29.375 s 6(2): 29.375 s 6(3): 29.375 ss 7 to 9: 29.375 s 11: 29.350 s 11(2): 26.35 s 13: 25.60 s 14: 25.60, 25.65

Fair Trading Act 2012 s 24: 35.60, 35.110

Variation of Trusts Regulations 2014: 29.375

Imperial Acts Application Act 1980 s 5: 30.95

Wills Act 2008 s 8: 18.40 s 10: 18.40 s 42: 37.80 s 57: 17.185 Wrongs Act 1954 s 3: 14.175

VICTORIA Administration and Probate Act 1958 s 65: 22.90 Pt IV: 15.80 Adoption Act 1984 s 53: 25.165 Associations Incorporation Reform Act 2012: 17.190 Australian Consumer Law and Fair Trading Act 2012 s 24: 35.60, 35.110 Charities Act 1978 s 2: 29.355 s 3: 29.350 s 3(2): 26.35 s 4: 29.375 s 4(1): 29.375 s 5: 23.170, 29.375 s 7L: 29.15 s 7M: 29.295

Goods Act 1958 s 3: 16.200 s 4(2): 35.60 s 22: 16.70, 16.205 s 48(2): 16.200 s 58: 33.50 Health Records Act 2001 Pt 5: 4.300 Imperial Acts Application Act 1922 s 7: 30.95

Instruments Act 1958 s 126: 12.05, 18.10, 18.35 Land Tax Act 1958 s 52: 20.115, 20.155 Limitation of Actions Act 1958 s 3: 24.190, 24.195 s 8: 24.190 s 21(1): 24.180 s 21(1)(b): 10.70, 38.10, 38.250 s 21(2): 24.180, 24.190 s 22: 24.190 s 23(1): 24.190 s 26: 24.190 s 27: 24.190 Limitation of Actions Amendment (Child Abuse) Act 2015: 4.305 Partnership Act 1958 s 28: 14.115 s 34: 4.190 s 48: 14.170 Pay-​Roll Tax Act 1971 s 10(1): 29.85 Perpetuities and Accumulations Act 1968 s 3: 19.85 s 5: 19.85 s 6: 19.85 s 9(1): 19.85 clxxix

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Equity and Trusts in Australia

Perpetuities and Accumulations Act 1968—cont s 16(2): 29.25 s 19: 19.90 Property Law Act 1958 s 18(1): 18.10 s 19A(3): 26.55 s 19A(4): 26.55 s 49(2): 11.75 s 52: 18.105 s 53(1): 18.05 s 53(2): 18.25 s 55(d): 18.20 s 94: 2.95 s 101(1)(c): 36.165 s 101(3): 36.165 s 109(2): 36.165 s 109(3): 36.165 s 110: 36.165 s 131: 29.295 s 134: 3.25 s 146(1): 11.105 s 146(2): 11.105 s 146(12): 11.105 s 146(13): 11.105 s 172: 19.140 s 173: 19.140 s 174: 19.140 s 208: 36.140

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Protected Disclosure Act 2012: 6.300 Relationships Act 2008 s 35(1): 12.40, 38.165 s 45: 20.135, 26.50, 38.165 s 45(1): 20.145 s 63: 19.155 Settled Land Act 1958: 23.95 State Trustees (State-​Owned Company) Act 1994: 21.20 s 9: 21.25 s 9(2): 21.25 s 9(2)(c): 21.25 s 9(3): 21.25 s 13: 22.75 s 14: 22.75 Status of Children Act 1974: 25.165 Supreme Court Act 1986 s 29: P.35, 30.90 s 36: 37.05 s 37: 36.10 s 37(1): 31.05, 32.30 s 38: 34.65 s 52: 14.75 s 54: 22.140 ss 58 to 60: 34.60 s 79: 11.95 s 80: 11.95 s 85: 11.95

Supreme Court (General Civil Procedure) Rules 2015 r 13.14: 30.90 r 23.05: 37.05 r 37A.05(5): 32.100 r 37B.05(1)(d): 32.175 r 37B.06: 32.165 r 38B.03: 32.155 r 54.02: 23.170, 24.120 O 37A: 32.05 O 37B: 32.140 Transfer of Land Act 1958 s 43: 2.135, 8.45, 38.115, 39.20 s 45: 18.105 s 67(1)(d): 11.85 s 77(1): 36.60 s 86: 18.100, 18.105 Trustee Act 1958: 3.25 s 2(3): 21.135, 23.20, 23.115, 23.155 s 5(8): 30.35 s 6(1)(a): 22.190 s 6(1)(b): 22.190 s 6(2): 22.190 s 7(1): 22.190 s 8(1): 22.190 s 8(2): 22.190 s 11: 22.180 s 11(1): 30.35 s 12C: 22.195 s 12D(1): 22.195, 24.90 s 13: 22.75 s 13(1): 23.100 s 13(5): 23.105 s 13(6): 23.105 s 14: 22.75 s 15: 23.100 s 17: 23.100 s 20(1): 23.100 s 20(2): 23.100 s 22(1): 21.135 s 22(2): 21.135 s 25: 22.10, 22.60 s 25(2): 22.60 s 26: 22.60 s 27: 22.30, 22.60 s 28: 22.60 s 28(3): 22.60 s 30: 22.45 s 31: 30.35 ss 32 to 35: 22.230 s 33: 25.160 s 36(1): 24.95 s 36(2): 23.120 s 37: 23.115 s 37(2): 23.115 s 38: 23.115, 25.95 s 38(1): 23.115 clxxx

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Table of Statutes

Trustee Act 1958—cont s 39: 27.120 s 39(1)(b): 27.120 s 40: 21.85 s 41: 21.60 s 41(1): 21.60 s 41(8): 21.60 s 42(3): 21.60 s 44: 21.95 s 46: 21.90 s 48: 21.95, 21.100 s 51: 21.140 s 53: 21.140 s 54: 21.140 s 55: 21.140 s 56: 21.140 s 57: 21.140 s 58(1): 21.145 s 58(2): 21.145 s 60: 21.145 s 63: 25.30 s 63A: 25.60 s 67: 24.200 s 68(1): 23.165 s 69: 17.130 s 71: 21.30 s 71(2): 21.30 s 71(3): 21.30, 21.35 s 71(3A): 21.30 s 71(4): 21.30 s 71(4)(a): 21.35 s 71(4)(c): 21.35 s 71(4)(d): 21.35 s 71(4)(e): 21.35 s 71(4)(k): 21.35 s 74: 22.150 s 77: 22.90 Trustee Companies Act 1984: 21.15 ss 9 to 17: 21.15 s 25: 21.15 Trustee and Trustee Companies (Amendment) Act 1995: 22.190 Wills Act 1997 s 7: 18.40 s 9: 18.40 s 31: 37.80 s 32: 37.80 s 47: 17.185 Wrongs Act 1958: 14.165 Pt IVAA: 14.175 Pt IV: 14.175

WESTERN AUSTRALIA Adoption Act 1994 s 75: 25.165

Associations Incorporation Act 2015: 17.190 Charitable Collections Act 1946 s 16: 29.350 s 17: 29.350 Charitable Trusts Act 1962: 29.370 s 5: 29.270 s 7: 29.355 s 7(1): 29.370 s 7(3)(a): 29.370 s 8: 29.380 s 10: 29.375 s 10A: 29.375, 29.380 s 21: 29.15 Pt III: 29.375 Civil Judgments Enforcement Act 2004 s 86(1): 36.140 Civil Liability Act 2002 Pt 1F: 14.175 Civil Liability Legislation Amendment (Child Sexual Abuse Actions) Act 2018: 4.305 Defamation Act 2005 s 21(1): 31.175 Family Court Act 1997 s 106B: 19.155 s 106B(1): 19.155 s 106B(5): 19.155 s 205ZD(3)(a): 20.145 s 205ZG: 20.135, 26.50, 38.165 s 205ZG(4)(e): 20.145 s 222: 19.155 s 222(1): 19.155 Family Provision Act 1972: 15.80 Guardianship of Children Act 1972 s 10: 16.15 Imperial Acts Adopting Ordinance 1867: 14.75 Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 s 7: 14.175 Law Reform (Statute of Frauds) Act 1962 s 2: 12.05, 18.10, 18.35 Limitation Act 2005 s 3(1): 24.190, 24.195 s 16: 24.190 s 19: 24.190 s 27(1): 24.180 s 27(2): 24.180 s 38(2): 24.180, 24.190 s 42: 24.190 ss 46 to 51: 24.190 s 62: 24.190 clxxxi

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Equity and Trusts in Australia

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Partnership Act 1895 s 34: 14.115 s 41: 4.190 s 57: 14.170 Property Law Act 1969 s 7: 18.10 s 11: 16.140 s 20: 3.25 s 20(3): 3.35 s 33: 18.105 s 34(1): 18.05 s 34(2): 18.25 s 36(d): 18.20 s 38: 26.55 s 57(3): 36.165 s 65(1): 36.165 s 65(2): 36.165 s 65(3): 36.165 s 66: 36.165 s 81(1): 11.105 s 81(2): 11.105 s 81(8)(a): 11.110 s 81(9): 11.105 s 81(10): 11.105 s 89: 19.140 s 90: 19.140 s 91: 19.140 s 99: 19.85 s 101: 19.85 s 103: 19.85 s 105(1): 19.85 s 111(2): 29.25 s 113: 19.90 s 124(1): 8.140 s 124(2): 8.140 s 125(1): 8.140 s 131: 22.140 Public Interest Disclosure Act 2003: 6.300 Public Trustee Act 1941: 21.20 s 38: 22.75 Rules of the Supreme Court 1971 O 18, r 16: 37.05 O 20, r 17: 30.90 O 52, r 9: 31.130 O 52A: 32.05 O 52A, r 5(5): 32.100 O 52B: 32.140 O 52B, r 3: 32.155 O 52B, r 5(2)(d): 32.175 O 52B, r 6: 32.165 O 58, r 2: 24.120 Sale of Goods Act 1895 s 4: 12.05 s 6: 16.200 s 7(9): 16.200 s 17: 16.70

s 51: 33.50 s 59(2): 35.60 s 77(4): 16.200 Supreme Court Act 1935 s 24: P.35, 30.90 s 25: P.35 s 25(6): 37.05 s 25(9): 31.05, 32.30, 36.10 s 25(10): 34.65 s 32: 34.60 Transfer of Land Act 1893 s 82: 18.105 s 93(2): 11.85 s 127: 18.100, 18.105 s 134: 2.135, 8.45, 38.115, 39.20 Trustee Companies Act 1987: 21.15 ss 5 to 14: 21.15 s 16: 21.15 Trustees Act 1962 s 3: 30.35 s 5(2): 21.135, 23.20, 23.100, 23.115, 23.155 s 5(3): 21.135, 23.20, 23.155 s 6: 23.95 s 6(1): 24.195 s 7: 21.60 s 7(1)(b): 21.60 s 7(1)(h): 21.60 s 7(2)(a): 21.85 s 7(7): 21.60 s 79: 21.95 s 12: 21.90 s 13(1): 24.180, 30.35 s 14: 21.25 s 14(2): 21.25 s 14(3): 21.25 s 14(5): 22.90 s 15: 21.30 s 15(1): 21.30 s 15(2)(a): 21.35 s 15(2)(c): 21.35 s 15(2)(f): 21.35 s 15(2)(h): 21.35 s 15(4): 22.90 s 18(1)(a): 22.190 s 18(1)(b): 22.190 s 18(2): 22.190 s 19(1): 22.190 s 20(1): 22.190 s 20(2): 22.190 s 24: 22.180 s 26B: 22.195 s 26C(1): 22.195, 24.90 s 27: 23.100 s 27(1): 30.35 s 27(1)(c): 23.105 s 27(2): 30.35 s 27(3)(a): 22.40 clxxxii

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Table of Statutes

Trustees Act 1962—cont s 27(3)(b): 22.40 s 27(5): 23.105 s 28A: 22.40 s 30: 23.100 s 31: 23.100 s 32: 23.100 s 34: 23.100 s 38: 22.75 s 43(1): 23.100 s 45(1): 21.135 s 45(2): 21.135 s 48: 22.10, 22.60 s 50: 22.60 s 51: 22.30, 22.60 s 53: 22.60 s 53(3): 22.60 s 53(4): 22.60 s 53(5): 22.60 s 54: 22.45 s 58: 23.115 s 58(2): 23.115 s 59: 23.115, 25.95 s 59(a): 23.115 s 61: 27.120 s 61(3): 27.120 ss 62 to 64: 22.230 s 63: 25.160 s 65: 24.135 s 65(7): 24.135 s 65(8): 24.135 s 67: 22.230 s 69: 22.230 s 70: 24.95 s 71: 23.120 s 75: 24.200 s 76: 23.165 s 77: 21.65, 21.100 s 78: 21.140 s 80: 21.140, 30.35 s 81: 21.140 s 82: 21.140 s 83: 21.140 s 84: 21.140 s 85(1): 21.145 s 85(2): 21.145 s 87: 21.145 s 89: 25.30 s 89(3): 25.50 s 90: 25.60 s 91: 25.80 s 92: 23.170 s 92(1): 23.170 s 94(1): 23.75 s 95: 23.170 s 97: 23.185 s 98: 22.90 s 99: 17.130 s 101: 22.60 s 102: 29.295

s 104: 22.150 s 105(1): 22.155 s 105(3): 22.155 Trustees Amendment Act 1997: 22.190 Wills Act 1970 s 8: 18.40 s 32: 18.40 s 50: 37.80 Pt IX: 25.165

IMPERIAL Australian Courts Act 1828 s 11: P.35 Mercantile Law Amendment Act 1856 s 5: 14.75 New South Wales Act 1823: P.35 s 9: P.35

CANADA Perpetuities Act 1990 (Ontario) s 16(1): 17.165

HONG KONG Contracts (Rights of Third Parties) Ordinance 2016: 16.140

IRELAND Charities Act 1961 s 50: 17.150

NEW ZEALAND Administration Act 1969 ss 49 to 51: 24.135 s 50(a): 24.135 Charitable Trusts Act 1957 s 32(3)(a): 29.370 Charities Act 2005: 29.270 s 5(2)(a): 29.65 s 5(2A): 29.270 Civil Union Act 2004: 38.165 Contracts (Privity) Act 1982 s 4: 16.140 Contract and Commercial Law Act 2017 s 12: 16.140 s 13: 16.140 s 21(1): 8.180 s 24(1)(a): 8.180 s 25: 8.180 s 28(2): 8.180 s 28(5): 8.180 Pt 2: 8.180 clxxxiii

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Equity and Trusts in Australia

Contractual Mistakes Act 1977: 8.180 s 4(1): 8.180 s 6(1)(a): 8.180 s 6(2)(a): 8.180 s 7(3): 8.180 s 7(6): 8.180 Credit Contracts and Consumer Finance Act 2003 s 120: 9.195

Contracts (Rights of Third Parties) Act 2001: 16.140

UNITED KINGDOM Administration of Justice Act 1982 s 20: 37.80

Declaratory Judgments Act 1908 s 3: 37.40

Chancery Amendment Act 1858: 6.345, 34.65

Health Practitioners Competence Assurance Act 2003: 29.285

Charities Act 2006 s 2(2): 29.40 s 2(2)(g): 29.270 s 2(2)(i): 29.230 s 3(1): 29.40 s 3(2): 29.90

Insurance Law Reform Act 1977 s 10(2): 10.335 Judicature Act 1908 s 94A(1): 8.140 s 94A(2): 8.140 s 94B: 8.140 Law Reform (Testamentary Promises) Act 1949: 10.110 Matrimonial Property Act 1976: 38.165 Medical Practitioners Act 1968: 29.285 Property Law Act 1952 s 49A(3): 18.10

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SINGAPORE

Property Law Act 2007: 18.10 s 48: 3.35 ss 48 to 53: 3.35 s 49(1): 3.35 s 50(2): 3.35 s 51(2): 3.35 s 243: 11.85 ss 243 to 264: 11.85

Charitable Trusts (Validation) Act 1954: 29.295

Charities Act 2011: 29.40 s 3(1)(g): 29.40, 29.270 s 3(1)(i): 29.230 s 4(2): 29.90 Civil Procedure Act 1997 s 7: 32.180 s 7(7): 32.180 Common Law Procedure Act 1854: P.25 Companies Act 1985 s 727: 24.200 Contracts (Rights of Third Parties) Act 1999: 16.140 Equality Act 2010 s 199(1): 26.155 Financial Services and Markets Act 2000 s 253: 24.155

Property (Relationships) Act 1976: 38.165 s 13: 38.165

Human Rights Act 1998: 6.120, 6.130, 29.100

Receiverships Act 1993: 36.05 s 2(1): 36.05

Judicature Acts 1873–​1875: P.05, P.25, P.30, P.35, P.40, 3.135 s 25(11): P.25, P.30

Trustee Act 1956 s 64(1): 25.50 s 83(5): 22.140 Trustee Amendment Act 1988: 22.190 Unit Trusts Act 1960 s 24: 24.155 Wills Act 2007 s 30: 38.135 s 31: 37.80

Insolvent Debtors Relief Act 1728: 30.95

Law of Property Act 1925 s 49(2): 11.75 Law of Property (Miscellaneous Provisions) Act 1989: 10.390 s 1(3): 10.390 s 2: 1.75 s 2(1): 12.20 s 2(5): 10.390 Lord Cairns' Act 1858: P.25, P.60, 6.345, 34.65

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Table of Statutes

Misrepresentation Act 1967: 35.55 Perpetuities and Accumulations Act 2009 s 1: 19.85 s 5: 19.85 Provisions of Oxford 1258: P.10 Public Trustee Act 1906 s 4: 21.30 Recreational Charities Act 1958: 29.270 Senior Courts Act 1981 s 72: 32.180 Set-​off Act 1735: 30.95 Statute of Charitable Uses 1601: 29.35, 29.110, 29.215 Statute of Frauds 1677: 8.40, 12.05, 18.05, 18.40, 18.45, 18.75 s 4: 12.05, 18.10, 18.35 Statute of Uses 1535: 16.35 Statute of Westminster 1285: P.10 Statutes of Set-​off: 30.95, 30.100

Trustee Act 2000 s 1(1): 22.25 s 3(1): 22.190 s 4: 22.190 s 11: 22.45 Sch 1: 22.25 Trusts of Land and Appointment of Trustees Act 1996: 21.95 s 19(1): 21.95 s 19(2): 21.95 Variation of Trusts Act 1958: 25.60

UNITED STATES Uniform Commercial Code s 2-​306(2): 4.270 s 2-​401(1): 16.75 Uniform Trade Secrets Act s 2(b): 6.260

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Supreme Court Act 1981 s 72: 32.180

Trustee Act 1925 s 33: 27.120 s 44: 21.140 s 51: 21.140 s 57: 25.30 s 81(1): 25.30

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LIST OF ABBREVIATIONS Text abbreviations Dal Pont, Law of Charity

Dal Pont, Law of Charity (LexisNexis Butterworths, 2010)

Meagher, Gummow and Lehane

Meagher, Heydon and Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4th ed, Butterworths LexisNexis, 2002)

Spry Spry, The Principles of Equitable Remedies (9th ed, Lawbook Co, 2014)

Statutory abbreviations Trustee legislation ACT Trustee Act 1925 NSW

Trustee Act 1925

NT

Trustee Act 1893; Trustee Act 1907 [references to 1893 Act unless specified]

Qld

Trusts Act 1973

SA

Trustee Act 1936; Trustee Act 1893 [references to 1936 Act unless specified]

Tas

Trustee Act 1898

Vic

Trustee Act 1958

WA

Trustees Act 1962

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Limitations legislation ACT Limitation Act 1985 NSW

Limitation Act 1969

NT

Limitation Act 1981

Qld

Limitation of Actions Act 1974

SA

Limitation of Actions Act 1936

Tas

Limitation Act 1974

Vic

Limitation of Actions Act 1958

WA

Limitation Act 2005

Court rules CPR Court Procedures Rules 2006 (ACT) FCR

Federal Court Rules

HCR

High Court Rules

RSC

Supreme Court Rules

SCCR

Supreme Court Civil Rules 2006 (SA)

UCPR

Uniform Civil Procedure Rules

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PROLOGUE

Nature of Equity HISTORICAL BACKGROUND [P.05] “Equity”, in the most general sense, means fairness in resolution of disputes through

the application of good conscience. In Anglo-​Australian law, however, “equity” has a specific and unique meaning. It can be described as the body of law that, before the Judicature Acts of 1873–​1875, was administered in England by the Court of Chancery, and was received and administered in Australian courts. Though administered in modern times by a single set of courts of general jurisdiction  —​leading some to argue for fusion of common law and equity: see [P.40]–​[P.65] —​equity jurisdiction nonetheless retains its distinctive character. To this end, Spry observes:1

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Equitable principles have above all a distinctive ethical quality, reflecting as they do the prevention of unconscionable conduct. They are of great width and elasticity, and are capable of direct application, as opposed to application merely by analogy, in new circumstances as they arise from time to time.

Equity developed both as a response to the inadequacies of the common law and as a creature of the Court of Chancery. Its practices and procedures, so developed, were inextricably entwined with the growth and expansion of common law jurisdiction, via the common law courts. Equity provided new procedures, rules and remedies as a supplement to the common law, which were intimately related to the development of the institution of the Court of Chancery. Early development of equity [P.10]  The Curia Regis (Kings Council) of the Norman Kings did not differentiate between

legislative, executive and judicial powers; the King was the font of all power. Gradually, there arose a differentiation of functions and the emergence of the three common law courts of Kings Bench, Exchequer and Common Pleas. Parliament was a later institutional development. A major characteristic of the early common law was its reliance on fixed procedural forms. Every legal action had to be commenced with a “writ” in a particular form, being a command from the King for the matter to be heard in the common law courts. Through the 12th and 13th centuries, a system of centralised royal justice developed. These writs issued from Chancery, which was headed by the King’s Chancellor. Yet early on, the forms of action ossified. The Provisions of Oxford 1258 provided that the Chancellor should seal no new writs without the consent of the King and Council. Plaintiffs unable to bring their grievance within an established writ could secure no redress from the common law courts. And so, by the mid-​13th century, the common law could aptly be characterised in the Latin aphorism ubi ius, ibi remedium (where there was a writ, there was a remedy). While some expansion 1

Spry, p 1.

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Equity and Trusts in Australia

of writs was possible following the Statute of Westminster 1285, which allowed writs to be issued in consimili casu (in a similar case), in practice this proved limited. The jurisdiction of the Court of Chancery developed from the process of informal application by petitioners seeking relief directly from the King. In or around the year 1347, a proclamation declared that all petitions should be presented to the Chancellor and not to the King. Petitions were referred to the Chancellor where the common law was inadequate or defective (by reason of the restricted variety of writs which were available to initiate proceedings before the common law courts), where the common law remedy of damages was inappropriate or inadequate, and where the common law courts lacked jurisdiction (for example, over foreign merchants). Petitions were varied and not restricted to the stylised forms of action of the common law courts. They concluded with a plea to the conscience of the Chancellor, such as: May it please your most gracious Lordship … to grant writs summoning [X]‌to appear before you in the King’s Chancery … there to make answer in this matter as is demanded by reason and conscience otherwise the said petitioner is and shall be without remedy.

The procedure of petitioning the Chancellor in time became more formalised. By the mid-​ 14th century, the Court of Chancery was being mentioned specifically and independently of the common law courts; by the middle of the 15th century, decrees were being recorded in the name of the Chancellor.

Chancery as a court of conscience

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[P.15] The Court of Chancery’s jurisdiction during the 14th century related to recognising

and enforcing uses, specific performance of contracts, grants of relief in cases of fraud and mistake and the issue of injunctions. It also enjoyed a limited common law jurisdiction where the plaintiff was unable to obtain legal relief in the common law courts (the so-​called “Latin” jurisdiction). More generally, though, ingrained in the court’s jurisdiction was a focus on conscience or unconscionable behaviour, which has suffused equitable principle since:2 see [P.150]–​[P.160]. Its function was to use the King’s prerogative to interfere with the administration of the common law, “in the interests of justice, where conscience rendered such interference necessary”,3 reflected in a 1615 judicial observation that “[t]‌he Office of the Chancellor is to correct men’s consciences for frauds, breach of trust, wrongs and oppressions of what nature so ever they be”.4 Not surprisingly, the Chancellor did not look solely to the terms of any agreement, but looked behind it to see whether the petitioner had fallen foul of fraud or some breach of confidence. As a result, the Chancellor did not develop fixed rules, but general principles, prompting the aphorism that equity varied with the length of the Chancellor’s foot. The Chancellor would also relieve the conscience of a wrongdoer by imposing a common injunction preventing an offending party from suing in the common law courts or from enforcing a judgment obtained in those courts. [P.20]  The Chancellor’s concern with conscience in individual cases prompted the develop-

ment of different principles in relation to procedure and relief. The Chancellor assumed the 2

Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75 at [134] per Spigelman CJ (“Equitable relief in personam will be available only if there is established something in the nature of unconscionable conduct”).

3

Strahan, A Digest of Equity (5th ed, Butterworths, 1928), p 5.

4

Earl of Oxford’s Case (1615) 1 Ch Rep 1 at 7; 21 ER 485 at 486. The development of “conscience” in equity jurisdiction to the modern day is catalogued in Hudson, “Conscience as the Organising Concept of Equity” (2016) 2 CJCCL 261.

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Nature of Equity  Prologue

power of summoning a person by the writ or subpoena and examining the person on oath. He could order that person specifically to perform some act or refrain from doing an act. The jurisdiction therefore focused on the person; the orders of equity were in personam, and disobedience a contempt of the court. Common law judgments, conversely, were enforceable against the property of the defendant. Yet in many ways the maxim “equity acts in personam” (see [P.105]) disguises as much as it clarifies about the nature of the development of equity jurisdiction.

Conflict between law and equity [P.25]  Particularly during the reign of the Tudors and Stuarts, the separation of the common

law and equity jurisdiction accentuated. Equity’s procedures, rules, remedies and doctrines developed as a more identifiable, discrete and coherent body of law rather than a piecemeal response to individual petitions. The workings, uneasy at times, of these two related yet mutually exclusive systems of law came into historic conflict at the outset of the 17th century. In the Earl of Oxford’s Case,5 in the court of King’s Bench, Coke CJ gave judgment in a common law action on a writ of ejectment. In the Court of Chancery, that judgment was held to have been obtained by fraud, prompting the issue of an injunction preventing proceedings to enforce it. In doing so, Lord Ellesmore delivered the following famous dictum on the nature of equity jurisdiction:6

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The Cause why there is a Chancery is, for that Mens Actions are so divers and infinite, that it is impossible to make any general Law which may aptly meet with every particular Act, and not fail in some Circumstances.

As this decision locked the systems of common law and equity in conflict, the matter was referred to the Attorney-​General, Sir Francis Bacon, for independent and arbitral advice. The ensuing advice has become enshrined as the basic principle underlying the relationship between common law and equity: in cases of conflict between the rules of common law and equity, the rules of equity prevail.7 This principle received statutory recognition in England some 250  years later by s 25(11) of the Judicature Acts 1873–​1875. These Acts also provided for the administration of equity and common law in the same court. Even before the Judicature Acts, steps had been taken to avoid duplication and improve the administration of justice. For instance, via the Common Law Procedure Act 1854 common law courts enjoyed a limited power to grant injunctions, and Lord Cairns’ Act 1858 (see [34.65]–​[34.135]) empowered the Court of Chancery to award damages in place of, or in addition to, an injunction or specific performance. Transformation of equity [P.30] The appointment of Lord Nottingham as Chancellor (1673–​1682) has been seen

as the start of the modernisation of equity. From this time the office of Chancellor vested exclusively in lawyers, and the jurisdiction witnessed a concentration on issues involving property and property rights. A  need for certainty saw precedent taking an increasingly important role, gradually “superseding conscience as the foundation of practical

5

Earl of Oxford’s Case (1615) 1 Ch Rep 1; 21 ER 485.

6

Earl of Oxford’s Case (1615) 1 Ch Rep 1 at 6; 21 ER 485 at 486.

7

Despite the Earl of Oxford’s Case, in 1653 Parliament introduced a Bill to abolish Chancery, which was referred to as “the greatest grievance in the nation” (Holdsworth, A History of English Law (3rd ed, Methuen & Co Ltd, 1923), Vol 1, p 432). The Bill was never enacted, but the contest between the two systems continued.

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Equity and Trusts in Australia

equity”.8 This move to the refinement and systemisation of equity continued under Lord Hardwicke (1737–​1756), reaching its high point in the Chancellorship of Lord Eldon (1801–​1827).9 So much so that it has been suggested that modern equity is grounded in the 32 volumes that comprise Lord Eldon’s decisions. During this time equity developed into a more rigid and clearly defined system,10 its field determined by two boundaries. At one pole, equity had become the handmaid of the common law, serving at the limits of the common law. At the other, it became a system based upon precedent. Perhaps the best description of the distinctive relationship between the jurisdictions of the Common Law Courts and the Court of Chancery is that of Professor Maitland:11

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We ought not to think of common law and equity as of two rival systems. Equity was not a self-​sufficient system, at every point it presupposed the existence of common law. Common law was a self-​sufficient system. I mean this: that if the legislature had passed a short Act saying “Equity is hereby abolished”, we might have got on fairly well; in some respects our law would have been barbarous, unjust, absurd, but still the great elementary rights, the right to immunity from violence, the right to one’s good name, the rights of ownership and possession would have been decently protected and contract would have been enforced. On the other hand, had the legislature said, “Common law is hereby abolished”, this decree if obeyed would have meant anarchy. At every point equity presupposed the existence of common law.

In this respect, equity was often described as a “gloss” on the common law, suggesting that the moral rules of equity improved and facilitated the common law’s operation.12 Expressed another way, the function of equity “was to fulfil the common law: not so much as to correct it as to perfect it”.13 Building on legislative reform throughout the 19th century, the Judicature Acts introduced reforms to the administration of justice in England. The Acts abolished the need to enforce rights and remedies in different courts, and settled perceived conflicts between legal and equitable rules. The Common Law Courts and Court of Chancery were absorbed into a single Supreme Court of Judicature with various divisions. Each division was empowered to grant common law and equitable remedies of damages, injunctions, specific performance and the like. The Judicature Acts allowed a defendant to rely on equitable estates and interests or any legal estate of interest in any action before the divisions of the Supreme Court of Judicature. Finally, as noted earlier, the supremacy of the principles of equity over the common law in cases of conflict, recognised in the Earl of Oxford’s Case some 250 years earlier, became the subject of statutory enactment.14

8

Winder, “Precedent in Equity” (1941) 57 LQR 245 at 247.

9

See Young, Croft and Smith, On Equity (Lawbook Co., 2009), [1.300]–​[1.350].

10

See Rossiter and Stone, “The Chancellor’s New Shoe” (1988) 11 UNSWLJ 11 at 16, who suggest that many of equity’s principles became ossified as long ago as Lord Eldon’s chancellorship. Strahan (A Digest of Equity (5th ed, Butterworths, 1928), p 6) opined that the “last new precedent openly made by the Chancellor was in 1848” (in Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143).

11

Maitland’s Equity (Brunyate ed, Cambridge University Press, 1936), pp 18–​19.

12

Lord Dudley and Ward v Lady Dudley (1705) Prec Ch 241 at 244; 24 ER 118 at 119 (“Now equity is no part of the law, but a moral virtue, which qualifies, moderates, and reforms the rigour, hardness, and edge of the law, and is an universal truth; it does also assist the law where it is defective and weak in the constitution (which is the life of the law) and defends the law from crafty evasions, delusions, and new subtleties, invented and contrived to evade and delude the common law, whereby such as have undoubted right are made remediless; and this is the office of equity, to support and protect the common law from shifts and crafty contrivances against the justice of the law. Equity therefore does not destroy the law, nor create it, but assist it”).

13

Evershed, “Reflections on the Fusion of Law and Equity After 75 Years” (1954) 70 LQR 326 at 328.

14

Judicature Act 1873 (UK), s 25(11).

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Nature of Equity  Prologue

Equity in Australian courts

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[P.35]  The rules of common law and equity arrived with the settlement of Australia by the

English.15 In the well-​known words of the English jurist Blackstone, the “colonists carry with them only so much of English laws as is applicable to their new situation and the condition of the infant colony”.16 Therefore, the rules and practices of English equity jurisdiction, as developed in the Court of Chancery, laid the foundation for the equity jurisdiction of the early Australian courts. When Supreme Courts were established in the colonies, particularly after 1823, “their powers and procedures were often modelled closely on those of England”.17 While there were never two separate systems of courts in the Australian colonies, a distinction between the common law and equity jurisdictions was maintained in the Supreme Courts of the colonies via the use of different modes of trial. After settlement, specific legislation clarified the equitable jurisdiction of the colonial Supreme Courts. The New South Wales Act 1823 (Imp) provided for the separate administration of Van Diemen’s Land and, amongst other things, the establishment of a Supreme Court on the mainland and another for Van Diemen’s Land. By s 9 the Supreme Courts were authorised to “be Courts of Equity [with] Power and Authority to administer Justice, and to do, exercise and perform all such Acts Matters and Things necessary for the due execution of such Equitable Jurisdiction as the Lord Chancellor of Great Britain can or lawfully may in England”. Section 11 of the Australian Courts Act 1828 (Imp) prescribed that the “Supreme Courts respectively shall be courts of equity in New South Wales and Van Diemen’s Land”. This scheme, whereby the equity jurisdiction of the Chancellor was conferred on the new Supreme Courts of the colonies, was followed in legislation applicable in the colonies of Victoria and Queensland when they separated from New South Wales, and those of South Australia and Western Australia that were never part of New South Wales. The development of equity jurisdiction in the colonial Supreme Courts followed the equity jurisdiction of the English Court of Chancery, but with one notable difference in the Supreme Court of New South Wales. In that jurisdiction, there was the separation of the common law and equity jurisdictions of the Supreme Court, which by 1850 was “well entrenched in the working of the Court”.18 It remained largely intact through much the 20th century, finally yielding in 1970. This in turn explains what has been branded as “a large body of learning as to the separate administration of law and equity” in that State.19 While many of the 19th century English statutes preceding the Judicature Acts dealing with equity and trusts were copied with little or no amendment into the legislation of the Australian colonies, the essential changes brought about by the English Judicature Acts in time also saw adoption in all Australian jurisdictions.20 Broadly, these Acts made provision for

15

For an historical analysis of the growth of equity in the legal systems of the Australian colonies and States see Meagher, Gummow and Lehane, [1-​115]–​[1-​195]; Young, Croft and Smith, On Equity (Lawbook Co., 2009), [1.500]–​[1.610].

16

Cited by Castles, An Australian Legal History (The Law Book Company Limited, 1982), p 11.

17

Castles, An Australian Legal History (The Law Book Company Limited, 1982), p 17. The modelling of powers and procedures was reflected in court proceedings. So Commissioner Bigge, in his Report of the Commissioner of Enquiry on the Judicial Establishments of New South Wales and Van Dieman’s Land (1823), noted that “the mode of proceeding in the Supreme Court of New South Wales is similar in every respect to the forms of the courts of common law and equity” (p 6, cited by Castles, p 111).

18

Castles, An Australian Legal History (The Law Book Company Limited, 1982), p 192. See also Smith, “The Early Years of Equity in the Supreme Court of New South Wales” (1998) 72 ALJ 799.

19

Heydon, Gummow and Austin, Cases and Materials on Equity and Trusts (4th ed, Butterworths, 1993), [101].

20

Supreme Court Act 1933 (ACT), ss 25–​34; Supreme Court Act 1979 (NT), ss 61–​70; Civil Proceedings Act 2011 (Qld), Pt 2; Supreme Court Act 1935 (SA), ss 20–​28; Supreme Court Civil Procedure Act 1932 (Tas), ss 10, 11; Supreme Court Act 1986

[P.35]  5 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Equity and Trusts in Australia

the concurrent administration of common law and equity by judges of a Supreme Court. The New South Wales legislation in the 1970s,21 coming as it did so far behind the other States, prompted the then Chief Justice of New South Wales, Sir Laurence Street, to quip that New South Wales had by its judicature legislation “advanced back to 1873”.

THE FUSION DEBATE What is meant by “fusion”? [P.40]  There has been ongoing debate as to the impact of the Judicature Acts on the relation-

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ship between common law and equity, specifically as the extent to which common law and equity can, as a result of those Acts (and their Australian equivalents), be seen as fused. As the common law and equity divide is a creature of history —​described as an exercise in historical labelling22 —​the issue is heavily influenced by the weight given to the justification(s) for historical practice. Resistance to “fusion” voiced in Australia is curious given that, with the exception of New South Wales, there never were two separate systems of courts in this country. Aside from purely historical justifications, it is the nature of equity, based on an ethical value system different to the common law —​namely the values of “individual restraint, mutuality and social responsibility”23 as distinguished from the “individualism and the universalism of the common law”24 —​that is often cited as the main reason for maintaining a distinction. Yet even assuming the approaches of the common law and equity were as diverse as some suggest,25 this does not of itself explain why a rigid distinction should remain. One step to understanding and addressing this issue is to appreciate that “fusion” may operate at different levels, and does not always refer to the same thing. There are at least five different contexts in which fusion (or lack of it) may be discussed. 1.

There is the fusion of the court system and the administration of justice due to the Judicature Acts, that is, “administrative fusion” (or “procedural fusion”). This proposition is unexceptionable.26

2.

There is the nature of equitable, as compared to common law, rights and remedies. The prevailing view is that many legal and equitable doctrines and remedies retain their unique characteristics, and so on the orthodox view there is no fusion on this level (subject to (3) below).27 In particular, there is no justification for fusion (lacking a quantum (Vic), s 29; Supreme Court Act 1935 (WA), ss 24, 25. The High Court exercises legal and equitable jurisdiction under the Judiciary Act 1903 (Cth), s 32.

21

Supreme Court Act 1970 (NSW), ss 57–​63; Law Reform (Law and Equity) Act 1972 (NSW), s 5.

22

Burrows, “We Do This at Common Law But That in Equity” (2002) 22 OJLS 1 at 2.

23

As exhibited in the maxims discussed at [P.70]–​[P.125] and the themes discussed at [P.130]–​[P.190].

24

Keane, “The Conscience of Equity” (2010) 10 QUTLJJ 106 at 131.

25

Cf Edelman, “Remedial Certainty or Remedial Discretion in Estoppel after Giumelli” (1999) 15 JCL 179 at 181–​185 (who challenges the notion that equity acted according to a “pure” or “guided” discretion, arguing that equity’s discretion was “rule-​ based” and very little different to this end to the common law).

26

Salt v Cooper (1880) 16 Ch D 544 at 549 per Jessel MR (“it was not any fusion or anything of the kind; it was the vesting in one tribunal the administration of Law and Equity in every cause”).

27

See Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 at 306 per Spigelman CJ (“The heart of the ‘fusion fallacy’ —​as it has come to be called in Australia —​is the proposition that the joint administration of two distinct bodies of law means that the doctrines of one are applicable to the other. That is no more true of equity and common law than it was and is true of tort and contract within the common law context. That is not to say that one body of law does not influence the other. It is only to say that they remain conceptually distinct”).

6 [P.40] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Nature of Equity  Prologue

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shift in the law) where common law and equity coexist coherently and the labels of common law and equity remain the best or at least useful terminology (such as the trust, which must be explained according to the distinction between legal and equitable title).28 3.

Where equity has recognised equivalent rights as the common law, there may be grounds to fuse the common law and equitable doctrine in issue into a substantive doctrine (“doctrinal fusion”). There have been judicial steps in this direction, especially in the fields of mistake (see [8.145]–​[8.205]), duress (see [8.30]) and (albeit less successfully) estoppel (see [10.80]–​[10.100]).29 The process has occurred on another level in respect of the equitable defence of laches that is applied by analogy in accord with its common law counterpart on the basis that “equity follows the law”: see [30.40]. Yet beyond this, Australian courts have been unwilling, as a general rule, to allow common law defences to fetter claims in equity.30

4.

There is the issue of whether a person having only equitable ownership of property can maintain an action for interference with that property by a third party. Historically common law courts would not recognise the rights of equitable owners of property, instead requiring the legal owner to enforce those rights. This rule was not altered by the Judicature Acts, “which were intended to achieve procedural improvements in the administration of law and equity in all courts, not to transform equitable interests into legal titles or to sweep away altogether the rules of the common law”.31 As such, there is no “standing fusion”; where there is an intentional or negligent interference with land or goods in which another has an equitable interest, the legal owner is treated as the appropriate plaintiff. The equitable owner has no standing unless he or she can secure standing in some other way (such as through possessory title) or joins the legal owner in the action either as co-​plaintiff or as co-​defendant.32

5.

There is the issue of “remedial fusion”, namely whether a common law remedy ought to be available for a breach of a purely equitable right or, conversely, whether equitable remedies should be available generally for common law wrongs.33 As the “fusion debate” has been most vigorously debated in this respect, it merits further treatment below: see [P.45]–​[P.65].

28

Burrows, “We Do This at Common Law But That in Equity” (2002) 22 OJLS 1 at 5. Burrows argues that where common law and equity do not coexist coherently (such as regarding the law of set-​off, tracing, compound interest, limitation of actions, compensation), and where both recognise essentially the same phenomenon (namely wrongs or breaches of duty triggering compensation), there is no reason to have a category of wrongs called equitable wrongs. He argues that, in these circumstances, the so-​called “equitable wrong” should be subsumed under either breach of contract or tort (at 6–​9). This suggestion steps beyond what (even liberal Canadian and New Zealand) judges have countenanced as the scope of fusion.

29

Cf Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [62] (FC) (where the High Court ruled that while the common law has assumed the equitable jurisdiction to relieve against penalties (discussed in Ch 13), it did not destroy equity’s separate jurisdiction to this end: see [13.05]).

30

See, for example, Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 201 per McHugh, Gummow, Hayne and Callinan JJ, at 230–​231 per Kirby J (rejecting contributory negligence as a defence to a claim for equitable compensation for breach of fiduciary duty), discussed at [34.50].

31

MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 at 691 per Mummery LJ. See Tettenborn, “Trust Property and Conversion: An Equitable Confusion” [1996] CLJ 36.

32

Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785 at 812 per Lord Brandon; MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 at 701 per Hobhouse LJ (reasoning that “[e]‌quitable rights are of a different character and are recognised by the grant of equitable remedies which too have a different character”). A typical example in this context relates to the standing entitlements of beneficiaries of trusts against third parties who interfere with trust property: see [24.15], [24.20].

33

This point may not be limited to remedies, as there is case law recognising that the equitable defences of laches and acquiescence may be pleaded to a common law claim for breach of copyright: Habib Bank Ltd v Habib Bank AG Zurich [1981] 1 WLR 1265; Hoover plc v George Hulme (Stockport) Ltd [1982] FSR 565; Autocaps (Aust) Pty Ltd v Pro-​Kit Pty Ltd (1999)

[P.40]  7 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Equity and Trusts in Australia

Perhaps the term “fusion” should be avoided entirely, as it connotes two discrete parts becoming one, which may inaptly represent the common law–​equity relationship. As “intermingling” or “integration” connote two discrete parts becoming “so interwoven that neither retains any discrete existence”,34 these descriptors are likewise inaccurate. Perhaps the term “intertwined” best characterises the relevant relationship.35 In any case, Ashburner’s fluvial metaphor —​“the two systems of jurisdiction, though they run in the same channel, run side by side and do not mingle their waters”36 —​in modern times represents too restrictive an approach.37 Remedial fusion [P.45]  The greatest push in modern law towards fusion concerns remedial fusion, grounded

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in what may be termed a “basket of remedies” approach (sometimes termed “discretionary remedialism”).38 Underscoring it is the notion that equity and the common law, working collaboratively, “should be able to provide whatever relief or combination of remedies best suits the justice of the case”.39 Remedial fusion assumes that issues as to substantive liability are distinguishable from those surrounding the relevant remedy, which in turn rests on the exercise of curial discretion rather than a rule.40 The “basket of remedies” approach has to date not enjoyed great support in Australian or English courts,41 more so in New Zealand courts.42 The Australian reticence to engage in remedial fusion has been influenced by the strong anti-​fusionist stance adopted in the leading equity text, Meagher, Gummow and Lehane, which remains grounded heavily in historical antecedents.43 In England the works of the late Professor Birks have generated a similar effect, although for different reasons, namely on the ground that the nature of the relevant right does impact on the appropriate remedy, which if left entirely at the courts’ discretion could involve

AIPC ¶91-​516 at 39,971 per Finkelstein J. This is, however, recognised as anomalous and, in any case, specific to the intellectual property arena. 34

Tipping, “Causation at Law and in Equity: Do We Have Fusion?” (2000) 7 Canta L Rev 443 at 450.

35

Tipping, “Causation at Law and in Equity: Do We Have Fusion?” (2000) 7 Canta L Rev 443 at 450. Cf Maxton, “Some Effects of the Intermingling of Common Law and Equity” (1993) 5 Canta L Rev 299.

36

Ashburner, Principles of Equity (Butterworth & Co, 1902), p 23.

37

See Burrows, “We Do This at Common Law But That in Equity” (2002) 22 OJLS 1; Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 at 325–​326 per Mason P dissenting.

38

The terminology “discretionary remedialism”, though, appears to extend beyond the common law versus equity debate to remedies generally, distinguishing the cause of action from the remedy, and denying an automatic link between certain causes of action and certain remedies: see the discussion in Burns, “Giumelli v Giumelli Revisited: Equitable Estoppel, the Constructive Trust and Discretionary Remedialism” (2001) 22 Adel L Rev 123 at 142–​156. Tilbury instead prefers the terminology “crossover of remedies”: “Fallacy or Furphy? Fusion in a Judicature World” (2003) 26 UNSWLJ 357 at 375.

39

Tipping, “Causation at Law and in Equity: Do We Have Fusion?” (2000) 7 Canta L Rev 443 at 449. See also Thomas, “An Endorsement of a More Flexible Law of Civil Remedies” (1999) 7 Waikato L Rev 23.

40

Evans, “The High Court’s Equity Jurisprudence” in Cane (ed), Centenary Essays for the High Court of Australia (LexisNexis Butterworths, 2004), p 399.

41

This is not to say that one cannot find in English judgments statements consistent with remedial fusion:  see, for example, Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130 at 135 per Denning J; United Scientific Holdings Ltd v Bornley Borough Council [1978] AC 904 at 925 per Lord Diplock (“[the] waters of the confluent streams of law and equity have surely unified now”).

42

See, for example, Aquaculture Corporation v NZ Green Mussel Co Ltd [1990] 3 NZLR 299 at 301 per Cooke P (“For all purposes now material, equity and common law are mingled or merged … in the circumstances of the dealings between the parties the law imposes a duty of confidence. For its breach a full range of remedies should be available as appropriate, no matter whether they originated in common law, equity or statute”).

43

See generally Meagher, Gummow and Lehane, Ch 2. Note also Meagher JA’s judicial characterisation of the view that the common law and equity were fused as “so obviously erroneous as to be risible”: G R Mailman and Associates Pty Ltd v Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80 at 99.

8 [P.45] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Nature of Equity  Prologue

the unelected judiciary to make political choices.44 These influences may be waning, though, in the face of some curial tendency to focus on the “practical justice” of a case.45 In a 2003 dissenting judgment, the then President of the New South Wales Court of Appeal remarked:46 [Meagher, Gummow and Lehane’s] “fusion fallacy” bogey … condemns law and equity to the eternal separation of two parallel lines, ignoring the history of the two “systems” both before and after the passing of the Judicature Act (UK). And it treats the permission of the statute to fuse administration as if it were an enacted prohibition against a judge exercising the fused administration from applying doctrines and remedies found historically in one “system” in a case whose roots may be found in the other “system”. Both “Equity” and “Common Law” had adequate powers to adopt and adapt concepts from each other’s system well before the passing of the Judicature Act, and nothing in that legislation limits such powers. They are of the very essence of judicial method which was and is part of the armoury of every judge in every “common law” jurisdiction.

The argument against remedial fusion grounded in its impossibility before the Judicature Acts raises no issue of principle apart from an uncertain historical legacy.47 The argument that importing concepts from one jurisdiction to another is inappropriate because the concepts are “foreign” to each other has been challenged on the ground that “the current structure of legal doctrine, as well as today’s social realities, may mean that the concepts are now far from foreign”.48 This does not mean that remedial fusion should be accepted as a matter of course; debate in the area serves an important function in warning of the danger of “assuming too readily that cases are alike, both in terms of their factual circumstances and in the application of the legal doctrines to which those circumstances give rise”.49 And it should not be forgotten in this regard that altering a remedy can impact on the nature of the right in issue, and thus potentially fuse not only remedies but those rights underscoring those remedies.50

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[P.50]  A case commonly cited as an illustration of remedial fusion is Seager v Copydex Ltd,51

where the English Court of Appeal ostensibly awarded common law damages for an equitable breach of confidence. The court’s apparent assumption that damages were available for breach of confidence has been criticised by some commentators,52 and led others to seek to explain the award of damages in the case in other ways.53

44

See, for example, Birks, “Three Kinds of Objection to Discretionary Remedialism” (2000) 29 UWALR 1.

45

Spedley Securities Ltd (in liq) v Greater Pacific Investments Pty Ltd (in liq) (1992) 30 NSWLR 185 at 191 per Cole J (“a court of equity is empowered to fashion a remedy to procure substantial and practical justice”); Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559 (FC) (identifying as “the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts”).

46

Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 at 326 per Mason P (paragraph break omitted).

47

See Kirby, “Equity’s Australian Isolationism” (2008) 8 QUTLJJ 444 (who expresses a need to disregard Australian equity’s isolationism, and that the “apparent antagonism to the suggested updating of old principles … reveals a hostility to evolution that we need to overcome”: at 468).

48

Tilbury, “Fallacy or Furphy? Fusion in a Judicature World” (2003) 26 UNSWLJ 357 at 375.

49

Tilbury, “Fallacy or Furphy? Fusion in a Judicature World” (2003) 26 UNSWLJ 357 at 375–​376.

50

See Worthington, “Fiduciaries: When Is Self-​Denial Obligatory?” [1999] CLJ 500 at 501.

51

Seager v Copydex Ltd [1967] 1 WLR 923, discussed at [6.355].

52

See, for example, Ricketson, “Confidential Information —​A New Proprietary Interest Part II” (1977–​78) 11 MULR 289 at 294–​295.

53

See, for example, Palmer, “Information as Property” in Clarke (ed), Confidentiality and the Law (Lloyd’s of London Press Ltd, 1990), pp 99–​103 (who suggests that Seager v Copydex is explainable on the basis that entrusting information to another for a limited purpose creates a bailment-​type relationship, the breach of which can give rise to common law damages).

[P.50]  9 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Equity and Trusts in Australia

In New Zealand the issue seems to have passed into the historical. In 2009 Tipping J, sitting in the Supreme Court, denied a need to speak of common law damages or equitable damages, proffering the view that “when monetary relief is being referred to, the single word ‘damages’ can be used, with the descriptor confined to the nature of the damages rather than their historical origin”.54 This aligns with the approach of the (then) highest New Zealand court, some two decades earlier, in recognising the award of exemplary damages (that is, common law damages) for breach of confidence in circumstances where compensatory damages did not adequately punish the defendant for outrageous conduct.55 Although an Australian judge reached a similar outcome in Digital Pulse Pty Ltd v Harris56 in the context of breach of fiduciary duty, the decision on this point was reversed on appeal,57 seemingly halting the flow of Australian law in this direction: see [34.130]. This is odd in a sense, particularly as equity often provides more extensive relief to a plaintiff than allowed by the common law,58 principally on the ground that equitable duties (in particular, fiduciary duties) are of a higher nature than common law duties. It seems strange that equity, via equitable relief, is willing to be more stringent against defendants who breach these higher duties, but will not countenance greater relief (in the form of exemplary damages) for especially flagrant breaches of these duties.59 This may explain why Neave JA in Giller v Procopets60 envisaged that an award of equitable damages (or equitable compensation) could, if the circumstances justified it, encompass aggravated (though not exemplary) damages: see [6.360].

Equitable relief for breach of a purely common law right

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[P.55]  To some extent, it is true that “[t]‌here is nothing inherently heretical or wrong in salv-

ing a legal wound with an equitable balm”.61 After all, for example, from the earliest times equity assumed jurisdiction to award specific performance for a breach of contract: see Ch 33. Where the fusion issue is most debated in this context, however, concerns whether equitable remedies of a “gain-​stripping” (such as an account of profits: see [34.140]–​[34.175]) or proprietary (such as the imposition of a constructive trust: see Ch 38) nature should be available for a breach of contract that involves no breach of any coexistent equitable duty. The traditional Australian approach is that where a breach of contract is established, a breach of an equitable obligation (such as a breach of fiduciary duty or breach of confidence) must also be

54

Premium Real Estate Ltd v Stevens [2009] 2 NZLR 384 at [111].

55

Aquaculture Corporation v NZ Green Mussel Co Ltd [1990] 3 NZLR 299 at 301–​302. See also Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 602–​605 per Binnie J.

56

Digital Pulse Pty Ltd v Harris (2002) 40 ACSR 487.

57

Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298 (per Spigelman CJ and Heydon JA, Mason P dissenting).

58

For example, the award of equitable compensation not limited by common law concepts of causation, foreseeability or remoteness (see [24.40], [34.20]–​[34.45]), and the award of relief by means of a constructive trust (see Ch 38). Cf the notion of contributory responsibility as a defence to breach of fiduciary duty recognised by New Zealand courts but rejected by the High Court of Australia: see [34.50].

59

Cf Mason, “The Place of Equity and Equitable Remedies in the Contemporary Common Law World” (1994) 110 LQR 238 at 243–​244 (“The traditional principles of equity are not so invincibly superior to the concepts of the common law that equity cannot occasionally profit from common law ideas. And, though the courts should look at policy arguments with due circumspection, it would be absurd to suggest that the courts cannot adjust or modify equitable principle on policy grounds where to do so is appropriate”).

60

Giller v Procopets (2008) 24 VR 1.

61

Tipping, “Causation at Law and in Equity: Do We Have Fusion?” (2000) 7 Canta L Rev 443 at 451.

10 [P.55] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Nature of Equity  Prologue

shown before an account of profits will flow62 (unless the contract itself makes provision for an account of profits as a remedy).63

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[P.60] Yet the House of Lords in Attorney-​General v Blake,64 in awarding an account of

profits for a breach of contract, re-​opened the debate. The case involved the publication of a book by the defendant who, as an officer in the British intelligence services, disclosed to the Soviet Union valuable secret information gained through his employment. The defendant was imprisoned but subsequently escaped to Moscow, from where he wrote his autobiography. The defendant was found not to have owed fiduciary duties to his employer in this respect, and any equitable duty of confidence had expired because the information contained in the book was no longer confidential (see [6.75]). While the defendant had breached his employment contract, under which he undertook not to disclose any information derived in the course of his service, this had caused no loss to the Crown, thus leading the lower courts to award only nominal damages. Before the House of Lords it was argued that the Crown ought to be entitled to an account of profits for breach of this contractual undertaking. The appeal focused on the recovery of a £90,000 advance yet to be paid to the defendant by the publishers. Lord Nicholls, who gave the leading speech, accepted the general rule that damages are measured by the plaintiff’s loss, not the defendant’s gain. However, his Lordship noted that the common law long recognised situations where a strict application of this principle would not do justice between the parties. In particular, the “user principle” in tort dictates that the owner of land or goods another person tortiously uses may be entitled to a reasonable fee for that use, even though that use has not caused the owner any compensable loss.65 Lord Nicholls then noted that courts of equity went further, in some cases requiring the wrongdoer to yield up all her or his gains (such as an account of profits in cases of breach of confidence: see [6.330], [6.335]), wherein “[g]‌ains were to be disgorged even though they could not be shown to correspond with any disadvantage suffered by the other party”.66 Thus, his Lordship reasoned:67 Considered as a matter of principle, it is difficult to see why equity required the wrongdoer to account for all his profits in these cases, whereas the common law’s response was to require a wrongdoer merely to pay a reasonable fee for use of another’s land or goods. In all these cases rights of property were infringed. This difference in remedial response appears to have arisen simply as an accident of history.

Lord Nicholls also noted equity’s jurisdiction to reinforce a fiduciary obligations by requiring an account for profits derived from a fiduciary position (see [34.140]–​[34.175]), remarked that under Lord Cairns’ Act 1858 (UK) equitable damages could allow compensation for loss in effect measured by reference to the benefits likely to be obtained in future by the defendant 62

Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 at 835 per Hope JA; Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 180 per Fullagar J. Cf Barnett, Accounting for Profit for Breach of Contract: Theory and Practice (Hart Publishing, 2012) (who argues for grounds, in certain circumstances, to issue an account of profits for a breach of contract).

63

See, for example, Attorney-​General for England and Wales v R [2002] 2 NZLR 91 at 125 per Tipping J, at 132–​133 per McGrath J.

64

Attorney-​General v Blake [2001] 1 AC 268.

65

See, for example, Whitwam v Westminster Brymbo Coal Co [1892] 2 Ch 538; Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246; Penarth Dock Engineering Co Ltd v Pounds [1963] 1 Lloyd’s Rep 359; Ministry of Defence v Ashman [1993] 2 EGLR 102.

66

Attorney-​General v Blake [2001] 1 AC 268 at 280.

67

Attorney-​General v Blake [2000] 1 AC 268 at 280.

[P.60]  11 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Equity and Trusts in Australia

(see [34.65]–​[34.135]), and referred to equity’s jurisdiction to order specific performance for breach of contract (see Ch 33). This background his Lordship used as support for the following conclusion:68 [T]‌here seems to be no reason, in principle, why the court must in all circumstances rule out an account of profits as a remedy for breach of contract … Remedies are the law’s response to a wrong (or, more precisely, to a cause of action). When, exceptionally, a just response to a breach of contract so requires, the court should be able to grant the discretionary remedy of requiring a defendant to account to the plaintiff for the benefits he has received from his breach of contract. In the same way as a plaintiff’s interest in performance of a contract may render it just and equitable for the court to make an order for specific performance or grant an injunction, so the plaintiff’s interest in performance may make it just and equitable that the defendant should retain no benefit from his breach of contract.

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If confidential information is wrongfully divulged in breach of a non-​disclosure agreement, Lord Nicholls then reasoned, “it would be nothing short of sophistry to say that an account of profits may be ordered in respect of the equitable wrong but not in respect of the breach of contract which governs the relationship between the parties”.69 In other words, given the practice of the law in some circumstances to countenance relief of a “gain-​stripping” or “restitutionary” variety, where the facts are analogous to those circumstances, a parallel approach to relief should apply. This may explain his Lordship’s reference to the defendant’s undertaking being “closely akin to a fiduciary obligation”.70 Having overcome the jurisdictional hurdle, Lord Nicholls cautioned that an account of profits would be an appropriate remedial response to a breach of contract only in “exceptional circumstances”, where remedies of damages, specific performance or injunction prove inadequate.71 Yet his Lordship offered little to guide future courts in making this assessment,72 except to say that it is relevant to inquire “whether the plaintiff had a legitimate interest in

68

Attorney-​General v Blake [2001] 1 AC 268 at 284–​285 (emphasis in original).

69

Attorney-​General v Blake [2001] 1 AC 268 at 285.

70

Attorney-​General v Blake [2001] 1 AC 268 at 287. In a shorter judgment, Lord Steyn concurred generally with Lord Nicholls. He characterised the distinctive feature of the case as being that the defendant gave an undertaking not to divulge any information obtained during his work in the intelligence services, such that he was “in regard to all information obtained by him in the intelligence services … in a very similar position to a fiduciary”: at 292. According to his Lordship, the prime duty of judges to do “practical justice whenever possible … strongly militates in favour of granting an order for disgorgement of profits against Blake”: at 292. Lords Goff and Browne-​Wilkinson concurred. Cf Anderson, “Account of Profits for Breach of Contract” [2000] NZLJ 415 (who finds the fiduciary analogy unconvincing because “[i]‌t is odd to base the availability of a remedy on whether the facts of the case came close to, but fail to meet the requirements of another cause of action”: at 416).

71

Attorney-​General v Blake [2001] 1 AC 268 at 285.

72

His Lordship did, however, agree with Lord Woolf in the Court of Appeal (Attorney-​General v Blake ([1998] 1 All ER 833 at 845) that the following would not justify departing from the normal basis on which damages are awarded: the fact that the breach was cynical and deliberate; the fact that the breach enabled the defendant to enter into a more profitable contract elsewhere; or the fact that entering into a new and more profitable contract put it out of the defendant’s power to perform the contract with the plaintiff: Attorney-​General v Blake [2001] 1 AC 268 at 286. In Experience Hendrix LLC v PPX Enterprises Inc [2003] EMLR 515 at [29] Mance LJ remarked that the exceptional nature of Blake lay in three aspects: (1) in its context —​employment in the security and intelligence service, of which secret information was the lifeblood, its disclosure being a criminal offence; (2) Blake had committed deliberate and repeated breaches causing untold damage, from which breaches most of the profits indirectly derived in the sense that his notoriety as a spy explained his ability to command large sums for publication; and (3) the contractual undertaking Blake had given was closely akin to a fiduciary obligation. His Lordship noted that none of these aspects appeared in the case before him, involving the defendants’ breach of a settlement agreement, and so declined an account of profits. This approach by close analogy almost seems to treat Blake as a case decided purely on its own facts. But this is unlikely to be so: see, for example, World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2008] 1 WLR 445; Vercoe v Rutland Fund Management Ltd [2010] EWHC 424 (Ch) at [339] per Sales J; Marathon Asset Management LLP v Seddon [2017] ICR 791 at [215], [216] per Leggatt J.

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Nature of Equity  Prologue

preventing the defendant’s profit-​making activity”.73 On the facts, though, he was willing to order the publishers to pay to the Attorney-​General the amount due and owing to the defendant under the publishing agreement. Lord Hobhouse dissented, reasoning that the order proposed by the majority awarded to the Crown a money sum not assessed by reference to what would be the reasonable fee to pay for permission to publish, but equalling the entire amount owed by the publisher to the defendant. His Lordship branded this as “a remedy based on proprietary principles when the necessary proprietary rights are absent”.74 In Australia, the Federal Court has likewise questioned the majority judgment in Blake, viewing it as inconsistent with the principle that damages for breach of contract should not entitle the plaintiff to obtain a superior position than had the contract been performed.75 [P.65]  Yet to characterise the award made in Blake as damages —​which is how the English

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Court of Appeal has interpreted the case76 —​essentially avoids the fusion question, as well as overlooks the fact that Lord Nicholls himself eschewed the term “restitutionary damages”77 in favour of the established equitable remedy of account of profits. Criticism of the judgment should focus not on the role of damages, it may be argued, but on the jurisdictional point of whether an account of profits should come within the remedial arsenal for breach of contract. Complete focus on so-​called “restitutionary damages” ignores both the fusion issue and what the House of Lords actually decided. Shorn of reference to “restitutionary damages”, some have welcomed the decision in Blake.78 In the Blake scenario, an alternative to engaging in remedial fusion, or adopting the confusing concept of restitutionary damages, is to analogise the Crown’s non-​financial loss to the user principle applicable in tort.79 As a similar principle was applied in contract in Farley v Skinner,80 the House of Lords could have ordered the publishers to pay money to the Crown in recognition of the erosion of the mutual trust between members of the intelligence services,

73

Attorney-​General v Blake [2001] 1 AC 268 at 285.

74

Attorney-​General v Blake [2001] 1 AC 268 at 299.

75

Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157 at 196–​197 per Hill and Finkelstein JJ. Other Australian judges have also shown a disinclination to follow Attorney-​General v Blake [2001] 1 AC 268: see, for example, Town & Country Property Management Services Pty Ltd v Kaltoum [2002] NSWSC 166 at [85] per Campbell J; Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874 at [236] per Einstein J.

76

See World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2008] 1 WLR 445 at [59] per Chadwick LJ, with whom Maurice Kay and Wilson LJJ concurred (“To label an award of damages … as a ‘compensatory’ remedy and an order for an account of profits as a ‘gains-​based’ remedy does not assist an understanding of the principles on which the court acts. The two remedies should, I think, each be seen as a flexible response to the need to compensate the claimant for the wrong which has been done to him”). This labelling of accounts of profits as compensatory has been criticised: see, for example, Cunnington, “Changing Conceptions of Compensation” [2007] CLJ 507; Rotherham, “ ‘Wrotham Park Damages’ and Accounts of Profits: Compensation or Restitution?” [2008] LMCLQ 25.

77

Attorney-​General v Blake [2001] 1 AC 268 at 284 (“I prefer to avoid the unhappy expression ‘restitutionary damages’ ”).

78

See, for example, Doyle and Wright, “Restitutionary Damages —​The Unnecessary Remedy?” (2001) 25 MULR 1 (who reject the need for “restitutionary damages” because an account of profits can provide the appropriate relief pursuant to a well established set of principles (see [34.140]–​[34.175]), remarking that there is nothing in principle or policy to prevent an expanded operation of the remedy of account, and that the remedy should, like that of specific performance, be available as a remedy for common law wrongs “wherever the legal remedies available to the plaintiff, and in particular common law damages, are inadequate”: at 12); Erbacher, “An Account of Profits for a Breach of Contract (Attorney-​General v Blake)” (2001) 29 ABLR 73. Cf Rickett, “Disgorgement for Breach of Contract: My Loss, Your Gain?” (2001) 9 Auck ULR 375.

79

MVF 3 APS (formerly Vestergaard Frandsen A/​S) v Bestnet Europe Ltd [2017] FSR 5 at [83], [84] per Floyd LJ; Marathon Asset Management LLP v Seddon [2017] ICR 791 at [176] per Leggatt J.

80

Farley v Skinner [2002] 2 AC 732 (where money was awarded to a plaintiff in recognition of the non-​financial loss suffered as a result of the defendant’s breach of contract).

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Equity and Trusts in Australia

and between those members and their informers, caused by the defendant’s breach of contract. This is the view preferred by one commentator, who states that:81 … both the user principle and … the Farley principle, are concerned with ordering a defendant to pay to the plaintiff a sum of money to reflect (but not to measure) the extent of the non-​financial loss suffered by the plaintiff in consequence of the defendant’s tort or breach of contract, respectively. Thus, both of these principles of liability are essentially designed to provide a monetary remedy in respect of (but not to compensate for) non-​financial loss … [The House of Lords should] have ordered Blake to pay to the Crown a sum of money that would have reflected (although it would not have been able to measure in monetary terms) the serious nature of the Crown’s non-​financial loss. The latter sum could not have measured the Crown’s non-​financial loss, but there would have been no conceptual impediment to an award to the Crown of a substantial sum of money, not to compensate the Crown for its non-​compensable loss, but rather to recognise that Blake had caused the Crown to suffer serious non-​financial loss by his breach of contract. The Crown’s non-​financial loss could not logically have been measured by Blake’s financial gain.

The difficulty with such an approach is that inherent in all cases of non-​financial loss, namely the parameters within which to quantify the loss in question. This may explain why the House of Lords in Blake adopted the somewhat “crude” measure of the sum due to the defendant. It may also explain the earlier troublesome decision of Brightman J in Wrotham Park Estate Co v Parkside Homes Ltd,82 who awarded equitable damages upon an analogy with the tort “user principle” calculated according to a percentage of the defendant’s anticipated profit stemming from the breach of the covenant in issue.

MAXIMS OF EQUITY

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[P.70] Equitable maxims, while they may guide the exercise of equitable jurisdiction, and

represent ethical principles at the centre of equity jurisdiction, often invoked to justify or fortify decisions,83 create no causes of action or positive rules of law. For instance, a New South Wales judge has cautioned that the words of the maxim “equity considers as done that which ought to have been done” are “deceptive if taken at face value as an absolute and unqualified principle of universal application”.84 Attempts to be prescriptive overlook that the operation of one maxim can on occasion displace the operation of another, such as where the maxim “a person who comes to equity must do equity” (see [P.75]) is used to overcome the objection stemming from the maxim “a person who comes to equity must come with clean hands”.85

81

Ong, “Non-​Financial Loss Resulting from Tort and Breach of Contract: The Availability of a Monetary Remedy That Is Non-​ Compensatory, Non-​Restitutionary, Non-​Punitive, and Not a Mere Solatium” (2002) 22 UQLJ 20 at 33, 51–​52 (emphasis in original).

82

Wrotham Park Estate Co v Parkside Homes Ltd [1974] 1 WLR 798 at 812–​816. Ong criticises this decision on the ground that Brightman J “transformed his own specific finding, that the breach of the covenant did not cause, and would not continue to cause, the plaintiff any financial loss, into a fictitious financial loss suffered by the plaintiff” and “purported to measure that fictitious non-​financial loss by reference to a fair percentage of the financial gain obtained by the developer defendant through its breach of the covenant”: Ong, “Non-​Financial Loss Resulting from Tort and Breach of Contract: The Availability of a Monetary Remedy That Is Non-​Compensatory, Non-​Restitutionary, Non-​Punitive, and Not a Mere Solatium” (2002) 22 UQLJ 20 at 23 (emphasis in original).

83

See Oleck, “Maxims of Equity Be Appraised” (1952) 6 Rutgers L Rev 528; Young, Croft and Smith, On Equity (Lawbook Co., 2009), Ch 3.

84

Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd (2003) 12 ANZ Ins Cas ¶61-​553 at [78] per Palmer J.

85

Automobile and General Finance Co Ltd v Hoskins Investments Ltd (1934) 34 SR (NSW) 375 at 388–​389 per Long Innes J. See, for example, Lodge v National Union Investment Co Ltd [1907] 1 Ch 300 (discussed at [37.165]); Nelson v Nelson (1995) 184 CLR 538 (discussed at [19.40], [19.45]).

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Nature of Equity  Prologue

Also, there are cases where two maxims may dictate opposite conclusions. For example, the maxim “equity will not assist a volunteer” (see [P.120]) may, in the case of an imperfect gift, dictate a conclusion different from the maxim “equity looks to intent rather than form”86 (see [P.95]). It is with this understanding, and thus caveat, that the following brief illustrative catalogue of equitable maxims should be approached. A person who seeks equity must do equity [P.75]  The maxim “a person who seeks equity must do equity” means that equity looks to the

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conscience of the petitioner in determining whether to grant relief. Yet it does not substitute moral for legal standards in setting the conditions of relief. Its true meaning is that “those who ask for the assistance of a court of equity must be willing to do justice by accepting terms which flow from the legal or equitable rights of the defendant to the suit”.87 So a plaintiff may be denied equitable relief in respect of rights conferred on her or him —​whether under an instrument of title,88 by contract,89 by statute,90 by the common law91 or under established equitable principles92 —​unless he or she compensates the defendant to the extent of the benefit derived in respect of the dealing he or she repudiates, but not exceeding the amount of the loss sustained by the defendant.93 If the plaintiff derives no benefit from that dealing, equity does not require the imposition of terms. What the maxim does, therefore, is determine in what cases terms are imposed on a plaintiff seeking equitable relief, and the extent of those terms.94 Importantly, the maxim simply “expresses a general equitable principle applicable in aid of or incidental to a claim”.95 Of itself it provides no enforceable right to a party seeking damages or equitable relief by way of damages; it is available only as a “defensive equity”.96

86

Corin v Patton (1990) 169 CLR 540 at 556–​560 per Mason CJ and McHugh J.

87

Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [67] (FC). See also Langman v Handover (1929) 43 CLR 334 at 351 per Rich and Dixon JJ.

88

For example, pursuant to the doctrine of election, as to which see [15.100]–​[15.120].

89

See, for example, Geraghty v Minter (1979) 142 CLR 177 at 187 per Gibbs J (parties who seek equitable relief by injunction to enforce a covenant in restraint of trade cannot obtain such relief unless they allege and prove that they have performed their part of the bargain and are ready and able also to perform their part in the future).

90

See, for example, Lodge v National Union Investment Co Ltd [1907] 1 Ch 300 (discussed at [37.165]); Langman v Handover (1929) 43 CLR 334 (discussed in the text).

91

For example, the equitable right of a tenant-​in-​common (or joint tenant) of real estate, who has increased the value of the property by expenditure on it, to be compensated out of the proceeds of sale, or in partition, for such extent to which the value of the land has been increased thereby, but not exceeding the amount of the actual expenditure: Boulter v Boulter (1898) 19 LR (NSW) Eq 135 at 137 per Simpson CJ; Re Jones [1893] 2 Ch 461; Re Byrne (1906) 6 SR (NSW) 532 (joint tenants).

92

For example, the general equitable principle that where a person seeks to enforce a claim to an equitable interest in property, the court has a discretion to require, as a condition of giving effect to that equitable interest, that an allowance be made for costs incurred and for skill and labour expended in connection with the administration of the property: Re Berkeley Applegate (Investment Consultants) Ltd (in liq) [1989] Ch 32 at 50 per Edward Nugee QC. An example is the right of a constructive trustee of property to be recouped her or his expenditure out of the property to the extent of the amount by which the trust estate has been enhanced in value by such expenditure: Rowley v Ginnever [1897] 2 Ch 503. Another example is said to be where the court denies or reduces an equitable right to contribution where it would be inequitable to enforce it (Staples v Baker [1999] 1 Qd R 317 at 327–​328 (CA)), although this situation could better be explained as an operation of the maxim “a person who comes to equity must come with clean hands”: see [30.170]–​[30.180].

93

Automobile and General Finance Co Ltd v Hoskins Investments Ltd (1934) 34 SR (NSW) 375 at 389 per Long Innes J.

94

Automobile and General Finance Co Ltd v Hoskins Investments Ltd (1934) 34 SR (NSW) 375 at 391 per Long Innes J.

95

National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 at 573 per Kaye J. See also at 603 per Brooking J.

96

Automobile and General Finance Co Ltd v Hoskins Investments Ltd (1934) 34 SR (NSW) 375 at 390 per Long Innes J.

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Equity and Trusts in Australia

The cases provide manifold applications of the maxim. For example, in Langman v Handover97 the plaintiff sought a declaration that the securities she had given for a loan from the defendant were void because the defendant was an unregistered moneylender. The defendant successfully demurred on grounds including that the plaintiff should be denied equitable relief because her statement of claim made no offer to do equity by repaying the defendant the money borrowed. In Nelson v Nelson98 the High Court required that, as a condition of granting the plaintiff an equitable interest in the property in issue, the plaintiff should satisfy the statutory requirements she had sought to evade by the transaction she sought to upset. In Maguire v Makaronis99 the same court required, as a condition of rescinding a mortgage for breach of fiduciary duty, the mortgagors to submit to the repayment of the moneys borrowed. The courts’ practice of placing conditions on relief by way of rescission, or to order partial rescission, is also grounded in the maxim (see [35.20], [35.25]), as is the practice of requiring an applicant for an interlocutory injunction to give an undertaking as to damages (see [31.130]–​[31.140]). That equity requires that a plaintiff be ready, willing and able to perform her or his side of the bargain before granting specific performance (see [33.150]–​[33.160]), and a beneficiary to defray the expenses of her or his trustee before instituting an action for breach, further illustrate the application of the maxim. A person who comes to equity must come with clean hands [P.80] The maxim “a person who comes to equity must come with clean hands” conveys

the notion that a court of equity may refuse relief to a plaintiff whose conduct in relation to the matter(s) in issue is proscribed by equity. As it is more commonly characterised as the “unclean hands defence”, it is discussed under the general heading of equitable defences: see [30.170]–​[30.180].

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Equity will not suffer a wrong without a remedy [P.85] The maxim “equity will not suffer a wrong without a remedy” does not so much

introduce new remedies as allow for the extension of existing remedies. To this end, in Re Diplock100 the English Court of Appeal stated that “if a claim in equity exists it must be shown to have an ancestry founded in history … it is not sufficient … that the ‘justice’ of the present case requires it”. This conservative view has not prevented the extension of existing remedies to cover new circumstances. The concept captured in the maxim has at times induced boldness in the development of equity, for example, the extension of injunctions in the form of the Mareva order to prevent the dissipation of assets (see [32.05]–​[32.135]), the extension of the constructive trust to de facto (and domestic) relationships (see [38.165]–​[38.230]), and the extension of equitable estoppel in contract (see [10.80]–​[10.100]). Equity will not allow statute to be used as an instrument of fraud [P.90]  As a court of conscience, Chancery looked suspiciously not only at the unconscientious

assertion of common law rights but also the unconscientious assertion of statutory rights. 97

Langman v Handover (1929) 43 CLR 334.

98

Nelson v Nelson (1995) 184 CLR 538. Nelson v Nelson is discussed in greater detail at [19.40], [19.45].

99

Maguire v Makaronis (1997) 188 CLR 449 at 474–​475 per Brennan CJ, Gaudron, McHugh and Gummow JJ, at 496–​499 per Kirby J.

100

Re Diplock [1948] Ch 465 at 481–​482.

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Nature of Equity  Prologue

If the assertion of a statutory right cloaked a fraud, equity would intervene under this maxim. As explained by Lord Westbury in 1869:101 The Court of Equity has, from a very early period, decided that even an Act of Parliament shall not be used as an instrument of fraud; and if in the machinery of perpetuating a fraud an Act of Parliament intervenes, the Court of Equity … does not set aside the Act of Parliament, but it fastens on the individual who gets a title under that Act, and imposes upon him a personal obligation, because he applies the Act as an instrument for accomplishing a fraud.

This maxim has an obvious application in the law of trusts, where a party unconscionably denies an equitable interest in property by relying on the absence of the statutory requirement of writing. In these cases, the court may apply the maxim and thereby recognise that equitable interest: see [18.30]. The maxim can also be seen as a foundation for the equitable doctrine of part performance102 (see Ch 12), the operation of the doctrine of estoppel in certain contexts,103 and the law pertaining to secret trusts (see [18.45]–​[18.85]). Importantly, the maxim does not have a broad application.104 While it is perhaps too restrictive to say, as suggested by a New South Wales judge, that the maxim “is limited to cases in which the legal owner of property has only obtained its legal title by acceding to the existence of a trust”,105 it clearly does not justify relief on every occasion where statutory writing requirements have not been fulfilled.106 Equity looks to intent rather than form

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[P.95]  The maxim “equity looks to intent rather than to form” is not a boundless power, but

is applied only in cases where a party’s intention is clear. For example, a court will find that an express trust exists even in the absence of particular words to this effect if satisfied that a person has exhibited an intention that another person should be entitled to benefit out of specific property and a trust is, in the circumstances, the apt legal mechanism for effecting that intention: see [17.45]–​[17.55]. Nor are particular words required to effect an assignment of equitable interests; the court focuses on the alleged assignor’s intention: see [3.45], [3.50]. That equity perfects an incomplete gift if the donor has done all that is necessary on her or his part to transfer the property the subject matter of the gift also illustrates the maxim:107 see [18.90]–​[18.105]. The maxim operates in a slightly different context to mitigate the rigours of specific contractual provisions. For example, whereas the common law jealously guarded times for the completion of agreements under the common law maxim “time is of the essence”, equity distinguished between substance and form and allowed completion within a reasonable time unless it was clear that the parties intended a specific time for completion.108 Equity’s

101

McCormick v Grogan (1869) LR 4 HL 82 at 97.

102

Steadman v Steadman [1976] AC 536 at 540 per Lord Reid, at 551 per Viscount Dilhorne.

103

See, for example, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, discussed at [10.315].

104

Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd (2003) ATPR (Digest) ¶46-​242 at [68], [73] per Young CJ in Eq, with whom Meagher and Beazley JJA concurred.

105

ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue (2003) 12 BPR 22,941 at [336] per Barrett J.

106

See, for example, Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd (2003) ATPR (Digest) ¶46-​242 (where a statutory writing requirement stated as a precondition to recovery of estate agent’s commission was not fulfilled, the New South Wales Court of Appeal gave no weight to the maxim even in the face of an oral promise to pay commission).

107

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 34 per Windeyer J.

108

Perpetual Trustee Co (Ltd) v Waddell (1949) 49 SR (NSW) 266 at 268–​269 per Sugerman J. See further Young, Croft and Smith, On Equity (Lawbook Co., 2009), [2.720]–​[2.780].

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Equity and Trusts in Australia

jurisdiction to relieve against forfeiture (see Ch 11)  can likewise be seen to reflect equity’s jurisdiction to place intent over form. Equity assists the diligent and not the tardy [P.100]  A party seeking to resort to equity should “act timeously”.109 Thus equity may refuse

assistance to a plaintiff guilty of unnecessary delay (“laches”). As many equitable actions are not subject to limitations legislation (though equity recognises that the latter may be applied by way of analogy: see [30.40]), the doctrine of laches can subsist independently of the limitations legislation. It prevents a plaintiff enforcing an equitable right where there has been unreasonable delay in the bringing of the action: see [30.10]–​[30.20]. Equity acts in personam

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[P.105]  The description of equity jurisdiction as operating “in personam” as opposed to “in

rem” highlights the proposition that equity acts on the individual conscience. Yet this distinction is practically dubious and of chiefly historical significance. A distinction can be drawn between a personal (in personam) contract of service and the common law fee simple (in rem), but there are many relationships in between. Generally, the distinction is drawn between execution at common law, which was against property, and in equity, which was against the person. However, equity also acted against property; for example, equity made vesting orders against trustees to take possession of trust property; and equity could also order sequestration of the assets of a defendant, akin to the common law writ of execution, fieri facias. Nor can the nature of a beneficiary’s interest against her or his trustee be described as solely in personam. Beneficiaries may proceed against trust property (even when it is in the hands of another, via the process of tracing: see Ch 39), so that beneficiaries’ interests and rights against the trustee are properly characterised as both personal and, to a degree, proprietary.110 Moreover, equitable rights are not purely personal as they are assignable (see Ch 3) and may devolve by inheritance. Equity is equality [P.110]  The maxim “equity is equality” invokes a presumption that where equitable interests

and rights are to be allocated between rival claimants, lacking any other justifiable basis of division equality is the proper basis of making that allocation.111 The maxim may, in this context, qualify the principle that a trust fails for lack of certainty as to the interest taken by each beneficiary (as to which see [17.80]). In Doyley v Attorney-​General112 a default provision in a testamentary trust benefited both such of the testator’s relations on his mother’s side who were most deserving, and such charitable uses and purposes as the trustees should think most

109

Telecom New Zealand Ltd v Sintel-​Com Ltd [2008] 1 NZLR 780 at [47] per Hammond J.

110

See Rickett, “The Classification of Trusts” (1999) 18 NZULR 305 at 308–​309; Barnett, “The Nature of a Beneficiary’s Interest in the Assets of an Express Trust” (2004) 10 APLJ 169; FHR European Ventures LLP v Cedar Capital Partners LLC [2015] AC 250 at [32] per Lord Neuberger (who, in the context of constructive trusts arising out of secret commissions by agents (see [38.35]–​[38.50]), noted the paradox that while equity, unlike the common law, classically acts in personam, “equity is far more ready to accord proprietary claims than common law”).

111

Pascoe v Boensch (2008) 250 ALR 24 at [34] (FC(FCA)). Cf Secureland Mortgage Investments Nominees Ltd v Harman & Co Solicitor Nominee Co Ltd [1991] 2 NZLR 399 at 415 per Williamson J.

112

Doyley v Attorney-​General (1735) 2 Eq Ca Abr 195.

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Nature of Equity  Prologue

proper and convenient. The maxim was applied to divide the fund into two halves, one half to charity and the other to the relations. Contributions made to property for the purposes of a joint endeavour over a relatively lengthy period of time, which are not accurately reflected in the legal interests held in that property, may justify equity resolving the parties’ equitable interests, as a starting point, by reference to the “equity is equality” maxim.113 The maxim also informs equity’s preference of a tenancy-​in-​common over a joint tenancy; on the death of a joint tenant, the entire estate belongs to the survivor, and the representatives of the deceased take nothing, and so there is “no equality except, perhaps, an equality of chance”.114 So, for instance, equity presumes that partners and joint venturers who acquire property hold it as beneficial tenants-​in-​common.115 The maxim can apply to effect “proportionate” equality.116 For example, it functions to justify the principle that co-​sureties may claim contribution from each other in proportion to their respective agreed liabilities:117 see [14.185]. Equity will not perfect an imperfect gift

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[P.115]  The main justification for the maxim “equity will not perfect an imperfect gift” is to

ensure donors do not act in a way they may subsequently regret. It envisages, therefore, that donors may change their minds at any time before the gift becomes completely constituted.118 The maxim ordinarily dictates, to this end, that equity does not give effect to an alleged gift where something remains to be done by the donor to effect the gift unless the intended donee has given consideration for the promise to make the gift:119 see [18.90]–​[18.105]. This justification must be weighed against policy considerations that, on the facts of a given case, may favour holding a gift to be completely constituted, such as effectuating a clear and continuing intention of the donor, or preventing the donor from acting unconscionably.120 To this end, the equitable doctrines of estoppel (see Ch 10) and constructive trust (see Ch 38), based as they are on proof of unconscionable conduct, may give solace from the unyielding operation of the maxim.

113

See, for example, Baumgartner v Baumgartner (1987) 164 CLR 137 (discussed at [38.175]); Anson v Anson (2004) 12 BPR 22,303 (involving a joint enterprise between three siblings on foot for 38 years, Campbell J remarking that “it is only ‘at the level of broad impression’ that a conclusion can be arrived at about what has been established concerning the proportionate contributions made to the present value of the property”, and that “[a]‌ny room for doubt in the estimation process should be resolved by choosing the end of the spectrum of doubt which lies closer to a one-​third, one-​third, one-​third division”: at [49]). Cf Repatriation Commission v Tsourounakis (2007) 158 FCR 214 at [116]–​[123] per Dowsett and Edmonds JJ.

114

Xenou v Katsaras (2002) 7 VR 335 at [67] per Mandie J.

115

Minter v Minter (2000) 10 BPR 18,133 at [59] per Santow J.

116

Re Steel [1979] Ch 218 at 225–​226 per Megarry VC; Bialkower v Acohs Pty Ltd (1998) 83 FCR 1 at 13 (FC); Re Hazelton Air Charter Pty Ltd (2002) 41 ACSR 472 at 484–​485 per Goldberg J.

117

Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 119 per Bryson J.

118

Pennington v Waine [2002] 1 WLR 2075 at 2090 per Arden LJ. Her Ladyship cited another objective of the maxim —​to safeguard the position of the alleged donor where it is discovered after her or his death that her or his estate was insolvent —​such that the court could ensure the gift did not defeat the rights of creditors. Though a relevant consideration, her Ladyship did not consider that “this need concern the court to the exclusion of other considerations as in the event of insolvency there are other potent remedies available to creditors where insolvents have made gifts to defeat their claims”: at 2090.

119

Olsson v Dyson (1969) 120 CLR 365 at 386 per Windeyer J (“an intending donor cannot be compelled to perfect his intended gift”); Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 391 per Barwick CJ.

120

Pennington v Waine [2002] 1 WLR 2075 at 2090–​2091 per Arden LJ (suggesting that the principle that animates the answer to the question whether an apparently incomplete gift is to be treated as completely constituted is that “a donor will not be permitted to change his or her mind if it would be unconscionable, in the eyes of equity, vis-​á-​vis the donee to do so”: see [18.145], [18.150]).

[P.115]  19 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:22.

Equity and Trusts in Australia

Equity will not assist a volunteer [P.120] The maxim “equity will not assist a volunteer” reflects equity’s concern that those

seeking its intervention to recognise an interest in property should be able to point to some “equity” to bind the legal owner’s conscience. Merely being the promisee of an interest was not a sufficient equity for this purpose;121 but giving valuable consideration in a contractual sense raises that equity, as it removes the stain of being no more than a volunteer.122 So, as equity treats a purported assignment of future property as a contract, it will not give effect to the assignment if the purported assignee has not furnished consideration: see [3.105]. A parallel notion may underlie equity’s prescription of detriment in estoppel (see [10.220], [10.225]) and, at least according to some, proof of detriment to establish an actionable breach of confidence (see [6.230], [6.235]). In this sense equity follows the law, which requires consideration to enforce a contract. Yet it has been noted that “[h]‌istorically the emergence of the principle may have been due to the need for equity to follow the law rather than an intuitive development of equity”, such that “[b]efore long, equity had tempered the wind to the shorn lamb (ie the donee)”.123 To this end, courts of equity retain the jurisdiction to qualify or oust the operation of the maxim where, say, a donor (or assignor) has done all that is necessary for her or him to do to effect the transfer (or assignment) of property (see [18.95]–​[18.105]), the donee (or assignee) establishes the elements of an estoppel (see [18.140]), or denying relief would represent an unconscionable denial of a beneficial interest rectifiable by the imposition of a constructive trust.124 Equity considers as done that which ought to have been done

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[P.125]  The maxim “equity considers as done that which ought to have been done” aims to

give effect to that which the circumstances dictate should prevail given the nature of the transaction and the relationship between the parties. That transaction or relationship may justify equity piquing the conscience of a person to do that which equity dictates should be done. To this end, the maxim can explain why the court gives effect to a promise for consideration to assign future property: see [3.105]. It also explains the courts’ approach to recognising interests in property arising by virtue of contributions to property (whether by way of estoppel (see [10.60]–​[10.70]), part performance (see Ch 12) or constructive trust (see [38.175]–​[38.210])), the rule that recognises a trust in favour of a person who contracts to purchase property (see [38.150]–​[38.160]), and the entitlement of a person to whom an interest is conferred under a specifically enforceable contract to that interest.125 But while capable of explaining equitable doctrine, this maxim, in common with others, is no independent source of obligation or entitlement.126

121

Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 96 per Isaacs J (“Equity … does not regard a voluntary promise as binding on the conscience of the promisor, and therefore withholds its assistance from a volunteer”).

122

Conlan v Registrar of Titles (2001) 24 WAR 299 at 338 per Owen J.

123

Pennington v Waine [2002] 1 WLR 2075 at 2087 per Arden LJ.

124

See, for example, T Choithram International SA v Pagarini [2001] 1 WLR 1, discussed at [18.145].

125

Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd (2003) 12 ANZ Ins Cas ¶61-​553 at [78] per Palmer J.

126

See, for example, Parkview Qld Pty Ltd v Commonwealth Bank of Australia (2013) 11 ASTLR 19 at [119] per Leeming JA (“It is wrong to invoke the maxim as the basis for a legal conclusion that a party in breach of a promise is to be regarded in equity as though it had performed its promise; a more specific rule or principle is needed”).

20 [P.120] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature of Equity  Prologue

THEMES [P.130]  The nature of equity, as exhibited in the historical sketch earlier in this chapter and

the immediately preceding treatment of equitable maxims, is reflected in multiple themes, which inform the structure of this book. To the extent that various doctrines are grouped under a single theme, these deserve some introduction and explanation, which appears below. These themes must be viewed against the backdrop of statute, which has on more than on occasion incorporated equitable concepts:127 see [9.160]–​[9.195] by way of example. Also meriting some introductory remarks is the equity’s approach to the award of relief, typified in the remedies discussed in Part VII of the book. Equity’s role in preventing or rectifying abuses of trust [P.135] In equity, certain relationships of trust give rise to obligations more onerous than

those imposed by the common law, traditionally characterised as relationships of confidence. These form the subject of Part II of the book. In the words of Lord Chelmsford LC in Tate v Williamson:128 Wherever two persons stand in such a relation that, while it continues, confidence is necessarily reposed by one, and the influence which naturally grows out of that confidence is possessed by the other, and this confidence is abused, or the influence is exerted to obtain an advantage at the expense of the confiding party, the person so availing himself of his position will not be permitted to retain the advantage, although the transaction could not have been impeached if no such confidential relation had existed.

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Where A obtains a benefit or advantage at B’s expense, which, by reason of A’s relationship with B would be contrary to good conscience for A to retain, equity will require A to disgorge that benefit. This protects B from being taken advantage of by A who, because of A’s position, causes B to place trust in A. [P.140]  In the case of fiduciary relationships (discussed in Ch 4), it is precisely because of

the trust placed by one person in another that the law imposes on the latter duties designed to prevent its abuse. Similarly, as to confide information to another person is to render the confider vulnerable to a breach of that confidence, equity intervenes to ensure that the confidence is maintained (see Ch 6). Where the relationship between two persons is such that one person’s actions are under another’s influence, a bargain achieved as a result of the impairment stemming from that (undue) influence attracts relief in equity (see Ch 7). In each case, it is the relationship between the parties —​their relative position inter se —​that justifies equitable intervention. Hence, even though fiduciary law,129 and the doctrines of confidentiality130 and undue influence,131 have on occasion been described in terms of unconscionable conduct, a breach of duty within these relationships is not premised on lack of good faith or want of probity (although

127

As to the impact of statute on equity generally see Wu, ‘Equity in the Age of Statutes’ (2015) 9 J Eq 214.

128

Tate v Williamson (1866) LR 7 Ch App 55 at 61.

129

See, for example, Hill v Rose [1990] VR 129 at 141 per Tadgell J.

130

See, for example, Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 227 per Gleeson CJ, at 272 per Kirby J; Douglas v Hello! Ltd [2001] 2 WLR 992 at 1009 per Brooke LJ.

131

See, for example, Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 408–​409 per Gaudron, McHugh, Gummow and Hayne JJ, discussed at [7.215].

[P.140]  21 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

it will often exhibit this). Nor are these doctrines premised on the unfairness of the outcome; it is the relationship of trust (or confidence) that equity seeks to reinforce and protect. This is not to say that courts in applying fiduciary law, confidentiality and undue influence are unconcerned with unjust outcomes, but that this is not their core inquiry or focus. [P.145] The common foundation for these doctrines makes it unsurprising to find some apparent overlap between them. For instance, some argue that the action for breach of confidence is a subset of fiduciary law, not an action sui generis. The notion of loyalty underlying each such doctrine, it is argued, is equivalent.132 In the words of a senior Canadian barrister:133

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There does not appear to be any basis upon which one can fairly reach the conclusion that a confidant in a relationship of confidence owes any different degree of loyalty to the confider than does any other fiduciary in respect of that which has been entrusted. The plain fact is that information has been given which cannot be used except for the “limited purpose”. That being so, the recipient is obliged to act in just the same way as any other fiduciary; in accordance with the terms of the trust and not in his or her unbridled self interest. The confidant in a relationship of confidence, like any other fiduciary, is obliged to forego self-​interested behaviour and, upon a failure to do so, the court will intervene. It seems of small importance to distinguish … between whether the court’s action is motivated by a desire to ensure that the beneficiary’s interests are being served or by a desire to maintain the fidelity to the beneficiary. It is usually much simpler than that; the court intervenes to stop or adjust a situation where the recipient of a trust and confidence in respect of some “thing” is proposing to act or has acted in a self-​ interested fashion.

Others see breach of confidence as fitting within fiduciary law on the basis that the confidant is in a position of a trustee of something valuable, and so it is reasonable to expect that he or she cannot use the information for her or his own benefit without the knowledge and consent of the confider.134 Yet fiduciary law and the doctrine of confidentiality remain sui generis, a point supported by both case law135 and commentators.136 This saw emphasis in both the English and New Zealand Courts of Appeal137 in cases where the presence of allegedly confidential information was argued to carry with it a fiduciary relationship, an argument that in each case was rejected. There is also some commonality between fiduciary law and the doctrine of undue influence, aspects of which closely ally to fiduciary law. For instance, presumed undue influence can be said to arise because the relationship between the parties is one of trust and confidence. In fact, there are judicial suggestions that the presumption of undue influence applies to transactions

132

Cf Arklow Investments Ltd v MacLean [2000] 1 WLR 594 at 600 per Henry J (PC) (“Characterising the duty to respect confidential information as fiduciary does not create particular duties of loyalty, which are imposed as a result of the nature of the particular relationship and the circumstances giving rise to it”).

133

McDougall, “The Relationship of Confidence” in Waters (ed), Equity, Fiduciaries and Trusts (Carswell, 1993), p 170 (footnote omitted).

134

See, for example, Finn, “The Fiduciary Principle” in Youdan (ed), Equity, Fiduciaries and Trusts (Carswell Co, 1989), pp 36–​37; Bayliss, “Breach of Confidence as a Breach of Fiduciary Obligations: A Theory” (2002) 9 Auck ULR 702.

135

See, for example, AB Consolidated Ltd v Europe Strength Food Co [1978] 2 NZLR 515 at 520–​521 (CA); Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 50–​52 per Mason J; Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 587–​591 per Binnie J.

136

See Shepherd, The Law of Fiduciaries (Carswell, 1981), p 319; Gurry, Breach of Confidence (The Law Book Company Limited, 1984), Ch III.

137

See Attorney-​General v Blake [1998] 1 All ER 833 [not addressed on appeal: Attorney-​General v Blake [2001] 1 AC 268] and MacLean v Arklow Investments Ltd [1998] 3 NZLR 680 [affd Arklow Investments Ltd v MacLean [2000] 1 WLR 594 (PC)].

22 [P.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature of Equity  Prologue

between parties in a fiduciary138 or confidential relationship.139 But the doctrine of undue influence is not confined to cases of abuse of trust and confidence, but is also concerned to protect the vulnerable from exploitation —​the relationship need not be a relationship of trust and confidence; it may (or perhaps must) be one of ascendancy and dependence. As explained by Lord Nicholls in Royal Bank of Scotland v Etridge (No 2):140 The principle is not confined to cases of abuse of trust and confidence. It also includes, for instance, cases where a vulnerable person has been exploited. Indeed, there is no single touchstone for determining whether the principle is applicable. Several expressions have been used in an endeavour to encapsulate the essence: trust and confidence, reliance, dependence or vulnerability on the one hand and ascendancy, domination or control on the other. None of these descriptions is perfect. None is all embracing. Each has its proper place.

The presumption of undue influence may therefore arise absent a recognised fiduciary relationship, and a confidential relationship is neither necessary nor sufficient for undue influence to be presumed. Equity’s role in preventing or rectifying unconscionable conduct

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[P.150]  Relief against the detriment caused by, and the prevention of, unconscionable con-

duct has been described as “the overriding aim of all equitable principle” and “[t]‌he fundamental principle according to which equity acts”.141 The various instances in which equity grants relief under the banner of unconscionable conduct highlight the breadth of equity jurisdiction. The language of unconscionable conduct is used in a variety of ways in the case law. Some equitable doctrines, such as estoppel (see Ch 10), unilateral mistake (see [8.200], [8.205]) and relief against forfeiture (see Ch 11), are united by the idea that equity prevents an unconscionable insistence on strict legal rights, and are conditioned on an explicit finding of unconscionable conduct in the persons against whom they are invoked. Unconscionable conduct can alternatively form the basis for a cause of action independent of any discrete doctrine, such as in the case of remedial constructive trusts (see [38.175]–​[38.210]). There is also a discrete doctrine of unconscionable dealing (see Ch 9), attracted by a stronger party’s exploitation of a weaker party’s special disadvantage. There is scope, therefore, for the concept of unconscionability to be invoked for the purpose of setting aside or avoiding a contract. To this end, Mason J in Commercial Bank of Australia Ltd v Amadio observed:142 Historically, courts have exercised jurisdiction to set aside contracts and other dealings on a variety of equitable grounds. They include fraud, misrepresentation, breach of fiduciary duty, undue influence and unconscionable conduct. In one sense they all constitute species of unconscionable conduct on the part of a party who stands to receive a benefit under a transaction which, in the eye of equity, cannot be enforced because to do so would be inconsistent with equity and good conscience.

138

Johnson v Buttress (1936) 56 CLR 113 at 135 per Dixon J; Shotter v Westpac Banking Corporation [1988] 2 NZLR 316 at 334 per Wylie J.

139

Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 133 per Dixon CJ, McTiernan and Kitto JJ.

140

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [11].

141

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491 at 498 per French J. See also Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 at [46] (FC); Parente v Parente [2006] NSWSC 1154 at [35] per Young CJ in Eq.

142

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461. See also Legione v Hateley (1983) 152 CLR 406 at 444 per Mason and Deane JJ; Stern v McArthur (1988) 165 CLR 489 at 526 per Deane and Dawson JJ.

[P.150]  23 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

It may also, in certain circumstances, be used to enforce an agreement, such as where detriment in estoppel can only be rectified by an order enforcing a promise. In each situation equity inquires into the defendant’s conduct and, by the remedies at its disposal, denies the defendant the right to retain the fruits of her or his unconscionable conduct. In this context, Powell JA has observed that:143

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… the High Court … appears to have been reviewing … cases with a view to reducing what is said to be the group of principles applicable to each to a body of doctrine based on a broad general principle, that principle being that, in any case in which a court of equity is faced which is unconscionable, or which is held to constitute fraud in equity, then the court will provide a remedy … which remedy will be commensurate with and adequate to protect the subject person against the detriment to which that person would otherwise have been subjected by reason of the other’s unconscionable conduct. [P.155]  Importantly, the term “unconscionable” attracts varied shades of meaning, depending on the context in which it is used.144 For this reason, an English judge has remarked that it would be unwise “to seek to define the expression ‘unconscionable conduct’ in anything like an exhaustive manner”.145 There may be different levels or thresholds of conduct all of which are described by the term “unconscionable” (or, in some circumstances, “unconscientious”), and so the judicial remark that “[u]‌nconscionability is a concept which requires a high degree of moral obloquy”146 should not blindly be accepted. This is reflected in the chapters in Part III. In equitable doctrines grounded in notions of equitable fraud, such as fraud on a power and most forms of mistake (discussed in Ch 8), the relevant threshold for unconscionable conduct appears relatively low; simply requiring a “breach of the sort of obligation which is enforced by a court that from the beginning regarded itself as a court of conscience”.147 The equitable doctrine of unconscionable dealing (discussed in Ch 9), on the other hand, locates unconscionable conduct in the knowing exploitation of another person’s special disadvantage to secure a bargain. Finally, the underlying basis for equity’s intervention pursuant to the doctrine of estoppel is unconscionable conduct (see Ch 10), as it is for its grant of relief against forfeiture (see Ch 11), in which case the courts appear to have adopted a higher threshold than that inhering in equitable fraud. The above doctrines are not unique in being capable of explanation by notions of unconscionable conduct. It could be argued that the doctrine of part performance (see Ch 12), and equity’s intervention to grant relief against penalty clauses (see Ch 13), aim to prevent unconscionable conduct in resiling from an assumed state of affairs (in the case of part performance) or in enforcing a burdensome contractual entitlement (in the case of penalties). Yet traditionally, and perhaps characteristic more of form over substance than anything else, in these doctrines unfairness of the outcome ostensibly activates equity’s jurisdiction more than the presence of unconscionable conduct. They are therefore relegated to Part IV under the heading “Unfair Outcomes”.

143

Akins v National Australia Bank (1994) 34 NSWLR 155 at 175–​176.

144

See Dal Pont, “The Varying Shades of ‘Unconscionable’ Conduct  —​Same Term, Different Meaning” (2000) 19 Aust Bar Rev 135.

145

South Carolina Insurance Co v Assurantie Maatschappij “De Zeven Provincien” NV [1987] 1 AC 24 at 41 per Lord Brandon.

146

Attorney-​General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at [121] per Spigelman CJ.

147

Nocton v Lord Ashburton [1914] AC 932 at 954 per Viscount Haldane LC.

24 [P.155] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature of Equity  Prologue

[P.160] Whatever the doctrine involved, although unconscionable conduct as a concept

exhibits a moral dimension, judges have denied that it presents a licence to act idiosyncratically.148 As explained by Mr Justice Hayne, writing extrajudicially:149 Identifying some conduct as unconscionable or unconscientious is a statement of a conclusion which would sit as well in the discourse of an ethicist, as it does in reasons for judgment. But in the law, they are not terms that invite, or even permit, recourse to a judge’s idiosyncratic sense of justice. What sets apart the two fields of discourse of the ethicist and the judge is the need for the judge to articulate what it is that leads him or her to the conclusion that the conduct in question should wear this label.

Gleeson CJ, writing judicially, made the parallel point that although in ordinary parlance “unconscionable” as a term may be “merely an emphatic method of expressing disapproval of someone’s behaviour … its legal meaning is considerably more precise”.150 More recently, in a joint judgment, his Honour added that the phrase “unconscionable conduct” misleads in several respects, namely:151

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[I]‌t encourages the false notions that (i) there is a distinct cause of action, akin to an equitable tort, wherever a plaintiff points to conduct which merits the epithet “unconscionable”; and (ii) there is an equitable defence to the assertion of any legal right, whether by action to recover a debt or damages in tort or for breach of contract, where in the circumstances it has become unconscionable for the plaintiff to rely on that legal right … [A]s a corollary to [this] proposition, to speak of “unconscionable conduct” may, wrongly, suggest that sufficient foundation for the existence of the necessary “equity” to interfere in relationships established by, for example, the law of contract, is supplied by an element of hardship or unfairness in the terms of the transaction in question, or in the manner of its performance.

Accordingly, unconscionable conduct is by itself no ground for equitable relief, at least not independent of the elements of a doctrine that go to substantiating what it is about the relevant conduct that can properly be described as “unconscionable”. This reflects the broader observation that “while equity is not yet past the age of child bearing, her progeny must be legitimate —​by precedent out of principle”.152 It is thus unsurprising that the High Court had made the same point earlier in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd153 (see [31.30]) in another context, that of interlocutory injunctions, as has the House of Lords more recently in Cobbe v Yeoman’s Row Management Ltd154 vis-​à-​vis estoppel. Judges wish to avoid the impression that intervention in equity is triggered by individual perceptions of fairness. Yet even judges have queried, albeit extrajudicially, whether the

148

See, for example, Stern v McArthur (1988) 165 CLR 489 at 514 per Brennan J (“If unconscionability were regarded as synonymous with the judge’s sense of what is fair between the parties, the beneficial administration of the broad principles of equity would degenerate into an idiosyncratic intervention”); Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [29] per Bryson J.

149

Hayne, “Letting Justice be Done Without the Heavens Falling” (2002) 27 Mon ULR 12 at 16.

150

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [7]‌.

151

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [24], [26] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ.

152

Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2012] VSCA 103 at [134] per Nettle and Neave JJA, with whom Bell AJA concurred.

153

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199.

154

Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [16], [17] per Lord Scott.

[P.160]  25 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

notion of unconscionability has now so expanded to signify conduct that is “unfair”,155 such as to herald the acceptance of a more general implied duty of good faith and fair dealing in equity.156 This has prompted one commentator to brand unconscionability as “simply a label for the points in judicial process at which ideas of fairness intrude, or the factual situations in which they have become embedded, and in this sense it does not unify equitable doctrines except to the extent that fairness itself can be said to do so”.157 Equity’s role in preventing or rectifying unfair outcomes

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[P.165]  Whereas the equitable doctrines discussed in Part III under the heading of “uncon-

scionable conduct” target the conduct of the defendant, those the subject of Part IV focus less on the conduct of the defendant as on the unfairness of the outcome against which equity will grant relief. This is not to deny a link between the unconscionability of conduct and the unfairness of the outcome stemming from that conduct. For example, the doctrine of part performance (see Ch 12) can be explained partly on the basis that it is unconscionable for a person to deny another an interest in property pursuant to an unenforceable contract the latter has partly performed. And factual scenarios triggering claims for part performance may be amenable to relief by way of estoppel or constructive trust, each grounded in proof of unconscionable conduct. And when equity grants relief against a penalty clause (see Ch 13), there are grounds to conclude that it does so because to give effect to the relevant contractual provision would amount to unconscionable conduct. Yet in each of these doctrines, the courts’ inquiry has not primarily been the conduct of the defendant, but the unfairness of the outcome should the relief claimed be refused. There is little or no such overlap in objectives regarding the doctrines of subrogation, contribution and marshalling (see Ch 14), and those of satisfaction, ademption and election (see Ch 15). Their operation is not ostensibly premised on a particular form of conduct, but on circumstances in which equity recognises and/​or allocates entitlements by implication of law so as to generate an outcome consistent with its dictates. That these doctrines do not operate to create entitlements inconsistent with the parties’ actual intentions serves to further emphasise equity’s focus in this respect on relieving against unfair outcomes. Equity’s approach to remedies [P.170]  The principal remedy at common law is the award of damages, to which the plain-

tiff is entitled as of right upon proof of the requisite elements of the relevant cause of action. Equity supplements the restricted range of remedies available at common law by providing an array of remedies that may be awarded to enforce both legal rights (equity’s “concurrent” or “auxiliary” jurisdiction) and equitable rights (equity’s “exclusive” jurisdiction). Common law remedies, conversely, have not traditionally been used to enforce purely equitable rights: see

155

Mason, “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66 at 89–​90 (having earlier remarked that the alleged uncertainty attendant to the concept of unconscionability “is exaggerated”, given that in other fields of law “we have become accustomed to dealing with concepts that do not lend themselves to precise definition —​fraud, undue influence, the duty of care in negligence”, and that like these concepts, unconscionability “involves matters of fact, degree and value judgment so that, to the extent necessary, greater guidance will come from an array of decisions in particular situations”: at 89).

156

Finn, “Unconscionable Conduct” (1994) 8 JCL 37 at 47.

157

Wilson, “Unconscionability and Fairness in Australian Equitable Jurisprudence” (2004) 11 APLJ 1 at 29.

26 [P.165] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature of Equity  Prologue

[P.50]. Courts of equity “fashion a remedy to procure substantial and practical justice”158 to “undo, so far as in practice can be done, the consequences of a breach of obligation”.159 This does not mean that they make orders that reflect “the indulgence of idiosyncratic notions of fairness and justice”; rather, the aim is to act “consistently and in accordance with principle”.160

Adequacy of common law relief [P.175]  Equitable relief will not, as a general rule, be awarded if there is an adequate remedy

at law.161 This is an historical legacy stemming from equity’s role in mitigating the rigours of the common law. Particularly regarding injunctions, modern courts persist in requiring the plaintiff to demonstrate that otherwise available common law remedies do not adequately protect her or his interests: see [31.50]. This approach has not escaped criticism. Tilbury, for instance, perceives “no reason why the availability of one remedy should depend, first and foremost, on the inadequacy of another remedy, rather than on the appropriateness of the remedy in question in all the circumstances”.162

Discretionary nature of equitable relief

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[P.180]  Unlike common law remedies, the award of equitable remedies lies in the discretion

of the court. This, it is said, reflects the notion that “equitable remedies are designed to meet the needs of the particular case after a close analysis of the facts, and that equitable remedies accommodate the relative merits of plaintiff and defendant in the particular case”.163 This discretion, however, is no invitation to engage in an unfettered and ultimately unjudicial whim, but “must be exercised judicially, that is, having regard to the relevant principles and considerations identified in the case law”.164 The court may, in its discretion, refuse to grant equitable relief where to do so would be unfair,165 prejudice the rights or interests of innocent third parties or cause hardship (see [33.130]–​[33.140]) to the defendant, or where the plaintiff comes with unclean hands (see [30.170]–​[30.180]) or undue delay (see [30.10]–​[30.80]). Nor will equity grant relief that would require constant curial supervision: see [31.65], [33.90]–​[33.100]. Moreover, a person who seeks equity’s aid to enforce a claim must be prepared to submit to any directions that equitable principle may make it proper to give.166

158

Spedley Securities Ltd (in liq) v Greater Pacific Investments Pty Ltd (in liq) (1992) 30 NSWLR 185 at 191 per Cole J. See also Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559 (FC) (“the cardinal principle of equity [is] that the remedy must be fashioned to fit the nature of the case and the particular facts”).

159

White v Shortall (2006) 68 NSWLR 650 at [270] per Campbell J [affd Shortall v White (2008) DFC ¶95-​411].

160

Muschinski v Dodds (1985) 160 CLR 583 at 615 per Deane J.

161

See National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 at 544–​546 (FC); G E Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd (2003) 11 BPR 21,253 at [64] per Young CJ in Eq; Telecom New Zealand Ltd v Sintel-​Com Ltd [2008] 1 NZLR 780 at [46] per Hammond J. See further Young, Croft and Smith, On Equity (Lawbook Co., 2009), [2.100]–​[2.130].

162

Tilbury, Civil Remedies, Vol 1 (Butterworths, 1990), [1021]. See also Chittick v Maxwell (1993) 118 ALR 728 at 742 per Young J.

163

Gummow, “The Injunction in Aid of Legal Rights —​An Australian Perspective” (1993) 56 Law & Contemp Probs 83 at 83.

164

Doyle and Wright, “Restitutionary Damages —​The Unnecessary Remedy?” (2001) 25 MULR 1 at 21.

165

See Summers v Cocks (1927) 40 CLR 321 at 324 per Isaacs ACJ, at 331 per Starke J; Blomley v Ryan (1956) 99 CLR 362 at 402–​405 per Fullagar J.

166

Colvin v Hartwell (1837) 5 Cl & F 484 at 522; 7 ER 488 at 504. This represents an application of the maxim “a person who seeks equity must do equity”: see [P.75].

[P.180]  27 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

Personal as compared to proprietary relief [P.185] A personal remedy relates directly to the conduct or behaviour (“conscience”) of

a person, whereas a proprietary remedy attaches to property. Historically, a common law judgment was enforceable against the property (in rem) of the defendant, whereas the orders of equity were enforceable against the person (in personam).167 This distinction, to a great extent, explained the development of most equitable remedies, such as injunctions, specific performance, equitable compensation, account of profits and declarations. Hence the maxim “equity acts in personam”: see [P.105]. Yet equitable relief is not confined to orders against the person. Early on, the Court of Chancery recognised beneficiaries’ entitlement to trace trust property through a string of successive owners via an equitable charge: see [39.45]. A more recent innovation is the adoption of the constructive trust as a means of preventing the denial of an interest in property recognised according to equitable principle: see [38.175]–​[38.210]. Underlying the process of tracing and constructive trust relief is the notion that, where a person has made a gain via an equitable wrong, equity can recognise in the victim an equitable interest in the property the subject of the gain (or its proceeds) commensurate with that gain. This does not mean that constructive trust relief is invariably proprietary in nature (or that tracing always seeks a proprietary outcome); it may function to make a wrongdoer personally accountable for a gain, or liable to compensate for a loss, as if he or she were a trustee of an express trust: see [38.10]. A plaintiff’s ability to establish an equitable interest in property exhibits advantages over a personal right, whether at common law or in equity, which include the following: • if the defendant is insolvent, the plaintiff may have a right in priority over the defendant’s creditors;

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• if the original recipient transfers the money or property to a third party who is not a bona fide purchaser for value, the plaintiff’s interest is enforceable against the third party; and • the plaintiff is entitled to profits made from the property.

Proportionality of equitable relief [P.190]  Equitable relief must, as a general principle, be proportional to the loss or detriment

suffered by the plaintiff, or the benefit derived by the defendant, as a result of the impugned conduct. The court, it is said, “grants the equitable remedy which is the minimum necessary to do justice”,168 and so will not grant relief that unjustly enriches the plaintiff.169 Expressed another way, it takes care “to avoid granting equitable relief which goes beyond the necessities of the case”.170 Proportionality may be reflected in the nature of the relief granted171 and/​or

167

See Young, Croft and Smith, On Equity (Lawbook Co., 2009), [2.230]–​[2.280].

168

G E Capital Asset Services & Trading Asia Pacific Pty Ltd v Rocks Excavations & Plant Hire Pty Ltd (2003) 12 BPR 21,253 at [71] per Young CJ in Eq. See also TCT Logistics Inc v Nordeen (1999) 181 DLR (4th) 74 at 82 (CA(BC)) (“courts ought to be careful to limit the grant of equitable relief to that reasonably necessary to protect the interests threatened”).

169

Wilby v St George Bank (2001) 80 SASR 404 at 414 per Perry J, with whom Doyle CJ and Bleby J concurred.

170

John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [129] (FC).

171

For instance, where the only way of rectifying the detriment caused by unconscionably resiling from a representation is to enforce the promise via the doctrine of estoppel, the court will order specific performance of the promise. Where, however, a proportional response does not require the enforcement of the promise, the court may elect to make an order for compensation. See generally [10.230]–​[10.265].

28 [P.185] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature of Equity  Prologue

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in the conditions or terms of that relief.172 It operates on another level in some circumstances, namely where the relief granted is proportionate to the nature of the impugned conduct.173 It stands to reason, therefore, that equity’s remedial jurisdiction is designed to compensate but not to punish. Hence the maxim “equity and penalty are strangers”. This does not mean that the nature and form of equitable relief carries no deterrent aspect —​indeed it does especially where a breach of fiduciary duty is involved: see [4.35] —​but that in giving relief the court is not chiefly concerned with punitive objectives. There is also an element of proportionality in assessing the application of the “unclean hands” defence (as to which see [30.170]–​[30.180]). For instance, although the plaintiff may not come to equity with completely clean hands, where the plaintiff’s perfidy “pales into insignificance” compared to the defendant’s iniquity, a court may not preclude the plaintiff from relief.174

172

For instance, the court will prescribe provisos on the grant of a Mareva order so as to ensure that the order is not used as an abuse of its processes and goes no further than necessary to achieve its purpose: see [32.75]–​[32.85].

173

See, for example, Nelson v Nelson (1995) 184 CLR 538 (to deny equitable relief would have imposed an outcome on the plaintiff disproportionate in severity to the plaintiff’s default: see [19.40], [19.45]).

174

See, for example, Burmeister v O’Brien [2010] 2 NZLR 395 at [289] per Asher J (where against the deliberate fraud of the defendants any moral wrongdoing on the part of the plaintiffs in being prepared to acquiesce in a scheme that might involve some tax avoidance “pale[d]‌into insignificance”).

[P.190]  29 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

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EQUITABLE INTERESTS

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PARTI Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

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Chapter 1

Nature and Creation of Equitable Interests NATURE OF AN EQUITABLE INTEREST Hallmarks of an equitable interest in property

Concept at general law

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[1.05]  It has been suggested that, for an equitable interest in property to subsist, its holder

must be able to protect the rights pertaining to that interest against the person who holds the legal estate (whether by way of specific performance, injunction or otherwise), and be able to enforce those rights as against third parties.1 The latter does not automatically give standing to sue in respect of interference by third parties in respect of the property. The legal owner has standing, and so the holder of the equitable interest must, unless he or she has possessory title sufficient to confer standing on her or his own account,2 join the legal owner (whether as co-​plaintiff or as co-​defendant) for this purpose.3 Generally speaking, a proprietary interest is also commonly capable of being disposed by its holder, although it is not essential that property be necessarily susceptible of transfer.4 In any case, equity adopted a more welcoming approach to the transfer, of both legal and equitable interests, than the common law: see [3.05]–​[3.15]. Yet to the extent that the above “protective” and “enforcement” characteristics of equitable interests suggest no more than an entitlement to standing to sue that may be denied to others, they do not fully reflect the nature of an equitable interest. Of course, an important ramification of an equitable interest is an entitlement to standing that may otherwise be denied.5 But a person’s standing to sue in equity need not be classified as an equitable interest. In many instances, it is little more than what may be described a “mere equity” —​the right to seek equitable relief, whether or not in aid of a property right —​to be distinguished in both nature and consequences from an equitable interest in property: see [2.105]–​[2.120]. It is the proprietary nature of the interest, rather, that confers the entitlement to standing, and impacts on the 1

Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 at [43] per Finkelstein J.

2

See, for example, Healey v Healey [1915] 1 KB 938.

3

Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785 at 812 per Lord Brandon; MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 at 687–​691 per Mummery LJ, at 701 per Hobhouse LJ. See Tettenborn, “Trust Property and Conversion: An Equitable Confusion” [1996] CLJ 36. A typical example in this context relates to the standing entitlements of beneficiaries of trusts against third parties who interfere with the trust property: see [24.15], [24.20].

4

National Trustees Executors and Agency Co of Australasia v Federal Commissioner of Taxation (1954) 91 CLR 540 at 558 per Dixon CJ; Georgiadis v Australian and Overseas Telecommunications Corp (1994) 179 CLR 297 at 311–​312 per Brennan J; Yanner v Eaton (1999) 201 CLR 351 at [85] per Gummow J.

5

See, for example, Bahr v Nicolay (No 2) (1988) 164 CLR 604, discussed at [17.50], where standing would otherwise have been denied for lack of privity of contract.

[1.05]  33 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

nature of the relief ordinarily available. There is an ability to recover from the defendant the property the subject of the interest (or income from it), rather than being limited to recovery of compensation from the defendant from no specific fund.6 This attracts important advantages, especially where the property has increased in value or generated income, or there are competing claims to it. As to the latter, an existing equitable interest in property, as compared to a merely personal claim or a mere equity, has greater scope for securing priority over third parties’ claims to the property.

“Beneficial” interests or ownership under statute

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[1.10]  It is not uncommon for legislation, particularly taxing legislation, to prescribe a change

in “beneficial interests” or “beneficial ownership” in property as a trigger for liability. Where liability is alleged to have been triggered in the context of a variation of trust, the issue often focuses on whether or not there has been a “resettlement” of the trust (itself a concept of no fixed meaning): see [25.105]–​[25.115]. Meaning must be given, in each case, to the statutory provision imposing the liability, which rests on an exercise in statutory construction, not a blind assumption that a “beneficial interest” under statute equates to an equitable interest as understood at general law.7 As a starting point, though, it is legitimate to inquire into whether the concept, at law, of a beneficial interest aligns with the statutory schema. For instance, it has been said that the word “beneficial”, in the context of a beneficial interest in property under statute, “ordinarily denotes a proprietary interest to which a person or persons, other than the person in whom legal title to the property is vested, is entitled”.8 On this basis, it has been held that reference in a taxing statute to a person “acquir[ing] an interest in a land rich landholder if the person obtains an interest beneficially”9 was intended to import that well-​recognised concept of obtaining the relevant benefit for that person and not for the benefit of others.10 Accordingly, if a trustee obtains that interest, it is not obtained “beneficially” by the trustee, who by definition holds it for the benefit of others: see [16.05]. The same approach arguably applies where the statutory language is directed to “beneficial ownership”. It is not uncommon to find judicial references to a presumption that, when the words “beneficial ownership” are used, the legislature has in mind “a technical reference to an entitlement in equity”.11 Yet it should not be assumed that statutory and equitable concepts always align. Ownership, in any case, is often something greater than an equitable or

6

Meagher, Gummow and Lehane, [4-​015].

7

Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2005) 60 ATR 135 at [24] per Hollingworth J [affd Lygon Nominees Pty Ltd v Commissioner of State Revenue (2007) 23 VR 474]; Commissioner of State Revenue v Serana Pty Ltd (2008) 36 WAR 251 at [130], [131] per Buss JA.

8

Commissioner of State Revenue v Serana Pty Ltd (2008) 36 WAR 251 at [135] per Buss JA.

9

Under Duties Act 2000 (Vic), s 77(1), as it then read.

10

Landrow Properties Pty Ltd v Commissioner of State Revenue (2008) 73 ATR 901 at [42] per Mandie J [affd Commissioner of State Revenue v Landrow Properties Pty Ltd (2010) 79 ATR 800].

11

See, for example, Trust Company of Australia Ltd v Commissioner of State Revenue (2007) 19 VR 111 at [59] per Mandie J (although his Honour’s reference, for this purpose, to Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at [50], [58] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ, at [127] per McHugh J, does not directly support the proposition in the text). See also Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2005) 60 ATR 135 at [52] per Hollingworth J (who, in the context of land tax legislation, held that the term “beneficial owner” should be construed as requiring “the right at least to deal with the property as one’s own”) [affd Lygon Nominees Pty Ltd v Commissioner of State Revenue (2007) 23 VR 474 (see at [52] per Redlich JA, with whom Ashley JA and Bell AJA concurred)].

34 [1.10] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

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beneficial interest.12 In the statutory context it may be that the focus is on “the concept of benefit, not on the jurisdictional divisions between legal and equitable interests”.13 The point is illustrated by the High Court’s decision in Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq).14 It concerned the construction of a provision in income tax legislation that allowed the carrying forward of tax losses by a company if the rights to exercise voting power, and to receive dividends and capital distributions, “were beneficially owned by persons who, at all times during the year in which the loss was incurred, beneficially owned shares in the company carrying between them rights of those kinds”.15 The issue was whether a company’s winding up ousted its “beneficial ownership” of shares it held in another company. In addressing essentially the same issue, the House of Lords had ruled that “beneficial ownership” subsists in a person who can enjoy the fruits of the property or dispose of it for her or his own benefit.16 On this logic, the appointment of a liquidator would deprive the company of beneficial ownership. But a High Court majority rejected this outcome, ruling that “[p]‌ower to deal with an asset and matters of ownership or title are not interchangeable concepts”.17 In a concurring judgment, McHugh J elaborated as follows:18 [T]‌he correct view is that the change in control of a company’s assets brought about by the winding up order does not have the effect that shares in another company held by the company cease to be “beneficially owned” by the company, the subject of the winding up order. On liquidation, the ownership of the shares is not “for the benefit of others”; rather, the administration of the assets is for the benefit of the creditors. Although a company shareholder, which is the subject of a winding up order, is no longer able to exercise many of the rights in the “bundle of rights” that attach to its shares, it does not cease to be the beneficial owner of the shares. The company retains its interest in the shares and continues to be subject to the liabilities provided by the company’s memorandum and articles of association and the legislation. For example, it may be liable as a contributory in relation to any part-​paid shares it holds. Moreover, it retains some rights, such as the right to participate in the distribution of surplus assets available for shareholders on a winding up. It does not lose its interest in a company in which it holds shares (as measured by a right to a specified amount of the share capital of a company) on the making of a winding up order. Rather, that interest simply becomes subject to the set of liabilities prescribed by the statutory scheme and the company’s memorandum and articles of association.

His Honour found it unnecessary to conflate a power to deal with an asset with its ownership in order to give effect to the legislative purpose of the section. Although the majority endorsed the finding of both the trial judge and the Full Federal Court in this respect, their Honours focused more heavily on aligning the statutory concept of “beneficial ownership” to general law concepts than the lower courts, which emphasised that the phrase “beneficial ownership”, when used in a statute, derives its meaning from the statutory context.19 The joint judgment in the High Court instead noted that “[t]‌he term ‘beneficial’ is usually employed in trust law as

12

Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 at [66] per Tamberlin and Hely JJ.

13

Stone and Lesnie, “Some Thoughts on Beneficial Interests and Beneficial Ownership in Revenue Law” (1996) 19 UNSWLJ 181 at 182.

14

Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592.

15

Income Tax Assessment Act 1936 (Cth), s 80A(1). The relevant provision is now found in Income Tax Assessment Act 1997 (Cth), s 165-​12.

16

Ayerst (Inspector of Taxes) v C & K (Construction) Ltd [1976] AC 167.

17

Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at [55] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

18

Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at [125].

19

See, for example, Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2003) 129 FCR 42 at [59] (FC).

[1.10]  35 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

a cognate of ‘beneficiary’ ”, one that “identifies those persons for whose benefit the trustee of a private trust … is bound to administer the trust property”.20 It is no prerequisite to an equitable interest, at general law, that its holder have complete power to deal with it; that interest may be defeasible, such as an interest under a protective trust (see [27.115], [27.120]) or of a default beneficiary of a trust (see [20.155]). Kirby J dissented on this point, ruling that to burden the relevant section “with all of the expositions about beneficial ownership derived from the law of trusts, and elsewhere in the law, is to fall into a serious error of statutory interpretation”.21 His Honour saw the correct approach as one to give the statutory words meaning in their context and to achieve the purposes of the section. For those purposes, Kirby J held that a person could not be the beneficial owner of property without the right to deal with the property as her or his own. In the case of shares this included their unimpeded disposal or sale, and enjoyment of the fruits of such disposal or sale, neither of which was possible where the shareholder was in liquidation.22

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[1.15]  Irrespective of the differing views expressed in the High Court in Linter Textiles, even

at general law an equitable interest is not the same as equitable ownership. For instance, an equitable chargee clearly has an equitable interest in the property charged (see [1.65]–​[1.80]) but lacks equitable ownership. The concept of equitable ownership is, at general law, commonly ascribed to a beneficiary under a fixed or unit trust (see [20.100]–​[20.110]), or to the beneficiaries of private trusts collectively (often in their ability to terminate the trust when acting in concert: see [25.135]–​[25.145]), although even here there exist inherent limitations on “ownership” in its full sense (that is, a plenary power to do as one wishes with property): see [20.115]. For example, the terms of a unit trust commonly deny to unit holders the right to claim specific trust assets (see [20.110]), and even the ability to demand an entitlement to trust property is subject to satisfying the trustee’s right of indemnity (see [23.120]–​[23.130]). This informs the High Court’s rejection of a “dogma” that, where legal ownership vests in a trustee, equitable “ownership” must necessarily be vested in someone else.23 Issues of this kind, again, have arisen principally in the context of statutory taxing provisions triggered by changes in “ownership” of property.24 Scope of an equitable interest in property [1.20]  Frequent reference in the case law brands the scope of an equitable interest as com-

mensurate with the relief equity will grant to protect or enforce it.25 In this sense, the protective and enforcement aspects are not so much a precondition to the existence of an equitable interest, but “an incident or characteristic of such interest signifying its quality or extent”.26

20

Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at [52] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ.

21

Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at [222].

22

Federal Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 220 CLR 592 at [225].

23

CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at [25] per Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ.

24

See, for example, CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98, discussed at [20.115].

25

Trustees, Executors and Agency Co Ltd v Acting Federal Commissioner of Taxation (1917) 23 CLR 576 at 583 per Isaacs J; Stern v McArthur (1988) 165 CLR 489 at 511 per Brennan J, at 522 per Deane and Dawson JJ, at 537 per Gaudron J; Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252–​253 per Mason CJ, Brennan, Deane and McHugh JJ; Suncorp Insurance and Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285 at 301 per Fitzgerald P.

26

Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 at 224 per Kearney J.

36 [1.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

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The scope of an equitable interest can also be tested by reference to the limits or restrictions of equity’s intervention to enforce or protect it. An important limitation on its scope is that it cannot prevail against a bona fide purchaser for value of the legal interest in the property who lacks notice of the equitable interest.27 So while at general law a person without legal title cannot pass title to a third party (nemo dat qui non habet),28 the legal owner of property subject to an equitable interest in favour of another can nonetheless pass valid title to a bona fide purchaser for value of the property if the latter lacks notice of that interest. Because an equitable interest in property is premised on the continuing existence of the property in question —​it makes little sense to speak of an interest in property that no longer exists —​where the property in issue is dissipated or destroyed, there is no continuing equitable interest in that property (although this does not preclude a personal action for monetary relief against the former holder of the property who illegitimately destroyed or dissipated it). It is also possible for an equitable interest to be contingent or defeasible by the terms of the document creating it, typical illustrations being the interest in a beneficiary of a protective trust (which is defeasible: see [27.115], [27.120]) or a superannuation trust (which is contingent: see [28.130]). Moreover, equity may deny a person what would otherwise constitute an equitable interest in property where to recognise it would be contrary to equitable principle. This reflects the discretionary nature of relief in equity, premised as it is on justice in the circumstances, and heavily influenced by the parties’ behaviour (sometimes described as their relative “equities”). For example, although equity recognises that a person who has entered into a contract to purchase land has an equitable interest in the land pending completion (see [38.150]–​[38.160]), that equitable interest can be denied for unclean hands (such as where the contract was entered into as a result of undue influence or unconscionable dealing), the vendor’s hardship or the interests of third parties: see [33.130]–​[33.145]. Equitable interests compared to legal interests [1.25]  An absolute owner of property does not hold two estates, one legal and the other equi-

table, only the legal estate, with all the rights and incidents that attach to that estate. “When the whole right of property is in a person … there is no need to distinguish between the legal and equitable interest in that property, any more than there is for the property of a full beneficial owner”.29 An equitable interest, it is said, “is not carved out of a legal estate but impressed upon it”.30 This does not mean that an absolute owner of property can never owe duties in equity to a third party in respect of the property. For instance, an executor, though vested with complete ownership of the property of the estate for the purposes of its administration, owes

27

As to the concept of a bona fide purchaser for value without notice, see further Young, Croft and Smith, On Equity (Lawbook Co., 2009), [2.540]–​[2.710].

28

No one gives who possesses not.

29

Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694 at 712 (PC). See also Re Transphere Pty Ltd (1986) 10 ACLR 776 at 777 per McLelland J; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 706 per Lord Browne-​Wilkinson; Probert v Commissioner of State Taxation (1998) 72 SASR 48 at 53 per Olsson J. This has implications, inter alia, in the context of formality requirements for the “disposition” of equitable interests. The requirement that “a disposition of an equitable interest or trust subsisting at the time of the disposition” be in writing (as to which see [18.05], [18.10]) does not apply where the full owner disposes her or his beneficial ownership or intends to dispose of both her or his legal and beneficial ownership: Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 at 312 per Lord Upjohn, at 317 per Lord Donovan.

30

DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 474 per Brennan J.

[1.25]  37 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

duties in equity to those who are to take under the estate, in whom lies an equitable chose in action (but no equitable interest) to enforce its proper administration: see [16.205]. But where there is no complete identity between legal and equitable interests in an item of property —​where the persons who hold the equitable interest do not also hold the complete legal interest —​there is a need to distinguish between the two. The typical example is the trust, the very nature of which is premised on a separation of legal and equitable interests in property: see [16.05]. A trustee, as legal owner of trust property, has at law all the rights of the absolute owner —​he or she is, after all, the holder of the property in issue31 —​but is not free to use those rights for her or his own benefit; equity requires the trustee to use those rights for the benefit of other persons (beneficiaries), who depending on the nature of the trust hold equitable interests, whether individually or collectively, in the trust property. [1.30]  Equitable interests can also contrast with legal interests according to the manner of

their creation and transfer. Legal interests must be created or transferred as prescribed by either the common law or statute; equitable interests may, generally speaking, be created and transferred in an informal manner. For instance, a legal assignment of a chose of action must fulfil statutory requirements, whereas an equitable assignment can often be effected less formally: see Ch 3. Another example is the often-​cited, though potentially misleading, distinction between legal interests as rights in rem (against property) and equitable interests as rights in personam (against the person): see [P.185].

CREATION OF EQUITABLE INTERESTS IN PROPERTY

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[1.35]  Equitable interests in property may arise or be created in three ways: pursuant to the

intention of the creator of the interest; by being presumed by law to arise where the equitable interest reflects the nature of a transaction in issue (implication of law); and in circumstances that justify the court imposing an equitable interest in property independent of actual or presumed intention (operation of law). Distinguishing between these modes of creation is extant for at least three reasons. First, it goes to what is the relevant inquiry as to the existence of the interest. An interest alleged to be created by express or inferred intention relies on evidence of that intention. Where, instead, the interest is alleged to arise by presumption or implication of law, evidence of a transaction or circumstance capable of attracting such a presumption or implication must be adduced. An equitable interest alleged to arise by operation of law requires proof of circumstances that justify the court imposing it. Secondly, the distinction may be important when it comes to the timing of the equitable interest. When created pursuant to intention, it is the express or inferred intention of its creator that ordinarily determines when the equitable interest takes effect. When imposed by the court, on the other hand, an equitable interest should take effect at the moment it is imposed (although this is not always so: see [38.250]–​[38.260]). Where implication of law is involved, an equitable interest arises when the circumstances that trigger the implication (or presumption) arise, but must yield to contrary express or inferred intention. Thirdly, statute requires certain equitable interests created by way of express (or inferred) intention to be created by or evidenced in writing as a condition of validity or

31

Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 at [258] per Pullin JA.

38 [1.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

enforceability, but excludes from this requirement those arising by implication or operation of law: see [18.25]. [1.40]  This threefold classification does not always exhibit well-​defined boundaries, though.

For instance, a court may infer an intention to create an equitable interest in property, but making this inference on slender evidence of intention may suggest that the court in effect presumes an intention via implication of law. An example is the case law on equitable mortgages by the deposit of title deeds: see [1.75]. Another relates to equitable interests in property arising pursuant to the doctrine of proprietary estoppel (see [10.60]–​[10.70]), which can be explained on the basis of intention (namely the promise or representation by the legal owner of the property), but also by operation of law (imposed by the court to remedy the detriment caused by the legal owner’s unconscionable conduct in resiling from the promise). Conversely, certain equitable interests arising by operation of law pursuant to a constructive trust can also be explained on the grounds of inferred or presumed intention,32 explicitly so in the case of the so-​called “common intention constructive trust”: see [38.215]–​[38.230]. Equitable interests created pursuant to intention

Property given subject to certain obligations

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[1.45]  An equitable interest in property may arise under an express trust, whether via a trans-

fer of property coupled with an intention that the transferee hold legal title for the benefit of others, or by a person declaring herself or himself a trustee of property for others. Critical to the creation of an express trust is the requisite certainty of intention: see [17.10]–​[17.55]. Not every transfer of property attached to which is an obligation on the transferee in relation to that property necessarily constitutes a trust.33 It may generate an equitable interest in the nature of an equitable charge: see [1.65]–​[1.80], [16.165]. Or it may be a transfer subject to condition (see [16.160]), or subject to a (non-​trust) equitable personal obligation (see [16.170]), wherein no equitable interest in property is necessarily created. If it creates no more than a moral obligation, there are no legal consequences: see [16.155].

Equitable assignments [1.50]  An equitable interest in property may be created by way of assignment in two main

ways. First, an intended assignment under statute that does not fulfil the statutory requirements (see [3.25]–​[3.35]) may take effect as an equitable assignment, giving the assignee some equitable proprietary rights: see [3.120]–​[3.150]. Secondly, the purported assignment of property not yet in existence (“future property”) in equity constitutes the assignor a trustee for the assignee as soon as the property comes into existence if the assignee has given consideration: see [3.105]–​[3.115].

Contributions to property [1.55] Equity may recognise an equitable interest in property pursuant to the doctrine of

proprietary estoppel where there is evidence that its owner promised to confer on another person an interest in the property in return for that person doing some substantial act in relation to it (often its renovation or improvement): see [10.60]–​[10.70]. This equitable interest 32

See Dal Pont, “Equity’s Chameleon —​Unmasking the Constructive Trust” (1997) 16 Aust Bar Rev 46 at 72–​78.

33

Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 418–​420 per Dixon J.

[1.55]  39 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

may be secured by way of an equitable charge34 or lien35 or, as is becoming more common in Australian law, by a court declaration granting the claimant the interest he or she was promised: see [10.240]–​[10.265]. Yet in other circumstances, the claimant’s “equity” can be satisfied by an award of compensation in place of an equitable interest in the property.36 Oral promises of an interest in property contingent on the performance by the promisee(s) of prescribed acts, whether or not in relation to the property in question, may alternatively give rise to an equitable interest under the doctrine of part performance if the prescribed acts are carried out: see Ch 12.

Completely and incompletely constituted gifts [1.60]  For a gift of property to take effect, the donor must have done everything that, accord-

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ing to the nature of the property, was necessary for the donor to have done to transfer the property to the donee:  see [18.95], [18.100]. Hence, the gift is effective even if something remains to be done for the complete transfer of the property, provided that it is not necessary for that something to be done by the donor. As a result, the donee acquires an equitable interest in the subject matter of the gift “once the transaction is complete so far as the donor is concerned”.37 If there remains something that must be done by the donor in relation to the purported transfer, an equitable interest in the donee can arise if the donee can establish the existence of a contract to transfer the property (which presupposes that the donee has given consideration) or that, pursuant to the doctrine of proprietary estoppel (see [10.60]–​[10.70]), the donor should be not permitted to resile from a representation that the donee would receive an interest in the property:  see [18.140]. The grounds for equitable interference may be broader if the general principle is that “a donor will not be permitted to change his or her mind if it would be unconscionable, in the eyes of equity, vis-​á-​vis the donee to do so”:38 see [18.145], [18.150].

Equitable interests arising from instruments of security —​equitable charges and mortgages [1.65]  An intention to create an equitable interest in property can derive from an instrument

of security. For example, a contract to create a charge can take effect in equity, subject to any applicable statutory writing requirements (see [18.05], [18.10]),39 as an equitable charge; equity, after all, looks on as done that which ought to be done.40 To this end, an equitable charge is created “by an appropriation of specific property to the discharge of some debt or 34

Taylor v Marmaras [1954] VLR 476 at 477 per O’Bryan J; Chalmers v Pardoe [1963] 1 WLR 677 at 681–​682 (PC).

35

Raffaele v Raffaele [1962] WAR 238; Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at 39–​40 per Young J; Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 54 per Handley JA, with whom Mason P and Beazley JA concurred.

36

Gibb v MacDonnell [1992] 3 NZLR 475 at 479–​480 per Anderson J.

37

Corin v Patton (1990) 169 CLR 540 at 559 per Mason CJ and McHugh J.

38

Pennington v Waine [2002] 1 WLR 2075 at 2090–​2091 per Arden LJ.

39

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 418 per Bryson J; Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd (2010) NSW ConvR ¶56-​263 at [17] per Windeyer AJ (in each case referring to an equitable mortgage).

40

Clark v Raymor (Brisbane) Pty Ltd (No 2) [1982] Qd R 790 at 795 per Thomas J; Pacific Homes Ltd v Consolidated Joineries Ltd [1996] 2 NZLR 652 at 657 per Blanchard J (CA); BBC Hardware Ltd v GT Homes Pty Ltd [1997] 2 Qd R 123 at 125 per Thomas J; United Bank of Kuwait plc v Sahib [1997] Ch 107 at 120 per Chadwick J; Allen’s Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202. As to the maxim “equity regards as done that which ought to be done”, see [P.125].

40 [1.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

other obligation without there being any change in ownership either at law or in equity”.41 Entwined in the relevant inquiry into intention is its consequence, namely that in the event of a default by the debtor (chargor), the creditor (chargee) may apply to the court for an order to sell the charged property and that the debt be paid out of the sale proceeds: see [1.150]. Consistent with the maxim “equity looks to intent rather than form” (see [P.95]), no specific words are required to create an equitable charge by an instrument, although use of the words “charge” (or “mortgage”) may be compelling evidence speaking of their intention.42 Yet that outcome can ensue upon evidence from which the court can objectively ascertain from the instrument an intention that the property is to constitute a security.43 The case law reveals occasions evincing such an intention where the terms of a guarantee entitled the lender to “attach” a debt to assets of the guarantor after default,44 and a loan contract authorised the lender to “lay first claim to any other property” in the borrower’s name “to the value of the debt plus costs” in the event of default.45 Specific segregation of a fund for the purpose of repaying a debt is likewise capable of substantiating an intention to create an equitable charge over the fund.46 The point has witnessed a steady stream of litigation, in part because many (alleged) equitable charges are created informally, and the court is invited to make an inference as to intention from what can be slender and conflicting evidence. Given the proprietary consequences of an equitable charge, inter alia, there is sense in courts not being overly enthusiastic to make the said inference in the absence of sufficiently clear indications of intention.47 For instance, that a borrower has authorised the lender to lodge a caveat over the borrower’s property, though potentially probative of an intention to benefit the lender as chargee if corroborated,48 is not likely by itself to be sufficiently clear evidence of an intention charge the borrower’s property for the debt. Bryson AJ explained the point as follows:49

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[T]‌he meaning conveyed by a contractual document, including what is conveyed by implication, must be understood by addressing the terms and the whole terms of the document

41

Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 at 227 per Peter Gibson J.  See also National Provincial and Union Bank of England v Charnley [1924] 1 KB 431 at 449–​450 per Atkin LJ; Re Charge Card Services Ltd [1987] Ch 150 at 176 per Millett J; Hughmans Solicitors v Central Stream Services Ltd [2013] WTLR 239 at [27] per Ward LJ; Amari Lifestyle Ltd v Warnes [2018] Ch 161 at [32] per Stephen Jourdan QC.

42

See, for example, Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 at [70], [71] per Darke J (on the facts coupled with an entitlement to lodge a caveat).

43

Cradock v Scottish Provident Institution (1893) 69 LT 380 at 382 per Romer J; Cinema Plus Ltd v Australia and New Zealand Banking Group Ltd (2000) 49 NSWLR 513 at [144] per Giles JA; McMillan v Dunoon [2005] VSC 440 at [37] per Gillard J; Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162 at [28], [39], [40] per McLure JA.

44

See, for example, Murphy v Wright (1992) 5 BPR 11,734.

45

See, for example, Wilson v Graham (1997) 10 BPR 19,051.

46

Cf Jackson v Richards (2005) 12 BPR 23,091.

47

Tradegro (UK) Ltd v Wigmore Street Investments Ltd [2011] BCLC 616 at [36] per Lord Neuberger MR.

48

The leading case, one reading of which is that the authority to lodge a caveat is sufficient to support an equitable charge, is that of the New South Wales Court of Appeal in Troncone v Aliperti (1994) 6 BPR 13,291. Though it has its supporters (see, for example, Nudd v Official Trustee in Bankruptcy (2002) 11 BPR 20,163; Peters v Lithgow Forge Pty Ltd (2011) 15 BPR 29,611), more recent case law, as listed in the ensuing footnote, favours no such principle, but instead a more nuanced and contextualised exercise.

49

Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489 at [60], [61] (paragraph break omitted). These remarks were endorsed by the New South Wales Court of Appeal in Aged Care Services Pty Ltd v Kanning Services Pty Ltd (2013) 86 NSWLR 174 at [82], [83] per Gleeson JA, with whom Meagher and Leeming JJA agreed. See also Northern Star Agriculture Pty Ltd v Morgan and Banks Developments Pty Ltd (2007) 13 BPR 24,163 at [57] per Young CJ in Eq; McGarry v 14 Hiscock Street Pty Ltd [2012] VSC 573 at [59] per Lansdowne AsJ; Complex Scaffolding Solutions Pty Ltd v Doueihi (2014) 17 BPR 32,753 at [30] per Robb J; Yaran Holdings Pty Ltd v Goldsmith 7 Pty Ltd [2014] WASC 17 at [71] per Allanson J.

[1.65]  41 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

in question, and there is no principle or true principle establishing what implication must be drawn in all cases from authority to lodge a caveat in connection with an obligation to pay money … The circumstances that there was a debt and that there is to be a caveat, together with the nature of the caveat, certainly direct attention to whether it was intended that the debt should be protected by a charge or some other interest. It is quite likely that there was some such intention in the mind of one party or of both, but if that intention is not found expressed or by implication in their document there is no equitable interest. Authorisation to lodge a caveat does not create by necessary implication the conclusion that there must have been an intention to create an equitable interest, and that there must have been the further intention that that interest should be a charge over the property.

Courts, it seems, are suspicious of the easy availability of a “bootstraps” caveat by an embattled lender.50 In line with the need for some clarity in intention, if the evidence reveals no intention for a present right to have the security made available, but only a right in the future by agreement (such as a licence) to seize the goods, there can be no equitable charge.51 This does not, however, preclude the potential efficacy of a charge over after-​acquired property, provided that the relevant property is identifiable at the time when the charge is sought to be enforced.52

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[1.70]  The High Court has remarked that the term “equitable mortgage” is not used in the

authorities “with any single denotation”.53 As foreshadowed above, the nature of the security created turns on the intention of the alleged security-​holder and the nature of the relevant asset(s). For instance, a mortgage of an equitable interest, being an equity of redemption, can be effected only via an equitable mortgage. In respect of a legal interest, an agreement to give a legal mortgage is described as an equitable mortgage; it may be treated in equity as if a legal mortgage had been granted, subject to compliance with any statutory formalities, and thus as carrying with it the remedies, including foreclosure, incident to a legal mortgage.54 It is in this sense that an equitable mortgage is distinguished from an equitable charge; the latter can be enforced only pursuant to court-​ordered sale whereas the mortgagee may unilaterally initiate foreclosure: see [1.155]. [1.75]  Equitable mortgages need not be created or evidenced in writing; they can be created

at general law by deposit of title deeds where to do so evidences an intention to enter a contract to mortgage.55 Also, equity treats a binding promise for the delivery of a certificate of title

50

Aitken, “Priority in Equity: Failure to Caveat and ‘Postponing Conduct’?” (2012) 86 ALJ 291 at 295.

51

National Provincial and Union Bank of England v Charnley [1924] 1 KB 431 at 449–​450 per Atkin LJ.

52

Re Clarke (1887) 36 Ch D 348 at 355 per Bowen LJ; Re Kelcey [1899] 2 Ch 530 at 533 per Kekewich J; Re Carter Holt Harvey Woodproducts (Australia) Pty Ltd (No 1) [2017] VSC 499 at [40]–​[44] per Robson J; Bunnings Group Ltd v Hanson Construction Materials Pty Ltd [2017] WASC 132 at [34], [35] per Chaney J.

53

Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at [25] (FC).

54

Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at [26] (FC); McGarry v 14 Hiscock Street Pty Ltd [2012] VSC 573 at [70]–​[72] per Lansdowne AsJ.

55

Bank of New South Wales v O’Connor (1889) 14 App Cas 273 at 282 (PC); United Bank of Kuwait plc v Sahib [1996] 3 All ER 215 at 221, 223–​224 per Peter Gibson LJ; Westpac Banking Corporation v Cronin (1990) 6 BPR 13,105 at 13,110 per Waddell CJ in Eq; UTC Ltd v NZI Securities Australia Ltd (1991) 4 WAR 349 at 351 per Malcolm CJ; National Australia Bank Ltd v Clowes (2013) 8 BFRA 600 at [24] per Leeming JA, with whom McColl and Macfarlan JJA concurred. It has been suggested that, in a sense, the courts effectively presume such an intention from the deposit of title deeds, and as such, the presumption can be rebutted by oral evidence: United Bank of Kuwait plc v Sahib at 223. But as equitable security interests are ordinarily premised on proof of express or inferred intention, it is better to avoid the language of presumption in this context: see Hepburn, “Recognising the Scope of the Equitable Mortgage Arising from Deposit of Title Documents” (2006) 80 ALJ 121.

42 [1.70] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

by way of security as a contract to create an equitable mortgage, which, if specifically enforceable, creates an interest in the relevant land.56 The doctrine is now, however, effectively eliminated by the statutory requirement that mortgages (other than certain goods mortgages)57 be in writing as a condition of enforceability,58 except in the Northern Territory, South Australia and Queensland, where it is preserved by statute.59 The doctrine was discussed by the High Court in Theodore v Mistford Pty Ltd.60 There a contract for the sale of a business by the respondents to a third party, which was guaranteed by the appellant’s son, provided for the guarantor to deposit with the vendors’ solicitors an instrument of mortgage of land owned by the appellant together with the duplicate certificate of title. The guarantor obtained the appellant’s authority to release the duplicate certificate of title as security for the purchase, which was deposited with the vendors’ solicitors four days prior to settlement. The vendors did not insist on provision of the instrument of mortgage. The court held the deposit of the duplicate certificate of title created an equitable mortgage. That there were no direct dealings between the appellant and the respondents did not undermine the respondents’ case because the evidence established that the appellant had the necessary intention to deposit the duplicate certificate of title as security for her son’s indebtedness under the sale contract, and to effectuate that intention she gave her son actual authority in broad terms encompassing his subsequent dealing with the duplicate certificate of title to procure settlement of the sale contract.61 Nor was it critical that the son rather than the appellant made the deposit, as the authority the appellant gave her son was apt to permit that step being taken on her behalf.62 As explained when the case was before the Queensland Court of Appeal: “[t]‌here is no sound reason why an equitable mortgage will not arise from the deposit of deeds belonging to a third party rather than the debtor provided, as here, this is done with the third party’s knowledge”.63

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[1.80]  The weight of authority holds that a floating security or charge64 gives an immediate

equitable charge (see [1.150], [1.155]) on the assets of the borrower, subject to a right in the borrower in the ordinary course and for the purposes of its business to dispose of those assets

56

Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 79 ALJR 825 at [68] (FC).

57

Namely those where the credit provider lawfully had possession of the goods that are subject to the mortgage before the mortgage was entered into otherwise than because the credit provider supplied the goods: Consumer Credit Code, s 42(3) (found in National Consumer Credit Protection Act 2009 (Cth), Sch 1).

58

Consumer Credit Code, ss 42(1), 42(4) (found in National Consumer Credit Protection Act 2009 (Cth), Sch 1). Likewise in the United Kingdom, legislation provides that, without writing, the deposit of title deeds by way of security no longer creates a mortgage or charge: Law of Property (Miscellaneous Provisions) Act 1989 (UK), s 2, as to which see United Bank of Kuwait plc v Sahib [1996] 3 All ER 215 at 225 per Peter Gibson LJ, at 227 per Phillips LJ (who saw the clear intent of s 2 as to “introduce certainty in relation to contracts for the disposition of interests in land where uncertainty existed before”).

59

Land Title Act 2000 (NT), s 77; Real Property Act 1886 (SA), s 149; Land Title Act 1994 (Qld), s 75 (as to which see Theodore v Mistford Pty Ltd [2003] QCA 580 at [9]‌per McMurdo P; Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at [37] (FC)). Yet with the advent of electronic title and progressive cancellation of paper certificates of title, the use of the statute for this purpose will ultimately become obsolete: see Duncan, “Creating Interests in Land and Merely Assuring Their Creation” (2004) 24 Qld Lawyer 233 at 235.

60

Theodore v Mistford Pty Ltd (2005) 221 CLR 612.

61

Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at [23] (FC).

62

Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at [39] (FC).

63

Theodore v Mistford Pty Ltd [2003] QCA 580 at [9]‌per McMurdo P.

64

As to the distinction between a fixed and a floating charge, see Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284 at 295 per Romer LJ; Illingworth v Houldsworth [1904] AC 355 at 358 per Lord Macnaghten; Fire Nymph Products Pty Ltd v Heating Centre Pty Ltd (in liq) (1992) 7 ACSR 365 at 376–​377 per Sheller JA; Re Cosslett (Contractors) Ltd [1998] 2 WLR 131 at 143 per Millett LJ.

[1.80]  43 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

as if the charge had not existed.65 Though the charge is dormant —​in the sense that it does not specifically affect any asset until it crystallises into a fixed security on the occurrence of a prescribed event66 —​it remains a present (as opposed to future) security that affects all of the borrower’s assets expressed to be included in it.67 Crystallisation of the charge effects an equitable assignment of the assets to the lender, upon whom is conferred the rights of an equitable assignee (as to which see [3.120]–​[3.135]) for the purposes of securing payment.68 The general law just mentioned must be read subject to the Personal Property Securities Act 2009 (Cth).69 It declares a reference to a floating charge over personal property as a reference to a security interest that has attached to a circulating asset.70 In other words, it deems a floating charge to be a statutory fixed charge over circulating assets, thereby ousting the concept of crystallisation. Equitable interests arising by implication of law [1.85]  The law can recognise an equitable interest to give effect to what could be construed

as the implied (as opposed to the express or inferred) intention of the parties in respect of the relevant transaction. The main instances where this may ensue, noted below, lie outside the personal property securities regime established by the Personal Property Securities Act 2009 (Cth) by reason of the fact that it is expressed not to apply to “a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law”.71

Resulting trusts

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[1.90]  Resulting trusts arise where one person (the “settlor”) confers legal title to property

to another person but is presumed to retain equitable ownership of the property, in whole or in part. Hence, the resulting trust is created pursuant not to the settlor’s actual intention but to the intention the law presumes in light of the form of transaction effected. Resulting trusts

65

Wallace v Evershed [1899] 1 Ch 891 at 894 per Cozens-​Hardy J; Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966 at 978 per Buckley LJ; Landall Holdings Ltd v Caratti [1979] WAR 97 at 103 per Lavan SPJ, at 107–​108 per Wickham J; Moodemere Pty Ltd (in liq) v Waters [1988] VR 215; Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 at [7]‌–​[10] per Sackville J. Contra Tricontinental Corp Ltd v Commissioner of Taxation [1988] 1 Qd R 474; Lyford v Commonwealth Bank of Australia (1995) 130 ALR 267, which hold that, as a floating charge does not specifically affect any asset until it crystallises into a fixed security, it confers no proprietary interest before crystallisation. The view cited in the text is preferable because, prior to the crystallisation of the charge, the chargee is entitled in equity to protection against a dealing with the charged property contrary to the provisions of the instrument creating the charge, such as by way of injunction to restrain the chargor from dealing with the charged property other than in the ordinary course of business, or to prevent a third party interfering with the rights of the chargee over the charged property. Hence, the rights protected by equity prior to crystallisation are proprietary in nature. See Wily v St George Partnership Banking Ltd at [25]–​[29] per Finkelstein J. Cf Relwood Pty Ltd v Manning Homes Pty Ltd (No 2) [1992] 2 Qd R 197 at 201 per McPherson SPJ.

66

Governments Stock and Other Securities Investment Co Ltd v Manila Railway Co [1897] AC 81 at 86–​ 87 per Lord Macnaghten; Luckins v Highway Motel (Carnarvon) Pty Ltd (1975) 50 ALJR 309 at 312 per Gibbs J.

67

Driver v Broad [1893] 1 QB 744; Evans v Rival Granite Quarries Ltd [1910] 2 KB 979 at 999 per Buckley LJ; R v Jackson (2005) 194 FLR 215 at [13], [14] per Gray J.

68

G & M Aldridge Pty Ltd v Walsh (1999) 33 ACSR 546 at 556–​557 per Phillips JA [affd G & M Aldridge Pty Ltd v Walsh (2001) 203 CLR 662].

69

Although the Act became part of Australian law on 14 December 2009, the Personal Property Securities Register under the Act did not commence operation until 30 January 2012.

70

Personal Property Securities Act 2009 (Cth), s 339(5) (“circulating asset” is defined in s 340).

71

Personal Property Securities Act 2009 (Cth), s 8(1)(c). It may be that the position is otherwise where what would have been be a security interest arising by implication of law is actually the product of the terms of the relevant instrument that purport to replace the security interest implied by law: see D’Angelo and Busljeta, “The Trustee’s Lien or Charge Over Trust Assets: A PPSA Security Interest or Not?” (2011) 22 JBFLP 251 (in the context of the trustee’s lien).

44 [1.85] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

are commonly divided into two categories. First, where the settlor has failed to dispose the entire equitable interest in the property, the equitable interest remaining undisposed is said to “result” to the settlor to fill the gap in equitable ownership: see [26.15]–​[26.40]. Secondly, a resulting trust may arise where legal title to property is transferred but the transferor is presumed by law not to have intended to dispose of her or his equitable interest in the property: see [26.45]–​[26.85]. In each case, evidence of contrary actual intention ousts this presumption of intention: see [26.100]–​[26.115].

Contractual dealings in property giving rise to equitable lien —​vendors’ and purchasers’ liens [1.95]  An equitable lien may arise by implication to secure the discharge of actual or poten-

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tial indebtedness. An example is a vendor’s lien to secure unpaid purchase moneys, which arises independently of any implied agreement between the parties.72 The lien, which is over the property sold —​whether real or personal73 —​secures the vendor’s right to the purchase money74 in circumstances where the vendor has parted with legal title without receiving the full purchase price, on the ground that “a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration”.75 It arises once the contract is signed,76 but cannot be actively enforced before the agreed completion date;77 prior to this date the vendor is protected by the contractual right to refuse to complete until the purchaser tenders the balance of the money owing. As with other interests arising by implication of law, the lien can be ousted by express contractual provision78 or by acts that are inconsistent with continuing reliance on it.79 The lien is ousted by statute in the Northern Territory and Queensland.80

72

Kettlewell v Watson (1884) 26 Ch D 501 at 507 per Lindley LJ; Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415 at 420 per Millett LJ. See Barnsley, “Conveyancing Liens” [1997] Conv 336 at 337–​350.

73

Davies v Thomas [1900] 2 Ch 462; Re Stucley [1906] 1 Ch 67; Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at 221 per Debelle J. The lien does not, however, apply to goods subject to the vendor’s legal lien under the sale of goods legislation, as there is no need for it in such circumstances: Re Wait [1927] 1 Ch 606 at 639 per Lord Atkin; Evans v McLean (No 2) (1985) 9 ACLR 796 at 800 per Wallace J (FC(WA)). But the lien is not excluded because the sale consists of both goods and realty: Byland Nominees Pty Ltd (in liq) v Maclean [1985] WAR 352 at 361 per Pidgeon J.

74

The lien extends to include interest on the unpaid purchase money: Williams v Contovasilis (2007) 13 BPR 24,785 at [5]‌per Young CJ in Eq.

75

Mackreth v Symmons (1808) 15 Ves 329 at 340; 33 ER 778 at 782 per Lord Eldon. See also Hewett v Court (1983) 149 CLR 639 at 645 per Gibbs CJ (“the lien is security for the money which is justly due”). It may also be based on the maxim “equity considers as done that which ought to be done” (see [P.125]): Wossildo v Catt (1934) 52 CLR 301 at 305 per Rich J.

76

That is, on exchange of contracts:  Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415 at 419–​420 per Millett LJ.

77

Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 478 per Hope JA.

78

Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415 at 420–​421 per Millett LJ. An agreement or covenant to pay the purchase money of itself is not sufficient to exclude the lien: Byland Nominees Pty Ltd (in liq) v Maclean [1985] WAR 352 at 363–​364 per Pidgeon J.

79

Such as the vendor taking other security for the debt. See, for example, Re Brentwood Brick and Coal Co (1876) 4 Ch D 562, where the lien was held to be excluded because, under the contract, the vendor agreed to receive a charge for the purchase money upon the capital of the purchaser company, meaning that the vendor intended to rely on the capital of the company for payment, not on any lien. Cf Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415, where the defendant sold land to his son in return for £70,000 and a share of the profits of its proposed development. Only £19,000 of the purchase moneys was paid by completion, subsequent to which the son conveyed the land to a company without the defendant’s consent. That company went into liquidation having granted the plaintiff bank a legal charge on the land. The English Court of Appeal held that this arrangement did not exclude the vendor’s lien, and as such the plaintiff was entitled to possession of the property only on payment of the remainder of the purchase money.

80

Land Title Act 2000 (NT), s 197; Land Title Act 1994 (Qld), s 191.

[1.95]  45 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

[1.100]  Courts of equity have long recognised that, in addition to the equitable interest cre-

ated in her or his favour by entry into a contract for the purchase of land (see [38.150]–​ [38.160]), the purchaser has a lien for deposit (and other) moneys paid on that transaction.81 Payment under a valid contract, here including a conditional contract wherein the condition is not yet fulfilled,82 gives rise to the lien83 —​which is not dependent on whether specific performance of the contract is available —​but it becomes exercisable only if the contract goes off for reasons other than the purchaser’s default.84 The lien places the purchaser in the position of a secured creditor,85 securing the purchaser’s right to recover the moneys paid on a vendor’s default. It constitutes a sufficient interest to support a caveat over the land.86 Again, as the lien does not rely on an express contractual term, it can be modified or excluded by contract. Once the contract in issue is completed, however, the lien is extinguished, as its purpose has been fulfilled.

Equitable lien in fund arising from role in its management or creation [1.105]  Equity may raise liens based either upon general considerations of justice, or upon

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the principle that a person who seeks the aid of equity in enforcing a claim must admit the equitable rights of others directly connected with or arising out of the same subject matter.87 For example, the law gives a receiver an indemnity over the debtor’s assets, secured by a lien, for remuneration, expenses and costs: see [36.25], [36.125]. The same principle applies regarding liquidators88 and administrators89 (even though the latter are not appointed by the court and statute recognises a parallel lien in any case).90 In the context of liquidators,

81

Whitbread & Co Ltd v Watt [1901] 1 Ch 911 at 915 per Farwell J; McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477–​478 per Dixon J. See generally Barnsley, “Conveyancing Liens” [1997] Conv 336 at 350–​361.

82

Chattey v Farndale Holdings Inc (1998) 75 P & CR 298 at 304–​305 per Morritt LJ, with whom Kennedy and Potter LJJ concurred; New Galaxy Investments Pty Ltd v Thomson (2017) 18 BPR 36,811 at [296] per Sackville AJA (reasoning that were no lien created in favour of a purchaser under a conditional contract of sale, it would not be available precisely when it is most required).

83

Ridout v Fowler [1904] 1 Ch 658 at 663 per Farwell J; Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at 230 per Debelle J.

84

Dinn v Grant (1852) 5 De G & Sm 451; 64 ER 1194; Rizoto Kaihatsu Gumi Ltd v Capital and Coastal Ltd (1998) Q Conv R ¶54-​511; Commonwealth v South East Queensland Aboriginal Corporation for Legal Services (2005) 219 ALR 180 at [62] per Muir J; Slan v Edgerly (2008) 14 BPR 26,369 at [19] per Bryson AJ.

85

Ex parte Lord [1985] 2 Qd R 198 at 201 per Williams J; Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at 230 per Debelle J. Cf Slan v Edgerly (2008) 14 BPR 26,369 at [20] per Bryson AJ (who queried whether equating a purchaser with a secured creditor with respect to the lien would be reliable in all circumstances where competition with an equitable interest of some other person intervenes, remarking that “[w]‌hat would be appropriate would be appraisal of all facts in evidence about the times and other relevant circumstances of creation of the competing interests and the behaviour of their owners which might have affected priorities; it could well be important to examine knowledge of or notice to the competitor of the existence of the purchaser’s lien when the competitor acquired an interest”; as to the rules pertaining to competing equitable interests, see [2.10]–​[2.120]).

86

Ex parte Lord [1985] 2 Qd R 198.

87

Shirlaw v Taylor (1991) 31 FCR 222 at 228 (FC).

88

Nationwide News Pty Ltd v Samalot Enterprises Pty Ltd (No 2) (1986) 5 NSWLR 227; Shirlaw v Taylor (1991) 31 FCR 222 (FC); Australian Securities and Investments Commission v John McKenney Consulting Pty Ltd (2002) 43 ACSR 458; Inetstore Corporation Pty Ltd (in liq) v Southern Matrix International Pty Ltd (2005) 221 ALR 179; Dixon v Wieselmann (2013) 93 ACSR 576; Clout v Stoddart (SE Queensland) Pty Ltd (2016) 115 ACSR 459; Primary Securities Ltd v Willmott Forests Ltd (recs and mgrs appt) (in liq) (2016) 50 VR 752.

89

Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64 at 70 per Young J; Weston v Carling Constructions Pty Ltd (in prov liq) (2000) 175 ALR 202 at 205–​206 per Austin J; Lockwood v White (2005) 23 ACLC 379 at [34], [35] per Winneke P.

90

Corporations Act 2001 (Cth), s 443F. It appears that the equitable lien remains notwithstanding the statutory lien, operating in a supplementary fashion but not in a way inconsistent with the statutory lien: see Hamilton v Donovan Oates Hannaford Mortgage

46 [1.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

it has been described as the Universal Distributing principle,91 informed by the notion that “a secured creditor may not have the benefit of a fund created by a liquidator’s efforts in the winding up without the liquidator’s costs and expenses, including remuneration, of creating that fund being first met”.92 The foregoing reflects a broader principle, sometimes termed the “salvage” principle, which dictates that “a person who works for the exclusive purpose of realising, caring for or preserving property to create a fund or pool of assets is entitled to a lien or charge against the fund or pool of assets for the expenses and remuneration incurred in such work”.93 Likewise reflecting the notion that those who benefit from another’s work should bear its proper cost, the general law gives trustees an indemnity for expenses properly incurred in the management of the trust, also secured by an equitable lien (over the trust property) (see [23.120]–​[23.155]), and in solicitors a lien for their unpaid costs out of the fruits of any judgment or compromise in the proceedings.94

Equitable interest protecting agreements that do not meet statutory formalities [1.110]  Equity recognises that a statutory form of documentation requisite to the passing of

an interest in land under the Torrens system of land registration may give rise to an equitable interest in that land until the registration supervenes.95 Hence, an unregistered instrument can vest in its holder an equitable interest in land beyond her or his contractual rights. For example, an unregistered mortgage can create an equitable mortgage or charge over the land.96 That interest will be defeated by a registered security, but entitles the mortgagee to lodge a caveat to protect it and to rank as a secured creditor.97 Similarly, a lease instrument that does not fulfil the legal formalities, though generally unenforceable at law, may be enforceable in equity, which can treat an agreement to lease as giving rise to a lease in equity: see [1.165].

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Interests of a partner in partnership property [1.115]  Although a partner’s share in the partnership is not title to specific property, but a

right to her or his proportion of the surplus after the realisation of assets and the payment of debts and liabilities, the law accepts that a partner has a present equitable proprietary interest in every asset of the partnership.98 It is not limited to an equitable chose in action giving rise

Corp Ltd (2007) 207 FLR 163 at [39] per Barrett J; Coad v Wellness Pursuit Pty Ltd (in liq) (2009) 226 FLR 91 at [89]–​[97] per Buss JA. See further Walter, “The Voluntary Administrator’s Equitable Lien: Nature, Scope and Priority” (2004) 12 Insolv LJ 150. 91

Named after what was said by Dixon J in Re Universal Distributing Co Ltd (in liq) (1933) 48 CLR 171 at 174.

92

Stewart v Atco Controls Pty Ltd (in liq) (2014) 252 CLR 307 at [22] (FC).

93

Freelance Global Ltd (in liq) v Bensted [2016] VSC 181 at [63] per Riordan J.

94

See Dal Pont, Law of Costs (4th ed, LexisNexis Butterworths, 2018), Ch 27.

95

Abigail v Lapin [1934] AC 491 at 500 per Lord Wright.

96

Barry v Heider (1914) 19 CLR 197; Abigail v Lapin [1934] AC 491 at 500 per Lord Wright; Farrier-​Waimak Ltd v Bank of New Zealand [1965] NZLR 426 at 436 (PC); Re Shoreline Homes Ltd [1982] 1 NZLR 663 at 664–​665 per Richardson J, at 668 per McMullin J. This equitable interest can alternatively be explained on the grounds of the chargor’s or mortgagor’s (inferred) intention: Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 594–​595 per Buckley LJ.

97

Re Universal Management Ltd [1983] NZLR 462 at 479 per McMullin J.

98

Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 at 327 per McTiernan, Menzies and Mason JJ; United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 144 CLR 673 at 687 per Mason J (describing the partner’s equitable interest as “of a special and non-​specific kind”); Atwell v Roberts (2012) 43 WAR 507 at [142]–​[150], [199]–​[203] per Buss JA, at [299] per Murphy JA; Sze Tu v Lowe (2014) 89 NSWLR 317 at [119]–​[123] per Gleeson CJ. This does not mean, however, that the interest in question can be described, for statutory purposes (under, for example, the Duties Act 2000 (Vic) s 10(1)), as an estate in fee simple in and owned by the partnership: Commissioner of State Revenue v Danvest Pty Ltd [2017] VSCA 382.

[1.115]  47 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

to a mere equity, and like other equitable interests is capable of supporting a caveat (in this case, over partnership property).99 Equitable interests arising by operation of law [1.120]  Equity may recognise and give effect to an equitable interest in property, not because

of any express or inferred intention, or any intention implied or presumed by the court, but to make a person accountable for property in which he or she should be denied equitable ownership. The principal circumstances in which equity may do so receive mention below.

Breaches of fiduciary duty [1.125]  A fiduciary who secures property through a breach of fiduciary duty can be declared a

constructive trustee of that property for the person(s) to whom the fiduciary duty is owed: see [38.25]–​[38.50]. This can also extend to persons whom equity decrees are a party to, or are otherwise involved in, the fiduciary breach, even though they owe no fiduciary duties themselves: see [38.55]–​[38.125]. Yet as proprietary relief via constructive trusteeship is the most extensive form of relief available for breaches of fiduciary duty, a court may award a non-​ proprietary remedy, such as an account of profits, if this better reflects the unauthorised gain (see [38.25]), or equitable compensation where the breach has generated a loss: see [34.05]–​ [34.15]. In any case, a non-​proprietary remedy represents the only option where the defaulting fiduciary, or third party involved in the breach, no longer holds the relevant property.

Contributions to property

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[1.130] Where a person has made a direct or indirect contribution to property that is not

reflected in the legal title to that property, the court may order the legal owner to hold the property as constructive trustee to the extent of that contribution:  see [38.165]–​[38.240]. Alternatively, the court can recognise the contribution via an equitable charge or lien on the property.100 So, for example, a co-​owner’s claim for contribution from the other co-​owner to recoup expenditure benefiting their joint property can be supported by an equitable charge upon the undivided share of the other co-​owner.101 A successful action in proprietary estoppel (as to which see [10.60]–​[10.70]) may also function to vest in a claimant an equitable interest in property,102 though it is open to the court to make a monetary award in the alternative:103 see [10.270]. It follows that a bare claim in estoppel regarding an interest in property does not necessarily create an equitable interest in that property, and does not ordinarily substantiate a caveat in respect of it.104 99

Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352 at 373–​374 per Malcolm CJ.

100

Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at 39–​40 per Young J; Smith v Glegg [2005] 1 Qd R 561 at [68] per McMurdo J.

101

Calverley v Green (1984) 155 CLR 242 at 263 per Mason and Brennan JJ; Muschinski v Dodds (1985) 160 CLR 583 at 598 per Gibbs CJ.

102

Wood v Browne [1984] 2 Qd R 593 at 607 per Macrossan J. Such an interest may, however, perhaps be better classified as an interest arising from intention (stemming from the representation or promise essential to an estoppel): Kintominas v Secretary, Department of Social Security (1991) 103 ALR 82 at 90–​93 per Einfeld J.

103

Jackson v Crosby (No 2) (1979) 21 SASR 280 at 307 per Cox J, at 310 per Mohr J; Public Trustee v Kukula (1990) 14 Fam LR 97 at 102–​103 per Handley JA.

104

See, for example, Mazzuchelli v Mazzuchelli [2006] WASC 124 (where Hasluck J held that a weak claim for proprietary estoppel did not justify the lodgement or extension of fresh caveats). Cf FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd (2006) 12 BPR 23,517 (where Palmer J allowed a caveat to remain in respect of an oral agreement to create a charge

48 [1.120] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

When an order under s 79 or 90SM of the Family Law Act 1975 (Cth) requires the holder of a legal interest in property to transfer that interest to another person, an equitable interest is thereby vested in that other person.105

Mutual wills [1.135] Where two persons (usually husband and wife) execute mutual wills to the effect

that, following the death of the survivor of them, the testamentary property is to be disposed of according to agreed terms, equity allows the beneficiaries of the wills to enforce this agreement by vesting in them an equitable interest, arguably via a constructive trust, to take effect in accordance with that agreement: see [38.135]–​[38.145].

Contracts for the disposition of land [1.140]  A vendor who is contractually bound to dispose of land to a person who has given

value is said to hold her or his legal interest in the land as constructive trustee for the purchaser until the moment when the full purchase price is paid:  see [38.150], [38.155]. The rationale for this has been explained as follows:106

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[A]‌lthough the basis of the equity jurisdiction was and still is founded on an order in personam, the courts of equity evolved the doctrine that, in the eyes of equity, that which ought to have been done is to be treated as having been done. Thus under a specifically enforceable contract for the sale of land, the purchaser is treated in equity as the owner of the property whether or not an order for specific performance has been made … In this way the plaintiff’s rights, although founded upon the ability of the court to make an order in personam against the other contracting party or the trustee, become an interest in the property itself, an equitable interest.

The same principle dictates that the grant of an option to purchase land causes the holder of the option to acquire an equitable interest in the land: see [38.160]. Again, the foundation for the equitable interest is the availability of specific performance. So if the conditions for exercising the option are met, a contractual right transmutes to one that confers an equitable interest in the land. But prior to these conditions being satisfied, it appears that no equitable right exists.107

over the land in view of sufficient evidence to raise a triable issue as to part performance of that agreement); Naumovski v Naumovski [2015] NSWSC 2 at [11] per Black J. 105

Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217 at [62] per Wilcox J, at [136] per Merkel J; Jones v Daniel (2004) 141 FCR 148 at [14] per Moore J, with whom Hill and Allsop JJ concurred.

106

Swiss Bank Corporation v Lloyds Bank Ltd [1979] Ch 548 at 565 per Browne-​Wilkinson J [revd but not on this point Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584]. See also Baloglow v Konstanidis (2001) 11 BPR 20,721 at [186] per Giles JA; Mountney v Treharne [2003] Ch 135 at 155 per Jonathan Parker LJ.

107

Mackay v Wilson (1947) 47 SR (NSW) 315 at 325 per Street J; Sahade v BP Australia Pty Ltd (2004) 12 BPR 22,149 at [41]–​ [43] per Campbell J; Redglove Projects Pty Ltd v Ngunnawal Local Aboriginal Council (2004) 12 BPR 22,319 at [28], [29] per White J; Marchesi v Apostolou [2007] FCA 986 at [113]–​[116] per Jessup J (where the right to exercise the option was conditional on the grantee paying rates and outgoings on the subject properties); Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683 at [102] per Ward JA (speaking in terms of a contingent equitable interest).

[1.140]  49 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

TYPES OF EQUITABLE INTERESTS IN PROPERTY Trust [1.145]  Perhaps the best known form of equitable interest in property is that vesting in a

beneficiary of a trust. Its nature, though, depends on the terms of the trust. For example, a beneficiary of a fixed trust enjoys, in the usual case, an equitable interest in the trust property —​a proprietary interest —​and with it the right to compel the trustee to distribute in her or his favour consistent with this interest: see [20.100]. Conversely, a beneficiary of a discretionary trust has no more than a hope that the discretion will be exercised in her or his favour, and a right to enforce the terms of the trust; he or she therefore has no proprietary interest in the trust property until distribution: see [20.125]. Equitable charge or mortgage

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[1.150] Where an equitable charge exists (see [1.65]–​[1.80]), the chargee (the person who

takes the benefit of the security) may resort to the charged property only for the purpose of satisfying a liability due to her or him.108 The chargee is not entitled to possession of the property, but to enforce the charge by an order for its sale109 or the appointment of a receiver.110 The availability of these remedies means that an equitable charge has proprietary qualities; in fact, it is said that a right that does not vest in the alleged chargee a proprietary security interest, or does not secure the discharge of a debt or other legal obligation of the alleged chargor, is by definition not a charge.111 Yet because these remedies can only be gained through an application to, and an order of, the court,112 the proprietary interest remains “inchoate and ineffectual until an order of the court is made”.113 A contract between the parties may, however, give the chargee further remedies not dependent on a court order. Property subject to an equitable charge can only be sold subject to that charge,114 which then attaches to the fund produced by the sale while the fund remains in existence.115

108

Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214 at 226 per Lord Hoffmann.

109

Melbourne Tramways Trust v Melbourne Tramway & Omnibus Co Ltd (1887) 13 VLR 487 at 490 (FC); Re Otway Coal Co Ltd [1953] VLR 557 at 568 per O’Bryan J; Taylor v Marmaras [1954] VLR 476 at 477–​478 per O’Bryan J; Avco Financial Services Ltd v White [1977] VR 561 at 563–​564 per Gillard J; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 681 per Young J.

110

Wallace v Evershed [1899] 1 Ch 891 at 894 per Cozens-​Hardy J; Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 at 227 per Peter Gibson J; Bland v Ingrams Estates Ltd [2001] Ch 767 at 777 per Nourse LJ.

111

Re Cosslett (Contractors) Ltd [1998] 2 WLR 131 at 141 per Millett LJ.

112

Guinness v Gardiner (1992) 9 WAR 107 at 111 per Scott J; BBC Hardware Ltd v G T Homes Pty Ltd [1997] 2 Qd R 123 at 126 per Thomas J. Thomas J considered the court’s power to make such an order to be as of right whereas Scott J viewed it as a matter of discretion. The latter view is consistent with the nature of equitable relief (see [P.180]), which may, for example, be denied for unclean hands (see [30.170]–​[30.180]) or delay (see [30.10]–​[30.80]). Yet in practice Thomas J’s view is likely to operate in most cases, where the court is asked to enforce an existing equitable entitlement, and no factors disqualify the plaintiff from relief. As to how the charge is enforced, and the sale conducted, see Aitken, “What Is an ‘Absolute’ Assignment? Further Reflections on Charges, ‘Tacking’ and Marshalling” (2013) 24 JBFLP 93 at 98–​101.

113

Bland v Ingrams Estates Ltd [2001] Ch 767 at 777 per Nourse LJ.

114

Avco Financial Services Ltd v White [1977] VR 561 at 563 per Gillard J.

115

Hope v Hope [1977] 1 NZLR 582 at 583 per Wilson J; Avco Financial Services Ltd v Commonwealth Bank of Australia (1989) 17 NSWLR 679 at 682 per Young J.

50 [1.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

An equitable charge creates an interest sufficient both to lodge a caveat to protect it and to rate as a secured creditor,116 but not one sufficient to give standing to apply for relief against the forfeiture of an interest in the land over which the charge is claimed (although this may be effected indirectly by joining the holder of that interest as defendant: see [11.135]). [1.155]  An equitable charge is distinguishable from an equitable mortgage because no estate

or interest is conveyed or agreed to be conveyed, at law or in equity. Under a mortgage the mortgagee gains the equitable title to the property the subject of the security (while the mortgagor enjoys an equity of redemption), whereas a charge, it is said, “burdens” the property once it has been “appropriated” to the charge.117 As explained by Buckley LJ in Swiss Bank Corporation v Lloyds Bank Ltd:118

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An equitable charge may … take the form either of an equitable mortgage or of an equitable charge not by way of mortgage. An equitable mortgage is created when the legal owner of the property constituting the security enters into some instrument or does some act which, though insufficient to confer the legal estate or title in the subject matter upon the mortgagee, nevertheless demonstrates a binding intention to create a security in favour of the mortgagee, or in other words, evidences a contract to do so … An equitable charge which is not an equitable mortgage is said to be created when property is expressly or constructively made liable, or is specially appropriated, to the discharge of a debt or some other obligation, and confers on the chargee a right of realisation by judicial process, that is, by the appointment of a receiver or an order for sale.

The main practical distinction goes to the relevant remedy in the event of default. A mortgagee has a right to foreclosure on default, assuming this is consistent with the parties’ intentions, whereas a chargee at general law does not (although this can be modified by the terms of the instrument creating the charge).119 The equitable mortgagee, to this end, has an implied power of sale, whereas the equitable chargee must, to effect a sale of the charged property, apply to the court.120 An equitable mortgagee of Torrens system land may, again assuming the relevant intention is present, compel the mortgagor to execute a legal mortgage (which can then be registered); an equitable charge cannot give rise to a registrable instrument as statute makes no provision for its registration.121 Equitable lien [1.160]  At common law a lien describes the right to hold property belonging to another per-

son as security for the performance of an obligation or the payment of a debt. Being little more than a right of retention, the common law lien is possessory, protective and passive in nature. 116

Avco Financial Services Ltd v White [1977] VR 561; Composite Buyers Ltd v Soong (1995) 38 NSWLR 286; Montaigne Pty Ltd v Nerana at Nicholson Pty Ltd [2004] VSC 116 (second equitable mortgagee held to have a caveatable interest); Circuit Finance Australia Ltd v Registrar of Titles [2006] 1 Qd R 204.

117

Aitken, “What Is an ‘Absolute’ Assignment? Further Reflections on Charges, ‘Tacking’ and Marshalling” (2013) 24 JBFLP 93 at 96.

118

Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 594–​595. See also McGarry v 14 Hiscock Street Pty Ltd [2012] VSC 573 at [70]–​[72] per Lansdowne AsJ.

119

Tennant v Trenchard (1869) LR 4 Ch App 537 at 542 per Lord Hatherley LC; King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441 at [51] per Campbell J; Hanson Construction Materials Pty Ltd v Norlis Pty Ltd [2010] QSC 34 at [33] per Margaret Wilson J [affd Hanson Construction Materials Pty Ltd v Davey (2010) 79 ACSR 668]; Mathieson Nominees Pty Ltd v Aero Developments Pty Ltd [2016] VSC 131 at [84]–​[87] per Vickery J.

120

Sood v Christianos (2008) 14 BPR 26,101 at [10]–​[18] per Brereton J (remarking that “where it is a remedy of an equitable chargee, judicial sale is not a remedy of last resort but the standard remedy”: at [16]).

121

Crampton v French [1996] ANZ Conv R 156 at 158 per Harper J.

[1.160]  51 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

By itself it provides no basis for actively enforcing a demand. Nor does it create a charge on the property or give any right to payment out of the property the subject of the lien.122 An equitable lien, on the other hand, is a right against property implied by equity to secure the discharge of an actual or potential indebtedness.123 Though called a lien it is, in reality, a form of equitable charge over the subject property in that, unlike the common law lien, it does not depend upon possession.124 As such, it may be enforced in the same way as an equitable charge (see [1.150]) and can support a caveat. Though commonly arising out of a contractual relationship  —​such as the vendor’s lien for unpaid purchase moneys (see [1.95]) and the purchaser’s lien for its deposit (see [1.100]) —​proof of a contract between the parties is not essential to attract equitable intervention,125 the lien to secure a trustee’s right of indemnity being a prime example (see [23.125], [23.130]). In Hewett v Court,126 Deane J identified the circumstances giving rise to the implication of an equitable lien between the parties in a contractual relationship:

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They are (i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of property or of an expense incurred in relation to it … (ii) that the property … be specifically identified and appropriated to the performance of the contract … and (iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property … to a stranger without the consent of the other party or without the actual or potential liability having been discharged.

The breadth of this description shows that equitable liens, far from being confined to particular scenarios, can apply where “the court considers that it is important to protect parties from inequitable loss”.127 The lien therefore comes within equity’s remedial arsenal, arguably grounded in preventing unconscionable conduct (see [P.150]–​[P.160]).128 For example, in Emanuel Management Pty Ltd (in liq) v Emanuele,129 the plaintiff paid the costs of its chief executive officer (the defendant) in defending criminal charges of bribery. As a result of the proceedings, the Director of Public Prosecutions was ordered to pay the defendant’s costs. After over half of the costs were, with the plaintiff’s consent, dispersed to various solicitors, the balance was paid into an interest-​bearing account (“fund”) jointly held in the name of the plaintiff and the defendant. The plaintiff claimed the fund on the ground that the defendant’s legal costs it had paid exceeded the moneys in the fund. Applying the general principle stated by Deane J above, Wicks J upheld the claim, reasoning that “the defendant, being a fiduciary for the plaintiff, would otherwise be unjustly enriched and acting unconscionably in seeking

122

Warner v Ulysius International Trading Pty Ltd (2011) 91 IPR 570 at [28] per Tamberlin AJ.

123

Evans v McLean (No 2) (1985) 9 ACLR 796 at 805–​806 per Rowland J. Cf Wossildo v Catt (1934) 52 CLR 301 at 310 per Dixon J.

124

Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 158 FLR 307 at 313 per Gillard J. However, an equitable lien can also be enforced by retention of possession where this exists: Mercantile Credits Ltd v Jarden Morgan Australia Ltd (1990) 1 ACSR 805 at 814 per Derrington J.

125

Shirlaw v Taylor (1991) 31 FCR 222 at 228 (FC).

126

Hewett v Court (1983) 149 CLR 639 at 668. See also at 645 per Gibbs CJ, at 653–​654 per Wilson and Dawson JJ (in dissent).

127

Scammell & Co v WorkCover Corporation (2006) 95 SASR 278 at [72] per Layton J.

128

See Burns, “The Equitable Lien Rediscovered: A Remedy for the 21st Century” (2002) 25 UNSWLJ 1 at 16–​24.

129

Emanuel Management Pty Ltd (in liq) v Emanuele (2002) 83 SASR 501.

52 [1.160] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Nature and Creation of Equitable Interests  Chapter  1

to retain the fund for his own profit and benefit”.130 Hence the plaintiff was entitled to an equitable lien over the fund to secure payment to it of the money held in the fund. Equitable lease [1.165]  Non-​fulfilment of the legal formalities for a lease generally renders the lease unen-

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forceable at law. However, the lease may be enforceable in equity under the doctrine of Walsh v Lonsdale,131 which treats an agreement to lease as giving rise to a lease in equity for the term agreed upon.132 The court’s willingness to treat an agreement as an equitable lease rests on its amenability to specific performance.133 An agreement to lease may be so amenable where it is sufficiently certain, that is, it is complete and enforceable on the usual contractual principles,134 and there is no bar to the award of specific performance.135 The plaintiff need not actually seek and obtain that remedy; it is enough that the court can determine ex post facto that it could have been granted had it been sought at an earlier point in time.136 Equity’s intervention is based on the notion that equity treats as done that which ought to have been done.137 The leading Australian case is Chan v Cresdon Pty Ltd,138 which involved a lease containing a provision by which the guarantors, as parties, guaranteed the lessee’s performance of its obligations “under this lease”. The lease was not registered under legislation which provided that, until registration, no instrument was “effectual to pass any estate or interest” in land. The lessee entered into possession, paid rent, but later defaulted. On this default, the lessor sought to recover the rent due from the guarantor. The High Court held that the existence of an unregistered lease operated to bring into existence or evidence an equitable lease. However, on the facts it considered that the guarantor had not guaranteed the lessee’s obligations under the lease as an equitable lease, but as a lease at law.

130

Emanuel Management Pty Ltd (in liq) v Emanuele (2002) 83 SASR 501 at [63].

131

Walsh v Lonsdale (1882) 21 Ch D 9.

132

Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 26 per Mason J; Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252–​253 per Mason CJ, Brennan, Deane and McHugh JJ. Only the briefest account of the law in this area is attempted in the text. For a more detailed treatment, see Bradbrook et  al, [14.105]–​[14.115]; Gardner, “Equity, Estate Contracts and the Judicature Acts: Walsh v Lonsdale Revisited” (1987) 7 OJLS 60; Sparkes, “Walsh v Lonsdale: The Non-​ Fusion Fallacy” (1988) 8 OJLS 350.

133

Moore v Dimond (1929) 43 CLR 105 at 123–​124 per Starke J; Dimond v Moore (1931) 45 CLR 159 at 170 per Gavan Duffy CJ and Starke J, at 186 per Evatt J; Warmington v Miller [1973] 1 QB 877 at 887 per Stamp LJ.

134

Cf Mexfield Housing Co-​operative Ltd v Berrisford [2011] Ch 244 (where the English Court of Appeal refused to enforce an agreement to grant a lease that, by reason of its uncertain term, was void for uncertainty).

135

Cf NZI Insurance Australia Ltd v Baryzcka (2003) 85 SASR 497 (where no equitable lease was found because, on the facts, the rent was an essential term of the proposed lease upon which the parties had failed to agree, thus denying the element of agreement in the first place).

136

Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 41 ATR 29 at 40 per Mason P.

137

Warmington v Miller [1973] 1 QB 877 at 887 per Stamp LJ.

138

Chan v Cresdon Pty Ltd (1989) 168 CLR 242.

[1.165]  53 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

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Chapter 2

Equitable Priorities [2.05]  Equity’s recognition of interests in property, discussed in Ch 1, raises several poten-

tially problematic prospects. It is possible that more than one equitable interest may be created, arise or be imposed in respect of the one property in circumstances where the property is insufficient to meet each such interest. There is also the common instance of both legal and equitable interests existing in the same property, which can also create difficulties if the property cannot fulfil the interests of both legal and equitable interest holders. The law, therefore, must provide rules to prioritise both equitable interests inter se, and legal and equitable interests, within the same property. The relevant rules are discussed in this chapter. As to the priorities between security interests in personal property is concerned, what follows must, though, be read subject to the priority rules prescribed by Part 2.6 of the Personal Property Securities Act 2009 (Cth).

COMPETING EQUITABLE INTERESTS General principle [2.10] The classic statement of the general principle for prioritising competing equitable

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interests is that of Kindersley VC in Rice v Rice, who said:1 [I]‌n a contest between persons having only equitable interests, priority of time is the ground of preference last resorted to; ie, that a Court of Equity will not prefer the one to the other, on the mere ground of priority of time, until it finds upon an examination of their relative merits that there is no other sufficient ground of preference between them, or in other words that their equities are in all other respects equal; and that if one has on other grounds a better equity than the other, priority of time is immaterial.

Even though the priority in time was, in the opinion of Kindersley VC, the last criterion to be resorted to in determining priorities between equitable interests, it has hardly been uncommon for courts to adopt the “first in time” as the relevant starting point for determining priority between equitable interests,2 evidenced in turn by imposing on the later equity holder the onus in reversing the order of temporal priority.3 Consistent with Kindersley VC’s admonition in Rice v Rice, though, the relative merits of the parties are considered in each case. The conduct

1

Rice v Rice (1853) 2 Drew 73 at 78; 61 ER 646 at 648. This rule is encapsulated by the maxim qui prior est tempore potior est jure. See also Butler v Fairclough (1917) 23 CLR 78 at 91 per Griffith CJ; Latec Investments Ltd v Hotel Terrigal Pty Ltd (1965) 113 CLR 265 at 276 per Kitto J; Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 333 per Gibbs CJ, at 339 per Mason and Deane JJ; Secureland Mortgage Investments Nominees Ltd v Harman & Co Solicitor Nominee Co Ltd [1991] 2 NZLR 399 at 414 per Williamson J. See further Rodrick, “Resolving Priority Disputes Between Competing Equitable Interests” (2001) 9 APLJ 172.

2

See, for example, Abigail v Lapin [1934] AC 491 at 504 per Lord Wright.

3

General Finance Agency and Guarantee Co of Australia Ltd (in liq) v Perpetual Executor and Trustees Association of Australia Ltd (1902) 27 VLR 739 at 743 per Holroyd J; Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 137 (CA); Moffett v Dillon [1999] 2 VR 480 at 504 per Ormiston JA.

[2.10]  55 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

of the holder of the prior interest is usually closely scrutinised4 to determine if he or she is guilty of some act or default that prejudices her or his claim.5 The conduct of the later equity holder may also be scrutinised where, say, he or she causes the holder of the earlier interest to act contrary to its interests.6 The parties’ conduct after the creation of the second interest may also influence the question.7 So heavily focused on respective behaviour, it stands to reason that the courts “do not treat the competition of priorities of equities as turning on precise categorisations”.8 [2.15] Three further matters must be noted at the outset. First, the strength of an equity

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does not depend on the strength of the legal interests it reflects, but on matters of equity and conscience.9 As such, it has been said that “[t]‌he better equity does not mean, where two equitable securities are in competition, the better, in the sense of more efficacious, security”.10 A useful elaboration of the point appears in the following remarks of Ormiston JA in Moffett v Dillon:11 Expressions such as “the merits” and “the better equity” unfortunately connote … some enquiry as to which security is objectively the more effective and it also connotes, which perhaps is more objectionable, that in some way ordinarily one can ascertain the “better” equity as a matter of determining comparative strength or enforceability, an enquiry which, apart from asking which is first in point of time, is one to be avoided. Merits, in equity, are those matters which impinge, broadly speaking, on the conscience of those who seek its aid or are otherwise subject to its jurisdiction. So priority is to be resolved against the holder of the prior equity only if the other party can establish the first holder’s want of “merits” or comparative lack of “merit”. That is essentially a negative enquiry into behaviour on the part of the holders of each of the equitable interests as to whether they can be shown to have been obtained or enforced in a manner which is so unconscionable or otherwise inequitable so as to deprive the holder of the earlier interest of the priority to which it is otherwise entitled, whether that behaviour be evidenced by fraud, unfairness, negligence, the wrongful creation of particular assumptions by representations or the like or in a number of other ways which reflect on the behaviour of the holders of each of the interests …

It follows, for instance, that there is no reason here to prefer an equity created by a registrable instrument to one created by a non-​registrable one, or to one that is not created by any instrument, registrable or not.12

4

Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 333 per Gibbs CJ, at 341 per Mason and Deane JJ; Green v Meltzer (1993) 6 NZCLC 68,393 at 68,396 per Casey J, at 68,409 per Thomas J.

5

Butler v Fairclough (1917) 23 CLR 78 at 91–​92 per Griffith CJ; Abigail v Lapin [1934] AC 491 at 503–​504 per Lord Wright; Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 137 (CA).

6

Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 137 (CA). See also Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 336 per Mason and Deane JJ (“the conduct of both parties”); Cash Management Resources Australia Pty Ltd v BT Securities Ltd [1990] VR 576 at 586 per Brooking J; Avco Financial Services Ltd v Fishman [1993] 1 VR 90 at 93 per Tadgell J.

7

Clark v Raymor (Brisbane) Pty Ltd [No  2] [1982] Qd R 790 at 791 per Andrews SPJ, at 797 per Thomas J; Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 136–​137 (CA).

8

Cranston v CBFC Ltd (unreported, SC(NSW), Bryson J, 11 June 1993) at 30.

9

Mercantile Credits Ltd v Jarden Morgan Australia Ltd (1990) 1 ACSR 805 at 813–​814 per Derrington J.

10

Moffett v Dillon [1999] 2 VR 480 at 491 per Brooking JA. See also at 499 per Ormiston JA.

11

Moffett v Dillon [1999] 2 VR 480 at 500 (emphasis supplied). Cf Shawyer v Amberday Pty Ltd (in liq) (2001) 10 BPR 18,869 at 18,880 per Bryson J (who appeared to assess the merits of a later equitable interest not according to the parties’ behaviour but the nature of the interest itself, favouring the later equitable interest on the ground that, unlike the earlier interest, it was fully constituted and sourced by a court order made publicly and ascertainable by search of the companies register).

12

Moffett v Dillon [1999] 2 VR 480 at 491 per Brooking JA.

56 [2.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equitable Priorities  Chapter  2

Secondly, where a later equitable interest prevails over an earlier interest, the court takes care to ensure that the holder of the earlier equity is postponed only to the extent that her or his conduct prejudiced the holder of the later equity.13 Thirdly, as the law recognises equitable interests  —​both unregistered14 and unregistrable15  —​in land registered under the Torrens system,16 the issue of competing equitable interests retains relevance to Torrens land.17 Relevant factors in ascertaining the better equity [2.20] Below are the main factors that courts have considered relevant to the determina-

tion of which of the equitable interest holders has the “better” equity in cases of competing equities. Compendiously, the question involves, it has been said, “general considerations of fairness and justice”.18 But this refers not to fairness in outcome; it instead heralds, as foreshadowed above, a search for conduct that is both blameworthy and causative. As explained by a New South Wales judge:19 Mere unfairness in the outcome is irrelevant unless there is also some tangible conduct by the holder of the first interest which caused the holder of the later interest to act on a false premise. This is why, in such a case, the conduct of the holder of the first interest is often described as “postponing” or “disentitling” conduct. It is not sufficient to point to the eventual outcome and contend that it is unfair. It may well be so by some moral standard. But the unfairness of the outcome is not a reason for departing from well-​established legal principle. The only relevant question is whether the supposedly unfair result is the consequence of some causative act, neglect or default by the plaintiff.

Estoppel

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[2.25] An owner of property who clothes a third party with apparent ownership and the

associated right of disposition may be estopped from asserting that title as against a person to whom the third party has disposed or charged the property, who took it in good faith and for value.20 Here the courts inquire into whether the holder of the prior equitable interest “armed” a third party “to go into the world under false colours”.21 In Rice v Rice,22 for example, the vendors, without receiving the purchase price, delivered to the purchaser the title

13

Green v Commonwealth Bank of Australia (No 2) (1994) 29 ATR 599 at 606 per Young J [revd but not on this point: Commonwealth Bank of Australia v Green (unreported, CA(NSW), 24 September 1997)].

14

Such as unregistered mortgages and transfers for which a dealing could be, but has not been, lodged for registration.

15

For example, the vendor’s lien for unpaid purchase price (see [1.95]) and the interest of a beneficiary under a trust (see [20.100]–​[20.110]).

16

See, for example, Barry v Heider (1914) 19 CLR 197; Butler v Fairclough (1917) 23 CLR 78 (discussed at [2.35]). In fact, it has been noted that Sir Robert Torrens never advocated the abolition of equitable interests in land: McCrimmon, “Protection of Equitable Interests Under the Torrens System: Polishing the Mirror of Title” (1994) 20 Mon ULR 300 at 301. The reason for this is that it could not have been the intention of the Torrens system to allow proprietors of land to escape liability for illegal or unconscionable acts merely because their title is registered: Skapinker, “Equitable Interests, Mere Equities, ‘Personal’ Equities and ‘Personal Equities’ —​Distinctions With a Difference” (1994) 68 ALJ 593 at 599. The Australian Torrens legislation contains no provision that deals specifically with competing equitable interests in Torrens system land, except where the equitable interest is contained in a document that has been lodged for registration.

17

That this is the case has not passed without dissent:  see Hughson, Neave and O’Connor, “Reflections on the Mirror of Title: Resolving the Conflict Between Purchasers and Prior Interest Holders” (1997) 21 MULR 460 at 477–​478.

18

Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 341 per Mason and Deane JJ.

19

Circuit Finance Australia Ltd (recs and mgrs apptd) (in liq) v Panella (2011) 16 BPR 30,347 at [13] per Pembroke J.

20

Rimmer v Webster [1902] 2 Ch 163 at 173 per Farwell J.

21

Being the phrase used by Lord Selborne LC in Dixon v Muckleston (1872) LR 8 Ch App 155 at 160.

22

Rice v Rice (1853) 2 Drew 73; 61 ER 646. See also Ettershank v Zeal (1882) 8 VLR (E) 333; Barry v Heider (1914) 19 CLR 197; Abigail v Lapin (1934) 51 CLR 58; Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371; Heid v

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Equity and Trusts in Australia

deeds endorsed with a receipt acknowledging payment. Subsequently, the purchaser made an equitable mortgage by deposit of the title deeds (as to which see [1.75]). The vendors, it was held, armed the purchaser with the means of dealing with the estate as the absolute owner; thus possession of the deeds and the fact of endorsement of the receipt gave the mortgagee a better equity than the vendors’ equitable lien for the unpaid purchase price (as to which see [1.95]). Though the underlying principle of cases of this kind has been identified as estoppel by representation (see [10.40]), commonly no actual, direct representation is made. Only in an artificial sense does a representation exist, as explained by Lord Wright in Abigail v Lapin:23 [I]‌t is seldom that the conduct of the person whose equity is postponed takes or can take the form of a direct representation to the person whose equity is preferred: the actual representation is, in general … by the third party, who has been placed by the conduct of the party postponed in a position to make the representation.

Most often, the effect of transferring title —​in arming the transferee to go into the world under false colours —​operates and is interpreted as the representation. So, where a third party relies on the representation that no adverse equitable interest exists, and later acts to her or his detriment, the holder of the prior equitable interest is estopped from asserting that interest.24

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[2.30]  In the alternative, the decisions can be explained on the basis that a person who hands

over title deeds to an agent, with authority to deal with the property in a restricted manner, cannot rely on the restrictions as against a third party who lacked notice of them.25 Yet this explanation proves difficult to apply without proof of an agency relationship, or otherwise rests upon an artificial extension of agency. Another rationale is that the possessor of the prior equity has acted negligently, and so should be deprived of priority.26 In this regard, determination of the better equity arises out of an examination of those circumstances that are the reasonably foreseeable results of the conduct of the possessor of the first equity.27 But this should not be interpreted as bringing common law concepts of tort into the equities equation, but merely to emphasise that an inquiry into the relative behaviour of the parties, including omissions, impacts on the relevant equities.

Failure to caveat [2.35] The holder of an equitable interest cannot improve her or his priority by lodging a

caveat;28 a caveat does not, after all, enlarge existing rights but protects them.29 Yet failure to lodge a caveat to protect a prior interest may prove important in determining whether it

Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 138–​139 (CA). Cf Daniell v Paradiso (1991) 55 SASR 359. 23

Abigail v Lapin [1934] AC 491 at 507.

24

Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 335–​336 per Gibbs CJ.

25

Perry Herrick v Attwood (1857) 2 De G & J 21; 44 ER 895; Rimmer v Webster [1902] 2 Ch 163 at 173 per Farwell J; Tsang Chuen v Li Po Kwai [1932] AC 715.

26

Capell v Winter [1907] 2 Ch 376. See, for example, AG(CQ) Pty Ltd v A&T Promotions Pty Ltd [2011] 1 Qd R 306.

27

Dixon v Muckleston (1872) LR 8 Ch App 155 at 160 per Lord Selborne LC; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 578 per Kitto J; Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 343–​344 per Mason and Deane JJ; FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552 at 554–​555 per Young J.

28

Butler v Fairclough (1917) 23 CLR 78 at 84 per Griffith CJ.

29

Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at 224 per Debelle J; Commonwealth Bank of Australia v Psevdos [2015] SASC 66 at [22] per Parker J.

58 [2.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equitable Priorities  Chapter  2

is inequitable that the holder of the earlier interest takes priority.30 For example, in Butler v Fairclough31 an equitable mortgagee’s failure to lodge a caveat for one clear day brought about the loss of priority over the holder of a competing equitable interest who had been misled by the result of a search of the register. In Abigail v Lapin,32 the respondents transferred land to H as security for a debt, and then H executed an equitable mortgage in favour of the plaintiff as security for a loan. The Privy Council advised that the respondents armed H with the means of dealing with an estate as the absolute and equitable owner, and their failure to caveat was a factor in postponing their interest. A caveat would have disarmed H, thereby neutralising the respondents’ earlier arming effect.33

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[2.40]  Yet the failure to lodge a caveat to protect a prior interest may not of itself postpone that

interest.34 In J & H Just (Holdings) Pty Ltd v Bank of New South Wales,35 the registered proprietor of Torrens system land executed a memorandum of mortgage in favour of the defendant bank, which took possession of the certificate of title but did not register the memorandum. Three years later the plaintiff lent money to the proprietor, who had represented that the land was unencumbered. The plaintiff searched the register and, finding no encumbrances, lodged a caveat. Shortly thereafter the defendant lodged the memorandum of mortgage for registration. The High Court held that the defendant’s priority in time had not been lost by failure to caveat. Barwick CJ conceded that there are situations in which a failure to caveat, combined with other circumstances, may justify a conclusion that the holder of the prior equity had contributed to a belief on the part of the holder of the later equity that the prior equity was not in existence, but that “the failure to lodge a protective caveat cannot properly be said necessarily to be such an act or default”.36 Similarly, Windeyer J considered that “the fact that a caveat discoverable by a search of the title is ‘notice to all the world’ of the interest claimed does not mean that the absence of a caveat is a notice to all and sundry that no interest is claimed”.37 To conclude otherwise would equate lodging a caveat with registering a dealing, so making “competing equitable interests depend not upon priority of creation in time and other equitable considerations, but upon priority of the lodgment of caveats”.38 That the ruling in J & H Just Holdings may have placed too little weight on the failure to caveat is implicit in subsequent statements at Supreme Court level.39 For example, in

30

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 420–​421 per Bryson J; Epic Feast Ltd v Mawson KLM Holdings Pty Ltd (in liq) (1998) 71 SASR 161 at 173 per Debelle J; Taleb v National Australia Bank Ltd (2011) 82 NSWLR 489 at [37], [38] per Bryson AJ.

31

Butler v Fairclough (1917) 23 CLR 78 at 91–​92 per Griffith CJ, at 97 per Isaacs J.

32

Abigail v Lapin (1934) 51 CLR 58.

33

Abigail v Lapin (1934) 51 CLR 58 at 65 (PC).

34

Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 342 per Mason and Deane JJ; Person-​to-​Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 at 747–​749 per McLelland J; Jacobs v Platt Nominees Pty Ltd [1990] VR 146 at 151–​152 (FC); Australian Guarantee Corp (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 138 (CA); Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 420–​421 per Bryson J; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 285–​287 per McPherson JA.

35

J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546.

36

J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 554, 555.

37

J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 558.

38

J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 at 558.

39

There are also more direct statements by commentators to this effect. For example, Hughson, Neave and O’Connor suggest that “[i]‌f the legislature provides a means by which a person can be prevented from representing that they have unencumbered title, failure to take those precautions should surely have great significance in determining priorities”:  “Reflections on the Mirror of Title: Resolving the Conflict Between Purchasers and Prior Interest Holders” (1997) 21 MULR 460 at 484. Similarly,

[2.40]  59 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

Handberg v MIG Property Services Pty Ltd,40 involving facts not too removed in substance to J & H Just Holdings, Robson J noted that the conduct of the bank in failing to lodge a caveat to notify its unregistered mortgages was sufficient to defer priority, as the later equity holder relied on the absence of a caveat to his detriment. His Honour noted that the bank offered no explanation why it did not follow usual practice in lodging a caveat notifying its interest, taking judicial notice that the bank “is a major banking corporation and well aware of conveying practice and that of the purpose and function of caveats”.41 What J & H Just Holdings reveals, it seems, is no more than that a decision on priorities must be made in view of all the relevant facts, which when complex may not always produce the same result. To this end, the following observation arguably represents the current law:42 Priority which would otherwise exist according to time may be lost where some act or omission by the holder of the earlier interest has led the holder of a later interest to acquire his interest on the supposition that the earlier one did not exist. Examples of those circumstances occur where the holder of a later interest searched the register, found no such information as lodgement of a caveat would have put there and acted in reliance on the apparent absence of any such interest. As is shown by J & H Just Holdings where these circumstances exist they may not be the only significant circumstances, and they may be outweighed by other circumstances.

There may, accordingly, be occasions where a failure to caveat has limited or no probative effect on ousting temporal priority. This may be so, say, where the court discerns good reasons for the prior interest holder not lodging a caveat,43 or can reasonably conclude that failure to carry out obvious and prudent searches was the real cause of any ignorance of a prior (claimed) interest rather than any failure to caveat to notify of that interest.44 [2.45] Where a caveat has been lodged and then removed, a person searching title to the

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property is entitled to assume that the former caveator no longer seeks to sustain the interest

the Victorian Law Reform Commission has recommended that the “[f]ailure to lodge a caveat before another person registers or protects their interest should postpone the interest”: Priorities, No 22, 1989, p 12. Contra Watts, “The Loss of Equitable Priority Through Negligent Omission —​Kindersley VC’s Heresy” (1998) 18 NZULR 48, who argues that the priority accorded to an equitable interest in property by reason of its being first in time is not lost simply because the holder has omitted to take a step that might readily have alerted later interest holders to the prior interest (although he concedes that this thesis is contrary to certain modern statements of the law). Watts is not the only commentator to put forth arguments of this kind: see also Wallace and Grbich, “A Judge’s Guide to Legal Change in Property  —​Mere Equities Critically Examined” (1979) 3 UNSWLJ 175. 40

Handberg v MIG Property Services Pty Ltd (2010) 79 ACSR 595.

41

Handberg v MIG Property Services Pty Ltd (2010) 79 ACSR 595 at [198].

42

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 423 per Bryson J. See also Person-​to-​ Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 at 748 per McLelland J; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 285 per McPherson JA; Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at 226–​227 per Debelle J; Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd (2010) NSW ConvR ¶56-​263 at [34] per Windeyer AJ; Handberg v MIG Property Services Pty Ltd (2010) 79 ACSR 595 at [182]–​[199] per Robson J. See further the discussion in Stubbs, “Equitable Priorities and the Failure to Caveat” (1989) 6 Auck ULR 199 at 210–​223; Castle, “Caveats and Priorities:  The ‘Mere Failure to Caveat’ ” (1994) 68 ALJ 143; McCrimmon, “Protection of Equitable Interests Under the Torrens System: Polishing the Mirror of Title” (1994) 20 Mon ULR 300 at 304–​308; Hughson, Neave and O’Connor, “Reflections on the Mirror of Title: Resolving the Conflict Between Purchasers and Prior Interest Holders” (1997) 21 MULR 460 at 482–​487.

43

See, for example, Jacobs v Platt Nominees Pty Ltd [1990] VR 146 (where the prior interest holder was the daughter of the controller of the corporate owner of land and expected that the controller would not do anything to prejudice her interest without her being consulted).

44

See, for example, Phoenix Vision Coal Pty Ltd v Southern Cross Exploration NL [2012] NSWSC 461 (where the prior equity holder (plaintiff) had nonetheless acted promptly to lodge the relevant transfer for registration, and the defendant omitted to conduct a search of the register); Champion Homes Sales Pty Ltd v JKAM Investments Pty Ltd [2014] NSWSC 952 at [98] per Darke J.

60 [2.45] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equitable Priorities  Chapter  2

the caveat had sought to protect or no longer has any interest in the property. Accordingly, the former caveator’s interest is liable to be defeated by the holder of a subsequent interest who, having searched the title, has seen the registration of the caveat and its later removal.45 This is not necessarily so where the later claimant has not searched the title, as in this event the claimant cannot be said to have relied on the withdrawal of the caveat, thereby denying any causal connection between the failure to lodge a caveat and the creation of the later interest.46 [2.50] The interplay of detriment and unconscionability, relevant as it is to estoppel (see

[10.310]), may also be relevant in the context of failure to caveat. Nettle J in Mimi v Millennium Developments Ltd47 suggested that to postpone a prior equitable interest holder, the subsequent equity holder must show both an act capable of being regarded as unconscionable, and detriment that renders that act unconscionable. That his Honour identified the failure to lodge a caveat as an example of unconscionable conduct in this regard reveals a use of the term “unconscionable” in a weak sense, perhaps adding little to existing legal formulae applicable to balancing competing equities. It should not be assumed, in any case, that detriment is essential to an ouster of temporal priority, as disentitling conduct takes account of far more than the outcome-​based inquiry into detriment.48 How detriment can factor into this equation appears from Nettle J’s ruling in Mimi v Millennium Developments Ltd. Where prior purchasers of land failed to caveat their interest, his Honour held that to deny the second purchasers and their mortgagee priority (each having relied upon the register) would cause detriment incapable of being remedied, given the absence of evidence that the vendor could fulfil a claim for damages against the second purchasers and their mortgagee.

Accepted conveyancing practice

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[2.55]  Conduct of the possessor of the first equitable interest may not operate to postpone

that interest to a later interest if it accords with established practice and is necessary to enable a conveyancing transaction to be completed.49 In IAC (Finance) Pty Ltd v Courtenay,50 a vendor accepted as payment cash combined with a mortgage back to the vendor. The vendor’s solicitor, having registered both the transfer and the mortgage, later withdrew the transfer and mortgage without the purchasers’ knowledge or authority. The High Court held that the purchasers’ failure to caveat was not postponing conduct as they had followed an established practice in permitting the mortgagee to lodge the transfer for registration. Conversely, as appears from the discussion at [2.40], a failure to caveat may, where to caveat represents

45

See, for example, Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210; Performance Capital Mortgage Pty Ltd v Motive Finance & Leasing Pty Ltd (2010) NSW ConvR ¶56-​263.

46

Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at 227–​229 per Debelle J; Harris v Anais Holdings Ltd [2002] 3 NZLR 511 at 517 (CA).

47

Mimi v Millennium Developments Ltd (2004) V ConvR ¶54-​687 at [39].

48

Cf Jacobs v Platt Nominees Pty Ltd [1990] VR 146 at 152 (FC) (“we agree that detriment or loss is not essential though it will of course always be a relevant circumstance to be considered with all the circumstances of the case, as to whether loss or detriment is suffered as opposed to mere acquisition of the interest. It also needs to be noted that the notion of negligence which usually characterises this broad principle necessarily carries with it the notion of loss sustained by a victim of any negligence”).

49

Reliance Finance Corporation Pty Ltd v Heid [1982] 1 NSWLR 466 at 482 per Hope JA [affd Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 344 per Mason and Deane JJ]; Elderly Citizens Homes of SA Inc v Balnaves (1998) 72 SASR 210 at 226–​227 per Debelle J.

50

IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550. See also Avco Financial Services Ltd v White [1977] VR 561; Person-​ to-​Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745.

[2.55]  61 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

usual practice, function to postpone a prior interest if the relative equities otherwise dictate this outcome.

Notice

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[2.60] Ordinarily, if the later equity holder has notice, actual or constructive, of the ear-

lier equity, her or his claim to priority is defeated at the threshold.51 So if the later equity holder “had every reason to suspect that there was a prior equity it made no enquiry”, it has been remarked, “it cannot hide behind its own ignorance” but “will be presumed to have the knowledge that such reasonable enquiries would have revealed”.52 Notice for this purpose may derive from the earlier equity holder’s occupation of the relevant property, as appears from the Full Federal Court’s decision in Perpetual Trustee Co Ltd v Smith.53 There the prior equity was an unregistered lease, intended to last for the life of the tenants, purchased in a retirement village in exchange for a lump sum payment and periodic instalments. That interest competed with the later interest of the appellant mortgagee, to whom the operators of the village had mortgaged the property. Moore and Stone JJ remarked that “it beggars belief that the appellant did not have notice, at the very least constructive notice, of the [tenants’] interests” and “the fact that the mortgaged properties were residential premises occupied by an elderly person or an elderly couple should have alerted a potential purchaser or mortgagee of the need to make enquiries”.54 There was no need, in the circumstances, for the tenants to caveat their interests to alert a future purchaser or mortgagee to their interest in the property. “The fact of their occupation”, their Honours noted, “was constructive notice of their interest which would thus prevail even against a bona fide purchaser of the legal interest”.55 And it made no difference whether the appellant’s interest was regarded as legal or equitable. The tenants’ interest thus prevailed. Especially if the later interest holder is a financial institution, even notice of the relationship between the debtor and the claimant of a prior equitable interest may oust any claim to priority. For example, in Platzer v Commonwealth Bank of Australia,56 even though the wife, who had an equitable interest in property under a resulting trust, had not lodged a caveat and had allowed the certificate of title to be deposited with the bank as security for a loan to her husband, that the bank knew that the parties were living together as husband and wife fixed it with notice of the wife’s interest, which would have been revealed by reasonable inquiries. The foregoing is not a blanket rule. Exceptions include where there is an agreement to postpone,57 a waiver of priority,58 or some other conduct by the prior equity holder capable

51

Australian Mutual Provident Society v Gregory (1908) 5 CLR 615; Courtenay v Austin [1962] NSWR 296 at 314 per Hardie J; Secureland Mortgage Investments Nominees Ltd v Harman & Co Solicitor Nominee Co Ltd [1991] 2 NZLR 399 at 414–​415 per Williamson J; Moffett v Dillon [1999] 2 VR 480 at 486 per Brooking JA, at 506 per Buchanan JA; Doubtless Bay Water Supply Company Ltd v Robinson [1999] ANZ Conv R 272 at 277–​278 per Salmon J; Commonwealth Bank of Australia v Psevdos [2015] SASC 66 at [24] per Parker J.

52

Mentech Resources Pty Ltd v MCG Resources Pty Ltd (in liq) (2012) 188 LGERA 140 at [48] (Land App Ct, Qld).

53

Perpetual Trustee Co Ltd v Smith (2010) 186 FCR 566.

54

Perpetual Trustee Co Ltd v Smith (2010) 186 FCR 566 at [72].

55

Perpetual Trustee Co Ltd v Smith (2010) 186 FCR 566 at [74].

56

Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 287, 289 per McPherson JA.

57

Australia and New Zealand Banking Group Ltd v National Mutual Life Nominees Ltd (1977) 15 ALR 287.

58

Fung Ping Shan v Tong Shun [1918] AC 403.

62 [2.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equitable Priorities  Chapter  2

of estopping an assertion of priority59 or otherwise causing a subsequent interest holder not to protect its existing rights.60 [2.65] The converse dictates that a person who bona fide purchases an equitable interest

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in property can lose priority to an earlier equitable interest in that property even if lacking actual or constructive notice of that earlier interest.61 An interesting illustration is Harris v Anais Holdings Ltd.62 The appellants sold their farm  —​a home block and two northern blocks —​to the respondent. The latter refused the appellants’ request for a right of first refusal to repurchase the property, but via an email assured the appellants of first option to purchase the property should it decide to sell. The following year the respondent decided to sell the northern blocks to Z (who lodged no caveat), and six months later the house block to K conditional on the appellants not proceeding to purchase the house block. The appellants wished to repurchase the entire property, not just the house block, and the respondent sent them a contract that mistakenly referred to the entire property, which they signed. The appellants then lodged a caveat against the titles of both the home block and the northern blocks, arguing that Z’s equitable interest was adversely affected by the email containing the respondent’s promise that they would have first option to purchase. It was agreed that this promise created no more than a moral obligation in the respondent. The New Zealand Court of Appeal remarked that even if Z knew of the email before agreeing to buy the blocks, all Z would have known was of the respondent’s moral obligation to the appellants. Blanchard J, who delivered the judgment, reasoned as follows:63 How then, merely because at a later time [the appellants] have acquired an identical (and therefore equal) interest, can [the appellants] say that [Z’s] prior in time interest is in some manner affected by the email, even if [the appellants] were, as they allege, ignorant of the existence of [Z’s] contract? … To accede to the argument would be to recognize the unenforceable obligation of [the respondent] as binding upon the conscience of [Z]‌. When the cases speak of fairness and justice being the determinant for reversal of equities … they do not … intend that a Court can bring into consideration “obligations” of such a character. To do so, particularly in a transaction with a commercial character, might have far-​reaching consequences.

His Honour noted that in other circumstances Z’s failure to caveat might have been good reason to reverse the priorities, but as the appellants were unable to say that the absence of a caveat on the search copies of the titles had misled them, let alone caused them material prejudice, there were no grounds for reversing the priorities.64 As Z’s interest was prior in time, it prevailed.

Doing equity [2.70]  It has been said that where a later equity holder is given priority over an earlier equi-

table interest, the court can, as a condition of giving effect to its decision, require the later

59

Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 273 per Davies JA.

60

Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683 at [245], [256] per Ward JA.

61

Moffett v Dillon [1999] 2 VR 480 at 489 per Brooking JA.

62

Harris v Anais Holdings Ltd [2002] 3 NZLR 511.

63

Harris v Anais Holdings Ltd [2002] 3 NZLR 511 at 516–​517.

64

Harris v Anais Holdings Ltd [2002] 3 NZLR 511 at 517.

[2.70]  63 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

equity holder do equity.65 This approach has been criticised on the ground that it “effectively amounts to a jurisdiction to apportion the loss as between the holders of the two equitable interests in question, the existence of which is likely to make it virtually impossible to settle any dispute as to priorities of equitable interests without going to court”.66 Yet given the diversity in curial approach to competing equitable interests, especially in relation to the failure to caveat (see [2.35]–​[2.50]), the same criticism can arguably be levied at the entire law of equitable priorities. Priorities in relation to trusts [2.75]  A beneficiary’s equitable interest under a trust cannot be postponed by fraudulent or

negligent acts of the trustee that result in the creation of another equitable interest, even if the trustee’s possession of the title documents came through the beneficiary.67 For example, in Shropshire Union Railways and Canal Company v The Queen,68 a director of the appellant company held certain shares as trustee for the company. In breach of trust, the director borrowed money and deposited the share certificates with the lender. The lender died not having registered the shares, subsequent to which his widow applied to be registered as their owner. The Privy Council advised that the trustee’s fraud could not be imputed to the beneficiary company, and so the widow’s later equitable interest did not prevail against the earlier equitable title of the company. Lord Cairns LC observed: “I cannot find that there was anything done by the [beneficiaries] in this case which ought to forfeit and displace that equitable title”.69 Tacking

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[2.80]  The doctrine of “tacking” is a particular illustration of principles forming part of the

priorities regime. It takes three main forms, each discussed below, although only the third involves priorities between two equitable interests.70

Later advance by legal mortgagee advancing money on the same security [2.85] A holder of a legal mortgage who makes a further advance on the same security is

entitled to “tack” that advance onto the original security even though there is a later security provided he or she lacked notice of the later security at the time when the further advance was made.71

First mortgage expressed to cover further advances —​the rule in Hopkinson v Rolt [2.90]  Where a first mortgage is expressed to cover further advances, the first mortgagee can

tack a further advance onto the original security with priority over the second charge holder.72 65

Australian Guarantee Corporation (NZ) Ltd v CFC Commercial Finance Ltd [1995] 1 NZLR 129 at 140–​141 (CA); Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683 at [277]–​[283] per Ward JA.

66

Oakley, “Judicial Discretion in Priorities of Equitable Interests” (1996) 112 LQR 215 at 219.

67

Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 109 per Hansen J.

68

Shropshire Union Railways and Canal Company v The Queen (1875) LR 7 HL 496.

69

Shropshire Union Railways and Canal Company v The Queen (1875) LR 7 HL 496 at 509.

70

Chase Corporation (Australia) Pty Ltd v North Sydney Brick and Tile Co Ltd (1994) 35 NSWLR 1 at 16–​17 per Cohen J; Bank of Western Australia v Connell (1996) 16 WAR 483 at 494–​495, 498 per Owen J.

71

Bank of Western Australia v Connell (1996) 16 WAR 483 at 494–​495 per Owen J.

72

Bank of Western Australia v Connell (1996) 16 WAR 483 at 495 per Owen J.

64 [2.75] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equitable Priorities  Chapter  2

This doctrine is limited by what is known as the rule in Hopkinson v Rolt,73 under which “[a]‌ first mortgagee, whose mortgage is taken to cover what is then due to him and also further advances, cannot claim the benefit of this security for further advances in priority to a second mortgagee of whose mortgage he had notice before the further advances were made”.74 The rule applies to charges over Torrens system land,75 and is not confined to competing mortgages; it applies when the holder of the subsequent interest is a purchaser of land76 as it does to an assignee of the mortgagor’s interest.77 Its rationale is that it is unjust for the mortgagor, having created successive mortgages, to take a further advance on the first, and thereby enlarge the scope of the first to the detriment of the later chargee or mortgagee.78 As explained by a Victorian judge:79 The source of the rule is to be found in equitable principles based on notice affecting the conscience, so that the person with notice takes subject to it … It is the equities derived from the contractual relationship which make it unconscionable for the mortgagor to further charge the property to secure a subsequent advance made by the mortgagee. Notice that the prior interest exists makes it inequitable for the mortgagee to rely upon its subsequently acquired interest which the mortgagor was not entitled to create.

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The party alleging notice sufficient to affect the conscience must prove it, but this does not require proof of personal dishonesty, moral turpitude or an intention to oust that party’s rights. Conduct that involves a failure to make the inquiries that a reasonable and honest person would make in the light of known facts will likely suffice to affect the conscience and result in equitable intervention.80 The rule operates only when the first mortgagee has made a further advance. It has no application where the first mortgagee is bound to make, and the mortgagor bound to accept, advances made after the date of the second mortgage,81 or if the further advances under the first mortgage effected an increase (not a decrease) in the value of the mortgaged property.82 Nor does it apply where the parties agree to the contrary.83

73

Hopkinson v Rolt (1861) 9 HLC 514; 11 ER 829.

74

West v Williams [1899] 1 Ch 132 at 142 per Lord Lindley MR. See also Oversea Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd [2003] VSC 495 at [68]–​[70] per Redlich J; Pourzand v Home Building Society Ltd [2004] WASC 127 at [20] per Pullin J.

75

Network Finances Ltd v Deposit and Investment Co Ltd [1972] QWN 10; Philos Pty Ltd v National Bank of Australasia Ltd (1976) 5 BPR 11,810; Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 at 130 per Kearney J; Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407 at 409–​411 per King CJ; Olympic Holdings Pty Ltd v Windslow Corp Pty Ltd (in liq) (2008) 36 WAR 342 at [114] per E M Heenan AJA.

76

London & County Banking v Ratcliffe (1881) 6 App Cas 722.

77

Wilson v Holland [1915] VLR 46.

78

Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 at 298 per Holland J; Mercantile Credits Ltd v Australia and New Zealand Banking Group Ltd (1988) 48 SASR 407 at 409 per King CJ; Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 207 FCR 502 at [148] per Jagot J.

79

Oversea Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd [2003] VSC 495 at [72] per Redlich J.

80

Oversea Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd [2003] VSC 495 at [173] per Redlich J. Cf R & I Bank of Western Australia Ltd v Cash Resources Australia Pty Ltd (1993) 11 WAR 536 at 547 per Anderson J.

81

See, for example, Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 (where the advances made were necessary to enable the buildings to be completed, and so the mortgagee’s obligation to make advances under the terms of the mortgage was not discharged by notice of the subsequent mortgages).

82

Oversea Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd [2003] VSC 495 at [77] per Redlich J.

83

Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 207 FCR 502 at [93] per Dowsett J, at [165] per Yates J.

[2.90]  65 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

[2.95]  The general law rules relating to the above two forms of tacking have been largely codi-

fied by statute in the Northern Territory, Queensland, Tasmania and Victoria.84 It provides that a prior mortgagee has the right to make further advances to rank in priority to the claims of subsequent mortgagees if: • an arrangement to that effect has been reached with subsequent mortgagees; • the prior mortgagee had no notice85 of the subsequent mortgage when making the further advance; • in Queensland and Victoria, the mortgage imposes an obligation on the prior mortgagee to make such further advances; or • in the Northern Territory, the total amount advanced under the mortgage at any time does not exceed the maximum amount specified in the loan agreement or mortgage as the maximum that may be secured by the mortgage.

Doctrine of tabula in naufragio [2.100]  The doctrine of tabula in naufragio86 is an exception to the general rule that, where there

are two competing equitable interests of equal merits, the first in time prevails. Under this doctrine, where the holder of a second-​ranking equity, who has acquired that interest for value and without notice of the first equity, then obtains the legal estate, the holder’s second equity “tacks” to the legal estate. This serves to displace the prior equitable interest, provided that it was not obtained in breach of trust.87 It is not a bar to priority that the second interest holder has obtained notice of the existence of the first equitable interest by the time he or she obtains the legal estate. Equitable priorities and mere equities

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[2.105]  The distinction between equitable rights of a proprietary nature and those that confer

no more than a personal right to seek relief in equity is generally, although by no means universally, evidenced by different nomenclatures: the former are termed “equitable interests”;88 the latter “personal” or “mere” equities.89 So it is sometimes said that, in cases where the claimant has no equitable interest in property, a court of equity’s intervention is premised on 84

Law of Property Act 2000 (NT), s 85; Property Law Act 1974 (Qld), s 82; Conveyancing and Law of Property Act 1884 (Tas), s 38; Property Law Act 1958 (Vic), s 94. In Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 at [29] White J remarked that the law about tacking and further advances has largely been preserved by the legislation with minor alterations.

85

For this purpose, “notice” has been held to mean “actual notice”: Beachquest Pty Ltd v Interstate Mortgage and Investments Pty Ltd [2003] 2 Qd R 586 at [42] per White J.

86

The phrase tabula in naufragio is Latin for “plank in a shipwreck”. Tacking the lower-​ranking equity to the legal estate is the plank on which the lower-​ranked mortgagee is saved and the higher-​ranked mortgagee is shipwrecked (or squeezed out). As to the underlying basis of the doctrine of tacking, see Union Bank of Scotland v National Bank of Scotland (1886) 12 App Cas 53 at 99 per Lord Watson; West v Williams [1899] 1 Ch 132 at 146 per Chitty LJ; Central Mortgage Registry of Australia Ltd v Donemore Pty Ltd [1984] 2 NSWLR 128 at 132 per Kearney J.

87

Mumford v Stohwasser (1874) LR 18 Eq 556; Bailey v Barnes [1894] 1 Ch 25; Bank of Western Australia v Connell (1996) 16 WAR 483 at 498 per Owen J; Olympic Holdings Pty Ltd v Windslow Corp Pty Ltd (in liq) (2008) 36 WAR 342 at [126] per E M Heenan AJA.

88

Sometimes termed “equitable estates”. As to the nature of “equitable interests”, see [1.05]–​[1.30].

89

There is also a practice of distinguishing “personal equities” from “mere equities”, largely on the ground that a mere equity, unlike a personal equity, can exhibit proprietary characteristics for some purposes and not others. The use of the term “mere equity” in the text is used to encompass that which constitutes a personal equity in this nomenclature. The threefold division has been criticised as creating too much complexity and uncertainty, with consequent illogicality of results: see Wright, “The Continued Relevance of Divisions of Equitable Interests to Real Property” (1995) 3 APLJ 163 at 172–​174. Cf Skapinker, “Equitable Interests, Mere Equities, ‘Personal’ Equities and ‘Personal Equities’ —​Distinctions With a Difference” (1994) 68 ALJ 593.

66 [2.95] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equitable Priorities  Chapter  2

an equity being raised in the claimant’s favour, it then being within the court’s discretion “to decide in what way that equity should be satisfied”.90 The concept of an “equity”, therefore, is relevant both in expressing the notion that a claimant has a cause of action in equity,91 and in determining the scope of appropriate relief.92 It is also relevant so far as caveats are concerned, for a mere equity is not an interest in land capable of protection by caveat, whereas an equitable interest is.93 For the present purposes, the distinction between mere equities and equitable interests is addressed in the context of priorities. Few difficulties arise where a prior equitable interest competes with a later mere equity —​the first in time rule applies. Conversely, it appears that a prior mere equity will be postponed to a later equitable interest acquired bona fide without notice of it because the latter is the better equity;94 the first in time rule applies only between equitable interests.95 This has led one judge to observe that mere equities “do not participate in competitions of priorities on the same basis as equitable interests”,96 and to phrase the relevant principle as follows:97 [A]‌mere equity, meaning a claim to have an equitable interest which can only be enforced by succeeding in some claim to a court for equitable relief … does not participate in competitions of priorities with equitable interests which have been acquired in good faith, for valuable consideration and in a manner which can be clearly shown without obtaining any decision of the court upholding them.

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The position is otherwise if the holder of the later equitable interest had notice of the earlier equity at the time of acquiring that interest. In Shawyer v Amberday Pty Ltd (in liq),98 for example, Bryson J ruled that a mere equity (which required the establishment of an entitlement to an equitable remedy in which there was a discretionary element) was defeated by a later equitable interest (namely a receiver’s lien) acquired bona fide without notice of the earlier mere equity. Cases that suggest a later equitable interest may prevail over a mere equity even if the holder of the later interest has notice of the earlier equity99 should be seen

90

Greasley v Cooke [1980] 1 WLR 1306 at 1312 per Lord Denning MR. See also Plimmer v Wellington City Council (1884) 9 App Cas 699 at 714 (PC).

91

Grgic v Australia and New Zealand Banking Group Ltd (1994) 33 NSWLR 202 at 222 per Powell JA.

92

See Hepburn, “Reconsidering the Benefits of Equitable Classification” (2005) 12 APLJ 157.

93

Re CM Group Pty Ltd’s Caveat [1986] 1 Qd R 381; Global Minerals Australia Pty Ltd v Valerica Pty Ltd (2000) 10 BPR 18,463 at 18,467 per Windeyer J (where a possible right to have a transfer of land set aside for fraud was held to amount to a mere equity, and thus not a caveatable interest); Mazzuchelli v Mazzuchelli [2006] WASC 124 (where Hasluck J held that a weak claim for proprietary estoppel did not justify the lodgement or extension of fresh caveats); Garwoli v Garwoli [2015] SASC 1 (claim of undue influence insufficient to substantiate a caveatable interest).

94

Cave v Cave (1880) 15 Ch D 639 at 646 per Fry J; Westminster Bank Ltd v Lee [1956] 1 Ch 7 at 18 per Upjohn J; Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 424–​425 per Bryson J; Doubtless Bay Water Supply Company Ltd v Robinson [1999] ANZ Conv R 272 at 275 per Salmon J; Vrkic v Otta International Pty Ltd (2003) 12 BPR 22,535 at [56] per Campbell J (“Counsel were not able to show me any cases where conduct of the holder of an equitable interest could result in that equitable interest being postponed to an earlier mere equity”).

95

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 278 per Kitto J.

96

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 424 per Bryson J.

97

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 425 per Bryson J. See also Shawyer v Amberday Pty Ltd (in liq) (2001) 10 BPR 18,869 at 18,872 per Bryson J.

98

Shawyer v Amberday Pty Ltd (in liq) (2001) 10 BPR 18,869 at 18,880.

99

See, for example, Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 475 per Priestley JA (however, this was not the result on the facts of this case because the holder of the later equitable interest was not only on notice of the salient facts giving rise to the plaintiff’s earlier equity, but acquired its interest subject to it; in any event, the equity in question was interpreted as more akin to an equitable interest). Cf Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 424–​425 per Bryson J.

[2.105]  67 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

as exceptional, explainable on the basis that for some other reason the later equitable interest is the better equity, not simply because it is an equitable interest. [2.110]  On top of the inherent difficulties in comparing the relative status of mere equities

and equitable interests, there is the problem stemming from the fact that mere equities may have proprietary characteristics for some purposes but not others. Moreover, as giving effect to an equitable interest also rests ultimately on curial discretion,100 distinguishing it from a mere equity is less “black and white” than continuum based. A “mere equity” has, to this end, been described as “a slippery creature”, which “can be cornered and illuminated by example but not captured and confined by definition”.101 The right to set aside a contract for fraud or undue influence, claims in proprietary estoppel,102 the right to rectify a contract for mistake103 and a claim that rests on the doctrine of part performance104 are, for instance, often described as mere equities; yet they may exhibit proprietary characteristics, as the mere equity may crystallise into an equitable interest once relief is granted. At the same time, for example, where a contract does no more than create mutual rights and obligations inter partes, a right to rectification is easily seen as a mere equity, whereas where the contract creates property rights, a right to rectification is more readily seen as ancillary to those property rights (and so is close to becoming an equitable interest).105

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[2.115]  The confusion stemming from the inchoate character of mere equities surfaced in the

High Court’s decision in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq).106 A mortgagor sought to set aside a sale of land by its mortgagee some five years earlier on the ground that the latter’s power of sale had been fraudulently exercised. In the meantime, the purchaser of the land created an equitable charge over it in favour of a trustee for debenture holders. Despite the mortgagor’s interest being first in time, the court held that the trustee’s interest had priority, though each member of the court adopted different reasoning. Kitto J reasoned that, if the mortgagor was in fact entitled to have the sale set aside, it had a mere equity, not an equitable interest.107 The equitable charge, on the other hand, created an equitable interest. Given that the trustee, as holder of such an interest, had no notice of the prior mere equity, the trustee’s interest prevailed over the prior mere equity.

100

See Pelenoy Pty Ltd v Donovan Oates Hannaford Mortgage Corp [2004] NSWSC 4 at [34] per Barrett J, who rejected the submission that an equitable chargee never had in relation to the property more than a “mere equity” because its position was always one in which it was dependent on the assistance of the court to obtain relief in respect of the property, remarking that “I do not consider that submission to be supportable: if it were correct, there could never be an equitable interest as such, since all such interests are, of their nature, the product of equity’s willingness to provide relief in personam”.

101

Mills v Ruthol Pty Ltd (2002) 10 BPR 19,381 at [126] per Palmer J.

102

Cf Gibb v MacDonnell [1992] 3 NZLR 475 at 479–​480 per Anderson J.

103

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 425 per Bryson J; Harris v Smith (2008) 14 BPR 26,223 at [53] per Brereton J.

104

Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 425 per Bryson J.

105

Child v Dynes [1985] 2 NZLR 554; Doubtless Bay Water Supply Company Ltd v Robinson [1999] ANZ Conv R 272 at 275–​276 per Salmon J. Cf Longtom Pty Ltd v Oberon Shire Council (1996) 7 BPR 14,799 at 14,814 per Young J.

106

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265.

107

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 277–​279. His Honour relied on the authority of Lord Westbury LC in Phillips v Phillips (1862) De GF & J 208; 45 ER 1164 in reaching this conclusion. Kitto J’s approach appears to have been identified as the ratio of Latec Investments by Bryson J in Double Bay Newspapers Pty Ltd v A  W Holdings Pty Ltd (1996) 42 NSWLR 409 at 425.

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Equitable Priorities  Chapter  2

Taylor J pursued a different approach.108 His Honour referred to 19th century authorities to the effect that an owner of land, a transfer of which has been obtained by fraud, retains an equitable interest in the land. Such a conclusion would ordinarily have conferred priority on the interest first in time, but Taylor J found that the two rights in issue —​both “equitable interests” —​were not equal. Specifically, as the holder of the earlier interest (the mortgagor) required the court’s assistance to remove the impediment to its title, the court would not grant that assistance as against a subsequent equitable interest in a bona fide purchaser without notice (the trustee). Menzies J attempted to reconcile the two lines of authority that had generated the distinction in reasoning between his colleagues by asserting that whether any given right is a mere equity or an equitable interest rests on the purpose for which the inquiry is made.109 His Honour held that, for the purpose of determining priorities, the right to set aside a transaction for fraud or undue influence was a mere equity. This was without prejudice to other purposes, such as assignment, in respect of which such a right may be an equitable interest. These differences in approach did not prevent the New South Wales Court of Appeal directly applying Latec to decide Ruthol Pty Ltd v Mills.110 There two parties (P1 and P2) had validly exercised options to purchase the same property granted by its owner (D). P1’s option was exercisable only if the existing tenant (T) did not exercise an option to renew the lease. T elected not to exercise the option, but because D did not wish to sell at the option price, D misrepresented to P1 that T had exercised the option. D then granted an option to P2 at a substantially higher price. On learning of this, P1 purported to exercise its option even though out of time. Sheller JA, with whom Meagher JA concurred, concluded that, for the reasons given in Latec, P2’s equitable interest as purchaser took priority over P1’s equity to proceed against D for breach of contract in reliance on P1’s late exercise of the option.111 Cripps AJA agreed, noting that although in Latec the registered proprietor was deprived of its property by fraud, whereas in the present case P1 was precluded from acquiring property by fraud, “[i]‌n both cases the equitable interests arising subsequently were acquired without notice of the earlier interests”.112 [2.120]  In any event, case law supports the proposition that the equitable right of a registered

proprietor to prevent completion of a voidable sale following the exercise of a mortgagee’s power of sale constitutes an equitable interest in the land, not a mere equity, which can in turn sustain a caveat.113 This is because until the contract is completed there is no conveyance to set aside and thus no impediment to the mortgagor asserting an equity of redemption.

108

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 282–​286. Harrison J in Waller v Davies [2005] 3 NZLR 814 at [41]–​[46] applied a similar approach [affd but not on this specific point: Waller v Davies [2007] 2 NZLR 508].

109

Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 at 290–​291.

110

Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793.

111

Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 at [101].

112

Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 at [113].

113

See, for example, Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870; Re McKean’s Caveat [1988] 1 Qd R 524; Patmore v Upton (2004) 13 Tas R 95 at [61] per Underwood J. The contrary view, espoused in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672, has been regularly subjected to criticism and more recently been branded as “clearly wrong”: Stone v Leonardis (2011) 110 SASR 503 at [48] per White J.

[2.120]  69 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

EQUITABLE ESTATE AND SUBSEQUENT LEGAL ESTATE General principle [2.125]  A bona fide purchaser of a legal estate for value without notice of any prior equitable

interest takes the legal estate free from any such interest.114 Where a purchaser has notice of an equitable interest, equity regards her or his conscience affected, making it inequitable to allow the legal estate to take priority.115 Consistent with the maxim “equity will not assist a volunteer” (see [P.120]), requiring a “purchaser” operates to exclude the application of the general principle to those who take the legal estate without giving valuable (though not necessarily adequate) consideration, that is, as volunteers.116 [2.130]  Notice serves to postpone a legal interest only if communicated before considera-

tion is furnished. The title of a purchaser who acquires notice after furnishing consideration, but before obtaining legal title, is taken as unencumbered by any prior equitable interests provided the conveyance of the legal estate is not in breach of trust.117 In this context, notice may be actual, constructive or imputed.118 “Actual” notice is actual knowledge of the facts, which may include a rumour if its source is someone with an actual interest in the property.119 Though vague rumours are insufficient,120 relevant information obtained from third parties cannot be ignored.121 “Constructive” notice consists of what would have come to a person’s attention had he or she made the inquiries a reasonably prudent person would have made in the circumstances.122 A person has “imputed” notice of those facts acquired by her or his agent in the particular transaction, whether actual or constructive.123 Notice of one joint tenant will not, however, be imputed to another.124

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Qualifications to the general principle [2.135]  Two qualifications to the above general principle must be made. First, a purchaser

of a legal estate for value, and without notice of any prior equitable interests, can give good 114

Pilcher v Rawlins (1872) LR 7 Ch App 259; Wilkes v Spooner [1911] 2 KB 473; Pearce v Bulteel [1916] 2 Ch 544; Craddock Bros v Hunt [1923] 2 Ch 136; Meth & Co (Australia) Pty Ltd v Commercial Banking Company of Sydney Ltd (1977–​78) ACLC ¶40-​302 at 29,232–​29,233 per Sheppard J.

115

Pilcher v Rawlins (1872) LR 7 Ch App 259 at 266 per Lord Hatherley LC; Midland Bank Trust Co Ltd v Green [1981] AC 513 at 528 per Lord Wilberforce.

116

Reeves v Poole [1914] 2 KB 284; Park v Dunn [1916] NZLR 761. Natural love and affection is not sufficient consideration for this purpose: Goodright v Moses (1774) 2 Wm Bl 1019; 96 ER 599. However, marriage has been held to be sufficient consideration: Jackson v Rowe (1826) 2 Sim & St 472; 57 ER 427; Attorney-​General v Jacobs Smith [1895] 2 QB 341.

117

Pilcher v Rawlins (1872) LR 7 Ch App 259; Blackwood v London Chartered Bank (1874) LR 5 PC 92; Mumford v Stohwasser (1874) LR 18 Eq 556; Newman v Newman (1885) 28 Ch D 674; Bailey v Barnes [1894] 1 Ch 25.

118

Meth & Co (Australia) Pty Ltd v Commercial Banking Company of Sydney Ltd (1977–​78) ACLC ¶40-​302 at 29,232–​29,233 per Sheppard J. See Bradbrook et al, [2.490]–​[2.550].

119

Barnhart v Greenshiels (1853) 9 Moo PCC 18; 14 ER 204; Vockensohm v Zeven (1893) 3 WW & A’B 122.

120

Williamson v Bors (1900) 21 LR (NSW) Eq 302.

121

Lloyd v Banks (1868) LR 3 Ch App 488.

122

Cosser v Collinge (1832) 3 My & K 283; 40 ER 108; Kennedy v Green (1834) 3 My & K 699 at 719; 40 ER 266 at 274 per Brougham LC; Bailey v Barnes [1894] 1 Ch 25 at 35 per Lindley LJ; Milne v James (1910) 13 CLR 168; Wilkes v Spooner [1911] 2 KB 473 at 484–​485 per Vaughan Williams LJ, at 486–​487 per Farwell LJ; Abigail v Lapin [1934] AC 491; Midland Bank Trust Co Ltd v Green [1981] AC 513 at 528 per Lord Wilberforce.

123

Wyllie v Pollen (1863) 3 De G J & S 596; 46 ER 767; Societe Generale de Paris Tramways Union Co Ltd (1884) 14 QBD 424; R v Biggin [1955] VLR 36; Schultz v Corwill Properties Pty Ltd (1969) 90 WN (Pt 1) (NSW) 529.

124

Myers v Smith (1992) 5 BPR 11,494 at 11,500–​11,501 per Hodgson J.

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Equitable Priorities  Chapter  2

title to a second purchaser of the legal estate even if the latter has notice of a prior equitable interest. However, a trustee who sold property to the vendor in breach of trust, or a person who had originally acquired the property by fraud, is not protected by then purchasing it from a bona fide purchaser for value without notice.125 Secondly, statute provides that a transferee of Torrens system land is not affected by actual or constructive notice of any unregistered (that is, equitable) interests in the land unless he or she has been guilty of fraud.126 Importantly, this protection against notice is provided only upon registration by the transferee, and not before.127

LEGAL ESTATE AND SUBSEQUENT EQUITABLE ESTATE

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[2.140]  Where competing interests between two parties consist of a prior legal estate and a

later equitable estate, the legal estate prevails if the equities are equal.128 Consistent with the principles applicable between competing equitable interests (see [2.20]), the court examines the conduct of the possessor of the legal estate to determine if her or his interest ought to be postponed because of some blameworthy conduct that renders the equities unequal. In particular, three instances in which the prior legal interest will likely be deferred are mentioned below. First, where the holder of a legal interest is a party to a fraud that has led to the creation of a subsequent equitable estate, the holder of the equitable interest will secure priority.129 Conversely, the holder of an earlier legal interest is entitled to priority over the holder of a later equitable interest where the latter is put on notice that the transaction under which its interest was created was being carried out in breach of trust or fiduciary duty.130 Secondly, mere negligence or carelessness is insufficient to postpone a legal interest, but gross negligence is.131 The failure of the holder of a legal interest to obtain possession or inquire into the whereabouts of title deeds to property will likely constitute gross negligence and persuade the court to postpone the legal interest in favour of a later equitable interest.132 In Walker v Linom,133 the settlor of a trust transferred to his solicitor-​trustees a bundle of

125

Wilkes v Spooner [1911] 2 KB 473 at 483 per Vaughan Williams LJ; Independent Trustee Services Ltd v GP Noble Trustees Ltd [2013] Ch 91 at [49] per Patten LJ, at [89] per Lloyd LJ.

126

Land Titles Act 1925 (ACT), s 59; Real Property Act 1900 (NSW), s 43; Land Title Act 2000 (NT), ss 188(2), 188(3); Land Title Act 1994 (Qld), ss 184(2), 184(3); Real Property Act 1886 (SA), ss 186, 187; Land Titles Act 1980 (Tas), s 41; Transfer of Land Act 1958 (Vic), s 43; Transfer of Land Act 1893 (WA), s 134. As to the concept of “fraud” in this context, see Bradbrook et al, [4.200]–​[4.245].

127

Templeton v Leviathan Pty Ltd (1921) 30 CLR 34; Webb v Hooper [1953] NZLR 111.

128

Northern Counties of England Fire Insurance Company v Whipp (1884) 26 Ch D 482; Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 at 282–​284 per Windeyer J.

129

Northern Counties of England Fire Insurance Company v Whipp (1884) 26 Ch D 482 at 494 per Fry LJ; Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 at 282–​284 per Windeyer J.

130

Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 110 per Hansen J.

131

Oliver v Hinton [1899] 2 Ch 264 at 274 per Lindley MR; Davidson v O’Halloran [1913] VLR 367; Grierson v National Provincial Bank [1913] 2 Ch 18. That there is no clear means of distinguishing between “mere” and “gross” negligence has led some commentators to suggest that the use of the “gross negligence” criterion is unhelpful: see Meagher, Gummow and Lehane, [8-​050]. For a contrary view (albeit in a different context), see Dal Pont, “The Exclusion of Liability for Trustee Fraud” (1998) 6 APLJ 41 at 49–​50.

132

Ettershank v Zeal (1882) 8 VLR (E) 333 at 338–​339 per Holroyd J; Northern Counties of England Fire Insurance Company v Whipp (1884) 26 Ch D 482; Walker v Linom [1907] 2 Ch 104. Cf Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 at 283–​284 per Windeyer J.

133

Walker v Linom [1907] 2 Ch 104 at 114 per Parker J.

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Equity and Trusts in Australia

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deeds purporting to be title deeds. Unbeknown to the trustees, the settlor retained the deed in the chain of title by which the land was originally conveyed, and later used it to create an equitable mortgage (as to which see [1.155]) over the property. The trustees’ failure to get in the title deeds amounted to such a degree of negligence, it was held, to make it inequitable to allow their legal interest to take priority. Thirdly, a later equitable interest always prevails against an earlier legal interest when the holder of the legal interest creates the equitable interest.134

134

Koorootang Nominees Pty Ltd v Australia and New Zealand Banking Group Ltd [1998] 3 VR 16 at 110 per Hansen J.

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Chapter 3

Assignments in Equity CONCEPT OF AN ASSIGNMENT [3.05]  An assignment has been described as “the immediate transfer of an existing proprietary

right, vested or contingent, from the assignor to the assignee”.1 Construed so broadly, it can include a change in legal or equitable ownership of land or chattels, where the term “transfer” is more commonly used. The concept of an “assignment”, though, is more commonly used to refer to the disposition of a chose in action from its holder (the “assignor”) to another person (the “assignee”), which use is adopted in this chapter. The term “chose in action” describes, it has been said, “all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession”.2 This highlights that an essential criterion of a chose in action is that the right exhibit a proprietary character; a purely personal right is not a chose in action.3 It suggests, moreover, that choses in action are, generally speaking, intangible rights enforceable through action. A debt is the most common example, being the intangible right to the payment of a money sum from another. Historical background to assignments of choses in action

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[3.10] The common law did not recognise assignments of choses in action for two rea-

sons: the “intensely personal character” of a chose in action; and the fear of “multiplying of contentions and suits”.4 As to the former, the law viewed a contractual claim as inseparable from the person of the contracting parties, which explained why it could be enforced only by one contracting party against another. This policy consideration also informed the doctrine of privity of contract. Because debts, in particular, were not freely assignable at common law, “novation” could be utilised to effect the same outcome without infringing the relevant policy considerations or privity. Via novation the parties to a contract agree to substitute that contract with a new one, under which a new party is substituted for the creditor in the original contract. This new contract serves to extinguish the debtor’s contractual obligation to the creditor, replacing it by

1

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26 per Windeyer J. On the concept and law of assignment generally, see Liew, Guest on the Law of Assignment (3rd ed, Sweet & Maxwell, 2018).

2

Torkington v Magee [1902] 2 KB 427 at 430 per Channell J. See also Krishell Pty Ltd v Nilant (2006) 32 WAR 540 at [76] per McLure JA.

3

Haxton v Equuscorp Pty Ltd (2010) 265 ALR 336 at [281], [282] per Dodds-​Streeton JA; Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 at [95] per McLure P.

4

Lampet’s Case (1612) 10 Co Rep 46 at 48; 77 ER 994 at 997–​998.

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Equity and Trusts in Australia

an equivalent contractual obligation to another person. Windeyer J explained how novation compares to assignment in Olsson v Dyson:5 The ultimate distinction, in juristic analysis, between a transfer of a debt by assignment and by novation is simple enough. Novation is the making of a new contract between a creditor and his debtor in consideration of the extinguishment of the obligations of the old contract: if the new contract is to be fully effected to give enforceable rights or obligations to a third person he, the third person, must be a party to the novated contract. The assignment of a debt, on the other hand, is not a transaction between the creditor and the debtor. It is a transaction between the creditor and the assignee to which the assent of the debtor is not needed. The debtor is given notice of it; for notice is necessary to complete an assignment pursuant to the statute or in the case of an equitable assignment to preserve priorities. But the debtor’s assent is not required. He is not a party to the transaction.

On novation, therefore, there is no assignment of rights and obligations,6 but the creation of new rights and obligations in a new contract. It usually requires the agreement of the original and the substituted party, but this does not preclude the original contract authorising a party to substitute a contracting party in its place without need for a further tri-​partite agreement. The common law’s deficiency here was rectified in England via s 25(6) of the Judicature Acts, which created a general right to assign choses in action. Its equivalent in each Australian jurisdiction is discussed at [3.25]–​[3.35]. This initiative was an incident of the amalgamation of the superior courts of common law and equity in England, the intention being that in all matters where the rules of equity and those of the common law were in conflict or varied with reference to the same matter, the rules of equity would prevail: see [P.25].

Equity’s recognition of the validity of assignments of choses in action

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[3.15] At an early stage equity formulated its own rules for the validity of assignments of

both equitable7 and legal8 choses in action, allowing the assignee to sue in her or his own name.9 In so doing, like the statute at common law, it overcame the privity doctrine. For legal choses in action, equity made the assignment effective via an injunction to compel the assignor to give the use of her or his name to the assignee, so forbidding the assignor to sue in her or his own name.10 Otherwise a defendant, after defeating the claim of an equitable claimant, might have been faced with proceedings by the legal owner, or by persons claiming under the legal owner as assignees for value without notice of any prior equity, causing proceedings to be indefinitely and oppressively multiplied.11 That statute now provides for assignments of choses in action does not, however, deny any role to equity in the recognition and enforcement of choses in action: see [3.40]–​[3.115].

5

Olsson v Dyson (1969) 120 CLR 365 at 388. See also ALH Group Property Holdings Pty Ltd v Chief Commissioner of State Revenue (2012) 245 CLR 338 at [12] per French CJ, Crennan, Kiefel and Bell JJ; Yara Australia Pty Ltd v Oswal (No 2) [2013] WASCA 187 at [96], [97] per McLure P.

6

This is so even if the contract in question uses the language of assignment, when in substance what is effected is no more than a novation: see, for example, Savvy Vineyards 3552 Ltd v Kakara Estate Ltd [2015] 1 NZLR 281.

7

Meaning choses in action recoverable only in a court of equity, for example, pecuniary legacies, a share or interest in a partnership, an interest in trust funds and a reversionary interest under a will.

8

A legal chose in action means a chose enforceable by an action at law, such as a common debt.

9

Warmstrey v Tanfield (1628) 1 Rep Ch 29; 21 ER 498; Re Crothers [1930] VLR 49 at 55 per Cussen J, at 65 per Macfarlane J.

10

Heath v Hall (1812) 4 Taunt 326 at 328; 128 ER 355 at 356 per Mansfield CJ.

11

Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 at 14 per Viscount Cave LC.

74 [3.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Assignments in Equity  Chapter  3

Disposal and transfer of equitable interests outside of an assignment [3.20]  Assignment is not the only vehicle through which an equitable interest in property can

be transferred or disposed. Other vehicles include the following.12 First, the holder of an equitable interest who expresses an intention to hold that interest on trust for other persons may become a trustee thereof. This amounts to a declaration of trust, and exhibits similarities to an assignment.13 Each is premised on an expression of intention and some action by the declarant/​assignor. Unlike an assignment, though, the declarant of the trust disposes of the equitable interest but retains a legal interest in the trust property. By contrast, the assignor intends by a sufficient voluntary act to divest herself or himself of the chose in action the subject of the assignment. Also, whereas an assignee may in some circumstances be met with the objection that “equity will not assist a volunteer” (see [P.120]), no such objection stands in the way of a beneficiary of a trust created by a person declaring herself or himself trustee of property he or she owns. This is because, subject to any applicable writing requirements (see [18.05]), the trust is created by the declaration and does not require the trustee actually to transfer the trust property to another person. Secondly, a person for whom property is held upon trust may give to her or his trustee a direction requiring the trustee to hold the property on trust for another person. Thirdly, a person may release or surrender her or his equitable interest or, in the case of a beneficiary under a trust, disclaim that interest: see [20.75]–​[20.90]. Fourthly, equitable interests under a trust may expire pursuant to a power of revocation of the trust: see [25.125]. Importantly, statute requires that the disposition of an equitable interest subsisting at the time of its disposition be in writing: see [18.05], [18.10].

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Statutory Assignments Statutory scheme [3.25]  The assignment of “debts and other legal choses in action” is governed by statute in

each State and Territory.14 The relevant Victorian provision is set out by way of example: Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to claim such debt or thing in action, shall be and shall have been deemed to have been effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice —​

(a) the legal right to such debt or thing in action;



(b) all legal and other remedies for the same; and



(c) the power to give a good discharge for the same without the concurrence of the assignor;

12

Comptroller of Stamps (Vic) v Howard-​Smith (1936) 54 CLR 614 at 619–​620 per Starke J, at 621–​622 per Dixon J; Sheffield v Sheffield [2014] WTLR 1039 at [80] per Judge Pelling QC.

13

Cf Edelman and Elliott, “Two Conceptions of Equitable Assignment” (2015) 131 LQR 228 (who maintain an alternative conception of equitable assignment as involving the creation of a trust, in this context characterising the assignment not as a transfer of rights but a creation of new rights or powers in the assignee in equity that encumber the assignor’s existing rights).

14

Civil Law (Property) Act 2006 (ACT), s 205; Conveyancing Act 1919 (NSW), s 12; Law of Property Act 2000 (NT), s 182; Property Law Act 1974 (Qld), s 199; Law of Property Act 1936 (SA), s 15; Conveyancing and Law of Property Act 1884 (Tas), s 86; Property Law Act 1958 (Vic), s 134; Property Law Act 1969 (WA), s 20.

[3.25]  75 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

Provided that if the debtor, trustee, or other person liable in respect of such debt or thing in action has notice —​

(a) that the assignment is disputed by the assignor or any person claiming under him; or



(b) of any other opposing or conflicting claims to such debt or thing in action; he may, if he thinks fit, either call upon the persons making claim thereto to interplead concerning the same, or may pay the debt or other thing in action into Court under the provisions of the Trustee Act 1958.

The legislation gives the assignee the legal right to the debt,15 and not merely the right to sue for it without joining the assignor, the latter being a procedural advantage over equitable assignments (see [3.120]).16 As explained by Lord Esher MR in Read v Brown:17 [T]‌he words mean what they say; they transfer the legal right to the debt as well as the legal remedies for its recovery. The debt is transferred to the assignee and becomes as though it had been his from the beginning; it is no longer to be the debt of the assignor at all, who cannot sue for it, the right to sue being taken from him; the assignee becomes the assignee of a legal debt and is not merely an assignee in equity, and the debt being his, he can sue for it, and sue in his own name.

An Australian judge has likewise noted that a valid statutory assignment effects “a divesting of legal title correlative to the transfer of the right, so that if notice has been duly given, the debt or chose in action no longer belongs to the assignor and he cannot take proceedings to recover it”.18 [3.30]  This statutory form of assignment does not govern all assignments. Specific rules pre-

scribed by other statutes exist for assignment of certain choses in action, such as copyright,19 patents20 and trademarks.21 Principal requirements

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[3.35]  What the legislation does is give a further means of enforcement to assignees of debts

or legal choses in action. It does not deal with the transaction of assignment itself,22 and so an assignment for the purposes of the statute requires, like an equitable assignment (see [3.45], [3.50]), a clear and unconditional intention to assign.23 Beyond this, characteristics of a valid statutory assignment are the following: • The assignment must be “absolute”. Though whether or not an assignment is “absolute” is ultimately a matter of construction of the relevant instrument as a whole, it requires at its core that the assignment transfer “unconditionally all the rights of the assignor in the chose to the assignee”.24 It follows that assignments subject to a condition

15

Read v Brown (1888) 22 QBD 128 at 131 per Lord Esher MR (adding that the assignee would have a legal right to sue for and recover the debt even had the legislation not contained the words “and all legal and other remedies for the same”).

16

Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1371 per Mance LJ.

17

Read v Brown (1888) 22 QBD 128 at 132.

18

Carob Industries Pty Ltd (in liq) v Simto Pty Ltd (2000) 23 WAR 515 at 522 per Malcolm CJ.

19

Copyright Act 1968 (Cth), s 196.

20

Patents Act 1990 (Cth), ss 13, 14.

21

Trade Marks Act 1995 (Cth), Pt 10.

22

Goodridge v Macquarie Bank Ltd (2010) 265 ALR 170 at [165] per Rares J.

23

Westbourne Grammar School v Sanget Pty Ltd [2007] VSCA 39 at [5]‌per Nettle JA.

24

Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 at 732 per Hammond J, endorsed by Sackville AJA (with whom Hodgson and Campbell JJA concurred) in One.Tel Ltd (in liq) v Watson [2009] NSWCA 282 at [107].

76 [3.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Assignments in Equity  Chapter  3

precedent,25 or (excepting Western Australia and New Zealand)26 of part only of a debt,27 are not absolute. Nor is an assignment purporting to be only by way of charge,28 except where the whole right of the mortgagor/​chargor in the estate passes to the mortgagee/​ chargee with provision for reassignment, including via a resulting trust,29 on the occurrence of a future event (such as the repayment of a loan for which the assignment is being held as a security).30 Non-​absolute assignments can only be effected in equity, and then only if the requirements of an equitable assignment are met: see [3.40]–​[3.115]. • The assignment must be made in writing and signed by the assignor. The assignment can be absolute and “effectual in law” without notice to the assignee or the assignee’s assent.31 A disclaimer by the intended assignee renders a purported assignment a nullity as from the date of the disclaimer, and relates back to the time of the notice given to the person liable; any moneys received by the assignee prior to disclaiming are held as trustee.32

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• The subject matter of the assignment must be a debt or “other legal chose in action”. That the phrase “legal chose in action” has been interpreted to mean “lawfully assignable chose in action”33 allows traditionally equitable choses in action to be assigned under the statute.

25

Durham Bros v Robertson [1898] 1 QB 765; Interstate Investment Company Ltd v Mobbs (1928) 28 SR (NSW) 572; Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 at 673 per Glass JA (dissenting on the facts on this point); NT Power Generation Pty Ltd v Trevor (2000) 23 WAR 482 at 488 per Ipp J; Gibbston Valley Estate Ltd v Owen [2000] ANZ Conv R 295 at 298 per Henry and Blanchard JJ, at 300 per Tipping J.

26

See Property Law Act 1969 (WA), s 20(3) (which expressly allows the transfer of part of a chose in action); Property Law Act 2007 (NZ), s 48 (definition of “thing in action”, applicable to assignments made on or after 1 January 2008: s 49(1)).

27

Jones v Humphreys [1902] 1 KB 10; Williams v Atlantic Assurance Co [1933] 1 KB 81; Re Steel Wing Co Ltd [1921] 1 Ch 349; Sandford v D V Building & Constructions Co Pty Ltd [1963] VR 137 at 139 per Sholl J; Re Smyth [1970] ALR 919 at 922 per Fox J; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447 per Barwick CJ, Stephen, Mason and Wilson JJ; Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1371 per Mance LJ. There is also an historical reason for this. Before the statute an assignee was permitted to bring her or his action at law in the name of the assignor when he or she was seeking to recover a whole debt assigned to her or him. Where, however, a debt had been broken into parts this procedure was not appropriate (because a creditor cannot recover a debt piecemeal in a court of law), so proceedings to enforce the assignment had to be brought in a court of equity; the assignee, not the assignor, being the plaintiff in the suit. The assignor (the creditor) as legal owner, the debtor and any assignees of other parts of the debt were all necessary parties, so that all the obligations of the debtor and the rights of all persons interested in the fund might be established by the decree. See Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 29–​30 per Windeyer J.

28

National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 37 FLR 404 at 407–​408 per Blackburn J.  See, for example, Mio Art Pty Ltd v Mango Boulevard Pty Ltd (No 6) [2015] QSC 116 (where the relevant agreement provided that, upon the occurrence of an event of default, the third party “chargee” could exercise an option to be paid amounts due to the plaintiff “chargor”; this meant that, until an event of default, there was a charge and so did not effect an absolute assignment) [affd Mango Boulevard Pty Ltd v Mio Art Pty Ltd [2016] QCA 148]. It may be queried, in any case, whether a charge in the strict legal sense involves any assignment: see Turner, “Assignment by Way of Charge” (2004) 24 Aust Bar Rev 280.

29

One.Tel Ltd (in liq) v Watson [2009] NSWCA 282 at [107] per Sackville AJA, with whom Hodgson and Campbell JJA concurred. See, for example, Burlinson v Hall (1884) 12 QBD 347.

30

Clyne v Commissioner of Taxation (1981) 150 CLR 1 at 20 per Mason J; Lawless v MacKendrick [2007] WASC 114 at [29] per Newnes M; Austino Wentworthville Pty Ltd v Metroland Australia Ltd (2013) 93 ACSR 297 at [62] per Barrett JA, with whom Beazley P and Meagher JA concurred. See, for example, Tancred v Delagoa Bay and East Africa Railway Co (1889) 23 QBD 239 (where it was held that an assignment of a debt to secure an advance, with a proviso for redemption and reassignment upon payment of all moneys due under the advance, was an absolute assignment).

31

Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 at 673 per Glass JA (dissenting on the facts on this point), at 678–​679 per Samuels JA.

32

Crago, “Principles of Disclaimer of Gifts” (1999) 28 UWALR 65 at 75. The trust is a constructive trust, as it is imposed to secure accountability where retaining an equitable interest in property is inconsistent with the dictates of equity: see [38.05].

33

Torkington v Magee [1902] 2 KB 427 at 430 per Channell J; Re Pain [1919] 1 Ch 38 at 44; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447 per Barwick CJ, Stephen, Mason and Wilson JJ; Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 at [191]–​[193] per Emmett J.

[3.35]  77 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

But it does not encompass assignments of a “future” chose in action, which can only be assigned in equity:34 see [3.95]–​[3.115]. • Express notice of the assignment must be given in writing to the debtor,35 although the assignor need not give it; the assignee may do so.36 Until notice is given, the assignment is not effective, and so a putative assignee lacks standing at law to sue to recover the debt or other chose in action in her or his own name.37 There is authority that an effective notice must be accurate in all essential particulars,38 so that “the notice with a wrong date was a notice of a non-​existing document”.39 Yet the contrary view is that notice of the fact of an assignment is sufficient if it leads the debtor to know with certainty in whom the legal right to enforce the debt is vested.40 On this view, even if the form of the notice contains a mistake as to the date of the assignment, or some other omission,41 it is effective if in all the circumstances the document would acquaint the debtor with the fact that a third party is or claims to be the assignee of the chose in action. As this view places substance over form —​it distinguishes between imperfections that are merely in form so as not to confuse any debtor as to the fact of the assignment, and those imperfections that are of substance, which may indeed have that effect —​it is to be preferred. The significance of this issue is, in any event, reduced given that assignments not meeting the statutory formalities may be effective as equitable assignments:42 see [3.40], [3.45].

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• If the statutory requirements are met, consideration is not necessary for the assignment to be valid and fully effectual even though it is not by deed.43 The legislation provides a means whereby the legal owner of a chose in action can make a complete and perfect gift of it.44 Outside the legislation, though, consideration may in some circumstances be required to effect a valid equitable assignment: see [3.80]–​[3.115].

34

Sandford v D V Building & Constructions Co Pty Ltd [1963] VR 137; Westgold Resources NL v St George Bank Ltd (1998) 29 ACSR 396 at 433–​434 per Anderson J; Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1371 per Mance LJ.

35

For assignments made on or after 1 January 2008, the equivalent New Zealand legislation removed the requirement for giving notice to the debtor, thus removing one of the remaining distinctions between statutory and equitable assignments (although notice remains important, as in the case of equitable assignments, to determine upon whom the debtor is required to pay, and for the purposes of priorities and protecting the assignee’s position): see generally Property Law Act 2007 (NZ), ss 48–​53. The assignee who omits to give notice remains vulnerable because the legislation preserves the rule that a debtor who pays the assignor without knowledge of the assignment cannot be required to pay twice:  s 51(2). For commentary, see Fenton, “Assignments: Abolition of the Requirement for Written Notice in New Zealand” (2010) 126 LQR 183; Fenton, “Notice to a Debtor in Statutory Assignment —​New Zealand Developments” [2010] Conv 39.

36

Olsson v Dyson (1969) 120 CLR 365 at 386–​387 per Windeyer J; Bennell v Westlawn Finance Ltd [2010] FCA 658 at [67] per Nicholas J.

37

Westbourne Grammar School v Sanget Pty Ltd [2007] VSCA 39 at [8]‌per Nettle JA.

38

International Leasing Corp (Vic) Ltd v Aiken [1967] 2 NSWR 427 at 449–​450 per Asprey JA; W F Harrison and Co Ltd v Burke [1956] 1 WLR 419 at 421 per Denning LJ; NT Power Generation Pty Ltd v Trevor (2000) 23 WAR 482 at 488 per Ipp J.

39

Van Lynn Developments Ltd v Pelias Construction Co Ltd [1969] 1 QB 607 at 612 per Lord Denning.

40

Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 at 439 per Dixon and Evatt JJ; Lonsdale Sand and Metal Pty Ltd v Federal Commissioner of Taxation (1998) 162 ALR 220 at 234–​235 per Mansfield J.

41

See, for example, Grey v Australian Motorists & General Insurance Co Pty Ltd [1976] 1 NSWLR 669 at 680–​681 per Samuels JA (who did not think that the omission of either date or signature from the second part of the relevant document prevented the words in question —​“payment of that amount must accordingly be made forthwith to it” —​from constituting adequate notice, given that it evidenced a clear intention to effect an absolute assignment).

42

Westgold Resources NL v St George Bank Ltd (1998) 29 ACSR 396 at 436 per Anderson J; Lonsdale Sand and Metal Pty Ltd v Federal Commissioner of Taxation (1998) 162 ALR 220 at 233 per Mansfield J; Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 at 339–​340 per Tipping J (CA).

43

This made explicit in the equivalent New Zealand legislation: Property Law Act 2007 (NZ), s 50(2).

44

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 28 per Windeyer J.

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Assignments in Equity  Chapter  3

• Statutory assignments are subject to the equities that would have been entitled to priority had the statute not been enacted. These equities are defensive, being matters that justice requires be brought to account in permitting a claim to be enforced, not “offensive” equities creating new rights or improving the position of the debtor or obligor. As explained by Brereton J in Franks v Equitiloan Securities Pty Ltd:45 The preserving of the “equities” … means that the obligor can raise against an assignee all matters that he could have raised against the assignor in extinguishment or reduction of the liability. This ensures that the obligor does not become liable to pay the assignee a sum which, because of an available set-​off or counter-​claim, it would never have had to pay to the assignor. But that is not to say that the obligor should be better off. The obligor retains its rights against the assignor, who remains primarily liable on any counter-​obligation. This leaves the obligor in no worse position than would have been the case in the absence of an assignment. As against the assignee, the obligor retains the benefit of the defences it would have had against the assignor. That extends to defences by a way of cross-​claim, which can be set off in extinguishing or reduction of the obligor’s liability, but it does not extend to improving the obligor’s position by creating new rights to sue the assignee, in circumstances where those rights lie against the assignor. Liabilities, unlike assets, are not capable of assignment. It is consistent with this that the idea of an equity, in this context at least, is that while it impeaches the right of the assignee, it does not create a right in the obligor. • An assignee need not join the assignor when suing upon the assignment;46 after all, the debt or chose in action has been made over unconditionally to the assignee. Conversely, it is commonplace for an equitable assignee to be required to join the assignor in these circumstances: see [3.120]–​[3.135].

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EQUITABLE ASSIGNMENTS [3.40] The phrase “equitable assignment” can mean an assignment of an interest that is a

creature of equity (such as the interest of a trust beneficiary) or an assignment of a legal chose in action not assignable except by the aid of equity.47 Expressed more generally, “[a]‌n equitable assignment is an assignment which a Court of Equity will recognise and protect”.48 As the statutory mode of assignment discussed at [3.25] applies to both legal and equitable choses in action, in practice the concept of an equitable assignment is relevant only to assignments that either do not fulfil the statutory requirements, or fall outside the statute but are otherwise recognised and protected by equity. Some choses in action, however, are non-​ assignable even in equity, such as public salaries,49 assignments tainted with maintenance50 (including, for instance, the assignment of a bare right to litigate)51 and contracts involving personal skill or

45

Franks v Equitiloan Securities Pty Ltd [2007] NSWSC 812 at [33].

46

Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 at 731–​732 per Hammond J.

47

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 30–​31 per Windeyer J.

48

Yablonski v Cawood (1997) 143 DLR (4th) 65 at 73 (CA(Sask)).

49

Field v Battye [1939] SASR 235.

50

As to the tort of maintenance, see Balkin and Davis, Law of Torts (5th ed, LexisNexis Butterworths, 2013), [25.33]–​[25.43].

51

Poulton v Commonwealth (1953) 89 CLR 540 at 602 per Williams, Webb and Kitto JJ (in the context of bare causes of action in tort); Wakeling v Wade [2011] FCA 1292 at [73] per Nicholas J (applying the same principles to bare causes of action for breach of contract and breach of fiduciary duty); Simpson v Norfolk and Norwich University Hospital NHS Trust [2012] QB

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Equity and Trusts in Australia

confidence.52 These exclusions rest on public policy and the intrinsically personal nature of the interest. Even in equity, therefore, a covenant entered into for the benefit of a person, and not for the protection of property, is not assignable.53 As a result, rights that are purely personal to an individual can be assigned neither in law nor in equity.54 Requirement of an intention to assign [3.45]  An assignment that does not meet the statutory prescription (see [3.25]–​[3.35]) may

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be enforceable in equity55 on proof of an intention to assign by the assignor. Reflecting the maxim “equity looks to intent rather than form”, no particular form is required.56 An intention to assign, whether appearing on the face of the document, or proved by extrinsic circumstances,57 will be probative unless its terms prove insufficiently uncertain. So a valid equitable assignment need not necessarily on its face purport to be an assignment, or use the language of assignment. If the transaction is in substance an assignment the courts will treat it so; the parties cannot effectually agree that what is in law an assignment shall not be an assignment. A transaction not in the form of an assignment cannot, however, operate as an assignment pursuant to an agreement that it effects an assignment.58 Thus the distinctions between statute and equity go to the form of the assignment, not to the entitlement to make it or to the requirement of an intention to assign. In Smith v Perpetual Trustee Co Ltd,59 for example, a will under which the appellant was entitled to a benefit stipulated for the benefit to lapse were the appellant to assign or charge it. The appellant owed moneys to several creditors, including his solicitor (D), and planning to travel overseas he executed a power of attorney empowering D to demand, sue for, and recover all moneys payable to the appellant by the trustees of the will. The appellant informed the trustees by letter that he had instructed D to pay his creditors out of his income as it fell due, requesting the trustees to pay all future income and corpus in the estate to which he 640 at [15]–​[24] per Moore-​Bick LJ, with whom Dame Janet Smith and Maurice Kay LJ concurred (in the context of a claim for personal injury). Cf Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 703 per Lord Roskill, with whom Lords Keith, Edmund-​Davies and Fraser agreed (noting that the assignment of a cause of action may nonetheless be valid if there has been an assignment of a property right to which the cause of action is attached, or if the assignee has a genuine commercial interest in taking the assignment and enforcing it for her or his own benefit). 52

Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014.

53

Davies v Davies (1887) 36 Ch D 359 at 388 per Cotton LJ, at 394 per Bowen LJ; Wilson v Commissioner of Probate Duties (Vic) (1978) 8 ATR 799 at 804 per Murphy J.

54

Wilson v Commissioner of Probate Duties (Vic) (1978) 8 ATR 799 at 805 per Murphy J.

55

As equity originally intervened to assist the assignments of choses in action because they were not assignable at law, now that they are so assignable under statute it can be queried why equity should aid imperfect attempts at voluntary assignments of them. The better view is that the statute provides a method or machinery whereby assignment may be effected, but that it does not by its terms purport to detract from the validity of any transaction that would have been effective in equity had it occurred before the statute came into operation: William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 461 per Lord Macnaghten (“The statute does not forbid or destroy equitable assignments or impair their efficacy in the slightest degree”); Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 28 per Windeyer J.

56

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 at 158–​159 per Griffith CJ; Re K B Docker (1938) 10 ABC 198 at 225–​ 230 per Lukin J; Re Bond (1940) 35 Tas LR 96 at 101–​102 per Morris ACJ; Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 391 per Barwick CJ, at 397 per Kitto J.

57

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 at 158–​159 per Griffith CJ. The weight accorded to extrinsic evidence varies inversely with the formality of the instrument and the deliberateness with which it is cast: Federal Commissioner of Taxation v Betro Harrison Constructions Pty Ltd (1978) 20 ALR 647 at 651 per Bowen CJ.

58

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 at 160 per Griffith CJ, at 167 per Higgins J; NT Power Generation Pty Ltd v Trevor (2000) 23 WAR 482 at 489 per Ipp J.

59

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148.

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Assignments in Equity  Chapter  3

was entitled to D. The power of attorney was expressed to continue in force until notice of death or revocation. This did not effect an assignment, ruled the High Court, and so did not trigger the forfeiture clause. Higgins J explained that, for an assignment, “there must be some distinct indication of intention to make over, to part with control over, the thing alleged to be assigned”.60 On its face the power of attorney was “merely a power given by [the appellant] … to his solicitor to receive moneys payable to him by the trustees of his grandfather’s estate, and to operate on his bank account”.61 His Honour saw nothing to brand the power as irrevocable, to the contrary rather. Barton J elaborated the latter point in the following terms:62

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The power of attorney was revocable, and if it were revoked, as it might be next day, the letter [to the trustees] would cease to operate with it. It cannot be said that the case comes within those in which a transaction has been held to be an assignment because of the giving of a power of attorney to a creditor, which is irrevocable, it is true, where not expressly made revocable. But where the document is on its face revocable the creditor who so takes it does so with that incident, and Mr Smith had it in his power to revoke at any moment. No doubt the parties intended to make the transaction as near an approach to a security as they could without making an assignment or a charge. But I am clearly of opinion that the dominant intention was to avoid any such alienation, an intention as strong on the part of [D]‌as on that of the appellant. The documents are entirely in conformity with that intention, and the evidence rather confirms than negatives it.

It follows that an assignment requires proof of an intention to transfer a chose in action to the assignee in a manner binding on the assignor, not merely an intention to give a revocable mandate but retaining ownership of the chose in action. The assignment is effective only if the alleged assignor, opined Griffith CJ in Smith, “intends to part with his dominion over the property”.63 If the evidence denies an intention that the assignment takes immediate (or any) effect, no equitable assignment arises.64 For example, in NT Power Generation Pty Ltd v Trevor,65 Ipp J held that as the assignors intended to make a complete disposition and transfer of a debt only on a demand being made by the assignee, no valid equitable assignment arose until the demand was made. As this was the parties’ paramount intention, “equity would not give effect to any different result”.66 [3.50]  Many of the cases dealing with intention to assign, like Smith, relate to the alleged

assignment of debts. Smith shows that a mere request to a debtor to pay the debt to a creditor of the person making the request does not automatically constitute an equitable assignment —​ whether or not it does depends on the nature of the transaction. The old dicta of Lord Truro that “an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor … will operate as an equitable assignment of the … fund”67

60

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 at 167.

61

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 at 168.

62

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 at 162.

63

Smith v Perpetual Trustee Co Ltd (1910) 11 CLR 148 at 159.

64

Pennington v Waine [2002] 1 WLR 2075 at 2098 per Clarke LJ.

65

NT Power Generation Pty Ltd v Trevor (2000) 23 WAR 482.

66

NT Power Generation Pty Ltd v Trevor (2000) 23 WAR 482 at 489.

67

Rodick v Gandell (1852) 1 De GM & G 763 at 777, 778; 42 ER 749 at 754. See also Durham Bros v Robertson [1898] 1 QB 765 at 769 per Chitty LJ; Perpetual Trustee Co Ltd v Smith (1938) 39 SR (NSW) 19 at 38 per Jordan CJ.

[3.50]  81 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

is therefore phrased in terms too absolute.68 The better view is that a person effectually assigns a debt only if “the debt and the right to receive it have been transferred to the third party”;69 more is required than a mere request to another to pay the money to the third party as agent. A person’s declaration as trustee of debts owing to her or him does, however, evidence an intention to effect an equitable assignment of the debts.70 Equity will compel that person, as trustee, to pay over the proceeds of the debts, which are impressed with the same trust as that which affects the debts represented by those proceeds.71 An irrevocable authorisation directed to the government to pay funds to a bank as repayment for a loan has also been held to evidence an intention to effect an assignment,72 as has a purported transfer of “all my right title and interest” in a debt or other chose in action.73 Yet if the obligations created by an agreement are triggered only after a debtor has paid her or his creditor, the creditor in undertaking that obligation does not assign or agree to assign the debt.74 Relevance of notice [3.55] Unlike a statutory assignment, an effectual equitable assignment, as between assignor

and assignee, does not require notice to the debtor; a valid and effective title in the assignee vests independent of notice.75 Yet there remain three practical reasons why notice is desirable, each discussed below.

Third party not bound until notice received [3.60]  Until notice is received, a third party (debtor or obligor) is not bound by the assign-

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ment and may continue to pay the assignor. After all, a debtor cannot be expected to alter payment arrangements to reflect the terms of an assignment of which he or she lacks notice. So in a sense, until the debtor receives notice not even in equity is there an assignment in the

68

Cf Palmer v Carey [1926] AC 703 where the Privy Council advised that a promise by A to a creditor (B) that A would pay the money received from other persons (C) in respect of goods A sold to C, to B’s bank to the credit of B for appropriation and distribution between A and B in accordance with their agreement did not constitute an equitable assignment of the money received by A from such sales: see at 706–​707 per Lord Wrenbury. This decision was questioned by Fitzgerald P in Re Bruynius [1995] 1 Qd R 492 at 495–​496, who opined that an agreement such as in Palmer should not necessarily be denied effect as an equitable assignment. See also at 498 per Pincus JA and Derrington J. Cf Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 at 422–​423 per Brennan CJ (who considered the statement of law upon which Lord Wrenbury based his decision in Palmer v Carey to be correct); G & M Aldridge Pty Ltd v Walsh (1999) 33 ACSR 546 at 556–​557 per Phillips JA [affd G & M Aldridge Pty Ltd v Walsh (2001) 203 CLR 662]; Flightline Ltd v Edwards [2003] 1 WLR 1200 at 1209–​12 (CA); FTV Holdings Cairns Pty Ltd v Smith [2014] QCA 217 at [42] per Fraser JA.

69

James Talcott Ltd v John Lewis & Co Ltd [1940] 3 All ER 592 at 595 per MacKinnon LJ.

70

G E Crane Pty Ltd v Federal Commissioner of Taxation (1971) 126 CLR 177 at 183 per Menzies J. This does not mean, however, that an assignment can be equated with a declaration of trust: see [3.20].

71

Federal Commissioner of Taxation v Betro Harrison Constructions Pty Ltd (1978) 20 ALR 647 at 655 per Brennan J.

72

Cowichan Native Heritage Society (Trustee of) v TD Bank (1993) 106 DLR (4th) 126.

73

Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 391 per Barwick CJ, at 397 per Kitto J.

74

Palmer v Carey (1924) 34 CLR 380 at 388 per Knox CJ [affd Palmer v Carey [1926] AC 703 at 707 (PC)]; Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 13 per Latham CJ; Federal Commissioner of Taxation v Betro Harrison Constructions Pty Ltd (1978) 20 ALR 647 at 655–​656 per Brennan J.

75

Re Crothers [1930] VLR 49 at 66 per Macfarlane J; Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 at 561 per Giles J; Zuks v Jackson McDonald (a firm) (1996) 132 FLR 317 at 328 per Steytler J; Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 at 449 per McMurdo P, at 456 per Pincus JA. See Chin-​Aun, “Notice in Equitable Assignment of Choses in Action: Divergence in the Common Law and its Impact” (2002) 18 JCL 107.

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Assignments in Equity  Chapter  3

full sense, that is, the transfer of rights so as to put the assignee in the position of the assignor in relation to the other party to the contract.76 To throw on the debtor an obligation to pay the assignee, the debtor must “be given to understand that the debt has been made over by the creditor to some person”.77 Notice need not be in any particular form; it may be informal, provided the fact of the assignment is clearly brought to the mind of the debtor.78 A debtor who has received no “clear and unambiguous notice of the assignment” may discharge her or his debt by payment to the assignor.79 In Squires v SA Steel and Sheet Pty Ltd,80 for example, a finance company (“Heller Factors Pty Ltd”) purchased the debts owed to a trading company (“Eastern Haulage”) and sent invoices to the debtors bearing the words: “This account has been purchased by Heller Factors Pty Ltd. Please forward payment to [a nominated address]”. Bollen J held that these words did not clearly say or imply that there had been an assignment, at best leaving the matter in doubt. His Honour explained:81 After all, the words do not tell the [defendant debtor] that it may not pay Eastern Haulage or that it must pay Heller Factors. That … is a vital point … [A]‌reasonable officer of the defendant might well decide to pay Eastern Haulage, whom it knew, thinking that Eastern Haulage would adjust to Heller Factors. The words do not give the reasonable debtor a sense of peril if he ignores the request to pay. And … it is only a request, “please pay …”. The words do not say that the purchase of the account means that payment to Heller Factors and no one else is essential.

On the facts this dictated that a debtor who had paid the trading company was not then liable also to pay the finance company. No doubt his Honour’s decision was influenced by the fact that the notice had come from the assignee. Had it come from the assignor, a different conclusion would likely have ensued.

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[3.65]  A debtor who has received notice of an equitable assignment must withhold all further

payments to the assignor, except with the consent of the assignee, or be liable to pay again to the assignee payments made to the assignor once notice was received. Notice to a lawyer regarding a transaction in which he or she is engaged on behalf of a client is, for this purpose, notice to the client, as appears from the New Zealand Court of Appeal’s decision in Magee v UDC Finance Ltd.82 There the appellants purchased property under an arrangement to mortgage it back to the vendor (“B”). B assigned the mortgage to the respondent financier. B’s solicitors had communicated to the appellants’ solicitors both orally and in writing that B was assigning the interest to the respondent. The respondent then informed the appellants that they would be required to meet the balance outstanding. The appellants argued that they had no knowledge of an effective equitable assignment of the debt. The New Zealand Court of 76

Re Crothers [1930] VLR 49 at 65 per Macfarlane J; Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 at 561 per Giles J; Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 at 340–​345 per Tipping J.

77

William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 462 per Lord Macnaghten.

78

Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142 at 144 per Bollen J; Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995] 3 NZLR 1 at 5 (PC).

79

Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142 at 144 per Bollen J.

80

Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142.

81

Squires v SA Steel and Sheet Pty Ltd (1987) 45 SASR 142 at 147.

82

Magee v UDC Finance Ltd [1983] NZLR 438.

[3.65]  83 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

Appeal held that the appellants could not have the benefit of the payments made to B after the assignment to the respondent, but must meet the respondent’s demand because, in the words of Cooke J, “[n]‌otice to a solicitor in and affecting a transaction in which he is engaged on behalf of the client is notice to the client”.83

Priority of assignees dependent on order of notice [3.70]  Where there are successive dealings with a chose in action, the priority between those

claiming as assignees is determined prima facie by the order in which those assignees gave notice84 of their assignment to the debtor, not by the order in which the assignments were made. Known as the rule in Dearle v Hall,85 it is an exception to the often-​cited notion that, where there are competing equities, the “first in time” prevails (as to which see [2.10]). An application of the rule is found in E Pfeiffer Weinkellerei-​Weineinkauf GmbH & Co v Arbuthnot Factors Ltd.86 The plaintiff sold wine to an English importer on terms including a property reservation clause under which “[a]‌ll claims [the importer] gets from sale … with all rights including his profit amounting to his obligation towards [the plaintiff], will be passed on to [the plaintiff]”. The importer sub-​sold the wine and subsequently entered into a factoring agreement by which he agreed to assign to the defendant the debts owed to him. The assignments were made and the sub-​purchasers notified. The importer failed to pay the plaintiff all sums due to it. The latter claimed to be the beneficial owner of the proceeds of each sub-​sale and that the defendant’s title to the goods was subordinate to the plaintiff’s prior equitable title. Phillips J, applying Dearle v Hall, held that the defendant enjoyed priority over any interest of the plaintiff.

Impact of notice on standing of assignee

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[3.75]  What remains the subject of conflicting authority is whether an equitable assignment is

effective to entitle the assignee to sue on a chose in action assigned before notice of the assignment is given to the obligor. As this relates to an equitable assignee’s standing, it is discussed under that heading: see [3.135]. Equitable assignment of legal choses [3.80]  As statute provides a means of assignment to effect a “perfect gift” at law, non-​com-

pliance with the statutory requirements (as to which see [3.25]–​[3.35]) renders the assignment imperfect. Consistent with the maxim “equity will not perfect an imperfect gift”, the assignment of a legal chose in action that does not meet the statutory formalities cannot be upheld in equity unless “by reason of some fact or circumstance which a court of equity regards as binding the legal owner in conscience to hold the property upon trust for the assignee”.87

83

Magee v UDC Finance Ltd [1983] NZLR 438 at 441. See also at 442–​443 per Somers J, at 443 per Jeffries J.

84

This notice may be in any form and may even be from an outside, but reliable, source: Lloyd v Banks (1868) LR 3 Ch App 488.

85

Dearle v Hall (1828) 3 Russ 1; 38 ER 475. See de Lacy, “The Priority Rule of Dearle v Hall Restated” [1999] Conv 311; Marchant v Morton, Down & Co [1901] 2 KB 829 at 831 per Channell J (“the priority as between the two assignments, assuming each to be valid, is governed by the dates of the notices”); Re Crothers [1930] VLR 49 at 65–​66 per Macfarlane J; Olsson v Dyson (1969) 120 CLR 365 at 388 per Windeyer J; E Pfeiffer Weinkellerei-​Weineinkauf GmbH & Co v Arbuthnot Factors Ltd [1988] 1 WLR 150 at 163 per Phillips J; Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 at 561 per Giles J; Colonial Mutual General Insurance Co Ltd v ANZ Banking Group (New Zealand) Ltd [1995] 3 NZLR 1 at 5 (PC).

86

E Pfeiffer Weinkellerei-​Weineinkauf GmbH & Co v Arbuthnot Factors Ltd [1988] 1 WLR 150.

87

Olsson v Dyson (1969) 120 CLR 365 at 375 per Kitto J.

84 [3.70] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Assignments in Equity  Chapter  3

In this context, the assignor’s conscience can be bound by equity in one of three main ways. First, if the assignee has furnished consideration for the assignor’s promise to assign, equity will regard that promise as binding the assignor’s conscience.88 This represents the flipside of the maxim “equity will not assist a volunteer”. Secondly, if the alleged assignor, even though not all the statutory requirements have been complied with, has nonetheless done all the statute requires her or him to do to effect the assignment, equity restrains the assignor from derogating from the assignment.89 For example, statute requires notice of the assignment to be given, and so the assignment is incomplete at law until notice is given. But the statute does not require that the assignor give it —​it can be given by the assignee. Until that notice is given, the assignor is bound in equity, even if the assignment is without consideration, because he or she has done all that the law required of her or him to complete the dealing.90 So although consideration is essential for equity to enforce a mere promise to assign, it is not needed where there is nothing further required to be done by the assignor to complete it.91 Thirdly, equity will regard an assignor’s conscience as bound to give effect to a promise to assign if, absent consideration, the intending assignor subsequently encourages or induces the intended assignee to act to her or his prejudice on the footing that the interest the subject of the assignment has become the assignee’s, such that it is unconscionable for the assignor to withhold that interest from the assignee.92 This represents an application of the doctrine of equitable estoppel: see Ch 10.

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[3.85]  There may be other ways to bind an assignor’s conscience independent of considera-

tion, or even an overlying principle to this end. The English Court of Appeal in Pennington v Waine93 discussed the point. A donor signed a share form intending to gift the shares, which was delivered to neither the donee nor the company before the donor’s death. As the donor’s will made no mention of the shares, the issue concerned who was entitled to the shares. The court held that the gift operated as an equitable assignment of the shares to the donee. In so concluding, Arden LJ opined that because the principle against imperfectly constituted gifts led to harsh and seemingly paradoxical results, “[b]‌efore long, equity had tempered the wind to the shorn lamb (ie the donee)”.94 This included by the grounds mentioned above, and also by utilising the constructive trust95 and by applying a benevolent construction to words of gift.96 Her Ladyship located the principle underscoring equity’s intervention as that “a donor will not be permitted to change his or her mind if it would be unconscionable, in the eyes of

88

Perpetual Trustee Co Ltd v Smith (1938) 39 SR (NSW) 19 at 37 per Jordan CJ; Olsson v Dyson (1969) 120 CLR 365 at 375–​ 376 per Kitto J.

89

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 33 per Windeyer J (“His conscience becomes bound, not by value received, but because, as between him and the assignee, his gift was complete”); Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 397 per Kitto J; Property Law Act 1974 (Qld), s 200.

90

Anning v Anning (1907) 4 CLR 1049 (see [18.95]); Olsson v Dyson (1969) 120 CLR 365 at 386–​387 per Windeyer J.

91

Re Bond (1940) 35 Tas LR 96 at 101 per Morris ACJ.

92

Olsson v Dyson (1969) 120 CLR 365 at 376, 378–​379 per Kitto J.

93

Pennington v Waine [2002] 1 WLR 2075.

94

Pennington v Waine [2002] 1 WLR 2075 at 2087.

95

See, for example, T Choithram International SA v Pagarini [2001] 1 WLR 1, discussed at [18.145].

96

Pennington v Waine [2002] 1 WLR 2075 at 2089 (“where a court of equity is satisfied that the donor had an intention to make an immediate gift, the court will construe the words which the donor used as words effecting a gift or declaring a trust if they can fairly bear that meaning and otherwise the gift will fail”).

[3.85]  85 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

equity, vis-​á-​vis the donee to do so”.97 As the donor’s expressed intention was that the donee qualify as a director of the company, and as the only means to do so was via a shareholding, Arden LJ was satisfied that the donor intended to make an immediate gift of the shares. It would therefore have been unconscionable for the donor to recall the gift.98 Though accepting that, were proof of unconscionable conduct necessary, the facts would have justified such a finding,99 Clarke LJ preferred to focus on the basic question of whether the donor had done all she was required to do in order to effect the gift. His Lordship remarked that as “[d]‌elivery of the instrument of transfer to the transferee has never been necessary to effect a transfer of shares, whether at law or in equity”, there was no reason why “delivery to the company of either the share certificates or the transfer form should be necessary to perfect an equitable assignment”.100 The donor’s signature on the stock transfer form was, therefore, capable by itself of amounting to an equitable assignment.101 Arden LJ considered that the same result could be attained via the principle of benevolent construction. Her Ladyship remarked that the words used by a partner in the company’s auditors —​who, after a meeting at which the donor expressed her intention and the share transfers were executed, wrote to the donee on the donor’s instructions informing him of the gift and that no action on his behalf was needed —​should be construed as the donor and the partner becoming the donee’s agents for the purpose of submitting the share transfer to the company.102

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[3.90] There remains no reported Australian authority applying any such general form of

unconscionability doctrine in this context or, for that matter, recognising a specific role for constructive trusts or any principle of benevolent construction here. Yet Australian courts’ tendency to seek to give effect to a donor’s intention —​evidenced in part by recognising a valid gift when the donor has done all he or she is required to do to effect the gift: see [18.95], [18.100]  —​and to recognise a broad principle of unconscionability underlying equitable intervention (see [18.145], [18.150]), suggests that Arden LJ’s line of reasoning may not sit too uncomfortably in this jurisdiction. In any case, as the law of equitable estoppel and the remedial constructive trust is grounded in proof of unconscionable conduct (see [10.310]–​ [10.350], [38.165]–​[38.210]), though the inquiries to this end are not the same, there may be a role for an (expanded) application of these doctrines in this arena.103 Equitable assignment of equitable choses [3.95]  The presence or lack of consideration becomes a potential issue in respect of equitable

assignments of equitable choses. Whether consideration is required depends on the distinction between vested equitable choses and future equitable choses.

97

Pennington v Waine [2002] 1 WLR 2075 at 2090–​2091.

98

Pennington v Waine [2002] 1 WLR 2075 at 2091–​2092.

99

Pennington v Waine [2002] 1 WLR 2075 at 2105.

100

Pennington v Waine [2002] 1 WLR 2075 at 2095, 2096.

101

Pennington v Waine [2002] 1 WLR 2075 at 2098. See also at 2092 per Arden LJ (“delivery of the share transfer before her death was unnecessary so far as perfection of the gift was concerned”).

102

Pennington v Waine [2002] 1 WLR 2075 at 2092.

103

Cf Tjio and Yeo, “Re Rose Revisited: The Shorn Lamb’s Equity” [2002] LMCLQ 296 at 300 (who favour an approach based on the elements of estoppel rather than any general unconscionability doctrine).

86 [3.90] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Assignments in Equity  Chapter  3

Vested (“present”) equitable choses [3.100]  For an assignment of an existing vested equitable interest, consideration is not nec-

essary provided that a clear act of assignment and an intention to assign exist (see [3.45], [3.50]).104 For example, though the assignment of part of a debt cannot be effected under the statute (see [3.35]), it is effectual in equity without consideration if it is a present assignment of existing property.105 Only where an assignee has not furnished consideration is equity’s assistance required to complete the assignment, distinct from enforcing the right given, and the assignee is met with the defence that equity will not assist a volunteer.106 It should be noted that statute requires an assignment of an equitable interest or trust subsisting at the time of the assignment (that is, a vested equitable chose) to be in writing: see [18.05], [18.10].

Future equitable choses [3.105]  As the common law did not recognise assignments of choses in action generally, it

did not enforce assignments of future equitable choses in action (“expectancies”).107 Equity, however, treated an assignment of a future equitable chose as an agreement to assign the thing once it came into existence, which it would enforce if the assignee provided consideration.108 In this context, consideration serves to bind the assignor’s conscience to act in accordance with the agreement,109 not to enforce any contract.110 Without consideration the assignee is met with the defence that “equity will not assist a volunteer”.

Distinguishing vested from future equitable choses

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[3.110] As consideration is not required for effectual vested (“present”) equitable choses,

but is required for future equitable choses, it is necessary to distinguish present from future choses. This distinction is also necessary because an assignment of present chose takes effect at once, whereas an assignment of a future chose takes effect only once the property to which it applies comes into existence. A comparison of the two leading cases provides a convenient illustration of the distinction. In Norman v Federal Commissioner of Taxation,111 a husband purported to assign to his wife:  first, the interest on a loan the husband had made to a partnership, which loan was repayable at will; and secondly, the dividends from shares the husband was to receive

104

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 30–​31 per Windeyer J.

105

Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 390–​391 per Barwick CJ, at 396 per Kitto J; Re Smyth [1970] ALR 919 at 922 per Fox J; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447 per Barwick CJ, Stephen, Mason and Wilson JJ; Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1365 per Mance LJ; Cropley v Cropley (2002) 11 BPR 20,171 at [39]–​[41] per Barrett J.

106

Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 390–​391 per Barwick CJ.

107

Lunn v Thornton (1845) 1 CB 379; 135 ER 587; Joseph v Lyons (1884) 15 QBD 280.

108

Tailby v Official Receiver (1888) 13 App Cas 523 at 546 per Lord Macnaghten; Re Ellenborough [1903] 1 Ch 697; Re Lind [1915] 2 Ch 345 at 359–​360 per Swinfen-​Eady LJ, at 365–​366 per Phillimore LJ, at 370, 372–​373 per Bankes LJ; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 18 per McTiernan J, at 20–​21 per Menzies J, at 24–​26 per Windeyer J (in dissent but not on the law: see at 16 per Dixon CJ); Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 390–​392 per Barwick CJ; Re Androma Pty Ltd [1987] 2 Qd R 134 at 149 per McPherson J; Westgold Resources NL v St George Bank Ltd (1998) 29 ACSR 396 at 433–​434 per Anderson J; Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1373 per Mance LJ; FTV Holdings Cairns Pty Ltd v Smith [2014] QCA 217 at [43] per Fraser JA.

109

Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 16 per Latham CJ, at 27 per Dixon J; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 24 per Windeyer J (in dissent but not on the law); Re Androma Pty Ltd [1987] 2 Qd R 134 at 149 per McPherson J.

110

So even in the case of assignments by deed, equity required consideration: Re Ellenborough [1903] 1 Ch 697.

111

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9.

[3.110]  87 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Equity and Trusts in Australia

from the distribution of two estates, the shares having been transferred to the husband. The Commissioner of Taxation argued that the interest and dividends were derived by the husband and so were taxable in his hands, not in the hands of the wife. The High Court held that the interest was a future chose, a mere expectancy, which had been ineffectively assigned for lack of consideration from the wife. Menzies J characterised “interest which may accrue in the future upon an existing loan repayable without notice as having the character of a right to come into existence”.112 The dividends were also held to be assessable income of the husband in that they were future choses that could not be assigned in equity without consideration. This was because, in the words of Windeyer J, “[t]‌he court will not compel directors to declare a dividend … A dividend is not a debt until it is declared. Until then it is in the eye of the law a possibility only”.113 The facts in Norman can be contrasted with those in Shepherd v Federal Commissioner of Taxation.114 The case involved an assignment of “all my right title and interest in and to an amount equal to ninety per centum of the income [by way of royalties] which may arise during a period of three years from the date of this assignment”. A majority of the High Court ruled that the words evinced the assignor’s intention to “place the persons he wished to benefit in the position of being able themselves to assert a right to receive the appropriate amounts from the licensee”.115 The terms of the assignment indicated, their Honours concluded, that the assignor intended presently to assign portions of his right to royalties, even though the terms were somewhat equivocal.

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[3.115]  Shepherd illustrates that it is possible to assign a present right to future income,

independently of the proprietary right that generates that income, before that income arises. However, as Norman demonstrates, in some cases it may be impossible to identify a present right to future income divorced from the proprietary right that generates that income.116 Neither case denies that a legal right to be paid money at a future date is a present chose in action. And so in Federal Commissioner of Taxation v Everett,117 the taxpayer’s assignment of a share of his interest in a partnership, which carried a share of future income attributable to that interest, was held to be an assignment of a present chose.

ENTITLEMENTS OF AN EQUITABLE ASSIGNEE Standing [3.120]  In the case of an effectual equitable assignment, equity regards the assignee as hav-

ing an interest in the property assigned that can be enforced or protected by proceedings in her or his own name.118 This rests not on contract, but on equity, and so is unconstrained

112

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 21.

113

Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 40.

114

Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385.

115

Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 392 per Barwick CJ. See also at 397 per Kitto J. Contra at 399–​400 per Owen J in dissent.

116

Booth v Federal Commissioner of Taxation (1987) 164 CLR 159 at 167–​168 per Mason CJ.

117

Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 452 per Barwick CJ, Stephen, Mason and Wilson JJ.

118

Durham Bros v Robertson [1898] 1 QB 765 at 769 per Chitty LJ; Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 95 per Isaacs J; Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 at 342 per Tipping J.

88 [3.115] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:28:32.

Assignments in Equity  Chapter  3

by the privity doctrine.119 The equitable assignee of a debt may, therefore, sue to recover it even though he or she has no direct contractual relationship with the debtor,120 or sue for the infringement of the assignor’s rights absent a legal relationship with the infringing party.121

Joinder of assignor [3.125]  In any such proceedings it is ordinarily appropriate to join the assignor as a party,

as an equitable assignee who sues in her or his own name is denied damages or a perpetual injunction unless the assignor has been joined. This avoids a risk of duplication of claims against the debtor both from legal owner of the chose (the assignor) and any competing assignees. Were the assignor not a party, the debtor could remain liable to the assignor even once having paid the assignee, or could be subject to a claim from another assignee who has secured priority by first giving notice and consideration.122 In any event, the joinder of the assignor’s name is a formality, as the assignor who does not consent can be joined as co-​defendant.123 It stands to reason that an action commenced by an equitable assignee without joining the assignor is not a nullity, but is liable to be stayed until the proper parties are joined.124 This does not mean that it is essential that the assignor be joined in every case; the requirement of joinder has been described as “a rule of procedure which may be dispensed with”.125 For instance, there is arguably no need for joinder where there is no risk of a separate claim by the assignor,126 or where the assignor otherwise has no further interest in the matter being litigated.127 The case for joinder is strongest where there is an issue between assignor and assignee regarding the existence of an assignment, or the equitable assignee has acquired only part of the chose in action.128

Extent of assignee’s entitlement [3.130]  An equitable assignee takes subject to all the equities and infirmities of the assignor’s Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

title.129 The debtor, therefore, has the same rights of set-​off130 and other defences against the 119

Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 at 561 per Giles J.

120

See, for example, William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454.

121

See, for example, Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1.

122

Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 at 14 per Viscount Cave LC, at 19–​20 per Viscount Finlay; Central Insurance Co Ltd v Seacalf Shipping Corporation (The “Aiolos”) [1983] 2 Lloyd’s Rep 25 at 33–​34 per Oliver LJ, with whom Ackner LJ agreed; Weddell v J A Pearce & Major [1988] Ch 26 at 40–​41 per Scott J; Baytur SA v Finagro Holding SA [1991] 4 All ER 129 at 131 per Lloyd LJ; Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 at 734 per Hammond J; Three Rivers District Council v Governor and Company of the Bank of England [1996] QB 292 at 298 per Staughton LJ, at 307–​313 per Peter Gibson LJ; Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709 at 716 per Santow J; Kapoor v National Westminster Bank plc [2012] 1 All ER 1201 at [30]–​[43] per Etherton LJ, with whom Sir Mark Potter and Pill LJ concurred.

123

E M Bowden’s Patents Syndicate Ltd v Herbert Smith & Co [1904] 2 Ch 86 at 91 per Warrington J; National Mutual Life Nominees Ltd v National Capital Development Commission (1975) 37 FLR 404 at 411–​412 per Blackburn J; Treadwell v Hickey [2009] NSWSC 1395 at [84] per Barrett J (who noted that if the defendant takes the point of want of a necessary party, the court will, “virtually as of course”, order the joinder of the assignor as a defendant).

124

Weddell v J A Pearce & Major [1988] Ch 26 at 41–​43 per Scott J; Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709 at 719, 722 per Santow J; Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 at 457–​458 per Pincus JA, at 460 per Thomas JA; Westbourne Grammar School v Sanget Pty Ltd [2007] VSCA 39 at [9] per Nettle JA; Treadwell v Hickey [2009] NSWSC 1395 at [92]–​[98] per Barrett J.

125

Long Leys Co Pty Ltd v Silkdale Pty Ltd (1991) 5 BPR 11,512 at 11,518 per Sheller JA, with whom Priestley and Meagher JJA concurred.

126

Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1365 per Mance LJ.

127

See, for example, Thomas v National Australia Bank Ltd [2000] 2 Qd R 448.

128

Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1366 per Mance LJ.

129

Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 91 per Griffith CJ and Barton J.

130

Bank of New Zealand v Harry M Miller & Co Ltd (1992) 26 NSWLR 48 at 52–​56 per Brownie J.

[3.130]  89 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

assignee as he or she would have against the assignor. The assignee is a proper, and may also be a necessary, party to an action against the assignor impeaching the assignor’s title. This stems from the assignee’s interest in resisting the claim, not from any requirement that the plaintiff debtor maintain a separate case against the assignee.131 Hence, a plaintiff who succeeds against the assignor succeeds against the assignee, for otherwise the assignee would be in a better position than the assignor.

Notice to the debtor

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[3.135]  There remains some debate over whether an equitable assignment is effective to enti-

tle the assignee to sue on the chose in action assigned before notice of the assignment is given to the debtor. Two lines of approach appear from both Australian and English cases.132 One view is that after the enactment of the Judicature Act 1873 (UK) notice to the debtor is not essential in any form of equitable assignment for value, whether the subject matter is legal or equitable, in order to render the debtor liable to the assignee; the assignee’s cause of action is complete, so as to be able to sue on it, before notice of the assignment is given to the debtor. The alternative view is that notice to the debtor is essential for a legal chose and, lacking notice, the assignee’s title for the purposes of bringing suit is incomplete. Modern Australian as well as English authority favours the former view,133 the Queensland Court of Appeal noting that “the mere fact that the action was commenced before the notice of assignment was given did not preclude the appellant from maintaining the action”.134 New Zealand authority as well as some mid-​twentieth century English authority favours the latter,135 although in New Zealand the Court of Appeal has gone further to the effect that “notice to the person liable is required before an assignee (whether legal or equitable) can enforce the cause of action assigned”.136 This approach can be criticised for subjugating equitable assignments to the rules of law, and for its inconsistency with the basic principle that the rules of equity and common law coexist and in the event of conflict the former should prevail.137 Assignor as trustee [3.140] Ordinarily, an equitable assignment of an equitable chose entitles the assignee to

all equitable remedies applicable to the subject matter of the assignment and to give a good discharge. As the assignee stands in the shoes of the assignor, there is no need to regard the

131

Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 92 per Griffith CJ and Barton J.

132

See Chin-​Aun, “Notice in Equitable Assignment of Choses in Action: Divergence in the Common Law and Its Impact” (2002) 18 JCL 107 at 111–​117.

133

See Weddell v J A Pearce & Major [1988] Ch 26; Three Rivers District Council v Governor and Company of the Bank of England [1996] QB 292; Jennings v Credit Corp Australia Pty Ltd (2000) 48 NSWLR 709 at 721–​722 per Santow J; Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 at 449–​450 per McMurdo P, at 456 per Pincus JA, at 459–​460 per Thomas JA; Alma Hill Constructions Pty Ltd v Onal (2007) 16 VR 190 at [19]–​[26] per Kaye J.

134

Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 at 459 per Thomas JA.

135

Compania Colombiana De Seguros v Pacific Steam Navigation Co [1964] 1 All ER 216 at 235–​236 per Roskill J; Warner Bros Records Inc v Rollgreen Ltd [1976] QB 430. Cf Showa Shoji Australia Pty Ltd v Oceanic Life Ltd (1994) 34 NSWLR 548 at 561 per Giles J.

136

Mountain Road (No 9) Ltd v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 at 345 (emphasis supplied).

137

Chin-​Aun, “Notice in Equitable Assignment of Choses in Action: Divergence in the Common Law and its Impact” (2002) 18 JCL 107 at 120.

90 [3.135] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Assignments in Equity  Chapter  3

assignor as a trustee for the assignee.138 But in at least the two circumstances discussed below, courts have found it necessary to impose on the assignor the duties of a trustee. It should, in passing, also be noted that an assignment of a chose in action may evidence an intention to create a trust.139

Partner’s equitable interest in a partnership [3.145]  Where the interest assigned is a partner’s equitable interest in a partnership, the High

Court has held that the assigning partner “continues to stand in the relationship of a trustee to the assignee, notwithstanding that the assignee may be entitled to receive payments from the partnership profits direct from the partnership”.140 The reason is that the assignment does not make the assignee a partner, nor confer upon the assignee any entitlements in the partnership’s management and administration or legal title to partnership assets; the extent of the assignee’s interest is ascertainable only on dissolution of the partnership.

Assignor of future property

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[3.150]  The assignment of future property is treated as effectual in equity as a contract to

assign if the assignee provides consideration:  see [3.105]. As the assignee’s entitlement to the property passes to her or him (“crystallises”) once the property comes into existence,141 the assignor’s conscience is bound at that time as a trustee of her or his legal rights for the assignee.142 Expressed another way, “[t]‌he assignor is the conduit but the beneficial interest in the subject-​matter of the assignment never vests beneficially even for an instant in the assignor”.143 Hence, if the assignor is entitled to the fund, no attempt to prevent its passing to the assignee will avail.144 That the assignor is a trustee dictates that the assignment binds the property itself when it comes into existence; it does not merely rest in, or amount to, a contractual right giving rise to an action.145 It also means that the assignee’s right is a “higher right” than the right of specific performance of a contract, and is not premised on the availability of that remedy.146 It instead 138

Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447 per Barwick CJ, Stephen, Mason and Wilson JJ. However, this does not mean that the assignor can sue without joining the assignee; the assignor will not be allowed to sue in the absence of the assignee: Three Rivers District Council v Governor and Company of the Bank of England [1996] QB 292 at 313 per Peter Gibson LJ. Cf at 303–​304 per Staughton LJ.

139

See, for example, Re Emilco Pty Ltd (2002) 20 ACLC 388, discussed at [16.135].

140

Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 448 per Barwick CJ, Stephen, Mason and Wilson JJ.

141

Tailby v Official Receiver (1888) 13 App Cas 523; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 24 per Windeyer J (in dissent but not on the law); Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 450–​451 per Barwick CJ, Stephen, Mason and Wilson JJ; Re Androma Pty Ltd [1987] 2 Qd R 134 at 138–​139 per Connolly J, at 148–​150 per McPherson J; Elders Pastoral Ltd v Bank of New Zealand (No 2) [1990] 1 WLR 1478 at 1481 (PC); Hadlee v Commissioner of Inland Revenue [1991] 3 NZLR 517 [affd Hadlee v Commissioner of Inland Revenue [1993] 2 NZLR 385 (PC)]; Re Puntoriero (1991) 104 ALR 523 at 528–​529 per Einfeld J; Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 at 727 per Hammond J; Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] 2 WLR 1344 at 1373 per Mance LJ; FTV Holdings Cairns Pty Ltd v Smith [2014] QCA 217 at [43] per Fraser JA.

142

Re Lind [1915] 2 Ch 345 at 360 per Swinfen-​Eady LJ; Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 17 per Latham CJ, at 27 per Dixon J; Hadlee v Commissioner of Inland Revenue [1991] 3 NZLR 517 at 520 per Cooke P; Re Puntoriero (1991) 104 ALR 523 at 528–​531 per Einfeld J.

143

Hadlee v Commissioner of Inland Revenue [1991] 3 NZLR 517 at 527 per Richardson J. See also Kelly v Commissioner of Inland Revenue [1970] NZLR 161 at 162 per Woodhouse J (when the future property comes into existence, “the equitable ownership in it passes automatically to the assignee”).

144

Re Bond (1940) 35 Tas LR 96 at 114 per Morris ACJ.

145

Re Lind [1915] 2 Ch 345 at 359–​360 per Swinfen-​Eady LJ.

146

Tailby v Official Receiver (1888) 13 App Cas 523 at 547–​548 per Lord Macnaghten; Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 16 per Latham CJ; Re Androma Pty Ltd [1987] 2 Qd R 134 at 139 per Connolly J.

[3.150]  91 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

rests on the principle that equity regards as done that which ought to be done.147 The assignment creates a proprietary interest in the assignee in the form of an equitable charge upon the property coming into existence.148 The one proviso is that, as in all cases where an equitable right in property is created, the property to which the interest attaches must be sufficiently described to be identifiable at the moment legal ownership is conferred on the assignor.149

IMPACT OF CONTRACTUAL NON-ASSIGNABILITY CLAUSES [3.155]  Generally speaking, a party’s contractual rights, as choses in action, are prima facie

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assignable. The main exceptions to this general principle target prohibitions on assignment created by statute, public policy (say, because it savours of maintenance, or where the parties’ personality or identity is material) or the terms of the contract itself.150 The preceding discussion relating to legal and equitable assignments must, as a consequence, be read subject to these restrictions.151 So far as contractual restrictions on assignment are concerned, it has been suggested that where a contract between A and B prohibits assignment of contractual rights by A, at least four possible interpretations ensue depending on the construction of the contract:152 1.

the term does not invalidate a purported assignment by A to C but gives rise only to a claim by B against A for damages for breach of contract;

2.

the term precludes or invalidates any assignment from A to C, but not as to preclude A  from agreeing, as between A  and C, that A  will account to C for what A  receives from B;

3.

the term invalidates a purported assignment and precludes A from agreeing as in (2); or

4.

a purported assignment by A to C constitutes a repudiatory breach of condition entitling B to refuse to pay both C and A.

That cases within (1)  and (4)  are likely to be rare led Lord Browne-​Wilkinson in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd153 to remark that “a prohibition on assignment … invalidates the assignment as against the other party to the contract so as to prevent a transfer of the chose in action”. His Lordship reasoned that it would otherwise defeat the

147

Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 16 per Latham CJ; Re Androma Pty Ltd [1987] 2 Qd R 134 at 139 per Connolly J; Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 at 733 per Hammond J.

148

Re Lind [1915] 2 Ch 345 at 364–​366 per Phillimore LJ, at 373–​374 per Bankes LJ; Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 27 per Dixon J; Booth v Federal Commissioner of Taxation (1987) 164 CLR 159 at 165 per Mason CJ, at 177–​178 per Toohey and Gaudron JJ; Re Androma Pty Ltd [1987] 2 Qd R 134 at 139 per Connolly J. The assignee’s interest may survive the assignor’s bankruptcy because it attaches when the property arises and gives the assignee an equitable interest in that property: Palette Shoes Pty Ltd (in liq) v Krohn at 27. As to the nature of an equitable charge, see [1.150].

149

Tailby v Official Receiver (1888) 13 App Cas 523 at 533 per Lord Watson, at 543–​546 per Lord Macnaghten; Re Wait [1927] 1 Ch 606 at 622 per Lord Hanworth; Palette Shoes Pty Ltd (in liq) v Krohn (1937) 58 CLR 1 at 16–​17 per Latham CJ; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 24 per Windeyer J; Commercial Factors Ltd v Maxwell Printing Ltd [1994] 1 NZLR 724 at 733 per Hammond J.

150

Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 at [43] per Finn and Sundberg JJ, at [194] per Emmett J.

151

Bluebottle UK Ltd v Deputy Commissioner of Taxation (2007) 232 CLR 598 at [65] (FC).

152

Goode, “Inalienable Rights?” (1979) 42 MLR 553. See also Tolhurst, “The Efficacy of Contractual Provisions Prohibiting Assignment” (2004) 26 Syd L Rev 161; Tolhurst and Carter, “Prohibitions on Assignment:  A Choice to be Made” [2014] CLJ 405.

153

Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 108.

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Assignments in Equity  Chapter  3

legitimate commercial reason for inserting the prohibition. There is some indication to the same effect in Australian case law.154 Linden Gardens was applied by the New Zealand Court of Appeal in New Zealand Payroll Software Systems Ltd v Advanced Management Systems Ltd.155 There a contract between A and B (the respondent) for the development of a computerised payroll system prohibited the assignment by either party of “its rights, duties or obligations under [the] agreement” without the prior written consent of the other. Without notice to B, A purported to assign to C (the appellant) all its interest (including copyright) in the system, together with its agreements with B. The court refused to give effect to the purported assignment, reasoning as follows:156 An agreement, express or implied, not to assign contractual or other rights in personam, or not to assign them without consent, should generally be specifically enforced as between the immediate parties, unless there is some strong reason why that course should not be adopted … A non-​assignability clause has a clear commercial purpose. The parties do not wish, without consent, to be obliged to deal with a party not of their own choosing. The identity of the other party matters to them, so they expressly or implicitly agree to reverse the general rule that contractual rights can be assigned … [I]‌f the law did not enforce such an agreement the legitimate commercial reason for agreeing not to assign would be defeated. Similarly the legitimate commercial expectations of the parties would be defeated.

As such, the purported assignment was ineffective to vest contractual rights in C (the purported assignee), meaning that C “has not and never has had any title to the copyright”.157

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[3.160]  In each case, what is prohibited or restricted by contract is determined on a process

of construing the words used. As contractual restrictions or prohibitions on the assignment of choses in action represent an infringement on a contracting party’s freedom to transfer her or his proprietary interest, and the law has from early times been disinclined to restrict alienation of proprietary interests, restrictions or prohibitions of this kind are unlikely to receive an expansive interpretation. The point is illustrated by the decision of the English Court of Appeal in Barbados Trust Company Ltd v Bank of Zambia,158 where the relevant contractual clause read as follows: Each Bank may at any time and from time to time assign all or any part of its rights and benefits in respect of the Facility to any one or more banks or other financial institutions (an ‘Assignee’), provided that any such assignment may only be effected if (save in the case where the assignee is a member of the same group as the assignor, no such consent then being required) the prior written consent thereto of the Borrower shall have been obtained …

154

Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 at [32] per Finn and Sundberg JJ, at [194] per Emmett J; Bluebottle UK Ltd v Deputy Commissioner of Taxation (2007) 232 CLR 598 at [65]–​[68] (FC).

155

New Zealand Payroll Software Systems Ltd v Advanced Management Systems Ltd [2003] 3 NZLR 1.

156

New Zealand Payroll Software Systems Ltd v Advanced Management Systems Ltd [2003] 3 NZLR 1 at 8 (CA).

157

New Zealand Payroll Software Systems Ltd v Advanced Management Systems Ltd [2003] 3 NZLR 1 at 8 (CA). Cf Thomas, “Contractual Prohibitions on the Assignment of Copyright” (2004) 120 LQR 218 (who criticises the decision in its application in the intellectual property arena because copyright arises solely by virtue of a statutory regime (see Copyright Act 1968 (Cth), s 8) that identifies copyright as property transmissible by way of assignment (s 196), such that to allow the terms of a contract to prevail illegitimately ousts the operation of the statute).

158

Barbados Trust Company Ltd v Bank of Zambia [2007] 1 Lloyd’s Rep 495 (noted Tolhurst, “Prohibitions on Assignment and Declaration of Trust” [2007] LMCLQ 278; Smith, “Equitable Owners Enforcing Legal Rights” (2008) 124 LQR 517; Turner, “Trusts of Debts of Restricted Assignability” [2008] CLJ 23; see further the discussion in Bridge, “The Nature of Assignment and Non-​Assignment Clauses” (2016) 132 LQR 47 at 63–​66).

[3.160]  93 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

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An issue before the court was whether, under this clause, a declaration of trust would require consent of the borrower. Though willing to interpret the word “assignment” in the clause to include legal and equitable assignments, Waller LJ held that “a declaration of trust is not an equitable assignment”.159 Accordingly, the language of the clause did not in terms locate a declaration of trust within the prohibition. His Lordship added, more generally, that “since one is concerned with the question whether a restriction should be placed on the transfer of a piece of property, an acknowledged debt, the court should be slow to contemplate that the parties ever intended such to be within the prohibition”.160 Rix LJ agreed, seeing nothing in the clause “to suggest that the limitations on assignment go as far as preventing the contract between would-​be assignor and assignee taking effect as between those two as a declaration of trust”.161

159

Barbados Trust Company Ltd v Bank of Zambia [2007] 1 Lloyd’s Rep 495 at [43].

160

Barbados Trust Company Ltd v Bank of Zambia [2007] 1 Lloyd’s Rep 495 at [43].

161

Barbados Trust Company Ltd v Bank of Zambia [2007] 1 Lloyd’s Rep 495 at [89].

94 [3.160] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

RELATIONSHIPS OF TRUST

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Chapter 4

Fiduciary Relations FIDUCIARY DUTIES [4.05]  Where A owes fiduciary duties to B, equity requires of A, in relations with B, a propri-

ety of conduct exceeding the tortious standard of care and usually also the standards imposed by any contract between them.1 Reflected in the duties superimposed by fiduciary law upon the relationship, it is directed at securing that A remains loyal to B: see [4.10]. Importantly, although the relationship between A and B is commonly described as a “fiduciary relationship”, that relationship is simply the vehicle that attracts, and defines the scope of, any fiduciary duties. It follows that this description can mislead, as not all legal duties owed by a person in a “fiduciary relationship” are necessarily fiduciary duties. Also, a person may owe fiduciary duties in respect of only part of that relationship.2 It is therefore better to speak of the relevant fiduciary duties to avoid perpetuating the incorrect impression that “fiduciary” law traverses every aspect of a relationship. Nature of fiduciary duties

Central concept of “loyalty”

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[4.10]  The central fiduciary duty, and what distinguishes it from other legal duties, is a duty

of loyalty “unequalled elsewhere in the law”.3 Importantly, a duty is fiduciary only if it is a duty of loyalty. Consistent with the preceding paragraph, a relationship between two parties may involve a range of duties only some of which are fiduciary.4 Fiduciary duties not infrequently coexist with contractual, tortious or even statutory duties that govern the parties’ relationship. There is no need for fiduciary law to replicate these other duties, which often focus on competence. For example, although the general law imposes upon directors, trustees, lawyers and other professionals a duty to exercise reasonable care and skill, this duty is not fiduciary.5 This is because the general law already prescribes that a breach of that duty may be redressed through resort to the law of tort, contract or trusts. Absent an element of disloyalty,

1

See Finn, Fiduciary Obligations (The Law Book Company Limited, 1977); Finn, “The Fiduciary Principle” in Youdan (ed), Equity, Fiduciaries and Trusts (Carswell Co, 1989), p 1. Although the focus of this chapter is clearly on fiduciary principles developed by the common law, the broader fiduciary concept has been traced from times preceding the common law, in times and cultures divorced from those that spawned the common law: see Frankel, Fiduciary Law (OUP, 2011), Ch 2.

2

NZ Netherlands Society v Kuys [1973] 2 All ER 1222 at 1225 per Lord Wilberforce (“A person in his position may be in a fiduciary position quoad a part of his activities and not quoad other parts”); Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685 at 14,704 per Santow J.

3

Moffat v Wetstein (1996) 135 DLR (4th) 298 at 315 per Granger J. See also Meinhard v Salmon (1928) 164 NE 545 at 546 per Cardozo CJ (fiduciaries must conduct themselves “at a level higher than that trodden by the crowd”).

4

Breen v Williams (1996) 186 CLR 71 at 82 per Brennan CJ; Bristol and West Building Society v Mothew [1996] 4 All ER 698 at 710 per Millett LJ.

5

Breen v Williams (1996) 186 CLR 71 at 93 per Dawson and Toohey JJ; Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 680 per Gault J, at 687 per Tipping J; Rexstraw v Johnson [2003] NSWCA 287 at [118] per Tobias JA.

[4.10]  97 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

a breach of a duty will be actionable through the primary bodies of law that govern the incidents of the relationship in question.

Proscriptive nature of fiduciary duties [4.15]  Seeking to distinguish fiduciary from other duties, the High Court in Breen v Williams6

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emphasised that fiduciary duties are proscriptive (that is, prohibitive), not prescriptive, in nature. Its concern was that, were the law to impose “fiduciary” duties of a prescriptive nature —​such as a positive duty to act in the interests of the person to whom the duty is owed  —​fiduciary law would encroach upon the legitimate domain of contract and tort.7 So in Australian law fiduciary duties prohibit a person owing those duties (the “fiduciary”) from acting inconsistently with the interests of the person to whom the duties are owed (the “principal” or “beneficiary”).8 Though a similar notion may be reflected in some other duties recognised by both law and equity, such as a duty not to act unconscionably, a duty to deal fairly or a duty to act in good faith, these fall short of the fiduciary standard of loyalty (and associated selflessness).9 The fiduciary standard is encapsulated in two principal duties: the “no conflict” and the “no profit” duties.10 The former prohibits a fiduciary, except with the informed consent of the principal, from placing herself or himself in a position involving a real and sensible possibility of a conflict between the duty as a fiduciary and her or his own interest11 (a “duty-​interest conflict”), or between the duty as a fiduciary to two or more persons (a “duty–​duty conflict”). The “no-​profit” duty prohibits a fiduciary from making a profit or benefit, or exploiting an opportunity arising, out of a fiduciary position except with the principal’s informed consent. The duties in question can, and not infrequently will, intersect; for instance, a breach of the “no profit” duty may reflect a yielding to a conflict.12 A contravention of either duty, in any case, speaks of disloyalty.

Prescriptive aspects of fiduciary duties (?) [4.20]  As it is the principal whose interests fiduciary law seeks to protect, the principal may

absolve the fiduciary from fulfilling some or all fiduciary duties he or she is owed.13 Hence the qualification to the above proscriptive fiduciary duties phrased in terms of the principal’s 6

Breen v Williams (1996) 186 CLR 71. See Dempsey and Greinke, “Proscriptive Fiduciary Duties in Australia” (2004) 25 Aust Bar Rev 1.

7

Breen v Williams (1996) 186 CLR 71 at 95 per Dawson and Toohey JJ, at 113 per Gaudron and McHugh JJ; Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 198 per McHugh, Gummow, Hayne and Callinan JJ.

8

An alternative term, which has seen use in the United States following its inception in Frankel, “Fiduciary Law” (1983) 71 Cal L Rev 795, is “entrustor”.

9

See Finn, “The Fiduciary Principle” in Youdan (ed), Equity, Fiduciaries and Trusts (Carswell Co, 1989), p 1 (“unconscionability” permits one party to act self-​interestedly in her or his actions towards the other but precludes excessively self-​interested or exploitative conduct; “good faith” permits a party to act self-​interestedly, but requires that party to have regard to the legitimate interests of the other; the “fiduciary” standard requires one party to act selflessly and with undivided loyalty in the interests of the other: pp 3–​4); Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 at 81 per Finn J; Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 at [107] per Sundberg and Emmett JJ.

10

Moss v Moss (No 2) (1900) 21 LR (NSW) Eq 253 at 258 per Simpson CJ; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 67 per Gibbs CJ; Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557 (FC).

11

The term “interest” here signifies the presence of “some personal concern of possible pecuniary value in a decision taken, or a transaction effected, within the scope of a fiduciary’s duties”, which “may be a contingent or expectant one”: Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296 at [180] (FC).

12

See Boardman v Phipps [1967] 2 AC 46 at 123 per Lord Upjohn; Howard v Commissioner of Taxation (2014) 253 CLR 83 at [56], [57] per Hayne and Crennan JJ; Conaglen, “The Nature and Function of Fiduciary Loyalty” (2005) 121 LQR 452 at 467.

13

Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 at 636–​637 per Upjohn LJ.

98 [4.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

informed consent. Here, however, the strict proscriptive approach breaks down somewhat. This is because, without the fiduciary’s full disclosure of the (prospective) conflict or profit, the principal cannot give an informed consent to a dilution of fiduciary duty. At the risk of being found to be in breach of fiduciary duty, the law imposes on a fiduciary a positive duty to disclose fully the nature and incidents of any conflict of interest or unauthorised profit arising during the course of the relationship. The duty extends to all material of which the fiduciary is aware or has deliberately refrained from acquiring.14 The onus of proving the principal’s informed consent rests on the fiduciary.15 In some instances, this may well require that the principal have obtained independent legal advice.16 Yet as the duty of full disclosure serves to avoid the conduct proscribed by fiduciary law, it is better understood as an adjunct to the proscriptive fiduciary duties than an independent prescriptive duty. As explained by a Federal Court judge:17 [T]‌hat which is often regarded as a fiduciary obligation of disclosure should not be seen as a positive duty resting on a fiduciary, but a means by which the fiduciary obtains the release or forgiveness of a negative duty; such as the duty to avoid a conflict of interest, or the duty not to make a secret profit.

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That is not to say that the proscriptive–​prescriptive dichotomy is exact in practice, leading some to query it,18 especially to the extent that the fiduciary duty is construed as a duty to act in the interests of the principal.19 For instance, company directors’ duties to act bona fide in the interests of the company, and to exercise their powers for proper purposes, have not traditionally been divorced from fiduciary notions. In Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3),20 each member of the Western Australian Court of Appeal saw them as fiduciary in nature. And while compelling explanations, by both judges21 and commentators,22 have been

14

BLB Corporation of Australia v Jacobsen (1974) 48 ALJR 372 at 378 (FC(HC)); Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 577 per Finkelstein J. See, for example, Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1 (where, in the context of a financial advisor and client fiduciary relationship (as to which see [4.235]–​[4.245]), Rares J found that the advisor’s disclosure of its being the counterparty in, and on occasion, the possibility that it might earn unspecified fees or profits from, trading with its clients was insufficient disclosure to support an inference that the clients gave their fully informed consent to the advisor obtaining such a benefit: at [937]).

15

New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 2 All ER 1222 at 1227 per Lord Wilberforce; Maguire v Makaronis (1997) 188 CLR 449 at 466–​467 per Brennan CJ, Gaudron, McHugh and Gummow JJ.

16

Soia v Bennett (2014) 46 WAR 301 at [55] per Pullin JA (though noting that “it is incorrect to speak of a fiduciary ‘duty’ to recommend or require a beneficiary to obtain independent legal advice”).

17

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 576 per Finkelstein J.

18

See, for example, Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 214 per Kirby J (in dissent on the fiduciary point) (who questioned the viability of the dichotomy “because omissions quite frequently shade into commissions”); Conaglen, “Fiduciary Liability and Contribution to Loss” [2001] CLJ 480 at 481–​482.

19

Birks, “The Content of Fiduciary Obligation” (2000) 34 Israel L Rev 3 at 32–​33 (who argues that an ancillary obligation of disinterestedness cannot be understood without a principal obligation to act in another’s interest); Firios, “Precluding Prescriptive Duties in Fiduciary Relationships: The Problems with the Proscriptive Limitation” (2012) 40 ABLR 166 (who likewise sees difficulties in drawing the line between positive and negative (fiduciary) duties, and maintains that the distinction has led to an unsatisfactory divergence between equitable obligations of trustees and fiduciaries).

20

Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 at [895]–​[902] per Lee AJA, at [1947]–​[1978] per Drummond AJA, at [2714]–​[2733] per Carr AJA (dissenting but not on this point).

21

See, for example, Collard v State of Western Australia (No 4) [2013] WASC 455 at [1209]–​[1218] per Pritchard J.

22

See, for example, Langford, “Solving the Fiduciary Puzzle —​The Bona Fide and Proper Purposes Duties of Company Directors” (2013) 41 ABLR 127; Langford, “Directors’ Fiduciary Duties: The Relationship Between Conflicts, Profits and Bona Fides” (2013) 31 C&SLJ 423; Langford, “The Distinction Between the Duty of Care and the Duties to Act Bona Fide in the Interests of the Company and for Proper Purposes” (2013) 41 ABLR 337.

[4.20]  99 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

given of this decision from a proscriptive perspective, their Honours’ zeal to distance directors from the doctor–​patient scenario in Breen v Williams23 (see [4.300]) attests to a different perspective. The question is whether the matter is merely one of perspective, or one of greater substance. As to the former, the relevant duties can be seen in both negative terms —​a duty not to act in the interests of anyone but the beneficiary24 —​or as the fundamental positive duty that either generates or informs the proscriptive duties. Whatever the correct position, there seems no room in Australian law for the view, espoused by the English Court of Appeal in Item Software (UK) Ltd v Fassihi,25 and followed in Singapore,26 that conflict disclosure extends to a positive duty to disclose past wrongdoing. Disclosure in Australian law retains its sole function, for fiduciary purposes, as a means of obtaining the consent of the principal.27 This does not preclude the terms of a contract, corporate constitution or statute from imposing such a prescriptive obligation.

Economic/​proprietary focus of fiduciary duties [4.25]  The proscriptive nature of fiduciary duties, related as it is to a preoccupation with

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ensuring that they do not tread the same ground as common law duties, has led Australian courts to focus fiduciary protection on economic or proprietary interests.28 The fear, not necessarily shared by all,29 is that extending fiduciary relief to non-​economic loss would unjustifiably impinge on the function performed, most often, by tort law. Cases where it has been sought to bring compensation for non-​economic loss within the fiduciary umbrella

23

See Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 at [900]–​[902] per Lee AJA (opining that the High Court’s comments in Breen on the distinction between prescriptive and proscriptive duties should be read: (1) in the context of the particular facts of that case; (2) with an understanding that they were directed at rejecting the suggestion that existence of a fiduciary relationship per se could impose an obligation on a fiduciary to act in all circumstances in the interests of the other party to the relationship; and (3) as driven essentially by an attempt to distinguish Australian from Canadian law), at [1962] per Drummond AJA (noting that Breen did not consider the position of directors).

24

Bayliss, “Breach of Confidence as a Breach of Fiduciary Obligations: A Theory” (2002) 9 Auck ULR 702 at 720.

25

Item Software (UK) Ltd v Fassihi [2005] 2 BCLC 91.

26

Quality Assurance Management Asia Pte Ltd v Zhang Qing [2013] 3 SLR 631 at [97] per Vinodh Coomaraswamy JC.

27

P & V Industries Pty Ltd v Porto (2006) 14 VR 1 at [24], [25] per Hollingworth J; P & V Industries Pty Ltd v Porto (No 2) [2007] VSC 64 at [22] per Hollingworth J; Levy v Bablis [2007] NSWSC 565; Wilden Pty Ltd v Green (2009) 38 WAR 429 at [106] per McLure JA, at [241] per Pullin JA; Blackmagic Design Pty Ltd v Overliese (2010) 84 IPR 505 at [94]–​[96] per Jessup J [affd Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1 at [105]–​[108] per Besanko J]; Hodgson v Amcor Ltd (2012) 264 FLR 1 at [1561]–​[1569] per Vickery J. See also Jensen, “Prescription and Proscription in Fiduciary Obligations” (2010) 21 King’s LJ 333 (who argues against a positive duty to “confess” conduct contrary to the principal’s interests, preferring to maintaining that the proscriptive paradigm because: (1) it confines fiduciary obligations to their proper place within the broader complex of legal duties owed by those who undertake to act in the interests of another; (2) the disclosure rule functions not as a primary rule of obligation but as a subsidiary rule, which when it applies serves to remove the relevant activities from the scope of the proscription; and (3) it is best reflected in the remedies awarded for breach of fiduciary duty). Contra Ho and Lee, “A Director’s Duty to Confess: A Matter of Good Faith?” [2007] CLJ 348; Lee, “Rethinking the Content of the Fiduciary Obligation” [2009] Conv 236.

28

Breen v Williams (1996) 186 CLR 71 at 89–​90 per Dawson and Toohey JJ, at 111 per Gaudron and McHugh JJ; Paramasivam v Flynn (1998) 90 FCR 489 at 504–​508 (FC).

29

See, for example, Des Rosiers, “Childhood Sexual Abuse and the Civil Courts” (1999) 9 Tort L Rev 201 (who argues that the distinction between economic and non-​economic interests fails to recognise that non-​economic disloyalty can have economic consequences, and “does not seem to relate to the distinguishing features of a fiduciary relationship, which are the presence of trust and the requirement of selflessness”: at 203); Cassidy, “The Stolen Generation: Canadian and Australian Approaches to Fiduciary Duties” (2002–​2003) 34 Ottawa L Rev 175 (who argues the economic loss should not be a determining factor because it is not essential to loyalty or the hallmarks of relationships giving rise to fiduciary duties, and it illegitimately uses the consequences of the breach (economic as opposed to non-​economic) to determine whether there is a duty in the first place: at 191); Joyce, “Fiduciary Law and Non-​economic Interests” (2003) 28 Mon ULR 239 (who argues that the distinction between economic and non-​economic interests is arbitrary and pays insufficient regard to the central concept of fiduciary obligations: at 266).

100 [4.25] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

have almost invariably involved relationships attracting an equivalent tortious duty:  see [4.300]–​[4.315].

Coexistence of fiduciary and contractual duties [4.30]  It is not unusual for fiduciary duties to coexist with a contractual relationship between

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the parties. As the precise nature of the parties’ relationship determines both the existence and scope of fiduciary duties,30 the contractual relationship between them may of itself dictate that fiduciary duties should be superimposed on the contractual duties in order to secure the loyalty required by equity.31 Conversely, a contractual term may be so precise in regulating what a party can (or cannot) do as to leave no scope for imposing fiduciary duties.32 In fact, the terms of a contract between the parties may themselves operate to deny the fundamental fiduciary indicia33 (as to which see [4.50]–​[4.70]). Ultimately fiduciary duties must be moulded or tailored to reflect the relationship between the parties created by their own specific arrangements.34 Where those arrangements are evidently commercial, and the outcome is a comprehensive and detailed account of the parties’ agreement stemming from arm’s length negotiations informed by legal advice, courts are especially cautious in identifying supervening fiduciary obligations: see [4.265]. In this context, a contractual clause explicitly ousting fiduciary duties may prove a difficult hurdle to superimposing duties of that kind, even if in form more so than in substance.35 Otherwise too little weight may attach to the fact that fiduciary duties, unlike terms of a contract, are imposed as opposed to agreed.36 The contract may, to this end, impact upon the nature of the duty. It may, for instance, where the parties cooperate in the form of a partnership or joint venture, envisage that a party owes fiduciary duties to act jointly in her or his own interests and those of the other party/​ies to the relationship, and not necessarily exclusively for the interests of another party:  see [4.190]–​[4.230]. Contractual terms may likewise limit the scope of any coexisting fiduciary duty, attracting such a duty only in relation to a defined area of conduct,

30

Kelly v C A & L Bell Commodities Corp (1989) 18 NSWLR 248 at 256 per Mahoney JA; Dempster v Mallina Holdings Ltd (1994) 15 ACSR 1 at 46–​47 per Rowland J; News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 312 (FC(FCA)); State of South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231 at 265–​266 per Olsson J.

31

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 99–​100 per Mason J; Counties Manukau Pacific Trust v Manukau City Council [2009] 2 NZLR 260 at [88] per Cooper J (“To determine that a fiduciary duty arises to comply with the evident common objectives of the parties is not to reach a conclusion contrary to the terms of the contract; in fact the reverse is true”).

32

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 98 per Mason J; Morris v Hanley (2003) 173 FLR 83 at [47] per Hamilton J.

33

See, for example, Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306.

34

Chan v Zacharia (1984) 154 CLR 178 at 195 per Deane J; Mabo v State of Queensland (No 2) (1992) 175 CLR 1 at 204 per Toohey J; Ratiu v Conway [2006] 1 All ER 571 at [73] per Auld LJ; Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35 at [281] per Jacobson J; F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 2) [2012] Ch 613 at [223]–​[225] per Sales J; Howard v Commissioner of Taxation (2014) 253 CLR 83 at [34] per French CJ and Keane J (noting, more generally, that “[t]‌he scope of the fiduciary duty generally in relation to conflicts of interest must accommodate itself to the particulars of the underlying relationship which give rise to the duty so that it is consistent with and conforms to the scope and limits of that relationship”).

35

See, for example, Streetscape Projects (Aust) Pty Ltd v City of Sydney (2013) 85 NSWLR 196 (see at [100]–​[128] per Barrett JA, with whom Meagher and Ward JJA concurred). Contra Finn, “Fiduciary Reflections” (2014) 88 ALJ 127 (who criticises the decision in Streetscape for placing form ahead of substance in this regard, and suggests that “the courts should be slow indeed to give their blessing to a blanket denial of fiduciary responsibility in a relationship which manifestly would otherwise be fiduciary”, as “[t]‌o allow this simple expedient to become the norm would be to rob much of the fiduciary principle of its purpose in the law”: at 143).

36

United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 799 per McLelland J.

[4.30]  101 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

outside of which the “fiduciary” retains economic liberty.37 It follows that “[f]‌iduciaries are not all required … to lie on a bed of the same length”.38 But it must always be remembered that fiduciary duties are directed not at replicating contractual duties of performance, but at fostering loyalty in circumstances where the terms of the contract do not, in view of the parties’ relationship relative to one another, adequately protect one party from another’s abuse of position.39 This does not, however, mean that fiduciary law aims to align inequality in bargaining power and knowledge in every aspect of the parties’ relationship. As explained by the New Zealand Court of Appeal:40 Fiduciary law is not concerned with private ordering. That is, it is not the function of fiduciary law to mediate between the various interests of parties who are dealing with each other. That is for contract law. Fiduciary law serves to support the integrity and utility of relationships in which the role of one party is perceived to be the service of the interests of the other. It does so by imposing a specific duty of loyalty.

Strictness of fiduciary duties

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[4.35]  As a general rule, courts apply the “no-​conflict” and “no-​profit” duties strictly. A reason is that the position of trust held by persons upon whom the law imposes fiduciary duties may give those persons the ability to abuse that position at their principal’s expense, which the principal may find difficult to establish.41 This is because, a Scottish court has noted, “it is normal to accord a very high level of discretion to a fiduciary, and the supervision of the fiduciary’s activities is generally minimal or non-​existent, at least at a day-​to-​day level”.42 The “hard line against faithless fiduciaries”43 taken by the law surfaces in a variety of ways:

• The law seeks to deter fiduciaries from contemplating even the possibility of self-​interest prevailing over loyalty to their principal by providing avenues for relief for breach of fiduciary duty more expansive and less constrained than those available for breaches of common law (and even some other equitable) duties:44 see [4.325], [4.330]. • By applying the fiduciary proscriptions whether or not the fiduciary’s own interest or duty to a third party actually generates disloyalty. As a result, a person can breach fiduciary duty whilst being well-​intentioned, and acting in good faith;45 there is no “fault” element, 37

Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 15, 17 per Bryson J; MacIntosh v Fortex Group Ltd [1997] 1 NZLR 711 at 717 per Gallen J; Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35 at [280] per Jacobson J.

38

Brandeis Brokers Ltd v Black [2001] 2 Lloyd’s Rep 359 at 367 per Toulson J.

39

This explains the remark by Barrett JA, with whom Meagher and Ward JJA concurred, in Streetscape Projects (Aust) Pty Ltd v City of Sydney (2013) 85 NSWLR 196 at [100], that contractual and fiduciary obligations will, in general, “co-​exist only if and to the extent that the sanctions available for breach of contract (including any implied terms) are insufficient to deal with some possibility of unconscionable conduct to which one party is exposed”. Cf Finn, “Fiduciary Reflections” (2014) 88 ALJ 127 at 144 (who views the upshot of Barrett JA’s remark as the “quite surprising proposition” that “equitable obligations and equitable wrongs are themselves to be defined by reference to the inadequacy of remedies for breach of contract”).

40

Chirnside v Fay [2004] 3 NZLR 637 at [51] (varied on appeal but not on this point: Chirnside v Fay [2007] 1 NZLR 433).

41

Green and Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1 at 6 per Burt CJ; Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at 155 per McLachlin J; Murad v Al-​Saraj [2005] WTLR 1573 at [74], [75] per Arden LJ.

42

Park’s of Hamilton (Holdings) Ltd v Campbell [2014] SC 726 at [38] per Lord Drummond Young.

43

Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 591 per Binnie J.

44

See Conaglen, “The Nature and Function of Fiduciary Loyalty” (2005) 121 LQR 452 at 463 (“Removing the fruits of temptation is designed to neutralise the temptation itself by rendering it pointless”). Cf Smith, “Deterrence, Prophylaxis and Punishment in Fiduciary Obligations” (2013) 7 J Eq 87 (who queries whether fiduciary norms have a deterrent function).

45

Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557 (FC); Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 721 per Young J [affd Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672] (“equity takes a very

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Fiduciary Relations  Chapter  4

as liability is strict. The same applies to the making of an unauthorised profit, the liability to account arising “from the mere fact of a profit having, in the stated circumstances, been made”.46 Fiduciary duties, to this end, rest less on morality47 or even conscience48 as on the Biblical injunction that no person can loyally serve two masters.49 • That the principal has benefited from a fiduciary breach does not mitigate the fiduciary’s liability to account for an unauthorised benefit he or she has concurrently secured,50 although it is open to the court (exceptionally) to grant the defaulting fiduciary an allowance for benefiting the principal: see [34.140]. • Merely because the principal was legally or practically unable to effect the dealing that constitutes the fiduciary breach provides no defence to the breach, lacking the principal’s informed consent.51 • By the refusal of Australian courts to allow a defaulting fiduciary to plead contributory fault on the part of the principal as a means of reducing the scope of liability for a fiduciary breach: see [34.50]. Reasons for seeking to establish breach of fiduciary duty

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[4.40] There are three main reasons why a prospective plaintiff may seek to establish that

he or she is owed a fiduciary duty by another person, which has been breached. It may be because the plaintiff lacks a (viable) cause of action at common law. It may be because proof of a breach of fiduciary duty opens the spectrum for equitable remedies, proprietary relief in particular (including the ability to trace an existing equitable interest into the hands of a third party: see Ch 39), which may accord more closely with the relief the plaintiff seeks: see [4.325], [4.330]. Or it may be that relief in equity may be available where common law relief is excluded (say, by limitations legislation) or reduced (say, by a defence such as contributory negligence). These advantages have prompted plaintiffs to pursue the existence of fiduciary duties in what has judicially been described as an “over-​ready tendency to reach for the amplitude of [the] fiduciary remedy”.52 Being alert to this technique, courts have generally refused to superimpose fiduciary duties on common law duties merely to improve the nature or extent of

hard line against breach of fiduciary duty and makes even a comparatively innocent fiduciary account”). See, for example, Boardman v Phipps [1967] 2 AC 46 (discussed at [4.165]). 46

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 144–​145 per Lord Russell. See also Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 at 635 per Upjohn LJ.

47

See Conaglen, “The Nature and Function of Fiduciary Loyalty” (2005) 121 LQR 452 at 472–​473.

48

It follows that references aligning fiduciary breaches with “unconscionable conduct” either use the term “unconscionable” in a loose sense (see, for example, United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 799 per McLelland J) or involve factual scenarios where the conduct in question can genuinely be described as unconscionable (see, for example, Re Property Force Consultancy Pty Ltd (in liq) [1997] 1 Qd R 300 at 316 per Derrington J; Owners —​Strata Plan 74602 v Eastmark Holdings Pty Ltd [2015] NSWSC 1981 at [123], [129] per Stevenson J).

49

Breen v Williams (1996) 186 CLR 71 at 108 per Gaudron and McHugh JJ.

50

See, for example, Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 (discussed at [4.90]); Boardman v Phipps [1967] 2 AC 46 (discussed at [4.165]); Maher v Millennium Markets Pty Ltd [2004] VSC 174 (discussed at [4.160]).

51

See, for example, Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 (discussed at [4.90]); Boardman v Phipps [1967] 2 AC 46 (discussed at [4.165]).

52

Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 at 14,709 per Santow J. A way to address this is to permit judges to have at their disposal a “basket of remedies” such that, once a legal wrong has been established, the remedy that is most appropriate can be selected and applied: see [P.45].

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Equity and Trusts in Australia

the remedy53 —​“[t]‌he finding of fiduciary obligations is not remedy-​led”.54 Instead, fiduciary duties are recognised only where the nature of the relationship between the parties justifies the imposition of the fiduciary standard on dealings between them, and to do so does not modify the operation or effect of statute.55 Duration of fiduciary duties

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[4.45] Fiduciary duties are attracted in relationships that exhibit certain characteristics,

discussed at [4.50]–​[4.75]. It therefore stands to reason that once a relationship no longer exhibits these characteristics, or the requisite level of these characteristics, there should be little reason to for fiduciary duties to continue. This has led some to reject “the concept of a fiduciary obligation which continues notwithstanding the determination of the particular relationship which gives rise to it”.56 It is easiest to draw a line between the existence and the termination of a fiduciary-​type relationship in cases where it is constituted by contract; once the contract attracting both contractual and fiduciary duties has come to an end, there is arguably no justification for continuing fiduciary duties of loyalty exist.57 But it cannot be assumed that, without exception, fiduciary duties always chart the parameters of a coexisting contractual relationship.58 The characteristics that justify the superimposition of fiduciary duties may exist independently of contract, and so may precede or succeed the existence of a contract. Moreover, the case law countenances that, at least for directors (see [4.95], [4.100]), lawyers (see [4.155]) and trustees (see [22.105]), a duty of loyalty may subsist beyond the termination of the relationship that gave rise to fiduciary duties in the first place. This may be so, it is reasoned, where the dealing the director, lawyer or trustee purports to pursue “relates back” in some sense to when their formal relationship with the company, client or trust was on foot. Though this has led one judge to remark that “[e]‌ach category has its own problems and it is not possible to generalise from one to the other”,59 it should not be assumed that fiduciary law provides the only means to protect some obligation post-​contract. Subject to the strictures of the law on restraints of trade, contract itself may do so. Equity also may have an important role here; as the chief concern underscoring post-​contractual duties of directors, lawyers and trustees here appears to be a misuse of information derived in a

53

State of South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231 at 266 per Olsson J; Williams v Minister, Aboriginal Land Rights Act 1983 (1999) 25 Fam LR 86 at 240 per Abadee J; Cubillo v Commonwealth of Australia (2001) 183 ALR 249 at 370 (FC(FCA)); Howard v Commissioner of Taxation (2014) 253 CLR 83 at [35] per French CJ and Keane J.

54

MacLean v Arklow Investments Ltd [1998] 3 NZLR 680 at 690 per Gault J. See also Gladstone v Canada (Attorney-​General) [2005] 1 SCR 325 at [24] per Major J (“The concept of fiduciary duty is not an invitation to engage in ‘results-​oriented’ reasoning. It is a principled analysis”).

55

Otherwise equity would have supremacy over the sovereignty of Parliament: Cubillo v Commonwealth of Australia (2001) 183 ALR 249 at 370 (FC(FCA)) (ruling that no fiduciary obligation can forbid what legislation expressly permits).

56

Attorney-​General v Blake [1998] 1 All ER 833 at 841 per Lord Woolf MR (appeal determined on a different point: Attorney-​ General v Blake [2001] 1 AC 268: see [P.60]). See also MacLean v Arklow Investments Ltd [1998] 3 NZLR 680 [affd Arklow Investments Ltd v Maclean [2000] 1 WLR 594 (PC)]; Collard v State of Western Australia (No 4) [2013] WASC 455 at [1513] per Pritchard J (who was “unable to see any principled justification for the conclusion that a fiduciary duty continues long past the time when the fiduciary relationship itself comes to an end”).

57

Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 200–​201 per McHugh, Gummow, Hayne and Callinan JJ (“The fact that dealings are completed will ordinarily demonstrate that any interest or duty associated with those dealings is at an end”).

58

Ratiu v Conway [2006] 1 All ER 571 at [72]–​[80] per Auld LJ.

59

Edmonds v Donovan (2005) 12 VR 513 at [58] per Phillips JA.

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Fiduciary Relations  Chapter  4

fiduciary capacity to secure a personal benefit, it can be addressed by the equitable doctrine that protects against the misuse of confidential information discussed in Ch 6.60

CHARACTERISTICS OF RELATIONSHIPS THAT ATTRACT FIDUCIARY DUTIES A fiduciary principle?

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[4.50]  Notwithstanding a degree of consensus as to the nature of fiduciary duties, a compre-

hensive, accepted statement of the hallmarks or indicia of a relationship that attract fiduciary duties has proven elusive. The fiduciary concept has, in this regard, been described as “a concept in search of a principle”.61 The lack of a “fiduciary principle” —​namely a widely accepted single basis for imposing fiduciary duties —​impacts both on whether (and when) fiduciary duties arise and on the scope of any such duties. For instance, if fiduciary duties are imposed on a person in whom trust and confidence is placed, their scope must be determined by the extent of that trust and confidence. If fiduciary duties arise because a person is vulnerable to the exercise of another’s discretion, their extent may chart the extent of the vulnerability. As trust and confidence cannot in all cases be equated with vulnerability, it is evident that different “fiduciary principles” can dictate varying outcomes on the same factual scenario. The resulting uncertainty has generated considerable case law. Even unqualified acceptance of a fiduciary principle would not remove all uncertainty; the need for such a principle to be drafted in terms broad enough to ensure its flexibility would itself generate some uncertainty as to how it applies to each factual situation (“factual uncertainty”). Yet issues of factual uncertainty are fodder for trial judges. It is factual uncertainty compounded with the legal uncertainty generated by the lack of an accepted fiduciary principle that unduly complicates fiduciary law. The challenge for the courts is to adopt a principle that emphasises the element of loyalty while at the same time being sufficiently distinct from existing duties in other areas of law. It must be phrased in terms flexible enough for it to be moulded to new situations, but not so open-​ended to be of little use in predicting the nature of relationships that attract fiduciary duties and the scope of those duties.62 Below are discussed the main candidates found in the case law for the fiduciary principle. Trust and confidence? [4.55] The original concept of fiduciary duties developed by the Court of Chancery in the

late 18th century targeted a relation of trust and confidence that may be abused.63 It led the

60

See Glover, “Is Breach of Confidence a Fiduciary Wrong? Preserving the Reach of Judge-​made Law” (2001) 21 LS 594; Dal Pont, “Conflicts of Interest: The Interplay Between Fiduciary and Confidentiality Law” [2002] AMPLA Yearbook 583 at 594–​ 601. As one of the main reasons why breach of fiduciary duty is pleaded is to access proprietary relief, such as a constructive trust (see [38.25]–​[38.50]), the clear recognition of the availability of proprietary relief for breach of confidence may assist in this respect. To date, the debate concerning whether or not information is property has stultified many judges in adopting this approach: see [6.375].

61

Mason, “Themes and Prospects” in Finn (ed), Essays in Equity (The Law Book Company Limited, 1985), p 246.

62

Cf Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 72 per Gibbs CJ (“any test can only be stated in the most general terms and that all the facts and circumstances must be carefully examined to see whether a fiduciary relationship exists”).

63

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 69 per Gibbs CJ. The term “fiduciary” comes from the Latin “fiducia”, meaning “trust”.

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Equity and Trusts in Australia

courts to intervene where a person occupying a position of trust or confidence took improper advantage of this position to benefit herself or himself or a third party. This highlights the common genesis of, and close relationship between, fiduciary law and the equitable doctrine of breach of confidence (discussed in Ch 6). But it should not be assumed that the doctrines exhibit the same temporal parameters or foster the same aims. For instance, by itself a receipt of confidential information does not per se attract fiduciary duties. As explained by a New Zealand judge:64 The relationship of trust and confidence which arises whenever a party places him or herself in a position where they receive information is likely to embrace the concept of confidentiality. Confidential information may well be imparted and may, depending on the circumstances, be indicia of a fiduciary relationship. Consequently, both a duty not to act contrary to the interests of the other party and an obligation to retain and not misuse confidential information may arise and overlap in the same case. It is accepted … that the imparting of the confidential information does not of itself give rise to a fiduciary obligation. Where a fiduciary obligation is found to exist the scope of the relationship may be quite narrow. Indeed, it may extend to little more than keeping confidences, although it is hard to imagine a fiduciary relationship where there are no other obligations.

In any case, it is clear that a subjective element of trust or reposing of confidence is not determinative of the existence of fiduciary duties.65 Not all relationships where a person places trust and confidence in another person necessarily require equity’s intervention to protect the former from the latter’s abuse of position. An actual relation of confidence does not, moreover, of itself imply a duty of loyalty; only where the trust and confidence is directed to the subordination of self-​interest to the interest of another (or to the joint interest with another) can scope for fiduciary duties arise.66

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Undertaking to act in the interests of another? [4.60]  Relationships that attract fiduciary duties have been viewed from a quasi-​contractual

perspective:  an undertaking or pledge between two persons. A  proponent of this view was Mason J in Hospital Products Ltd v United States Surgical Corporation:67 The critical feature of [accepted fiduciary relationships] is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense … The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

64

MacLean v Arklow Investments Ltd [1998] 3 NZLR 680 at 733 per Thomas J (in dissent but not on this statement of law). See also at 690 per Gault J [affd Arklow Investments Ltd v Maclean [2000] 1 WLR 594 (PC)]; Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 593 per Binnie J.

65

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 69 per Gibbs CJ; State of South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231 at 265 per Olsson J.

66

Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 at [13] per Finn J.

67

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96–​97. See also Elders Pastoral Ltd v Bank of New Zealand [1989] 2 NZLR 180 at 192 per Somers J; Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at 154 per McLachlin J; Galambos v Perez [2009] 3 SCR 247 at [76] per Cromwell J (“what is required in all cases of ad hoc fiduciary obligations is that there be an undertaking on the part of the fiduciary to exercise a discretionary power in the interests of that other party”).

106 [4.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

This basis of fiduciary responsibility expressly recognises that fiduciary duties may depend upon contract for their existence;68 indeed, the parties’ agreement is often the prime source for discerning the existence and scope of fiduciary duties.69 The undertaking serves to justify the reposing of trust and confidence, and the consequent imposition of equitable duties to ensure that this trust and confidence is not abused.70 Yet in this respect the undertaking theory appears to add only an evidentiary gloss to the trust and confidence principle. At the same time, it may unduly tie fiduciary duties to the existence of a contract rather than being superimposed to foster loyalty;71 after all, in some circumstances, it is the absence of contractual protection against disloyalty that justifies the imposition of fiduciary duties: see [4.200], [4.215]. This theory, in any event, does not adequately explain all relationships that give rise to fiduciary duties, only those grounded in some form of agreement. Attempts to generalise its application consequently face the drawback of implying, or perhaps more accurately imputing, an undertaking.72 And even if an undertaking apparently exists, issues of degree remain to distinguish its fiduciary incidents from any express or implied contractual good faith (or general cooperation) obligation. Disadvantage, vulnerability and unequal bargaining power? [4.65]  An Australian High Court judge has suggested that the notion underlying all the cases

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of fiduciary obligation “is a position of disadvantage or vulnerability on the part of one of the parties which causes him to place reliance upon the other and requires the protection of equity in acting upon the conscience of that other”.73 According to this theory, where a party is at the mercy of another’s discretion or power, fiduciary duties are needed to guard against abuse of that discretion or power.74 At one time the Supreme Court of Canada adopted a parallel theory to justify fiduciary duties arising out of what it termed “power-​dependency” relationships.75 Yet Canadian judges 68

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97 per Mason J; Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 174–​175, 209 per La Forest J.  See Finn, “Contract and the Fiduciary Principle” (1989) 12 UNSWLJ 76.

69

Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 17 per Bryson J. See, for example, Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 (in the context of a contract denying the fiduciary indicia).

70

Bristol and West Building Society v Mothew [1996] 4 All ER 698 at 711 per Millett LJ.

71

Chirnside v Fay [2007] 1 NZLR 433 at [80], [82], [85] per Blanchard and Tipping JJ.

72

See McPherson, “Fiduciaries: Who Are They?” (1998) 72 ALJ 288 at 289; Galambos v Perez [2009] 3 SCR 247 at [79] per Cromwell J (acknowledging that the fiduciary’s undertaking may be implied in the particular circumstances of the parties’ relationship). Cf Edelman, “When Do Fiduciary Duties Arise?” (2010) 126 LQR 302 (who argues that an understanding of when fiduciary duties arise requires them to be conceived as obligations based on manifestations of a voluntary undertaking to another, as opposed to imposed by law or necessarily referable to a relationship or status, but in so doing adopts a very loose concept of undertaking, and concedes an exception if fiduciary duties are also imposed, as they are, to deter fiduciaries from particular action); Edelman, “The Importance of the Fiduciary Undertaking” (2013) 7 J Eq 128. Contra Conaglen, “Fiduciary Duties and Voluntary Undertakings” (2013) 7 J Eq 105.

73

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 142 per Dawson J. Similar statements can be found in Canadian and New Zealand courts: LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 63 per Sopinka J; Watson v Dolmark Industries Ltd [1992] 3 NZLR 311 at 315 per Cooke P.

74

Weinrib, “The Fiduciary Obligation” (1975) 25 UTLJ 1 at 7; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96–​97 per Mason J; Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 94 ALR 225 at 244–​245 (FC(FCA)); Auag Resources Ltd v Waihi Mines Ltd [1994] 3 NZLR 571 at 578 per Barker J.

75

Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 178–​180 per La Forest J; Blueberry River Indian Band v Canada (1995) 130 DLR (4th) 193 at 209 per McLachlin J. See also Frame v Smith (1987) 42 DLR (4th) 81 at 99 per Wilson J (who identified the following indicia: “(1) The fiduciary has scope for the exercise of some discretion or power. (2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests. (3) The beneficiary is particularly vulnerable to or at the mercy of the fiduciary holding the discretion or power”); Ammon v Consolidated Minerals

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Equity and Trusts in Australia

remained wary of being definitive, one warning that as vulnerability is only a corollary of the ability to cause harm, it is undesirable to overemphasise vulnerability in determining the existence of fiduciary duties.76 And in 2009 the highest court “reverted” to an analysis grounded in an undertaking to act in the interests of another (combined with a discretionary power in the fiduciary to affect the principal’s interests),77 conceding that “not all power-​dependency relationships are fiduciary in nature, and identifying a power-​dependency relationship does not, on its own, materially assist in deciding whether the relationship is fiduciary or not”.78 Australian judges, though not discounting its relevance, have likewise been reticent to identify disadvantage, dependence or vulnerability as the fiduciary principle.79 This is sensible, as not every relationship exhibiting vulnerability necessarily requires the imposition of fiduciary duties to safeguard the weaker party. The duty of care in tort, implied terms in contract, equitable doctrines like undue influence (see Ch 7), unconscionable dealing (see Ch 9) and estoppel (see Ch 10), and statutory unconscionability initiatives (see [9.160]–​[9.195]), may prove more appropriate vehicles to protect the vulnerable than a doctrine based on loyalty. In any case, fiduciary law is more closely concerned with the position of the parties that results from the relationship that gives rise to the fiduciary duty than, as is usually the case with these other doctrines, with their respective positions before they enter into the relevant relationship.80 Synthesis

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[4.70] The above fiduciary indicia offer related but distinct criteria. Relationships of trust

and confidence may arise by undertaking, or entail inequality or dependency. Relationships of inequality or vulnerability can also arise via an undertaking,81 or solely from the position of the parties relative to one another independent of an undertaking. Moreover, an undertaking presupposes an element of voluntary choice to act in a fiduciary capacity, whereas trust, confidence or vulnerability may exist irrespective of voluntary choice. Attempts by some courts to combine these principles into an all-​inclusive formulation82 illustrate what is implicit in the judgments: that no one principle fully explains the circumstances wherein fiduciary duties should be imposed or their scope. Different principles may explain different relationships. For example, trust and confidence is more readily applicable to “horizontal” relationships

Ltd (No 3) [2007] WASC 232 (where Martin CJ was attracted to this enunciation with “one slight qualification”, namely that “vulnerability should not be regarded as the touchstone of fiduciary obligation, rather, the fundamental question is for what purpose and for the promotion of whose interest the fiduciary power is held”: at [321]). 76

Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 192 per La Forest J. See also LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 39 per La Forest J.

77

Galambos v Perez [2009] 3 SCR 247 at [67]–​[84] per Cromwell J, delivering the reasons of the court.

78

Galambos v Perez [2009] 3 SCR 247 at [74] per Cromwell J, delivering the reasons of the court.

79

See, for example, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 69–​70 per Gibbs CJ; C-​Shirt Pty Ltd v Barnett Marketing and Management Pty Ltd (1997) 37 IPR 315 at 336 per Lehane J; Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 217–​218 per Kirby J; Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323 at [357] per Beech J (noting that vulnerability is “used in a particular sense”, namely to refer to “the potential for detriment arising from an exercise of power or discretion by the fiduciary in circumstances where the fiduciary has agreed or undertaken to act for or on behalf of the other in the exercise of that power”).

80

Galambos v Perez [2009] 3 SCR 247 at [68] per Cromwell J, delivering the reasons of the court.

81

Cf Meagher and Maroya, “Crypto-​Fiduciary Duties” (2003) 26 UNSWLJ 348 at 350 (who view vulnerability to abuse of a position of trust and confidence as “the inevitable corollary of an abuse of the fiduciary’s undertaking to act in the interests of the principal”).

82

See, for example, Cook v Evatt (No 2) [1992] 1 NZLR 676 at 685 per Fisher J (“an inequality of bargaining power brought about by the trust or confidence reposed in, and accepted by, the fiduciary to perform some function for another’s benefit in circumstances where the beneficiary lacks the power adequately to control or supervise the exercise of that function”).

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Fiduciary Relations  Chapter  4

(a partnership, for instance: see [4.190]), whereas the notion of a party undertaking to act solely in the interests of another fits better where the relationship between them is “vertical” (such as principal and agent: see [4.170]).83 The inherent drawbacks of accepting multiple fiduciary principles have prompted a more fervent search for the fiduciary principle. Just as the work of Dr Finn,84 as he then was, influenced the judiciary in the early 1980s to favour the undertaking theory, his revised view based on the reasonable expectations of parties to a relationship gathered momentum in the 1990s.85 It was in 1989 that Finn proposed and formulated this view as follows:86

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What must be shown … is that the actual circumstances of a relationship are such that one party is entitled to expect that the other will act in his interests in and for the purposes of the relationship. Ascendancy, influence, vulnerability, trust, confidence or dependence doubtless will be of importance in making this out, but they will be important only to the extent that they evidence a relationship suggesting that entitlement. The critical matter in the end is the role that the alleged fiduciary has, or should be taken to have, in the relationship. It must so implicate that party in the other’s affairs or so align him with the protection or advancement of that other’s interest that foundation exists for the “fiduciary expectation” … A  fiduciary responsibility, ultimately, is an imposed not an accepted one … The factors which lead to its imposition doubtless involve recognition of what the alleged fiduciary has agreed to do. But equally public policy considerations can ordain what he must do, whether this be agreed to or not … [A]‌person will be in a fiduciary in his relationship with another when and insofar as that other is entitled to expect that he will act in that other’s or in their joint interest to the exclusion of his own several interest.

The expectations-​based principle is objective in nature. Were it purely subjective, it would suffer the same drawbacks as the principle based on trust and confidence, or even that based on an undertaking. It has the advantage of highlighting that the court imposes fiduciary duties not by reason of any agreement between the parties, or the subjective views or expectations of the parties, but from an objective assessment of the nature of the relationship and its practical incidents.87 The “imposed” rather than “accepted” aspect of fiduciary duties can readily be accepted, although it should not be assumed that with it must come a reasonable expectations approach. For instance, a majority of the Supreme Court of New Zealand has, whilst endorsing the “imposed” nature of fiduciary duties, identified all fiduciary relationships as marked by the entitlement of one party to place trust and confidence in the other.88 In any case, the expectations approach is not lacking weaknesses, chiefly the breadth in which it is phrased. It is no more specific or discriminating than notions of trust, confidence, agreement or vulnerability,89 but draws from those vague notions to derive its substance. To this end, it may add little in the way of concrete guidance to judges in their exercise of equitable discretion. Nor does it improve certainty and predictability. It must be queried what substantive difference there is

83

News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 312 (FC(FCA)).

84

Finn, Fiduciary Obligations (The Law Book Company Limited, 1977), p 201.

85

See, for example, Lintrose Nominees Pty Ltd v King [1995] 1 VR 574 at 580 per Ormiston J; Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 179 per La Forest J; Wik Peoples v Queensland (1996) 187 CLR 1 at 95 per Brennan J.

86

Finn, “The Fiduciary Principle” in Youdan (ed), Equity, Fiduciaries and Trusts (Carswell Co, 1989), pp 46, 47, 54. See further Finn, “Fiduciary Reflections” (2014) 88 ALJ 127 at 139–​140.

87

State of South Australia v Peat Marwick Mitchell & Co (1997) 24 ACSR 231 at 265 per Olsson J.

88

Chirnside v Fay [2007] 1 NZLR 433 at [80] per Blanchard and Tipping JJ, with whom Gault J agreed on this point.

89

See Michalik, “Doctors’ Fiduciary Duties” (1998) 6 JLM 168 at 173–​175.

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Equity and Trusts in Australia

between the expectations approach and one simply based on assessing whether, in view of what fiduciary duties dictate, it would be inequitable not to impose those duties on a person.90 Moreover, reasonable expectations provide, to a greater or lesser degree, the foundation for other equitable doctrines, namely the doctrine of estoppel (discussed in Chapter 10) and, in New Zealand at least, certain constructive trusts.91 With judges lamenting the indiscriminate pleading of the fiduciary duties, it is arguably undesirable to converge equitable doctrine in this manner. In order for the expectations approach to sustain a cause of action independent from other equitable doctrines, it must be clear as to what the expectations in issue relate: loyalty and nothing else. Other expectations may form the domain of different legal or equitable doctrines, as explained by Santow J in the following illustration:92 [T]‌here may still be the expectation in commercial situations that a party in a superior position will not take advantage of another’s known vulnerability to act to that party’s detriment, in those circumstances in which equity would deem this unconscionable. That is not to invoke a fiduciary duty. Rather it is to invoke the equitable doctrine of unconscionability, where the consequent obligation, if applicable, is of a lesser standard, namely not to act to the detriment of the vulnerable party. In contrast, fiduciary must act so as to prefer the interest of the other or, in the case of a partnership, must act in their joint interest.

Categorising relationships that give rise to fiduciary duties

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[4.75] Some relationships are recognised as fiduciary in nature in the sense that they are

presumed to give rise to fiduciary duties. These include relationships between trustee and beneficiary, director and company, lawyer and client, agent and principal, and that between partners. The fiduciary incidents pertaining to each of these relationships is discussed below: see [4.80]–​[4.210]. The “fiduciary principle” in such cases serves its main role in determining the scope of the fiduciary duties owed. As fiduciary duties are presumed to arise, the party who alleges that no fiduciary duties exist in the relevant circumstances carries the onus of proof. Fiduciary duties may also arise in other relationships where the nature of the relationship in issue may lead the court to conclude that fiduciary duties should be imposed. Below are discussed various relationships that have been litigated, successfully or otherwise depending on the circumstances, on a fiduciary premise: see [4.215]–​[4.315]. In these cases the fiduciary principle serves to determine both whether fiduciary duties arise and their scope. The person who contends that fiduciary duties should be imposed bears the onus of establishing why this should be so.

TRUSTEE AND BENEFICIARY [4.80]  The relationship between trustee and beneficiary is the archetypal fiduciary relation-

ship. The reason is that the trustee, as the legal owner of the trust property, can exercise considerable control over the interests of the beneficiaries under the trust. Beyond the duties imposed upon trustees in equity directed at ensuring the trustee acts in the beneficiaries’ best interests, fiduciary duties are necessary to give effect to the express or implied undertaking of a trustee to give undivided loyalty to those interests:  see [22.70]. The seminal case is

90

Pavan v Ratnam (1996) 23 ACSR 214 at 217 per Mahoney ACJ.

91

See Butler (ed), Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, 2009), pp 342–​346.

92

Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685 at 14,705–​14,706.

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Fiduciary Relations  Chapter  4

Keech v Sandford,93 in which the trustee of a lease renewed the lease in his own name where the lessor had refused to renew the lease to the trust. Lord King LC held that it was a “rule” that “should be strictly pursued, and not in the least relaxed” that a trustee who obtains a renewal of a lease for herself or himself holds the interest in the renewed lease as part of the trust estate.94 Keech v Sandford established the principle that “a trustee must not use his position as trustee to make a gain for himself”, which has subsequently been applied generally to all cases where one person stands in a fiduciary relation to another.95

DIRECTOR AND COMPANY [4.85]  Like other fiduciaries, company directors must not, unless authorised, profit person-

ally from their position as directors or allow conflicts between their duty as directors and their own interest.96 This duty is reflected in the proscription against exercising a directorial power so as to obtain a private advantage or for a purpose foreign to that power.97 Laskin J aptly described the rationale for directors’ fiduciary duties in Canadian Aero Service Ltd v O’Malley:98

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Strict application [of fiduciary obligations] against directors and senior management officials is simply a recognition of the degree of control which their positions give them in corporate operations, a control which rises above day-​to-​day accountability to owning shareholders and which comes under some scrutiny only at annual general meeting or at special meetings. It is a necessary supplement, in the public interest, of statutory regulation and accountability which themselves are, at one and the same time, an acknowledgment of the importance of the corporation in the life of the community and the need to compel obedience by it and by its promoters, directors and managers to norms of exemplary behaviour.

The Corporations Act 2001 (Cth), via s 182(1), reflects the general law99 in proscribing a director (or a secretary, other officer or employee) of a company improperly using their position to gain an advantage for themselves or someone else or to cause detriment to the company. It highlights what is the case also at general law, namely that fiduciary-​ type obligations are not the sole province of those who actively manage the company, but have potential application to non-​executive directors,100 shadow directors101 and senior

93

Keech v Sandford (1726) Sel Cas T King 61; 25 ER 223.

94

Keech v Sandford (1726) Sel Cas T King 61 at 62; 25 ER 223 at 223. See the discussion of Keech v Sandford by Deane J in Chan v Zacharia (1984) 154 CLR 178 at 200–​201. Cf Hicks, “The Remedial Principle of Keech v Sandford Reconsidered” [2010] CLJ 287 (who argues that the case itself does not support the broader remedial principle for which it has subsequently been applied).

95

Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 at 350 per Dixon CJ, McTiernan and Fullagar JJ.

96

Furs Ltd v Tomkies (1936) 54 CLR 583 at 592 per Latham CJ; Pacifica Shipping Co Ltd v Andersen [1986] 2 NZLR 328 at 333 per Davison CJ; Woolworths Ltd v Kelly (1991) 22 NSWLR 189 at 225 per Mahoney JA.

97

Bishopsgate Investment Management Ltd (in liq) v Maxwell (No 2) [1994] 1 All ER 261 at 265 per Hoffmann LJ; O’Halloran v R T Thomas & Family Pty Ltd (1998) 29 ACSR 148 at 159 per Spigelman CJ.

98

Canadian Aero Service Ltd v O’Malley (1973) 40 DLR (3d) 371 at 384. See also Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) (2008) 39 WAR 1 at [4574] per Owen J.

99

Digital Pulse Pty Ltd v Harris (2002) 40 ACSR 487 at 492 per Palmer J (“[s 182(1)] does no more than repeat one aspect of the law of fiduciaries as it relates to directors, officers and employees of a corporation”) [revd but not on this point: Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298].

100

See, for example, Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265 at [59]–​[71] per E M Heenan J; Commonwealth Oil & Gas Company Ltd v Baxter [2009] SLT 1123.

101

See, for example, Vivendi SA v Richards [2013] BCC 771. The Corporations Act 2001 (Cth), s 9 defines a director to include a person who, while not formally appointed as a company director, acts in that role or on whose instructions or wishes the

[4.85]  111 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

employees102 (as to which see also [4.285]). There is also an indication in the case law of (fiduciary) duties owed by members of governing committees of incorporated (and even unincorporated) associations to the associations themselves, on the same logic.103 The pursuance of corporate business opportunities outside the company umbrella has presented some of the most challenging, and indeed strictest, applications of fiduciary duties in the director–​company context: see [4.90]–​[4.115]. Yet that the law envisages the legitimate existence of a person holding multiple directorships (see [4.120], [4.125]), and of a director owning shares in and transacting with the company (see [4.130]), shows that the fiduciary proscriptions must be applied with a dose of commercial reality in this environment. Corporate business opportunities

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[4.90] Company directors104 who, lacking company consent, usurp for their own benefit,

whether personally or through an associate, a business opportunity the company is actively pursuing commit a fiduciary breach. A leading case is Industrial Development Consultants Ltd v Cooley.105 The defendant, in his capacity as a director of the plaintiff company, attempted to interest a Gas Board in a project. He proved unsuccessful because the Board’s policy was not to employ development companies. As the defendant was a distinguished architect with considerable gas industry experience, the Board offered the contract to him personally. This he accepted, obtaining a release from the plaintiff by falsely representing that he was ill. Roskill J held that the information concerning the Board’s contract came to the defendant in his fiduciary capacity as director of the plaintiff, meaning that he was duty bound to convey it to the plaintiff.106 That opportunity, being exactly the type of opportunity the plaintiff relied on the defendant to obtain, made him liable to account to the plaintiff for the profits from the contract. Cooley’s case represents a relatively straightforward application of fiduciary principle, and highlights that a corporate opportunity is treated almost akin to property of the company, in the sense that it “belongs” to the company. But how strict the law can be is perhaps better illustrated by the House of Lords earlier decision in Regal (Hastings) Ltd v Gulliver.107 R Ltd established a subsidiary, A Ltd, with an authorised share capital of 5000 £1 ordinary shares, to acquire the leases of two cinemas. The owner of the cinemas required A Ltd’s share capital to be fully subscribed prior to agreeing to the leases. As R Ltd had resources to subscribe for

directors of the company are accustomed to act (“shadow director”). Cf Hadjinestoros, “Stigmata of Fiduciary Duties in Shadow Directorship” (2012) 11 Co Lawyer 331. 102

See, for example, Mann v Able Tours Pty Ltd [2010] WASCA 59.

103

See, for example, Stratford Racing Club Inc v Adlam [2008] NZAR 329 at [58] per Chambers J; Lai v Tiao (No 2) [2009] WASC 22 at [84] per Johnson J. See further Dal Pont, Law of Associations (LexisNexis Butterworths, 2018), [8.35]–​[8.39].

104

Although much of the case law focuses on company directors, the same basic principle applies in the context of business opportunities to be secured for the benefit of a partnership or (potentially) joint venture. See, for example, Edmonds v Donovan (2005) 12 VR 513, where a joint venture agreement was terminated by an alleged repudiation, upon which the relevant opportunity was pursued by some of the joint venturers (the appellants). On the issue of whether the opportunity should accrue for the benefit of all the joint venturers, Phillips JA, with whom Winneke P and Charles JA concurred, upheld the trial judge’s conclusion that “in all of the particular circumstances the termination of the arrangement … for profit sharing by [the appellants] did not mean that the latter were thereupon free to seize for themselves, and behind the backs of the respondents, the business opportunity which the parties had been pursuing in conjunction and which the respondents were intent on still pursuing, as they made plain”: at [61].

105

Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162.

106

Industrial Development Consultants Ltd v Cooley [1972] 2 All ER 162 at 173–​174.

107

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134.

112 [4.90] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

only 2000 of the 5000 shares, its directors agreed to subscribe the remaining 3000 shares. On the subsequent sale of R Ltd to new controllers, the directors profited from their holdings in A Ltd. The new controllers succeeded in rendering the ex-​directors accountable for this profit, Lord Russell reasoning that:108

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… the directors standing in a fiduciary relationship to [R Ltd] in regard to the exercise of their powers as directors, and having obtained these shares by reason and only by reason of the fact that they were directors of [R Ltd] and in the course of the execution of that office, are accountable for the profits which have been made out of them.

Three features of Regal (Hastings) illustrate the strictness of the fiduciary duty. First, that the directors acted bona fide made no difference to their liability to account; “[t]‌he rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides”.109 Secondly, although the new controllers obtained a windfall —​in effect recouping part of their cost in purchasing R Ltd shares —​their Lordships viewed “the principle that a person occupying a fiduciary relationship shall not make a profit by reason thereof” as of “such vital importance” as to render the windfall an immaterial consideration.110 Thirdly, also immaterial was the fact that by purchasing the A Ltd shares the directors enabled R Ltd to effect a transaction otherwise commercially impossible for it to enter. This was because the decision as to commercially impossibility was made by the very persons who benefited from it. This strictness persists in English courts. In Bhullar v Bhullar,111 for instance, the English Court of Appeal applied the principle from Regal (Hastings) to require two directors of a property investment company, which was in the course of being wound up, to disclose to the company a property investment opportunity they had pursued personally. Whether the company could or would have taken that opportunity, had it been aware of it, was irrelevant, said the court; rather, the mere existence of the opportunity was information relevant for the company to know, and so the directors were duty bound to communicate it to the company.112

108

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 149.

109

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 144–​145 per Lord Russell. See also at 137 per Viscount Sankey, at 146–​147 per Lord Russell, at 156–​157 per Lord Wright; Cook v Evatt (No 2) [1992] 1 NZLR 676 at 689–​690 per Fisher J; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 720 per Young J [affd Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672 at 692 per Spigelman CJ] (“The cases in this area of law may sometimes appear to give a harsh result to a more or less innocent director. However, as a matter of policy, equity bares its teeth to ensure that fiduciary agents lead a pure corporate life”). Cf Murad v Al-​Saraj [2005] WTLR 1573 at [82] per Arden LJ (who made the obiter remark that “[i]‌t may be that the time has come when the court should revisit the operation of the inflexible rule of equity in harsh circumstances, as where the trustee has acted in perfect good faith and without any deception or concealment, and in the belief that he was acting in the best interests of the beneficiary”), at [121] per Jonathan Parker LJ (who likewise envisaged, again in obiter, the possibility that in future the House of Lords may consider that the time has come to relax the severity of the “no conflict” and “no profit” rules to some extent in appropriate cases, opining that commercial conduct which in the 1800s “was thought to imperil the safety of mankind may not necessarily be regarded nowadays with the same depth of concern”), at [158] per Clarke LJ; Langbein, “Questioning the Trust Law Duty of Loyalty: Sole Interest or Best Interest?” (2005) 114 Yale LJ 929 (who argues that the law should allow a conflicted trustee (or fiduciary) to defend an action on the ground that it was prudently undertaken in the best interests of the beneficiaries (or principal)). Not all support the loosening of fiduciary strictures in this context: see, for example, Conaglen, “Strict Fiduciary Loyalty and Accounts of Profits” [2006] CLJ 278 (who argues that any such relaxation of the strictness of the fiduciary proscriptions risks “undermining the internal logic and the protective function of fiduciary doctrine”: at 280); Flannigan, “The Adulteration of Fiduciary Doctrine in Corporate Law” (2006) 122 LQR 449 (who concludes that greater fiduciary leniency in the corporate environment “will radically hobble the main civil control on the self-​regarding impulse”: at 468).

110

Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 157 per Lord Porter.

111

Bhullar v Bhullar [2003] 2 BCLC 241.

112

Bhullar v Bhullar [2003] 2 BCLC 241 at [41] per Jonathan Parker LJ, with whom Brooke and Schiemann LJJ concurred.

[4.90]  113 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

By denying a director scope to make a private judgment as to whether or not the company is able or likely to exploit the corporate business opportunity as a means of avoiding fiduciary accountability, the courts have propounded a “bright line” approach. An alternative approach not only has the capacity to foster conflicts of interest, it is also likely to involve a slippery slope. For instance, American law —​which allows directors to pursue corporate opportunities personally where it is impossible for the company to do so —​seeks to restrict the operation of impossibility via narrow conceptions of impossibility and requirements of actual insolvency. This in turn highlights the wisdom of a “bright line” rule.113 The consequent lack of flexibility can be addressed by allowing the company board to authorise the exploitation of the corporate business opportunity specifically: see [4.105]–​[4.115].

Application of fiduciary duty post-​termination of directorship?

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[4.95]  The principles discussed above have been held to apply where a director’s resignation

may fairly be said to have been prompted or influenced by the desire to obtain a corporate opportunity.114 Were fiduciary obligations capable of being unilaterally determined by a director through resignation, it may prove too easy for a director to circumvent them. The “informational asymmetry” between director and stakeholders in the company, and with it control a director wields over the transmission of that information to the company, it has been suggested, provides the basis for extending fiduciary duties beyond a director’s resignation.115 Yet to recognise, for this purpose, a fiduciary duty that persists beyond the termination of the relationship that attracted the duty in the first instance presents difficult issues as to the temporal parameters of fiduciary duties generally. If fiduciary duties do indeed survive the expiry of the director–​company relationship, there must be some factor, in theory at least, other than that relationship that justifies their imposition. Courts have faced this challenge by linking the former position as a director to the exploitation of a corporate business opportunity. For instance, an Australian judge has opined that a director breaches fiduciary duty by taking up an opportunity for profit “where there is a sufficient temporal and causal connection between the obligations and the opportunity”,116 which rests on the circumstances in which the opportunity arises and the nature and extent of the company’s current and future operations. An absence of the requisite connection appears in the facts of Foster Bryant Surveying Ltd v Bryant,117 where the defendant director had accepted an offer of work from a customer after his resignation as director became effective, the evidence revealing that his resignation was planned with no ulterior motive and that he had not sought to divert to himself any maturing (or even a possible) business opportunity.

113

See Scott, “The Corporate Opportunity Doctrine and Impossibility Arguments” (2003) 66 Mod L Rev 852 at 867–​869; Prentice and Payne, “The Corporate Opportunity Doctrine” (2004) 120 LQR 198 at 202. Cf Armour, “Corporate Opportunities: If in Doubt, Disclose (but How?)” [2004] CLJ 33.

114

Natural Extracts Pty Ltd v Shotter (1997) 24 ACSR 110 at 141 per Hill J; Rhino Systems International Pty Ltd v Canon Standish (Australia) Pty Ltd (1997) 41 IPR 367 at 371 per Muir J.

115

Koh, “Once a Director, Always a Fiduciary?” [2003] CLJ 403 at 424–​425.

116

SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 at 557 per Cooper J. See also Canadian Aero Service Ltd v O’Malley (1973) 40 DLR (3d) 371 at 382 per Laskin J; Woolworths Ltd v Kelly (1991) 22 NSWLR 189 at 225 per Mahoney JA. Cf Nicholls v Michael Wilson & Partners Ltd [2012] NSWCA 383 at [184] per Sackville AJA, with whom Meagher and Barrett JJA concurred.

117

Foster Bryant Surveying Ltd v Bryant [2007] 2 BCLC 239 (see at [87] per Rix LJ, at [98] per Moses LJ, at [100], [101] per Buxton LJ).

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Fiduciary Relations  Chapter  4

Persons should not, in the interests of freedom to contract and freedom of competition, be bound for a totally indeterminate period to give loyalty to a company in which they formerly held office. A temporal limit to the duration of the post-​resignation obligation is necessary, but difficult to set. Attempts to prescribe an arbitrary period —​a rebuttable presumption of one year, for instance118 —​prove problematic precisely due to their arbitrariness,119 although it may be conceded that the severity of the problem will often exhibit an inverse relationship with the length of time after resignation. [4.100] As corporate opportunity cases almost invariably involve information derived in a

directorial (or equivalent) capacity being misused to generate a post-​directorship benefit, a preferable means of addressing the mischief to which the corporate opportunity doctrine is aimed may be to target the misuse of information received for a limited purpose rather than any continuing duty of loyalty.120 The relevant principle could, in the words of an English judge, be phrased in the following terms:121

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By resigning his directorship [the director] will put an end to his fiduciary obligations to the company so far as concerns any future activity by himself (provided that it does not involve the exploitation of confidential information or business opportunities available to him by virtue of his directorship).

This essentially invokes the equitable doctrine of breach of confidence, which in this context is illustrated by cases exhibiting a confluence between fiduciary law and confidentiality.122 So long as the information used by a former director to pursue an opportunity was received in the capacity of director, its use effects a breach of confidence, unless that information has lost its confidentiality by becoming public knowledge (see [6.75]) or is merely “know-​how” (see [6.50]–​[6.70]). As to the latter, the law recognises that former directors (as well as employees) acquire a “general fund of knowledge and expertise”, which they ought in the public interest be free to use in a new position. Claims that fail to substantiate any specific business opportunity diverted from the company by a former director may, to this end, indicate that what is sought to be harnessed is no more than know-​how.123

118

As suggested by Koh, “Once a Director, Always a Fiduciary?” [2003] CLJ 403 at 427.

119

Hence the call for the temporal qualification to be “a flexible one”, albeit “for a substantial time after resignation” (Austin, “Fiduciary Accountability for Business Opportunities” in Finn (ed), Equity and Commercial Relationships (The Law Book Company Limited, 1987), p 180), and the suggestion that the time frame represent a “reasonable period” in the circumstances (Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1 at [36] per Debelle J, with whom Nyland and Lander JJ concurred).

120

The suggestion that the law in this area cannot rely solely on confidentiality because not all information that can generate a corporate opportunity is necessarily “confidential information” at law (see Koh, “Once a Director, Always a Fiduciary?” [2003] CLJ 403 at 431) is at odds with the broad conception of confidential information propounded by Australian courts in the context, particularly, of departing employees (see [6.50]–​[6.70]), which applies with as much, if not greater, force to resigning directors: see, for example, Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1. In any case, although Koh prefers a continuing fiduciary duty as the basic foundation for intervention ahead of breach of confidence, she phrases her conclusion in terms of confidential information (“once a director has resigned and it is alleged that he has exploited information that can be distinctly traced to or linked with the acts of the ex-​director prior to resignation, then whether the director should be made liable must depend on an inquiry into his role in the company and therefore the corresponding scope of his discretion prior to his resignation”: at 442).

121

British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523 at [89] per Hart J.

122

See, for example, Southern Real Estate Pty Ltd v Dellow (2003) 87 SASR 1; WA Fork Truck Distributors Pty Ltd v Jones [2003] WASC 102.

123

See, for example, Rishmont Pty Ltd v Tweed City Medical Centre Pty Ltd [2002] 2 Qd R 222 at 226–​227 per Holmes J.

[4.100]  115 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

Company consent to director pursuing corporate business opportunity [4.105]  As a breach of the “no-​conflict” and “no-​profit” rules rests on the principal not hav-

ing consented to the conflict or profit (see [4.20]), it follows that a director may seek the company’s informed consent to engage in a transaction or dealing that would otherwise consist of a fiduciary breach. Informed consent is premised upon a full and frank disclosure of the nature and incidents of the conflict or profit to the appropriate organ of the company.124

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[4.110]  Some difficult issues in this context surface in corporate opportunity cases. Prime

amongst these is whether the fact that the company is no longer pursuing that opportunity should by itself licence a director to pursue the opportunity personally. It appears that where the company bona fide resolves not to pursue an opportunity, knowing that it is an opportunity a director plans to pursue personally, there is no fiduciary breach in the director doing so.125 The high watermark case is Queensland Mines Ltd v Hudson,126 where the Privy Council appeared to envisage the acquiescence of the company board as consent for this purpose. The defendant, as managing director of the plaintiff company, successfully obtained for the company the licences necessary to enable it to develop a mining operation. Liquidity problems prompted the company’s choice not to proceed with the operation, subsequent to which the defendant resigned as managing director and, with the knowledge of the company’s board, successfully developed the mines. The company’s claim for an account from the defendant was refused on the basis that, once the company had rejected the opportunity, there was no real sensible possibility of conflict of interest between him and the company. Their Lordships’ remark that “a limit has to be set to the liability to account of one who is in a special relationship with another whose interests he is bound to protect”127 can be readily accepted. The issue concerns where that limit should be drawn. To argue, as Queensland Mines appears to accept, that a board’s rejection of the opportunity for commercial reasons immunises a director against liability for a breach of fiduciary duty is not easy to reconcile with Regal (Hastings). Expansion of the logic in Queensland Mines may, it has been suggested, prompt a new line of defences —​such as bona fides, illegality, ultra vires, inability or lack of desire on the part of the company to exploit the opportunity —​available to directors charged with breach of fiduciary duty, which could have significant implications for fiduciary duties in general.128 Directors who personally usurp a corporate opportunity relying merely on the board’s refusal to pursue the opportunity take a risk, it seems, for it cannot be stated with certainty that acquiescence equates with consent in all cases. [4.115]  There is also the issue of who represents the company when it comes to consenting to

the director’s personal exploitation of a corporate business opportunity. Directors can clearly protect themselves against a finding of breach by securing a resolution of the shareholders in

124

See, for example, BLB Corporation of Australia v Jacobsen (1974) 48 ALJR 372.

125

See, for example, Peso Silver Mines Ltd v Cropper (1966) 58 DLR (2d) 1 at 8–​9 per Cartwright J; SEA Food International Pty Ltd v Lam (1998) 16 ACLC 552 at 558 per Cooper J.

126

Queensland Mines Ltd v Hudson (1978) 18 ALR 1.

127

Queensland Mines Ltd v Hudson (1978) 18 ALR 1 at 3.

128

See Austin, “Fiduciary Accountability for Business Opportunities” in Finn (ed), Equity and Commercial Relationships (The Law Book Company Limited, 1987), p 141 (especially at pp 152–​158 for a discussion of the United States “corporate opportunity doctrine”); Lowry and Edmunds, “The No Conflict —​No Profit Rules and the Corporate Fiduciary: Challenging the Orthodoxy of Absolutism” [2000] JBL 122.

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Fiduciary Relations  Chapter  4

general meeting to that effect.129 Yet as a director owes fiduciary duties to the company, not generally to shareholders,130 logically the company board’s consent should suffice.131 But the appropriate course may depend on the size of the company and the value of the opportunity. Especially where the board’s decision impacts on the value of the shareholders’ investment, the consent of shareholders in general meeting should be sought.132 So while in a large company a decision to abandon a small project may not require shareholder resolution, in a closely held smaller company that same decision would require it.133 In any case, shareholder consent cannot be used as a blanket indemnification or exemption on a prospective basis, only for specific absolution for properly disclosed conflicts or profits. Nor is consent effective if it constitutes a fraud on a minority, is given by an insolvent company to the prejudice of its creditors, or if the majority in general meeting acts for the same improper purpose as the directors.134 Multiple directorships [4.120]  Strict application of fiduciary duties in the director–​company context sits somewhat

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uncomfortably with judicial recognition of the commercial reality of multiple directorships. Case law dictates that it is not impermissible per se for a director of a company to be, at the same time, a director of a competitor, or to personally carry on a competing business (known as the London and Mashonaland rule).135 As this may place the director in a position in which her or his own interests conflict with the fiduciary duty to the first company, courts have ostensibly propounded a less stringent fiduciary duty in this context,136 albeit to be viewed as only a limited incursion into the fiduciary standard and one not to be extended.137 To this end, the London and Mashonaland rule does not operate to dilute fiduciary duties when a conflict

129

Furs Ltd v Tomkies (1936) 54 CLR 583 at 592 per Latham CJ; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 149–​150 per Lord Russell, at 157 per Lord Wright, at 158–​159 per Lord Porter; Warman International Ltd v Dwyer (1995) 182 CLR 544 at 556–​557, 561–​562 (FC).

130

Note that in some circumstances, directors may owe fiduciary duties to shareholders:  see, for example, Coleman v Myers [1977] 2 NZLR 225; Brunninghausen v Glavanics (1999) 46 NSWLR 538; Peskin v Anderson [2001] 1 BCLC 372; Thexton v Thexton [2001] 1 NZLR 237; Crawley v Short (2009) 262 ALR 654; Holmes v Kiriwai Conulstants Ltd [2015] NZCA 149.

131

Centofanti v Eekimitor Pty Ltd (1995) 65 SASR 31 at 44–​45 per Olsson J.

132

Woolworths Ltd v Kelly (1991) 22 NSWLR 189 at 207 per Samuels JA, at 228 per Mahoney JA; Emanuel Management Pty Ltd (in liq) v Emanuele (2002) 83 SASR 501 at 509–​510 per Wicks J.

133

Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1998) 28 ACSR 688 at 721 per Young J [affd Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (2001) 37 ACSR 672] (adding that, as a director’s fiduciary duty is owed to the company as a whole, not its individual members, the shareholders’ resolution need not be unanimous: at 747).

134

Miller v Miller (1995) 16 ACSR 73 at 89 per Santow J.

135

Titled after London and Mashonaland Exploration Co Ltd v New Mashonaland Exploration Co Ltd [1891] WN 165.

136

Rosetex Company Pty Ltd v Licata (1994) 12 ACSR 779 at 782–​783 per Young J. See Lawrence, “Multiple Directorships and Conflicts of Interest: Recent Developments” (1996) 14 C&SLJ 513; Wells, “Multiple Directorships: The Fiduciary Duties and Conflicts of Interest that Arise when One Individual Serves More than One Corporation” (2000) 33 John Marshall Law Rev 561 (in the United States context).

137

British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523 at [82] per Hart J; Foster Bryant Surveying Ltd v Bryant [2007] 2 BCLC 239 at [70] per Rix LJ; Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265 at [78], [79], [90] per E M Heenan J; Commonwealth Oil & Gas Company Ltd v Baxter [2009] SLT 1123 at [5]‌per the Lord President (who did “not regard Mashonaland otherwise than as a decision on its own facts and therefore of limited value on any matter of principle”). See also Christie, “The Directors’ Fiduciary Duty Not To Compete” (1992) 55 MLR 506 at 516; Goddard, “Competing Directorships” (2004) 25 Co Lawyer 23 (who ponders why the London and Mashonaland rule has survived in view of decisions such as Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134, discussed at [4.90]); Prentice and Payne, “The Corporate Opportunity Doctrine” (2004) 120 LQR 198 at 202 (who suggests that the strict modern approach to company directors’ fiduciary duties should be seen as putting the London and Mashonaland rule to rest).

[4.120]  117 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

in fact arises, as appears from the following extract from the judgment of the High Court in R v Byrnes:138 A company is entitled to the unbiased and independent judgment of each of its directors. A director of a company who is also a director of another company may owe conflicting fiduciary duties. Being a fiduciary, the director of the first company must not exercise his or her powers for the benefit or gain of the second company without clearly disclosing the second company’s interests to the first company and obtaining the first company’s consent. Nor, of course, can the director exercise those powers for the director’s own benefit or gain without clearly disclosing his or her interest and obtaining the company’s consent.

In the multiple directorship scenario, as in other contexts, the prospect of a conflict or unauthorised profit can be cured by informed company consent. In BLB Corporation of Australia v Jacobsen,139 for example, at the relevant time the respondent was both manager of the appellant’s Australian business and a director of a company that was a customer of the appellant (BK). The appellant alleged that the respondent had breached his fiduciary duty by extending credit to BK from the appellant at a time when BK was insolvent. On the evidence before it, the High Court found that the respondent was unaware that BK had incurred a substantial trading loss for the year in question. He merely knew that BK “was not going too well” that year, which information he conveyed to the appellant, explaining that BK was struggling to establish itself in the market. The court held that once the respondent disclosed the nature and extent of his interest in BK, it was for the appellant to ask for precise details if it wished.140 As the appellant was content to assent to the continuation of trading with BK without further enquiry, it could not complain of a fiduciary breach.

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[4.125]  If the judgment of Sedley LJ in Plus Group Ltd v Pyke141 is correct, it may be possible

for a director of one company to establish a company that competes directly against the first company —​a clear conflict of interest —​without committing a fiduciary breach where he or she has been excluded from all involvement in the first company by that company’s board. This occurred in Plus Group, his Lordship remarking that:142 [t]‌he defendant’s role as director of the claimants was throughout the relevant period entirely nominal, not in the sense in which a non-​executive director’s position might (probably wrongly) be called nominal but in the concrete sense that he was entirely excluded from all decision-​ making and all participation in the claimant company’s affairs.

This approach, not shared by the other judges in the case,143 raises problems of degree  —​ namely the extent to which the director in question is “involved” in the company’s operations —​and endangers the main fiduciary objective of loyalty.144 Even in England it has been

138

R v Byrnes (1995) 183 CLR 501 at 516–​517 per Brennan, Deane, Toohey and Gaudron JJ (footnotes omitted). See also Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265 at [78]–​[90] per E M Heenan J; Links Golf Tasmania Pty Ltd v Sattler (2012) 213 FCR 1 at [562]–​[565] per Jessup J. See, for example, Humphris v Jenshol (1997) 160 ALR 107 (where a director who used his position to generate a benefit for another company of which he was a de facto controller was found liable to the first company for breach of fiduciary duty stemming from the conflict of interest as a result of him acting for and managing the business affairs of both companies).

139

BLB Corporation of Australia v Jacobsen (1974) 48 ALJR 372.

140

BLB Corporation of Australia v Jacobsen (1974) 48 ALJR 372 at 376–​377.

141

Plus Group Ltd v Pyke [2002] 2 BCLC 201.

142

Plus Group Ltd v Pyke [2002] 2 BCLC 201 at 226.

143

Brooke LJ, with whom Jonathan Parker LJ concurred, found there had been no breach of duty on the ground that the defendant had not used the company’s property or confidential information in establishing the competing company.

144

Grantham, “Can Directors Compete with the Company?” (2003) 66 MLR 109 at 112–​113.

118 [4.125] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

judicially branded “a rare case” that “presents a somewhat novel proposition”.145 Perhaps a better approach in cases where a director lacks real involvement in the plaintiff company’s management is to excuse her or his breach pursuant to statute.146 Director having an interest in, and transacting with, the company [4.130]  That the law allows a person to own shares in, and transact with, the company of

which he or she is a director highlights that the fiduciary proscriptions are not, in this regard, always applied rigorously.147 The law can countenance a compartmentalisation of a director’s capacity, between that as director and that as an investor, debtor, guarantor or creditor. In Mills v Mills,148 the High Court recognised that a director may hold shares in the company, even though it may raise a personal interest capable of conflicting with her or his fiduciary duties as a director. In so ruling, Latham CJ accepted the commercial reality that directors are often also shareholders, and noted that in promoting the interests of the company directors will also promote their own interests. But this did not mean that directors are prohibited from acting in any matter where their own interests are affected by what they do in their capacity as directors, his Honour reasoning as follows:149

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It would be ignoring realities and creating impossibilities in the administration of companies to require that directors should not advert to or consider in any way the effect of a particular decision upon their own interests as shareholders. A  rule which laid down such a principle would paralyse the management of companies in many directions. Accordingly, the judicial observations which suggest that directors should consider only the interests of the company and never their own interests should not be pressed to a limit which would create a quite impossible position.

It follows that, for instance, in exercising share voting rights directors can vote in their own interests, and are not bound by their duty as directors to act in the interests of the company as a whole.150 It also means that no fiduciary proscription necessarily applies to directors making loans to, or giving guarantees in respect of, the company.151 Access to finance, especially for small companies, would otherwise be heavily restricted. And so the enforcement of a loan or guarantee by a director against the company is not, for this purpose, viewed as an act of the director in the capacity of director, but an action in a personal capacity.152

145

Foster Bryant Surveying Ltd v Bryant [2007] 2 BCLC 239 at [70] per Rix LJ.

146

Under the Corporations Act 2001 (Cth), s 1318 (court may grant to a director who has acted honestly, and ought fairly to be excused for the breach). See, for example, Coleman Taymar Ltd v Oakes [2001] 2 BCLC 749.

147

Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 at 638 per Upjohn LJ (remarking that, in the company director scenario, the fiduciary rule “must be applied realistically to a state of affairs which discloses a real conflict of duty and interest and not to some theoretical or rhetorical conflict”).

148

Mills v Mills (1938) 60 CLR 150.

149

Mills v Mills (1938) 60 CLR 150 at 163–​164. See also Howard v Commissioner of Taxation (2014) 253 CLR 83 at [34] per French CJ and Keane J, at [61] per Hayne and Crennan JJ; Corporations Act 2001 (Cth), s 191(2)(a)(i) (which states that the duty, under s 191(1), of a director who has a material personal interest in a matter that relates to the affairs of the company to give the other directors notice of the interest does not apply where the interest “arises because the director is a member of the company and is held in common with the other members of the company”).

150

Whitlam v Australian Securities and Investments Commission (2003) 57 NSWLR 559 at [154] (CA).

151

Lewis v Nortex Pty Ltd (in liq) (2004) 214 ALR 634 at [198] per Hamilton J.

152

See also Corporations Act 2001 (Cth), s 191(2)(a)(iv) (which states that the duty, under s 191(1), of a director who has a material personal interest in a matter that relates to the affairs of the company to give the other directors notice of the interest does not apply where the interest “arises merely because the director is a guarantor or has given an indemnity or security for all or part of a loan (or proposed loan) to the company”).

[4.130]  119 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

LAWYER AND CLIENT [4.135] The relationship between lawyer and client gives rise to fiduciary duties, requiring

undivided loyalty to the client. The reason for this, in the words of Lord Westbury LC over 150 years ago, is that “there is no relation known to society, of the duties of which it is more incumbent upon a court of justice strictly to require a faithful and honourable observance, than the relation between solicitor and client”.153 It is ordinarily the retainer that attracts fiduciary duties, evidencing the lawyer’s undertaking to give undivided loyalty to client interests. It follows that a lawyer must not make an unauthorised profit out the retainer, or during the course of the retainer engage in conduct that places her or his own interests, or those of a third party, in conflict with the duty to the client. The courts have historically been especially strict in enforcing lawyers’ fiduciary duties. They have rejected arguments, more likely to be accepted in the context of some other relationships giving rise to fiduciary duties (such as that between director and company: see [4.130]), that such duties can be diluted by virtue of another kind of relationship existing between lawyer and client. The fear is that a looser approach would “be disruptive of the solicitor-​client relation, undermining of the principles underlying that fiduciary relationship and contrary to the public interest”.154 The strictness with which lawyer–​client fiduciary duties have been interpreted can be illustrated by reference to examples of the application of the no-​conflict and no-​profit duties to that relationship. Application of the “no-​conflict” duty

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[4.140]  The lawyer, as a fiduciary, must shun situations involving a conflict between the law-

yer’s personal interest and the duty to the client (“lawyer–​client conflict”) or the interests of multiple clients (“client–​client conflict”). The latter arises where a lawyer represents two or more clients with conflicting interests (termed a “concurrent conflict”). It can also arise out of representing a client in conflict with duties owed to a former client (termed a “successive conflict”), although the trend of the case law justifies judicial intervention here on the ground of protecting confidential information rather than upholding a fiduciary duty: see [4.155].

Lawyer–​client conflict [4.145] Lawyer–​client conflicts arise most commonly out of dealings between lawyer and

client.155 To avoid a fiduciary breach, the lawyer must ensure that no such dealing is effected without the client’s fully informed consent. Not infrequently, in the face of a pre-​existing conflict of interest, any informed consent will require the client to have first received independent advice. In Maguire v Makaronis,156 for example, a law firm lent money secured by way of mortgage to clients for the purchase of a farm, without disclosing to the clients the firm’s interest as mortgagee. The firm also acted on the purchase of the farm. The clients defaulted after only one payment. The High Court found a conflict between the duty of the firm to the clients and its own interest in the transaction, in particular as mortgagee.157 The firm’s loyalty

153

Tyrell v Bank of London (1862) 10 HLC 26 at 44; 11 ER 934 at 941.

154

Sims v Craig Bell & Bond [1991] 3 NZLR 535 at 545 per Richardson J.

155

See generally Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), Ch 6.

156

Maguire v Makaronis (1997) 188 CLR 449.

157

Maguire v Makaronis (1997) 188 CLR 449 at 467 per Brennan CJ, Gaudron, McHugh and Gummow JJ.

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Fiduciary Relations  Chapter  4

to its clients had not therefore remained undivided, such that it could not loyally discharge its duty to the clients. As the firm had not taken the necessary steps to obtain informed client consent —​there being a lack of independent legal advice —​the mortgage was set aside on the condition that the clients repaid the moneys borrowed.

Client–​client conflict [4.150]  The proscription against concurrent client–​client conflicts reflects that no lawyer can

give undivided loyalty to two clients whose interests conflict.158 A lawyer unwise enough to undertake irreconcilable duties cannot, in the words of the House of Lords, “use his discomfiture as a reason why his duty to either client should be taken to have been modified”.159 The need to fulfil the duty to one client, where it conflicts with that owed to another, therefore provides no defence to lawyer liability. The lawyer’s duty of confidentiality to one client may, for instance, conflict with the duty to act in the interests of another client. This occurred in Hilton v Barker Booth & Eastwood (a firm),160 where solicitors failed to disclose confidential information pertaining to client A  (A’s antecedents as a fraudster) to client B, with whom A was transacting. When the case was before the English Court of Appeal, Judge LJ explained the point this way:161

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By loyally fulfilling the obligation of confidentiality to [A]‌, [the solicitors] were simultaneously acting contrary to [B’s] best interests, and by retaining him as their client, they restricted his opportunity to discover the unpalatable facts about [A] from sources which were not bound by the same obligation of confidentiality. In short, the best interests of one client were prejudiced to the advantage of the other. That was impermissible, whichever client was favoured.

Similarly, a lawyer who acts for each party to a conveyancing or financing transaction may, unless there is a continuing identity of interests in the parties, be placed in a position in which he or she cannot act in the interests of each party because acting in the interests of one party is contrary to the interests of another. Complete loyalty dictates that the lawyer commits a breach of fiduciary duty if he or she purports to continue representing more than one party to that transaction after a conflict of duties arises.162

“Successive” client–​client conflicts —​any role for fiduciary law? [4.155] The trend of Australian case authority denies that the court’s intervention in cases

of a successive client–​client conflict —​via an order disqualifying the lawyer from acting —​is based on fiduciary notions of loyalty.163 Rather, fiduciary duties arising out of the retainer end with the termination of the retainer, leaving curial intervention to be grounded not in fiduciary law but in equity’s protection of confidential information (discussed in Ch 6). In so

158

Bristol and West Building Society v May May & Merrimans (a firm) [1996] 2 All ER 801 at 815 per Chadwick J; Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 at 234 per Lord Millett. See generally Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), Ch 7.

159

Hilton v Barker Booth & Eastwood (a firm) [2005] 1 WLR 567 at [46] per Lord Walker. See also at [8]‌per Lord Scott.

160

Hilton v Barker Booth & Eastwood (a firm) [2005] 1 WLR 567 (noted in Getzler, “Inconsistent Fiduciary Duties and Implied Consent” (2006) 122 LQR 1).

161

Hilton v Barker Booth & Eastwood [2002] Lloyd’s Rep PN 500 at [40]. Although the House of Lords reversed the Court of Appeal’s decision that B could not establish that he had suffered loss as a result of the solicitors’ breach, it cast no doubt on the quote extracted in the text.

162

See, for example, Stewart v Layton (1992) 111 ALR 687 [affd Layton v Stewart [1994] ANZ Conv R 283].

163

See generally, Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), Ch 8.

[4.155]  121 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

ruling, various Australian judges164 have endorsed the approach propounded by Lord Millett in Prince Jefri Bolkiah v KPMG (a firm) to the effect that:165 The court’s jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence.

At the same time, Australian judges also recognise a jurisdiction to disqualify lawyers from acting against former clients independent of proof of a potential misuse of confidential information. Although it has been suggested that this could be grounded in some continuing duty of loyalty or an implied term,166 the balance of case authority supports the proposition that it reflects an exercise of an inherent jurisdiction of the court to determine who, among its officers, is to appear before it. Importantly, it is a jurisdiction more likely confined to the exceptional than the ordinary case, and is premised on the court concluding that a fair-​minded reasonably informed member person would find it subversive to the proper administration of justice to allow the representation to continue.167 Application of the “no-​profit” duty

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[4.160]  Lawyers who make an unauthorised profit out of their retainer commit a breach of

fiduciary duty, and are accountable to their client for that profit. An example is a lawyer who accepts a benefit for referring a client to a third party, such as in Re Two Solicitors,168 where the solicitors, in return for introducing business to an auctioneer, received part of the latter’s commission on the sale of a property that the solicitors had been retained to place on the market. Dodds CJ and McIntyre J held that the solicitors had “failed to perform the obvious and necessary duty of an attorney towards his client of fully informing him of his position before they sought approval of the sharing of the commission”.169 As secret profits give rise to fiduciary breaches, the proper course for a lawyer who wishes legitimately to retain the profit is to seek informed client consent before the transaction is effected. For this purpose, it may be that only independent advice can truly safeguard the lawyer’s position. In Maher v Millennium Markets Pty Ltd,170 for example, a solicitor received a fee from a third party to effect arrangements for the sale of clients’ properties. It was incumbent upon the solicitor, Osborn J ruled, either to ensure that the clients were independently advised as to the potential for conflict of interest implicit in the fee agreement, or at the very

164

See, for example, Newman v Phillips Fox (1999) 21 WAR 309 at 315 per Steytler J; A v Law Society of Tasmania (2001) 10 Tas R 152 at 165, 168 per Underwood J; Photocure ASA v Queen’s University at Kingston (2002) 56 IPR 86 at 98 per Goldberg J; AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464 at [139] per Campbell J; Flanagan v Pioneer Permanent Building Society Ltd [2002] QSC 346 at [11] per Dutney J; Kallinicos v Hunt (2005) 64 NSWLR 561 at [76] per Brereton J; Nasr v Vihervaara (2005) 91 SASR 222 at [33] per Doyle CJ; Barron v Ward Kellner Pty Ltd (2006) 17 NTLR 195 at [13]–​[15] per Southwood J; Maxwell-​Smith v S & E Hall Pty Ltd (2014) 308 ALR 149 at [24], [25] per Barrett JA, with whom Beazley P and McColl JA concurred.

165

Prince Jefri Bolkiah v KPMG (a firm) [1999] 2 AC 222 at 235.

166

See Spincode Pty Ltd v Look Software Pty Ltd (2001) 4 VR 501 at 514 per Brooking JA.

167

See Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), [17.20].

168

Re Two Solicitors (1911) 7 Tas LR 78.

169

Re Two Solicitors (1911) 7 Tas LR 78 at 81.

170

Maher v Millennium Markets Pty Ltd [2004] VSC 174.

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Fiduciary Relations  Chapter  4

least to himself advise them explicitly on such issues. Simply to advise the clients of the opportunity to seek independent advice was insufficient; absent independent legal advice, the solicitor “face[d]‌a difficult task to persuade the Court that the [clients] gave fully informed consent to the transaction”.171 This was so despite that the arrangements were on their face financially beneficial to the clients (effecting the rationalisation of their liabilities), who were experienced in both business and litigation. In a ruling affirmed on appeal,172 his Honour ordered that the fee in question be repaid to the clients.

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[4.165]  The decision in Maher highlights that merely because the lawyer is not motivated by

greed, and has been diligent and effective in representing the client, is no defence to accountability for fiduciary breach. In this regard, Osborn J was simply following the established course of case authority, punctuated by the House of Lords’ leading judgment in Boardman v Phipps.173 It involved a solicitor to a trust, which held shares in a company as trust property. Together with one of the beneficiaries and a trustee of the trust, the solicitor was dissatisfied with the management of the company, and on behalf of the trust secured information relating to the company’s finances. The trust could not legally purchase further shares as these were not an authorised investment.174 This prompted the solicitor to purchase additional shares in his own name, through which he was able to secure control over the company. He liquidated the company’s assets, out of which substantial capital dividends were paid out on each share, after which each share nonetheless retained a healthy value. It followed that the transaction was very profitable for both the trust and the solicitor. A majority in the House of Lords175 ordered the solicitor to account for the profits made on his shares. Their Lordships reasoned that the solicitor had, out of his fiduciary position, obtained both the opportunity and the knowledge to make a profit. In so ruling, Lords Hodson and Guest characterised the information obtained by the solicitor through that opportunity as property of the trust.176 Lord Cohen instead preferred to characterise the information as part of the opportunity that came to the solicitor by reason of his fiduciary position.177 In any case, the majority considered that the duty to account was not ousted by the fact that the trust had lost nothing but had greatly benefited, that the trust could not have raised the money, that the trustees would not have wished to use the money for that purpose even if they had it, and that such a use would have been in breach of trust. Yet because the solicitor had acted bona fide, and greatly benefited the trust, their Lordships entitled him to payment on a liberal scale for the work and skill he had displayed: see [34.140]. The dissenters, Viscount Dilhorne and Lord Upjohn, held that the relevant information was not property of the trust, chiefly because they refused to accept that information could be property. Viscount Dilhorne added that because the trust did not contemplate purchasing further shares at any stage, there could be no conflict between duty and interest when the solicitor acquired shares in his own name. Lord Upjohn found that the fiduciary duties owed

171

Maher v Millennium Markets Pty Ltd [2004] VSC 174 at [83].

172

Brott v Maher (No 2) [2004] VSCA 220.

173

Boardman v Phipps [1967] 2 AC 46.

174

Trustee legislation historically prescribed a list of investments (“authorised investments”) in which trustees could invest without fear of being liable for breach of trust: see [22.185].

175

Per Lords Hodson, Guest and Cohen, Viscount Dilhorne and Lord Upjohn dissenting.

176

Boardman v Phipps [1967] 2 AC 46 at 107 per Lord Hodson, at 115 per Lord Guest.

177

Boardman v Phipps [1967] 2 AC 46 at 102–​103.

[4.165]  123 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

by the solicitor to the trust did not extend to his dealings with the company in question, branding as inequitable an extension of equitable doctrine to make the solicitor accountable.178 Subsequent case law trends have, far from bearing out the concerns of the minority, largely undermined them.

AGENT AND PRINCIPAL [4.170]  As a general rule, the agent–​principal relationship is recognised as giving rise to fidu-

ciary duties.179 Fiduciary law dictates that, without the fully informed consent of the principal, an agent must not assume a position where her or his own interest to the principal conflicts with the duty as a fiduciary, or retain a profit acquired in transactions within the scope of the agency.180 So, for example, the donee of a power of attorney, whom the law views as an agent,181 is subject to fiduciary duties in exercising the power, and must not do so for her or his own benefit (or that of an associate) except as prescribed by the power.182 Care should, however, be exercised in adopting too literal an interpretation of the foregoing, chiefly because the word “agent” is used in a variety of contexts.183 It is not always used in the true legal sense of a person appointed in a representative capacity who, within the scope of authority, has the ability to influence legal relations between the principal and third parties. It is this representative capacity that attracts fiduciary duties, as it evidences the requisite undertaking to act in the interests of the principal. The ability to impact on the principal’s legal relations with third parties, moreover, may place the principal in a position of vulnerability to an agent’s abuse of authority. This representative capacity also explains why agency underscores aspects of some other relationships presumed to give rise to fiduciary duties, such as the lawyer–​client and director–​company relationships.

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Real estate agents [4.175]  Some persons commonly described as agents lack the authority to create legal rela-

tions for their principal, but instead act as intermediaries between their principal and third parties. These “agents” are often remunerated by way of commission upon a successful transaction between the principal and a third party, and so are termed “commission agents”. A common illustration is a real estate agent, to which fiduciary law has a direct application. As such, a real estate agent must not profit at the expense of a principal (usually the vendor), and must exhibit undivided loyalty to the principal by avoiding situations of conflicts of interest and duty, except with the principal’s informed consent.

178

Boardman v Phipps [1967] 2 AC 46 at 129–​134.

179

For a more detailed treatment of agents’ fiduciary duties, see Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), [12.2]–​[12.56].

180

Phipps v Boardman [1965] Ch 992 at 1030 per Pearson LJ; Walden Properties Ltd v Beaver Properties Pty Ltd [1973] 2 NSWLR 815 at 835–​836 per Hope JA; Yamabuta v Tay (No 1) (1995) 16 WAR 254 at 257 per Pringle C; Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 at [52]–​[54] per Lawrence Collins J.

181

See Dal Pont, Powers of Attorney (2nd ed, LexisNexis Butterworths, 2015), [1.8]–​[1.12].

182

See, for example, Smith v Glegg [2005] 1 Qd R 561 (where the transfer of the plaintiff’s property to the defendant’s son, pursuant to an enduring power of attorney granted to the defendant by the plaintiff (being the defendant’s 85-​year-​old mother), was held to amount to a breach of fiduciary duty by the defendant).

183

For the meaning of “agent” at law, see Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), [1.1]–​[1.9].

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Fiduciary Relations  Chapter  4

Application of the “no-​profit” duty [4.180]  The application of the no-​profit duty to real estate agents is illustrated by McKenzie

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v McDonald,184 although the case falls outside the traditional relationship between real estate agent and vendor because the agent had not specifically been retained to effect the sale of the property in question. This explains Dixon AJ’s disinclination to presume the relationship to give rise to fiduciary duties, and instead probe whether it exhibited the requisite fiduciary indicia. The plaintiff, a widow, owned a small farm but desired to live in Melbourne. She was introduced to the defendant, an estate agent, whom she disclosed her desire to sell the farm at a price of £4 10s per acre. A local property agent informed the defendant that the plaintiff could reasonably expect to sell the farm at that price. The defendant nonetheless then advised the plaintiff to reduce her asking price to £4 per acre because she would be unlikely to realise a greater amount. He then offered to purchase the farm at £4 per acre (£2300) and sell the plaintiff a property he owned in Melbourne for £2000 (found to be worth only £1550). The plaintiff agreed, and the defendant later sold the farm at a profit. Dixon AJ ruled that the defendant, on assuming the function of advising and assisting a woman in difficulty in the acquisition of a residence by means of the disposal of her property, occupied a position of confidence warranting fiduciary duties,185 which confidence had been abused. The defendant’s conduct had therefore breached the loyalty standard required of fiduciaries, in that:186 [The defendant] was necessarily furnished with an intimate knowledge of [the plaintiff’s] financial position, her obligations and family needs … [H]‌e set out to make a bargain with her as advantageous to himself as possible, and to that end suppressed the opinion he had obtained from [the local agent] … took no steps to find a purchaser, and wrote a misleading and untruthful report which he intended to dishearten his client … When it came to make that proposal, I  think he misstated his motives and intentions, under-​estimated somewhat the value of the farm, grossly over-​estimated the value of the shop, and adopted a form of expression, in dealing with the income she would receive, likely to mislead her.

Although this meant that the plaintiff was entitled to have the agreement set aside, as the agreement had been executed and third parties had acquired interests in the farm, the defendant was ordered to pay compensation for the undervaluation of the farm and the overvaluation of the shop and dwelling. A more recent example is Pedersen v Larcombe,187 where the defendant, who was the managing agent of the plaintiff’s rental property, suggested that the plaintiff sell the property. The plaintiff engaged the defendant for this purpose. The defendant did not advertise or market the property, but instead purchased it through his company, which shortly thereafter sold the property for over double the price it had paid. This, said Palmer J, amounted to a breach of fiduciary duty, and ordered that the profit be reimbursed to the plaintiff by way of equitable compensation.

184

McKenzie v McDonald [1927] VLR 134.

185

McKenzie v McDonald [1927] VLR 134 at 145.

186

McKenzie v McDonald [1927] VLR 134 at 145–​146.

187

Pedersen v Larcombe [2008] NSWSC 1362.

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Equity and Trusts in Australia

Application of the “no-​conflict” duty [4.185]  As real estate agents are commonly remunerated by commission, payable only upon

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the sale of the relevant property, it is in their interests to ensure that a sale is effected. This can place their own interests —​in securing their commission —​in conflict with those of their principal, who may well rely on their advice in accepting or rejecting an offer. An agent who, blinded by the prospect of earning a commission, fails to disclose to the principal (the vendor) information in the agent’s possession material to the principal’s decision, will likely commit a fiduciary breach. For example, where an agent failed to disclose to the vendor that the prospective purchaser was, to the agent’s knowledge, a person who purchased luxury homes with a view to short-​term gain by renovation, but instead fostered a belief that the prospective purchaser planned to use the home as his residence, the Supreme Court of New Zealand in Premium Real Estate Ltd v Stevens188 ruled that the agent had breached her fiduciary duty to the vendor. The vendors were, accordingly, entitled to compensation for “under-​selling” their property. Estate agents, like other fiduciaries, must eschew an engagement where a duty to a third party conflicts with the fiduciary duty to their principal (“duty–​duty” conflict). However, as the scope of fiduciary duties owed by an agent to a principal is defined by the terms of the contract of agency, the scope of certain fiduciary duties may be modified or excluded by its express or implied terms. This may be necessary, say, where the agent’s business is to act for multiple principals, whose interests may in some circumstances conflict. Whereas such a scenario is to be avoided entirely by fiduciaries such as lawyers (see [4.150]), the nature of a real estate agent’s business may justify a (limited) dilution of fiduciary duties in this context. For example, in Kelly v Cooper,189 the Privy Council upheld estate agents’ freedom to act for competing principals on the basis that they would otherwise be unable to perform their function. In particular, the Board advised that:190 … [i]‌t cannot sensibly be suggested that an estate agent is contractually bound to disclose to any one of his principals’ information which is confidential to another of his principals … Accordingly in such cases there must be an implied term of the contract with such an agent that he is entitled to act for other principals selling competing properties and to keep confidential the information obtained from each of his principals.

The decision in Kelly has been criticised for negating the fiduciary standard by “setting the agent’s duties at a level no higher than that of business competitors dealing at arm’s length”,191 and indeed it appears to buck the more recent trend of English case law towards strictness in fiduciary duties, particularly in respect of lawyers (see [4.150]) and company directors (see [4.90]).192 It has also been queried, albeit by way of obiter, in New Zealand.193 It is, in any case, arguably limited in its application to the real estate agent scenario that, of necessity, will likely involve representation of multiple vendors whose interests do not coincide.194

188

Premium Real Estate Ltd v Stevens [2009] 2 NZLR 384 (see at [27]–​[29] per Elias CJ, at [68]–​[73] per Blanchard J).

189

Kelly v Cooper [1993] AC 205.

190

Kelly v Cooper [1993] AC 205 at 214 (emphasis supplied). See further Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), [12.53]–​[12.56].

191

Brown, “Divided Loyalties in the Law of Agency” (1993) 109 LQR 206 at 210.

192

See Getzler, “Inconsistent Fiduciary Duties and Implied Consent” (2006) 122 LQR 1.

193

Premium Real Estate Ltd v Stevens [2009] 2 NZLR 384 at [77] per Blanchard J (SC).

194

See, for example, Rossetti Marketing Ltd v Diamond Sofa Co Ltd [2013] Bus LR 543 (where Lord Neuberger MR, with whom Moses and Rimer LJJ concurred, saw it as “highly questionable” whether the reasoning in Kelly v Cooper [1993] AC 205

126 [4.185] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

PARTNERS Nature of partnership duties [4.190]  A partnership is a relation between persons who carry on a business in common with

a view to profit.195 Partners owe fiduciary duties to one another in relation to the conduct of the partnership business and in respect of partnership assets.196 The law imposes fiduciary duties by reason of the mutual confidence that the partners will engage in a particular kind of activity or transaction for joint advantage only.197 This dictates the following proscription:198 [O]‌ne partner must not directly or indirectly use the partnership assets for his own private benefit. He must not, in anything connected with the partnership, take any profit clandestinely for himself, nor must he carry on the business of the partnership or any business similar to the business of the partnership in his own or another name separate from it, otherwise that for the benefit of the partnership.

Unlike fiduciary duties arising out of agency-​type (“vertical”) relationships (such as director–​ company and lawyer–​client relationships), a partner’s fiduciary duties are to act jointly in her or his own interests and those of other partners (and can thus be described as “horizontal”). [4.195]  Partners’ rights and duties inter se are chiefly contractual, flowing from the express

or implied terms of the partnership agreement.199 The latter can therefore limit the scope of fiduciary duties, though exclusion of all fiduciary duties arguably denies the existence of a partnership. That the rights and duties are chiefly contractual does not mean that partners’ fiduciary duties are always temporally coincident with the formal existence of a partnership; the case law indicates that fiduciary duties can both precede and post-​date the partnership itself: see [4.200]–​[4.210].

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Fiduciary duties prior to the execution of a partnership agreement [4.200]  That fiduciary duties can precede the execution of a partnership agreement, during

the negotiation stage, is evident from the following statement by the High Court:200

should be extended to other cases of agency, at least in the absence of clear evidence to support such an extension (at [27]), and found “no obvious or inherent grounds for believing that the reasoning in [Kelly v Cooper] should apply to an agency [on the facts] for promoting, placing and selling furniture in Great Britain” (at [26])). 195

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 15 per Dawson J.

196

Chan v Zacharia (1984) 154 CLR 178 at 196 per Deane J.

197

Helmore v Smith (1887) 35 Ch D 436 at 444 per Bacon VC; Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384 at 407–​408 per Dixon J; Rochwerg v Truster (2002) 212 DLR (4th) 498 at 517–​518 (CA(Ont)); Battye v Shammall (2005) 91 SASR 315 at [52] per Gray J.

198

Dean v McDowell (1878) 8 Ch D 345 at 350–​351 per James LJ. See also at 354 per Cotton LJ, at 355–​356 per Thesiger LJ; Aas v Benham [1891] 2 Ch 244 at 255–​256 per Lindley LJ; Rochwerg v Truster (2002) 212 DLR (4th) 498 at 509–​513 (CA(Ont)). This is reflected by provision in the partnership legislation in each jurisdiction: Partnership Act 1963 (ACT), s 35(1); Partnership Act 1892 (NSW), s 30(1); Partnership Act 1997 (NT), s 34(1); Partnership Act 1891 (Qld), s 33(1); Partnership Act 1891 (SA), s 30(1); Partnership Act 1891 (Tas), s 35(1); Partnership Act 1958 (Vic), s 34; Partnership Act 1895 (WA), s 41. See further Fletcher, The Law of Partnership in Australia (9th ed, Lawbook Co, 2007), pp 128–​130.

199

Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384 at 408 per Dixon J.

200

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 12 per Mason, Brennan and Deane JJ. See also at 7–​8 per Gibbs CJ, at 16 per Dawson J; Tuna Tasmania Pty Ltd v Allison [2003] TASSC 4 at [8]‌–​[11] per Cox CJ; Battye v Shammall (2005) 91 SASR 315. Cf Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 at [7]–​[9] per Finn J; Leach v Ross [2013] QSC 333 (no fiduciary duty found where partnership did not eventuate and, had it done so, would have been illegal as contrary to statute).

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Equity and Trusts in Australia

[F]‌iduciary duties can exist between parties who have not reached, and who may never reach, agreement upon the consensual terms which are to govern the arrangement between them. In particular … fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled. Indeed, in such circumstances, the mutual confidence and trust which underlie most consensual fiduciary relationships are likely to be more readily apparent than in the case where mutual rights and obligations have been expressly defined in some formal agreement.

For example, in Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd,201 the plaintiff, who leased premises in a shopping centre, was offered the lease of other premises in the same centre. The offer, contained in a letter from the lessor addressed to the plaintiff, was open for acceptance by completion and return to the lessor. The plaintiff entered negotiations with the defendant with a view to operating a business from the new premises, pursuant to which it left the letter with the defendant for the latter’s perusal. The defendant then returned the letter of acceptance to the lessor seeking to take as sole lessee. Williams J ruled in the plaintiff’s favour, stating that the absence of a formal partnership did not deny a fiduciary duty.202 The same relationship of mutual confidence and trust existed and, in some ways, the breach was accentuated because the defendant’s conduct prevented the plaintiff from taking up the offer of the lease that had initially been made to it. Fiduciary duties following dissolution of partnership

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[4.205]  Fiduciary duties can survive the formal dissolution of the partnership to cover any

matters involved in its dissolution, as the need for mutual trust and confidence persists. In Chan v Zacharia,203 the plaintiff (Z) operated a medical practice for which he leased premises from Ajay Investments Pty Ltd (A). In September 1978, Z agreed to sell to the defendant (C) one-​ half of the practice and thereafter to conduct the practice as a partnership. The partnership ended in May 1981. In January 1979 A gave the doctors a written lease of the premises for a three-​year term with an option to renew for a further two years upon written request not less than three months preceding the expiry of the term. The partnership agreement provided for a general account to be taken of the assets of the partnership upon dissolution. Despite requests from Z, C declined to join in exercising the option to renew the lease. Instead, C approached A separately to secure a renewal of the lease in C’s own name, having offered a premium for the renewed lease. A majority of the High Court204 held that C was a constructive trustee for himself and Z of the new lease that was an asset of the partnership. Deane J, with whom Brennan and Dawson JJ agreed, observed that fiduciary duties between partners are curtailed and altered by the dissolution of the partnership, but do not cease. Specifically, “each partner remained under a fiduciary obligation to co-​operate in and act consistently with the agreed procedure for the realisation, application and distribution of partnership property”.205 Deane J applied

201

Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1.

202

Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1 at 10.

203

Chan v Zacharia (1984) 154 CLR 178.

204

Per Gibbs CJ, Brennan, Deane and Dawson JJ, Murphy J dissenting.

205

Chan v Zacharia (1984) 154 CLR 178 at 197. See also at 183 per Gibbs CJ; Thompson’s Trustee in Bankruptcy v Heaton [1974] 1 All ER 1239 at 1249 per Pennycuick VC; Don King Productions Inc v Warren [1999] 3 WLR 276 at 319–​322 per Morritt LJ.

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Fiduciary Relations  Chapter  4

the rule in Keech v Sandford206 (see [4.80]) to this case: where a trustee obtained for her or his own use a lease previously held for the benefit of others, it is presumed that the lease was obtained by (mis)use of fiduciary position. And so where C, as a partner, obtained a lease in these circumstances, it was presumed to have been acquired by the (mis)use of his position.207 However, no continuing fiduciary duties stemming from a partnership attach where the partnership has been fully wound up, for in such a case the relationship that gave rise to those duties has ended.208 Fiduciary duties following death of a partner [4.210] The relationship between surviving partners and the estate of a deceased former

partner is also fiduciary.209 But it is not equivalent for all purposes to a trustee–​beneficiary relationship. For example, there is no rule under which surviving partners, who carry on the business after its dissolution due to the death of a former partner, become trustees for the former partner’s estate of such part of the profits thereby made as are attributable to the use of the latter’s share of the original partnership assets.210

JOINT VENTURERS

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[4.215]  What commonly distinguishes partnerships from joint ventures is that the former is

an association of persons who engage in a common undertaking for profit, whereas the latter associate with a view to generate a product to be shared among the participants.211 Many joint ventures, moreover, are in the nature of a single undertaking rather than an ongoing business, although it is possible for single undertakings to take the form of (or be analogous to) a partnership.212 That, unlike the relationship between partners, the law does not presume that fiduciary duties arise between joint venturers,213 has led to attempts to superimpose additional contractual duties by implication of good faith terms,214 and to attract fiduciary duties via analogy to a partnership or at least the hallmarks of fiduciary principle. A flexible approach is essential because joint ventures vary greatly in their structure and incidents. Many are established precisely because the venturers wish to avoid partnership-​like duties. Others are set up because, although in many respects the venturers wish to embark upon a joint endeavour imposing

206

Keech v Sandford (1726) Sel Cas T King 61; 25 ER 223.

207

Chan v Zacharia (1984) 154 CLR 178 at 200–​204.

208

Sew Hoy v Sew Hoy [2001] 1 NZLR 391 at 400–​401 per Blanchard J, at 406 per McGrath J.

209

Birtchnell v Equity Trustees Executors and Agency Co Ltd (1929) 42 CLR 384.

210

Cameron v Murdoch (1986) 63 ALR 575 at 587–​588 (PC).

211

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 15 per Dawson J.

212

See, for example, Chirnside v Fay [2007] 1 NZLR 433.

213

See generally McPherson, “Joint Ventures” in Finn (ed), Equity and Commercial Relationships (The Law Book Company Limited, 1987), p 19; Ongley, “Joint Ventures and Fiduciary Obligations” (1992) 22 VUWLR 265; Loke, “Fiduciary Duties and Implied Duties of Good Faith in Contractual Joint Ventures” [1999] JBL 538; Knowler and Rickett, “The Fiduciary Duties of Joint Venture Parties —​When Do They Arise and What Do They Comprise?” (2011) 42 VUWLR 117. Cf Chirnside v Fay [2007] 1 NZLR 433 at [14] per Elias CJ (“Where parties join together in a venture with a view to sharing the profit obtained, their relationship is inherently fiduciary within the scope of the venture and while it continues”), at [74] per Blanchard and Tipping JJ (“There is a strong case for saying that most joint venture relationships can properly be regarded as being inherently fiduciary because of the analogy with partnership”).

214

See Birchall, “Duties of Good Faith in Commercial Joint Ventures? Contractual Duties, Fiduciary Duties, and Shareholder Remedies” [2005] JBL 269.

[4.215]  129 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

fiduciary duties, aspects of the dealings remain over which each venturer wishes to retain the right to act in accordance with commercial considerations best suited to it. The most that can be said, it seems, is that whether or not a relationship between joint venturers attracts fiduciary duties rests on the form the joint venture takes and on the content of the duties the parties have assumed. So, as explained by the High Court:215

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If the joint venture takes the form of a partnership, the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers being a fiduciary one. In such a case, the joint venturers will be under fiduciary duties to one another, including fiduciary duties in relation to property the subject of the joint venture, which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship.

Form-​wise, for instance, that joint venturers have covenanted to act bona fide in the interests of the venture may carry fiduciary duties to act in the joint interests of the venturers, ahead of the individual interests of each venturer in the event of conflict.216 Yet it must be remembered that fiduciary duties differ from good faith expectations; the latter do not necessarily mandate the subordination of the obligor’s interest to that of the obligee whereas fiduciary duties do.217 And it is not enough to attract a fiduciary duty that one party may have given up more than the other in entering into the venture, or that the venture may be more advantageous for one party than the other.218 The terms of the joint venture agreement also heavily influence the scope of any fiduciary duty. Courts are, after all, wary of imposing obligations upon contracting parties wider than, or otherwise different to, those they have in careful terms assumed consensually. So where a joint venture agreement is confined by its terms to a defined area of interest, it is ordinarily legitimate for the venturers to pursue economic advantages on their own account outside that area.219 Yet there is no necessary temporal coincidence between the execution of a joint venture agreement and the potential attraction of fiduciary duties. As in the case of a partnership (see [4.200]), it may be justifiable to impose fiduciary duties upon prospective joint venturers, at which time the parties may lack any contractual protection but may have nonetheless made disclosures that engender a relationship of confidence sufficient to attract an expectation of loyalty.220 Here the “presumptive hijacking of the incipient transaction”221 by a prospective venturer may amount to a fiduciary breach.222

215

United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 10–​11 per Mason, Brennan and Deane JJ. See also Auag Resources Ltd v Waihi Mines Ltd [1994] 3 NZLR 571 at 577–​579 per Barker J; Whywait Pty Ltd v Davison [1997] 1 Qd R 225 at 231 (FC).

216

See, for example, Pacific Coal Pty Ltd v Idemitsu (Qld) Pty Ltd (unreported, SC(Qld), Ryan J, 21 February 1992).

217

Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 at [107] per Sundberg and Emmett JJ; Loke, “Fiduciary Duties and Implied Duties of Good Faith in Contractual Joint Ventures” [1999] JBL 538 at 556–​557.

218

Paper Reclaim Ltd v Aotearoa International Ltd [2007] 3 NZLR 169 at [31] per Blanchard J.

219

Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 at 15, 17 per Bryson J.

220

This is consistent with the view that an undertaking to act in the interests of another is not essential to attract fiduciary duties (see [4.70]): Chirnside v Fay [2007] 1 NZLR 433 at [82] per Blanchard and Tipping JJ.

221

Chirnside v Fay [2004] 3 NZLR 637 at [58] (CA) [affd on this point: Chirnside v Fay [2007] 1 NZLR 433].

222

See, for example, Phosphate Resources Ltd v Western Stevedores Pty Ltd [2003] WASC 84; G M & A M Pearce & Co Pty Ltd v Australian Tallow Producers [2005] VSCA 113; Chirnside v Fay [2007] 1 NZLR 433 (although Blanchard and Tipping JJ envisaged that a joint venture could be in place at a time before all the necessary details had been given effect via a formal contract (at [91]), and so the case could be viewed as one giving rise to fiduciary duties between existing as opposed to prospective venturers).

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Fiduciary Relations  Chapter  4

[4.220]  Courts are not, in any case, constrained by the form or terms of the venture in this

regard; absent any express covenant capable of being construed as fiduciary-​like, the nature of the parties’ relationship inter se can attract fiduciary duties.223 In Say-​Dee Pty Ltd v Farah Constructions Pty Ltd,224 the appellant (S)  and respondent (F)  entered a joint venture to redevelop property (No 11), which S was to finance. F’s role was to manage the development application to the council and the subsequent construction and sale. The council refused the development application but indicated that an application would succeed were No 11 amalgamated with adjoining properties (Nos 13 and 15). F then acquired Nos 13 and 15 on its own account. According to the New South Wales Court of Appeal, what marked the parties’ relationship as fiduciary, and determined the parameters of the attendant fiduciary duties, included that:225 • the nature of the obligations undertaken by F for the purpose of redeveloping No 11, namely to obtain from the council the knowledge and information that would enable the parties to achieve the maximum development potential of that property; • S reposed trust and confidence in F to perform those obligations in their joint interests, thereby subordinating its own interests to those of S, and the consequent entitlement of S to expect that F would act in their joint interests in and for the purpose of the joint venture; and

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• the joint venture arrangement gave F a special opportunity to obtain knowledge or information from the council concerning the redevelopment of No 11 to the exclusion of S, making S wholly dependent upon F to disclose that knowledge or information to S and not use it to further its own interests at the expense of those of S without S’s fully informed knowledge and consent. Ultimately, though, the High Court reversed the Court of Appeal’s finding of fiduciary breach because it was able to conclude, contrary to the lower court, that F had made sufficient disclosure of the conflict, to which S had given its informed consent.226 [4.225]  But aside from any suggestion of inequality of bargaining power between the parties,

where the vulnerability alleged simply flows from the terms of the agreement freely entered into by the parties, equity will not superimpose fiduciary duties so as to rewrite that agreement.227 In LAC Minerals Ltd v International Corona Resources Ltd,228 for example, the respondent (“Corona”) owned mining rights over land on which it was in the process of drilling exploratory holes. The established and well-​financed appellant (“LAC”), with a view to a joint venture, approached Corona, in response to which Corona disclosed results of its exploratory drilling. These showed an adjacent property was likely to contain mineral-​ bearing deposits. Corona’s attempt to acquire mining rights over this property was frustrated by LAC’s competing bid. LAC developed the mine on its own account. A  majority of the

223

Chirnside v Fay [2007] 1 NZLR 433 at [71] per Blanchard and Tipping JJ.

224

Say-​Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309.

225

Say-​Dee Pty Ltd v Farah Constructions Pty Ltd [2005] NSWCA 309 at [169] per Tobias JA, with whom Mason P and Giles JA concurred.

226

Farah Constructions Pty Ltd v Say-​Dee Pty Ltd (2007) 230 CLR 89 at [107], [108] (FC).

227

Visagie v TVX Gold Inc (2000) 187 DLR (4th) 193 at 204 (CA(Ont)); Imperial Oil Ltd v Westlake Fuel Ltd (2001) 203 DLR (4th) 604 at 616 (CA(Man)).

228

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14.

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Equity and Trusts in Australia

Canadian Supreme Court held that no fiduciary duties arose between the parties because Corona was not in a position of vulnerability, reasoning that:229 While it is perhaps possible to have a dependency of [a physical or psychological nature] between corporations, that cannot be so when … dealing with experienced mining promoters who have ready access to geologists, engineers and lawyers … If Corona placed itself in a vulnerable position because LAC was given confidential information, then this dependency was gratuitously incurred.

The absence of inherent vulnerability could not, according to their Honours, be replaced by the fact that LAC had sought out Corona, the geochemical programme constituted an embarkation on a joint venture, Corona had divulged confidential information to LAC, a practice in the mining industry supported the existence of fiduciary duties, and the parties were negotiating towards a common object.230 The result would most likely have differed had the entire venture been guided by and under the supervision of one of the venturers, as in Say-​Dee, thus obliging the latter not to put its own interests ahead of the other venturer(s).231 [4.230] That a relationship involves cooperation between the parties towards a main goal

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does not of itself attract fiduciary duties.232 Otherwise many commercial relationships, which by their nature require mutual cooperation for their successful fruition, would traverse into the fiduciary domain. The point is illustrated by News Ltd v Australian Rugby Football League Ltd,233 where clubs’ defection from the respondent’s competition to the appellant’s Super League was alleged to amount to a breach of fiduciary duty. Rejecting this contention, the Full Federal Court found insufficient grounds to conclude that the clubs were bound to act only for the joint advantage of the participants in the respondent’s competition, or any expectation for each club to subjugate its own interests to those of other participants.234 Indicators that the clubs were entitled to act in accordance with their own interests, even if to do so involved conflict with the interests of other participants, included that:235 • individual clubs had built up assets in their own hands, had connected businesses and entered their own contractual commitments, as well received injections of capital and financial assistance, independently of the respondent; • the agreement between the clubs and the respondent showed that in important respects the clubs could pursue their own interests at the expense of other clubs in the competition; • the respondent’s articles and rules provided for the clubs’ entitlement to withdraw from the League, and gave no indication that a club making such a decision should consider the good of the competition;

229

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 68–​69 per Sopinka J, with whom Lamer and McIntyre JJ concurred.

230

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 64–​68 per Sopinka J, with whom Lamer and McIntyre JJ concurred. These factors led La Forest J, in dissent, to conclude that the relationship attracted fiduciary duties: at 35–​42. In the opinion of Wilson J, also in the minority, found that “a fiduciary duty arose in LAC when Corona made available to LAC its confidential information concerning the [adjacent] property, thereby placing itself in a position of vulnerability to LAC’s misuse of that information”: at 16.

231

Dempster v Mallina Holdings Ltd (1994) 15 ACSR 1 at 47 per Rowland J.

232

Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569 at [16], [17] per Finn J.

233

News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193.

234

News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 323.

235

News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 317–​321.

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Fiduciary Relations  Chapter  4

• the clubs had no entitlement to receive the whole or a fixed proportion of the net revenue derived by the respondent; and • rather than the respondent being vulnerable to the clubs, the clubs were vulnerable to the respondent in view of its power to exclude clubs from its competition.

FINANCIAL ADVISER AND CLIENT

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[4.235]  The need to promote loyalty from lawyer to client by the strict application of fidu-

ciary duties (see [4.135]–​[4.150]) has not historically translated directly to the relationship between accountant (or financial adviser) and client. This may have been because of the traditional compliance role of many accountants, their role in providing financial services and planning advice being comparatively recent. There is a growing tide of authority, though, that a financial adviser, accountant or stockbroker who undertakes work that vests her or him with a power or discretion that can detrimentally affect a client’s interests, and triggers a relationship of influence, dependency or trust between the parties, assumes fiduciary duties to the client. An undertaking to give financial or investment advice in an ostensibly impartial manner provides a typical scenario, requiring disclosure of any matter that may impinge upon the adviser’s loyalty.236 For example, in Hodgkinson v Simms,237 the defendant tax adviser recommended that a client (the plaintiff) pursue a form of property investment, omitting to disclose that he received kickbacks from the developers for each client introduced. The plaintiff sustained losses therefrom as a consequence of declining real estate values, which he sought to recover from the defendant by alleging a breach of fiduciary duty. A majority of the Canadian Supreme Court upheld the claim, distinguishing arm’s length commercial relations, characterised by self-​interest, from professional advisory relations, the essence of which is trust, confidence and independence.238 In so construing the said relationship, the court saw a wider reason to justify fiduciary duties: that financial advisers are given authority over their clients’ money, and thus are vested not only with considerable trust but a corresponding power.239 Australian judges’ rejection of Canadian courts’ continued march of fiduciary law into the prescriptive arena does not preclude the validity of the result in Hodgkinson v Simms in Australian law. As that case involved the breach of a “true” fiduciary duty —​namely the “no-​ profit rule” —​a similar outcome would most likely have ensued here. In L T King Pty Ltd v Besser,240 involving a financial adviser who failed to disclose to a client a personal interest in the transaction in which the client was being advised to invest, Osborn J found that as the adviser “implicitly undertook to act in the interests of his clients and not in his own interests in giving advice to them”, he breached his fiduciary duty to the client in not making full disclosure, and so should indemnify the client for the loss arising out of the transaction. Indeed, more recently a New South Wales judge has, adopting the double-​negative, found no presumption that the relationship between a financial adviser and client is not a fiduciary

236

Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371 at 385 per Brennan J; Cook v Evatt (No 2) [1992] 1 NZLR 676 at 689 per Fisher J; Grantwell Pty Ltd v Franks (1993) 61 SASR 390 at 396–​399 per King CJ; Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 181–​184, 191–​192 per La Forest J; Aequitas v AEFC (2001) 19 ACLC 1006 at 1063 per Austin J.

237

Hodgkinson v Simms (1995) 117 DLR (4th) 161.

238

Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 182 per La Forest J.

239

Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 192 per La Forest J.

240

L T King Pty Ltd v Besser (2002) 172 FLR 140 at [93].

[4.235]  133 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

one. To the contrary, his Honour remarked that the relationship “is likely to involve elements of trust, confidence and vulnerability requiring undivided loyalty”.241 Certainly, when there is, beyond the basic existence of the relationship, some evidence of additional trust placed by the client in the financial adviser, Australian courts have not strained to find fiduciary duties.242 [4.240]  Yet where the adviser’s interest in the relevant dealing is disclosed to the client, the

mere fact of the adviser–​client relationship does not necessarily demand that the client be independently advised. In Pavan v Ratnam,243 for example, in order to reduce a client’s tax liability, a tax accountant suggested an investment in property the accountant intended to develop. The client’s action against the accountant for breach of fiduciary duty consequent upon the failure of the investment was rejected by the New South Wales Court of Appeal. Their Honours reasoned that although the client undoubtedly had confidence that the project would succeed, which may have been engendered by his accountant’s involvement, the facts exhibited “none of the indicia of vulnerability, reliance or confidence in the sense that those matters bear in the context of a fiduciary relationship”.244 The decision should not be seen as a dilution of fiduciary duties in this context; in circumstances where the relevant indicia are present, any absolution from fiduciary accountability may rest not only on disclosure but potentially also independent advice.245

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[4.245]  Consistent with the basic principle that not all duties, even in a so-​called “fiduciary

relationship”, are necessarily fiduciary in nature, not every task performed by an accountant or adviser for a client attracts fiduciary duties. As a fiduciary duty does not derive from the relationship of adviser–​client per se,246 it is determined by the particular task the adviser has agreed to undertake. Specifically, as fiduciary duties are driven by expectations of loyalty, merely placing trust in an adviser because of her or his special skills does not by itself mark the professional relationship as fiduciary. What are in essence duties of performance, whether tortious or contractual, fall outside the fiduciary umbrella even if pleaded as fiduciary. The point is illustrated by the High Court’s ruling in Pilmer v Duke Group Ltd (in liq),247 where a client (K) retained a firm of accountants to supply an independent expert valuation report for its proposed takeover of another company. The negligent preparation of that report led K to proceed with the takeover, which proved financially disadvantageous. K alleged that the firm’s previous dealings with both it and target company placed it in a conflict of interest situation, and sought equitable compensation for breach of fiduciary duty. A  majority

241

Calvo v Sweeney [2009] NSWSC 719 at [219] per White J.

242

See, for example, Cameron v McMahon [2009] VSC 277 (where the client was relying not only on the accountant’s skill and experience as an accountant, but trusted him absolutely to protect her interests and investment); Calvo v Sweeney [2009] NSWSC 719 (where the defendant was retained as the plaintiffs’ adviser to find purchasers for the plaintiffs’ shares or to raise capital for a company to repay the plaintiffs’ loan, but the defendant obtained control of company and procured the issue of a substantial shareholding to himself for no consideration); Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1 (in acting, and holding itself out, as a financial adviser, the respondent was held to owe fiduciary duties to the applicant investors).

243

Pavan v Ratnam (1996) 23 ACSR 214.

244

Pavan v Ratnam (1996) 23 ACSR 214 at 225 per Beazley JA. See also at 219 per Mahoney JA; Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229 at [88] per Young JA (involving an accountant who simply made investment suggestions and gave advice, without charge, to a longstanding client and friend; the accountant was not held to have assumed fiduciary duties); McClymont v Critchley [2011] NSWSC 493.

245

As in the case of lawyer–​client dealings: see [4.145], [4.160].

246

Simpson v Donnybrook Properties Pty Ltd [2010] NSWCA 229 at [65] per Young JA.

247

Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165.

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Fiduciary Relations  Chapter  4

of the High Court rejected this claim, affirming the trial judge’s conclusion that the circumstance that the firm acted in breach of its contractual and tortious duties did not mean that it gave advice in the relevant sense for the purpose of liability as a fiduciary.248 Nor were their Honours satisfied that a conflict of interest had been established, reasoning that “[c]‌onflict is not shown by simply pointing to the fact that there had been past dealings between the [firm] and interests associated with [K’s] directors”.249 Pilmer shows that where loss is caused by negligent conduct, absent clear evidence of co-​ existing conflict of interest, Australian courts will leave a plaintiff to remedies at common law. Importantly, though, the court did not deny that fiduciary duties could arise in this context,250 but simply that the case as pleaded did not justify the imposition of fiduciary duties.

BANKER AND CUSTOMER

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[4.250]  The duties of a lender (or mortgagee) to its borrower (or mortgagor) cannot gener-

ally be described as fiduciary. Rather, the relationship is between debtor and creditor, wherein each party may pursue their own interests, subject to any contractual, tortious or statutory limitations.251 This is not to say that a financial institution can never owe fiduciary duties to a customer. A financial institution that creates in a customer an expectation that, irrespective of its own interests, it will advise in the customer’s interests as to the wisdom of a proposed investment, may assume fiduciary duties, occupying a position akin to a financial adviser:252 see [4.235]. Financial institutions’ foray into the investment advice arena increases the frequency in which fiduciary duties between banker and customer are likely to materialise.253 In Commonwealth Bank of Australia v Smith,254 the appellant had been the banker and financial adviser to the respondents for 24 years, during which time the latter engaged in several business ventures. The respondents nonetheless had limited experience in financial matters and in forms of business outside their own. Pursuant to a request for assistance regarding their proposed purchase of the leasehold of a hotel, the bank advised that the purchase was a good one, and preferable to other options the respondents had entertained. But it failed to 248

Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 197 per McHugh, Gummow, Hayne and Callinan JJ.

249

Pilmer v Duke Group Ltd (in liq) (2001) 207 CLR 165 at 200 per McHugh, Gummow, Hayne and Callinan JJ. Kirby J dissented on the fiduciary issue, preferring to endorse the conclusion of the South Australian Full Court that the firm owed a fiduciary duty to its client because it relied on the firm for “an independent, impartial and competent report which the [firm was] incapable of providing”: at 220–​221.

250

Cf Arthur Andersen & Co v Gibson [2002] BCL 715 (where the New Zealand High Court held that an accounting firm, in introducing to a client who sought financial advice a person (GW) as an investor who was a close friend and business confidant of one of the firm’s partners, had committed a breach of fiduciary duty to its client by failing to disclose its association with GW and GW’s true financial position).

251

Joachimson v Swiss Bank Corporation [1921] 3 KB 110 at 127 per Atkin LJ; Elders Pastoral Ltd v Bank of New Zealand [1989] 2 NZLR 180 at 192 per Somers J; Vita Health Co (1985) Ltd v Toronto-​Dominion Bank (1995) 118 DLR (4th) 289 at 296–​299 (CA(Man)); Golby v Commonwealth Bank of Australia (1996) 72 FCR 134 at 136 per Hill J; Toronto Dominion Bank v Forsythe (2000) 183 DLR (4th) 616 at 623–​624 (CA(Ont)); Timms v Commonwealth Bank of Australia [2004] NSWSC 76 at [169] per Barrett J; Goodridge v Macquarie Bank Ltd (2010) 265 ALR 170 at [206] per Rares J.

252

Potts v Westpac Banking Corporation [1993] 1 Qd R 135 at 138 per Macrossan CJ. See, for example, Becker v Anderson [2014] NZHC 2037 (where Moore J refused to characterise unsecured loans by the plaintiffs to the defendants, who were friends and neighbours, as capable of giving rise to fiduciary obligations).

253

See Duncan, “Caveat Lender: Liability of Lenders Arising from Unconscionable Conduct in the Loan Approval Process” (2000) 21 Qld Lawyer 18 at 20–​26; Tuch, “Investment Banks as Fiduciaries: Implications for Conflicts of Interest” (2005) 29 MULR 478; Tuch, “Banker Loyalty in Mergers and Acquisitions” (2016) 94 Tex L Rev 1079 (who argues that investment banks when advising on merger and acquisition transactions should be characterised as fiduciaries of their clients rather than simply arm’s length counterparties).

254

Commonwealth Bank of Australia v Smith (1991) 102 ALR 453.

[4.250]  135 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

disclose its knowledge that a mortgagee valuation of the leasehold was well below the value allotted to the leasehold in the purchase price. The vendor of the leasehold was also a customer of the bank, a fact that was disclosed. The Full Federal Court held that the bank owed fiduciary duties to the respondents because the bank manager “assumed the role of introducing the parties and bringing them together, that he then acted as the respondents’ financial adviser in the matter, and that they had complete faith in him”.255 [4.255]  The position will be otherwise where there is far less, or no, evident reliance by the

customer on the bank’s advice. For instance, on facts bearing similarity to those in Smith, the Queensland Court of Appeal in Commonwealth Bank of Australia v Finding256 rejected the fiduciary claim. It distinguished Smith because the bank had not assumed a role as the respondents’ adviser; there was no evidence that the respondents relied on its advice in respect of the dealing or held any expectation that the bank would disclose information to them.257 The longstanding nature of the parties’ relationship, and the bank’s dual role as mortgagee-​ in-​possession and as lender to the respondents did not, in the court’s view, alter this finding.258 This highlights the courts’ unwillingness to allow fiduciary duties to infiltrate commercial relationships absent compelling evidence of a legitimate expectation of loyalty in the customer, which unwillingness is the more acute where the bank expressly disclaims any role as adviser.259 [4.260] Attempts to oust the effect of loan or guarantee agreements between banker and

customer are, in any case, more commonly pleaded in undue influence (see Ch 7) or unconscionable dealing (see Ch 9), or for breach of the statutory proscription against misleading and deceptive conduct (see [8.95]), than breach of fiduciary duty.

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COMMERCIAL TRANSACTIONS GENERALLY [4.265]  Where parties deal at arm’s length in a negotiated commercial transaction, and no

special reliance or trust is placed by one in the other, or no special vulnerability exists, there is no justification for fiduciary law to intervene.260 This is especially so where the agreement is

255

Commonwealth Bank of Australia v Smith (1991) 102 ALR 453 at 477.

256

Commonwealth Bank of Australia v Finding [2001] 1 Qd R 168.

257

Commonwealth Bank of Australia v Finding [2001] 1 Qd R 168 at 172–​173.

258

At the same time, the case law supports the proposition that a mortgagee who holds surplus proceeds of sale is under a fiduciary obligation to all subsequent interest holders to account to them for the manner in which the surplus is disposed of, and not to prejudice their interest in the surplus by the manner in which he or she disposes of it: Residential Housing Corporation v Esber (2011) 80 NSWLR 69 at [143], [144] per Campbell JA, with whom Macfarlan and Sackville AJA concurred.

259

See, for example, Bowkett v Action Finance Ltd [1992] 1 NZLR 449 (where no fiduciary duty was imposed where a legal executive employed by the defendant finance company advised the plaintiffs, whose son had requested them to pledge their home as security for a loan, explained to the plaintiffs that she acted for the defendant, advised them to seek independent legal advice and warned them of the possible consequence of losing their home).

260

Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 at 351 per Dixon CJ, McTiernan and Fullagar JJ; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 70 per Gibbs CJ; Dempster v Mallina Holdings Ltd (1994) 15 ACSR 1 at 47 per Rowland J; Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74 at 98 per Lord Mustill; Hodgkinson v Simms (1995) 117 DLR (4th) 161 at 180 per La Forest J; John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [90] (FC); Vercoe v Rutland Fund Management Ltd [2010] EWHC 424 (Ch) at [352] per Sales J. See Lehane, “Fiduciaries in a Commercial Context” in Finn (ed), Essays in Equity (The Law Book Company Limited, 1985), p 95; Kearney, “Accounting for a Fiduciary’s Gains in Commercial Contexts” in Finn (ed), Equity and Commercial Relationships (The Law Book Company Limited, 1987), p 186.

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Fiduciary Relations  Chapter  4

between substantial entities and fully prescribes their rights and responsibilities.261 If the parties elect to structure their affairs in a form that does not attract fiduciary duties in the main, the court will ordinarily respect this,262 especially where supported by an express disavowal of any fiduciary obligations.263 Absent an undertaking to the contrary or some prevailing vulnerability or inequality, fiduciary duties would undermine the nature of the relationship that parties have sought to create. A widespread or wholesale introduction of equity doctrine into commerce would, it is feared, create uncertainty in commercial dealings, especially where the parties occupy unequal bargaining positions.264

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[4.270] As a result, duties arising out of, say, the manufacturer–​distributor,265 franchisor–​

franchisee266 and licensor–​licensee267 relationships are not ordinarily fiduciary. These usually arise out of a transaction that has been negotiated at arm’s length between parties of comparable bargaining power for the express purpose of mutual profit, which makes them inimical to fiduciary notions of loyalty. In a leading case, Hospital Products Ltd v United States Surgical Corporation,268 the respondent (“USSC”) manufactured surgical stapling devices and disposable loading units. Under an oral agreement it appointed B as its exclusive Australian distributor. B established a company (HPI), which acted as exclusive distributor for USSC for eight months, during which time B manufactured surgical staples based directly on USSC’s product, which, together with repackaged USSC demonstration models, he sold as HPI’s own products. B offered customers the “HPI staples” on the pretence that stocks of USSC’s product were short. HPI terminated the distributorship agreement and subsequently the appellant (“HPL”) acquired the business and assets of B and HPI. USSC sued HPL, B and related companies, seeking an account of profits from the sale of the staples, and orders that HPL’s business be held on constructive trust for USSC. The availability of each of these remedies required a finding that B owed USSC fiduciary duties: see [4.325], [4.330]. A majority of the High Court269 held that while there was an implied term of the contract that HPI would use its “best efforts” to promote USSC’s products in Australia,270 there was no scope to imply a further term that HPI would not, during the distributorship, do anything

261

Paul Dainty Corporation Pty Ltd v National Tennis Centre Trust (1990) 94 ALR 225 at 244 (FC(FCA)); Amertek Inc v Canadian Commercial Corp (2005) 256 DLR (4th) 287 at 308–​311 (CA(Ont)).

262

Friend v Brooker (2009) 239 CLR 129 at [86] per French CJ, Gummow, Hayne and Bell JJ (“equity does not impose fiduciary duties between the parties to a deliberate commercial decision to adopt a corporate structure in which they would owe duties, but to the corporation and as directors”). See, for example, Amaltal Corporation Ltd v Maruha Corporation [2007] 3 NZLR 192 (where the parties were commercial companies that had elected not to continue as partners and, instead, to frame their relationship by internal and external rules applicable to a company, supplemented by a contract between them in their capacity as shareholders; Blanchard J, who delivered the reasons of the Supreme Court, thus found no warrant for imposing upon them generally obligations not found in the company’s own constitution, in companies legislation or in the terms of the contract: at [19]).

263

See, for example, BB Australia Pty Ltd v Danset Pty Ltd [2017] NSWSC 1307 at [102]–​[121] per McDougall J; Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd [2017] VSCA 326 at [137] per Santamaria JA.

264

Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd [2008] FCAFC 53 at [116] per the court (“Absent some unconscionable conduct, such detailed contractual arrangements would be pointless if they could be swept aside on the basis that there was an inequality of commercial experience between the parties”).

265

See, for example, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, discussed in the text.

266

See, for example, Jirna Ltd v Mister Donut of Canada Ltd (1973) 40 DLR (3d) 303.

267

Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 436.

268

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41.

269

Per Gibbs CJ, with whom Wilson and Dawson JJ agreed. Cf Mason J in dissent: see [4.275].

270

Pursuant to the Uniform Commercial Code (US), §2-​306(2).

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Equity and Trusts in Australia

to damage USSC’s market in Australia. HPI did not owe USSC fiduciary duties because the arrangement was a commercial one entered into by parties at arm’s length and on an equal footing, pursuant to which both USSC and HPI intended to profit. As HPI had no duty not to profit from its position, USSC’s relief was confined to damages for breach of contract. [4.275] Yet, as noted by an English judge, “[i]‌t is not always easy to delimit the scope of

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fiduciary relationships from arm’s length relationships not involving a fiduciary duty”.271 Also, “[t]he fiduciary aspect of a commercial relationship may well only be a small —​indeed a quite small —​and discrete part of a larger arrangement that exists for the several, the individual, benefit of the participants”.272 Judicial minds have, to this end, differed on both the imposition of fiduciary duties and their scope in the commercial arena. The remarks of Mason J, dissenting in Hospital Products, highlight that fiduciary duties of limited scope are not always inconsistent with commercial transactions between well-​advised businesspersons or organisations. In characterising the judicial reluctance to subject commercial transactions to “fiduciary” notions as overly simplistic, his Honour revealed a willingness to more closely investigate the relative positions of the parties as created by the actual relationship, as opposed to their positions in entering into it. This required, said his Honour, each transaction to be examined on its own merits to ascertain whether fiduciary duties should be imposed in respect of it. Mason J reasoned as follows:273 [E]‌ntitlement to act in one’s own interests is not an answer to the existence of a fiduciary relationship, if there be an obligation to act in the interests of another. It is that obligation which is the foundation of the fiduciary relationship, even if it be subject to qualifications including the qualification that in some respects the fiduciary is entitled to act by reference to his own interests. The fiduciary duty must then accommodate itself to the relationship between the parties created by their contractual arrangements … The difficulty of deciding under the contract when the fiduciary is entitled to act in his own interests is not in itself a reason for rejecting the existence of a fiduciary relationship, though it may be an element in arriving at the conclusion that the person asserting the relationship has not established that there is any obligation to act in the interests of another …

Because USSC had entrusted HPI with the responsibility of protecting and promoting the market for USSC’s products in Australia, Mason J found that HPI owed fiduciary duties for the limited purpose of protecting and promoting USSC’s Australian product goodwill.274 Within the ambit of those duties, HPI could not act if there was a possibility of conflict between its interests and those of USSC. The manufacturing of copies of USSC’s products and the sale of HPI packaged and labelled goods were breaches of fiduciary duty. This approach likens the distributorship agreement to a partnership, pursuant to which a party must act in the joint interests of the other parties, not necessarily to the exclusion of her or his personal interest: see [4.190]. It has received subsequent judicial support,275 including in its application,276 and

271

Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 at [55] per Lawrence Collins J.

272

Finn, “Fiduciary Reflections” (2014) 88 ALJ 127 at 135.

273

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 99. See also Kelly v C A  & L Bell Commodities Corp (1989) 18 NSWLR 248 at 258 per Mahoney JA; Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74 at 98 per Lord Mustill.

274

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 100.

275

See, for example, Litwin Construction (1973) Ltd v Pan (1988) 52 DLR (4th) 459 at 473.

276

See, for example, Watson v Dolmark Industries Ltd [1992] 3 NZLR 311 (where the appellant, who marketed household products in Australia, conferred manufacturing and sole distribution rights for a product to the respondent in respect of the New Zealand market in return for royalties per item sold. The respondent suppressed sales of 10,000 units of the product,

138 [4.275] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

accords with the fact-​based analysis that modern courts adopt in ascertaining the applicability and scope of fiduciary duties. [4.280]  In any case, the statutory proscriptions against misleading and deceptive conduct (see

[8.95]), and on unconscionable conduct (see [9.160]–​[9.165]), under the Australian Consumer Law, to which attach a wide variety of avenues for relief, dictate that improper conduct arising out of commercial relationships may also attract a statutory cause of action.277

EMPLOYER AND EMPLOYEE Employees’ contractual duty of fidelity compared to fiduciary duties [4.285]  Employees owe a duty of fidelity to their employer sourced from an implied term of

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the employment contract.278 It is thus ordinarily a breach of contract for employees during their employment to embark upon a business competing with that of the employer, or to take an opportunity within the sphere of the employer’s business, without the employer’s fully informed consent.279 As fidelity and loyalty are similar concepts,280 the boundary between a duty of fidelity, and the full force of fiduciary duties, is inexact.281 It has been suggested that the duty of fidelity does not require the employee to subordinate her or his own interests to those of the employer, but rather invokes fidelity to the employment relationship as defined by the contract of employment.282 The issue is likely to be ultimately one of degree, involving inquiry into whether the relationship in question needs protection exceeding that prescribed by the terms of the employment contract. Employees owe fiduciary duties if the nature of the employment relationship demands a standard of loyalty exceeding the duty of fidelity prescribed by contract.283 The employee’s position and responsibility in the employer’s business is probative to this end: the more senior the employee, and the greater the latitude afforded to the employee

using the funds so obtained to manufacture and market a product similar to the appellant’s. The appellant’s dependence on the respondent’s faithfulness for knowledge of the extent of New Zealand manufacturing and marketing placed the former in a vulnerable position vis-​à-​vis the latter, which the New Zealand Court of Appeal found attracted fiduciary duties); Amaltal Corporation Ltd v Maruha Corporation [2007] 3 NZLR 192 at [21]–​[24] (SC). 277

See White, “Commercial Relationships and the Burgeoning Fiduciary Principle” (2000) 9 Griffith L Rev 98 at 105–​108.

278

See Sappideen, O’Grady and Riley, Macken’s Law of Employment (8th ed, Lawbook Co, 2016), [5.520]–​[5.530].

279

Reading v Attorney-​General [1951] AC 507 at 518 per Lord Oaksey; Morris v Hanley (2003) 173 FLR 83 at [88] per Hamilton J; Consolidated Paper Industries Pty Ltd v Matthews [2004] WASC 161 at [60] per Newnes M; Labelmakers Group Pty Ltd v LL Force Pty Ltd [2012] FCA 512 at [112] per Tracey J.

280

Which explains the sometimes loose use of the term “fiduciary” in the employment context: see, for example, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96 per Mason J; Digital Pulse Pty Ltd v Harris (2002) 40 ACSR 487 at 491 per Palmer J. Some nonetheless maintain that employment is a status fiduciary relation: see, for example, Flannigan, “The [Fiduciary] Duty of Fidelity” (2008) 124 LQR 274 (who argues that there is no duty of fidelity distinct from fiduciary duty); Flannigan, “Employee Fiduciary Accountability” [2015] JBL 189. Cf Frazer, “The Employee’s Contractual Duty of Fidelity” (2015) 131 LQR 53.

281

University of Nottingham v Fishel [2000] ICR 1462 at 1491 per Elias J; Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1 at [117]–​[125] per Besanko J; Ranson v Customer Systems plc [2012] EWCA Civ 841 at [40] per Lewison LJ, with whom Lloyd and Pill LJJ concurred (who saw it as “unfortunate” that the “fidelity” label is given to the duty is so closely aligned with the label commonly applied to relationships that do give rise to fiduciary obligations). The accuracy of Hart J’s remark in British Midland Tool Ltd v Midland International Tooling Ltd [2003] 2 BCLC 523 at [94] that the employee’s duty of fidelity, unlike the director’s fiduciary duty, “does not include, in the usual case, any prohibition as such on being in a position where his duty as employee and his self-​interest may conflict” must depend on how, if at all, that self-​interest is manifested.

282

Marathon Asset Management LLP v Seddon [2017] ICR 791 at [170] per Leggatt J.

283

Reading v Attorney-​General [1951] AC 507 at 516–​517 per Lord Porter; Woolworths Ltd v Olson (2004) 184 FLR 121 at [212] per Einstein J.

[4.285]  139 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

by the employer, the greater the employer’s vulnerability to the potential misuse of that position of power by the employee.284 Green and Clara Pty Ltd v Bestobell Industries Pty Ltd285 illustrates circumstances in which an employee may owe fiduciary duties. The respondent secured a major building contract for Stage 1 of a medical centre. The appellant, whilst acting as the respondent’s state manager, established a company through which he successfully tendered for the contract for Stage 2 of the medical centre. The respondent also tendered for the contract. The appellant’s senior managerial post in the respondent, coupled with the confidential information to which he was thus privy, attracted fiduciary duties to the respondent, ruled the Western Australian Full Court. By tendering against his employer the appellant placed himself in a duty–​interest conflict situation, and used knowledge gained as manager to tender (and profit) on behalf of his own company. The employee’s job description and responsibility can also impact on whether or not fiduciary duties surface. In Helmet Integrated Systems Ltd v Tunnard,286 for example, the English Court of Appeal found that the first respondent, who had been employed as a senior salesperson for the appellant, which was in the business of producing and selling protective equipment, had committed no breach of fiduciary duty in developing a new form of helmet for members of the fire brigades prior to his resignation from the appellant. What influenced Moses LJ, with whom Lloyd and May LJJ concurred, in this finding was that the appellant had employed the first respondent as a salesperson, not as a designer. It was not in the parties’ contemplation that he would develop a helmet. Accordingly, he owed no fiduciary duties in relation to “the development of a preliminary concept for a new helmet [and] was not in breach of any such obligation by seeking to raise funds for such a project while still in employment”.287

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Employees’ duty of confidentiality compared to fiduciary duties [4.290]  It is not uncommon in cases where employees have taken advantage of the employ-

ment relationship for their own benefit, aside from any action for breach of contract, for a breach of confidence to be pleaded. Though this obviates the need to establish fiduciary duties, it requires proof that the employee has misused confidential information, not merely know-​how, “belonging” to the employer. The case law affords manifold instances of employers who argue that an ex-​employee has (mis)used confidential information as a “head start” or “springboard” to compete with the employer: see [6.40], [6.45]. That the same factual situation can trigger both a breach of fiduciary duty and a breach of confidence has led some to conclude that an employee’s misuse of confidential information per se effects a breach of fiduciary duty.288 Yet notwithstanding the common genesis of the two doctrines (see [P.145]), and calls by some for confidentiality to be viewed as a subset of

284

C & K A Flanagan Sailmakers Pty Ltd v Walker [2002] NSWSC 1125 at [44]–​[49] per Macready AsJ; Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 at [231], [232] per Foster J.

285

Green and Clara Pty Ltd v Bestobell Industries Pty Ltd [1982] WAR 1. See also Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488 (discussed at [38.30]); Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2013] FCA 1341 (involving an employee holding a “very significant managerial position”: at [238] per Foster J).

286

Helmet Integrated Systems Ltd v Tunnard [2007] FSR 16.

287

Helmet Integrated Systems Ltd v Tunnard [2007] FSR 16 at [50].

288

See, for example, Fortuity Pty Ltd v Barcza (1995) 32 IPR 517 at 528–​529 per Heenan J; Co-​ordinated Industries Pty Ltd v Elliott (1998) 43 NSWLR 282 at 288–​289 per Hodgson CJ in Eq; Morris v Hanley (2003) 173 FLR 83 at [88] per Hamilton J.

140 [4.290] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

fiduciary doctrine,289 confidentiality cannot be assumed to carry with it an equivalent fiduciary duty.290 Not only do the relevant inquiries differ  —​fiduciary law focuses on loyalty while breach of confidence is concerned with the confidentiality of information  —​within the same relationship each duty will not always be temporally co-​existent. In the employer–​ employee context any fiduciary duty (and also the duty of fidelity) that may have existed expires on the termination of employment.291 A continuing duty of confidentiality may nonetheless apply as regards information protected either by contract or by equity as confidential to the employer.292 So in Attorney-​General v Blake,293 the English Court of Appeal rejected a claim for breach of fiduciary duty against that the defendant, a former member of the secret intelligence service, arising out of the publication of his autobiography based on information acquired in his capacity as a member of the service. Lord Woolf MR remarked that a duty of confidentiality could not be imposed on information that is no longer confidential by invoking a duty of loyalty after the relationship giving rise to the latter duty has ceased. Employers’ duty [4.295] Prior to the High Court’s 2014 decision in Commonwealth Bank of Australia

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v Barker,294 a line of Australian case authority, in accord with English law,295 implied into employment contracts a term that the employer would not, without reasonable and proper cause, act so as to destroy or seriously damage the relationship of confidence and trust existing between employer and employee:296 see [28.155]. The High Court in Barker rejected the implication of any such term. In any case, obligations under such a term could not be described as fiduciary duties, as “[m]‌utual trust and confidence may characterise a fiduciary relationship, but are not sufficient, without more, to give rise to one”297 (though it may function to impose obligations of confidentiality on an employer vis-​à-​vis an employee).298 A difficulty in finding a

289

See, for example, McDougall, “The Relationship of Confidence” in Waters (ed), Equity, Fiduciaries and Trusts (Carswell, 1993), Ch 8. Cf Dal Pont, “Conflicts of Interest: The Interplay Between Fiduciary and Confidentiality Law” [2002] AMPLA Yearbook 583 at 594–​601; Dal Pont, Law of Confidentiality (LexisNexis Butterworths, 2015), [2.8]–​[2.19].

290

MacLean v Arklow Investments Ltd [1998] 3 NZLR 680 at 690 per Gault J [affd Arklow Investments Ltd v MacLean [2000] 1 WLR 594 (PC)]. Cf at 726–​727, 733 per Thomas J in dissent.

291

Ormonoid Roofing & Asphalts Ltd v Bitumenoids Ltd (1930) 31 SR (NSW) 347 at 360–​361 per Harvey CJ in Eq; Wessex Dairies Ltd v Smith [1935] 2 KB 80 at 89 per Maugham LJ.

292

The same has been held to apply in respect of independent contractors: Wimmera Industrial Minerals Pty Ltd v Iluka Midwest Ltd [2002] FCA 653 at [50] per Sundberg J.

293

Attorney-​General v Blake [1998] 1 All ER 833 [appeal determined on a different point: Attorney-​General v Blake [2001] 1 AC 268: see [P.60]].

294

Commonwealth Bank of Australia v Barker (2014) 253 CLR 169.

295

See, in particular, Malik v Bank of Credit and Commerce International SA (in liq) [1998] AC 20.

296 See, for example, Burazin v Blacktown City Guardian Pty Ltd (1996) 142 ALR 144 at 146–​ 147, 151 (FC(FCA)); Hollingsworth v Commissioner of Police (1998) 47 NSWLR 151 at 190 (NSWIRComm). See further Godfrey, “Contracts of Employment: Renaissance of the Implied Term of Trust and Confidence” (2003) 77 ALJ 764. 297

Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 at [267] per Lindgren J. Cf Dopf v Royal Bank of Canada (1998) 156 DLR (4th) 56, where the defendant bank exerted pressure on an employee (the plaintiff), whose spouse owed moneys to the bank, to provide a personal guarantee for the repayment of those moneys. The British Columbia Court of Appeal held that as the bank chose to deal directly with the plaintiff rather than the debtor, it was foreseeable that the employee would develop a sense of dependency about her employment sufficient to characterise the relationship as a power-​ dependency relationship capable of attracting fiduciary duties: at 76. The court awarded the plaintiff $30,000 in compensation for humiliation and anxiety. It is difficult to imagine an Australian court reaching the same conclusion, at least not on the basis of breach of fiduciary duty, in that the notion of undivided loyalty inherent in the Australian concept of fiduciary duty does not sit well with an employer’s duty.

298

See Toulson and Phipps, Confidentiality (3rd ed, Sweet & Maxwell, 2012), pp 301–​303 (citing as an example the employee’s personal information that has come to the knowledge of the employer, as opposed to the employer’s opinion as to the

[4.295]  141 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

fiduciary duty owed by employer to employee is the unavoidable conflict that may arise in its application as between multiple employees. “Loyalty” to one employee, however defined, may cause “disloyalty”, or another form of detriment, to another.299 The terms of the employment contract may, moreover, present other hurdles to the recognition of fiduciary duties, specifically where it evinces no express or implied undertaking to act in the employee’s interests at the expense of its own.300

DOCTOR AND PATIENT [4.300] The doctor–​patient relationship has not traditionally been viewed as triggering fiduci-

ary duties.301 Yet following the High Court’s decision in Breen v Williams302 there are grounds to conclude that, at least in so far as issues of loyalty are concerned, doctors should eschew engagements that place their own interest, or a duty to a third party, in conflict with the duty to a patient.303 Nor may doctors make an unauthorised profit out of their position. Any such duty does not, however, extend beyond the no-​conflict and no-​profit duties. The court rejected the view espoused in Canada that fiduciary duties carry with them prescriptive obligations304 and thus a means to compensate for non-​economic injury caused by doctors’ abuse of dominant position305 or failures to exercise reasonable care and skill.306 In Breen this led, contrary to Canadian authority,307 to the rejection of the appellant’s contention that a doctor owes a fiduciary duty to give a patient access to medical records that relate to that patient.308 Perhaps it is regarding unauthorised profit that doctor–​patient fiduciary duties are most likely to develop. For example, a doctor who prescribes medication without disclosing the

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employee’s qualities); Prout v British Gas plc [1992] FSR 478 (involving an obligation of confidentiality in the employer over information proffered as part of an employee suggestion scheme). 299

In this sense, arguments for fiduciary duties in this context face similar hurdles to those alleging fiduciary duties owed by government to individual citizen: see [5.30].

300

See, for example, Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 (where Lindgren J rejected a claim by the plaintiff footballer that the defendant club owed him, inter alia, fiduciary duties in directing him to defer surgery until season end in return for a playing contract the following year: at [269], [270]). Cf Bodie, “Employment as Fiduciary Relationship” (2017) 105 Geo LJ 819 (who argues that employers have long had significant statutory and common law responsibilities towards their employees that reflect a fiduciary character, and that employers should refrain from opportunism, especially when employees have no voice in governance).

301

Sidaway v Board of Governors of Bethlehem Royal Hospital [1985] 1 AC 871 at 884 per Lord Scarman.

302

Breen v Williams (1996) 186 CLR 71 at 83 per Brennan CJ (who saw the doctor–​patient relationship as one of ascendancy), at 107–​108 per Gaudron and McHugh JJ (who countenanced that a doctor could be a fiduciary for some purposes), at 134–​135 per Gummow J (who viewed the doctor–​patient relationship as fiduciary).

303

The scope for conflicts in this regard is elaborated in Nestorovska, “Revisiting Breen v Williams: Breathing Life into a Doctor-​ Patient Fiduciary Relationship” (2018) 25 JLM 692.

304

Breen v Williams (1996) 186 CLR 71 at 95 per Dawson and Toohey JJ, at 113 per Gaudron and McHugh JJ, at 137–​138 per Gummow J.

305

Cf the Canadian cases ordering a doctor to pay compensation for fiduciary breach to patients of which a doctor has taken sexual advantage: Norberg v Wynrib (1992) 92 DLR (4th) 449; Taylor v McGillivray (1994) 110 DLR (4th) 64.

306

Breen v Williams (1996) 186 CLR 71 at 89–​90 per Dawson and Toohey JJ, at 111 per Gaudron and McHugh JJ.

307

See McInerney v MacDonald (1992) 93 DLR (4th) 415.

308

In so doing, the court rejected any analogy between a doctor and a trustee, the latter being required to provide trust documents to beneficiaries (see [20.30], [20.55], [20.60]). It noted that beneficiaries’ entitlements to trust documents stem from their equitable interest in the trust property, and so could not be characterised as an incident of the trustee’s fiduciary duty: at 89 per Dawson and Toohey JJ, at 137–​138 per Gummow J. Some jurisdictions have legislated to provide access to medical records:  Health Records (Access and Privacy) Act 1997 (ACT), Pt 3; Health Records and Information Privacy Act 2002 (NSW), ss 26–​32; Health Records Act 2001 (Vic), Pt 5.

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Fiduciary Relations  Chapter  4

receipt of a financial benefit from its supplier arguably breaches fiduciary duty.309 This duty attaches because patients have no other legal avenue to redress conduct of this kind, and the doctor’s gain introduces the required economic aspect. Pure conflicts of interest lacking direct economic implications are unlikely to attract fiduciary protection.310 Doctor–​patient financial dealings have an economic aspect, but usually lie outside the scope of the professional relationship, and so absent some independent aspect of the parties’ relationship exhibiting the fiduciary hallmarks, there is little scope for fiduciary duties in this context.311

SOCIAL AND FAMILIAL RELATIONSHIPS Child abuse and fiduciary duties [4.305]  The High Court in Breen v Williams312 declined to recognise parental prescriptive fidu-

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ciary duties to their children. It therefore rejected the proposition, propounded in Canadian case law,313 that fiduciary law should form a foundation for compensation for sexual or other abuse by a parent, or some other person. Tort law, according to the High Court, is the vehicle through which to secure compensation for physical and other abuse. This clear indication of judicial policy did not prevent plaintiffs from pursuing sexual abuse claims under the fiduciary label, chiefly in attempts to circumvent otherwise applicable limitation legislation,314 which does not, generally speaking, apply to fiduciary breaches: see [30.35]. The judicial attitude is that “it is inappropriate that a limitation statute can be circumvented by an equitable plea in a non-​trustee type relationship arising from the same circumstances and particulars relied upon to support a tortious or contractual liability”.315 As such, these attempts have proven unsuccessful, to the chagrin of some commentators,316 lower courts giving full effect to the policy espoused at High Court level. In Paramasivam v Flynn,317 for instance, the Full Federal Court, though accepting a parent’s duty to refrain from inflicting

309

See Michalik, “Doctors’ Fiduciary Duties” (1998) 6 JLM 168 at 184–​185.

310

For example, though it has been suggested that a doctor who, for the purposes of her or his own research, treats a patient in a manner that departs from the accepted treatment without the patient’s consent may breach a fiduciary duty to the patient by virtue of conflict of interest and duty (Michalik, “Doctors’ Fiduciary Duties” (1998) 6 JLM 168 at 181–​182), the absence of a direct economic aspect coupled with the potential for proceedings in tort dictate that this is unlikely in Australian law.

311

See, for example, Freeman v Perlman (1999) 169 DLR (4th) 133 (no relevant fiduciary duty relating to a loan advanced to a doctor by a patient).

312

Breen v Williams (1996) 186 CLR 71 at 83 per Brennan CJ.

313

See, for example, M(K) v M(H) (1992) 96 DLR (4th) 289 at 325 per La Forest J; J(LA) v J(H) (1993) 102 DLR (4th) 177 at 186 per Rutherford J (extending the fiduciary duty to a parent who failed to intervene so as to protect the child from sexual assaults); K(K) v G(KW) (2008) 90 OR (3d) 481. See Hall, “ ‘Intuitive Fiduciaries’: The Equitable Structure of Family Life” (2002) 19 Can J of Fam Law 345.

314

The issue has been overcome by recent changes to limitation legislation in most jurisdictions, which remove the time bar for child sexual assaults and operate retrospectively. The amending statutes to date are the following: Limitation Amendment (Child Abuse) Act 2016 (NSW); Limitation Amendment (Child Abuse) Act 2017 (NT); Limitation of Actions (Child Sexual Abuse) and Other Legislation Amendment Act 2016 (Qld); Limitation Amendment Act 2017 (Tas); Limitation of Actions Amendment (Child Abuse) Act 2015 (Vic); Civil Liability Legislation Amendment (Child Sexual Abuse Actions) Act 2018 (WA).

315

Woodhead v Elbourne [2001] 1 Qd R 220 at 231 per White J.

316

See, for example, Des Rosiers, “Childhood Sexual Abuse and the Civil Courts” (1999) 9 Tort L Rev 201; Joyce, “Fiduciary Law and Non-​economic Interests” (2003) 28 Mon ULR 239.

317

Paramasivam v Flynn (1998) 160 ALR 203 at 220. See also Pope v Madsen [2016] 1 Qd R 201 (where no cause of action in breach of fiduciary duty was found in claims by a daughter against her biological father stemming from alleged sexual and other abusive conduct); Mullany, “Civil Actions for Childhood Abuse in Australia” (1999) 115 LQR 565.

[4.305]  143 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Equity and Trusts in Australia

personal injuries on her or his child should be protected by law, did not see “fiduciary” as the right label. Similarly, in Woodhead v Elbourne,318 White J rejected the plaintiff’s claim for breach of fiduciary duty against a friend of her adoptive parents who had allegedly sexually assaulted her. [4.310] Canadian judges have subsequently sought to wind back the spread of fiduciary duties in the child abuse arena, seeking to debunk the view, arguably open on some of the judicial language, that fiduciary duties equate to a duty to act in a child’s best interests. The Supreme Court, in particular, has attempted to demarcate more clearly fiduciary from tortious duties in the parental and quasi-​parental context. In G (ED) v Hammer,319 the court rejected an attempt to make a school board liable for fiduciary breach arising out of a school janitor’s sexual abuse of children. Although accepting that the relationship between the school board and the students was fiduciary, it rejected any “broad fiduciary duty to act in the best interests of the child”. McLachlin CJC, with the concurrence of the other judges, reasoned as follows:320

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The maxim that parents should act in their child’s best interests may help to justify particular parental fiduciary duties, but it does not constitute a basis for liability. The cases on the parental fiduciary duty focus not on achieving what is in the child’s best interest, but on specific conduct that causes harm to children in a manner involving disloyalty, self-​interest, or abuse of power —​failing to act selflessly in the interests of the child. This approach is well grounded in policy and common sense. Parents may have limited resources and face many demands, rendering it unrealistic to expect them to act in each child’s best interests. Moreover, since it is often unclear what a child’s “best” interests are, the idea does not provide a justiciable standard. Finally, the objective of promoting the best interests of the child, when stated in such general and absolute terms, overshoots the concerns that are central to fiduciary law. These are … loyalty and “the avoidance of a conflict of duty and interest and a duty not to profit at the expense of the beneficiary”.

This winding back of the fiduciary crawl also figured in a judgment the court delivered on the same day, in which it rejected a fiduciary claim against the government by plaintiffs who experienced abuse as children in foster homes. McLachlin CJC found no evidence that the government put its own interests ahead of those of the children or committed acts that harmed the children in a way that amounted to disloyalty.321 Any fault in the government was, according to her Honour, not disloyalty, but failure to take sufficient care, and so within the province of tort, not fiduciary law. The New Zealand Court of Appeal, also in 2003, rejected an almost identical claim, and on the same grounds,322 although this has not outright precluded New Zealand courts from identifying fiduciary obligations in the child abuse scenario.323

318

Woodhead v Elbourne [2001] 1 Qd R 220.

319

G (ED) v Hammer [2003] 2 SCR 459.

320

G (ED) v Hammer [2003] 2 SCR 459 at [23]. Arbour J dissented but on a different point.

321

B (KL) v British Columbia [2003] 2 SCR 403 at [50].

322

S v Attorney-​General [2003] 3 NZLR 450.

323

See, for example, B v R (1996) 10 PRNZ 73 (where Morris J awarded a niece exemplary damages in relation to childhood abuse for assault and battery and breach of fiduciary duty perpetrated by her uncle); J v J [2013] NZHC 1512 (where Chisholm J held that sexual abuse by an uncle of his niece was a breach of fiduciary duty (at [136]–​[140]), remarking that breach of fiduciary claims encompass the “true nature” of the wrong inherent in sexual abuse (at [128])).

144 [4.310] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Fiduciary Relations  Chapter  4

Guardian and ward

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[4.315] Guardianship is an office of trust, attracting the fiduciary “no-​conflict” and “no-​

profit” duties.324 A court will accordingly not sanction dealings between an infant beneficiary and a guardian where the interest of the latter is clearly in conflict with her or his duty.325 The fiduciary nature of the guardian–​ward relationship has led to attempts to circumvent the judicial policy evident in Breen v Williams326 (see [4.305]) to bring events otherwise within the purview of tort under the fiduciary mantle. Again, these attempts have proven futile, as courts are alert to attempts to cast tort duties with a fiduciary slant. In Tusyn v State of Tasmania,327 Blow J held that the guardian–​ward relationship does not encompass a fiduciary duty to take reasonable care for the ward’s physical safety. The plaintiff’s claim for compensation for sexual abuse suffered while a ward of the State based on an alleged breach of fiduciary duty by the State of Tasmania could not, therefore, succeed. Dunford J in Webber v New South Wales328 likewise refused to accept that a guardian’s failure to provide adequate protection, education and medical care for a ward amounted to a breach of fiduciary duty. What duty of care arose was not because the State was a fiduciary, but because the relationship of guardian and ward made the plaintiff a “neighbour” and in a position of proximity to the State. This gave rise to a tortious duty to take care, the breach of which Dunford J remarked “is not a breach of fiduciary duty and should not be erroneously labelled at such”.329 And in SB v State of New South Wales330 alleged breaches by a statutory guardian so far as foster care placements were concerned, being couched in terms of a failure to take positive or prescribed action to protect the interests of the plaintiff, also fell outside the fiduciary umbrella. That years earlier Abadee J in Williams v Minister, Aboriginal Land Rights Act 1983331 had reached a similar conclusion makes it surprising that plaintiffs continue to plead fiduciary duties in this context. In that case a partly aboriginal plaintiff had, at the request of her mother, been placed under the control of the Aborigines Welfare Board, and raised in a Children’s Home as a result. As the result of her childhood experiences she claimed to have been denied bonding and attachment and suffered maternal deprivation, productive of a borderline personality disorder and substance abuse problems. His Honour remarked that as on the facts there was no allegation of conflict between duty and interest, and there were no economic interests at stake, he could “not see why a fiduciary duty should be found to convert an unsustainable claim at common law, based on the same facts, into a sustainable 324

Plowright v Lambert (1885) 52 LT 646 at 652 per Field J; Paramasivam v Flynn (1998) 160 ALR 203 at 218 (FC(FCA)); Clay v Clay (2001) 202 CLR 410 at 430 (FC) (but rejecting the argument that a guardian equates to a trustee); Webber v New South Wales (2004) 31 Fam LR 425 at [29] per Dunford J; Tusyn v State of Tasmania (2004) 13 Tas R 51 at [10], [11] per Blow J; C v W (No 2) [2016] NSWSC 945 (financial manager vis-​à-​vis an incapable person). Cf Williams v Minister, Aboriginal Land Rights Act 1983 (1999) 25 Fam LR 86 at 237 per Abadee J.

325

Prince v Attorney-​General [1996] 3 NZLR 733 at 746–​747 per Anderson J (fiduciary relationship between reporting Social Welfare officer and child); Crossingham v Crossingham [2012] NSWSC 95 (where White J countenanced, by way of analogy to the relationship between guardian and ward, that a fiduciary obligation could arise as between a carer and the person cared for: at [18]).

326

Breen v Williams (1996) 186 CLR 71.

327

Tusyn v State of Tasmania (2004) 13 Tas R 51.

328

Webber v New South Wales (2004) 31 Fam LR 425.

329

Webber v New South Wales (2004) 31 Fam LR 425 at [34].

330

SB v State of New South Wales (2004) 13 VR 527 at [660], [661] per Redlich J.

331

Williams v Minister, Aboriginal Land Rights Act 1983 (1999) 25 Fam LR 86.

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Equity and Trusts in Australia

one in equity”.332 Similar remarks were made in a more recent “stolen generation” case, State of South Australia v Lampard-​Trevorrow,333 where the South Australian Full Court rejected the plaintiff’s argument that the Aborigines Protection Board’s failure to inform him that he had been removed without legal authority, or provide him with access to professional advice about his rights arising out of the removal, constituted a breach of fiduciary duty. According to their Honours, if there was any breach, it was sourced in the Board acting beyond statutory power, not in equity.

DEFENCES TO BREACH OF FIDUCIARY DUTY [4.320]  Traditional equitable defences of estoppel (see Ch 10), laches (see [30.10]–​[30.20]),

acquiescence (see [30.25], [30.30]), waiver (see [30.140]–​[30.165]) and unclean hands (see [30.170]–​[30.180]) may be pleaded in response to an action for breach of fiduciary duty. Statute, moreover, empowers the court to grant complete or partial relief to a defaulting trustee from the consequences of, inter alia, a breach of fiduciary duty where the trustee has behaved honestly, reasonably and in the court’s opinion ought fairly to be excused from the breach: see [24.200]–​[24.215]. Statute invests an equivalent jurisdiction in the courts in respect of defaults by company directors, albeit without the need for a finding of reasonableness.334 Although sometimes characterised as a defence, the prior informed consent of a principal to what would otherwise be a fiduciary breach denies to the fiduciary’s action the character of a fiduciary breach: see [4.20].

REMEDIES FOR BREACH OF FIDUCIARY DUTY

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[4.325]  In granting relief from a breach of fiduciary duty, the court aims to identify the fidu-

ciary’s “gain”, or alternatively the principal’s “loss”, as a result of the breach.335 The main remedy for a fiduciary breach that causes loss to the principal is equitable compensation: see [34.05]–​[34.55]. Alternatively, where the breach has generated an unauthorised profit, the principal may seek an account of that profit: see [34.140]–​[34.175]. In each case the court, under its equitable jurisdiction can award interest, either simple or compound, for the purpose of stripping a fiduciary of profits that were or should have been made:336 see [34.60]. The court may also rescind a transaction effected in breach of fiduciary duty: see [35.65]. A court may grant an injunction (discussed in Ch 31)  to restrain a continuing breach of fiduciary duty. Interim injunctions are particularly appropriate to restrain an inequitable

332

Williams v Minister, Aboriginal Land Rights Act 1983 (1999) 25 Fam LR 86 at 242. The plaintiff’s appeal was unsuccessful: Williams v Minister, Aboriginal Land Rights Act 1983 [2000] NSWCA 255 (on appeal the claim for breach of fiduciary duty was not pressed or discussed). See also Collard v State of Western Australia (No 4) [2013] WASC 455 at [1222]–​[1236] per Pritchard J.

333

State of South Australia v Lampard-​Trevorrow (2010) 106 SASR 331 at [329]–​[342].

334

Corporations Act 2001 (Cth), s 1318.

335

United States Surgical Corporation v Hospital Products International Pty Ltd [1983] 2 NSWLR 157 at 212–​213 (CA); Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 110 per Mason J; Watson v Dolmark Industries Ltd [1992] 3 NZLR 311 at 316 per Cooke P.

336

Hungerfords v Walker (1989) 171 CLR 125 at 148 per Mason CJ and Wilson J; Meerkin & Apel v Rossett Pty Ltd (No 2) [1999] 2 VR 31 at 36 per Callaway JA; Nattrass v Nattrass [1999] WASC 77 at [153]–​[159] per Commissioner Buss QC.

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Fiduciary Relations  Chapter  4

springboard advantage gained by reason of the breach.337 A  wronged principal may seek Anton Piller relief to preserve evidence against a defaulting fiduciary (see [32.140]–​[32.210]), or a Mareva order against a fiduciary likely to render herself or himself judgment proof (see [32.05]–​[32.135]). [4.330]  Where a fiduciary breach has generated an asset in the hands of the defaulting fidu-

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ciary, the principal may seek title to that asset via a constructive trust: see [38.25]–​[38.50]. The constructive trust is also a vehicle to make accountable third parties who do not owe fiduciary duties to the principal, but have received property in breach of another’s fiduciary duty or otherwise assisted a breach of fiduciary duty: see [38.65]–​[38.125]. The third party may, if he or she retains the property, be treated as a constructive trustee of it, and in other instances, including where assisting a fiduciary breach has caused loss to the principal, may be held personally liable to compensate the principal for the loss as if he or she were a trustee.

337

See, for example, Pacifica Shipping Co Ltd v Andersen [1986] 2 NZLR 328 (where Davidson CJ ordered an injunction postponing the defendants’ operations for the period of time it would have taken them to establish their business operation had they not breached fiduciary duties in so doing).

[4.330]  147 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

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Chapter 5

Government and the Public Trust Concepts of Trust in Public Law

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[5.05] Equity has been most prominent in private law, there being an ancient and well-​

developed equitable jurisdiction guarding the conduct of relationships of trust between private individuals. Courts of equity have, however, shunned a parallel jurisdiction between government and the governed, and equity’s application in this context is less developed. Yet the breadth of equitable remedies is, with limited exceptions, available to plaintiffs who establish the relevant cause of action against the government. And public sector organisations and agencies are generally subject to equitable doctrines. Were equity not to apply at all in public law, there would be inconsistency with the accepted social and legal policy of equality before the law that all have access to the same rights and remedies. Yet merely to label the relationship of government and citizen as a fiduciary one, or as one of trust,1 and then apply private law concepts of trust may be entirely inappropriate. Private trust concepts, applied in isolation, may not achieve the optimum balance between the autonomy ceded by the people to the government and the responsible use of this collective authority by the government. And yet to deny the relevance or applicability of any such trust relationship may deny the fundamentals of democracy. Democratically elected governments operate in a representative capacity, the authority to do so having been conferred by the persons whom the government is to represent. As explained by Deane and Toohey JJ in Nationwide News Pty Ltd v Wills:2 [T]‌ he central thesis of the doctrine [of representative government] is that the powers of government belong to, and are derived from, the governed, that is to say, the people of the Commonwealth. The repositories of government power under the Constitution hold them as representatives of the people under a relationship, between representatives and represented, which is a continuing one.

Once it is recognised, though, that unique characteristics attach to the democratic nature and tenets of government, it can be recognised that the private trust ideal cannot provide an exact analogy. Rather, it must be modified to take account of the reality and complexity of public 1

The concept of the public trust is not a recent invention. The public trust doctrine arose in the United States in the context of governmental use and management of natural resources: see Illinois Central Railroad v Illinois (1892) 146 US 387. The doctrine is “based on a principle that certain natural resources, whether because of unique and irreplaceable values or because of a special significance to the general population, are protected from incompatible uses by a sovereign’s fiduciary duty”: Bader, “An Analysis of the Potential Impact of Public Trust Doctrine on the Sovereign’s Use of Its Eminent Domain Power” (1994) 18 Hamline L Rev 50 at 51. See further, and more recently, (2012) 45 UC Davis L Rev 663–​1176 (“Symposium —​The Public Trust Doctrine: 30 Years Later”). The concept of public trust utilised in this chapter is far broader and more general in its application and scope.

2

Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 72.

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Equity and Trusts in Australia

representation and, in so doing, provide a reasoned and principled basis for reform, whether curial or legislative. Fiduciary theory and the government–​citizen relationship [5.10] It can be argued that the relationship between government and the electorate

exhibits hallmarks of a relationship giving rise to fiduciary duties (as to which see [4.50]–​ [4.70]). For instance, if fiduciary duties stem from an undertaking by one to act in the interests of another, that the constitution of a state provides for the representation of the people by persons chosen by the people supports the implication that elected representatives undertake to act on behalf of the people. Mason CJ in Australian Capital Television Pty Ltd v Commonwealth (No 2) explained this notion in terms of representative government:3

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The very concept of representative government and representative democracy signifies government by the people through their representatives. Translated into constitutional terms, it denotes that the sovereign power which resides in the people is exercised on their behalf by their representatives … the Constitution brought into existence a system of representative government for Australia in which the elected representatives exercise sovereign power on behalf of the Australian people.

Fiduciary duties arising by reason of trust or confidence placed by one in another, or by reason of a special vulnerability, also translate into the public law arena. By ceding part of their autonomy in electing representative government, and submitting to the authority of another within the scope of the autonomy ceded, the people place trust and confidence in elected representatives and their agencies.4 And once elected representatives assume office, the people’s power to influence government action in the short term is limited. This places the people in a position of disadvantage or vulnerability vis-​à-​vis the government, which is empowered to affect the interests of the people with the sphere of autonomy that the people have yielded to it.5 The foregoing also carries with it the notion that the people are reasonably entitled to expect that the government will exercise its powers for their benefit, not for its own. Trust analogy [5.15]  The archetypal relationship giving rise to fiduciary duties is that between trustee and

beneficiary: see [22.70]. Trustees hold legal title to property, and therefore control and dictate the manner in which that property is managed for specified persons or purposes. The exercise of trustees’ power is subject to an equitable personal obligation to deal with trust property for the benefit of the beneficiaries according to the terms of the trust. Like some trustees, the government controls and distributes that which has been sourced from the people. The exercise of its power to affect the interests of the people is subject to a corresponding obligation to deal with these resources for the people’s benefit according to the mandate of its appointment. In

3

Australian Capital Television Pty Ltd v Commonwealth (No 2) (1992) 177 CLR 106 at 137, 138 (emphasis supplied).

4

See Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 191 per McHugh JA.

5

It has further been argued that it is the Australian constitutional architecture that has contrived the vulnerability of the Australian people: see Finn, “The Abuse of Public Power in Australia: Making Our Governors Our Servants” (1994) 5 Public L Rev 43 at 49–​50.

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Government and the Public Trust  Chapter  5

this analysis, the people can be characterised as “beneficiaries” of a trust established by their conferral of authority on the government to act on its behalf.6 The government’s “trustee” responsibility is arguably not confined to wealth redistribution. Unlike most private trustees, government can affect non-​financial interests of the people. For example, it can limit or deny certain individual freedoms, such as freedom of choice or freedom of movement. More so than its authority to redistribute wealth, the power to affect individual freedoms can severely affect the interests of the people. For this reason, any trust duty should arguably be wider than that imposed concerning the management of wealth. In practical terms, this means that governmental restrictions of individual freedoms should be the subject of stringent supervision and control.7 There are limits, however. Courts are reticent to interfere with private trustees’ exercise of discretion absent mala fides: see [23.35], [23.40]. Similarly, aside from a general election, the people rarely fetter the exercise of governmental legislative and policy-​making authority. This has led a leading commentator to observe that “we have made the gatekeepers of our power the very persons who have an incentive to be its poachers”.8 In an environment of scarce resources and multiple interests (whether personal or collective), to devote resources to one interest in favour of another is an inevitable role of government. An atmosphere in which competing interests must be balanced, or at least prioritised, necessarily involves a position of conflicting responsibilities. That a government cannot simultaneously act in the interests of all persons it governs is not fatal to the concept of public trust. Rather, it serves to parallel the role of government as trustee with that of a trustee of a large discretionary trust. The latter may, in its discretion, appoint trust property in favour of certain beneficiaries over others. Provided the discretion is exercised in good faith, in accordance with the purpose for which it was conferred, and upon a real and genuine consideration, the court will not interfere:  see [23.30]. Likewise, the government is conferred a discretion to make decisions that may benefit some but not others. Applying these principles, it could be viewed as anomalous if, in the absence of a fraudulent abuse of power, the government could be held accountable for failing to exercise its discretion in a particular manner.

IMPACT OF TRUST CONCEPTS ON PUBLIC LAW [5.20]  The grant of authority over the person and property of another attracts consequent

duties in relation to that authority.9 Fiduciary duties are duties of loyalty, reflected by twin proscriptions: fiduciaries must not place their interests in conflict with their duty as fiduciary, and must not profit from their position as fiduciary: see [4.15]. A principal duty of a trustee is to account to the beneficiaries concerning the performance of the trustee’s duties in managing

6

See Finn, “The Abuse of Public Power in Australia: Making Our Governors Our Servants” (1994) 5 Public L Rev 43 at 45. See also Finn, “The Forgotten ‘Trust’: The People and the State” in Cope (ed), Equity: Issues and Trends (Federation Press, 1995), Ch 5. Cf Finn, “Public Trusts, Public Fiduciaries” (2010) 38 Fed L Rev 335.

7

See Fox-​Decent, Sovereignty’s Promise: The State as Fiduciary (OUP, 2011) (who proffers a theory for state authority being confined by fiduciary principles).

8

Finn, “The Abuse of Public Power in Australia: Making Our Governors Our Servants” (1994) 5 Public L Rev 43 at 51. See also Laws, “Law and Democracy” [1995] Pub Law 72 at 83 (“The government’s constituency is the whole body of … citizens; and a democratic government can have no remit but to act in what it perceives to be in their best interests. It may get it wrong, and let the people down. But it cannot knowingly do so, for that would be to act in bad faith; and no government can justify its own bad faith by pointing to the fact that it was elected by the people. That would be to assert that the electorate endorsed in advance the government’s right deliberately to act against its interests, which is an impossible proposition”).

9

Hegel’s Philosophy of Right (translated by Knox, Clarendon Press, 1942), para 261.

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Equity and Trusts in Australia

the trust property: see [22.30], [22.35]. To seek to apply these duties in the public law sphere, the attributes of public employment on an individual level must be distinguished from the government’s collective responsibility owed to the public. Trust at an individual level [5.25]  The public officer owes a duty of fidelity to her or his employer, the government: see

[4.285]. Yet the very fact of public employment can be construed to mean that the public officer, depending on her or his role and position, owes fiduciary-​like duties to the people her or his employment is serving.10 Public officers are duty-​bound to avoid dealings that conflict with their official duties, and must not make unauthorised profits from their position. As explained by Rich J:11

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Members of Parliament are donees of certain powers and discretions entrusted to them on behalf of the community, and they must be free to exercise these powers and discretions in the interests of the public unfettered by considerations of personal gain or profit. So much is required by the policy of the law. Any transaction which has a tendency to injure this trust, a tendency to interfere with this duty, is invalid … Courts of equity, in dealing with transactions between private persons, have always avoided as contrary to the policy of the law purchases by trustees from themselves … This applies with greater force to public affairs and the obligations and the responsibility of the trust towards the public implied by the position of representatives of the people.

Also, as a necessary incident of the duty to deal with public funds, public property and public expectations for the public interest, the public officer owes a duty to account to the public for those dealings. In so doing, the public can monitor the performance of duties arising out of public office. This duty parallels that of a trustee, who must provide a timely, faithful, accurate account to the beneficiaries of her or his management of the trust property: see [22.30], [22.35]. Hence, public employment, at least when viewed from the perspective of the public officer as an individual, does not necessarily raise issues to which established concepts of fiduciary responsibility are inapplicable or inappropriate.12 What may distinguish public officers from other fiduciaries is that they are “trustees twice over: first, of the public in view of their role as public officers; secondly, of the Crown in view of their role as employees”,13 which responsibilities may diverge. This characteristic is not peculiar to the public officer. For instance, an employed lawyer owes a duty of fidelity to her or his employer —​the firm —​but also owes fiduciary duties to a client: see [4.135]–​[4.165]. Where these duties conflict, few would submit that the former prevail. Similarly, and perhaps more forcefully given the scope of the public officer’s duty, her or his duty to the public must prevail over any conflicting duty to the Crown. 10

See Finn, “Public Officers: Some Personal Liabilities” (1977) 51 ALJ 313 at 316–​318; Finn, “Integrity in Government” (1992) 3 Public L Rev 243 at 254–​255; Finn, “The Abuse of Public Power in Australia: Making Our Governors Our Servants” (1994) 5 Public L Rev 43 at 55. See also Horne v Barber (1920) 27 CLR 494 at 500 per Isaacs J (“When a man becomes a member of Parliament, he undertakes high public duties. Those duties are inseparable from the position: he cannot retain the honour and divest himself of the duties”); R v Boston (1923) 33 CLR 386 at 412 per Higgins J.

11

Horne v Barber (1920) 27 CLR 494 at 501–​502 (emphasis supplied). See also at 500 per Isaacs J; United States v Carter (1909) 217 US 286 at 306 per Lurton J.

12

Cf Whincop, “Another Side of Accountability: The Fiduciary Concept and Rent-​Seeking in the Governance of Government Corporations” (2002) 25 UNSWLJ 379 (who argues that, in the context of directors and officers of government corporations, “a standard imposing a requirement of selflessness in a public law context is unrealistic, because of its failure to recognise the inevitability of self-​interest seeking by politicians and those wielding public power”: at 406).

13

Finn, “Integrity in Government” (1992) 3 Public L Rev 243 at 249.

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Government and the Public Trust  Chapter  5

The conflict is vividly illustrated by reference to duties in respect of information. Statute and regulations governing the public service prohibit public servants from disclosing to other persons information acquired in office other than in the course of official duty or with express authority of the departmental head.14 At general law, however, only governmental information the disclosure of which is likely to injure the public interest is protected by equity: see [6.155]. To pretend that the scope of information disclosed in the first instance is coextensive with the latter instance is to deny the motivation behind the regime of freedom of information legislation. Yet unless public officers who disclose information, which, although contrary to public service regulations is not inconsistent with law, are granted protection from reprisal within the service, there is little motivation in practice, apart from principle, to favour such disclosure.15 Trust on a collective level

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[5.30]  In the context of the responsibility of the government to the governed as trustee, per-

haps the easiest duty to conceptualise is the duty comprehensively to account faithfully and accurately to the people in a form that facilitates public monitoring of the government’s performance.16 This operates as a check upon misuse of the power conferred by the public upon its representative and, as such, founds the basis of responsible government. The courts’ reluctance to attach equitable doctrines of confidence to governmental information (see [6.155], [6.160]) reflects this policy at a judicial level. It is more difficult to conceptualise or apply conflict of interest rules in the context of a large collective body that purports to govern the gamut of human endeavour. Fiduciary or trust duties, should they be envisaged in this respect, must be framed broadly; that government must act in the interests of the people, the interests of whom it affects in a representative capacity. Yet to recognise such a duty is neither to add to, nor modify, the established principle recognised as responsible government. Breaches of trust or fiduciary duty on a collective scale are nebulous at best, as the interests of government and those of the public are not distinct. For example, actions that on their face appear to promote the former’s interests, such as an increase in the salaries of public officers, or the formation of a governing coalition inconsistent with earlier assurances, can be justified on the public interest of attracting appropriately qualified public officers and the necessity of stable government, respectively. Apparent breaches of the duty to exercise a fiduciary power only for the purposes for which it was conferred (see [8.50]) can be met by the same justification. Curial application of trust concepts in public law —​fiduciary duties to indigenous persons [5.35]  Courts have historically been wary of imposing fiduciary duties on the Crown, recog-

nising as the main hurdle that “the Crown has many tasks to perform in the discharge of its legislative, executive, and public administration of responsibilities which are governmental functions to be enforced in the political arena rather than encumbered with court-​imposed remedies”.17 So even if an arrangement is established ostensibly through the vehicle of a trust,

14

Public Service Act 1999 (Cth), s 13(6); Public Service Regulations 1999 (Cth), reg 2.1.

15

See Finn, “Integrity in Government” (1992) 3 Public L Rev 243 at 252.

16

Australian Capital Television Pty Ltd v Commonwealth (No 2) (1992) 177 CLR 106 at 138 per Mason CJ.

17

Authorson v Canada (Attorney General) (2002) 215 DLR (4th) 496 at 518 per Austin and Goudge JJA (CA(Ont)).

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Equity and Trusts in Australia

where the Crown is involved it is open to the court to view it as a “political trust” case, enforceable politically but not by a private law duty enforceable in the courts. For example, in Kinloch v Secretary of State for India in Council18 the House of Lords held that a royal warrant that granted booty of war to the Secretary of State for India “in trust” for the officers and men of certain armed forces did not create a trust enforceable in the courts. It is chiefly, though not exclusively, in the relationship subsisting between government and indigenous citizen or group that common law judges have recognised legally enforceable fiduciary or trust duties.19 The reasons for this are discussed below, according to jurisdiction. [5.40] As early as 1831, the United States Supreme Court, relying on an analogy between

guardian and ward (see [4.315]), found a fiduciary relationship between the United States government and the various Indian tribes.20 In the seminal case, Cherokee Nation v Georgia, Marshall CJ explained that:21

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… the relations of the Indians to the United States is marked by peculiar and cardinal distinctions which exist nowhere else … It may well be doubted whether those tribes which reside within the acknowledged boundaries of the United States can, with strict accuracy, be denominated foreign nations. They may, more correctly, perhaps, be denominated domestic dependent nations … They are in a state of pupilage. Their relation to the United States resembles that of a ward to his guardian. [5.45]  It took longer for Canadian courts to recognise an equivalent relationship. Preceding its watershed decision in Guerin v The Queen,22 the Canadian Supreme Court had generally characterised the relationship between the Crown and Indian peoples as a “political trust”. The enduring contribution of Guerin was to recognise that the concept of political trust did not exhaust the potential legal character of the multitude of relationships between the Crown and aboriginal people, such that the existence of a public law duty did not exclude the possibility that the Crown undertook, in discharging that public law duty, duties of a private law nature towards aboriginal peoples. Unlike its United States counterparts, however, Canadian courts recognised such fiduciary duties on a sui generis basis, not via analogy.23 In a subsequent case, for instance, the Supreme Court of Canada viewed the relationship between the government and aboriginals as “trust-​ like, rather than adversarial”, which must “be the first consideration in determining whether the legislation or action in question can be justified”.24 The decision in Guerin itself illustrates

18

Kinloch v Secretary of State for India in Council (1882) 7 App Cas 619. See also Tito v Waddell (No 2) [1977] Ch 106 (where the claims of Banaban Islanders that certain royalties held by the Crown’s representative as a result of mining operations on their land gave rise to a trust in their favour failed because Megarry VC found an insufficient relationship between the land on which the operations took place and the royalties to yield the conclusion that a true trust of the royalties was intended). Cf Proprietors of Wakatu v Attorney-​General [2017] 1 NZLR 423 (where Tito v Waddell was distinguished on multiple grounds to support a conclusion that the terms of the purchase of Mäori land by the Crown in the 1840s attracted a fiduciary duty to ensure that the land was set aside for Mäori, in form of trust: see at [374]–​[378], [401]–​[414] per Elias CJ, at [571]–​[582] per Glazebrook J).

19

See Hughes, “The Fiduciary Obligations of the Crown to Aborigines: Lessons from the United States and Canada” (1993) 16 UNSWLJ 70; Tan, “The Fiduciary as an Accordion Term: Can the Crown Play a Different Tune?” (1995) 69 ALJ 440; Elliott, “Aboriginal Peoples in Canada and the United States and the Scope of the Special Fiduciary Relationship” (1998) 24 Manitoba LJ 137.

20

Cherokee Nation v Georgia (1831) 30 US 1; Worcester v Georgia (1832) 31 US 350; United States v Kagama (1886) 118 US 375; United States v Mitchell (1983) 103 S Ct 2961.

21

Cherokee Nation v Georgia (1831) 30 US 1 at 14–​15.

22

Guerin v The Queen (1984) 13 DLR (4th) 321.

23

Guerin v The Queen (1984) 13 DLR (4th) 321; R v Sparrow (1990) 70 DLR (4th) 385.

24

R v Sparrow (1990) 70 DLR (4th) 385 at 408, 413 per Dickson CJC and La Forest J.

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Government and the Public Trust  Chapter  5

the application of the fiduciary principle in a case involving surrender of indigenous land to the Crown. The court held that if native title is surrendered to the Crown in expectation of a grant of tenure to indigenous title-​holders, the Crown may owe a fiduciary duty to exercise its discretionary power to grant tenure in land so as to satisfy the expectation.25 The equivalent scenario in Australian law, the alienation of indigenous land, likewise led Toohey J in Mabo v State of Queensland (No 2) to envisage scope for fiduciary duties in the government–​ indigenous person relationship, reasoning as follows:26 [I]‌f the Crown … has the power to alienate land the subject of the [aboriginal] people’s traditional rights and interests and the result of that alienation is the loss of traditional title, and if the people’s power to deal with their title [is] restricted in so far as it is inalienable, except to the Crown, then this power and corresponding vulnerability give rise to a fiduciary obligation on the part of the Crown. The power to destroy or impair a people’s interests in this way is extraordinary and is sufficient to attract regulation by Equity to ensure that the position is not abused. The fiduciary relationship arises, therefore, out of the power of the Crown to extinguish traditional title by alienating the land or otherwise; it does not depend upon an exercise of that power.

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But even Canadian courts, notwithstanding a keenness to invoke fiduciary law as a source of responsibility, have refused to use fiduciary law to source plenary Crown liability covering every aspect of the relationship between the Crown and indigenous persons. Fiduciary duties in this context depend, rather, on identification of a cognisable indigenous interest, and the Crown’s undertaking of discretionary control in relation to it in a way that invokes responsibility “in the nature of a private law duty”.27 In a case involving two Indian bands claiming each other’s reserves, and each alleging that it would have possession of both reserves but for the Crown’s breach of fiduciary duty, Binnie J made the following important observations:28 When exercising ordinary government powers in matters involving disputes between Indians and non-​Indians, the Crown was (and is) obliged to have regard to the interest of all affected parties, not just the Indian interest. The Crown can be no ordinary fiduciary; it wears many hats and represents many interests, some of which cannot help but be conflicting … As the dispute evolved into conflicting demands between the appellant bands themselves, the Crown continued to exercise public law duties in its attempt to ascertain “the places they wish to have” … and, as a fiduciary, it was the Crown’s duty to be even-​handed towards and among the various beneficiaries.

This admonition cannot be confined to disputes between different indigenous groups, but must in principle be applicable to disputes between different groups and members of society as a whole. For instance, a reason given by the New Zealand Court of Appeal, in a 2008 judgment, for rejecting the wholesale application of fiduciary duties by the Crown to the Mäori was that the Crown “has a duty to the population as a whole”.29 It also feared, in line with

25

Guerin v The Queen (1984) 13 DLR (4th) 321 at 334, 339, 342–​343 per Dickson J, at 356–​357, 360–​361 per Wilson J.

26

Mabo v State of Queensland (No 2) (1992) 175 CLR 1 at 203. See also at 111–​113 per Deane and Gaudron JJ. Contra at 164–​170 per Dawson J.

27

Wewaykum Indian Band v Canada [2002] 4 SCR 245 at [85] per Binnie J.

28

Wewaykum Indian Band v Canada [2002] 4 SCR 245 at [96], [97]. See also Elder Advocates of Alberta Society v Alberta [2011] 2 SCR 261 at [44] per McLachlin CJ (noting, more generally, that “[t]‌he Crown’s broad responsibility to act in the public interest means that situations where it is shown to owe a duty of loyalty to a particular person or group will be rare”).

29

New Zealand Mäori Council v Attorney-​General [2008] 1 NZLR 318 at [81] (CA). See also Paki v Attorney-​General [2009] 1 NZLR 72 at [122] per Harrison J (“The Crown’s principal is collectively its citizens and its must act in their best interests, not singularly for [any group of Mäori] unless there is a legislative direction to the contrary”) [affd Paki v Attorney-​General [2011] 1 NZLR 125; Paki v Attorney-​General [2015] 1 NZLR 67].

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Equity and Trusts in Australia

the scenario noted above by Binnie J, that an unrestricted introduction of fiduciary duties may place the Crown “in a position where its duty to one Mäori claimant group conflicts with its duty to another”.30 These remarks sit well with the challenges noted earlier of adopting fiduciary law in circumstances where the alleged fiduciary is required to balance competing interests: see [5.15]. [5.50] Toohey J in Mabo31 considered that fiduciary duties may stem from a power inherent

in government which, if exercised, may cause greater detriment, or alternatively detriment of a character peculiar, to particular persons, such as to cast upon the government a special duty to consider the interests of those persons. Moreover, his Honour reasoned, where the government has, in addition to undertaking to act in the interests of the people, undertaken a more specific duty in respect of particular persons, it can be argued that the latter duty, by reason of its specificity, should be accorded legal significance. This rationale in no way confines equitable protection to aboriginal persons. Yet in that it is only the interests of indigenous persons, as opposed to any other underprivileged class of society, that has to date been held to justify this form of equitable protection suggests that the application of the fiduciary principle in this context is unique.32 This is a point expressly recognised by Canadian courts.33 In that the High Court of Australia has sought to limit fiduciary duties as proscriptive and concerned solely with economic interests (see [4.25]), the prescriptive duties propounded in the case law on the government–​aboriginal citizen context must indeed, if they accurately represent the law, be a sui generis fiduciary principle.

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[5.55] Yet Australian courts, more so than counterparts in other common law juris-

dictions, eschew this sui generis principle. There may be good reasons for this. Many of the Canadian cases depend at least in part upon a construction of particular statutes, and in any case Canadian fiduciary law has developed in ways not reflected in Australia. The United States decisions rest largely upon the limited sovereignty of Indian tribes recognised as domestic dependent nations coupled with particular statutory regimes. And although New Zealand courts have envisaged fiduciary duties in the Crown–​Mäori context, there the Treaty of Waitangi, an agreement concluded in 1840 between the Mäori and the Crown, provides a major driver for this,34 albeit not the only 30

New Zealand Mäori Council v Attorney-​General [2008] 1 NZLR 318 at [81] (CA).

31

Mabo v State of Queensland (No 2) (1992) 175 CLR 1 at 203–​204.

32

Cf Amankwah, “Is the Limit of the Equitable Doctrine of Fiduciary Liability Determinable?” (1996) 3 JCULR 102 (who calls for a modified fiduciary jurisprudence to deal with the government-​indigenous citizen relationship using as an illustration the fiduciary principle in the former British West Africa).

33

Guerin v The Queen (1984) 13 DLR (4th) 321 at 349 per Wilson J, at 383 per Dickson J; A (C) v Critchley (1999) 166 DLR (4th) 475 at 499–​500 per McEachern CJBC; Elder Advocates of Alberta Society v Alberta [2011] 2 SCR 261 at [40] per McLachlin CJ.

34

See New Zealand Mäori Council v Attorney-​General [1987] 1 NZLR 641 (where the Court of Appeal held that the principles underlying the Treaty of Waitangi created an enduring relationship of a fiduciary nature akin to a partnership, each party accepting a positive duty to act in good faith, fairly, reasonably and honourably towards the other, notwithstanding various differences of opinion regarding the exact content of these principles); Te Runanga o Wharekauri Rekohu Inc v Attorney-​General [1993] 2 NZLR 301 at 304–​306 (CA); Lanning, “The Crown-​Mäori Relationship: The Sphere of a Fiduciary Relationship” (1997) 8 Auck LR 445. Cf Paki v Attorney-​General [2009] 1 NZLR 72 [affd Paki v Attorney-​General [2011] 1 NZLR 125; Paki v Attorney-​General [2015] 1 NZLR 67] (where Harrison J rejected the fiduciary claim arising out of a Mäori claim for a beneficial interest in a river bed because, inter alia: (1) the applicable statutory structure vested rights in Mäori land owners and recognised their legal autonomy, such that “[t]‌he Crown could not be subject to a paternalistic duty to advise the original owners about whether or not to exercise their autonomous power of sale and if so on what terms” (at [121]); and (2) given the Crown’s freedom to deal with the original land owners, it was entitled to act in its own interests, so that “[t]he absence of an obligation of absolute or single-​minded loyalty to the vendor is fatal” (at [122]); Guerin was distinguished on the ground that the Parliament in that case had conferred on the Crown a statutory discretion to decide what was in the Indians’ best

156 [5.50] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

Government and the Public Trust  Chapter  5

one.35 In any case, New Zealand courts ostensibly proceed by analogy rather than a sui generis approach.36 And merely because the parliament has enacted particular legislation to provide for the welfare of indigenous persons is not sufficient to attract fiduciary obligations; otherwise, these would ensue in any instance where protective statutory provision is made for a class of persons.37 In the first major native title case subsequent to Mabo, Wik Peoples v Queensland,38 only Brennan CJ addressed the issue of fiduciary duties. It was argued that the Crown owed a fiduciary duty to indigenous inhabitants of land subject to pastoral leases arising from the vulnerability of native title, the Crown’s power to extinguish it and the position occupied for many years by the indigenous inhabitants vis-​à-​vis the Queensland Government. Brennan CJ rejected this argument on the following basis:39

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These factors do not by themselves create some freestanding fiduciary duty. It is necessary to identify some action or function the doing or performance of which attracts the supposed fiduciary duty to be observed. The doing of the action or the performance of the function must be capable of affecting the interests of the beneficiary and the fiduciary must have so acted that it is reasonable for the beneficiary to believe and expect that the fiduciary will act in the interests of the beneficiary … to the exclusion of the interest of any other person or the separate interest of the beneficiary.

The Chief Justice then noted that the exercise of statutory powers characteristically affects the rights or interests of individuals for better or worse, and if the exercise of a discretionary power must adversely affect the rights or interests of individuals, “it is impossible to suppose that the repository of the power shall so act that the beneficiary might expect that the power will be exercised in his or her interests”.40 He further noted that the power of alienation conferred by statute was inherently inconsistent with the notion that it should be exercised as agent for or on behalf of the indigenous inhabitants of the land in question, and so there was no foundation for imputing to the Crown a fiduciary duty governing the exercise of that power. This, in his Honour’s opinion, served to deny the further argument that the court should impose a remedial constructive trust on the Crown’s reversionary interest in the land, as a court cannot impose a constructive trust without a proper conceptual foundation for it.41 [5.60]  The judgment of Brennan CJ in Wik42 shows the difficulty in finding fiduciary duties

merely from the relative position of government and citizen. As noted earlier (see [5.10]), what creates this difficulty is that a representative government must act in the interests of the people as a whole, inherent in which is the notion that an action cannot be beneficial to all.43 In interests, which, when coupled with a discretionary power, gave rise to fiduciary duties, and there was no conflict of interest, as the Crown was representing the tribe’s interests in dealing with third parties (at [137], [138])). 35

See, for example, Proprietors of Wakatu v Attorney-​General [2017] 1 NZLR 423 at [366] per Elias CJ, at [784] per Arnold and O’Regan JJ (in the context of assumption of responsibility by the Crown).

36

New Zealand Mäori Council v Attorney-​General [2008] 1 NZLR 318 at [81] (CA).

37

See Collard v State of Western Australia (No 4) [2013] WASC 455 at [1172], [1173] per Pritchard J.

38

Wik Peoples v Queensland (1996) 187 CLR 1.

39

Wik Peoples v Queensland (1996) 187 CLR 1 at 95–​96.

40

Wik Peoples v Queensland (1996) 187 CLR 1 at 96.

41

Wik Peoples v Queensland (1996) 187 CLR 1 at 97.

42

See also the judgment of Dawson J in Mabo v State of Queensland (No 2) (1992) 175 CLR 1 at 164–​170.

43

Collard v State of Western Australia (No 4) [2013] WASC 455 at [1177] per Pritchard J (noting that the alleged general fiduciary duty to act in the best interests of aboriginal people “failed to grapple with the implications of the assumption of such a general and undefined duty by a State in a pluralist society where different vulnerable groups need access to the same pool of resources —​financial and otherwise —​which the State may be able to make available”, especially as the position of an executive government is “quintessentially concerned with balancing competing interests”).

[5.60]  157 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:20.

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Equity and Trusts in Australia

fact, on the trust analogy mentioned earlier (see [5.15]), the trustee’s duty of impartiality (see [22.120]–​[22.170]) may actually militate against a government affording special protection to certain classes of the community. As the Canadian and New Zealand case law shows, if a statutory instrument (on the trust analogy, the trust instrument) evidences a specific governmental concern for a prescribed class of person in the community (a class of beneficiaries), then the existence of fiduciary duties in favour of that class of person may prove easier to support. There is the further difficulty in such cases of identifying the clear duty the Crown has allegedly breached, as well as its specific incidents. For example, in Bodney v Westralia Airports Corporation Pty Ltd,44 another extinguishment of native title case, breach of fiduciary duty by the Crown was pleaded in an attempt to secure a constructive trust over the land. The claim was based mainly upon an alleged general obligation, assumed by the Crown at and following European settlement, to protect indigenous people. This obligation, coupled with a power to injure the interests of indigenous people (by granting land and thereby extinguishing native title), was argued to give rise to a fiduciary duty that was breached where title to land was granted or assumed by the Crown without consultation with, or regard to their interests of, indigenous people who may have had rights in relation to it. Lehane J expressed particular difficulty with the level of generality at which the facts were pleaded, noting that the question whether fiduciary duties arise is usually decided with “regard to the particular circumstances of particular relationships, or particular dealings, between particular people”.45 Having considered the relevant Australian cases, his Honour accepted that circumstances could arise in which the Crown could owe fiduciary duties to particular indigenous people in relation to the alienation of land over which they hold native title. But the generality of the claim in question, viewed in the context of Australian case law denying fiduciary status to prescriptive duties (see [4.15]), led him to reject the claim.46 Similar reasoning may support the rejection of fiduciary claims for compensation arising out of the “stolen generation” litigation, arising out of the forced removal of part-​Aboriginal children in 1940s and 1950s from their families to institutions. These cases, moreover, may be barred on the grounds that fiduciary duties cannot modify the operation or effect of a statute that permitted or sought to regulate the conduct alleged to constitute the fiduciary breach,47 and that claims of this kind are more properly within the purview of the duty of care imposed by tort law: see [4.315].

44

Bodney v Westralia Airports Corporation Pty Ltd (2000) 109 FCR 178.

45

Bodney v Westralia Airports Corporation Pty Ltd (2000) 109 FCR 178 at [50].

46

Bodney v Westralia Airports Corporation Pty Ltd (2000) 109 FCR 178 at [66].

47

See Collard v State of Western Australia (No 4) [2013] WASC 455 at [1179] per Pritchard J (noting that the fiduciary duties alleged to have been owed by the State to aboriginal people “would overlap to a very considerable extent with the statutory powers and duties of those officers under the legislation”, and so equity would not intervene “to impose fiduciary duties in addition to the statutory duties to which those officers were already subject”); Paki v Attorney-​General [2015] 1 NZLR 67 at [190]–​[196] per McGrath J.

158 [5.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Chapter 6

Confidential Information NATURE AND JURISDICTIONAL BASIS [6.05] A confidence is formed when one party (“the confider”) imparts to another (“the

confidant”) private or secret matters on the express or implied understanding that the communication is for a restricted purpose. In these circumstances, equity will restrain the confidant from making unauthorised use of the information and, if need be, hold her or him accountable for any profits acquired, or liable for any losses incurred, by that improper use. This is because the law recognises that “it is the privilege of any person who possesses information to keep that information confidential”.1 Jurisdiction

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[6.10]  The confidentiality of information can be, and commonly is, protected by the common

law, usually by way of contractual stipulation. Statute may also prescribe that certain information is to be confidential. Yet courts have recognised that, independently of any right at law, a court of equity has an original, inherent and independent jurisdiction to prevent the violation of a confidence.2 Thus equity can grant relief against an actual or threatened abuse of confidential information, though not involving any tort, breach of express or implied contractual provision, wider fiduciary duty, copyright or patent right. At the same time, where information is adequately protected at common law or by statute, there is no need for equity to intervene. The equitable obligation of confidence had its origin in circumstances giving rise to a trust or fiduciary obligation (see [P.145]) regarding the information in question.3 This explains why judges have viewed the jurisdiction as based on principles of good faith4 and fair dealing with the work of another,5 such that a confidant should not be allowed to take unfair advantage of the information confided6 or fraudulently abuse the trust reposed in her or him. There is, also, an increasing judicial trend to justify equitable intervention on the ground of proscribing conduct

1

Johns v Australian Securities Commission (1993) 178 CLR 408 at 426 per Brennan J.

2

Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 211–​212 per Lord Greene MR; AB Consolidated Ltd v Europe Strength Food Co [1978] 2 NZLR 515 at 520–​521 per Woodhouse J (CA); Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 50–​52 per Mason J; Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 587–​591 per Binnie J.

3

Schering Chemicals Ltd v Falkman Ltd [1982] 1 QB 1 at 27 per Shaw LJ; David Syme & Co Ltd v GMH Ltd [1984] 2 NSWLR 294 at 309 per Samuels JA; Fractionated Cane Technology Ltd v Ruiz-​Avila [1988] 1 Qd R 51 at 62 per McPherson J.

4

Fraser v Evans [1969] 1 QB 349 at 361 per Lord Denning MR; Foster v Mountford and Rigby Ltd (1976) 14 ALR 71 at 75 per Muirhead J; G v Day [1982] 1 NSWLR 24 at 34 per Yeldham J.

5

Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104 at 119 per Bowen CJ in Eq.

6

Seager v Copydex Ltd [1967] 1 WLR 923 at 931 per Lord Denning MR; Attorney-​General (UK) v Wellington Newspapers Ltd [1988] 1 NZLR 129 at 178 per McMullin J.

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Equity and Trusts in Australia

against conscience (that is, unconscionable conduct).7 If this accurately explains equitable intervention to protect confidentiality, the doctrine may be going from its fiduciary (trust) roots, towards equitable doctrines, such as estoppel, which are grounded in the concept of unconscionability. It may supply a basis for expansion and flexibility unrestricted by set requirements. It is perhaps unsurprising that most of the references to unconscionable conduct in this context are found in cases of surreptitiously obtained confidential information (see [6.265]–​[6.275]) or involving an attempt to protect privacy (see [6.110]–​[6.135]), where an unyielding application of the requirements of the doctrine of breach of confidence has proven problematic due to the lack of any pre-​existing trust or confidential relationship between the parties.8 [6.15]  Whatever the fundamental basis for equity’s intervention, the importance of the equi-

table jurisdiction is twofold: it affords a ground for relief in circumstances where no or limited common law or statutory rights exist; and it opens the door to equitable remedies. Equity’s confidential information jurisdiction may coexist but is not conterminous with statutory protections for intellectual property.9 Information protected by equity may be in written or verbal form;10 an action for breach of copyright, conversely, protects not the information itself but its mode of expression, whether in written or pictorial form. So if, for example, the expression of ideas, schemes, systems or methods is not copied, there can be no infringement of copyright,11 but there may be a breach of confidence.12 The law of confidential information can also be distinguished from the law of patents in that the information in question need not be novel, merely private or not in the public domain.13 Patent law, moreover, grants a statutory temporal monopoly premised on the public disclosure of the specification rather than the maintenance of its secrecy. Elements

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[6.20] Australian courts have accepted the approach stated by Megarry J in Coco v A  N

Clark (Engineers) Ltd14 to identify the three elements upon which the equitable duty of confidence is based, namely that: 7

See, for example, Stephens v Avery [1988] Ch 449 at 456 per Sir Nicholas Browne-​Wilkinson VC; Titan Group Pty Ltd v Steriline Manufacturing Pty Ltd (1990) 19 IPR 353 at 376 per O’Loughlin J; Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679 at 692 (FC(FCA)); Sullivan v Sclanders (2000) 77 SASR 419 at 424 per Gray J; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 227 per Gleeson CJ, at 272 per Kirby J; Matthews v Clifton (2014) 99 ACSR 265 at [79] per White J.

8

Cf Birch, “Breach of Confidence: Dividing the Cause of Action Along Proprietary Lines” (2007) 81 ALJ 338 (who argues that the tension between a focus on conscionable conduct as foundation for the doctrine, as compared to a proprietary foundation, should be addressed by reference to two types of information that are protected by breach of confidence: splitting into two causes of action, one focusing on proprietary information (aligned with trade secrets; information that has an inherent wealth-​ generating capacity: see [6.30]–​[6.85]), and the other on protecting relationships of trust and confidence).

9

See Dal Pont, Law of Confidentiality (LexisNexis Butterworths, 2015), [3.23]–​[3.33].

10

Printers and Finishers Ltd v Holloway [1965] RPC 239 at 255 per Cross J.

11

Hollinrake v Truswell [1894] 3 Ch 420 at 427 per Lindley LJ; Autodesk Inc v Dyason (1992) 173 CLR 331 at 344 per Dawson J.

12

Admar Computers Pty Ltd v Ezy Systems Pty Ltd (1997) 38 IPR 659 at 670–​671 per Goldberg J. This is especially so in the context of confidential information used as to confer upon the confidant a head start or springboard in a commercial venture: see [6.40], [6.45].

13

AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 at 521 per Woodhouse J (CA); Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (2008) 78 IPR 262 at [89]–​[92] per Gordon J. However, unlike a patentee, the confider of a trade secret can neither exclude a person who independently invents or discovers the subject matter of the secret from making use of publicly available information, nor prevent a person from attempting to discover and subsequently exploiting the secret through reverse engineering: see [6.45].

14

Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 47, cited with approval in Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 51 per Mason J.

160 [6.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

• the information be confidential; • the information was imparted in circumstances importing an obligation of confidence; and • there has been an unauthorised use of that information. The first two elements are not always independent of one another; circumstances in which information is communicated may dictate the confidentiality of the information: see [6.170]. Moreover, on occasions where the equitable doctrine has been held to relieve against what are ostensibly invasions of privacy (see [6.110]–​[6.135]) and the securing of confidential information through reprehensible means (see [6.265]–​[6.275]), there is ordinarily no actual communication of that information and so the second element has by and large been ignored. Each element is nonetheless addressed separately below.

CONFIDENTIALITY

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[6.25] Information that is confidential in law is not confined to words; it can encompass

information in a pictorial, photographic,15 video16 or electronic17 form. Whatever its form, though, confidentiality is premised upon it not being in the public domain or common knowledge,18 sometimes phrased in terms of whether or not the information is generally accessible.19 Information is confidential, it is said, if “it is available to one person (or a group of people) and not generally available to others, provided that the person (or group) who possesses the information does not intend that it should become available to others”.20 If information is a matter of public knowledge or notoriety, no amount of swearing to secrecy can impose an obligation of confidence that equity will enforce.21 Information can be characterised as public knowledge even though it is notorious only in a particular industry or profession.22 No formal standards exist, however, that apply to the mode in which information must be expressed so as to be confidential. Aside from judicial remarks that equity has set a relatively low threshold on what kinds of information are capable of constituting the subject matter of a breach of confidence,23 perhaps the most that can be said is that different types of information may be subject to varying requirements in so far as the issue of confidentiality is concerned. Relief for breach of confidence is often sought in the context of commercial and technical information, although equity also protects personal confidences and governmental information. It cannot be assumed that these classes of information never intersect. For instance, personal information, especially when related to a celebrity, may have a commercial aspect.24 The incidents of confidentiality relating to each of these types of information are discussed below. 15

See, for example, Campbell v MGN Ltd [2004] 2 AC 457 (discussed at [6.110]).

16

See, for example, Kwok v Thang [1999] NSWSC 1034 (discussed at [6.80]); Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 (discussed at [6.270]).

17

See, for example, CA Inc v ISI Pty Ltd (2012) 201 FCR 23 at [374], [375] per Bennett J (computer program); IPC Global Pty Ltd v Pavetest Pty Ltd (2017) 122 IPR 445 (source code for computer program).

18

Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215 per Lord Greene MR; Johns v Australian Securities Commission (1993) 178 CLR 408 at 460–​461 per Gaudron J, at 475 per McHugh J.

19

CF Partners (UK) LLP v Barclays Bank plc [2014] EWHC 3049 (Ch) at [124] per Hildyard J.

20

Douglas v Hello! Ltd (No 3) [2006] QB 125 at [55] per Lord Phillips MR.

21

Mense v Milenkovic [1973] VR 784 at 801 per McInerney J.

22

O’Brien v Komesaroff (1982) 150 CLR 310 at 326 per Mason J.

23

See, for example, Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 609–​610 per Binnie J; Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (2008) 78 IPR 262 at [89] per Gordon J.

24

See, for example, OBG Ltd v Allan [2008] AC 1, discussed at [6.115].

[6.25]  161 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Equity and Trusts in Australia

Commercial or technical information

“Trade secrets” [6.30]  In the context of confidential commercial or technical information, courts often use

the terminology “trade secret”. Yet “trade secret”, at least in Australian law, is no more than a synonym for a commercial confidence;25 it introduces no new concepts let alone a new area of law. So information that can be described as a “trade secret” is protected by equity, though not necessarily exclusively. Whether or not information is a trade secret rests on the facts of each case. That a person specifies certain information to be a “trade secret” does not by itself make it so,26 although a court may be disinclined to rule that information is not confidential if parties have taken the trouble to say that it is.27 That the concept of a “trade secret” largely exhausts the general law’s (non-​contractual) protection of confidential information in the United States has not prevented judges reciting the relevance of the following factors emanating from the American Restatement of Torts28 in Anglo-​Australian law:29 • the extent to which the information is known outside the plaintiff’s business; • the extent to which the information was known by employees and others involved in the business; • the extent of measures taken by the plaintiff to guard the secrecy of the information; • the value of the information to the plaintiff and to its competitors; • the amount of effort or money expended by the plaintiff in developing the information; and

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• the ease or difficulty with which the information could be properly acquired or duplicated by others. These factors —​which target both the nature of the information itself and the measures taken to preserve its confidentiality —​are no more than lines of inquiry directed to the question whether, in the circumstances, information is properly seen as confidential. In Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd,30 for example, Gowans J held that details of the design, construction and operation of a machine for the production of household rubber gloves were capable of constituting confidential information. The plaintiff had, to this end, gone to some length to ensure that these details would remain private through rules against the admission of unauthorised persons into its factory and express communication to its employees that these details were not to be disclosed to persons outside the company. This highlights the broader point that the precautions or measures to preserve the secrecy of information —​in an era of electronic information storage and communication extending beyond

25

Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 at 46 per Gowans J; Secton Pty Ltd v Delawood Pty Ltd (1991) 21 IPR 136 at 149 per King J.

26

Drake Personnel Ltd v Beddison [1979] VR 13 at 20 per Anderson J.

27

Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 333 per Kirby P; Minister for Mineral Resources v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 at 409 per Young J.

28

American Law Institute, Restatement of Torts, 1939, §757 cmt b (since superseded).

29

See, for example, Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 at 50 per Gowans J; Thomas Marshall (Exports) Ltd v Guinle [1979] Ch 227 at 248 per Megarry VC; Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 334 per Kirby P; Lansing Linde Ltd v Kerr [1991] 1 All ER 418 at 425 per Staughton LJ; Skids Programme Management Ltd v McNeill [2013] 1 NZLR 1 at [80] per Asher J.

30

Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37.

162 [6.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

the merely physical31 —​speak both to whether the confidant did or should have considered the information to be confidential, and ultimately whether it is confidential in law. Conversely, the absence of any such precautions or measures, in the face of information not in its very nature confidential, presents a hurdle to a claim of confidentiality.32 [6.35] Importantly, so far as the law of confidentiality is concerned, the legal concept of

a “trade secret” is not confined to secret formulae for the manufacture of products; it can include commercial information, such as customer names that, if disclosed to a competitor, would cause real or significant harm to the confider.33 An “idea” or “concept” is capable of being a trade secret if it exhibits a significant element of originality or novelty not already in the realm of public knowledge.34 Although most such cases involve ideas to be used on television, radio or films,35 the principle clearly extends to industrial and commercial ideas.36 A bare idea, goal, purpose or possibility, as opposed to some novel means of achieving it, is not a trade secret.37 Novelty, however, by itself is not the relevant determinant of confidentiality —​ rather, the information must not be in the public domain —​and so cannot be equated to the concept and role of novelty in patent law.38

“Head start” or “springboard” notion

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[6.40]  The typical case of unauthorised use of commercial or technical confidential informa-

tion is where a confidant uses the information for its own purposes or profit. A seminal case is Saltman Engineering Co Ltd v Campbell Engineering Co Ltd.39 The respondents, requested to make leather punches as subcontractors for the appellant, were given drawings of tools for their manufacture on the basis that they would use them only for the construction of punches on the appellant’s instructions. The respondents nonetheless manufactured a large number of punches from the drawings on their own account. The English Court of Appeal noted that, although no contract existed between the parties, a cloak of confidentiality covered the drawings because, to the respondents’ knowledge, their possession of the drawings was for a limited purpose. Lord Greene MR commented:40 What the [respondents] did … was to dispense in certain material respects with the necessity of going through the process which had been gone through in compiling these drawings, and thereby save themselves a great deal of labour and calculation and careful draughtsmanship. No doubt, if they had taken the finished article, namely, the leather punch, which they might have bought in a shop, and given it to an expert draughtsman, that draughtsman could have produced the necessary drawings for the manufacture of machine tools required for making

31

See Good, “Trade Secrets and the New Realities of the Internet Age” (1998) 2 Marq Intell Prop L Rev 51 at 91–​93.

32

See, for example, Sports Data Pty Ltd v Prozone Sports Australia Pty Ltd (2014) 316 ALR 475.

33

Lansing Linde Ltd v Kerr [1991] 1 All ER 418 at 425–​426 per Staughton LJ, at 435 per Butler-​Sloss LJ.

34

Fractionated Cane Technology Ltd v Ruiz-​Avila [1988] 1 Qd R 51 at 62–​63 per McPherson J; Secton Pty Ltd v Delawood Pty Ltd (1991) 21 IPR 136 at 156–​157 per King J.

35

See, for example, Talbot v General Television Corporation Pty Ltd [1980] VR 224, discussed at [6.350].

36

See, for example, Seager v Copydex Ltd [1967] 1 WLR 923, discussed at [6.355].

37

See, for example, De Maudsley v Palumbo [1996] FSR 447 (claim for confidentiality for an idea for a nightclub denied); Abrahams v Biggs [2011] FCA 1475 (idea for a device that prevented bed bugs from accessing beds, conveyed in global terms in a casual conversation, held not to meet the requirement of confidentiality: at [68]–​[71] per Jessup J).

38

Krueger Transport Equipment Pty Ltd v Glen Cameron Storage & Distribution Pty Ltd (2008) 78 IPR 262 at [89]–​[92] per Gordon J.

39

Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203.

40

Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215.

[6.40]  163 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Equity and Trusts in Australia

that particular finished article. In at any rate a very material respect they saved themselves that trouble by obtaining the necessary information either from the original drawings or from the tools made in accordance with them. That, in my opinion, was a breach of confidence.

Saltman Engineering illustrates what has been termed the “springboard” or “head start” notion.41 Misuse of confidential information gives the confidant a “springboard” or “head start” in savings of time and cost. In line with Lord Greene’s remarks, that the elements forming the product or process in issue are in the public domain does not mean that the combination that forms the product or process is likewise public. So simply because, with sufficient time, labour and expense, the confidant could have ascertained the correct combination is no defence to a breach of confidence, as he or she has nonetheless obtained a time and cost advantage.42 Similarly, merely that a confidential process or combination is simple will not prevent it from being protected;43 a simple solution may, after all, be self-​evident once discovered. What makes a process confidential is that the confider has used her or his brain, thereby producing a result that can only be produced by someone who has gone through that process.44 It follows that a person who wishes to design a product without misusing confidential information “must proceed through an independent design sequence and not use confidential information as a springboard to jump through that sequence”.45 The same may be said regarding allegedly confidential information concerning a business model.46

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[6.45]  The law of confidentiality does not, however, preclude successful attempts to reverse

engineer where no confidential information has been misused as a springboard or head start. For instance, for a product on the market, that its designer has coded or encrypted information pertaining to the product is no bar in equity (as contrasted with patent law) to a person with the requisite de-​coding skills using the de-​coded information for her or his own purposes. The mere fact of encryption does not make what is encrypted confidential, or dictate that it is necessarily taken to have received in confidence.47 The position is otherwise in a case where the unencrypted information is stolen: see [6.265]–​[6.275].

Distinguishing “know-​how” from confidential information [6.50] “Know-​how”, distinguishable from confidential information, is a person’s accumu-

lated knowledge, skill and experience in a particular field derived, whether partly or otherwise, by reason of a relationship that may be a confidential one, typically an employment relationship. Equity does not protect “know-​how” even if it was imparted under a confidential

41

See Dal Pont, Law of Confidentiality (LexisNexis Butterworths, 2015), [5.22]–​[5.29].

42

Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 at 408 per Goldberg J; Forkserve Pty Ltd v Jack and Aussie Forklift Repairs Pty Ltd (2001) 19 ACLC 299 at 317 per Santow J; RLA Polymers Pty Ltd v Nexus Adhesives Pty Ltd (2011) 280 ALR 125 at [45] per Ryan J; Zomojo Pty Ltd v Hurd (No 2) (2012) 299 ALR 621 at [191] per Gordon J.

43

AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 at 521 per Woodhouse J (CA).

44

Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 215 per Lord Greene MR; Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 47 per Megarry J; LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 71–​72 per Sopinka J; Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 374–​375 per Laddie J.

45

Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 at 408 per Goldberg J.

46

See, for example, Ezystay Systems Pty Ltd v Link 2 Pty Ltd [2015] NSWSC 1105 (where although some of the relevant information pertaining to the business model was not confidential (by reason of being accessible by those who deal with the business), in forming part of a broader business model, the putting together of which was the product of time and cost, the broader model was held to constitute confidential information).

47

Mars UK Ltd v Teknowledge Ltd (1999) 46 IPR 248 at 256–​257 per Jacob J.

164 [6.45] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

badge.48 So in Stephenson Jordan & Harrison Ltd v MacDonald & Evans,49 an employee of the plaintiff published a book outlining the principles of “management engineering”, being the business in which the plaintiff was engaged. Information in the book was familiar only to skilled management engineers and their customers. The English Court of Appeal rejected the plaintiff’s claim that the book contained confidential information, characterising its contents as evidencing a quality or capability resulting from experience, which a person is entitled to use for her or his own purposes and advancement.

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[6.55] The distinction between confidential information and know-​how is not always easy

to draw, chiefly because it operates on a continuum.50 The challenge, to this end, is to balance two competing public policy considerations. One targets a need to protect trade secrets,51 whereas the other acknowledges that persons should be free to use skill, experience and know-​ how acquired in serving a former employer in legitimate competition.52 That information is jealously guarded by the employer, is made available only to employees in positions of seniority and cannot without considerable risk be acquired by others, suggests its disclosure for a limited purpose. Likewise where the employee is clearly told that the employer regards information as confidential, or where the usages of the industry or the very nature of the information support an assertion of confidentiality. So aside from a contractual provision attaching confidentiality, the employment relationship may attract a duty to treat information received within its parameters confidentially.53 In Wright v Gasweld Pty Ltd,54 Samuels JA endorsed the following classification of information obtained by reason of employment: (a) information that because of its triviality or public availability cannot be regarded as confidential; (b) information an employee must treat as confidential until the termination of employment, but which once learned becomes part of her or his skill and knowledge (“know-​how”); and (c) specific trade secrets that cannot lawfully be used other than for the employer’s benefit. Equity protects the third category; although it may also extend protection in the second category within the duration of the employment, there is little need for this protection to the extent that the confidentiality obligation is governed by the employee’s implied contractual duty of fidelity (as to which see [4.285]).55 Employers wishing to protect information in the second category beyond the tenure of the employment 48

Amway Corporation v Eurway International Ltd [1974] RPC 82 at 85–​86; O’Brien v Komesaroff (1982) 150 CLR 310 at 328 per Mason J; Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [43] per Hodgson JA. See Stewart, “Confidentiality and the Employment Relationship” (1988) 1 Aust J of Labour Law 1 at 8–​12.

49

Stephenson Jordan & Harrison Ltd v MacDonald & Evans (1951) 69 RPC 10.

50

Europa International Pty Ltd v Child [2016] NSWSC 923 at [123] per McDougall J.

51

Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 714 per Lord Shaw; Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37 at 47 per Gowans J; Riteway Express Pty Ltd v Clayton (1987) 10 NSWLR 238 at 240 per McLelland J; Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 329 per Gleeson CJ; TV Shopping Network Ltd v Scutt (1998) 43 IPR 451 at 459–​460 per Young J; Barton Insurance Brokers Ltd v Irwin (1999) 170 DLR (4th) 69 at 88 (CA(BC)); Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [41], [42] per Hodgson JA.

52

Stenhouse Australia Ltd v Phillips [1974] AC 391 at 400 per Lord Wilberforce; Balston Ltd v Headline Filters Ltd [1987] FSR 330 at 351–​352 per Scott J.

53

Herbert Morris Ltd v Saxelby [1916] 1 AC 688 at 714 per Lord Shaw; McPherson v Moiler (1920) 20 SR (NSW) 535 at 540 per Harvey J; Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 211 per Lord Greene MR; Magna-​Alloys & Research Pty Ltd v Ten-​Haaf [1978] Tas SR 136 at 151–​153 per Green CJ; Pioneer Concrete Services Ltd v Galli [1985] VR 675 at 711 (FC).

54

Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 339. See also at 333–​334 per Kirby P. This was the classification advanced by Goulding J at first instance in Faccenda Chicken Ltd v Fowler [1984] ICR 589 at 598–​599.

55

Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 370–​371 per Laddie J; Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [32] per Hodgson JA; Stewart, “Confidentiality and the Employment Relationship” (1988) 1 Aust J of Labour Law 1 at 19–​21.

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Equity and Trusts in Australia

must do so via an express contractual term56 that is not an unreasonable restraint of trade.57 The foregoing therefore speaks of the importance of identifying the scope of what may constitute a “trade secret” in any given factual scenario. Sales or price information is unlikely to exhibit the degree of confidentiality that merits protection by equity post-​termination of employment. Information of this kind is not, in any event, ordinarily communicated in confidential circumstances, but often necessarily acquired by employees, easily committed to memory and rarely the sole province of senior employees.58 The same cannot necessarily be said of customer or client lists. Although “taken in isolation … names or addresses remembered by the employee, are not … protected following termination of employment”,59 a consistent line of authority says that departing employees cannot take with them or deliberately memorise such information for the purpose of using it in competition with the former employer.60 As explained by Palmer J in Digital Pulse Pty Ltd v Harris:61 When the employment ceases, the employee is free to compete with the employer unless subject to a valid contractual restraint on competition. The employee may take away and utilise the benefit of personal relationships built up with particular customers of the former employer and may solicit any customer whom the employee can recall without the aid of a list taken from the former employer and without deliberate memorisation of a customer list. The employee may not, however, use for his or her own benefit confidential information of the former employer, whether to solicit business from the former employer’s customers or to carry out work for such customers even if unsolicited.

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For example, in Freedom Motors Australia Pty Ltd v Vaupotic,62 an employee of the plaintiff established a competing business of converting motor vehicles for wheelchair access. The

56

Courts are disinclined to imply a term in this context, given that restraint of trade clauses are prime facie void, except to the extent that they are reasonable in the circumstances: see Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [34], [35] per Hodgson JA.

57

Telephonic Communicators International Pty Ltd v Motor Solutions Australia Pty Ltd (2004) 62 IPR 323 at [48] per Selway J. This is contrary to the finding of the Court of Appeal in Faccenda Chicken Ltd v Fowler [1987] Ch 117 at 137 that held that only information in the third category could be protected or restrained after termination of employment by express covenant appropriately designed for such purposes. Yet by their very nature, trade secrets and the like are protected by the equitable doctrine of confidentiality and therefore do not necessarily require express contractual protection. Where an employer seeks to restrain the disclosure and/​or use of information outside the boundaries of equitable protection, it is in these circumstances that contractual restraints are necessary. In this respect, Faccenda Chicken does not represent the law in Australia: see Wright v Gasweld Pty Ltd (1991) 22 NSWLR 317 at 339–​341 per Kirby P. On restraints of trade in this context see Stewart, “Confidentiality and the Employment Relationship” (1988) 1 Aust J of Labour Law 1 at 12–​17.

58

Half Court Tennis Pty Ltd v Seymour (1980) 53 FLR 240 at 256 per Dunn J; Faccenda Chicken Ltd v Fowler [1987] Ch 117 at 140 (CA).

59

I F Asia Pacific Pty Ltd v Galbally (2003) 59 IPR 43 at [227] per Dodds-​Streeton J. See also Drake Personnel Ltd v Beddison [1979] VR 13 at 22–​23 per Anderson J (remarking that an employer cannot “place an embargo upon an employee by compiling lists which are a mixture of clients and non-​clients; a fortiori, when the non-​client content greatly exceeds the client content”).

60

Robb v Green [1895] 2 QB 1 at 13 per Hawkins J; Ecrosteel Pty Ltd v Perfor Printing Pty Ltd (1996) 37 IPR 22 at 33–​36 per Cowdroy AJ (customer records and information); Telstra Corporation Ltd v First Netcom Pty Ltd (1997) 148 ALR 202 at 208 (FC(FCA)); International Entertainment New Zealand (No 2) Ltd v Lewis (1998) 42 IPR 162 at 164 per Bryson J (records analogous to customer lists); N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 157 per Debelle J (FC) (discussed at [6.55]); Halliday & Nicholas Insurance Brokers Pty Ltd v Corsiatto (2001) 11 ANZ Ins Cas ¶61-​505 at 75,851 per Handley JA, with whom Spigelman CJ and Heydon JA concurred; Forkserve Pty Ltd v Jack and Aussie Forklift Repairs Pty Ltd (2001) 19 ACLC 299 at 317 per Santow J (though the information contained in a teledex book could have been reconstructed from other sources, it contained sufficient details of the plaintiff’s customers to constitute a “modified” customer list); DC Payments Pty Ltd v Next Payments Pty Ltd (2016) 51 VR 151 (master customer list); Isaac v Dargan Financial Pty Ltd [2018] NSWCA 163 at [149]–​[157] per Gleeson JA, with whom Bathurst CJ and Beazley P concurred.

61

Digital Pulse Pty Ltd v Harris (2002) 40 ACSR 487 at 491 [revd but not on this point: Harris v Digital Pulse Pty Ltd (2003) 56 NSWLR 298].

62

Freedom Motors Australia Pty Ltd v Vaupotic [2003] NSWSC 506.

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Confidential Information  Chapter  6

evidence revealed that there had been a misuse by the employee of confidential information belonging to the plaintiff. In particular, when the errant employee resigned, he kept on his computer for his own reference various documents confidential to the plaintiff, including information about the plaintiff’s customers. What made the latter especially valuable was that the plaintiff’s customers were few and specialised in number, and whose needs varied. [6.60]  The memorisation issue can create difficulties, as genuine unaided memory of the for-

mer employer’s customers generally falls within employee know-​how.63 (The same may be said of other information easily ingrained by an employee without any overt attempt to memorise).64 That calls are made on some customers of a former employer does not by itself usually substantiate a breach of confidence.65 This distinction is troublesome, for it invites speculation as to the defendant’s motivation. This has led at least one judge to query it, finding “no valid reason why a servant, endowed with a good memory, should be accorded more extensive rights of canvassing his master’s customers than one who is not so blessed”.66 Yet it remains ingrained in the case law, although the extent of the canvassing of a former employer’s clients may provide weighty evidence as to motivation, or even that the former employee has taken an actual customer list.

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[6.65] Customer lists ordinarily retain their confidentiality even if made by the employee

legitimately for the purpose of performing duties as an employee. In N P Generations Pty Ltd v Feneley,67 the respondent, who had been employed by the appellant as manager of its rental business, compiled an address book containing information from customer lists for use in her employment, and a diary of entries related to her employment duties. Debelle J, with whom Williams and Wicks JJ concurred, opined that a customer list is confidential if it is the product of work done by the former employer, or the result of the employer’s labour and experience of the trade.68 As appellant and its employees treated the rent roll as confidential, and it was not available to the public and was plainly of value to the appellant’s business, it represented confidential information. This impacted upon the status of the address book, as appears from the following extract from the judgment:69 The obligation of conscience … has the necessary consequence that, if a departing employee takes with her copies of a list of customers which were initially prepared for legitimate purposes, the departing employee has an obligation to return the copies to her former employer. To hold otherwise would be to make it quite impossible for an employer to uphold the integrity

63

Ormonoid Roofing & Asphalts Ltd v Bitumenoids Ltd (1930) 31 SR (NSW) 347 at 354 per Harvey CJ in Eq; Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272 at [72] per Bryson J. See also Lancashire Fires v S A Lyons & Company Ltd [1996] FSR 629 (where the English Court of Appeal identified as a presumption that information an employee obtains without memorising specific documents can be used by the employee for the benefit of future employers). Cf Wentworth Partners Estate Agents Pty Ltd v Gordony (2007) 60 AILR ¶200-​348 (where the defendant, a former employee of the plaintiff real estate agency, while still employed by the plaintiff emailed to himself a copy of the plaintiff’s rent roll database; this was, according to Young CJ in Eq, evidence of a breach of confidentiality rather than a mere use of memorised know-​how, as “the fact that [the defendant] felt he needed to email himself the list provides some evidentiary material that he was unable to recall the complete list, or alternatively, felt that he might be unable to recall the complete list”: at [44]).

64

See, for example, Europa International Pty Ltd v Child [2016] NSWSC 923 (where a manufacturing method, alleged to be confidential, involved very simple steps and processes, such as to be replicated without too much time or effort, was held to constitute know-​how: at [130], [131] per McDougall J).

65

Forkserve Pty Ltd v Pacchiarotta (2000) 50 IPR 74 at 79 per Young J.

66

SSC & B: Lintas New Zealand Ltd v Murphy [1986] 2 NZLR 436 at 456 per Prichard J.

67

N P Generations Pty Ltd v Feneley (2001) 80 SASR 151.

68

N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 155.

69

N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 157.

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Equity and Trusts in Australia

of the customer list or of any other kind of confidential information. Applying those principles to the names and addresses on this rent roll, those names and addresses could be copied by the respondent into an address book for the purpose of assisting her in the management of the appellant’s business but could not be used for any other purpose. It follows that, on ceasing her employment, she could no longer use her list of names and addresses. In other words, the list of names and addresses were confided to the respondent for a specific and limited use, namely, to enable her to manage the appellant’s rental property business. Once her employment by the appellant ended, she could no longer use that list or any copy of it.

That the address book contained some 30 entries of a personal nature did not relieve the respondent of the obligation to deliver it up once her employment ceased, though she could copy the personal entries. “The fact that the respondent made her own list for her own purposes”, Debelle J remarked, “does not alter the fact that it is a copy of what was contained on the appellant’s list”.70 It was, therefore, illegitimate for her to resort to the address book to supplement her memory. Debelle J viewed the diary differently.71 Although it was a record kept by the respondent in the course, and for the purpose, of her employment, and thus contained some confidential information that also appeared in the rent roll, the information was not compiled from the rent roll. Entries in the diary were prompted by requests that caused the respondent to note an appointment to see a landlord or a landlord’s property. She would undertake other work to ascertain the landlords’ addresses and telephone numbers. Coupled with the fact that the appellant had not required that the diary be confidential, this led Debelle J to rule that the diary contained information that was part of the respondent’s general knowledge, skill and experience, and thus was not confidential information over which the appellant was entitled to lasting protection.

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[6.70] The requirement that the employer establish with specificity the confidential infor-

mation an employee has misused (see [6.215]), coupled with the fluidity between know-​how and confidential information, makes it inadvisable in practice simply to rely on a contractual covenant prohibiting an ex-​employee disclosing “confidential information”. Also, lack of specificity as to the precise nature of the information may evidence an attempt to prevent an employee from making legitimate use of know-​how.72 Beyond a confidentiality clause, it may be preferable to take a contractual undertaking from the employee that he or she will not work for a rival in the trade provided that the length and scope of the restraint is reasonable in the circumstances (a restraint of trade clause).73 This is all the more important given that the modern labour market is knowledge-​based, increasing the likelihood of confidential information created by employees. In turn this makes it more difficult to distinguish information confidential to the employer from that which in a sense “belongs” to the employee.74

70

N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 158.

71

N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 159–​160.

72

Westminster Chemical NZ Ltd v McKinley [1973] 1 NZLR 659 at 667 per Speight J; Lock International plc v Beswick [1989] 3 All ER 373 at 383–​384 per Hoffmann J; Liberty Financial Pty Ltd v Scott (No 3) (2004) 11 VR 621 at [16]–​[18] per Harper J; Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629 at [12] per Harper J.

73

Printers and Finishers Ltd v Holloway [1965] RPC 239 at 256–​257 per Cross J; Littlewoods Organisation Ltd v Harris [1978] 1 All ER 1026 at 1033 per Lord Denning MR; Balston Ltd v Headline Filters Ltd [1987] FSR 330 at 351–​352 per Scott J. Cf Napier, “Confidentiality and Labour Law” in Clarke (ed), Confidentiality and the Law (Lloyd’s of London Press Ltd, 1990), pp 115–​119.

74

See Brooks, “ ‘Fidelity’ in the Post-​ Industrial Age:  Developments in Case Law on Employee Disclosure of Confidential Information” (2002) 28 Mon ULR 126.

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Confidential Information  Chapter  6

Loss of confidentiality [6.75] As information is confidential only if it is not public property and common knowl-

edge, information that was once confidential can lose that protective mantle upon subsequent public awareness of it.75 So aside from any contractual provision to the contrary,76 from the moment that information loses its confidentiality the confidant is no longer obliged in equity to retain its confidentiality. Any equitable relief here is not only unjustified, but futile.77 [6.80]  The foregoing raises the issue of what extent of disclosure or publication of informa-

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tion will deny its confidentiality. Information published to the world at large, or otherwise placed in the public domain (which may include via the internet),78 loses its confidentiality.79 For example, in British Broadcasting Corporation v Harpercollins Publishers Ltd,80 the plaintiff was unsuccessful in its application for an injunction to prevent the actor who played “The Stig” in the television program Top Gear from revealing his identity in a book, as the press coverage relating to that identity had already gone “well beyond speculation”, so that “anyone who would have any interest in knowing the identity of The Stig now knows it”. Obtaining a patent will likewise serve to publicise what may previously have been confidential information about a product or process.81 And product design information may lose its confidentiality once the product is marketed.82 Yet as the equitable doctrine of confidence presupposes a communication of confidential information, its disclosure or publication will not always upset confidentiality. Ipp AJA explained the point in National Roads and Motorists’ Association Ltd v Geeson:83 The mere fact that particular information is of a confidential character does not impose an obligation of absolute confidentiality on every person in possession of it. For example, ordinarily, a director who knows a trade secret of the company would be entitled to discuss that trade secret with appropriate officers of the company. Senior government officers will often be entitled to discuss matters of great secrecy and great national interest with others who are authorised to receive such information. Moreover, circumstances may arise where a person in possession of confidential information is duty bound to disclose it. Each case depends on its own circumstances and in each case there has to be an enquiry into the extent and limits of the obligation of confidentiality that may be imposed on an individual in regard to particular pieces of confidential information in his or her possession.

75

Titan Group Pty Ltd v Steriline Manufacturing Pty Ltd (1990) 19 IPR 353 at 376–​377 per O’Loughlin J.

76

See, for example, Attorney-​General v Blake [2001] 1 AC 268, discussed at [P.60].

77

Westpac Banking Corporation v John Fairfax Group Pty Ltd (1991) 19 IPR 513 at 525 per Powell J. As to futility in the context of injunctive relief, see [31.60].

78

In EPP Australia Pty Ltd v Levy [2001] NSWSC 482 at [20] Barrett J regarded “everything which is accessible through resort to the internet as being in the public domain”, adding that, although not every person has access to a computer connected to an internet, “those barriers are … no more challenging or significant in today’s Australia complete with internet cafes, than those involved in access to a newspaper or television content, both of which should, according to precedent, be seen as involving the public domain”. Cf Australian Football League v The Age Company Ltd (2006) 15 VR 419, discussed in the text.

79

Castrol Australia Pty Ltd v EmTech Associates Pty Ltd (1980) 33 ALR 31 at 48 per Rath J; O’Brien v Komesaroff (1982) 150 CLR 310 at 326 per Mason J; Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 161–​166 per Kirby P; Attorney-​General (UK) v Wellington Newspapers Ltd [1988] 1 NZLR 129 at 175 per Cooke P; Johns v Australian Securities Commission (1993) 178 CLR 408 at 460–​462 per Gaudron J.

80

British Broadcasting Corporation v Harpercollins Publishers Ltd [2011] EMLR 6 at [56] per Morgan J.

81

Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104 at 118–​119 per Bowen CJ in Eq; G v Day [1982] 1 NSWLR 24 at 37 per Yeldham J; ANI Corporation Ltd v Celtite Australia Pty Ltd (1991) AIPC ¶90-​728 at 37,095 per Burchett J.

82

British Franco Electric Pty Ltd v Dowling Plastics Pty Ltd [1981] 1 NSWLR 448.

83

National Roads and Motorists’ Association Ltd v Geeson (2001) 40 ACSR 1 at 6.

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Equity and Trusts in Australia

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So the mere fact that some publication has occurred, or that secrecy is imperfect in relation to a confidential communication, does not in itself deny confidentiality.84 The extent of the publication, and the number and nature of the persons to whom it is circulated, are relevant matters.85 In Kwok v Thang,86 in the context of personal confidences, Austin J held that the publication in Hong Kong of a verbal account of the contents of a covertly taken videotape of the plaintiff did not prevent the plaintiff from enjoining the defendants from making the video available for viewing in a public way, such as by release on the internet. His Honour reasoned that a “prior transitory publication of information, which may not be remembered or discovered by all of those who would be interested in it, does not necessarily defeat an obligation of confidentiality, where what is sought to be restrained is a more permanent and enduring form of disclosure”.87 A point will be reached, though, “when the number of people who know of the information is so widespread that the information could no longer be regarded as confidential”.88 And yet impacting on this may be the nature of the information in question and the medium of its communication. If, for instance, it involves only speculative gossip or innuendo, its widespread disclosure may not necessarily breach confidence pertaining to the true information. The point is illustrated by Australian Football League v The Age Company Ltd,89 where the plaintiff sought to maintain confidential the names of players in its league that had yielded positive drug tests. The claim was defended on the basis, inter alia, that players’ names had been disclosed by anonymous internet “discussion forum” participants. Kellam J ruled that disclosure of this kind did not place the information in the public domain. In so concluding, his Honour was influenced by issues of veracity and accountability regarding the information disclosed, reasoning as follows:90 Obviously there are many users of the internet and an unknown, but no doubt significant, number of users of such web sites … might well have seen the names to which anonymous persons have referred in their postings. However, it is still in the realm of speculation. That is a vastly different proposition from the circumstances of publication of material by a newspaper, television station or other source of dissemination of news and other material such as radio or authorised web sites conducted by such sources. Those sources are accountable for the information they publish and are, to an extent at least, trusted by the public to report material to that public accurately. On the evidence before me the public, and particularly that part of the public who use internet chat rooms have no such expectation of authenticity, veracity or otherwise of the information posted on such websites.

Duration of “springboard” or “head start” [6.85] A confidant remains affected by an obligation of confidence for as long as

labour, time and expense may be required for a member of the public to reproduce the

84

G v Day [1982] 1 NSWLR 24 at 39 per Yeldham J.

85

Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 54 per Mason J; Bacich v Australian Broadcasting Corporation (1992) 29 NSWLR 1 at 8 per Brownie J; Johns v Australian Securities Commission (1993) 178 CLR 408 at 460–​ 462 per Gaudron J, at 475 per McHugh J; European Pacific Banking Corporation v Fourth Estate Publications Ltd [1993] 1 NZLR 559 at 565 per Henry J; CF Partners (UK) LLP v Barclays Bank plc [2014] EWHC 3049 (Ch) at [124] per Hildyard J.

86

Kwok v Thang [1999] NSWSC 1034.

87

Kwok v Thang [1999] NSWSC 1034 at [33].

88

Re Jeffery and Corrections Victoria (2004) 21 VAR 196 at [52] per Morris J (where no breach of confidence was held to have occurred where confidential terms of a settlement placed on the tribunal’s file in error were inspected by a journalist and published to some 40 people, Morris J ruling that “the fact that some 40 odd people have been informed of it does not deny the information of the quality of being confidential information. That number can be contrasted with the number of readers who typically read the Herald Sun each day”: at [52]).

89

Australian Football League v The Age Company Ltd (2006) 15 VR 419.

90

Australian Football League v The Age Company Ltd (2006) 15 VR 419 at [56].

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Confidential Information  Chapter  6

information.91 Its duration is therefore “a question of degree depending on the particular case”,92 although in every case the period of the springboard or head start is “one of limited duration”.93 Yet even if the information that formed the springboard has since become public knowledge, equity can give the confider relief (say by ordering an account of profits) in line with the benefit the confidant has and continues to derive via the illegitimate springboard secured by the misuse of the information.94 Personal confidences [6.90]  Whether a court will protect personal confidences depends on the nature of the com-

munication, and the relationship between confider and confidant, each informed by prevailing notions of public policy.

Nature of the relationship between confider and confidant

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[6.95] The prime example of a relationship in which the court will protect personal con-

fidences is that between husband and wife. The leading case, Duchess of Argyll v Duke of Argyll,95 involved the parties’ well-​publicised divorce by reason of the Duchess’ alleged adultery. In response to the publication of articles by the Duchess relating to the Duke’s personal conduct and financial affairs, the Duke threatened to disclose secrets of the Duchess’ private life, personal affairs and private conduct communicated to him during their marriage. The Duchess secured an interlocutory injunction to prevent its disclosure and publication. Ungoed-​Thomas J characterised the marital relationship as one of the “highest legal consideration”, beyond that of a mere contract, identifying confidentiality as its very essence. To this end, his Lordship opined that, if the policy of the law is to preserve the close confidence and mutual trust between husband and wife, “that policy and the purpose of the jurisdiction would indeed be impaired if subsequent adultery by one spouse, resulting in divorce, were to release the other spouse from obligation to preserve their earlier confidences”.96 That the Duchess had published information of the Duke’s affairs did not bar her claim to equitable relief because, although a person who seeks equity must come with clean hands (see [30.170]–​ [30.180]), such cleanliness should be judged in relation to the relief sought.97 The nature of the Duchess’ publications, said his Lordship, was not of the same level of perfidy as those threatened by the Duke.

91

International Tools Ltd v Kollar (1968) 67 DLR (2d) 386 at 393 per Kelly JA (CA(Ont)); Landmark Underwriting Agency Pty Ltd v Kilborn (2006) 59 AILR ¶200-​284 at [92] per Young CJ in Eq.

92

Franchi v Franchi [1967] RPC 149 at 153 per Cross J.

93

Harrison v Project & Design Co (Redcar) Ltd [1978] FSR 81 at 87 per Graham J. In Terrapin Ltd v Builders’ Supply Co (Hayes) Ltd [1967] RPC 375 at 391 Roxburgh J opined that “a person who has obtained information in confidence is not allowed to use it as a springboard for activities detrimental to the person who made the confidential communication, and springboard it remains even when all the features have been published or can be ascertained by actual inspection by any member of the public”. Although these words suggest that once affected by an obligation of confidence, a confidant is permanently prevented from using the information, even where it is freely available for use by the general public, the courts have not interpreted his Lordship’s words so literally: Potters-​Ballotini Ltd v Weston-​Baker [1977] RPC 202 at 206–​207 per Lord Denning; British Franco Electric Pty Ltd v Dowling Plastics Pty Ltd [1981] 1 NSWLR 448 at 451 per Wootten J; Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 396–​397 per Laddie J.

94

Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 396 per Laddie J.

95

Duchess of Argyll v Duke of Argyll [1967] Ch 302.

96

Duchess of Argyll v Duke of Argyll [1967] Ch 302 at 332. See also In the Marriage of Gibb (1979) 5 Fam LR 694 at 701–​702 per Baker J.

97

Duchess of Argyll v Duke of Argyll [1967] Ch 302 at 332.

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Equity and Trusts in Australia

Not all information communicated within a marital relationship attracts equity’s protection. In the words of Fullagar J, “if a wife says to her husband, ‘I am only 5 feet 1 inch tall’, it would be difficult to imagine circumstances in which that information was given, and where it ought to have been known by the donee that it was given, upon the faith of the matrimonial relationship”.98 Equity, rather, restrains only the disclosure of secrets relating to the private life, personal affairs (which may include financial affairs)99 or private conduct as between spouses, where these are not already in the public domain.100 Changing societal standards may prescribe some parallel duty of confidentiality as between unmarried sexual partners.101 Judges distinguish permanent relationships from fleeting casual encounters, envisaging a greater claim to equitable intervention for the former than the latter.102 This does not mean that equitable protection never extends to personal information outside of a longstanding committed relationship,103 especially with the march towards protection of personal privacy. Ultimately, what may tip the scales is the nature of the information in question: the more personal and private the information —​photographs and video recordings of sexual activity being an egregious illustration104 —​the less important is the closeness of the relationship: see [6.100]. The issue here is really one of personal privacy, which English courts have openly construed as coming with the protection of equity, a development that in Australia awaits definitive judicial pronouncement: see [6.110]–​[6.135].

Nature of the communication [6.100]  Information of a highly personal nature may come under a legally enforceable duty

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of confidence even outside of what the law views as a “confidential” relationship, such as marriage. In this sense, it is the very nature of the information disclosed that carries with it

98

Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 193.

99

See, for example, Imerman v Tchenguiz [2011] Fam 116 (where, in a divorce proceeding, a wife unlawfully obtained information and documents relating to her husband’s financial affairs relevant to an application for ancillary relief, the English Court of Appeal ruled that this amounted to a breach of confidence).

100

Compare, for example, Lennon v News Group Ltd [1978] FSR 573 (no breach of confidence where marriage “secrets” of John Lennon were disclosed because the information was already in the public domain) with AMM v HXW [2010] EWHC 2457 (QB) (where a celebrity secured an injunction prohibiting his ex-​wife from writing about their relationship and claiming that they had a sexual affair after he had remarried).

101

Stephens v Avery [1988] Ch 449 at 454 per Sir Nicholas Browne-​Wilkinson VC.

102

See, for example, A v B plc [2003] QB 195 (where Lord Woolf CJ refused an interim injunction to restrain the publication of a footballer’s transient adulterous relationships with two women). Cf Howarth, “Privacy, Confidentiality and the Cult of Celebrity” [2002] CLJ 264 at 268 (who argues that injunctive relief should have been granted in A v B plc to prevent the unconscionable conduct of the footballer’s sexual partners in selling their stories to the press instead of informing the footballer’s wife directly).

103

See, for example, Kwok v Thang [1999] NSWSC 1034 at [30] per Austin J (who remarked that even a fresh, short-​lived relationship can raise an obligation of confidence, and ordered an interlocutory injunction to restrain the defendants from selling a videotape of the plaintiff, a Chinese pop music star, made in a private room without the plaintiff’s consent); Mosley v News Group Newspapers Ltd [2008] EMLR 20 (where the plaintiff, a well-​known public figure, was reported in the defendant’s newspapers as being involved in scandalous sexual conduct in private; the plaintiff established that this amounted to a breach of confidence, Eady J reasoning that “[t]‌he modern approach to personal privacy and to sexual preferences and practices is very different from that of past generations”, “there is a greater willingness … to accord respect to an individual’s right to conduct his or her personal life without state interference or condemnation” and “it is not for the state or for the media to expose sexual conduct which does not involve any significant breach of the criminal law”: at [125], [127]).

104

See, for example, Giller v Procopets (2008) 24 VR 1 (where the showing the videotapes of sexual activity between unmarried partners constituted a breach of confidence); Wilson v Ferguson [2015] WASC 15 (where the internet publication of explicit images of a former sexual partner shared during the course of a relationship was declared a breach of confidence, Mitchell J noting that “[i]‌ntimate photographs and videos taken in private and shared between two lovers would ordinarily bear a confidential character, and be implicitly provided on condition that they not be shown to any third party”: at [56]).

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Confidential Information  Chapter  6

confidentiality.105 In Stephens v Avery,106 the parties were close friends who freely discussed personal matters on an understanding of confidentiality. The information included details of the plaintiff’s lesbian relationship with a woman who had been killed by her husband. The defendant disclosed this information to a newspaper, in response to which the plaintiff claimed damages. In deciding that the information in question was confidential, Sir Nicholas Browne-​Wilkinson VC rejected the defendant’s submission that there is no confidentiality in tittle-​tattle and gossip. Yet the closeness of the parties’ friendship, and their mutual understanding of confidentiality, can explain Stephens v Avery. In other contexts information pertaining to sexual conduct, especially outside a committed relationship, does not necessarily attract equitable protection, even though it is arguably private. English courts have, on several occasions, denied public figures injunctive relief against media outlets publicising their sexual activities. In Theakston v MGN Ltd,107 involving the proposed publication of information of a television presenter’s visit to a brothel, Ouseley J made the following observations:

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If a well known man has sexual relations with a prostitute in a brothel, the desire on his part to keep their actions and “relationship” confidential and the desire on the part of the other to exploit their actions and relationship commercially are irreconcilable … It is not inherent in the nature of a brothel that all or anything that transpires within is confidential. The relationship between a prostitute in a brothel and the customer is not confidential of its nature and the fact that they participate in sexual activity does not in my judgment constitute a sufficient basis by itself for the attribution to the relationship, if such it be, of confidentiality. It is difficult to see why the protection of confidentiality should be imposed essentially for one party to a fleeting transaction for money when there is no reason to suppose that at the time the other party would have considered the relationship or the activity confidential for one moment.108

The more famous the person, it appears, the less likely a court will cloak her or his personal information. The reason is that a celebrity “should recognise that because of his public position he must expect and accept that his actions will be more closely scrutinised by the media”, such that “[c]‌onduct which in the case of a private individual would not be the appropriate subject of comment can be the proper subject of comment in the case of a public figure”.109 It may also be that persons who court public attention have “less ground to object to the intrusion which follows”.110 [6.105]  There is nonetheless a distinction between publicising a sexual relationship between

consenting adults, as opposed to details of the activities of the parties within that relationship. While in one sense the mere existence of the relationship is a private matter, in most instances disclosure of its existence does little to impinge upon anything confidential. The same cannot necessarily be said of what transpires as between the parties in the relationship itself; these matters may well be private and confidential. In Barrymore v News Group Newspapers Ltd,111 the plaintiff, a television personality, sued the defendant (which published The Sun 105

Titan Group Pty Ltd v Steriline Manufacturing Pty Ltd (1990) 19 IPR 353 at 379 per O’Loughlin J.

106

Stephens v Avery [1988] Ch 449.

107

Theakston v MGN Ltd [2002] EMLR 22 at [76].

108

His Lordship was not, however, willing to allow the disclosure of photographs taken of the plaintiff at the brothel, reasoning that “the publication of photographs taken there without his consent could still constitute an intrusion into his private and personal life and would do so in a peculiarly humiliating and damaging way”: Theakston v MGN Ltd [2002] EMLR 22 at [78].

109

A v B plc [2003] QB 195 at [11] per Lord Woolf CJ.

110

A v B plc [2003] QB 195 at [11] per Lord Woolf CJ.

111

Barrymore v News Group Newspapers Ltd [1997] FSR 600.

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Equity and Trusts in Australia

newspaper) arising out of its publication of an “exclusive” about the plaintiff and his homosexual relationship with the second defendant, on the basis of details received from the latter. Jacob J found it strongly arguable that the details of the relationship should be treated as confidential, reasoning that “common sense dictates that, when people enter into a personal relationship of this nature, they do not do so for the purpose of it subsequently being published in [a]‌newspaper”; information about the relationship “is for the relationship and not for a wider purpose”.112 There had, on the facts, been a breach of confidence as a result. His Lordship accepted, though, that the outcome may have differed had the publication revealed no more than that there had been a relationship. As the plaintiff had already disclosed his homosexuality, to publicise that he had had a particular partner would be to add nothing new, and thus not breach confidence. It seems, though, that the result, at least in the modern law, would be the same for a plaintiff who had not (yet) “come out”; the English case law, after all, reveals multiple instances where, especially against the backdrop of celebrity, attempts to keep an affair secret have proven unsuccessful.113

Relationship to privacy

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[6.110]  Issues raised in cases such as Theakston (see [6.100]) highlight that the law of con-

fidentiality is not necessarily ideally suited to protecting expectations of what can be termed “personal privacy”. Although there is some overlap between confidentiality and privacy —​ private information is not infrequently also confidential  —​there are areas where the concepts inhabit mutually exclusive environments. Private information need not be confidential, whereas material in the public domain can be private but not confidential, as in Theakston for instance. This has prompted calls for an American-​style privacy tort, targeted at a right to protect personal autonomy, as opposed to the maintenance of confidences in the context of a relationship where confidence is either express or implied.114 A stumbling block to confidentiality assuming a privacy mantle has traditionally been the requirement that information be communicated in confidential circumstances. Private information may be secured without any communication from a confider. Yet just as this element of the equitable doctrine has been obviated in the case of surreptitiously obtained information (see [6.265]–​[6.275]), English courts have largely abandoned it in circumstances where an illegitimate invasion of privacy has occurred. In several well-​publicised cases involving celebrities —​chiefly Campbell v MGN Ltd115 and OBG Ltd v Allan116 —​ they have “shoe-​horned” breaches of a plaintiff’s privacy into the equitable doctrine. In the former case the appellant, a “supermodel” who stated publicly that she did not use drugs, successfully restrained the respondent from publishing details of her drug addiction and a photograph of her attending a Narcotics Anonymous meeting for therapy. On the issue of the communication of information in confidential circumstances, Lord Hope remarked that:117

112

Barrymore v News Group Newspapers Ltd [1997] FSR 600 at 602.

113

See, for example, A v B plc [2003] QB 195; Goodwin v NGN Ltd [2011] EMLR 27; McClaren v News Group Newspapers Ltd [2012] EMLR 33.

114

See, for example, Tobin, “Privacy: One Step Forward, Two Steps Back!” [2003] NZLJ 256; Caldwell, “Protecting Privacy Post Lenah: Should the Courts Establish a New Tort or Develop Breach of Confidence?” (2003) 26 UNSWLJ 90.

115

Campbell v MGN Ltd [2004] 2 AC 457.

116

OBG Ltd v Allan [2008] AC 1.

117

Campbell v MGN Ltd [2004] 2 AC 457 at [85].

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Confidential Information  Chapter  6

… the need for the existence of a confidential relationship should not give rise to problems as to the law because a duty of confidence will arise whenever the party subject to the duty is in a situation where he knows or ought to know that the other person can reasonably expect his privacy to be protected.

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His Lordship, together with the other two judges in the majority,118 upheld the trial judge’s conclusion that the details of the appellant’s attendance at Narcotics Anonymous were private information importing a duty of confidence. The medical nature of the information and the need for “anonymity” in attending meetings of Narcotics Anonymous together heavily influenced this conclusion. The private nature of these meetings, said his Lordship, encourages addicts to attend them in the belief that they can do so anonymously, making the assurance of privacy an essential part of the exercise.119 Importantly, the dissenters in Campbell did not deny that breach of confidence could, in an appropriate case, protect reasonable expectations of privacy. Like the majority, Lord Nicholls believed that the equitable cause of action had “firmly shaken off the limiting constraint of the need for an initial confidential relationship”, and in so doing “changed its nature”.120 For this reason his Lordship preferred to speak of “private” rather than “confidential” information, conceding that information about a person’s private life would not in ordinary usage be called “confidential”.121 According to Lord Nicholls, the law imposes a duty whenever a person receives information he or she knows or ought to know is fairly and reasonably to be regarded as confidential or private. Inclined similarly, Lord Hoffmann bemoaned the artificiality of distinguishing confidential information obtained through violation of a confidential relationship from similar information obtained in another way.122 His Lordship perceived “a shift in the centre of gravity of the action for breach of confidence”, from one based upon the duty of good faith applicable to confidential personal information, to one aimed at protecting human autonomy and dignity, namely “the right to control the dissemination of information about one’s private life and the right to the esteem and respect of other people”.123 [6.115] That commercial motivations drive an action for invasion of privacy does not,

according to the English courts, oust a role for the law of confidentiality. The point appears from OBG Ltd v Allan,124 where the House of Lords ruled that the taking of unauthorised photographs of the appellants’ celebrity wedding portrayed aspects of their private life protected by the law of confidentiality. That the action was prompted in part by commercial concerns, emanating from the photographs appearing in a magazine (Hello!) other than the one the appellants had authorised (for £1m) to publicise their wedding (OK!), did not disincline the court to apply the expanded doctrine of confidentiality. Lord Hoffmann held that the information was protected “because it was information of commercial value over which the [appellants] had sufficient control to enable them to impose an obligation of confidence”. Lord Brown added:125 118

Namely, Lord Carswell and Baroness Hale.

119

Campbell v MGN Ltd [2004] 2 AC 457 at [95].

120

Campbell v MGN Ltd [2004] 2 AC 457 at [14].

121

Campbell v MGN Ltd [2004] 2 AC 457 at [14]. See also Douglas v Hello! Ltd (No 3) [2006] QB 125 at [83] per Lord Phillips MR.

122

Campbell v MGN Ltd [2004] 2 AC 457 at [46].

123

Campbell v MGN Ltd [2004] 2 AC 457 at [51].

124

OBG Ltd v Allan [2008] AC 1.

125

OBG Ltd v Allan [2008] AC 1 at [326]. See also at [307] per Baroness Hale.

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Equity and Trusts in Australia

What is the information to which the confidence here attached? Plainly the information as to how the wedding looked —​the photographic images which bring the event to life and make the viewer a virtual spectator at it. How can one doubt that this was commercially confidential information or, if one prefers, a trade secret? It was, after all, secret information for which OK! had been prepared to pay £1 million, in the expectation, obviously, that it was to remain secret until they chose to make use of it. And that is certainly how it would also have been perceived by Hello! (who had themselves hoped to acquire and exploit the secret in the same way).

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[6.120]  Yet the role of the Human Rights Act 1998 (UK), which prescribes a right to respect for private and family life,126 cannot be downplayed in the English cases. Each judge in Campbell made reference to the Act in this context, Lord Hoffmann in particular openly conceding that the law of confidentiality needed to be viewed under the influence of human rights legislation that recognises the privacy of personal information as something worthy of protection in its own right.127 The trend has replicated in subsequent English cases.128 This can impact not only on the elements of the cause of action but also on relief, it being acknowledged that an injunction may issue to preserve privacy where the information may otherwise have lost its confidentiality.129 The absence of parallel legislation in Australia, excepting in the Australian Capital Territory and Victoria,130 has arguably retarded Australian courts’ willingness to either bring privacy within the law of confidentiality or recognise an invasion of privacy tort. The High Court declined this invitation in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd,131 albeit in terms leaving open potential for a future expanded role for confidentiality as privacy132 (an invitation to date only accepted in the Victorian County Court).133 While existing privacy legislation, which now traverses the private sector, gives some protection for privacy in Australian law,134 it is chiefly directed at the use and disclosure of information that is collected or supplied for a limited purpose rather than a more encompassing privacy entitlement.

126

The Human Rights Act 1998 (UK) (operative from 2 October 2000) incorporates the European Convention on Human Rights, Art 8 of which prescribes a right to respect for private and family life.

127

Campbell v MGN Ltd [2004] 2 AC 457 at [46]. See also at [17] per Lord Nicholls.

128

See, for example, Lord Browne of Madingley v Associated Newspapers Ltd [2008] QB 103; McKennitt v Ash [2008] QB 73; Associated Newspapers Ltd v His Royal Highness The Prince of Wales [2008] Ch 57 (each involving the disclosure —​by a former lover, a former friend and a former employee, respectively —​of personal and private information relating to a public figure by way of publication to a newspaper or in a book).

129

See, for example, PJS v News Group Newspapers Ltd [2016] AC 1081 (where the plaintiff, a celebrity, succeeded in securing an injunction to prevent the publication of his alleged extra-​marital affairs even though the court conceded that the existing dissemination of this information had compromised its confidentiality, viewing the injunction as a vehicle through which further intrusion into privacy could be prevented: at [45] per Lord Mance, at [57], [58] per Lord Neuberger).

130

See Human Rights Act 2004 (ACT), s 12(a) (“Everyone has the right not to have his or her privacy, family, home or correspondence interfered with unlawfully or arbitrarily”); Charter of Human Rights and Responsibilities Act 2006 (Vic), s 13(a) (in similar terms to the ACT provision).

131

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 226 per Gleeson CJ, at 257–​258 per Gummow and Hayne JJ; cf at 277–​279 per Kirby J, at 328 per Callinan J (see Taylor and Wright, “Australian Broadcasting Corporation v Lenah Game Meats: Privacy, Injunctions and Possums: An Analysis of the High Court’s Decision” (2002) 26 MULR 707 at 708–​714).

132

See Butler, “A Tort of Invasion of Privacy in Australia?” (2005) 29 MULR 339.

133

See Doe v Australian Broadcasting Corporation [2007] VCC 281 (where the plaintiff succeeded in securing damages for a breach of privacy generated from the disclosure by the defendant of information that may have led her identification as a victim of assault and rape by her estranged husband).

134

This legislation therefore targets what is termed “information privacy” or “data protection”, and was heralded by the enactment of the Privacy Act 1988 (Cth), which spawned parallel statutory initiatives in each State and Territory except South Australia and Western Australia.

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Confidential Information  Chapter  6

[6.125]  Just as there are those who view the equitable doctrine of confidentiality as an apt vehicle

to protect privacy at general law —​focusing chiefly on equity’s flexibility to deal with new challenges and viewing a fully-​blown privacy (tortious or statutory) cause of action as a disproportionate response to relatively rare circumstances135 —​there are others who believe that the law, were it to recognise a right to privacy, should protect it “openly rather than by recourse to an artificially constructed relationship of confidentiality”.136 The latter fear that to shoehorn confidentiality into privacy, or vice versa, may undermine the characteristics of confidentiality,137 and hinder development of privacy law. A privacy tort, it has been suggested, “provides a more candid and coherent means through which to protect against privacy invasions through non-​consensual disclosures of personal information than does the privacy approach under the equitable action”.138 [6.130] New Zealand courts have been willing to recognise openly a role for tort law to

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guard invasions of privacy, albeit against the backdrop of some judges incorrectly identifying breach of confidence as a tort.139 Notwithstanding this error, the New Zealand Court of Appeal has, following a groundswell of dicta going back for some time,140 promulgated a tort of invasion of privacy in its 2004 decision in Hosking v Runting.141 This led one commentator to remark that New Zealand courts’ candour “lies in contrast with the approach of the House of Lords”.142 In Hosking, a case involving a television personality who objected to a magazine publishing photographs of his small children taken in a public place, three of the five judges143 countenanced a tort of invasion of privacy premised on proof of two elements: the existence of facts giving rise to a reasonable expectation of privacy; and publicity given to those facts that would be considered highly offensive144 to a reasonable person. Yet the court unanimously held that the law recognised no tortious cause of action in privacy based on publication of photographs taken in a public place, a conclusion that led to its rejection of the plaintiff’s

135

See, for example, Richardson, “Whither Breach of Confidence: A Right of Privacy for Australia?” (2002) 26 MULR 381; Dean, “A Right to Privacy?” (2004) 78 ALJ 114; Geddis, “Hosking v Runting: A Privacy Tort for New Zealand” (2005) 13 Tort L Rev 5; Hosking v Runting [2005] 1 NZLR 1 at [271] per Anderson P (dissenting).

136

Elliott, “Privacy, Confidentiality and Horizontality: The Case of the Celebrity Wedding Photographers” [2001] CLJ 231 at 232. See also Moreham, “Douglas and others v Hello! Ltd —​The Protection of Privacy in English Private Law” (2001) 64 MLR 767; Phillipson, “Transforming Breach of Confidence? Towards a Common Law Right of Privacy Under the Human Rights Act” (2003) 66 MLR 726; Tobin, “Privacy: One Step Forward, Two Steps Back!” [2003] NZLJ 256; Evans, “Was Privacy the Winner on the Day?” [2004] NZLJ 181.

137

See Morgan, “Privacy in the House of Lords, Again” (2004) 120 LQR 563 at 564 (who opined that a result of Campbell v MGN Ltd [2004] 2 AC 457 (discussed at [6.110]) is that “breach of confidence has changed beyond all recognition, apparently requiring neither a relationship not even confidentiality”); Morgan, “Hello! Again: Privacy and Breach of Confidence” [2005] CLJ 549 at 550 (who opined that the “new sub-​species” of breach of confidence “is in fact nothing of the sort, when the fundamental features of that action (a relationship of confidence; any confidential information to protect) are so readily dispensable”, and that “[u]‌nless and until our highest court prefers boldness to subterfuge, invasion of privacy will continue to be the tort that dares not speak its name”).

138

Caldwell, “Protecting Privacy Post Lenah: Should the Courts Establish a New Tort or Develop Breach of Confidence?” (2003) 26 UNSWLJ 90 at 123.

139

See, for example, Stepping Stones Nursery Ltd v Attorney-​General [2002] 3 NZLR 414 at 420 per Harrison J; Hosking v Runting [2005] 1 NZLR 1 at [42] per Gault and Blanchard JJ.

140

See, for example, Tucker v News Media Ownership Ltd [1986] 2 NZLR 716 at 733 per McGechan J; Bradley v Wingnut Films Ltd [1993] 1 NZLR 415 at 423–​424 per Gallen J; TV3 Network Services Ltd v Broadcasting Standards Authority [1995] 2 NZLR 720 at 727–​728 per Eichelbaum CJ; P v D [2000] 2 NZLR 591 at 599–​601 per Nicholson J.

141

Hosking v Runting [2005] 1 NZLR 1. See Tobin, “Yes, Virginia, There is a Santa Claus: The Tort of Invasion of Privacy in New Zealand” (2004) 12 Tort LJ 95; Geddis, “Hosking v Runting: A Privacy Tort for New Zealand” (2005) 13 Tort L Rev 5.

142

Morgan, “Hello! Again: Privacy and Breach of Confidence” [2005] CLJ 549 at 550.

143

Per Gault, Blanchard and Tipping JJ, Keith and Anderson JJ dissenting.

144

Tipping J, also in the majority, set the standard a little lower, as “substantially” offensive: Hosking v Runting [2005] 1 NZLR 1 at [256].

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Equity and Trusts in Australia

claim. (Interestingly, essentially identical facts spawned the opposite conclusion before the English Court of Appeal a decade or so later, albeit under the Human Rights Act 1998 (UK) regime, as to which see [6.120]).145 Gault and Blanchard JJ accepted that in many instances the identification of private facts essential to the first element will be analogous to the test of “information with the necessary quality of confidence” employed in breach of confidence cases.146 The second element, though, highlights the limited scope for the invasion of privacy tort, their Honours noting that publicity of private matters that are not really sensitive should not give rise to legal liability, which should confine to publicity that is truly humiliating and distressful or otherwise harmful to the individual concerned.147 Their Honours’ reluctance to bring this action within the umbrella of the law of confidence was driven largely by a view that “[p]‌rivacy and confidence are different concepts”, and so attempts to press all cases seeking a remedy for unwarranted exposure of information about persons’ private lives into a cause of action grounded in trust and confidence “would be to confuse those concepts”.148 In this sense, the court simply reflected concerns mentioned earlier, namely the dilution of accepted notions of confidentiality, which could undermine their use in other contexts. The other judge in the majority, Tipping J, conceded that the result in substantive terms of recognising a separate tort is “not significantly different” from the extended form of breach of confidence developed in England, adding that “[w]hat is at stake is really a matter of legal method rather than substantive outcome”.149 The dissenters were unwilling to countenance a new privacy tort, or to expand the law of confidence to cover privacy-​like obligations. Keith J could not overcome the hurdle of applying the law of confidence lacking a relationship between the parties.150 Anderson P saw the majority as having declared “a new civil liability for publishing facts about a person … created in a sidewind [that is] is amorphous, unnecessary, a disproportionate response to rare, almost hypothetical circumstances”.151 At least one commentator supports this cautious approach “to resist the urge to place the judicial cart before the legislative horse”, remarking New Zealand privacy law’s lack of the statutory foundation found in the United Kingdom may prompt a judicial struggle to delimit the scope of a nebulous, general privacy tort.152 [6.135]  Recommendations that Australian (and English) law pursue American-​style privacy

torts153 —​that encompass not only the tort identified in Hosking but also the related privacy tort of intrusion upon seclusion together with two other torts not so clearly associated with privacy ideals154  —​in place of development of the law of confidentiality must be viewed 145

Weller v Associated Newspapers Ltd [2016] 1 WLR 1541.

146

Hosking v Runting [2005] 1 NZLR 1 at [119].

147

Hosking v Runting [2005] 1 NZLR 1 at [126].

148

Hosking v Runting [2005] 1 NZLR 1 at [48]. See also at [142] per Tipping J (noting that whereas “[b]‌reach of confidence, being an equitable concept, is conscience based”, invasion of privacy is a common law wrong “founded on the harm done to the plaintiff by conduct which can reasonably be regarded as offensive to human values”).

149

Hosking v Runting [2005] 1 NZLR 1 at [247].

150

Hosking v Runting [2005] 1 NZLR 1 at [201].

151

Hosking v Runting [2005] 1 NZLR 1 at [271].

152

Geddis, “Hosking v Runting: A Privacy Tort for New Zealand” (2005) 13 Tort L Rev 5 at 13.

153

See Australian Law Reform Commission, For Your Information:  Australian Privacy Law and Practice (Report 108, vol 1, May 2008), recommendations 74-​1–​74-​5; McDonald, “A Statutory Action for Breach of Privacy: Would it Make a (Beneficial) Difference?” (2013) 36 Aust Bar Rev 241; Dal Pont, Law of Confidentiality (LexisNexis Butterworths, 2015), [4.33]–​[4.35].

154

Namely publicity that places the plaintiff in a false light in the public eye, and appropriation (for the defendant’s advantage) of the plaintiff’s name or likeness: see American Law Institute, Restatement (Second) of Torts (1977), §652B.

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Confidential Information  Chapter  6

against a backdrop of American law not, in the main, recognising a cause of action for breach of confidence as to personal information. Yet this has not precluded recognition in Ontario and New Zealand of a tort of intrusion upon seclusion,155 directed to an intentional intrusion upon the solitude or seclusion of another person (or her or his private affairs or concerns) that is highly offensive to a reasonable person.

Relevance of nature and extent of potential detriment from disclosure [6.140] In making an assessment of confidentiality, the court may legitimately take into

account the nature and extent of potential detriment that may flow from the disclosure proposed. In Foster v Mountford and Rigby Ltd,156 for example, Muirhead J preserved the confidentiality of information by restraining publication of the defendant’s book, which revealed secret ceremonies of a group of Aborigines. The defendant received the information in confidence, and his Honour accepted the plaintiffs’ argument that the book could disrupt their social system, damage that could not be alleviated by monetary damages. [6.145]  Concern as to potential detriment from disclosure may even lead equity to protect

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a person’s identity or whereabouts. In G v Day,157 the plaintiff alleged that he had seen a person it was believed had earlier committed suicide. Fearing that publication of his identity may endanger him and his family, the plaintiff secured assurances from the authorities that his anonymity would be preserved. The defendant sought to publish the plaintiff’s identity in its newspaper. Yeldham J distinguished the permanent character of publication in the print media from the limited and impermanent nature of brief mention of the plaintiff’s identity on television,158 stating the general principle as follows:159 [I]‌f a person is likely to suffer prejudice from the disclosure of his name, if no sound reasons of public interest or public policy exist why such disclosure should take place, and if he has obtained assurances of confidence in relation to his identity before imparting his information, I find no reason in principle why his identity should not be treated as confidential information in the same way as the material which he provides to the authorities.

This same logic underlies curial willingness to restrain the publication or disclosure of the identity of police informants, even if the proposed disclosure is simply by way of a photograph.160 How far confidentiality can attach to identity is evidenced by the grant of an injunction in Venables v News Group Newspapers Ltd161 to restrain the publication of the identity, whereabouts and appearance of applicants who as children had been convicted of murder, upon their release on attaining their majority. In so ruling, Dame Elizabeth Butler-​Sloss P viewed the applicants as being in a “most exceptional situation”, where “the risks to them of

155

Jones v Tsige (2012) 108 OR (3d) 241 (where the defendant used her workplace computer to repeatedly access personal information of the plaintiff over a four-​year period, but did not disclose the information so gleaned); C v Holland [2012] 3 NZLR 672 (where the plaintiff, who shared a house with her boyfriend (the defendant), was deeply distressed upon discovering that the defendant had surreptitiously installed a recording device that recorded her whilst showering).

156

Foster v Mountford and Rigby Ltd (1976) 14 ALR 71.

157

G v Day [1982] 1 NSWLR 24.

158

G v Day [1982] 1 NSWLR 24 at 40–​41.

159

G v Day [1982] 1 NSWLR 24 at 35. See also D v National Society for the Prevention of Cruelty to Children [1978] AC 171 at 218 per Lord Diplock, at 228–​229 per Lord Hailsham, at 232 per Lord Simon.

160

Falconer v Australian Broadcasting Corporation [1992] 1 VR 662 at 669–​671 per Ashley J (identifying the danger to informant and his family as “a very significant consideration”: at 671).

161

Venables v News Group Newspapers Ltd [2001] 2 WLR 1038.

[6.145]  179 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Equity and Trusts in Australia

identification are real and substantial”.162 The public hatred of the applicants was such that, without the protection sought, they could be seriously harassed, injured or even killed. In more general terms, her Ladyship accepted that in exceptional cases the court may preserve the confidentiality of information, and even impose restrictions on the press, “where not to do so would be likely to lead to serious physical injury, or to the death, of the person seeking that confidentiality, and there is no other way to protect the applicants other than by seeking relief from the court”.163

Duration of confidentiality [6.150]  As in the case of commercial and technical confidential information, confidentiality

attaching to personal information expires once that information enters the public domain. For example, in Bunn v British Broadcasting Corporation,164 the reading by a judge in open court of a statement made by the plaintiff at a police interview, coupled with the circulation of over 2000 copies of a book containing a full report of its content, was held to have led to a loss of confidentiality. Governmental information

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[6.155]  Information can be supplied confidentially to government by third parties about pri-

vate, personal or business affairs.165 Here there is sense in applying accepted principles of confidentiality,166 at least absent a statutory mandate to use or disclose this information other than for the purposes it was received.167 The same may be said of information acquired by the public sector in the course of performing what would otherwise be regarded as non-​governmental activities (for instance, business operations).168 But outside of information of these kinds, the law approaches confidentiality in the governmental context somewhat differently than in the business or personal environment. A leading statement as to what a plaintiff must prove to establish a breach of confidence in this regard is that of Lord Widgery CJ in Attorney-​ General v Jonathan Cape Ltd:169 (a) that such publication would be a breach of confidence; (b) that the public interest requires that the publication be restrained, and (c) that there are no other facts of the public interest 162

Venables v News Group Newspapers Ltd [2001] 2 WLR 1038 at 1070.

163

Venables v News Group Newspapers Ltd [2001] 2 WLR 1038 at 1065.

164

Bunn v British Broadcasting Corporation [1998] 3 All ER 552 at 557 per Lightman J (noted Thompson, “A Loss of Confidence” [1998] Conv 480 at 484–​488).

165

See Finn, Official Information:  Integrity in Government Project (Interim Report 1, ANU, 1991), pp 19–​27; Tsaknis, “The Jurisdictional Basis, Elements, and Remedies in the Action for Breach of Confidence —​Uncertainty Abounds” (1993) 5 Bond L Rev 18 at 31–​34.

166

R (Ingenious Media Holdings plc) v Revenue and Customs Commissioners [2016] 1 WLR 4164 at [28] per Lord Toulson (“public bodies are not immune from … the law of confidentiality”).

167

See, for example, Castrol Australia Pty Ltd v EmTech Associates Pty Ltd (1980) 33 ALR 31 (discussed at [6.190]); Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 [affd Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679] (discussed at [6.175]); Deputy Commissioner of Taxation v Rettke (1995) 31 IPR 457 at 461–​463 per Cooper J (information given to taxation authorities for a limited purpose).

168

Earthquake Commission v Krieger [2014] 2 NZLR 547 at [38] per Collins J (noting that “[t]‌oday, a number of government departments, crown entities and local authorities undertake activities which are commercial and which, if carried out by a private entity would unquestionably be protected by commercial confidentiality”, and that “[w]here a public body wishes to protect information on the grounds of commercial confidentiality it may not be necessary to establish that restraining publication is in the public interest”).

169

Attorney-​General v Jonathan Cape Ltd [1976] 1 QB 752 at 770–​771, approved in Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 52 per Mason J.

180 [6.150] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

contradictory of and more compelling than that relied upon. Moreover, the court, when asked to restrain such a publication, must closely examine the extent to which relief is necessary to ensure that restrictions are not imposed beyond the strict requirement of public need.

The onerous burden placed upon governments to justify secrecy of this information stems from the fact that governments control it in a representative capacity, and so their workings should be open to public scrutiny and criticism.170 This does not mean, however, that information in the hands of government is all tarred with the same presumptive non-​confidential brush. The leading case is Commonwealth of Australia v John Fairfax & Sons Ltd.171 The Australian Government obtained an injunction restraining the defendants from publishing excerpts from a book in The Age and The Sydney Morning Herald. By the time notice of the injunction reached the defendants, the early edition of both newspapers had been distributed. The book, which had yet to be published, contained unpublished memoranda, assessments and briefings relating to such matters as the “East Timor crisis”, the renegotiation of agreements covering United States military bases in Australia, the presence of the Soviet Navy in the Indian Ocean, Australia’s support for the Shah of Iran, the security of the RAAF base in Malaysia, outlines of the structures of US and UK intelligence services and the ANZUS treaty. Mason J expressed the following opinion:172

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It is unacceptable in our democratic society that there should be a restraint on the publication of information relating to government when the only vice of that information is that it enables the public to discuss, review and criticise government action. Accordingly, the court will determine the government’s claim to confidentiality by reference to the public interest. Unless the disclosure is likely to injure the public interest, it will not be protected.

His Honour then noted that disclosure of information concerning the past workings of government serves the public interest in keeping the community informed and in promoting discussion of public affairs. However, its disclosure will be restrained if it will be inimical to the public interest for reasons of national security, relations with foreign governments or in that the ordinary business of government will be prejudiced. The issue was identified as one of balancing the public’s interest in knowing and in expressing its opinion against the need to protect confidentiality, which in itself indirectly could be justified by the public interest.173 On the facts, Mason J was unpersuaded that the degree of embarrassment to Australia’s foreign relations flowing from disclosure was sufficient to justify interim protection of confidential information. The John Fairfax case illustrates judicial reticence to restrain the public disclosure of certain governmental information. Yet if there is a sensitive matter involving government policy, the courts are likely to recognise prejudice to government by disclosure, even for information voluntarily supplied by the public. John Fairfax neither licences disloyalty on the part of government employees or others nor justifies leaking of confidential government material to the press. Rather, the case stands for the narrower proposition that “there are often overriding

170

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 191 per McHugh JA; Attorney-​ General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 283 per Lord Goff.

171

Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39.

172

Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 52. See also State of Victoria v Nine Network (2007) 19 VR 476 (where Osborn J remarked (at [19]) that the statement of principle by Mason J “explicitly acknowledges the public interest in free speech with respect to the actions of government generally as an incident of a democratic society”, and accepted (at [21]) that “there is both a general underlying interest in the free publication of information bearing on governmental action and that there may be a special public interest arising with respect to information concerning activities of government which bear directly on the liberty of the subject”).

173

See also Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 153 per Kirby P.

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Equity and Trusts in Australia

public interests which mean that the court will not give its aid by injunction to prevent public discussion of public issues”.174

Duration of confidentiality —​the “Spycatcher” cases

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[6.160] The Spycatcher case, as it has become known, deserves special attention in part

because it gave rise to corresponding litigation in Australia, England and New Zealand. It involved the publication of the book Spycatcher, authored by Peter Wright, a former member of the British Secret Service. The Attorney-​General for the United Kingdom sought to restrain the publication of the book and publication of excerpts of the book in newspapers. The relevant Australian decision is that of the New South Wales Court of Appeal in Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd.175 A majority of the court held that, though Mr Wright received the information in circumstances of confidence, much of it had since passed into the public domain, largely via books by and television interviews with other (former) members of the security service. The appellant urged that “the inference be drawn from the relationship between the Crown and Mr Wright … that nothing whatsoever could ever be stated publicly by Mr Wright … without authority, unless earlier ‘officially made public’ ”.176 Kirby P described this argument as “absurd” in that it would mean that an officer who survived even 50 years after working for the service would be bound to total secrecy, and refused to accept that “a person living in Australia would be so imprisoned by an equitable duty of confidence”.177 His Honour catalogued the many previous publications of a like nature that the United Kingdom government allowed to pass without action.178 He saw the relevant duty owed by Mr Wright as “diminished to the extent that the same matters appear ‘ad nauseam’ in the multitude of other books … already published and still in the course of publication”.179 As the “overwhelming bulk” of the material in Spycatcher had entered the public domain, the court did not believe that such matters should be suppressed.180 The same scenario was argued before the House of Lords in Attorney-​General v Guardian Newspapers (No 2),181 in seeking an injunction restraining the respondent from publishing instalments of Spycatcher in its newspaper. At this time the book had been published in Australia and was to be published in the United States. The House of Lords held that, to justify restraint on the disclosure of government secrets, the Crown must demonstrate that disclosure was likely to damage, or had damaged, the public interest. As the worldwide publication of Spycatcher had destroyed any secrecy as to its contents, and copies were readily available to any individual who wished to obtain them, injunctive relief was refused. 174

Minister for Mineral Resources v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 at 408 per Young J.

175

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86. The Attorney-​General appealed this decision to the High Court: Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30. The High Court’s discussion of confidential information focused upon the “public interest defence” and the primacy of the Australian public interest in such cases: see [6.285].

176

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 163.

177

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 163.

178

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 163–​165.

179

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 171.

180

A similar conclusion was reached by the New Zealand Court of Appeal: Attorney-​General (UK) v Wellington Newspapers Ltd [1988] 1 NZLR 129 at 175 per Cooke P, at 179 per McMullin J; Attorney-​General for England and Wales v Television New Zealand Ltd (1998) 44 IPR 123 at 126–​128 per Keith J. In the first of those cases Cooke P (at 175) and McMullin J (at 179) gave effect to what they termed the defence of prior publication. Rather than view prior publication as a defence, it is better to treat it as a factor determining the presence or absence of confidentiality because this utilises established concepts of confidentiality and avoids the introduction of an equitable defence peculiar to actions in breach of confidence.

181

Attorney-​General v Guardian Newspapers (No 2) [1990] 1 AC 109.

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Confidential Information  Chapter  6

Statutory initiatives [6.165] Although the Freedom of Information Act 1982 (Cth) opens the door for access

to government documents, s 45 provides that documents which if disclosed would found an action for breach of confidence are exempt from disclosure. Other exemptions from disclosure include documents affecting national security (s 33), the protection of public safety (s 37) and containing trade secrets and other business information of commercial value (s 43). Corresponding legislation has been enacted in each State and Territory, though not necessarily in identical terms.

CONFIDENTIAL CIRCUMSTANCES Relevance of confidential circumstances

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[6.170]  The requirement that confidential information be communicated in confidential cir-

cumstances is relevant for three reasons. First, those circumstances may be cogent evidence of the confidentiality of the information in the first place.182 For example, the factors that substantiate a “trade secret” (see [6.30], [6.35]) also reflect aspects of the circumstances in which the communication is made. Secondly, the circumstances in which confidential information is communicated reveal the purpose for which the communication is made, which in turn determines the scope of the confidential obligation.183 So receipt of confidential information in circumstances of confidence establishes a duty not to use that information outside the scope for which it is conveyed. Thirdly, it highlights the fact that the doctrine of confidentiality is invoked to control information rather than its plenary non-​disclosure. Yet the element of confidential circumstances has been downplayed, or even outright ignored, where the law has extended the operation of the doctrine of confidentiality to support a privacy-​based right (see [6.110]–​[6.135]) and in respect of surreptitiously obtained information (see [6.265]–​[6.275]). In those circumstances, and indeed also some others (such as in Venables v News Group Newspapers Ltd,184 discussed at [6.145]), the nature of the information alone can potentially give rise to the duty of confidence. To the extent that confidential circumstances remain relevant, pertinent inquiries include the terms (express or implied) of any agreement and the nature of the relationship between persons (say, confidences between parties to a marriage: see [6.95]), whether the information was supplied gratuitously, whether past practice gave rise to an understanding as to confidentiality and whether the confider has any interest in the purpose for which the information is to be used or has warned the confidant against a particular disclosure.185 Objective test [6.175]  An objective test applies to determine whether the circumstances of communication

are confidential. So “if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds 182

Titan Group Pty Ltd v Steriline Manufacturing Pty Ltd (1990) 19 IPR 353 at 379 per O’Loughlin J; Trevorrow v South Australia (No 3) (2005) 94 SASR 44 at [29] per Gray J.

183

Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [2005] WASC 255 at [61] per Johnson J.

184

Venables v News Group Newspapers Ltd [2001] 2 WLR 1038.

185

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679 at 690 (FC(FCA)).

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Equity and Trusts in Australia

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the information was being given to him in confidence, then this should suffice to impose upon him the equitable obligation of confidence”.186 The existence and scope of a confidential obligation imposed by equity is thus determined not only by what the defendant knew, but what he or she ought to have known in the circumstances.187 In the ordinary case, a person given free access to material pursuant to a request without any duty of confidentiality reserved may assume that there is no restriction on its use or disclosure.188 But in other circumstances, where the very nature of the information in question speaks of its confidentiality, the position is different. So, for example, a person who receives an examination paper prior to the date of the examination is taken to have known both that its contents are confidential and that he or she must not disclose them other than for the purposes for which the paper was received.189 Emails containing personal and business affairs of their senders are likewise generally regarded as confidential, as are communications that are on their face between lawyer and client.190 Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health191 illustrates the objective test. The applicant held a patent for a drug. The respondent regulated its importation and marketing. The applicant provided the respondent with information relating to, inter alia, the chemistry and quality control of the drug, and alleged that the respondent intended to use this information in considering applications for approval in relation to the drug by other pharmaceutical companies, a purpose other than for which it had been supplied. Gummow J found that the information in issue had an initial and continuing character of confidentiality. But he found that the respondent, while understanding the information to be confidential vis-​à-​vis third parties, did not know that it was furnished for a purpose that excluded use in evaluating other applications. As the respondent neither knew nor ought to have known of that limited purpose, equity could not bind the respondent’s conscience.192 His Honour held that a common implicit understanding is required involving mutual obligations of confidence, not merely an intended limited purpose on the part of the party providing the information. Information communicated within a contractual relationship [6.180]  Persons in a contractual relationship may expressly or impliedly193 arrange to protect

confidential information exchanged between them. This may occur, for example, in a contract 186

Mense v Milenkovic [1973] VR 784 at 801 per McInerney J.  See also Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [2005] WASC 255 at [69]–​[72] per Johnson J; Trevorrow v State of South Australia (No 4) (2006) 94 SASR 64 at [41] per Doyle CJ.

187

Mainbridge Industries Pty Ltd v Whitewood (1984) 73 FLR 117 at 122 per McLelland J; Fractionated Cane Technology Ltd v Ruiz-​Avila [1988] 1 Qd R 51 at 62 per McPherson J; Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 at 111 per Gummow J [affd Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679].

188

See, for example, Trevorrow v State of South Australia (No 4) (2006) 94 SASR 64 (where the State’s archive permitted the applicant to copy documents referring to legal advice relating to the scope of the Aborigine Protection Board’s power to remove children of Aboriginal descent from their families, the court found nothing in the circumstances to suggest to a reasonable person that the Crown wished to maintain the confidentiality of that advice).

189

See, for example, National Education Advancement Programs (NEAP) Pty Ltd v Ashton (1995) 128 FLR 334; Warwickshire County Council v Matalia [2017] ECC 25.

190

Matthews v Clifton (2014) 99 ACSR 265 at [61], [62] per White J.

191

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 [affd Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679]. The plaintiff lodged similar complaints in the United Kingdom and New Zealand: Re Smith Kline & French Laboratories Ltd [1990] 1 AC 64; Smith Kline & French Laboratories Ltd v Attorney-​General [1991] 2 NZLR 560.

192

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 at 110.

193

See, for example, Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10.

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Confidential Information  Chapter  6

of employment, directed at restricting an employee’s use of information received in the course of employment. Where parties agree, via a contract, to impose confidentiality obligations, there is a legitimate question as to what, if any, role equity retains. Where Australian law sits on this point remains the subject of conflicting authority. One line of authority, emanating chiefly from New South Wales courts, locates the existence of a relevant, applicable contractual obligation of confidentiality, including via an implied term, as ousting any occasion for equity to intervene to impose its own obligation.194 This view, it is reasoned, “accords with the residual nature of the equitable duty” and is “consistent with the notion of equity’s ‘supplementing’ role … in relation to fiduciary duties”.195 As to the latter, it is clear that whilst contractual and fiduciary relationships may coexist, it is the contractual terms that regulate the parties’ obligations and entitlements, and that the fiduciary relationship, if it exists, must be accommodated to the terms of the contract: see [4.30]. Yet it seems that the issue is not quite so clear-​cut. A second line of authority, deriving chiefly from the Full Court of the Federal Court in Optus Networks Pty Ltd v Telstra Corporation Ltd,196 is that contractual and equitable duties can coexist. The court remarked that “[t]‌he notion that no equitable duty of confidence arises where there is a comparable contractual duty is opposed to much authority”.197 But aside from listing several mainly English cases in support of this proposition, their Honours did not elaborate the point, or explain how those cases supported the proposition. In fairness, there was little need to do so, because the contract before the court explicitly stated that the remedies it prescribed were “not exclusive of the rights, powers or remedies provided by law independent of this agreement” and referred to an account of profits as being “a remedy provided by law independent of this agreement”. It followed that the contract itself left the door open to equitable doctrine, making the court’s observation above strictly obiter.

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[6.185]  Ultimately, no court is suggesting that equitable jurisdiction can never exist in the

face of contract; after all, “contract does not necessarily assuage conscience, and equity may yet give force to conscience”.198 Also clear is that any equitable obligation must accommodate to the terms of the parties’ agreement. Equity is loathe to impose confidentiality obligations misaligned with those contractually agreed, especially in commercial dealings between sophisticated parties. The question is therefore whether, and if so the extent to which, the equitable jurisdiction provides scope, in each case, for a different (broader) obligation than agreed in contract or an avenue for relief not available in contract. In Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd,199 that the agreement in issue contained an entire contract clause —​which marked its written terms as “the entire agreement and understanding between the parties on everything connected with the subject

194

International Entertainment New Zealand (No 2) Ltd v Lewis (1998) 42 IPR 162 at 166 per Bryson J; Del Casale v Artedomus (Aust) Pty Ltd (2007) 73 IPR 326 at [118] per Campbell JA; Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd [2013] NSWSC 281 at [89]–​[97] per Stevenson J. See also Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915 at [63] per Gordon J; Optus Networks Ltd v Telstra Corp Ltd (No 3) [2009] FCA 728 at [4]‌–​[6] per Edmonds J.

195

Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) 85 NSWLR 196 at [150] per Barrett JA, with whom Meagher and Ward JJA agreed.

196

Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281.

197

Optus Networks Pty Ltd v Telstra Corporation Ltd (2010) 265 ALR 281 at [38] per the court.

198

CF Partners (UK) LLP v Barclays Bank plc [2014] EWHC 3049 (Ch) at [133] per Hildyard J.

199

Gold & Copper Resources Pty Ltd v Newcrest Operations Ltd [2013] NSWSC 281 at [97].

[6.185]  185 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Equity and Trusts in Australia

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matter of this Agreement” —​led Stevenson J to rule that a confidentiality clause in the contract covered the confidentiality issue, thereby leaving no reason for equity to impose its own obligation. There is sense in this conclusion; otherwise the court would, under the guise of conscience, be imposing obligations on parties to commercial transactions more extensive than those they had negotiated. A court may, on good grounds, surmise that had the parties desired different confidentiality obligations, they would have bargained for these via the terms of their agreement. The foregoing assumes, though, that contract necessarily covers the field. Even in some commercial dealings this may not always be so. Contract may fail to address part of the relationship —​including aspects of (confidential) pre-​contractual negotiations —​or not address an event or course that is unforeseen, or may do so in a manner that lacks clarity.200 There may be occasions where a restraint of trade clause is struck down for unreasonableness. In each instance, equity’s so-​called supplementary role, as a source of duty and remedy, is extant. But where confidentiality derives from contract, the remedies for its enforcement or breach are those available for the purposes of contract law. It may not, at least in theory, open the door to the span of equitable remedies merely because equity may, lacking the confidentiality term, have granted relief in the circumstances. Yet why this should necessarily be so is unclear, assuming that the nature (as opposed to source) of the obligation is the same.201 It is legitimate to query why a difference in source —​between agreed (contractual) and imposed (equitable) duties —​should translate to distinct remedial options if the obligations are in truth of the same nature and cover the same ground. The uncertainty surrounding the law here may explain why the contracting parties in Optus Networks, above, chose to make explicit that contract did not oust the equitable jurisdiction, including equitable remedies. In any event, the law reports evince instances where courts have granted relief in equity for a contractual breach of confidence, informed by a coexistent parallel equitable obligation.202 Information disclosed to a governmental body [6.190]  Citizens who disclose confidential information to the government or a governmental

body may in equity (as well as under privacy legislation) be able to restrain its use for purposes beyond the purpose of the disclosure. In Castrol Australia Pty Ltd v EmTech Associates Pty Ltd,203 before marketing a new lubricating oil, the plaintiff consulted the (then) Trade Practices Commission for guidance to assess whether proposed promotional material complied with consumer protection provisions of the (then) Trade Practices Act 1974 (Cth). For this purpose, it supplied confidential documents. The Commission later sought to prosecute the plaintiff for breaches of other provisions of that Act on the basis of information found in those confidential documents. The plaintiff successfully restrained the use of those documents in this manner, arguing that they had been supplied for a limited purpose, Rath J observing that:204 Where information provided is to be considered as confidential, its use and disclosure is … to be limited to the purpose for which the information was given … the information was given, 200

CF Partners (UK) LLP v Barclays Bank plc [2014] EWHC 3049 (Ch) at [132] per Hildyard J.

201

See Aplin, Bently, Johnson and Malynicz, Gurry on Breach of Confidence (2nd ed, OUP, 2012), pp 111–​117.

202 See, for example, Peter Pan Manufacturing Corporation v Corsets Silhouette Ltd [1964] 1 WLR 96; McKennitt v Ash [2008] QB 73. 203

Castrol Australia Pty Ltd v EmTech Associates Pty Ltd (1980) 33 ALR 31.

204

Castrol Australia Pty Ltd v EmTech Associates Pty Ltd (1980) 33 ALR 31 at 46–​47.

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Confidential Information  Chapter  6

and a copy of the report supplied, for a limited purpose. It is proper to infer that the information was received, and the copy of the report taken, with knowledge and acceptance by the Commission of the limitations on use imposed by that purpose. That purpose did not extend to any investigation of the plaintiff’s advertising with a view to a prosecution of the plaintiff.

Conversely, if the government or governmental body has given no undertaking to treat the information as confidential and proposes to do no more than its statutory or constitutional duty or privilege regarding the information, equity will not intervene to enforce any alleged confidentiality obligation.205 Information collected by law enforcement officers [6.195]  Statutory powers given to the police carry a public law duty to exercise them in the public interest and with due regard to the rights of individuals.206 This combines with a private law duty of confidentiality under which information received by police, as police, can be disclosed and used only for the purposes of carrying out the public duty. For instance, where statements are made by an accused under caution to the police, implicit in that relationship is that the information is to be used only for the purposes for which it is provided and not for extraneous purposes (such as leaking it to the press or anyone else). The caution warns the accused that a statement may be used for the purpose of the proceedings, not that it is at the free disposal of the police or anyone else into whose hands it may fall.207 The same applies regarding items or documents seized, or photographs or videotapes made, in a criminal investigation; they cannot be used or disclosed for purposes inconsistent with the limited purpose of the investigation.208

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[6.200] Such an obligation of confidentiality can be overridden by a countervailing pub-

lic interest only in extreme circumstances, “where the information disclosed is of a nature destructive to or placing at real risk public welfare and safety, and disclosure is necessary to protect the public”.209 Even then the disclosure may be limited to a person or body who has a proper interest in receiving the information, such as a public body in order to enable it to perform its duty210 or, exceptionally, to the press. The dilemma is illustrated by the issue of police disclosure of offenders’ identities or addresses to persons in a neighbourhood. In R v Chief Constable of the North Wales Police,211 police disclosed, on a “need to know” basis, the identity and address of two persons with convictions for paedophilia. Buxton J upheld the police action, reasoning as follows:212 205

Re Smith Kline & French Laboratories Ltd [1990] 1 AC 64 at 104–​105 per Lord Templeman.

206

Marcel v Commissioner of Police of the Metropolis [1992] Ch 225 at 261 per Nolan LJ.

207

Bunn v British Broadcasting Corporation [1998] 3 All ER 552 at 556 per Lightman J.

208

Marcel v Commissioner of Police of the Metropolis [1992] Ch 225 at 261 per Nolan LJ; Donnelly v Amalgamated Television Services Pty Ltd (1998) 45 NSWLR 570 at 575–​576 per Hodgson CJ in Eq (restricting the television broadcasting of video footage of the plaintiff being arrested in the course of police accessing private premises pursuant to a search warrant); Stepping Stones Nursery Ltd v Attorney-​General [2002] 3 NZLR 414 at 421–​422 per Harrison J (disclosure by police officer of information gathered during the execution of a search warrant to a competitor of the plaintiff held to constitute a breach of confidence).

209

Stepping Stones Nursery Ltd v Attorney-​General [2002] 3 NZLR 414 at 425 per Harrison J. Cf Marcel v Commissioner of Police of the Metropolis [1992] Ch 225 at 265 per Sir Christopher Slade (who allowed the police to disclose documents seized for the purposes of a criminal investigation to the victim of an alleged crime so as to ensure a fair trial on full evidence in civil proceedings arising out of that crime). As to the public interest defence, see [6.280]–​[6.310].

210

See, for example, Stepping Stones Nursery Ltd v Attorney-​General [2002] 3 NZLR 414 at 426–​427 per Harrison J (information derived in the course of a criminal investigation that the plaintiff may have stolen a competitor’s budwood could have been reported to the Commissioner of Plant Variety Rights).

211

R v Chief Constable of the North Wales Police [1999] QB 396.

212

R v Chief Constable of the North Wales Police [1997] 3 WLR 724 at 737 per Buxton J.  See also at 733, 735 per Lord Bingham CJ.

[6.200]  187 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Equity and Trusts in Australia

[I]‌nformation acquired by the police in their capacity as such, and when performing [their] public duties … cannot be protected against disclosure in the proper performance of those duties by any private law obligation of confidence. That is not because the use and publication of confidential information will not be enjoined when such use is necessary in the public interest, though that is undoubtedly the case. Rather, because of their overriding obligation to enforce the law and prevent crime the police in my view do not have the power … to acquire information on terms that preclude their using that information in a case where their public duty demands such use.

The English Court of Appeal affirmed this decision, though with the caution that disclosure “should only be made when there is a pressing need for that disclosure”,213 and that prior to doing so the police should seek information from the persons the subject of the possible disclosure in assessing the risk in question.

BREACH OF DUTY Standing to enforce confidentiality

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[6.205]  Enforcement of a confidentiality obligation, whatever its source, rests on the basis that

the plaintiff has standing to bring the claim. The party complaining must, it has been judicially observed, be the person, or persons, “entitled to the confidence and to have it respected”.214 In Fraser v Evans,215 the plaintiff (F) prepared a report for the Greek government at the latter’s request. The contract between them bound F not to disclose information obtained during or after the contract, but imposed no reciprocal obligation of confidence on the government. The defendant, the editor of a British national newspaper, intended to publish a version of the report that had been obtained clandestinely, which F feared could damage his reputation. F failed in his application for an injunction to prevent the publication for lack of standing. As confidentiality was owed by F, but not owed to F, under the contract, F lacked an entitlement to have the alleged confidence respected.216 As confidentiality protected by equity may be independent of any contractual relationship, relevant standing to enforce the obligation is not determined by the identity of contracting parties or how the contract allocates entitlements. In this context it is necessary to identify the person(s) to whom the confidentiality is owed, as it is they who have standing. In Broadmoor Special Hospital Authority v Robinson,217 the defendant, who having been convicted of manslaughter was detained in a secure hospital, authored a book identifying other patients in the facility, detailing their offences and mental states. The English Court of Appeal refused an application by the plaintiff authority to restrain the publication of the book. It reasoned that the authority lacked standing to bring proceedings to protect the other patients’ rights to confidentiality, unless the conduct complained of affected the authority’s responsibilities within the hospital, which on the facts it did not.218 The latter suggests that there are occasions

213

R v Chief Constable of the North Wales Police [1999] QB 396 at 428 per Lord Woolf MR.

214

Fraser v Evans [1969] 1 QB 349 at 361 per Lord Denning MR.

215

Fraser v Evans [1969] 1 QB 349.

216

Fraser v Evans [1969] 1 QB 349 at 361 per Lord Denning MR, at 363 per Davies LJ, at 364 per Widgery LJ.

217

Broadmoor Special Hospital Authority v Robinson [2000] QB 775.

218

Broadmoor Special Hospital Authority v Robinson [2000] QB 775 at 789 per Lord Woolf MR, at 795 per Waller LJ.

188 [6.205] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

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where an authority, body or institution —​usually a governmental one —​may have standing to protect the confidentiality (or privacy) of persons in its care.219 [6.210] In the commercial environment, in particular, the question of standing may be informed by inquiry into who created the information, that is, by some measure or her or his own time, skill or effort.220 A person who has done no more than, say, summarise confidential information created by another cannot usually maintain standing to enforce the confidence.221 Identifying to whom the information “belongs”222 may assist the inquiry in some instances. In Murray v Yorkshire Fund Managers Ltd,223 a confidential business plan was prepared by a team of persons, including the plaintiff, and communicated to the defendant, an investment manager, for the purpose of securing investment in the venture. There was no partnership or other contractual relationship between members of the team. The defendant was unwilling to make the investment were the plaintiff to become managing director of the planned company. The plaintiff was then paid £5,000 for his work as compensation, after which the team (minus the plaintiff) used the confidential information to secure the defendant’s investment in the venture. The English Court of Appeal dismissed the plaintiff’s action against the defendant for breach of confidence on the ground that the information, being an adjunct to the team relationship, ceased to belong to the plaintiff once that relationship was dissolved.224 Murray does not mean that in a group scenario each party is free to disclose confidential information to third parties, even on a confidential basis, for the purposes for which the information was brought into existence. In Centaur Mining & Exploration Ltd v Anaconda Nickel Ltd,225 the receiver of one of the parties investigating the possibility of entering a joint venture sought an order that the contents of a pre-​feasibility study carried out by the parties be disclosed to prospective purchasers so as to maximise the return for creditors. Warren J refused the application on the grounds that, unlike in Murray, the prospective joint venturers had contractually provided that the content of the study be confidential, the issue concerned the disclosure of the information to a competitor, and the party in receivership had made an investment in the project.226

219

See, for example, Green Corns Ltd v Claverley Group Ltd [2005] EMLR 31 (where an operator of care homes for troubled children succeeded in securing an injunction to prevent the publication of the addresses and intended locations of the homes, Tugendhat J reasoning that “[p]‌ublication or republication risks causing serious harm to the children and carers who occupy, or are to occupy, the addresses concerned”: at [81]); A Local Authority v W [2006] 1 FLR 1 (injunction issued at behest of a local authority to prevent publication of information likely to cause “serious short-​term and long-​term prejudice” to the welfare of children the subject of care proceedings: at [78] per Sir Mark Potter P).

220

Jones v IOS (RUK) Ltd (in members’ vol liq) [2012] EWHC 348 (Ch) at [40] per HHJ Hodge QC.

221

Scott & Associates Engineering Ltd v Finavera Renewables Inc (2013) 79 Alta LR (5th) 172 at [100]–​[105] per S L Martin J.

222

Although this may suggest that information is being treated as property, and indeed in Murray v Yorkshire Fund Managers Ltd [1998] 1 WLR 951 this appears implicit in the court’s conclusion, the term “belong” is used simply to identify the person who has standing to bring the action. Information can hardly be said to “belong” to a person other than the confider, and so such a person lacks standing to enforce its confidentiality.

223

Murray v Yorkshire Fund Managers Ltd [1998] 1 WLR 951 (noted Thompson, “A Loss of Confidence” [1998] Conv 480 at 480–​484).

224

Murray v Yorkshire Fund Managers Ltd [1998] 1 WLR 951 at 959–​960 per Nourse LJ, at 960–​961 per Schiemann LJ.

225

Centaur Mining & Exploration Ltd v Anaconda Nickel Ltd (2001) 19 ACLC 1375.

226

Centaur Mining & Exploration Ltd v Anaconda Nickel Ltd (2001) 19 ACLC 1375 at 1384.

[6.210]  189 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Equity and Trusts in Australia

Need for specificity in identifying confidential information [6.215] A confidant’s disclosure or use of confidential information inconsistent with the

limited purpose (if any) for which it was received represents a breach of confidence, even if unintentional or subconscious.227 Relief rests on a confider identifying with particularity, not merely in global terms, the information alleged to be confidential, so that it can be measured against the alleged or threatened breach.228 An identifiable use of specific confidential information, or at least circumstances from which an inference could properly be drawn as to the use of particular information, must be shown.229 The following are the reasons for this: • Where a plaintiff seeks an injunction to prevent a threatened or continuing publication of confidential information (see [6.320], [6.325]), if the information alleged to be confidential is not clearly defined, any injunction would be of uncertain scope and hence difficult to enforce.230 • The lack of proper particulars may compromise the defence of the action, as the defendant may not know what case he or she has to meet.231 An absence of specificity may raise the inference that the action is designed to harass the defendant, not protect the plaintiff, leading the court to strike it out as an abuse of process.232

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• Where the allegation of misuse of confidential information imputes conduct of a gravely improper character, the law ordinarily demands clear particularisation.233 • The more general the description of the information the plaintiff seeks to protect, the more difficult it is for the court to satisfy itself that the information was imparted or received in circumstances giving rise to an obligation of confidence. This has particular relevance in the employment context; for the law to intervene at the instance of a former employer without the requisite specificity is to endanger the former employee’s legitimate use of know-​how secured in the course of employment (as to which see [6.50]–​[6.70]).234

227

Force India Formula One Team Ltd v 1 Malaysia Racing Team Sdn Bhd [2012] RPC 29 at [240] per Arnold J; Vestergaard Frandsen A/​S v Bestnet Europe Ltd [2013] ICR 981 at [24] per Lord Neuberger. See, for example, Seager v Copydex Ltd [1967] 1 WLR 923 (where the plaintiff communicated to the defendants a trade secret about his new design of a carpet-​grip, and although the defendants understood that the information was imparted in confidence, in utilising it to assist in the design a new form of carpet-​grip on their own account the defendants did not realise that they had (mis)used the information, as they had done so unconsciously, and believed that the law solely precluded them from infringing the plaintiff’s patent; this did not, however, enable them to avoid liability).

228

O’Brien v Komesaroff (1982) 150 CLR 310 at 326–​328 per Mason J; Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 438 per Deane J; CA Inc v ISI Pty Ltd (2012) 201 FCR 23 at [374] per Bennett J; Streetscape Projects (Australia) Pty Ltd v City of Sydney (2013) 85 NSWLR 196 at [159] per Barrett JA, with whom Meagher and Ward JJA agreed.

229

Pioneer Concrete Services Ltd v Galli [1985] VR 675 at 715 (FC).

230

See, for example, Suhrer & Co AG v Transradio Ltd [1967] RPC 329; P A Thomas & Co v Mould [1968] 2 QB 913.

231

Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 359–​360 per Laddie J (noting that it may likewise be an abuse of process to give proper particulars of information that is not, in fact, confidential, in that “[a]‌claim based even in part on wide and unsupportable claims of confidentiality can be used as an instrument of oppression or harassment against a defendant”: at 360); Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629 at [15] per Harper J.

232

See, for example, John Zink & Co Ltd v Wilkinson [1973] RPC 717.

233

John Zink & Co Ltd v Wilkinson [1973] RPC 717 at 725 per Edmund Davies LJ; Liberty Financial Pty Ltd v Scott (No 4) (2005) 11 VR 629 at [13] per Harper J.

234

Liberty Financial Pty Ltd v Scott (No 3) (2004) 11 VR 621 at [16]–​[18] per Harper J. See also Creative Brands Pty Ltd v Franklin [2001] VSC 338 at [22] per Warren J (who remarked that the mere claim by an employer that its former employees had established their own business in competition with the employer’s business “is not sufficient to make out even an arguable case of [misuse] of confidential information”).

190 [6.215] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

For example, in O’Brien v Komesaroff,235 the High Court denied equitable protection to unit trust documents prepared by a solicitor for tax minimisation schemes because the solicitor could not identify with particularity what part of the information was not common knowledge. Inferring a breach of confidence [6.220]  Where the confider alleges that the confidant, in manufacturing a product or adopt-

ing a process, has misused confidential information obtained from the confider, similarities between the products or processes in issue is relevant evidence going to breach. That the confider can demonstrate that the offending product or process represents an evolution from the confider’s ideas or designs may be prima facie evidence of misuse of confidential information.236 It may be, in such a case, that “[t]‌he coincidences are too strong to permit of any other explanation”.237 In any case, where there is evidence that the confidant has misused confidential information, equity will intervene notwithstanding her or his attempts to distinguish the ultimate product or process from the product or process that was the repository of the confidential information. The existence of dissimilarities does not by itself neutralise the court’s jurisdiction,238 which remains because of the use of that information as a springboard. [6.225]  Yet even where the resultant product or process exhibits substantial similarities, the

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onus remains on the confider to establish that the confidant misused confidential information. Lacking direct evidence, if there are two reasonably possible explanations for the confidant’s behaviour, the confider will struggle to discharge this burden. As explained by a New Zealand appellate judge:239 Where… proof [of misuse of confidential information] depends on the drawing of an inference from similarity between what it is that the defendant has disclosed or done and the confidential information … [i]‌t is helpful to begin from some basic principles. First, the possession of confidential information does not of itself preclude a person from developing a product equivalent to that which is protected, provided that the confidential information or element is not misused. Secondly, the fact that a person is aware, when receiving information from an independent source, that it conforms with the confidential information, does not in itself give rise to misuse. Nor does the mere fact that the person takes comfort from that knowledge. It is only if the knowledge or comfort causes the person to do, or to omit to do, something that there is conduct amounting to misuse. Normally this will take the form of a person avoiding having to undertake some part of the process required to develop the product. Were the rule to be otherwise, it would be virtually impossible for those possessing confidential information

235

O’Brien v Komesaroff (1982) 150 CLR 310 at 326–​327 per Mason J. See also Amway Corporation v Eurway International Ltd [1974] RPC 82 at 86–​87 per Brightman J; Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 189–​190 per Fullagar J; Lawrence David Ltd v Ashton (1988) 20 IPR 244 at 252–​253 per Balcombe LJ; Rhino Systems International Pty Ltd v Canon Standish (Australia) Pty Ltd (1997) 41 IPR 367 at 372–​373 per Muir J; Trustek Australia Pty Ltd v Burke (1998) 40 IPR 455 at 458–​461 per Wheeler J.

236

Conveyor Co of Australia Pty Ltd v Cameron Bros Engineering Co Ltd [1973] 2 NZLR 38 at 42 per Moller J; Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 375 per Laddie J.

237

Seager v Copydex Ltd [1967] 1 WLR 923 at 931 per Lord Denning MR.

238

Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 at 409 per Goldberg J.

239

Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2004] 3 NZLR 49 at [35] per McGrath J (CA) [revd Norbrook Laboratories Ltd v Bomac Laboratories Ltd [2006] UKPC 25 but without specifically questioning this point, although their Lordships added that “if A entrusts B in confidence with secret proprietary information not publicly available, and B is precluded by contract from using that information for its own purposes, and the relationship between them ends, and B puts on the market a product which could not ordinarily be made without using A’s secret information, a claim by A for breach of contract is likely to succeed unless B shows that it obtained the information from another legitimate source, or as a result of independent research, or in some other manner not involving misuse of A’s information”: at [31]].

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Equity and Trusts in Australia

ever to be involved in developing equivalent competing products. It must be borne in mind that the purpose of the protection of confidences in law and equity is to prevent disclosure and misuse, not to disqualify people from competing.

For example, in Coco v A N Clark (Engineers) Ltd,240 notwithstanding the close resemblance between the engine manufactured by the confidant to that designed by the confider, Megarry J found that, as many of its components were available on the open market, the confider had not established that that the information was confidential in nature. The evidence adduced failed to reveal that the similarities between the engines were achieved by the use of the information, or that the confider’s engine had original qualities that would amount to confidential information. Need for proof of detriment?

Governmental information

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[6.230]  At least in the case of certain governmental information (as to which see [6.155]), the

High Court has indicated that detriment to the confider is a necessary ingredient of an action in breach of confidence.241 In Commonwealth of Australia v John Fairfax & Sons Ltd,242 Mason J observed that, although it may be sufficient detriment to a citizen that disclosure of information will expose her or his actions to public discussion and criticism, the same cannot be said of the government. There must be detriment to the public interest that outweighs the interest of individual free speech. Kirby P in Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd243 saw the “special character of Government” and the nature of its interest in defending from public knowledge governmental confidences as requiring a governmental plaintiff to establish detriment. There the appellant sought to identify detriment by reference to the very nature of a security and intelligence operation, and the loss of confidence in that operation were an insider to “get away with” publishing information concerning it. His Honour rejected this submission on the ground that, inter alia, its non-​interventionist practice in numerous earlier and recent instances regarding similar publications evidenced the absence of detriment.244

Other information [6.235] In Coco v A N Clark (Engineers) Ltd,245 Megarry J identified the unauthorised use

of confidential information “to the detriment of” the confider as an element of an action for breach of confidence. Yet later in his reasons he conceived the possibility of cases where a 240

Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 51–​52.

241

Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 51–​52 per Mason J. See also Director-​General of Education v Public Service Association of NSW (1984) 79 FLR 15 at 20 per McLelland J; Attorney-​General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 271 per Lord Griffiths.

242

Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 50–​51, discussed at [6.155]. In N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 157, Debelle J opined that the need for detriment prescribed in Commonwealth v John Fairfax & Sons Ltd may have to be reviewed, although in making this statement his Honour did not distinguish between governmental and non-​governmental information.

243

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 156, discussed at [6.160].

244

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 160.

245

Coco v A  N Clark (Engineers) Ltd [1969] RPC 41 at 47. Cf Nichrotherm Electrical v Percy [1956] RPC 272 at 273 per Harman J (where relief was allowed even though the confidential information related to a machine that had brought “nothing but loss” to those involved with it); Dunford & Elliott Ltd v Johnstone & Firth Brown Ltd [1975] FSR 143 at 148 per Lord Denning MR.

192 [6.230] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

plaintiff might be motivated to seek equitable relief without having suffered detriment, such as when disclosure of confidential information shows her or him in a favourable light but injures a person whom he or she wishes to protect.246 The judicial trend, to this end, seems to be against the need for proof of detriment, at least outside of governmental information. In Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health,247 for instance, Gummow J favoured this view on the ground that “equity intervenes to uphold an obligation and not necessarily to prevent or to recover loss”, adding that “[t]‌he obligation of conscience is to respect the confidence, not merely to refrain from causing detriment to the plaintiff”.248 On appeal the Full Federal Court spoke in terms of “unconscientious use” of confidential information rather than detriment.249 An alternative approach may be to view the issue of detriment as arising “solely as a question of discretion in considering the desirability of imposing an equitable remedy”.250 If indeed equity’s intervention to preserve the confidentiality of information reflects its proclivity against unconscionable or unconscientious conduct, the element of detriment could have some role to play to the extent that unconscionability requires some consideration of the practical effect on the confider of the misuse of the information.251 If this is correct, detriment can be seen as a variable through which the courts engineer relief appropriately tailored to the facts in each case. In any event, the issue is unlikely to be of frequent significance because in most cases in which a breach of confidence is alleged, detriment of one kind or another is present.252 And if the claim is one in contract, detriment is superfluous because a breach of contract is actionable per se without proof of damage. Receipt of confidential information by third parties

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[6.240] Equity can restrain third parties who receive information in breach of confidence

from its unauthorised disclosure or use.253 Otherwise equitable protection of confidences would be of little practical value once the information had been disclosed to a third party; it would suffer the same drawback as contractual protection of confidences, namely privity of contract. As equity acts on the conscience of a person, a third party recipient of confidential information cannot escape liability if, knowing the information to be confidential, he or she

246

Coco v A N Clark (Engineers) Ltd [1969] RPC 41 at 48.

247

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87.

248

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 at 126. See also N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 157 per Debelle J; Rapid Metal Developments (Australia) Pty Ltd v Anderson Formrite Pty Ltd [2005] WASC 255 at [78] per Johnson J (“the requirement for proof of detriment is inconsistent with the established notion that the basis for the exercise of equitable jurisdiction is to enforce the obligation of confidence”); Ammon v Consolidated Minerals Ltd (No 3) [2007] WASC 232 at [310] per Martin CJ.

249

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679 at 692.

250

Dean, The Law of Trade Secrets and Personal Secrets (2nd ed, Lawbook Co, 2002), p 122.

251

Telephonic Communicators International Pty Ltd v Motor Solutions Australia Pty Ltd (2004) 62 IPR 323 at [47] per Selway J. Cf the relationship between detriment and unconscionable conduct in estoppel: see [10.340].

252

See, for example, Ecrosteel Pty Ltd v Perfor Printing Pty Ltd (1996) 37 IPR 22 at 34–​35 per Cowdroy AJ; Director of Public Prosecutions (Cth) v Kane (1997) 140 FLR 468 at 475 per Hunt CJ at CL; N P Generations Pty Ltd v Feneley (2001) 80 SASR 151 at 157 per Debelle J.

253

See Dal Pont, Law of Confidentiality (LexisNexis Butterworths, 2015), Ch 14.

[6.240]  193 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Equity and Trusts in Australia

makes unauthorised use or disclosure of that information.254 The liability attaches from the date of such knowledge. Knowledge in this context clearly embraces actual knowledge, such as where documents are marked “secret” or “confidential”,255 where their very nature attests to their confidentiality,256 or where the third party has deliberately closed her or his eyes for fear of discovering their confidentiality.257 Constructive knowledge —​that is, knowledge of information a reasonable person in the third party’s position would have appreciated was confidential —​ can also trigger liability.258 Notwithstanding suggestion in England aligning the test in this context with one of dishonesty, in the sense in which that term is used in cases of accessory liability in that jurisdiction259 (which does not encompass mere constructive knowledge: see [38.75]), that this has been queried by English judges260 suggests an alignment with the position in Australia. [6.245]  Where an injunction has been granted prohibiting a defendant from using or disclos-

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ing confidential information, a third party who, with knowledge of the order, does an act that has the effect of interfering with or undermining its manifest purpose commits contempt even if the order was not directed to her or him.261 In Attorney-​General v Punch Ltd,262 the Crown, having secured an interlocutory injunction restraining a former Security Service officer from disclosing information obtained in the course of his employment, brought contempt proceedings against the editor of a magazine for publishing an article by the officer disclosing information in breach of the injunction. The House of Lords found the editor guilty of criminal contempt on the basis that he knew that the proceedings against the officer raised confidentiality issues relating to national security, and must have appreciated that in publishing the article he was doing exactly what the order sought to prevent, namely pre-​empting the court’s decision on those issues.

254

Fraser v Evans [1969] 1 QB 349 at 361 per Lord Denning MR; Butler v Board of Trade [1971] Ch 680 at 690 per Goff J; Foster v Mountford and Rigby Pty Ltd (1976) 14 ALR 71 at 75 per Muirhead J; G v Day [1982] 1 NSWLR 24 at 35 per Yeldham J; Wheatley v Bell [1982] 2 NSWLR 544 at 550 per Helsham CJ in Eq.

255

English & American Insurance Co Ltd v Herbert Smith [1988] FSR 232 at 238 per Browne-​Wilkinson VC; Jockey Club v Buffham [2003] QB 462 at [41]–​[44] per Gray J (who added that it is not appropriate in this respect to “cherry-​pick” from the documents passages than when divorced from their context may lack the quality of confidence and argue from there that the entire document has not been shown to be confidential).

256

Such as a patient’s medical records held by a doctor:  see, for example, AMI Australia Holdings Pty Ltd v Fairfax Media Publications Pty Ltd (2011) Aust Torts Rep ¶82-​077 at [28], [135] per Brereton J (distinguishing this from information relating to the way in which the applicant remunerated its employed doctors, which a third party would not necessarily appreciate to be confidential: at [129]).

257

Attorney-​General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 281 per Lord Goff.

258

Wheatley v Bell [1982] 2 NSWLR 544 at 548 per Helsham CJ in Eq; Minister for Mineral Resources v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 at 405 per Young J. See Arnold, “Circumstances Importing an Obligation of Confidence” (2003) 119 LQR 193.

259

Thomas v Pearce [2000] FSR 718 at 720–​721 per Buxton LJ.

260

See, for example, Campbell v MGN [2003] QB 633 at [66]–​[71] (CA); Force India Formula One Team Ltd v 1 Malaysia Racing Team Sdn Bhd [2012] RPC 29 at [251] per Arnold J. See also Stanley, The Law of Confidentiality: A Restatement (Hart Publishing, 2008), pp 28–​30 (remarking that “[i]‌t would be bizarre indeed if the person who acquired information from a third party who was acting in breach of confidence was in a better position than someone who acquired the information directly or without any breach by a third party”, meaning that “there is no reason why the ‘dishonesty’ standard should apply to the person who acquires the information from a third party who happens to be acting wrongfully in communicating it”: p 28).

261

Attorney-​General v Punch Ltd [2003] 1 AC 1046 at [4]‌per Lord Nicholls, at [66] per Lord Hoffmann, at [87] per Lord Hope; Jockey Club v Buffham [2003] QB 462 at [23], [24] per Gray J.

262

Attorney-​General v Punch Ltd [2003] 1 AC 1046.

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Confidential Information  Chapter  6

Innocent recipients

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[6.250]  Recipients of information conveyed in breach of confidence who lack knowledge of

its original confidentiality can be restrained from perpetuating the breach by using or disclosing the information after receiving notice of the impropriety.263 It follows that any account of profits (as to which see [6.330], [6.335]) against an innocent third party will be limited to profits derived after receipt of notice of the breach.264 The plaintiff’s commencement of proceedings amounts to the requisite notice.265 In Wheatley v Bell,266 the plaintiffs had the idea of creating a directory of small businesses and local services in a locality so that businesses could be placed within easy contact of potential customers. A teledex system was used, for advertising material to be inserted into. Businesses would pay to be included in the directory. Each locality would be the subject of a franchise agreement. To procure franchisees, the plaintiffs advertised the scheme in metropolitan Perth. The advertisements did not disclose the nature of the business. The first defendant responded to the advertisement and showed some interest in the business. The plaintiffs gave the first defendant a detailed explanation of the system and mentioned that they intended to commence a similar business in Sydney. The defendant questioned the plaintiffs about the protection a franchisee would have against others independently commencing such a business, and was informed that nobody apart from the plaintiffs knew how it worked. The defendant subsequently told the plaintiffs that he had lost interest in the venture, but then proceeded to establish a business adopting the plaintiffs’ idea and system in Sydney. This the plaintiffs discovered when they attempted to pursue the business in Sydney, by which time the defendant had been carrying on the business for some three months and had found three buyers for the scheme. These buyers were joined as defendants. It was clear that the first defendant knew or ought to have known that the information was being supplied in confidence. Helsham CJ in Eq had greater difficulty with the other defendants. At least two of these, the evidence indicated, had no knowledge that the information about the system had been imparted to the first defendant in confidence. It was argued that these defendants were analogous to bona fide purchasers for value without notice, and thus should be free to use the information that had come to them innocently. The Chief Justice rejected this, remarking that “[t]‌he defence of bona fide purchaser for value is an equitable defence directed towards the resolution of priorities in relation to property rights … [and] there are no property rights associated with the type of equity involved here”.267 By reason of the court action, the previously innocent defendants were conferred knowledge of the breach of confidence, and so could be restrained from using the information by means of an injunction. [6.255]  Essentially, the ruling in Wheatley v Bell proceeds on the assumption that confidential

information is not property.268 This reasoning has been criticised on the basis that information 263

Butler v Board of Trade [1971] Ch 680 at 690 per Goff J; Malone v Metropolitan Police Commissioner [1979] Ch 344 at 361 per Megarry VC; Goddard v Nationwide Building Society [1987] QB 670 at 685 per Nourse LJ; Johns v Australian Securities Commission (1993) 178 CLR 408 at 460 per Gaudron J; Director of Public Prosecutions (Cth) v Kane (1997) 140 FLR 468 at 473–​474 per Hunt CJ at CL; Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 at 406 per Goldberg J; Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 587–​588 per Binnie J.

264

Butler v Board of Trade [1971] Ch 680; G v Day [1982] 1 NSWLR 24.

265

Ricketson, “Confidential Information —​A New Proprietary Interest” (1977–​1978) 11 Melb ULR 223 at 240–​241.

266

Wheatley v Bell [1982] 2 NSWLR 544.

267

Wheatley v Bell [1982] 2 NSWLR 544 at 549–​550.

268

As to the issue of information as property, see Aplin, “Confidential Information as Property?” (2013) 24 King’s LJ 172; Dal Pont, Law of Confidentiality (LexisNexis Butterworths, 2015), Ch 3.

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Equity and Trusts in Australia

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exhibits sufficient of the traditional characteristics of property to sustain a valid analogy with property.269 The purpose of this analogy is not to protect some conception of property but to treat equitably and equally a class of persons whose behaviour is similar, namely innocent purchasers in good faith and for value.270 An alternative approach is to give a confider’s standing to enforce an obligation of confidence a status exceeding a mere equity —​namely a recognition that some mere equities come closer to equitable proprietary interests than others. In this sense, the right to a remedy for breach of confidence is viewed as a form of property,271 which therefore competes with competing proprietary interests according to the “better equity”: see [2.10]–​[2.120].272 A suggested alternative, but related, approach is to inquire into whether a third party recipient of confidential information has acted unconscionably in acquiring the information or in the way it has been employed. This was favoured by the New Zealand Court of Appeal in Hunt v A,273 and aligns with that of some judges vis-​à-​vis surreptitiously obtained confidential information (see [6.275]). In reflecting equity’s predilection against unconscionable conduct, it was unsurprising that the court viewed the state of the defendant’s knowledge as “the most critical factor in the vast majority of cases”.274 Actual knowledge, including wilful blindness, equates to unconscionable conduct in this regard, but the court saw as “much more problematic” the extent to which, if any, constructive knowledge or even “true” innocence should factor into the relevant inquiry.275 Unless the law is able to address these “difficult” cases under the banner of unconscionable conduct, the test suffers significant limitations. [6.260]  Another method of balancing the interests of the confider against those of innocent third parties is to allow the confider a prima facie right to take action against third parties, subject to the defence of change of position. This would mean that “[a]‌good faith defendant who is later told that information has been given to him in breach of confidence should be excused from liability if he has irrevocably changed his position to his detriment, so that it would be inequitable to grant the plaintiff any relief”.276 This approach is said to exhibit two principal virtues.277 First, it gives a measure of protection to both innocent parties: to the third party who cannot be restored easily to her or his initial position; and to the confider whose injury can be avoided simply by paying to the third party her or his expenditure for the information. Secondly, it avoids bringing what may prove a potentially misleading analogy —​the bona fide purchaser —​into confidence law.

269

Gurry, “Breach of Confidence” in Finn (ed), Essays in Equity (The Law Book Company Limited, 1985), pp 122–​123.

270

In fact, there are dicta that an action for breach of confidence should not extend to bona fide purchasers for value without notice: Morison v Mouat (1851) 9 Hare 241 at 263–​264; 68 ER 492 at 501–​502 per Turner VC; Attorney-​General v Guardian Newspapers (No 2) [1990] 1 AC 109 at 177 per Sir John Donaldson MR; Valeo Vision Société Anonyme v Flexible Lamps Ltd [1995] RPC 205 at 227–​228 per Aldous J; Minister for Mineral Resources v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 at 405 per Young J; Tchenguiz v Imerman [2011] Fam 116 at [74] per Lord Neuberger MR; Retractable Technologies Inc v Occupational & Medical Innovations Ltd (2007) 72 IPR 58 at [87] per Greenwood J.

271

See Smith Kline & French Laboratories (Aust) Pty Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 at 135–​136 per Gummow J; Wheeldon, “Reflections on the Concept of ‘Property’ with Particular Reference to Breach of Confidence” (1997) 8 Auck ULR 353 at 379–​385.

272

See Palmer, “Information as Property”, in Clarke (ed), Confidentiality and the Law (Lloyd’s of London Press Ltd, 1990), pp  92–​99.

273

Hunt v A [2008] 1 NZLR 368.

274

Hunt v A [2008] 1 NZLR 368 at [94].

275

Hunt v A [2008] 1 NZLR 368 at [94].

276

Jones, “Restitution of Benefits Obtained in Breach of Another’s Confidence” (1970) 86 LQR 463 at 477.

277

Finn, Fiduciary Obligations (The Law Book Company Limited, 1977), p 162.

196 [6.260] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

American law acknowledges scope for a change of position defence in this context.278 And at least in so far as the law of restitution is concerned, specifically in its application in the mistaken payment environment,279 English and Australian law recognises a change of position defence.280 But there has been greater reticence in the Australian judiciary to countenance a parallel defence with a broader application, in part because what jurisprudence underscores it remains in a relatively rudimentary state.281 This, in part, explains why it awaits judicial recognition and endorsement in any application to breaches of confidence. There may, in any case, be legitimate questions as to the practical need for a change of position defence to qualify some existing restitutionary, compensatory or even injunctive relief.282

INFORMATION GAINED BY REPREHENSIBLE MEANS [6.265]  The surreptitious taking of information may raise issues impacted upon by tort law,

such as trespass, nuisance, defamation and injurious falsehood, or by the law of intellectual property. Equity also has a role to play, as it can restrain the misuse of confidential information obtained illegally, tortiously, surreptitiously or improperly.283 The latter represents an extension of the jurisdiction to restrain the use of confidential information against third party recipients (as to which see [6.240]–​[6.260]).284 The rationale for equity’s intervention was well explained by the Supreme Court of Hong Kong:285

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If it be … the policy of the law to encourage people to respect confidential information imparted to them, then all the more must it be the policy of the law to discourage people from misappropriating and then misusing other people’s confidential information … It is wrong to obtain other people’s confidential information surreptitiously for one’s own use. No man may benefit from his own wrong … [U]‌nless the use is so trifling that the maxim “de minimis non curat lex” —​the law does not concern itself with trifles —​comes into play, any self-​use of other people’s confidential information obtained through wrong doing is, practically by definition, misuse.

In fact, the case for equitable intervention to protect confidentiality is at least as strong, if not stronger, when information is stolen or otherwise secured by surreptitious means.286 It follows that a defendant who uses confidential information directly or indirectly obtained from the plaintiff without the latter’s express or implied consent infringes the plaintiff’s equitable

278

American Law Institute, Restatement (Third) of Unfair Competition (1995), §40 cmt d; Uniform Trade Secrets Act, s 2(b) (drafted by the National Conference of Commissioners on Uniform State Laws) (enacted in almost every US State).

279

See, for example, Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560.

280

See Mason, Carter and Tolhurst, Mason and Carter’s Restitution Law in Australia (3rd ed, LexisNexis Butterworths, 2016), Ch 24. As to the topic more generally, see Bant, The Change of Position Defence (Hart Publishing, 2009).

281

As appears from detail differences in the views, even in the mistaken payment context, espoused by respective judges of the High Court of Australia in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 (see at [5]‌–​[25] per French CJ, at [77]–​[88] per Hayne, Crennan, Kiefel, Bell and Keane JJ, at [143]–​[158] per Gageler J).

282

See Stanley, The Law of Confidentiality: A Restatement (Hart Publishing, 2008), pp 102–​105.

283

Lord Ashburton v Pape [1913] 2 Ch 469 at 475 per Swinfen Eady LJ; Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 50 per Mason J; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 222–​225 per Gleeson CJ, at 272 per Kirby J. See further Richardson, “Breach of Confidence, Surreptitiously or Accidentally Obtained Information and Privacy: Theory Versus Law” (1994) 19 MULR 673; McRobert, “Breach of Confidence: Revisiting the Protection of Surreptitiously Obtained Information” (2002) 13 AIPJ 69.

284

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 272 per Kirby J.

285

Koo v Hing (1992) 23 IPR 607 at 634, 636, 637 per Bokhary J.

286

Minister for Mineral Resources v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 at 405–​406 per Young J; Sullivan v Sclanders (2000) 77 SASR 419 at 428 per Gray J.

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Equity and Trusts in Australia

rights.287 For instance, a thief who steals a trade secret for use in commercial competition with its owner acts in a manner attracting the intervention of equity. In Franklin v Giddins,288 for example, the plaintiff was the only grower of a commercially successful fruit known as the “Franklin Early White” nectarine. The defendant stole budwood cuttings from the plaintiff’s orchard, carried out a grafting process, and began to grow Franklin Early White nectarines. Dunn J found that, by stealing the budwood, the defendant had stolen a trade secret (as to which see [6.30], [6.35]), as the “information” represented by the genetic structure of the wood was of substantial commercial value, which the plaintiff had expended considerable time and effort in developing. [6.270]  A competitor’s secret can be legitimately used if its discovery is through reverse engineering or independent research even where an attempt has been made to encrypt the information, provided that the product in question has not been obtained surreptitiously. Equity will, however, restrain the disclosure and misuse of information surreptitiously obtained where reasonable precautions are taken to maintain its secrecy. For example, the misuse of information obtained by the defendant as to a plaintiff’s secure plant by taking aerial photographs of the site may constitute a breach of confidence.289 That the airing of information in the form of photographs obtained by trespass could be protected by equity was recognised by Gleeson CJ in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd.290 His Honour held that the videotape of operations of a processor of possums effected through trespass could, had it been private (which on the facts had not been established), be restricted from being broadcast pursuant by equity because images and sounds of those private activities so recorded could be viewed as confidential information.291 Beyond physical barriers, other precautions that serve to bring home to the defendant knowledge that the information is intended to remain confidential include a plaintiff’s use of signage,292 oral instructions and the selective admittance of persons to a defined area,293 and passwords and firewalls for electronic information. Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

[6.275]  Equity’s intervention here does not require proof of a communication of confidential

information in confidential circumstances, for there is no communication by the “owner” of the information. For this reason some have argued that the traditional protection of trade secrets via breach of confidence should not extend to preventing misuse of accidentally or surreptitiously obtained information, but should have proprietary justifications.294 This view 287

Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203 at 213 per Lord Greene MR.

288

Franklin v Giddins [1978] Qd R 72.

289

E I du Pont de Nemours & Co Inc v Christopher (1970) 431 F 2d 1012 at 1015–​1016.

290

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 (see Taylor and Wright, “Australian Broadcasting Corporation v Lenah Game Meats: Privacy, Injunctions and Possums: An Analysis of the High Court’s Decision” (2002) 26 MULR 707 at 714–​718).

291

Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 225.

292

See, for example, Shelley Films Ltd v Rex Features Ltd [1994] EMLR 134.

293

See, for example, Creation Records Ltd v News Group Newspapers Ltd (1997) 39 IPR 1.

294

See Mitchell, “The Jurisdictional Basis of Trade Secret Actions: Economic and Doctrinal Considerations” (1997) 8 AIPJ 134 at 146–​150. The proprietary notion derives some support from the judgment of Callinan J in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 315–​320, although his Honour focused on the film as the item of property rather than the information on it, and introduced fiduciary trust-​type notions in his analysis. Callinan J viewed the film as an infringement of an important aspect of the respondent’s proprietary rights, its right to exclusive possession of its abattoir and to control what might be done inside it. He considered that equity should regard the relationship “created by the possession of the appellant of a tangible item of property obtained in violation of the respondent’s right of possession, and the exploitation of which would be to its detriment, and to the financial advantage of the appellant, as a relationship of a fiduciary kind and of confidence”: at 315. According to his Honour, where an item of valuable property is obtained in violation of a person’s proprietary right to exclusive possession in circumstances in which the defendant knows or ought to know of the violation, it is “regarded as unconscionably obtained and to be delivered up on demand to the person whose rights have been violated”: at 316.

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Confidential Information  Chapter  6

has some appeal especially in cases involving the theft of tangible property, such as Franklin v Giddins. However, if the information is what represents the property for this purpose, not the tangible item stolen, there is little justification for denying information that character generally. On this basis little scope for equitable protection of confidential information would remain because the information would be protected by the common law. Some have proffered the law of restitution, via unjust enrichment, as an explanation or justification for curial intervention in this context.295 Although cases of this kind may exhibit enrichment to the defendant gained at the expense of the plaintiff as a result of an unjust factor in the absence of a recognised defence, to date no Australian authority has endorsed this approach. Instead the modern case law endorses the application of equitable doctrine in this context, albeit not based in the traditional notions of trust and confidence but focused on equity’s jurisdiction to prevent unconscionable conduct.296 This is justified on the basis that, absent an obligation imposed by the confider on the confidant not to use the information other than for the purposes specified, equity must supply one, and a concern with rectifying the consequences of unconscionable conduct is equity’s historical function (see [P.150]–​[P.160]) and its practice in other areas of equitable jurisdiction.297 Others query whether focusing on unconscionable conduct supplies a sufficiently precise basis for distinguishing illegitimate espionage from legitimate competitor intelligence or surveillance.298

PUBLIC INTEREST DEFENCE

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[6.280]  In England the courts have recognised, as a general defence against breach of confi-

dence, a claim that the public interest may justify the disclosure of information that amounts to such a breach.299 The same appears to have ensued in New Zealand.300 It involves a balancing exercise:  to balance the private interest (that also reflects a broader public interest) that confiders should have their confidences protected against the public interest in those confidences being known. It is a question of weighing the respective public interests in each case, and ultimately the weightiest public interest prevails. The person who seeks the disclosure of confidential information bears the onus of substantiating an overriding public interest. Although some Australian judicial statements recognise such a general defence,301 the bulk of Australian authority arguably envisages a more limited role for the public interest, namely in

295

See Mitchell, “The Jurisdictional Basis of Trade Secret Actions: Economic and Doctrinal Considerations” (1997) 8 AIPJ 134 at 143–​146.

296

See, for example, Franklin v Giddins [1978] Qd R 72 at 80 per Dunn J; Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 271–​272 per Kirby J, at 316 per Callinan J. Cf Sullivan v Sclanders (2000) 77 SASR 419 at 429 per Gray J.

297

Such as, for example, in the context of estoppel (see [10.270]), relief against forfeiture (see [11.05]) and constructive trusts (see [38.175]–​[38.230]). See further Richardson, “Breach of Confidence, Surreptitiously or Accidentally Obtained Information and Privacy: Theory Versus Law” (1994) 19 MULR 673 at 695–​697 (favouring unconscionability over restitutionary principles).

298

Gurry, “Breach of Confidence” in Finn (ed), Essays in Equity (The Law Book Company Limited, 1985), p 119.

299

On the public interest defence generally see Pizer, “The Public Interest Exception to the Breach of Confidence Action: Are the Lights About to Change?” (1994) 20 Mon ULR 67; Cripps, The Legal Implications of Disclosure in the Public Interest (2nd ed, Sweet & Maxwell, 1994); Simes, “The Development of the Public Interest Defence to Breach of Confidence” (1999) 7 Waikato L Rev 165.

300

See, for example, Blum v ANZ Bank New Zealand Ltd [2015] NZCA 335.

301

See, for example, David Syme & Co Ltd v GMH Ltd [1984] 2 NSWLR 294 at 297–​298 per Street CJ, at 310 per Samuels JA.

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Equity and Trusts in Australia

the context of governmental information, and in respect of iniquitous information. Each is addressed in turn below. Though discussed by reference to a breach of confidence in equity, the “public interest defence”, whatever its parameters, may provide a defence also to a contractual confidentiality breach. The phrase “no confidence as to the disclosure of an iniquity” —​which as foreshadowed above informs Australian law in this regard —​has been said to extend “beyond a mere discretion to refuse an equitable remedy”.302 That the law would not imply into a contract any duty to maintain as confidential iniquitous information supports this proposition.303 The assumption here is that contractual terms directed to this end should not be enforceable for being against public policy;304 indeed, several of the leading decisions on the scope of the “iniquity rule” have involved contractual confidentiality duties.305 Public interest and governmental information [6.285]  To establish a breach of confidence relating to governmental information the plaintiff

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must show not only that its publication would be a breach of confidence, but that the public interest requires restraint of the publication and that there are no other facets of the public interest contradictory of and more compelling than that relied upon: see [6.155]. This was illustrated in Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd,306 discussed at [6.160], where the New South Wales Court of Appeal rejected the British Government’s claim that disclosure ought to be restrained in the public interest. In fact, Kirby P suggested that the public interest dictated precisely the opposite:307 [I]‌t would be hard to conceive of matters of greater public interest and gravity than those revealed in Spycatcher … Precisely because of the very high Australian public interest in the disclosure contained in Spycatcher and the relevance of those disclosures to the defences which this country should build against similar treason, deception and error, I regard it as virtually impossible, in the circumstances, for the appellant to overcome the defence of public interest which I would hold to apply and to have been made out.

On appeal, the High Court agreed, ruling that Australian courts must resolve the question whether the public interest of Australia should prevail over the right of a foreign state to prevent disclosure rather than examining the public interest of the foreign state.308 Brennan J, who devoted the bulk of his judgment to this matter, concluded that:309 … [p]‌ublic policy requires that Australian security and foreign relations be the overriding consideration to which any obligation of confidence owed to a foreign government is subject and the court, as a branch of government administering domestic law, ought not undertake the function of assessing the impact which the enforcement of such an obligation might have on Australian security and foreign relations.

302

Richardson, Bryan, Vranken and Barnett, Breach of Confidence: Social Origins and Modern Developments (Edward Elgar, 2012), pp 42–​43.

303

Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 456 per Gummow J.

304

See Toulson and Phipps, Confidentiality (3rd ed, Sweet & Maxwell, 2012), p 137, 158.

305

See, for example, Weld-​Blundell v Stephens [1920] AC 956; Initial Services Ltd v Putterill [1968] 1 QB 396.

306

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86.

307

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 10 NSWLR 86 at 170.

308

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 at 45 per Mason CJ, Wilson, Deane, Dawson, Toohey and Gaudron JJ.

309

Attorney-​General (UK) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 at 52–​53. To similar effect in New Zealand, see Attorney-​General (UK) v Wellington Newspapers Ltd [1988] 1 NZLR 129 at 176–​177 per Cooke P.

200 [6.285] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:27.

Confidential Information  Chapter  6

Disclosure of iniquity [6.290]  It has been said that “[t]‌here is no confidence as to the disclosure of an iniquity”.310 In

Corrs Pavey Whiting & Byrne v Collector of Customs (Vic),311 Gummow J interpreted this to mean that “information as to crimes, wrongs and misdeeds lack[s] the necessary quality of confidence and as such prevent one of the constituent elements of the action for breach of confidence from being established rather than providing a defence to the confider”. Rather than approaching the matter as a defence, this approach locates the question as one of determining the confidentiality of information. Yet whether this is so must be queried given Gummow J’s remark in a later case, in the course of rejecting an English-​style general public interest defence, that “equitable principles are best developed by reference to what conscionable behaviour demands of the defendant not by ‘balancing’ and then overriding those demands by reference to matters of social or political opinion”.312 If the focus is on what conscionable behaviour demands, then perhaps the courts are really referring to an inquity defence rather than an inquiry as to confidentiality in the first place. Such an approach has the bonus of avoiding a legal fiction, namely that information of “iniquity” lacks the quality of confidence; indeed such information may, according to ordinary standards of confidentiality, be highly secret.313

Meaning of “iniquity”

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[6.295]  Judges have wrestled with the concept of “iniquity” (or “criminality”) in the search

for a criterion that distinguishes information that may, from that which may not, be disclosed. Clearly, the scope of the term “iniquity” determines the breadth of the defence. If defined broadly, covering any behaviour that equity considers to be unconscionable, the iniquity defence is arguably little more than a public interest defence in different clothes.314 This was not the view of Gibbs CJ in A v Hayden,315 who branded the statement that the public interest in the disclosure of iniquity always outweighs the public interest in preserving confidentiality as too broad unless “iniquity” is confined to mean serious crime, adding that the administration of justice, though a fundamental public interest, is not an exclusive one. On this approach, the more serious the nature of the misdeed, the more likely the iniquity defence will succeed. So a breach of the statutory proscription against misleading and deceptive conduct (see [8.95]), or proof of actionable negligence, may not by itself necessarily amount to an iniquity.316 Nor does behaviour that some, or even many, in society may consider to be

310

Gartside v Outram (1856) 26 LJ Ch 113 at 114 per Wood VC.

311

Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 456 (emphasis supplied).

312

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 at 125. The matter was not addressed on appeal:  Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1991) 99 ALR 679 (FC(FCA)); Smith Kline & French Laboratories (Australia) Ltd v Commonwealth (1991) 173 CLR 194. Gummow J’s approach was endorsed by Gray J in Sullivan v Sclanders (2000) 77 SASR 419 at 427–​431.

313

Cf AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464 at [194] per Campbell J (who suggested that for some types of information, communicated in circumstances which might ordinarily give rise to an obligation of confidence, the recipient of the information is entitled to say, “I am not, in conscience, obliged to keep quiet about conduct like that”).

314

For instance, the characterisation of “iniquity” as “a crime, civil wrong or serious misdeed of public importance” by Kellam J in Australian Football League v The Age Company Ltd (2006) 15 VR 419 at [69] appears difficult to distinguish from a more general public interest conception.

315

A v Hayden (1984) 156 CLR 532 at 545–​546.

316

AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464 at [191] per Campbell J.

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Equity and Trusts in Australia

immoral, depraved or even scandalous, if it is not otherwise illegal.317 In any case, mere allegations of iniquity, however defined, cannot activate the defence; the allegations must prima facie have substance.318 Yet neither Gummow J, nor others who support an iniquity defence,319 have attempted to prescribe the boundaries of “iniquity”. Consistent with any concept informed by notions of what conscionable conduct demands,320 the “iniquity” concept is not inflexible. It must be queried whether, and to what extent, such an approach obviates the main criticism of a general public interest defence as being “not so much a rule of law as an invitation to judicial idiosyncrasy by deciding each case on an ad hoc basis as to whether … it is better to respect or to override the obligation of confidence”.321 So viewed, the “iniquity defence” may reflect (or perhaps extend) the “unclean hands” defence (see [30.170]–​[30.180]).322 If so, the “iniquity” concept does not merit strict confines, as “unclean hands” are not restricted to serious criminal activity.323

Extending the boundaries of the defence [6.300]  Where the threshold is to be set or, put another way, the weight to be accorded to

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“unclean hands”, remains unclear. Reference to English case law on the weight accorded to the public interest may assist. For instance, there is case authority allowing the disclosure of confidential information that discloses a breach of statutory duty in some circumstances, usually in a whistleblower type situation,324 but not in others involving confidential communications the law encourages to be made.325 317

See, for example, Mosley v News Group Newspapers Ltd [2008] EMLR 20 (involving reporting by the defendant newspapers that the plaintiff, a well-​known public figure, had been involved in scandalous sexual conduct in private; Eady J held that a breach of confidence had occurred, and that the public interest was no defence, as it is “highly questionable whether in modern society that is a concept that can be applied to sexual activity, fetishist or otherwise, conducted between consenting adults in private” (at [106]), adding that “it is not for judges to make individual moral judgments or to be swayed by personal distaste” (at [130])).

318

Attorney-​General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 262 per Lord Keith; AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464 at [202] per Campbell J.

319

See, for example, Sullivan v Sclanders (2000) 77 SASR 419 at 427–​431 per Gray J, with whom Prior and Williams JJ concurred.

320

Cowell v British American Tobacco Australia Services Ltd [2007] VSCA 301 at [35] per the court (“there is a public interest in disclosure of iniquity which makes it unconscionable for the applicant to insist upon the maintenance of a confidence which would keep the iniquity secret”).

321

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 at 125 per Gummow J. See also Sullivan v Sclanders (2000) 77 SASR 419 at 427 per Gray J.

322

Hubbard v Vosper [1972] 2 QB 84 at 101 per Megaw LJ; AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464 at [194] per Campbell J. Cf Sullivan v Sclanders (2000) 77 SASR 419 at 431 per Gray J, with whom Prior and Williams JJ concurred; Blum v ANZ Bank New Zealand Ltd [2015] NZCA 335 at [54] per Wild J (citing the sixth edition of this work); Ricketson, “Public Interest and Breach of Confidence” (1979) 12 MULR 176 at 179 (who sees “public interest” as a “wider and more amorphous exception” than that of “unclean hands”); Aplin, Bently, Johnson and Malynicz, Gurry on Breach of Confidence (2nd ed, OUP, 2012), p 724 (who note that the unclean hands defence does not target the public interest but instead focuses on the claimant’s personal conduct in the dealing).

323

Cf Westpac Banking Corporation v John Fairfax Group Pty Ltd (1991) 19 IPR 513 at 525 per Powell J (suggesting that publication of confidential material might be permitted in cases in which there is shown to have been some impropriety that is of such a nature that it ought in the public interest be exposed).

324

See, for example, Initial Services Ltd v Putterill [1968] 1 QB 396 at 410 per Salmon LJ; Jockey Club v Buffham [2003] QB 462 at [57] per Gray J. So far as whistleblowing scenarios are concerned, the need for an iniquity defence is reduced in Australian law, at least in some contexts, by public interest disclosure statutes in each State and Territory, as well as now at a Federal level: Public Interest Disclosure Act 2013 (Cth); Public Interest Disclosure Act 2012 (ACT); Public Interest Disclosures Act 1994 (NSW); Public Interest Disclosure Act 2008 (NT); Public Interest Disclosure Act 2010 (Qld); Whistleblowers Protection Act 1993 (SA); Public Interest Disclosures Act 2002 (Tas); Protected Disclosure Act 2012 (Vic); Public Interest Disclosure Act 2003 (WA). See also Corporations Act 2001 (Cth), Pt 9.4AAA (ss 1317AA–​1317AE) (which provides protection for company employees who whistleblow as to certain breaches of the Act).

325

See, for example, S v S [1997] 1 WLR 1621 at 1625 per Wilson J; Bunn v British Broadcasting Corporation [1998] 3 All ER 552 at 556–​557 per Lightman J.

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Confidential Information  Chapter  6

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[6.305] More difficult issues arise regarding the disclosure of matters relevant to public

health and welfare. A case in point is W v Egdell.326 The plaintiff was detained in a mental institution as a threat to public safety, having shot and killed five people and wounded two others. A decade after being first detained, the plaintiff applied to a mental health review tribunal with a view to eventual discharge. His solicitors instructed the defendant, a psychiatrist, to examine the plaintiff for this purpose. Having done so, the defendant strongly opposed the plaintiff’s discharge on the grounds of his continuing interest in firearms and explosives. This led the plaintiff’s solicitors to withdraw the application. On learning of this, the defendant ensured that the tribunal received a copy of his report. The plaintiff unsuccessfully sought an injunction restraining the recipients of the report from using or disclosing it. Bingham LJ noted that the circumstances gave rise to a duty of confidence, prohibiting the defendant from disclosing the report to the media, in his memoirs or whilst “gossiping with friends” unless he concealed the plaintiff’s identity. Yet where a person had committed multiple killings under the disability of mental illness, decisions that may lead to his release should, according to his Lordship, be made by a responsible authority able to make an informed judgment that the risk of repetition is so small as to be acceptable.327 Sir Stephen Brown P similarly observed that “[t]‌he suppression of the material contained in [the defendant’s] report would have deprived both the hospital and the Secretary of State of vital information, directly relevant to questions of public safety”.328 This approach has been criticised for being insufficiently based in legal principle.329 Notions of iniquity or unclean hands must be stretched in order to explain the court’s intervention in a case of this kind. Yet where the maintenance of confidentiality of information may impact upon public safety, there is indeed a weighty public interest in disclosure, a point recognised by at least one Australian judge.330 Unlike other scenarios justifying equitable intervention, or the protection of equitable rights —​say in respect of breach of fiduciary duty, undue influence or unconscionable dealing —​the scope for detriment in not giving effect to a defence is much greater. It is not limited to the litigants, but may have a public dimension. As Australian courts inquire into the public interest regarding governmental information precisely because of its public dimension (see [6.155]), it seems odd to refuse any such inquiry in other cases with a significant public dimension. There is, in any event, a precedent at common law for such an approach, as the common law envisages that a court can balance private confidential interests against a public interest in disclosure in restricting the boundaries of confidentiality under the terms of a contract.331 The foregoing should not mean that, even were Australian courts to accept a general public interest defence, the defence should be expansive in its scope. Influenced by fear of apparent individual judicial idiosyncrasy, and excessive infringement upon individual rights and

326

W v Egdell [1990] 2 WLR 471.

327

W v Egdell [1990] 2 WLR 471 at 493.

328

W v Egdell [1990] 2 WLR 471 at 485.

329

Smith Kline & French Laboratories (Australia) Ltd v Secretary, Department of Community Services and Health (1990) 95 ALR 87 at 125 per Gummow J.

330

See AMI Australia Holdings Pty Ltd v Fairfax Media Publications Pty Ltd (2011) Aust Torts Rep ¶82-​077 (where the publication by the respondent alleged that the applicant incentivised its employed doctors to disregard patients’ best interests; Brereton J remarked that, if true, this would not have been amenable to protection as confidential information, “because to encourage a doctor to act in that manner would be so potentially injurious to public health and contrary to the public interest as to override any private obligation of confidentiality in that respect”: at [129]).

331

See, for example, Richards v Kadian (2005) 64 NSWLR 204.

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Equity and Trusts in Australia

beliefs,332 the judicial technique should justifiably be a cautious one. Before finding an obligation of confidence to be outweighed by a public interest in ensuring the health and welfare of the community (whether as a whole or a section of it), the court would need to assess the likelihood and severity of the relevant danger were the disclosure unrestrained. Where the danger by maintaining confidentiality is minimal in nature or risk, no doubt a court would be unlikely to override confidentiality, especially when it concerns private information about an individual.333 Yet this is not a task beyond the courts’ experience or expertise, for in other contexts the courts are called upon to do the same.

Restricted disclosure [6.310]  Even when the grounds for the defence are made out, whether based in iniquity, unclean hands or a broader public interest, it does not mean that the information in question can be disclosed at will. Equity’s intervention does not exceed what is necessary to redress the wrong in question, and this applies with equal force to equitable defences. Where equity has recognised information as confidential, it stands to reason that it will not, via an equitable defence, deny that confidentiality to an extent greater than necessary to reflect the policy underlying the defence. So where, for instance, the information involves alleged criminal activity, its disclosure to the police may be justified,334 or where it involves a breach of duty imposed by statute, disclosure may be directed to the relevant regulatory body.335 Broader disclosure, say to the general public via the media, is much more likely the exception than the rule.

REMEDIES FOR BREACH OF CONFIDENCE

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[6.315] The range of remedies available for a misuse of confidential information varies

according to the nature of the claim. For a claim based in contract, tort or property, the legal remedy of damages is available, together with any equitable remedies in aid of the plaintiff’s legal rights (equity’s “auxiliary jurisdiction”). Although claims based solely in equity restrict the plaintiff to equitable remedies, their breadth ensures that appropriate relief is available. Consistent with equitable principle, the court employs proportionality between the perceived threat to the plaintiff’s rights, and the remedy granted:336 see [P.190]. As with equitable relief generally, moreover, the court retains a discretion as to its nature and form and, in addition to the nature of the relevant infringement, may be influenced by the conduct of the litigants. If indeed equitable intervention for breach of confidence is grounded in preventing unconscionable conduct, the prevailing broad interpretation of s 20 of the Australian Consumer Law may serve to attract the broad avenues for relief available under that Law for such a breach: see [9.170], [9.175]. 332

Cf Church of Scientology of California v Kaufman [1973] RPC 635 at 649–​654 per Goff J (who refused to disallow the publication of a book alleged to contain confidential information derived by its author as a student of Scientology, in the face of considerable evidence suggesting that the practices of Scientologists were injurious to health).

333

See, for example, X v Y [1988] 2 All ER 648 at 661 per Rose J (who restrained the disclosure of information that two doctors employed by the plaintiff health authority had contracted AIDS, ruling that although “there is some public interest in knowing that which the defendants seek to publish … those public interests are substantially outweighed when measured against the public interests in relation to loyalty and confidentiality both generally and with particular reference to AIDS patients’ hospital records”); Australian Football League v The Age Company Ltd (2006) 15 VR 419 (a clearer case of a right to confidentiality overriding any alleged public interest, Kellam J refusing to find that the disclosure of players in the plaintiff’s league who had yielded positive drug tests should be disclosed in the public interest: at [84]–​[95]).

334

See, for example, Francome v Mirror Newspapers Ltd [1984] 2 All ER 408.

335

See, for example, Woolgar v Chief Constable of Sussex Police [2000] 1 WLR 25 at 36–​37 per Kennedy LJ.

336

Lock International plc v Beswick [1989] 3 All ER 373 at 384 per Hoffmann J.

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Confidential Information  Chapter  6

Injunction [6.320] An injunction is an appropriate device to restrain apprehended or continuing

misuse of confidential information.337 Interlocutory injunctions are especially suitable as a duty of confidence is rarely indefinite, but lasts only for the period the information remains confidential.338 So an injunction preventing a confider misusing confidential information as a springboard (see [6.40], [6.45]) “should not normally extend beyond the period for which the unfair advantage may reasonably be expected to continue”.339 No injunction will be granted where such an order is futile, such as where there can be no further damage,340 confidentiality has been essentially compromised,341 or detriment the plaintiff apprehends will not be avoided by its grant.342 Nor is an injunction appropriate where damages recoverable at common law are an adequate remedy and the defendant is in a financial position to pay them.343 An applicant guilty of delay344 (see [31.155]) or who fails to give an undertaking as to damages (see [31.130]–​[31.140]) may be denied injunctive relief.345 [6.325] The scope of an injunction depends on the scope of the obligation of confidence

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and the potential detriment the plaintiff would suffer from the misuse of the information. It must be formulated in terms no wider than the occasion demands,346 and in terms sufficiently clear so that the person to whom it is directed (and third parties who are aware of it) can ascertain the information to which it applies.347 The plaintiff in Attorney-​General v Guardian 337

See generally Dal Pont, Law of Confidentiality (LexisNexis Butterworths, 2015), Ch 15.

338

Such relief is especially useful where damages are of no avail and where delay may jeopardise a plaintiff: Foster v Mountford and Rigby Ltd (1976) 14 ALR 71 at 75 per Muirhead J. Yet there may be circumstances where the nature of the information in question, often due to its highly private and/​or sensitive nature, justifies the award of a permanent injunction against its disclosure: see, for example, Australian Football League v The Age Company Ltd (2006) 15 VR 419 (permanent injunction granted restraining the defendant from publishing the identity of players in the plaintiff’s league who had yielded positive drug tests).

339

Roger Bullivant Ltd v Ellis [1987] ICR 464 at 477 per Nourse LJ. See, for example, Hartleys Ltd v Yukich (2002) 115 IR 275 at [38] per McKechnie J (duration of injunction limited to the extent necessary to negate any advantage from the breach).

340

Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622–​623 per Kitto, Taylor, Menzies and Owen JJ; Minister for Mineral Resources v Newcastle Newspapers Pty Ltd (1997) 40 IPR 403 at 411 per Young J.

341

Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 401 per Laddie J.  See, for example, Westpac Banking Corporation v John Fairfax Group Pty Ltd (1991) 19 IPR 513 at 525 per Powell J; Day Neilson v Matthey (1997) 15 ACLC 168 at 178 per Byrne J; Berryman v Solicitor-​General [2005] 3 NZLR 121. Cf Wilson v Ferguson [2015] WASC 15 (where publication of explicit images by a jilted ex-​lover on the Internet did not preclude the issue of an injunction absent evidence that the distribution of the images had been “so widespread that the grant of injunctive relief would serve no utility at this stage”, or that the images had “lost their confidential character by reason of the extent of their publication so that the grant of an injunction would not prevent further detriment to the plaintiff”: at [61] per Mitchell J).

342

Commonwealth of Australia v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 54 per Mason J.

343

American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 408 per Lord Diplock. Cf Woolworths Ltd v Olson (2004) 184 FLR 121 at [278] per Einstein J (who ordered an injunction to prevent an ex-​employee from making unauthorised use of the employer’s confidential information where that disclosure had yet to occur, and so no loss had been suffered to date).

344

See, for example, Trevorrow v State of South Australia (No 4) (2006) 94 SASR 64 at [88] per Debelle J.

345

Dart Industries Inc v David Bryar & Associates Pty Ltd (1997) 38 IPR 389 at 414 per Goldberg J; Bunn v British Broadcasting Corporation [1998] 3 All ER 552 at 557–​558 per Lightman J (cf Thompson, “A Loss of Confidence” [1998] Conv 480 at 488).

346

Day Neilson v Matthey (1997) 15 ACLC 168 at 179 per Byrne J; Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 610–​614 per Binnie J; Attorney-​General v Punch Ltd [2003] 1 AC 1046 at [30], [34], [35] per Lord Nicholls.

347

See, for example, Attorney-​General v Punch Ltd [2003] 1 AC 1046 at [35], [36] per Lord Nicholls (who, in a case involving confidential national security information, stated that an order expressed to restrain publication of “confidential information” or “information whose disclosure risks damaging national security”, or one restraining publication of material whose disclosure “arguably risks damaging national security”, or words to the like effect, would be undesirable because its ambit would not be sufficiently certain; emphasis in original). The fact that an agreement may restrict the use or disclosure of confidential information in quite broad terms does not remove the need for an injunction to be framed with an appropriate degree of precision so as to define what is caught by the injunction: see, for example, Thomas Marshall (Exports) Ltd v Guinle [1979] Ch 227.

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Equity and Trusts in Australia

Newspapers Ltd (No 2)348 sought an injunction to restrain future publication of material derived from security service members. Lord Keith observed that the object of the injunction sought was to “set up a second line of defence … for the confidentiality of the operations of the security service”.349 The first and most important line of defence was identified as steps to secure that service members and ex-​members did not speak about their experiences to the press or anyone else to whom they were not authorised to speak. His Lordship saw the main problem emanating from the general width of the injunction sought as that injunctions normally aim at preventing a specific wrong, not wrongdoing in general.350 He considered it inappropriate to subject a person to an injunction on the ground that he or she is the sort of person likely to commit some kind of wrong. Accordingly, the House of Lords declined to issue a general injunction of the nature sought, because the most appropriate means of preventing publication of such material lay in the observance by security services members of their lifelong duty of confidentiality. Account of profits

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[6.330]  Where a confidant or third party profits from the misuse of confidential information,

the confider may be entitled to an account of those profits even if, at the time of the proceedings, the information is no longer confidential. Account of profits and damages are alternative remedies, as damages compensatory for loss whereas an account of profits disgorges gains: see [34.150]. An account of profits is particularly apt where the confidant has profited more from the misuse of the information than the confider would or could have. An example is where a small manufacturer discloses a trade secret to a large manufacturer in the hope of an agreement that does not eventuate, and the latter profits from the misuse of the trade secret. It is also useful in circumstances where the profit so gained is easily identifiable.351 A leading case is Peter Pan Manufacturing Corporation v Corsets Silhouette Ltd.352 The plaintiff, an American company, licensed the defendant to manufacture women’s underwear based on its designs, and so provided the defendant with design information for certain styles of brassieres. The plaintiff subsequently showed one of the defendant’s designers the former’s new designs for long-​line bras. The defendant later manufactured two new styles of bra, the U15 and the U25, based in part on the plaintiff’s designs. The plaintiff sought an account of profits on the sale of the U15 and U25. Pennycuick J held that as the information had been given in confidence, the plaintiff was entitled to relief. His Lordship determined the amount due to a plaintiff who elects in favour of an account of profits as follows:353 What has the plaintiff expended on manufacturing these goods? What is the price which he has received on their sale? and the difference is profit. That is what the plaintiffs claim in the order for an account as formulated by them; that is simply an account of the profits made by the defendants in the manufacture and sale of the brassieres U15 and U25.

348

Attorney-​General v Guardian Newspapers Ltd [1990] 1 AC 109.

349

Attorney-​General v Guardian Newspapers Ltd [1990] 1 AC 109 at 264.

350

Attorney-​General v Guardian Newspapers Ltd [1990] 1 AC 109 at 264. See also at 280 per Lord Griffiths, at 293 per Lord Goff.

351

See Patfield, “The Remedy of Account of Profits in Industrial and Intellectual Property Litigation” (1984) 7 UNSWLJ 189 at 190–​191; Patfield “The Modern Remedy of Account” (1987) 11 Adel L Rev 1 at 5.

352

Peter Pan Manufacturing Corporation v Corsets Silhouette Ltd [1964] 1 WLR 96.

353

Peter Pan Manufacturing Corporation v Corsets Silhouette Ltd [1964] 1 WLR 96 at 108.

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Confidential Information  Chapter  6

[6.335] English authority indicates that a contractual breach of confidence can attract, in

exceptional cases, the remedy of account of profits even though the information in issue is not protected by equity, but such an approach has not found favour in Australian courts: see [P.60]. Equitable damages [6.340] Historically, equity could grant restitutionary relief (account of profits) but not

compensatory relief (damages). Damages were the domain of courts of law. Where confidential information was protected by contract or property rights, damages could therefore be awarded for its misuse. However, damages were not available for breaches of the purely equitable obligations of confidence.

Jurisdiction pursuant to statute [6.345]  In England, a power to award damages in lieu of or in addition to the remedies of

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injunction and specific performance vested in the Court of Chancery by Lord Cairns’ Act (the Chancery Amendment Act 1858 (UK)). The same power exists in all Australian jurisdictions: see [34.65]. Pursuant to these initiatives, the award of damages is contingent upon an entitlement to the award of an injunction or specific performance. As a threatened breach of confidentiality is most commonly visited by an order for an injunction, it stands to reason that, if it is too late for an injunction because a breach has already occurred, the court should be able to award to the confider a monetary amount as damages he or she has suffered from the breach. Regarding the award of damages for breach of confidence, Lord Keith in Attorney-​ General v Guardian Newspapers Ltd (No 2) noted:354 In cases where the information disclosed is of a commercial character an account of profits may provide some compensation for loss which he has suffered through the disclosure, but damages are the main remedy for such loss. The remedy [of damages] is … more satisfactorily to be attributed to the principle that no one should be permitted to gain from his own wrongdoing. Its availability may also, in general, serve a useful purpose in lessening the temptation for recipients of confidential information to misuse it for financial gain.

As this quote highlights, it has been in cases involving commercially valuable information that the issue of damages has surfaced. So far as their quantum is concerned, a leading case is Talbot v General Television Corporation Pty Ltd.355 The plaintiff, a film producer, developed a concept for a television series entitled “To Make a Million” that would relate the success stories of selected millionaires, with the aim of giving viewers the inspiration to make their own fortunes. His written submission was used in negotiations with the defendant (Channel 9)  in December 1976, which requested him prepare a pilot script for the programme. He received no further response. In April 1977 the plaintiff saw advertisements run by Channel 9 of a proposed programme in which millionaires would be interviewed about their success with the question “could you be a millionaire too?” being posed for viewers. The plaintiff sought to restrain the broadcast of those programmes on the basis that they pirated his concept. He obtained an interim injunction shortly before the first segment was to be broadcast. Notwithstanding, Channel 9 ran the segment.

354

Attorney-​General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 262.

355

Talbot v General Television Corporation Pty Ltd [1980] VR 224.

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Equity and Trusts in Australia

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Marks J ruled that Channel 9 had breach its duty of confidentiality in making unauthorised use of the segments for its programme series. As well as ordering an injunction restraining Channel 9 from using the plaintiff’s idea, his Honour held that the plaintiff was entitled to equitable damages. As to quantum, Marks J held that the plaintiff was entitled to monetary compensation to the value by which his equitable right had been depreciated by the defendant’s breach of confidence.356 His Honour found no single standard method of assessing damages for breach of confidence, other than that in each case damages should be fixed by the method most appropriate to compensate for the loss suffered as a result of the breach of confidence. The Full Court upheld this finding, and made the following observations with respect to damages for breach of confidence.357 First, the right in respect of which damages are awarded for breach of confidence is the right to the confidential information, not a right to have a confidence respected. Secondly, neither the difficulty in assessing damages nor the fact that the amount of the loss depends upon a contingency relieves the court from its duty to assess damages.358 Finally, the fact that damages cannot be assessed with certainty does not relieve the wrongdoer from paying damages. The decision in Talbot does not mean that the quantum of equitable damages for breach of confidence should in all cases be assessed according to the value by which the plaintiff’s right has been depreciated. Equity is not so circumscribed, and will adopt the method that most appropriately compensates the plaintiff in the circumstances.359 If, say, damages are awarded against a defendant who has illegitimately used confidential information as a springboard (see [6.40], [6.45]), the court must “adjust the measure of damages to accord with the commercial setting of the injury, the likely future consequences of the misappropriation and the nature and extent of the use the defendant puts the trade secret to after misappropriation”.360 This may, in some cases, justify an award of damages commensurate with the expenditure the plaintiff incurred in creating the secret that has been misappropriated.361 The logic for this is that it represents the defendant’s “savings” derived through misusing the confidential information. [6.350]  On the other hand, prior to the decision of the Victorian Court of Appeal in Giller

v Procopets,362 no Australian authority supported the award of equitable damages outside of the commercial arena. Yet as the doctrine of confidentiality also extends to personal information, it cannot be assumed that an unauthorised disclosure of personal confidential information can never produce injury to the confidant. In Giller, Neave JA reasoned that as equitable damages are sui generis, and can be awarded where common law damages are not recoverable, they “should be available where the essence of the plaintiff’s case is that he or she has

356

See also Dowson & Mason Ltd v Potter [1986] 2 All ER 418 at 421–​422 per Sir Edward Everleigh; Titan Group Pty Ltd v Steriline Manufacturing Pty Ltd (1990) 19 IPR 353 at 397–​398 per O’Loughlin J.

357

Talbot v General Television Corporation Pty Ltd [1980] VR 224 at 250–​253.

358

On this point, see also University Computing Co v Lykes-​Youngstown Corp (1974) F 2d 518 at 538; Apotex Fermentation Inc v Novopharm Ltd (1998) 162 DLR (4th) 111 at 175 (CA(Man)).

359

Darvall McCutcheon v H K Frost Holdings Pty Ltd (2002) 4 VR 570 at 588–​598 per Chernov JA. See Stuckey-​Clarke, “Damages for Breach of Purely Equitable Rights: The Breach of Confidence Example”, in Finn (ed), Essays on Damages (The Law Book Company Limited, 1992), p 69.

360

University Computing Co v Lykes-​Youngstown Corp (1974) F 2d 518 at 538.

361

See, for example, Kubik Inc v Hull (1974) 224 NW 2d 80 at 95; Salsbury Laboratories Inc v Merieux Laboratories Inc (1990) 908 F 2d 706 at 714–​715; Apotex Fermentation Inc v Novopharm Ltd (1998) 162 DLR (4th) 111 at 170–​175 (CA(Man)).

362

Giller v Procopets (2008) 24 VR 1.

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Confidential Information  Chapter  6

been embarrassed by the exposure of private information, rather than that the defendant has profited from the wrongful use of that information”.363 The defendant in Giller had, following the termination of his relationship with the plaintiff, shown to family and acquaintances videotapes of him and the plaintiff engaging in sexual activity. The court held that this amounted to a breach of confidence, which the court saw as remediable by an award of equitable damages, without which the “serious breach of the obligation of confidence, productive of mental distress, would lead nowhere”.364 In addition to ensuring that a wrong attracted a remedy, the court gave four reasons for making an award of equitable damages in the circumstances. First, “equity is here dealing not with some careless act, but with intentional conduct in defiance of a good faith obligation of confidence”.365 Secondly, on the facts “an anticipated breach would surely have attracted injunctive relief”, so that “it would be odd if breach of an equitable obligation could attract no remedy when anticipated breach would do so”.366 Thirdly, that the common law for historic reasons367 shied from permitting damages for distress was no reason why equity, starting with a clean slate, should do so.368 Fourthly, there was “considerable similarity” between the facts in question and an area where the common law allows damages for distress, namely where the proceedings are for defamation, as on the facts “the victim’s reputation is damaged, and distress ensues, by reason of material disclosed in breach of confidence —​such material being prima facie defamatory”.369 Although the award of equitable damages for mental distress and embarrassment represents a distinctly non-​traditional application of Lord Cairns’ Act, this reasoning is compelling. If confidentiality is to be protected by the general law, it stands to reason that those who suffer injury, whether or not monetary, as a result of a breach of confidence, should be compensated. To the extent that breaches of confidence align with unconscionable conduct —​and the defendant’s behaviour in Giller merits that appellation —​the award of damages here is not far removed from equity’s recognised ability to award of compensation for emotional distress in cases of equitable estoppel, also grounded in unconscionable conduct: see [10.300]. With it the law of confidentiality takes a step further from fiduciary law, which retains an economic focus: see [4.25].

Inherent jurisdiction —​the step to aggravated and exemplary damages [6.355] There is English authority that a court of equity has the inherent power to award

damages for breach of an equitable duty of confidence. This rests on the disputed notion that law and equity are remedially fused: see [P.40]–​[P.65]. In Seager v Copydex Ltd,370 the plaintiff negotiated with the defendant with a view to marketing a carpet grip the former had patented. In the negotiations the plaintiff disclosed particular features of the grip and suggested a means

363

Giller v Procopets (2008) 24 VR 1 at [428].

364

Giller v Procopets (2008) 24 VR 1 at [145] per Ashley JA.

365

Giller v Procopets (2008) 24 VR 1 at [149] per Ashley JA.

366

Giller v Procopets (2008) 24 VR 1 at [150], [151] per Ashley JA.

367

Which are associated with “floodgates” arguments, perceived difficulties of proof, and concern (sensible or otherwise) about the ability of civil juries to separate the real from the fictitious.

368

Giller v Procopets (2008) 24 VR 1 at [152] per Ashley JA.

369

Giller v Procopets (2008) 24 VR 1 at [153] per Ashley JA.

370

Seager v Copydex Ltd [1967] 1 WLR 923.

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Equity and Trusts in Australia

by which it could be adapted. The negotiations proved fruitless, subsequent to which the defendant made a grip which, while not infringing the plaintiff’s patent, embodied his suggestion. The English Court of Appeal upheld the plaintiff’s contention that the defendant had acted in breach of confidence and awarded damages for breach of confidence, a purely equitable obligation, without reference to Lord Cairns’ Act as the basis of the award. Damages were assessed on the basis of reasonable compensation for the use of the confidential information. [6.360]  Although the approach in Seager has not been followed in Australia, and has been the

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subject of academic criticism,371 in 1990 the New Zealand Court of Appeal has countenanced the award of exemplary damages (that is, common law damages) for breach of confidence in instances where compensatory damages inadequately punish a defendant for outrageous conduct.372 And in 2012, in Skids Programme Management Ltd v McNeill,373 the same court awarded exemplary damages for a breach of confidence where a franchisee established a competing business upon the expiry of the franchise term, using the appellant’s policy and procedures manual for this purpose. In delivering the reasons of the court, Asher J remarked that an ordinary damages award did not adequately punish the respondent’s outrageous conduct in deliberately copying the appellant’s material while protesting that she was not doing so, and then maintaining that denial for such a long period. The court’s broader reasoning directed to the availability of exemplary damages for breach of confidence appears in the following extract:374 While the origin of the cause of action lies in equity, we do not consider that this factor should dictate the remedies that are available. The action for breach of confidence has been seen as similar to torts that are concerned with a claimant’s autonomy … New Zealand courts have adopted a flexible approach to equitable remedies. As this case demonstrates, a breach of confidence may not give rise to any ascertainable compensatory damages or profits to the wrongdoer, but nevertheless constitute a flagrant infringement of the rights of the plaintiff which warrants a monetary award, reflecting the disapproval of the Court. We conclude that exemplary damages are available in New Zealand for breach of confidence.

The Hong Kong Court of Appeal has held likewise.375 In Australia the tide goes the other way. Beyond the New South Wales Court of Appeal rejecting the availability of exemplary damages for breach of fiduciary duty (see [34.130]), subsequently the Victorian Court of Appeal in Giller v Procopets,376 discussed at [6.350], refused to order exemplary damages for an egregious breach of confidence. However, this did not preclude it taking the unheralded step of awarding the plaintiff aggravated damages, which remain compensatory but “focus upon the effect upon the victim of the manner in which the hurt was inflicted”.377 A component for aggravation was justified, in Neave JA’s opinion, because the defendant breached his duty of confidence with the deliberate purpose  —​and having the effect  —​of humiliating,

371

See, for example, Ricketson, “Confidential Information —​A New Proprietary Interest Part II” (1977–​78) 11 MULR 289 at 294–​295.

372

Aquaculture Corporation v NZ Green Mussel Co Ltd [1990] 3 NZLR 299 at 301–​302 per Cooke P. Contra at 302 per Somers J. See Michalik, “The Availability of Compensatory and Exemplary Damages in Equity: A Note on the Aquaculture Decision” (1991) 21 VUWLR 391.

373

Skids Programme Management Ltd v McNeill [2013] 1 NZLR 1.

374

Skids Programme Management Ltd v McNeill [2013] 1 NZLR 1 at [123].

375

China Light & Power Company Ltd v Ford [1996] 1 HKLR 57 at 62 per Godfrey JA, at 65 per Liu JA, at 68 per Bokhary JA.

376

Giller v Procopets (2008) 24 VR 1 at [155]–​[160] per Ashley JA, at [437] per Neave JA.

377

Giller v Procopets (2008) 24 VR 1 at [158] per Ashley JA.

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Confidential Information  Chapter  6

embarrassing and distressing the plaintiff.378 As aggravated damages are compensatory in nature, the main argument against this extension of the law is that it involves the award of a traditionally common law form of relief for the breach of a purely equitable cause of action, which the tendency of Australian courts has been against: see [P.50], [34.125], [34.130].

Equitable compensation?

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[6.365]  Rather than debate whether equity can award damages independent of statute, a preferable approach is to extend equity’s jurisdiction to award equitable compensation, traditionally arising out of breaches of fiduciary duty, to breaches of confidence. Precedent for doing so outside the fiduciary arena exists, namely in undue influence cases (see [7.285]), and parallels between abuses of trust inherent in fiduciary breaches and undue influence can justify a similar remedial approach.379 And now there is Australian precedent in the breach of confidence field itself. In Giller v Procopets,380 discussed at [6.350], [6.355], Neave JA reasoned that as an injunction lies to prevent publication without the need to show that, if unrestrained, the breach of confidence will cause financial loss or psychiatric injury, “[b]‌y parity of reasoning there should be no barrier to the making of an order for equitable compensation to compensate a claimant for the embarrassment or distress she has suffered as the result of a breach of an equitable duty of confidence which has already occurred”. Her Honour agreed with the view of Morland J in Cornelius v De Taranto, who said:381 [I]‌t would be a hollow protection of [the right to protection of confidential information] if in a particular case in breach of confidence without consent details of the confider’s private and family life were disclosed by the confidant to others and the only remedy that the law of England allowed was nominal damages. In this case an injunction or order for delivery up of all copies of the medico-​legal report against the defendant will be of little use to the claimant. The damage has been done … In cases of commercial or business breach of confidence the powers of the court are not barren. Such remedies as injunction, delivery-​up, account of profits and damages may be available … similarly in the case of personal confidences exploited for profit or peddled to the media … In the present case in my judgment recovery of damages for mental distress caused by breach of confidence, when no other substantial remedy is available, would not be inimical to considerations of policy but indeed to refuse such recovery would illustrate that something was wrong with the law.

In remarks equally applicable to an award of equitable damages, Neave JA added that “[a]‌n inability to order equitable compensation to a claimant who has suffered distress would mean that a claimant whose confidence was breached before an injunction could be obtained would have no effective remedy”.382 It may be that, except to the extent that there remains scope for equitable damages to balm a continuing breach of confidence via a monetary award —​that is, damages are awarded in lieu of an injunction while the breach is allowed to persist —​there 378

Giller v Procopets (2008) 24 VR 1 at [233]. Her Honour awarded the plaintiff $40,000, including $10,000 for aggravated damages, with whose order Maxwell P concurred. Ashley JA was also willing to make an award of equitable damages, but in the lower sum of $27,500 (including $7,500 for aggravated damages): at [160]. Cf Wilson v Ferguson [2015] WASC 15 (discussed at [6.365]) (where Mitchell J awarded equitable compensation for the damage the plaintiff sustained “in the form of significant embarrassment, anxiety and distress as a result of the dissemination of intimate images of her in her workplace and among her social group”, taking into account that the impact of the disclosure on the plaintiff was aggravated by the fact that the release of the images was an act of retribution by the defendant, and intended to cause her harm: at [85]; his Honour made an award of $35,000, in addition to economic loss of $13,404).

379

See Wei, “Breach of Confidence, Downstream Losses, Gains and Remedies” [2005] Sing JLS 20 at 52–​62.

380

Giller v Procopets (2008) 24 VR 1 at [423]. Hampel J in Doe v Australian Broadcasting Corporation [2007] VCC 281 had ruled likewise the year before (see at [138]–​[145]).

381

Cornelius v De Taranto [2001] EMLR 12 at [66], [67], [69].

382

Giller v Procopets (2008) 24 VR 1 at [424].

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Equity and Trusts in Australia

arguably remains little independent scope for equitable damages to operate in the face of equitable compensation in this context. The latter may be implicit in the reasons of Mitchell J in Wilson v Ferguson,383 a case factually similar to Giller, involving the defendant’s Internet publication of sexually explicit material secured during the course of a relationship with the plaintiff. Having characterised this behaviour as a clear breach of confidence, his Honour put equitable damages to one side due to differences in wording between the Victorian and Western Australian statutory provisions.384 While these are indeed not phrased identically, the substance of the two provisions does not diverge, and so by itself should not have precluded inquiry into equitable damages. But that inquiry was obviated by Mitchell J’s award of equitable compensation as a remedy. Underscoring that award was the following reasoning:385 The not uncommon contemporary practice of couples privately engaging in intimate communications, often involving sexual images, by electronic means, the damaging distress and embarrassment which the broader dissemination of those communications would ordinarily cause and the ease and speed with which that dissemination can be achieved should inform the way in which equity responds to a breach of the obligation of confidence. The obligation which equity recognises is not new … The relief which is given in response to a breach of that obligation should, however, accommodate contemporary circumstances and technological advances, and take account of the immediacy with which any person can broadcast images and text to a broad, yet potentially targeted, audience.

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To this end, his Honour endorsed the step taken in Giller, that extending relief to monetary compensation “avoids the obligation being effectively unenforceable in many cases”, which he viewed as representing “an appropriate incremental adaptation of an established equitable principle to accommodate the nature, ease and extent of electronic communications in contemporary Australian society”.386 Delivery up [6.370]  Pursuant to an order for delivery up (as to which see generally [37.155]–​[37.175]),

the defendant must return the documents or chattels the subject of the breach of confidence. Although the court may accept the defendant’s undertaking on oath to destroy the documents in question, if the plaintiff requests delivery up, the court will usually accede to this.387 The court reasons that “[w]‌ithout such an order, the information [may] still be ‘out there’ in the possession of someone who should not have it”.388 However, if the defendant manufactures a product by the use of a combination of confidential and other information, property in the product so manufactured does not vest in the plaintiff. In these circumstances, the court may order delivery up of the articles to a court officer or to the plaintiff on oath for destruction,389 or alternatively some other form of relief,

383

Wilson v Ferguson [2015] WASC 15.

384

Wilson v Ferguson [2015] WASC 15 at [74].

385

Wilson v Ferguson [2015] WASC 15 at [81].

386

Wilson v Ferguson [2015] WASC 15 at [82].

387

Industrial Furnaces Ltd v Reaves [1970] RPC 605 at 627 per Graham J.

388

Imerman v Tchenguiz [2011] Fam 116 at [73] per Lord Neuberger MR.

389

See Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37. The court may make an order limited to “those parts of the documents which contain confidential information”: AG Australia Holdings Ltd v Burton (2002) 58 IPR 327 at [33] per Campbell J.

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Confidential Information  Chapter  6

such as an account of profits or damages. In ordering delivery up, the court must ensure the defendant’s customers are not prejudiced thereby (reflecting equity’s concern not to impugn the rights of innocent third parties) and so may allow the defendant to retain copies of documents it requires to maintain or repair the items created as a result of the combination of confidential and non-​confidential information.390 Constructive trust [6.375]  The constructive trust (discussed generally in Ch 38) has not traditionally been rec-

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ognised as a remedial device in breach of confidence actions, partly because of the reticence of courts to recognise proprietary relief in respect of the misuse of something that is not necessarily property, namely information. No such reticence has been shown where a misuse of information substantiates a fiduciary breach.391 For this reason, what are essentially confidentiality cases are pleaded on fiduciary grounds, inviting courts potentially to extend or strain the fiduciary concept. Yet even Canadian judges, notwithstanding an inclination to expand “fiduciary relationships” (see [4.300], [4.310]), have warned against accepting such invitations.392 This has led to a call for explicit curial recognition of “the existence of a range of remedies, including the constructive trust, available on a principled basis even though outside the context of a fiduciary relationship”.393 It is difficult to appreciate why a plaintiff succeeding in an action for breach of confidence, unlike a plaintiff who establishes a breach of fiduciary duty —​causes of action having the same genesis (see [P.145]) —​should be denied constructive trust relief if it is appropriate in the circumstances.394 The Supreme Court of Canada in LAC Minerals Ltd v International Corona Resources Ltd,395 discussed at [4.225], by a slim majority, held that the constructive trust is available in a breach of confidence action as a remedy, independently of any co-​existing fiduciary relationship. The majority imposed constructive trusteeship on LAC, Wilson J reasoning as follows:396 Since the result of LAC’s breach of confidence … was its unjust enrichment through the acquisition of the [adjacent] property at Corona’s expense, it seems to me that the only sure way in which Corona can be fully compensated for the breach in this case is by the imposition of a constructive trust on LAC in favour of Corona with respect to the property. I believe that the remedy of constructive trust is available for breach of confidence as well as for breach of fiduciary duty. The distinction between the two causes of action as they arise on the facts of this case is a very fine one. Inherent in both causes of action are concepts of good conscience and vulnerability.

The main reasons for the majority’s view were that, first, the confidential information related to unique land rather than an opportunity to compete more generally in the market place;

390

Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 410 per Laddie J.

391

See, for example, Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 (discussed at [4.90]); Boardman v Phipps [1967] 2 AC 46 (discussed at [4.165]).

392

See, for example, LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 30 per La Forest J.

393

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 32 per La Forest J.

394

See Dal Pont, “Conflicts of Interest:  The Interplay Between Fiduciary and Confidentiality Law” [2002] AMPLA Yearbook 583 at 601–​605; Wei, “Breach of Confidence, Downstream Losses, Gains and Remedies” [2005] Sing JLS 20 at 40–​45 (albeit focusing on the sui generis nature of breach of confidence). Contra Wu, “Confidence and the Constructive Trust” (2003) 23 LS 135 at 142–​147 (focusing on the differences between actions for breach of confidence and breach of fiduciary duty).

395

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14.

396

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 17.

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Equity and Trusts in Australia

secondly, monetary compensation for the loss of the opportunity to develop a gold mine was particularly difficult to assess; thirdly, the protection of an innocent plaintiff was better safeguarded by a remedy in rem; and fourthly, a remedy in rem was a more effective deterrent than compensation to a defendant minded to breach a confidence to its own advantage rather than pursue a negotiation in good faith to the advantage of itself or another. La Forest J, also in the majority and with whom Lamer J concurred regarding the appropriate remedy, held that the constructive trust should not be reserved for situations where a right of property is recognised, as this would limit the constructive trust to its institutional function, and deny to it the status of a remedy, which he identified as “its more important role”.397 According to his Honour, it is not in all cases that a pre-​existing right of property will exist when a constructive trust is ordered, as the imposition of a constructive trust “can both recognize and create a right in property”. This did not mean that the constructive trust is an automatic remedy in this context; it will only be awarded once the right to relief is established,398 which his Honour considered would not be in the vast majority of cases. In his opinion, “a constructive trust should only be awarded if there is reason to grant the plaintiff the additional rights that flow from recognition of a right of property”,399 such as to receive priority accorded to the holder of a right in property in a bankruptcy. This approach was endorsed by the same court in Cadbury Schweppes Inc v FBI Foods Ltd,400 to the effect that “whether a breach of confidence in a particular case has a contractual, tortious, proprietary or trust flavour goes to the appropriateness of a particular equitable remedy but does not limit the court’s jurisdiction to grant it”. In other words, it countenanced that in an appropriate case proprietary relief may be available for a breach of confidence, whether or not information is classed as property.401 The foregoing sits not uncomfortably with the incidents of the remedial constructive trust recognised by the Australian High Court. In that context the court has been willing to recognise a proprietary interest under the doctrine of the remedial constructive trust even though the alleged contribution to property that forms its foundation is at best only indirect:  see [38.180], [38.185]. It has also noted that the constructive trust is not automatically granted; the court will not grant constructive trust relief if “there is an appropriate equitable remedy

397

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 50. See also Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 415 per Laddie J (who opined that La Forest J’s judgment in this context “makes eminent sense”).

398

Cf Penk, “Confidential Information in a Commercial Context:  An Analysis of ‘Use’ of Confidential Information and the Availability of a Proprietary Remedy for Breach of Confidence” (2001) 9 Auck ULR 470 at 484, to the effect that the precision of the remedy of constructive trust may only be a valid justification “if there is one unique, identifiable asset at stake. In contrast, if what is involved is the use of confidential information to gain entry into a competitive marketplace, a constructive trust may be an impractical and unsuitable remedy”. Yet this overlooks that a constructive trust has been used as a remedy in the context of breaches of fiduciary duty in the latter context: see, for example, Timber Engineering Co Pty Ltd v Anderson [1980] 2 NSWLR 488, discussed at [38.30].

399

LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 51.

400

Cadbury Schweppes Inc v FBI Foods Ltd (1999) 167 DLR (4th) 577 at 590 per Binnie J (emphasis in original). Cf Abdullah and Hang, “To Make the Remedy Fit the Wrong” (1999) 115 LQR 376.

401

Contra LAC Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14 at 75 per Sopinka JJ in dissent (noting that constructive trusts are ordinarily reserved for situations where a right of property is recognised; as confidential information does not exhibit all the characteristics of property, a constructive trust ought not be imposed over property acquired from the misuse of confidential information).

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Confidential Information  Chapter  6

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which falls short of the imposition of a trust”,402 such as where third parties have an interest in the property and the court decrees that those interests should not lose priority via the proprietary nature of the claimed relief.403 More generally, Australian courts have noted the need to do practical justice via a remedial response,404 which is consistent with the recognition of the remedy most appropriate to the facts in question.405

402

Giumelli v Giumelli (1999) 196 CLR 101 at 113 per Gleeson CJ, McHugh, Gummow and Callinan JJ.

403

This partly addresses the concern raised by Wu (“Confidence and the Constructive Trust” (2003) 23 LS 135 at 152) that priority in insolvency should not be granted to a claimant for an abuse of confidence.

404

See, for example, Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 112 per Deane, Dawson, Toohey, Gaudron and McHugh JJ (partial rescission), discussed at [35.25].

405

In Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 320, Callinan J found no reason why a claim for breach of confidence involving the misuse of a film made in violation of the plaintiff’s right of exclusive possession should not be remedied by a constructive trust over the film. His Honour’s approach, however, was coloured by his proprietary analysis, characterising the film in question as property and so cannot be taken as a wholesale endorsement of the availability of a constructive trust as a remedy for breach of confidence.

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Chapter 7

Undue Influence NATURE OF UNDUE INFLUENCE Definition [7.05]  “Undue influence” is the improper use by a person (the stronger party) of an ascendancy

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for her or his (or a third party’s) benefit so that the acts of the person influenced (the weaker party) are not free, voluntary acts.1 The nature of the relationship between the parties —​one of ascendancy by a person over another —​is the foundation for any undue influence.2 The term “undue” highlights that not all forms of influence by one person over another have legal significance.3 It targets the impairment of judgment of the weaker party, not improper conduct on the part of the stronger party. Influence can, therefore, be “undue” even absent “malign intent”,4 whether in the form of coercion, pressure or concealment.5 The focus is on whether the influence prevented the weaker party from making an independent and informed judgment in effecting the transaction in issue. If so, that the stronger party is innocent or well-​ meaning, and without ulterior motive, is irrelevant.6 As explained in the context of presumed undue influence (see [7.25]) by Mummery LJ in Pesticcio v Huet:7 Although undue influence is sometimes described as an “equitable wrong” or even as a species of equitable fraud, the basis of the court’s intervention is not the commission of a dishonest or wrongful act by the defendant, but that, as a matter of public policy, the presumed influence arising from the relationship of trust and confidence should not operate to the disadvantage of the victim, if the transaction is not satisfactorily explained by ordinary motives … The court scrutinises the circumstances in which the transaction, under which benefits were conferred on the recipient, took place and the nature of the continuing relationship between the parties, rather than any specific act or conduct on the part of the recipient. A transaction may be set aside by the court, even though the actions and conduct of the person who benefits from it could not be criticised as wrongful.

Consistent with the foregoing, and with other equitable doctrines directed to conscience, that the defendant has not benefited from the transaction procured by undue influence is irrelevant to the plaintiff’s claim; it is the nature of the equitable wrong that attracts relief, not

1

Union Bank of Australia Ltd v Whitelaw [1906] VLR 711 at 720. See generally Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), Chs 6–​14.

2

National Commercial Bank (Jamaica) Ltd v Hew [2003] UKPC 51 at [30] per Lord Millett.

3

Hart v Burbidge [2013] WTLR 1191 at [49] per Sir William Blackburne.

4

Carey v Norton [1998] 1 NZLR 661 at 670 per Keith and Williams JJ.

5

Bridgewater v Leahy (1998) 194 CLR 457 at 493 per Gaudron, Gummow and Kirby JJ (the passive acceptance of a benefit will not prevent a finding of undue influence); Dunbar Bank plc v Nadeem [1998] 3 All ER 876 at 883 per Millett LJ; Liptak v Commonwealth Bank of Australia [1999] ANZ Conv R 119 at 122–​123 per Doyle CJ.

6

Carey v Norton [1998] 1 NZLR 661 at 663 per Thomas J; Green v Green [2017] 2 NZLR 321 at [39], [40] per French J.

7

Pesticcio v Huet [2004] EWCA Civ 372 at [20], with whom Jacob and Pill LJJ concurred.

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Equity and Trusts in Australia

its consequence. The latter, of course, may however impact on the nature and scope of the relevant relief. Distinguished from unconscionable dealing [7.10] The above features of undue influence distinguish it from the equitable doctrine of

unconscionable dealing (discussed in Ch 9), which focuses more on the conduct of the stronger party than the relationship between the parties. It explains why undue influence is addressed in Part II of this book (entitled “Relationships of Trust”) whereas the treatment of unconscionable dealing is located within Part III (entitled “Unconscionable Conduct”). Yet judicial statements that undue influence occurs “whenever one party has acted unconscionably in exploiting the power to direct the conduct of another which is derived from a relationship between them”,8 and indications that conduct can be unconscionable for the purposes of the doctrine of unconscionable dealing without proof of an intention to exploit (see [9.120]–​ [9.140]), break down this distinction somewhat. The use of the term “unconscionable” in this context may, to this end, be synonymous with equitable fraud (see [8.05]), not requiring proof of a substantial want of probity.9 The doctrines of undue influence and unconscionable dealing nonetheless remain distinct. Though both are at least partly directed to preventing victimisation of the weak,10 an ascendancy for the purposes of undue influence is not by itself a special disadvantage for the purposes of unconscionable dealing. Hence facts may give rise to undue influence but not unconscionable dealing11 and vice-​versa,12 although the same facts can ground legitimate claims under both doctrines.13 Neither doctrine, however, serves merely to absolve persons from imprudent, foolish or onerous bargains or undertakings.

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Compared to undue influence at law (“testamentary undue influence”) [7.15] The equitable doctrine of undue influence has a namesake at common law in the

probate context. The equitable doctrine focuses on inter vivos dispositions, whereas common law undue influence, as well as having a different historical genesis (the validity of wills was a matter of probate, not equity), is premised on proof of such pressure on a testator that the bequest cannot be regarded as a free and voluntary act.14 The overbearing of the testator’s

8

Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705 at 712 per Stuart-​Smith LJ. See also Bridgewater v Leahy (1998) 194 CLR 457 at 493 per Gaudron, Gummow and Kirby JJ (noting that it is unconscionable for a person to retain the benefit of an improvident transaction effected through undue influence); Dunbar Bank plc v Nadeem [1998] 3 All ER 876 at 884 per Millett LJ (“[A court of equity] sets aside transactions obtained by the exercise of undue influence because such conduct is unconscionable”); Archer v Archer [2000] NSWCA 314 at [71] per Handley JA.

9

See Dal Pont, “The Varying Shades of ‘Unconscionable’ Conduct —​Same Term, Different Meaning” (2000) 19 Aust Bar Rev 135 at 157–​162.

10

National Commercial Bank (Jamaica) Ltd v Hew [2003] UKPC 51 at [33] per Lord Millett.

11

Bridgewater v Leahy (1998) 194 CLR 457 at 491 per Gaudron, Gummow and Kirby JJ (noting that undue influence may be invoked to set aside a transaction even where the party invoking it was perfectly competent to understand and intend what he or she did, because the issue in cases of undue influence is not whether the weaker party knew what he or she was doing, but how her or his intention to enter into the transaction sought to be impugned was produced).

12

See, for example, Begbie v State Bank of New South Wales Ltd (1994) ATPR ¶41-​288 at 41,896–​41,897 per Drummond J.

13

See, for example, Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435; Geelong Building Society (in liq) v Thomas (1996) V Conv R ¶54-​545.

14

Wingrove v Wingrove (1885) LR 11 PD 81; Winter v Crichton (1991) 23 NSWLR 116. On the doctrine of testamentary undue influence, see further Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [2.39]–​[2.47]; Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), Ch 13.

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Undue Influence  Chapter  7

will at the core of the common law conception of undue influence  —​the consequence of which is that the bequest is void —​likens it to common law duress15 (as to which see [8.10]). This strict approach has historically been justified by reference to testamentary dispositions having no impact on the testator, evidential difficulties on the propounder of the will (after all, the testator is not available to give evidence), the once social acceptability of lobbying testators for bounty16 and the existence of statutory family provision regimes.17 Yet as factual scenarios involving testamentary gifts may be almost indistinguishable from inter vivos gifts, the legitimacy of divergent principles may be queried,18 the main concern being a failure of common law undue influence to protect the elderly and vulnerable in society.19 In any case, if the High Court’s judgment in Bridgewater v Leahy20 is correct (queried at [9.135], [9.140]), scope may exist for the equitable doctrine of unconscionable dealing to give relief in probate-​type cases.

TYPES OF UNDUE INFLUENCE [7.20] The equitable doctrine is traditionally divided into two classes of undue influ-

ence:  “presumed” undue influence, and “actual” (or “express”) undue influence, each treated separately below. Presumed undue influence [7.25]  Where there exists a special relation of confidence, control, domination, influence or other

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form of superiority between the parties to a transaction, such as to render reasonable a presumption that it was procured by the stronger party through improper use of an ascendancy over the weaker party, the law makes that presumption. The law thereby throws on the stronger party the burden of supporting the transaction and of rebutting the presumption of its invalidity.

Relationships that as a matter of law raise the presumption of undue influence [7.30] Equity presumes certain relationships to be of influence until the contrary is

shown.21 These include the relationship between trustee and beneficiary,22 lawyer and

15

See, for example, Boyse v Rossborough (1857) 6 HLC 1 at 48–​49; 10 ER 1192 at 1211 per Lord Cranworth LC. Cf Thompson v Foy [2010] 1 P & CR 16 at [101] per Lewison J (opining that “it is highly unlikely on the facts that the court would ever be justified in finding that undue influence consisted both of coercion and abuse of trust and confidence. People do not usually trust those who coerce them”).

16

See Parfitt v Lawless (1872) LR 2 PD 462 at 469–​470 per Lord Penzance.

17

Ridge, “Equitable Undue Influence and Wills” (2004) 120 LQR 617 at 627–​634.

18

See Burns, “Elders and Testamentary Undue Influence in Australia” (2005) 28 UNSWLJ 145 at 175–​182 (who suggests a modified doctrine of testamentary undue influence to take account the susceptibility of elders to undue influence); Hamilton, “The Doctrine of Unconscionable Bargains in Equity: Potent Sword for Estate Lawyers” (2007) 27 Qld Lawyer 180 (who argues that equitable doctrines should be applied in estate cases because the burden of proof with the estate doctrine makes it too difficult to prove undue influence); Harrison, “Undue Influence” [2010] NZLJ 313 (who argues that a unified approach ought to apply, and that the equitable doctrine ought to apply to both testamentary and non-​testamentary dispositions).

19

See, for example, Kerridge, “Wills Made in Suspicious Circumstances, the Problem of the Vulnerable Testator” [2000] CLJ 310; Ridge, “Equitable Undue Influence and Wills” (2004) 120 LQR 617; Mason, “Undue Influence and Testamentary Disposition:  An Equitable Jurisdiction in Probate Law?” [2011] Conv 115; Kerridge, “Undue Influence and Testamentary Dispositions: A Response” [2012] Conv 129.

20

Bridgewater v Leahy (1998) 194 CLR 457.

21

Johnson v Buttress (1936) 56 CLR 113 at 119 per Latham CJ, at 134 per Dixon J; Union Fidelity Trustee Co Ltd v Gibson [1971] VR 573 at 577 per Gillard J; Louth v Diprose (1992) 175 CLR 621 at 628 per Brennan J.

22

Ellis v Barker (1871) LR 7 Ch App 104.

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Equity and Trusts in Australia

client,23 doctor and patient,24 religious adviser and novice,25 parent and child (see [7.115]), guardian and ward,26 and (traditionally at least) fiancée and future husband (see [7.100]). Nourse LJ explained the reason for this, in the context of professional relationships, in Goldsworthy v Brickell:27 The reason why the presumption applies to those relationships is that doctors and solicitors are trusted and confided in by their patients and clients to give them conscientious and disinterested advice on matters which profoundly affect, in the one case, their physical and mental and, in the other, their material well-​being. It is natural to presume that out of that trust and confidence grows influence.

A presumption of undue influence can also be raised by statute. For example, s 87 of the Powers of Attorney Act 1998 (Qld) provides that a transaction between a principal and an attorney under an enduring power of attorney, or a relation, business associate or close friend of the attorney, gives rise to a presumption in the principal’s favour that the principal was induced to enter the transaction by the attorney’s undue influence. At general law, that presumption would not arise in every such transaction, but due to a perceived risk of undue influence in the principal-​attorney context, s 87 aims to “provide strong protection against the risk of some misconduct by an attorney, by requiring the recipient … to justify the transaction”28 by reference to the factors that go to rebutting the presumption at general law.29

Relationships that may raise the presumption of undue influence [7.35]  Outside of a category of relationship giving rise of itself to a presumption of undue

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influence, such a presumption can nonetheless arise on proof of a relationship such that one party has achieved an influence over the other in relation to the transaction in issue so as to 23

Powell v Powell [1900] 1 Ch 243 at 246 per Farwell J; Westmelton (Vic) Pty Ltd (receiver and manager appointed) v Archer [1982] VR 305 at 312–​313 (FC); Verduci v Golotta (2010) 15 BPR 28,865 at [67]–​[74] per Slattery J. See Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), [6.125], [6.130].

24

Dent v Bennett (1839) 4 My & Cr 269; 41 ER 105; Billage v Southee (1852) 9 Hare 532; 68 ER 623; Bar-​Mordecai v Hillston [2004] NSWCA 65 (the existence of a de facto relationship between the parties did not rebut the presumption in so far as the gift of a surgery from patient to doctor was concerned, although the presumption was rebutted in respect of a gift of a one-​third interest in a house due to the need for substantial renovations the doctor would finance).

25

Allcard v Skinner (1887) 36 Ch D 145 (discussed at [7.270]); Quek v Beggs (1990) 5 BPR 11,761. This does not mean that all relationships between a church member and a church office holder necessarily give rise to the presumption: see, for example, Illuzzi v Edwards (1997) Q ConvR ¶54-​490 (relationship between church member and a person whose official position was as “counsellor” in the church held not to automatically give rise to presumption); Clark v Corporation of the Trustees of the Roman Catholic Archdiocese of Brisbane [1998] 1 Qd R 26 at 32 per Williams J; Khan v Khan (2004) 62 NSWLR 229 (influence exercised by Mufti to honour a legally unenforceable oral promise to sell land). Cf Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810, discussed at [7.75]. See Ridge, “Legal and Ethical Matters Relevant to the Receipt of Financial Benefits by Ministers of Religion and Churches” (2003) 12 Griffith L Rev 91 (a case study of the New South Wales Synod of the Uniting Church of Australia); Ridge, “The Equitable Doctrine of Undue Influence Considered in the Context of Spiritual Influence and Religious Faith: Allcard v Skinner Revisited in Australia” (2003) 26 UNSWLJ 66.

26

Hylton v Hylton (1754) 2 Ves Sen 547; 28 ER 349.

27

Goldsworthy v Brickell [1987] Ch 378 at 404.

28

Smith v Glegg [2005] 1 Qd R 561 at [39] per McMurdo J (who held that as the plaintiff at the relevant time plaintiff was an 85-​year-​old widow entirely dependent upon her daughter (the defendant) for domestic and health care, financial assistance and personal company, a presumption of undue influence would in any case have arisen at general law in respect of the defendant’s transfer, pursuant to an enduring power of attorney, of the plaintiff’s only substantial asset to the defendant’s son for no consideration: at [41]). See also Baker v Affoo [2014] QSC 46 (where the attorney —​a neighbour of the principal, who was elderly, had recently become widowed and lacked emotional support beyond the attorney —​provided ongoing care and support to the principal, and received from the principal a gift of the latter’s farm, Jackson J found that a presumption of undue influence by attorney over principal was raised under s 87, which had not been rebutted).

29

See, for example, Exponential Trading Pty Ltd v Anscombe-​Black [2003] 2 Qd R 183 (where the evidence showed that the donor could not be easily manipulated, was not physically infirm, had a shrewd understanding of the relevant transaction and had entered into such transactions before, the presumption was rebutted).

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Undue Influence  Chapter  7

invite the protection of equity.30 In this event, in the absence of evidence disproving undue influence, the complainant will succeed in raising the presumption setting aside the impugned transaction by proof that he or she reposed trust and confidence in the wrongdoer without also proving that the wrongdoer exerted actual undue influence or otherwise abused such trust and confidence in relation to that transaction.31 The courts have often identified the elements of dominion and dependence as hallmarks of a “presumptive” relationship of undue influence.32 More generally, there is the suggestion that the presumption is raised in transactions effected between parties in a fiduciary relationship33 or one otherwise involving the reposing of confidence.34 In that fiduciary duties are directed at fostering loyalty (see [4.10]), they inherently proscribe the exercise of undue influence. But not every relationship of trust is the subject of the presumption. Nor is a confidential relationship a necessary or sufficient condition for undue influence to be presumed. After all, the description by close friends of their relationship as trusting and confidential does not imply ascendancy and corresponding dependency by one over the other.35 Whether a presumptive relationship exists rests upon a close examination of the facts, including the weaker party’s age, health, education, literacy, intelligence, business experience, character and personality. The parties’ relative strength of character and personality, the period and closeness of their relationship and the opportunity afforded to influence the weaker party serve as correlative considerations.36 Brusewitz v Brown37 illustrates circumstances that can give rise to a presumption of undue influence. The plaintiff’s husband, Mr Brusewitz, being of advanced age and poor health due to alcoholism, four months before his death transferred to the defendant practically all his property in return for an annuity (which, by definition, terminates on death). Salmond J found that Mr Brusewitz’s feeble condition and the precarious tenure of his life were visible to all who knew him. The confidence he placed in the defendant was sufficiently indicated by financial transactions that took place shortly before his death, pursuant to which the defendant effectively acted as his trusted agent. Having regard to Mr Brusewitz’s character, the nature

30

Union Fidelity Trustee Co Ltd v Gibson [1971] VR 573 at 577 per Gillard J; Farmers’ Co-​operative Executors & Trustees Ltd v Perks (1989) 52 SASR 399 at 404 per Duggan J.

31

Whereat v Duff [1972] 2 NSWLR 147 at 168 (CA); Barclays Bank plc v O’Brien [1994] 1 AC 180 at 190 per Lord Browne-​Wilkinson.

32

Johnson v Buttress (1936) 56 CLR 113 at 119 per Latham CJ; National Westminster Bank plc v Morgan [1985] 1 AC 686 at 707 per Lord Scarman; Geffen v Goodman Estate (1991) 81 DLR (4th) 212 at 227 per Wilson J; Tulloch (decd) v Braybon (No 2) [2010] NSWSC 650 at [51] per Brereton J (speaking in terms of a person having “some element of authority or superiority (which may be moral or practical as distinct from legal) over the other”, whereby “one party is seen or supposed to be in some way beholden, obliged, or disadvantaged in relation to the other”). In Lloyds Bank Ltd v Bundy [1975] 1 QB 326 at 337–​339, Lord Denning identified the “inequality of bargaining power” as the single thread running through all cases of undue influence. The House of Lords in National Westminster Bank plc v Morgan rejected this, Lord Scarman remarking (at 708) that “[t]‌he fact of an unequal bargain will … be a relevant feature in some cases of undue influence. But it can never become an appropriate basis of principle of an equitable doctrine which is concerned with transactions ‘not to be reasonably accounted for on the ground of friendship, relationship, charity, or other ordinary motives on which ordinary men act’ ”.

33

See, for example, Johnson v Buttress (1936) 56 CLR 113 at 135 per Dixon J; Shotter v Westpac Banking Corporation [1988] 2 NZLR 316 at 334 per Wylie J. As to fiduciary relationships, see Ch 4.

34

Jenyns v Public Curator (Qld) (1953) 90 CLR 113 at 133 per Dixon CJ, McTiernan and Kitto JJ; Goldsworthy v Brickell [1987] Ch 378 at 404 per Nourse LJ.

35

Tulloch (decd) v Braybon (No 2) [2010] NSWSC 650 at [77], [87] per Brereton J.

36

Union Fidelity Trustee Co Ltd v Gibson [1971] VR 573 at 577 per Gillard J.

37

Brusewitz v Brown [1923] NZLR 1106.

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Equity and Trusts in Australia

of the defendant’s relations with him, and the nature of the transaction in issue, his Honour found sufficient basis for the presumption of undue influence.38 A Brusewitz-​type scenario would nowadays likely be argued under the doctrine of unconscionable dealing. Another case illustration, namely Watkins v Combes,39 would probably remain under the umbrella of undue influence. There it was alleged that the appellants had exercised undue influence over the testatrix. Isaacs J found the existence of a presumptive relationship in the following facts:40 [The testatrix] was sixty-​nine years of age, and was not in good health. She was living apart from and at variance with her husband. She had … no relatives except the present respondents and their children; and they were far away. Her affairs were somehow becoming more and more entangled, her property encumbered, her liabilities increasing, her money disappearing, and her apprehensiveness must have been great lest she should ultimately and perhaps speedily fall into utter want and helplessness … [The testatrix] though by no means incapable of transacting her own business, and even though competent to make up her own mind in general affairs of a comparatively simple and ordinary character, had … come to depend very much on [the appellants] as her reliable and trustworthy advisers, and had come to regard them as persons … so kindly disposed that they were willing and competent to help her in the financial difficulties in which she found herself. In short, [the male appellant] was by this time regarded by [the testatrix] as her able and disinterested business man, in whom … she “reposed confidence”, and whose advice she sought and acted on as being the best for her interests.

Facts less extreme may attract the presumption. In Credit Lyonnais Bank Nederland NV v Burch,41 Millett LJ found the relationship of employer and junior employee to give rise to a presumption of undue influence where the employee had effected a transaction beneficial to the employer but manifestly disadvantageous to her, the inference being that the relationship in question had ripened into one of trust and confidence.

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Assessment of the presumption [7.40]  Few have questioned the role and justification for the law recognising certain relation-

ships as giving rise to a presumption of undue influence (sometimes termed “Class 2A undue influence”).42 Otherwise it would, for instance, open to question categories of relationships that give rise to other equitable duties, such as fiduciary duties. The position is less clear for relationships that may, on the facts in question, give rise to the said presumption (sometimes termed “Class 2B undue influence”).43 In this context, Lord Nicholls in Royal Bank of Scotland v Etridge (No 2)44 admitted that distinguishing between actual and presumed undue influence “can be a little confusing”. Lord Hobhouse likewise opined that “[w]‌here the relevant question is one of fact and degree and of the evaluation of evidence, the language

38

Brusewitz v Brown [1923] NZLR 1106 at 1114–​1115.

39

Watkins v Combes (1922) 30 CLR 180.

40

Watkins v Combes (1922) 30 CLR 180 at 191–​192. See also Johnson v Buttress (1936) 56 CLR 113 at 120–​122 per Latham CJ, at 126 per Starke J, at 136–​137 per Dixon J; Trevenar v Ussfeller [2005] NSWSC 582 (where the presumption of undue influence was raised in respect of a substantial gift by an 83-​year-​old plaintiff to the defendant, upon whom he was emotionally dependent).

41

Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 at 154–​155.

42

Following the usage of Lord Browne-​Wilkinson in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 189.

43

Following the usage of Lord Browne-​Wilkinson in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 189.

44

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [17]. See Bigwood, “Undue Influence in the House of Lords: the Principles and Proof” (2002) 65 MLR 435.

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Undue Influence  Chapter  7

of presumption is likely to confuse rather than assist and this is borne out by experience”.45 A reason is its potential to blur the distinction between presuming that one party reposed trust and confidence in the other and presuming that an abuse of that relationship has occurred. Lord Scott also expressed concern regarding the language of presumption:46 I doubt the utility of the Class 2B classification. Class 2A is useful in identifying particular relationships where the presumption arises. The presumption in Class 2B cases, however, is doing no more than recognising that evidence of the relationship between the dominant and subservient parties, coupled with whatever other evidence is for the time being available, may be sufficient to justify a finding of undue influence on the balance of probabilities. The onus shifts to the defendant. Unless the defendant introduces evidence to counteract the inference of undue influence that the complainant’s evidence justifies, the complainant will succeed. In my opinion, the presumption of undue influence in Class 2B cases has the same function in undue influence cases as res ipsa loquitur has in negligence cases. It recognises an evidential state of affairs in which the onus has shifted.

It follows that, in England at least, the language of presumption is unique to Class 2A. This is a welcome development, for it seems odd to impose upon a litigant a duty to lead evidence to establish a presumption. Having said that, as the House of Lords in Etridge continued to countenance a shift in onus, it is unclear what (if anything) beyond the matter of terminology it purported to change. Perhaps it is best to recognise openly that, outside of relationships presumed per se to be influence, the matter is decided less by reference to presumptions than by balancing the facts and circumstances of each case. Given this uncertainty, and the lack of any Australian pronouncement on the specific point, this chapter adopts the traditional terminology. Actual undue influence

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[7.45] There are cases where, in circumstances that give rise to no presumption of undue

influence, “there has been some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, and generally, though not always, some personal advantage by a donee placed in some close and confidential relation to the donor”.47 These cases, known as “actual” (or “Class 1”)48 undue influence, rest on the policy that no person should be allowed to retain a benefit arising from her or his wrongful act.49 In such cases, the plaintiff must prove affirmatively that the defendant exerted undue influence to enter into the transaction sought to be impugned.50 This requires proof of the capacity to influence the plaintiff, the exercise of that influence, that its exercise was undue, and that this brought about the transaction.51 Mere suspicion does not 45

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [105] (branding the class 2B presumption as “not a useful forensic tool”: at [107]). In Hogan v Commercial Factors Ltd [2006] 3 NZLR 618 at [32], the New Zealand Court of Appeal (per William Young J) remarked that in this area of the law, the language customarily used by lawyers is “rather slippery”, particularly so in relation to so-​called “presumptions” of undue influence.

46

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [161].

47

Allcard v Skinner (1887) 36 Ch D 145 at 181 per Lindley LJ.

48

Following the usage of Lord Browne-​Wilkinson in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 189.

49

Allcard v Skinner (1887) 36 Ch D 145 at 171 per Cotton LJ; O’Sullivan v Management Agency and Music Ltd [1985] QB 428 at 455 per Dunn LJ; CIBC Mortgages plc v Pitt [1994] 1 AC 200 at 209 per Lord Browne-​Wilkinson.

50

Watkins v Combes (1922) 30 CLR 180 at 194 per Isaacs J; Johnson v Buttress (1936) 56 CLR 113 at 134 per Dixon J; Barclays Bank plc v O’Brien [1994] 1 AC 180 at 189 per Lord Browne-​Wilkinson.

51

Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923 at 967 (CA); Farmers’ Co-​operative Executors & Trustees Ltd v Perks (1989) 52 SASR 399 at 404 per Duggan J; Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 at 166

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Equity and Trusts in Australia

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suffice.52 That is, the plaintiff must show that, as a result of the defendant’s influence, the transaction was not the result of the free exercise of her or his independent will. For instance, importunity and pressure, to the point at which the plaintiff can no longer exercise an independent will, amount to actual undue influence.53 Yet pressure is neither always necessary nor always sufficient. Legitimate commercial pressure brought by a creditor, however strong, or proper feelings of family loyalty and a desire to aid a family member in financial difficulty, may be difficult to resist. But it does not substantiate actual undue influence unless it leads the plaintiff to effect the transaction not because he or she is persuaded it is the right thing to do but because the defendant’s importunity left her or him with no independent will.54 In Frederick v State of South Australia,55 for instance, the plaintiff gave written notice of his resignation as a magistrate, which he signed during a meeting with the Chief Magistrate shortly after being convicted of two criminal offences. Upon these convictions being set aside on appeal, the plaintiff argued that his resignation was not effective for having been procured, inter alia, by undue influence exerted by the Chief Magistrate. White J found that the relationship in question was not one giving rise to any presumption of undue influence, and that the plaintiff had not established actual undue influence. In reaching this conclusion, his Honour distinguished the case from Brusewitz v Brown56 (discussed at [7.35]), noting that the plaintiff had been a magistrate for 17 years and a legal practitioner for ten years before that. This made it unrealistic to suppose that the plaintiff —​with the qualities of character, integrity and independence that made him suitable to be a magistrate —​was in a position of dependence on, or subjection to, the Chief Magistrate.57 White J then characterised the nature of the events in question as follows:58 [The] evidence falls short, in my opinion, of establishing that the plaintiff’s will was overborne or that his agreement to resign was procured by undue influence. The fact that the choices apparently open to him were unpalatable does not indicate that his will was overborne. It is an unfortunate fact that often people are called upon to make difficult decisions and, in particular, to make decisions which they would prefer very much not have to make. Where a person confronts the circumstance, and makes the difficult decision, it will often be inappropriate to speak of their will having been overborne. In my opinion, that is the position in the present case.

RELEVANT EVIDENCE [7.50] The presence or absence of the factors discussed below is relevant in determining

whether or not: the presumption of undue influence arises in the context of a specific relationship; the presumption of undue influence, once it has arisen, has been rebutted; or there has been actual undue influence. In each case, the relevant inquiry is directed to the situation at the time the impugned transaction was entered into, rather than at subsequent events, save per Richardson J; ASB Bank Ltd v Harlick [1996] 1 NZLR 655 at 659 per Gault J; Carey v Norton [1998] 1 NZLR 661 at 673 per Keith and Williams JJ. 52

Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 at 578 per Latham CJ.

53

Prompting the suggestion that the doctrine of actual undue influence should be subsumed into a broader doctrine of duress: Kantic, “How a Clarification of Duress Renders the ‘Equitable’ Doctrine of Actual Undue Influence Futile” (2015) 26 NZULR 642.

54

Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 135 per Debelle and Wicks JJ.

55

Frederick v State of South Australia (2006) 94 SASR 545.

56

Brusewitz v Brown [1923] NZLR 1106.

57

Frederick v State of South Australia (2006) 94 SASR 545 at [144].

58

Frederick v State of South Australia (2006) 94 SASR 545 at [147] (footnote omitted).

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Undue Influence  Chapter  7

in so far as subsequent events cast light on what was happening before and at the time of the impugned transaction.59 Independent advice

Role of independent advice [7.55]  Independent advice is a weighty factor in determining whether a transaction repre-

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sented the purely voluntary and well-​understood act of a complainant. This is because undue influence is concerned primarily not with a lack of understanding but a lack of an independent will arising from an ascendancy over the weaker party.60 So an obvious way of proving the complainant entered into the transaction freely exercising an independent will is to show he or she did so following independent advice.61 That advice is especially significant where it is required to obtain a proper appreciation of the nature of the transaction and a full understanding of rights released and liabilities incurred. This may be so where, for example, the transaction is complicated, involves a large sum of money,62 or is improvident to the complainant (see [7.75]).63 This explains suggestions in the case law that a court will not set aside a small gift simply on the ground that the donor lacked independent advice.64 At the same time, even if not independent, it is conceivable that “a full and dispassionate explanation” by the stronger party may, in some cases, assist in rebutting the presumption.65 Nor is a lack of independent advice fatal to attempts to rebut the presumption of undue influence, or to deny actual undue influence. Evidence that the complainant is no longer the subject of the influence may do so,66 as may other evidence that the transaction was the spontaneous act of someone who comprehended their actions, which were the result of free will.67 Also, the lack of independent advice will not vitiate a transaction where, had it been obtained, it would not have altered the outcome because an independent adviser would likely have recommended the course adopted.68 Neither will its absence be legally relevant where a complainant has

59

Thompson v Foy [2010] 1 P & CR 16 at [101] per Lewison J (adding that “[a]‌transaction into which someone enters of their own free will does not retrospectively become tainted by undue influence merely because the counter-​party fails to perform his or her side of the bargain”).

60

Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [153] per Habersberger J.

61

Haskew v Equity Trustees, Executors & Agency Co Ltd (1919) 27 CLR 231 at 235 per Isaacs J; Watkins v Combes (1922) 30 CLR 180 at 196 per Isaacs J; Johnson v Buttress (1936) 56 CLR 113 at 120 per Latham CJ.

62

Bank of New South Wales v Rogers (1941) 65 CLR 42 at 87 per Williams J; Union Fidelity Trustee Co Ltd v Gibson [1971] VR 573 at 577 per Gillard J.

63

See, for example, Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [36] per Bryson J (remarking that it would not often happen that an improvident donation for religious purposes would be upheld unless some person altogether independent of the donee and who had a full understanding of the donor’s circumstances had succeeded in bringing the donor’s mind to bear on the implications of the gift for the donor’s own economic position and welfare).

64

Allcard v Skinner (1887) 36 Ch D 145 at 185 per Lindley LJ; Spong v Spong (1914) 18 CLR 544 at 550 per Isaacs J; Whereat v Duff [1972] 2 NSWLR 147 at 168 per Asprey JA.

65

Harris v Rothery (2013) 10 ASTLR 108 at [176] per Kunc J. See, for example, Courtney v Powell [2012] NSWSC 460 (where Ball J accepted that a daughter had rebutted the presumption of undue influence as to the gift of her elderly father’s house to her, stemming from evidence that “[f]‌ar from exercising the influence she had over the deceased to obtain the house, she sought unsuccessfully to exercise that influence to dissuade the deceased from pursuing the course he did”: at [49]). Cf Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923 at 969 (CA) (omission by husband to fully disclose to his wife the risks involved in the transaction in which he had invited her to participate did not rebut undue influence).

66

Mitchell v Homfray (1891) 8 QBD 587 at 591 per Lord Selborne LC.

67

Allcard v Skinner (1887) 36 Ch D 145 at 171 per Cotton LJ; Union Fidelity Trustee Co Ltd v Gibson [1971] VR 573 at 578 per Gillard J; Whereat v Duff [1972] 2 NSWLR 147 at 159–​160 per Sugerman P; Frederick v State of South Australia (2006) 94 SASR 545 at [164] per White J (in the context of alleged unconscionable dealing).

68

Linderstam v Barnett (1915) 19 CLR 528.

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Equity and Trusts in Australia

entered into a transaction voluntarily not reading the relevant documents though capable of understanding them.69 But to argue that a complainant, had he or she received independent advice, would not have followed it, will not rebut the presumption.70 The same may be said of mere speculation as to how the complainant could have behaved had he or she received that advice.71 While independent (or other) advice to the party the subject of the influence is ordinarily a compelling basis to nullify the influence, this cannot always be assumed. In Thorne v Kennedy,72 a majority of the High Court set aside a pre-​nuptial agreement for undue influence at the instance of the wife (the appellant), despite being strongly advised by a solicitor not to sign it. Beyond the patently improvident terms of the agreement, what influenced their Honours to so rule included that the appellant, with few funds of her own, had been brought to Australia by her wealthy husband-​to-​be, who in turn threatened to call off the marriage unless she signed the agreement as presented. In these emotional circumstances, and lacking time or real opportunity for any careful reflection, the appellant realistically considered that she had no choice or was powerless other than to enter the agreements.73 The solicitor’s advice did not, accordingly, dilute the undue influence.

Quality of advice

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[7.60]  For advice to have legal significance, it must be given by a person who has some exper-

tise regarding the nature of the transaction in question, is privy to all the material facts74 and is requested to give advice specifically in relation to that transaction.75 For example, the solicitor who acted for the defendant in Brusewitz v Brown,76 discussed at [7.35], being of the opinion that Mr Brusewitz should have independent advice, requested another solicitor to advise him. However, the other solicitor believed his role merely to satisfy himself that Mr Brusewitz was in a fit state to understand and execute the documents in issue. To fulfil the requirements of independent advice, Salmond J held that the second solicitor was duty-​bound to inquire into Mr Brusewitz’s state of health and his prospects of life, the financial standing of the defendant

69

Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265 at [59] per Owen J. See also Attorney-​General for England and Wales v R [2004] 2 NZLR 577 (where, in rejecting an argument by a soldier (R), who had been instructed to sign a contract not to publish information relating to service in the special forces, that the contract was procured by undue influence, Lord Hoffmann (delivering the advice of the Privy Council) remarked that as the contract was in simple terms the absence of legal advice did not affect the fairness of the transaction, adding that (at [28]) “[t]‌he most that R can say is that a lawyer might have advised him to reflect upon the matter and, as in fact he changed his mind within a fairly short time after signing, that might have led to his not signing at all. But that is a decision which he could have made without a lawyer’s advice”).

70

Lloyds Bank Ltd v Bundy [1975] 1 QB 326 at 346 per Sir Eric Sachs; Canadian Imperial Bank of Commerce v Ohlson (1997) 154 DLR (4th) 33 at 48, 50 per Conrad JA.

71

Allcard v Skinner (1887) 36 Ch D 145 at 185 per Lindley LJ.

72

Thorne v Kennedy (2017) 91 ALJR 1260.

73

Thorne v Kennedy (2017) 91 ALJR 1260 at [59] per Kiefel CJ, Bell, Gageler, Keane and Edelman JJ. Gordon J dissented on the undue influence point, reasoning that the appellant’s belief that she had no choice but to sign the agreements if she wished the relationship to continue “does not speak to a lack of will or capacity to exercise independent judgment” but “demonstrates that she did enter into each agreement in the free exercise of her independent will”: at [106]. Instead her Honour (at [107]) saw the paucity of options available to the appellant as relevant to the question of special disadvantage for the purposes of the doctrine of unconscionable dealing: see [9.70].

74

Brusewitz v Brown [1923] NZLR 1106 at 1116 per Salmond J; Quek v Beggs (1990) 5 BPR 11,761 at 11,778 per McLelland J; Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 at 166 per Richardson J.

75

Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 at 35 per Street J; Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 at 156 per Millett LJ.

76

Brusewitz v Brown [1923] NZLR 1106.

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Undue Influence  Chapter  7

and also the proper amount of the annuity.77 This highlights that the need for the advice to reflect the nature of the complainant rather than being “one size fits all”, as explained by an Irish judge:78 It should be noted that the focus in this regard is on ensuring that the particular donor fully appreciates the quality of the transaction. This means that greater care must be taken to ensure that persons who are particularly susceptible to exploitation, such as those who are aged, or suffer from ill health, or are vulnerable, genuinely understand the nature and effect of the transactions into which they enter, particularly when those transactions are of substantial value. The advice must also be such as a competent advisor would give if acting solely in the interests of the donor.

Flowing from the foregoing, the mere fact that a document is explained, and that no questions are asked or criticism made of it by the complainant, does not always substantiate a deliberate and intelligent choice to adopt all its provisions.79 The more complex the transaction, and the greater the inequality of knowledge or experience between the parties, the more extensive the scope of independent advice required. In Bank of New South Wales v Rogers,80 for example, Williams J observed that, as giving a guarantee is often a complicated matter, it is essential that the guarantor be independently advised regarding its nature and effect.

Independent advice given by solicitors [7.65] As independent advice is often sourced from solicitors, particularly in the giving of

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guarantees, much of the case law focuses on the duties of solicitors in this context. An important statement is that of King CJ in McNamara v Commonwealth Trading Bank of Australia which, though lengthy, deserves quotation:81 [Solicitors must provide] a careful explanation to the guarantor of the terms of the document and its legal effect … [T]‌he duty of a solicitor to a client who consults him for advice prior to signing the guarantee [requires the solicitor to] raise with the client questions relating to the prudence of entering into the guarantee and [to] ascertain whether the client wishes to be advised on such questions … [U]nless the client [instructs otherwise] the instructions from the client should be regarded as extending to advice on all matters relating to the guarantee, including the wisdom of entering into it from a practical point of view. The state of the financial affairs of the principal debtor should be discussed as well as the extent of the assets of the client. A client whose assets are few and who will be putting the whole of his assets, perhaps including his home, at risk obviously needs careful and perhaps quite forthright advice. The need is even greater where … the affairs of the principal debtor are precarious. Solicitors undertaking to advise clients in relation to guarantees … should remember … that there is a potential conflict of interest between the principal debtor and the prospective surety. Frequently the debtor who desires to be guaranteed is a near relative and the prospective surety is under considerable emotional pressure. It is essential that the solicitor act and be understood to act solely

77

Brusewitz v Brown [1923] NZLR 1106 at 1117. See also Hewitt v Gardner [2009] NSWSC 1107 at [86] per Ward J.

78

Prendergast v Joyce [2009] 3 IR 519 at [66] per Gilligan J. See, for example, Ryan v Aboody [2012] NSWSC 136 (where the evidence showed that the solicitor did not satisfy himself that the gift was one that it was “right and proper” for the donor to make, Slattery J remarked (at [79]) that “with a client who was, demonstrating fixed but distorted thinking, proposing to undertake a transaction that on its face appeared to be improvident, and was obviously frail and had some dependence on the recipients of the gift, the circumstances called for such a challenge”).

79

Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 at 36 per Street J; Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 at 156 per Millett LJ; Pesticcio v Huet [2004] EWCA Civ 372 at [23] per Mummery LJ.

80

Bank of New South Wales v Rogers (1941) 65 CLR 42 at 87.

81

McNamara v Commonwealth Trading Bank of Australia (1984) 37 SASR 232 at 241 (emphasis supplied). See further Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), [5.100]–​[5.140].

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Equity and Trusts in Australia

for the prospective surety … Sound professional practice requires also that the solicitor be and be seen to be free to advise the prospective surety unencumbered by any ties to the prospective debtor. The solicitor, moreover, should be at pains to ensure that his client’s decision is as free of the influence of the debtor as he can arrange.

Solicitors need not, though, traverse the document clause-​by-​clause for this would, to ordinary lay persons, overload their attention span, flood them with unnecessary detail and distract attention from major features of the transaction, bearing in mind, as noted earlier, that the degree of explanation must vary according to the nature and knowledge of the client.82 Rather, solicitors should “concentrate on giving a clear account in summary of the salient features of the transaction in terms likely to be understood by a lay person unversed in legal matters”.83 In all cases, however, solicitors must ensure that clients have an understanding of the full implications of the transaction.84 So if, for instance, a transaction involves giving an all moneys unlimited guarantee, the solicitor must bring home that the client will have no control over the extent of the liability in question —​not simply that the liability is “unlimited” —​and inform the client of any alternatives. The “independence” of advice does not, in every case, dictate that only a solicitor with no (prior) connection with the stronger party can give it.85 But as a matter of general principle, a beneficiary of the weaker party’s bounty does not discharge any presumed undue influence merely by showing that the one solicitor acted for both parties in the transaction.86 Clear intention to enter transaction sought to be impugned

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[7.70]  There is authority that, provided the complainant has the capacity to understand the

transaction and has freely exercised her or his will, the transaction will not be set aside merely because he or she failed to appreciate its financial implications.87 Yet a complainant’s ability to understand and intend a transaction may not by itself necessarily bar equitable relief. Influence can be subtle, and so the inquiry is not whether the complainant knew what he or she was doing, but how the intention was produced.88 It follows that merely because the proposal to, say, make a gift, appears to emanate from the donor is not decisive in the donee’s favour if the donative intention is a product of feelings of trust and dependence within a close relationship,89 especially for a gift highly improvident and substantial relative to the donor’s circumstances. For example, in Hartigan v International Society for Krishna Consciousness Inc,90 the plaintiff gave her land  —​being her only real asset and her only abode  —​to a

82

Citibank Savings Ltd v Nicholson (1997) 70 SASR 206 at 233–​234 per Perry J.

83

Citibank Savings Ltd v Nicholson (1997) 70 SASR 206 at 233 per Perry J.

84

This may, in addition, involve counselling the client to obtain advice on the financial wisdom of the transaction from an accountant: Citibank Savings Ltd v Nicholson (1997) 70 SASR 206 at 234 per Perry J.

85

McIvor v Westpac Banking Corporation [2012] QSC 404 at [96] per Applegarth J.

86

See, for example, Ryan v Aboody [2012] NSWSC 136 at [75]–​[79] per Slattery J.

87

Jenyns v Public Curator (Qld) (1953) 90 CLR 113.

88

Harris v Jenkins (1922) 31 CLR 341 at 368 per Starke J; Johnson v Buttress (1936) 56 CLR 113 at 119 per Latham CJ; Whereat v Duff [1972] 2 NSWLR 147 at 169 per Asprey JA; Leeder v Stevens [2005] EWCA Civ 50 at [19] per Jacob LJ (discussed at [7.100]) (who phrased the inquiry in terms of whether the complainant was “in a position where, because of her vulnerability, financial and perhaps otherwise, she agreed to something which if she had been fully alert in her own interest and advised by an independent adviser she would not have done or may not have done”).

89

Spong v Spong (1914) 18 CLR 544 at 549 per Griffith CJ. Cf in the context of the doctrine of unconscionable dealing, see Bridgewater v Leahy (1998) 194 CLR 457, discussed at [9.130].

90

Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810.

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Undue Influence  Chapter  7

religious movement. On her application to have the gift set aside, Bryson J explained the judicial approach as follows:91 In the application of this basic principle to gifts to religious institutions or religious advisers, the court does not act only for the restraint of deceptions and of intended exploitation of religious enthusiasms or beliefs; if there has been behaviour of those kinds the court will set aside gifts which the behaviour has produced, but the grounds of the court’s intervention extend well beyond such behaviour. The court’s approach … is more exacting than ordinary community standards and goes well beyond overcoming deliberate exploitation. It may be unconscionable to accept and rely on a gift which was fully intended and understood by the donor and originated in the donor’s own mind, where the intention to make the gift was produced by religious belief. Characteristically persons claiming this relief have made gross errors of judgment, obvious to any objective outsider. Finally, an owner of property is entitled to dispose of it, even to dispose of it in a very improvident way, but the court requires to be satisfied that the transaction is not unconscionable after examining the events and circumstances closely.

His Honour accepted that the defendant had not deliberately attempted to overbear or deceive the plaintiff, or to deprive her of the opportunity of making up her own mind. However, as a dominating fact the extreme improvidence of the gift would have been obvious to any reasonable observer who knew anything of her circumstances, and was obvious to persons who conducted the defendant’s side of the transaction. Bryson J characterised the gift as “so extraordinarily improvident as itself to call for consideration of the circumstances and state of mind which led the plaintiff to decide to make it”.92 This served to raise the presumption of undue influence, which the defendant proved unable to rebut. Improvidence of transaction

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[7.75]  That a transaction is based on an inadequate consideration is not in itself conclusive

evidence that it was the product of undue influence.93 Adequacy of consideration is, nonetheless, an evidentiary matter relevant in considering whether a position of influence existed.94 The improvidence of a transaction from the perspective of the complainant may, to this end, be a powerful indicator of undue influence,95 especially where it involves a gift that is substantial relative to the donor’s means. The inquiry into relativity informs whether the transaction is explicable by ordinary motives. This explains Hartigan v International Society for Krishna Consciousness Inc, discussed at [7.70], and Watkins v Combes,96 where Isaacs J found that the donor’s conduct amounted to such a complete surrender of her means of sustenance as to suggest that she could not have been in a state of mind to weigh for herself the act and its consequences. Similarly, in Thorne v Kennedy,97 mentioned at [7.55], the plurality noted that despite the usual financial imbalance in pre-​nuptial (and indeed post-​nuptial) agreements, 91

Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [28].

92

Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [37].

93

Brusewitz v Brown [1923] NZLR 1106 at 1109, 1111 per Salmond J; Louth v Diprose (1992) 175 CLR 621 at 654 per Toohey J.

94

Blomley v Ryan (1956) 99 CLR 362 at 405 per Fullagar J; K v K [1976] 2 NZLR 31 at 39 per O’Regan J; Washband v Buck (1997) Q Conv R ¶54-​491 at 59,936 per Muir J.

95

Bank of Montreal v Stuart [1911] AC 120 at 137 (PC); Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30 at 35 per Street J; European Asian of Australia Ltd v Lazich (1987) ASC ¶55-​564 at 57,291 per Clarke J; Goldsworthy v Brickell [1987] Ch 378 at 407 per Nourse LJ; Quek v Beggs (1990) 5 BPR 11,761 at 11,777–​11,778 per McLelland J; Hammond v Osborn [2002] EWCA Civ 885 (cf Scott [2003] LMCLQ 145).

96

Watkins v Combes (1922) 30 CLR 180 at 197.

97

Thorne v Kennedy (2017) 91 ALJR 1260 at [56] per Kiefel CJ, Bell, Gageler, Keane and Edelman JJ.

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Equity and Trusts in Australia

it can be an indicium of undue influence where such an agreement “is signed despite being known to be grossly unreasonable even for agreements of this nature”. The focus on the improvidence of the transaction does not, however, shift undue influence into the realms of substantive unfairness —​the substantive unfairness of the transaction is evidence of the procedural unfairness that underlies the doctrine of undue influence.98

Manifest disadvantage [7.80] If indeed a transaction that is manifestly disadvantageous to the complainant may

indicate that it was procured by undue influence, the issue arises as to whether the presence or absence of manifest disadvantage is decisive. Lord Scarman answered this question in the affirmative in National Westminster Bank plc v Morgan, stating:99 I know of no reported authority where the transaction set aside was not to the manifest disadvantage of the person influenced. It would not always be a gift: it can be a “hard and inequitable” agreement … or a transaction “immoderate and irrational” … or “unconscionable” in that it was a sale at an undervalue … Whatever the legal character of the transaction, the authorities show that it must constitute a disadvantage sufficiently serious to require evidence to rebut the presumption that in the circumstances of the relationship between the parties it was produced by the exercise of undue influence.

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Though endorsed by the English Court of Appeal100 and some Antipodean authority,101 both courts102 and commentators103 have queried Lord Scarman’s approach. In particular, Lord Browne-​Wilkinson in CIBC Mortgages plc v Pitt104 considered that Lord Scarman was concerned to establish that disadvantage had to be shown, not as an element of the cause of action for undue influence, but so to raise the presumption of undue influence.105 Moreover, at least in cases where actual undue influence has been exercised and proved, Lord Browne-​ Wilkinson could find no logic in imposing a requirement of “manifest disadvantage”, reasoning as follows:106 Actual undue influence is a species of fraud … A man guilty of fraud is no more entitled to argue that the transaction was beneficial to the person defrauded than is a man who has procured a transaction by misrepresentation. The effect of the wrongdoer’s conduct is to prevent the wronged party from bringing a free will and properly informed mind to bear on the proposed transaction which accordingly must be set aside in equity as a matter of justice.

98

Cf the role of the improvidence of transaction in the context of the doctrine of unconscionable dealing: see [9.60].

99

National Westminster Bank plc v Morgan [1985] 1 AC 686 at 704.

100

Goldsworthy v Brickell [1987] Ch 378 at 407–​408 per Nourse LJ; Midland Bank plc v Shephard [1988] 3 All ER 17 at 21 per Neill LJ; Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923 at 961–​962, 964 (CA); Cheese v Thomas [1994] 1 All ER 35 at 38–​39 per Sir Donald Nicholls VC.

101

See, for example, Farmers’ Co-​operative Executors & Trustees Ltd v Perks (1989) 52 SASR 399 at 403–​404 per Duggan J; Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 at 166 per Richardson J.

102

See, for example, Baburin v Baburin [1990] 2 Qd R 101 at 109 per Kelly SPJ; Geffen v Goodman Estate (1991) 81 DLR (4th) 212 at 227 per Wilson J; Prendergast v Joyce [2009] 3 IR 519 at [49], [50] per Gilligan J. Cf Newjur Pty Ltd v Pangas (1993) 17 Fam LR 245 at 254 per Santow J.

103

See Tiplady, “Undue Influence and Allegedly Manifestly Disadvantageous Transactions:  National Westminster Bank plc v Morgan” (1985) 48 MLR 579; Ogilvie, “Undue Influence in the House of Lords” (1986) 11 CBLJ 503; Dale, “Undue Influence and Manifest Disadvantage” [1988] Conv 441; Dixon, “The Limits of Undue Influence Explained” [1989] CLJ 359.

104

CIBC Mortgages plc v Pitt [1994] 1 AC 200.

105

CIBC Mortgages plc v Pitt [1994] 1 AC 200 at 209.

106

CIBC Mortgages plc v Pitt [1994] 1 AC 200 at 209.

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Undue Influence  Chapter  7

This suggests that a person who can prove the exercise of actual undue influence may have the transaction set aside without proof of manifest disadvantage, but that such proof is required where the exercise of undue influence is only presumed.107 It appears, in any case, that any need for manifest disadvantage is being whittled away, one judge stating that “[p]‌rovided it is clear and obvious and more than de minimis, the disadvantage may be small”.108 More recently, Lord Nicholls in Royal Bank of Scotland v Etridge (No 2)109 opined that the label “manifest disadvantage”, though it may be apt if applied to straightforward transactions such as a substantial gift or an undervalue sale, is prone to mislead in other transactions. His Lordship used the scenario of a wife guaranteeing her husband’s debt to illustrate the problem:110

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In a narrow sense, such a transaction plainly (“manifestly”) is disadvantageous to the wife. She undertakes a serious financial obligation, and in return she personally receives nothing. But that would be to take an unrealistically blinkered view of such a transaction. Unlike the relationship of solicitor and client or medical adviser and patient, in the case of husband and wife there are inherent reasons why such a transaction may well be for her benefit. Ordinarily, the fortunes of husband and wife are bound up together. If the husband’s business is the source of the family income, the wife has a lively interest in doing what she can to support the business. A wife’s affection and self-​interest run hand-​in-​hand in inclining her to join with her husband in charging the matrimonial home, usually a jointly-​owned asset, to obtain the financial facilities needed by the business. The finance may be needed to start a new business, or expand a promising business, or rescue an ailing business.

This led Lord Nicholls to identify the correct approach in deciding whether a transaction is disadvantageous to the wife as to discard a label that gives rise to this sort of ambiguity. The presence of manifest disadvantage is thus probably best viewed as a powerful evidential factor; the more disadvantageous the transaction to the complainant, the easier it is to establish it was procured by improper means and the more difficult for the wrongdoer to rebut the inference.111 That a transaction is manifestly disadvantageous to one of the parties is also significant for its appearance to a third party, thus assisting the complainant to establish that the third party should be subject to her or his equity arising from undue influence.112 Transaction not the proximate result of the influence [7.85]  A court will not upset a transaction for undue influence if the evidence shows that, on

the balance of probabilities, the complainant would have entered into it whether influenced or not.113 If the complainant knows the general nature of the transaction and, though placing

107

Dunbar Bank plc v Nadeem [1998] 3 All ER 876 at 882 per Millett LJ; Barclays Bank plc v Coleman [2001] QB 20 at 32–​33 per Nourse LJ.

108

Barclays Bank plc v Coleman [2001] QB 20 at 33 per Nourse LJ (see Pawlowski, “Undue Influence: Manifest Disadvantage” (2000) 144 Sol J 376; Thompson, “Disadvantageous Transactions” [2000] Conv 444).

109

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [26] (see Andrews, “Undue Influence —​Where’s the Disadvantage?” [2002] Conv 456).

110

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [28].

111

Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705 at 713 per Stuart-​Smith LJ.

112

Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 at 152, 154–​155 per Millett LJ. That in the context of the latter point, the courts focus, inter alia, on whether or not the guarantor receives any benefit from the transaction sought to be impugned (see [7.235]–​[7.245]) illustrates how the substantive unfairness of the transaction can carry with it notice of possible procedural unfairness in relation to its execution. As to third party situations generally see [7.160]–​[7.265].

113

Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923 at 971 (CA).

[7.85]  231 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

confidence in the alleged influencer’s judgment, enters into it without coercion or persuasion from the latter, the transaction cannot be said to be the proximate result of the influence.114 A typical case is where the complainant may derive some not insubstantial personal advantage or benefit from the transaction. In Commonwealth Bank of Australia v Cohen,115 the New South Wales Supreme Court found that the defendant, who alleged that the plaintiff had used her husband to obtain her signature on mortgage and guarantee documents in circumstances of undue influence, saw these transactions as necessary and desirable for the continuation of the family company of which she was a director. Her motivation to enter the transactions was an expectation of benefits from them, not undue influence exerted by her husband. Cole J was swayed by a finding that the defendant had separate means, business knowledge and skills, and so was properly situated to make a judgment as to her own best interests.116

UNDUE INFLUENCE AND PARTICULAR RELATIONSHIPS Undue influence by husband over wife [7.90]  Although undue influence may be more easily proved by husband over wife than in

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cases where no special relationship exists between the parties, there is no presumption of undue influence from the marital relationship. Dixon J explained the reason for this in Yerkey v Jones:117 The reason for excluding the relation of husband and wife from the category to which the presumption applies is to be found in the consideration that there is nothing unusual or strange in a wife from motives of affection or even prudence conferring a large proprietary interest or pecuniary benefit upon her husband. The Court of Chancery was not blind to the opportunities of obtaining and unfairly using influence over his wife which a husband possesses. But in the relations comprised within the category to which the presumption of undue influence applies, there is another element besides the mere existence of an opportunity of obtaining ascendancy or confidence and of abusing it. It will be found that in none of those relations is it natural to expect one party to give property to the other. That is to say, the character of the relation itself is never enough to explain the transaction and to account for it without suspicion of confidence abused. [7.95]  Yet the husband–​wife relationship has never been fully divested of so-​called equitable presumptions of an invalidating tendency. Dixon J in Yerkey v Jones identified two such presumptions:118 if a voluntary disposition in favour of the husband is impeached, the burden of establishing that it was not improperly or unfairly procured may be placed upon him by proof of circumstances raising any doubt or suspicion; and it may be a condition of the validity of a voluntary dealing by the wife for the advantage of her husband that she obtained an adequate understanding of the nature and consequences of the transaction.

114

Berk v Permanent Trustee Co of New South Wales Ltd (1947) 47 SR (NSW) 459 at 464 per Nicholas CJ in Eq.

115

Commonwealth Bank of Australia v Cohen (1988) ASC ¶55-​681.

116

Commonwealth Bank of Australia v Cohen (1988) ASC ¶55-​681 at 58,160.

117

Yerkey v Jones (1939) 63 CLR 649 at 675. See also at 658–​659 per Latham CJ; Colonial Bank of Australasia v Kerr (1889) 15 VLR 314 at 317–​318 per Higinbotham CJ; Newjur Pty Ltd v Pangas (1993) 17 Fam LR 245 at 254 per Santow J.

118

Yerkey v Jones (1939) 63 CLR 649 at 675–​676. His Honour also identified a third presumption, namely that third parties who deal through the husband with the wife in a transaction operating to the husband’s advantage may, by that fact alone, be affected by any equity as between the wife and the husband that might arise from his conduct: see [7.210].

232 [7.90] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

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Undue Influence  Chapter  7

It follows that the onus of establishing presumed undue influence by husband over wife is not onerous.119 This has prompted the suggestion that these “invalidating tendencies” are simply a vehicle for introducing a presumption of undue influence between husband and wife via the back door.120 Some Australian courts have branded as anachronistic the view that a wife is in a position of disadvantage vis-​à-​vis her husband, a relic from the days when married women were almost incapable at law, and have used this as an excuse to downplay Dixon J’s “invalidating tendencies”.121 Yet in Garcia v National Australia Bank Ltd,122 a majority of the High Court located the principles in Yerkey as “simply particular applications of accepted equitable principles which have as much application today as they did then”. The plurality noted that although the role of women in Australian society had changed since Yerkey was decided, many women remain in relationships marked by disparities of economic and other power.123 It identified the rationale for Dixon J’s invalidating tendencies as the trust and confidence between marriage partners in which a wife may leave many business judgments to her husband, not from any subservience or inferior economic position of women, or from women’s vulnerability to exploitation because of their emotional involvement (except in cases involving actual undue influence).124 For example, in Geelong Building Society (in liq) v Thomas,125 Hedigan J raised the presumption of undue influence where, due to the wife’s lack of sophistication and education in comparison to her husband, she was unduly prone to trusting and relying on her husband. And in Hewett v First Plus Financial Group plc,126 the English Court of Appeal held that a husband’s deliberate concealment of his ongoing affair when seeking his wife’s agreement to mortgage the family home to secure his debts gave rise to undue influence, as the wife’s accession to the husband’s request was based on her (incorrect) assumption that he was as committed as she was to the marriage, to the family and to the preservation of their home life in the future. On the other hand, a court is less likely to presume undue influence where the benefit of the transaction in question would have accrued to both husband and wife, especially where the transaction is not irrational from the wife’s perspective.127 In European Asian of Australia

119

Broadlands International Finance Ltd v Sly (1987) 4 BPR 9420 at 9425 per Foster J; Davies v AIB Group (UK) plc [2012] 2 P & CR 19 at [10] per Norris J.

120

See, for example, Barclays Bank plc v O’Brien [1994] 1 AC 180 at 195 per Lord Browne-​Wilkinson. Cf Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), p 223 (who maintains that the presumption should apply to the husband–​wife relationship, as “[t]‌his would accord with the reality, already accepted in the authorities, that this relationship is one which creates opportunities for one party to acquire ascendancy”).

121

See, for example, European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 at 200 per Rogers J; Warburton v Whiteley (1989) 5 BPR 11,628 at 11,629 per Kirby P, at 11,644 per Clarke JA; Akins v National Australia Bank (1994) 34 NSWLR 155 at 168, 170–​172 (CA).

122

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 403 per Gaudron, McHugh, Gummow and Hayne JJ. Their Honours emphasised that it is for the High Court alone to determine whether one of its previous decisions is to be departed from or overruled: at 403. See also at 440 per Callinan J. Contra at 421–​429 per Kirby J.

123

Similar observations were made by Lord Browne-​Wilkinson in Barclays Bank plc v O’Brien [1994] 1 AC 180 at 190–​191, 196.

124

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 403–​405 per Gaudron, McHugh, Gummow and Hayne JJ.

125

Geelong Building Society (in liq) v Thomas (1996) V Conv R ¶54-​545 at 66,468–​66,471.

126

Hewett v First Plus Financial Group plc [2010] 2 FLR 177 at [24]–​[33] per Briggs J, with whom Leveson and Jacob LJJ concurred.

127

Cf the rationale for the “volunteer” requirement in the Garcia doctrine (see [7.215]); Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [30] per Lord Nicholls (“I do not think that, in the ordinary course, a guarantee of the character I have mentioned is to be regarded as a transaction which, failing proof to the contrary, is explicable only on the basis that it has been procured by the exercise of undue influence by the husband. Wives frequently enter into such transactions. There are good and sufficient reasons why they are willing to do so, despite the risks involved for them and their families. They may be enthusiastic.

[7.95]  233 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

Ltd v Lazich,128 the borrower was a company owned and operated by the husband and wife, each assuming liability as guarantors. The loan was obtained at an advantageous rate of interest and used largely to discharge other liabilities of the company that the wife had guaranteed. These matters, coupled with evidence that the wife was “as much concerned in the success of the company as was her husband”, led Rogers J to deny a presumption of undue influence arising from the transaction.129 The relationship between man and woman to whom he is affianced (?) [7.100]  Large gifts to a man from a woman to whom he is affianced traditionally attracted

the presumption of undue influence, the logic being that their relationship provides an opportunity for obtaining ascendancy and of abusing it and that it is not natural here to expect one party to give property to the other.130 This had been judicially queried for some time, though, in view of changing social conditions and statutes that reflect gender equality.131 Even if applied to each gender, the presumption operated anomalously because, it has been observed, “the law would be saying that couples who are engaged to be married repose sufficient trust and confidence in one another but that the trust and confidence evaporates as soon as they are married”.132 The foregoing supplied the backdrop for the High Court in 2017 to declare that “[c]‌ommon experience today of the wide variety of circumstances in which two people can become engaged to marry negates any conclusion that a relationship of fiancé and fiancée should give rise to a presumption that either person substantially subordinates his or her free will to the other”.133 Other personal relationships

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[7.105]  No undue influence presumption arises as a matter of law between de facto partners,

although, as shown in the English Court of Appeal’s decision in Leeder v Stevens,134 the facts may justify raising such a presumption. The parties were in a long-​term relationship. The appellant owned a house, which she agreed to put in their joint names on the understanding that the respondent would repay the mortgage (some £5000 was owing, being a small proportion of the value of the property). The transfer was effected via a deed of consent drafted by the respondent’s solicitors, which was prejudicial to the appellant’s interests as it empowered the respondent to force a sale of the property. Despite being urged by the respondent’s solicitors to do so, the appellant did not take independent advice. Jacob LJ noted that the manifestly disadvantageous nature of the transaction from the appellant’s perspective was “the sort They may not. They may be less optimistic than their husbands about the prospects of the husbands’ businesses. They may be anxious, perhaps exceedingly so. But this is a far cry from saying that such transactions as a class are to be regarded as prima facie evidence of the exercise of undue influence by husbands”; emphasis in original). 128

European Asian of Australia Ltd v Lazich (1987) ASC ¶55-​564.

129

European Asian of Australia Ltd v Lazich (1987) ASC ¶55-​564 at 57,290–​57,291.

130

Page v Horne (1848) 11 Beav 227 at 235; 50 ER 804 at 807 per Lord Langdale MR (“no one can say what may be the extent of the influence of a man over a woman, whose consent to marriage he has obtained”); Yerkey v Jones (1939) 63 CLR 649 at 675 per Dixon J.

131

Zanet v Hyman [1961] 3 All ER 933 at 937–​938 per Lord Evershed MR; Louth v Diprose (1992) 175 CLR 621 at 630 per Brennan J.

132

Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), p 218.

133

Thorne v Kennedy (2017) 91 ALJR 1260 at [36] per Kiefel CJ, Bell, Gageler, Keane and Edelman JJ.

134

Leeder v Stevens [2005] EWCA Civ 50.

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Undue Influence  Chapter  7

of thing which calls for explanation”, and when coupled with the trust and confidence she placed in the respondent due to their long-​term relationship, provided grounds to raise the presumption of undue influence.135 The position is otherwise where, outside of a committed relationship, a party under no disability seeks to ingratiate herself or himself with another person by effecting transactions favourable to the latter. In Xu v Lin,136 for example, desirous of a closer relationship with the defendant prostitute, of which he had been a longstanding client, the plaintiff sold his house to her at an undervalue. Barrett J held that, given the absence of any emotional relationship by which the plaintiff might have reposed trust and confidence in the defendant at the relevant time, the parties’ relationship triggered no presumption of undue influence. Influencing this outcome was the commercial nature of the relationship, the defendant’s lack of involvement in the plaintiff’s personal affairs, and the lack of cohabitation and exclusive commitment.137 Moreover, that the plaintiff, an experienced businessman, took steps to inform himself of the market value of the house before its sale, and took no take advantage of the opportunity to reconsider the sale when the defendant defaulted, confirmed the deliberate nature of his decision, and with it the absence of any effects of undue influence.138 Intra-​family undue influence

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[7.110] “While close family relationship creates a situation where influence is readily

acquired”, an Irish judge has observed, “mere blood relationship is not sufficient of itself to call the principle into play; it must be shown that the actual relations between the parties give rise to a presumption of influence”.139 An Australian judge has similarly noted that “many aspects of domestic life where a person’s conduct will be influenced by other members of the household by reason of the emotional relationship between them, without the relationship being one of influence for the purpose of the equitable doctrine”.140 And, consistent with the law recognising no presumption of undue influence as between husband and wife, an English judge has cautioned that “[s]‌tatements or conduct by a husband which do not pass beyond the bounds of what may be expected of a reasonable husband in the circumstances should not, without more, be castigated as undue influence”.141 Yet as discussed below, these remarks do not preclude the law recognising instances where the presumption of undue influence arises, whether as a matter of law or on the facts, in familial relationships.

135

Leeder v Stevens [2005] EWCA Civ 50 at [14], with whom Gage LJ agreed.

136

Xu v Lin (2005) 12 BPR 23,131.

137

Xu v Lin (2005) 12 BPR 23,131 at [28].

138

Xu v Lin (2005) 12 BPR 23,131 at [32]. See also Lee v Chai [2013] QSC 136 (where an older successful business man purchased property in the name of his girlfriend, and it was found that there was no undue influence in this regard, as the gifts were the product of an independent will; Peter Lyons J concluded (at [220]) that “as an experienced businessman and well educated and intelligent person, [the plaintiff] understood well what he was doing, and had ample opportunity to make a different decision, but maintained the decision he had initially made, independently, voluntarily, and well understanding what he was doing, to provide money for the purchase of the unit in [the defendant’s] name”).

139

Gregg v Kidd [1956] IR 183 at 195 per Budd J.

140

Lee v Chai [2013] QSC 136 at [202] per Peter Lyons J.

141

Davies v AIB Group (UK) plc [2012] 2 P & CR 19 at [10] per Norris J.

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Equity and Trusts in Australia

Undue influence by parent over child

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[7.115] The parent–​child relationship gives rise to a presumption of undue influence until

such time as the dominion of parent over child ceases.142 The parent therefore bears the onus of showing that any transaction was not the product of parental influence.143 This can be discharged by evidence that, at the time, the child was emancipated from parental influence, or had received the requisite independent advice (see [7.55]–​[7.65]).144 Children under the age of majority are presumed to be subject to parental influence. The age of majority does not, however, necessarily equate to the age at which parental influence over the child ceases. In fact, many of the cases dealing with the presumption of parental influence involve transactions effected shortly after the child has attained the age of majority, with the consequent capacity to make a binding gift.145 It follows that age is merely a matter taken into consideration in addressing the question of emancipation. Ordinarily, the older the child, the lighter the onus on the parent. One judge has, to this end, doubted whether a presumption of influence could arise between a child aged 43 and a parent aged 75, or if it arose, whether it could not be rebutted by mere proof of the ages.146 Yet no inflexible rule applies, and the law does not blithely assume that a child’s advancing age always dulls parental influence. Other relevant factors include the child’s financial and emotional independence, business experience, intelligence, education, character, personality and state of health relative to those of parent.147 In Phillips v Hutchinson,148 the plaintiff was aged 35, married and had for some years lived apart from her 83-​year-​old father. Gavan Duffy J nonetheless found her attitude to the business of everyday life to be childlike, as she interested herself only in the imaginary life going on in her own mind.149 This, supported by evidence that the plaintiff unreservedly trusted her father and leaned on his advice, dictated that she remained under parental influence. In Commonwealth Bank of Australia v Ridout Nominees Pty Ltd,150 Wheeler J found that two sons in their 30s, though of average intelligence and firmness, were subject to their father’s influence because they were employed on the family farm, habitually deferred to him in matters of importance to the business, and depended on the father in a way “rarely found outside farming families”. Conversely, in Powell v Powell,151 McLure J refused to set aside a transfer of real property from a son, aged 41, to his mother at less than half market value, as the son had not lived with his mother for nearly 20 years and was in his third marriage. That the son was not well educated and had

142

Wright v Vanderplank (1855) 2 K & J 1; 69 ER 669; Lancashire Loans Ltd v Black [1934] 1 KB 380; Lamotte v Lamotte (1942) 42 SR (NSW) 99 at 103 per Roper J; Kerr v West Australian Trustee Executor & Agency Co Ltd (1937) 39 WALR 34 at 45 per Draper J; Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040 at [80] per Brereton J.

143

Lamotte v Lamotte (1942) 42 SR (NSW) 99 at 102–​103 per Roper J; West v Public Trustee [1942] SASR 109 at 119–​120 per Mayo J; Phillips v Hutchinson [1946] VLR 270 at 273 per Gavan Duffy J; Powell v Powell [2002] WASC 105 at [131] per McLure J. Cf Powell v Powell [1900] 1 Ch 243 at 245–​246 per Farwell J; Re Pauling’s Settlement Trusts [1964] Ch 303 at 337 (CA).

144

Powell v Powell [1900] 1 Ch 243 at 246 per Farwell J.

145

See, for example, Berdoe v Dawson (1865) 34 Beav 603; 55 ER 768.

146

Lamotte v Lamotte (1942) 42 SR (NSW) 99 at 102 per Roper J.

147

Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573 at 577 per Gillard J.

148

Phillips v Hutchinson [1946] VLR 270.

149

Phillips v Hutchinson [1946] VLR 270 at 272.

150

Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37 at [200].

151

Powell v Powell [2002] WASC 105 at [163].

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Undue Influence  Chapter  7

held many jobs did not, in her Honour’s view, justify an inference that he was vulnerable to his mother’s control and authority.

Undue influence in relationships in loco parentis [7.120]  Undue influence can be presumed where the defendant stands in the position of a

parent (in loco parentis) vis-​à-​vis the plaintiff. In Bank of New South Wales v Rogers,152 the plaintiff had resided with her uncle since her father’s death. As the evidence revealed that the uncle stood in a quasi-​parental relationship to his niece, which involved trust and confidence and much of the general dependence proper to the parental relationship, and that his will would dominate hers on any course he asked her to take in business matters,153 the presumption of undue influence arose.

Undue influence by child over parent or between other family members/​carers

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[7.125]  Recent years have witnessed a rise in litigation pleading undue influence by a child

over a parent, within members of the one family, or by a carer over the patient. The cases have often involved an inter vivos gift to a child, family member or carer, which thereby exclude its subject matter from the testamentary estate available to (other) siblings or family members. The law nonetheless rejects a presumption of undue influence by children over parents, and no presumption arises simply by proof of a normal family relationship in which parents agree to assist their children in their business ventures absent evidence of influence and lack of independent judgment, or evidence of any greater trust or confidence than ordinarily expected between parents and adult children.154 There is good reason for this approach, as parents’ willingness to assist their children is usually explainable by the very nature of the relationship between them. It would be odd, then, for the law to presume influence by children over their parents, which children must lead evidence to rebut. The law also goes against presuming undue influence between relatives, absent evidence of ascendancy, dependency, influence or trust beyond that ordinarily expected in a familial relationship.155 [7.130]  Yet in circumstances where the parent(s) place additional confidence in their children

by virtue, say, of advanced age, frailty, or lack of education or experience, grounds may surface for the presumption to operate (although here an alternative cause of action under the doctrine of unconscionable dealing, discussed in Ch 9, may exist).156 In the words of Lindsay J in Hogg v Hogg:157 [I]‌t is at least arguable that the … presumption … could arise where the particular circumstances are that the alleged victim is an elderly parent, that that parent is living alone and is

152

Bank of New South Wales v Rogers (1941) 65 CLR 42.

153

Bank of New South Wales v Rogers (1941) 65 CLR 42 at 63–​64 per McTiernan J. See also at 54 per Starke J.

154

ASB Bank Ltd v Harlick [1996] 1 NZLR 655 at 657, 661–​662 per Gault J; Wilby v St George Bank (2001) 80 SASR 404 at 414 per Perry J; Urane v Whipper (2002) NSW ConvR ¶55-​992 at 58,178 per Windeyer J.

155

H G & R Nominees Pty Ltd v Fava [1997] 2 VR 368 at 399–​400 (CA); Washband v Buck (1997) Q ConvR ¶54-​491 at 59,936 per Muir J.

156

The point is further discussed in the context of third party surety situations: see [7.180], [7.250], [7.255]. On the issue of undue influence and the elderly, see Burns, “Undue Influence Inter Vivos and the Elderly” (2002) 26 MULR 499 (who argues that old age should in modern times warrant special protection and treatment by the law, that the law to date has made it too difficult for the elderly to set aside transactions for undue influence by setting the threshold for judicial intervention too high, and that one solution is to recognise a presumption of undue influence where an elderly dependent person has transferred significant property for less than full consideration).

157

Hogg v Hogg [2008] WTLR 35 at [43].

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Equity and Trusts in Australia

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no longer in good health, that the child alleged to have influence is the one who, in large part, is responsible for his care and that the impugned transaction is one that cannot readily be accounted for (it may be said) by the ordinary motives of ordinary persons in all the attendant circumstances.

And it has been judicially observed that, beyond the relationship between parent and child, “it has almost become a rule of elder law that when one is dealing with an elderly person who is lonely and friendless, a person who befriends her must, if they are to gain a personal benefit, be extremely careful to ensure that there is no unworthy conduct”.158 Courts are, it is said, “naturally suspicious of transactions in which an elderly and frail person gives his or her principal asset to a family member”.159 A scenario of this kind gave rise to the presumption of undue influence in Hewitt v Gardner,160 where the deceased transferred her home to her daughter (the defendant), who was her primary carer, for consideration of one dollar. Ward J held that, as the deceased was elderly and frail, and depended on the defendant for her daily care while having limited contact with her other children, there was a clear relationship of dependence such as to give rise to a presumption of undue influence,161 which the defendant proved unable to rebut. Her Honour found likewise in Barkley v Barkley-​Brown,162 involving a transfer of property from aunt to niece in circumstances where the aunt had become increasingly emotionally and physically dependent on the niece. The cases reveal multiple other instances of the presumption of undue influence being raised, and not rebutted, where an elderly person has transferred property to her or his child or other relative.163 At the same time, that a parent or relative is old or infirm is not itself a reason to presume undue influence. There must, in addition, be shown an ascendancy and corresponding dependence to bring the case outside of the ordinary one whereby one family member benefits another. Evidence of the closeness of the relationship —​which can serve to heighten the influence or alternatively explain the benefit by reference to natural love and affection164 —​and of the personalities involved is highly relevant. In Christodoulou v Christodoulou,165 an elderly mother’s transfer of her only significant asset (her home) to her son at a time of ailing health did not, according to Kaye J, raise a presumption of undue influence, as the evidence revealed

158

Badman v Drake [2008] NSWSC 1366 at [83] per Young CJ in Eq.

159

Courtney v Powell [2012] NSWSC 460 at [56] per Ball J.

160

Hewitt v Gardner [2009] NSWSC 1107.

161

Hewitt v Gardner [2009] NSWSC 1107 at [70].

162

Barkley v Barkley-​Brown [2009] NSWSC 76 at [145], [146].

163

See, for example, Janson v Janson [2007] NSWSC 1344 (voluntary transfer by 90-​year-​old, deaf, almost blind, childless bachelor to his nephew of virtually his only asset, the house in which he had lived for almost his entire life); Winefield v Clarke [2008] NSWSC 882 (transfer of interest in property by aged mother to daughter without consideration, where the mother was reliant on the daughter and reposed trust and confidence in her); Prendergast v Joyce [2009] 3 IR 519 (aunt’s transfer of money into joint accounts with the defendant nephew within four days of her husband’s (uncle’s) funeral vitiated by undue influence in view of “the nature of the relationship between the defendant and his aunt, and her position and condition at the time of the transaction, were such as to give rise to a presumption of undue influence”: at [46] per Gilligan J); Re Smith (deceased) [2015] 4 All ER 329 (gift by elderly lady of the proceeds of the sale of her house, being her only significant asset, to her daughter in a relationship of trust and confidence gave rise to the presumption of undue influence); Round v Round [2017] NZHC 428 (transfer of ownership of elderly disabled father’s home to his son for fear that the son would cease to care for the father triggered the presumption of undue influence).

164

See, for example, McIvor v Westpac Banking Corporation [2012] QSC 404 (where Applegarth J found that guarantees and mortgages given by a mother, with an understanding of what she was doing, for the benefit of her son’s business or daughter, could be “explained as being the product of parental love and affection”: at [82]).

165

Christodoulou v Christodoulou [2009] VSC 583.

238 [7.130] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

the mother to be of independent disposition, who at all times made the key decisions relating to her own interests, including the decision to make the gift in question.166 [7.135] The same considerations underscore gifts to carers. A transfer of substantial prop-

erty by an elderly or disabled person to her or his carer at no or nominal consideration will, if there is evidence of dependence or dominion by the carer, raise the presumption of undue influence.167 Conversely, where the evidence shows the carer–​patient relationship not to have been punctuated by relevant dependence and ascendancy, such as where the patient was a person of conviction and robust in his dealings with others, there is little justification for undue influence to be presumed.168 Undue influence and commercial relationships [7.140]  Business persons bargaining at arm’s length do not generally attract the operation

of the doctrine of undue influence.169 Though one party in a commercial relationship may have a dominating influence over the other, this is not ordinarily the type of influence envisaged by equitable doctrine to impugn a dealing, and in any case most commercial entities are independently advised regarding proposed transactions. Hence, any such transaction entered into by abuse of dominant position is likely to be argued upon grounds of economic duress (see [8.15]) or statutory unconscionability under the Australian Consumer Law (see [9.160]–​[9.195]).

Debtor and creditor relationship

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[7.145]  The debtor–​creditor relationship only triggers a presumption of undue influence if

the complainant can show some special relation with the other party that makes it reasonable to presume that a transaction between them was procured by the latter’s improper use of influence. In Wardley Australia Ltd v McPharlin,170 the plaintiff creditor was a commercial organisation entitled to the exercise of certain legal rights that dictated the terms on which it might withhold their exercise. But the fact that the plaintiff was in a much stronger bargaining position than the defendant debtor did not, in the opinion of the Supreme Court of New South Wales, prove the position of ascendancy necessary to establish a presumptive relationship.171

166

Christodoulou v Christodoulou [2009] VSC 583 at [105]. See also De Wind v Wedge [2010] WTLR 795 (where Patten LJ ruled that, while the presumption arose where an elderly mother transferred almost the totality of her property to her son, it was rebutted the evidence indicated that the mother was a strong personality well able to understand the effect of what she was doing and her reasons for doing it, and the idea of the gift had come from her: at [57]–​[59]); Catanzariti v Romano [2011] ACTSC 106 (where Harper M found no presumption of undue influence arising from a gift by a grandfather to his grandson because, inter alia, the gift was the grandfather’s own idea, and not the product of influence: at [144]–​[147]).

167

See, for example, Law v Mo [2009] NSWSC 639 (plaintiff reliant on carer for assistance in her daily living, and only six weeks prior to the transfer of the property for $1 to the carer the plaintiff had lost her husband, upon whom she had been totally dependent for years; Bergin CJ in Eq found (at [76]) the plaintiff trusted the carer and was in a position in which the carer was able to exercise dominion over her, particularly when the purported gift of the property was made).

168

See, for example, Tulloch (decd) v Braybon (No 2) [2010] NSWSC 650 (where Brereton J concluded (at [79]) that the evidence established no special relationship of influence between the carer and the donor, as the latter “was robust in his dealings” and “had formed the intention to divest himself of his assets before he died”, and that although he enjoyed the carer’s company and attentions, “the idea that he was in a relationship in which [the carer] had dominion over him approaches the absurd”).

169

Walmsley v Christchurch City Council [1990] 1 NZLR 199 at 205–​206 per Hardie Boys J.

170

Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500.

171

Wardley Australia Ltd v McPharlin (1984) 3 BPR 9500 at 9502 per Rogers J.

[7.145]  239 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

Banker and customer relationship [7.150] Nor does the relationship between banker and customer ordinarily trigger a pre-

sumption of undue influence,172 unless the will of the customer has been overborne, whether because of some wrongful act or threat on the part of the bank, or by reason of the position of influence in which the bank stands.173 In James v ANZ Banking Group Ltd,174 the applicants, Western Australian farmers who sought finance for the completion of a farm purchase, alleged that the bank had recommended a short-​term high-​interest finance option, and failed to offer less onerous financial arrangements, which it knew or should have known they would be unable to service. Settlement was imminent, and the applicants’ other attempts to raise the balance of the purchase price had failed. The evidence established that the bank was not anxious to lend money to the applicants, urging them rather to sell land and reduce the extent of their borrowings. Although the finance package eventually furnished may not have been satisfactory from the applicants’ perspective, it was all that the bank was prepared to offer in the circumstances and would not have attracted undue onerous obligations had the applicants been prepared to sell some of their land. These findings led Toohey J to conclude that the bank had merely acted pursuant to the commercial considerations inherent in the predicament in which the applicants had located themselves without actual or presumed undue influence.

Accountant/​financial adviser and client relationship [7.155]  No presumption of undue influence arises in the relationship between an accountant

or financial adviser and a client,175 again unless the client can establish that the relationship exhibits the requisite nature and form of influence to attract the intervention of equity.176

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UNDUE INFLUENCE AND THIRD PARTIES [7.160]  A person induced to enter into a transaction by undue influence (or some other viti-

ating factor) has an “equity” to set aside the transaction enforceable against third parties. It is the scenario of undue influence (or some other vitiating conduct, such as misrepresentation or duress) allegedly exercised by an intermediary regarding a guarantee to secure a loan from the creditor to the intermediary that has arisen frequently in the cases.177 The main issue is to

172

In some circumstances, though, the relationship can be of a fiduciary nature: see [4.250].

173

National Westminster Bank plc v Morgan [1985] 1 AC 686 at 707 per Lord Scarman; James v ANZ Banking Group Ltd (1986) 64 ALR 347 at 389–​390 per Toohey J; Shotter v Westpac Banking Corporation [1988] 2 NZLR 316 at 333–​334 per Wylie J.

174

James v ANZ Banking Group Ltd (1986) 64 ALR 347.

175

Cowen v Piggott [1989] 1 Qd R 41. Note that the relationship between financial adviser and client can attract fiduciary duties: see [4.235].

176

See, for example, Calvo v Sweeney [2009] NSWSC 719 at [249]–​[254] per White J (who found that there was an antecedent relationship in which the defendant financial adviser exercised influence and ascendancy over the plaintiffs). See also Lopwell Pty Ltd v Clarke (2009) 3 BFRA 807 (albeit in the context of unconscionable dealing), discussed at [9.75].

177

It is, however, not the only type of scenario that can give rise to issues of this kind. In Khan v Khan (2004) 62 NSWLR 229, for example, the issue of “third party” undue influence arose where a Mufti advised the defendant, in the plaintiffs’ presence, of her religious duty to honour an oral (and hence unenforceable) promise to sell land to the plaintiffs. The defendant then signed a written memorandum of agreement, which she subsequently sought to rescind on the ground of undue influence by the Mufti. Barrett J found that the plaintiffs were aware that the defendant could not be contractually bound as seller except by writing, and insisted that the defendant sign a memorandum with the knowledge that as a Muslim woman she would not go against the Mufti’s word. This, according to his Honour, meant that the plaintiffs had “notice” that the defendant signed the memorandum under the Mufti’s religious influence rather than her own free will, and so they could not enforce the contract: at [39].

240 [7.150] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

define those circumstances in which the third party creditor ought to be subject to the equity of the victim of the undue influence. In cases of this kind, it is not so much a conflict between right and wrong as between right and right.178 Both the guarantor and the creditor are essentially “innocent”. That the person “guilty” of undue influence  —​the principal debtor  —​is usually impecunious means that the guarantor has no practical cause of action against her or him (and, in any case, in the absence of an agreement to the contrary, the guarantor has no legal cause of action against the principal debtor because there is no privity of contract between them). The challenge for the courts, accordingly, is to “find a fair and sensible balance between the interests of the creditor, seeking to enforce the surety’s guarantee, and the interests of the volunteer resisting that enforcement”.179 In the search for this balance, judges have uniformly cast upon creditors more stringent standards of conduct and more onerous obligations than upon guarantors. This is usually justified by the stronger commercial position of the creditor relative to the guarantor. The creditor often not only possesses greater knowledge and expertise regarding the nature of the transaction, but is also financially better able to absorb a loss by spreading it across the creditor’s customers. In one sense, therefore, the law provides little encouragement for certain guarantors to take positive steps to understand the nature and effect of guarantee commitments, but rather shifts the onus to creditors to ensure such understanding. Yet in this regard heed must be paid to the following observations of Blanchard J in Wilkinson v ASB Bank Ltd:180

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Sympathy for a victim of undue influence or misrepresentation should not lead a Court into the error of imposing upon lenders an unrealistic standard. Transactions in which one relative assists another to borrow are commonplace. It would be unfortunate if a few hard cases were to discourage financiers from lending to borrowers in need of such assistance for fear of being found to have fallen short of perfection in their lending practices.

Ideally, therefore, the law should state with some certainty the circumstances in which creditors are obliged to ensure that a guarantor is not affected by undue influence (or some other vitiating factor), and the content of that obligation. Unfortunately, and notwithstanding a torrent of litigation on the issue (or maybe as a result of it), the law has not achieved the level of clarity that creditors (or guarantors) deserve. A hurdle is a curial tendency to subject creditors to varying standards of conduct depending on the nature of the relationship between the guarantor and the principal debtor, most commonly wife and husband. In other words, the law discriminates by making it easier to set aside a guarantee for undue influence (or another vitiating factor) as against some classes of persons than others. This lack of legal neutrality is illustrated by the High Court’s judgment in Garcia v National Australia Bank Ltd181 (discussed at [7.215]), where the court, in accordance with longstanding authority, singled out wives as deserving of special legal protection from guarantees given for the benefit of their husbands. There are arguably three bases on which a debtor’s undue influence can be imputed to the creditor so as to give the guarantor’s “equity” to set aside the guarantee priority over the 178

Santow, “Sex, Lies and Sureties —​Touching the Conscience of the Creditor” (1999) 10 JBFLP 7 at 7.

179

Santow, “Sex, Lies and Sureties —​Touching the Conscience of the Creditor” (1999) 10 JBFLP 7 at 7. See also Barclays Bank plc v O’Brien [1994] 1 AC 180 at 188 per Lord Browne-​Wilkinson; Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 689 per Blanchard J; Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [2]‌per Lord Bingham.

180

Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 689.

181

Garcia v National Australia Bank Ltd (1998) 194 CLR 395.

[7.160]  241 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

creditor’s contractual entitlement to enforce the guarantee. First, where the debtor was, when obtaining the guarantor’s signature, the agent of the creditor in a relevant sense, the creditor as principal is liable for the agent’s undue influence or other vitiating conduct. Secondly, a creditor with notice of the debtor’s influence is subject to the guarantor’s rights in equity against the debtor of which it has notice. Thirdly, if the creditor knows that the guarantor is the wife of the debtor and that the transaction is not for the wife’s benefit, a failure by the creditor to ensure that the wife understands the purport and effect of the transaction is unconscionable, and gives the wife an equity to set the transaction aside if indeed she lacked that understanding. The latter is the upshot of the ruling in Garcia, and it remains unclear the extent to which it is capable of subsuming the first two bases. Each of these bases is considered in turn below. Agency [7.165]  Where the creditor appoints the debtor as agent for the purpose of obtaining the exe-

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cution of a guarantee (or another document), the debtor’s undue influence (or other vitiating conduct) can be imputed to the creditor under ordinary principles of agency law.182 Yet no agency, as understood at general law,183 is created merely by a creditor leaving to the debtor the task of procuring the guarantor’s signature,184 although in New Zealand, it appears little more will suffice at least in this context.185 The latter arguably reflects, in an attempt to fix a creditor with the consequences of a principal debtor’s actions, a strained concept of agency. As explained by Santow J in Burke v State Bank of New South Wales:186 Although the party entrusted with the task of procuring the guarantor’s signature may, in a sense, be the creditor’s agent, the correct test for the purpose of this rule is not whether there has been a conferral of actual or ostensible authority, but whether the creditor has knowingly entrusted to someone with a motive for or interest in its execution and who is therefore affected by that person’s actions … The essential element affecting the creditor with the wrongdoing of another is the leaving to that other the task of procuring the guarantor’s signature. In such circumstances, the creditor ought to be in no better position than he who procures the signature.

Hence, to describe the basis for equity’s intervention purely by reference to agency is somewhat artificial.187 Also, that the establishment of the “agency” requires knowledge in the creditor as to the relationship between the debtor and guarantor suggests that agency here may reflect

182

See generally Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), Chs 19 (liability in contract), 22 (liability in tort). In the context of undue influence (and unconscionable dealing), see generally Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), Ch 22.

183

As to what constitutes agency at general law, see Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), Chs 1, 4.

184

Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 at 183 per McKay J; Begbie v State Bank of New South Wales Ltd (1994) ATPR ¶41-​288 at 41,897–​41,898 per Drummond J; H G & R Nominees Pty Ltd v Fava [1997] 2 VR 368 at 404 per J D Phillips J. Contra Challenge Bank Ltd v Pandya (1993) 60 SASR 330 at 343 per King CJ; Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 133–​134 (FC).

185

See Nathan v Dollars & Sense Finance Ltd [2007] 2 NZLR 747 (CA) [affd Dollars & Sense Finance Ltd v Nathan [2008] 2 NZLR 557 (SC)] (where a borrower (R) entrusted with loan documentation for his elderly parents’ signatures was held to be the agent of the lender for this purpose: see [2007] 2 NZLR 747 at [50] per William Young P, at [82], [83] per Glazebrook and Robertson JJ, and [2008] 2 NZLR 557 at [25], [26] per Blanchard J).

186

Burke v State Bank of New South Wales (1994) 37 NSWLR 53 at 76 (emphasis supplied) [affd State Bank of New South Wales Ltd v Burke (1997) 8 BPR 15,511]. See also Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435 at 446–​447 per Heerey J; Farrow Mortgage Services Pty Ltd (in liq) v Peto [1997] ANZ Conv R 226 at 229–​230 per Thomas J; Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [154], [155] per Habersberger J.

187

Barclays Bank plc v O’Brien [1994] 1 AC 180 at 194–​195 per Lord Browne-​ Wilkinson. See L’Estrange, “Third Party Securities: Who Is the Creditor’s ‘Agent’?” (1997) 8 JBFLP 328 (who concludes that “the courts progressively have moved away from the looser agency approach, if not entirely abandoning it”: at 336).

242 [7.165] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

simply an aspect of the notice doctrine discussed below. Either way, where the guarantor has received independent advice, little room remains for an agency-​type argument.188 Notice

Doctrine of “notice” for the purposes of undue influence

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[7.170]  English and New Zealand courts have traditionally held that a creditor’s exercise of

legal rights against the guarantor depends on whether it has actual or constructive notice of the guarantor’s “equity” to set aside the transaction on the grounds of undue influence (or another vitiating factor) by the debtor.189 For relationships presumed as a matter of law to be of influence (see [7.30]), notice of that relationship by itself puts the creditor on inquiry as to the existence of the guarantor’s equity.190 The same is the case where the creditor knows the guarantor is accustomed to place implicit trust in the debtor.191 Evidence to this end may be that the transaction is so improvident to be difficult to explain in the absence of some impropriety.192 In cases of actual undue influence, for the creditor to be affected, it must have notice of the circumstances alleged to constitute the actual exercise of undue influence. In Australia a majority of the High Court in Garcia v National Australia Bank Ltd193 considered that focusing on notice distracts attention from principle, being that the enforcement of the creditor’s legal rights would be unconscionable: see [7.215]. Yet as the court phrased its judgment by reference to cases of wives guaranteeing their husbands’ debt, it left open the issue of whether or not the notice doctrine applies outside that scenario: see [7.250], [7.255]. The House of Lords has since stepped away from a doctrine concentrated on notice of a particular type of relationship, to one favouring notice of a particular type of transaction: see [7.185]. This attempt at “objectification” of the law in some ways parallels the Garcia approach, but is not confined to the husband and wife relationship. Yet in that it remains, at least on one level, based on notice (rather than on a broader, say, unconscionability ground), it is discussed under the notice heading. [7.175]  Under the traditional notice approach, equity views it as contrary to good conscience

for a creditor, who knows of circumstances putting it on notice of possible undue influence by debtor over guarantor, to rely on the guarantee unless it has taken steps to protect the guarantor from that undue influence.194 Hence two important inquiries, each addressed below, stem from this formulation. In which circumstances is a creditor treated as knowing of circumstances putting it on notice of possible undue influence? And what steps must the creditor take to protect the guarantor from this potential undue influence?

188

Citibank Savings Ltd v Nicholson (1997) 70 SASR 206 at 228 per Perry J; Australia and New Zealand Banking Group Ltd v Alirezai (2002) Q Conv R ¶54-​574 at 60,808–​60,809 per Mullins J [affd Australia and New Zealand Banking Group Ltd v Alirezai (2004) Q ConvR ¶54-​601].

189

The leading cases are Barclays Bank plc v O’Brien [1994] 1 AC 180 and Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674. There is also Australian High Court authority to similar effect: Bank of New South Wales v Rogers (1941) 65 CLR 42 at 51 per Starke J, at 60 per McTiernan J, at 85 per Williams J. See generally Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), Chs 23–​25.

190

See, for example, Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37 at [200], [201] per Wheeler J.

191

Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 690–​691 per Blanchard J.

192

See, for example, Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144.

193

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 411 per Gaudron, McHugh, Gummow and Hayne JJ. Cf at 432 per Kirby J who preferred the notice doctrine: see [7.180].

194

Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 695 per Tipping J.

[7.175]  243 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

Circumstances raising notice of potential undue influence [7.180]  Notwithstanding that influence is not presumed as a matter of law by husband over

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wife, the law has historically accepted that a creditor who knows that the guarantor is the wife of the principal debtor is taken to have notice of potential undue influence (or other vitiating conduct), such as to raise an equity against it if it proves that the wife was in fact subject to undue influence (or other vitiating conduct).195 This approach has witnessed application to relationships between lovers,196 divorced parties197 and siblings,198 in respect of guarantees given by parent for child,199 and in relationships in loco parentis.200 It has even seen application once, perhaps dubiously,201 to an employer–​employee relationship.202 Each of these relationships involves, it is said, trust and confidence placed by the guarantor in the principal debtor, which then attracts the creditor’s notice and consequent duty. In Garcia v National Australia Bank Ltd,203 Kirby J, in a judgment received more warmly by commentators than those of his peers,204 conceptualised such relationships as those that, to the creditor’s knowledge, involve an “emotional dependency” by the guarantor on the debtor. Yet courts do not automatically assume that each of the above relationships always exhibits the requisite trust and confidence. While emotional ties of, say, parent to child may reinforce the risk of undue influence (or other vitiating conduct), they do not by themselves impose on a creditor a duty to inquire; the creditor must also have notice of trust and confidence placed by the guarantor in the debtor.205 Where facts establish no more than a normal family relationship in which parents readily agree to assist children in their business ventures, the element of trust and confidence in that relationship by itself cannot thus justify either a finding of undue influence or its attribution to a third party creditor.206 Lacking facts that raise a suspicion of undue influence, nor do relationships between friends carry notice to a creditor, as “[a]‌bank

195

See, for example, Barclays Bank plc v O’Brien [1994] 1 AC 180.

196

Midland Bank plc v Massey [1995] 1 All ER 929.

197

Allied Irish Bank v Byrne [1995] 2 FLR 325.

198

Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435 at 448 per Heerey J.

199

Burke v State Bank of New South Wales (1994) 37 NSWLR 53 at 77 per Santow J [affd State Bank of New South Wales Ltd v Burke (1997) 8 BPR 15,511]; IOOF Australia Trustee Ltd v Oxenham [1999] ANZ Conv R 113 at 116–​117 per Allan J.

200

Bank of New South Wales v Rogers (1941) 65 CLR 42 at 54–​55 per Starke J, at 71 per McTiernan J, at 85–​87 per Williams J (bank subject to undue influence by uncle over niece in charging most of her estate as security for his overdraft); Geelong Building Society (in liq) v Thomas (1996) V Conv R ¶54-​545 at 66,474–​66,476 per Hedigan J (guarantee given by daughter-​ in-​law for the benefit of her father-​in-​law set aside). Certain relationships in loco parentis may, however, give rise to the legal presumption of undue influence: see [7.120].

201

See Kwiatkowski, “Undue Influence” (1996) 140 Sol J 1000 (who contends that the conscience of the court was “far too readily shocked”); Chen-​Wishart, “The O’Brien Principle and Substantive Unfairness” [1997] CLJ 60 (who suggests that the only way that Burch can be explained is to openly admit its concern was to prevent substantive unfairness as opposed to unconscientious conduct or vitiated consent: at 70).

202

Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 at 155 per Millett LJ.

203

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 432. Similar statements have been made by other antipodean judges: Burke v State Bank of New South Wales (1994) 37 NSWLR 53 at 78 per Santow J; Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 690–​691 per Blanchard J.

204

See, for example, Phang and Tjio, “From Mythical Equities to Substantive Doctrines —​Yerkey in the Shadow of Notice and Unconscionability” (1999) 14 JCL 72 at 87; Hii, “From Yerkey to Garcia: 60 Years on Still as Confused as Ever” (1999) 7 APLJ 47; Giancaspro, “ ‘I Now Prounce You … in a State of Uncertainty’: Contemporary Treatment of the Wives’ Special Equity and a Plan for the Future” (2017) 11 J Eq 80 at 108–​110.

205

Burke v State Bank of New South Wales (1994) 37 NSWLR 53 at 77 per Santow J [affd State Bank of New South Wales Ltd v Burke (1997) 8 BPR 15,511].

206

ASB Bank Ltd v Harlick [1996] 1 NZLR 655 at 661 per Gault J; Geelong Building Society (in liq) v Thomas (1996) V Conv R ¶54-​545 at 66,474 per Hedigan J; Watt v State Bank of New South Wales Ltd [2003] ACTCA 7.

244 [7.180] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

has no business inquiring into the personal relationship between those with whom it has business dealings or as to their personal motives for wanting to help one another”.207 [7.185]  The operation of the doctrine of notice in this context is not without its problems,

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both in theory and in practice. In theory, it is inconsistent with the notion that notice does not operate in the context of Torrens system land. Moreover, using notice to determine priority is fallacious in that the guarantor’s equity to set aside the guarantee cannot logically precede the guarantee itself. The courts have sought to overcome these objections by viewing the concept of notice here as of a different genus to its property law equivalent.208 There is in any case the practical difficulty that notice of the risk of undue influence is not an “all or nothing” question; situations differ across a spectrum, from a small risk to a serious risk verging on a probability.209 The deluge of litigation, particularly in England, seeking to activate notice as a ground for attributing undue influence (or another vitiating factor) to a creditor prompted the House of Lords to search for an alternative (“wider”) basis for equitable intervention, and to clarify, in detailed terms, the responsibilities of creditors in this context. It did so in Royal Bank of Scotland v Etridge (No 2),210 Lord Nicholls, with whom Lord Scott agreed, giving the leading speech. His Lordship stated that the law does not regard sexual relationships as standing in some special category of their own so far as undue influence is concerned. Rather, what is appropriate for sexual relationships ought, in principle, be appropriate for other relationships where trust and confidence are likely to exist.211 On this point, Lord Nicholls reasoned as follows:212 [A]‌bank cannot be expected to probe the emotional relationship between two individuals, whoever they may be. Nor is it desirable that a bank should attempt this. Take the case where a father puts forward his daughter as a surety for his business overdraft. A bank should not be called upon to evaluate highly personal matters such as the degree of trust and confidence existing between the father and his daughter, with the bank put on inquiry in one case and not in another. As with wives, so with daughters, whether a bank is put on inquiry should not depend on the degree of trust and confidence the particular daughter places in her father in relation to financial matters. Moreover, as with wives, so with other relationships, the test of what puts a bank on inquiry should be simple, clear and easy to apply in widely varying circumstances. This suggests that, in the case of a father and daughter, knowledge by the bank of the relationship of father and daughter should suffice to put the bank on inquiry. When the bank knows of the

207

Banco Exterior Internacional SA v Thomas [1997] 1 WLR 221 at 230 per Sir Richard Scott VC. See, for example, Australia and New Zealand Banking Group Ltd v Alirezai (2004) Q ConvR ¶54-​601, where a mortgage by a friend of the principal debtor to secure the latter’s debts was upheld, McMurdo P remarking that “[a]‌close friendship between borrower and surety based on shared cultural and religious values does not in itself require a banker to do more than what was done here, namely, ensure the surety obtains independent legal advice on the transactions”: at [53]. Her Honour affirmed the trial judge’s finding that the appellant bank did not know the relationship between the principal debtor and the appellant was one where the level of trust and confidence made it objectively unreasonable for a volunteer to provide the surety: at [55]. See also at [117] per Wilson J. Contra at [83] per Jerrard JA (dissenting).

208

See, for example, Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [39] per Lord Nicholls, at [145], [146] per Lord Scott (remarking that constructive notice in this context serves “a different function from that served by constructive notice in its traditional role and is not necessarily subject to the same rules”, and that in the bank versus surety wife cases “the constructive notice that is sought to be attributed to the bank is not constructive notice of any pre-​existing prior right or prior equity of the wife”, adding that “[i]‌t is notice of the husband’s impropriety that the bank must have, not notice of any prior rights of the wife”).

209

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [108] per Lord Hobhouse.

210

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773.

211

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [82].

212

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [84].

[7.185]  245 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

relationship, it must then take reasonable steps to ensure the daughter knows what she is letting herself into.

But, his Lordship added, the law cannot stop at this point, with banks put on inquiry only in cases where the debtor and guarantor share a sexual relationship or one presumed by law to exhibit trust and confidence. Such a boundary, in Lord Nicholls’ opinion, would be arbitrary, as the reality of life is that relationships in which undue influence can be exercised are infinitely various, and incapable of a comprehensive listing. This led his Lordship to frame the relevant principle as follows:213

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[T]‌here is no rational cut-​off point, with certain types of relationship being susceptible to the [notice] principle and others not. Further, if a bank is not to be required to evaluate the extent to which its customer has influence over a proposed guarantor, the only practical way forward is to regard banks as “put on inquiry” in every case where the relationship between the surety and the debtor is non-​commercial. The creditor must always take reasonable steps to bring home to the individual guarantor the risks he is running by standing as surety. As a measure of protection, this is valuable. But … it is a modest burden for banks and other lenders. It is no more than is reasonably to be expected of a creditor who is taking a guarantee from an individual. If the bank or other creditor does not take these steps, it is deemed to have notice of any claim the guarantor may have that the transaction was procured by undue influence or misrepresentation on the part of the debtor.

Different considerations, according to his Lordship, apply where the relationship between the debtor and guarantor is commercial, as where a guarantor is being paid a fee, or a company is guaranteeing the debts of another company in the same group. “Those engaged in business”, he remarked, “can be regarded as capable of looking after themselves and understanding the risks involved in the giving of guarantees”.214 Lord Nicholls’ approach shifts the inquiry from notice of the nature of the relationship between the parties —​always a problematic inquiry —​to the nature of the transaction. It is therefore not confined to marriage (or marriage-​like) relationships but can apply to other relationships punctuated by uncommerciality.215 What attracts the creditor’s duty is notice of a “non-​commercial” transaction, a test arguably capable of more objective application than (though perhaps not entirely independent of) one grounded in the relationship between the particular parties. It may serve to broaden the scope of creditors’ inquiries, in that not all “non-​commercial” transactions necessarily involve trust and confidence, or emotional dependency, capable of attracting the abuse of ascendancy.216 Yet at the same time, it is closer to marking a bright line between those cases justifying further inquiry and those that do not. It propounds an approach not entirely dissimilar from the High Court in Garcia (discussed at

213

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [87] (emphasis supplied).

214

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [88].

215

See, for example, Gardiner v Westpac New Zealand Ltd [2015] 3 NZLR 1 (in the context of parents (appellants) who signed guarantees in respect of advances by the respondent financier to a company of which they were the shareholders together with their son and his former partner; Lang J, who delivered the reasons of the Court of Appeal, ruled that if this was a “non-​ commercial transaction” (which was questionable, given the parents’ shareholding in the company), the respondent had taken sufficient steps to insulate itself from the possibility that the appellants may have been victims of undue influence).

216

See, for example, Hogan v Commercial Factors Ltd [2006] 3 NZLR 618, where a father, who was an experienced business person and possessed with a good knowledge of the business conducted by his son’s company, gave a guarantee in respect of the indebtedness of that company (in which he had no direct financial interest), and then sought to rescind the guarantee on the basis of undue influence. William Young J, delivering the judgment of the New Zealand Court of Appeal, remarked that merely because a transaction is non-​commercial does not mean that there is a relationship of trust and confidence carrying a duty of inquiry, but was in any case “satisfied that the transaction was in fact, in every sense, ‘commercial’ from the point of view of [the father] and that there were no factors which could be said to have put [the lender] relevantly on inquiry”: at [57].

246 [7.185] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

[7.215]) in being based on the nature of the transaction at stake, and in its move towards a broader foundation for equitable intervention.217 Ultimately, if a creditor’s duty to a guarantor is attracted by a non-​commercial transaction, and not fulfilling that duty may subject the creditor to the guarantor’s equity, it may take only a small step to bring the doctrine within the broader umbrella of unconscionability.218

Fulfilling the equity

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[7.190]  If the creditor has notice putting it on inquiry as to the potential existence of the

guarantor’s equity —​whether due to notice of trust and confidence or an emotional dependency between guarantor and debtor or, under the Etridge approach, notice of a non-​commercial transaction —​it can avoid the consequences of that notice by showing that it has taken steps necessary to satisfy its equitable duty arising from that notice.219 The most extensive judicial catalogue of those steps is found in the House of Lords’ judgment in Royal Bank of Scotland v Etridge (No 2),220 which appears to have found favour in New Zealand,221 but is less likely to be endorsed by Australian courts:222 see [7.205]. The speeches in Etridge, though couched in terms of the husband–​wife debtor–​guarantor relationship, principle-​wise can be applied in all non-​commercial transactions. Lord Nicholls questioned the need, in every case where a wife guarantees her husband’s debt, to require the creditor to discover for itself “whether a wife’s consent is being procured by the exercise of undue influence of her husband” or to “insist on confirmation from a solicitor that the solicitor has satisfied himself that the wife’s consent has not been procured by undue influence”.223 His Lordship viewed this “intrusive, inconclusive and expensive exercise” as “an altogether disproportionate response to the need to protect those cases, presumably a small minority, where a wife is being wronged”.224 Rather, the furthest a creditor should “be expected to go is to take reasonable steps to satisfy itself that the wife has had brought home to her, in a meaningful way, the practical implications of the proposed transaction”.225 Though not eliminating the risk of undue influence or misrepresentation, such an approach would mean that a wife 217

However, it differs from Garcia v National Australia Bank Ltd (1998) 194 CLR 395 in at least two ways: (1) under Garcia the wife need show only that she did not fully understand the implications of what she was agreeing to (see [7.215]), whereas in Etridge, the plaintiff must show either undue influence or misrepresentation; and (2) Garcia requires the wife to show that she derived no substantial value from the guarantee (see [7.235]–​[7.245]), but in Etridge if the other vitiating elements are present, that the surety gains indirect benefits from the debt being guaranteed does not matter, which explains why the plaintiff need not show manifest disadvantage: Watts, “Restitution” [2001] NZ Law Rev 509 at 522–​523.

218

See Phang and Tjio, “The Uncertain Boundaries of Undue Influence” [2002] LMCLQ 231 at 242, 244.

219

Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 695 per Tipping J.

220

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773. See also the earlier decisions: Barclays Bank plc v O’Brien [1994] 1 AC 180 at 196–​198 per Lord Browne-​Wilkinson; Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 691–​692 per Blanchard J; Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 430–​431 per Kirby J.

221

See Attorney-​General for England and Wales v R [2002] 2 NZLR 91 at 114 per Tipping J; Hogan v Commercial Factors Ltd [2006] 3 NZLR 618 at [44], [50] per William Young J. Contra Lee v Damesh Holdings Ltd [2003] 2 NZLR 422 at [34]–​[39] per Chisholm J (who saw the requirements stated in Etridge as incompatible with those stated by the New Zealand Court of Appeal in Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674). Cf Gardiner v Westpac New Zealand Ltd [2015] 3 NZLR 1 at [43], [44] per Lang J (who, in delivering the reasons of the Court of Appeal, did not consider it necessary to finally determine whether the principles enunciated in Etridge should be applied in New Zealand).

222

Cf Kranz v National Australia Bank Ltd (2003) 8 VR 310 at [87], [89] per Eames JA (who although noting that Etridge does not represent the law in Australia, found “much to commend the principle that a bank upon becoming aware that the relationship between debtor and surety is a non-​commercial one ought to be on notice that it has an obligation to bring home to a proposed guarantor the risks he or she is taking in acting as surety”).

223

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [53].

224

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [53].

225

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [54].

[7.190]  247 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

enters into a transaction “with her eyes open so far as the basic elements of the transaction are concerned”.226 [7.195]  The most common and effective way in which a creditor can fulfil the above requirement is to receive from a solicitor confirmation that the wife understands the practical implications of the proposed transaction. As such, the court explained the minimum a solicitor must do in this respect:227

• Advise the wife as to the nature of the documents and of their practical consequences, say, the risk she could lose her home if her husband’s business does not prosper, or be made bankrupt. • Advise the wife as to the seriousness of the risks involved. The wife must be told the purpose of the proposed transaction, its amount and principal terms, that the bank might increase the amount of the loan, or change its terms, or grant a new loan, without reference to her, and the amount of her liability under the guarantee. The solicitor should discuss the wife’s financial means, including her understanding of the value of the property being charged, and inquire whether the wife or her husband has other assets out of which repayment could be made should the husband’s business fail. • Advise the wife that she has a choice. The decision is the wife’s alone; this calls for discussion of the present financial position, including the amount of the husband’s present indebtedness, and the amount of his current overdraft facility.

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• Check whether the wife wishes to proceed. The wife should be asked whether she is content that the solicitor should write to the bank confirming he has explained to her the nature of the documents and the practical implications they may have for her, or whether, for instance, she would prefer the solicitor to negotiate with the bank on the terms of the transaction (such as the sequence the various securities will be called upon or a specific or lower limit to her liabilities). The above discussion should occur face-​to-​face, in the husband’s absence, and the explanations couched in suitably non-​technical language.228 A solicitor who believes the transaction is not in the wife’s best interests must give reasoned advice to that effect. The client, not the solicitor, must decide whether or not to proceed, and so a wife is not precluded from entering into a financially unwise transaction if she wishes to do so.229 Though it is not for the solicitor to veto the transaction, Lord Nicholls envisaged exceptional circumstances where it is glaringly obvious that the wife is being grievously wronged, in which case the solicitor should decline to act further.230 226

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [54]. Cf Wong, “Revisiting Barclays Bank v O’Brien and Independent Legal Advice for Vulnerable Sureties” [2002] JBL 439 at 456 (who maintains that such an approach forms a compromise on the intended purpose of the independent legal advice, as the advice of the solicitor serves a single as opposed to twofold purpose, that is, ensuring that the surety’s consent is informed, as opposed to ensuring that it is both informed and independent).

227

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [65] per Lord Nicholls, at [169] per Lord Scott.

228

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [66] per Lord Nicholls.

229

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [61] per Lord Nicholls (who disagreed with the Court of Appeal’s statement in the case that if the transaction is “one into which no competent solicitor could properly advise the wife to enter”, the availability of legal advice is insufficient to avoid the bank being fixed with constructive notice: Royal Bank of Scotland v Etridge (No 2) [1998] 4 All ER 705 at 722).

230

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [62]. Cf Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 692 per Blanchard J (remarking that there may be rare cases in which the substance of the transaction is so disadvantageous that no

248 [7.195] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

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[7.200]  So far as the independence of the solicitor is concerned, the House of Lords held

that the advantages attendant upon the employment of a solicitor acting solely for the wife231 did not justify the additional expense this would involve for the husband.232 When accepting instructions to advise the wife, the solicitor assumes legal and professional responsibilities owed to her alone. Lord Scott conceded that where the solicitor also acts for the husband, if there is a particular reason known to the creditor for suspecting undue influence or other impropriety by the husband, the creditor should insist on the wife being advised by a solicitor independent of the husband. Yet his Lordship added that absent such a particular reason, or where the risk is no more than the possibility present in all surety wife cases, there is no reason why the solicitor should not also be the husband’s solicitor.233 This would not, however, absolve a solicitor in each case from carefully considering whether there is a conflict of duty or interest and, more widely, whether it would be in the wife’s best interests to accept instructions solely from her.234 As the solicitor represents the wife alone for this purpose, a failure to fulfil the terms of the retainer means that the wife, as the client, may sue the solicitor for negligence. The creditor has no liability in such a case, as the solicitor is not accountable to the creditor for the advice given to the wife. That the creditor, for its own purposes, asked the solicitor to advise the wife does not make the solicitor the creditor’s agent in giving that advice. Hence, there is no justification to impute to the creditor knowledge of what passed between the solicitor and the wife, as this is confidential as between the wife and the solicitor. It follows that, in the ordinary case, the creditor is entitled to proceed on the assumption that a solicitor advising the wife has done her or his job properly.235 The court in Etridge then returned to the steps the creditor should take for its protection.236 First, the creditor should check directly with the wife the name of her solicitor, informing her that for its own protection it requires written confirmation from a solicitor. Secondly, the creditor must provide the solicitor with the financial information he or she needs for this purpose. The creditor must first obtain the consent of its customer (the husband) to this circulation of

solicitor could properly advise signature, in which case the creditor would be unwise to rely on the certificate but should at the very least obtain a certificate from the independent solicitor that the particular matter has been pointed out to the guarantor). 231

Such as, for example, a wife being inhibited in discussion with a solicitor who also acts for the husband, the concern that a solicitor whose main client is the husband may not give single-​minded attention to the wife’s position: Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [72] per Lord Nicholls.

232

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [73] per Lord Nicholls, at [173] per Lord Scott. Contra Watkins v Combes (1922) 30 CLR 180 at 188 per Knox CJ, Gavan Duffy and Starke JJ, at 197 per Isaacs J.  Cf Webb, “Wives’ Guarantees —​Again” [2002] NZLJ 81 (who adds a note of caution on the conflict point in that there is no suggestion that the duties of a lawyer are in any way diluted when acting for multiple parties to such a transaction, such that if it is shown that the transaction was the result of undue influence a lawyer who advised both husband and wife would have a difficult task in establishing that there was no conflict of interest between the parties that resulted in a breach of duty to one of them).

233

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [174]. Or, it seems from Gardiner v Westpac New Zealand Ltd [2015] 3 NZLR 1, the solicitor instructed by the relevant financier; cf Beck, “Contract” [2015] NZ L Rev 455 at 464–​465.

234

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [74] per Lord Nicholls. Cf National Westminster Bank plc v Breeds (2001) 151 NLJ Rep 170 (where Lawrence Collins J held that where a wife granted a mortgage over the family home as security for a loan to her husband’s company as a result of the husband’s misrepresentation and undue influence, and the solicitor acting for both lender and borrower was the company secretary who had been actively involved in raising the finance, the bank will have constructive notice of the husband’s conduct even though the solicitor had certified that the wife had understood the nature of the charge; the logic being that the solicitor could not give independent advice in his role in seeking finance for the company).

235

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [74] per Lord Nicholls, at [116]–​[122] per Lord Hobhouse.

236

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [79] per Lord Nicholls, at [169], [191] per Lord Scott.

[7.200]  249 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

confidential information, and without this the transaction cannot proceed.237 Thirdly, if the creditor believes or suspects that the wife has been misled by her husband or is not entering into the transaction of her own free will, it must inform the wife’s solicitor of the facts giving rise to this belief or suspicion. [7.205]  While the detailed “pragmatic” guidance provided in Etridge has been welcomed by

many,238 others query a prescriptive approach in an area “where room for elasticity might be thought desirable”.239 It may, moreover, encourage a “checklist” mentality, and an over-​ reliance on standard procedures in an area of law where much rests on the particular circumstances.240 For instance, a Queensland judge, speaking extra-​judicially, has issued the following caution:241

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[I]‌t is highly doubtful that Courts in this country will embrace the approach taken in Etridge of attempting to prescribe in great detail the precise actions required to be engaged in by a creditor and/​or solicitor purporting to give independent advice. A “one size fits all” approach of prescribing a protocol to cover all contingencies is not without its disadvantages … Prescribing a standard or uniform code of conduct to cover an almost limitless range of circumstances no doubt achieves a commendable degree of certainty but will also result in the imposition of inappropriate standards in many cases. Furthermore, it is not the traditional role of courts to prescribe rules of the nature of those laid down in Etridge. Nor are courts generally well equipped to do so. Such matters, in my view, if they are to be determined at all, are best left to be determined by appropriate professional bodies after receipt of detailed submissions from interested persons and bodies.

He did not, however, devalue the Etridge guidelines, remarking that any solicitor advising a wife or a lender “would be wise to give them careful consideration”.242 Ultimately, Etridge heralds, it seems, a shift in focus from creditors, whose duties are clear, to solicitors whose task is potentially more complex, thus making solicitors more likely targets for litigation.243 To this end, most commentators see Etridge as tipping the scales in favour of creditors,244 although to date limited analysis has targeted what is arguably of greater significance, namely the extension of the creditor’s duty to all non-​commercial transactions.245 What the case law reveals is that where it appears to the creditor that a wife, whether as guarantor or borrower, is likely to benefit from the transaction in question, there are grounds to conclude that the transaction is

237

See Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [190] per Lord Scott (noting that “[e]‌xpress instructions to the contrary, if given by the husband to the bank, would constitute a warning to the bank of an extra risk that the husband might be abusing his wife’s trust and confidence in him”).

238

See, for example, Wong, “Revisiting Barclays Bank v O’Brien and Independent Legal Advice for Vulnerable Sureties” [2002] JBL 439 at 455; Thompson, “Wives, Sureties and Banks” [2002] Conv 174 at 192.

239

Butt, “Banks, Wives and Undue Influence” (2001) 76 ALJ 8 at 8.

240

Butt, “Banks, Wives and Undue Influence” (2001) 76 ALJ 8 at 10. Cf Commonwealth Bank of Australia v Khouri [1998] VSC 128 at [63] per Harper J (who warned that faith in a standardised approach cannot be justified when the bank is dealing with a customer with limited business experience).

241

Muir, “Recent Decisions”, QLS Symposium, 2 March 2002, cited in MacGillivray, “Guarantee by a Wife of Her Husband’s Obligations” (May 2002) 22 Proctor 30.

242

Muir, “Recent Decisions”, QLS Symposium, 2 March 2002, cited in MacGillivray, “Guarantee by a Wife of Her Husband’s Obligations” (May 2002) 22 Proctor 30. See also Butt, “Banks, Wives and Undue Influence” (2001) 76 ALJ 8 at 8 (who considers that Lord Nicholls’ guidelines make good practical as well as commercial sense).

243

Wilson, “Under the Influence” (2003) 153 New LJ 252 at 254.

244

See, for example, O’Sullivan, “Developing O’Brien” (2002) 118 LQR 337 at 350; Scott, “Evolving Equity and the Presumption of Undue Influence” (2002) 18 JCL 236 at 249.

245

Cf Hogan v Commercial Factors Ltd [2006] 3 NZLR 618, discussed in a note to [7.185].

250 [7.205] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

a commercial one.246 In this sense, the “uncommercial” concept displays parallels with that of a “volunteer” in Australia (as to which see [7.235]–​[7.245]). Unconscionable conduct by creditor

Yerkey/​Garcia principles [7.210] In Yerkey v Jones,247 Dixon J opined that the opportunities arising out of a husband–​

wife relationship are such that, if a husband procures his wife to become guarantor for his debt, a creditor who accepts that guarantee may be treated as taking it subject to any invalidating conduct on the part of her husband, even if not actually privy to that conduct. His Honour, however, distinguished cases in which a wife is procured to become her husband’s guarantor by his exertion of actual undue influence (though aware of the nature and effect of the obligation she is undertaking) from those where she does not understand the nature and effect of the transaction.248 In the former case, the fact that the creditor explains the effect of the document to the wife will not protect the creditor; nothing but independent advice or relief from the husband’s ascendancy over her suffices. In the latter case, if the creditor takes adequate steps to inform the wife and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking, the fact that she has failed to grasp some material part of the document or the significance of what she was doing does not give her an “equity” to set it aside as against the creditor. The sufficiency of the creditor’s explanation depends upon the ramifications and complexities of the transaction, the level of deception practised by the husband and the wife’s intelligence and business understanding.

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[7.215] These principles were endorsed by five members of the High Court in Garcia v

National Australia Bank Ltd.249 The case involved a security given by the appellant wife over her house for the benefit of her husband’s company in favour of the respondent bank. Due to her husband’s misrepresentation, the appellant believed the guarantee to be limited to $270,000; in reality it contained an all-​moneys clause thus rendering it a secured guarantee. Gaudron, McHugh, Gummow and Hayne JJ phrased the Yerkey principles in terms of unconscionable conduct. In cases of actual undue influence, to enforce the voluntary transaction against the wife when in fact she did not bring a free will to its execution would be

246

See, for example, Public Trust v Ottow [2009] NZHC 2904 at [68]–​[72] per Asher J (where the wife was a trustee and a beneficiary of a trust that borrowed money for purposes that benefited both her and her husband); UDC Finance Ltd v Down (2009) 9 NZBLC 102,705 (where a wife had become a sole director and shareholder of a company, at the insistence of her husband who had become disqualified from acting as a director; the New Zealand Court of Appeal refused to set aside guarantees she had given for loans to the company, reasoning that “there is nothing in the nature of the transaction that calls for an explanation. As the sole shareholder and director of the company, Ms Down has obvious motivation to provide a guarantee to enable a loan to be made to the company”: at [31]).

247

Yerkey v Jones (1939) 63 CLR 649 at 678.

248

Yerkey v Jones (1939) 63 CLR 649 at 684–​685. See also at 662–​663 per Latham CJ.

249

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 per Gaudron, McHugh, Gummow and Hayne JJ. Callinan J delivered a separate judgment in which he wholly endorsed the principles stated in Yerkey: at 440. Kirby J, however, rejected the principles in Yerkey on the grounds that they: (a) do not protect other classes of guarantors in arguably analogous positions (such as a de facto spouse, an unmarried child in position of dependence, a parent vulnerable from a child, and same sex couples); (b) enforce discriminatory stereotypes, namely that the status as a married woman of itself requires special protection supported by a legal presumption; (c) are inconsistent with the legal principle that marriage does not support a presumption of undue influence (see [7.90]); and (d)  create a disincentive to the provision of capital to the class artificially singled out for special protection: at 424–​429. As noted at [7.180], his Honour preferred an approach based on notice of an emotional dependency by the guarantor on the debtor.

[7.215]  251 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

unconscionable. In cases of the second type mentioned by Dixon J in Yerkey, their Honours held that what makes it unconscionable for a creditor to enforce the guarantee is that:250 • the guarantor did not understand the transaction; • the transaction was voluntary, in the sense that the guarantor received no gain from it; • the creditor is taken to understand that, as a wife, the guarantor may repose trust and confidence in her husband in matters of business and so understand that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and • the creditor did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her. Their Honours noted that if the creditor explains the transaction sufficiently to the guarantor, or knows that the guarantor has received competent, independent and disinterested advice from a third party, it is no longer unconscionable for it to enforce a guarantee even if the guarantor is a volunteer and later claims to have lacked understanding.251 On the facts, as the respondent knew that the appellant was the debtor’s wife and was unlikely to derive any real benefit from entering the transaction, but failed to ensure that she understood its purport and effect, the guarantee should be set aside. So if the wife understands the transaction252 or is not a volunteer (see [7.235]–​[7.245]), the creditor’s failure to explain it will not have a vitiating effect, at least under the doctrine propounded by the court in Garcia. The onus of establishing a lack of understanding of the transaction, and also that it was voluntary, rests on the wife. The third element of the Garcia formulation does not go to matters of proof. When it comes to the fourth element, though, it rests on the creditor, if it is to receive protection, to establish that it took steps to adequately explain the nature and effect of the transaction to the wife.253

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What must the wife know? [7.220]  The elements in Garcia do not expressly include a causal link between the misunder-

standing and the entry into the transaction,254 but there is a need for materiality, that is, that the bank did not disclose facts that were material to the wife’s decision. This provides the link between the misunderstanding of the wife and the unconscionability of the creditor’s attempt to enforce the guarantee.255 It has been judicially remarked in this respect that “[n]‌othing less than a full explanation of the transaction will be sufficient because without a full explanation, there can be no hope of a guarantor having a full understanding”.256 Yet such an explanation must be subject to a materiality threshold, in the sense of a full understanding of matters that are material to a decision whether or not to give the guarantee; it may be unrealistic to premise it on an inexperienced guarantor receiving a detailed clause-​by-​clause explanation of a lengthy legal document, which could obscure rather than enlighten. It is better to target a 250

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 409.

251

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 411.

252

See, for example, Liptak v Commonwealth Bank of Australia [1999] ANZ Conv R 119 at 123–​124 per Doyle CJ (where the fact that the wife was in business, was intelligent and was aware of the general nature of the transaction was held to prevent any issue of undue influence impacting on a guarantee she had given to the respondent).

253

Schultz v Bank of Queensland Ltd [2016] 2 Qd R 86 at [36]–​[39] per Boddice J, with whom Holmes CJ and Philippides JA concurred.

254

National Australia Bank Ltd v Savage [2013] NSWSC 1718 at [101] per Adamson J.

255

State Bank of New South Wales Ltd v Chia (2000) 50 NSWLR 587 at 604 per Einstein J.

256

Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [124] per Habersberger J.

252 [7.220] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

wife’s understanding “in essential respects”, namely the existence of the liability, the extent of the liability and the consequences of default.257 When it comes to the wife’s understanding, her qualifications and experience are hardly irrelevant. In Groves v Groves,258 for instance, the wife’s academic achievements, her involvement with other entities at both an organisational and financial level and associated substantial background in the relevant field of finance, laid to rest any claim that she lacked the requisite understand the guarantee in issue. Yet it should not be assumed that professional women, with knowledge of the nature of a guarantee, and that they were acting as surety, fall outside of Garcia protection, even if they do not inquire regarding the transaction. The High Court held so in Garcia itself, involving a wife of mature years who practised physiotherapy. A case closer to the line is Agripay Pty Ltd v Byrne,259 involving a practising medical practitioner with some business experience. What inclined Margaret McMurdo P to extend Garcia protection to her appears in the following extract:260

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… the [wife], despite her intelligence, education and experience of life, did not read or even browse through the application she signed as guarantor. She knew only that she was urgently required to guarantee [her husband’s] loan to invest in an agricultural managed investment scheme so that he could avoid his short term tax problem. Although she knew in general terms the obligations of a guarantor, no-​one explained that the money from the loan she was guaranteeing was to be invested in an unusual scheme which had very high management fees in the early years and was relatively illiquid. Nor did she know the amount of the debt she was guaranteeing or the term of the loan. These were essential aspects of the transactions she was guaranteeing and she did not know about them.

That the wife could have perused the documentation, and understood it, but did not in view of the time premium involved, accordingly did not place her outside of Garcia protection. McMeekin J, to this end, remarked that “Garcia extends the principle to the indifferent wife as well as the mistaken wife”,261 but did add that “[e]‌quity might have more concern for the former’s position”.262 The difference may also impact on the relevant inquiry. For a mistaken wife the enquiry centres on the materiality of the mistake. Assuming all material matters are unknown, for an indifferent wife the court must, surmised his Honour, “examine closely what the wife did know and weigh that up with all the circumstances to see if the lender acts unconscionably in insisting on its legal rights”.263 Though ostensibly less willing to extend protection to the wife on the facts in issue  —​which revealed that the wife had sufficient knowledge to understand the transaction, did not have misapprehensions about any relevant matter, and raised no reason to think that any explanation would have made any difference to her actions —​McMeekin J nonetheless concluded that the wife was protected.264 It seems, ultimately, that what justified the outcome in Agripay was the (time) pressure applied to the wife; it is difficult, outside of this, to see why someone well able to understand a transaction should escape liability by mere indifference. The position is different where the wife genuinely 257

Yerkey v Jones (1939) 63 CLR 649 at 683 per Dixon J; State Bank of New South Wales Ltd v Chia (2000) 50 NSWLR 587 at 600 per Einstein J.

258

Groves v Groves [2013] QSC 277 at [207]–​[229] per Martin J.

259

Agripay Pty Ltd v Byrne [2011] 2 Qd R 501.

260

Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 at [21]. See also at [66] per White JA.

261

Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 at [131].

262

Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 at [133].

263

Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 at [133].

264

Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 at [143]–​[146].

[7.220]  253 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

lacks this understanding, irrespective of whether the document she has signed contains a clause confirming that she had read and understood it.265

Notice compared with Yerkey/​Garcia

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[7.225] The Garcia principles differ in two main ways from the notice doctrine (discussed

at [7.170], [7.175]). First, Garcia dictates that mere non-​understanding by a wife suffices to vitiate a guarantee; the notice doctrine, including the Etridge approach, as well as the doctrine of unconscionable dealing (discussed in Ch 9), requires some form of overreaching. As a victim of undue influence may nonetheless understand the purport and effect of the transaction sought to be impugned —​undue influence is, after all, concerned chiefly not with lack of understanding but lack of independent will arising from an ascendancy over the weaker party: see [7.55] —​there may be scope for the notice doctrine to operate even where the wife has an understanding of that transaction.266 Secondly, the creditor’s failure to give the wife appropriate advice denies the creditor’s entitlement more or less automatically under Garcia; under the notice doctrine this is premised on the creditor having notice of potential undue influence (or other vitiating conduct) by husband over wife. The only question of notice that arises under Garcia is whether the creditor knows the guarantor is married to the borrower; notice of actual trust and confidence is not required. The traditional notice doctrine thus involves the husband committing a legal or equitable wrong. In a Garcia-​type situation no such wrong is required; that the surety does not understand the guarantee in its essential respects suffices. As noted earlier, in England Etridge has since modified the traditional notice position by focusing not on notice of wrongdoing, but on whether the transaction is non-​commercial: see [7.185]–​[7.205]. Whether these distinctions necessarily follow from the judgment of Dixon J in Yerkey has been queried. Some have suggested that in referring to the creditor reasonably supposing the wife to have an adequate comprehension of the obligations she is undertaking, Dixon J was effectively adopting a notice doctrine, in that this could not be so reasonably supposed if the creditor had notice that there was something amiss insofar as the husband’s procurement of the transaction was concerned.267 If this is correct, the “special equity” theory that the High Court in Garcia applied never really existed in the first instance, and there is, moreover, no effective distinction between Yerkey and the notice approach. [7.230]  Other challenges, discussed in turn below, remain arising from the decision in Garcia,

which go to the core of the court’s formulation: What is meant by the wife as “volunteer”? Can the principles be applied to relationships other than husband and wife? What does “unconscionable” mean in the context of the Garcia doctrine?

Wife as a volunteer [7.235] A transaction is “voluntary”, said Gaudron, McHugh, Gummow and Hayne JJ in

Garcia,268 if “the surety obtained no gain from the contract the performance of which was 265

National Australia Bank Ltd v Savage [2013] NSWSC 1718 at [81] per Adamson J (who rejected the bank’s submission that the wife should be bound by her signature, irrespective of her understanding, as “[t]‌o hold otherwise would be to permit the creditor to profit from its own unconscionability”).

266

Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [153] per Habersberger J.

267

Phang and Tjio, “From Mythical Equities to Substantive Doctrines —​Yerkey in the Shadow of Notice and Unconscionability” (1999) 14 JCL 72 at 79.

268

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 409. Cf the fact that a wife receives a benefit under the transaction in issue is no bar to a defence based on the doctrine of unconscionable dealing (see Ch 9) or under the Etridge approach (see [7.185]).

254 [7.225] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

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guaranteed”. This requirement aims to achieve a balance between protecting the vulnerable and placing too onerous a burden on creditors. In Garcia, the appellant wife was a director of the company in relation to which she provided the guarantee. Their Honours nonetheless characterised her as a volunteer because the evidence showed the company was under her husband’s complete control and that she had no financial interest in its fortunes.269 In determining whether a guarantor is a volunteer, a court will thus not presume that a wife has a financial interest in her husband’s company merely by virtue of a directorship, but will investigate whether or not such an interest accrues. This dictates that a creditor must do likewise if it is to avoid liability, for a wife who appears prima facie to have a financial stake in a dealing may in reality be a volunteer. What their Honours in Garcia did not identify or explain is what level of benefit excludes the operation of the doctrine. Requiring that the wife as guarantor receive “no gain” appears to deny its operation to any case where a wife may derive an indirect advantage from the transaction, even if only the continuation of a certain standard of living. Nor did the court specify whether the gain need be monetary or indirect.270 The inquiry may be one whether the wife has a “sufficiently substantial interest”271 or “more than minimal financial stake”272 in the transaction. The courts have pursued a largely pragmatic approach. A wife is not a volunteer, generally speaking, where she expects to reap direct profit from the transaction,273 the moneys secured by the guarantee are used to purchase an asset in which she is equally interested with her husband,274 or the wife has an active and substantial interest in the conduct of, and the fortunes of, the business.275 Conversely, a shareholding or directorship in a company through which her husband conducted the business, but in which she had no real involvement, does not deny status as a volunteer; here the courts may view incidental benefits accruing to the family of which she is a member as accruing to her as a wife, not as a shareholder or

269

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 412.

270

Cf Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 691 per Blanchard J (opining that if a guarantor is motivated by an indirect personal advantage arising from the transaction, the transaction may not be product of undue influence). But see Bank of Cyprus (London) Ltd v Markou [1999] 2 All ER 707 at 720 per Jarvis QC.

271

Lang, “High Court Wipes Out Sexually Transmitted Debt” (September 1998) 36 LSJ 53.

272

Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 690 per Blanchard J.

273

Westpac Banking Corporation v Paterson (2001) 187 ALR 168 at 174 (FC(FCA)) (funds borrowed used in part to discharge former wife’s own liability); Watt v State Bank of New South Wales Ltd [2003] ACTCA 7 at [27] per Higgins CJ and Crispin P (where the refinancing transaction actually discharged the wife’s liability to a bank); Amtel Pty Ltd v Ah Chee [2015] WASC 341 at [273]–​[285] per Pritchard J (where the wife benefited through a loan to a company used together with her husband to pursue a business for their mutual benefit); Bank of Queensland v Edwards [2017] QSC 191 at [199]–​[201] per Daubney J (where the loan functioned to secure a discharge of a mortgage over property the wife owned, which she and her family used as their residence, and funded renovations thereto).

274

Commonwealth Bank of Australia v Khouri [1998] VSC 128 at [65] per Harper J (where the wife was found to be a volunteer for the purposes of one transaction but not for another: at [69]–​[72]) [affd Commonwealth Bank of Australia v Horkings [2000] VSCA 244 at [53]–​[55] per Winneke P]; Mavaddat v HSBC Bank Australia Ltd (No 2) [2016] WASCA 94 (in the context of a loan used to fund the purchase of a residence in which the wife lived). Cf Cranfield Pty Ltd v Commonwealth Bank of Australia [1998] VSC 140 at [104] per Mandie J (that the shops for which money was borrowed were erected on the wife’s land did not prevent her transaction with the bank being voluntary); Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [121], [122] per Habersberger J (wife held to be a volunteer even though the loan she guaranteed was partly used to pay out a lease on a vehicle she used and to repay a sum she was owed from her husband).

275

Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 at [405] per McLure J (wife derived a financial benefit from the moneys advanced to the company, which was the primary generator and the source of funds from which husband and wife built their jointly owned asset base); Liu v Adamson (2003) 12 BPR 22,205 at [34]–​[41] per Macready M; Commonwealth Bank of Australia v Crowe [2004] NSWSC 330 at [268] per James J (where the wife gave security over her home for a loan to her husband’s company, of which both were its only directors and shareholders, to purchase a truck, the wife was held not to be a volunteer because “the truck was to be an asset of a business in the nature of a joint enterprise between them, which would be carried on for the benefit, not only of [her husband], but of [her], her children by her first marriage and

[7.235]  255 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

director.276 It remains to be seen whether the advent of sole director/​shareholder companies will reduce disputes over whether or not a wife is a volunteer. [7.240]  If the wife derives some gain, whether direct or indirect, from the transaction, it is

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arguable that the Garcia doctrine should not apply in an “all or nothing” fashion. The courts have recognised proportionality as a principle influencing relief in equity (see [P.190]), and so have countenanced by rescission on terms and partial rescission of transactions vitiated by equitable fraud (see [35.20], [35.25]). This has translated to the Garcia-​type scenario, as appears from the New South Wales Court of Appeal’s judgment in Elkofairi v Permanent Trustee Co Ltd.277 There the appellant and her husband gave a mortgage to the respondent over their jointly owned home as security for a loan, part of which was applied to discharge an existing mortgage over the property. Santow JA remarked that the part borrowed to re-​ finance the family home was truly borrowed by both husband and wife, and so the wife was not a volunteer as to that portion.278 His Honour, though, was unwilling to let the matter rise and fall on this point, remarking as follows:279 [W]‌hen resorting instead to the wider doctrine of unconscionability, here in granting relief to the wife … the fact that the transaction is in the strict sense not one of guarantee need not provide an insuperable obstacle to relief. Nor that the wife is only a volunteer as to a portion of the loan. Each circumstance must be taken into account in looking at all the circumstances, to see if indeed it would be unconscionable for the lender to enforce the rights against the wife. The circumstances which here justify the conferring of relief can be briefly stated. The Respondent bank made no attempt to find out if the business portion of the loan was for a business owned also by the wife, but lent it under documentation describing it as a joint loan, jointly secured. The loan was of a substantial sum lent to a couple with, to the knowledge of the bank, no money or income to meet its repayment, let alone interest. That left no means to satisfy the loan other than selling the family home, being the wife’s only asset. The home was being used not just to refinance monies lent originally for its joint purchase, but to support the husband’s own business in which the wife had no interest. The improvidence of the loan was manifest as should have been apparent to the Respondent. The evidence shows the wife

her young child by [her husband]”); Chandran v Narayan [2006] NSWSC 104 at [53]–​[55] per Young CJ in Eq; BNY Trust Co of Australia Ltd v Glambedakis [2009] NSWSC 815 at [79] per Johnson J (where the borrowings were used to refinance the mortgage on the home of which the wife was a joint owner, and from which husband and wife conducted a family business). Cf Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37 at [207] per Wheeler J (transaction held to be voluntary in that, although indirect benefit may have flowed to the wife, she gave the guarantee in her personal capacity in which capacity she received no benefit from it). 276

See, for example, Armstrong v Commonwealth Bank of Australia (1999) 9 BPR 17,035 at 17,053 per Hamilton J (“The shareholding of 25% may not have been insubstantial or nominal in amount, but was insubstantial or nominal in the sense that Mrs Armstrong in fact exercised no rights and received no benefits by reference to her shareholding”); Bylander International Consortium (Australia) Pty Ltd v Multilink Investments Pty Ltd [2001] NSWCA 53 at [20], [21] per Handley JA, at [25], [26] per Giles JA; Brueckner v Satellite Group (Ultimo) Pty Ltd (2002) 15 BPR 28,885 at [189] per Campbell J; Bank of Western Australia Ltd v Abdul [2012] VSC 222 at [58]–​[62] per Croft J; National Australia Bank Ltd v Wehbeh [2014] VSC 431 at [52]–​[58] per Macaulay J. Cf McNee, “Why Women Should Love, Honour and Obey —​An Attempt to Make the Wife’s Special Equity a Statutory Defence” (2003) 11 Insolv LJ 147 at 160–​161, who favours the view that, if the earnings of the debtor company substantially contribute to or are the sole source of the family’s income, absent a matrimonial divide between husband and wife where the income is not shared, the wife should be seen to be benefiting from the loan and the Yerkey principle should not apply (especially where the wife is a director and shareholder of the company, irrespective of whether or not she participates in the company’s management). The concern is that otherwise the lender bears the onerous task of inquiring into the intricacies of the relationship between husband and wife to determine whether the wife actively participates in management and whether the wife otherwise “benefits”.

277

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841.

278

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [91].

279

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [96] (emphasis supplied), with whom Campbell AJA agreed. Cf at [47] per Beazley JA.

256 [7.240] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

received no proper explanation of the transaction and clearly could not have appreciated its effect in any adequate sense.

Santow JA reasoned that a doctrine based on unconscionability should not be confined by inflexible rules —​say, limiting its application to volunteers or even to guarantee transactions (see but below at 7.250]) —​but should be a vehicle through which justice can be achieved.280 Yet in National Australia Bank Ltd v Satchithanantham,281 McCallum J doubted whether Garcia protects a “partial volunteer” in respect of the “voluntary” part of a transaction. Her Honour remarked that the majority in Garcia used the term “voluntary” to refer to the surety obtaining “no financial benefit” or “no gain” from the contract the performance of which was guaranteed. “What pricks good conscience”, said McCallum J, “is the complete absence of benefit; the fact that a person’s separate assets are exposed entirely in the interests of another”. In any event, in the case in question the wife was a borrower, and the benefit she obtained from the loan —​a large debt was repaid, forestalling a likely claim by the bank for possession of her property —​was substantial. This finding was affirmed on appeal, but without comment on the partial volunteer issue.282 There are policy reasons going both ways here. The case law mentioned at [7.235] highlights the challenges in deciding whether or not a person is a volunteer, and that whether or not a wife is protected by Garcia rests, inter alia, upon the substantiality of the benefit to the wife consequent upon the relevant transaction. That judges have openly accepted that some benefit does not preclude Garcia protection acknowledges that the concept of a “volunteer” is not “black and white”. If so, and remembering that the relevant inquiry is ostensibly one directed to unconscionable conduct, there is appeal in Santow JA’s suggested approach, even at the risk of potential uncertainty. It, after all, gives explicit recognition to the shades of grey implicit in the concept of a “volunteer”.

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[7.245] Another aspect of Santow JA’s views has struggled to find acceptance in the case

law. The Victorian Court of Appeal has ruled that Garcia does not apply outside the guarantee/​surety environment.283 It rejected the contention that Yerkey is capable of application to instruments, apart from suretyship, that operate to the husband’s advantage or confer a voluntary benefit on him.284 While Garcia may not have foreclosed a court subsequently extending its principles outside the surety context, there may be good reason for caution in this path. A non-​commercial surety (that is, a volunteer) usually stands to lose a great deal, but personally gains little or nothing from the transaction, and it is her consequent vulnerability that has arguably driven both the notice doctrine and the protection offered by Garcia. Where, conversely, husband and wife assume liability jointly under a loan, the benefit therefrom ostensibly accrues to both of them; that one of the borrowers is the spouse of the other does not speak, of itself, of any vulnerability in this regard. Actual knowledge in the bank here of any undue influence (or other vitiating factor) by husband over wife will, of course,

280

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [97].

281

National Australia Bank Ltd v Satchithanantham [2009] NSWSC 21 at [74].

282

Satchithanantham v National Australia Bank Ltd [2009] NSWCA 268.

283

Narain v Euroasia (Pacific) Pty Ltd (2009) 26 VR 387 at [45] per Nettle JA, with whom Bongiorno JA and Byrne AJA agreed.

284

Curiously, in doing so, their Honours construed Santow JA’s view in Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [92], [96] as being that it was impermissible for an intermediate court of appeal to treat Yerkey as capable of application or extension to anything other than suretyship. Yet Santow JA explicitly countenanced, albeit in obiter, that under a doctrine grounded in unconscionable conduct, constraining relief to guarantee transactions may not be justified.

[7.245]  257 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

subject the bank to the wife’s equity, but otherwise an unqualified application of Garcia (or the notice doctrine in any case)285 would threaten certainty surrounding ordinary (familial) business transactions.286

Extension beyond the husband–​wife relationship?

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[7.250]  Gaudron, McHugh, Gummow and Hayne JJ in Garcia limited the application of the

Yerkey doctrine to guarantees given by a wife for the benefit of her husband, or a company owned or controlled by him. There is some suggestion in their Honours’ judgment that this doctrine may in future find application to other relationships, such as de facto287 and same sex relationships, that are more prevalent now than when Yerkey was decided.288 However, they saw no need to state with any certainty whether this should eventuate, or to specify criteria to distinguish relationships that attract the doctrine from those that do not. In this respect the Garcia approach exhibits certain limitations. The joint judgment avoided the notice doctrine by deeming that knowledge that the guarantor is the wife of the principal debtor attracts legal responsibility in the creditor. This logic can operate only where the relationship deemed to carry with it legal responsibility is capable of being ascertained by a clear and objective standard (such as marriage and close family relationships). Applying Garcia more generally to relationships of emotional dependency proves problematic as a broader base for liability. This is because a determination of whether a relationship between two parties is one of emotional dependency is not capable of clear objective proof. It thus requires more than mere notice of a legally substantiable relationship, but notice of the possibility of one party taking advantage of the other. The House of Lords’ focus in Etridge (discussed at [7.185]) on the nature of the transaction rather than the nature of the relationship therefore has its advantages. It may be that in Australia guarantors other than wives may need to rely not on notice, but on the doctrine of unconscionable dealing (see [9.05]–​[9.145]) or statute (see [9.160]–​[9.195]) in order to set aside a guarantee. In Garcia,289 Callinan J restricted the Yerkey principles to the wife–​husband relationship, fearing that to extend them to cases in which the creditor is aware of an emotional relationship between the cohabitees may narrow the range of persons deserving of protection (although it is unclear why). Statutory intervention, said his Honour, pointed the way forward.290 As noted at [7.180], Kirby J preferred a notice approach extending to all relationships involving an emotional dependency. [7.255]  As Australian law stands, it seems, the setting aside of a guarantee given by a wife

to benefit her husband arguably rests on principles different to those applicable to guarantees given by other guarantors to benefit persons in whom they place emotional dependency.

285

See, for example, Darjan Estate Co plc v Hurley [2012] 1 WLR 1782 (where Geraldine Andrews QC, sitting as a deputy High Court Judge, refused to accept that the notice principle applied outside the surety context, and so on the facts it did not apply where husband and wife were joint signatories to a lease of licensed premises).

286

See, for example, National Australia Bank Ltd v Savage [2013] NSWSC 1718 (where Adamson J refused to apply Garcia in circumstances where, for each of the facilities to which the wife was a party, she was a co-​debtor with her husband and the loan was advanced to both of them jointly: at [91]).

287

As to the arguments in favour of applying Yerkey to de facto couples, see Fisher, “De Facto Relationships and Yerkey v Jones” (1996) 3 JCULR 16.

288

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 404.

289

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 442.

290

To the same effect, see Watt v State Bank of New South Wales Ltd [2003] ACTCA 7 at [38] per Higgins CJ and Crispin P.

258 [7.250] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Undue Influence  Chapter  7

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Both members of the judiciary291 and commentators292 have remarked the undesirability of an approach that discriminates between relationships exhibiting potentially equivalent characteristics. There is also a concern, again expressed by both courts293 and commentators,294 that the Yerkey principles are too absolute and also inconsistent with prevailing norms of sexual equality, for in treating all wives the same way the law presumes that all are unable to understand the essential aspects of the guarantee, irrespective of their intelligence, education or business experience. Yet some Australian judges have been reticent to extend Garcia beyond the husband and wife scenario. For example, in State Bank of New South Wales Ltd v Hibbert,295 Bryson J saw it as “material that the law has evolved and has been stated in terms which protect wives who are sureties for their husbands, and not persons in other domestic relationships”. His Honour added that the marital relationship is essential both for the historical derivation of the state of the law and of the presumptions propounded by Dixon J in Yerkey, such that “[t]‌he application of the presumptions to some other relationship is not possible without a large departure from a chain of historical circumstances which brought this body of law into being”.296 This led him to refuse to apply Garcia to a case involving de facto spouses.297 On this approach, it is unsurprising to find cases denying the application of Garcia in a familial but non-​marriage scenario.298 So in Watt v State Bank of New South Wales Ltd, in the context of guarantees given by parents for loans to their children, the Australian Capital Territory Court of Appeal remarked:299

291

See, for example, Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 423–​424 per Kirby J.

292

See, for example, O’Donovan, “The Retreat from Yerkey v Jones:  From Status Back to Contract” (1996) 26 UWALR 309 at 326–​327; Phang and Tjio, “From Mythical Equities to Substantive Doctrines  —​Yerkey in the Shadow of Notice and Unconscionability” (1999) 14 JCL 72 at 88–​89; Brown, “Undue Confusion over Garcia!” (2009) 3 J Eq 1 (who argues that the underlying reasoning in Garcia v National Australia Bank Ltd (1998) 194 CLR 395 should not be limited to cohabitants); Giancaspro, “ ‘I Now Prounce You … in a State of Uncertainty’: Contemporary Treatment of the Wives’ Special Equity and a Plan for the Future” (2017) 11 J Eq 80.

293

European Asian of Australia Ltd v Kurland (1985) 8 NSWLR 192 at 200 per Rogers J; National Australia Bank Ltd v Garcia (1996) 39 NSWLR 577 at 578 (CA); Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 424–​425 per Kirby J.

294

See, for example, O’Donovan, “The Retreat from Yerkey v Jones: From Status Back to Contract” (1996) 26 UWALR 309 at 326–​327; Hanak, “The Wife’s Special Equity Survives the High Court: Garcia v National Australia Bank” (1998) 6 Insolv LJ 202 at 208.

295

State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543 at [51]. See also Watt v State Bank of New South Wales Ltd [2003] ACTCA 7 at [20] per Higgins CJ and Crispin P; Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 at [197] per Murphy J (who did not see the burden of current authority as supporting an extension of the Garcia principles by treating the relationship of aged parent/​child as synonymous with the husband/​wife relationship for the purposes of the application of those principles). Cf Wenczel v Commonwealth Bank of Australia [2006] VSC 324 (where Habersberger J applied Garcia v National Australia Bank Ltd (1998) 194 CLR 395 where the husband and wife were separated for five months at the time of the relevant transaction, reasoning that “the emotional vulnerability of a woman such as the plaintiff who was vainly trying to hold a failing marriage together is the very weakness which this equity seeks to protect” and that “in this case the [wife] did still repose trust and confidence in her husband”: at [136]).

296

State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543 at [55].

297

State Bank of New South Wales Ltd v Hibbert (2000) 9 BPR 17,543 at [60]. Contra Liu v Adamson (2003) 12 BPR 22,205 at [13]–​[23] per Macready M (Garcia principles applied in the context of a longstanding de facto relationship yielding multiple children and generally akin to a marriage).

298

See, for example, National Australia Bank Ltd v Starbronze Pty Ltd (2001) V ConvR ¶54-​640 at 62,261 per Coldrey J (relief refused where guarantor sought to avoid the enforcement of a guarantee he had signed after inadequate explanations from his brother-​in-​law); Watt v State Bank of New South Wales Ltd [2003] ACTCA 7 at [20]–​[22] per Higgins CJ and Crispin P (parent as guarantor).

299

Watt v State Bank of New South Wales Ltd [2003] ACTCA 7 at [21], [22] per Higgins CJ and Crispin P (paragraph break omitted). It has been suggested that the courts should pay closer attention (adopting a “special equity” approach) where an elderly person guarantees a debt for (usually) her or his child or relative: see Burns, “Elders and Undue Influence Inter Vivos: Lessons from the United Kingdom?” (2003) 24 Adel L Rev 38 (who expresses concern that, under the present law, the fact that the transaction involves an elder, particularly an elderly parent, does not of itself impose further obligations on the financial institution or subject the transaction to special scrutiny, as compared to protection afforded to wives: at 70–​71).

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Equity and Trusts in Australia

[T]‌he relationship between a parent and his or her child or his or her child’s partner is obviously quite different from the relationship between a wife and her husband. Parents do not normally leave business decisions to their children or rely unquestioningly on their judgment. On the contrary, the role of parent involves being mentor and guide and parents tend to remain concerned about the wisdom of their children’s decisions, even when they have reached adulthood … [T]he real vulnerability of parents usually stems not from a failure to comprehend the nature of the transactions in which they have been asked to participate or from insufficient information concerning their implications. It stems from their love of their children. Their desire to help and protect them, to advance their interests, to maintain a close relationship, to avoid causing disappointment, hurt or distress, to maintain the relationship may all make it difficult to say “no”. The principles in Yerkey v Jones and Garcia offer no protection for people lured into improvident transactions by feelings of this kind.

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There is some suggestion, though, that Garcia can apply to a woman who, while still married, has separated from her husband,300 although this assumes that, notwithstanding the separation, the wife continues to place the relevant trust in her husband. The latter may be more challenging to accept in cases of long separation.301 Others have not viewed the Garcia approach in terms so restrictive. In Australia and New Zealand Banking Group Ltd v Alirezai,302 for instance, McMurdo P opined that special relationships where one party could abuse trust and confidence so as to invoke equitable relief are not a closed category, and could arise in some parent–​child relationships or perhaps in the relationship between a disabled person and carer. These obiter remarks echoed those of Charles JA in Kranz v National Australia Bank Ltd that:303 … it was put to us by [counsel] for the bank that the [trial] judge had correctly confined the application of Garcia to a relationship of husband and wife, even though allowing for a possible extension to other intimate relationships … But the formulation in the judgment of the majority of the High Court in Garcia is not so confined. The principle stated by the High Court in Garcia would make it unconscionable for a bank to enforce a guarantee given by a volunteer if it has not explained the situation to the guarantor, and does not know that an independent person has done so, if the bank knows that there was a relationship of trust and confidence between the guarantor and the debtor whose debt has been guaranteed. In Australia it remains therefore for the debtor to establish that the bank was aware of a relationship that put the bank on enquiry, such as that of husband and wife or solicitor and client, or that there was a relationship of trust and confidence between the debtor and the third party.

Yet aside from the banner of unconscionable conduct being used as an umbrella justification for intervention, there is arguably little to distinguish his Honour’s formulation of principle

300

Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [135], [136] per Habersberger J; Dowdle v Pay Now For Business Pty Ltd [2012] QSC 272 at [101]–​[107] per Mullins J.

301

Groves v Groves [2013] QSC 277 at [191] per Martin J.

302

Australia and New Zealand Banking Group Ltd v Alirezai (2004) Q ConvR ¶54-​601 at [39]. See also at [115] per Wilson J.

303

Kranz v National Australia Bank Ltd (2003) 8 VR 310 at [31] (footnote omitted). See also Australian Regional Credit Pty Ltd v Mula (2009) 14 BPR 26,779 at [138] per McCallum J (who opined, in obiter, that in line with Kranz “[t]‌he formulation of the requirement by reference to relationships of trust and confidence does no injury to the reasoning in Garcia”, accepting that an “equally well-​founded assumption” as applies in the husband–​wife context “can be made as to a lender’s understanding of the likely conduct of, at least, elderly parents towards their adult children”); Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 at [4] per Margaret McMurdo P (who saw “no sound reason why [the Garcia] principles should be limited to wives entering into guarantees of their husbands’ liabilities”); McIvor v Westpac Banking Corporation [2012] QSC 404 at [104] per Applegarth J; Amtel Pty Ltd v Ah Chee [2015] WASC 341 at [254] per Pritchard J (opining that while the claim of unconscionability in this context is often referred to in shorthand as the “wife’s special equity”, “[q]uite apart from the stereotypical characterisation of the role of women that that label conveys, the use of that label is liable to convey the erroneous impression that equitable intervention is solely attributable to the gender of the surety, rather than to the combination of all of the factors identified in Garcia”).

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Undue Influence  Chapter  7

from the “notice” approach the High Court was at pains to distance itself from in Garcia (see [7.215]). It therefore must be queried. In any case, in both Alirezai and Kranz, the courts refused to set aside the mortgage/​guarantee because the creditor was, in the circumstances, found to lack the requisite notice of a relationship of trust and confidence (where the mortgage had been given by a friend of the principal debtor in Alirezai, and security had been advanced by a relative by marriage in Kranz).

“Unconscionable” conduct [7.260]  The meaning and scope of unconscionable conduct in Garcia-​type cases also remain

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unclear from the judgment of the plurality. It cannot mean unconscionable conduct within the doctrine of unconscionable dealing, which requires overreaching of the guarantor by the debtor and knowledge of that overreaching by the creditor (see [9.20]). In any case, their Honours emphasised that the doctrine of unconscionable dealing did not subsume the Yerkey doctrine.304 Though unconscionable conduct in Garcia relies on the guarantor’s defective comprehension, it does not require notice in the creditor of that defective comprehension.305Garcia also fails to explain why imperfect understanding suffices to vitiate a guarantee but does not suffice to vitiate any other transaction for consideration, for which overreaching would be required.306 The plurality in Garcia saw the principles they espoused as simply an illustration of the equitable principle that a party having a legal right cannot be permitted to exercise it unconscionably.307 Their Honours referred to the judgment of Mason and Deane JJ in the estoppel case of Legione v Hateley308 in support of this. But for estoppel the unconscionable conduct threshold (see [10.310]–​[10.350]) exceeds that in Garcia.309 Another prime example of equity’s predilection against unconscionable assertions of legal rights —​the constructive trust —​also arguably envisages a higher threshold of unconscionability than Garcia: see [38.195]–​[38.210]. [7.265]  Unconscionable conduct in Garcia is effectively deemed to arise from a failure to

ensure that a volunteer in a specified relationship understands the purport and effect of a transaction;310 it stems chiefly from omission rather than commission. As such, it is of a different genus to unconscionable conduct that informs certain other equitable doctrines. It is easier 304

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 408. Cf Phang and Tjio, “From Mythical Equities to Substantive Doctrines —​Yerkey in the Shadow of Notice and Unconscionability” (1999) 14 JCL 72 at 97 (who argue that Yerkey represented “an incipient and prototype version of the doctrine of unconscionability”).

305

Gardner, “Wives’ Guarantees of their Husbands’ Debts” (1999) 115 LQR 1 at 3. See also Santow, “Sex, Lies and Sureties —​ Touching the Conscience of the Creditor” (1999) 10 JBFLP 7 at 15 (who distinguished the equitable doctrine of unconscionable dealing from Garcia’s application of the concept of unconscionability in that the former depends primarily on the circumstances in which knowledge of the guarantor’s “special disadvantage” is attributed to the creditor —​it involves a deliberate shutting of the eyes, whereas in Garcia, the creditor is “taken to appreciate” the likelihood of no sufficient explanation of the guarantee). Cf Duggan, “Till Debt Us Do Part: A Note on National Australia Bank Ltd v Garcia” (1997) 19 Syd L Rev 220 at 229. The doctrines can, however, overlap on the same set of facts, such as where the wife’s intelligence, comprehension skills, business experience and education level are so deficient that the disability becomes obvious to the creditor.

306

Gardner, “Wives’ Guarantees of their Husbands’ Debts” (1999) 115 LQR 1 at 4.

307

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 409.

308

Legione v Hateley (1983) 152 CLR 406 at 444.

309

See Dal Pont, “The Varying Shades of ‘Unconscionable’ Conduct —​Same Term, Different Meaning” (2000) 19 Aust Bar Rev 135 at 157–​162. The point has since received judicial acknowledgement: Agripay Pty Ltd v Byrne [2011] 2 Qd R 501 at [145] per McMeekin J (remarking that had the “estoppel standard” for unconscionable conduct dictated the outcome in a Garcia scenario, the case in question (as to which see [7.220]) would have been decided differently).

310

Amtel Pty Ltd v Ah Chee [2015] WASC 341 at [252] per Pritchard J (described in terms of the circumstances giving rise to unconscionability not including “the establishment of any causal link between the absence of advice to the surety or guarantor, and her decision to enter into the transaction”).

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Equity and Trusts in Australia

to conceive of unconscionable conduct, in its traditional livery, where an alleged wrongdoer has notice of the claimant’s interest.311 This appears to be behind Tipping J’s remark that securing independent advice in cases involving notice of a relationship involving an emotional tie or dependency so as to give rise to the possibility of undue influence operates to make the creditor’s conscience clear.312 Perhaps what underlies Garcia is not so much unconscionable conduct, as an unfair outcome. To deem conduct unconscionable may be seen as a tool directed to giving weight to substantive unconscionability, not traditionally the domain of equitable doctrine. In a sense, Gaudron, McHugh, Gummow and Hayne JJ in Garcia conceded this in observing that “the statement that enforcement of the transaction would be ‘unconscionable’ is to characterise the result rather than to identify the reasoning that leads to the application of that description”.313 The point has not been lost on some commentators, who construe Garcia as grounded in the outcome-​based notion of unjust enrichment.314

DEFENCES

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[7.270]  In a sense, the main defences to an allegation of actual undue influence, or in rebut-

tal of a presumption of undue influence, are the factors discussed at [7.50]–​[7.85], chiefly independent advice. Aside from these, a plaintiff’s delay in commencing an action once the influence has ceased may undermine her or his claim of undue influence in the first place or may function as an affirmation of the transaction.315 It may otherwise bar equitable relief if this would unreasonably prejudice the defendant.316 This may be so where the delay has led the defendant to alter her or his position detrimentally. For this purpose, the period of delay generally commences when the plaintiff first became aware of the facts upon which the right to relief is founded.317 The leading case is Allcard v Skinner.318 The plaintiff became a member of a sisterhood in 1871, and in so doing transferred considerable property to the lady superior of the sisterhood (the defendant). Though she left the sisterhood in 1879, the plaintiff made no demand for the return of that property until 1885. The English Court of Appeal found that, while the plaintiff was under the defendant’s influence, her claim was barred by laches and acquiescence. Lindley LJ construed the plaintiff’s inactivity and delay as “conduct amounting to confirmation of her gift”,319 and proceeded to explain that:320 [a]‌gift made in terms absolute and unconditional naturally leads the donee to regard it as his own; and the longer he is left under this impression the more difficult it is justly to deprive him

311

Cf Geelong Building Society (in liq) v Thomas (1996) V ConvR ¶54-​545 at 66,475 per Hedigan J (who held that notice of the potential for undue influence made it unconscionable for a creditor to enforce the security).

312

Wilkinson v ASB Bank Ltd [1998] 1 NZLR 674 at 695.

313

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 409.

314

See Edelman and Bant, “Setting Aside Contracts of Suretyship: The Theory and Practice of Both Limbs of Yerkey v Jones” (2004) 15 JBFLP 5 at 16 (and so suggest that, in exceptional circumstances, the defence of change of position could be available to the creditor: at 18–​19).

315

See, for example, Public Trust v Ottow [2009] NZHC 2904 at [56], [57] per Asher J.

316

Whereat v Duff [1972] 2 NSWLR 147 at 179–​182 per Asprey JA; Goldsworthy v Brickell [1987] Ch 378 at 410–​411 per Nourse LJ, at 416–​417 per Parker LJ. As to effect of delay in equity generally see [30.10]–​[30.80].

317

Baburin v Baburin (No 2) [1991] 2 Qd R 240; Humphreys v Humphreys [2004] WTLR 1425 at [99] per Rimer J.

318

Allcard v Skinner (1887) 36 Ch D 145.

319

Allcard v Skinner (1887) 36 Ch D 145 at 186.

320

Allcard v Skinner (1887) 36 Ch D 145 at 187. See also at 193 per Bowen LJ. Cf at 174–​175 per Cotton LJ in dissent; Quek v Beggs (1990) 5 BPR 11,761 at 11,779–​11,780 per McLelland J.

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Undue Influence  Chapter  7

of what he has naturally so regarded. So long as the relation between the donor and the donee which invalidates the gift lasts, so long as it is necessary to hold that lapse of time affords no sufficient ground for refusing relief to the donor. But this necessity ceases when the relation itself comes to an end; and if the donor desires to have his gift declared invalid and set aside, he ought … to seek relief within a reasonable time after the removal of the influence under which the gift was made. If he does not the inference is strong, and if the lapse of time is long the inference becomes inevitable and conclusive, that the donor is content not to call the gift in question, or, in other words, that he elects not to avoid it, or, what is the same thing in effect, that he ratifies and confirms it.

His Lordship refused to accept that the plaintiff did not know of her rights until shortly before her request for the return of the property, but that, even if she did, her ignorance resulted from her own omission to inquire about them. “Ignorance which is the result of deliberate choice is no ground for equitable relief”, he noted, adding that “nor is it an answer to an equitable defence based on laches and acquiescence”.321 But where the plaintiff’s lack of resources and difficulty in funding the litigation is directly connected with the impoverishing nature of the gift, the consequent delay, even if substantial, may not bar relief, particularly where the defendant is not prejudiced by the lapse of time.322 That delay may, however, impact remedy-​wise, so as to deny the plaintiff interest in respect of the period of delay.323

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[7.275]  Another potential defence is hardship, which courts of equity countenance in various

contexts.324 In the context of undue influence, such a defence most likely would be pleaded where the donee would suffer undue hardship were he or she required to return a gift made pursuant to undue influence. It would require an exceptional case, though, for hardship to succeed as a defence —​justice to the plaintiff is indeed a weighty element —​and it is more likely to form an additional bow to a laches claim than anything else.325 It is ordinarily no defence here that the gift or its proceeds have been spent, because relief for undue influence is not limited to proprietary relief, but can be in personam: see [7.285], [7.290].

REMEDIES [7.280]  The main remedy in undue influence cases involves rescission of the offending trans-

action and the return of the parties to the status quo.326 Equity will grant rescission even when it cannot restore the parties precisely to their pre-​transaction position: see [35.15]. In reversing the transaction the court aims to achieve “practical justice” for both parties, and for this reason exercises a measure of discretion in determining what practical justice requires.327 That this process may generate a result not representing what either side would have wished is an inevitable consequence of the balancing of competing interests.328 It is open to the court

321

Allcard v Skinner (1887) 36 Ch D 145 at 188.

322

Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [103] per Bryson J.

323

Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [104] per Bryson J.

324

See, for example, in the context of specific performance, [33.130]–​[33.140].

325

See, for example, Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [97] per Bryson J.

326

See generally Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), Ch 28.

327

Cheese v Thomas [1994] 1 All ER 35 at 39–​43 per Sir Donald Nicholls VC; Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 113–​114 (FC).

328

Bridgewater v Leahy (1998) 194 CLR 457 at 494 per Gaudron, Gummow and Kirby JJ.

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Equity and Trusts in Australia

to grant the plaintiff a security interest (say, by way of an equitable charge: see [1.150]) over the property in question pending its recovery.329 Consistent with the nature of equitable relief, the remedy must be proportional with the benefit illegitimately derived by the defendant from the transaction: see [P.190]. A court will not grant relief that unjustly enriches a plaintiff.330 It may, for instance, make the right to rescind conditional on the plaintiff making counter-​restitution, such as where the transaction has provided a benefit to the plaintiff.331 Where the transaction is one of guarantee this presents no difficulty, as a surety incurs a liability but obtains no benefit. It is sufficient to set aside her or his liability; there is nothing to disgorge by way of counter-​restitution. But where the transaction is one of loan, it is not just merely to set aside the loan, as this would leave the borrower unjustly enriched. The proper course is to set aside the loan contract and require the borrower to account for the moneys received with interest at a rate fixed by the court.332 Also, where a guarantor lacks understanding as to the extent of the security given, a court may uphold the guarantee to the extent of the misunderstanding.333 Yet where, had the true nature of the liability been understood, the guarantor would not have entered into the transaction at all, it is no windfall to the guarantor for the transaction to be completely set aside.334

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[7.285] A growing body of case law recognises the court’s power to order the payment of

compensation in undue influence cases.335 If correct, which it is submitted it is, the foundation for this remedy does not rest on proof of some concurrent fiduciary breach, and so relieves the pressure to extend fiduciary law beyond its legitimate parameters.336 The logic is that, as undue influence is an instance of fraud in equity, availability of a remedy directed to compensating loss occasioned by fraud is justified. So if, for example, the property the defendant is ordered to return has deteriorated in the defendant’s hands, the plaintiff may have, in addition to rescission, a claim for compensation for that deterioration. The flipside is that if the defendant has improved that property, the plaintiff may be ordered to compensate her or him by way of counter-​restitution. Relief in personam also dictates that merely because the defendant has dissipated or sold the property in question is no defence to a claim for undue influence.337

329

See, for example, Smith v Glegg [2005] 1 Qd R 561 at [68] per McMurdo J. Cf Skead, “Undue Influence and the Remedial Constructive Trust” (2008) 2 J Eq 143 (who maintains that the remedial constructive trust could also be a remedy in this context to relieve against relevant unconscionability).

330

Wilby v St George Bank (2001) 80 SASR 404 at 414 per Perry J.

331

Dunbar Bank plc v Nadeem [1998] 3 All ER 876 at 884–​885 per Millett LJ, at 887–​888 per Morritt LJ; Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [98] per Santow JA. This is an application of the maxim “a person who seeks equity must do equity”: see [P.75].

332

National Commercial Bank (Jamaica) Ltd v Hew [2003] UKPC 51 at [43] per Lord Millett.

333

Burke v State Bank of New South Wales (1994) 37 NSWLR 53 at 80 per Santow J [affd State Bank of New South Wales Ltd v Burke (1997) 8 BPR 15,511]; Australia and New Zealand Banking Group Ltd v Petrik [1996] 2 VR 638 at 644 per Phillips JA.

334

Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435 at 449 per Heerey J; Geelong Building Society (in liq) v Thomas (1996) V ConvR ¶54-​545 at 66,480 per Hedigan J.

335

See, for example, Mahoney v Purnell [1996] 3 All ER 61 (although May J sourced the entitlement to compensation from a coexisting fiduciary duty); Smith v Glegg [2005] 1 Qd R 561 at [64] per McMurdo J. See Akkouh, “Equitable Compensation Where Rescission Is Impossible” (2002) 16 TLI 151; Vann, “Equitable Compensation When Rescission Is Impossible:  A Response” (2003) 17 TLI 66 (who prefers the terminology “pecuniary rescission”).

336

Being a concern expressed in Heydon, “Equitable Compensation for Undue Influence” (1997) 113 LQR 8.

337

Hartigan v International Society for Krishna Consciousness Inc [2002] NSWSC 810 at [98] per Bryson J.  Cf the personal action available against third-​party volunteer recipients of trust property: see [24.130], [24.135].

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Undue Influence  Chapter  7

[7.290]  A leading case illustration of the practical justice approach is O’Sullivan v Management

Agency and Music Ltd.338 The plaintiff, a composer and performer of pop music, entered into management and recording contracts with the defendant found to have been procured through undue influence. The parties performed under these contracts for six years before the plaintiff sought to have them set aside. Although precise restitutio in integrum could no longer be achieved, the court held that justice would be served by orders that the contracts be set aside, the copyright in the plaintiff’s compositions be reassigned to him, and that the defendant account to the plaintiff for the profits it made reduced by the amount the defendant would have been entitled to receive absent undue influence. Another, more recent, illustration is Elkofairi v Permanent Trustee Co Ltd,339 where the appellant and her husband gave a mortgage to the respondent over their jointly owned home as security for a loan. Part of the loan was applied to discharge an existing loan of $469,000 over the property, the remainder for the husband’s business purposes. Santow JA noted that the combined benefit that Mr and Mrs Elkofairi received from the loan was the discharge of the $469,000 mortgage. However, the individual benefit the appellant received from the joint loan, and thus from an order discharging her liability under it, was only 50% of that discharge figure, the remaining half of the benefit accruing to her husband. To require the appellant to pay the entire $469,000 as a condition of relief under the Garcia principles (see [7.215]) would have given her husband a windfall benefit of half that sum.340 This led his Honour to limit the appellant’s liability, and thus the scope of relief, commensurately with the benefit she received from the loan.341

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[7.295]  In circumstances where a person who has secured property through undue influence

then transfers the property to a third party, whether the victim of the undue influence can see rescission of the transaction as to the third party depends on the circumstances.342 If the third party has actual or constructive knowledge of the undue influence (or another vitiating factor), the law pertaining to third parties discussed at [7.160]–​[7.265] should subject the third party to the victim’s “equity”. In the absence of knowledge, whether or not recovery should follow may rest on the nature of the transfer. If effected by way of gift, there are compelling grounds in equitable principle —​equity does not, after all, assist a volunteer: see [P.120] —​to conclude that, absent any statutory protection, rescission can issue against the third party. The position will likely differ if the (innocent) third party has supplied consideration, or otherwise benefits from statutory protection, leaving the victim to any relief he or she may have against the wrongdoer. [7.300]  Broader scope for relief may be available pursuant to claims under the Australian

Consumer Law that a party has behaved unconscionably: see [9.160]–​[9.195]. A factor going to unconscionable conduct in this context is, after all, whether any undue influence was exerted during the negotiating process: ss 22(1)(d), 22(2)(d). The prevailing interpretation of s 20(1), moreover, may dictate that unconscionable conduct for the purposes of the Garcia doctrine can attract the broad avenues for relief available under that Law: see [9.170].

338

O’Sullivan v Management Agency and Music Ltd [1985] QB 428.

339

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841.

340

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [103], with whom Campbell AJA agreed.

341

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [111].

342

On this topic generally see Ridge, “Third Party Volunteers and Undue Influence” (2014) 130 LQR 112.

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UNCONSCIONABLE CONDUCT

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Chapter 8

Fraud and Mistake FRAUD IN EQUITY [8.05]  In cases of actual fraud —​conduct involving conscious dishonesty whether by intent

or reckless indifference —​courts of equity and common law historically exercised a concurrent jurisdiction. Equity also exercised an exclusive jurisdiction in cases that, although classified as fraud, did not require proof of an intention to deceive or of recklessness. In Nocton v Lord Ashburton1 Lord Haldane LC explained the nature of equitable fraud in the following classic statement:

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[W]‌hen fraud is … used in Chancery in describing cases which were within its exclusive jurisdiction, it is a mistake to suppose that an actual intention to cheat must always be proved. A man may misconceive the extent of the obligation which a court of Equity imposes on him. His fault is that he has violated however innocently because of his ignorance, an obligation which he must be taken by the Court to have known, and his conduct has in that sense always been called fraudulent … It was thus that the expression “constructive fraud” came into existence … What it really means in this connection is, not moral fraud in the ordinary sense, but breach of the sort of obligation which is enforced by a court that from the beginning regarded itself as a court of conscience.

Hence, in equity the term “fraud” does not depend on proof of subjective knowledge in the defendant of the relevant facts. The term is used to describe that which, although falling short of deceit, imports breach of a duty to which the sanction of equity is attracted,2 namely conduct of a nature sufficient to invoke the intervention of a court of conscience. Frequently this is branded as “unconscionable” conduct,3 a level of conduct here intended to set a relatively low threshold, being used in a broad sense interchangeably with the terms “unconscientious”, “inequitable” or the phrase “inconsistent with honesty and fair dealing”.4 Upon this construction equitable fraud can be seen to form the basis of relief for constructive trusts, breaches of fiduciary duty, undue influence and unconscionable dealing.5 Yet as each of these has flourished into a “separate” equitable doctrine, it is discussed in another chapter.6 Certain other causes of action remain that retain the badges of equitable fraud and so are appropriately classified under this banner. These include the doctrines of equitable duress and fraud on a power, and equity’s jurisdiction to prevent a statute from being used as

1

Nocton v Lord Ashburton [1914] AC 932 at 954.

2

Mander v Evans [2001] 1 WLR 2378 at 2385 per Ferris J.

3

Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 553 per Mahoney JA; First City Capital Ltd v British Columbia Building Corp (1989) 43 BLR 29 at 37 per McLachlin CJ. Cf Inca Ltd v Autoscript (New Zealand) Ltd [1979] 2 NZLR 700 at 708 per Mahon J.

4

As to the various uses of the term “unconscionable” see Dal Pont, “The Varying Shades of ‘Unconscionable’ Conduct —​Same Term, Different Meaning” (2000) 19 Aust Bar Rev 135.

5

Nocton v Lord Ashburton [1914] AC 932 at 953 per Lord Haldane LC.

6

See Chs 4 (fiduciary law), 7 (undue influence), 9 (unconscionable dealing), 38 (constructive trusts).

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Equity and Trusts in Australia

a cloak for fraud, to rescind a contract for innocent misrepresentation, and to set aside judgments for fraud. Excepting the latter,7 each is discussed below.

PRESSURE IN EQUITY Common law duress distinguished from pressure in equity [8.10] Although duress, meaning compulsion or coercion, has traditionally been viewed as

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forming the basis of a common law action, courts of equity developed an analogous jurisdiction to relieve persons induced by undue pressure from transactions not avoidable at law.8 Equity’s role evolved to mitigate three rigours at common law.9 First, legal obligations assumed under duress could only be avoided at law where the threat constituting the duress was to the life or limb of the person seeking relief or members of that person’s family. Secondly, the common law concept of duress operated where there was induced thereby a fear that could be assumed to some extent to paralyse the will.10 Finally, and arguably as a corollary of the former, a plaintiff alleging duress at common law could not succeed without establishing that but for the threats he or she would not have undertaken the legal obligation in question. Responding to the strictness of the common law, equity began at a comparatively early date to grant relief in cases of transactions procured by the exercise of pressure that the Chancellor considered illegitimate, though not amounting to common law duress. Subsequent developments at common law, to a substantial degree,11 effectively deprived equity of an exclusive jurisdiction in this respect. But equity’s exclusive jurisdiction has not, in this respect, been superseded in its response to the originally narrow scope of duress at common law via the doctrine of undue influence, which focuses on an influence improperly brought to bear by one party on the mind of another rather than compulsion or coercion.12 Scope of the pressure doctrine in equity [8.15]  Equity permitted threats other than to life or limb to found a basis for setting aside

an agreement. For example, in Mutual Finance Ltd v John Wetton & Sons Ltd13 the threat

7

As to equity’s jurisdiction to set aside judgments for fraud see Dal Pont, “Judgments Fraudulently Obtained —​The Forgotten Equity” (1995) 14 U Tas L Rev 129; Biritz v National Australia Bank Ltd (2001) 187 ALR 757 at 762–​764 per Kenny J; Toubia v Schwenke (2002) 54 NSWLR 46 at 51–​56 per Handley JA, with whom Heydon and Hodgson JJA concurred; Clone Pty Ltd v Players Pty Ltd (in liq) (2018) 353 ALR 24.

8

Williams v Bayley (1866) LR 1 HL 200; O’Rorke v Bolingbroke (1877) 2 App Cas 814 at 822–​823 per Lord Hatherley.

9

Barton v Armstrong [1973] 2 NSWLR 598. However, it must be noted that money paid under a compulsion not amounting to duress at common law could be recovered under a separate doctrine of the common law originally based in quasi-​ contract: Smith v William Charlick Ltd (1924) 34 CLR 38; Furphy v Nixon (1925) 37 CLR 161; Mason v New South Wales (1959) 102 CLR 108. Its current basis is restitution or unjust enrichment.

10

This requirement has since been rejected by the House of Lords in Director of Public Prosecutions for Northern Ireland v Lynch [1975] AC 653. See also Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 45–​46, where McHugh JA observed that “[a]‌person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action”. Moreover, to accept the “overbearing of the will” theory presumes that the victim has no choice but to enter into the contract. Were this to be the case, the contract should be void, not voidable. The recognition that duress is not inconsistent with the act and will is therefore consonant with the accepted principle that contracts vitiated by duress or pressure are voidable.

11

There does, however, remain modern case law recognising an independent doctrine of equitable duress (or “unconscionable pressure”): see, for example, Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 at 290 per Kiefel J.

12

The same facts can, however, involve both undue influence and duress: see, for example, Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [159], [160] per Habersberger J.

13

Mutual Finance Ltd v John Wetton & Sons Ltd [1937] 2 KB 389.

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Fraud and Mistake  Chapter  8

of prosecution and imprisonment activated the intervention of equity to set aside a contract thereby procured. The advent of cases pleading “economic duress”, though not explicitly couched in equitable terms, arguably represents the blossoming of a concurrent equitable jurisdiction in this respect.14 In Crescendo Management Pty Ltd v Westpac Banking Corporation15 McHugh JA identified the proper approach as being to “ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate”. Importantly, his Honour defined illegitimate pressure in terms reminiscent of equity, namely where the pressure amounts to unconscionable conduct.16 Although some have endorsed McHugh JA’s adoption of “unconscionable conduct”,17 others have seen it as productive of uncertainty. The New South Wales Court of Appeal has suggested that this uncertainty can be avoided by limiting the concept of “duress” to threatened or actual unlawful conduct and eschewing the term “illegitimate pressure”.18 Their Honours saw this as a vehicle through which to differentiate the relevant doctrines more clearly, in countenancing that, if the conduct or threat is not unlawful, the resulting agreement may nevertheless be set aside if the weaker party establishes undue influence (see Ch 7) or unconscionable dealing in the Amadio sense (see Ch 9). Yet it remains unclear, at least for economic duress, what it is about a threat to a party’s legitimate commercial and financial interests that makes it “unlawful” as opposed to (merely) unconscionable. This has in turn recently prompted a High Court judge, via dictum, to favour McHugh J’s approach ahead of one grounded in inquiry into unlawfulness.19 In any case, in referring to unconscionable conduct it is unlikely that McHugh JA was intending to converge the equitable doctrine of pressure with that of unconscionable dealing.20 The latter, though arguably sharing a genesis with the doctrine of equitable pressure,21 targets the quality of the stronger party’s conduct rather than its effect on the weaker party: see [9.15], [9.20]. If the term “unconscionable” is to be used to explain both doctrines, the relevant inquiry must accordingly differ. Under Amadio it refers to the nature of the advantage taken of a person in a position of special disadvantage, whereas for the purposes of economic duress, it looks to the nature of the duress or compulsion exercised, to its legitimacy or illegitimacy.

14

See Sindone, “The Doctrine of Economic Duress” (1996) 14 Aust Bar Rev 34 (Pt 1), 114 (Pt 2).

15

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46.

16

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46.

17

See, for example, Dimksal Shipping Co SA v International Transport Workers Federation [1991] 3 WLR 875 at 883 per Lord Goff; Deemcope Pty Ltd v Cantown Pty Ltd [1995] 2 VR 44 at 48 per Coldrey J.

18

Australia and New Zealand Banking Group Ltd v Karam (2006) 64 NSWLR 149 at [66] (CA). Chesterman J propounded a similar approach in Emanuel Management Pty Ltd (in liq) v Foster’s Brewing Group Ltd (2003) 178 FLR 1 at [1233] (a point his Honour reiterated in Mitchell v Pacific Dawn Pty Ltd [2006] QSC 198 at [20]–​[23]). In so ruling, Chesterman J in Emanuel Management was influenced by his interpretation of the High Court’s decision in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 as restricting the class of persons in respect of whom conduct may now be regarded as unconscionable, thus calling into question whether McHugh JA’s reference to “unconscionable conduct” had been misplaced. Yet as the High Court’s remarks focused principally on the concept of unconscionability found in Pt IVA of the Trade Practices Act 1974 (Cth) (now Pt 2-​2 of the Australian Consumer Law: see [9.160]–​[9.195]), it is by no means certain that the court intended to restrict the scope of unconscionability concept more generally.

19

Thorne v Kennedy (2017) 91 ALJR 1260 at [70]–​[72] per Nettle J.

20

Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 at 289 per Kiefel J. Cf Hardingham, “Unconscionable Dealing” in Finn (ed), Essays in Equity (The Law Book Company Limited, 1985), pp 21–​24; Australia and New Zealand Banking Group Ltd v Karam (2006) 64 NSWLR 149 at [61] (CA) (“Concepts of ‘illegitimate pressure’ and ‘unconscionable conduct’, if they do not refer to equitable principles, lack clear meaning”).

21

O’Rorke v Bolingbroke (1877) 2 App Cas 814 at 822–​823 per Lord Hatherley.

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Equity and Trusts in Australia

It has been suggested that the High Court’s ruling in Bridgewater v Leahy22 (discussed at [9.130]) on the equitable doctrine of unconscionable dealing, with its apparent de-​emphasis on special disadvantage and its apparent recognition that the doctrine can provide relief from purely “situational” inequity, may herald the convergence of the doctrines of duress and unconscionable dealing.23 If this is correct, it does little to foster certainty in the law. It also arguably places too much weight on a majority judgment light on legal reasoning, that did not in its terms purport to modify the doctrine of unconscionable dealing, and has in any event not been so interpreted in subsequent case law: see [9.135], [9.140].

Pressure a contributing factor to the assumption of the obligation [8.20]  In equity it is unnecessary for the victim to prove that the illegitimate pressure was

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the sole reason for entering into the contract; it need only be one of the reasons for entering into it.24 In Barton v Armstrong25 the appellant, a director and major shareholder in a company, alleged that he had signed certain documents, the effect of which was to “buy out” the respondent’s shareholding on terms unfavourable to the company, under duress from the respondent. In addition to evidence of threats by the respondent to the appellant’s life and safety, there was evidence that the transaction was motivated by a desire to “rid” the company of the respondent. The respondent contended that, as the threats were not the sole or primary cause inducing the appellant to execute the documents, duress could not be made out. The Privy Council advised that common law duress did not assist the appellant, but that duress in equity could be established upon proof that the threats or pressure were “a” reason for pursuing a particular course of action, even though it may have been pursued irrespective of the threats.26 In so doing, their Lordships aligned the law of duress with mistake and misrepresentation —​being other conduct triggering a right of rescission —​which need be only an inducement to entry into the transaction sought to be avoided on that ground.27 Onus of proof and relief [8.25] The person alleging duress bears the onus of proving that unlawful pressure was

exerted on her or him. If this is satisfied, the onus then shifts to the person applying the pressure to show that such pressure made no contribution to the victim entering the agreement.28

22

Bridgewater v Leahy (1998) 194 CLR 457.

23

McKeand, “Economic Duress —​Wearing the Clothes of Unconscionable Conduct” (2001) 17 JCL 1 at 10. There are also dicta suggesting that duress can come within a broader mantle of unconscionable dealing: see, for example, Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 at 290 per Kiefel J (“An approach which inquires whether, in all the circumstances, it is unconscientious to retain a benefit wrongfully procured might be thought to encompass the situation where improper pressure is brought to bear on one party, since it would have regard to that conduct and its relationship to the advantage obtained”).

24

Barton v Armstrong (1973) 47 ALJR 781 at 786 (PC); Couch v Branch Investments (1969) Ltd [1980] 2 NZLR 314 at 317 per Cooke J, at 331–​332 per McMullin J; Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46 per McHugh JA.

25

Barton v Armstrong (1973) 47 ALJR 781.

26

Barton v Armstrong (1973) 47 ALJR 781 at 785–​786.

27

In fact, Lord Cross drew an analogy between the law of duress and that of misrepresentation, in the latter case there being no requirement to prove that the plaintiff would not have assumed the legal obligation had it not been for the misrepresentation: Barton v Armstrong (1973) 47 ALJR 781 at 786. This paralleled the observations of Jacobs JA in his dissenting judgment in the New South Wales Court of Appeal: Barton v Armstrong [1973] 2 NSWLR 598 at 610–​611.

28

Barton v Armstrong (1973) 47 ALJR 781 at 787 (PC); Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 at 46 per McHugh JA.

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Fraud and Mistake  Chapter  8

An agreement induced by duress is voidable. Until rescinded by the innocent party, it remains effective and binding on the parties. Alternatively, the innocent party may affirm the agreement, whether expressly or by implication from conduct after the illegitimate pressure is spent.29 Broader scope for relief may be available under the Australian Consumer Law,30 vis-​à-​vis its prohibition on use of physical force or undue harassment or coercion in connection with the sale of land (s 50(1)(c), (d)) or the supply of goods and services (s 50(1)) or its prohibition against unconscionable conduct, a factor going to which is whether pressure was exerted during the negotiating process (ss 22(1)(d), 22(2)(d):  see [9.180]–​[9.195]). Also, if duress in equity is indeed grounded in unconscionable conduct, s 20 may dictate the availability of those same avenues for redress for the purposes of the duress doctrine: see [9.170], [9.175]. A modern substantive doctrine of duress? [8.30] Though equity historically exercised an exclusive jurisdiction in the instances men-

tioned above, courts today infrequently distinguish duress at law from pressure in equity. For this reason, the doctrine of pressure in equity is notable more as a historical precursor to the current doctrine than as a cause of action in itself. The modern concept of duress thus appears a substantive doctrine resulting from a merger of common law and equity (or at least the emergence of a wholly concurrent jurisdiction) prompted by the “growing doctrine of duress” at law.31 Pursuant to this doctrine, duress is pressure constituted by the existence of unlawful threats (or possibly unconscionable conduct), informed by the nature and extent of the threat and its subject matter (that is, whether it is directed to the person, property or economic interests).

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EQUITABLE FRAUD AND STATUTE [8.35] Equity will not, it is said, permit a statute to be a cloak for, or an instrument of,

fraud:  see [P.90]. In McCormick v Grogan Lord Westbury explained the character of this jurisdiction as follows:32 The court of equity has, from a very early period, decided that even an Act of Parliament shall not be used as an instrument of fraud: and if in the machinery of perpetrating a fraud an Act of Parliament intervenes, the court of equity, it is true, does not set aside the Act of Parliament, but it fastens on the individual who gets a title under that Act, and imposes on him a personal obligation, because he applies the Act as an instrument for accomplishing a fraud. [8.40]  A focus this jurisdiction are attempts to plead Statute of Frauds writing requirements (see [18.05], [18.10]) where these would deny the plaintiff an equitable interest that can be evidenced otherwise than in writing. The purpose of the writing requirements having been to reduce scope for fraud in relation to certain transactions, the Court of Chancery acknowledged that, in some instances, those requirements could be utilised to smother proof of an

29

Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 at 304, 306 per Priestley JA.

30

The Australian Consumer Law is found in Competition and Consumer Act 2010 (Cth), Sch 2.

31

Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 at [6]‌–​[8] per Lord Nicholls.

32

McCormick v Grogan (1869) LR 4 HL 82 at 97. See also Kettlewell v Watson (1882) 21 Ch D 685 at 702–​705 per Fry J; British Railways Board v Pickin [1974] AC 765 at 795–​796 per Lord Wilberforce; Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 553–​554 per Mahoney JA.

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Equity and Trusts in Australia

agreement that equity would recognise.33 This led equity to enforce a transaction requiring writing at law where it would be fraudulent (or unconscionable) for the defendant to insist on her or his strict legal entitlement. So, for example, an express trust of land may be proved by oral evidence where the statutory writing requirements are being used as an instrument of fraud: see [18.30]. Upon this broad characterisation of equity’s jurisdiction lie the doctrines of part performance (see Ch 12) and secret trusts34 (see [18.45]–​[18.85]). In each instance, a court of equity may admit parol or extrinsic evidence as proof of an equitable interest in property where a denial of this interest would amount to equitable fraud by the defendant.35 Nor do the writing requirements govern the availability or scope of equitable estoppel (see [10.385], [10.390]), as Mahon J noted in Avondale Printers & Stationers Ltd v Haggie:36 Fraud in equity will only arise where in all the circumstances it will be dishonest for the legal owner to rely upon the statute, and that result will most commonly occur when … the legal owner has so conducted himself as to induce the other party to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land. [8.45] Where a statute confers priority on registration of an interest in land, it is fraud in

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equity for a person to defeat an unregistered equitable interest of which he or she has notice by effecting registration and thereby obtaining the legal estate.37 Fry J explained the basis of this jurisdiction in Kettlewell v Watson as follows:38 The Court will not allow a man to avail himself of a legal estate which he has recovered, or of the right which he may have under a registered conveyance, when he, at the time he took the legal estate, or at the time of the registration of the conveyance, knew a fact which made it unconscionable for him to take the legal estate or to effect the registration. That unconscionable act requires, of course, the coincidence in the same person of the knowledge and of the act, because, if A knows a thing, and B does something inconsistent with A’s knowledge, there is nothing fraudulent in the Act; but, if A knows something which renders it unconscionable for him to do the act, and does it, then there is fraud.

These principles do not apply to a transferee of Torrens system land, who by statute is not affected by actual or constructive notice of unregistered equitable interests in the land unless guilty of fraud, which generally requires proof of dishonesty.39 Mere notice of an unregistered equitable interest in the land cannot, therefore, constitute fraud for this purpose.

33

Organ v Sandwell [1921] VLR 622 at 630 per Irvine CJ.

34

This is based on the assumption that a secret trust is an express trust as opposed to a constructive trust. The basis for this assumption is the accepted understanding that constructive trusts are imposed irrespective of intention. By contrast, secret trusts are created pursuant to the actual or inferred intention of the settlor. Writing requirements do not apply to constructive trusts: see [18.25]. Therefore, were secret trusts actually a form of constructive trust, the relevant query would not be whether the statute is being used as an instrument of fraud, but whether the defendant has unconscionably denied the plaintiff a beneficial interest in the property in issue: see [38.175].

35

British Railways Board v Pickin [1974] AC 765 at 795 per Lord Wilberforce; Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 553 per Mahoney JA.

36

Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 at 164.

37

Le Neve v Le Neve (1747) Amb 436; 27 ER 291.

38

Kettlewell v Watson (1882) 21 Ch D 685 at 704 [revd on other grounds: Kettlewell v Watson (1884) 26 Ch D 501].

39

Land Titles Act 1925 (ACT), s 59; Real Property Act 1900 (NSW), s 43; Land Title Act 2000 (NT), s 188(2), 188(3); Land Title Act 1994 (Qld), s 184(2), 184(3); Real Property Act 1886 (SA), ss 186, 187; Land Titles Act 1980 (Tas), s 41; Transfer of Land Act 1958 (Vic), s 43; Transfer of Land Act 1893 (WA), s 134. As to the concept of “fraud” in this context see Bradbrook et al, [4.200]–​[4.245].

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Fraud and Mistake  Chapter  8

FRAUD ON A POWER [8.50] A power is an authority to dispose of real or personal property irrespective of any

existing estate or interest in it: see [16.175]. That person in whom that authority is vested is termed the “donee” of the power (or “appointor”). The persons to whom the property is disposed pursuant to this authority are the “objects” of the power (or “appointees”). The person who gives the donee the authority is called the “donor” or “settlor” of the power. The donee must exercise the power bona fide and not for a purpose or design other than within the intention of the donor, as evidenced by the instrument creating the power. Where the donee disposes of property (or appoints) contrary to this principle, equity holds the disposition (or appointment) bad as a “fraud on a power”. Here the term “fraud” does not necessarily denote conduct that could be viewed as dishonest or immoral. It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of, or not justified by, the instrument creating it.40 Relevance of intention [8.55] In Vatcher v Paull41 Lord Parker conceived that to be a fraud on a power “[i]‌t is

enough that the appointor’s purpose and intention is to secure a benefit for himself, or some other person not an object of the power”. This does not mean that the exercise of a power is bad whenever there is any intention to benefit a non-​object. Although equity’s intervention is not premised on proof of dishonest or immoral conduct, it does require a deliberate intention to benefit non-​objects of a power. It follows that “it is the appointor’s ‘real purpose and intention’ that must be looked for and the mere fact that strangers may benefit from the exercise of the power is not conclusive that the exercise was a fraud on the power”.42

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[8.60]  Equity requires, moreover, that the relevant intention or purpose of the appointor to

benefit herself or himself (or a stranger) be a dominant or primary one, that is, an actuating purpose without which the appointment would not have been made.43 The court looks to both the instrument itself and extrinsic material to determine whether the appointor would ever have exercised the power, had it not been for a purpose of benefiting herself or himself or non-​ objects, or whether such a purpose was merely incidental to a primary purpose of benefiting valid objects. In the former case the exercise is fraudulent; in the latter it is excessive. This is an important distinction, as a fraudulent exercise of a power is void whereas an excessive exercise can be severed leaving the power intact: see [8.75], [8.80]. For example, in Hooke v Robson44 H gave a power to his son, A, to appoint property by will among A’s children. By his

40

Vatcher v Paull [1915] AC 372 at 378 (PC); Re Dick [1953] All ER 559 at 563, 567 per Evershed MR; Re UEB Industries Ltd Pension Plan [1990] 3 NZLR 347 at 366 per Gault J; Dwyer v Ross (1992) 34 FCR 463 at 467 per Davies J; Re Burton (1994) 126 ALR 557 at 559–​560 per Davies J; Wong v Burt [2005] 1 NZLR 91 at [28] (CA); Kain v Hutton [2008] 3 NZLR 589 at [46] per Tipping J. See generally Devonshire, “Fraud on a Power: Patterns in the Mosaic” (2007) 22 NZULR 496; Devonshire, “Fraud on a Power: A Doctrine in Retreat” [2010] NZ L Rev 503.

41

Vatcher v Paull [1915] AC 372 at 378 (PC).

42

Re O’Brien [1974] 1 NZLR 58 at 68 per Roper J. See also Re Dick [1953] All ER 559 at 563 per Evershed MR; Wong v Burt [2005] 1 NZLR 91 at [30] (CA); Kain v Hutton [2008] 3 NZLR 589 at [49] per Tipping J (“An appointment which secures a benefit for a non-​object is not for that reason alone a fraud on the power. The focus should rather be on whether the purpose of the appointment was truly to benefit an object. If that is so, it does not matter that a non-​object also obtains a benefit”).

43

Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 93 per Griffith CJ and Barton J, at 97 per Rich J; Hooke v Robson [1962] NSWR 606 at 609 per Jacobs J.

44

Hooke v Robson [1962] NSWR 606.

[8.60]  275 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

will, A purported to exercise the power to transfer the property to his son absolutely, subject to and charged by him with the payment of A’s debts, funeral and testamentary expenses. Jacobs J could find no evidence supporting an inference that there was a primary or actuating purpose or intent to benefit the appointor by inclusion of a provision for payment of debts, such that it could be said that without it the appointment would not have been made. There was, as a result, an excessive, not fraudulent, exercise of the power, the excessive portion of which was severable. [8.65] The appointor’s intention is to be ascertained at the time the power is exercised.45

Evidence of the appointor’s state of mind need not, though, necessarily be contemporaneous with the date of its exercise, so long as that state of mind remains operative on its exercise.46 Where the appointor’s intention and purpose is shown by evidence at an earlier time, that intention and purpose is presumed to have continued.47 But heed must be paid to the following warning in regarding the sufficiency of evidence demonstrating intention:48 As you cannot enter into a man’s mind and so conjecture what were his motives, unless there are some acts from which we can draw a legitimate inference as to his motives … the Court will not control the exercise of the discretion. You may have a suspicion that a power has been exercised from a particular motive; but if it is a mere suspicion, and not a matter of clear, judicial inference, you must leave it as you find it.

At the same time, though, it has been observed that the donee’s approval and co-​operation may be a strong indication that what the donor is intending to effect is truly for the donee’s benefit.49 Anticipation or knowledge of the conduct of object(s) as intention

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[8.70]  That an appointor appoints in the hope that the object will dispose of the property so

as to benefit a non-​object will not invalidate the appointment. But appointment with knowledge that the object has already agreed to assign to non-​objects anything to which he or she might become entitled under the power is invalid as a fraud on the power. The same is the case where the appointment is made pursuant to a previous bargain struck between the appointor and object, whereby the object agreed to give part of the benefit appointed to the appointor or other non-​objects.50 Where an intention to benefit non-​objects can be established, it is not necessary that the object through which it is activated know of that ulterior motive. Where, say, an appointment is made to an object in the belief that the object will be subject to strong moral persuasion to benefit a non-​object, which persuasion the object would, in the appointor’s opinion, be unable to resist, the appointment is invalid even if the object is unaware of any ulterior motive.51 This

45

Re Marsden’s Trusts (1859) 28 LJ Ch 906; Re Wright [1920] 1 Ch 108.

46

Re Wright [1920] 1 Ch 108; Re Crawshay [1948] 1 All ER 107 at 114 per Cohen LJ.

47

Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 91 per Griffith CJ and Barton J.

48

Re Marsden’s Trusts (1859) 28 LJ Ch 906 at 908 per Kindersley VC.

49

Kain v Hutton [2008] 3 NZLR 589 at [21] per Blanchard J.

50

Re Crawshay [1948] 1 All ER 107; Kain v Hutton [2008] 3 NZLR 589 at [47] per Tipping J (describing this as a “clandestine excessive execution” of the power). However, such appointment will be valid where the appointor is the person entitled to take in default or where the latter is a party to it: Vatcher v Paull [1915] AC 372.

51

Re Crawshay [1948] 1 All ER 107 at 114 per Cohen LJ.

276 [8.65] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Fraud and Mistake  Chapter  8

occurred in Re Marsden’s Trusts,52 where the testatrix, desiring to benefit her husband, who was not an object of the power, appointed to her daughter, believing that her husband could effectively pressure the daughter to give effect to her mother’s desire. Severance of an excessive exercise of a power [8.75]  An appointment to objects intended by the appointor to benefit non-​objects is void in

toto unless it can cut down by severing the invalid excess.53 The defendant bears the onus in submissions of severability.54 Such appointment will be invalid unless the court can sever the intentions of the appointor and distinguish the good from the bad. To this end, the court seeks to distinguish the quantum of benefit bona fide intended to be conferred on the object from that intended to be derived by the appointor or to be conferred on a non-​object.55 However, where the appointment is infected by fraud and, at the time of appointment, it is not possible to determine with certainty this quantum, the appointment is inseverable.56 [8.80]  That the appointor attaches conditions to be fulfilled by an appointee is not of itself

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sufficient to constitute a fraud on a power.57 The court may render a condition on which the power is to be exercised for the benefit of non-​objects void, whilst upholding the validity of the appointment to the object, if the latter can be said to be independent of the condition.58 The court must determine whether the condition in favour of benefiting non-​objects permeated the entire appointment.59 In Re Cohen60 an appointment was made to an object of the power (the appointor’s wife) on condition that she pay the appointor’s debts. As to whether the condition in favour of the appointor could be severed from the gift to the appointee so as to make the gift good, Joyce J held the appointment void in toto and inseverable because it could not be said that the gift or appointment was independent of the condition.61 The appointment would never have been made except for the full expectation of the payment of the appointor’s debts. Default, revocation and release of powers [8.85]  Because the donee of a power has no imperative duty to make an appointment

(see [16.185]), it has been said that the donee’s only duty is to those persons who take in default of appointment.62 What ensues is that an agreement to allow property to go in default of appointment to a person entitled, or a condition the non-​performance of which will leave the funds to go in default of appointment, is not a fraud on a power as neither defeats the donor’s primary intention.63 It also means that there can be no fraud on

52

Re Marsden’s Trusts (1859) 28 LJ Ch 906.

53

Churchill v Churchill (1867) LR 5 Eq 44.

54

Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 94 per Isaacs J.

55

Vatcher v Paull [1915] AC 372 at 379 (PC); Re Mahoney [1918] VLR 580 at 583 per Hood J.

56

Hooke v Robson [1962] NSWR 606 at 608–​609 per Jacobs J.

57

Re Burton’s Settlements [1955] 1 Ch 82.

58

Re Holland [1914] 2 Ch 595 at 601 per Sargant J.

59

Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84 at 94 per Isaacs J.

60

Re Cohen [1911] 1 Ch 37.

61

Re Cohen [1911] 1 Ch 37 at 41.

62

Re Somes [1896] 1 Ch 250 at 255 per Chitty J; Re Greaves [1954] Ch 434 at 446–​447 (CA).

63

Vatcher v Paull [1915] AC 372 at 379 (PC).

[8.85]  277 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

a power action in relation to release of a power, or in the revocation of the exercise of a power.64

INNOCENT MISREPRESENTATION Equitable relief [8.90]  Both the common law and equity countenanced the rescission of a contract procured

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by fraudulent misrepresentation. A fraudulent misrepresentation is “a false representation … made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false”.65 But as rescission at common law did not lie for innocent misrepresentation, absent a total failure of consideration a person induced to enter a contract by an innocent misrepresentation had no remedy at law.66 Here recourse could be had only to equity, which provided relief activated by the concept of equitable fraud.67 Equity did not allow a person to benefit from a false representation that induced entry into a contract that the representee may not otherwise have entered. The classic judicial statement is that of Sir George Jessel MR in Redgrave v Hurd:68 According to the decisions of Courts of Equity it was not necessary, in order to set aside a contract obtained by material false misrepresentation, to prove that the party who obtained it knew at the time when the representation was made that it was false. It was put in either of two ways either of which was sufficient. One way of putting the case was: “A man is not to be allowed to get a benefit from a statement which he now admits to be false. He is not allowed to say, for the purpose of civil jurisdiction, that when he made it he did not know it to be false; he ought to have found that out before he made it.” The other way of putting it was this: “Even assuming that moral fraud must be shewn in order to set aside a contract, you have it where a man, having obtained a beneficial contract by a statement which he now knows to be false, insists on keeping that contract. To do so is a moral delinquency: no man ought to seek to take advantage of his own false statements.” The rule in equity was settled, and it does not matter on which of the two grounds it was rested.

In equity the representee must prove that the false statement induced her or his entry into the contract and that the representor intended the representee to so act.69 There is no need to establish that the representation is the ground on which the transaction took place; that it was a factor that induced the contract is sufficient. Where the representee made up her or his mind to act before the representation is made, the latter cannot be said to have induced the representee to act. Even in this case, though, there may be liability based on the representation having induced the representee to persevere in a decision already reached.70 Despite statements by both judges and commentators that an innocent misrepresentation must be “material” to attract equity’s intervention,71 the modern approach locates materiality 64

Re Greaves [1954] Ch 434 at 447–​449 (CA) (but see limitations thereon at 449–​450).

65

Derry v Peek (1889) 14 App Cas 337 at 374 per Lord Herschell.

66

Bell v Lever Bros Ltd [1932] AC 161 at 220 per Lord Atkin.

67

Nocton v Lord Ashburton [1914] AC 932 at 955 per Lord Haldane LC; Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 at 709 (FC(FCA)).

68

Redgrave v Hurd (1881) 20 Ch D 1 at 12–​13.

69

Savill v NZI Finance Ltd [1990] 3 NZLR 135 at 145 per Hardie Boys J.  These concepts apply equally to fraudulent misrepresentation.

70

Australian Steel & Mining Corporation Pty Ltd v Corben [1974] 2 NSWLR 202 at 207, 209 per Hutley JA.

71

Smith v Chadwick (1882) 20 Ch D 27 at 44–​45 per Jessel MR.

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Fraud and Mistake  Chapter  8

as a factor relevant to the issue of inducement, not distinct from it. The relevant question is: “Was the representation in the mind of the plaintiff so material that it was to her or him a real inducement?”72 The main issues relating to rescission for innocent misrepresentation, namely the grounds for rescission and the bars to it, are discussed separately under the heading of rescission (see Ch 35). Statutory intervention —​misleading and deceptive conduct

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[8.95]  The former s 52(1) of the Trade Practices Act 1974 (Cth), and its current equivalent

found in s 18(1) of the Australian Consumer Law,73 which prohibits “conduct” “in trade or commerce” that is “misleading or deceptive or likely to mislead or deceive”, has served to supersede much of the scope for the operation of the general law of innocent misrepresentation.74 This provision is designed to protect the public and “ensure that in trade or commerce persons conduct themselves honestly and truthfully”.75 This, coupled with its broad wording, has led courts to decree that it should be “construed so as to give the fullest relief which the fair meaning of its language will allow”.76 Its main value, beyond avoiding various limitations on common law misrepresentation, is as a “passport to … extensive relief”,77 opening the door to a “remedial smorgasbord”78 found principally in Ch 5 of the Law. Remedies include injunctions (s 232), orders for the recovery of the amount of loss or damage suffered from the contravention (s 236), and a wide range of orders on the application of a person who, as a result of contravening conduct, has suffered, or is likely to suffer, loss or damage (ss 237–​245). The latter include orders declaring a contract void in whole or in part, orders varying or refusing to enforce any or all contractual provisions, orders for the refund of moneys or the return of property, and orders requiring the payment of losses or damages sustained by reason of the conduct proscribed. Importantly, the statutorily prescribed remedial responses rest upon the exercise of a properly construed statutory discretion. It follows that the amount recoverable pursuant to an order is not limited by drawing an analogy with the law of contract, tort or equitable remedies, though they remain of assistance.79 The general law bars to rescission (see [35.75]–​[35.110]) do not restrict the jurisdiction;80 nor do common law principles relating to

72

Australian Steel & Mining Corporation Pty Ltd v Corben [1974] 2 NSWLR 202 at 207–​208 per Hutley JA. See also Nicholas v Thompson [1924] VLR 554 at 564–​566 per Cussen ACJ; Savill v NZI Finance Ltd [1990] 3 NZLR 135 at 145 per Hardie Boys J.

73

The Australian Consumer Law is found in Competition and Consumer Act 2010 (Cth), Sch 2.

74

Although the Australian Consumer Law (and the former Trade Practices Act 1974 (Cth)) contains other provisions that supplement the general law of misrepresentation (for example, s 29  —​false representations, s 32(1)  —​offering gifts and prizes with the intention of not providing them, s 34 —​misleading conduct in relation to services), s 18(1) is unique in that its contravention cannot attract a fine. This makes s 18(1) the most apposite statutory equivalent to the general law action for innocent misrepresentation. Moreover, its broad wording renders it more likely to be relied on by persons induced by innocent misrepresentations than other more specific provisions.

75

Mikaelian v Commonwealth Scientific and Industrial Research Organisation (1999) 163 ALR 172 at 190 per Hill J.

76

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 114 ALR 355 at 387 (FC(FCA)).

77

Farrow Mortgage Services Pty Ltd (in liq) v Edgar (1993) 114 ALR 1 at 6 (FC(FCA)).

78

Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 at 366 per Mason P.

79

Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 503 per Gaudron J, at 510 per McHugh, Hayne and Callinan JJ, at 529 per Gummow J; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 at [44] (FC).

80

Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 505 per Gaudron J, at 535 per Gummow J.

[8.95]  279 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

traditional causes of action, such as, say, foreseeability, contributory negligence or contribution between tortfeasors.81 The considerable law on the meaning and application of s 18(1) of the Australian Consumer Law (and its precursor) and its attendant remedial provisions lies beyond the scope of this text, for which specialist works ought to be consulted.82

MISTAKE [8.100] Equity’s jurisdiction to relieve for mistake includes the rectification of documents

to conform them to the true agreement of the parties, where the writing fails to express their antecedent agreement accurately: see [37.65]–​[37.135]. Mistake may also provide a ground for refusing specific performance: see [33.170]. In these two contexts equity’s role is discussed elsewhere because it relates to specific equitable remedies. In this chapter the focus is equity’s jurisdiction to order the recovery of amounts paid under mistake, and to grant relief from contracts contaminated by mistake. Recovery of amounts paid under mistake

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[8.105]  Traditionally the legal consequence of moneys paid under mistake rested on whether

the mistake was one of fact or one of law. As to the former, the general principle was that the payer retained an equitable property in the money, via a form of trust, which subjected the conscience of the payee to a fiduciary duty to respect the payer’s proprietary right83 (albeit, according to subsequent case law, arising only upon the payee discovering the mistake).84 Payments made under mistakes of law, on the other hand, could not be recovered because every person was presumed to know the law.85 The artificiality of the distinction between mistakes of fact and those of law —​leading to potentially capricious results, and a judicial tendency to manipulate the distinction to secure a just outcome —​and the numerous exceptions to it, prompted commentators86 and law reform bodies87 to call for its abolition. It was difficult to appreciate, moreover, why the notion that all are presumed to know the law should apply only to the payer and not the payee, especially as this allowed the payee to be unjustly enriched at the payer’s expense.88

81

Goldsbro v Walker [1993] 1 NZLR 394 at 403–​404 per Richardson J; Henville v Walker (2001) 206 CLR 459 at 482 per Gaudron J, at 505 per McHugh J, at 510 per Hayne J.

82

See generally Lockhart, The Law of Misleading or Deceptive Conduct (5th ed, LexisNexis Butterworths, 2018).

83

Barclays Bank Ltd v W J Simms Son & Cooke (Southern) Ltd [1980] QB 677 at 695 per Goff J; Chase Manhattan Bank NA v Israel-​British Bank (London) Ltd [1981] 1 Ch 105 at 119 per Goulding J.

84

Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 704–​706, 714–​715 per Lord Browne-​Wilkinson; Papamichael v National Westminster Bank plc [2003] 1 Lloyd’s Rep 341 at [224]–​[228] per Judge Chambers QC; Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429 at [40]–​[43] per White J; Westpac Banking Corporation v Ollis [2007] NSWSC 956 at [24], [25] per Einstein J.

85

Bilbie v Lumley (1802) 2 East 469; 102 ER 448; Kiriri Cotton Co Ltd v Dewani [1960] AC 192 at 204–​205 per Lord Denning.

86

See, for example, Birks, An Introduction to the Law of Restitution (Clarendon Press, 1989), pp 166–​167.

87

See, for example, Law Reform Committee of South Australia, Report Relating to the Irrecoverability of Benefits Obtained by Reason of Mistake of Law (No 84, 1984); New South Wales Law Reform Commission, Restitution of Benefits Conferred under Mistake of Law (No 53, 1987); Law Reform Commission of British Columbia, Report on Benefits Conferred Under a Mistake of Law (No 51, 1981); Law Commission, Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (No 227, 1994).

88

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 405–​407 per Lord Hope.

280 [8.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Fraud and Mistake  Chapter  8

The High Court of Australia, following the Supreme Court of Canada’s lead in Air Canada v British Columbia,89 responded to this criticism in David Securities Pty Ltd v Commonwealth Bank of Australia90 by ruling that “the rule precluding recovery of moneys paid under a mistake of law should be held not to form part of the law in Australia”. The House of Lords in Kleinwort Benson Ltd v Lincoln City Council91 followed suit in holding that “the mistake of law rule no longer forms part of English law”. Western Australia and New Zealand had earlier enacted legislation permitting recovery in such cases: see [8.140]. [8.110]  As to the basis for judicial intervention, the High Court again followed the Canadian

approach, grounding the relevant principle in “unjust enrichment” in respect all mistakes. To this end it observed:92

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[T]‌he payer will be entitled prima facie to recover moneys paid under a mistake if it appears that the moneys were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys or that the payee was legally entitled to payment of the moneys. Such a mistake would be causative of the payment … [I]t is not legitimate to determine whether an enrichment is unjust by reference to some subjective evaluation of what is fair or unconscionable. Instead, recovery depends upon the existence of a qualifying or vitiating factor such as mistake, duress or illegality … As La Forest J stated in Air Canada v British Columbia the two species of mistake (ie, fact and law) should be considered as factors which can make an enrichment at the plaintiff’s expense “unjust” or “unjustified”.

So if a payment would have been made notwithstanding that the payer knew the true position, there is no unjust enrichment. A payment is not the result of an operative mistake if the payer chooses to pay despite a belief that a particular law or contractual provision requiring payment is, or may be, invalid, or if the payer is prepared to pay irrespective of the validity or invalidity of the obligation rather than contesting the claim for payment.93 This general direction of the law obviates a need to resort to equity, and to distinguish legal from equitable interests, as a vehicle for securing relief. As noted earlier, an alternative analysis, sourced from equity, is to construe the payee of a mistake payment as holding the money on a form of institutional trust, most likely a constructive trust, for the payer once the payee’s conscience is effected by knowledge of the mistake.94 Prior to the discovery of the mistake, it is difficult to cast on the payee any liability in equity, as to do so would in effect make liability 89

Air Canada v British Columbia (1989) 59 DLR (4th) 161 (La Forest J describing the distinction between mistake of fact and mistake of law as “a fluttering, shadowy will-​o’-​the-​wisp”: at 191).

90

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 376 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ.

91

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 375 per Lord Goff. See also at 398–​401 per Lord Hoffmann, at 405–​407 per Lord Hope. Even the dissentients, Lords Browne-​Wilkinson (at 357–​364) and Lloyd (at 397–​398), agreed that payments under mistake of law should be recoverable, but considered that Parliament should effect any change given the retrospective nature of judicial dispensation of the law. See also Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2007] 1 AC 558 (ruling that at common law a taxpayer who wrongly pays tax as a result of a mistake of law is entitled to a restitutionary cause of action against the revenue).

92

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 378, 379 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ (see Bryan, “Mistaken Payments and the Law of Unjust Enrichment:  David Securities Pty Ltd v Commonwealth Bank of Australia” (1993) 15 Syd L Rev 461; Rickett, “Banks and the Recovery of Mistaken Payments” (1994) 16 NZULR 105). See also Hydro Electric Commission of Nepean v Ontario Hydro (1982) 132 DLR (3d) 193 at 205 per Dickson J; Griffiths v Commonwealth Bank of Australia (1994) 123 ALR 111 at 122–​124 per Lee J.

93

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 411 per Lord Hope.

94

Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 704–​706, 714–​715 per Lord Browne-​Wilkinson; Papamichael v National Westminster Bank plc [2003] 1 Lloyd’s Rep 341 at [224]–​[228] per Judge Chambers QC; Wambo Coal Pty Ltd v Ariff (2007) 63 ACSR 429 at [40]–​[43] per White J; Westpac Banking Corporation v Ollis [2007] NSWSC 956 at [24], [25] per Einstein J. Cf Opus Productions Pty Ltd v Popwing Pty Ltd (unreported, SC(NSW),

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Equity and Trusts in Australia

strict. At least in the absence of some pre-​existing trust or fiduciary duty, responsibility in equity is ordinarily premised on a fault element that pricks the conscience. Any equitable interest in this context, of course, will yield to a bona fide purchaser for value without notice, and is subject to the defences (such as delay) and restrictions (such as innocent third party interests) that inform the exercise of equitable relief generally. The action need not go against property in this regard; personal liability can accrue where it is more appropriate, such as where the fund, or its product, no longer exists.

Defences to claims for recovery [8.115] In David Securities95 the court noted that acceptance of the principle that payments

under a mistake of law should be prima facie recoverable in the same way as those made under mistake of fact —​as opposed to being based on a fault element in equity —​dictated the need for a defence of change of position to ensure that the payee’s enrichment is prevented only in circumstances where it would be unjust. Change of position as a defence supplanted the earlier curial approach, one that viewed the defence in terms of a common law estoppel by representation.96 The judicial shift here was due in part to the fact that relief under estoppel by representation was “all or nothing” —​it would either not operate, or instead operate as a complete defence, thus potentially giving the payee a windfall: see [10.50]. The rationale for the change of position defence, it has been said, “lies in the inherent unfairness of requiring a recipient to make restitution where the recipient has received the payment in good faith and has irreversibly and materially altered his or her position, on the faith of the receipt, to his or her detriment”.97

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[8.120]  Yet the Australian development of equitable estoppel —​grounded in proof of uncon-

scionability and allowing relief according to the minimum equity to do justice —​arguably creates scope for an estoppel-​type defence premised on unconscionable conduct (see Ch 10). Ironically it was English judges —​who have been circumscribed in recognising any general concept of estoppel by conduct based in unconscionability —​that took the lead in this respect, countenancing that equitable estoppel may provide a useful defence to a claim for recovery of money paid under mistake.98 The English Court of Appeal phrased the relevant test in terms of “whether it would be unconscionable and inequitable for the recipient of the moneys

Santow J, 28 February 1995), at 12–​13 (who held that moneys paid under a mistake of fact could be recovered by way of a remedial constructive trust). 95

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 385 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ. See also Lipkin Gorman (a firm) v Karpnale Ltd [1991] 2 AC 548 at 579–​580 per Lord Goff (who held “change of position” to be a defence to a restitutionary claim for repayment of money paid under a mistake of fact to the extent that it would be an injustice if the payee were called upon to repay or to repay in full); Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 412–​413 per Lord Hope; Palmer v Blue Circle Southern Cement Ltd (1999) 48 NSWLR 318 at 322–​325 per Bell J; Philip Collins Ltd v Davis [2000] 3 All ER 808 at 826 per Jonathan Parker J; Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd (2008) 66 ACSR 594 at [20] per Pullin JA. As to the change of position defence generally see Bant, The Change of Position Defence (Hart Publishing, 2009).

96

See, for example, Avon County Council v Howlett [1983] 1 WLR 605 at 611–​612 per Eveleigh LJ, at 620 per Slade LJ. Cf Taylor, “The Role of Estoppel as a Defence to Claims in Unjust Enrichment” (2003) 9 Auck ULR 1208 (who argues that estoppel by representation retains an important continuing role in the law of unjust enrichment).

97

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Company Ltd (2008) 66 ACSR 594 at [201] per Buss JA.

98

Scottish Equitable plc v Derby [2001] 3 All ER 818 at 831 per Robert Walker LJ; National Westminster Bank plc v Somer International (UK) Ltd [2002] QB 1286 at [39]–​[47] per Potter LJ, at [59]–​[61] per Clarke LJ, at [65]–​[67] per Peter Gibson LJ; Pitt v Holt [2013] 2 AC 108 at [128] per Lord Walker. See Fung and Ho, “Establishing Estoppel After the Recognition of Change of Position” [2001] RLR 52; Key, “Estoppel by Representation as a Defence to Restitution: The Exception Proves the Rule?” [2001] CLJ 465.

282 [8.115] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

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Fraud and Mistake  Chapter  8

mistakenly paid to retain the moneys having regard to what the recipient did in reliance on the representation made to him”.99 English courts, in any case, might accept some confluence between notions of unjust enrichment and unconscionable conduct,100 albeit not under the guise of mere inquiry into fairness.101 What is clear is that, however the relevant inquiry is phrased, proof of dishonesty is not required.102 As a result of the opinions expressed by members of the High Court in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd,103 there is some indication that Australian law may be heading in a broadly similar direction. French CJ stated that whether or not the defence of change of position is available “depends upon whether it would be inequitable for the recipient to refuse to repay the money”104 and that the defence should be capable of “practical application”.105 The joint judgment of Hayne, Crennan, Kiefel, Bell and Keane JJ elaborated these points by locating an inquiry into change of position in the mistaken payment scenario against the backdrop of equity’s jurisdiction to relieve against the detriment “that would enure to the disadvantage of a person who has been induced to change his or her position if the state of affairs so brought about were to be altered by the reversal of the assumption on which the change of position occurred”.106 This “accords with the understanding of detrimental reliance sufficient to ground an estoppel”, said their Honours, before locating both estoppel and the defence as “grounded in that body of equitable doctrine that prevents the unconscientious assertion of what are said to be legal rights”.107 What this dictated, they concluded, was that in the context of mistaken payments, “the question is whether it would be unconscionable for a recipient who has changed its position on the faith of the receipt to be required to repay”.108 Gageler J, in a separate judgment, was even more explicit in placing change of position under the estoppel umbrella, informed by the development in Australia of a substantive doctrine of estoppel not hamstrung by an “all or nothing” approach to relief but capable of delivering relief proportional to measurable detriment (see [10.230]–​[10.260]).109 His Honour explained the point as follows:110

99

National Westminster Bank plc v Somer International (UK) Ltd [2002] QB 1286 at [67] per Peter Gibson LJ. Cf Clancy v Salienta Pty Ltd (2000) 11 BPR 20,425 at [238] per Giles JA (“The relationship between the emerging law of restitution and equitable intervention on grounds of unconscionability is not settled … but they have much in common”); Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at 555 per Gummow J; McConvill and Bagaric, “The Yoking of Unconscionability and Unjust Enrichment in Australia” (2002) 7 Deakin L Rev 225.

100

See, for example, Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985 at [147]–​[153] per Clarke LJ, at [189]–​[192] per Sedley LJ (who seemed to assimilate the “unjust” aspect of enrichment with unconscionable conduct).

101

Investment Trust Companies v Revenue and Customs Commissioners [2018] AC 275 at [39] per Lord Reed (“A claim based on unjust enrichment does not create a judicial licence to meet the perceived requirements of fairness on a case-​by-​case basis”).

102

This aligns the principles for recovery of money paid under mistake with those applicable to recipient liability (as to which see [38.100]–​[38.125]): Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985 at [154] per Clarke LJ, at [189] per Sedley LJ.

103

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560. See Boadle, “Conscience and Unjust Enrichment” (2015) 89 ALJ 641 (who, as a consequence of the judgment, contends that principled conscience forms part of the law of unjust enrichment).

104

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [27] (emphasis supplied).

105

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [28].

106

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [84].

107

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [85], [86].

108

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [88].

109

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [152]–​[154].

110

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 at [155].

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Equity and Trusts in Australia

There is much to be said for treating the defence of change of position as there articulated as a particular application of that doctrine. The doctrine has always been recognised to operate as a defence to a common law action for money had and received although, for so long as the action lay for money paid under a mistake of fact but not for money paid under a mistake of law, it was understandable that it would be thought appropriate that it be constrained only to operate where there was a representation on the part of the payer. The doctrine is itself founded on notions of good conscience indistinguishable in concept from those underlying the law of unjust enrichment. In the flexible form in which it has developed in Australia, the doctrine provides a principled basis for determining circumstances in which it would be inequitable or unjust to require the innocent recipient of a mistaken payment to make restitution or full restitution. The doctrine employs established concepts capable of predictable application. Treating the defence of change of position as a particular application of it would avoid both the uncertainty of defining a separate content for the change of position defence and the complication of attempting then to determine whether, and if so how, circumstances giving rise to the defence might separately give rise to an estoppel.

These remarks represent, it is argued, a welcome convergence (or even fusion) of doctrine at common law and equity (which stalled vis-​à-​vis estoppel: see [10.80]–​[10.100]), and a corresponding bucking of the (questionable) trend in proprietary estoppel cases to shelve direct inquiry into proportionality (see [10.230]–​[10.260]). Yet it remains to see the extent to which the elements of the law of estoppel necessarily translate in their entirely within the mistaken payment scenario.

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[8.125] In Kleinwort Benson Ltd v Lincoln City Council111 Lord Goff remarked that the law

must evolve other defences that, together with the defence of change of position, “provide protection where appropriate for recipients of money paid under a mistake of law in those cases in which justice or policy does not require them to refund the money”. Yet the nature and scope of defences other than change of position are unclear, especially in the Australian context in view of the High Court’s focus on change of position in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd. Yet a defence that has received some judicial approval is where the money paid under mistake was paid as, or as part of, a compromise. Where a claim is satisfied by accord and satisfaction, a payment made in satisfaction of an obligation created by the accord is unaffected by any mistake as to the validity of the compromise.112 This defence is based, at least in part, on the public policy recognising the need to preserve the validity of compromises freely entered into with advice. In Brennan v Bolt Burdon (a firm),113 for instance, a claimant who compromised an action relying on the law as it was understood to be, which understanding was changed by judicial decision, was not permitted to withdraw the offer of compromise. Bodey J reasoned as follows:114 So important is the principle of seeking to uphold contracts of compromise that in my view the court should not permit them to be reopened for mistake of law created by the retrospective impact of the declaratory theory of judicial decisions except where, for some truly exceptional reason, justice very clearly demands.

111

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 373.

112

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 395 per Brennan J; Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 412–​413 per Lord Hope.

113

Brennan v Bolt Burdon (a firm) [2005] QB 303.

114

Brennan v Bolt Burdon (a firm) [2005] QB 303 at [51]. See also at [23] per Kay LJ, at [64] per Sedley LJ (“The law must be taken to have been what it was only later declared to be, but the putative mistake created by this shift cannot be allowed to undo a compromise of litigation entered into in the knowledge both of how the law now stood and of the fact —​for it is always a fact —​that it might not remain so”).

284 [8.125] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Fraud and Mistake  Chapter  8

[8.130]  Other suggested defences have met with less judicial enthusiasm. First, the argument that a payer who has passed on the burden of a tax later found not to be payable should not be entitled to recover that payment because the payee’s enrichment is not at the payer’s expense115 was rejected by Mason CJ in Commissioner of State Revenue (Victoria) v Royal Insurance Australia Ltd116 on the basis that the payee had nonetheless been unjustly enriched. Secondly, a defence based on a “settled understanding of the law” when the payment was made was rejected by the House of Lords in Kleinwort Benson Ltd v Lincoln City Council117 on the ground that it is based on the theory that such a payment is not made under a mistake at all, and that, in any event, it may be difficult to ascertain exactly what a “settled understanding of the law” is or was. Thirdly, Brennan J’s suggestion in David Securities118 that a payee’s honest belief that he or she was entitled to receive and retain the money or property should be a defence to its recovery has not garnered support from other Australian judges, and has been rejected by the House of Lords on the basis that it would serve to exclude the right of recovery in a large proportion of cases.119

Enforcement of money claims in aid of equitable rights [8.135] Mistake of law is no barrier to enforcing money claims made in equity in aid of

equitable rights or titles.120 For example, a trustee or executor who by mistake overpays a beneficiary may recover the overpayment from the overpaid beneficiary’s share remaining in the trust estate or from future receipts of income to which that beneficiary would otherwise be entitled: see [22.225]. Similarly, moneys coming into the hands of an officer of a court of equity, namely a receiver or trustee-​in-​bankruptcy, through mistake of law will be the subject of an order for repayment.121

Legislative initiatives —​Western Australia and New Zealand

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[8.140] Statute in Western Australia and New Zealand provides that “where relief in

respect of any payment that has been made under mistake is sought in any Court … and that relief could be granted if that mistake was wholly one of fact, that relief shall not be denied by reason only that the mistake is one of law whether or not it is in any degree also one of fact”.122 Relief in respect of any payment made under mistake (whether of fact or law) is denied “if the person from whom relief is sought received the payment in good faith and has so altered his position in reliance on the validity of the payment that in the opinion of the Court, having regard to all possible implications in respect of other persons, it is inequitable to grant relief, or to grant relief in full”.123 In Westpac Banking Corporation

115

See Shannon v Hughes & Co (1937) 109 SW (2d) 1174; Air Canada v British Columbia (1989) 59 DLR (4th) 161 at 193–​194 per La Forest J. Contra at 169–​170 per Wilson J.

116

Commissioner of State Revenue (Victoria) v Royal Insurance Australia Ltd (1994) 182 CLR 51 at 73–​78.

117

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 382–​384 per Lord Goff, at 400–​401 per Lord Hoffmann, at 414–​415 per Lord Hope (cf Hedley, “Restitution —​Mistake of Law —​Reform in Haste, Repent at Leisure” [1999] CLJ 21 at 22–​23).

118

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 399.

119

Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 384–​385 per Lord Goff, at 413 per Lord Hope. See also Niru Battery Manufacturing Co v Milestone Trading Ltd [2004] QB 985 at [159] per Clarke LJ.

120

Ministry of Health v Simpson [1951] AC 251 at 269–​270 per Lord Simonds (as to which see [24.130]).

121

Re Carnac (1885) 16 QBD 308 at 312–​313 per Lord Esher MR.

122

Property Law Act 1969 (WA), s 124(1); Judicature Act 1908 (NZ), s 94A(1).

123

Property Law Act 1969 (WA), s 125(1); Judicature Act 1908 (NZ), s 94B (emphasis supplied). See Goss v Chilcott [1996] 3 NZLR 385 at 391–​392 per Lord Goff; National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd

[8.140]  285 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

v Rae,124 for example, the plaintiff bank authorised the acceptance of a draft under the mistaken belief that the defendant’s signature was in fact the signature of its customer. Holland J held that, as the bank had not intended to pay the defendant, it could recover the payment.125 Nor had the defendant altered his position such as to make it inequitable to grant the bank relief in that, although he had applied the moneys to pay his debts, his net worth had not altered. Relief is also denied under the legislation in respect of a payment made at a time when the law requires or allows, or is “commonly understood to require or allow”, it to be made or enforced “by reason only that the law is subsequently changed or shown not to have been as it was commonly understood to be at the time of the payment”.126 The difficulty in precisely defining the “common understanding of the law” has made law reform bodies in other jurisdictions reticent to endorse it as a suitable statutory defence.127 Contracts contaminated by mistake [8.145] Before turning to the rules of mistake in contract, whether at common law or in

equity, it must first be determined whether the contract itself, by its terms express or implied, provides who bears the risk of the relevant mistake.128 Only if the contract is silent on this point is there scope for invoking the relevant principles governing the impact of mistake.129 These principles may differ according to whether the mistake is mutual, common or unilateral, as discussed below.

Mutual mistake

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[8.150]  A mutual mistake exists where the parties to an agreement misunderstand one anoth-

er’s intentions and are at cross-​purposes. For example, A agrees to sell products in warehouse X to B (believing that this is what B intends to buy) whereas B believes that the products he intends to buy are contained in warehouse Z (believing that this is what A intends to sell). Both A and B are mistaken and their mistakes differ too. As one party intends to make a contract on one set of terms, and the other intends to make a contract on another, there is arguably no [1999] 2 NZLR 211 at 227 per Thomas J, at 231–​232 per Tipping J; Saunders & Co (a firm) v Hague [2004] 2 NZLR 475 at 491–​499 per Chisholm J; ASB Securities Ltd v Guerts [2005] 1 NZLR 484 at 497–​499 per Venning J; Bant and Creighton, “The Statutory Change of Position Defences in Western Australia” (2003) 31 UWALR 47. 124

Westpac Banking Corporation v Rae [1992] 1 NZLR 338 (see Scott, “Mistaken Payment of Another’s Debt —​Is there an Equitable Solution? A Reflection on Westpac Banking Corporation v Rae” [1993] NZRLR 232). See also Farmers’ Mutual Insurance Ltd v QBE Insurance International Ltd [1993] 3 NZLR 305 at 315–​316 per Barker J; National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1997] 1 NZLR 724 at 732–​733 per Gallen J.

125

Westpac Banking Corporation v Rae [1992] 1 NZLR 338 at 343.

126

Property Law Act 1969 (WA), s 124(2); Judicature Act 1908 (NZ), s 94A(2).

127

See, for example, Law Reform Commission of British Columbia, Report on Benefits Conferred Under a Mistake of Law (No 51, 1981), p 72 (the New Zealand provision “goes far beyond what is required”); Law Reform Committee of South Australia, Report Relating to the Irrecoverability of Benefits Obtained by Reason of Mistake of Law (No 84, 1984), p 31. The English Law Commission attempted to improve the statute by referring to a “settled view of the law” that has been departed from by a subsequent judicial decision, although it is unclear how this necessarily avoids the uncertainty in issue: Restitution: Mistakes of Law and Ultra Vires Public Authority Receipts and Payments (No 227, 1994), para 5.13. Cf Law Reform Commission of New South Wales, which recommended the legislative adoption of a similar but not identical provision: Restitution of Benefits Conferred under Mistake of Law (No 53, 1987), pp 51–​56. See also Bell Bros Pty Ltd v Shire of Serpentine-​Jarrahdale [1969] WAR 155; Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 at 414–​415 per Lord Hope.

128

See, for example, Triple Seven Msn 27251 Ltd v Azman Air Services Ltd [2018] 4 WLR 97 at [91], [92] per Peter MacDonald Eggers QC.

129

Bell v Lever Bros Ltd [1932] AC 161 at 224 per Lord Atkin; Associated Japanese Bank (International) Ltd v Credit du Nord SA [1988] 3 All ER 902 at 912 per Steyn J.

286 [8.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Fraud and Mistake  Chapter  8

agreement and so no contract.130 As this limits the parties to remedies of a restitutionary kind, and adversely affects rights acquired innocently by third parties on the assumption that the contract was valid, courts are understandably reluctant to reach this conclusion.131 Where A behaves such that a reasonable person would believe A was assenting to the terms proposed by B, and upon that belief B enters into the contract, A is bound as if he or she had assented to B’s terms.132 To conclude otherwise is to risk fraudulent claims. As a consequence, equity will not, absent fraud (in a broad sense, including undue influence and unconscionable dealing) or misrepresentation, grant relief by rescission in these circumstances.133

Common mistake at law [8.155]  In a case of common mistake, both parties labour under the same misapprehension.

This is so where, for example, both parties mistakenly believe the vendor of land to be its owner whereas the land is in fact owned by a third party. The relevant legal principles discussed below, whether at common law or in equity, apply whether the mistake is of fact or of law.134

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[8.160]  The common law historically attached paramount importance to the observance of

contracts. For this reason, where the parties honestly complied with the essentials for the formation of a contract, courts would uphold rather than destroy agreement.135 But the common law could declare a contract void for a mistake regarding identity, or where a plea of non est factum (“it is not my deed”) could be established.136 It allowed a contract to be avoided, moreover, in the rare event that it was, on its proper construction, expressly or impliedly conditional on a “misapprehended state of affairs” existing at the time of performance.137 A related jurisdiction was assumed to grant relief for a mistake substantially shared by both parties, related to facts as they existed at the time the contract was made, that rendered the subject matter of the contract essentially and radically different from that which the parties believed to exist.138 Mistakes of this nature would operate to render the contract void ab initio. In more recent times Lord Phillips MR collapsed the relevant law into five prerequisites for common mistake to avoid a contract:139 (i) there must be a common assumption as to the existence of a state of affairs; (ii) there must be no warranty by either party that that state of affairs exists; (iii) the non-​existence of the state of affairs must not be attributable to the fault of either party; (iv) the non-​existence of the state of affairs must render performance of the contract impossible; (v) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.

130

See, for example, Babsari Pty Ltd v Wong [2000] 2 Qd R 576.

131

Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 13.

132

Smith v Hughes (1871) LR 6 QB 597 at 604 per Cockburn CJ, at 607 per Blackburn J.

133

Riverlate Properties Ltd v Paul [1975] Ch 133 at 140–​141 per Russell LJ.

134

Clasic International Pty Ltd v Lagos (2002) 60 NSWLR 241 at [42], [43] per Palmer J; Brennan v Bolt Burdon (a firm) [2005] QB 303 at [10] per Kay LJ, at [25], [26] per Bodey J.

135

Solle v Butcher [1950] 1 KB 671 at 691 per Denning LJ.

136

Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 14.

137

Bell v Lever Bros Ltd [1932] AC 161 at 225 per Lord Atkin; McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 409 per Dixon and Fullagar JJ.

138

Bell v Lever Bros Ltd [1932] AC 161 at 218, 224 per Lord Atkin; Ware v Johnson [1984] 2 NZLR 518 at 539 per Prichard J; Associated Japanese Bank (International) Ltd v Credit du Nord SA [1988] 3 All ER 902 at 912 per Steyn J.

139

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [76].

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Equity and Trusts in Australia

[8.165]  In the case in which his Lordship gave the above exposition, Great Peace Shipping

Ltd v Tsavliris Salvage (International) Ltd,140 the defendant undertook to charter the claimant’s vessel to provide salvage services for a stricken vessel. The parties contracted in the mistaken belief that the rescue vessel was much closer to the stricken vessel than proved to be the case. This led the defendant to cancel the agreement, and the claimant successfully sued for breach of contract. The English Court of Appeal found no basis to avoid the contract for mistake. It agreed with the trial judge that the mistake did not mean that the contract was essentially different from that to which the parties agreed. As it gave the defendant a right to cancel subject to liability to pay a “cancellation fee”, there was no injustice in the defendant being liable to pay that fee.141 The clear implication from the reasons, it has been suggested, is that “a commercial contract will not be upset where one or other party fails to address issues of risk allocation concerning reasonably foreseeable pre-​contract circumstances”.142 There is, to this end, general agreement in the case law that the common law’s willingness to intervene in cases of common mistake is most restrictive,143 arguably less common than instances of frustration,144 which are themselves hardly common.

Common mistake in equity [8.170]  The strictness of the common law in this respect led Denning LJ in Solle v Butcher145

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to rule that a contract is liable to be set aside in equity “if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault”. By clothing a mistake in equity, his Lordship opened the door to flexible and discretionary forms of relief. A contract affected by mistake in equity could, for instance, be set aside on terms. Similarly, conditions could be attached to orders for rescission or specific performance. The reasoning in Solle has been applied in both England146 and Australia.147 [8.175] Yet the English Court of Appeal in Great Peace Shipping Ltd v Tsavliris Salvage

(International) Ltd148 rejected Solle v Butcher, denying any doctrine of common mistake in equity that enables a court to intervene in circumstances where the mistake does not render the contract void at common law. Lord Phillips MR, who delivered the reasons of the court, held that prior to Bell v Lever Bros Ltd149 equity intervened only in circumstances where the common law would have ruled the contract void for mistake.150 Not only did equity lack any exclusive jurisdiction in this respect, in his Lordship’s opinion, it was unclear how Denning LJ’s requirement that the mistake be “fundamental” differed from the requirement proffered

140

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679.

141

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [162]–​[166].

142 Chandler, Devenney and Poole, “Common Mistake:  Theoretical Justification and Remedial Inflexibility” [2004] JBL 34 at  57–​58. 143

Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 15.

144

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [85].

145

Solle v Butcher [1950] 1 KB 671 at 693 (emphasis supplied).

146

See, for example, Grist v Bailey [1967] 1 Ch 532.

147

See, for example, Clasic International Pty Ltd v Lagos (2002) 60 NSWLR 241.

148

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679.

149

Bell v Lever Bros Ltd [1932] AC 161.

150

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [118]. See, for example, Cooper v Phibbs (1867) LR 2 HL 149.

288 [8.165] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Fraud and Mistake  Chapter  8

by Lord Atkin in Bell v Lever Bros of a mistake “as to some quality which makes the thing without the quality essentially different from the thing as it was believed to be”.151 Lord Phillips MR opined that none of the relatively few cases that had purported to follow Solle v Butcher assisted in making this distinction, making it untenable. His Lordship saw as the common element in these cases the effect of the mistake being to make the contract a bad bargain for one of the parties.152 That neither equity nor the common law recognised any jurisdiction to fix bad bargains meant that, according to the court, the Solle v Butcher line of cases purported to exercise a jurisdiction that did not (and should not) exist. This led him to conclude that “[i]‌f coherence is to be restored to this area of our law, it can only be by declaring that there is no jurisdiction to grant rescission of a contract on the ground of common mistake where that contract is valid and enforceable on ordinary principles of contract law”.153

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[8.180]  Yet Lord Phillips MR conceded that he understood why Bell v Lever Bros Ltd did not

find favour with Denning LJ, as an equitable jurisdiction to grant rescission on terms where a common fundamental mistake has induced a contract “gives greater flexibility than a doctrine of common law which holds the contract void in such circumstances”.154 This prompted him to call for legislation to give greater flexibility to the law of mistake than allowed by the common law. Legislation of this kind has existed for some time in New Zealand in the Contractual Mistakes Act 1977,155 which as from 1 September 2017, migrated to the Contract and Commercial Law Act 2017 (NZ), Pt 2, Subpart  2. Its express purpose is to mitigate the arbitrary effects of mistakes on contracts by conferring upon the court powers to grant relief in specified circumstances: s 21(1) (formerly s 4(1)). The Act, which provides a cause of action previously unknown to the law,156 confers on the court a discretion to make an order as it thinks just on such terms and conditions as it thinks fit: s 28(2), 28(5) (formerly s 7(3), 7(6)). Relief may be granted in respect of the three types of mistake catalogued in s 24(1) (a) (formerly s 6(1)(a)): a unilateral mistake; a mutual or common mistake;157 or where the applicant and at least one other party were each influenced in their respective decisions to enter into the contract by a different mistake about the same matter of fact or of law.158 Relief

151

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [131], referring to Bell v Lever Bros Ltd [1932] AC 161 at 218 (emphasis supplied).

152

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [155].

153

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [157]. See also Statoil ASA v Louis Dreyfus Energy Services LP [2008] 2 Lloyd’s Rep 685 at [105] per Aikens J (who disagreed with Andrew Smith J’s conclusion in Huyton SA v Distribuidora Internacional De Productos Agricolas SA de CV [2003] 2 Lloyd’s Rep 780 at [455] that there is an equitable jurisdiction to grant rescission of a contract where one party has made a unilateral mistake as to a fact or state of affairs which is the basis upon which the terms of the contract are agreed, but that assumption does not become a term of the contract; Aikens J opined that the Great Peace decision “strongly suggests that there is no such jurisdiction in the case of a unilateral mistake”, as if there is no such jurisdiction in the case of a common mistake, “I am unable to see how, in logic, one can devise a rationale for an equitable jurisdiction in the case of a unilateral mistake, at least where there has been no misrepresentation by the other party”).

154

Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679 at [161].

155

See McLauchlan, “Mistake of Identity after the Contractual Mistakes Act 1977” (1983) 10 NZULR 199; “Mistake as to Contractual Terms under the Contractual Mistakes Act 1977” (1986) 12 NZULR 123; Chen-​Wishart, “The Contractual Mistakes Act 1977 and Contract Formation” (1986) 6 Otago L Rev 334; Beck, “The New Zealand Contractual Mistakes Act: A Lesson in Legislation” [1987] LMCLQ 325.

156

Ware v Johnson [1984] 2 NZLR 518 at 539 per Prichard J.

157

See, for example, Ware v Johnson [1984] 2 NZLR 518; Paulger v Butland Industries Ltd [1989] 3 NZLR 549.

158

See, for example, Shivas v Bank of New Zealand [1990] 2 NZLR 327; National Bank of New Zealand Ltd v Murland [1991] 3 NZLR 86.

[8.180]  289 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

is denied where the mistake in issue relates to the interpretation of the contract:159 s 25 (formerly s 6(2)(a)).

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[8.185]  No equivalent Australian legislation exists. Like their English counterparts, Australian

courts have generally resisted any jurisdiction to fix bad bargains. Hence, it is unsurprising to find case authority, albeit inconclusive on the point, aligning with the position stated in Great Peace. In Svanosio v McNamara,160 for instance, Dixon CJ and Fullagar J found it “difficult to conceive of any circumstances in which equity could properly give relief by setting aside the contract unless there has been fraud or misrepresentation or a condition can be found express or implied in the contract”. More recently, the High Court has, in the context of moneys paid under mistake, remarked that the “extremely vague” notion of “fundamentality” means that it should not dictate the recoverability or otherwise of such payments.161 And in 2005 a Queensland Court of Appeal judge gave unqualified, albeit obiter, endorsement to the law as stated by Lord Phillips MR in Great Peace.162 This should not be read as denying that Australian law recognises a general equitable jurisdiction to rescind contracts contaminated by common mistake not void at law. Even in England, although Great Peace may no doubt “be applauded by practitioners who crave the predictability engendered by judicial commitment to … ‘sanctity of contract’ ”,163 and “may be no bad thing in the context of achieving commercial certainty and protecting third parties”,164 it does not necessarily enjoy the support of the entire English judiciary. Only two years before Great Peace, Sir Christopher Staughton in another English Court of Appeal decision saw it as “a matter of some satisfaction … that we can and do regard ourselves as bound by the decision in Solle v Butcher”, adding that Solle “has now stood for over 50 years”, “remains unchallenged in a higher court” and “can on occasion be the passport to a just result”.165 This has led at least one English commentator to remark that to undo 50 years of consistent, if sporadic, common law development should be a matter for Parliament or the House of Lords (now the Supreme Court).166 [8.190]  The decision in Great Peace may well have been heavily influenced by the fact that

the parties were commercial entities that the law might expect to take responsibility for the basis on which they contract.167 But to apply a similarly strict approach irrespective of context, including outside of the commercial arena, is to deny a main attribute of equitable doctrine,

159

See, for example, Mechenex Pacific Services Ltd v TCA Airconditioning (New Zealand) Ltd [1991] 2 NZLR 393.

160

Svanosio v McNamara (1956) 96 CLR 186 at 196. Earlier Dixon CJ and Fullagar J had opined that “there may be cases of mistake in which it would be so inequitable that a party should be held to his contract that equity would set it aside” but in the context of the paragraph in question, it is clear that what their Honours had in mind was mistake attached to fraud or misrepresentation rather than mistake in and of itself: at 196.

161

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 at 377–​378 per Mason CJ, Deane, Toohey, Gaudron and McHugh JJ.

162

Australia Estates Pty Ltd v Cairns City Council [2005] QCA 328 at [52] per Atkinson J, with whose analysis Jerrard JA broadly agreed. McMurdo P did not address Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679, as no common mistake was found on the facts.

163

McMeel, “ ‘Equitable’ Mistake Repudiated: The Demise of Solle v Butcher?” [2002] LMCLQ 449 at 449.

164

Chandler, Devenney and Poole, “Common Mistake: Theoretical Justification and Remedial Inflexibility” [2004] JBL 34 at 57.

165

West Sussex Properties Ltd v Chichester District Council [2000] NPC 74 at [42]. More recently, moreover, in purporting to apply Great Peace, an English judge has pursued an inquiry into “fundamentality” of the mistake: see Triple Seven Msn 27251 Ltd v Azman Air Services Ltd [2018] 4 WLR 97.

166

McMeel, “ ‘Equitable’ Mistake Repudiated: The Demise of Solle v Butcher?” [2002] LMCLQ 449 at 452.

167

See Cartwright, “Unilateral Mistake in the English Courts: Reasserting the Traditional Approach” [2009] SJLS 226.

290 [8.185] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Fraud and Mistake  Chapter  8

flexibility.168 This was the main reason the Singapore Court of Appeal opted not to follow Great Peace.169 A Canadian judge has voiced the view, to this end, that “[t]‌he loss of the flexibility needed to correct unjust results in widely diverse circumstances that would come from eliminating the equitable doctrine of common mistake would … be a step backward”.170 It also reduces the protection afforded to innocent third parties, as common law mistake renders the contract void, not voidable.171 From an Australian perspective, it overlooks the local courts’ willingness to resort to broader notions of unconscionability in equity to mitigate the rigours of the common law.172 The High Court in Taylor v Johnson173 identified unconscionable conduct as its basis for intervention in cases of unilateral mistake but in comments not expressly limited to mistakes of this kind.174 As the distinction between a common mistake and a unilateral mistake is not precise in all cases,175 to apply different law depending on how the mistake is characterised impedes legal consistency. This led Santow J in Pacer v Westpac Banking Corporation Ltd176 to give effect to a general equitable jurisdiction to set aside a conveyance or contract on the grounds of common mistake where it would be unconscionable for one party to enforce the agreement subject to the mistake. His Honour focused on substantive unconscionability in this regard, remarking as follows:177

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Substantive unconscionability is the basis of equity’s jurisdiction to relieve for common mistake. This is because in common mistake, procedural unconscionability is unlikely to be involved. By definition both parties are mistaken, though the fact that one may have contributed more than the other to the joint mistake may also have a bearing. Thus, generally unconscionability in common mistake consists, not in concealment actions by the unmistaken party preceding the contract, but rather the unconscionability of retaining a contractual benefit as a result of upholding an agreement which may never have been entered into, but for the mistake. The jurisdiction to set aside contracts on the basis of common mistake recognizes that Equity will intervene to prevent wrongful and undue advantage being taken by one mistaken party of the other, in holding that other to a bargain both mistakenly entered into.

According to his Honour, substantive unconscionability provides the element of “fraud” necessary to attract a right of rescission under equitable principles, an approach in line with the broader notion that equity does not permit a person to assert a contractual right where it

168

Pawlowski, “Common Mistake” (2002) 146 Sol J 1108 at 1110; Hare, “Inequitable Mistake” [2003] CLJ 29 at 31–​32. See further Tettenborn, “Agreements, Common Mistake and the Purpose of Contract” (2011) 27 JCL 91.

169

Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502 at [77].

170

Miller Paving Ltd v B Gottardo Construction Ltd (2007) 86 OR (3d) 161 at [26] per Goudge JA (CA(Ont)).

171

Hare, “Inequitable Mistake” [2003] CLJ 29 at 32.

172

See, for example, Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (discussed at [9.30]); Muschinski v Dodds (1985) 160 CLR 583 (discussed at [38.175]); Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (discussed at [10.315]).

173

Taylor v Johnson (1983) 151 CLR 422, discussed at [8.200].

174

See Greig and Davis, The Law of Contract (The Law Book Company Limited, 1987), p 918; Seddon, “Contract:  Mistake Mistake” (2006) 80 ALJ 92 at 93. Cf Australia Estates Pty Ltd v Cairns City Council [2005] QCA 328 at [52] per Atkinson J, who viewed Taylor v Johnson as the “high water mark for Solle v Butcher in the High Court”.

175

In cases of common mistake, it is not necessary that the shared or common mistake be of equal significance to both parties. Indeed, at the time of contracting the parties will almost certainly have not directed their minds equally to the matter in respect of which the mistake was made. While one party may have thought about the matter seriously and have been prepared to make an assumption (which has since proved to be mistaken), the other party may not have given it a passing thought. The dividing line between common mistake and unilateral mistake may therefore blur. See Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 14–​15.

176

Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 17.

177

Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 31 (paragraph break omitted).

[8.190]  291 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Equity and Trusts in Australia

would be unconscionable to do so.178 Santow J linked the “fundamentality” of the mistake from Solle v Butcher to a jurisdiction based on unconscionability by concluding that a mistake must be serious enough to warrant a conclusion that the party opposing relief would be acting unconscionably in seeking to uphold the transaction.179 His Honour found the relevant unconscionability in circumstances where A and B labour under a serious mistake that would result in B obtaining a substantially greater benefit under the contract than either party intended, which B insists on retaining by seeking to uphold the contract.180 [8.195]  In any event, Australian law recognises a specialised equitable jurisdiction to undo

a sale of land after conveyance in circumstances where there has been fraud, or where there is such a discrepancy between what has been sold and what has been conveyed that there is a total failure of consideration, or what amounts practically to a total failure of consideration.181 For example, in Svanosio v McNamara,182 a case involving the sale of land together with licensed hotel premises sited on the land, both parties mistakenly believed the premises to stand wholly on the land sold. The High Court held that, as the transfer of the licence was a principal part of the consideration, the contract could not be discharged for want of consideration.

Unilateral mistake [8.200] A mistake is unilateral where only one of the parties to a contract has a mistaken

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belief in respect of the basis on which he or she contracts. In Taylor v Johnson the High Court characterised the scope of the equitable jurisdiction to grant relief on the ground of unilateral mistake as follows:183 [A]‌party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.

Consistent with the above remarks, the case law on the availability of rescission for unilateral mistake targets essential or fundamental aspects of the contracts in question.184 A  mistake 178

Legione v Hateley (1983) 152 CLR 406 at 447 per Mason and Deane JJ.

179

Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 18.

180

Pacer v Westpac Banking Corporation Ltd (unreported, SC(NSW), Santow J, 2 August 1996), at 28.

181

Svanosio v McNamara (1956) 96 CLR 186 at 198–​199 per Dixon CJ and Fullagar J.

182

Svanosio v McNamara (1956) 96 CLR 186.

183

Taylor v Johnson (1983) 151 CLR 422 at 432 per Mason ACJ, Murphy and Deane JJ (emphasis supplied). The court (at 428–​429) grappled with the conflicting theories of the nature of the assent necessary to constitute a valid contract. Under the “subjective theory”, a contract is void if one party enters into it under a serious mistake as to the content or existence of a fundamental term and the other party has knowledge of that mistake: Smith v Hughes (1871) LR 6 QB 597 at 607 per Blackburn J, at 609 per Hannen J. Hence, there is no binding contract either at common law or in equity, equity following the law in this respect. The “objective theory” is that the law is concerned, not with the real intentions of the parties, but with the outward manifestations of those intentions. According to this theory, there is a contract that, in conformity with the common law, continues to be binding, unless and until it is avoided in accordance with equitable principles that take as their foundation a contract valid at common law but transform it so that it becomes voidable. The court found (at 429–​430) that the balance of authority, both judicial and academic, supported the objective theory. See Davis, “Taylor v Johnson: Unilateral Mistake in Australian Contract Law” (1985) 11 Mon ULR 65.

184

See, for example, Garrard v Frankel (1862) 30 Beav 445; 54 ER 961 (substantial mistake by a lessor as to the annual rent for a property); Harris v Pepperell (1867) LR 5 Eq 1 (mistake as to what land was included in a conveyance); Torrance v Bolton (1872) LR 8 Ch App 118 (mistaken belief that a contract was for the purchase of a freehold interest in land, not an equity of

292 [8.195] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:33.

Fraud and Mistake  Chapter  8

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in these circumstances renders the contract voidable at the instance of the party mistaken. The reason is that it is unfair for the mistaken party to be held to the written contract by the other party whose lack of precise knowledge of the first party’s actual mistake proceeds from wilful ignorance because, knowing or having reason to know that there is some mistake or misapprehension, he or she engages deliberately in a course of conduct designed to inhibit its discovery. Yet this may be stating the principle too narrowly, for there is authority that a court of equity will grant relief in respect of a contract mistakenly entered into by one party if the other party simply knows of that mistake, whether or not the latter party positively induced the mistake or prevented its discovery.185 If correct, this illustrates equity’s discretion to deny enforcement of a contract where to enforce it would be unconscionable in the broad sense.186 Taylor v Johnson involved the sale of adjoining pieces of land (totalling some 10 acres) for a total price of $15,000. The vendor refused to proceed on the ground that, at the time of signing, she believed the contract of sale to provide for a price of $15,000 per acre. The court found that the stipulation as to price was plainly a fundamental term of the contract. Moreover, the proper inference from the evidence was that the purchaser believed the vendor to be under some serious mistake or misapprehension about either the terms (the price) or subject matter (its value) of the relevant transaction, and deliberately set out to ensure that the vendor did not become aware of her mistake. Accordingly, the court upheld the New South Wales Court of Appeal’s decision to set aside the contract. If there is no such knowledge or awareness in the person seeking to enforce the contract, equity will not grant relief. In the words of Russell LJ in Riverlate Properties Ltd v Paul:187 If a man may be said to have been fortunate in obtaining a property at a bargain price, or on terms that it make it good bargain, because the other party unknown to him has made a miscalculation or other mistake, some high minded men might consider it appropriate that he should agree to a fresh bargain to cure the miscalculation or mistake, abandoning his good fortune. But if equity were to enforce the views of those high minded men, we have no doubt that it would run counter to the attitudes of much the greater part of ordinary mankind (not least the world of commerce) and would be venturing upon the field of moral philosophy in which it would soon be in difficulties.

redemption); Bloomer v Spittle (1872) LR 13 Eq 427 (mistaken belief by a purchaser that a conveyance of land to him did not provide for a reservation of minerals to the vendor); Paget v Marshall (1884) 28 Ch D 255 (mistake as to whether the first floor of a particular building was included in a lease); Tutt v Doyle (1997) 42 NSWLR 10 (transfer to two purchasers of more land than they contracted to purchase). Cf Blackley Investments Pty Ltd v Burnie City Council (No 2) (2011) 21 Tas R 98 (where Blow J, with whom Evans and Wood JJ concurred, refused to grant relief in circumstances where the mistake in issue did not relate to a fundamental term of the contract, but “as to what the rights of the parties would be if a particular contingency, desired by neither of them, eventuated”: at [12]). 185

Lowe v Harrington (1997) 21 Fam LR 583 at 602 (FC).

186

There are statements to this effect in England (Solle v Butcher [1950] 1 KB 671 at 692 per Denning LJ; but see Statoil ASA v Louis Dreyfus Energy Services LP [2008] 2 Lloyd’s Rep 685 at [105], [106] per Aikens J), Canada (Stepps Investments Ltd v Security Capital Corp Ltd (1976) 33 DLR (3d) 351 at 362–​364 per Grange J (HCJ(Ont)); First City Capital Ltd v British Columbia Building Corp (1989) 43 BLR 29 at 37 per McLachlin CJSC), the United States (Coleman v Holecek (1976) 542 F (2d) 532 at 535–​536) and Singapore (Chwee Kin Keong v Digilandmall.com Pte Ltd [2005] 1 SLR 502). See also Tutt v Doyle (1997) 42 NSWLR 10 at 12–​13 per Handley JA; Eroc Pty Ltd v Amalg Resources NL [2003] QSC 74 at [49], [50] per Muir J. Cf Smith v Smith (2004) 12 BPR 23,051 at [50] per Barrett J.

187

Riverlate Properties Ltd v Paul [1975] Ch 133 at 141. For illustrations of this principle see Fragomeni v Fogliani (1968) 42 ALJR 263; Leighton v Parton [1976] 1 NZLR 165; Commercial Credit Corp v Newall Agencies (1982) 126 DLR (3d) 728.

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Equity and Trusts in Australia

There is no unconscionable conduct, for this purpose, where the plaintiff is made aware of the defendant’s interpretation of the contract but does not seek to address this, or alter it, and instead proceeds to contract on its own (ultimately incorrect) interpretation.188 [8.205] If indeed equity’s jurisdiction to provide relief for unilateral mistake (and maybe

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common mistake) is based on its jurisdiction to prevent unconscionable conduct, the prevailing interpretation of the former Trade Practices Act 1974 (Cth), s 51AA (now s 20(1) of the Australian Consumer Law) may dictate the availability of the broad avenues for statutory relief: see [9.170], [9.175].

188

See, for example, Gallinar Holdings Pty Ltd v Riedel (2014) 17 BPR 32,977.

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Chapter 9

Unconscionable Dealing NATURE OF THE DOCTRINE Elements of the doctrine [9.05]  Equity has a jurisdiction to prevent a stronger party to a dealing acting against good

conscience by enforcing, or retaining the benefit of, that dealing.1 But it is not a paternal one protecting or assisting those who repent of imprudent, foolish or onerous bargains2 or undertakings.3 Nor does it arm the courts with a general power to set aside bargains simply for being unfair, unjust, onerous or harsh.4 Rather, the exercise of the jurisdiction is an exceptional one; the courts “enforce legal rights except in circumstances which are so far out of the ordinary course, so much an enormity and a departure from ordinary standards of conduct that the position of a person who relies on legal rights should rightly be adjudged unconscionable”.5 It arises out of proof of the concatenation of three elements:6 • a relationship that places one party at a special disadvantage vis-​à-​vis the other;

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• knowledge of that special disadvantage in the stronger party; and • unconscientious exploitation by the stronger party of the weaker party’s disadvantage.

1

The modern “unconscionability” jurisdiction had its origins in the equitable jurisdiction over “catching bargains” (which is the terminology still, inaccurately, adopted for the modern doctrine: see, for example, Meagher, Gummow and Lehane, Ch 16). Its focus was “expectant heirs” who, standing to inherit property, were persuaded by another to pledge that property as security for a loan where this would be unconscientious: see Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125; 28 ER 82; Earl of Aylesford v Morris (1873) LR 8 Ch App 484; O’Rorke v Bolingbroke (1877) 2 App Cas 814 at 822–​823 per Lord Hatherley. The genesis of the modern jurisdiction derives from the extension of this specific jurisdiction to persons suffering other disadvantages, such as poverty, sickness, age, inexperience or lack of education: Fry v Lane (1888) 40 Ch D 312 at 322 per Kay J. See further Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), pp 391–​401.

2

Although traditionally expressed in terms of unconscionable “bargains”, the term “bargain” should not be construed as suggesting a need for some contract or exchange of consideration in this context; the doctrine applies equally vis-​à-​vis gifts procured by unconscionable dealing: see Willis v Thompson [2017] NZAR 1448 at [50]–​[67] per Moore J.

3

Familiar Pty Ltd v Samarkos (1994) 115 FLR 443 at 456 per Thomas J; Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 109 per Debelle and Wicks JJ; Xu v Lin (2005) 12 BPR 23,131 at [40] per Barrett J.

4

Bridge v Campbell Discount Co Ltd [1962] AC 600 at 626 per Viscount Simonds (“ ‘Unconscionable’ must not be taken to be a panacea for adjusting any contract between competent persons when it shows a rough edge to one side or the other”).

5

Burt v Australia and New Zealand Banking Group Ltd (1994) ATPR (Digest) ¶46-​123 at 53,598 per Bryson J.

6

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 459 per Gibbs CJ, at 461–​462 per Mason J, at 474 per Deane J; Louth v Diprose (1992) 175 CLR 621 at 626 per Brennan J; Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 109 per Debelle and Wicks JJ; Turner v Windever [2003] NSWSC 1147 at [105] per Austin J (whose characterisation of the jurisdiction as involving five elements is simply an expanded version of the elements cited in the text); Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [118] (FC) (speaking in terms of “an unconscientious taking advantage by one party of some disabling condition or circumstance that seriously affects the ability of the other party to make a rational judgment as to his or her own best interests”).

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Equity and Trusts in Australia

If the weaker party proves the first two of these elements, the burden shifts to the stronger party to prove that he or she is not behaving unconscionably in seeking to enforce the transaction: see [9.115]. Focus on “procedural” rather than “substantive” unconscionability [9.10]  Equity targets unconscionability of a “procedural” nature, namely the conduct in the

bargaining process leading to a transaction. Factors going to that process include the conduct of the negotiations in adverse circumstances, superiority of bargaining power, absence of meaningful choice, the use of an influential third party and lack of information. “Substantive unconscionability”, conversely, focuses on the actual content of the bargain, namely the fairness or otherwise of its terms. The doctrine of unconscionable dealing confers no power on courts to set aside bargains merely on the basis of their content. Courts have distinguished “a person under a condition or circumstance disabling him from making a sound judgment” from “a person who is able to make a judgment but fails to make a sound one”.7 Yet evidence of substantive unconscionability —​usually the improvidence of the bargain from the weaker party’s perspective: see [9.60] —​can be probative of procedural unconscionability. In any case, it is statute that empowers the court to set aside a bargain for substantive unconscionability: see [9.160]–​[9.195]. This does not mean that substantive unconscionability is never a concern of equity; it can potentially explain equity’s intervention via the doctrines of common mistake (see [8.190]), penalties (see [13.20]) and the remedial constructive trust (see [38.175]–​[38.210]). Unconscionable dealing distinguished from undue influence

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[9.15]  The doctrines of undue influence (discussed in Ch 7) and unconscionable dealing are

closely related. Each is “a species of that genus of equitable intervention to refuse enforcement of or to set aside transactions which, if allowed to stand, would offend equity and good conscience”8 and tempers freedom of contract with the need to prevent abuse and protect the weak.9 It follows that the same facts can give rise to a valid claim both for undue influence and unconscionable dealing.10 Proof of the elements of an action in unconscionable dealing may also be probative of aspects of undue influence.11 These similarities have led some to lament the need for two similar doctrines, and call to subsume undue influence under the head of unconscionability.12 7

Turner v Windever [2005] ANZ ConvR 214 at [74] per Giles JA.

8

Bridgewater v Leahy (1998) 194 CLR 457 at 478 per Gaudron, Gummow and Kirby JJ.

9

Canadian Imperial Bank of Commerce v Ohlson (1997) 154 DLR (4th) 33 at 40 per Conrad JA. See also Lawrence v Poorah [2008] UKPC 21 at [20] per Lord Walker (“the doctrines of undue influence and unconscionable bargain share a common root —​equity’s concern to protect the vulnerable from economic harm —​but they are generally regarded as distinct doctrines”); Bigwood, “Undue Influence: ‘Impaired Consent’ or ‘Wicked Exploitation’?” (1996) 16 OJLS 503 at 514 (noting that both doctrines are conceptually linked by an “expansive anti-​exploitation theme”).

10

See, for example, Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435.

11

Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 at 151 per Nourse LJ. This is particularly so where undue influence or unconscionability is pleaded as a defence to a proceeding to enforce a guarantee and the issue relates to the creditor’s knowledge of the special disability or influence: see [7.210]–​[7.220], [7.260], [7.265].

12

See, for example, Capper, “Undue Influence and Unconscionability:  A Rationalisation” (1998) 114 LQR 479 at 480 (who argues for a unified doctrine of unconscionability containing the elements of relational inequity, transactional imbalance and unconscionable conduct: at 504); Mason, “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66 at 89 (“the emergence from the shadows of [the doctrine of unconscionable dealing] has relegated the doctrine of undue influence to a position of relative unimportance”).

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Unconscionable Dealing  Chapter  9

[9.20]  Yet any such convergence is unlikely in Australian law which, aside from hints in sev-

eral mainly New South Wales cases to the contrary13 since disapproved by the High Court,14 maintains a distinction between the doctrines.15 Undue influence looks to the quality of the consent or assent of the weaker party; in cases of undue influence the weaker party’s will is not independent and voluntary because it is overborne. Unconscionable dealing instead looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disadvantage in circumstances where it is inconsistent with good conscience that he or she should do so. In cases of unconscionable dealing, the will of the weaker party, even if independent and voluntary, is the result of the disadvantageous position in which he or she is placed and the unconscientious taking advantage of that position by the other party. Another way of characterising this distinction is to view undue influence as “plaintiff-​ sided”, concerned as it is with the weakness of the plaintiff’s consent owing to an excessive dependence on the defendant, and unconscionable dealing as “defendant-​sided”, given its focus on the defendant’s exploitation of the plaintiff’s vulnerability.16 The source of the plaintiff’s vulnerability may also differ. For unconscionable dealing, the vulnerability is not usually brought about through a special relation existing between the parties, but from a disabling condition unassociated with the defendant. In most undue influence cases the plaintiff is vulnerable precisely because of a “special antecedent relational condition”, namely misplaced trust or reliance, relative to the defendant.17 This does not deny that a plaintiff’s vulnerability may, in a given factual scenario, exhibits aspects from both of these sources.

SPECIAL DISADVANTAGE

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Nature of “special” disadvantage [9.25]  The nature of the relevant “special disadvantage” (sometimes termed “special disabil-

ity”) concerns the weaker party’s ability to make an informed judgment as to her or his interests.18 Qualifying the word “disadvantage” by the adjective “special” aims to disavow any suggestion that the jurisdiction is triggered simply due to a difference in the parties’ bargaining power,19 or mere unawareness of a matter material to one’s interests,20 which are hardly

13

These cases held that the principles applied in Yerkey v Jones (1939) 63 CLR 649, a case of a wife guaranteeing her husband’s debt that was argued on the basis of undue influence (see [7.90], [7.210]), had been subsumed into the equitable doctrine of unconscionable dealing: see Warburton v Whiteley (1989) 5 BPR 11,628 at 11,634 per Kirby P; Akins v National Australia Bank (1994) 34 NSWLR 155 at 170–​173 per Clarke JA; Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41–​436 at 40,902 per Kiefel J; National Australia Bank Ltd v Garcia (1996) 39 NSWLR 577 at 597 per Sheller JA.

14

Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 408 per Gaudron, Gummow, McHugh and Hayne JJ.

15

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 per Mason J, at 474 per Deane J; Bridgewater v Leahy (1998) 194 CLR 457 at 478 per Gaudron, Gummow and Kirby JJ; Thorne v Kennedy (2017) 91 ALJR 1260 at [40] per Kiefel CJ, Bell, Gageler, Keane and Edelman JJ.

16

Birks and Chin, “On the Nature of Undue Influence” in Beatson and Friedmann (eds), Good Faith and Fault in Contract Law (Carswell, 1995), p 57.

17

Bigwood, “Undue Influence: ‘Impaired Consent’ or ‘Wicked Exploitation’?” (1996) 16 OJLS 503 at 514.

18

Bridgewater v Leahy (1998) 194 CLR 457 at 470 per Gleeson CJ and Callinan J, dissenting but not on this point.

19

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 per Mason J; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [184] per Callinan J.

20

Turner v Windever [2005] ANZ ConvR 214 at [72] per Giles JA (noting that the position is different where the unawareness is due to a condition or circumstance evidencing special disadvantage, misrepresentation, misleading or deceptive conduct under statute, or to other circumstances amounting to vitiating mistake under contractual principles: at [73]).

[9.25]  297 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

uncommon in many transactions.21 The word “special” also emphasises that “the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests”.22 This clearly seeks to set a high threshold for equitable intervention, and attempts by litigants to mollify its strictness have not, as a general rule,23 been embraced by the courts. Identifying what represents the special disadvantage is critical because it is what the weaker party bears the onus of establishing the stronger party knew or ought to have known of.24 Factors indicating special disadvantage [9.30]  As the relationships in which one party stands in a position of special disadvantage vis-​

à-​vis the other are infinitely various, courts have avoided listing those relationships, but have identified factors from which special disadvantage can be inferred, arising from personal characteristics (“constitutional”) or circumstances surrounding the transaction (“situational”). Fullagar J identified several in Blomley v Ryan:25

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The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-​à-​vis the other.

It cannot be assumed that the presence or absence of any one factor is decisive in any given case. It is usually a combination of factors, impacting on the parties’ relative positions and on the weaker party in relation to the transaction,26 that invites equitable relief. The point is illustrated by the leading case, Commercial Bank of Australia Ltd v Amadio,27 in which the respondents, two elderly Italian migrants unfamiliar with written English, were requested by their son to execute a mortgage over their property in favour of the appellant bank to secure the overdraft of a company the son controlled. The son misrepresented to his parents that the mortgage was limited in amount and duration. The respondents were unaware that the company was in a precarious financial predicament, and that the appellant had been selectively dishonouring company cheques to preserve its appearance of solvency. The court found that the respondents’ reliance on their son was due in no small degree to their infirmities: their age, limited understanding of written English and no experience of business in the field in, or at the level at, which their son and the company engaged. It therefore found a gross inequality 21

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [11] per Gleeson CJ (“Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests”).

22

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 per Mason J (emphasis supplied).

23

An apparent exception to this is the majority judgment in Bridgewater v Leahy (1998) 194 CLR 457 but, as discussed at [9.135]–​[9.145], the case should not be read as heralding a new approach.

24

Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 at [289] per McLure J; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 189 ALR 76 at 97 (FC(FCA)).

25

Blomley v Ryan (1956) 99 CLR 362 at 405. See also at 415 per Kitto J. This proposition has been accepted in subsequent authorities: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 per Mason J, at 474–​475 per Deane J; Louth v Diprose (1992) 175 CLR 621 at 628–​629 per Brennan J, at 637–​638 per Deane J, at 650 per Toohey J.

26

See, for example, Washband v Buck (1997) Q ConvR ¶54-​491 at 59,937 per Muir J (who held that although the plaintiff suffered a psychiatric condition, of which the defendant was aware, this disability did not impact on the equality between plaintiff and defendant in relation to the transactions in issue).

27

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

298 [9.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Unconscionable Dealing  Chapter  9

of bargaining power between the parties, so much so that the respondents stood in a position of special disadvantage vis-​à-​vis the bank in relation to the proposed mortgage guarantee.28 Below are discussed factors that may figure in allegations of special disadvantage. These do not exhaustively catalogue the matters capable of substantiating special disadvantage, in that the courts’ jurisdiction is capable of adapting to different transactions entered into in changing circumstances.29

Financial need

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[9.35]  Financial need may seriously affect a person’s ability to judge her or his best interests.

For example, in Morlend Finance Corporation (Vic) Pty Ltd v Luke30 the plaintiff finance company leased a prime mover to the husband and wife defendants, secured by a mortgage over their home and that of the wife’s mother. When the vehicle proved unreliable, the defendants fell behind in their payments. The evidence revealed that they had little option but to negotiate the transfer of an older vehicle to have any chance of paying their way out of the lease agreement. Had the transaction not been effected, the defendants and the wife’s mother were likely to lose their homes. This “desperate financial position” was held to be a weighty indicator of special disadvantage on the defendants’ behalf. However, financial need per se is unlikely to constitute a special disadvantage.31 This is especially so in the case of a major commercial transaction negotiated at arm’s length between parties with access to financial and legal expertise. In cases of this kind, aside from any legitimate claim for economic duress (see [8.15]) or unconscionable conduct under statute (see [9.160]–​[9.195]), the courts distinguish an opportunistic approach to strike a hard bargain from acting unconscionably.32 In Micarone v Perpetual Trustees Australia Ltd,33 for example, plaintiffs who had re-​financed when in a desperate financial state were found not to suffer special disadvantage because they had had considerable experience with financial transactions of the kind, and had approached the defendant (and other financiers) through finance brokers. For financial need to substantiate special disadvantage it must ordinarily be coupled with other factors. In Familiar Pty Ltd v Samarkos,34 for instance, the defendant’s special disadvantage arose not only out of his desperate financial position, but in being unrealistic in the management of his financial affairs and his lack of business understanding.

28

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 464 per Mason J, at 477 per Deane J. See also Verduci v Golotta (2010) 15 BPR 28,865 at [75]–​[80] per Slattery J. Cf State Bank of New South Wales Ltd v Vecchio (unreported, SC(NSW), Kirby J, 10 November 1998) at 49 (where Amadio was distinguished because the defendants spoke English, were quite well educated, and were mature without being old, and although lacking commercial experience, in that respect they were no differently placed to many people who approach a bank for a loan).

29

For example, prior to Louth v Diprose (1992) 175 CLR 621 (see [9.70]) there was scant authority for the proposition that emotional dependence of itself could constitute a special disadvantage.

30

Morlend Finance Corporation (Vic) Pty Ltd v Luke (1991) ASC ¶56-​095.

31

Diera Pty Ltd v Grover (1990) ASC ¶55-​974 at 58,851 per Rowland J; Morlend Finance Corporation (Vic) Pty Ltd v Luke (1991) ASC ¶56-​095 at 56,995 per Smith J; Australian Securities and Investments Commission v Australian Lending Centre Pty Ltd (No 3) (2012) 213 FCR 380 at [199] per Perram J (“it is not, without more, unconscionable to offer to arrange a loan for a person who is financially distressed”).

32

Commonwealth Bank of Australia v Spira (2002) 174 FLR 274 at [193], [194] per Gzell J [affd Spira v Commonwealth Bank of Australia (2003) 57 NSWLR 544].

33

Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 113 per Debelle and Wicks JJ.

34

Familiar Pty Ltd v Samarkos (1994) 115 FLR 443 at 458–​460 per Thomas J.

[9.35]  299 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

Lack of knowledge and/​or experience [9.40]  The weaker party’s level of education, intelligence and business experience will influ-

ence her or his understanding of the transaction in question. The more complex the transaction, the greater the potential for special disadvantage. For example, in Nichols v Jessup,35 which involved an action for specific performance of an agreement granting a right of way by the defendant to the plaintiff to improve the road access to the latter’s land, the trial judge found that the defendant was “ignorant about property rights”, “unintelligent and muddleheaded”, and that her judgment in business matters was “likely to be swayed by wholly irrelevant considerations”. This, the New Zealand Court of Appeal held,36 placed the defendant in a position of special disadvantage vis-​à-​vis the plaintiff. Independently of education or experience, special disadvantage may ensue from an inadequate understanding of the nature, incidents and consequences of a transaction (a “situational” disadvantage). In Melverton v Commonwealth Development Bank of Australia,37 involving a mortgage over the plaintiff’s home as security for a loan to her son’s company, the evidence revealed that the plaintiff did not appreciate the facts relevant to the risk being undertaken. She knew nothing of the company’s dire financial position, including matters such as the dishonouring of company cheques, the exceeding of overdraft limits, the dependence of the business on one transaction, and the winding-​up petition lodged against it. She also mistakenly believed that the mortgage was a formality and would be for six months only. These matters led Hodgson J to conclude that “the plaintiff did not have the opportunity to make an informed and real choice in the matter”.38

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[9.45] Conversely, a person who enters into a transaction containing no unusual features

cannot be said to be under a special disadvantage simply because he or she chooses not to read, or attempt to understand, the documentation.39 Nor is there any special disadvantage simply because, in a banking transaction, the alleged weaker party lacked knowledge of all the matters known to the bank; otherwise all third party guarantees and mortgages in favour of banks would be deemed contracts uberrimae fidei (utmost good faith), requiring full disclosure, which they are not. Certainly an experienced businessperson aware of, say, pitfalls of borrowing at a high rate of interest and on restrictive conditions is not placed at a special disadvantage to the bank.40 It follows that special disadvantage is unlikely to exist in commercial agreements contracted at arm’s length. That one party takes a “firm line” which, by reason of their relationship, places another party in a difficult position is not by itself sufficient to establish special

35

Nichols v Jessup [1985] ANZ Conv R 246 at 250.

36

Nichols v Jessup [1986] 1 NZLR 226.

37

Melverton v Commonwealth Development Bank of Australia (1989) ASC ¶55-​921. See also Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (discussed at [9.30]); National Australia Bank Ltd v Nobile (1988) 100 ALR 227; Begbie v State Bank of New South Wales Ltd (1994) ATPR ¶41-​288 at 41,896 per Drummond J (special disadvantage stemming from lack of awareness of the purpose for which the moneys advanced were to be applied); Lisciandro v Official Trustee in Bankruptcy (1995) ATPR ¶41-​436 at 40,901 per Kiefel J.

38

Melverton v Commonwealth Development Bank of Australia (1989) ASC ¶55-​921 at 58,459.

39

Swift v Westpac Banking Corporation (1995) ATPR ¶41-​401 at 40,429 per Kiefel J; Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265 at [69] per Owen J; Mirvac (Docklands) Pty Ltd v La Rocca [2006] VSC 48 at [191] per Hargrave J; CIT Credit Pty Ltd v Keable (2006) Aust Contract R ¶90-​243 at [70]–​[80] per Spigelman CJ (in the context of s 51AC of the Trade Practices Act 1974 (Cth); now see ss 21, 22 of the Australian Consumer Law, as to which see [9.180]–​[9.195]).

40

Diera Pty Ltd v Grover (1990) ASC ¶55-​974. Cf Asia Pacific International Pty Ltd v Dalrymple [2000] 2 Qd R 229, discussed at [9.140].

300 [9.40] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Unconscionable Dealing  Chapter  9

disadvantage in the latter. To this end the Full Federal Court has observed that “[a]‌t least in the case of an experienced business person there must … be something more than commercial vulnerability (however extreme) to elevate disadvantage into special disadvantage”.41 The position is clearer again where a contract is negotiated at arm’s length between corporations represented by commercial negotiators led by persons possessing business experience, and having the ongoing and active assistance of their respective lawyers.42 This does not mean that a corporation can never labour under a special disadvantage.43 It may, for instance, be in a desperate financial position and, attempting to escape from that position, act without legal or other advice. It may be justifiable for the court to interfere where it is sufficiently evident to those dealing with the corporation that its effective decision makers suffer from a special disadvantage that makes them unable to make a real judgment as to the company’s best interests.44 Yet in each case the law provides other avenues for relief; in the former instance it may be economic duress (see [8.15]), and in the latter provisions such as s 21 of the Australian Consumer Law (see [9.180]–​[9.195]) may be apt.

Age [9.50]  As the modern “unconscionability” doctrine had its genesis in the equitable jurisdic-

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tion over “expectant heirs” who, standing to inherit property, were persuaded by another to pledge that property as security for a loan where this would be unconscientious, it stands to reason that age is a factor capable of contributing to a special disadvantage. Most of the recent case law has instead focused at the other end of the spectrum, namely advanced age. But it highlights that by itself advanced age is unlikely to amount to special disadvantage,45 a New Zealand judge remarking that “care must be taken to avoid stereotypes, especially as perceptions of what constitutes ‘old age’ continue to evolve in an aging population”.46 In Davey

41

Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 189 ALR 76 at 97 (FC(FCA)) (where a tenant who carelessly failed to exercise an option to renew a lease was held not to be in a position of special disadvantage). See also Gustav & Co Ltd v Macfield Ltd [2008] 2 NZLR 735 (where the sole director of the appellant company (P), who was an experienced property developer, was not found to have been suffering a special disability in contracting to purchase a commercial property even though, inter alia, he had been recently diagnosed with terminal cancer and had contracted at a time when that illness was taking its course, and the development was far more substantial than any of his previous projects; the Supreme Court (at [34]) saw a strong inference that when the contract was entered into P was suffering from little, if any, disadvantage, his customary business acumen having not deserted him, and he had a rational reason for paying what he knew to be a premium for one of the best development sites left in the central business district of Christchurch).

42

Overlook Management BV v Foxtel Management Pty Ltd (2002) Aust Contract Rep ¶90-​143 at 91,976 per Barrett J.

43

See, for example, Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37 at [212], [213] per Wheeler J. Cf Hammond, “Can a Company be the ‘Victim’ of Undue Influence and Unconscionability?” (2001) 19 C&SLJ 74.

44

Commonwealth Bank of Australia v Ridout Nominees Pty Ltd [2000] WASC 37 at [59] per Wheeler J (but opining that it would be “stretching the principle in Amadio too far to hold that where a lender is aware of any special disability of any director of a corporation, it is unconscionable for the lender to rely upon its transaction with that corporation, even where it is plain that decisions about the transaction on behalf of the corporation will effectively be made by some other person”: at [62]; emphasis in original).

45

Concern has been expressed that this proposition may give elders insufficient protection: Burns, “The Equitable Doctrine of Unconscionable Dealing and the Elderly in Australia” (2003) 29 Mon ULR 336 (who maintains that as it remains easier to establish a case of unconscionable dealing where the elder lacks mental capacity or understanding due to mental illness, alcoholism or poor English language skills, this has unduly limited the application of the doctrine “because the courts have focused on the mental capacity and understanding of the elder as establishing special disadvantage rather than the defendant’s active exploitation or passive advantage-​taking of the elder’s special disadvantage which includes the personal circumstances which the elder faces”: at 374).

46

West v West [2017] NZHC 3110 at [22] per Downs J. See, for example, Christodoulou v Christodoulou [2009] VSC 583 (where an 83 year old Greek speaking woman who gave away her sole asset, the matrimonial home, to her son, was found to have been unaffected by any special disadvantage or disability, as she was independent, and indeed feisty, knowing her own mind and exercising her own independent decision making powers: at [111] per Kaye J); Hewitt v Gardner [2009] NSWSC

[9.50]  301 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

v Challenger Managed Investments Ltd47 the appellants, widowed pensioners aged 76 and 70, guaranteed a loan to enable their children to establish a business, and mortgaged their homes to support the guarantees. When the business failed and the lender sued for possession under its mortgages, the appellants sought to set aside the mortgages on the ground that, inter alia, they suffered a special disadvantage relative to the lender. Handley JA, with whom Hodgson JA and Grove J concurred, ruled that “[t]‌he age and status of the appellants as pensioners did not deprive them of the legal capacity to do what they did”,48 before adding the following more general observation:49 The Court has no way of knowing how many business ventures financed by parents in this way are successful for the benefit of the community and all concerned. Courts only ever see the cases where the business has failed and the mortgages are enforced. The Court might be doing a disservice to the community if it treated age and pensioner status as disabling parents from helping their children in this way. The law has not taken that step, and under ordinary principles the appellants have no proper claim for relief.

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The court rejected the proposition that the appellants were at a special disadvantage; after all, they were not illiterate, English was their first language, they had full possession of their faculties and, although elderly, were in general good health. Handley JA added that a mortgage and a guarantee are well known transactions in the community, noting that one of the appellants had entered into a similar transaction for the benefit of her son only a few months earlier.50 Moreover, the appellants’ claim that they had not properly understood the transactions was countered by evidence that they had executed the security documents in the presence of an independent solicitor, who had spent 50 minutes explaining the documents to them. In other circumstances, such as in Blomley v Ryan51 (discussed at [9.60]) and Smith v Smith52 (discussed at [9.65]), where advanced age is coupled with other factors indicating special disadvantage, the outcome has proven different.

Need for independent advice [9.55] That a person received no independent legal or financial advice concerning a trans-

action is by itself no special disadvantage.53 A person may be at a special disadvantage for lacking that advice only where its provision was imperative.54 The weaker party’s knowledge or experience, and the complexity of the transaction, impacts on the need for, and the scope of, the advice. For example, it is imperative that a person who is inexperienced in, and has limited understanding of, general commerce be given independent advice, not merely regarding the

1107 (where Ward J reasoned that “ the deceased’s age and deteriorating health does not in light of the evidence of her general capacity to answer questions clearly and lucidly and the instances where she was capable of speaking her own mind in the case of opposing views … does not suggest a special disadvantage on the deceased’s part”: at [113]); West v West (where a 92 year old man was found not to labour under a special disability). 47

Davey v Challenger Managed Investments Ltd [2003] NSWCA 172.

48

Davey v Challenger Managed Investments Ltd [2003] NSWCA 172 at [23].

49

Davey v Challenger Managed Investments Ltd [2003] NSWCA 172 at [24].

50

Davey v Challenger Managed Investments Ltd [2003] NSWCA 172 at [19].

51

Blomley v Ryan (1956) 99 CLR 362.

52

Smith v Smith (2004) 12 BPR 23,051.

53

State Bank of New South Wales Ltd v Watt [2002] ACTSC 74 at [37] per Gray J [affd Watt v State Bank of New South Wales [2003] ACTCA 7]. See further Enonchong, Duress, Undue Influence and Unconscionable Dealing (2nd ed, Sweet & Maxwell, 2012), Ch 19.

54

Bridgewater v Leahy (1998) 194 CLR 457 at 470–​471 per Gleeson CJ and Callinan J.

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Unconscionable Dealing  Chapter  9

nature and effect of the proposed transaction, but also as to whether it should be entered into at all.55 That the transaction is one that is ordinarily submitted to solicitors for consideration and advice may likewise indicate the need for independent advice to the weaker party.56 In Davey v Challenger Managed Investments Ltd,57 discussed above at [9.50], Handley JA saw independent legal advice as desirable, if not necessary, in the circumstances to ensure that the elderly appellants, who were volunteers, understood the guarantee and mortgage transactions and their implications, and, with that understanding, executed the security documents freely and voluntarily. As they received this advice before executing the documents, and signed an acknowledgment that they understood its effect and had freely and voluntarily signed those documents, the claim of special disadvantage could not be sustained. Where a person exhibits a clear understanding of the substance of the transaction in issue, and an adviser, independent or otherwise, would not have informed that person of anything that he or she did not already know or had full opportunity to evaluate, special disadvantage will be lacking where no independent advice is given even if the transaction is improvident.58 In Frederick v State of South Australia,59 for example, White J rejected the claim of the plaintiff, who was an experienced magistrate, that his decision to resign from the magistracy in the wake of being convicted of two criminal offences was the result of an exploitation of a special disadvantage by the Chief Magistrate. His Honour reasoned that shock and disappointment did not deprive the plaintiff of the ability to reason rationally in relation to his position and to make appropriate decisions about his own best interests. So far as the absence of independent advice was concerned, White J remarked that “[o]‌rdinarily an experienced legal practitioner, such as the plaintiff, should be able to determine if legal or other advice or assistance is necessary”.60

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[9.60]  Most instances of relief against unconscionable dealing have involved inadequacy of

consideration moving from the stronger party, or a transaction otherwise improvident from the weaker party’s perspective. In Blomley v Ryan61 an old and sick vendor sold his farming property at a considerable undervalue to the plaintiff, which the High Court found could not be explained by reason of friendship or gratitude. There was evidence that the vendor had recently refused to sell the property at a higher price and that the terms of the sale were favourable to the plaintiff. Fullagar J observed saw the question of inadequacy of consideration as “a matter of major, and perhaps decisive, importance”.62 And in Williams v Maalouf63 Hargrave J branded the plaintiff’s gift of virtually all her assets as “so improvident from the plaintiff’s point of view” as to be “explicable only by reason that the plaintiff was affected by a special disadvantage at the time of making the gift”. Also influencing his Honour were

55

Vital Finance Corporation Pty Ltd v Taylor (1991) ASC ¶56-​099 at 57,051–​2 per Smart J.

56

Nichols v Jessup (No 2) [1986] 1 NZLR 237 at 240 per Prichard J.

57

Davey v Challenger Managed Investments Ltd [2003] NSWCA 172 at [21].

58

White v Ormsby (1988) ASC ¶55-​665 at 58,030–​1 per Bryson J; Swift v Westpac Banking Corporation (1995) ATPR ¶41-​401 at 40,429 per Kiefel J; Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265 at [67] per Owen J.

59

Frederick v State of South Australia (2006) 94 SASR 545.

60

Frederick v State of South Australia (2006) 94 SASR 545 at [164].

61

Blomley v Ryan (1956) 99 CLR 362.

62

Blomley v Ryan (1956) 99 CLR 362 at 405.

63

Williams v Maalouf [2005] VSC 346 at [185].

[9.60]  303 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

findings that, at the time of the gift, the plaintiff was suffering an abnormal grief reaction to her mother’s death, causing a sudden and unusually strong emotional dependence on the donee, who had two months earlier been no more than a friendly work colleague. Yet evidence of improvidence or undervalue is not of itself conclusive of a special disadvantage.64 It may be that the relevant transaction is not causally related to any special disadvantage.65 Conversely, that adequate consideration has moved from the stronger party does not protect a transaction from scrutiny, such as where the benefit of the consideration moves not to the party under the disadvantage but to a third party involved in the transaction.66 Improvidence in this context can traverse into transactions punctuated by great risk. Generally speaking, that a transaction is risky does not by itself bespeak of any special disadvantage in the risk taker, especially if he or she is an experienced business person and not subject to any other evident disadvantage. Otherwise the law in this regard would be protecting against what with hindsight prove foolish dealings. In Wu v Ling67 an advance to the appellant of short-​term finance, at high interest, to invest in a speculative venture, was held not to have been the product of unconscionable dealing. What led the New South Wales Court of Appeal to so conclude was that the appellant was commercially sophisticated and received independent advice. Indeed, the respondent lender actually warned the appellant of the risks, and it seemed better appreciated those risks than the appellant. At the same time, it is conceivable that circumstances may arise where entry into a risky and ultimately improvident transaction has been the product of the exploitation of a special disadvantage, in which event relief may ensue.

Emotional or other dependency

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[9.65]  Emotional dependency may give force to a claim of special disadvantage, although

by itself it takes an unusual case for it to substantiate special disadvantage on its own. Louth v Diprose68 was ostensibly such a case. The respondent, a solicitor of comparatively modest means, provided funded the purchase of a house in which a woman (the appellant) with whom he was infatuated could reside. The woman was registered as the proprietor. The evidence showed the appellant to have deliberately manufactured a false atmosphere of crisis —​ that she was to be evicted from her lodgings, and that she would commit suicide were this to occur —​with the aim of persuading the respondent to fund the purchase. The transaction as so improvident in the light of the respondent’s financial position, said Mason CJ, as to be explicable only on the basis that he was so emotionally dependent upon, and influenced by, the appellant as to entirely disregard his own interests.69 Deane J noted that the special disadvantage arose not merely from the respondent’s infatuation, but from his extraordinary vulnerability in the false atmosphere of crisis.70 The respondent was found to be in a position of

64

Cranfield Pty Ltd v Commonwealth Bank of Australia [1998] VSC 140 at [95] per Mandie J.

65

White v Ormsby (1988) ASC ¶55-​665.

66

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 475 per Deane J.

67

Wu v Ling [2016] NSWCA 322.

68

Louth v Diprose (1992) 175 CLR 621.

69

Louth v Diprose (1992) 175 CLR 621 at 626.

70

Louth v Diprose (1992) 175 CLR 621 at 638. See also at 629–​630 per Brennan J, at 642–​643 per Dawson, Gaudron and McHugh JJ; Truran v Cortorillo [2011] VSC 488 (special disadvantage arising out of a widow’s lonely and depressed state, described by Mukhtar AsJ as a “fragile emotional and needy condition” (at [46]), which the defendant exploited, though promises of marriage, to secure substantial cash payments; his Honour viewed the facts as “very much along the lines as happened in the High Court case of Louth v Diprose”: at [45]).

304 [9.65] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Unconscionable Dealing  Chapter  9

special disadvantage notwithstanding that he was a solicitor, and had ample time to consider the wisdom or otherwise of the proposed transaction.71 That Louth v Diprose sits outside the norm is evident by comparing it to Xu v Lin,72 involving the sale of a house at considerable undervalue by a longstanding client (plaintiff) to a prostitute (defendant). The plaintiff’s attempt to have the sale set aside for unconscionable dealing failed because Barrett J was unable to accept that he was suffering any special disadvantage in the circumstances. His Honour, though accepting that infatuation and emotional dependency can amount to special disadvantage, did not believe the plaintiff’s alleged infatuation affected the property transaction to the necessary extent, noting that there was valuable consideration for the transaction and that the plaintiff had entered into the transaction of his free will.73 The same outcome ensued in Mackintosh v Johnson,74 where a man’s infatuation with a woman and his alleged “clouded judgment” in purchasing her a home and financing her business was insufficient, said the Victorian Court of Appeal, to constitute a special disability. Their Honours distinguished Louth v Diprose by reference to two additional factors, beyond the man’s infatuation, in that case, namely the false “atmosphere of crisis” and that the gifts were substantial relative to the man’s assets, explaining that:75

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[t]‌he facts of this case are a long way from those in Louth v Diprose. Mr Johnson was a wealthy, successful businessman who, although infatuated with Ms Mackintosh, was not emotionally dependent upon her in the way the donor was in Louth v Diprose. He made payments to her which were well within his means in the hope of an enduring relationship with her. Having regard to his wealth, the payments were not of a size which permit any inference of emotional dependence, or inability to make decisions in his own interests. This is a case of mere folly by Mr Johnson. Louth v Diprose was an extreme case … This is not. The trial judge set the threshold for a finding of special disability too low. On his findings and reasoning, any person who becomes infatuated with another, and has “clouded judgment” as a result, is suffering from a special disability. That is not in accordance with principle.

While the court did not dispute the trial judge’s finding that the woman acted deceitfully, by concealing the true nature of her feelings for the man from him, it reasoned that “conduct of that kind would not, on its own, be sufficient to amount to exploitation of the kind required to establish a case based on unconscionable conduct”, as “[i]‌t is the stuff of ordinary human relationships”.76 [9.70] To be probative of a special disadvantage, emotional dependence is ordinarily coupled with other factors evidencing disadvantage, as in Smith v Smith,77 where the plaintiff (mother), who was profoundly deaf and throughout her 39  year marriage relied on her husband to advise and help her with financial and business matters, transferred the matrimonial home to the defendant (her daughter) only days before her husband died from an illness. This, according to Barrett J, placed the mother in a position of extreme anxiety and isolation, with a consequent heavy emotional dependence on her daughter, sufficient to place her at a special disadvantage vis-​ à-​ vis her

71

This is what influenced Toohey J in dissent: Louth v Diprose (1992) 175 CLR 621 at 653–​655.

72

Xu v Lin (2005) 12 BPR 23,131.

73

Xu v Lin (2005) 12 BPR 23,131 at [35].

74

Mackintosh v Johnson (2013) 37 VR 301.

75

Mackintosh v Johnson (2013) 37 VR 301 at [82], [83] (paragraph break omitted).

76

Mackintosh v Johnson (2013) 37 VR 301 at [84].

77

Smith v Smith (2004) 12 BPR 23,051.

[9.70]  305 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

daughter.78 A  more recent illustration, Thorne v Kennedy,79 involved entry into a pre-​ nuptial agreement. The husband had paid for the appellant to come to Australia to live, and only shortly before the nuptials required her to sign a manifestly improvident pre-​ nuptial agreement, on the basis that the marriage would otherwise not proceed. That the appellant depended on her husband-​to-​be both financially and emotionally, and was by then emotionally invested in their relationship, made her “unusually susceptible”, Gordon J observed, to entering an improvident transaction.80 The other judges were similarly influenced by the urgency and haste surrounding the signature of the agreement,81 prompting a finding that she laboured under a special disadvantage when entering into the agreement.

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[9.75]  There are other circumstances where dependence can constitute special disadvantage.

In the familial context, for instance, one family member may depend heavily on the exercise of another’s judgment in financial matters, but this is usually because there is some other disadvantage, such as advanced age or a lack of education. Yet it possible, in a professional relationship, for a client to be entirely dependent on the professional for advice. This explains why, for instance, the law recognises a presumption of undue influence as between lawyer and client: see [7.30]. It may also be possible for special disadvantage for the purposes of the doctrine of unconscionable dealing to surface in this context. For example, in Lopwell Pty Ltd v Clarke82 the New South Wales Court of Appeal found that the respondent guarantors were under a special disability arising from dependence on the advice of their accountant (U). By virtue of being their accountant for close to 20 years, U became, the evidence revealed, “their trusted adviser and a personal friend”. On his advice, the respondents signed a loan agreement as guarantors and executed mortgages over their properties, doing so without reading them and without ensuring that they would receive consideration for their role in the transaction. They instead relied upon U’s assurance that he would not let the scheme go “belly up”, which it ultimately did. According to Macfarlan JA, with whom Ipp and Campbell JJA concurred, the trial judge’s description of the respondents as “trusting to an unworldly extent” was well warranted.83 His Honour saw complete dependence upon a trusted adviser for financial advice as potentially “just as much a disability for this purpose as the emotional dependence in Louth v Diprose”.84

KNOWLEDGE OF SPECIAL DISADVANTAGE [9.80] Once the court has determined the presence of a special disadvantage, equity will

give relief if the stronger party has, where he or she knew or ought to have known of that

78

Smith v Smith (2004) 12 BPR 23,051 at [62]–​[64].

79

Thorne v Kennedy (2017) 91 ALJR 1260.

80

Thorne v Kennedy (2017) 91 ALJR 1260 at [117].

81

Thorne v Kennedy (2017) 91 ALJR 1260 at [64] per Kiefel CJ, Bell, Gageler, Keane and Edelman JJ, at [74], [75] per Nettle J (opining that “[i]‌n all likelihood, things would have been different if, instead of waiting until the eleventh hour, [the respondent] had made clear to [the appellant] from the outset of their relationship that his love for her was in truth so conditional that the marriage he proposed would depend upon her giving up any semblance of her just entitlements in the event of a dissolution of their marriage”: at [75]).

82

Lopwell Pty Ltd v Clarke (2009) 3 BFRA 807.

83

Lopwell Pty Ltd v Clarke (2009) 3 BFRA 807 at [46].

84

Lopwell Pty Ltd v Clarke (2009) 3 BFRA 807 at [47].

306 [9.75] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Unconscionable Dealing  Chapter  9

disadvantage, taken advantage of the weaker party’s position of disadvantage.85 Below are discussed some important matters the courts have taken into account in assessing whether the stronger party knew of the weaker party’s special disadvantage. Statements of weaker party revealing misunderstanding [9.85] Frequently in alleged unconscionable dealing cases the issue is whether a financial

institution that has lent funds on security had knowledge of the guarantor’s or debtor’s special disadvantage so to make the enforcement of the transaction unconscionable. Evidence relevant for the purposes of establishing notice of undue influence (see [7.170], [7.175]) may also be probative here.86 The leading case is again Commercial Bank of Australia Ltd v Amadio,87 discussed at [9.30]. Having established that the respondents were in a position of special disadvantage vis-​à-​vis the appellant, the court found that the bank must have been fixed with the following knowledge, as explained by Mason J, of the respondents’ circumstances:88

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[The bank manager] was aware that the respondents were Italians, that they were of advanced years and that they did not have a good command of English. He knew that [the respondents’ son] had procured their agreement to sign the mortgage guarantee. He had no reason to think that they had received advice and guidance from anyone but their son … [The bank manager] also knew that, in the light of the then financial condition of the company, it was vital to [the respondents’ son] to secure his parents’ signature to the mortgage guarantee so that the company could continue in business. It must have been obvious to [the bank manager], as to anyone else having knowledge of the facts, that the transaction was improvident from the viewpoint of the respondents. In these circumstances it is inconceivable that the possibility did not occur to [the bank manager] that the respondents’ entry into the transaction was due to their inability to make a judgment as to what was in their best interests, owing to their reliance on their son, whose interests would inevitably incline him to urge them to sign the instrument put forward by the bank.

Deane J was particularly influenced by the male respondent’s remark to the bank manager on executing the instrument that the mortgage was only for six months, revealing that he was seriously misinformed as to a basic term of the transaction, which would place a reasonable person on inquiry.89 Less persuasive evidence may suffice to put a financier on inquiry. In Geelong Building Society (in liq) v Thomas,90 where a wife gave a guarantee in favour of her husband and father-​in-​law, Hedigan J held that a statement made in the presence of a bank officer by the husband to the effect that “it was all right” for her to sign the guarantee, coupled with the fact that the transaction was against the wife’s financial interest, sufficed to make the bank aware that the wife may have been under a special disadvantage so as to require it to ensure that the wife received independent advice. 85

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 466–​468 per Mason J, at 477–​479 per Deane J; Westwill Pty Ltd v Heath (1989) 52 SASR 461 at 475 per Duggan J; Australia and New Zealand Banking Group Ltd v Barry [1992] 2 Qd R 12 at 23 per Derrington J; Akins v National Australia Bank (1994) 34 NSWLR 155 at 171–​172 (CA); Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 114–​115 per Debelle and Wicks JJ. Cf Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [150]–​[160] (FC) (speaking in terms of whether the special disability is “sufficiently evident” to the stronger party, and rejecting a constructive notice threshold).

86

Geelong Building Society (in liq) v Thomas (1996) V ConvR ¶54-​545 at 66,478 per Hedigan J; Credit Lyonnais Bank Nederland NV v Burch [1997] 1 All ER 144 at 151 per Nourse LJ; Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 115 per Debelle and Wicks JJ.

87

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

88

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 466–​467.

89

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 479.

90

Geelong Building Society (in liq) v Thomas (1996) V ConvR ¶54-​545 at 66,478.

[9.85]  307 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

Knowledge of improvidence of transaction [9.90]  The providence or otherwise of the transaction sought to be impugned is particularly

relevant to the issue of the stronger party’s knowledge of any special disadvantage in the weaker party. This is because the improvidence apparent on the face of a transaction may raise a need to inquire whether the weaker party was labouring under a special disadvantage in entering into it.91 So even in the absence of actual knowledge of special disadvantage in the weaker party, the requisite knowledge, or at least the need to make this inquiry, can in some circumstances be derived from the improvidence of the transaction.92 For example, in Elkofairi v Permanent Trustee Co Ltd93 the appellant’s lack of education, illiteracy in English and difficult domestic circumstances placed her in a position of special disadvantage vis-​à-​vis the respondent financier. That the respondent had actual knowledge of none of those matters did not prevent the New South Wales Court of Appeal from ruling that it ought to have known of the special disadvantage, reasoning as follows:94 [N]‌otwithstanding that the respondent did not have knowledge of the appellant’s lack of education and her language and domestic difficulties, her lack of income, in the circumstances of this transaction —​that is, a large borrowing secured over her only asset, in circumstances where the application form failed to disclose any income for either husband or wife —​placed her in a special position of disadvantage. Though the full extent of that special position of disadvantage was not known to the respondent, nonetheless the absence of any relevant financial information was sufficient to put the respondent on notice of the appellant’s lack of capacity to meet the repayment obligations under the mortgage. That left as the only source of repayment the selling of her only asset, as again the respondent must be taken to have known.

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[9.95] Improvidence also carries weight, and a corresponding duty to inquire, where the transaction is, to the stronger party’s knowledge, for the benefit of a third party who has some ability to influence the weaker party: see [9.60].

Knowledge stemming from longstanding relationship [9.100]  That the weaker party is a long-​time customer of the financier can influence the finan-

cier’s duty. In National Australia Bank Ltd v Nobile Davies J explained the point as follows:95 The fact that a person is a customer of a branch does not mean that the customer necessarily trusts or is understood to trust the bank manager. But it does mean that the customer and the bank have had contractual relationships which have involved duties and proper dealing on the

91

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 465–​466 per Mason J; National Australia Bank Ltd v Nobile (1988) 100 ALR 227 at 233 per Davies J; Jedda Investments Pty Ltd v Krambousanos (1997) 72 FCR 138 at 148 (FC); Bridgewater v Leahy (1998) 194 CLR 457 at 492–​493 per Gaudron, Gummow and Kirby JJ; Smith v Smith (2004) 12 BPR 23,051 at [65] per Barrett J; Williams v Maalouf [2005] VSC 346 at [188] per Hargrave J. See further Capper, “Undue Influence and Unconscionability: A Rationalisation” (1998) 114 LQR 479 at 486–​492.

92

Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 115 per Debelle and Wicks JJ. Cf Tessman v Costello [1987] 1 Qd R 283 at 294 per Williams J; Wu v Ling [2016] NSWCA 322 (discussed at [9.60]) (where the respondent lender’s appreciation of the risk the appellant was undertaking in borrowing the funds in question was held not to support any finding of knowledge of a special disadvantage (which in any case the court found to be absent); Leeming JA remarked that “[k]‌nowledge or belief of a plaintiff’s foolishness alone is not sufficient to affect the defendant’s conscience”: at [11]).

93

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841.

94

Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [56]. See also Small v Gray (2004) 1 BFRA 249 (where McDougall J remarked that even where the personal circumstances of special disadvantage that were present in Elkofairi are absent, it may nonetheless “be unconscionable for a lender to lend on the basis of security only, knowing that the borrower has no means of repayment and knowing that default will cost the borrower his or her only asset”: at [109]).

95

National Australia Bank Ltd v Nobile (1988) 100 ALR 227 at 239.

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Unconscionable Dealing  Chapter  9

bank’s part and that the customer has been entitled to rely upon the bank’s proper performance of those duties. It is not a great step to conclude that a customer who has dealt with a branch for a long time with mutual satisfaction on each side has come to trust the officers of the branch in their dealings with him.

In Nobile, a case factually similar to Amadio96 (discussed at [9.30]), the Full Court of the Federal Court of Australia found that the disadvantageous nature of the transaction into which the weaker parties entered carried the inference that they entered into it not only because they trusted their son but also because they relied upon the bank and its manager. A relationship of trust and confidence engendered by a financial institution in a customer may, in addition, be capable of attracting fiduciary duties: see [4.250]. Knowledge of relationship between guarantor and debtor

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[9.105]  Mere knowledge in a financier that the guarantor of a loan is the debtor’s wife is

unlikely to suffice to establish knowledge that the wife was under a special disadvantage as to her own interests in relation to the transaction. It is less likely again if both the husband and wife guarantee a loan to a company in which they are directors, and there is nothing to indicate that the wife is under a special disadvantage.97 Where, however, a creditor leaves it to the debtor husband to procure the execution of a guarantee, and takes no steps to ensure that the wife understands the liability she is undertaking or that she is independently advised, the creditor may, depending on the facts, be held to be aware of the possibility that the wife was in a position of special disadvantage.98 This may be so if the loan is risky and its terms harsh, so as to make the transaction improvident from the wife’s perspective as guarantor, and the financier had no sufficient reason to believe that the onerous obligations would be explained to her.99 Yet given that the High Court in Garcia v National Australia Bank Ltd100 (discussed at [7.215]) held that it is unconscionable, though not in the sense of the doctrine of unconscionable dealing, for a financier to enforce a guarantee given by a wife for her husband where the transaction is voluntary and the wife did not understand its purport and effect unless the financier has taken steps to explain the transaction to the wife, it appears that the doctrine of unconscionable dealing has a more restricted role in the context of wives as sureties for their husbands. [9.110]  As straying too far from actual knowledge leaves the court open to the criticism of

pursuing a policy of protecting the mistaken or disadvantaged under the guise of proscribing essentially innocent behaviour,101 courts have, at least under the doctrine of unconscionable dealing, been wary of requiring a creditor to make further enquiries solely due to the relationship of the guarantor to the debtor. For instance, that security is given by a parent for a loan to a child by itself does not attract the duty to make further inquiry to ensure no special

96

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

97

Miles v Shell Company of Australia (1998) 156 ALR 133 at 139–​140 per Sundberg J.

98

Akins v National Australia Bank (1994) 34 NSWLR 155 at 171–​172 per Clarke JA.

99

Farrow Mortgage Services Pty Ltd (in liq) v Peto [1997] ANZ Conv R 226 at 232 per Thomas J.

100

Garcia v National Australia Bank Ltd (1998) 194 CLR 395.

101

Finn, “Equity and Contract”, in Finn (ed), Essays on Contract (The Law Book Company Limited, 1987), p 141.

[9.110]  309 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

disadvantage in the parent, for parents not infrequently assist children in this way.102 More than this is required knowledge-​wise, as was known in Amadio103 (discussed at [9.30]). To the extent that notice principles underscore third party liability in cases of alleged undue influence, however, creditors’ obligations in this regard may be more onerous: see [7.170]–​[7.205].

EXPLOITATION OF SPECIAL DISADVANTAGE Protection by independent advice

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[9.115]  Once the weaker party proves that her or his special disadvantage was sufficiently

evident to the stronger party at the time of the transaction, the burden shifts to the stronger party to prove that it is not behaving unconscionably in seeking to enforce the transaction.104 The most effective means of discharging this burden is to adduce evidence of steps it has taken to ensure that the weaker party understood the nature and effect of the transaction. Though advice and assistance given by the stronger party may prove sufficient for this purpose, a safer course is to require the weaker party be independently advised. If the weaker party has been independently advised, it is challenging to see how the stronger party acts unconscionably105 (at least unless the advice is, to the knowledge of the strong party, insufficient to overcome the operative effect of the special disadvantage).106 In Chen v Song,107 for example, involving the defendants’ default under a high interest short-​term loan, James J refused to set aside the loan on the grounds of unconscionable dealing. As the plaintiff lenders knew that a solicitor represented the defendants in the transaction, they were entitled to assume that, if the defendants had any disadvantage in understanding English, the solicitor would take steps to remedy that disadvantage.108 So it can be said that “while lack of assistance is a well-​recognised basis for a finding of special disadvantage, the existence of legal representation will usually be an answer to such a claim”.109 Expressed in terms more comprehensive, the New Zealand Supreme Court has stated:110 Even when a lender has knowledge of circumstances which might otherwise cause it to suspect something about the borrower or the borrowing which might make the borrowing highly improvident, it will ordinarily be excused from making inquiry if it is also aware that the

102

Tessman v Costello [1987] 1 Qd R 283 at 293 per Williams J (“The familial bond will frequently lead parents into transactions involving obligations which they would not ordinarily undertake”); Burt v Australia and New Zealand Banking Group Ltd (1994) ATPR (Digest) ¶46-​123 at 53,597 per Bryson J; Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 120–​122 per Debelle and Wicks JJ; Janesland Holdings Pty Ltd v Simon [2000] ANZ Conv R 111 at 120–​121 per Crispin J.

103

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

104

Blomley v Ryan (1956) 99 CLR 362 at 428–​429 per Kitto J; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474, 479 per Deane J; Cranfield Pty Ltd v Commonwealth Bank of Australia [1998] VSC 140 at [92] per Mandie J; Janesland Holdings Pty Ltd v Simon [2000] ANZ Conv R 111 at 120 per Crispin J; Turner v Windever [2003] NSWSC 1147 at [106] per Austin J; Smith v Smith (2004) 12 BPR 23,051 at [60], [61] per Barrett J.

105

Australia and New Zealand Banking Group Ltd v Alirezai (2002) Q ConvR ¶54-​574 at 60,814 per Mullins J [affd Australia and New Zealand Banking Group Ltd v Alirezai (2004) Q ConvR ¶54-​601].

106

See, for example, Thorne v Kennedy (2017) 91 ALJR 1260 (discussed at [9.70]) (where although the appellant had been independently advised against entering into an improvident pre-​nuptial agreement, that advice did not in the circumstances function to negate the effect of her special disadvantage, which had been fostered by the timing and manner in which the respondent had presented the agreement for signature: see, in particular, at [123] per Gordon J).

107

Chen v Song [2005] ANZ ConvR 130.

108

Chen v Song [2005] ANZ ConvR 130 at [166]. His Honour also held that defendants were not entitled to relief under the Contracts Review Act 1980 (NSW) except in relation to the rate of interest when compounded from year to year: at [197].

109

Moss v Insurance Australia Ltd [2004] FCA 1636 at [108] per Jacobson J.

110

GE Custodians v Bartle [2011] 2 NZLR 31 at [48] per Blanchard J, delivering the reasons of the court.

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Unconscionable Dealing  Chapter  9

borrower is being advised about the transaction by an independent lawyer. The lender is entitled to assume that a lawyer instructed by the borrower will not have accepted that instruction if any conflict of interest exists and so will give dispassionate advice on whether and on what terms the borrower should proceed with the transaction, including the borrowing. The lender is also entitled to assume that the advice given to the borrower by the lawyer is competent advice and that the borrower has chosen to enter into the transaction on a fully informed basis, and so that all risks associated with it have been pointed out.

Importantly, however, for independent advice to shield the stronger party from liability for unconscionable dealing, it should come from (usually a professional) person who is genuinely independent of the stronger party and must actually address the substance of what would otherwise be the impact of a special disability. In Aboody v Ryan,111 for instance, an elderly father’s transfer of a house to his daughter was motivated by poor health, dependence on the daughter and irrational political fears. Although the father was advised in the transaction by a solicitor, the New South Wales Court of Appeal found the advice to be neither independent nor adequate. It lacked independence because the solicitor also acted for the daughter, and it was inadequate as the solicitor neither addressed the question of improvidence nor ensured that the father fully understood both the legal and practical consequences of his actions. As the daughter was aware of her father’s special disadvantage and the improvidence of the gift, it followed that, absent other countervailing factors, “it might be seen to be unconscionable [for her] to seek to retain the benefit of the transaction”.112 Need for proof of subjective intention to exploit?

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[9.120]  The case law contains dicta indicating that to establish a party has behaved uncon-

scionably it is not sufficient to show merely that the parties were of unequal bargaining power, but that the conduct of the stronger party was exploitative of the weaker party’s position.113 Equity, it has been said, grants relief only where the impugned behaviour shocks the conscience, not where it is merely unreasonable or unfair.114 As explained by Sir Anthony Mason, writing extra-​judicially:115 There is a strong objection to simply equating the concept [of unconscionability] to what is unreasonable and unfair. The object of the doctrine is not to protect people from the consequences of their own mistakes. Because our contract law, unlike that of the United States, does not impose a general obligation of good faith and fair dealing, it is preferable to think of unconscionable conduct in terms of that which shocks the conscience, something which is harsh or oppressive in that it involves taking advantage of another’s special disability or disadvantage. So understood, the concept is not one which is open-​ended, to be applied according to the subjective whim of the Judge, though like other standards, such as that of “the reasonable person”, borderline applications will require an element of value judgment.

Indeed there are cases where an absence of exploitation by the stronger party has been held to deny relief to the weaker party.116 But these cases do not mean that a person can never engage 111

Aboody v Ryan (2012) 17 BPR 32,359.

112

Aboody v Ryan (2012) 17 BPR 32,359 at [80] per Allsop P, with whom Bathurst CJ and Campbell JA concurred.

113

See, for example, Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265 at [65] per Owen J.

114

Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 127 per Debelle and Wicks JJ; Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168 at [24] per Santamaria JA, with whom Neave and Osborn JJA concurred.

115

Mason, “The Impact of Equitable Doctrine on the Law of Contract” (1998) 27 Anglo-​Am L Rev 1 at 12.

116

See, for example, Xu v Lin (2005) 12 BPR 23,131 (where Barrett J rejected the plaintiff’s attempt to set aside his undervalue transfer of a house to the defendant on the ground that, inter alia, it was the plaintiff who engineered the transaction in an

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in unconscionable conduct lacking a subjective intention to exploit. Whereas the focus on conduct that shocks the conscience appears to involve an inquiry into the mind of the stronger party, in reality the court determines this issue objectively by reference to its own experience. So simply because the stronger party does not believe he or she has behaved unconscionably, or that there has been no dishonesty or moral obloquy, is no bar to the claim.117 [9.125]  There are cases that go further, suggesting that proof of “an active extortion of a benefit, an abuse of confidence, a lack of good faith by the party seeking to hold the bargain” are not preconditions to relief. In O’Connor v Hart118 the Privy Council made the obiter remark that unconscionability “can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances”. The New Zealand Court of Appeal in Nichols v Jessup119 seized on this statement, ruling that a bargain may be unconscionable if “made by a poor or ignorant person without advice because of its inherent unfairness and without any element of over-​reaching by one party”. This led it to conclude that “[a]‌ccepting the benefit of an improvident bargain by an ignorant person acting without independent advice which cannot be shown to be fair, may be unconscionable”.120 Although ostensibly couched in terms of conduct, this approach effectively negates proof of conduct that can truly be described as unconscionable. The reference to “unconscionable circumstances” in O’Connor v Hart, and to an “unconscionable bargain” in Nichols v Jessup, reveal that the courts are arguably concerned less with proof of exploitation or taking advantage amounting to unconscionable conduct, and more with the fairness or otherwise of the outcome. At the very least they can be seen as inferring unconscionable conduct purely from the nature of the transaction, a move away from the traditional focus on proof of exploitation as unconscionable conduct. Of course courts can, and do, in this and other areas of law make inferences as to conduct from objective characteristics of transactions. Yet in the doctrine of unconscionable dealing, based as it is on unconscionable conduct, it is difficult to appreciate how finding a bargain to be improvident is by itself evidence of unconscionable conduct sufficient to attract the doctrine. Any such approach is inconsistent with observations in Amadio121 to the effect that the doctrine of unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disadvantage.

attempt to secure or increase the defendant’s affections and to persuade her to live with him, rather than the defendant exploiting the plaintiff by pursuing the transaction: at [40]). Cf Williams v Maalouf [2005] VSC 346 (where although the original offer of a gift sought to be impugned was not fostered by the intended donee, Hargrave J nonetheless found a substantial element of procurement by the donee subsequently amounting to exploitation: at [192]). 117

Johnson v Smith [2010] NSWCA 306 at [5]‌per Allsop P; Aboody v Ryan (2012) 17 BPR 32,359 at [65] per Allsop P, with whom Bathurst CJ and Campbell JA concurred.

118

O’Connor v Hart [1985] AC 1000 at 1024 (emphasis supplied).

119

Nichols v Jessup [1986] 1 NZLR 226 at 233 per Somers J.

120

Nichols v Jessup [1986] 1 NZLR 226 at 234 per Somers J, cited with approval by Young JA in Johnson v Smith [2010] NSWCA 306 at [101]. See also Williams v Maalouf [2005] VSC 346 at [192] per Hargrave J (who likewise accepted that the “mere receipt” of a gift, in circumstances where the donor’s special disadvantage is or should be sufficiently evident to the donee(s), is sufficient to set aside the gift for unconscionable dealing); Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 at [376] per Murphy J (who phrased unconscionable dealing as including “the passive acceptance of a benefit in unconscionable circumstances”).

121

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 per Mason J, at 474 per Deane J.

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Unconscionable Dealing  Chapter  9

Bridgewater v Leahy [9.130]  The High Court in Bridgewater v Leahy122 endorsed a broad reading of O’Connor v

Hart. The case involved a transaction between the deceased (Bill) and his nephew (Neil), pursuant to which Neil secured farming property previously belonging to Bill at a $550,000 undervalue. Neil had devoted his life to working and managing the properties of both his father and Bill. The evidence showed that Neil suggested the transaction to Bill some 18 months before Bill’s death. It also showed that Neil’s suggestion aligned with Bill’s wishes that Neil use the proceeds of the sale of land Neil owned (the Injune land) to buy Bill out. It was also evident that the reason why Bill wished Neil to hold the land was to ensure that the properties continued to be part of a farming enterprise under reliable and experienced management. Prior to entry into the transaction, Bill was examined by a doctor to confirm that he was of sound mind and capable of making decisions about his personal affairs. Bill’s daughters sought to have this transaction set aside on the grounds of unconscionable dealing. A majority of the court upheld the claim, reasoning as follows:123

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Bill had a goal of retaining the properties as an integrated farming enterprise under reliable and experienced management … The transfers and the deed, as a means of attaining that goal, involved an improvident transaction which was neither fair nor just nor reasonable … This transaction put it out of Bill’s power to change his testamentary arrangements with respect to that portion of his assets … Bill’s goal to preserve his rural interests intact and his perception that Neil was the candidate to provide reliable and experienced management thereof were significant elements in his emotional attachment to and dependency upon Neil. The initiative to utilise the circumstances of the sale of the Injune land (to the retention of which Bill had been opposed) for the irreversible implementation of Bill’s wishes during his lifetime came from Neil. It is not an answer that there was no finding that Neil had pursued the initiative to its implementation … with the motive or purpose of forestalling any change in Bill’s testamentary intentions.

Having so reasoned, their Honours concluded that the relationship between Bill and Neil meant that, in discussing the use of the proceeds from the sale of the Injune land, they were meeting on unequal terms, Neil taking advantage of this position to obtain a benefit “through a grossly improvident transaction on the part of his uncle”.124 This led them to hold that “[i]‌t is unconscionable for Neil and his wife to retain the benefit of the improvident transaction by asserting the forgiveness of the whole of the debt which would otherwise be owing to Bill’s estate”.125

Assessment of Bridgewater v Leahy [9.135]  The majority judgment in Bridgewater v Leahy lacks any reasoned analysis and appli-

cation of the elements that form the doctrine of unconscionable dealing. The improvidence of the transaction was, apparently, sufficient to characterise the supposed exploitation as unconscionable, notwithstanding uncontradicted evidence that Bill had good reason to effect the transaction as he did, and no suggestion he lacked mental capacity or understanding when he did so. Though couched in terms of unconscionability, it is difficult to find in Neil’s conduct

122

Bridgewater v Leahy (1998) 194 CLR 457. See Cockburn, “The Boundaries of Unconscionability and Equitable Intervention: Bridgewater v Leahy in the High Court” (2000) 8 APLJ 143.

123

Bridgewater v Leahy (1998) 194 CLR 457 at 492–​493 per Gaudron, Gummow and Kirby JJ.

124

Bridgewater v Leahy (1998) 194 CLR 457 at 493.

125

Bridgewater v Leahy (1998) 194 CLR 457 at 493.

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anything that merits the description “unconscionable”. It appears, rather, that the transaction was set aside because it generated an unfair outcome (“substantive unconscionability”). If so, it is inconsistent with existing authority126 and undermines the operation of the common law doctrine of undue influence in probate applications (as to which see [7.15]).127 If this is truly the upshot of the decision, little or no role remains for proof of “special disadvantage” or, if it retains a role, “it may be found in the inferior negotiating position of the innocent party consequent upon the application of pressure or the exploitation of existing pressure”.128 Yet given the weight of High Court authority that explicitly recognises the importance of special disadvantage, and the practice of lower courts subsequent to Bridgewater v Leahy to continue to recognise and set a high threshold for that requirement, Bridgewater v Leahy should not be viewed as denying this element, which is after all pivotal to the doctrine. More than a lightly reasoned bare majority judgment, which did not in any case explicitly herald any change in the law, is needed to modify substantially a well-​established doctrine. The minority judgment is to be preferred in any case. Gleeson CJ and Callinan J did not even reach the exploitation stage, rightly finding that Bill suffered no special disadvantage in effecting the relevant transaction. Lacking special disadvantage, there was nothing Neil could exploit.129

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[9.140] The extreme to which the majority’s reasoning in Bridgewater v Leahy can be

taken is illustrated by the ostensibly aberrant decision of Shepherdson J in Asia Pacific International Pty Ltd v Dalrymple,130 even though Bridgewater v Leahy was not cited in the reasons. His Honour found that the transaction, a loan, was at arm’s length and that the plaintiff’s solicitors were at pains to ensure the defendants were properly advised as to its terms and understood its consequences. What Shepherdson J found oppressive and unreasonable was the loan agreement’s provision for the capitalisation of interest read in conjunction with the high interest rate.131 This had the practical effect of increasing the loan debt astronomically. His Honour held that the requirement to pay interest on unpaid interest took advantage of the defendants’ special vulnerability that, though not expressly stated, was apparently their financial need, and thus was unconscionable conduct.132 As a remedy, he declared that the loan agreement be construed as if any reference to payment of interest on unpaid interest or capitalisation of interest were deleted. Such an exercise of jurisdiction, independent of statutory foundation (see [9.180]–​[9.195]), is the more remarkable when read in the light of Shepherdson J’s statement that “it is important that courts do not as a general rule interfere in transactions entered into at arm’s length between men of commerce”.133

126

See Dietrich, “Bridgewater v Leahy: Unconscionability and the Flexibility of Equitable Remedies in the High Court” (1999) 73 ALJ 112 at 116 (who criticises the majority judgment for this reason).

127

See Vines, “Challenging the Testator’s Mind by Challenging Lifetime Transactions: Bridgewater v Leahy as Backdoor Probate Law?” (2003) 10 APLJ 53 at 62–​63.

128

McKeand, “Economic Duress —​Wearing the Clothes of Unconscionable Conduct” (2001) 17 JCL 1 at 12.

129

Bridgewater v Leahy (1998) 194 CLR 457 at 472.

130

Asia Pacific International Pty Ltd v Dalrymple [2000] 2 Qd R 229.

131

On this point see also PSAL Ltd v Kellas-​Sharpe (2012) 7 BFRA 337 at [115]–​[120] per Applegarth J [affd Kellas-​Sharpe v PSAL Ltd [2013] 2 Qd R 233].

132

Asia Pacific International Pty Ltd v Dalrymple [2000] 2 Qd R 229 at 240–​241.

133

Asia Pacific International Pty Ltd v Dalrymple [2000] 2 Qd R 229 at 240.

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Unconscionable Dealing  Chapter  9

Refocusing on victimisation or exploitation [9.145]  A welcome “refocusing” on procedural unconscionability at a High Court level appears from the later unanimous judgment of the court in Kakavas v Crown Melbourne Ltd.134 There the appellant, a “high roller” gambler, sought to recover some $20 million he had lost between 2004 and 2006 while gambling at the respondent casino. He alleged that the respondent had knowingly exploited his special disadvantage —​claimed to be his inability, by reason of a pathological urge to gamble, to make rational decisions in his own interests while engaged in gambling  —​by allowing him to (continue to) gamble at its casino. In dismissing the appeal, the court ruled that a pathological interest in gambling was not a special disadvantage that made the appellant susceptible to exploitation by the respondent. The appellant, their Honours noted, “was able to make rational decisions to refrain from gambling altogether had he chosen to do so”.135 Even had a special disadvantage been established, the respondent lacked the requisite knowledge of the disadvantage at the time of the alleged unconscionable conduct. It had accordingly not exploited the alleged disadvantage, and thus not behaved unconscionably. By targeting notions of “victimisation” and “exploitation” in this context, the court threw some doubt over the notion of “passive” exploitation:136

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Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind. Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm’s length commercial transaction. Inadvertence, or indifference, falls short of the victimisation or exploitation with which the principle is concerned.

While no doubt influenced by the respective positions of the appellant and respondent in Kakavas  —​chiefly that the appellant was a successful businessperson who chose to gamble137 —​as well as the fact that casino operations are lawful and directed to profiting from patrons’ gambling,138 the decision ostensibly resets the (higher) bar when it comes to special disadvantage.139 It also confirms the suspicion the law brings to what can be described as a “voluntarily assumed” (special) disadvantage, against a backdrop of accepted principle that unconscionable dealing’s raison d’être is not one of paternalism to rectify imprudent or foolish actions. That, it seems, is distinct from the victimisation and exploitation that lies at the core of unconscionable dealing.

DEFENCES [9.150]  Unconscionable dealing, as a ground for relief in equity, is subject to the same limi-

tations as any grant of equitable relief, including the defences of laches (see [30.10]–​[30.80]) and unclean hands140 (see [30.170]–​[30.180]). 134

Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392.

135

Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [135] (FC).

136

Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [161] (FC) (emphasis supplied).

137

Their Honours remarked, in this regard, that “[i]‌t is necessary to be clear that one is not concerned here with a casino operator preying upon a widowed pensioner who is invited to cash her pension cheque at the casino and to gamble with the proceeds”, a scenario that might sensibly be described as “a case of victimisation”: Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [30] (FC).

138

Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at [20] (FC).

139

See the discussion in Swain, “The Unconscionable Dealing Doctrine: In Retreat?” (2014) 31 JCL 255.

140

Adenan v Buise [1984] WAR 61.

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Equity and Trusts in Australia

REMEDIES [9.155] A victim of unconscionable dealing most commonly seeks the rescission (setting

aside) of the transaction impugned (see Ch 35), and can precede the actual re-​vesting of property by imposing upon the stronger party a constructive trust vis-​à-​vis the interest in property secured by that dealing.141 Alternatives include the refusal to grant specific performance in relation to the contract (see [33.145]) or the grant of an injunction to prevent the unconscionable exercise of rights under the contract (see Ch 31). There is no reason in principle why equitable compensation should not issue in place of another form of equitable relief (see [34.05]), such as where the property tainted by unconscionable dealing was sold to a bona fide purchaser,142 or where the unconscionable dealing involved the transfer of money sums.143 In granting relief the court has the power to do what is “practically just”, including imposing such terms upon a party as the justice of the case requires.144 The advent of legislation that proscribes unconscionable (and other improper) conduct (see [9.160]–​[9.195]) brings with it, moreover, a broad spectrum of remedial relief. Whatever the response, it must be proportional to the benefit derived from the impugned transaction.145 A  court will not grant relief that unjustly enriches the plaintiff. It will ensure that a person who seeks equity does equity: see [P.75]. It may require the weaker party to make restitution for a benefit derived from the unconscionable dealing,146 or set aside that dealing only to the extent of the misconception the weaker party was under regarding its scope.147 However, in the latter case the court may be inclined to set aside the whole dealing if, had the weaker party been fully informed, he or she would not have entered into it.148

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STATUTORY INITIATIVES [9.160] It is increasingly common for statute to empower courts to set aside transactions

on the ground that they are “unconscionable”, in addition to the jurisdiction at general law.

141

See, for example, Smith v Smith (2004) 12 BPR 23,051 (involving property held by a mother (plaintiff/​weaker party) and daughter (defendant) as tenants in common, which was purchased with the proceeds of the sale of the mother’s matrimonial home, and as a result of unconscionable dealing by the daughter; Barrett J ordered that the daughter’s legal interest be held on constructive trust for the mother because the defendant “is, in equity, not a co-​owner at all”: at [70]).

142

Australia and New Zealand Banking Group Ltd v Dzienciol [2001] WASC 305 at [413] per McLure J; Paroz v Paroz (2010) 5 ASTLR 452 at [138] per Peter Lyons J.

143

See, for example, Truran v Cortorillo [2011] VSC 488.

144

Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 113–​114 (FC). See, for example, NZI Capital Corporation Ltd v Poignand (1997) ATPR ¶41-​586 (rescission of a guarantee procured by unconscionable conduct ordered on condition that the guarantor enter into a fresh guarantee for a lesser sum).

145

Wilby v St George Bank (2001) 80 SASR 404 at 414 per Perry J.

146

Geelong Building Society (in liq) v Thomas (1996) V ConvR ¶54-​545 at 66,480 per Hedigan J; Micarone v Perpetual Trustees Australia Ltd (1999) 75 SASR 1 at 70 per Olsson J (in dissent but not on this point); Elkofairi v Permanent Trustee Co Ltd (2002) 11 BPR 20,841 at [98] per Santow JA.

147

Burke v State Bank of New South Wales (1994) 37 NSWLR 53 at 80 per Santow J [affd State Bank of New South Wales Ltd v Burke (1997) 8 BPR 15,511]; Varthalis v Commonwealth Bank of Australia (1996) 7 BPR 14,766 (under the Contracts Review Act 1980 (NSW)); Australia and New Zealand Banking Group Ltd v Petrik [1996] 2 VR 638 at 644 (CA).

148

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 481 per Deane J (who countenanced the possibility that the appropriate relief was an order setting aside the guarantee/​mortgage to the extent to which it imposed a potential liability in excess of the amount the respondents intended to undertake, but concluded that the respondents were entitled to have the whole transaction set aside unconditionally because they would not have entered it at all had they been adequately informed);

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Unconscionable Dealing  Chapter  9

Statute thus impacts upon the concept of “unconscionability” —​which does not necessarily equate to its namesake at general law —​and upon the scope of available remedies. The main generally applicable statutory initiative in this context, Part 2-​2 of the Australian Consumer Law149 (previously Part IVA of the Trade Practices Act 1974 (Cth)), is discussed below. Other relevant provisions of note include Part 2-​3 of the Australian Consumer Law, dealing with unfair contract terms, and statutes targeting particular types of unjust contracts, including credit contracts.150 Australian Consumer Law, Pt 2-​2

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[9.165]  Part IVA was inserted into the (then) Trade Practices Act 1974 (Cth) in 1992, oper-

ative 21 January 1993, at which time it contained ss 51AA and 51AB. A further section, s 51AC, became operative on 1 July 1998. Equivalents in the Australian Consumer Law are ss 20–​22.151 The translation of the equitable principle of unconscionable conduct into a statutory prohibition allows the Australian Competition and Consumer Commission to scrutinise commercial transactions, and opens the door for representative action by the Commission. There is also the educative and deterrent effect of a statutory prohibition. It has caused more frequent use of unconscionability as a defence (or even a cause of action) in commercial disputes, and has required providers of goods and services (and their legal advisers) to review documents and procedures carefully to guard against possible claims of unconscionable conduct. The statutory proscription of unconscionable conduct has the advantage not only of broadening the concept of “unconscionability”; it opens the door to a broader range of remedies. Under the Australian Consumer Law, any person who has suffered, or is likely to suffer, loss or damage as a result of the contravention may apply for injunctive relief (s 232), and may claim damages for loss or damage suffered as a result of the unconscionable conduct (s 236). And under s 243 the court can, inter alia: (a) declare the whole or part of a contract void; (b) refuse enforcement of all or part of a contract; (c) direct a refund of money or the return of property; (d) direct payment of an amount of loss or damages; (e) direct repair or provision for goods supplied; (f) direct the supply of services; or (g) order that an offending person execute necessary legal documentation.

Section 20 (former s 51aa) [9.170] Section 20(1) of the Australian Consumer Law (equivalent to the former s

51AA(1) of the Trade Practices Act 1974 (Cth)) prohibits a person, in trade or commerce, from engaging “in conduct that is unconscionable, within the meaning of the unwritten law from time to time”.152 The original section was not intended to create new legal

Alderton v Prudential Assurance Company Ltd (1993) 41 FCR 435 at 449 per Heerey J; Geelong Building Society (in liq) v Thomas (1996) V ConvR ¶54-​545 at 66,480 per Hedigan J. 149

The Australian Consumer Law is found in Competition and Consumer Act 2010 (Cth), Sch 2.

150

Consumer Credit Code, ss 76–​78 (found in National Consumer Credit Protection Act 2009 (Cth), Sch 1).

151

As a result of the Competition and Consumer Legislation Amendment Act 2011 (Cth), effective from 1 January 2012, the former ss 21 and 22 (equivalent to ss 51AB and 51AC of the Trade Practices Act 1974 (Cth)) were collapsed into a single s 21, leaving s 22 to list matters to which the court may have regard in determining whether conduct is unconscionable for the purposes of s 21. The list parallels the matters formerly found in the former ss 21(2), 22(2) and 22(3).

152

An equivalent proscription applies in relation to financial services: Australian Securities and Investments Commission Act 2001 (Cth), s 12CA. See also Corporations Act 2001 (Cth), s 991A(1), which prohibits a financial services licensee, in relation to the provision of a financial service, from engaging in conduct that is, in all the circumstances unconscionable.

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Equity and Trusts in Australia

rights,153 but to statutorily recognise existing equitable principles relating to unconscionable conduct as developed by the courts.154 According to the relevant Explanatory Memorandum, the section was designed to embody the concept of unconscionable conduct propounded by the High Court in Commercial Bank of Australia Ltd v Amadio155 (discussed at [9.30]). Yet its literal words —​targeting what is unconscionable within the unwritten law —​potentially go beyond the Amadio doctrine. Other equitable doctrines that require identification of unconscionable conduct in a sense known to the unwritten law —​the Garcia doctrine (see [7.205]), estoppel (see [10.310]), duress (see [8.15]), unilateral mistake (see [8.200]) and relief from forfeiture (see [11.05]) (and this list is not closed) —​arguably come within s 20(1).156 The logic for this has been explained as follows:157

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There is no rule of equity which prohibits unconscionable conduct. Rather there are remedies available to relieve against or prevent such conduct in certain classes of case. The Act, however, creates a prohibition. What then does it prohibit? It prohibits conduct in respect of which a judge in equity would have been prepared to grant relief. The imposition of the prohibition precedes any actual or notional judicial decision. The judge deciding a case under [s 20(1)] will be asking himself or herself whether he or she would have been prepared to grant relief at equity on the basis of an assessment of the conduct in question as unconscionable.

Yet there are strong reasons why an expansive approach to the s 20(1) unconscionable conduct jurisdiction is not justified.158 First, it renders meaningless the phrase “within the meaning of the unwritten law, from time to time, of the States and Territories”; had the section been intended to apply to unconscionable conduct generally, it could have ended with the word “unconscionable”. Secondly, the intention of Parliament noted in the Explanatory Memorandum envisaged a narrow approach. Thirdly, “unconscionable” in the wide sense is notoriously difficult to define with precision.159 Where there is a choice between ascribing to a word in legislation a narrow precise definition from case law or a broader loose one, the former should ideally be preferred. Had the legislature intended the term “unconscionable” to attract a wide definition, it would have included a list of factors such as those appearing in s 21. Fourthly, if “unconscionable” is defined broadly, it denies a justification for the existence of s 21.

153

Trade Practices Commission, Unconscionable Conduct in Commercial Dealings:  A Guide to Section 51AA of the Trade Practices Act (1993), p 1. See also Australian Consolidated Investments Ltd v England (1995) 183 LSJS 408 at 439 per Doyle CJ; Australian Competition and Consumer Commission v Chats House Investments Pty Ltd (1996) 22 ACSR 539 at 549–​550 per Branson J.

154

Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 189 ALR 76 at 90 (FC(FCA)) (but adding that it must be recognised that the development of the judge-​made or “unwritten” law may be affected in part by decisions in proceedings in which the former s 51AA is invoked).

155

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

156

Olex Focas Pty Ltd v Skodaexport Co Ltd [1998] 3 VR 380 at 402 per Batt J; Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 189 ALR 76 at 92 (FC(FCA)). Contra GPG (Australia Trading) Pty Ltd v GIO Australia Holdings Ltd (2001) 191 ALR 342 at 389–​390 per Giles J.

157

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2000) 169 ALR 324 at 342 per French J [revd Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 but without expressing a concluded view on the point; cf at [68], [116] per Kirby J dissenting].

158

These criticisms stem from Buckley, “Unconscionability Amok, or Two Readily Distinguishable Cases?” (1998) 26 ABLR 323 at 325; Buckley, “Sections 51AA and 51AC of the Trade Practices Act 1974: The Need for Reform” (2000) 8 TPLJ 5 at 8–​9. See also Tucker, “Unconscionability: The Hegemony of the Narrow Doctrine Under the Trade Practices Act” (2003) 11 TPLJ 78 (who argues that an expansive reading of the former s 51AA “leads this provision into areas that can only be limited subsequently by arbitrary barriers”: at 90).

159

See Dal Pont, “The Varying Shades of ‘Unconscionable’ Conduct  —​Same Term, Different Meaning” (2000) 19 Aust Bar Rev 135.

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Unconscionable Dealing  Chapter  9

[9.175]  Whatever approach is correct, as s 20(1) does not cover conduct prohibited by s 21 (s 20(2)), the enactment of s 21 (and the associated s 22) (as to which see [9.180]–​[9.195]), within its sphere of operation, arguably renders s 20(1) redundant, especially given the broad concept of “unconscionable conduct” found in s 22.160 In any case, consistent with equitable doctrine, there can be no finding of unconscionable conduct under s 20(1) where the parties are experienced operators, accustomed to making commercial judgments, and acutely aware of their own interests and how to advance them.161 A distinction exists between parties who adopt an opportunistic approach to strike a hard bargain and those who act unconscionably.162 In the words of Gleeson CJ in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd:163 It is neither the purpose nor the effect of [s 20(1)] to treat people generally, when they deal with others in a stronger position, as though they were all expectant heirs in the nineteenth century, dealing with a usurer … Parties to commercial negotiations frequently use their bargaining power to “extract” concessions from other parties. That is the stuff of ordinary commercial dealing. What is relevant to a commercial negotiation is whatever one party to the negotiation chooses to make relevant.

There is also a distinction between unreasonable or unfair conduct and unconscionable conduct, although the qualities of unreasonableness and unfairness may inform whether or not conduct is unconscionable.164 And unconscionable conduct is different in nature to mere negligence, although again the degree of negligence, if it translates to recklessness, could potentially substantiate unconscionability.165 Reflecting the general law to this end, what is necessary is at least “some degree of moral tainting in the transaction of a kind that permits the opprobrium of unconscionability to characterise the conduct of the party”.166

Sections 21 and 22 (the former ss 51ab, 51AC)

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[9.180]  Section 21(1) of the Australian Consumer Law proscribes a person, in trade or commerce,

engaging in conduct that is unconscionable in connection with the (possible) supply or acquisition of goods or services to or from a person (other than a listed public company).167 It does not apply to conduct that is engaged in only because the person institutes legal proceedings, or refers to arbitration a dispute or claim, in relation to the said supply or acquisition: s 21(2). For the purpose

160

Dietrich, “The Meaning of Unconscionable Conduct Under the Trade Practices Act 1974” (2001) 9 TPLJ 141 at 147–​148; Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491 at [189] per Selway J.

161

Wenzel v Australian Stock Exchange Ltd (2002) 40 ACSR 557 at 588 per Sundberg J; Arrowcrest Group Pty Ltd v Ford Motor Company of Australia Ltd [2002] FCA 1450 at [35]–​[37] per Heerey J.

162

C G Berbatis Holdings Pty Ltd v Australian Competition and Consumer Commission (2001) 185 ALR 555 at 571 (FC(FCA)) [affd Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51].

163

Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at [14], [16] (footnote omitted). See also at [176] per Callinan J (“Whenever parties are in a business relationship with each other and they fall out over an aspect of that relationship, it will generally not be unreasonable or indeed unconscionable for them to seek to insist upon their legal rights, or to require that one party give up some right in exchange for the conferral of a new right upon that party”).

164

Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168 at [48] per Santamaria JA, with whom Neave and Osborn JJA concurred.

165

Director of Consumer Affairs Victoria v Scully (No 3) [2012] VSC 444 at [31] per Hargrave J [affd Director of Consumer Affairs Victoria v Scully (2013) 303 ALR 168].

166

Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699 at [293] per Allsop P, with whom Bathurst CJ and Campbell JA agreed.

167

An equivalent proscription applies in relation to financial services: Australian Securities and Investments Commission Act 2001 (Cth), s 12CB.

[9.180]  319 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

of determining whether s 21(1) has been contravened, the court cannot pay heed to any circumstances that were not reasonably foreseeable at the time of the alleged contravention: s 21(3). Now s 21(4), introduced by the Competition and Consumer Legislation Amendment Act 2011 (Cth), effective from 1 January 2012, makes explicit that s 21 “is not limited by the unwritten law relating to unconscionable conduct”, evincing an intention that “statutory unconscionable conduct may, where appropriate, continue to develop independently from the equitable and common law doctrines”.168 This had been acknowledged, in any event, in the pre-​2012 case law.169 The sub-​section also makes clear that s 21 is “capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour”. Conduct may, as a result, be unconscionable even where there is no “victim” identified.170 Again, the law had already been heading in this direction.171 Finally, the sub-​section adds that in considering whether conduct to which a contract relates is unconscionable, a court may consider its terms and the manner in which and the extent to which it is carried out; it is not limited to circumstances relating to formation of the contract. Accordingly, a finding of unconscionable conduct may, unlike the general law, emanate from substantive, and not merely procedural, unconscionability. [9.185] The latter had already been evident in the pre-​existing ss 51AB and 51AC of the

Trade Practices Act 1974 (Cth), and their pre-​1 January 2012 equivalents in ss 21 and 22 of the Australian Consumer Law; each listed a variety of matters inclusive of substantive unconscionability. These have translated to the current s 22. For instance, s 22(1) states that, without limiting the matters to which the court may have regard for the purpose of determining whether a supplier has contravened s 21 in connection with the (possible) supply of goods or services to a customer, the court may have regard to: Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

• the relative strengths of the bargaining positions of the supplier and the customer; • whether, as a result of the supplier’s conduct, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; • whether the customer was able to understand any documents relating to the (possible) supply of the goods or services; • whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer by the supplier in relation to the (possible) supply of the goods or services; • the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier;

168

Explanatory Memorandum, Competition and Consumer Legislation Amendment Bill 2011 (Cth), p 21.

169

See, for example, Zoneff v Elcom Credit Union Ltd (1990) ATPR ¶41-​009 at 51,158 per Hill J; Australian Competition and Consumer Commission v Simply No-​Knead (Franchising) Pty Ltd (2000) 178 ALR 304 at 316 per Sundberg J.

170

Explanatory Memorandum, Competition and Consumer Legislation Amendment Bill 2011 (Cth), p 22.

171

See, for example, Australian Securities and Investments Commission v National Exchange Pty Ltd (2005) 148 FCR 132 at 140 (FC).

320 [9.185] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Unconscionable Dealing  Chapter  9

• the extent to which the supplier’s conduct towards the customer was consistent with the supplier’s conduct in similar transactions between the supplier and other like customers; • the requirements of any applicable industry code; • the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; • the extent to which the supplier unreasonably failed to disclose to the customer:  (i) any intended conduct of the supplier that might affect the interests of the customer; and (ii) any risks to the customer arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); • if there is a contract between the supplier and the customer for the supply of the goods or services: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; (ii) the terms and conditions of the contract; (iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; • whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and

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• the extent to which the supplier and the customer acted in good faith. Equivalent provision is made in s 22(2) in connection with the (possible) acquisition of goods or services. The second and fifth matters listed above, in particular, invoke primarily substantive inquiries. In practice, though, courts rarely consider substantive unconscionability independent of procedural unconscionability. So it has been said that “[m]‌ere reliance on the terms of a contract cannot, without something more, constitute unconscionable conduct”,172 and a contravention of s 21 requires “some circumstance other than the mere terms of the contract itself which renders reliance on the terms of the contract unconscionable”.173 But at the same time, that the exercise of contractual rights is involved does not immunise the defendant from a finding of unconscionable conduct.174 [9.190]  Although judicial mention of “a high level of moral obloquy”175 has been made in this

context, this was to differentiate the moral or normative standard in unconscionability from mere unfairness or unjustness rather than to introduce an alternative test to that prescribed by

172

Hurley v McDonald’s Australia Ltd (2000) ATPR ¶41-​741 at [29] (FC(FCA)). Equity, after all, already provides relief against the exercise of a legal right in an unconscionable manner: Legione v Hateley (1983) 152 CLR 406 at 444 per Mason and Deane JJ; Stern v McArthur (1988) 165 CLR 489 at 526–​527 per Deane and Dawson JJ.

173

Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 at [94] per Nicholson J.

174

Australian Competition and Consumer Commission v Lee Lee Pty Ltd (2000) ATPR ¶41-​742 at 40,606 per Mansfield J.

175

Attorney-​General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at [121] per Spigelman CJ. See also Cameron v Qantas Airways Ltd (1995) 55 FCR 147 at 179 per Beaumont J (“serious misconduct, something clearly unfair or unreasonable”); Cameron v Qantas Airways Ltd (1996) 66 FCR 246 at 262 per Davies J (conduct that shows “no regard for conscience; irreconcilable with what is right and reasonable”); Landmark Operations Ltd v J Tiver Nominees Pty Ltd [2008] SASC 322 at [756] per Sulan J (conduct “of such a type as to be deserving of significant moral opprobrium”).

[9.190]  321 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

statute.176 Judges have since disclaimed any need to prove “a high level of moral obloquy” to trigger the unconscionability provisions in question.177 While notions of “moral tainting” are hardly foreign to conduct described as unconscionable, what is clear is that the relevant conduct against conscience must be assessed by reference to the norms of the society in issue.178 That conduct is not divorced from the context wherein it occurs. In Australian Competition and Consumer Commission v Lux Distributors Pty Ltd179 a sale of a vacuum cleaner by prevailing upon an elderly woman after 90 minutes of practised selling technique in her home, access to which was gained via the ruse of a free maintenance check, was found to be unconscionable. The Full Federal Court reasoned that “[t]‌he norms and standards of today require businesses who wish to gain access to the homes of people for extended selling opportunities to exhibit honesty and openness in what they are doing, not to apply deceptive ruses to gain entry”.180 Conversely, pressure selling from a public or business location, even to the elderly, may not traverse into unconscionable conduct for the purposes of the Australian Consumer Law. [9.195]  Questionable lending practices that, in part, precipitated the global financial cri-

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sis commencing in 2009, have figured in the case law pertaining to statutory unconscionability. The practice of “asset lending” —​where a loan is advanced on the security of an asset without a proper investigation or assessment of the borrower’s capacity to repay the loan —​has generated more than one finding of unconscionable conduct.181 The advance of a loan secured by the borrower’s only asset, in circumstances where “it is obvious to the lender that default is inevitable and that the security is to serve as the primary means by which the loan will be repaid”, may well traverse into unconscionable conduct.182 Yet it should not be assumed that all forms of asset-​based lending are unconscionable; otherwise

176

Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at [261] per Allsop CJ.

177

Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199 at [259]–​[306] per Allsop CJ; Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd (2017) 251 FCR 404 at [50]–​[52] per the court; Stubbings v Jams 2 Pty Ltd [2017] VSC 404 at [32]–​[37] per Elliott J; Ipstar Australia Pty Ltd v APS Satellite Pty Ltd (2018) 329 FLR 149 at [275]–​[278] per Leeming JA. Various commentators have endorsed this approach: see, for example, McLeod, “Statutory Unconscionable Conduct Under the ACL: The Case Against a Requirement for ‘Moral Obloquy’” (2015) 23 CCLJ 123 (who argues that “moral obloquy” is too ambiguous to provide a useful tool for statutory interpretation, as well as too narrow to reflect the relevant statutory provisions); Baxt, “Continuing ‘Furore’ Over Moral Obloquy and Unconscionability” (2017) 91 ALJ 809 (who calls for the legislation to be amended to make clear that moral obloquy “has no real place to play as a high value factor in assessing whether unconscionable conduct exists or not”: at 811).

178

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd (2013) ATPR ¶42-​447 at [41] (FC(FCA)).

179

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd (2013) ATPR ¶42-​447.

180

Australian Competition and Consumer Commission v Lux Distributors Pty Ltd (2013) ATPR ¶42-​447 at [63]. As to what has been perceived as a move towards a “norms and standards” approach see Fielder, “Unconscionable Conduct in Equity and Under Statute: The Australian Consumer Law and the Lux Decision” (2015) 23 AJCCL 161.

181

See, for example, Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 at [207] per J Forrest J [affd Violet Home Loans Pty Ltd v Schmidt (2013) 44 VR 202]; Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353 at [364] per Murphy J; Perpetual Trustees Victoria Ltd v Burns [2015] WASC 234 at [222]–​[238] per E M Heenan J; Stubbings v Jams 2 Pty Ltd [2017] VSC 404 at [39]–​[45] per Elliott J. See also National Consumer Credit Protection Act 2009 (Cth), ss 118, 119, 131 (involving credit contracts assessed as unsuitable on the ground that, inter alia, the consumer will be unable to comply with the consumer’s financial obligations under the contract, or could only comply with substantial hardship), Sch 1 (“National Credit Code”, s 76(2)(l), which states that, “at the time the contract, mortgage or guarantee was entered into or changed, the credit provider knew, or could have ascertained by reasonable inquiry at the time, that the debtor could not pay in accordance with its terms or not without substantial hardship” is relevant to the court’s power to reopen the relevant transaction); Aitken, “ ‘Asset Lending’ and the Improvident Borrower” (2012) 86 ALJ 134; McGill, “Asset Lending, Unconscionable Conduct and Intermediaries” (2014) 42 ABLR 146.

182

Australian Securities and Investments Commission v Australian Lending Centre Pty Ltd (No 3) (2012) 213 FCR 380 at [238] per Perram J. See also Butler v Vavladelis [2012] VSC 186 at [17]–​[23] per Hargrave J.

322 [9.195] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Unconscionable Dealing  Chapter  9

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the legitimate practice of advancing “low doc” loans —​at a higher interest rate to compensate for greater risk —​would be imperilled.183 There must, to this end, ordinarily be some other factor beyond the mere fact of asset-​based lending that marks a transaction of this kind as unconscionable.184 Certainly, if the borrowers are independently advised, this will likely protect the lender from a finding of unconscionability.185

183

See Michalopoulos v Perpetual Trustees Victoria Ltd [2010] NSWSC 1450 at [96]–​[108] per White J; PSAL Ltd v Kellas-​ Sharpe (2012) 7 BFRA 337 at [88] [affd Kellas-​Sharpe v PSAL Ltd [2013] 2 Qd R 233]; Provident Capital Ltd v Papa (2013) 84 NSWLR 231 at [113] per Macfarlan JA (cf at [8]‌per Allsop P, at [119] per Sackville AJA); Bank of Queensland v Edwards [2017] QSC 191 at [191] per Daubney J; Bank of Queensland Ltd v Banjamin [2017] QSC 209 at [59]–​[69] per Mullins J.

184

Violet Home Loans Pty Ltd v Schmidt (2013) 44 VR 202 at [59] (CA) (“the task requires a more synthesised approach which takes into account all of the facts relevant to the impugned conduct and determines whether, in all the circumstances, that particular conduct is unconscionable”); Rajapakse, “Unconscionable or Unfair Dealing in Assey-​based Lending in Australia” (2014) 22 CCLJ 151.

185

See, for example, GE Custodians v Bartle [2011] 2 NZLR 31 at [67] per Blanchard J (dealing with the power to reopen credit contracts that the court finds “oppressive” under the Credit Contracts and Consumer Finance Act 2003 (NZ), s 120).

[9.195]  323 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

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Chapter 10

Estoppel [10.05]  The basic purpose of an estoppel is to prevent the harm that results from a person

repudiating the foundation of a belief or assumption he or she has induced. Beyond this broad statement are numerous applications to specific circumstances and qualifications, which have developed into different “forms” of estoppel, at common law and in equity. The customary classification recognises three general classes of estoppel: in writing (by deed), by record (or judgment) and “in pais” (by conduct).1 Estoppel by deed and estoppel by judgment derived from the common law whereas estoppel by conduct was a product of concurrent developments in common law and equity. For this reason, this chapter focuses principally on estoppel by conduct.

COMMON LAW ESTOPPEL Estoppel by deed (or estoppel in writing)

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[10.10]  Estoppel by deed is a rule of evidence founded on the principle that “a solemn and

unambiguous statement or engagement in a deed must be taken as binding between parties and privies, and therefore as not admitting any contradictory proof”.2 It dictates that either party to a deed, if sued in respect of obligations under the deed, may defend the action by virtue of a fact recited therein, the truth of which the parties have agreed to accept as the basis of their transaction.3 For this purpose, the deed must be shown to contain a precise and unambiguous statement of the fact(s) in question —​not merely something from which its existence may be inferred —​and that the statement is indeed that of the person denying the allegation.4 It is not necessary that the fact(s), the truth of which is assumed for the purposes of the transaction, be true.5 The estoppel only operates in proceedings that arise out of the transaction into which the parties entered upon the basis of the assumed facts, not in proceedings arising out of some other transaction.6 Estoppel by judgment (or estoppel by record) [10.15]  The rationales behind estoppel by judgment are threefold: that litigants should not be

twice vexed by the same claim or point; the public interest that there be an end to litigation;

1

Reed v Sheehan (1982) 39 ALR 257 at 275 per Deane J; Labracon Pty Ltd v Cuturich (2013) 17 BPR 32,497 at [119], [120] per Lindsay J.

2

Greer v Kettle [1937] 4 All ER 396 at 404 per Lord Maugham.

3

Dabbs v Seaman (1925) 36 CLR 538 at 548 per Isaacs J; McCathie v McCathie [1971] NZLR 58 at 69 per Turner J; Helmich and Taylor v Thorp and Strathdee [1997] 3 NZLR 86 at 91–​94 per Fisher J.

4

Discount & Finance Ltd v Gehrig’s NSW Wines Ltd (1940) 40 SR (NSW) 598 at 603 per Jordan CJ; Re Bond (1992) 25 ATR 61 at 74 per Hill J.

5

Offshore Oil NL v Southern Cross Exploration NL (1985) 3 NSWLR 337 at 341 per Clarke J.

6

Offshore Oil NL v Southern Cross Exploration NL (1985) 3 NSWLR 337 at 341 per Clarke J.

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Equity and Trusts in Australia

and the undesirability of having conflicting judgments on the record.7 Estoppel by judgment encompasses issue estoppel, res judicata and what is known as “Anshun estoppel”.

Issue estoppel [10.20]  Issue estoppel prevents a party to a civil case8 from raising issues of fact or law that

have already been the subject of determination by order or judgment in previous proceedings.9 Before it can arise, the issue must have been both clearly identified and clearly resolved against the party said to be estopped.10 This requires the court to distinguish decisions of fact or law “fundamental or cardinal” to the judgment from those that are not.11 Proof that the issue has been clearly resolved dictates that a prior interlocutory judgment does not ordinarily suffice to create an issue estoppel12 unless it is reasonable to regard the judgment as a final determination of the issue that one of the parties wishes to raise again.13

Res judicata [10.25]  Unlike issue estoppel, in the case of res judicata14 “the very right or cause of action

claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence”.15 It means that upon final judgment between the parties, one party is estopped from taking proceedings against the other in respect of a cause of action the subject of those previous proceedings or any other cause of action available on the facts of the previous proceedings.16 It is necessary to show that the earlier judgment relied on was a final judgment, and that between the former and the present litigation there is identity of parties and of subject matter or “cause of action”.17

Anshun estoppel

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[10.30]  Anshun estoppel, named after the High Court decision in Port of Melbourne Authority

v Anshun Pty Ltd,18 dictates that a party may be estopped from raising a claim or defence if he or she, through negligence, inadvertence or even accident, failed to raise it in prior proceedings when, given its relevance, and the identity between the parties, to the earlier proceedings, that

7

Westpoint Corp Pty Ltd v Coles Supermarket Australia Pty Ltd (1996) 71 FCR 584 at 593 per Nicholson J; Foodco Group Pty Ltd v Northgan Pty Ltd (1998) 41 IPR 138 at 143 per Marshall J. See generally Maiden, “Recent Steps in the Evolution of Res Judicata, Cause of Action Estoppel and the Anshun Doctrine in Australia” (2004) 25 Aust Bar Rev 130.

8

Issue estoppel does not apply in criminal proceedings: Rogers v The Queen (1994) 181 CLR 251 at 254–​255 per Mason CJ, at 275–​276 per Deane and Gaudron JJ.

9

Hoystead v Federal Commissioner of Taxation (1921) 29 CLR 537; Blair v Curran (1939) 62 CLR 464 at 531 per Dixon J; Mraz v The Queen (No 2) (1956) 96 CLR 62; Kuligowski v Metrobus (2004) 220 CLR 363 at [45] (FC).

10

Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 at 44 (CA).

11

Ramsay v Pigram (1968) 118 CLR 271 at 277 per Barwick CJ; Murphy v Abi-​Saab (1995) 37 NSWLR 280 at 288 per Gleeson CJ.

12

Somodaj v Australian Iron & Steel Ltd (1963) 109 CLR 285; Schlieske v Minister for Immigration and Ethnic Affairs (1987) 79 ALR 554 at 574 per Beaumont J.

13

Makhoul v Barnes (1995) 60 FCR 572 at 582 (FC); Re Martin (1996) 62 FCR 438 at 442–​443 per Cooper J.

14

Res judicata pro veritate accipitur —​once a matter is adjudicated it is accepted as the truth. Res judicata is also called “cause of action estoppel” or “estoppel per rem judicatam”.

15

Blair v Curran (1939) 62 CLR 464 at 532 per Dixon J.

16

See Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597–​604 per Gibbs CJ, Mason and Aickin JJ.

17

Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 at 909–​910 per Lord Reid; Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 at 41 (CA).

18

Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. See generally Handley, “Anshun Today” (1997) 71 ALJ 934.

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Estoppel  Chapter  10

failure was unreasonable.19 It differs from res judicata, where proof that a party seeks to litigate a cause of action previously taken to judgment operates to bar the later action completely. Anshun estoppel operates only where the new litigation involves a point properly belonging to the first proceeding that was unreasonably not included in it, the appropriate order being a stay of proceedings.20 Estoppel by conduct [10.35]  At common law estoppel by conduct (often termed “estoppel in pais”) aims “to pre-

vent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other’s detriment”.21 Estoppel by conduct, so characterised, takes two main forms: estoppel by representation and estoppel by convention.22

Estoppel by representation [10.40]  Estoppel by representation addresses situations in which a person, by a representa-

tion of existing fact, leads another to alter her or his position. Its elements are the following:23

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(1) A representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made. (2) An act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made. (3) Detriment to such person as a consequence of the act or omission.

In these circumstances the court compels adherence to the assumption of fact by denying the person estopped the right to assert a contrary matter of fact.24 Estoppel by representation, for instance, serves to explain the doctrine of ostensible authority in agency, where the principal’s holding out of a person to have authority in excess of any actual authority is characterised as a representation of authority, which in turn serves to estop the principal from denying the consequences of that holding out.25 English law now appears to have taken the step of extending the scope of this form of estoppel to encompass representations of law, aligning it with English law on estoppel by convention:26 see [10.45]. Australian law has yet to proceed in this direction, but there seems

19

O’Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 at 613 per Kirby P; Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 309 per Brennan J; Symonds v Raphael (1998) 24 Fam LR 20 at 41–​42 per Baker and Burton JJ, at 56–​57 per Finn J.

20

Macquarie Bank v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 558 (CA).

21

Thompson v Palmer (1933) 49 CLR 507 at 547 per Dixon J. See also Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 657, 674, 676 per Dixon J; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 397–​399 per Mason CJ and Wilson J, at 413–​415 per Brennan J, at 443 per Deane J, at 458 per Gaudron J.

22

Although historically derived from the common law, there are indications that “estoppel by convention seems to have moved house, from the common law tradition to equitable estoppel” (Cooke, The Modern Law of Estoppel (OUP, 2000), p 31, citing Norwegian American Cruises A/​S v Paul Mundy Ltd (The “Vistafjord”) [1988] 2 Lloyd’s Rep 343 as an example; see also Blindley Heath Investments Ltd v Bass [2017] Ch 389 at [72] per Hildyard J), a trend also observed in Australia (see Harvey, “Estoppel by Convention —​An Old Doctrine with New Potential” (1995) 23 ABLR 45). Whether this makes any great difference in practice, though, remains to be determined.

23

Greenwood v Martins Bank Ltd [1933] AC 51 at 57 per Lord Tomlin. See also Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 at 738 per Starke J; Wykes v Samilk Pty Ltd (1999) Aust Contract Rep ¶90-​097 at 91,008 per Sheller JA.

24

N B Hunt & Sons Ltd v Maori Trustee [1986] 2 NZLR 641 at 655–​657 (CA); Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 458 per Gaudron J.

25

See Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), [20.7]–​[20.12].

26

Briggs v Gleeds (Head Office) (a firm) [2015] Ch 212 at [33]–​[35] per Newey J.

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Equity and Trusts in Australia

little in principle to preclude this development given that Australian law (indeed preceding its English counterpart) has, in the parallel context of mistake, dismantled the distinction between law and fact: see [8.105].

Estoppel by convention [10.45]  Estoppel by convention may arise where parties to a transaction act on an assumed

state of facts, the assumption being either shared by them, or made by one and acquiesced by the other.27 For this purpose, the party claiming the benefit of the estoppel (the proponent) must, beyond establishing the parties proceeded on the basis of an underlying assumption of sufficient certainty to be enforceable (the assumption), prove:28

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[1]‌Each party has, to the knowledge of the other, expressly or by implication accepted the assumption as being true for the purposes of the transaction. [2] Such acceptance was intended to affect their legal relations in the sense that it was intended to govern the legal position between them. [3] The proponent was entitled to act and has, as the other party knew or intended, acted in reliance upon the assumption being regarded as true and binding. [4] The proponent would suffer detriment if the other party were allowed to resile or depart from the assumption. [5] In all the circumstances it would be unconscionable to allow the other party to resile or depart from the assumption.

What distinguishes estoppel by convention from estoppel by representation is that agreement (or convention) —​“a common participation in an assumed state of affairs”29 —​not a representation made by one party to another, is the source of the estoppel. This explains why an estoppel by convention can arise by silence, whereas this is most unlikely for an estoppel by representation.30 Nor does estoppel by convention require a party to have induced (or acquiesced in) the adoption of the assumption by another or, in particular, a party to know that another may incur detriment by reliance on the assumption.31 English and New Zealand law acknowledges that estoppel by convention can extend to assumed matters of law.32 Australian law remains unclear on the point, hampered by the remarks of the Full High Court in Con-​Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd33 that “just as estoppel by representation requires a

27

Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878 at 913 per Lord Steyn; Ryan v Moore [2005] 2 SCR 53 at [61], [62], [76] per Bastarache J. See generally Harvey, “Estoppel by Convention —​An Old Doctrine with New Potential” (1995) 23 ABLR 45; Derham, “Estoppel by Convention” (1997) 71 ALJ 860 (Pt 1), 976 (Pt 2). Though there may be some overlap between the doctrine of estoppel by deed and those of estoppel by representation and estoppel by convention (Prime Sight Ltd v Lavarello [2014] AC 436 at [29] per Lord Toulson), estoppel by conduct remains distinct from estoppel by deed: see generally see Labracon Pty Ltd v Cuturich (2013) 17 BPR 32,497 at [114]–​[153] per Lindsay J (rejecting the proposition that estoppel by deed is a subset of estoppel by convention, noting that, in particular, “estoppel by deed does not (whereas estoppel by convention does) require a person claiming an entitlement to rely on an estoppel, as a primary party to the alleged estoppel, to prove, as a fact, that the parties adopted (or that he, she or it relied, to his, her or its detriment, on) the agreed or assumed conventional basis upon which the parties’ affairs have been conducted”: at [128]).

28

National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548n at 550 per Tipping J (numbers altered). See also Thompson v Palmer (1933) 49 CLR 507 at 547 per Dixon J; Con-​Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244–​245 (FC); Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500 at [37]–​[49] per Macfarlan JA.

29

Mulholland, “Estoppel by Convention” [2002] NZLJ 395 at 397.

30

Ryan v Moore [2005] 2 SCR 53 at [59], [76] per Bastarache J.

31

Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713 at [37] per Brereton J.

32

See, for example, Norwegian American Cruises A/​S v Paul Mundy Ltd (The “Vistafjord”) [1988] 2 Lloyd’s Rep 343 at 351 per Bingham LJ; National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548n at 550 per Tipping J; PW & Co v Milton Gate Investments Ltd [2004] Ch 142 at [171]–​[174] per Neuberger J.

33

Con-​Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 at 244–​245.

328 [10.45] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

representation of fact, so too estoppel by convention requires the assumed state of affairs to be an assumed state of fact”, so that on the facts in issue an assumption as to the legal effect of the contracting parties’ conduct could not form the basis of an estoppel by convention. Yet only four years later two members of the High Court, including Mason J who had formed part of the court in Con-​Stan, in Commonwealth v Verwayen34 accepted that estoppel by conduct could arise from an assumption as to a legal state of affairs. In practice, however, the distinction appears a fluid one, with multiple instances in the case law where what is approached as an assumed state of facts could be construed as matters of law, such as, for instance, an (incorrect) assumption about the operation or validity of a legal document.35

EQUITABLE ESTOPPEL Distinctions between common law and equitable estoppel by conduct

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[10.50] There are three main distinctions between common law and equitable estoppel by

conduct. First, common law estoppel operates upon a representation of existing fact;36 equitable estoppel can operate upon representations or promises as to future conduct, including promises about legal relations. This explains judicial statements that common law estoppel operates by reference to an assumption of fact whereas equitable estoppel operates by reference to an assumption of rights.37 Secondly, common law estoppel establishes a state of affairs by reference to which the legal relation between the parties is to be decided. Any rights flow from the court’s decision on the state of affairs established by the estoppel. Here the role of estoppel is largely explicable as a rule of evidence.38 Equitable estoppel creates rights known as “equities” against the party estopped, which prevail over that party’s common law rights to the extent that the detriment stemming from the unfulfilled representation is remedied. Therefore, equitable estoppel is a source of legal obligation.39 Thirdly, common law estoppel aims to make good the assumption; it is “all or nothing” because, explicable as a rule of evidence, it is directed to “maintaining a particular state of affairs according to which the pre-​existing rights and obligations between the parties will be determined”.40 Equity, conversely, grants relief proportional to the loss suffered by the party misled, although Australian courts since have shied from this proposition at least vis-​à-​vis proprietary estoppel: see [10.240]–​[10.250]. In its traditional form, equitable estoppel does “not compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfulfilled, will be suffered by the party who has been induced to act or abstain from acting thereon”.41 The discretionary and flexible nature of

34

Commonwealth v Verwayen (1990) 170 CLR 394 at 413 per Mason CJ, at 445 per Deane J.

35

See, for example, Coghlan v SH Lock (Australia) Ltd (1985) 4 NSWLR 158; Farrow Mortgage Services Pty Ltd v Hogg (1995) 64 SASR 450 Government Employees Superannuation Board v Martin (1997) 19 WAR 224; Riseda Nominees Pty Ltd v St Vincent’s Hospital (Melbourne) Ltd [1998] 2 VR 70; LCY Pty Ltd v Ma [2017] VSCA 383.

36

Jorden v Money (1854) 5 HLC 185; 10 ER 868.

37

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 458 per Gaudron J.

38

Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472 per Priestley JA.

39

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 416, 425 per Brennan J; Commonwealth v Verwayen (1990) 170 CLR 394 at 500–​501 per McHugh J.

40

Hudson, “The True Purpose of Estoppel by Representation” (2015) 32 JCL 275 at 275–​276.

41

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 423 per Brennan J.

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Equity and Trusts in Australia

equitable relief, in any case, allows a court to tailor relief to take account of the circumstances surrounding the relationship in question to arrive at a just result. Forms of estoppel by conduct in equity [10.55]  Estoppel “in pais” (by conduct) is ordinarily understood as encompassing proprie-

tary estoppel and promissory estoppel, each discussed below.

Proprietary estoppel [10.60]  Proprietary estoppel can prevent an owner of an interest in property from asserting

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her or his rights against another party whom he or she has allowed or encouraged to deal with that interest, or act in relation to that property, as if the latter had rights to the property. As its name suggests, proprietary estoppel requires, it is said, “that the assurances given to the claimant (expressly or impliedly, or, in standing-​by cases, tacitly) should relate to identified property owned (or, perhaps, about to be owned) by the defendant”.42 Traditionally, proprietary estoppel took one of two forms:43 where the representor encouraged expenditure on the property by some representation of benefit, known as “estoppel by encouragement”;44 where he or she acquiesced to the expenditure, “estoppel by acquiescence” was the description.45 The equity created by the expenditure could be a beneficial interest, or could be given effect by way of a charge or lien.46 As proprietary estoppel is equitable in origin, the above forms of relief do not circumscribe the court. Rather, “[t]‌he equitable relief will be moulded to fit the particular case”.47 Where the advantage or benefit promised less precisely aligns with an established category of legal interest in land, equity takes a greater initiative in fashioning appropriate relief in order to match it with the benefits promised.48 For example, estoppel can be invoked even if the facts do not establish an equitable interest in the land, such as where the promise is only of a possessory interest.49 [10.65]  In modern Australian law the typical scenario giving rise to claims of a proprietary

estoppel is often argued by resort to the remedial constructive trust, imposed by the court to reflect contributions to property that it is unconscionable to deny legal significance:  see [38.175]–​[38.210]. Constructive trust relief is not premised on proof of a representation, reliance or detriment, though evidence of this kind may influence whether conduct is unconscionable. As constructive trust relief is based on conduct, there is relatively little need for estoppel to provide a cause of action. Yet it is not uncommon for estoppel to be pleaded as

42

Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [61] per Lord Walker (emphasis supplied).

43

See Kirk, “Confronting the Forms of Action: The Emergence of Substantive Estoppel” (1991) 13 Adel L Rev 225 at 237–​241.

44

Dillwyn v Llewelyn (1862) 4 De GF & J 517; 45 ER 1285.

45

Ramsden v Dyson (1866) LR 1 HL 129; Willmott v Barber (1880) 15 Ch D 96 at 105–​106 per Fry J; Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 at 903 per Lord Wilberforce (dissenting but not on the law); Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at 34–​35 per Young J; Tram Lease Ltd v Croad [2003] 1 NZLR 73 at 78–​79 per Salmon J [affd Tram Lease Ltd v Croad [2003] 2 NZLR 461 at [22] per Blanchard J].

46

Chalmers v Pardoe [1963] 1 WLR 677 at 681–​682 (PC); Crabb v Arun District Council [1976] Ch 179 at 187 per Lord Denning MR; Jackson v Crosby (No 2) (1979) 21 SASR 280 at 307 per Cox J, at 310 per Mohr J; Cadorange Pty Ltd (in liq) v Tanga Holdings Pty Ltd (1990) 20 NSWLR 26 at 39–​40 per Young J; Kintominas v Secretary, Department of Social Security (1991) 103 ALR 82 at 90–​93 per Einfeld J; Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 54 (CA).

47

Wood v Browne [1984] 2 Qd R 593 at 606 per Macrossan J.

48

Wood v Browne [1984] 2 Qd R 593 at 607 per Macrossan J; Jennings v Rice [2003] 1 P & CR 100 at [36] per Aldous LJ (see Thompson, “The Flexibility of Estoppel” [2003] Conv 225).

49

Gibb v MacDonnell [1992] 3 NZLR 475 at 479–​480 per Anderson J.

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Estoppel  Chapter  10

an alternative cause of action in cases that may come within both doctrines.50 In the United Kingdom, on the other hand, judicial reticence to embrace the remedial constructive trust in this context  —​grounded in the belief that whether a proprietary right exists is a question of the law of property; it is not for the court’s discretion, except with the imprimatur of Parliament —​has burdened proprietary estoppel with a greater load.51

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[10.70]  Interplay between proprietary estoppel and the remedial constructive trust nonethe-

less persists. The court may, in its discretion to grant relief moulded to the circumstances of the case, use the constructive trust as a remedy to give effect to the promise of an interest in land. This may be so where the elements of proprietary estoppel are met in respect of that promise, and imposing constructive trusteeship on the representor is an appropriate means of giving effect to the equity raised in the representee.52 Here the constructive trust is used to vest beneficial ownership in the representee so as to estop the representor from resiling from her or his promise to the representee of that ownership. It should not be assumed that the trust here is created by the court, as opposed to arising upon the reliance on the relevant assumption. The point is of significance where the timing of the relevant equitable interest is in issue, say, for the purposes of priority in relation to other interests,53 insolvency, protection via a caveat, or triggers for limitation bars.54 It cannot, however, be assumed that the constructive trust is always the appropriate remedy to give effect to a plaintiff’s expectation of an interest in land. It may prove too extensive a form of relief. As foreshadowed at [10.60], a charge or lien, or even an order for equitable compensation, may suffice. The High Court pursued the latter course in Giumelli v Giumelli,55 a case involving three promises by parents to their son of an interest in the parents’ land. Over the years the son relied to his detriment on these promises, which were retracted following a family disagreement. The court found an estoppel in the son’s favour, but declined to grant him rights under a constructive trust because, in the intervening period, his brother had acquired an interest in the property the subject of the second promise. Their Honours instead opted to fix a money sum to represent the present value of the son’s equitable claim to the promised property.56

50

See, for example, Stowe v Stowe (1995) 127 FLR 25; W v G (1996) 20 Fam LR 49.

51

See Etherton, “Constructive Trusts and Proprietary Estoppel: The Search for Clarity and Principle” [2009] Conv 104 at 125 (“Proprietary estoppel, with its traditional requirements of a clear representation and detriment or change of position and the remedy restricted to the minimum to do justice, has usually been considered a more reliable and certain instrument for remedying unconscionable conduct than the rather fluid concept of the constructive trust”).

52

See, for example, Flinn v Flinn [1999] 3 VR 712 at 750 per Brooking JA; Lieschke v Lieschke [2003] NSWSC 743.

53

See, for example, Mould v Canale [2017] VSC 793 (where the interests of third parties in land were subordinated to a successful claimant in equitable estoppel whose interest was first in time and known to the third parties); James v James [2018] WTLR 1313 at [53]–​[67] per HHJ Paul Matthews.

54

See, for example, McNab v Graham [2017] VSCA 352 (characterising a claim in proprietary estoppel as a proceeding “to recover … trust property” for the purposes of the Limitation of Actions Act 1958 (Vic), s 21(1)(b), to which no limitation period applied, because the constructive trust in favour of the representee pre-​dated the court’s recognition of it).

55

Giumelli v Giumelli (1999) 196 CLR 101.

56

Giumelli v Giumelli (1999) 196 CLR 101 at 125 per Gleeson CJ, McHugh, Gummow and Callinan JJ, at 127–​128 per Kirby J. The case has generated considerable commentary (see, for example, Edelman, “Remedial Certainty or Remedial Discretion in Estoppel after Giumelli” (1999) 15 JCL 179; Wright, “Giumelli, Estoppel and the New Law of Remedies” [1999] CLJ 476; Burns, “Giumelli v Giumelli Revisited: Equitable Estoppel, the Constructive Trust and Discretionary Remedialism” (2001) 22 Adel L Rev 123), most focusing on the remedial aspects. Yet the court did not attempt any serious analysis of remedies for estoppel generally, and as the case has been interpreted as both an example of discretionary remedialism (namely Wright) and one that removes discretion from the law of equitable estoppel (namely Edelman), perhaps too much has been attributed to

[10.70]  331 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

Promissory estoppel [10.75]  The operation of estoppel by acquiescence or encouragement extended beyond the

proprietary context. From Lord Cairns LC’s judgment in Hughes v Metropolitan Railway Co57 stemmed the equitable doctrine of promissory estoppel. His Lordship explained the doctrine in the following terms:58 [I]‌f parties who have entered into definite and distinct terms involving certain legal results … afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties.

In Waltons Stores (Interstate) Ltd v Maher 59 the High Court modified this formulation in three important respects:  it abandoned the requirement that the parties be in a pre-​existing legal relationship; 60 it permitted promissory estoppel to be used as a cause of action (a sword) rather than merely as a defence (a shield);61 and it substituted “unconscionability” for “inequity” as the criterion upon which the court exercises its jurisdiction. Hence, a modern statement of the doctrine likely follows that expressed by Priestley JA in Austotel Pty Ltd v Franklins Selfserve Stores Pty Ltd:62

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For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in the circumstances where departure from the assumption by the defendant will be unconscionable.

Although there has been some judicial reluctance to embrace the notion of promissory estoppel within the established category of estoppel in pais, there appears no valid reason artificially to restrict the latter in this fashion.63 In fact, its current formulation makes promissory estoppel arguably the paradigm example of estoppel by conduct.

the decision (cf Burns who argues that Giumelli is simply an example of moderate discretionary remedialism: at 154). More generally, some query whether relief in proprietary estoppel is too discretionary: see Gardner, “The Remedial Discretion in Proprietary Estoppel —​Again” (2006) 122 LQR 492. 57

Hughes v Metropolitan Railway Co (1877) 2 App Cas 439.

58

Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 at 448. See also Birmingham and District Land Co v London and North Western Railway Co (1888) 40 Ch D 268 at 286 per Bowen LJ; Central London Property Trust Ltd v High Trees House Ltd [1947] 1 KB 130.

59

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

60

This, it appears, remains a requirement of promissory estoppel in England: Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [61] per Lord Walker.

61

Cf English courts’ refusal to acknowledge that promissory estoppel (as compared to proprietary estoppel) can act as a sword, which has been the subject of criticism:  see, for example, Barnes, “Estoppels as Swords” [2011] LMCLQ 372; Knowles and Balen, “What’s Special About Land? The Relationship Between Promissory and Proprietary Estoppel” (2013) 24 KLJ 111.

62

Austotel Pty Ltd v Franklins Selfserve Stores Pty Ltd (1989) 16 NSWLR 582 at 610.

63

See Lindgren, “Estoppel in Contract” (1989) 12 UNSWLJ 153 at 159.

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Estoppel  Chapter  10

Attempts to fuse estoppel by conduct into a substantive doctrine

Fusion of common law and equitable estoppel by conduct? [10.80] In Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd64 Lord

Hailsham LC predicted that “the time may soon come when the whole sequence of cases based on promissory estoppel since the war … may need to be reviewed and reduced to a coherent body of doctrine by the courts”. Mason CJ and Deane J in the High Court of Australia sought to fulfil this prophecy by propounding a unified doctrine of estoppel —​incorporating both common law and equitable forms of estoppel by conduct (including possibly estoppel by convention) —​unshackled by distinctions that, particularly regarding representations as to present fact as opposed to future conduct, often bordered upon sophistry. Deane J reasoned compellingly as follows in Waltons Stores (Interstate) Ltd v Maher:65

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There is no reason, in authority or in principle, for introducing into a fused system a dichotomy between equity and law in those cases where estoppel by conduct, under the nomenclature of promissory estoppel, is recognised as extending to at least some representations or assumptions about future facts. Nor, in a fused system where equitable and legal remedies are all generally available, is there any pragmatic reason why the application of the doctrine of estoppel by conduct to preclude departure … from a representation or assumption of a future state of affairs should be seen as an exclusively equitable development. Finally, once it is recognised that the doctrine of estoppel is one of substantive law and equity, there is no reason why that doctrine cannot be applied as effectively in relation to a representation or assumption of a future state of affairs as to one of an existing state of affairs.

In Foran v Wight66 Mason CJ concluded that “we should now recognise that common law estoppel as well as an equitable estoppel may arise out of a representation or mistaken assumption as to future conduct”, adding that “[t]‌o do so would give greater unity and consistency to the general doctrine of estoppel”. The Chief Justice, in repeating this opinion in Commonwealth v Verwayen,67 viewed estoppel as a label that “covers a complex array of rules spanning various categories”, all of which are intended to serve the same fundamental purpose, namely “protection against the detriment which would otherwise flow from a party’s change of position if the assumption (or expectation) that led to it were deserted”. His Honour observed that to premise the form of relief according to whether a representation is of existing fact as opposed to future conduct “is unsatisfactory and produces arbitrary results instead of serving any useful purpose”.68 [10.85]  One substantive doctrine of estoppel by conduct —​covering assumptions as to the

present, past or future state of affairs —​avoids extended argument concerning the representor’s intention. Distinguishing between an assumption as to present, past or future state of

64

Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 at 758.

65

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 451. See also Foran v Wight (1989) 168 CLR 385 at 434–​435 per Deane J.

66

Foran v Wight (1989) 168 CLR 385 at 430.

67

Commonwealth v Verwayen (1990) 170 CLR 394 at 409.

68

Commonwealth v Verwayen (1990) 170 CLR 394 at 410. See also Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 at 242 per Lord Denning MR; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 398–​399 per Mason CJ and Wilson J, at 450–​452 per Deane J; Foran v Wight (1989) 168 CLR 385 at 411–​413 per Mason CJ, at 433–​437 per Deane J.

[10.85]  333 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

affairs is not always easy. A representation of a promissory nature may be difficult to classify clearly as a representation of a presently existing intention as opposed to an intention as to a future state of affairs. Where in the one factual situation representations are made with respect to both present and future intention, maintaining the distinction between common law and equitable estoppel is unnecessary. For example, in Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd69 Handley JA observed that, although excuses and promises made by X in response to Y’s request for payment under a contract conveyed representations of fact to Y that X had a present intention of performing the contract by paying the agreed debt, they could equally be seen as promissory representations that X would perform the contract in the future. Inconsistency in consequences flows from the often “subjective” categorisation of representations between those of present facts as compared with future intention. In the former event, the only remedy at law would be to hold the representor to the assumption he or she had induced. Representations as to future conduct, traditionally the province of equity, prompted relief proportional to the detriment suffered by the representee. Yet given the fine and sometimes equivocal distinction between representations of presently existing intention and representations as to future conduct, “it is anomalous and potentially unjust to allow the two doctrines to inhabit the same territory yet produce different results”.70 Hence, a single substantive doctrine of estoppel as propounded by Mason CJ and Deane J would:71 … give the whole doctrine a degree of flexibility which it might lack if it were an exclusively common law doctrine. In particular, the prima facie entitlement to relief based upon the assumed state of affairs will be qualified in a case where such relief would exceed what could be justified by the requirements of good conscience and would be unjust to the estopped party. In such a case, relief framed on the basis of the assumed state of affairs represents the outer limits within which the relief appropriate to do justice between the parties should be framed.

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Fusion of forms of equitable estoppel? [10.90]  Judicial efforts to mould common law and equitable estoppel by conduct into a single

doctrine pressure any claim for persisting in the distinction between proprietary and promissory estoppel in equity. If indeed the main distinction between these two types of equitable estoppels is that one focuses on promises of an interest in property, whereas the other deals with other kinds of promises, unless there is some principled justification for a substantive difference in judicial response to each type of promise, the logic for retaining the distinction evaporates. There may indeed be differential remedial responses, for a promise relating to property may be more likely to evoke a proprietary remedial response than one directed to a different subject matter, but this goes to remedy and not to the cause of action. To this end, it is perhaps unsurprising that the High Court in Giumelli v Giumelli,72 noted at [10.70], did not distinguish proprietary from promissory estoppel in granting relief on the facts of that case.

Estoppel by conduct as a single substantive doctrine? [10.95]  The above developments arguably provide scope for a substantive doctrine of estop-

pel, uniting both common law and equitable estoppel by conduct, and the two main forms of equitable estoppel, or at least evidence a judicial trend to apply a substantive doctrine 69

Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 at 307.

70

Commonwealth v Verwayen (1990) 170 CLR 394 at 412 per Mason CJ.

71

Commonwealth v Verwayen (1990) 170 CLR 394 at 445–​446 per Deane J.

72

Giumelli v Giumelli (1999) 196 CLR 101.

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Estoppel  Chapter  10

increasingly shorn of historical distinctions.73 On this approach, a court may do what is required, but not more, to prevent a person who has relied upon an assumption as to a present, past or future state of affairs from suffering a detriment in reliance upon the assumption that is not fulfilled.74 The central principle of such a “substantive” doctrine would be that:75 … the law will not permit an unconscionable … departure by one party [the representor] from the subject matter of an assumption which has been adopted by the other party [the representee] as the basis of some relationship, course of conduct, act or omission which would operate to that other party’s detriment if the assumption be not adhered to for the purpose of the litigation.

The substantive doctrine requires the representee to establish detrimental reliance on the representation(s) of the representor, such as to make it unconscionable for the representor to resile from the representation. It could be pleaded (either as a cause of action or as a defence) where the assumption created does not fulfil the elements of an enforceable contract (whether or not the formation of a contract was the assumption created) irrespective of whether or not the parties are in an existing legal relationship.

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[10.100] Notwithstanding the remarks of several members of the High Court directed to

fusing common law and equitable estoppel by conduct, and the two main forms of equitable estoppel, into a substantive doctrine, the effluxion of time has seen little progress in this direction.76 The movement commenced by Mason CJ and Deane J, in particular, in the late 1980s has seen no replication at High Court level subsequently. Australian judges in lower courts have declined to accept that, on the present state of the law, there is fusion of common law and equitable estoppel by conduct.77 There is similar discord on the point between judges in England.78 So far as fusion between the two main forms of estoppel in equity is concerned, the prospects seemed more promising in Australian courts —​which did not, as a matter of course, in the 1990s and the early twenty-​first century, distinguish proprietary and promissory estoppel —​but more recently, informed by the delphic judgment of the High Court in Giumelli

73

See Commonwealth v Verwayen (1990) 170 CLR 394 at 413 per Mason CJ, at 445 per Deane J, at 487 per Gaudron J. Neither Brennan J (at 428–​431) nor Toohey J (at 475)  specifically addressed this issue. Contra at 454 per Dawson J (“estoppel at common law and in equity may have had common origins, but there the similarity stops”). See also Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [217] per Nettle J (while accepting that the idea of “one overarching doctrine of estoppel rather than a series of independent rules” may not yet have “won general acceptance”, responded that “in as much as the recognised categories of equitable estoppel are instances of the operation of the more general foundational principle, the determination of whether it is unconscionable for the charged party to depart from an assumption or expectation created in the mind of the claimant must always depend on the particular facts and circumstances of the case”); Miller Heiman Pty Ltd v Sales Principles Pty Ltd (2017) 94 NSWLR 500 at [42] per McColl JA (remarked that while Deane J’s remark in Commonwealth v Verwayen at 445 that the doctrine of estoppel should be seen as “a unified one which operates consistently in both law and equity”, whilst not the law so far, does not deny that “the principles of equitable and common law estoppel are undoubtedly closely related”).

74

Commonwealth v Verwayen (1990) 170 CLR 394 at 413 per Mason CJ.

75

Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J. Cf See Lunney, “Towards a Unified Estoppel —​The Long and Winding Road” [1992] Conv 239 at 242–​244 (for a succinct analysis of the very fine, if not negligible, distinctions between the various estoppels by conduct).

76

The arguments that remain in favour of fusing estoppels in this regard are catalogued in Bryan, “Unifying Estoppel Doctrine: The Argument for Heresy” (2013) 7 J Eq 209.

77

See, for example, Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 at 307 per Handley JA; McCraith v Fraser (1991) 6 ANZ Ins Cases ¶61-​061 at 77,144 per Gray J; Matthews v Doctrieve Corporation Pty Ltd (2003) 59 IPR 155 at [20] per Finkelstein J; MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 at [71] per Hodgson JA.

78

See, for instance, judges who are against any type of fusion (see First National Bank v Thompson [1996] Ch 231 at 236 per Millett LJ; Republic of India v India Steamship Co Ltd (No 2) [1998] AC 878 at 914 per Lord Steyn), some who are equivocal

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Equity and Trusts in Australia

v Giumelli,79 some judges have displayed an inclination to maintain a separate doctrine of proprietary estoppel designed to enforce promises rather than necessarily provide a remedy proportional to detriment. This view, not one shared by all judges,80 is discussed, and queried, at [10.240]–​[10.260]. The treatment of estoppel that ensues  —​in relation to the elements of representation, reliance, detriment and unconscionability —​proceeds on the basis of a substantive doctrine of equitable estoppel by conduct, one that has in any case arguably superseded common law estoppel by conduct, assuming the latter subsists in Australian law.

REPRESENTATION [10.105]  The foundation for establishing an estoppel is proof of a promise or the creation of

an assumption (commonly termed a “representation”).81 It need not be that a contract will come into existence; the creation or encouragement that a promise will be performed will suffice.82 It is therefore no bar to an estoppel that the promise, had it fulfilled the requirements of a contract, would not have been specifically enforceable.83 Clarity of the representation [10.110]  It is often said that, whatever its subject matter, to be probative for the purposes

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of estoppel, the representation must be clear and unequivocal, whether in relation to present fact or future intention or conduct.84 So a mere expression of opinion of what may occur, or a statement phrased in tentative and non-​committal terms, is unlikely to amount to an actionable representation.85 In Legione v Hateley,86 involving a contract for the sale of land, the respondent purchasers alleged that a statement by a clerk employed by the appellant vendors’ solicitors estopped the appellants from refusing to complete. That statement, made in response to notification by the respondents’ solicitor that the respondents had obtained finance and

(see National Westminster Bank plc v Somer International (UK) Ltd [2002] QB 1286 at [38], [39] per Potter LJ) and yet others who appear to countenance some fusion (see Johnson v Gore Wood [2002] 2 AC 1 at 41 per Lord Goff). 79

Giumelli v Giumelli (1999) 196 CLR 101.

80

Cf Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLR 567 at [111], where Randerson J, delivering the reasons of the court, remarked that although a number of the relevant cases targeted proprietary estoppel, “there is no reason to suppose that the general principles relating to remedy do not also apply to other categories of equitable estoppel”.

81

Cf Equititrust Ltd v Franks (2009) 258 ALR 388 at [72] per Handley AJA (who, favouring the maintenance of separate categories of common law and equitable estoppel by conduct, considered it “helpful and an aid to clear analysis” if the term “representation” was only used to refer to statements about an existing or past fact, and the terms “promise” or “assurance” were used to describe the statements which can give rise to a promissory estoppel).

82

Forbes v Australian Yachting Federation Inc (1996) 131 FLR 241 at 287 per Santow J.

83

See, for example, W v G (1996) 20 Fam LR 49 at 66 per Hodgson J (where the defendant’s promise to act, together with the plaintiff, as a parent of two children to which the plaintiff had given birth, though not enforceable as a contract, was held to give rise to an estoppel entitling the plaintiff to compensation).

84

Legione v Hateley (1983) 152 CLR 406 at 436–​437 per Mason and Deane JJ.

85

See, for example, Wingecarribee Shire Council v Concrite Quarries Pty Ltd (2001) 114 LGERA 82 at 91 per Lloyd J.

86

Legione v Hateley (1983) 152 CLR 406. See also Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 at 513–​516 (FC) (where promises made at a sales convention that service station franchisees that met certain standards in the conduct of their business would receive additional tenure for free were held, inter alia, not to be clear and unequivocal because the framework within which the statements were made was tentative in nature and the commitment was expressed in terms too general); Murphy v Overton Investments Pty Ltd (2001) 182 ALR 138 at 156–​157 per Branson J, at 162–​163 per R D Nicholson J (contra at 179–​180 per Gyles J in dissent) [revd on another point on appeal: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388]. Cf EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 (where, unlike Mobil Oil,

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Estoppel  Chapter  10

could settle on a certain date, was: “I think that’ll be all right but I’ll have to get instructions”. Mason and Deane JJ rejected the respondents’ submission because no clear and unequivocal representation could be discerned from the facts.87 In their Honours’ view, the clerk expressed only her personal opinion, in any case subject to securing instructions. Brennan J similarly viewed the statement as no more than the clerk’s expectation of what the vendors’ instructions would be, as distinct from a promise or representation on behalf of vendors that they would extend time.88 Also, an alleged representation contained in pre-​contractual documentation, expressed to be subject to some future contingency (say, preparation of a formal contract89 or council approval for subdivision),90 is unlikely to be unequivocal. Nor is a representation expressed, or reasonably understood, to be revocable capable of generating an estoppel, a typical scenario relating to promises of an inheritance, against the backdrop that a will is an inherently revocable instrument. In this regard, the law must distinguish, it is said, “expressions of present expectation or prediction” from actionable promises,91 and may face difficulties attendant to what are often mere oral statements (allegedly) uttered years earlier. The latter, in turn, raises what can prove to be insurmountable hurdles to proof, especially where the evidence of those statements is tainted by self-​interest and lacks satisfactory corroboration.92 A court will not, moreover, read into a representation consequences not merited by its terms. For example, a promise of marriage, even were it enforceable,93 does not amount to a clear and unequivocal promise to grant the promisee a half share in the promisor’s property.94

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the term, commencement, duration, and rent of the lease had all been settled, as had almost all the other terms, and so White J had little difficulty in concluding that an effective representation for the purposes of an estoppel had been established: at [269]–​[278]). 87

Legione v Hateley (1983) 152 CLR 406 at 439–​440.

88

Legione v Hateley (1983) 152 CLR 406 at 452, 454–​455. Gibbs CJ and Murphy J dissented on this point, arguing that, although the statement may have seemed “tentative and provisional”, when put in its context (that is, between parties who knew that the time fixed by the notice of rescission was about to expire and that if the purchasers did not settle within that time the contract would be at an end), it was clear and would have entitled the purchasers’ solicitor to believe that the position was being left in abeyance until instructions were received: at 422.

89

See, for example, Waipara Pty Ltd v Police Association (1998) V ConvR ¶54-​583 at 66,976–​7 (CA); Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421.

90

See, for example, Hayden v Mitchell (1986) 60 LGRA 123 at 136 per Campbell J (involving an oral promise to sell land expressed to be subject to council approval for subdivision).

91

Wilcox v Wilcox [2012] NSWSC 1138 at [8]‌per Pembroke J. Compare, for example, Taylor v Dickens [1998] 3 FCR 455 (where the plaintiff failed to establish a proprietary estoppel in relation to a promise of a legacy of residue on the ground that it was not enough for the plaintiff to believe that he was going to be given a right over the legal owner’s property if he knew that the latter had reserved the right to change his mind) and Milling v Hardie [2014] NSWCA 163 (invitation to live on homestead on farming property and acquiescence in improvements thereto held not to amount to a representation that the representees would inherit the property but only that they could occupy it for a period to enable them to obtain the benefit of the improvements; see also [10.275]) with Flinn v Flinn [1999] 3 VR 712 (where the evidence showed that the deceased’s promise to leave an interest in a farm in a will was made, and was reasonably understood and acted upon by the promisees, as a promises of the making, not of a revocable testamentary instrument, but of a gift by will taking effect on death: at 737–​738 per Brooking JA, with whom Charles and Batt JJA concurred) and Thorner v Major [2009] 1 WLR 776 (discussed at [10.115]). Cf Law Reform (Testamentary Promises) Act 1949 (NZ) (which addresses relief, under statute, against the backdrop of testamentary promises: see Patterson, Law of Family Protection and Testamentary Promises (4th ed, LexisNexis NZ, 2013), Ch13).

92

Watson v Foxman (1995) 49 NSWLR 315 at 319 per McLelland CJ in Eq; Robinson & Aballa Pty Ltd v Gollan [2012] NSWSC 51 at [25] per Black J; Wilcox v Wilcox [2012] NSWSC 1138 at [9]‌, [10] per Pembroke J.

93

As statute has abolished the action for breach of promise to marry (see Marriage Act 1961 (Cth), s 111A), equity will not circumvent this by recognising an estoppel in these circumstances:  Public Trustee v Kukula (1990) 14 Fam LR 97 at 100 (CA(NSW)).

94

Stowe v Stowe (1995) 127 FLR 25 at 41, 44–​45 (FC(WA)).

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Equity and Trusts in Australia

[10.115]  Yet the requirement that the representation be clear and unequivocal should not be

construed as promulgating too exacting a standard. As explained by an English judge:95 [I]‌t would be quite wrong to be unrealistically rigorous when applying the “clear and unambiguous” test. The court should not search for ambiguity or uncertainty, but should assess the question of clarity and certainty practically and sensibly, as well as contextually … at least normally, it is sufficient for the person invoking the estoppel to establish that he reasonably understood the statement or action to be an assurance on which he could rely.

The law is concerned with what the terms of the representation objectively convey to the representee. What must be proved is not that the terms used cannot possibly be open to different constructions, “but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed”.96 It follows that the bounds of sufficient clarity rest heavily on the factual context.97 So in Thorner v Major98 what may otherwise have been seen as oblique statements by the owner of a farm to the claimant —​who had worked on the farm without pay for years —​as to its devolution on his death needed to be viewed, said the House of Lords, in the context of a taciturn farmer, given to indirect statements. Giving considerable weight to the findings of the trial judge, before whom evidence concerning the farmer’s character had been adduced, their Lordships found that oblique assurances of an intention to devise the farm to the claimant (the farmer had died intestate) were, in the circumstances, sufficiently clear to raise an estoppel.

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[10.120]  In an informal or familial context, the threshold for clarity will likely be less exact-

ing than in the commercial sphere. In family or domestic situations, it may not be unreasonable for a representee to adopt an assumption on language and conduct less unequivocal than in arm’s length business relationships.99 In the latter context, the law expects parties to document their agreement in a legally enforceable way; informal and vague promises are thus unlikely candidates for relief by way of estoppel.100 This explains, for instance, the House of Lords’ willingness in Thorner to construe oblique assurances as representations, but the year before in Cobbe v Yeoman’s Row Management Ltd101 its refusal to enforce an oral promise to sell a block of units to an experienced property developer. To uphold an estoppel in this latter event, feared Lord Walker, “would tend to introduce considerable uncertainty into commercial negotiations”.102 It also explains why the High Court in Crown Melbourne Ltd 95

Thorner v Major [2009] 1 WLR 776 at [85] per Lord Neuberger. See also Australian Crime Commission v Gray [2003] NSWCA 318 at [183]–​[193] per Ipp JA; Galaxidis v Galaxidis [2004] NSWCA 111 at [83] per Tobias JA; Waterman v Gerling Australia Insurance Company Pty Ltd (2005) 65 NSWLR 300 at [91] per Brereton J; Pazta Co Pty Ltd v Idelake Pty Ltd [2008] NSWSC 941 at [28] per Brereton J.

96

Low v Bouverie [1891] 3 Ch 82 at 106 per Bowen LJ. See also Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [134], [135] per Dodds-​Streeton JA; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [35] per French CJ, Kiefel and Bell JJ.

97

Thorner v Major [2009] 1 WLR 776 at [56] per Lord Walker, at [80], [84] per Lord Neuberger.

98

Thorner v Major [2009] 1 WLR 776.

99

MacDonald v Frost [2009] WTLR 1815 at [20] per Geraldine Andrews QC (“The assurances must be evaluated in the specific context in which they are given, bearing in mind that members of a family are less likely to be precise and legalistic when discussing such matters than people in a commercial relationship”).

100

Cf Mee, “Proprietary Estoppel, Promises and Mistaken Belief” in Bright (ed), Modern Studies in Property Law (Hart Publishing, 2011), Ch 8 (who counters the suggestion that differentiates commercial from familial cases in this context: see pp 192–​197).

101

Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752.

102

Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [85]. See Goymour, “Cobbling Together Claims where a Contract Fails to Materialise” [2009] CLJ 37 at 39 (who opines that the Cobbe decision “provides a welcome injection of certainty into commercial dealings”). Although some commentators feared that the decision in Cobbe would hobble proprietary estoppel generally (see, for example, McFarlane and Robertson, “The Death of Proprietary Estoppel” [2008] LMCLQ

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Estoppel  Chapter  10

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v Cosmopolitan Hotel (Vic) Pty Ltd103 found no actionable estoppel in a statement by a landlord to tenants that they would be “looked after at renewal time”. Alternatively, this can be viewed from the perspective of reasonable reliance, as those experienced in business are not as a general rule justified, it is assumed, in relying on oral or informal assurances: see [10.195]. The statement in Crown, for instance, was insufficient to convey to a reasonable person that the tenants would be offered a renewal of the lease. Even in the commercial or business environment, though, where the representee, relative to the representor, lacks relevant business experience, or is otherwise in a position of inequality vis-​à-​vis the representor, the threshold for clarity may be less rigorous. For example, in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd104 the majority unit holder (H), in order to implement his business plans, induced the appellants to invest funds in a business but to forgo any short term return or benefit from its operation and growth. The appellants’ investment were induced by H’s repeated, though relatively imprecise, representations that their investment would be “for the long term”, to facilitate significant expansion and, implicitly, capital growth. Less than three and a half years after the establishment of the trust, at a time when the business was “taking off”, in opportunistic reliance on a recently discovered legal power in the trust deed, H caused the trustee to serve on the appellants notices of compulsory redemption of their units. This meant that the appellants, who had made the necessary sacrifices in the start-​up phase, would be deprived of a reasonable opportunity for, if not the certainty of, the capital growth anticipated following the maturation of the business. Dodds-​ Streeton JA, with whom Ashley JA and Forrest AJA concurred, ruled that the trustee should be estopped from acting on the notices of compulsory redemption because the appellants’ premature expulsion, to their detriment, and contrary to the expectations induced by H, would be unconscionable.105 As to the clarity of the representation, her Honour reasoned as follows:106 The terms of the representation, considered in context and by reference to a number of the relevant circumstances, indicate that the meaning conveyed was that investors would be entitled to retain their investment until either successful expansion on a substantial scale was achieved, substantial capital gain secured and the routine reinvestment of all profit was no longer required, or, at least, until there had been a reasonable opportunity to achieve those goals. The compulsory redemption of the investors’ interests while the reinvestment policy continued and the business was on the verge of a new phase of significant growth is inconsistent with that meaning … Although it is unnecessary for the purposes of this proceeding to determine the precise meaning of “the long term”, it cannot be understood independently of the practice and policy of retaining substantially the profits for the purposes of expansion rather than paying dividends. In my opinion, “the long term” would appear to be coterminous with the bona fide maintenance of that policy and practice. [10.125] In Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd,107 mentioned at

[10.120], Keane J opined that “it would tend to reduce the law to incoherence if a representation, too uncertain or ambiguous to give rise to a contract or a variation of contractual rights

449), others remarked that equitable concepts such as proprietary estoppel “sit more comfortably within the realm of domestic situations” (Chambers, “Yeoman’s Scope” (2008) 158 NLJ 1629 at 1630). The latter view was vindicated in Thorner v Major [2009] 1 WLR 776. 103

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1.

104

Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325.

105

Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [187].

106

Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [181], [188] (paragraph break omitted).

107

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [143].

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Equity and Trusts in Australia

and liabilities, were held to be sufficient to found a promissory estoppel”. His Honour’s concern, directed at ensuring certainty in commercial relationships, no doubt was influenced by the facts in question, between independently advised contracting parties. The same did not, Keane J conceded, govern scenarios where equitable estoppel “is invoked precisely because there is no charter of contractually based rights and obligations governing the parties’ relationship”.108 Yet whether it should outright preclude (as opposed to significantly impede) estoppels in a contractual context may well be queried. Nettle J in the same case did not think so,109 and existing case authority indicates that a promise that is insufficiently precise to give rise to a contract is not, for that reason only, disqualified from founding an estoppel.110 Estoppel is, after all, a doctrine independent of contract. Nor need a representation be clear and unequivocal in its entirety for an actionable estoppel. For example, a representation that a right will not be asserted for at least x days is not rendered unclear or equivocal merely because the words used are equivocal as to whether the relevant period is x days, x plus one day or x plus two days.111 It stands to reason, moreover, that a promise may be unequivocal, in the sense of a clear promise to do something, even if that something is not precisely defined. [10.130]  Depending on context, clarity and lack of ambiguity are not always inconsistent

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with breadth and generality, as a statement expressed in general terms may nonetheless be clear. The point is illustrated by Australian Crime Commission v Gray,112 where a police inspector, to entice husband and wife respondents to give court testimony, promised them witness protection on terms that “you will be looked after and not be financially disadvantaged”. On her husband’s death, the wife claimed that this promise had not been met. Ipp JA, with whom Mason P and Tobias JA concurred, remarked that the relevant circumstances113 compelled the inference that the respondents must have understood the promise to be constrained by reasonableness,114 such that:115

108

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [147].

109

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [211] (“The notion that it takes a representation of contractual certainty to found a promissory estoppel is misplaced”), [218] (“although an equivocal or objectively ambiguous representation would be incapable of forming a binding contract, it may yet found a promissory estoppel”).

110

See, for example, Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [132], [178] per Dodds-​Streeton  JA.

111

Legione v Hateley (1983) 152 CLR 406 at 438–​439 per Mason and Deane JJ.

112

Australian Crime Commission v Gray [2003] NSWCA 318.

113

Namely that: (1) the respondents’ lives and property were at risk, and they had a strong incentive to enter the witness protection program immediately; (2) the male respondent had in the past earned his living substantially from transactions that he had not disclosed in his tax returns and which involved, at least to a significant degree, unlawfully transferring monies on behalf of other persons to foreign countries without the knowledge of the authorities; (3) the inspector knew that the male respondent’s income over the past few years was likely to have been derived from activities that were contrary to the law; (4) it was obvious that, upon entry into witness protection, the respondents were not likely to be able to earn a living from any source; (5) it was obvious that the respondents would have to be maintained by the appellant, and that the longer they remained in witness protection, the more difficult it would become for them, after the witness protection had ceased, to re-​establish themselves in society and begin earning a living again; (6) the male respondent had expressed concerns about being discharged summarily from witness protection and the inspector had assuaged his anxieties by the promises he had made; and (7) the male respondent’s testimony was extremely important to the appellant as it was likely to lead to the successful prosecution of organised crime leaders, making the appellant extremely anxious for the respondents to co-​operate with it: Australian Crime Commission v Gray [2003] NSWCA 318 at [185].

114

Australian Crime Commission v Gray [2003] NSWCA 318 at [187].

115

Australian Crime Commission v Gray [2003] NSWCA 318 at [189].

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Estoppel  Chapter  10

… the promise did not mean that the [appellant] would keep Mr and Mrs Gray according to the standard to which they were accustomed, nor did it mean that they would be reimbursed for every expense they incurred. The promise meant that Mr and Mrs Gray would be provided with reasonably comfortable accommodation and given a reasonable subsistence allowance, taking into account their prior living standard, the fact that a government authority was providing witness protection, the risks Mr and Mrs Gray would face were they not to enter the witness protection program, the fact that it was open to the [appellant] to proceed with the prosecution of Mr Gray for the offences that he was suspected of having committed (that might well result in a sentence of imprisonment) and all the other matters that I have set out.

His Honour noted that while it might prove difficult to work out what was reasonable and what was not, and what constituted financial disadvantage, this did not stain the promise with ambiguity sufficient to preclude a promissory estoppel arising.116 At the termination of the witness protection program, the respondents were virtually destitute, a position they had not been in at any point in their lives prior to entering the program. It followed that it was unconscionable, according to Ipp JA, for the appellant not to keep its promise, and he upheld the quantum of compensation assessed by the trial judge as representing the consequential minimum detriment the respondents suffered.117 [10.135]  The specificity of the promise may, in any case, be inherently intertwined with the

other elements of estoppel. It may, as noted at [10.120], go to the reasonableness of the promisee’s reliance on it;118 it may also go to the remedy to rectify any resulting detriment, and ultimately to the unconscionability of resiling from it.119 Assumptions are not restricted to factual matters

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[10.140]  A valid equitable estoppel may be founded upon representations of fact, of mixed

fact and law, or even purely of law.120 This avoids the troublesome and artificial distinction between assumptions as to fact and assumptions as to law. For example, the assumed existence of a contract may be a matter of mixed fact and law. The assumption of a trustee-​in-​ bankruptcy that a creditor has a debt provable in a composition that has been induced by the creditor’s lodgement of proof of debt is likewise one of mixed fact and law.121 Neither scenario, in itself, precludes an estoppel. Nor will a representation as to the legal effect of an agreement, the state of the law or the existence of a legal right impede an estoppel.

116

Australian Crime Commission v Gray [2003] NSWCA 318 at [192].

117

Australian Crime Commission v Gray [2003] NSWCA 318 at [207], [293]. However, that detriment did not cover the provisional tax notice and a notice of assessment from the Commissioner of Taxation requiring the husband to pay tax of $127,457 based on the benefits he received whilst in witness protection. Mason P, with whom Tobias JA concurred, remarked that neither the inspector nor the appellant had authority to make representations as to the operation or enforcement of income tax legislation, and the promised saving from “financial disadvantage” could not fairly be construed as going anywhere near that far: at [60].

118

Sullivan v Sullivan (2006) 13 BPR 24,755 at [85] per Hodgson JA; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [146] per Keane J.

119

Australian Crime Commission v Gray [2003] NSWCA 318 at [200] per Ipp JA; Galaxidis v Galaxidis [2004] NSWCA 111 at [83], [94] per Tobias JA; Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325 at [178] per Dodds-​Streeton  JA.

120

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 415–​416 per Brennan J; Foran v Wight (1989) 168 CLR 385 at 415–​417 per Brennan J; Commonwealth v Verwayen (1990) 170 CLR 394 at 413 per Mason CJ, at 445 per Deane J.

121

Wills v Abram (unreported, FCA, Heerey J, 12 May 1993).

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Equity and Trusts in Australia

Conduct or dealings as a representation [10.145]  The requirement that a representation be clear does not require it to be express: it

can be inferred from conduct.122 For example, an anticipatory repudiation of a contract represents to the other party that it is pointless or futile to complete the contract. Here the representation may arise from the repudiation itself and operates to protect that party from a claim that failure to tender performance is a breach of contract.123 Yet conduct of itself is unlikely to be unequivocal in all cases. That, for instance, an insurer continues negotiating over a claim with the insured beyond the period stipulated by the contract within which the insured could bring claims or commence proceedings does not amount to an estoppel if the insurer “did nothing to raise an expectation in the mind of the insured that the time bar would not be relied on”.124 Similarly, that a creditor omits to send a bill, or sends a bill that does not fully cover the amount due, is no clear representation that the unbilled amount will not be recovered.125 There is, in this context, no obligation on a creditor to bring a claim immediately an amount owing is due, and absent a clear promise to the debtor to the contrary, there is nothing unconscionable in delaying the demand for payment.126 In Spalla v St George Wholesale Finance Pty Ltd,127 for example, the respondent’s overlooking the appellants’ frequent lateness in paying debts due to it was not a representation that the respondent would refrain from action. The Full Federal Court reasoned as follows:128

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If indulgence of this kind were to result in financiers being prevented from exercising their legal rights in the way suggested by the appellants, financiers would be forced to adopt very draconian approaches. This would not be for the benefit of borrowers. Moreover, any indulgences, or reliance thereon by the appellants, were overtaken by the intense negotiations in January and February 1999. The Spalla companies were given a last chance on very specific conditions. As the evidence shows, those conditions were not met and the St George companies were entitled to enforce their rights.

The position is different where a clear and unequivocal representation by a creditor alleviates the debtor’s obligations under the loan agreement.129 [10.150] More commonly, evidence of conduct clarifies a prior representation, and may

remove or at least reduce disputes over it. In Metropolitan Transit Authority v Waverley Transit Pty Ltd130 the respondent, a bus proprietor, sought to estop the appellant statutory authority from refusing to renew a two-​year contract, the latter having induced the assumption in the respondent that renewal would occur without recourse to public tenders if the respondent engaged in industry “rationalisation”. The respondent, so encouraged by the appellant, purchased shares in another company and expanded its fleet. The appellant argued that the relevant representation was incapable of identification with precision because there 122

Legione v Hateley (1983) 152 CLR 406 at 438–​439 per Mason and Deane JJ.

123

Foran v Wight (1989) 168 CLR 385 at 410–​411 per Mason CJ, at 422 per Brennan J.

124

Super Chem Products Ltd v American Life and General Insurance Co Ltd [2004] 2 All ER 358 at [23] (PC).

125

Olga Investments Pty Ltd v Citipower Ltd [1998] 3 VR 485 at 499 per Charles JA; Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [74] per Pembroke J [affd Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 149].

126

Mainzeal Property and Construction Ltd v Facility Finance Ltd [2000] 3 NZLR 594 at 602 per Salmon J.

127

Spalla v St George Wholesale Finance Pty Ltd (1999) 95 FCR 359.

128

Spalla v St George Wholesale Finance Pty Ltd (1999) 95 FCR 359 at 377.

129

See, for example, Mallory Technologies Pty Ltd v 3D Global Ltd [2002] NSWSC 1035.

130

Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181.

342 [10.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

was uncertainty as to the meaning of “rationalisation” in the industry. The Appeal Division of the Victorian Supreme Court rejected this submission on the ground that it overlooked the respondent’s course of dealing with the appellant, pursuant to which small bus operators were encouraged to participate in a takeover or merger, or otherwise jeopardise their chances of contract renewal.131 Moreover, the respondent had not been informed that, at the expiration of the two-​year contract, a tender system would most likely be introduced. Silence as a representation [10.155]  Although it is sometimes said that silence can amount to a representation, it is more

accurate to say that an estoppel by silence can only arise where a legally enforceable duty to speak is owed to the party relying on the estoppel.132 This is because silence is rarely unequivocal —​described as “a particularly thin reed on which to base an estoppel”133 —​and is unlikely to evidence a clear statement of the terms of the representation alleged.134 However, where the representor has made a clear and unequivocal representation, the absence of any attempt to qualify or retract it can be seen as bolstering the force of that representation.135

RELIANCE [10.160]  In addition to establishing a clear and unequivocal representation, the representee

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must show her or his reliance on that representation. The relevant connection between representation and reliance, and any consequent detriment, appears in the following remarks by the New South Wales Court of Appeal:136 The question is not whether the promisee or representee acted, or desisted from acting, solely in reliance on the promise or representation of the other party. Rather, the question is whether the conduct of the representee or promisee was so influenced by the promise or representation that it would be unconscionable for the promisor or representor thereafter to enforce her or his strict legal rights. It is sufficient for the promisee or representee to show that the promise or representation was a significant factor taken into account by the promisee or representee when

131

Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181 at 206–​209.

132

Legione v Hateley (1983) 152 CLR 406 at 438–​439 per Mason and Deane JJ; KMA Corporation Pty Ltd v G & F Productions Pty Ltd (1997) 38 IPR 243 at 249 per Eames J; Blackley Investments Pty Ltd v Burnie City Council (No 2) (2011) 21 Tas R 98 at [49]–​[51] per Blow J, with whom Evans and Wood JJ concurred.

133

Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [70] per Pembroke J [affd Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 149].

134

Furness v Adrium Industries Pty Ltd [1996] 1 VR 668 at 674 per Marks J; Arcadia Holdings Pty Ltd v Brown (1997) 18 WAR 350 at 356–​358 per Owen J; KMA Corporation Pty Ltd v G & F Productions Pty Ltd (1997) 38 IPR 243 at 249 per Eames J.

135

See, for example, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (discussed at [10.315]); O’Brien v Sheahan [2002] FCA 1292 (where a trustee-​in-​bankruptcy represented to the bankrupts that they could reside in their house whilst discharging their obligations under a first mortgage, but four years later, in which time the bankrupts made payments to reduce the principal of the mortgage and substantial refurbishments to the house, sought to sell the house, Carr J held that the bankrupts’ equity was one supporting an order requiring the trustee to make good the assumption he had induced in them: at [50]–​[62]); New Zealand Pelt Export Company Ltd v Trade Indemnity New Zealand Ltd (2004) 13 ANZ Ins Cas ¶61-​626 at [101] per Nettle JA (failure to correct a misapprehension the respondent had induced held to amount to a representation as to the accuracy of the representation, and in the circumstances resiling from that representation was held to be unconscionable).

136

Priestley v Priestley [2017] NSWCA 155 at [136] per Emmett AJA, with whom McColl JA concurred. See also Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 104–​105 per Robert Goff J; Wayling v Jones (1993) 69 P & CR 170 at 173 per Balcombe LJ; Steria Ltd v Hutchison [2007] ICR 445 at 465 per Neuberger LJ; Sidhu v Van Dyke (2014) 251 CLR 505 at [69]–​[74] per French CJ, Kiefel, Bell and Keane JJ (referring to assurances as “objectively likely to have had a significant effect upon the decision-​making of a person in the respondent’s position” (at [69]) and, on the facts, “material to the respondent’s willingness” to remain living at a home she was promised by the appellant as part of maintaining her ongoing relationship with the appellant (at [74])).

[10.160]  343 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

deciding whether to act or not to act. If the belief of the promisee or representee is a contributing cause of the conduct of the promisee or representee, that will be a sufficient connection between the assumption induced by the belief and the detriment.

It follows that whether the representee would have acted differently had the representor not encouraged the assumption and belief is not the pertinent inquiry; rather, it is whether the representee was influenced, in a significant or material way, such that it was a contributing cause to her or his conduct, or made a difference to her or his action or inaction, so that it would be unconscionable for the representor to resile from the assumption.137 But Australian law has rejected the view, emanating from English courts,138 of a rebuttable presumption to the latter effect where the claimant adopted a prejudicial course of conduct in the aftermath of assurances by the representor. In the words of the High Court:139 In point of principle, to speak of deploying a presumption of reliance in the context of equitable estoppel is to fail to recognise that it is the conduct of the representee induced by the representor which is the very foundation for equitable intervention. Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact … It is not the breach of promise, but the promisor’s responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise.

Reliance must be reasonable [10.165] The representee must establish that her or his reliance on the representation was

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reasonable in the circumstances. Reliance focuses on the conduct of the representee, not that of the representor.140 Yet it can also impact on whether it would be unconscionable for the representor to depart from the representation,141 given that unconscionability is a function of the each of the elements of estoppel (see [10.310]). For instance, it has been judicially remarked that:142 … especially remembering that equity is always very tender towards those who are not fully experienced commercial business people, it seems … that even an unreasonable assumption judged by the standard of the person on the Bondi bus would be sufficient … so long as the first defendant knew or intended that the plaintiff would make the assumption.

137

Priestley v Priestley [2017] NSWCA 155 at [138] per Emmett AJA, with whom McColl JA concurred. Cf Silink, “Causation in Equitable Estoppel” (2016) 43 Aust Bar Rev 320 (who argues that the causative element should require proof that the representee would have acted differently “but for” the representation, on the basis that this is consistent with the purpose of the doctrine); Osborne Park Co-​operative Society Ltd v Wilden Pty Ltd (1989) 2 WAR 77; Valbirn Pty Ltd v Powprop Pty Ltd [1991] 1 Qd R 295; Hodgins v Duke Nominees Pty Ltd (2000) 77 SASR 74 at 101–​102 per Bleby J.

138

Greasley v Cooke [1980] 1 WLR 1306; Coombes v Smith [1986] 1 WLR 808 at 821 per Jonathan Parker QC; Stevens & Cutting Ltd v Anderson [1990] 1 EGLR 95 at 97 per Stuart-​Smith LJ. Though this approach had been endorsed in Van Dyke v Sidhu (2013) 301 ALR 769 at [79]–​[93], [100]–​[104] per Barrett JA, with whom Basten JA and Tobias AJA concurred (in the context of cases of estoppel by encouragement), it was rejected on appeal, as noted in the text.

139

Sidhu v Van Dyke (2014) 251 CLR 505 at [58] per French CJ, Kiefel, Bell and Keane JJ (adding that “[t]‌o speak of a shifting onus of proof is both wrong in principle and contrary to authority”, and that the representee “at all times bore the legal burden of proving that she had been induced to rely upon the [representor’s] promises”: at [61]).

140

See Robertson, “The ‘Reasonableness’ Requirement in Estoppel” (1994) 1 Canberra L Rev 231.

141

See Commonwealth v Verwayen (1990) 170 CLR 394 at 445 per Deane J; Pratt, “Defeating Reasonable Reliance” (1999) 18 U Tas L Rev 181.

142

Fleming v State of New South Wales (unreported, SC(NSW), Young J, 10 November 1997), at 10 (emphasis supplied). This may explain the statement in Downderry Construction Ltd v Secretary of State for Transport, Local Government, and the Regions (2002) 152 NLJ Rep 108 that if a representor makes a false assumption intending or knowing that it was likely to be acted upon, and the representee relies on it to her or his detriment, the representor cannot defeat an estoppel on the basis that the representee’s reliance on it was not reasonable.

344 [10.165] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

It follows that the reasonableness element, though ostensibly objective in nature, may have subjective aspects to it.143 Reasonableness, therefore, is determined according to the facts of each case, with reference to the parties involved, their knowledge and bargaining position, and the circumstances in which the alleged representation was made.144 Clearly, although actual knowledge in the representee of the untruth of the representation will prevent an estoppel,145 an estoppel is not defeated because the representee had the means of knowing or discovering the truth.146 And if it is reasonable for a representee to take the representations at their face value and rely on them, it is not generally open to the representor to say that he or she had not intended the representee to rely on them.147 [10.170] A court inquires into both whether the representee acted reasonably in adopting

the representation, and whether he or she acted reasonably in taking the relevant detrimental action in so relying. In some circumstances, after all, it may be reasonable to adopt an assumption, and reasonable to act on it in a limited way, but not reasonable to take the detrimental action taken by the representee.148 This is relevant from the perspective of remedy, for the court may limit the relief available to the representee according to what reasonable conduct would have justified in the circumstances.149 It follows that if there is a “grey area” in what is represented or promised, but it was reasonable for the representee to interpret it as extending at least to the lower limit of the grey area and to act in reliance on it as so understood, this does not preclude a court from regarding the representation or promise as sufficiently certain up to this lower limit.150

Actual or inferred knowledge of the promisor’s lack of authority

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[10.175]  Actual, constructive or imputed151 knowledge of the representor’s lack of actual or

ostensible authority precludes a representee from arguing that he or she reasonably relied on a representation outside the scope of that authority. Knowledge of the representor’s position generally carries with it knowledge of the limitations of that person’s authority. In Legione v Hateley152 a majority of the High Court found that the respondents’ solicitor could not 143

Fleming v State of New South Wales (unreported, SC(NSW), Young J, 10 November 1997), at 12 (“One has got to look objectively as to what would induce the reasonable man to so act or, alternatively, the plaintiff has by strong and cogent evidence got to show that the reasonable expectation would have been that that was what the defendant intended or knew”).

144

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1986) 16 NSWLR 582 at 585–​ 586 per Kirby P; Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 506 (FC). It has been suggested that for this purpose reference could be made to the reasonableness concept in the law of negligence: Robertson, “Reasonable Reliance in Estoppel by Conduct” (2000) 23 UNSWLJ 87 at 94–​95.

145

N B Hunt & Sons Ltd v Maori Trustee [1986] 2 NZLR 641 at 655–​656 (CA); Standard Chartered Bank Australia Ltd v Bank of China (1991) 23 NSWLR 164 at 180–​181 per Giles J; Powercor Australia Ltd v Pacific Power [1999] VSC 110 at [1132] per Gillard J.

146

Nigel Watts Fashion Agencies Pty Ltd v GIO General Ltd (1995) 8 ANZ Ins Cases ¶61-​235 at 75,653–​4 (CA(NSW)).

147

Thorner v Major [2009] 1 WLR 776 at [17] per Lord Scott.

148

See Robertson, “Reasonable Reliance in Estoppel by Conduct” (2000) 23 UNSWLJ 87 at 97–​98.

149

Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 at [222] per Nettle J. See, for example, Milling v Hardie [2014] NSWCA 163 (defendant’s invitation to the plaintiffs to live on a homestead on the plaintiff’s farming property, and his acquiescence in improvements thereto, held to give rise to a reasonable expectation that the plaintiffs were entitled to occupy the relevant parts of the property during the defendant’s lifetime, but not to any expectation that they would inherit the homestead).

150

Sullivan v Sullivan (2006) 13 BPR 24,755 at [85] per Hodgson JA; Thorner v Major [2009] 1 WLR 776 at [86] per Lord Neuberger.

151

For example, a principal is imputed with her or his agent’s knowledge: see Equiticorp Industries Group Ltd (in statutory management) v The Crown [1998] 2 NZLR 481 at 716 per Smellie J.

152

Legione v Hateley (1983) 152 CLR 406.

[10.175]  345 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

reasonably rely on a conditional statement, made by a clerk employed by the appellants’ solicitors as to the date of completion of a property transaction, to ground an estoppel against the appellants. This was because the respondents’ solicitor was taken to have been aware of the limits on the clerk’s authority. “[T]‌he known limits of the authority —​albeit the apparent or implied authority”, noted Brennan J, “define the ambit of their negotiations and thus shape the promises or representations”.153 So in Francis v South Sydney District Rugby League Football Club Ltd154 Lingdren J found that the plaintiff’s reliance on his coach’s statement that the club would contract him the following year was not reasonable because the coach clearly lacked actual and ostensible authority to commit the club to player contracts. An awareness of the representor’s lack of authority may stem from previous dealings between the parties. In State Rail Authority of NSW v Heath Outdoor Pty Ltd155 a manager of the appellant Authority had, whilst maintaining that there was no power to contract on terms other than those contained in a standard form contract, indicated that the termination clause did not apply where an advertiser constructed hoardings itself. A majority of the New South Wales Court of Appeal held that the Authority was not estopped from enforcing the termination clause because prior dealings between the parties had made the respondent aware of the limitations on the manager’s authority to give assurances, and so affected the weight that might in the circumstances be given to such assurances.156

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[10.180]  Conversely, where the representor has at least ostensible authority to make the rep-

resentation in issue, and the representee lacks actual or constructive knowledge of any absence of actual authority, the representor cannot maintain that any consequent reliance was unreasonable for lack of actual authority on her or his behalf. For example, in Mallory Technologies Pty Ltd v 3D Global Ltd157 Palmer J found that it was reasonable for the plaintiff to rely upon a clear and unequivocal representation by the managing director of the first defendant that time would be extended for payment of an instalment due to the first defendant, on the ground that a managing director had at least ostensible authority to make this representation on the first defendant’s behalf, and had subsequently made an agreement with the plaintiff extending time under another contract without informing the plaintiff of any need first to refer the matter to the first defendant’s board.

Context in which the representation is made [10.185]  The context of a representation can impact on the reasonableness of the represen-

tee’s reliance on it. In Legione v Hateley,158 putting the alleged representation in context necessitated taking into account the fact that the vendors had displayed a consistent attitude in the past of requiring observance of contractual rights. In State Rail Authority of NSW v Heath 153

Legione v Hateley (1983) 152 CLR 406 at 453. See also at 439 per Mason and Deane JJ.

154

Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 at [304].

155

State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170.

156

State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 175 per Kirby P, at 184 per Glass JA. McHugh JA dissented, placing greater emphasis on the managerial position held by the representor within the Authority, which led him to conclude that to all outward appearances, the manager had ostensible or apparent authority to inform an advertiser as to the circumstances in which the termination clause might be invoked. His Honour distinguished between authority to make or terminate a contract and authority to make representations concerning the administration of a contract, which the manager had: at 194.

157

Mallory Technologies Pty Ltd v 3D Global Ltd [2002] NSWSC 1035 at [45], [46].

158

Legione v Hateley (1983) 152 CLR 406 at 439 per Mason CJ and Deane J.

346 [10.180] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

Outdoor Pty Ltd159 Kirby P noted that the appellant’s advertising manager’s representation concerning the circumstances in which the termination clause would not apply had to be seen in the light of his constant repetition of the inability to alter the standard form contract. [10.190]  A representation made casually, in an informal location or on an informal occasion

may operate to deny the representee’s claim that her or his reliance was reasonable. In Sterns Trading Pty Ltd v Steinman160 the lessor alleged that its tenant was estopped from exercising a right of pre-​emption because, in an informal discourse between the parties during which a purchase price to another interested party was first mentioned, the tenant had opined that such a price was unacceptable. At that time the tenant was unaware that the suggestion as to price had emanated from a developer. In the circumstances, Kearney J held that reliance by the lessor on this initial reaction was not reasonable, as “it is one thing in general conversation … to indicate a view, but it is … an entirely different matter for such general conversation to involve the abandonment of … important contractual rights as to pre-​emption of the property”.161 Similarly, in Mobil Oil Australia Ltd v Wellcome International Pty Ltd162 the Full Federal Court held that promises made at a sales convention that service station franchisees who met certain standards in conducting their business would receive additional tenure for free could not reasonably be relied on, as they were made in a mixed social and business context, their overall tenor being “motivational and exhortatory”, as evidenced by their general and tentative terms.

Nature and bargaining strengths of the parties

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[10.195] The relative bargaining strength of the parties can impact on the reasonableness

of the reliance. Equity is disinclined to protect those able to adequately protect themselves. So well resourced and advised commercial enterprises, whose actions depend on self-​interest and profit making, are unlikely candidates for equity’s protection via the estoppel. Kirby P explained the rationale for this in Austotel Pty Ltd v Franklins Selfserve Pty Ltd:163 We are not dealing here with individuals invoking the protection of equity from the unconscionable operation of a rigid rule of common law. Nor are we dealing with parties which were unequal in bargaining power. Nor were the parties lacking in advice either of a legal character or of technical expertise … At least in circumstances such as the present, courts should be careful to conserve relief so that they do not, in commercial matters, substitute lawyerly conscience for the hard-​headed decisions of business people … [C]‌ourts should … be wary lest they distort the relationships of substantial, well-​advised corporations in commercial transactions by subjecting them to the overly tender consciences of judges.

Such a statement should not be seen as a blanket rule, however, as its widespread application may create an image of courts sanctioning unconscionable behaviour by commercial entities. In any case, statute operates to prevent or remedy unconscionable conduct in trade and commerce: see [9.165]–​[9.195].

159

State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 176.

160

Sterns Trading Pty Ltd v Steinman (1988) NSW Conv R ¶55-​414.

161

Sterns Trading Pty Ltd v Steinman (1988) NSW Conv R ¶55-​414 at 57,793.

162

Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 at 513–​514.

163

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585. See also Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2010] NSWSC 776 at [35]–​[37] per Pembroke J [affd Summer Hill Business Estate Pty Ltd v Equititrust Ltd [2011] NSWCA 149].

[10.195]  347 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

In any event, the courts’ attitude is otherwise where the parties’ relative position places the representor in a far stronger position than the representee, as to make the latter’s reliance on the representation more likely to be reasonable (although it should be noted that inequality of position is traditionally the domain of equitable doctrines such as fiduciary law, undue influence and unconscionable dealing). In Commonwealth v Verwayen,164 for example, the respondent alleged that the Commonwealth should not be allowed to dispute its liability, having previously represented that it would not contest liability or plead an available defence. Mason CJ held that, while ordinarily a party cannot reasonably rely on a statement that her or his opponent will not plead a particular defence or cause of action to found an estoppel, in this case the fact that express representations reflecting a deliberate government policy had been made to the respondent gave them the “quality of apparent reliability”,165 and supported the conclusion that the “assumption was a reasonable assumption for a person in the respondent’s position to make”.166 Written contract inconsistent with extra-​contractual representations

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[10.200]  In contract law the parole evidence rule states that when the contracting parties

intend to document all the express terms of their contract in a particular document, evidence is inadmissible for the purpose of adding to, varying, subtracting from or contradicting those terms.167 The assumption underscoring the rule —​that representations made during negotiations are superseded by the terms of a comprehensive written agreement —​has impacted on curial willingness to recognise an estoppel in equivalent situations.168 In any event, pre-​contractual statements can impact on the parties’ legal relationship through doctrines other than estoppel, including duress, mistake, misrepresentation, misleading or deceptive conduct under statute and collateral contracts. To this end, it has been said that where parties execute a formal legally binding contract expressed to constitute their entire agreement, one party cannot, except for fraud, estop another from relying on rights created by the contract.169 A further reason for this approach was stated as follows by Bryson J:170 My adherence to this view has been reinforced with the passage of time and accumulation of experience of this and many other forensic endeavours to set up estoppels out of circumstances or terms of pre-​contractual exchanges; the evidence offered is often extensive, discursive and

164

Commonwealth v Verwayen (1990) 170 CLR 394. See also Baillieu v Australian Electoral Commission (1996) 33 IPR 494 at 509–​510 per Sundberg J; Deane v Attorney-​General [1997] 2 NZLR 180 at 197–​198 per Hammond J.

165

Commonwealth v Verwayen (1990) 170 CLR 394 at 417.

166

Commonwealth v Verwayen (1990) 170 CLR 394 at 414. See also at 448 per Deane J (“The claimed estoppel does not arise merely from the Commonwealth’s failure to deny liability in the proceedings. It arises from the fact that other actions of the Commonwealth constituted an unambiguous representation to [the respondent] that liability would not be contested”), at 503–​504 per McHugh J.

167

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347, 352 per Mason J. As to the parole evidence rule generally see Paterson, Robertson and Duke, Principles of Contract Law (5th ed, Lawbook Co., 2016), [12.110]–​[12.160].

168

Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd (2009) 266 LSJS 25 at [92] per Kourakis J. See Seddon, “Can Contract Trump Estoppel?” (2003) 77 ALJ 126.

169

Johnson Matthey Ltd v A  C Rochester Overseas Corporation (1990) 23 NSWLR 190 at 196 per McLelland J; Skywest Aviation Pty Ltd v Commonwealth of Australia (1995) 126 FLR 61 at 105 per Miles CJ; Australian Co-​operative Foods Ltd v Norco Co-​operative Ltd (1999) 46 NSWLR 267 at [52] per Bryson J. It has also been held that no estoppel by convention based on pre-​contractual conduct can be established in the face of such an “entire contract” clause: Chint Australasia Pty Ltd v Cosmoluce Pty Ltd (2008) 14 BPR 26,279 at [141] per Einstein J; Waste Recycling & Processing Corporation v Global Renewables (Eastern Creek) Pty Ltd [2009] NSWSC 453 at [77] per Einstein J.

170

Australian Co-​operative Foods Ltd v Norco Co-​operative Ltd (1999) 46 NSWLR 267 at [52].

348 [10.200] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

inconclusive and, where it is of any value at all, clearly of less value than the considered written expression. Poorly based and incompletely considered forensic attempts to set up pre-​contractual estoppels are unfortunately common, and in most cases they are quite unuseful and very wasteful of resources.

One judge has gone so far as to remark that inclusion of an “entire contract” clause “gives rise to an estoppel by convention that excludes any antecedent estoppel which might otherwise have had effect”.171 [10.205]  Yet the position is, in reality, more yielding. While a court may be disinclined from

giving effect to an estoppel in the face of written evidence and/​or an entire contract clause, it is not prohibited from doing so. The concern is to balance the need for certainty in business transactions and to discourage judges from substituting their own notions of equity for the bargain negotiated and accepted by the parties, against the need to do justice in a given case involving proof of unconscionable conduct.172 McHugh JA went further, in a dissenting judgment, remarking as follows:173

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Equity’s intervention is called for because the defendant is unconscionably insisting on strict letter of the contract. Courts of equity should not be deterred from giving effect to the beneficial protection of the doctrine of promissory estoppel by fear of upsetting commercial contracts. Certainty as to the effect of contracts is desirable. But the prevention of injustice arising from unconscionable conduct is more important.

There are various judicial indications supportive of such an approach,174 and it sits well with the notion that estoppel operates independently of contract. Rather than outright deny scope for estoppel, the existence of a contractual provision inconsistent with a pre-​contractual representation is better seen as an evidentiary issue the representee must overcome —​albeit a “heavy burden”175 —​in proving that resiling therefrom is unconscionable.176 It follows that “an attempt to trump estoppel by a contract clause will in all likelihood not be successful so long as the necessary ingredients of estoppel are present”.177

171

Johnson Matthey Ltd v A C Rochester Overseas Corporation (1990) 23 NSWLR 190 at 196 per McLelland J.

172

State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 177 per Kirby P, at 184 per Glass JA; Overlook Management BV v Foxtel Management Pty Ltd (2002) Aust Contract Rep ¶90-​143 at 91,975 per Barrett J; Wright v Hamilton Island Enterprises Ltd (2003) Q ConvR ¶54-​588 at [12], [13] per McMurdo P.

173

State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 195.

174

See, for example, Whittet v State Bank of New South Wales (1991) 24 NSWLR 146 at 153 per Rolfe J; Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [447] per Allsop J, with whom Drummond and Mansfield JJ concurred; Arnot v Hill-​Douglas [2006] NSWSC 429 at [85] per Young CJ in Eq; Chint Australasia Pty Ltd v Cosmoluce Pty Ltd (2008) 14 BPR 26,279 at [141] per Einstein J; Saleh v Romanous (2010) 79 NSWLR 453 at [68] per Handley AJA. Contra Australian Co-​operative Foods Ltd v Norco Co-​operative Ltd (1999) 46 NSWLR 267 at [52] per Bryson J (such an approach does not “accord appropriate weight to indications of finality and completeness which the parties give when they adopt formal written expression”).

175

Palm Gardens Consolidated Pty Ltd v PG Properties Pty Ltd (2009) 266 LSJS 25 at [95] per Kourakis J (remark made in the context of an entire agreement clause). See also Noon v Bondi Beach Astra Retirement Village Pty Ltd (2010) 15 BPR 28,221 at [243] per Young JA (“it is rare for courts to favour finding an estoppel where the parties have reduced their arrangements to legal documentation. A fortiori where the person now seeking to rely of the estoppel is the proferens of that documentation”); Sandri v O’Driscoll [2014] VSCA 88 at [42] per the court (“the execution of a formal agreement will ordinarily bar any attempt to turn pre-​contractual negotiations into equitable obligations”; these remarks were made in the context of a contract of sale between family members for the transfer of a half-​interest in a home by elderly parents, their Honours adding that while the parties were not substantial commercial enterprises, they nonetheless “understood the importance of documenting their agreement in a legal form, and spent some years attempting to do so”: at [41]).

176

Liangis Investments Pty Ltd v Daplyn Pty Ltd (1994) 117 FLR 28 at 33–​35 per Higgins J.

177

Seddon, “Can Contract Trump Estoppel?” (2003) 77 ALJ 126 at 136.

[10.205]  349 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

[10.210] Where, however, the alleged representation is contained in pre-​contractual docu-

mentation that makes it clear that the performance of the promise in issue is subject to a future contingency or is otherwise provisional, it is unlikely that the representee can be said to have reasonably relied, or even relied at all, on the representation, especially where he or she is a well advised party to a commercial transaction.178 [10.215] The considerations that incline judges against giving effect in estoppel to pre-​

contractual promises or assurances apply with far less force to post-​contractual conduct.179 After a formal contract is made, parties may so conduct themselves as to treat provisions of the contract as no longer relevant or varied in some way or suspended in operation. Indeed, representations made post-​contractually that a contractual right will not be enforced are the classic territory of estoppel. This is hardly confined to the contractual environment. There is scope, for instance, for the terms of a trust to be varied or displaced via the law of estoppel.180

DETRIMENT Rationale [10.220]  Beyond showing reasonable reliance upon a clear and unequivocal representation, the

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representee must establish reliance on the promise to her or his detriment. A sufficient causal link between that reliance and the detriment must be proven; the issue is not whether the representee suffered detriment, but whether the representee acted to her or his detriment on the basis of the relevant assumption.181 If a representee suffers no detriment thereby, “it is difficult to see where the injustice of permitting [the representor] to do so would lie”.182 It is proof of relevant detriment that raises the equity. To recognise an estoppel without proof of detriment would, it is said, undermine the doctrine of consideration.183 Some judges express this element in terms of “change of position”184 or “disadvantage” stemming from the departure from the promise.185

178

Waipara Pty Ltd v Police Association (1998) V ConvR ¶54-​583 at 66,972, 66,976–​7 per Ormiston JA.

179

Waterman v Gerling Australia Insurance Company Pty Ltd (2005) 65 NSWLR 300 at [84] per Brereton J; Saleh v Romanous (2010) 79 NSWLR 453 at [55] per Handley AJA.

180

See, for example, Clarke v Meadus [2013] WTLR 199 at [56] per Warren J (“It cannot … sensibly be argued that once beneficial interests have been declared in a formal document, those interests become immutable and incapable of being affected by a proprietary estoppel”; on the facts it was held that the express trusts declared in the relevant Deed of Appointment and Declaration of Trust could be overridden by a proprietary estoppel as a result of relevant representations: at [76]). See further Pawlowski, “Informal Variation of Express Trusts” [2011] Conv 245.

181

Re Ferdinando (1993) 42 FCR 243 at 247 per Einfeld J; Gillett v Holt [2001] Ch 210 at 232 per Robert Walker LJ; Mason v Wagonga Local Aboriginal Land Council [2002] NSWSC 351 at [40] per Gzell J.

182

Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 at 106 per King CJ.

183

Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 305 per Doyle CJ.

184

See, for example, Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 588–​589 per Finkelstein J; Wingecarribee Shire Council v Concrite Quarries Pty Ltd (2001) 114 LGERA 82 at 91 per Lloyd J. There is, moreover, an indication that Australian law is heading towards subsuming the “defence” of change of position in mistaken payment cases under the broader banner of estoppel: see [8.120].

185

See, for example, Thompson v Palmer (1933) 49 CLR 507 at 547 per Dixon J; Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 at 734 per Dixon and Evatt JJ; Legione v Hateley (1983) 152 CLR 406 at 437 per Mason and Deane JJ; State Rail Authority of NSW v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 per McHugh JA; Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J (“significant disadvantage”); Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 per Handley JA; Australian Horizons (Vic) Pty Ltd v Ryan Land Co Pty Ltd [1994] 2 VR 463 at 500 per Hedigan J.

350 [10.210] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

[10.225]  However the notion of detriment is couched, courts are unlikely to estop the repre-

sentor unless the alleged detriment is “material” (“significant”186 or “substantial”).187 Three observations should be made as to “materiality”. First, the concept is relative, not absolute, and so no strict parameters govern it. Secondly, what may constitute sufficient consideration in contract does not necessarily equate to material detriment for the purposes of estoppel. This is because in contract consideration is the price of a bargain the law strives to uphold. Equitable estoppel lacks this element of mutuality; the relevant detriment has not been accepted by the party estopped as the price for binding itself to the representation.188 Thirdly, the need for unconscionable conduct (see [10.310]–​[10.350]) on behalf of the representor may function as a de facto threshold of materiality. Calculation of detriment

“Narrow view” vs “broad view” [10.230]  It must appear that detriment would be suffered were the representor allowed to

resile from the representation.189 Whether detriment ought to be limited to that flowing from reliance on the representation (“narrow view”), or should extend to what would or will result from resiling from the representation (“broad view”), remains the subject of some debate. Brennan J expressed the former view in Commonwealth v Verwayen:190

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The relevant detriment in a case of equitable estoppel is detriment occasioned by reliance on a promise, that is, detriment occasioned by acting or abstaining from acting on the faith of a promise that is not fulfilled. The relevant detriment does not consist in a loss attributable merely to non-​fulfilment of the promise.

In the same case Mason CJ thought that, although it would be strange to grant relief were detriment of the broad kind absent, the relief granted by equity “will often be closer in scope to the detriment suffered in the narrow sense”.191 The basic facts of Verwayen, noted at [10.195], illustrate the different results that stem from the application of each view. On the narrow view, the exacerbation of the respondent’s ill health and loss of chance of success flowed from the appellant’s failure to fulfil its promise rather than from his reliance on that promise. For this reason, it was not “relevant detriment”, which would be limited to the respondent’s legal costs in pursuing his claim in reliance upon the appellant’s promise.192 On the broad view, the

186

See, for example, Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 at [308], [309] per Lindgren J.

187

See, for example, Gillett v Holt [2001] Ch 210 at 232 per Robert Walker LJ.

188

Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 at 307–​308 per Handley JA.

189

Thompson v Palmer (1933) 49 CLR 507 at 547 per Dixon J; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674 per Dixon J; Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 at 105–​107 per King CJ, at 110–​116 per White J, at 120 per Cox J; Legione v Hateley (1983) 152 CLR 406 at 437 per Mason and Deane JJ; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 404 per Mason CJ and Wilson J, at 416, 423, 424, 429 per Brennan J.

190

Commonwealth v Verwayen (1990) 170 CLR 394 at 429. See also Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 306 per Doyle CJ.

191

Commonwealth v Verwayen (1990) 170 CLR 394 at 429 at 415–​416.

192

Commonwealth v Verwayen (1990) 170 CLR 394 at 416 per Mason CJ, at 429–​430 per Brennan J, at 504 per McHugh J. See also Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 308 per Doyle CJ (“the disappointment which the defendant suffers, upon finding that the representation has not been adhered to, is not a sufficient detriment to give rise to an estoppel. Nor is the bare fact that the defendant is now called upon to pay the moneys due. It is necessary to identify how, if at all, the defendant has acted to his detriment relying upon the representation that the

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Equity and Trusts in Australia

“relevant detriment” could also include the stress, anxiety and inconvenience the respondent would suffer were the appellant allowed to resile from its representation.193 It follows that the broader the view of detriment, the more likely the court will utilise estoppel as a vehicle to enforce promises, more so than one merely directed to rectifying detriment.

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[10.235]  The narrow view of detriment has its advantages. First, the focus on the detriment

that would be suffered were the promisor allowed to resile from the promise (the “broad view”) may entail speculation as to the consequences for the promisee of departure from the promise. By contrast, the detriment suffered in reliance on the assumption (the “narrow view”) refers to past events, which may thus be more amenable to independent proof and quantification (although this may not always be so, say, where the alleged detriment is the loss of a past opportunity: see [10.290], [10.295]). Secondly, the narrow view’s requirement that detriment flow from acts or omissions done in reliance on the assumption is utile as a litmus test for investigating the possibility that a detriment would have been suffered apart from the reliance —​had no representation been made. For estoppel to operate, the promisee must suffer a detriment he or she would not otherwise have suffered aside from relying on the promise. For example, in McCraith v Fraser194 the defendant’s insurer assured the defendant that the latter was covered by the insurer, which later took over the conduct of a defence to a claim made against the defendant. Gray J held that the possibility that the defendant would become personally liable to the insurer under judgment were the insurer allowed to resile from the representation was not a relevant detriment, since he would have been liable to his insurer even in the absence of the representation.195 That is, the detriment did not flow from acts done in reliance on the assumption or representation. Thirdly, the narrow view’s focus on an entitlement to be protected from harm (a “reliance” approach) better expresses “equity’s traditional ameliorative role” than a protection of expectations approach (inherent in the “broad” approach). The latter, it is said, “overlooks the fundamental tenet of equity jurisprudence that equity limits itself to ameliorating the harsh effects of the common law”.196 As noted at [10.50], a chief distinction between common law and equitable estoppel was that the latter avoided an “all or nothing” remedial approach, and so was not always a vehicle to enforce promises. Otherwise it would undermine the principles of contract. The leading case, Commonwealth v Verwayen,197 is littered with statements defining the role of estoppel as to effect the “minimum equity to do justice” in the particular

claim would not be enforced”); Mohedo v Mohedo [2002] WASC 240 at [32], [33] per Wheeler J; Galaxidis v Galaxidis [2004] NSWCA 111 at [118] per Tobias JA. 193

Commonwealth v Verwayen (1990) 170 CLR 394 at 448–​449 per Deane J, at 462 per Dawson J, at 487 per Gaudron J. See also Commonwealth v Clark [1994] 2 VR 333 at 343 per Marks J, at 377 per Ormiston J; Blazely v Whiley (1995) 5 Tas R 254 at 275 per Wright J; Baillieu v Australian Electoral Commission (1996) 33 IPR 494 at 507–​508 per Sundberg J; Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685 at 14,721 per Santow J.

194

McCraith v Fraser (1991) 6 ANZ Ins Cases ¶61-​061.

195

McCraith v Fraser (1991) 6 ANZ Ins Cases ¶61-​061 at 77,141.

196

Jensen, “In Defence of the Reliance Theory of Equitable Estoppel” (2001) 22 Adel L Rev 157 at 179. See generally Spence, “Australian Estoppel and the Protection of Reliance” (1997) 11 JCL 203; Robertson, “Reliance and Expectation in Estoppel Remedies” (1998) 18 LS 360; Spence, Protecting Reliance:  The Emergent Doctrine of Equitable Estoppel (OUP, 1999); Campbell, “Waltons v Maher: History, Unconscientiousness and Remedy —​The ‘Minimum Equity’ ” (2013) 7 J Eq 171 (who views the “minimum equity” approach as better aligned with the usual approach to the granting of equitable remedies).

197

Commonwealth v Verwayen (1990) 170 CLR 394 at 413, 417 per Mason CJ, at 429 per Brennan J, at 441 per Deane J, at 454 per Dawson J.

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Estoppel  Chapter  10

case or, in other words, requiring “proportionality” between remedy and detriment. The same can be found in Australian case law both before and after Verwayen,198 as well as in English cases.199 The broad arsenal of remedies within equity’s armoury in addition to ordering the performance of the promise  —​such as injunctions, compensation and orders for costs  —​ emphasise that promise enforcement is not the principal role of equitable estoppel. It has prompted judicial remarks that equitable estoppel is “intended to relieve against the detriment suffered and not to make good an expectation”,200 and that “equity will permit the court to do what is necessary to avoid detriment, but no more”.201 If so, relief framed on the basis of the assumed state of affairs represents the “outer limits”, of which Waltons Stores (Interstate) Ltd v Maher202 (see [10.315]) is an illustration, of the relief appropriate to do justice between the parties should be framed.203

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[10.240] Not all subscribe to the “narrow” view of detriment, or the “minimum equity”

approach. Various commentators favour a “broad” view, in so far as it is directed to enforcing the promise the subject of the representation.204 In Verwayen itself Deane and Gaudron JJ viewed equitable estoppel as a vehicle prima facie to enforce a promise, and to provide relief short of enforcement if, in the words of Deane J, enforcing the promise “would exceed what could be justified by the requirements of good conscience and would be unjust to the estopped party” or, in the words of Gaudron J, “no detriment will be suffered other than that which can be compensated by some other remedy”.205 But it was the High Court’s judgment in Giumelli v Giumelli206 that has led some judges, almost a decade after it was handed down, to conclude that, at least in cases of proprietary estoppel (although the court did not distinguish proprietary from promissory estoppel in its judgment), Australian law has shifted from a “minimum equity” approach to one targeting enforcement of the relevant promise, assuming the other elements of the estoppel are met. The judgment of Nettle JA, with whom Maxwell ACJ and Ashley JA concurred, Donis v Donis207 is in point. His Honour, faced with an argument that equitable estoppel permits a court only to do that required to avoid detriment to the party who has relied on the assumption induced by the party estopped, conceded that this argument finds support in some of the

198

See, for example, Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 472 per Priestley JA; Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464 at 474–​475 per Young J; Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181 at 210 (FC); Re Neal (1993) 114 ALR 659 at 669 per Drummond J; Commonwealth v Clark [1994] 2 VR 333 at 372, 384 per Ormiston J; Hollier v Australian Maritime Safety Authority (1998) V ConvR ¶54-​581 at 66,948 per Sundberg J; Mohedo v Mohedo [2002] WASC 240 at [32], [33] per Wheeler J; Galaxidis v Galaxidis [2004] NSWCA 111 at [118] per Tobias JA; Henderson v Miles (No 2) (2005) 12 BPR 23,579.

199

See, for example, Gillett v Holt [2001] Ch 210 at 237 per Robert Walker LJ (“The court’s aim is, having identified the maximum, to form a view as to what is the minimum required to satisfy it and do justice between the parties”); Jennings v Rice [2003] 1 P & CR 100 at [36] per Aldous LJ, at [47]–​[50], [56] per Robert Walker LJ; Suggitt v Suggitt [2012] WTLR 1607 at [43], [44] per Arden LJ, with whom Sullivan LJ and Sir Nicholas Wall concurred. Cf James v James [2018] WTLR 1313 at [51], [52] per HHJ Paul Matthews.

200

Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 at 516 (FC).

201

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 588 per Finkelstein J.

202

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

203

Commonwealth v Verwayen (1990) 170 CLR 394 at 446 per Deane J.

204

See, for example, Mescher, “Promise Enforcement by Common Law or Equity?” (1990) 64 ALJ 536 at 547; Birks, “Equity in the Modern Law: An Exercise in Taxonomy” (1996) 26 UWALR 1 at 63; Cooke, “Estoppel and the Protection of Expectations” (1997) 17 LS 258.

205

Commonwealth v Verwayen (1990) 170 CLR 394 at 445–​446 per Deane J, at 487 per Gaudron J.

206

Giumelli v Giumelli (1999) 196 CLR 101.

207

Donis v Donis (2007) 19 VR 577.

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Equity and Trusts in Australia

judgments in Waltons Stores (Interstate) Ltd v Maher and Verwayen. However, he opined that the later decision in Giumelli v Giumelli shows:208

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… there is no such restriction in cases where the expectation which is encouraged is the acquisition of an interest in property. In such cases the remedy relates to the understanding of the parties and the expectation that has been encouraged. Prima facie the estopped party can only fulfil his or her equitable obligation by making good the expectation which he or she has encouraged. The estopped party, having promised to confer a proprietary interest on the party entitled to the benefit of the estoppel, and the latter having acted upon the promise to his or her detriment, is bound in conscience to make good the expectation. It follows that the detrimental reliance that supports the estoppel need not constitute in any sense a consideration moving to the party bound. It is a unilateral element of the estoppel and not the price paid for it.

The Victorian Court of Appeal did not tread its own course in this way for long. The following year a New South Wales Supreme Court judge made the obiter remark that, after toiling for some time with the concept of the minimum equity to do justice in the field of proprietary estoppel, “the law has moved to the position that the prima facie remedy in such a case is the making good of the relevant assumption on which the plaintiff acted”.209 Giumelli was cited as authority for this move. And two years hence, Allsop P in the New South Wales Court of Appeal said that Giumelli210 “appear[s]‌to remove as a governing principle in the relief to be granted in equitable or proprietary estoppel cases the notion of enforcement or vindication only of the ‘minimum equity’ ”.211 His Honour, accordingly, cautioned against proportionality being “transformed into a necessary constitutive element of a cause of action to be pleaded or proved by the party seeking relief”.212 In the same case Handley AJA likewise opined that previous judicial statements limiting relief to removing or reversing the detriment suffered by the party entitled to the estoppel were superseded by Giumelli, so that the minimum equity principle “since Giumelli is probably not the law in this country”.213 Aside from being recited in his extra-​judicial writings,214 his Honour’s views were hardly unheralded; he had made the same remarks in a dissenting judgment some four years earlier.215 It is most doubtful that the majority in that case saw Giumelli as authority for any such proposition, given that they made no reference to it.216 Yet the same approach has since witnessed endorsement in Queensland and Western Australia too,217 as well as by other judges in New South Wales218 and Victoria,219 and in a more limited sense (in the exercise of discretion not governed by any presumptive starting point one way or the other) in New Zealand.220

208

Donis v Donis (2007) 19 VR 577 at [19].

209

McKay v McKay [2008] NSWSC 177 at [32] per Brereton J.

210

Referring to Giumelli v Giumelli (1999) 196 CLR 101 at 123–​125.

211

Delaforce v Simpson-​Cook (2010) 78 NSWLR 483 at [3]‌.

212

Delaforce v Simpson-​Cook (2010) 78 NSWLR 483 at [4]‌.

213

Delaforce v Simpson-​Cook (2010) 78 NSWLR 483 at [56], [59].

214

See, for example, Handley, “The Three High Court Decisions on Estoppel 1988–​1990” (2006) 80 ALJ 724; Handley, “Further Thoughts on Proprietary Estoppel” (2010) 84 ALJ 239.

215

Sullivan v Sullivan (2006) 13 BPR 24,755 at [11]–​[32].

216

Sullivan v Sullivan (2006) 13 BPR 24,755 per Hodgson JA, with whom McColl JA concurred.

217

Como v Helmers [2011] WASC 179 at [77] per Corboy J; Germanotta v Germanotta [2012] QSC 116 at [139] per McMeekin J.

218

Milling v Hardie [2014] NSWCA 163 at [55] per Macfarlan JA, with whom Beazley P concurred.

219

Harrison v Harrison [2013] VSCA 170 at [141] per Garde AJA, with whom Harper and Tate AJA concurred.

220

Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLR 567 (where Randerson J, delivering the reasons of the court, appeared to side with granting expectation (as opposed to reliance) relief, but at the same time refused to countenance a presumptive or prima facie approach one way or the other: at [119]).

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Estoppel  Chapter  10

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[10.245]  The matter, though, may be one of perspective. Rejection of a “minimum equity”

approach speaks against a starting point informed by the least extensive form of relief to rectify the relevant detriment. It does not, by itself, entirely obviate inquiry into issues of proportionality. Rather, the principle of proportionality remains but is a “negative one”, in that the enforcement of the expectation must not be disproportionate.221 Expressed another way, where the expectation is disproportionate to the detriment suffered, “the plaintiff’s equity may be better satisfied in another and possibly more limited way”.222 Also, relief may, as in Giumelli, be moulded to meet practical considerations, and take into account the impact of its orders on “innocent” third parties. It may, in any case, be that often enforcing the promise is a proportionate response to rectifying the detriment suffered by the plaintiff,223 as it was in Waltons Stores (discussed at [10.315]). The point now appears established in view of the High Court’s ruling in Sidhu v Van Dyke,224 to the effect that (at least) proprietary estoppel serves to vindicate a representee’s expectations against a party who seeks unconscionably to resile from an expectation he or she has created. Their Honours ruled, in this vein, that “where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise”.225 On the facts, this dictated that the appellant ought to be held to his promises to transfer a house to the respondent (albeit ultimately by an award of equitable compensation),226 on which the latter relied upon in not pursuing a property settlement with her former husband, continuing to rent the house, carrying out maintenance and renovations, and not seeking full-​time employment. Yet paralleling the development of the law explained in the preceding paragraph, the court accepted that “[t]‌he requirements of good conscience may mean that in some cases the value of the promise may not be the just measure of relief”.227 Reflecting the impact of proportionality on the core issue of unconscionability, their Honours countenanced that had the respondent been instead induced to make no more than a small, readily quantifiable monetary outlay on the faith of the appellant’s promises, it might not have been unconscionable for the appellant to resile from his promises on condition that he reimburse her for her outlay.228

221

Delaforce v Simpson-​Cook (2010) 78 NSWLR 483 at [77] per Handley AJA; Estephan v Estephan (2012) 6 BFRA 567 at [98] per Bergin CJ in Eq; Milling v Hardie [2014] NSWCA 163 at [55] per Macfarlan JA, with whom Beazley P concurred.

222

Harrison v Harrison [2013] VSCA 170 at [141] per Garde AJA, with whom Harper and Tate AJA concurred. See also Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLR 567 at [118] per Randerson J.

223

Como v Helmers [2011] WASC 179 at [77] per Corboy J (remarking that the court is not limited to doing “the minimum equity to do justice to the plaintiff” because “generally the estopped party can only avoid the detriment that would occur by resiling from the assumption or expectation that they had engendered by making good that assumption or expectation”); Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] 3 NZLR 567 at [115] per Randerson J (remarking that “the clearer and more explicit the assurance is, the more likely it is that a court will be willing to grant expectation-​based relief”, and that “the greater the degree and consequences of detrimental reliance by the claimant, the more likely it is that the court will be prepared to hold the defendant to the promise rather than make an award … designed to compensate for reliance-​based losses”).

224

Sidhu v Van Dyke (2014) 251 CLR 505 at [77] per French CJ, Kiefel, Bell and Keane JJ.

225

Sidhu v Van Dyke (2014) 251 CLR 505 at [85] per French CJ, Kiefel, Bell and Keane JJ (emphasis supplied).

226

See Van Dyke v Sidhu [2014] NSWSC 1341.

227

Sidhu v Van Dyke (2014) 251 CLR 505 at [83] per French CJ, Kiefel, Bell and Keane JJ. To this end, whether it is entirely accurate to say that “[t]‌he principle of proportionality applies only in unusual cases where proprietary relief would be out of all proportion to the detriment” (Priestley v Priestley [2017] NSWCA 155 at [164] per Emmett AJA; emphasis supplied) may be queried.

228

Sidhu v Van Dyke (2014) 251 CLR 505 at [84] per French CJ, Kiefel, Bell and Keane JJ.

[10.245]  355 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

[10.250]  Given the shift in the Australian law of equitable estoppel ostensibly heralded by

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Giumelli, it may have been safely assumed that the judgment in that case would have contained multiple explicit statements correcting the law’s prior wrong turn, and setting its course in the right direction. Yet the joint judgment is curiously devoid of any such statement, leaving its interpretation to inference rather than direction. Indeed, to the extent that the judgment makes oblique overtures to enforcing the relevant promise(s), the actual result in the case represents, it has been correctly observed, a classic example of an entitlement to “minimum equity” rather than enforcement of an expectation, as the award was substantially less than the expectation.229 The High Court’s 2010 observation that the Giumelli line of cases highlights that “care must be taken to avoid granting equitable relief which goes beyond the necessities of the case”230 makes its subsequent rejection of a “minimum equity” approach in Sidhu v Van Dyke perhaps the more surprising. The difference between a “minimum equity” approach, and that supposedly supported by Giumelli, is not only an academic one. Its impact in practice is illustrated by the facts and outcome in Donis v Donis.231 The litigation stemmed from a promise made to the respondent by her future in-​laws to transfer an interest in real property to the respondent following her marriage to their son. The respondent married and gave up work to have a child ostensibly in (at least partial) reliance on the promise. The marriage ended in divorce shortly thereafter. The property in question was later sold at a very significant profit. The main issue was whether the promisors were bound to pay the respondent a proportion of sale price in line with the promise. The promisors argued that enforcing the promise would grossly exceed that required to satisfy the respondent’s equity. The Victorian Court of Appeal rejected this argument, and utilised equitable estoppel to enforce the promise. Nettle JA response to the alleged disproportion between the enforcement of the promise and the detriment suffered is captured in the following extract:232 … [the law of proprietary estoppel] is the product of a discrete equitable principle that the conduct of a promisor in engaging a promisee to change his or her position to the promisee’s detriment binds the promisor to make good the promisee’s expectation. The detrimental reliance which supports the estoppel is, therefore, not to be conceived of as consideration in any sense. It is not a case of quid pro quo and even less one which requires correspondence as between the financial value of whatever may move each way.

The court did not consider the enforcement of the promise as disproportionate to the detriment suffered by the respondent. On this point Nettle JA reasoned as follows:233 [I]‌t cannot reasonably be supposed that an educated young woman contemplating marriage, and bent on buying a new matrimonial home in which she would have an unconditional half interest, would be prepared to go to an older home (which she did not like) in an area well removed from her family (which she found to be disagreeable); put her and her husband’s funds into improving the property and defraying mortgage payments; put her own efforts and those

229

Aitken, “The Future of the ‘Minimum Equity’, and the Appropriate ‘Fault Line’ in Promissory and Proprietary Estoppel” (2010) 33 Aust Bar Rev 212 at 218. See also Aitken, “Unscrambling ‘Detriment’ —​Unjust Enrichment, Mistaken Payments, and Estoppel” (2014) 38 Aust Bar Rev 269 at 279 (opining that “[s]‌ince no-​one can discern a ratio in Giumelli (apart from a generalised notion that a court should not impose a constructive trust, if an equitable charge will do)” the case is “a slender reed upon which to hang an argument that the requirement of ‘minimum equity’ has disappeared”).

230

John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [129] (FC).

231

Donis v Donis (2007) 19 VR 577.

232

Donis v Donis (2007) 19 VR 577 at [56].

233

Donis v Donis (2007) 19 VR 577 at [33].

356 [10.250] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

of her family into renovating the property; and allow herself to become pregnant and give up teaching sooner than she otherwise would have done, unless she had been assured that she had the unconditional half interest in the property.

Yet in view of the significant increase in value of the property in question, enforcement of the promise meant that the respondent secured a (much) more beneficial outcome than one based on her contributions, whether for the purposes of a constructive trust or pursuant to the Family Court’s discretion to alter property interests on divorce. This explains the remark by a commentator that the decision “seemed to cry out” for the grant of special leave to the High Court,234 but the court refused it.235 Nettle JA in Donis accepted that the result may have been different had the promise been made conditional on the marriage subsisting or envisaging an adjustment in the event of divorce.236 Yet it may be queried who, at a time of harmony, would expressly couch a promise in these terms. His Honour also surmised that the outcome may have differed had the respondent entered the marriage without an intention that it should last, in which case “it is hard to see that it would have been unconscionable for the [promisors] to resile from their promises”.237 Proof of such an intention would hardly be easy. But revealing his sympathies in the case, Nettle JA noted that it was the respondent who had been abandoned, and left to care for a child without a roof over her head and without any other form of support.

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[10.255] The above approach does have the benefit of simplifying the judicial process, as to

assume that, at least in family-​type disputes involving promises relating to property, the law will enforce the promise (if the elements of estoppel are made out) avoids extended investigation (and therefore lawyer and court time) on quantifying the minutiae of detriment. Having said that, even under a “minimum equity” approach, the courts never proceeded on the basis that detriment would be precisely quantified by mathematical formulae.238 The Donis, and now Sidhu v Van Dyke, approach may foster potential unjust enrichment in a representee. Even though Nettle JA in Donis rejected legal notions of unjust enrichment in the law of estoppel,239 this does not deny that equitable relief has, given its role in mitigating the rigours of the common law, traditionally been limited in scope to avoid a party wronged being unjustly enriched: see [P.190]. An approach better aligned with equitable principle, and more explicit High Court authority than Giumelli, is that adopted by the New South Wales Court of Appeal in Sullivan v Sullivan.240 There the husband and wife respondents promised the appellant (the husband’s sister) that she could occupy a house they had purchased for her life at a minimal rent. Relying on this, the appellant relinquished her public housing. The arrangement having been on foot for eight years, disharmony developed between the parties, and the respondents directed the appellant to vacate the property. She refused, and sought enforcement of the promise, entitling her to a lifelong tenure in the property. Hodgson JA, with whom McColl JA concurred, accepted that relinquishing subsidised public housing accommodation, for which the appellant had waited seven years, was substantial detriment she suffered in relying on the promise, 234

Aitken, “The Future of the ‘Minimum Equity’, and the Appropriate ‘Fault Line’ in Promissory and Proprietary Estoppel” (2010) 33 Aust Bar Rev 212 at 217.

235

Donis v Donis [2007] HCATrans 609.

236

Donis v Donis (2007) 19 VR 577 at [28].

237

Donis v Donis (2007) 19 VR 577 at [35].

238

See Robertson, “The Reliance Basis of Proprietary Estoppel Remedies” [2008] Conv 295 at 319.

239

Donis v Donis (2007) 19 VR 577 at [56].

240

Sullivan v Sullivan (2006) 13 BPR 24,755.

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Equity and Trusts in Australia

and that requiring her to vacate the house in six weeks was unconscionable.241 However, for the following five reasons, they ruled that to give relief that would hold the respondents to a promise that the house would be the appellant’s for life would exceed that justified by the requirements of conscientious conduct, and would therefore be disproportionate to the detriment alleged:242 • the promise was gratuitous, given in the absence of any substantial moral obligation or any kind of trade off; • the promise was given in the context of an affectionate family relationship, which had since broken down; • the appellant, being aged about 40, had a life expectancy likely to be in the order of 40 years; • an order that bound the respondents for up to a further 40 years or so could work significant hardship should their financial circumstances change; and

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• the paucity of evidence led by the appellant, which should not operate in her favour. To fulfil the dictates of conscientious conduct while at the same time not unjustly enriching the appellant, the court entitled the appellant to reside in the property for a further period of seven years, subject to payment of the agreed rent as part of the promise (with inflation adjustments) and to her taking reasonable care of it. The time frame was chosen to afford the appellant time to secure public housing accommodation.243 Of course, the facts in Sullivan are distinguishable from those in Donis, but it seems that, had the approach in Donis been applied in Sullivan, the result would have been more favourable to the appellant. That this would have been likely draws support from the fact that Handley JA, whose dissent in Sullivan favoured giving the appellant an entitlement to enforce the promise, exhibited reasoning that was applied in Donis. In Donis v Donis244 Nettle JA considered that the fact that a promise was gratuitous should be irrelevant. He viewed the suggestion that a promisor should not be held to a promise made gratuitously without any kind of trade off as tantamount to the idea, which he had rejected, that a promisor will not be estopped “unless the promise is supported by consideration or unless there is some degree of financial correspondence between the value of the detriment and the value of the promise”,245 and that “[t]‌he idea that a promisor should not be held to his promise because of lack of prior moral obligation appears to me also to be flawed”.246 Provided that the detriment suffered in relying on a promise is rectified via estoppel, though, the fact that the promise is made gratuitously and without prior moral obligation is arguably relevant in determining how the equities are to be balanced. By refusing to enforce promises unsupported by consideration, contract law recognised that policy those who are promised “something for nothing” have no moral (or legal) claim to that promised. And while equitable estoppel has a role in addressing the injustices of the common law rule in this regard, its operation should not presumably serve to entirely outflank it. 241

Sullivan v Sullivan (2006) 13 BPR 24,755 at [90]–​[93].

242

Sullivan v Sullivan (2006) 13 BPR 24,755 at [95].

243

Sullivan v Sullivan (2006) 13 BPR 24,755 at [98].

244

Donis v Donis (2007) 19 VR 577 at [36].

245

Donis v Donis (2007) 19 VR 577 at [38].

246

Donis v Donis (2007) 19 VR 577 at [39].

358 [10.255] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

[10.260] In any case, it may be that the Donis/​Sidhu approach is confined primarily to a

domestic or family context, one commentator disclaiming an “overarching” doctrine capable of treating uniformly both loss of a house in a purely domestic situation, as opposed to a claim for $1b on a failed bond deal.247 This derives support from another judgment of the Victorian Court of Appeal, ACN 074 971 109 (as Trustee for Argot Unit Trust) v National Mutual Life Association of Australasia Ltd,248 handed down the year after Donis. The facts, involving a commercial transaction between arm’s length parties, revealed the difference between the detriment suffered in reliance on the relevant representation ($37m) and that which would (arguably) have been the relevant expectation ($1.44b). The court ruled that in the circumstances “such an exorbitant amount of money could not be justified by the requirements of conscientious conduct”.249 Their Honours added that, as the case was only about money, it was not one in which “the effects of unconscionable conduct are to be measured in the imponderables of human feelings”.250 Curiously, the judgment earlier contained a statement principle that “satisfaction of the equity calls for the enforcement of a promise only as a means of avoiding the detriment and only to the extent necessary to achieve that object”.251 [10.265]  A court may be more inclined to enforce a promise through the doctrine of equitable

estoppel if the detriment in question is difficult to quantify in monetary terms. This emanates from the majority judgment in Verwayen252 (see [10.230], [10.300]) albeit presupposing that the detriment is not so apparently insubstantial as to represent an entirely disproportionate response to the represent’s conduct. Remedies to rectify detriment

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[10.270]  Where a court accepts that a proportionate and just response to the detriment

suffered requires that the promise be enforced, it may order its performance or, for a promise of an entitlement to property, impose a constructive trust,253 charge254 or lien. In the alternative, the court may order compensation (with perhaps security by a charge over the relevant property)255 if, say, proprietary relief would impinge upon the rights of innocent third parties,256 the promise targeted only part of a property257 or only the payment 247

Aitken, “The Future of the ‘Minimum Equity’, and the Appropriate ‘Fault Line’ in Promissory and Proprietary Estoppel” (2010) 33 Aust Bar Rev 212 at 221.

248

ACN 074 971 109 (as Trustee for Argot Unit Trust) v National Mutual Life Association of Australasia Ltd (2008) 21 VR 351.

249

ACN 074 971 109 (as Trustee for Argot Unit Trust) v National Mutual Life Association of Australasia Ltd (2008) 21 VR 351 at [180].

250

ACN 074 971 109 (as Trustee for Argot Unit Trust) v National Mutual Life Association of Australasia Ltd (2008) 21 VR 351 at [180].

251

ACN 074 971 109 (as Trustee for Argot Unit Trust) v National Mutual Life Association of Australasia Ltd (2008) 21 VR 351 at [167] (emphasis supplied).

252

Commonwealth v Verwayen (1990) 170 CLR 394. See also McCraith v Fraser (1991) 6 ANZ Ins Cases ¶61-​061 at 77,144 per Gray J; Commonwealth v Clark [1994] 2 VR 333 at 383–​384 per Ormiston J.

253

See, for example, Flinn v Flinn [1999] 3 VR 712 at 750 per Brooking JA; Estephan v Estephan (2012) 6 BFRA 567 at [102]–​ [108] per Bergin CJ in Eq; Mould v Canale [2017] VSC 793 at [98]–​[100] per Macaulay J.

254

See, for example, Stenlake v Whipps [2016] NSWSC 719 (arising out of the plaintiff’s renovation of a property pursuant to promises made by his partner that the plaintiff would have the right to occupy the property during their joint lifetimes and after the partner’s death; Slattery J declared that the plaintiff had an equitable charge over the property in a sum representing the increase in the value of the property due to the renovations: at [55]–​[59]).

255

See, for example, Byrnes v Byrnes [2012] NSWSC 1600 at [124]–​[131] per Lindsay J.

256

See, for example, Giumelli v Giumelli (1999) 196 CLR 101, discussed at [10.70].

257

See, for example, Galaxidis v Galaxidis [2004] NSWCA 111 at [124] per Tobias JA.

[10.270]  359 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

of money,258 or its performance would force the parties to persist a relationship that has broken down259 (a “clean break” notion, for example, in cases involving representations as to entry into or the renewal of leases),260 or if the alleged detriment was indeed minimal in comparison to the representation.261 Moreover, the prevailing broad interpretation of s 20 of the Australian Consumer Law (see [9.170]) may mean that unconscionable conduct in the context of the estoppel can attract the extensive avenues for relief available under that Law. Whatever the remedy, it must be “based upon broad discretion rather than mathematical or accountancy principles”.262 Detriment compensated or remedied by other means

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[10.275]  Detriment compensated or remedied by means other than the claimed estoppel is

not relevant detriment. As estoppel aims to rectify the detriment suffered by the representee in reliance on an unfulfilled representation, equity requires the parties to act on the basis of the relationship assumed by the innocent party until the detriment is removed or the innocent party is otherwise compensated. Hence, the payment of, or a binding undertaking to pay, adequate compensation will preclude a finding of estoppel.263 A statutory right to compensation may also deny an estoppel. For example, forbearance to sue in reliance on a representation by the defendant may not constitute detriment for the purposes of estoppel where the court is statutorily empowered to award interest that would adequately compensate the plaintiff for the loss suffered by reason of the forbearance.264 In Milling v Hardie265 the plaintiffs alleged that, by reason of being invited by the representor (M)  to live on a homestead on M’s farming property, and in making improvements thereto over a 20 year timeframe, there was an implied promise that they would inherit the homestead. The New South Wales Court of Appeal found no such promise —​at most it was a promise of residence during M’s lifetime. Macfarlan JA, with whom Beazley P concurred, noted that the plaintiffs had benefited from rent-​free of occupation of the homestead for a 258

See, for example, Australian Crime Commission v Gray [2003] NSWCA 318, discussed at [10.130].

259

See, for example, W v G (1996) 20 Fam LR 49 at 66 per Hodgson J; Gillett v Holt [2001] Ch 210 at 237 per Robert Walker LJ; Jennings v Rice [2003] 1 P & CR 100 at [52] per Robert Walker LJ.

260

See, for example, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (discussed at [10.315]); Marvon Pty Ltd v Yulara Development Co Ltd (1989) 98 FLR 348; Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 587 per Kirby P (who refused to accept that a court should “require the parties (one of whom is resisting) to proceed with the lease with all the opportunities for friction and variation in the ongoing relationship which a lease entails”). In Austotel, however, Kirby P denied a remedy because, in his view, no estoppel had been made out. Cf Priestley JA in dissent, who held that the remedy that should be granted to prevent the detriment to Franklins was an order for the grant of a lease. He justified this conclusion by the fact that Austotel had built a supermarket “physically created to the Franklins’ model”, refuting the argument by Austotel that such relief was too extensive. His Honour reasoned that “although the forcing of Franklins upon Austotel as a tenant, for a significant period and in valuable property might in some circumstances be regarded as onerous, in the circumstances of the present case it does not seem to me that would be so; the evidence shows that the rent is a fully commercial rent and that Franklins are desirable tenants”: at 616.

261

See, for example, Ryan v Ryan [2016] TASSC 4 (which Estcourt J characterised as “a case where the plaintiff had been induced to make a relatively small, readily quantifiable monetary outlay on the faith of the deceased’s assurances”, in which event “it would not be unconscionable for the deceased to have resiled from his promises to the plaintiff as long as the first defendant reimburse the plaintiff for his outlay”: at [49]).

262

Blazely v Whiley (1995) 5 Tas R 254 at 279 per Wright J.

263

Commonwealth v Verwayen (1990) 170 CLR 394 at 441–​442 per Deane J, at 501 per McHugh J; Re Neal (1993) 114 ALR 659 at 669 per Drummond J; Powell v Benney [2007] EWCA Civ 1283 at [30] per Sir Peter Gibson (“it would offend common sense to leave out of account a benefit received in connection with a detriment when considering the detriment for the purpose of proprietary estoppel”).

264

Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 at 308 per Handley JA.

265

Milling v Hardie [2014] NSWCA 163.

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Estoppel  Chapter  10

lengthy time, and had use of the improvements for a decade or, in some cases, considerably more. Their expenditure on improvements could accordingly be regarded, said his Honour, “as having been largely, if not wholly, amortised over the period of their occupation”.266 The plaintiffs’ equity could be met by estopping M from denying them an entitlement to occupy the homestead during M’s lifetime. Similarly, in Etchison v ANZ Executors and Trustee Company Ltd,267 arising out of an alleged promise made to the plaintiff that she would be paid for nursing the deceased, McMurdo J held that as the plaintiff inherited under the deceased’s will far more than she could claim as a fair remuneration for her services according to a “going rate”, she suffered no relevant detriment. It was not unconscionable, as a result, for the executor to leave the plaintiff’s expectation unfulfilled.

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[10.280]  An estoppel may nonetheless lie where the detriment is inadequately or only par-

tially remedied by another means. The court may inquire as to whether the relief claimed is proportionate to the “net” detriment suffered by the representee. In some circumstances, this “net” detriment may be substantial enough for the court to estop the representor from resiling from its representation. In Metropolitan Transit Authority v Waverley Transit Pty Ltd,268 for example, the appellant represented to the respondent that renewal of the bus service contract between them would occur without recourse to public tenders if the respondent engaged in industry rationalisation. The appellant argued that its failure to renew the contract could not give rise to any detriment in view of a “buyer of last resort” clause in the contract, which required the appellant, on giving notice of its intention not to renew the contract, to purchase from the proprietor assets (such as buses, plant and machinery) on the latter’s request. The Full Court of the Supreme Court of Victoria rejected this contention, noting that, as the clause failed to provide for payment in respect of loss of goodwill, it did not adequately remedy the detriment the respondent suffered in relying on the appellant’s representation.269 In other cases, the remedy sought will be disproportionate to the “net” detriment suffered. In Mobil Oil Australia Ltd v Wellcome International Pty Ltd,270 involving a promise by the appellant to its franchisees of free tenure on meeting certain performance standards, the Full Federal Court held that much of the claimed detriment in reliance on this promise —​such as greater investment in staff training, uniforms, additional marketing costs and wages, preference for Mobil products, and so on —​“were simply sound and desirable business practices” that were likely to, and did in fact, lead to increased turnover, sales and profitability. Hence, in the court’s opinion, to hold the appellant to its promises, as the franchisees sought to do, was not proportional to the detriment they had suffered.271 266

Milling v Hardie [2014] NSWCA 163 at [69]. See also Sledmore v Dalby (1996) 72 P & CR 196 (noted Pawlowski (1997) 113 LQR 232; Milne [1997] CLJ 34) (where the English Court of Appeal similarly held that the extent of the detriment claimed by the defendant in reliance on a promise of ultimate ownership of property had been removed by the passage of time because his continued occupation of the property rent-​free for over 18 years had redressed or removed the equity arising from his expenditure in improving it); Gors v Henderson (unreported, SC(WA), Steytler J, 7 September 1998), at 32–​33; Petronijevic v Milojkovic [2014] NSWSC 1337 at [19]–​[27] per White J.

267

Etchison v ANZ Executors and Trustee Company Ltd [2005] QSC 363 at [43]–​[64].

268

Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181.

269

Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181 at 210.

270

Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 at 519.

271

Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 at 519. See also Prudential Building and Investment Society of Canterbury v Hankins [1997] 1 NZLR 114 at 121 per Hammond J (who noted that estoppel is not available where there is a benefit to the claimant from conduct in reliance on the representation); Stone v Glendyc Pty Ltd [2003] WASC 80 (where Templeman J refused to find an estoppel out of promises by parents to their son regarding a share in the family farming enterprise because the son’s reliance was not detrimental, as he benefited considerably from the arrangements: at [230]).

[10.280]  361 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

[10.285]  The giving of reasonable notice of an intended departure from a promise will, if no

or little detriment has been suffered in reliance on it, likely prevent a successful claim in estoppel. Particularly in cases involving an assumption surrounding a future state of affairs, the circumstances may be such that any significant detriment would be avoided altogether were the party affected given reasonable notice of the intended departure. In such cases, estoppel may only preclude departure from the assumed state of affairs otherwise than after such reasonable notice has been given.272 Opportunities foregone as detriment [10.290]  For the purposes of estoppel, detriment may be constituted by chances or oppor-

tunities foregone in reliance on a representation. What remains uncertain is the standard of proof the representee must satisfy for equitable intervention. One view requires the representee only to establish that he or she has been deprived of an available opportunity to do better, regardless of whether that opportunity would have been pursued or its likely success or failure.273 This approach enjoys some support at Supreme Court level. For example, in McCraith v Fraser274 the Northern Territory Supreme Court held that the insured (representee) need only prove that he had been deprived of the opportunity to pursue alternative courses or arrangements by acting on the insurer’s representation that he was covered and its agreement to conduct his defence. In the court’s opinion, it was not necessary to speculate endlessly about what steps the insured might have taken had he been told at an earlier date that he was uninsured. Similarly, in Je Maintiendrai Pty Ltd v Quaglia275 a majority of the South Australian Full Court found that the defendant, in continuing to lease the plaintiff’s premises relying on the latter’s promise to accept a lower rental, suffered detriment in having foregone other choices open to him had the landlord refused to reduce the rent. Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

[10.295]  The above view fails to inquire into the likelihood that the representee would have

pursued any one of the opportunities or options allegedly foregone, and whether that option would have been successful. It is arguably contrary to accepted principles of equity to require a person to remedy losses that are speculative or conjectural at best. To this end, a South Australian judge has noted that although courts will at times “act upon evidence which may be somewhat inconclusive or sparse”, they must act with justice to both parties, there being “a limit to speculation”.276 Accordingly, alleged detriment that is nothing more than the loss of a possibility, especially when its value cannot be quantified, rests almost entirely on speculation,

272

Commonwealth v Verwayen (1990) 170 CLR 394 at 442 per Deane J; Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 at 750 per Santow J; Murphy v Overton Investments Pty Ltd (2001) 182 ALR 138 at 157 per Branson J (viewing it from the perspective of precluding unconscionable conduct), at 163 per R D Nicholson J (“I do not consider that as a matter of law a warning denying the correctness of an assumption or expectation cannot have effect where a detrimental course has been embarked upon but opportunity to ameliorate or curtail it exists because of the warning”) [revd on another point on appeal: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388].

273

Hansen v Marco Engineering (Aust) Pty Ltd [1948] VLR 198 at 211 per Fullagar J.

274

McCraith v Fraser (1991) 6 ANZ Ins Cases ¶61-​061 at 77,142–​3 per Gray J.

275

Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 at 115–​116 per White J. See also at 106–​107 per King CJ. Contra at 116–​115 per Cox J.

276

Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 308 per Doyle CJ. See also Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524 at 540 per Handley JA (in proving detriment, it is sufficient for the representee to establish that its reliance caused it to lose a real chance of avoiding the detriment that has ensued); Nigel Watts Fashion Agencies Pty Ltd v GIO General Ltd (1995) 8 ANZ Ins Cases ¶61-​235 at 75,646 per Kirby P, at 75,654 per Handley JA.

362 [10.285] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

and so should not be thrown on the representor.277 In other words, no estoppel should arise on the basis of an unforeseen and unforeseeable detriment, though this should not be taken to mean that estoppel rests on the precise detriment being foreseen or foreseeable.278 This narrower view, as espoused in the dissenting judgment of Cox J in Quaglia, is preferable. His Honour branded it as insufficient for a promisee simply to identify a number of alternative courses of action he or she could have pursued but for the reliance on the representation, and maintain that these were the detriment.279 The representee must establish that he or she would otherwise reasonably have adopted those alternatives. To this end, evidence tending to show that opportunities may not have been successful will likely detract from a finding of relevant detriment. For example, in Re Neal280 the applicant debtors argued that they had acted to their detriment in relying on a creditor’s representations that a bill would not be presented if a cash payment were made to its solicitor’s trust account. The detriment alleged was the abandonment of steps to arrange for another entity to meet the bill on presentation. Drummond J held that, although prima facie this appeared to be a detriment, the fact that the debtors never had anything near the amount of funds required to meet the bill meant that any such efforts would have been unsuccessful.281 Hence, there was no relevant detriment. Conversely, clear evidence of an opportunity foregone in reliance on a promise will support a positive finding of detriment. For example, in Foran v Wight282 Deane J held that detriment flowed from the vendor’s anticipatory repudiation of the contract of sale because the evidence indicated a “real chance” that, had the purchasers not been induced to cease their efforts to arrange finance by the vendors’ intimation, they would have been able to obtain the balance of the purchase price. Emotional distress as detriment

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[10.300]  Stress, anxiety or other psychological or physiological health impairments may con-

stitute detriment for the purposes of estoppel. Deane and Dawson JJ in Commonwealth v Verwayen283 (see [10.230]) rejected the argument that the only monetary loss could constitute relevant detriment. Deane J observed that “the past stress, anxiety, inconvenience and effort which were involved in the pursuit of the proceedings would be rendered futile” were the Commonwealth allowed to depart from the assumed state of affairs.284 Similarly, Dawson J remarked that the respondent had foregone “any exploration of the possibility of settlement thereby subjecting himself to a prolonged period of stress in an action in which the

277

Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 308–​309 per Doyle CJ; Re Zurich Australian Insurance Ltd [1999] 2 Qd R 203 at [92]–​[121] per Chesterman J.

278

Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 307 per Doyle CJ. Cf Harrison v Harrison [2013] VSCA 170 at [141] per Garde AJA, with whom Harper and Tate AJA agreed (declaring that it is inappropriate to apply “loss of chance” principles derived from the common law to the formulation of equitable relief in cases of proprietary estoppel where the relief is moulded around the engendered expectations).

279

Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 at 121.

280

Re Neal (1993) 114 ALR 659.

281

Re Neal (1993) 114 ALR 659 at 669.

282

Foran v Wight (1989) 168 CLR 385 at 436–​437. Mason CJ (in dissent) also rested his decision on whether the opportunity foregone would have been successful, but held that no detriment flowed from the vendor’s anticipatory repudiation of the contract of sale because “the purchasers would have been unable to tender performance on that date, due to the inadequacy of their financial resources”: at 412.

283

Commonwealth v Verwayen (1990) 170 CLR 394.

284

Commonwealth v Verwayen (1990) 170 CLR 394 at 448. See also Commonwealth v Clark [1994] 2 VR 333 at 383–​384 per Ormiston J.

[10.300]  363 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Equity and Trusts in Australia

damages claimed were for, amongst other things, a high level of anxiety and depression”.285 That the litigation was between a natural person and a defendant with the resources of the Commonwealth his Honour saw as a relevant factor in the determination of detriment in this form. Although the minority in Verwayen found insufficient evidence that any exacerbation of the plaintiff’s ill-​health was caused by his reliance on the defendant’s promise to admit liability, they did not deny that in an appropriate case detriment could be sustained on this basis.286 Their Honours’ hesitation may reflect a concern that the floodgates would be opened for representees alleging some emotional distress to justify a claim in estoppel. To this end, Mason CJ stipulated that detriment must be affirmatively demonstrated, not merely speculative. Detriment sustained by third parties [10.305]  Detriment suffered by third parties is not a relevant detriment for the purposes of

estoppel. For example, where foreign investors in the representee company rather than the company itself would suffer the alleged detriment, an estoppel will not operate against the representor because the representee has not sustained detriment.287 Although in this context the courts have not generally distinguished between directors or employees and the companies in which they operate, where it is unclear whether the representee was the director/​employee or the company, the detriment suffered by the former may not necessarily equate to that suffered by the latter.288

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[10.310]  The purpose of equitable estoppel has historically been to provide relief where to

insist upon a right at law would offend conscience.289 Yet prior to the High Court’s judgment in Waltons Stores (Interstate) Ltd v Maher290 the notion of offence to conscience tended to be classified according to established categories. In Waltons Stores Mason CJ and Wilson J analysed previous authority in Australia, the United Kingdom and the United States,291 and discerned a “common thread” in the cases, namely that equitable estoppel “extends to the enforcement of voluntary promises on the footing that a departure from the basic assumptions underlying the transaction between the parties must be unconscionable”.292 This basic

285

Commonwealth v Verwayen (1990) 170 CLR 394 at 461–​462. See also at 487 per Gaudron J.

286

Commonwealth v Verwayen (1990) 170 CLR 394 at 416 per Mason CJ, at 429 per Brennan J. See also Mason v Wagonga Local Aboriginal Land Council [2002] NSWSC 351 at [40] per Gzell J.

287

Cairns Festival Faire Pty Ltd v AEFC Ltd (unreported, FCA, Heerey J, 3 September 1993), at 32.

288

Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464 at 474 per Young J.

289

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 584–​585 per Kirby P; Commonwealth v Verwayen (1990) 170 CLR 394 at 441 per Deane J.

290

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

291

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 399–​404.

292

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 406. See also at 430 per Brennan J, at 453 per Deane J. The same has been recognised by New Zealand courts, Tipping J noting that “the element of unconscionability runs through all manifestations of estoppel”:  National Westminster Finance NZ Ltd v National Bank of NZ Ltd [1996] 1 NZLR 548n at 549. Prior to Waltons Stores, English courts had frequently associated “unconscionable conduct” with equitable estoppel (see, for example, Crabb v Arun District Council [1976] Ch 179 at 195 per Scarman LJ; Taylor Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1981] 1 All ER 897 at 915–​916 per Oliver J; Amalgamated Investment & Property Co Ltd v Texas

364 [10.305] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-06 20:33:39.

Estoppel  Chapter  10

motivating force for equitable relief explains why the categories of relief via estoppel are not closed.293 What must be unconscionable is not the dealing per se between the parties,294 nor the conduct of the judge in refusing relief,295 but the representor’s (intended) departure from the representation. To safeguard the flexible nature of equitable relief, courts have refrained from providing an exhaustive definition of what is “unconscionable”. Yet there are judicial admonitions that unconscionability must be determined by reference to principle, not left to expediency or general notions of fairness.296 The courts’ dilemma is to formulate a principle consistent with equitable notions of flexibility, but not so as to invite “resort to a kind of palm-​tree justice according to which the answer to the critical question in every future case will reside only in the breast of the judge”.297 To this end, Deane J typifies the general approach adopted by the courts in the following statement in Commonwealth v Verwayen:298 Ultimately … the question whether departure from the assumption would be unconscionable must be resolved not by reference to some pre-​conceived formula framed to serve as a universal yardstick but by reference to all of the circumstances of the case, including the reasonableness of the conduct of the other party in acting upon the assumption and the nature and extent of the detriment which he would sustain by acting upon the assumption if departure from the assumed state of affairs were permitted.

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Hence, unconscionability as an element of estoppel cannot be viewed in a vacuum. On the one hand, it functions as a “balancing item” through which the courts can ensure that conduct contrary to conscience, rather than any strict three element formulation per se, dictates the availability of equitable relief. Yet it is the character of the representation, the reasonableness of the representee’s reliance and the nature and extent of the detriment suffered in this reliance that determine whether or not the conduct of the representor in resiling from

Commerce International Bank Ltd [1981] 3 All ER 577 at 584 per Lord Denning MR) and the practice has continued (see, for example, Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [92] per Lord Walker; Hopkins, “Understanding Unconscionability in Proprietary Estoppel” (2004) 20 JCL 210). 293

Cf Handley, “Further Thoughts on Proprietary Estoppel” (2010) 84 ALJ 239 at 241, who maintains that the decision of the House of Lords in Thorner v Major [2009] 1 WLR 776 establishes that unconscionability is not an element of proprietary estoppel. Yet none of their Lordships said anything questioning the existence or role of unconscionability as an element, focusing instead on the clarity or otherwise of the representation, which was the issue at stake: see [10.115]. Moreover, the year before, in what proved an unsuccessful claim for proprietary estoppel in Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752, the House of Lords made manifold references to unconscionability. In particular, Lord Walker remarked (at [92]) that “unconscionability” plays “a very important part in the doctrine of equitable estoppel, in unifying and confirming, as it were, the other elements”. Handley’s views must be seen against the backdrop of his Honour’s previous extra-​judicial writing, which argues that reference to unconscionability in the case of estoppel by conduct is “unhelpful, unnecessary, and unsatisfactory”: Handley, “Unconscionability in Estoppel by Conduct: Triable Issue or Underlying Principle?” [2008] Conv 382 at 382 (concluding that “[t]‌he requirements of good conscience have been subsumed in the elements which define each form of estoppel by conduct and unconscionability has no further useful role”: at 400).

294

Unconscionable transactions (or substantive unconscionability) are chiefly the domain of statute: see [9.160]–​[9.195].

295

Cf Commonwealth v Clark [1994] 2 VR 333 at 380, 384 per Ormiston J, who phrased the relevant question, on more than one occasion, as whether it would be unconscionable for him not to grant relief.

296

Collin v Holden [1989] VR 510 at 516 per Tadgell J; Lennox v Cameron (1997) 8 BPR 15,939 at 15,951 per Bryson J; Depew v Wilkes (2002) 216 DLR (4th) 487 at 493 (CA(Ont)).

297

Bobko v Commonwealth (unreported, SC(Vic), Fullagar J, 22 April 1988). A  similar concern has been voiced in New Zealand: Westland Savings Bank v Hancock [1987] 2 NZLR 21 at 36 per Tipping J (“On the one hand it is necessary for the concept of estoppel to remain flexible and not to be confined to any rigid formula; on the other hand there must be some test or principle so that those who have to consider the matter in advance of a decision by the Court can have a reasonable prospect of forecasting what the result will be”). Cf Taylor v Dickens [1998] 3 FCR 455 at 471 per Wicks J (criticising unconscionability as an appeal to palm tree justice).

298

Commonwealth v Verwayen (1990) 170 CLR 394 at 445 (emphasis supplied).

[10.310]  365 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

the representation is unconscionable.299 Unconscionable conduct is, therefore, a function of what is proven as the representation, the reliance and the detriment, not a discrete ingredient independent of those elements.300 Parameters of unconscionable conduct

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[10.315]  Consistent with the foregoing, whilst an assumption or expectation can form the

basis of equitable estoppel, the existence of a mere assumption alone is not sufficient. Nor will evidence showing merely that a promise has been or will be departed from satisfy the requirement of unconscionability. There must be “something more”,301 namely an inducement or creation of the assumption or expectation by the representor in the representee with the knowledge or intention that it will be acted on by the latter.302 The representor, it is said, “must have played such a part in the adoption of, or persistence in, the assumption that he would be guilty of unjust and oppressive conduct if he were now to depart from it”.303 The facts of Waltons Stores (Interstate) Ltd v Maher304 illustrate unconscionable conduct in this context. The appellant negotiated with the respondents to lease land the latter owned. It was envisaged that the respondents would demolish the building on the land and replace it with one to be leased by the appellant. Negotiations reached an advanced stage. Work was commenced and a draft lease sent to the appellant for signature. The appellant’s solicitors corresponded with the respondents’ solicitors to the effect that “we have not yet obtained our client’s specific instructions to each amendment requested, but we believe that approval will be forthcoming. We shall let you know tomorrow if any amendments are not agreed to”. Three days later, the documents executed by the respondents were forwarded to the appellant’s solicitors “by way of exchange”, and demolition commenced. However, the appellant, knowing that the respondents had commenced demolition pursuant to these assurances, changed its retailing policy. Its solicitors advised that, as contracts had yet to be exchanged, it was under no legal obligation to complete, in response to which the appellant instructed its solicitors to “go slow”. The respondents’ construction of the new building was 40 per cent complete by the time the appellant informed them that it did not intend to sign the proposed lease. Prior to this moment, the respondents had received no indication that the appellant would not sign the lease. Mason CJ and Wilson J gave the leading judgment. Their Honours considered that the mere exercise of its legal right not to exchange contracts by the appellant did not amount to unconscionable conduct.305 But the presence of two additional factors —​the urgency of the 299

Commonwealth of Australia v Clark [1994] 2 VR 333 at 367 per Ormiston J; Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 317–​318 per Lander J.

300

Anaconda Nickel Ltd v Edensor Nominees Pty Ltd (2004) 50 ACSR 679 at [40] per Buchanan JA; Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [16], [17] per Lord Scott, at [92] per Lord Walker; Southwell v Blackburn [2015] WTLR 147 at [20] per Tomlinson LJ.

301

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 406 per Mason CJ and Wilson J.

302

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428–​429 per Brennan J; Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 at 116–​117 per Hill J; Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 309 per Doyle CJ. See Spence, “Australian Estoppel and the Protection of Reliance” (1997) 11 JCL 203 at 211–​218; Robertson, “Knowledge and Unconscionability in a Unified Estoppel” (1998) 24 Mon ULR 115 at 138–​144.

303

Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J.

304

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.

305

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 406–​408. See also at 428–​430 per Brennan J; Marvon Pty Ltd v Yulara Development Co Ltd (1989) 98 FLR 348 at 351 per Kearney J.

366 [10.315] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Estoppel  Chapter  10

matter and the fact the executed counterpart deed had been forwarded to the appellant’s solicitor —​obliged the appellant to communicate with the respondents within a reasonable time of receiving it and certainly upon learning of the demolition. The appellant’s inaction constituted clear encouragement or inducement to the respondents to continue to act on the basis of the assumption they had made. Coupled with its knowledge that the respondents in acting on the basis of a false assumption were suffering detriment, this made it unconscionable for the appellant to adopt a course of inaction that encouraged them in the course they had adopted. There was accordingly that “something more” —​beyond a mere resiling from a promise —​ that justified an estoppel. The outcome would have differed in the absence of encouragement to the respondents of a binding agreement; a “hope” or even some “confident expectation” is not ordinarily sufficient to trigger an estoppel, especially in the face of terms that remain to be negotiated and agreed.306

Inducement, knowledge and intention as a basis for unconscionable conduct [10.320]  That the chief hallmarks of unconscionable conduct entail inducement, knowledge

and intention on behalf of the representor clearly appears in Brennan J’s formulation of equitable estoppel in Waltons Stores,307 namely that the representee must prove that the representor: • induced the representee to adopt an assumption or expectation that a particular legal relationship was to exist or existed between them;308 • knew or intended the representee to act or abstain from acting in reliance on that assumption or expectation; and

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• failed to act to avoid the detriment that has been or would be suffered by the representee were the assumption or expectation not fulfilled. Although the above is phrased in terms of actual knowledge in the representor, the bulk of authority suggests that it is sufficient if the party sought to be estopped ought to have known or foreseen that the representee would rely on the promise to her or his detriment (“constructive knowledge”).309 At the same time, because a finding of unconscionable conduct rests on something that piques the conscience, imputed knowledge is not, in the usual case, likely to suffice to substantiate an estoppel in this regard.310 306

See, for example, DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728 (where a lease of commercial office premises was taken by the appellant on an assumption that the premises would be occupied in part by the respondent; Meagher JA, with whom Macfarlan JA concurred, held that the respondent’s subsequent refusal to occupy that part did not trigger an estoppel, as the respondent’s promises that it was “going ahead with the leasing arrangements” and was “committed” did not in the circumstances provide any objective basis for concluding that there was a binding contract, and nor was there any communication by which the respondent indicated that it regarded itself as bound to proceed notwithstanding that there was no agreement as to all of the relevant commercial terms of any right of occupation: at [67]).

307

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428–​429.

308

Although this element cannot be applied literally in instances where the parties do not intend to enter into a contract or otherwise formalise their legal relationship: see, for example, Doueihi v Construction Technologies Australia Pty Ltd (2016) 92 NSWLR 247 (where, in view of the close familial connections in the relevant dealings, there was no expectation that the relevant promises would ultimately translate to a legally enforceable document).

309

Commonwealth v Verwayen (1990) 170 CLR 394 at 445 per Deane J; Calaby Pty Ltd v Ampol Pty Ltd (1990) 102 FLR 186 at 210 per Angel J [estoppel not addressed on appeal: Ampol Ltd v Calaby Pty Ltd (1991) 109 ALR 343]; Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 309 per Doyle CJ; Australian Olympic Committee Inc v Big Fights Inc (1999) 46 IPR 53 at 134–​135 per Lindgren J; New Zealand Pelt Export Company Ltd v Trade Indemnity New Zealand Ltd (2004) 13 ANZ Ins Cas ¶61-​626 at [99] per Nettle JA, with whom Ormiston JA and Hansen AJA agreed; Leading Synthetics Pty Ltd v Adroit Insurance Group Pty Ltd [2011] VSC 467 at [69] per Macaulay J.

310

Portland Downs Pastoral Co Pty Ltd v Great Northern Developments Pty Ltd [2012] QCA 18 at [57], [58] per Chesterman JA, with whom White JA and Margaret Wilson AJA concurred.

[10.320]  367 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

[10.325]  Consistent with the foregoing, a court is unlikely to find unconscionable conduct

in a person who lacked knowledge concerning the effect of its representation on the representee.311 For example, in Milchas Investments Pty Ltd v Larkin312 Young J found that the plaintiff, in retracting from a deal involving the sale of its property to the defendant, did not know that the defendant had passed up another purchase opportunity in reliance upon the deal. The defendant’s attempt to estop the plaintiff from so retracting was characterised as “really no more than asserting that it is unconscionable for the plaintiff to breach a naked promise” which, on the authority of Waltons Stores, was not enough to raise an estoppel.313 [10.330]  The giving of sufficient notice of an intention to resile from a representation may,

from the moment of the notice, make it unreasonable for the representee to rely on the original representation to her or his detriment (see [10.285]), and may to this end preclude a finding of unconscionable conduct in the representor at least as from the date of the notice.314 So if prior to the notice no relevant detriment has been suffered in reliance on the representation, or the representor lacks any knowledge of such detriment, it may be difficult to establish that he or she acts unconscionably in resiling from the representation.315

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Silence or acquiescence as unconscionable conduct [10.335]  It has been judicially observed that “[o]‌ne can only have estoppel by silence if there is a duty to speak or where the party remaining silent might reasonably infer that that silence would be taken by others as sanctioning a particular course of conduct, that is, that it is inequitable to keep silent”.316 But ordinarily, where a party acquiesces in the making of an assumption when he or she ought to object to it, the inference of knowledge or intention that the assumption will be acted on may prove more difficult to draw than where the assumption is induced by the making of a promise.317 In Gold Star Insurance Ltd v Gaunt318 an insurance broker represented to the respondent that the latter’s vehicle would, from the following day, be covered by a policy of insurance. Although the broker forwarded the respondent’s proposal for insurance to the appellant insurer, the insurer never accepted it. The evidence revealed that the appellant had done nothing for 21  days following its receipt of the proposal indicating that the commencement of coverage was to have occurred before the proposal was accepted. The New Zealand Court of Appeal observed although this inaction could be criticised for lack of business efficiency, it was “a long leap to transpose it into unconscionable conduct where there is nothing specifically bringing to the attention of the appellant the reliance of the respondent on the broker’s

311

Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 at 116–​117 per Hill J.

312

Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464.

313

Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464 at 474. Although the defendant had given instructions to the real estate agent to tell the plaintiff that he had another contract on a property that was due to be exchanged the following week, the agent failed to relay this message. Had this message been communicated to the plaintiff, the outcome would most likely have been different.

314

Powercor Australia Ltd v Pacific Power [1999] VSC 110 at [1132] per Gillard J.

315

See, for example, Murphy v Overton Investments Pty Ltd (2001) 182 ALR 138 at 157 per Branson J, at 163 per R D Nicholson J [revd on another point on appeal: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388].

316

Waring v Ellis (2005) 13 BPR 24,459 at [58] per Young CJ in Eq.

317

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 423 per Brennan J; Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 at 87 per Holland J (CA).

318

Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80.

368 [10.325] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Estoppel  Chapter  10

statement”.319 It concluded that no legal obligation should lie on the appellant to take any step within a period of 21 days, absent anything more than the broker’s inaccurate assertion to the respondent that he was insured, when the broker was not the agent of the insurer for the purpose of making that assertion. Yet the courts have not been slow to find an estoppel where there is clear evidence that the representor knew or ought to have known that, by reason of its silence or acquiescence, the representee adopted and acted upon an erroneous assumption or expectation. Waltons Stores (Interstate) Ltd v Maher320 (see [10.315]) provides an example. Another is found in Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd,321 involving a contract obliging the appellant to erect premises for the respondent. The latter acquiesced in the former’s oral proposals for variations even though the contract required variations to be in writing. This acquiescence, ruled the New South Wales Court of Appeal, had, to the respondent’s knowledge, induced the appellant to proceed to its detriment with the building work without complying with its formal contractual obligations.322 Hence, the respondent was subsequently estopped from relying upon the requirement for writing.

Relationship between unconscionability and detriment

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[10.340]  Unconscionability and detriment are interdependent. The representor’s knowledge

of the extent of the detriment suffered by the representee in relying on the representation influences whether or not it is unconscionable to resile from that representation.323 This led Brennan J, on the facts of Waltons Stores (Interstate) Ltd v Maher,324 discussed at [10.315], to declare it “unconscionable for Waltons subsequently to seek to withdraw after a substantial part of the work was complete, leaving the Mahers to bear the detriment which non-​fulfilment of the expectation entailed”. Also, the relationship between unconscionability and detriment can operate as a de facto threshold of materiality ensuring that estoppel is not successfully pleaded in circumstances where the detriment in question is minimal or even spurious.325 In circumstances where the representee has, for instance, suffered no net detriment, it is unlikely that the court would conclude that it is unconscionable to resile from the relevant representation.326

319

Gold Star Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 at 87 per Holland J, who delivered the judgment of the court. A statutory provision (Insurance Law Reform Act 1977 (NZ), s 10(2)) deemed the insurer to have knowledge of all matters material to the contract of insurance known to the representative before the proposal is accepted. But the court held that this deeming provision did not operate to deem the appellant to have the relevant notice for the purposes of estoppel.

320

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 430. See also at 406–​407 per Mason CJ and Wilson J. Cf Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 313 per Bollen J dissenting (“when there has been blatantly unconscionable conduct … it is reasonable enough not to weigh the suggested detriment too precisely”).

321

Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251.

322

Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at 276–​277. See also Stevens v Standard Chartered Bank Australia Ltd (1988) 53 SASR 323.

323

Commonwealth v Verwayen (1990) 170 CLR 394 at 445 per Deane J; Commonwealth v Clark [1994] 2 VR 333 at 368 per Ormiston J; Fletcher v Minister for Environment & Heritage (1999) 73 SASR 474 at 482 per Bleby J (who found an identifiable and not speculative detriment, remarking that it is a detriment “of a kind required to find that departure from the representations … would be unconscionable”).

324

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 430. See also at 406–​407 per Mason CJ and Wilson J. Cf Mortgage Acceptance Nominees Ltd v Australian Thoroughbred Finance Pty Ltd (1996) 69 SASR 302 at 313 per Bollen J dissenting (“when there has been blatantly unconscionable conduct … it is reasonable enough not to weigh the suggested detriment too precisely”).

325

Gillett v Holt [2001] Ch 210 at 232 per Robert Walker LJ; Murphy v Burrows [2004] EWHC 1900 (Ch) at [112].

326

See, for example, Etchison v ANZ Executors and Trustee Company Ltd [2005] QSC 363, discussed at [10.275].

[10.340]  369 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

Stricter test of unconscionability in pre-​contractual negotiations? [10.345]  Waltons Stores (Interstate) Ltd v Maher327 (discussed at [10.315]) countenanced the

availability of equitable estoppel in pre-​contractual settings. The main objection to enforcing a non-​contractual promise absent a pre-​existing relationship is that it would outflank the principles of contract, principally the doctrine of consideration. To guard against cutting up this doctrine “by the roots”,328 it has been suggested that where the conduct relied on to create an equity occurs outside a contractual relationship, a determination of what should be seen as unconscionable should be the subject of meticulous examination. In these circumstances, it may be that the burden of establishing an estoppel is more exacting than where the parties are in a pre-​existing legal relationship.329 Particularly, it may be more difficult to establish unconscionability where the relationship between the parties is non-​contractual. In the words of Brennan J in Waltons Stores:330

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Parties who are negotiating a contract may proceed in the expectation that the terms will be agreed and a contract made but, so long as both parties recognise that either party is at liberty to withdraw from the negotiations at any time before a contract is made, it cannot be unconscionable for one party to do so … It is only if a party induces the other party to believe that he, the former party, is already bound and his freedom to withdraw has gone, that it could be unconscionable for him to subsequently assert that he is legally free to withdraw.

Austotel Pty Ltd v Franklins Selfserve Pty Ltd331 illustrates the challenges in establishing an estoppel outside an existing contractual relationship between the parties. During negotiations between the appellant property developer and the respondent supermarket proprietor to lease floor space in premises under construction, the parties exchanged letters of intent expressed to be subject to approval of the plans and store size, and entry into a formal lease. In subsequent negotiations the store size was increased but no agreement was reached on the rent for the enlarged premises. The respondent proceeded to acquire special equipment and fittings and took steps to terminate a current lease of premises in another shopping centre. The appellant proceeded to construct and adapt the premises to the respondent’s specifications but subsequently refused to complete the proposed deal. A majority of the New South Wales Court of Appeal found no estoppel on the facts, emphasising that the parties had deliberately refrained from committing themselves to a contract. Kirby P noted that while the appellant had taken many steps in anticipation of becoming the lessee of the enlarged premises, the parties had nevertheless reserved to themselves a right to avoid legal liability.332 Had they wished to terminate that entitlement, they could have formalised their agreement or at least agreed on the rental for the enlarged premises. From their failure to agree on the rent could be inferred an intention to keep their options open as to whether a lease should be entered into at all. Rogers AJA viewed the case not as one where

327

Waltons Stores (Interstate) Ltd v Maher (1987) 164 CLR 387.

328

Commonwealth v Scituate Savings Bank (1884) 137 Mass 301 at 302 per Holmes J.

329

Collin v Holden [1989] VR 510 at 516–​517 per Tadgell J. In Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464 at 472 Young J warned that “the principle in Waltons v Maher is not to be implied as a back-​up submission in every case where parties have failed to obtain a binding exchange of contracts. This, unfortunately, is tending to be the stance taken in almost every case of this nature”.

330

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 423 (emphasis supplied). See also Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421 at [100] per Vanstone J (“Merely acting in the hope, assumption or expectation that an agreement will be reached does not give rise to an estoppel”).

331

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582.

332

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 586–​587.

370 [10.345] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Estoppel  Chapter  10

the parties simply failed to address a question necessary for a complete agreement, but as a conscious and deliberate decision to refrain from coming to an enforceable agreement.333 The plaintiff had embarked on a “deliberate gamble” that had failed, his Honour added, and “it is not for equity to put the plaintiff in the position it would have been in had it never embarked on its gamble”.334

Representation induced by fraud —​unclean hands [10.350]  It is not unconscionable to depart from a representation procured or induced by

misrepresentation or other equitable wrong.335 For example, in Official Trustee in Bankruptcy v Tooheys Ltd336 the New South Wales Court of Appeal found that it was not unconscionable for a landlord to treat itself as no longer bound to honour its representations to its tenants as to security of tenure because it had been tricked into accepting the tenants in the first place. Sheller JA, however, made clear that inequitable conduct by the representee will not always deny an estoppel; rather, the issue rests on an examination of all the circumstances of the case.337 That the “clean hands” defence, which can explain the above principle, does not operate inflexibly (see [30.170]–​[30.180]) aligns Sheller JA’s approach with equitable principle. Consistent with this, that the representor is found to have engaged in misleading or deceptive conduct contrary to statute vis-​à-​vis the representee (see [8.95]) does not by itself justify an estoppel against the representor.338

ESTOPPEL AND THIRD PARTIES

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[10.355]  Estoppel operates primarily between the representor and representee; it is the rela-

tionship between these parties that equity protects.339 But once an estoppel is established, its benefit or burden may in some circumstances extend to third parties.340 Whether or not it does so rests on whether the third party in question was a party or privy to the principal transaction. A claimant who is not a party or privy thereto cannot, as a general principle, enforce an estoppel arising from the representor’s conduct, at least absent some special nexus between the claimant and representor.341

333

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 618.

334

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 620. See also Milchas Investments Pty Ltd v Larkin (1989) 96 FLR 464; Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421 (where a majority of the court found no estoppel arising out of lease negotiations because, as explained by Vanstone J, the plaintiff’s unsuccessful attempts at procuring a signature on a lease document by the defendant, the fact that the proposed starting date passed without occupation commencing and the absence of a formal acknowledgment of compliance with any of the specified conditions, should have put the plaintiff on notice that there were problems with respect to any agreement: at [100]; see also at [113]–​[118] per Layton J).

335

George Whitechurch, Ltd v Cavanagh [1902] AC 117 at 145 per Lord Brampton; Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J; Trippe Investments Pty Ltd v Henderson Investments Pty Ltd (1992) 106 FLR 214 at 231 (CA(NT)).

336

Official Trustee in Bankruptcy v Tooheys Ltd (1993) 29 NSWLR 641.

337

Official Trustee in Bankruptcy v Tooheys Ltd (1993) 29 NSWLR 641 at 651.

338

See, for example, Murphy v Overton Investments Pty Ltd (2001) 182 ALR 138 at 158 per Branson J [revd on another point on appeal: Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388].

339

Simm v Anglo-​American Telegraph Co (1879) 5 QBD 188 at 206–​207 per Brett LJ; Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74 at 93–​94 per Lord Mustill; Dixon Projects Pty Ltd v Masterton Homes Pty Ltd (1996) 36 IPR 136 at 144 per Spender J.

340

Commonwealth v Verwayen (1990) 170 CLR 394 at 444 per Deane J.

341

Grace v Hamilton Island Enterprises Ltd (unreported, SC(Qld), Thomas J, 17 March 1998), at 42 (who queried “why persons with sufficient proximity to enable them to sue a defendant for a tort cannot also sue that defendant to enforce an estoppel, if

[10.355]  371 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

On the other hand, there is no difficulty in upholding the benefit of an estoppel in favour of a party who stands in the shoes of someone who would have been entitled to assert the estoppel.342 In Wills v Abram,343 for example, a creditor’s conduct in participating in a bankruptcy composition by lodging proof of debt was held to estop him from later attempting to sue the bankrupt for that debt. The bankrupt himself was allowed to claim the benefit of the estoppel, being privy to the trustee who was administering his estate. Similarly, in Bay of Plenty Electricity Ltd v Natural Gas Corporation Energy Ltd344 an estoppel against an assignor was held binding as against the assignee because the assignee must have been fully aware of the facts giving rise to the estoppel, and the evidence showed that the assignee accepted the position established by the estoppel. The assignee could not escape being bound by the estoppel on the ground that it had not received any notice of a waiver or estoppel, for it had taken both the benefit and the burden of the agreement in question via the assignment, and so could not be in a better position than the assignor, but stood in the same position.345

ESTOPPEL AND STATUTE Inconsistency between estoppel and statute

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[10.360]  As the various species of estoppel are creatures of the common law or equity (or

both), they must operate consistently with the terms of any statute that impacts upon the relevant dispute.346 The courts have taken two approaches in refusing to countenance an estoppel raised against the operation of a statute.347 Under the first approach, the court justifies its decision on the basis that the estoppel would fly in the face of the policy of the legislation, and thereby deny the statutorily conferred benefit or protection to the person against whom the estoppel is asserted.348 The alternative approach is based purely on construction of the statutory words.349 The difference between these approaches may be more illusory than real, as “the factors that would influence a court in holding that, as a matter of implication from its express provisions, a statute prohibits the exclusion of its operation by estoppel would also tend to justify a court in holding that the statute expresses a social policy to which effect must be given regardless of the circumstances”.350 It follows that, absent clear statutory language

such persons would otherwise be subject to continuing detriment”); Powell v State of Tasmania (2001) 10 Tas R 283 at 297 per Crawford J. 342

Grace v Hamilton Island Enterprises Ltd (unreported, SC(Qld), Thomas J, 17 March 1998), at 42.

343

Wills v Abram (unreported, FCA, Heerey J, 12 May 1993).

344

Bay of Plenty Electricity Ltd v Natural Gas Corporation Energy Ltd [2002] 1 NZLR 173.

345

Bay of Plenty Electricity Ltd v Natural Gas Corporation Energy Ltd [2002] 1 NZLR 173 at 180–​181 per Thomas J.

346

Walsh v Commercial Travellers’ Association of Victoria [1940] VLR 259 at 268–​269 per Gavan Duffy J.

347

Goldman and Lindsay, “Estoppel in the Face of a Statute” (1988) 16 ABLR 375.

348

See, for example, Roach v Bickle (1915) 20 CLR 663 at 671 per Isaacs and Gavan Duffy JJ (“In any case, where an Act of Parliament lays down a rule of public policy it is impossible for private individuals to abrogate it at will … Where that rule of public policy takes the form of express declaration of invalidity no Court can permit personal relations to effect a virtual repeal of the enactment”); Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 at 1016 (PC); Attorney-​General v Gray [1977] 1 NSWLR 406; ACE Insurance Ltd v Trifunovski (2011) 200 FCR 532 at [134]–​[146] per Perram J.

349

See, for example, Gerloff v Edwards [1917] SASR 93; Pratten v Warringah Shire Council [1969] 2 NSWR 161; North West County District Council v J I Case (Australia) Pty Ltd [1974] 2 NSWLR 511; Commonwealth v Hamilton [1992] 2 Qd R 257 at 267–​268 per McPherson ACJ, at 271–​274 per Williams J. See further Christensen and Duncan, “Estoppel in the Face of Consumer Protection in Land Transactions —​Judicial Reasoning or Judicial Intuition?” (2010) 18 APLJ 113.

350

Goldman and Lindsay, “Estoppel in the Face of a Statute” (1988) 16 ABLR 375 at 388. See also Tudor Developments Pty Ltd v Makeig (2008) 72 NSWLR 624 at [73] per Basten JA (whether general law principles relating to estoppel “can operate in

372 [10.360] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Estoppel  Chapter  10

capable of determining the issue, the court may resort to policy. Where the language is clear, it may be presumed to reflect the policy underlying the provision.

Estoppel and questions of jurisdiction [10.365]  Estoppel cannot be used to oust a court’s statutory jurisdiction to make orders.351

For example, in ND v BM352 the Family Court held that the parties’ agreement that a sperm donor would have no legal rights as parent could not estop the court from exercising its statutory power to order child support from the donor where to do so was just and equitable. Nor can estoppel function to evade or overcome mandatory statutory requirements; estoppel cannot give a court a jurisdiction it is denied by statute.353 In Re Pollard354 a creditor sought to rely on estoppel to avoid s 52(1) of the Bankruptcy Act 1966 (Cth), which requires the court to demand proof of matters stated in creditors’ petitions. As Gummow J had found the bankruptcy notice was a nullity, to estop the debtor from denying its validity would simply operate to “shut out proof of the truth” that the notice was a nullity. Such a step would, moreover, have been contrary to the legislative policy that, in view of the serious consequences of bankruptcy on both debtors and creditors, a court should not render a debtor bankrupt on an ambiguity.

Estoppel to prevent insistence on, or denial of, statutory rights and duties

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[10.370]  Estoppel may prevent the representee from insisting on its legal rights or defences,

whether those rights or defences stem from the common law, equity or statute. A court is, however, unlikely to deprive a litigant of its statutory rights except where this is the only means of rectifying the detriment. For example, in Commonwealth v Clark355 the Appeal Division of the Victorian Supreme Court held that the appellant was estopped from pleading a statutory defence to a negligence action by reason of its earlier representation to the respondent that the defence would not be relied upon. In reliance upon the representation, the respondent instituted proceedings pursuant to which, for the purposes of evidence, he had to recount and relive the trauma of the incident that underscored the claim. In the court’s opinion, the only adequate means of rectifying the detriment so sustained was to order that the appellant be held to the assumption it had created. Similarly, a person who represents that it will not insist on statutory writing requirements as a prerequisite to the enforceability of the agreement in question may be estopped from resiling from this representation.356 Estoppel cannot deprive a person of rights or protections of which statute, as a matter of public policy, will not allow her or him to be deprived. For instance, persons given statutory

a particular case will depend upon the construction of the particular statutory provision, in its context and informed by an understanding of its purpose”). 351

Marriage of Woodcock (1997) 21 Fam LR 393 at 412 (FC).

352

ND v BM (2003) 31 Fam LR 22 at [26] per Kay J.

353

Ross v Smith, Timms & Co [1909] SALR 128; Maritime Electric Co Ltd v General Dairies Ltd [1937] 1 All ER 748 at 753 per Lord Maugham; J & F Stone Lighting and Radio Ltd v Levitt [1947] AC 209 at 216 per Lord Thankerton; Prospect County Council v Australian Blue Metal Ltd (1965) 11 LGRA 331; Pratten v Warringah Shire Council [1969] 2 NSWR 161; North West County District Council v J I Case (Australia) Pty Ltd [1974] 2 NSWLR 511; Day Ford Pty Ltd v Sciacca [1990] 2 Qd R 209; Waitemata Electric Power Board v King Builders Ltd [1993] 1 NZLR 312; Wang v Minister for Immigration and Multicultural Affairs (1997) 45 ALD 104 at 109 per Merkel J.

354

Re Pollard (1991) 33 FCR 284.

355

Commonwealth v Clark [1994] 2 VR 333. See also Commonwealth v Verwayen (1990) 170 CLR 394 per Deane and Dawson JJ.

356

Collin v Holden [1989] VR 510 at 514 per Tadgell J, discussed at [10.320].

[10.370]  373 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

rights to apply for family provision or for maintenance cannot contract out of those rights —​ except in accordance with any statutory provision that authorises these agreements —​“just as policy denies legal validity to contracts in those circumstances, so it denies legal validity to estoppels that would produce the same effect”.357

Statutorily abolished or prohibited rights [10.375]  Estoppel cannot be used to enforce a right that has been statutorily abolished. For

example, as statute has abolished the action for breach of promise to marry,358 equity will not circumvent this by recognising an estoppel in these circumstances.359 Nor can it be invoked to do or create that which is prohibited by statute.360 In Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) (No 4),361 for example, Byrne J held that where a statutory provision rendered void a lawyer–​client costs agreement in certain circumstances, and it was its evident policy to protect clients and to discourage lawyers from entering into agreements contravening the relevant statutory requirements, the raising of an estoppel would undermine the operation of that provision, and so denied any estoppel. However, if the statute does not prohibit the conduct forming the basis of the estoppel, it must follow that, where its elements are satisfied, the party waiving its statutory rights will be estopped from exercising them.362

Detail prescribed by statute

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[10.380]  That a statute provides a formalised procedure by which a party may waive its right

indicates that it is only through this procedure that waiver may be effected; a claim of estoppel against that party will thus be denied.363 Similarly, where for a protective purpose statute defines in some detail the steps to be taken, and the consequences if they are not, the existence of such a policy is inconsistent with an estoppel being allowed to operate to defeat it.364 That a statute prescribes consequences of its contravention, or omits protection against harsh consequences of its operation, “weighs against the inference that the legislature intended that a limited degree of protection would be available through the general law doctrine of estoppel”.365

Estoppel and statutory writing requirements [10.385] As estoppel aims to rectify detriment suffered in reliance upon a representation

unconscionably resiled from, not to overcome non-​compliance with statutory formalities 357

Kell & Rigby Pty Ltd v Flurrie Pty Ltd (2006) 67 NSWLR 113 at [57] per Brereton J.

358

Marriage Act 1961 (Cth), s 111A.

359

Public Trustee v Kukula (1990) 14 Fam LR 97 at 100 (CA(NSW)); Stowe v Stowe (1995) 127 FLR 25 at 41, 44–​45 (FC(WA)).

360

Re Burton [1938] NZLR 637 at 643 per Callen J.

361

Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) (No 4) [2006] VSC 28 at [29] [revd but not on this point: Equuscorp Pty Ltd v Wilmoth Field Warne (a firm) (2007) 18 VR 250]. See also Considine v Citicorp Australia Ltd [1981] 1 NSWLR 657; Beckford Nominees v Shell Company of Australia Ltd (1986) 73 ALR 373; Formosa v Secretary, Department of Social Security (1988) 46 FCR 117.

362

Waitemata Electric Power Board v King Builders Ltd [1993] 1 NZLR 312.

363

Commonwealth v Hamilton [1992] 2 Qd R 257 at 271–​274 per Williams J.

364

See, for example, Pacific Rim Developments Pty Ltd v Anketell [1999] NSWSC 304 at [17] per Hulme J (ruling that the general public policy apparent in the Conveyancing Act 1919 (NSW), s 66ZG, being to provide protection particularly to purchasers of residential land by defining in some detail the steps to be taken, and the consequences if they are not, for there to be binding contracts relating to the sale of residential land, was not consistent with allowing the operation of an estoppel to defeat it); MGM Bailey Enterprises v Austin Australia (2002) 20 ACLC 765 at 768–​769 per Austin J (ruling that the policy behind the Corporations Act 2001 (Cth), s 459G, which required the right to apply to set aside a statutory demand to be exercised within 21 days of the demand being served, was inconsistent with the operation of an estoppel).

365

Tudor Developments Pty Ltd v Makeig (2008) 72 NSWLR 624 at [32], [76] per Basten JA.

374 [10.375] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Estoppel  Chapter  10

for making contracts, such formality requirements do not govern its availability or scope.366 Estoppel does not create a contract to which those requirements might apply; the equity arises out of the circumstances rather than from any contract. However, a court will not uncritically brand a retreat from a promise required to be in writing as unconscionable, for too great a willingness to do so would undermine the statutory formality requirements (and also the doctrine of part performance, which grew out of unfairness generated by strict adherence to those requirements: see [12.05]).367 This is especially so where the writing requirements have been prescribed to protect persons who are likely to be in a weaker position vis-​à-​vis the person seeking to rely on the estoppel.368

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[10.390] The issue has received judicial airing in England, following the enactment of the

Law of Property (Miscellaneous Provisions) Act 1989 (UK), which contains no express avenue for part performance or estoppel to overcome non-​fulfilment of formality requirements. Yet although the English courts appear to have accepted that, for the purposes of the Act, part performance as a doctrine is dead (see [12.20]), there has been greater reticence to oust scope for the doctrine of estoppel. As s 2(5) provides that nothing in the Act “affects the creation or operation of resulting, implied or constructive trusts”, the English Court of Appeal in Yaxley v Gotts369 held that in circumstances where the concepts of proprietary estoppel and the constructive trust coincide —​in a joint enterprise for the acquisition of land (what the courts have applied as a “common intention” constructive trust: see [38.215]–​[38.240]) —​an estoppel of this kind (but not others) can operate consistently with the Act. This outcome, which has been criticised for singling out one form of estoppel as worthy of recognition in place of others without any reason in principle for making this distinction,370 may no longer represent English law following later dicta in the House of Lords.371 A more flexible interpretation has been given to s 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 (UK), which provides that “[a]‌n instrument is validly executed as a deed by an individual if, and only if: (a) it is signed: (i) by him in the presence of a witness who attests the signature; or (ii) at his direction and in his presence and the presence of two

366

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 405 per Mason CJ and Wilson J, at 433 per Brennan J (where, although the appellant’s promise to lease the respondent’s property was unenforceable as a lease for lack of writing —​ as required by the Conveyancing Act 1919 (NSW), s 54A —​this did not oust an estoppel arising out of that promise: see [10.315]); Marvon Pty Ltd v Yulara Development Co Ltd (1989) 98 FLR 348 at 351 per Kearney J.

367

Carr v McDonald’s Australia Ltd (1994) 63 FCR 358 at 368 per Burchett J.

368

See, for example, Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd (2004) Aust Contract Rep ¶90-​181 (where a property owner, who had orally engaged an agent to sell its property, resisted the agent’s claim for commission on the basis that statute deprived the agent of remuneration unless the agency agreement was in writing; the New South Wales Court of Appeal rejected a submission by the agent based upon estoppel, observing that the legislature had made it plain that there was to be no remuneration in the case before the court, and so no estoppel in the face of the statute would therefore lie: at [55]).

369

Yaxley v Gotts [2000] 1 All ER 711 at 721–​724 per Robert Walker LJ, at 725–​726 per Clarke LJ. Cf at 734–​736 per Beldam LJ (who say a continuing role for estoppel generally independently of the terms of the Act).

370

Milne, “Estoppel, Trusts and the Need for Writing” [2000] NLJ Charities Supplement 21 at 24; Thompson, “Oral Agreement for the Sale of Land” [2000] Conv 245 at 251–​254. See also Tee, “A Merry-​go-​round for the Millennium” [2000] CLJ 23; Smith, “Oral Contracts for the Sale of Land: Estoppels and Constructive Trusts” (2000) 116 LQR 11; Moore, “Proprietary Estoppel, Constructive Trusts and Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989” (2000) 63 MLR 912.

371

See Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 at [29] per Lord Scott (who opined that “[t]‌he proposition that an owner of land can be estopped from asserting that an agreement is void for want of compliance with the requirements of section 2 is, in my opinion, unacceptable. The assertion is no more than the statute provides. Equity can surely not contradict the statute”).

[10.390]  375 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

witnesses who each attest the signature; and (b) it is delivered as a deed by him or a person authorised to do so on his behalf”. In Shah v Shah Pill LJ stated:372 I can detect no social policy which requires the person attesting the signature to be present when the document is signed … It is not fundamental to the public interest, which is in the requirement for a signature. Failure to comply with the additional formality of attestation should not in itself prevent a party into whose possession an apparently valid deed has come from alleging that the signatory should not be permitted to rely on the absence of attestation in his presence. It should not permit a person to escape the consequences of an apparently valid deed he has signed, representing that he has done so in the presence of an attesting witness, merely by claiming that in fact the attesting witness was not present at the time of signature. The fact that the requirements are partly for the protection of the signatory makes it less likely that Parliament intended that the need for them could in all circumstances be used to defeat the claim of another party.

This led his Lordship to conclude that, in laying down a requirement of attestation in s 1(3), Parliament was not excluding the possibility that an estoppel could be raised to prevent the signatory relying upon the need for the requisite formalities.373 This was notwithstanding the clarity of the statutory language used, and the fact that attestation was integral to the requirement for signature given that the validity of the signature was stipulated to depend on the presence of the attesting witness. At the same time, estoppel cannot be invoked where a document does not even appear to comply with the Act on its face; otherwise it would undermine the certainty that s 1(3) was designed to secure.374 Estoppel and the discretion of statutory authorities [10.395]  In the application of the doctrine of estoppel to decisions of statutory authorities,

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courts have distinguished between the following situations:375 • where the representation is one in which the represented exercise of discretion exceeds the authority’s statutory powers; and • where the representation relied upon as giving rise to the estoppel is one in which a discretion, within the power of the statutory authority, is said to be have been exercised in conformity with that power. Courts have refused estoppel operation in the first situation because it would undermine the doctrine of ultra vires.376 In cases of the second kind, they have often applied the principle that an estoppel cannot be raised to prevent or hinder the exercise of a statutory duty to

372

Shah v Shah [2001] 3 WLR 31 at 40.

373

Shah v Shah [2001] 3 WLR 31 at 41.

374

Briggs v Gleeds (Head Office) (a firm) [2015] Ch 212 at [43] per Newey J.

375

Adams v Executive Director, Fisheries WA [2000] WASC 34 at [67], [68] per McKechnie J. See Campbell, “Estoppel in Pais and Public Authorities” (1998) 5 Aust J of Admin Law 157; Thomson, “Estoppel by Representation in Administrative Law” (1998) 26 Fed L Rev 83; Morzone, “Estoppel and Other Private Law Preclusionary Doctrines in Public Law” (1999) 19 Qld Lawyer 135.

376

South Australia v ATSA Pty Ltd (1980) 24 SASR 66 at 96–​97 per Williams AJ; Formosa v Secretary, Department of Social Security (1988) 46 FCR 117 at 124–​125 (FC); Shire of Kilmore v Dally [1989] VR 314 at 321–​322 per Southwell J; Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 208 per Gummow J; Minister for Immigration and Ethnic Affairs v Polat (1995) 57 FCR 98 at 104–​107 (FC); Latitude Fisheries Pty Ltd v Australian Fisheries Management Authority (2002) 68 ALD 365 at [76] per RD Nicholson J.

376 [10.395] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Estoppel  Chapter  10

exercise an unhindered discretion.377 But there is scope for alleviation of the strictness of this principle. This rests on making the fine distinction between whether the representation was one that a discretion (within power) had been exercised in a particular way, as opposed to one where there was no call for the exercise of such a discretion because the authority had no discretion to prevent the proposed action, there being scope in the latter case but not in the former to apply estoppel.378 This is notwithstanding that in either case estoppel might have the practical consequence of preventing what should have been the proper exercise of a statutory discretion.379 Similar notions underlie the exercise of discretion by the Executive generally. Mason CJ explained the point in Attorney-​General (NSW) v Quin as follows:380 The Executive cannot by representation or promise disable itself from, or hinder itself in, performing a statutory duty or exercising a statutory duty or exercising a statutory discretion to be performed or exercised in the public interest, by binding itself not to perform the duty or exercise the discretion in a particular way in advance of the actual performance of the duty or exercise of the power … What I have just said does not deny the availability of estoppel against the Executive, arising from conduct amounting to a representation, when holding the Executive to its representation does not significantly hinder the exercise of the relevant discretion in the public interest. And, as the public interest necessarily comprehends an element of justice to the individual, one cannot exclude the possibility that the courts might in some situations grant relief on the basis that a refusal to hold the Executive to a representation by means of estoppel will occasion greater harm to the public interest by causing grave injustice to the individual who acted on the representation than any detriment to that interest that will arise from holding the Executive to its representation and thus narrowing the exercise of the discretion …

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This explains the willingness of the High Court in Commonwealth v Verwayen381 to allow estoppel to deny the Executive the right to resile from its representation not to plead defences it would otherwise have been entitled to plead at its discretion.

377

See, for example, Southend-​on-​Sea Corporation v Hodgson (Wickford) Ltd [1962] QB 416 at 424–​425 per Lord Parker CJ; Brickworks Ltd v Warringah Shire Council (1963) 108 CLR 568 at 577 per Windeyer J; Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 210 per Gummow J; Adams v Executive Director, Fisheries WA [2000] WASC 34 at [75] per McKechnie J; Wort v Whitsunday Shire Council (2001) 116 LGERA 179 at 184 (CA(Qld)); Seymour CBD Pty Ltd v Noosa Shire Council (2002) 123 LGERA 113 at 116–​117 (CA(Qld)); Saitta Pty Ltd v Commonwealth of Australia (2003) Aust Torts Rep ¶81-​717 at [180]–​[190] per Williams J. Cf R v East Sussex County Council [2002] 4 All ER 58 at 66 per Lord Hoffmann (see Bradley, “Estoppel: The Need for Public Law to Stand ‘on its own two feet’ ” [2002] Public Law 597).

378

See, for example, Brickworks Ltd v Warringah Shire Council (1963) 108 CLR 568 at 577 per Windeyer J.

379

Enoka v Shire of Northhampton (1996) 15 WAR 483 at 493–​494 per Steytler J.

380

Attorney-​General (NSW) v Quin (1990) 170 CLR 1 at 17, 18 (paragraph break omitted).

381

Commonwealth v Verwayen (1990) 170 CLR 394, discussed at [10.195].

[10.395]  377 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

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Chapter 11

Relief Against Forfeiture BASIS FOR RELIEF AGAINST FORFEITURE Unconscionable conduct

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[11.05]  The premature termination of a contract may, under its terms, require the promisor

to forfeit moneys paid or an interest in property the subject of the contract. Equity, however, has a jurisdiction “to prevent one man from forfeiting what in fair dealing belongs to someone else, by taking advantage of a breach from which he is not commensurately and irreparably damaged”.1 A court will exercise this jurisdiction to relieve against forfeiture if there is an “equity” that justifies it doing so, which jurisdiction cannot be ousted by the parties’ agreement.2 What attracts the jurisdiction is unconscionable conduct by the party seeking to enforce contractual rights to forfeiture. Although courts have on occasion justified their intervention in terms of outcome rather than conduct —​for instance, by reference to unjust enrichment3 —​the High Court in Tanwar Enterprises Pty Ltd v Cauchi4 directed the inquiry to conduct. This does not mean that the enrichment of the party relying on her or his legal rights (or more generally the fairness or otherwise of an outcome) is irrelevant, but that these matters fall under the unconscionable conduct umbrella. This explains why relief against forfeiture is addressed in Part III (“unconscionable conduct”) of this book. Importantly, the court inquires into unconscionable conduct because it is being requested to intervene where the parties have entered into the contract lacking any vitiating factors going to procedural aspects of contract formation (such as undue influence, unconscionable dealing or duress). Nor is there ordinarily a suggestion that the applicant for relief had any misunderstanding of her or his obligations under the contract. Although the focus is chiefly on whether the party exercising contractual rights has acted unconscionably in so doing, as in other areas of equity jurisprudence the applicant’s conduct can inform the determination of where the equities lie. To this end, the court will not grant that relief to an applicant whose conduct makes it inequitable for relief to be granted.5

1

Hyman v Rose [1912] AC 623 at 631 per Lord Loreburn LC.

2

Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 at 700 per Davies J.

3

See, for example, Stern v McArthur (1988) 165 CLR 489 at 526–​527 per Deane and Dawson JJ (speaking in terms of “a person should not be permitted to use or insist upon his legal rights to take advantage of another’s special vulnerability or misadventure for the unjust enrichment of himself”); PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 at 636–​637 per Mahoney JA; Sunstar Fruit Pty Ltd v Cosmo [1995] 2 Qd R 214 at 227 per Derrington J.

4

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315. The same approach appears to have prevailed in New Zealand: Greenshell MZ Ltd (in receivership) v Kennedy Bay Mussel Co (NZ) Ltd [2016] 2 NZLR 44 at [44] (CA).

5

ING Bank (Australia) Ltd v O’Shea (2010) 14 BPR 27,317 at [19] per Giles JA. See, for example, Gill v Lewis [1956] 2 QB 1 at 17 per Hodson LJ (such as where, for example, the lessee seeking relief against forfeiture of a lease has been conducting

[11.05]  379 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

Proprietary rights in applicant [11.10]  Most of the case law on relief against forfeiture involves contracts for the sale or lease

of land. This is in part because these contracts are ordinarily specifically enforceable (see [33.20], [33.25]), and the grant of relief is consistent with their specific performance.6 To give relief, so far as this requires the parties to continue in the contractual relationship, in respect of contracts not specifically enforceable would in effect equate to an order for specific performance. For example, in Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana,7 the Privy Council declined to relieve against forfeiture in a time charter, on the ground that it “transfers to the charterer no interest in or right to possession of the vessel”, and “[b]‌eing a contract for services it is thus the very prototype of a contract of which … a court would never grant specific performance”. Lord Diplock developed the latter point as follows:8

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To grant an injunction restraining the shipowner from exercising his right of withdrawal of the vessel from the service of the charterer, though negative in form, is pregnant with an affirmative order to the shipowner to perform the contract; juristically it is indistinguishable from a decree for specific performance of a contract to render services … This is … sufficient reason in itself to compel rejection of the suggestion that the equitable principle of relief from forfeiture is juristically capable of extension so as to grant to the court a discretion to prevent a shipowner from exercising his strict contractual rights under a withdrawal clause in a time charter which is not a charter by demise.

Deriving from the foregoing is that the threshold for relief is grounded in the purported forfeiture, by another person under the terms of a contract, of property that the claimant owns or has a right to possess. A claimant who is to forego a right to make a contractual claim or is prevented from using property to which he or she had a mere contractual right cannot invoke the jurisdiction to relieve against forfeiture; after all, the forfeitor in such a case is merely claiming or re-​claiming her or his own property.9 This does not mean that the jurisdiction to relieve against forfeiture is necessarily confined to interests in real property; relief may, premised on the availability of specific performance, extend to proprietary or possessory interests in personal property,10 redemption rights under mortgages11 and even to choses in action (such as a right to exercise an option to renew a lease).12 But the further the relevant interest moves away from property, the less inclined is

the premises unlawfully); Mulkearns v Chandos Developments Pty Ltd (2003) 11 BPR 21,277 (where the purchaser was not ready, willing and able to complete, did not pay the deposit in full, did not pay the occupation fee until after the proceedings were commenced, and took any technicality to postpone settlement, and so was denied relief against forfeiture in respect of improvements made to the property). 6

Cf Stern v McArthur (1988) 165 CLR 489 at 537–​538 per Gaudron J.

7

Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana [1983] 2 AC 694 at 700–​701 per Lord Diplock.

8

Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana [1983] 2 AC 694 at 701.

9

UK Housing Alliance (North West) Ltd v Francis [2010] 3 All ER 519 at [11] per Longmore LJ (where the plaintiff merely lost a contingent right to payment of a debt, which could not give rise to relief against forfeiture: at [14]).

10

BICC plc v Burndy Corporation [1985] Ch 232 at 251–​252 per Dillon LJ, at 259 per Kerr LJ; Jobson v Johnson [1989] 1 WLR 1026; RHG Mortgage Securities Pty Ltd v BNY Trust Company of Australia Ltd [2009] NSWSC 1432 at [144], [145] per McDougall J; Vauxhall Motors Ltd v Manchester Ship Canal Co Ltd [2018] EWCA Civ 1100 (involving relief against forfeiture of a licence giving possessory rights over canal infrastructure). See Pawlowski, “The Scope of Equity’s Jurisdiction to Relieve Against Forfeiture of Interests in Property Other Than Land” [1994] JBL 372.

11

See, for example, Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (Nos 3 to 5) [2016] AC 923.

12

Melacare Industries of Australia Pty Ltd v Daley Investments Pty Ltd (1995) 9 BPR 17,079 at 17,091–​17,092 per Hodgson J; Leads Plus Pty Ltd v Kowho Intercontinental Pty Ltd (2000) 10 BPR 18,085 at 18,088–​18,089 per Young J (who recognised the jurisdiction to relieve against forfeiture of an option for renewal of a lease, but ruled that as the failure to exercise the option was an oversight by the lessee, there were no grounds for granting relief on the facts); Xiao v Perpetual Trustee

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Relief Against Forfeiture  Chapter  11

the law to entertain relief against forfeiture. For instance, leases of chattels do not ordinarily give the lessee a proprietary interest, but if the lease allows the lessee to retain possession of the chattel indefinitely, it may be treated as analogous to one in which the lessee ultimately acquires ownership, and so may well be amenable to relief.13 The position will likely be otherwise where the lease is for a limited period and envisages the return of the chattel to the lessor. In Celestial Aviation Trading 71 Ltd v Paramount Airways Private Ltd,14 involving a lease of aircraft for about a third of their economic life, to be returned to the lessor upon its expiry, Hamblen J characterised this as a “bare possessory right” incapable of attract relief against forfeiture. His Lordship was encouraged in this conclusion by the need for commercial certainty in aircraft leases, fearing that, were relief against forfeiture of the lessee’s interest available, “the lessor will not know when (or indeed whether) it can terminate a lease and will be prevented from being able to rely timeously or at all on the clear and detailed default and termination provisions of its leases”.15

FORFEITURE AND CONTRACTS FOR THE SALE OF LAND Scope of jurisdiction

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[11.15]  The termination of a purchaser’s interest under a contract for the sale of land by the

exercise of a vendor’s legal rights is a forfeiture against which equity has the power to grant relief. The circumstances in which relief might be granted include the following. First, the jurisdiction is available in cases where the parties’ relationship is viewed in equity as, or analogous to, that of mortgagor and mortgagee. Because borrowers enter into mortgages under the pressure of financial need, it is just and equitable, it is reasoned, to relieve against strict compliance with their obligations if the aim of the transaction —​the repayment of the loan and interest —​can be secured by other means.16 Secondly, the jurisdiction is available in cases where the main object of the agreement (and the purchaser’s performance of it) is to secure a particular result —​the provision for forfeiture being included as security for the production of that result  —​where the court can effectively attain it.17 In a sense, this can explain cases in the first category, as between mortgagor and mortgagee. Thirdly, intervention can occur in circumstances in which equity

Co Ltd [2008] VSC 412 at [106] per Vickery J (who countenanced that, in the appropriate case, an option to renew a lease is a contractual right that, if forfeited, can be the subject of relief against forfeiture). Contra Westminster Properties Pty Ltd v Comco Constructions Pty Ltd (1991) 5 WAR 191 at 197–​198 per Malcolm CJ, at 202–​206 per Kennedy J (ruling that a party’s contractual right to the continuance of the contract was, as a chose in action, insufficient to invoke the doctrine of relief against forfeiture); Clark Auto Body Ltd v Integra Custom Collision Ltd (2007) 28 BLR (4th) 17 at [30] per Kirkpatrick JA. See generally McKay, “Relief Against Forfeiture of Options” (2017) 26 APLJ 233. 13

See, for example, On Demand Information plc v Michael Gerson (Finance) plc [2003] 1 AC 368 (discussed at [11.130]).

14

Celestial Aviation Trading 71 Ltd v Paramount Airways Private Ltd [2010] 1 CLC 165 at [57]. See Aitken, “Forfeiture and the ‘Operating Lease’” (2010) 126 LQR 505.

15

Celestial Aviation Trading 71 Ltd v Paramount Airways Private Ltd [2010] 1 CLC 165 at [73]. His Lordship added that, even were he wrong on this point, there were in any event grounds to refuse relief against forfeiture, namely the gravity and persistency of the breaches by the lessee, the ample warning given by the lessor of the consequences of continued default and the prejudice to the lessor in granting relief: at [92]–​[121].

16

Stern v McArthur (1988) 165 CLR 489 at 500–​501 per Mason CJ; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [136] per Callinan J (referring to the “probably generally correct assumption” that “a lessor or mortgagee was in an especially powerful and superior position to a lessee or mortgagor, and was therefore more able, and likely, to act unconscionably in exploiting that position”).

17

Shiloh Spinners Ltd v Harding [1973] AC 691 at 722 per Lord Wilberforce; Stern v McArthur (1988) 165 CLR 489 at 527 per Deane and Dawson JJ.

[11.15]  381 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

would intervene on conventional grounds of fraud (see [8.05]), accident,18 mistake (see [8.145]–​[8.205]) or surprise.19 Fourthly, in line with the remarks at the outset of this chapter, the court has a general jurisdiction to relieve against forfeiture in cases where the vendor’s action in terminating the contract is viewed as unconscionable by equity.20 This last category affords the doctrine considerable flexibility, and scope for development. Even though fraud, mistake, accident or surprise (or provision for forfeiture included as security for the production of a result) may, broadly speaking, render it unconscionable for a vendor to rely on her or his legal rights, these grounds do not exhaust the scope of unconscionability.21 Forfeiture of payments made under a contract of sale [11.20]  In the absence of a forfeiture clause, the common law entitles the purchaser under

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a contract for the sale of land to the return of any money advanced in part payment of the purchase price where the vendor terminates the contract, even if due to the purchaser’s default (unless in the latter event the payment can be construed as a deposit: see [11.50]–​[11.80]).22 It is recoverable at law as on a failure of consideration. But if the contract contains a forfeiture clause, the payer cannot recover moneys paid under the contract outside of an entitlement in equity to relief. Equity will ordinarily grant relief against forfeiture of sums paid by way of part payment on the ground their retention is unconscionable.23 A forfeiture provision can, in the alternative, be viewed as a penalty,24 for it is designed to ensure payment of the entire purchase price and it exceeds the damage the vendor suffers by reason of the purchaser’s default:25 see Ch 13. Another way of approaching the issue, as discussed below, is to seek relief against 18

Scope for successfully pleading “accident” in this context has, however, been reduced following the decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315, where Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ remarked that equity will not relieve where “the possibility of the accident may fairly be considered to have been within the contemplation of the contracting parties” (citing from Smith, Principles of Equity (4th ed, Stevens & Sons, 1908) pp 243–​244) and noted that “the learned writers on the subject emphasise and put to one side those situations where the event which has come to pass is one for which an express exculpatory provision might have been made, but was not sought or was not agreed to, and where to relieve against its consequences after it has occurred would deprive the other party to the contract of an essential right”: at [66]. On the facts of the case, discussed at [11.35], as the possibility of the purchaser’s mortgagee not providing the money on time could have been (but was not) addressed in the relevant contract, the purchaser could not maintain that he had been prevented from performance by an accident: at [67]. See also Jeppesons Road Pty Ltd v Di Domenico (2005) Q ConvR ¶54-​620 (where it was held relief arising out of the purchaser’s inability to pay the balance of the purchase price at settlement of a contract for the sale of land was not available on the grounds of “accident” because the negligence of the buyer’s financier’s solicitors, who had given a wrong direction of funds, was not an “accident” for this purpose: at [83], [84] per Atkinson J). More generally, see Zerilli, “Accident in the Equitable Jurisdiction” (2008) 24 JCL 112; Young, Croft and Smith, On Equity (Lawbook Co, 2009), [5.140]–​[5.210].

19

Shiloh Spinners Ltd v Harding [1973] AC 691 at 722 per Lord Wilberforce. See, for example, Legione v Hateley (1983) 152 CLR 406, discussed at [11.20].

20

Legione v Hateley (1983) 152 CLR 406 at 444 per Mason and Deane JJ; Stern v McArthur (1988) 165 CLR 489 at 513–​514 per Brennan J, at 526–​528 per Deane and Dawson JJ, at 538–​539 per Gaudron J; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [58]–​[60] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ, at [106] per Kirby J.

21

Legione v Hateley (1983) 152 CLR 406 at 447 per Mason and Deane JJ; Stern v McArthur (1988) 165 CLR 489 at 526 per Deane and Dawson JJ; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [58] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ.

22

Mayson v Clouet [1924] AC 980; Dies v British & International Mining & Finance Corporation Ltd [1939] 1 KB 724 at 743 per Stable J; Stockloser v Johnson [1954] 1 QB 476 at 489–​490 per Denning LJ.

23

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 469–​470 per Starke J, at 478 per Dixon J. See, for example, Tropical Traders Ltd v R & H Goonan (No 2) [1965] WAR 174 at 177 per Jackson J.

24

After all, relief against forfeiture was, it seems, originally conceived as part of the jurisdiction to relieve against penalties: see, for example, Peachy v Duke of Somerset (1720) 1 Str 447. The courses have since digressed: see [13.55].

25

Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319 at 325 (PC); McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 470 per Starke J; Legione v Hateley (1983) 152 CLR 406 at 445 per Mason and Deane JJ. See, for example, Coates v

382 [11.20] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Relief Against Forfeiture  Chapter  11

forfeiture of the interest in land the payer secured on entry into the contract (as to which see [38.150], [38.155]) and perhaps its specific performance. Forfeiture of other interests under a contract of sale [11.25]  Equity may relieve against forfeiture where it concludes that the exercise of a vendor’s legal rights under the contract —​not just to moneys already paid, but to moneys as yet unpaid, to improvements effected by the purchaser, or to the property itself —​amounts to unconscionable conduct. A  typical scenario is where the purchaser cannot raise sufficient funds to complete the deal, and points to a combination of the vendor’s conduct, an increase in the value of the land, and improvements he or she has made to the land, in an attempt to colour the vendor’s behaviour in rescinding the contract as unconscionable. To this end, the High Court has assumed a jurisdiction to relieve against forfeiture at the instance of a purchaser in breach of an essential term (including an essential time stipulation), albeit only in exceptional cases.26 Mason and Deane JJ in Legione v Hateley explained the relationship between an exceptional case and unconscionable conduct as follows:27

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Whether the exceptional circumstances exist in a given case hinges on the existence of unconscionable conduct. It is impossible to define or describe exclusively all the situations which may give rise to unconscionable conduct on the part of a vendor in rescinding a contract for sale. None the less it may be said that where the conduct of the vendor, though not creating an estoppel or waiver, has effectively caused or contributed to the purchaser’s breach of contract there is ground for exercising the jurisdiction to relieve. And if it also appears that the object of the rescission is not to safeguard the vendor from adverse consequences which he may suffer as a result of the contract remaining on foot, but merely to take unconscientious advantage of the benefits which will fortuitously accrue to him on forfeiture of the purchaser’s interest under the contract, there will be even stronger ground for the exercise of the jurisdiction.

Their Honours considered that the result in a given case rests on the resolution of subsidiary questions, such as: (1) did the conduct of the vendor contribute to the purchaser’s breach? (2) was the purchaser’s breach trivial or slight, and inadvertent and not wilful? (3) what damage or other adverse consequences did the vendor suffer by reason of the purchaser’s breach? (4) what is the magnitude of the purchaser’s loss and the vendor’s gain if the forfeiture is to stand? (5) is specific performance with or without compensation an adequate safeguard for the vendor? In Legione v Hateley, the court held that in insisting on rescission where a statement by the vendor’s solicitors had lulled the purchaser into a belief that the vendor would extend time for completion, where rescission would give the vendor the benefit of valuable improvements effected to the property by the purchaser, the vendor behaved unconscionably.28

Sarich [1964] WAR 2 at 8–​9 per Wolff CJ, at 10–​11 per D’Arcy J (contra at 17 per Hale J) (forfeiture of instalments held to be penal, but relief denied because the vendor’s damages exceeded the amount of the instalments). 26

Legione v Hateley (1983) 152 CLR 406 at 429 per Gibbs CJ and Murphy J, at 449 per Mason and Deane JJ; Ciavarella v Balmer (1983) 153 CLR 438 at 453–​454 (FC); Stern v McArthur (1988) 165 CLR 489 at 501 per Mason CJ, at 511 per Brennan J, at 526 per Deane and Dawson JJ. This is contrary to the traditional view of English courts: Steedman v Drinkle [1916] 1 AC 275 at 279 (PC); Brickles v Snell [1916] 2 AC 599 at 604–​605 (PC).

27

Legione v Hateley (1983) 152 CLR 406 at 449.

28

Legione v Hateley (1983) 152 CLR 406 at 429 per Gibbs CJ and Murphy J, at 450 per Mason and Deane JJ. Their Honours held that the purchasers were entitled to raise a claim for relief against forfeiture, which they ordered to be remitted to the Supreme Court of Victoria for determination.

[11.25]  383 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

The High Court has later characterised Legione as an example of the narrower equitable concept of surprise, focusing on the vendors lulling the purchasers into an incorrect belief.29 [11.30] The five subsidiary questions listed by Mason and Deane JJ in Legione v Hateley

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have not proven conducive to clear application.30 Their literal application as ultimate determinants could negate an essential time stipulation in many cases where a purchaser had effected improvements and tendered payment only slightly late, which may not necessarily be “exceptional” cases. Their Honours gave little indication as to the relative importance of each question. The outcome in Legione appeared to focus heavily on only two of the questions, the first and the fourth. How, in their Honours’ words, “the special heads of fraud, mistake, accident or surprise or some other element which would render it unconscionable or inequitable to insist on forfeiture”31 relate to the five subsidiary questions also remained unclear. This uncertainty arguably led to the division evident in the High Court’s later decision in Stern v McArthur,32 involving a contract to purchase land, the price payable by monthly instalments coupled with interest. With the vendors’ consent, the purchasers took possession before completion and, with the vendors’ knowledge, built a house on the land. Following non-​payment of instalments, the vendors issued a notice to complete, and following the purchasers’ non-​compliance, terminated the contract. A bare majority of the court held that the respondents were entitled to relief against forfeiture of their interest in the land, even in the face of the vendors’ offer to allow the purchasers the value of the house. The majority considered relief to be necessary in order to deny the vendors the windfall nature of the benefit of the increase in value of the land over time. As explained by Deane and Dawson JJ:33 [I]‌t is the respondents who had a reasonable expectation of benefiting from any increase in the value of the land with the passage of time. Under the contract the appellants could, in the absence of default, look for no more than the purchase price together with the interest provided. The land has in fact increased considerably in value so that it forms much more than adequate security for the balance of the purchase moneys owing. The forfeiture of the respondents’ interest in the land would truly result in a windfall to the appellants whereas relief against forfeiture would not result in a gain to the respondents properly describable as a windfall. The offer made by the appellants to allow the respondents the value of the improvements is but an attempt —​and clearly an inadequate attempt —​to make allowance for the unexpected advantage which would be enjoyed by them upon forfeiture.

Mason CJ dissented, reasoning that the vendors’ offer to give the respondents the benefit of the value of the improvements denied anything in their conduct “which can accurately be described as unconscionable”, and concluding that “[t]‌o grant relief against forfeiture on the basis of unconscionability on the appellants’ part would be to drain unconscionability of any meaning”.34 Earlier in the judgment, his Honour had remarked that equity is not authorised “to reshape contractual relations into a form the court thinks more reasonable or fair where subsequent events have rendered one side’s situation more favourable”.35

29

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [61] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ.

30

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [44], [45] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ; Aussie Invest Corporation Pty Ltd v Pulcesia Pty Ltd (2005) 13 VR 168 at [237], [238] per Dodds-​Streeton J.

31

Legione v Hateley (1983) 152 CLR 406 at 447.

32

Stern v McArthur (1988) 165 CLR 489.

33

Stern v McArthur (1988) 165 CLR 489 at 529. See also at 540–​541 per Gaudron J.

34

Stern v McArthur (1988) 165 CLR 489 at 505. See also at 520–​521 per Brennan J (also dissenting).

35

Stern v McArthur (1988) 165 CLR 489 at 503.

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Relief Against Forfeiture  Chapter  11

[11.35] An opportunity to resolve some of the uncertainty in this field presented itself in

Tanwar Enterprises Pty Ltd v Cauchi.36 There the High Court favoured the stricter approach Mason CJ had propounded in Stern. Yet in so ruling, Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ cautioned that the five subsidiary questions identified by Mason and Deane JJ in Legione v Hateley should “be treated with care”,37 whilst at the same time warning that the term “exceptional” in this context is apt to be misunderstood,38 and that proof of “exceptional” circumstances is not a prerequisite for equity’s intervention.39 The judgment also clearly located “the special heads of fraud, accident, mistake or surprise” under a broader umbrella of circumstances that make it inequitable for vendors to exercise their contractual rights.40 In Tanwar, the vendor had granted the purchaser two lengthy extensions of time for completion, and agreed to a peremptory date for completion, which the purchaser proved unable to meet. The High Court denied the purchaser’s claim for relief. Their Honours held that the purchaser had not discharged the onus of proving that it was unconscionable for the vendors to terminate the contract.41 To this end, they endorsed the finding of the New South Wales Court of Appeal42 that, as the purchaser’s breach was not trivial, and the completion date had been fixed consensually at a time when the purchaser had earlier failed to complete, to hold the purchaser to its last chance to complete on a time of the essence basis created no injustice. Unlike in Legione v Hateley, nothing in the vendor’s conduct had contributed to the purchaser’s breach, nor was there evidence of a grasping or catching rescission to obtain the benefit of an unmerited windfall at the purchaser’s expense. That the land in issue had increased in value was not an exceptional circumstance, but was, as far as land in Sydney was concerned, a normal result of deferred settlement.43

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[11.40]  The upshot of the decision in Tanwar, it has been suggested, is to require purchasers

to prove more; their hardship, or the vendor’s windfall, by themselves, are insufficient. This does not mean that hardship or fairness is irrelevant, but that “hardship or unfairness must be brought home to the vendor’s conduct, and not merely result from extraneous factors”.44

36

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [37] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ.

37

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [44].

38

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [39].

39

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [59]. Cf at [106] per Kirby J, at [147] per Callinan J (who both continued to speak in terms of an “exceptional case”).

40

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [58].

41

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [60]. See also at [147] per Callinan J.

42

Tanwar Enterprises Pty Ltd v Cauchi (2002) 10 BPR 19,107.

43

Tanwar Enterprises Pty Ltd v Cauchi (2002) 10 BPR 19,107 at 19,113 per Handley JA, with whom Beazley JA and Matthews AJA concurred. See also Ciavarella v Balmer (1983) 153 CLR 438 at 453–​454 (FC) (relief refused where, far from acting precipitately, the vendor refrained from making time of the essence for a period of nine months during which the purchaser might at any time have completed the contract); Clancy v Salienta Pty Ltd (2000) 11 BPR 20,425 (where the appellants occupied and farmed the respondent’s property, carrying out improvements substantially increasing its value, pursuant to two licence agreements, and two contracts for purchase which they did not complete; a majority of the New South Wales Court of Appeal declined to grant the appellants relief from the respondents’ forfeiture of the agreements because the appellants, still being unable to pay the purchase price, notwithstanding ample opportunity to do so, could not maintain that the respondents were acting unconscionably in seeking to enforce their legal rights: at [111]–​[113] per Stein JA, at [242]–​[252] per Giles JA); Burke & Riversdale Road Pty Ltd v Gemini Investments Pty Ltd (No 2) [2003] VSC 48 at [14], [18] per Nettle J (who distinguished Legione on the ground that the vendor had not lulled the purchaser into any sense of false security so as to unwittingly overlook the necessity to pay on time, and that even though the purchaser would lose out were relief from forfeiture denied, its expenditure would not necessarily enure for the benefit of the vendor).

44

Butt, “Relief Against Forfeiture of Purchaser’s Interest in Land” (2004) 78 ALJ 18 at 20.

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Equity and Trusts in Australia

Yet although Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ squarely placed relief against forfeiture within the mantle of unconscionable (or unconscientious) conduct, earlier in the judgment, their Honours were at pains to disclaim abstract notions of unconscionable conduct.45 This may explain why the judgment itself gives very little guidance as to how to determine what amounts to unconscientious conduct.46 Indeed, the uncertainty inherent in such a concept is the main reason why English courts have on the whole been less than welcoming to it as a ground to base the jurisdiction to grant relieve against forfeiture of a contract for the sale of land.47 Only Kirby J in Tanwar developed the point:48

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In deciding whether it would be unconscientious conduct for a party to take advantage of the forfeiture consequent on a breach of an essential time stipulation leading to a termination of the contract, various factual considerations, typical of such cases, have often been taken into account. The five mentioned in Legione are not exhaustive. They are merely cited as “[t]‌he more important” of those that normally have to be considered. Other factual considerations that may be taken into account in judging the existence or absence of unconscionable conduct for this purpose include (a) the character of the contract in which the time stipulation appears (ie whether it is of a commercial, domestic or personal kind); (b)  the relevant background facts explaining any special significance of the stipulation as to time; (c) whether the parties have access to appropriate independent legal advice; and (d) any degree to which the party in default may be regarded as disadvantaged, vulnerable or in need of equity’s protection from the insistence on its rights of a party in a superior economic or other position. Generally speaking, equity is more solicitous for the plight of the vulnerable.

Kirby J’s recognition that the relative position of the parties, and their ability or otherwise to look after their own interests, is relevant to the issue of unconscionable conduct found resonance in Romanos v Pentagold Investments Pty Ltd,49 decided by the High Court on the same day as Tanwar. There the purchasers were investment companies that contracted to acquire several adjoining parcels of land, time being of the essence, subject to development approval for the erection of units being obtained. The balance of the deposit was payable on approval being obtained, but when that occurred the purchasers failed to pay the deposit on time, instead paying the following day. This led the vendors to terminate the contract, and the purchasers to seek specific performance by claiming relief against forfeiture. Although the land had significantly increased in value, the court unanimously refused equitable relief, finding that it was not unconscionable for the vendors to rely on their legal rights under the contract.50 Kirby J, in a separate concurring judgment, reinforced this conclusion by reference to the commercial character of the transaction and of the purchasers, the availability to them at all times of independent legal advice, the explicit terms of the time provision, and the absence

45

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [20]–​[26].

46

The judgment is criticised on this ground by Turner, “Relief Against Forfeiture of a Proprietary Interest: When Will Equity Come to the Rescue?” (2004) 23 UQLJ 464 at 473.

47

See, for example, Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 at 519 per Lord Hoffmann (PC) (“The existence of an undefined discretion to refuse to enforce the contract on the ground that this would be ‘unconscionable’ is sufficient to create uncertainty”).

48

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [106] (footnotes omitted).

49

Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367.

50

Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367 at [24], [25] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ, at [64] per Callinan J.

386 [11.40] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Relief Against Forfeiture  Chapter  11

of any suggestion that the purchasers were disadvantaged, vulnerable or otherwise in need of equity’s protection from a party in a superior position.51 [11.45] The message from Tanwar is that, where the vendor has afforded the purchaser

ample opportunity to complete the contract (such as where the vendor has granted substantial concessions or otherwise gone to some lengths to accommodate the purchaser’s difficulties), courts will not relieve against the consequences of the purchaser’s failure to complete. The stage is reached where “enough is enough”, at which the equities balance in favour of the vendor, leaving the loss to lie where it falls. It follows that, absent evidence of unconscionable conduct by the vendor, merely because the vendor secures a windfall gain (even a substantial one), whether in the increase of the value of the land or in improvements made to the land, is not by itself a justification to relieve against forfeiture. Cases that presuppose some automatic entitlement in a defaulting purchaser to recover the value or cost of improvements52 must therefore be viewed with suspicion. Whether the purchaser is entitled to equitable compensation for improvements is to be considered by asking whether it is unconscionable for the vendor to walk away from this transaction while retaining land that has increased in value because of the purchaser’s efforts, without giving compensation.53 Forfeiture of moneys paid as a deposit [11.50] A deposit54 is forfeited if the purchaser fails to complete, even absent a forfeiture

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clause,55 and equity will not relieve against its forfeiture. The special treatment afforded to deposits —​it is an exception to the law of penalties (discussed in Ch 13), in a sense, because it cannot be assumed that a deposit represents a genuine pre-​estimate of the loss suffered by the vendor in the event the purchaser is unable to complete56 —​derives from the ancient custom of providing an earnest for the performance of a contract.57 That a deposit is forfeited does

51

Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367 at [53]. Factors of this kind also influenced Harrison J in Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2003] 2 NZLR 92 [affd Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2004] 2 NZLR 615] albeit in the context of an alleged penalty clause, noting (at [56]) that the parties, as sophisticated commercial entities of apparently equal bargaining strength, who were each entitled to independent legal and accounting advice before entering the contract, were free to settle for themselves the rights and liabilities that might flow from a breach.

52

See, for example, Real Estate Securities Ltd v Kew Golf Links Estate Pty Ltd [1935] VLR 114; Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446; PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 at 648 per Clarke JA; Clancy v Salienta Pty Ltd (2000) 11 BPR 20,425 at [83]–​[91] per Beazley JA (dissenting).

53

Mulkearns v Chandos Developments Pty Ltd (No 3) (2005) 12 BPR 22,985 at [43] per Young CJ in Eq.

54

This includes a deposit payable post-​contractually, such as where the purchasers are let into possession without the immediate payment of a deposit and without an occupation fee, but the contract nonetheless provides for the payment of a deposit: Kirk v Ashdown [1998] ANZ Conv R 57 at 62 (CA(Qld)). It also includes a deposit of chattels rather than money.

55

Yardley v Saunders [1982] WAR 231 at 238 per Kennedy J.

56

Luu v Sovereign Developments Ltd (2006) 12 BPR 23,629 at [24] per Bryson JA. See also Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257 at [69] per Kaye J (who did not regard the fact that the vendor might have profited, even significantly, by retaining the deposit dictates that it would be unconscionable to retain the deposit, especially in a case where, as on the facts, the parties negotiated at arm’s length a deposit that was forfeited as a result of the purchaser’s unilateral election to repudiate its agreement).

57

Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 at 578 (PC); Kirk v Ashdown [1998] ANZ Conv R 57 at 62 (CA(Qld)); Garratt v Ikeda [2002] 1 NZLR 577 at 588–​592 per Tipping J; Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257 at [62] per Kaye J; Griffon Shipping LLC v Firodi Shipping Ltd [2013] 2 Lloyd’s Rep 50 at [27] per Teare J.

[11.50]  387 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

not absolve the vendor from giving credit for the deposit against the damages to which he or she is entitled from the purchaser as a result of the latter’s failure to complete.58 That mention of the principles surrounding forfeiture of deposits is here located under the broader heading of contracts relating to land should not be read as confining their application to contracts of that kind. Most of the case law has focused on real property in this context, but the principles have potential application outside the real property sphere.59

Strictness of forfeiture

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[11.55]  Curial refusal to interfere with the forfeiture of “true” deposits translates to an intran-

sigence with purchasers who fail to meet strict time conditions. A high watermark illustration is found in Union Eagle Ltd v Golden Achievement Ltd,60 where the Privy Council refused relief from forfeiture to a purchaser who, having paid a 10% deposit under a contract for the purchase of an apartment that made time of the essence, sought to complete only 10 minutes after the deadline prescribed in the contract. In reaching this decision, Lord Hoffmann stressed the importance of parties to transactions of this kind being able to determine with certainty “that the terms of the contract will be enforced”, adding that to recognise, in cases of this kind, the existence of a discretion is to enable “litigation to be employed as a negotiating tactic”.61 His Lordship added that to suggest that relief should be available because the purchaser was only slightly late “is bound to lead to arguments over how late is too late, which can be resolved only by litigation”.62 That by rescinding the vendor sought to take advantage of a rising market, and so could receive the windfall of both the deposit and a higher price, has led some to characterise the decision as too strict.63 Yet the ruling in Romanos v Pentagold Investments Pty Ltd,64 discussed at [11.40], where the High Court refused relief against forfeiture where the balance of a deposit was paid a day late, indicates that a strict approach is also likely to reflect Australian law. The need for certainty in land contracts heavily influenced the court in so concluding, Kirby J remarking that “[t]‌he application of a clear rule is specially desirable” in contracts concerned with, as in Romanos, the development of land.65 This does not mean that equity has no role. Where lateness is due to the purchaser’s accident, sickness or misadventure —​unlike in Union Eagle or Romanos —​equitable relief may follow independent of proof of unconscionable conduct by the vendor.66 58

Carpenter v McGrath (1996) 40 NSWLR 39; Federal Commissioner for Taxation v Reliance Carpet Co Pty Ltd (2008) 236 CLR 342 at [24] (FC) (“where, as here, the contract was terminated for breach, the deposit would be brought into account in any assessment of damages if an action were pursued against the purchaser”); Ng v Ashley King (Developments) Ltd [2011] Ch 115.

59

See, for example, Dies v British and International Mining and Finance Corporation Ltd [1939] 1 KB 724 (contract to purchase a quantity of rifles and ammunition); Commission Car Sales (Hastings) Ltd v Saul [1957] NZLR 144 (contract to sell a motor vehicle); Fiorelli Properties Pty Ltd v Professional Fencemakers Pty Ltd (2011) 34 VR 257 (contract for the purchase of steel fencing and gates).

60

Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 (noted Heydon, “Equitable Aid to Purchasers in Breach of Essential Time Stipulations” (1997) 113 LQR 385).

61

Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 at 519.

62

Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 at 523.

63

See, for example, Stevens, “Having Your Cake and Eating It? Union Eagle Ltd v Golden Achievement Ltd” (1998) 61 MLR 255 at 260–​262.

64

Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367.

65

Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367 at [54].

66

Jeppesons Road Pty Ltd v Di Domenico (2005) Q ConvR ¶54-​620 at [81] per Atkinson J.

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Relief Against Forfeiture  Chapter  11

The issue remains in Australian law as to whether a very minor time delay in completing a contract of which time is of the essence can make it unconscionable for the vendor to rescind aside from evidence of accident, sickness or misadventure.67 The point was not directly decided in Romanos, and may rest on the nature of the parties and their relationship, including whether the property was for development purposes and whether the parties were well advised. State Supreme Court authorities go both ways.68 In the end, set rules are unlikely to be determinative when the criterion is one of unconscionable conduct; whether or not a vendor’s conduct is unconscionable must depend on the whole of the relevant circumstances.

“Deposit” exceeding 10% of purchase price [11.60] A vendor cannot manipulate the courts’ refusal to grant relief from forfeiture of a

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deposit by simply describing an extravagant sum as a deposit. In the typical scenario involving a contract for the sale of land, in respect of which a short settlement period is prescribed, equity will not allow the vendor to retain a “deposit” far exceeding the usual 10% of the purchase price if the purchaser fails to complete. To this end, “deposits” of 25%,69 30%70 and 50%71 of the purchase price in transactions of this kind have been treated as penalties72 —​ not objectively capable of being viewed as “earnest money” —​and relief against their forfeiture granted. Yet each case rests on its own facts.73 A mere comparison of percentages is not decisive;74 also potentially relevant are “the nature of the property sold and the circumstances of the case generally”,75 including prevailing practice and market conditions. An important factor is the risk to which the vendor is exposed by virtue of the terms of the contract, which in turn is a function of matters such as the length of the settlement period, whether the purchaser is given possession or other benefits before the date of completion, the subject matter of the contract and the nature of the breaches alleged.76

67

Cf Rossiter, “The Essence of Punctuality: Termination of Contracts for the Sale of Land for Late Performance and Relief in Equity” (2001) 24 UNSWLJ 1 at 15 (who accepts that Union Eagle was correctly decided, given the absence of any fraud, accident or misadventure, opining that a ten-​minute delay in completion where time has been made of the essence is, in the absence of some evidence to the contrary, neither slight nor trivial).

68

Compare Smilie Pty Ltd v Bruce (1998) NSW ConvR ¶55-​841 (where Bryson J contemplated that a short delay occasioned by traffic or being stuck in a lift for ten or 15 minutes might not be inconsistent with substantial performance) with Imperial Brothers Pty Ltd v Ronim [1999] 2 Qd R 172 (CA) (following Union Eagle where the purchaser tendered settlement a few minutes late, although ultimately ruling that the contract remained on foot on another ground); Aussie Invest Corporation Pty Ltd v Pulcesia Pty Ltd (2005) 13 VR 168 at [313]–​[327] per Dodds-​Streeton J (vendor’s behaviour in rescinding the contract once the purchasers had not completed by the close of business on the day prescribed in the contract held not to have been unconscionable because the purchasers conveyed “the impression that the attempt to settle had concluded and would not be renewed that day” (at [326]) and “[t]‌he breach was caused by the purchaser’s failure to secure the necessary funding to settle” (at [327])).

69

Smyth v Jessep [1956] VLR 230; Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573.

70

Saunders v Leonardi (1976) 1 BPR 9409.

71

Codot Developments Ltd v Potter [1981] 1 NZLR 729.

72

James v Hill [2004] NSWCA 301 at [48] per Tobias JA; Luu v Sovereign Developments Ltd (2006) 12 BPR 23,629 at [24] per Bryson JA.

73

Tropical Traders Ltd v R & H Goonan (No 2) [1965] WAR 174 at 176 per Jackson J.

74

Re Hoobin (deceased) [1957] VR 341 at 346 per O’Bryan J.

75

Yardley v Saunders [1982] WAR 231 at 238 per Kennedy J.

76

See, for example, Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130 at 140 per Hoffmann LJ (who upheld the forfeiture of some 32% of the pre-​paid price, influenced by the fact that the purchaser had obtained non-​monetary benefits before completion, and that the purchaser’s breaches were grave and persistent).

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Equity and Trusts in Australia

In Coates v Sarich,77 a contract for the sale of a farm stipulated a deposit of nearly 30%. The purchaser was let into possession on entry into the contract, which envisaged completion 16  years later. On the purchaser’s default, the vendor rescinded the contract. The Western Australian Full Court refused to grant relief against forfeiture of the deposit. Wolff CJ remarked that on a sale on extended terms, the parties might be expected to fix a larger sum for a deposit than for a cash sale. The risk the vendor took in entrusting his property to the purchaser for such a long period of time —​financial risk, risk of disease, bad seasons, poor management —​made it impossible “to forecast the vendor’s position at that indefinite period when he my exercise his right to rescind, and so a higher deposit is justified”.78 Hale J also accepted that a proportionately larger deposit may be reasonable where the subject matter of the sale “is a wasting asset which may be quickly worked out, or where it is a business which by mismanagement can be seriously prejudiced in a short time”.79 So in Re Hoobin (deceased),80 O’Bryan J upheld a 25% deposit on the sale of a hotel where payment of the balance was postponed for eight years, during which the purchaser would have possession, placing the vendor at risk given that the value of the hotel depended upon good management. The nature and bargaining position of the parties may influence the court in this respect. Hence it has been said, resonating with that often expressed in the context of court intervention via other doctrines,81 that “[t]‌he courts should be hesitant before interfering with a commercial contract made between businessmen who are on terms of bargaining equality with each other and where there is no element of pressure or duress”.82 [11.65]  Stipulating an excessive deposit may, especially if the parties do not transact as equals,

alternatively provide evidence of procedural unfairness —​such as fraud, mistake, undue influence or unconscionable dealing —​in the formation of the contract.83

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“Deposits” less than 10% of purchase price [11.70]  There is nothing to preclude parties to a real estate transaction agreeing to a deposit

less than 10% of the purchase price. With the inflation of real estate values, stipulation of a 5% deposit is not uncommon. In an attempt to protect vendors’ interests, though, contract drafters have sought to craft the contract so as to make the difference between the lower “deposit” (say, 5%) and the “usual deposit” (10%) recoverable by the vendor in the event of the purchaser’s default. Yet when tested in court, clauses of this kind have generally been found wanting, chiefly because it is difficult to conceive as a deposit an amount that has not

77

Coates v Sarich [1964] WAR 2.

78

Coates v Sarich [1964] WAR 2 at 6–​7.

79

Coates v Sarich [1964] WAR 2 at 15. See also Omar v El-​Wakil [2001] NPC 114 (relief in respect of a 31% deposit refused on the basis that inability to complete was precisely the risk the deposit was intended to guard against); Burke & Riversdale Road Pty Ltd v Gemini Investments Pty Ltd (No 2) [2003] VSC 48 (forfeiture of 15% deposit upheld given the long settlement period, Nettle J inferring that “so much of the deposit as exceeds 10% was intended to provide a security to the [vendor] against the expense which it would incur by standing out of the purchase price for such a long period and then having the [purchaser] default”: at [21]).

80

Re Hoobin (deceased) [1957] VR 341 at 347, 349.

81

Such as undue influence (see [7.05]) and unconscionable dealing (see [9.05]).

82

Tropical Traders Ltd v R & H Goonan (No 2) [1965] WAR 174 at 177 per Jackson J (who upheld a deposit of 21% in a contract for the sale of real estate, completion of which was stipulated as four years hence, during which time the purchaser had been in possession).

83

See Ho, “Deposit: The Importance of Being (an) Earnest” (2003) 119 LQR 34 at 37 (who suggests if the deposit exceeds a genuine pre-​estimate of the loss, a rebuttable presumption of procedural unfairness should arise, thus throwing the onus on the depositee to show that the deposit was agreed in accordance with the depositor’s free will).

390 [11.65] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Relief Against Forfeiture  Chapter  11

been advanced as an “earnest” for the performance of the contract.84 It thus falls outside the exemption from the law of penalties enjoyed by “true” deposits. For example, in Luu v Sovereign Developments Ltd,85 a contract for the sale of land provided for a deposit of less than 1% of purchase price, but added that “if the Purchaser commits a default hereunder the whole of the 10% deposit shall become due and payable notwithstanding that this Contract is not completed”. Bryson JA, with whom Handley and McColl JJA concurred, having construed the latter to mean that “if there is a default the purchaser has to increase the part of the purchase price which is subject to the risks to which his deposit is subject”, ruled that “[t]‌his lacks any connection with damages at all, and falls to be tested as a penalty”.86 Similarly, in Iannello v Sharpe,87 a contract to purchase land set a 5% deposit ($225,000) “unless otherwise stated and paid in accordance with special condition 14”. The latter provided that:

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… if the Purchaser defaults in the observance or performance of any obligation hereunder which is or has become essential the balance of the deposit, namely $225,000.00, shall become immediately due and payable and the Purchaser shall forfeit the whole of the sum of $450,000.00 …

Hodgson JA, with whom Santow and Basten JJA concurred, found that on the true construction of these clauses, the contractual obligation to make the second payment of $225,000 was not one to pay a deposit or part thereof. This was because there never would be a time when this second $225,000 would be paid so as to show that the purchaser was in earnest in committing himself to pay the rest.88 The purchaser’s default thus entitled the vendors to forfeit the $225,000 paid on exchange, but not to receive the second $225,000, because it was a penalty. Similar facts have generated the same outcome in Victoria.89 Following Luu and Iannello, many lawyers altered the wording of their “deposit by instalments” clause so as to make any later instalment of a “deposit” payable on a specified date with no mention of a right to recover on default.90 This succeeded in two cases91 but not in another.92 The law is unclear as a result, and so it has been cautioned that, until it is clarified, a vendor should be wary of entering into a contract providing for the payment of the deposit by instalments, as the right to recover any unpaid instalments (even if these do not in total exceed 10% of the purchase price) “must be regarded as a matter of real doubt”.93

84

See generally Bentley, “Contracts for the Sale of Land —​When Does a Deposit Paid via Instalments Constitute a Penalty?” (2016) 25 APLJ 40.

85

Luu v Sovereign Developments Ltd (2006) 12 BPR 23,629.

86

Luu v Sovereign Developments Ltd (2006) 12 BPR 23,629 at [31].

87

Iannello v Sharpe (2007) 69 NSWLR 452.

88

Iannello v Sharpe (2007) 69 NSWLR 452 at [32].

89

Simcevski v Dixon (No 2) [2017] VSC 531.

90

As recommended by Lane, “Split Deposits —​Again” (2007) 81 ALJ 439 at 441.

91

Cloud Top Pty Ltd v Toma Services Pty Ltd [2008] NSWSC 568 (where what influenced Einstein J was that the obligation to pay the remaining 5% of the deposit was not to occur on the completion of the contracts but to precede that date: at [65]); Rana v Dalla Costa (2014) 17 BPR 33,253 (where the contract made provision for a deposit in the sum of $50,000 (on purchase of $1.25m), half of which was paid on exchange, with the other half to be paid 70 days after exchange; when the latter was not paid, Harrison AsJ held to be recoverable and not a penalty). See also Golden Oceans (NSW) Pty Ltd v Evewall Pty Ltd [2009] NSWSC 674 at [68] per Rein J (“the fact that the vendor did not insist on the payment of all the deposit on exchange does not turn the contractual obligation to pay the amount specified as a deposit (and in total 10% of the purchase price) into a penalty”).

92

Boyarsky v Taylor (2008) 14 BPR 26,553 (where the second instalment was payable “on the date for completion” with no mention of default being a trigger for this purpose, but Brereton J nonetheless ruled that the second instalment was a penalty because “[i]‌f the contract is applied according to its terms, the only circumstance in which the second instalment would become due would be if, in breach of special condition 15, the purchaser did not complete on the completion date”: at [50]).

93

Butt, “Recovery of Instalment of Deposit: A Penalty?” (2009) 83 ALJ 512 at 513.

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Equity and Trusts in Australia

Statutory intervention: New South Wales and Victoria [11.75]  In New South Wales and Victoria, following the English lead,94 statute provides that

where a court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, it may “if it thinks fit, order the repayment of any deposit”.95 Though expressed as a wide discretion without apparent boundaries, and some judges have interpreted the provision along these lines,96 the bulk of Australian case authority has been more circumspect in exercising the discretion. As explained by a New South Wales judge in a leading case on the New South Wales provision:97 The jurisdiction under s 55(2A) does not give to a court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which has been terminated. A vendor who forfeits a deposit in strict enforcement of his legal rights is not to be deprived of it under s 55(2A) unless it is unjust and inequitable to permit him to retain it. If the court would not, in its discretion, specifically enforce the contract against the purchaser, then it may follow that it would be unjust and inequitable to allow the vendor to retain the deposit. In appropriate cases he should be left to prove the damages payable to him by the defaulting purchaser in accordance with the established rules governing the measure of damages, rather than simply pocketing the deposit, which might in some cases exceed the damages which would properly be recoverable by him at law.

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The case law indicates that prima facie a vendor who at law is entitled to forfeit the deposit should be able to do so, given the commercial purpose of the deposit as an earnest on the part of the purchaser that the contract will be performed.98 Statutory relief is premised on proof of some significant factor, not necessarily a special or exceptional circumstance,99 but one that usually sounds against the vendor’s conscience so as to attract relief in equity,100 which includes factors such as mistake101 and hardship.102 The justice of the situation is the pivotal consideration;103 hence judicial statements as to whether it is “unjust and inequitable” to allow the vendor to retain the deposit.104 But because the legislation gives the court a jurisdiction to 94

The current English provision is Law of Property Act 1925 (UK), s 49(2).

95

Conveyancing Act 1919 (NSW), s 55(2A); Property Law Act 1958 (Vic), s 49(2). The wording follows the New South Wales provision.

96

See, for example, Zsadony v Pizer [1955] VLR 496 at 503–​504 per Dean J; Universal Corporation v Five Ways Properties Ltd [1979] 1 All ER 552 at 555 per Buckley LJ.

97

Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268 at 272–​273 per Street CJ in Eq. See also Re Hoobin (deceased) [1957] VR 341 at 350 per O’Bryan J; Mallett v Jones [1959] VR 122 at 134–​135 per Dean and Smith JJ; Pentagold Investments Pty Ltd v Romanos (2002) NSW ConvR ¶56-​014 at 58,341 per Giles JA (in dissent but not on the interpretation of s 55(2A)) [affd Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367 at [27]].

98

Omar v El-​Wakil [2001] NPC 114 at [35], [36] per Arden LJ, at [49] per Pill LJ; Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 at [173] per Santow JA; Mulkearns v Chandos Developments Pty Ltd (No 4) (2005) 12 BPR 22,993 at [140] per Young CJ in Eq.

99

Cf Poort v Development Underwriting (Victoria) Pty Ltd [1976] VR 779 at 786 per Gillard J; Aussie Invest Corporation Pty Ltd v Pulcesia Pty Ltd (2005) 13 VR 168 at [324] per Dodds-​Streeton J; Midill (97PL) Ltd v Park Lane Estates Ltd [2009] 2 All ER 1067 at [52] per Carnwath LJ (referring to “something special or exceptional to justify overriding the ordinary contractual expectations of the parties”).

100

Schindler v Pigault (1975) 30 P & CR 328 at 336–​337 per Megarry J; Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 at [173] per Santow JA.

101

See, for example, Golding v Vella (2003) NSW ConvR ¶56-​044 (where Barrett J identified two factors that pointed to injustice in allowing the vendor to retain the benefit of the deposit: (1) the plaintiff resold the property for the same price; and (2) the purchasers were under a serious misapprehension as to their inability to extricate themselves from the contract under statutory “cooling off” provisions when they later elected to affirm the contract: at [39], [55]).

102

See Pratt v Hawkins (1991) 32 NSWLR 319 at 323–​325 per Young J.

103

Wight v Foran (1987) 11 NSWLR 470 at 482 per Kirby P.

104

See, for example, Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367 at [27] per Gleeson CJ, McHugh, Gummow, Hayne, and Heydon JJ. Cf Lucantonio v Ciofuli (2003) 11 BPR 21,181 at [86] per Bryson J (“References to the unjust and

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Relief Against Forfeiture  Chapter  11

return forfeited deposits previously unavailable either at common law or in equity, it has been judicially remarked that “it would be wrong to seek to confine the jurisdiction conferred by the words of the statute by analogy with the jurisdiction of common law and equity to relieve against penalties or forfeiture”.105 That non-​completion was the purchaser’s fault —​even if the vendor may also have been partly at fault —​is in most cases almost conclusive against the grant of relief.106 The position is otherwise if non-​completion is due to the vendor’s default alone107 or a matter over which the purchaser had little control.108 Likewise, that some misstatement or misleading conduct by or on behalf of the vendor has affected the purchaser’s decision or ability to complete may incline the court to afford relief.109 It now appears to be established that, by itself, that the vendor has received a windfall benefit, such as by reselling at a higher price, or suffered no loss, on rescinding the transaction is not a ground to activate the statutory jurisdiction.110 If the vendor has sustained a loss, there is certainly likely to be nothing inequitable in the vendor being allowed to retain the deposit.111 Importantly, that a court elects to exercise its statutory discretion to order the vendor to return a deposit does not affect the vendor’s right to sue at law for damages for breach of contract.112

Form of relief [11.80]  There is Australian authority that, where relief against the forfeiture of a “deposit”

exceeding 10% is granted, the court may allow the vendor to retain the normal 10% of the purchase price.113 This is consistent with equitable principle that, in other contexts where

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inequitable, and like formulations, cannot rightly be understood as prescribing or defining a test for relief, or as substituting a formulation for the words in s 55(2A); the formulations are convenient allusions to what s 55(2A) says”). 105

Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 at [173] per Santow JA. See also Baird v Chambers (2010) 15 BPR 28,337 at [13] per Ball J.

106

See, for example, Omar v El-​Wakil [2001] NPC 114 at [36] per Arden LJ, at [49] per Pill LJ (allowing the forfeiture of a deposit of 31% of the purchase price); Karfoal Pty Ltd v Lorence (2002) 11 BPR 20,129 at [14]–​[18] per Gzell J; One Spencer Street Pty Ltd v Maryland International Pty Ltd (2005) 12 BPR 23,113; Nwai Pty Ltd v Johnson (2005) 12 BPR 23,939; Simcevski v Dixon (No 2) [2017] VSC 531.

107

Omar v El-​Wakil [2001] NPC 114 at [48] per Pill LJ.

108

Clurstock Pty Ltd v Timanu Pty Ltd (1988) NSW ConvR ¶55-​419 at 57,831 per Young J.

109

See, for example, Hawkins v Butcher (2002) 55 NSWLR 558 at 571–​574 per Handley JA (purchasers who failed to complete due to the vendor’s innocent misrepresentation entitled to an order returning their deposit); Havyn Pty Ltd v Webster (2005) 12 BPR 22,837 (deposit ordered to be returned even though the purchaser had affirmed the contract after discovering the vendor’s misrepresentation, Santow JA being influenced by conduct of the vendor in the transaction which, in his view, was more unreasonable than the conduct of the purchaser: at [170], [171]); Higgins v Statewide Developments Pty Ltd (2010) 14 BPR 27,293 at [123]–​[135] per Barrett J (where vendor misrepresented the availability of 180 degree water views) [affd Statewide Developments Pty Ltd v Higgins (2011) 15 BPR 29,195].

110

See, for example, Clurstock Pty Ltd v Timanu Pty Ltd (1988) NSW ConvR ¶55-​419; Karfoal Pty Ltd v Lorence (2002) 11 BPR 20,129; Golding v Vella (2003) NSW ConvR ¶56-​044; Nwai Pty Ltd v Johnson (2005) 12 BPR 23,939; Nassif v Caminer (2009) 74 NSWLR 276; Midill (97PL) Ltd v Park Lane Estates Ltd [2009] 2 All ER 1067; Baird v Chambers (2010) 15 BPR 28,337; Ari v Decevic [2013] NSWSC 1967 at [96], [97] per Slattery J. Cf Delgado v Walker Developments Pty Ltd (1989) NSW ConvR ¶55-​497 (relief granted where the vendor had resold at a large profit, without any element of misconduct of the vendor); Nelson v Bellamy (2000) 10 BPR 19,011 at 19,027 per Simos J; Rushcutters Bay Developments Pty Ltd v Dragon Asset Investment Pty Ltd (No 2) (2017) 18 BPR 37,025 at [90]–​[93] per Darke J; Simcevski v Dixon (No 2) [2017] VSC 531 at [122], [123] per Riordan J.

111

See, for example, Notter v Girault [2004] ANZ Conv R 503 at [68] per White J.

112

Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268 at 273 per Street CJ in Eq; Mulkearns v Chandos Developments Pty Ltd (No 4) (2005) 12 BPR 22,993 at [129] per Young CJ in Eq.

113

Smyth v Jessep [1956] VLR 230; Mehmet v Benson (1963) 81 WN (Pt 1)  (NSW) 188 [revd on other grounds:  Mehmet v Benson (1965) 113 CLR 295]; Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59. A similar practice appears in New Zealand: Worsdale v Polglase [1981] 1 NZLR 722; Codot Developments Ltd v Potter [1981] 1 NZLR 729.

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Equity and Trusts in Australia

relief is granted for unconscionable conduct, envisages partial relief (see [9.155], [10.235], [38.180]–​[38.190]). But it conflicted with the approach of some judges to the law of penalties, to the effect that if an agreed sum is a penalty, a plaintiff suing for breach of the contract is entitled to claim in an action for damages, as if there had been no such agreement as to the amount, but cannot sue for the penalty as such: see [13.95]. This is a problem because equity’s jurisdiction to relieve against forfeiture of deposits can be explained on the basis that an unreasonable deposit operates as a penalty: see [11.60]. Whether or not (partly) for this reason, the High Court veered from this conception of the law of penalties in 2012,114 which serves largely to obviate the problem: see [13.95]. In any case, an alternative approach that overcomes the (former) problem is for the court to order a refund of the entire deposit, subject to a set-​off for actual loss suffered by the vendor. It found favour in the Privy Council in Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd, where Lord Browne-​Wilkinson said:115

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The Court of Appeal took a middle course by ordering the repayment of 15% out of the 25% deposit, leaving the bank with its normal 10% deposit which it was entitled to forfeit. Their Lordships are unable to agree that this is the correct order. The bank has contracted for a deposit consisting of one globular sum, being 25% of the purchase price. If a deposit of 25% constitutes an unreasonable sum and is not therefore a true deposit, it must be repaid as a whole. The bank has never stipulated for a reasonable deposit of 10%: therefore it has no right to such a limited payment. If it cannot establish that the whole sum was truly a deposit, it has not contracted for a true deposit at all.

This approach has also been preferred when exercising the discretion under statute to order repayment of a deposit (as to which see [11.75]); such an order “merely stops a vendor’s summary remedy and stops a vendor who has in fact suffered no loss from getting a windfall, but does not put an end to any other remedy which the vendor may have to sue for damages”.116 Yet the ultimate outcome in a given case, whether on one approach or the other, may differ little given that the award of relief is flexible and discretionary.

FORFEITURE AND CONTRACTS FOR THE LEASE OF LAND [11.85]  A lessor may at common law forfeit a lease if the lessee breaches one or more of its

conditions.117 But no right of forfeiture at common law applies vis-​à-​vis breaches of covenants, only an action for damages and/​or an injunction.118 The latter is modified by statute in most jurisdictions, entitling lessors to re-​enter for breaches of covenant within a specified time.119 In any event, leases commonly contain a forfeiture clause entitling the lessor to re-​ enter upon the lessee’s breach of a specific covenant or covenants. 114

See Andrews v Australian and New Zealand Banking Group Ltd (2012) 247 CLR 205.

115

Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 at 582. Smart AJ found this approach persuasive in Manufacturers House Pty Ltd v Ashington No 147 Pty Ltd (2005) 12 BPR 23,913 at [58]–​[60].

116

Pratt v Hawkins (1991) 32 NSWLR 319 at 324 per Young J. See also Poort v Development Underwriting (Victoria) Pty Ltd [1976] VR 779 at 785 per Gillard J [affd without comment on this point: Poort v Development Underwriting (Vic) Pty Ltd (No 2) [1977] VR 454]; Bernard v Weingarth (1997) 8 BPR 15,651 at 15,656 per McLelland CJ in Eq; Lucantonio v Ciofuli (2003) 11 BPR 21,181 at [88] per Bryson J; Mulkearns v Chandos Developments Pty Ltd (No 4) (2005) 12 BPR 22,993 at [134]–​[139] per Young CJ in Eq. Cf Clarke v Dilberovic (1982) NSW ConvR ¶55-​083 (where Rath J actually ordered return of part only of the deposit).

117

Doe d Lockwood v Clarke and Brown (1807) 8 East 185; 103 ER 313.

118

Bashir v Commissioner of Lands [1960] AC 44 (PC).

119

Land Titles Act 1925 (ACT), s 120(1)(d); Conveyancing Act 1919 (NSW), s 85(1)(d); Law of Property Act 2000 (NT), s 119(1)(d); Property Law Act 1974 (Qld), s 107(d); Real Property Act 1886 (SA), s 125(3); Land Titles Act 1980 (Tas), s

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Relief Against Forfeiture  Chapter  11

Relief against forfeiture for breach of covenant to pay rent [11.90]  Relief against forfeiture of the lease was originally the province of equity, and was

limited to leases forfeited for breach of the covenant to pay rent. This was because equity viewed the lessor’s right of re-​entry here as primarily a security for the rent. As explained by Jenkins LJ in Gill v Lewis:120 [S]‌ave in exceptional circumstances, the function of the court in exercising this equitable jurisdiction is to grant relief when all that is due for rent and costs has been paid up, and (in general) to disregard any other causes of complaint that the landlord may have against the tenant. The question is whether, provided all is paid up, the landlord will not have been fully compensated; and the view taken by the court is that if he gets the whole of his rent and costs, then he got all that he is entitled to so far as rent is concerned, and extraneous matters of breach of covenant, and so forth, are, generally speaking, irrelevant.

A standard illustration of an “exceptional circumstance” in this respect is the use of premises as a brothel,121 although this does not mean that relief against forfeiture is never granted in such a case.122 Other exceptional circumstances may arise. In Stieper v Deviot Pty Ltd,123 the lessee’s conduct in storing flammable liquids on the premises in breach of statute, thus making it unlikely that the lessor could insure the premises against fire risk, was held to constitute an exceptional circumstance. [11.95] The Gill v Lewis principle finds statutory expression in some jurisdictions,124 which

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provides that payment of arrears of rent and costs into court, or to the lessor prior to the hearing for the recovery of possession, determines all further proceedings in the action. If the lessee does not pay the arrears and costs prior to hearing, the legislation empowers the court to give relief to the lessee on equitable grounds within six months of the date of the execution of the court’s judgment, which is exercised in the lessee’s favour save in exceptional circumstances. Though statutory, the jurisdiction is exercisable according to settled equitable principles,125 and 67(b); Transfer of Land Act 1958 (Vic), s 67(1)(d); Transfer of Land Act 1893 (WA), s 93(2). Cf Property Law Act 2007 (NZ), ss 243–​264 (in force from 1 January 2008) (which replaces the general law (being intended as a code: s 243) and uses the term “cancellation” in place of “forfeiture”): see Gravells, “The New Law of Forfeiture of Leases: More Than a Change of Terminology?” (2008) 23 NZULR 1. See also Law Commission, Termination of Tenancies for Tenant Default (Law Com No 303, 2006) (which recommended the abolition of the current law to be replaced with a statutory scheme governing the termination of tenancies for tenant default). 120

Gill v Lewis [1956] 2 QB 1 at 13. See also Lo Giudice v Biviano (No 2) [1962] VR 420 at 425 per Adam J; Direct Food Supplies (Victoria) Pty Ltd v DLV Pty Ltd [1975] VR 358 at 359 per Starke J; Jam Factory Ltd v Sunny Paradise Pty Ltd [1989] VR 584 at 590–​591 per Ormiston J; Symmons Plains Pastoral Holdings Pty Ltd v Tasmanian Motor Racing Co Pty Ltd (1996) 6 Tas R 284 at 289, 292 per Zeeman J; Melacare International Ltd (in receivership) v Daley Investments Pty Ltd (1999) 9 BPR 17,095 at [9]‌per Bryson J; Tannous v Cipolla Bros Holdings Pty Ltd (2001) 10 BPR 18,563 at 18,568 per Barrett J; Bland v Ingrams Estates Ltd (No 2) [2002] 2 WLR 361 at 369 (CA).

121

See, for example, Rugby School (Governors) v Tannahill [1935] 1 KB 87; Borthwick-​Norton v Romney Warwick Estates Ltd [1950] 1 All ER 798 at 801 per Lord Goddard CJ.

122

Central Estates (Belgravia) Ltd v Woolgar (No 2) [1972] 1 WLR 1048 at 1053–​1054 per Lord Denning MR, at 1055–​1056 per Buckley LJ; Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 at 9609 per Hutley JA.

123

Stieper v Deviot Pty Ltd (1977) 2 BPR 9602 at 9605–​9607 per Moffitt P, at 9609 per Hutley JA, at 9610 per Glass JA (“To suggest that equity will uphold the forfeiture if the lessee conducts a brother but not if he threatens to burn down uninsured premises derives as much support from equitable doctrine as it does from common sense”). To the same effect under the statutory jurisdiction to relieve against forfeiture for other breaches of covenant, see Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 at [464] per Hollingworth J.

124

Landlord and Tenant Act 1899 (NSW), ss 8–​10; Landlord and Tenant Act 1936 (SA), ss 4, 5, 7, 9; Supreme Court Act 1986 (Vic), ss 79, 80, 85. The Northern Territory and Queensland provisions (Law of Property Act 2000 (NT), ss 137, 138; Property Law Act 1974 (Qld), s 124) do not distinguish a breach of covenant to pay rent from breaches of other covenants; the same statutory procedure applies to both: see [11.105]. Cf Supreme Court Civil Procedure Act 1932 (Tas), s 11(14), 11(14A).

125

Symmons Plains Pastoral Holdings Pty Ltd v Tasmanian Motor Racing Co Pty Ltd (1996) 6 Tas R 284 at 290 per Zeeman J.

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Equity and Trusts in Australia

in jurisdictions lacking statutory provision the inherent equitable jurisdiction applies.126 To this end, Barrett J in Tannous v Cipolla Bros Holdings Pty Ltd stated the relevant test as follows:127 [T]‌he test to be applied here is one of unconscionability: whether, in the light of the tenant’s remedying of the default in the payment of rent, resort by the landlord to his strict legal right of re-​entry would be unconscionable; or, if I may put this another way, whether the tenant has been guilty of conduct over and above the remedied default in payment of rent which is of such gravity that, even accepting that the default for which the right of re-​entry is security has been satisfied, it would not be unconscionable on the landlord’s part to insist on his strict legal right.

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For example, in Novasource Consulting Pty Ltd v Primelife Property Holdings Pty Ltd,128 the Supreme Court of Victoria exercised its discretion in favour of the tenant even though it had withheld rent. Ashley J was influenced by the following facts: the breach was recent; the tenant had the capacity to remedy the breach and had speedily attempted to do so, as well as offered to meet the lessor’s costs of re-​entry; the tenant had expended a considerable amount on fit-​ out of the premises; and the lessor held a security deposit far exceeding the amount of the outstanding rent. This made the lessor’s re-​entry “highly opportunistic”, said his Honour.129 More generally, where the tenant has not displayed a deliberate disregard for its obligations to pay rent, and there is some prospect that, in future, those obligations will be met, courts have on the whole been reasonably willing to entertain relief;130 this is especially so if there has been a lengthy history of punctual payment of rent131 or, as in Novasource, there is in place an adequate bond.132 Conversely, a court is likely to refuse relief in cases of consistently lengthy defaults that fairly lead to the inference that, even if relief is given, there is a reasonable likelihood that the rent will not be paid in the future, at least for some considerable time after the due date for payment.133 It will also be disinclined to grant relief where this may prejudice the leasehold interests of an innocent third party in the property in question.134

126

Canberra International Airport Pty Ltd v Ansett Australia Ltd (2002) 41 ACSR 309 at 318 per Kenny J.  In the Northern Territory and Queensland, the relevant provisions expressly state that the statutory jurisdiction is not intended to displace the equitable jurisdiction: Law of Property Act 2000 (NT), s 138(5); Property Law Act 1974 (Qld), s 124(7).

127

Tannous v Cipolla Bros Holdings Pty Ltd (2001) 10 BPR 18,563 at 18,568.

128

Novasource Consulting Pty Ltd v Primelife Property Holdings Pty Ltd (2003) V ConvR ¶54-​671.

129

Novasource Consulting Pty Ltd v Primelife Property Holdings Pty Ltd (2003) V ConvR ¶54-​671 at [113].

130

See, for example, Wilkinson v S & S Gikas Pty Ltd (2006) 12 BPR 23,685 (where the tenants’ business had suffered severe financial difficulties but Campbell JA granted relief because the tenants “have some financial resources, and the size of the rental that needs to be paid is not an amount that is large, per month, by comparison with the available equity that they have”: at [26]); Constantine v Sanders [2007] NSWSC 250 (where there was evidence that the tenant’s business had become more established, and this increased the prospects of punctual payment of rent in future). Cf Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd (2013) 120 SASR 450 (where Nicholson J noted that the lessee played “ducks and drakes” with the lessor in an effort to manage its cash flow difficulties (at [33]) and accepted that there “may well have been a deliberate strategy in the past on the part of [the lessee] to delay payments from time to time” (at [34]), but nonetheless ordered relief against forfeiture because all arrears of rent had been paid, and the prejudice the lessee would suffer were relief refused far exceeded the (minimal) prejudice the lessor would suffer as a result).

131

See, for example, Chittick v Galea [2007] NSWSC 38; Greek Macedonian Club Ltd v Pan Macedonian Greek Brotherhood NSW Ltd [2007] NSWSC 92 [affd on a different point: Pan Macedonian Greek Brotherhood NSW Ltd v Greek Macedonian Club Ltd [2008] NSWCA 7].

132

See, for example, Mineaplenty Pty Ltd v Trek 31 Pty Ltd [2007] ANZ Conv R 123 (where the default arose as a consequence of a sudden and unforeseen demand for a lump sum by way of arrears as a result of a miscalculation by the landlord of earlier adjustments, and there was a security deposit in place sufficient to cover the default); Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd (2014) 17 BPR 33,147 (doubt over lessee’s capacity to meet rental obligations in future addressed by requiring proof of financial capacity as a condition of granting relief: at [164] per Robb J).

133

See, for example, Endeavour Lodge Motel Ltd v Langford and Gavin [1998] BCL 820 (involving deficiencies in the tenant’s performance of its obligations and its doubtful solvency); International Business College Pty Ltd v Alphacrucis College Ltd [2009] NSWSC 1088. Cf World by Nite Pty Ltd v Michael [2004] 1 Qd R 338 at 344–​345 per Helman J.

134

Kofoo Sussex Pty Ltd v Commerce Building Pty Ltd (2014) 17 BPR 33,147 at [143] per Robb J.

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Relief Against Forfeiture  Chapter  11

In granting relief, whether pursuant to the inherent or the statutory jurisdiction, the court aims to return the parties to the position they would have been in had there been no forfeiture.135 This underlies the practice of requiring an applicant, as a condition of relief, to pay the outstanding rent together with the costs properly incurred by the lessor in the re-​entry and proceedings for relief (save in so far as those costs have been increased by the lessor’s opposition to the grant of relief).136 It explains why, if the lease contains a provision for rent review at a date between the date of forfeiture and that of relief, the court in granting relief must not deny the lessor the benefit of any increased rent due to the operation of that provision during the period prior to the grant of that relief.137 Yet it also follows that relief will not be granted on terms enabling the lessor to profit from exercising the right of re-​entry; the lessor must give credit for benefits enjoyed as a result of re-​entry.138 [11.100]  The application of the statutory jurisdiction is limited to cases where an action for

forfeiture for non-​payment of rent is brought and the lessor’s re-​entry has not completed that action.139 Where the statutory jurisdiction is exercised, the leased premises are held according to the terms of the lease and without the necessity of any new lease; the original lease continues as if there had been no interruption by re-​entry.140 A residual equitable jurisdiction remains where forfeiture proceedings have been completed on the lessor re-​entering into possession of the premises141 (in which case a new lease must be executed).142 Relief against forfeiture for breach of covenants other than to pay rent [11.105] Statute vests the court with discretion to relieve against forfeiture arising by

reason of breaches of covenant other than non-​payment of rent143 (and in the Northern Territory and Queensland for non-​payment of rent). The relevant New South Wales provision is typical:144 Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.



(1) A right of re-​entry or forfeiture under any proviso or stipulation in a lease, for a breach of any covenant, condition, or agreement (express or implied) in the lease, shall not be enforceable by action or otherwise unless and until the lessor serves on the lessee a notice:



(a) specifying the particular breach complained of, and



(b) if the breach is capable of remedy, requiring the lessee to remedy the breach, and

135

Egerton v Jones [1939] 2 KB 702 at 706 per Sir Wilfrid Greene MR.

136

Howard v Fanshawe [1895] 2 Ch 581 at 592 per Stirling J; Abbey National Building Society v Maybeech Ltd [1985] Ch 190 at 206 per Nicholls J; Cicinave Pty Ltd v Jasco Pty Ltd (1989) 5 BPR 11,139 at 11,143–​11,144 per Powell J; Bland v Ingrams Estates Ltd (No 2) [2002] 2 WLR 361 at 366 per Chadwick LJ; Kyriacou v Manakis [2006] NSWSC 804 at [20], [21] per White J.

137

Bland v Ingrams Estates Ltd (No 2) [2002] 2 WLR 361 at 367 per Chadwick LJ.

138

Bland v Ingrams Estates Ltd (No 2) [2002] 2 WLR 361 at 369 per Chadwick LJ.

139

Symmons Plains Pastoral Holdings Pty Ltd v Tasmanian Motor Racing Co Pty Ltd (1996) 6 Tas R 284 at 290 per Zeeman J.

140

Dendy v Evans [1910] 1 KB 263 at 269 per Cozens-​Hardy MR, at 270–​271 per Farwell LJ; Driscoll v Church Commissioners for England [1957] 1 QB 330 at 340 per Denning LJ, at 343–​344 per Hodson LJ; Bland v Ingrams Estates Ltd (No 2) [2002] 2 WLR 361 at 366 per Chadwick LJ.

141

Rogers v Rice [1892] 2 Ch 170; Abbey National Building Society v Maybeech [1985] Ch 190.

142

Symmons Plains Pastoral Holdings Pty Ltd v Tasmanian Motor Racing Co Pty Ltd (1996) 6 Tas R 284 at 290 per Zeeman J.

143

Civil Law (Property) Act 2006 (ACT), s 426(5)(e); Conveyancing Act 1919 (NSW), s 129(8); Landlord and Tenant Act 1936 (SA), s 12(5); Conveyancing and Law of Property Act 1884 (Tas), s 15(7); Property Law Act 1958 (Vic), s 146(12); Property Law Act 1969 (WA), s 81(9).

144

Conveyancing Act 1919 (NSW), s 129(1), 129(2). In other jurisdictions, see: Civil Law (Property) Act 2006 (ACT), s 426(1)–​ 426(4); Law of Property Act 2000 (NT), ss 137(1)–​137(3), 138(1)–​138(3); Property Law Act 1974 (Qld), s 124(1), 124(2); Landlord and Tenant Act 1936 (SA), ss 10, 11; Conveyancing and Law of Property Act 1884 (Tas), s 15(1), 15(2); Property Law Act 1958 (Vic), s 146(1), 146(2); Property Law Act 1969 (WA), s 81(1), 81(2).

[11.105]  397 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia



(c) in case the lessor claims compensation in money for the breach, requiring the lessee to pay the same,



and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and where compensation in money is required to pay reasonable compensation to the satisfaction of the lessor for the breach.



(2) Where a lessor is proceeding by action or otherwise to enforce such a right of re-​entry or forfeiture, or has re-​entered without action the lessee may personally bring a suit and apply to the Court for relief; and the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances, may grant or refuse relief, as it thinks fit; and in case of relief may grant the same on such terms (if any) as to costs, expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future, as the Court in the circumstances of each case thinks fit.

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Like its equitable counterpart, the statutory jurisdiction is exercisable notwithstanding any stipulation to the contrary in the lease.145 It does not displace the equitable jurisdiction,146 though similar principles apply to equitable relief as under statute.147 It follows that, in assessing the availability of relief, the court determines whether it is unconscionable or inequitable for the lessor to rely on its right to terminate.148 This inquiry is, nonetheless, heavily influenced by the conduct of the tenant, as was explained by Hollingworth J in Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd:149 A tenant must, so far as possible, attempt to remedy the breach or breaches alleged in the notice served and pay reasonable compensation for the breaches which cannot be remedied. The tenant must come to court with clean hands and ought not to be relieved if evincing an intention to continue or to repeat the breach of covenant. Where the conduct of the tenant reveals a clear history of wilful breaches of more than one covenant, a case of contumacious disregard by the tenant of the landlord’s rights over a period of time, and a total lack of evidence as to the tenant’s ability to speedily and adequately make good the consequences of the default, relief against forfeiture will not be granted.

In Beamer, her Honour refused relief because the tenant remained in breach of the lease in not paying land tax, had shown no capacity or willingness to respond to and rectify

145

Civil Law (Property) Act 2006 (ACT), s 425; Conveyancing Act 1919 (NSW), s 129(10); Law of Property Act 2000 (NT), ss 137(7)(c), 138(5)(b); Property Law Act 1974 (Qld), s 124(9); Landlord and Tenant Act 1936 (SA), s 12(6); Conveyancing and Law of Property Act 1884 (Tas), s 15(8); Property Law Act 1958 (Vic), s 146(13); Property Law Act 1969 (WA), s 81(10).

146

Esther Investments Pty Ltd v Cherrywood Park Pty Ltd [1986] WAR 279; Law of Property Act 2000 (NT), s 138(5); Property Law Act 1974 (Qld), s 124(7).

147

See, for example, GMS Syndicate Ltd v Gary Elliott Ltd [1981] 1 All ER 619 at 625–​626 per Nourse J. Cf the statement by Kenny J in Canberra International Airport Pty Ltd v Ansett Australia Ltd (2002) 41 ACSR 309 at 318 that the court “has an absolute discretion in applications of this kind as to whether to grant or refuse relief”, which should not be taken to suggest that the discretion is independent of equitable concerns.

148

Melacare International Ltd (in receivership) v Daley Investments Pty Ltd (1999) 9 BPR 17,095 at [16] per Bryson J; Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 at [439]–​[442] per Hollingworth J.

149

Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 at [443]. See, for example, Shiloh Spinners Ltd v Harding [1973] AC 691 at 725 per Lord Wilberforce, at 727–​728 per Lord Simon; Melacare International Ltd (in receivership) v Daley Investments Pty Ltd (1999) 9 BPR 17,095 at [18]–​[39] per Bryson J (where “[t]‌he history of the relationship of lessor and lessee between these parties is one of continued and studied breach of obligations by the plaintiff, and of continued conflict, involving litigation … strongly incline me against any discretionary decision which would have the effect of continuing the relationship and overriding the contractual right to bring it to an end”: at [39]).

398 [11.105] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Relief Against Forfeiture  Chapter  11

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serious breaches of fire standards and had delayed applying for relief.150 Where, conversely, a tenant remedies the breach and pays the lessor’s costs within the set time, and avows not to continue or repeat the breach, relief will ordinarily ensue.151 Yet an unremediated breach may not be fatal to an application, as relief can be granted on conditions that will ensure, despite the breach, that the lease will be observed or at least that the parties are in the position they would have been in had the lease been observed.152 The court’s focus is ultimately directed chiefly at possible remedial measures; those that can be expected to be effective should be accepted,153 but not if the lessee can be expected to continue or repeat the breach.154 The foregoing is not to deny that the lessor’s conduct vis-​à-​vis the lessee, and any windfall the lessor may secure from the forfeiture, can factor into an assessment of where the equities lie. In Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd,155 for instance, the lessee of a caravan park breached a covenant in the lease proscribing additions or alterations without the lessor’s consent. Yet since the commencement of the original lease nearly ten years earlier, the lessee (at its own expense) replaced dwellings on the land with new dwellings, without obtaining the lessor’s consent. The lessor knew of the breach, but continued to accept rent. It then sought to terminate the lease for the breach, the evidence revealing that its motivation was to sell or develop the land at a considerable profit. Palmer J granted relief against forfeiture, in order to avoid the lessor retaining the benefit of the considerable sums that the lessee had expended on improving the lessor’s fixtures on the land. His Honour described this as “precisely the sort of unmerited windfall to which the courts have regard in forfeiture cases … in granting relief”.156 Although the judgment made no reference to the lessor’s acquiescence in the lessee’s breach —​no doubt driven by the prospect of benefit for itself in the new dwellings —​the lessor’s attempt to terminate the lease could have been met by the equitable defence of acquiescence.

150

Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 at [445]–​[476]. Her Honour noted (at [471]) that in cases involving applications for relief against forfeiture of a lease, courts have generally been strict in requiring parties to institute and prosecute their claims expeditiously, citing as an example Sharma v Magistrates’ Court of Victoria (unreported, SC(Vic), Beach J, 18 December 1995) (where in an application brought in the Practice Court two months after the re-​entry notice was served, the plaintiff’s delay in instituting the proceeding for relief against forfeiture was held of itself sufficient to disentitle him to the relief). Cf Pineport Ltd v Grangeglen Ltd [2016] EWHC 1318 (Ch) (relief granted even though the application was delayed, as there was a compelling explanation for the delay).

151

Bathurst (Earl) v Fine [1974] 1 WLR 905 at 908 per Lord Denning MR; Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 at [438] per Hollingworth J.

152

Lontav Pty Ltd v Pineross Custodial Services Pty Ltd (2011) V ConvR ¶54-​805 at [55] per Dixon J. See, for example, Hyman v Rose [1912] AC 623 (where the landlord re-​entered following the tenant’s neglect to comply with a notice to repair, and the tenant offered, as a condition of obtaining relief, to deposit a sum of money to secure the restoration of the premises to their original condition at the end of the lease, the House of Lords considered that deposit appropriate to justify relief).

153

Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [2005] VSC 236 at [444] per Hollingworth J.

154

Melacare International Ltd (in receivership) v Daley Investments Pty Ltd (1999) 9 BPR 17,095 at [14] per Bryson J.

155

Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123.

156

Byron Bay Retirement Villages Pty Ltd v Zandata Pty Ltd [2008] NSWSC 1123 at [50]. On the windfall point, see also Freifeld v West Kensington Court Ltd [2016] 1 P & CR 5 (where, according to Briggs LJ, the trial judge had “wrongly discounted the value of the windfall [of £1m to £2m] which would accrue to the landlord if forfeiture was not relieved, by reference to the growing risk of forfeiture caused by the tenant’s continuing failure to comply with his obligations”: at [66]; Arden LJ (at [43]) noted that “as a matter of principle that the exercise of the court’s wide discretion should not enable the landlord to take advantage of a breach by which he is not irreparably damaged”, before adding (at [47]) that “[t]‌he windfall point is about proportionality”).

[11.105]  399 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

Breaches of non-​assignment covenants [11.110] The conduct of the applicant is scrutinised more closely, and relief is denied

more frequently, in respect of breaches of non-​assignment covenants. As explained by Lord Wilberforce in Shiloh Spinners Ltd v Harding:157 Failure to observe the covenants having occurred, it would be right to consider whether the assignor should be allowed to exercise his legal rights if the essentials of the bargain could be secured and if it was fair and just to prevent him from doing so. It would be necessary … to consider the conduct of the assignee, the nature and gravity of the breach, and its relation to the value of the property which might be forfeited. Established and, in my opinion, sound principle requires that wilful breaches should not, or at least should only in exceptional cases, be relieved against, if only for the reason that the assignor should not be compelled to remain in a relation of neighbourhood with a person in deliberate breach of his obligations.

So even though statute in some jurisdictions precludes relief against breach of a non-​assigning covenant (and also covenants against underletting, parting with possession or disposing of the land leased),158 relief for such a breach may be obtainable in equity in exceptional cases.159 A court may be persuaded to grant relief if the lessor suffered no loss and the assignee was willing and able to fulfil future obligations.160 A usual condition of relief here is an undertaking by the applicant to observe the covenant in future.161

Breaches not the subject of the notice

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[11.115] Where a notice under the statute is issued specifying one breach, a court cannot,

for the purposes of determining whether and on what terms relief should be granted, take into account other breaches outside the notice except in special circumstances.162 Nor does the court ordinarily take into account a breach for which lack of a notice did not allow a right of re-​entry or forfeiture to be enforced by action.163 For example, in Batiste v Lenin,164 very significant breaches of covenant, coupled with a history of non-​payment of rent, led the New South Wales Court of Appeal to find that it would be unjust to the lessor to ignore such breaches in considering whether to exercise its discretion to grant relief, adding that “the lessor should not compelled to remain in a relation of neighbourhood with a lessee in deliberate breach of its obligations”.

Failure to give notice [11.120]  A re-​entry by a lessor without fulfilling the notice requirement prescribed by stat-

ute165 (or by the lease itself) is invalid. In such a case, therefore, no issue of relief against 157

Shiloh Spinners Ltd v Harding [1973] AC 691 at 725 (emphasis supplied). See also Warnocks (1992) Ltd v Queensgate Centre Ltd [1993] 2 NZLR 236 at 242–​246 per Heron J; Canberra International Airport Pty Ltd v Ansett Australia Ltd (2002) 41 ACSR 309 at 319 per Kenny J.

158

Conveyancing and Law of Property Act 1884 (Tas), s 15(6); Property Law Act 1969 (WA), s 81(8)(a).

159

Shiloh Spinners Ltd v Harding [1973] AC 691 at 721–​725 per Lord Wilberforce, at 726–​727 per Lord Simon; Minister for Lands and Forests v McPherson (1990) 22 NSWLR 687 at 691–​693 per Kirby P.

160

Canberra International Airport Pty Ltd v Ansett Australia Ltd (2002) 41 ACSR 309 at 319 per Kenny J.

161

Rose v Spicer [1911] 2 KB 234 at 241–​242 per Cozens-​Hardy MR.

162

Cf Pioneer Quarries (Sydney) Pty Ltd v Permanent Trustee Co of NSW Ltd (1970) 2 BPR 9562 at 9575–​9577 per Hope J.

163

Tutita Pty Ltd v Ryleaco Pty Ltd (1989) 4 BPR 9635 at 9638 per Meagher JA; Batiste v Lenin (2002) 11 BPR 20,403 at [62] per Sheller JA.

164

Batiste v Lenin (2002) 11 BPR 20,403 at [62], [63] per Sheller JA, with whom Giles and Santow JJA concurred.

165

See, for example, Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (2010) 15 BPR 28,563.

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Relief Against Forfeiture  Chapter  11

forfeiture need arise.166 Yet there is older authority suggesting that merely asking for relief against forfeiture is an admission of the breach(es) giving rise to forfeiture.167 Whatever may have once been the case, this no longer appears to be so. In any event, where, as is common, relief is sought in the alternative —​that is, in the alternative that the re-​entry was valid —​it is difficult to view the alternative plea as an admission of forfeiture.168 Even if not expressed in the alternative, it is presumably open to the court to treat the relief application other than as an admission if it finds that the relief is not ultimately required.169

NATURE OF RELIEF AGAINST FORFEITURE Forms of relief [11.125]  An applicant for relief from forfeiture commonly seeks an injunction, an order for

specific performance or an order of the repayment of money (say, where seeking recovery of a deposit or instalments in purchase price). Moreover, the broad interpretation of s 20 of the Australian Consumer Law (see [9.170]), and the reference in s 22 directing the court to assess whether a party was required to comply with conditions not reasonably necessary for the other’s protection (see [9.185]), may dictate that unconscionable conduct for the purposes of the forfeiture doctrine can attract the broad avenues for relief available under the Australian Consumer Law where the transaction is in trade or commerce.170

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[11.130]  Independent of statute, courts of equity are not in any event hamstrung in formu-

lating relief. The judicial attitude is illustrated by the House of Lords’ decision in On Demand Information plc v Michael Gerson (Finance) plc.171 In addition to applying the doctrine outside of the realm of real property, it shows the court’s willingness to grant monetary relief even if the property in dispute has been sold or otherwise disposed to a third party. The case involved finance leases of video and editing equipment, which allowed the lessee, upon the expiry of each lease, to sell the equipment and retain 95% of the proceeds. The leases made the appointment of a receiver to the lessee a repudiatory breach entitling the lessor to terminate. A receiver was appointed to the lessee, and sought a buyer for the lessee’s business, which only had value as a going concern. A prospective purchaser was located, but would only proceed if able to take over the leased equipment. The lessee and receiver applied for and secured an interim order to allow the equipment to be sold forthwith, the proceeds to be held in an escrow account pending the hearing of the action for relief against forfeiture. Lord Millett noted that as the sale of the equipment brought the leases to an end independently of the antecedent forfeiture against which relief was sought, the court could not

166

MI Design Pty Ltd v Dunecar Pty Ltd (2001) NSW ConvR ¶55-​969 at 57,926 per Santow J.

167

Langley v Foster (1909) 10 SR (NSW) 54 at 62 per A H Simpson CJ.

168

Water Wine & Juice Pty Ltd v Konstantopoulos [2010] NSWSC 312 at [82]–​[88] per White J.

169

MI Design Pty Ltd v Dunecar Pty Ltd (2001) NSW ConvR ¶55-​969 at 57,926 per Santow J; International Business College Pty Ltd v Alphacrucis College Ltd [2009] NSWSC 1088 at [40] per Brereton J.

170

See Giles, “New Limitations on Equitable Intervention Against Vendors” (2005) 79 ALJ 122 at 128.

171

On Demand Information plc v Michael Gerson (Finance) plc [2003] 1 AC 368. See Dharmananda, “Relief Against Forfeiture: On Demand On Appeal” (2002) 13 JBFLP 233 (who concludes that the case will “broaden the scope for remedial orders, or schemes for remedies, in the context of forfeiture under finance leases, where things can move quickly”: at 234).

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Equity and Trusts in Australia

technically order relief from forfeiture.172 Yet this did not, in his Lordship’s view, cause the substance of the lessee’s entitlement to relief against forfeiture to dissipate. The relief he had in mind appears from the following statement:173 But the fact that by the time the case was heard the court could no longer give the lessee the particular relief claimed in the writ does not mean that it was bound to dismiss its claim. If (i) the lessee would not have been entitled to the relief claimed in the writ immediately before the sale and (ii) the only reason that the court could not grant that relief was that the equipment had since been sold pursuant to an order of the court which was not intended to affect the parties’ rights, then it should give effect to those rights by making whatever order in relation to the proceeds of sale best reflects them. This is not to ignore the fact that the equipment had been sold or to grant relief as if it had not been sold, but to recognise that the sale was not to affect the parties’ substantive rights, and that substantive rights can be given effect in more than one way.

The sale brought to an end the lessee’s claim to a particular remedy (relief from forfeiture), but not the rights to which such a remedy would have responded. Lord Millett noted that had it been possible to grant relief from forfeiture immediately before the sale, it would have been on terms that all outstanding rentals were paid and that the receivers guarantee payment of future rentals. This, together with what had been established as the best available price for the equipment, were matters to be taken into account in deciding the proportions in which the parties were entitled to the moneys in the escrow account.174 Lord Scott expressed a similar view, remarking that the court being satisfied that an order for relief from forfeiture would have been made had there been no sale, the respective rights that the lessor and lessee would have had in the proceeds of sale should be given effect to by treating the proceeds of the sale as the proceeds of a sale for the purposes of the lease agreement.175 Lords Nicholls and Browne-​ Wilkinson concurred.

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Standing to seek relief [11.135]  In the ordinary case, there are few difficulties on the issue of standing; the intending

purchaser or lessee has standing to seek relief against forfeiture of her or his interest under the relevant contract. Where the rights under the contract have been assigned, the assignee has standing to seek the relief:176 see [3.120]. The position is not so obvious where, rather than the purchaser or lessee, the applicant for relief is a person who has some interest in the property derived through the purchaser or lessee. In Bland v Ingrams Estates Ltd,177 involving a lease subject to a charge in favour of the lessee’s creditor (the equitable chargee), it was the latter who sought relief against forfeiture for the lessee’s non-​payment of rent. The English Court of Appeal held that neither under statute nor in equity could the court entertain a direct claim for relief against forfeiture by a person not entitled to the possession of the land nor having a legal or equitable interest in

172

On Demand Information plc v Michael Gerson (Finance) plc [2003] 1 AC 368 at 381.

173

On Demand Information plc v Michael Gerson (Finance) plc [2003] 1 AC 368 at 381. See also at 375 per Lord Hobhouse.

174

On Demand Information plc v Michael Gerson (Finance) plc [2003] 1 AC 368 at 382. His Lordship held that failing agreement between the parties on those proportions, the matter should be remitted to Chancery Division.

175

On Demand Information plc v Michael Gerson (Finance) plc [2003] 1 AC 368 at 383. His Lordship suggested one outcome could be that 5% of the proceeds of sale go to the lessor and the remainder to the lessee.

176

Old Grovebury Manor Farm Plant Sales & Hire Ltd v W Seymour Ltd (No 2) [1979] 3 All ER 504.

177

Bland v Ingrams Estates Ltd [2001] Ch 767.

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Relief Against Forfeiture  Chapter  11

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it.178 However, as an equitable chargor has implied obligations to take reasonable steps to protect the chargee’s security (see [1.150]), which would include initiating and pursuing an application for relief against forfeiture of the lease, their Lordships reasoned that, under the inherent jurisdiction, this allowed the chargee to join the lessee as a defendant to the action, and then claim relief indirectly in the lessee’s shoes.179 This outcome was seen as analogous to the position as between a beneficiary under a trust and a trustee who fails or neglects to protect the trust estate or the interests of the beneficiary, in which case the beneficiary may join the trustee as a defendant to the action and sue in right of trust in the shoes of the trustee:180 see [24.15], [24.20].

178

Bland v Ingrams Estates Ltd [2001] Ch 767 at 780 per Nourse LJ, at 788 per Chadwick LJ. Cf at 790–​791 per Hale LJ (suggesting that a chargee may have a proprietary interest in the lease as to give standing to seek relief from forfeiture).

179

Bland v Ingrams Estates Ltd [2001] Ch 767 at 780–​781 per Nourse LJ, at 788–​789 per Chadwick LJ.

180

Bland v Ingrams Estates Ltd [2001] Ch 767 at 781 per Nourse LJ, at 789 per Chadwick LJ.

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UNFAIR OUTCOMES

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Chapter 12

Part Performance DOCTRINE OF PART PERFORMANCE Relationship to statutory writing requirements [12.05] The English Statute of Frauds 1677 and its modern equivalents render unenforce-

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able certain agreements not in writing or, in some circumstances, not evidenced in writing. Contracts for the sale of land are the principal type of agreement to which the writing requirements apply.1 In some jurisdictions the enforceability of contracts of guarantee2 and contracts for the sale of goods3 also rest on their manifestation in writing. The Statute of Frauds aimed to make fraud more difficult to perpetrate by means of false claims about promises made. However, its strict terms allowed persons to shelter behind writing requirements to avoid a clear oral agreement. Equity devised the doctrine of part performance to relieve against this prospect.4 Lord Cranworth LC explained its purpose in Caton v Caton:5 [T]‌hough Courts of equity have held themselves bound by [the Statute of Frauds], yet they have in many cases felt themselves at liberty to disregard it when to insist upon it would be to make it the means of effecting instead of preventing, fraud … The ground on which the Court holds that part performance takes a contract out of the purview of the Statute of Frauds is, that when one of two contracting parties has been induced, or allowed by the other, to alter his position on the faith of the contract … there it would be a fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced, or allowed, the person contracting with him to act, and expend his money.

Equity can intervene against its literal terms because the Statute did not make an oral contract illegal or void, simply unenforceable. This intervention depends upon performance of the oral agreement sufficient to satisfy the court of the injustice of its non-​enforcement; it involves a

1

Civil Law (Property) Act 2006 (ACT), s 204; Conveyancing Act 1919 (NSW), s 54A; Law of Property Act 2000 (NT), s 62; Property Law Act 1974 (Qld), s 59; Law of Property Act 1936 (SA), s 26; Conveyancing and Law of Property Act 1884 (Tas), s 36; Instruments Act 1958 (Vic), s 126; WA: Statute of Frauds 1677 (UK), s 4 (which applies as a result of the Law Reform (Statute of Frauds) Act 1962 (WA), s 2). As to the formalities for the creation of trusts of land, see [18.05], [18.10].

2

Law of Property Act 2000 (NT), s 58; Property Law Act 1974 (Qld), s 56; Mercantile Law Act 1935 (Tas), s 6; Instruments Act 1958 (Vic), s 126; WA: Statute of Frauds 1677 (UK), s 4 (which applies as a result of the Law Reform (Statute of Frauds) Act 1962 (WA), s 2).

3

Sale of Goods Act 1896 (Tas), s 9; Sale of Goods Act 1895 (WA), s 4.

4

Yet it would appear that a part performance doctrine existed even before the Statute of Frauds: see Normanby v Devonshire (1697) 2 Freeman 216; 22 ER 1169; Khoury v Khouri (2006) 66 NSWLR 241 at [74] per Bryson JA.

5

Caton v Caton (1866) LR 1 Ch App 137 at 147, 148 (paragraph break omitted). See also Maddison v Alderson (1883) 8 App Cas 467 at 474–​475, 478 per Earl of Selborne LC, at 489 per Lord Blackburn; McBride v Sandland (1918) 25 CLR 69 at 77–​78, 87 per Isaacs and Rich JJ; Cooney v Burns (1922) 30 CLR 216 at 232–​233 per Isaacs J; J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 at 308–​309 per Evatt J; Millett v Regent [1975] 1 NSWLR 62 at 66 per Hutley JA [affd Regent v Millett (1976) 133 CLR 679 at 682–​683]; Steadman v Steadman [1976] AC 536 at 540 per Lord Reid, at 551, 555 per Viscount Dilhorne, at 571 per Lord Salmon. Although issues of part performance generally arise in the context of alleged agreements for an interest in real property, the doctrine is not restricted to agreements of this kind: McManus v Cooke (1887) 35 Ch D 681 at 691, 697 per Kay J; Commonwealth Oil Refineries Ltd v Hollins [1956] VLR 169 at 178.

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Equity and Trusts in Australia

search for evidence to connect the alleged performance with the alleged agreement, so as to “enlarge part performance into complete performance”.6 The court is called upon to enforce an “equity”, independent of the Statute, arising by force of circumstances subsequent to an alleged oral agreement, namely, acts of part performance sufficient to attract its equitable jurisdiction.7 But as an affirmative finding of part performance entitles the court to decree specific performance of the oral agreement8 —​it does not enable an action for common law damages for breach of a contract9 —​the doctrine does not apply unless that agreement would, had it been in writing, have been amenable to an order for specific performance.10 [12.10]  The doctrine of part performance in equity should not be confused with an inquiry

into the part performance of an enforceable contract as a means of assisting in interpreting uncertain terms or in implying a term from a course of dealing.11 In this context part performance is used as an aid to interpretation whereas the equitable doctrine operates in the absence of an enforceable contract to create an entitlement to enforce an agreement. Historically strict approach

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[12.15]  Equity’s concern not to upset a legislative policy that a contract must not be proved

by oral evidence led courts to adopt a stringent test of part performance, casting an onerous burden upon persons seeking specific performance of agreements that did not satisfy statutory formalities. In the leading case, Maddison v Alderson,12 the deceased, who died intestate, induced the appellant to serve him as a housekeeper for years by an oral promise to bequeath the appellant a life estate in his land. The Earl of Selborne LC, delivering the leading speech, saw the relevant authorities as supporting the view that “the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged”.13 Applying this test, the House of Lords ruled that the evidence of the appellant’s service did not unequivocally in its own nature substantiate the alleged agreement. Lord O’Hagan expressed the court’s reasoning best in the following remarks:14 [T]‌hough her long service is consistent with her present case, it is not demonstrative of any contract to give her a life estate she claims. She might unquestionably have remained with her master, in the enjoyment of some present comforts and the expectation of some future provision, though no such contract had been ever dreamt of … Then, as to her service without wages, I repeat that there is no proof of any engagement so to serve, or anything to shew that she might not have demanded and recovered them, at any time, in a Court of law. But, even if the appellant had made such an engagement, she might have done so from motives and with hopes such as those I have indicated, or others of a like kind, strong enough and persuasive

6

J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 at 310 per Evatt J.

7

Cooney v Burns (1922) 30 CLR 216 at 231–​233 per Isaacs J; Jones v Baker (2002) 10 BPR 19,115 at 19,119 per Young CJ in Eq.

8

Khoury v Khouri (2006) 66 NSWLR 241 at [31] per Bryson JA.

9

Penrith Whitewater Stadium Ltd v Lesvos Enterprises Pty Ltd (2007) 13 BPR 24,799 at [43] per Ipp JA, with whom McColl and Campbell JJA concurred.

10

McManus v Cooke (1887) 35 Ch D 681 at 697 per Kay J; Cooney v Burns (1922) 30 CLR 216 at 222 per Knox CJ. As to contracts that are, and are not, amenable to order for specific performance, see [33.20]–​[33.85].

11

See, for example, Re Galaxy Media Pty Ltd (in liq) (2001) 167 FLR 149 at 164, 168 per Santow J.

12

Maddison v Alderson (1883) 8 App Cas 467.

13

Maddison v Alderson (1883) 8 App Cas 467 at 479. See also at 485 per Lord O’Hagan, at 488 per Lord Blackburn.

14

Maddison v Alderson (1883) 8 App Cas 467 at 485–​486. See also at 480–​481 per Earl of Selborne LC, at 490–​491 per Lord Blackburn.

408 [12.10] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Part Performance  Chapter  12

enough to induce her, for the time, to labour gratuitously and without any agreement to give her in return an interest in land.

This strict approach translated to Australian law via McBride v Sandland.15 There the respondent alleged that her father (the appellant) had orally agreed to allow her and her husband to have possession of land during his lifetime, and for the purchase of the property at the latter’s death for £4,167. The respondent led evidence of the following acts of part performance: her and her husband’s entry into possession; her continued possession after her husband’s death; her payments to meet her father’s liability to land tax; and the making of substantial and permanent improvements to the land. Isaacs and Rich JJ followed Maddison v Alderson, outlining the elements necessary to raise the equity as follows:16

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(1) The act relied upon must be unequivocally and in its own nature referable to “some such agreement as that alleged.” That is, it must be such as could be done with no other view than to perform such an agreement … (2)  By “some such agreement as that alleged” is meant some contract of the general nature of that alleged … (3) The proved circumstances in which the “act” was done must be considered in order to judge whether it refers unequivocally to such an agreement as is alleged … (4) It must have been in fact done by the party relying on it on the faith of the agreement, and further the other party must have permitted it to be done on that footing … (5) It must be done by a party to the agreement … These requirements must be satisfied before the actual terms of the alleged agreement are allowed to be deposed to. Further, when those terms are established, it still remains to be shown: —​(6) That there was a completed agreement … (7) That the act was done under the terms of that agreement by force of that agreement.

Applying these criteria, the court held that the taking of possession of land did not constitute sufficient part performance, Isaacs and Rich JJ remarking that “[t]‌here is no evidence showing that anything was done or claimed to be done on the faith of the oral agreement relied on, and there is nothing in that alleged oral agreement requiring or permitting the erection of the improvements, or to which their erection can be referred as constituting part performance of its terms”.17 Loosening of the strict approach in England [12.20] The approach espoused in McBride v Sandland is stricter than what prevailed in

England at general law following Steadman v Steadman.18 The House of Lords held that if the alleged acts of part performance, considered in their surrounding circumstances, point on a balance of probabilities to some contract between the parties, and either showed the nature of, or were consistent with, the oral agreement alleged, there was sufficient part performance of the agreement for the purpose of its enforcement. In the words of Lord Reid:19

15

McBride v Sandland (1918) 25 CLR 69.

16

McBride v Sandland (1918) 25 CLR 69 at 78–​79 (emphasis supplied). See also Cooney v Burns (1922) 30 CLR 216 at 222 per Knox CJ, at 233–​245 per Isaacs J; J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 at 300–​301 per Dixon J, at 318 per McTiernan J; Francis v Francis [1952] VLR 321 at 341 per Smith J; Grummitt v Natalisio [1968] VR 156 at 160–​161 per Gillard J; Regent v Millett (1976) 133 CLR 679 at 683 per Gibbs J; Ogilvie v Ryan [1976] 2 NSWLR 504 at 521–​524 per Holland J; Freedom v AHR Constructions Pty Ltd [1987] 1 Qd R 59 at 71 per McPherson J; Watson v Delaney (1991) 22 NSWLR 358 at 366 per Meagher JA.

17

McBride v Sandland (1918) 25 CLR 69 at 84. See also at 94–​95 per Higgins J, at 98–​101 per Powers J.

18

Steadman v Steadman [1976] AC 536.

19

Steadman v Steadman [1976] AC 536 at 541–​542. See also at 563–​566 per Lord Simon, at 567 per Lord Salmon.

[12.20]  409 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

I am aware that it has often been said that the acts relied on must necessarily or unequivocally indicate the existence of a contract. It may be that we should consider whether any prudent reasonable man would have done those acts if there had not been a contract but many people are neither prudent nor reasonable and they might often spend money or prejudice their position not in reliance on a contract but in the optimistic expectation that a contract would follow. So if there were a rule that acts relied on as part performance must of their own nature unequivocally show that there was a contract, it would be only in the rarest case that all other possible explanations could be excluded. In my view, unless the law is to be divorced from reason and principle, the rule must be that you take the whole circumstances, leaving aside evidence about the oral contract, to see whether it is proved that the acts relied on were done in reliance on a contract: that will be proved if it is shown to be more probable than not.

The main distinction between this and the stricter approach lies in the aligning of the unequivocality test with the civil standard of proof. However, with the enactment of s 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 (UK), which requires, with few exceptions, all contracts for the disposition of land or an interest in it to be made in writing, it appears that, at least in the context of land, the doctrine of part performance no longer applies in the United Kingdom.20 This has seen proprietary estoppel “fill the gap” in cases involving unfulfilled (often testamentary) promises relating to property.21 Current legal position —​confluence with constructive trusts, estoppel and statute?

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[12.25]  The strict approach ostensibly holds sway in Australian courts,22 even in the face of

statements in lower courts querying it.23 In Ogilvie v Ryan,24 for example, the defendant lived in a de facto relationship with the deceased for ten years prior to the latter’s death. She led evidence of the deceased’s proposal to purchase a property for them to live in, in which the defendant would receive a life estate if she cared for the deceased for the rest of his life. The defendant acceded to this proposal, but on the deceased’s death it was discovered that she was not mentioned in the deceased’s will. The deceased’s estate sued to recover possession of the property, which the defendant unsuccessfully resisted on the ground of part performance, Holland J reasoning as follows:25 [I]‌t cannot be postulated of the defendant’s acts that they were unequivocally referable to or indicative of a promise to give her an interest in the deceased’s property. Her change of residence is not of the same significance as an owner letting another into possession of his land.

20

Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567 at 1571 per Peter Gibson LJ; Yaxley v Gotts [2000] 1 All ER 711 at 716–​ 717 per Robert Walker LJ. Cf Griffiths, “Part Performance —​Still Trying to Replace the Irreplaceable?” [2002] Conv 216.

21

See, for example, Jennings v Rice [2003] 1 P & CR 100; Thorner v Major [2009] 1 WLR 776 (see [10.115]); Henry v Henry [2010] 1 All ER 988 (PC).

22

See, for example, Thwaites v Ryan [1984] VR 65 at 87 per Fullagar J; Riches v Hogben [1985] 2 Qd R 292 at 298 per McPherson J; Trifid Pty Ltd v Ratto [1985] WAR 19 at 37 per Rowland J; Butler v Craine [1986] VR 274 at 282 per Marks J; McMahon v Ambrose [1987] VR 817; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 432 per Brennan J; Fletcher v Burns (1997) 12 BPR 22,937 at 22,939–​40 per Handley JA; Epic Feast Ltd v Mawson KLM Holdings Pty Ltd (in liq) (1998) 71 SASR 161 at 171 per Debelle J; Lydon v Ryding [2002] WASC 308 at [15] per McLure J; Khoury v Khouri (2006) 66 NSWLR 241 at [16], [17] per Hodgson JA, at [89]–​[92] per Bryson JA; Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520 at [73] per Buss JA; Re Oliver Brown Pty Ltd (No 2) (2012) 17 BPR 32,253 at [37] per Black J (describing the test to establish part performance as “relatively demanding”).

23

See, for example, Francis v Francis [1952] VLR 321 at 332 per Sholl J; South Coast Oils Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qd R 680 at 692 per Macrossan J; ANZ Banking Group Ltd v Widin (1990) 26 FCR 21 at 37 per Hill J. Cf Millett v Regent [1975] 1 NSWLR 62 at 65 per Hutley JA.

24

Ogilvie v Ryan [1976] 2 NSWLR 504.

25

Ogilvie v Ryan [1976] 2 NSWLR 504 at 524.

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Part Performance  Chapter  12

It is as consistent with her voluntarily continuing her existing association with the deceased as it is with his having promised her continuing rights of occupation of the property after his death. Her performance of services for him without pay are explicable on the grounds of love and affection, and an expectation on her part that she would be rewarded in some way on his death; but not necessarily by receiving an interest in his property which, though an appropriate reward, could not be said more probably to be anticipated than a monetary reward.

Confluence with constructive trusts

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[12.30]  Holland J in Ogilvie v Ryan conceded that the defendant would most likely have suc-

ceeded in part performance had Steadman reflected the law in New South Wales.26 Whatever the merits of the Steadman approach, the scope for the remedial constructive trust to remedy the unconscionable denial of a beneficial interest (see [38.175]) means that many cases that may once have been pleaded in part performance now attract the constructive trust as the principal submission.27 This does not equate the elements that go to establishing constructive trust relief to those necessary to invoke part performance. For constructive trusts it is chiefly the contributions made to the property in question that determine whether a party has behaved unconscionably (see [38.180]–​[38.210]); for part performance the alleged acts of performance of an oral agreement are the main inquiry. These inquiries may well overlap. But it should not be assumed, where there is an overlap, that constructive trust relief will necessarily function to generate an interest in the property in question; relief of a non-​proprietary (that is, compensatory) nature may be a proportionate response.28 Yet in view of some judicial remarks aligning part performance with the prevention of unconscionability,29 the difference between the two doctrines may not be huge.30 That there remains some way to go, though, is evident from the judgment of Holland J in Ogilvie v Ryan, who upheld the defendant’s claim on the basis of constructive trust a decade before developments marking unconscionability as the basis for the remedial constructive trust. More recently, another New South Wales judge has opined that history shows that there is a principle of part performance “wider than the modern principle of part performance [but that] rests on the same basic ground that it would be equitable fraud and against the conscience of a person to take the benefit of a contract and yet not fulfil the burden of it”.31 If indeed part performance is based on notions of equitable fraud and conscience, it may harbour a degree of flexibility as yet untapped in Australian law.

Confluence with estoppel [12.35]  The modern doctrine of estoppel by conduct, discussed in Ch 10, also grounded in

unconscionable conduct, may supply an alternative basis for actions once pleaded on the

26

Ogilvie v Ryan [1976] 2 NSWLR 504 at 524–​525.

27

See Harris, “The Doctrine of Part Performance and the Constructive Trust” (1993–​94) 11 Aust Bar Rev 27.

28

See, for example, Giumelli v Giumelli (1999) 196 CLR 101, discussed at [10.70].

29

See, for example, Steadman v Steadman [1976] AC 536 at 565 per Lord Simon (who characterised as the basis of equity’s intervention for part performance the pleading of statutory writing requirements in circumstances where to do so would be unconscionable); T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 at 109–​110 per Tipping J; Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 at 287 (CA); Fleming v Beevers [1994] 1 NZLR 385 at 391–​392 per Tipping J; Byrne v Mortyn [2008] TASSC 83 at [13] per Blow J; Welsh v Gatchell [2009] 1 NZLR 241 at [79] per Miller J.

30

Cf Frankel, “The Uncertain Doctrine of Part Performance” (2011) 42 VUWLR 37 at 43–​46 (remarking as to the uncertainty underscoring an inquiry into unconscionable conduct in this context).

31

Kymbo Pty Ltd v Paxton Management Pty Ltd (2001) 10 BPR 18,897 at 18,902–​18,903 per Young CJ in Eq.

[12.35]  411 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

ground of part performance.32 This is not to align the elements of part performance to those underlying estoppel  —​there are similarities, though, as many cases of alleged part performance, including the leading cases of Maddison, McBride and Ogilvie, involve reliance on promises or assurances potentially capable of giving rise to actionable representations for the purposes of estoppel —​but to emphasise that, due to commonality in the underlying basis for equity’s intervention in each case, the same facts can give rise to alternative actions.33 For this reason, there is sense in the suggestion that estoppel should always be pleaded in the alternative to part performance.34

Confluence with statute [12.40]  The statutory jurisdiction to alter property interests on the breakdown of de facto

relationships (see [38.165]) has been extended to a broader class of relationships in several jurisdictions. In the Australian Capital Territory and Victoria it extends to personal relationships between two adults in which one provides personal or financial commitment and support of a domestic nature for the material benefit of the other.35 In New South Wales and Tasmania it applies in respect of a relationship between two adults, whether or not related by family, one or each of whom provides the other with domestic support and personal care, albeit in New South Wales limited to where the parties are living together.36 Statute in these jurisdictions may thus provide a vehicle through which legitimate expectations of parties to a relationship outside of marriage or a de facto relationship can be fulfilled without the need to resort to equitable doctrine(s).

EVIDENCE OF PART PERFORMANCE

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What constitutes relevant evidence [12.45]  For probative purposes, acts of part performance are treated as a substitute for a stat-

utory writing requirement. It is this concept of substitute proof that triggered the requirement that acts of part performance, of themselves, without reference to the evidence of the oral contract, point to a contract relating to the property in issue and are consistent with it. So, at the initial stage, one must exclude from consideration evidence of the alleged oral contract between the parties, but look at the act(s) relied upon in the light of the surrounding circumstances as revealed by the remainder of the evidence.37 Once the acts of part performance

32

Cf ANZ Banking Group Ltd v Widin (1990) 26 FCR 21 at 37–​38 per Hill J.

33

See Mulholland, “The Equitable Doctrines of Estoppel and Part Performance” (1989) 7 Otago L Rev 69; Parkinson, “Equitable Estoppel: Developments after Waltons Stores (Interstate) Ltd v Maher” (1990) 3 JCL 50 at 64–​66. The English Law Commission, in recommending that all contracts for the sale of land be in writing, observed that “the courts would use doctrines of estoppel to achieve very similar results where appropriate to those of part performance”: Transfer of Land —​ Formalities for Contracts for Sale etc of Land (No 164, 1987), p 18.

34

Parkinson, “Equitable Estoppel: Developments after Waltons Stores (Interstate) Ltd v Maher” (1990) 3 JCL 50 at 64.

35

Domestic Relationships Act 1994 (ACT), s 3(1) (definition of “domestic relationship”); Relationships Act 2008 (Vic), s 35(1) (definition of “domestic relationship”).

36

Property (Relationships) Act 1984 (NSW), s 5(1) (definition of “domestic relationship”); Relationships Act 2003 (Tas), s 5(1) (definition of “caring relationship”).

37

Maddison v Alderson (1883) 8 App Cas 467 at 479 per Earl of Selborne LC, at 483–​484 per Lord O’Hagan; McBride v Sandland (1918) 25 CLR 69 at 77–​78; Cooney v Burns (1922) 30 CLR 216 at 222, 224 per Knox CJ; Broughton v Snook [1938] Ch 505 at 514–​515 per Farwell J; Francis v Francis [1952] VLR 321 at 331 per Sholl J, at 340, 342 per Smith J; Steadman v Steadman [1976] AC 536 at 541 per Lord Reid, at 559 per Lord Simon; Thwaites v Ryan [1984] VR 65 at 77 per Fullagar J; Riley v Osborne [1986] VR 193 at 198–​199 per Kaye J; Butler v Craine [1986] VR 274 at 282 per Marks J.

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Part Performance  Chapter  12

establish that there must have been a contract of the kind alleged, then its actual terms become admissible, despite the statutory writing requirements.38 Yet the reality may prove otherwise, as the court can ascertain the terms of the alleged contract from the pleadings. Also, it is difficult for a court to look at acts of part performance first before deciding whether they unequivocally point to the contract alleged unless it takes notice, at least in general terms, what contract is alleged. This has led one judge to “hear the evidence as to the alleged contract as part of the evidence in the trial going to all the issues, rather than to engage in an arcane bifurcation of the evidence”.39 The concept of substitute proof also serves to deny acts merely introductory, preparatory or ancillary to the agreement,40 or performed before the formation of the oral agreement,41 as evidence of part performance. In the classic formulation of the doctrine of part performance, the Earl of Selborne LC stated that “the acts relied on must be unequivocally, and in their own nature, referable to some such agreement as alleged”.42 Subsequent authority has interpreted this statement to mean that the act(s) in question need not point to the “very” contract alleged, but to “the existence of an agreement between the parties falling within the general class to which the agreement alleged belongs”.43 So if the plaintiff proves that he or she carried out acts in part performance of some contract to which the defendant was a party while the latter stood by, it becomes inequitable to allow the latter to plead, in exoneration of reciprocal obligations, that any such contract was unenforceable by reason of statutory writing requirements, particularly as few acts of part performance point exclusively to a particular contract, least of all a particular multi-​term contract.44

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[12.50] The relevant acts done in execution of the agreement are not confined to those

required by the agreement, but extend to those authorised by it.45 Were it necessary that acts of part performance be done in compliance with a requirement of the contract, Gibbs J in Regent v Millett46 observed that “the utility of the equitable doctrine would be reduced to vanishing point”. So if, for instance, a vendor allows a purchaser to take possession, the 38

Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 at 181 per Wilmer LJ; Millett v Regent [1975] 1 NSWLR 62 at 68 per Hutley JA; Steadman v Steadman [1976] AC 536 at 564 per Lord Simon; Boutique Balmoral Ltd v Retail Holdings Ltd [1976] 2 NZLR 222 at 225 per Mahon J.

39

Townsend v Townsend [2006] NTSC 7 at [51] per Mildren J.

40

Whitbread v Brockhurst (1784) 1 Bro CC 404 at 412; 28 ER 1205 at 1209 per Lord Thurlow LC; Cooney v Burns (1922) 30 CLR 216 at 233 per Isaacs J, at 240 per Higgins J; Francis v Francis [1952] VLR 321 at 325 per O’Bryan J, at 340 per Smith J; Grummitt v Natalisio [1968] VR 156 at 161 per Gillard J; Steadman v Steadman [1976] AC 536 at 554 per Viscount Dilhorne; Boutique Balmoral Ltd v Retail Holdings Ltd [1976] 2 NZLR 222 at 226 per Mahon J; Lensen v Lensen (1984) 14 DLR (4th) 611 at 623–​624 (CA(Sask)).

41

O’Rourke v Hoeven [1974] 1 NSWLR 622 at 625 per Glass JA; Boutique Balmoral Ltd v Retail Holdings Ltd [1976] 2 NZLR 222 at 226 per Mahon J.

42

Maddison v Alderson (1883) 8 App Cas 467 at 479 (emphasis supplied).

43

Francis v Francis [1952] VLR 321 at 340 per Smith J. See also at 331 per Sholl J; Thompson v Guaranty Trust Co of Canada (1973) 39 DLR (3d) 408 at 415 (SCC); Lensen v Lensen (1984) 14 DLR (4th) 611 at 626 (CA(Sask)).

44

Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 at 189 per Upjohn LJ, at 181 per Willmer LJ; McMahon v Ambrose [1987] VR 817 per Marks J; Steadman v Steadman [1976] AC 536 at 546 per Lord Morris, at 553 per Viscount Dilhorne, at 562 per Lord Simon, at 568–​570 per Lord Salmon; Lensen v Lensen (1984) 14 DLR (4th) 611 at 624–​626 (CA(Sask)); Darter Pty Ltd v Malloy [1993] 2 Qd R 615 at 622 (FC).

45

McBride v Sandland (1918) 25 CLR 69 at 84 per Isaacs and Rich JJ; Pejovic v Malinic [1960] SR (NSW) 184; Lensen v Lensen (1984) 14 DLR (4th) 611 at 627–​628 (CA(Sask)); Riley v Osborne [1986] VR 193 at 200–​201 per Kaye J. An excellent interjurisdictional account of the relevant issues in this context is found in the judgment of Tipping J in T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 at 101–​108.

46

Regent v Millett (1976) 133 CLR 679 at 683.

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Equity and Trusts in Australia

giving and taking of that possession may amount to part performance notwithstanding that under the contract the purchaser was entitled rather than bound to take possession. In each case, though, the acts relied upon must be themselves acts in performance of the contract, not merely acts in reliance on or enable by it.47 Were these latter acts to be probative of part performance, the doctrine would become in essence the assertion of an estoppel.48 [12.55]  Below are discussed two of the acts most commonly pleaded as part performance: tak-

ing possession of property and the payment of money. It should be understood that a single act is unlikely to meet the strict threshold of part performance; it is most often the combination of several acts of part performance that gives weight to the part performance relied upon. The mere multiplicity of distinct acts, none of which separately fulfils the necessary requirement, will not, however, change the essential nature of any of them. Taking possession

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[12.60] There is case authority for the proposition that acknowledged possession by a

stranger of the property of another (usually land) is explicable only by an agreement, that is, as evidence of an antecedent contract.49 An Australian High Court judge has, to this end, gone so far as to say that “there is always in part performance the actual transfer by enjoyment, directly or indirectly, of some right of ownership which the legal title would confer”.50 It would be fraud on the stranger, it is reasoned, to take possession on the faith of an agreement, but then be turned out of possession on the ground that there was no agreement.51 In Regent v Millett,52 for example, the plaintiffs alleged the existence of an oral contract for the sale of land between themselves and the vendors, who were the female plaintiff’s parents. The plaintiffs relied on the following acts as part performance on their behalf to resist eviction from the land: the taking of possession of the property; the carrying out of repairs, renovations and improvements to it; and the making of mortgage repayments. The High Court considered that the giving and taking of possession by itself was sufficient part performance, without resort to the other evidence. Although this may represent the correct result, the court’s reliance on the fact of possession by itself appears inconsistent with its earlier decision in Maiden v Maiden.53 Maiden held that, where the person in possession is not a stranger, for instance, the child of the legal owner, the inference of antecedent agreement of which the possession is in part performance is weaker. In cases of this kind the court perceived it as more difficult to establish that possession is unequivocally referable to an agreement to confer an equitable interest to the person in possession, the fact of possession being amenable to other explanations. It is perhaps better, therefore, to view Regent as a decision based upon acts of part performance beyond merely the giving and taking of possession. Such an approach sits well with subsequent authority.

47

Meshumar v Otmy [2018] NSWSC 125 at [424] per Robb J.

48

T A Dellaca Ltd v PDL Industries Ltd [1992] 3 NZLR 88 at 102, 108–​109 per Tipping J.

49

Maddison v Alderson (1883) 8 App Cas 467 at 480 per Earl of Selborne LC; McManus v Cooke (1887) 35 Ch D 681 at 697 per Kay J; Francis v Francis [1952] VLR 321 at 330–​331 per Sholl J; Regent v Millett (1976) 133 CLR 679 at 682 per Gibbs J; Riches v Hogben [1985] 2 Qd R 292 at 298 per McPherson J; Darter Pty Ltd v Malloy [1993] 2 Qd R 615 at 622–​623 (FC).

50

Cooney v Burns (1922) 30 CLR 216 at 235 per Isaacs J (emphasis in original).

51

Wilson v West Hartlepool Railway Co (1865) 2 De GJ & S 475 at 492–​493; 46 ER 459 at 466 per Turner LJ.

52

Regent v Millett (1976) 133 CLR 679.

53

Maiden v Maiden (1908) 7 CLR 727.

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Part Performance  Chapter  12

For instance, in Khan v Khan,54 Barrett J remarked that where parties have agreed a price and general terms for the sale and purchase of land, and proceed in the normal way towards an exchange of contracts, the expectation that they do not intend to enter into any legally binding oral agreement in advance of exchange of contracts is particularly strong, and so even the transfer of possession will not suffice as part performance. [12.65]  Certainly the sharing of possession of property with its legal owner is by itself most

unlikely to be unequivocally referable to an agreement to confer some beneficial interest.55

Mere possession of title deeds

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[12.70]  As acts done to satisfy the doctrine of part performance must be done in execution of the agreement alleged, the mere drawing and signing of a conveyance (general law land) or transfer (Torrens land) are not part execution of the substance of the contract. To this end, the High Court in Cooney v Burns56 held that the handing over of title deeds for the preparation of a conveyance, and its subsequent preparation, are not in themselves unequivocally referable to an agreement to sell the land, but are introductory to the performance of the agreement. Nor is the deposit of title deeds necessarily equivocal evidence of an intention to create a security interest in the nature of an equitable mortgage.57 This does not mean that the delivery of the certificate of title to land cannot amount to part performance of an agreement for its purchase, or the creation of a security interest. Sholl J addressed this issue in Francis v Francis, opining that:58 … as between strangers at all events, the delivery of a certificate of title to land is unequivocally referable to some such contract as a contract of sale of the land, within the meaning of the authorities … But … such a delivery is not unequivocally so referable as between a mother and her son, unless more appears, for example, that the delivery was made concurrently with a transfer expressed to be made on a sale, which by some accident the mother had omitted to execute, or, perhaps, was made in conjunction with a payment of the approximate market value of the land by the son to the mother. And … such a delivery is not, even if made in performance of the agreement, such as to affect the subject-​matter of the agreement, within the meaning of the authorities, unless the circumstances of the delivery in performance of the contract are proved and it is shown that the delivery did affect, in those circumstances, the right of ownership, in relation to the possession, use or title of the land.

Possession as part performance of an oral lease [12.75]  Where statute requires a lease to be in writing, possession by the alleged lessee of the

property in question may constitute part performance of an oral lease agreement. Again, the issue is whether possession is unequivocally referable to an agreement to lease the property. Entering into possession of premises and paying rent is usually sufficient evidence of part performance of an agreement for a lease. So in McMahon v Ambrose,59 Marks J held that

54

Khan v Khan (2004) 62 NSWLR 229 (where it was held that the plaintiffs moved into the property not because of an oral contract for sale but pursuant to an oral licence agreement in contemplation of a contract for sale to be created by an exchange of contracts in the normal way: at [51]).

55

Riches v Hogben [1985] 2 Qd R 292 at 298 per McPherson J.

56

Cooney v Burns (1922) 30 CLR 216 at 236–​237 per Isaacs J, at 240–​242 per Higgins J, at 243 per Gavan Duffy J, at 244 per Starke J. See also Francis v Francis [1952] VLR 321 at 324–​326 per O’Bryan J.

57

Ex parte Whitbread (1812) 19 Ves Jun 209 at 212; 34 ER 496 at 497 per Lord Eldon LC; Theodore v Mistford Pty Ltd (2005) 221 CLR 612 at [28] (FC). As to equitable mortgages by the deposit of title deeds, see [1.75].

58

Francis v Francis [1952] VLR 321 at 333. See also at 341, 343–​344 per Smith J; Cooney v Burns (1922) 30 CLR 216 at 224 per Knox CJ.

59

McMahon v Ambrose [1987] VR 817.

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Equity and Trusts in Australia

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receiving one month’s rent and authorising the assignee to obtain the keys to the premises was sufficient part performance of an agreement to assign a lease. But merely to remain in possession at the same rent and on the same conditions upon the expiry of the term of a written lease may be equivocal as to an agreement to extend the term of the original lease; it could, after all, be explained by the lessee’s holding over.60 It may be otherwise if the rent is increased and/​or there is evidence that the conditions of the lease are varied.61 For example, in Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd,62 involving the issue of a lease that did not meet the statutory formalities, the critical acts of the alleged tenant (the appellant) were its continued possession of the premises after the respondent became the registered proprietor (the original lessor having sold the premises to the respondent), and its payment to the managing agent of a rent increased in accordance with a rent review clause in the former lease, as well as water and council rates calculated in accordance with a provision in that lease. Buss JA saw these acts as “consistent only with having been paid in discharge of an obligation under an agreement to lease for a substantial term (as distinct from a tenancy at will or a periodic tenancy)”.63 Specific performance was accordingly ordered. The circumstances surrounding the grant of possession are potentially of considerable significance to the part performance issue. Where, for instance, the evidence shows the grant of possession was for a limited purpose or a limited time, inconsistent with the alleged lease agreement, a part performance claim cannot succeed. In Competitive Funerals Pty Ltd v Gurmit Singh Rai,64 the defendant’s act in giving the plaintiff a key to the premises in question was found to be merely preparatory to the possible conclusion of a future agreement for lease. This act, according to Lloyd AJ, could be explained other than as evidencing an existing agreement for lease, and so by itself it could not substantiate part performance of any such lease. That the plaintiff made no payments of rent or bond, or alterations to the premises pursuant to the alleged agreement to lease, confirmed this finding. Payment of money [12.80]  The mere payment or expenditure of money, even of the whole purchase money of

property, has not traditionally been seen as a sufficient act of part performance. The primary reason for this, explained the Earl of Selborne LC in Maddison v Alderson,65 is that “the payment of money is an equivocal act, not (of itself), until the connection is established by parol

60

Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520 at [79] per Buss JA, at [176], [195] per Le Miere AJA.

61

Wills v Stradling (1797) 3 Ves Jun 378; 30 ER 1963; Nunn v Fabian (1865) 1 LR Ch App 35 at 40–​41 per Lord Cranworth LC; McManus v Cooke (1887) 35 Ch D 681 at 693 per Kay J; Miller & Aldworth Ltd v Sharp [1899] 1 Ch 622 at 623–​626 per Byrne J; Strachan & Co Ltd v Lyall & Sons Pty Ltd [1953] VLR 81 at 82–​83 per Sholl J; Commonwealth Oil Refineries Ltd v Hollins [1956] VLR 169 at 179 per Sholl J; Kalnenas v Kovacevich [1961] WAR 188 at 193 per Jackson SPJ; Darter Pty Ltd v Malloy [1993] 2 Qd R 615 at 622–​623 (FC); Mahoe Buildings Ltd v Fair Investments Ltd [1994] 1 NZLR 281 at 287–​288 (CA); Laserbem Pty Ltd v Gainsville Investments Pty Ltd [2004] VSC 62 at [54] per Kaye J. Cf Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 at 181 per Willmer LJ (where it was held that the acts of a tenant in leaving one set of premises and entering into possession of another was sufficient evidence of part performance to make an oral agreement for a life tenancy enforceable in equity notwithstanding that it was also consistent with an ordinary periodic tenancy determinable on notice).

62

Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520.

63

Lighting by Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520 at [85]. See also at [198]–​[202] per Le Miere AJA.

64

Competitive Funerals Pty Ltd v Gurmit Singh Rai [2005] NSWSC 1171 at [157]–​[159].

65

Maddison v Alderson (1883) 8 App Cas 467 at 479.

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Part Performance  Chapter  12

testimony, indicative of a contract”, a view endorsed by Australian courts.66 Money can pass between two parties —​even at arm’s length —​for a variety of reasons: it may be a gift, a loan or for some other transaction. However, in Steadman v Steadman,67 the House of Lords questioned the absoluteness of the rule. Lord Simon best expressed the argument:68

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[N]‌either of the reasons put forward for the rule justified it as framed so absolutely. The first was that a plaintiff seeking to enforce an oral agreement to which the statute relates needs the aid of Equity: and Equity would not lend its aid if there was an adequate remedy at law. It was argued that a payment could be recovered at law, so there was no call for the intervention of Equity. But the payee might not be able to repay the money (he might have gone bankrupt), or the land might have a particular significance for the plaintiff … or it might have greatly risen in value since the payment, or money may have lost some of its value. So it was sought to justify the rule, alternatively, on the ground that payment of money is always an equivocal act: it need not imply a pre-​existing contract, but is equally consistent with many other hypotheses. This may be so in many cases, but it is not so in all cases. Oral testimony may not be given to connect the payment with a contract; but circumstances established by admissible evidence (other acts of part performance, for example) may make a nexus with a contract the probable hypothesis.

Recognition that the equivocal nature of the acts of payment or expenditure of money could be remedied by adducing evidence of other acts of part performance appears an admission that, of themselves, the former acts do not constitute sufficient part performance. Even if not so construed, it is rare for an allegation of part performance to be based solely on evidence of a payment of money. In most instances evidence in addition to payment would be tendered to support the claim. For example, in Welsh v Gatchell,69 the plaintiff (W) entered into an oral agreement to purchase land belonging to the defendant (G). The agreement stipulated that G would subdivide the land, although W was to be responsible for expenses relating to the surveyor, engineer, valuers, legal fees, resource consent fees and reserve fund contribution. A faxed confirmation was forwarded to W, who confirmed its contents by telephone, but neither party signed the fax. W then completed an agreement on a real estate form, signed it and forwarded it, along with a cheque for the deposit, to G. This form, which differed but not substantially from the fax, was also never signed. G banked the deposit cheque. The subdivision proceeded as agreed, following which the value of the land increased significantly. When G died his estate advised W’s solicitor that it did not wish to proceed. Although Miller J saw “payment of the deposit specified in the agreement [as] an unequivocal act of part performance” in the circumstances, that this was informed by the other supporting evidence of part performance is evident from the following extract from the judgment:70 So far as the other steps are concerned, the contract provided that [W]‌would pay the costs of subdivision, including engineer and Council reserve fund fees. It did not provide that [W] would instruct the firms concerned, although the evidence is that [W] did instruct some of them

66

See, for example, Cooney v Burns (1922) 30 CLR 216 at 222–​223, 226–​227 per Knox CJ; Jones v Peters [1948] VLR 331 at 336–​337 per Herring CJ; Grummitt v Natalisio [1968] VR 156 at 161–​162 per Gillard J; Harlow v Mitchell [1970] QWN 27; Riches v Hogben [1985] 2 Qd R 292 at 298 per McPherson J; ANZ Banking Group Ltd v Widin (1990) 26 FCR 21 at 34 per Hill J; Shawyer v Amberday Pty Ltd (in liq) (2001) 10 BPR 18,869 at 18,883 per Bryson J (alleged agreement to grant a mortgage not substantiated by the mere execution of an imperfect mortgage document and the payment of interest); Khoury v Khouri (2006) 66 NSWLR 241 at [89]–​[92] per Bryson JA; Meshumar v Otmy [2018] NSWSC 125 at [433]–​[436] per Robb J.

67

Steadman v Steadman [1976] AC 536.

68

Steadman v Steadman [1976] AC 536 at 565 (emphasis supplied). See also at 541 per Lord Reid, at 570 per Lord Salmon.

69

Welsh v Gatchell [2009] 1 NZLR 241.

70

Welsh v Gatchell [2009] 1 NZLR 241 at [79].

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Equity and Trusts in Australia

and kept [G] informed of developments. However, [W] did pay the engineer’s fee and there was no dispute that his work was needed to complete the subdivision. [W] also paid the valuer’s fee on request by [G]. These were also steps in the performance of the contract, and they indicate on the balance of probabilities that a contract was in existence. [12.85] Similarly, an advance of money and demand for its repayment do not support a

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promise to charge land with the obligation to repay the debt.71 Nor is an indication by a debtor of a willingness to sell property to raise the money to repay the loan an indication that the property was charged with the repayment. It may be different if the creditor goes into possession of the land to secure repayment. For instance, in Francis v Francis,72 there was an agreement for a loan, an advance of money, documents of title delivered to the lender and an oral agreement made to give a legal mortgage as security. This proved sufficient to amount to acts of part performance, but the critical feature was the delivery of documents of title. And in Ciaglia v Ciaglia,73 White J held that the plaintiff’s execution of a transfer of his land, coupled with his repayment of the moneys paid to him on the taking of the transfer with interest, were acts unequivocally referable to an agreement for the grant of a mortgage. This conclusion was supported by the further acts of part performance by the plaintiff in carrying out repairs and renovations to the property with the defendant’s knowledge.

71

Dinh v Dang [2007] QSC 3 at [19] per Chesterman J.

72

Francis v Francis [1952] VLR 321.

73

Ciaglia v Ciaglia (2010) 269 ALR 175 at [102].

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Chapter 13

Penalty Clauses BACKDROP AND CONTEXT [13.05]  The basic tenet of freedom of contract dictates that parties to a contract may pre-​

estimate the loss they believe that a breach of contract will cause, and agree via the terms of their contract for a measure of damage to be payable on that breach (a “liquidated damages clause”). The effect of such a clause, assuming it is enforceable, is that the innocent party may recover the amount of the liquidated damages and only that amount upon breach of the contract by the other party; whether the actual loss is greater than or less than the contractual amount, the innocent party is entitled to the contractual amount. This has procedural advantages. Proceedings may be by specially endorsed writ. Evidence of the contract, breach, remoteness and market value is obviated where the claim is in debt. Similarly, the duty to mitigate does not apply to a claim in debt. Such a term is enforceable if the sum stipulated represents a genuine pre-​estimate of the loss stemming from the breach.

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[13.10]  Although the common law gave effect to the parties’ agreement to this end, equity

characterised a clause of this kind as a “penalty”, and refused to enforce it, if it did not represent a genuine pre-​estimate of the relevant loss. Equity’s intervention was traceable to its willingness to restrain the enforcement at common law of penal bonds1  —​namely bonds providing for the payment of a sum of money upon the non-​payment of principal and interest due under another instrument —​which it extended to deal with penal stipulations in simple contracts. In time, though, the common law began to emulate relief in equity in this context by expanding the doctrine of assumpsit, thereby avoiding the expense and time needed for a separate suit in equity. Its genesis, and nature, nonetheless remains equitable, and it is not a doctrine that has been superseded by, or even subsumed into, the common law.2 Flowing from the above, the essence of a penalty, it was often said, is a payment of money (or a transfer of property)3 stipulated as in terrorem —​a condition intended to frighten or intimidate —​of the party in breach. It had been described “a punishment for non-​observance of a contractual stipulation [consisting] of the imposition of an additional or different liability upon the breach of the contractual stipulation”.4

1

An historical account to this end is found in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [33]–​[45] (FC); Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [4]‌–​[11] per Lords Neuberger and Sumption. See further Simpson, “The Penal Bond with Conditional Defeasance” (1966) 82 LQR 392.

2

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [62] (FC).

3

As to the applicability of the penalty doctrine to the transfer of property, see Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507 at 519 per Mason J, at 524 per Jacobs J; Jobson v Johnson [1989] 1 WLR 1026 at 1034–​1035 per Dillon LJ, at 1041–​1042 per Nicholls LJ; Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 at 555 per Handley JA; Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 at [21], [22] (FC); Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [13] (FC).

4

Legione v Hateley (1983) 152 CLR 406 at 445 per Mason and Deane JJ.

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Equity and Trusts in Australia

[13.15]  Two senior English judges have recently branded the penalty doctrine “an ancient, haphazardly constructed edifice which has not weathered well”, and indeed doubted that “the courts would have invented the rule today if their predecessors had not done so three centuries ago”.5 To the extent that equity intervenes to strike down contractual clauses as penalties, the doctrine dilutes freedom of contract.6 A related concern is that it “promotes uncertainty in commercial dealings as the contracting parties may not be able to foresee the judges’ value judgment on whether a particular provision is exorbitant or unconscionable”.7 There was also the concern that the doctrine could be circumvented by drafting the trigger event as other than a contractual breach, although in Australia at least this has been overcome by its extension outside the breach scenario (while concurrently raising other challenges): see [13.90]. Notwithstanding concerns surrounding the penalty doctrine, judges have proven disinclined to outright reject it. This is in part because of its pervasiveness not only in the common law tradition but across the western world,8 and its longstanding antecedents in English law,9 coupled with subsisting “significant imbalances in negotiating power in the commercial world”.10 The above concerns have nonetheless disinclined judges from extending the penalty doctrine,11 but maintain it “within narrow and clear boundaries”.12 The flow of recent authority —​in superior courts in England, Australia and New Zealand —​has in any case conspired to constrain the available scope for relief against penalties, especially in the commercial environment.

FOUNDATION FOR RELIEF

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[13.20]  Lord Dunedin’s statement in Dunlop Pneumatic Tyre Co Ltd v New Garage and

Motor Co Ltd13 that a sum is a penalty “if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have flowed from the breach” has, even though it was uttered over a century ago and was not explicitly endorsed by the other judges in the case, proven most influential. It has achieved “the status of a quasi-​statutory code”,14 despite his Lordship’s broader remarks being phrased in less than categorical terms. This test has spawned, it has been said, “countless attempts by parties alleging penalty to contrast the payment required on

5

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [3]‌per Lords Neuberger and Sumption.

6

Makdessi v Cavendish Square Holdings BV [2014] BLR 246 at [44] per Christopher Clarke LJ, with whom Tomlinson and Patten LJJ concurred (“a blatant interference with freedom of contract”); Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [33] per Lords Neuberger and Sumption.

7

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [259] per Lord Hodge.

8

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [37] per Lords Neuberger and Sumption, at [263] per Lord Hodge.

9

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [162] per Lord Mance (who, responding to the argument that the doctrine ought to be abolished, stated that “there would have to be shown the strongest reasons for so radical a reversal of jurisprudence which goes back over a century in its current definition and much longer in its antecedents”).

10

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [262] per Lord Hodge.

11

See, for example, Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1447 per Diplock LJ; Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130 at [30] per Evans LJ, at [58] per Hoffmann LJ; Lansat Shipping Co Ltd v Glencore Grain BV [2009] 1 CLC 379 at [59] per Blair J; Andrews v Australia and New Zealand Banking Group Ltd (2011) 211 FCR 53 at [78] per Gordon J.

12

Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292 at [159] per Allsop P.

13

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 87.

14

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [22] per Lords Neuberger and Sumption.

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Penalty Clauses  Chapter  13

default with the alternative remedy of damages for breach that might be found absent the clause”.15 When recently addressed by England and Australia’s highest courts, and the New Zealand Court of Appeal, the respective judges found little to question the “extravagant and unconscionable” language, except to note that, as explained below, it set a high threshold for judicial intervention. To this end, there is little doubt that equity’s intervention via the penalty doctrine remains focused on unfairness of the relevant outcome. What is, after all, being targeted is a clause that prescribes an “extravagant and unconscionable amount”. There is no explicit inquiry here into the conduct of a contracting party, but instead into the contractual terms. Hence the observation by a New Zealand court that “[e]‌quitable relief for penalties logically should be viewed now through the modern lens of unconscionability”16 should be seen as referring to substantive unconscionability as opposed to equity’s traditional focus on procedural unconscionability.17

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[13.25] Where the judges digressed from Lord Dunedin’s formulation was in comparing it

to the “greatest loss that could conceivably be proved to have flowed from the breach”, in its place favouring a comparison with the “innocent” party’s legitimate interest in enforcing the clause in issue. This does not serve to oust the relevance of his Lordship’s comparison, but to locate it only as part of a broader inquiry.18 According to the relevant Australian decision, Paciocco v Australia and New Zealand Banking Group Ltd,19 what underscores the penalty doctrine is that a provision that has its sole or predominant purpose to punish a contract breaker is contrary to public policy. The reference to punishment, harking to the in terrorem notion pervading the authorities, arguably characterises what marks a clause as “extravagant and unconscionable”. Kiefel J in Paciocco adopted the language of Lords Neuberger and Sumption in the core English decision in Cavendish Square Holdings BV v Makdessi,20 identifying the inquiry as whether the substituted obligation is “out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation”.21 Her Honour also cited from the Full High Court’s earlier decision in Ringrow Pty Ltd v BP Australia Pty Ltd,22 characterising

15

Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 at [76] per Kós J (CA). See also Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [31] per Lords Neuberger and Sumption (remarking that “the law relating to penalties has become the prisoner of artificial categorisation, itself the result of unsatisfactory distinctions: between a penalty and genuine pre-​estimate of loss, and between a genuine pre-​estimate of loss and a deterrent”, which originate in an over-​literal reading of Lord Dunedin’s formulation).

16

Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 at [69] per Kós J (CA).

17

AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 per Clarke JA. Cf Lanyon, “Equity and the Doctrine of Penalties” (1996) 9 JCL 234 at 237–​242 (noting that it may be difficult to deprive the doctrine of any procedural aspects of unfairness).

18

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [160] per Gageler J, at [254] per Keane J; Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 at [96] per Kós J (CA).

19

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [17], [22] per Kiefel J, at [157]–​[165] per Gageler J, at [221], [253], [254] per Keane J.

20

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [32]. Lord Hodge phrasing of the relevant inquiry in terms of whether the substituted obligation “is exorbitant or unconscionable when regard is had to the innocent party’s interest in the performance of the contract” (at [255]) appears to be directed to the same end.

21

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [54].

22

Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 at [32] (FC). Their Honours had earlier noted that the law relating to penalties requires that the money stipulated to be paid, or the property stipulated to be transferred, on breach produce for the payee or transferee “advantages significantly greater” than those that would flow from a genuine pre-​estimate of damage: at [27].

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Equity and Trusts in Australia

the phrase “extravagant and unconscionable” as indicating not merely a lack in proportion, but an amount “out of all proportion”.23 Its link with punishment was captured by Keane J’s remark that “[o]‌nly in cases where gross disproportion is such as to point to a predominant punitive purpose have agreed payments payable on breach of contract been struck down as penalties”.24 [13.30] Approaching the law in this fashion involved a substantial endorsement of what

had been espoused in Cavendish, where Lord Hodge explained that “the criterion of exorbitance or unconscionableness should prevent the enforcement of only egregious contractual provisions”.25 The point saw elaboration in the following remarks of Lords Neuberger and Sumption:26

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The real question when a contractual provision is challenged as a penalty is whether it is penal, not whether it is a pre-​estimate of loss. These are not natural opposites or mutually exclusive categories. A damages clause may be neither or both. The fact that the clause is not a pre-​estimate of loss does not therefore, at any rate without more, mean that it is penal. To describe it as a deterrent (or, to use the Latin equivalent, in terrorem) does not add anything. A deterrent provision in a contract is simply one species of provision designed to influence the conduct of the party potentially affected. It is no different in this respect from a contractual inducement. Neither is it inherently penal or contrary to the policy of the law. The question whether it is enforceable should depend on whether the means by which the contracting party’s conduct is to be influenced are “unconscionable” or (which will usually amount to the same thing) “extravagant” by reference to some norm.

It follows that in terrorem should be viewed from the perspective of punishment rather than deterrence per se, though this is not to deny the link between the two. After all, many contractual provisions of a coercive nature have some deterrent aim, namely to encourage a contracting party to perform her or his obligations, but are not for this reason alone illegitimate. As noted above the relevant threshold is punctuated by aligning judicial intervention with what is “extravagant and unconscionable”, or “out of all proportion”.27 [13.35]  Paciocco v Australia and New Zealand Banking Group Ltd28 concerned a fixed late

payment fee provision in credit card accounts provided by the respondent bank, equating to either $20 or $35 (in addition to interest). At first instance, the fee was held to be penal because it bore no relation to the bank’s direct cost of recovering the outstanding amounts. But on appeal to the Full Court of the Federal Court, and then to the High Court, the penalty characterisation was vacated. Focusing on the bank’s commercial interests, evidence before

23

See Lord Hope, “The Law on Penalties —​A Wasted Opportunity?” (2016) 33 JCL 93 at 105 (who viewed the phrase “out of all proportion” as “a neat way of explaining what the ancient words ‘extravagant, exorbitant or unconscionable’ really mean”).

24

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [221]. See also at [164] per Gageler J (“The relevant indicator of punishment lies in the negative incentive to perform being so far out of proportion with the positive interest in performance that the negative incentive amounts to deterrence by threat of punishment”).

25

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [266].

26

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [31]. See also at [152] per Lord Mance (“What is necessary in each case is to consider, first, whether any (and if so what) legitimate business interest is served and protected by the clause, and, second, whether, assuming such an interest to exist, the provision made for the interest is nevertheless in the circumstances extravagant, exorbitant or unconscionable”), at [255] per Lord Hodge (identifying “the correct test for a penalty [a]‌s whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party’s interest in the performance of the contract”).

27

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [248] per Lord Hodge; Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 at [97] per Kós J (CA).

28

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525.

422 [13.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Penalty Clauses  Chapter  13

the High Court revealed that late payments adversely affected the bank’s economic interests through added operational costs, loss provisioning and regulatory capital costs. When viewed in this context, the fee was not, in its quantum, grossly disproportionate so that its sole or predominant purpose was punitive.29 Keane J elaborated on the commercial context of the relevant dealings as follows:30

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The fixing of risk and reward on each side of each transaction reflected the circumstance that it was one of many transactions and that the very multiplicity of these transactions was a factor bearing upon the pricing of each facility to each of many customers. The circumstance that the value of an increase in credit risk may be difficult to assess is a consideration which tends against an affirmative conclusion that the stipulation is to be characterised as a punishment. That consideration gains added force where the creditor is a bank which, as such, is exposed to the risk that many borrowers may default at one time in circumstances unforeseen at the time of the original arrangements.

The recent decisions of the United Kingdom Supreme Court decision in Cavendish Square Holdings BV v Makdessi31 as well as the New Zealand Court of Appeal decision in Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership)32 likewise reveal a curial weighting of commercial interests rather than engagement in detail comparisons between charges and likely cost/​ damages. Cavendish actually involved two appeals, at opposite ends of the commercial spectrum. The first concerned the monetary consequences of a breach of a non-​competition covenant by vendors of a substantial business, namely that any outstanding price would no longer be payable and the purchaser had the right to acquire the remaining shares at a discounted price. The second (ParkingEye Ltd v Beavis) targeted an £85 fee charged, in accordance with signs clearly displayed, by a parking management company to a motorist had overstayed a two hour free parking licence provided by a shopping centre. Wilaci concerned contract for a $37m loan, which stipulated a fixed interest component ($320,000) but that if the loan was not repaid on the due date a late payment fee of $500,000 per week would accrue. Despite the quantum of the late payment fee, the court found no penalty was involved. What influenced Kós J, who delivered the reasons of the court, in so concluding was primarily the fact that both parties were substantial commercial entities, economically astute and independently advised, of comparable bargaining power, the loan having been the product of negotiation spanning several weeks. Moreover, the transaction involved an exceptionally high risk to the lender, and was on the facts unbankable except by lenders of last resort.33 [13.40]  The “legitimate interests” of the lender, Kós J explained, “reflect a raft of considera-

tions, including the value of the credit they provide, in the market in which it is provided, the level of risk to the borrower both before and after default (which are likely to differ), costs of recovery, and opportunity and reputational costs (if any)”.34 But, giving effect to freedom of contract, the “best measure” of these considerations is “the worth parties of even bargaining strength place on them in the transaction in issue”.35 This reflected what in Cavendish had 29

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [68] per Kiefel J, at [176] per Gageler J, at [279] per Keane J.

30

Paciocco v Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525 at [273].

31

Cavendish Square Holdings BV v Makdessi [2016] AC 1172.

32

Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293.

33

Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 at [91]–​[93].

34

Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 at [98].

35

Wilaci Pty Ltd v Torchlight Fund No 1 LP (in receivership) [2017] 3 NZLR 293 at [98].

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Equity and Trusts in Australia

been described as “the strong initial presumption must be that the parties themselves are the best judges of what is legitimate in a provision dealing with the consequences of breach”.36 Indeed, a Law Lord writing extra-​judicially has suggested that the court in Cavendish could have gone further, such as to disclaim the operation of the penalty doctrine between commercial parties of equal bargaining power (absent any mistake or misunderstanding).37

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[13.45]  Judicial reticence to allow the penalty doctrine to invade legitimate commercial deal-

ings was in any case a feature of the law preceding the above cases. It had been observed that this reticence “is even stronger in the case of commercial contracts freely entered into between parties of comparable bargaining power”.38 In this context, the commercial interests fostered by the relevant transaction had likewise featured in the law. An example is found in Ringrow Pty Ltd v BP Australia Pty Ltd,39 where the respondent was contractually entitled to repurchase the site the subject of the contract at a price excluding business goodwill in the event that the applicants breached certain conditions of the contract. On such a breach, the respondent sought to exercise its option of repurchase. Hely J rejected the applicants’ argument that the option was a penalty, reasoning that, as a matter of substance, the option formed part of the consideration each applicant gave for the original sale of the site, its purpose being to protect the respondent’s commercial interests. Treating the option clause as a penalty would deprive the respondent of part of the consideration for which it had so bargained. In so concluding, his Honour was influenced by the fact that the contract was the product of an arm’s length transaction entered into between commercial entities, in circumstances where the applicants had both time for reflection and the benefit of legal and accounting advice. Hely J’s decision was affirmed on appeal before the Full Federal Court40 and the High Court.41 Another instructive illustration is found in Grocon Constructions (Qld) Pty Ltd v Juniper Development No 2 Pty Ltd.42 A contract for the appellant to design and construct a development for the respondent contained a liquidated damages clause triggered if the appellant failed to achieve practical completion by a set date. The Queensland Court of Appeal refused to characterise the clause as penal, noting that the proportioning of the prospective loss to the extent of the delay was entirely typical of such contracts, and judicial interfering with them would introduce uncertainty to the disadvantage of all in the industry.43 That the parties enjoyed equal bargaining power, exercised upon competent advice, coupled with the importance to parties in building and engineering contract that the liabilities on breach be pre-​ determined by a liquidated damages clause, served to support this outcome.44

36

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [35] per Lords Neuberger and Sumption. See also at [152] per Lord Mance (“In judging what is extravagant, exorbitant or unconscionable, I consider … that the extent to which the parties were negotiating at arm’s length on the basis of legal advice and had every opportunity to appreciate what they were agreeing must at least be a relevant factor”).

37

Lord Hope, “The Law on Penalties —​A Wasted Opportunity?” (2016) 33 JCL 93.

38

Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005] BLR 271 at 280 per Jackson J.

39

Ringrow Pty Ltd v BP Australia Pty Ltd (2003) 203 ALR 281.

40

Ringrow Pty Ltd v BP Australia Pty Ltd (2004) 209 ALR 32.

41

Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656.

42

Grocon Constructions (Qld) Pty Ltd v Juniper Development No 2 Pty Ltd [2015] QCA 291.

43

Grocon Constructions (Qld) Pty Ltd v Juniper Development No 2 Pty Ltd [2015] QCA 291 at [136], [140] per McMeekin J, with whom Holmes CJ and Atkinson J concurred.

44

Grocon Constructions (Qld) Pty Ltd v Juniper Development No 2 Pty Ltd [2015] QCA 291 at [137], [140] per McMeekin J, with whom Holmes CJ and Atkinson J concurred.

424 [13.45] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Penalty Clauses  Chapter  13

[13.50]  The case law reveals multiple other instances where courts have refused to intervene

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in relations of a commercial nature, particularly financing transactions, effected by parties in parallel bargaining positions, even in the face of, as in Wilaci, discussed at [13.35], the prescribed consequences were onerous.45 In this context, the law allows what has been described as “a substantially larger degree of latitude”.46 The law also reveals instances of financing transactions where a modest increase in the applicable interest rate in the event of default is not treated as penal.47 Some commentators maintain that a result of Cavendish, Paciocco and Wilaci is, if not a virtual abolition of the penalty doctrine, at least its significant dilution.48 But this is not to suggest that the penalty doctrine has no ongoing function in the law. In none of these cases did the respective courts purport to outright reject the doctrine, even though pressed to do so in Cavendish. As noted at [13.15], courts remain alert to “significant imbalances in negotiating power in the commercial world”.49 Lord Mance in Cavendish, when referring to an uplift interest rate upon default, countenanced that if it is “evident from the size of the uplift that it is in its nature a punishment for or deterrent to breach, rather than an ordinary commercial re-​rating to reflect a change in risk (or administration cost), then it will still be disallowed as a penalty”.50 Australian case law, to this end, reveals repeated occasions of significant increases that have been viewed as penal.51

45

See, for example, Yarra Capital Group Pty Ltd v Sklash Pty Ltd [2006] VSCA 109 (where the court refused to characterise as a penalty a clause that entitled the respondent lender to very high rates of interest in default of the appellant borrower’s timely payment of multiple short-​term loans, influenced by what Warren CJ described as “a commercial relationship entered into between parties of commercial acumen and experience”: at [1]‌); Arab Bank Australia Ltd v Sayde Developments Pty Ltd (2016) 93 NSWLR 231 (commercial loan facility providing for default interest of 2% on the entire principal on default of meeting monthly repayments on time; Sackville AJA saw this as “a very good example of a contractual arrangement that should not attract the penalty doctrine”, involving as it did “[a] corporation, apparently perfectly capable of acting in its own interests, borrows a large amount of money from a bank to assist with a commercial undertaking”, where “[t]he borrower agrees to pay additional interest in the event of default, for the period the default continues”: at [7]; see also at [104], [105] per McDougall J).

46

Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79 at [54] (CA).

47

See, for example, David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1 at 30–​31 (FC) [revd on other grounds: David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353: see [8.105], [8.110]] (where the court upheld a provision in a loan agreement under which the lender could claim interest on the overdue amount at a rate of 1.5% above the interest rate ordinarily payable); Lordsvale Finance plc v Bank of Zambia [1996] QB 752 (where Colman J upheld a requirement that a defaulting borrower pay an additional one per cent interest); Secure Funding Pty Ltd v Patane [2009] NSWSC 845 (where the penalty rate of interest was four per cent, which Harrison AsJ considered could hardly be said to be “out of all proportion”, nor could the provision for the charge of an administration fee that rises from $25 to $95 where there is a default in payment: at [33], [34]).

48

See Day, “A Pyrrhic Victory for the Doctrine Against Penalties: Makdessi v Cavendish Square Holding BV” [2016] JBL 115; Stumbles, “Paciocco in the High Court: Penalties and Late Payment Fees” (2017) 91 ALJ 969; Carter, Courtney and Tolhurst, “Assessment of Contractual Penalties: Dunlop Deflated” (2017) 34 JCL 4.

49

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [262] per Lord Hodge.

50

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [148].

51

See, for example, Beil v Mansell (No 2) [2006] 2 Qd R 499 (where Chesterman J held that a provision in a mortgage agreement that prescribed interest of 25% per annum in the event of default in timely payment, but which set the rate absent default at 16% per annum, amounted to a penalty, reasoning that “the increase in interest to be paid in the event of default is extravagant and, indeed, exorbitant”, namely an increase of 9% “where there is no discernible increase in risk over that which existed when the agreement was made”: at [42]); Capital Securitisation Ltd v Jammal [2007] NSWSC 1073 (where the loan agreement stipulated a percentage by which the interest rate was to be increased for late payment —​from 5% per month to 11% per month —​which Bergin J held to be “totally extravagant and out of all proportion in the circumstances”: at [98]); Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251 (where White J accepted that there was a market in which the lender may have been able to re-​deploy its money at very high rates of interest of 60% or 100% or even 120% per annum, but in the absence of evidence from the lender, could not conclude there was a market in which it could lend at rates of 240% or 360% per annum, which he characterised as penal: at [55], [56]). See also Melbourne Linh Son Buddhist Society Inc v Gippsreal Ltd [2017] VSCA 161 (where an amount claimed for a loan establishment fee, which lacked any connection with an alleged breach of contract and remained the same notwithstanding a significant decrease in the quantum of the loan, was held to constitute a penalty).

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Equity and Trusts in Australia

DISTINGUISHED FROM RELIEF AGAINST FORFEITURE [13.55]  One way of distinguishing relief against forfeiture from the law of penalties is by

focusing on the difference between the executed and the executory. From a purely terminological basis, it makes little sense to describe a person required by contract to pay a sum, and who wishes to avoid doing so on the ground that it is penal, as seeking relief from forfeiture. This is because forfeiture assumes the loss of a payment already made (executed). As regards penalties, relief is sought vis-​à-​vis a sum to be paid (executory); the applicant seeks to avoid having to perform a contractual obligation. Another distinction targets the evidence relevant to the court’s inquiry, as explained by a Canadian judge:52

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The … penalty rule involves an assessment of the stipulated remedy clause only at the time the contract is formed. If the stipulated remedy represents a genuine attempt to estimate the damages the innocent party would suffer in the event of a breach, it will be enforced … Although the … law defined penalties in terms of unconscionability, that assessment is to be made at the time the contract was formed. The … doctrine did not include any discretion to be exercised in the light of circumstances that may exist at the time of breach.

Linking unconscionability here with judicial intervention in penalty cases does not mean that the focus is on unconscionable conduct: see [13.20]. That the inquiry targets the moment the contract is formed reveals that the law is concerned with the terms of that contract rather than either what has led up to the contract or the parties’ subsequent conduct. The relevant inquiry where relief against forfeiture is sought concerns, as noted at [11.05], primarily the defendant’s behaviour in exercising the legal right to effect forfeiture of the plaintiff’s money, property or other interest. What informs the court’s intervention here is not the terms of the forfeiture clause itself, but the events transpiring since the parties entered into the contract, specifically whether these events make it unconscionable for the defendant to rely on her or his legal rights.53 The overlap between the doctrines arises out of the fact that, like promises to pay a penalty, forfeitures can have penal consequences, as the right or property forfeited by the defaulting party may bear no relation to the loss suffered by the innocent party. This may explain why some judges have used the law of penalties as a vehicle to recover amounts withheld by the defendant,54 and even suggested that the grant of relief against penalties is simply a special application of the equitable doctrine of relief against forfeiture.55 But given that the High Court has now made it explicit that relief against forfeiture is grounded in proof of unconscientious behaviour, which the enrichment of the defendant (that is, “penal” consequences for the plaintiff) is by itself insufficient to establish (see [11.35]–​[11.45]), statements of this kind seem misdirected.

DEALINGS OUTSIDE THE PENALTY NET Legitimate deposits [13.60] The main qualification to the penalty doctrine is the law of deposits, described as

“something of an anomaly”,56 it being long accepted that a genuine deposit falls outside the 52

869163 Ontario Ltd v Torrey Springs II Associates Limited Partnership (2005) 256 DLR (4th) 490 at [24] per Sharpe JA (CA(Ont)).

53

Cadogan Petroleum Holdings Ltd v Global Process Systems LLC [2013] 2 Lloyd’s Rep 26 at [34] per Eder J.

54

See, for example, Legione v Hateley (1983) 152 CLR 406 at 445 per Mason and Deane JJ.

55

Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507 at 519 per Mason J.

56

Ng v Ashley King (Developments) Ltd [2011] Ch 115 at [21] per Lewison J.

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Penalty Clauses  Chapter  13

rule against penalties so that the vendor is entitled, upon the purchaser’s failure to complete, to forfeit the deposit without suffering a loss: see [11.50]. Acceleration clauses [13.65]  Nor does the penalty doctrine interfere with the legitimate use of what are termed

“acceleration clauses”;57 the law states that where a contract makes a sum payable by instalments but that, pursuant to an “acceleration clause”, in the event of one instalment not being punctually paid all fall in and become immediately payable, the acceleration is not a penalty.58 Grants of indulgence [13.70]  Where a stipulated sum is presently due and owing as a debt, but the creditor grants

the debtor an indulgence vis-​à-​vis payment, it is not a penalty for the creditor to prescribe that the indulgence will be withdrawn upon a specified default by the debtor.59 No judgment creditor could otherwise safely compromise the debt on terms that reserved to it the full amount of the debt should the debtor fail to meet the terms of any indulgence. In Acron Pacific Ltd v Offshore Oil NL,60 a moratorium deed, compromising a dispute and granting an indulgence, provided for the expiry of the moratorium if the examining accountant considered the debtor had breached the deed (cl 22). The High Court held that, as the moratorium deed granted an indulgence for the payment of a debt that was due and payable, cl 22 was not a penalty. Mason ACJ, Wilson, Brennan and Dawson JJ explained the point as follows:61

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The creditors’ covenants … not to enforce the debtors’ liabilities during the Moratorium related to debts that were unconditionally payable on demand. The loss of the benefit of the creditors’ covenants was therefore no more than the loss of the qualified indulgence which the creditors had agreed to give —​that is, an indulgence qualified by the terms of cl 22. The loss of the benefit of the creditors’ covenants was not a penalty.

The position differs where, according to the substance of the transaction, the stipulated sum is not a present debt. In Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd,62 a clause in a settlement deed entitled the creditor, if instalments were not paid on time, to enter judgment against the debtor for the full amount claimed plus interest and costs, which amount exceeded the settlement amount. The claim itself was disputed but the amount properly due was never established because of the settlement. The Queensland Court of Appeal ruled that as the stipulated sum was not a present debt, but merely an amount claimed that 57

But note that the Australian Consumer Credit Code (found in Sch 1 of the National Consumer Credit Protection Act 2009 (Cth)) provides that certain requirements must be met before a credit provider can enforce an acceleration clause: ss 92, 93.

58

Hunt v Kallinicos (2009) 14 BPR 27,001 at [18]–​[22] per Handley AJA.

59

Wallingford v Mutual Society (1880) 5 App Cas 685 at 696 per Lord Selborne LC, at 702 per Lord Hatherley, at 705–​706 per Lord Blackburn, at 710 per Lord Watson.

60

Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514.

61

Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514 at 519. See also at 521 per Deane J (who characterised cl 22 not as penalty, but as representing the agreed machinery for the termination of an agreed forbearance in the commercial context that payment of a debt would pro tanto extinguish the obligation to pay and the right to receive future interest); Lachlan v HP Mercantile Pty Ltd (2015) 89 NSWLR 198 (where a settlement agreement specified an amount the parties had agreed as due but provided for the payment of a lesser amount in instalments, but that an unrectified default in paying those instalments would trigger the recovery of the full amount; this was held not to be penalty, as it provided for the payment of a present debt, which the deed had been implicitly acknowledged); Auzcare Pty Ltd v Idameneo (No 123) Pty Ltd (2015) 91 NSWLR 581 (same outcome arising out of a deed of settlement acknowledging the debt to be released if ongoing obligations to supply services were performed, but otherwise for the debt to be immediately recoverable).

62

Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2001] 1 Qd R 114.

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Equity and Trusts in Australia

bore no rational relationship to the loss the debtor suffered by the late payment, the clause was a penalty.63 Yet Zenith was an unusual case, which ostensibly “turned very much on the terms of the deed of settlement there in issue”,64 against the backdrop of an absence of an admission or acknowledgement of any obligation to pay. It has, accordingly, been distinguished on more than one occasion in subsequent cases.65 [13.75]  Yet if an amount is due and owing, that the lesser sum payable due to the creditor’s indulgence is not agreed as a genuine pre-​estimate of damage should the debtor fail to fulfil the terms of the indulgence does not per se make it a penalty imposed to induce or compel compliance by the debtor with those terms, and thus to secure some collateral benefit to the creditor. Cameron v UBS AG,66 for example, involved an action by a judgment creditor in Victoria to enforce a foreign judgment. Terms of settlement were agreed, providing for payment by a judgment debtor of a lesser sum ($8.4m) by instalments, and in default for the debtor to consent to judgment for the judgment debt in full (cl 2). Phillips JA, who delivered the leading judgment, noted that the $8.4m sum was not agreed as a genuine pre-​estimate of damage should the debtor fail to comply with cl 2 in one respect or another, but neither was it a penalty imposed to induce or compel the debtor’s compliance with cl 2.67 By the terms of the settlement, the debtor impliedly acknowledged that his liability was, albeit conditional on the enforcement of the debt in Victoria, effective when its terms were agreed. Essentially, the debtor, in return for the opportunity to pay a lesser sum, bargained away any defence to the local enforcement of the judgment, making the case “quite different” from those in which the courts have refused to lend assistance to the enforcement of a penalty.68 The case was, for this reason, analogous in substance to Acron: see [13.70].

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TRIGGERING EVENT NOT CONFINED TO BREACH OF CONTRACT [13.80] In Export Credits Guarantee Department v Universal Oil Products Co,69 the

House of Lords held that a clause in a contract that requires a payment of money by one party on the occurrence of an event other than a breach of contract by that party cannot be a penalty. A similar view had prevailed in Australia.70 So in King Investment Solutions

63

Zenith Engineering Pty Ltd v Queensland Crane and Machinery Pty Ltd [2001] 1 Qd R 114 at 117 per Pincus JA, with whom White and Chesterman JJ concurred.

64

Calcorp (Australia) Pty Ltd v 271 Collins Pty Ltd (2010) 29 VR 462 at [24] per Nettle JA.

65

See, for example, Perpetual Trustee Co Ltd v Aspley Specialist Centre Pty Ltd [2010] QSC 232 at [25] per McMurdo J; Calcorp (Australia) Pty Ltd v 271 Collins Pty Ltd (2010) 29 VR 462 at [24] per Nettle JA. Cf Legal Practice Management (Vic) Pty Ltd (in liq) v Simms Corp Hotels & Leisure Pty Ltd [2013] VSC 734 (where Sloss J characterised a clause in a deed entered into between a law practice and several clients by way of compromise of a cost review proceeding, which provided for a (50%) higher sum to be paid immediately upon insolvency or default of any of the relevant parties, as a penalty, viewing the circumstances as closely analogous with those in Zenith: at [86]–​[89]).

66

Cameron v UBS AG (2000) 2 VR 108.

67

Cameron v UBS AG (2000) 2 VR 108 at 114.

68

Cameron v UBS AG (2000) 2 VR 108 at 115. See also at 109 per Winneke P, at 116–​117 per Buchanan JA.

69

Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399.

70

IAC (Leasing) Ltd v Humphrey (1972) 126 CLR 131 at 143 per Walsh J; C J Belmore Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507; O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 at 367 per Gibbs CJ, at 390 per Brennan J, at 398 per Deane J; Bay Bon Investments Pty Ltd v Selvarajah [2008] NSWSC 1251 at [47] per White J; First East Auction Holdings Pty Ltd v Ange [2010] VSC 72 at [151]–​[154] per Hargrave J [affd Ange v First East Auction Holdings Pty Ltd (2011) 284 ALR 638]; PSAL Ltd v Kellas-​Sharpe (2012) 7 BFRA 337 at [68] per Applegarth J [affd Kellas-​Sharpe v PSAL Ltd [2012] QCA 371 at [2]‌, [3] per Margaret McMurdo P, at [40]–​[49] per Gotterson JA, at [57]–​[59] per Fryberg J]. See also Marac Financial Services Ltd v Stewart [1993] 1 NZLR 86 at 94–​96 per Kennedy-​Grant M (where interest calculated at

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Penalty Clauses  Chapter  13

Pty Ltd v Hussain,71 for example, where the interest rate under a mortgage was 118.8% per annum, reducible to 60% per annum if paid within seven days of the due date, Campbell J ruled that this margin was not a penalty, reasoning as follows: One requirement for a provision in a contract being a penalty is that it states a consequence which is agreed to follow from breach of one of the provisions of the contract. The structure of the interest clause in the present case is not like that. Rather, the interest clause in the contract involves a promise by the mortgagors to pay interest at 118.8%, and a promise by the mortgagee that, if the mortgagors pay the interest on time, or no more than 7 days late, the mortgagee will accept interest at 60%. A clause structured in that way is not regarded as a penalty …

This principle also had implications for the quantum of losses a plaintiff could claim. It dictated, for instance, that a lessor who terminates a lease under an express power could recover only those losses resulting from the lessee’s default, not any damage suffered as a result of losing the bargain.72 [13.85] Yet Campbell J in King Investment Solutions expressed concern that confining the

penalty doctrine to instances of breach of contract could place form over substance. His Honour saw much to be said for the view that “a clause which gives a benefit to a contracting party who performs the contract is no different in substance to a clause which imposes a detriment, equal in amount to that benefit, on a contracting party for breach”.73 This was hardly the first instance of judicial dissatisfaction with this distinction.74 In 1990 the Full Federal Court noted the “well-​known, if not much praised, distinction” between an increase in the rate of interest (which can attract the penalty doctrine) and a covenant offering an incentive by reduction of the rate upon prompt payment (which does not attract the doctrine), which it described as “anomalous”.75 Other Australian judges, both trial and appellate, have uttered similar remarks.76 Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

[13.90]  While most Australian judges nonetheless felt hamstrung by the entrenched nature

of the distinction in issue, Brereton J in Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd took the courageous step of extending the penalty doctrine to “defaults” other than breaches of contract, reasoning as follows:77 Insofar as it has been suggested that the doctrine relating to the unenforceability of penalties is confined to payments (and transfers, retentions or withholdings) conditioned on a breach of

36% per annum was held not to be in the form of a penalty because, though not a genuine pre-​estimate of loss, it was payable upon an event that was not an inevitable consequence of the defendant’s breach, but a result of the independent decision of the plaintiff to close the defendant’s account). 71

King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441 at [138].

72

AMEV-​UDC Finance Ltd v Austin (1986) 162 CLR 170, but see the dissenters (at 204 per Deane J, at 213–​215 per Dawson J).

73

King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441 at [138].

74

See, for example, Seton v Slade (1802) 7 Ves 265 at 273–​274; 32 ER 108 at 111 per Lord Eldon LC.

75

David Securities Pty Ltd v Commonwealth Bank of Australia (1990) 23 FCR 1 at 29.

76

See, for example, Accom Finance Pty Ltd v Mars Pty Ltd (2007) 13 BPR 24,729 at [55] per Windeyer J (and see on appeal Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205 at [162] per Campbell JA, with whom Hodgson and McColl JJA agreed); PSAL Ltd v Kellas-​Sharpe (2012) 7 BFRA 337 at [62], [67] per Applegarth J (referring to “the much-​criticised rule that permits a mortgagee to effectively avoid the jurisdiction to relieve against penalties by reserving the higher rate as the interest payable under the mortgage and providing for its reduction in the event of punctual payment”, adding that the rule “may have unsatisfactory origins” and “[t]‌he time may have arrived for it to be replaced”) (and see on appeal Kellas-​Sharpe v PSAL Ltd [2012] QCA 371 at [57]–​[59] per Fryberg J, who opined that the rule “may express a practice which had some economic utility in the 19th century (although even that is far from clear), but it does not do so in the 21st” (at [57]), before adding that “[t] here is much to be said for reconfiguring the law in this area” (at [58])).

77

Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd (2007) Aust Contract Rep ¶90-​261 at [71].

[13.90]  429 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

obligation by one party —​and thus that a provision in a contract providing for payment of money by one party on the occurrence of a specified event, rather than on breach of a contractual duty, cannot be a penalty —​this must be judged according to substance and not form. It is clear that where the right to terminate and receive a payment arises on the happening of any number of events, only some of which are breaches of contract, the doctrine of penalty applies where in fact the termination is by reason of a breach. In this context, it would be extraordinary … if whether a provision was void as a penalty depended upon whether it was conditioned on a breach of contract as distinct from being a consequence of an election to terminate pursuant to an event entitling a party to terminate —​often called an “event of default” —​that did not involve a breach of contract. It would be wholly inconsistent with the maxim that equity looks to the intent, rather than to the form.

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While this courage met a frosty reception on appeal,78 it was vindicated before the High Court in Andrews v Australia and New Zealand Banking Group Ltd,79 which held that the penalty doctrine is not to be confined to payments consequent upon breach. It followed, in that case, that charges by the respondent bank —​in the form of honour fees, dishonour fees, over-​limit fees and non-​payment fees —​could potentially be penalties even though the event that triggered them could not be construed as a breach of contract. The decision may be welcomed as equity’s response to the former form over substance approach,80 although the reasons of the court are phrased more in terms of an historical exegesis than any genuine policy justification.81 Omission of the latter is regrettable, especially as “[t]‌he rule against penalties is ultimately based on public policy”.82 In so ruling, rather than distinguishing a payment consequent on breach from some other payment, the court distinguished the application of the penalty doctrine between what can be described as a collateral stipulation and an alternative stipulation.83 The former is amenable to the penalty doctrine, the money being the security for performance of a contractual obligation, which can be explained as follows:84 [W]‌here it is sought to secure the performance of a condition and, instead of exacting a promise from the obligor to perform the condition, the obligee exacts a promise from the obligor to pay a sum of money (or perhaps to convey property) if the condition not be performed, the promise is properly to be viewed as a security for the satisfaction of the condition and so, therefore, if the sum of money (or conveyance) is excessive and unconscionable, may now be treated as penal.

As an alternative stipulation, conversely, involves an obligation to pay a sum of money for the enjoyment of an additional right or service (in their Honours’ words, some “further

78

Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292.

79

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205.

80

See Harder, “The Relevance of Breach to the Applicability of the Rule Against Penalties” (2013) 30 JCL 52 at 69.

81

See Carter, Courtney, Peden, Stewart and Tolhurst, “Contractual Penalties: Resurrecting the Equitable Jurisdiction” (2013) 30 JCL 99 (who argue that “[i]‌f the law of penalties is to be applied to contingent payments not activated by breach … the basis should lie in policy, not ancient doctrine”, and that “the policy must be current policy, not policy which, even in England, has long ceased to be a controlling factor”: at 132); Gray, “The Law of Penalties and the Question of Breach” (2017) 45 ABLR 8. Indeed, in Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [42], Lords Neuberger and Sumption saw the High Court’s historical reasoning as “not in fact consistent with the equitable rule as it developed historically. The equitable jurisdiction to relieve from penalties arose wholly in the context of bonds defeasible in the event of the performance of a contractual obligation. It necessarily posited a breach of that obligation”. Cf Allsop, “The Doctrine of Penalties in Modern Contract Law” (2018) 30 SAcLJ 1 at 11–​13 (seeking to rationalise the disparate historical accounts).

82

Azimut-​Benetti SpA (Benetti Division) v Healey (2010) 132 Con LR 113 at [24] per Blair J.

83

In the text adopting the terminology from Peel, “The Rule Against Penalties” (2013) 129 LQR 152 at 156.

84

Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd (2014) 45 VR 79 at [43] (CA).

430 [13.90] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Penalty Clauses  Chapter  13

accommodation”),85 it is not amenable to being construed as a penalty.86 Yet nor is this distinction always easy to draw, prompting the observation that the court ousted one form-​based distinction but then introduced another.87 In any case, by widening the reach of the penalty rule, the challenge is now to determine its breadth, as a literal reading of the reasons inAndrews may cast a shadow over stipulated sums payable under a wide range of commercial contracts.88

ACTION FOR DAMAGES IF PENALTY UNENFORCEABLE [13.95]  Prior to the High Court’s ruling in Andrews v Australia and New Zealand Banking

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Group Ltd,89 the balance of Australian case authority indicated that once the agreed sum was held to be a penalty, the relevant clause was void. This did not, however, preclude the recovery of damages in such lesser amount as reflected the plaintiff’s actual loss, which the plaintiff bore the onus of establishing. Mason and Wilson JJ explained the rationale for this in AMEV-​ UDC Finance Ltd v Austin:90 At least since the advent of the Judicature system a penalty provision has been regarded as unenforceable or, perhaps void, ab initio … In all that time it has been thought that no action could be brought on such a clause, no doubt because the courts should not lend their aid to the enforcement in any way of a provision which is oppressive. However, this is not the only reason why the courts would refuse to lend their aid. In the majority of cases involving penalties, the courts, if called upon to assist in partial enforcement of the kind suggested by the appellant, would be required to undertake an unfamiliar role. They would need to rewrite the clause so as to permit the plaintiff to recover the loss he has actually sustained. Penalty clauses are not, generally speaking, so expressed as to entitle the plaintiff to recover his actual loss. Instead they prescribe the payment of a sum which is exorbitant or a sum to be ascertained by reference to a formula which is not an acceptable pre-​estimate of damage. In either case the court, if it were to enforce the clause, would be performing a function very different from that which it undertakes when it severs or reads down an unenforceable covenant, such as a covenant in restraint of trade.

Their Honours’ view, recently endorsed by Lords Neuberger and Sumption in Cavendish Square Holdings BV v Makdessi,91 misaligned with that expressed by Deane J in AMEV-​UDC, who allowed enforcement of the penalty clause up to the amount of the actual loss.92 This

85

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [79] (FC).

86

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [9]‌, [10], [79]–​[83] (FC).

87

Peel, “The Rule Against Penalties” (2013) 129 LQR 152 at 156 (who argues that the rule against penalties ought to be abandoned); Tyree, “Fees and Penalties” (2014) 25 JBFLP 43 at 44. A parallel criticism was made by Lords Neuberger and Sumption in Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [42].

88

See Manly, “Breach No Longer Necessary: The High Court’s Consideration of the Penalty Doctrine” (2013) 41 ABLR 314 at 334–​336. A parallel criticism was made by Lords Neuberger and Sumption in Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [42].

89

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205.

90

AMEV-​UDC Finance Ltd v Austin (1986) 162 CLR 170 at 192–​193. See also at 176 per Gibbs CJ; Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana [1983] 2 AC 694 at 702 per Lord Diplock; PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 at 645 per Clarke JA; Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2003] 2 NZLR 92 at [61] per Harrison J [affd Amaltal Corporation Ltd v Maruha (NZ) Corporation Ltd [2004] 2 NZLR 615]; Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd (2008) 257 ALR 292 at [159] per Allsop P; Riggall v Thompson [2010] QCA 144 at [35] per Fraser JA; Ng v Ashley King (Developments) Ltd [2011] Ch 115 at [20] per Lewison J.

91

Cavendish Square Holdings BV v Makdessi [2016] AC 1172 at [87]. Cf at [160] per Lord Mance.

92

AMEV-​UDC Finance Ltd v Austin (1986) 162 CLR 170 at 205.

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Equity and Trusts in Australia

latter view had found favour with the English Court of Appeal in Jobson v Johnson93 —​ where Nicholls LJ stated that “the legal position is that the clause remains in the contract and can be sued on, but it will not be enforced by the court beyond the sum which represents, in the events which have happened, the actual loss of the party seeking repayment” —​which was treated by Lords Neuberger and Sumption as wrongly decided. The position in Australia is, in any case, now clear as the High Court in Andrews held that if compensation can be made to the obligee for the prejudice suffered by failure of the primary stipulation, “the collateral stipulation and the penalty are enforced only to the extent of that compensation”, such that “[t]‌he first party is relieved to that degree from liability to satisfy the collateral stipulation”.94 [13.100]  In any event, the broad interpretation given to s 20(1) of the Australian Consumer

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Law (see [9.170]), and the reference in s 22 directing the court to assess whether a party was required to comply with conditions not reasonably necessary for the other’s protection (see [9.185]), may allow unconscionable conduct for the purposes of the penalties doctrine to attract the broad avenues for relief available under that Law. In Andrews, the court remarked that remedial legislation of this kind “suggests the need for caution in dealing with the unwritten law as if laissez faire notions of an untrammelled ‘freedom of contract’ provide a universal legal value”.95

93

Jobson v Johnson [1989] 1 WLR 1026 at 1040 (emphasis supplied). See also at 1033–​1035 per Dillon LJ, at 1047 per Kerr LJ.

94

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [10] (FC) (emphasis supplied).

95

Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205 at [5]‌ (FC).

432 [13.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Chapter 14

Subrogation, Contribution and Marshalling SUBROGATION The nature of subrogation [14.05]  If A  discharges B’s liability in circumstances where B is entitled to reimbursement

or recoupment in respect of the liability as against C, equity regards A as succeeding (being “subrogated”) to B’s right.1 This right of subrogation vests by operation of law; it is not as a product of agreement (which thereby serves to distinguish it from assignment)2 although persons can agree to extend or restrict such a right via a contract. Statute also prescribes rights of subrogation in various contexts.3 Subrogation permits A to stand in the place of B, and to have without assignment B’s rights and remedies. As a departure from ordinary principles, it is justifiable “only when the courts are satisfied that reason and justice demand that it should be”.4 If there is an effective vehicle at law to address the issue, there is no room for equity to intervene by subrogation.5

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Remedial focus [14.10]  Although traditionally viewed as an equitable doctrine, subrogation is closer to an

equitable remedy than a cause of action.6 It has been described as “a remedy that involves

1

HIH Casualty & General Insurance Ltd v Building Insurers’ Guarantee Corporation (2004) 13 ANZ Ins Cas ¶61-​597 at [127] per Barrett J. On subrogation generally see Ong, Ong on Subrogation (Federation Press, 2014).

2

Thought this is the principal distinguishing feature between subrogation and assignment (see Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 800 per Lord Denning MR; Santos Ltd v American Home Assurance Co (1987) 4 ANZ Ins Cas ¶60-​795 at 74,875 per White J; Dimella v Rudaks (2008) 102 SASR 582 at [33] per White J (adding (at [34]) that this distinction has a number of practical consequences: (1) a person exercising a right of subrogation does not have an entitlement to enforce a claim for any greater amount than the payment giving rise to the right of subrogation, whereas an assignee is not so limited; (2) the right of an assignee arises at the time of the making of the contract of assignment, whereas subrogated rights come into existence only upon the making of the payment that gives rise to the right, for example, upon the discharge by a guarantor of the debtor’s liability; and (3) ordinarily a person enforcing a right of subrogation must do so in the name of the person whose rights are being subrogated, whereas an assignee does so in his or her own name)), it is not the only one (see Saraceni v Mentha (No 2) (2012) 269 FLR 12 at [238] per Corboy J). Cf Burston Finance Ltd v Speirway [1974] 1 WLR 1648 at 1652 per Walton J; Napier v Hunter [1993] AC 713 at 736 per Lord Templeman. On the subject of assignments see Ch 3.

3

See, for example, Marine Insurance Act 1909 (Cth), s 85(1).

4

Orakpo v Manson Investments Ltd [1978] AC 95 at 110 per Lord Salmon. See also Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 809 per James LJ; Re Sara Properties Pty Ltd (in liq) [1982] 2 NSWLR 277 at 280 per Rath J; Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 at 194 per Smart J; Re Trivan Pty Ltd (1996) 14 ACLC 1,654 at 1,657 per Young J.

5

Cochrane v Cochrane (1985) 3 NSWLR 403 at 405 per Kearney J.

6

Dimella v Rudaks (2008) 102 SASR 582 at [29] per White J, with whom Anderson and Kelly JJ concurred; Lerinda Pty Ltd v Laertes Investments Pty Ltd [2010] 2 Qd R 312 at [7]‌per McMurdo J.

[14.10]  433 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:52.

Equity and Trusts in Australia

the substitution of one party for another with respect to rights against third parties” and the “process by which one party is substituted for another so that he may enforce that other’s rights against a third party for his own benefit”.7 Judges have gravitated to a remedial focus in part because the relevant equitable considerations respecting a claim to subrogation may differ depending on the circumstances in which subrogation operates,8 which are discussed below: see [14.25]. Giving subrogation a remedial focus dictates that, though the courts speak in terms of a right to subrogation in defined circumstances, that right may be lost where equitable principle so dictates. Its equitable genesis dictates that the availability of subrogation in equity, as opposed to in contract or under statute, ultimately rests on curial discretion. Accordingly, like the equitable remedy of specific performance, there are a variety of equitable defences that may incline a court against granting relief by way of subrogation (such as delay, acquiescence, hardship or unclean hands) and equity will not, in line with principle, grant relief where it would prejudice innocent third parties or otherwise produce an unjust outcome.9

Foundation for equitable intervention

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[14.15] Australian courts have rejected unjust enrichment as the basis for the doctrine of

subrogation: see [14.105]. At the same time, though, they have not focused on its traditional rival, unconscionable conduct. English judges, now enamoured with unjust enrichment in this area,10 nonetheless refer to “an equity of subrogation” arising “from the conduct of the parties on well settled principles and in defined circumstances which make it unconscionable for the defendant to deny the proprietary interest claimed by the plaintiff”.11 The latter makes subrogation difficult to distinguish in substance from the basis for Australian courts’ imposition of the remedial constructive trust, grounded as it is in an unconscionable denial of a beneficial interest in property: see [38.175]. It may be, as conceded by an Australian judge, that “a satisfactory doctrinal basis is difficult to identify”, and that to brand conduct in all cases where equity allows subrogation as unconscionable is to attenuate that concept.12 The latter point derives greater force in the wake of High Court warnings against the wholesale adoption of “unconscionable” conduct as a cause of action or remedial panacea.13 The conclusion may be inevitable that, if unconscionability is to be used as the relevant moniker in this context, it must refer to an unconscionable (or

7

Highland v Exception Holdings Pty Ltd (in liq) (2006) 60 ACSR 223 at [90] per Santow JA.

8

Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [6]‌ (FC).

9

In the context of subrogation see, for example, Lerinda Pty Ltd v Laertes Investments Pty Ltd [2010] 2 Qd R 312 at [8]‌–​[14] per McMurdo J.

10

Boscawen v Bajwa [1996] 1 WLR 328 at 355 per Millett LJ; Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 231–​232 per Lord Hoffmann, at 245 per Lord Hutton; Menelaou v Bank of Cyprus UK Ltd [2016] AC 176 at [49] per Lord Clarke. Cf Orakpo v Manson Investments Ltd [1978] AC 95 at 104 per Lord Diplock (noting that some rights by subrogation “appear to defeat classification except as an empirical remedy to prevent a particular kind of unjust enrichment”).

11

Boscawen v Bajwa [1996] 1 WLR 328 at 335 per Millett LJ. See also Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 245 per Lord Hutton.

12

Challenger Managed Investment Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452 at [50] per Bryson J (this paragraph is not included in the reported version).

13

Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [23]–​[26] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ (and on this point see [P.160]).

434 [14.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

unjust or unfair) outcome rather than any specific conduct of a litigant. Indeed there are Australian judicial statements to this effect.14

Circumstances where subrogation is precluded [14.20]  In addition to where subrogation would produce, as opposed to prevent, an unfair outcome, there are recognised specific instances where the doctrine is precluded. First, if without an antecedent request or legal obligation a person assumes an obligation or makes a payment for the benefit of another, the law will, as a general rule, refuse subrogation.15 For example, a third party who pays off a mortgage officiously without an arrangement with the mortgagor or mortgagee cannot avail of relief by way of subrogation.16 Secondly, no right of subrogation arises where it is inconsistent with the terms of a statute,17 including where the relevant provision by its terms leaves no gap to be filled by reference to general equitable principle.18 Thirdly, an entitlement to subrogation that may otherwise have arisen can be excluded or modified by the terms of the document creating the parties’ relationship:19 see [14.55] (in the insurance context). Fourthly, an entitlement to seek subrogation may be limited by a waiver, in whole or in part, by the person entitled to exercise that entitlement: see [14.60].

Principal areas of operation [14.25]  An effective means of illustrating equity’s jurisdiction pertaining to subrogation is to

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analyse the principal circumstances where equity considers it just and equitable that a person be subrogated to the rights of another. These are conveniently classified according to the following relationships: insured and insurer; principal and surety; and debtor and creditor. These categories are not exhaustive; the doctrine is sufficiently broad, potentially to cover each instance where a person satisfies an obligation that in justice and good conscience ought to have been satisfied by another.20 14

Cochrane v Cochrane (1985) 3 NSWLR 403 at 405 per Kearney J; Registrar General v Gill (unreported, CA(NSW), 16 August 1994), at 7 (“The equitable principles relating to subrogation aim to adjust the interests of three parties, such as a creditor, a debtor and an insurer or surety, in such a way as to avoid the unconscionable result of double recovery by the creditor or inequitable discharge of the liability of the debtor”). See also Wright, “The Rise of Non-​consensual Subrogation” [1999] Conv 113 at 125.

15

Burnand v Rodocanachi Sons & Co (1882) 7 App Cas 333 at 343 per Lord Watson; Falcke v Scottish Imperial Insurance Co (1886) 34 Ch D 234 at 241 per Cotton LJ, at 248–​249 per Bowen LJ, at 252 per Fry LJ; Macclesfield Corporation v Great Central Railway [1911] 2 KB 528 at 536 per Vaughan Williams LJ, at 539 per Farwell LJ, at 540–​541 per Kennedy LJ; Re Cleadon Trust Ltd [1939] 1 Ch 286 at 315 per Scott LJ, at 321–​322 per Clauson LJ; Owen v Tate [1976] 1 QB 402 at 406–​412 per Scarman LJ, at 412–​413 per Stephenson LJ; Orakpo v Manson Investments Ltd [1978] AC 95 at 106 per Lord Diplock.

16

State Bank of South Australia v Rothschild Australia Ltd (1990) 8 ACLC 925 at 940 per Tadgell J.

17

Burnand v Rodocanachi Sons & Co (1882) 7 App Cas 333 at 335–​336 per Lord Selborne LC; John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 256 per McCardie J; Re Sara Properties Pty Ltd (in liq) [1982] 2 NSWLR 277 at 279–​281 per Rath J. See, for example, ss 65 and 66 of the Insurance Contracts Act 1984 (Cth), discussed at [14.65]. Cf Re Dalma No 1 Pty Ltd (in liq) (2013) 279 FLR 80 (where Brereton J ruled that, in the context of company liquidation, Corporations Act 2011 (Cth), s 560 did not exclude equitable subrogation: at [16]–​[22]).

18

See, for example, HIH Casualty & General Insurance Ltd v Building Insurers’ Guarantee Corporation (2004) 13 ANZ Ins Cas ¶61-​597 at [133] per Barrett J.

19

Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874 at 882 per North P; Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 812 per James LJ; Orakpo v Manson Investments Ltd [1978] AC 95 at 105 per Lord Diplock; State Bank of South Australia v Rothschild Australia Ltd (1990) 8 ACLC 925 at 941 per Tadgell J; GPS Power Pty Ltd v Gardiner Willis & Associates Pty Ltd [2001] 1 Qd R 586 at 592–​593 per de Jersey CJ, at 602 per Williams J; Bupa Australia Pty Ltd v Shaw [2013] VSC 507 at [17]–​[25] per Almond J.

20

Re Trivan Pty Ltd (1996) 14 ACLC 1,654 at 1,656–​7 per Young J. See also Boscawen v Bajwa [1996] 1 WLR 328 at 335 per Millett LJ; Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 245 per Lord Hutton.

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Equity and Trusts in Australia

Insured and insurer

Subrogation arises from the nature of a contract of indemnity [14.30]  Subrogation in insurance law rests on the rationale that an insured cannot recover a loss twice, once from the insurer and again from the wrongdoer.21 It achieves that by, inter alia, entitling the insurer under an indemnity insurance policy to stand in the shoes of the person indemnified (the insured) and thereby exercise the personal rights and remedies of the insured by proceeding in the insured’s name.22 Where there is no obligation to indemnify under the contract of insurance, there is no corresponding right of subrogation. So an insurance policy that secures payment of a specified sum on the happening of a specified event, such as a life insurance or accident policy, does not normally trigger a right of subrogation.23 But courts will not simply pigeonhole insurance policies as a matter of form for this purpose, as explained by Steytler P in Insurance Commission of Western Australia v Kightly:24

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[T]‌he doctrine does not ordinarily apply to accident policies … because such policies have not ordinarily been indemnity policies … A personal accident policy which provides for a specified lump sum compensation in the case of the loss of a limb, varying with the nature of the limb lost, while it could be said to compensate the person for the event, could not sensibly be said to do so by way of indemnification of a loss … The same could be said of a policy which provides for the payment of a weekly or monthly sum during a period of incapacity arising from an accident, where the payment is made regardless of any financial loss … However, a policy which compensates the insured for actual financial loss suffered as a consequence of an injury caused by accident is one of indemnity. This is so regardless of the generic name given to that type of policy … Even where the policy is a so-​called “valued” policy in which the parties to it agree what shall be paid on the happening of an event it may be one of indemnity if the agreement is that the insured is still required to prove the fact of his or her loss notwithstanding that the parties have agreed in advance what shall be the amount thereof in the event insured against … [14.35] Under the doctrine of subrogation, an insurer that has met the insured’s loss  —​ including vis-​à-​vis a claim it was not strictly obliged to pay25 —​is then entitled to the rights the insured has against third parties that may extinguish or diminish the loss.26 So completely do those rights pass that an insurer may restrain the insured from taking proceedings against 21

Affiliated FM Insurance Co v Quintette Coal Ltd (1998) 156 DLR (4th) 307 at 317 per Southin JA; Insurance Commission of Western Australia v Kightly (2005) 30 WAR 380 at [26] per Steytler P; Speno Rail Maintenance Australia Pty Ltd v Metals and Minerals Insurance Pte Ltd (2009) 226 FLR 306 at [197]–​[201] per Beech AJA [affd on a different point: Zurich Australian Insurance Ltd v Metals and Minerals Insurance Pte Ltd (2009) 240 CLR 391]. See generally Enright and Merkin, Sutton on Insurance Law in Australia (4th ed, Lawbook Co, 2015), Vol 2, Ch 18.

22

Castellain v Preston (1883) 11 QBD 380 at 386 per Brett LJ, at 393 per Cotton LJ, at 403 per Bowen LJ; John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 253–​255 per McCardie J; Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874 at 889 per McGregor J; State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 at 240–​241 per Barwick CJ; Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 805–​806 per Stamp LJ, at 812 per James LJ; Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 at 194–​ 195 per Smart J.

23

See, for example, Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 800–​804 per Stamp LJ (life insurance); Wollington v State Electricity Commission of Victoria (No 2) [1980] VR 91 at 97 per Young CJ and Menhennitt J (accident insurance).

24

Insurance Commission of Western Australia v Kightly (2005) 30 WAR 380 at [29], with whom Wheeler and Roberts-​Smith JJA concurred (emphasis in original).

25

See King v Victoria Insurance Co Ltd [1896] AC 250 at 254–​256 (PC); Bupa Australia Pty Ltd v Shaw [2013] VSC 507 at [58] per Almond J.

26

Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874 at 882 per North P, at 885 per McCarthy J, at 889 per McGregor J. Cf Insurance Contracts Act 1984 (Cth), s 67, which provides that an insurer cannot, by means of subrogation, recover an amount exceeding the indemnity paid.

436 [14.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

those third parties. The right to subrogation exists from the moment the contract of indemnity is made.27 But the insurer cannot, except under the express terms of the insurance contract,28 exercise its right to subrogation until it has fully paid out (or at least agreed to do so) the insured according to the terms of the policy.29 Once the insurer has done so, the insured must not do any act that might prejudice the insurer’s right of subrogation,30 a right the insurer may seek to protect by injunction or declaration.31 It follows that the insured must not release, diminish, compromise or divert the benefit of any right to which the insurer is or will be entitled to succeed and enjoy under its right of subrogation,32 and the insurer’s right of subrogation is not defeated by any such action by the insured.33 An insured who breaches this duty, and causes loss to the insurer, may be ordered to compensate the insurer via an order for equitable compensation.34

Insurer must sue in name of insured [14.40] As the right of action against a third party wrongdoer is that of the insured, the

insurer or indemnifier cannot, via subrogation, sue the wrongdoer who has caused the loss or damage in its own name. To sue the wrongdoer, the insurer or indemnifier must use the name of the insured or party indemnified. Lord Jauncey explained the rationale for this in Esso Petroleum Ltd v Hall Russell & Co Ltd:35 The reason for the rule is to prevent a wrongdoer or debtor from being subjected to double claims. A successful action by an indemnifier in his own name against a wrongdoer or debtor would not relieve the latter of his liability to the person indemnified. Such liability would only be extinguished by an action brought in the name of the person indemnified or in the name of the indemnifier suing as assignee of the rights of the person indemnified.

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However, the insurer has no right at law to use the insured’s name. Such a right can vest via by the insurance contract itself,36 pursuant to a letter of subrogation to this effect signed by the

27

John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 254 per McCardie J; State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 at 240–​241 per Barwick CJ.

28

Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874 at 882 per North P.

29

AFG Insurances Ltd v City of Brighton (1972) 126 CLR 655 at 663 per Mason J; Santos Ltd v American Home Assurance Co (1987) 4 ANZ Ins Cas ¶60-​795 at 74,874–​7 per White J; Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd (2003) 12 ANZ Ins Cas ¶61-​553 at 76,512 per Palmer J [affd QBE Mercantile Mutual Ltd v Hammer Waste Pty Ltd (2004) 13 ANZ Ins Cas ¶61-​586]; Speno Rail Maintenance Australia Pty Ltd v Metals and Minerals Insurance Pte Ltd (2009) 226 FLR 306 at [182], [195], [196] per Beech AJA [affd on a different point: Zurich Australian Insurance Ltd v Metals and Minerals Insurance Pte Ltd (2009) 240 CLR 391].

30

Standard form insurance contracts invariably include precise clauses dealing with subrogation and the duties of an insured not to prejudice the insurer’s right.

31

Hammer Waste Pty Ltd v QBE Mercantile Mutual Ltd (2003) 12 ANZ Ins Cas ¶61-​553 at 76,512 per Palmer J [affd QBE Mercantile Mutual Ltd v Hammer Waste Pty Ltd (2004) 13 ANZ Ins Cas ¶61-​586].

32

State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 at 241 per Barwick CJ.

33

Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 at 196–​198 per Smart J.

34

See, for example, Insurance Commission of Western Australia v Kightly (2005) 30 WAR 380 (where the settlement and release executed by the insured with no bona fide consideration of the insurer’s interests precluded the insurer’s exercise of its right of subrogation, thus amounting to a breach of duty by the insured to the insurer, and to an award of equitable compensation for the insurer’s loss: at [53], [54] per Steytler P, with whom Wheeler and Roberts-​Smith JJA concurred).

35

Esso Petroleum Ltd v Hall Russell & Co Ltd [1989] 1 AC 643 at 676. See also Simpson & Co v Thompson (1877) 3 App Cas 279 at 284 per Lord Cairns LC, at 290 per Lord Penzance, at 293 per Lord Blackburn; John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 253–​254 per McCardie J; Sydney Turf Club v Crowley [1971] 1 NSWLR 724 at 734 per Mason JA; AFG Insurances Ltd v City of Brighton (1972) 126 CLR 655 at 663 per Mason J.

36

Esso Petroleum Ltd v Hall Russell & Co Ltd [1989] 1 AC 643 at 663 per Lord Goff; Napier v Hunter [1993] AC 713 at 741 per Lord Goff. Such a clause may read as follows: “The insurer shall be entitled to use the name of the insured in any proceedings to enforce, for the benefit of the insurer, any order made, for costs or otherwise, and shall have the right of subrogation,

[14.40]  437 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

insured, or via an assignment of the insured’s rights from the insured of which notice is given to the wrongdoer.37 Otherwise, the insurer must apply to the court to compel the insured to allow it, to which the court will accede only on such terms as are just and equitable.38 The insurer can short-​circuit this cumbersome process by proceeding against both the insured and the third party wrongdoer, seeking, first, an order that the insured authorise it to proceed against the third party in the insured’s name and, second, to proceed (so authorised) against the third party.

Partial subrogation [14.45] Where the loss exceeds the amount paid by the insurer, the insured retains her or

his rights of action (“partial subrogation”). The court will not, therefore, interfere with the insured’s conduct of the action if he or she undertakes to claim for the entire loss. In such cases the insured must proceed with proper regard for the insurer’s interests, and can be liable in damages for any misconduct, or abandonment of rights effected in the issue of proceedings or by their compromise.39 An insured who recovers more than the uninsured loss must account to the insurer for the excess after fully recouping her or his loss, costs and expenses.40 As explained by Lord Templeman in Napier v Hunter:41

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The insured person is guilty of unconscionable conduct if he does not provide for the insurer to be recouped out of the damages awarded against the wrongdoer. Equity will not allow the insured person to insist on his legal rights to all the damages awarded against the wrongdoer and will restrain the insured person from receiving or dealing with those damages so far as they are required to recoup the insurer under the doctrine of subrogation. Where the insured person has been paid policy moneys by the insurer for a loss in respect of which the insured person recovers damages from a wrongdoer the insured person is guilty of unconscionable conduct if he does not procure and direct that the sum due to the insurer shall by way of subrogation be paid out of the damages.

To effect this account, the insurer has an equitable proprietary right, in the form of a lien, for the amount in respect of which it is entitled to be subrogated.42 The lien is enforceable against

in respect of all rights which the insured may have against any person or persons who may be responsible to the insured, or otherwise in respect of any claim for any loss or injury covered by this policy, and the insured shall as and when required execute any necessary documents for the purpose of vesting such rights in the insurer”. 37

King v Victoria Insurance Co Ltd [1896] AC 250 at 256 (PC).

38

John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 253–​254 per McCardie J; Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 at 339 per Diplock J; Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 800–​801 per Lord Denning MR; Esso Petroleum Ltd v Hall Russell & Co Ltd [1989] 1 AC 643 at 672–​674 per Lord Jauncey; Woodside Petroleum Development Pty Ltd v H & R-​E & W Pty Ltd (1999) 10 ANZ Ins Cas ¶61-​430 at 74,851–​2 per Ipp J.

39

West of England Fire Insurance Co v Isaacs [1897] 1 QB 226; Phoenix Assurance Company v Spooner [1905] 2 KB 753; Globe and Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659 at 668–​669 per Ferguson JA.

40

Burnand v Rodocanachi Sons & Co (1882) 7 App Cas 333 at 339 per Lord Blackburn; Assicurazioni Generali de Trieste v Empress Assurance Corporation Ltd [1907] 2 KB 814; Re Driscoll (deceased) [1918] 1 IR 152; Globe and Rutgers Fire Insurance Co v Truedell [1927] 2 DLR 659 at 662 per Hodgins JA.

41

Napier v Hunter [1993] AC 713 at 738. Cf at 747 per Lord Jauncey.

42

In Napier v Hunter [1993] AC 713 at 741–​742 Lord Goff noted 19th century authority that recoveries by the insured that reduce the loss paid by the insurer are held in trust for the insurer: Commercial Union Assurance Co v Lister (1874) LR 9 Ch App 483 at 484n per Jessel MR. But his Lordship (at 744–​745) preferred to characterise the insurer’s interest as a lien than a beneficial interest in trust property. See also at 737–​738 per Lord Templeman. Lord Browne-​Wilkinson (at 752) considered that “the imposition of a trust is neither necessary nor desirable: to impose fiduciary liabilities on the assured is commercially undesirable and unnecessary to protect the insurers’ interests”. To the same effect in the context of sureties see Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467 at 486–​487 per Giles J. Lord Browne-​Wilkinson added (at 752) that, in addition to the

438 [14.45] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

the fund so long as it is traceable and has not been acquired by a bona fide purchaser for value without notice.43

Role for implied contract? [14.50] There is case law identifying the origin of subrogation in the context of insurance

contracts in the implied terms of the contract.44 Because a contract of insurance is a contract of indemnity, it is reasoned, business efficacy justifies the implication of promises by the insured to: (a) take proceedings to reduce her or his loss; (b) account to the insurer for any money recovered in respect of the insured loss; and (c) allow the insurer to take proceedings in the name of the insured against the wrongdoer to recover the insured loss if the insured declines to do so.45 Under this analysis, equity’s role was only in its auxiliary jurisdiction to compel the insured to lend her or his name to the insurer to enforce rights and remedies to which the insurer was subrogated. Lord Goff in Napier v Hunter46 doubted this analysis because it ignores that subrogation was the subject of separate development by courts of equity. Lord Templeman in the same case sought to reconcile the concurrent common law and equitable analysis as follows:47

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[C]‌ontractual promises may create equitable interests … [P]romises implied in a contract of insurance with regard to rights of action vested in the insured person for the recovery of an insured loss from a third party responsible for the loss confer on the insurer an equitable interest in those rights of action to the extent necessary to recoup the insurer who has indemnified the insured against the insured loss.

In any case, the implied term theory cannot explain categories of subrogation not founded on agreement or an intention to indemnify.48 Consistency of principle thus dictates that subrogation is an equitable right,49 or a form of equitable relief, deriving its lifeblood not from intention but according to equitable principle. That an insurer may need to seek the assistance of a court of equity equally shows that its entitlement to sue in the name of the insured is based in equity, not an express or inferred contractual intention.50 lien, the insurer has a personal right of action at law to recover the amount received by the insured as moneys had and received to the use of the insurer. Cf at 740 per Lord Templeman, at 745 per Lord Goff. 43

Arthur Barnett Ltd v National Insurance Co of New Zealand Ltd [1965] NZLR 874 at 883 per North P, at 885–​886 per McCarthy J; Napier v Hunter [1993] AC 713 at 737–​738 per Lord Templeman, at 741–​745 per Lord Goff, at 752 per Lord Browne-​Wilkinson.

44

Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330 at 339–​341 per Diplock J; Hobbs v Marlowe [1978] AC 16 at 39 per Lord Diplock; Woodside Petroleum Development Pty Ltd v H & R-​E & W Pty Ltd (1999) 10 ANZ Ins Cas ¶61-​430 at 74,852 per Ipp J. Cf Orakpo v Manson Investments Ltd [1978] AC 95 at 104 per Lord Diplock, at 119 per Lord Keith; Santos Ltd v American Home Assurance Co (1987) 4 ANZ Ins Cas ¶60-​795 at 74,875 per White J.

45

Woodside Petroleum Development Pty Ltd v H & R-​E & W Pty Ltd (1997) 18 WAR 539 at 569 per Anderson J [affd Woodside Petroleum Development Pty Ltd v H & R-​E & W Pty Ltd (1999) 10 ANZ Ins Cas ¶61-​430].

46

Napier v Hunter [1993] AC 713 at 741–​744.

47

Napier v Hunter [1993] AC 713 at 736. See also at 744 per Lord Goff; State Government Insurance Office (Qld) v Brisbane Stevedoring Pty Ltd (1969) 123 CLR 228 at 241–​242 per Barwick CJ; Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 812 per James LJ.

48

Cf Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 231 per Lord Hoffmann (who considered that the doctrine of subrogation in insurance rests upon the common intention of the parties and gives effect to the principle of indemnity embodied in the contract).

49

Aldrich v Cooper (1803) 8 Ves 382 at 389; 32 ER 402 at 405 per Lord Eldon LC; John Edwards & Co v Motor Union Insurance Co Ltd [1922] 2 KB 249 at 252 per McCardie J; Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 348 per Gibbs ACJ; Morganite Ceramic Fibres Pty Ltd v Sola Basic Australia Ltd (1987) 11 NSWLR 189 at 196 per Smart J.

50

Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 801 per Lord Denning MR.

[14.50]  439 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

Exclusion by insurance contract [14.55]  A right of subrogation can be excluded explicitly by the terms of the insurance policy

itself. Even where the right of subrogation subsists under the policy, however, it is conceivable that the terms of some underlying contract between the insured and the third party may denude it of substance and thus preclude its exercise. As explained by Elias LJ in Rathbone Brothers plc v Novae Corporate Underwriting Ltd:51 The terms of the underlying contract may be such that the insured cannot recover against the third party because on its proper construction, in the particular circumstances, the insured either has no right against the third party, or only has a right to the extent that there is a shortfall following receipt of the insurance moneys. In such cases the underlying contract envisages that the insurer bears the primary liability for the loss in question and the third party is, if liable at all, the secondary source of indemnity. Where that is the case, since the insurer cannot claim any greater rights than the insured, there is nothing to be enforced. This is not defeating the right to subrogation itself; rather it is leaving that right empty of any content in the particular case.

His Lordship, with whom Sharp LJ agreed, also countenanced that the right to subrogation can be excluded by implication, where it is inconsistent with the objective underscoring the relevant policy.52

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Waiver of subrogation by insurance policy [14.60]  A right to seek subrogation may be limited or excluded by a waiver, in whole or in part, by the person entitled to exercise that right.53 For instance, an insurer that has agreed with the insured to waive its right of subrogation cannot bring a subrogated claim against a third party,54 who can plead this waiver even though not a party to the insurance contract.55 However, a waiver by an insured of her or his rights under a waiver of subrogation clause cannot bind a third party. In Fraser River Pile & Dredge Ltd v Can-​Dive Services Ltd56 a marine insurance policy included a waiver of the insurer’s right of subrogation against, inter alia, “any charterer”. Following the loss, the insurer and the owner (the insured) agreed that the owner would “waive any right he or she may have pursuant to the waiver of subrogation clause”. The insurer then proceeded in the owner’s name against the charterer. The Supreme Court of Canada held that, as the insurer intended to benefit the charterer in the precise circumstances that occurred, the parties’ intentions and commercial reality mandated an exception to privity of contract. On this basis, it treated the subsequent agreement to waive the waiver clause as ineffective to revoke the charterer’s rights, which had crystallised on the occurrence of the loss. Iacobucci J explained the point as follows:57

51

Rathbone Brothers plc v Novae Corporate Underwriting Ltd [2015] Lloyd’s Rep IR 95 at [67].

52

Rathbone Brothers plc v Novae Corporate Underwriting Ltd [2015] Lloyd’s Rep IR 95 at [85] per Elias LJ, at [123], [124] per Sharp LJ. Cf at [119] per Beatson LJ (“clear words are needed to exclude a right of subrogation”).

53

New Zealand Society of Accountants v ANZ Banking Group (New Zealand) Ltd [1996] 1 NZLR 283 at 286 (CA); Woodside Petroleum Development Pty Ltd v H & R-​E & W Pty Ltd (1999) 10 ANZ Ins Cas ¶61-​430 at 74,852–​4 per Ipp J.

54

Woodside Petroleum Development Pty Ltd v H & R-​E & W Pty Ltd (1999) 10 ANZ Ins Cas ¶61-​430 at 74,852–​4 per Ipp J.

55

Thomas & Co v Brown (1899) 4 Com Cas 186.

56

Fraser River Pile & Dredge Ltd v Can-​Dive Services Ltd (1999) 176 DLR (4th) 257.

57

Fraser River Pile & Dredge Ltd v Can-​Dive Services Ltd (1999) 176 DLR (4th) 257 at 274–​275.

440 [14.55] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

A plain reading of the waiver of subrogation clause indicates that the benefit accruing in favour of third parties is not subject to any qualifying language or limiting conditions. When sophisticated commercial parties enter into a contract of insurance which expressly intends the benefit of a waiver of subrogation clause to an ascertainable class of third party beneficiary, any conditions purporting to limit the extent of the benefit or the terms under which the benefit is to be available must be clearly expressed. The rationale for this requirement is that the obligation to contract for exceptional terms must logically rests with those parties whose intentions do not accord with what I assume to be standard commercial practice.

This sensible conclusion would most likely follow in Australia, as the High Court has shown a willingness either to create exceptions to the doctrine of privity in insurance contracts,58 or to use other doctrines, such as agency or trust,59 to circumvent privity problems.

Statutory exclusions: Insurance Contracts Act 1984 (Cth), ss 65 and 66 [14.65] The Insurance Contracts Act 1984 (Cth) modifies or excludes the exercise of rights of

subrogation in specified circumstances in respect of contracts governed by it.60 Under s 65 the insurer is deprived of its right to be subrogated where the insured has not exercised her or his rights against a third party and might reasonably be expected not to because: (a) of the family relationship or other personal relationship between the insured and the third party; or (b) the insured consented to the third party’s use of a motor vehicle the subject of the contract of insurance. Section 66 denies an employer’s right to be subrogated to the rights of the insured against an employee where: (a) the insured’s rights under a contract of general insurance in respect of a loss are exercisable against an employee; and (b) the conduct of the employee that gave rise to the loss occurred in the course of or arose out of the employment and was not serious or wilful misconduct.

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Principal and surety

Right of subrogation upon payment of debt [14.70]  A “surety” is a person who answers for the default of another (the principal debtor).

A surety who fulfils her or his obligation under the contract of guarantee61 is entitled (subject to contrary provision in that contract62 or by taking a substitute security to that discharged)63 to stand in the creditor’s shoes and exercise the creditor’s right to sue the principal debtor for the amount, and to any securities given by the principal debtor to the creditor for the debt.64

58

See Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 121–​124 per Mason CJ and Wilson J.

59

See, for example, Bahr v Nicolay (No 2) (1988) 164 CLR 604, discussed at [17.50].

60

The Insurance Contracts Act 1984 (Cth) applies to all insurance contracts other than those excepted under s 9.

61

Where the guarantor’s liability is limited to a particular sum, the surety is entitled to subrogation upon payment of that sum: Equity Trustees Executors and Agency Co Ltd v NZ Loan & Mercantile Agency Co Ltd [1940] VLR 201 at 207 per Lowe J. Cf Bayley v Gibsons Ltd (1993) 1 Tas R 385 at 397 per Zeeman J (“to establish a right to subrogation on equitable principles a surety needs to establish no more than that the creditor’s debt has been paid in full and that the surety has paid some part of it”; emphasis supplied).

62

O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 219–​220 per Dixon J, at 222 per Evatt J, at 223 per McTiernan J; Johnson v Australian Guarantee Corporation Ltd (1992) 59 SASR 382 at 386–​387 per King CJ, at 397–​398 per Olsson J; Aquilina Holdings Pty Ltd v Lynndell Pty Ltd [2008] QSC 57 at [25]–​[34] per Daubney J.

63

Highland v Exception Holdings Pty Ltd (in liq) (2006) 60 ACSR 223 at [91] per Santow JA.

64

Duncan, Fox & Co and Robinson & Co v North and South Wales Bank (1880) 6 App Cas 1 at 12 per Lord Selborne LC; O’Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 223 per McTiernan J; Morris v Ford Motor Co Ltd [1973]

[14.70]  441 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

Again, these rights depend not on contract but on a right of subrogation recognised by equity. The reason why equity intervenes, it has been said, is that “it would be unconscionable for the debtor to escape the liability which has been discharged by the [surety’s] acts”.65 [14.75]  The equitable right of a guarantor who has paid out the creditor to be subrogated to

the right of the creditor, including any securities held by the creditor, is reflected in legislation in each jurisdiction.66 The wording of the Victorian provision illustrates the extent of the statutory intrusion:

(1) A person who is —​



(a) a surety for the debt or duty of another; or



(b) is liable with another for a debt or duty —​ and who pays that debt or performs that duty, is entitled to have assigned to that person or to a trustee for that person every judgment specialty or other security held by the creditor in respect of that debt or duty …



(3) A person who pays a debt or performs a duty as referred to in sub-​section (1) is entitled —​



(a) to stand in the place of the creditor; and



(b) to use all the remedies of the creditor; and



(c) if necessary and on a proper indemnity, to use the name of the creditor —​

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in any proceedings to obtain from the principal debtor or any co-​surety, co-​contractor or co-​debtor … indemnity for the advances made and loss sustained by the person who paid the debt or performed the duty.

This has been described as “a general remedial provision designed to codify and provide a broad legal framework for the law related to trade and commercial transactions; and to clarify rights of, and relationships between, parties in the absence of an expressed contrary intention”.67 As the legislation does not proscribe contracting out of it, an appropriately drafted contract may exclude the guarantor’s statutory rights of subrogation.68 The general law principles of subrogation still apply in cases of non-​compliance with the terms of the legislation.69

1 QB 792 at 800 per Lord Denning MR; Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 348 per Gibbs ACJ; Israel v Foreshore Properties Pty Ltd (in liq) (1980) 54 ALJR 421 at 423–​424 per Aickin J; Mahoney v McManus (1981) 55 ALJR 673 at 680 per Brennan J; Commissioners of State Savings Bank of Victoria v Patrick Intermarine Acceptances Ltd (in liq) [1981] 1 NSWLR 175 at 180 per Meares J; D & J Fowler (Aust) Ltd v Bank of New South Wales [1982] 2 NSWLR 879 at 886 per Helsham CJ in Eq; Maxal Nominees Pty Ltd v Dalgety Ltd [1985] 1 Qd R 51 at 53 per McPherson J; Austin v Royal (1999) 47 NSWLR 27 at 31 per Cole AJA. 65

Cook v Italiano Family Fruit Company Pty Ltd (in liq) (2010) 80 ACSR 680 at [109] per Finkelstein J. See also Re Dalma No 1 Pty Ltd (in liq) (2013) 279 FLR 80 at [28] per Brereton J.

66

Mercantile Law Act 1962 (ACT), s 13; Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 3; NT: Mercantile Law Amendment Act 1861 (SA), s 3 (repealed); Mercantile Act 1867 (Qld), s 4; Mercantile Law Act 1936 (SA), s 17; Mercantile Law Act 1935 (Tas), s 13; Supreme Court Act 1986 (Vic), s 52; WA: Mercantile Law Amendment Act 1856 (Imp), s 5 (as adopted by the Imperial Acts Adopting Ordinance 1867 (WA)).

67

Johnson v Australian Guarantee Corporation Ltd (1992) 59 SASR 382 at 398 per Olsson J.

68

Johnson v Australian Guarantee Corporation Ltd (1992) 59 SASR 382 at 386 per King CJ, at 397 per Olsson J (where the following clause in a guarantee was held to oust the statutory entitlement to subrogation: “none of the Guarantors will claim the benefit of or seek or require the transfer of any Guarantee or other security which the Creditor may now or thereafter hold in respect of all or any part of the guaranteed moneys”).

69

Bayley v Gibsons Ltd (1993) 1 Tas R 385 at 397 per Zeeman J (the legislation “does not derogate from the equitable rights of a surety”).

442 [14.75] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

Bills of exchange [14.80]  A “bill of exchange” is defined in s 8(1) of the Bills of Exchange Act 1909 (Cth) as

“an unconditional order in writing, addressed by one person to another, signed by the person giving it [the ‘drawer’], requiring the person to whom it is addressed [the ‘drawee’ or ‘acceptor’ (which the drawee becomes once having accepted the bill) being the principal debtor] to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer”. The general principles relating to principal–​surety subrogation discussed above apply equally to bills of exchange, such that the indorser (or payee) of a bill (as a surety) who pays the drawer of it is entitled to the benefit of the securities given by the acceptor that the drawer has in her or his hands at the time of payment, and upon which he or she has no claim except for the bill itself. As explained by Lord Blackburn in Duncan, Fox & Co and Robinson & Co v North and South Wales Bank:70 [T]‌here is neither principle nor authority for saying that the indorsers are, during the currency of the bill, sureties, or in the nature of sureties to the indorsee, or that they have any equity to prevent the indorsee from dealing as it may seem to him most desirable, with any other parties unless thereby he prevents himself from giving notice of dishonour, so as to give them their remedy against prior parties to the bill … But though the indorsers had no such right by contract, yet after the bills were dishonoured and notice of dishonour had been given to the indorsers, the position of the parties is altered. Though the indorser is primarily liable as principal on the bill, and is not strictly a surety for the acceptor, he has this in common with a surety for the acceptor, that he is entitled to the benefit of all payments made by the acceptor, and is entitled, on paying the holder, to be put in a situation to have a right to sue the acceptor.

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The drawer’s or indorser’s right to subrogation upon payment on a bill also arises under statute. The Bills of Exchange Act 1909 (Cth), s 64(2) reads:

(a) where a bill payable to, or to the order of, a third party is paid by the drawer, the drawer may enforce payment thereof against the acceptor, but may not re-​issue the bill:



(b) where a bill is paid by an indorser, or where a bill payable to the drawer’s order is paid by the drawer, the party paying it is remitted to his or her former rights as regards the acceptor or antecedent parties, and he or she may, if he thinks fit, strike out his or her own and subsequent indorsements, and again negotiate the bill.

Also, s 87(1) of the Cheques Act 1986 (Cth) states that where a cheque payable to order is paid by, but is not indorsed to, the drawer, the drawer is entitled to have the payee indorse the cheque so as to transfer to her or him the cheque by negotiation. Debtor and creditor

General principle —​based on presumed intention? [14.85]  Where a loan is to be secured, and the loan moneys are to be applied to discharge an

existing security, if the new security is invalid from the outset the lender is treated as subrogated to the first valid security.71 Subrogation here has generally been viewed as being based 70

Duncan, Fox & Co and Robinson & Co v North and South Wales Bank (1880) 6 App Cas 1 at 18. See also at 13–​15 per Lord Selborne LC; A M Spicer and Son Pty Ltd (in liq) v Spicer (1931) 47 CLR 151; Re Downer Enterprises Ltd [1974] 2 All ER 1074; Commissioners of State Savings Bank of Victoria v Patrick Intermarine Acceptances Ltd (in liq) [1981] 1 NSWLR 175 at 180–​182 per Meares J; Dalgety Ltd v Commercial Bank of Australia Ltd [1981] 2 NSWLR 211 at 213–​215 per Rogers J.

71

Wylie v Carlyon [1922] 1 Ch 51 at 63 per Eve J; Re Downer Enterprises Ltd [1974] 2 All ER 1074 at 1082 per Pennycuick VC; Burston Finance Ltd v Speirway [1974] 1 WLR 1648 at 1652 per Walton J; Paul v Speirway Ltd (in liq) [1976] 1 Ch 220 at 231–​233 per Oliver J; Orakpo v Manson Investments Ltd [1978] AC 95 at 104 per Lord Diplock; State Bank of South

[14.85]  443 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

upon the presumed mutual intentions of the lender and borrower. Hence, the relevant inquiry has been phrased as whether the terms of the loan agreement between the borrower and the new lender are “sufficient to demonstrate an intention that the security for the debt paid out of the new loan should not be kept alive if the new lender’s security should prove for some reason to be ineffective”.72 Where the court is satisfied that the true nature of the transaction is simply an unsecured loan, this ordinarily suffices to dispose of any question of subrogation.73 Yet if subrogation is truly a remedy for an unjust outcome rather than a right based on presumed intention (see [14.10], [14.15]), this scenario should not preclude the claim from being subrogated to the personal rights of the creditor whose debt is discharged if the contractual liability of the original borrower proves to be unenforceable.74

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[14.90]  That money lent has been expended upon discharging a secured liability of the bor-

rower does not give rise to rights of subrogation unless the contract under which the money was borrowed provides that the money is to be applied for this purpose.75 For instance, in Evandale Estates Pty Ltd v Keck76 Hudson J held that money lent for the purpose of being applied towards the purchase price of land purchased by the borrower does not entitle the lender, by way of subrogation, to the equitable lien the vendor would have had if unpaid (as to which see [1.95]), unless the whole of the circumstances dictate the parties intended that the lender have security for the loan over the land. Even when the contract provides (expressly or impliedly) that moneys borrowed will be used for the purpose of discharging an existing secured debt, a presumed intention that the lender is entitled to the security of the existing creditor can be displaced by inconsistent provisions in the contract. However, merely because the contract of loan contemplates that the lender is to obtain a specific new security from the borrower does not necessarily displace the doctrine of subrogation. Where the moneys are advanced on the understanding that the lender is to have certain security for the moneys advanced and, for whatever reason, he or she does not receive the promised security, the doctrine of subrogation may apply. For example, in Ghana Commercial Bank v Chandiram77 the appellant bank (lender) was to have a legal mortgage over land to secure a loan to enable the borrower to discharge an existing equitable mortgage over that land in favour of another. The legal mortgage proved to be invalid. The Privy Council took the bank’s intention to be to replace the equitable charge by a valid and effective legal mortgage, but to keep the equitable charge alive and to have the benefit of it save in so far as it was replaced. Their Lordships went so far as to say that a third party who pays off a mortgage is presumed, unless the contrary appears, to intend that the mortgage

Australia v Rothschild Australia Ltd (1990) 8 ACLC 925 at 940 per Tadgell J; Halifax plc v Omar (2002) 16 EGCS 180 at [80] per Jonathan Parker LJ. Cf Cid v Cortes (1987) 4 BPR 9391 at 9393–​4 per Young J. 72

State Bank of South Australia v Rothschild Australia Ltd (1990) 8 ACLC 925 at 941 per Tadgell J. See also Orakpo v Manson Investments Ltd [1978] AC 95 at 120 per Lord Keith.

73

Paul v Speirway Ltd (in liq) [1976] 1 Ch 220 at 232–​233 per Oliver J; Cochrane v Cochrane (1985) 3 NSWLR 403 at 405 per Kearney J. Cf Cid v Cortes (1987) 4 BPR 9391 at 9393–​4 per Young J. This proposition was not disputed by Lord Hoffmann in Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 234.

74

Boscawen v Bajwa [1996] 1 WLR 328 at 338 per Millett LJ, citing Re Wrexham [1899] 1 Ch 440 (where the borrowing was ultra vires) and B Liggett (Liverpool) Ltd v Barclays Bank Ltd [1928] 1 KB 48 (where the borrowing was unauthorised).

75

Wylie v Carlyon [1922] 1 Ch 51.

76

Evandale Estates Pty Ltd v Keck [1963] VR 647.

77

Ghana Commercial Bank v Chandiram [1960] AC 732.

444 [14.90] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

be kept alive for her or his benefit.78 It follows that a creditor who is still properly exercising rights under a security cannot be said to have no further use for or entitlement to hold the security; it remains “alive” for her or his benefit.

Alternative analysis based on unfair outcome?

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[14.95] In Boscawen v Bajwa79 Millett LJ noted that the doctrine of subrogation may apply

even though it is impossible to infer a mutual intention to keep the original security alive on the part of the creditor and the person claiming to be subrogated to the creditor’s security. In this regard the House of Lords has lamented the artificiality of an analysis based on presumed intention, opining that this intention must inevitably “be propped up by presumptions which can verge upon outright fictions”.80 Instead, their Lordships favoured an approach based not on intention but on equitable principle. The relevant case is Banque Financiére de la Cité v Parc (Battersea) Ltd.81 The appellant lent money to the respondent to enable the repayment of part of an existing loan from another financial institution, the latter being secured by a first charge on the respondent’s land. The loan was not expressed to be secured, but was subject to an undertaking that other companies in the respondent’s group would not demand repayment of loans they had advanced to the respondent until the appellant had been repaid. A loan to the respondent from a company in that group (OOL) was secured by a second charge over the land in issue. As the officers of the respondent who negotiated this deal lacked authority to commit OOL to such an undertaking, it was found not to be binding on OOL. When the respondent became insolvent, the issue before the House of Lords was whether, as against OOL, the appellant was entitled to be subrogated to the first charge to the extent that its money was used to repay the debt that the first charge had secured. The House of Lords held that equity’s ground for intervention by way of subrogation in this context was to prevent unjust enrichment. Were the appellant denied a right to be subrogated to the first charge, OOL would be unjustly enriched at the appellant’s expense.82 This, in its opinion, conferred on the appellant no greater rights than it had bargained for, for it meant that OOL would be prevented from enriching itself to the extent that the appellant’s money paid off the first charge. The practical effect of the ruling was that the appellant, though unsecured, achieved priority over OOL (the second charge holder). Lord Hoffmann, who delivered the leading speech, explained that to say that the charge is “kept alive” for the benefit of a

78

Ghana Commercial Bank v Chandiram [1960] AC 732 at 745. See also Butler v Rice [1910] 2 Ch 277 at 282–​283 per Warrington J; Re Sara Properties Pty Ltd (in liq) [1982] 2 NSWLR 277 at 281–​282 per Rath J; Cochrane v Cochrane (1985) 3 NSWLR 403 at 405 per Kearney J; State Bank of South Australia v Rothschild Australia Ltd (1990) 8 ACLC 925 at 941–​943 per Tadgell J.

79

Boscawen v Bajwa [1996] 1 WLR 328 at 339.

80

Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 234 per Lord Hoffmann. See also at 241 per Lord Hutton.

81

Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221.

82

Per Lord Hoffmann (with whom Lords Clyde and Griffiths agreed) and Lord Hutton. See also Menelaou v Bank of Cyprus UK Ltd [2016] AC 176 (where the respondent bank held charges over property to secure its owners’ indebtedness, but agreed to release those charges to enable the owners to sell the property, and purchase a new property for their daughter and repay part of their indebtedness, on the condition that it was granted a charge over the new property; it transpired that the charge over the new property was defectively executed and void; the Supreme Court ruled that the bank was entitled to be subrogated to the unpaid vendor’s lien so as to have equitable charge over new property; by in effect reinstating the daughter’s liability under the charge, “the remedy of subrogation is reversing what would otherwise be her unjust enrichment”: at [49] per Lord Clarke; see also at [92]–​[97] per Lord Neuberger).

[14.95]  445 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

plaintiff (here the appellant) means that the plaintiff’s legal relations with a defendant (such as OOL) who otherwise would be unjustly enriched are regulated “as if the benefit of the charge had been assigned to him”.83 As on the facts the first charge had been discharged, to say it was “kept alive” is to speak metaphorically. It could not be seen as conferring a proprietary entitlement,84 as subrogation gives no greater relief than that bargained for. [14.100]  The House of Lords’ analysis is not without its problems, as the appellant’s mistake

did not result in its failing to obtain any anticipated proprietary interest. As explained by one commentator:85

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There is arguably a difference in kind between the existing subrogation cases, where the payer has stipulated for a proprietary interest before the payment and mistakenly assumes it is in place, and [Banque Financiére] where the plaintiff intended to be an unsecured creditor but proceeded under a mistake as to the extent of its exposure as such. In this respect, its position might be thought weaker even than that of the standard mistaken payer, who does not intend to be a creditor at all.

A distinction of this kind was subsequently recognised by the English Court of Appeal, namely between subrogation as a security in the usual sense and, on the other hand, subrogation as merely to the indebtedness limited to rights in personam.86 It may follow that, in the usual case of persons who claim to be subrogated to security rights, unjust enrichment has little to do with the relief claim. If this is so, Banque Financiére is a case that can to a large degree be confined to its own facts.87 Another difficulty with Banque Financiére concerns the fact that the appellant had, in making the loan, not taken the elementary precaution of ensuring that the respondent had authority to commit the other members of the group to the undertaking. This was held not to impact on the issue of unjust enrichment.88 Yet as the court characterised subrogation as an equitable remedy, there arguably should have been scope for denying such relief by resort to equitable defences such as acquiescence and estoppel.89 Moreover, in that equity does not ordinarily assist those well able to protect their own interests, it may be queried whether relief should have been available to a large financial institution that neglected to take proper precautions. Thus the concerning upshot of Banque Financiére is that “no creditor receiving payment can confidently expect to remain unchallenged by some third party claiming that there has been unjust enrichment”.90

83

Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 236 (emphasis in original).

84

Cf Robertson, “Subrogation and the Law of Restitution” (1998) 9 JBFLP 146 at 148.

85

Watts, “Subrogation —​A Step Too Far?” (1998) 114 LQR 341 at 343.

86

Halifax plc v Omar (2002) 16 EGCS 180 at [70] per Jonathan Parker LJ.

87

See Midwinter, “Subrogation Finds Some ‘Well-​Settled Principles’” [2003] LMCLQ 6 at 10–​11 (who argues that a major step that remains in achieving the goal of a simplified and coherent law of subrogation “is for it to be acknowledged that unjust enrichment doctrine is as much an unnecessary confusion in cases involving a personal remedy as it is in the realm of property law”).

88

Banque Financiére de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 235 per Lord Hoffmann (who considered that carelessness is not a ground for holding that a consequent enrichment is not unjust), at 243–​244 per Lord Hutton (who held that there is no requirement that a lender can claim the benefit of subrogation only on proof that it took reasonable precautions to ensure that the security for which he stipulated would be effective).

89

Robertson, “Subrogation and the Law of Restitution” (1998) 9 JBFLP 146 at 147.

90

Bridge, “Failed Contracts, Subrogation and Unjust Enrichment: Banque Financiére de la Cité v Parc (Battersea) Ltd” [1998] JBL 323 at 333. Cf Villiers, “A Path Through the Subrogation Jungle: Whose Right is it Anyway?” [1999] LMCLQ 223.

446 [14.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

[14.105]  In any event, Australian courts have given a largely frosty reception to unjust enrich-

ment as the foundation for subrogation in equity. Bryson J addressed the point in Challenger Managed Investment Ltd v Direct Money Corporation Pty Ltd as follows:91

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I would respectfully say that Lord Hoffmann’s relation … of subrogation to unjust enrichment [in Banque Financiére] was not articulated in the authorities to which his Lordship referred, and is not established in Australian case law. In my understanding explanation of subrogation in terms of restitution and unjust enrichment was introduced by Millett LJ in Boscawen v Bajwa [1996] 1 WLR 328 at 334, and was not earlier found. Lord Hoffmann’s reference to the law of restitution does not … provide an explanation for the mortgagor’s being treated as bound, in equity, to treat the person who paid off the previous mortgage as entitled to security under it. Restitution would provide a basis for treating the mortgagor as obliged to restore to the person who paid it the amount which had been paid to the mortgagee: the concept is inadequate for also treating the mortgagor as obliged to hold the payer secured. This is particularly clear where, as in this case, and in other cases where subrogation has been held to exist, the mortgagor in fact had no dealings with the payer, or where the payer believed that he was getting security under arrangements in which the mortgagor was not in fact involved. To my mind it is enough to see subrogation as an entitlement which equity accords to the payer, firmly established by judicial decisions …

The point is of some significance, not just going to whether the right arises, and the relevant remedies, but also to what defences may legitimately be available in response to the right (as defences in restitution, such as change of position, do not necessarily parallel those in equity).92 The High Court has since confirmed that the introduction of unjust enrichment in the context of subrogation “may conflict in a fundamental way with well-​settled equitable doctrines and remedies”.93 Their Honours expressed the view that, as the principles of equity in the law of subrogation “are well developed and have the vitality to permit further development in an orthodox fashion”, there was no need to resort to “some all-​embracing theories of unjust enrichment”.94 In fact, the court went further, rejecting unjust enrichment as “a principle which can be taken as a sufficient premise for direct application in a particular case”.95

Creditors of trading trusts [14.110]  The circumstances in which the creditors of a trading trust may be subrogated to

the trustee’s right of indemnity out of the trust property are discussed elsewhere: see [27.25].

91

Challenger Managed Investment Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452 at [50] (this paragraph is not extracted in the reported version). See also Saffron Sun Pty Ltd v Perma-​Fit Finance Pty Ltd (in liq) (2005) 65 NSWLR 603 at [13] per Windeyer J (who noted that Australian law does not embrace the principle that “subrogation is a remedy primarily aimed at preventing unjust enrichment”, as stated by Neuberger LJ in Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291 at [33]); Re Dalma No 1 Pty Ltd (in liq) (2013) 279 FLR 80 at [32] per Brereton J (who endorsed Bryson J’s remarks).

92

See Tilley, “Restitution and the Law of Subrogation in England and Australia” (2005) 79 ALJ 518 at 522. Cf Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560 (paralleling the defence of change of position to the doctrine of (equitable) estoppel: see [8.120]).

93

Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [91] (FC). See further van Zwieten, “Certainty and Flexibility: Why Bofinger Matters” (2010) 4 J Eq 71.

94

Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [89], [90] (FC).

95

Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [98] (FC).

[14.110]  447 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

Unauthorised loans [14.115]  Romer LJ stated the general principle in Bannatyne v D & C MacIver as follows:96 Where money is borrowed on behalf of a principal by an agent, the lender believing that the agent has authority though it turns out that his act has not been authorised, or ratified, or adopted by the principal, then, although the principal cannot be sued at law, yet in equity, to the extent to which the money borrowed has in fact been applied in paying legal debts and obligations of the principal, the lender is entitled to stand in the same position as if the money had originally been borrowed by the principal.

This principle applies to agents who are partners,97 and to company directors. In Blackburn Building Society v Cunliffe, Brooks, & Co98 the appellant building society, which lacked power to borrow money, was permitted by its bankers to overdraw its account, for which purpose certain members’ deeds were deposited with the bankers as security. There was evidence that the moneys so advanced were applied in satisfaction of members withdrawing from the society, and in payment of salaries, legal costs and expenses of mortgaged property. When, some five years later, a winding-​up order issued against the appellant, the bankers claimed to retain the deeds as security for the balance of their account. The English Court of Appeal held that, as the overdrawing was ultra vires, the bankers had no lien on the deeds. However, the court proceeded to note the equitable principle that “those who pay legitimate demands which they are bound in some way or other to meet, and have had the benefit of other people’s money advanced to them for that purpose, shall not retain that benefit so as, in substance, to make those other people pay their debts”.99 Therefore, in equity, the bankers were entitled to hold the deeds as security for such part of the money advanced as had been applied in payment of the appellants’ debts and liabilities that were properly payable and had not been repaid to the bankers.

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Invalid loans —​contracts for necessaries [14.120]  At common law, contracts entered into by a minor or insane person are voidable,

that is, unenforceable as against, but enforceable by, the minor or insane person. However, where moneys are lent to a minor or insane person for the purpose of satisfying a debt for “necessaries”, the lender is subrogated to the rights of the suppliers of the necessaries.100 Contracts for necessaries are those for the supply of goods and services which, having regard to the borrower’s social and financial position, it is reasonable that he or she should be permitted to pledge credit to acquire or make use of.101

96

Bannatyne v D & C MacIver [1906] 1 KB 103 at 109. See also Re Cleadon Trust Ltd [1939] 1 Ch 286 at 322–​323 per Clauson LJ.

97

Partners’ creditors can be subrogated to the partners’ right of indemnity conferred by the relevant legislation: Partnership Act 1963 (ACT), s 29(10); Partnership Act 1892 (NSW), s 24; Partnership Act 1997 (NT), s 28; Partnership Act 1891 (Qld), s 27; Partnership Act 1891 (SA), s 24; Partnership Act 1891 (Tas), s 29; Partnership Act 1958 (Vic), s 28; Partnership Act 1895 (WA), s 34.

98

Blackburn Building Society v Cunliffe, Brooks, & Co (1882) 22 Ch D 61 [affd Cunliffe Brooks & Co v Blackburn and District Benefit Building Society (1884) 9 App Cas 857].

99

Blackburn Building Society v Cunliffe, Brooks, & Co (1882) 22 Ch D 61 at 71 (CA).

100

Marlow v Pitfield (1719) 1 P Wms 558 at 559; 24 ER 516 at 517 per the MR; Re Beavan [1912] 1 Ch 196. See Greig and Davis, The Law of Contract (The Law Book Company Limited, 1987), pp 758–​767.

101

Bojczuk v Gregorcewicz [1961] SASR 128 at 131 per Ross J.

448 [14.115] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

CONTRIBUTION Nature of contribution

Foundation for equitable intervention [14.125]  The doctrine of contribution is based upon the principle of natural justice102 that,

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if several persons have a common obligation, they should as between themselves contribute proportionately in satisfying that obligation.103 It is the satisfaction of an obligation by one of a number of persons in common beyond her or his proportionate share of that obligation that raises an “equity” founding the case for equity’s intervention via contribution.104 Were equity not to intervene, it would remain within the power of the obligee so to act as to cause one obligor to be relieved of a responsibility shared with another. Equity operates not by seeking to direct the exercise of the rights by the obligee, but by making an adjustment between the obligors.105 There are repeated Australian judicial statements identifying unjust enrichment as the principle underlying contribution.106 Hence, in determining the entitlement to, and scope of, contribution the court considers all matters relevant to preventing an inequitable outcome; specifically the defendant’s enrichment at the expense of the plaintiff actually or imminently liable in part or whole.107 But this should not be interpreted as a “full blown” application of unjust enrichment  —​with its detailed inquiries into what is “unjust”, what amounts to “enrichment” and defences such as change of position —​but as reflecting equity’s jurisdiction directed at avoiding unjust outcomes.108 Contribution remains grounded in equity, such that a right to contribution may be lost or reduced where it would be inequitable to enforce it; equitable defences such as unclean hands, laches or acquiescence may preclude the court from giving effect to that entitlement.109 So although the right to contribution does not rest on judicial

102

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 351 per Kitto J; Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 294 per Gaudron ACJ and Hayne J. Put another way, in ordering contribution the court is giving effect to the notion that a person who enjoys the benefit ought also to bear the burden: Cummings v Lewis (1993) 41 FCR 559 at 593 per Cooper J.

103

Dering v Earl of Winchelsea (1787) 1 Cox 318 at 321; 29 ER 1184 at 1185 per Eyre LCB; Dimdore v Leventhal (1936) 36 SR (NSW) 378 at 385 per Jordan CJ; Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350–​351 per Kitto J; Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78 at 82–​83 per Helsham J; Mahoney v McManus (1981) 55 ALJR 673 at 676 per Gibbs CJ, at 679 per Wilson J; Scholefield Goodman & Sons Ltd v Zyngier [1984] VR 445 at 453 per Fullagar J; HIH Casualty & General Insurance Ltd v Territory Insurance Office (1998) 10 ANZ Ins Cas ¶61-​392 at 74,160 per Kearney J.

104

McLean v Discount and Finance Ltd (1939) 64 CLR 312 at 347 per Starke J, at 359 per McTiernan J; Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 119 per Bryson J.

105

Friend v Brooker (2009) 239 CLR 129 at [38], [39] per French CJ, Gummow, Hayne and Bell JJ.

106

Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 at 631 per Mason P; AMP Workers’ Compensation Services (NSW) Ltd v QBE Insurance Ltd (2001) 53 NSWLR 35 at 40 per Handley JA; Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 294 per Gaudron ACJ and Hayne J, at 303, 309 per McHugh J.

107

Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78 at 83 per Helsham J; Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 120 per Bryson J; HIH Casualty & General Insurance Ltd v Territory Insurance Office (1998) 10 ANZ Ins Cas ¶61-​392 at 74,160 per Kearney J.

108

Cf Stace, “The Law of Contribution —​Equitable Doctrine or Part of the Law of Unjust Enrichment?” (2017) 48 VUWLR 471.

109

Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 124–​125 per Bryson J; Staples v Baker [1999] 1 Qd R 317 at 327 (CA); Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2007) 214 FLR 48 at [38] per Hammerschlag J. This explains why contribution between co-​trustees is premised on them being in pari delicto (see [23.160]), and why a partner guilty of fraud, illegality, wilful misconduct or gross negligence is not entitled to contribution from her or his partners: Thomas v Atherton (1878) 10 Ch D 185; Lane v Bushby (2000) 50 NSWLR 404.

[14.125]  449 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

discretion at large, nor can it be said that equity recognises an absolute right to contribution; rather, it is a right that may be denied by the court in the circumstances.110 In any event, the right to contribution, although independent of agreement or undertaking to indemnify or contribute,111 can be reduced or excluded by the terms of a contract between the parties, or by other expression of intention to this effect.112

Need for “co-​ordinate liability” [14.130] Contribution has been judicially described as “an attempt by equity to dis-

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tribute equally, among those having a common obligation, the burden of performing it, so that without that common obligation there can be no claim for contribution”.113 Thus equitable intervention is premised, at the outset, on the existence of a common obligation or, in terminology favoured by the High Court, “co-​ordinate liabilities”.114 An obligation or liability can be characterised as co-​ordinate if its fulfilment by one person thereby discharges the liability of other persons, such that the latter would have a good defence against any subsequent claim in respect of that obligation.115 That an obligation is joint and several, or several,116 or that co-​ obligors can adopt different methods of discharg117 ing their obligations, does not preclude it from being “common”. It is sufficient if two persons are each liable in respect of the one loss,118 even if that liability arises out of different causes of action,119 the obligation was undertaken under separate instruments or

110

Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2007) 214 FLR 48 at [39] per Hammerschlag J.

111

Stirling v Forrester (1821) 3 Bli 575 at 596; 4 ER 712 at 719 per Lord Redesdale; Duncan, Fox & Co and Robinson & Co v North and South Wales Bank (1880) 6 App Cas 1 at 19 per Lord Blackburn; Ruabon Steamship Company Ltd v London Assurance [1900] AC 6 at 11–​12 per Earl of Halsbury LC; McLean v Discount and Finance Ltd (1939) 64 CLR 312 at 341 per Starke J; Scholefield Goodman & Sons Ltd v Zyngier [1984] VR 445 at 453, 459 per Fullagar J [affd Scholefield Goodman & Sons Ltd v Zyngier [1986] 1 AC 562 at 572 (PC)]; Capita Financial Group Ltd v Rothwells Ltd (1993) 30 NSWLR 619 at 621–​622 per Priestley JA.

112

Gadsden v Commissioner of Probate Duties [1978] VR 653 at 660 per Harris J; Muschinski v Dodds (1985) 160 CLR 583 at 596–​597 per Gibbs CJ.

113

Friend v Brooker (2009) 239 CLR 129 at [39] per French CJ, Gummow, Hayne and Bell JJ.

114

Friend v Brooker (2009) 239 CLR 129 at [41] per French CJ, Gummow, Hayne and Bell JJ (noting that the phrase “co-​ordinate liabilities” subsumes that of “common obligation”). See also Stirling v Forrester (1821) 3 Bli 575 at 596; 4 ER 712 at 719 per Lord Redesdale; Smith v Cock [1911] AC 317 at 326 (PC); Scholefield Goodman & Sons Ltd v Zyngier [1984] VR 445 at 456, 460 per Fullagar J; Maxal Nominees Pty Ltd v Dalgety Ltd [1985] 1 Qd R 51 at 55 per McPherson J; Bialkower v Acohs Pty Ltd (1998) 41 IPR 33 at 44 (FC(FCA)); Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 292–​293 per Gaudron ACJ and Hayne J. Cf Hotchin v New Zealand Guardian Trust Company Ltd [2016] 1 NZLR 906 at [90]–​[96] per Glazebrook J, at [149]–​[153] per Elias CJ (with whom William Young J agreed on this point: at [160]) (where a majority of the court liberalised the relevant inquiry, both under statute and in equity, in terms of a requirement that there have been the “same damage”, and no more, expressing concern that “inquiries in the cases into ‘co-​ordinate liability’ and ‘common obligation’ have often prompted such analysis and have led to confusion in the case-​law, perhaps because words such as ‘liability’ and ‘obligation’ may equally be used in relation to harm and in relation to source of responsibility”: at [152] per Elias CJ).

115

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 346 per Barwick CJ, McTiernan and Menzies JJ.

116

Dering v Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184; Stimpson v Smith [1999] Ch 340 at 348 per Peter Gibson LJ.

117

Capita Financial Group Ltd v Rothwells Ltd (1993) 30 NSWLR 619 at 627 per Priestley JA.

118

See, for example, in Chidiak v Maatouk [2010] NSWSC 386 at [203] per Ward J (where the obligors (A and P) were under a joint obligation to the bank for the repayment of the loan, albeit that A’s obligation was unsecured whereas P’s was secured; her Honour noted that, whether the bank chose to proceed first against A for repayment of the loan or to enforce its security, “the effect would be to discharge the obligations of the remaining co-​borrower in relation to a common liability owed to the bank”, and so a right to contribution would arise, and the distinction between secured and unsecured obligations was not material).

119

Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 at 597 per Gummow J.

450 [14.130] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

without one having knowledge of the other,120 or the creditor covenants not to sue one of the debtors.121 That the latter are not preconditions for contribution highlights that “common obligations” or “co-​ordinate liabilities” are not to be equated with “common design” between the obligors.122 In Friend v Brooker123 the parties were directors of the one company. The respondent personally borrowed money that he on-​lent to the company. Upon the company ceasing trading, the respondent unsuccessfully sought “contribution” from appellant to repay the personal loan. The High Court ruled that equitable contribution could not arise on the basis of a common design of the parties  —​the money being borrowed and on-​lent as part of a common design for the benefit of the company —​in the absence of a co-​ordinate liability.124 The approach in Friend v Brooker indicates that “co-​ordinate liabilities” do not arise merely out of related transactions125 or similar relationships between the claimant and others. Nor is it sufficient that the claimant’s payment has benefited or relieved the defendant financially; something more is required.126 And the law does not attribute to vague notions of substance over form the ability to convert what is not a co-​ordinate liability into one that is.127 There is no contribution between persons each liable in respect of a distinct portion of the single obligation, because they do not share their obligation in respect of the same subject matter.128 The position is otherwise where persons are liable upon the whole of an obligation but with a limitation upon the quantum recoverable, in which case where the limitation in amount differs between the obligors, each is liable to contribute ratably according to her or his undertaking.129 [14.135]  The principal evidence in determining whether an obligation is “common” or “co-​

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ordinate” is the terms of the document(s) creating the obligation.130 But because in granting relief equity considers substance over form, that those terms evince a common obligation will 120

Cummings v Lewis (1993) 41 FCR 559 at 592 per Cooper J; Stimpson v Smith [1999] Ch 340 at 348 per Peter Gibson LJ.

121

Lavin v Toppi (2015) 254 CLR 459 (where the appellants and respondents were co-​sureties of a guaranteed debt, the respondents paid the creditor a disproportionate amount of guaranteed debt, and the creditor gave the appellants a covenant not to sue them for the debt; the court held that the appellants and respondents shared co-​ordinate liabilities despite creditor’s covenant not to sue, and so the respondents were entitled to contribution from the appellants).

122

Friend v Brooker (2009) 239 CLR 129 at [42] per French CJ, Gummow, Hayne and Bell JJ.

123

Friend v Brooker (2009) 239 CLR 129.

124

The position would have been different had the parties chosen to carry on the business by means of a partnership, in which case the right of one to have the other reimburse him (through the medium of the taking of the partnership accounts) for half the amount of the borrowing would have been undoubted. Having chosen to conduct the business using a corporate structure made an essential difference. Their Honours remarked that “the equitable doctrine of contribution should not be extended to outflank the consequences of the selection by the parties of the corporate structure”: Friend v Brooker (2009) 239 CLR 129 at [88] per French CJ, Gummow, Hayne and Bell JJ.

125

See, for example, HIH Claims Support Ltd v Insurance Australia Ltd (2011) 244 CLR 72 (where Gummow ACJ, Hayne, Crennan and Kiefel JJ noted that a “community of interest” between obligors is “not a sufficient condition for the operation of an equity to contribute in circumstances where the obligations in question are qualitatively different”, as they were on the facts before the court: at [55]).

126

Ruabon Steamship Company v London Assurance Ltd [1900] AC 6 at 12–​13 per Lord Halsbury; Re La Rosa (1991) 31 FCR 83 at 90–​91 per French J; Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 at 631–​632 per Mason P.

127

HIH Claims Support Ltd v Insurance Australia Ltd (2011) 244 CLR 72 at [47] per Gummow ACJ, Hayne, Crennan and Kiefel JJ.

128

Bialkower v Acohs Pty Ltd (1998) 41 IPR 33 at 44 (FC(FCA)).

129

Ellesmere Brewery Co v Cooper [1896] 1 QB 75; Street v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 at 598 per Gummow J; Marlborough District Council v Altimarloch Joint Venture Ltd [2012] 2 NZLR 726 at [147] per Tipping J.

130

Cornfoot v Holdenson [1932] VLR 4 at 6–​7 per Mann J; Scholefield Goodman & Sons Ltd v Zyngier [1984] VR 445 at 459–​460  (FC).

[14.135]  451 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

not automatically carry a right to contribution. For instance, it is not uncommon in cases relating to contribution that, although persons appear on the face of a document to have entered into an obligation on the same basis, agreements or understandings among them or the circumstances in which they acted may establish that their true relationship is otherwise. In particular, it may be established that, as between them, one has a primary liability, the other’s liability to be resorted to only if resort to the first is insufficient.131 In Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd, for example, Wheeler J held that:132 … where … there is a contract for services which contains within itself an indemnity provision, together with insurance which may also cover the events the subject of the indemnity, it is generally appropriate to regard the insurance as a secondary rather than a co-​ordinate obligation.

In reaching this conclusion, the Western Australian Full Court was influenced not only by the fact that the secondary liability arose under a contract of insurance whereas the primary one did not, but also because the legislation that governed the liability of the insurer had no application to the liability of the principal.133 In Zurich Australian Insurance Ltd v CSR Ltd134 an employee sustained an injury whilst using a motor vehicle in the course of employment, and the issue was whether contribution was available between the respective insurers for motor vehicle third party compulsory insurance and workers compensation claims. Spigelman CJ held that as the employer’s statutory obligation to compensate an employee injured in the workplace whilst using a motor vehicle was a primary obligation, whereas the insurer of that employer as owner of the vehicle had no obligation under the third party legislation to the worker at all (only a secondary obligation to indemnify the employer against its liability to the worker), the respective obligations were not common or co-​ordinate, and so did not attract the doctrine of contribution.135

Satisfaction of obligation by person seeking contribution

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[14.140]  Though having an equitable genesis, in the 19th century the common law adopted the

doctrine of contribution in the context of sureties. At common law, the satisfaction of the obligation, usually by means of a monetary payment, was a prerequisite to contribution; no action accrued to an obligor until he or she had actually paid more than her or his just proportion.136 Wider relief accrued in equity, allowing a person entitled to contribution from another to enforce that right prior to sustaining actual loss, provided that it was imminent.137 Equity acts quia timet, ordering contribution upon entry of a judgment for the debt or liability concerned, or otherwise upon the obligee acquiring the entitlement to payment from an obligor, although that judgment or entitlement is as yet unsatisfied.138 For instance, between sureties inter se 131

Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 119–​120 per Bryson J.

132

Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd (2000) 23 WAR 291 at 327.

133

Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd (2000) 23 WAR 291 at 300–​301 per Malcolm CJ, at 312 per Ipp J (noting that the two liabilities were “intrinsically different in character”). See also Caledonia North Sea Ltd v British Telecommunications plc [2002] Lloyd’s Rep 261 at [16] per Lord Bingham, at [61] per Lord Mackay, at [71] per Lord Nicholls, at [103] per Lord Scott.

134

Zurich Australian Insurance Ltd v CSR Ltd (2001) 52 NSWLR 193.

135

Zurich Australian Insurance Ltd v CSR Ltd (2001) 52 NSWLR 193 at 212. Mason P and Handley JA concurred.

136

Spika Trading Pty Ltd v Harrison (1990) 19 NSWLR 211 at 214 per Giles J; Bialkower v Acohs Pty Ltd (1998) 41 IPR 33 at 44 (FC(FCA)).

137

Wolmershausen v Gullick [1893] 2 Ch 514 at 525–​528 per Wright J; McLean v Discount and Finance Ltd (1939) 64 CLR 312 at 341 per Starke J; Bond v Larobi Pty Ltd (1992) 6 WAR 489 at 503 per Owen J; Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 at 639 per Ipp AJA; Lavin v Toppi (2015) 254 CLR 459 at [48]–​[54] (FC).

138

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 351 per Kitto J; Mahoney v McManus (1981) 55 ALJR 673 at 676 per Gibbs CJ (contra at 679 per Wilson J in dissent); Spika Trading Pty Ltd v Harrison (1990) 19

452 [14.140] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

the right of contribution given to a co-​surety who pays the creditor does not rest on demand being made by the creditor (unless that payment is made officiously or voluntarily).139 Once the entitlement (an “equity”) to contribution has arisen, it is enforced by equity by imposing a duty of contribution on all those within the scope of the equitable obligation.140 As the circumstances in which the right of contribution may be enforced at common law are less extensive than those in equity, “the common law right [of contribution] appears to have lapsed into desuetude”.141 But even equity has its limitations, albeit more discretionary than jurisdictional in nature. For instance, a surety against whom a judgment is made for the full amount of the debt cannot, as a general principle, obtain contribution from a co-​surety in circumstances where the surety is unable to make payment due to insolvency;142 payment here cannot, after all, be said to be “imminent”. Measure of contribution [14.145]  As the doctrine of contribution aims to avoid throwing the entire burden of liability

on one of those liable to the exclusion of others, there is a need to determine the extent to which co-​obligors are required to contribute. In making this determination, the law adopts the principle “equality is equity” in order to achieve “equality of burden and benefit”.143 Ordinarily, therefore, justice dictates equality of sharing, a presumption not lightly departed from,144 and only in the circumstances discussed below.

Presumption of equality displaced by agreement

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[14.150]  The general equal sharing rule may be modified or excluded by agreement or inten-

tion, whether express or implied.145 Trotter v Franklin146 illustrates circumstances in which it can be upset by implied agreement. There, a company became the head lessee of a building from which the parties, a sharebroker (the defendant) and a partnership of three solicitors (the plaintiffs), conducted their practices. Its shares were held one-​half by the defendant, the remainder in thirds by each individual plaintiff. Each of the shareholders was a guarantor of

NSWLR 211 at 214 per Giles J; Bialkower v Acohs Pty Ltd (1998) 41 IPR 33 at 44 (FC(FCA)); Cockburn v GIO Finance Ltd (No 2) (2001) 51 NSWLR 624 at 639 per Ipp AJA. 139

Moulton v Roberts [1977] Qd R 135 at 136–​138 per Williams J; Re Hayes (1996) 138 ALR 54 at 56 per Heerey J; Stimpson v Smith [1999] Ch 340 at 348–​351 per Peter Gibson LJ, at 352–​353 per Judge LJ, at 354 per Tuckey LJ. It is said that the surety can “remove the cloud before it rains”: Thomas v Nottingham Incorporated Football Club Ltd [1972] Ch 596 at 606 per Goff J.

140

Abigroup Ltd v Abignano (1992) 39 FCR 74 at 82–​83 (FC); Cummings v Lewis (1993) 41 FCR 559 at 593 per Cooper J.

141

Gye v Davies (1995) 37 NSWLR 421 at 426 per Powell JA.

142

See, for example, Harpley Nominees Pty Ltd v Jeans [2006] NSWCA 176.

143

Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374 at 380 per Menzies, Walsh and Mason JJ; Scholefield Goodman & Sons Ltd v Zyngier [1986] 1 AC 562 at 575 (PC); Trotter v Franklin [1991] 2 NZLR 93 at 97–​98 per Tipping J; Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467 at 476–​477, 482 per Giles J; Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 120 per Bryson J.

144

Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467 at 476–​477 per Giles J; Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 125 per Bryson J.

145

Dering v Earl of Winchelsea (1787) 1 Cox 318 at 321; 29 ER 1184 at 1185 per Eyre LCB; Cornfoot v Holdenson [1932] VLR 4 at 6–​7 per Mann J; Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460 at 488 per Taylor and Owen JJ; Muschinski v Dodds (1985) 160 CLR 583 at 597 per Gibbs CJ, at 617 per Deane J; Scholefield Goodman & Sons Ltd v Zyngier [1986] 1 AC 562 at 572, 574–​575 (PC); Trotter v Franklin [1991] 2 NZLR 93 at 98 per Tipping J; Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467 at 476–​477 per Giles J; Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 125 per Bryson J; Sky Channel Pty Ltd v Tszyu (No 2) [2000] NSWSC 1150 at [9]‌per Young J.

146

Trotter v Franklin [1991] 2 NZLR 93.

[14.150]  453 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

the company’s obligations in respect of a bank loan. When the defendant sold his business, the plaintiffs paid off the bank loan, discharged the company’s liabilities and sought contribution. The defendant unsuccessfully argued that his liability to contribute was limited to one-​ quarter of the amounts paid in terms of the guarantees. Tipping J held that justice and equity required the defendant to contribute one-​half of the amounts in question, chiefly because he held one-​half of the company’s shares, and that company expenses and a lease inducement receipt were allocated according to the respective shareholdings.147 This prompted the following conclusion:148 [I]‌t was clearly understood from the start that the whole venture would be one in which the two practices would participate equally. Everything which was done is broadly consistent with that proposition … I  find it to be established by clear and necessary implication that the parties agreed to vary the prima facie rule with effect that [the defendant] should carry 50% of the liabilities under the guarantee and the three plaintiffs should carry the other 50% between them.

Presumption of equality displaced by nature of relationship between co-​obligors

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[14.155]  The relationship among the persons concerned may show it to be just that the pri-

mary liability should fall on one of them. Where, say, only one of several obligors derives the benefit from the obligation, that obligor should bear the entire burden.149 In Official Trustee in Bankruptcy v Citibank Savings Ltd150 a married couple, together with the husband’s parents, acted as guarantors for a loan made to a company the couple controlled. The parents had no stake in the company, either as shareholders, employees or as persons doing business with it, their only connection being their natural readiness to assist their son and daughter-​in-​law. The company defaulted on the loan, and the married couple’s property was sold to satisfy the guarantee. This caused them to become bankrupt, and the Official Trustee then sought contribution from the parents of the husband in respect of their guarantee. Bryson J rejected this contention, reasoning as follows:151 It would not be the understanding of a reasonable person, where one family member asked another to join in giving a guarantee so that credit could be extended by a bank to a private company with nominal capital controlled by the party making a request, that the consequence would be that, if the company did not repay the debt and the person making the request was compelled to, he could recover half the amount he was so compelled to pay from the person who had giving him assistance and support. Every reasonable person would see that settling the company’s debt was something which the person who controlled the company must attend to, and that that person would have no claim on the other guarantor if he could settle the company’s debt himself.

Had the guarantors had commercial involvements with the borrower company, it would have been more difficult to distinguish between them, said his Honour, but on the facts it was inappropriate to characterise each guarantor as being in an equal position.152

147

Trotter v Franklin [1991] 2 NZLR 93 at 99.

148

Trotter v Franklin [1991] 2 NZLR 93 at 99–​100. See also Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467 at 476–​ 477 per Giles J.

149

Bater v Kare [1964] SCR 206 at 211–​212 per Cartwright J.

150

Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116.

151

Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 128.

152

Official Trustee in Bankruptcy v Citibank Savings Ltd (1995) 38 NSWLR 116 at 128–​129.

454 [14.155] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

[14.160] This issue necessarily dovetails into whether the liabilities are common or co-​

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ordinate (discussed at [14.130], [14.135]). The point is illustrated by the differing judicial approaches in Burke v LFOT Pty Ltd.153 A company (H) was induced to purchase land at an inflated price by the respondent vendor’s misleading and deceptive conduct. The appellant (who was both a director of H as well as its solicitor) breached his duty of care to H in failing to check the accuracy of the respondent’s representations. Gaudron ACJ and Hayne J saw the respondent’s culpability and the causal significance of its conduct to H’s loss as of such a different order from that of the appellant as to disentitle the respondent from contribution from the appellant.154 Allowing the respondent any contribution would thus trigger its unjust enrichment because it would receive an amount exceeding the true value of the premises that the misleading conduct caused H to purchase.155 Although reaching the same outcome, McHugh J did so by denying that the respective liabilities were “of the same nature and to the same extent”.156 His Honour reasoned that the respondent’s positive obligation not to use misleading and deceptive conduct, and the appellant’s duty to check the accuracy of the representations in question, had different legal sources, and were separate and distinct.157 Yet McHugh J’s judgment is not devoid of undertones of causation. This is evident from his concern that to allow the respondent contribution against the appellant would not take account of the fact that its misleading and deceptive conduct misled the appellant in his capacity as solicitor and as agent for H.158 His Honour concluded as follows:159 In paying the entire amount of damages awarded against it, [the respondent] is merely accounting for the profit it wrongly made from this transaction by reason of its misleading and deceptive conduct. It is not discharging an antecedent obligation, but accounting for moneys that it should never have received. In those circumstances, it would be inequitable to make [the appellant] contribute to [the respondent’s] repayment of [H]‌’s loss —​a loss which was [the respondent’s] gain. It would be absurd to suggest that a person who stole money and was ordered to repay it could obtain contribution from a person who negligently failed to safeguard

153

Burke v LFOT Pty Ltd (2002) 209 CLR 282.

154

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 294. Kirby J dissented. His Honour reasoned that although the conduct claimed against the respondent substantially involved positive acts whereas that alleged against the appellant substantially involved omissions, this difference was immaterial to culpability where the defaults of the appellant represented a failure by him to conform to his duty to act, imposed upon him both by the common law of negligence and by his implied contract of retainer with H. For this reason, both the respondent and the appellant were culpable, and even if there were a distinction as to degree, his Honour saw this as legally irrelevant because co-​ordinate liabilities are established by which each co-​obligor is liable in law for the common loss. Kirby J also rejected any argument based on differences in causation, on the ground that “[i]‌t amounts to the contention that a solicitor is entitled to rely on his own negligent breach of the contract of retainer to exempt him from liability to his client, who the primary judge found would not have suffered damage had the solicitor acted with reasonable care and diligence”: at 322.

155

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 294.

156

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 304.

157

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 304. Kirby J, dissenting, found that the appellant and respondent had incurred a “like responsibility” (at 320–​321), but did not develop this point.

158

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 309. Kirby J, dissenting, rejected the notion that the appellant was the “very person misled” —​identifying that person as H —​adding that if both H and the appellant were misled it was because the appellant failed to perform his duties as H’s solicitor and director: at 319.

159

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 306. Kirby J, dissenting, express concern with that the majority’s conclusion, as it dictated that the appellant walked away from having to contribute anything, and yet had he alone been sued by H he would have been held liable for it in precisely the same sum of damages as that recoverable from the respondent. Yet this does not take into account the likelihood that, on the majority’s reasoning, the appellant would, had he been sued in the first instance, likely have been allowed full contribution against the respondent: at 322–​323. Cf Elliot & Tuthill (Mortgages) Pty Ltd v Farrell & Anderson Pty Ltd [2002] FCA 965 at [20]–​[24] per Madgwick J.

[14.160]  455 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

the money. And in substance, I do not think that there is any difference between that example and the present case.

Callinan J held likewise, also focusing on the lack of common or co-​ordinate obligations,160 adding that the degree of the respondent’s moral obloquy further indicated that the respective obligations and rights owed and enjoyed by the appellant differed, qualitatively and quantitatively, and thus legally, from those owed by the respondent.161 According to his Honour, having misled and deceived the appellant in that role, to allow the respondent contribution from the appellant “strikes at the very heart of notions of justice and equity” and permit the respondent to benefit from its own wrongdoing.162 A lack of clean hands thus served to deny the respondent contribution.163 Callinan J did, however, add that he did not wish to suggest that the presence of a degree of moral obloquy, or the fact that one of the obligations is owed by statute and another derives from the common law or another statute, should exclude the possibility of contribution in every instance.164

Scope for ratable contributions?

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[14.165] Having denied any contribution to the respondent, the High Court in Burke v

LFOT Pty Ltd165 did not need to address the issue of whether equity should allow —​as statutory entitlements to contribution have done —​other than equal contribution in cases of, say, unequal culpability. It is surprising that Australian law propounds no clear view as to whether a court in ordering contribution in equity may apportion the contribution of co-​obligors in a just and proportionate way. Some of the cases counter this proposition,166 against a backdrop of it being deemed necessary for statute to allow ratable contributions in tort actions (see [14.175]). The reticence to effect a like initiative in equity may stem from overemphasis on the maxim “equity is equality” (see [P.110]), and because a finding of unequal contribution may mean that the liability is not in essence a common or co-​ordinate one.167 But this is not automatically or necessarily so. There are various first instance judicial endorsements of such a jurisdiction,168 and Kirby J dissenting in Burke v LFOT169 considered that the purpose and character of contribution as an equitable remedy was not inconsistent, as a matter of principle, with ratable apportionment in differing amounts according to what is a just contribution in the circumstances. Given the 160

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 336–​337.

161

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 337.

162

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 336.

163

Kirby J, dissenting, considered that the maxim “a person who comes to equity must come with clean hands” (as to which see [30.170]–​[30.180]) should not be applied to deny a party, otherwise entitled, contribution to a common liability where the alleged co-​obligor is shown to have been seriously neglectful of her or his duties to the ultimate claimant and where he or she controls the claimant and directs, or influences, the course of its litigation. On this point Kirby J concluded that it fell ill from the appellant’s mouth to propound this defence given that it is effectively by his own “caprice” that H elected to proceed against the respondent instead of against him as it might have done: Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 323.

164

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 337–​338.

165

Burke v LFOT Pty Ltd (2002) 209 CLR 282.

166

See, for example, Sky Channel Pty Ltd v Tszyu (No 2) [2000] NSWSC 1150 at [7]‌, [12] per Young J.

167

Rein, “Just and Equitable! The Relevance of Benefit in a Claim for Contribution Against a Joint Tortfeasor or Wrongdoer” (2001) 9 Torts LJ 298 at 307–​308.

168

See, for example, Jones v Mortgage Acceptance Nominees Ltd (1996) 63 FCR 418 at 422 per Davies J; Acohs Pty Ltd v RA Bashford Consulting Pty Ltd (1997) 144 ALR 528 at 539 per Merkel J (but in the appeal the ratable apportionment was upheld under the Wrongs Act 1958 (Vic): Bialkower v Acohs Pty Ltd (1998) 41 IPR 33 at 45 (FC(FCA))); Duke Group Ltd (in liq) v Pilmer (1998) 27 ACSR 1 at 495–​496 per Mullighan J.

169

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 325.

456 [14.165] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

proportionality that underscores much of equitable relief (see [P.190]), and the High Court’s broader recognition that equitable relief is directed to “practical justice” (see [7.280], [9.155]), precedent appears heading in this direction (as it has in New Zealand).170 A ratable approach may, moreover, avoid artificial and unjust outcomes, reserving contribution in equal shares to cases of exact equivalence in the responsibilities of co-​obligors.171 Principal areas of operation [14.170]  Equity’s jurisdiction here is illustrated by analysing the principal occasions where

natural justice dictates operates to entitle a person to contribution from others in respect of an obligation discharged. Most frequently, it is in the context of sureties, insurers and trustees that an obligation to make contribution arises. The law of contribution relating to sureties and insurers is discussed below. Trustees’ right to contribution inter se is discussed elsewhere: see [23.160]. Though not elaborated below, being jointly liable for all partnership debts and obligations, partners are entitled to claim contribution inter se.172 This is no exhaustive list of situations that may trigger contribution in equity. The principle has been applied, for example, in the context of co-​adventurers to a maritime adventure173 and in respect of disproportionate contributions by a co-​owner of property to mortgage or other expenses pertaining to the property.174 The general principle can be phrased as follows:175

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Where there is a common design entertained by several persons and the means of attainment of the common end requires that one or their number do an act which will expose him or her to expense or loss, there is no difficulty in that situation in perceiving the notion of a request to perform the act and a promise to do what under the circumstances the others ought to do in relation to any expense or loss incurred in performing the act. What equity requires as ought to be done is that a burden imposed upon one for the benefit of all should be borne by all of those who stand to enjoy the benefit if it is attained.

Nor is the doctrine of contribution confined to liabilities arising in contractual settings.176 For instance, that a statute imposes a joint liability does not prevent a right of contribution arising.177 In Spika Trading Pty Ltd v Harrison178 Giles J held that the joint and several liability imposed by the insolvent trading provision in the companies legislation179 creates a 170

Hotchin v New Zealand Guardian Trust Company Ltd [2016] 1 NZLR 906 at [146]–​[157] per Elias CJ, with whom Glazebrook J (at [97]) and William Young J (at [160]) agreed on this point.

171

Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 325 per Kirby J.

172

Re Royal Bank of Australia (1856) 6 De GM & G 572 at 587–​588; 43 ER 1356 at 1362 per Lord Cranworth LC; Cummings v Lewis (1993) 41 FCR 559 at 593 per Cooper J; Gye v Davies (1995) 37 NSWLR 421 at 428 per Powell JA. Statute, moreover, provides that, on dissolution of a partnership, partners are entitled to contribution in proportion to which they were entitled to share profits (subject to contrary intention): Partnership Act 1963 (ACT), s 50; Partnership Act 1892 (NSW), s 44; Partnership Act 1997 (NT), s 48; Partnership Act 1891 (Qld), s 47; Partnership Act 1891 (SA), s 44; Partnership Act 1891 (Tas), s 49; Partnership Act 1958 (Vic), s 48; Partnership Act 1895 (WA), s 57.

173

See, for example, Cummings v Lewis (1993) 41 FCR 559 at 593–​594 per Cooper J.

174

Ingram v Ingram [1941] VLR 95 at 102 per O’Bryan J; Forgeard v Shanahan (1994) 35 NSWLR 206 at 224–​225 per Meagher JA. In the specific context of contributions to property by de facto partners see, for example, Muschinski v Dodds (1985) 160 CLR 583 at 596–​598 per Gibbs CJ; Brennan v Duncan [2006] NSWSC 674 at [69]–​[74] per White J; Dinsdale v Arthur (2006) 12 BPR 23,509 at [20] per Brereton J. The latter type of case, though, is most commonly chiefly addressed through the vehicle of the constructive trust: see [38.165]–​[38.210].

175

Cummings v Lewis (1993) 41 FCR 559 at 599 per Cooper J.

176

Spika Trading Pty Ltd v Harrison (1990) 19 NSWLR 211 at 214 per Giles J.

177

Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 (ruling that a right of contribution existed in relation to a statutory debt); Gadsden v Commissioner of Probate Duties [1978] VR 653 at 657 per Harris J.

178

Spika Trading Pty Ltd v Harrison (1990) 19 NSWLR 211 at 215–​217.

179

Then the Companies Code, s 556(1), now the Corporations Act 2001 (Cth), s 588G.

[14.170]  457 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

co-​ordinate liability apt to attract the doctrine of contribution. So although contribution is often voluntary in the sense that the co-​obligor voluntarily assumes an obligation, it can arise out of an obligation imposed by statute.180 [14.175]  Statute extends the equitable doctrine of contribution to shared liability in tort.181

However, the introduction of proportionate (or “apportionable”) liability by statute —​that limits a tortfeasor’s liability to the proportion of the loss he or she has caused, and so ousts joint and several liability —​removes with it the need for contribution within the sphere of its application. It generally applies to claims for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, or in an action for damages for misleading or deceptive conduct under statute.182 Contribution between sureties

General principle [14.180] A creditor to whom guarantees have been given may compel any surety to pay

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according to her or his contract. As the creditor need not distribute the burden among the sureties, a surety who has guaranteed the entire debt may be compelled to pay even though there are other sureties. Here the object of contribution is to place persons who act as common sureties in the same position as if the principal creditor had pursued remedies ratably instead of exhausting them against one surety or another.183 It follows that a surety who has paid more than her or his proper share of the principal debt may, in equity, seek contribution from co-​sureties for this excess, even if at the time of assuming the liability the surety did not know of the co-​sureties.184 In Mahoney v McManus Brennan J explained the nature of contribution between sureties as follows:185

180

See Lipton, “Sharing the Burden: Equitable Contribution and the Corporations Law” (March 1996) 70 LIJ 49.

181

Civil Law (Wrongs) Act 2002 (ACT), Pt 2.5; Law Reform (Miscellaneous Provisions) Act 1946 (NSW), Pt 3; Law Reform (Miscellaneous Provisions) Act 1956 (NT), Pt IV; Law Reform Act 1995 (Qld), Pt 3 Div 2; Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), s 6; Wrongs Act 1954 (Tas), s 3; Wrongs Act 1958 (Vic), Pt IV; Law Reform (Contributory Negligence and Tortfeasors’ Contribution) Act 1947 (WA), s 7. See generally Balkin and Davis, Law of Torts (5th ed, LexisNexis Butterworths, 2013), [29.31]–​[29.41].

182

Corporations Act 2001 (Cth), Pt 7.10, Div 2A; Competition and Consumer Act 2010 (Cth), Pt VIA; Civil Law (Wrongs) Act 2002 (ACT), Ch 7A; Civil Liability Act 2002 (NSW), Pt 4; Proportionate Liability Act 2005 (NT); Civil Liability Act 2003 (Qld), Ch 2 Pt 2; Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA), Pt 3; Civil Liability Act 2002 (Tas), Pt 9A; Wrongs Act 1958 (Vic), Pt IVAA; Civil Liability Act 2002 (WA), Pt 1F. See Balkin and Davis, Law of Torts (5th ed, LexisNexis Butterworths, 2013), [29.42].

183

American Surety Co of New York v Wrightson (1910) 103 LT 663 at 667 per Hamilton J; Cummings v Lewis (1993) 41 FCR 559 at 592 per Cooper J (“The court in requiring contribution does justice as between the sureties in circumstances where the creditor has failed to do justice by requiring equal contribution”). See Bingham, “The Surety’s Right to Contribution” (1984) 12 ABLR 394.

184

Wolmershausen v Gullick [1893] 2 Ch 514 at 523–​525, 527 per Wright J; Ellesmere Brewery Co v Cooper [1896] 1 QB 75 at 79 per Lord Russell CJ; McLean v Discount and Finance Ltd (1939) 64 CLR 312 at 328 per Latham CJ, at 341 per Starke J; Armstrong v Commissioner of Stamp Duties (1967) 69 SR (NSW) 38 at 43 per Wallace P; Morris v Ford Motor Co Ltd [1973] 1 QB 792 at 803 per Stamp LJ, at 809 per James LJ; Mahoney v McManus (1981) 55 ALJR 673 at 675 per Gibbs CJ; Commissioners of State Savings Bank of Victoria v Patrick Intermarine Acceptances Ltd (in liq) [1981] 1 NSWLR 175 at 181 per Meares J; McNamara v Commonwealth Trading Bank of Australia (1984) 37 SASR 232 at 247 per Legoe J; Scholefield Goodman & Sons Ltd v Zyngier [1986] 1 AC 562 at 571 (PC); Trotter v Franklin [1991] 2 NZLR 93 at 97–​98 per Tipping J; Capita Financial Group Ltd v Rothwells Ltd (1993) 30 NSWLR 619 at 621 per Priestley JA, with whom Kirby P and Cripps JA concurred; Morgan Equipment Co v Rodgers (1993) 32 NSWLR 467 at 482 per Giles J; Stimpson v Smith [1999] Ch 340 at 348 per Peter Gibson LJ.

185

Mahoney v McManus (1981) 55 ALJR 673 at 680, citing McLean v Discount and Finance Ltd (1939) 64 CLR 312 at 339 per Rich J (in dissent but not on the law on this point).

458 [14.175] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

The guarantor who relies upon a payment as entitling him to contribution from his co-​sureties must show that the payment discharged “the burden imposed upon him by his guarantee and to a greater extent than is just” … It is not the common benefit derived by co-​sureties from the payment made but the inequality of burden resulting from the enforcement or satisfaction of the creditor’s rights against the sureties which gives rise to the equity.

Hence, a surety, before claiming contribution, must show that he or she has defrayed the obligation beyond her or his proportionate share, or is under a liability or judgment to do so.

Measure of contribution [14.185]  Prima facie, the amount recoverable depends on both the number of sureties and the

proportion for which each is liable.186 The amount of contribution that can be recovered, or in respect of which the right can be declared, is in proportion to the limits of the respective liabilities of the sureties as expressly or impliedly prescribed by the instrument of guarantee.187 The proportional distribution approach applies likewise where the extent of each surety’s liability is subject to an upper limit. Lord Russell CJ stated the relevant principle in Ellesmere Brewery Co v Cooper:188

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Where the claim of the creditor is to the full amount, each must pay up to the fixed limit of his liability; but where the claim is less than such full amount, and is discharged by one, the claim must be proportionately borne by the others, even where the claim does not exceed the fixed limit of the liability of the surety who has paid.

By way of example, consider the situation where one surety, whose limit of liability is $1,000, realises $1,000 from such security, being bound with three other sureties with a limit of $2,000 each. The $1,000 discharged by the first surety is taken into account for the benefit of all the sureties inter se by means of proportional distribution so as to secure its equitable division. Applying this approach, the surety for $1,000 would benefit to the extent of one-​seventh, and each of the others to the extent of two-​sevenths each. This principle is modified where one or more of the co-​sureties are insolvent. For instance, where four sureties are jointly and severally bound in a surety bond, and one is sued and another is insolvent, the right of contribution against the other two sureties is for thirds, not fourths, of the sum paid.189 Contribution between insurers

General principle —​cases of “double insurance” [14.190] An insured who holds more than one insurance policy that covers the same risk

cannot recover an amount exceeding the full loss but may, subject to any conditions to the contrary, select the policy under which to claim indemnity, and the insurer selected is entitled to contribution from all other insurers who have covered the same risk.190 It is contrary to “general principles of justice”, it is reasoned, for an insured’s choice to leave one insurer with

186

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350 per Kitto J; Mahoney v McManus (1981) 55 ALJR 673 at 675 per Gibbs CJ.

187

McNamara v Commonwealth Trading Bank of Australia (1984) 37 SASR 232 at 247 per Legoe J; Trotter v Franklin [1991] 2 NZLR 93 at 98–​99 per Tipping J (discussed at [14.150]).

188

Ellesmere Brewery Co v Cooper [1896] 1 QB 75 at 81.

189

Ellesmere Brewery Co v Cooper [1896] 1 QB 75 at 80 per Lord Russell CJ; Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78 at 83 per Helsham J.

190

See generally Enright and Merkin, Sutton on Insurance Law in Australia (4th ed, Lawbook Co, 2015), Vol 2, Ch 19.

[14.190]  459 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

the entire burden,191 and so parties under a co-​ordinate liability to make good a loss should be required to share the burden pro rata.192 For this reason, the doctrine of contribution between insurers arises most commonly in the context of “double insurance”. A leading judicial statement is found in Albion Insurance Co Ltd v Government Insurance Office (NSW):193 There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved … There is no double insurance unless each insurer is liable under his policy to indemnify the insured in whole or in part against the happening which has given rise to the insured’s loss or liability.

As in the case of subrogation, and for the same reasons (see [14.30]), insurers’ right of contribution inter se arises only in the event of indemnity insurance. It is attracted because each contract of insurance covers the same loss sustained by the same insured, so that all the insurances are “regarded as truly one instance”.194 To this end, the court asks two questions: “did the two insurers have a common burden?” and “if the insured were to be paid under both policies would he be paid twice in respect of the same advantage?”195 [14.195]  The doctrine of double insurance is not concerned with working out the rights of

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insurers and third parties, but with distributing the indemnity to which the insured is entitled under policies of insurance with two (or more) insurers.196 The court must, accordingly, construe the terms of each policy to determine each insurer’s intentions.197 So far as relevant evidence to this end is concerned, the following remarks of the Canadian Supreme Court are instructive:198 Thus, while it remains true that the intentions of the insurers prevail, the inquiry is of necessity limited to the insurers’ intentions vis-​à-​vis the insured. In the case of an insurance contract, the entire agreement between the insurer and the insured is contained within the policy itself and evidence of the parties’ intentions must be sought in the words they chose. Were the dispute between the insurer and the insured, reference to surrounding circumstances may be appropriate if provisions of the policy are ambiguous. Once the interest of the insured is no longer at stake, that is, where the contest is only between the insurers, there is simply no basis for looking

191

Mercantile Mutual Insurance (Australia) Ltd v QBE Workers Compensation (NSW) Ltd (2004) 61 NSWLR 655 at [10] per Handley JA.

192

Godin v London Assurance Co (1758) 1 Burr 498 at 492; 97 ER 419 at 420 per Lord Mansfield CJ (“If the insured is to receive but one satisfaction, natural justice says that the several insurers shall all of them contribute pro rata, to satisfy that loss against which they have all insured”).

193

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 345–​346 per Barwick CJ, McTiernan and Menzies JJ. See also at 352 per Kitto J; North British and Mercantile Insurance Co v London, Liverpool and Globe Insurance Co (1877) 5 Ch D 569; Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374 at 379 per Menzies, Walsh and Mason JJ; Borg Warner (Aust) Ltd v Switzerland General Insurance Co Ltd (1989) 16 NSWLR 421 at 428 per Cole J; Mercantile Mutual Insurance (Australia) Ltd v QBE Workers Compensation (NSW) Ltd (2004) 61 NSWLR 655 at [20] per Handley JA.

194

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 352 per Kitto J.  See also State Government Insurance Commission v Switzerland Insurance Australia Ltd (1995) 64 SASR 537 at 542–​543 per Bollen J, at 545–​546 per Olsson J; Jansen v Thornton (1996) 132 FLR 255 at 263 per Miles CJ.

195

Australian Eagle Insurance Co Ltd v Mutual Acceptance (Insurance) Pty Ltd [1983] 3 NSWLR 59 at 64 per Priestley JA.

196

State Government Insurance Commission v Switzerland Insurance Australia Ltd (1995) 64 SASR 537 at 546 per Olsson J.

197

Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 345–​346 per Barwick CJ, McTiernan and Menzies JJ; Borg Warner (Aust) Ltd v Switzerland General Insurance Co Ltd (1989) 16 NSWLR 421 at 428–​432 per Cole J.

198

Family Insurance Corp v Lombard Canada Ltd [2002] 2 SCR 695 at [19] per Bastarache J.

460 [14.195] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

outside the policy. In the absence of privity of contract between the parties, the unilateral and subjective intentions of the insurers, unaware of one another at the time the contracts were made, are simply irrelevant.

Where there is double insurance, and one insurer indemnifies the insured and the second insurer then pays contribution to the first insurer, the second insurer is not entitled to be subrogated to the insured’s rights against a third party. At least three possible impediments stand in the way of this:199 the second insurer has not paid the full indemnity under its policy of insurance (see [14.30]); the second insurer’s payment is not made to the insured in satisfaction of the indemnity; and the first insurer paid the full amount of the indemnity and thereby itself obtained a right of subrogation. There is, moreover, no injustice in refusing the second insurer a right of subrogation in these circumstances, as any benefits that the first insurer receives on the exercise of a right of subrogation must be brought to account in determining the burden of their shared liability for the purposes of contribution.200 Nor does extending subrogation to the second insurer serve the core purpose of subrogation in insurance law, the avoidance of double recovery by the insured. [14.200]  Although the doctrine of contribution only applies when each insurer insures against

the same risk, it is not necessary that those insurances be identical. For example, in Jansen v Thornton201 two insurance policies indemnified the employer for liability to pay a person injured. In one case, the injury contemplated by the policy was that suffered by a worker arising out of or in the course of employment, whereas in the other it was that caused by using or operating a motor vehicle. This led Miles CJ to conclude as follows:202

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Where the same insured was liable to pay damages to a person who suffered injury which could be categorised as both injury arising out of or in the course of his employment and as injury occurring by the use or operation of a motor vehicle in the same incident or occurrence, the loss was, in my view, identical.

The loss suffered within the contemplation of both policies being identical, there was double insurance, even though the scope of each policy differed.203 That one insurer may, say, insure properties A and B against fire and the other insurer only insure property A against fire, or where one policy is for a limited amount and the other for an unlimited amount, may impact on the measure of contribution recoverable (see [14.210]) but does not bear upon the question whether or not each insurer has insured against the same risk so as to give rise to some contribution.204 Conversely, if an insurer is on risk in relation to an injury occurring in one time period and another insurer with respect to another time period,205 or if one policy excludes liability for injury in circumstances that occurred but the other does not,206 there is no double insurance.

199

Speno Rail Maintenance Australia Pty Ltd v Metals and Minerals Insurance Pte Ltd (2009) 226 FLR 306 at [209] per Beech AJA [affd on a different point: Zurich Australian Insurance Ltd v Metals and Minerals Insurance Pte Ltd (2009) 240 CLR 391].

200

Speno Rail Maintenance Australia Pty Ltd v Metals and Minerals Insurance Pte Ltd (2009) 226 FLR 306 at [221] per Beech AJA [affd on a different point: Zurich Australian Insurance Ltd v Metals and Minerals Insurance Pte Ltd (2009) 240 CLR 391].

201

Jansen v Thornton (1996) 132 FLR 255.

202

Jansen v Thornton (1996) 132 FLR 255 at 263 (emphasis supplied).

203

See also AMP Workers’ Compensation Services (NSW) Ltd v QBE Insurance Ltd (2001) 53 NSWLR 35 at 38–​41 per Handley JA, with whom Mason P and Beazley JA concurred.

204

See, for example, Family Insurance Corp v Lombard Canada Ltd [2002] 2 SCR 695.

205

HIH Casualty & General Insurance Ltd v Territory Insurance Office (1998) 10 ANZ Ins Cas ¶61-​392 at 74,170 per Kearney J.

206

See, for example, Workcover Queensland v Royal & Sun Alliance Insurance Australia Ltd (2001) 11 ANZ Ins Cas ¶61-​489.

[14.200]  461 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

[14.205]  So far as the requirement that the insured be identical is concerned, the law proceeds

by placing substance over form. In Workcover Queensland v Suncorp Metway Insurance Ltd,207 for instance, the insured under one policy was an individual (K), whereas under the other policy that insured against the same risk it was a partnership of which K was a partner. Williams J held that as a partnership has no recognised identity apart from its partners, when it came to liability the partners had to be sued individually and were liable jointly and severally.208 That under the second policy K was an insured jointly and severally with the other member(s) of the partnership did not prevent him being “insured in his own right”.209 There was thus an identity of insured, making the case one of double insurance.

Measure of contribution

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[14.210]  Where two or more indemnities cover the same specific property for the same or dif-

ferent amounts, the practice is to apportion the loss by way of contribution according to the proportion each cover bears to the total aggregated cover.210 So if, say, an insured elects to obtain unlimited insurance cover with respect to the same event from three different insurers, each will contribute in one-​third shares to cover the insured’s losses.211 However, the court is not bound by strict rules of apportionment, but may look at the circumstances giving rise to the claim, and apportion the loss in a manner that does justice among the obligors. For instance, where the amount of the cover bears no direct relationship to the amount of the loss, it may be inequitable to fix liability to contribute ratably. In Government Insurance Office (NSW) v Crowley212 two insurance policies indemnified the Sydney Turf Club for bodily injury caused by negligence and workers’ compensation, respectively. Neither policy was specific, in the sense of relating solely to the loss that ensued (being injury suffered by a stable hand in the course of employment at the club). The latter policy, unlimited so far as the extent of its cover was concerned, placed a limit upon the liability of the insurer issuing it for the event that occurred; the former policy, though limited in total amount, placed no limit up to that amount upon the actual liability of the insurer issuing it. In these circumstances, Helsham J identified the equitable solution as to treat the relative involvement of the two insurers upon the basis of their actual liability for the loss.213 So for the purpose of determining the appropriate measure of contribution, the court must look at the means by and extent to which each insurer has sought to limit its liability when the insured has purchased other policies covering the same risk. In cases of double insurance where the insurers accept different upper limits of liability, it is inferred that each insurer accepted the same level of risk up to the lower of the limits —​such that a “ratable satisfaction” is an equal division of liability up to the lower limit —​and that the burden of meeting that part of the claim exceeding the lower limit falls on the insurer that accepted the higher

207

Workcover Queensland v Suncorp Metway Insurance Ltd (2000) 33 MVR 113.

208

Workcover Queensland v Suncorp Metway Insurance Ltd (2000) 33 MVR 113 at 117–​118.

209

Workcover Queensland v Suncorp Metway Insurance Ltd (2000) 33 MVR 113 at 118.

210

Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374 at 380 per Menzies, Walsh and Mason JJ; Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78 at 83 per Helsham J; State Government Insurance Commission v Switzerland Insurance Australia Ltd (1995) 64 SASR 537 at 549 per Olsson J.

211

Mercer v Petroleum Drilling Services (Australia) Pty Ltd (1985) 39 SASR 277 at 280 per O’Loughlin J.

212

Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78.

213

Government Insurance Office (NSW) v Crowley [1975] 2 NSWLR 78 at 85.

462 [14.205] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

limit.214 This is a fairer approach than one based on using the limits as the basis for apportionment of contribution, which would be unfair to the insurer that gave a much higher limit for a small increase in premium.

MARSHALLING Nature and purpose of marshalling [14.215]  Marshalling is a principle for doing equity between two or more creditors, each

of whom are owed debts by the same debtor, but where one of whom can enforce its claim against more than one security or fund and the other can resort to only one.215 Marshalling gives the latter an “equity” to require that the first creditor satisfy itself (or be treated as having satisfied itself) so far as possible out of the security or fund to which the latter has no claim.216 Otherwise the person having title to the double fund (the double creditor) could defeat the claimants upon either fund by satisfying her or his security out of the other, to the exclusion of them. Hence, the double creditor would have the power to determine whether other claimants receive any satisfaction. As such an exercise of power produces an unfair outcome,217 courts of equity have historically entitled the single creditor to stand in the place of the double creditor to ensure “that the rights of ordinary creditors should not be defeated by the mere caprice of the secured creditor”.218 In the classic words of Sir William Grant MR: “a person having resort to two funds shall not by his choice disappoint another, having one only”.219 And, much more recently, Lord Neuberger cited the “unattractive and adventitious benefit” that would otherwise be accorded to the double creditor as one of the “good practical reasons” for equity to adopt the doctrine of marshalling.220

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Marshalling confers no equitable proprietary right [14.220]  Marshalling confers no equitable proprietary right on a party to whom the right is

available. It is no more than a right to seek from the court in its equitable jurisdiction the modern remedies that perform the same function as the decree of a court of equity did formerly. Marshalling involves a court adopting remedial rules for the purpose of doing equal justice

214

Commercial Union Assurance Co v Hayden [1977] QB 804 at 822 per Lawton LJ; Family Insurance Corp v Lombard Canada Ltd [2002] 2 SCR 695 at [37]–​[44] per Bastarache J.

215

See Cleaver, “Marshalling” (1991) 21 VUWLR 275; Ali, Marshalling of Securities (Clarendon Press, 1999).

216

Dolphin v Aylward (1870) LR 4 HL 486 at 505 per Lord Westbury; Re Crothers [1930] VLR 49 at 61–​62 per Cussen J; Miles v Official Receiver in Bankruptcy (1963) 109 CLR 501 at 510–​511 per Dixon CJ, Menzies and Windeyer JJ; Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 192 per Fullagar J; Re O’Leary (1985) 61 ALR 674 at 680 per Sheppard J; Westpac Banking Corporation v Daydream Island Pty Ltd [1985] 2 Qd R 330 at 332 per McPherson J; Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214 at 230–​231 per Lord Hoffmann; Highbury Pension Fund Management Co v Zirfin Investments Management Ltd [2014] Ch 359 at [18] per Lewison LJ, with whom Silber J and Rimer LJ concurred.

217

Cf Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VR 167 at 192 per Fullagar J (who characterised the doctrine of marshalling as an example of the general basis of equitable intervention in circumstances where a benefit arises that binds the conscience; the advantage the double creditor holds by virtue of her or his position binds the double creditor’s conscience such that equity compels her or him to exhaust the security upon which the single creditor has no claim).

218

Re Holland (1928) 28 SR (NSW) 369 at 379 per Long Innes J.

219

Trimmer v Bayne (1803) 9 Ves 209 at 211; 32 ER 582 at 583. See also Aldrich v Cooper (1803) 8 Ves 382 at 395, 397; 32 ER 402 at 407–​408 per Lord Eldon LC; Webb v Smith (1885) 30 Ch D 192 at 202 per Lindley LJ; Jenkins v Brahe & Gair (1902) 27 VLR 643 at 648 per A’Beckett J; Miles v Official Receiver in Bankruptcy (1963) 109 CLR 501 at 510–​511 per Dixon CJ, Menzies and Windeyer JJ.

220

National Crime Agency v Szepietowski [2014] AC 338 at [36].

[14.220]  463 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

between creditors (or legatees). To this end, its operation depends upon the assets in question being subject in some way to the court’s control, which reinforces the view that the doctrine depends not on any equitable right of property in the fund over which the claimant has otherwise no security, but on the court granting an equitable remedy in certain circumstances.221 Marshalling does not, as a result, make one secured creditor a trustee for another,222 or give one an equitable interest in another’s securities.

Marshalling does not compel choice of security to realise [14.225]  The court does not interfere with the double creditor’s choice of security to realise.

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Equity does not compel the double creditor to satisfy her or his security against the property single-​charged by her or him.223 Rather, if the double creditor satisfies a charge from the doubly-​charged property, equity gives the single creditor the right to stand in the double creditor’s place in respect of the property subject only to the double creditor’s charge. To this end, marshalling exhibits parallels with the doctrine of subrogation:224 see [14.05]. The common case for marshalling is where there are two creditors and a common debtor. Assume that A has a charge upon two properties of the debtor, namely X and Y, and B has a charge upon Y only. If A proceeds to satisfy her or his charge out of property Y, equity places B in A’s place regarding property X, even though B has no charge on X. This principle is qualified where there is an obligation recognised in equity upon one person to bear the burdens of all charges between that person and another person. In this context, the following statement of the Virginia Court of Appeals has been approved in Australia (described as the “common debtor exception”):225 The general rule with reference to the marshalling of assets … is subject to the qualification … that, though the funds belong to different persons, yet, if from independent equities there is, in equity, a duty resting upon the owner of the property which is subject to the two liens to pay off the lien thereon to the exoneration of the owner of the property which is subject to only one lien, a court of equity will enforce that duty at the instance of the junior lien creditor who has a lien on only the one property by marshalling the assets.

221

Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 at 125–​126, 128, 131–​132 per Neasey J; Chase Corp (Aust) Pty Ltd v North Sydney Brick & Tile Co Ltd (1994) 35 NSWLR 1 at 19–​21 per Cohen J.

222

This proposition is not free from contention, much of which stems from the decision in South v Bloxham (1865) 2 Hem & M 457; 71 ER 541. See Meagher, Gummow and Lehane, [11-​035]; Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 at 131–​132 per Neasey J. Cf New Zealand Loan and Mercantile Agency Co (Ltd) v Loach (1912) 31 NZLR 292 at 297–​303 per Denniston J.

223

There is authority that equity can compel the double creditor to take satisfaction out of the property single-​charged by her or him in order to leave the single creditor the doubly-​charged property, to which only the latter can resort: Webb v Smith (1885) 30 Ch D 192 at 200 per Cotton LJ. American authority supports this view: see Jackson v Finance Corporation of Washington (1930) 41 F 2d 103; First National Bank of Boston v Proctor (1930) 40 F 2d 841; Waff Bros Inc v Bank of North Carolina (1976) 221 SE 2d 273. However, this approach is inconsistent with the bulk of Australian and English authority which holds that “the doctrine [of marshalling] does not prevent an earlier mortgagee satisfying his charge against whichever fund or security he thinks fit”: Mir Bros Projects Pty Ltd v Lyons [1977] 2 NSWLR 192 at 196 per Waddell J. See Noyes v Pollock (1886) 32 Ch D 53 at 70 per Fry LJ; Flint v Howard [1893] 2 Ch 54 at 73 per Kay LJ; Jenkins v Brahe & Gair (1902) 27 VLR 643 at 647–​648 per A’Beckett J; Manks v Whiteley [1911] 2 Ch 448 at 466 per Parker J; Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 at 130–​131 per Neasey J; Chase Corp (Aust) Pty Ltd v North Sydney Brick & Tile Co Ltd (1994) 35 NSWLR 1 at 19–​21 per Cohen J; Across Australia Finance Pty Ltd v Kalls (2008) 3 BFRA 205 at [36], [37] per Bryson AJ; Naxatu Pty Ltd v Perpetual Trustee Co Ltd (2012) 207 FCR 502 at [61]–​[84] per Dowsett J.

224

Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 at 130, 132 per Neasey J; Mir Bros Projects Pty Ltd v Lyons [1977] 2 NSWLR 192 at 196 per Waddell J.

225

Savings & Loan Corporation v Bear (1930) 75 ALR 980 at 995, approved by Young J in Sarge Pty Ltd v Cazihaven Homes Pty Ltd (1994) 34 NSWLR 658. See also ACN 077 991 890 Pty Ltd v National Australia Bank Ltd (2007) 13 BPR 24,299.

464 [14.225] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Subrogation, Contribution and Marshalling  Chapter  14

Application in the context of the administration of deceased estates [14.230] In addition to its operation in respect of securities, such as mortgages, liens or

charges, marshalling has a parallel operation in the administration of deceased estates. Its main function here is to prevent injustice to the beneficiaries of a deceased estate, arising from the choices of the deceased’s creditors as to which of the estate property to realise in satisfying their claim.226 The relevant principle is that, where a creditor of the deceased has a right to resort to two (or more) properties in satisfaction of the debt, equity does not permit the creditor’s choice to deprive the legatee to which the property realised was bequeathed. Rather, once the claims of creditors have been satisfied, the executor(s), by means of marshalling, adjust the burden of these claims against the beneficiaries’ entitlements so as to reinstate the order of distribution set by the testator or by statute.

Marshalling compared to contribution [14.235]  Marshalling regulates the order of different classes of assets, and does not operate

between assets of the same class. As between the latter, the question is one of contribution:227 see [14.125]–​[14.210]. The difference between marshalling and contribution, however, is one of form rather than nature, as explained by Knight Bruce VC in Tombs v Roch:228 Marshalling and contribution are, each of them, the adjustment between several persons of their rights respectively, inter se, in respect of a charge or claim, which, affecting all of them, or properties belonging to all of them respectively, has been or may be enforced in a manner not unjust, as far as the person is concerned by whom it was or may be enforced, but not just as between the persons or properties liable.

Circumstances where marshalling is not available

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[14.240]  A court will not marshall where the terms of the security document or the will (as

the case may be) expressly or impliedly exclude its operation.229 If, for instance, the double creditor is contractually bound to look first to the property over which the single creditor has security, marshalling is not available to the single creditor because there is no arbitrariness the double creditor’s decision.230 The doctrine is also unavailable vis-​à-​vis different funds to which different rights exist. Where, say, two funds lie in the hands of the same persons, where over the one they have a security interest, but not over the other, marshalling is inapt.231 Nor will it apply where the single claimant lacks a proprietary interest in either fund,232 or where its application would cause undue prejudice to third party rights (see [14.245]).

Prejudice to third party rights [14.245]  The right to marshall, standing upon equitable grounds as it does, will be denied

where it would be inequitable for the double creditor to go against the fund against which

226

Aldrich v Cooper (1803) 8 Ves 382 at 396–​397; 32 ER 402 at 408 per Lord Eldon LC.

227

Ramsay v Lowther (1912) 16 CLR 1 at 23 per Isaacs J.

228

Tombs v Roch (1846) 2 Coll 490 at 502; 63 ER 828 at 832.

229

Aldrich v Cooper (1803) 8 Ves 382 at 397; 32 ER 402 at 408 per Lord Eldon LC; Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 at 126–​127 per Neasey J.

230

National Crime Agency v Szepietowski [2014] AC 338 at [38] per Lord Neuberger, citing with approval the Australian decisions of Re Holland (1928) 28 SR (NSW) 369 and Miles v Official Receiver in Bankruptcy (1963) 109 CLR 501 to this effect.

231

Webb v Smith (1885) 30 Ch D 192 at 199 per Brett MR, at 200 per Cotton LJ, at 202 per Lindley LJ.

232

Re Tremain (deceased) [1934] NZLR 369 at 387 per MacGregor J.

[14.245]  465 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

the single creditor has no claim.233 It follows that equity will not marshall where to aid one creditor would injure another.234 This reveals an aspect of equity’s disinclination to grant relief that would prejudice the rights of third parties. In Dolphin v Aylward Lord Hatherley LC illustrated this limitation on the doctrine by means of the following example:235 [A]‌person having three estates, which we will call A, B, and C, with mortgages upon all the three, executes a voluntary settlement of one of the estates, say of C, and afterwards creates a [second] mortgage upon B alone, I apprehend that he cannot … affect the interests created in third parties by the doctrine of marshalling, that is to say, he cannot throw the mortgagees of A, B, and C upon the estate conveyed by voluntary settlement, in order that he may leave B entirely clear from mortgage debt.

Where properties X and Y are mortgaged to A, and subsequently X is mortgaged to B, and Y is mortgaged to C, marshalling will not be applied so as to prejudice either B or C. Cohen J explained the courts’ approach in such cases in Chase Corp (Aust) Pty Ltd v North Sydney Brick & Tile Co Ltd:236

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The principle is that although under the usual rule of marshalling the second mortgagee can look to the security over which it does not have security, this would create an unfair situation if that other property is also secured by a second mortgage. In those circumstances there must be an apportioning of the debt due to the first mortgagee over both properties so as to leave a balance in each to the second mortgagees.

This procedure is known as “marshalling by apportionment”. In the example cited above, under marshalling by apportionment B and C have the right to require that A’s debt be satisfied ratably out of the two estates (that is, according to their respective values) so as to leave a proper proportion of it to satisfy their claims, any final surplus being payable to the mortgagor. This is irrespective of whether C took the second mortgage with notice of B’s second mortgage of X.237 If the subsequent mortgage to B is over both X and Y, the court will not, as between B and C, marshall the securities by directing A to take full payment out of either X or Y, even though A’s security could be satisfied out of either property. Instead, A’s debt is apportioned ratably between both properties, C having resort to the residue of Y, B then resorting to the residue of both X and Y.238

233

Ex parte Kendall (1811) 17 Ves 514 at 526; 34 ER 199 at 204 per Lord Eldon LC.

234

Dolphin v Aylward (1870) LR 4 HL 486 at 502–​503 per Lord Hatherley LC; Webb v Smith (1885) 30 Ch D 192 at 202 per Lindley LJ; Flint v Howard [1893] 2 Ch 54 at 73 per Kay LJ; The Chioggia [1898] P 1 at 6 per Gorell Barnes J; New Zealand Loan and Mercantile Agency Co (Ltd) v Loach (1912) 31 NZLR 292 at 298 per Denniston J; Bank of New South Wales v City Mutual Life Assurance Society Ltd [1969] VR 556 at 557 per Gillard J; Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 at 130 per Neasey J.

235

Dolphin v Aylward (1870) LR 4 HL 486 at 501.

236

Chase Corp (Aust) Py Ltd v North Sydney Brick & Tile Co Ltd (1994) 35 NSWLR 1 at 18.

237

Re Crothers [1930] VLR 49 at 63 per Cussen J, at 68–​69 per Macfarlan J; Commonwealth Trading Bank v Colonial Mutual Life Assurance Society Ltd [1970] Tas SR 120 at 128–​129 per Neasey J.

238

Barnes v Racster (1842) 1 Y & CCC 401; 62 ER 944; Olliver v Colonial Bank (1886) 5 NZLR 239; Baglioni v Cavalli (1900) 83 LT 500; Mir Bros Projects Pty Ltd v Lyons [1977] 2 NSWLR 192 at 196–​197 per Waddell J.

466 [14.245] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Chapter 15

Deceased Estates SATISFACTION IN EQUITY [15.05] Where a person under an obligation to make payment (a testator–​ obligor) later

bequeaths a sum to the obligee, the issue arises whether he or she intended that sum be in satisfaction of, or instead cumulative upon, the obligation. Courts of equity presume against a cumulative entitlement; instead the presumption of satisfaction treats the legacy as satisfying the prior obligation. It operates in two scenarios, each discussed below: between testators and their creditors, and between testators and the persons to whom they are in loco parentis. Presumption as between testators and creditors

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[15.10]  Equity presumes that a legacy to person is intended to satisfy a debt owed to that

person prior to the making of the will where it is equivalent to or exceeds what the person is entitled to apart from the will.1 The doctrine of satisfaction, in this regard, aims to prevent the “unconscientious enjoyment of two gifts which it is known were not intended to be cumulative”.2 Being in the nature of a presumption, its operation can be rebutted by evidence that the testator did not intend the legacy to be in satisfaction of the debt. Whereas the question of whether the presumption arises is determined solely by construing the testamentary instrument, extrinsic evidence is admissible to rebut the presumption once it is found to have arisen.3 [15.15]  As the strength of the presumption, and so the ease with which it is rebutted, var-

ies with the facts, it has been judicially branded as artificial.4 In the case, say, of a legacy bequeathed to a person who happens, by an ordinary business transaction, to become a creditor of the testator, there appears no real likelihood that the testator meant the legacy to satisfy the debt. Here the presumption is weak, lacking a natural foundation and contradicting experience. There is sounder ground for the presumption in instances where the liability forms part of the arrangements affecting in a general sense the enjoyment of the testator’s property.5

1

Russell v White (1895) 16 LR (NSW) Eq 158 at 164–​165 per Owen CJ in Eq; Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 804 per Rich J, at 811–​812 per Dixon J; Lambert v Waters [1954] QSR 212 at 227 per Philp J. The doctrine of satisfaction is said to be based on two maxims, namely “a debtor is not presumed to make a gift” (Johnstone v Haviland [1896] AC 95 at 103–​104 per Lord Herschell) and “a man ought to be just before he is bountiful” (Fowler v Fowler (1735) 3 P Wms 353 at 354; 24 ER 1098 at 1098 per Talbot LC).

2

Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 806 per Rich J. See also at 815–​816 per Dixon J.

3

See generally Re Will of Weiss (deceased) (1946) 48 WALR 37 at 40 per Dwyer CJ; Lambert v Waters [1954] QSR 212 at 221 per Macrossan CJ, at 229–​231 per Philp J.

4

Re Horlock [1895] 1 Ch 516 at 518, 522 per Stirling J; Webb v Webb (1900) 21 LR (NSW) Eq 245 at 251 per A H Simpson CJ; Re Rattenberry [1906] 1 Ch 667 at 670 per Swinfen Eady J; Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 804 per Rich J, at 808 per Starke J, at 812–​813 per Dixon J, at 818–​819 per McTiernan J; Re Manners [1949] 1 Ch 613 at 616 per Evershed MR.

5

Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 814 per Dixon J.

[15.15]  467 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

The issue of satisfaction thus targets the testator’s intention, construed from the terms of the will, the situation of the parties and the surrounding circumstances, free from inflexible rules of construction.6 The presumption nonetheless remains a convenient determinant of the onus. This approach locates the factors the courts have traditionally treated as evidence relevant to raising the presumption, and its rebuttal, as tools to determine whether the presumption aligns with the testator’s intention. Each of these factors, discussed below, must be weighed against others to determine the correct inference as to intention.

Relevance of identity of amounts

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[15.20]  A Queensland judge has opined that “[i]‌n all the cases I have seen where the presump-

tion has been held to arise (apart from those where the legacy was greater than the debt) the sum named by the testator has been exactly equal to the debt”.7 Certainly an identity between the legacy and the debt provides prima facie evidence that the testator intended it to be in satisfaction of the debt, as appears from the ruling of the High Court in Royal North Shore Hospital v Crichton-​Smith.8 There, on the separation of the parties to a marriage in 1922, the husband covenanted to pay an annuity to his wife of £630 quarterly in advance during his wife’s life so long as she should remain chaste. In his will, made in 1931, the husband directed that the income of a share of his residuary estate, up to £630, be paid quarterly in advance to his wife during her life or until she should remarry. The court viewed the identity of the main characteristics of the two provisions as raising a presumption that the husband intended the legacy to operate in satisfaction of the prior covenant.9 Where, conversely, the debt exceeds the legacy, even by a small amount, courts have generally refused to apply the presumption. In Lambert v Waters,10 the sum named in the legacy was £300 per annum whereas the debt accrued at £6 per week. Philp J refused to construe the legacy as in satisfaction of the debt, because “a covenant to pay £6 a week is at the least a covenant to pay £312 per annum”.11 Though conceding that, colloquially speaking £6 a week equates to £300 a year, his Honour was unwilling to “give a colloquial meaning to a phrase used in a will obviously drawn by a lawyer”.12 The strict approach again appears in the judgment of A H Simpson CJ in Webb v Webb.13 In Webb, the testator bequeathed to his widow a legacy of £750, being confirmed by a codicil. At both the dates of the will and of the codicil, the testator was indebted to his wife in respect of differing amounts, each being less than the bequest. At the date of his death the testator owed over £756 to his wife. The Chief Justice held that the bequest was taken out of the presumption of satisfaction due to it being “a fluctuating and varying amount, of which fact the testator was aware”.14

6

See Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 809 per Starke J.

7

Lambert v Waters [1954] QSR 212 at 227 per Philp J (emphasis in original).

8

Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798.

9

Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 805–​806 per Rich J, at 809–​810 per Starke J, at 816 per Dixon J, at 822 per McTiernan J.

10

Lambert v Waters [1954] QSR 212.

11

Lambert v Waters [1954] QSR 212 at 228 (emphasis in original).

12

Lambert v Waters [1954] QSR 212 at 228.

13

Webb v Webb (1900) 21 LR (NSW) Eq 245.

14

Webb v Webb (1900) 21 LR (NSW) Eq 245 at 251. See also Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 808 per Starke J.

468 [15.20] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Deceased Estates  Chapter  15

Relevance of the time of payment [15.25]  Where the legacy, although equal to or exceeding the debt in amount, is payable at a

different time, so as not to be equally advantageous to the legatee as the payment of the debt, courts have, from the earliest times, held that the presumption of satisfaction is repelled. The words of Lord Hardwicke in Clark v Sewell typify the curial attitude:15 [A]‌legacy that ought to be deemed a satisfaction must take place immediately after the death of the testator: for the debt, whether of a principal sum or for interest, is due at the death of the testator, and therefore the legacy must be so too … There is no case to make a legacy a satisfaction of a debt, where the legacy is not due at the time of the testator’s death, but is made contingent, and to take place at a future day … For whether the positioning of the legacy is a month only, or a longer time, it makes no manner of difference.

For instance, in Haynes v Mico,16 involving a debt payable within one month and a legacy within six months, that the latter was less advantageous to the creditor meant that it could not be in satisfaction of the debt.17 But a legacy is within the presumption if it is an immediate legacy, albeit only payable in a due course of administration and after provision for debts and funeral expenses. Moreover, that a legacy is given generally, without reference to time of payment or interest, does not exclude the presumption. In this case, if the court decrees the legacy to be in satisfaction of a debt, it gives interest from the date of the testator’s death, unless the will mentions a date for payment, in which case interest runs only from that date.18

Impact of a direction to pay debts

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[15.30] In Re Huish,19 Kay J said that to rebut the presumption of satisfaction “all that is

material is that there should be a direction that debts should be paid”. His Lordship reasoned that if after giving a legacy to a creditor, the testator says “I direct my debts to be paid”, that means: “Although I have given a legacy to my creditor, I direct that my debt to him or her be paid also”. Yet in Re Manners,20 Evershed MR, in opining that “a direction for payment either of debts or legacies, or of debts simpliciter, is treated as being … something which prima facie takes the case altogether outside the rule”, appeared to treat a testamentary direction to pay debts as evidence going not to rebutting the presumption but to its existence in the first place. At least one Australian judge has so construed this statement, namely that a mere direction to pay debts prevents the presumption of satisfaction arising at all.21 As the presence or absence of a direction to pay debts is determined on the construction of the testamentary document without resort to extrinsic materials, there is no reason in principle why it should not be addressed when the existence of the presumption is determined. Yet as noted above, in so doing the court effectively denies the admission of extrinsic evidence that may support the presumption notwithstanding the direction to pay debts in the will.

15

Clark v Sewell (1744) 3 Atk 96 at 97; 26 ER 858 at 859. See also Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798 at 808 per Starke J.

16

Haynes v Mico (1781) 1 Bro CC 129; 28 ER 1031.

17

Haynes v Mico (1781) 1 Bro CC 129 at 132; 28 ER 1031 at 1033.

18

See generally Re Rattenberry [1906] 1 Ch 667 at 671–​672 per Swinfen Eady J. Cf Re Horlock [1895] 1 Ch 516.

19

Re Huish (1889) 43 Ch D 260 at 264.

20

Re Manners [1949] 1 Ch 613 at 618 (emphasis supplied).

21

Lambert v Waters [1954] QSR 212 at 229 per Philp J.

[15.30]  469 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

Impact of the legacy being a share of the residue [15.35]  That the legacy forms part of the residue has historically been held sufficient to over-

turn the presumption, the reason being the courts’ concern that the thing given in satisfaction should be certain.22 However, as appears from the High Court’s decision in Royal North Shore Hospital v Crichton-​Smith23 (see [15.20]), this is merely a factor to be balanced against others to determine the testator’s intention. Presumption in respect of persons in loco parentis [15.40]  The presumption of satisfaction operates in circumstances where a person has cove-

nanted to provide “portions” of her or his estate, usually by means of a settlement, for persons to whom he or she is in loco parentis (“in the place of a parent”). A “portion” is “something given by the parent to establish the child in life, or to make what is called a provision for him —​not a mere casual payment”.24 Swinfen-​Eady J in Re Blundell stated the relevant principle as follows:25 Equity leans against double portions, and the general rule is that wherever a legacy given by a parent, or a person standing in loco parentis, is as great as or greater than a portion previously secured to the legatee upon marriage or otherwise, a presumption arises that the legacy was intended as a satisfaction of the portion. If the legacy is less than the portion a presumption arises that it was intended as a satisfaction pro tanto.

Again the inquiry focuses on whether the subject of the undertaking or obligation is substantially the same as the legacy,26 which together with the relevant context informs the testator’s intention.

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[15.45] However, the law of satisfaction in the context of portions from persons in loco

parentis differs from that governing the testator and her or his creditors in two important respects. First, that a legacy is less than the portion does not preclude the presumption of satisfaction; the obligation is instead presumed to have been satisfied to the extent of the legacy. For example, where a testator enters into a covenant to settle a sum of money upon a child for life, with remainder to the child’s issue, that covenant is not satisfied by a bequest of a like sum of money to that child absolutely; it is only satisfied so far as the child is concerned.27 Secondly, the presumption is stronger in the case of portions to persons to whom the obligor stands in loco parentis. The House of Lords explained the reason for this long ago as follows:28 Equity leans against legacies being taken in satisfaction of the debt, but leans in favour of a provision by will being in satisfaction of a portion by contract, feeling the great improbability of a parent intending a double portion for one child, to the prejudice generally, of other children. In the case of a debt, therefore, small circumstances of difference between the debt and

22

Thynne v Earl of Glengall (1848) 2 HLC 131 at 154; 9 ER 1042 at 1050 per the Lord Chancellor.

23

Royal North Shore Hospital v Crichton-​Smith (1938) 60 CLR 798.

24

Taylor v Taylor (1875) LR 20 Eq 155 at 157 per Jessel MR. See Crago, “Equitable Ademption Within the Family” (1987) 17 UWALR 272 at 282–​288.

25

Re Blundell [1906] 2 Ch 222 at 226. See also Chichester v Coventry (1867) LR 2 HL 71 at 83 per Lord Chelmsford LC, at 98 per Lord Colonsay; Russell v White (1895) 16 LR (NSW) Eq 158 at 164–​165 per Owen CJ in Eq.

26

Weall v Rice (1831) 2 Russ & My 251; 39 ER 390; Chichester v Coventry (1867) LR 2 HL 71 at 83 per Lord Chelmsford LC, at 98 per Lord Colonsay; Russell v White (1895) 16 LR (NSW) Eq 158 at 168–​169 per Owen CJ in Eq.

27

Chichester v Coventry (1867) LR 2 HL 71 at 92, 95 per Lord Romilly.

28

Thynne v Earl of Glengall (1848) 2 HLC 131 at 153; 9 ER 1042 at 1050. See also Re Horrocks (deceased) [1944] NZLR 314 at 325 per Fair J.

470 [15.35] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Deceased Estates  Chapter  15

the legacy are held to negative any presumption of satisfaction; whereas in the case of portions, small circumstances are disregarded. So in the case of debt, a smaller legacy is not held to be in satisfaction of part of a larger debt; but in the case of portions it may be satisfaction pro tanto. [15.50]  In other respects, the factors that aid the court in determining intention do not materially differ from those between the testator and her or his creditors. A leading case is Russell v White,29 where the testator, shortly after his daughter’s birth, settled a sum (£2000) on trust for her absolutely. Some 13 years later, he received back the money (which had accumulated to £5000) from the trustee, and executed a declaration of trust of the moneys so received for “the sole and separate use” of his daughter. Thereafter the testator treated the moneys as his own. In his will, he directed his trustees to invest the sum of £22,000 out of the residue for his daughter in trust to pay her out of the income £300 annually until she became 22 years of age and then to pay her the accumulated interest and the annual interest during her life with remainder to her children (and in default of children, to any person whom the daughter appointed). The issue was whether the daughter’s entitlement under the will included the £5000 held on trust on her behalf or was cumulative to it. Owen CJ in Eq held that, as the declaration of trust had been executed only 18 months before the execution of the will, and the £5000 was in the testator’s hands at the date of his death, the presumption of satisfaction arose. However, it was rebutted by reason of “the great difference in the amount of the two gifts and the great differences between the limitations of the two”.30

EQUITABLE ADEMPTION Nature of equitable ademption

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[15.55] Equitable ademption involves the satisfaction of legacies by subsequent gifts or

advances made inter vivos by the testator to the legatees. Equity presumes that, in certain circumstances, the testator intended, by means of a payment to a legatee, to satisfy a legacy due to that person under the testator’s will. The notion underlying the doctrine of ademption is that:31 … where a testator by his will directs the application of funds for particular purposes, or where he has a moral obligation to make such a provision, and he makes a subsequent provision of the same nature for the same or very similar purposes by another instrument effecting the same purposes in much the same way as in the earlier instrument, he is presumed to have intended to have substituted the later for the earlier provision, and it is adeemed.

Both satisfaction and ademption rest on equity’s presumption against double portions.32 Yet ademption is essentially the converse of satisfaction. Satisfaction presumes that a subsequent legacy of a testator to a third party is intended to satisfy a debt owed to that third party prior

29

Russell v White (1895) 16 LR (NSW) Eq 158.

30

Russell v White (1895) 16 LR (NSW) Eq 158 at 169.

31

Re Horrocks (deceased) [1944] NZLR 314 at 327 per Fair J. See also Re Wells (1930) 30 SR (NSW) 150 at 154–​157 per Long Innes J; Re Edwards (deceased) [1958] Ch 168 at 178 per Jenkins LJ.

32

Pym v Lockyer (1841) 5 My & Cr 29 at 34–​35; 41 ER 283 at 285 per Cottenham LC; Lake v Quinton [1973] 1 NSWLR 111 at 140 per Hutley JA. Although this presumption has been the subject of criticism (see, for example, Montagu v Earl of Sandwich (1886) 32 Ch D 525 at 541 per Bowen LJ; Elders Trustee & Executor Co Ltd v Eastoe [1963] WAR 36 at 38 per Hale J), it remains embedded in Australian law. As with the presumption of satisfaction, any continuing dissatisfaction with it would likely be dealt with by means of weakening, not abolishing, the presumption.

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Equity and Trusts in Australia

to the making of the will. The differences and relationship between the two doctrines have been explained as follows:33 If the earlier of the two gifts is not a revocable will but a legal obligation upon the donor —​for example his covenant with the trustees of his daughter’s marriage settlement to pay a sum to them —​then the question of whether the later gift by will was intended to meet the same purposes as the former covenant and is on that account to be a substitute for it is generally referred to as a question of “satisfaction”. If, however, the earlier gift is by a will as to which the donor is under no legal obligation and the latter is a gift inter vivos the corresponding question is generally referred to as one of “ademption”. Although the principles of satisfaction and ademption are not dissimilar it is clear upon the authorities that it is a good deal more difficult to prove a case of satisfaction than of ademption.

Also, in cases of satisfaction those intended to be benefited by the gift or advance and those intended to be benefited by the legacy are the same; in cases of ademption they may differ.34 [15.60]  Ademption in equity has a namesake at common law, but the doctrines are discrete.35

At common law, a “specific” gift36 is said to fail by “ademption” if its subject matter ceases to exist as part of the estate of the testator at the time of death. So if the testator sells the specific property, or it otherwise ceases to exist (say, by being destroyed) before the testator’s death, the gift is “adeemed” —​meaning in effect revoked —​and the beneficiary takes nothing.37 As noted in the preceding paragraph, the doctrine of ademption in equity instead involves a subsequent inter vivos gift adeeming —​again, revoking (or at least partially ousting) —​a legacy of the same or similar nature found in the will. Presumption of ademption

Classes of case where ademption presumed Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

[15.65]  An intention to adeem (that is, take away or revoke) is presumed in only two classes

of cases:38 first, where a parent39 (or person in loco parentis) gives a legacy to her or his child and then inter vivos makes a gift or advance of substantially the same quality to that child; secondly, where a person gives a legacy for a particular purpose and then makes a gift or advance to the legatee for the same purpose. Each instance of the application of the

33

Re Cameron (deceased) [1999] Ch 386 at 409–​410 per Lindsay J (emphasis in original).

34

Chichester v Coventry (1867) LR 2 HL 71 at 87–​88 per Lord Cranworth, at 91 per Lord Romilly. See, for example, Re Cameron (deceased) [1999] Ch 386, discussed at [15.80].

35

As to ademption at common law, see Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [7.23]–​[7.41].

36

Namely a specific gift of some part of the testator’s estate, which is identified and separated from the rest of the estate.

37

Brown v Heffer (1967) 116 CLR 344 at 348 per Barwick CJ, McTiernan, Kitto and Owen JJ; Johnston v Maclarn [2002] NSWSC 97 at [13]–​[15] per Young CJ in Eq (who uses the terms “extinction” and “annihilation” of the subject matter).

38

Re Everett [1917] SALR 52 at 65 per Murray CJ. See also Re Pollock (1885) 28 Ch D 552 at 556 per Earl of Selborne LC; Re Furness [1901] 2 Ch 346 at 348–​349 per Joyce J; Re Horrocks (deceased) [1944] NZLR 314 at 324 per Fair J; Re Sparrow (deceased) [1967] VR 739 at 741 per Little J. An attempt to support a presumption in the context of spouses or de facto partners failed before Lindsay J in Reynolds v Bonnici [2017] NSWSC 828 (although his Honour conceded that “[o]‌n the facts of a particular case, a presumption against double portions might operate as between a married couple or de facto partners; but it would require special circumstances not found in the present proceedings: a child-​like dependency of the donee on the donor or a purposive legacy duly particularised”: at [53]).

39

Though historically limited to gifts or advances made by fathers or other male persons, the modern understanding that mothers as much as fathers have an obligation to provide for their children (as evidenced by the judicial recognition that the presumption of advancement applies between mother and child: see [26.135]) dictates that the presumption of ademption should apply to such gifts or advances from mothers: Re Cameron (deceased) [1999] Ch 386 at 405 per Lindsay J.

472 [15.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Deceased Estates  Chapter  15

presumption is discussed at [15.80]–​[15.95]. In each case it is presumed, subject to contrary intention in the relevant instrument,40 that the donor did not intend both benefits be taken, but that the gift be in satisfaction of the legacy either wholly or pro tanto accordingly, as the amount of the gift is equal to or less than the amount of the legacy. At least in the first class of case, the presumption is stronger than that operating in cases of satisfaction, the reason for this being explained by Lord Chelmsford LC in Chichester v Coventry as follows:41 In the case where the revocable instrument is first [ademption], and a portion is given by it, if the event of marriage, or any other occasion for advancing a child, should afterwards occur, it may very reasonably be supposed that the parent has anticipated the benefit provided by the will, and has intended to substitute for it the new provision, either entirely or pro tanto. But where an irrevocable settlement is followed by a will [satisfaction], it is not so easy to infer that an additional benefit was not intended by the testator, except where he expressly declares his intention to be otherwise, or where the gift in the will and the portion in the settlement so closely resemble one another as to lead to a reasonable intendment that the one was meant to be substituted for the other.

Legacy and gift/​advance to be ejusdem generis

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[15.70]  The presumption of ademption surfaces only where the legacy and subsequent gift

or advance are ejusdem generis, that is, of the same kind or nature.42 A finding of this kind may stem from the form or self-​description of the instrument making the second gift, from the terms of the two gifts —​thus “simple repetition, where it is exact and punctual, has been regarded as sufficient proof” that it is only intended as repetition43 —​or where the sums and motive are the same in both instruments. Application of the ejusdem generis rule has seen considerable latitude, particularly vis-​à-​vis advances from persons in loco parentis:44 see [15.80]. Courts inquire into whether the two gifts have substantially the same nature, quality or purpose.45 For example, the presumption in favour of ademption is not rebutted because the limitations of the legacy differ from the limitations in the subsequent settlement, unless these differences are so substantial as to reveal that the donor did not intend the latter to be in satisfaction of the former.46 Neither is the fact that the later benefit results from an agreement for which the legatee gave consideration,47 or from an order of the court,48 sufficient by itself to rebut the presumption.

Rebuttal of the presumption [15.75]  The presumption of ademption may be rebutted by evidence showing that the donor

intended both gift and legacy to have effect (that is, to be cumulative), which in turn may 40

The presumption merely affords a means of ascertaining intention, which may otherwise be actually expressed in, or be gathered from, the relevant document(s). If an instrument later in time than a will expressly declares that the provision it makes for a particular person is in satisfaction of, or in substitution for, a disposition made by the will in favour of that person, it will be given its intended effect: Seaborn v Marsden (1926) 26 SR (NSW) 485 at 497 per Long Innes J; Re Sparrow (deceased) [1967] VR 739 at 745 per Little J.

41

Chichester v Coventry (1867) LR 2 HL 71 at 82.

42

See Crago, “Equitable Ademption Within the Family” (1987) 17 UWALR 272 at 288–​292.

43

Moggridge v Thackwell (1792) 1 Ves 464 at 473; 30 ER 440 at 444 per Lord Thurlow LC.

44

Re Chirnside (1903) 29 VLR 4 at 14 per A’Beckett J; Re Mills (deceased) [1952] SASR 274 at 277–​278 per Ligertwood J.

45

Chichester v Coventry (1867) LR 2 HL 71 at 83 per Lord Chelmsford LC; Re Cameron (deceased) [1999] Ch 386 at 410 per Lindsay J.

46

Re Furness [1901] 2 Ch 346 at 349 per Joyce J.

47

Re Horrocks (deceased) [1944] NZLR 314 at 325 per Fair J; Re Sparrow (deceased) [1967] VR 739 at 744–​745 per Little J.

48

Lake v Quinton [1973] 1 NSWLR 111 at 121–​122 per Jacobs P.

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Equity and Trusts in Australia

be met by evidence in support of the presumption. As in the case of satisfaction, the main issue is one of ascertaining the testator’s intention at the time of making the relevant gift or advance.49 Likewise, extrinsic evidence of intention is admissible for the purposes of rebutting the presumption (and in countering this rebuttal) but not to raise (or aid in raising) the presumption.50 Subsequent advance by parent (or person in loco parentis)

Operation of the presumption

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[15.80] As a general rule, a parent (or person in loco parentis) who by will gives a legacy

to a child, without expressing the purpose for which it is given, is understood to be giving a “portion”.51 For this purpose, while small gifts have never been portions,52 the term refers not merely to quantity, but has a qualitative significance; the issue is grounded in the donor’s intention.53 As equity leans against double portions, a subsequent inter vivos advance of a portion to the child is presumed as intended to adeem the legacy either altogether or, where the advancement is less than the legacy, pro tanto. The logic is that a parent who intends to set up a child in life or to make substantial provision for her or him by way of a “portion” does not intend to do that twice.54 The presumption against double portions grew out of equity’s desire to promote equality amongst children, and so in a sense aligns with the drive of family provision legislation that favours sharing within the family.55 Re Cameron (deceased)56 illustrates the operation of the presumption. By her will, a mother left her estate to her four sons equally, later granting an enduring power of attorney to her second, third and fourth sons, conferring a power to provide for and meet the needs of any person for which she might have been expected to do so. The donees of the power paid £62,596 for private school fees of the child of the first son on the basis that this payment would, due to the rule against double portions, adeem pro tanto the first son’s share in the residuary estate. On the mother’s death, the first son maintained that there had been no ademption of his share. Lindsay J rejected this claim, concluding that both the gift by will and the inter vivos gift were such that the law should regard them as making substantial provisions each intended to include the substantial benefit of one person. As there was no evidence to rebut the presumption, the inter vivos provision pro tanto adeemed the first son’s share of the residuary estate to which he would otherwise have been entitled. 49

Chichester v Coventry (1867) LR 2 HL 71 at 82 per Lord Chelmsford LC, at 86–​87 per Lord Cranworth; Re Everett [1917] SALR 52 at 65 per Murray CJ; Seaborn v Marsden (1926) 26 SR (NSW) 485 at 497–​498 per Long Innes J.

50

Kirk v Eddowes (1844) 3 Hare 509 at 516; 67 ER 482 at 485 per Wigram VC; Re Mills (deceased) [1952] SASR 274 at 278 per Ligertwood J.

51

See Crago, “Equitable Ademption Within the Family” (1987) 17 UWALR 272.

52

Ravenscroft v Jones (1863) 32 Beav 669; 55 ER 263; Watson v Watson (1864) 33 Beav 574; 55 ER 491.

53

Re Cameron (deceased) [1999] Ch 386 at 404 per Lindsay J.

54

Re Simpson (1906) 7 SR (NSW) 78 at 81–​82 per Street J; Seaborn v Marsden (1926) 26 SR (NSW) 485 at 495–​497 per Long Innes J; Re Wells (1930) 30 SR (NSW) 150 at 154–​157 per Long Innes J; Re Mills (deceased) [1952] SASR 274 at 277 per Ligertwood J; Elders Trustee & Executor Co Ltd v Eastoe [1963] WAR 36 at 37–​39 per Hale J; Re Sparrow (deceased) [1967] VR 739 at 741 per Little J; Lake v Quinton [1973] 1 NSWLR 111 at 122–​123 per Jacobs P; Re Cameron (deceased) [1999] Ch 386 at 407 per Lindsay J.

55

Family Provision Act 1969 (ACT); Succession Act 2006 (NSW), Ch 3; Family Provision Act 1970 (NT); Succession Act 1981 (Qld), Pt 4; Inheritance (Family Provision) Act 1972 (SA); Testator’s Family Maintenance Act 1912 (Tas); Administration and Probate Act 1958 (Vic), Pt IV; Family Provision Act 1972 (WA). As to the law surrounding family provision, see Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), Chs 15–​20.

56

Re Cameron (deceased) [1999] Ch 386.

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Deceased Estates  Chapter  15

Lindsay J saw nothing exceptional in the law recognising that a disposition can be for a person’s benefit even though it does not come into her or his hands. It followed that if “a gift to the grandchild can fairly be seen as intended for the substantial benefit of the child”, there is scope for the presumption.57 The issue arguably goes to the strength of the presumption, which may vary according to the closeness of the relationship in question. In this vein, his Lordship opined that as “the rule against double portions is entirely judge-​made”, it is “within familiar limits, capable of being reformed in the course of decided cases”.58 This represents what may be seen as a judicial trend to query the strict application of equitable presumptions having a genesis in a society markedly different from modern society,59 and is consistent with equity’s fluid approach.

Rebuttal of the presumption

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[15.85]  The effect of the presumption against double portions is to put the onus of proof on

the person claiming both portions.60 The presumption can be rebutted by evidence of the testator’s intention either from the language of the will or from any other relevant circumstances. The ejusdem generis principle does not operate mechanically so as to preclude the presumption. Absent cogent extrinsic evidence to the contrary, in cases of substantial similarity, slight differences between the gift/​advance and the legacy do not upset it.61 Substantial differences, though, such that the legacy cannot be regarded as adeeming the gift/​advance, may do so. The question in each case is: “are the differences so marked that the notion that one gift could have been intended as a substitute for the other was effectively excluded?”62 Lake v Quinton63 illustrates the curial approach. The testator, by his 1953 will, gave one-​ third of his residuary estate to his wife for a period of 30 years and thereafter to his children. He gave the income from the remaining two-​thirds of the estate to his children in equal shares until they should reach a specified age, and thereafter absolutely. The parties divorced in 1966. In 1967 the testator executed a settlement whereby his former wife was given a life estate in a house, the children taking in remainder. The following year he executed a settlement of shares to be held on trust for such of his children who should attain 21 years of age. The issue was whether legacies to the children were adeemed by the provisions of either of the two settlements. The New South Wales Court of Appeal held that, even though real estate can be ejusdem generis with personalty for the purposes of ademption,64 there was no ademption by the 1967 settlement because what was given thereby differed fundamentally from the legacies in the will. Jacobs P best explained these differences:65

57

Re Cameron (deceased) [1999] Ch 386 at 415.

58

Re Cameron (deceased) [1999] Ch 386 at 416.

59

See also, for example, Australian courts’ questioning of the strict application of the presumptions of resulting trust and advancement, discussed at [26.155], [26.160].

60

Re Mills (deceased) [1952] SASR 274 at 278 per Ligertwood J; Lake v Quinton [1973] 1 NSWLR 111 at 123 per Jacobs P.

61

Chichester v Coventry (1867) LR 2 HL 71 at 83 per Lord Chelmsford LC.

62

Re Cameron (deceased) [1999] Ch 386 at 411 per Lindsay J.

63

Lake v Quinton [1973] 1 NSWLR 111.

64

Lake v Quinton [1973] 1 NSWLR 111 at 123 per Jacobs P, at 140–​142 per Hutley JA. In so doing, the court rejected the traditional approach that real estate and personalty could not be ejusdem generis for the purposes of ademption (as propounded in Bellasis v Uthwatt (1737) 1 Atk 426; 26 ER 271; Re Chirnside (1903) 29 VLR 4 at 14 per A’Beckett J) in favour of the American approach, under which a gift of real estate can operate as an ademption of a legacy. Cf Public Trustee v Regan (1933) 33 SR (NSW) 361 at 368 per Long Innes J (who doubted the rule that a conveyance of real estate could not be a portion).

65

Lake v Quinton [1973] 1 NSWLR 111 at 121, with whom Street CJ agreed. See also at 142–​143 per Hutley JA.

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Equity and Trusts in Australia

Under the will and codicil the four children took their residuary shares immediately upon the death of the father testator. It is true that they … took interests subject to divesting, but nevertheless vested interests. In respect of the purchase price of the house and the house itself the four children took no such interest. Their interests were contingent remainders after the death of their mother which might be very many years after they should obtain vested interests as residuary beneficiaries under the will. Such a residuary legacy should not be held to be adeemed by a contingent gift liable to long postponement.

However, the court reached the contrary conclusion regarding the later settlement of shares. Under the settlement, the children received an equitable contingent remainder upon attaining 21 years of age, compared to the interests under the will which, though vested, were liable to be divested if they did not attain the prescribed age (being 25 years for the sons and 30 years for the daughters). It ruled that the differences in ages of absolute vesting did not oust the presumption that the testator intended an ademption pro tanto of the legacy by the terms of this settlement. The reasons for this were again best explained by Jacobs P:66 The terms of the settlement are more favourable to the children. Moreover, the nature of the settlement is such that it can fairly be described as an anticipation of the provision which the testator father intended to make for those children … The intention was to give them security to some extent pro tanto for what they would receive under the will and codicil if it were not altered. This in my view has all the characteristics of a portion.

Date at valuation of property adeemed

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[15.90]  For the purpose of determining the extent to which a gift or settlement satisfies a

prior legacy, it is necessary to establish the date at which the property adeemed is to be valued, particularly where its value fluctuates. Generally, the gift or settlement is so immediate that the relevant date for its valuation is the date at which the gift was made or the settlement executed.67 But where, as in Lake v Quinton,68 the beneficial enjoyment of the gift or settlement is postponed, Jacobs P opined that “the whole purpose of achieving equality among the children would be lost sight of if the donee had to be satisfied with property which by [that later date] might have become worthless”. And there is case authority to the effect that merely because the legacy and the gift prove not to be ejusdem generis does not serve to rebut the presumption where the portion was valued at the time it was advanced.69 Subsequent advance for a specific purpose [15.95]  A leading statement regarding ademption in the context of subsequent advances to

persons not in loco parentis is that of Selborne LC in Re Pollock, which deserves lengthy quotation:70

66

Lake v Quinton [1973] 1 NSWLR 111 at 122. See also at 143 per Hutley JA; Re Mills (deceased) [1952] SASR 274 at 279 per Ligertwood J.

67

Watson v Watson (1864) 33 Beav 574; 55 ER 491; Re Mills (deceased) [1952] SASR 274 at 280 per Ligertwood J; Lake v Quinton [1973] 1 NSWLR 111 at 122–​123 per Jacobs P, at 143–​144 per Hutley JA.

68

Lake v Quinton [1973] 1 NSWLR 111 at 124. See also at 134–​135 per Street CJ in Eq.

69

See, for example, Re George’s Will Trusts [1949] Ch 154.

70

Re Pollock (1885) 28 Ch D 552 at 556. See also Pankhurst v Howell (1870) LR 6 Ch App 136 at 138 per James LJ; Re Furness [1901] 2 Ch 346 at 349 per Joyce J; Re Everett [1917] SALR 52 at 65 per Murray CJ; Re Horrocks (deceased) [1944] NZLR 314 at 323–​324 per Fair J; Re Sparrow (deceased) [1967] VR 739 at 741–​742 per Little J.

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Deceased Estates  Chapter  15

The presumptions arising out of the parental relation do not of course extend to cases in which a legatee is a stranger to that relation. But numerous authorities have determined that if a legacy appears on the face of the will to be bequeathed (though to a stranger) for particular purpose and a subsequent gift appears by proper evidence to have been made for the same purpose, a similar presumption is raised prima facie in favour of ademption. And it is clear from the authorities, that evidence of the circumstances under which the subsequent gift was made including contemporaneous or substantially contemporaneous declarations of the donor (whether communicated to the donee or not) may be admissible in such a case. To constitute a particular purpose within the meaning of that doctrine it is not … necessary that some special use or application of the money, by or on behalf of the legatee … should be in the testator’s view. It is not less a purpose … if the bequest is expressed to be made in fulfilment of some moral obligation recognised by the testator, and originating in a definite external cause, though not of a kind which (unless expressed) the law would have recognised, or would have presumed to exist.

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For example, in Salway v Snowden,71 the testator bequeathed an annuity to his wife so that she could provide herself a suitable residence, but shortly before dying conveyed to her the residence they had been occupying since before executing the will. Holroyd J considered that it could not be supposed that the testator conveyed the house in which he was then living in order that she might dispose of it immediately.72 Rather, there was a strong presumption that the testator conveyed to his wife the house so that she could continue to occupy it. This led his Honour to conclude as follows:73 That would indicate that he no longer contemplated her immediately removing from that house after his death, but rather that she should continue to live in it thereafter. That even occurred a very short time before his death, which must be taken into consideration in regarding the question of the intention of the testator, and the question before me is wholly a question of the intention of the testator. The particular purpose which the testator had in view when he bequeathed this annuity … was to enable her to provide herself with, and reside in, a suitable dwellinghouse; and I  cannot conceive any other purpose for which his own dwellinghouse should be conveyed to his wife so shortly before his death.

Similarly, in Re Horrocks (deceased),74 the terms of a separation agreement were held to adeem the testamentary provision for the payment of an annuity from the testator to his widow, as the purpose of both the testamentary provision and the separation agreement was the same, namely to provide maintenance for the wife. In reaching this conclusion, Fair J was primarily influenced by two factors:  that the amount fixed by the agreement exceeded the maximum amount that the testator was legally obliged to provide by will; and that pursuant to the separation agreement the wife was entitled to an annuity immediately rather than upon the testator’s death.

71

Salway v Snowden (1888) 14 VLR 669.

72

Salway v Snowden (1888) 14 VLR 669 at 672.

73

Salway v Snowden (1888) 14 VLR 669 at 672–​673.

74

Re Horrocks (deceased) [1944] NZLR 314. See also Re Sparrow (deceased) [1967] VR 739.

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Equity and Trusts in Australia

ELECTION IN EQUITY Nature of election in equity [15.100]  The foundation of the equitable doctrine of election is that “a person cannot accept

and reject the same instrument”,75 sometimes phrased in terms of a person not being permitted to both “approbate and reprobate” an instrument.76 It dictates that if a deed or will purports to make a general disposition of property for the benefit of a person, “such person cannot accept a benefit under the instrument without at the same time conforming to all its provisions, and renouncing every right inconsistent with them”.77 Equity fastens the conscience of the person put to an election, who cannot take the benefit of a disposition except upon certain conditions.78 In this context, as distinct from the common law concept of election,79 election in equity is a principle directed at securing a just distribution in substantial accordance with the general scheme of the instrument.80 The onus is on a person who maintains that a case for election has arisen.81 The remedy is compensation, not forfeiture;82 a beneficiary is thus entitled to claim both under and against a will except so far as may be necessary to compensate disappointed beneficiaries. The equitable doctrine of election applies in two classes of case: cases of “dual gifts” and in cases of “mutual obligations”,83 each discussed below. Dual gifts [15.105]  Cases of “dual gifts” necessarily involve the purported disposal (usually by will)

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by a testator of property that belongs to a third party while giving to the latter by the same instrument an interest in property owned by the testator. The operation of the election in these

75

Birmingham v Kirwan (1805) 2 Sch & Lef 444 at 449 per the Lord Chancellor. See Crago, “Mistakes in Wills and Election in Equity” (1990) 106 LQR 487; Histed, “Election in Equity: The Myth of Mistake” (1998) 114 LQR 621; Liu, “The Use and Misuse of Equitable Election” (2013) 36 UNSWLJ 1053.

76

Re Lord Chesham (1885) 31 Ch D 466 at 473 per Chitty J; O’Connor v S P Bray Ltd (1936) 36 SR (NSW) 248 at 263 per Jordan CJ.

77

Codrington v Codrington (1875) LR 7 HL 854 at 861–​862 per Lord Cairns LC. See also at 866 per Lord Chelmsford, at 866–​867 per Lord Hatherley, at 867 per Lord O’Hagan; Re Lord Chesham (1885) 31 Ch D 466 at 473 per Chitty J; Douglas-​ Menzies v Umphelby [1908] AC 224 at 232 (PC); Gregg v Perpetual Trustee Co (1918) 18 SR (NSW) 252 at 257–​258 per Harvey J.

78

Re Mengel’s Will Trusts [1962] Ch 791 at 797 per Buckley J.

79

The equitable doctrine of election operates independently of the common law, not by analogy. At common law “[a]‌person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, that is, when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract”: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655 per Mason J. Cf Blueberry River Indian Band v Canada (Department of Indian Affairs and Northern Development) (2001) 201 DLR (4th) 35 at 61 per Rothstein JA (likening legal and equitable concepts of election). As to the common law doctrine of election, see Paterson, Robertson and Duke, Principles of Contract Law (5th ed, Lawbook Co, 2016), [25.35]–​[25.105].

80

Brown v Gregson [1920] AC 860 at 868 per Viscount Haldane.

81

McKeown v Byron (1903) 4 SR (NSW) 13 at 15 per Simpson CJ in Eq.

82

Padbury v Clark (1850) 2 Mac & G 298 at 308; 42 ER 115 at 119 per Lord Cottenham LC (“[the person] electing to take against the will is bound to make good to the disappointed party the value of the property intended for [that party]”); Public Trustee v Beckman (1914) 15 SR (NSW) 6 at 9 per Harvey J.

83

Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458 at 470 per R D Nicholson J.

478 [15.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Deceased Estates  Chapter  15

circumstances is illustrated by the following example given by Buckley LJ in Re Gordon’s Will Trusts:84

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If A by a disposition effected by an instrument such as a will confers a beneficial interest in property of which he is competent to dispose on B, and by the same instrument purports to confer a beneficial interest on C in property of which A is not competent to dispose, being the property of B, B may elect to adopt one of two courses. He may elect to accept the entire benefit under the will, in which case he will be equitably bound so far as he is able, to give effect to A’s purported gift to C; or he may elect not to give effect to that purported gift. In the latter case, he will not forfeit his interest under the will, but will be equitably bound to submit to C being compensated out of that interest, so far as practicable, for being deprived of the beneficial interest which A intended to give him.

B’s rights here are not true alternatives, because in the above latter event B’s rights under the instrument are not necessarily destroyed. B is required only to give up her or his benefits under it to the extent necessary to compensate C (the disappointed beneficiary), and may retain any excess.85 In each case, the doctrine requires a clear intention on A’s part to dispose of certain property, which is not in fact A’s property, and a benefit given by the will to the true owner of the property (B).86 At the same time, B’s acts will not be treated as constituting an equitable election if done in ignorance of the equitable duty to elect87 or without being fully informed as to the value of the relevant property(ies);88 after all, election means “free choice”,89 and a choice that is not informed is not, in law, a free choice. There is no need that the court be satisfied of A’s intention that B, were he or she to challenge or defeat any part of the will, be put to an election.90 Indeed, occasions in which A frames the will with the conscious intention of bringing the doctrine into play are likely to be rare. More likely the doctrine “applies because the testator has made a mistake”,91 by assuming an ability to do something that cannot be done of her or his own volition. This in turn provides a reason why some have queried the rationale for election in equity, at least to the extent that it said to involve fastening on B’s conscience.92 Yet consistent with its location in this part of the book,

84

Re Gordon’s Will Trusts [1978] Ch 145 at 153 (emphasis supplied). See also at 161–​162 per Eveleigh LJ; Rogers v Jones (1877) 3 Ch D 688 at 689 per Jessel MR; O’Connor v S P Bray Ltd (1936) 36 SR (NSW) 248 at 263 per Jordan CJ; Re Edwards (deceased) [1958] Ch 168 at 172–​175 per Jenkins LJ; Re Gillespie [1969] QWN 32.

85

O’Connor v S P Bray Ltd (1936) 36 SR (NSW) 248 at 263 per Jordan CJ.

86

Re Edwards (deceased) [1958] Ch 168 at 175 per Jenkins LJ, at 179 per Romer LJ; Re Mengel’s Will Trusts [1962] Ch 791 at 796–​798 per Buckley J; Granot v Hersen (1999) 173 DLR (4th) 227 at 231, 241 per Doherty JA (CA(Ont)).

87

Padbury v Clark (1850) 2 Mac & G 298 at 306; 42 ER 115 at 118 per Lord Cottenham LC (“if a party being bound to elect between two properties, not being called upon so to elect, continues in the receipt of the rents and profits of both, such receipt, affording no proof of preference, cannot be an election to take the one and reject the other”; emphasis supplied); Spread v Morgan (1865) 11 HLC 588; 11 ER 1461 (see at 602; 1467 per Lord Westbury, at 612–​613; 1471 per Lord Cranworth, at 615; 1472 per Lord Chelmsford).

88

Kidney v Coussmaker (1806) 12 Ves 136 at 153; 33 ER 53 at 59 per Sir William Grant MR (involving a misapprehension as to the value of the relevant property); Dillon v Parker (1818) 1 Swans 359 at 381; 36 ER 422 at 430 per Sir Thomas Plumer MR.

89

Re Lord Chesham (1885) 31 Ch D 466 at 476 per Chitty J.

90

There are indications in early cases that the testator must have intended that the legatee elect: Dummer v Pitcher (1833) 2 My & K 262 at 274; 39 ER 944 at 949 per Lord Brougham; Minchin v Gabbett [1896] 1 IR 1 at 12 per Porter MR; Re Mawson [1939] 4 DLR 801 at 802 per Kelly J (SC(Ont)). However, as noted in the text, in many cases, this approach necessitates something of a fiction, namely the attribution of an intention to the testator that he or she simply did not have because her or his action was perpetuated upon a mistaken understanding of property to which he or she had title: Cooper v Cooper (1874) LR 7 HL 53 at 70 per Lord Hatherley, at 78 per Lord Moncreiff.

91

Re Mengel’s Will Trusts [1962] Ch 791 at 796–​797 per Buckley J.

92

See, for example, Scarfe v Matthews [2012] WTLR 1579 at [34]–​[37] per Mr N Strauss.

[15.105]  479 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

reference to conscience in this context is as a vehicle to rectify an unfair outcome rather than any real inquiry into the conduct of an individual.

Intention inconsistent with doctrine of election [15.110]  Courts are reluctant to invoke the doctrine of election absent a clear intention, whether

express or arising by necessary implication, on the face of the will to dispose of property in a manner inconsistent with the rights of another (who is also a beneficiary under the will) in that property.93 The doctrine is therefore excluded where the relevant instrument contains a declaration of a particular intention inconsistent with it.94 The court construes the instrument as a whole to ascertain the character of the interest the testator intended to create. Where the beneficial interest of the person who is sought to be made to elect is such that, for any reason, he or she cannot be made to submit to that interest being applied in compensating the disappointed parties, the doctrine cannot apply.95 For example:96 If [the testator] intended to create an interest of such a character as would have the legal effect of inter alia preventing the beneficiary making provision for compensation under the doctrine of election, and the interest so created is not available in law for compensation when the time comes for making election, then the doctrine of election is excluded because the testator has created in fact an interest of that character, which is not so available, although the question of election was obviously not in his contemplation.

Similarly, if the testator has attached to a gift of a life estate a provision that the gift is to go to other beneficiaries should the devisee do any act whereby the rents and profits from that estate become payable to another person, the entire ground for curial interference is cut away; there is no available fund out of which to make compensation, and so no reason for that interference.97

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[15.115]  A testator who uses general words in a gift is presumed to intend by those general

words to deal only with interests of her or his own, not those belonging to another person.98 So where the property is only described in terms more or less general, a case of election can seldom be sustained.99 If a joint tenant of a particular property devises the property by will specifically to her co-​tenant, a case of election arises and the latter must elect between his own interest and the interest he takes under the will. Conversely, if the testator does not dispose of the property specifically, but by general words, such as “all my lands and hereditaments” or the like, no case for election arises because there is other property of the testator’s sufficient to satisfy the devise.100 For example, in Granot v Hersen,101 the testator gave all his property to his trustees to pay a bequest and to transfer certain land to his son, and the residue to his daughter. The residue included a condominium in Switzerland, in which Swiss law gave the son a quarter interest. 93

Granot v Hersen (1999) 173 DLR (4th) 227 at 238, 241 per Doherty JA (CA(Ont)).

94

Re Vardon’s Trusts (1885) 31 Ch D 275 at 280 per Fry LJ; Public Trustee v Beckman (1914) 15 SR (NSW) 6 at 8–​9 per Harvey J.

95

Re Gordon’s Will Trusts [1978] Ch 145 at 160 per Buckley LJ.

96

Re Hargrove [1915] 1 Ch 398 at 406 per Astbury J.

97

Public Trustee v Beckman (1914) 15 SR (NSW) 6 at 9 per Harvey J.

98

Eckford v Eckford (1924) 25 SR (NSW) 78 at 92 per Maughan AJ; Granot v Hersen (1999) 173 DLR (4th) 227 at 241 per Doherty JA (CA(Ont)).

99

Re Harris [1909] 2 Ch 206 at 209 per Parker J; Granot v Hersen (1999) 173 DLR (4th) 227 at 237 per Doherty JA (CA(Ont)).

100

Miller v Thurgood (1864) 33 Beav 496 at 499; 55 ER 461 at 462 per Romilly MR; Granot v Hersen (1999) 173 DLR (4th) 227 at 241 per Doherty JA (CA(Ont)).

101

Granot v Hersen (1999) 173 DLR (4th) 227.

480 [15.110] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Deceased Estates  Chapter  15

The will did not specifically refer to the condominium, and so the issue was whether the son was required to elect his entitlement under the will or that under Swiss law. The Ontario Court of Appeal held that as the language of the will did not demonstrate an intention to dispose of the son’s interest in the condominium to the daughter, the doctrine of election had no application.102 The son was thus entitled to both the one-​quarter interest and the gift under the will. Mutual obligations [15.120]  A person having a beneficial interest in property under a disposition may be required,

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on equitable principles, to submit that interest being resorted to so as to compensate another person who has been deprived of a beneficial interest under the same disposition in consequence of an action of the first person. Take, for example, the scenario where A and B enter into a mutual settlement pursuant to which A settles property upon trust under which B has a beneficial interest, and B covenants to settle property on trusts under which A and C will be entitled to a beneficial interest. If for some reason (say, that B was a minor at the date of the covenant) B repudiates her obligation to bring property into the settlement, equity compels B to submit to A or C (as the case may be) being compensated out of B’s beneficial interest in A’s trust fund, so far as practicable, for being deprived of A’s or C’s beneficial interest in B’s intended trust fund. Equity intervenes by reason of B’s repudiation of her obligation to bring her own property into settlement for the benefit of A or C. In other words, B cannot equitably retain her entire beneficial interest under the trusts of the settlement and at the same time fail to fulfil part of the consideration for the settlement.103

102

Granot v Hersen (1999) 173 DLR (4th) 227 at 238, 241–​242 per Doherty JA.

103

See generally Re Gordon’s Will Trusts [1978] Ch 145 at 153–​154 per Buckley LJ.

[15.120]  481 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

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TRUSTS

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Chapter 16

Nature of A Trust DEFINITION AND CHARACTERISTICS

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[16.05]  A trust has been described as existing “when the owner of a legal or equitable interest

in property is bound by an obligation, recognised by and enforced in equity, to hold that interest for the benefit of others, or for some object or purpose permitted by law”.1 It follows that the essence of a trust is the holding of property by its legal owner (the “trustee”) for the benefit of others (the “beneficiaries”). From this description, three elements common to all trusts are apparent: a trust must have a trustee who holds the legal title to the trust property; the trustee must hold the property for the benefit of a beneficiary or a purpose recognised by law, namely a charitable purpose (see Ch 29); and trust property must vest in the trustee. The foregoing highlights the major characteristic of a trust: a duality of legal and equitable ownership in the trust property. A person may be both a trustee and a beneficiary of the same trust property but, due to the requirement of duality, cannot be both sole trustee and sole beneficiary,2 in which case legal and equitable title merge and any trust is extinguished.3 The merger notion dictates that a person who holds both legal and equitable title to property does not hold two estates, one legal and the other equitable, but the one estate: see [1.25]. This does not mean that all trusts must necessarily exhibit an exact symmetry between the legal and equitable estates4 —​which for some raises broader questions over whether “duality” of ownership should be eschewed in some contexts5 —​although in reality many do. What the foregoing also highlights is that a trust, though it deals with the holding of property, describes the relationship the law recognises as between the holder of the legal title and those who take beneficially. For this reason, a trust is, unlike a company, not a separate (legal) entity.6 Accordingly, references to “the trust” as though it were some kind of entity, separate

1

Heydon and Leeming, Jacobs’ Law of Trusts in Australia (8th ed, LexisNexis Butterworths, 2016), [1-​01].

2

Cf where the liquidators of a sole beneficiary are appointed trustees, in which case there is arguably no merger because the liquidators are not the same person as the beneficiary whose affairs they control: Valofo Pty Ltd v PILT Nominees Pty Ltd [2011] NSWSC 134 at [19] per Rein J.

3

Re Douglas (1885) 28 Ch D 327 at 331 per Pearson J; Re Selous [1901] 1 Ch 921 at 922 per Farwell J; Re Cook [1948] Ch 212 at 214–​215 per Harman J; DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 463 per Aickin J; Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 41 ATR 29 at 38 per Mason P.

4

CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at [25] (FC) (rejecting the “dogma” that, where legal ownership vests in a trustee, equitable “ownership” must necessarily be vested in someone else). A lack of symmetry may be said to exist in the context of charitable trusts (which do not in effect vest a beneficial estate in any person: see [29.05]–​ [29.15]), discretionary trusts (where no complete list of beneficiaries can be made: see [17.115]), certain anomalous purpose trusts (see [17.150]–​[17.170]), and on one interpretation of the Quistclose trust (which is arguably not intended to create a beneficial interest in the beneficiaries of primary trust: see [27.80]–​[27.90]): Parkinson, “Reconceptualising the Express Trust” [2002] CLJ 657 at 659–​663.

5

See, for example, Clarry, “Fiduciary Ownership and Trusts in a Comparative Perspective” (2014) 63 ICLQ 901 (who, in its place, suggests a notion of “fiduciary ownership” in some contexts).

6

Jones (liquidator) v Matrix Partners Pty Ltd (2018) 354 ALR 436 at [31] per Allsop CJ. This has various important implications in trusts law, including relating to the liability of the trustee for debts and liabilities incurred in the course of acting as trustee (see [23.120]), and so far as the taxation of trust income or capital is concerned (see [27.130]).

[16.05]  485 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

from the trustee and the beneficiaries, are inaccurate.7 Even in the case of a corporate trustee (see [21.10]), while the trustee is an entity, the “trust” as such is not. [16.10]  Some view the trust almost purely as a device to give effect to obligations more than

a vehicle to vest an equitable proprietary interest in beneficiaries8 (indeed, for some “institutional” constructive trusts, it is all about a personal obligation rather than an interest in property: see [38.25], [38.30], [38.55], [38.60], [38.65]–​[38.95]). Certainly both historically and practically obligation is central to the concept of a trust. As legal ownership usually empowers the legal owner to deal with property as he or she deems fit, an equitable obligation binds a trustee to administer trust property for the benefit of the beneficiaries or charitable purposes in issue. Trustees, it is said, “exist for the benefit of the beneficiaries, and for that alone”.9 This obligation is reflected in a plethora of duties equity imposes on trustees; some are fiduciary in character, prohibiting trustees acting in a position of conflict of interest and duty, and from using their position to take an unauthorised profit or benefit: see [22.70]–​[22.115]. To this end, beneficiaries have a range of personal remedies against a defaulting trustee: see [24.25]–​[24.125]. Yet these duties go beyond the personal in nature, because in holding trust property a trustee has duties over and attaching to trust property.10 They give beneficiaries corresponding rights; an “equivalent to a right in the property itself, but only commensurate with [their] particular right in personam”, the estate of beneficiaries being ascertained “by their right in personam to compel their trustee to perform the trusts so far as their interest is concerned”.11 Beneficiaries have an equitable interest, whether individually or collectively depending on the nature of the trust, in the trust property enforceable in equity against a subsequent holder of the property12 other than a bona fide purchaser for value of the legal interest without notice.13

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CLASSIFICATION OF TRUSTS Express trusts [16.15]  A person (termed the “settlor”) can create a trust expressly by declaring herself or

himself a trustee of her or his own property, or by transferring that property to another person as trustee. Such a trust is termed an “express trust” because it is created pursuant to the settlor’s intention. The term “express” here is a little misleading, as it also covers trusts the courts infer the settlor intended to create, an inference that can be made when the court is satisfied that the parties intended to create a equitable interest in a third party and the trust relationship is 7

B v X [2011] 2 NZLR 405 at [87], [88] per Fogarty J.

8

See, for example, Parkinson, “Reconceptualising the Express Trust” [2002] CLJ 657 at 676–​683; Jaffey, “Explaining the Trust” (2015) 131 LQR 377 (discussing both the proprietary and obligations theories, and their applications).

9

Purcell v Deputy Federal Commissioner of Taxation (1920) 28 CLR 77 at 89 per Isaacs J.

10

See Rickett, “The Classification of Trusts” (1999) 18 NZULR 305 at 308–​309.

11

Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 at 503, 504 per Isaacs J. See also DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 520 per Hope JA; Heydon and Leeming, Jacobs’ Law of Trusts in Australia (8th ed, LexisNexis Butterworths, 2016), [1-​10] (“The obligation attaches to the trustee in personam, but it is also annexed to the property, so that the equitable interest resembles a right in rem”).

12

Whether the original property or substituted property into which it can be traced: see Ch 39.

13

Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 705 per Lord Browne-​ Wilkinson. See Barnett, “The Nature of a Beneficiary’s Interest in the Assets of an Express Trust” (2004) 10 APLJ 169.

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Nature of A Trust  Chapter  16

the appropriate means of creating that interest or of giving effect to that intention: see [17.45], [17.50]. Express trusts can be classified in a variety of ways, as explained below. Private and public express trusts:  An express trust may be a “private” trust, where it is intended to benefit one or more natural or corporate persons, or a “public” trust, where its purposes are recognised as charitable in law (see Ch 29). Fixed and discretionary trusts:  Under a “fixed” trust (of which a “unit trust” is a variety: see [20.100]–​[20.115]), the beneficiaries or class of beneficiaries are identified, and have fixed entitlements in equity in the trust income and/​or capital determined in accordance with the terms of the trust. The beneficiaries may, in line with those terms, enforce the administration and distribution of trust income and/​or capital. Trustees under a “discretionary” trust have an absolute discretion to apply the trust income and/​or capital to the trust’s beneficiaries or charitable purposes. The beneficiaries have a mere expectancy and, therefore, no enforceable claim to the trust income and/​or capital until the trustees elect to exercise the discretion in their favour: see [20.125]. Executed and executory trusts: Under an “executed” trust, all the necessary formalities to complete the trust have been fulfilled and its terms are clear. Under an “executory” trust, the intention of the settlor to establish a trust has been manifested but some further step (or steps) remains finally to settle and define its terms.14 Bare trusts: A trustee’s function under a “bare” trust is confined to holding legal title to the trust property, without little or nothing in the way of (further) active duties to perform, except to convey it on demand to the beneficiary(ies) or as directed by them: see [21.45]. Trusts arising from legislation: Statute may expressly create a trust, although it is straining the notion of the ordinary private express trust to view parliament as the settlor. Nonetheless, whether statute has created a trust rests on identifying parliament’s intention, derived by construing the statutory language:  see [17.40]. It follows that a trust may be created by statute even if the relevant provision does not expressly use the word “trust”.15 However, the mere circumstance that, by statute, one party is placed in the position of a fiduciary to a second party does not as such render the first party a trustee.16 And in some circumstances the detail and specificity of a statutory provision may oust the prospect of any trust interests or obligations.17

14

Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 280 per Gummow J; Davis v Richards & Wallington Industries Ltd [1990] 1 WLR 1511 at 1537–​1538 per Scott J.

15

Authorson v Canada (Attorney General) (2002) 215 DLR (4th) 496 at 517 (CA(Ont)). See, for example, Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 at 165–​166 per Mason CJ, Deane, Toohey and Gaudron JJ. Cf Victoria v Sutton (1998) 195 CLR 291 at 300 per Gaudron, Gummow and Hayne JJ (contra at 314 per McHugh J in dissent).

16

See, for example, Erwin v Shannon’s Brick, Tile and Pottery Co Ltd (1938) 38 SR (NSW) 555 at 563 per Jordan CJ (who rejected the submission that, because the plaintiff in an action under the Compensation to Relatives Act 1897 (NSW) owed fiduciary duties to the class of dependants for whose benefit the action was brought, the plaintiff was a trustee having the authority to compromise actions given by the Trustee Act 1925 (NSW), remarking that “a person is not necessarily a trustee, whether express, implied or constructive, by reason merely of the fact that he owes fiduciary duties to others”); Clay v Clay (2001) 202 CLR 410 at 428 (FC) (ruling that the Guardianship of Children Act 1972 (WA), s 10, whilst rendering a surviving parent the guardian of a “child” and thus a fiduciary (see [4.315]), did not render the guardian a trustee); Mercier Rouse Street Pty Ltd v Burness [2015] VSCA 8 (where fiduciary obligations arising out of a joint venture agreement (as to which see [4.215]–​[4.230]) were, in the absence of any expression of trust in the agreement itself, held not to carry trusteeship with them vis-​à-​vis joint venture property: at [103]–​[105] per Santamaria JA, with whom Warren CJ and Neave JJA concurred).

17

See, for example, Adelaide Brighton Cement Ltd v Victorian Rail Track [2007] VSCA 10.

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Equity and Trusts in Australia

Non-​express  trusts [16.20]  Even absent an express or inferred intention to create an interest that equity will rec-

ognise, equitable interests can arise by implication of law (see [1.85]–​[1.115]) or be imposed by the court (see [1.120]–​[1.140]). In the context of trusts, the former category includes resulting trusts, the latter constructive trusts. Resulting trusts:  Resulting trusts (discussed in Ch 26)  arise where a person (the settlor) confers title to property to another person but retains beneficial ownership of the property, in whole or in part. The resulting trust is premised on presumed intention arising out of a particular form of transaction. Constructive trusts: The court imposes a constructive trust (discussed in Ch 38) where no express trust has been declared, but where, according to the principles of equity, it would be a “fraud” for the person in whom the court imposes the trust (the constructive trustee) to assert beneficial ownership as to the property in issue, or otherwise not to account for a gain or compensate another for a loss as if he or she were a trustee of an express trust.

HISTORY OF THE TRUST The “use”

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[16.25]  The trust is an institution devised, nurtured and developed within equity’s exclusive

jurisdiction. It is a direct descendant of the medieval “use”, the characteristics of which paralleled the modern trust. Under the use, land was transferred by common law conveyance, to A (the “feoffee to use”, the modern trustee) to the use of B (the “cestui que use”, today’s beneficiary). Thus, very early the essential duality of ownership was confirmed, since, under the feudal doctrine of seisin, the common law recognised the feoffee to use as having legal ownership, but did not recognise the interest of the cestuis que use. The latter had, in actuality, nothing but an expectation or confidence that their feoffee to use would hold the land to their use. By the outset of the 15th century, though, equity’s jurisdiction had extended to recognising the interest of the cestuis que use. The Court of Chancery did not act directly against the land itself (the so-​called right in rem) but on the conscience of the feoffee to use to carry out the terms of the use in accord with the general principles of equity. In this way, equity did not interfere with the common law seisin of the feoffee to use, but proceeded against the conscience of the feoffee to use to comply with her or his personal obligations (proceedings in personam) to the cestuis que use.

Popularity of the use [16.30]  The widespread popularity of the use was a singular feature of English land law in

the Middle Ages. Indeed, it has been observed that “[d]‌uring the civil commotions, which attended the troublesome regions of Richard II and Henry IV [1377–​1413], most of the lands in the kingdom were conveyed to uses”.18 Likewise in the early sixteenth century it has been remarked that “it became a common, indeed an almost universal, practice on the part of landowners in England to have the legal title held by others for their use”.19

18

Sanders, Sanders on Uses and Trusts (5th ed, A Maxwell & Son, 1844), p 17.

19

Scott, Scott on Trusts (3rd ed, Little, Brown & Co, 1967), Vol V, para 440.

488 [16.20] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Nature of A Trust  Chapter  16

The reasons for its popularity were manifold. First, “purchases were things notorious and trusts were things secret”,20 an advantage that remains valid with the modern-​day trust. Secondly, the use alleviated some of the financial burdens imposed by the feudal system of land tenure, under which each tenant was at common law responsible to the landholder above for feudal dues, such as wardship, marriage, reliefs, forfeiture and escheat. Under this “pyramid” of land ownership, the absolute owner of all land was the sovereign, from whom all title derived. By conveying to more than one feoffee to use, many of these dues could be avoided. Thirdly, land when conveyed in use became more freely distributable after death. Under the common law system of primogeniture inheritance of land devolved to the first-​born son. But if land was held in use, the feoffee to use could administer the legal estate after the life, and according to the wishes, of the creator of the use. Fourthly, the methods by which land could be transferred were facilitated. The common law method of transfer required an open system of conveyance by “feoffment with livery of seisin”. This was achieved by a publicly witnessed disposition of the land, often with some symbolic transfer of a lump of earth. The use allowed transfer of land without this formality. Fifthly, the use, as with the modern trust, could cater for the creation of future interests in land with springing and shifting uses. Under a “springing use”, no prior estate was disturbed and the interest arose at the time of a specified future event. For example, “A to the use of any wife B may marry” or “A to the use of C at 21”. Under a “shifting use” the prior estate “shifted” on the occurrence of a specified event. For example, “A to the use of B however if B obtains Blackacre to C” or “A to the use of D but if D marries to the use of E”.

Statute of Uses 1535

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[16.35]  By the mid-​16th century, the essential characteristics of the use (and in turn the mod-

ern trust) had been established: a conveyance “to A and his heirs to the use of B and his heirs” created in A an enforceable legal estate, and in B an enforceable equitable estate. Its popularity drastically reduced the feudal dues collected. Henry VIII responded by introducing the Statute of Uses in 1535. This Act, preceded in 1529 by a Bill in more severe terms, represented an early legislative effort to prevent tax avoidance. Its effect was to “execute all uses” by recognising the “real” ownership of the cestui que use, who was deemed seised of the land. In the above example, the cestui que use (B) was deemed to be in lawful seisin; the statute executed the use so that B, the beneficial owner, became seised of the legal estate. Importantly, however, the Statute of Uses had no application to leaseholds or chattels as the doctrine of common law seisin only applied to real property. Nor did it apply to “active” uses, which arose where the feoffee to use was not a mere passive conduit of the equitable estate to the cestui que use but performed active duties. Although the Statute of Uses appeared to sound the death knell of the use, this setback proved temporary. The gradual resurrection of the use was achieved through the device of lawyers coupling one use with another, the “use upon a use”, expressing a conveyance as follows: “To A and his heirs to the use of B and his heirs to the use of C and his heirs”. The Court of Chancery did not, at first, recognise the second use on the ground that it was redundant. This position was followed at common law in Tyrrel’s Case,21 which held that the legal estate

20

Holdsworth, A History of English Law (4th ed, Methuen & Co, 1935), Vol IV, p 424 (quoting Bacon, Reading on the Structure of Uses).

21

Tyrrel’s Case (1557) 2 Dy 155a; 73 ER 336.

[16.35]  489 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

was executed to B, and ignored the second use to C. However, the Court of Chancery, as a court of conscience, later recognised that the legal estate executed in B as subject to the second use to C. In Sambach v Dalston,22 it was accepted that the second use could be enforced in the Court of Chancery. The usual practice for conveying land became a conveyance “unto and to the use of B and his heirs in trust for C”. So the practice was still for the legal estate to be held by one person and the equitable estate enjoyed by another. Now the legal estate was held by a “trustee” and enjoyed by a “beneficiary”. Movement to the modern trust

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[16.40]  Gradually through the 18th and 19th centuries, the exclusive jurisdiction of the Court

of Chancery over the trust became more formalised and defined. The maxim “equity looks to intent rather than form” (see [P.95]) meant that equity does not require any special words to establish a trust. It nonetheless became more common for the word “trust” to be used, and for precatory words (words of desire, wish or hope) to be considered insufficient to establish a trust: see [17.20]. And during this period the distinctions between the trust and other forms of relationships recognisable at law (for example, debt, agency, bailment, contract and powers) became more pronounced: see [16.50]–​[16.205]. In the last century, the trust has expanded from being principally a landholding device to an instrument for commercial activity. Its most dramatic and novel use remains in the commercial arena.23 It has become an alternative, in some cases, to the partnership or company as a form of trading entity. Yet the trust remains capable of continued development and growth. The constructive trust, for example, has proven versatile enough to secure the division of property on relationship breakdowns: see [38.165]–​[38.230]. Even the express trust has shown itself to be an exceedingly malleable institution, especially in the context of attempts to seek priority in insolvency: see [27.65]–​[27.105]. Professor Maitland captured this versatility, describing the trust as “an ‘institute’ of great elasticity and generality; as elastic, as general as contract”.24

MODERN FUNCTIONS OF TRUSTS [16.45]  The modern trust has many varied and flexible functions. These include the following:

Limited interests in succession: Under a trust, a settlor or testator can transfer property to be held in trust for a succession of different beneficiaries, subject to perpetuity restrictions (as to which see [19.80]–​[19.90]). The separation of the management of the trust property from the benefit of the property makes the trust an appropriate device where the beneficiaries are infants or persons unfamiliar with or unsuited to managing financial affairs. Claimant priority trusts: As property held in trust by a trustee is not divisible amongst the trustee’s general body of creditors (see [27.20]) —​after all, it is not property owned beneficially by the trustee but by others —​the trust may provide a vehicle to align a person who is ostensibly a creditor to a beneficiary of a trust, and thus secure priority over other (secured and unsecured) creditors in the event of the debtor’s insolvency.

22

Sambach v Dalston (1634) Tot 188; 21 ER 164. The recognition of the “use upon a use” may, however, have first occurred some time earlier than in Sambach v Dalston: see Jones, “The Use Upon a Use in Equity Revised” (2002) 33 Cambrian L Rev 67.

23

See Langbein, “The Secret Life of the Trust: The Trust as an Instrument of Commerce” (1997) 107 Yale LJ 165.

24

Maitland’s Equity (Brunyate ed, Cambridge University Press, 1936), p 23.

490 [16.40] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

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Nature of A Trust  Chapter  16

Protective trusts:  The separation of ownership and management from the beneficial enjoyment of the property makes the trust a suitable device for protecting property from dissipation by an improvident or spendthrift beneficiary (via a “protective trust”):  see [27.115], [27.120]. Investment: Unit trusts offer investors the opportunity to pool their funds with other investors to facilitate participation in substantial investments. By investing in a range of assets, the small investor participates in a portfolio of investments that may offer greater security of investment. The small investor is issued units in the trust property vested in a trustee. The Managed Investments Act 1998 (Cth) retains the trust as the vehicle for this purpose:  see [28.240]–​[28.260]. Also, the trust is the main vehicle through which superannuation funds are structured, albeit not via the unit trust: see [28.50]. Trusts for trading purposes: Trusts are a popular vehicle through which to conduct a business venture. Commonly termed as a “trading trust” (see [27.10]), it is distinguishable from other trusts on the basis that the trust property is used in the conduct of business. A common structure consists of a corporate trustee holding the business on a discretionary trust for beneficiaries or on a fixed trust for unit holders. Trusts for charitable purposes: Where money or property is settled, left by will or collected for charitable purposes, the trust is a device for fulfilling these charitable purposes: see Ch 29. Trust as a remedy: The law acknowledges the constructive trust as a remedial device to determine and allocate interests in property where, consistent with the dictates of equity, it is necessary to make the holder of that property accountable to another: see Ch 38. Unincorporated associations and trusts: The trust has been utilised as a vehicle to validate purpose gifts to unincorporated associations, which would otherwise fail due to the donee lacking legal personality:  see [17.170]–​[17.180]. In such cases, provided that the association (or gift) in question is charitable, the subject matter of the gift is held by the committee of the association (or one of its officers depending on its rules) as trustee for those purposes. Governmental trusts: The concept of a trust may be utilised to express a relationship that is enforceable politically but not by a private law obligation enforceable in the courts (known as a “political trust”). What is involved are not private funds, but “public funds or property held by the Crown, whose distribution is found to be the province of the political arena, not the courts”.25 Conversely, some public utilities such as water, electricity or transport authorities are, from time to time, established by legislation that may use a trust as the preferred device rather than a corporation. Land held for public purposes may also be branded by statute as being held on trust. It should be understood, though, that the legislation here may use the word “trust” not in the technical legal sense, but in some other way.26 Certainly where in the

25

Authorson v Canada (Attorney General) (2002) 215 DLR (4th) 496 at 517 (CA(Ont)). See, for example, Kinloch v Secretary of State for India in Council (1882) 7 App Cas 619 (where a royal warrant that granted booty of war to the Secretary of State for India “in trust” for the officers and men of certain armed forces was held not to create a trust enforceable in the courts). See also Wellington Harness Racing Club Inc v Hutt City Council [2004] 1 NZLR 82 at [58]–​[68] per Hammond J (who held that where, under statute, the Governor of New Zealand granted land to the superintendent of the Wellington province “in trust as a Race Course and for purposes connected therewith”, the “trust” should be understood in the context of the statute in question, it being impossible to see how there could be an independent, free-​standing trust in the equity sense, standing apart from the provisions of the statute that enabled the grant; see generally Palmer, “Local Authorities as Trustees: Obligations and Implications” [2006] NZLJ 53); Frevcourt Pty Ltd v Wingecarribee Shire Council (2005) 139 LGERA 140 at [25]–​[37] per Beazley JA.

26

Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at 585–​587 (FC).

[16.45]  491 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

public law context the term “trust” is not used at all, it is more difficult again to infer the existence of a trust in the private law sense.27

TRUSTS AND OTHER LEGAL RELATIONSHIPS [16.50] The trust relationship has characteristics similar to those of some other legal rela-

tionships. Yet its differentiation from other legal relationships is no mere academic exercise. Where parties are bound by a trust and not some other legal relationship, different legal consequences flow as a result. Under a trust the plaintiff, as a beneficiary, has available additional and different remedies to those available to, say, a bailor, principal or creditor. Trust and bailment [16.55]  The common law relationship of bailment arises when a “bailor” transfers possession

of personal property to a “bailee” for the latter’s use or to perform some work for the bailor.28 A bailee does not secure title to the property (except where specific legislation otherwise provides), but holds it upon a condition to redeliver it to the bailor after the purpose for which possession was transferred has been fulfilled. For example, a car delivered to a mechanic for repairs is under a bailment, the mechanic as bailee being obliged to effect the repairs and then redeliver the car once payment is made.

Similarities

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[16.60]  Bailment has a similarity with the trust in the sense that the bailee, like a trustee,

holds property for another. For this reason, both the bailee and trustee owe duties in respect of the property they hold. The trust gives rise to fiduciary duties, prohibiting the trustee from using that position to secure personal advantage. Similarly, where the hallmarks of a relationship giving rise to fiduciary duties exist (as to which see [4.50]–​[4.70]), a bailee may owe fiduciary duties to the bailor.29 In these circumstances, the bailee may be able to trace its property into the hands of a third party or through different forms as would a beneficiary of a trust:30 see Ch 39.

Distinctions [16.65]  A mere contract of bailment does not create a trust.31 First, the trustee has title to the

trust property and so is legally capable of passing title,32 whereas the bailee does not have title to the bailor’s property and so cannot pass title.33 So if a bailor (B) without authority sells the goods belonging to the bailee (A) to X, A can at general law recover the goods from X even if X has bought in good faith because X purchased the goods from a person who, not being

27

See, for example, Re West End Networks Ltd (in liq) [2004] 2 AC 506; Duggan v Governor of Full Sutton Prison [2004] 1 WLR 1010.

28

Booth Macdonald & Co Ltd v Hallmond (Official Assignee of) (1913) 33 NZLR 110 at 118 per Cooper J.  On bailment, generally see Palmer, Palmer on Bailment (3rd ed, Sweet & Maxwell, 2009).

29

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 101–​102, 104–​106 per Mason J.

30

See, for example, Re Brumm [1942] QSR 52.

31

Davis v Hueber (1923) 31 CLR 583 at 595 per Higgins J.

32

Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74 at 97 (PC).

33

MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 at 688 per Mummery LJ, at 702 per Hobhouse LJ (noting that where the language of bailment refers to a bailor “entrusting” the goods to the bailee, this does not equate to a declaration of trust).

492 [16.50] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Nature of A Trust  Chapter  16

the legal owner, could not pass title. But if B is a trustee and sells the trust property in breach of trust to X, if X buys in good faith and without notice of the breach, X takes title because B had title to give. The beneficiary has no right against X because trust (equitable) rights cannot be enforced against a bona fide purchaser for value: see [2.125]. It is the intention of the owner of the property at its transfer that determines whether a trust or a bailment relationship exists. If the owner intends to transfer ownership, as opposed merely to part with possession, no bailment arises but there is an inference that the owner may have been constituting a trust over, or making a gift of, the property. Secondly, the bailee can hold only personal property, whilst trusts can be declared over any form of property. Thirdly, a beneficiary’s equitable rights under a trust (see [20.10]–​ [20.90]) contrast with a bailor’s common law rights, such as conversion, detinue and breach of contract.

Retention of title clauses

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[16.70]  An interplay of equity and bailment may surface in contracts for the sale of goods

which stipulate that the ownership of the goods passes only a specified event, usually tied to the payment of the full contract price.34 The advantage of “retention of title clauses”, or commonly “Romalpa clauses”,35 lies in their ability to avoid the usual effects of a buyer’s insolvency, namely that the goods would pass to the liquidator with the proceeds of sale available for distribution to the buyer’s creditors. The basis for these clauses arises from the sale of goods legislation,36 which provides that under a contract for the sale of specific or ascertained goods, the property is transferred to the buyer at such time as the parties to the contract intend. An effective retention of title clause allows the seller to retake possession of the goods. This operates to oust the usual requirement that a seller must obtain the insolvent buyer’s consent to repossess goods, as the goods remain the buyer’s property. On receivership or liquidation, a retention of title clause may give the vendor, in addition to the ordinary remedies of an unsecured creditor, an additional proprietary remedy against goods delivered, without the need to register a security. Hence the caution that “potential creditors would be unwise to rely merely upon outward appearances in dealing with companies and individuals whose assets are to any significant extent made up of goods”.37 [16.75]  Retention of title clauses have proven effective where exercised over unmixed and

unaltered goods remaining in the purchaser’s possession,38 but less so where the purchaser deals with the vendor’s goods in a manner that causes them to lose their identity. Although it has judicially been said that there is “no reason in principle why the original legal title in a newly manufactured article composed of materials belonging to A and B should not lie where

34

See Chalmers, “Romalpa Retention of Title Clauses” (1986) 60 ALJ 545; McCormack, “Reservation of Title in England and New Zealand” (1992) 12 LS 195; Webb, “Title and Transformation: Who Owns Manufactured Goods?” [2000] JBL 513.

35

Named after the leading case: Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676.

36

Sale of Goods Act 1954 (ACT), s 22; Sale of Goods Act 1923 (NSW), s 22; Sale of Goods Act 1972 (NT), s 21; Sale of Goods Act 1896 (Qld), s 20; Sale of Goods Act 1895 (SA), s 22; Sale of Goods Act 1896 (Tas), s 22; Goods Act 1958 (Vic), s 22; Sale of Goods Act 1895 (WA), s 17.

37

Kennedy, “Equity in a Commercial Context” in Finn (ed), Equity and Commercial Relationships (The Law Book Company Limited, 1987), p 9.

38

See, for example, Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676.

[16.75]  493 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

A and B agreed it shall lie”,39 the acute practical difficulties of identifying a raw input in a finished product have proven a barrier to the effectiveness of retention of title clauses.40 This has prompted vendors of goods to argue that a retention of title clause creates a proprietary interest, such as a charge or trust, in the final product. A difficulty with this argument is that, as the purchaser is not the owner of the goods, it is incapable of granting a charge41 or creating a trust over them in favour of the vendor.42 Yet the courts have been able to overcome this problem by viewing the buyer, by doing with the goods what is permitted by the contract of sale, as creating a new good of which it is the owner, and in respect of which it may therefore grant a charge to the seller.43 Moreover, the appropriate drafting of a retention of title clause itself could, where the goods in issue lose their identifiability as a result of being mixed with other products, create a charge over the final product proportionate to the extent of the buyer’s liability to the seller. In ICI New Zealand Ltd v Agnew,44 for example, the relevant clause read as follows: If any of the goods are incorporated in or used as material for other products so as to lose their separate identity, then ownership of that proportion of the new products equal in value to the total sum owing to ICI [vendor] shall on manufacture immediately vest in ICI absolutely and not by way of charge until ICI receives payment in full of all sums owing by that buyer.

The New Zealand Court of Appeal held that, despite its wording, the clause created a floating charge over the new product because: first, there was no prohibition against incorporating other materials into the manufacturing process; secondly, suppliers of other materials may have relied on a similar clause; and thirdly, ownership of the new product did not relate to the price of the goods used to manufacture the individual product, nor did it transfer to the buyer when the requisite proportionality was reached.45 As this charge was unregistered, though, it was held void against the liquidator.

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[16.80]  As many charges must be registered in order to secure priority in insolvency,46 and

there remains some uncertainty as to the timing of the proprietary effect of a floating charge (see [1.80]), sellers of goods may seek to adopt a vehicle that overcomes these drawbacks. The Personal Property Securities Act 2009 (Cth) treats a retention of title agreement essentially as a secured loan, and prescribes its own procedures for the seller to enforce its security, thereby

39

Clough Mill Ltd v Martin [1985] 1 WLR 111 at 124 per Oliver LJ.

40

See, for example, Re Bond Worth Ltd [1979] 3 All ER 919 (fibre supplied for use in the manufacture of carpets); Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25 (resin supplied for use in the manufacture of chipboard); Re Peachdart Ltd [1984] Ch 131 (leather used to make handbags).

41

The courts have shown a preference for form over substance in refusing to characterise retention of title clauses as charges, because the practical effect of an appropriately drafted retention of title clause is to create a security interest in the vendor. This has led one commentator to brand retention of title clauses as “no more than de facto charges”: Ahdar, “Romalpa’s Empire: the Reception of Reservation of Title Clauses in New Zealand” [1993] LMCLQ 382. In the United States retention of title clauses are treated as a charge: Uniform Commercial Code, §2-​401(1). The same is, in effect, now the result of the Personal Property Securities Act 2009 (Cth) in Australia: see [16.80].

42

Clough Mill Ltd v Martin [1985] 1 WLR 111 at 122 per Oliver LJ; Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 at 353 per Lord Keith; Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (receiver appointed) (in liq) (1992) 28 NSWLR 338 at 345 per Cohen J; ICI New Zealand Ltd v Agnew [1998] 2 NZLR 129 at 133 per Henry J.

43

Kiwi Packaging Ltd v Isaac (2000) 6 NZBLC 102,985 at 102,989 per Blanchard J.

44

ICI New Zealand Ltd v Agnew [1998] 2 NZLR 129 (noted Conaglen, “Retention of Title and New Products” (1998) 4 NZBLQ 114).

45

ICI New Zealand Ltd v Agnew [1998] 2 NZLR 129 at 135–​136.

46

See, for example, Corporations Act 2001 (Cth), s 262.

494 [16.80] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Nature of A Trust  Chapter  16

rewriting the principles that underpin Romalpa clauses.47 Yet as it excludes from its grasp both “a transfer of the beneficial interest in a monetary obligation where, after the transfer, the transferee holds the monetary obligation on trust for the transferor”,48 and “a trust over some or all of an amount provided by way of financial accommodation, if the person to whom [that] accommodation is provided is required to use the amount in accordance with a condition under which the … accommodation is provided”,49 the trust retains its utility to secure priority in this context.50 In particular, that trust property is not available to satisfy the claims of creditors of an insolvent trustee (see [27.20]), coupled with the fact that trust interests require no form of registration and take effect at the time the settlor specifies, has led drafters of retention of title clauses to attempt to create a trust over mixed goods or the proceeds from their sale. This also may open the door to proprietary relief via tracing the proceeds into the hands of third parties, premised as it is on a breach of fiduciary duty (see [39.25]), whereas a chargor ordinarily owes no fiduciary duty. Such an outcome may be achieved even without the specific invocation of the trust concept by, say, an agreement to keep the proceeds of the sale of goods supplied separate from the purchaser’s other funds.51 The court may infer that the parties intended to create a trust of those proceeds in such a case: see [17.45]–​[17.55], [27.65]–​[27.105]. A prudent drafter will not leave these matters to chance, however, but will expressly identify the intended relationship as one of trust. For example, in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq),52 a retention of title clause read:

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In the event that the purchaser uses the goods/​product in some manufacturing or construction process of its own or some third party, then the purchaser shall hold such part of the proceeds of such manufacturing or construction process as relates to the goods/​product in trust for the vendor. Such part shall be deemed to equal in dollar terms the amount owing by the purchaser to the vendor at the time of the receipt of such proceeds.

Gaudron, McHugh, Gummow and Hayne JJ remarked that if the existence of a trust is explicit, the absence of an express obligation to keep trust moneys separate does not deny the trust.53 On the facts there was nothing to suggest that the parties did not mean what they said in their written instrument, or did not say what they meant.54 As a result, their Honours construed the above clause as an agreement to constitute a trust of future-​acquired property, not as a registrable charge, meaning that it was not void as against the buyer’s administrators or liquidator.55 They conceded that for third parties, such as financial institutions seeking to

47

See Whittaker, “Retention of Title Clauses under the Personal Property Securities Act 2009 (Cth)” (2010) 21 JBFLP 273; Collier, von Nessen and Collier, “The PPSA: Continuing the Reconceptualisation of Retention of Title (Romalpa) Security” (2011) 34 UNSWLJ 567; Duggan, “Romalpa Agreements Post-​PPSA” (2011) 33 Syd L Rev 645.

48

Personal Property Securities Act 2009 (Cth), s 8(1)(f)(x).

49

Personal Property Securities Act 2009 (Cth), s 8(1)(h).

50

See Glister, “The Role of Trusts in the PPSA” (2011) 34 UNSWLJ 628.

51

Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (receiver appointed) (in liq) (1992) 28 NSWLR 338 at 345–​ 347 per Cohen J; Puma Australia Pty Ltd v Sportsman’s Australia Ltd (No 2) [1994] 2 Qd R 159 (purchaser held liable to account as trustee because it had undertaken to refrain from selling the vendor’s goods other than in the ordinary course of business, and to record each sale and bank the proceeds into a separate account). Cf Twinsectra Ltd v Yardley [2002] 2 AC 164 at [81] per Lord Millett (who viewed the Quistclose trust as akin to an implied retention of title clause: see [27.85]).

52

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588.

53

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 605.

54

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 606.

55

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 610–​611. Contra Polymer Systems (1999) Ltd v Montgomerie [2002] 3 NZLR 383 at 390 per Paterson J (where, in a case involving very similar facts to

[16.80]  495 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

assess a buyer’s credit-​worthiness, the non-​registration of such a clause on a public register may create practical difficulties, but left these to be remedied by statute.56 It was not, according to their Honours, for the courts to destroy or impair property rights arising under trusts by supplementing the list of those rights that the legislature has selected for such treatment.57 The Associated Alloys decision authoritatively establishes:58 … the basic principle that, where the contracting parties specifically state in their contract that they intend to create a trust for the benefit of the seller, as opposed to creating a charge in favour of the seller, a court will not transmute the parties’ expression of an intention to create a trust into an intention on their part to create a charge, unless there is something else in their contract or in its surrounding circumstances to indicate that they are nevertheless intending to create a charge. [16.85] A problem with the decision, though, is that the court overlooked the presence in

the contract of an express right in the buyer to a credit period. Earlier case authority indicated that the provision of credit may mitigate against any fiduciary duty to account,59 as it may indicate that, at the time of contract, the seller was intended to be merely an unsecured creditor of the buyer.60 In any case, their Honours found that the seller had not, on the facts, proven that payments made to the buyer “related” within the meaning of the clause to the goods supplied under any particular invoice. As a result, no trust in favour of the seller was constituted under the clause.61 A parallel evidential difficulty was avoided by the clause considered before the Queensland Court of Appeal in Rondo Building Services Pty Ltd v Casaron Pty Ltd,62 which read as follows:

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The buyer shall be at liberty to agree to sell products (independently or affixed to the other materials) subject to the condition that until payment of the price, the buyer shall sell as agents and bailees for [the vendor] and that the entire proceeds from sale thereof shall be held in a separate account in trust for [the vendor].

McPherson JA noted that, unlike the clause in Associated Alloys, the condition was expressed to operate “until payment of the price”, which his Honour construed as an indication  —​ “possibly a decisive one” —​that the indebtedness or obligation to pay the price was intended to persist concurrently with the duty to hold the proceeds in a separate trust account.63 This Associated Alloys, it was held that the clause in question created an unregistered charge that was void against the liquidators, although his Honour relied on the Associated Alloys case in the New South Wales Court of Appeal (Associated Alloys Pty Ltd v Metropolitan Engineering and Fabrications Pty Ltd (1996) 20 ACSR 205) for this conclusion and did not appear to have been referred to the High Court’s decision). 56

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 611. The English Law Commission, in recommending the abolition of the system of registration of security interests in favour of a first-​to-​file system for determining priorities, recommended that express declarations of trust should be subject to notice-​filing requirements when they amount to security interests (excluding Quistclose-​ type trusts, however:  see [27.75]–​ [27.105]):  Registration of Security Interests: Company Charges and Property Other Than Land (No 164, 2002). See Glister, “Trusts as Quasi-​Securities? The Law Commission’s Proposals for the Registration of Security Interests” [2004] LMCLQ 460.

57

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 611.

58

Ong, “Romalpa Clauses and the Issues Concerning (i) the Meaning of ‘the proceeds’ Received by the Buyer; (ii) the Buyer’s Credit Period; and (iii) the Charge/​Trust Dichotomy in Relation to ‘the proceeds’” (2000) 12 Bond L Rev 148 at 159 (emphasis in original).

59

Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (receiver appointed) (in liq) (1992) 28 NSWLR 338 at 345–​ 347 per Cohen J. Cf Re Andrabell Ltd [1984] 3 All ER 407.

60

Ong, “Romalpa Clauses and the Issues Concerning (i) the Meaning of ‘the proceeds’ Received by the Buyer; (ii) the Buyer’s Credit Period; and (iii) the Charge/​Trust Dichotomy in Relation to ‘the proceeds’” (2000) 12 Bond L Rev 148 at 160.

61

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 613.

62

Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558.

63

Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 at [10].

496 [16.85] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Nature of A Trust  Chapter  16

meant that the contractual obligation to pay the price was overtaken by the trustee–​beneficiary relationship that then prevailed between the buyer and the seller with respect to those “proceeds”. On the facts, however, no such trust had been constituted because the parties, in the course of their trading, had never established any trust account and had “completely ignored the trust that is now alleged to have been constituted”.64 Trust and agency [16.90]  Agency is the relationship between one person (the agent) and another (the principal)

that gives the agent authority to impact on the principal’s legal relations with third parties.65 The existence of an agency or a trust relationship, or both, is determined by the intention of the parties at the creation of the relationship.

Similarities

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[16.95]  The agency relationship has similarities with the trust relationship. Both trustee and

agent act in the interests of and for the benefit of another: the trustee for the beneficiary, the agent for the principal. Each, as a result, act in a fiduciary capacity:  see [22.70]–​[22.115] (trustee), [4.170]–​[4.185] (agent). For this reason, the principal may be entitled to trace her or his property in circumstances akin to tracing by a beneficiary of a trust:66 see Ch 39. The court may, moreover, make an agent a constructive trustee in respect of unauthorised profits secured in breach of fiduciary duty (see [38.35]), or otherwise make the agent liable to compensate the principal for losses generated by a fiduciary breach (see [34.05]–​[34.60]). The same person can be both a trustee and an agent where the trust document empowers the settlor, or the beneficiaries, to direct the trustee concerning matters of trust administration normally within the trustee’s discretion.67 This dual office may also arise where there is an understanding that the agent will keep her or his property separate from property obtained on behalf of the principal.68

Distinctions [16.100]  The primary distinction between agency and trust is that an agency relationship

does not require that the agent to hold title to the principal’s property at any time during the agency, whereas a trustee by definition holds the legal title to trust property. There are also other distinctions. For instance, an agent acts within the express or ostensible authority of the principal. In contrast, a trustee must follow the directions specified in the trust instrument and is not, as a general rule, subject to the directions of a beneficiary.69 Also, unlike an agent,

64

Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] 2 Qd R 558 at [13].

65

On the definition of “agency”, see further Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), Ch 1.

66

See, for example, Seeley v Mercantile Bank of Australia (in liq) (1892) 18 VLR 485.

67

R v Hopkins (1915) 20 CLR 446 at 475–​476 per Isaacs and Gavan Duffy JJ.

68

Cohen v Cohen (1929) 42 CLR 91; Walker v Corboy (1990) 19 NSWLR 382 at 388–​390 per Clarke JA, at 396–​397 per Meagher JA (cf at 385 per Priestley JA). This is legislatively recognised in respect of certain professions whose operations require the holding of clients’ moneys. In respect of solicitors, see Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), Ch 9. In respect of real estate agents, see Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), [13.14], [13.15].

69

Where the trust instrument confers a discretion on the trustee(s), neither the beneficiaries nor the court can interfere with that discretion provided it is exercised bona fide: see [23.30]. Whilst all the beneficiaries, if of full age, may terminate the trust and have the trust property divided and paid over to them (see [25.135]–​[25.145]), this is a different matter to directing the trustees in the exercise of their powers.

[16.100]  497 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

a trustee contracts as principal,70 and is subject to personal liability for expenses incurred in managing the trust property: see [23.120]. Agents incur no personal liability where they disclose that they act on behalf of a principal, provided that the action is within the scope of their principal’s authority.71 Finally, an agency comes to an end by act of either principal or agent or by the death of either party,72 whereas trusts are not ordinarily terminable at the will of the settlor or trustee (see [25.125], [25.130]), or by reason of the trustee’s death (see [21.135]). [16.105]  There are circumstances where the language of trust is used not to create a trust

relationship, but to indicate the application of fiduciary duties within an agency relationship. Company directors and liquidators, for instance, are sometimes referred to as trustees vis-​ à-​vis the company,73 but this is metaphorical language, intended to reflect fiduciary duties they owe as agents of the company. The point arose in Lombe v Wagga Leagues Club Ltd,74 where the issue was whether deed of company arrangement  —​which required the deed administrators to hold “the Deed Fund on trust for the benefit of the Administrators, Deed Administrators and for those Creditors who become Participating Creditors” —​made the administrators trustees.75 Barrett J noted that the statutory scheme made the administrators the company’s agents, in which capacity they obtained no proprietary interest in the funds. In turn, this led his Honour to conclude as follows:76

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In the present case, there is specific reference to the “Deed Fund” being held “by” the deed administrators “on trust”. Those words did not, in my view, cause the relevant property of the Club to be divested from it and vested in the deed administrators … The statement that they were then to hold that part of the Club’s property “on trust” to be applied in certain ways is, in my view, no more than a particular way of emphasising the fiduciary position they occupied in relation to the Club and the trustee-​like responsibility they had to apply the relevant part of the Club’s property according to the benefits and detriments statutorily created by virtue of the advent of the deed.

Barrett J added that no trust could arise in the circumstances unless the company clearly divested itself of the legal and beneficial interests in its property. Merely because the fund was to be applied by reference to creditors’ claims was insufficient to give them beneficial interests in the fund or to justify a conclusion that the administrators became the legal owners of the property so as to be capable of holding it on trust.77 Trust and debt [16.110]  The relationship of debt arises where under a contract a sum of money is due from

one person (the debtor) to another (the creditor). The distinction between trust and debt is crucial in the event of insolvency; money held by an insolvent person as trustee falls outside

70

Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) 155 CLR 541 at 546 (FC).

71

See Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), [23.3]–​[23.41].

72

See Dal Pont, Law of Agency (3rd ed, LexisNexis Butterworths, 2014), Ch 25.

73

See, for example, Re Oriental Inland Steam Co (1874) 9 Ch App 577; Re Yagerphone Ltd [1935] Ch 392.

74

Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387.

75

The issue arose because the administrators sought advice and directions from the court under a provision in the trustee legislation available only to trustees: see [23.170]–​[23.185].

76

Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387 at [71].

77

Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387 at [76].

498 [16.105] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Nature of A Trust  Chapter  16

the funds available to be distributed amongst her or his creditors, whereas moneys held as a creditor receive no such favourable treatment:  see [27.20]. A  trust beneficiary therefore stands outside the trustee’s bankruptcy or liquidation and may enforce an equitable proprietary claim against the trust property unaffected by creditors’ claims. It is generally, though not invariably, the parties’ intention that separates a relationship of debt from that of trust. This may be derived from their statements, acts, circumstances and any special relationship between them in respect of the moneys in question. In the oft-​cited words of Channel J in Henry v Hammond:78 [I]‌f the terms upon which the person receives the money are that he is bound to keep it separate … and to hand that money so kept as a separate fund to the person entitled to it, then he is a trustee of that money and must hand it over to the person who is his cestui que trust. If on the other hand he is not bound to keep the money separate, but is entitled to mix it with his own money and deal with it as he pleases, and when called upon to hand over an equivalent sum of money, then … he is not a trustee of the money, but merely a debtor.

For example, in Walker v Corboy,79 the New South Wales Court of Appeal held that moneys received from purchasers by a farm produce agent did not create a trust for the benefit of the growers because none of the consignment notes used the word “trust”, the sales were mostly by credit, and there was neither agreement for any separate accounts nor any statutory requirement for them. Hence, the relationship between grower and agent was one of debt. It follows that when the alleged trust instrument expressly provides for payment of funds into a nominated and agreed account but does not prohibit intermixing of funds, it is an indication, and maybe a strong one, that no trust of those funding payments is intended.80

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[16.115]  Where the parties express an intention to create a trust, that the alleged trust mon-

eys are paid into a general account does not undermine the trust; the trustee must retain sufficient moneys in that account to meet her or his obligations as trustee.81 Similarly, although payment into a separate bank account is a useful indication of an intention to create a trust, a trust can ensue even without effective banking arrangements.82 If a debt is found to exist, a creditor is limited to the common law remedy of damages on that debt whereas the payer of money on trust —​as a victim of a fiduciary breach —​may trace the money into other property on which the payee has expended the money: see Ch 39. A trustee may be relieved by the court of personal liability for loss of trust property in circumstances where he or she has acted honestly and reasonably and ought fairly be excused

78

Henry v Hammond [1913] 2 KB 515 at 521. See also Harris v Truman (1882) 9 QBD 264 at 268 per Lord Coleridge CJ; Cohen v Cohen (1929) 42 CLR 91 at 101 per Dixon J; Walker v Corboy (1990) 19 NSWLR 382 at 385 per Priestley JA, at 389 per Clarke JA, at 397–​398 per Meagher JA; Re Australian Elizabethan Theatre Trust (1991) 102 ALR 681 at 689 per Gummow J; Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1994) 29 ATR 311 at 319 per Foster J; Jessup v Queensland Housing Commission [2002] 2 Qd R 270 at 274 per McPherson JA; Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 at [61] per Campbell JA, with whom Meagher and Barrett JJA concurred.

79

Walker v Corboy (1990) 19 NSWLR 382 at 397–​399 per Meagher JA.

80

G & M Aldridge Pty Ltd v Walsh (1999) 33 ACSR 546 at 550 per Phillips JA; Jessup v Queensland Housing Commission [2002] 2 Qd R 270 at 274–​275 per McPherson JA.

81

Meth & Co (Australia) Pty Ltd v Commercial Banking Company of Sydney Ltd (1977–​8) ACLC ¶40-​302 at 29,224–​29,226 per Sheppard J; Stephens Travel Service International Pty Ltd (receivers and managers appointed) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 341 per Hope JA; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 (discussed at [16.80]); Salvo v New Tel Ltd [2005] NSWCA 281 at [38] per Spigelman CJ (cf at [65]–​[67]); In the matter of Courtenay House Capital Trading Group Pty Ltd (in liq) (2018) 125 ACSR 149 at [26] per Brereton J.

82

Re Kayford Ltd (in liq) [1975] 1 WLR 279 at 282 per Megarry J (discussed at [27.70]).

[16.115]  499 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

(see [24.200]–​[24.215]), whereas a debtor is liable to repay the amount owed notwithstanding the absence of fault. Trust and contract

Distinguishing contract from trust [16.120] A contract represents an agreement giving rise to legally enforceable obligations

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binding its parties. It differs from a trust in several ways. First, trust, unlike contract, is not ordinarily based upon agreement but upon the intention of the creator of the trust.83 It follows that contract terms may be varied by agreement of the parties; trusts may be varied only in accordance with the terms of the trust instrument or by the court:  see [25.05]–​[25.80]. Similarly, a contract can be terminated by agreement; absent a specific power in the trust instrument, neither the trustees nor the settlor may revoke a trust:  see [25.125], [25.130]. Secondly, contract is premised on consideration; a trust is not, and can, in this regard, be viewed as an equitable equivalent to the common law gift.84 Although a trust is often created via a deed, this serves to recite its terms and to ensure the vesting of the property in the trustee(s), not to obviate any requirement of consideration. Thirdly, contracts create personal rights between the parties; trusts can create proprietary interests in the beneficiaries. Fourthly, liability for breach of contract requires the compensation of the innocent party for the loss occasioned by the breach. A  trustee must restore the trust to the position it would have stood had the breach of trust not occurred, a liability unconstrained by common law notions of causation or remoteness: see [24.30]–​[24.55]. Finally, a contractual obligation does not necessarily carry an equivalent fiduciary duty, nor does the absence of a contractual obligation preclude fiduciary duties. The terms of a contract may, though, impose upon one or more of its parties a fiduciary duty akin to trusteeship.85

Circumventing privity of contract through the trust [16.125]  Privity of contract dictates that only the parties to the contract can sue or be sued.

A beneficiary, on the other hand, may enforce a trust despite not being a party to its creation.86 This has prompted attempts to use the trust to circumvent the restrictions imposed by privity of contract, to allow non-​parties to benefit from and enforce contractual terms. The logic is that as a promise made by A to B to benefit C is enforceable as a chose in action, that chose in action can be held on trust by B (as trustee) for C (as beneficiary) so that C can force B to sue A to obtain the benefit of that promise.87 The question of whether a contract creates a trust of the benefit of one or more of its promises is primarily one of construction of its terms. 83

Wickstead v Browne (1992) 30 NSWLR 1 at 19 per Handley and Cripps JJA. This is not to deny that in some circumstances, the relevant intention to create a trust is the mutual intention of the settlor and the intended trustee (such as in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, discussed at [27.75]). Cf Langbein, “The Contractarian Basis of the Law of Trusts” (1995) 105 Yale LJ 625 (who argues that trusts are often deals, and so have more in common with the law of contract than generally ascribed or admitted, noting that there is a voluntary (consensual) deal between the settlor and the trustee that creates the trust, and that much of trust law is default law, rules that the parties can reject, that apply only where the trust instrument does not supply contrary terms: at 650).

84

This is not to say that all trusts are gifts; in commercial contexts, such as investment trusts and superannuation trusts (see Ch 28), the beneficiaries are not volunteers.

85

Watson v Dolmark Industries Ltd [1992] 3 NZLR 311 at 315–​316 per Cooke P; Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1994) 29 ATR 311 at 318 per Foster J.

86

Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1956) 95 CLR 43.

87

Wright, “Trusts Involving Enforceable Promises” (1996) 70 ALJ 911 at 912. See further Dal Pont, “1984–​2014: The Life of the Non-​Constructive Trust in the High Court” (2015) 36 Adel L Rev 179 at 196–​202.

500 [16.120] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Nature of A Trust  Chapter  16

What has proven a barrier to establishing a trust of a contractual promise is proof of an intention that a contracting party is to hold the benefit of her or his promise as trustee for a third party.88 It has been said that any such intention “appears to be a particularly artificial construct”,89 represents a “fictional process”,90 and that “in the ordinary sense of the term there is no trust”.91 Yet whether proof of express intention remains the threshold requirement to a finding of trusteeship in such cases must be questioned following statements such as the following from Deane J:92

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In the context of [a trust of a contractual promise to benefit a third party], the requisite intention should be inferred if it clearly appears that the third party should himself be entitled to insist upon performance of the promise and receipt of the benefit and if trust is, in the circumstances, the appropriate legal mechanism for giving effect to that intention. A fortiori, equity’s requirement of an intention to create a trust will be at least prima facie satisfied if the terms of the contract expressly or impliedly manifest that intention as the joint intention of both promisor and promisee … If the trustee of the promise declines to institute [proceedings for the enforcement of the promise or damages for its breach], the beneficiary can bring proceedings against the promisor in his own name, joining the trustee as defendant.

Mason CJ and Dawson J have, albeit in a different context, similarly noted that “if the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to that intention, then there is no reason why … an intention to create a trust should not be inferred”.93 This has led at least one commentator to observe that there is now no necessity to intend to create a trust, but merely an intention simply to benefit another pursuant to which the court decides whether the trust is the appropriate legal mechanism to execute this intention to benefit.94 Such an approach arguably strains the notion of an express trust, and is contrary to the usual intentions of contracting parties, namely that the promisor will, in exchange for the consideration furnished by the promisee, do the act or thing intended in favour of the third party.95 88

See, for example, Re Webb [1941] Ch 225 at 234 per Farwell J; Re Schebsman [1944] Ch 83 at 89 per Lord Greene MR, at 104 per du Parcq LJ; Green v Russell [1959] 2 QB 226 at 241 per Romer LJ.

89

Jaconelli, “Privity: The Trust Exception Examined” [1998] Conv 88 at 93.

90

Stewart, “Why Place Trust in a Promise? Privity of Contract and Enforcement of Contracts by Third Party Beneficiaries” (1999) 73 ALJ 354 at 361.

91

Corbin, “Contracts for the Benefit of Third Persons” (1930) 46 LQR 12 at 27. Cf the argument that the trust may be a constructive rather than an express trust: see Jaconelli, “Privity: The Trust Exception Examined” [1998] Conv 88 at 95–​96.

92

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 147, 148. The case involved an insurance policy taken out by B under which the “assured” was expressed to include B, all subsidiary, associated and related companies, and all contractors, subcontractors and suppliers. The issue was whether the respondent, whose sub-​contractor had been injured on B’s construction site, could seek an indemnity from the appellant insurer under the policy. A majority of the High Court held that the respondent was entitled to the indemnity, although upon different bases. Mason CJ, Wilson and Toohey JJ simply created an exception to the privity doctrine in this context, whereas Gaudron J favoured an approach based on unjust enrichment. Only Deane J based his decision upon the concept of trust of a contractual promise. His Honour (at 144) characterised much of the criticism of the doctrine of privity as “often being flawed by an incomplete perception of the extent to which the practical effect of the rule … is confined and qualified, and to which the injustice which the rule might otherwise cause is precluded, by the application of other principles”. These “other principles” were identified as estoppel, unjust enrichment and trust: at 145–​146. It is interesting to note that the dissenters, Brennan and Dawson JJ, expressed the view that future development of the principles of trust and estoppel could serve to avoid the injustices caused by the doctrine of privity. Therefore, three judges either were, or in an appropriate case would have been, willing to adopt recognised equitable concepts as a means of mitigating the rigours of the privity doctrine.

93

Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618.

94

Wright, “Trusts Involving Enforceable Promises” (1996) 70 ALJ 911 at 917, 919.

95

Stewart, “Why Place Trust in a Promise? Privity of Contract and Enforcement of Contracts by Third Party Beneficiaries” (1999) 73 ALJ 354 at 361; Dalton v Ellis (2005) 65 NSWLR 134 at [47], [48] per Young CJ in Eq.

[16.125]  501 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Equity and Trusts in Australia

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[16.130] Notwithstanding the apparent relaxation of the element of intention, and obiter

statements by High Court judges questioning the curial reticence to infer a trust where privity of contract operates unjustly,96 the outcomes of decided cases display a continuing reluctance to “infer” an otherwise non-​existent intention. Had the parties intended a trust, it is reasoned, they would have structured their dealings consistently with the incidents of trusteeship. For example, in Winterton Constructions Pty Ltd v Hambros Australia Ltd,97 Hambros entered into a contract obliging it to provide the funds for an office development pursued by Pan. The latter employed Winterton to carry out the construction. Winterton alleged that it was owed two progress payments, which it sought to recover from Hambros, alleging that Pan held the benefit of Hambros’ promise to lend money to Pan in trust for Winterton. Gummow J rejected Winterton’s submission on the ground that the terms and nature of the contract between Hambros and Pan indicated that Hambros did not intend to place itself in a position whereby, without its approval, rights against it under the contract would vest other than in Pan.98 Nor did the agreement indicate that Pan intended to displace its interests in favour of whoever was selected as the builder by assuming an obligation to exercise its rights against Hambros. The result is clearer again where it is obvious that the benefit of the promises between the contracting parties is intended for themselves and no one else. Recognising a trust in such cases runs counter to the parties’ intentions. In Marks v CCH Australia Ltd,99 for instance, a contract between a university and the defendant publisher, under which the latter agreed to endow a chair for the plaintiff, provided that it was determinable by the university if the publisher failed to provide the annual funding. The separate contract of employment between the university and the plaintiff provided that the plaintiff would only hold the chair during the term of the contract between the university and the publisher. Upon the publisher notifying the university of its intention to cease funding the chair, the university terminated the plaintiff’s employment. The plaintiff argued that the university held the benefit of the publisher’s promise to fund the chair on trust for him. This Mandie J rejected, reasoning that the publisher’s promise “was for the benefit of the university and the university’s option to terminate the agreement, if that promise was broken, was for the protection of the university”.100 The express inclusion of that option, according to his Honour, weighed against any inference that the university intended the plaintiff to have the benefit of the publisher’s promise. [16.135]  No such difficulties arise where contracting parties express themselves in a fashion

that invokes the trust as an effective vehicle to give effect to their intentions. Re Emilco Pty Ltd101 illustrates such a case. A  company sued its insurer in respect of a claim the insurer rejected. On the company’s subsequent liquidation, its liquidator, though minded to accept a compromise offer by the insurer (for $55,000), instead decided to assign the company’s chose in action to one of its former directors for the same amount. Clause 7.1 of the assignment required the director, if he received any money from the insurer out of the action, to remit the

96

Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43 at 67 per Fullagar J; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 120 per Mason CJ and Wilson J, at 146–​147 per Deane J, at 166 per Toohey J.

97

Winterton Constructions Pty Ltd v Hambros Australia Ltd (1991) 101 ALR 363.

98

Winterton Constructions Pty Ltd v Hambros Australia Ltd (1991) 101 ALR 363 at 370–​371.

99

Marks v CCH Australia Ltd [1999] 3 VR 513.

100

Marks v CCH Australia Ltd [1999] 3 VR 513 at 532.

101

Re Emilco Pty Ltd (2002) 20 ACLC 388.

502 [16.130] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:40:59.

Nature of A Trust  Chapter  16

balance (after reasonable solicitor-​client costs) to the liquidator for the benefit of the company’s creditors. As a result of mediation, the director received $550,000 from the insurer, $475,000 of which was paid into a separate trust account pursuant to court orders. The proceedings involved a claim that the director held the balance of funds on trust for the company. The liquidator pursued the existence of a trust on the ground that the cl 7.1 requirement remitting the balance to the liquidator for the benefit of the creditors of the company was distinguishable from a simple requirement that it be paid to the company. Had the clause been phrased in the latter way, the company itself (as a party to the contract) would have acquired a contractual right to be paid. Barrett J made the following observations:102 The introduction of the liquidator, as distinct from the Company, and the reference to the purpose or object of the remittance add an important dimension. They show that moneys received by [the director] from [the insurer] were intended to become, at the moment of receipt, subject to a personal liability on his part to apply the balance after expenses for the limited and specific purpose of accounting to the Company’s fiduciary agent charged with administering the claims of the Company’s creditors and that that balance should be received in augmentation of the fund available to ascertain and meet the claims of those creditors.

According to his Honour, evidence of this intention pointed clearly to the conclusion that the director was not intended to assume unfettered ownership of the chose in action, and that once the proceeds came into his hands they would not become his beneficial property. Rather, he would hold them subject to a trust requiring him to pay to the liquidator for the benefit of the company’s creditors the balance remaining after recouping relevant expenses. Because the proceeds, when received, became subject to a trust, the chose in action as it existed before realising its proceeds was also subject to a trust.

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[16.140]  In response to criticisms of the privity doctrine,103 the parliaments of the Northern

Territory, Queensland, Western Australia, New Zealand, England, Singapore and Hong Kong have enacted legislation that entitles third parties to enforce promises in a contract expressed to be for their benefit in certain circumstances.104 These initiatives significantly reduce the need to strain trust concepts to circumvent the privity doctrine.

Constructive trust arising from contract [16.145]  Trust and contract interact where a constructive trust arises from a contract or a

contractual chose in action held on trust. For example, there is authority that, between the date on which a person contracts to purchase land and the date on which full payment is made, the vendor holds the land on constructive trust for the purchaser, although the trust here is used not in the true technical sense but to impose on the vendor a duty to protect,

102

Re Emilco Pty Ltd (2002) 20 ACLC 388 at 391–​392.

103

See, for example, Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 116–​118 per Mason CJ and Wilson J, at 133–​136 per Brennan J.

104

Law of Property Act 2000 (NT), s 56; Property Law Act 1974 (Qld), s 55; Property Law Act 1969 (WA), s 11; Contract and Commercial Law Act 2017 (NZ), ss 12, 13 (before 1 September 2017, Contracts (Privity) Act 1982 (NZ), s 4; see Newman, “The Doctrine of Privity of Contract: The Common Law and the Contracts (Privity) Act 1982” (1983) 4 Auck ULR 339; Rattrays Wholesale Ltd v Meredyth-​Young & A’Court Ltd [1997] 2 NZLR 363 at 380–​382 per Tipping J; Attorney-​General v Forestry Corporation of New Zealand Ltd [2001] 1 NZLR 172 at 205–​208 per Williams J); Contracts (Rights of Third Parties) Act 1999 (UK) (see Burrows, “The Contracts (Rights of Third Parties) Act 1999 and its Implications for Commercial Contracts” [2000] LMCLQ 540); Contracts (Rights of Third Parties) Act 2001 (Sing); Contracts (Rights of Third Parties) Ordinance 2016 (HK).

[16.145]  503 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

pending completion, the purchaser’s interest under the contract: see [38.150], [38.155]. Where a purchaser has undertaken by contract to hold title in property subject to a third party’s right of repurchase and repudiates that party’s right, equity can impose a constructive trust so that the purchaser holds title on trust for the third party to the extent of the third party’s interest.105 In this case, the constructive trust is used, in part, as a vehicle to overcome a lack of privity of contract, as it is in the doctrine of mutual wills, where it is imposed to give practical effect to the terms of a contract: see [38.135]–​[38.145]. Trust, condition, charge and equitable personal obligation [16.150]  If A wishes to leave property to B, for B to make a payment to or perform an obli-

gation in favour of C, A  clearly wishes to benefit C.  In these circumstances A  may choose to establish a trust or may, more simply, make a gift direct to C. But in some circumstances, property may be left to B but subject to some “obligation” to C that is defined imprecisely in the language of the disposition. Such a disposition may be interpreted in at least four different ways distinct from trust:106 as a moral obligation, a condition, an equitable charge or an equitable personal obligation. The critical inquiry here is to discover A’s intention at the time of the disposition, gathered from the language used to describe the obligation, the nature of the property given and the nature of the obligation itself.107

Moral obligation [16.155]  The expression used may indicate that the donor intends only a moral obligation or

a wish, so that the donee takes an absolute beneficial interest in the property free of any binding obligation.108 For example, in the case of In the Will of Warren,109 a bequest to a person “believing that she will do justice to my relatives” was held to create only a moral obligation.

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Condition [16.160]  The disposition may amount to a condition upon and subject to which the person

takes a gift.110 A condition annexed to a gift, assuming it is intended to create a legally enforceable obligation, may be one of two types: a condition involving forfeiture for non-​fulfilment, or one creating a mere personal obligation to fulfil it. The matter is of some significance not only because the consequences clearly differ depending on the construction of the condition, but also because a condition involving forfeiture for non-​fulfilment may in some circumstances be declared void as either repugnant to the gift itself (unless there is a gift over)111 or as

105

Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 638 per Wilson and Toohey JJ, at 654 per Brennan J. Such a trust may alternatively be characterised as express in that it is inferred from the parties’ intention to create or protect an interest in a third party: Bahr v Nicolay (No 2) at 618–​619 per Mason CJ and Dawson J (see [17.50]); Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198. See generally McFarlane, “Constructive Trusts Arising on a Receipt of Property Sub Conditione” (2004) 120 LQR 667.

106

Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 418–​420 per Dixon J; Williams v Legg (1993) 29 NSWLR 687 at 694 (CA).

107

Gill v Gill (1921) 21 SR (NSW) 400 at 407 per Harvey J.

108

The case law dealing with precatory words involves the same issue: see [17.20].

109

In the Will of Warren [1907] VLR 325.

110

While the condition is usually found in a testamentary instrument and so is directed to benefitting a third party (that is, a beneficiary), in the non-​testamentary context, there is nothing to preclude the condition being directed to benefitting the donor or transferor: see, for example, O’Sullivan Partners (Advisory) Pty Ltd v Foggo (2012) 218 IR 331 at [95]–​[99] per Campbell JA.

111

See generally the discussion in Nathan v Leonard [2003] 1 WLR 827 at 830–​838 per John Martin QC.

504 [16.150] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

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Nature of A Trust  Chapter  16

an illegitimate attempt to deprive third party claimants against the property the subject of the gift of their rights (see [19.75]). The intention of the donor communicated to the donee at the time when the latter accepts the property determines which type of condition exists.112 Either way, though, for a condition to be construed as having legal effect, it must be expressed in terms sufficiently certain to be capable of enforcement; where the alleged condition is uncertain, it is void and the donee ordinarily takes free of it.113 A condition construed as a condition precedent is ordinarily one involving forfeiture, so that the gift will fail if the condition is not fulfilled. For example, in Re Gardiner,114 all the estate of the deceased was left “unto my son [I]‌… subject to [I] paying the sum of £1,000 within two years of my death unto my son [A]”. Helsham J held that, as the will required the payment of the £1,000 as a prerequisite to taking the estate, it could be construed neither as a trust, a charge, nor a mere personal obligation. Such constructions would have meant ignoring the words “within two years”. The condition, having been unfulfilled, had the effect of making the estate pass on intestacy and not under the terms of the will. Yet the courts, in the main, incline against forfeiture if a different meaning can fairly be given to the words used,115 the reason being that forfeiture would deprive the person intended to be benefited by the gift of that benefit. Accordingly, the curial preference, where this is open on the relevant wording, is to give effect to the gift by treating the condition as imposing on the donee an equitable personal obligation to perform the condition, enforceable by an order of compensation or, if appropriate, by a decree of specific performance.116 And the degree of certainty required in the wording of the condition is less exacting than when dealing with a condition going to forfeiture.117 In Gill v Gill,118 the testator bequeathed property to his son on condition that the son keep the property as a residence for his sisters. Harvey J declared that the gift amounted to an equitable personal obligation on the son enforceable by his sisters. His Honour held that the condition could be enforced not merely by personal action against the son, but also against the property.119 To construe the condition as going to forfeiture would have frustrated the testator’s intention that they be housed in the home in question.

Equitable charge [16.165]  An equitable charge is created where the transferor expressly charges property with

payments to a third party, or gives the property “subject to” such payments: see [1.65]–​[1.80]. A clear case is where, say, a will makes a property bequeathed to A subject to and charged with the payment of a sum to B.120 There need not be explicit language of charge, though, to

112

Muschinski v Dodds (1985) 160 CLR 583 at 605–​606 per Brennan J.

113

See, for example, Karastamatis v Tzanavaras [2013] SASC 163 at [89]–​[114] per Nicholson J.

114

Re Gardiner [1971] 2 NSWLR 494.

115

See Thomas, “Conditions in Favour of Third Parties” [1952] CLJ 240 at 242–​246.

116

Messenger v Andrews (1828) 4 Russ 478; 38 ER 885; Gregg v Coates (1856) 23 Beav 33; 53 ER 13; Re Hodge [1940] Ch 260 at 264 per Farwell J; Muschinski v Dodds (1985) 160 CLR 583 at 605–​606 per Brennan J, at 624–​625 per Dawson J; Hammond v Hammond (2007) 13 BPR 24,619 at [16]–​[37] per Young CJ in Eq.

117

Hammond v Hammond (2007) 13 BPR 24,619 at [23] per Young CJ in Eq (involving a gift by the testator to his brother (the defendant) on condition that he ensures that the testator’s son (the plaintiff, who suffered Downs Syndrome and was suing by his mother) “never wants for anything”; his Honour did not wish to express a concluded view on whether the words “on condition that he … never wants for anything” are sufficiently certain to be enforced by the court as an equitable personal obligation without further argument, but expressed an inclination in favour of its validity: at [37]).

118

Gill v Gill (1921) 21 SR (NSW) 400.

119

Gill v Gill (1921) 21 SR (NSW) 400 at 407.

120

See, for example, Friend v Brien [2014] NSWSC 613.

[16.165]  505 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

substantiate an equitable charge in this context (or in others). Gifts of property for the maintenance and benefit of children can be amenable to this interpretation. For example, in Hogden v Hogden,121 the testator’s bequest of flats on trust to his son “absolutely he to properly maintain my daughter” was construed to give the daughter an equitable charge over the properties as security for her proper maintenance. Yet the equitable charge need not be premised on actual or inferred intention; it can be imposed purely as a remedial device —​as an alternative to the more extensive constructive trust —​to recognise contributions to property in which the contributor has no legal interest: see [1.130], [38.270]. The chargor is not in a fiduciary position vis-​à-​vis the chargee whereas a trustee owes fiduciary duties to the beneficiaries.122 The chargee, unlike a beneficiary, has only a security interest in the relevant property. The chargee’s remedy is against the property the subject of the charge, whereas a beneficiary’s remedy is against the holder of the property (the trustee), that is, to proceed in equity for the performance of the trust, not for the sale of trust property to satisfy a secured liability.123 Further, once the chargor pays off the charge the property is held for her or his own benefit, not for the benefit of the settlor or testator in the case of a trust.124 Finally, the effectiveness of some charges rests on their registration, which is not ordinarily so for trusts.125

Equitable personal obligation

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[16.170]  As well as occasions where the court gives effect to a conditional gift via an equitable

personal obligation (see [16.160]), a disposition may amount to a statement of objects to which the person receiving the property is bound to apply the fund, whether as a trustee126 or in some other character such as a guardian. For example, though the nature of guardianship in a broad sense may be seen as akin to trusteeship, in a strict legal sense a guardian’s obligation “to apply moneys in the maintenance of children or others does not involve the liability which arises from an ordinary trust”.127 It has fiduciary characteristics (see [4.315]), and can be described as a “power” (see [16.175]) in that a guardian is entrusted with possession and management of the property of the ward without taking title to it.128 An equitable personal obligation may be coupled with a charge over the property bequeathed in order to ensure its performance.129 Trusts and powers

Powers [16.175] A power is an authority to dispose of real or personal property irrespective of

any existing estate or interest in the holder of the power.130 The person who exercises this

121

Hogden v Hogden (1956) 57 SR (NSW) 269.

122

Pearce v Wright (1926) 39 CLR 16.

123

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 596 per Gaudron, McHugh, Gummow and Hayne JJ.

124

Re Oliver (1890) 62 LT 533.

125

See, for example, Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588, discussed at [16.80].

126

See, for example, Re Frame [1939] Ch 700.

127

Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 420 per Dixon J.

128

Clay v Clay (2001) 202 CLR 410 at 430–​431 (FC) (where it was held that limitations legislation excluding from its scope “express trusts” applied in the context of guardian and ward, because a guardian did not amount to an express trustee).

129

Re Lester [1942] Ch 324 at 325–​326 per Simonds J.

130

Webb v McCracken (1906) 3 CLR 1018 at 1023 per Griffith CJ. As to the legal concept of a “power” in private law generally, see Thomas, Thomas on Powers (2nd ed, OUP, 2012), Ch 1.

506 [16.170] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Nature of A Trust  Chapter  16

authority is termed the “donee” (or also commonly, the “appointor”). The persons to whom the property is disposed pursuant to this authority are identified as the “objects” (or “appointees”). The person who confers upon the donee the said authority is called the “donor” (or “settlor”). Powers may be general, special, hybrid or intermediate. As donees of a “general” power are entitled to appoint to any person they wish, including themselves131 (unless the power can be characterised as a fiduciary one, in which case it cannot be exercised for a donee’s own benefit), a general power has been described as equivalent to unencumbered title to the property132 (although this does not make the donee its beneficial owner prior to the exercise of the power in her or his favour).133 A  “special” power of appointment allows the donee to appoint in favour of some or all of the persons within a specified class of objects;134 an appointment to a non-​object represents an excessive execution of the power. Under an “intermediate” power the donee may add some or all of a number of persons to a class of specified objects.135 A “hybrid” power permits the donee not only to appoint in favour of some or all of the persons within a specified class of objects but also allows the donee to exclude persons from the specified class.136

Similarities

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[16.180] There are various similarities between trusts (sometimes termed “trust powers”)

and powers (“mere powers”). First, in both instances property is conferred to a beneficiary or object when the trustee or donee makes an appointment.137 For this reason, the test of certainty of object for trust powers and mere powers is the same (the “criterion certainty” test): see [17.115]. Secondly, both beneficiaries and objects can, to some degree, control the trust or power by applying to the court to prevent payment being made outside (ultra vires) its terms.138 Both the beneficiaries and the objects can likewise prevent the trustee or donee from acting in bad faith (mala fides) in the administration of the trust or exercise of the power.139 Thirdly, both the beneficiaries of a discretionary trust and the objects of a special power can be considered for distribution. The trustee or donee here has no obligation to distribute the

131

Tatham v Huxtable (1950) 81 CLR 639 at 656 per Kitto J; Trustees Executors & Agency Co Ltd v Margottini [1960] VR 417 at 420 per Dean J; National Trustees Executors & Agency Co of Australasia Ltd v Trainor [1974] VR 49 at 56–​57 per Pape J; Gregory v Hudson (1997) 41 NSWLR 573 at 578–​579 per Young J [affd Gregory v Hudson (1998) 45 NSWLR 300].

132

Pedley-​Smith v Pedley-​Smith (1953) 88 CLR 177 at 190 (FC); Re Triffitt’s Settlement [1958] Ch 852 at 861 per Upjohn J; Re Nicholas’ Trusts (1986) 85 FLR 188 at 193–​194 per Kelly J; Kain v Hutton [2008] 3 NZLR 589 at [47] per Tipping J; Fonu v Merrill Lynch Bank and Trust Company (Cayman) Ltd [2012] 1 WLR 1721 at [33], [34] (PC); Clayton v Clayton [2015] 3 NZLR 293 at [100] (CA). Cf Re Dobson’s Settlement [1946] VLR 83 at 96–​97 per O’Bryan J.

133

Ex Parte Gilchrist (1886) LR 17 QBD 521 at 530–​531 per Fry LJ; Public Trustee v Smith (2008) 1 ASTLR 488 at [108], [109] per White J.

134

National Trustees Executors & Agency Co of Australasia Ltd v Trainor [1974] VR 49 at 56–​57 per Pape J.

135

In Re Manisty’s Settlement [1974] Ch 17 at 26–​27, Templeman J identified the difference between intermediate and special powers as being “that a settlor by means of a special power cannot be certain that he has armed his trustees against all developments and contingencies”. This limitation served to explain, in his Lordship’s opinion, the popularity of intermediate powers “which arm the trustees with a weapon which will enable them to consider all developments, and all future mishaps and disasters”.

136

Perpetual Executor & Trustee Association of Australia Ltd v Adams [1975] VR 462; Horan v James [1982] 2 NSWLR 376.

137

Pedley-​Smith v Pedley-​Smith (1953) 88 CLR 177 at 190–​191 (FC).

138

Re McLean [1930] VLR 85; Hooke v Robson [1962] NSWR 606; McPhail v Doulton [1971] AC 424 at 449 per Lord Wilberforce.

139

Gilbert v Stanton (1905) 2 CLR 447; Re Gestetner Settlement [1953] Ch 672 at 688 per Harman J; Re Manisty’s Settlement [1974] Ch 17 at 25–​26 per Templeman J.

[16.180]  507 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

property but has a duty of enquiry. Fourthly, a donee, like a trustee, can be subject to fiduciary duties in the exercise of the power, in which case he or she must not exercise the power for her or his own benefit.140 A general power of appointment impliedly empowers the donee to appoint to a trustee to hold on trust for the object chosen in exercise of the power. Depending on its terms, a special power of appointment may likewise empower the donee to appoint to a trustee for the benefit of the chosen object, as opposed to appointing directly to the chosen object.141

Distinctions

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[16.185]  Important differences exist between trusts and powers. First, the nature of the obli-

gation of the trustee and donee differs. In the case of a trust, the trustee must act; a trust is imperative. On the other hand, the donee of a power may or may not choose to act; a power is facultative.142 For this reason, the objects of a power cannot call on the donee to make any payment to them; nor can the court.143 Like beneficiaries under a discretionary trust (see [20.125]), they have no interest in the property beyond a mere expectancy. Under a fixed trust, however, a beneficiary’s interest is vested and the court can compel the exercise of the trust if the trustees fail to act. Secondly, there must always be a trustee in whom the trust property is vested to administer the trust, whereas a donee of a power need not have any property vested in her or him; only an authority to deal with property is required. Thirdly, a trust is an equitable relationship, whereas a power may be legal (such as a power of attorney)144 or equitable (if within a trust instrument). Fourthly, trusts remain exercisable despite lapse of time.145 Where trustees do not exercise their discretion under a trust power within a reasonable time, the discretion remains. If the trustees are willing to exercise it, albeit later than they should have done, the court will usually permit them to do so,146 or otherwise may exercise the discretion itself. A power not exercised within a reasonable time may be extinguished and any default of appointment provision applied.147 Fifthly, if a donee releases the power, any default of appointment provisions apply.148 On the other hand, a trustee, once having undertaken to act in the trust, cannot release (disclaim) the obligations of the trust, but can only retire from the trust according to its terms or the provisions of the trustee legislation:  see [21.95]. Finally, if the donee fails to exercise the power, the property usually passes under a default of appointment provision or, lacking such a provision, may go to the objects equally where the terms of the power can be so construed.149

140

Crawford v Phillips [2018] NZCA 208 at [18] per Asher J, delivering the reasons of the court. See, for example, Smith v Glegg [2005] 1 Qd R 561 (donee of an enduring power of attorney held to have committed a fiduciary breach by gifting to her son the donor’s only substantial asset).

141

Commissioner of State Revenue v Lam & Kym Pty Ltd (2004) 10 VR 420 at [41]–​[44] (CA).

142

Re Gulbenkian’s Settlements [1970] AC 508 at 524–​525 per Lord Upjohn; McPhail v Doulton [1971] AC 424 at 456–​457 per Lord Wilberforce.

143

Re Brockbank [1948] Ch 206 at 209 per Vaisey J (“The court itself regards … a power as deserving of the greatest respect and as one with which it will not interfere”).

144

As to nature of powers of attorney, see Dal Pont, Powers of Attorney (2nd ed, LexisNexis Butterworths, 2015), Chs 1, 2.

145

Breadner v Granville-​Grossman [2001] Ch 523 at 540 per Park J.

146

See, for example, Re Locker’s Settlement Trusts [1977] 1 WLR 1323.

147

See, for example, Re Allen-​Meyrick’s Will Trusts [1966] 1 WLR 499.

148

Trustees Executors & Agency Co Ltd v Margottini [1960] VR 417 at 420 per Dean J.

149

Perpetual Trustee Co (Ltd) v Tindal (1940) 63 CLR 232 at 249 per Latham CJ, at 261–​262 per Dixon J, at 273 per Evatt J.

508 [16.185] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Nature of A Trust  Chapter  16

On the other hand, if a trustee fails to act the trust does not fail; the court can intervene and may appoint a new trustee to act: see [21.65]–​[21.80].

Distinguishing trust powers from mere powers

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[16.190] A trust instrument may vest in the trustees discretions the trustees must exercise

(“trust powers”) and those they may exercise but have no duty to exercise (“mere powers”). The distinction is most familiar in the context of discretions to distribute income. In cases of trust powers the trustees are bound to distribute the income but have a discretion as to its division between the beneficiaries. Under a mere power the trustees have a discretion whether or not to distribute the income, and also as to how to divide the income between the beneficiaries. In the latter case there will usually be a default provision that deals with the income if the trustees do not exercise their discretion to distribute it, which typically provides for the undistributed income to be accumulated, or to be paid as of right to a “default beneficiary”. A person prescribed to take in default is treated by the law as having a vested interest in the income, albeit one liable to be divested upon the donee or trustee making an appointment or distribution:150 see [20.155]. Although a donee–​trustee is subject to a fiduciary duty in exercising either type of power,151 the different consequences arising from characterising a power as a trust power as opposed to a mere power triggers a need to distinguish between them. The law recognises that a person who owns property can, as a general rule, dispose of it as he or she chooses. For this reason, the court must search for the intention of the disponer in determining the manner in which her or his property should be dealt with. Hence, the issue of whether the disponer (or settlor) created a trust power or a mere power involves a process of construction to ascertain her or his intention.152 The relevant document is, to this end, construed in its context. By way of illustration, provision in a clause of the donor’s wish “without creating a binding trust thereby” is indicative of a mere power, but at the same time may justify a court interpreting other clauses without that language as trust powers. 153 Provision for a “gift over in default of appointment” is usually indicative of a mere power.154 It demonstrates that the donor did not intend to require the donee to make an appointment in any event, but contemplated that he or she might not do so. Even absent a gift in default, a mere power may exist if the instrument in issue clearly gives the donee a discretion whether or not to make an appointment.155 However, where its language imposes a clear duty to distribute the fund amongst some at least of the class of potential beneficiaries, the discretion extending merely to appointment and not to whether or not to appoint, 150

Commissioner of Succession Duties (SA) v Isbister (1941) 64 CLR 375 at 380 per Williams J; Commissioner of Stamp Duties (NSW) v Sprague (1960) 101 CLR 184 at 194 per Dixon CJ; Neill v Public Trustee [1978] 2 NSWLR 65 at 73 per Glass JA; Coventry v Smith (2004) 181 FLR 220 at [54]–​[57] (FC(Fam Ct)).

151

Powers of appointment can also be given to persons in non-​fiduciary positions: Re Hay’s Settlement Trusts [1982] 1 WLR 202 at 208–​209 per Megarry VC.

152

Re Weekes’ Settlement [1897] 1 Ch 289; Permanent Trustee Co v Redman (1916) 17 SR (NSW) 60; Re Griffiths [1926] VLR 212; Re O’Brien [1929] SASR 420; Perpetual Trustee Co (Ltd) v Tindal (1940) 63 CLR 232 at 248 per Latham CJ; Re Green [1942] VLR 210; Re Gulbenkian’s Settlements [1970] AC 508 at 525 per Lord Upjohn; Re Beckbessinger [1993] 2 NZLR 362 at 366.

153

See, for example, Crawford v Phillips [2018] NZCA 208 at [22] per Asher J, delivering the reasons of the court.

154

See, for example, Breadner v Granville-​Grossman [2001] Ch 523 at 540 per Park J.

155

The matter of construction is further complicated by the fact that, in some cases, the court may interpret the power of appointment as having an implied gift over to the members of the class equally in default of appointment. Under this construction, if the power is not exercised amongst the class, there is nevertheless an implied gift over to them: see Wilson v Duguid (1883) 24 Ch D 244. This construction is more generally found when the class, subject to the power of appointment, is the donor’s family.

[16.190]  509 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

a trust power is created.156 For example, in Hourigan v Trustees Executors and Agency Co Ltd,157 the testator directed that the residue of his estate be held by his wife “to be used by her at discretion in educating and providing for my two sons”. The High Court held that the disposition constituted the wife trustee of the residue. The court’s reasoning is evident from the following excerpt from Dixon J’s judgment:158 The critical words, “to be used by her at discretion in educating and providing for my two sons”, express a purpose for which the testator desired his wife to use the residue. It is, perhaps, possible to treat the purpose as one which, in any case, would be incumbent upon her and the gift as made simply to enable her to fulfil it according to her own discretion … But this construction does not appear to me to give proper effect to the words “to be used”, which naturally express a direction of an obligatory character. They impose upon her, and upon the residue vested in her, the necessity of fulfilling the purpose notwithstanding that, in carrying it out, she possesses a discretion.

Trustee and executor [16.195]  An executor is a person to whom the execution of a will is confided by the testator.

Pursuant to this office, an executor is obliged to get in the assets of the deceased (in the sense of holding legal title to those assets), pay expenses and distribute the residue of the estate in accordance with the will.159

Similarities

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[16.200]  Trustees and executors each owe fiduciary duties to those ultimately eligible to ben-

efit from the property held by them.160 The equitable entitlement to trace (as to which see Ch 39) is available to the beneficiaries if either misapplies that property. The trustee Acts include a “legal personal representative” (or executor) within the “trustee” definition,161 but at the same time limit the statutory power to appoint trustees to “trustees” proper.162 This does not preclude the court, under those Acts, from removing an executor.163 In most jurisdictions the probate and administration legislation allows commission to personal representatives; the trustee legislation in each jurisdiction allows a court to award commission to trustees: see [22.90].

156

Re Leek (deceased) [1967] Ch 1061 at 1073–​1075 per Buckley J [affd Re Leek (deceased) [1969] 1 Ch 563]; Lutheran Church of Australia SA District Inc v Farmers’ Co-​operative Executors and Trustees Ltd (1970) 121 CLR 628 at 651–​654 per Windeyer J.

157

Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619.

158

Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619 at 645.

159

Re Chirnside [1956] VLR 295 at 304 per Dean J; Porteous v Rinehart (1998) 19 WAR 495 at 502 per White J; Juul v Northey [2010] NSWCA 211 at [196] per McColl JA. As to the duties of executors generally see Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), Ch 12.

160

Re Stewart [2003] 1 NZLR 809 at 815–​816 per Laurenson J [revd on appeal but not on this point: Re Stewart [2004] 1 NZLR 354]; Johnson v Trotter (2006) 12 BPR 23,339 at [21]–​[23] per White J; Re Maguire (deceased) [2010] 2 NZLR 845 at [20], [21] per Asher J.

161

ACT s 4(1); NSW s 5; NT s 82; Qld s 5; SA s 4; Tas s 4; Vic s 3; WA s 6. This does not serve to augment the scope of executorial authority, nor clothe the executor with the authority to invoke the assistance of the court in relation to matters that may be outside her or his province: Re Moran (deceased) [1950] SASR 209.

162

See ACT ss 6(14), 70(7); NSW ss 6(12), 70(9); NT ss 11(7), 27(3); Qld ss 12(9), 80(4); SA ss 14(7), 36(3); Tas ss 13(6), 32(3); Vic s 48(2); WA ss 7(9), 77(4).

163

Porteous v Rinehart (1998) 19 WAR 495 at 506 per White J; Gibbs v Gibbs [2004] WASC 132; Williams v Williams [2005] 1 Qd R 105 at [11] per Wilson J. Cf Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 77 per Ashley J; H Stanke & Sons Pty Ltd v Von Stanke (2007) 250 LSJS 149 at [94] per Sulan J (stating that SA s 36 enables the removal, appointment or replacement of a trustee of a trust, but not of an executor; however, s 36(3) refers only to the appointment of an executor being outside the section). As to the removal of trustees by the court, see [21.105]–​[21.130].

510 [16.195] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Nature of A Trust  Chapter  16

Distinctions [16.205] An executor’s duties and powers differ from those of a trustee.164 First, the exec-

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utor’s duties and powers stem from the obligation to wind up the deceased estate. A trustee usually has an ongoing role, its nature and duration being determined primarily by the terms of the trust. Given an executor’s role, he or she generally has a power of sale broader, but a power to carry on a business narrower, than that of a trustee. Secondly, whatever property comes to the executor by reason of that office comes in full ownership without distinction between legal and equitable interests, whereas only the legal ownership of trust property vests in trustee.165 (This does not mean that the executor can treat the property as her or his own; the executor’s interest is not a full beneficial interest and, in any case, he or she remains bound by the fiduciary duties owed to the beneficiaries of the estate.166) As a result, beneficiaries of unadministered estates have no equitable interest in the assets of the estate,167 and thus no right to caveat the property in question,168 but do have a right to secure the proper administration of the estate.169 However, if an executor assumes the office of trustee on completing her or his duties,170 the equitable interest of a residuary beneficiary becomes vested, quantifiable and identifiable at that time.171 An executor who remains in possession of the property once the executorial duties have all been performed becomes a trustee under the terms of the will or court order (or otherwise is treated as a constructive trustee).172 Thus an executor can become the trustee of different assets of the estate at different times, thereby acting in both capacities at the same time.173 Thirdly, in disposing of trust property, trustees must act unanimously (see [22.65]) whereas one of several executors can, speaking generally, bind the estate of the testator, and so dispose of an asset of the deceased’s estate without the concurrence of the others (several power).174

164

See Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324–​325 per Latham CJ, at 335 per Dixon J.

165

See Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [10.43].

166

Were this otherwise, property held by an executor could be sold under a judgment against the executor personally: Hosken v Danahar [1911] VLR 214 at 226 per A’Beckett J; Re Heberley (deceased) [1971] NZLR 325 at 332 per Turner J.

167

Accordingly, the status of a beneficiary in an unadministered estate differs from that of an equitable assignee, who is the true owner (the assignor being no more than a bare trustee) (see [3.120]): Roberts v Gill & Co [2011] 1 AC 240 at [68] per Lord Collins, at [102] per Lord Walker.

168

Connell v Bond Corporation Pty Ltd (1992) 8 WAR 352 at 368 per Malcolm CJ; Meynert v Leafdale Pty Ltd [2005] WASC 102 at [32]–​[39] per Newnes M; Tobin v Ezekiel [2009] NSWSC 1313; Stacey v Stacey [2010] WASC 85. Cf Burns v Bayliss [2006] WASC 102.

169

Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694; Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; Kelly v Kelly [2007] NSWSC 1076; Re Maguire (deceased) [2010] 2 NZLR 845 at [18]–​[21] per Asher J.

170

Pagels v MacDonald (1936) 54 CLR 519 at 526 per Latham CJ; Porteous v Rinehart (1998) 19 WAR 495 at 503 per White J. In the Australian Capital Territory and New South Wales, the trustee legislation provides that an executor may, upon completing executorial duties, declare by registered instrument in writing that he or she has ceased to hold the property as executor and now holds the property as trustee or as beneficiary, as the case may be: ACT s 11(1); NSW s 11(1).

171

Probert v Commissioner of State Taxation (1998) 72 SASR 48 at 53 per Olsson J.

172

McCaughey v Commissioner of Stamp Duties (1946) 46 SR (NSW) 192 at 209 per Jordan CJ.

173

Porteous v Rinehart (1998) 19 WAR 495 at 503 per White J; H Stanke & Sons Pty Ltd v Von Stanke (2007) 250 LSJS 149 at [113] per Sulan J.  See further Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [10.45]–​[10.51].

174

Attenborough v Solomon [1913] AC 76; Porteous v Rinehart (1998) 19 WAR 495 at 503 per White J; Exception Holdings Pty Ltd (in liq) v Albarran (2005) 223 ALR 487 at [20]–​[26] per Young CJ in Eq; Johnson v Trotter (2006) 12 BPR 23,339 at [21] per White J. See Sundberg, “Powers of One of Several Personal Representatives” (1985) 59 ALJ 649; Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [11.90]–​[11.93].

[16.205]  511 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

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Fourthly, executors may not retire or appoint successors to their place during the period of administration.175 The retirement and appointment of trustees is statutorily provided for: see [21.60] (appointment), [21.95] (retirement). An executor who holds any property of the estate on trust upon completion of administration may utilise trustees’ statutory powers of retirement and appointment of successor(s).176 Finally, important distinctions in respect of limitation of actions between executors and trustees exist in most jurisdictions.177

175

In exceptional circumstances, the Public Trustee (see [21.20]) or a trustee company (see [21.15]) may be appointed in place of an unwilling executor.

176

In the Will of Holland (1891) 17 VLR 1; In the Will and Estate of Graham (deceased) [1910] VLR 466; Re Ponder [1921] 2 Ch 59; Harvell v Foster [1954] 2 QB 367; Re Cockburn’s Will Trusts [1957] Ch 438; In the Estate of Dunn (deceased) [1963] VR 165.

177

As to the periods of limitation applicable to trustees, see [24.180]–​[24.195]. Cf in the context of executors in the following jurisdictions: Qld s 28; SA s 33(1); Tas s 25; Vic s 22.

512 [16.205] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Chapter 17

The Requisite Certainties [17.05]  Express trusts are created inter vivos in one of two ways: by transfer of property cou-

pled with an intention to make the transferee a trustee (“trust by transfer”); or by declaration of trust, whereby the settlor (declarant) declares herself or himself to hold the property as trustee. These methods are mutually exclusive; a person who transfers property to another to hold upon trust cannot concurrently declare herself or himself as trustee of that property, or vice versa.1 Testamentary trusts are created by virtue of provision in the terms of a will: see [18.40]. However created, an express trust must fulfil the “three certainties” of intention, subject matter and object,2 each discussed below, and may need to meet statutory writing requirements (see [18.05], [18.10]). For trusts by transfer, there is the additional requirement that the settlor must have done everything necessary for her or him to do to completely constitute the trust: see [18.90]–​[18.105]. In each case there must be no other factor, such as incapacity of the settlor or illegality (see Ch 19), that prevents the creation of a valid trust.

CERTAINTY OF INTENTION

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[17.10]  Fundamental to the creation of an express trust is that the alleged settlor3 exhibit an

intention to create a trust. Absent this intention, the disposition can operate as an absolute gift to the donee (the purported trustee) or can be subject to some other legally enforceable obligation (such as a charge, a condition or an equitable personal obligation outside of a trust: see [16.150]–​[16.170]). The onus of proving an intention to create a trust lies on the person alleging that a trust was created.4 Process of construction [17.15]  Reflecting the maxim “equity looks to intent rather than form” (see [P.95]), no par-

ticular words are necessary to create a trust. The settlor’s language is construed to ascertain whether it evinces an intention, which can be inferred (as to which see [17.45]–​[17.55]), to create a trust, and, if so, the breadth of its terms.5 To create a trust, the words, construed in 1

Comptroller of Stamps (Vic) v Howard-​Smith (1936) 54 CLR 614 at 621–​622 per Dixon J; Commissioner of State Revenue v Lam & Kym Pty Ltd (2004) 10 VR 420 at [37]–​[41] per Nettle JA (adding (at [41]–​[45]) that reference to the creation of trusts in exercise of a power of appointment is not a reference to the method of creating a trust but to the power to create a trust vested in the donee of a power of appointment: see [16.175]).

2

Knight v Knight (1840) 3 Beav 148; 49 ER 58.

3

It should not be assumed that the person who supplies the property to establish the trust is necessarily the “true” settlor of the trust in each instance. In the business context, to (inter alia) avoid the effect of Income Tax Assessment Act 1936 (Cth), s 102, it is common for a lawyer or accountant to settle a small sum to establish the trust on behalf of a client, who is in reality the “true” settlor: see [27.160].

4

Re Armstrong [1960] VR 202 at 206 per Herring CJ.

5

Executor Trustee and Agency Co of South Australia Ltd v Deputy Federal Commissioner of Taxation (SA) (1940) 64 CLR 413 at 420 per Dixon J; Kauter v Hilton (1953) 90 CLR 86 at 98–​101 per Dixon CJ, Williams and Fullagar JJ; Thomas v Perpetual Trustee Co (Ltd) (1955) 94 CLR 537 at 548–​549 per Williams J; Re Altson [1955] VLR 281 at 285 per Herring CJ; Sacks v Gridiger (1990) 22 NSWLR 502 at 509–​510 per McLelland J; Herskope v Perpetual Trustees (WA) Ltd (2002) 41 ACSR 707 at 723–​725 per Powell JA.

[17.15]  513 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

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context, must bear an imperative, not a permissive, meaning. The usual words used are “to X on trust”; here it is difficult to discern an intention to make an outright gift or to create a debtor–​creditor relationship. An agreement for money to be placed in a “trust account” or to be held “in trust” also carries a strong presumption that the money is trust money,6 as does the addition of property by a trustee to an existing trust fund of which he or she is trustee.7 Where the language unambiguously refers to a trust, the onus shifts to the party who alleges that no trust was intended.8 This onus may be discharged, for instance, if the court is satisfied that the term “trust” is used not to reflect a disposition of an interest in property but simply as indicative of a fiduciary duty.9 Certainly, a disposition expressed “without however creating a binding trust” is unlikely to incline a court, without compelling evidence, to find that a trust was intended.10 Whatever the words used, they must be given their ordinary meaning (unless they have special or technical meaning), and be construed in the context of the instrument as a whole.11 The parties may, for instance, use the word “nominee”, and the court must determine whether in so doing they intended to express a concept synonymous with “trustee”.12 Even the word “trust” in a disposition may not, as foreshadowed above, prove decisive.13 Whether, say, a gift to trustees “to be disposed as the trustees think fit” creates a trust or an absolute interest cannot be determined with certainty independent of context.14 In Dean v Cole,15 the testator left (with a minor exception) all real and personal estate to the testator’s wife “trusting to her that she will … divide in fair just and equal shares between my children”. Knox CJ, Gavan Duffy and Rich JJ held that, as the testator had earlier in the will directed that certain sums forming part of his “estate” should be at his widow’s “absolute disposal”, to make her a trustee of the estate would be inconsistent with those directions.16 Their Honours construed the words “trusting to her” to express the testator’s confidence that his wife would make a just, fair and equal division of the

6

Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 605–​606 per Gaudron, McHugh, Gummow and Hayne JJ (see [16.80]); Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361 at [19] per Campbell J; In the Matter of Courtenay House Capital Trading Group Pty Ltd (in liq) (2018) 125 ACSR 149 at [23], [24] per Brereton J (where this conclusion was bolstered by the moneys in question being held “on behalf of” the investor, described as “your money” and not mixed with other accounts).

7

See, for example, La Housse v Counsel [2008] WASCA 207.

8

Stephens Travel Service International Pty Ltd (receivers and managers appointed) v Qantas Airways Ltd (1988) 13 NSWLR 331 at 340–​343 per Hope JA; Gliderol International Pty Ltd v Hall (2001) 80 SASR 541 at 544 per Nyland J.

9

See, for example, Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387, discussed at [16.105].

10

Re Singh (deceased) [1995] 2 NZLR 487.

11

Re Altson [1955] VLR 281 at 284–​286 per Herring CJ.

12

See, for example, Body Corporate No 1/​PS40911511E St James Apartments v Renaissance Assets Pty Ltd (2004) 11 VR 41 at [36] per Mandie J (who noted that the use of the word “nominee” as in a sense synonymous with “trustee” is not unusual).

13

Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178 at 181 per Knox CJ and Gavan Duffy J; Brisbane City Council v Attorney-​General (Qld) [1979] AC 411 at 421–​422 (PC); Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1994) 29 ATR 311 at 317–​318 per Foster J.

14

Compare Will of Lawn [1911] VLR 318 (where a disposition in a will that a widow could use property “as she may think proper for the benefit of herself and our children” was held to create an absolute interest) and Hammat v Chapman (1914) 14 SR (NSW) 416 (where a gift to be disposed as the appointee thought best was held to create absolute entitlement in the appointee) with Re Ah Chung (1915) 11 Tas LR 173; Re Hollole (deceased) [1945] VLR 295 (where similar gifts were held to create a trust).

15

Dean v Cole (1921) 30 CLR 1.

16

Dean v Cole (1921) 30 CLR 1 at 8. Contra at 11 per Higgins J in dissent, who held that the phrase “trusting her to divide” meant no more than “in trust to divide”.

514 [17.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

property, not as imposing a binding trust to make equal division of that property between the named children. Conversely, in Re Beckbessinger,17 where the testator left the residue of his estate to trustees “absolutely” with a direction that they apply it to benefit his interests, Tipping J held that the word “absolutely” did not denote an absolute beneficial interest because it was immediately followed by the restricting direction. In a similar vein, Henry J in Rhodes v Rhodes18 held that a testamentary gift of “all my worldly goods to my ex wife who will distribute it to me children as she sees fit” created a trust, as the words made provision for the mandatory distribution of the gifted property. [17.20]  Words that in their ordinary usage are not imperative in nature —​termed “precatory

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words” —​create no more than a moral obligation unless the instrument, read as a whole, justifies the conclusion that the imposition of a trust (or other legally enforceable) obligation was intended. For example, a disposition subject to an “understanding”,19 “request”,20 “recommendation”,21 “hope”,22 “belief”,23 “desire”,24 “wish”25 or “confidence”26 creates a trust only if the context allows the court to conclude that the disponer intended to impose an imperative obligation in respect of the property. In Re Altson,27 the testatrix’s will provided that “[i]‌t is my express wish” that “S” be granted a lease of certain of her properties. Though not denying that in an appropriate context the words “it is my express wish” could create a trust,28 as other clauses in her will were preceded by the imperative words “I direct”, Herring CJ concluded that the testatrix did not intend the leases to be held on trust for S. It remains a question of construction of the instrument in each case.29 Yet it is clear that an intention to create a trust is missing if the evidence establishes no more than an expression of an intention of what might happen in the future.30

17

Re Beckbessinger [1993] 2 NZLR 362 at 366.

18

Rhodes v Rhodes [2017] QSC 21.

19

See, for example, Hayes v National Heart Foundation of Australia, NSW Division [1976] 1 NSWLR 29.

20

See, for example, Re Pike [1932] SASR 264 (the word “request” held to give rise to trust obligations).

21

See, for example, Stuart v Clemons [1951] Tas SR 23 (gift to A of “the whole of my possessions to be disposed of to the best of his ability according to the recommendations set out in my letter accompanying this will” held to make A a trustee).

22

See, for example, Re Lord [1910] VLR 477; Re Dempsey [1914] QSR 200 (neither held to impose trust obligations).

23

See, for example, Will of Warren [1907] VLR 325 (whole of the estate be given to T “believing that she will do justice to my relatives” held to create a moral obligation).

24

Compare cases in which a precatory trust was held to have been created (see, for example, Re Mayne (1928) 28 SR (NSW) 157; Gunther v Commissioner of Stamp Duties (1932) 33 SR (NSW) 95; Re Stable (deceased) [1957] QSR 90) with others in which no legal obligation was created (see, for example, Re Connolly [1910] 1 Ch 219; West v Federal Commissioner of Taxation (1949) 79 CLR 319; Re Chanter [1952] SASR 299).

25

Compare cases in which a precatory trust was held to have been created (see, for example, Re Burley [1910] 1 Ch 215; Re Benham [1939] SASR 450; Re Harding (deceased) [2007] 1 All ER 747 at [9]‌–​[12] per Lewison J) with others in which no legal obligation was created (see, for example, Re Altson [1955] VLR 281 (discussed in the text); Trustees of the Christian Brothers in Western Australia (Inc) v Attorney General (WA) [2006] WASC 191 at [10]–​[14] per Templeman J).

26

See, for example, Mussoorie Bank, Ltd v Raynor (1882) 7 App Cas 321; Re Adams and Kensington Vestry (1884) 27 Ch D 394; Re Dempsey [1914] QSR 200; Comiskey v Bowring-​Hanbury [1915] AC 84.

27

Re Altson [1955] VLR 281.

28

Re Altson [1955] VLR 281 at 284.

29

Re Hamilton [1895] 2 Ch 370 at 373 per Lindley LJ (“You must take the will which you have to construe and see what it means, and if you come to the conclusion that no trust was intended, you say so, although previous judges have said the contrary on some wills more or less similar to the one you have to construe”).

30

Marriage of Cierpiatka (2000) 25 Fam LR 548 at 554 (FC); Atwell v Atwell [2002] TASSC 119 at [25] (“Mere intention to benefit another is insufficient to create a trust and a future wish to ‘put things in order’ is inadequate. That is because an express trust, once created, cannot be revoked and remains enforceable by the beneficiary”).

[17.20]  515 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

Admissibility of extrinsic evidence [17.25]  Where there is no trust instrument, it goes without saying that questions surrounding

the intention to create a trust are necessarily resolved by resorting to extrinsic evidence. Cases involved an inference as to the relevant intention exemplify the point: see [17.45]–​[17.55]. Where, though an intention to create a trust is clear, its terms are ambiguous, extrinsic evidence may be admissible in the search for meaning. The point has especial significance for testamentary trusts, where resort cannot be made to the settlor to resolve ambiguity. A court must therefore consider the circumstances and facts known to the settlor (testator) at the time the will was drafted. For example, in Boranga v Flintoff,31 the trust deed identified “the children of” the husband and wife as within the specified income class, and “their children” as within the specified capital class. The ambiguity arose because the husband and wife had one child of their own, whereas the wife had children from a former marriage. Parker J ruled the trust entitlement extended to the latter children because, first, at the date the deed was executed the parties had only one child between them, the use of the plural “children” thus showing an intention to encompass the wife’s children, and secondly, the wife’s children had received distributions of trust income and capital, showing that they were intended to come within the trust.32

Impact of inquiry into intention objectively determined

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[17.30]  Where the relevant relationship is couched in the language of trust, extrinsic evidence

of subjective intention cannot be admitted, the High Court in Byrnes v Kendle33 held, to deny an intention to create a trust. The respondent in that case signed an Acknowledgment of Trust declaring that he held one undivided half-​interest in the matrimonial home as tenant-​in-​ common upon trust for his wife. Upon the breakdown of the relationship, the home was sold. The respondent sought to withstand claims by the wife’s family to recover one-​half of the proceeds of sale by arguing that he had not intended to create a trust. The court unanimously rejected this argument. Importantly, this was largely independent of whether or not the respondent actually had a subjective (“real”) intention to create a trust. The court found that where there is executed a document that explicitly countenances the creation of a trust, aside from evidence of vitiating factors, evidence cannot be admitted to contradict the intention manifested by that document. Accordingly, extrinsic evidence of the respondent’s intentions underscoring the negotiations leading to the trust was inadmissible to prove that he did not intend to create a trust. (It should be noted that objectivity works both ways: a person who subjectively intends to create a trust may nonetheless fail to do so if her or his words or conduct, viewed objectively, fall short of what is required.)34 The assumption is that persons who use the unambiguous language of trust intend to create a trust. Language of this kind is decisive, and serves to preclude the admission of evidence inconsistent with it. The relevant intention is, in the words of Heydon and Crennan JJ, “an intention to be extracted from the words used, not a subjective intention which may have existed but which cannot be extracted from those words”.35 The focus on the intention as

31

Boranga v Flintoff (1997) 19 WAR 1.

32

Boranga v Flintoff (1997) 19 WAR 1 at 5–​6.

33

Byrnes v Kendle (2011) 243 CLR 253.

34

Bellis v Challinor [2015] WTLR 43 at [59] per Briggs LJ.

35

Byrnes v Kendle (2011) 243 CLR 253 at [114]. See also at [17] per French CJ, at [65] per Gummow and Hayne JJ.

516 [17.25] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

evinced on the face of the document —​an “objective” intention —​aligns with both the prevailing approach to contractual interpretation, and the policy(ies) underscoring the parol evidence rule.36 In so ruling, the court overruled its ruling some 90 years earlier in Commissioner of Stamp Duties (Qld) v Jolliffe,37 where a majority of the court was willing to admit evidence, where a bank account was opened as “trustee”, of the “real intention” of the purported settlor. But the court did not deny outright the relevance of inquiry into subjective intention in the law of trusts. As Heydon and Crennan JJ made explicit:38 As with contracts, subjective intention is only relevant in relation to trusts when the transaction is open to some challenge or some application for modification —​an equitable challenge for mistake or misrepresentation or undue influence or unconscionable dealing or other fraud in equity, a challenge based on the non est factum or duress defences, an application for modification by reason of some estoppel, an allegation of illegality, an allegation of “sham”, a claim that some condition has not been satisfied, or a claim for rectification.

It follows, it may be reasoned, that a settlor suffers no injustice by being denied the opportunity to adduce extrinsic evidence of her or his actual intention. Scenarios where the settlor could be the victim of injustice are, it seems, adequately addressed by existing vitiating doctrines.

Sham trusts

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[17.35]  One of these doctrines, which is not elaborated elsewhere in this book, mentioned

by their Honours in the preceding paragraph is where the trust is allegedly a “sham”.39 As suggested by its nomenclature, a “sham”, though it may look like a trust, is not intended by the settlor (and often also the trustees) to be a true trust. It presents an avenue whereby, in the face of a dealing ostensibly structured in the form of a trust, extrinsic evidence serves to deny any intention to create and perpetuate a true trust.40 In effect, a finding of sham is premised on “an intention to have an express trust in appearance only”, and accordingly an attendant “intention to mislead”.41 It is extant, most commonly, in instances directed to the setting aside of the “trust”, for instance, for the purposes of tax or insolvency. At the same time, merely because a trust is established on a person’s behalf by professional advisors, where the person lacks a complete understanding of the ramifications of the trust structure and/​or the terms of the trust instrument, does not brand the trust as a “sham”.42 Few businesspersons, after all, understand the intricacies of the trust structure, despite which they may, broadly speaking, intend to create a trust. 36

A point, however, queried by some commentators: see, for example, Karaka, “Secret Intentions and Slippery Words: Byrnes v Kendle” (2012) 34 Syd L Rev 599; Palmer [2012] NZ L Rev 141 at 142–​147.

37

Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178 (see at 181 per Knox CJ and Gavan Duffy J; contra at 190–​193 per Isaacs J dissenting, whose reasoning the court in Byrnes v Kendle unanimously endorsed).

38

Byrnes v Kendle (2011) 243 CLR 253 at [115] (footnotes omitted). See also at [15]–​[17] per French CJ.

39

The New Zealand Court of Appeal in Clayton v Clayton [2015] 3 NZLR 293 at [77] viewed a “sham trust” as synonymous with an “illusory trust”. On appeal (Clayton v Clayton [2016] 1 NZLR 551 at [123]), however, O’Regan J (who delivered the reasons of the Supreme Court) noted that “a finding that a trust deed is not a sham does not seem to us to preclude a finding that the attempt to create a trust failed and that no valid trust has come into existence”. This would lead to a finding that the trust is “illusory”, to use the terminology adopted in the courts below, but his Honour saw no value in using the “illusory” label, in that “if there is no valid trust, that is all that needs to be said”. An elaboration on the parameters of the illusory trust notion is found in Bennett, “Competing Views on Illusory Trusts: The Clayton v Clayton Litigation in Its Wider Context” (2017) 11 J Eq 48.

40

Vervoort v Forrest [2016] 3 NZLR 897 at [25] per Asher J (CA).

41

Official Assignee v Wilson [2008] 3 NZLR 45 at [26] per Robertson and O’Regan JJ. See further Palmer, “Dealing with the Emerging Popularity of Sham Trusts” [2007] NZ L Rev 81; Conaglen, “Sham Trusts” [2008] CLJ 176; Pagone, “Sham Trusts” (2012) Aust Tax Rev 119.

42

Clayton v Clayton [2016] 1 NZLR 551 at [115] per O’Regan J (SC).

[17.35]  517 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

Intention stemming from statute [17.40]  Statute can prescribe, expressly or impliedly, that in particular situations money or prop-

erty is to be held on trust. In some circumstances it simply recognises what would have been a trust at general law, such as legislation that marks money received by lawyers on behalf of another person as trust money.43 On other occasions the trust is imposed by statute to give additional protection for money or property, for instance, the statutory requirement that superannuation funds operate through a trust (see [28.50]) and that responsible entities of managed investment schemes hold scheme property on trust (see [28.235]). On these occasions statute commonly specifies obligations and rights beyond the general law of trusts. Just because a statute uses the term “trust”, though, does not always mean that a trust in the private law sense was intended. In the public law context in particular, the term “trust” may be used not in the technical legal sense, but interchangeably for a public function or in some other way.44 Or it may be used to reflect some but not all aspects of a trust at law.45 Whether money paid into court pursuant to statute or a court order creates a trust in the private law sense depends on the terms of the statute or order. Where it is clear that no claimant is beneficially entitled to the money, there is no private law trust; the concept of trusteeship in this context is utilised simply as a means of vesting title to the money.46

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Inferring an intention to create a trust [17.45]  The term “express trust” is somewhat misleading in that courts can infer an intention to create a trust absent any express intention.47 If a settlor enters into arrangements having the effect of creating a trust, it is not necessary that he or she should appreciate that they do so; it is sufficient that he or she intends to enter into them.48 Any such trust, as it is based on intention, is an express trust. Several of the cases where courts have been asked to infer an intention to create a trust involve claims to beneficial interests in property of an insolvent trustee. The motivation for these applications is the principle that assets held by an insolvent as trustee are not available to satisfy claims of the insolvent’s creditors (see [27.20]). The court is asked to rule that what is ostensibly a debtor–​creditor relationship is, alternatively or also, a relationship of trustee–​ beneficiary. Courts have proven most receptive to these requests if the money or property has

43

Jalmoon Pty Ltd (in liq) v Bow [1997] 2 Qd R 62 at 72 per Pincus JA and Helman J. As to this legislation, see Dal Pont, Lawyers’ Professional Responsibility (6th ed, Lawbook Co, 2017), Ch 9.

44

Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at 585–​587 (FC); Re Ahmed & Co (2006) 8 ITELR 779 at [111]–​[113] per Lawrence Collins J. See, for example, Wellington Harness Racing Club Inc v Hutt City Council [2004] 1 NZLR 82 at [58]–​[68] per Hammond J (who held that where, under statute, the Governor of New Zealand granted land to the superintendent of the Wellington province “in trust as a Race Course and for purposes connected therewith”, the “trust” should be understood in the context of the statute in question, it being impossible to see how there could be an independent, free-​standing trust in the equity sense, standing apart from the provisions of the statute that enabled the grant).

45

For example, bankruptcy legislation makes provision for the appointment of a trustee-​in-​bankruptcy to a bankrupt’s estate, but prior to the submission of all the proofs from creditors, the trustee has no way of knowing all of the beneficiaries for whom the estate is being administered, or the shares in which the estate will be distributed: Ayerst v C& K (Construction) Ltd [1976] AC 167 at 178 per Lord Diplock. The requisite certainty, respectively, of object (see [17.95]) and beneficial interest (see [17.80]) in trusts law is otherwise missing in this context. Trusteeship in the bankruptcy environment serves to highlight the essential characteristic that distinguishes trust property from other property, namely, that it cannot be used or disposed of by the legal owner for her or his own benefit but must be used or disposed of for the benefit of others.

46

See, for example, Andrew Garrett Wine Resorts Pty Ltd v National Australia Bank Ltd (No 7) (2005) 227 ALR 113.

47

Parkinson, “Chaos in the Law of Trusts” (1991) 13 Syd L Rev 227 at 231 (who opines that “many express trusts are not express at all. They are implied or inferred, or perhaps imputed to people on the basis of their presumed intent”).

48

Twinsectra Ltd v Yardley [2002] 2 AC 164 at [71] per Lord Millett.

518 [17.40] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

been advanced for a specific and limited purpose, and treated as such: see [27.65]–​[27.105]. In determining the issue the relevant inquiries include the nature of the transaction, the particular provisions of the parties’ agreement and the circumstances attending the parties’ relationship.49 Though the terms of a trust can be inferred from the evidence before it, the law will not impute to the settlor or declarant an intention he or she lacked.50 [17.50]  On other occasions judicial inference of intention has been sought to overcome the

strictures of the contractual doctrine of privity, and thereby protect the legitimate interests of non-​parties to a contract. In Bahr v Nicolay (No 2), for example, Mason CJ and Dawson J opined that:51

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… if the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to that intention, then there is no reason why in a given case an intention to create a trust should not be inferred.

In that case the appellants sold land to the first respondents with a lease back for three years. The contract of sale gave the appellants a right of re-​purchase at a specified price upon the expiry of the lease. During that time, the land was sold to the second respondent, who in the sale agreement acknowledged the buy-​back provision. At the expiration of the lease, the second respondent refused to sell the land back to the appellants. Their Honours held that the appellants had intended a trust that obliged the second respondent as trustee to hold the land subject to such rights created in favour of the appellants by the original contract of sale.52 This approach, underscored by an insistence on the trust being express in nature, (indirectly) feeds into the court’s focus in Byrnes v Kendle on objective intention as the core determinant of an express trust: see [17.30]. Over 20 years before Byrnes v Kendle, it ostensibly took objectivity to a new level, involving an inferred intention that the parties may have shared, had they turned their minds to the question, with the benefit of hindsight. On this reasoning, there may be little distinction between inferring and imputing intention, despite the fact that courts have traditionally eschewed the latter in trusts law.53 Notwithstanding the breadth of the above principle, third parties to a contract who seek to enforce a promise contained in the contract on the basis that the promisor holds that promise on trust for them still commonly face considerable evidential difficulties in justifying the relevant inference: see [16.125]–​[16.135].

49

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 121 per Mason CJ and Wilson J, at 147–​ 149 per Deane J.

50

Malsbury v Malsbury [1982] 1 NSWLR 226 at 230–​231 per Needham J. The statement by French CJ in Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 at [3]‌that, absent an explicit declaration of intention, “the court must determine whether intention is to be imputed”, should not be construed as imputing an intention that the person never had. This is evident from his Honour’s subsequent observation that “[i]t does so by reference to the language of the documents or oral dealings having regard to the nature of the transactions and the circumstances attending the relationship between the parties”. Hence the language of imputation here is used as synonymous with inference. The same may be said of Gageler J’s use of the term “imputed” (at [109]).

51

Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618.

52

The other judges were unwilling to infer such an intention, and held the relevant trust to be a constructive trust: Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 638 per Wilson and Toohey JJ, at 654 per Brennan J. Wood J followed the express trust characterisation in the factually similar case of Snowlong Pty Ltd v Choe (1991) 23 NSWLR 198. Cf Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2010] VSC 443 at [80] per Croft J.

53

For instance, in the case law on the so-​called “common intention constructive trust” (see [38.215]–​[38.230]), judges have explicitly refused to countenance imputing an intention: see, for example, Allen v Snyder [1977] 2 NSWLR 685 at 690–​694 per Glass JA, at 704 per Mahoney JA.

[17.50]  519 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

[17.55] A useful technique in assessing whether a trust was intended is to examine

whether the relationship created by the parties is consistent with the incidents or legal consequences of a trust. For instance, absent express language of trust, the failure to contractually (or otherwise) proscribe the mixing of funds alleged to be trust funds with other funds will likely prove a significant hurdle to inferring an intention to create a trust, especially in a commercial context, irrespective of whether this would be commercially advantageous to one of the parties.54 Mixing of funds is an indicator of a debt rather than a trust relationship: see [16.110]. The creation of an equitable security interest, by itself, is also not probative of a trust;55 trustees have ownership of property, not merely a security interest therein. Moreover, if the right of indemnity —​central as it is to trusteeship: see [23.120]–​[23.155] —​ does not align with what the parties have expressed as their agreement, it may be difficult to conclude that they intended to create a trust. Such a factor is nonetheless more likely to be used as a means of supporting other evidence against (or for) such a conclusion. For example, in Commonwealth of Australia v Booker International Pty Ltd,56 Campbell J doubted whether the consequences of the right of indemnity were what the parties intended, also noting that the agreement in question, though lengthy and making detailed provision for many matters, nowhere said, as it was open to the parties to do, in so many words that a trust was being created.

CERTAINTY OF SUBJECT MATTER

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[17.60]  The property of a trust must be defined and identifiable. Otherwise the trust is void

for uncertainty, for there can be no trust without property.57 Hence, an overdrawn bank account cannot be the subject matter of a trust,58 and nor can an expectancy (see [17.75]), as neither is property. Uncertainty as to trust property may, in any case, raise a question as to the settlor’s intention to establish a trust in the first place.59 Doubts over the subject matter of trust may, as explained below, arise either as to the nature of the property or the quantum (amount or shares) of any interests in the property.

54

See, for example, Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 at [43], [53] per French CJ, at [84] per Hayne and Kiefel JJ, at [111] per Gageler J, at [225]–​[229] per Keane J; Sino Iron Pty Ltd v Palmer (No 3) [2015] 2 Qd R 574 at [90]–​[93] per Jackson J.

55

See, for example, Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 at [36] per French CJ, at [101] per Hayne and Kiefel JJ, at [159] per Keane J. As to the distinction between a trust and an equitable charge, see [16.165]. As to the nature of an equitable charge, see [1.65]–​[1.80].

56

Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292 at [61]–​[63] (adding that “the very length and detail of the Agreement tells against there also being an intention on the parties, not expressed in the Agreement, that there should be a trust attaching to monies paid by the Commonwealth”: at [64]). See also Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 at [36]–​[43] per French CJ.

57

Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246 at 283–​285 per Higgins J; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 705, 709 per Lord Browne-​Wilkinson. See Wilson, “Lord Browne-​Wilkinson’s ‘Identifiable Trust Property’ Principle” (1998) 7 Waikato L Rev 86. The requirement of certainty of subject matter applies likewise to resulting and constructive trusts (with the exception of constructive trusts that generate personal accountability: see [38.10]): Westdeutsche at 705.

58

Fortex Group Ltd (in receivership and liquidation) v MacIntosh [1998] 3 NZLR 171 at 174–​175 per Tipping J; Williams v Peters [2010] 1 Qd R 475 at [5]‌per McMurdo P, at [31] per Muir JA.

59

See, for example, Margulies v Margulies [2008] WTLR 1853.

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The Requisite Certainties  Chapter  17

Nature of the property [17.65]  Property, whether real or personal, tangible or intangible, legal or equitable, may be the

subject matter of a trust.60 A limited interest in property, such as a life interest, may also constitute trust property. Where a person, pursuant to that contract, promises to benefit a third party, the legal entitlement to enforce that promise is a chose in action; it can therefore constitute the subject matter of a trust held by the promisee on behalf of the third party, and so can be enforced by that party: see [16.125]–​[16.135].

Sub-​trusts [17.70]  That the subject matter of a trust can constitute a beneficial interest in property allows the creation of a “sub-​trust”, namely a trust the beneficial interest in which is held by a person (the “sub-​trustee”) in trust for other beneficiaries (or charitable purposes). The beneficial interest here passes to the sub-​trustee to be held for the benefit of the ultimate beneficiaries. Provided that the sub-​trustee is not a bare trustee (see [21.45]), there remain two trusts.61

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Expectancies [17.75]  As a mere expectancy is not property, it cannot be the subject matter of a trust. Property yet to come into existence (“future property”) amounts to an expectancy unless it can be properly characterised as an existing vested or contingent benefit that is to accrue to stated beneficiaries on the occurrence of a specified future event.62 In Re Rule’s Settlement,63 for example, the settlor purported to settle moneys she might receive under the exercise of a power of appointment. The Collector of Imposts sought to assess stamp duty in respect of the property the subject of that power. The Full Court of the Victorian Supreme Court held that no stamp duty could be imposed because the settlor had no property interest in the money under the power of appointment, only an expectancy.64 Like the object of a power of appointment (see [16.175]), a beneficiary’s interest under a discretionary trust is an expectancy, for he or she cannot make the trustees distribute any of the trust property in her or his favour: see [20.125]. Accordingly, there can be no binding trust of an interest in a discretionary trust.65

60

Comptroller of Stamps (Vic) v Howard-​Smith (1936) 54 CLR 614 at 621–​622 per Dixon J. See, for example, Swift v Dairywise Farms Ltd [2000] 1 WLR 1177 (a milk quota held to be capable of forming the subject matter of a trust, being analogous to a trust of non-​assignable contracts).

61

Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 41 ATR 29 at 40 per Mason P.

62

Re Midleton’s Will Trusts [1969] 1 Ch 600 at 607 per Stamp J; Williams v Commissioner of Inland Revenue [1965] NZLR 395 at 401 per North P and Turner J, at 403 per McCarthy J. Examples of future property include an interest a person hopes to take upon an intestacy (Re Lind [1915] 2 Ch 345); future income the certainty of which is unclear, such as future royalties (Re Trytel [1952] 2 TLR 32), future book debts (Tailby v Official Receiver (1888) 13 App Cas 523), dividends to be declared (Norman v Federal Commissioner of Taxation (1963) 109 CLR 9: see [3.110]), copyright in songs to be written (Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1); and damages that may be recovered in pending litigation (Glegg v Bromley [1912] 3 KB 474).

63

Re Rule’s Settlement [1915] VLR 670.

64

Re Rule’s Settlement [1915] VLR 670 at 674.

65

However, the same result may be achieved by: (a) a distribution to the beneficiary under the discretionary trust being transferred to the trustees in accordance with a prior ineffective declaration of trust, provided there is an intention to create a trust; (b) a declaration of trust by the beneficiary over any distribution actually received; or (c) a covenant by the beneficiary with the trustees to transfer any distributions received: Lindsay and Zeigler, “Trust of an Interest in a Discretionary Trust —​Is It Possible?” (1986) 60 ALJ 387 at 398.

[17.75]  521 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

Quantum of interest [17.80] That the beneficial interests taken under a trust must be certain has two ramifica-

tions. First, it must be possible to identify with precision the actual property the subject of the trust; otherwise there is no basis for determining either the extent of the trustee’s duty or the scope of the beneficiaries’ entitlement. Secondly, assuming that the trust property is identifiable with precision, the trustees must, in the case of a fixed trust, also be able to identify with like precision the actual entitlement of each beneficiary (sometimes termed “certainty of beneficial interest”). Imprecise expressions that do not define the actual beneficial interest to be taken are void for uncertainty, say, “the bulk of my estate”,66 “most of the … residue of my estate”,67 “the remaining part which he does not want”68 and “blue chip securities”.69 In Boyce v Boyce,70 the testator devised all his houses in trust to convey one of them chosen by his daughter to her. The others were to be conveyed to the other daughter. That no choice was made raised uncertainty as to which house was to pass, the court characterising the devise as in effect a trust of “most of my houses”. In Perpetual Trustees WA Ltd v Riverwest Pty Ltd,71 Barker J likewise held that a purported trust over a “block” of land that was not a “lot” under the relevant planning legislation failed for uncertainty. [17.85] There is no difficulty if the words used are capable of being interpreted with cer-

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tainty by the court, such as where objective criteria for the calculation of the quantum are available. In Re Golay’s Will Trusts,72 a disposition in a will of “a reasonable income” was upheld on the basis that the testator had set a yardstick to identify “a reasonable income” objectively, Ungoed-​Thomas J opining that courts are “constantly involved in making such objective assessments”. This reflects a much older body of authority usually in the context of trusts for the maintenance and advancement of children, as explained by Wigram VC in Thorp v Owen:73 [A]‌court of equity can measure the extent of interest which an adult, as well as an infant, takes under a trust for his support, maintenance, advancement, provision or other like indefinite expression, applicable to a fund larger, confessedly, than the party entitled to the support, maintenance or advancement can claim, and some interest in which is given to another person.

Equity can, moreover, uphold a prima facie uncertain gift by reference to the maxim “equity is equality” (as to which see [P.110]). In this context, it may adopt a presumption that where equitable interests and rights are to be allocated between rival claimants, and there is no other basis of division, equality is the proper basis of making that allocation.74 For example, in Doyley v Attorney-​General,75 a testamentary trust provided for both such of the testator’s 66

Palmer v Simmonds (1854) 2 Drew 221; 61 ER 704.

67

Re Estate of Rummer (2017) 12 ACTLR 258.

68

Sprange v Bernard (1789) 2 Bro CC 585; 29 ER 320.

69

Re Kolb’s Will Trusts [1962] Ch 531.

70

Boyce v Boyce (1849) 16 Sim 476; 60 ER 959.

71

Perpetual Trustees WA Ltd v Riverwest Pty Ltd [2004] WASC 81 at [68]–​[126].

72

Re Golay’s Will Trusts [1965] 1 WLR 969 at 972.

73

Thorp v Owen (1843) 2 Hare 607 at 610; 67 ER 250 at 252. See Parkinson, “Reconceptualising the Express Trust” [2002] CLJ 657 at 675–​676.

74

Pascoe v Boensch (2008) 250 ALR 24 at [34] (FC(FCA)). Cf Secureland Mortgage Investments Nominees Ltd v Harman & Co Solicitor Nominee Co Ltd [1991] 2 NZLR 399 at 415 per Williamson J.

75

Doyley v Attorney-​General (1735) 2 Eq Ca Abr 195.

522 [17.80] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

relations on his mother’s side who were most deserving, and for such charitable uses and purposes as the trustees should think most proper and convenient. The maxim was applied to divide the fund into two halves, one-​half to charity and the other to the relations.

Trust over part of bulk of identical items

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[17.90]  Difficulties may arise in cases where a settlor purports to create a trust over a pro-

portion or number of a bulk of identical items. In Hunter v Moss,76 the settlor declared a trust over 50 of his 950 shares without either identifying specific shares as trust property or separating the shares to be held on trust from others. Dillon LJ noted that “it would not be good enough for a settlor to say, ‘I declare that I hold fifty of my shares on trust for B’ without indicating the company he had in mind of the various companies in which he held shares”.77 His Lordship compared the aforementioned situation to where “a person holds, say, 200 ordinary shares in ICI and he executes a transfer of 50 ordinary shares in ICI either to an individual donee or to trustees”, in which case there is a valid gift to the individual or trustees of the 50 shares without any further identification of their numbers. The English Court of Appeal’s decision in upholding the trust has been criticised for being inconsistent with authority and principle, which are alleged to require that specific trust shares be identified within the holding. The decision is said to raise practical hurdles where a settlor purports to transfer any part of the shareholding, or invests some of it profitably and some not, after declaring the trust, in which case it is argued that one cannot tell which shares were the subject matter of the trust. Also, shares, though of the same kind, may not be identical in that one parcel may, for instance, have been transferred to the settlor under a forged transfer.78 Countering these criticisms, tracing rules as to mixed assets (see Ch 39) could enable the identification of the relevant trust property.79 In any event, persons who declare trusts over part of a shareholding or bank balance are duty bound, as trustees, to segregate the trust assets from their own, analogising their position to a trustee who has wrongly mixed trust property with her or his own.80 And the public policy considerations that may justify a court denying a claim to a mixed fund motivated by an attempt to gain priority over creditors of the declarant81 arguably do not apply in the Hunter v Moss scenario, where no third parties (creditors) had a claim on the shares.82

76

Hunter v Moss [1994] 1 WLR 452.

77

Hunter v Moss [1994] 1 WLR 452 at 457.

78

Hayton, “Uncertainty of Subject Matter of Trusts” (1994) 110 LQR 335 at 337. Cf White v Shortall (2006) 68 NSWLR 650 at [267] per Campbell J [affd Shortall v White (2008) DFC ¶95-​411].

79

See White v Shortall (2006) 68 NSWLR 650 at [264], [265] per Campbell J [affd Shortall v White (2008) DFC ¶95-​411].

80

Martin, “Certainty of Subject Matter: A Defence of Hunter v Moss” [1996] Conv 223 at 225–​226.

81

See, for example, Re London Wine Shippers [1986] PCC 121; Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74 at 99–​103 (PC). Cf Re Harvard Securities Ltd [1997] BCLC 369, where a company purchased a block of shares to be held in the name of nominees, which it then on-​sold to clients. The sale was recorded in company’s books but the shares continued to be registered in the company’s name (in order to save transaction costs), the company declaring that it held the contracted-​for number of shares as nominee for the client. No particular shares were segregated or identified by number as held for any particular client. Some of the transactions were governed by English and some by Australian law. Neuberger J held, in respect of the shares governed by English law, that beneficial title to them had passed to the clients, who therefore took priority over the liquidator of the company. On the advice of a memorandum prepared by Australian solicitors, his Lordship held, however, that under Australian law different principles applied, causing the trust to fail for lack of certainty stemming from no proper identification. Yet Australian law is not so circumscribed: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 604 per Gaudron, McHugh, Gummow and Hayne JJ (discussed at [16.80]); White v Shortall (2006) 68 NSWLR 650 at [244] per Campbell J [affd Shortall v White (2008) DFC ¶95-​411].

82

Martin, “Certainty of Subject Matter: A Defence of Hunter v Moss” [1996] Conv 223 at 227.

[17.90]  523 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

The rationale for the criticisms of Hunter v Moss has greater force in the situation where the trust is over part of a broader set of goods, in which case difficulties in identifying the trust property arise where, for instance, some of the goods are lost, damaged or spoiled.83 To this end, the relevant principle may be that in order to create a valid trust over goods, specific items must be identified or separated from any pre-​existing bulk held by the settlor, but no equivalent process need occur where intangibles such as shares, money or debts are its subject matter.84 The latter draws support in Australia from Campbell J’s judgment in White v Shortall.85 The case involved a written confirmation, following the breakdown of a domestic relationship, by the male party (the defendant) that he held 222,000 shares in a company (of which he held 1.5m shares) in trust for the female party (the plaintiff). His Honour found no impediment to certainty of subject matter, reasoning as follows:86 A trust of this kind is not analogous to a simple trust, where a single and discrete item of property is held on a bare trust for a single beneficiary. Rather, it is a trust of a fund (the entire shareholding of 1.5 million shares) for two different beneficiaries (the plaintiff and the defendant himself), where powers of management are necessarily involved in the trust (to sell or encumber, within limits that such dealings do not impinge on the plaintiff’s rights), and where duties on the trustee would arise as a matter of law (eg to deal with any dividends and capital distributions by distributing them in the appropriate proportions). It is because the trust is construed as being of the entire shareholding that it is not necessary for the plaintiff to be able to point to some particular share and be able to say “That share is mine” … Given the nature of shares in a company, it is perfectly sensible to talk about an individual having a beneficial interest in 222,000 shares out of a parcel of 1.5 million, even if it is not possible to identify individual shares that are held on trust.

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Accordingly, as the property subject to the trust could be identified (the entire shareholding), as could the trustee (the defendant) and the beneficiaries (the plaintiff as to 220,000 shares, the defendant as to the rest), a valid trust had been created.

CERTAINTY OF OBJECT “Beneficiary principle” [17.95]  The “beneficiary principle” requires that a trust be in favour of definite beneficiaries,

ascertained or capable of ascertainment, or a recognised charitable purpose. Its classic judicial emanation appears in Morice v Bishop of Durham, where Sir William Grant MR said:87 [T]‌here can be no trust over the exercise of which this Court will not assume a control: for an uncontrollable power of disposition would be ownership and not trust. If there be a clear

83

See, for example, Re London Wine Shippers [1986] PCC 121 (bottles of wine). Hunter v Moss is said to be distinguishable from such a case not only on the basis that shares are intangible and fungible assets, but because London Wine type cases involve a fluctuating mass, making it impossible to identify the assets owned in equity by each customer by reference to proportions: Parkinson, “Reconceptualising the Express Trust” [2002] CLJ 657 at 671.

84

Martin, “Certainty of Subject Matter: A Defence of Hunter v Moss” [1996] Conv 223. Cf Villiers, “Certainty of Subject Matter in Trusts: The Controversy Continues” (1998–​1999) 9 King’s College LJ 112; Worthington, “Sorting Out Ownership Interests in a Bulk: Gifts, Sales and Trusts” [1999] JBL 1. See, for example, Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at 604 per Gaudron, McHugh, Gummow and Hayne JJ (who held that there is no objection to the effective creation of a trust that the trust property is identified as a proportion of the proceeds received by a buyer referable to moneys from time to time due and owing but unpaid by the buyer to the seller).

85

White v Shortall (2006) 68 NSWLR 650 [affd Shortall v White (2008) DFC ¶95-​411].

86

White v Shortall (2006) 68 NSWLR 650 at [212].

87

Morice v Bishop of Durham (1804) 9 Ves 399 at 404–​405; 32 ER 656 at 658.

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The Requisite Certainties  Chapter  17

trust but for uncertain objects, the property that is the subject of the trust is undisposed of and the benefit of such trust must result to those to whom the law gives the ownership in default of disposition by the former owner … Every trust must have a definite object. There must be somebody, in whose favour the court can decree performance.

This statement contains two major elements: the court must assume control over trusts; and every trust must have a definite object (beneficiary) who can enforce the trust. As the court does not take the initiative in the enforcement of trusts, there must be a person to bring the matter to the court’s attention. On appeal, Lord Eldon LC explained that the notions of control and enforceability are based on the possibility that the court might be called upon to step in and administer the trust, or to direct distribution of trust income or capital to a beneficiary. A trust that does not fulfil certainty of object fails to take effect, and the intended trustee holds the property in question on resulting trust for the settlor (or the settlor’s estate): see [26.20]. Application of the beneficiary principle to fixed trusts [17.100]  For a fixed trust the beneficiary principle translates into a requirement that a list

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of all its possible beneficiaries (objects) be compiled or capable of compilation (the “list certainty” test).88 So if a settlor creates a trust for beneficiaries “in equal shares”, it must be possible to compile a list of all the beneficiaries as that is the only way in which the fund can be divided equally between them. However, it is not essential that all objects be ascertained when the trust commences, provided that they are described with sufficient precision for an exhaustive list to be made at the date upon which they are entitled to their estate.89 A trust may accordingly be validly created for the benefit of unborn children, the beneficial interest becoming vested upon birth.90 The existence of statute in some jurisdictions that gives the court the discretion to consent to a variation on behalf of unborn beneficiaries (see [25.60]–​ [25.75]) is an implicit recognition of the latter point. [17.105]  Yet following the decision of Young J in West v Weston,91 there may be grounds for

applying a test less stringent than the list certainty test, at least for fixed trusts that contemplate distribution of the entire capital of the fund. That case involved a testamentary gift to a trustee of residue to be divided equally “amongst such of my issue living at my death of my four grandparents … as attain the age of twenty-​one (21) years”. It was practically impossible to make a complete list of these persons as at that time. His Honour applied a slightly modified list certainty rule, satisfied if “within a reasonable time after the gift comes into effect, the court can be satisfied on the balance of probabilities that the substantial majority of the beneficiaries have been ascertained and that no reasonable inquiries could be made which could improve the situation”.92 Young J justified this approach, inter alia, on the basis

88

Inland Revenue Commissioners v Broadway Cottages Trust [1950] Ch 20; Re Hain’s Settlement [1961] 1 WLR 440 at 445 per Lord Evershed MR; Re Beckbessinger [1993] 2 NZLR 362 at 369–​370 per Tipping J; Commissioner of State Revenue v Viewbank Properties Pty Ltd (2004) 55 ATR 501 at [20], [21] per Nettle J.

89

Kinsela v Caldwell (1975) 132 CLR 458 at 461 per McTiernan, Stephen and Mason JJ. However, any trust in favour of persons not in existence at the date of its creation may raise issues relating to the rule against perpetuities: see [19.80]–​[19.90].

90

Routledge v Dorril (1794) 2 Ves 356; 30 ER 671; Re Bowles [1902] 2 Ch 650 at 653 per Farwell J; Re Leeds and Hanley Theatres of Varieties Ltd [1902] 2 Ch 809 at 819 per Romer LJ (who suggested that, just as a trust may be created in favour of an unborn child, so also it can be created in favour of a corporation not yet organised; there is American authority to this effect: Leslie v Midgate Center Inc (1967) 436 P 2d 201).

91

West v Weston (1998) 44 NSWLR 657.

92

West v Weston (1998) 44 NSWLR 657 at 664.

[17.105]  525 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

that to allow the gift to fail for lack of certainty of object would have frustrated the testator’s intention.93 This approach, though inconsistent with the accepted strict list certainty test, and capable itself of generating uncertainty,94 has merit within its limited sphere of application. As it was formulated in the context of a trust requiring the distribution of its entire capital, and in terms requiring court approval, Young J’s approach differs little in substance to the law applicable where trustees seek leave of the court to distribute trust property so as to terminate the trust where other beneficiaries may possibly come into existence (as to which see [25.165]). [17.110] The West v Weston scenario is distinguishable from one involving evidential diffi-

culties in ascertaining the identity of beneficiaries, which do not by themselves undermine the validity of the trust. Prosper v Wojtowicz,95 where the testator left part of his estate to “such persons who attended my funeral and who are not (and were not) at any time related to me”, provides an example. Wilson J construed this as intended to create a fixed trust, noting that at the testator’s death it would have been possible to compile a complete list of funeral attendees. That such a list was not in fact compiled did not, in her Honour’s view, invalidate the trust even though it gave rise to evidential uncertainty (as to which see [17.130]). Application of the beneficiary principle to discretionary trusts

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[17.115]  The increasing flexibility in discretionary trusts —​often involving a class of benefi-

ciaries that is wide and difficult to precisely list —​led courts to assimilate the rules of certainty of object for discretionary trusts (often referred to as “trust powers”) to those relating to “mere powers” (as to which see [16.175]). Prior to McPhail v Doulton,96 it was assumed that the list certainty test applied to discretionary trusts. Yet certainty for a mere power required the donee only to know whether a prospective object was or was not within the description of the class (the “criterion certainty” or “in/​out” test).97 In McPhail v Doulton, the House of Lords extended the criterion certainty test to trust powers in favour of a discretionary class. Lord Wilberforce, with whom Lord Reid and Viscount Dilhorne agreed, found it unsatisfactory to let fine rules distinguish between a trust and a power:98 It is striking how narrow and in a sense artificial is the distinction, in cases such as the present, between trusts or as the particular type of trust is called, trust powers and powers. It is only necessary to read the learned judgments in the Court of Appeal to see that what to one mind may appear as a power of distribution coupled with a trust to dispose of the undistributed surplus, by accumulation or otherwise, may to another appear as a trust for distribution coupled with a power to withhold a portion and accumulate or otherwise dispose of it. A layman and, I suspect, also a logician would find it hard to understand what difference there is.

Where the distinction lay, in his Lordship’s opinion, was in the extent of the survey a trustee is required to carry out. A person who is obliged to distribute the whole of a fund’s income 93

West v Weston (1998) 44 NSWLR 657 at 664–​665.

94

See Creighton, “Certainty of Objects of Trusts and Powers: The Impact of McPhail v Doulton in Australia” (2000) 22 Syd L Rev 93 at 97–​98 (who criticises West v Weston on the grounds that: (1) it is difficult to in measure objectively a “substantial majority” of the beneficiaries; (2) the test undermines the essential nature of a fixed trust, namely that the trust instrument fixes the quantum of a beneficiary’s share; and (3) the trust could only be carried into effect by the court authorising what would otherwise have been a breach of trust).

95

Prosper v Wojtowicz [2005] QSC 177.

96

McPhail v Doulton [1971] AC 424.

97

Re Gulbenkian’s Settlements [1970] AC 508.

98

McPhail v Doulton [1971] AC 424 at 448. See also Re Baden’s Deed Trusts (No 2) [1973] Ch 9 at 24 per Megaw LJ.

526 [17.110] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

must necessarily make a wider and more systematic survey than one who, like a donee of a mere power, simply has a power to make grants. Thus it has been observed that “[t]‌he scope of the survey is relative to the range of possible beneficiaries, a sliding scale in fact; the smaller the group, the more rigorous the survey, the more diffuse the group, the less rigorous the survey”.99 Though the High Court of Australia has yet to rule on the application of the criterion certainty test in relation to trust powers, lower court judgments endorse the correctness of McPhail v Doulton in Australian law,100 and it would be strange were it to upset what is established understanding and practice. Three principal forms of uncertainty of object regarding discretionary trusts have been identified: semantic uncertainty, evidential uncertainty and administrative uncertainty.101

Semantic uncertainty

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[17.120]  A disposition that meets the criterion certainty test is said to fulfil “semantic” cer-

tainty (also known as “conceptual” or “linguistic” certainty). Conversely, semantic uncertainty is the failure to prescribe in the terms of the disposition a criterion capable of certain application by the trustees (or the court). So a class is semantically certain if the terms used to define it have precise boundaries of meaning. If, conversely, it cannot be said with certainty that a possible claimant is or is not a member of the class in issue, then the class is semantically uncertain. A disposition tainted by semantic uncertainty is void, and the trustee holds the property in question on resulting trust for the remaining objects:102 see [26.20]. A common example of semantic uncertainty is that cited by Lord Upjohn in Re Gulbenkian’s Settlements,103 that of a donor who directs that a fund be divided equally between “my old friends”. His Lordship remarked that, lacking admissible evidence that the donor has given a special “dictionary” meaning to that phrase that enables the trustees to identify the class with sufficient certainty,104 “it is plainly bad as being too uncertain”. In line with this, the Alberta Supreme Court in Re Connor105 declared a gift to be “divided among my close friends in such a way and at such time as my trustee in her discretion should determine” void for uncertainty. After all, it may be reasoned, there are different degrees of friendship, and such a description may be arrived at subjectively, making it challenging to satisfy the criterion certainty test. Yet there are cases where mere powers to appoint to the “friends” of the donor have been upheld.106 If these are correct, the assimilation of the test for certainty of object for mere 99

Davies, “The Variety of Express Trusts” (1986) 9 U Tas L Rev 209 at 211. See also Re Hay’s Settlement Trusts [1982] 1 WLR 202 at 209–​211 per Megarry VC.

100

See, for example, Horan v James [1982] 2 NSWLR 376 per Mahoney and Glass JJA; Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 277 per Gummow J; McCracken v Attorney-​General [1995] 1 VR 67 at 71 per Phillips J; Re Blyth [1997] 2 Qd R 567 at 576 per Thomas J; Commissioner of State Revenue v Viewbank Properties Pty Ltd (2004) 55 ATR 501 at [20] per Nettle J; Yeomans v Yeomans [2006] 1 Qd R 390 at [12] per McMurdo J. See Creighton, “Certainty of Objects of Trusts and Powers: The Impact of McPhail v Doulton in Australia” (2000) 22 Syd L Rev 93 at 99–​103.

101

McPhail v Doulton [1971] AC 424 at 457.

102

Re Gulbenkian’s Settlements [1970] AC 508 at 524 per Lord Upjohn; Re Beckbessinger [1993] 2 NZLR 362 at 369–​370, 377 per Tipping J.

103

Re Gulbenkian’s Settlements [1970] AC 508 at 524.

104

For instance, it may be envisaged that friends identified by reference to “Facebook friends” at a particular time could meet the criterion certainty test.

105

Re Connor (1970) 10 DLR (3d) 5.

106

See, for example, Re Coates (deceased) [1955] Ch 495 (where a will vested in an executor a power to select “friends” to benefit, Roxburgh J observed that “[f]‌riendship, of course, draws a picture particularly blurred in outline, but its context, and the circumstances of the case —​and a circumstance that I have particular regard to is the power of appointment vested in the testator’s widow —​may well fill in what would otherwise be vague”: at 499); Re Gibbard’s Will Trusts [1967] 1 WLR 42 (where a bare power to appoint to “any of my old friends” was upheld as sufficiently certain, since it would not be difficult,

[17.120]  527 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

powers and trusts powers should mean that the same should be the outcome for trust powers. It should be noted, to this end, that the example given in Gulbenkian and the facts in Connor each involved the need to divide a sum between old or close “friends”, as opposed to a power to simply appoint money or property to friends. In the most recent Australian judicial excursus in the area, a gift “to such of them my friends who resided with me from overseas” was held to be of the former class, and therefore void for semantic uncertainty.107 There are fewer challenges where the words are objectively capable of definition. In Re Baden’s Deed Trusts (No 2),108 for instance, the English Court of Appeal upheld a disposition to the “dependants” or “relatives” of specified persons because, even on the widest meaning attributable to those words, the trustees were capable of determining in any given case whether or not a particular candidate could come within that class. [17.125]  It is unlikely that a settlor can overcome semantic uncertainty problems by defining

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the objects as those the trustee or a third person considers to have met a specified uncertain criterion. This is because the “referee” cannot be expected to answer a question the meaning of which is itself uncertain.109 For example, in Tatham v Huxtable,110 a power in favour of persons who, in the executor’s opinion, had “rendered service meriting consideration” by the testator was held uncertain. Kitto J found it impossible to say what constituted “service”, especially as the will gave no guidance as to the standard of the executor’s own opinion.111 And in Public Trustee v Butler,112 a gift to “help … the deserving material hardship cases amongst my relatives” was found to be uncertain because, even if meaning could be given to “material hardship”, its qualification by the “deserving” criterion fostered too much uncertainty. The outcome may be otherwise if the settlor sets some objective criteria to give meaning to an otherwise ambiguous term,113 or where such a term can be accorded a meaning with the requisite certainty because of the context in which it appears.114

the court reasoned, for claimants to show that they were within the relevant description of the class). See also Re Barlow’s Will Trusts [1979] 1 WLR 278 (where the testatrix’s will granted her friends an option to purchase her pictures, Browne-​Wilkinson LJ ruled that this was not a divisible asset in the manner that a fund to be divided between friends might be, and so ascertaining each member of the class of “friends” was not required in order to give effect to the testatrix’s intention). 107

Lempens v Reid (2009) 2 ASTLR 373 (where Gray J perceived further uncertainty stemming from the phrase “resided with me from overseas” because it required the court to give a meaning to “reside” for this purpose: at [28], [29]).

108

Re Baden’s Deed Trusts (No 2) [1973] Ch 9. This case was the final step of the litigation that generated McPhail v Doulton [1971] AC 424. In the latter case, the House of Lords remitted the case to the Chancery Division for determination whether, on the basis that the clause in question created a discretionary trust rather than a power, the clause was valid. Re Baden’s Deed Trusts (No 2) is the appeal from the judgment of Brightman J in the Chancery Division. See also Re Griffiths [1926] VLR 212 (“near relatives” interpreted as meaning those related by blood to the testatrix, discarding the alternative meaning as including relatives related by marriage, and simply ignoring the qualification that relatives be “near”); McFadden v Public Trustee for Victoria [1981] 1 NSWLR 15 at 31 per Holland J (“dependants” held to fulfil the requisite certainty of object); Prosper v Wojtowicz [2005] QSC 177 at [41], [42] per Wilson J (“relatives” held to refer to “blood relatives”).

109

Creighton, “Certainty of Objects of Trusts and Powers: The Impact of McPhail v Doulton in Australia” (2000) 22 Syd L Rev 93 at 104.

110

Tatham v Huxtable (1950) 81 CLR 639.

111

Tatham v Huxtable (1950) 81 CLR 639 at 653. See also Re Blyth [1997] 2 Qd R 567 (where a trust power in favour of “such organisations as in the Public Trustee’s opinion are formed for the purpose of raising the standard of life throughout the world” was ruled uncertain for lack of a certain criterion for the Public Trustee to apply).

112

Public Trustee v Butler [2012] WTLR 1043 at [18].

113

Creighton, “Certainty of Objects of Trusts and Powers: The Impact of McPhail v Doulton in Australia” (2000) 22 Syd L Rev 93 at 104 (giving the example of the phrase “loyal employees” when objective criteria are included to determine loyalty).

114

See, for example, Public Trustee v Butler [2012] WTLR 1043 (involving a gift “to grant … scholarships for education in India, British Isles or elsewhere to my promising relatives”, it was held (in obiter) that the adjective “promising” did not lack the required certainty because it was not added in a vacuum but in the context of scholarships for education: at [15]).

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The Requisite Certainties  Chapter  17

Evidential uncertainty [17.130] “Evidential uncertainty” refers to the extent to which evidence available in a par-

ticular case enables specific persons or bodies to be identified as members of the class of (potential) beneficiaries.115 For example, a discretion exercisable in favour of a very wide class may suffer from evidential uncertainty if it is difficult to ascertain the whereabouts or continued existence of some members of that class. In cases of this kind, assuming semantic certainty is fulfilled, the evidential uncertainty does not defeat the disposition; the trustees are not required to “survey mankind from China to Peru”,116 especially where the identity of the prime candidates for the exercise of the discretion is clear.117 The trustees may, in any case, apply to the court for directions (see [23.170]–​[23.185]) or pay a share into court.118

Administrative uncertainty [17.135] In McPhail v Doulton,119 Lord Wilberforce envisaged a further form of uncertainty

arising where the meaning of the words used is clear but the definition of beneficiaries is so hopelessly wide as not to form “anything like a class”, such as to render the trust administratively unworkable and thus void. His Lordship hesitated to give examples for fear of prejudicing future cases, but opined that a trust for “all the residents of greater London” could be administratively uncertain120 (though it has been noted that modern technological capacity to “identify and correspond with vast numbers of people instantaneously at a global scale” renders such an instance “mildly antiquated”).121 Administrative uncertainty does not, in any case, undermine mere powers, given the option whether or not to exercise them:122 see [16.175]. Purpose trusts

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General rule [17.140]  As the beneficiary principle requires someone who can enforce the trust —​a person

who has an interest in ensuring the trustee properly carries out the trust —​a trust expressed for a purpose cannot satisfy the beneficiary principle unless there is another way to ensure

115

As to the distinction between semantic uncertainty and evidential difficulties, see McPhail v Doulton [1971] AC 424 at 457 per Lord Wilberforce. This dichotomy has been judicially criticised as leading the courts to discordant decisions: Re Tuck’s Settlement Trusts [1978] 2 WLR 411 at 416 per Lord Denning MR. For an analysis of some “uncertainties” surrounding the terms “conceptual” and “evidential”, see Austin, “Discretionary Trusts: Conceptual Uncertainty and Practical Sense” (1980–​ 82) 9 Syd L Rev 58 (who refutes the propositions that semantic uncertainty should always be considered fatal to a trust and that evidential uncertainty will never produce invalidity, and argues that uncertainty ought to be treated as a practical problem for which “[t]‌he evidence should always be examined”: at 64).

116

Re Gestetner Settlement [1953] Ch 672 at 688–​689 per Harman J.

117

Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [41] (PC).

118

Re Gulbenkian’s Settlements [1970] AC 508 at 524 per Lord Upjohn; Re Beckbessinger [1993] 2 NZLR 362 at 369–​370 per Tipping J. The trustee legislation provides that where trustees, or the majority of them, have in their hands or under their control money or securities belonging to a trust, they may pay the same into court: ACT s 95; NSW s 95; NT s 44; Qld s 102; SA s 47; Tas s 48; Vic s 69; WA s 99.

119

McPhail v Doulton [1971] AC 424 at 457. See Creighton, “Certainty of Objects of Trusts and Powers: The Impact of McPhail v Doulton in Australia” (2000) 22 Syd L Rev 93 at 106–​110.

120

In the alternative, the very breadth of such a trust may justify its construction as a purpose trust, which may be valid if the trust falls within the case law upholding, as charitable, trusts for the benefit of a locality: see [29.225].

121

Turner v Coombe [2018] NZAR 574 at [28] per Whata J.

122

Re Manisty’s Settlement [1974] Ch 17 at 23, 27–​29 per Templeman J; Re Hay’s Settlement Trusts [1982] 1 WLR 202 at 212 per Megarry VC.

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Equity and Trusts in Australia

its enforcement. Charitable trusts present the principal exception because, even though clearly trusts for purposes, they are enforceable by the relevant State or Territory Attorney-​ General: see [29.15]. As “a trust for non-​charitable purposes, as distinct from a trust for individuals, is clearly void because there is no beneficiary”,123 those seeking to uphold the validity of what is ostensibly a purpose trust will maintain that either it is a trust for individual beneficiaries or that it fosters a charitable object. The distinction between a trust for purposes and one for individuals is not always obvious. In Re Segelman (deceased),124 the testator’s will required his trustees to hold and apply the trust fund for a period of 21 years after his death for the “the poor and needy of the persons set out in the Second Schedule then living” in such proportions as the trustees in their discretion determined. The Second Schedule comprised six members of the testator’s family, and included (but did not name) the issue of five of them. Though noting that this case was very close to the line, Chadwick J ruled that it was a purpose gift, reasoning as follows:125

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The gift [has] the feature that the class of those eligible to benefit was not closed upon the testator’s death. It remained open for a further period of 21 years. During that period issue of the named individuals born after the death of the testator will become members of the class. It is, in my view, impossible to attribute to the testator an intention to make a gift to those after-​born issue as such. His intention must be taken to have been the relief of poverty amongst the class of which they would become members.

Other cases are clearer, although this has not necessarily prevented arguments to the contrary. It was argued in Strathalbyn Show Jumping Club Inc v Mayes,126 for instance, that a declaration of trust that land be held by the trustees for use as a polo ground and, subject to such use by any polo club, for use as a recreation ground for other sports or games as the trustees thought fit, was a gift for individuals, namely the members of polo clubs. This Bleby J rejected, noting that being expressed as a trust “to permit [the land] to be used as a polo ground”, being in the nature of a power or authority and allowing the land to be used for a particular purpose, did not sit well with a trust for individuals.127 This conclusion was fortified by other clauses in the trust deed, which misaligned with any intention to confer a beneficial interest on an identified or identifiable group of people.128

123

Re Recher’s Will Trusts [1972] Ch 526 at 538 per Brightman J.

124

Re Segelman (deceased) [1996] Ch 171.

125

Re Segelman (deceased) [1996] Ch 171 at 192. Chadwick J upheld the purpose trust so created as a trust for “poor relations”, being an anomalous category of charitable trust: see [29.75].

126

Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54.

127

Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 at 63.

128

Namely: (1) cll 1 and 2 contemplated periods where there may not be a polo club in existence, and the land may be applied for other uses, the use of expressions such as “so long as” and “whenever” relating to the existence of a polo club suggesting that the land was to be kept in perpetuity for use by such clubs as and when they may exist, not for the beneficial interest of any particular club or of its members; (2) cl 2 required the land to be kept for the unrestricted use and enjoyment of a polo club only “if so demanded”, thereby recognising other possible uses compatible with that of a polo ground; (3) if and when the land was let, cl 9 required that the trustees apply the rents, income, tolls and profits from the land “for the purposes of improving the said land as a polo ground or as a recreation ground … or in promoting or establishing polo at Strathalbyn”, not for the purposes of a particular club or association or group of individuals; (4) to allow the trust property to become vested in any particular group of individuals or incorporated body for their or its exclusive use or purposes beneficially would have destroyed the remaining possible uses the settlors clearly intended in cll 1 and 3: Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 at 63–​64.

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The Requisite Certainties  Chapter  17

[17.145]  Notwithstanding the apparent strictness of the principle that non-​charitable pur-

pose trusts fail, there is authority that upholds certain trusts for the maintenance of tombs and animals, and at least one English decision bringing a type of non-​charitable purpose trust within the beneficiary principle. Each is discussed below, together with potential reforms to that principle.

Anomalous “tomb” and “animal” cases [17.150] Although trusts to erect and maintain tombs not associated with a church or to

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maintain a testator’s animals do not create valid charitable trusts (see [29.175], [29.220]), a line of case authority, described as “troublesome, anomalous and aberrant”,129 has upheld such trusts as non-​charitable trusts. The typical “tomb case” is one of a primary trust to apply the income of a fund in perpetuity in repair of a tomb not tied to a church followed by a charitable trust in terms extending only to the balance or residue of that income. Here the law ignores the invalid trust for the repair and treats the entire income as devoted immediately to the charitable object.130 The bequest is valid, it is reasoned, because the court can construe the non-​charitable purpose as imposing a moral obligation that a trustee may follow within the perpetuity period131 without being liable for breach of trust at the suit of a beneficiary (such as a residuary legatee or a remainderman).132 For this reason, the tomb (and animal) cases may be less an exception to the rule than an exceptional method of construction.133 Although some of the cases can be explained, though not convincingly, on the basis that there were persons interested in the residue who would have standing to enforce the trust,134 this view is by no means universal. For example, in Re Dean, North J said:135 [S]‌uch a trust [referring to the tomb cases] would be good, although a testator must be careful to limit the time for which it is to last, because, as it is not a charitable trust, unless it is to come to an end within the limits fixed by the rule against perpetuities, it would be illegal. But a trust to lay out a certain sum in building a monument, and the gift of another sum in trust to apply the same to keeping that monument in repair, say, for ten years, is, in my opinion, a perfectly good trust, although I do not see who could ask the court to enforce it.

Clearly, neither the skewed construction given to such gifts, nor their alleged enforcement by residuary legatees, adequately explain or justify their validity in modern law.136 Though

129

Re Endacott (deceased) [1960] Ch 232 at 251 per Harman LJ. See also at 245 per Lord Evershed MR; Re Astor’s Settlement Trusts [1952] Ch 534 at 547 per Roxburgh J (“anomalous and exceptional”).

130

Re Filshie [1939] NZLR 91; Re Budge [1942] NZLR 350; Re Ross (deceased) [1964] Qd R 132 at 142 per Philp J. Cf Muir v Archdall (1918) 19 SR (NSW) 10 at 15 per Harvey J; South Eastern Sydney Area Health Service v Wallace (2003) 59 NSWLR 259 at [13] per Burchett AJ.

131

This period is equally “anomalous” as apparently a misunderstanding of the vesting rules in the law of perpetuities. Generally, the rule against perpetuities provides that an interest must vest, if at all, within the life and being plus 21 years. The rule is about when property must vest, not about its duration: see [19.80]–​[19.90].

132

Perpetual Trustee Co Ltd v John Fairfax & Sons Pty Ltd (1959) 76 WN (NSW) 226 at 228 per Else-​Mitchell J; Re Ross (deceased) [1964] Qd R 132 at 138 per Mansfield CJ; South Eastern Sydney Area Health Service v Wallace (2003) 59 NSWLR 259 at [18] per Burchett AJ.

133

Public Trustee v Nolan (1943) 43 SR (NSW) 169 at 173 per Roper J.

134

Pettingall v Pettingall (1842) 11 LJ Ch 176 (sum bequeathed for keeping of the testator’s favourite black mare); Mitford v Reynolds (1848) 16 Sim 105; 60 ER 812; Pilbright v Salwey [1896] WN 86; Re Hooper [1932] 1 Ch 38.

135

Re Dean (1889) 41 Ch D 552 at 556 (emphasis supplied).

136

In Pedulla v Nasti (1990) 20 NSWLR 720 at 722–​723, Needham J entertained the thought that the “tomb” cases ought not be followed but ultimately invalidated the gift in question on the ground of perpetuity. The same ensued in Phillips v McCabe [2016] SASC 27 at [26]–​[31] per Gray J.

[17.150]  531 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

perhaps “concessions to human weakness and sentiment”,137 and related peripherally to objects the courts have recognised as charitable,138 no logical basis exists for upholding these gifts at the expense, for instance, of other public benevolent but non-​charitable objects.139 At least the scope of the animal and tomb cases is unlikely to be extended,140 for to do so “would be to validate almost limitless heads of non-​charitable trusts, even though they were not (strictly speaking) public trusts”.141 Yet there is some empirical evidence of public demand for trusts to maintain graves or animals,142 and there is arguably some public benefit attached to these objects, beyond giving effect to testamentary intention. This led some states in the United States to validate trusts for the perpetual care of individual graves by statute,143 a path also adopted in Ireland (subject to monetary limits).144 Others have suggested, short of statutory validation, various means to enforce these trusts.145

Trusts for purposes “directly or indirectly for the benefit of ascertainable beneficiaries” [17.155]  A step towards reassessment of purpose trusts was taken by Goff J in Re Denley’s

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Trust Deed.146 There, land and money were left to trustees for the maintenance of a sports ground to be used by company employees and other persons, with the permission of the trustees. Although this was a trust for the purpose of running a sporting facility, Goff J upheld its validity. His Lordship reasoned that, though not a charitable trust,147 it was a trust “directly or indirectly for the benefit of ascertainable beneficiaries”, namely company employees and those allowed to enter with the trustees’ permission. The court could sufficiently control the trust, Goff J held, by restraining any abuse of the ground, reasoning as follows:148 [T]‌he court can … execute the trust both negatively by restraining any improper disposition or use of the land, and positively by ordering the trustees to allow the employees and such other persons (if any) as they may admit to use the land for the purpose of a recreation or sports ground. Any difficulty there might be in practice in the beneficial enjoyment of the land by those entitled to it is … really beside the point. The same kind of problem is equally capable of arising in the case of a trust to permit a number of persons —​for example, all the unmarried children of a testator or settlor —​to use or occupy a house or to have the use of certain chattels; nor can I assume that in such cases agreement between the parties concerned would be

137

Re Astor’s Settlement Trusts [1952] Ch 534 at 547 per Roxburgh J.

138

Namely tombs in a church (see [29.175]) and the prevention of cruelty to animals (see [29.220]).

139

Courts have held that a “benevolent” object does not equate with a “charitable” object: see [29.290].

140

See, for example, Re Porter [1925] Ch 746 at 751 per Eve J (bequest for the upkeep of a Masonic Temple held not to be charitable, observing that the tomb cases ought not be extended “to something which certainly is not a tomb”); Re Wood (deceased) [1949] Ch 498 at 502 per Harman J (gift to provide sums for current “This Week’s Good Cause” of the BBC held not to come within this anomalous class, but to be wholly uncertain for failure of any object).

141

Re Endacott (deceased) [1960] Ch 232 at 246 per Lord Evershed MR. See also at 250–​251 per Harman LJ.

142

See Brown, “What Are We to Do with Testamentary Trusts of Imperfect Obligation?” [2007] Conv 148.

143

See Scott, Fratcher and Ascher, Scott and Ascher on Trusts (5th ed, Wolters Kluwer, 2009), vol 6, §38.7.20.

144

Charities Act 1961 (Ireland), s 50 (under which every gift “for the provision, maintenance or improvement of a tomb, vault or grave or of a tombstone or any other memorial to a deceased person or deceased persons which would not otherwise be charitable” is deemed a charitable gift, so far as it does not exceed £60 a year (in the case of a gift of income) or £1,000 (in any other case)).

145

See, for example, Brown, “What Are We to Do with Testamentary Trusts of Imperfect Obligation?” [2007] Conv 148 at 158–​160.

146

Re Denley’s Trust Deed [1969] 1 Ch 373.

147

The promotion of sport per se is not a charitable purpose: see [29.255].

148

Re Denley’s Trust Deed [1969] 1 Ch 373 at 388.

532 [17.155] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

more likely, even if that be a sufficient distinction, yet no one would suggest, I fancy, that such a trust would be void.

His Lordship saw “abstract and impersonal” purpose trust cases149 as distinguishable, the objection to those cases being that “the benefit is so indirect and intangible … as not to give those persons any locus standi to apply to the court to enforce the trust”.150 [17.160]  Re Denley has been criticised judicially in Australia, mostly on the basic ground

that, as a purpose trust, it should have been held invalid.151 It is most unlikely to represent Australian law. Australian courts may, in any case, enjoy less liberty than English courts to apply the distinction in Re Denley since the Privy Council’s advice in Leahy v Attorney-​General (NSW)152 (see [29.300]), which held that a residuary gift for the building of a new convent was a non-​charitable purpose trust notwithstanding that the trust would have benefited individuals. At the same time, Re Denley has adherents in Canada, albeit almost exclusively as a vehicle to give effect to purpose trusts aimed at benefiting a class of indigenous persons.153 An alternative construction of cases benefiting indigenous persons is under the banner of charitable trusts: see [29.240].

Validation of purpose trusts

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[17.165]  It may be that the beneficiary principle is a weak rationale for invalidating purpose

trusts. Problems in enforcement and control of some private trusts, and most charitable trusts, may differ little to problems in enforcing and controlling purpose trusts. It has been observed that “the possibility of large funds being subjected to fiduciary administration without any practical possibility of the fiduciary being held accountable is not confined to non-​charitable purpose trusts”.154 In this light, the strength of the argument based upon the beneficiary principle loses force with respect to purpose trusts. Moreover, the argument that charitable trusts are enforced by the Attorney-​General is hardly persuasive as the Attorney-​General carries out no monitoring of the activities of charitable trusts and rarely intervenes in practice. Proposals have surfaced from time to time for methods by which purpose trusts could be validated. One such proposal is to treat trusts for non-​charitable purposes as valid powers. For example, s 16(1) of the Ontario Perpetuities Act 1990 reads: A trust for a specific non-​charitable purpose that creates no enforceable equitable interest in a specific person shall be construed as a power to appoint the income or the capital, as the case may be, and, unless the trust is created for an illegal purpose or a purpose contrary to public policy, the trust is valid so long as and to the extent that it is exercised either by the original trustee or the trustee’s successor, within a period of twenty-​one years, despite the fact that the limitation creating the trust manifested an intention, either expressly or by implication, that the trust should or might continue for a period in excess of that period, but, in the case of such a trust that is expressed to be of perpetual duration, the court may declare the limitation to be

149

Such as Re Astor’s Settlement Trusts [1952] Ch 534 (where a settlement of issued shares in a newspaper upon trust to apply the income for the purpose of the improvement of good understanding between nations, the preservation and promotion of the integrity of newspapers and the protection of newspapers from being absorbed by combines, was struck down).

150

Re Denley’s Trust Deed [1969] 1 Ch 373 at 383. See also Re Lipinski’s Will Trusts [1976] Ch 235 at 247–​248 per Oliver J.

151

See Strathalbyn Show Jumping Club Inc v Mayes (2001) 79 SASR 54 at 65 per Bleby J.

152

Leahy v Attorney-​General (NSW) [1959] AC 457.

153

See, for example, Keewatin Tribal Council Inc v Thompson (City) (1989) 61 Man R 241; Peace Hills Trust Co v Canada Deposit Insurance Corp (2007) 288 DLR (4th) 237. The orthodox approach appears to apply outside of the indigenous context: see, for example, Ernst & Young Inc v Central Guaranty Trust Co (2004) 29 Alta LR (4th) 269.

154

Ford, “Dispositions for Purposes” in Finn (ed), Essays in Equity (The Law Book Company Limited, 1985), p 172.

[17.165]  533 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

void if the court is of opinion that by so doing the result would more closely approximate the intention of the creator of the trust than the period of validity provided by this section.

An alternative is to recognise a person other than a beneficiary who has standing to enforce the trust, as the beneficiary principle is arguably more concerned with accountability than who “should hold the reins”.155 It may, in any case, be that (some) beneficiaries are not particularly effective to enforce the trust, whether for a lack of interest, lack of understanding or lack of capacity. To this end, it has been said that “there appears to be no reason of policy for not giving effect to that implied wish and the only need is for machinery to identify those persons or institutions in the community who might have capacity or incentive enough to be a watchdog on behalf of the purpose”.156 This “watchdog” would be an “interested adversary” instead of a beneficiary, an initiative more appropriately the domain of the legislature than the courts. Statute in various countries —​commonly island tax havens,157 aiming to lure trust funds into a jurisdiction not amenable to the domestic law of the country in which the funds are sourced but at the same time provide a level of control by the creators of the trust —​provides for the appointment of an “enforcer” or “protector” as a means of validating non-​charitable purpose trusts. The enforcer, inter alia, monitors the trustees’ activities and actively pursues remedies for maladministration and misuse of the fund. The terms of any such statutory initiative, if enacted into Australian law, would need to clearly state the enforcer’s duties, and to whom those duties are owed, as well as any remedies for breaching those duties.158 Gifts to unincorporated associations

Approaches to validating gifts

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[17.170] As an unincorporated association lacks legal status separate from its individual

members, it cannot itself hold property.159 It follows that a gift to an unincorporated association should lapse. That this may prove a harsh outcome, and one inconsistent with the (likely) objective of the donor, prompted the law to find ways to validate a gift that would otherwise fail because the donee lacks legal personality. To this end, such a gift may take effect in one of three ways.160 First, it may on its true construction be an absolute and beneficial gift to the members of the association at the relevant date, entitling any member to sever her or his share and claim it whether or not he or she remains a member of the association.161 The association is used as a convenient label or definition of the class that is intended to take but, the class being ascertained, each member takes free from any contractual fetter inter se stemming from 155

Goodwin, “Purpose Trusts: Doctrine and Policy” (2013) 24 KLJ 102 at 104.

156

Ford, “Dispositions for Purposes” in Finn (ed), Essays in Equity (The Law Book Company Limited, 1985), p 175.

157

Such as Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Cook Islands, Cyprus, Mauritius, and the Seychelles.

158

See Pawlowski and Summers, “Private Purpose Trusts —​A Reform Proposal” [2007] Conv 440; Tey, “The Duties of a Trust Enforcer” (2010) 22 SAcLJ 363; Ruce, “The Trustee and the Trust Protector: A Question of Fiduciary Power. Should a Trust Protector be Held to a Fiduciary Standard?” (2010) 59 Drake L Rev 67; Gillen, “A Proposal for Flexibility in Private and Public Express Trust Enforcement” (2016) 2 CJCCL 115.

159

See generally Dal Pont, Law of Associations (LexisNexis Butterworths, 2018), Ch 2.

160

Neville Estates Ltd v Madden [1962] Ch 832 at 849 per Cross J; Re Goodson (deceased) [1971] VR 801 at 811 per Adam J; Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 at 661–​665 per Young CJ in Eq. See Keeler, “Devises and Bequests to Unincorporated Bodies” (1963–​1966) 2 Adel L Rev 336.

161

See, for example, Re Clarke [1901] 2 Ch 110 at 114 per Byrne J (bequest “to the Committee for the time being” of an unincorporated association upheld); Re Smith [1914] 1 Ch 937 at 948 per Joyce J (gift to “the society or institution known as the Franciscan Friars of Clevedon” upheld as an absolute gift to the friars in the society at the date of the testator’s death).

534 [17.170] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

association membership.162 In such a case, the gift is valid whether or not the association or the gift is limited to charitable objects, because the gift is for individuals, not a purpose. There is no trust, nor is there any issue of perpetuity.163 Yet the law is loath to construe gifts in this fashion, reasoning that a donor who wishes to benefit individual members of the association in their individual capacity would more likely make a gift directly to those individuals rather than to an association. Secondly, the more likely intention of the donor, the courts have suggested, is that the gift is to the existing members subject to their respective contractual rights and liabilities towards one another as members of the association.164 On this construction, the gift is treated as an accretion or augmentation to the association’s funds so that it becomes subject to the contract —​normally evidenced by the rules of the association —​that governs members’ rights inter se.165 Each member can ensure that the gift is applied in accordance with those rules, but cannot sever her or his share, which accrues to the other members on her or his death or resignation (consistent with those rights being contractual rather than proprietary).166 That the objects of the association are non-​charitable,167 or that the gift is expressed to be for its purposes,168 is irrelevant because no purpose trust arises.169 Thirdly, the terms or circumstances of the gift may show that the property is not to be at the disposal of the members for the time being, but is to be held on trust (or, in the words of some judges, as an endowment), or to be applied, for the purposes of the association as an entity. Such a gift will fail for either perpetuity or uncertainty unless the association is a charitable body or the gift is confined to charitable objects.170 As an unincorporated association cannot hold property, its nomination as trustee is indicative of no more than a subsidiary intention that the charitable purpose designated by the donor should be advanced through the vehicle of the association.171

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[17.175] In any disposition to an unincorporated association, therefore, it must be deter-

mined at the outset whether it is intended to be an absolute gift to the members or instead create a trust. The courts have treated the second construction as a presumption (or a prima facie construction) rebuttable by evidence indicative of a trust.172 In this context, the High Court of Australia has stated that:173 162

Re Grant’s Will Trusts [1979] 3 All ER 359 at 364 per Vinelott J.

163

Re Smith [1914] 1 Ch 937 at 945 per Joyce J; Re McAuliffe (deceased) [1944] St R Qd 167 at 177 per Macrossan ACJ.

164

Re Cain (deceased) [1950] VLR 382 at 390 per Dean J; Re Lipinski’s Will Trusts [1976] Ch 235 at 243 per Oliver J.

165

Re Ogden [1933] Ch 678 at 681–​682 per Lord Tomlin; Re Wilkinson (deceased) [1941] NZLR 1065 at 1079–​1080 per Kennedy J; Re Goodson (deceased) [1971] VR 801 at 812–​814 per Adam J; Re Recher’s Will Trusts [1972] Ch 526 at 539 per Brightman J; Re Grant’s Will Trusts [1979] 3 All ER 359 at 364 per Vinelott J. Cf where the association is not bound together by identifiable rules: Re Koeppler Will Trusts [1986] Ch 423 at 434 per Slade LJ.

166

However, where there remains only one member of the association, that person, it appears, may claim the assets of the association (converting contract into property):  Hanchett-​Stamford v Attorney General [2009] Ch 173 at [47]–​[51] per Lewison J.

167

Re Ogden [1933] Ch 678 at 681–​682 per Lord Tomlin; Re Grant’s Will Trusts [1979] 3 All ER 359 at 365 per Vinelott J.

168

Re Goodson (deceased) [1971] VR 801 at 813–​814 per Adam J; Re Lipinski’s Will Trusts [1976] Ch 235 at 247 per Oliver J.

169

Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 at 662 per Young CJ in Eq. Cf Bacon v O’Dea (1989) 88 ALR 486 at 494 (FC(FCA)).

170

Bowman v Secular Society Ltd [1917] AC 406 at 442 per Lord Parker. As to how to determine whether or not an association is charitable, see [29.280], [29.285].

171

Kytherian Association of Queensland v Sklavos (1958) 101 CLR 56 at 69 per McTiernan, Fullagar and Taylor JJ.

172

Re Ogden [1933] Ch 678; Leahy v Attorney-​General [1959] AC 457 at 484 per Lord Simonds; Re Grosvenor (deceased) [1965] NSWR 723 at 727 per McLelland CJ in Eq; Re Hargreaves [1973] Qd R 448 at 451 per Lucas J; Hanchett-​Stamford v Attorney General [2009] Ch 173 at [29]–​[31] per Lewison J.

173

Bacon v Pianta (1966) 114 CLR 634 at 638 per McTiernan, Taylor and Owen JJ.

[17.175]  535 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

[i]‌ndications sufficient to rebut the prima facie presumption may be found to some extent in the form which the gift takes, in the number and disposition of the members of the association, in the subject matter of the gift and in the capacity of the members to put an end to their association and distribute its assets.

In the leading case of Leahy v Attorney-​General (NSW),174 which centred on the validity of a bequest to a selected order of nuns, Viscount Simonds stated the law as follows:175 [I]‌f a gift is made to individuals, whether under their own names or in the name of their society, and the conclusion is reached that they are not intended to take beneficially, then they take as trustees. If so, it must be ascertained who are the beneficiaries. If at the date of death of the testator the class of beneficiaries is fixed and ascertained or ascertainable within the limit of the rule against perpetuities, all is well. If it is not so fixed and not so ascertainable the trust must fail.

It was held that the form of gift (to a selected order), the number and geographical spread of members of that order,176 and the subject matter of the gift (a grazing property),177 made it unlikely that the testator intended the nuns to take beneficially, but that the gift was to operate as a trust.178 Similarly, in Bacon v Pianta,179 a gift “to the Communist Party of Australia”, an unincorporated association, was held to displace the prima facie construction favouring a beneficial gift to the members of the association. The reasons for this were the form of the gift (to the Community Party “for its sole use and benefit”), the extensive membership of the Party that was subject to substantial fluctuation, and the inability to say that at the time when the bequest became operative the members of the Party had any (practical) capacity to wind up the Party and distribute its assets.180 This led the High Court to conclude that it was a gift to the members, both present and future, in trust for the purposes of the Party, which trust was void on the ground that it was for a political purpose.181

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[17.180]  Whether a gift to an unincorporated association “for its general purposes” reflects

an intention to create a purpose trust rests on the facts of each case. Taken on its own the expression has been said to aptly express an intention to augment the association’s funds, which are to be applied, by reason of its constitution, for the purposes for which it exists.182 The same is the case regarding a gift for the “the use and benefit of an unincorporated association absolutely”, provided that it is of the entire beneficial interest in the property without

174

Leahy v Attorney-​General (NSW) [1959] AC 457.

175

Leahy v Attorney-​General (NSW) [1959] AC 457 at 484.

176

That the members of the order may be scattered may go towards the difficulty of administering the trust, but it is unclear why it should impact on the issue of intention: see Keeler, “Devises and Bequests to Unincorporated Bodies” (1963–​1966) 2 Adel L Rev 336 at 345–​346.

177

However, it has been suggested that the nature of the property given should not be conclusive in itself, for there is always the overriding consideration that it may be sold: Keeler, “Devises and Bequests to Unincorporated Bodies” (1963–​1966) 2 Adel L Rev 336 at 347. Cf Re de Vedas (deceased) [1971] SASR 169 at 181–​182 per Wells J (subject matter of gift was land).

178

Leahy v Attorney-​General (NSW) [1959] AC 457 at 485–​486 (the trust was held not exclusively charitable, but was validated by saving legislation: see [29.275]–​[29.285]). See also Re Wilson’s Grant [1960] VR 514 at 522 per Hudson J. Cf Re Grosvenor (deceased) [1965] NSWR 723 at 727 per McLelland CJ in Eq.

179

Bacon v Pianta (1966) 114 CLR 634.

180

Bacon v Pianta (1966) 114 CLR 634 at 640 per McTiernan, Taylor and Owen JJ.

181

Bacon v Pianta (1966) 114 CLR 634 at 640–​641 per McTiernan, Taylor and Owen JJ. As to the trusts for political purposes, see [29.100], [29.105].

182

Re Goodson (deceased) [1971] VR 801 at 814 per Adam J (gift “for the general purpose of the Loyal Orange Institution” held not to be a gift to the members of the institution as individuals, but a gift in augmentation of the general funds of the institution to be applied with its other common funds in conformity with its laws and constitution: at 812–​813).

536 [17.180] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

The Requisite Certainties  Chapter  17

any requirement that it be used for a particular purpose and without any provision that it be held in perpetuity.183 In such a case, the members are bound by agreement inter se to apply the moneys received to the objects stated in the constitution, not because of any trust, but because of the constitution. However, where other factors are present, such as those in Leahy and Bacon v Pianta, gifts of this kind can be treated as creating a trust.184

Legislative initiatives [17.185]  In stating that a gift for an unincorporated association takes effect in augmentation

of the general funds of the association and must be applied in accordance with its constitution, statute in Queensland gives effect to the prima facie construction at general law.185 It adds that the validity of the gift is unaffected by the fact that a list of association members cannot be compiled at any one time or that the members cannot divide the association’s assets beneficially among themselves.186 It is expressed not to apply to gifts to charitable associations, thereby giving explicit recognition to the third potential construction mentioned above. Similar legislation has since been enacted in New South Wales, the Northern Territory, Tasmania and Victoria.187 In the Australian Capital Territory and South Australia the trustee legislation validates gifts on trust to unincorporated bodies by providing that “[w]‌here an unincorporated body is named in an instrument establishing a trust, the persons for the time being comprising the body will be taken to have been individually named in the instrument”.188 Yet as this provision speaks of gifts on trust, presumably it is not intended to impact upon the prima facie rule that gifts to unincorporated bodies are presumed to be to the present members, for in the case of gifts that come within that presumption, no trust arises.

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[17.190] The difficulties that arise in the context of gifts to unincorporated associations

can be avoided if the donee is incorporated pursuant to the associations incorporation legislation.189

183

Re Goode (deceased) [1960] VR 117 at 124 per O’Bryan J. Cf Re Price [1943] Ch 422 at 428–​432 per Cohen J.

184

Re Stone (deceased) (1970) 91 WN (NSW) 704 at 710 per Helsham J.

185

Succession Act 1981 (Qld), s 33Q(1), 33Q(2) (originally s 63). See, for example, Re Lovell [1985] 1 Qd R 209 (gift upheld to trustees “for the Tyrian Branch of the Masonic Lodge, Bundaberg for the general purposes of the Lodge in Bundaberg”).

186

Succession Act 1981 (Qld), s 33Q(6).

187

Succession Act 2006 (NSW), s 43; Wills Act 2000 (NT), s 42; Wills Act 2008 (Tas), s 57; Wills Act 1997 (Vic), s 47.

188

ACT s 5A(2); SA s 4(3).

189

The relevant legislation is as follows:  Associations Incorporation Act 1991 (ACT); Associations Incorporation Act 2009 (NSW); Associations Act 2003 (NT); Associations Incorporation Act 1981 (Qld); Associations Incorporation Act 1985 (SA); Associations Incorporation Act 1964 (Tas); Associations Incorporation Reform Act 2012 (Vic); Associations Incorporation Act 2015 (WA).

[17.190]  537 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved. Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Chapter 18

Formalities and Complete Constitution FORMALITIES FOR ESTABLISHING AN INTER VIVOS TRUST Statutory writing requirements [18.05]  As equity looks to intent rather than form (see [P.95]), there is no general law require-

ment of writing to create a valid or enforceable trust. Any such requirement must derive from statute. In each jurisdiction statute prescribes writing requirements, stemming from the Statute of Frauds 1677 (UK), applicable to express trusts created “inter vivos” (that is, to operate during the life of the settlor). The New South Wales provision, s 23C(1) of the Conveyancing Act 1919, is typical and reads:1

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Subject to the provisions of this Act with respect to the creation of interests in land by parol:

(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;



(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;



(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by his will, or by his agent thereunto lawfully authorised in writing.

[18.10] The following important observations must be made regarding the above requirements, expressed in terms of the paragraphs extracted above, which are common to the legislation in each jurisdiction. First, there is authority that the para (a) requirement that interests in land be created or disposed of by writing applies to both legal and equitable interests.2 A reason for this is that the phrase “interest in land”, when appearing in a statute, is ordinarily understood to include both the legal and equitable estates, as well as any right, charge, power or privilege over or in connection with the land (as, for instance, for statutory provisions that premise standing

1

The equivalent legislation in the other jurisdictions is Civil Law (Property) Act 2006 (ACT), s 201(1)–​201(3); Law of Property Act 2000 (NT), s 10(1); Property Law Act 1974 (Qld), s 11; Law of Property Act 1936 (SA), s 29(1); Conveyancing and Law of Property Act 1884 (Tas), s 60(2); Property Law Act 1958 (Vic), s 53(1); Property Law Act 1969 (WA), s 34(1). See Everett, “Reconciliations of the Statutory Requirements for Writing in Land Transactions” (1987) 17 UWALR 301.

2

Adamson v Hayes (1973) 130 CLR 276 at 297 per Walsh J, at 304 per Gibbs J, at 319–​320 per Stephen J; Theodore v Mistford Pty Ltd [2003] QCA 580 at [5]‌per McMurdo P, at [51] per Jerrard JA [affd on a different issue: Theodore v Mistford Pty Ltd (2005) 221 CLR 612].

[18.10]  539 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

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Equity and Trusts in Australia

to lodge a caveat on an interest in the land).3 Yet if para (a) applies to equitable interests in land, the scope for the independent operation of para (b) —​which deals specifically with the creation of trusts of, and thus equitable interests in, land  —​is significantly reduced unless para (a) is limited in its application to the disposition of equitable interests in land other than those created by trusts.4 This apparent overlap can be avoided if para (a) is read to refer only to legal interests in land. The latter approach derives support from the judgment of Giles JA, with whom Mason P concurred, in Baloglow v Konstanidis,5 who located the operation of para (a) (and the remainder of s 23C(1)) at the date when the interest in land is actually disposed —​that is, when title is to pass —​which in the case of land is likely to occur after the actual agreement to dispose of the land. His Honour saw the formality requirements applicable to the actual agreement to dispose as those that render contracts “for the sale or other disposition of land or any interest in land” unenforceable for lack of writing (the s 54A formalities),6 which are less stringent than those under s 23C. This was driven by a concern to harmonise these writing requirements. Yet that this aspect was not essential to the court’s decision allowed a differently constituted New South Wales Court of Appeal in Khoury v Khouri7 to restrict Baloglow to authority for the proposition that s 23C does not apply to a wholly executory agreement, limiting its application to the creation of interests in land and not directed to agreements as such, except for those intended to have immediate dispositive or creative effect. So where there is an agreement to declare immediately a trust over land, the formalities prescribed by both para (a) and s 54A apply, even though the agreement had been performed.8 This analysis, it has been explained, “is only consistent with s 54A applying not only to executory but also to executed agreements”,9 thus retaining an overlap between the sections. The differing views that ss 23C and 54A have generated calls, as yet unheeded, for statutory clarification. Secondly, both paras (a) and (b) are limited in their application to interests in land. Thus, where a settlor intends to create a trust of her or his freehold property, leasehold property or any other interest in land, the declaration of trust must be in writing. On the other hand, a declaration of trust over personal property (for example, shares) may be made orally.10 Thirdly, unlike paras (a) and (c), para (b) does not require the trust to be created in writing; it only requires that it be evidenced in writing. So although a trust may be created where

3

As to which see Bradbrook et al, [5.35]–​[5.45].

4

Secretary, Department of Social Security v James (1990) 95 ALR 615 at 622 per Lee J; Hagan v Waterhouse (1991) 34 NSWLR 308 at 385–​386 per Kearney J; Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 at [119] per Besanko J.

5

Baloglow v Konstanidis (2001) 11 BPR 20,721 at [161]–​[183]. See also S v P (2006) 198 FLR 1 at [57] (where the Full Court of the Family Court was attracted to the reasoning of Giles JA in Baloglow that the relationship between ss 23C and 54A should be harmonious).

6

Namely Conveyancing Act 1919 (NSW), s 54A. In other jurisdictions, see: Civil Law (Property) Act 2006 (ACT), s 204; Law of Property Act 2000 (NT), s 62; Property Law Act 1974 (Qld), s 59; Law of Property Act 1936 (SA), s 26; Conveyancing and Law of Property Act 1884 (Tas), s 36; Instruments Act 1958 (Vic), s 126; WA: Statute of Frauds 1677 (UK), s 4 (which applies as a result of the Law Reform (Statute of Frauds) Act 1962 (WA), s 2). See also Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 229 CLR 545 at [45] per Gleeson CJ, Gummow, Kirby and Hayne JJ (who viewed s 54A as distinct from s 23C, in that s 54A “is concerned not with dispositions but with the bringing of actions upon contracts for the sale or other disposition of land or any interest in land”).

7

Khoury v Khouri (2006) 66 NSWLR 241 at [53] per Bryson JA, with whom Handley and Hodgson JJA concurred.

8

Khoury v Khouri (2006) 66 NSWLR 241 at [43]–​[55]. See also Thompson v White (2006) 13 BPR 24,537 at [122]–​[148] per Tobias JA, with whom Ipp and McColl JJA concurred.

9

Ciaglia v Ciaglia (2010) 269 ALR 175 at [62] per White J.

10

Grey v Inland Revenue Commissioners [1960] AC 1 at 16 per Lord Radcliffe; Paul v Constance [1977] 1 WLR 527.

540 [18.10] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

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a settlor makes an oral declaration of trust over land, it is unenforceable until evidenced in writing by a document containing its terms signed by the settlor.11 The document need not be in any particular form. A combination of documents capable of being read together may comprise the requisite “writing”. What is required is documentary material from which the terms of the trust, the trust property and the beneficiaries can be ascertained.12 It is not necessary that the settlor intend that the document signed should evidence a trust, or that the writing be made at the time the trust is declared; it may be made subsequently.13 But writing that predates the declaration and makes no reference to it is not evidence of a declaration.14 Fourthly, for the purposes of para (b), unlike paras (a) and (c), the signature must be by the beneficial owner of the land; signature by an agent is not sufficient.15 Also, the signature of only one of the persons able to declare the trust is insufficient to satisfy para (b).16 Fifthly, the above rules operate subject to para (c), which requires a disposition of an equitable interest or trust “subsisting at the time of the disposition” to be in writing.17 Unlike para (b), para (c) requires the actual disposition to be in writing and, moreover, applies to dispositions of equitable interests in both realty and personalty.18 Its purpose is to prevent hidden oral transactions in equitable interests and to enable trustees to identify the persons to whom they are accountable.19 The term “disposition” has a wider meaning than the term “grant”,20 and is defined by statute other than in Tasmania.21 It is directed at dealings with the equitable estate divorced from the legal estate. So an assignment by a trust beneficiary of her or his interest to another, and the release or surrender of an equitable interest,22 must be in writing to be enforceable. In the Territories, New South Wales and Queensland the statutory concept of “disposition” extends to a disclaimer, which would not otherwise come within the concept

11

Kauter v Hilton (1953) 90 CLR 86 at 98 per Dixon CJ, Williams and Fullagar JJ; Macary Manufacturing Pty Ltd v Chief Commissioner of Land Tax (1998) 39 ATR 255 at 259–​260 per Black AJ.

12

Smith v Matthews (1861) 3 De GF & J 138; 45 ER 831; Ryder v Taylor (1935) 36 SR (NSW) 31; Hagan v Waterhouse (1991) 34 NSWLR 308 at 385–​386 per Kearney J; Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 at [122] per Besanko J.

13

Rochefoucauld v Boustead [1897] 1 Ch 196 at 206 (CA); Secretary, Department of Social Security v James (1990) 95 ALR 615 at 622 per Lee J; Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 at 481 per Sackville J; Taylor v Taylor [2017] 4 WLR 83 at [50] per Judge Paul Matthews.

14

Benjamin v Leicher (1998) 45 NSWLR 389 at 400 per Cohen J (involving a will executed 12 years before any declaration of trust was made, which could not therefore provide evidence of a declaration of trust).

15

Tierney v Wood (1854) 19 Beav 330; 52 ER 377; Ryder v Taylor (1935) 36 SR (NSW) 31 at 51 per Nicholas J; Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 at 481 per Sackville J.

16

Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 at [123] per Besanko J.

17

The previous equivalent to para (c) in New Zealand (Property Law Act 1952 (NZ), s 49A(3)) was omitted by the Property Law Act 2007 (NZ).

18

PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 at 251–​252 per Giles J; Warner v Hung (No 2) (2011) 297 ALR 56 at [129] per Emmett J [affd Hung v Warner [2013] FCAFC 48]; Kelly v Commissioner of Taxation (2012) 88 ATR 409 at [158] per Besanko J (in the context of the assignment of the (equitable) interest of a partner in a partnership, as to which see [1.115]) [affd Kelly v Commissioner of Taxation (2013) 213 FCR 460]. Cf Baloglow v Konstanidis (2001) 11 BPR 20,721 at [115] per Priestley JA (who remarked that, without the burden of authority, he would have thought that each of paras (a), (b) and (c) of s 23C(1) was dealing with a different kind of assurance or disposition of some kind of interest in land).

19

Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 at 311 per Lord Upjohn.

20

Crichton v Crichton (1930) 43 CLR 536 at 562 per Dixon J; Grey v Inland Revenue Commissioners [1960] AC 1 at 12–​13 per Viscount Simonds, at 15–​16 per Lord Radcliffe; Adamson v Hayes (1973) 130 CLR 276 at 304 per Gibbs J; PT Ltd v Maradona Pty Ltd (No 2) (1992) 27 NSWLR 241 at 249–​250 per Giles J.

21

Civil Law (Property) Act 2006 (ACT), Dictionary; Conveyancing Act 1919 (NSW), s 7(1); Law of Property Act 2000 (NT), s 4; Property Law Act 1974 (Qld), Sch 6; Law of Property Act 1936 (SA), s 7; Property Law Act 1958 (Vic), s 18(1); Property Law Act 1969 (WA), s 7.

22

Grey v Inland Revenue Commissioners [1960] AC 1 at 12–​13 per Viscount Simonds.

[18.10]  541 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

of a disposition given that disclaimers operate by way of avoidance rather than disposition.23 The formalities are not required where the owner disposes of her or his beneficial ownership but not legal ownership, or intends to dispose of full ownership.24 This is because the owner of property does not have separate legal and equitable estates in that property preceding its disposition (see [1.25]), meaning that an equitable interest disposed in these circumstances is not pre-​existing but is created by the disposition.25 Sixthly, the precise writing requirements differ according to whether a trust falls within para (b) or (c). If it falls within both paragraphs (say, where the trust property is an equitable interest in land), the requirements of both paragraphs must be satisfied. In this context, it must be noted that whereas para (b) requires the writing to be signed by some person who is able to declare the trust (that is, the settlor), para (c) enables the disposition to be signed either by the settlor or an agent authorised in writing to do so. Enforcement of trust where formalities not fulfilled [18.15]  The statutory writing requirements do not invalidate dispositions by will (as to which

see [18.40]), nor do they affect the operation of the law of part performance or the recognition of resulting or constructive trusts. They may further be avoided where they would otherwise operate as an instrument for fraud, or where the elements of estoppel can be established.

Part performance [18.20]  The requirement of writing does not affect the court’s jurisdiction in a proper case to

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enforce the equity arising from acts of part performance by a party to an oral contract for an interest in land, and to grant specific performance of that contract.26 It follows that statutory writing requirements may be overcome by acts of part performance of the intended trust by a purported beneficiary: see Ch 12.

Resulting or constructive trusts [18.25]  Formality requirements do not “affect the creation or operation of resulting, implied

or constructive trusts”.27 As the term “implied trust” is sometimes used interchangeably with “resulting trust”,28 and its use in the present statutory context is likely to conform to this; after all, were an implied trust to encompass a trust created pursuant to an inferred intention (by definition, an express trust: see [17.45]), it would go some way to undermining the object of the formality requirements in their application to trusts. As resulting trusts are presumed to arise from particular forms of transactions rather than actual (or inferred) intention (see [26.05]), and the court imposes constructive trusts (see [38.20]), to premise their enforceability on writing would be inconsistent with their

23

Re Paradise Motor Co Ltd [1968] 1 WLR 1125 at 1143 (CA).

24

Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 at 312 per Lord Upjohn, at 317 per Lord Donovan.

25

Lowther v Kim [2003] 1 NZLR 327 at 332 per Randerson J.

26

Civil Law (Property) Act 2006 (ACT), s 203(1)(d); Conveyancing Act 1919 (NSW), s 23E(d); Law of Property Act 2000 (NT), s 5(b); Property Law Act 1974 (Qld), s 6(d); Law of Property Act 1936 (SA), s 31(d); Conveyancing and Law of Property Act 1884 (Tas), s 60(5)(d); Property Law Act 1958 (Vic), s 55(d); Property Law Act 1969 (WA), s 36(d).

27

Civil Law (Property) Act 2006 (ACT), s 201(4)(a); Conveyancing Act 1919 (NSW), s 23C(2); Law of Property Act 2000 (NT), s 10(2); Property Law Act 1974 (Qld), s 11(2); Law of Property Act 1936 (SA), s 29(2); Conveyancing and Law of Property Act 1884 (Tas), s 60(2); Property Law Act 1958 (Vic), s 53(2); Property Law Act 1969 (WA), s 34(2).

28

See, for example, Allen v Snyder [1977] 2 NSWLR 685 at 699 per Samuels JA.

542 [18.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

fundamental basis. This explains attempts by litigators to clothe what would otherwise be an express trust as a constructive trust. The so-​called “common intention constructive trust”, having its genesis in the courts seeking a way of equitably dividing property interests in a failed relationship, presents an illustration of such an attempt:  see [38.215]–​[38.230]. Although courts have countenanced that such a trust can circumvent writing requirements, it is jurisprudentially inaccurate, as trusts grounded in actual or inferred intention are clearly express trusts. Its use for this purpose should have (but has not) been overtaken by the remedial constructive trust: see [38.165]–​[38.210]. It is better to characterise a trust of land based upon common intention as an express trust, hence requiring writing. Where the absence of writing is used to perpetrate what would be a fraud, the equitable jurisdiction to prevent statute from being used as an instrument of fraud (see [18.30]) could be invoked. Although resulting and constructive trusts do not require writing to be enforceable, some English judges believe that dispositions of equitable interests in the nature of a resulting or constructive trust must be in writing.29 This is because a transfer of an equitable interest of this nature is not the “creation” or “operation” of a resulting or constructive trust as envisaged by the terms of the legislation. This construction sits poorly with the legislative purpose of the relevant provision and has, in any case, been judicially queried.30 The difference in approach arises principally in the context of constructive trusts said to arise as a result of a contract that precedes the legal transfer of an interest in property (as to which see [38.150]–​[38.160]), which if treated as falling outside the formality requirements would effectively undermine their operation in many instances. The New South Wales approach —​in construing the formality requirements to apply at the time of the actual transfer of ownership of the property rather than at the date of contract:  see [18.10]  —​can potentially overcome this apparent inconsistency.

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Statute not to be used as an instrument of fraud [18.30]  An express trust of land may be proved by oral evidence where the statutory writing

requirements are being used as an instrument of fraud. The classic statement of this equitable principle is that of Lindley LJ in Rochefoucauld v Boustead:31 [The statutory requirements do not] prevent the proof of a fraud; and that it is a fraud on the part of the person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the [statutory requirements], it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself.

29

Oughtred v Inland Revenue Commissioners [1960] AC 206 at 230 per Lord Cohen, at 233 per Lord Denning.

30

See Oughtred v Inland Revenue Commissioners [1960] AC 206 at 226–​227 per Lord Radcliffe; Neville v Wilson [1997] Ch 144 at 157–​158 (CA) (see Milne, “Oughtred Revisited” (1997) 113 LQR 213); Baloglow v Konstanidis (2001) 11 BPR 20,721 at [120]–​[125] per Priestley JA.

31

Rochefoucauld v Boustead [1897] 1 Ch 196 at 206. See also Cadd v Cadd (1909) 9 CLR 171 at 187 per Isaacs J; Organ v Sandwell [1921] VLR 622 at 630 per Irvine CJ; Bannister v Bannister [1948] 2 All ER 133 at 136 (CA); White v Cabanas Pty Ltd (No 2) [1970] Qd R 395 at 406–​409 per Campbell J; Last v Rosenfeld [1972] 2 NSWLR 923 at 929 per Hope J; Allen v Snyder [1977] 2 NSWLR 685 at 689, 692 per Glass JA; Dalton v Christofis [1978] WAR 42 at 46–​47 per Smith J; Brown v Wylie (1980) 6 Fam LR 519 at 525 per Powell J; Thwaites v Ryan [1984] VR 65 at 92 per Fullagar J; Di Pietro v Official Trustee in Bankruptcy (1995) 59 FCR 470 at 482 per Sackville J; Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 at [128]; Young v Young (2014) 23 Tas R 76 at [14]–​[22] per Blow CJ.

[18.30]  543 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

For example, in Pearce v Public Trustee,32 the plaintiff transferred land to her son upon an oral express trust. Chapman J found that all the circumstances pointed to the plaintiff’s retention of the beneficial interest in the land. She had continued to live on the land as if she were the owner, and had met the outgoings pertaining to the land. Moreover, the plaintiff’s solicitor gave evidence that the plaintiff had transferred the property to protect it from her estranged husband. Hence, to deny the plaintiff a beneficial interest in the land due to the absence of writing would be to use the writing requirements as an instrument of fraud.33 Another instance where the principle applies is where a person has by her or his fraud prevented a transaction from being reduced into writing.34 In each case, its operation is premised on proof that fraud (“unconscionable conduct”)35 will result from the application of the statutory provisions. So it does not apply where a person has done no more than decline to perfect or acknowledge an assignment he or she has agreed to make,36 or to enable a third party to enforce an oral trust where in the circumstances there is a resulting trust in favour of the person able to declare the trust.37

Estoppel

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[18.35]  An absence of writing may not invalidate a trust of land if the doctrine of equitable

(proprietary) estoppel applies. Where A, by conduct or words represents to B that A intends to confer or has conferred an interest in land on B, upon which B relies to her or his detriment while A acquiesces, A may be estopped from denying B’s equity. In some cases, the estoppel may require nothing short of a transfer of the estate or interest to satisfy the demands of equity; in others, the relief proportionate to the relevant detriment can be rectified by an order for compensation: see [10.70]. In each case the court must be satisfied that the facts alleged to constitute the representation are indeed an unequivocal inducement to the representee to act in a certain way. In Actionstrength Ltd v International Glass Engineering SpA,38 the issue was whether the second defendant could be estopped from resiling from its oral promise to the claimant to withhold money due to the first defendant, and instead pay it to the claimant if the first defendant failed to meet its contractual obligations to the claimant. This the House of Lords construed as a guarantee transaction, to which the Statute of Frauds 1677 (UK), s 4 continues to apply in England.39 The absence of writing to support the promise led the claimant to resort

32

Pearce v Public Trustee [1916] GLR 125.

33

As the relationship between mother and son now gives rise to the presumption of advancement (see [26.140]), in modern law the mother could only have ousted that presumption, and thus been found to retain a beneficial interest in the land on resulting trust, by adducing evidence of intention inconsistent with the presumption. However, because evidence of this kind is limited to acts or declarations of the parties before or at the time of the relevant transaction, the mother’s behaviour after the transfer of the land would not be admissible for this purpose: see [26.145]. At the time of Pearce, though, a gift from mother to son would give rise to a presumption of resulting trust, and so the case could have been decided as falling outside the formality requirements in the first instance.

34

Cf Tharp v Tharp [1916] 1 Ch 142.

35

See, for example, Jahnsen v Jahnsen [2002] NSWSC 995 at [32] per Bergin J (ruling that in the circumstances it was appropriate to enforce an oral express trust because it would be unconscionable for the legal owner to rely on statutory writing requirements to defeat the plaintiff’s beneficial interest).

36

Parker v Glenninda Pty Ltd (1998) Q ConvR ¶54-​499 at 60,024 per Muir J.

37

Equuscorp Pty Ltd v Jimenez (2002) 220 LSJS 252 at [134] per Besanko J.

38

Actionstrength Ltd v International Glass Engineering SpA [2003] 2 AC 541.

39

In Australia, see Law of Property Act 2000 (NT), s 58; Property Law Act 1974 (Qld), s 56; Mercantile Law Act 1935 (Tas), s 6; Instruments Act 1958 (Vic), s 126; WA: Statute of Frauds 1677 (UK), s 4 (which applies as a result of the Law Reform (Statute of Frauds) Act 1962 (WA), s 2). This formality requirement has been repealed in the remaining Australian jurisdictions.

544 [18.35] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

to pleading estoppel. Lord Hoffmann explained the judicial approach in such cases as follows:40 The terms of the Statute … show that Parliament, although obviously conscious that it would allow some people to break their promises, thought that this injustice was outweighed by the need to protect people from being held liable on the basis of oral utterances which were ill-​ considered, ambiguous or completely fictitious. This means that while normally one would approach the construction of a statute on the basis that Parliament was unlikely to have intended to cause injustice by allowing people to break promises which had been relied upon, no such assumption can be made about the Statute. Although the scope of the statute must be tested on the assumption that the facts alleged by [the claimant] are true, it must not be construed in a way which would undermine its purpose.

On this reasoning, their Lordships ruled unanimously against an estoppel. How the relevant judicial approach applied to the facts in question was well explained by Lord Clyde:41

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The only assurance given to [the claimant] was the promise itself. In order to be estopped from invoking the statute there must be something more, such as some additional encouragement, inducement or assurance. In addition to the promise there must be some influence exerted by [the second defendant] on [the claimant] to lead it to assume that the promise would be honoured. But there is no suggestion made that [the second defendant] said or did anything to lead [the claimant] to assume that [the second defendant] would not stand on its rights. Nor is [the second defendant] said to have done anything which would foster such an assumption. Further the acts of [the claimant] in keeping the labour force on site and continuing to work do not demonstrate a reliance on some assumption of the enforceability of the guarantee. The acts may have followed upon the giving of the verbal promise and they could operate to support the conclusion of the contract. But they do not necessarily relate to an assumption of the enforceability of that contract. They are essentially no different from the acts which any creditor would normally carry out after a surety has given him some guarantee relating to his provision of credit.

Similarly, Lord Bingham remarked that, were the second defendant estopped, “it is hard to see why any oral guarantor, where credit was extended to a debtor on the strength of a guarantee, would not be similarly estopped”, a result that would “render nugatory a provision which … Parliament has deliberately chosen to retain”.42 This reasoning was endorsed and applied by the New South Wales Court of Appeal in Powercell Pty Ltd v Cuzeno Pty Ltd,43 also a case involving a failure to fulfil statutory writing requirements (though for the sale of land). Giles JA opined that the doctrine of part performance, adopted by equity to ameliorate the harshness of reliance on writing requirements (see [12.05]), would be unnecessary were a plaintiff routinely able to rely on estoppel in these circumstances.44 So although the requirement of “something more” has been questioned in light of the flexibility of the Australian law

40

Actionstrength Ltd v International Glass Engineering SpA [2003] 2 AC 541 at [20].

41

Actionstrength Ltd v International Glass Engineering SpA [2003] 2 AC 541 at [35]. See also at [28] per Lord Hoffmann, at [53], [54] per Lord Walker. Cf Bank of Scotland v Wright [1991] BCLC 244 at 266 per Brooke J.

42

Actionstrength Ltd v International Glass Engineering SpA [2003] 2 AC 541 at [9]‌.

43

Powercell Pty Ltd v Cuzeno Pty Ltd (2004) 11 BPR 21,429.

44

Powercell Pty Ltd v Cuzeno Pty Ltd (2004) 11 BPR 21,429 at [80], with whom Meagher and Santow JJA concurred. See also Tipperary Developments Pty Ltd v State of Western Australia [2006] WASC 137 at [379] per Murray ACJ (who also applied Actionstrength, remarking that “the doctrine of estoppel cannot be applied so as to defeat the operation of s 4 of the Statute of Frauds, rendering unenforceable a promise by way of guarantee made orally, if, as in this case, there is no other element to the estoppel claimed than that the creditor has acted to its detriment on the basis of the guarantor’s oral promise”) [affd Tipperary Developments Pty Ltd v State of Western Australia (2009) 38 WAR 488].

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Equity and Trusts in Australia

of estoppel,45 it arguably properly locates estoppel within the Australian law of obligations,46 and aligns with the notion that unconscionable conduct requires more than a mere resiling from a promise: see [10.315]. The New Zealand High Court’s decision in Tait-​Jamieson v Cardrona Ski Resort Ltd47 illustrates a scenario where estoppel may function in this context. Like Actionstrength, it involved a guarantee transaction, but on this occasion what prompted resort to the law of estoppel was that one of the named guarantors (the plaintiff, T) had not signed the guarantee instrument. On the facts the requisite “something more” included a written record of the agreement coupled with express representations confirming the unsigned agreement would be honoured. French J elaborated the point as follows:48 To apply estoppel in the circumstances of this case does not in any way undermine the policy of the [statutory writing requirements]. Certainty is not being sacrificed at the altar of fairness. The agreement being enforced was in writing, so there is certainty as to its terms. Nor is this a case of a powerful creditor and an inexperienced person being led into a one-​sided and ill-​ considered obligation he did not fully understand, and from which he did not gain any benefit. This was not a document drawn up by the creditor, or even at the suggestion of the creditor. The document was the result of a meeting which [T]‌attended and it was a document which was circulated to him for approval … As for the requirement of a signature, the purpose of a signature is to evidence an intention to be contractually bound. [T] personally and expressly affirmed his intention to be bound both orally over the telephone and also, importantly, in writing via email. Further, he personally obtained a significant benefit as a result of the guarantee.

In these circumstances, her Honour reasoned that it would be unconscionable for the plaintiff to rely on the absence of a signature, and so he should be estopped from doing so.

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FORMALITIES FOR ESTABLISHING A TESTAMENTARY TRUST Formality requirements for a valid will [18.40]  The formal requirements for trusts contained in a will are coextensive with the for-

malities required for the creation of a valid will.49 These are that the will be in writing, signed by the testator at the end (or by someone in the presence and at the direction of the testator), which signature must be made or acknowledged in the presence of two or more witnesses present together at the same time and who attest to the will in the presence of the testator. In all jurisdictions statute allows these rules to be less strictly applied where it is clear from the writing that the testator’s intention was that the instrument was to be a will or codicil.50

45

See Robertson, “The Statute of Frauds, Equitable Estoppel and the Need for ‘Something More’” (2003) 19 JCL 173. Cf Neyers and Moncrieff, “(Mis)understanding Estoppel” [2003] LMCLQ 429.

46

See Tipperary Developments Pty Ltd v State of Western Australia (2009) 38 WAR 488 at [138] per McLure JA.

47

Tait-​Jamieson v Cardrona Ski Resort Ltd [2012] 1 NZLR 105.

48

Tait-​Jamieson v Cardrona Ski Resort Ltd [2012] 1 NZLR 105 at [64] (footnote omitted).

49

Wills Act 1968 (ACT), s 9; Succession Act 2006 (NSW), s 6; Wills Act 2000 (NT), s 8; Succession Act 1981 (Qld), s 10; Wills Act 1936 (SA), s 8; Wills Act 2008 (Tas), s 8; Wills Act 1997 (Vic), s 7; Wills Act 1970 (WA), s 8. On testamentary formalities generally see Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), Ch 4.

50

Wills Act 1968 (ACT), s 11A; Succession Act 2006 (NSW), s 8; Wills Act 2000 (NT), s 10; Succession Act 1981 (Qld), s 18; Wills Act 1936 (SA), s 12(2); Wills Act 2008 (Tas), s 10; Wills Act 1997 (Vic), s 9; Wills Act 1970 (WA), s 32. See further Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [4.30]–​[4.52].

546 [18.40] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

Secret trusts [18.45]  Independent of wills legislation formality requirements, trusts may be created, most

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frequently in wills (and for this reason reference is made here to testators rather than settlors), under the doctrine of secret trusts.51 Secret trusts arise where a testator leaves property to X after having communicated with X that X is to hold the property on trust. Statute governing formalities for testamentary dispositions does not impact on the operation of secret trusts,52 which operate outside the will: see [18.80]. Since a will is opened for public inspection on the testator’s death, a secret trust allows a testator to provide for an object he or she wishes to be kept secret. He or she may, for example, wish to benefit a mistress or ex-​nuptial child,53 or a cause with which he or she is secretly concerned. It may even be open to a person made bankrupt, or the subject of an order to transfer property by the Family Court, to argue that property ostensibly in her or his name should fall outside the bankruptcy or the terms of that order because it is impressed with secret trusteeship, although given the policy considerations involved in cases of this kind, only compelling evidence can suffice.54 As “equity will not allow statute to be used as an instrument of fraud”, the doctrine of secret trusts allows evidence to be admitted to prove a trust over property claimed beneficially by a person not named in the will against a person (the “trustee”) denying the trust.55 Equity, to this end, enforces the secret trust by engrafting on the intended trustee an obligation to hold or deal with property according to the testator’s intention.56 The reference to “fraud” here is not confined to common law fraud —​that is, deliberate or conscious wrongdoing —​but encompasses equitable fraud, which binds the conscience of the intended trustee to give effect to the testator’s intention.57 The onus of establishing a secret trust is on the person alleging its existence, the standard of proof being the ordinary civil standard of balance of probabilities.58

51

See generally Critchley, “Instruments of Fraud, Testamentary Dispositions, and the Doctrine of Secret Trusts” (1999) 115 LQR 631; Kincaid, “The Tangled Web: The Relationship Between a Secret Trust and the Will” [2000] Conv 420; Allan, “The Secret is Out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law” (2011) 40 Common Law World Rev 311; Yazdani, “Secret Trusts: An Ancient Doctrine in Need of Reform?” (2015) 23 APLJ 196.

52

Blackwell v Blackwell [1929] AC 318 at 339 per Viscount Sumner.

53

Although these are commonly cited examples, their relatively infrequent appearance in the case law suggests that secret trusts operate in a (much) broader context: see Allan, “The Secret Is Out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law” (2011) 40 Common Law World Rev 311 at 340–​341.

54

See, for example, Page v Page [2002] BCL 570 (where the husband’s claim that a valuable art collection stood outside of the property available for division on the breakdown of his marriage because it was the subject of a secret trust imposed on him by his mother was found not to have been substantiated).

55

Cf Challinor, “Debunking the Myth of Secret Trusts?” [2005] Conv 492, who argues that fraud would be better prevented by insistence on compliance with the wills legislation formality requirements, which themselves are directed (as was the Statute of Frauds) to reducing scope for fraud to be perpetrated.

56

Blackwell v Blackwell [1929] AC 318 at 334 per Viscount Sumner; Guest v Webb [1965] VR 427 at 432 per Starke J.

57

Howell v Hyde (2003) 47 ACSR 230 at [44], [45] per Austin J. See also McCormick v Grogan (1869) LR 4 HL 82 at 89 per Lord Hatherley (who justified the “wide departure from the policy which induced the Legislature to pass the Statute of Frauds” arising out of secret trusts by reference to equity’s jurisdiction as the “court of conscience”); Duggan v White [2018] NSWSC 364 at [11] per Parker J.

58

Re Snowden (deceased) [1979] Ch 528 at 537 per Megarry VC; Re Lory (1996) 14 FRNZ 456; Brown v Pourau [1995] 1 NZLR 352 at 369–​371 per Hammond J; Howell v Hyde (2003) 47 ACSR 230 at [47] per Austin J. Although Megarry VC in Re Snowden at 537 suggested that a higher standard of proof may be required where there is an allegation of fraud, this does not seem to have been generally accepted: Voges v Monaghan (1954) 94 CLR 231 at 233 per Dixon CJ; Brown v Pourau at 369 (“the cases show that what is required is a close traverse of the evidence and the quality of that evidence before a plaintiff can hope to successfully establish a secret trust”). See further Rickett, “Secret Trust or Moral Obligation? —​A Question of Evidence” [1979] CLJ 260.

[18.45]  547 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

Elements

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[18.50]  In addition to the requirements of express trusts generally, a secret trust is premised

on proof of three elements: the testator’s intention that the property be used according to her or his specification; that this intention be communicated to the intended trustee(s); and acquiescence on behalf of the trustee(s).59 Any change in the directions regarding the manner in which the property in question is to be dealt with on secret trust, to be effective, must equally exhibit the communication and acquiescence requirements.60 The element of intention seems little more than a specific application of the basic express trust requirement of certainty of intention (as to which see [17.10]–​[17.55]); the court will not enforce to a trust-​like obligation unless it is satisfied that the person imposing the relevant obligation intended it to be one of trusteeship. What appears no more than a moral obligation, or a legal obligation via other than a trust, is not capable of operating as a secret trust.61 So far as communication is concerned, although the testator need not communicate the details of the intended trust at the time of executing the will (or other document), communication to the intended trustee that he or she is to act as trustee is necessary at that time. Otherwise there would be no grounds on which the intended trustee could validly acquiesce to that role, for acquiescence, though passive, presumes (at least some level of) knowledge on the part of the person acquiescing: see [30.25]. Provided that such knowledge exists, a person may be held to accept a secret trust by silently acquiescing at the moment of communication.62 Where a testator gives property on secret trust to two or more trustees but not all acquiesce, it appears that whether the non-​ acquiescing trustee(s) are bound depends upon whether the property is to vest in the trustees as joint tenants or as tenants-​in-​common.63 Where the trustees are to take as joint tenants, all are bound upon one of their number acquiescing before the will is made; acquiescence after the will is made binds only the acquiescing trustee. Where the trustees take as tenants-​in-​ common, it is arguable that only the acquiescing trustee(s) are bound.

Fully-​secret  trusts [18.55] Secret trusts have traditionally been categorised as either “fully secret” or “half

secret”. A testator may leave property “to X” after having communicated with X that X has to hold the property on trust. The trust is “fully secret” as there is no indication in the terms of the will that X is to hold as trustee. The persons claiming an equitable interest in the property as beneficiaries of the alleged trust bear the onus of proving the requisite elements, namely intention, communication and acceptance, a heavy onus given the absence of any indication of a trust on the face of the will. In another context, but in terms equally relevant to the matter in issue, McLelland J has observed:64

59

Blackwell v Blackwell [1929] AC 318 at 334, 339–​340 per Viscount Sumner; Voges v Monaghan (1954) 94 CLR 231 at 233 per Dixon CJ, at 235 per McTiernan J; Brown v Pourau [1995] 1 NZLR 352 at 367–​369 per Hammond J.

60

Re Cooper [1939] Ch 811 at 818 per Greene MR.

61

See, for example, Hardy v Whitcombe [2017] NZHC 2382 (where the words “looking after the grandchildren” were viewed “as least as if not more suggestive of moral or family obligation than it is of enforceable trust obligation”: at [73] per Osborne AJ).

62

Rowbotham v Dunnett (1878) 8 Ch D 430; Re Williams [1933] Ch 244; Ottaway v Norman [1972] Ch 698.

63

Re Stead [1900] 1 Ch 237 at 241 per Farwell LJ. This distinction has been criticised for lacking merit: see Perrins, “Can You Keep Half a Secret?” (1972) 88 LQR 225 at 226.

64

Grundel v Registrar General (1990) 5 BPR 11,217 at 11,219.

548 [18.50] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

[B]‌y reason of the danger of estates of deceased persons being subjected to false or exaggerated claims in respect of matters of which the deceased has no opportunity to give his own account, the court will treat [evidence of communications between the plaintiff and the deceased] with considerable caution, if not suspicion, will scrutinise it with great care, and act only if convinced of its truth.

Hence, extrinsic evidence of intention to create a trust must be clear and distinct before a court will accept it as probative.65 It may be circumstantial and/​or may consist of admissions by the legatee upon whom the trust is sought to be fixed.66 These admissions may be express or by conduct. The leading Australian authority is Voges v Monaghan,67 in which the testator bequeathed his estate to the appellant, a woman who had assumed the management of his affairs. It was alleged that the appellant took the estate subject to the obligation to pay annuities to the respondent and another. The basis of this allegation was a letter containing the testator’s wishes that the appellant had read to the respondent subsequent to the testator’s death. The letter was no longer in existence at the date of the trial. Fullagar and Kitto JJ noted that although it was possible that the testator may have intended the appellant to take absolutely, subject only to a moral obligation, the evidence indicated otherwise. The court was particularly influenced by the trial judge’s opinion on credibility of witnesses and the impression created of the testator’s character. This revealed the testator as “a man desiring that the practice he was following, of relying upon a trusted agent to carry out his instructions, should continue after his death”.68 As the appellant was resiling from her undertaking that had partly induced the testator to leave his estate in her hands, the court enforced a trust against the appellant in respect of the annuities.

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[18.60] The communication and acceptance of a fully-​secret trust, though it may be made

before or after the will, must occur during the testator’s lifetime (or, for an inter vivos secret trust, preceding the date the trust is intended to take effect). Otherwise no trust arises and the intended trust property is held, via a resulting trust, for the residuary estate.69 Yet where the testator informs the donee that he or she takes as trustee, that the terms of the trust are not communicated prior to the former’s death does not entitle the donee to take free of the trust. For example, in Re Boyes,70 the testator instructed a solicitor to draft a will leaving all his property to the solicitor. The property was to be held and disposed of according to later written instructions. No such instructions were given, but after the testator’s death an unattested paper was found, stating that X was to be the beneficiary. It was held that, having admitted that he was a trustee for a secret trust, the solicitor could not take the property beneficially.

Half-​secret  trusts [18.65]  In the case of a half-​secret trust the testator discloses an indication in the will that

a legatee is not to hold beneficially but as trustee. For example, it may read “to X for the

65

Jankowski v Pelek Estate (1996) 131 DLR (4th) 717 at 742 per Helper JA.

66

See, for example, Howell v Hyde (2003) 47 ACSR 230 (evidence of five conversations and later confirmatory evidence held to substantiate a fully-​secret trust).

67

Voges v Monaghan (1954) 94 CLR 231.

68

Voges v Monaghan (1954) 94 CLR 231 at 252.

69

McCormick v Grogan (1869) LR 4 HL 82 at 88–​89 per Lord Hatherley LC, at 97 per Lord Westbury; Brown v Pourau [1995] 1 NZLR 352 at 366–​367 per Hammond J.

70

Re Boyes (1884) 26 Ch D 531.

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Equity and Trusts in Australia

purpose I have communicated”71 or “to X for purposes with which he is acquainted”.72 Here the secrecy concerns the name and description of the object. The cardinal elements of intention, communication and acquiescence apply equally to half-​ secret trusts. An issue arises regarding communication and acceptance of a half-​secret trust. The traditional view allowed the admissibility of evidence of communications made before or at the time the will was executed to prove the terms of the trust, but not of future communications of the objects of a half-​secret trust.73 The reason touted for this was that “[a]‌testator cannot reserve to himself a power of making future unwitnessed dispositions by merely naming a trustee and leaving the purposes of the trust to be supplied afterwards”.74 For example, in Re Jeffery,75 a residuary estate was left to four persons or their survivor “to be applied … in accordance with my wishes”. Three of the four predeceased the testator. There was no evidence of any communication but a letter was found amongst the papers of one of those persons who predeceased the testator. No secret trust was created as this communication occurred subsequent to the making of the will. The dichotomy in approach regarding the (in)admissibility of subsequent evidence between fully secret and half-​secret trusts has been criticised for being unjustified in principle,76 and following the decision of Young J in Ledgerwood v Perpetual Trustee Co Ltd77 arguably no longer represents Australian law. His Honour envisaged the creation of a valid half-​secret trust even if its details are communicated subsequent to the execution of the will, reasoning that it is against the donee’s conscience to resile from the undertaking to carry out the testator wishes.78

Disclaimer by, or death of, secret trustee

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[18.70]  If a trustee of a half-​secret trust disclaims, or predeceases the testator, the trust remains

good on the principle that equity will not allow a trust to fail for lack of a trustee.79 On the other hand, there is authority that a fully-​secret trust fails in the same circumstances,80 on the logic that the trust only affects the property by reason of the personal obligation binding the individual legatee. Yet it is unclear why such a difference in outcome should rest on whether the trust is fully secret or half secret. Certainly where the trustee seeks to disclaim upon the testator’s death, at that moment the secret trust is constituted81 and so the court can, as it does where trustees disclaim generally, appoint another trustee (see [21.90]). The same should

71

Re Fleetwood (1880) 15 Ch D 594; Blackwell v Blackwell [1929] AC 318; Re Beckbessinger [1993] 2 NZLR 362 (“to be held in accordance with a confidential memorandum which I have given to them”).

72

Re Boyes (1884) 26 Ch D 531; Re Keen [1937] Ch 236.

73

Re Gardner [1920] 2 Ch 523; Re Keen [1937] Ch 236 at 247 per Lord Wright MR; Re Karsten (deceased) [1953] NZLR 456; Re Mihalopous (1956) 5 DLR (2d) 628; Guest v Webb [1965] VR 427 at 430 per Starke J.

74

Blackwell v Blackwell [1929] AC 318 at 339 per Viscount Sumner. See also Jankowski v Pelek Estate (1996) 131 DLR (4th) 717 at 730 per Huband JA.

75

Re Jeffery [1951] SASR 237.

76

See, for example, Holdsworth, “Secret Trusts” (1937) 53 LQR 501; Perrins, “Secret Trusts: The Key to the Dehors” [1985] Conv 248. Cf Wilde, “Secret and Semi-​Secret Trusts: Justifying Distinctions Between the Two” [1995] Conv 366 at 373–​375; Allan, “The Secret Is Out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law” (2011) 40 Common Law World Rev 311 at 330–​332.

77

Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532.

78

Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 at 538–​540. Cf Re Walsh (1911) 30 NZLR 1166 (where Williams J upheld the validity of a half-​secret trust pursuant to “instructions to be given hereafter”).

79

Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 at 535–​536 per Young J.

80

Re Maddock [1902] 2 Ch 220 at 231 per Cozens-​Hardy LJ.

81

Lim v Permanent Trustee Co Ltd (unreported, SC(NSW), McLelland J, 26 March 1981), at 8.

550 [18.70] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

ensue if the disclaimer occurs before the secret trust is intended to take effect (that is, before it is constituted).82 This is consistent with the approach generally adopted by the law where a trustee predeceases the testator; equity will not allow a trust to fail for want of a trustee, and the court in seeking to give effect to the testator’s intention will appoint a new trustee.83

Express as opposed to constructive trust [18.75] There is some debate, and conflicting authority, as to whether a secret trust is an

express trust or a variety of constructive trust.84 The latter is usually substantiated by reference to equitable intervention here being grounded in the prevention of “fraud”,85 a common ground for the law to utilise the constructive trust. Yet as the creation of a secret trust is premised on the express or inferred intention of the testator, it seems difficult to characterise it as other than an express trust. This aligns with the notion that the court does not impose a secret trust, but recognises its prior existence by a close analysis of the evidence. Attempts have been made to reconcile the two views. In Brown v Pourau,86 for example, Hammond J viewed a secret trust as an express trust, but added that the trustee’s obligation is supported by a remedial constructive trust. But as the court enforces express trusts according to ordinary trusts principles, any constructive trust is arguably superfluous for this purpose.87 The suggestion that fully-​secret trusts are constructive whereas half-​secret ones are express88 also fails to address why intention to create a trust is an element of both.

Operation outside the will [18.80] Although secret trusts often arise in a will, they do not operate because of the

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will.89 They operate outside the will, so that a beneficiary takes by virtue of the trust, not the will.90 This explains why a secret trust need not satisfy the statutory writing requirements for wills. And it explains why, even though statute in most jurisdictions denies an attesting beneficiary her or his legacy under the will,91 a beneficiary’s interest under a secret trust is

82

Cf Glister, “Disclaimer and Secret Trusts” [2014] Conv 11 (who argues that an intended trustee under a fully secret trust should not be permitted to disclaim).

83

See Kincaid, “The Tangled Web: The Relationship Between a Secret Trust and the Will” [2000] Conv 420 at 439–​440.

84

For a discussion of the case law and arguments on both sides, see Richardson, “Secret Trusts in New Zealand” (1995) 6 Canta L Rev 108 at 110–​114; Allan, “The Secret Is Out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law” (2011) 40 Common Law World Rev 311 at 337–​340 (who favours the view that all secret trusts are of the constructive variety). In Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at 583 is found dicta that a secret trust is a “species” of constructive trust on the ground that it may apply to cases where the intent of a settlor or testator would fail for want of compliance with the formalities for creation of an express trust. It is unclear what the court had in mind in this regard, for secret trusts are commonly testamentary trusts, and so operate outside the Statute of Frauds writing requirements (see [18.15]), and though intended to operate in a testamentary fashion, operate outside the will and so are not subject to the formalities prescribed by the wills legislation: see [18.80]. Constructive trusts are discussed in Ch 38.

85

See Allan, “The Secret Is Out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law” (2011) 40 Common Law World Rev 311 at 314–​328.

86

Brown v Pourau [1995] 1 NZLR 352 at 368.

87

See Rickett, “Thoughts on Secret Trusts from New Zealand” [1996] Conv 302 at 305. More generally on the inappropriateness of imposing a constructive trust over assets already held on express trust, see Rickett, “Instrumentalism in the Law of Trusts —​ The Disturbing Case of the Constructive Trusts Upon an Express Trust” (2016) 47 VUWLR 463.

88

See Cope, Constructive Trusts (The Law Book Company Limited, 1992), p 524.

89

See the discussion in Allan, “The Secret Is Out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law” (2011) 40 Common Law World Rev 311 at 332–​336.

90

Blackwell v Blackwell [1929] AC 318 at 339–​340 per Viscount Sumner; Re Snowden (deceased) [1979] Ch 528 at 535 per Megarry VC; Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 at 536–​537 per Young J.

91

See Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [4.53]–​[4.60].

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Equity and Trusts in Australia

not forfeited.92 Yet where the trust arises in a will, revocation of the will revokes the trust because the trust has yet to be constituted.93 The trust and the will are also interdependent in that the death of the secret beneficiary, as with the death of any beneficiary of a will, sees the gift to that beneficiary lapse unless the terms of the trust (or will) provide otherwise.94 It is arguable that the arrangement outside the will must not be inconsistent with the will.95 For example, in Re Karsten (deceased),96 where it was established that a bequest “to be distributed as [my trustee] has direction from me” created an interest in trust, the New Zealand Court of Appeal ruled inadmissible parol evidence to the effect that a beneficial interest was intended.

Distinguishable from doctrine of incorporation by reference [18.85] Under the doctrine of incorporation by reference, a testator may provide for an

extraneous document in existence at the time the will is executed,97 and to which the will clearly refers, to become part of and read as the testator’s will even though that document is unattested.98 A secret trust, conversely, does not depend on an extraneous document but on the elements of intention, communication and acquiescence.

COMPLETE CONSTITUTION OF TRUSTS Complete constitution by full legal transfer of trust property

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[18.90]  Express trusts can be created either by the owner of property declaring a trust over it

(“declaration of trust”) or transferring the property to another as trustee (“trust by transfer”). In the case of a declaration of trust, the declarant is already the owner of the property, and so, provided that any statutory formalities (see [18.05], [18.10]) and the requisite certainties (see Ch 17) are met, the declaration is itself effective to create a trust.99 In the case of trusts by transfer, however, a further step is required to “completely constitute” the trust, the classic statement of which is that of Turner LJ in Milroy v Lord:100

92

Re Young [1951] Ch 344 at 350–​351 per Danckwerts J; Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532 at 536–​537 per Young J. Cf Kincaid, “The Tangled Web: The Relationship Between a Secret Trust and the Will” [2000] Conv 420 at 424–​425.

93

Kincaid, “The Tangled Web: The Relationship Between a Secret Trust and the Will” [2000] Conv 420 at 426–​427. A trust that has been constituted cannot be revoked except pursuant to an express power of revocation in the trust instrument itself: see [25.125]. Cf Pawlowski and Brown, “Constituting a Secret Trust by Estoppel” [2003] Conv 388 (who raise the prospect of an intended beneficiary precluding the revocation of a secret trust prior to its complete constitution by raising an estoppel; they suggest that in such a case the relevant property should, at the time of the departure from the promise, vest in the secret trustee on trust for the testator for life with remainder to the secret trustee absolutely, but do not address the prospect of this undermining the “secret” aspect of the trust).

94

Kincaid, “The Tangled Web: The Relationship Between a Secret Trust and the Will” [2000] Conv 420 at 434–​439.

95

Re Huxtable [1902] 2 Ch 793; Re Keen [1937] Ch 236; Re Spence [1949] WN 237; Re Rees [1950] Ch 204.

96

Re Karsten (deceased) [1953] NZLR 456.

97

This requirement prevents a testator supplementing her or his will by later informal codicils.

98

See Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [4.61]–​[4.67].

99

But a mere promise by a person to declare herself or himself as trustee of property at some time in the future does not automatically give rise to a trust once that time arrives. Such a promise —​which is no more than a present intention to create a trust in the future —​is distinguishable from a present creation of a trust with a postponement of enjoyment by the beneficiaries, which has legal effect: Harpur v Levy (2007) 16 VR 587 (where Neave JA remarked that “[t]‌o purport to declare a trust, but to state that it will not come into operation until a later date, is inconsistent with an intention to relinquish the beneficial interest in the property from the date of execution of the deed”: at [63]; see also at [101] per Redlich JA).

100

Milroy v Lord (1862) 4 De GF & J 264 at 274–​275; 45 ER 1185 at 1189–​1190 (emphasis supplied).

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Formalities and Complete Constitution  Chapter  18

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[I]‌n order to render a [trust] valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may, of course, do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the [trust], or declares that he himself holds it in trust for those purposes … [O]ne or other of these modes must … be resorted to, for there is no equity in this court to perfect an imperfect gift … [I]f the [trust] is intended to be effectuated by one of the modes to which I have referred, the court will not give effect to it by applying another of those modes. If it is intended to take effect by transfer, the court will not hold the intended transfer to operate as a declaration of trust, for then every imperfect instrument would be made effectual by being converted into a perfect trust.

Until the settlor has done everything that, according to the nature of the intended trust property, is necessary to be done to transfer the property, the trust is not completely constituted and, as a result, the beneficiaries have no equitable interest in that property. Once the trust is completely constituted, the beneficiaries (whether individually or collectively, depending on the type of trust) take an equitable interest in the trust property,101 and can enforce the trust whether or not they have given consideration. An incompletely constituted trust may be enforced in equity as an agreement to create a trust only if the claimant has provided consideration: see [18.110]. The issue has most commonly arisen in circumstances where the transferor either dies prior to the transfer being perfected or, where for another reason usually beyond the transferor’s immediate control (say, the transferor’s bankruptcy), the property is subject to competing claims. Two important aspects of the passage extracted above merit elaboration: the requirement that the settlor must have done everything necessary to transfer the property; and that this must be done according to the nature of the property. These are discussed in turn below. There is also the point that an ineffective transfer will not operate as a declaration of trust. The relative informality of the declaration of trust does not mean that equity will perfect an imperfect transfer by treating it as a declaration of trust; if one mode of creation of a trust is used, that mode applies. The court will not interchange one with the other for fear that this may attract onerous obligations a donor does not expect to assume (that is, as a trustee) when intending an outright gift.

First element: everything must be done [18.95]  The meaning of the phrase “everything must be done that was necessary to be done”

traditionally caused interpretative difficulties. It could refer to steps that can only be taken by the transferor, steps that can be taken by either the transferor or the transferee, or steps that can be taken by third parties.102 These three potential interpretations reflected the varying views of the members of the High Court in Anning v Anning.103 Griffith CJ considered that the transferor must do only those acts that are obligatory for her or him to do and no-​one else;104 Higgins J envisaged that the transferor must do those acts it is possible for her or him to do;105

101

In the case of a discretionary trust, the beneficiaries can call for the proper administration of the trust: see [20.125], [20.130].

102

See Zines, “Equitable Assignments: When Will Equity Assist a Volunteer?” (1965) 38 ALJ 337.

103

Anning v Anning (1907) 4 CLR 1049.

104

Anning v Anning (1907) 4 CLR 1049 at 1057.

105

Anning v Anning (1907) 4 CLR 1049 at 1081–​1082.

[18.95]  553 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

and Isaacs J held that the transferor must ensure that all necessary acts are done, irrespective of who can do them.106 Case law in both Australia and New Zealand sided with Griffith CJ. In Scoones v Galvin,107 the deceased purported to transfer property by way of gift, and made constructive delivery of a memorandum of transfer to the transferee’s solicitors. As the deceased’s solicitors retained the relevant certificate of title, the New Zealand Court of Appeal held that there was not a complete gift prior to the deceased’s death, as all that could be done by the deceased had not been done. To this end, Myers CJ, Blair and Kennedy JJ observed:108 [W]‌here the gift is one of [Torrens system] land … the delivery to the donee of the memorandum of transfer alone is not sufficient. But if the transfer is accompanied by the certificate of title, then there is nothing which it is necessary for the donee to do to perfect the gift. It is true that he may pay the gift duty and attend to the stamping of the transfer and the registration thereof, but all these things can equally be done by the donee, provided that the donee has the documents. If then both documents are delivered to the donee, or to someone on his behalf, in our opinion there is a complete gift.

A similar understanding ultimately prevailed in Australia, although the route was less direct.109 In Corin v Patton,110 the High Court removed any lingering doubt that the view of Griffiths CJ did not represent the law. To this end, Mason CJ and McHugh J stated:111

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[I]‌f an intending donor of property has done everything which it is necessary for him to have done to effect a transfer of legal title, then equity will recognise the gift. So long as the donee has been equipped to achieve the transfer of legal ownership, the gift is complete in equity. “Necessary” used in this sense means necessary to effect a transfer. From the view point of the intending donor, the question is whether what he has done is sufficient to enable the legal transfer to be effected without further action on his part … [so] the donee will acquire an equitable estate or interest in the subject matter of the gift once the transaction is complete so far as the donor is concerned.

Therefore, a transferee acquires an equitable estate or interest in the subject matter of the gift (or trust) once the transaction is complete so far as the transferor is concerned. In other words, the meaning to be ascribed to Turner LJ’s principle of “everything to be done” is everything that has to be done by the transferor rather than the completion of every single step in the transfer. [18.100]  This approach has the merit of giving primacy to the settlor’s intention; after all,

if the settlor has done everything necessary to be done by her or him to effect the transfer, to refuse to enforce a trust would be to frustrate the settlor’s intention. However, where some act remains to be done that is the sole province of the settlor, the trust will be incompletely constituted until that act is done; here it cannot be inferred as a matter of course that the settlor intended to create a trust because he or she has failed to fulfil the acts required of her or him. 106

Anning v Anning (1907) 4 CLR 1049 at 1069.

107

Scoones v Galvin [1934] NZLR 1004.

108

Scoones v Galvin [1934] NZLR 1004 at 1018.

109

This path can be traced through the following cases: Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 28–​29 per Windeyer J; Cope v Keene (1968) 118 CLR 1 at 6 per Kitto J; Olsson v Dyson (1969) 120 CLR 365 at 375–​376 per Kitto J; Taylor v Deputy Federal Commissioner of Taxation (1969) 123 CLR 206. Cf Brunker v Perpetual Trustee Co Ltd (1937) 57 CLR 555 at 599–​600 per Dixon J. For a concise analysis of these authorities, see Corin v Patton (1990) 169 CLR 540 at 551–​556 per Mason CJ and McHugh J.

110

Corin v Patton (1990) 169 CLR 540.

111

Corin v Patton (1990) 169 CLR 540 at 559. See also at 582 per Deane J.

554 [18.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

For example, in Corin v Patton,112 a joint tenant of Torrens system land executed a transfer of her interest to be held on trust for herself, but the certificate of title was held at all times by the mortgagee of the land. The transferor died without the transfer being registered. Mason CJ, Deane and McHugh JJ ruled that the transferor had not done everything necessary to be done to effect the transfer because she had not authorised the mortgagee to deliver the certificate of title to the transferee. Under the applicable legislation, the transfer could not be registered without producing the original certificate of title; only the registered proprietor (the transferor) could call for its production, which she had not done by the time of her death. The result would have been different had the case emanated from the Northern Territory, Victoria or Western Australia, where the relevant statute requires a first mortgagee who holds the duplicate certificate of title to produce it for the registration of any subsequent dealing.113 In Re Vasiliou,114 an alleged transferor (the second respondent) was bankrupt. Weinberg J held that second respondent had not perfected a transfer of properties to his family trust in the face of evidence that he had not sought the consent to the transfer of the mortgagees of those properties and in raising funds for business ventures had subsequently represented himself to banks as their owner. As a result, the second respondent retained both legal and equitable title to the properties, which therefore could not be shielded from creditors on his bankruptcy, but instead vested in his trustee-​in-​bankruptcy.

Second element: what must be done according to the nature of different property

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[18.105]  The transferor must use the appropriate mode of transfer according to the nature of

the property involved. Examples of the mode of transfer for different forms of property illustrate this requirement. First, the mode of transfer of a lease is by way of assignment. Hence, in Richards v Delbridge,115 an endorsement written on the back of a lease to the effect that the deed was given to a specified person was held ineffectual. Secondly, an effective gift by cheque requires the cheque to be endorsed to its beneficiary. In Jones v Lock,116 a statement that a cheque was to be put away for the benefit of a child represented an ineffectual effort to transfer by way of gift. Thirdly, regarding chattels capable of passing by delivery, a transfer is effective where the intending settlor delivers the chattels to the intended trustee or executes and delivers a deed of gift of the chattels.117 Fourthly, the signature of a donor on a share transfer form as prescribed by statute is effective in equity to assign the shares; there is arguably no need for delivery of the share transfer certificate to the company or the donee.118 Delivery of a duly executed instrument of transfer is nonetheless advisable to avoid doubt. In Re Rose,119 for example, an unrevoked gift of shares in a company was held complete notwithstanding that the company had yet to register it, where the transfer was in the prescribed form, signed by 112

Corin v Patton (1990) 169 CLR 540.

113

Law of Property Act 2000 (NT), s 82(2)(b); Transfer of Land Act 1958 (Vic), s 86; Transfer of Land Act 1893 (WA), s 127. See St Kilda Road Pty Ltd v Parker Simmonds Securities Ltd (2002) V ConvR ¶54-​652; Vasiliou v Marchesi (2006) 157 FCR 252.

114

Re Vasiliou (2006) 235 ALR 136.

115

Richards v Delbridge (1874) LR 18 Eq 11.

116

Jones v Lock (1865) 1 Ch App 25.

117

Anning v Anning (1907) 4 CLR 1049 (as explained in Corin v Patton (1990) 169 CLR 540 at 551 per Mason CJ and McHugh J); Nolan v Nolan (2003) 10 VR 626 at [145] per Dodds-​Streeton J.

118

Pennington v Waine [2002] 1 WLR 2075 at 2092 per Arden LJ, at 2095–​2098 per Clarke LJ; Colbart Pty Ltd v Parsons (2017) 120 ACSR 377 at [258]–​[293] per Robson J.

119

Re Rose [1952] Ch 499.

[18.105]  555 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

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the transferor and the transferee and lodged with the share certificates. Provisions regarding transfer of shares contained in the company’s constitution may contain further and/​or different requirements. Fifthly, for the transfer of general law land, the delivery of a duly executed deed of conveyance to the trustee is generally required of the transferor.120 For Torrens system land the transferor must execute an instrument of transfer and deliver it, and arguably also the certificate of title (except in the Northern Territory, Victoria and Western Australia if that instrument is in the first mortgagee’s possession),121 to the intended trustee.122 Registration is unnecessary as the intended trustee can effect it.123 New South Wales authority supports the proposition that, for a joint tenancy, the putative donor must not only hand over the duly executed and registrable transfer with the intention of parting with the property, but also have done whatever is necessary for her or him to do to make the certificate of title available to the donee or the Registrar to enable the intended donee to lodge the transfer for registration.124 But where the certificate of title is held on behalf of the putative donor and the other (non-​assigning) joint tenant, the gift remains revocable by the donor and is taken to be incomplete.125 It is complete and beyond recall only when the putative donor’s direction is acted upon by actual production of the certificate of title.126 Sixthly, the mere opening of a bank account by a person in trust for another is not necessarily sufficient to make that person a trustee for the other person. But where a person not only opens an account but hands the passbook to the purported beneficiary and thereafter consults that beneficiary on the basis that the latter is the beneficial owner of the moneys (or an interest in them), the evidence tends strongly towards establishing that the depositor intended to create an immediate trust in favour of that other person.127 Conversely, where the alleged trustee retains possession of an item that is essential to the right to have any money paid over, the trust remains incompletely constituted.128

120

Civil Law (Property) Act 2006 (ACT), s 204; Conveyancing Act 1919 (NSW), s 23B; Law of Property Act 2000 (NT), s 9; Property Law Act 1974 (Qld), s 10; Law of Property Act 1936 (SA), s 28; Conveyancing and Law of Property Act 1884 (Tas), s 60; Property Law Act 1958 (Vic), s 52; Property Law Act 1969 (WA), s 33.

121

Law of Property Act 2000 (NT), s 82(2)(b); Transfer of Land Act 1958 (Vic), s 86; Transfer of Land Act 1893 (WA), s 127.

122

Land Titles Act 1925 (ACT), ss 73, 75; Real Property Act 1900 (NSW), s 46; Land Title Act 2000 (NT), ss 61, 62; Land Title Act 1994 (Qld), ss 61, 62; Real Property Act 1886 (SA), s 96; Land Titles Act 1980 (Tas), s 58; Transfer of Land Act 1958 (Vic), s 45; Transfer of Land Act 1893 (WA), s 82. Where a solicitor who acts for both donor and donee holds the executed transfer, the question of whether the donor has done everything necessary for her or him to effect a transfer of the legal title depends largely on whether the solicitor holds the transfer as agent for the donor or for the donee. In Marchesi v Apostolou [2007] FCA 986 at [62], Jessup J considered that this change “cannot be assumed to have occurred … until at least he or she has the donor’s authority to treat the transfer as the property of the donee, and as being held on behalf of the donee” and that “[w]‌hen that authority arises will, almost inevitably, be a matter of inference from all the circumstances, but … should be taken as having arisen while the donor still intends to do something apropos the transfer or its registration which requires physical possession of the instrument” [affd but on a different ground: Vasiliou v Marchesi [2008] FCAFC 129].

123

Scoones v Galvin [1934] NZLR 1004; Corin v Patton (1990) 169 CLR 540 at 559–​560 per Mason CJ and McHugh J, at 567–​569 per Brennan J, at 580–​583 per Deane J, at 589–​592 per Toohey J; Catanzariti v Romano [2011] ACTSC 106 (where in the case of a gift of a suburban house by a grandfather to his grandson, an indication by the grandfather to the grandson as to the location of the certificate of title was treated as a notional delivery of the certificate for this purpose: at [149]–​[155] per Harper M).

124

Stefanovic v Petrovic (unreported, CA(NSW), 30 October 1989); Corin v Patton (1990) 169 CLR 540.

125

Costin v Costin [1997] ANZ Conv R 401 at 403–​404 per Brownie AJA; Stone v Registrar of Titles [2012] WASC 21 at [113]–​ [133] per Simmonds J.

126

Motor Auction Pty Ltd v John Joyce Wholesale Cars Pty Ltd (1997) 138 FLR 118 at 128 per Santow J.

127

Kauter v Hilton (1953) 90 CLR 86 at 100 per Dixon CJ, Williams and Fullagar JJ.

128

Haythorpe v Rae [1972] VR 633 at 637 per Crockett J.

556 [18.105] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

Enforceability of an incompletely constituted trust by way of contract [18.110]  The intended trustee or beneficiary of an incompletely constituted trust can enforce

the trust only if he or she has given consideration to the settlor (and so is a volunteer) or otherwise falls within the exceptions to the principle “equity will not assist a volunteer” (see [18.125]–​[18.150]). If a settlor promises to create a trust, the enforceability of this promise rests on the law of contract. In line with the latter, a party (whether trustee or beneficiary) who has given consideration may enforce the promise as a contract.129 But the trust that is created as the result of a contract is only enforceable as a trust once it is completely constituted. At that point, trust law applies and the question of consideration becomes irrelevant; the trust is enforced in equity.

Settlor’s promise to intended beneficiary [18.115] Where a settlor promises to create a trust and the beneficiary is a party to the

promise and provides valuable consideration, the beneficiary is generally entitled to specific performance of the promise, thus compelling the settlor to create the trust. Valuable consideration is something actually given or intended to be forborne.130 Therefore, a claimant under an incompletely constituted trust is not a volunteer where he or she forbears to sue on any existing cause of action. Forbearance to sue is treated in equity as a benefit, and equivalent to consideration. Nor is a person within a marriage settlement131 a volunteer, as equity regards a promise to create a trust made before and in contemplation of marriage as made for good consideration (or, if the trust was created after marriage, reciting a pre-​marriage promise to make a trust). Persons within the marriage consideration are the actual parties themselves and their children,132 each of whom can sue for specific performance of the promises contained in the settlement. Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

Settlor’s promise to intended trustee [18.120]  A settlor may by deed (which does not require consideration as a prerequisite of its

operation) or for consideration promise to transfer property to a trustee to be held on trust for a beneficiary. Here the trustee is the party to the settlor’s promise, and so it is the trustee who has contractual rights against the settlor. Thus, a trustee who has given consideration is generally entitled to specific performance of the promise.133 If the trustee gives no valuable consideration but the promise is contained in a deed, the trustee may obtain damages. It is an unclear whether the trustee is able to obtain damages that represent the beneficiary’s loss (in which case the trustee would hold the damages for the benefit of the beneficiary) or only damages that represent her or his own loss, which will normally be minimal if not non-​ existent. The better view is the former, in that a trustee’s right to sue for damages or specific performance is form of property (a chose in action), which the trustee cannot be said to hold

129

Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246 at 283–​284 per Higgins J.

130

Lee v Lee (1876) 4 Ch D 175; Teasdale v Braithwaite (1877) 5 Ch D 630; Re Foster (1877) 6 Ch D 87 at 89 per Jessel MR; Pullan v Koe [1913] 1 Ch 9.

131

A marriage settlement comprises a fund, vested in trustees, to which the bride and groom and their respective families contribute, to be devoted to the new branch of each family brought into existence by the marriage. Upon marriage, the husband and wife can derive income from that fund, the capital passing to their children on the death of the survivor.

132

Attorney-​General v Jacobs Smith [1895] 2 QB 341 at 347–​349 per Lindley LJ; Pullan v Koe [1913] 1 Ch 9; Re Cook’s Settlement Trust [1965] Ch 902.

133

Colyear v Lady Mulgrave (1836) 2 Keen 81; 48 ER 559.

[18.120]  557 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

beneficially because the promises giving rise to that right were made to her or him as trustee. The right must therefore be held for the beneficiary’s benefit. So if the trustee refuses to sue the settlor, the beneficiary can do so, joining the trustee as a party.134 A different conclusion may ensue if the court finds that it was not the settlor’s intention to create a trust of the chose in action for the benefit of the beneficiary, in which case the trustee may hold the chose in action on resulting trust for the settlor. Exceptions to the rule that equity will not assist a volunteer [18.125]  Incompletely constituted trusts may have legal effect in the circumstances that con-

stitute exceptions to the rule that equity will not assist a volunteer, each discussed below.

Rule in Strong v Bird

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[18.130] The rule in Strong v Bird135 is premised on the presence of four conditions:136

(1) that the testator (“A”) purported to make an inter vivos immediate137 gift of specific property138 to another person (“B”); (2) that this gift failed for want of compliance with the legal requirements for a complete divesting of the title from A to B; (3) that at A’s death A retained the intention that the property should be treated as having been effectually given to B; and (4) that A left a will appointing B as the executor or one of A’s executors.139 If B discharges the onus of establishing that these conditions are satisfied, B is entitled to an equitable claim against the estate for the property, albeit one that can be defeated by a successful family provision claim.140 The rule has been extended to apply to any imperfect gift where there is a continuing intention to give, and even (though with some dissent) to a situation where the will was made before the gift of property.141 Yet the rule is anomalous,142 and it has been said that “[i]‌t is certainly strange that the property rights of beneficiaries under a will may depend upon the accident that the testator selects as executor an individual to whom he wrongly believes he has made a gift”.143 In any case, as the rule only applies where

134

Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564. Cf Re Pryce [1917] 1 Ch 234; Re Cook’s Settlement Trust [1965] Ch 902. As to the beneficiaries’ right to sue a person other than the trustee, see [24.15], [24.20].

135

Strong v Bird (1874) LR 18 Eq 315.

136

These are found in the judgment of Kitto J in Cope v Keene (1968) 118 CLR 1 at 8. See also Re Stewart [1908] 2 Ch 251; Re Freeland [1952] Ch 110 at 117 per Evershed MR; Re Ariell (No 2) [1974] Qd R 293 at 295 per Douglas J; Blackett v Darcy (2005) 62 NSWLR 392 at [32]–​[35] per Young CJ in Eq.

137

The rule cannot be applied where the gift is intended to be in the future: Re Freeland [1952] Ch 110; Cope v Keene (1968) 118 CLR 1 at 8 per Kitto J; Rutledge v Sheridan [2010] QSC 257 at [24], [25] per Daubney J (where the rule did not apply because precatory language was adopted: see at [39], [40]).

138

This includes a gift of land: Benjamin v Leicher (1998) 45 NSWLR 389 at 402 per Cohen J; Stone v Registrar of Titles [2012] WASC 21 at [140] per Simmonds J (although refusing to apply the rule to perfect an attempt to make a gift of a joint tenant’s interest in real property, as the death of a donor causes any interest as joint tenant to accrue to the surviving joint tenant, so that the estate of the donor cannot include that interest: at [142], [143]).

139

The rule has also been held to apply where there are two donees and only one is appointed an executor: Blackett v Darcy (2005) 62 NSWLR 392 at [34] per Young CJ in Eq (reasoning that on first principles a joint gift is treated as a gift of the whole to each of the joint donees, though they will be liable to make contribution inter se).

140

Cope v Keene (1968) 118 CLR 1 at 9 per Kitto J; Public Trustee v Jones (2007) 251 LSJS 364 at [70] per Layton J.

141

Re Pink [1912] 2 Ch 528. Cf Benjamin v Leicher (1998) 45 NSWLR 389 at 401 per Cohen J (who considered it difficult to see the legal basis for this extended operation).

142

Blackett v Darcy (2005) 62 NSWLR 392 at [37] per Young CJ in Eq (adding that the rule “should not in this 21st century be extended at all”). See also Rutledge v Sheridan [2010] QSC 257 at [23] per Daubney J; Jaconelli, “Problems in the Rule in Strong v Bird” [2006] Conv 432 (who maintains that the rule “is not rooted in any clear moral principle or common sense notion”, and that the founding case itself did not even establish many of its main features: at 450).

143

Heydon and Leeming, Cases and Materials on Equity and Trusts (8th ed, LexisNexis Butterworths, 2011), [6.15].

558 [18.125] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

the beneficial interest is given to the person who is granted probate as executor,144 it does not apply where B is to hold the gift on trust145 or where B’s interest is subject to a condition.146

Gifts in contemplation of death [18.135]  Gifts in contemplation of death (donationes mortis causa) fall outside both the gen-

eral rule of unenforceability of incompletely constituted trusts, and the formal requirements of a valid will.147 Four conditions must exist to constitute a valid donatio mortis causa:148 (1) the gift must be in contemplation of impending death; (2)  its subject matter must be personal property;149 (3) there must be delivery of the subject matter of the gift, a transfer of the means or part of the means of getting at the property, or a transfer of the indicia of title; and (4) the gift must be conditional on the donor’s death (but otherwise be unconditional). A  donatio mortis causa becomes absolute only on the death of the donor —​the donee’s rights disappear and the gift reverts to the donor if the contemplated death does not occur150 —​and does not vest in the executor for distribution under the will. So gifts in contemplation of death, like secret trusts (see [18.80]), operate outside the will.

Estoppel

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[18.140] An imperfect gift may be enforceable where the donee can establish the elements

of an estoppel (see Ch 10), namely proof of a representation by the purported settlor/​testator intended to be relied on and that was, in fact, relied upon to the representee’s detriment. If so, equity may perfect the gift to satisfy the representee’s claim. Estoppel was argued in Olsson v Dyson.151 A  company owed a husband $2000. The husband represented to his wife, the respondent, that she was entitled to this debt. The husband also spoke to the managing director of the company to this effect. On the husband’s death, the issue arose whether the executors or the wife were entitled to the debt. The High Court was asked to determine whether the husband’s conduct caused the respondent to alter her position detrimentally in reliance on it, so as to raise an equity in her favour to have the debt made over to her. On the facts, the court found that the respondent had not established an estoppel. Kitto J, with whom Menzies and Owen JJ agreed, explained the reasons for this conclusion as follows:152 [T]‌here is not the slightest evidence that after the making of the purported gift the deceased ever adverted to the question whether his purported gift might be treated by his wife as a reason for abstaining from making a testator’s family maintenance application after his death or

144

Re Weaver [1916] SALR 167; Re Hince [1946] SASR 323 at 331 per Abbott J.

145

Re Halley (1959) 43 MPR 79 (Nfld) (Maritime Provinces Reports).

146

Blackett v Darcy (2005) 62 NSWLR 392 at [35]–​[37] per Young CJ in Eq (involving a Gill v Gill condition, as to which see [16.160]).

147

See generally Dal Pont and Mackie, Law of Succession (2nd ed, LexisNexis Butterworths, 2017), [1.15]–​[1.28].

148

Dufficy v Mollica [1968] 3 NSWR 751 at 758 per Holmes JA; Sen v Headley [1991] 2 All ER 636 at 639 per Nourse LJ; Bayliss v Public Trustee (1988) 12 NSWLR 540; Wilson v Paniani [1996] 3 NZLR 378 at 381 per Gallen J.

149

For example, a cheque drawn in favour of the donor and endorsed in favour of the donee may be a valid donatio (Clement v Cheesman (1884) 27 Ch D 631) as can a bank credit (see Else Mitchell, “Donationes Mortis Causa of Bank Credits” (1943) 17 ALJ 167). However, following the English Court of Appeal’s decision in Sen v Headley [1991] 2 All ER 636, in England a gift of land by delivery of title deeds (that is, unregistered land) can be the subject of a donatio mortis causa. This decision is unlikely to impact on Torrens system land because the elements of title to Torrens land cannot pass merely by delivery of the certificate of title: see Meagher, Gummow and Lehane, [31-​050].

150

Cain v Moon [1896] 2 QB 283 at 286 per Lord Russell CJ; Harneiss v Public Trustee (1940) 40 SR (NSW) 414.

151

Olsson v Dyson (1969) 120 CLR 365.

152

Olsson v Dyson (1969) 120 CLR 365 at 379.

[18.140]  559 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

acting in any other way to her prejudice. He intended to make her a gift; he went some distance towards doing so and assumed that he had done so completely; no doubt he realized that she too assumed he had completely done so; but there the matter ended, without his thereafter offering her any encouragement or inducement to adopt a course prejudicial to herself, and without his doing anything else that can be held to have bound him in conscience to perfect the imperfect gift.

Olsson seems a relatively harsh decision, and perhaps under the potentially more expansive modern notion of estoppel would be decided differently. Also, a role for an overcharging concept of unconscionable conduct (discussed immediately below) may indicate a judicial willingness not to be circumscribed by matters of form over substance.

Unconscionability and constructive trusts

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[18.145] In Pennington v Waine,153 Arden LJ recently remarked that “the principle that equity

will not assist a volunteer at first sight looks like a hard-​edged rule of law not permitting much argument or exception”, and that “[h]‌istorically the emergence of the principle may have been due to the need for equity to follow the law rather than an intuitive development of equity”. Because the principle against imperfectly constituted gifts led to harsh and seemingly paradoxical results, Arden LJ added, “equity had tempered the wind to the shorn lamb (ie the donee)” by, inter alia, utilising the constructive trust or applying a benevolent construction to words of gift.154 These were instances of a more general principle, according to her Ladyship, namely that “a donor will not be permitted to change his or her mind if it would be unconscionable, in the eyes of equity, vis-​à-​vis the donee to do so”.155 Arden LJ referred to the advice of the Privy Council the year before in T Choithram International SA v Pagarini156 as illustrative of the curial approach both on the ground of constructive trusts and benevolent construction. Yet in that case their Lordships made no reference to either such concept. The only inclination to this end is the statement that “[a]‌lthough equity will not aid a volunteer, it will not strive officiously to defeat a gift”.157 The obscure nature of their Lordships’ reasoning in Choithram nonetheless may benefit from a more principled justification. Choithram involved an attempt by a donor to gift all his wealth to a foundation. Whilst seriously ill the donor executed a trust deed establishing a philanthropic foundation. He appointed himself a trustee, and made an oral statement that he gave his entire wealth to the foundation, expressly including his deposit balances and shares in four companies. The donor told the accountant for those companies to transfer those balances and shares to the foundation. Some of the other trustees signed the trust deed on that day and others did so later. At a board meeting later in the day the donor reported orally what he had done, and resolutions were passed to this effect. The shares in question were not transferred until after the donor’s death. The claim, brought by the donor’s next-​of-​kin, concerned whether the donor had made an immediate irrevocable gift.

153

Pennington v Waine [2002] 1 WLR 2075 at 2087.

154

Pennington v Waine [2002] 1 WLR 2075 at 2087, 2088–​2089.

155

Pennington v Waine [2002] 1 WLR 2075 at 2090–​2091. See also at 2105 per Clarke LJ.

156

T Choithram International SA v Pagarini [2001] 1 WLR 1.

157

T Choithram International SA v Pagarini [2001] 1 WLR 1 at 11 per Lord Browne-​Wilkinson. This statement was cited with approval by Young CJ in Eq in Blackett v Darcy (2005) 62 NSWLR 392 at [30].

560 [18.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Formalities and Complete Constitution  Chapter  18

The British Virgin Islands Court of Appeal upheld the next-​of-​kin’s claim, remarking that the donor had not done everything he was required to do in order to transfer the property to the foundation, and had not created a declaration of trust because his words were of outright gift. The Privy Council considered that these findings did not end the matter. Lord Browne-​Wilkinson reasoned that whereas the words used by the donor were those normally appropriate to an outright gift, because the foundation had no legal existence apart from the trust declared by the foundation trust deed, a gift to the foundation could only mean “I give to the trustees of the foundation trust deed to be held by them on the trusts of foundation trust deed”.158 Although the words were apparently words of outright gift, they were, according to his Lordship, essentially words of gift on trust. This led him to conclude as follows:159 There can in principle be no distinction between the case where the donor declares himself to be sole trustee for a donee or a purpose and the case where he declares himself to be one of the Trustees for that donee or purpose. In both cases his conscience is affected and it would be unconscionable and contrary to the principles of equity to allow such a donor to resile from his gift.

So the Privy Council reached a different conclusion to the lower court because it chose to construe the case as one of a declaration by the donor of himself as trustee, rather than as one of transfer to trustees. Yet it has rightly been queried whether the decision breaches the principle that a failed transfer will not be interpreted as a successful declaration of trust.160 Perhaps the nub of the decision lies in the notion of unconscionable conduct mentioned by Lord Browne-​Wilkinson, namely that there comes a stage in the gift-​making process beyond which it is unconscionable for the donor to resile from the gift. Yet to date this has been given effect through the vehicle of estoppel —​based as it is in Australia on proof of unconscionable conduct (see [10.310]) —​rather than any broader unconscionability jurisdiction.

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[18.150] As suggested by Arden LJ in Pennington v Waine, perhaps the constructive trust

has a role to play in this context; a donor who resiles from a promise to gift property may be said to unconscionably deny a beneficial interest in that property to the intended donee. Curiously this better fits the concept of constructive trusteeship in Australia than in England, but faces the basic hurdle that, generally speaking, simply going back on one’s word is not unconscionable.161 In cases of estoppel, more is required (see [10.315]) and, to attract a remedial constructive trust, contributions to property must usually be established (see [38.180], [38.185]). It should not, therefore, be assumed that Australian courts will necessarily adopt such an expansive approach, notwithstanding that they, more so than their English counterparts, favour relief based on unconscionability. There is the further concern that a malleable concept such as unconscionability may be used “to grant judges an unfettered discretion to perfect imperfect transactions in an arbitrary and unpredictable fashion”.162

158

T Choithram International SA v Pagarini [2001] 1 WLR 1 at 11–​12.

159

T Choithram International SA v Pagarini [2001] 1 WLR 1 at 12.

160

Rickett, “Completely Constituting an Inter Vivos Trust: Property Rules?” [2001] Conv 515 at 519.

161

Tjio and Yeo, “Re Rose Revisited: The Shorn Lamb’s Equity” [2002] LMCLQ 296 at 300. Cf Ladds (2003) 17 TLI 35 at 39 (“It may be that Pennington is best understood as an estoppel case”).

162

Garton, “The Role of the Trust Mechanism in the Rule in Re Rose” [2003] Conv 364 at 379. See also Halliwell, “Perfecting Imperfect Gifts and Trusts: Have We Reached the End of the Chancellor’s Foot?” [2003] Conv 192 at 202 (“if we are left with a maxim that equity will not assist a volunteer unless it is unconscionable not to do so, then we are left with a very unruly beast”). ContraHepburn, “The Discourse of Conscience in the Assessment of Voluntary Assignments in Equity” (2006) 1 J Eq 117 (who endorses the broader unconscionability approach as one that has liberated equitable analysis from undue formalism in this context).

[18.150]  561 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

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Chapter 19

Legality of Trusts FORMS OF ILLEGALITY [19.05]  A trust will not be enforced if its purpose or object, had it involved a gift or contract,

could not be enforced at law as being contrary to public policy or statute. It would be inconsistent with both the maxim “equity follows the law”, and the historical and modern role of equity, for equity to enforce an obligation unenforceable at law by virtue of illegality. When referring to illegality as a ground for invalidating a trust, the distinction is traditionally made between public policy illegality, which stems from the policy espoused by judges, and statutory illegality, which represents the policy of the legislature. Public policy illegality [19.10] Immoral or illegal trusts, or trusts otherwise contrary to public policy, cannot be

enforced at law.1 In Trustees of Church Property of the Diocese of Newcastle v Ebbeck Windeyer J warned of the dangers of basing a decision on public policy:2

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Public policy we know is “a very unruly horse”; it is also “a treacherous ground for legal decision”; “a very unstable and dangerous foundation on which to build until made safe by decision”; “slippery ground”; “a vague and unsatisfactory term and calculated to lead to uncertainty and error when applied to the decision of legal rights”; and much else.

For this reason, his Honour was mindful of the remark of Lord Atkin in Fender v St John-​ Mildmay3 that “the doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable and does not depend upon the idiosyncratic inferences of a few judicial minds”. The dynamic nature of the legal system necessarily dictates that public policy may change with the passage of time. The legislative trend may provide a useful indicator of current public policy.4 A settlor’s right to dispose of property as he or she deems fit must be balanced against the public desirability of that disposition. Rather than attempting to define (or even describe) public policy  —​a difficult if not impossible task  —​analysing those instances found by the courts to infringe public policy can convey an appreciation of its meaning: see [19.20]–​[19.95].

1

Symes v Hughes (1870) LR 9 Eq 475; Permanent Trustee Co v Dougall (1931) 34 SR (NSW) 83; Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394; Blathwayt v Baron Cawley [1976] AC 397.

2

Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 at 415 (footnotes omitted).

3

Fender v St John-​Mildmay [1938] AC 1 at 12.

4

For example, the existence of legislation that gives legal recognition to de facto (heterosexual and, now, homosexual) relationships, and empowers the court to enforce rights arising out of such relationships, precludes the court from characterising de facto relationships as contrary to public policy: Green v Green (1989) 17 NSWLR 343 at 358 per Gleeson CJ. Similarly, although trusts in favour of future illegitimate children have traditionally been declared void (Hill v Crook (1873) LR 6 HL 265 at 276 per Lord Chelmsford), the enactment of status of children legislation indicates that today these trusts are unlikely to offend public policy.

[19.10]  563 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

Statutory illegality [19.15]  Trusts may be unenforceable or void by reason of infringement of a statutory pro-

vision. It is a question of construction of the relevant provision to determine its effect on the trust. Issues of statutory illegality can arise in the context of pleading an illegal purpose to substantiate an entitlement under a trust: see [19.30]–​[19.50]. Principally, though, statutory illegality focuses on trusts to avoid creditors (see [19.100]–​[19.145]), trusts to evade taxation (see [19.150]) and the Family Court’s power to set aside family trusts that have the effect of defeating an order of the court (see [19.155]–​[19.170]).

TRUSTS FOR ILLEGAL PURPOSES [19.20]  An equitable interest arising under a trust for an illegal purpose will not, as a general

rule, be enforced because a court will not assist a party to carry out an illegal transaction.5 The illegality of purpose does not, however, prevent an equitable proprietary interest from arising or generate a forfeiture of that interest.6 Lord Denning explained the reason for this in Singh v Ali:7

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The reason is because the transferor, having fully achieved his unworthy end, cannot be allowed to turn round and repudiate the means by which he did it —​he cannot throw over the transfer. And the transferee, having obtained the property, can assert his title to it against all the world, not because he has any merit of his own, but because there is no one who can assert a better title to it.

An example of a trust for an illegal purpose is found in Thrupp v Collett (No 1).8 The testator bequeathed a sum to purchase the discharge of poachers “committed to prison for non-​ payment of fines, fees or expenses under Game Laws”. The Master of the Rolls held the bequest contrary to public policy as being calculated to encourage offences prohibited by statute, reasoning that “[i]‌t is impossible not to see, that the effect of it would be to give immunity and protect persons in the commission of acts, which are treated by the legislature as offences, and for which penalties by fine are imposed”.9 Where the court considers that, in fairness, effect should be given to a trust, that its establishment may have involved illegal acts does not necessarily prevent its enforcement. For example, in Edmunds v Pickering10 Lander J remarked that, on the facts before him, the trustee could have acquired the trust property and held it without committing an illegal act, and so the fact that the trustee had committed two illegal acts in so doing did not brand the trust as established for an illegal purpose. His Honour reasoned that as neither of the illegal acts was necessary for the purpose of acquiring or maintaining the trust property, there was no reason to deny the beneficiary its entitlement to the trust property merely because the purpose of the trust was forbidden by statute.

5

Payne v McDonald (1908) 6 CLR 208 at 211 per Griffith CJ.

6

Muckleston v Brown (1801) 6 Ves 52 at 69; 31 ER 934 at 942 per Lord Eldon LC.

7

Singh v Ali [1960] AC 167 at 176–​177.

8

Thrupp v Collett (No 1) (1858) 26 Beav 125; 43 ER 844.

9

Thrupp v Collett (No 1) (1858) 26 Beav 125 at 127–​128; 43 ER 844 at 845.

10

Edmunds v Pickering (1999) 75 SASR 407 at 566 [affd Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 at 193–​194 per Gray J, with whom Prior ACJ and Wicks J concurred].

564 [19.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Legality of Trusts  Chapter  19

[19.25]  Traditionally a party to a trust for an illegal purpose could recover property trans-

ferred under the trust only if her or his claim can be substantiated without pleading evidence pertaining to the illegal purpose (see [19.30], [19.35]) or where the illegal purpose had yet to be carried into effect (see [19.55]). The law’s recognition, in Australia and now also in England, that illegal purposes do not per se preclude the recovery of property (see [19.40]–​ [19.50]) necessarily qualifies the strictness of these principles. Disclosure of illegal purpose [19.30]  The classic statement of principle is that of Lord Mansfield in Holman v Johnson:11

“[n]‌o court will lend its aid to a man who founds his cause of action upon an immoral or illegal act”. This dictum applies in both law and equity.12 The policy is to discourage fraud. This principle generates the general rule that a court assists a party to a transfer of property for an illegal purpose to recover that property only if he or she can establish legal or equitable title without relying on her or his own illegality. A party who cannot establish a cause of action without disclosing the illegality is not entitled to the relief sought.13

Application in cases of presumptions of resulting trust and advancement: the traditional view

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[19.35]  It flows from the general principle noted above that a party cannot rely upon her

or his own fraud or illegality to rebut a presumption.14 Its operation can be illustrated by cases where it is sought to rebut the presumptions of resulting trust or advancement (which are discussed in Ch 26). A  mechanical application of the Holman principle dictates that where money or property has been transferred for an illegal purpose in circumstances giving rise to a presumption of advancement, the transferor cannot rebut the presumption without leading evidence of the illegality.15 For a claim based on the presumption of resulting trust, conversely, the plaintiff need not disclose an illegality because the law presumes that a trust exists.16

Application in cases of presumptions of resulting trust and advancement: the modern view [19.40] That a mechanical application of the Holman v Johnson17 principle may generate

a result “achieved at the expense of substance” that may “lead to harsh consequences” was recognised by the High Court in Nelson v Nelson,18 which favoured a flexible approach more

11

Holman v Johnson (1775) 1 Cowp 341 at 343; 98 ER 1120 at 1121. See Katekar, “Recovery of Property from Trusts Formed for Illegal Purposes” (1991–​1992) 8 Aust Bar Rev 107 at 129–​136.

12

Ayerst v Jenkins (1873) LR 16 Eq 275 at 283; Chettiar v Chettiar [1962] AC 294 at 303; Tinsley v Milligan [1994] 1 AC 340 at 354–​356 per Lord Goff.

13

Scott v Brown, Doering, McNab & Co [1891–​4] All ER Rep 654 at 660 per Smith LJ; Tinsley v Milligan [1994] 1 AC 340 at 369–​370 per Lord Browne-​Wilkinson.

14

Gascoigne v Gascoigne [1918] 1 KB 223 at 226 per Lush J; Preston v Preston [1960] NZLR 385 at 402 per Gresson P, at 404–​405 per North J; Chettiar v Chettiar [1962] AC 294 at 302 (PC); Tinker v Tinker [1970] 1 All ER 540 at 542–​543 per Salmon LJ; Weston v Beaufils (1994) 122 ALR 240 at 261–​266 per Hill J.

15

See, for example, Chettiar v Chettiar [1962] AC 294.

16

See, for example, Blackburn v Yarra Vale Properties Pty Ltd [1980] VR 290; Tinsley v Milligan [1994] 1 AC 340.

17

Holman v Johnson (1775) 1 Cowp 341 at 343; 98 ER 1120 at 1121.

18

Nelson v Nelson (1995) 184 CLR 538 at 558 per Deane and Gummow JJ. See also at 610 per McHugh J.

[19.40]  565 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

consistent with equitable principle.19 It held that a transferor of property for a purpose rendered illegal by statute can recover the property despite having to adduce and rely on evidence of the illegality if the enforcement of the transferor’s equitable rights is not inconsistent with the underlying policy of that statute. This principle was well expressed by McHugh J:20

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[C]‌ourts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies.

Deane and Gummow JJ remarked that equity is equipped to attain a result that eschews harsh extremes in that “equity may impose terms upon a party seeking the administration of equitable remedies”.21 In Nelson a mother (first appellant) provided funds for the purchase of a house (the “Bent Street property”) in the names of her son (the second appellant) and daughter (first respondent). This transaction was designed to enable the mother to access subsidised finance under the Defence Service Homes Act 1918 (Cth) on the purchase of another home (the “Kidman Lane property”) for herself. The mother later obtained that finance having declared that she had no interest in a house other than the one for which the subsidy was sought. On the later sale of the Bent Street property, the mother claimed the proceeds. Her son conceded the claim and joined with his mother seeking declarations that the proceeds were held on trust for the mother. The daughter cross-​claimed, arguing that she held a beneficial interest in the proceeds on the basis that her mother had provided the original purchase moneys by way of advancement. As the court held that the relationship between mother and child gave rise to the presumption of advancement (see [26.135]), the issue was whether the mother was precluded from admitting evidence rebutting the presumption of advancement on the basis that it disclosed an illegality. Although four separate judgments were delivered, excepting Dawson J22 some commonality in reasoning appears. Deane and Gummow JJ noted that the Defence Service Homes Act prescribed penalties for what the mother did, and so the imposition of a further sanction —​to deprive her of the proceeds of what otherwise was her beneficial ownership of the Bent Street

19

Commentators have likewise called for the rejection of a mechanical application of the Holman v Johnson principle: see, for example, Davies, “Presumptions and Illegality” in Oakley (ed), Trends in Contemporary Trust Law (Clarendon Press, 1996), Ch 2; Thompson, “Illegal Transactions” [1999] Conv 242. In this respect, the decision in Nelson has been welcomed by commentators: see, for example, Phang, “Of Illegality and Presumptions —​Australian Departures and Possible Approaches” (1996) 11 JCL 53; Butler, “Illegally Tainted Transfers and Resulting Trusts: Nelson v Nelson” (1997) 19 UQLJ 150. See also Duncan v McDonald [1997] 3 NZLR 669 at 684 (CA) (Nelson suggests that “the tide is flowing in the direction of a flexibility which will enable the Courts in their equitable jurisdiction to make an appropriate apportionment of losses amongst wrongdoers”). The English Law Commission has since recommended legislative reform to vest in the courts a discretion to determine the effect of illegality in a limited class of trust: Law Commission, The Illegality Defence (LawCom No 320, March 2010).

20

Nelson v Nelson (1995) 184 CLR 538 at 613.

21

Nelson v Nelson (1995) 184 CLR 538 at 559.

22

Dawson J stated that “illegal conduct on the part of a person claiming equitable relief does not in every instance disentitle that person to the relief”; rather, the illegality must have “an immediate and necessary relation to the equity sued for”: Nelson v Nelson (1995) 184 CLR 538 at 581. In his Honour’s opinion, where reliance is not placed upon the illegality —​in other words, where the court is not asked to effectuate the illegal purpose but merely to recognise an interest admittedly in existence —​there was not an immediate and necessary relation between the illegality and the claim. On the facts, Dawson J concluded, unlike the other members of the court, that the appellant in her claim for equitable relief did not place reliance upon her fraudulent conduct in any direct or necessary way. Cf McInnes, “Advancement, Illegality and Restitution” (1997) 7 APLJ 1 at 11–​12.

566 [19.40] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Legality of Trusts  Chapter  19

property —​would not be an appropriate adjunct to the scheme of the Act. However, their Honours added that:23

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… as the price of obtaining the relief she seeks for the recognition and enforcement of a resulting trust in respect of the whole of the balance of the proceeds of sale of the Bent Street property, Mrs Nelson must be prepared to do equity according to the requirements of good conscience. That may involve consideration of more than the interests of the parties to the litigation. Here, good conscience calls for the taking by Mrs Nelson of steps sufficient to satisfy the demands of the underlying policy of the Act. This requires denial to Mrs Nelson of the benefit in respect of the purchase of the Kidman Lane property which she has obtained by her unlawful conduct.

In a similar vein, McHugh J noted that the Act contained internal mechanisms to deal with false declarations and applications by persons not entitled to subsidised loans, and provided for recovery of a subsidy paid in relation to those persons.24 According to his Honour, these mechanisms supported the mother’s submission that the policy of the Act would not be defeated if the court enforced her equitable rights. As the parliament saw the legislative sanctions and remedies as sufficient to deal with unlawful conduct of this kind, McHugh J could see no justification to impose a further sanction by refusing to enforce the legal or equitable rights of applicants under the Act, especially where this would generate a penalty disproportionate to the seriousness of an applicant’s conduct.25 Like Deane and Gummow JJ, McHugh J observed that rights associated with or arising out of unlawful conduct should only be enforced on condition that the wrongdoer takes all lawful steps to overcome the consequences of that conduct. His Honour recognised that it would not always be possible for the claimant to do so, or for the courts to impose terms designed to remedy the wrongdoing.26 Toohey and Dawson JJ, on the other hand, rejected the need for Mrs Nelson to “do equity” by foregoing the benefit of her unlawful conduct. Dawson J considered that it was no part of the court’s function to assist the Commonwealth in proceedings to which it was not a party.27 Toohey J held that the imposition of any such condition would be “to require more than that a plaintiff do equity between the parties”, but accepted that the Commonwealth should be informed of the false declaration.28 [19.45] Although Nelson was concerned with the issue of an illegal purpose stemming from

statute, the judgments reveal an indication of the curial attitude to the enforcement of trusts for purposes rendered illegal otherwise than by statute. In this case, it appears that equity will enforce a trust created for an illegal purpose where it is contrary to the principles of equity to do otherwise. Deane and Gummow JJ relied on American authority in phrasing the issue as one of whether the unjust enrichment of the transferee is outweighed by the policy against giving relief to the transferor who has entered into an illegal transaction.29

23

Nelson v Nelson (1995) 184 CLR 538 at 571 (paragraph break omitted). Cf Koh v Chan (1997) 139 FLR 410 at 428–​429 per Murray J.

24

Nelson v Nelson (1995) 184 CLR 538 at 616.

25

Nelson v Nelson (1995) 184 CLR 538 at 616–​617. See also Edmunds v Pickering (1999) 75 SASR 407 at 567 per Lander J [affd Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 at 197 per Gray J, with whom Prior ACJ and Wicks J concurred]; Ikeuchi v Liu (2001) 160 FLR 94 at 110 per Muir J.

26

Nelson v Nelson (1995) 184 CLR 538 at 617–​618.

27

Nelson v Nelson (1995) 184 CLR 538 at 581–​582.

28

Nelson v Nelson (1995) 184 CLR 538 at 598.

29

Nelson v Nelson (1995) 184 CLR 538 at 564, 566–​567.

[19.45]  567 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

In Toohey J’s opinion, a universal application of the Holman v Johnson30 rule —​ that “[n]‌o court will lend its aid to a man who founds his cause of action upon an immoral or illegal act” —​would often lead to unjust and capricious results.31 He added that although the public policy in discouraging unlawful acts and refusing them judicial approval is important, it is not the only relevant policy consideration; there is also the need to prevent injustice and the enrichment of one party at the expense of the other,32 especially if each participated in the illegal transaction. That to refuse the mother’s claim would be to give the daughter a windfall gain with a corresponding detriment to the mother led Toohey J to find no rule of public policy demanding that relief to the mother be refused, or precluding giving effect to a resulting trust in her favour. McHugh J expressed similar views, remarking that a finding that an agreement is unlawful or tainted by an unlawful purpose merely sets the stage for a further inquiry:  are the circumstances surrounding the agreement such that the court should deny a relevant remedy to the party seeking its assistance?33 Like Toohey J, his Honour saw a strict application of the Holman rule as too extreme and inflexible to represent sound legal policy.34

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[19.50]  Statements in English courts querying the appropriateness of a strict application of

the Holman v Johnson principle have been surfacing for some time,35 in turn setting the scene for its re-​evaluation. The opportunity presented itself before the Supreme Court in Patel v Mirza,36 involving a contract under which the plaintiff advanced money to the defendant for (illegal) insider trading. Lord Toulson, with the agreement of Lords Kerr, Wilson and Hodge, and Lady Hale, refused to accept the strict upshot of Holman v Johnson. Judging whether allowing a claim in some way tainted by illegality would be contrary to the public interest requires, his Lordship explained, a consideration of the underlying purpose of the prohibition that has been transgressed, any other relevant public policies that may be rendered ineffective or less effective by denial of the claim, and “the possibility of overkill unless the law is applied with a due sense of proportionality”.37 In elaborating on the latter, Lord Toulson envisaged that whether it would be disproportionate to refuse relief, in public policy, relevant factors would include “the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties’ respective culpability”.38 As “[p]‌unishment is not generally the function of the civil courts”, those courts, he reasoned, should not set “what would amount in substance to an additional penalty disproportionate to the nature and seriousness of any wrongdoing”.39

30

Holman v Johnson (1775) 1 Cowp 341 at 343; 98 ER 1120 at 1121.

31

Nelson v Nelson (1995) 184 CLR 538 at 595.

32

Nelson v Nelson (1995) 184 CLR 538 at 597.

33

Nelson v Nelson (1995) 184 CLR 538 at 604.

34

Nelson v Nelson (1995) 184 CLR 538 at 611.

35

See, for example, Tinsley v Milligan [1994] 1 AC 340 at 363–​364 per Lord Goff in dissent; Tribe v Tribe [1995] 4 All ER 236 at 244 per Nourse LJ; Silverwood v Silverwood (1997) 74 P & CR 453 at 458 per Nourse LJ; Lowson v Coombes [1999] 2 WLR 720 at 729 per Robert Walker LJ.

36

Patel v Mirza [2017] AC 467.

37

Patel v Mirza [2017] AC 467 at [101]. Lord Neuberger also agreed with this factor-​based approach: at [174]. See also at [134] per Lord Kerr.

38

Patel v Mirza [2017] AC 467 at [107].

39

Patel v Mirza [2017] AC 467 at [108].

568 [19.50] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Legality of Trusts  Chapter  19

While intentionally phrased in more encompassing terms than in Nelson v Nelson, Lord Toulson appeared to be influenced by considerations that had impacted upon the various judges in that case. While his approach can be criticised for potentially fostering uncertainty inherent in what seems a wide judicial discretion  —​as did Lords Clarke and Sumption in Patel40 —​the step in that direction in Nelson in Australia does not appear to have generated substantial litigation.41 Doctrine of locus poenitentiae —​carrying out the illegal purpose

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[19.55]  The law has long recognised that a person who transfers property pursuant to a trust

(or contract) for an illegal purpose may, despite the illegality, recover the property if he or she has repented before the illegal purpose is carried out, and the property in question remains identifiable. This is known as the doctrine of the locus poenitentiae,42 which applies both at law and in equity.43 With the more flexible approach to recovery of property tainted by illegality espoused in Nelson v Nelson and (especially) Patel v Mirza, the need to rely on this doctrine as a means of overcoming that taint is arguably correspondingly reduced or, if Lord Toulson in Patel is correct,44 obviated entirely. Be that as it may, the High Court in Nelson did not purport to oust it, and so the locus poenitentiae doctrine ostensibly remains potentially pertinent in Australian law. The doctrine applies only where the plaintiff withdraws from the transaction while the “fraud” remains in intention only; the law draws the line once the intention has been wholly or partly carried into effect. While phrased in terms of “repentance”, there is no need to adduce evidence of genuine remorse or contrition. The issue is simply whether the illegal purpose has been carried into effect; it involves not so much an inquiry into attitude or motive as into the degree of harm caused to others.45 In Perpetual Executors and Trustees Association of Australia Ltd v Wright,46 for example, the administrators of a deceased wife’s estate alleged that the husband’s transfer of property was for the purpose of defeating his creditors and that this illegal purpose had been carried into effect. Isaacs, Gavan Duffy and Rich JJ identified the relevant inquiry as being “whether the illegal purpose from which the plaintiff insists on retiring still rests in intention only”.47 Their Honours held that the administrators had not satisfied their burden because, even though the transfer had been effected to defraud creditors, 40

See Patel v Mirza [2017] AC 467 at [217] per Lord Clarke, at [262]–​[265] per Lord Sumption.

41

Lord Toulson opined that he was unaware of evidence that uncertainty has been a source of serious problems in those jurisdictions that had taken a relatively flexible approach and, in any event, while there are areas in which certainty is particularly important, “[t]‌he same considerations do not apply in the same way to people contemplating unlawful activity”: Patel v Mirza [2017] AC 467 at [113]. Cf Goudkamp, “The End of an Era? Illegality in Private Law in the Supreme Court” (2017) 133 LQR 14 at 17–​18.

42

Namely “a place (or opportunity) for repentance”.

43

Regarding the doctrine at law see Taylor v Bowers (1876) 1 QBD 291. Regarding the doctrine in equity see Payne v McDonald (1908) 6 CLR 208 at 211 per Griffith CJ; Perpetual Executors and Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185 at 194 per Barton ACJ, at 197 per Isaacs, Gavan Duffy and Rich JJ; Martin v Martin (1959) 110 CLR 297 at 305 per Dixon CJ, McTiernan, Fullagar and Windeyer JJ; Sykes v Stratton [1972] 1 NSWLR 145 at 165 per Helsham J; Tinsley v Milligan [1994] 1 AC 340 at 373–​374 per Lord Browne-​Wilkinson; Weston v Beaufils (1994) 122 ALR 240 at 266, 268 per Hill J.

44

Patel v Mirza [2017] AC 467 at [116]. Cf at [202] per Lord Mance.

45

Payne v McDonald (1908) 6 CLR 208 at 213 per Higgins J; Martin v Martin (1959) 110 CLR 297 at 305 per Dixon CJ, McTiernan, Fullagar and Windeyer JJ.

46

Perpetual Executors and Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185.

47

Perpetual Executors and Trustees Association of Australia Ltd v Wright (1917) 23 CLR 185 at 196. See also Donaldson v Freeson (1934) 51 CLR 598 at 610–​611 per Gavan Duffy CJ and Starke J.

[19.55]  569 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Equity and Trusts in Australia

no creditors had in fact been defrauded. Therefore, the transferor could recover the property from the transferee (or the transferee’s personal representatives) because the illegal purpose had in no respect been carried out.

TRUSTS THAT DISTURB THE SANCTITY OF MARRIAGE OR THE FAMILY

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[19.60]  Trusts that have the effect of interfering with the sanctity of marriage are void. Yet

the case law reflects the difficulty courts have had in formulating consistent principles capable of dealing with the niceties of different factual situations. For instance, trusts expressed to take effect on the future separation of a parties to a marriage have generally been held to be void for encouraging divorce.48 Yet in Ramsay v Trustee Executors and Agency Co Ltd49 the High Court held that a direction by the testator that his son be absolutely entitled to the corpus of a trust estate when no longer married to his present wife did not offend public policy. Ramsay was followed in Queensland in Ellaway v Lawson,50 the facts of which provided a greater incentive to divorce than those in Ramsay. There Douglas J found a provision in a will denying the applicant a bequest until she became divorced or widowed from her current husband not to infringe public policy. It may be that the increased frequency of divorce and the ease in securing a divorce, when coupled with the availability of claims under family provision legislation (such that a person who is disqualified from taking under a testamentary trust by reason of the relevant restraint can nonetheless claim against the estate of the testator), today give stronger grounds to uphold dispositions of this kind.51 Also, though a clause providing for the forfeiture of a life estate on marriage counters public policy, trusts determinable on the remarriage of the settlor’s surviving partner or on the marriage of the beneficiary have been upheld.52 A relevant inquiry for the court, in any event, targets the reason for the restraint —​which upon investigation may prove not to have been driven to interfere with marriage —​and the extent to which, if at all, it necessarily deprives a claimant of a practical entitlement to the (trust) property.53 [19.65]  A partial restraint (“to Y provided he never marries an Irish woman”) may be void

depending on the construction of the words used. The court must balance the competing public policies: that of upholding the sanctity of marriage, and that of freedom to dispose of

48

Westmeath v Westmeath (1830) 1 Dow & Cl 519; 6 ER 619; Re Moore (1888) 39 Ch D 116; Re Caborne [1943] Ch 224; Re Johnson’s Will Trusts [1967] 1 All ER 553. Where the trust was created subsequent to an agreement to separate, it will be valid: Wilson v Wilson (1848) 1 HLC 538; 9 ER 870.

49

Ramsay v Trustee Executors and Agency Co Ltd (1948) 77 CLR 321.

50

Ellaway v Lawson [2006] QSC 170.

51

These were factors that influenced Douglas J in Ellaway v Lawson [2006] QSC 170 at [15]–​[17], although his Honour conceded that “there is still significant support for marriage as an institution and little to support the view that any increase in the number of divorces is socially desirable” (at [16]). Cf Jones v Krawczyk (2011) 7 ASTLR 104 at [38]–​[44] per White J.

52

Morley v Rennoldson (1843) 2 Hare 570 at 579; 67 ER 235 at 239 per Wigram VC; Lloyd v Lloyd (1852) 2 Sim (NS) 255 at 263–​264; 61 ER 338 at 341 per Kindersley VC.

53

See, for example, Jones v Krawczyk (2011) 7 ASTLR 104 (where White J upheld a condition in the deceased’s will barring her daughter from being appointed the trustee of three testamentary trusts, of which the daughter was named as the principal beneficiary, as long as she remained married to her husband, finding that the restraint was driven by the deceased’s belief that her daughter might be inclined or persuaded to deal with the property in a way which was not in her best interests rather than a wish that she divorce her husband, and that as the daughter was not debarred from receiving the corpus of her share of the estate while she remained married to her husband, the restraint would not likely lead to divorce and separation: at [41], [45], [46]).

570 [19.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:08.

Legality of Trusts  Chapter  19

property.54 In Jenner v Turner55 the testator bequeathed her residuary estate in trust for her brother absolutely, the brother’s interest under the trust to be forfeited were he to marry a domestic servant. Bacon VC upheld the trust on the basis that:56 … there is no reason nor any authority for saying that a testator may not make it a condition that the person the object of his bounty shall not marry any particular person by name, or any person of particular nation, or belonging to a specified class. It is not competent for the Court to seek to inquire into the motives which have induced the restriction. If it could properly be said they had been prompted by spite or malevolence the condition would nonetheless be valid; for the law does not prohibit testators from indulging such bad feelings, provided that no principle of public policy is thereby contravened. Under this will no question can arise in which public policy can be said to be involved. The condition is not in restraint of marriage generally.

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Jenner v Turner may be contrasted with Trustees of Church Property of the Diocese of Newcastle v Ebbeck,57 where the testator left his residuary estate on trust for his wife for life, and thereafter to his three sons in equal shares, which interest was to be forfeited if, at the time of the wife’s death, the sons or their wives did not profess the Protestant faith. In light of the fact that, prior to the date of the will, two sons had married Roman Catholics and the third was about to marry a Roman Catholic, the High Court held that the clause tended to encourage the dissolution of marriage. Accordingly, it was contrary to the policy of the law and thus void to the extent of the restraint on religious choice. Dixon CJ characterised the forfeiture clause as saying to the donee:  “Your marriage must be dissolved or your wife must change religion: otherwise your patrimony will be forfeited. You have until your mother’s death to resolve this dilemma”.58 The Chief Justice reasoned as follows:59 Whether designedly or not such a disposition creates an opposition between the wife’s religious beliefs and a serious temporal interest of her husband, and doubtless by consequence of her own. If she cannot or will not desert her faith it provides an inducement to him of a pecuniary or proprietary nature the operation of which cannot but be in opposition to the policy of the law, its policy to preserve and maintain marriage. [19.70]  A trust designed to cause the separation of parent and child is void.60 For example,

a stipulation that a legacy should only pass to the donor’s children if they do not reside with their father offends public policy, and the children take absolutely.61 However, in Blathwayt v Baron Cawley62 Lord Wilberforce noted that it is not every “condition which in any way might affect or influence the way a child is brought up, or in which parental duties are exercised” that is void. For instance, a condition as to the religious upbringing of a child will not of itself be contrary to public policy.

54

Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 at 414 per Windeyer J.

55

Jenner v Turner (1880) 16 Ch D 188.

56

Jenner v Turner (1880) 16 Ch D 188 at 196–​197.

57

Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394.

58

Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 at 402.

59

Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 at 403–​404. See also at 414–​417 per Windeyer J.

60

Re Boulter [1922] 1 Ch 75.

61

Re Piper [1946] 2 All ER 503.

62

Blathwayt v Baron Cawley [1976] AC 397 at 426.

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Equity and Trusts in Australia

TRUSTS IN RESTRAINT OF ALIENATION OF PROPERTY Conditional dispositions and deprivation clauses

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[19.75]  From the earliest times, the policy of the law has been to promote the free alienability

of property. The law of trusts reflected this policy in prohibiting a settlor transferring property absolutely but subject to conditions restraining the transferee from transferring, mortgaging, selling or otherwise dealing with the property.63 The general principle is that “where there is an absolute gift of real or personal property and a condition is attached which is inconsistent with or repugnant to the gift, the condition is wholly void, and the donee takes the gift free of the condition”.64 The issue arises most frequently in the context of dispositions by testamentary trust. The following appears to be established from the case law. First, a disposition on trust “on condition that the interest is not alienated” is void as against public policy as infringing freedom of alienation,65 and the condition is struck down in toto. Secondly, not every restraint on alienation is void. Partial restraints of alienation, say, that restrict alienation to members of a specified class and/​or for a short period of time, may be valid, depending on the extent or breadth of the restraint. The issue is “whether the condition takes away the whole power of alienation substantially”.66 For example, in Re Macleay67 a devise on condition that the devisee “never sell it out of the family” was upheld as the devisee could dispose of the land to any one of a large number of family members. However, where the scope for alienation is more limited, for instance, to a brother of the devisee, the restraint will be struck down.68 A restraint on disposing property for a specified period of time may also be void, although again it is a matter of degree. In Grayson v Grayson69 a testator devised certain land to his sons on the condition that they not alienate it to other than a lineal descendant of the testator during the lives of the sons for the period of 21 years after their death. As to whether one of the sons was entitled to an absolute interest in fee simple discharged from the condition against alienation, McCawley J held that:70 … when the area and locality of the lands devised are considered in conjunction with the limited number of persons to whom it may be sold and the duration of the restriction, the power to alienate must be regarded as restricted within limits so narrow as to constitute a substantial taking away, not of the whole power of alienation, but of a valuable portion or it, subjecting it to fetters which inevitably, by limiting the market, diminish the ordinary selling value of the land, and which might, in fact, destroy all opportunity of selling.

Thirdly, a vested interest subject to the proviso that it will not pass to the disponee’s creditors on the disponee’s bankruptcy, or that it will otherwise be free of the creditors’ claims, is void because it attempts to make an absolute interest defeasible on the breach of a condition subsequent.71 Also, if a person has a specific asset not subject to a deprivation provision, then a 63

Re Rosher (1884) 26 Ch D 801; Blackburn v McCallum (1902) 33 SCR 65 at 92 per Mills J; Faucher v Tucker (1994) 109 DLR (4th) 699 at 710 per Kroft JA.

64

Re Goode (deceased) [1960] VR 117 at 121 per O’Bryan J.

65

Brandon v Robinson (1811) 18 Ves 429; 34 ER 379.

66

Re Macleay (1875) LR 20 Eq 186 at 189.

67

Re Macleay (1875) LR 20 Eq 186.

68

Re Brown (deceased) [1954] Ch 39; Re Mavromates (deceased) [1964] VR 612.

69

Grayson v Grayson [1922] QSR 155.

70

Grayson v Grayson [1922] QSR 155 at 163.

71

Brandon v Robinson (1811) 18 Ves 429 at 433–​434; 34 ER 379 at 381 per Lord Eldon LC; Re Williams [1923] VLR 609; Re Bond (1992) 25 ATR 61 at 75–​77 per Hill J; Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 59 per Rattee J.

572 [19.75] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Legality of Trusts  Chapter  19

deprivation provision to which he or she subsequently agrees to make it subject is unenforceable in the event of insolvency.72 On the other hand, at general law a disposition subject to a determining event limiting the duration of the interest, such as the disposition of an interest in property “until bankruptcy” of the recipient, is valid.73 Rattee J in Re Scientific Investment Pension Plan Trusts stated the relevant principles as follows:74 (a) A forfeiture clause purporting to forfeit an absolute interest in possession in the event of alienation will be void. (b) So will be such a clause which purports similarly to forfeit a life or other limited interest in possession which is not, on the true construction of the instrument creating it, made determinable in the same events as those in which the forfeiture is expressed to operate. (c) On the other hand, there is nothing objectionable about such a forfeiture clause which purports to defeat a future interest in the event of purported alienation before it falls into possession or to create a gift over in the event in which an income interest in possession is, on the true construction of the trust instrument, expressed to be determinable. If a forfeiture clause purports to apply both to interests in possession within (a) or (b) above or future or determinable interests within (c) above, it will be wholly void, even as to interests within (c) above, as to which it would have been valid if limited to interests within that class.

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His Lordship characterised the above distinction as “not a particularly attractive one, being based on form rather than substance”, as the effect intended to be achieved by both forms of limitation appeared to be the same.75 Nonetheless, he upheld it because it is “firmly embedded in our law”.76 To this end, the court may be influenced by whether there is an evident intention to evade bankruptcy law, proof of which may serve to invalidate a provision that would otherwise have been upheld. If the parties’ intention was not to evade insolvency laws, the court may be more ready to uphold the deprivation provision if it provides for compensation for the deprivation.77 The position so far as bankruptcy is concerned has, in any case, been legislatively addressed in Australia by s 302B(1) of the Bankruptcy Act 1966 (Cth), which reads as follows: A provision in a trust deed is void to the extent that it has the effect of: cancelling, reducing or qualifying a beneficiary’s interest under a trust; or allowing the trustee to exercise a discretion to the detriment of a beneficiary’s interest; if the beneficiary becomes a bankrupt, commits an act of bankruptcy or executes a deed of assignment or a deed of arrangement under this Act.

Fourthly, at general law there may be exceptional cases where a deprivation provision will be upheld, such as where the right or property subject to the provision has no value, is incapable of assignment or depends on the character or status of the owner. If the asset has no value or is incapable of transfer, it is unlikely that creditors would suffer any detriment were the owner

72

Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 250 per Neuberger J.

73

Brandon v Robinson (1811) 18 Ves 429 at 433–​434; 34 ER 379 at 381 per Lord Eldon LC; Official Assignee v NZI Life Superannuation Nominees Ltd [1995] 1 NZLR 684 at 690–​691, 696–​697 per Blanchard J; Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 59 per Rattee J; Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 247 per Neuberger J. This is known as a “protective trust” (see [27.115], [27.120]) and its validity stems from the fact that the duration of the interest in the trust is delimited; the trust itself is not conditional.

74

Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 60–​61. See also Re Bond (1992) 25 ATR 61 at 75–​77 per Hill J.

75

Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 59. See also Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 246, 255 per Neuberger J (who did “not find it easy to discern any consistent approach in the authorities” and remarked that “it is not entirely easy to reconcile the conclusions, and indeed the reasoning, in some of the cases”).

76

Re Scientific Investment Pension Plan Trusts [1999] Ch 53 at 59.

77

Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 255 per Neuberger J.

[19.75]  573 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

deprived of it.78 Similarly, if the ownership of the asset depends on the personal characteristics of the owner, it is difficult to see how objection could be taken to a power to take away the asset, not least because it would be inherently unsuitable to be retained for the benefit of her or his creditors. In such cases, aside from statute, a deprivation provision is normally enforceable in the event of the owner’s insolvency. For example, in Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd79 the defendant’s articles of association provided that its member firms, on going into liquidation, would forfeit their interest as members. Neuberger J upheld this deprivation provision, reasoning that:80 … the loss of membership of a financial institution, such as a stock exchange, where one has failed to meet one’s debts or has gone bankrupt cannot … be said to fall foul of the principle. Membership of such an exchange turns on the personal attributes and acceptability of a particular individual, and expulsion on the grounds of not honouring financial obligations (or, indeed, insolvency) would seem to be almost an inevitable incident of membership.

The same reasoning can serve to validate provisions in leases that cause the lessee to forfeit entitlements under the lease in the event of insolvency. Trusts that infringe the rule against perpetuities

General law

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[19.80]  To dispose of property subject to an indefinitely postponed vesting date has the effect

of tying up property and preventing its free alienation. The rule against perpetuities, also known as the “rule against remoteness of vesting”, reflects a legal initiative to avoid this outcome. It “performs a useful social function in limiting the power of members of generations past from tying up property in such a form as to prevent its being freely disposed of in the present or the future”.81 The rule, to this end, is concerned with not allowing the vesting of an interest in property to be postponed indefinitely (in perpetuity). It does so by requiring the vesting of property not to be postponed beyond the “perpetuity period”. The rule invalidates any future interest under a trust that is not bound to vest, if at all, within this period. At general law the “perpetuity period” extends to the lifetimes of persons alive at the date of creation of the trust and 21 years from the date of the death of the last survivor of those persons (“life or lives in being”). As the rule aims to prevent the possibility of the vesting of an interest outside of the perpetuity period, it does not affect its duration once vested.82 A trust that infringes the rule against perpetuities fails, so that the beneficial interest in the trust property reverts (on resulting trust) to the settlor, or her or his personal representatives: see [26.20]. Because of the difficulties posed in calculating the “life or lives in being” component of the rule, in the past it was common to include in trust instruments a clause that specifies a particular life or lives in being. As the actual “life or lives in being” need not relate to a person taking

78

Cf the suggestion that simply because a contract is unassignable does not mean it is of no value to creditors, in that the liquidator may be able to procure the insolvent company to complete the contract: Armour, “The Uncertain Flight of British Eagle” [2003] CLJ 39 at 42.

79

Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223.

80

Money Markets International Stockbrokers Ltd (in liq) v London Stock Exchange Ltd [2001] 4 All ER 223 at 253.

81

Nemesis Australia Pty Ltd v Commissioner of Taxation (2005) 150 FCR 152 at [24] per Tamberlin J.

82

This explains why, for instance, the rule does not apply to general powers of appointment over property, given that a person entitled to exercise such a power is treated in law as the owner of the property, but does apply in respect of special powers of appointment (which do not confer the equivalent to beneficial ownership): Nemesis Australia Pty Ltd v Commissioner of Taxation (2005) 150 FCR 152 at [27] per Tamberlin J. As to powers of appointment see [16.175].

574 [19.80] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Legality of Trusts  Chapter  19

a beneficial interest, drafters of trust deeds often chose a line of lives less likely ultimately to run out. Standard clauses often specified a period of “21 years after the death of the last survivor of his late Majesty King George V”.83 Particular regard to the rule against perpetuities must be paid regarding the insertion of sub-​trusts (trusts as beneficiaries of existing trusts) because the sub-​trust’s perpetuity period cannot exceed that of the head trust. To this end, a clause is ordinarily inserted into the sub-​ trust’s trust deed to the effect that its trustees will ensure that the vesting of interest under the sub-​trust precedes the vesting date for the head trust.

Statutory modification [19.85] The general law position in relation to the rule against perpetuities is modified by

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statute that, except for the Northern Territory and South Australia,84 applies only in respect of instruments taking effect after the date prescribed.85 The legislation modifies the general law in five main ways. First, the most radical reform is that of South Australia, where the rule against perpetuities has been statutorily abolished.86 The legislation there states that if there remain interests in property that have not vested 80 years or more after the date of its disposition, the court may, with stated exceptions,87 pursuant to an application88 for this purpose vary the terms of the disposition so that the interests vest immediately.89 It may also vary the terms of a disposition so that interests that cannot vest, or are unlikely to vest, within 80 years of the date of the disposition, will vest within that period.90 In so doing the court must give effect to the spirit of the original disposition to the extent possible, given that interests are to vest earlier than contemplated by the disponer.91 Secondly, in the remaining jurisdictions statute modifies the perpetuity period. In Queensland, Tasmania, Victoria and Western Australia, a settlor may, instead of adopting the general law perpetuity period, select a period not exceeding 80 years.92 If no period up to

83

See, for example, Clay v Karlson (No 2) (1998) 19 WAR 287.

84

In the Northern Territory and South Australia the statutory modifications apply in relation to settlements taking effect before or after the commencement of the relevant legislation: Law of Property Act 2000 (NT), s 184; Law of Property Act 1936 (SA), s 61.

85

Perpetuities and Accumulations Act 1985 (ACT), s 3 (19 December 1985); Perpetuities Act 1984 (NSW), s 4 (31 October 1984); Property Law Act 1974 (Qld), s 207 (1 April 1973); Perpetuities and Accumulations Act 1992 (Tas), s 4 (1 December 1992); Perpetuities and Accumulation Act 1968 (Vic), s 3 (10 December 1968); Property Law Act 1969 (WA), s 99 (6 December 1962). The English Law Commission’s recommendation that the rule against perpetuities should not apply except as provided by statute, and should be limited to interests and rights arising under wills and trusts, and for a fixed perpetuity period of 125 years (see The Rules Against Perpetuities and Excessive Accumulations (Law Com No 251, March 1998) was implemented by the Perpetuities and Accumulations Act 2009 (UK), ss 1, 5).

86

Law of Property Act 1936 (SA), s 61.

87

Namely a trust: (a) constituted by statute or letters patent; (b) for wholly charitable purposes; (c) wholly for the provision of: (i) superannuation or retirement benefits; (ii) medical, hospital or funeral benefits; or (iii) other benefits payable in the event of death, sickness or incapacity; or (d) for the benefit of the members of an unincorporated association: Law of Property Act 1936 (SA), s 62(6).

88

An application may be made by: (a) the Attorney-​General; (b) a trustee of property to which the disposition relates; (c) the next-​of-​kin of a deceased person to whose estate the disposition relates; (d) a person who has, under the terms of the disposition, an actual or potential interest in property subject to the disposition; or (e) a person who would, assuming the existence and continuance of lineal issue, be the ancestor of a person (as yet unborn) who would have an actual or potential interest in property subject to the disposition: Law of Property Act 1936 (SA), s 62(5).

89

Law of Property Act 1936 (SA), s 62(1).

90

Law of Property Act 1936 (SA), s 62(2).

91

Law of Property Act 1936 (SA), s 62(4).

92

Property Law Act 1974 (Qld), s 209; Perpetuities and Accumulations Act 1992 (Tas), s 6; Perpetuities and Accumulation Act 1968 (Vic), s 5; Property Law Act 1969 (WA), s 101.

[19.85]  575 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

80 years is prescribed, the general law period applies. In the Australian Capital Territory and New South Wales “the perpetuity period applicable to an interest created by settlement shall be 80 years from the date on which the settlement takes effect”.93 In the Northern Territory “the perpetuity period applicable to an interest created by a settlement is (a) a life in being plus 21 years; or (b) 80 years from the date on which the settlement takes effect, whichever is specified in the settlement”.94 The 80-​year period applies unless a “life in being plus 21 years” is specified in the trust instrument. Thirdly, again in the remaining jurisdictions an interest that may vest outside the period is not for this reason void; the interest is void only if it in fact vests outside the period.95 The legislation adopts a “wait and see” approach. The New South Wales provision is typical and reads as follows:96

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Where a provision of a settlement which creates an interest would, but for this section …, infringe the rule against perpetuities, the interest shall be treated, until such time (if any) as it becomes certain that it must vest, if at all, after the end of the perpetuity period, as if the provision did not infringe that rule, and its becoming so certain does not affect the validity of any thing previously done in relation to the interest.

Fourthly, in all jurisdictions except South Australia and Western Australia, where a trust creates an interest the vesting of which depends on the attainment by any person of a specified age,97 and it becomes apparent that this would infringe the rule against perpetuities but would not have done so had the specified age been a lesser age,98 the interest will be treated as if its vesting depended on the attainment by the person of the greatest age99 which, if put in place of the specified age, would save the provision from infringing the rule.100 The Western Australian provision is phrased slightly differently. It states that where the absolute vesting of either capital or income, or the ascertainment of a (class of) beneficiary, depends on the attainment by any person of an age exceeding 21 years, and the gift to that beneficiary, class or member101 would infringe the rule against perpetuities, the trust takes effect as if the absolute vesting or ascertainment had been made to depend on the person attaining the age of 21 years, and that age will be substituted for the age stated in the instrument.102 Fifthly, it is statutorily provided that the rule against perpetuities does not apply to superannuation entities.103 Absent such statutory intervention, the rule would impact upon superannuation funds.104

93

Perpetuities and Accumulations Act 1985 (ACT), s 8; Perpetuities Act 1984 (NSW), s 7.

94

Law of Property Act 2000 (NT), s 187(1).

95

Perpetuities and Accumulations Act 1985 (ACT), s 9; Perpetuities Act 1984 (NSW), s 8; Law of Property Act 2000 (NT), s 190; Property Law Act 1974 (Qld), s 210; Perpetuities and Accumulations Act 1992 (Tas), s 9; Perpetuities and Accumulation Act 1968 (Vic), s 6; Property Law Act 1969 (WA), s 103. See Nemesis Australia Pty Ltd v Commissioner of Taxation (2005) 150 FCR 152 at [41]–​[45] per Tamberlin J.

96

Perpetuities Act 1984 (NSW), s 8(1).

97

In Victoria, exceeding 21 years, in Queensland, 18 years.

98

In Victoria, 21 years, in Queensland, 18 years.

99

In Victoria, the age nearest to that age.

100

Perpetuities and Accumulations Act 1985 (ACT), s 10(1); Perpetuities Act 1984 (NSW), s 9(1); Law of Property Act 2000 (NT), s 191(1); Property Law Act 1974 (Qld), s 213(1); Perpetuities and Accumulations Act 1992 (Tas), s 11(1); Perpetuities and Accumulation Act 1968 (Vic), s 9(1).

101

Including any gift over, remainder, executory limitation or trust arising on the total or partial failure of the original gift.

102

Property Law Act 1969 (WA), s 105(1).

103

Superannuation Industry (Supervision) Act 1993 (Cth), s 343. As to superannuation trusts see [28.20]–​[28.235].

104

Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 at 1408 (PC).

576 [19.85] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Legality of Trusts  Chapter  19

Accumulations [19.90]  There are no restrictions on the period allowed for the accumulation of income in

all jurisdictions apart from those imposed by the legislation dealing with perpetuities.105 The Northern Territory provision is typical of all jurisdictions except South Australia, and reads as follows:



(1) Where property is settled or disposed of otherwise than for a purpose that is charitable, so that the income of the property may be, or is directed to be, accumulated wholly or in part, the power or direction to accumulate the income is valid only if the disposition of the accumulated income is, or may be, valid. (2) Nothing in subsection (1) affects: (a) the power of any person to terminate an accumulation that is for his or her benefit; (b) the jurisdiction or power of the Supreme Court to maintain or advance out of accumulations; or (c) any power of a trustee under the Trustee Act or other Act or law, or an instrument creating a trust or making a disposition.

In South Australia, if a disposition provides for the accumulation, or partial accumulation, of income from property over a period that will or may terminate 80 years or more after the date of the disposition, the court may, pursuant to an application, vary its terms so that both capital and income will vest within 80 years from the date of the disposition.106 Rule against indestructibility

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[19.95]  The public policy of preventing property being tied up indefinitely is further reflected

in the rule against indestructibility of trusts. Excepting charitable trusts,107 a trust is void if it is indestructible. The rule that the beneficiaries of a trust may, if they be sui juris and consent, terminate the trust by requesting the trustees to pay over their respective interests under the trust (see [25.135]–​[25.145]), reflects this policy. As a corollary of the rule against indestructibility, an unlimited and perpetual gift of income is presumed, aside from evidence of contrary intention, to be a gift of the body of the fund itself.108 A contrary intention is made out where the trust instrument gives a clear indication that the beneficiary is not to receive the corpus but only the annual income.109

TRUSTS TO AVOID CREDITORS [19.100]  In separating legal ownership from beneficial enjoyment of property, and because

trust property falls outside that available for distribution to creditors on a trustee’s insolvency (see [27.20]), the trust is an attractive device for those desiring to protect their assets from the vicissitudes and potential misfortunes of the commercial world. However, the Bankruptcy Act 1966 (Cth) may render a trust void —​as against the trustee-​in-​bankruptcy (being the person

105

Perpetuities and Accumulations Act 1985 (ACT), s 19; Perpetuities Act 1984 (NSW), s 18; Law of Property Act 2000 (NT), s 202; Property Law Act 1974 (Qld), s 222; Law of Property Act 1936 (SA), ss 61(1)(c), 62(3); Perpetuities and Accumulations Act 1992 (Tas), s 22; Perpetuities and Accumulations Act 1968 (Vic), s 19; Property Law Act 1969 (WA), s 113.

106

Law of Property Act 1936 (SA), s 62(3).

107

As a charitable trust is for purposes (see [29.05]), once assets are vested in the charity there is nothing to prevent the charity from enduring in perpetuity: see [29.25].

108

Congregational Union of New South Wales v Thistlethwayte (1952) 87 CLR 375; Sydney Homoeopathic Hospital v Turner (1959) 102 CLR 188; Roberts v University of Sydney [1960] NSWR 702. See further Dal Pont, Law of Charity, [6.13]–​[6.15].

109

Re Williams [1955] VLR 65 at 69 per Dean J; Re Weaver [1963] VR 257 at 262 per Hudson J; Re Inman (deceased) [1965] VR 238 at 240 per Gowans J; Re Denhert [1973] VR 449 at 451 per Starke J; Playoust v Hornsby [2005] VSCA 73 at [48] per the court.

[19.100]  577 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

appointed to represent the interests of the bankrupt’s creditors) —​if it has the effect, or was created with the intention, of defeating the settlor’s creditors: see [19.105]–​[19.130]. Where the settlor is a company, the Corporations Act 2001 (Cth) may operate to upset trusts created for the purpose of avoiding creditors, or having that effect: see [19.135]. Independent of insolvency, statute also makes provision for the setting aside of dispositions intended to defraud creditors: see [19.140], [19.145]. Setting aside where settlor is a natural person [19.105] The Bankruptcy Act 1966 (Cth) prescribes specific circumstances under which a

trust is void as against the trustee-​in-​bankruptcy on the ground that it was created for the purpose of avoiding creditors, or has that effect. From the commencement date of the bankruptcy, all the settlor’s property belongs to the trustee-​in-​bankruptcy and every transaction, unless statutorily protected (see [19.130]), is liable to be set aside by the trustee-​in-​bankruptcy. The commencement date is the date of the earliest “act of bankruptcy” within the six months preceding the presentation of the debtor’s or creditor’s petition:  s 115. The phrase “act of bankruptcy” includes the making by the settlor of a conveyance, transfer, settlement or other disposition of her or his property that would, if he or she became bankrupt, be void as against the trustee-​in-​bankruptcy:  s 40(1)(b)(i). This means that the settlor’s bankruptcy “relates back” to a period preceding the presentation of the relevant petition, and trusts created within this period are liable to be set aside by the settlor’s trustee-​in-​bankruptcy. Importantly, however, the Bankruptcy Act permits the trustee-​in-​bankruptcy to set aside trusts created prior to the date of the commencement of the settlor’s bankruptcy in defined circumstances, including in the case of undervalued transactions and transfers to defeat creditors, as explained at [19.110]–​[19.130]. Copyright © 2018. Thomson Reuters (Professional) Australia Pty Limited. All rights reserved.

Undervalued transactions [19.110]  Section 120(1) of the Bankruptcy Act 1966 (Cth) reads as follows: A transfer of property by a person who later becomes bankrupt (the transferor) to another person (the transferee) is void against the [trustee-​in-​bankruptcy] if: (a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and (b) the transferee gave no consideration for the transfer or gave consideration of less than the market value of the property.

The term “void” in this context has been judicially interpreted as meaning “voidable”, because the trustee-​in-​bankruptcy must take steps or actions in court to bring the section into effect.110 The operation of s 120(1) is expressed not to affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value111 of the property: s 120(6). Moreover, under s 120(3) a transfer is not voidable against the trustee-​in-​bankruptcy if the transfer took place more than two years (four years in the case of a transfer to a related entity of the transferor)112 before the commencement of the bankruptcy, and the transferee proves that, at the time of the transfer, the transferor was solvent. A person is 110

N A Kratzmann Pty Ltd v Tucker (No 1) (1969) 123 CLR 257 at 291–​292 per Kitto J.

111

Namely its market value at the time of the transfer: Bankruptcy Act 1966 (Cth), s 120(7). The reference to market value is designed to overcome case law that consideration must be real and substantial, not merely nominal or trivial: Explanatory Memorandum to the Bankruptcy Legislation Amendment Bill 1996, para 84.13.

112

The four-​year period applicable to a related entity took effect on 31 May 2006 pursuant to the Bankruptcy Legislation Amendment (Anti-​avoidance) Act 2006 (Cth). The term “related entity” is defined in Bankruptcy Act 1966 (Cth), s 5(1).

578 [19.105] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Legality of Trusts  Chapter  19

“solvent” if, and only if, the person is able to pay all her or his debts as and when they become due and payable: s 5(2). As from 31 May 2006,113 a rebuttable presumption arises that the transferor was insolvent at the time of the transfer if it is established that the transferor: (a) had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and sufficiently disclose the transferor’s business transactions and financial position; or (b) having kept such books, accounts and records, has not preserved them:  s 120(3A). Consideration. The trustee-​in-​bankruptcy must pay to the transferee an amount equal to

the value of any consideration that the transferee gave for the transfer that is void: s 120(4). Under s 120(5), the following have no value as consideration for this purpose: • the fact that the transferee is related to the transferor; • if the transferee is the spouse or de facto spouse of the transferor, the transferee making a deed in favour of the transferor; • the transferee’s promise to marry, or to become the de facto spouse of, the transferor; • the transferee’s love or affection for the transferor; or

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• if the transferee is the spouse, a former spouse or a former de facto partner of the transferor —​the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975 (Cth). Transfer. A “transfer” of property includes a payment of money, and a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to that other person: s 120(7). A trust by transfer of property clearly comes within s 120, and it is arguable that the word “transfer” also covers a trust created by declaration, in which case the term may be interpreted to include a change in beneficial ownership.

Transfers to defeat creditors [19.115]  Section 121(1) of the Bankruptcy Act 1966 (Cth) reads as follows: A transfer of property by a person who later becomes bankrupt (the transferor) to another person (the transferee) is void against the [trustee-​in-​bankruptcy] in the transferor’s bankruptcy if: (a) the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and (b) the transferor’s main purpose in making the transfer was: (i) to prevent the transferred property from becoming divisible among the transferor’s creditors; or (ii) to hinder or delay the process of making property available for division among the transferor’s creditors.

As in s 120, the term “void” in s 121 has been interpreted as meaning voidable.114 Section 121(4) states that a transfer of property is not voidable against the trustee-​in-​bankruptcy if: first, the consideration given by the transferee was at least as valuable as the market value of the property; secondly, the transferee did not know or could not reasonably have inferred that the transferor’s main purpose in making the transfer was the purpose described in para (b) extracted above; and thirdly, the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent. The transferor’s 113

Pursuant to the Bankruptcy Legislation Amendment (Anti-​avoidance) Act 2006 (Cth).

114

Brady v Stapleton (1952) 88 CLR 322 at 333–​334 per Dixon CJ and Fullagar J.

[19.115]  579 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

main purpose in making a transfer is taken to be the purpose described in para (b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, he or she was or was about to become insolvent (s 121(2)), although this does not limit the ways of establishing that purpose (s 121(3)). From 31 May 2006,115 a new s 121(4A) creates a rebuttable presumption of insolvency in terms equivalent to that applicable to s 120 (see [19.110]). The trustee-​in-​bankruptcy must pay to the transferee an amount equal to the value of any consideration the transferee gave for the transfer that is void: s 121(5). The items specified as having no value as consideration in s 120 (see [19.110]) also have no value for this purpose under s 121: s 121(6). Section 121 does not apply to a transfer of property under a debt agreement116 (s 121(7)) and does not affect the rights of a person who acquired property from the transferee in good faith and for at least its market value (s 121(8)). [19.120]  A useful illustration of the application s 121 is found in Trustees of the Property

of Cummins v Cummins,117 where the bankrupt (a senior barrister) transferred his interest in the matrimonial home to his wife (the first respondent) and transferred shares to a company that was the trustee of his family trust (the second respondent). The principal creditor of the bankrupt was the Australian Taxation Office (“ATO”), arising out of his failure to lodge tax returns for decades. The High Court was satisfied that the appellant trustees-​in-​bankruptcy had discharged their onus by adducing evidence giving rise to “a reasonable and definite inference, not merely to conflicting inferences of equal degree of probability” that in making the transfers the bankrupt’s “main purpose” was to defeat his creditors, chiefly the ATO.118 In so doing, their Honours affirmed the ruling of Sackville J at first instance, whose findings were that:119

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• the bankrupt was well aware in August 1987 that he had incurred very substantial liabilities to the ATO, contingent only on the ATO issuing assessments in respect of past income years; • the bankrupt was well aware at that time that the ATO would issue assessments once his longstanding tax delinquency became known, an event that could occur at any time; • the bankrupt divested himself voluntarily of virtually all his substantial assets in August 1987; • in any event, the assets retained by the bankrupt were not sufficient to meet his taxation liabilities, if the ATO decided to issue assessments; and • the bankrupt saw the transfers as increasing the chances that his assets would be protected from any claims made by the ATO. The High Court rejected the bankrupt’s argument that he transferred the assets for fear that barristers would lose their in-​court immunity for negligence, especially given that the prevailing decision at the time was one of the Victorian Full Court, which had upheld the immunity, and the High Court had not granted leave to appeal at the time the transfers were made (and when it ultimately did so, and heard the appeal, it retained the

115

Pursuant to the Bankruptcy Legislation Amendment (Anti-​avoidance) Act 2006 (Cth).

116

Debt agreements are governed by the Bankruptcy Act 1966 (Cth), Pt IX.

117

Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278.

118

Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 at [34] (FC).

119

Prentice v Cummins (2002) 124 FCR 67 at 100.

580 [19.120] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Legality of Trusts  Chapter  19

immunity).120 In this regard their Honours affirmed the dissenting judge in the Full Federal Court, Tamberlin J, who thought it would be “most unusual to take the significant decision to commit to a divesting of major assets before the decision of the High Court on a special leave application, when that decision may have brought an end to the question of barristers in-​court immunity by refusal of leave”.121

Transactions where consideration given to a third party [19.125]  A new section, s 121A, was inserted into the Bankruptcy Act 1966 (Cth) with oper-

ation from 31 May 2006 by the Bankruptcy Legislation Amendment (Anti-​avoidance) Act 2006 (Cth). It applies if a person who later becomes a bankrupt (the transferor) transfers property to another person (the transferee), and the transferee gives some or all of the consideration for the transfer to a third party, in which case ss 120 and 121 apply as if the giving of the consideration to the third party were a transfer by the transferor of the property constituting the consideration. If the giving of the consideration to the third party is void against the trustee-​in-​bankruptcy in the transferor’s bankruptcy under ss 120 or 121, the trustee-​in-​ bankruptcy is given the same rights to recover the property constituting the consideration as the trustee would have if the giving of the consideration had actually been a transfer by the transferor of the property constituting the consideration.

Protection of certain transactions against being set aside

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[19.130]  Section 123(1)122 of the Bankruptcy Act 1966 (Cth) protects certain transactions

from being set aside by the trustee-​in-​bankruptcy. It provides that, subject to ss 120 and 121, the Act does not invalidate, in any case where a debtor becomes a bankrupt, a prescribed transaction123 if:  first, it took place before the day on which the debtor became bankrupt; secondly, the person, other than the debtor, with whom it took place, did not, at the time of the transaction, have notice of the presentation of a petition against the debtor; and thirdly, it was in good faith and in the ordinary course of business. A transaction is not deemed to have been other than in good faith and in the ordinary course of business by reason only that, at the time of the transaction, the person, other than the debtor, with whom it took place had notice of the commission of an act of bankruptcy by the debtor: s 123(3). Setting aside where settlor is a company [19.135]  Part 5.7B of the Corporations Act 2001 (Cth) governs voidable transactions, and

operates in circumstances that include the following:124 • a transaction entered into by a company is voidable if it is an “insolvent transaction” entered into (or an act was done for the purpose of giving effect to it) during the six months 120

See Giannarelli v Wraith (1988) 165 CLR 543.

121

Cummins v Trustees of the Property of Cummins (2004) 209 ALR 521 at 560 [affd Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 at [51] (FC)].

122

Sections 124–​128 of the Bankruptcy Act 1966 (Cth) also contain protections against transactions being set aside, but these are less relevant to trusts: see generally Murray and Harris, Keay’s Insolvency: Personal and Corporate Law and Practice (10th ed, Lawbook Co, 2018), Ch 4.

123

Namely: (a) a payment by the debtor to any of his creditors; (b) a conveyance, transfer or assignment by the debtor for market value; (c) a contract, dealing or other transaction by or with the debtor for market value; or (d) any transaction to the extent of a present advance made by an existing creditor: Bankruptcy Act 1966 (Cth), s 123(1)(a)–​123(1)(d).

124

See generally Broderick and Lenicka, “Uncommercial Transactions —​Corporate Governance for Insolvent Companies” (2004) 22 C&SLJ 7.

[19.135]  581 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

ending on the relation-​back day125 or, if it occurred after that date, up to the day when the winding-​up began: s 588FE(2). • a transaction is voidable if it is both an “insolvent transaction” and an “uncommercial transaction” entered into (or an act was done for the purpose of giving effect to it) during the two years ending on the relation-​back day: s 588FE(3). • an “insolvent transaction” to which a related entity126 of the company is a party is voidable where it has been entered into (or an act was done for the purpose of giving effect to it) during the four years ending on the relation-​back day: s 588FE(4).

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• an “insolvent transaction” entered into for the purpose (or purposes including the purpose) of defeating, delaying or interfering with the rights of any or all its creditors on a winding-​ up is voidable if it was entered into (or an act was done for the purpose of giving effect to it) during the ten years ending on the relation-​back day: s 588FE(5). A transaction is an “insolvent transaction” if it is, inter alia, an “uncommercial transaction” entered into (or an act is done, or an omission is made, for the purpose of giving effect to it) at a time when the company is insolvent, or the company becomes insolvent (partly) by reason of entering into the transaction (or a person doing an act, or making an omission, for the purpose of giving effect to it): s 588FC. A transaction is an “uncommercial transaction” if it may be expected that a reasonable person in the company’s circumstances would not have entered into it, having regard to the benefits and detriment to the company, and the respective benefits to other parties to the transaction, of entering into it, and to any other relevant matter: s 588FB. The court adopts a purposive approach to the interpretation of this term, having regard to the fact that it is aimed at preventing companies disposing of their assets or other resources through transactions resulting in the recipient receiving a gift or obtaining a bargain of a commercial magnitude that cannot be explained by normal commercial practice.127 As such, where “the purchaser is a related entity in the corporate sense, or a relation by blood or by law in the individual sense, then the court should look at the transaction far more closely and be less inclined to excuse a sale at an undervalue because of some commercial factor”.128 Part 5.7B also applies in respect of an “unfair loan”129 to the company made at any time on or before the day when the winding-​up began (s 588FE(6)) and to an “unreasonable director-​ related transaction”130 entered into (or an act was done for the purposes of giving effect to it) during the four years ending on the relation-​back day, or after that day but on or before the day when the winding-​up began (s 588FE(6A)). The court is empowered to make a wide range of orders where it is satisfied that a transaction is voidable under Pt 5.7B: s 588FF. It will not, however, make an order that materially prejudices a person who entered into the voidable transaction in good faith131 and without reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent: s 588FG. 125

“Relation-​back day” is defined in the Corporations Act 2001 (Cth), s 9 as either the day on which the winding-​up application was filed (if the matter arises under Div 1A of Pt 5.6) or the day on which the winding-​up is taken to have begun (in other circumstances).

126

“Related entity” is defined in the Corporations Act 2001 (Cth), s 9.

127

Skouloudis Group Pty Ltd (in liq) v Planet Enterprizes Pty Ltd (2002) 41 ACSR 369 at 374 per Windeyer J.

128

McDonald v Hanselmann (1998) 144 FLR 463 at 470 per Young J.

129

As defined in the Corporations Act 2001 (Cth), s 588FD.

130

As defined in the Corporations Act 2001 (Cth), s 588FDA.

131

As to the meaning of “good faith” and “suspicion of insolvency” in this context see Re Ermayne (1998) 30 ACSR 330 at 334–​ 336 per Wicks J; Sydney Appliances Pty Ltd v Eurolinx Pty Ltd (2001) 19 ACLC 633 at 638–​639 per Santow J.

582 [19.135] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Legality of Trusts  Chapter  19

Voidable dispositions outside of insolvency

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[19.140] Statute declares an alienation132 (in South Australia and Tasmania, convey-

ance)133 of property —​which includes by way of trust —​with intent to defraud creditors as voidable at the instance of the person thereby prejudiced.134 This is expressed not to affect the law of bankruptcy, and not to extend to any estate or interest in property alienated to a purchaser in good faith and (excepting New South Wales) for valuable consideration, not having at the time of the alienation notice of the intent to defraud creditors. The term “alienation” here encompasses every conceivable means whereby property might be removed from the reach of a person’s creditors, and does not require that it be via the act of the fraudulent debtor.135 In this sense, this legislation is wider in reach than s 121(1) of the Bankruptcy Act 1966 (Cth), which catches only “a transfer of property by a person who later becomes bankrupt”: see [19.115], [19.120]). But in another way it is narrower than s 121(1), as it focuses on “intent” (see [19.145]) rather than “purpose”, meaning that a case that falls within s 121 clearly falls within these statutory provisions but the obverse is not necessarily so.136 A creditor would proceed under these provisions only if the debtor is not insolvent and the property disposed is capable of being recovered. The onus of proof lies on the person seeking to have the alienation set aside.137 The aim of these provisions is “to enhance the prospects of recovery of debts notwithstanding fraudulent action by the debtor to defeat or hinder such recovery”.138 The conduct struck down is directed not to a person preferring to pay some creditors over others, or to causing some creditors to be made into secured creditors; “it is preferring oneself to the general body of creditors”.139 The legislation adds that every voluntary disposition of land made with intent to defraud a subsequent purchaser is voidable at the instance of that purchaser, and that no voluntary disposition is deemed to have been made with the intent to defraud by reason only that a subsequent conveyance for valuable consideration was made.140

132

In this context the term “alienation” has been held to constitute a parting with property, and to include a parting with some interest in property: Re Symon [1944] SASR 102; Re Cummins (1951) 15 ABC 185. It has also been said that alienation is the transfer of value from one person to another (Ord Forrest Pty Ltd v Federal Commissioner of Taxation (1974) 130 CLR 124 at 142 per Barwick CJ) but usually to be understood as applying only to a transfer of property effected by the action of the transferor, as distinct from a transfer by involuntary operation of law (Australian Trade Commission v Film Funding & Management Pty Ltd (1989) 24 FCR 595 at 613 per Gummow J).

133

The use of the word “conveyance” has been held to restrict the application of the statutory provision to dispositions of realty: Thomson v Nicholson [1939] VLR 157.

134

Civil Law (Property) Act 2006 (ACT), s 239; Conveyancing Act 1919 (NSW), s 37A; Law of Property Act 2000 (NT), s 208; Property Law Act 1974 (Qld), s 228; Law of Property Act 1936 (SA), s 86; Conveyancing and Law of Property Act 1884 (Tas), s 40; Property Law Act 1958 (Vic), s 172; Property Law Act 1969 (WA), s 89.

135

Hall v Poolman (2007) 215 FLR 243 at [550] per Palmer J (adding (at [551]) that “if a person acts collusively with a fraudulent debtor in such a way as to cause ownership of property to move, or to remain away, from the apparently passive debtor, there nevertheless has been an alienation of property for the purposes of the section”).

136

Andrew v Zant Pty Ltd [2004] FCA 1716 at [20] per Hill J.

137

Ex parte Mercer (1886) 17 QBD 290.

138

Green v Schneller (2001) 164 FLR 82 at 86 per Barrett J.

139

Alati v Wei Sheung (2000) 34 ACSR 489 at 492 per Young J (although his Honour opined that there could be circumstances where a person so acted to prefer some creditors that it should be held that the general conduct involved alienation with intent to defraud creditors generally).

140

Civil Law (Property) Act 2006 (ACT), s 240; Conveyancing Act 1919 (NSW), s 37B; Law of Property Act 2000 (NT), s 209; Property Law Act 1974 (Qld), s 229; Law of Property Act 1936 (SA), s 87; Conveyancing and Law of Property Act 1884 (Tas), s 41; Property Law Act 1958 (Vic), ss 173, 174; Property Law Act 1969 (WA), ss 90, 91.

[19.140]  583 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

[19.145]  The person seeking to set aside the alienation bears the onus of proving an intention

to defraud and the lack of good faith or valuable consideration by the disponee141 (although if the evidence suggests an intention to defraud, the burden of proving any good faith and valuable consideration shifts on the person making this claim).142 It is unnecessary to show that the debtor wanted creditors to suffer a loss or had a purpose of causing loss; rather, it is necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly.143 There is no need to prove dishonesty in the sense of a desire to cheat or swindle those prejudiced,144 as the relevant provisions “should receive a liberal construction in effecting their purpose of suppressing fraud”.145

TRUSTS TO EVADE TAXATION [19.150] Trusts established to evade tax liability are void as against the Commissioner of

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Taxation. Given the prevalence of trusts as a tax planning vehicle, it is of special importance to distinguish arrangements to reduce the incidence of taxation that are legitimate from those that are not. Central to this are the general anti-​avoidance provisions146 found in Pt IVA of the Income Tax Assessment Act 1936 (Cth).147 Part IVA provides that if a taxpayer148 obtains a “tax benefit” in connection with a “scheme”, the Commissioner of Taxation can cancel the benefit (s 177F) where it can objectively149 be concluded, having regard to the prescribed factors150 whether individually or globally,151 that the taxpayer entered the scheme for the dominant purpose152 of obtaining that 141

Williams v Lloyd (1934) 50 CLR 341 at 372 per Dixon J; Official Trustee v Marchiori (1983) 69 FLR 290; Official Trustee v Mitchell (1992) 38 FCR 364; Re Hale (a bankrupt) [1989] 2 NZLR 503n at 506 per Wild CJ.

142

Noakes v J Harvy Holmes & Son (1979) 26 ALR 297; Official Trustee v Marchiori (1983) 69 FLR 290.

143

Regal Castings Ltd v Lightbody [2009] 2 NZLR 433 at [52]–​[54] per Blanchard and Wilson JJ, endorsed in Marcolongo v Chen (2011) 242 CLR 546 at [32] per French CJ, Gummow, Crennan and Bell JJ.

144

Marcolongo v Chen (2011) 242 CLR 546 at [28]–​[33] per French CJ, Gummow, Crennan and Bell JJ.

145

Marcolongo v Chen (2011) 242 CLR 546 at [20] per French CJ, Gummow, Crennan and Bell JJ.

146

The Income Tax Assessment Act 1936 (Cth) also contains specific anti-​avoidance provisions pertinent to trusts. See, for example, Income Tax Assessment Act 1936 (Cth), s 100A (“reimbursement agreements”), Pt eeIII, Div 6AA (income of certain children). A discussion of these provisions is beyond the scope of this work.

147

As to Pt IVA generally see Pagone, Tax Avoidance in Australia (Federation Press, 2010).

148

This includes a taxpayer in the capacity of a trustee: Income Tax Assessment Act 1936 (Cth), s 177A(1). That no trustee is liable to pay income tax in a given year, say because the income of the trust has all been distributed to the beneficiaries, does not prevent Pt IVA from applying to a trustee: Grollo Nominees Pty Ltd v Commissioner of Taxation (1997) 73 FCR 452 at 499–​501  (FC).

149

Part IVA does not authorise consideration of evidence of the subjective purpose or motivation of a particular person; s 177D seeks to establish the conclusion that would be reached by reference to what may be referred to as objective factors, that conclusion being however, a conclusion as to the purpose of a person who entered into or carried out the scheme: Eastern Nitrogen Ltd v Federal Commissioner of Taxation (2001) 108 FCR 27 at 44 per Carr J; Federal Commissioner of Taxation v Zoffanies Pty Ltd (2003) 54 ATR 280 at [53], [54] per Hill J.

150

These factors are (a) the manner in which the scheme was entered into or carried out; (b) the form and substance of the scheme; (c) the time at which the scheme was entered into and the length of the period during which the scheme was carried out; (d) the result in relation to the operation of the Income Tax Assessment Act 1936 (Cth) that, but for Pt IVA, would be achieved by the scheme; (e) any change in the financial position of the relevant taxpayer that has resulted, or may reasonably be expected to result, from the scheme; (f) any change in the financial position of any person who has, or has had, any connection with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme; (g)  any other consequence for the relevant taxpayer, or person with a connection with that taxpayer, of the scheme being entered into or carried out; and (h) the nature of any connection between the relevant taxpayer and any person referred to in factor (f): Income Tax Assessment Act 1936 (Cth), s 177D(2).

151

Federal Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 207 CLR 235 at 263 (FC).

152

Income Tax Assessment Act 1936 (Cth), s 177A(5). The purpose of the taxpayer’s tax advisor is attributable to the taxpayer for this purpose: Federal Commissioner of Taxation v Consolidated Press Holdings Ltd (2001) 207 CLR 235 at 264 (FC).

584 [19.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Legality of Trusts  Chapter  19

benefit. “Scheme” means “any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and any scheme, plan, proposal, action, course of action or course of conduct”: s 177A(1). Despite the breadth of this definition the Commissioner cannot, for the purpose of cancelling a tax benefit, select part of a scheme and affix the dominant purpose of securing the tax benefit to that part. As explained by the High Court in Federal Commissioner of Taxation v Peabody:153

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Part IVA does not provide that a scheme includes part of a scheme and it is possible, despite the very wide definition of a scheme, to conceive of a set of circumstances which constitutes only part of a scheme and not a scheme in itself. That will occur where the circumstances are incapable of standing on their own without being “robbed of all practical meaning” … That, of course, does mean that if part of a scheme may be identified as a scheme in itself the Commissioner is precluded from relying upon it as well as the wider scheme.

It should not be assumed, though, that the court’s use of the phrase “robbed of all practical meaning” was intended as a statement of the appropriate legal test, given that the language of Pt IVA does not contain this expression.154 In any event, the breadth of the definition of “scheme” is consistent with the objective nature of the inquiries made under Pt IVA.155 Under s 177C(1), a “tax benefit” comprises, inter alia, an amount not being included in a taxpayer’s assessable income where that amount would (or might reasonably be expected to) have been included therein had the scheme had not been entered into or carried out, and a deduction being allowable to the taxpayer where all or part of it would not (or might reasonably be expected not to) have been allowable had the scheme not been entered into or carried out. A “reasonable expectation” requires more than a possibility. It involves a prediction as to events that would have taken place had the relevant scheme not been entered into or carried out, which must be sufficiently reliable for it to be regarded as reasonable.156 For a transaction motivated by both tax and non-​tax considerations, in Federal Commissioner of Taxation v Spotless Services Ltd Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ observed:157 A particular course of action may be … both “tax driven” and bear the character of a rational commercial decision. The presence of the latter characteristic does not determine the answer to the question whether … a person entered into or carried out a “scheme” for the “dominant purpose” of enabling the taxpayer to obtain a “tax benefit”. Much turns upon the identification, among various purposes, of that which is “dominant”. In its ordinary meaning, dominant indicates that purpose which was the ruling, prevailing, or most influential purpose.

McHugh J agreed in a short separate judgment, noting that the court would seldom if ever find a scheme had been entered into for the dominant purpose of securing a tax benefit “if

153

Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 at 383–​384 (footnotes omitted).

154

Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [47] per Gummow and Hayne JJ.

155

Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [43] per Gummow and Hayne JJ.

156

Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 at 385.

157

Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 at 416. See also Metal Manufacturers Ltd v Federal Commissioner of Taxation (1999) 43 ATR 375 at 427 per Emmett J (noting that the fact that a taxpayer adopted one of two or more alternative courses of action, being the one that produces a tax benefit, will not by itself decide the case in favour of the Commissioner).

[19.150]  585 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

no more appears than that a change of business or investment has produced a tax benefit for the taxpayer”.158 Gleeson CJ and McHugh J in Federal Commissioner of Taxation v Hart159 likewise remarked that the fact that a particular commercial transaction is chosen from several possible alternative courses of action because of tax benefits associated with its adoption does not of itself mean that there is necessarily a dominant purpose of securing a tax benefit in so doing. Their Honours noted that taxation is part of the cost of doing business, and business transactions are normally influenced by cost considerations. What the courts generally investigate is whether the scheme makes commercial sense without the tax benefit; if it does, then it is difficult to conclude that securing the tax benefit is the dominant purpose of the scheme.160

FAMILY COURT POWERS TO SET ASIDE FAMILY TRUSTS Setting aside dispositions [19.155]  Section 106B(1) of the Family Law Act 1975 (Cth) empowers the Family Court to

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“set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order or which, irrespective of intention, is likely to defeat any such order”.161 The jurisdiction clearly encompasses the striking down of trusts162 that circumvent the court’s property jurisdiction. It is immaterial that the trust was made some time before the proceedings or even before the marriage took place,163 or that it only partly as opposed to wholly defeats the court’s order.164 Moreover, s 106B operates irrespective of the settlor’s

158

Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 at 425.

159

Federal Commissioner of Taxation v Hart (2004) 217 CLR 216 at [15].

160

WD & HO Wills (Aust) Pty Ltd v Commissioner of Taxation (1996) 65 FCR 298 at 338 per Sackville J.

161

See generally Dickey, Family Law (6th ed, Lawbook Co, 2014), Ch 48. In Western Australia the equivalent provision is the Family Court Act 1997 (WA), s 222(1). Statute vests in State and Territory courts a similarly worded power to set aside trusts or other dispositions in the context of the breakdown of de facto (or domestic) relationships (Domestic Relationships Act 1994 (ACT), s 29; Property (Relationships) Act 1984 (NSW), s 42; De Facto Relationships Act 1991 (NT), s 41; Property Law Act 1974 (Qld), s 335; Domestic Partners Property Act 1996 (SA), s 14; Relationships Act 2003 (Tas), s 58; Relationships Act 2008 (Vic), s 63; Family Court Act 1997 (WA), s 222) but with the extension of the financial settlement regime under the Family Law Act 1975 (Cth) to de facto relationships (as defined in s 4AA of that Act) as from 1 March 2009 (pursuant to the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth) and corresponding referral of powers legislation other than in Western Australia), s 106B now also applies to de facto relationships (other than in Western Australia).

162

The courts construed the term “disposition” broadly (see Bassola v Bassola (1985) 10 Fam LR 413 at 416 per Connor J; Newjur Pty Ltd v Pangas (1997) 140 FLR 194 at 199 per Bryson J; Re Bassi and K D Sales Force Specialists Pty Ltd (1999) 25 Fam LR 678 at 703–​704 (FC)), and the section defined the term to include “a sale and a gift” (s 106B(5)). Although this was sufficient to encompasses the creation of a trust, any doubts were removed by an amendment to definition of “disposition” in s 106B(5), with effect from 3 August 2005 (the date of effect of the pursuant to the Family Law Amendment Act 2005 (Cth)), to include “the issue, grant, creation, transfer or cancellation of, or a variation of the rights attaching to, an interest in a company or a trust”. The term “interest” in a trust includes: (a) a beneficial interest in the trust; (b) the interest of a settlor in property subject to the trust; (c) a power of appointment under the trust; (d) a power to rescind or vary a provision of, or to rescind or vary the effect of the exercise of a power under, the trust; and (e) an interest that is conditional, contingent or deferred.

163

Marriage of Johnson (2000) 155 FLR 44 at 50–​52 per Warnick J (noting that the section prescribes no temporal limitation bearing upon the making of the instrument or disposition that might be set aside or restrained; and adding that it is not impossible that, notwithstanding that a marriage has not yet taken place, a disposition may be made by a party to the proposed marriage, fearful of the breakdown of that marriage and wishing, in that event, to preserve the property for some other person (such as a parent or a child from a previous marriage) rather than retain the property, with the possibility that it might be the subject of proceedings by the intended spouse).

164

Newjur Pty Ltd v Pangas (1997) 140 FLR 194 at 199 per Bryson J.

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Legality of Trusts  Chapter  19

intention; the court examines not the purpose of the trust but its effect on the other party,165 although this is not to deny that evidence of actual intention may carry weight.166 There must, though, be some connection between the disposition and the (likely) defeat of the order; else a transaction could subsequently be set aside if at any future time a person’s assets prove insufficient to meet the demands of an order.167 The court inquires into what a “reasonable disponer” would have in contemplation or foresee regarding an “anticipated order”.168 For example, in Marriage of Toohey169 the matrimonial home had been transferred to the husband’s parents some five or six years prior to separation. McCall J held that “it would be quite unrealistic to say that a reasonable disponer would objectively have had in contemplation or be able to foresee [at the time of the disposition] that an order in property proceedings was likely to be made [five or six years later] or the years following”.170

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[19.160]  In determining whether or not to make the order, s 106B(3) directs the court to

have regard to the interests of, and make any order proper for the protection of, a bona fide purchaser or other person interested. This does not deny the court jurisdiction to set aside a transaction if it cannot make an order to protect the interests of a relevant third party; it gives the court discretion as to the degree and manner of protection to be accorded to a third party.171 The court may, at one extreme, decline to set aside the transaction so as to ensure full protection to the third party172 and, at the other extreme, set aside the transaction without making an order protecting the third party’s interests.173 It may even be that the court can, in its discretion, decline to exercise its s 106B(1) power in respect of a third party found not to be properly entitled to the statutory protection, although the circumstances in which it would do so will likely be very limited.174 As the phrase “bona fide” in s 106B(3) qualifies the term “purchaser”, not the phrase “other person interested”, a disponee may in theory qualify as a “person interested” whether or not he or she acts bona fide. Yet the presence or absence of bona fides (or negligence or other conduct of a like kind) may well impact upon the extent to which, if at all, a court will extend that protection,175 especially as the claim of a bona fide purchaser is usually more likely to merit legal protection than that of another person.176 [19.165] The section was amended, with effect on 18 September 2005,177 such that if a

party to a marriage is a bankrupt (or is subject to a personal insolvency agreement) and the 165

Halabi v Artillaga (1993) 17 Fam LR 675 at 679–​680 per Nicholson CJ; Markham v Markham [2010] FamCA 460 at [99] per Austin J.

166

Marriage of Johnson (2000) 155 FLR 44 at 52 per Warnick J (s 106B(1) “is … also operative in respect of actual intention, that is, subjectively, and in circumstances in which actual intention is proved … as a fact, the order will have been anticipated”).

167

Whitaker v Whitaker (1980) FLC ¶90-​813 at 75,129 per Nygh J.

168

Pflugradt v Pflugradt (1981) FLC ¶91-​052 at 76,430 per Elliott J; Holley v Holley (1982) FLC ¶91-​257 at 77,440 (FC); Marriage of Johnson (2000) 155 FLR 44 at 52 per Warnick J.

169

Marriage of Toohey (1991) 14 Fam LR 843.

170

Marriage of Toohey (1991) 14 Fam LR 843 at 850.

171

Marriage of Szelley (1977) FLC ¶90-​323 at 76,704 per Murray J; Marriage of Heath (1983) FLC ¶91-​362 at 78,428–​78,429 per Nygh J.

172

See, for example, Marriage of Ivanfy (1978) FLC ¶90-​512.

173

See, for example, Marriage of Heath (1983) FLC ¶91-​362 [affd Marriage of Heath (No 2) (1984) FLC ¶91-​517 at 79,196].

174

Re Bassi and K D Sales Force Specialists Pty Ltd (1999) 25 Fam LR 678 at 702 (FC).

175

Balnaves v Balnaves (1988) 12 Fam LR 488 at 501 (FC).

176

Marriage of Heath (No 2) (1984) FLC ¶91-​517 at 79,196 (FC).

177

Under Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth), Sch 1.

[19.165]  587 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

trustee-​in-​bankruptcy is a party to the family law proceedings, the court may set aside or restrain the making of an instrument or disposition made or proposed by or on behalf of the bankrupt (debtor) to defeat an existing or anticipated order in the proceedings (or that is likely to do so): s 106(1A), 106(1B). Foreshadowing this amendment the section was, as from 15 April 2005,178 amended to entitle a creditor of a party who may be unable to recover her or his debt were the instrument or disposition made, or any other person whose interests would be affected by the instrument or disposition, to apply for an order under s 106B: s 106B(4AA). Setting aside marriage settlements

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[19.170]  Section 85A(1) of the Family Law Act 1975 (Cth) empowers the Family Court to

make such order as is just and equitable for the benefit of all or any of the parties to a marriage with respect to the application of property dealt with by ante-​nuptial or post-​nuptial settlements179 made in relation to the marriage.180 The jurisdiction is not premised upon a breakdown of the marriage or even the contemplated of a breakdown; it is only necessary that the settlement be incidental (“in relation to”) to the marriage.181 It was a legislative response in part to apprehensions that s 79 of the Act —​under which the court may alter property interests —​did not allow the court to “deal directly” with the unascertained interest that a spouse may have in a discretionary trust.182 These apprehensions proved a lower hurdle than anticipated (see [20.135]–​[20.145]), but at the same time the ostensible value of s 85A for this purpose was reduced by the decision of Nygh J in Knight v Knight183 that a settlement cannot be described as a “settlement in relation to marriage” if persons outside the marriage are substantial beneficiaries. As it is common for discretionary trust deeds to permit trustees to distribute the capital and income to a wide range of beneficiaries of which the husband and wife are but two, it appears that s 85A can be circumvented with relative ease. Yet without reference to the ruling in Knight, Kiefel J in Kennon v Spry184 opined that s 85A(1) “is intended to have a wide operation, to property held for the benefit of the parties on a settlement and to which they have contributed”. Her Honour saw its essential requirement as a sufficient association between the property the subject of a settlement and the marriage the subject of proceedings. She was willing to apply the section even though, on the facts in question, the beneficiaries included the four children of the husband and wife, the husband’s sister, her three children and the daughter of the husband’s deceased sister. This led Heydon

178

Under Bankruptcy and Family Law Legislation Amendment Act 2005 (Cth), Sch 5.

179

A “settlement” presupposes “a disposition of property on certain terms”, which “must have some continuing provision for the parties who enjoy the property the subject of the settlement”, and although nothing in the section indicates that that enjoyment or those terms and conditions have to give rise to equitable interests or even rights enforceable in equity, the use of “settlement” language indicates they do (that is, an obligation upon the legal title holder): Rice v Rice (2015) 52 Fam LR 618 at [123] per Cronin J.

180

See generally Dickey, Family Law (6th ed, Lawbook Co, 2014), Ch 46.

181

See, for example, Rice v Rice (2015) 52 Fam LR 618 (where the relevant arrangement, wherein husband and wife transferred their farm to two daughters 16 years earlier for the purposes of receiving a pension, was incidental to the marriage because it was directed towards their future security as a couple and was organised for their benefit: at [124] per Cronin J).

182

Kennon v Spry (2008) 238 CLR 366 at [132] per Gummow and Hayne JJ. See also Rice v Rice (2015) 52 Fam LR 618 at [81], [82] per Cronin J.

183

Knight v Knight (1987) 90 FLR 313. See also Spellson v Spellson (1989) FLC ¶92-​044; Marriage of Toohey (1991) 14 Fam LR 843 at 851 per McCall J.

184

Kennon v Spry (2008) 238 CLR 366 at [227].

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Legality of Trusts  Chapter  19

J, dissenting in the case, to find s 85A had no application,185 but did not deter Kiefel J, who said:186 The trustees also placed reliance upon the description of the beneficiaries of the Trust, which extended beyond the husband and wife and the children of the marriage. By this means it was sought to deny the necessary nuptial element of the Trust. The husband’s sisters and their issue also fell within the class of beneficiaries. The question of the impact of any order under s 85A upon those persons may be put to one side for present purposes. So far as concerns the character of the Trust, their inclusion does not deny the nuptial element. Regard must be had to the circumstances pertaining to the Trust, for the purposes of s 85A. The nuptial element can readily be seen by the contribution made by the parties to the marriage to the Trust and the holding of that property for their benefit. The fact that the other beneficiaries may have received some, undisclosed, distribution from the Trust at some point does not detract from its essential character.

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Her Honour’s approach is less prescriptive than that of Nygh J in Knight. It places substance ahead of form in recognising that, depending on the circumstances, the presence of beneficiaries beyond husband and wife is not fatal to the existence of a nuptial settlement. A definitive statement of the law awaits, though, as the other judges in the majority did not address the point.

185

Kennon v Spry (2008) 238 CLR 366 at [186] (remarking that “[t]‌he relevant settlement must be made in relation to the marriage, not simply in relation to marriage”; emphasis in original).

186

Kennon v Spry (2008) 238 CLR 366 at [231].

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Chapter 20

Beneficiaries [20.05]  Essential to the creation of a trust is that a trustee holds trust property for one or

more beneficiaries or for a purpose the law recognises as charitable (known as the “beneficiary principle”): see [17.95]. It is apt, accordingly, to investigate the rights accruing to beneficiaries, as well as the nature of a beneficiary’s interest under a trust. Though these topics are addressed separately in this chapter, the latter impacts on the former; the nature of a beneficiary’s interest influences a beneficiary’s rights.

RIGHTS OF BENEFICIARIES Beneficiaries’ rights generally

Rights arising out of beneficiaries’ standing to enforce the trust

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[20.10]  Central to the beneficiary principle is the notion, reflected in the classic statement of

Sir William Grant MR in Morice v Bishop of Durham,1 that, as the court does not take the initiative in the enforcement of trusts, there must be someone to bring the matter before the court, namely a definite object who can enforce the trust. What ensues is that beneficiaries have standing to approach the court for an order to compel the trustees to properly perform their duties and powers under the trust, as well as standing to seek relief for any breach of trust: see [24.10]. The latter may involve seeking an injunction to prevent a (continuing) breach of trust (see [24.115]), the appointment of a receiver to the trust property (see [24.125]) or an award of monetary or proprietary remedies either to compensate the trust for any loss caused by the breach or to make the trustees accountable for any illegitimate gain they have thereby secured (see [24.30]–​ [24.90]). Beneficiaries’ standing can extend against third parties who have breached an obligation owed to the trust, albeit generally only where the trustee is unwilling or unable to pursue the matter on behalf of the trust: see [24.15], [24.20]. A cause of action in personam may, though, be available to beneficiaries against a third-​party volunteer who has received trust property in breach of trust: see [24.130], [24.135]. Essential, in each case, to the ability to properly enforce the trust is access by beneficiaries to information regarding the management of the trust, the scope of which is discussed in this chapter: see [20.30]–​[20.70]. Beneficiaries who are dissatisfied with the trustee’s management of trust property may petition the court for the removal of the trustee and the appointment of another trustee, but aside from the terms of the trust deed to the contrary, the court is disinclined to appoint a beneficiary as trustee or to appoint a trustee who is not likely to be even-​handed as between the (classes of) beneficiaries: see [21.80]. As the trustee manages trust property for the benefit of the beneficiaries, it stands to reason that beneficiaries can absolve the trustee from the consequences of failing to properly

1

Morice v Bishop of Durham (1804) 9 Ves 399 at 404–​405; 32 ER 656 at 658.

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Equity and Trusts in Australia

administer the trust in accordance with its terms, whether by prior consent (see [24.160]), subsequent acquiescence (see [24.165]) or a release (see [24.170]). [20.15]  But beneficiaries cannot, absent a clear provision in the trust deed, direct trustees as

to the exercise of discretions —​whether in the exercise of trustees’ powers to manage the trust property, or in selecting beneficiaries for distributions of trust income or capital —​that the settlor has vested in the trustee: see [23.65], [23.70].

Rights arising out of beneficiaries’ “ownership” of trust property

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[20.20]  Other beneficiaries’ rights stem less from their standing to enforce the trust than from

their equitable “ownership” of the trust property. Fundamental to a trust is the duality of ownership of trust property; legal ownership vests in the trustee, and equitable “ownership” in the beneficiaries: see [16.05], [16.10]. This explains why the law vests in beneficiaries the capacity, where they all consent and are of full capacity, to terminate the trust by requesting the trustees to pay over their respective interests under the trust, thereby extinguishing it (known as the rule in Saunders v Vautier): see [25.135]–​[25.145]. It also informs why a beneficiary who is absolutely and indefeasibly entitled to an aliquot (“several”) share of the trust fund can call for payment of that share: see [25.150]. And it affords beneficiaries’ proprietary relief by following (“tracing”) trust property into the hands of third parties (except bona fide purchasers for value without notice of the trust) even though it may have changed form (unless it has been dissipated): see Ch 39. As a trustee of a “bare trust” holds the trust property for the absolute benefit and at the absolute disposal of beneficiaries of full age and capacity in respect of that property, but has no interest in that property other than by reason of legal title (see [21.45]), those beneficiaries can demand that the property be conveyed to them or as directed by them. The same may be said of beneficiaries of fixed trusts as to their entitlements to income and/​or capital under the trust. Whether in the bare trust scenario, or that involving an unconditional debt owed to a (fixed trust) beneficiary, the beneficiaries’ claim can be enforced both in equity and via an action for money had and received at common law.2 Where the interest of a beneficiary under a trust is of a proprietary nature (for example, a unit in a unit trust: see [20.100]–​[20.110]), the general law recognises that the beneficiary has a right to transfer or assign that interest. Even beneficiaries’ interests that are not proprietary in nature —​say, mere choses in action or mere expectancies in the case of discretionary trusts  —​may be the subject of an agreement to assign if made for consideration.3 In each case, though, the right to transfer or assign may be restricted by the terms of the trust deed. The law also recognises that a beneficiary may disclaim her or his interest under the trust: see [20.75]–​[20.90].

Rights conferred by the trust deed and statute [20.25]  In addition to the rights conferred on beneficiaries by the general law, statute and

the terms of the trust deed can give beneficiaries further rights. For instance, the Queensland and Western Australian trustee legislation gives beneficiaries standing to apply to the court to

2

Fischer v Nemeske Pty Ltd (2016) 257 CLR 615 at [16], [17], [33] per French CJ and Bell J, at [109] per Gageler J.

3

R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 at 79 per Owen J. See, for example, Re Coleman (1888) 39 Ch D 443. Cf Global Constructions Ltd v Mesh [2002] NSWSC 47 at [84], [115] per Young CJ in Eq. As to equitable assignments generally see Ch 3.

592 [20.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

review a trustee’s act, omission or decision, or to give directions in respect of it: see [23.75]. The trust deed may make certain of the trustee’s powers subject to the consent of the beneficiaries (or a proportion of them), or may give the beneficiaries a say in the removal and appointment of trustees. Yet it is not unusual for a trust deed to restrict rather than expand the rights of beneficiaries. However, any attempt via the trust deed to oust the beneficiaries’ right to secure the proper administration of the trust is ineffective,4 as it is inconsistent with the nature (“irreducible core”) of a trust in the first place. As such, it may even cast doubt on whether the settlor intended to create a trust. Beneficiaries’ access to trust information

Nature of entitlement [20.30]  Beneficiaries are entitled to full information regarding the trust property, to be fur-

nished fully and not reluctantly by the trustee.5 Some judges have described this right as proprietary in nature, such as Lord Wrenbury in O’Rourke v Darbishire, who said:6

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If the plaintiff is right in saying that he is a beneficiary, and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desires to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access to them.

This should not be taken to mean that a beneficiary has an actual proprietary interest in trust documents,7 but that the right to access trust documents stems from of the beneficiary’s interest in the trust property, and so in that sense the right may be described as proprietary.8 This may make sense for fixed trusts, being the form of trust prevalent at the time Lord Wrenbury made his remarks. But as it is difficult to conceive of individual beneficiaries of discretionary trusts as having a proprietary interest in the property of the trust (see [20.125]), there are obstacles to translating the same logic to the discretionary trusts arena (albeit without prejudice to being able by virtue of a “proprietary” interest to sue a third party who has secured trust property in breach of trust should the trustee omit to do so: see [24.15]). A better foundation, it seems, is to view a beneficiary’s right to inspect trust documents as simply founded on the trustee’s duty, as incidental to properly managing the trust property, to keep 4

Cf Leerac Pty Ltd v Fay [2008] NSWSC 1082 (where Brereton J upheld a testamentary non-​contest clause —​which read “if any beneficiary should at any time commence any action in any Court … against the Trustee … in respect of any matter arising under or in relation to a specified trust other than for wilful default on the part of the Trustee … then such beneficiary shall be deemed not to be and never to have been a beneficiary hereunder” —​on the ground that it did not prevent actions to secure due administration but only deter actions asserting liability for breach of trust against the trustees other than those for wilful default, for which the law allows liability to be excluded (see [24.140]–​[24.150]): at [26]).

5

Kelly v Bruce [1907] SALR 174; Manning v Federal Commissioner of Taxation (1928) 40 CLR 506; Re Pennell [1945] VLR 302; Butt v Kelson [1952] Ch 197 at 204 per Romer LJ; Re Fairbairn (deceased) [1967] VR 633 at 637–​640 per Gillard J; Morris v Morris (1993) 9 WAR 150 at 152–​153 per Seaman J; Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 494 per Windeyer J.

6

O’Rourke v Darbishire [1920] AC 581 at 626.

7

Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at 498 per Doyle CJ, with whom Perry and Martin JJ concurred; Global Constructions Ltd v Mesh [2002] NSWSC 47 at [83] per Young CJ in Eq; Re Maguire (deceased) [2010] 2 NZLR 845 at [31] per Asher J.

8

Re Londonderry’s Settlement [1965] Ch 918 at 938 per Salmon LJ; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 435 per Mahoney JA; Breen v Williams (1996) 186 CLR 71 at 89 per Dawson and Toohey JJ; McDonald v Ellis (2007) 72 NSWLR 605 at [46], [51] per Bryson AJ. See further Dal Pont, “I Want Information! Beneficiaries’ Basic Right or Court Controlled Discretion?” (2013) 32 U Tas L Rev 52.

[20.30]  593 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

the beneficiary informed and to render accounts.9 The right here may be understood as deriving from either the “irreducible core” of trustee obligations.10 Whether it is necessary to take the further step, as did the Privy Council in Schmidt v Rosewood Trust Ltd,11 to view access to trust information merely “as one aspect of the court’s inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts”, may be queried, however, in view of its implications: see [20.35]. Avoiding couching the beneficiaries’ right in proprietary terms does, in any case, dodge distinctions between the rights of beneficiaries of different forms of trusts, or even as between trust beneficiaries12 and objects of mere powers.13 [20.35]  The upshot of the Privy Council’s advice in Schmidt, it seems, is that it is not correct

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to speak of a “right” of a beneficiary to inspect trust documents, subject to exceptions (see [20.40]–​[20.70]), because the matter lies within the court’s discretion by balancing competing interests. The relevant extracts from Lord Walker’s reasons are the following:14 Their Lordships consider that the more principled and correct approach is to regard … a beneficiary’s right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, [as] best approached as one aspect of the court’s inherent jurisdiction to supervise, and where appropriate intervene in, the administration of trusts. There is therefore … no reason to draw any bright dividing line either between transmissible and non-​transmissible (that is, discretionary) interests, or between the rights of an object of a discretionary trust and those of the object of a mere power (of a fiduciary character) … However the recent cases also confirm … that no beneficiary (and least of all a discretionary object) has any entitlement as of right to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests of different beneficiaries, the trustees themselves and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it. In many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief.

No doubt his Lordship was seeking to consign to history the view that beneficiaries’ access to trust documents is grounded in property. And in recognising occasions may arise where beneficiaries’ access to information would be restricted, the approach seems little different from the existing law catalogued at [20.40]–​[20.70]. But there was arguably no need for his Lordship to have then placed beneficiaries’ access to trust information as squarely within the court’s discretion, as opposed to couched as a right subject to exceptions or qualifications (often targeting reasons for discretionary decisions and confidentiality). Yet this has, perhaps surprisingly,15 not stopped several Australian judges from endorsing Lord Walker’s

9

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 421–​422 per Kirby P, at 443–​444 per Sheller JA; Re Maguire (deceased) [2010] 2 NZLR 845 at [30] per Asher J.

10

See Hayton, “The Irreducible Core Content of Trusteeship” in Oakley (ed), Trends in Contemporary Trusts Law (Clarendon Press, 1996), Ch 3.

11

Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [51].

12

Murphy v Murphy [1999] 1 WLR 282 at 290 per Neuberger J (successful application by discretionary beneficiaries for an order of disclosure of the names of the trustees).

13

Spellson v George (1987) 11 NSWLR 300 at 316–​317 per Powell J; Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [66] (PC).

14

Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [51], [66], [67] (paragraph breaks omitted).

15

See Dal Pont, “Beneficiaries and Trust Information” (2014) 39 Aust Bar Rev 46.

594 [20.35] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

approach,16 though the cases do reveal an indication that curial discretion should not ordinarily extend to denying access to trust accounts (as opposed to other documents).17 Not all Australian judges favour Lord Walker’s discretionary analysis of the law. Bryson AJ in McDonald v Ellis18 denounced both Schmidt’s precedent value and the Board’s reasoning. As to the former, his Honour stated that “[a]‌n obiter dictum in the Privy Council about trust law in the Isle of Man has … very little claim to be followed at first instance in New South Wales where a different view has been accepted”.19 As to the latter, he made the following observation:20 A decision that all access to trust documents should be in the discretion of the court is a drastic solution to whatever problems might be perceived in supposing a proprietary basis for discretionary interests, and whatever problems may be perceived in delimiting which documents should be treated as trust documents and in protecting from access documents access to which involves some conflicting principle … In my opinion it is not a better rule because it introduces discretion and promotes resistance and debate in substitution for a rule which is relatively concrete. The tendency will be that only the determined and litigious beneficiary will find out about his own affairs. Where there is a judicial discretion, there is room for litigious debate about the exercise of the discretion; there is no certainty on so elementary a matter as whether or not a beneficial owner is entitled to information about property in which the beneficial owner has an equitable interest.

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Certainly the basic proposition espoused by Bryson AJ —​that as a starting point “the beneficiary is entitled to see trust documents and have information about trust property”21  —​ more closely aligns with the approach espoused by the leading Australian case of Hartigan Nominees Pty Ltd v Rydge,22 discussed later. It also has the merit, as Bryson AJ noted, of greater certainty.23 But whether the Schmidt approach will, in practice, generate different outcomes remains to be seen, especially as the beneficiaries’ “right” to information, under the traditional approach, is not without restrictions.24 What may be telling, to this end, is that the

16

See, for example, Avanes v Marshall (2007) 68 NSWLR 595 at [11] per Gzell J; Silkman v Shakespeare Haney Securities Ltd (2011) 8 ASTLR 117 at [27] per Hammerschlag J; Mercanti v Mercanti [2014] WASC 64 at [34] per Le Miere J; AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Ltd [2015] NSWSC 216; Wright v Stevens [2018] NSWSC 548 at [286] per Hallen J; Webster (Trustee) v Murray Goulburn Co-​Operative Co Ltd (No 3) [2018] FCA 990 at [110]–​[117] per Beach J.

17

Avanes v Marshall (2007) 68 NSWLR 595 at [15] per Gzell J; Re Maguire (deceased) [2010] 2 NZLR 845 at [30] per Asher J. Curiously, though, the application in Schmidt was, in the words of Lord Walker, both “to obtain trust accounts and other information from the trustees of the two settlements”: Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [3]‌. As the reasons do not distinguish “trust accounts” from “other information”, it is no foregone conclusion that his Lordship intended to segregate trust accounts from the court’s discretionary purview.

18

McDonald v Ellis (2007) 72 NSWLR 605.

19

McDonald v Ellis (2007) 72 NSWLR 605 at [50].

20

McDonald v Ellis (2007) 72 NSWLR 605 at [47], [51] (paragraph break omitted). See also Murray v Schreuder (2009) 1 ASTLR 340 at [57], [58] per Newnes J [affd Schreuder v Murray (No 2) (2009) 41 WAR 169]; Deutsch v Trimble [2016] VSC 263 at [66]–​[74] per Hargrave J.

21

McDonald v Ellis (2007) 72 NSWLR 605 at [46].

22

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405.

23

And for this reason is favoured by Dawson, “A Fork in the Road for Access to Trust Documents” (2009) 3 J Eq 1.

24

Cf Campbell, “Access by Trust Beneficiaries to Trustees’ Documents and Reasons” (2009) 3 J Eq 97 (who does not believe that “the explicit recognition that access to information is granted as an exercise of the inherent jurisdiction over trusts, and involves some discretionary judgments, involves any greater uncertainty than was recognised in previous decisions”, but that Schmidt “applied the principle that has always been the generative principle of the court’s role in enforcing trusts”: at 146–​147).

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Equity and Trusts in Australia

case law to date that has favoured the Schmidt approach does not appear to have generated an outcome distinct from that under the more traditional “rights-​based” approach.25 There are nonetheless difficulties with resting beneficiaries’ access to trust information squarely within judicial discretion without a backdrop of a general rule or principle. Should Lord Walker’s speech in Schmidt receive broad(er) endorsement in Australia, the former relative certainty regarding access to trust information has a distinct capacity to produce uncertainty. Unless the parameters of this discretion are set clearly  —​which likely explains the New Zealand Supreme Court’s preference in Erceg v Erceg26 for “a jurisdiction that must be exercised in accordance with principle, after careful assessment of the factors relevant to the disclosure sought by the particular beneficiary” —​this represents what appears an open invitation for beneficiaries to litigate to secure access to information, and for trustees to defend the claims. Areas of law where relief is grounded in broad judicial discretion are, after all, frequent candidates for ongoing litigation, especially where it involves a contest over a fund and there is a belief, often inaccurate, that costs may be met from the fund. To this end, suggestions that Schmidt improves the current law via its introduction of greater flexibility27 arguably underplay its drawbacks. The same may be said of suggestions that the Schmidt approach heralds no more than an incremental shift.28

Parameters of access to trust information

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[20.40]  Even though the case law has traditionally spoken in terms of a beneficiary’s “right”

to information, this did not wholly exclude courts from the exercise. Relevant to the court’s discretion may be whether the applicant is a beneficiary of a fixed trust, or an object of a discretionary trust or mere power, who may have no more than a theoretical possibility of benefit and thus a lesser claim.29 Also relevant, it has been suggested, is a contrast between, on the one hand, a confined, closed trust with a known and relatively static beneficiary cohort, and on the other hand a large commercial trust comprised of substantial and transferable units.30 Though prone to create uncertainty,31 this aligns with the notion that the beneficiaries’ entitlement is to be reasonably informed, which imports a limitation, as a trustee’s task “is to

25

See, for example, Foreman v Kingstone [2004] 1 NZLR 841 at [101] per Potter J (where information denied the beneficiaries collapsed almost entirely into that which would reveal the reasons for trustees’ discretionary decisions: see [20.45]); Silkman v Shakespeare Haney Securities Ltd (2011) 8 ASTLR 117 at [29] per Hammerschlag J (where relief would have been refused in any event because the documents in issue went beyond the definition of “trust documents”: see [20.55]); AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Ltd [2015] NSWSC 216 (where Bergin CJ in Eq refused a unit holder in a private trading trust access to the Register of Unit Holders given the confidentiality of other unit holders’ personal information; as to confidentiality in this context see [20.65], [20.70]); Webster (Trustee) v Murray Goulburn Co-​Operative Co Ltd (No 3) [2018] FCA 990 at [118] per Beach J.

26

Erceg v Erceg [2017] 1 NZLR 320 at [50] per O’Regan J, delivering the reasons of the court (noting that the discretionary approach has been met with some criticism, citing inter alia Dal Pont, “Beneficiaries and Trust Information” (2014) 39 Aust Bar Rev 46 by way of example, and later noting (at [68]) that “[w]‌e do not see the supervisory jurisdiction as discretionary: it is better seen as a jurisdiction”).

27

See, for example, Tey, “Trustee’s Duty of Disclosure” (2012) 24 SAcLJ 191 at 222; Bishop, “Limiting the Nature and Scope of a Beneficiary’s Entitlement to Receive Trust Information” (2014) 88 ALJ 416 at 426.

28

See, for example, Kaldor, “Competing Approaches to Beneficiary Access to Trust Information: Perhaps not so Much of ‘a Fork in the Road’” (2012) 86 ALJ 775. Cf Dawson, “A Fork in the Road for Access to Trust Documents” (2009) 3 J Eq 1.

29

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 432 per Mahoney JA; Murphy v Murphy [1999] 1 WLR 282 at 291–​293 per Neuberger J; Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at [67] (PC); Erceg v Erceg [2017] 1 NZLR 320 at [56], [59] (SC).

30

Webster (Trustee) v Murray Goulburn Co-​Operative Co Ltd (No 3) [2018] FCA 990 at [108] per Beach J.

31

See Mitchell, “Disclosure of Information to Discretionary Beneficiaries” (1999) 115 LQR 206 at 208.

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Beneficiaries  Chapter  20

administer the trust estate for the benefit of the beneficiaries as a whole, rather than to respond to voluminous and lengthy queries from a particular beneficiary”.32 Informing the decision in each case is the basic tenet that “[b]‌eneficiaries are entitled to receive information which will enable them to ensure the accountability of the trustees in terms of the trust deed”.33 It follows that some information that pertains to the trust need not come within this entitlement.34 The court may need to balance competing interests of different beneficiaries, the trustees and third parties. How these interests are to be balanced appears from the limitations on beneficiaries’ right to information discussed below.

No right to reasons [20.45] A trustee is under no duty to explain the reasons for particular decisions,35 unless the

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trust deed or statute36 dictates otherwise. In speaking of decisions, or the exercise of trustees’ discretion, in this context, the target is the exercise of decision-​making power or discretion as to appointment of trust income or capital, although this is not always made explicit in judicial statements. Decisions of trustees exercising choices in the performance of management duties, such as decisions whether or not to carry out some repair or other, or whether or not to make a provision for a class of repairs in the future, are not the discretions to which this body of case law ordinarily relates.37 Three justifications have been proffered for denying beneficiaries a right to reasons.38 First, the disclosure of reasons is inconsistent with the proposition that trustees’ exercise of a discretionary power cannot be challenged absent mala fides: see [23.35]. In this regard, beneficiaries “are obligated to respect the autonomy of the trustees pursuant to broad discretions vested

32

Gray v Guardian Trust Australia Ltd [2003] NSWSC 704 at [39] per Austin J (who held that the beneficiary’s demands for information and access to documents were excessive —​being demands for explanation as to what the trustee had done, was doing, and proposed to do about various matters —​and that even if the beneficiary was entitled to answers to every question he raised, his demands “exceeded the permissible volume and frequency of a beneficiary’s demands for information”). See also Erceg v Erceg [2017] 1 NZLR 320 (where the Supreme Court, in what it conceded was an unusual case, refused a primary discretionary beneficiary (the appellant) access to trust documents (including the trust deed and financial statements) because his conduct gave “genuine reason for concern as to what he would do with the information if he received it”, in particular that information as to the identity of other beneficiaries would lead the appellant to harass those beneficiaries: at [99]; see also at [88], [101]; the court was also influenced by the fact that the appellant was bankrupt at the time, and so “he could not have expected a distribution to be made, given that it would essentially have benefitted his creditors rather than himself”: at [99]).

33

Foreman v Kingstone [2004] 1 NZLR 841 at [97] per Potter J. See also Erceg v Erceg [2017] 1 NZLR 320 at [51] (targeting information “necessary to assess whether the trustee has acted in accordance with the trust deed”), [56] (“The case for disclosure will be compelling if meaningful monitoring of the trustee’s compliance with the trust deed in the administration of the trust could not otherwise occur”) (SC).

34

Wentworth v de Montford (1988) 15 NSWLR 348 at 356 per Hope JA; Re Simersall (1992) 108 ALR 375 at 380–​381 per Gummow J; Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at 498 per Doyle CJ.

35

Re Beloved Wilkes’s Charity (1851) 3 Mac & G 440 at 448–​449; 42 ER 330 at 334 per Lord Truro LC; Re Londonderry’s Settlement [1965] Ch 918 at 933 per Harman LJ, at 936–​937 per Salmon LJ; Tierney v King [1983] 2 Qd R 580 at 583 per Matthews J, with whom Kelly and Macrossan JJ concurred; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 434 per Mahoney JA, at 444–​445 per Sheller JA; Foreman v Kingstone [2004] 1 NZLR 841 at [99] per Potter J; Mandie v Memart Nominees Pty Ltd (2014) 42 VR 325 at [94], [111] per Macaulay J [affd Mandie v Memart Nominees Pty Ltd [2014] VSCA 181].

36

See, for example, Trustee Companies Act 1988 (SA), s 15B(1) (a trustee company that invests trust money in a common fund must, on a written request by a person who has a proper interest in the matter, furnish to that person the company’s reasons for so investing the money).

37

McDonald v Ellis (2007) 72 NSWLR 605 at [31] per Bryson AJ; Lewis v Tamplin [2018] WTLR 215 at [47] per HHJ Paul Matthews.

38

Re Londonderry’s Settlement [1965] Ch 918 at 936–​937 per Salmon LJ; Re Fairbairn (deceased) [1967] VR 633 at 639–​640 per Gillard J; Foreman v Kingstone [2004] 1 NZLR 841 at [90]–​[96] per Potter J.

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Equity and Trusts in Australia

in them by the trust deed”.39 Secondly, a requirement to give reasons would add to trustees’ already onerous obligations. Thirdly, knowledge of reasons for trustees’ decisions may embitter the relationship between trustees and beneficiaries, or that between beneficiaries inter se, particularly in family settlements. The second and third of these justifications are practical concerns; only the first is truly grounded in legal principle. Yet the first justification is somewhat self-​perpetuating, as the lack of reasons may itself make it difficult to establish whether or not the trustees have acted bona fide;40 the distinction between the legitimate inquiry into whether the discretion has been exercised —​that is, honestly, for a proper purpose and on fair consideration: see [23.30]–​[23.40] —​not how it was exercised, which falls outside of the beneficiaries’ purview, is not always precise.41 Ostensibly in recognition of the latter point, it has been judicially observed that if a plaintiff makes a prima facie case that the trustees’ discretion has miscarried, an absence of reasons will tend to make that prima facie case “a virtual certainty”.42 So trustees may be practically compelled to disclose their reasons to avoid adverse inferences being drawn. Also, where a decision is directly attacked in legal proceedings, the trustees may be compelled legally, through discovery or subpoena, to disclose the substance of their reasons for it.43 Where reasons are divulged  —​and here there may arise questions of degree as to whether some disclosure is treated as opening the door to a fuller disclosure44 —​the court may assess the correctness of the trustees’ reasoning.45 If the reasons divulged are of a kind that no trustee acting reasonably could arrive at or could rely on to justify the exercise of a discretion in the manner adopted, this permits the inference to be drawn by the court that the trustee had acted improperly.46

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[20.50]  In Queensland and Western Australia statute modifies the general law, allowing bene-

ficiaries who are aggrieved by an act, omission or decision in the exercise of the trustee’s powers, or who have reasonable grounds to anticipate being so aggrieved, to apply to the court to review the act, omission or decision or to give directions in respect of it: see [23.75]. The logic for this statutory intervention is that “it is … preferable that trustees should occasionally experience some embarrassment in publicly justifying their decisions than that beneficiaries should be left quite ignorant as to the reasons which have determined dispositions of what is, after all, beneficially their property and not that of the trustee”.47

39

Foreman v Kingstone [2004] 1 NZLR 841 at [99] per Potter J.

40

Esso Australia Ltd v Australian Petroleum Agents’ and Distributors’ Association [1999] 3 VR 642 at 652 per Hayne J.

41

Mandie v Memart Nominees Pty Ltd (2014) 42 VR 325 at [109] per Macaulay J [affd Mandie v Memart Nominees Pty Ltd [2014] VSCA 181] (noting that where beneficiaries commence an action alleging, on a proper basis, some want of good faith or some other impugning feature of the exercise of discretion, such as pursuit of an improper purpose or failure to give fair consideration to the issue, “the reasoning and the material used in that consideration may then be examined, but even then only for the limited purpose of ascertaining whether the discretion was lawfully exercised and not how it was exercised”).

42

Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 at 604 per Young J.

43

Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 at 719 per Robert Walker J.

44

See Mandie v Memart Nominees Pty Ltd (2014) 42 VR 325 at [123]–​[128] per Macaulay J [affd Mandie v Memart Nominees Pty Ltd [2014] VSCA 181] (opining that “[i]‌f material that forms or might form the basis of the trustee’s exercise of a discretion enjoys the same protection as the reasons for its exercise, it might reasonably be argued that, under the same exception applicable to reasons, voluntary disclosure of some of the material basis for a decision opens up the examination of the whole of the material”: at [125]; emphasis in original).

45

Re Beloved Wilkes’s Charity (1851) 3 Mac & G 440 at 448; 42 ER 330 at 334 per Lord Truro LC; Dundee General Hospitals Board of Management v Walker [1952] 1 All ER 896 at 900 per Lord Normand.

46

Manglicmot v Commonwealth Bank Officers Superannuation Corp (2010) 239 FLR 159 at [36] per Rein J.

47

Queensland Law Reform Commission, Report on the Law Relating to Trusts, Trustees, Settled Land and Charities (No 8, 1971), p 13.

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Beneficiaries  Chapter  20

No right to “non-​trust documents” [20.55] The beneficiaries’ “right” to inspect has traditionally been confined to what meets

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the description of “trust documents”. A “trust document” has been judicially described, with an element of circularity, as one in the possession of the trustees as trustees that contains information about the trust that the beneficiaries are entitled to know.48 Typically these target documents containing or evidencing the terms of the trust, relating to the trust property, and that verify the trustees’ representations as to the trust’s financial position,49 such as financial statements and books of account of the trust.50 In fact, it has been noted that, given the trustee’s role in managing trust property, “[t]‌he beneficiary’s right of access to documents in the hands of the trustee seems to be strongest where the subject matter is financial information about the administration of the trust”.51 This may extend to financial statements of a company in which trust funds have been invested.52 Beneficiaries are entitled to names of all past and present trustees, and their dates of appointment, retirement or resignation, including copies of any deeds or documents effecting these changes. Beneficiaries are also entitled to any deeds or documents constituting or varying the terms of the trust.53 Whether beneficiaries are entitled to other beneficiaries’ names and addresses, which information may be important for the making of joint decisions (such as terminating the trust: see [25.135]–​[25.145]), depends on the terms of the trust and the circumstances of the request, as such a disclosure may raise privacy issues.54 But in the usual case there is no entitlement to documents that reveal the timing and quantum of distributions to other beneficiaries, for access to this information, in addition to invading other beneficiaries’ privacy (and confidentiality), would be “tantamount to inviting a review of the exercise of the trustees’ discretion … in circumstances where it must be accepted their decisions to do so (in the absence of bad faith) cannot be the subject of challenge”.55 This information, moreover, is not ordinarily necessary for the purposes of rendering the trustees accountable. [20.60]  Legal opinions obtained by the trustees for the purposes of the trust, funded from

trust funds, are prima facie trust documents, even if privileged as against third parties56 (that is, a joint privilege between trustees and beneficiaries). But that a document came into existence in relation to the trust’s management or the discharge of the trustees’ duties does not for

48

Re Londonderry’s Settlement [1965] Ch 918 at 938 per Salmon LJ.

49

Re Tillott [1892] 1 Ch 86 at 88 per Chitty J; Re Fairbairn (deceased) [1967] VR 633 at 640 per Gillard J; Murphy v Murphy [1999] 1 WLR 282 at 290 per Neuberger J; Global Constructions Ltd v Mesh [2002] NSWSC 47 at [77] per Young CJ in Eq; Foreman v Kingstone [2004] 1 NZLR 841 at [97] per Potter J. The inquirer may be required to meet any expenses of the provision of the information: Strauss v Wykes [1916] VLR 200 at 203–​204 per Madden CJ.

50

Re Simersall (1992) 108 ALR 375 at 379 per Gummow J; Morris v Morris (1993) 9 WAR 150 at 154–​155 per Seaman J; Hancock v Reinhart (2015) 13 ASTLR 1 at [359]–​[362] per Brereton JGuest v Guest [2015] VSC 761 at [78] per Mukhtar AsJ; Erceg v Erceg [2017] 1 NZLR 320 at [73] (SC).

51

Gray v Guardian Trust Australia Ltd [2003] NSWSC 704 at [37] per Austin J.

52

Chaine-​Nickson v Bank of Ireland [1976] IR 393; Murphy v Murphy [1999] 1 WLR 282 at 290 per Neuberger J; Global Constructions Ltd v Mesh [2002] NSWSC 47 at [80] per Young CJ in Eq.

53

Foreman v Kingstone [2004] 1 NZLR 841 at [101] per Potter J.

54

Cf Slater v Global Finance Group Pty Ltd (1999) 150 FLR 264 at 273–​274 per Wheeler J.

55

Erceg v Erceg [2015] NZAR 1227 at [43] per Venning J.

56

Attorney-​General of Ontario v Ballard Estate (1995) 119 DLR (4th) 750 at 754–​756 per Lederman J.  Whether a trustee has the right to withhold disclosure from a beneficiary on the grounds of privilege is determined by the ordinary principles applicable to the protection of privileged information, not via an analysis of the beneficiary’s “proprietary” right to trust documents: Schreuder v Murray (No 2) (2009) 41 WAR 169 at [10]–​[12] per Pullin JA, at [98], [99] per Buss JA; Krok v Szaintop Homes Pty Ltd [2011] VSC 16 at [13], [14] per Judd J.

[20.60]  599 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

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Equity and Trusts in Australia

that reason alone mark it as a trust document.57 Documents that do not relate to the exercise of any discretion or power the trustees possess under the trust, or that are otherwise prepared by trustees for their own purposes, are not “trust documents”. This applies, say, to documents containing confidential legal communications for the personal guidance of the trustees,58 and to those relating to the trustees’ defence of proceedings brought against them by the beneficiaries.59 It also applies, said the New South Wales Court of Appeal in Hartigan Nominees Pty Ltd v Rydge,60 to agendas and minutes of trustees’ meetings, correspondence between trustees, and correspondence between trustees and individual beneficiaries. It did add, though, that the class of documents to which beneficiaries are denied access should not extend beyond those necessary to preserve the trustees’ right not to disclose their reasons for exercising discretionary powers and their reasoning processes. More generally, given the ostensible justification to protect the private, discretionary reasoning of trustees, that justification logically extends to shield the source information used by the trustees in close connection with their process of reasoning. After all, material considered in making a decision often, albeit not always or conclusively, “provides a solid clue to the reasoning itself”.61 It is conceivable, therefore, that (some) “trust documents” could, if divulged, tend to disclose the trustees’ reasons for discretionary decisions. In this event, Salmon LJ in Re Londonderry’s Settlement62 made the simple suggestion that “all parts of any documents … which contain information to which the beneficiary is not entitled should be covered up before being shown to the beneficiary”. In Londonderry the English Court of Appeal held that the beneficiaries were not entitled to inspect the minutes of, and agenda for, trustees’ meetings, as these would make them privy to the trustees’ motives and reasons for exercising their discretion. Harman LJ observed that, were this otherwise, “[t]‌rustees who wish to preserve their rights in this respect must either commit nothing to paper or destroy everything from meeting to meeting”.63 In similar vein, Gzell J in Avanes v Marshall64 ruled that documents preparatory to the trust accounts, comprising requests for professional advice on matters affecting the presentation of the accounts, went to the deliberations of trustees, and so fell outside the beneficiaries’ purview.

Qualification or ouster of right by the trust deed or another document [20.65]  Beneficiaries’ right to information may be qualified or ousted by the trust deed. It

may, for instance, require the trustees to maintain secrecy over part of the operations of the trust.65 A secrecy or confidentiality requirement may also be found in a document attached to

57

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 432–​433 per Mahoney JA.

58

Avanes v Marshall (2007) 68 NSWLR 595 at [21] per Gzell J; Webster (Trustee) v Murray Goulburn Co-​Operative Co Ltd (No 3) [2018] FCA 990 at [127] per Beach J.

59

Hancock v Reinhart (2015) 13 ASTLR 1 at [360] per Brereton J.

60

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 432, 434 per Mahoney JA, at 444–​445 per Sheller JA. See also Re Londonderry’s Settlement [1965] Ch 918 at 938 per Salmon LJ, at 933 per Harman LJ; Gray v Guardian Trust Australia Ltd [2003] NSWSC 704 at [39] per Austin J.

61

Mandie v Memart Nominees Pty Ltd (2014) 42 VR 325 at [107] per Macaulay J [affd Mandie v Memart Nominees Pty Ltd [2014] VSCA 181].

62

Re Londonderry’s Settlement [1965] Ch 918 at 937.

63

Re Londonderry’s Settlement [1965] Ch 918 at 933. See also Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 444–​445 per Sheller JA.

64

Avanes v Marshall (2007) 68 NSWLR 595 at [23]–​[25].

65

See Tierney v King [1983] 2 Qd R 580.

600 [20.65] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

the trust; the settlor, knowing the trust deed (as a trust document) is available to beneficiaries for inspection, may wish the trustee to take into account certain matters in exercising the discretion that are to remain unknown to the beneficiaries. In Hartigan Nominees Pty Ltd v Rydge66 a trustee was not obliged to disclose a memorandum of wishes provided by the settlor of a discretionary trust. Sheller JA, in reaching this conclusion, reasoned as follows:67 That [the instigator of the trust] did not disclose his wishes in, or in a document attached to, the deed of settlement, but delivered a separate memorandum of wishes to the trustees, leads to the conclusion that it was his, and thus the settlor’s, intention that his wishes should remain confidential, and consequently that the contents of the memorandum were obtained by the trustees in circumstances of confidence, which bound the trustees not to disclose them to the respondent and to withhold the memorandum from him.

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Hartigan shows that the court can infer an obligation of confidentiality over certain information pertaining to the trust. That obligation can attach to documents in the trustee’s possession due to circumstances in which those documents were received and/​or the evident nature of the trustee’s role.68 Ultimately, the court must carefully consider whether non-​disclosure properly accords with the trustee’s duties to the beneficiaries as a whole. In Rouse v IOOF Australia Trustees Ltd Doyle CJ proffered an illustration of circumstances that may justify inferring confidentiality:69 There must be various situations in which a trustee, particularly a trustee conducting a business, would be put in an impossible position if the beneficiary of the trust could, as a matter of right, claim to inspect documents in the possession of the trustee and relevant to the conduct of the business. It is readily conceivable that there will be situations in which an undertaking of confidentiality is not sufficient protection. The fact that the trust is one in which numerous beneficiaries have an interest, and the further fact that those beneficiaries may have differing views about the wisdom of the course of action being pursued by the trustee, only serve to emphasise, in my opinion, the need for the law to recognise some scope for a trustee to refuse to disclose information on the grounds that it is confidential and on the further ground that the disclosure is not in the interests of the beneficiaries as a whole. I make that observation on the basis and on the assumption that the ultimate right of the beneficiaries will be to have the trustee removed if they are dissatisfied with the approach of the trustee.

It followed that a trustee could decline to supply information to certain beneficiaries “when the trustee has reasonable grounds for considering that to do so will not be in the interests of the beneficiaries as a whole, and will be prejudicial to the ability of the trustee to discharge its obligations under the trust”.70 His Honour, however, viewed any such a discretion as “a limited one”, not to be used “as an excuse for paternalism or to disregard the interests of beneficiaries” nor “to enable a trustee to deal in a partial or discriminatory manner as between beneficiaries or groups of beneficiaries, except to the extent that the necessary result of a

66

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405.

67

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 446. See also at 433 per Mahoney JA. Sheller JA (at 447) envisaged, in some cases, countervailing circumstances that call for the disclosure of a document given to the trustees in confidence. His Honour suggested that such a circumstance could spring from the nature of the document itself, from want of good faith on the part of the trustees, or from some overriding public interest. As to the latter see [6.280]–​[6.310]. Cf Foreman v Kingstone [2004] 1 NZLR 841 at [101] per Potter J (who inclined to the view, without deciding the point, that memoranda of wishes or like communication from a settlor which exists outside the trust deeds are trust documents which should be disclosed to beneficiaries in the absence of a substantiated claim for confidentiality by the trustees).

68

Foreman v Kingstone [2004] 1 NZLR 841 at [92] per Potter J.

69

Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at 499.

70

Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at 500.

[20.65]  601 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

proper exercise of the discretion may be that particular beneficiaries are not given access to a document”.71 Rouse v IOOF Australia Trustees Ltd involved a claim by beneficiaries to see privileged and confidential documents the trustee created in relation to a separate claim against the managers of a forestry scheme, who were also trust beneficiaries and thus joint plaintiffs in the action. Doyle CJ, with whom Perry and Martin JJ concurred, held that those documents could properly be regarded as confidential because of their connection with the management dispute, and that to require their disclosure would prejudice the trustee’s ability to meet its obligations.72 In other instances confidentiality may be aptly protected via a written undertaking by the beneficiary not to publicise the contents of the documents in question, except for the purposes permitted by the court.73

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[20.70] The discretionary approach to beneficiaries’ access to trust information ostensibly

emanating from the advice of the Privy Council in Schmidt v Rosewood Trust Ltd,74 discussed at [20.35], has translated into an English judge espousing a similar discretion so far as the disclosure of a confidential “wish letter” to the beneficiaries. The case was Breakspear v Ackland,75 where the settlor established a family discretionary trust contemporaneous with which he drafted a non-​binding wish letter, wherein he requested the trustees to take into account listed matters in exercising their discretion to make distributions to his children as beneficiaries. Three of the beneficiaries sought the disclosure of the wish letter to assess their future expectations from the trust. The trustee refused on the basis that it was confidential, and disclosure would precipitate family discord. Briggs J accepted that, as most settlors would expect their trustees to take into account the wishes expressed in a wish letter, its content would be of interest to, and potentially to the advantage of, the beneficiaries.76 At the same time, his Lordship noted, as wish letters in family discretionary trusts are ordinarily brought into existence for the sole purpose of “serving and facilitating an inherently confidential process”, it was logical to say that the wish letter itself should properly be regarded as confidential.77 This in turn fostered “an inevitable tension between on the one hand the advantages of confidentiality, and on the other hand, the advantages of disclosure, in relation to wish letters”.78 Rather than simply give effect to the settlor’s desire for confidentiality, whether express or implied, Briggs J ruled that, consistent with Schmidt, the question of how to address that tension “begins and ends, both for trustees and for the court, a question of discretion, or of the review of the exercise of discretion”, meaning that “[t]‌here are no fixed rules, and the trustees need not approach the question with any pre-​disposition towards disclosure or non-​ disclosure”.79 That the trustees sought curial sanction for a scheme of distribution of the trust

71

Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at 500.

72

Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at 501.

73

Morris v Morris (1993) 9 WAR 150 at 155 per Seaman J; Foreman v Kingstone [2004] 1 NZLR 841 at [93] per Potter J; Erceg v Erceg [2017] 1 NZLR 320 at [56] (SC).

74

Schmidt v Rosewood Trust Ltd [2003] 2 AC 709.

75

Breakspear v Ackland [2009] Ch 32.

76

Breakspear v Ackland [2009] Ch 32 at [8]‌.

77

Breakspear v Ackland [2009] Ch 32 at [58].

78

Breakspear v Ackland [2009] Ch 32 at [9]‌.

79

Breakspear v Ackland [2009] Ch 32 at [73].

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Beneficiaries  Chapter  20

fund, and the wish letter was directly relevant to the scheme’s approval, led his Lordship to rule that risk of family discord was outweighed by the need for the applicants to have an informed opportunity to address the court on the proposed scheme. He therefore ordered the disclosure of the wish letter. The focus on discretion, in both the trustees and the court, means that, if Briggs J is right, a settlor cannot be guaranteed that the confidentiality of instructions in a wish letter, or the like, will be preserved, even if the letter itself is clearly expressed to be confidential.80 In this sense his Lordship’s views challenge those adopted in Australian courts mentioned earlier. Contrary views did not, in his Lordship’s opinion, give sufficient recognition to the status of trustees as “fiduciaries exclusively for their beneficiaries” who should not be “asked to accept, nor should they without good cause accept, restraints upon their use of relevant information which would prevent disclosure even where, in their view, disclosure was preferable to the continued maintenance of confidence”.81 But this overlooks that trustees must, as part of their basic duty to carry out the terms of the trust, give effect to any directions given by the settlor. To the extent that a settlor prescribes, not just prefers, confidentiality in her or his instructions, it seems odd that trustees or, without a statutory foundation for intervention or otherwise compelling public policy grounds,82 the court should have the discretion to override a clear expression of confidentiality. Beneficiaries’ right to disclaim

Effect of disclaimer

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[20.75] A beneficiary’s right to disclaim an interest83 under a trust reflects the notion that

“[y]‌ou certainly cannot make a man accept as a gift that which he does not desire to possess”.84 A beneficiary may choose to disclaim, say, to avoid a liability that attaches to the interest, such as a tax liability,85 a liability to indemnify the trustee86 or to perform an obligation to a third party on which the interest is conditional,87 or otherwise to avoid vesting property in the event that he or she is, or will shortly be, insolvent.

80

In fact, his Lordship expressed that he was not persuaded that it is either appropriate or legitimate for a settlor to fetter the trustees’ discretion by the inclusion of special terms as to confidentiality in the wish letter itself or, still less, on any subsequent occasion: Breakspear v Ackland [2009] Ch 32 at [63].

81

Breakspear v Ackland [2009] Ch 32 at [63].

82

Public policy may, for instance, justify an order to disclose a wish letter if its terms, in family law property division proceedings, directly impact upon the likely future distributions a party to the marriage will receive: see, for example, Read v Chang (2010) 44 Fam LR 198.

83

The reference to “interest” in this context should not be construed as confined to an existing proprietary interest. The law acknowledges that a beneficiary of a discretionary trust, whose interest pre-​distribution is not proprietary in nature, can nonetheless disclaim any entitlement to a future distribution: Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd (2017) 106 ATR 151 at [18], [19] per Leeming JA.

84

Standing v Bowring (1885) 31 Ch D 282 at 286 per Lord Halsbury LC. See also at 288 per Cotton LJ; Townson v Tickell (1819) 3 B & Ald 31 at 38; 106 ER 575 at 577 per Holroyd J; Crago, “Principles of Disclaimer of Gifts” (1999) 28 UWALR 65.

85

See, for example, Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 (ineffective attempted disclaimer).

86

See, for example, J W Broomhead (Vic) Pty Ltd (in liq) v J W Broomhead Pty Ltd [1985] VR 891 (discussed more generally at [27.50]).

87

See, for example, Re Hodge [1940] Ch 260 (where the plaintiff, who accepted a testamentary gift on condition, by treating himself as the owner in equity of the property was held unable to then disclaim the gift once he became fully apprised of the equitable personal obligation to a third party that came with the gift).

[20.75]  603 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

The value of a disclaimer rests on its effect; it operates retrospectively, not merely from the moment of the disclaimer.88 This does not mean that the interest never vested in the beneficiary (or, more generally, the donee), but that it is liable to be divested, with effect from the date the interest arose, on proof of a valid disclaimer.89 It follows, for example, that a beneficiary is assessable to tax on a distribution of trust income under s 97 of the Income Tax Assessment Act 1936 (Cth) (see [27.165]) even though he or she has no knowledge or understanding of it.90 (This itself suggests that trustees are not necessarily obliged to apprise beneficiaries of their rights; whether or not such an obligation attaches rests chiefly on the nature of the trust and the terms of the trust deed).91 If that distribution is validly disclaimed, the disclaimer then operates retrospectively so that the beneficiary is treated as never having been entitled to the income for the purposes of s 97.92 In whose hands the income is then taxable depends on the terms of the trust deed; it may be assessable in the hands of default beneficiaries (see [20.155]) or the trustee (see [27.170]–​[27.180]).

Effecting a valid disclaimer

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[20.80]  An effective disclaimer is premised on an absolute, not a qualified, rejection of the

gift (or interest). The court looks for “some act to show [the donee’s] dissent”;93 mere silence or inactivity is not ordinarily sufficient. Because an effective disclaimer of a gift operates by way of avoidance, rather than by way of disposition, its enforceability is not premised on meeting the writing requirements applicable to dispositions of equitable interests (see [18.05], [18.10]), except in the Territories, New South Wales and Queensland where the statutory concept of “disposition” is expressed to include a disclaimer.94 The extent to which a beneficiary can disclaim one gift (or distribution of income) but not another rests on the terms of the gift or trust. Whether or not the disclaimer must extend to the benefit of the trust as a whole depends on whether the provisions of the deed result in the making of more than one gift.95 Where there are separate gifts, a disclaimer operates only in relation to the gift disclaimed. Also, the capacity in which a gift is received (or trust distribution is made) can impact on whether a disclaimer (or acceptance) in one capacity impacts on

88

Townson v Tickell (1819) 3 B & Ald 31 at 38; 106 ER 575 at 577 per Holroyd J (disclaimer means that “the estate never was in [the beneficiary]”); Probert v Commissioner of State Taxation (1998) 72 SASR 48 at 54–​55 per Olsson J; Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [30] (FC(FCA)).

89

Standing v Bowring (1885) 31 Ch D 282 at 286 per Lord Halsbury LC (“It vests only subject to repudiation”), at 288 per Cotton LJ (a transfer of property vests in a person before that person knows of the transfer, “subject to his right when informed of it to say, if he pleases, ‘I will not take it’. When informed of it he may repudiate it, but it vests in him until he so repudiates it”); Re Stratton’s Disclaimer [1958] Ch 42 at 54 per Jenkins LJ.

90

Federal Commissioner of Taxation v Vegners (1991) 21 ATR 1347.

91

SAS Trustee Corporation v Cox (2011) 285 ALR 623 at [148] per Campbell JA (“Because that is the way in which trustees’ duties arise, one cannot say that trustees always are, or always are not, under a duty to inform a potential beneficiary of his or her entitlements under the trust”); Segelov v Ernst and Young Services Pty Ltd (2014) 10 ASTLR 390 at [42]–​[72] per Nicholas AJ (finding that the trustee of a discretionary trust had no duty to inform a beneficiary of an entitlement under the trust) (affd Segelov v Ernst and Young Services Pty Ltd (2015) 89 NSWLR 431 at [119]–​[136] per Gleeson JA, with whom Meagher and Leeming JJA concurred). A qualification may, however, arise whereupon a minor beneficiary attains majority, upon which he or she takes a fixed trust interest: Hawkesley v May [1956] 1 QB 304.

92

Nemesis Australia Pty Ltd v Commissioner of Taxation (2005) 150 FCR 152 at [50] per Tamberlin J.

93

Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394 at 401 per Latham CJ.

94

Civil Law (Property) Act 2006 (ACT), Dictionary; Conveyancing Act 1919 (NSW), s 7(1); Law of Property Act 2000 (NT), s 4; Property Law Act 1974 (Qld), Sch 6.

95

Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [43] (FC(FCA)).

604 [20.80] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

a disclaimer (or acceptance) in another capacity.96 It follows, for example, that a beneficiary can disclaim her or his interest as a default beneficiary (as to which see [20.155]) without this having the effect of disclaiming other distributions to which he or she may be entitled as a non-​default beneficiary.97

Loss of right to disclaim

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[20.85]  Once a beneficiary has knowledge of the gift/​interest, a failure to dissent within a

reasonable period may dictate tacit acceptance.98 This is significant as the right to disclaim is lost if a beneficiary is taken to have accepted the gift.99 The point is illustrated in Federal Commissioner of Taxation v Ramsden,100 arising out of a $429,000 trust distribution on 30 June 1996 to a non-​beneficiary. This came to the Commissioner’s attention in 2000, leading him to assess each of the four default beneficiaries (the respondents) one-​quarter each in respect of that distribution. The issue was whether the respondents’ purported disclaimers in 2002 and 2003 were effective to dictate that the distribution never formed part of their assessable income. The Full Federal Court held that once the respondents became aware of their interests in the trust income, they had to determine whether they wished to disclaim those interests, and could not stand by for years before purporting to do so. Their Honours held that two to three years “was well in excess of a reasonable period” to effect a disclaimer,101 and so the respondents were assessable on the distribution. That the beneficiary was mistaken as to the nature, extent or implication of her or his trust interest does not prevent an assent to that interest being effective to deny any purported subsequent disclaimer. In Pearson v Commissioner of Taxation,102 for example, another case where a beneficiary (the appellant) purported to disclaim an income entitlement under a trust, Spender J remarked that it was “not to the point that at the time of acceptance the appellant believed that the quantum appointed to her as beneficiary was substantially less than the amount which the resolutions appointing income in fact conferred”. As the evidence revealed that the appellant was involved in the trustee’s resolutions, had signed the trust’s tax returns that she declared to be correct, and in correspondence in connection with a loan to the trustee acknowledged and accepted the appointment to her of income as a beneficiary in each respective tax year, the appellant was held to have affirmed her interest.103 This finding was not displaced on appeal, although the Full Federal Court did allow the appellant’s appeal in part on a different point.104

96

See, for example, Re Hodge [1940] Ch 260 (where the same person was both a specific devisee and a residuary beneficiary, the disclaimer of the specific gift did not prevent the same property passing to the donee under the residuary gift).

97

Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [36]–​[40] (FC(FCA)).

98

J W Broomhead (Vic) Pty Ltd (in liq) v J W Broomhead Pty Ltd [1985] VR 891 at 930–​931 per McGarvie J (but on the facts the disclaiming beneficiary knew nothing of her beneficial interest or the action by the liquidator until a few days prior to giving evidence, and so was held to have validly disclaimed that interest).

99

Lady Naas v Westminster Bank Ltd [1940] AC 366 at 401 per Lord Wright; Re Paradise Motor Co Ltd [1968] 1 WLR 1125 at 1143 per Danckwerts LJ; Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [52] (FC(FCA)). Cf Lewis v Lohse [2003] QCA 199 (disclaimer after initial acceptance in the context of a testamentary gift).

100

Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485.

101

Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [62].

102

Pearson v Commissioner of Taxation (2005) 218 ALR 101 at [90]. See also Re Hodge [1940] Ch 260.

103

Pearson v Commissioner of Taxation (2005) 218 ALR 101 at [89].

104

Pearson v Commissioner of Taxation (2006) 232 ALR 55.

[20.85]  605 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

[20.90]  Where, on the other hand, a donee or beneficiary purports to disclaim, but does so

without full knowledge of matters going to its exercise, the disclaimer is ineffective unless innocent third parties would be prejudiced by the donee or beneficiary wishing to retract the disclaimer.105

NATURE OF BENEFICIARIES’ INTERESTS UNDER A TRUST [20.95] The main distinction between express trusts, from the perspective of beneficiaries’

interests, is that between the fixed trust (and specifically in the commercial environment, the unit trust) and the discretionary trust. This explains why the ensuing discussion distinguishes unit trusts from discretionary trusts, although there is nothing to prevent a settlor establishing a trust of a “hybrid” nature, with aspects or combinations of both of these types of trusts:106 see [27.10]. The chapter concludes by explaining the legal treatment of the interest of a default beneficiary: see [20.155]. The nature of members’ interests in a superannuation fund is addressed separately in Ch 28, where superannuation trusts are discussed: see [28.130]. Unit trusts

Nature of a unit trust [20.100] The principal feature of the unit trust is that “the beneficial interest in the trust

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estate is divided into fractions, ordinarily called units”,107 which explains why the beneficiaries are termed “unit holders”.108 The nature of a unit holder’s interest in a typical unit trust, and the unit holder’s corresponding rights, found expression in Read v Commonwealth of Australia:109 A unit holder thus has a beneficial interest in the assets of the Trust, a right to have the trusts executed in accordance with the Deed, and a right to proportionate distribution of the proceeds representing the assets of the trust fund upon termination of the Trust. The extent of a unit holder’s beneficial interest at any given time is that proportion which his or her units bear to the total number of units issued.

The Queensland Court of Appeal has described a unit as “an aliquot share or interest in the undivided assets of a trust that are held for investment or profit by the trustee for the benefit of the unit holders or beneficiaries of that unit trust”.110 It follows that, subject to the terms of the trust deed,111 a unit confers a proprietary interest in all the property that for the time

105

Tantau v MacFarlane [2010] NSWSC 224 at [107]–​[109] per Ward J (who on the facts found that the purported acceptance was ineffective due to the misapprehension as to the conditions on the gift: at [114], [117]).

106

Such as, for example, where a trust deed makes the same persons discretionary objects in respect of distributions of capital, and fixed objects in respect of distributions of income.

107

Elecnet (Aust) Pty Ltd v Commissioner of Taxation (2016) 259 CLR 73 at [85] per Nettle J.

108

See generally Sin, The Legal Nature of the Unit Trust (Clarendon Press, 1997).

109

Read v Commonwealth of Australia (1989) 167 CLR 57 at 61–​62 per Mason CJ, Deane and Gaudron JJ. Cf CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at [15] (FC) (which remarked that “unit trust”, like “discretionary trust”, in the absence of an applicable statutory definition, does not have a constant, fixed normative meaning).

110

Reef & Rainforest Travel Pty Ltd v Commissioner of Stamp Duties [2002] 1 Qd R 683 at [11] per McPherson JA.

111

See, for example, Re S & D International Pty Ltd (No 4) (2010) 79 ACSR 595 (where the trust deed, inter alia, empowered the trustee at its discretion to divert such income into a “reserve”, to determine the “net” amount of receipts for distribution, to transpose both capital and income into other assets or use them to pay the trust’s liabilities, as well as precluded any power or ability in the trustee to make distributions to unit holders of particular trust assets in specie).

606 [20.90] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

being is the subject of the trust,112 and its trustees have no discretion as to the selection of beneficiaries or the quantum of their interest. [20.105]  Although unit trusts are often adopted as alternatives to companies for business struc-

turing, and they do share similarities,113 a unit held under a trust deed differs fundamentally from a share in a company; a share gives a shareholder no legal or equitable interest in the company’s assets, but is a separate piece of property.114 Other features also distinguish unit trusts from companies, including that: • a trust does not create a separate entity: see [16.05]; • a unit holder has, subject to the terms of the trust deed, an interest in all of the property and income of the trust as soon as it is derived; • there is unlimited liability in the trustee and potentially the beneficiaries (see [23.140], [23.145], [27.50], [27.55]) unless restricted by the trust deed (or by appointing a company as trustee); and • the trustee is not the agent of the unit holders. Also, unlike as between partners, no contract exists between unit holders115 unless they enter into a formal unit holders’ agreement.116 Nor do unit holders, or trust beneficiaries generally, owe one another fiduciary duties unless their relationship exhibits the requisite fiduciary indicia (as to which see [4.50]–​[4.70]).117

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[20.110] Consistent with their proprietary interest in the trust property, unit holders are

in theory entitled to assign or transfer their unit(s) to another person, and to redeem their unit(s); in practice, though, trust deeds may restrict these entitlements. Unit holders under a typical unit trust may also have sufficient interest in the trust property to sustain a caveat on it,118 although this again can be ousted by way of express provision in the trust deed in order to avoid the potential inconvenience that could result from a unit holder doing so.119 But the

112

Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 at 609 per Dixon CJ, Kitto and Taylor JJ; Trevisan v Commissioner of Taxation (1991) 29 FCR 157 at 163 per Burchett J; Suncorp Insurance and Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285 at 301–​302 per Fitzgerald P; Re Flat Rock Forests Trust [2000] 3 NZLR 207 at 217 per Durie J; Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 at [48] per Tamberlin and Hely JJ. Cf Elkington v Moore Business Systems Australia Ltd (1994) 13 ACSR 342 at 349 per Bryson J; Sin, The Legal Nature of the Unit Trust (Clarendon Press, 1997), pp 264–​292.

113

For instance, it has been observed that “[u]‌nits in unit trusts as ordinarily understood are, in reality, regularly cancelled, extinguished and redeemed by processes akin to the cancellation, extinguishment or redemption of shares in a company”: Elecnet (Aust) Pty Ltd v Commissioner of Taxation (2016) 259 CLR 73 at [93] per Nettle J.

114

Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 at 609 per Dixon CJ, Kitto and Taylor JJ; Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 at [47], [72] per Tamberlin and Hely JJ.

115

But see Sin, “Enforcing the Unit Trust Deed Amongst Unitholders” (1997) 15 C&SLJ 108.

116

As to unit holders’ agreements see Tait, “Unitholder Agreements” (2006) 40 TIA 548.

117

Disher v Farnworth [1993] 3 NZLR 390 at 399 per McKay J; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 595 per Finkelstein J; Price v Powers [2005] WASC 154 at [75] per Le Miere J (in the context of unit holders) [affd Price v Powers [2006] WASCA 262].

118

Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90; Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258; Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14; Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447; Interview Holdings Pty Ltd v Registrar of Titles [2008] WASC 144; Jonsue Investments Pty Ltd v Balweb Pty Ltd (2013) 9 ASTLR 460. Contra Evindon Pty Ltd v Ambasax Pty Ltd [1996] ANZ Conv R 398; Floriston Nominees Pty Ltd v Kingsley Brown Finance Pty Ltd [2005] VSC 467. See also Raphael, “Caveats and Unit Trusts” (2007) 81 ALJ 881.

119

Binningup Nominees Pty Ltd v Brogue Tableau Pty Ltd [2004] WASC 14 at [26] per Pullin J (this inconvenience being ostensibly what led O’Bryan J in Evindon Pty Ltd v Ambasax Pty Ltd [1996] ANZ Conv R 398 to reject a unit holders’ claim to lodging a caveat over trust property; cf Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 at [31] per Warren CJ).

[20.110]  607 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

following clause, commonly found in unit trust deeds, does not have this effect;120 it simply avoids a unit holder absolutely and indefeasibly entitled to a specified share of the trust fund being able to call for a trust asset in satisfaction of her or his entitlement for payment: Each unit shall entitle the registered holder thereof together with the registered holders of all other units to the beneficial interest in the trust fund as an entirety but subject thereto shall not entitle a unit holder to any particular security or investment comprised in the trust fund or any part thereof and no unit holder shall be entitled to the transfer to her or him of any property comprised in the trust fund other than in accordance with the provisions hereinafter contained.

Of course, it is possible for the trust deed to make alternative provision, say, to give unit holders the right to acquire or call for the transfer of specific assets.121

Unit holders as “owners” of trust property?

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[20.115] That a unit confers a proprietary interest in all the property for the time being the

subject of the trust, and that unit holders may collectively be able to terminate the trust (see [25.135]–​[25.145]), does not dictate that unit holders are “owners” of the trust property for all purposes. Equitable interests in property do not necessarily correlate with full ownership of that property.122 And in the unit trust scenario, the terms of the trust can restrict unit holders’ ability to deal with their interest and trust property, which may serve to deny some indicia of ownership (which often is viewed as correlating to the ability to enjoy the fruits of the property or otherwise dispose of it). Also, the unit trust proprietary interest is unusual in that if the trustee, as is commonly the case, has a power to sell trust property, the unit holders’ interest is a “defeasible interest in the specific assets of the trust”, that is, “defeasible in relation to particular assets of the trust if they were disposed of by the trustee in the course of administration of the trust prior to the vesting day”.123 Especial caution in making conclusions as to unit holders’ “ownership” must be exercised where the inquiry concerns matters of ownership for a liability or entitlement under statute. In Kent v SS “Maria Luisa” (No 2)124 Tamberlin and Hely JJ noted that it may be unsafe to conclude that, because each unit holder has an equitable interest in each asset of the trust, the sole unit holder must be the equitable owner of each asset. It all depends on the terms of the trust. The Full High Court in CPT Custodian Pty Ltd v Commissioner of State Revenue125 seized on this point when facing the issue of whether a sole unit holder could be viewed as the “owner of freehold in possession” for the purposes of land tax legislation. Their Honours said that an affirmative answer to the inquiry whether the unit holder had a proprietary interest in each of the assets comprising the entirety of the trust fund did not “require the conclusion that

120

Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90; Jonsue Investments Pty Ltd v Balweb Pty Ltd (2013) 9 ASTLR 460.

121

See, for example, Lock v Commissioner of Taxation (2003) 129 FCR 1 at [54], [55] per Goldberg J.

122

Public Trustee v Smith (2008) 1 ASTLR 488 at [108]–​[138] per White J (distinguishing, generally, an “interest” in property from “ownership” of that property).

123

Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 at [71] per Tamberlin and Hely JJ. See also Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258 at [14] per Pullin J (who noted that unit holders’ equitable interest is “an interest which is held subject to the provisions of the trust deed”, so that, for example, if the trustee sells trust land under a valid exercise of a power of sale, “the unit holders would no longer have any caveatable interest in the land”, but an interest “in the proceeds of sale which would become part of the trust fund”); Batt v Clipse (Caloundra) Pty Ltd (2011) 7 ASTLR 441 at [40], [41] per Ann Lyons J.

124

Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 at [60]. Cf Wiley, “Is the Sole Unit Holder in a Unit Trust the ‘Owner’ of the Trust Assets?” (2005) 34 Aust Tax Rev 29.

125

CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98.

608 [20.115] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

in the statutory sense they were ‘owners’ of the land held on the trusts”.126 This was because the relevant legislation spoke of entitlement to any estate of freehold in possession, not of ownership of proprietary interests at large. The court held that even a sole unit holder would not have been the “owner” for this purpose because the terms of the trust envisaged that other persons (namely, the trustees and managers) could have trust property applied in their favour (for their fees), so that until such time as this (fee) liability was satisfied, it could not be said with certainty what estate the sole unit holder was the “owner” of.127 The High Court therefore concluded that the unit holder in CPT was not liable to land tax because it was not an “owner of freehold in possession”. It added that merely because unit holders (or a sole unit holder) have the power to terminate the trust does not mean that, without exercising this power, they are the “owner(s)” of “any estate of freehold in possession” in the trust property. This is consistent with the findings of Tamberlin and Hely JJ in Kent v SS “Maria Luisa” (No 2),128 involving a statutory provision that premised a proceeding on a general maritime claim concerning a ship on the claimant being its “owner”, who held that the existence of a power in the unit holder to cause the trustee to terminate the trust had no impact, prior to the exercise of the power, on the trustee’s ownership of the ship. It simply meant that ownership existing at a point in time could be displaced thereafter by unilateral action, their Honours explaining that:129 … [t]‌he circumstance that [the unit holder] may be said in general terms to enjoy “a bundle of rights” which may enable it by a series of discrete actions to obtain ultimately possession of the ship, control its activities, and entitle it to alienate the ship, does not equate to present ownership at a particular point in time. Rather, it indicates the potential to become the owner. The bundling of a series of discrete entitlements which if exercised could lead to ownership does not satisfy the requirement of [the statute].

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Discretionary trusts

Trustees’ discretion [20.120] The term “discretionary trust” is “used to describe particular features of certain

express trusts”.130 The main such features are that its trustees commonly enjoy discretion to select who in the designated class of potential beneficiaries, whether that class be broad or narrow, is to receive any benefit, and to decide the amount of any benefit to be paid. These discretions place the trustee in a “strong position” in relation to the beneficiaries131 but, being confided in a fiduciary capacity, cannot be exercised other than bona fide for the purposes and objects of the trust.132 There is no objection to the settlor giving the trustee an indication of

126

CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at [17]. See also Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2005) 60 ATR 135 at [52]–​[58] per Hollingworth J (who declined to find that default beneficiaries (as to which see [20.155]) were “beneficial owners” for the purposes of Land Tax Act 1958 (Vic), s 52) [affd Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2007) 23 VR 474].

127

CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at [50], [51].

128

Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 at [72].

129

Kent v SS “Maria Luisa” (No 2) (2003) 130 FCR 12 at [74].

130

Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 234 (FC).

131

Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 234 (FC).

132

Hourigan v Trustees, Executors and Agency Co Ltd (1934) 51 CLR 619 at 634–​635 per Starke J; Gartside v Inland Revenue Commissioners [1968] AC 553 at 617–​618 per Lord Wilberforce; Lutheran Church of Australia SA District Inc v Farmers’ Co-​operative Executors and Trustees Ltd (1970) 121 CLR 628 at 639 per Barwick CJ; Re Manisty’s Settlement [1974] Ch 17 at 26 per Templeman J; Karger v Paul [1984] VR 161 at 164–​165 per McGarvie J.

[20.120]  609 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

how he or she wishes the discretion to be exercised, whether in the actual trust instrument, or in an attached (confidential) memorandum.133 Where a discretionary trust has multiple objects or purposes, some of which are legal and the remainder not, it is nonetheless valid, although in this event the trustees can only validly exercise their discretion in favour of the legal objects or purposes, not with respect to those that are illegal.134 The conferral of the above discretions on a trustee allows a testator to postpone the vesting of the trust fund to the most convenient time for the beneficiaries. For example, a testator may bequeath her or his estate to a trustee “to have and to hold for the maintenance and education of my children”.135 By its very nature, such a disposition, absent contrary intention, gives the trustee discretion to apply the income according to the needs and requirements of the beneficiaries.136 The trust property is usually stated to vest in the children absolutely (and thus terminate the trust) once the children attain a certain age.137 A discretion to provide for a surviving spouse may be expressed to terminate on remarriage. The discretion may also provide a means by which a donor can benefit certain persons in circumstances where he or she is concerned that those benefits could be dissipated in some inappropriate way: see [27.115], [27.120]. The most extensive manipulation of trustee discretion to distribute trust income or capital, though, is arguably in tax planning; that is, through giving the trustee (usually a parent, or an entity controlled by a parent) a discretion to allocate pre-​tax income between beneficiaries (relatives) in a manner that, by virtue of progressive rates of taxation, minimises the total liability to taxation:138 see [27.125].

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Discretionary beneficiary’s “interest” [20.125]  The nature of a beneficiary’s “interest” under an appropriately drafted discretionary trust is a mere expectancy, that is, an expectation or hope that the discretion will be exercised in her or his favour.139 As a consequence, discretionary beneficiaries have neither an “interest in possession” (namely, a present right of present enjoyment of property), an immediate entitlement to income as it accrues,140 nor a contingent interest in the trust

133

See, for example, Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, discussed at [20.65].

134

Lewis v Allenby (1870) LR 10 Eq 668; Re Piercy [1898] 1 Ch 565.

135

See, for example, Williams v Papworth [1900] AC 563; Dickey v Driscoll (1905) 22 WN (NSW) 197; Re Watts (1909) 9 SR (NSW) 567; Will of O’Rourke [1920] VLR 546; Re Dunlop (1925) 26 SR (NSW) 126; Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619; Re Bukowski (deceased) [1954] QSR 286; Re Mason [1954] QWN 60; Sacks v Gridiger (1990) 22 NSWLR 502 at 507–​508 per McLelland J.

136

Re Bukowski (deceased) [1954] QSR 286 at 293–​294 per Townley J.

137

An imperative trust to apply income for the maintenance, education and support of a class until the youngest member of that class attains majority will, in the absence of a special direction to the contrary, entitle each member of the class on attaining majority to an aliquot share of the income during the continuance of the trust, subject to the trustees’ right to withhold and accumulate a portion of the income to meet contingencies: Re Wilson (1905) 5 SR (NSW) 345 at 347 per A H Simpson CJ.

138

In Gregory v Hudson (1997) 41 NSWLR 573 at 586–​587 Young J remarked that because “discretionary trusts are used for the anti-​social purpose of minimising taxation … there does not seem to be any reason in conscience why a court of equity should take any notice of them at all”. His Honour did not develop this line of thought, but added that it was his belief “that the message should be put abroad that the time may well have come where equity will have to reconsider its attitude to enforcing this sort of trust”: at 587. Young J’s remarks were not addressed on appeal: Gregory v Hudson (1998) 45 NSWLR 300. To date such “anti-​social” concerns have been addressed through statutory anti-​avoidance provisions such as the Income Tax Assessment Act 1936 (Cth), Pt III, Div 6AA (see [27.200]) and the trust loss provisions under the Income Tax Assessment Act 1936 (Cth), Sch 2F, Divs 265–​272.

139

Gartside v Inland Revenue Commissioners [1968] AC 553 at 607 per Lord Reid, at 615 per Lord Wilberforce.

140

Queensland Trustees Ltd v Commissioner of Stamp Duties (Qld) (1952) 88 CLR 54 at 62–​65 per Dixon CJ, McTiernan, Webb and Kitto JJ; Re Goldsworthy (deceased) [1969] VR 843 at 847–​849 per Smith J; Pearson v Inland Revenue Commissioners [1981] AC 753 at 775 per Viscount Dilhorne, at 786 per Lord Keith; Re Trafford’s Settlement [1985] Ch 32 at 38 per Peter Gibson J; Johns v Johns [2004] 3 NZLR 202 at [31] per Tipping J. This has implications in the context of superannuation

610 [20.125] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

property.141 They therefore have no legal or equitable interest in the trust property, and so clearly lack an interest sufficient to maintain a caveat on that property,142 or otherwise to claim an entitlement that is premised, whether under statute or contract, on an interest in property.143 Beneficiaries of discretionary trusts cannot direct the trustee to make a distribution, as this would be inconsistent with the nature of the discretion vested in the trustee; they receive a vested interest only if and to the extent the trustee, in exercising the discretion, distributes trust income or capital to them.144 In the words of Lord Reid in Gartside v Inland Revenue Commissioners:145 … a right to require trustees to consider whether they will pay you something does not enable you to claim anything. If the trustees do decide to pay you something, you do not get it by reason of having the right to have your case considered: you get it only because the trustees have decided to give it to you.

It is in this respect that the High Court has remarked that “[t]‌he use of terms such as ‘beneficial interest’ is apt to mislead when applied to beneficiaries’ interests under a discretionary trust”,146 an observation that applies with equal force to the term “equitable interest”.147 [20.130]  The foregoing does not mean that discretionary trust beneficiaries lack rights. Like

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beneficiaries of all trusts, they may access information pertaining to the management of the trust (see [20.40]–​[20.70]) with a view to exercising their right to have the trust properly administered.148 They have standing to challenge improper exercises of the trustee’s discretion (see [23.35]) and can make application to the court to prevent a distribution outside the class of beneficiaries specified in the trust deed.149 The foregoing stem partly from a discretionary beneficiary’s right “to be considered as a potential recipient of benefit by the trustees”, a right in the nature of an equitable chose in action.150 The closest link to a proprietary interest

trusts: see [28.130]. Cf Barnett, “The Nature of a Beneficiary’s Interest in the Assets of an Express Trust” (2004) 10 APLJ 169 (who argues that the entitlements of a discretionary beneficiary make it inaccurate to deny that such a beneficiary has an equitable interest). 141

Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509 at [36] per French J.

142

Walter v Handberg [2003] VSCA 122 at [15] per Chernov JA; Allan v Allan (No 2) (2012) 49 Fam LR 461 at [90]–​[92] per Watts J; Szozda v NSW Trustee and Guardian (2012) 17 BPR 32,223 at [31] per Nicholas J; Kambouris v Tahmazis [2012] VSC 432 at [12] per Dixon J.

143

See, for example, Liberty International Underwriters v Salisbury Group Pty Ltd (in liq) (2014) 13 ASTLR 206 (in the context of a contractual entitlement to a “financial interest” in the trust).

144

Re Vestey’s Settlement [1951] Ch 209 at 220 per Evershed MR, at 222–​223 per Jenkins LJ; Queensland Trustees Ltd v Commissioner of Stamp Duties (Qld) (1952) 88 CLR 54 at 64 per Dixon CJ, McTiernan, Webb and Kitto JJ.

145

Gartside v Inland Revenue Commissioners [1968] AC 553 at 607.

146

MSP Nominees Pty Ltd v Commissioner of Stamps (South Australia) (1999) 198 CLR 494 at 509 (FC). See also Wright v Stevens [2018] NSWSC 548 at [206] per Hallen J (describing the members of a class of beneficiaries in a discretionary trust as “objects of a power, rather than beneficiaries in the strict sense”).

147

Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [34] (FC(FCA)).

148

R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 at 63 per Rowland J, at 79 per Owen J.

149

In practice, however, the schedule of beneficiaries under the trust is often so wide as to prevent any such application. Trust instruments may direct trustees to select amongst beneficiaries listed in a schedule to the trust instrument (being a “special” power of appointment). There is not infrequently another schedule that lists objects the trustees may consider from time to time to add to the schedule of beneficiaries (an “intermediate” power). In effect, the trustees are not choosing amongst a class of beneficiaries chosen by the settlor but are themselves choosing, in a fiduciary manner, the beneficiaries (see, for example, Re Manisty’s Settlement [1974] Ch 17; Re Hay’s Settlement Trusts [1982] 1 WLR 202). There may be a third schedule that lists, for tax purposes, beneficiaries that must not be added to the schedule of beneficiaries (such as, for example, the settlor).

150

Gartside v Inland Revenue Commissioners [1968] AC 553 at 617–​619 per Lord Wilberforce.

[20.130]  611 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

in discretionary beneficiaries is their theoretical ability to terminate the trust collectively, although this is unlikely in practice: see [25.145]. In Scott v National Trust for Places of Historic Interest or Natural Beauty151 Robert Walker J opined that where the trustee of a discretionary trust has over an extended period paid a set sum to an impoverished beneficiary, the expectation so created may entitle the beneficiary to an opportunity to persuade the trustee to continue the payment, at least temporarily. The notion that an expectancy can in certain circumstances create in a beneficiary a “legitimate expectation” that the trustee will continue to exercise her or his discretion in a way that favours the beneficiary is a novel proposition (albeit one cited with approval in Australia)152 given the courts’ consistent denial of any role to administrative law concepts of natural justice in trust law.153

Implications of nature of discretionary beneficiary’s interest [20.135]  That a discretionary beneficiary has no proprietary interest in the income or capital

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of the trust fund until a distribution is made in her or his favour has important implications in various areas of law. It does not, for instance, form property divisible on the breakdown of a marriage or de facto relationship. Although the interest of a party to marriage in a fixed trust can constitute “property” for the purposes of the Family Court’s jurisdiction to alter “property” interests between parties to a marriage,154 the same has not traditionally translated to an “interest” under a discretionary trust. Yet where the trust is the “mere puppet” or “alter ego” of a party to the marriage, the Family Court has proven willing to treat the trust as the “property” of that party, even if he or she is not its beneficiary or is merely a discretionary beneficiary.155 A similar approach has been applied in the context of de facto and domestic relationships legislation,156 hardly surprising as its provisions as to property allocation were modelled on those in the Family Law Act 1975 (Cth).157 In any event, equivalent provision is now made regarding de facto relationships under the Family Law Act158 as a result of the referral of powers (other than by Western Australia) to the Commonwealth.159

151

Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 at 718.

152

Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 at 605 per Young J.

153

Karger v Paul [1984] VR 161 at 166 per McGarvie J; Stuart v Armourguard Security Ltd [1996] 1 NZLR 484 at 506 per McGechan J; Mercanti v Mercanti (2016) 50 WAR 495 at [239] per Buss P.

154

Under Family Law Act 1975 (Cth), s 79.

155

Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 at 354–​355 per Gibbs J. See, for example, Ashton v Ashton (1986) FLC ¶91-​777, where the husband was the trustee and appointor of the family trust. At the date of trial, the husband had appointed a corporate trustee in his place, the shares being held by himself and his cousin, who in turn held his share on trust for the husband. Strauss J concluded that the powers of the husband in the family trust give him control of the trust either as trustee or through a trustee that was his creature, and at the same time he was able to apply all the income and property of the trust for his own benefit. This meant that the husband effectively had “de facto legal and beneficial ownership” of the trust property: at 75,653. See also Davidson v Davidson (1991) FLC ¶92-​197 at 78,365–​78,366; Marriage of Milankov (2002) 28 Fam LR 514 at 541 per Kay J (noting that once the husband became the appointor or trustee of the family trust, the trust deed allowed him as trustee to distribute its income and/​or corpus to himself). Cf Marriage of Webster (1998) 24 Fam LR 198.

156

See, for example, C v B [2007] 1 Qd R 212 (where, for the purposes of allocating property interests under Property Law Act 1974 (Qld), Pt 19, the first defendant’s rights in relation to a discretionary trust —​being standing to compel the proper administration of the trust and as “appointor” under the trust deed —​were held to constitute “property”: at [26]–​[29] per McMurdo J).

157

Domestic Relationships Act 1994 (ACT), s 19; Property (Relationships) Act 1984 (NSW), s 20; De Facto Relationships Act 1991 (NT), s 18; Property Law Act 1974 (Qld), s 298; Domestic Partners Property Act 1996 (SA), s 11; Relationships Act 2003 (Tas), s 40; Relationships Act 2008 (Vic), s 45; Family Court Act 1997 (WA), s 205ZG.

158

Family Law Act 1975 (Cth), s 90SM. For this purpose, “de facto relationship” is defined in s 4AA.

159

Pursuant to the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth), with effect on 1 March 2009.

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Beneficiaries  Chapter  20

Although once understood to be unique to the family law jurisdiction, French J in Australian Securities and Investments Commission v Carey (No 6)160 applied the same logic in the commercial sphere, ruling that the power to appoint a receiver “of the property” of a person under s 1323(1)(h) of the Corporations Act 2001 (Cth) encompasses property held on discretionary trust that “is controlled by a trustee who is in truth the alter ego of a beneficiary”, that is, where “the beneficiary effectively controls the trustee’s power of selection”. [20.140] The extent to which this heralds an incursion into the insolvency and corporate

governance arena —​where the policy issues differ from those in family law —​remains to be seen.161 So far as family law is concerned, the High Court has, in any case, taken a step further in Kennon v Spry.162 It ruled that the wife’s right, as a discretionary beneficiary of a family trust, to secure its due administration, when coupled with her husband’s discretionary power (as trustee) to appoint all the trust assets to the wife, constituted “property of the parties to the marriage” for the purposes of allocating property interests under s 79 of the Family Law Act 1975 (Cth). In so concluding, French CJ reasoned as follows:163

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The word “property” in s 79 is to be read as part of the collocation “property of the parties to the marriage”. It is to be read widely and conformably with the purposes of the Family Law Act. In the case of a non-​exhaustive discretionary trust with an open class of beneficiaries, there is no obligation to apply the assets or income of the trust to anyone. Their application may serve a wide range of purposes … Where property is held under such a trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as “property of the parties to the marriage” because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion.

In the circumstances, his Honour added that the characterisation of trust assets as property of the parties to the marriage was supported by the husband’s legal title to the assets, the origins of their greater part as property acquired during the marriage, the absence of an equitable interest in them in any other party, the absence of any obligation on the husband’s part to apply all or any of the assets to any beneficiary, and the contingent character of the interests of those who might be entitled to take upon a default distribution at the distribution date.164 In reaching the same conclusion, Gummow and Hayne JJ emphasised that the term “property” is not a term with a specific and precise meaning, it being necessary to pay regard to the statutory context in which the term is used, specifically its subject matter, scope and purpose.165 What the decision indicates, it has been suggested, is that:166

160

Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509 at [29], [36].

161

Compare Official Assignee v Wilson [2006] 2 NZLR 841 (involving an unsuccessful attempt to argue that an “alter ego” trust as recognised by the Family Court of Australia amounted to a sham for the purposes of recovering trust property in an insolvency context); Glover, “A Challenge to Established Law on Discretionary Trusts? —​Re Richstar Enterprises” (2007) 30 Aust Bar Rev 70 at 88–​89 (who believes the decision in Carey “is not satisfactory and highlights dubious line authority on the Family Law Act, which has never been subjected to final appeal”, and opines that “[n]‌o legal system which acknowledges the trust has ever managed to look through the discretionary trust consistently with the rule of law”).

162

Kennon v Spry (2008) 238 CLR 366.

163

Kennon v Spry (2008) 238 CLR 366 at [64], [65] (paragraph break omitted). Contra at [175] per Heydon J dissenting.

164

Kennon v Spry (2008) 238 CLR 366 at [70].

165

Kennon v Spry (2008) 238 CLR 366 at [89]. See also Clayton v Clayton [2016] 1 NZLR 551 at [73] (SC) (characterising the importance of Kennon v Spry as “the fact that the High Court majority interpreted the definition of ‘property’ in light of its context in relationship property legislation and in a manner calculated to conform with the purposes and principles of that legislation”).

166

Gleeson, “Spry’s Case: Exploring the Limits of Discretionary Trusts” (2010) 84 ALJ 177 at 184.

[20.140]  613 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

… where the trust, as established or as operated, constitutes a vehicle for the accumulation of assets of the marriage which, in other circumstances, might simply be held in joint names, then, upon the breakdown of the marriage the ample powers of the Family Court under the Act allow it effectively to deal with those assets in the altered circumstances which have eventuated.

The majority’s focus in Kennon on the statutory context, against the backdrop of a lengthy marriage, speaks against an unthinking application of an equivalent approach outside the familial environment.167 Nor should it necessarily be assumed that it represents the standard approach in family law property proceedings, as differences in trust beneficiaries and their entitlements may well dictate a different outcome.168 By the same token, however, where in this context what is involved is a general power of appointment in relation to the assets of a trust, there is a much more compelling case for treating this as property,169 given the alignment of a general power with proprietary notions: see [16.175]. [20.145] In any case, in family law cases there is scope for the Family Court, in making

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an order for the division of property, to take into account a non-​proprietary interest as a “financial resource”.170 Practical ability to control distribution of trust property is relevant to quantifying a party’s “financial resources”. So whether a party to the marriage is a trustee, appointor (see [21.55]), beneficiary, or is otherwise capable of controlling or influencing the distribution of income and/​or capital of the trust, are all pertinent inquiries.171 Parallel provision is made in de facto (or domestic) relationships legislation,172 albeit now largely superseded by parallel provisions in the Family Law Act 1975 (Cth) that, as a result of a referral

167

One commentator has suggested that the decision “could be read down as an eccentric view on the width of ‘property’ as a term under the Family Law Act”: Aitken, “Muddying the Waters Further —​Kennon v Spry: ‘Ownership’, ‘Control’ and the Discretionary Trust” (2009) 32 Aust Bar Rev 173 at 181 (cf Kennon v Spry (2008) 238 CLR 366 at [175] per Heydon J dissenting, who adopted a more traditional approach to the meaning of “property”). See also Aitken, “Control and the Discretionary Trust” (2009) 125 LQR 542 at 544 (referring to the “increasing tension between conceptual purity in equity, and the desire on the part of regulators and the like to bring those who ‘control’ a discretionary trust but do not ‘own’ its assets, within their reach”); Parkinson, “Family Trusts and Third Parties under the Family Law Act 1975 (Cth)” (2012) 26 AJFL 5 at 27 (who cautions that the judgments in Kennon “need to be read in the light of the material facts of that case”, making it inappropriate “to extrapolate from the judgments novel principles in relation to issues that were not before the court”).

168

See, for example, Essex v Essex (No 2) [2007] FamCA 639 (where discretionary trusts were created with assets sourced other than from the parties to the marriage, designed to benefit the parties’ children, Benjamin J found that the husband exercised no control over the trusts, and neither the husband nor the wife had reasonable grounds to expect that a discretion would be exercised in their favour, and so the trust assets were never the property of the parties to the marriage: at [128]–​[134]); Harris v Dewell [2018] FamCAFC 94 (where the husband’s exercise of control over a unit trust was held not to constitute property because it did not ultimately confer a lawful right to benefit from the assets of the trust).

169

See, for example, Clayton v Clayton [2016] 1 NZLR 551.

170

Pursuant to Family Law Act 1975 (Cth), ss 75(2)(b), 79(4)(e).

171

See, for example, Marriage of Whitehead (1979) 37 FLR 302 (where the wife, who was the appointor, could compel the trustee as a matter of fact to exercise his discretion in her favour by the implied threat of removal, the court held that the financial resources of the trust could be regarded as part of the wife’s financial resources); Shaw v Shaw (1989) FLC ¶92-​030 (similar outcome where the husband was the principal beneficiary and appointor); Harris v Dewell [2018] FamCAFC 94. Cf Glover, “Discretionary Trusts, Fiduciary Duties and the Family Law Act: Has the Family Court Acted Beyond Power?” (2000) 14 AJFL 184 (who maintains that the Family Court has been too willing to control trustees in the context of discretionary trusts, arguing that the legal ability to control trustees does not mean that the trustees are controlled in fact, and that what must be shown in addition is that the trustees have succumbed to the controller, to have acted on specific occasions without considering their fiduciary duties, in that “[a]‌nything less is pre-​judgment that a breach of trust or other unlawful conduct has occurred”: at 210).

172

Domestic Relationships Act 1994 (ACT), s 19(2)(a); Property (Relationships) Act 1984 (NSW), s 20(1)(a); De Facto Relationships Act 1991 (NT), s 18(1)(a); Property Law Act 1974 (Qld), s 298(a) (see, for example, Stephens v Ell (2002) Q ConvR ¶54-​568 at 60,754 per Moynihan J); Domestic Partners Property Act 1996 (SA), s 11(1)(a)(ii); Relationships Act 2003 (Tas), s 40(1)(b); Relationships Act 2008 (Vic), s 45(1); Family Court Act 1997 (WA), ss 205ZD(3)(a), 205ZG(4)(e).

614 [20.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Beneficiaries  Chapter  20

of power (excepting Western Australia), apply to de facto relationships.173 Also, statute now treats superannuation interests (which are generally effected through the vehicle of a trust) as the property of marriage or de facto relationships, and the Family Court can alter those interests in property proceedings following relationship breakdown: see [28.135]. [20.150] A discretionary beneficiary’s “interest” is not property available to a trustee-​ in-​

bankruptcy (or liquidator) on the beneficiary’s insolvency (see [27.110]), although depending on the courts’ responses to the approach adopted by French J in Carey (No 6), noted at [20.135], the position may not be so clear. What is clear is that beneficiaries of discretionary trusts are not liable to tax on trust income until the trustee elects to distribute in their favour (see [27.155]);174 beneficiaries of fixed trusts instead have a present entitlement to trust income, upon which they are taxed whether or not a distribution is made. Nor do discretionary trust beneficiaries have any claim to being a “beneficial owner” for the purposes of indirect taxation legislation.175 After all, as noted at [20.115], even unit holders can lack this status. While assets held on discretionary trust have not traditionally factored in assets and other means testing for social security purposes, amendments to the Social Security Act 1991 (Cth) with effect on 1 January 2002 dictate that now trust assets can in some circumstances be attributed to discretionary beneficiaries.176 Default beneficiaries

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[20.155]  Discretionary trusts commonly include a “default beneficiary” (or “default distri-

bution”) clause. It nominates the beneficiaries who are to take should the trustee fail to fully distribute the trust income in a given year. In the absence of a contrary intention, a default beneficiary (sometimes termed a “taker in default of appointment”) has a vested interest in the trust income, albeit liable to be divested by the trustee exercising the power to distribute that income among the class of beneficiaries stipulated by the trust deed.177 The issue has assumed prominence in the case law chiefly because s 99A of the Income Tax Assessment Act 1936 (Cth) levies tax on trust income to which no beneficiary is presently entitled at the highest marginal rate: see [27.180]. In this context “default beneficiary” clauses aim to ensure that if the trustee fails to make a determination about which beneficiaries are

173

Pursuant to Family Law Act 1975 (Cth), ss 90SF(3)(b) and 90SM(4)(e), which commenced on 1 March 2009 (pursuant to the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth)). For this purpose, “de facto relationship” is defined in Family Law Act 1975 (Cth), s 4AA.

174

Gartside v Inland Revenue Commissioners [1968] AC 553 at 618–​619 per Lord Wilberforce. Cf Leedale v Lewis [1982] 1 WLR 1319 (distinguishing Gartside because the Inspector of Taxes was conferred a statutory discretion to levy capital gains tax based on justice and reasonableness to adjudge the respective values of interests under a discretionary trust).

175

See, for example, Lygon Nominees Pty Ltd v Commissioner of State Revenue (2007) 23 VR 474 (where the Victorian Court of Appeal held that an object of power of appointment under a discretionary trust was not a “beneficial owner” under land tax legislation: at [69]–​[78] per Redlich JA, with whom Ashley JA and Bell AJA concurred).

176

Social Security Act 1991 (Cth), Pt 3.18. As to these provisions see Re Briggs and Secretary, Department of Employment and Workplace Relations (2007) 93 ALD 762; Secretary, Department of Families, Housing, Community Services and Indigenous Affairs v Elliott (2009) 174 FCR 387. See also Ingram, “Social Security Changes: Discretionary Trusts Taxation Implications?” (2001) 36 TIA 48; Antsis, “Social Security and Trusts” (May 2003) 77 LIJ 50.

177

Commissioner of Succession Duties (SA) v Isbister (1941) 64 CLR 375 at 380 per Williams J; Commissioner of Stamp Duties (NSW) v Sprague (1960) 101 CLR 184 at 194 per Dixon CJ; Neill v Public Trustee [1978] 2 NSWLR 65 at 73 per Glass JA; Coventry v Smith (2004) 181 FLR 220 at [55] (FC(Fam Ct)); Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [37]–​[39] (FC(FCA)); Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2005) 60 ATR 135 at [50] per Hollingworth J (although her Honour held that the future interests of the “takers in default” did not make those persons “beneficial owners” for the purposes of (then) Land Tax Act 1958 (Vic), s 52: at [52]) [affd Lygon Nominees Pty Ltd v Commissioner of State Revenue (Vic) (2007) 23 VR 474]; Kain v Hutton [2008] 3 NZLR 589 at [25] per Blanchard J.

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Equity and Trusts in Australia

entitled to income in a particular year by the requisite date, or makes a distribution to persons not entitled under the trust instrument, the “default beneficiaries” are taken to be presently entitled to the income in question. For example, the following default beneficiary clause was held to be effective for this purpose in Idlecroft Pty Ltd v Federal Commissioner of Taxation:178 [T]‌he Trustees shall hold so much of the net income of the Trust Fund for each Accounting Period as shall not be the subject of a determination effectively made at or prior to the end of such Accounting Period … in Trust successively for the [default beneficiaries] as though the last day of such Accounting Period were the Vesting Day.

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In Idlecroft the person to whom income had been distributed was not validly appointed as a beneficiary. As a result, Spender J found that the default beneficiaries had a present entitlement in the year of income, which existed “notwithstanding that the Trustee may have appointed income to a non-​beneficiary thinking that it was a beneficiary”.179 Care should be taken to ensure that the default beneficiary clause is worded to take effect before or by the day on which the issue of present entitlement is assessed (usually the final day of the income tax year).180

178

Idlecroft Pty Ltd v Federal Commissioner of Taxation (2004) 56 ATR 699.

179

Idlecroft Pty Ltd v Federal Commissioner of Taxation (2004) 56 ATR 699 at [92] [affd on a different point: Idlecroft Pty Ltd v Federal Commissioner of Taxation (2005) 144 FCR 501].

180

See, for example, BRK (Bris) Pty Ltd v Federal Commissioner of Taxation (2001) 46 ATR 347 (where a default beneficiary clause that “if the Trustee shall not exercise any discretion as aforesaid then the Fund in relation to any income year shall be distributed equally between the beneficiaries as tenants in common” was held not to be operative until after the end of the financial year, meaning that at year end there was income to which no beneficiary was presently entitled: at 356 per Cooper J). Cf Federal Commissioner of Taxation v Marbray Nominees Pty Ltd 85 ATC 4750 at 4758–​4760 per Tadgell J. See McDermott, “Trust Default Distribution Clause Ineffective for Tax Purposes” (2001) 75 ALJ 666.

616 [20.155] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Chapter 21

Trustees WHO MAY ACT AS TRUSTEE Capacity to act as trustee

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[21.05] Persons who are capable at law of holding property in their own right have the

capacity to hold the office of trustee.1 This focus on the capacity to take and hold title to property stems from the fact that a person cannot be a trustee until he or she is vested with the trust property.2 Nor can a person be a trustee where he or she lacks the natural capacity to exercise the discretions required by the office. The fact that the general law requires no further qualification for trusteeship does not oust the need to give thought as to who should be so appointed. As a trustee is required to undertake important and potentially onerous duties relating to the management of trust property (see Ch 22), major criteria for selection include financial experience and responsibility, and integrity and trustworthiness. Where directions contained in a trust instrument require that trustees possess particular qualifications, heed must be paid to these. Also, the trustees of a charitable trust established for the benefit of a religious denomination should ideally be members of that denomination.3 No rule prevents beneficiaries acting as trustees —​except that a sole beneficiary cannot be a sole trustee because this causes the legal and equitable estates to merge and thus the trust to disappear:  see [16.05]  —​though appointing a beneficiary as trustee may create conflict between the duty as trustee to administer the trust as a whole and her or his personal interest as beneficiary.4 An attempt to vest property in a person who cannot legally hold it does not in itself invalidate the trust; equity does not allow a trust to fail for want of a trustee.5 The court will appoint another trustee: see [21.65]–​[21.80]. 1

In the Australian Capital Territory and New South Wales, statute provides that the appointment as trustee of a person under the age of 18 is void, but without prejudice to the power to appoint a new trustee to fill the vacancy: Trustee Act 1925 (ACT), s 7A; Conveyancing Act 1919 (NSW), s 151a. In New South Wales, statute also provides that a person aged 18 years and over may become a trustee, with the powers attendant to that office: Minors (Property and Contracts) Act 1970 (NSW), s 10(1)(b), 10(2). These provisions do not, however, affect the ability of a person under the age of 18 years being a trustee under a resulting trust or a constructive trust: Sanofi-​Aventis Australia Pty Ltd v Kartono [2006] NSWSC 1284 at [7]‌per Campbell J.

2

Church of England Property Trust Diocese of Goulburn v Rossi (1893) 14 LR (NSW) Eq 186 at 196 per Owen CJ. The statement in the text needs qualification where constructive trusteeship is imposed in circumstances designed to do no more than secure personal accountability for a loss; in this context, there is no true trust property but an obligation to pay money by a person who is treated as a trustee: see [38.25], [38.30], [38.55], [38.60], [38.65]–​[38.95].

3

Re Norwich Charities (1837) 2 My & Cr 275 at 305; 40 ER 645 at 657 per Lord Cottenham LC. Cf Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 at 94–​98 per Tipping J (see [21.80]). As to charitable trusts, see Ch 29.

4

See, for example, Forster v Abraham (1874) LR 17 Eq 351. This explains why the court, pursuant to its power to appoint trustees, is reticent to appoint a beneficiary as a trustee: see [21.80].

5

Sinnott v Hockin (1882) 8 VLR (E) 205 at 210 per Molesworth J. See also Charlesworth Nominees Pty Ltd v Charlesworth [2017] VSC 445 at [25] per Croft J (noting that the maxim that a trust will not fail for want of a trustee translates “to the effect that the identity of the trustee is not a matter affecting the due administration of the Trust and not a matter with which equity is concerned, save to ensure that, if necessary, a new trustee is appointed to ensure the due, and in this case, neutral administration of the Trust”).

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Equity and Trusts in Australia

Company as trustee [21.10] A company, including a foreign company,6 may act as trustee. If a company’s con-

stitution limits its objects, its capacity to act as trustee is limited to trust objects that come within the company’s objects.7 It is a usual form of organisation for a trading trust to have a corporate trustee, thereby affording the flexibility of the discretionary trust with the limited liability protection of the company (although in practice lenders to a corporate trustee require personal guarantees from the directors of the trustee or other guarantors, or the giving of security over non-​trust assets). Statutory trustee companies

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[21.15]  State and Territory legislation has traditionally governed the creation and operation

of what are known as “trustee companies”, which should not be confused with corporate trustees.8 Although the relevant statutes remain in force, the Corporations Act 2001 (Cth) was amended from 6 May 2010 to address various aspects of the operation of trustee companies,9 to the exclusion of the State and Territory laws.10 The Commonwealth legislation does not purport to alter the capacities in which trustee companies act, including as executors and administrators, trustees, receivers, attorneys and guardians of minors’ estates.11 But it does regulate the establishment and operation of common funds by trustee companies formerly found in the State and Territory legislation, which facilitates the companies’ service of investing and managing funds on behalf of clients.12 Without provision to this effect trustee companies would face the prohibition applicable to other trustees on mixing moneys from different trusts. As trustee companies hold themselves out as having special skill and are entitled to charge fees for acting,13 the law expects standards of trusteeship exceeding those applicable to lay trustees: see [22.25]. In addition to regulating fee charging by trustee companies (including empowering the court to review and, if appropriate, reduce those fees), the Corporations Act provides for trustee companies’ duty to account,14 lists the duties of officers and employees of trustee companies15 and restricts the ownership and voting power of persons in those

6

Re McPhillamy’s Trusts (1909) 10 SR (NSW) 42; Re Balfour [1916] VLR 397.

7

Re Levin & Co Ltd [1936] NZLR 558.

8

Trustee Companies Act 1947 (ACT); Trustee Companies Act 1964 (NSW); Companies (Trustees and Personal Representatives) Act 1981 (NT); Trustee Companies Act 1968 (Qld); Trustee Companies Act 1988 (SA); Trustee Companies Act 1953 (Tas); Trustee Companies Act 1984 (Vic); Trustee Companies Act 1987 (WA).

9

See Corporations Act 2001 (Cth), Ch 5D (inserted by the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (Cth)). A “trustee company” is a corporation to which s 51(xx) of the Australian Constitution applies and that is prescribed by the Corporations Regulations 2001 (Cth) (see Sch 8AA) as a trustee company: Corporations Act 2001 (Cth), s 601RAB(1).

10

Corporations Act 2001 (Cth), s 601RAE(2).

11

Trustee companies legislation: ACT ss 4–​14; NSW ss 4–​15C; NT ss 14–​20; Qld ss 5–​12; SA ss 4–​6; Tas ss 5–​10A; Vic ss 9–​17; WA ss 5–​14.

12

Corporations Act 2001 (Cth), ss 601SCA–​601SCC; Corporations Regulations 2001 (Cth), regs 5D.2.03–​5D.2.09.

13

Corporations Act 2001 (Cth), ss 601TAA–​601TEB. See, for example, Union Trustee Co of Australia Ltd v Bartlam (1948) 76 CLR 492. As to trustees’ remuneration, see [22.75]–​[22.90].

14

Corporations Act 2001 (Cth), ss 601SBA–​601SBC.

15

Corporations Act 2001 (Cth), ss 601UAA, 601UAB.

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Trustees  Chapter  21

companies.16 Directors of a trustee company are not concerned merely with the interests of shareholders in a business, but with the interests of the relevant beneficiaries.17 State and Territory trustee companies legislation in most jurisdictions makes the managing officers of a trustee company personally liable for the due administration of the trust.18 Public trustee [21.20]  The Public Trustee (in New South Wales, the “NSW Trustee”; in Victoria, the “State

Trustees”) is empowered to act as executor and trustee by statute in all jurisdictions,19 whether pursuant to express appointment under a will, or by appointment by the court in cases of intestacy, small estates or estates of the mentally incompetent.20 The court may also appoint the Public Trustee if there is dissension and uncertainty as to who was validly appointed as trustee,21 to replace a trustee it has removed,22 or otherwise where it is necessary to have an impartial agency managing particular property.23 Advisory trustees [21.25] Advisory trustees can be appointed in Queensland, Tasmania and Victoria, to act

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with the Public Trustee24 or with any trustee in Western Australia,25 by order of the court, by the trust instrument or by any person having the power to appoint new trustees.26 The role of an advisory trustee is, as the name suggests, merely to give advice to the responsible trustee(s). Yet as an advisory trustee is not vested with trust property and lacks powers of management or administration,27 he or she is not a trustee in the true sense of the word.

16

Corporations Act 2001 (Cth), ss 601VAA–​601VBI.

17

Elder’s Trustee and Executor Co Ltd v Higgins (1963) 113 CLR 426 at 452–​453 per Dixon CJ, McTiernan and Windeyer JJ.

18

ACT ss 16, 17; NSW s 31; NT s 50; Qld s 48; Tas s 17; Vic s 25; WA s 16. Cf SA s 23 (directors and managers individually and collectively responsible to the court).

19

Public Trustee Act 1985 (ACT); NSW Trustee and Guardian Act 2009 (NSW); Public Trustee Act 1979 (NT); Public Trustee Act 1978 (Qld); Public Trustee Act 1995 (SA); Public Trustee Act 1930 (Tas); State Trustees (State-​Owned Company) Act 1994 (Vic); Public Trustee Act 1941 (WA).

20

Slater v Global Finance Group Pty Ltd (1999) 150 FLR 264 at 269 per Wheeler J (noting that in the case where there is no adult person who has both the desire and the capacity to manage property “the Public Trustee fulfils an important role in the public interest as the person who, in the last resort, cares for that property”).

21

See, for example, Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 at 94–​98 (CA) (see [21.80]).

22

See, for example, Titterton v Oates (1998) 143 FLR 467 (see [21.110]); Baldwin v Greenland [2005] QSC 386 at [23] per Wilson J [affd Baldwin v Greenland [2007] 1 Qd R 117].

23

See, for example, Saul v Lin (No 2) (2004) 60 NSWLR 275 at [53], [54] per Palmer J (who appointed the Public Trustee rather than the Protective Commissioner, because the latter’s duty under statute was solely to look after and to advance the interests of one of the beneficiaries); Nicholls v Nelson [2006] NSWSC 813 (where a child, who was seriously injured as a result of a motor vehicle accident, received an insurance payout that funded the purchase of a residence, Brereton J appointed the Public Trustee to hold legal title to the residence in place of a relative).

24

Public Trustee Act 1978 (Qld), s 41; Public Trustee Act 1930 (Tas), s 22; State Trustees (State Owned Company) Act 1994 (Vic), s 9.

25

Trustees Act 1962 (WA), s 14.

26

Public Trustee Act 1978 (Qld), s 41(2); Public Trustee Act 1930 (Tas), s 22(2); State Trustees (State Owned Company) Act 1994 (Vic), s 9(2); Trustees Act 1962 (WA), s 14(2). In Victoria, an advisory trustee may also be appointed pursuant to an agreement between the State Trust and any executor, administrator or trustee, in which the executor, administrator or trustee agrees to give the State Trust a power of attorney: State Trustees (State Owned Company) Act 1994 (Vic), s 9(2)(c).

27

Public Trustee Act 1978 (Qld), s 41(3); Public Trustee Act 1930 (Tas), s 22(3); State Trustees (State Owned Company) Act 1994 (Vic), s 9(3); Trustees Act 1962 (WA), s 14(3).

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Equity and Trusts in Australia

Custodian trustees [21.30]  Statute in Queensland, South Australia, Tasmania, Victoria and Western Australia

envisages that custodian trustees can hold trust property to be managed by managing trustees.28 Under such an arrangement the functions normally reposed in one trustee are divided between two “trustees”, although as the managing trustee lacks title to the trust property, he or she is not a trustee in the legal sense of the word. The identity of a custodian trustee is confined by statute. In South Australia the custodian trustee must be the Public Trustee.29 In Tasmania it must be the Public Trustee30 or a trustee company,31 and in Victoria it may be either the State Trustees or an “approved corporation”,32 whereas in Queensland and Western Australia a custodian trustee can be any corporation.33 That a custodian trustee must be an entity avoids problems that might arise as to the vesting of property on the appointment of new trustees or the death or disability of a sole trustee. More generally, as to a managing trustee, it is said that “the possibility of misappropriation … would be lessened if he were deprived of all title to the trust property”.34

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[21.35]  Upon appointment, trust property vests in the custodian trustee.35 In South Australia,

Tasmania and Victoria statute expressly provides that the custodian trustee may be appointed under the trust instrument, by order of the court or by any person having the power to appoint a new trustee.36 The same is arguably the case in the remaining jurisdictions, where the statutory definition of “trustee” does not exclude a custodian trustee; as such, the appointment provisions relating to trustees (as to which see [21.60]) seem to apply in this context. The persons who would, apart from the custodian trustee, be the sole trustees, manage the trust property (as “managing trustees”). In Queensland, Tasmania and Western Australia the custodian trustee’s sole function is to hold trust property, invest trust funds and dispose of trust assets as the managing trustees direct, and, for this purpose, execute all documents and perform all such acts as the managing trustees direct.37 In South Australia, Tasmania and Victoria statute gives the custodian trustee custody of all securities and documents of title relating to the trust property, to which the managing trustees are entitled access.38 Reflecting what may otherwise be implicit, the legislation in South Australia and Victoria requires the custodian trustee to do all things necessary to enable the managing trustees to perform their functions and exercise their powers.39

28

Trusts Act 1973 (Qld), s 19; Public Trustee Act 1995 (SA), s 17; Public Trustee Act 1930 (Tas), ss 23, 24; Trustee Companies Act 1953 (Tas), s 18B(c); Trustee Act 1958 (Vic), s 71; Trustees Act 1962 (WA), s 15. These provisions have their origins in parallel English legislation: Public Trustee Act 1906 (UK), s 4.

29

Public Trustee Act 1995 (SA), s 17(1).

30

Public Trustee Act 1930 (Tas), ss 23, 24.

31

Trustee Companies Act 1953 (Tas), s 18B(c).

32

Trustee Act 1958 (Vic), s 71(3), 71(3A), 71(4). The term “approved corporation” is defined in the Trustee Act 1958 (Vic), s 71(2).

33

Trusts Act 1973 (Qld), s 19(1); Trustees Act 1962 (WA), s 15(1).

34

Coral Vista Pty Ltd v Halkeas [2010] QSC 449 at [46] per Margaret Wilson J.

35

Trusts Act 1973 (Qld), s 19(2)(a); Public Trustee Act 1995 (SA), s 17(3)(a); Public Trustee Act 1930 (Tas), s 24(a); Trustee Act 1958 (Vic), s 71(4)(a); Trustees Act 1962 (WA), s 15(2)(a).

36

Public Trustee Act 1995 (SA), s 17(1); Public Trustee Act 1930 (Tas), s 23; Trustee Act 1958 (Vic), s 71(3).

37

Trusts Act 1973 (Qld), s 19(2)(c); Public Trustee Act 1930 (Tas), s 24(d); Trustees Act 1962 (WA), s 15(2)(c).

38

Public Trustee Act 1995 (SA), s 17(3)(c); Public Trustee Act 1930 (Tas), s 24(c); Trustee Act 1958 (Vic), s 71(4)(c).

39

Public Trustee Act 1995 (SA), s 17(4); Trustee Act 1958 (Vic), s 71(4)(d).

620 [21.30] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Trustees  Chapter  21

Statute protects the custodian trustee from liability for any act or default of the managing trustees.40 Statute in Queensland, Tasmania and Western Australia provides that a person dealing with the custodian trustee need not be concerned to inquire as to any direction, concurrence or otherwise of the managing trustees and is not affected by notice of the fact that the managing trustees have not concurred.41 [21.40] In jurisdictions that make no statutory provision for custodian trustees, there is

ostensibly nothing to preclude express provision in the trust instrument for custodian trusteeship in terms desired by the settlor. So far as the respective roles and duties of custodian and managing trustees are concerned, a leading judicial statement is that of Cross J in Re Brooke Bond & Co Ltd’s Trust Deed:42 It is apparent that the duties of a custodian trustee differ substantially from those of an ordinary trustee. If the trust instrument or the general law gives the trustees power to do this, that or the other, it is not for the custodian trustee to consider whether it should be done. The exercise of powers or directions is a matter for the managing trustees with which the custodian trustee has no concern, and he is bound to deal with the trust property so as to give effect to the decisions and actions taken by the managing trustee unless what he is requested to do by them would be a breach of trust or would involve him in personal liability.

To this end, it has been said that a custodian trustee performs “a lesser function than an ordinary trustee”,43 and that while a custodian trustee is not a bare trustee (see [21.45]), the distinction is “perhaps a fine one”.44 Bare trustees

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[21.45]  A “bare” trustee holds property in trust for the absolute benefit and at the absolute

disposal of beneficiaries of full age and capacity in respect of that property, but has no interest in that property other than by reason of legal title as trustee, and no (further) duty to perform except to convey the property on demand to the beneficiaries or as directed by them.45 Bare trustees include an assignor of future property upon acquiring title to the property (see [3.105]), and a person with title to property under a purchase money resulting trust (see [26.60]).46 The presence of active duties of management has generally been regarded as the touchstone of the distinction between an active and a bare trust.47 The absence of duties of this

40

Trusts Act 1973 (Qld), s 19(2)(f); Public Trustee Act 1995 (SA), s 17(6); Public Trustee Act 1930 (Tas), s 24(g); Trustee Act 1958 (Vic), s 71(4)(e), 71(4)(k); Trustees Act 1962 (WA), s 15(2)(f).

41

Trusts Act 1973 (Qld), s 19(2)(h); Public Trustee Act 1930 (Tas), s 24(i); Trustees Act 1962 (WA), s 15(2)(h).

42

Re Brooke Bond & Co Ltd’s Trust Deed [1963] 1 Ch 357 at 363. See also Public Trustee (Qld) v Opus Capital Ltd (2013) 9 ASTLR 555 at [20] per Dalton J.

43

Forster v Williams Deacon’s Bank Ltd [1935] Ch 359 at 367 per Hanworth MR.

44

Inland Revenue Commissioners v Silverts Ltd [1951] 1 All ER 703 at 705–​706 per Evershed MR.

45

Lysaght v Edwards (1876) 2 Ch D 499 at 516–​517 per Jessel MR; Re Cunningham and Frayling [1891] 2 Ch 567 at 571–​ 572 per Stirling J; Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 281 per Gummow J; Motor Vehicle Dealers Inst Inc v UDC Finance (1991) [1994] 1 NZLR 659 at 664 per McKay J; CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174 at [36] (FC).

46

Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 281 per Gummow J.

47

Schalit v Joseph Nadler Ltd [1933] 2 KB 79 at 81–​82 per Goddard J; Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 281 per Gummow J; Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 at [57] per McLure J, with whom Murray and Parker JJ concurred; Jessup v Lawyers Private Mortgages Ltd [2006] QSC 3 at [54] per Chesterman J [affd Jessup v Lawyers Private Mortgages Ltd [2006] QCA 432].

[21.45]  621 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

kind ordinarily serves to brand a person a bare trustee. But the “active duties” test must not be applied too rigidly. In that there is “almost no situation [that] can be postulated where a trustee cannot in some circumstances have active duties to perform”,48 bare trustees can have some active (usually non-​management) duties49 (as compared to powers).50 For instance, a bare trustee retains the duty to preserve the trust property so long as the trusteeship subsists,51 which may include ensuring it is productive.52 Also, a bare trustee of shares, though obliged to exercise voting power as directed by the beneficiaries, may lacking such a direction exercise that power, as trustee, in the interests of the beneficiaries.53 When used in a statute, however, “bare trust” terminology must take its meaning from the statutory context.54

APPOINTMENT OF TRUSTEES [21.50]  The appointment of trustees to replace or augment the number of trustees is effected

either under the express terms of the trust instrument, under the trustee legislation, or by the court. Appointment pursuant to the trust instrument [21.55]  Trust instruments commonly prescribe the occasions and manner of appointment of

new trustees, and vest a power to appoint a new trustee (and remove existing trustees) in an “appointor”. For example:

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The appointor or if there shall be no appointor then surviving then the trustee or trustees for the time being or the personal representatives of the last surviving trustee shall have the right jointly if more than one: (a) to increase or reduce the number of trustees; (b) to remove any trustee for any reason whatsoever; (c) to appoint new and/​or additional trustees other than the appointor.

The trust instrument takes precedence over a power to appoint prescribed by statute except in Queensland.55 It is construed strictly in accordance with its terms,56 but if unfettered another person cannot control the appointor’s discretion and the court will not place unjustified limits on it.57 An appointor may, as a result, wield a potentially considerable degree of influence in the trust’s administration, the more so where, as is not unusual, the trust deed makes the

48

Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398 per Meagher JA.

49

Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 41 ATR 29 at 38 per Mason P.

50

See ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue (2003) 12 BPR 22,941 at [275]–​[280] per Barrett J (who remarked that “an ‘active power’ (as opposed to an ‘active duty’), regardless of its significance, will be sufficient to render the trust something other than a bare trust … A power expressly conferred upon a trustee will give that trustee an interest in the property other than the minimal interest that exists simply by virtue of the trusteeship itself”: at [280]); Re Fletcher [2012] FCA 803 at [34] per Collier J (noting that a bare trustee has no power of sale).

51

Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 281 per Gummow J; Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation (2011) 193 FCR 442 at [16] (FC).

52

See, for example, Byrnes v Kendle (2011) 243 CLR 253, discussed at [22.175].

53

Kirby v Wilkins [1929] 2 Ch 444 at 454 per Romer J. Cf Hotung v Ho [2002] 3 HKLRD 641.

54

Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 at 398 per Meagher JA; Thorpe v Bristile Ltd (1996) 16 WAR 500; Burns v Steel [2006] 1 NZLR 559 at [62] per Randerson J.

55

Under Trusts Act 1973 (Qld), s 10, the statutory provision for the appointment of trustees applies whether or not a contrary intention appears in the trust instrument: see Kneipp v Annunaka Pty Ltd [2015] QSC 359 at [11] per North J.

56

Iffla v Beany (1861) 1 W & W (E)  110; Re Campbell (1875) 1 VLR (IP & M) 32; Re Norris (1884) 27 Ch D 333; Re McPhillamy’s Trusts (1909) 10 SR (NSW) 42; Re Mayne (1928) 28 SR (NSW) 157.

57

Green v Nicholson (1869) 6 EE & A’B (E) 147; In the Estate of Dimond (1891) 13 ALT 18.

622 [21.50] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Trustees  Chapter  21

exercise of one or more trustee powers subject to the consent of the appointor. Even so, by itself a power to appoint a new trustee does not usually carry the power to remove an existing trustee.58 It is common, albeit not invariable,59 for an appointor’s power to be construed as fiduciary in nature, in which event it cannot be exercised in the appointor’s own interests.60 But the position may be otherwise where the appointor is a beneficiary, the reason being that beneficiaries can act in their own interests in exercising a power; after all, beneficiaries are not trustees for the trust or one another, and their relations inter se are not generally fiduciary.61 Yet though a beneficiary (or, for that matter, a non-​fiduciary appointor) may act in her or his own interests, the power is not unfettered; it must be exercised in good faith, and for the benefit of the beneficiaries in line with the objects of the trust (that is, not as a fraud on a power: see [8.50]).62 Appointment under statutory power [21.60]  Lacking an express power under the trust instrument to appoint a trustee, the trus-

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tee legislation prescribes the circumstances in which an appointment can be made, and the persons who may make that appointment.63 This, it is said, “avoids uncontentious applications to court for appointment of new trustees and enables the trust to be conducted in the manner that was anticipated by the settlor”.64 The relevant provision states that a new trustee may be appointed to replace an outgoing trustee where the latter is:  dead; remains out of the State or Territory for 12 months;65 desires to be discharged, or refuses, is

58

See, for example, James v Douglas [2016] NSWCA 178 (where, concerning a power to appoint an “additional or replacement” trustee, Meagher JA remarked that it is not “a necessary incident or aspect of the exercise of such a power to appoint that any person first be removed”: at [41]; his Honour countenanced that the position would be differed had the power been directed to an appointment “in substitution for … any existing trustee” or “in place of the trustee”: at [43]); McCallum v McCallum [2017] NZHC 1218 at [23]–​[29] per Woodhouse J.

59

Mercanti v Mercanti (2016) 50 WAR 495 at [319] per Buss P (noting that “not every power created by a trust deed, and conferred on a person or entity who is not the trustee, is necessarily a fiduciary power” and explaining (at [320]) that the proper characterisation resting upon whether or not it can be exercised for the person’s own benefit). See, for example, Australian Conservation Services Pty Ltd v Liladel Holdings Pty Ltd (2017) 12 ACTLR 124 (where Mossop J noted that because of D’s effective control over the trust “through his position as appointor, by his participation in the initially appointed trustee and because of the fact that the definition of the beneficiaries of the Trust is focused upon him, it can be seen that the trust is effectively under his control”, which in turn justified the exercise of the power in D’s favour: at [22], [23]).

60

Re Skeats’ Settlement (1889) 42 Ch D 522 at 526–​527 per Kay J; Re Burton (1994) 126 ALR 557 at 559 per Davies J; Hillcrest (Ilford) Pty Ltd v Kingsford (Ilford) Pty Ltd (No 2) (2010) 4 ASTLR 233 at [36]–​[43] per Biscoe AJ; Rayner v N J Sheaffe Pty Ltd [2010] NSWSC 810 at [149]–​[152] per Lindgren AJ; Berger v Lysteron Pty Ltd [2012] VSC 95 at [84], [85] per Habersberger J; Carmine v Ritchie [2012] NZHC 1514 at [66] per Gilbert J; New Zealand Maori Council v Foulkes [2016] 2 NZLR 337 at [22] (CA). Cf Schuhmacher v Emmerson [2013] QSC 205 at [94] per Daubney J (“Self appointment to the position of trustee has long been frowned on in equity”; on the exceptional facts before the court, however, his Honour found such an appointment justifiable: see at [97]–​[99]).

61

Disher v Farnworth [1993] 3 NZLR 390 at 399 per McKay J; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 595 per Finkelstein J; Price v Powers [2005] WASC 154 at [75] per Le Miere J [affd Price v Powers [2006] WASCA 262] (in the context of unit holders); Australian Conservation Services Pty Ltd v Liladel Holdings Pty Ltd (2017) 12 ACTLR 124 at [23], [34] per Mossop J. Cf Berger v Lysteron Pty Ltd [2012] VSC 95 at [84] per Habersberger J.

62

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 595 per Finkelstein J.

63

ACT s 6; NSW s 6; NT s 11; Qld s 12; SA s 14; Tas s 13; Vic s 41; WA s 7.

64

Thorne Developments Pty Ltd v Thorne (2015) 296 FLR 334 at [42] per Mullins J [affd Thorne Developments Pty Ltd v Thorne [2017] 1 Qd R 156].

65

The 12-​month period is construed strictly. The period does not run if broken by a week: Re Walker [1901] 1 Ch 259. In the Australian Capital Territory, New South Wales, Queensland, Victoria and Western Australia, the 12-​month period of absence does not afford grounds for a new appointment where the trustee in question has properly delegated the execution of the trust: ACT s 6(2)(b); NSW s 6(2)(b); Qld s 12(1)(b); Vic s 41(1); WA s 7(1)(b). The Australian Capital Territory and New South Wales legislation adds that, notwithstanding a proper delegation, a new trustee may be appointed where a trustee remains out of the jurisdiction for more than two years: ACT s 6(2)(c); NSW s 6(2)(c). As to delegation by trustees, see [22.45].

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Equity and Trusts in Australia

incapable66 or unfit67 to act; or is removed under a power contained in the trust instrument. Except for the Northern Territory, South Australia and Tasmania, the trustee legislation provides that a new trustee may be appointed where the trustee, being a corporation, is dissolved.68 The order of persons who may appoint in these circumstances is: persons nominated in the trust instrument; the surviving trustee; and the personal representatives of the last or only surviving trustee.69 Appointment by the court [21.65]  The court has an inherent jurisdiction to appoint new trustees arising from its general

supervisory jurisdiction over trusts pursuant to which it gives effect to the important maxim “a trust will not fail for want of a trustee”.70 As the court’s power to appoint new trustees owes its origin to an inherent jurisdiction, it has power to make such in personam orders as may be necessary to achieve the vesting of trust assets in the new trustees, whether or not the trust assets are located in the jurisdiction71 or the proper law is domestic law. It requires only that the individual trustee should be subject to the jurisdiction of the domestic courts.72 The court’s inherent jurisdiction is reflected by the trustee legislation that, except in the Australian Capital Territory and South Australia (see [21.70]), provides that:73 … the Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient difficult or impracticable to do so without the assistance of the Court, make an order appointing [new trustee(s)] either in substitution for or in addition to any existing trustee[s]‌, or although there is no existing trustee.

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It adds that the court may appoint a new trustee in substitution for a trustee who is convicted of a crime, insane, bankrupt or a corporation that is in liquidation or has been dissolved. The Australian Capital Territory and South Australian trustee legislation empowers the court to appoint, remove or replace one or more trustees if satisfied that this is desirable either

66

The words “incapable of acting” refer to personal incapacity (Re Bignold’s Settlement Trusts (1872) 7 Ch App 223) and to an involuntary incapacity as opposed to a voluntary one: Iffla v Beany (1861) 1 W & W (E) 110. Persons of unsound mind (Re East (1873) 8 Ch App 735) or who suffer a serious prolonged illness (Re Weston’s Trusts (1898) 43 Sol Jo 29) have been held to be incapable of acting for this purpose.

67

Unfitness relates to conduct inconsistent with the confidence to be reposed in a trustee. Trustees who have become bankrupt (Chambers v Jones (1902) 2 SR (NSW) Eq 177), absconded (Re Wheeler and De Rochow [1896] 1 Ch 315 at 322 per Kekewich J), committed a breach of trust or neglect of duty serious enough to endanger the confidence to be reposed in them (Willis v Stephens [1934] VLR 19; Fysh v Coote [2000] VSCA 150; Dimos v Skaftouros (2004) 9 VR 584), or engaged in a conflict of interest and duty (Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 81–​82 per Ashley J), have been held to be unfit to act for this purpose.

68

ACT s 6(2)(g); NSW s 6(2)(g); Qld s 12(1)(h); Vic s 42(3); WA s 7(1)(h).

69

The expression “the personal representatives of the last surviving or continuing trustee” refers to a deceased trustee who, immediately before her or his death, was the only trustee who had not ceased by reason of death or some other cause to hold office as trustee: Re Geelong Waterworks and Sewerage Trust [1955] VLR 302 at 308 per Smith J. The trustee legislation provides that a continuing trustee includes a refusing or retiring trustee if willing to act in the appointment: ACT s 6(12); NSW s 6(11); NT s 11(4); Qld s 12(7); SA s 14(4); Tas s 13(4); Vic s 41(8); WA s 7(7). Were this not so, there would be no continuing trustee where a single trustee wishes to retire.

70

In the rare case where a court has removed a sole trustee but no replacement trustee is forthcoming, the inherent jurisdiction of the court extends, exceptionally, to itself give directions for the orderly administration of the trust estate: see, for example, Gonder v Evans [2010] WTLR 41.

71

The location of the trust property will determine whether the removal can be achieved by an in rem order or whether an in personam order is appropriate: Chellaram v Chellaram [1985] Ch 409 at 432 per Scott J.

72

Chellaram v Chellaram [1985] Ch 409 at 428 per Scott J.

73

NSW s 70; NT s 27; Qld s 80; Tas s 32; Vic s 48; WA s 77. The wording in the text follows the Victorian provision.

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Trustees  Chapter  21

in the interests of the beneficiaries or to advance the purposes of the trust.74 The legislation makes it explicit that there is no need for the court to find fault or inadequacy on the part of the existing trustees before making such an order.75 The Attorney-​General, a trustee, a beneficiary or any other person who satisfies the court that he or she has a proper interest76 in the trust, may apply for the order.77 In the case of a charitable trust, the following persons may apply for such an order: (a) a person named in the trust deed as a person who must, or may, be consulted before the distribution or use of money or property for the purposes of the trust; (b) a person who in the past has received money or property from the trustees for the purposes of the trust; (c) a person in a class of people the trust is intended to benefit; and (d) in South Australia, a person named in the trust deed as a person who is entitled to, or may, receive money or other property for the purposes of the trust.78 [21.70]  The court generally appoints trustees where both the terms of the trust and the stat-

utory provisions have been exhausted. The jurisdiction therefore enters into play most often where any appointor’s powers have proven insufficient, the appointor has otherwise failed to exercise the power or the events fall outside of those that trigger the statutory power to appoint. Yet the court is not deprived of its power to appoint merely because a power of appointment exists in someone else; its exercise rests on it being convinced of the “expediency” or “desirability” of the appointment.79 Having said that, because the exercise of such a power interferes with the appointments, by deed ordinarily, by the parties, a court is justifiably cautious in exercising it, and reserves its jurisdiction to occasions where it is satisfied that there is “a clear need for the appointment to be made”.80 And notwithstanding the breadth of the statutory language, it is not wide enough to vest in the court a power to appoint (and remove) on a retrospective basis.81

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“Expediency” [21.75]  The term “expedient” in this context means “conducive to, or fit or proper or suitable

having regard to, ‘the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee’ ”82 or, more generally, “advantageous or merely appropriate or suitable to the circumstances of the case”.83 There is no reason, therefore, to equate expediency with necessity; instead the court is concerned with whether or not its intervention

74

ACT s 70(1)–​70(3); SA ss 36(1), 36(1a).

75

ACT s 70(4); SA s 36(1b).

76

In its context, “interest” means a legal, equitable or financial interest. It does not extend to an interest arising merely out of moral concern about the affairs of the trust: Thorn v Bettens [2006] SASC 59 at [12] per Judge Lunn (ruling that, where trust beneficiaries were infant children, their grandmother, who was not a beneficiary of the trust or the guardian of the children, lacked a proper interest in the trust under the statute).

77

ACT s 70(5)(a)–​(c), (e); SA s 36(1c)(a)–​(c), (e).

78

ACT s 70(5)(d); SA s 36(1c)(d). Charitable trusts are discussed in Ch 29.

79

Re Fauntleroy (1839) 10 Sim 252; 59 ER 610; Re Foxhall (1847) 2 Ph 281; 41 ER 951; Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78 at 88 per Bleby J.

80

Smith v Smith [2006] WASC 166 at [4]‌per Murray J. See also Re Cooper Street Property Trust (No 2) [2017] VSC 291 at [39] per McMillan J (applying the same notion to appointments by virtue of the court’s inherent jurisdiction).

81

NSW Masonic Youth Property Trust v Attorney-​General (NSW) (2010) 5 ASTLR 211 at [77] per Hall J.

82

Re Roberts (1983) 70 FLR 158 at 162 per O’Leary J, citing Miller v Cameron (1936) 54 CLR 572 at 580 per Dixon J.

83

Pope v DRP Nominees Pty Ltd (1999) 74 SASR 78 at 86 per Bleby J.

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Equity and Trusts in Australia

“is a suitable, practical and efficient step to take in order to advance the interests of the estate and its beneficiaries”.84 Instances held to justify an appointment by the court include where there was no trustee appointed or capable of acting,85 an existing trustee was under a legal disability,86 or animosity or ingrained disagreement between the trustees.87 In Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq),88 for example, Rolfe J found it expedient to replace a corporate trustee in provisional liquidation that had been removed from other trusts it had administered, adding that the beneficiaries’ interests would be better served by a trustee independent of the company.

Welfare of the beneficiaries

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[21.80]  The welfare of the beneficiaries is the court’s dominant consideration in appointing

(and removing:  see [21.105]) trustees.89 The court is alert to something that induces it “to think either that the trust property will not be safe or that the trust will not be properly executed in the interests of the beneficiaries”.90 To this end, it looks chiefly to the following three factors when appointing.91 First, the court considers whether the settlor has impliedly or expressly shown whom he or she wishes to act as trustee. Those wishes merit considerable weight92 —​her or his wisdom in appointing the trustee(s) in question is beside the point —​although a court is not, usually in an exceptional case, bound to follow them. For example, in Mendelssohn v Centrepoint Community Growth Trust,93 the New Zealand Court of Appeal upheld the temporary “caretaker” appointment of the Public Trustee as trustee of a religious charitable trust crippled by dissension over the identity of the appointed trustee, even though the settlor envisaged the trustee would be a member of the religious group in question. Secondly, as a trustee must hold the balance of all interests, the court will ordinarily avoid making an appointment of someone who will not represent the interests of all the beneficiaries. So the court eschews persons likely to be consciously biased against one or more of the beneficiaries,94

84

Coote v Warren [2013] NZHC 3210 at [11] per Panckhurst J.

85

See, for example, Re Lemann’s Trusts (1883) 22 Ch D 663; Re Williams’ Trusts (1887) 36 Ch D 231; Re Rogers [1921] NZLR 245; Re Shepherd’s Trusts [1955] NZLR 585.

86

See, for example, Re Shelmerdine (1864) 33 LJ Ch 474.

87

See, for example, Letterstedt v Broers (1884) 9 App Cas 371; Watson v Vaughan [2011] TASSC 17.

88

Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185.

89

Letterstedt v Broers (1884) 9 App Cas 371 at 386 per Lord Blackburn; Miller v Cameron (1936) 54 CLR 572 at 579 per Starke J.

90

Re Wrightson [1908] 1 Ch 789 at 803 per Warrington J. See also Miller v Cameron (1936) 54 CLR 572 at 575 per Latham CJ.

91

Re Tempest (1866) LR 1 Ch App 485 at 487–​488 per Turner LJ; Wells v Wily (2004) 183 FLR 284 at [21] per Austin J; Saul v Lin (No 2) (2004) 60 NSWLR 275 at [48] per Palmer J.

92

Re Wilson (deceased) [1923] VLR 277 at 279 per Macfarlan J; Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 75 per Ashley J; Titterton v Oates (1998) 143 FLR 467 at 478 per Crispin J; Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 at 97 per Tipping J; Telford v Telford [2003] VSC 8 at [16] per Ashley J.

93

Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 at 97–​98 per Tipping J.  See also Re Wilson (deceased) [1923] VLR 277 (where in appointing a trustee company as trustee notwithstanding an express prohibition contained in the trust instrument, Macfarlan J noted that the prohibition was annexed to a power to appoint granted 40 years prior at which time the position of trustee companies was not as well established); Titterton v Oates (1998) 143 FLR 467 at 478–​483 per Crispin J (where evidence that the relevant circumstances had changed since the death of the settlor, which added to the conflict of interest inherent in the original appointment, when coupled with prolonged dereliction of duty by the trustee, justified the appointment of the Public Trustee).

94

Wallace v Wallace (No 2) (1899) 24 VLR 893; Re Parsons [1940] Ch 973.

626 [21.80] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Trustees  Chapter  21

such as a person aligned with a beneficiary95 or a tenant for life.96 For the same reason, the court is loath to appoint a beneficiary or a near relative of a beneficiary,97 even if he or she is of the highest character or has the support of the majority of other beneficiaries.98 The latter is informed by the remark, endorsed in recent times,99 of Romilly MR that “I have always observed that the worst breaches of trust are committed by relatives who are unable to resist the importunities of their cestuis que trust, when they are nearly related to them”.100 It has been judicially said, in this vein, that:101 … the general rule that the court prefers not to appoint relatives of beneficiaries as new trustees is not confined to the appointment of relatives of any particular degree of propinquity to the beneficiaries. It is a commonsense rule and it is to be applied in a commonsense way whenever it is apparent that the proposed new trustees have such family connections with the beneficiaries as to be susceptible to the influences and partialities which almost inevitably pervade family histories and family affairs, particularly where money is concerned.

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Yet the appointment of a (relative of a) beneficiary may be practically unavoidable in some circumstances, and indeed an appropriate outcome because a stranger to the trust may be disinclined to assume the onerous duties of trusteeship.102 In particular, where the estate is small, and would likely be depleted were the Public Trustee or a trustee company (who charge for their services) appointed, it may find it expedient to appoint or accept as trustees beneficiaries (or relatives thereof) who can act gratuitously absent persuasive evidence that they would not carry out their duties or that the trust property would otherwise be imperilled.103 It is open to the court, in any case, to place controls on the appointment, such as requiring that judicial advice be sought before significant decisions are made,104 or otherwise that third party consents precede certain actions. Thirdly, the court will consider whether the proposed appointment will promote the execution of the trust. In determining whether a trustee should be replaced, the court may consider the trustee’s financial stability,105 the trustee’s connection or relationship with other

95

See, for example, Australian Olympic Committee Inc v Big Fights Inc (No 2) (2000) 176 ALR 124 at 134 per Lindgren J (who found it unsatisfactory to allow one of two trustees to remain as sole trustee given, inter alia, that each trustee was aligned with one of the beneficiaries, and expressed a preference for the appointment of new independent trustees).

96

Re Cunningham’s Settled Estates (1909) 27 WN (NSW) 28; Will of Benjamin [1920] VLR 393. Cf Re Simmonds [1954] QWN 3 (where, by reason that the executors and trustees under the will had disclaimed and that the Public Curator appeared on the application as a guardian for the infant remaindermen, a tenant for life was appointed with another person as trustees for the tenant’s husband’s estate).

97

Re Ferrett’s Trusts (1894) 6 QLJ 183; Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90; Re Shepherd’s Trusts [1955] NZLR 585; Re Roberts (1983) 70 FLR 158; Saul v Lin (No 2) (2004) 60 NSWLR 275; Nicholls v Nelson [2006] NSWSC 813.

98

Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90; Re Friend’s Trust (1904) 21 WN (NSW) 166.

99

Saul v Lin (No 2) (2004) 60 NSWLR 275 at [9]‌per Palmer J (who added that “[h]uman nature has not changed since those words were uttered”).

100

Wilding v Boulder (1855) 21 Beav 222 at 222; 52 ER 845 at 845. See, for example, Thurston v Thurston [2013] NZHC 1886 (where the court removed a trustee-​beneficiary because he had shown himself incapable of acting impartially as between all beneficiaries, stemming from an inability to keep separate his duties as trustee from his interests as a beneficiary).

101

Saul v Lin (No 2) (2004) 60 NSWLR 275 at [11] per Palmer J.

102

For example, the appointment of beneficiaries as trustees (Re Simmonds [1954] QWN 3; Re Neeve [1956] QWN 21; Re Paroz [1956] QWN 37; Hancock v Reinhart (2015) 13 ASTLR 1), the appointment of parents of beneficiaries as trustees (Re Grace [1955] QWN 81) and the appointment of spouses of beneficiaries as trustees (Re Greenfield (No 2) (1909) 12 GLR 22).

103

McLauchlan v Prince [2002] WASC 274 at [38]–​[40] per Hasluck J; Telford v Telford [2003] VSC 8 at [17] per Ashley J; Williams v Williams [2005] 1 Qd R 105 at [45] per Wilson J. See also the unusual scenario in Kennedy v Kennedy [2011] NSWSC 1619 (where the plaintiffs, who established a trust appointing their son as trustee, and themselves as principal beneficiaries, were appointed as trustees by the court upon their son having disappeared for nearly three years).

104

See, for example, Hancock v Reinhart (2015) 13 ASTLR 1 at [319] per Brereton J.

105

Sapio v Carter [1959] NZLR 848. See also Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185 per Rolfe J (who saw no advantage in leaving a company in provisional liquidation as trustee).

[21.80]  627 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

trustees,106 whether the trustee has been removed from other trusts and whether the current appointment gives rise to potential conflicts of interest.107 Friction between trustee and beneficiaries, or the trustee’s lack of business experience, does not by itself mandate the appointment of an additional or replacement trustee.108 But an appointment will not generally be made of a trustee outside the jurisdiction where the trust property is situated, as this may put it out of the court’s power to protect persons within the jurisdiction.109 Number of trustees [21.85]  The original number of trustees need not be maintained on an appointment of new

trustees unless the trust instrument so directs.110 In all jurisdictions except Queensland and Victoria there is no limit on the number of trustees who may be appointed under an express power. In the Australian Capital Territory, New South Wales and Western Australia a statutory limit on the number of trustees who may be appointed applies only to the statutory power of appointment, not to one found in the trust instrument.111 In Queensland and Victoria the legislation restricts to four the number of trustees who may be appointed to a private trust (although in Victoria, the limitation applies only with respect to trustees of a settlement of land).112 There is no restriction on the number of charity trustees who may be appointed, whether at the creation of the trust or under an express power of appointment in the trust instrument. But the statutory power to appoint cannot be exercised to increase the number of trustees beyond four in the Australian Capital Territory, New South Wales and Western Australia.113

DISCLAIMER BY TRUSTEE

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[21.90]  A person appointed as a trustee may disclaim the trust office, whether because the

appointment is made without her or his consent or in light of changed circumstances, before doing any act in performing the trust that could be interpreted as its acceptance.114 Once a trustee accepts the office —​say, by the signing a relevant document —​the ability to disclaim is lost, and he or she may only elect to leave the office by way of retirement (see [21.95]). The disclaimer must be of the entire trust, not a part (or parts) only.115 It must be within a

106

Re Whitehouse [1982] Qd R 196; Burns v Burns [2008] QSC 173 at [57], [58] per Chesterman J (the court will not make an appointment that will actually cause deadlock or conflict between the existing and new (additional) trustees).

107

Global Funds Management (NSW) Ltd v Burns Philp Trustee Co Ltd (in prov liq) (1990) 3 ACSR 183 at 185 per Rolfe J.

108

Telford v Telford [2003] VSC 8 at [18]–​[21] per Ashley J.

109

Re Mitchell’s Trust Estate (1879) 5 VLR (E) 42; Re J S Mitchell’s Trusts (1900) 17 WN (NSW) 164; Re McPhillamy’s Trusts (1909) 10 SR (NSW) 42 at 46 per A H Simpson CJ in Eq; Re Kay [1927] VLR 66 at 69 per Mann J; Sapio v Carter [1959] NZLR 848; Re Seale’s Marriage Settlement [1961] Ch 574 at 580 per Buckley J; Re Whitehead’s Will Trusts [1971] 2 All ER 1334 at 1337 per Pennycuick VC; Re Roberts (1983) 70 FLR 158 at 163 per O’Leary J. In Re Kissock (1910) 7 Tas LR 21, it was held that a court may appoint new trustees resident outside the jurisdiction when all the beneficiaries of the trust are similarly resident. So in Re Kay [1927] VLR 66, the appointment of trustees in New Zealand was allowed as the trust property in Australia was held on trust to pay an annuity to persons resident in New Zealand. See also Re Hawkes (1900) 3 GLR 33; Re Renshaw’s Trust Deed [1928] NZLR 460.

110

Re Mayne (1928) 28 SR (NSW) 157 at 159–​160 per Harvey CJ in Eq. Cf Cohen v Bayley-​Worthington [1908] AC 97.

111

ACT s 6(6)(b); NSW s 6(5)(b); WA s 7(2)(a).

112

Qld s 11; Vic s 40.

113

ACT s 6(5)(b); NSW s 6(5)(b); WA s 7(2)(a).

114

Lady Naas v Westminster Bank Ltd [1940] AC 366 at 401 per Lord Wright.

115

Re Lord and Fullerton’s Contract [1896] 1 Ch 228.

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Trustees  Chapter  21

reasonable time of appointment, and ideally be in writing, though inaction by a purported trustee may be construed as a disclaimer.116 The onus of establishing a disclaimer lies on the party alleging it.117 The trust instrument may grant a power to appoint new trustees in place of trustees who refuse to act, in which case the donees of that power may appoint new trustees.118 A disclaimer by a person appointed to act as sole trustee causes the trust property to revest in the settlor as trustee until a new trustee is appointed.119 Alternatively, the court may appoint a trustee in place of the disclaiming trustee, as it does not allow a trust to fail for want of a trustee: see [21.65]–​[21.80]. In the Australian Capital Territory, New South Wales, Queensland, Victoria and Western Australia the trustee legislation provides that a person appointed by will as both executor and trustee who renounces probate, or after being duly cited fails to apply for probate, is deemed to have disclaimed the trust contained in the will.120

RETIREMENT OF TRUSTEES

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[21.95]  Trustees may retire from a trust in one of four ways. First, retirement may be effected

pursuant to a provision to this effect in the trust instrument, which is ordinarily strictly construed, presumably in an effort to ensure the continued proper management and security of the trust property. For example, in General Investment Pty Ltd v Tyson,121 the trust deed permitted a sole trustee for debenture holders of a company to retire without giving reasons. Crawford J held that, pursuant to this clause, notice of retirement had to be given to the beneficiaries, not merely to the company. Secondly, advantage may be taken of provisions in the trustee legislation that broadly allow a trustee to retire if two trustees (or a trustee company) remain, or if no new trustee is being appointed but the other trustee consents.122 Thirdly, retirement can follow upon consent of all beneficiaries, being of full legal capacity, although this does not empower them to direct the continuing trustee(s) to appoint a new trustee, or in any way control the administration of the trust.123 Fourthly, a trustee may retire by consent of the court. Courts have allowed retirement on grounds, inter alia, of sickness, infancy and where the trustee is carrying on the testator’s business at a loss.124 That the trustee is leaving the jurisdiction may not in itself warrant the court accepting such an application, particularly given modern communication and data transfer facilities. Importantly, a court will not permit a trustee to retire for the purpose of effecting a transaction between herself or himself and the trust: see [22.105].

116

Re Gordon (1877) 6 Ch D 531; Re Birchall (1889) 40 Ch D 436. Cf Re Clout and Frewer’s Contract [1924] 2 Ch 230.

117

Lady Naas v Westminster Bank Ltd [1940] AC 366 at 400 per Lord Wright; J W Broomhead (Vic) Pty Ltd (in liq) v J W Broomhead Pty Ltd [1985] VR 891 at 933 per McGarvie J.

118

See Will of Wethers (1878) 12 SALR 32.

119

Mallott v Wilson [1903] 2 Ch 494 at 502–​503 per Byrne J.

120

ACT s 10; NSW s 10; Qld s 18; Vic s 46; WA s 12.

121

General Investment Pty Ltd v Tyson [1967] Tas SR 96. Cf Custodial Ltd v Greig [2005] 2 Qd R 115; Raftland Pty Ltd v Commissioner of Taxation (2006) 227 ALR 598 at [67] per Kiefel J.

122

ACT s 8; NSW s 8; NT s 12; Qld s 14; SA s 15; Tas s 14; Vic s 44; WA s 9. See Commonwealth v Colonial Combing Spinning and Weaving Co Ltd (1922) 31 CLR 421 at 470 per Higgins J.

123

Cf Trusts of Land and Appointment of Trustees Act 1996 (UK) which permits beneficiaries to give trustees a written direction to retire from the trust and/​or a written direction to appoint by writing to the person(s) specified in the written direction as trustees (s 19(2)), although any such direction can only be given if there is no person nominated in the trust instrument for the purpose of appointing trustees and the beneficiaries are all sui juris and absolutely entitled to the trust property (s 19(1)).

124

See Will of Phillips (1879) 5 VLR (E) 274.

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Equity and Trusts in Australia

REMOVAL OF TRUSTEES [21.100] There is an essential overlap between questions of trustees’ appointment and

removal. Proceedings to appoint new trustees are often concurrent with efforts to remove a trustee. The same three jurisdictional stages apply to the removal as apply to the appointment of trustees: • trustees may be removed under a power in the trust instrument, which is strictly construed because, inter alia, it interferes with the persons appointed by the settlor;125 • the statutory provisions as to replacement of trustees may be applied to remove a trustee;126 or • the court may intervene to remove trustees, pursuant to its inherent jurisdiction to administer trusts, if satisfied that this is necessary for the welfare of the beneficiaries. In the absence of some reason for their non-​joinder, the general rule is that all persons interested in a trust estate should be joined as parties to, or at the very least be given notice of, proceedings to remove or appoint a trustee.127 Delay can prove a bar to action to remove a trustee, although it is usually a factor to be kept in mind rather than decisive in itself.128 Ordinarily a court will not exercise its power to remove a trustee at an interlocutory stage where the nature of the case is one that involves competing evidence.129 Removal by the court —​welfare of the beneficiaries [21.105]  The court’s inherent power to remove a trustee is “exercised cautiously” and only in

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“exceptional circumstances”,130 as it interferes with the identity of the trustee(s) as prescribed by the settlor. The welfare of the beneficiaries is the dominant consideration,131 and the court will ordinarily interfere in this regard only to the extent necessary to secure that welfare.132 The nature of the jurisdiction appears from the following High Court statement:133 The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trust and a faithful and sound exercise of the powers conferred upon the trustee. In deciding 125

Werner v Boehm (1890) 16 VLR 73; Equitable Group Ltd v Pendal Nominees Pty Ltd (1984) 3 ACLC 546; Khyentse v Hope [2007] 1 NZLR 645 at [41]–​[47] (CA).

126

ACT s 70; NSW s 70; NT s 27; Qld s 80; SA s 36; Tas s 32; Vic s 48; WA s 77.

127

Allinson v Permanent Trustee Australia Ltd (unreported, SC(NSW), Powell J, 8 September 1988), at 29.

128

Porteous v Rinehart (1998) 19 WAR 495 at 516–​517 per White J. As to delay in equity generally see [30.10]–​[30.80].

129

See, for example, Kain v Hutton [2001] BCL 304 (requiring an undertaking by trustees of certain actions not being pursued without six weeks’ notice to the plaintiffs’ solicitors) [affd Kain v Hutton [2002] BCL 813].

130

Porteous v Rinehart (1998) 19 WAR 495 at 507, 518 per White J. See also Quinton v Proctor [1998] 4 VR 469 at 475 per Kellam J; Coote v Warren [2013] NZHC 3210 at [12] per Panckhurst J (noting that the removal of trustees “is not to be undertaken lightly”).

131

Letterstedt v Broers (1884) 9 App Cas 371 at 387 per Lord Blackburn.

132

See, for example, Powell v Powell [2014] NZHC 476 (where great animosity existed between co-​trustees, who were two sons of the deceased settlor, Dunningham J removed one but allowed the other remain but to be joined by an independent trustee, thereby ensuring an even hand at the same time as giving effect to the settlor’s intention that a family member have some responsibility in managing and growing the trust assets).

133

Miller v Cameron (1936) 54 CLR 572 at 580–​581 per Dixon J. See also Re Wrightson [1908] 1 Ch 789 at 803 per Warrington J; Guazzini v Pateson (1918) 18 SR (NSW) 275 at 293 per Street CJ; Pughe v Brodribb [1921] St R Qd 163 at 170–​171 per Chubb J; Hunter v Hunter [1938] NZLR 520 at 529–​531 per Myers CJ, at 552–​553 per Callan J; Re Whitehouse [1982] Qd R 196 at 205–​207 per Macrossan J; Re Roberts (1983) 70 FLR 158 at 161–​162 per O’Leary J; Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545 at 559–​561 per Bollen J; George v McDonald (1992) 5 BPR 11,669 at 11,671–​11,672 per Waddell CJ in Eq.

630 [21.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Trustees  Chapter  21

to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorise the court to act, the delicate question of whether it should act and proceed to remove the trustee is one upon which the decision of a primary judge is entitled to especial weight.

Because the dominant consideration is the welfare of the beneficiaries, the exercise of the discretion to remove a trustee is not penal in character.134

Breaches of trust

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[21.110]  The welfare of the beneficiaries may be discrete from any issue of breach of trust.

This is because a trustee can breach trust without threatening the beneficiaries’ welfare. Accordingly, a breach of trust does not necessarily lead to an order to remove a trustee.135 A trustee will not be removed merely for making a mistake or taking into account irrelevant considerations if this was bona fide and the court is satisfied that there is no reason in future why the trustee should not comply with her or his duties.136 But the court will remove a trustee for a breach amounting to a negation of the trust, or conduct likely to jeopardise the security of trust property,137 or there is evidence that the trust will not be properly executed in the interests of the beneficiaries.138 For example, in Craven-​ Sands v Koch,139 the evidence —​the trustees had written blank cheques, lost records, had a confrontational approach and tolerated inordinate delay —​had “a cumulative effect on the disintegration of the trustees’ capacity to carry out their duties”, leading Bergin J to order their removal. In Waterhouse v Waterhouse,140 Windeyer J ordered the removal of a trustee who had, inter alia, failed to acknowledge the existence of the trust, produce the trust deeds and other trust records for inspection over a long period, furnish accounts and carry out certain provisions of the trust deed.

Friction and hostility [21.115]  At the same time, absence of a breach of trust provides no ground to resist removal

if that course aligns with the beneficiaries’ welfare. Though mere friction between the trustees, or between the trustees and the beneficiaries, does not usually offend the principle of welfare of the beneficiaries,141 outright hostility may justify removal. The court will remove trustee(s) 134

Craven-​Sands v Koch (2000) 34 ACSR 341 at 369 per Bergin J; Elovalis v Elovalis [2008] WASCA 141 at [40] per Martin CJ.

135

Princess Ann of Hesse v Field [1963] NSWR 998 at 1019 per Jacobs J; Re Roberts (1983) 70 FLR 158 at 163 per O’Leary J; Whitton v ACN 003 266 886 Pty Ltd (1996) 42 NSWLR 123 at 158–​159 per Bryson J.

136

Quinton v Proctor [1998] 4 VR 469 at 475 per Kellam J (who refused to remove a trustee in these circumstances even though the trustee defended the proceedings against the other co-​trustees as plaintiffs).

137

Attorney-​General (NSW) v Elliott (1868) 6 SCR (NSW) Eq 85; Swanson v Dungey (1892) 25 SALR 87; Symes v Weedow (1893) 14 ALT 197; Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545; Williams v Williams [2005] 1 Qd R 105; Baldwin v Greenland [2007] 1 Qd R 117; Bailey v Bailey [2009] NSWSC 1018.

138

Attorney-​General (NSW) v Elliott (1868) 6 SCR (NSW) Eq 85; Falkingham v Harbison (1899) 21 ALT 116; Re Wrightson [1908] 1 Ch 789 at 803 per Warrington J; Hobkirk v Ritchie (1934) 29 Tas LR 14; Re Whitehouse [1982] Qd R 196; Longworth v Allen [2005] SASC 469 at [72]–​[74] per Anderson J; Mansour v Mansour (2009) 24 VR 498.

139

Craven-​Sands v Koch (2000) 34 ACSR 341 at 369.

140

Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 500–​501.

141

Letterstedt v Broers (1884) 9 App Cas 371 at 389 per Lord Blackburn; Guazzini v Pateson (1918) 18 SR (NSW) 275 at 294 per Street CJ; Hunter v Hunter [1938] NZLR 520 at 530–​531 per Myers CJ; Gibbs v Gibbs [2004] WASC 132 at [10]–​[12] per Sanderson M [affd Gibbs v Gibbs [2006] WASCA 224]; National Westminster Bank plc v Lucas [2014] WTLR 637 at [83]–​[93] per Sales J.

[21.115]  631 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

if the friction is so obstructive to the administration of the trust that there is no prospect of improvement in the future.142 In Bratovic v SBM Argentinian Bar and Grill Pty Ltd,143 for example, a corporate trustee, whose directors could not “function in a business-​like and constructive manner” due to disputes inter se, was removed as trustee, Lunn M remarking that it was highly unlikely that the trustee could in the future “satisfactorily and faithfully perform its obligations … for the benefit of all of its beneficiaries”. In Titterton v Oates,144 a trustee who had administered the trust honestly was removed because, inter alia, some beneficiaries harboured considerable bitterness and suspicion towards her, generated by a history of family disputes and distrust. Yet courts are wary to remove a trustee where the friction is not the trustee’s fault;145 otherwise beneficiaries could be placed in a falsely powerful position of being able to raise a dispute with the trustee and then apply for her or his removal. When trustees are removed for friction, the replacement appointee will not infrequently be an independent trustee (typically the Public Trustee or a trustee company), whether or not in tandem with an existing trustee. Even though this may come at a cost to the trust estate, the court may reason that this cost may avoid an even greater cost should dissent and consequent litigation persist. This was, for instance, the order in Titterton v Oates. At the same time, in circumstances where the cost of an independent trustee is out of all proportion with trust assets, if someone other than the removed trustee steps forward the court may appoint that person, even if it has some reservations relating to the appointment.146

Potential conflict of interest

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[21.120]  That a trustee is in a position of potential conflict of interest and duty does not by

itself justify her or his removal,147 though it may present strong grounds for it.148 For example, in Hunter v Hunter,149 Myers CJ ordered removal where the evidence150 showed that: there was a conflict between interest and duty; the trustees had failed to recognise this conflict and take steps to ensure that their interest did not prevail against their duty; the trustees had disregarded the interests of infant beneficiaries; and a state of hostility existed between the trustees and the immediate possessor of the trust estate which was calculated to work against the true interests of the estate.

142

Hunter v Hunter [1938] NZLR 520 at 536–​537 per Myers CJ, at 553–​554 per Callan J; Re Consiglio’s Settlement (1973) 36 DLR (3d) 658 at 660 per Kelly JA; Re Whitehouse [1982] Qd R 196 at 206–​207 per Macrossan J; Trojan v Nest Egg Nominees Pty Ltd [2004] SASC 182 at [42], [43] per Nyland J; Longworth v Allen [2005] SASC 469 at [74] per Anderson J; Wales v Wales (2013) 10 ASTLR 41.

143

Bratovic v SBM Argentinian Bar and Grill Pty Ltd (2005) 242 LSJS 445 at [25]. See also Trojan v Nest Egg Nominees Pty Ltd [2004] SASC 182 at [42], [43] per Nyland J (where friction between the trustees led to their removal in favour of an independent trustee).

144

Titterton v Oates (1998) 143 FLR 467 at 480–​482 per Crispin J.

145

Cf where it is the trustee’s actions that created the dispute that generated the litigation: Wendt v Orr [2004] WASC 28 at [255] per Commissioner Johnson QC [revd but without casting doubt on this statement of law: Orr v Wendt [2005] WASCA 199]; Longworth v Allen [2005] SASC 469 at [72]–​[74] per Anderson J.

146

See, for example, Ashrafinia v Ashrafinia (No 4) [2014] NSWSC 676.

147

Gowans v Watkins (unreported, SC(Vic), Teague J, 21 February 1996), at 12 (before a court will remove a trustee for conflict of duty, it must be satisfied that such conflict has caused, or is likely to cause, “mischief” at a reasonably high level of seriousness); Porteous v Rinehart (1998) 19 WAR 495 at 514 per White J.

148

Fysh v Coote [2000] VSCA 150 at [21] per Ormiston JA; Miorada v Miorada [2005] WASC 105 at [194], [195] per Commissioner McKerracher QC.

149

Hunter v Hunter [1938] NZLR 520 at 530.

150

In this case, a number of difficulties arose in the administration of the trust, including mismanagement of a sheep station, money paid out of property let at a low rent and excessive charges by agents.

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Trustees  Chapter  21

Courts have also removed trustees where:  a trustee-​beneficiary mortgaged his beneficial interest under the trust;151 the trustee took an assignment of a security given by persons owing rent to the trust estate;152 and one of the trustees acted as manager of the business, the subject of the trust, at a salary.153 But a court is unlikely to remove a trustee for this reason where it is evident that the settlor (or testator) contemplated the conflict of interest inherent in appointing that person as trustee, unless allowing that person to continue as trustee endangers the security of the trust property.154 As to the latter it has been observed that “[i]‌t is the inability to act independently and to deal adequately with conflicts and potential conflicts which leads to the need to remove [a trustee]”.155

Incapacity of trustee [21.125]  Courts have removed trustees by reason of incapacity, such as where a trustee was

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in financial distress,156 had disappeared157 or was absent for a prolonged period.158 In Hackett v Hackett,159 a trustee was removed for drunkenness combined with financial difficulties and a general disregard of the interests of the trust. Whether bankruptcy per se justifies removal is unsettled; in Miller v Cameron,160 Latham CJ said that “a trustee who becomes bankrupt is removed almost as of course”, but other judges have been more circumspect, reserving this outcome for where the bankruptcy impinges on fitness to continue as trustee.161 Whether the liquidation of a corporate trustee requires its removal as trustee is likewise unsettled; some judges suggest that it does,162 whereas others prefer to probe the circumstances of the relevant case before making such an order.163 151

Hobkirk v Ritchie (1934) 29 Tas LR 14.

152

Officer v Haynes (1877) 3 VLR (E) 115.

153

Nissen v Grunden (1912) 14 CLR 297.

154

Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 83 per Ashley J; Porteous v Rinehart (1998) 19 WAR 495 at 518 per White J; Titterton v Oates (1998) 143 FLR 467 at 479–​482 per Crispin J; Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 486, 500–​501 per Windeyer J.

155

Fysh v Coote [2000] VSCA 150 at [25] per Ormiston JA (in the context of the removal of an executor, but the same principles apply to the removal of trustees).

156

See, for example, Re Michael Malouf [1934] QSR 82; Miller v Cameron (1936) 54 CLR 572.

157

See, for example, Re Streeter (1905) 11 ALR 99; Re Rogers [1921] NZLR 245; Re Graham (1938) 55 WN (NSW) 168.

158

See, for example, York v Fraser (1894) 11 WN (NSW) 12 (where the court reduced the number of trustees from three to two in circumstances where the third trustee had long been absent from the colony and there remained little for the trustees to do).

159

Hackett v Hackett [1922] NZLR 242.

160

Miller v Cameron (1936) 54 CLR 572 at 575.

161

Re Matheson (1994) 121 ALR 605 at 614 per Spender J; Brien v Graspas (2004) 207 ALR 275 at [107] per McInnis FM. Cf Chambers v Jones (1902) 2 SR (NSW) Eq 177 at 182 per Simpson CJ in Eq; Andrew Garrett Wines Resorts Pty Ltd v National Australia Bank Ltd [2006] SASC 381 at [21] per Anderson J; Dawson v Paul [2014] 2 NZLR 689 at [22] per Brown J.

162

See, for example, Dreiberg v Bettles [2007] NSWSC 1204 at [4]‌per White J (“It is undesirable for an insolvent company in liquidation to remain as trustee”); Austec Wagga Wagga Pty Ltd v Rarebreed Wagga Pty Ltd [2012] NSWSC 343 at [90]–​[98] per Stevenson J; Commissioner of Inland Revenue v Newmarket Trustees Ltd [2012] 3 NZLR 207 at [75] per White J (“an insolvent trustee company should as a general rule almost invariably be put into liquidation”).

163

See, for example, Wells v Wily (2004) 183 FLR 284 (where Austin J concluded that “the court will not replace a corporate trustee in insolvent liquidation as a matter of course, but rather will approach the question with an open mind, and assess where the balance of interest lies, in the exercise its discretion” (at [31]), having noted (at [26]) that although there comes a stage in the liquidator’s administration that makes it inevitably necessary to replace a corporate trustee, where the liquidation has just commenced, and particularly where it seems likely that it will be necessary to realise the trust assets in order to pay trust creditors, there may be good reason to allow the liquidator to administer the trust and the liquidation, for a time, concurrently; on the facts his Honour found no good practical reason to replace the corporate trustee at that time because to do so would delay the efficient administration of the trust’s affairs, contrary to the interests of its creditors, and also to the legitimate interests of the beneficiaries in realisation and distribution of the fund: at [38]).

[21.125]  633 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

Costs of a proceeding for removal [21.130]  As a general rule, a trustee who is removed is ordered to pay the costs of the applica-

tion for removal,164 particularly if the removal is due to misconduct.165 The court nonetheless retains a discretion as to the award of costs, and may allow costs out of the trust estate to a trustee whose conduct has been honest albeit mistaken,166 or may require that trustee to bear her or his own costs where there have been breaches of trust but other mitigating circumstances explain (if only partly) her or his conduct.167 A person interested in the trust fund who properly institutes proceedings for removal receives costs from the fund,168 but is not in the usual case allowed costs in the event that the proceedings prove unsuccessful.169

DEATH OF TRUSTEE

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[21.135]  The trustee legislation allows a power or trust given to or vested in two or more

trustees jointly to be exercised or performed by the survivor(s) of them.170 Yet title to trust property only passes to surviving trustees where the trust property was originally vested in them as joint tenants (in which case a right of survivorship applies). If the trustees hold as tenants-​in-​common, the deceased trustee’s share passes to her or his personal representatives,171 upon whom the office of trustee does not devolve because no person can legally act as trustee unless validly appointed by the settlor, under statute or by the court.172 This difficulty can be avoided by ensuring that trustees hold trust property as joint tenants173 or by express provision in the trust instrument that the office and powers of a deceased trustee vest in her or his personal representatives. In Tasmania, Victoria and Western Australia statute provides that until the appointment of new trustees, unless a contrary intention is expressed in the trust instrument,174 the personal representatives of the last surviving or continuing trustee may exercise or perform any power or trust given to the last surviving or continuing trustee.175 The personal representatives of a sole surviving trustee may be ousted by an appointment of new trustees by the appointor. 164

Attorney-​General v Murdoch (1856) 2 K & J 571 at 573; 69 ER 910 at 911 per Page Wood VC. See, for example, Pope v Pope [2001] SASC 26 at [26], [42] per Bleby J, with whom Doyle CJ and Duggan J concurred; Longworth v Allen [2005] SASC 469 at [75]–​[90] per Anderson J; Wales v Wales (No 2) (2014) 12 ASTLR 98.

165

Swanson v Dungey (1892) 25 SALR 87; Miller v Cameron (1936) 54 CLR 572 at 579 per Latham CJ; Hunter v Hunter [1938] NZLR 520 at 538–​539 per Myers CJ.

166

Guazzini v Pateson (1918) 18 SR (NSW) 275 at 295 per Street CJ; Miller v Cameron (1936) 54 CLR 572 at 578 per Latham CJ.

167

See, for example, Titterton v Oates (1998) 143 FLR 467 at 484 per Crispin J (where the trustee who was removed had committed several breaches of trust, involving an element of wilfulness, which could, however, be explained albeit only partly, by episodes of a longstanding depressive illness).

168

Perkins v Williams (1905) 22 WN (NSW) 107; Titterton v Oates (1998) 143 FLR 467 at 483–​484 per Crispin J.

169

See Dal Pont, Law of Costs (4th ed, LexisNexis Butterworths, 2018), [10.15], [10.16].

170

ACT s 57(1); NSW s 57(1); NT s 23(1); Qld s 16(1); SA s 32(1); Tas s 25(1); Vic s 22(1); WA s 45(1). The proposition cited in the text reflects the general law position: Re Bacon [1907] 1 Ch 475. The Queensland provision applies whether or not a contrary intention is expressed in the trust instrument: Qld s 10.

171

On the law of joint tenancy and tenancy-​in-​common, see generally Bradbrook et al, Ch 12.

172

Re Crunden and Meux’s Contract [1909] 1 Ch 690 at 695 per Parker J; Ballenden v Bryant [2012] NSWSC 1471 at [10] per Pembroke J.

173

Cf the trustee companies legislation in New South Wales, Queensland and Western Australia, which provides that where property is vested jointly in a trustee company and another person in any fiduciary capacity or as mortgagees, they are deemed to be joint tenants unless otherwise expressly provided: NSW s 12; Qld s 25; WA s 39.

174

Conveyancing and Law of Property Act 1884 (Tas), s 34(2); Trustee Act 1958 (Vic), s 2(3); Trustees Act 1962 (WA), s 5(2), 5(3).

175

Conveyancing and Law of Property Act 1884 (Tas), s 34(1); Trustee Act 1958 (Vic), s 22(2); Trustees Act 1962 (WA), s 45(2). As to the meaning of the expression “the personal representatives of the last surviving or continuing trustee”, see [21.60].

634 [21.130] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Trustees  Chapter  21

The Queensland trustee legislation deals with a vacancy in trusteeship caused by the death of the last surviving and continuing trustee by vesting the trust property in the Public Trustee pending the appointment of a new trustee,176 irrespective of contrary provision in the trust instrument.177 In the remaining jurisdictions, which lack a statutory direction dealing with the vacancy in trusteeship, trust deeds should include a clause equivalent to the statutory provision in Tasmania, Victoria and Western Australia. Lacking such a clause, the persons upon whom the trust assets devolve hold the assets upon a bare trust for the new trustee(s).178

ORDERS VESTING TRUST PROPERTY IN NEW TRUSTEES [21.140]  The trustee legislation empowers the court to make orders vesting trust property in

new trustees (“vesting orders”).179 These ensure a trust can achieve the purpose for which it was created and that those persons entitled to an interest pursuant to, or as a result of, a trust can receive the benefit or interest to which they are so entitled.180 Circumstances in which a vesting order can be made include where: • the court appoints or has appointed a new trustee; • the trustee is under a disability, out of the jurisdiction, or cannot be found; • the identity of the survivor of two or more trustees jointly entitled to or possessed of any property is uncertain; • whether the last trustee known to be possessed of any property is living or dead is uncertain; • there is no legal representative, or uncertainty as to the existence, of a trustee who was entitled to or possessed with any property; or

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• any person neglects or refuses to convey any property in accordance with a court order. Vesting orders can also ensue in cases other than those connected with the transmission of trusteeship. For example, they may be made in respect of property affected by contingent rights,181 incapable mortgagees182 and property the subject of an order for specific performance.183 In most jurisdictions vesting orders may be made to effect a sale or mortgage of trust property.184 And in Queensland, Victoria and Western Australia the court may make a vesting order effecting a sale of trust property if this is required for the maintenance or advancement of an infant.185

176

Qld s 16(2). See also s 16(3)–​16(8).

177

Qld s 10.

178

Robson v Flight (1865) 4 De GJ & S 608; 46 ER 1054; Ballenden v Bryant [2012] NSWSC 1471 at [11] per Pembroke J.

179

ACT s 71; NSW s 71; NT ss 28, 37; Qld s 82; SA ss 37, 41; Tas ss 33, 34; Vic s 51; WA s 78. In the Northern Territory and South Australia, following the English precedent (Trustee Act 1925 (UK), ss 44, 51), the court’s power to make vesting orders is limited to property in the nature of land, stocks and choses in action.

180

Re Purkiss [1999] 3 VR 223 at 228 per Warren J.

181

ACT s 72; NSW s 72; NT s 29; Qld s 84; SA s 38; Tas s 35; Vic s 53; WA s 80. See Re McCready (2004) 12 BPR 22,327.

182

ACT s 74; NSW s 74; NT s 30; Qld s 85; Trustee Act 1893 (SA), ss 30, 38; Tas s 37; Vic s 54; WA s 81.

183

ACT s 77; NSW s 77; NT s 34; Qld s 89; Trustee Act 1893 (SA), s 34; Tas s 39; Vic s 57; WA s 84. These provisions do not operate to allow land to be vested in the purchasers as trustees for themselves: Brice v Mackay [1983] 2 Qd R 543 at 546 per Demack J. As to specific performance, see Ch 33.

184

ACT s 76; NSW s 76; Qld s 88; Trustee Act 1893 (SA), s 32; Tas s 38; Vic s 56; WA s 83. See Rizos v Rizos [1970] VR 150; Pennie v Pennie [2010] NSWSC 1070.

185

Qld s 87; Vic s 55; WA s 82. See Re Gower’s Settlement [1934] Ch 365; Re Newton (1936) 53 WN (NSW) 117; Re Heyworth’s Settlement [1956] 2 All ER 21; Re White [1959] VR 661 at 665 per Smith J; Rubery v Rubery [2003] WASC 164.

[21.140]  635 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

[21.145]  The trustee legislation prescribes that the vesting order is given the same effect as

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the document in the absence of which it is desired to make good.186 It adds that, in all cases where a vesting order can be made, the court may, if it is more convenient, appoint a person to convey the property or release any contingent right, and a conveyance or release by that person in conformity with the order has the same effect as an order under the appropriate provision.187 In all jurisdictions except Queensland vesting orders consequential upon the appointment or retirement of a trustee are distinguished from vesting orders in other cases. As to the former, the vesting order has the same effect as if the persons who before the appointment or retirement had duly executed all proper conveyances of the property as the court directs.188 In other cases the legislation states that the vesting order has the same effect as if the trustee had been an ascertained and existing person of full capacity and had executed a conveyance or release to the effect intended by the order.189 The Queensland legislation declares that a vesting order vests the property to which it relates in the persons named therein as trustees without any conveyance, transfer or assignment.190

186

ACT ss 78(1), 78(2); NSW ss 78(1), 78(2); NT s 35; SA s 39; Tas s 40; Vic ss 58(1), 58(2); WA ss 85(1), 85(2).

187

ACT s 79; NSW s 79; NT s 36; Qld s 92; SA s 40; Tas s 41; Vic s 60; WA s 87. See Borough of Burwood v Freehill (1906) 23 WN (NSW) 243; Re Jenkin [1932] VLR 314; Re Fraser [1941] QWN 18; MacDonald v MacDonald (No 2) [1956] QWN 25; Gardiner v Fitzgerald [1962] Qd R 29.

188

ACT s 78(1); NSW s 78(1); NT s 35; SA s 39; Tas s 40; Vic s 58(1); WA s 85(1).

189

ACT s 78(2); NSW s 78(2); NT s 35; SA s 39; Tas s 40; Vic s 58(2); WA s 85(2).

190

Qld s 90.

636 [21.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Chapter 22

Duties Of Trustees NATURE OF DUTIES [22.05]  Upon accepting office, a trustee becomes subject to the duties and acquires the pow-

ers and rights that attach to that office. Duties are imperative. They compel or prohibit a trustee from acting in a certain way. Powers, on the other hand, are facultative. They enable a trustee to act in a certain way, but leave her or him with discretion as to whether and how to act. Trustees’ rights are prescribed principally by the general law but can, in most cases, be excluded by contrary provision in the trust instrument. Duties of trustees are the subject of this chapter, whereas trustees’ powers and rights are discussed in Ch 23. Initial duties

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[22.10]  Trustees must familiarise themselves with the terms of the trust1 and ensure that the

trust property is brought under their control and vested in them.2 As trustees’ duties commence from the time of appointment, not from the moment of vesting, appointed trustees may be accountable for any loss arising from a failure to vest the property promptly. Another facet of the duty to get in the trust property requires a trustee to take proceedings against a co-​trustee, a former trustee or a stranger who is liable to redress a breach of trust (see [24.10]) or otherwise owes a present liability to the trust, unless to do so would be futile due to the financial position of the person liable, the existence of competing claims, or otherwise.3 A trustee must also ensure that the documents of title to the trust property are stored safely and safeguarded from unauthorised access or use.4 Fundamental duty to obey the terms of the trust [22.15] A trustee’s plainest and overriding duty is to obey the terms of the trust. This is

because a trustee is duty-​bound to give effect to the settlor’s intention as expressed in the

1

Harvey v Olliver (1887) 57 LT 239 at 241 per Kay J; Hallows v Lloyd (1888) 39 Ch D 686 at 691 per Kekewich J; Arakella Pty Ltd v Paton (No 2) (2004) 49 ACSR 706 at [38] per Austin J (in the case of a corporate trustee, this duty is to be discharged on its behalf by the directors).

2

Field v Field [1894] 1 Ch 425 at 429 per Kekewich J; Dawson v Dawson [1945] VLR 99 at 103 per O’Bryan J; CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174 at [36] (FC).

3

Longhurst v Waite [1920] SALR 407 at 428 per Poole J; National Trustees Executors and Agency Co of Australia Ltd v Dwyer (1940) 63 CLR 1 at 22 per Starke J; Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149 at 164 per Starke, Dixon and Williams JJ; Re Atkinson (deceased) [1971] VR 612 at 616 per Gillard J; Young v Murphy [1996] 1 VR 279 at 282 per Brooking J.

4

Field v Field [1894] 1 Ch 425 at 429 per Kekewich J; Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 at 283–​ 284 per McPherson JA. This does not preclude a trustee lodging title documents with a solicitor for safekeeping or, where this is necessary for the transacting of trust business, provided that at all times the trustee is able to access those documents. The trustee legislation in most jurisdictions allows a trustee to deposit any documents held as trustee relating to the trust or trust property with any financial institution or with any incorporated company whose business it is to undertake the safe custody of documents: ACT s 50; NSW s 50; Qld s 49; Vic s 25; WA s 48.

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Equity and Trusts in Australia

trust instrument, irrespective of how seemingly insignificant its terms may appear. The duty of obedience qualifies virtually every other duty of a trustee. The trust instrument is the trustee’s “charter”, by which he or she must constantly be guided. Failure to fulfil a duty prima facie renders the trustee liable for breach of trust. However, a trustee is not bound to carry out the terms of the trust instrument if: • directed by the beneficiaries (being all of full age and capacity, absolutely entitled and unanimous) to this effect;5 • an illegality will occur as a result, whether because the terms are illegal or because carrying them out will involve an illegal act; • statute or a court order warrants or compels this departure; or • the deviation is sanctioned by the court pursuant to its inherent jurisdiction or statutory provisions (see [25.25]–​[25.80]). Standard of care [22.20]  The law requires a trustee to exercise her or his duties and powers to the (minimum)

standard of an ordinary prudent business person. This represents the equitable counterpart of the common law reasonable person.6 In the classic words of Jessel MR in Re Speight:7

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[A]‌trustee ought to conduct the business of the trust in the same manner that an ordinary prudent man of business would conduct his own, and that beyond that there is no liability or obligation on the trustee. In other words, a trustee is not bound because he is a trustee to conduct business in other than the ordinary and usual way in which similar business is conducted by mankind in transactions of their own. It never could be reasonable to make a trustee adopt further and better precautions than an ordinary prudent man of business would adopt, or to conduct the business in any other way. If it were otherwise, no one would be a trustee at all.

What is required of an ordinary prudent business person depends on the facts of each case, the trustee’s conduct being measured against the conduct expected of a person similarly positioned. [22.25]  Professional trustees, such as trustee companies, are subject to a higher standard of

care than other (non-​professional or unpaid) trustees. An English judge explained the reason for this as follows:8 A trust corporation holds itself out in its advertising literature as being above ordinary mortals. With specialist staff of trained trust officers and managers, with ready access to financial

5

Re Dumbel (1802) 6 Ves 617; 31 ER 1223; Wilkinson v Parry (1828) 4 Russ 272; 38 ER 808; Griffiths v Porter (1858) 25 Beav 236; 53 ER 627; Wharton v Masterman [1895] AC 186; Plimsoll v Drake (1995) 4 Tas R 334.

6

Lord Nicholls, “Trustees and Their Broader Community: Where Duty, Morality and Ethics Converge” (1996) 70 ALJ 205 at 210. A trustee owes no common law duty of care to protect a beneficiary from economic loss affecting her or his beneficial interest: Wickstead v Browne (1992) 30 NSWLR 1 at 19 per Handley and Cripps JJA.

7

Re Speight (1883) 22 Ch D 727 at 739–​740 [affd Speight v Gaunt (1883) 9 App Cas 1 at 19 per Lord Blackburn]. See also Re Whiteley (1886) 33 Ch D 347 at 350 per Cotton LJ, at 355 per Lindley LJ; Learoyd v Whiteley (1887) 12 App Cas 727 at 731–​732 per Lord Halsbury LC, at 733–​734 per Lord Watson; Austin v Austin (1906) 3 CLR 516 at 525 per Griffith CJ; Thornley v Boyd (1925) 36 CLR 526 at 536 per Knox CJ; Re Bowman (deceased) [1955] SASR 98 at 106–​107 per Napier CJ; Cowan v Scargill [1985] Ch 270 at 289 per Megarry VC; Nestle v National Westminster Bank plc [1993] 1 WLR 1260 at 1267–​1268 per Dillon LJ; Government Employees Superannuation Board v Martin (1997) 19 WAR 224 at 273 per Ipp J; Re Mulligan (deceased) [1998] 1 NZLR 481 at 500 per Panckhurst J. The general law standard of care has been codified by statute with respect to the investment of trust funds: see [22.190].

8

Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515 at 534 per Brightman J.

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Duties of Trustees  Chapter  22

information and professional advice, dealing with and solving trust problems day after day, the trust corporation holds itself out, and rightly, as capable of providing an expertise which it would be unrealistic to expect and unjust to demand from the ordinary prudent man or woman who accepts, probably unpaid and sometimes reluctantly from a sense of family duty, the burdens of trusteeship.

Dicta in Australian courts support the above statement.9 Moreover, the trustee legislation locates the standard of care required of a professional trustee in the investment of trust funds as that which a prudent person engaged in that profession would exercise in managing others’ affairs: see [22.190]. The English parliament has gone further, prescribing that in determining the requisite care and skill required of a trustee, reference may be made “to any special knowledge or experience that he has or holds himself out as having” and “if he acts as trustee in the course of a business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession”, at least in the context of specified trustee responsibilities.10 But any higher standard should be confined to where the conduct in issue relates to an area in which the trustee professed or has expertise.11

DUTY TO ACCOUNT [22.30] “[T]‌he first and primary duty of every … trustee having money in his hands to be

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received and to be paid is, that an account of his receipts and payments should be kept, to be produced to those interested in the account when it is properly demanded”.12 The duty to account has been described as “a central part of a trustee’s duty”,13 being a necessary incident of the trustee’s personal obligation to hold and deal with trust property for the beneficiaries’ benefit.14 The account must be timely,15 faithful, accurate16 and usually supported by 9

Australian Securities Commission v AS Nominees Ltd (1995) 133 ALR 1 at 18–​19 per Finn J; Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 693 per Rolfe J; Re Investa Properties Ltd (2001) 187 ALR 462 at 472 per Barrett J; Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (recs and mgrs apptd) (in liq) (controllers appt) (No 3) [2013] FCA 1342 at [536]–​[543] per Murphy J; Australian Securities and Investments Commission v Drake (No 2) (2016) 340 ALR 75 at [272]–​[276] per Edelman J.

10

Trustee Act 2000 (UK), s 1(1) (the responsibilities in question being stated in Sch 1, namely in respect of: investment; acquisition of land; the appointment of agents; nominees and custodians; the compounding of liabilities; insuring of trust property; and reversionary interests, valuations and audit).

11

Jones v AMP Perpetual Trustee Company NZ Ltd [1994] 1 NZLR 690 at 707–​708 per Thomas J.

12

Wroe v Seed (1863) 4 Giff 425 at 429; 66 ER 773 at 774–​775 per Stuart VC. See also Dagle v Dagle Estate (1990) 70 DLR (4th) 201 at 223–​224 per MacDonald CJTD; Waterhouse v Waterhouse (1998) 46 NSWLR 449 at 494 per Windeyer J; Fast v Rockman [2015] VSCA 61 at [49] per the court. Cf the trustee legislation in the following jurisdictions: ACT s 102; NSW s 102; NT 1907 s 8; SA s 84B; Tas s 28.

13

Antill v Mostyn [2010] NSWSC 587 at [13] per Bryson AJ. See also Hancock v Reinhart (2015) 13 ASTLR 1 at [350] per Brereton J (“an essential ingredient of a trustee’s irreducible core obligations”).

14

Re Simersall (1992) 108 ALR 375 at 379–​380 per Gummow J.

15

Strauss v Wykes [1916] VLR 200 at 204 per Madden CJ; Re Craig (1952) 52 SR (NSW) 265 at 267 per Roper J.

16

In practice a trustee will employ an accountant for this purpose. The trustee legislation in most jurisdictions entitles the trustee to have trust accounts audited and the costs borne by the trust: ACT s 51; NSW s 51; Qld s 52; Vic s 27; WA s 51. In South Australia trustees must keep records relating to the administration of the trust (which are listed in Trustee Regulations 2011 (SA), reg 5) and, at the request of the Public Trustee, another trustee of the trust or a beneficiary of the trust, produce those records for inspection (see Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at 494–​495 per Doyle CJ, with whom Perry and Martin JJ concurred): SA s 84B. Under s 84C the Supreme Court may appoint an inspector to investigate the administration of any trust either on its own motion, or on the application of any person whom the court considers has a proper interest in the matter. An inspector so appointed is conferred broad powers to investigate and demand information, and must report her or his findings to the court and the Attorney-​General: ss 84D, 84E. The foregoing operates as a de facto audit process. Section 84C provides an alternative for a beneficiary who alleges possible misconduct against a trustee to pursuing complex and drawn out litigation to obtain information and documents necessary to see whether there is a proper basis for some claim for substantive relief against the trustee: Oxer v Astec Paints Australia Pty Ltd (2005) 240 LSJS 109 at [10] per Lunn M. The

[22.30]  639 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Equity and Trusts in Australia

documentary evidence.17 These accounts monitor the trustee’s performance of her or his duties generally. Comprehensive reporting to, and monitoring by, the beneficiaries serves to fulfil the beneficiary principle and with it reduces the likelihood of trustees being able to perpetuate breaches of trust. The cost of keeping proper accounts —​to engage professional accounting services, where appropriate (see [22.55]) —​is the subject of the trustee’s right of indemnity out of trust property (as to which see [23.120]). The form and extent of accounts and documentation (and, in tandem, the degree and level of professional accounting assistance) required varies according to the size and nature of the trust fund. In each case, the trustees must have ready reference to the terms of the trust together with any court orders that affect its management.18 So far as accounts are concerned, it has been said that:19 [a]‌trustee’s accounts prepared on a proper basis would [show] the assets of the trust at the opening and closing of each accounting period, valuations of assets by the trustees, dates and details of investments and disposals with amounts expended and realised, receipts and expenditures, allocations of receipts and expenditures to income or capital account and payments to beneficiaries.

The maintenance of separate income and capital accounts is necessary to fulfil trustees’ duty of impartiality (as to which see [22.120]–​[22.170]) and to properly manage trust property. Similarly, an account of all cash transactions affecting income and capital is essential to determine the trust’s short-​term liquidity. Accounts must be identified as “trust” accounts, and be the subject of appropriate controls to minimise the risk of misappropriation. Trustees must also keep accurate and timely information regarding the name, age, address and marital status of beneficiaries, and retain a current schedule of trust property.

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[22.35]  The trustee’s duty to account carries with it a corresponding entitlement in the ben-

eficiaries, albeit subject to some limitations, to information regarding the trust property and the management of the trust: see [20.40]–​[20.70].

DUTY TO ADMINISTER THE TRUST PERSONALLY Fettering discretion [22.40]  The duty to administer the trust personally dictates that trustees must not permit oth-

ers —​the settlor, the beneficiaries or someone else —​to dictate to them the manner in which their discretion ought to be exercised unless the trust instrument so requires.20 It also requires phrase “any trust” in s 84C is subject to the restriction that the legislative competence of the South Australian Parliament does not extend to making laws with respect to the administration of trusts having no connection with South Australia. However, no further restriction should be read into the wide words “any trust”, which are apt to apply to trusts administered in South Australia wherever those trusts may have been created and wherever the assets may be: see Estate of Webb (1992) 57 SASR 193 at 195 per King CJ. 17

Christensen v Christensen [1954] QWN 37.

18

For instance, orders conferring on the trustees additional powers (see [25.30]–​[25.55]), and directions of the court (see [23.170]–​[23.185]).

19

Antill v Mostyn [2010] NSWSC 587 at [13] per Bryson AJ. See also Hancock v Reinhart (2015) 13 ASTLR 1 at [353] per Brereton J.

20

Re Brockbank [1948] Ch 206; Wilson v Wilson (1950) 51 SR (NSW) 91; Walker v Willis [1969] VR 778 at 782 per Lush J; Quinton v Proctor [1998] 4 VR 469 at 471 per Kellam J; Breadner v Granville-​Grossman [2001] Ch 523 at 544–​545 per Park J; Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZAR 882 at [36] (CA) (where Asher J noted that the expression of a settlor’s wishes may be taken into account but, unless expressed as a direction, need not constrain the trustees in pursuing what is consistent with the trust).

640 [22.35] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:41:15.

Duties of Trustees  Chapter  22

trustees not to commit themselves in advance as to their future conduct as trustees. So trustees must not bind themselves contractually to exercise a discretion in a prescribed manner, decided by considerations other than their own conscientious judgment at the time, in respect of what is in the best interests of the beneficiaries.21 For example, in Re Stephenson’s Settled Estates22 Street J held that by entering a contract binding them to sell trust property for a fixed price at a specified future date the trustees had breached trust. Beneficiaries, in such a case, can seek an injunction to prevent completion of the relevant transaction, in which case the trustee may be liable to the other contracting party for damages.23 Prima facie the non-​fettering principle appears to outlaw, say, the grant of an option to purchase or lease trust property.24 But judges have not been so unyielding, and have accepted that in some circumstances a limited fetter can reflect the actions of an ordinary prudent business person. As the granting of options to purchase property is part and parcel of ordinary commercial dealings, there is authority that trustees may legitimately grant options to purchase trust property where it is a proper and reasonable method of effecting a prompt sale of the trust property at the best price.25 This is explicitly recognised by the trustee legislation in Queensland and Western Australia, which empowers trustees to grant options to purchase trust property.26 Also, the trustee legislation in the most jurisdictions permits trustees to grant lessees of trust property options to renew their lease,27 reflecting the position at general law.28 It is legitimate, and indeed appropriate to avoid the parties going to court, for a trustee to agree to limit her or his activities for a short time to enable the resolution of a dispute as to whether he or she still holds office, or to undertake not to dispose of trust property pending the resolution of litigation concerning her or his powers to deal with that property.29

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Duty not to delegate and its exceptions [22.45]  The duty not to delegate the exercise of a trustee’s powers, authorities and discretions

arising under the trust, either to a co-​trustee or a third party, is a corollary of the duty to act personally.30 Trusteeship is, after all, a personal office,31 for which trustees are selected to act

21

Re King (1902) 29 VLR 793 at 796 per Holroyd J; Re Stephenson’s Settled Estates (1906) 6 SR (NSW) 420 at 424–​425 per Street J; Osborne v Amalgamated Society of Railway Servants [1909] 1 Ch 163 at 187 per Moulton LJ; Watson’s Bay & South Shore Ferry Co Ltd v Whitfeld (1919) 27 CLR 268 at 277 per Isaacs J.

22

Re Stephenson’s Settled Estates (1906) 6 SR (NSW) 420.

23

Coronation Syndicate v Lilienfeld [1903] TS 489 at 497 (South Africa).

24

Oceanic Steam Navigation Co v Sutherberry (1880) 16 Ch D 236 at 245 per James LJ, at 245–​246 per Lush LJ; Rawcliffe v Johnstone and Morton [1921] NZLR 470 at 473 per Hosking J.

25

Rousset v Antunovich [1963] WAR 52 at 60 per Hale J. See further Swil and Forbes, “Fettering the Fiduciary Discretion by Agreement:  Breach of Duty or Commercial Reality?” (2010) 84 ALJ 32 (endorsing the qualification of the rule to reflect commerciality).

26

Qld s 32(3)(b); WA s 27(3)(b). The Western Australian legislation contains a further provision indemnifying the trustee from breach of trust for the grant of such an option in prescribed circumstances: WA s 28A.

27

ACT s 36(3)(b); NSW s 36(3)(b); Qld s 32(3)(a); SA s 25C(3)(b); WA s 27(3)(a).

28

Meek v Bennie [1940] NZLR 1.

29

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 600 per Finkelstein J.

30

McMillan v McMillan (1891) 17 VLR 33 at 38–​39 per Hodges J; Niak v Macdonald [2001] 3 NZLR 334 at 338 per Paterson J; Ponniah v Palmer [2012] NZCA 490 at [22]–​[25] per Stevens J.

31

Ballenden v Bryant [2012] NSWSC 1471 at [10] per Pembroke J.

[22.45]  641 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

by reason of their personal qualities and skills. Pursuant to the non-​delegation duty, “each individual trustee has a separate responsibility to ensure that the terms of trust are carried out”.32 The law does not, in the main, countenance a “passive” trustee who simply delegates responsibilities to the “active” trustee.33 It follows that one trustee, especially in the case of a professional trustee, must not defer to the wishes of a co-​trustee (or a third party) without good reason.34 Delegation is, however, permitted to the extent to which the trust instrument permits it.35 For example, the trust instrument may provide as follows:

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The trustees shall not be bound in any case to act personally but they shall be at full liberty to act as managers or to employ any contractor, manager, solicitor, accountant, clerk, workman, employee, servant, agent or any other person or persons (including any parent or guardian of any beneficiary and including any beneficiary) to transact all or any business of whatever nature required to be done in the premises including the receipt and payment of money and the trustees shall decide the remuneration to be allowed and paid and all charges and expenses so incurred.

Also, the trustee legislation permits delegation in defined circumstances.36 The delegation permitted in the territories, New South Wales, Tasmania and Victoria is limited to where a trustee is out of State, or is about to depart from it. The Queensland and Western Australian provisions extend to a trustee who may by reason of physical infirmity become temporarily incapable of performing all of the duties as a trustee, and in respect of a trustee who is a member of the armed forces. The South Australian provision is broader again, entitling a trustee to “delegate to any person or persons residing in the State all or any of the powers, authorities and discretions vested in him as trustee either alone or jointly with any other person or persons”.37 The statutory delegation provisions prescribe formalities for the delegate’s appointment, attribute liability to the trustee for the delegate’s acts and defaults (except for Western Australia, where an appointment in good faith and without negligence affords the trustee a defence), and protect third parties dealing with a delegate whose authority, unknown to the third party, has been terminated. Engagement of agents by trustees [22.50]  Unlike delegates, who by definition actually exercise the trustee’s power, discretion

and authority, agents are employed either to inform trustees in making their decisions, or to effect or implement decisions properly taken by the trustees. It is, it has been noted, “for advisers to advise and for trustees to decide”.38 Agents may be appointed where the trust instrument, the general law or statute permits this.

32

Re Mulligan (deceased) [1998] 1 NZLR 481 at 502 per Panckhurst J.

33

Selkirk v McIntyre [2013] 3 NZLR 265 at [44] per Katz J.

34

See, for example, Re Mulligan (deceased) [1998] 1 NZLR 481, discussed at [22.220].

35

Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 at 195 per Hammond J; Re Trusts of Kean Memorial Trust Fund (2003) 86 SASR 449 at [96] per Besanko J.

36

ACT s 64; NSW s 64; NT (1907) s 3; Qld s 56 (applies notwithstanding anything to the contrary in the trust instrument: s 31(1); SA s 17; Tas s 25AA; Vic s 30; WA s 54.

37

This is indicative of the trend of trustee legislation elsewhere (see, for example, Trustee Act 2000 (UK), s 11), and of recommendations by law reform bodies (see British Columbia Law Institute, Report on Statutory Powers of Delegation by Trustees (Report No 11, July 2000) (recommending that statute entitle trustees to delegate to another person the authority to carry out any act or exercise any power or discretion relating to the administration of the trust, where it is reasonable and prudent to do so: recommendation 1(1)); New Zealand Law Commission, Some Problems in the Law of Trusts (No 79, April 2002), pp 2–​3).

38

Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 at 717 per Robert Walker J.

642 [22.50] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

Appointment of agents at general law [22.55]  Like any other person in the conduct of business, trustees may require the assistance

of experts. The general law allows trustees to engage agents to assist in the performance of their duties and powers where this is necessary for practical reasons. As Bowen LJ explained in Re Speight:39 [I]‌n the administration of a trust a trustee cannot do everything himself —​he must to a certain extent make use of the arms, legs, eyes, and hands of other persons, and the limit within which it seems to me he is confined has been described … to be this —​that a trustee may follow the ordinary course of business, provided he runs no needless risk in doing so … In other words, a trustee may not employ an agent where he should do the work himself; but he may employ an agent where … it is in the ordinary course of business to use others, and if he runs no needless risk in doing so.

Therefore, whether an agent ought be engaged depends on whether doing so is consistent with the standard of care expected of the trustee (as to which see [22.20], [22.25]). For example, in Swanson v Emmerton,40 Cussen J found that, having regard to the magnitude and nature of the estate, the nature of the trusts in the will, and the necessity of having properly kept accounts on hand, it was reasonable for the trustees to employ accountants to keep accounts. Care must be exercised in selecting agents suitable41 and competent42 in the area of appointment, and in supervising the work undertaken.43 If the requisite care is taken, the trustee is not liable for the agent’s defaults.44

Appointment of agents under statute

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[22.60]  Excepting the Northern Territory, South Australia and Tasmania, the trustee legisla-

tion allows agents to be appointed.45 It is expressed in wide terms —​albeit not wide enough for the appointment of a delegate46  —​thus making it unnecessary to include a power to appoint agents in the trust instrument. The trustee is not responsible for the default of an agent employed in good faith47 (and, in Queensland and Western Australia, without negligence). In

39

Re Speight (1883) 22 Ch D 727 at 762–​763 [affd Speight v Gaunt (1883) 9 App Cas 1]. See also at 739–​740 per Jessel MR, at 756–​760 per Lindley LJ; Learoyd v Whiteley (1887) 12 App Cas 727 at 731–​732 per Lord Halsbury LC, at 734 per Lord Watson; Macartney v Macartney [1909] VLR 183 at 191–​192 per Hodges J; Estate of Purdon (1935) 53 WN (NSW) 148; Jones v AMP Perpetual Trustee Company NZ Ltd [1994] 1 NZLR 690 at 704–​705 per Thomas J.

40

Swanson v Emmerton [1909] VLR 387 at 390–​391.

41

An agent who has a (potential) conflict of interest (such as a lawyer who owes duties to another client) is not a suitable agent: Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 694 per Rolfe J.

42

Fry v Tapson (1884) 28 Ch D 268 at 280 per Kay J.

43

Graham v Gibson (1882) 8 VLR (Eq) 43; Guazzini v Pateson (1918) 18 SR (NSW) 275; Re Lucking’s Will Trusts [1968] 1 WLR 866 at 876–​877 per Cross J.

44

Re Speight (1883) 22 Ch D 727 at 741–​744 per Jessel MR, at 759–​762 per Lindley LJ [affd Speight v Gaunt (1883) 9 App Cas 1].

45

ACT s 53; NSW s 53; Qld s 54; Vic s 28; WA s 53. For a discussion of these provisions see Estate of Purdon (1935) 53 WN (NSW) 148 at 148–​149. The detail of the provisions varies from jurisdiction to jurisdiction. The provisions in Queensland, Victoria and Western Australia follow a similar schema. The Australian Capital Territory and New South Wales provisions are similar to one another, but are subject to additional limitations: (a) they extend to the receipt and payment of moneys in certain contexts (s 53(4): see Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 694–​696 per Rolfe J); and (b) nothing in them authorises a trustee to employ an agent where a person acting with prudence would not employ the agent to transact the business or do the act, if the business or act was required to be transacted or done in such person’s own affairs (s 53(5)).

46

Niak v Macdonald [2001] 3 NZLR 334 at 338 per Paterson J.

47

In the Australian Capital Territory, “honestly”.

[22.60]  643 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

any event, general protection is afforded to the trustee against an agent’s default pursuant to “wilful default” provisions: see [24.95], [24.100]. In most jurisdictions the trustee legislation gives trustees specific powers to employ solicitors and bankers to receive trust moneys.48 Apart from Tasmania, it protects bankers acting on the instruction of trustee clients from liability in the performance of their usual functions.49 In most jurisdictions trustees are also specifically empowered to employ valuers and auditors.50 Unanimity in trustee decision-​making [22.65] Trustees of non-​charitable trusts must agree unanimously to any course of action.51

The unanimity rule is a corollary to the non-​delegation principle, for if trustees cannot delegate, it follows that they must all perform the duties attendant upon the execution of the trust.52 The practical consequence of the rule is that trust business can only be transacted at a meeting of all trustees; the general law of private trusts recognises no concept of a “managing trustee”53 (although the trust instrument or statute —​in the case of custodian trustees: see [21.30] —​can envisage “managing trustees”). Actions of one trustee taken independently of co-​trustees are ultra vires, although there is nothing in principle to preclude the co-​trustees ratifying the action, assuming they are fully informed in so doing.54 To this end, the object of appointing two (or more) trustees is as an additional control over trust property, and a safeguard against wanton or capricious exercises of trustee discretion.55 Trustees unable to agree on a course of action may jointly approach the court for its advice and directions: see [23.170]–​[23.185]. The unanimity requirement does not apply to charitable trusts, whose trustees act by majority.56 Nor does it apply where statute57 or the trust instrument58 provides otherwise.

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48

NT s 17; Qld s 54(3); SA s 24; Tas s 20; Vic s 28(3); WA s 53(3). The legislation in most jurisdictions allows a trustee to deposit trust documents with any financial institution or corporation whose business it is to undertake the safe custody of documents: ACT s 50; NSW s 50; Qld s 49; Vic s 25; WA s 48.

49

ACT ss 54, 54A; NSW ss 54, 54A; NT (1907) s 5; Qld s 55; SA ss 19, 19A (cf ss 84B–​84E); Vic s 25(2); WA s 101.

50

ACT ss 51, 52; NSW ss 51, 52; Qld ss 51, 52; Vic ss 26, 27; WA ss 50, 51.

51

Luke v South Kensington Hotel Company (1879) 11 Ch D 121 at 125–​126 per Jessel MR; Weston v Weston [1933] QSR 7 at 11 per E A Douglas J; Re Billington (deceased) [1949] QSR 102 at 115 per Macrossan CJ, with whom Mansfield and Philp JJ concurred; Pelham v Pelham [1955] SASR 53 at 57 per Mayo J; Sky v Body (1970) 92 WN (NSW) 934 at 935–​936 per Street J; Estate of William Just (No 1) (1973) 7 SASR 508 at 513–​514 per Jacobs J; Dulhunty v Dulhunty [2010] NSWSC 1465 at [31]–​[34] per Slattery J; Yule v Irwin (No 2) [2016] SASC 178 at [155] per Nicholson J, (noting that “the office of co-​trustees of a private trust is a joint one” and that “[n]‌otwithstanding that a number of persons might hold the office they will form but one collective trustee and must execute the duties of the trustee in their joint capacity”); Newman v Clarke [2017] 4 WLR 26 at [7] per Recorder Klein (explained in terms that the trustees “are regarded in law as being a single body”).

52

Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 at 195 per Hammond J.

53

Dulhunty v Dulhunty [2010] NSWSC 1465 at [31] per Slattery J (who spoke in terms of the law recognising no distinction between “active” and “inactive” trustees).

54

Meeseena v Carr (1870) LR 9 Eq 260 at 262–​263 per Lord Romilly MR. Cf Hansard v Hansard [2015] 2 NZLR 158 at [51] (CA) (where subsequent approval of financial statements was held not to be sufficient to amount to ratification of actions taken without the unanimous approval of trustees “because, in order to ratify a transaction, the person ratifying must know the essential detail of the act or decision in question” and that “[i]‌t is not sufficient to show that he or she was aware of a change in the trust’s financial position”).

55

Pelham v Pelham [1955] SASR 53 at 57 per Mayo J; George v McDonald (1992) 5 BPR 11,659 at 11,668 per Waddell CJ in Eq; Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 at 195 per Hammond J; Beath v Kousal [2010] VSC 24 at [55] per Kaye J.

56

Perry v Shipway (1859) 1 Giff 1; 65 ER 799; Re Whiteley [1910] 1 Ch 600 at 607–​608 per Eve J.

57

For example, the Australian Capital Territory and New South Wales trustee legislation permits a majority of trustees to compromise liabilities: ACT s 49(1); NSW s 49(1).

58

Dawson v Dawson [1945] VLR 99 at 103 per O’Bryan J; MEPC Australia Ltd v Commonwealth [1973] 2 NSWLR 848 at 855–​856 per Wootten J; Ballard Estate v Ballard Estate (1991) 79 DLR (4th) 142 at 147–​148 per Finlayson JA; Dulhunty v Dulhunty [2010] NSWSC 1465 at [35]–​[37] per Slattery J.

644 [22.65] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

Trust deeds commonly include a clause allowing for majority decisions to be effective on some issues. For instance: If at any time the trustees are unable to agree regarding any matter in connection with the trust estate, the decision of a majority of the trustees shall govern and be final and binding upon all persons concerned.

If majority decision-​making is enshrined within the trust deed, it may be appropriate to also make provision for a dissenting trustee not to be liable for decisions and courses of action that prove to give rise liability in the trustees. A dissenting trustee may approach the court for its advice and directions, usually with notice to the majority trustees.59

FIDUCIARY DUTIES [22.70]  Trusteeship has been described as “a fiduciary capacity of the highest order”,60 cast-

ing on trustees a strict application of the dual fiduciary proscriptions: the “no-​conflict rule” —​ a trustee must avoid a situation where her or his own interest may conflict with the duties as trustee; and the “no-​profit rule” —​a trustee cannot take an unauthorised profit or benefit from the trust. The no-​conflict and no-​profit rules are designed to “ensure that the trustee’s loyalty to serve the interests of the trust … is not distracted by a personal interest which conflicts with those interests”.61 Only those trustee duties that are justified within the framework of fiduciary proscriptions are fiduciary duties.62 The general nature and requirements of the rules are discussed in Ch 4. Below are discussed three specific applications of the fiduciary proscriptions to trustees: trustee remuneration; the purchase rule; and the fair dealing rule. They illustrate, not exhaust, the application of fiduciary law to trustees.

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Trustees’ remuneration [22.75] Fiduciary law precludes the payment of remuneration to a trustee (or her or his

spouse), given that a trustee who is remunerated prima facie profits from the position of trustee.63 A trustee is, however, allowed remuneration in the circumstances discussed at [22.80]–​ [22.90], and trustee companies (see [21.15]) and Public Trustees64 (see [21.20]) are entitled to charge commission by the legislation governing them.

Remuneration pursuant to the trust instrument [22.80] A trustee is allowed remuneration where expressly provided by the trust instru-

ment. A  charging clause may be inserted for this purpose, especially where the trustee is a

59

Dulhunty v Dulhunty [2010] NSWSC 1465 at [45] per Slattery J.

60

Re Permanent Trustee Australia Ltd (1997) 137 FLR 190 at 199 per Hansen J.

61

Jones v AMP Perpetual Trustee Company NZ Ltd [1994] 1 NZLR 690 at 711 per Thomas J.

62

Cf Goldfinch, “Trustee’s Duty to Exercise Reasonable Care: Fiduciary Duty?” (2004) 78 ALJ 678 (who argues that the trustee’s duty to exercise reasonable care is a fiduciary duty).

63

Robinson v Pett (1734) 3 P Wms 249; 24 ER 1049; Scott v Murray (1887) 13 VLR 425 at 426 per Webb J; Re Corsellis (1887) 34 Ch D 675 at 681 per Cotton LJ; Re Whitehead [1958] VR 143 at 144–​145 per Herring CJ and Dean J; Re Spedding (deceased) [1966] NZLR 447 at 464 per Turner J, at 465 per McCarthy J; Re Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [1999] 2 Qd R 524 at 526 per Williams J.

64

Public Trustee Act 1985 (ACT), s 28; NSW Trustee and Guardian Act 2009 (NSW), s 112; Public Trustee Act 1979 (NT), s 74; Public Trustee Act 1978 (Qld), s 17; Public Trustee Act 1995 (SA), ss 44, 45; Public Trustee Act 1930 (Tas), s 11; State Trustees (State Owned Company) Act 1994 (Vic), ss 13, 14; Public Trustee Act 1941 (WA), s 38.

[22.80]  645 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

professional (such as a lawyer or accountant). As it goes against the fiduciary grain, the court will ordinarily construe such a clause strictly.65 An example of a charging clause is: Any trustee hereof who may be a solicitor or accountant or any firm of which he or she may be a member shall be entitled to make all usual and proper charges for both her or his professional and other services in the administration of the trusts hereof and for the time and trouble that he or she would have been entitled to make if not a trustee and so employed including work which might properly be done by any trustee if not a solicitor or accountant.

There is less justification for a charging clause where the trustee is a company through which the trust carries on a family business, in which case the trustee is owned and controlled by the family, and therefore does not usually require remuneration other than to the extent necessary to meet its own internal expenses.66 The quantum and duration of remuneration provided for in the trust instrument is a question of construction. As to its quantum, “[p]‌rima facie one must suppose that the testator’s method of ascertaining the amount of remuneration which his trustees should receive was intended to bear some relation to the work done and the services done by them”.67 Care must therefore be taken in drafting to ensure relevant details are included, such as intended payee(s),68 the work covered by the provision,69 the part of the fund on which remuneration is charged70 and whether the clause disqualifies the trustee from seeking further remuneration. The latter will not be regarded as an attempt to oust the court’s jurisdiction to award remuneration.71

Remuneration pursuant to agreement between the trustee and the beneficiaries

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[22.85]  A trustee can be remunerated under a valid agreement with the beneficiaries (being

of full age and capacity). But courts are wary of such agreements, and may refuse to enforce them in the face of the slightest apparent unfairness or undue pressure. There must be clear agreement, not an indefinite understanding, with fully informed beneficiaries. This effectively requires that the beneficiaries’ consent be in writing.

Court-​awarded remuneration [22.90]  A court may allow remuneration to a trustee under statute, or pursuant to its inher-

ent jurisdiction to authorise, increase or vary remuneration where the work is time-​consuming and remuneration is required to ensure proper services are obtained.72 The statutory jurisdiction derives from either specific provisions —​the trustee legislation in most jurisdictions specifically empowers the court to authorise any person to charge remuneration for services

65

Re Spedding (deceased) [1966] NZLR 447 at 465–​466 per McCarthy J; Chick v Grosfeld (No 3) [2012] NSWSC 1536; Spencer v Spencer [2014] 2 NZLR 190 at [90]–​[95] per Randerson J.

66

Moreover, there is the danger that a trustee-​in-​bankruptcy or a liquidator, who stands in the place of a trustee on the trustee’s insolvency, can use a charging clause to meet any unpaid remuneration.

67

Re McGaw (1904) 4 SR (NSW) 591 at 598 per A H Simpson CJ in Eq.

68

Re Chirnside [1956] VLR 295.

69

Re Birch [1924] VLR 510.

70

Re Dowling [1961] VLR 615.

71

Will of Shannon [1977] 1 NSWLR 210.

72

Johnston v Johnston (1903) 4 SR (NSW) 8; Nissen v Grunden (1912) 14 CLR 297; Guazzini v Pateson (1918) 18 SR (NSW) 275; Re Moore [1956] VLR 132; Re Spedding (deceased) [1966] NZLR 447 at 465–​466 per McCarthy J; Will of Sheldon [1972] 1 NSWLR 196; Re Duke of Norfolk’s Settlement Trusts [1982] Ch 61 at 78 per Fox LJ; Re Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [1999] 2 Qd R 524 at 526–​528 per Williams J; Re White (2003) 7 VR 219.

646 [22.85] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

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as trustee as the court thinks fit73 —​or its general “expediency” jurisdiction74 (see [25.30]–​ [25.55]). The inherent jurisdiction is thus unlikely to be the first point of call. In each case the jurisdiction to order remuneration is premised on a trustee (or a person for practical purposes controlling the trustee)75 applying to the court, and making applications from time to time as appropriate.76 The rationale underscoring the court’s jurisdiction is that a person who manages property for others, and who devotes time to producing an income that others receive free of trouble, should in fairness be paid for those services.77 Especially for professional trustees who exercise judgment in managing the trust estate, there is accordingly no justification for the court approaching an application for remuneration in a miserly way. It has been said, to this end, that “trusts in any commercial context are better handled by professional people such as chartered accountants, solicitors or trustee companies than left to people who undertake the work without being paid for it”.78 Even outside the professional trustee scenario, though, the breadth of the terms in which the statutory jurisdiction is phrased speaks against court-​imposed limitations, such as, for instance, any threshold of special or exceptional circumstances.79 The court’s jurisdiction covers an award of both prospective and retrospective remuneration in circumstances where it is for the benefit of the estate.80 But courts are wary of allowing remuneration for past services if an unexpected application may prejudice the beneficiaries. Courts also carefully scrutinise applications to raise remuneration prescribed in the trust deed or agreed by the beneficiaries. Breach of trust will usually reduce or deny an award of remuneration to a trustee81 —​fraud or dishonesty will itself deny an award —​unless it was innocent and caused the estate no loss.82 It stands to reason, therefore, that trustees will find it difficult, in ordinary cases, to satisfy the court that they should be awarded remuneration for their time in defending claims brought against them by beneficiaries.83 73

NT s 78; Qld s 101; Administration and Probate Act 1919 (SA), s 70(1) (see, for example, Chiro v Linton (No 2) [2009] SASC 197); Tas s 58; Vic s 77; WA s 98. The Australian Capital Territory and New South Wales have no specific counterpart, but personal representatives and testamentary trustees may be statutorily allowed commission in the discretion of the court: Administration and Probate Act 1929 (ACT), s 70; Probate and Administration Act 1898 (NSW), s 86 (to which it appears, rightly, similar principles apply: see, for example, Hawkins v Barkley-​Brown [2010] NSWSC 48). Similar provisions exist in other jurisdictions: Administration and Probate Act 1969 (NT), s 102; Succession Act 1981 (Qld), s 68; Administration and Probate Act 1935 (Tas), s 64; Administration and Probate Act 1958 (Vic), s 65. South Australia and Western Australia include this power in the above legislation. In some jurisdictions statute also empowers the court to award commission to advisory trustees (Public Trustee Act 1978 (Qld), s 41(8); Public Trustee Act 1930 (Tas), s 22(8); Trustees Act 1962 (WA), s 14(5)) and custodian trustees (Trusts Act 1973 (Qld), s 101(3); Public Trustee Act 1930 (Tas), s 24(m); Trustees Act 1962 (WA), s 15(4)).

74

See, for example, Re Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [1999] 2 Qd R 524 at 527–​528 per Williams J; Re Cuesuper Pty Ltd [2009] NSWSC 981.

75

See, for example, Re Application of Sutherland (2004) 50 ACSR 297 at [14]–​[16] per Campbell J (allowing remuneration to an administrator and liquidator in practical control of a corporate trustee); Grossman v E Katz Manufacturing Jewellers (ACT) Pty Ltd (2004) 213 ALR 373 at [14], [15] per Barrett J (provisional liquidator of a corporate trustee allowed remuneration out of the trust assets).

76

Re Darling [1925] SASR 262 at 266 per Angas Parsons J; Re Application of Sutherland (2004) 50 ACSR 297 at [13] per Campbell J.

77

Will of Moore (1896) 17 LR (NSW) B & P 78 at 79 per Manning J.

78

Re Propestate Pty Ltd (in liq) [2009] NSWSC 859 at [13] per Bryson AJ.

79

Zevering v Callaghan [2012] 1 Qd R 194 at [46]–​[54] per Peter Lyons J, with whom Fraser and White JJA concurred.

80

Nissen v Grunden (1912) 14 CLR 297 at 304–​308 per Griffith CJ; Guazzini v Pateson (1918) 18 SR (NSW) 275; Re Keeler’s Settlement Trusts [1981] Ch 156 at 161–​162 per Goluding J. Cf Strauss v Wykes [1916] VLR 200 at 206–​208 per Madden CJ; Perpetual Trustee Co (Ltd) v Jefferson (1938) 56 WN (NSW) 18.

81

Will of Sherringham (1901) 1 SR (NSW) B & P 48 at 49 per Walker J; Will of Greer (1911) 11 SR (NSW) 21 at 23 per Street J; Atkins v Godfrey [2006] WASC 83.

82

Re Darling [1925] SASR 262.

83

Toyama Pty Ltd v Landmark Building Developments Pty Ltd (No 2) [2007] NSWSC 55 at [40]–​[42] per White J.

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Equity and Trusts in Australia

The amount and rate of remuneration rest on the nature of the activities carried out. The court considers the time occupied in performing the duty, the skill and ability displayed and the success that has attended the trust’s administration. That the trustee’s duties are considerable and more onerous than those associated with most trust estates, and these duties have been performed with skill and diligence, may warrant the award of remuneration commensurate with the proper performance of these duties.84 In each case, the court is likely to be influenced by the size and complexity of the estate, although this is not decisive. A solicitor-​trustee, or some other professional (for instance, an accountant) may be allowed additional commission for professional skill in administering the trust.85 Courts are wary, though, to ensure that any award of commission does not duplicate the remuneration under an existing charging clause, and may conclude that the latter is sufficient. Purchase of trust property by trustee (“purchase rule” or “self-​dealing  rule”)

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[22.95]  The purchase (or lease)86 of trust property by a trustee is generally prohibited.87 This

is because it places the trustee’s personal interest (in securing the best deal for herself or himself) in conflict with the duty to the beneficiaries,88 and the trustee may derive an advantage over third party purchasers stemming from her or his knowledge of the property.89 The same prohibition applies to a sale of trust property by co-​trustees to one of themselves and third parties.90 Equity treats any such transaction as voidable at the instance of the beneficiaries, however open or honest the trustee’s conduct and however fair the price.91 Contrarily, in Holder v Holder,92 the English Court of Appeal envisaged a discretion in the court not to set an impugned transaction aside if it is fair and the trustee has acted honestly. Specifically, Sachs LJ prophesied that “the rigidity of the shackles imposed by the [purchase] rule on the discretion of the court may perhaps before long be reconsidered as the courts tend to lean more and more against such rigidity of rules as can cause patent injustice”.93 Given the

84

Will of Sheppard [1972] 2 NSWLR 714 at 720–​721 per Helsham J; Will of Stratten [1981] WAR 58; Re Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [1999] 2 Qd R 524 at 527–​528 per Williams J; Re White (2003) 7 VR 219 at [73]–​[75] per Kellam J; Kazar v Filaria Pty Ltd [2004] ACTSC 124 at [36]–​[42] per Harper M; Atkins v Godfrey [2006] WASC 83 at [78]–​[88] per Le Miere J.

85

Umphelby v Grey (1898) 24 VLR 979; Nissen v Grunden (1912) 14 CLR 297; Re Craig (1952) 52 SR (NSW) 265; Re Whitehead [1958] VR 143.

86

See, for example, Cardigan v Moore [2012] WTLR 931.

87

See generally McPherson, “Self-​dealing Trustees” in Oakley (ed), Trends in Contemporary Trusts Law (Clarendon Press, 1996), Ch 6; Conaglen, “A Re-​appraisal of the Fiduciary Self-​dealing and Fair-​dealing Rules” [2006] CLJ 366.

88

Aberdeen Railway Co v Blaikie (1854) 1 Macq 461 at 471–​472 per Lord Cranworth LC; Re White (1910) 10 SR (NSW) 295 at 300 per Street J; Tanti v Carlson [1948] VLR 401 at 405 per Herring CJ; Re O’Shea [1957] VR 352 at 356 per O’Bryan J; Re Thompson’s Settlement [1985] 2 All ER 720 at 730 per Vinelott J; Ballard Estate v Ballard Estate (1991) 79 DLR (4th) 142 at 150 per Finlayson JA.

89

Re Tabone (deceased) [1968] VR 168 at 171 per Winneke CJ. A third reason sometimes given is that the same person cannot occupy the position of vendor and purchaser (see, for example, Re White (1910) 10 SR (NSW) 295 at 300 per Street J; People’s Prudential Assurance Co Ltd v Australian Federal Life and General Assurance Co Ltd (1935) 35 SR (NSW) 253 at 265 per Long Innes CJ in Eq; Union Trustee Co of Australia Ltd v Gorrie [1962] Qd R 605 at 614 per Gibbs J), but this is hardly compelling given that the purchase involves an interest that the trustee does not have, namely the beneficial interest in the property in question.

90

Re White (1910) 10 SR (NSW) 295; Union Trustee Co of Australia Ltd v Gorrie [1962] Qd R 605.

91

Morse v Royal (1806) 12 Ves 355; 33 ER 134; Farrell v Cox (1898) 19 LR (NSW) Eq 103; Re City of Sydney Real Estate Co Ltd (1928) 29 SR (NSW) 80 at 86–​89 per Street CJ; Tito v Waddell (No 2) [1977] Ch 106 at 240 per Megarry VC.

92

Holder v Holder [1968] Ch 353.

93

Holder v Holder [1968] Ch 353 at 402–​403.

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Duties of Trustees  Chapter  22

traditional strict interpretation of fiduciary proscriptions (see [4.35]), coupled with trusteeship being recognised as the archetypal fiduciary relation, his Lordship’s prophecy is unlikely to be fulfilled.94 In any case, it has been rejected by first instance Australian and New Zealand judgments.95

Purchase by persons associated with the trustee [22.100]  The purchase of trust property by a trustee’s spouse, close relative or associate ren-

ders the dealing open to suspicion.96 It triggers a presumption that the dealing is for the trustee’s own benefit, which, if not rebutted, justifies its setting aside.97 Trustees should accordingly seek the court’s approval prior to entering a transaction of this kind.98 Interposing a third party, such as an agent or a company the trustee controls, between the trustee and the acquisition of the trust property does not circumvent the purchase rule.99 Hence, the rule forbidding purchase of trust property extends to solicitors of trustees, and to purchases by directors of a corporate trustee.100

Purchases prior and subsequent to appointment [22.105] The trustee’s retirement from the trust for the purpose of purchasing (or leasing)

trust property is subject to the purchase rule. Jacobs J elaborated the reasons for this in Gould v O’Carroll:101

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First … the fact that [the trustee] retires in order to effect that purpose means that the decision to effect that purpose has been taken during the period of his trusteeship when he was actually performing the duties of a trustee; in other words the decision to deal with the trust is his own. Secondly, the trustee who has been actively managing the trust has all the advantage of the information and knowledge which comes to him as trustee and which he should use in no way for his own benefit, but purely for the benefit of the beneficiaries.

It follows that a trustee who has retired in order to purchase trust property or has gained an unfair advantage due to knowledge acquired as trustee acts improperly.102 However, an executor-​trustee who renounces this office before acting in either capacity is not necessarily incapacitated from becoming a purchaser from an executor-​trustee who does accept office.103 Moreover, there is nothing in principle to preclude a person who contracts, or holds a

94

See Re Thompson’s Settlement [1985] 2 All ER 720 at 728–​730 per Vinelott J; Kane v Radley-​Kane [1998] 3 WLR 617 at 621–​629 per Sir Richard Scott VC.

95

Calvo v Sweeney [2009] NSWSC 719 at [236]–​[242] per White J; Chellew v Excell [2009] 1 NZLR 711 at [34]–​[45] per Allan J.

96

Coles v Trecothick (1804) 9 Ves 234 at 244; 32 ER 592 at 596 per Lord Eldon LC; Tanti v Carlson [1948] VLR 401 at 407 per Herring CJ; Re O’Shea [1957] VR 352 at 357 per O’Bryan J; Re McNally (deceased) [1967] NZLR 521 at 522–​523 per Tompkins J; Tito v Waddell (No 2) [1977] Ch 106 at 240 per Megarry VC. See, for example, Larnach v Alleyne (1862) 1 W & W (E) 342 (purchase by next friend or guardian); Heywood v Pryor (1905) 23 WN (NSW) 44 (purchase by wife of trustee); Henderson v Woodruffe [1921] NZLR 411 (purchase by son of trustee).

97

Robertson v Robertson [1924] NZLR 552 at 554 per Salmond J; Re Douglas (1928) 29 SR (NSW) 48 at 50 per Harvey CJ in Eq.

98

Heywood v Pryor (1905) 23 WN (NSW) 44.

99

Parker v McKenna (1874) 10 Ch App 96; Williams v Scott [1900] AC 499; Re James (deceased) [1949] SASR 143.

100

Ex parte James (1803) 8 Ves 337; 32 ER 385; Blair v Martin [1929] NZLR 225; Re James (deceased) [1949] SASR 143; Bela v Beehag (1984) 3 BPR 9402.

101

Gould v O’Carroll [1964] NSWR 803 at 805.

102

Rowell v Keats (1885) 19 SALR 8; Gould v O’Carroll [1964] NSWR 803 at 805 per Jacobs J.

103

Fysh v Page (1956) 96 CLR 233 at 240–​241 per Dixon CJ, Webb and Kitto JJ.

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Equity and Trusts in Australia

statutory right, to purchase trust property prior to appointment as trustee from enforcing those rights.104

Exceptions to the purchase rule [22.110] There are three main exceptions to the purchase rule.105 First, in practice there is

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often a provision included in trust instruments allowing for the sale of trust property to the trustees.106 Secondly, a trustee may purchase trust property where all beneficiaries consent, provided the beneficiaries are fully informed, of full age and capacity, and the transaction occurs at arm’s length for a fair price. Courts scrutinise the transaction carefully and the onus of proof is on the trustee.107 Thirdly, a trustee may purchase trust property where sanctioned under the court’s inherent jurisdiction108 in the event of beneficiaries who object to the sale or are unable to consent to it. The court must consider the interests of those beneficiaries in order to determine whether an objection raised is contrary to the interests of the beneficiaries as a whole.109 To this end, the nature and extent of beneficiaries’ objections to the dealing will influence, although not determine, the court’s decision.110 Court approval has usually rested on a trustee demonstrating exceptional circumstances, essentially a last resort, such that the interests of the trust demand it.111 It has also been said that, to establish that no other purchaser will offer as good a price as that offered by the trustee, what is required is an auction fairly conducted with a reserve based upon an independent valuation and without the trustee bidding so as to test the market.112 The trustee legislation in the Northern Territory and South Australia makes specific provision for the court to authorise a trustee to purchase trust property, which omits reference to exceptional circumstances.113 Even in other jurisdictions, nor should it be assumed that an auction is invariably the only appropriate vehicle to test the value of the relevant property.

104

Re Taylor [1950] VLR 476; Newman v Clarke [2017] 4 WLR 26.

105

Kane v Radley-​Kane [1998] 3 WLR 617 at 621–​622 per Sir Richard Scott VC; Patros v Patros (2007) 16 VR 182 at [5]‌per Cavanough J.

106

See, for example, Re Estate of Cummins [1964] SASR 236.

107

Williams v Scott [1900] AC 499 at 507–​508 (PC).

108

That the sanction must ordinarily be sought before the transaction does not deny that the court has the power to sanction the transaction retrospectively, although for reasons underscored by the need to uphold fiduciary standards, a retrospective sanction would rest on an unusual case not punctuated by fraud: see, for example, Mills v Mills [2015] WTLR 1631 (involving a good faith transaction entered into in ignorance of any breach of the purchase rule and on the faith of which the claimants had expended considerable sums, not only in the purchase but also in acquiring other property outside the original boundaries of the trust).

109

Irving v Irving (1901) 18 WN (NSW) 63; Smith v Green (1903) 22 NZLR 976.

110

Throp v Trustees Executors and Agency Co of NZ Ltd [1945] NZLR 483.

111

Scott v Murray (1888) 14 VLR 708 at 710 per A’Beckett J; Re Overland [1960] QWN 25; Union Trustee Co of Australia Ltd v Gorrie [1962] Qd R 605 at 616 per Gibbs J; Re Tabone (deceased) [1968] VR 168 at 171 per Winneke CJ; Re Chomley (2014) 10 ASTLR 338 at [19]–​[23] per McMillan J.

112

Heywood v Pryor (1905) 23 WN (NSW) 44; Savage v Carruthers [1958] QWN 21 at 33 per Philp J; Union Trustee Co of Australia Ltd v Gorrie [1962] Qd R 605 at 616 per Gibbs J. In exceptional circumstances, it has been said, the court may permit the trustee to bid as a purchaser at an auction of trust property:  Re Tabone (deceased) [1968] VR 168 at 170 per Winneke CJ.

113

NT (1907) s 7; SA s 49. These sections require affidavits that exhibit the instructions given to the valuer for the purpose of making her or his valuations. The valuer should depose personally as to such valuations. The affidavits should disclose the elements (if any) that might be treated as unfavourable to the proposed transaction, and show why the purchase is in all the circumstances for the benefit of the beneficiaries. See Re James (deceased) [1949] SASR 143 at 147 per Mayo J.

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Duties of Trustees  Chapter  22

On occasion courts have accepted valuations to avoid casting on the trust estate the expense of an auction sale.114 An alternative source of curial power to approve trustee self-​ dealing is its statutory “expediency” jurisdiction (as to which see [25.30]–​[25.55]) or jurisdiction to consent to dealings on behalf of incapable beneficiaries (see [25.60]–​[25.75]).115 Though not premised on proof of exceptional circumstances, the requirements for the exercise of these jurisdictions must be met, which often speak against perpetuation of fiduciary conflict. Purchase of a beneficiary’s interest (“fair dealing rule”) [22.115]  By purchasing a beneficiary’s interest in the trust property, the trustee unites the

legal and equitable interests in that property. Such a transaction is voidable at the instance of the beneficiary unless the trustee proves conclusively that:116 • he or she made full disclosure of all the facts that might have influenced the desire to purchase; • no advantage was taken of information obtained by reason of her or his trusteeship; • the parties were at arm’s length; • full value was given for the interest acquired; • the beneficiary is of full age and capacity; and • the transaction could in no way be characterised as fraudulent.

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For example, in Edmunds v Pickering,117 that the parties were at arm’s length, and independently advised by competent solicitors, did not satisfy the fair dealing rule because the beneficiary was not fully informed about several matters regarding the transaction, thus rendering it voidable.

DUTY TO ACT IMPARTIALLY Nature of the duty [22.120]  The duty of impartiality, broadly speaking, prohibits a trustee acting to favour one

class of beneficiaries at the expense of another.118 It follows that, in a dispute between rival 114

See, for example, Waine v King (unreported, SC(NSW), Hodgson J, 5 October 1994); Patros v Patros (2007) 16 VR 182 at [15] per Cavanough J (approving a dealing allowing the trustee of a deceased estate to purchase the trust property so that three infant children of the deceased could live in the property).

115

See, for example, Patros v Patros (2007) 16 VR 182.

116

Williams v Scott [1900] AC 499 at 508 (PC); Dougan v Macpherson [1902] AC 197 at 202–​204 per Earl of Halsbury LC; Harris v Jenkins (1922) 31 CLR 341 at 355–​356 per Higgins J, at 367–​369 per Starke J; Tito v Waddell (No 2) [1977] Ch 106 at 241 per Megarry VC; Edmunds v Pickering (1999) 75 SASR 407 at 558–​559 per Lander J [affd Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 at 189 per Gray J, with whom Prior ACJ and Wicks J concurred]; Clay v Clay (2001) 202 CLR 410 at 434 (FC); Miorada v Miorada [2005] WASC 105 at [174]–​[179] per Commissioner McKerracher QC. See Conaglen, “A Re-​appraisal of the Fiduciary Self-​dealing and Fair-​dealing Rules” [2006] CLJ 366.

117

Edmunds v Pickering (1999) 75 SASR 407 at 560–​561 per Lander J [affd Pickering v Smoothpool Nominees Pty Ltd (2001) 81 SASR 175 at 189 per Gray J, with whom Prior ACJ and Wicks J concurred, ruling that fair value had not been established].

118

Re Lepine [1892] 1 Ch 210 at 219 per Fry LJ; Re Charteris [1917] 2 Ch 379 at 388–​389 per Swinfen Eady LJ; Re Mitchell (deceased) [1955] VLR 120 at 123 per Dean J; Re Zimpel [1963] WAR 171 at 174 per Jackson SPJ; Re Mulligan (deceased) [1998] 1 NZLR 481 at 501 per Panckhurst J. The duty of impartiality is not a fiduciary duty (Wilden Pty Ltd v Green (2009) 38 WAR 429 at [165] per McLure JA; cf Re Stewart [2003] 1 NZLR 809 at 816 per Laurenson J). Though it can be likened to the fiduciary duty that prevents a lawyer, for example, representing two or more clients with adverse interests (as to which see [4.150]), the trustee’s duty of impartiality necessarily requires her or him to balance the interests of beneficiaries. It can

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Equity and Trusts in Australia

claimants to a beneficial interest, the trustee must remain neutral.119 This is particularly pertinent where there are beneficial interests in succession: namely, where trustees hold property on trust to pay income to income beneficiaries and, at a later stage, transfer the capital to those taking in remainder.120 For instance, if the trust property consists of money invested in a deposit account, payment of the entire interest income to the income beneficiaries will dictate that the real value of the fund will, in time, decrease by reason of inflation and thus deplete the fund of the capital beneficiaries. Or trust property may consist of land that produces little or no income for income beneficiaries, but may appreciate considerably in value thereby benefiting the capital beneficiaries. To ensure fairness between income and capital beneficiaries, the trustee must make the trust fund productive in the interests of the income beneficiaries, but not risk capital to secure a higher income return. Maintaining separate capital and income accounts is, to this end, mandatory. The courts are alert to schemes that effect an imbalance between the income and capital beneficiaries. For example, in Re Zimpel121 Jackson SPJ directed the trustees not to accept a recommendation that would have changed the nature of trust funds from income to capital, as this would have benefited the persons in remainder to the detriment of the income beneficiaries, irrespective of whether the majority of the latter were agreeable to the proposal. [22.125] The duty of impartiality does not fetter a trustee vested with broad discretion to

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select who, in the designated class of potential beneficiaries, is to receive any benefit, and to decide its amount, provided that the discretion is exercised bona fide for the purposes of the trust, not irresponsibly, capriciously or wantonly.122 Reference to a duty of impartiality is, it is said, “inapposite where what is in point is a discretionary power to choose between different beneficiaries”.123 Hence, the duty of impartiality does not preclude a trustee from making a discretionary decision that is for the ultimate benefit of the trust even though it immediately advantages one beneficiary and disadvantages another.124 Apportionment required by the duty of impartiality [22.130] The main task of a trustee in fulfilling the duty of impartiality is to carry out an

apportionment. “Apportionment” is an adjustment between successive property interests so

be likened to that of company directors not to act sectionally or partially by favouring one section of shareholders over another: see Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 289 per Mason, Deane and Dawson JJ. 119

Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 at 435 per Lightman J; Re Schroder’s Wills Trusts [2004] 1 NZLR 695 at [39]–​[43] per Nicholson J.

120

See, for example, Re Mulligan (deceased) [1998] 1 NZLR 481, discussed at [22.220].

121

Re Zimpel [1963] WAR 171 at 174. See also Re Campbell [1973] 2 NSWLR 146.

122

Edge v Pensions Ombudsman [1998] Ch 512 at 533–​534, 537–​538 per Sir Richard Scott VC. On appeal, where his Lordship’s judgment was affirmed, Chadwick LJ stated: “Properly understood, the so-​called duty to act impartially … is no more than the ordinary duty which the law imposes on a person who is entrusted with the exercise of a discretionary power: that he exercises the power for the purpose for which it was given, giving proper consideration to the matters which are relevant and excluding from consideration matters which are irrelevant”: Edge v Pensions Ombudsman [2000] Ch 602 at 627. This statement, in its attempt to categorise the duty of impartiality into a more general taxonomy, is somewhat misleading to the extent that it suggests that the duty of impartiality differs little from the exercise of a discretionary power: see Manukau City Council v Lawson [2001] 1 NZLR 599 at 617 per Paterson J. As to the court’s control on the exercise of a trustee’s discretion see [23.35], [23.40].

123

Edge v Pensions Ombudsman [1998] Ch 512 at 538 per Sir Richard Scott VC [affd Edge v Pensions Ombudsman [2000] Ch 602]. See also Lee v Torrey [2015] NZHC 2135 at [86] per Faire J; McLaren v McLaren [2017] NZHC 161 at [49] per Dobson J.

124

Re Charteris [1917] 2 Ch 379 at 397 per Bankes LJ, at 398–​399 per Warrington LJ; Manukau City Council v Lawson [2001] 1 NZLR 599 at 617 per Paterson J.

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Duties of Trustees  Chapter  22

that the beneficiaries’ rights are treated impartially. It may be required according to directions contained in the trust instrument, provisions of any applicable statute, or equitable principle.

Apportionment under the terms of the trust instrument [22.135]  The court ordinarily follows directions in the trust instrument as to apportionment

before resorting to statute or equitable principles, as the former express the settlor’s intention and so must be given effect. In this context, a typical clause in the trust instrument may read as follows: TO DETERMINE WHETHER CAPITAL OR INCOME. To determine whether any real or personal property or any increase or decrease in amount number or value of any property or holdings of property or any receipts or payments from for or in connection with any real or personal property shall be treated as and credited or debited to capital or to income and generally to determine all matters as to which any doubt difficulty or question may arise under or in relation to the execution of the trusts and powers of this settlement; and every determination of the trustees in relation to any of the matters aforesaid whether made upon a question formally or actually raised or implied in any of the acts or proceedings of the trustees in relation to the trust fund shall bind all parties interested therein and shall not be objected to or questioned on any ground whatsoever.

This clause, while it ousts the operation of statutory apportionment provisions, does not oust the jurisdiction of the court to determine what is capital and what is income.125 There is nothing to preclude, though, the trust instrument defining what is capital and income for the purposes of the trust, to which the trustee must give effect126 unless he or she succeeds in securing a variation of the trust upon an application to the court (see [25.30]–​[25.55]). The following discussion assumes the absence of a provision in the trust instrument that resolves the specific issues of apportionment addressed.

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Apportionment of income under statute and equitable principle [22.140]  Statute provides that all rent, annuities, dividends and other periodical payments

in the nature of income accrue from day-​to-​day and are apportionable accordingly.127 Where these provisions apply to the payment of a dividend, the terms in which the dividend is declared to be payable must be properly construed to ascertain the period for or in respect of which the payment is declared or expressed to be made.128 But no apportionment need be made upon the sale of shares the price of which is affected by the proximity of a dividend receipt; the proceeds accrue to the capital account, notwithstanding the increment attributable to the dividend, which would, apart from the sale, have accrued to the income account.129 Income beneficiaries benefit in the converse situation, where the trustee has purchased cum dividend.130

125

Re Baillie [1928] VLR 171 at 177–​178 per Mann J; Re Davis (deceased) [1953] VLR 639 at 647 per Herring CJ; Re Mitchell (deceased) [1955] VLR 120 at 122 per Dean J.

126

Bamford v Federal Commissioner of Taxation (2009) 176 FCR 250 at [52] per Emmett J.

127

Civil Law (Property) Act 2006 (ACT), s 250; Conveyancing Act 1919 (NSW), s 144(1); Law of Property Act 2000 (NT), s 212; Property Law Act 1974 (Qld), s 232(1); Law of Property Act 1936 (SA), s 64; Apportionment Act 1871 (Tas), s 2; Supreme Court Act 1986 (Vic), s 54; Property Law Act 1969 (WA), s 131.

128

Will and Estate of McCutcheon [1960] VR 289 at 291–​293 per Hudson J; Re Campbell [1973] 2 NSWLR 146 at 154 per Helsham J.

129

This is statutorily provided in New Zealand: Trustee Act 1956 (NZ), s 83(5).

130

Re Clarke (1881) 18 Ch D 160; Re Hood (1940) 40 SR (NSW) 449.

[22.140]  653 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

[22.145] Business profits/​ receipts are not apportionable under statute as they do not

accrue from day-​to-​day, but at the agreed or conventional accounting time at which expenses are set off against revenue and the net result ascertained.131 The issue has especial significance in the context of deceased estates. Business profits generated in the period between the end of the relevant accounting period and the death of the testator do not, to this end, form part of the deceased’s estate. But where the business would terminate by reason of the death of the testator and the instrument by which the business was established provides for an accounting of the profits at the date of termination, the estate is entitled to them.132 [22.150]  Income may be earned during the period of administration of a deceased estate on

amounts yet to be expended in meeting the testator’s debts, legacies and expenses. In South Australia and Tasmania the trust accounts must be adjusted to ensure that this income, to the extent that it exceeds what ought to have been paid to income beneficiary (life tenant), is credited to the capital account and deducted from further income payments until the adjustment is reconciled. Termed the rule in Allhusen v Whittell,133 it has been abolished by statute in other jurisdictions in favour of a system that avoids complex adjustments to capital and income accounts. This legislation permits the life tenant to retain the excess amount received in the administration period, but to receive a little less each year for the remainder of the tenancy as a consequence of the capital being slightly reduced in value (because of the above excess).134 Residuary personalty of a wasting, hazardous or reversionary nature

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[22.155]  The rule in Howe v Dartmouth135 requires the conversion of residuary personalty of

a wasting, hazardous or reversionary nature into authorised investments in the interests of the beneficiaries in remainder where successive interests are left by a will containing no direction to convert. In Michael v Callil, Latham CJ described the rule as follows:136 [W]‌here residuary personalty is settled by will for the benefit of persons who are to enjoy it in succession, it is the duty of the trustees to convert into property of a permanent and income-​ bearing character those parts of it which are of a future or reversionary nature (in the interests of the tenant for life) and those parts of it which consist of wasting assets (in the interests of the persons interested in the remainder). Adjustments should prima facie be made between successive interests upon this basis, so that a tenant for life would be entitled only to receive, not the possibly very large but temporary income from a disappearing security, leaving perhaps nothing for a remainderman, but the income which he would have received if there had been a due conversion into authorised securities.

131

Hughes v Fripp (1922) 30 CLR 508 at 520–​521 per Starke J; Re Brunette (deceased) [1922] NZLR 490 at 496 per Sim ACJ; Re Moore [1956] VLR 132 at 133 per Lowe ACJ.

132

Hughes v Fripp (1922) 30 CLR 508 at 521 per Starke J.

133

Allhusen v Whittell (1867) LR 4 Eq 295. See Re Hayward [1934] SASR 364 at 380–​385 per Murray J; Re Gellibrand’s Will (1939) 34 Tas LR 1 at 12–​16 per Morris ACJ; Hassell v Perpetual Executors Trustees and Agency Co (WA) Ltd (1952) 86 CLR 513 at 526 per Dixon CJ, Webb, Fullagar and Kitto JJ; Princess Ann of Hesse v Field [1963] NSWR 998 at 1017 per Jacobs J.

134

Administration and Probate Act 1929 (ACT), s 41D; Probate and Administration Act 1898 (NSW), s 46D; Administration and Probate Act 1969 (NT), s 58; Trusts Act 1973 (Qld), s 78; Trustee Act 1958 (Vic), s 74; Trustees Act 1962 (WA), s 104. See Princess Anne of Hesse v Field [1963] NSWR 998.

135

Howe v Dartmouth (1802) 7 Ves 137; 32 ER 56.

136

Michael v Callil (1945) 72 CLR 509 at 522.

654 [22.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

Excepting Western Australia,137 if this conversion does not occur within one year of the testator’s death (to allow for the completion of the administration of a deceased estate) the law effects a “notional conversion” by assuming the conversion occurred at this time, determining the property to be either income or capital at that moment.138 The life tenant is not entitled to the actual income earned during the period between the two conversions because the wasting asset may produce excess income for the life tenant but be dissipated by the time the capital beneficiary succeeds. The testator may negative the duty to convert by contrary intention, express or inferred, in the will.139 For example, the settlor may make the consent of the life tenant a condition precedent to conversion,140 the duty to convert may be expressly postponed,141 or a discretion may be given to the trustee to retain the estate in its condition as at the date of the testator’s death.142 However, a power to postpone conversion does not of itself negative the duty to convert.143 The testator may also negative the duty to make a notional conversion. This is commonly achieved by defining the fund from which the life tenant is to derive income as being unconverted for the time being.144 Allocation of revenue and costs [22.160] Augmentation of the trust fund is usually capital in nature and the income from

the augmentation is payable to the income beneficiaries (life tenants). Upon the sale of a trust asset, the proceeds are accordingly attributed to the capital account, and the income from their investment is then paid to the life tenant(s).145 The following instances have been selected to illustrate the courts’ approach in this area.

Dividends

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[22.165]  Where the trust property consists of company shares, the general rule is that divi-

dends from those shares are allocated to the income account.146 Profit on the sale of the shares, conversely, usually accrues to capital, although the circumstances and the terms of the trust

137

The Trustees Act 1962 (WA), s 105(1) provides, inter alia, that where under a will any real or personal property included in a residuary gift is settled by way of succession, then, notwithstanding that the property may be of a wasting, speculative or reversionary nature: (a) pending the sale or conversion of the property, the whole of the net income of the property is to be applied as income and no part of it is to be apportioned to capital; and (b) on the sale or conversion of the property, no part of the proceeds of the sale or conversion is to be applied as past income. This provision may be overridden by contrary intention expressed in the will: s 105(3).

138

Dimes v Scott (1828) 4 Russ 195; 38 ER 778.

139

Michael v Callil (1945) 72 CLR 509 at 533 per Dixon J.

140

Re Walker (1901) 1 SR (NSW) Eq 237.

141

Re Meinck [1944] SASR 202.

142

Re Owens [1963] NSWR 1160.

143

Re Wilcox [1940] SASR 217; Re Berry [1962] Ch 97.

144

Re MacPherson [1913] SALR 207; Perpetual Trustee Co Ltd v Noyes (1925) 25 SR (NSW) 226; Re Grant [1933] VLR 263; Michael v Callil (1945) 72 CLR 509; De Little v Byrne (1951) 84 CLR 532 at 545 (FC); Hassell v Perpetual Executors Trustees and Agency Co (WA) Ltd (1952) 86 CLR 513 at 524 (FC).

145

Clayton v Montgomery (1897) 18 LR (NSW) Eq 171; McKee v Ballarat Trustees Executors and Agency Co Ltd [1910] VLR 358 at 360 per Cussen J.

146

Bouch v Sproule (1887) 12 App Cas 385 at 401–​402 per Lord Watson; Hill v Permanent Trustee Co of NSW Ltd [1930] AC 720; Bakewell v Holme (1943) 44 SR (NSW) 150 at 154 per Roper J; Manukau City Council v Lawson [2001] 1 NZLR 599 at 621–​623 per Paterson J; Wong v Burt [2003] 3 NZLR 526 at 538–​543 per Ronald Young J [affd Wong v Burt [2005] 1 NZLR 91 at 101–​103 (CA)].

[22.165]  655 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

instrument may dictate otherwise.147 However, where the company makes a distribution that, though legally a distribution of profits, practically compels a trustee-​shareholder, acting in the best interests of the trust, to return the money to the company in the form of capital, the distribution may be added to the capital of the trust fund. As explained by Isaacs J:148 [T]‌o accomplish this, the bonus or dividend must be so offered that the ordinary instincts of human self interest of a reasonably prudent man will naturally and instantly direct the money back into the coffers of the company in exchange for the new shares contemporaneously offered, notwithstanding that they are legally refusable by the shareholders.

For example, in Hawkins v Hawkins,149 a company declared a bonus dividend that the shareholders could apply towards the purchase of new shares on terms whereby the shareholders who opted otherwise would suffer a considerable net loss. Harvey J held that this amounted to a practical compulsion, thus marking the dividend as capital.

Cost of repairs [22.170]  Whether the cost of repairs is to be borne by capital or income depends on the nature

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of the repair. A distinction may be made for this purpose between three types of repairs:150 First, those ordinarily recurring repairs which more fully appertain to the enjoyment of the tenant for life and which last only for a short time —​such as papering and painting. Income must bear all such repairs. Secondly, where structural repairs are very great or considerable they are to be charged wholly to corpus, because the advantage obtained from them tells very much more in favour of the remainderman. Thirdly, there is a middle position where you have repairs which are structural in some degree, being more than the ordinary recurring repairs which a tenant, as between landlord and tenant ordinarily carries out  —​a class of repairs which is midway between the two classes indicated. The cost of these should be borne in due proportion by income and corpus … [T]‌he rule is that trustees should be trusted in their just discretion to appropriate the proportion which either should bear. That only can be determined when you come to consider the particular repair, and consider specifically how much should be borne by the life tenant and how much by the estate in remainder.

The South Australian trustee legislation gives trustees a discretion, inter alia, to source the cost of repairs from either capital or income, subject to a contrary intention in the trust instrument.151

DUTY TO INVEST [22.175] Trustees are obliged to invest trust moneys, even absent a direction in the trust

instrument to this effect.152 For this reason, investment is clearly a duty —​to be exercised in the manner authorised by the trust instrument, statute or court order —​although like most duties the trustee has a discretion (or power) as to how the duty is carried out. As explained by Heydon and Crennan JJ in Byrnes v Kendle:153 147

See, for example, Orr v Wendt [2005] WASCA 199 at [27]–​[48] per Wheeler JA, with whom Owen and Roberts-​Smith JJA concurred [reversing Wendt v Orr [2004] WASC 28 where the profit on the sale of shares had been held to accrue to the capital account].

148

Mitchell v Hart (1914) 19 CLR 33 at 41.

149

Hawkins v Hawkins (1920) 20 SR (NSW) 550.

150

Wilkie v Equity Trustees Executors and Agency Co Ltd [1909] VLR 277 at 281–​282 per Madden CJ (emphasis supplied).

151

SA s 25A.

152

Adamson v Reid (1880) 6 VLR (E) 164 at 167 per Molesworth J.

153

Byrnes v Kendle (2011) 243 CLR 253 at [119].

656 [22.170] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

Even if there is no direction in the trust instrument that the trust property be invested, it is the duty of the trustee to invest the trust property subject to the limits permitted by the legislation in force under the proper law of the trust and subject to any limits stated in the trust document. If there are no limits of that kind, a trustee who receives a trust asset, like an executor of a deceased estate, must “lay it out for the benefit of the estate”. That is, it is the duty of a trustee to obtain income from the trust property if it is capable of yielding an income. If the property is money, it should be invested at interest or used to purchase income-​yielding assets like shares. If the property consists of business assets, it should be employed in a business. If the property is lettable land, it should be let for rent. And if the intended means of gaining an income turn out to be unsatisfactory, those means must be abandoned and others found.

The duty is not denied merely because the trustee is a bare trustee, or otherwise has few active duties. So in Byrnes v Kendle, the High Court ruled that a husband who had declared that he held a half-​interest in a house as tenant-​in-​common upon trust for his wife had breached the trust by failing to collect rent from his son, to whom the house was leased following the breakdown of the matrimonial relationship.154 Though the court refused to characterise the husband as a bare trustee, implicit in the reasons of French CJ was that even if he could have been so characterised, this was not conclusive against a duty to generate income, for the benefit of the beneficiary(ies), from the trust property.155 Investments authorised by the trust instrument

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[22.180]  The trust instrument may expressly prescribe the kinds of investments the trustee

may make. This permits the settlor to ensure that the trustee is given investment powers commensurate with the purpose of the trust. A trust instrument that allows trustees to invest “upon such investments as to them seem fit” carries a discretion to invest in any investments “they honestly think are desirable investments for the investment of moneys subject to the trusts of the settlement”.156 This discretion is, however, circumscribed by the ordinary prudent person standard of care (see [22.20]) that operates, inter alia, to prevent speculation by the trustee.157 It is also circumscribed by fiduciary law, which precludes a trustee investing trust funds in breach of the “no conflict” and “no profit” rules (see [22.70]).158 The word “invest”, whether it appears in a trust instrument or in statute, is directed, according to its ordinary meaning, towards something from which a return or profit is expected.159 It is distinguished, as a result, from what may be acquired merely for, say, use and enjoyment. “Investment” of trust funds thus targets their use in a manner to obtain a return by way of income or profit for the beneficiaries’ benefit, although the power of investment may be widened by the trust instrument to enable the purchase of property without the purpose of securing a pecuniary return,160 for instance, the purchase of a dwelling house for a beneficiary.161 154

Byrnes v Kendle (2011) 243 CLR 253 at [19]–​[23] per French CJ, at [67]–​[73] per Gummow and Hayne JJ, at [119]–​[124] per Heydon and Crennan JJ.

155

Byrnes v Kendle (2011) 243 CLR 253 at [19]–​[22].

156

Re Harari’s Settlement Trusts [1949] 1 All ER 430 at 434 per Jenkins J.

157

Crook v Smart (1872) 11 SCR (NSW) Eq 121; Keys v Keys (1898) 20 ALT 7; Sidey v Huntly (1900) 21 LR (NSW) Eq 104 at 108 per A H Simpson CJ in Eq; Pacella v Sherborne (No 2) [2010] WASC 186 at [57] per Blaxell J.

158

Antill v Mostyn [2010] NSWSC 587 at [17]–​[19] per Bryson AJ.

159

Perpetual Trustee Co Ltd v Cheyne (2011) 42 WAR 209 at [52] per Edelman J.

160

Re Wragg [1919] 2 Ch 58 at 64–​65 per Lawrence J; In the Will of Sherriff [1971] 2 NSWLR 438 at 442 per Helsham J.

161

See, for example, Re Estate of Graham (deceased) (2009) 105 SASR 95 at [37], [38] per Gray J. This is, in any case, a feature of the powers vested in a trustee by the trustee legislation: see ACT s 14E; NT s 10A; NSW s 14DA; Qld s 28; SA s 12; Tas s 12; Vic s 11; WA s 24.

[22.180]  657 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

Investments authorised by statute

Historical statutory list approach [22.185] Trustee legislation historically prescribed a list of investments in which trustees

could invest trust funds (termed “authorised investments”), usually subject to contrary intention expressed in the trust instrument. A trustee who invested in any security so listed was presumed to have invested with due care and prudence. Conversely, if a beneficiary suffering loss challenged an investment found to be unauthorised, the trustee would attract liability no matter how prudent the investment. Investments in the statutory lists had the common feature of being conservative, including government stocks and securities, debts or securities guaranteed by the State or federal government, municipal bonds, mortgages of land, deposits with banks and building societies, and investments in common trust funds established by a trustee company.

Modern statutory discretion

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[22.190]  Statutory lists have been repealed in all jurisdictions.162 In their place statute now

permits a trustee, unless expressly prohibited by the trust instrument,163 to invest trust funds in any form of investment, and vary such an investment at any time.164 The control on this seemingly unrestricted power of investment is the statutory equivalent of the general law standard of care, namely that “a trustee exercising any power of investment shall exercise the care, diligence, and skill that a prudent person of business would exercise in managing the affairs of others”.165 In the case of a professional trustee, the standard of care required is that which a prudent person engaged in that profession would exercise in managing the affairs of others.166 In each case, though, the standard may be de facto diluted by a valid trustee exculpation clause167 (as to which see [24.140]–​[24.150]). A trustee must exercise a power of investment in accordance with any provision of the trust instrument that requires that consent or approval regarding trust investments be obtained.168 This does not upset any rules and principles of law or equity that impose a duty on a trustee exercising a power of investment except to the extent of any inconsistency with statute or the trust instrument.169

162

See Trustee (Amendment) Act 1999 (ACT); Trustee Amendment (Discretionary Investments) Act 1997 (NSW); Trustee Amendment Act (No 2) 1995 (NT); Trusts (Investments) Amendment Act 1999 (Qld); Trustee (Investment Powers) Amendment Act 1995 (SA); Trustee Amendment (Investment Powers) Act 1997 (Tas); Trustee and Trustee Companies (Amendment) Act 1995 (Vic); Trustees Amendment Act 1997 (WA). These provisions followed the lead of 1988 New Zealand initiatives (Trustee Amendment Act 1988 (NZ)), and are phrased in terms similar to their New Zealand counterpart.

163

It appears that any such prohibition must be clear indeed if it is to oust the statutory discretion:  see AXA Trustees Ltd v Attorney-​General [2000] VSC 530 at [16], [17] per Byrne J (who refused to interpret a restriction to investment in shares on the Melbourne Stock Exchange as an express prohibition on investment in other stock exchanges); Estate of Graham (deceased) (2009) 105 SASR 95 at [47] per Gray J (who remarked that although cl 5 of the trust instrument provided a series of authorised trustee investments, no express prohibition could be inferred from its terms preventing investment in other ways). Even if it is so ousted, the court retains a jurisdiction to broaden trustees’ powers: see [25.30]–​[25.55].

164

ACT s 14; NSW s 14; NT s 5; Qld s 21 (although ss 29–​30C apply despite anything contained in the trust instrument: s 20); SA s 6; Tas s 6; Vic s 5; WA s 17. See also Trustee Act 2000 (UK), s 3(1) (which provides that “a trustee may make any kind of investment that he could make if he were absolutely entitled to the assets of the trust”).

165

ACT s 14A(2)(b); NSW s 14A(2)(b); NT s 6(1)(b); Qld s 22(1)(b); SA s 7(1)(b); Tas s 7(1)(b); Vic s 6(1)(b); WA s 18(1)(b).

166

ACT s 14A(2)(a); NSW s 14A(2)(a); NT s 6(1)(a); Qld s 22(1)(a); SA s 7(1)(a); Tas s 7(1)(a); Vic s 6(1)(a); WA s 18(1)(a).

167

Australian Securities and Investments Commission v Drake (No 2) (2016) 340 ALR 75 at [327]–​[365] per Edelman J.

168

ACT s 14A(3); NSW s 14A(3); NT s 6(2); Qld s 22(2); SA s 7(2); Tas s 7(2); Vic s 6(2); WA s 18(2).

169

ACT s 14B(1); NSW s 14B(1); NT s 7(1); Qld s 23(1); SA s 8(1); Tas s 9(1); Vic s 7(1); WA s 19(1).

658 [22.185] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

The legislation prescribes a list of matters to which a trustee must have regard when exercising a power of investment, so far as they are appropriate to the circumstances of the trust. The relevant South Australian provision, extracted below, is typical:170 (a) the purposes of the trust and the needs and circumstances of the beneficiaries; (b) the desirability of diversifying trust investments; (c) the nature of and risk associated with existing trust investments and other trust property; (d) the need to maintain the real value of the capital or income of the trust; (e) the risk of capital or income loss or depreciation; (f) the potential for capital appreciation; (g) the likely income return and the timing of income return; (h) the length of the term of the proposed investment; (i) the probable duration of the trust; (j) the liquidity and marketability of the proposed investment during, and on the determination of, the term of the proposed investment; (k)  the aggregate value of the trust estate; (l)  the effect of the proposed investment in relation to the tax liability of the trust; (m) the likelihood of inflation affecting the value of the proposed investment or other trust property; (n) the costs (including commissions, fees, charges and duties payable) of making the proposed investment; (o)  the results of a review of existing trust investments.

A trustee may obtain and consider independent and impartial advice reasonably required for the investment of trust funds or the management of the investment from a person whom the trustee reasonably believes to be competent to give the advice, and meet the reasonable costs of obtaining the advice from trust funds.171 [22.195]  The trustee legislation adds that, in proceedings against a trustee for breach of trust

in respect of a duty relating to the power of investment, the court may, when considering the issue of the trustee’s liability, take into account:172 • the nature and purpose of the trust;

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• whether the trustee had regard to the statutorily prescribed matters so far as was appropriate to the circumstances of the trust; • whether the trust investments were made pursuant to an investment strategy formulated in accordance with the duty of a trustee under the legislation; and • the extent to which the trustee acted on the independent and impartial advice of a person competent (or apparently competent) to give the advice. Hence, the legislation effectively requires (or at least strongly encourages) trustees to adopt modern portfolio theory (see [28.115], [28.120]) in investing trust funds.173

170

SA s 9(1). In the other jurisdictions see: ACT s 14C(1); NSW s 14C(1); NT s 8(1); Qld s 24(1); Tas s 8(1); Vic s 8(1); WA s 20(1). In New South Wales the Trustee Regulation 2015, cl 4 provides guidance to trustees with respect to investment of trust funds the value of which does not exceed $50,000. For commentary on what the legislation may allow so far as investment avenues are concerned see Lee, “Trustee Investing: Homes and Hedges” (2001) 1 QUTLJJ 3. Cf Trustee Act 2000 (UK), s 4, which provides that in exercising any power of investment, a trustee must have regard to the standard investment criteria, namely: (a) the suitability to the trust of investments of the same kind as any particular investment proposed to be made or retained and of that particular investment as an investment of that kind; and (b) the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust.

171

ACT s 14C(2); NSW s 14C(2); NT s 8(2); Qld s 24(2); SA s 9(2); Tas s 8(2); Vic s 8(2); WA s 20(2).

172

ACT s 89; NSW s 90; NT s 10E; Qld s 30B; SA s 13C; Tas s 12D; Vic s 12C; WA s 26B. See, for example, Pacella v Sherborne (No 2) [2010] WASC 186 (where the trustee, after taking expert advice, chose to invest the trust moneys in a “balanced fund” managed by a reputable and long-​established trustee company, which fund was regularly reviewed by the fund manager to “help reduce the volatility of the investment” and to avoid “over exposure” to any particular asset class; Blaxell J was not persuaded that by placing the funds in that investment the trustee failed to exercise the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons: at [63]).

173

See Butler, “Modern Portfolio Theory and Investment Powers of Trustees: The New Zealand Experience” (1995) 16 NZULR 349 at 366–​377. Cf Re Mulligan (deceased) [1998] 1 NZLR 481 (discussed at [22.220]) where Panckhurst J essentially

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Equity and Trusts in Australia

When considering an action for breach of trust arising out of an investment where a loss has been, or is expected to be, sustained by the trust, the legislation entitles the court to set off (part of) the loss resulting from that investment against all or part of the gain resulting from any other investment whether in breach of trust or not.174 This circumvents the general law proscription on setting off losses and gains from distinct breaches of trust (see [24.90]), and in its place gives the court a discretion to be exercised according to what is fair and just in all the circumstances.175 Investments authorised by the court pursuant to its “expediency” jurisdiction [22.200]  The court may authorise the investment of trust funds in a manner not provided for

by the trust instrument or the trustee legislation pursuant to its “expediency” jurisdiction (as to which see [25.30]–​[25.55]). The popularity of wide investment clauses in trust instruments, and the statutory discretion as to modes of investment in all jurisdictions (see [22.190]), nowadays makes recourse to the court infrequent. The most likely candidate for this jurisdiction is now the trust deed that, whether because of its antiquity or otherwise, expressly prohibits certain investment avenues. The court’s jurisdiction here is not limited by the terms of the trust instrument, and so can empower trustees to act even if contrary to the settlor’s directions. Although the courts were traditionally slow in exercising this jurisdiction in respect of investment, and were unlikely to accede to a request to give trustees a general discretion as to a broad class of investments,176 this restrictive approach is arguably a relic of the past,177 especially in light of the modern statutory discretion as to investment. Investment for the financial advantage to the trust

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[22.205]  Barring exceptional circumstances or provision in the trust deed to the contrary, in

carrying out their duty to invest trustees must be concerned chiefly with financial advantage to the trust.178 The relevant law was expressed in the important judgment of Megarry VC in Cowan v Scargill:179 The starting point is the duty of trustees to exercise their powers in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between different classes of beneficiaries. This duty of the trustees towards their beneficiaries is paramount. They must, of course, obey the law; but subject to that, they must put the interests of their beneficiaries first. When the purpose of the trust is to provide financial benefits for the beneficiaries, as is usually the case, the best interests of the beneficiaries are normally their best financial interests. In the case of a power of investment … the power must be exercised so as to yield the best return for the beneficiaries, judged in relation to the risks of the investments in question.

required the trustees to have engaged in modern portfolio theory investing as from 1972: see Manns, “New Zealand Trustee Investing: Reflecting on Modern Portfolio Theory and the Ancient Distinction of Principal and Income” (1998) 28 VUWLR 611 at 615–​617. 174

ACT s 89A; NSW s 90A(1); NT s 10F(1); Qld s 30C(1); SA s 13D(1); Tas s 12E(1); Vic s 12D(1); WA s 26C(1).

175

EPAS Ltd v James [2007] QSC 127 at [37] per Wilson J.

176

Re Strang (1941) 41 SR (NSW) 114 at 117–​119 per Jordan CJ, with whom Nicholas CJ in Eq and Roper J concurred; Boyd v Cowell [1952] VLR 288 at 296 per Coppel AJ and O’Bryan J, at 304 per Sholl J.

177

In this respect, note the tenor of the judgment of Byrne J in AXA Trustees Ltd v Attorney-​General [2000] VSC 530 in allowing trustees to invest in a manner not authorised by the trust instrument.

178

See generally Dal Pont, “Conflicting Signals for the Trustees’ Duty to Invest” (1996) 24 ABLR 140.

179

Cowan v Scargill [1985] Ch 270 at 286–​287 (emphasis supplied).

660 [22.200] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

Megarry VC explained that the paramount duty to the beneficiaries meant that trustees must “put to one side their own personal interests and views”.180 For example, while trustees may, for reasons of principle, object to investments in, say, certain countries, or in companies concerned with alcohol, tobacco or armaments, if investments of this type would be more beneficial to the beneficiaries than other investments, the trustees cannot refrain from making the investments by reason of those personal views. There is nothing to preclude trustees seeking the opinion of beneficiaries (or others), and/​or taking account of social, ethical181 and environmental issues, but these cannot justify an investment strategy that reduces financial advantage to the trust.182 That Cowan v Scargill involved a pension fund, much of which was contributed by its members, reinforced the trustees’ duty to secure the best financial return for the members.183 Trustees may even have to act dishonourably if the beneficiaries’ interests require it. For example, in Buttle v Saunders,184 the best financial interests of the beneficiaries dictated that the trustees not fulfil an agreement to sell trust property that, though not legally enforceable, commercial morality would have dictated should be completed. The difficulty with justifying an omission to invest on the grounds of morality is that “there is no identifiable yardstick which can be applied to a set of facts so as to yield one answer which can be seen to be ‘right’ and the other ‘wrong’ ”.185

Exceptional circumstances

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[22.210]  In the rare case where the subject of a profitable investment would be inconsistent

with the views on moral and social activities strictly held by adult beneficiaries, it may not be for their “benefit” to know that they are receiving larger financial returns under the trust by reason of investments in those activities than in other investments.186 This situation will most likely arise in the context of charitable trusts.187 In Harries v Church Commissioners for England,188 Nicholls VC envisaged a situation where a charity’s objects conflict with investments of a particular type; for instance, cancer research charities and tobacco shares, trustees of temperance charities and brewery shares, and trustees of charities for the Society of Friends and shares in companies that produce armaments. His Lordship also countenanced occasions where the trustees’ holdings of particular investments might hamper the charity’s work, by

180

Cowan v Scargill [1985] Ch 270 at 287.

181

See, for instance, Manitoba Law Reform Commission, Ethical Investments by Trustees (No 79, 1993); Lord Nicholls, “Trustees and Their Broader Community: Where Duty, Morality and Ethics Converge” (1996) 70 ALJ 205 at 210–​214; Leigh, “ ‘Caveat Investor’: The Ethical Investment of Superannuation in Australia” (1997) 25 ABLR 341. Cf the argument that ethical investment may be financially unsound investment: Langbein and Posner, “Social Investing and the Law of Trusts” (1980) 79 Mich L Rev 72. Contra McCormack, “Sexy but not Sleazy: Trustee Investments and Ethical Considerations” (1998) 19 Co Lawyer 39 at 46–​49.

182

See Martin v City of Edinburgh District Council [1988] SLT 329 (where trustees who avoided South African investments on political and moral grounds were held in breach of trust, the court ruling that since the trustees had decided to boycott South African investments on these grounds, they were precluded from adducing evidence that their decision was also sustainable on economic grounds).

183

Cowan v Scargill [1985] Ch 270 at 290.

184

Buttle v Saunders [1950] 2 All ER 193.

185

Harries v Church Commissioners for England [1992] 1 WLR 1241 at 1247 per Nicholls VC.

186

Cowan v Scargill [1985] Ch 270 at 288 per Megarry VC.

187

See Luxton, “Ethical Investments in Hard Times” (1992) 55 MLR 587; Meakin, “Socially Responsible Investment by Charities” (2001) 7 Charity Law & Practice Review 137.

188

Harries v Church Commissioners for England [1992] 1 WLR 1241 at 1246.

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Equity and Trusts in Australia

making potential recipients of aid unwilling to be assisted because of the source of the money, or by alienating the charity’s financial supporters.189

Maintenance of the “real” value of the trust fund [22.215]  As the relevant standard expected of trustees carrying out their duty to invest is that

exercised by the ordinary prudent business person in the management of her or his own affairs (see [22.20]), by itself the failure to maintain the “real” value of the trust fund is not a breach of trust.190 In managing their own affairs persons do not, after all, always succeed in maintaining (or bettering) the real value of their investments. To prove a breach of trust the beneficiaries must convince the court that the trustees made decisions regarding investments that would not have been made by an ordinary prudent business person, and that this has caused a quantifiable loss to the trust estate.191 The cases are littered with cautions in this regard, such as that “the trustees’ performance must not be judged with hindsight: after the event even a fool is wise”,192 “in judging the past performance of trustees one must apply the standards of the relevant period”,193 “a trustee is neither a surety, nor an insurer of the fund for which he is responsible”,194 and “[t]‌he importance of preservation of a trust fund will always outweigh success in its advancement”.195

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[22.220]  If, however, it is clear that the trustees’ failure to adopt an appropriate investment

strategy is not consistent with the standard of an ordinary prudent business person, and that this has caused the trust estate a quantifiable loss, the trustees will be ordered to pay compensation whether or not the real value of the fund has been maintained. In Re Mulligan (deceased)196 the co-​trustees of a testamentary trust were the testator’s widow and a trustee company. For some 25 years prior to the widow’s death, the trust estate was invested in fixed-​ interest securities. During this time various officers of the trustee company unsuccessfully sought to persuade the widow to allow investment in shares to counter the effects of inflation. The widow’s stubborn refusal to accede to this meant that, at the date of her death, the real value of trust capital was only a small proportion of what it had been 25 years earlier. The residuary beneficiaries sued the trustees for breach of trust on the basis that the investment strategy breached the duties of impartiality and to act personally. The evidence of three officers of the trustee company revealed that they each recognised the risk posed by inflation and thus recommended a remedial course of action. This evidence, according to Panckhurst J, was “the best evidence of proper trustee practice at the time”.197 As such, the trustee company should have exercised an independent judgment, not deferred in the face of opposition to diversification by the widow (who was also the income beneficiary). Failing to do so constituted

189

Harries v Church Commissioners for England [1992] 1 WLR 1241 at 1247.

190

Re Mulligan (deceased) [1998] 1 NZLR 481 at 501 per Panckhurst J.

191

Nestle v National Westminster Bank plc [1993] 1 WLR 1260 at 1274–​1276 per Staughton LJ, at 1283–​1284 per Leggatt LJ; Daniel v Tee [2016] 4 WLR 115 at [156]–​[158] per Richard Spearman QC. Cf Dal Pont, “Conflicting Signals for the Trustees’ Duty to Invest” (1996) 24 ABLR 140 at 146–​149; Watt and Stauch, “Is There Liability for Imprudent Trustee Investment?” [1998] Conv 352.

192

Nestle v National Westminster Bank plc [1993] 1 WLR 1260 at 1276 per Staughton LJ.

193

Re Mulligan (deceased) [1998] 1 NZLR 481 at 500 per Panckhurst J.

194

Re Mulligan (deceased) [1998] 1 NZLR 481 at 501 per Panckhurst J.

195

Nestle v National Westminster Bank plc [1993] 1 WLR 1260 at 1284 per Leggatt LJ.

196

Re Mulligan (deceased) [1998] 1 NZLR 481.

197

Re Mulligan (deceased) [1998] 1 NZLR 481 at 503.

662 [22.215] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Duties of Trustees  Chapter  22

a breach of trust.198 As it was common ground that the share market provided the logical area of investment, there was no need to identify the best alternative economic use of the trust fund. What remained for his Honour to do was to assess the appropriate quantum of loss, for which he admitted expert evidence as to the proportion of the fund that should have been invested in shares, an inflation multiplier and a contingency reduction.199 That this approach lacks precision, generating what is at best an informed guess, is unavoidable, in dealing with events and practices over a lengthy period of time to which various contingencies attach. What the decision in Mulligan shows is that courts may, in an appropriate case, find a trustee liable for the gain he or she should have made in investing trust property and, to this end, may quantify the resultant loss to the trust fund by reference to the standard of a reasonable trustee similarly positioned. It is likely that an Australian court would have adopted a similar approach and reached a like conclusion. In a more blatant case, for example, involving a trustee who lent trust money to herself on uncommercial terms, Bryson AJ held that the trustee should be treated as accountable for the misappropriated money on the basis of what it could be expected to have produced had it been invested in the share market, and managed with reasonable prudence.200 Though conceding that use of a share index employed a seemingly “very broad brush”, following Mulligan his Honour was willing to quantify the loss in this fashion.

DUTY TO PAY CORRECT BENEFICIARIES Duty of trustee in the event of overpayment

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[22.225] The duty to pay the correct beneficiaries is most likely to surface in the event of

overpayment of a beneficiary. This in turn causes the trust fund to be insufficient to meet the entitlements of the remaining beneficiaries. Therefore, the trustee is subject to a further duty to recover the overpayment from the overpaid beneficiary’s share remaining in the trust estate, or from future receipts of income to which that beneficiary would otherwise be entitled.201 All the trust funds are treated as one fund for the purpose of adjusting the interests of overpaid and underpaid beneficiaries.202 If the overpaid beneficiary’s share remaining in the trust account, or future income, is insufficient to cover the amount overpaid, case authority is against the trustee being able to recover from the overpaid beneficiary due to the inequity or injustice to that beneficiary of this course.203 However, it is arguable that, with the developments of the law of restitution in

198

The trustees’ attempt to secure relief from the breach by resort to the court’s statutory jurisdiction to do so (as to which see [24.200]–​[24.215]) was rejected by Panckhurst J: Re Mulligan (deceased) [1998] 1 NZLR 481 at 506–​507. His Honour also rejected any claim by the trustee company for contribution from the widow’s estate: at 511.

199

Re Mulligan (deceased) [1998] 1 NZLR 481 at 509–​511.

200

Antill v Mostyn [2010] NSWSC 587 at [82].

201

Downes v Bullock (1858) 25 Beav 54 at 62; 53 ER 556 at 559 per Romilly MR; Merriman v Perpetual Trustee Co Ltd (1896) 17 LR (NSW) Eq 325; Church v Talbot (1901) 1 SR (NSW) Eq 13; Re McGaw (1904) 4 SR (NSW) 591; Re Powell (1907) 7 SR (NSW) 874; Harris v Harris (1919) 20 SR (NSW) 61; Macphillamy v Fox (1932) 32 SR (NSW) 427; Re Robertson [1953] VLR 685; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 227–​228 per Dowsett J. A similar principle applies in respect of beneficiaries who owe moneys to the trust estate; the trustee can deduct the amount owing from money falling due to the beneficiary as a means of satisfying the debt.

202

Macphillamy v Fox (1932) 32 SR (NSW) 427.

203

Merriman v Perpetual Trustee Co Ltd (1896) 17 LR (NSW) Eq 325; Perpetual Executors & Trustees Association v Simpson (1906) 27 ALT 179; Reid v Deane [1906] VLR 138; Davies v National Trustees Executors & Agency Co of Australasia Ltd [1912] VLR 397 at 409–​410 per Cussen J; Re Aspinall (1913) 30 WN (NSW) 215; Harris v Harris (1919) 20 SR (NSW) 61; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 228 per Dowsett J.

[22.225]  663 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

relation to payments made under mistake (see [8.105]–​[8.130]), the trustee should be able to pursue an overpaid beneficiary, who may plead one or more restitutionary defences (including change of position). In Western Australia the trustee is statutorily afforded relief subject to conditions: see [8.140]. Also, the conduct or involvement of the beneficiary may provide grounds for curial intervention. For instance, a beneficiary who induces the trustee to make a distribution to which he or she is not entitled may be ordered to restore to the trust fund the amount of the overpayment.204 Action by underpaid beneficiary [22.230]  An underpaid beneficiary may sue the trustee for breach of trust, and the trustee is

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liable to make good the loss caused by the wrongful payment. Limited statutory protection against the absoluteness of this duty is afforded to trustees.205 Also, an underpaid beneficiary may, in some circumstances, pursue an action in personam against the overpaid recipient if the trustee cannot meet the liability: see [24.130], [24.135].

204

Moody v Simpson (1895) 21 VLR 244; Davies v National Trustees Executors & Agency Co of Australasia Ltd [1912] VLR 397 at 409–​410 per Cussen J.

205

The trustee legislation in most jurisdictions: (a) protects trustees who act or pay money in good faith under a power of attorney from any liability arising by reason of the fact that at the time of the payment or act the person who gave the power of attorney was dead or had done some act to avoid the power, if the trustees did not know this at the time of so acting or paying; (b) protects trustees from claims if, having distributed the trust property on the termination of the trust, they have made the prescribed inquiries by way of published notices (see [25.160]); and (c) protects trustees against liability to pay calls on shares on the distribution of the trust estate or the transferring of the shares: ACT ss 58, 60, 61A; NSW ss 58, 60, 61A; NT s 22; Qld ss 66–​68, 70, 75; SA ss 29–​31; Tas s 26; Vic ss 32–​35; WA ss 62–​64, 67, 69.

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Chapter 23

Powers and Rights of Trustees POWERS OF TRUSTEES [23.05]  Powers vested in trustees can take the form of powers to appoint —​that is, powers

to distribute the trust income or capital to the beneficiaries —​or what may be described as management powers. The latter are directed at vesting in the trustee sufficient authority to carry out her or his functions to manage the trust property for the benefit of the beneficiaries. Powers to appoint are invariably prescribed in the trust instrument, and indeed go to the core of what a trust is about. Management powers are also frequently listed in the trust instrument, but may also be conferred by statute or the court. This chapter targets management powers, although the material dealing with trustee discretion (see [23.30]–​[23.75]) also has application in the context of powers to appoint. Powers of management are illustrated in this chapter by reference to powers of sale, and powers to maintain or advance in respect of a beneficiary. These are illustrative only, and are by no means exhaustive so far as trustees’ management powers are concerned.

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Sources of trustees’ powers

Powers conferred by the trust instrument [23.10]  Powers are usually conferred on the trustee by the trust instrument. Trust instruments

commonly specify trustee powers, for instance, the power to lend and borrow money, to vary investments, to deal with property, to pay costs and expenses, to carry on business, and so on. Care must be taken in drafting widely expressed grants of power to trustees, as the courts may construe such clauses restrictively.1 To avoid this a trustee can simply be granted the powers that a natural person of full legal capacity has by law. The powers conferred by the trust instrument will reflect the nature and duration of the trust created. For instance, a testamentary trust ordinarily calls for less extensive powers than an inter vivos trust. A trustee of an estate that includes a business requires different powers from a trustee of land or funds to be invested. Similarly, a trust for charitable purposes will confer a different range of powers from a private trust.

Powers exercisable only with the consent of a designated person [23.15] The trust instrument may, as a protective device, make certain powers exercisable

only with the consent of a designated person. For example, a settlor who seeks to preserve the

1

See, for example, Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149; Wilson v Metro-​Goldwyn-​ Mayer (1980) 18 NSWLR 730.

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Equity and Trusts in Australia

family business for desired family members may make the trustee’s power of sale subject to the beneficiaries’ consent. Whether or not a power to consent is conferred in a fiduciary capacity will depend on the nature of the power, evidenced by its terms construed in their context.2 Broadly speaking, if the power in question appears intended to benefit a person other than the person whose consent is stipulated, it is likely to be fiduciary and thus to be exercised for the benefit of that person.3 No such obligation arises where a person’s power to consent can be construed as intended for her or his exclusive benefit.4 The relationship of the donee of the power to the trusts may also be an important consideration, as explained in Blenkinsop v Herbert:5

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A power conferred on the trustee would ordinarily be conferred for the benefit of the beneficiaries as a whole, while a power conferred on a beneficiary is more likely to be conferred for the benefit of that beneficiary. A power conferred on a third party who is not a beneficiary, and who is otherwise unconnected with the administration of the trust, might ordinarily be viewed as being conferred on the donee as fiduciary. These considerations are just that: considerations; they are not determinative.

The nature and parameters of the power may prove a further relevant matter to probe. The consent power in Blenkinsop, for instance, was permissive rather than mandatory in its terms and nature, functioning in effect as a power of veto, and not expressed as requiring the donee to be “satisfied” or having formed an “opinion” as to a state of affairs. That power was, accordingly, very different from the active powers conferred on the trustee and the implicit duties associated with such active powers. The consent power gave an opportunity, without a duty, to the donee to exercise some measure of control over the otherwise very broad, and largely unchallengeable, discretions of the trustee. This, surmised the Western Australian Court of Appeal, made it “objectively unlikely that the settlor intended that the [donee] would have fiduciary duties superimposed on the effectual exercise of the discretionary powers conferred on the Trustee”.6 Of course, even if the power to consent is not conferred in a fiduciary capacity, the doctrine of fraud on a power proscribes its exercise in bad faith or for an object inconsistent with the power itself: see [8.50]–​[8.85]. No rule of law requires a consent to the exercise by trustees of a power to always precede or be contemporaneous with the exercise of the power. Unless the nature and object of the power and the relevant circumstances suggest that prior consent is a prerequisite of the effective exercise of the power, a later approbation may suffice.7

Relationship between powers conferred by trustee legislation and trust instrument [23.20]  In Victoria and Western Australia the trustee legislation states that, except in the face

of a specific provision to the contrary, powers conferred on the trustee by statute apply “so far only as a contrary intention is not expressed in the instrument”.8 The Tasmanian legislation 2

Blenkinsop v Herbert (2017) 51 WAR 264 at [70], [95] (CA).

3

Commonwealth v Colonial Combing, Spinning and Weaving Co Ltd (1922) 31 CLR 421 at 470 per Higgins J.

4

Perpetual Trustee Co Ltd v Cowan (No 2) (1900) LR (NSW) Eq 278.

5

Blenkinsop v Herbert (2017) 51 WAR 264 at [110] (CA) (footnotes omitted).

6

Blenkinsop v Herbert (2017) 51 WAR 264 at [124].

7

Perkins v Permanent Trustee Co Ltd (1923) 23 SR (NSW) 358 at 362–​363 per Street CJ.

8

Vic s 2(3); WA s 5(2) (individual as trustee), s 5(3) (company as trustee). The expression of a contrary intention excludes any contrary intention based on a mere inference or implication: Re Lesser [1954] VLR 435 at 439 per Dean J. To this end, if a fair reading of the trust instrument leads to the conclusion that the application is inconsistent with the purport of the instrument, this serves to oust a statutory power made subject to contrary intention: Inland Revenue Commissioners v Bernstein [1961] 1

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Powers and Rights of Trustees  Chapter  23

states that nothing in it authorises a trustee to do anything he or she is in express terms forbidden to do, or to omit to do anything he or she is in express terms directed to do, by the trust instrument.9 In the territories, New South Wales and South Australia the individual sections that confer a power frequently state that the power is subject to the trust instrument. In these jurisdictions the absence of such a provision dictates that the statutory power overrides anything in the trust instrument. The Queensland legislation also prescribes that, except where it provides otherwise, powers conferred on the trustee by statute are subject to the provisions of the trust instrument.10 However, the force of this provision is largely undermined by the fact that, at the commencement of each Part, it is generally provided that the powers listed in it apply whether or not a contrary intention is expressed in the trust instrument.11

Powers conferred by the court [23.25]  The court may, pursuant to its jurisdiction to intervene for reasons of “expediency”,

give trustees the necessary power to effect a transaction otherwise precluded by reason of a lack of a power for that purpose in the trust instrument: see [25.30]–​[25.55]. Exercise of trustees’ discretion

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[23.30]  The exercise of most powers contained in modern trust instruments is at the trustee’s

discretion. The trustee is often given powers equivalent to absolute ownership. But this does not allow a trustee to exercise the discretion in her or his own interests —​after all, these discretions are vested in a fiduciary capacity12 (see [22.70]) —​or to act on a whim. The trustee’s discretion must be exercised in accordance with the purpose for which it was conferred. It must not be exercised irresponsibly, capriciously or wantonly, as such conduct would not fulfil the required good faith and real and genuine consideration the exercise demands.13 Trustees must inform themselves, before making a decision, of matters relevant to the decision.14

All ER 320 at 325 per Lord Evershed MR; Re Gertsman (deceased) [1966] VR 45 at 55 per Pape J. Hence, in those jurisdictions where the statute uses the phrase “so far only as a contrary intention is not expressed in the instrument”, it is not necessary for the statutory powers to be excluded to find in the trust instrument any words of express prohibition precluding its application: Re Havill (deceased) [1968] NZLR 1116 at 1131 per Turner J; Clarke v Clarke [2002] WASC 73 at [20] per White AUJ. 9

Tas s 64. This construction operates to excludes the statutory power, not when its exercise would be inconsistent with the exercise in respect of the same subject matter of a power given by the trust instrument, but where its grant is inconsistent with the grant of the power contained in the trust instrument: Re Havill (deceased) [1968] NZLR 1116 at 1131 per Turner J.

10

Qld s 4(4).

11

Qld ss 7A, 10, 31(1), 60, 65, 79, 111 (with the exception of ss 21–​28: s 20).

12

That a trustee is also a beneficiary does not preclude discretionary powers conferred on the trustee (including powers in relation to the distribution of income or capital) from being fiduciary in character. But where the trustee is also a beneficiary and the trust instrument dispenses with the fiduciary “no conflict rule”, the trustee may distribute income or capital to herself or himself provided the power is exercised properly (that is, in good faith and for the purposes for which the power was given, including giving proper consideration to matters that are relevant and excluding from consideration matters that are irrelevant): Elovalis v Elovalis [2008] WASCA 141 at [70] per Buss JA.

13

Lutheran Church of Australia SA District Inc v Farmers’ Co-​operative Executors and Trustees Ltd (1970) 121 CLR 628 at 639 per Barwick CJ; Parkes Management Ltd v Perpetual Trustee Co Ltd (1977) 3 ACLR 303 at 311 per Hope JA; Karger v Paul [1984] VR 161 at 163–​165 per McGarvie J; Edge v Pensions Ombudsman [1998] Ch 512 at 533–​536 per Sir Richard Scott VC [affd Edge v Pensions Ombudsman [2000] Ch 602]; Esso Australia Ltd v Australian Petroleum Agents’ and Distributors’ Association [1999] 3 VR 642 at 652–​653 per Hayne J; Elovalis v Elovalis [2008] WASCA 141 at [63] per Buss JA.

14

Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 at 717 per Robert Walker J. It has been said that the duty of trustees properly to inform themselves is “more intense” in superannuation trusts than in ordinary private trusts: Finch v Telstra Super Pty Ltd (2010) 242 CLR 254 at [66] (FC). As to superannuation trusts see [28.20]–​[28.235].

[23.30]  667 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

A contemplation of the settlor’s state of mind is necessary. This does not preclude a trustee, however, looking beyond the words of the settlor, to the surrounding circumstances, including the acts and words of a person closely associated with the founding of the trust, to ascertain the objective he or she must effect in exercising the discretion.15

Court’s assessment of trustees’ discretion

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[23.35] As the relevant discretions are conferred by the trust instrument not on the court

but on the trustees, “the court can have no authority to usurp the functions so conferred on the trustees except where such a course is shown to be necessary in order to give effect to the intention evidenced by the terms of the trust instrument”.16 The most obvious situation requiring curial interference is where, in exercising a discretion to distribute trust income or capital (discretion “as to appointment”), the trustee makes a distribution to a person outside the class of beneficiaries (or objects) allowed.17 It has proven more challenging to identify useful guidelines for establishing when the intra vires exercise of a discretion may nonetheless justify curial interference. It is clear that an exercise of trustee discretion cannot be challenged solely on the ground that the court would not have reached the same conclusion(s) on the facts as the trustee, or that it generates an unfair outcome.18 More generally, a court will not interfere with trustee discretion in the absence of bad faith.19 A heavy onus accordingly lies on a person seeking curial review of a trustee’s discretion. This is also because in an imperfect world trustees do make decisions based on less than complete information and less than full analysis and discussion, meaning that “there is a real difficulty in formulating the test for determining when a decision is so flawed as to be invalid”.20 Too stringent a test may impose intolerable burdens on trustees, especially those who undertake heavy responsibilities for no financial reward, and add uncertainty as to what has and has not been validly decided. It follows that if a discretion is at large, the fact that it was exercised in a particular way “does not permit the drawing of a conclusion that the exercise of the discretion has miscarried”.21 Honest blundering, carelessness or even gross negligence in exercising a discretion does not amount to bad faith, though fraud or making a decision for an ulterior motive will.22 If a trustee suspects something is wrong, but refrains from further inquiry for fear of confirming that suspicion, this can amount to bad faith. There may be occasions where the court will intervene because it is satisfied that the trustee has not given real and genuine consideration to the exercise of the discretion. For example, a trustee who makes decisions in respect of the trust income or property relying solely on

15

Esquire Nominees Ltd v Federal Commissioner of Taxation (1972) 129 CLR 177 at 191 per Gibbs J.

16

Rapa v Patience (unreported, SC(NSW), McLelland J, 14 April 1985), at 15.

17

See, for example, BRK (Bris) Pty Ltd v Federal Commissioner of Taxation (2001) 46 ATR 347.

18

Edge v Pensions Ombudsman [1998] Ch 512 at 535–​536 per Sir Richard Scott VC [affd Edge v Pensions Ombudsman [2000] Ch 602].

19

Re Beloved Wilkes’s Charity (1851) 3 Mac & G 440 at 448; 42 ER 330 at 333 per Lord Truro LC; Tempest v Lord Camoys (1882) 21 Ch D 571 at 578 per Jessel MR, at 579 per Brett LJ, at 580 per Cotton LJ; Cock v Smith (1909) 9 CLR 773 at 829 per Isaacs J; Guazzini v Pateson (1918) 18 SR (NSW) 275 at 289 per Street CJ; Re Whitehouse [1982] Qd R 196 at 203–​204 per Macrossan J; Karger v Paul [1984] VR 161 at 165, 178 per McGarvie J; Edge v Pensions Ombudsman [1998] Ch 512 at 533–​534 per Sir Richard Scott VC [affd Edge v Pensions Ombudsman [2000] Ch 602]; Asea Brown Boveri Superannuation Fund No 1 Pty Ltd v Asea Brown Boveri Pty Ltd [1999] 1 VR 144 at 154–​157 per Beach J.

20

Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 at 718 per Robert Walker J.

21

Esso Australia Ltd v Australian Petroleum Agents’ and Distributors’ Association [1999] 3 VR 642 at 656 per Hayne J.

22

Gailey v Gordon [2003] 2 NZLR 192 at [89] per O’Regan J.

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Powers and Rights of Trustees  Chapter  23

directions or requests of another without referring to the terms of the trust does not exhibit real and genuine consideration.23 [23.40]  A court that assesses the trustee’s discretion will examine evidence of the inquiries the

trustee made, the information he or she had, and the reasons for,24 and manner of, the exercise of the discretion.25 In the usual case where intervention is justified, the court will set aside the errant exercise of discretion, and direct the trustee to re-​exercise the discretion correctly. However, the court can substitute its own decision for that of the trustee where it considers that the trustee is unlikely to properly fulfil the relevant duty.26 Discretion cannot be placed outside trustees’ obligations under their instrument of appointment or under the general law. For example, a clause that purports to make a trustee’s determinations binding on all interested parties and incapable of objection or questioning on any ground is void as an attempt to oust the court’s jurisdiction.27

Rule in Hastings-​Bass —​a wrong turn? [23.45]  English law pursued a foray into a further principle allowing interference with the

exercise of a trustee’s discretion. It was the so-​called “rule in Hastings-​Bass”, after a case of the same name, in which the English Court of Appeal made the following statement:28

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[W]‌here by the terms of a trust a trustee is given a discretion as to some matter under which he acts in good faith, the court should not interfere with his action notwithstanding that it does not have the full effect which he intended, unless (1) what he has achieved is unauthorised by the power conferred upon him, or (2) it is clear that he would not have acted as he did (a) had he not taken into account considerations which he should not have taken into account, or (b) had he not failed to take into account considerations which he ought to have taken into account.

Though decided in 1975, the application of this “rule” largely awaited the turn of the 21st century —​judicially described as “an emerging principle … still in an early stage of development”29 —​when it saw several applications as a means of rectifying the revenue law consequences of trustee mistakes. In Green v Cobham,30 for example, where the trustees failed to realise that appointing a trustee of a sub-​fund would cause the entire settlement to be resident in the United Kingdom for capital gains tax purposes, with adverse tax consequences, it was held that the trustees would not have appointed the new trustee had they taken into account the tax consequences, and so on the Hastings-​Bass principle the appointment was held void. And in Sieff v Fox31 Lloyd LJ was likewise inclined to rectify the exercise of trustee discretion generating adverse fiscal implications. There the trustees had sought professional advice as to the tax implications of exercising a power of appointment, which after the appointment was 23

See, for example, Turner v Turner [1984] Ch 100 at 109–​111 per Mervyn Davies J.

24

Trustees are not, however, legally obliged to disclose reasons for discretionary decisions: see [20.45], [20.50].

25

See Parkes Management Ltd v Perpetual Trustee Co Ltd (1977) 3 ACLR 303 at 311 per Hope JA; Karger v Paul [1984] VR 161 at 164, 178 per McGarvie J; Boe v Alexander (1987) 41 DLR (4th) 520 at 526–​527 per MacDonald JA.

26

Minehan v AGL Employees Superannuation Pty Ltd (1998) 134 ACTR 1 at 11–​12 per Gallop ACJ.

27

Re Baillie [1928] VLR 171.

28

Re Hastings-​Bass (deceased) [1975] Ch 25 at 41.

29

Breadner v Granville-​Grossman [2001] Ch 523 at 542, 543 per Park J. See also Abacus Trust Company (Isle of Man) Ltd v NSPCC [2001] WTLR 953 at 963 per Patten J (“the time may yet come when the limits of the Hastings-​Bass principle fall to be determined by some higher court”).

30

Green v Cobham [2000] WTLR 1101.

31

Sieff v Fox [2005] 1 WLR 3811.

[23.45]  669 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

made was discovered to be incorrect, exposing the object of the power to a substantial tax liability. Lloyd LJ allowed the trustees’ application for a declaration that the appointment was ineffective, reasoning that the consequences of the appointment as regards tax were matters the trustees were under a duty to consider, which they failed to consider properly because the advice they received was incorrect. Had the trustees received correct advice, they would not have made the appointment, and so the exercise of their discretion was ineffective.32

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[23.50]  At the same time, English judges warned against a broad application of the rule in

Hastings-​Bass. Park J in Breadner v Granville-​Grossman33 said that “[t]‌here must surely be some limits”, adding that “[i]t cannot be right that, whenever trustees do something which they later regret and think that they ought not to have done, they can say that they never did it in the first place”. Others also queried the “second bite” notion inherent in the Hastings-​Bass rule. In Re Barr’s Settlement Trusts34 Lightman J considered it insufficient to bring the rule into play that the trustees, due to ignorance or mistake, did not take into account a relevant consideration or took into account an irrelevant one. What was needed, said his Lordship, was that the trustees failed to consider what they were duty bound to consider. So the decision of trustees who identified the relevant considerations, and used care and diligence in obtaining the relevant information and advice relating to them, could not be impugned merely because that information proved partial or incorrect. Thus the rule could not apply where the trustee mistakenly understood that the settlor wished an appointment of income to extend to 60% of the trust fund when the settlor’s true intention was that it only extend to 40% of that fund. Judicial caution in applying the so-​called “rule” was coupled with a lack of certainty regarding two important aspects. The first was whether its effect was to make the exercise of the discretion void or only voidable. The latter option seemed sensible, as the likely lapse of time in cases invoking the rule meant that justice could only be effected were the decision successfully challenged under the rule voidable.35 Also, this aligned the rule with the principle that a decision challenged on grounds of breach of fiduciary duty is voidable.36 For these reasons, and against the face of (lower court) judicial statements to the contrary,37 the English Supreme Court later confirmed the correctness of the voidable approach.38 A second area of uncertainty targeted the test to be phrased in terms of whether, had the trustees taken the right matters into consideration, it would have materially affected their decision,39 or whether it might have done so.40 One judge suggested that in cases where the

32

Sieff v Fox [2005] 1 WLR 3811 at [114].

33

Breadner v Granville-​Grossman [2001] Ch 523 at 543.

34

Re Barr’s Settlement Trusts [2003] Ch 409 at [23].

35

Cf Nolan and Conaglen, “Trustee “(In)discretion” [2006] CLJ 15 at 17–​18 (who suggest that the actions should be void where the trustees act outside their authority but that, in the usual case where the Hastings-​Bass principle is called into play —​where trustees act on the basis of a flawed decision —​their actions should be voidable).

36

Mitchell, “Reining in the Rule in Re Hastings-​Bass” (2006) 122 LQR 35 at 42.

37

See, for example, Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at 1624 per Warner J; Green v Cobham [2000] WTLR 1101 (discussed at [23.45]); AMP (UK) plc v Barker [2001] PLR 77 at 96 per Lawrence Collins J (“the language of the cases strongly suggests that the application of the principle leads to the act being void rather than voidable”).

38

Pitt v Holt [2013] 2 AC 108 at [93] per Lord Walker, describing Lloyd LJ’s preference in the court below (Pitt v Holt [2012] Ch 132 at [99]; see also Lloyd LJ’s earlier remarks in Sieff v Fox [2005] 1 WLR 3811 at [79]) as “plainly right”. See also Abacus Trust Company (Isle of Man) v Barr [2003] Ch 409; Ogden v Trustees of the RHS Griffiths 2003 Settlement [2009] Ch 162.

39

See, for example, Re Hastings-​Bass (deceased) [1975] Ch 25 at 41.

40

See, for example, AMP (UK) plc v Barker [2001] PLR 77 at 96 per Lawrence Collins J.

670 [23.50] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

beneficiary is entitled to require the trustees to act41 it may suffice to vitiate the trustees’ decision to show that they “might” have acted differently, but that in all other cases the “would” test should apply.42 More recently, the English Supreme Court has spoken against any rigid rule in this regard, fearing that it “would inhibit the court in seeking the best practical solution in the application of the Hastings-​Bass rule in a variety of different factual situations”.43 What seemed clear was that the so-​called “rule in Hastings-​Bass” was distinguishable from the doctrine of rectification in equity. The latter, where ordered by the court, functions to alter the wording of a document so that it ceases to say what it had mistakenly been expressed to say and instead says what it had been intended to say: see [37.65]. A correct version is substituted for the incorrect version stemming from the mistake. The courts recognised, to this end, that where a correction in the wording of documents is sought, rectification remained the appropriate remedy, and not the ostensibly less demanding process of an application under the Hastings-​Bass principle.44

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[23.55]  In its application in the revenue law context, the value of the Hastings-​Bass principle

seemed to be in giving trustees some protection from being sued for an ostensibly negligent exercise of discretion, or in eschewing the need to sue professional advisers who gave incorrect advice. But this counters the basic notion that those who commit the legal wrong should bear responsibility for it.45 The English Court of Appeal, in its 2011 decision in Pitt v Holt,46 also influenced by the concerns underscoring the potential application of a “rule” with ostensibly malleable boundaries, put a practical stop to its application in instances where trustees allegedly failed to take into account a relevant factor or took into account an irrelevant one. Their Lordships, albeit in separate judgments, declared that the law had taken a “seriously wrong turn”47 in applying Hastings-​Bass in this context. The court saw the statement from Hastings-​ Bass extracted at [23.45] as merely obiter, and limited to its factual situation involving trustees considering an advancement by way of sub-​settlement. Lloyd LJ explained the “true principle” as follows:48 The purported exercise of a discretionary power on the part of trustees will be void if what is done is not within the scope of the power … By contrast with [this type] of case …, if an exercise by trustees of a discretionary power is within the terms of the power, but the trustees have in some way breached their duties in respect of that exercise, then (unless it is a case of a fraud on the power) the trustees’ act is not void but it may be voidable at the instance of a beneficiary who is adversely affected … If no relevant person takes any steps to have such an act by the trustees set aside, then it is as valid and effective as if there had been no vitiating factor. In that respect the position is the same as if a transaction is procured by misrepresentation, undue influence or fraud.

41

As in Kerr v British Leyland (Staff) Trustees Ltd [2001] WTLR 1071 (decided in 1986); Stannard v Fisons Pension Trust Ltd [1991] 1 PLR 225.

42

See Sieff v Fox [2005] 1 WLR 3811 at [77] per Lloyd LJ. Cf Nolan and Conaglen, “Trustee “(In)discretion” [2006] CLJ 15 at 17; Mitchell, “Reining in the Rule in Re Hastings-​Bass” (2006) 122 LQR 35 at 41–​42.

43

Pitt v Holt [2013] 2 AC 108 at [92] per Lord Walker.

44

Smithson v Hamilton [2008] 1 WLR 1453 at [63], [66] per Sir Andrew Park.

45

Hence the observation that “[i]‌nstead of seeking solace in mistake, beneficiaries should sue those at fault:  either trustees who have breached their duties, or advisers who have been negligent”: Davies, “Correcting Mistakes: Wither the Rule in Re Hastings-​Bass” [2011] Conv 406 at 421.

46

Pitt v Holt [2012] Ch 132.

47

Pitt v Holt [2012] Ch 132 at [227] per Longmore LJ.

48

Pitt v Holt [2012] Ch 132 at [96], [99], [100] (paragraph breaks omitted).

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Equity and Trusts in Australia

His Lordship then addressed the specific scenario, common to several former applications of Hastings-​Bass, where trustees’ exercise of a discretionary power generated an unintended tax consequence. If the trustees took competent professional advice, Lloyd LJ considered that they could not be liable for a breach of trust. In these circumstances the trustees would meet their standard of care, a point he explained as follows:49 [I]‌f the trustees fulfil their duty of skill and care by seeking professional advice (whether in general or in specific terms) from a proper source, and act on the advice so obtained, then (in the absence of any other basis for a challenge) they do not commit a breach of trust even if, because of inadequacies of the advice given, they act under a mistake as to a relevant matter, such as tax consequences. In the absence of a breach of trust, the trustees’ act is not voidable.

But aside from circumstances where the trustees properly seek and follow competent professional advice, his Lordship couched the trigger for the exercise of the trustees’ discretion —​ where allegedly vitiated by a failure to take into account a relevant matter, or taking something irrelevant into account —​being voidable at the instance of the persons affected in terms of whether the trustees’ act was a breach of fiduciary duty. To be voidable, Lloyd LJ said, the act “must be shown to have been done in breach of a fiduciary duty of the trustees”50 and, to this end, he branded the duty to take relevant, and no irrelevant, matters into account as a fiduciary duty. Yet it is difficult to conclude that every occasion in which trustees breach this duty involves the disloyalty that lies at the core of a fiduciary breach; to the contrary, in most if not all of the preceding cases on Hastings-​Bass, what generated the litigation was “negligence” of trustees as opposed to acting in a conflict of interest situation.

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[23.60] The re-​ direction heralded by the English Court of Appeal in Pitt v Holt was

affirmed when the case came before the Supreme Court.51 There Lord Walker noted that “[i]‌t is a striking feature of the development of the Hastings-​Bass rule that it has led to trustees asserting and relying on their own failings, or those of their advisers, in seeking the assistance of the court”, and agreed with Lloyd LJ’s remark that “in general it would be inappropriate for trustees to take the initiative in commencing proceedings of this nature”.52 What ensues with this affirmation is that if trustees make mistakes grounded in an incorrect appreciation of tax consequences, scope for relief derives from equitable doctrine surrounding mistake, not any Hastings-​Bass rule. The law in England has been clarified as a result, by restoring the orthodoxy in this field (as well as directing the liability for a wrong at the person responsible). Yet its “careless” use of the fiduciary label, also subsisting through the speech of Lord Walker in the Supreme Court, is unfortunate. Not all duties owed by trustees are fiduciary duties, and therefore not all breaches of duty are fiduciary breaches. Australian law has, in any event, resisted the temptation to apply the Hastings-​Bass rule as formerly understood.53 It is now even less likely that the Hastings-​Bass principle will see application in this jurisdiction.

49

Pitt v Holt [2012] Ch 132 at [222].

50

Pitt v Holt [2012] Ch 132 at [222]. See also at [235]–​[238] per Mummery LJ.

51

Pitt v Holt [2013] 2 AC 108.

52

Pitt v Holt [2013] 2 AC 108 at [69], referring to Pitt v Holt [2012] Ch 132 at [130].

53

See Maclean, “Sieff v Fox and the Rule in Re Hastings-​Bass” (2006) 80 ALJ 561; Edmundson, “Setting Aside Trustees’ Decisions: How Secure is the Rule in Hastings-​Bass?” (2008) 31 Aust Bar Rev 36; Campbell, “Should the ‘Rule in Hastings-​ Bass’ be Followed in Australia? Trustees’ Duty to Enquire and Trustees’ Mistakes” (2011) 34 Aust Bar Rev 259.

672 [23.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

Relevance of beneficiaries’ views: general law [23.65]  Beneficiaries cannot direct trustees in the performance of their trust.54 Were the ben-

eficiaries, even if sui juris and representing all the beneficial interests under the trust, able to make trustees exercise their discretion, this would illegitimately fetter the trustees’ discretion: see [22.40]. Unless required to do so by the terms of the trust or by statute, trustees are not obliged to consult the beneficiaries in exercising their discretion or to give reasons for their decisions, although trustees may accede to beneficiary requests where these do not dictate conduct inconsistent with the best interests of the trust.55 [23.70]  At general law, those who may be adversely affected by the exercise of a discretionary

power are not usually entitled to an opportunity to make representations to the trustees before the trustees exercise their discretion.56 Robert Walker J in Scott v National Trust for Places of Historic Interest or Natural Beauty57 queried this point in an obiter suggestion that the trustee of a discretionary trust who has over an extended period paid a set amount to an impoverished beneficiary, and who elects to discontinue the payment, should afford the beneficiary the opportunity to persuade the trustee to continue the payment, at least temporarily, in order to reflect the beneficiary’s legitimate expectation. Though this notion is novel, and inconsistent with repeated curial denials of any role of administrative law concepts of natural justice in the trustee-​beneficiary relationship,58 its has witnessed obiter endorsement by an Australian judge.59

Relevance of beneficiaries’ views: statutory modification

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[23.75] The traditional view expressed at [23.65] is modified in Queensland and Western

Australia by the trustee legislation, which allows a person with a vested or contingent interest in trust property60 who is aggrieved by, or has any grounds to apprehend to be aggrieved by, any act, omission or decision of a trustee, to apply to the court for a review or directions in respect of the act, omission or decision.61 The court may require the trustee to substantiate the grounds for the impugned act, omission or decision. As per the general law, where the (proposed) exercise 54

Re Brockbank [1948] Ch 206 at 209–​210 per Vaisey J; Walker v Willis [1969] VR 778 at 782 per Lush J; Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 at 889 per Walton J; Hespe v Surfers Paradise Forests Ltd (1985) 10 ACLR 182 at 192 per Carter J; Quinton v Proctor [1998] 4 VR 469 at 471 per Kellam J; Burns v Steel [2006] 1 NZLR 559 at [61]–​ [71] per Randerson J; Kowalski v MMAL Staff Superannuation Fund Pty Ltd (No 3) [2009] FCA 53 at [83] per Finn J (who remarked that while it is a trustee’s duty to act in the interests of its beneficiaries, absent an express power of dictation, “a trustee is not the pawn of a beneficiary”).

55

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 431 per Mahoney JA, at 442–​445 per Sheller JA; X v A [2000] 1 All ER 490 at 496 per Arden J. Cf Burns v Steel [2006] 1 NZLR 559 at [69] per Randerson J.

56

Karger v Paul [1984] VR 161.

57

Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705 at 718.

58

Karger v Paul [1984] VR 161 at 166 per McGarvie J; Stuart v Armourguard Security Ltd [1996] 1 NZLR 484 at 506 per McGechan J; Mercanti v Mercanti (2016) 50 WAR 495 at [239] per Buss P. Cf Esso Australia Ltd v Australian Petroleum Agents’ and Distributors’ Association [1999] 3 VR 642 at 652 per Hayne J; Butler, “The Legitimate Bounds of a Trustee’s Discretion” (1999) 11 Bond L Rev 14 (who criticises any requirement for natural justice concepts in trust proceedings generally but suggests a very limited exception in the context of superannuation trusts).

59

Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 at 605 per Young J. See also McEwen v Combined Coast Cranes Pty Ltd (2002) 44 ACSR 244 at 251 per Young CJ in Eq (remarking that there is probably no reason in principle why the “legitimate expectation” learning in connection with oppression in companies should not apply in the case of trusts “because equity is flexible enough to deal with unconscionable conduct in any appropriate way”).

60

An applicant under family provision legislation has a sufficient interest to have standing under the legislation: Re Faulkner [1999] 2 Qd R 49 at 52 per Moynihan J.

61

Qld s 8(1); WA s 94(1) (but note that, unlike its Queensland counterpart, it is limited to persons who have an interest in the trust property, and so does not extend to objects of a discretionary trust). See Hardingham and Baxt, Discretionary Trusts (2nd ed, Butterworths, 1984), [515]; Rickett, “Reviewing a Trustee’s Act, Omission or Decision under s 68 of the Trustee Act 1956” [1990] NZ Recent L Rev 69 (dealing with the equivalent New Zealand provision).

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Equity and Trusts in Australia

of trustee discretion is examined, the court may consider the purpose for which the discretion was conferred, and whether it is was exercised with an absence of indirect motive, honesty of intention and a fair consideration of the subject.62 Where solely the accuracy of the trustee’s conclusion is in issue, the applicant must present cogent reasons to sustain the challenge.63 In the Australian Capital Territory and South Australia the trustee legislation requires trustees of a trust established wholly or partly for charitable purposes to have regard to written information, representations or advice by:64 • a person named in the trust instrument as a person who is entitled to, or may, receive money or other property for the purposes of the trust; • a person who is named in the trust instrument as a person who may or must be consulted by the trustees before distributing or applying money or property for the purposes of the trust; • a person who has in the past received money or property from the trustees for the purposes of the trust; or • a person of a class the trust is intended to benefit. Powers of sale [23.80]  A power of sale vests in the trustee only under an express or implied authority. This

is because the trustee’s primary duty is to preserve the trust property in specie for the beneficiaries’ benefit. The authority to sell may be conferred by the trust instrument, by statute, by the court or by all beneficiaries, being of full legal capacity.

Authority to sell conferred by the trust instrument

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[23.85] The trust instrument may expressly or by implication contain a power of sale, the

breadth of which rests on a process of construction. Trustees with a broad power of sale may adopt any proper and reasonable method of effecting a prompt sale at the best price.65 It is usual for trustees to invite competition for the sale of trust property, having fixed a reserve price after informing themselves of its value through a competent valuer.66 The trustees may, moreover, structure the sale transaction to generate the best price. For example, where the trustees hold shares in two or more trusts, and selling them as one parcel can attain a higher price, the trustees may do so and divide the additional profit between the trust funds proportionately.67 Similarly, a sale of trust property may be effected on terms, subject to sufficient safeguards against purchaser default.68 62

Edington v Board of Trustees of the State Public Sector Superannuation Scheme [2015] QSC 245 at [55] per Bond J.

63

Re Koczorowski [1974] Qd R 177 at 183–​186 per Dunn J; Re Whitehouse [1982] Qd R 196 at 203–​204 per Macrossan J; Wendt v Orr [2004] WASC 28 at [56] per Commissioner Johnson QC [revd without addressing this point: Orr v Wendt [2005] WASCA 199]; Edington v Board of Trustees of the State Public Sector Superannuation Scheme [2015] QSC 245 at [63] per Bond J (noting that the object of the provision “is not the substitution of a judge’s opinion for that of a trustee” and “is not a general merits review of the trustee’s decision”). Cf Neagle v Rimmington [2002] 3 NZLR 826 at 838 per Paterson J; Burns v Burns [2008] QSC 173.

64

ACT s 106 (inserted by the Justice and Community Safety Legislation Amendment Act 2003 (ACT), with effect from 31 March 2003); SA s 9A (inserted by the Statutes Amendment (Trusts) Act 1999 (SA), with effect from 18 October 1999).

65

Clay v Clay (1999) 20 WAR 427 at 443 (FC).

66

Re Cooper & Allen’s Contract for Sale to Harlech (1876) 4 Ch D 802 at 816 per Jessel MR.

67

Re Wilkinson (No 2) [1924] SASR 156.

68

Permanent Trustee Co v Angus (1917) 17 SR (NSW) 364.

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Powers and Rights of Trustees  Chapter  23

A power of sale is implied where, by reason of the nature of the trust property and the settlor’s instructions as to its application, the court can reasonably conclude that it is necessary to carry out the provisions of the trust document. For example, in Seelander v Rechner69 a direction in a will empowering the trustees to act according to their best opinion for the benefit and welfare of the beneficiaries was held to confer a power of sale. Further examples where a power of sale was implied include a direction to distribute a trust estate,70 a direction that a trust fund be equally divided between given beneficiaries,71 and a trust to invest personalty in freehold property.72 [23.90]  The settlor may prescribe limitations on the trustees’ power of sale; for instance, a

direction not to sell trust property until the expiration of the term of a lease;73 a direction to trustees to transfer property if the majority of the beneficiaries so desire;74 or a direction that the property be first offered for sale to a specified person.75 That a restriction is void for illegality does not generally taint the validity of the power of sale.76

Trusts for sale

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[23.95]  A trust for sale imposes an immediate binding duty to sell trust property, its object

being to sell the property and use the proceeds as a fund for the benefit of the beneficiaries (usually the testator’s family) as a whole.77 Whether there is a trust for sale or a discretionary power to sell is a question of construction of the trust instrument as a whole to determine the intention of the settlor or testator. A discretion to pay, convey or assign does not generally trigger a trust for sale.78 Nor do the precatory words “it is my express wish” create a binding obligation to sell if this is inconsistent with the tenor of the remainder of the trust instrument.79 Yet nor does the use of imperative words give rise to a trust for sale if the terms of the trust instrument indicate that the trustees enjoy a discretion to sell if they think fit.80 At the same time, although the clause dealing with the sale of trust property may be phrased in discretionary terms, a trust for sale may exist where, on the face of the trust instrument,

69

Seelander v Rechner (1884) 18 SALR 82.

70

Altson v Equity Trustees, Executors and Agency Co (1912) 14 CLR 341 at 345 per Griffith CJ.

71

Re Jones [1917] QSR 74; Grant v Grant (1914) 14 SR (NSW) 271; Will of Edwards (1926) 22 Tas LR 1; Pagels v MacDonald (1936) 54 CLR 519. Cf Re McInnes [1925] VLR 496; Sivewright v Casey (1949) 49 SR (NSW) 294.

72

Re Moffitt (1910) 11 SR (NSW) 202.

73

National Trustees, Executors & Agency Co of Australia v McGuigan (1900) 28 VLR 273.

74

Re Patane [1957] QSR 529.

75

Estate of Cummings [1964] SASR 236; Re O’Brien (1971) 2 SASR 9.

76

Re Raphael (1903) 3 SR (NSW) 196.

77

Historically, trusts for sale were commonly used to settle realty on trust for successive beneficiaries with the object of avoiding the common law regime of settled land. The aim of settled land legislation was to vest in the person having the interest in possession (the life tenant) the power to sell the fee simple in the bulk of the settled land. The use of trusts for sale would ensure that the trustee, rather than the tenant for life, made any sale, the trustee usually being conferred the power to postpone sale until the time desired by the settlor. In Tasmania and Victoria legislation of this kind remains in place: Settled Land Act 1884 (Tas); Settled Land Act 1958 (Vic). In New South Wales, the Northern Territory and South Australia the tenant’s power of sale is available with recourse to the court: Conveyancing and Law of Property Act 1898 (NSW), Pt 4; Settled Estates Act 1880 (SA) (which also applies in the Northern Territory). In Queensland and Western Australia the trustee legislation operates to declare all property which formerly came within the definition of “settled land” to be trust property: Qld s 5; WA s 6.

78

Dykes v Archer (1906) 2 Tas LR 1.

79

Re Altson [1955] VLR 281.

80

Estate of Cummings [1964] SASR 236.

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Equity and Trusts in Australia

there is an obvious intention as to render a sale necessary for the purposes of the trust.81 For example, where perishable property is given for life with remainders over, the court will order its conversion and investment absent a direction for sale in the trust instrument.82 The duty to sell unaccompanied by a power to postpone sale (see [23.105]) requires the trustee to sell as soon as a fair price is obtained.83 The duty must be exercised within a reasonable time, the trustee being entitled to use a reasonable discretion in its determination. The court may, however, permit the trustees to defer the sale of trust property to avoid “a most disastrous sacrifice”.84 A trust to sell “with all convenient speed” is inconsistent with a power to postpone sale; the trustees are bound by a duty to sell at the first favourable opportunity. In King v Berndt Holroyd J explained the trustees’ duty in such circumstances:85 I think that, by the words “with all convenient speed”, a certain discretion is confided to [the trustees] as to postponing the sale, if it is manifest, or they have good grounds for believing, that the postponement would prevent the property from being sacrificed … [The trustees] ought, moreover, as far as possible, to keep their discretion open, and not to put it for a definite period out of their power to sell, although an opportunity of selling at a fair price should offer.

Statutory authority to sell

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[23.100]  The trustee legislation in Queensland and Western Australia gives every trustee the

power to sell trust property, subject to contrary intention in the trust instrument,86 and provides for miscellaneous powers in respect of property.87 In all jurisdictions except the Northern Territory and Tasmania the trustee legislation authorises trustees to sell trust property in circumstances where they have the power to pay or apply capital moneys.88 Of the jurisdictions that do not confer a broad power of sale, it is the Australian Capital Territory and New South Wales legislation that gives trustees for sale the broadest powers.89 All jurisdictions bestow upon trustees with an existing power of sale the power to: sell to any other person any part of the property together or in lots by public auction or private contract;90 sell on terms of deferred payment (except the Northern Territory and Tasmania);91 and sell on “unnecessarily depreciatory” terms.92

81

Langdon v Korff (1885) 2 WN (NSW) 47; Re Austin’s Settlement [1960] VR 532.

82

Williamson v Smalley (1887) 13 VLR 428 at 429 per Webb J.

83

George v McDonald (1992) 5 BPR 11,659 at 11,668 per Waddell CJ in Eq.

84

Harrison, Jones & Devlin Ltd v Union Bank of Australia Ltd (1909) 10 SR (NSW) 266 at 278 per A H Simpson CJ in Eq. See also National Trustees Executors and Agency Co Ltd v Johnson (1892) 18 VLR 386.

85

King v Berndt (1902) 27 VLR 519 at 521.

86

Qld ss 4(4), 32; WA ss 5(2), 27.

87

Qld s 33; WA s 30.

88

ACT s 38(1); NSW s 38(1); Qld s 45; SA s 28b(1); Vic s 20(1); WA s 43(1). In some jurisdictions an exception is made for charitable trusts: ACT s 38(3); NSW s 38(2); SA s 28b(3); Vic s 20(2).

89

ACT s 26; NSW s 26. Moreover, trustees may sell trust property where necessary to pay rates, taxes and statutory charges: ACT s 38(2); NSW s 38(1A).

90

ACT s 26(2); NSW s 26(2); NT s 14(1); Qld s 34(1); SA s 20(1); Tas s 16(1); Vic s 13(1); WA s 31.

91

ACT s 28 (limited to land); NSW s 28 (limited to land); Qld s 37 (any property); SA s 23A (limited to land); Vic s 17 (limited to land); WA s 34 (any property).

92

ACT s 30; NSW s 30; NT s 15; Qld s 35; SA s 21; Tas s 17; Vic s 15; WA s 32. Under the general law a trustee must not sell trust property on terms that have the effect of depreciating its value, unless there are reasonable grounds for doing so: Dance v Goldingham (1873) LR 8 Ch App 902.

676 [23.100] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

[23.105] The trustee legislation in the Australian Capital Territory, New South Wales and

Victoria implies a power to postpone sale in every trust for sale, subject to contrary intention.93 In Queensland and Western Australia every trustee has a power to postpone sale (albeit with some exceptions in respect of property of a wasting, speculative or reversionary nature).94 In each of the foregoing jurisdictions, it is further provided that, pursuant to this power, the trustee is not liable for postponing sale for any indefinite period unless the trust instrument dictates otherwise.95 Where a power to postpone sale exists, the duty remains to sell at a fair price within a reasonable time. The trustee’s discretion must be exercised in good faith and by reference to relevant considerations. These may include the rights of beneficiaries inter se, economic reasons and difficulty in sale. This must be balanced against the duty to sell, which remains the dominant consideration.96

Authority to sell conferred by the court [23.110] The court may authorise a trustee to sell trust property if this is “expedient” in

the management or administration of the trust but the trust instrument or statute does not bestow (or may even deny) a power of sale: see [25.30]–​[25.55]. If a contract of sale is entered into conditionally on obtaining the court’s sanction, no sale can be effected until it is so sanctioned.97 Powers of maintenance and advancement

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[23.115]  A beneficiary whose entitlement to the trust capital is contingent on attaining the

age prescribed by the trust instrument may, before attaining that age, request from the trustee a capital sum (“advancement”)98 or some day-​to-​day money (“maintenance”).99 The power of the trustee to make payments for maintenance and advancement of under-​age (or even other) beneficiaries is commonly stated in express terms in trusts of this kind: see [20.120]. At general law a trustee’s power to make payments for maintenance is, in general, limited to payments from the income of the trust fund.100 Yet the trustee legislation, other than in

93

ACT s 27B(1); NSW s 27B(1); Vic s 13(5).

94

Qld s 32(1)(c); WA s 27(1)(c).

95

ACT s 27B(2); NSW s 27B(2); Qld s 32(4); Vic s 13(6); WA s 27(5).

96

Benjamin v Sanders (1891) 17 VLR 68; Ward v Trustees, Executors & Agency Co Ltd (1893) 14 ALT 274; Cain v Watson [1910] VLR 256; Re Charteris [1917] 2 Ch 379; Re Wilkinson [1924] SASR 47; Perpetual Trustee Co Ltd v Noyes (1925) 25 SR (NSW) 226; Re Morish [1939] SASR 305.

97

Re Longworth [1965] NSWR 481 at 485 per McLelland CJ in Eq.

98

The term “advancement” traditionally referred to the establishment in life of the beneficiary or at any rate some step that would contribute to the furtherance of her or his establishment: Brooke v Brooke (1911) 3 OWN 52 (where Middleton J suggested that the term points to some occasion out of the everyday course, when the beneficiary has in mind some new act or undertaking that calls for pecuniary outlay and which, if properly conducted, holds out a prospect of something beyond a mere transient benefit or employment); Pilkington v Inland Revenue Commissioners [1964] AC 612 at 634 per Viscount Radcliffe; Clay v Clay (1999) 20 WAR 427 at 461 (FC) (“maintenance” denotes a periodical payment whereas “advancement” denotes a definite unique outlay for a specific purpose); Re Gerbich [2002] 2 NZLR 791 at 796 per Hammond J (noting that originally the conception was payment for purposes such as starting a person in a business or in a profession, paying apprenticeship fees, or supplying capital to allow a business to be carried on).

99

The term “maintenance” is of wide import and is not limited to bare subsistence expenses: Public Trustee v Larkman (1999) 21 WAR 295 at 307 per White J. It may include food, clothing, custody, safe conduct, transport, lodging, care, medicine and other necessaries: Hayne v Hayne (1994) FLC ¶92-​512 at 81,296 per Mullane J. In Re Bremer [1986] 2 NZLR 53, however, Bisson J held that the school boarding fees for the plaintiff were not for her “maintenance”, but for her “education and benefit”.

100

Public Trustee v Larkman (1999) 21 WAR 295 at 304–​305 per White J.

[23.115]  677 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

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Tasmania, empowers trustees to apply trust income for the beneficiaries’ maintenance, education or benefit.101 In Queensland, South Australia, Victoria and Western Australia the income can also be applied for their advancement. Accumulation is required if part of the available fund is not expended for the benefit of the object of the maintenance power. The provisions dealing with accumulations aim to ensure that an infant receives the accumulation only if he or she survives to attain a vested interest or marries.102 These statutory provisions are subject to any expression of contrary intention in the trust instrument.103 The power to apply trust capital for maintenance, education, advancement or benefit104 is read into all trust instruments by trustee legislation (except Tasmania, where it is limited to advancement or benefit).105 Where a person is entitled to the capital of the trust fund, the trustee may pay or apply any of the trust capital not exceeding a prescribed amount for that person’s advancement or benefit.106 The trust instrument may modify or exclude this statutory power except in Queensland.107 Trustees must therefore ascertain whether a power to advance found in the trust instrument expressly or impliedly excludes the statutory power. For example, where the trust instrument provides for the maintenance and education of a beneficiary, this in itself does not serve to exclude the statutory powers of advancement.108 Powers of maintenance and advancement are similar to powers of appointment only in the sense that both are processes by means of which interests in property are transferred from a person (usually a trustee) to another. But they differ in substance because an object of a power of appointment (a beneficiary under a discretionary trust is an example) commonly has no interest in the trust property until the appointment is made, whereas a power of maintenance

101

ACT s 43; NSW s 43; NT s 24; Qld s 61; SA s 33; Vic s 37; WA s 58. “Benefit” is defined broadly, and has been held to include such diverse things as purchasing an outfit (Re Welch (1854) 23 LJ Ch 344), furnishing a house (Perry v Perry (1870) 18 WR 482), the payment of debts (Lowther v Bentinck (1874) LR 19 Eq 166) and the payment of a tax (Klug v Klug [1918] 2 Ch 67). In Perpetual Trustee Co Ltd v Smith (1906) 6 SR (NSW) 542 Walker J held that the payment or application of trust capital may be for the benefit of an infant beneficiary who has a vested interest to pay her or his debts out of the trust property in order to preserve that interest, even though it is liable to be divested on bankruptcy before distribution. The purchase of a dwelling house for infant beneficiaries to live in with their parents has been held to be a proper exercise of this statutory power: Re Lesser (deceased) [1947] VLR 366.

102

ACT s 43(7)–​43(9); NSW s 43(6)–​43(8); NT s 24(2); Qld s 61(2); SA s 33(4)–​33(6); Vic s 37(2); WA s 58(2).

103

ACT s 43(11); NSW s 43(10); NT s 24(3); Qld s 61(7) (limited to inconsistencies with s 61(2)); SA s 33(8); Vic s 2(3); WA s 5(2). In Re Gertsman (deceased) [1966] VR 45 at 50–​57 Pape J noted that where the trust instrument defines the payments that may be made out of income for the maintenance and education of a beneficiary, this represents a contrary intention excluding the statutory powers. See also Re Nathan [1938] VLR 72 at 75 per Macfarlan J; Re Watts [1949] VLR 64 at 67–​68 per Fullagar J; Re Lesser [1954] VLR 435 at 439 per Dean J. Cf Re Brenner [1986] 2 NZLR 53 at 56–​57 per Bisson J (statutory powers applied to the extent that not inconsistent with the trust instrument).

104

The phrase “advancement or benefit” means “any use of the money which will improve the material situation of the beneficiary”: Pilkington v Inland Revenue Commissioners [1964] AC 612 at 634 per Viscount Radcliffe. See also Public Trustee v Larkman (1999) 21 WAR 295 at 306 per White J; Re Gerbich [2002] 2 NZLR 791 at 797 per Hammond J (noting that the term “benefit” serves to enlarge the term “advancement”).

105

ACT s 44; NSW s 44; NT s 24A; Qld s 62; SA s 33A; Tas s 29; Vic s 38; WA s 59. As to the resettlement of trust property by using the statutory power of advancement see [25.95].

106

In the Australian Capital Territory and New South Wales the prescribed amount is one-​half of the value of the property or share: ACT s 44(1); NSW s 44(1). In the Northern Territory, Queensland, Victoria and Western Australia payments that exceed the greater of $2000 or half the capital may not be made under the legislation: NT s 24A(1); Qld s 62(1); Vic s 38(1); WA s 59(a). The prescribed amount in South Australia and Tasmania is half the share of the share or interest of the beneficiary in question: SA s 33A(1); Tas s 29(1)(a).

107

ACT s 44(7); NSW s 44(7); NT s 24A(2); SA s 33A(6); Vic s 2(3); WA s 5(2). See also Re Gertsman (deceased) [1966] VR 45 at 50–​57 per Pape J. The proposition in the text can arguably be inferred in the absence of a reference to this point in the Tasmanian legislation. In Queensland the power applies irrespective of anything to the contrary in the trust instrument: Qld s 60.

108

Re Gertsman (deceased) [1966] VR 45 at 50–​57 per Pape J.

678 [23.115] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

or advancement is directed to benefit a person who has an interest, whether vested or contingent, in the property concerned, albeit one not yet enjoyed in possession.109

RIGHTS OF TRUSTEES Right to indemnity (and exoneration) [23.120] As the legal owner of the trust property, and given that a trust is not a separate

entity (see [16.05]), a trustee is personally liable for debts incurred in performing the trust. There are, in this sense, no debts of “the trust”110 (although trustees may limit their liability by contract: see [27.25]). However, because trustees manage the trust property for the benefit of the beneficiaries, they can resort to that property to satisfy debts properly incurred on the trust’s behalf. The right of “indemnity” has been branded “an incident of trusteeship that enables a trustee to act in the best interests of the trust in an impartial and disinterested manner with some assurance that his personal financial position will not be prejudiced”.111 It is recognised both at general law112 and by the trustee legislation.113 Instead of expending her or his own funds and subsequently seeking indemnity, the trustee may alternatively discharge liabilities directly out of the trust property where this is permitted (“right of exoneration”).114 The said right (collectively described in terms of “indemnity” below except where different principles apply vis-​à-​vis exoneration) accrues the moment the obligation or liability is incurred,115 extends to bare trustees116 and to trustees under resulting trusts.117

Nature of the right [23.125] The right of indemnity is supported by a security interest in the trustee over the

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trust assets taking the form of an equitable lien (sometimes referred to as an equitable charge, though it arises by implication of law rather than by agreement).118 This security interest

109

Kain v Hutton [2008] 3 NZLR 589 at [32], [33] per Blanchard J (who also delivered the reasons of Elias CJ, McGrath and Anderson JJ), at [55]–​[61] per Tipping J.

110

Harpur v Levy (2013) 9 ASTLR 496 at [112] per Whelan J.

111

Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 at 444 per McPherson JA.

112

Worrall v Harford (1802) 8 Ves 4 at 8; 32 ER 250 at 252 per Lord Eldon LC; National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 277 per Williams J; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324–​325 per Latham CJ, at 335–​336 per Dixon J; Trautwein v Richardson [1946] ALR 129 at 134–​135 per Dixon J; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 per Stephen, Mason, Aickin and Wilson JJ; Re Enhill Pty Ltd [1983] 1 VR 561 at 567–​569 per Lush J.

113

ACT s 59(4); NSW s 59(4); NT s 26; Qld s 72; SA s 35(2); Tas s 27(2); Vic s 36(2); WA s 71.

114

Johnson v Salvage Association (1887) 19 QBD 458 at 460 per Lindley LJ; Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170 at 1197 per O’Connor J; Grime Carter & Co Pty Ltd v Whytes Furniture (Dubbo) Pty Ltd [1983] 1 NSWLR 158 at 160–​161 per McLelland J; Re Suco Gold Pty Ltd (in liq) (1983) 33 SASR 99 at 104–​105 per King CJ; Garra Water Investments Pty Ltd (in liq) v Ourback Yard Nursery Pty Ltd (2012) 279 LSJS 582 at [26] per Gray J.

115

De Santis v Aravanis (2014) 227 FCR 404 at [102] per Farrell J (remarking that the obligation was incurred “at the time the borrowing is made, even though principal, interest and other charges may only become due and payable periodically; the indemnity is a continuing right from the time the obligation is incurred which can be enjoyed as exoneration or recoupment depending on how the trustee responds in satisfying the obligation”; on the facts, as the trustee’s right of indemnity conferring a proprietary interest in the relevant property predated the trustee’s bankruptcy, that right became part of his bankrupt estate when he became bankrupt: at [105]).

116

Garra Water Investments Pty Ltd (in liq) v Ourback Yard Nursery Pty Ltd (2012) 279 LSJS 582 at [37] per Gray J.

117

Iscorp Investments Pty Ltd v Yohana [2011] NSWSC 1387 at [39] per Rein J. As to resulting trusts see Ch 26.

118

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 per Stephen, Mason, Aickin and Wilson JJ; Commissioner of Australian Federal Police v Cornwell (1990) 98 ALR 677 at 681–​682 per Burchett J. As the charge arises by operation of law, a corporate trustee need not register the charge under companies legislation: Corporations Act 2001 (Cth), s 262(2). Nor

[23.125]  679 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

applies to all trust assets in the trustee’s possession, except those that under the terms of the trust instrument the trustee is not authorised to use for the purposes of carrying on the activity for which the debt was incurred.119 Until the right of indemnity has been satisfied, it follows, “it is impossible to say what the trust fund is”.120 The right itself does not, however, depend on the taking of final accounts between the trustee and beneficiaries.121 In the context of a trustee seeking an indemnity for expenses incurred in carrying on the trust business, the High Court in Octavo Investments Pty Ltd v Knight explained:122 In such a case there are then two classes of persons having a beneficial interest in the trust assets: first, the [beneficiaries], those for whose benefit the business was being carried on; and secondly, the trustee in respect of his right to be indemnified out of the trust assets against personal liabilities incurred in the performance of the trust. The latter interest will be preferred to the former, so that the [beneficiaries] are not entitled to call for a distribution of trust assets which are subject to a charge in favour of the trustee until the charge has been satisfied.

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Accordingly, for trust property from which the trustee is entitled to be indemnified, the trustee holds not only legal ownership but an equitable interest to the extent of the amount the subject of the indemnity. So, to the extent that the assets held by the trustee are subject to an unsatisfied indemnity, they are not trust assets or trust property “in the sense that they are held solely upon trusts imposing fiduciary duties which bind the trustee in favour of the beneficiaries”.123 This does not mean that the assets corresponding to the unsatisfied indemnity are not trust assets at all, or that the trustee’s “interest” equates to full beneficial ownership;124 no trust would otherwise remain should the quantum of an unsatisfied right of indemnity prove to exceed the trust property.125 Rather, the issue is one of priority in relation to trust assets. As explained by Nettle J in Karingal 2 Holdings Pty Ltd v Commissioner of State Revenue:126

is it subject to registration under the personal property securities regime, as it does not apply to “a lien, charge, or any other interest in personal property, that is created, arises or is provided for by operation of the general law”:  Personal Property Securities Act 2009 (Cth), s 8(1)(c). See also D’Angelo and Busljeta, “The Trustee’s Lien or Charge Over Trust Assets: A PPSA Security Interest or Not? (2011) 22 JBFLP 251 (who, in any event, maintain that the trustee’s lien is not ordinarily a security interest for this purpose because there is no transaction or grantor, and no obligation is secured, but countenance that if the trust instrument purports to displace the general law lien with its own security interest, the personal property securities regime may apply vis-​à-​vis personal property as part of the trust estate). 119

Dowse v Gorton [1891] AC 190.

120

Dodds v Tuke (1884) 25 Ch D 617 at 619 per Bacon VC.

121

Holli Managed Investments Pty Ltd v Australian Securities Commission (1998) 30 ACSR 113 at 124 per Finkelstein J.

122

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 per Stephen, Mason, Aickin and Wilson JJ. See also Re Staff Benefits Pty Ltd [1979] 1 NSWLR 207 at 213 per Needham J; Re Enhill Pty Ltd [1983] 1 VR 561 at 563 per Young CJ, at 567–​569 per Lush J; Kemtron Industries Pty Ltd v Commissioner of Stamp Duties (Qld) [1984] 1 Qd R 576 at 585–​587 per McPherson J; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 223 per Dowsett J; Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486 per Anderson J; Re Matheson (1994) 121 ALR 605 at 608–​609 per Spender J; Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 246–​247 (FC); X v A [2000] 1 All ER 490 at 496 per Arden J.

123

Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 246 (FC).

124

Brereton J in Re Stansfield DIY Wealth Pty Ltd (in liq) (2014) 291 FLR 17 at [19] described the trustee’s equitable interest arising out of the right to indemnity as “in the nature of a hypothecation, and does not equate to beneficial ownership”.

125

This is because otherwise the equitable and legal title to trust property would merge at the moment at which the unsatisfied right of indemnity exceeded the trust property. As to merger see [16.05].

126

Karingal 2 Holdings Pty Ltd v Commissioner of State Revenue (2002) 51 ATR 190 at 207 [revd on appeal without casting doubt on this point:  CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98]. See also Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 246–​247 (FC); Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 41 ATR 29 at 41 per Mason P; Arjon Pty Ltd v Commissioner of State Revenue (2003) 8 VR 502 at [62] per Phillips JA (although not all appearing in this paragraph survives the High Court’s decision in CPT Custodian, above); Newcastle Airport Pty Ltd v Chief Commissioner of State Revenue (2014) 99 ATR 748 at [96] per White J; Re MINMXT Holdings Pty Ltd (in liq) [2017] NSWSC 156 at [23] per Barrett AJA.

680 [23.125] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

A trustee whose only claim in respect of trust assets is a right of indemnity does not in that sense hold trust assets on trust for himself beneficially. He holds the assets on trust beneficially for the beneficiaries, albeit subject to a right, which is treated in equity as proprietary, to satisfy obligations out of the trust fund. The existence of the right of indemnity, proprietary though it may be, is not sufficient to change the essential nature of the beneficial interests which are held for the beneficiaries.

As a security interest, the trustee’s interest is imposed on top of the beneficiaries’ rights only for the purposes of enforcement.

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[23.130] Ordinarily the trustee can simply exercise a right of indemnity against available

trust funds without assistance from the court. After all, “a trustee in office who has recourse to the trust assets to be exonerated or recouped for liabilities properly incurred does so by virtue of its legal ownership of the assets, not by enforcing a security against them”.127 And should the liquid assets of the trust be insufficient to satisfy the indemnity, a trustee with a power to sell trust property can exercise that power for the purposes of satisfying the indemnity, again without resort to the court. The position is otherwise where the trustee has no power of sale; in this event, he or she must rely on the equitable lien or charge underscoring the indemnity to supply standing to apply to the court to enforce that interest by way of sale.128 The characterisation of the trustee’s right of indemnity as in the nature of a lien or charge is apt for two main other reasons. The first surfaces in the event of a change of trustee; as the trustee with the right of indemnity no longer has ownership or possession of the trust assets, he or she secure an indemnity out of trust assets by exercising the rights of legal ownership. The right, to this end, survives the trustee’s loss of office (say, by retirement or removal).129 In such a case the former trustee’s claim for indemnity lies against the trustee in whom the trust assets are (now) vested, the new trustee taking the trust property subject to the predecessor trustee’s right of indemnity.130 Whether or not a trustee who is about to lose office is able to retain the trust property —​against both the beneficiaries and any new trustee(s) —​until its indemnity is satisfied is the subject of conflicting authority.131 One view is that the trustee’s right of indemnity, being in the nature of a lien, carries no entitlement to possession of the property; as the trustee is protected due to the lien surviving the termination of trusteeship, there is no justification for the trustee to hold the trust property for “ransom” pending its

127

Newcastle Airport Pty Ltd v Chief Commissioner of State Revenue (2014) 99 ATR 748 at [78] per White J.

128

Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226 at 246–​247 (FC); Apostolou v VA Corporation Aust Pty Ltd (2010) 77 ACSR 84 at [38]–​[46] per Finkelstein J.

129

Coates v McInerney (1992) 7 WAR 537 at 538–​539 per Anderson J; Dimos v Dikeakos Nominees Pty Ltd (1996) 149 ALR 113; Rothmore Farms Pty Ltd v Belgravia Pty Ltd [1999] FCA 745 at [37], [42] per Mansfield J; Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162 at [30] per McLure JA; Trim Perfect Australia Pty Ltd (in liq) v Albrook Constructions Pty Ltd [2006] NSWSC 153; Ronori Pty Ltd v ACN 101 071 998 Pty Ltd [2008] NSWSC 246 at [15] per Barrett J; Australian Capital Territory Commissioner for Revenue v Slaven (2009) 178 FCR 334 at [52] per Rares J; Northey v Juul [2014] NSWSC 464 at [84]–​[92] per Slattery J (including charges and expenses properly incurred after retirement); Park & Muller (liquidators of LM Investment Management Ltd) v Whyte [2015] QSC 287 at [56]–​[74] per Jackson J. As to the retirement and removal of trustees see [21.95]–​[21.130].

130

Williams v Hathaway (1877) 6 Ch D 544 at 551 per Jessel MR; Cummins v Perkins [1899] 1 Ch 16 at 19–​20 per Lindley MR; Kemtron Industries Pty Ltd v Commissioner of Stamp Duties (Qld) [1984] 1 Qd R 576 at 587 per McPherson J; Re Indopal Pty Ltd (1987) 12 ACLR 54; Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 487 (CA); Collie v Merlaw Nominees Pty Ltd (in liq) (2001) 37 ACSR 361 at 370 per Warren J [affd Nolan v Collie (2003) 7 VR 287]; Ronori Pty Ltd v ACN 101 071 998 Pty Ltd [2008] NSWSC 246 at [18] per Barrett J.

131 See Loxton, “In With the Old, Out With the New? The Rights of a Replaced Trustee Against its Successor, and the Characterisation of Trustees’ Proprietary Rights of Indemnity” (2017) 45 ABLR 285.

[23.130]  681 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

indemnity being met.132 The opposing view is that, subject to a court order to the contrary, a trustee should not be compelled, by the new trustee(s) or the beneficiaries, to reduce the worth of its security interest.133 Possession of property over which a security interest exists, after all, presents a stronger claim than where possession is lost. The second reason underscores the passing of the trustee’s right to indemnity to the trustee-​ in-​bankruptcy or liquidator where the trustee is insolvent,134 with a corresponding entitlement to enforce the charge by way of appointing a receiver or seeking a curial order for sale. The same applies vis-​à-​vis a trustee’s creditors, who may likewise be subrogated to her or his charge,135 provided that the trustee incurred the debts in a trustee capacity and that a judgment against the trustee, if obtained, would be fruitless.136 The subrogation is wholly derivative; if the trustee’s right is in any way restricted, the creditors’ right of subrogation will likewise be restricted.137 But a creditor, liquidator or trustee-​in-​bankruptcy would in the first instance ordinarily proceed against the trustee to recover debts due; the right to access trust assets via subrogation is inchoate unless the trustee is insolvent or it is otherwise reasonable to assume that obtaining a judgment against the trustee would be pointless.138

Expenses the subject of the trustee’s indemnity [23.135]  As the right of indemnity dictates that the trust property meets the trustee’s expenses

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and liabilities, there must be a check on the expenses and liabilities incurred. The check is that those expenses and liabilities must be properly incurred;139 improperly incurred expenses or liabilities fall outside the right of indemnity on the trustee personally.140 Provided a debt is properly incurred, the right of indemnity is not denied merely because the trustee in incurring it did not disclose that he or she was doing so in the capacity of trustee.141 A  “mere slip” or “error of judgment” will not prevent an expense from being properly incurred,142 given the judicial admonition that “properly incurred” equates to “not improperly incurred”.143 132

Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550 at [23]–​[50] per Brereton J.

133

Apostolou v VA Corporation Aust Pty Ltd (2010) 77 ACSR 84 at [50], [51] per Finkelstein J; Prior v Simeon (No 2) [2011] WASC 61.

134

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 per Stephen, Mason, Aickin and Wilson JJ.

135

Re Johnson (1880) 15 Ch D 548 at 552–​553 per Jessel MR; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367 per Stephen, Mason, Aickin and Wilson JJ; Re Staff Benefits Pty Ltd [1979] 1 NSWLR 207 at 213 per Needham J; Re Enhill Pty Ltd [1983] 1 VR 561 at 568 per Lush J; Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 223 per Dowsett J; Agusta Pty Ltd v Provident Capital Ltd (2012) 16 BPR 30,397 at [70] per Barrett JA, with whom Campbell JA and Sackville AJA concurred (noting that “[b]‌efore a trustee actually pays debts that have given it a preferred beneficial interest in the trust assets, the interest enures for the benefit of the unpaid creditors”). As to the doctrine of subrogation see [14.05]–​[14.120].

136

Re Wilson [1942] VLR 177 at 180–​182 per O’Bryan J; Corozo Pty Ltd v Total Australia Ltd [1987] 2 Qd R 11 at 18–​20 per Connolly J.

137

Marginson v Potter (1976) 11 ALR 64 at 75 per Jacobs J.

138

Deancrest Nominees Pty Ltd v Nixon (2007) 25 ACLC 1681 at [49] per Newnes J; Zen Ridgeway Pty Ltd v Adams [2009] 2 Qd R 298 at [13] per Wilson J.

139

Turner v Hancock (1882) 20 Ch D 303 at 305 per Jessel MR; Re Beddoe [1893] 1 Ch 547 at 558 per Lindley LJ; Nolan v Collie (2003) 7 VR 287 at [44]–​[57] per Ormiston JA. Statements in Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) (2002) ATPR ¶41-​864 that appear to cast doubt on the requirement that expenses be properly incurred to come within the indemnity should be viewed in the context of tortious liability rather than indicating any change in the law: Nolan v Collie (2003) 7 VR 287 at [44]–​[50]. See further Aitken, “A Liability ‘Properly Incurred’? The Trustee’s Right to Indemnity, and Exemption from Liability for Breach of Trust” (2011) 35 Aust Bar Rev 53.

140

Re O’Donoghue [1998] 1 NZLR 116 at 121 per Hammond J; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 606 per Finkelstein J.

141

JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 706 per Santow J.

142

Nolan v Collie (2003) 7 VR 287 at [54]–​[56] per Ormiston JA.

143

Re Beddoe [1893] 1 Ch 547 at 558 per Lindley LJ.

682 [23.135] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

It follows that a trustee may be entitled to an indemnity in respect of one set of expenses but not another; to determine whether a trustee can be indemnified in respect of multiple claims, the circumstances giving rise to each liability require separate investigation.144 If called upon, the trustee must show that the expense for which he or she seeks to be indemnified arose out of acts within the scope of the trusteeship, and that its incurrence (and quantum) was “reasonable”.145 If the expense appears regular enough, though, the burden of proving unreasonableness falls on the party alleging it.146 Expenses that are, on their face, properly incurred include those authorised by the trust deed, statute or the general law, such as general outgoings associated with land held in trust, and expenses of carrying on a business where this is authorised.147 However, no right of indemnity exists at general law vis-​à-​vis trustee remuneration148 unless the trust instrument creates a security interest to this effect or there is otherwise an agreement to create a charge over trust property for that remuneration.149

Enforceability of right of indemnity against beneficiaries [23.140]  A trustee’s right of indemnity may be enforceable against a beneficiary of full capac-

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ity.150 The right is of two types: a right against the trust property itself, and an additional right to proceed against a beneficiary personally for recoupment.151 The latter stems from the Privy Council’s advice in Hardoon v Belilios,152 its rationale being the unfairness of a person who benefits from property or a transaction (that is, a beneficiary) not bearing all or a proportionate part of the burden associated with it.153 In practice, this right is usually only exercised once the trustee, or a person subrogated to the trustee,154 has exhausted the right to indemnity out of the trust estate.155

144

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 604 per Finkelstein J.

145

The statutory expression of the trustee’s general law right to indemnity makes no reference to the expense or liability being “reasonably” incurred (other than in Queensland and Western Australia), granting the right for “all expenses incurred in or about the execution of the trusts or powers”. As the statutory expression is intended to replicate the general law, it must be read according to the general law concepts of propriety and reasonableness.

146

Re O’Donoghue [1998] 1 NZLR 116 at 122 per Hammond J.

147

Ex parte Garland (1803) 10 Ves 110; 32 ER 786; Savage v Union Bank of Australia Ltd (1906) 3 CLR 1170; Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 324 per Latham CJ; RWG Management Ltd v Commissioner for Corporate Affairs (Vic) [1985] VR 385 at 393–​400 per Brooking J. See Hughes, “The Right of a Trustee who Carries on Business to Indemnity out of Trust Property” (1991) 19 ABLR 5.

148

Perpetual Trustees WA Ltd v Kelly (1993) 8 WAR 480 at 486–​487 per Anderson J.

149

See, for example, Southern Wine Corporation Pty Ltd (in liq) v Frankland River Olive Co Ltd (2005) 31 WAR 162.

150

See Hughes, “The Rights of a Trustee to a Personal Indemnity from Beneficiaries” (1990) 64 ALJ 567.

151

Balkin v Peck (1998) 43 NSWLR 706 at 710 per Mason P.

152

Hardoon v Belilios [1901] AC 118.

153

Balkin v Peck (1998) 43 NSWLR 706 at 712 per Mason P. This rationale informs the doctrines of contribution (see [14.125]) and marshalling (see [14.215]).

154

See, for example, J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891 (liquidator being subrogated: see [27.50]); Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 at 443–​444 per McPherson JA (creditor subrogated where the beneficiaries had notice of the creditor’s claim when they arranged for the trust assets to be paid to themselves, thus enriching themselves at the expense of satisfying the creditor’s claim against the trustee).

155

J W Broomhead (Vic) Pty Ltd (in liq) v J W Broomhead Pty Ltd [1985] VR 891 at 936 per McGarvie J. This does not mean that it is a prerequisite to any such action that proceedings against the trustee be exhausted. The point was confused by the Queensland Court of Appeal in Belar Pty Ltd (in liq) v Mahaffey [2000] 1 Qd R 477 at 487, where it said that the right to proceed directly against the beneficiaries depends upon exhaustion of any remedy against the trustee. This is correct under the Re Diplock action and its Queensland statutory equivalent (see [24.135]), which applies in respect of distributions of trust property incorrectly made to beneficiaries who are volunteers. This does not ordinarily involve the exercise of a trustee’s right of indemnity (although it may: see Bayer v Balkin (1995) 31 ATR 295, discussed at [23.145]), for it cannot be assumed in the ordinary case that the insolvency of the trustee is a result of incorrect distributions to the beneficiaries. In Belar a former trustee claimed to be indemnified by the beneficiaries personally for liabilities properly incurred in the execution of the trust.

[23.140]  683 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

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A sole beneficiary of full legal capacity and absolutely entitled is an evident candidate to fulfil the equitable personal obligation to indemnify the trustee.156 In the event of multiple beneficiaries, suggestions have been made, though not necessarily justified in principle,157 that to establish personal liability more is needed than the beneficiaries being of full legal capacity and absolutely entitled. What may attract the liability here is that the beneficiaries requested or approved the expenditure, or that the trustee carried on a business established to benefit the beneficiaries even absent a specific request.158 It may be sufficient if two or more beneficiaries have requested a person to become trustee for them.159 In each case, the court is guided by the Hardoon v Belilios principle, which emphasises the need for facts that make it just for a person who incurred an expense to be reimbursed by another.160 It is arguable on this broader basis that circumstances may exist in which the right of indemnity does not rest on all beneficiaries being of full legal capacity, but only on those of full legal capacity. But the Hardoon v Belilios principle cannot, it has been held, extend so far as to allow recovery of the trust debt from a person who owns or controls a corporate beneficiary.161 Nor does it accrue against the objects of a discretionary trust, whose right is not proprietary (see [20.125]). In any event, inherent in the discretionary trust is the difficulty of identifying to what extent each beneficiary should be liable to indemnify the trustee. While it is not beyond the realm of possibility that a discretionary trust, if established to benefit specific beneficiaries who can collectively terminate the trust (see [25.145]), could come within the mischief to which the rule in Hardoon v Belilios is directed, this would be an unlikely scenario given the way discretionary trusts are usually structured and drafted. The most common use of the principle, rather, is vis-​à-​vis beneficiaries of a unit trust, the trustee of which carries on a business on their behalf, and incurs debts it cannot repay.162 Even here it cannot be assumed that persons who subscribed to units after a debt was incurred should necessarily be held to indemnify the trustee for that debt in the event of the trustee’s insolvency;163 the court is guided by what it considers to be a just result in each case. [23.145] An interesting application of the relevant principle is found in Bayer v Balkin.164

There the plaintiff trustees (who also acted as solicitors to the trust) distributed the trust property between three beneficiaries. Three years later they became aware of an unsatisfied tax liability associated with the realisation of the trust property preceding its distribution.

The court rejected the claim on three grounds; first, the evidence failed to establish the existence of trust assets; secondly, the former trustee had not exhausted its remedies against the continuing trustee; and thirdly, the former trustee failed to prove that the debts in question were reasonably incurred in the execution of the trust. Only the third ground withstands close analysis: at 488–​489. The first ground presupposes that the right of indemnity against the beneficiaries is limited to the extent to which trust assets are available to satisfy the claim. This lacks sense in that it is precisely because trust assets are insufficient that the claim is made against the beneficiaries. The second ground assumes that the proceeding involved a Re Diplock-​type action, which was not open on the facts in question. 156

Hardoon v Belilios [1901] AC 118; Quindo Pty Ltd v Queensland Drilling Ltd (unreported, SC(WA), Commnr Hasluck QC, 26 September 1989). See Ford, “Trading Trusts and Creditor Rights” (1981) 13 MULR 1 at 7.

157

See Hughes, “The Rights of a Trustee to a Personal Indemnity from Beneficiaries” (1990) 64 ALJ 567 at 572–​575.

158

Countryside (No 3) Pty Ltd v Best [2001] NSWSC 1152 at [38] per Davies AJ; Ford, “Trading Trusts and Creditor Rights” (1981) 13 MULR 1 at 7–​8. Cf Balkin v Peck (1998) 43 NSWLR 706 at 713–​714 per Mason P.

159

Matthews v Ruggles-​Brise [1911] 1 Ch 194; Buchan v Ayre [1915] 2 Ch 474 at 477–​478 per Sargant J.

160

Countryside (No 3) Pty Ltd v Best [2001] NSWSC 1152 at [39] per Davies AJ.

161

Chief Commissioner of State Revenue v CCM Holdings Trust Pty Ltd [2014] NSWCA 42 at [74]–​[76] per Gleeson JA.

162

See, for example, J W Broomhead (Vic) Pty Ltd (in liq) v J W Broomhead Pty Ltd [1985] VR 891, discussed at [27.50].

163

See, for example, Countryside (No 3) Pty Ltd v Best [2001] NSWSC 1152 at [44] per Davies AJ.

164

Bayer v Balkin (1995) 31 ATR 295.

684 [23.145] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

The trustees paid the tax liability, for which they sought an indemnity from the beneficiaries. Cohen J held that:165 When that sale took place, the proceeds of it were held by the trustees for the [beneficiaries]. They alone had the benefit of the trust and accordingly it was they who, upon receiving the proceeds of sale, were liable to indemnify the trustees for the expenditure incurred relating to those trust assets.

However, that indemnity did not extend to the interest charged by the relevant taxing authority as a result of the delay in paying the tax because this delay was caused by the trustees’ own mistake. The interest therefore did not represent a liability properly incurred in the circumstances.166 The decision was upheld on appeal,167 Mason P noting that it is no objection to say that the trustees should or could have recouped the liability out of the trust property when it was in their hands, as the “personal right is distinct from the right of indemnity out of trust assets”. So even though the trustees might have pursued the beneficiaries before settling with the tax authorities, they “were not bound to do so on pain of loss of their right”.168 The case reflects, it has been said, the broader principle that:169 … where the entire trust assets have been distributed, and the trustees subsequently incur a liability incidental to their administration of the trust, their right of indemnity against trust assets extends to entitle them to recover assets that remain identifiable and traceable from a recipient, other than a bona fide purchaser for value without notice.

Breach of trust and improper incurrence

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[23.150]  The trustee’s right to indemnity may be denied or reduced in respect of expenses or

liabilities not properly incurred.170 Also, a clear breach of trust relating to the subject matter of the indemnity ordinarily debars a trustee from this right.171 Otherwise a trustee would be entitled to expenses arising out of her or his own misconduct.172 But the law recognises, as a qualification to the foregoing, that a trustee is entitled to be indemnified in respect of a liability improperly incurred “to the extent to which, acting in good faith, he has benefited the trust estate”.173 This assumes that the improper payment or expense resulted in a benefit to the estate “of at least equivalent value”; it is not enough that it, in some undefined way, benefited the estate.174 A trustee who breaches trust cannot claim recoupment before providing compensation for that breach.175 If the amount of the indemnity claimed exceeds what is due by way of compensation, the trustee may recover from the trust estate to the extent of the excess.176

165

Bayer v Balkin (1995) 31 ATR 295 at 300.

166

Bayer v Balkin (1995) 31 ATR 295 at 301.

167

Balkin v Peck (1998) 43 NSWLR 706.

168

Balkin v Peck (1998) 43 NSWLR 706 at 714.

169

Grizonic v Suttor [2011] NSWSC 471 at [66] per Brereton J.

170

Re O’Donoghue [1998] 1 NZLR 116 at 122 per Hammond J.

171

Re Staff Benefits Pty Ltd [1979] 1 NSWLR 207 at 214 per Needham J.

172

Re O’Donoghue [1998] 1 NZLR 116 at 121–​122 per Hammond J.

173

RWG Management Ltd v Commissioner for Corporate Affairs (Vic) [1985] VR 385 at 396 per Brooking J.

174

Beath v Kousal [2010] VSC 24 at [24], [43] per Kaye J.

175

McEwan v Crombie (1883) 25 Ch D 175; Doering v Doering (1889) 42 Ch D 20; Holli Managed Investments Pty Ltd v Australian Securities Commission (1998) 30 ACSR 113 at 124 per Finkelstein J.

176

RWG Management Ltd v Commissioner for Corporate Affairs (Vic) [1985] VR 385 at 397–​398 per Brooking J.

[23.150]  685 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

The trustee’s right of indemnity may be improved by the terms of the trust. It is common to find provisions authorising a trustee to recover expenses incurred in respect of unauthorised transactions, provided they have been entered into honestly or in good faith.177 For example: The Trustees when acting in good faith shall be entitled to be indemnified out of the assets for the time being comprising the Trust Fund in respect of all liabilities incurred by them relating to the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions hereof or by virtue of being the Trustees hereof.

Ouster of indemnity by the trust instrument [23.155]  Whether the right of indemnity can be denied or reduced by the terms of the trust

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instrument depends on the jurisdiction. In Queensland the statutory right applies irrespective of anything to the contrary in the trust instrument.178 This is also likely to be the position in the Australian Capital Territory, New South Wales and South Australia, where the legislation does not make the right of indemnity subject to the trust instrument.179 In the remaining jurisdictions the trustee legislation envisages that the right can be excluded or modified by the terms of the trust instrument.180 There is logic in this. After all, it is established that a trust instrument can limit the trustee’s right of indemnity to a specific part of the trust assets,181 as well as exclude any right of the trustee to claim an indemnity against the beneficiaries personally (see [27.55]). Even in the face of legislation ostensibly allowing the ouster of the right of indemnity, there nonetheless remains debate as to whether the right is so intrinsic to the nature of a trust that its exclusion could deny the existence of the trust.182 Yet were this so, one would expect it be clearly reflected by statute, whereas in four jurisdictions the opposite appears. The right of indemnity is arguably different in nature to other “core” elements of a trust,183 such as, say, the need for a beneficiary to enforce the trust (see [17.95]). Indeed, as it is possible to exclude liability for non-​fraudulent breach of trustees’ duties while not imperilling a trust’s existence (see [24.145]), it stands to reason that to exclude, where this is statutorily permitted, 177

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566 at 606 per Finkelstein J.

178

Qld s 65. See also Kemtron Industries Pty Ltd v Commissioner of Stamp Duties (Qld) [1984] 1 Qd R 576 at 585 per McPherson J; Jessup v Queensland Housing Commission [2002] 2 Qd R 270 at 275 per McPherson JA (the right of indemnity is so central to the nature of trusteeship that its consistency with the type of relationship created by the parties may be an important indicator of whether the parties intended to create a trust).

179

Moyes v J & L Developments Pty Ltd (No 2) (2007) 250 LSJS 61 at [40] per Debelle J (who reasoned that the Trustee Act 1936 (SA) does not contain any other provision which qualifies the operation of s 35(2), which served not only in the interests of trustees and beneficiaries but also in the public interest recognising, among other things, that the indemnity available to a trustee will also avail creditors of the trust). In the Australian Capital Territory and New South Wales this conclusion can be supported by the fact that the indemnity entitlement is set by s 59(3), which provides that nothing in s 59(1) or 59(2) “shall prejudice the provisions of the instrument, if any, creating the trust”. See Agusta Pty Ltd v Provident Capital Ltd (2012) 16 BPR 30,397 at [38] per Barrett JA, with whom Campbell JA and Sackville AJA concurred.

180

NT s 26; Tas s 64(2); Vic s 2(3); WA s 5(2), 5(3) (see Franknelly Nominees Pty Ltd v Abrugiato (2013) 10 ASTLR 558 at [212]–​[216] per Buss JA, with whom McLure P and Newnes JA concurred).

181

See Re Ballman (1804) 10 Ves Jun 110 at 119–​122; 32 ER 786 at 789–​790 per Lord Eldon LC; Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773 at 774 per Glass JA, at 778 per Mahoney JA.

182

Cf JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 706, 713 per Santow J (“the better view is that (apart from statute) a trustee may not by agreement exclude the right of indemnity from the trust estate which arises as a necessary incident of the office of trustee … [T]‌he rights of reimbursement and exoneration arises a necessary incident of holding the office of trustee and are integral to the institution of a trust and for the benefit not only of the trustee, but also its creditors, whether or not aware they are dealing with a trust”); Edmundson, “Express Limitation of a Trustee’s Rights of Indemnity” (2011) 5 J Eq 77 (who catalogues the case law, and explains how at general law the position is unclear).

183

See Franknelly Nominees Pty Ltd v Abrugiato (2013) 10 ASTLR 558 at [239] per Buss JA, with whom McLure P and Newnes JA concurred (remarking that “it does not follow, as a matter of logic, from the source of a trustee’s right of indemnity in equity (namely, the nature of the office of trustee) or from that right being ‘inseparable’ from the office of trustee, that the right of indemnity may not be excluded or released”).

686 [23.155] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

a right of a trustee cannot deny a trust. In any event, for a trust instrument to exclude the right of indemnity, clear language must be used.184 Right to contribution from co-​trustees

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[23.160]  That trustees, as a corollary of the duty to act personally (see [22.45]), administer

a trust together, does not itself render a trustee liable for the breaches of a co-​trustee:  see [24.95]. But where a breach of trust is committed, the trustees185 are equally liable in the eyes of equity. Their liability is joint and several —​in part because “[e]‌quity simply does not recognise the concept of an ‘active’ trustee or a ‘passive’ trustee”186 —​so that each trustee is liable for the entire liability, and a judgment against them is enforceable against one of them without regard to any rights of contribution that one trustee may have against the other(s).187 But if a trustee discharges the liability for which all were responsible, equity does not allow the co-​trustees to avoid liability. It allows an action for contribution to compel the co-​trustees to contribute to the discharging trustee so that all bear the burden equally.188 It has been said, to this end, that “as between two trustees who are in pari delicto, the one who has made good a loss occasioned by a breach of trust for which the two are jointly and severally liable may obtain contribution to that loss from the other”.189 One trustee may, however, bear the entire loss flowing from the breach without contribution from co-​trustees in the following instances. First, where a trustee is fraudulent, but the co-​trustee who has paid is not, the latter may recover from the fraudulent trustee the entire amount paid.190 For example, a trustee who employs trust property for personal use and conceals that from co-​trustees must indemnify the co-​trustees in full.191 A trustee accordingly has an “equity” to be indemnified by a co-​trustee who personally received trust funds and converted them to her or his own use. Relief in specie can satisfy this equity if the funds remain in the hands of the co-​trustee, but a personal equity remains against the defaulting trustee if the funds cannot be traced.192 Secondly, where a solicitor-​trustee’s actions have caused the loss, and the co-​trustee reasonably relied on the solicitor’s expertise, the burden of the loss may fall on the solicitor-​trustee.193 Thirdly, a trustee-​beneficiary is obliged to indemnify co-​trustee(s) to the extent of her or his beneficial interest.194 Contribution from

184

JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at 714 per Santow J.

185

This has been held to include constructive trustees: Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265 at [489] per E M Heenan J.

186

Selkirk v McIntyre [2013] 3 NZLR 265 at [45] per Katz J.

187

Goodwin v Duggan (1996) 41 NSWLR 158 at 162, 166 per Handley and Beazley JJA, at 167 per Powell JA; Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265 at [489] per E M Heenan J; Selkirk v McIntyre [2013] 3 NZLR 265 at [16], [17] per Katz J.

188

As to the doctrine of contribution generally see [14.125]–​[14.210].

189

Chillingworth v Chambers [1896] 1 Ch 685 at 707 per Smith LJ.

190

Bahin v Hughes (1886) 31 Ch D 390 at 395–​396 per Cotton LJ; Re Mulligan (deceased) [1998] 1 NZLR 481 at 502, 511 per Panckhurst J; Miorada v Miorada [2005] WASC 105 at [196]–​[203] per Commissioner McKerracher QC.

191

Baynard v Woolley (1855) 20 Beav 583; 52 ER 729; Wentworth v Tompson (1859) 2 Legge 1238.

192

Goodwin v Duggan (1996) 41 NSWLR 158 at 166 per Handley and Beazley JJA. As to tracing see Ch 39.

193

Chillingworth v Chambers [1896] 1 Ch 685; Re Turner [1897] 1 Ch 536; Re Linsley [1904] 2 Ch 785; Re Mulligan (deceased) [1998] 1 NZLR 481 at 511 per Panckhurst J. The principle may not be confined to solicitors: Re Partington (1887) 57 LT 654 at 662 per Stirling J. Practically, there are advantages in proceeding against a solicitor, who carries professional indemnity insurance.

194

Chillingworth v Chambers [1896] 1 Ch 685 at 698–​700 per Lindley LJ, at 707 per Kay LJ, at 710 per Smith LJ.

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Equity and Trusts in Australia

co-​trustees ensues if the loss exceeds the trustee-​beneficiary’s beneficial interest to the extent of the excess.195 Right to impound the interest of a beneficiary [23.165]  The trustee legislation provides that, where a trustee commits a breach of trust at

the instigation or with the written consent of a beneficiary, the court may, if it thinks fit, make such order as it considers just for impounding all or any part of the beneficiary’s interest in the trust estate by way of indemnity to the trustee or person claiming through the trustee.196 The statute “was not intended and did not operate to curtail the previously existing rights and remedies of trustees or to alter the law except by giving greater power to the courts”.197 In any event, a beneficiary who instigates, consents or concurs in a trustee’s breach of trust cannot succeed in an action based upon that breach (see [24.160]–​[24.170]), and a beneficiary who participates in a dishonest and fraudulent design on the part of the trustee may be personally liable as an accessory for any resultant loss (see [38.65]–​[38.95]). Right to seek advice and directions from the court

Application for advice and directions [23.170]  A right to seek the court’s opinion, advice or direction198 on questions respecting the

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management or administration of the trust property vests in trustees by the trustee legislation other than in the Northern Territory, Tasmania and Victoria.199 In the Northern Territory and Victoria an equivalent right is conferred by the court rules.200 The foregoing mirrors a right

195

Cumming v Austin (No 2) (1902) 28 VLR 347.

196

ACT s 86(1); NSW s 86(1); NT s 50; Qld s 77; SA s 57; Tas s 53; Vic s 68(1); WA s 76. ACT s 86(2) and NSW s 86(2) have no counterpart in other jurisdictions. They provide that “subsection (1) shall be deemed to empower the Court to impound all or any part of the interest of any beneficiary who receives any pecuniary benefit from the breach of trust” (emphasis supplied). These provisions appear to confine the right to impound to cases where the beneficiary has received a pecuniary benefit. If this is so, the sections have a narrower operation than the general law in these jurisdictions, which is opposed to the wide interpretation of the statutory right to impound exercised in the United Kingdom.

197

Bolton v Curre [1895] 1 Ch 544 at 549 per Smith LJ. See also Chillingworth v Chambers [1896] 1 Ch 685 at 707–​709 per Smith LJ.

198

In Queensland and Western Australia the statutory right refers only to “directions”, not “opinion” or “advice”, which may mean that the statutory jurisdiction is more limited than in other jurisdictions: Ex parte Nilant (2004) 28 WAR 81 at [52] per Barker J.

199

ACT s 63; NSW s 63; Qld s 96; SA s 91; WA s 92. As to the history behind the New South Wales provision see Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547 at 548–​549 per Young J. The South Australian legislation provides that ss 69 and 70 of the Administration and Probate Act 1919 (SA) apply to trustees as defined in the Trustee Act. Under s 69(1) of the 1919 Act, a trustee may, when in difficulty or doubt, apply to a judge for advice or direction as to matters connected with the administration of the estate or the construction of any will, deed or document. See, for example, Martin v Hayward [1908] SALR 187; Re Jackson [1944] SASR 82; Re Scott [1948] SASR 193. As to the history behind the South Australian provision see Re Magarey Farlam Lawyers Trust Accounts (No 3) (2007) 96 SASR 337 at [40]–​[47] per Debelle J; Public Trustee v O’Donnell (2008) 101 SASR 228 at [25]–​[30] per Gray J.

200

The rules provide that trustees (as well as executors and administrators) may approach the court to determine questions or matters relating to: the ascertainment of, and rights or interests of, parties to the trust; the furnishing of particular accounts; the payment into court of trust funds; whether to do or abstain from doing particular acts; the approval of any dealing with trust property; and to the administration of the trust: Supreme Court Rules 1987 (NT), s 54.02; Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 54.02. This rule has been described as conferring on the court very broad powers, enabling a trustee “to seek an order of the court either to approve a transaction or to direct that an act be done in the execution of the trust”: Ballard v Attorney-​General (2010) 30 VR 397 at [41] per Kyrou J. In Victoria the trustees of small charitable funds may, instead of applying to the court, act on the opinion or advice of the Attorney-​General given under s 5 of the Charities Act 1978 (Vic).

688 [23.165] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

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recognised at general law,201 which remains extant in Tasmania.202 The jurisdiction is available to all trustees, including those of a managed investment scheme203 and constructive trustees,204 but not to non-​trustee fiduciaries,205 a non-​trustee beneficiary,206 a former trustee,207 or an applicant who denies he or she is a trustee of the trust in question.208 A trustee who acts in accordance with the advice or directions, where all relevant evidence was placed before the court209 and the facts are substantially as submitted in the application, is deemed to have discharged her or his duty as trustee in the subject matter of the application.210 Parties represented upon the application are bound by the judicial advice given,211 subject to the proviso that, while a trustee may apply to the court for advice as to the exercise of a discretionary power,212 a court may not direct its exercise in a particular way213 (unless the application is made on an undertaking to surrender the trustee’s discretion to the court).214 The foregoing reflects the broader notion that, under an application for advice or directions, “it is not the function of the court to order, or even just to tell, the trustee what to do”; the order is permissive, and so is usually in the form that the trustee “is justified” in acting

201

Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547 at 548 per Young J.

202

Cf Dobson v Salvation Army (unreported, SC(Tas), Neasey J, 31 March 1983), who queried whether such a right existed independent of statute, but made a provisional determination of the matter raised on the originating summons before him.

203

Re Mirvac Ltd (1999) 32 ACSR 107 at 115 per Austin J; MTM Funds Management Ltd v Cavalane Holdings Pty Ltd (2000) 35 ACSR 440 at 444 per Austin J; Re Perpetual Investment Management Ltd [2014] NSWSC 784 at [66] per Robb J. As to managed investment schemes see [28.240]–​[28.260].

204

Including trustees de son tort (as to which see [38.55], [38.60]): Application of Uncle’s Joint Pty Ltd (2014) 12 ASTLR 487 at [17] per Brereton J.

205 Such as a court appointed receiver (see Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240 at 242–​243 per Barrett J) or the administrator of a deed of company arrangement (see Lombe v Wagga Leagues Club Ltd (2006) 56 ACSR 387). However, the court may give receivers its opinion, advice or direction under s 424 of the Corporations Act 2001 (Cth) (see [36.85]) or its general equitable jurisdiction: Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd at 243. 206

Gailey v Gordon [2003] 2 NZLR 192 at [74] per O’Regan J.

207

Neagle v Rimmington [2002] 3 NZLR 826 at 835 per Paterson J.

208

Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441 at [18]–​[24] per Palmer J.

209

Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 at 201 (PC); Ryan v Public Trustee of Queensland [1998] 1 Qd R 679 at 685 per Williams J, with whom Fitzgerald P and Mackenzie J concurred; Application by Perpetual Trustee Co Ltd [2003] NSWSC 1185 at [24] per Young CJ in Eq.

210

ACT s 63(2); NSW s 63(2); Qld s 97; SA s 91; WA s 95. This represents the position at general law, which continues to apply in the Northern Territory and Tasmania: Smith v Smith (1861) 1 Drew & Sm 384 at 387; 62 ER 426 at 427 per Kindersley VC; Re Earl of Radnor’s Will Trusts (1890) 45 Ch D 402 at 423 per Lord Esher MR; Estate of Hunter (deceased) [1957] SASR 194 at 195–​196 per Napier CJ.

211

Re Grose (deceased) [1949] SASR 55 at 60 per Mayo J. Parties not represented on the application are not bound by the advice or direction given by the court: Re Mitchell (deceased) (1913) 30 WN (NSW) 137 at 138 per Harvey J; Re Union Trustee Co of Australia Ltd [1936] QWN 6.

212

Law Guarantee Trust and Accident Society v Munich Re-​insurance Co [1912] 1 Ch 138 at 156 per Warrington J; Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 at 201 (PC); Ansett Australia Ground Staff Superannuation Plan Pty Ltd (ACN 065 590 178) v Ansett Australia Ltd (ACN 004 209 410) (2004) 49 ACSR 1. See also Qld s 96(1); WA s 92(1), which specifically provide that a trustee may apply to the court for directions “respecting the exercise of any power or discretion vested in the trustee”.

213

Re Trusts of the Will of Osborne (1863) 2 SCR (NSW) Eq 89; Gailey v Gordon [2003] 2 NZLR 192 at [34] per O’Regan J; Ansett Australia Ground Staff Superannuation Plan Pty Ltd (ACN 065 590 178) v Ansett Australia Ltd (ACN 004 209 410) (2004) 49 ACSR 1 at [53] per Goldberg J; Australian Executor Trustees Ltd v Attorney-​General (WA) [2015] WASC 439 at [33] per Martin CJ.

214

Gailey v Gordon [2003] 2 NZLR 192 at [33], [34] per O’Regan J; Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZAR 882 at [33] per Asher J (CA).

[23.170]  689 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

in a particular way”.215 Importantly, as a prelude to seeking the court’s advice or directions, the trustee must give due consideration to the issue to be presented upon the application. As explained by Kunc J in Re Application of NSW Trustee and Guardian:216 In applying to the court for judicial advice, the trustee is not abrogating or delegating its obligation to apply its own judgment in deciding whether to do (or not do) something in execution of the trust. The trustee must actively and honestly bring its mind to bear on any particular problem confronting it. Where necessary, it is entitled to do so with the benefit of such legal or other advice (for example, accounting, actuarial or valuation) as the trustee thinks appropriate. The trustee should then determine a course of action subject, again if it thinks appropriate, to obtaining judicial advice about that course of action. While I express no concluded view … in my opinion there is much to be said for the proposition that a trustee has failed in its duty if it does no more than identify a problem as difficult and then approach the court without having formed its own view as to how it will resolve the problem.

It follows that, where advice is sought on whether pursuing or defending legal action is justified, it is usually necessary for the trustee to obtain a legal opinion (usually from counsel) before approaching the court, the content of which, Kunc J remarked, “will be a significant matter which the court will take into account in determining whether or not to give the advice sought”.217 Otherwise the court is essentially be being asked to “take on the role of counsel advising the trustee”, and in so doing, advising on the prospects of success.218 An opinion that, as it should, anticipates lines of inquiry that a judge might identify and addresses them so as to focus attention on real problems in need of a solution, not only serves to foster speed and efficiency, but may also provide comfort to the court that the questions identified are indeed ripe for consideration.219

Scope of jurisdiction

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[23.175]  The statutory jurisdiction is “an exception to the court’s ordinary function of decid-

ing disputes between competing litigants”.220 It is a compromise between a procedure for affording private advice to trustees and the need for affected persons to be given a hearing in some cases.221 Situations in which approaches to the court have proven particularly useful include where the issue is whether proceedings ought be instituted or defended (see [23.170]), or compromised,222 an early distribution of an estate is desired,223 or the trustee remains in

215

In the Application of NSW Trustee and Guardian (2014) 12 ASTLR 513 at [24] per Kunc J. See also Plan B Trustees Ltd v Parker (2013) 11 ASTLR 242 at [47] per Edelman J.

216

In the Application of NSW Trustee and Guardian (2014) 12 ASTLR 513 at [25]. See also Plan B Trustees Ltd v Parker (2013) 11 ASTLR 242 at [48] per Edelman J.

217

In the Application of NSW Trustee and Guardian (2014) 12 ASTLR 513 at [27]. Cf Blatchford v Laine [2018] WASC 207 at [59]–​[67] per Vaughan J.

218

Re Perrot Mill Pty Ltd (No 1) (2013) 11 ASTLR 125 at [4]‌per Croft J.

219

Re Estate of Chow Cho-​Poon (2013) 10 ASTLR 251 at [49], [113], [114] per Lindsay J.

220

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [64] per Gummow ACJ, Kirby, Hayne and Heydon JJ.

221

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [65] per Gummow ACJ, Kirby, Hayne and Heydon JJ.

222

See, for example, Ireland v Retallack (2012) 8 ASTLR 431; Brown-​Sarre v Waddingham [2012] VSC 116; Morrison v Russo [2012] VSC 372.

223

In these cases, it is mandatory to seek judicial advice: Re Cassidy [1979] VR 369; Bullas v Public Trustee [1981] 1 NSWLR 641. See [25.155]–​[25.165].

690 [23.175] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Powers and Rights of Trustees  Chapter  23

doubt as to the extent of her or his powers under the trust instrument.224 Indeed, so far as the first of these is concerned, the High Court has declared that “a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings”.225 There have been judicial murmurings thereafter, however, querying the absoluteness of this remark, especially as it was made in the context of a charity trustee acting gratuitously and seeking from the trust fund indemnity for its costs.226 Advice that may be sought includes questions in connection with the rights and interests of beneficiaries or creditors,227 jurisdictional queries,228 whether further inquiries should be made in certain circumstances,229 the ascertainment of any class of beneficiaries or creditors,230 the furnishing of accounts,231 the settling of minor administration problems,232 and the approval of dealings with the trust property.233 [23.180]  Judicial advice proceedings are not, however, to be treated as a trial of the issues

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to be agitated in the principal proceedings.234 Consistent with this observation, it has been said that the procedure should not be used to determine substantive issues,235 such as issues of interpretation of the trust document that involve a question of breach of trust,236 to secure additional powers for the trustees,237 or for resolving a contest between the trustees238 or other parties to the trust.239 These are ordinarily matters in respect of which all parties should be served and have the opportunity to be heard.240 But the High Court in the Macedonian Orthodox case has since declared it inappropriate to read down the statutory words by making implications or imposing limitations not found in those words. In particular, their Honours expressed concern over indications in the cases

224

Re Falls’ Will Trusts (1874) 12 SCR Eq 89; Re Campbell (1883) 9 VLR (E) 138; Harrison, Jones & Devlin Ltd v Union Bank of Australia Ltd (1909) 10 SR (NSW) 266; Re Union Trustee Co of Australia Ltd [1936] QWN 6; Re Barry [1936] QWN 12; Re Allen-​Meyrick’s Will Trusts [1966] 1 WLR 499 at 503–​504 per Buckley J; Re Havill (deceased) [1968] NZLR 1116 at 1128 per Turner J, at 1133 per Richmond J.

225

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [74] per Gummow ACJ, Kirby, Hayne and Heydon JJ.

226

See Northey v Juul [2014] NSWSC 464 at [105] per Slattery J; Re Perpetual Investment Management Ltd [2014] NSWSC 784 at [52]–​[56] per Robb J.

227

Re Fletcher [1947] QWN 11; Re Otto Maletz [1948] QWN 30; Re Littlewood [1954] QWN 41.

228

Couzens v Negri [1981] VR 824.

229

Estate of Cave-​Brown-​Cave [1906] VLR 283.

230

Re Symons [1949] SASR 289.

231

Re Ready’s Estate [1920] QSR 87.

232

Re Campbell (1883) 9 VLR (E) 138; Re Nicholas’ Trusts (1986) 85 FLR 188.

233

Re Campbell (1883) 9 VLR (E) 138; Harrison, Jones & Devlin Ltd v Union Bank of Australia Ltd (1909) 10 SR (NSW) 266; Re Mitchell (deceased) (1913) 30 WN (NSW) 137; Re Union Trustee Co of Australia Ltd [1936] QWN 6; Re Barry [1936] QWN 12; Ryan v Public Trustee of Queensland [1998] 1 Qd R 679 at 685 per Williams J; Cody v Cody [2013] VSC 274.

234

Re Willoughby City Council [2016] NSWSC 1717 at [91] per Brereton J.

235

Will of Gilchrist (1867) 6 SCR (NSW) Eq 74; Re George Sinnamon [1940] QWN 67; Re Magarey Farlam Lawyers Trust Accounts (No 3) (2007) 96 SASR 337 at [48]–​[57] per Debelle J; Re Atlantis Holdings Pty Ltd [2012] NSWSC 112 at [22] per Rein J.

236

Harrison v Mills [1976] 1 NSWLR 42 at 45–​46 per Needham J.

237

Harrison, Jones & Devlin Ltd v Union Bank of Australia Ltd (1909) 10 SR (NSW) 266. Trustees seeking additional powers should apply to the court pursuant to the expediency jurisdiction: see [25.30]–​[25.55].

238

Harrison v Mills [1976] 1 NSWLR 42 at 45 per Needham J.

239

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 at 440 per Sheller JA.

240

Re Pegasus Securities Ltd (1999) 74 SASR 396 at 399 per Wicks J; Re IOOF Australia Trustees Ltd (1999) 75 SASR 290 at 296 per Wicks J.

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Equity and Trusts in Australia

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that the jurisdiction is limited to matters that are “non-​adversarial”.241 Only one jurisdictional bar to the jurisdiction exists, said the court: that “the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument”.242 Where there is the prospect of litigation, or even litigation on foot, the use of the jurisdiction aims not only to protect the trustee but, in their Honours’ view, “has another and no less important purpose of protecting the interests of the trust”,243 as it determines the appropriateness or otherwise of allocating trust resources to litigation. To this end, the relevant provision has been described as “beneficial legislation” that “should not be narrowly construed”.244 This does not mean that the court will always entertain a trustee’s application for advice in an adversarial environment. The issue is one of discretion rather than jurisdiction. And the court’s approach may vary with the type of trust involved. For instance, in the case of a private trust involving conflict between beneficiaries, or between beneficiaries and the trustee, where the defendants have the capacity to fund the defence, it might not be correct to give the trustee an opinion, advice or direction. The position may be otherwise in the case of a charitable trust, as in Macedonian Orthodox, where the public interest is involved, as none of the contestants in the litigation is suing or defending in order to augment, defend or seek the restoration of personal assets.245 Even before the High Court’s pronouncement in Macedonian Orthodox judges revealed some willingness to traverse the advice jurisdiction into the adversarial arena, for instance, for a contention confined to an issue of law,246 or where others with an interest had been served and appeared before the court.247 That occasions may arise when advice may be given even though it affects the rights of persons not represented at the hearing was countenanced by Austin J in MTM Funds Management Ltd v Cavalane Holdings Pty Ltd:248 Where the trustee is in doubt as to the extent of a dispositive power such as a power of sale, it is open to the court to give judicial advice even though not all of the potential objects of the power, or even any of them, are represented. In many cases the crucial issue for the court will be whether the giving of advice might operate unfairly as regards a person not before it. That, in turn, requires an assessment of whether the court might fail to take into account some relevant submission in the absence of representation of the affected person. But these matters fall within the ambit of the court’s discretion, and the absence of representation of an affected party is not a jurisdictional bar.

241

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [58] per Gummow ACJ, Kirby, Hayne and Heydon JJ.

242

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [59] per Gummow ACJ, Kirby, Hayne and Heydon JJ (noting that the section “does not provide that the adversarial nature of the proceedings about which the advice is sought, the tendency of the advice to foreclose an issue in those proceedings, or the fact that the trustees seeking the advice are being sued for breach of trust are of special significance”).

243

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [72] per Gummow ACJ, Kirby, Hayne and Heydon JJ. See also at [196]–​[198] per Kiefel J.

244

Re Perpetual Investment Management Ltd [2011] NSWSC 133 at [46] per White J.

245

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [67] per Gummow ACJ, Kirby, Hayne and Heydon JJ.

246

MTM Funds Management Ltd v Cavalane Holdings Pty Ltd (2000) 35 ACSR 440 at 445 per Austin J.

247

Application by Perpetual Trustee Co Ltd [2003] NSWSC 1185 at [16]–​[19] per Young CJ in Eq.

248

MTM Funds Management Ltd v Cavalane Holdings Pty Ltd (2000) 35 ACSR 440 at 445.

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Powers and Rights of Trustees  Chapter  23

The trustee’s application in MTM raised specific and narrow issues of construction of companies legislation. Both the trustee and its challenger had obtained conflicting legal advice from senior counsel, and the issues had been fully ventilated on behalf of the trustee and its challenger as the principal protagonists. The issue would affect the conduct of a meeting of a listed entity that had already been convened, and there was a risk that the meeting would make an ineffective decision if the trustee acted contrary to what would prove to be the true legal position. These factors, taken together, Austin J ruled, outweighed any possible disadvantage to unit holders that might flow from the giving of judicial advice without direct representation of their interests in the proceedings.249

Costs of the application [23.185]  The costs of the application are generally the subject of a complete indemnity out

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of the trust fund, provided the appropriate procedure is followed by the trustee. This indemnity exists pursuant to the trustee legislation other than in the territories, South Australia and Victoria,250 or alternatively the trustee’s general right of indemnity251 (as to which see [23.120]–​[23.155]). Trustees may be denied costs where they have unnecessarily applied to the court,252 unduly delayed the application,253 litigated unreasonably254 or incurred unnecessary expense in the proceedings before the court.255

249

MTM Funds Management Ltd v Cavalane Holdings Pty Ltd (2000) 35 ACSR 440 at 446.

250

NSW s 93; Qld s 100; Tas s 44; WA s 97.

251

Gleeson v Fitzpatrick (1920) 29 CLR 29 at 35 per Knox CJ, at 38 per Rich J.

252

Trimble v Kirkland (1913) 13 SR (NSW) 417.

253

Corbiere v Dulley [2016] QSC 134 at [36] per Burns J.

254

Dixon v Williams (1875) 13 SCR Eq 7; Re Hewitt (deceased) (unreported, HC(NZ), Fisher J, 19 May 1998).

255

Read v Cohen (1929) 46 WN (NSW) 154; Re Price (1935) 35 SR (NSW) 444.

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Chapter 24

Breach of Trust [24.05]  A breach of trust has been described as “nothing more nor less than an act by the

trustee in contravention of the duties imposed on him by the trust or in excess of his powers”.1 Also, even a trustee who acts within the letter of her or his powers may commit a breach of trust by failing to exercise those powers reasonably, in good faith and for the purposes for which they were conferred.2 Hence the need to understand the nature and scope of trustees’ duties and powers (discussed in Chs 22 and 23). Breaches of trust can be passive as well as active; active breaches consist of some intentional, negligent or dishonest act committed by a trustee, whilst a passive breach consists of a trustee’s failure to act. Importantly, liability for a trustee’s breach of trust is strict;3 it is not premised on proof of any bad faith or dishonesty,4 and may not be precluded simply because the trustee acted in accordance with skilled professional advice.5

STANDING TO SUE Identity of persons with standing

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[24.10]  A trustee who has breached trust may be sued in respect of that breach by a bene-

ficiary (including a person representing the beneficiary’s estate), a co-​trustee or a successor trustee.6 A  co-​trustee or successor trustee may be obliged to take proceedings (unless they would be futile)7 as part of the duty to get in the trust estate, which includes rights of action against co-​trustees, former trustees and strangers (as recipients of trust property (see [38.100]–​ [38.125]) or accessories (see [38.65]–​[38.95])) for breach of trust.8 A trustee who pursues this action need not make the beneficiaries parties unless he or she cannot properly represent their interests.9 The latter may be so if, say, the proceedings raise questions between one beneficiary

1

Re Spedding (deceased) [1966] NZLR 447 at 463–​464 per Spedding J. See also Re Wood (deceased) [1961] Qd R 375 at 378 per Mansfield CJ.

2

Pitt v Holt [2013] 2 AC 108 at [80] per Lord Walker. See, for example, Dunn v Flood (1885) 28 Ch D 586 (where trustees who exercised a power of sale to sell trust land subject to special conditions that the court held to be severely depreciatory were held to have breached trust). As to the proper exercise of trustee discretion see [23.30]–​[23.40].

3

Proprietors of Wakatu v Attorney-​General [2017] 1 NZLR 423 at [692] per Glazebrook J (“A trustee cannot justify a breach of trust or escape the consequences by saying it thought the trust property belonged to it”).

4

The same applies, more generally, to breaches of fiduciary duty by a fiduciary (including a trustee): see [4.35].

5

Pitt v Holt [2013] 2 AC 108 at [78]–​[81] per Lord Walker. Depending on the circumstances, however, acting on the advice of a skilled and properly instructed professional may justify the trustee being excused from liability pursuant to the court’s statutory jurisdiction to do so: see [24.200]–​[24.215].

6

Occidental Life Insurance Co of Australia Ltd v Bank of Melbourne (1991) 7 ANZ Ins Cases ¶61-​201 at 78,320–​78,321 per Brooking J. As to the rights of beneficiaries to sue where the trustee subsequently commences an equivalent action see Permanent Trustee Australia Ltd v Perpetual Trustee Co Ltd (1994) 15 ACSR 722 at 728–​729 per Cohen J.

7

Spencer v Spencer [2014] 2 NZLR 190 at [56] per Randerson J (noting that the onus of proof in this respect is on the trustees).

8

Re Forest of Dean Coal Mining Company (1878) 10 Ch D 450.

9

Horsley v Fawcett (1847) 11 Beav 565; 50 ER 935; Noble v Meynott (1851) 14 Beav 471; 51 ER 367; Wentworth v Tompson (1859) 2 Legge 1238.

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Equity and Trusts in Australia

and another,10 or between the beneficiaries and the trustee.11 Where one or more (but not all) the beneficiaries sue the trustees with a view to augmenting their share in the trust, they must join as defendants not only the trustees but also the remaining beneficiaries.12 Beneficiaries’ standing to sue third parties

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[24.15]  In most circumstances trustees are the proper plaintiffs in claims involving the trust.

Beneficiaries do not, generally speaking, have a right of action against a third party who wrongly breached an obligation owed to the trust.13 Failure by the trustees to enforce such a claim entitles the beneficiaries to sue the trustees for failure to carry out their duties. This course of action, in most cases, provides adequate protection to the beneficiaries. Yet if a trustee refuses to institute proceedings to protect, preserve or get in trust property, a beneficiary14 may, in “special” or “exceptional” circumstances, bring those proceedings, whether in the trustee’s name or in her or his own name.15 Though not exhaustively defined, special or exceptional circumstances usually relate to where a “substantial impediment to the trustee prosecuting the proceedings” exists.16 It may even be that, at least where the obligation owed to the trustee is clearly documented —​such as a debt, an obligation under a contract or a covenant in a deed —​exceptional or special circumstances are unnecessary.17 Here it may be sufficient for the beneficiary to prove that the trustee is unwilling to sue and “is, in effect, acting in breach of trust in failing to commence and prosecute a particular proceeding”.18 The former may be inferred from the lapse of a sufficient period since the obligation arose without the trustee suing. In any case, the concept of “exceptional” or “special” circumstances may not be too unyielding. It seems to involve, one judge has suggested, “no more than a failure by the trustee —​ excusable or inexcusable —​to sue on a cause of action against the third party in performance of the duties owed by the trustee to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate”.19 In Lidden v Composite Buyers Ltd,20 for

10

See, for example, Wales v Vrsecky [2015] VSC 223 (involving a conflict as to unpaid present entitlements between capital beneficiaries: see at [39]–​[44] per McMillan J).

11

Young v Murphy [1996] 1 VR 279 at 283–​284 per Brooking J; Nicholson Street Pty Ltd (recs & mgrs apptd) (in liq) v Letten [2016] VSCA 157 at [76] per Whelan and Ferguson JJA.

12

Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653 at 656 per Meagher JA.

13

Hayim v Citibank NA [1987] AC 730 at 748 (PC); Pearson v Commissioner of Taxation (2001) 116 FCR 357 at 369 per Emmett J.

14

Which can encompass a discretionary object in an appropriate case: El Sayed v El Hawach (2015) 88 NSWLR 214 at [55], [56] (CA).

15

Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432 at 436–​437 per Cohen J; Pearson v Commissioner of Taxation (2001) 116 FCR 357 at 360 per Tamberlin and Mansfield JJ; Nolan v Nolan (2003) 10 VR 626 at [114]–​[120] per Dodds-​ Streeton J; Roberts v Gill & Co [2011] 1 AC 240 at [46] per Lord Collins, at [110] per Lord Walker. Some judges term the action in the name of the trustee(s) a “derivative action”; others use this phrase more generally to cover all proceedings by beneficiaries against third parties:  compare, for example, Pearson v Commissioner of Taxation at 370 per Emmett J with Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) (1999) 34 ACSR 371 at 383–​384 (FC(FCA)); Highland v Labraga (No 2) [2005] NSWSC 1212 at [11]–​[15] per Young CJ in Eq.

16

Highland v Labraga (No 2) [2005] NSWSC 1212 at [16] per Young CJ in Eq.

17

Fried v National Australia Bank Ltd (2001) 111 FCR 322 at 374–​375 per Gray J.

18

Pearson v Commissioner of Taxation (2001) 116 FCR 357 at 370 per Emmett J.

19

Chahwan v Euphoric Pty Ltd (2009) 73 ACSR 252 at [17] per Brereton J. Cf Roberts v Gill & Co [2011] 1 AC 240 at [46] per Lord Collins (who identified the underlying question as “whether the circumstances are sufficiently special to make it just for the beneficiary to have the remedy”), at [110] per Lord Walker (“the unifying factor —​what has to be special about the circumstances —​is that the derivative action is needed to avoid injustice”).

20

Lidden v Composite Buyers Ltd (1996) 139 ALR 549.

696 [24.15] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Breach of Trust  Chapter  24

example, a trustee refused to pursue a claim, the benefit of which would enure to the beneficiaries, against parties whose alleged wrongful conduct was said to have induced the creation of both the trust and the trust business. Finn J held that it was competent for the beneficiaries, or some of them, to institute proceedings in their own name to enforce those claims. In Lamru Pty Ltd v Kation Pty Ltd21 Cohen J found exceptional circumstances where the trustees had been discharged from the trusts and had no funds to pursue litigation. Also, if a trustee refuses to sue a debtor in the face of alleged collusion between the trustee and debtor, is otherwise potentially in a position of conflict between interest and duty, is in liquidation,22 or each of the trustees is deadlocked,23 this may justify a proceeding commenced by beneficiaries.24 Conversely, in Pearson v Commissioner of Taxation25 the Full Federal Court denied a beneficiary standing to appeal the Commissioner’s determination in relation to a corporate trustee. Tamberlin and Mansfield JJ considered that the only circumstance said to warrant the beneficiary acting independently of the trustee was that the trustee had declined to challenge the appealable objection decision, and by itself this was not exceptional.26 Emmett J opined that the appropriate course for the beneficiary was to furnish the trustee with a copy of any advice as to the prospects of success, request the trustee to file a notice of appeal, undertake to the trustee to fund the costs of the appeal and undertake to indemnify the trustee in respect of any costs orders in the event of the appeal being unsuccessful. As the beneficiary had done none of those things, his Honour denied her standing to sue.27 Nor is a court inclined to find special circumstances in this context if it remains unconvinced that the trustees have been given full opportunity to pursue the action in question.28

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[24.20]  Beneficiaries who sue in their own name must join the trustees as parties,29 the con-

cern being that the defendant could otherwise be “vexed by more than one proceeding making the same claim”,30 namely by both the beneficiaries and the trustees. By being joined, the trustees will be bound by a judgment given in the matter and so will be unable to have a change of heart and commence a proceeding as trustees. For the same reason —​to avoid the possibility of multiple proceedings —​if there are multiple beneficiaries of the trust, all must be joined as parties. It follows that the court may restrict a beneficiary’s right to sue in her or his own right where it is not yet possible to ascertain the identity of all beneficiaries.31 Although historically beneficiaries could proceed against third parties only where the relief sought was in the court’s equitable jurisdiction —​such that a claim within the common law jurisdiction could only be against the trustee for the execution of the trust, the application

21

Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432 at 437 per Cohen J. See also Fried v National Australia Bank Ltd (2001) 111 FCR 322 at 375 per Gray J.

22

Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd (2017) 251 FCR 404 at [114] (FC).

23

See, for example, Deutsch v Deutsch (2012) 6 ASTLR 386 at [41] per Hargrave J. Cf Randa Lee Investments Pty Ltd v Ballan [2015] VSC 178 at [75] per Sifris J.

24

Ramage v Waclaw (1988) 12 NSWLR 84 at 91–​92 per Powell J; Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109 at [164] per Callinan J (dissenting but not on this statement of principle).

25

Pearson v Commissioner of Taxation (2001) 116 FCR 357.

26

Pearson v Commissioner of Taxation (2001) 116 FCR 357 at 360.

27

Pearson v Commissioner of Taxation (2001) 116 FCR 357 at 370.

28

See, for example, Randa Lee Investments Pty Ltd v Ballan [2015] VSC 178; Simpson v Sax [2015] NZAR 1210.

29

Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432 at 436–​437 per Cohen J; Fried v National Australia Bank Ltd (2001) 111 FCR 322 at 376 per Gray J; Roberts v Gill & Co [2011] 1 AC 240 at [62] per Lord Collins.

30

Fried v National Australia Bank Ltd (2001) 111 FCR 322 at 373 per Gray J.

31

Fried v National Australia Bank Ltd (2001) 111 FCR 322 at 373 per Gray J.

[24.20]  697 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

being for the appointment of a receiver and then for leave to sue in the name of the trustee or receiver —​this is no longer so. Now no relevant distinction exists between claims at common law and claims in equity for the purposes of the rule permitting a beneficiary to sue when the trustee proves unwilling to do so.32

REMEDIES FOR BREACH OF TRUST [24.25]  A trustee is personally liable to the beneficiaries for the consequences of breaches of

trust, for which the beneficiaries may seek redress from the trustee personally. Compensation and account of profits are the principal personal remedies in this respect. If the trustee is insolvent, beneficiaries may prove a claim for breach of trust as unsecured creditors.33 Yet where a trustee uses trust moneys or property, or a mixture of trust moneys and her or his own moneys, or trust moneys from more than one trust, to purchase or improve an asset in the trustee’s own name (or that of a third party), the beneficiaries may pursue a remedy directly against that asset. After all, that asset, or part of it, represents property of the trust. Pursuing such an action, known as a proprietary claim, offers three main advantages over a personal action against the trustee: if the trustee is insolvent, it allows the beneficiaries to claim the asset in priority to the trustee’s creditors; if the asset is transferred to someone excepting a bona fide purchaser for value, the claim is enforceable against that third party; and any increase in the value of the asset (at least partially) accrues to the beneficiaries. Proprietary claims are discussed in Ch 39. Compensation

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[24.30]  Where a breach of trust causes loss to the trust estate, the trustee is liable to restore

the trust estate to the position it would have been in absent the breach.34 The court, it is said, “[c]‌ompels restitution of property unconscientiously withheld; it gives full compensation for any loss or damage through failure of some equitable duty; but it has no power of punishing any one”.35 Use of the language of restitution in this context should not be confused with the law of restitution, which is the law’s response to reverse unjust enrichment at the expense of another. Its use here is not as a legal term of art but in its ordinary dictionary sense meaning “recompense for injury or loss”.36 The date at which the loss is assessed, though ordinarily the date of judgment,37 is not invariably so. If the breach consisted of an improper disposal of an asset, but at a later date, the trustee could have disposed of the asset properly, loss will be assessed as at that later 32

Lidden v Composite Buyers Ltd (1996) 139 ALR 549 at 552–​553 per Finn J; Lamru Pty Ltd v Kation Pty Ltd (1998) 44 NSWLR 432 at 436–​437 per Cohen J; Fried v National Australia Bank Ltd (2001) 111 FCR 322 at 375 per Gray J; Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450 at [105]–​[107] per Perram J. Cf Pearson v Commissioner of Taxation (2001) 116 FCR 357 at 360 per Tamberlin and Mansfield JJ.

33

Bankruptcy Act 1966 (Cth), s 82 (see Re Crest Realty Pty Ltd (in liq) [1977] 1 NSWLR 664 at 667 per Needham J); Corporations Act 2001 (Cth), s 553.

34

Target Holdings Ltd v Redferns (a firm) [1996] AC 421 at 433–​434 per Lord Browne-​Wilkinson; Re Mulligan (deceased) [1998] 1 NZLR 481 at 507 per Panckhurst J; AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at [93], [134] per Lord Reed JSC. As to compensation in equity generally see [34.05]–​[34.60].

35

Vyse v Foster (1872) LR 8 Ch App 309 at 333 per James LJ.

36

Quality Assurance Management Asia Pte Ltd v Zhang Qing [2013] 3 SLR 631 at [34] per Vinodh Coomaraswamy JC.

37

Re Dawson (deceased) [1966] 2 NSWR 211; AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at [135] per Lord Reed JSC (“The measure of compensation should … normally be assessed at the date of trial, with the benefit of hindsight”).

698 [24.25] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Breach of Trust  Chapter  24

date.38 Also, where the trust has been terminated and the fund distributed, the date of assessment is the date of final distribution of the trust estate.39

Compensation distinguished from common law damages [24.35]  The duty to compensate can be distinguished from an action for common law dam-

ages. The leading statement in this context is that of Street J in Re Dawson (deceased):40

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The obligation of a defaulting trustee … is of a personal character and its extent is not to be limited by common law principles governing remoteness of damage … if a breach has been committed then the trustee is liable to place the trust estate in the same position as it would have been in if no breach had been committed. Considerations of causation, foreseeability and remoteness do not readily enter into the matter … [T]‌he obligation … is of a more absolute nature than the common law obligation to pay damages for tort or breach of contract … Moreover the distinction between common law damages and relief against a defaulting trustee is strikingly demonstrated by reference to the actual form of relief granted in equity in respect of breaches of trust. The form of relief is couched in terms appropriate to require the defaulting trustee to restore to the estate the assets of which he deprived it. Increases in market values between the date of breach and the date of recoupment are for the trustee’s account; the effect of such increases would, at common law, be excluded from the computation of damages; but in equity a defaulting trustee must make good the loss by restoring to the estate the assets of which he deprived it notwithstanding that market values may have increased in the meantime. The obligation to restore to the estate the assets of which he deprived it necessarily connotes that, where a monetary compensation is to be paid in lieu of restoring assets, that compensation is to be assessed by reference to the value of the assets at the date of restoration and not at the date of deprivation. In this sense the obligation is a continuing one and ordinarily, if the assets are for some reason not restored in specie, it will fall for quantification at the date when recoupment is to be effected, and not before.

In Re Dawson exchange rate fluctuations between the time of breach and the time of the action caused the amount necessary to replenish the trust fund to increase. That it cost the trustee more to replenish the fund at the time of the action was held to be immaterial because the issue was the amount of compensation necessary to restore the trust estate to the position it would have enjoyed had no breach been committed. [24.40]  Although Street J in Re Dawson opined that considerations of, inter alia, causation

“do not readily enter into the matter”, the law does require some causal connection between the breach of trust and the loss to the trust estate for which compensation is recoverable.41 The trustee’s liability encompasses “all losses which would not have been incurred but for the trustee’s breach”.42 The focus of this “common sense view of causation”43 is the loss that,

38

Re Bell’s Indenture [1980] 1 WLR 1217.

39

Elder’s Trustee and Executor Co Ltd v Higgins (1963) 113 CLR 426 at 473 per Dixon CJ, McTiernan and Windeyer JJ.

40

Re Dawson (deceased) [1966] 2 NSWR 211 at 214–​216. See also Vyse v Foster (1872) LR 8 Ch App 309 at 329, 333 per James LJ; Ex parte Adamson (1878) 8 Ch D 807 at 819 per James and Baggallay LJJ; Webb v Stenton (1883) 11 QBD 518 at 530 per Fry LJ; Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 at 543, 545 per Brightman LJ; Wickstead v Browne (1992) 30 NSWLR 1 at 14 per Handley and Cripps JJA; AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at [135]–​[138] per Lord Reed JSC.

41

Target Holdings Ltd v Redferns (a firm) [1996] AC 421 at 434 per Lord Browne-​Wilkinson.

42

Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 678 per Gault J (emphasis supplied). See also Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at [44] (FC).

43

Canson Enterprises Ltd v Boughton & Co (1991) 85 DLR (4th) 129 at 164 per McLachlin J.

[24.40]  699 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

“using hindsight and common sense, can be seen to have been caused by the breach”.44 To this end, a commentator has noted that “[t]‌here does not appear to be any substantial difference between common law and equitable theories of causation”,45 a point that has force at least when comparing causation in equity to causation in tort. This point is elaborated in the context of equitable compensation for breach of fiduciary duty: see [34.20]–​[34.45]. In any case, it is clear that compensation for breach of trust, unlike common law damages, is not limited by concepts of foreseeability and remoteness. The concepts are jettisoned, it is reasoned, “to encourage trustees to observe to the full their duties in relation to the trust property”46 and “to deter breaches of trust and confidence by those in a position to take advantage of the vulnerable by using powers to be exercised solely for their benefit”.47 Yet in the context of non-​fiduciary breaches of trust, that involve no more than a lack of appropriate skill and care —​where “the fiduciary relationship … merely provides a setting for a duty which is indistinguishable from a common law duty of care”48 —​New Zealand law accepts that common law concepts of causation, foreseeability and remoteness should apply to restrict any relief to beneficiaries.49 Where the wrong amounts in substance to carelessness or breach of contract, they suggest, “the policy considerations underpinning the stricter approach are absent”,50 there being no principled reason for the law to treat trustees any differently from persons who breach duties of care imposed by contract or tort.51 The point is compelling but may not translate to Australian law in view of the following dicta of the Full High Court in Youyang Pty Ltd v Minter Ellison Morris Fletcher, where it said:52

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[T]‌here must be a real question whether the unique foundation and goals of equity, which has the institution of the trust at its heart, warrant any assimilation even in this limited way with the measure of compensatory damages in tort and contract. It may be thought strange to decide that the precept that trustees are to be kept by courts of equity up to their duty has an application limited to the observance by trustees of some only of their duties to beneficiaries in dealing with trust funds.

44

Target Holdings Ltd v Redferns (a firm) [1996] AC 421 at 439 per Lord Browne-​Wilkinson. See also AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at [135], [136] per Lord Reed JSC.

45

Capper, “Compensation for Breach of Trust” [1997] Conv 14 at 23.

46

Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 687 per Tipping J. See also Maguire v Makaronis (1997) 188 CLR 449 at 473–​474 per Brennan CJ, Gaudron, McHugh and Gummow JJ.

47

Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 681 per Gault J.

48

Libertarian Investments Ltd v Hall [2015] WTLR 241 at [77] per Ribeiro PJ.

49

Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 687–​688 per Tipping J, at 681 per Gault J. See also Bristol and West Building Society v Mothew [1996] 4 All ER 698 at 711 per Millett LJ; Novoship (UK) Ltd v Mikhaylyuk [2015] QB 499 at [107], [108] per Longmore LJ (but cf now AIB Group (UK) plc v Mark Redler & Co Solicitors [2015] AC 1503 at [127]–​[132] per Lord Reed JSC); Birks, “The Content of Fiduciary Obligation” (2000) 34 Israel L Rev 3 at 30–​38 (who argues that a breach of a duty of care, even by a trustee, is negligence, so it is not a distinct wrong, whereas a breach of the obligation of disinterestedness is a distinct wrong, that does not have a parallel in other areas of law); Elliott, “Remoteness Criteria in Equity” (2002) 65 MLR 588.

50

Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 688 per Tipping J.

51

Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 664 at 681 per Gault J. In this case, the trustee’s breach involved a failure to take reasonable care, which did not in and of itself cause any damage or loss to the trust property. Although it did cause the appellant, as beneficiary, an individual loss (the loss of the opportunity to consider its position in light of the information the trustee carelessly failed to supply), this loss was not the diminution in the value of the trust property caused by the trustee’s breach of duty. As such, the court applied ordinary notions of foreseeability and remoteness.

52

Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at [39]. Cf Goldfinch, “Trustee’s Duty to Exercise Reasonable Care: Fiduciary Duty?” (2004) 78 ALJ 678 (who maintains that the trustee’s and fiduciary’s duty to exercise reasonable care is a fiduciary duty, which in turn has important consequences for, inter alia, the availability and calculation of compensation).

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Breach of Trust  Chapter  24

Compensation and beneficiaries of bare trusts [24.45]  Where a trustee commits a breach of trust causing a loss to the trust estate, the bene-

ficiaries have the right to have the trust fund properly administered and any misplaced assets restored to the trust. If, however, the same breach occurred in respect of a bare trust (as to which see [21.45]), the beneficiary is effectively the owner of the property and is not ordinarily entitled to restitution of the fund but instead to compensation payable directly to her or him measured by the amount of the loss attributable to the breach.53

Compensation for gain that would have been made though reasonable diligence [24.50]  Compensation must be made for any gain that would have accrued to the trust had

the trustee not committed a breach. For example, where a trustee effects an unauthorised sale of an asset that later rises in value, the beneficiaries are entitled to the gain that would have accrued to the trust had the property not been sold prematurely.54 Also, a trustee who fails to generate the best price in exercising a power of sale, say, as a consequence of failing to turn her or his mind to the task of determining the value of the property, is liable to make good any loss to the trust fund from the breach.55 Where a trustee fails to purchase assets it is her or his duty to purchase and these would have profited the trust, the beneficiary can sue for the gain that would have been made had the duty been fulfilled.56 Conversely, if the trustee retains assets that should have been sold, the beneficiaries may claim compensation for any subsequent fall in value.57 Yet where trustees are alleged not to have maximised the financial benefit for the beneficiaries in the course of investing trust property, courts have shown reticence in attaching liability for the returns they should have secured, at least absent a blatant breach causatively linked with quantifiable loss: see [22.215], [22.220].

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Equitable interest of trustee impounded to make good loss from breach [24.55]  According to the principle that “a party cannot take anything out of the fund until

he has made good what he owes to the fund”,58 a trustee-​beneficiary (or person who controls a trustee-​beneficiary) must, before claiming an entitlement under the trust, make good to the trust “the amount which he has misappropriated out of it”.59 It follows that where a trustee has misappropriated trust funds, any equitable interest to which he or she is entitled under the trust can be impounded to make good the misappropriation. Where trust funds have been definitely split up and appropriated to different trusts, defalcations of the trustee with respect to one trust cannot, however, be made good out of the trustee’s interest in another fund.60

53

Target Holdings Ltd v Redferns (a firm) [1996] AC 421 at 434–​436 per Lord Browne-​Wilkinson.

54

Re Bell’s Indenture [1980] 1 WLR 1217.

55

Clay v Clay (1999) 20 WAR 427 at 444–​445 (FC).

56

Elder’s Trustee and Executor Co Ltd v Higgins (1963) 113 CLR 426.

57

Hicks v Trustees, Executors and Agency Co Ltd (1901) 27 VLR 389; Perpetual Executors, Trustees and Agency Co (WA) Ltd v West Australian Trustee, Executor and Agency Co Ltd (1942) 44 WALR 29.

58

Re Rhodesia Goldfields Ltd [1910] 1 Ch 239 at 247 per Swinfen Eady J.

59

Re Tolley (deceased) (1972) 5 SASR 466 at 472 per Walters J. See, for example, Hunters Beach Investments Pty Ltd v Braams (2001) 38 ACSR 701 at 712–​713 per Young J; J D & K J Zohs Properties Pty Ltd v Ferme [2015] SASC 55 at [66]–​[75] per Stanley J.

60

Palmer v Permanent Trustee Co (1915) 16 SR (NSW) 162 at 166–​167 per Harvey J.

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Equity and Trusts in Australia

Interest [24.60]  A trustee who has occasioned loss to the trust property through breach of trust must

make good that loss together with interest.61 Though usually discussed by reference to compensation, a court may also order that an account of profits carry interest.62 An award of interest is founded upon stripping a trustee of profits rather than compensating the beneficiary for loss suffered.63 For example, interest is usually allowed where the amount payable under a contract at a certain time is, by reason of dispute, paid at a later date.64 Similarly, a trustee guilty of unreasonable delay in investing trust funds is answerable to the beneficiaries for interest that would otherwise have accrued during the period of non-​investment.65

Rate of interest: “trustee” rate compared to “mercantile” rate [24.65]  No universal and inflexible principle dictates the rate of interest to be applied in each

case. In the words of Lord Cranworth in Attorney-​General v Alford:66

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What the Court ought to do … is to charge him only with the interest which he has received, or which it is justly entitled to say he ought to have received, or which it is so fairly to be presumed that he did receive that he is estopped from saying that he did not receive it.

Where the trustee is in breach by reason of mere negligence, say, in failing to invest trust moneys,67 the court usually imposes interest reflecting that obtainable from investment in government stock at the time, known as the “trustee rate”. Until the mid-​1970s, the rate was 4% as a matter of policy of the court,68 but the courts have later more closely aligned the rate to prevailing market rates.69 A higher rate, the “mercantile rate”, has traditionally been charged as a means of recovering profit as a result of misapplying trust funds, namely where the trustee has,70 is presumed to have,71 or ought to have,72 earned a higher rate of interest than the trustee could have obtained from authorised trustee investments.73 As the concept of an authorised trustee investment has been superseded by a broad discretion to invest conferred by statute (see [22.190]), direct

61

Re Dawson (deceased) [1966] 2 NSWR 211 at 217–​218 per Street J.

62

Warman International Ltd v Dwyer (1995) 182 CLR 544 at 570 (FC); Edmunds v Pickering (No 4) (2000) 77 SASR 381 at 400 per Lander J.

63

Wallersteiner v Moir (No 2) [1975] QB 373 at 388 per Lord Denning; Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 at 179, 181 per Smith J.

64

Nixon v Furphy (1926) 26 SR (NSW) 409.

65

Re Emmet’s Estate (1879) 17 Ch D 142 at 150–​151 per Hall VC; Re Barclay [1899] 1 Ch 674 at 685–​686 per Stirling J; Re Pearce [1936] SASR 137 at 150 per Richards J; Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 at 181 per Smith J.

66

Attorney-​General v Alford (1855) 4 De GM & G 843 at 851; 43 ER 737 at 741.

67

Adamson v Reid (1880) 6 VLR (E) 164.

68

Re Barclay [1899] 1 Ch 674 at 686 per Stirling J; Re Tennant (1942) 65 CLR 473 at 507 per Dixon J.

69

A E Goodwin Ltd v AG Healing Ltd (1983) 7 ACLR 481 at 483 per Powell J; McColl’s Wholesale Pty Ltd v State Bank of New South Wales [1984] 3 NSWLR 365 at 377 per Powell J; Hagan v Waterhouse (1991) 34 NSWLR 308 at 391–​392 per Kearney J; Re Evans (deceased) [1999] 2 All ER 777 at 790 per McCombe QC.

70

This includes the case where the trustee has used the trust fund to make a saving for herself or himself: Farnell v Cox (1898) 19 LR (NSW) Eq 142; Re Kearney (1908) 8 SR (NSW) 87.

71

In this case, the court presumes that trustees who misappropriate trust moneys invest these moneys at interest:  Hagan v Waterhouse (1991) 34 NSWLR 308 at 392 per Kearney J.

72

This case arises where a higher rate of interest is expected for some reason. The trustee may have been directed to invest in a security carrying a higher rate of interest than ordinarily produced by authorised trustee securities. See Nixon v Furphy (1926) 26 SR (NSW) 409; Re Stillman and Wilson (1950) 15 ABC 68.

73

Re Dawson (deceased) [1966] 2 NSWR 211 at 218 per Street J.

702 [24.60] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Breach of Trust  Chapter  24

comparisons of this kind hold little relevance. Other indicators of current commercial investment returns are better reference points. An English judge has remarked, to this end, that “the high interest rates payable on money lent reflect and compensate for the continual erosion in the value of money by reason of galloping inflation”.74 This aligns with the court’s modern flexible approach that allows for changes in monetary conditions.75 The court will receive evidence as to prevailing market interest rates; it will not follow every fluctuation but adopt a rate that over a sustained period represents “a fair or mean rate of return for money”.76 To this end, there is today arguably little justification to distinguish the “trustee” from the “mercantile” rate.

Simple or compound interest? [24.70] Historically defaulting trustees were normally charged with simple interest only.

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Yet courts award compound interest where the trustee was under a direction to accumulate income, and had this direction been observed compound interest would have been earned,77 or where it was established (or even presumed) that the trustee used the money in trade.78 Perhaps more problematically the case law also recognises an avenue for compound interest where the trustee has acted fraudulently, or otherwise so grossly as to warrant it.79 It is difficult to appreciate, given that an award of interest aims to compensate rather than punish, why the moral quality of the breach should impact on its quantum.80 Equally, given the compensatory aim, allowing a trust estate to be out of funds for a period, especially a lengthy one, while only charging simple interest, arguably under-​compensates for its loss.81 Straddling the divide,

74

Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 at 547 per Brightman LJ (10% interest awarded). See also Southern Cross Commodities Pty Ltd (in liq) v Ewing (1987) 11 ACLR 818 (mercantile rate set at 1% above the minimum base rate for borrowers offered by the National Australia Bank).

75

Whereas the practice of the courts was once to impose a mercantile rate of 5% (see Vyse v Foster (1872) LR 8 Ch App 309 at 329 per James LJ; Re Barclay [1899] 1 Ch 674 at 686 per Stirling J; Nixon v Furphy (1926) 26 SR (NSW) 409 at 418 per Long Innes J; Skinner v James Symphonic Visible Measures Ltd (1927) 28 SR (NSW) 20), modern practice involves the imposition of more commercially realistic rates: Re Hatton Developments (Aust) Pty Ltd and The Companies Act (1978) 3 ACLR 484; Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 at 547 per Brightman LJ; Hagan v Waterhouse (1991) 34 NSWLR 308 at 392–​393 per Kearney J (noting that the volatile range of fluctuations in interest rates in the 1980s should be taken into account in applying to these changed conditions the policy of the court settled in times of greater monetary stability); Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 707 per Rolfe J (appropriate rate being the rate provided by the Supreme Court Act 1970 (NSW)); Re Duckwari plc (No 2) [1999] Ch 268 at 273 per Nourse LJ; Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 at [13] per Hamilton J (appropriate rate being the rate provided by the NSW UCPR Sch 5); Thomas v SMP (International) Pty Ltd (No 6) [2010] NSWSC 1311 at [18], [19] per Pembroke J (who opined that “the very distinction between a trustee rate and a mercantile rate” has “an antediluvian commercial quality”: at [19]); Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd (2015) 318 ALR 302 at [321], [322] per Garde AJA (adopting a 6% rate as a balance between the higher rates available before the Global Financial Crisis and the lower rates available subsequently). See Elliott, “Rethinking Interest on Withheld and Misapplied Trust Money” [2001] Conv 313 at 326–​332.

76

Re Tennant (1942) 65 CLR 473 at 508 per Dixon J.

77

Re Barclay [1899] 1 Ch 674; Mulleneux v Brennan [2002] WASC 43 at [22] per Sanderson M.

78

Wallersteiner v Moir (No 2) [1975] QB 373 at 388 per Lord Denning; Ninety Five Pty Ltd (in liq) v Banque Nationale de Paris [1988] WAR 132 at 179–​180 per Smith J; Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 at [11] per Hamilton J; Eden Refuge v Hohepa [2011] 3 NZLR 273 at [28]–​[33] per Duffy J; Ash v Ash (No 2) [2017] VSC 569 at [113] per McMillan J.

79

Gordon v Gonda [1955] 1 WLR 885 at 896 per Evershed MR; Southern Cross Commodities Pty Ltd (in liq) v Ewing (1987) 11 ACLR 818 at 848 per Boehm AM; Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 708 per Rolfe J; Stambulich v Ekamper (1998) 41 ATR 169 at 185–​186 per Scott J [on appeal Stambulich v Ekamper (2001) 48 ATR 159 at 163–​167 per Templeman J]; Reid v Hubbard [2003] VSC 387 at [41] per Nettle J; Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 at [11] per Hamilton J; Eden Refuge v Hohepa [2011] 3 NZLR 273 at [36]–​[38] per Duffy J.

80

Thomas v SMP (International) Pty Ltd (No 6) [2010] NSWSC 1311 at [16] per Pembroke J.

81

See Elliott, “Rethinking Interest on Withheld and Misapplied Trust Money” [2001] Conv 313 at 332–​340.

[24.70]  703 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

it remains open to the court to make a mixed order: to allow compound interest up to a set time and simple interest thereafter (or vice versa).82 Account of profits [24.75]  A trustee must account to the beneficiaries for any profit the trustee made from the

trust property, whether by breach of trust or in the ordinary course of managing the trust. As compensation and an account of profits are alternative remedies —​to secure both would essentially amount to double-​dipping, and therefore the unjust enrichment of the beneficiaries —​an account of profits will be sought where it yields more than compensation with interest. For a single breach, the beneficiaries cannot choose compensation for part of the period of breach and an account of profits for the remainder. For each breach, rather, the beneficiaries must seek compensation for net loss, or account for net profit; an election must be made. But there are occasions, say, involving a discrete change in usage of the funds, or several distinct breaches of trust, where both remedies may be available in respect of the discrete components or distinct breaches.83 The remedy of account of profits is particularly beneficial where the trustees have made a profit, in breach of trust, that the trust or the beneficiaries could not have made for lack of skill, information or capacity; say, where trustees utilise confidential information or appropriate a business opportunity for their own benefit. In association with the personal claim for an account of profits, beneficiaries may seek to charge the trust property in the trustees’ hands as a means of securing whatever is awarded upon the account.84

Profit derived partly from trustee’s contribution

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[24.80]  Where trust funds are invested profitably in breach of trust, the beneficiaries are enti-

tled to the entire profit. Where the trustee has used both trust money and her or his own money to realise an unauthorised gain, the beneficiaries are entitled at least to a proportional amount of the profits. The trustee is entitled to the return of her or his own contribution85 —​ otherwise the remedy would operate punitively —​but there remains uncertainty as to whether, and if so the extent to which, the trustee should be entitled to share in the profits. While this arguably infringes the strict fiduciary proscription against trustees making an unauthorised profit from their position (see [22.70]), the cases do reveal instances where trustees have been allowed an interest in the profits proportionate to their contribution to the fund or property that generated the profits: see [39.75], [39.80]. There is, it seems, no unyielding rule; the outcome rests on the justice of each case, placing into the balance the compensatory aim, the need to avoid unjust enrichment (of trustee and beneficiary) and the policy of deterring breaches of trust. The strict fiduciary approach is evident in Paul A Davies (Australia) Pty Ltd v Davies.86 In purchasing land in its own name, the trustee used trust funds for the deposit. Under the contract the trustee was allowed to enter into possession and conduct a business on the premises

82

See, for example, Moss v Moss (1898) 19 LR (NSW) Eq 146 (compound interest awarded for the period allowed by law for the accumulation, and simple interest charged thereafter); Edmunds v Pickering (No 4) (2000) 77 SASR 381 at 400 per Lander J (compound interest allowed over the period for which the account of profits was taken and simple interest thereafter).

83

Heathcote v Hulme (1819) 1 Jac & W 122 at 133; 37 ER 322 at 326 per Sir Thomas Plumer MR; Vyse v Foster (1872) LR 8 Ch App 309 at 334 per James LJ.

84

Scott v Scott (1963) 109 CLR 649.

85

Australian Postal Corporation v Lutak (1991) 21 NSWLR 584 at 591 per Bryson J.

86

Paul A Davies (Australia) Pty Ltd v Davies [1983] 1 NSWLR 440.

704 [24.75] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Breach of Trust  Chapter  24

prior to completion. The latter was scheduled some three years later —​the trustee being able to complete via a mortgage it secured on the security of its equitable interest in the property derived from the deposit (see [1.140]) —​at which time the property had increased in value significantly. The New South Wales Court of Appeal held that as the mortgage advance rested on the deposit as security, which in turn flowed from the breach of trust —​it was not the trustee’s own money —​the entire profit belonged to the beneficiaries.87 This was applied in Australian Postal Corporation v Lutak,88 where the defendants used proceeds of stamps stolen from the plaintiff ($20,000) to purchase a house, borrowing the remainder of the purchase price ($70,000) on the security of an unregistered mortgage. Bryson J held that the defendants, as constructive trustees of the sale proceeds from the subsequent sale of the house ($110,000), were not entitled to any part of the profit on sale ($20,000). If the strict fiduciary approach generates potential unfairness for the defaulting trustee, especially where he or she can establish that her or his skill, time and resources have contributed to the profit, it is open to the court to grant the trustee allowances representing this:89 see [34.140].

Ouster of entitlement to profits by contract or statute

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[24.85]  It cannot be assumed that a trustee who accepts moneys for investment as part of

its business will, as a matter of course, be liable to account to the beneficiaries (investors) for any profit exceeding the return to which the beneficiaries are entitled by way of contract. As contract can modify fiduciary principle, if the terms of the investment expressly exclude beneficiaries from any right to surplus profit arising therefrom, the trustee, as so authorised, may retain the profit. The same outcome may stem from statute. For example, in Contradictors v Attorney-​General90 contributors to a common fund managed by the Public Trustee claimed a beneficial interest in the surplus exceeding their entitlement under statute. Richardson J remarked that the statute must be interpreted in light of the general law “but so too must the general law be adapted and applied in a way consistent with the statute”.91 Because assets, once received by the Public Trustee, were subject to the statutory scheme, legal or beneficial interests therein were to be determined by reference to that scheme. Under the scheme, the trust was for an amount of capital on which the beneficiary received a prescribed rate of interest and had guarantees of both capital and income, the effect of which was to give the Public Trustee all of the interest earned on investments, from which it paid a prescribed rate to the contributors. His Honour concluded that as no beneficial interest in any surplus ever vested in contributors, they could not now obtain such a beneficial interest in the event of the Public Trustee being wound up.92 This conclusion was affirmed by the Privy Council, which advised

87

Paul A Davies (Australia) Pty Ltd v Davies [1983] 1 NSWLR 440 at 448 per Hutley JA, at 456–​458 per Mahoney JA. See also Marriage of Wagstaff (1990) 14 Fam LR 78 at 85–​86 (FC); Hagan v Waterhouse (1991) 34 NSWLR 308 at 354–​356, 365 per Kearney J. Cf Calverley v Green (1984) 155 CLR 242 where the High Court held that the respondent’s liability under the mortgage constituted a direct contribution by her to the purchase price for the purposes of the doctrine of resulting trust: at 251 per Gibbs CJ, at 257–​258 per Mason and Brennan JJ, at 267–​268 per Deane J (see [26.70]).

88

Australian Postal Corporation v Lutak (1991) 21 NSWLR 584.

89

Docker v Somes (1834) 2 My & K 655 at 668; 39 ER 1095 at 1099 per Brougham LC; Boardman v Phipps [1967] 2 AC 46 at 104 per Lord Cohen; Paul A Davies (Australia) Pty Ltd v Davies [1983] 1 NSWLR 440 at 448 per Moffitt P, at 451 per Hutley JA; Australian Postal Corporation v Lutak (1991) 21 NSWLR 584 at 596 per Bryson J.

90

Contradictors v Attorney-​General [1999] 2 NZLR 523.

91

Contradictors v Attorney-​General [1999] 2 NZLR 523 at 526 (CA).

92

Contradictors v Attorney-​General [1999] 2 NZLR 523 at 532–​533 (CA).

[24.85]  705 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

that “[t]‌he beneficial interest of the participating estates is limited to the monetary value of the capital paid into the common fund and interest on such capital at the prescribed rate, however the capital money may be invested. All else is the property of the Public Trustee”.93

Set off of profits against losses [24.90]  As a general rule, a trustee can only set off losses against gains where these apply to

the one breach of trust.94 This is the flipside of the rule that a beneficiary must elect either compensation or an account of profits in respect of the one breach:  see [24.75]. A  trustee liable in respect of distinct breaches of trust, one resulting in a loss and the other in a gain, is not entitled to set off the gain against the loss unless they arise in the same transaction.95 The difficulty lies in determining whether breaches of trust are distinct, or are rather continuations of a single breach. Case authority tends to favour trustees, in combining apparently discrete transactions in breach of trust. For example, in Vyse v Foster96 a gain from a sale of land was set off against a loss from construction of a villa upon the land, both activities being in breach of trust. The court viewed the real and personal estates as constituting a single fund. In Bartlett v Barclays Bank Trust Co Ltd (No 1)97 two property developments, one that made a profit and another that failed dismally, were allowed to be set off because each stemmed from the same policy and exemplified the same folly.98 Ousting the general law in this regard, the trustee legislation provides that the court may, as it thinks just, set off losses incurred by a trustee in investing trust property in breach of trust against gains made by the trustee from investing trust property (whether or not in breach of trust).99 Liability for co-​trustee’s breaches of trust —​“wilful default”

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[24.95]  Trustees’ liability for breach of trust, being joint and several,100 triggers an equitable

debt for which each trustee is liable for the entire amount. Accordingly, a judgment against the trustees is enforceable against one of them without regard to any rights of contribution or indemnity that trustee may have: see [23.160]. However, the trustee legislation provides that a trustee is answerable and accountable only for her or his own acts, receipts, neglects or defaults, and not for those of any other trustee except where the latter occur through the first trustee’s own “wilful default” (in Queensland “default”; in South Australia, “wrongful or negligent act or omission”).101 A provision of this kind is, in any case, often found in trust instruments. In South Australia the statute adds that trustees are also liable if loss is occasioned as a result of circumstances that they could reasonably be expected to have foreseen and avoided.102

93

Contradictors v Attorney-​General [2001] 3 NZLR 301 at 304 per Lord Millett.

94

Dimes v Scott (1828) 4 Russ 195; 38 ER 778.

95

Vyse v Foster (1872) LR 8 Ch App 309 [affd Vyse v Foster (1874) LR 7 HL 318].

96

Vyse v Foster (1872) LR 8 Ch App 309.

97

Bartlett v Barclays Bank Trust Co Ltd (No 1) [1980] Ch 515 at 538 per Brightman J.

98

Cf Hagan v Waterhouse (1991) 34 NSWLR 308 at 356–​357 per Kearney J.

99

ACT s 89A; NSW s 90A(1); NT s 10F(1); Qld s 30C(1); SA s 13D(1); Tas s 12E(1); Vic s 12D(1); WA s 26C(1).

100

Goodwin v Duggan (1996) 41 NSWLR 158 at 162, 166 per Handley and Beazley JJA, at 167 per Powell JA; Western Areas Exploration Pty Ltd v Streeter (No 3) (2009) 234 FLR 265 at [489] per E M Heenan J.

101

ACT s 59(2); NSW s 59(2); NT s 26; Qld s 71; SA s 35(1); Tas s 27(1); Vic s 36(1); WA s 70.

102

SA s 35(1A).

706 [24.90] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Breach of Trust  Chapter  24

The classic formulation of “wilful default”, that of Romer J in Re City Equitable Fire Insurance Co Ltd,103 places a person in wilful default only if “he knows that he is committing, and intends to commit, a breach of his duty, or is recklessly careless in the sense of not caring whether his act or omission is or is not a breach of duty”. It is said, to this end, that mere negligence or error of judgment does not amount to wilful default,104 and that some degree of “moral turpitude” is required.105

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[24.100] Yet it may be queried if the test of “wilful default” here is as strict as Re City

Equitable suggests, requiring as it does an intentional or reckless act or omission. Both early and recent English case law defines “wilful default” in terms of “want of ordinary prudence”,106 lending support to the contention that the wilful default requirement expresses no more than a trustee’s standard of care (as to which see [22.20]).107 If this is so, the position in Queensland and South Australia is no different from that in other jurisdictions. This has some support in Australian law, as in Dalrymple v Melville108 a trustee was held to be in wilful default for allowing his co-​trustee to put himself in a position to misappropriate trust funds even though the trustee did not suspect his co-​trustee to be a thief. The judicial trend, to this end, is to equate an absence of wilful default with the proper performance of the trustee’s standard of care in the circumstances. This is to be welcomed for at least three reasons.109 First, it is consistent with the onerous obligations the general law imposes on trustees directed to ensuring the proper management of the legal estate, justified in large part because beneficiaries often lack the ability to make any input into the operation of the trust. Secondly, a non-​trustee in receipt of trust property can be liable to hold the property as a trustee, and liable for any misuse of the property in question as a trustee would be, if the receipt or the misuse is effected with constructive knowledge that such constitutes a breach of fiduciary duty: see [38.105]. Yet according to the doctrine of wilful default propounded in Re City Equitable, conduct less serious than recklessness will not attract liability in a trustee for the acts, receipts, neglects or defaults —​and this includes but is not limited to fiduciary breaches —​of a co-​trustee. It seems odd that there can potentially be greater scope to subject third parties to liability as a trustee than those actually appointed as trustees. The position ought, intuitively, be the converse. Thirdly, trustees must not delegate the trust, and if

103

Re City Equitable Fire Insurance Co Ltd [1925] 1 Ch 407 at 434.

104

Lewis v Great Western Railway Co (1877) 3 QBD 195; Re Vickery [1931] 1 Ch 572 at 585. See, for example, Larnach v Alleyne (1862) 1 W & W (E) 342 (purchase by next friend of trust estate involving no moral turpitude held not to constitute wilful default); St George v Burnett (1871) 5 SALR 77 (sale of trust property in breach of trust not wilful default where trustees sought reconveyance of property on discovering mistake); Hartigan v O’Shanassy (1872) 3 VR (E) 41 (failure to take inventory or superintend the management of a farm that one trustee permitted his co-​trustee to occupy held not to amount to wilful default).

105

Larnach v Alleyne (1862) 1 W & W (E) 342.

106

Acland v Gaisford (1816) 2 Mad 28; 56 ER 245; Re Chapman [1896] 2 Ch 763 at 776 per Lindley LJ; Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 at 546 per Brightman LJ (who considered that wilful default is not limited to instances of “conscious wrongdoing”); Woodland-​Ferrari v UCL Group Retirement Benefits Scheme [2003] Ch 115 at 133 per Ferris J (who refused to equate “wilful default” in this context with “fraudulent breach of trust”).

107

Re Lucking’s Will Trusts [1968] 1 WLR 866 at 874 per Cross J; Wilkinson v Feldworth Financial Services Pty Ltd (1998) 29 ACSR 642 at 702 per Rolfe J. See Stannard, “Wilful Default” [1979] Conv 345 (who considered that a review of the authorities showed that “wilful default” was always interpreted by courts of equity to include some degree of neglect, concluding that the cases identified wilful default with “the failure to act as a prudent man of business with regard to the activities of agents”: at 350).

108

Dalrymple v Melville (1932) 32 SR (NSW) 596 at 603–​604 per Long Innes J.

109

The point is elaborated in Dal Pont, “Wilful Default Revisited —​Liability for a Co-​Trustee’s Defaults” [2001] Conv 376 at 381–​385.

[24.100]  707 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

permitted the trustee remains liable for a delegate’s defaults: see [22.45]. It is thus inconsistent to allow trustees who, say through negligence or gullibility, fail to involve themselves in the management of the trust, to defend the beneficiaries’ claim to be restored any consequent loss to the fund effected by a co-​trustee. Account on the basis of wilful default [24.105]  If a beneficiary can show at least one instance of “wilful default”110 and an actual

loss of assets received (or that ought to have been received) had the trustee’s duties been discharged,111 the court may order an account to be taken on this basis. It will only do so if the trustee’s conduct gives rise to a prima facie inference that other breaches of trust not yet known have occurred.112 This inference is not readily drawn where the trustee is cooperative and frank with the court;113 successful claims are more likely if the trustee is uncooperative in relation to the accounts.114 Sale of a trust asset at an undervalue has been treated as wilful default, presumably because of failure to obtain its full value,115 as has failure to obtain rent for a stranger’s occupation of trust property.116 The breach of duty need not be conscious wrongdoing,117 but wilful default here is not coextensive with breach of trust; there may be a breach of trust that is not wilful default.118 For example, Giles JA in Meehan v Glazier Holdings Pty Ltd119 held that although failure to maintain adequate records, and prepare monthly accounts, were breaches of trust on the facts before him, it did not follow from those breaches that something was not received by the trust or otherwise lost to it, on any reasonable amplitude of the concept of wilful default. Options apart from action for breach of trust

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[24.110]  Other courses of action may be available instead of an action for breach of trust.

Beneficiaries may apply to the court to remove offending trustees (see [21.105]–​[21.125]), seek an order to inspect trust documents or an account,120 or seek a declaration as a means of resolving a question as to whether a particular course of conduct was, or will be, in breach of

110

Sleight v Lawson (1857) 3 K & J 292 at 297; 69 ER 1119 at 1121 per Wood VC; Collman v Druitt (1881) 2 LR (NSW) Eq 74; Russell v Russell (1891) 17 VLR 729; Rabone v Shannon (1913) 30 WN (NSW) 50; Re Wood (deceased) [1961] Qd R 375; Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 at 155 per Giles JA. However, if all instances of alleged default are statute-​barred by limitation, none can be permitted to found relief by way of a general account on the footing of wilful default: Coulthard v Disco Mix Club Ltd [1999] 2 All ER 457 at 481 per Jules Sher QC.

111

Partington v Reynolds (1858) 4 Drew 253 at 255; 62 ER 98 at 98 per Kindersley VC; Re Stevens [1898] 1 Ch 162 at 175 per Vaughan Williams LJ; Armitage v Nurse [1998] Ch 241 at 252 per Millett LJ; Coulthard v Disco Mix Club Ltd [1999] 2 All ER 457 at 481 per Jules Sher QC; Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 at 149–​150 per Giles JA.

112

Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 at 155 per Giles JA.

113

Russell v Russell (1891) 17 VLR 729 at 732 per Webb J; Re Tebbs (deceased) [1976] 2 All ER 858 at 863 per Slade J.

114

Re Morish [1939] SASR 305; Perpetual Executors, Trustees and Agency Co (WA) Ltd v Western Australian Trustee, Executor and Agency Co Ltd (1942) 44 WALR 29.

115

Re Tebbs (deceased) [1976] 2 All ER 858.

116

Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515.

117

Bartlett v Barclays Bank Trust Co Ltd (No 2) [1980] Ch 515 at 546 per Brightman LJ; Re Ellis (2015) 14 ASTLR 475 at [144] per E M Heenan J.

118

Russell v Russell (1891) 17 VLR 729 at 732 per Webb J; Re Wrightson [1908] 1 Ch 789 at 799–​800 per Warrington J; Re Wood (deceased) [1961] Qd R 375 at 378 per Mansfield CJ.

119

Meehan v Glazier Holdings Pty Ltd (2002) 54 NSWLR 146 at 163.

120

See, for example, Henchley v Thompson [2018] WTLR 1289 (which contains a useful discussion of the court’s jurisdiction to order an account: see at [15]–​[26]). In some jurisdictions there is express statutory support for the duty to account in the trustee legislation: ACT s 102; NSW s 102; NT (1907) s 8; Tas s 28.

708 [24.105] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Breach of Trust  Chapter  24

trust. A beneficiary may, alternatively, be able to call in her or his share (see [25.150]) or the beneficiaries collectively may be able to terminate the trust (see [25.135]–​[25.145]). Further options are canvassed below.

Injunction [24.115] A beneficiary (or other person with a right to have the trust property properly

administered, such as a co-​trustee) may restrain a breach of trust, or compel proper performance of the trustee’s duties, by seeking an injunction.121 Commonly, an injunction is adopted to restrain dealings with trust property in violation of the terms of the trust, or at a clear undervalue. In Park v Dawson122 Asprey J ruled that to obtain an injunction to restrain a trustee selling without sufficient notice of sale, the plaintiff must show at least a very strong probability that the steps taken by the trustee would inevitably result in a sale at an undervalue. Hence, the court may refuse injunctive relief where its grant would constitute a premature interference with a discretion of the trustee, such as a power of sale. To this end, the court can wait until a contract is entered into, at which point full details are apparent, and then intervene to restrain completion. Injunctions have also been used to restrain distributions of trust funds in disregard of the terms of the trust instrument123 and to prevent disposal of property the plaintiff alleges should accrue to her or him (see [32.05]–​[32.135]).

Administration action [24.120]  Curial assistance in administering a trust can be obtained by means of an admin-

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istration action calling for an order that the trust be carried into execution by the court. Its object is to get questions settled between trustee and beneficiaries, and/​or between beneficiaries inter se.124 In McLean v Burns Philp Trustee Co Pty Ltd Young J explained the right of a beneficiary to the order as follows:125 A beneficiary, if he complains to the court about the administration of a trust is, as a matter of course, entitled to the appropriate order, either to answer his question as to the construction of a trust instrument, or to settle a dispute as to the administration of the trust in whole or in part under the authority of the court, unless the court is satisfied that there is no question which requires its decision. Suspicion of irregularities on very scanty material with respect to mal-​administration may be sufficient because the sanction is if, on the court’s further inquiry, its initial order is made wrongly, then it will be discharged and the plaintiff must pay the costs of the inquiry. A fortiori, if the affairs of the trust are in great confusion or there have been significant breaches of trust.

His Honour considered that a general administration order is made only where the trustees cannot pull together, the circumstances give rise to recurring difficulties requiring the frequent direction of the court, or a prima facie doubt is thrown on the trustee’s bona fides or discretion.126 However, as the court will not make a general administration order where the questions could be determined upon the exercise of the trustees’ statutory right to seek advice and

121

Dance v Goldingham (1873) LR 8 Ch App 902 at 911 per James LJ, at 913 per Mellish LJ. As to injunctions generally see Ch 31.

122

Park v Dawson [1965] NSWR 298. See also Wheelwright v Walker (1883) 23 Ch D 752; Waller v Waller [1967] 1 All ER 305.

123

Fox v Fox (1870) LR 11 Eq 142.

124

Evans v Evans (1910) 10 SR (NSW) 594 at 597 per A H Simpson CJ in Eq.

125

McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 636.

126

McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 634–​635.

[24.120]  709 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:49.

Equity and Trusts in Australia

directions of the court (see [23.170]–​[23.185]), the questions involve issues of construction of the trust document that may be determined via an originating summons procedure in the equitable jurisdiction of the court,127 or it would involve the court exercising a discretion given to the trustee by the trust instrument,128 there remains little scope for administration orders.

Appointment of receiver

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[24.125]  Beneficiaries (or a trustee) may successfully obtain the appointment of a receiver

“if misconduct, waste, or improper disposition of assets can be shown, or if it appears that the trust property has been improperly managed, or is in danger of being lost or if it can be satisfactorily established that parties in a fiduciary position have been guilty of a breach of duty”.129 An appointment is more likely in respect of unit or trading trusts130 and investment trusts,131 but less appropriate for an ordinary trust created by will or settlement, in which case a new trustee is usually appointed.132 It has been said that “the appointment of a receiver and manager is a drastic step, and ought only to be made when it is necessary to do so”.133 This is because, inter alia, receivership is an expensive process that could adversely affect third parties’ rights.134 Courts apply a qualitative judgment in assessing the risk to the trust. In Yunghanns v Candoora No 19 Pty Ltd (No 2)135 the trustee’s reluctance to disclose proper accounting records of the trust’s financial affairs, coupled with the fact that the two persons who controlled the trustee treated trust funds as their own and expressed a continuing hostility against a rival infant beneficiary, led Warren J to appoint a receiver until the hearing of the principal proceedings. In Pittorino v Pittorino136 Le Miere J appointed a receiver and manager in the face of evidence that the trust property was relevantly at risk, including that the person who controlled the corporate trustee kept trust income for his own use, had conducted the trust affairs is an unbusinesslike manner, had not acted impartially as between the beneficiaries and may have acted in breach of fiduciary duty. Receiver appointments may also be justified where necessary to secure continuity of management of the trust due to disorder in its affairs,137 where trustees or beneficiaries disagree in circumstances that place the trust property in jeopardy138 and where the trustees deny or dispute the trust.139 127

ACT CPR rr 2700, 2701; NSW UCPR r 54.3; NT RSC r 54.02; Qld UCPR r 11(a); SA SCCR r 206; Tas RSC rr 604, 605; Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 54.02; WA RSC O 58 r 2.

128

McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 634–​637 per Young J.

129

Yunghanns v Candoora No 19 Pty Ltd (No 2) (2000) 35 ACSR 34 at 46 per Warren J. As to receivers generally see Ch 36.

130

See, for example, Irvine v Australian Sharetrading and Underwriting Ltd (in liq) (1996) 22 ACSR 765 at 787 per Mandie J.

131

See, for example, Australian Securities and Investments Commission v Sydney Investment House Equities Pty Ltd (No 2) [2006] NSWSC 1264.

132

Cf Re Gradfan (1996) 20 ACSR 689 at 702–​703 per Steytler J. As to the appointment of trustees see [21.50]–​[21.85].

133

Re Ciccarello [2008] FCA 141 at [31] per Mansfield J.

134

Yunghanns v Candoora No 19 Pty Ltd (No 2) (2000) 35 ACSR 34 at 52 per Warren J; Bastion v Gideon Investments Pty Ltd (in liq) (2000) 35 ACSR 466 at 479 per Austin J.

135

Yunghanns v Candoora No 19 Pty Ltd (No 2) (2000) 35 ACSR 34 at 53.

136

Pittorino v Pittorino [2005] WASC 97 at [52]–​[60].

137

Attorney-​General v Schonfield [1980] 3 All ER 1.

138

Swale v Swale (1856) 22 Beav 584; 52 ER 1233; Hart v Denham [1871] WN 2; Estate of William Just (No 1) (1973) 7 SASR 508; Martyniuk v King [2000] VSC 319 (where the unit holders were in dispute and ongoing litigation between them had the capacity to put the trust assets at risk).

139

Sheppard v Oxenford (1855) 1 K & J 491; 69 ER 552; Talbot, Earl v Hope-​Scott (1858) 4 K & J; 70 ER 58.

710 [24.125] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:57.

Breach of Trust  Chapter  24

Personal action against third-​party recipients of trust property —​Re Diplock [24.130]  A personal claim against persons who receive trust property as volunteers may be

available where the distribution was in breach of trust and all possible remedies against the trustee have been exhausted. Re Diplock140 exemplifies this action. There, a testator’s bequest to “such charitable institution or institutions or other charitable or benevolent object or objects” as his executors in their discretion selected was struck down as non-​charitable because it could allow a distribution for potentially non-​charitable purposes (see [29.275]), but only after the executors had distributed some £250,000 to 139 charitable institutions. The next-​of-​kin, as beneficiaries in default, sued the executors, which action was settled by a compromise for £15,000. The next-​of-​kin then sued to recover the remainder directly against those charitable institutions that had been wrongly paid. The English Court of Appeal traced the history of this personal action and found a basis for the action in the “ancestry” of equity,141 proceeding to observe the following:142

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[I]‌t seems to us, first, to be established that the equity may be available equally to an unpaid or underpaid creditor, legatee, or next of kin. Second, it seems to us that a claim by a next of kin will not be liable to be defeated merely (a) in the absence of administration by the court; or (b) because the mistake under which the original payment was made was one of law rather than fact; or (c) because the original recipient, as things turn out, had no title at all and was a stranger to the estate; though the effect of the refund in the last case will be to dispossess the original recipient altogether rather than to produce equality between him and the claimant and other persons having a like title to that of the recipient.

However, their Lordships held that any action against a recipient was subject to the qualification that “[s]‌ince the original wrong payment was attributable to the blunder of the personal representatives, the right of the unpaid beneficiary is in the first instance against the wrongdoing executor or administrator:  and the beneficiary’s direct claim in equity against those overpaid or wrongly paid should be limited to the amount which he cannot recover from the party responsible”.143 Accordingly, the amount recovered from the executors was to be credited rateably against any moneys claimed from the 139 charitable institutions.144 Re Diplock was appealed to the House of Lords, reported as Ministry of Health v Simpson,145 where the issue was whether the money had to be personally repaid by the appellant (representing a number of the hospitals wrongly paid). The decision of the Court of Appeal was affirmed, entitling the next-​of-​kin to a personal action against the recipients of the wrongful distributions. Lord Simonds found the reasoning of the Court of Appeal unimpeachable, stating:146 In Harrison v Kirk [[1904] AC 1 at  7] Lord Davey says this:  “But the Court of Chancery, in order to do justice and to avoid the evil of allowing one man to retain what is really and

140

Re Diplock [1948] Ch 465.

141

Re Diplock [1948] Ch 465 at 482.

142

Re Diplock [1948] Ch 465 at 502.

143

Re Diplock [1948] Ch 465 at 503.

144

Re Diplock [1948] Ch 465 at 504.

145

Ministry of Health v Simpson [1951] AC 251.

146

Ministry of Health v Simpson [1951] AC 251 at 266.

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Equity and Trusts in Australia

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legally applicable to the payment of another man, devised a remedy by which, where the estate had been distributed either out of court or in court without regard to the rights of a creditor, it has allowed the creditor to recover back what has been paid to the beneficiaries or the next of kin who derive title from the deceased testator or intestate.” The importance of this statement is manifold. It explains the basis of the jurisdiction, the evil to be avoided and its remedy: its clear implication is that no such remedy existed at common law: it does not suggest that it is relevant whether the wrong payment was made under error of law or of fact: it is immaterial whether those who have been wrongly paid are beneficiaries under the will or next of kin, it is sufficient that they derive title from the deceased. It is true that Lord Davey expressly dealt with the case of a claimant creditor not a beneficiary or next of kin. I shall show your Lordships that what he said of the one might equally well be said of the other. It would be strange if a court of equity, whose self-​sought duty it was to see that the assets of a deceased person were duly administered and came into the right hands and not into the wrong hands, devised a remedy for the protection of the unpaid creditor but left the unpaid legatee or next of kin unprotected. [24.135] Although Re Diplock concerned the administration of estates, it arguably also applies to trusts.147 This is recognised by the trustee legislation in Queensland and Western Australia.148 Consistent with the general law, the Queensland provision requires a plaintiff first to proceed against the trustee, either in personam or in rem, before resorting to remedies in personam against a recipient of the wrongly appropriated trust property. Conversely, in Western Australia the plaintiff must proceed directly against the recipient prior to exhausting “all other remedies”149 that may be available as against the trustee.150 Being a remedy in personam, whether at general law or under statute, it is no defence that the recipients have dissipated the money.151 Nor does the defence of change of position appear to be available to the recipient, except in Queensland and Western Australia where it is recognised by statute.152 The personal nature of the claim makes it not sustainable against any further holder of the property. It is arguable that, in a proper case, the court may exercise its inherent jurisdiction to award interest on the amounts wrongly received.153 The precondition that remedies against the trustees or executors be exhausted may not always apply, as in some cases it may be appropriate to excuse the trustee where he or she has acted honestly and reasonably (see [24.200]–​[24.215]) or where the trustee would suffer great hardship while the recipient makes a windfall gain.

147

See Martin, “Recipient Liability After Westdeutsche” [1998] Conv 13 at 22 (arguing that this approach is appropriate because it achieves coherence in equity’s treatment of the rights of beneficiaries of trusts and beneficiaries of estates, and avoids the unjust enrichment of volunteers who, although innocent, cannot establish the defence of change of position).

148

Qld s 113 (formerly s 109: see Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 228 per Dowsett J; Ron Kingham Real Estate Pty Ltd v Edgar [1999] 2 Qd R 439 at 440 per Davies JA, at 445 per McPherson JA); WA s 65. See also Administration Act 1969 (NZ), ss 49–​51.

149

This has been interpreted, in obiter, as intended to affect only proprietary remedies available to a claimant, and not reaching personal claims: Corporate Systems Publishing Pty Ltd v Lingard (No 4) (2008) 2 ASTLR 431 at [183], [184] per Beech J [affd but not on this specific point: Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158].

150

WA s 65(7). Cf Administration Act 1969 (NZ), s 50(a) (any person may exercise her or his remedies without first exercising the rights and remedies available against the trustee).

151

Ministry of Health v Simpson [1951] AC 251 at 276 per Lord Simonds.

152

Qld s 113(3); WA s 65(8). See Bant and Creighton, “The Statutory Change of Position Defences in Western Australia” (2003) 31 UWALR 47.

153

Cf Re Diplock [1948] Ch 465 at 506–​507, 556 (CA).

712 [24.135] Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:57.

Breach of Trust  Chapter  24

DEFENCES TO BREACH OF TRUST Trustee exemption clauses [24.140] A trust instrument may include provisions impacting on the extent of a trustee’s

liability for breach of trust.154 As with exclusion clauses in contract,155 courts construe trustee exemption clauses according to the ordinary meaning of the words used in their context (or factual matrix) but construe any ambiguity contra proferentem, that is, against the person(s) relying on them.156 A defaulting trustee bears the onus of establishing that he or she is protected by the exemption. Beyond propounding a consistent approach to the construction of exemption clauses, the challenge courts face centres on the extent to which these clauses can legitimately exclude or limit trustee liability for breach of trust. Three points are clear. First, a clause that seeks to exclude liability for all breaches of trust is void, as it essentially undermines the nature of a trust. Secondly, the trust instrument cannot exclude liability for a trustee’s dishonesty, as this would counter not only public policy, but undermine the responsibility inherent in the role of a trustee. Thirdly, there is no objection in principle for a trustee’s liability for innocent breaches of trust to be excluded. For instance, the following clause is likely to be upheld:157

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The trustees shall not be personally liable for the consequences of any error or forgetfulness whether of law or of fact on the part of any of the trustees or their legal or other adviser or generally for any breach of duty or trust whatsoever unless it shall be proved to have been committed or omitted in personal conscious fraudulent bad faith by the trustees charged to be so liable. [24.145]  More difficult is the question whether trustee exemption clauses can protect trustees against negligence, especially gross negligence, or from positive breaches of duty. The English Court of Appeal’s decision in Armitage v Nurse158 brought the matter to the fore. It involved a settlement under which the plaintiff became entitled in remainder to certain lands subject to her mother’s life tenancy. It contained a clause (cl 15) that read: “[n]‌o trustee shall be liable for any loss or damage which may happen to [the plaintiff’s] fund or any part thereof or the income thereof at any time or from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud”. Millett LJ held that the phrase “actual fraud” “connotes at the minimum an intention on the part of the trustee to pursue a particular course of action, either knowing that it is contrary to the interests of the beneficiaries or being recklessly indifferent whether it is contrary to their interests or not”.159 This led his Lordship to conclude that

154

See Cockburn, “Trustee Exculpation Clauses Furnished by the Settlor” (1993) 11 Aust Bar Rev 163; Carter, “Contractual Issues for Trustees” (2001) 17 JCL 274 at 284–​291.

155

See Paterson, Robertson and Duke, Principles of Contract Law (5th ed, Lawbook Co, 2016), [13.75]–​[13.115].

156

Walker v Stones [2001] QB 902 at 941 per Slade LJ; Nick Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd (2001) 38 ACSR 57 at 69 per Hamilton J [affd Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) (2002) ATPR ¶41-​864]; Alexander v Perpetual Trustees WA Ltd [2001] NSWCA 240 at [131] per Davies JA [affd on a different point:  Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109]; Reader v Fried [2001] VSC 495 at [14] per Pagone J; Commissioner of Taxation v Bargwanna (2012) 244 CLR 655 at [13] per French CJ, Gummow, Hayne and Crennan JJ (remarking that trustee exemption clauses “are to be construed no more widely than their language on a fair reading requires”); Spread Trustee Co Ltd v Hutcheson [2012] 2 AC 194 at [106] per Lord Mance.

157

As upheld in Nick Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd (2001) 38 ACSR 57 [affd Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) (2002) ATPR ¶41-​864].

158

Armitage v Nurse [1998] Ch 241.

159

Armitage v Nurse [1998] Ch 241 at 251.

[24.145]  713 Gino, Dal Pont. Equity and Trusts in Australia, Thomson Reuters (Professional) Australia Pty Limited, 2018. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=5602215. Created from usyd on 2019-07-12 22:42:57.

Equity and Trusts in Australia

cl 15 “exempts a trustee from liability for loss or damage to the trust property no matter how indolent, imprudent, lacking in diligence, negligent or wilful he may have been, so long as he has not acted dishonestly”.160 He proceeded to uphold its effectiveness to exclude the trustee’s liability for breach of trust. If Armitage v Nurse is correct, a trust deed can exclude a trustee’s liability for any and all breaches of trust, including deliberate breaches or any (even grossly) negligent conduct, unless these involve dishonesty.161 Within the academy, the decision has both detractors162 and supporters.163 It saw endorsement by the Privy Council in Spread Trustee Co Ltd v Hutcheson, where Lord Clarke, cognisant of criticisms that Armitage diluted the fiduciary obligations of trustees, was at pains to distinguish negligence for fiduciary breach:164

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Nothing in the fiduciary duties owed by the trustee alters the standard of the duty of care owed by it. In the opinion of the Board, the suggestion that the standard of the duty of care owed by the trustee is somehow elevated by reference to concomitant fiduciary duties elides the fundamental distinction between the fiduciary duties owed by the trustee on the one hand and the duty to exercise care and skill owed by the trustee on the other. Secondly, the exemption from liability in respect of a trustee’s gross negligence is not inimical to the fiduciary duties owed by a trustee for the simple reason that the absence of honesty and good faith inherent in the failure to perform fiduciary duties would take such conduct outside the scope of such an exemption.

Lord Kerr delivered a strong dissent on this point, concluding that “the notion of exempting from liability a trustee’s gross negligence is not only inimical to the fiduciary duty that he owes to the beneficiary …, it is wholly destructive of the essential feature of the relationship between the two”.165 Moreover, it may be said, it adds yet another obstacle to beneficiaries’ practical ability to secure the administration of the trust.166 In that lawyers cannot, on the grounds (inter alia) of conflict of interest, exclude liability for negligence by the terms of the retainer,167 it is