Adams & Ors v Alemite Lubrequip Pty Ltd

[1995] HCATrans 345

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S158 of 1994

B e t w e e n -

BRIAN ELLISTON ADAMS & ORS

Applicants

and

ALEMITE LUBREQUIP PTY LIMITED & ORS

Respondents

Application for special leave to appeal

BRENNAN CJ
DAWSON J
TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 24 NOVEMBER 1995, AT 10.10 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR N. PERRAM, for the applicants.  (instructed by Mallesons Stephen Jaques)

MR D.E. GRIEVE, QC:   May it please your Honours, I appear with MS C.E. ADAMSON for the respondents.  (instructed by Vandenberg Reid)

BRENNAN CJ:   Yes, Mr Jackson.

MR JACKSON:   Your Honours, may I just say one or two things about the facts before moving on to the substance of the application.  This is a case where the ultimate facts can be stated really very briefly and may I just proceed to do so.  They are these:  the applicants, who were a firm of accountants, were paid sums of money from a body called the Business Newsletter Group.  Your Honours will see the sums of money listed at page 61.  I do not think I need to take your Honours to the detail of it except to indicate - if one goes to page 61 for just a moment - you will see on 10 May, if one looks down the left column at about line 11, your Honours will see “Business letter Trust Account  657,360.00” and another entry of 25 June “142,560.00”, another entry 1 July.

Now, your Honour, that group was not a client; it was a body run by a Mr Ward who was president of a Tax Investors Club, as it was described.  The moneys had been paid to the Business Newsletter Group by large numbers of investors.  The investors had been solicited by material published by the Business Newsletter Group in its Small Business Newsletter and, quite without authority from us, the investors were told that the funds would be held under our control, in effect, to be disbursed in accordance with the documents which constituted the scheme into which they were paying their money.  The money was paid out by us, not in accordance with the terms of the documents establishing the arrangement, but in accordance with the directions of those who had established the scheme and who, presumably after having received that money, decamped with it.

Your Honours, there was no doubt, of course, that the investors when they paid the money to the Business Newsletter Group intended that the money would be held on trust for them.  That is from the point of view of the investors.  There is no doubt they intended that money would be held on trust for them.  Also, I gather, the other side.  We do not suggest that we had a beneficial interest in the money.  But it is another thing to say that the payment out by us was in breach of a duty which we owed to the investors because - and, your Honours, because the investors are told without authority from us that we are acting as trustee for them - it does not follow that their perception of our obligations is binding on us.  Your Honours, they were not our client and what we did was to pay in accordance with the directions of the persons who were.

TOOHEY J:   Who were you trustees for, Mr Jackson?

MR JACKSON:   We were trustees for the persons who were our clients, put shortly.  Those persons being the persons - Your Honour, I am just trying to put it into composite form - who were the promoters of the scheme.

BRENNAN CJ:   Why then were you interested to discover, if it was a simple trust for them, whether any of the conditions which entitled them to payment were satisfied?

MR JACKSON:   Because, your Honour, in respect of some of the moneys that had been paid, not being the ones to which I am referring, the payments had been made in circumstances where there was no doubt there was a trust.

BRENNAN CJ:   For?

MR JACKSON:   May I put it differently.  There was no doubt the money was held to be applied in those cases in connection with the terms of the arrangements.

BRENNAN CJ:   Is that by reason of the memorandum that was settled by Mr Lennon?

MR JACKSON:   Yes, your Honour.

BRENNAN CJ:   It was found that Mr Lennon understood that that memorandum was to be used in promoting the sale of units.

MR JACKSON:   I am sorry; perhaps I am misunderstanding your Honour.  What I was speaking about, your Honour, was in relation to the money that was paid by, I think the total number was ten, investors who paid money to be dealt with in accordance with the terms of the deed.

BRENNAN CJ:   My question to you is based upon the terms of the document referred to at the bottom of page 75 and the top of 76.  That document was a document which led you to accept the funds from the ten investors on the trust to which you have just referred.

MR JACKSON:   Yes, your Honour.

BRENNAN CJ:   And there is a finding that it was understood that that document was to be used for the sale of units.  It is difficult to resist the inference that whatever flowed from reference to the document imposed the character of trust upon the funds subscribed as the result of it.

MR JACKSON:   Well, your Honour, what it said, of course, was that we were to :

be keeping a register of investors, auditing and accounting for the investors, the partnership and the management and leasing companies.

Your Honours, it referred then to “income distribution to the Investors” and that is the total of it.

BRENNAN CJ:   I appreciate that.  But if the inference to be drawn from the circumstances which were the utilisation of that document for the purpose of garnering subscriptions, it is difficult to see why some distinction should be made between the subscriptions which came from the ten and the subscriptions which came from the Business Newsletter Group.

MR JACKSON:   Could I just say this:  in relation to the use of that document, it did not appear that that document was one that was the basis upon which the persons who were the investors who ultimately were the owners of the money - or said to be the owners of the money that is in question - that it was part of the business going to them, in effect.  They were ‑ ‑ ‑

BRENNAN CJ:   That is not the point, is it?  The point is the terms on which you accepted it.

MR JACKSON:   The terms on which we accepted it were that money was sent to us by the Business Newsletter Group saying, in effect, “This money is money that, in the end, has come from investors”.  But, your Honour, the investors are told, “This is money that is being held in trust for you to be applied in accordance with the terms”.  To impose that trust on us, us knowing nothing of that being said - and it being said, in fact, without authority - is a different proposition, with respect.  Your Honour, I should have said that if one looks at page 80, in relation to the persons who paid the money directly to us, what your Honours will see about between lines 40 to 45 - in any event, your Honours, could I just say this, that the case in the end

gives rise, in our submission, to the question of the degree of proof of knowledge that is necessary to establish the express trust that is relied on.

DAWSON J:   That is not really; that is a question of fact, is it not, Mr Jackson?  There is no principle involved in this.  There was a trust.  It is just a question of who the beneficiaries were.

MR JACKSON:   Could I just say this in relation to that:  the issues of this kind always arise - and particularly ones where there is an element of fraud involved - because the facts tend to be peculiar.  But one does have the genus of cases of fraud and the degree of proof.  They have to arise fundamentally from facts, and this is case which gives rise to these ‑ ‑ ‑

DAWSON J:   But this Court is not going to elucidate the law of trusts by taking this case on appeal.

MR JACKSON:   Your Honour, the issue that would arise is the extent to which we are bound by something that is said without authority on our behalf.  Your Honours, those are our submissions.

BRENNAN CJ:   This case involves no more than the inference of the nature and terms of a trust to be drawn from the facts as found by the courts below.  It is not a case therefore which warrants a grant of special leave.

MR GRIEVE:   We ask for costs, if your Honours please.

MR JACKSON:   Nothing I can say, your Honours.

BRENNAN CJ:   Special leave is refused with costs.

AT 10.20 AM THE MATTER WAS CONCLUDED