Alexander & Ors trading as Minter Ellison v Perpetual Trustees WA Ltd & Anor
[2003] HCATrans 742
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S509 of 2002
B e t w e e n -
CHARLES DELIUS SOMERVILLE ALEXANDER & ORS Trading as MINTER ELLISON
Appellants
and
PERPETUAL TRUSTEES WA LIMITED
First Respondent
PERPETUAL TRUSTEES COMPANY LIMITED
Second Respondent
GLEESON CJ
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 18 JUNE 2003, AT 10.24 AM
Copyright in the High Court of Australia
__________________
MR B.J. SHAW, QC: If the Court pleases, I appear with my learned friend, MR T.M. FAULKNER, for the appellant. (instructed by Mallesons Stephen Jaques)
MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR S.D. ROBB, QC, for the respondents. (instructed by Phillips Fox)
GLEESON CJ: Yes, Mr Shaw.
MR SHAW: If the Court pleases, in the period between May 1993 and December 1995, in a series of instalments the two Perpetual companies, the respondents, invested a total of some $10 million trust funds held by them in redeemable preference shares in a company called EC Consolidated Capital Limited. That company had invited subscriptions from the public in sums of not less than $500,000 on the basis that the redemption obligations in relation to the preference shares were supported by provisions of what was called a bearer certificate of deposit. The bearer certificate of deposit was to be issued by what was called a prime bank and was intended to have effect such that when it was presented the prime bank was obliged to pay as they would under a letter of credit.
The subscription moneys were to be paid for the purposes of subscription for the shares to the company’s solicitors. They were our clients, the appellants, Minters, and released by them in two phases, but substantially against the certificate of deposit having been made available and being held by somebody who was called the paying agent in order to secure the redemption. In fact, no such bearer certificate of deposit was ever obtained, but the moneys were released in circumstances in which it was held that both the Perpetual companies and Minters were acting in breach of trust.
The funds were lost and some of the persons who had provided the funds to the Perpetual companies instituted proceedings in the commercial division of the Supreme Court of New South Wales against a number of defendants, including the Perpetual companies but not including Minters.
In volume 1 of the appeal books the proceedings by the beneficiaries of the Perpetual trusts appear at page 1, but because the proceedings were in the commercial division there were not pleadings in the ordinary sense, that being the practice in that division, and that would be easily seen by looking at, say, page 9 where it will be seen that there is a statement of the nature of the dispute and it is said that:
The Plaintiffs have invested through the Third Defendant, the Fourth Defendant –
that is the Perpetual companies –
and the Fifth Defendant –
that was FlexiPlan and I will ignore that for the moment –
as their trustees in “A” class preference shares in the capital of a company called E.C. Consolidated Capital Limited –
and there is a statement of some claims against the first and second defendants which is not presently relevant. Then at line 19:
The principal security for the investment was the lodgement of Deposit Certificates with the custodian for the life of the investment. The Deposit Certificates were never lodged with the custodian but were misappropriated by ECCCL and used for its own purpose. ECCCL has now been placed into official liquidation. The Third, Fourth and Fifth Defendants breached their duty as trustee for the Plaintiffs by failing to ensure that the Deposit Certificates were lodged with the custodian upon completion of the subscription for the “A” class preference shares.
Then if one goes over to page 49 there is set out the duties of the Perpetual companies as trustees. And written on the next page, breach of the duties is pleaded and particulars will be seen at the next page, one of them being:
failure to ensure that at the completion of each Subscription Agreement the Deposit Certificates had been deposited with National Registries ‑
that was the paying agent -
in accordance with the terms of the Paying Agency Agreement and/or Subscription Agreements -
And if one goes down to (iv):
failure to make enquiries . . . as to whether the Deposit Certificate had been deposited ‑
with the paying agent. Then going down to the bottom of page 52, the appointment of Minters to act as Perpetual’s agent in circumstances where it was also acting as solicitors for the company.
Then there are set out various implied warranties and covenants and various representations in clauses 49G and 49M, and a duty of care against the fourth defendant in paragraph 60. Then if I could take the Court over to page 98, there is a cross-claim by one of the Perpetual companies. There is a similar cross-claim by the other Perpetual companies at page 133.
That cross-claim is against, amongst others, Minters. It can be seen on the first page of the first of the cross-claims I have referred to, that is page 98, it set out the trustee status, presently at that time and formerly, in relation to various funds. At the bottom of the page:
2. As trustee of the Excelsior Funds, PTWA invested trust funds at the direction of trust members (including some of the Plaintiffs) by subscribing for redeemable “A” class preference shares issued by EC Consolidated Capital Limited (“ECCCL”).
3. In this Cross-Claim, PTWA seeks to recover from the Cross‑Defendant trust moneys invested in ECCCL for each of the Excelsior Funds and/or damages.
4. PTWA sues those persons listed in Schedule 2 (“Minter Ellison”) for:
4.1 breach of trust;
4.2 negligence;
4.3 misleading and deceptive conduct in breach of the Fair Trading Act (Vic)
in dealing with those subscription moneys and seeks:
4.4 restoration of trust funds or equitable compensation for breach of trust;
4.5 damages for negligence and breach of the Fair Trading Act -
If I could then go over to page 104, there is set out at the bottom of the page the claim for breach of trust; at page 111, the claim in negligence, and at page 112, the claim under the Fair Trading Act. The defence appears at page 128 and it will be observed on page 129, at the bottom of the page in paragraph 10 at line 45:
In further answer to the claims for loss and damage . . . the first cross‑defendants say that:
(a) any causal connection . . . was severed –
and then going on to paragraph 11(b) on the next page at line 30:
By reason of the matters alleged in paragraph 10:
. . .
(b) such loss or damage as has been suffered should be apportioned (in equity and/or pursuant to s.23B of the Wrongs Act 1958 (Vic)) or the liability . . . should be reduced or diminished –
pursuant to various provisions which are referred to. The relevant part of that is the reference “pursuant to s.23B of the Wrongs Act 1958 (Vic))”.
KIRBY J: Could you clarify this for me. In Mr Jackson’s submissions - I must have misread them. I thought it was suggested that this was not asserted and litigated at trial. That seems to clearly put the issue of the application of the Act in issue.
MR SHAW: That is a phrase pursuant ‑ ‑ ‑
KIRBY J: What is the point of difference between the parties on what happened at trial?
MR SHAW: Your Honour, I do not think that there is any difference. The amendments were made after trial inserting the reference to 23B but the matter was argued at trial and determined by the trial judge. So the matter was ‑ ‑ ‑
KIRBY J: Does anything turn in the appeal on the course that the proceedings took in terms of pleading and conduct of the trial?
MR SHAW: In our submission, not, your Honour, no. There is a second set of cross-claims and defences in the same terms from the other Perpetual company. Then if I could go to a cross-claim by Minters against the Perpetual companies which appears at 171 at line 9 ‑ ‑ ‑
KIRBY J: Just let me finish that point. The words underlined were amendments to the cross-claim and, as I understand your submissions, the amendment was not objected to by the respondents.
MR SHAW: They were consented to, yes.
KIRBY J: When precisely did that amendment take place?
MR SHAW: It was March 1999, your Honour.
KIRBY J: Thank you.
MR SHAW: I have just referred to the seventh cross‑claim which is at page 171. It will be seen at lines 9 to 11 a claim for contribution against the Perpetual companies and at page 175 at line 5 in paragraph 3:
The cross‑claimants –
that is Minters –
on the seventh cross‑claim deny that they have any liability to the first and second cross‑defendants on the seventh cross‑claim and FlexiPlan. If, which is denied, the cross‑claimants on the seventh cross‑claim are held to have a liability in these proceedings –
Then, going down to (aa) at line 25 it says:
alternatively, the cross‑defendants on the seventh cross‑claim –
It should say, I think, “the cross‑claimants” -
claim contribution in equity and/or pursuant to s23B of the Wrongs Act 1958 (Vic) against the first and second cross‑defendants on the seventh cross‑claim.
KIRBY J: Is it agreed that we should read “defendants” as cross‑claimants? It is the only way you can make sense of it.
MR SHAW: Yes. My learned friend is half agreeing.
KIRBY J: Reluctantly.
MR SHAW: Cautiously, your Honour. If I might then go to the judgment of the trial judge. It seemed to us that it was likely to be of assistance to the Court if I referred to the terms of what his Honour said rather more extensively that one ordinarily would because the judgment is so elaborate and, unless one is provided with some sort of map, it may be rather indigestible. If once I have started it seems the Court is not being helped, I will stop but it is difficult to quickly pick up what is there unless somebody points to various different bits and, accordingly, I will be a bit more elaborate than I ordinarily would.
GUMMOW J: There is an index at least.
MR SHAW: There is an index, true. At page 376, which is already 54 pages into his Honour’s judgment, his Honour begins to consider the case which is made by the plaintiffs at first instance against the Perpetual companies and at page 378/379 at line 50 his Honour says:
At the end of the evidentiary day the essential case made by the plaintiffs against PTWA and PT was that they were in breach in two essential respects. Firstly, it was submitted that they were in breach of their duties as trustees in appointing Minter Ellison to act as their agent on settlement, by which the submission meant all facets of the settlement and completion. This submission was based on their failure to ascertain whether and/or to appreciate that Minter Ellison had a conflict of duty or interest, which they should have ascertained or appreciated, and by reason of that conflict, they should not have appointed Minter Ellison as their agent. Secondly, it was submitted that PTWA and PT were in breach of their duty in failing to ensure that the Deposit Certificates were Bearer Deposit Certificates and thus complied with the Subscription Agreements. PTWA and PT made no attempt to sight the certificates nor to obtain confirmation from either Minter Ellison or National Registries –
that was the paying agent -
that the Deposit Certificates were Bearer Certificates. Nor did they obtain, independently of any steps they took, any such confirmation from either Minter Ellison or National Registries. Further, they failed to call for or read the Paying Agency Agreement.
CALLINAN J: Mr Shaw, would it be usual for a client to ask a solicitor whether the solicitor had a conflict of interest, a duty? I do not really understand why that should be assumed. Why should not the solicitor just say that he or she does have a conflict?
MR SHAW: Your Honour, the position was here that the subscription agreement, which was entered into to make the subscriptions for redeemable ‑ ‑ ‑
CALLINAN J: Made provision for the money to be lodged with ‑ ‑ ‑
MR SHAW: With Minters ‑ ‑ ‑
CALLINAN J: Yes, I understand that.
MR SHAW: ‑ ‑ ‑ as solicitors for the company and, accordingly, they had a duty to the company. They also had a duty under the terms of the subscription agreement to ensure that the funds were not lodged – and I use this loosely – except against – “against” is a bit inaccurate but gives the right idea – against a bearer certificate of deposits. What his Honour was saying I think was that if the ‑ ‑ ‑
CALLINAN J: His Honour made that finding ultimately, did he not? His Honour found that that was one of the respects in which ‑ ‑ ‑
MR SHAW: Yes, he did.
CALLINAN J: ‑ ‑ ‑ Perpetual had been in breach of its duty as a trustee.
MR SHAW: Yes.
CALLINAN J: I really would have thought, at first blush that is, that the solicitor should say, “Look, we have a potential conflict here.”
KIRBY J: In practice solicitors have now – they do computer searches to see whether there is conflict.
MR SHAW: Your Honour, whether or not the solicitor should have said, the conclusion his Honour came to was in the circumstances these particular subscribers to shares should have asked because if they had paid attention to the documents they would have demonstrated either the existence of a conflict or the potentiality for a conflict.
CALLINAN J: I understand that. I understand what the finding was and the general outline of the document, only the general outline of it, but I still do not understand why there should not have been a primary duty of some kind upon the solicitors to alert even a trustee company – and perhaps a trustee company one would expect to be more alive to these sorts of problems – but to alert even a trustee company to the fact of the potentiality of conflict.
MR SHAW: Your Honour, the fact is his Honour did come to the conclusion he came to.
CALLINAN J: And there is no notice of contention, is there?
MR SHAW: That was never appealed.
CALLINAN J: No.
MR SHAW: The appeals only related to other matters than the liability of the Perpetual companies to ‑ ‑ ‑
CALLINAN J: I would just like to get that clear. There was no appeal against that finding and, indeed, there is no notice of contention here.
MR SHAW: No. If I might then go to page 382. At that page his Honour starts to consider evidence given by Mr Shaw who was an expert on investments. At page 394 at line 26 his Honour says:
In my opinion certain important matters emerged from the evidence of Mr Shaw, which I accepted without reservation. Firstly, I am satisfied that in the circumstances of this case a prudent trustee acting reasonably would have appreciated that there was, at the least, a potential for a conflict of interest, and would have either taxed Minter Ellison about this to find out how they would handle the matter and/or used an agent other than Minter Ellison. If this had happened I am satisfied that only a Bearer Deposit Certificate would have been accepted on settlement.
And then he goes on to say:
I am satisfied that a report on what had occurred on settlement should have been furnished within two working days of settlement.
Then going over to page 398 at line 10, his Honour says:
For reasons upon which I shall elaborate after I have considered all the evidence, I do not consider that PTWA and PT have shown that they acted as reasonable and prudent trustees should have acted. The evidence establishes that they acted with high disregard for their obligations, for the performance of which, of course, they were receiving fees. In my opinion their appointment of Minter Ellison as their agent, notwithstanding the potential conflict of interest and without having satisfied themselves as to how Minter Ellison proposed to overcome that problem and their having considered whether that was appropriate, was a clear breach of how a reasonable and prudent trustee should have acted. That breach was compounded by the inexplicable failure of PTWA and PT to make any enquiry from Minter Ellison or National Registries whether settlement had been completed in the proper way and, in particular, whether the crucial Deposit Certificates had been received. Nor did they seek to inspect them. The very fact that Minter Ellison did not advise that conforming Deposit Certificates had been received should, in my opinion, have alerted PTWA and PT to the prospect that that may not have occurred and, at the very least, have caused them to make enquiries.
Then his Honour goes on to consider the evidence of various witnesses called on behalf of Perpetual and going over to page 430 under the heading at line 24, “Mr Heydon’s Submissions”. Mr Heydon was counsel for the Perpetual companies and he sets out those submissions in a summary sort of way on that page and the next page and at page 439 at line 26 or 27 his Honour says:
It was accepted by the parties, as I understand the submissions, that PTWA and PT were not liable for the acts of Minter Ellison, acting as their agent, unless the trustees were guilty of “wilful default”.
And at page 452 at line 31 his Honour said:
The question which arises is whether the trustees had a consciousness of breach of duty or negligence, or were reckless in the performance of a duty in the sense to which have referred. I have come to the conclusion that the trustees acted with complete indifference to their obligations.
And then at the bottom of the page he refers to the matters that he relies on, which are set out on the next few pages, and at page 455 his Honour says at line 35, after having set out those matters:
All of these matters indicate to me a complete indifference on the part of PTWA to the performance of its obligations as trustee. I am satisfied that this indifference amounted to recklessness and, accordingly, that there was “wilful default” on its part. The same comments apply to PT. They apply, of course, to the specific breaches alleged, viz the appointment of Minter Ellison as agent, and the failure to take any reasonable steps to ensure that Deposit Certificates were sighted and received.
At page 459 he considers the question of damages as against the Perpetual companies. Right at the very bottom of the page there is a heading and he deals with that matter.
KIRBY J: Is that the foundation for his Honour’s conclusion that the trustee company had an obligation of its own to make a check as to a conflict of interest, that there is an additional duty in the trustee company of caution?
MR SHAW: I think that is so, your Honour.
KIRBY J: And that was the basis on which, unlike an ordinary client, this particular client had some particular and special duty; it could not just rely on the solicitor to disclose the conflict.
MR SHAW: Yes, your Honour.
CALLINAN J: That finding is at page 431. In fact, you have a trustee company owed a higher duty than perhaps another person in the position of the trustee because the respondents “held themselves out as trustee companies” - line 35, page 431.
McHUGH J: The very nature of the security itself ‑ ‑ ‑
MR SHAW: Indicated that, your Honour.
McHUGH J: - - - indicated that.
MR SHAW: It did, your Honour.
HAYNE J: What is the remedy that is being considered at 459, common law damages? What is it?
MR SHAW: Your Honour, I will come to what the remedy was, but in the end the order that was made was that amounts be paid and it was on the basis that the money was to be used to restore the trust fund.
At page 470E, his Honour begins to consider the claim by the Perpetual companies against Minter Ellison and at page 471 at line 26 he says:
It was pleaded that by reason of the breaches of trust PTWA suffered and will suffer loss and damage in that the Subscription Moneys were not invested upon the security required by the terms of the trust and have been lost; and that had Minter Ellison informed PTWA of the matters alleged PTWA would have ceased immediately to enter into further Subscription Agreements with ECCC whereby, in relation to the various trusts, there was loss.
GLEESON CJ: At 471?
MR SHAW: At 471, I started to read at line 26, your Honour, and it sets out there a claim for breach of trust and at line 46 he says:
The breach of trust claim propounded by PTWA and PT was their principal claim.
In the alternative there was a claim made in negligence, based essentially on the same matters.
And at the top of the next page, 472:
There was a claim made under the Fair Trading Act of Victoria, which alleged Minter Ellison represented to PTWA that Deposit Certificates as defined in the Subscription Agreements had been procured –
Then at page 475, at line 6, his Honour says:
It was acknowledged that as Minter Ellison acted as the solicitor for ECCC and as agent for Perpetual on completion, there was the potential for a conflict of interest, which Mr Lewis –
a partner in Minters –
recognised and for which he sought to provide in –
various clauses of the agreements which were entered into. Then at page 477, his Honour says under the heading “The Submissions On Behalf of PTWA And PT”:
Mr Heydon submitted that clause 2.1 of the Subscription Agreement created an express purpose trust over the Subscription Moneys of which trust Minter Ellison were the trustees. He submitted Minter Ellison had a duty to hold the trust property to procure the provision of Deposit Certificates; to pay certain expenses and commissions and to pay the balance to ECCC to be used as its working capital; and in the event that those two purposes were not achieved on trust for the investor. Ultimately, none of this was in issue.
Then his Honour goes on:
The submission was that the Subscription Moneys were correctly treated by Minter Ellison as trust moneys by being paid into their trust account for which receipts were given, and the moneys paid out to obtain the Deposit Certificates were paid by trust account cheques. It was submitted that from that it flowed that if the document, which was procured under 3.3, was not a Deposit Certificate, Minter Ellison’s duty was not to disburse the Subscription Moneys, up to the Deposit Certificate purchase limit, and, if the document procured using part of the Subscription Moneys was not a Deposit Certificate, their duty was not to part with the balance of the Subscription Moneys on completion.
His Honour then says:
In my opinion these submissions, including the trustee position of Minter Ellison, must be correct and, as I have indicated, they were hardly in issue.
At page 479 at line 10, he says:
I shall recount the evidence of Mr Lewis in some detail for the reasons to which I have referred. I have come to the conclusion that in performing the duties on behalf of PTWA and PT Mr Lewis was grossly negligent.
Then he sets out the circumstances in the remainder of that paragraph. Then going over to page 502 ‑ ‑ ‑
KIRBY J: Could I just ask, you provided with your written submissions in this 19‑volume appeal a very succinct and elegant summary of the background facts. Do you understand that the way you have set the facts out is contested by the respondent?
MR SHAW: Your Honour, what I understand to be the case is that it is not contested that what we have said is inaccurate, or not said that it is inaccurate. What is said is that it is incomplete in certain respects.
KIRBY J: They say they broadly accept your statement.
MR SHAW: Yes, and then they go on to add some additional things.
KIRBY J: Then you present what, as I understand it, are the two alternative ways in which you present your case, a bit repetitiously there ‑ that is where the elegance got lost a bit – but it certainly would be helpful, I think, if we can, as it were, start addressing the issue from the point of view of a high measure agreement on the facts because 19 volumes of appeal books is rather intimidating.
MR SHAW: There has never been any contest about the facts, your Honour. When I say “never”, of course, there was at first instance, but once first instance was passed, there was not really – first of all, the position as between the original plaintiffs and parties to their proceedings was not appealed and ‑ ‑ ‑
KIRBY J: It is just that one of the issues is “just and equitable” and, to some extent, that emerges from a consideration of the entirety of a case.
MR SHAW: It does, your Honour, although our understanding of the terms on which special leave was granted was that that was not an issue which this Court was to consider. What this Court was to consider was whether there was a right to contribution or not. If there was, then how much, including the just and equitable points, was to be determined by some other court? One can understand why Justices Gaudron and Gummow, who were sitting on the special leave application, took that view, in view of, as it has turned out, the fact that there happened to be 19 volumes of appeal books.
KIRBY J: I do not wish to appear unenthusiastic to read the whole 19 volumes. You are going to read many of them to us.
MR SHAW: As I said to begin with, your Honour, first of all, the judgment at first instance is a long judgment and complex, and there are substantial supporting materials. In case the members of the Court or any member of the Court wished to look at any of the original material, that is to say, any of the documents – I do not mean the oral evidence, I mean the documents – we have prepared a short list which sets out, I hope, all the documents which anybody might want to look at. We do not really think that it will be necessary to look at those documents, but in case somebody did want to look, that is where you find them.
GLEESON CJ: Thank you.
GUMMOW J: We have got to the stage of the very lengthy treatment of Mr Lewis’s evidence, which we do not need to go to, I suppose, in detail.
MR SHAW: No. At page 502 at line 30, his Honour says:
I think the more appropriate analysis is that Minter Ellison, through Mr Lewis and, perhaps to a lesser extent, Mr Gaffney –
who was a solicitor assisting Mr Lewis –
were not merely negligent, but derelict in their duty as agent for the investors, which constituted a breach of trust, in circumstances where Minter Ellison owed a duty both to ECCC and the investor and, in these circumstances, clearly preferred the interest of ECCC. The continued failure of Minter Ellison to advise the investor that conforming Deposit Certificates were not being obtained was, in my opinion, inexcusable.
Then, if one goes from there over to page 528, his Honour says at line 19:
Mr Lewis’ evidence confirmed beyond doubt the concessions that Minter Ellison acted in breach of trust and negligently. It also established that such breaches were gross and occurred in circumstances where the interest of ECCC was preferred to that of the investor.
KIRBY J: Now, where is that, I am sorry?
MR SHAW: It is on page 528, starting at line 19.
KIRBY J: Yes, thank you.
MR SHAW: He then deals with the effect of some exclusion clauses which were relied on by Minter’s and rejects the reliance which was placed on them. Then at page ‑ ‑ ‑
GUMMOW J: These activities or inactivities of Mr Lewis, they were taking place in Melbourne, were they?
MR SHAW: I think so, yes, your Honour.
GUMMOW J: Hence our attachment to the Victorian statute.
MR SHAW: Yes, your Honour. Then at page 546, his Honour starts to deal with the matter that your Honour just referred to, or one of the matters, the Fair Trading Act claim, which was under the Fair Trading Act (Vic), and his Honour sets out the obligation not to act in a misleading or deceptive way in trade and commerce at the commencement of that consideration.
He says that the first letter which was sent off was misleading - that is at page 547 at lines 40 to 45 - and in the rest of that paragraph he deals with the fact that it was misleading. Then going over to page 554, he concludes at lines 19 to 24 that the letters which had been written were misleading. At the bottom of page 555 at line 51 his Honour says:
the letters from Minter Ellison to PTWA and PT amounted to misrepresentations by silence in so far as they conveyed the impression, on a fair reading of them, that settlement had taken place conformably with the Subscription Agreements whereas it had not.
Then his Honour has a heading “Causation” on page 556, and at page 557 at the bottom of the page his Honour says:
These submissions were linked with the further submission that the only loss caused by any breach by Minter Ellison was the loss of that portion of the investments represented by the amounts of the Deposit Certificates because, so it was submitted, the balance of the investment was lost through ECCC’s trading losses. This submission, if I may say so with respect, overlooks the fact that Minter Ellison were only authorised to pay out the balance of the money on receiving a conforming Deposit Certificate, and that had a conforming Deposit Certificate been obtained the interest on the amount invested would have been sufficient to repay the principal. It also overlooks the evidence that had PTWA and/or PT been advised of the situation earlier they would have been in a position to call for the return of all the money and, at least to a certain point, ECCC would have been able to comply with that request.
Then going over to page 564 right at the bottom of the page, line 54:
Minter Ellison owed trust obligations, which they breached. After the breaches, and I have no doubt because of them, the losses were suffered. The authorities support the proposition that that provides a sufficient causal nexus.
For these reasons I am satisfied that the breach by Minter Ellison was causative of the loss.
Then his Honour goes on to consider contribution under that heading. At line 35 his Honour says:
Firstly, I am satisfied that the plaintiffs are entitled to recover from PTWA and PT by reason of their breaches of trust. Secondly, I am satisfied that PTWA and PT are entitled to recover from Minter Ellison by reason of their breaches of trust to PTWA and PT. This is not a case . . . where two trustees are liable to a plaintiff. In such a case the trustees would be, generally speaking, jointly and severally liable and, in those circumstances, entitled, inter se, to contribution.
In the present case PTWA and PT are liable for certain breaches to the plaintiffs, and Minter Ellison are liable for certain other breaches to PTWA and PT. The question is whether there should be any apportionment.
GUMMOW J: Is there any consideration at this stage in the trial judge’s judgment of the points now made by your opponents in their supplementary submissions of 18 June as to right of indemnity?
MR SHAW: Your Honour, that was a matter which was not mentioned by anybody until 17 June, when it was mentioned to me last evening as something which might occur today in the sense that leave would be sought to rely on these additional submissions. We received that document a little but not much before your Honour received it, and we are unable to deal with it because we have not had any chance to consider it. But the answer to your Honour’s question is no.
GUMMOW J: Thank you.
MR SHAW: At the top of page 568 his Honour says:
the authorities to which I have been referred albeit very generally, do not support the proposition that there is any entitlement to apportionment –
and then he refers to section 23B and he sets out some of the provisions and says at the bottom:
For the reasons I have given I do not consider this is a case in which the principles of contribution arise. The amount recoverable on the cross‑claim by PTWA and PT will be more than they are obliged to pay under the principal claim, although it includes that amount. It is not “the same damage”. The damage springs from different breaches and there is no co‑ordinate liability.
At page 569 his Honour said:
If the case turned on the negligence of Minter Ellison then, in my opinion, it would be appropriate to consider whether PTWA and PT had been guilty of contributory negligence. If that was a matter I had to consider I would have come to the conclusion, essentially for the reasons I have given in articulating why they are liable to the plaintiffs, that they had been guilty of contributory negligence and, as between them and Minter Ellison I would have apportioned the damages as to forty per cent and sixty per cent respectively.
If I had come to the conclusion that the matter turned on the Fair Trading Act I would have found that Minter Ellison engaged in misleading conduct and it would have been necessary for me to mould relief conformably with the decision of the Court of Appeal in Akron Securities . . . My inclination, prima facie, would have been to grant relief reflecting the culpability between the parties in the terms to which I have referred in considering contributory negligence. It is not necessary to reach a final conclusion on this point.
In my view, the highest duty owed by Minter Ellison to PTWA and PT was as trustee and, accordingly, I am of the view that PTWA and PT are entitled to judgment against Minter Ellison for the full amount required to replenish the trusts, together with compound interest on yearly rests on the trustee basis and for costs.
Then he says that interest is to be awarded on a compound interest basis. If I could then go to the fourth volume of the appeal book. There is another judgment by his Honour relating to orders and relating to costs. At page 597 his Honour sets out, having set out on page 596 the orders in respect of the first and second defendants, the orders to be made in relation to the claim by the plaintiffs against the Perpetual companies and at page 607 the orders as between the Perpetual companies and Minter Ellison and the Court will see that the orders are made on the basis that the moneys be paid by Minter Ellison on terms that the moneys are to be applied:
to replenish the relevant trust funds or to pay the plaintiffs.
That is in paragraphs 8 and 9. Then that is dealt with again in the same terms on pages 621 to 623. There is a variation in the amount of the orders set out at page 636 and at 643 the orders themselves, 643 to 644.
GUMMOW J: The relevant orders are where?
MR SHAW: On page 644, your Honour.
GUMMOW J: I know, but whereabouts in the 30 orders that follow?
MR SHAW: Paragraphs 8 and 9, your Honour.
GUMMOW J: Yes, thank you. Now, it says:
to replenish the relevant trust funds or to pay the Plaintiffs.
I do not quite understand that.
MR SHAW: Your Honour will recall that the plaintiffs were not all the people who had their funds used by Perpetual companies to subscribe for the redeemable preference shares in ECCCL, so that there is a difference in the amount of the moneys which the plaintiffs were ultimately to receive and the amount of the moneys which Minters was ordered to provide to the Perpetual companies for the purpose of replenishing the trust funds.
GUMMOW J: So, in other words, there might be some moneys left in the trust, the parties entitled to which were not party to the litigation.
MR SHAW: Yes, your Honour, that is right, yes.
GUMMOW J: But, in respect of those beneficiaries who were parties to the litigation, they had a present right to the money as against the trustees, so ‑ ‑ ‑
MR SHAW: I am really not quite sure about that, your Honour; it seems to be entirely alternative.
GUMMOW J: Yes, at some election of PTWA, as distinct from obligation.
MR SHAW: Yes, it does not really seem to say.
GUMMOW J: No.
MR SHAW: I suppose, your Honour, it did not make any material difference which was done.
Then there is the notice of appeal at page 657. The body of it appears at page 659 and the following pages and it was an appeal by Minters and it will be seen that there were a number of grounds of appeal, some of them relating to contribution. Those grounds appear on page 659. The Court of Appeal dealt with the appeal commencing at page 676. Justice Stein’s judgment commences at 679 and at page 686 his Honour deals with the exclusion clauses and goes on to hold that Minters could not rely on them. At page 701 he deals with contribution and that consideration goes through to page 703. I shall not read that to the Court because his Honour does not refer to section 23B at all.
Justice Davies does refer to section 23B. His judgment starts at page 703 and at page 707 at lines 9 and 10 his Honour says:
The claim was brought under s 5 of the Law Reform (Miscellaneous Provisions) Act, 1946 and/or s 23B of the Wrongs Act –
But except for that reference to the section, there is no separate consideration of the section by his Honour at that stage. Justice Ipp at page 709 says that his Honour agrees with Justice Stein.
GLEESON CJ: What Justice Davies says at page 707 in paragraph 138 seems, although it is not expressed in those terms, to anticipate the indemnity argument that is now sought to be raised against you.
MR SHAW: In a kind of a way it does, yes, your Honour.
GLEESON CJ: It is really the third sentence in paragraph 138 that is the key point, is it not, right or wrong?
MR SHAW: Yes.
GLEESON CJ: The fourth sentence, I mean.
MR SHAW: Then at page 713 there was an application made for the court to consider section 23B further and the court accepted that invitation, if “invitation” is the right word. At page 716 his Honour Justice Stein explains the circumstances and at page 717 in paragraph 6 of his Honour’s reasons, says that he thinks:
the parties are entitled to supplementary reasons dealing with . . . s 23B –
and sets out the various provisions. At page 718 at paragraph 12 his Honour says:
For s 23B to apply it is therefore essential that the beneficiaries are entitled to recover compensation from the appellants.
This requirement cannot be here satisfied because, as a general proposition, beneficiaries of a trust do not have a right of action for compensation against a third party who wrongly breached an obligation owed to the trustee of the beneficiaries.
Then at page 719 in paragraph 16 his Honour says:
Further, Rolfe J found against the appellants on s 23B on the basis that the ‘same damage’ was not involved.
In my view, his Honour was correct . . . The parties (the appellants and the respondents) were not liable with respect to the same debt or to make good the same loss sustained by the beneficiaries. The respondents owned the property which was lost notwithstanding that they held it on trust for the beneficiaries. The respondents appointed the appellants as their agents and trustees and the solicitors breached duties which they owed personally to the respondents. The respondents had their own rights of action against the appellants under which the appellants were liable to make good the loss suffered by the respondents. This loss may include, in an appropriate case, the loss suffered by the trustees in being exposed to claims for breach of trust.
Since writing these reasons I have had the benefit of reading the draft supplementary reasons for judgment of Davies AJA. I agree with his Honour and, in particular, paragraph 26.
GLEESON CJ: And paragraph 27 presumably?
MR SHAW: I think his Honour probably did not mean paragraph 26; he probably meant paragraph 27.
GLEESON CJ: Yes, and there is the indemnity point in the second sentence.
MR SHAW: In paragraph 27 his Honour says:
In the circumstances of this case, for the reasons which the members of the Court explained in their reasons for judgment, it was not just and equitable that an order for contribution be made against the respondents.
Justice Ipp says on the same page at the bottom at paragraph 29 that he agrees with both Justice Stein and Justice Davies.
That being so, if I could take the Court to section 23B of the Wrongs Act of Victoria and it will be seen that it provides that:
a person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with the first-mentioned person or otherwise).
If I might take the Court also to subsection (6) of that section:
References in this section to a person’s liability in respect of any damage are references to any such liability which has been or could be established in an action brought against that person in Victoria by or on behalf of the person who suffered the damage and it is immaterial whether any issue arising in any such action was or would be determined . . . by reference to the law of a place outside Victoria.
Going back to section 23A(1):
For the purposes of this Part a person is liable in respect of any damage if the person who suffered that damage, or anyone representing the estate or dependants of that person, is entitled to recover compensation from the first-mentioned person in respect of that damage whatever the legal basis of liability, whether tort, breach of contract, breach of trust or otherwise.
(2) References in this Part to an action brought by or on behalf of the person who suffered any damage includes references to an action brought for the benefit of the estate or dependants of that person.
In subsection (3) “dependants” is defined to mean:
those persons for whose benefit an action could be brought under Part III –
and ‑ ‑ ‑
KIRBY J: What was the history of this Act in Victoria? Why is it in 23A and 23B? How did these provisions come in? Is this not based on the template that was followed throughout the British Empire in the 1930s or is it ‑ ‑ ‑
MR SHAW: Your Honour, it was later than that. There were previous provisions but these provisions, I think ‑ ‑ ‑
KIRBY J: I am looking at Hardie v Seltsam. Is it the same source that ‑ ‑ ‑
GUMMOW J: It is derived from the English Civil Liability (Contribution) Act 1978, is it not?
MR SHAW: It is, your Honour, the ‑ ‑ ‑
KIRBY J: That was an update on the old contribution provisions of the 1930s.
MR SHAW: The provisions are ‑ ‑ ‑
KIRBY J: I would just like to put this statute in its historical context so that I understand its source.
MR SHAW: The immediate source is, as your Honour Justice Gummow said, the Civil Liability (Contribution) Act 1978.
HAYNE J: It was brought in in Victoria by the 1985 amendments made by the Wrongs Contribution Act 1985.
MR SHAW: Yes, your Honour is perfectly correct. There were previous provisions but the ‑ ‑ ‑
KIRBY J: The common law did not allow it then.
MR SHAW: No.
KIRBY J: Then there were a lot of judicial suggestions for it in the 19th century and at long last the Imperial Parliament got round to doing something in the 1930s that was copied throughout the Empire, including in all jurisdictions of Australia, and then defects in that were discovered. It might be important to know what those defects were perceived to be. That led to the English Act of 1978. That led to the Victorian amendment of 1985. Has that been followed in all jurisdictions of Australia do you know, or not?
MR SHAW: I do not know what the answer to that is, your Honour.
KIRBY J: I think we ought to know this history of the section.
MR SHAW: I will see if I can find that out, your Honour.
KIRBY J: Yes, not necessarily today.
MR SHAW: No. Let your Honour have a note of it.
KIRBY J: Because it may bear out your suggestion of the remedial purpose being reinforced by the 1985 amendments in Victoria.
McHUGH J: Well, one very plain indication of its remedial nature is that this is the only Act around the nation, if I remember rightly, that provides for contribution in respect of breach of contract or breach of trust, is it not?
MR SHAW: Your Honour, I cannot answer whether it is the only one.
KIRBY J: I thought that ‑ ‑ ‑
MR SHAW: One of the purposes, as I understood it, but now that I am asked a direct question I cannot say that I can confidently say it is so, was that one of the purposes was to extend the rights to contribution in circumstances where the liabilities were of disparate kinds.
CALLINAN J: They did not have it in South Australia because when we decided Astley’s Case there was no such Act relied on.
KIRBY J: I have a recollection that following Astley a lot of Parliaments have moved, including in New South Wales. I mean in your written submissions towards the end there are many statements almost passionate saying that the Act is remedial.
MR SHAW: Yes.
KIRBY J: Well, I think we need to know what was ‑ ‑ ‑
MR SHAW: The point that I wanted to make first was that in this particular case that the Court is concerned with here one is not concerned with circumstances in which the trustee of trust A has a power to invest trust moneys in, amongst other things, units in other trusts or interests in other trusts and does invest the trust moneys in interest in another trust, and the second trust ‑ ‑ ‑
HAYNE J: I lost you, Mr Shaw.
MR SHAW: What I was saying, your Honour, was that this is not a case in which you have a series of trusts in which each of the trustees has a power under its own trust to invest the moneys and you have a series of trusts in which the moneys from the first trust are invested in units in the second trust, then the trust moneys in the second trust are invested in something – we will say in breach of trust, despite the fact the investment by the first trust in the second trust was a proper investment. Here what has happened is that the trustees of the first trust, that is to say Perpetual, or the Perpetual companies, paid the money to Minters for the purpose of Minters performing acts which would, if carried out properly, have produced for Perpetual an investment in the redeemable preference shares in ECCCL.
GLEESON CJ: Are you concerned to make the preliminary point that this case is different from the case that you mentioned because the case that you mentioned would not be governed by section 23B?
MR SHAW: Because it might not ‑ ‑ ‑
GLEESON CJ: Well, how would section 23B work in a fairly straightforward case where the trustees of the estate of a deceased person, having the power to invest trust property but acting in breach of their power to invest trust property, invest in a unit trust and the trustee of the unit trust dissipates the trust property in breach of the terms of the unit trust? Would section 23B apply there?
MR SHAW: Probably not, your Honour, no.
GLEESON CJ: Why not? I am not suggesting it would, but I am interested to know why not.
MR SHAW: There might be a number of reasons, your Honour, but one would be that it is very likely in those situations you would not be able to say there was the same damage. Here, because the moneys were in accordance with the subscription agreement, paid to Minters and paid into their trust account, to be released – if I could speak in a broad way, since I do not think the inaccuracy matters for the present moment – against the bearer certificate of deposit, if that had been done properly, Minters trust would have been over and discharged and the shares would have been assets of Perpetual held by it as trustee of its trusts. Because there is that difference, it is possible and, in our submission, appropriate to say that there is here the same damage because the damage is the loss of the funds to be invested in the redeemable preference shares in ECCCL.
CALLINAN J: It is the same trust, is it not, the trust to apply the money to obtain, in effect, guaranteed preference shares? Was that not the way in which the money had to be applied, no matter whether it was held by Perpetual or by the solicitors?
MR SHAW: Your Honour, Perpetual held the moneys on trust and it was directed to apply them in investing in the shares. If you wanted to invest in the shares, the subscription agreement provided that the moneys had to be paid in appropriate amounts – which was over $500,000 – to Minters, who were solicitors for ‑ ‑ ‑
CALLINAN J: But ultimately to be applied ‑ ‑ ‑
MR SHAW: To the shares.
CALLINAN J: ‑ ‑ ‑ in the way in which I have said.
MR SHAW: Yes, absolutely.
CALLINAN J: So it is the same trust.
MR SHAW: Yes. So it is the same damage. We, in our submission ‑ ‑ ‑
GUMMOW J: But damage to whom?
MR SHAW: Well, if I can just come to that.
GUMMOW J: And what does “damage” mean? The House of Lords seems to say it means harm.
McHUGH J: Can I just add to it. In the statutes in the other States, unless my recollection is defective, the term is “liable in respect of that damage”. Is there any significance in the change of language “liable in respect of the same damage”?
MR SHAW: None occurs to me, your Honour, no.
McHUGH J: No, it does not occur to me either.
MR SHAW: Your Honour Justice Gummow said, “Yes, but liable to whom?”
GUMMOW J: No, I said, “Damage to whom?”
MR SHAW: In subsection (6) it says that:
liability in respect of any damage are references to any such liability which has been or could be established in an action brought against that person in Victoria by or on behalf of the person who suffered the damage ‑ ‑ ‑
HAYNE J: Is there a distinction between the idea of “liable to whom” and “damage to whom”? Does the statute present the question, “damage to whom”? Does it present the question, “liable to whom”? Are those questions the same or different?
MR SHAW: Your Honour, it certainly presents some questions of “liable to whom” because it talks about people liable in respect of damage and other people liable in respect of the same damage.
HAYNE J: One point to the question, Mr Shaw, is that it seemed from some of the earlier answers you have given that the idea of damage that may lie below your submissions or as part of your submissions in this case is to focus upon identified trust property and to focus upon a fact that trust property has been paid away in breach of trust, and that damage somehow is to be understood by reference to an identifiable trust fund.
MR SHAW: Your Honour, what we would submit is that here, because the trust which Minters was subject to, was carrying out a task, as it were, for Perpetual in order to achieve the result that Perpetual invested in the appropriate way in the redeemable preference shares, one has a situation in which, when the money was paid out in circumstances in which each of Perpetual and Minters were in breach of trust, if one is looking at the damage, it is, if you like ‑ ‑ ‑
GUMMOW J: The breach of trust owed to whom?
MR SHAW: We would submit, your Honour, that here one looks at the situation of the Perpetual company and says that when it complains about the breach of the duties owed to its beneficiaries, it is making a complaint, not only on its own behalf, but on their behalf.
GLEESON CJ: Does “damage” in this section mean interference with a legal or equitable right or interest?
MR SHAW: Probably, yes, I think, your Honour.
McHUGH J: It must be compensable because 23A says:
For the purposes of this Part a person is liable in respect of any damage if the person who suffered . . . is entitled to recover compensation from the first ‑ ‑ ‑
MR SHAW: Yes, but it ‑ ‑ ‑
GLEESON CJ: The liability is what we call damages, is it not, which is different from damage?
MR SHAW: Yes, it is liability for damages, but that is not the damage. You get an award of damages in order to compensate you for some damage or other that you have suffered.
GLEESON CJ: Yes.
MR SHAW: So that “damages” and “damage” are not the same, we submit.
GLEESON CJ: Here are there not superimposed rights and interests?
MR SHAW: Your Honour, the rights which Perpetual has and the rights which Perpetual’s beneficiaries have and one of the questions which arises, it is submitted, is when Perpetual complains about what Minters did with the money, that is, failed to release it in appropriate circumstances, it is making a complaint on its own behalf only or on behalf of the beneficiaries of its trust.
It would seem, your Honour, that, first of all, the complaint that was originally made was a complaint as trustee, because your Honour will remember the terms of the cross-claim was complaining that it was trustee and we want the trust moneys restored and, when one comes to the order, the order is that money has been paid on terms that they either be paid to the plaintiff or they be used to replenish the trust funds. So that the terms of the order and the original complaint support the suggestion, it is submitted, that the claim which Perpetual made against Minters was made, not only on its own behalf, but on behalf of its beneficiaries as well.
There is a question about what “on behalf of” means. If we might take your Honours to Gillespie v City of Glasgow Bank (1879) 4 App Cas 632. That was a case in which some shares had been purchased.
KIRBY J: No, you slipped away from the statute. What is the object of this citation? What is the proposition…..to the proposition?
MR SHAW: The proposition is that when I just submitted that “on behalf of” is a term appropriate to cover the present circumstances where Perpetual complains about Minters’ breach of trusts and submitting that it was made on behalf of the beneficiaries of Perpetual’s trust that the use of the term “on behalf of” to establish a trust is and has for a long while been accepted. It is not, your Honour, slipping away from the statute but a citation in order to provide support for our construction of “on behalf of”.
McHUGH J: I appreciate this is a separate point but you are concentrating on the rights inter se between these two respondents in respect of breach of trust, but is it possible to look at it in an even wider context in determining whether the same damage has been suffered? Can one test it by other causes of action brought by the beneficiaries, for instance, against Minters or against Perpetual?
MR SHAW: I think one can, your Honour.
McHUGH J: If you look at it that way, it may be that the beneficiaries would have rights of action against each of them.
KIRBY J: That is your alternative case.
MR SHAW: Yes, it is and, your Honour, the beneficiaries of Perpetual’s trust would have an action against Minters if Perpetual refused to sue.
CALLINAN J: Is that right? Let me ask you this, Mr Shaw. I know that is what Justice Stein said and you seem to accept it. That is what his Honour said in paragraph 13 at page 718, citing for that Hayim v Citibank NA [1987] AC 730 at 748, but in the advice which was given there by Lord Templeman on behalf of the Privy Council his Lordship says this - it looked to me as if your case might be clearly within that – the last paragraph:
These authorities demonstrate that a beneficiary has no cause of action against a third party –
that would be your client in this case -
save in special circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate.
Why does not this case fall squarely within that proposition?
MR SHAW: Your Honour, we would say, first of all, that it might but assuming for a minute that it does not ‑ ‑ ‑
CALLINAN J: No, I want you to deal with the proposition whether it does or does not first. I know you have some further proposition. You do not accept that, do you? I need to know what your position is on that. It seems to me to be a quite different effect from what Justice Stein said in the Court of Appeal.
MR SHAW: I do accept what your Honour has put to me but the problem with what happened in the Court of Appeal was that the section 23B question came to be dealt with in circumstances where the court had already taken a view that there really was not any difference between section 23B and the equitable rights to contribution. What seems to have occurred was that they simply regarded what they had said about the equitable rights as equally applicable to the statute.
CALLINAN J: Is there a misreading of Hayim’s Case, which really, bearing upon what Justice McHugh put to you as to the entitlement of the beneficiaries to sue your clients direct?
GUMMOW J: The difficulty with Justice Stein’s passage is first in the use of the phrase “a general proposition” and the second is “a right of action”. We are talking about a common law right of action, say, that the trustee might have against some party in contract.
CALLINAN J: The case that Justice Stein relies on, BT Australia Ltd, seems to be exactly that, a common law action in negligent misstatement, I think.
GUMMOW J: No, there would be an action in contract or tort, say, which would be sued on by the trustee, but if the trustee refuses to do so he may be compelled to do so by an action in equity by the beneficiaries requiring him to do so and to make it less circuitous you would do it all at once now. In other words, there is one action that takes all these steps.
MR SHAW: What is more, the section seems to clearly contemplate that you might have an action for breach of contract, say, and an action for breach of trust, and that does not stop it being the same damage or a relevant liability.
McHUGH J: Exactly, that is the sort of point I was making and it may be that in some circumstances even the beneficiaries of the trust might themselves have an action for breach of a duty of care owed to them, resulting in loss to them.
KIRBY J: Am I wrong, but is that your alternative case?
MR SHAW: Your Honour, we had thought that it might be that we had to say that in circumstances which existed here, namely, where Perpetual had sued, we could not say that the beneficiaries could sue, but it has been pointed out to me that that is not necessarily right.
CALLINAN J: It may not be so and there may be a good reason for it. If the trustee himself or itself has been culpable in some way and even if the trustee sues on those circumstances, the beneficiary might well think that that knowledge of its own culpability might very much colour and make it less enthusiastic in the way in which it pursues the action.
MR SHAW: Indeed, yes.
GUMMOW J: The question then is removing the trustee. That is how that is solved. If there is some breach of trust by the trustee, he has to be removed, and that can be part of that ‑ ‑ ‑
MR SHAW: There are all sorts of things like that, yes, your Honour.
McHUGH J: What I was trying to explore, Mr Shaw, was whether you could test the proposition that the same damage had been suffered by going outside the form of action which had been brought in a particular case. In other words, can you test whether it is the same damage only by reference to the causes of action sued upon in this particular case, or can you test it by reference to other causes of action which may or may not have been available, but which did not happen to be available. Do you follow what I ‑ ‑ ‑
MR SHAW: I do, your Honour. In our submission, you can test it by looking at other causes of action because the section clearly assumes that the mere fact that the cause of action is different does not mean that the damage is different. It may be the same. Of course it might be different too, but one has to accept for present purposes that, although they are entirely disparate causes of action, the damage may be the same. I suppose, your Honour, an example of that might be in this case here there is the Fair Trading Act claim and the breach of trust claim.
McHUGH J: I had those causes of action in mind. If this action had been brought in New South Wales in 1972 before there was any fusion of law and equity, you had a pure common law claim in the commercial list.
MR SHAW: Yes.
HAYNE J: An additional way in which the matter may have to be tested is against the case where the trust property is a chattel. At the moment we are dealing with a case where the trust property is fungible, it is money, but if the trust property was a unique chattel and you had this succession of dealings leading to the giving away rather than paying away of the trust property, how then would the section operate?
MR SHAW: Your Honour, what we wish to submit is that we have a case here which is very like that because both the trustees of the two separate trusts had duties to perform in relation to the same moneys and duties to ensure that an identified investment was made in a particular way.
HAYNE J: Well, a breach was payment away otherwise than in accordance with.
MR SHAW: And that caused the loss of the moneys. In each case the loss of the moneys, or in your Honour’s example the destruction or giving away of the book or painting or whatever, and because here the two trustees have duties in relation to the investment of these moneys for both of them, for Perpetual, in a particular way and there is a failure to achieve that, it is submitted that it is what one would submit was in accordance with common usage of words to say that the damage is the same.
GLEESON CJ: But in a case of tracing trust property, the obligation of somebody to restore the trust property could not be diminished by a right of contribution under 23B, could it? Suppose, for example, that the trustees of a deceased estate owned a valuable painting as an asset of the estate and they gave it to an art dealer to be held by the dealer on trust to do something and the dealer fraudulently transferred the property to somebody who was not a bona fide purchaser of a value without notice and there was then a claim to get the painting back. The person who was obliged to give the painting back could not seek some kind of contribution under section 23B, could he? He would just have to give the painting back.
MR SHAW: Your Honour, he would have to give the painting back, that is true, but if the situation was that the position here had been that the investment to be made was an investment in buying a Brueghel or a Van Gogh or something, and the investment was improperly made and it involved a breach of trust by more than one person, not co-trustees but people subject with separate duties, their failures in relation to the trust fund might give rise to the same damage, that is loss of the trust funds.
HAYNE J: But each may suffer judgment for the whole to the beneficiary.
MR SHAW: They might, yes, but, as between the two of them, there may be contribution.
GLEESON CJ: How does section 23B operate, Mr Shaw, in a case where there is liability in respect of the same damage, but also liability in respect of a different damage?
MR SHAW: In that case, your Honour, I submit that what you would do is simply look at the same damage and ignore the different damage. For example, if Minters had got some money from some quite different trustee company as well and they failed in the same way to deal with the moneys in making an investment in ECCCL, the fact that breaches had occurred in relation to the Perpetual moneys ‑ assuming for a minute that Perpetual is liable in respect of them ‑ then that would be enough, and one would simply ignore the different damage.
GLEESON CJ: That might be this case, might it not? Subject to your argument about subsection (6) and Mr Jackson’s argument about indemnity, it may be that there is a liability to the beneficiaries in respect of certain damage which is the same damage as damage in respect of which there is a liability on the part of your client, but there is an additional form of damage, that is to say, the interference with the right or interest of the trustee companies. So that there is both the same damage and different damage.
MR SHAW: Yes. Your Honour, that, in a sense, is looking from a different angle at what I was submitting about the action by the Perpetual companies when I was submitting, your Honour, that it may be that one can say it is brought on their own behalf, in order to protect their own position and protect themselves by getting an appropriate award. But it does not follow from that that it is not brought on behalf of the beneficiaries as well. In that sense, there is different damage, but there is the same damage as well.
If I could go back to Gillespie v The City of Glasgow Bank, at page 637 at about point 5 on the page, Lord Cairns says in the last three lines of the first paragraph on the page:
The transfer, therefore, is to the two, Gillespie and Paterson, “and the survivor of them, for behoof of the firm of Gillespie & Paterson”.
His Lordship says:
Now, what is the meaning of those words, “for behoof of the firm of Gillespie & Paterson”?
If I go down to the paragraph at the end of the page:
The first question is, was there, or was there not, a trust created by these words?
Then ‑ ‑ ‑
GUMMOW J: It is a question that arose in liquidation, is it not?
MR SHAW: Yes, it was.
GUMMOW J: The question was whether a trust had been created.
MR SHAW: It was, by those words, and the answer was it was.
GUMMOW J: Well, I am not surprised.
MR SHAW: At the top of page 640 his Lordship says:
My Lords, there is no magic, as was admitted at the Bar, in the use of the word “trust”. There may be half-a-dozen words in the English language which would bring about the same result as the use of the word “trust”, and it appears to me that words which say that one person holds property “on behalf of” or “for behoof of” another, are words which come up to and satisfy the idea of the word “trust”, just as much as the word “trust” itself ‑ ‑ ‑
GUMMOW J: But we are trying to find out someone’s intention, whether they use words indicative of an intention to create an express trust. This is a perfectly orthodox case. But how does it bear on what we are doing now?
MR SHAW: Your Honour, if I might just finish the reference to that case.
GUMMOW J: Yes.
MR SHAW: At 640 his Lordship says what I have just read to the Court and at 641 Lord Hatherley says:
Whether you say you hold “for behoof of” some one, or you hold “on behalf of” some one, or you hold “in trust for” some one, there is no particular magic in the choice of words; all those words indicate that you are not beneficially the owner.
And on the next page, 642, he says “for behoof of” means:
the same as . . . “on behalf of” or “for the benefit of” –
GUMMOW J: This is designed to assist the construction of subsection (6), is it?
MR SHAW: Yes, your Honour. The relevance which I hope the case has is that it shows that it is, in your Honour’s words, a perfectly orthodox use of language to say that when a trustee brings an action for restoration of the trust fund, he is bringing it on behalf of his beneficiaries, despite the fact that he may also be bringing it on his own behalf and to protect himself against the liability which he might otherwise have.
GUMMOW J: It appears that the British Act followed Law Commission Report No 79, a report on contribution, published in March 1977. We had perhaps better be supplied with any relevant portions of that.
MR SHAW: If your Honour pleases.
HAYNE J: I have a memory that there was a Victorian Royal Commission or Chief Justice’s Law Reform Report that preceded these amendments – I may be quite wrong. Again, if there is, could we have some reference to it?
MR SHAW: If your Honour pleases.
McHUGH J: I also have a recollection that New Zealand has a statute which is not dissimilar from this. Have you looked at New Zealand at all?
MR SHAW: No, your Honour.
GUMMOW J: I also think Ontario and British Columbia have it too, but I may be wrong.
MR SHAW: I can say I am embarrassed at my answer to his Honour, but not in answer to your Honour’s question.
KIRBY J: This is a typical case, Mr Shaw, of a matter which has proceeded at trial and, to a large extent, in the Court of Appeal, looking at general equitable principles and not looking at the statute. The Bar loves the general equitable principles or principles at common law and hates statutes, and the Court of Appeal was careful in its second decision on the motion to blame Mr Pembroke for this, saying that ‑ ‑ ‑
MR SHAW: They certainly found some solace in his misbehaviour.
KIRBY J: We were led into this by the way this matter was dealt with, but it is a very, very common phenomenon and we see it virtually every sittings.
MR SHAW: It is submitted it is plain that the Court of Appeal did think that really what had been said, although section 23B was not expressly referred to, was sufficient to explain a decision that section 23B did not apply, without any further explanation, and it is submitted that that is just simply not so, because the circumstances here do give rise to circumstances which, on the face of it, at any rate, fall within the terms of the statute.
The other thing we would say about the ability of the beneficiaries to sue Minters: if it is true that they cannot do that, if Perpetual sues – and I have accepted that it looks as if I was wrong in thinking that that was so ‑ but assume for a minute that it is right and that if Perpetual sues, they cannot sue. That does not mean, it is submitted, that there is no right to sue directly, so long as there are some circumstances in which a suit can be brought. It is very odd, it is submitted, if whether or not there is a right to contribution is determined by whether or not one of the supposed or alleged contributors decides itself to bring an action or not. The fact that in some circumstances an action might be brought, even if not in all circumstances, must be enough to establish the right, it is submitted.
The next thing we would submit is this, that in any case there is the further direct right, which I referred to in answer to your Honour Justice McHugh, namely, the rights under the Fair Trading Act, which need consideration. It is clear enough that under the Fair Trading Act a plaintiff does not have to be the person who has been misled in order to bring an action. It is enough that the plaintiff suffers damage by reason of misleading or deceptive conduct, and I think your Honour Justice Gummow in Marks v GIO referred to what was said by Justice Lockhart in Janssen‑Gilag in 37 FCR 526. Your Honour’s reference to that case is in 196 CLR 528.
Your Honour also, in the case of Poignand (1992) 37 FCR 363, indicated that beneficiaries of a trust who have suffered damage from misleading or deceptive conduct have themselves a right to bring an action under, in that case, the Trade Practices Act, in respect of misleading and deceptive conduct despite the fact that the trustee might also have an action.
So that here one has a situation in which his Honour has held that Minters are liable to Perpetual for breach of trust, for negligence and for breach of the Fair Trading Act, and it would seem to be clear that those findings were, in the circumstances, sufficient to indicate that the beneficiaries would also have had a right to sue under the Fair Trading Act in respect of the loss which they had suffered. Again, it is the same loss, the loss of the moneys that were to be invested in ECCCL.
GLEESON CJ: Would the beneficiaries of a discretionary trust have a right to sue?
MR SHAW: The beneficiaries of a discretionary trust, in the sense of discretionary objects of the trust, would not, your Honour, have an interest which was – at least, I would not have thought. I suppose if you had circumstances in which the discretion has to be exercised amongst a number of people, although which is left open to the trustees, maybe they would, together, but in ordinary circumstances where there is, as it were, no right to share that might not be so. But maybe even the default beneficiaries might have a right, depending on what the loss was.
GLEESON CJ: In a case of that kind, you might not be able to identify anybody who suffered any damage.
MR SHAW: Yes, that might be so.
CALLINAN J: They might have suffered a loss of a chance. Discretionary beneficiaries might have suffered a loss of a chance.
MR SHAW: Yes, they might have.
CALLINAN J: There may be an element of that which is the same as the actual damage.
MR SHAW: That is true, your Honour. If I might then go from there to refer the Court to Young v Murphy [1996] 1 VR 279, a decision of the Appeal Division of the Supreme Court of Victoria. At the bottom of page 285 at line 45, his Honour Justice Brooking says:
The appellants raised what they called the argument of “double jeopardy” as the third ground on this question of standing. The submission was that the new trustees could not sue for the alleged breaches of trust without joining the beneficiaries because judgment in the action, whether for or against the plaintiffs, would not bar an action by beneficiaries complaining of the same breaches of trust. The same point was long ago noticed in Lewin on Trusts, 3rd ed, 1857, pp 850-1 in stating the rule laid down in Franco v Franco and other decisions –
Then, at the top of page 286 he cites from Lewin:
“Where a breach of trust has been committed, it is competent to one or more of the trustees at any time to institute a suit against the person liable to make good the fund without making the cestuis que trust parties. It may be objected that, as a suit by the cestuis que trust would also clearly lie in such a case, the defendant would thus be liable to be twice vexed for the same matter. However, the rule from its great convenience has been repeatedly recognised, and may be considered established.”
His Honour goes on:
If a claim falls within the rule that a trustee may sue to redress a breach of trust without making any of the beneficiaries parties where he seeks only to have the trust fund restored, the trustee will have standing, without joining the beneficiaries, to require the defendant or defendants to redress in full the breach of trust, according to equitable principles, so that it will not be possible for any beneficiary in other proceedings to maintain a claim for breach of trust against the person or persons successfully sued by the trustee: the trustee’s judgment swallows up the beneficiary’s claim. If, on the other hand, the trustee’s action is unsuccessful, then the adjudication will by the same token, in the absence of fraud or collusion, bind the beneficiaries. This must be so on principle, since the trustee and beneficiaries are privies, and the authority is not wanting.
Then his Honour goes on to discuss that matter.
GUMMOW J: There is a fuller discussion by Scott, paragraphs 280 through to 282 of the 4th edition of Scott, which I think is consistent with what Justice Brooking is saying.
MR SHAW: If your Honour pleases.
GUMMOW J: I notice his Honour has referred to American decisions, and that is why I mention Scott.
MR SHAW: Yes, he has, quite extensively, in fact, your Honour.
GUMMOW J: Yes.
MR SHAW: So that what is submitted is that here we can say that one has a situation in which Minters are liable in respect of damage suffered by the Perpetual beneficiaries and they can recover contribution from Perpetual in respect of the same damage. One does that either by the direct or the indirect route, either through the “on behalf” extension which occurs in subsection (6), or by reason of the direct liability which Minters does have to the beneficiaries in the circumstances found by the trial judge.
It is submitted that the Court of Appeal really founded themselves on equitable principles rather than on statutory construction, and the proper construction of the provisions enables one to see that this case does indeed fall within section 23B. If the Court pleases.
GLEESON CJ: Thank you. Yes, Mr Jackson.
MR JACKSON: Your Honours, may I just say two things before moving to the substance of our argument. The first concerns a question asked by your Honour Justice McHugh about the use of the term “that damage” as distinct from “same damage”. In fact, if one looks at the terms of section 23A(1) of the Wrongs Act your Honours will see the opening words:
For the purposes of this Part a person is liable in respect of any damage if the person who suffered that damage ‑
and then one goes on to see -
is entitled to recover compensation from the first-mentioned person in respect of that damage ‑
So the expression “that damage” is there used. When one goes to section 23B(1), that is where you see the expression “same damage” being used. The common form of the earlier provisions was expressed in this way: “where damage is suffered by any person as a result of a tort”, then “damage recovered against any tortfeasor liable in respect of that damage shall not be a bar to an action against another person who would if sued have been liable as a joint tortfeasor in respect of the same damage”. So, your Honour, those words do not seem to have changed in the statutes. That is the first thing.
The second thing, your Honours, and this is something I will come back to later if I may, is that your Honour Justice Callinan was asking about Hayim v Citibank and referred to a passage in [1987] AC 748, dealing with circumstances in which a beneficiary might sue where there had been some misconduct on the part of the trustee. If one looks on the previous page one sees really an answer to the question, “What’s in effect the damage? “What does the beneficiary sue for?” What the beneficiary sues for, in our submission, would be what the trustee could have sued for.
GUMMOW J: Which page, Mr Jackson?
MR JACKSON: Your Honour, I was looking at page 747. The passage your Honour Justice Callinan referred to was at page 748 at the ‑ ‑ ‑
CALLINAN J: It was just as a statement of general principle that I referred to it, which seemed to be a distillation of all the previous authorities.
MR JACKSON: Yes. Your Honour, what one sees in the passage - your Honour’s passage was 748F to G, I think.
CALLINAN J: Yes.
MR JACKSON: What I want to refer to is on the previous page at letter C. Their Lordships dealing with such circumstances in effect say:
The authorities cited by Mr Nugee only demonstrate that when a trustee commits a breach of trust or is involved in a conflict of interest and duty or in other exceptional circumstances a beneficiary may be allowed to sue a third party in the place of the trustee. But a beneficiary allowed to take proceedings cannot be in a better position than a trustee carrying out his duties in a proper manner.
GUMMOW J: That is rather too wide, that statement, because the suit would be deficient for want of parties.
MR JACKSON: I am sorry, I was not meaning ‑ ‑ ‑
GUMMOW J: Unless the trustee was on the record.
MR JACKSON: Quite, your Honour. Your Honour, I am not talking about really the parties so much as the question of what in effect is recoverable.
GUMMOW J: Yes.
MR JACKSON: And in relation to that, your Honour will see on the same page, between F and H, the reference to Sharpe v San Paulo Railway Co, in particular the last few lines of that:
and then to obtain the proper order for using the trustee’s name, or for obtaining a receiver . . . who would, on behalf of the whole estate, institute the proper action, or the proper suit of the court.”
The point I am simply seeking to make, your Honours, is this. True it is that a beneficiary may have the right in some circumstances to institute proceedings but what the beneficiary institutes is, in effect, the proceedings that the trustee could have instituted and he is relying on the right that the trustee had, as against a third party, and what the beneficiary obtains is to produce to the estate the same result that could have been brought about the trustee suing, if the trustee had been so prompted. Your Honours, may I come back to that aspect with a little more detail later. Your Honours, could I move immediately to the terms of the Act. Some of us, if I may so say so with respect, do quite like statutes.
KIRBY J: It is elusive because we see it so often.
HAYNE J: Counsel will do anything to ingratiate themselves with the Court, Mr Jackson. It is admirable.
MR JACKSON: Your Honour, I have been blackened in this way in more than one case, with profound respect, and I would like to adopt the white mantle of purity in the area and go straight to the terms of the statute.
KIRBY J: Did you look at the Law Commission report out of which the statutory provisions arose?
MR JACKSON: Your Honour, we have copies of it and I hope to have enough copies to give your Honour a little book containing the relevant references from the United Kingdom and Victoria and I will take your Honours in a moment to the discussion of that in the House of Lords in the Brompton Hospital Case.
Your Honours, may I come though to the terms of the statue first. Your Honours will see that if one goes to section 23B(1) that it does make it clear, in our submission, that the claimant for contribution on the one hand and on the other hand the person from whom that claimant seeks the contribution must both be liable in respect of what is described as “the same damage”. That is really very clear from the words of the provision. The definition, if I can use that expression, of liability in respect of damage in section 23A(1) if we move there, makes it apparent that three parties are involved. That is so because if one goes to the terms of section 23A(1) a party is, in terms of that provision, liable in respect of damage if a third party could recover against the person in respect of the damage. That is the first aspect.
The second aspect is that since both parties to a claim for compensation must be liable in respect of the same damage, that means they must both be liable to the person who suffered the damage. Your Honours will see the words in 23A(1), “is entitled to recover compensation from the first‑mentioned person”, so that there has to be an entitlement to recover compensation on the part of the third person from each of the persons as between whom there are claims for compensation.
Your Honours, the decision of the House of Lords in Royal Brompton Hospital NHS Trust v Hammond [2002] 1 WLR 1397, is correct, in our submission, in identifying that requirement. Your Honours will see Lord Bingham at page 1399 in paragraphs 1 through to 4 sets out a history of the English provisions, which are in relevant terms the same. If one goes first to paragraph 4 on page 1400, your Honours will see that he refers to “The Law Revision Committee’s Third Interim Report” and the fact that it dealt only with the position of “those who had committed tortious acts” and refers to that as having been “a weakness” that was identified, discusses in the first half of page 1401 some of the proposals, and then goes on to say in paragraph 5:
It is plain beyond argument that one important object of the 1978 Act was to widen the classes of persons between whom claims for contribution would lie and to enlarge the hitherto restricted category –
But he went on to say at about F:
It is, however, as I understand, a constant theme of the law of contribution from the beginning that B’s claim to share with others his liability to A rests upon the fact that they (whether equally with B or not) are subject to a common liability to A.
And he said there was nothing in the new Act and the reports preceding it:
which in any way weakens that requirement. Indeed both sections –
that is the old and the new –
by using the words “in respect of the same damage”, emphasise the need for one loss to be apportioned among those liable.
Perhaps, your Honours, if I can just pause there for a moment. Lord Steyn at page 1409 in paragraphs 26 and 27 dealt with the concept that the Act was to be a reforming and enlarging measure. Your Honours will see the observations which he makes in the paragraph commencing between C and D and going through to the bottom of that page. At the bottom of that page he says:
At this stage I concentrate on the proposition that the 1978 Act ought to be given a broad interpretation. In large measure this statement is correct. This view can in particular be accepted to the extent that the 1978 Act extended the reach of the contribution principle to a wider range of cases –
and then he quotes the part –
“whatever the legal basis of . . . liability” . . . and in the light of the comprehensive powers of the court under section 2(1) and (2).
They are section 24 in this case. But he then goes on in paragraph 27 to say:
But this purposive and enlarged view of the reach of the statute does not assist on the central issue of construction before the House. The critical words are “liable in respect of the same damage”.
Again, as the cases in Australia have, he draws a distinction between “damage” and “damages”. Then he goes on to say a few lines further down:
the notion of a common liability, and of sharing that common liability, lies at the root of the principle of contribution . . . The legislative technique of limiting the contribution principle under the 1978 Act to the same damage was a considered policy decision. The context does not therefore justify an expansive interpretation of the words “the same damage” so as to mean substantially or materially similar damage.
Now, your Honours, I will not read the rest of the paragraph out, but we would submit that what his Lordship is there saying is correct. Could I refer also your Honours to Lord Hope at page 1417 ‑ ‑ ‑
McHUGH J: But there is this great distinction, is there not, between the Civil Liability Act and the Law Reform Act of 1935 and that is that the old law – and the law is still prevalent in many States – does not apply to concurrent wrongs, other than torts. There had to be two tortfeasors. Now, there does not have to be tortfeasors. It may be once you accept that notion that it has in some way extended the meaning of “same damage”.
MR JACKSON: Your Honour, there is, I suspect, if I may say so, an element of correctness in what your Honour says. What I mean by that is that one is speaking about damage, whatever be the legal basis of liability.
McHUGH J: Yes, exactly.
MR JACKSON: So that one has to take the expression “that damage” in the context in which it appears, but one is at the same time looking to see what is the damage and the one thing it, plainly enough, in our submission, does have to be damage suffered by the same person. That is a difficulty to which I will come in a moment, your Honours, because the claim that is now being made is one which has not been made in these proceedings. May I come to that in a moment.
McHUGH J: I wonder whether that is fateful though, Mr Jackson.
MR JACKSON: We would say it is terminal, your Honour. The speed of the execution of it may be a different question but, in our submission, it is something that is of considerable consequence, because the claim that has been made in this case – and, again, can I come to it in a moment. I will just say essentially this: the claim that has been made is fundamentally one for contributory negligence and not for contribution, and contributory negligence under the Wrongs Act is one in relation to which the only basis for it is fought in the tort sense. Your Honour, that will take me a moment, could I come back to it. Your Honours, I was going to say ‑ ‑ ‑
GUMMOW J: You were going to take us to Lord Hope.
MR JACKSON: I was, your Honour, at page 1417, and in particular to paragraphs 46 to 47. He, immediately before paragraph 46 and the last few lines of 45 said:
the wording in section 6(1) is undoubtedly very wide. But I think that it is a misconception to regard the Act as a whole as being open to the widest possible interpretation.
Could I invite your Honours to read paragraphs 46 and 47. The words which we ultimately seek to emphasise appear in a couple of places. One is about the fifth line in paragraph 46, that is, “where a single harm has resulted”. The second is contained really in the last four lines of paragraph 46 and then in the first six or seven lines of paragraph 47. We would refer your Honours to the whole of those paragraphs.
GUMMOW J: There is a bit of a problem with this and I think it arises from – I think the point was made by – yes, at paragraph 27. I think it is the fourth sentence:
It was common ground that the closest synonym of damage is harm.
That is not a very helpful proposition.
MR JACKSON: Your Honour, synonyms sometimes are not, I suppose.
GUMMOW J: Yes. What I am saying is, it somehow shut off their Lordships looking more closely at what was meant by “harm”. Does it mean injury to the same legal record of interest, as the Chief Justice was mentioning earlier, or having in mind that you can now have contract, tort - and statute presumably - all in play? Is there some greater level of generalisation in which one looks at this harm? That is not really addressed, I do not think.
MR JACKSON: No, well, perhaps not, your Honour, but harm in the sense in which it is there being used one suspects as being used as the English version of injuria, as it were.
GUMMOW J: Yes, but harm to what?
MR JACKSON: Your Honour, it has to be, in a sense, harm to the person ‑ I am not talking about personal injury, of course. It has to be harm to the one person. Then it has to be a harm which is one compensable by each of the persons as between whom contributions claim.
McHUGH J: But it need not necessarily be the same amount of compensation.
MR JACKSON: No, I am not saying that, your Honour.
McHUGH J: I mean, for example, the rules of remoteness are different in contract than they are in tort, and therefore the same harm may lead to different compensations, yet the statute would seem to be designed to cover both.
MR JACKSON: Your Honour, I do not suggest that one has to end up with the same number of dollars, but what there has to be is – and any adjustment, one would think, would be done pursuant to the ambit of the right which is provided for by section 24(2). But in terms of what one is speaking of as being the same damage is the same person suffers a legal harm – I know I have fallen into it a bit – but legal harm, meaning something that gives one an entitlement to recover compensation, being a money compensation, in respect of that legal harm.
HAYNE J: Is it as broad then, do you say, as any deleterious consequence to a plaintiff, compensable by a monetary award?
MR JACKSON: Your Honour, I will have to think about the qualifications of that, but, broadly speaking, that is so. The precise cause of action does not matter, in the sense they do not have to be the same as between the two parties who will claim the contribution, but the position would be that there has to be some similarity, or identity, really, of the damage, the same damage.
McHUGH J: I suppose the notion of contribution itself indicates you are dealing with money sums. One form of compensation in a general sense can be an order for reinstatement or something or other, for instance.
MR JACKSON: Well, yes, your Honour, it could be but in the ‑ ‑ ‑
McHUGH J: But it may not be within the scope of the statute. For instance, an employer may be required to reinstate somebody, or somebody else might be liable for compensation for the same wrong. Maybe the statute does not apply in such a case.
MR JACKSON: It probably does not, your Honour. The statute really works on the assumption that one is talking in the end about money.
McHUGH J: Yes.
MR JACKSON: And you can see that ‑ ‑ ‑
McHUGH J: Or its equivalent. You may be talking about value, something that would be assessable in terms of money.
MR JACKSON: Your Honour, if one looks at the definition in 23A(1) it works on the underlying assumption that the third person has, in respect of each of the two parties to the contribution claim, an entitlement to recover compensation from that person.
McHUGH J: I appreciate that. All I was indicating is that in one case one may be compensated for the loss of value of an asset, for example.
MR JACKSON: Yes.
McHUGH J: It need not be a monetary sum that you have to ‑ ‑ ‑
MR JACKSON: No, your Honour, I am not suggesting that it is really damages for personal injuries in that sense or anything of that kind. The point I am simply seeking to make, perhaps in response to your Honour Justice Gummow, is that one is looking at something where you have the same person who has an entitlement to recover in respect to injury to a legal interest a sum of money from each of two persons.
HAYNE J: Now, ordinarily, perhaps invariably even, the damage can be identified, can it not, from what the plaintiff says in its claim?
MR JACKSON: Yes.
HAYNE J: Contribution will be in respect of ‑ ‑ ‑
MR JACKSON: I am sorry, your Honour, not the plaintiff claiming contribution?
HAYNE J: No. The plaintiff who institutes action in respect of which a defendant or defendants seek contribution either between themselves or from a third party.
MR JACKSON: Yes.
HAYNE J: The damage in question will be fixed, will it not, and identifiable by the way in which the plaintiff frames its case?
MR JACKSON: Well, your Honour, that will ordinarily be so and could I just say, if one were dealing with the earlier style of contribution legislation, one sees a liability arising from the judgment in the ordinary course of events, but it has been held in Victoria – and I do not really seek to challenge the basis of it – that it is perfectly possible to have a contribution action brought without there being a claim made by a plaintiff. But, your Honour, in the contribution action, what one would have to have is the party claiming contribution alleging that both it and the party against whom contribution was claimed were each liable to a third person.
HAYNE J: But in the present case the damage that is to be considered is, is it not, the damage which the plaintiffs identified in their principal claim? It was in respect of that claim that contribution was sought.
MR JACKSON: Well, your Honour, with respect, no.
HAYNE J: No?
MR JACKSON: The case would have had an element of greater simplicity, perhaps, if that had been the case, but – this is the second point I wanted to come to – the claim that is made for contribution is not a claim in respect of the claims of the plaintiffs who were some of the investors with us, but in respect of the amount which the appellant has been ordered to pay us, “us” being – it being a claim, and that is why I say, your Honour, it is really a claim for contribution by a negligent plaintiff, as it were – as against a negligent plaintiff, rather than a claim as between two persons liable to someone else.
May I just say one other thing. There is no claim and really no contention that in the case against us by the appellants that the appellants are themselves liable to the various investors. One hears my learned friend saying it, of course, but if one is looking at the way the case is conducted, that is not so.
GLEESON CJ: Is that a convenient time, Mr Jackson?
MR JACKSON: Yes, your Honour.
GLEESON CJ: We will adjourn until 2.15.
AT 12.46 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.17 PM:
GLEESON CJ: Yes, Mr Jackson.
MR JACKSON: Thank you, your Honours. May I conclude the references I wanted to make to the Royal Bromptom Hospital NHS Trust Case [2002] 1 WLR 1401, paragraph 6 in Lord Bingham’s speech. This is the point to which I adverted earlier and that is that one is really talking about tripartite transactions when one is speaking about the terms of section 23B. Your Honours will see that his Lordship said:
When any claim for contribution falls to be decided the following questions in my opinion arise. (1) What damage has A suffered? (2) Is B liable to A in respect of that damage? (3) Is C also liable to A in respect of that damage or some of it?
He referred to it as being a “striking‑out stage” in that particular case. He said:
I do not think it matters greatly whether, in phrasing these questions, one speaks . . . of “damage” or of “loss” or “harm”, provided it is borne in mind that “damage” does not mean “damages” . . . and that B’s right to contribution by C depends on the damage, loss or harm for which B is liable to A corresponding (even if in part only) with the damage, loss or harm, for which C is liable to A.
Your Honours will see the next sentence in which he expands upon that slightly.
GUMMOW J: Why did the claim fail in that case?
MR JACKSON: Your Honour, I have to say it was rather on the borderline.
GUMMOW J: I thought you might say that.
MR JACKSON: One sees the tests set out by Lord Bingham in paragraph 7, at about the eight or ninth line:
The question would then be –
In the end, I think, your Honour – one can see it in Lord Steyn’s speech at, I think, your Honour, paragraphs 22 and 23 and particularly paragraph 22, the second and third sentences, paragraph 23, the first sentence, and then to about halfway through that paragraph.
HAYNE J: When it is said that the employer’s claim against the contractor was for late delivery of the building, how would one describe the damage that was suffered?
MR JACKSON: Your Honour, first, there are differing levels of generality with which one can express it, of course. One is to say that it is a case for damages for breach of the building contract, the nature of the damage being for the loss which might have been made – sorry, for the damage which was occasioned by the inability to use the building at the particular time and thereafter. That is on the one hand.
On the other hand, the position in relation to the architect was for – I think one could put it in two ways, your Honour – increasing the liability of the hospital authority to the builder, on the one hand, or, on the other hand, denying it the ability to invoke penalty clauses against the builder. Your Honour, there is obviously a degree of similarity, in broad terms, between the two, and that is perhaps why it is a borderline case, but one is looking to see what, in the end, the damage is. One related to the future, in effect, one related to the past.
Your Honours, the last thing I want to say about that case is simply to invite your Honours to note one thing and that is at the bottom of page 1411, and referring to the case of Wallace v Litwiniuk, which is identified between C and D, there is a reference to the difference in nature between a claim against a defaulting solicitor for not starting an action on time and the original claim that might have been made against the original tortfeasor. A similar observation can be seen in a decision in this Court in Johnson v Perez (1988) 166 CLR 351 at 367 about halfway down the page in the judgment of three Justices in the case. I simply thought I should mention it, your Honours.
Could I move to say that the view that there is a tripartite consideration involved can be seen also in the decision of the Victorian Court of Appeal in Arthur Young v Brunswick No Liability [1999] 1 VR 387.
The principal point in the proceeding was that it was held that under Part IV of the Wrongs Act one could start a proceeding for contribution independently of there being a decision in a case brought by the plaintiff against the defendant. That is, I think, the point I was adverting to in response to your Honour Justice Hayne this morning. But your Honours will see that what happened in the case was that in the claim for contribution, there was not an assertion that the party claiming contribution was liable to a third party. That was held to make the pleading defective and there was a difference of view on whether amendment should be permitted, the majority saying it should, the minority saying it should not.
Your Honours will see at page 388 that Acting Chief Justice Winneke agreed, to put it shortly, with Justice Brooking. Then at page 390 Justice Brooking in paragraph 8 of his reasons referred to “The basis of the judge’s decision” and he set out then five propositions and then, as your Honours will see from the bottom of the page, he dealt with the second, fourth and fifth.
Now, your Honours, in relation to the fourth of those propositions – the first one I have adverted to already – at page 393 in paragraph 18, his Honour said this:
As regards the fourth proposition, there is a continuing difficulty with the statement of claim, in that it does not allege that the plaintiffs are in any sense liable in respect of damage suffered by the persons who have brought the 1995 action. For the pleading says that Arthur Young deny liability in the 1995 action and that they claim to be entitled to contribution in the event that they are held liable in that earlier action . . . Under the legislation as it presently stands, there is no cause of action for contribution until the person claiming contribution is liable within the meaning of the definition in s 23A(1).
To the same effect is Justice Callaway in paragraph 28 at page 395.
Your Honours, I have dwelt a little on the tripartite aspect of it and the fact that it is one person claiming contribution for another in respect of the damage suffered by a third. That is where, in our submission, one does encounter an initial difficulty for the appellants. It is one to which we refer in paragraphs 29 to 31 of our written submissions at page 10. May I seek to make the point as briefly as I can, and the point, your Honours, is this.
This is a case where the claim for contribution was not made by the appellant for contribution to the damages payable by it in respect of liability to the investors, that is to persons not parties to these proceedings. Rather, it was a claim for contribution in respect of its liability to us. That can be seen by looking at the claim, the seventh cross-claim in volume 1. Could I go first of all to the parties. Your Honours will see the parties set out at page 171 in the right column under the heading “Seventh Cross-Claim”. The present appellants are the cross‑claimants. We are the first and second cross‑defendants and then National Registries is the third. It should be cross‑defendant, it says “Cross-Claimant”. So we are the first and second cross‑defendants.
Your Honours will see then a summary of the contentions of the cross‑claimant at page 174. Your Honours will see paragraph 1 under C on page 174. It says:
In these proceedings, the first and second cross-defendants ‑
that is us ‑
have issued cross‑claims against ‑
Minter Ellison ‑
on the seventh cross‑claim alleging conduct by them ‑
Minter Ellison ‑
in breach of various legal and equitable duties which they alleged caused loss and damage to them.
Now, the “them”, your Honours, is relevantly us. So it is our loss and damage that is referred to there.
Your Honours will then see, going over to the top of the next page, that in paragraph 3 at about line 6:
The cross‑claimants . . . deny they have any liability to ‑
to put it shortly, us ‑
If, which is denied, the cross‑claimants on the seventh cross‑claim are held to have a liability in these proceedings -
Your Honours can forget about (a). The only relevant one is (aa). The cross‑claimants, as it should be:
on the seventh cross‑claim, claim contribution . . . pursuant to s.23B . . . against the first and second cross‑defendants on the seventh cross‑claim.
Your Honours, the point I am seeking to make about it is simply this. The claim that is being made in the seventh cross‑claim purports to be under section 23B in respect of any liability which the appellants have to us.
Now, your Honours, one needs to bear in mind two things. One is that the investors made no claim in the proceedings against the appellants, so there was no claim in the proceedings against them by the investors. The liability in the proceedings, referred to in paragraphs 1 and 3 of that cross‑claim, could only be in respect of a liability to us. Now, your Honours, that claim, in our submission, is in essence not one for contribution in the relevant sense but essentially one for something akin to contributory negligence. I do not use that exactly correctly, but akin to contributory negligence.
KIRBY J: You keep saying that, but the section, which I see Acting Chief Justice Winneke said introduced “sweeping changes” that made the application of past authority dubious, does not seem to require that the investors should have made, in the same proceedings, or other proceedings, such a claim. It is at a level of hypothesis, is it not?
MR JACKSON: Your Honour, I accept that, but one has to have a relevant hypothesis, and the hypothesis on which the claim is based is not, as your Honours will see, that there is a liability to the investors, but the claim is made to attempt to reduce a liability of the appellants to us.
KIRBY J: Yes, but by reason of the same damage being caused in the circumstances, so it is alleged, that attract the section.
MR JACKSON: Your Honour, with respect, we say it is not alleged. Nothing is alleged – and this is, in a sense, the point of the Arthur Young Case to which I just referred – nothing is alleged to allege that there is a liability in the appellant to the investors.
HAYNE J: Now, no such claim had been made by the investors. The investors had not sued Minters. What you say should have been in the cross‑claim is presumably a conditional or hedged statement, what, that Minters positively assert they would be liable to investors if they were sued?
MR JACKSON: Yes, your Honour, with sufficient particulars. I leave aside the question of particulars, but the contention would have to be that there is a liability in Minters to the investors and that there is a liability in us to the investors.
KIRBY J: It all comes down to whether that is wrapped up in the assertion of the same damage.
MR JACKSON: Well, it is not, with respect, your Honour, because if one looks at the way in which the assertion is made at paragraphs 1 and 3 on page 174, the damage in respect of which there is a contribution sought is what appears in the fourth line, paragraph 1 on page 174, and that is “loss and damage to them” – “them” being us.
GLEESON CJ: Is this only a pleading point?
MR JACKSON: No, it is not, with respect, your Honour.
HAYNE J: If it were made at trial, would it not have been amended? Has it been made before this moment, Mr Jackson, this suggestion?
MR JACKSON: No, your Honour. One sees that the allegation, for example, in relation to the Fair Trading Act – reliance on that – one sees, in our submission, for the first time in this Court.
HAYNE J: But is the contention which you have just made, namely, that this pleading is deficient, a contention that your side has made previously?
MR JACKSON: Well, it is, your Honour. It is a contention that the basis of the claim being so expressed is one that cannot succeed. Now, that covers both aspects of it.
GLEESON CJ: The problem is there are no pleadings.
MR JACKSON: Your Honour, I appreciate that. There are no pleadings in ‑ ‑ ‑
GLEESON CJ: So this point would be dealt with in the commercial division on questions of fairness and surprise and adequate warning. But is there any dispute on the basis of the facts found by the trial judge as to whether Minters were liable to the investors?
MR JACKSON: There is, your Honour, there is. The only individual cause of action that it has been suggested that there may be in the investors in their own right as distinct from suing and joining the trustee to augment the trust estate, the only basis upon which it is suggested that there is any individual right has been by reference to the provisions of the Fair Trading Act.
Now, your Honours, that claim has never been investigated. What I mean by that is really two things, and I will come to this in a moment, but one aspect of it is that in relation to the question of damage, there is a question whether there was the same damage suffered and what damage the investors – I mean, we were not a company that had, in effect, no money. There was a liability on us to indemnify our beneficiaries and it would be a question whether our obligation to indemnify the beneficiaries was one that put them in a situation where, whilst there might have been a breach, they had not suffered relevant damage – never investigated.
The second question, your Honours, is whether there was any entitlement to recover because of the provisions of the Wrongs Act dealing with the time in which proceedings have to be instituted. What I mean by that – and perhaps I can take your Honours to the provisions immediately. Your Honours will see, if one goes to section 23B of the Act – and this is the first of two groups of provisions I want to refer to – section 23B(3) says that:
A person shall be liable to make contribution . . . notwithstanding that that person has ceased to be liable in respect of the damage in question since the time when the damage occurred unless that person ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against that person in respect of the damage was based.
Now, your Honour, in relation to that, two questions no doubt arise. The relevant limitation period was one of three years which was provided by section 37(2) of the Fair Trading Act. A question which arises but which, in our submission, would be answered in our favour would be whether the expiration of that provision had the result that the cause of action was, for the purposes of section 23B, or the liability, extinguished the right on which the claim against the person in respect to the damage arose. That is the first thing. The second thing, your Honours, is this. If one goes to section 24(4) ‑ ‑ ‑
KIRBY J: There were cases on that in the old language, were not there, as to whether the statute of limitations attached? “Would, if sued, have been liable” led to the question of “Would, if sued, when have been liable”, and I think this Court said, “Would, if sued, at any time”.
MR JACKSON: Your Honour, except that there is a specific provision that your Honour ‑ ‑ ‑
KIRBY J: Yes, that may solve that problem.
MR JACKSON: Amending Act, your Honour. One should look at the Act first, with respect.
Your Honours, the second thing is, if one goes to section 24(4), your Honours will see in its first words it refers to “notices” but then it goes on. It says:
Notwithstanding any provision in any statute requiring a notice to be given before action or prescribing the period within which an action may be brought –
so there is a period in the Fair Trading Act prescribing the time within which action may be brought -
where under section 23B any person becomes entitled to a right to recover contribution in respect of any damage from any other person, proceedings to recover contribution by virtue of that right –
and one assumes proceedings to recover contribution from us by the appellant in respect of, one assumes, the same damage suffered by the beneficiaries or investors -
may be commenced by the first‑mentioned person‑
(a) at any time within the period‑
(i) within which the action against the first‑mentioned person might have been commenced –
three years
or
(ii) within the period of twelve months after the writ in the action against the first‑mentioned person was served on him –
that assumes a writ was served and may reduce the period or extend it a little. Then, your Honours, in (b):
where another person liable in respect of that damage, within the period within which the action against him might have been commenced or within twelve months after the writ in the action was served on him, serves a writ on the first‑mentioned person seeking to recover contribution . . . at any time within the period of six months after that writ is so served.
Now, your Honours, the point I am seeking to make is that these issues are not ones that were dealt with in the courts of ‑ ‑ ‑
KIRBY J: Were they within three years when the matter was before Justice Rolfe when the proceedings were commenced?
MR JACKSON: No, your Honour. The original proceedings, your Honours, that are set out in Justice Rolfe’s reasons ‑ ‑ ‑
KIRBY J: This goes back to the question of whether the point could have been cured by pleading amendment.
MR JACKSON: Your Honour, the amendment to add section 23B was made, as your Honours have seen, in fact after the hearing.
KIRBY J: We were told the matter was argued as if the amendment had been made. Is that correct, or not?
MR JACKSON: Your Honour will see that referred to in our written submissions and we consented to the amendment being made. At the time when that happened ‑ ‑ ‑
HAYNE J: How can you now be heard to say that that amendment raised a statute barred claim?
MR JACKSON: Your Honour, what we said in relation to it was we consented to the making of the amendment. We did not submit, your Honour, that the amendment was otherwise substantively properly made. The point I am seeking to make about it, your Honour, is that in any event one has a situation of this issue, so far as it relates to the beneficiaries, is one that was just never raised below.
KIRBY J: But is it not inherent in that amended provision on page 175? It is exactly what they are contending, is it not?
MR JACKSON: With respect, your Honour, it is the reverse of that. What they are contending is not that there is a liability in respect of the beneficiaries but a liability in respect of the damage that we suffered. That is what they say. Your Honours, one can from their other two pleadings say, effectively, exactly the same thing.
KIRBY J: It merely says the cross‑claimants claim contribution against the first and second cross‑defendants. It does not plead the basis upon which the claim for contribution is made.
MR JACKSON: No, it does, with respect, your Honour. What it says is (aa) follows on from the opening words of 3 and it says:
The cross‑claimants . . . deny they have any liability to the first and second cross‑defendants on the seventh cross‑claim –
If they “are held to have a liability in these proceedings”, alternatively, they claim contribution against us. Now, that goes back to paragraph 1 on the preceding page. Your Honours will see the first four lines of paragraph 1. They refer to:
legal and equitable duties which they alleged cause loss –
which we allege cause loss and damage to us.
GUMMOW J: Your point is that the state of account between the trustee, being you, and the investors is a mystery.
MR JACKSON: Indeed, your Honour.
GUMMOW J: There might have been some set‑off between you on some other cause, which would be one thing, or there might have been a full recovery possible, which would then perhaps have been an answer to Minters.
MR JACKSON: We consented, in effect, to full recovery in the case because your Honour will appreciate that the case that was brought by us – I will start again. The case brought against us was brought by a number of beneficiaries. We made a claim against the appellant in respect of all the moneys that we had invested with the appellant. Your Honour, it is a sort of an L‑shape, as distinct from a triangle.
HAYNE J: Thereby asserting, did you not, that those were sums which, if the other investors sued for, you would be bound to pay or restore to the fund?
MR JACKSON: Your Honour, that was not an essential part of the case; it was not the necessary part of the case.
HAYNE J: No, your claim against Minters was for the whole of the sum invested, was it not?
MR JACKSON: Yes. It was immaterial whether we did or did not have investors to us, as it were.
HAYNE J: Yes. Is it not a necessary part of that assertion that you were asserting that you were obliged as trustee either to make good that sum to the investors or to the trust fund?
MR JACKSON: It was not, your Honour. We were in no different position from the plaintiff in Youyang and it would not have mattered whether the plaintiff in Youyang was or was not trustee of a discretionary trust. The point I was going to go on to next, if I may, what I was seeking to say, your Honours, was if one is talking about the position of a trustees claim against a third party, could we seek to make first two general propositions, and I will come back to something in support of them in just a moment.
The first of them is this, that where a third party damages trust property or breaches an obligation owed to a trustee, the general rule is that it is the trustee, and the trustee alone, who can sue the third party for the breach. Your Honours, the second aspect is that the trustee can proceed in the action as though the trustee were the owner of the claim which the trustee is enforcing, and is entitled to the full remedy that it would obtain if it were not trustee.
GLEESON CJ: Was it an essential element of your cause of action against Minter Ellison that the funds in question were trust funds?
MR JACKSON: That we held them as trust funds?
GLEESON CJ: Yes.
MR JACKSON: No, not at all, your Honour. If it had been an individual investor it would have been exactly the same position. One of the things is that the argument of the appellant, in our submission, tends to blur the fact that there are two matters: one, that there are, in fact, two trusts; and the second is that the position of - the fact that we held moneys in trust for people who were investors to us is, in our submission, ultimately not relevant.
Could I refer your Honours to some observations made in the case to which our learned friends referred earlier, Young v Murphy [1996] 1 VR 279 and to Justice Brooking’s reasons at pages 290 and 291. Your Honours will see in the paragraph commencing about line 14 on page 290 the reference to Lord Northington’s observation:
it conveys to the trustee the legal burthens, and invests the trustee with the legal privileges” . . . So if a third person commits a tort with respect to trust property, it is in general the trustee and not the beneficiaries who can maintain an action; but a beneficiary in possession of trust property can bring an action in tort that is available to a person in possession. The trustee can maintain such actions in tort as he could maintain if he were the beneficial owner of the property.
Then, your Honours, if I could pass over the citations and to the next paragraph:
Similarly, a trustee holding a contract in trust can maintain such actions on it as he could maintain if the contract was held free of trust.
After the citations a few lines down:
The beneficiaries are not necessary parties to the trustee’s action;
Again a few lines:
Nor can a beneficiary sue on a contact held in trust. Nor is it necessary here to discuss in what exceptional circumstances a beneficiary may directly or indirectly enforce a claim –
and your Honours will see the words:
for the benefit of the trust estate, a matter considered in -
the cases there referred to.
GLEESON CJ: Was the obligation to obtain a bearer certificate of deposit something that arose from the same set of contractual arrangements as imposed the trust obligations on your clients?
MR JACKSON: No, your Honour, there are two sets of obligations. The obligation to obtain the bearer certificate was an obligation that arose between us and the appellants, because we entered into the transactions with the appellants. The appellants were, relevantly, trustees for us. So far as the position with the investors was concerned, they were rounded up, as it were, by one of the other original parties to the action. They provided money to us which went into larger trusts that we held on terms where we received some remuneration for conducting the trusts. But one of the purposes for which the money was given to us was so that we could then put it into money grouped together, the investment – if I can call it that ‑ that was being operated by ECCCL.
GLEESON CJ: This did not have to comply with the interest provisions of the corporations legislation?
MR JACKSON: No, your Honour. I think because of the $500,000, I think, minimum that was involved, it did not have to be, no, your Honour. That was why it was in that form, no doubt. Now, your Honours, I was only otherwise going to refer to page 291 about line 14:
The rule that in general it is the trustee, and (except as regards breaches of trust) the trustee alone, who can sue for torts with respect to the trust estate and enforce contracts made in the administration of the trust and indeed take any appropriate proceedings to protect the estate and enforce rights belonging to it, is reflected by the long line of cases –
Now, your Honours, there are some cases, of course, in which a beneficiary will have standing to sue, but the beneficiary’s standing is to sue in respect of the damage to the trust estate. Could I give your Honours references in that regard – I will not take your Honours to the detail of them. Your Honours should have references to the American Law Institute’s 2nd Edition, if that be the right word, on “Trusts”, Article 280 and to “Scott on Trusts”, 4th Edition which is paragraphs 280.1 to 280.5 and to Bogert, “Law of Trusts and Trustees”, 2nd Edition, particularly at page 292.
What I wanted to say about them is this, if I could go briefly to the first of those references and that is the American Law Institute, the relevant page number being page 38. Your Honours will see the introductory note on page 38 about the middle of the note:
where an action could be maintained by the holder of the title to the trust property if he held it free of trust.
Your Honours will see Article 280:
The trustee can maintain such actions at law or suits in equity or other proceedings against a third person as he could maintain if he held the trust property free of trust.
Your Honours will see that discussed in the succeeding pages. Could I refer particularly to page 41. Your Honours will see at letter h towards the top of page 41:
He can proceed in the action as though he were the owner of the claim which he is enforcing. If he does describe himself as trustee the description is treated as surplusage. Whatever money or other property is recovered by the trustee in the action he holds subject to the trust.
Your Honours will see then the heading “Joinder of beneficiary” and an article at 281 on page 42. Although the heading says, “Action at Law by Beneficiary”, the text of it says, in sub‑article (1):
Where the trustee could maintain an action at law or suit in equity or other proceeding against a third person if the trustee held the trust property free of trust, the beneficiary cannot maintain an action at law against the third person, except as stated in Subsection (2).
Then there is the possession case and then at article 282 on the next page, the standard position, in a sense, in equity, and we would refer particularly to subparagraph (1) to the same effect and ‑ ‑ ‑
McHUGH J: Who was the reporter for this trust? Was it Scott?
MR JACKSON: I think so, your Honour, because not only do the articles have more or less the same numbers but one sees similar phrases being used and, in particular, the reference to it being surplusage to have beneficiaries as parties in such action. One can see, for example, at page 15 of the Scott extract, at the top of page 15, where again it is said in, I think, more or less the same terms:
It is true that whatever is recovered by the trustee in the action, he will hold subject to the trust; but with this the defendant is not concerned.
The point I am seeking to make is simply this, that we are in the position of a trustee, that is so. We have dealings with someone else. The relationship with the someone else happens to be that we are the beneficiary of another trust. So far as that trustee is concerned, our position is the same as if we were not a trustee. We have the same rights against them as we would have if we were not a trustee. Your Honours, that being so, whilst it may be we did not perform our duty in suing that person, a beneficiary could, by joining us as a defendant, also sue but what the beneficiary would sue for would be the same damage as we sued for, that is damage to the trust. Our damage, not the beneficiary’s damage.
Your Honours can see in the case to which my learned friend referred in passing this morning a distinction, in effect, neatly drawn between the position as against third parties and the beneficiary under a trust, in Gillespie v City of Glasgow Bank (1879) 4 App Cas 632 at 642. If I could leave aside the “behalfs” and “behoofs”. At the bottom of page 641 your Honours will see Lord Hatherley saying:
You in effect tell the creditors of the concern. As between you and me ‑
and this is by saying, in effect, in a register that you hold something on behalf of someone else ‑
I am the holder of the stock, but as between me and a third person with whom ‑
that is the beneficiary ‑
you have nothing to do, I am the holder of it for that person’s benefit.
At the end of the next paragraph your Honours will see the last five lines:
which indicate that although to the bank you are the absolute owner of the shares, yet as regards a third person, with whom you entered into an arrangement, you are not that owner; but that makes no difference as regards your position to the bank and to its creditors.
So, your Honours, our submission is then that the damage in respect of our claim against the appellants was one which was our damage, in effect.
GUMMOW J: And, in particular, an action brought directly by the beneficiaries under any procedural possibility for that would answer to it if your claim had been satisfied.
MR JACKSON: Yes, your Honour.
GUMMOW J: It is a point made by Lord Scott in one of the English cases, which the House of Lords rather dismissed. It may be a good point.
MR JACKSON: It is adverted to also, your Honour, by Justice Brooking in Young v Murphy ‑ ‑ ‑
GUMMOW J: Can we just find that?
MR JACKSON: Yes. I think it is the passage my learned friend was referring to earlier, your Honours, at page 286 about line 15:
If, on the other hand, the trustee’s action is unsuccessful, then the adjudication will by the same token, in the absence of fraud or collusion, bind the beneficiaries.
It is the passage immediately above that, I think, that ‑ ‑ ‑
GUMMOW J: Yes, it follows up.
MR JACKSON: Yes. Could I just say in relation to the passage immediately above that, and, I think, on the preceding page to which my learned friend referred, the “breach of trust” that is being referred to in Young v Murphy there is in a sense in this case our breach of trust. One is speaking of the position of the beneficiary suing the trustee. That would be our breach of trust. It is possible, if one does not read that really carefully, to elide, in effect, our breach of trust with the breach of what happens to be another trust.
HAYNE J: Now, does the availability of an answer that the trustee has obtained judgment conclude the question presented by the section, or does it simply say that in certain circumstances there may be an answer to a claim made under the section?
MR JACKSON: Your Honour, could I say two things in response to that. The first is this, that the fact that there is an answer is really describing one of the species, in effect, flowing from the genus. What I mean by that is that it reflects the fact that what was sued for was the loss suffered by the trustee. Any entitlement of the beneficiary to sue would be an entitlement to do, in effect, what the trustee should have done. So, if the trustee has done it and failed or succeeded, that issue has come to an end, because the right, in effect, has merged in the judgment against a third party. That is why in the passage to which I think I just referred in Young v Murphy there is a degree of privity referred to. That is the first thing, your Honour.
HAYNE J: There is a second?
MR JACKSON: Yes. The second one, your Honour, is this, that if one goes to the terms of section 23B(5), in some cases that may potentially have relevance. Your Honours will see that it says that:
a judgment given in an action brought by or on behalf of the person who suffered the damage in question against any person from whom contribution is sought under this section shall be conclusive in the proceedings for contribution as to any issue determined by that judgment in favour of the person from whom the contribution is sought.
That, I think, would not directly arise on what your Honour put to me, but I mention that there is some provision dealing with the consequences of judgments.
HAYNE J: As between the parties to the action, the fact that the plaintiff may have trust obligations to others in respect of sums recovered by that action is irrelevant?
MR JACKSON: Yes.
HAYNE J: In working through the application of Part IV in circumstances where it is dealing with breaches of trust, why should we shut our eyes to the fact that a party, if it recovers a judgment, may have trust obligations in respect of what it recovers?
MR JACKSON: Your Honour, one would do it in this way, or one does it for this reason, if I could put it that way, and that is that in the end one has to start from the way in which the entitlement to recover is framed. That, your Honours will see, is based upon there being a liability in respect of the same damage in two people to a third. Your Honour, that perhaps simplifies it slightly but that is essentially what it is. So that what one is looking to see is there a liability in respect of the same damage, and then to answer that question, one goes to 23A(1) and 23A(1) requires that:
the person who suffered that damage . . . is entitled to recover compensation from –
each of the two persons in respect of that damage. So that one has to be able to say for 23A(1) and ,thus, 23B(1) to operation, that in this case the beneficiaries would be entitled to recover compensation from us and from the appellants in respect of the same damage they have suffered. That is the essential thing, your Honour, on which it operates. All that the additional words do, in effect, in 23A(1) is to say that you may have suffered that damage by a “tort, breach of contract, breach of trust”, whatever. They may be different, but the damage has to be the same. Your Honours, what the provision has done has been to expand the causes of action that may give rise to the damage but not take away the requirement for the same damage, that damage be the same.
Your Honours, the general proposition, of course, is that a beneficiary may sue a third party in exceptional circumstances, for example, where there is a conflict of interest or where the trustee is not prepared to sue. Your Honours have seen that referred to in Young v Murphy [1996] 1 VR at 291 about line 15. It is discussed also, your Honours, at some length by Justice Powell in the New South Wales Supreme Court in Ramage v Waclaw (1988) 12 NSWLR 84 in a passage that commences at page 89. It goes through for a number of pages. May I just identify what are the parts of particular relevance, your Honours.
KIRBY J: Does the fact that it is exceptional alter the fact that it can be done and that it is therefore, on one view, a matter that gives rise to entitlements?
MR JACKSON: It may give rise to entitlements, your Honour. It does not give rise to a different damage – I am sorry, it does give rise to the same – the damage being the same. Your Honour, what I mean by that is if one looks, for example, at the bottom of page 88 of that report, you will see a reference ‑ ‑ ‑
KIRBY J: Ultimately the damage is the loss to the investors.
MR JACKSON: Well, that is one damage, yes. That is the damage they suffer; it is not the damage we suffer.
KIRBY J: But how, in the quantification of your damage, is it different in the end from the aggregation of the damage that is suffered by the investors?
MR JACKSON: Your Honour, in the particular case, we were content to let – because what we recovered was simply the amount of the $500,000 that had been paid in and interest on that and we were content to say by way of the final order that all this simply goes into the trust. We made no claim for the commission we would otherwise be entitled to under the terms of the trusts in which the people invested with us. Could I just say that, whilst this is relatively speaking a simple case in that regard, the common situation that would arise is this: if one took a case, for example, where you have a trust which is, say, a unit trust at fixed interest, let us say 5 per cent is the fixed interest rate, and the trustee, if it makes more interest from the money, keeps it; if it makes less, it still has to pay. Now, your Honour, the damage, if the investment that the trustee makes is lost, that the beneficiary has suffered is different from the damage that the trustee suffered. It is in terms of number of dollars for a start, but it is a different damage. One is the trustee’s damage; one is the beneficiary’s damage. What we sued for here was our damage and, in fact ‑ ‑ ‑
KIRBY J: We are not looking of course to the damages; we are looking to the damage and the substance of what the damage is, which is the loss consequential upon the failure to comply with the requirements which descended on both trustees.
MR JACKSON: But, your Honour, it is important to look at the fact that one is speaking about damage, not damages, because it is the fact that there happens to be a pretty fair correspondence between the number of dollars that people, plaintiffs and others, invested with us, and the number of dollars we invested on, that makes it easy for the other side to say, “Well, we suffered the same damage”, but, your Honour, that is not right, with respect. The damage is different. The damages in terms of the number of dollars may be the same, but they are not the same thing.
Your Honours, I was going to refer to this case as briefly as I can, and what I wanted to refer to first was what appears simply at the bottom of page 88. Your Honours will see that his Honour refers to the fact that it was recognised that the public trustee, who was the trustee who should ordinarily have brought the proceedings - at the top of page 89:
submitted that, the Public Trustee having declined to bring proceedings, the plaintiff was, in the circumstances –
your Honours will then see the words:
entitled to bring these proceedings for the benefit of the Deceased’s estate –
Similar extracts can be found. For example, at the bottom of page 89, where his Honour was quoting from Daniell’s Chancery Practice, about letter G:
Thus, though an unsatisfied legatee has an interest in the estate of his testator, and a right to have it applied in a due course of administration, yet he has no right to institute a suit against the debtors to his testator’s estate for the purpose of compelling them to pay their debts in satisfaction of his legacy -
Your Honours will see then at page 90 between D and E, quoting from the Sharpe v San Paulo Case:
I came to the conclusion very clearly, that a person interested in an estate or a trust fund could not sue a debtor to that trust fund, or sue for that trust fund, merely on the allegation that the trustee would not sue ‑
and then your Honours will see that his Lordship goes on to describe the remedy and, in particular, between E and F as being:
on behalf of the whole estate [could] institute the proper action –
Similarly, your Honours, at page 91.
GUMMOW J: Now, the “whole estate” that is being spoken of there could include – or to put it more accurately, the whole estate would be liable to administration and there would be persons other than the beneficiaries interested in that administration.
MR JACKSON: Yes.
GUMMOW J: There would be creditors for one thing.
MR JACKSON: Your Honour, the ‑ ‑ ‑
GUMMOW J: That is not against you.
MR JACKSON: No.
GUMMOW J: It is explaining that the injury is to the estate.
MR JACKSON: Yes, it is, your Honour. One sees, of course, trusts can be simple, complicated, discretionary and of various kinds. If one has circumstances where a ‑ ‑ ‑
GUMMOW J: The danger is in treating the trust as if it is A holding on trust for B and C who are absolutely entitled, and that is it.
MR JACKSON: Your Honour, if one took ‑ ‑ ‑
GUMMOW J: Trusts often include more than that.
MR JACKSON: It might be a charitable trust, of course.
GUMMOW J: Exactly, or a trust with all sorts of contingent interests or a trust carrying on a business. It could be all sorts of things.
MR JACKSON: Yes. Your Honours, I was going to refer also to page 92, in the quotation from Stainton v Carron and, in particular, the early part of the quotation:
Such relief as they will obtain, if they succeed, will be indirect, and merely consequential upon their making out the case of the executors against the Carron Company.
In the quotation at about E:
which, but for such suit, would probably be lost to the estate”.
One sees also, your Honours, in a case to which I alerted earlier, Hayim v Citibank [1987] AC 730 at 747, the two passages which I mentioned in passing this morning, 747C the last sentence:
But a beneficiary allowed to take proceedings cannot be in a better position than a trustee carrying out his duties in a proper manner.
Then, of course, there is also the reference again to that Sharpe v San Paulo Case.
Your Honours, what we would submit is that whilst it is right to say that a beneficiary in some circumstances may be able to sue, when the beneficiary does so, it does so for the benefit for the trust. It sues for the damage suffered by the trustee.
Your Honours, could I come then to the appellants’ liability, as it were, to us. It was entirely immaterial to their liability to us or to the damages that we sustained whether we were subscribing for shares in ECCCL on our own account or as trustees for other persons, and if so on what terms, or perhaps for ourselves and for other persons as well. Their liability was in respect of their breaches of duty to us and the loss was our loss. I have taken your Honours to the seventh cross‑claim but one sees to the same effect are the defences to our cross‑claims in the proceedings. Could I take your Honours very briefly to those?
KIRBY J: There just seems to be an element of unreality about this argument though, that our primary object is to apply the statute.
MR JACKSON: Quite, your Honour.
KIRBY J: Both of you were trustees, both of you have been found to be in breach of your trust obligations. The investors are the same, the amounts are the same. If you are concentrating on the application of the Act, its purpose is to ensure contribution. Now, in these circumstances, your argument seems to defeat the application of the purpose of the Act which was a reforming statute designed to introduce quite radical changes, as Acting Chief Justice Winneke said, sweeping changes ‑ ‑ ‑
MR JACKSON: His Honour did not identify them with any detail, with respect, but may I say that there was no change in the use of the expression “the same damage”. The change was to increase the causes of action that might give rise to the same damage. One sees that there are provisions which have the effect of allowing there to be proceedings, in effect, brought for contribution, without there being a determination of the liability as to the plaintiff in other proceedings, but the changes – and there are a few others, your Honour, but they are not very dramatic beyond that. To say they are sweeping is right, sweeping insofar as they relate to causes of action, unchanged in relation to damage.
HAYNE J: Can I see if I understand the point at which you deny the application of 23B(1) and do so by reference to its terms, and leave out the subject clause which we will set aside for the moment. The person claiming contribution was Minters. Therefore, a person liable in respect of any damage suffered, the person there mentioned is Minters. Minters asserted liability in respect of damage suffered by another person. What other person? It has to be the investors if the section is to have any tripartite operation, because the person from whom they sought contribution was your clients, Perpetual companies, therefore, the second half of 23B(1) has to be engaged on their contention by saying that the other person liable in respect of the same damage is the Perpetual companies, the liability being liability to the investors. Do I understand you to deny the operation of the first limb, saying that Minters, because of their relationship with you, were liable to you? They were not relevantly liable to the investors?
MR JACKSON: Your Honour, as to that, we would say these things. The position may have been a liability – there may have been a liability in relation to the Fair Trading Act provision. Apart from that, your Honour, we would say – and I will come to that in a moment if I may – there was no liability that they had to ‑ ‑ ‑
GUMMOW J: They only had a liability to the beneficiaries if you, on your part, broke your trust by refusing to sue. You had not done that because you had sued.
MR JACKSON: Yes, that is so, your Honour.
McHUGH J: But it may depend upon what content you give the phrase “liable in respect of”.
MR JACKSON: Your Honour, may I just say one further thing in response to the last question?
McHUGH J: Yes, certainly.
MR JACKSON: It was just this, that your Honour referred to the liability to the beneficiaries. The beneficiaries in the circumstances your Honour was positing would have standing to sue, but standing to sue in respect of a liability to the trustee. So it is the trustee’s ‑ ‑ ‑
GUMMOW J: Yes, and the whole problem arises from merging notions of standing into notions of what the action is and what the damage is.
MR JACKSON: Yes, your Honour.
McHUGH J: So your argument reads this section this way, does it not, in its application to the present case: a person, that is to say Minters, being liable in respect of any damage suffered by you, may recover contribution from any other person liable in respect of the same damage, and there is not any other person on your argument.
MR JACKSON: I am saying that is what they have done, that is what their case has been.
McHUGH J: I know, and so you say the section does not apply.
MR JACKSON: It does not apply.
McHUGH J: But may it not depend upon what content you give the phrase “liable in respect of” because the damage suffered by another person – it may be they are liable in respect of damage suffered by another person, namely the beneficiaries, if you give the words “in respect of” a wide meaning.
MR JACKSON: Your Honour, can I come to that immediately?
McHUGH J: Yes.
MR JACKSON: Now, undoubtedly, of course, the words “in respect of” can be treated as wide or narrow, but what one sees in the cases about the use of the term in the Court is that they all say it depends on the context. There are least three decisions of the Court saying just that. Can I give your Honours the references without going to the detail?
GUMMOW J: Can we just stop for a minute. The reason Justice McHugh puts to you is the reason why I limited the question I put to you, namely, if you were delinquent and refuse to sue, it could then be that there was the liability in respect of damage. You were not delinquent, so there is no liability.
MR JACKSON: I am sorry, your Honour. I just missed what your Honour said to me and I am sorry.
GUMMOW J: If you had been delinquent and had refused to sue so that the beneficiaries had to take these procedural steps which gave them, in effect, standing to claim, it could be possible to say that there would then be liability on the part of your client in respect of damage, as Justice McHugh puts to you. But there is no liability because you have not been delinquent.
MR JACKSON: Your Honour, I accept that. Could I just say in relation to it that one is, of course, in dealing with 23B(1) ‑ ‑ ‑
GUMMOW J: In other words, if this was a Hayim case, the sort of case that has been talked about by Lord Templeman, the section might then work, but it is not a Hayim case.
MR JACKSON: That is so, your Honour, and I accept that.
CALLINAN J: Is that necessarily so? I mean, that general proposition in Hayim suggests that if the trustee is delinquent as a trustee, not merely in not taking action as a trustee, then that might be an exceptional case in which the beneficiaries do have standing to suit third parties. The general principle distilled from the cases seems to say that apparently.
MR JACKSON: Your Honour, they may have standing to sue, but if one goes to 23B(1), read with 23A(1), which defines parts of it, 23A(1) defines ‑ ‑ ‑
GUMMOW J: Just stop there for a moment. You cannot have a whole lot of beneficiaries running around, some of them want to sue, some of them do not want to sue. The whole idea of this is to funnel it all through the trustees, so the hapless defendant only gets vexed once. That is the whole idea.
MR JACKSON: Yes, your Honour, I accept that. There is only one action. In the simplest case you have a trustee where there are circumstances where a beneficiary is entitled to sue, but the beneficiary sues the defendant, joins the trustee as a defendant, and then, if one took a case of multiple beneficiaries, there would be someone appointed to represent the beneficiaries.
GUMMOW J: Exactly.
MR JACKSON: All the beneficiaries are bound by the judgment.
McHUGH J: Well, I appreciate the force of what you put, but in a sense it does require a cutting back of this remedial statute, because you want to concentrate on what action can be taken, whereas the old section spoke about a person who if sued would have been liable.
MR JACKSON: Your Honour, I am simply seeking to apply the words of 23B as expanded by 23A and one speaks of “in respect of damage”. Your Honours will see that 23A(1) defines when a person is liable in respect of damage and your Honours will see that a person is not liable in respect of damage under 23A(1) unless these things occur. First of all:
the person who suffered the damage –
or, that person’s estate or that person’s dependants, a term defined in Part III -
is entitled to recover compensation from the –
person said to be liable.
McHUGH J: Yes, the word “entitled” may get you home in this case.
MR JACKSON: Yes. Your Honour, “in respect of damage” is the same as in the previous statutes, but when one sees “entitled to recover compensation”, this is a case where it is not the widest of views and when one sees - it says:
entitled to recover compensation . . . in respect of that damage –
Ultimately one goes to see, is it the same damage because of 23B(1) and even in the case where ‑ ‑ ‑
McHUGH J: But, more importantly, it is entitled to recover “from the first‑mentioned person”.
MR JACKSON: Yes. Your Honour, when one goes to the case where the beneficiary is allowed to sue, joining the trustee, the damage that is being recovered is the damage of the trustee.
I was going to give your Honours some references in relation to “in respect of”. Our learned friends have referred to Technical Products Pty Limited v State Government Insurance Office (Queensland) (1989) 167 CLR 45. The relevant pages are 47, 51 and 54. Could I refer your Honours to an earlier case of State Government Insurance Office (Queensland) v Rees 144 CLR 549 at pages 553 and 560 to 561.
KIRBY J: Do they not say that “in respect of” is an expression of the widest ambit? That is what I have always understood and I think Justice Kitto said that.
MR JACKSON: Could I say this, your Honour, what your Honour put to me was a phrase commonly used until, I think, the first of those cases in time, State Government Insurance Office v Rees, where you see Justice Mason’s reasons, which were agreed in by the other members of the Court, I think, and Justice Stephen to the same effect reciting what your Honour said and then saying, “But, of course, it all depends on the context”. The reference to context can be seen in two Technical Products Case, the second of which I have given your Honours the reference to. The first is Workers’ Compensation Board v Technical Products Pty Limited 165 CLR 642 at 653 to 655. If one looks at the context in the particular case, one sees in 23A(1) there has to be the entitlement to recover compensation from that person. Your Honours, could I perhaps go back for a moment.
GUMMOW J: Is there any consideration given in the Law Reform materials to the slant that is given this section if it operates in the situation where there is a second level, as it were?
MR JACKSON: I think the answer is no, your Honour. I think what one sees is a discussion ‑ ‑ ‑
GUMMOW J: I am sure there is not.
MR JACKSON: I am sorry, your Honour.
GUMMOW J: I bet there is not.
MR JACKSON: What there is is a discussion of the fact that limiting it to liability in tort was unnecessarily limited.
GUMMOW J: Yes.
KIRBY J: You were going to hand up to us at some stage the Law Commission materials.
MR JACKSON: Yes. We were having the bundle of them copied at lunch, your Honour. I will make sure that your Honours have them, in any event.
KIRBY J: Yes, thank you.
MR JACKSON: Your Honours’ tipstaves will have them. Your Honours, could I go on to say this. In our submission, the damage which the investors suffer by our breach of duty is not the same damage. Could I take your Honours to what was said by Justice Rolfe in this regard in volume 3. Justice Rolfe at page 568, line 44, having referred to section 23A and 23B, said at about line 48:
The amount recoverable on the cross‑claim . . . will be more than they are obliged to pay under the principal claim, although it includes that amount. It is not “the same damage”. The damage springs from different breaches and there is no co‑ordinate liability.
If one goes to page 565, a few pages back, your Honours will see he had expanded upon that at about line 30. He says:
Firstly, I am satisfied that the plaintiffs are entitled to recover from PTWA and PT by reason of their breaches of trust. Secondly, I am satisfied that PTWA and PT are entitled to recover from Minter Ellison by reason of their breaches of trust to PTWA and PT. This is not a case . . . where two trustees are liable to a plaintiff.
Then, at the bottom of the page:
In the present case PTWA and PT are liable for certain breaches to the plaintiffs, and Minter Ellison are liable for certain other breaches to PTWA and PT.
His Honour, in our submission, is perfectly right in describing the matter in that way.
Your Honours, the other feature about it is that the liabilities are, in our submission, at different levels. This was an aspect that Justice Davies referred to in volume 4 page 721, where your Honours will see in paragraph 24 he referred to his earlier reasons, and, at about line 4, he said:
I went on to say (at [140]),
“Perpetual WA and Perpetual, on the one hand, and the solicitors, on the other, were not persons whose liability was ‘of the same nature and the same extent’”.
At the bottom of that quotation ‑ ‑ ‑
KIRBY J: Which page is this, I am sorry?
MR JACKSON: Page 721, your Honour, in volume 4, bearing in mind one is looking to see, is it the same damage? What his Honour adverts to is the fact that – the last four lines on page 721:
“Another aspect of the same point is that the parties must be liable ‘on the same level of liability’” ‑
and he refers there to two cases, Scholefield Goodman and Street v Retravision.
McHUGH J: But his Honour cannot be right when he referred – it being liable to the same extent, can he? After all, in Royal Brompton, Lord Bingham in paragraph 6 said – his third element was:
Is C also liable to A in respect of that damage or some of it?
MR JACKSON: Your Honour, could I say, I suppose, two things about that. I do not know that his Honour is there seeking to say “to the same extent” in the sense of the two being exactly the same. What he is seeking to say is “of the same nature” and “both cover a similar theme”, as distinct from saying there has to be a complete mirroring of one by the other.
What I was going to say about it was that since those observations were made, one sees expressions of that kind being the test used in the Court’s observations in Burke v LFDT Pty Limited 209 CLR 282 and Justice Gaudron and your Honour Justice Hayne at page 292 at paragraph 14.
McHUGH J: Yes, but this is a case of equitable contribution.
MR JACKSON: Yes, but, your Honour, could I just say though that the way in which it is expressed there in paragraph 14 - their Honours said:
In general terms, the principle of equitable contribution requires that those who are jointly or severally liable in respect of the same loss or damage should contribute to the compensation payable in respect of that loss or damage –
not very different from the terms of section 23B. Could I note in passing two things. First of all, in paragraph 16, their Honours refer in the last four lines to:
the requirement that liability be “of the same nature and to the same extent” -
in the sense, obviously used in paragraph 14. At page 301 in paragraph 43, your Honour Justice McHugh referred to the Scholefield Goodman Case that Justice Davies had referred to and said halfway down the paragraph:
the Privy Council held that there was no room for the application of the doctrine unless the person from whom contribution is claimed has placed himself on the same level of liability . . . contribution will not lie simply because the respective liabilities of parties arise out of similar relationships or related transactions –
Your Honours, I am conscious, of course, this is dealing with contribution as such, but the requirement in relation to contribution is not very different, in our submission, from that referred to in 23A and 23B. Could I say that your Honour Justice McHugh at page 307 paragraphs 63 to 65 appeared to regard the decision of the Court of Appeal in the present case as one which was correct.
GUMMOW J: As what?
MR JACKSON: One which was correct.
McHUGH J: Yes, but why is it referred to 23B?
MR JACKSON: Your Honour, I make no more of it than appears there. I expressed it in restrained terms.
Now, your Honours could I also say the different level aspect was referred to by your Honour Justice Gummow in the Federal Court in Street v Retravision(NSW) Pty Ltd (1995) 56 FCR 588. The passage commences at 599B and goes through to page 600B and at the paragraph commencing at 599B your Honour referred to the Privy Council in Scholefield Goodman and the quotation from that case:
the same level of liability as the surety who claims contribution from him.
Your Honour referred to what was said by Justice Dixon in Spicer:
were their liabilities upon an equality, or is one secondary and the other primary?
Your Honour then discussed the details of that case and then at the top of page 600 your Honour said:
However that may be, in either case cl 1 of the guarantee places the applicants on a level of liability, to use the phrase of the Judicial Committee, which is conceptually distinct, as a matter of basic legal principle, from that of those having a direct primary liability, joint and several, to the creditor in respect of the guaranteed debt.
Then the next paragraph is “no common interest and no common burden”, et cetera.
GUMMOW J: The question is, does this statute, which would apply obviously in trust situations, reach a different position, change the law?
MR JACKSON: Well, your Honour, the first thing is one sees about it that section ‑ ‑ ‑
GUMMOW J: Because, under the general law of contribution, equality would be the idea.
MR JACKSON: Yes.
GUMMOW J: The statute gives a power to reach an equitable result which is different.
MR JACKSON: Yes, which may involve no contribution at all.
GUMMOW J: Yes.
MR JACKSON: That is section 24. Could I just say, also, I should add that section 24AD(4) says that:
The right to recover contribution in accordance with section 23B supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Part in corresponding circumstances –
So what it is doing is to, in effect, identify and then cover a field. So it would not be surprising if, subject to the ability to alter equitably, on a just and equitable basis, proportions, one says that when it is speaking of contribution in 23B(1) it is speaking of a concept not very different from contribution under the general law and, also, your Honours, particularly when one sees the provision using “same damage” – a term which one sees also used in, for example, the description of contribution in the passage from your Honour Justice Gaudron and Justice Hayne in Burke v LFOT.
Your Honours, our learned friends referred to the decision in Bialkower v Acohs Pty Ltd (1998) 83 FCR 1. That case held that section 23B extends to a claim for a contribution of section 52 of the Trade Practices Act to claim for damages. That is referred to, your Honours, at page 11, in particular, at the bottom of the page. It is said by their Honours that “The provisions are of a remedial nature”, and no doubt the Full Court was right in the observation that it there made. But where does that take one? What one does see, when the court goes on to apply it, is what appears at page 12, and, in particular, at about letter C. It said:
It is not necessary in order that liabilities be co‑ordinate or common that parties be jointly liable.
And then two sentences on:
It is sufficient if two people are both liable in respect of the one loss, even if they are liable on different causes of action.
They refer to your Honour’s judgment in Street v Retravision. If one goes to the reference that their Honours make at page 597 it is quite apparent, in our submission, that your Honour was there speaking of the same damage.
Could I come then, your Honours, to the reliance by our learned friends on the Fair Trading Act provisions. Their argument in that regard appears in essence in paragraph 70 of the appellant’s submissions, the proposition being that:
Where misleading or deceptive conduct . . . causes a trustee to act so as to diminish the value of the assets of the trust, a beneficiary of the trust suffers loss or damage by that conduct:
And it is then said:
By reason of the findings at first instance, all the ingredients necessary for a direct liability of the Appellants to the beneficiaries under section 37 have been established.
That argument, as your Honours will see, is based on taking an observation in your Honour Justice Gummow’s reasons in Poignand v NZI Securities Australia Limited (1992) 37 FCR 363. Could I say that was an observation based upon a pleading…..and our learned friend’s argument converts it to a general principle.
The point we would seek to make, of course, is that no such case was pleaded here. But if I could go to that case, Poignand, for a moment, the case was one where there was a representative proceeding under Part IVA of the Federal Court Act, in which, to put it shortly, the unit holders in a retirement village trust contended that the representatives of their trustee had been misled and that – and your Honours will see this at page 367 – the assets of the trust have been diminished.
Your Honours will see, as I said, this was an issue - the case was one based on the pleadings as they stood. That appears at page 365 about point 3. The argument which was advanced was that only the trustee could sue, and so a representative action was not available. That argument is referred to at page 370 about point 4. I should also say the position was that all the beneficiaries were also guarantors. That appears at page 366 at about point 8. That is the matter to which your Honour referred, about halfway down page 370:
As a matter of the application of general principles of trust law, not only the assets of the DYV Trust but also the unit holders are at hazard by reason of the existence of the covenants given by Ripoll and the legal and equitable securities created by it over the trust assets and in favour of the second respondent. In particular . . . each unit holder is at risk of enforcement of a personal obligation to provide an indemnity for the liabilities incurred by the trustee.
Now, your Honour then went on at page 371 about point 7 to say:
As matters stand on the present motion, I accept the submission by the applicant that there is a real chance or possibility that the unit holders are likely to suffer loss or damage by the conduct complained of against the respondents . . . But that is a question for another day. In any event, upon the allegations pleaded, the appointments of the third respondent have diminished the assets of the DYV Trust and thus the value of the units held by the unit holders. That is loss or damage already sustained by them.
Your Honours, that was the position on the pleadings. In the present case, there was nothing to show that each of the investors suffered actual damage by reason of conduct contravening section 11 of the Fair Trading Act. Each was entitled to an indemnity from us. There was no evidence to show that that indemnity was not worth the value of the assets that were lost, and, your Honours, the position, of course, is that there is the difficulty which is brought about by section 23B(3), namely, that the investors have never sued us – 23B(3) of the Wrongs Act.
The investors have never sued us. They would be out of time to do so under the Fair Trading Act, section 37(2), nor have we – I am sorry, may I start that again. The investors, I should have said, have never sued the appellants. They would be out of time to do so under the Fair Trading Act ‑ that is because of a three year period in section 37(2) – nor have we been sued under the Fair Trading Act provisions, and they are out of time against us. We were sued under the Trade Practices Act, but that was abandoned. Your Honours will see the abandonment referred to in volume 3 at page 379, lines 34 to 45, in the judge’s reasons. So, your Honours, there is, in our submission, no relevant liability under the Trade Practices Act.
Could I come then to the question of indemnity. This is the issue which we seek to raise by the written submissions to which my learned friend referred. Your Honours, may I say immediately it is absolutely correct to say that although I foreshadowed the matter to him last night, the only indication we had given was morning about half an hour before Court. Your Honours, if there be any issue about it, we would have no objection to our learned friends putting in a written submission on the matter. But may I indicate what our submission is, your Honours ‑ ‑ ‑
MR SHAW: If my learned friend wishes to rely on this point and if the Court thinks that it is appropriate, as I indicated this morning, we really were taken by surprise when it turned up. It has not been mentioned before and we would ask the Court, if the Court does give leave, to give it on terms that we have an appropriate time to put in written submissions about the point.
GLEESON CJ: Yes, Mr Jackson will have leave but on terms that you will have – is seven days sufficient?
MR SHAW: Your Honour, we have said we would do some other things and ‑ ‑ ‑
GLEESON CJ: Would you like to make it 14?
MR SHAW: I would, your Honour, yes.
GLEESON CJ: All right. On terms that you have the 14 days from today to file your response.
MR SHAW: Thank you, your Honours.
MR JACKSON: Could I take your Honours to section 24AD(4). Your Honours, may I say that although in the Court of Appeal we contended – and your Honours have, I think, copies of the written submissions in the Court of Appeal – our written submissions. Although in paragraph 27 we said that we were entitled to an indemnity, we did not refer in terms to section 24AD(4). But if I could take your Honours to section 24AD(4). Your Honours will see that it says:
The right to recover contribution in accordance with section 23B supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Part in corresponding circumstances but nothing in this Part –
which is the whole of Part IV –
shall affect –
(a) any express or implied contractual or other right to indemnity –
and then it goes ‑ ‑ ‑
GUMMOW J: In other words, by turning the right to indemnity into some conditional right it is less than that, by the use of the “or other”?
MR JACKSON: Yes. Your Honour, we referred in our supplementary submission to a decision of the Court in McGrath v The Council of the Municipality of Fairfield 156 CLR 672. The fact that the term “indemnity” is commonly used in relation to contractual rights is adverted to there, but in the context in which it appeared, what was held to be the case was that the term “indemnity” covered the obligation for an employee to indemnify the employer under the general law before it is amended and their question was the effect of the amendment. Your Honours will see that section 24AD(4) concludes by saying:
which would be enforceable apart from this Part –
Your Honours, in our submission, we were the appellants’ cestui que trust. As the primary judge said, in volume 3 at page 569, in their last paragraph on the page, the second line:
accordingly, I am of the view that PTWA and PT are entitled to judgment against Minter Ellison for the full amount required to replenish the trusts, together with compound interest –
et cetera. Now, your Honours, that is about as good as an indemnity would ever get, in our submission – an entitlement to recover the full amount.
It is a reflection, in our submission, of what was said by two members of the Court in a passage of Breen v Williams which was adopted in Pilmer v The Duke Group (2001) 207 CLR 165. At page 198 in paragraph 74, four members of the Court said – this is at the top of page 198:
In Breen v Williams, Gaudron and McHugh JJ said –
there was a reference to fiduciary obligations, more generally, then the last two sentences of that quotation –
“If these obligations are breached, the fiduciary must account for any profits and make good any losses arising from the breach.”
The present case in the area of trust is one where that right, in our submission, is a right to indemnity, something which is not affected by Part IV. The obvious intent of the provision is that section 23B(1) is not to be relied on by a person in the position ‑ ‑ ‑
GUMMOW J: I think there might be some language in Re Dawson which assists you. I am not sure.
GLEESON CJ: [1966] NSWR 211 at page 216 perhaps. It is a decision of Justice Street.
MR JACKSON: I think I was referring to another case, your Honour.
GLEESON CJ: I thought it was recently discussed in the House of Lords.
MR JACKSON: Yes, recently, your Honour, it was.
McHUGH J: It was, yes.
MR JACKSON: I think that is so, yes. Your Honours, could I say two further things. One concerns the reliance by our learned friends on the words “for the benefit of” and “by or on behalf of” that are seen in some of the provisions of section 23B. Could I take your Honours very briefly to those. First of all, section 23B(6) contains the words:
any such liability which has been or could be established in an action brought against that person in Victoria by or on behalf of the person who suffered the damage –
One sees in 23B(5) also the words:
judgment given in an action brought by or on behalf of the person who suffered the damage –
Now, your Honours, that expression “by or on behalf of” in the ordinary course of events, in our submission, refers to proceedings brought on behalf of persons who are under a disability; for example, a minor or a handicapped person, to use the language of Victorian Order 15.
GLEESON CJ: Mr Jackson, can I just interrupt you to ask this in relation to the word “indemnify”. Are there some contexts in which that word has a narrower meaning than a reference to a liability to make good any loss? I have in mind that there may be some context in which that word means to keep a person harmless against a legal liability to a third party.
MR JACKSON: Your Honour, as in, for example, a guarantee or indemnity.
GLEESON CJ: Yes.
MR JACKSON: And one commonly sees provisions which make what, prima facie, looks like a guarantee into a separate obligation described as an indemnity itself to do the thing that the primary…..would be liable for.
GLEESON CJ: I just wondered whether this provision of the Wrongs Act might be talking about indemnity in the narrower sense.
MR JACKSON: Your Honour, it does not really use narrow language, and your Honour will appreciate that there were, in the other Acts, provisions excluding indemnity; cases of indemnity and indemnity in that context, it seems pretty clear, with respect, must have been indemnity in respect of liability to damages.
GLEESON CJ: Yes, but you are not here saying that you had a right of indemnity in respect of your liability to your investors, are you? I understand you to be saying you have a right of indemnity in the wider sense of a right to have recoupment of any loss you suffered.
MR JACKSON: Yes, that is so, your Honour. What we are saying is that we have an implied right to be indemnified in respect of the loss we suffered as a beneficiary under a trust of which the appellants were the trustee.
GLEESON CJ: In the context of this legislation it would make sense, would it not, to say that the right to contribution does not operate in a case where there is a right to be indemnified in the narrower sense.
MR JACKSON: Yes, that is so, your Honour, and that is really what ‑ ‑ ‑
GLEESON CJ: I just wondered whether it might not be something that would be worthwhile for Mr Shaw to have a look at. I just have in the back of my mind, and my memory may be playing tricks with me, that there are cases that say that this narrower meaning of the word “indemnify” is its technical legal meaning.
MR JACKSON: Well, your Honour, can I just say in relation to that, you will see that the contribution legislation has always used the expressions “contribution” and “indemnity”, as does 24AD(4), as do the provisions of section 24(2) which speaks of “complete indemnity”.
GLEESON CJ: As in making good the whole loss.
MR JACKSON: Yes, and it is in a context where one is speaking about damages and, in our submission, where it says “contribution (as distinct from indemnity)”, one reads that in the context in which it appears, particularly when it goes beyond contractual indemnity, it says so specifically. So it is a broad provision.
Your Honours, may I just go back to what I was saying about “for the benefit of” and “on behalf of”. Our submission is that the expression “on behalf of” in the ordinary course of events refers to proceedings brought on behalf of persons who are under a disability as dealt with by Order 15 in Victoria. If one goes then to section 23A(2) on which reliance is placed by our learned friends, all that it does, in our submission, is to extend the position to actions that are:
brought for the benefit of the estate or dependants of that person.
Then one sees that “dependants” is defined by section 23A(3) to mean, to put it shortly, the persons for whose benefit the modern version of a Lord Campbell’s Act action can be brought. That is what is referred in Part III of the Act.
The final thing, I think, to which I wish to refer was something I interrupted myself in relation to earlier. It was, your Honours, to deal with the defences to the claims that we had against the appellant. Your Honours will see that if one goes to volume 1, page 129, it is paragraphs 10 and 11. Paragraph 11 on page 130 says:
By reason of the matters alleged in paragraph 10 ‑
and then one goes to (b):
such loss or damage as has been suffered should be apportioned . . . or the liability of the first cross-defendants should be reduced or diminished.
Your Honours will see the loss or damage referred to there is that which is referred to at the top of page 130, “any loss and damage suffered by”, to put
it shortly, us. The same situation obtains with the other pleading in relation to the other respondent. Those are our submissions.
GLEESON CJ: Thank you, Mr Jackson. Yes, Mr Shaw.
MR SHAW: If your Honour please, I would ask my learned friend, Mr Faulkner, to make the reply.
MR FAULKNER: Your Honours, there are only three points to be made in reply and I will make them as briefly as I can. The first point, whilst your Honours have volume 1 of the appeal book before you, is in relation to I think what was described as the pleading point on the seventh cross-claim and, in particular, page 175 where the appellants’ claim for contribution is set out. As has been said previously, legal proceedings are brought in the commercial division of the Supreme Court and under Part 14 rule 5, proceedings are commenced in that division by way of summons, not statement of claim. The cross-claim is in the usual form; it is not a formal pleading.
GUMMOW J: There is an absolute cobweb of pleadings in this case and we are solemnly told they are not pleadings, because of some magic in the commercial ‑ ‑ ‑
MR FAULKNER: Well, it is a summons.
GUMMOW J: Yes, I know that, but it is what then follows: fourth cross‑claim, seventh cross-claim.
KIRBY J: It would be easy to miss some little subparagraph there; I would not want to do that.
MR FAULKNER: Happily, not all the pleadings have been reproduced in the appeal books.
HAYNE J: There is no money now. There is more.
GUMMOW J: But why does it matter?
MR FAULKNER: We say that it does not matter.
KIRBY J: Yes, but what is your answer to the point about the time limitation? It does not appear to have been, as it were, cross‑pleaded, if that is possible, but it is raised in objection to your claim.
MR FAULKNER: Can I say this: all the seventh cross‑claim does is specify in paragraph 3 the liability to which contribution is sought, namely any liability the appellants are held to have in these proceedings, and then in paragraph 3(aa) assert the entitlement to contribution. Nowhere in this document does it specify the basis upon which the entitlement to contribution is asserted.
KIRBY J: Well, you may have been as surprised about the point concerning limitations as you are about the indemnity point but, as far as I am concerned, you will have to answer it.
MR FAULKNER: Yes.
KIRBY J: If you have to do that in your reply or your written document, well, you will have to do it, as far as I am concerned.
MR FAULKNER: Yes.
KIRBY J: It seems something we have to think about.
MR FAULKNER: Well, until this afternoon the only reason that had been advanced by our opponents as to why we would not have a liability directly to the beneficiaries under the Fair Trading Act was that which appeared in paragraph 43 and 44 of the written submissions, namely to say that had the respondents discharged a liability to the beneficiaries from their own resources then there would not have been any loss.
In the appellant’s submission, that just reinforces the proposition that it is in substance the same damage. But I do not mean to avoid your question. We have had read to us some limitation provisions of the Wrongs Act, which have a number of hypothetical and factual scenarios encompassed in them, and I am not in a position to deal with them now but would seek to include within the written submissions on the indemnity point, to be filed within 14 days, anything we want to say about that.
GLEESON CJ: Yes.
MR FAULKNER: In paragraph 3 on page 175, the liability in respect of which contribution is sought is any liability which the appellants are held to have in these proceedings. That liability can be identified by the orders made by Justice Rolfe at first instance, namely, orders 8 and 9 which are in volume 4 at page 644. The form of those orders are that we are to pay money to the respondents on terms that they be paid to the plaintiffs or used to replenish the trust. It is that liability in respect of which we seek contribution.
HAYNE J: If that is so, how do you say that 23B(1) is engaged by reference to the words of 23B(1), and what is the operation you are giving to it?
MR FAULKNER: That is my second point. As I think had previously been said, the key phrase is a person liable in respect of any damage suffered by another person.
GUMMOW J: That requires you to read 23A(1).
MR FAULKNER: It requires to read two provisions. The statute has two definitions of the phrase “liable in respect of any damage”. One of them appears in section 23A(1) and the second appears in section 23B(6), and there is some tension between the language of those two provisions. Section 23A(1) provides:
a person is liable in respect of any damage if the person who suffered that damage . . . is entitled to recover compensation from the first‑mentioned person ‑ ‑ ‑
KIRBY J: A lot of work is being done by that word “liable” there. It is the cause of my anxiety about the time limitation, but not only that. As Justice McHugh observed to Mr Jackson, that word might get him home.
MR FAULKNER: I think the word that his Honour Justice McHugh said might get my opponents home is “entitled”.
GUMMOW J: Yes, but the two are connected.
MR FAULKNER: Yes.
McHUGH J: You see section 23A makes it clear that for the purposes of 23B:
a person is liable in respect of any damage if the person who suffered that damage . . . is entitled to recover compensation from the first‑mentioned person.
Applying that to section 23B Minter Simpson is liable in respect of damage within the meaning of 23A only to Perpetual. It was not liable to the beneficiaries as Perpetual was because the beneficiaries could not recover compensation against Minter Simpson unless you can make out a claim, it seems to me, under the Fair Trading Act. That is your only basis it seems to me at the moment.
MR FAULKNER: Well, “entitled to recover compensation” cannot mean entitled to bring an action to recover compensation, because, if that is what it means ‑ ‑ ‑
GUMMOW J: What else does it mean?
MR FAULKNER: ‑ ‑ ‑ it is inconsistent with section 23B(6).
GUMMOW J: 23B(6) is the choice of…..reassurance, I think, of some sort.
HAYNE J: And has been or could be established; so past or potential establishment provision.
MR FAULKNER: But it contemplates the liability being established, not only by an action brought by the person who suffered the damage, but by someone else on behalf of that person.
McHUGH J: Well, it gives some content to 23A. It may well be, primarily, directed to the Part III cause of action, the Victorian equivalent of Lord Campbell’s Act.
MR FAULKNER: There is nothing in section 23B(6) which suggests it is supposed to be limited like that.
McHUGH J: I know it is, and it probably covers agency cases, where people are in possession of property and so on.
MR FAULKNER: Or trustee cases.
McHUGH J: Yes.
GUMMOW J: That is the first ‑ ‑ ‑
MR FAULKNER: But informed by section 23B(6), 23A, when it refers to “entitled to recover compensation”, must include some form of entitlement or an entitlement which another can vindicate on your behalf, like when a trustee sues on behalf of its beneficiaries. 23B(6) is not the only place where the language of “on behalf of” is used.
GUMMOW J: Now, when you say, “on behalf of beneficiaries”, you mean on behalf of beneficiaries being absolutely beneficially entitled, so that it operates differently with other sorts of trusts. You have to say that, do you not?
MR FAULKNER: For the purposes of this case, yes.
GUMMOW J: Well, that is an odd sort of statute.
MR FAULKNER: The only other point in reply is to say that caution ought be used before equitable principles governing equitable contribution are used to discern the meaning of the statute. In equity, contribution arises where there is co‑ordinate liability, and there is some discussion of that in Burke, in particular in relation to being of the same level and the same extent, but co‑ordinate liability is a gateway to a different world of contribution, that being a world of contribution where equality is equity and apportionment is 50:50.
GUMMOW J: Just going back to where we were before, assume this beneficiary itself was a trustee of a family trust or a pension fund as some of these were. How far on do you roll? That is in the third generation.
MR FAULKNER: Yes.
GUMMOW J: Where do you actually ever touch base on your theory?
MR FAULKNER: The peculiar feature of this case is that not only were there two trusts ‑ ‑ ‑
GUMMOW J: More than two. The plaintiffs describe themselves as the trustees of this, that and the other…..They did not own anything absolutely either.
MR FAULKNER: For the purposes of the claim for contribution, there were two trusts and the peculiar feature of this case is that both the appellants and the respondents acted in breach of their respective trusts. It would not extend indefinitely unless there were an indefinite sequence of breaches of trust.
GLEESON CJ: But it is said against you, as I understand it, that the fact that the respondent acted in breach of its trust was irrelevant to its claim against your client.
MR FAULKNER: It is irrelevant in the sense that it is not necessary for it to advance its claim against us, but it is relevant in the sense that it shows the substance of the claim and identifies the damage.
The final point I was making is that section 23B(1) is a gateway to a statutory world of contribution where apportionment is governed not by the principle that equality is equity but by the matters set out in section 24(2), so you might have a broader gateway on the basis that someone undeserving getting through that gateway might have their entitlement for
contribution dealt with there by way of apportionment of an amount that reflects their particular responsibility for the loss.
GLEESON CJ: Yes, thank you. We will reserve our decision in this matter.
AT 4.20 PM THE MATTER WAS ADJOURNED
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