and Nicholson Street Pty Ltd (ACN 069 104 089) (Receivers & Managers Appointed) (in Liquidation) v Mark Ronald Letten and Paul James Lane
[2016] VSCA 157
•11 July 2016
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2015 0125 | |
| NICHOLSON STREET PTY LTD (ACN 069 104 089) (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) & ORS | Applicant |
| v | |
| MARK RONALD LETTEN | First Respondent |
| and | |
| PAUL JAMES LANE | Second Respondent |
---
| JUDGES: | WHELAN, FERGUSON and KAYE JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 16 June 2016 |
| DATE OF JUDGMENT: | 11 July 2016 |
| MEDIUM NEUTRAL CITATION: | [2016] VSCA 157 |
| JUDGMENT APPEALED FROM: | [2015] VSC 583 (Judd J) |
---
TRUSTS – Breach of trust – Second limb of Barnes v Addy – Allegedly dishonest and fraudulent trustees as plaintiffs – Accessorial liability of former officers – Managed investment schemes in liquidation – Court appointed receivers over trust property and liquidators of trustee companies – Whether trustees can sue to redress breach of trust when trustees are guilty of misconduct – Primary judge stayed proceeding as beneficiary representative not joined – Whether independent party representing beneficiaries’ interests should be joined to the proceeding – Stay order set aside – Young v Murphy – Marshall Futures Ltd v Marshall – Trustee, even if itself party to wrongdoing, may bring proceeding to redress breach of trust without joining beneficiaries or representative if trustee can properly represent interests of beneficiaries
---
| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr R D Strong | King & Wood Mallesons |
| For the First Respondent | Mr Ian Waller QC Mr St John Hibble | Baker & McKenzie |
| For the Second Respondent | Mr Simon Rubenstein | Maddocks |
WHELAN JA
FERGUSON JA:
The three plaintiffs are trustees of unregistered managed investment schemes which are being wound up by order of the Federal Court of Australia. They are under the control of two insolvency practitioners appointed by the Federal Court as both liquidators of the plaintiff companies and receivers and managers of the trust property. The two defendants, Mr Letten and Mr Lane, are former officers of the three plaintiffs. The claim is that they knowingly assisted the plaintiffs in dishonest and fraudulent breaches of trust by the plaintiffs.
On 13 November 2015, a judge in the trial division stayed this proceeding until further order. He did so because he did not consider that the proceeding should continue ‘in the absence of some transparently independent party representing the interests of the beneficiaries’.
The plaintiffs have applied for leave to appeal from the stay order, and from consequential costs orders. The application for leave was heard on the basis that if leave was granted, the appeal should be heard and determined forthwith.
We have concluded that leave to appeal should be granted and that the appeal should be allowed.
It is necessary to begin by setting out the history of the windings up of the three relevant managed investment schemes and of a number of related schemes.
History of the windings up
On 17 February 2010, the Australian Securities and Investments Commission (‘ASIC’) filed an originating process in the Federal Court against Mr Letten and 44 corporations, including the three plaintiffs. Orders were sought for the winding up of the corporations and for the winding up of 16 managed investment schemes which it was contended had operated illegally in that they had not been registered. The corporate defendants included companies which had been incorporated to act as project managers and/or property owners of joint venture schemes promoted by Mr Letten, and also included companies under Mr Letten’s control which had performed what was described as ‘the central treasury function’ in the schemes. A company named LGH Administration Pty Ltd (‘LGHA’) was one of these.
On 25 February 2010, Gordon J made a declaration that certain of the schemes were managed investment schemes which were required to be registered but which had not been registered, that Mr Damian Templeton and Mr Phillip Hennessy (‘the receivers’) be appointed as joint and several receivers and managers of the property of certain of the corporate defendants (including the three plaintiffs), that the unregistered managed investment schemes be wound up, and that the receivers be appointed as joint and several receivers and managers of the property of those schemes with designated powers. The orders made that day are detailed. It is unnecessary to refer to their full terms. They included orders that the receivers identify, collect and secure the property of the schemes. Specific provision was made in relation to the remuneration and costs and expenses of the receivers. They were to be fixed by the Court, on application, at rates which were specified in the order.[1]
[1]ASIC v Letten [2010] FCA 140.
Mr Letten was represented by senior and junior counsel at the hearing on 25 February 2010 and, in the broad, the orders made were either consented to or not opposed by him.
There have been many further applications to the Federal Court in relation to these schemes. It is necessary to refer to some of them.
After 25 February 2010, orders were made for the winding up of further unregistered managed investment schemes promoted by Mr Letten, so that by 11 November 2010 there were 21 such schemes being wound up. The receivers were
also appointed as joint and several receivers and managers of the property of those schemes and of the property of the corporations associated with them.
On 13 April 2010 the receivers filed what were described as ‘Disclosure Reports’ in relation to the schemes, and on 6 May 2010 orders were made requiring the receivers to prepare a proposal in relation to the distribution of the property of the schemes.[2]
[2]See the procedural history set out at ASIC v Letten (No 7) (2010) 190 FCR 59, 65–6 [7]–[12].
The question of distribution then came before Gordon J in October 2010 on an application by the receivers for directions. ASIC and Mr Letten were each respectively represented by senior and junior counsel. Notice of the receivers’ application had been given to a secured lender, and to creditors and the investors in the schemes.
In substance, the receivers’ proposal was that the assets of the schemes and the associated corporate entities should be pooled and that, after the payment of certain specified amounts, any surplus should be placed in a ‘Common Fund’ for distribution rateably between claimants. ASIC supported the receivers proposal,[3] as did counsel for Mr Letten.[4]
[3]Ibid 65 [5].
[4]Ibid 132 [315]–[316].
The Court received 99 written submissions and heard four oral submissions from investors in the schemes, and two trade creditors also made submissions. The positions they put were not consistent. One group of investors (referred to as the ‘Light Interests’) were represented by senior counsel and made detailed submissions opposing any ‘wholesale’ order for pooling.
The impetus for the proposal to pool the assets arose out of the manner in which the schemes had been conducted, which was not the subject of controversy, and which was summarised by Gordon J as follows:
Because of the way in which Mr Letten and companies associated with him (including the Corporate Defendants) conducted the Schemes, it is not possible to say now what are the net assets of any Scheme. There appear to have been so many inter-scheme transactions that it is not possible to say what assets were acquired by what scheme using whose money. [5]
[5]Ibid 70 [26].
Her Honour went through the individual schemes in detail.[6] As to the capacity in which assets were held, her conclusion was as follows:
Each of the Schemes is a separate managed investment scheme in that it appears that investors contributed money as consideration to acquire rights to benefits produced by the acquisition of a particular identified asset or assets. However, the property of the Schemes was irretrievably commingled owing to the central treasury role played by LGHA and the manner in which the Schemes were operated.
It was common ground that each of the Schemes was established as a trust or a number of trusts. [7]
[6]Ibid 70–109 [31]–[237].
[7]Ibid 109 [238]–[239].
Gordon J set out the various ways in which investors had invested in the schemes, and she then addressed the attempts which the receivers had made to trace individual investor contributions. In order to reconstruct the accounts, the receivers concluded that it would be necessary to consider approximately 110,000 transactions. They estimated the approximate cost at $18 million. The judge described that cost as ‘prohibitive’ and accepted the receivers’ assessment that it was not justifiable.[8]
[8]Ibid 113 [258].
Gordon J went on to say:
Even if the tracing exercise could be completed (and it cannot), in the circumstances of this case it is not justifiable to reduce the available funds for distribution to investors by $18 million (the approximate cost of the tracing exercise) out of a possible fund of $13 to $14 million (after payment of secured creditors) …[9]
[9]Ibid 113 [259].
Gordon J set out a number of reasons why that was so, and concluded:
[I]t is for those reasons that I accept that any further tracing of investor contributions should not be attempted on the basis that it would not ‘be justifiable to incur any further costs in the tracing exercise in circumstances where it is clear that the tracing exercise cannot be completed’.[10]
[10]Ibid 114 [260].
Her Honour then referred to the relevant legal principles concerning pooling and addressed a number of options which might be adopted for pooling. After setting out a number of relevant factors, including that it was not possible to say now what were the net assets of any scheme or what assets were acquired by what scheme using whose money, that the receivers had been unable to trace investor contributions, that some schemes had been oversubscribed and the oversubscriptions had not been returned but had been used to pay distributions to investors in other schemes, and that there was a general lack of reliable financial and accounting data, she concluded that rateable distribution was the pooling option which ought to be adopted on the basis that the investors had suffered what was, on analysis, a ‘common misfortune’.[11]
[11]Ibid 135–7 [332]–[337].
Gordon J also determined, however, that the orders made should preserve ‘the possibility that a claimant may seek to prove that it should be entitled to a different dividend’,[12] a conclusion which she restated at the end of her judgment in the following terms:
For the sake of completeness, the effect of the directions sought, and granted, does not affect the rights of any person to claim that they have, or any other person has, an entitlement to distribution from an asset of a Scheme or a Corporate Defendant (or the proceeds of sale of such an asset) which differs from the distribution which they would receive if the pooling process identified by the Receivers is adopted.[13]
[12]Ibid 136 [334].
[13]Ibid 137 [336].
In 2011, amongst other things, orders were made on the application of ASIC for the winding up of the relevant corporations and the receivers were appointed as joint and several liquidators.[14]
[14]ASIC v Letten (No 10) [2011] FCA 498; ASIC v Letten (No 15) [2011] FCA 1268.
By a judgment delivered on 12 December 2011, Gordon J found that two of those corporations, who had acted as trustees, had no right of exoneration or indemnity and directed the receivers accordingly.[15] It was submitted to us on the hearing of the application and appeal that that conclusion would necessarily apply more generally. That contention was not contested. The basis upon which that conclusion was reached reflected the analysis concerning irretrievable intermingling which had also been the basis for the judge’s conclusions in relation to pooling.[16] The judge found that the trustees had ‘permitted investor funds to be used by LGHA (which Mr Letten also controlled) for purposes other than that connected with the identified project, failed to properly account for income generated by the project and/or additional debt funding secured against the property and failed to properly account for distributions to investors.’[17]
[15]ASIC v Letten (No 17) [2011] FCA 1420.
[16]Ibid [27].
[17]Ibid [74].
By a further judgment delivered on 19 November 2012,[18] Gordon J gave the receivers directions as to the formula to be applied in the determination of entitlements to receive a distribution from the Common Fund. Directions were given to that effect, subject to the following further direction:
Nothing in paragraphs 1 and 2 above is to affect the rights of any person to claim that they have, or any other person has, an entitlement to distribution from an asset of a Scheme or a Corporate Defendant (or the proceeds of sale of such asset) which differs from the distribution which they would receive pursuant to the directions in paragraphs 1 and 2 above or under the Pooling Orders.
[18]ASIC v Letten (No 20) [2012] FCA 1283.
In 2014, before instituting this proceeding, the receivers sought directions from Gordon J to the effect that it was appropriate for them to do so. Senior and junior counsel for Mr Letten appeared on that application and opposed the directions sought. Gordon J delivered judgment on that application on 26 June 2014.[19] Shortly before delivery of that judgment, on 12 May 2014, Mr Letten pleaded guilty to 21 charges of operating an unregistered managed investment scheme, one charge of carrying on a financial services business without a licence, and five charges of dishonestly using his position as the director of LGHA with the intent of gaining advantage for himself or others. On 14 August 2014, he was sentenced to a total effective sentence of five years and eight months’ imprisonment with a non-parole period of three years by a judge in the County Court.[20] The sentencing judge set out a number of characteristics of Mr Letten’s conduct which he considered ‘stood out’. They were:
[19]ASIC v Letten (No 22) [2014] FCA 681 (‘Directions judgment’).
[20]CDPP v Letten [2014] VCC 1285.
(a) Grossly inappropriate and inadequate accounting practices;
(b) The utilisation of the funding of each of the particular 21 projects, sourced from a variety of persons, in a way which makes it difficult to trace such investments;
(c) Screeds offering unusually high returns, by way of both income and capital; however, when such schemes were documented by way of a joint venture document, which was the formal document evidencing each scheme, normally there was no provision for any income payments to be made. However, despite this fact, in many instances regular income payments were made to the investors;
(d) A failure to properly identify the actual projects relevant to each joint venture document;
(e) Returns of funds by way of income payments to investors over and above the value of the subscribed funds, in each particular scheme, by way of the use of a centralised treasury, conducted by Mr Letten;
(f) A central treasury conducted by Mr Letten, under the guise of a corporation known as LGH Administration Pty Ltd, which effectively allowed him unfettered utility of the substantial funds invested.[21]
[21]Ibid [12].
Senior counsel on behalf of Mr Letten at the plea hearing[22] relied upon the lack of differentiation between the 21 schemes as a factor which ought to mitigate the sentence. Counsel submitted that upon analysis ‘there was only one property trust, which was conducting 21 projects, and that such trust, pursuant to the authorities, was, in fact, registrable in such form.’[23] The sentencing judge rejected that submission.[24]
[22]Not counsel who appeared for Mr Letten before us.
[23]CDPP v Letten [2014] VCC 1285 [22].
[24]Ibid [41].
It is necessary to address Gordon J’s judgment in relation to the application for directions concerning the institution of this proceeding in some detail.
Federal Court directions as to institution of the proceeding
After reviewing the relevant history Gordon J set out the details of the application. The receivers sought directions that they were justified in deploying funds from the Common Fund in order to institute proceedings ‘by and in the names of’ the three plaintiffs against Mr Letten and Mr Lane for recovery of losses sustained by three specified unregistered managed investment schemes. Directions were also sought in relation to a legal costs agreement and a receivers’ remuneration agreement. A direction was sought to the effect that the receivers would not be entitled to remuneration unless there was a recovery either by judgment or settlement. Her Honour referred to the arrangements as to remuneration proposed by the receivers and their solicitors as ‘no win no fee’, with money from the Common Fund to be available for disbursements and any adverse cost orders.
A draft statement of claim was put before Gordon J, the details of which are not important, other than to observe that the claim made was for knowing assistance in breaches of trust which were alleged to have been dishonest and fraudulent and to have been perpetrated by the proposed plaintiffs themselves as trustees.
The application was opposed by counsel on behalf of Mr Letten on a number of grounds. It was submitted that the court did not have power to make the directions sought, and that if the court did have power it should not do so because the proposed proceeding was being brought for an improper purpose and was an abuse of process, because the effect of the directions sought would be to improperly appoint the receivers as agents for each of the beneficiaries, because there was a lack of clarity about the capacity in which the receivers proposed to act, because the receivers’ decision to bring proceedings in relation to only three of the 21 schemes meant that the benefits and burdens of the proposed proceeding would not be shared equally amongst beneficiaries, and because the proposed proceeding would be fruitless.[25]
[25]Directions judgment [30].
Gordon J rejected the contention that the proposed proceeding was beyond power or had been brought for an improper purpose.[26] She then turned to the contention that the effect of the proposed directions was to appoint improperly the receivers as agents of the investor beneficiaries.
[26]Ibid [33]–[47].
The submission put on behalf of Mr Letten was that the proposed proceeding ‘would require that the many beneficiaries (the investors) of the alleged trusts be joined as parties’.[27] Gordon J rejected this contention relying upon a passage in the judgment of Brooking J (as he then was) in Young v Murphy.[28] Gordon J observed that Brooking J had indicated that a distinction was to be drawn between proceedings which sought to get back a trust fund and proceedings for the execution or administration of the trust; the former may be maintained by the trustee without joining beneficiaries and the latter may be incapable of being so maintained. Gordon J concluded that the proposed claim was ‘directed at restoring the trust fund’.[29]
[27]Ibid [48].
[28][1996] 1 VR 279, 281–285 (‘Young v Murphy’).
[29]Directions judgment [50].
Gordon J rejected the proposition that the rights of the proposed beneficiaries would be ‘brought into question’ in the proposed claim. It had been suggested that that would occur because the receivers would be in control of the proceeding, because the investors’ right to sue would be extinguished, and because of the impossibility of tracing funds to particular investors.[30] It was submitted that the investors would have no oversight of the proceeding, would not have the protections of the Legal Profession Act 2004, and that the Common Fund could be depleted by a compromise entered into by the receivers or by costs orders. Gordon J concluded:
These contentions are misplaced. There is nothing that distinguishes the Proposed Proceeding from any other proceeding in which a trustee, whether or not under the control of receivers, seeks to recover the trust fund or part of it. In particular, because the Receivers are appointed by this Court, they are subject to the Court’s oversight and supervision, including any decision to settle or compromise the proceeding.[31]
[30]Ibid [51].
[31]Ibid [53].
Gordon J then turned to the suggestion that the benefits and burdens of the proceeding would not be shared equally because the receivers had chosen to pursue claims in relation to only three of the 21 schemes. Her Honour set out the previous findings she had made which had led to her pooling orders. She observed that the receivers had made ‘a risk assessment and business judgment that it is better to focus on the three strongest claims’.[32] She concluded that the pooling orders meant that ‘there was and is no differential rate of return’.[33]
[32]Ibid [58].
[33]Ibid [60].
Gordon J rejected a submission that there was a ‘lack of clarity’ in relation to the capacity in which the receivers were proposing to institute the proceeding.[34]
[34]Ibid [65].
Submissions were also made as to whether the draft statement of claim which was put before Gordon J complied with pleading rules. Gordon J dealt with those submissions as follows:
As counsel for the Receivers submitted, those matters should be dealt with by the Supreme Court in the event they are pursued after the Proposed Proceeding has been filed and served. The Receivers are not asking this Court to settle or endorse the precise form of the pleading, and the points raised do not go to the real issue for the Court: whether such a proceeding should be instituted.[35]
[35]Ibid [72].
Gordon J directed that the receivers were justified in deploying funds from the Common Fund in the institution and prosecution of what the orders defined as the ‘Breach of Trust Litigation’. Her Honour also directed that the receivers were justified in entering into the proposed costs and remuneration arrangements. Finally, she directed as follows:
In the event that the Breach of Trust Litigation results in a Recovery … the Receivers shall be entitled to reasonable remuneration and reasonable costs and expenses properly incurred (not exceeding the amount of the Recovery) as may be fixed by the Court on the application of the Receivers, such sum to be calculated on the basis of the time reasonably spent by the Receivers, their partners and staff, in the conduct of the Breach of Trust Litigation at the rates previously ordered by the Court multiplied by 1.25 as per the Proposed KPMG Fee Agreement.
The proceeding in this Court
The receivers commenced the proceeding which Gordon J had directed they were justified in commencing in this Court on 23 July 2014. In substance, the statement of claim alleged that between 1999 and 25 February 2010 Mr Letten promoted unregistered managed investment schemes and that the three plaintiffs respectively acted as trustees on behalf of investors in those schemes. It was alleged that each of the plaintiffs committed breaches of trust that were ‘procured by’ Mr Letten. It was further alleged that the breaches of trust committed by the plaintiffs were dishonest and fraudulent and that each of Mr Letten and Mr Lane had assisted in those breaches with requisite knowledge.
The claim against Mr Letten and Mr Lane, leaving to one side the separate claim against Mr Letten for procuring the breaches, relied upon what is conventionally referred to as the second limb of Barnes v Addy[36] whereby a person who assists a trustee with knowledge of a dishonest and fraudulent design on the part of the trustee is made liable.[37]
[36](1874) LR 9 Ch App 244.
[37]See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, 159 [160].
Amendments were made to the statement of claim in December 2014. On 9 April 2015 Mr Letten and Mr Lane each issued summonses seeking to have substantial parts of the amended statement of claim struck out under rule 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’).[38] When those applications first came on for hearing, on 5 May 2015, the plaintiff sought the opportunity to review the statement of claim and in due course filed and served a proposed further amended statement of claim. The defendants maintained objections to the new pleading and opposed the plaintiffs’ application to file and serve the proposed further amended statement of claim.
[38]Rule 23.02 is a rule directed at the sufficiency of a pleading, in contrast to rule 23.01 which is directed at the validity of a claim or defence.
It was in the context of the pleading summonses under Rule 23.02 and the application to further amend, that the issue concerning joinder of beneficiaries arose which resulted in the order for a stay.
So far as the asserted pleading deficiencies were concerned, the primary judge rejected Mr Letten’s complaints and upheld Mr Lane’s. His Honour determined to stay the entire proceeding, however, not because of any pleading deficiencies, but because of contentions advanced on behalf of Mr Letten and Mr Lane to the effect that ‘the trustees were not competent to prosecute the claims in the absence of beneficiaries, or at least a representative beneficiary under each trust as a party’.[39]
[39][2015] VSC 583 [11] (‘Reasons’).
Primary judge’s reasons for ordering a stay
The primary judge began the relevant part of his analysis by observing that the claim as formulated ‘exposed a conceptual anomaly’.[40] This anomaly was said to be that the plaintiffs were claiming compensation for a loss of value which had been caused by their own dishonesty and fraud. His Honour observed:
There is no independent plaintiff, such as a new trustee, or a representative beneficiary, to represent the interests of the beneficiaries in addition to the errant trustee who, it was proposed, would make its own assessment of the extent of its liability to restore the trust. An objective observer might reasonably experience some disquiet at the prospect of such an important issue in the proceeding, advanced within an adversarial framework, wholly defined and prosecuted by ‘dishonest and fraudulent’ plaintiffs against defendants who knowingly assisted the plaintiffs in the dishonest and fraudulent design.[41]
[40]Ibid [12].
[41]Ibid [12].
The primary judge referred to the character of a claim under the second limb of Barnes v Addy, and he went on to refer to alternative ways in which claims could have been made. His Honour observed:
The conceptual anomaly, evident in this proceeding, would not exist if the court-appointed receivers had brought this claim. [42]
[42]Ibid [16]. Counsel for all parties were asked in the hearing before us what claim was being postulated. Counsel were not able to indicate what that claim might be. Perhaps it was thought that as receivers and managers of the trust property they could bring a claim on the basis that they were exercising the power to collect and secure the trust property as provided for in Gordon J’s orders of 25 February 2010.
The primary judge then observed that the receivers might have taken ‘a less tortured path’ by alleging breach of duty by the defendants as directors.[43] Counsel for the receivers before us agreed that such a course was open, but indicated that it had not been taken because of statute of limitations concerns.
[43]Ibid.
His Honour then said that the defendants did not contend that the case was hopeless but rather that they challenged ‘the competency of the errant trustees to sue in the absence of a representative beneficiary as a party’.[44]
[44]Ibid [17].
The primary judge referred to and quoted at length from Brooking J’s judgment in Young v Murphy, upon which Gordon J had also relied.
It was submitted on behalf of Mr Letten before the primary judge that Brooking J had made it clear that claims involving fraud or collusion by the trustee could not be maintained by the trustee alone as such a trustee could not properly represent the interest of beneficiaries. More generally, Mr Letten contended that a trustee could not rely on its own fraudulent conduct to maintain a claim against a third party who had allegedly assisted in the breach without at least joining a representative beneficiary.
The plaintiffs had referred to a number of cases which were said to demonstrate that a trustee could maintain such a claim. The primary judge reviewed each of those cases distinguishing them from the case before him.[45] His Honour was not referred to the 1991 decision of Tipping J in the High Court of New Zealand in Marshall Futures Ltd v Marshall (‘Marshall Futures’).[46] We will return to that decision.
[45]The cases reviewed and distinguished were: LHK Nominees Pty Ltd v Kenworthy (as Administratrix of the Estate of Lionel Kenworthy) (2002) 26 WAR 517, reviewed at Reasons [26]–[29]; Koorootang Nominees Pty Ltd v Australian and New Zealand Banking Group Ltd [1998] 3 VR 16, reviewed at Reasons [30]–[33]; Glazier v Australian Men’s Health Pty Ltd [2000] NSWSC 253, reviewed at Reasons [34]–[35]; Morlea Professional Services Pty Ltd v Richard Walter Pty Ltd (in liq) (1999) 96 FCR 217, reviewed at Reasons [36]–[37]; Evans v European Bank Ltd (2004) 61 NSWLR 75, reviewed Reasons [38]–[40].
[46][1992] 1 NZLR 316.
The primary judge referred to Gordon J’s judgment in the directions proceeding but observed that the views expressed by her Honour could not prevent this Court from supervising proceedings commenced and prosecuted here.[47]
[47]Reasons [41].
His Honour expressed the view that the plaintiffs in seeking to justify their position had wrongly sought to elevate aspects of what Brooking J had said in Young v Murphy to ‘an inflexible rule’.[48]
[48]Ibid [42].
The primary judge considered that the correct issue to be addressed was:
[W]hether, in all the circumstances, the plaintiffs sufficiently represent the interests of the beneficiaries in this case.[49]
[49]Ibid.
His Honour reached the conclusion that the plaintiffs did not sufficiently represent the interests of the beneficiaries. He reasoned as follows:
As Gordon J pointed out in ASIC v Letten (No 22), the receivers in control of the plaintiffs were appointed by the court and remain under its supervision. That is no doubt correct, but they are not parties. The plaintiffs have chosen a litigation path that requires proof of their own dishonesty. While it is true that they had no independent mind, intention or purpose other than the mind, intention and purpose of at least one of the defendants, the objective observer might reasonably conclude that in the absence of some transparently independent party representing the interests of the beneficiaries, their interests will be at risk. In the absence of an alleged common dishonest and fraudulent design, perpetrated by the plaintiffs and assisted by the defendants, the requirement for an independent representative of the beneficiaries may not be so compelling. But for so long as the plaintiffs maintain their case based on the second limb of Barnes v Addy, I am of the opinion that the interests of the beneficiaries must be transparently protected.[50]
[50]Ibid [44].
The trial judge concluded by observing that ‘an independent representative beneficiary or beneficiaries‘ might be joined under rule 16.01 of the Rules or that ‘transparency might be achieved’ if the receivers were themselves to become plaintiffs.
It seems to us that the factor the primary judge regarded as critical in determining that the plaintiffs did not sufficiently represent the interests of the beneficiaries was that an objective observer might reasonably conclude that in the absence of an independent party representing beneficiaries their interests will be at risk. His expressed conclusion in this regard, as quoted above, closely reflected his opening remarks on the relevant issue concerning the ‘disquiet’ which an objective observer might reasonably experience.
Submissions on the application (and appeal, if leave is granted)
The issue argued on the application (and appeal) before us was a confined one.
All counsel agreed that the relevant principles had been articulated by Brooking J in Young v Murphy.
The applicant plaintiffs contended that the question of whether a trustee could properly represent beneficiaries was not to be determined on a case by case basis but rather was to be determined according to the nature of the proceedings. If the proceeding was to recover trust property, the trustee could maintain the proceeding alone. If the proceeding was for execution or administration of the trust, beneficiaries or representatives of beneficiaries may have to be joined.
In the alternative, the applicant plaintiffs argued that, if the issue of whether the trustees could properly represent the interests of beneficiaries was to be determined on a case by case basis, then the primary judge had erred in his application of that principle ‘by adopting a test for its application based solely upon the reasonable apprehension of risk by an objective observer when … his Honour made no finding that such a risk existed in fact; [and] such a finding was not open’.
The respondent defendants supported the primary judge’s conclusion that the relevant issue was whether the trustee could properly represent the interests of the beneficiaries in the circumstances of the particular case, although they also relied on Young v Murphy to submit that the trustee could never do so in a case which concerned fraud or collusion.
The respondent defendants contended that the trustees in this proceeding could not properly represent the interests of beneficiaries because the proceeding raised or was capable of raising questions between the beneficiaries and the trustee. It was also submitted that Brooking J had expressly indicated that in cases alleging fraud or collusion the trustee could not maintain the claim alone and that this is such a case.
It was put on behalf of the respondent defendants that this is not a simple case of a trustee seeking to recover the trust funds. The trustees were seeking equitable compensation as a result of their own fraudulent misconduct and, in this case, any compensation would not be paid to the beneficiaries of the trusts affected but rather would be ‘made available to claimants in the Common Fund’. It was submitted that the class of beneficiaries in the trusts which were the subject of the proceeding were not the same as the class of claimants in the Common Fund and that the rights and interests of the beneficiaries of the trusts were not the same as those of the claimants in the Common Fund.
It was submitted on behalf of the respondent defendants that another reason why the trustees could not properly represent the interests of beneficiaries was because there were facts indicating that the ‘underlying’ trusts had in fact been terminated.
The submissions concerning the lack of identity between the beneficiaries of the three trusts which were the subject of the proceeding and the beneficiaries of the Common Fund was not a matter relied on before the trial judge, nor was the issue about the possible termination of the trusts.
Otherwise, the respondents contended that a claim of this kind, involving dishonesty and fraud by the plaintiffs themselves, necessarily meant that those allegedly dishonest and fraudulent plaintiffs could not represent the interests of the beneficiaries properly and that the trial judge had been correct in concluding the proceeding should not be permitted to continue unless beneficiaries or representatives for them were joined.
Leave to appeal
Leave to appeal may be granted if the appeal has a real, rather than fanciful, prospect of success.[51] Even if that is established the Court retains a residual discretion to refuse leave.[52] Where a matter is one of practice and procedure, it may be appropriate to exercise the residual discretion, particularly where no substantial injustice will be done if the order is permitted to stand.[53] The respondents contended that the present was a case concerning a matter of practice and procedure and that the applicants had not established that substantial injustice would occur if the orders were permitted to stand.
[51]Supreme Court Act 1986 s 14C; Kennedy v Shire of Campaspe [2015] VSCA 47 [12].
[52]Kennedy v Shire of Campaspe [2015] VSCA 47 [5].
[53]Ibid [14].
The plaintiff applicants’ case on appeal has a real prospect of success. The proceeding has been stayed, and will continue to be stayed unless a new party (or parties) is joined. The joinder of a new party (or parties) will inevitably increase the costs of the proceeding, and is likely to lead to at least some increased complexity and delay. There would be substantial injustice to the plaintiffs should the order staying the proceeding be permitted to stand if it can be shown it ought to be set aside.
The plaintiff applicants should have leave to appeal.
The appeal: the relevant authorities
As indicated, all parties agreed that the relevant principles had been set out by Brooking J in Young v Murphy. Young v Murphy concerned a new trustee’s claim against, among others, a former trustee and the former trustee’s directors.
The importance of Brooking J’s judgment in this context means that it is necessary to quote from it extensively. Relevantly, Brooking J said:
The standing of a trustee to take proceedings to have a breach of trust redressed against a trustee or former trustee or a stranger who has become liable to redress a breach of trust is well recognised. Not only may a trustee take such proceedings, but he runs the risk of himself committing a breach of trust if he fails to do so … His obligation to take the proceedings (unless they would be futile) is part of his duty to get in the trust estate, which includes rights of action against co-trustees or former trustees and strangers for breach of trust. This is clear as a matter of both principle and authority. Moreover, since the trustee will take the proceedings for breach of trust for the benefit of the beneficiaries, he can sue even if he was a party to the breach of trust or some other breach of trust.
… [I]n Wentworth v Tompson (1859) 2 Legge 1238 the Full Court of New South Wales, in rejecting the suggestion that a trustee could not sue his co-trustees for breach of trust where he had been himself a party to that breach, observed at 1241 that it was the duty of each trustee to recover the trust fund, for the benefit of the objects of it. In the same way, Scott on Trusts, 4th ed, s 294.2, in asserting the right of a trustee who in breach of trust transfers property to a person who has notice of the trust or pays no value to sue the transferee notwithstanding his own breach of trust, rests that view on the circumstance that the trustee is suing for the benefit of the trust estate. Likewise it is said in Scott, s 200.2, that a co-trustee is not debarred by his own misconduct from maintaining a suit to redress a breach of trust committed by a trustee, since the purpose of the suit is to maintain the interests of the beneficiaries. Statements of principle to the same effect are contained in Scott on Trusts, s 294.2; Bogert, Handbook of the Law of Trusts, s 166; 76 Am Jur 2d, s 673.
…
In general, if the trustee takes proceedings to have a breach of trust redressed, he need not make the beneficiaries parties. For in general the trustee sufficiently represents their interests for the purposes of proceedings to have a breach of trust redressed. … The right of the trustee in general to sue for breach of trust without making the beneficiaries parties is well established. …
But, while the trustee in general sufficiently represents the beneficiaries' interests for the purposes of proceedings to redress a breach of trust, they should be made parties if their interests may not be properly represented by the trustee. If it can be said that for any reason the trustee should not be regarded as a party who will properly represent the interests of all beneficiaries, then he should not be regarded as able to sue without joining any beneficiary. Cases of suggested fraud or collusion or a hidden interest of the trustee may be put to one side. The proceedings which the trustee brings may be such as to raise, or be capable of raising, questions between one beneficiary and another or questions between the beneficiaries and himself. In such a case the trustee does not sufficiently represent the interests of the beneficiaries for the purposes of the proceedings. Accordingly, if in the proceedings the trustee seeks the execution or administration of the trust in addition to seeking to have the breach of trust redressed, the beneficiaries will or may be necessary parties, since their interests inter se or their rights against the trustee may have to be determined. This is not so if in the proceedings the trustee seeks only to get in the trust fund, or seeks in addition only any account necessary for that purpose. On the other hand, in proceedings for the execution or administration of the trust the interests of the beneficiaries may conflict among themselves and there may in addition be a conflict of interest between the trustee and the beneficiaries with regard to the accounting by the trustee required for the purposes of the general distribution of the trust estate which is asked for in the proceedings. So a distinction is drawn between proceedings which seek merely to get back the trust fund and proceedings for the execution or administration of the trust. The former can be maintained by the trustee without joining the beneficiaries; the latter are or may be incapable of being so maintained.
… As I have said, the trustee's right and duty to sue is part of his duty to get in the trust estate, which includes rights of action against co-trustees or former trustees and strangers for breach of trust. Whether the remedy or relief sought is specific relief or, on the other hand, monetary compensation for the loss is immaterial to the question of title to sue. … Payment of compensation is as much a means of making restitution as making restitution in specie
…
I have said that, while a trustee in general sufficiently represents the interests of beneficiaries in proceedings to redress a breach of trust, the beneficiaries should be made parties if questions between one beneficiary and another may arise in the proceedings: this has been the rule for 200 years. … [T]he fact that there may be doubt as to the existence or extent of the interest of beneficiaries will not prevent a trustee from suing to redress a breach of trust without making any of the beneficiaries parties. Such a doubt will have this effect only if the question will or may arise in the proceedings sought to be maintained. As it was put in Lewin on Trusts, 3rd ed, 1857, at 852, using an expression current at the time, ‘the frame of the suit’ must not involve any matter of contest, whether between the plaintiff and the beneficiaries or between the beneficiaries themselves.
…
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.
… Where a trustee sues to redress a breach of trust, seeking only to have the trust fund restored, the trustee and the beneficiaries are in privity.[54]
[54][1996] 1 VR 279, 281–6.
The other members of the appeal division of this Court in Young v Murphy were J D Phillips and Batt JJ. Whilst he delivered a separate judgment, J D Phillips J did not differ from Brooking J on any issue of principle, as is confirmed by the fact that Batt J agreed with the conclusions and the reasons of each of them. J D Phillips J specifically addressed the position in relation to a claim under the second limb of Barnes v Addy against one of the former directors, Mr Young. The primary judge had held that the new trustee had standing to sue Mr Young for participation and procurement of breaches of duty by the former trustee without joinder of the beneficiaries. After referring to the fact that the claim was under the second limb of Barnes v Addy, J D Phillips J said:
On that basis, the appellants argue that, although the participant may be liable to the beneficiaries, and may be jointly liable with the defaulting trustee, he is not liable to the defaulting trustee, who, by virtue of his own wrongdoing is precluded from suing. … [Two authorities were cited]. … In my view, neither of these is sufficient to sustain the proposition of law which otherwise has been consistently rejected. As Brooking J’s review of the cases demonstrates, a defaulting trustee remains obliged, notwithstanding his own wrongdoing, to make good the trust property and, if necessary, to institute proceedings against those who participated in the wrongdoing to make good the loss. Whatever the consequences might be in respect of his own liabilities, the trustee does not cease to be so obliged; certainly he does not become disqualified from proceeding.[55]
[55]Ibid [300].
We referred earlier to Tipping J’s decision in Marshall Futures. In that case the liquidator of a trustee company issued proceedings against officers and former officers of the trustee claiming, amongst other things, that they were liable for breaches of trust, committed by the trustee plaintiff itself, in which they had knowingly assisted. It was contended before Tipping J that the ‘wrong plaintiff had sued’ because the trustee would have to assert a breach of trust against itself in order to succeed. The pleading was criticised on the basis that there was no clear allegation the trustee had itself been fraudulent in committing a breach of trust, although Tipping J held that particulars which had been filed in response to a request had made that clear.[56]
[56][1992] 1 NZLR 316, 326.
Tipping J’s relevant conclusion was as follows:
In the present case [the trustee] has since the events in question gone into liquidation and it is now under the control of a liquidator. Although in strictly analytical terms it is the same legal entity as it was when the allegedly fraudulent breaches of trust occurred, the hands controlling it now are those of the liquidator and not those of the directors. There cannot be any suggestion that the liquidator’s hands are unclean. In substance the liquidator, through the vehicle of the company, is suing on the first cause of action for the benefit of the clients of [the trustee] whose funds have been lost. I agree that at first blush it may appear a little bizarre that the nominal plaintiff is asserting its own fraudulent breach of trust as part of its cause of action against its officers.
It seems to me however that in these particular and unusual circumstances the corporate veil can reasonably be lifted to reflect the reality of what is going on. There can be no disadvantage or injustice to the defendants in so doing. They cannot of course be bound by any concession the plaintiff may make as is inherent in its cause of action that it was in breach of trust and dishonest. That must be fully proved against the defendants in the ordinary way.
… What I am saying is that in substance in the present case the company now in liquidation raises the first cause of action in essence as the agent of its creditors.
… In the very unusual circumstances which prevail in this case I do not consider it inevitable that the plaintiff’s claim must be so defeated and I do not consider it right to strike out the first cause of action on this basis, ie that the wrong plaintiff is suing.[57]
[57]Ibid 330–1.
The way in which the matter was put before Tipping J (whether the trustee was the ‘wrong’ plaintiff and the issue of ‘clean hands’) is different to the way in which the matter was put here both before the primary judge and before us, but the observations made are, it seems to us, still of assistance.
The applicable principles
In effect, each of the parties before us asserted that Brooking J in Young v Murphy had established an inflexible rule. The applicant submitted if the nature of the proceeding was one to recover trust property, as opposed to execution or administration of the trust, then beneficiaries did not have to be joined and the trustee could bring the proceeding alone. The respondents submitted that whenever any issue of fraud or collusion was raised the trustee would have to join the beneficiaries or representatives. To the extent these principles were characterised as being inflexible they are not founded on a proper understanding of Brooking J’s analysis, in our view.
Brooking J’s analysis reveals that a trustee can sue to redress a breach of trust even if the trustee was itself guilty of misconduct and committed, or was a party to, the relevant breach of trust. ‘In general’ in such proceedings the trustee need not make the beneficiaries a party because ‘in general’ the trustee sufficiently represents their interests. But while that is the position ‘in general’, the beneficiaries or representatives should be made parties if their interests may not be properly represented by the trustee. This position may arise ‘for any reason’. Fraud or collusion or a hidden interest are obvious circumstances which might (not must) lead to a conclusion that a trustee could not properly represent the interests of beneficiaries. An obvious example would be a second limb Barnes v Addy claim where there was a continuing connection or association between the alleged assisters and those controlling the claimant trustee. More generally, if the proceeding raises issues of potential controversy between the beneficiaries themselves or between the beneficiaries and the trustee then the trustee may not be able to represent the beneficiaries’ interests properly. Thus, if a proceeding involves issues concerning execution or administration of the trust, in addition to seeking to redress a breach of trust, then beneficiaries or representatives may have to be joined. That is not ‘generally’ the position if the proceeding is confined to obtaining redress for a breach of trust. Accordingly, there is a distinction to be drawn between a proceeding concerning redress for a breach of trust, and a proceeding concerning execution or administration of the trust.
Other matters made clear by Brooking J, which are relevant here, are that it makes no difference to the analysis whether the trustee is seeking specific relief or monetary compensation, and that doubt as to the existence or extent of the interests of beneficiaries will not prevent a trustee from suing for redress for a breach of trust without making the beneficiaries parties unless issues will or may arise in the proceeding as to the existence or extent of the beneficiaries’ interests. Finally, Brooking J made it clear that where a trustee does properly bring a proceeding without joining the beneficiaries, the beneficiaries will themselves be bound by the outcome.
Tipping J’s decision in Marshall Futures seems to us to be relevant because we agree with the view that he expressed that a court is entitled to look to the practical reality of who is bringing the claim when assessing whether a trustee plaintiff can properly represent the interests of beneficiaries. Tipping J referred to this as lifting the corporate veil, an expression which causes apprehension in corporate lawyers. But there is no need for such apprehension in these circumstances. The fundamental principle of separate corporate identity is consistent with, and indeed advanced by, an analysis that permits the corporate trustee to bring the claim. The corporate veil is lifted only in the sense that, when assessing whether the corporate trustee can properly represent the interests of beneficiaries in the claim, the court has regard to who the relevant decision makers are in fact.
Analysis
The primary judge correctly identified the relevant issue when he said that the question to be addressed was whether, in all the circumstances, the plaintiffs sufficiently represent the interests of the beneficiaries in this case.
We have, however, reached the conclusion that his Honour did not determine the matter by addressing that issue. Instead, as the applicants submitted, he concluded that a stay was required, not because he had found that the plaintiffs did not sufficiently represent the interests of the beneficiaries, but rather because an objective observer might reasonably conclude that in the absence of an independent party representing the beneficiaries their interests would be at risk. Again, as the applicant submitted, he made no finding that the beneficiaries’ interests were in fact at risk. Rather, he stayed the proceeding because an observer ‘might reasonably’ consider that they were at risk. It seems to us that the trial judge acted upon a wrong principle and allowed an extraneous and irrelevant matter (how an objective observer might reason) to guide or affect him.[58]
[58]House v The King (1936) 55 CLR 499, 505.
In any event, we also consider that, in the particular facts of this case, the primary judge’s conclusion that an objective observer might reasonably conclude that in the absence of an independent party representing the beneficiaries their interests will be at risk was not open on the material that was before the court. We have reached this conclusion for the following reasons:
(1)Conceptually, it may appear odd that a plaintiff can pursue a claim for loss caused by its own dishonesty and fraud. Be that as it may, in a case which involves a corporate plaintiff, there may be no practical difficulty, unless the controlling mind has not changed since the relevant events which gave rise to the loss occurred. The plaintiffs here are entirely under the control of the receivers. The receivers had no part in any relevant wrongdoing. Tipping J’s observations (quoted earlier) apply.
(2)The objective observer, fully appraised of all the circumstances dealt with by Gordon J to which we have referred, would not, in our view, experience any disquiet at the fact that the receivers were conducting the litigation. In our view, a fully informed objective observer would be more likely to experience disquiet at the prospect of a new party (or parties), with new lawyers, being joined to the litigation with the inevitable additional costs and complexity that that would involve.
(3)There was a suggestion put in submissions on behalf of Mr Letten that some conflict might arise as a result of the receivers’ interest in securing their own remuneration. That is possible in any litigation insolvency practitioners might pursue. In this case that possibility has been addressed. The Federal Court has made orders regulating the receivers’ entitlement to remuneration both generally and specifically in relation to this proceeding.
(4)The receivers have sought directions at every stage of these administrations to date and counsel for the receivers told the court this matter would not be compromised without seeking a further direction, as we would have expected in these circumstances.
(5)There is a potential conflict which inherently arises out of the fact that the receivers are both liquidators of the trustees and receivers and managers of the trust property. This inherent conflict has often arisen in more recent times due to the prevalence of the use of trusts in business and commercial ventures. Sometimes the additional costs of having separate insolvency administrations are warranted, and sometimes they are not. These particular administrations have been the subject of most detailed and comprehensive consideration in the Federal Court. No reason has been suggested why the roles occupied by the receivers are not appropriate in the circumstances. No issue in that regard concerning the prosecution of this proceeding was put forward.
(6)Assuming for the purposes of this part of the argument that there was an identified basis for a conclusion that the beneficiaries’ interests were in fact at risk, it is not at all clear, in the circumstances existing here, what representative or representatives could be joined. The Federal Court has found, and no-one submitted to the contrary before us, that it is not possible to say what are the net assets of any particular scheme nor is it possible to say what assets were acquired by what scheme using whose money. One might rhetorically ask: how many different representative beneficiaries would need to be joined in order to reflect the beneficial interests which might exist in relation to these three trusts? If only one representative were to be joined, in what way would that representative better represent the interests of the beneficiary claimants than the receivers?
(7)There can be potential for a conflict of interest in the liquidator of a corporate trustee because of the liquidator’s duty to trust creditors, which might conflict with the interests of beneficiaries. No such conflict was suggested here, but, in any event, the material before us suggests that no such conflict could arise here because it seems there will be no right of indemnity or exoneration to which the various trustees can have recourse. The Federal Court has made a finding to that effect already in relation to two trustee companies.
(8)The possibility that a beneficiary or beneficiaries might have some separate claim which the receivers could not properly represent, given their role in relation to all of the beneficiaries as a class, does exist. No such potential claimant has come forward at this point, at least before this Court. That possibility has been provided for, in any event, in the orders made in the Federal Court.
The new reasons put by the respondents to us but not to the trial judge for a conclusion that the trustees cannot properly represent the interests of the beneficiaries do not alter the analysis.
The first new reason was that the beneficiaries of the three trusts are not the same as the beneficiaries of the Common Fund. Somewhat similar arguments were put to Gordon J. The first point to be made here is that it is not possible to differentiate the respective beneficiaries in the manner suggested, as Gordon J’s judgments reveal. More significantly, the pooling orders already made mean that all beneficiaries’ interests in the proceeding are the same, subject to each beneficiary’s capacity to seek to make a separate claim at the distribution stage.
The second new reason was the possibility that the trusts had terminated. There is no evidentiary basis for a conclusion the trusts have terminated.
Our conclusion is that it was not shown that the receivers could not properly represent the interests of the beneficiaries. There was no proper basis for a departure from the general position, as described by Brooking J, whereby a trustee, even if itself a party to the wrongdoing, may bring a proceeding to redress a breach of trust without joining the beneficiaries or a representative for them.
Conclusions
The applicants should have leave to appeal and the appeal should be allowed. The order staying the proceeding should be set aside. We will hear the parties further on the orders to be made, including as to costs.
KAYE JA:
I agree with Whelan and Ferguson JJA that the appeal should be allowed, and that the order staying the proceeding should be set aside.
On a conceptual level, there is, undoubtedly, an anomaly involved in the plaintiffs asserting their own dishonesty and fraud as a basis for their claims against both defendants. However, unlike the primary judge, I do not consider that the applicable principles, as summarised by Brooking J in Young v Murphy,[59] have the effect that in this case the trustees do not adequately propound or protect the interests of the beneficiaries of the trusts.
[59]See also Evans v European Bank Ltd (2004) 61 NSWLR 75, 99 [109] (Spigelman CJ); Chalker v Clark [2008] VSCA 92 [31] (Osborn AJA); Ashton v Pratt [2013] NSWCA 400 [23]–[24] (Bathurst CJ, McColl and Barrett JJA).
The fraud, that is alleged in the proceeding, is that of the former directors of the plaintiffs, namely, the two defendants. There is no suggestion, in the amended statement of claim, or otherwise, that either of the defendants are, at all, involved in the present management or control of the plaintiffs. No reason has been advanced as to why the plaintiffs, under the management and control of the present liquidators and receivers of the trust property, are not capable of adequately asserting and protecting the interests of the beneficiaries, at least in the prosecution of the claims that are made in these proceedings. Nor is there any suggestion that there is any inherent conflict between the plaintiffs, as trustees, and any of the beneficiaries, or
between the interests of the beneficiaries, involved in the prosecution of the claims contained in the amended statement of claim.
Thus, unlike the primary judge, I consider that the test is practical, rather than conceptual. As the judgments in Young v Murphy make clear, a trustee is obliged to take action to recover trust funds, notwithstanding that the trustee was, or might have been, itself, involved in the breach of trust that is a basis of the claim made against the defendants. The view that the appropriate approach to a case such as this is practical, rather than conceptual, is reinforced by the judgment of Tipping J in Marshall Futures.[60]
[60][1992] 1 NZLR 316, 330–331.
For the reasons stated by Whelan and Ferguson JJA, I do not consider that any of the additional arguments, now relied on by the respondents, support the conclusion by the primary judge. Accordingly, I am of the opinion that there is no basis for the ordering of a stay in this matter. It follows that the applicant should have leave to appeal, and that the appeal should be allowed.
- - -
5
17
0