Belfield and Anor v Belfield and Anor

[2013] HCATrans 138

[2013] HCATrans 138

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney   No S10 of 2013

B e t w e e n -

CHARLES HOME BELFIELD

First Applicant

TALOYE HOLDINGS PTY LTD ACN 003329744

Second Applicant

and

RICHARD EDGAR HOME BELFIELD

First Respondent

KIALAMI PTY LIMITED ACN 001559315

Second Respondent

Application for special leave to appeal

FRENCH CJ
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 7 JUNE 2013, AT 10.04 AM

Copyright in the High Court of Australia

____________________

MR B.W. COLLINS, QC:   If it please your Honours, I appear with my learned friend, MR S. ROBERTSON, for the applicant.  (instructed by Watson McNamara & Watt)

MR G.A. SIRTES, SC:   If it please the Court, I appear with my learned friend, MS V.A. THOMAS, for the respondent.  (instructed by G.L. Abbott & Co)

FRENCH CJ:   Thank you, Mr Collins.  Mr Sirtes.

MR COLLINS:   If your Honours please, it is our first contention that the decision was wrong and the point that we want to elevate for primary consideration is that the decision of the Court of Appeal proceeded on an erroneous assumption when that court wrongly concluded not only that it was entitled to make that assumption, but that it was compelled to do so by reason of the way in which the litigation had been conducted both in the Court of Appeal and before the trial judge.  Our primary contention is that when the legislation, as section 23 does, as was recognised in the Court of Appeal, makes it obligatory for the court to be satisfied, that being the word used in the legislation, of a particular matter, the court is not entitled to substitute an assumption which it felt compelled to make in place of that state of satisfaction.

FRENCH CJ:   This was an assumption that was not challenged in the Court of Appeal?

MR COLLINS:   No, it was not challenged in the Court of Appeal, your Honour.

FRENCH CJ:   I think the only one who mentioned it really was Justice Young, was it not?

MR COLLINS:   Yes, in a curious concurring judgment which ‑ ‑ ‑

FRENCH CJ:   No doubt inspired the application.

MR COLLINS:   Well, your Honour, it was one of the things I looked at; I would be churlish if I said it was not, but I must say the same intuitive approach to the broad nature of this fetter was what really got us going on the point.  Your Honours, could I just read the fetter for a moment because I think it is best to set that out in place before I say anything more?  It is at application book 137, if your Honours please.  By that – and I am referring in particular to clause 1(d) ‑ but the whole of clause 1 is really a cascading fetter which culminates in this fetter of the broadest kind:

That the Trustee shall exercise any discretions and powers conferred upon it under the said Settlement –

that is the trustee –

in such manner as Madge Clarendon Belfield –

the testatrix –

shall direct.

It is our contention that nothing could be more radical in terms of dismantling the trust, nor could you imagine a more complete fetter.

FRENCH CJ:   The primary judge made some reference to the power to vary the terms of the trust, in particular clause 15, proviso (iv).  I think that is at application book 20, paragraph 76.

MR COLLINS:   It is, your Honour, and I am grateful to your Honour because I have obviously got to deal with that.

FRENCH CJ:   That is a fairly important point, I would have thought.

MR COLLINS:   It is, your Honour, and I will deal with it right now.  The first thing to say about it is, if that point is, as we accept at the moment for the purposes of this application, an important point which the respondent seeks to maintain then, of course, it partakes of special leave considerations of its own.  But let me say something about why we say, your Honours, with respect, that the point simply does not get off the ground?  When one looks at the deed of appointment, it is very plain that it is a covenant by the trustee to do the things that I have just read out in clause 1(d).  It does not either purport to be, your Honours, or in essence appear to be anything like an exercise of that standard power in clause 15.

FRENCH CJ:   Justice Campbell said I think, did he not, in his judgment that one had to treat the deed of appointment as having been executed after the deed of settlement.

MR COLLINS:   Yes, your Honour, and that is, with very great respect, our contention.  The reason for that is, first of all, there would be no subject matter to which it could refer unless the earlier deed had preceded it.

FRENCH CJ:   So it is not, from that point of view, temporally inconsistent with an exercise of the variation power?

MR COLLINS:   Well, no, your Honour, it just is not an exercise of the variation power.  That is not what it said it was doing.  In fact, on the proper construction of clause 1(d), which is the most potent of the fetters, it just is not a variation of the trust.  What it says is that I as the trustee promise that I will do in the future whatever the testatrix or the appointor tells me I will do in the future.  Now, at that stage there is only a contingent revision of the trust deed but, nevertheless, there is a potential fetter which has the potential to completely dismantle a fully constituted trust.

KIEFEL J:   Justice Young took the view, did he not, that because it postdated the trust deed it was not a power of appointment as such?

MR COLLINS:   That is what he said, yes.  Your Honours, could I just sketch a couple of facts briefly?  I do not want to get too far into this.  I am going to only deal with non‑contentious matters.  The property that we are concerned with in this application is the same property through these various transmogrifications as this family worked its way through, through life.  The patriarch, Edgar, died in 1962.

FRENCH CJ:   I think we are familiar with the facts.  This is the farm and the property the subject of the trust was 40 per cent interest in the farm, effectively, through the shares in the company that owned the farm.

MR COLLINS:   Yes.  The point I wanted to make though, your Honour, was that that was disposed of by the patriarch, and I can deal with it very briefly in case your Honour thought I was about to become deeply embroiled.  One‑fifth, two‑fifths, two‑fifths – one‑fifth to the testratrix, two‑fifths to each of the brothers, and then in the 1970s when there was a bitter family dispute –

FRENCH CJ:   Well, Richard exited with a settlement.

MR COLLINS:   He did, he gave up his two‑fifths to his mother and his brother and that, of course, is very relevant.  Out of all that and by what we say is a curious set of errors, the Court of Appeal looks at the deed of appointment, it looks at the power of attorney and then says, well, because the power of attorney was not exercised and upon the assumption that the ‑ ‑ ‑

FRENCH CJ:   That was a prescribed transaction.

MR COLLINS:   Well, your Honour, no, with great respect, it was not unless and ‑ ‑ ‑

FRENCH CJ:   That was what was held, was it not?

MR COLLINS:   Yes, but, your Honour, unless and until one assumes that there is a valid power, you cannot get to prescribed transaction ‑ ‑ ‑

FRENCH CJ:   Of course, and that comes back to the primary question, the question in the case which you agitate, which is as to the fettering of the discretion and the validity of the deed.

MR COLLINS:   Yes, your Honour.  Your Honour puts it, with great respect, accurately.  It is very difficult to disentangle those two questions.  But when one does look at it from the point of view of an absence of satisfaction, this case is all about a lack of the preconditions for the exercise of a judicial power.  The salutary feature of this case, your Honours, is that nowhere before the trial judge, nowhere before the Court of Appeal and not even now in the submissions that are made on this application, does the respondent contend either that the Court of Appeal was not obliged to satisfy itself – and, in fact, it goes further ‑ it does not contend that the Court of Appeal was, in fact, satisfied.  So we would respectfully contend that the application has got to be approached on the basis that the respondent does not allege that satisfaction is not necessary, nor does it contend that satisfaction has been achieved.

That leaves this Court in the position where an intermediate appellate court has concluded that it has the jurisdiction to make an order.  We prefer to use the word “power”, your Honours.  There are a lot of references to jurisdiction in the old Testator’s Family Maintenance cases, as your Honours know, but we would prefer to put it on the basis that there simply was not a power to make this order.  Now, that is something which has nothing to do with the way in which the case was conducted by my client below because if one drills into this question of whether the matter was argued or not, the party responsible for agitating that the court ought to entertain a degree of satisfaction is the plaintiff because, unless that matter is established to the court’s satisfaction, it is not entitled to any relief.  But it does not matter what ‑ ‑ ‑

KIEFEL J:   Where is the special leave point?  As you say, putting aside how the parties conducted the matter, which very much colours this application, I would think, it is a question of construction of a trust deed.

MR COLLINS:   Well, your Honour, might I just defer dealing with that, but I will very quickly foreshadow the answer, which is that this is the perfect vehicle.  It is the purest form that this vehicle could ever be in firstly ‑ ‑ ‑

KIEFEL J:   What is the point of principle?

MR COLLINS:   I will deal with the vehicle first, your Honour, then come to principle.  It is the purest vehicle because the fetter is absolute.  No court has considered a fetter as absolute as this.

FRENCH CJ:   But you or whoever appeared below did not invite the Court of Appeal to enter upon the necessary constructional questions ‑ ‑ ‑

MR COLLINS:   No, we did not, your Honour.

FRENCH CJ:   ‑ ‑ ‑ which had been adverted to by the primary judge, that is, in relation to the connection between the variation power and the deed of settlement and the so‑called fetter imposed by the deed of appointment.

MR COLLINS:   That is perfectly true, your Honour.

FRENCH CJ:   That is a constructional question which is anterior to the question of principle, is it not, because you do not get to the question of principle unless and until you, as it were, jump over that hurdle?

MR COLLINS:   But in a sense, your Honour – and I appreciate your Honour’s question, with great respect – every case is a question of construction.  The real test, in our respectful submission, is whether or not when a document of that kind, whatever it be, is construed, the court in the course of so doing enunciates a principle of broad and general application.  Now, your Honour, last year in New South Wales there were over 800 family provision cases filed.  There are hundreds and hundreds more waiting in the back blocks, and at the moment this Court of Appeal decision stands for the proposition that where in section 23 the court is required to be satisfied of something, it can substitute that satisfaction by saying, well, the matter was not argued so we are compelled to assume it.  Now, that, with very great respect to the Court of Appeal –

KIEFEL J:   Is that the general principle you are contending?

MR COLLINS:   Well, that is the principle that will be in the books now, your Honour, so to come back to your Honour’s ‑ ‑ ‑

FRENCH CJ:   It is not a principle about fettering of trustees’ powers.

MR COLLINS:   Well, your Honour, if you had to compare the two points that we take, the primary point is one of judicial power.  This Court purported to exercise a power that it acknowledged in essence that it did not have.  Those who read the books and look at section 7 of the Family Provision Act, which is now reproduced in the Succession Act 2008, and who look at the equivalent of section 23, where they see that the court is required to be satisfied of something, they will then say, well, we can achieve that state of satisfaction without looking at it de novo, without looking at it at all, and we will simply act on the parties’ agreement.  Now, it is the kind of thing that your Honour had in mind, with great respect, in the ‑ ‑ ‑

FRENCH CJ:   Consent orders, you are looking at?

MR COLLINS:   Well, your Honour, in a sense this is the perfect equivalent of a consent order because neither party agitated this point.  It was the same as if, in essence, they had agreed that it was not going to be agitated, and in the ACCC Case your Honour the Chief Justice drew upon what was said in Thomson and said, look, it does not matter what the parties do, it does not matter what they consent to, they cannot scrub up from nowhere a power that does not otherwise exist.  That is this case in its purest form and that is what the Court of Appeal has done, but that error has been compounded, in our respectful submission, because it said it was compelled to do that.  Now, when one comes to the ‑ ‑ ‑

FRENCH CJ:   The court has made findings so that the issue in ACCC v REIWA, which I think you are referring to in Thomson, is whether parties by consent could confer upon a court a power to grant injunctive relief beyond the scope of the powers conferred upon it by the statute.  In this case what we are talking about is a court on the basis of the arguments put before it making a finding of mixed fact and law of a prescribed transaction and then on the basis of that identification of a notional estate and on the basis of that a legacy order; it seems to me a very different line of country from ACCC v REIWA.

MR COLLINS:   With great respect, no, your Honour.  You do not get anywhere near prescribed transaction in the way sections 22 and 23 are intertwined unless you have concluded that there is a valid fetter, and there are no questions of fact involved, with great respect, your Honour.

FRENCH CJ:   Well, there is a question of construction.

MR COLLINS:   A question of construction, but, your Honour ‑ ‑ ‑

FRENCH CJ:   In fact, the respondent also says there are questions of fact involved, I think.

MR COLLINS:   Well, it does in a faint way in its Suttor v Gundowda contention but we have disposed of that, with great respect, by simply saying we accept and we would admit on any hearing every single proposition they have advanced in their Suttor v Gundowda proposition because they do not in those submissions deal with the question which is fundamental, basal ‑ you do not get to first base unless you construe the power of appointment as a valid power.  With great respect, your Honour’s formulation about prescribed transaction takes away the validity of the power and there is no transaction at all, and that is the point that we make.

In terms of Thomson, your Honour, we say this an a fortiori case because in Thomson the parties had actually given consideration to the question whether or not there was power, and both the trial judge and both parties had seemed to accept the proposition that there was.  But when your Honour came to look at the case your Honour said, with great respect correctly, well, look, it does not matter what these characters do, you cannot confer a judicial power if one does not exist.

On any view of the facts of this case and what was said by the trial judge and by the Court of Appeal, nobody looked at the question whether or not they were satisfied that this fetter was valid.  Mr Justice Young said it was not and that is the best evidence of non‑satisfaction, and I will take your Honours now to what Mr Justice Campbell had to say about it because it is interesting – we take our stance on the point that satisfaction simply means to be assured or to be free from doubt or uncertainty.  We do not see any special circumstances there.  What Mr Justice Campbell had to say on the subject can conveniently be looked at if your Honours go to application book 59 at 34 where his Honour correctly said, with great respect, that “the Court must be satisfied”.  Then Mr Justice Campbell in another passage of importance at application book 77 went on to say at line 28, if your Honours please:

When there is any such arrangement, it will require a close analysis of the terms of the particular trust documentation to decide whether the powers of the “protector” or “guardian” add up to “a power to appoint –

In both those instances his Honour was saying, this is the task I set for myself, but instead of doing that, the third passage I wanted to contrast with that, your Honours, was the passage at application book 78 almost in the true middle of the page at line 32 – line 40 is the better passage, your Honours:

Assuming its validity, as we must within the scope of the issues raised on this appeal –

It is those passages together with the passage of Mr Justice Young, which your Honour the Chief Justice mentioned a moment ago, that we go to say the court made an additional mistake in assuming – it said it was compelled to assume ‑ and it is our primary contention that it does not matter what the parties do, if the court falls under a statutory obligation, a judicial responsibility to look at the question of satisfaction or not, then it must do so.

Your Honours, could I very quickly just go to why leave should be granted?  The decision below is clearly wrong.  In our respectful submission, the judgment can be combed, and there is no pronouncement of satisfaction.  This is not a case where the Court of Appeal should be treated as the final court of appeal, as it would if the leave application was refused.  The case squarely raises questions which are fundamental to the law of trusts which have not been considered by this Court.  The case is of fundamental importance to the body of family provision applications, and I have mentioned how many there were last year.  It is important to matters of tax law and asset protection because if this fetter is valid then it means that any trust can be unscrambled, whatever the consequences of unscrambling it might be.

Your Honour Madam Justice Kiefel’s question about the special leave point ‑ we say this has a great bearing upon the nature and character of statutory provisions which require a court to be satisfied and, in particular, the court would be required to rule upon the question whether satisfaction can be assumed or an important legal question can be assumed or be compelled to be assumed.  Perfect vehicle – the two trust deeds are exemplars, in our submission.  There is nothing idiosyncratic about either of them because they raise the point in its purest form.  We also say that there is no arguable point of construction.  When your Honours examine the respondent’s submissions your Honours will not see that there is an arguable point of construction.  They concede that if this particular fetter is invalid, then it is a complete answer to their case.

That is a curious admission coming from someone who did not argue the point either below or before the trial judge.  The reasoning that we say ought to have governed this case was that the court should have gone straight to the fetter, asked the question that section 23 demanded, namely, are we satisfied that there is a transaction.  Answer, no, we cannot be because on our own statements, on our own utterances, we have said that we are not.  For those reasons, your Honours, this is a case, in our respectful submission, in which leave should be granted.

FRENCH CJ:   Thank you, Mr Collins.  We will not need to trouble you, Mr Sirtes.

This application for special leave to appeal against a decision of the Court of Appeal of the Supreme Court of New South Wales is said to raise, inter alia, the question whether a trustee can bind itself to exercise its discretions and powers in accordance with the directions of a non‑trustee.  The question is said to go to the validity of a Deed of Appointment whereby the trustee of a discretionary trust agreed with the Appointor under the Deed that it would exercise any discretions or powers conferred upon it under the Trust Deed in accordance with the directions of the Appointor.  The application is also said to raise a question whether a court can exercise a power on the basis of an assumption about the construction of a deed said to be necessary to enliven that power. 

It was not contended at trial that the Deed of Appointment in issue was invalid.  The primary judge found that the Deed of Appointment was valid and within the terms of the Trust Deed.  The primary judge also observed that the Deed presumably took effect under proviso 4 to clause 15 of the Deed of Settlement which contained a very wide power to reconstitute or vary the Trust.  The applicants did not challenge the primary judge’s finding of validity by way of a Notice of Contention in the Court of Appeal.  The first respondent contends that the argument now raised by the applicants would in turn raise factual issues.

It suffices to say that the decision of the Court of Appeal is not authority for the proposition that is said to warrant the grant of special leave.  The proposition, namely that a trustee can bind itself to exercise its discretions and powers in accordance with the directions of a non‑trustee, was not argued before the Court of Appeal and was not decided by it.  The decisions of the primary judge and the Court of Appeal arose out of a particular set of circumstances and were framed by the particular way in which the parties decided to conduct the litigation.

No question about the power of the court to make the order it did arises in the way in which it might arise if the matter were one of jurisdiction.  Special leave should be refused with costs.

MR COLLINS:   If your Honours please.

MR SIRTES:   If your Honours please.

FRENCH CJ:   Thank you.

AT 10.27 AM THE MATTER WAS CONCLUDED