Burton and the Persons Named in Schedule 1 to the Originating Process of the Plaintiffs Dated 17 April 2003 v Arcus - [2004] WASC 244

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BURTON AND THE PERSONS NAMED IN SCHEDULE 1 TO THE ORIGINATING PROCESS OF THE PLAINTIFFS DATED 17 APRIL 2003 -v- ARCUS & ORS [2004] WASC 244

CORAM: JOHNSON J

HEARD: 14 NOVEMBER 2003

DELIVERED : 24 NOVEMBER 2004

FILE NO/S: COR 138 of 2003

BETWEEN: JOYCE MIRIAM BURTON AND THE PERSONS NAMED IN SCHEDULE 1 TO THE ORIGINATING PROCESS OF THE PLAINTIFFS DATED 17 APRIL 2003
Plaintiffs
AND
ALBERT LAWRENCE ARCUS
VIVIENNE CONSTANCE ARCUS
First Defendants
GLOBAL FINANCE GROUP PTY LTD (IN LIQ) (SUPERVISOR APPOINTED) (ACN 009 380 205)
GLOBAL MORTGAGE INVESTMENTS (WA) PTY LTD (IN LIQ)
Second Defendants
NEWROSE HOLDINGS PTY LTD (ACN 078 463 546)
Third Defendant
NABIL MICHEL SADEK
Fourth Defendant

Catchwords:

Corporations Act - Application to wind up managed investment scheme - Whether scheme is "managed investment scheme" - Whether fiduciary duties exist as between co-mortgagees where pooled mortgage - Turns on own facts

Legislation:

Corporations Act, s 9, s 420, s 500(2), s 554D, s 554E, s 554F, s 554G, s 554H, s 554I, s 554J, s 601EE, s 601EE(2)

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiffs:     Mr J C Giles
First Defendants           :     Mr K J de Kerloy & Ms K F Banks-Smith
Second Defendants       :     No appearance
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance

Solicitors:

Plaintiffs:     Solomon Brothers
First Defendants           :     Freehills
Second Defendants       :     No appearance
Third Defendant           :     No appearance
Fourth Defendant          :     No appearance

Case(s) referred to in judgment(s):

ASIC v Chase Capital Management Pty Ltd (2001) 36 ACSR 778
ASIC v Hutchings (2001) 38 ACSR 287
ASIC v IP Product Management Group Pty Ltd (2002) 42 ACSR 343
ASIC v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561
ASIC v Takaran Pty Ltd (2002) 43 ACSR 46
ASIC v Young (2003) 173 FLR 441
Conlan v Registrar of Titles (2001) 24 WAR 299
Dowsett v Reid (1912) 15 CLR 695
Kay v ASIC (2002) 43 ACSR 229
Kennedy v De Trafford [1897] AC 180
Maunder‑Hartigan v Hamilton (1984) 8 ACLR 937
Re Lawloan Mortgages Pty Ltd (2003) 2 Qd R 200
United Dominions Corporation Ltd v Brian Pty Ltd (1984) 157 CLR 1
Wik Peoples v The State of Queensland & Ors (1996) 187 CLR 1

Case(s) also cited:

ASIC v Enterprise Solutions 2000 Pty Ltd [2003] 1 Qd R 135
ASIC v Koala Quality Produce Ltd (2002) 41 ACSR 628
ASIC v Secure Finance & Investment Services (Australia) Pty Ltd [2002] WASC 260
ASIC v Young (2003) 21 ACLC 655
Australian Industry Development Corporation v Co-operative Farmers and Graziers' Direct Meat Supply Ltd (1978) 3 ACLR 543
Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (Ex rel Corporate Affairs Commission) (1981) 148 CLR 121
Bandwill v Spencer-Laitt (2000) 23 WAR 390
Biala Pty Ltd v Mallina Holdings Ltd (No 2) (1993) 13 WAR 11
Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384
Choules v Siglin [2002] WASC 230
Collie v Merlaw Nominees Pty Ltd (in liq) [2001] VSC 604
Doyle v Doyle (1992) 3 NZLR 170
Drake v Templeton (1913) 16 CLR 153
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41
Industrial Equity Ltd v Lyons, unreported; SCt of NSW; 15 October 1991
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Mariconte v Batiste (2000) 48 NSWLR 724
Martell v Consett Iron Co Ltd [1955] Ch 363
National Australia Bank v Bond Brewing Holdings Ltd [1991] 1 VR 386
Owen & Gutch v Homan (1853) 4 HL Cas 997
Owen v Carrington Confirmers Pty Ltd, unreported; QG 148/1994; FC Qld (Kiefel J); 28 April 1995
Pilmer v The Duke Group Ltd (In Liq) (2001) 207 CLR 165
Re Casalin Pty Ltd, unreported; SCt of Qld 86/615 (Dowsett J); 22 December 1986
Re Doran Constructions Pty Ltd (In Liq) (2002) 194 ALR 101
Re Real Estate and Business Agents Supervisory Board; Ex parte Cohen (1999) 21 WAR 158
Yunghanns v Elfic Pty Ltd (2000) 1 VR 92

JOHNSON J: This is the plaintiffs' application to wind up what is said to be a managed investment scheme ("the scheme") and to appoint a receiver over six adjoining lots at the corner of Wellington, Plain and Bronte Streets, Perth ("the properties"). The first‑named second defendant, Global Finance Group Pty Ltd ("Global Finance"), is said to be the manager of the scheme. This dispute is yet another aspect of the wreckage left by what is generally known as the finance brokers' scandal.
There are some 38 plaintiffs in this application and four defendants. In support of their application the plaintiffs relied upon various affidavits, including those of Vernon William Deague (Mr Deague). For their part, the first defendants relied on an affidavit of the first‑named first defendant, Albert Lawrence Arcus (Mr Arcus). Of the defendants, only the first defendants were represented at the hearing.
The facts are not in dispute and can be briefly summarised by particular reference to Mr Deague's affidavit evidence. He is an elderly retired business proprietor. Prior to August 1998 he had made a number of investments in loans secured by registered pooled mortgages promoted by Global Finance. Mr Deague says that he was aware that Global Finance was a licensed finance broker which carried on the business of promoting or broking loans secured by pooled or contributory mortgage. Some time early in August 1998 Mr Deague received a letter from Global Finance, dated 3 August 1998, promoting a pooled mortgage investment ("the investment"). The letter shows that the amount of the loan was to be $3,750,000, secured over the properties. The letter states that the properties had a sworn valuation of $6 million. The borrower was to be the third defendant and the borrowing was to be guaranteed by the fourth defendant. Mr Deague and his wife decided to invest in the loan. They contributed an amount of $70,000. The first defendants were also approached by Global Finance to invest in the loan. They received a letter in identical terms to that received by Mr and Mrs Deague. The first defendants, Mr and Mrs Arcus, also decided to contribute. They invested $1,400,000, as a result of which they held a 37 per cent interest in the mortgage. The first defendants' interest was significantly larger than that of any of the other mortgagees. For ease of reference, with the exception of Mr Deague and Mr Arcus, I will refer to any person or entity that invested in the pooled mortgage investment as a member.
It is important to note that at the time the members invested in the pooled mortgage, a copy of the letter dated 3 August 1998 was produced which had endorsed upon it the following:
"I/we hereby accept the above named investment and appoint Global Finance Group Pty Ltd as our Agent to administer all matters relating to the mortgage and confirm funds will be forwarded to your office."
There was then a provision for each of the investors to sign and a provision for the date. Mr and Mrs Deague signed where indicated, as did the first defendants.
It is also relevant to note that, at the time the members contributed money to the loan, they were not known to one another. The loan was brokered and promoted by Global Finance. Global Finance did not identify any particular member to any other member. As detailed below, it was only after the members had made their investment that all other members were identified.
In his affidavit evidence, Mr Arcus produced a document entitled "Interest Disposal Authority" which was provided to Global Finance at the time the first defendants made their investment. The document identifies the first defendants and provides a direction as to where interest payments made pursuant to the mortgage were to be directed. It also contains the following provision:
"I/We hereby acknowledge that any funds held by Global Finance Group Pty Ltd on our behalf pending placement into investment will be paid interest at current ANZ Indicator money market rates of interest as declared from time to time for amounts of $50,000 to $99,999. I/We also consent to any surplus interest received above this rate by Global Finance Group Pty Ltd as a result of incentives provided to it by the bank for bulk investments will be retained by Global Finance Group Pty Ltd to cover government charges and administration costs on investing these funds."
There is no direct evidence that each of the members signed an interest disposal authority. However, on the available material, it is reasonable to assume that they did. Clearly the authority was designed to alert Global Finance as to where and to whom interest should be paid and to permit investment of funds pending disbursement pursuant to the mortgage. It is worthy of note that the investment authority granted in relation to uncommitted funds is wide. Apart from specifying the rate of interest to be paid, the authority gives to Global Finance an unfettered discretion as to where funds are to be invested. The wide scope of that authority is, at least on the plaintiffs' case, of some significance.
Settlement of the transaction subsequently took place and a mortgage in favour of the members was registered over the properties. By letter dated 2 September 1998, Global Finance advised the members that settlement had taken place and provided a document titled "Notice to Lender and Borrower". This notice set out details of the loan and also listed the individuals who had contributed to the loan and the amount they had contributed. There is no suggestion that the security documents are defective in any way.
Interest was paid to the members from September 1998 to February 1999. Then the interest payments stopped. In February 1999 Global Finance was placed under external administration. Thereafter, various meetings took place and it quickly became apparent that development of the properties would not take place and that the value of the properties was far less than the $6,000,000 represented in Global Finance's letter of offer. The guarantor was a man of straw. The members were left with their rights under the mortgage. In due course the members, as mortgagees, exercised their right under the mortgage and became mortgagees in possession.
The evidence from the parties goes into some detail as to what occurred after default on the mortgage took place. For present purposes, it is unnecessary to even summarise these events. However, two matters are of importance. First, there is disagreement between the plaintiffs and the first defendants as to the price at which the properties should be sold. The plaintiffs say that the properties are worth no more than $2,500,000 and an effort should be made to sell them at that price. The first defendants will not agree to the sale of the properties at a price less than $4,000,000. It is agreed between the parties that sale pursuant to the mortgage is not possible unless all the mortgagees agree. Faced with the first defendants' firm position as to the sale price, the properties have not been sold and are unlikely to be sold in the near future.
Secondly, costs are being incurred as a consequence of the mortgagees being in possession. There were a number of buildings on the land which were derelict and had to be demolished pursuant to an order of the local authority. At present, one building remains on the properties and that is rented. The rent received does not cover all of the costs of holding the properties. If the members, as mortgagees in possession, are to retain rather than sell the properties, they will have to contribute funds from time to time to meet the outgoings, or risk action being taken by a local or State government instrumentality.
Against that background, the plaintiffs seek, by way of originating process, the following orders:
"…
3.An order winding up the Scheme under s 601EE of the Corporations Act.
4.An order that Mr Kimberley Stuart Wallman be appointed as receiver of all property of the Scheme for the purpose of winding up the Scheme and distributing the property of the Scheme to the plaintiffs and to the first defendants in accordance with their respective entitlements.
5.Further orders as to the powers granted to Mr Kimberley Stuart Wallman as receiver of the property of the Scheme and as to Mr Kimberley Stuart Wallman's remuneration as contained in the minute filed herewith.
6.Alternatively to orders 2‑4, an order winding up the Joint Venture.
7.An order that Mr Kimberley Stuart Wallman be appointed as receiver of all property of the Joint Venture for the purpose of winding up the Joint Venture and distributing the property of the Joint Venture to the plaintiffs and the first defendants in accordance with their respective entitlement.
8.Further order as to the powers granted to Mr Kimberley Stuart Wallman as receiver of the property of the Joint Venture and as to Mr Kimberley Stuart Wallman's remuneration as contained in the minute filed herewith."
The Minute of Proposed Orders as to Receiver's Powers and Remuneration filed with the application had as par 1 the following:
"1.Mr Kimberley Stuart Wallman, as receiver of all property of the Scheme, shall have all of:-
1.1the powers conferred by Department of Land Administration registered mortgage G892202 on a receiver appointed under that mortgage; and
1.2the powers conferred on a receiver by s 420 of the Corporations Act 2001 read as if all references to 'the corporation' in s 420 of the Corporations Act 2001 were a reference to the Scheme, the property of the Scheme and each member of the Scheme as required by the context of the reference to 'the corporation';
1.3the power to sign a transfer of land by mortgagee form in relation to the real property the subject of Department of Land Administration mortgage G892202 on behalf of and as attorney of each of the plaintiffs, the first defendants and, to the extent necessary, Global Mortgage Investments (WA) Pty Ltd (in liq)."
By this application the plaintiffs are seeking to achieve the sale of the properties. True it is that they seek to wind up the scheme, but it is the appointment of the receiver with power to sell the properties that is at the heart of the plaintiffs' case. They are looking to in some way overcome what they see as the unreasonable and intransigent attitude of the first defendants.
It is important to pause at this point to note what interest each of the members held consequent upon their contribution to the loan. Each of the plaintiffs and the first defendants were registered first co‑mortgagees under a mortgage registered pursuant to the Transfer of Land Act. That was the security for their share of the loan to the third defendant. They are therefore entitled to the rights and protections under the mortgage. These rights must be determined by reference to the terms of the mortgage document itself as supplemented by the various relevant provisions of the Transfer of Land Act and the general law. Their primary right is to have their loan repaid in full and not to have their rights as mortgagee disturbed unless and until that occurred. Absent fraud (and there is no suggestion of fraud in this case) the registered mortgagees' rights are indefeasible: see Conlan v Registrar of Titles (2001) 24 WAR 299 at 326 ‑ 329. This trite statement of principle should be borne in mind as it provides a backdrop to everything that follows.
It is the interest that the first defendants have in the properties pursuant to their rights under the mortgage that stands in the way of the plaintiffs' desire to sell the properties. The question then is whether or not, in the light of the first defendants' proprietary interest in the land, there is any basis for the appointment of a receiver with the power to dispose of the properties. Whether or not the scheme ought to be wound up is really a subsidiary question.
It is the primary contention of the plaintiffs that the loan is a managed investment scheme within the meaning of the Corporations Act. It is said that the scheme is not registered and therefore is liable to be wound up under s 601EE(2) of the Act. The first defendants say that the loan is not a managed investment scheme, but even if it is, there is no justification for the appointment of a receiver with the power of sale as contended for by the plaintiffs.
The phrase "managed investment scheme" is defined in s 9 of the Corporations Act. It means:
"(a)a scheme that has the following features:
(i)people contribute money or moneys worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not);
(ii)any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders);
(iii)the members do not have day‑to‑day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions)."
It is conceded by the first defendants that the loan to the third defendant satisfies the first two requirements of a managed investment scheme. It is said, however, that the third requirement is not satisfied. It is said that it has not been established that the members do not have day‑to‑day control over the operation of the scheme. On behalf of the plaintiffs, it is said that all aspects of the definition are satisfied.
It is very difficult, based upon the available evidence, to assess the precise extent to which members of the pooled mortgage investment had day‑to‑day control over its operation. The starting point is to look at what the day‑to‑day control of the operation might be. Global Finance received funds from individual investors and invested those funds pending settlement of the loan. It would appear that Global Finance had an unfettered right to invest the funds it held from individual investors prior to settlement of the loan. That is the effect of the interest disposal authority. If the scheme is seen as including all steps between investment and repayment, it might be said that this "investing prior to settlement" was a part of the scheme and, hence, is evidence that the investors had divested themselves of day‑to‑day control. However, there is no evidence to suggest that at this stage in the overall investment process there was to be any pooling of the funds held on behalf of each investor pending settlement. For example, these funds could be received at different times, deposited in different bank accounts or placed in different short term investments. For this reason, the initial part of the investment process cannot be a managed investment scheme or part of such a scheme.
In my view, if indeed there is a scheme, it does not include any period of investment prior to the pooling of moneys at settlement. As a result, I do not consider that the unfettered right to invest given to Global Finance by each individual interest disposal authority supports a conclusion that the pooled mortgage investment meets the third criteria in the definition of a managed investment scheme set out in s 9 of the Act.
If I am wrong in that conclusion, once settlement took place, any power that Global Finance may have had to control the investment was limited by the terms of the mortgage. The relationship between the member as mortgagee and the mortgagor was covered by the provisions of the mortgage. True it is that Global Finance received payments of interest, but they did so in their capacity as agent of each individual investor. That is made clear by the endorsement on the copy of the letter signed by the investor when funds were handed over. As a general proposition, it does not follow that appointing an agent to act on a person's behalf in relation to an investment is an act relinquishing day‑to‑day control over the investment. Much will depend on the nature of the investment and the terms of the agency. In the context of a mortgage, there is, in my view, little scope for arguing that the appointment of an agent removes from the principal day‑to‑day control over the investment. There can be no suggestion that Global Finance could lawfully have retained the interest payments and invested them elsewhere. Nor is there anything to suggest that, if the borrower had decided to make early repayment, Global Finance could have lawfully invested the money due to the investors without reference to those investors. Although Global Finance held the title deed, I consider that to be a matter of convenience where there are multiple first mortgagees rather than evidence of the handing over of day‑to‑day control by the mortgagees.

There was in fact a shortfall of funds proposed to be raised for the mortgage. Global did not disclose this fact to the mortgagees and the loan proceeded despite the shortfall. This, it is said by the plaintiffs, is evidence that the mortgagees did not have day‑to‑day control of the investment. The flaw in this argument is that the broker could create the situation said to evidence a lack of day‑to‑day control on the part of the investors by failing to act appropriately or lawfully with respect to the investment or failing to keep the investors properly advised.
The first defendants rely on the following factors in relation to whether day‑to‑day control was held by the mortgagee investors:
(i)The loan was for a 12‑month period secured by a registered first mortgage.
(ii)Each mortgagee made the investment decision to provide loan funds to this particular borrower on certain terms. The investment decision was not made by a "scheme manager".
(iii)The mortgagees did not delegate their powers under the mortgage to a manager. The mortgagees maintained control through their registered mortgage and concomitant rights and powers thereunder.
(iv)There are no other contractual agreements diluting or proscribing the mortgagees' rights.
(v)Global Finance's only administrative function was to receive and disburse interest payments.
(vi)The mortgage assumes the mortgagees can assign their interest under the mortgage without restriction. A new mortgagee taking under an assignment is not required to agree to be bound by any prescription of their rights.
(vii)Each mortgagee maintained control of their loan and that was the nature of the investment in which they participated.
(viii)Only the mortgagees had the power to extend the loan or the right to enforce the rights and remedies under the mortgage.
The cases in this area are not a great deal of assistance. There are a number of cases where schemes involving contributory mortgagees have been held to be managed investment schemes. Such cases include ASIC v Young (2003) 173 FLR 441, ASIC v IP Product Management Group Pty Ltd (2002) 42 ACSR 343, Kay v ASIC (2002) 43 ACSR 229, ASIC v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561, ASIC v Hutchings (2001) 38 ACSR 287, ASIC v Chase Capital Management Pty Ltd (2001) 36 ACSR 778, ASIC v Takaran Pty Ltd (2002) 43 ACSR 46 and Re Lawloan Mortgages Pty Ltd (2003) 2 Qd R 200. However, each of these cases is distinguishable on its facts. In some cases there was not even a dispute as to whether or not the investors had day‑to‑day control of their investment. Indeed, it is difficult to draw any broad statement of principle from these cases. Certainly these authorities do not support the plaintiffs' proposition that a pooled loan secured by a contributory mortgage is a managed investment scheme for the purposes of s 160EE of the Act.
For their part, the first defendants relied upon the decision of the Full Court of this Court in Maunder‑Hartigan v Hamilton (1984) 8 ACLR 937. That was a case which dealt with so‑called "prescribed interest" under earlier legislation. It is an authority which, in my view, must be treated with caution when dealing with managed investment schemes.
In light of the matters to which I have referred, I have come to the conclusion that the members do have day‑to‑day control over the operation of the scheme. That, I think, is the effect of their rights under the mortgage. Such was the nature of the investment that in fact, all things being equal, there was no need for any day‑to‑day control over the operation of the scheme. The scheme called for money to be pooled and lent and secured by mortgage with interest to be paid monthly. Nothing else was required. But when some steps needed to be taken, for instance, when there was a default under the loan, it was the mortgagees who had the right to act and not a scheme manager. In my view, the third limb of the definition is not satisfied. None of the factors raised by the plaintiffs persuade me to the contrary.
But even if that conclusion is incorrect, and properly considered this was a managed investment scheme, there is, in my view, no basis for making the orders sought by the plaintiffs. The power given to the Court under s 601EE(2) of the Act is a power to wind up the managed investment scheme. Here there is nothing to wind up. Furthermore, if a liquidator were to be appointed to this scheme, absent agreement from all of the mortgagees, the property being secured property, he or she would have no power to sell it: see generally s 554D ‑ s 554J of the Act. If the Court were to appoint a receiver under s 500(2) of the Act or O 51 of the Rules of the Supreme Court, it would be subverting the indefeasible rights of the first defendants were it to direct that a receiver sell the property. To do so would be inappropriate and, since there is no other purpose for the appointment, an order appointing a receiver should not be made. In reading this conclusion, I have not taken into account the fact that the first defendants hold a significantly larger interest in the properties than any other investor. In my view, the proportion of the interest held by each investor is irrelevant.
The second argument put by the plaintiffs is that there is a fiduciary duty which arises as between the other mortgagees and the first defendants. As a consequence, by refusing to agree to a sale of the property, the first defendants are in breach of their fiduciary duty. Two factors are identified, each of which are said to found a fiduciary relationship:
(i)A fiduciary duty arises because the mortgagees rely on each other to be able to exercise the powers conferred by the mortgage. This requirement for unanimity is said to place the mortgagees in a relationship of vulnerability, the characteristic of a fiduciary relationship.
(ii)The members are said to be joint venturers and, hence, owe a fiduciary duty to their fellow venturers. In support of that proposition, reliance was placed on the High Court decision in United Dominions Corporation Ltd v Brian Pty Ltd (1984) 157 CLR 1.
There are numerous difficulties with the plaintiffs' argument and the propositions on which it is based. First, a mortgage comprises an interest in land. The mere fact of joint ownership of land does not give rise to a fiduciary relationship between co‑owners. This is a principle of long standing and is not to be doubted: see Kennedy v De Trafford [1897] AC 180; Dowsett v Reid (1912) 15 CLR 695. Secondly, in United Dominions Corporation Ltd v Brian Pty Ltd the Court held that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the content of the obligations which the parties to it have undertaken: at 10 ‑ 11 per Mason, Brennan and Deane JJ. In reaching that conclusion, the Court made it clear that not all joint ventures are partnerships, nor give rise to a fiduciary relationship: at 11 per Mason, Brennan and Deane JJ; at 15 per Dawson J.
The Court in United Dominions Corporation Ltd v Brian Pty Ltd did provide some insight into the types of activities which can properly be described as a joint venture (at 10 per Mason, Brennan and Deane JJ):
"The term 'joint venture' is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purpose of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit, with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture … will often be a partnership. The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership; such as a company, a trust, an agency or joint ownership."
Dawson J, in agreeing with the majority, identified the distinction between a partnership and a joint venture (at 15):
"… [T]he important distinction between a partnership and a joint venture is, for practical purposes, the distinction between an association of persons who engage in a common undertaking for profit and an association of those who do so in order to generate a product to be shared among the participants."
The important feature of United Dominions Corporation Ltd v Brian Pty Ltd was that the Court determined there was a fiduciary relationship because the parties to the mortgage were in partnership. Further, the fact that the formal joint venture agreement came after the mortgage was considered to be immaterial. It is apparent, therefore, that the result in United Dominions Corporation Ltd v Brian Pty Ltd does not assist the Plaintiffs. Neither do the statements of principle to which the Court referred in reaching their decision. Each definition refers to an "association of persons" which is formed for the purpose of a particular trading. On the facts in this case, including the total absence of any knowledge about other members of the scheme or contact with them, there is no basis upon which it could be said that the mortgagees were partners or joint venturers. There is no "association of persons" engaged in a common undertaking for profit or in order to generate a product to be shared amongst them.
Nor is there any other feature of the relationship between the plaintiffs and the first defendants which could, in my view, give rise to a fiduciary relationship. As Brennan CJ put it in Wik Peoples v The State of Queensland & Ors (1996) 187 CLR 1 at 95 ‑ 96:
"It is necessary to identify some action or function the doing or performance of which attracts the supposed fiduciary duty to be observed. The doing of the action or the performance of the function must be capable of affecting the interests of the beneficiary and the fiduciary must have so acted that it is reasonable for the beneficiary to believe and expect that the fiduciary will act in the interests of the beneficiary (or, in the case of a partnership or joint venture, in the common interest of the beneficiary and fiduciary) to the exclusion of the interest of any other person or the separate interest of the beneficiary."
It is clear in this case that the action complained of by the plaintiffs is the failure of the first defendants to agree to the sale of the property. Assuming for the present that the sale of the property is in the interests of the plaintiffs, there is nothing raised by the plaintiffs which could lead them to expect that the first defendants would act in their interests. All the first defendants have done is rely upon the clear terms of the mortgage. There is nothing to suggest that at any time they led the plaintiffs to believe that they would consent to a sale of the property at a price the plaintiffs considered reasonable if they became mortgagees in possession. That then is really the end of the matter.
In my view, the plaintiffs' application ought to be dismissed. I will hear the parties as to costs.