Chalker v Barwon Coast Committee of Management Inc
[2005] VSCA 101
•3 May 2005
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 4252 of 2001
| JOHN LEONARD CHALKER and BENJAMIN JOHN CHALKER | First Appellant |
| Second Appellant | |
| v. | |
| BARWON COAST COMMITTEE OF MANAGEMENT INCORPORATED and STATE OF VICTORIA | First Respondent |
| Second Respondent |
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JUDGES: | CHERNOV, VINCENT and EAMES, JJ.A. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 5 April 2005 | |
DATE OF JUDGMENT: | 3 May 2005 | |
MEDIUM NEUTRAL CITATION: | [2005] VSCA 101 | |
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Practice – Trusts – Competence of plaintiffs to commence proceeding on behalf of trustee of unit trust – Appellant/Plaintiffs neither beneficiaries nor trustees of unit trust – Trustee company deregistered - Trust deed – “Trustee” includes “any other person appointed or acting in the place and stead of the trustee from time to time” - Trustee company deemed to have resigned upon going into liquidation – Property rights held at time of resignation vest “on the new Trustee executing the instrument of appointment” - Whether subsequent execution of instrument of appointment of appellant/plaintiffs as trustees ratified proceeding – Whether appellant/plaintiffs acting in the place and stead of trustee when writ issued - Proceeding a nullity – Corporations Law s.601AD.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr. G.J. Herbert | J.M. Roccisano |
| For the Respondents | Mr. P.J. Bick Q.C. with Mr. M.R. Scott | Tresscox |
CHERNOV, J.A.:
I have had the advantage of reading in draft form the reasons for judgment of Eames, J.A. in this case and agree, for the reasons advanced by his Honour, that the application to amend the ground of appeal and to rely on fresh evidence should be refused and the appeal should be dismissed.
VINCENT, J.A.:
I agree in the disposition of this matter as proposed by Eames, J.A. I do so for the reasons advanced by him in his judgment.
EAMES, J.A.:
The two appellants are father and son. They issued a writ on 29 January 2001 claiming damages for breach of a lease agreement entered between the predecessor of the first respondent, as lessor, and Chalky’s in the Dunes Pty. Ltd., as lessee, in respect of Crown land at Ocean Grove. The claim against the second respondent, the State of Victoria, asserted that it was responsible for ensuring that the lessor complied with the terms of the lease; alternatively, that the first respondent acted as agent for the State of Victoria; in the further alternative, that the State owed a duty of care to the Chalkers and to the lessee.
A restaurant had been conducted on the leased land, Chalky’s in the Dunes Pty. Ltd. having entered into possession of the restaurant site as nominee of John and Catherine Chalker, on 19 December 1994. The lessee, Chalky’s in the Dunes Pty. Ltd, was trustee of the Chalky’s in the Dunes Unit Trust, all units of which were held by Caveron Pty. Ltd. (“Caveron”) which in turn was trustee for the Chalker Family Trust, a discretionary trust which was created by deed of settlement dated 21 June 1982, the initial beneficiaries being the first plaintiff and his wife Catherine Mary Chalker.
On 30 January 1995 the predecessor of the first defendant allegedly breached the lease, and did so again on 7 February 1995 and 25 February 1995.
Clause 1 of the amended statement of claim alleged that the plaintiffs sued in their capacity as the trustees of the Chalky’s in the Dunes Unit Trust. Although an alternative basis for claim was pleaded in the statement of claim that was not pursued and may be put to one side. The sole issue as it emerged on the appeal was whether the proceeding, commenced in the names of the plaintiffs, was competent, bearing in mind that, when the action was issued, they had not been appointed trustees of the Trust. The appellants contend, however, that the proceedings were competent because they either were the trustees, having been subsequently appointed by Caveron, thereupon, with its authority, ratifying the commencement of the proceeding, or else, they were acting in the stead of the trustee of the unit trust by virtue of the definition of “trustee” in the trust deed, whereby they were trustees when the proceeding was issued.
The respondents contend that the appellants were strangers to the Chalky’s in the Dunes Unit Trust and had no status to bring the proceeding on its behalf. The proceeding, therefore, was a nullity, they said, and could not be ratified by any later step taken to appoint or substitute the appellants as trustees of the trust. It is accepted on both sides that if the proceeding was a nullity then fresh proceedings would be futile because the claims would now be statute barred.
From 22 July 1996 an administrator was appointed to Chalky’s in the Dunes Pty. Ltd. On 15 August 1996 a liquidator was appointed in a creditors’ voluntary winding up. On 26 May 2000 John Chalker ceased to be director of Caveron and on 6 June 2000 he became bankrupt. On 15 August 2000 notice of final meeting was given by the liquidator of Chalky’s in the Dunes Pty. Ltd. and on 22 November 2000 that company was deregistered.
On 24 January 2001 John Chalker attempted to purchase all of the units in the Chalky’s in the Dunes Unit Trust and thereupon to appoint himself and his son trustees of the trust. It is conceded that those steps were ineffective. On 26 January 2001 John Chalker had approached his trustee in bankruptcy seeking consent to the issue of proceeding which consent was refused whereupon the two plaintiffs issued this proceeding. It is not now contended that either the first or second appellant had been appointed trustee of the trust by any action taken prior to the commencement of the proceeding on 29 January 2001.
The respondents, by summons dated 4 October 2002, applied for the dismissal of the proceeding, or for judgment pursuant to r.23.01, 23.02 and/or 23.03 on the basis that the statement of claim disclosed no cause of action and that the proceeding was an abuse of process. In turn, the appellants applied by summons for leave to file an amended statement of claim. Those applications came on for hearing before a Master, who upheld the respondent’s summons and ordered that the proceeding be forever stayed. From that decision the appellants appealed and the hearing of the appeal de novo was conducted by Gillard, J., sitting in the Practice Court. His Honour held that the proceedings were a nullity as the appellants had no standing to bring them on behalf of the trust. He dismissed the appeal and in so doing varied the order made below, so as to order that the proceeding stand dismissed rather than merely be stayed. From those orders the appellants now further appeal to this Court.
Mr Herbert, counsel for the appellants, contended that the authority of the appellants to commence proceedings required consideration, first, of clause 19 of the trust deed, which clause governed the retirement and removal of a trustee. The clause reads as follows:
“19 RETIREMENT AND REMOVAL OF TRUSTEE
19.1The Trustee may retire upon giving 90 days prior notice to the Holders of its desire so to do and by Special Resolution at a meeting of the Unitholders a new Trustee shall be appointed in its stead.
19.2If the Trustee goes into liquidation or ceases to carry on business or a Receiver or an Official Manager of its undertaking is appointed the Trustee shall forthwith give notice in writing to all Unitholders of that entry into liquidation, cessation or appointment and shall convene a meeting of Unitholders. The Trustee shall be deemed to have resigned effective on the date of such liquidation, cessation or appointment and by Special Resolution at a meeting of the Unitholders a new Trustee shall be appointed.
19.3At any time and from time to time the Trustee may be removed and another Trustee may be appointed in its place by Special Resolution at a meeting of the Unitholders.
19.4A new trustee appointed pursuant to sub-clauses 19.1, 19.2 and 19.3 hereof shall execute an instrument setting out his or its consent to his or its appointment as Trustee.
19.5Every new Trustee appointed pursuant to sub-clauses 19.1, 19.2 and 19.3 hereof on the execution of the instrument of appointment referred to in sub-clause 19.4 hereof shall have all the powers, authorities and discretions as his or its predecessor and may in all respects act as if he or it had been originally appointed the Trustee of the Trust by this Deed.
19.6On the retirement or removal of a Trustee, he shall cease to be Trustee and all property rights and benefits of any kind vested in him or it shall without need for any instrument vest in the new Trustee on the new Trustee executing the instrument of appointment, provided always that the retired or removed Trustee shall have the benefit of the indemnity in Clause 29 hereof in respect of all matters and things the subject of that indemnity prior to the date of retirement or removal.”(my emphasis)
Mr Herbert contended that by virtue of cl 19.2 Chalkey’s in the Dunes Pty. Ltd. resigned as trustee as at August 1996 when the liquidator had been appointed, notwithstanding the fact that a meeting had not been called and a new trustee had not been appointed. As a new trustee was not appointed until some time after the commencement of the proceeding it followed that there was an apparent vacancy in the position of trustee upon the deemed resignation of Chalky’s in the Dunes Pty. Ltd. Equity, he submitted, would not permit a trust to fail for want of a trustee and, therefore, he said, upon the resignation of the company the position of trustee was filled by the plaintiffs (because of their indirect interest in the subject of the Trust).
Gillard, J. concluded that the trustee had not, in fact, resigned pursuant to cl 19.2 upon the liquidator being appointed, because upon reading that clause with cl.19.6 a deemed resignation only occurred if notice was given, a meeting of unit holders was convened and a new trustee was appointed. Those steps were not taken. Accordingly, so Gillard, J. held, Chalky’s in the Dunes Pty. Ltd. remained the trustee until by virtue of s.601AD (2) of the Corporations Law the property of the trust vested in ASIC, upon deregistration on 22 November 2000, whereupon ASIC, so his Honour concluded, became the trustee. Counsel for the respondents agreed generally with his Honour’s analysis of cl.19.2 and cl.19.6, save that Mr Bick submitted that his Honour was in error in concluding that ASIC became the trustee of the unit trust. Although the property in the company vested in ASIC, it held it as a bare trustee, subject to the trust, Mr Bick submitted, but did not assume any obligations under the trust deed.
Mr Herbert agreed with Mr Bick that ASIC did not become trustee, but went further and contended that not only did ASIC not become trustee of the trust, nor did it become holder of the property comprising the chose in action, i.e, the right of action under the lease. That was held by Caveron, he submitted, upon the resignation of the trust company (which occurred immediately the liquidator was appointed in July or August 1996, he contended). Caveron, in turn, as holder of the legal right to the property, appointed the appellants as trustees, counsel submitted, albeit at a time after the commencement of the proceeding, but thereby ratifying the commencement of the action.
In my opinion, it is unnecessary to resolve the question whether the effect of cl.19.2 is that the trustee’s resignation is deemed to take effect immediately upon the happening of the disqualifying action, i.e the appointment of liquidator in 1996, or only after the steps are taken to given notice of that event, call a meeting and appointment of a new trustee. Whatever be the correct interpretation the critical question is whether as at the time of the issuing of the proceeding on 29 January 2001 the appellants then had authority to commence the action on behalf of, or as trustees of, the unit trust. If Chalky’s in the Dunes Pty. Ltd. remained trustee until replaced by ASIC (as Gillard, J. concluded) then neither of them authorised the appellants to commence the proceeding. If, however, Chalky’s in the Dunes Pty. Ltd. had ceased to be trustee as at the time when the writ was issued then the question remained as to the basis on which, and by whose authority, the appellants could fill the role of trustee of the unit trust in commencing proceedings.
Mr Herbert advanced two bases on which the plaintiffs could have had the entitlement that they claimed to commence the proceedings on behalf of the unit trust. In the first place, he submitted that by virtue of the definition of “The Trustee” in cl.1.1 of the trust deed they derived their entitlement to bring the proceedings at the time when the writ was issued. Alternatively, he submitted, the appellants had been subsequently appointed trustees by Caveron which had then ratified their conduct in earlier commencing the proceeding. Mr Herbert expressly abandoned any contention on appeal that the entitlement of the appellants derived from any claimed entitlement to so act as agents or beneficiaries of the unit trust (or any other trust).
The relevant definition in cl.1.1 is as follows:
“’The Trustee’ means the Trustee or any other person appointed or acting in the place and stead of the Trustee from time to time.”
In contending that cl.1.1 enabled the plaintiffs to bring these proceedings on behalf of the unit trust, Mr Herbert submitted that the appellants acted “in the place of” or “in the stead of” the trustee, Chalky’s in the Dunes Pty. Ltd., which had resigned that position. Counsel said that, in doing so, they were authorised, informally, by Caveron which was the sole holder of units in the unit trust and which was itself trustee for the Chalker Family Trust, of which the appellants were the beneficiaries. Accordingly, there being no disadvantage to the respondent in them so acting, and there being no other trustee appointed as at 29 January 2001, they stood in the “stead” of the trustee, Chalky’s in the Dunes Pty. Ltd., within the meaning of that term in cl.1.1, and acted on behalf of the trust in a situation of urgency so as to ensure that the time limit for the commencement of proceedings did not expire without proceedings having been issued to preserve the assets of the unit trust.
This basis for their bringing the proceeding was not advanced by them at the time of the hearings below. In an affidavit sworn 24 December 2002 John Chalker deposed that when the proceeding was issued he did so in anticipation of a transaction being successfully completed whereby he was to purchase the entire beneficial interest of the Chalky’s in the Dunes Unit Trust and would thereupon appoint himself and his son as trustees. That transaction, however, failed, and it was only upon its failure that he then claimed to have acted pursuant to cl.1.1.
Mr Bick, senior counsel for the respondent, contended that the appellants were mere strangers to the unit trust, being neither beneficiaries nor trustees of that trust. When the proceedings were issued they had not been authorised to act in the place of and/or to stand in the “stead” [1] of the trustees within the meaning of cl 1.1. They simply arrogated to themselves the power to so act.
[1]“Stead” is defined in the New Shorter Oxford English Dictionary, 1993, as, inter alia, ”the place or function of a person or thing as held by a substitute or successor”.
In my opinion, Mr Bick’s analysis is correct. The appellants did not derive authority to issue proceedings on behalf of the unit trust by way of cl 1.1. At the time the proceeding was issued the appellants had no standing to act on behalf of the trust. They were not beneficiaries of the Chalky’s in the Dunes Unit Trust but, at best, only of a different trust, the family trust, which was a discretionary trust. In any event, the entitlement to bring the proceeding is not asserted to derive from any suggested status as beneficiaries. It is not contended that they had been appointed under the trust, or by Caveron, to act in the place and stead of Chalky’s in the Dunes Pty. Ltd.
At the time the proceeding was issued, the legal title to the property of the trust was vested in ASIC and it was thereupon in the position of a trustee because if there was any person then acting in the place and stead of the trustee it was ASIC. Before ASIC had entered the picture, by virtue of the deregistration, the liquidator of Chalky’s in the Dunes Pty. Ltd. would have acted in the place and stead of the trustee. Although Mr Herbert contended that Caveron, the sole beneficiary of the trust, had been “aware” of the action taken by the appellants to commence the proceeding Caveron had not appointed them trustees of the trust. The awareness was said to flow from the fact that behind all of the corporations and trusts were the same individuals. I am not persuaded that on any basis, whether in law or equity, the appellants were authorised to assume the place and stead of the trustee. No doubt the complexity of the corporate and trust structure, which was put in place for the conduct of the business, created confusion and uncertainty when the individuals behind those bodies sought to bring proceedings to assert rights under the lease. The effect of the adopted structure, however, is that, from a legal point of view, the appellants were, at all times – including when they instituted the proceeding – strangers to the unit trust. The proceeding, in my opinion, did not derive legitimacy from cl.1.1.
The alternative basis on which the appellants claimed to have an entitlement to commence proceedings on behalf of the trust was that they had been appointed as trustees by Caveron on one or other of three separate occasions after the writ had been issued, whereupon, as trustees, and with the authority of Caveron, they had ratified their conduct in commencing the proceeding. The three separate occasions referred to were as follows:
(a)On 23 December 2002 Caveron appointed the plaintiffs (one of them, John, being bankrupt at that time) as trustees of Chalky’s in the Dunes Unit Trust. In the deed of approval of 23 December 2002 the recital stipulated in paragraph (e) that between 29 January 2001 and the date of the deed of approval there was no trustee duly appointed for the trust. In the same deed of approval the plaintiffs, as duly appointed trustees, purported to ratify and adopt their conduct in issuing the proceeding on 29 January 2001.
(b)On 11 July 2003 Caveron purported to confirm the appointment of the first plaintiff as a trustee upon his being released from bankruptcy and again purported to ratify the institution of the proceedings, by Caveron consenting to them doing so. It was resolved that Benjamin and John Chalker had incorrectly alleged that they were duly appointed trustees of the trust “but they now admit that they did not then hold such office but have now been duly appointed as trustees” and, therefore, “Caveron so far as it is empowered to do so ratifies and consents to them ratifying and continuing the proceeding insofar as it claims any remedy or relief for or on behalf of the trust as if the same had been commenced with its and their full knowledge and authority.”
(c)On 11 November 2004 (that is after this appeal was instituted) Caveron resolved to remove ASIC from the powers and office of trustee and purported to appoint in lieu the plaintiffs John Chalker and Benjamin Chalker as trustees with immediate effect. On the same date John and Benjamin Chalker “as trustees of the Chalky’s in the Dunes Unit Trust” purported to ratify actions taken by themselves “acting in the place and stead of the trustee and as trustees under a specific trust for the preservation of the said cause of action”.
At the outset of the appeal Mr Herbert, for the appellants, applied for leave to tender fresh evidence, and to amend the notice of appeal. These applications sought to establish the efficacy of the purported appointment of the appellants as trustees which had occurred after the judgment on appeal had been given by Gillard, J. The Court gave leave to the appellants to rely upon and argue the appeal by reference to the proposed new ground, and also the fresh evidence, reserving a ruling on those applications until delivery of judgment on the appeal.
In my opinion, the contention that the proceeding has been ratified by subsequent appointment of the appellants as trustees must be rejected. Mr Bick did not challenge the capacity of Caveron to have appointed the appellants trustees. Indeed, he accepted that one or both of the last two instances where Caveron purported to do so, probably achieved that result. That, however, only achieved a prospective effect; it could not act retrospectively to make the appellants trustees at the time of the issue of the writ. Caveron had not appointed the appellants trustees before they issued the writ. The proceeding was a nullity.
In my opinion, the outcome would be the same whether or not ASIC was the trustee as at 29 January 2001 (as the judge held) or whether there was, in fact, no trustee in place at that time (as Mr Bick contended was the true position). If ASIC was trustee then it did not authorise the appellants to commence the proceeding. Mr Herbert contended that if ASIC was not the trustee (and he agreed with Mr Bick it was not) then there had to be a trustee, because equity would not permit a trust to fail for want of a trustee. Thus, if ASIC was not trustee then the beneficiaries would be entitled to commence proceedings in their own name in order to preserve the assets of the trust, and they would be acting as trustees in so doing. There are a number of problems with that argument.
Mr Herbert referred to a passage in Jacobs Law of Trusts in Australia[2] in which the learned authors opined:
“In equity a trust will not be allowed to fail for want of a trustee. If none has been appointed or if there ceases to be a trustee in office, the person in whom trust property for the time being is vested will be regarded as trustee thereof until appointment of a trustee or a new trustee, as the case may be.”
[2]6th Edition, at page 4 [105].
Mr Herbert emphasised the first sentence in that paragraph, but this trust would not have failed for want of a trustee. The trust property was preserved at the time of issuing of proceedings by being vested in ASIC, and before that, whilst under liquidation, the legal title in the property was either held by the liquidator or remained with Chalky’s in the Dunes Pty. Ltd. (as Mr Bick contends was the case, there having been no new trustee appointed and thus, the trustee not then having been deemed to have resigned)[3]. Assuming ASIC was trustee (which assumption the appellants made, having regard to the decision of Gillard, J., when making their most recent attempt to appoint the appellants trustees) the proceeding might well have been regularised by Caveron, prior to its commencement,[4] removing ASIC as trustee and appointing the appellants trustees. Those steps were not taken, and the appellants were not trustees, and nor were they persons in whom the trust property was vested as beneficiaries. There is no evidence of Caveron having taken any step, as beneficiary, to address the resignation of the trustee (if that had occurred before 29 January 2001). If there was no trustee at that time, then the action taken, ostensibly on behalf of the trustee, was not capable of being ratified, later, as having been taken in that capacity. If ASIC was the trustee, then it has not ratified the action[5].
[3]Octavo Investments Pty Ltd v. Knight (1979) 144 C.L.R. 360, at 371.
[4]See Gamble v. Commissioner for Corporate Affairs (1987) 5 A.C.L.C. 378, at 380, per Olney, J.
[5]The fresh evidence disclosed that ASIC denied that it had assumed the role of trustee upon de-registration of the trustee, or had taken any action to appoint a trustee.
The proceedings were incompetent when issued because the appellants had no right to litigate with respect to the chose in action, that being the property of the trust, held at the relevant time either by ASIC or by the liquidator of Chalky’s in the Dunes Pty. Ltd. In either case, the proceeding may not be retrospectively validated by a subsequent appointment of the appellants as trustees[6].
[6]Gertsch v. Roberts (1993) 35 N.S.W.L.R. 631, at 635; Minister for the Interior v. RT Co Pty. Ltd. (1962) 107 C.L.R. 1, at 7; Byers v. Overton Investments Pty. Ltd. (2001) 186 ALR 280, at 287-288 [25]-[29]. I note Noble v. State of Victoria (2000) 2 Qd. R. 154, but insofar as that may allow an exception for an equitable claim brought by a beneficiary that was not this case.
In my opinion, the proceeding when issued was incompetent and Gillard, J. was right to conclude that it should be dismissed. The application to amend the grounds of appeal and to rely on fresh evidence should be refused and the appeal should be dismissed.
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