CHIANTI PTY LTD -v- LEUME PTY LTD [2007] WASCA 270

Reported Decision:	(2007) 35 WAR 488
Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2007] WASCA 270
Court:	THE COURT OF APPEAL (WA)
Case No:	CACV:89/2006	Heard:	2 AUGUST 2007
Coram:	MARTIN CJ PULLIN JA BUSS JA	Delivered:	11/12/07
No of pages:	43	Judgment Part:	1 of 1
Result:	Appeal dismissed Respondent's application refused
Category:	A
PDF Version

Parties:	CHIANTI PTY LTD LEUME PTY LTD
Catchwords:	Jurisdiction District Court District Court of Western Australia Act 1969 (WA), s 50(1) Claim by beneficiary against trustee for nonpayment of distributed trust income Whether claim is at law or in equity Liability of trustee to beneficiary in debt or for money had and received Character of distributions of trust income Whether claim is a 'personal action' within s 50(1) of the District Court of Western Australia Act Whether financial statements of trustee contained admissions of money owing to beneficiary Counterclaim Whether a finding that there was a serious question to be tried on trustee's counterclaim is inconsistent with a finding that the trustee had no reasonably arguable defence, or right of setoff, in relation to beneficiary's claim Turns on own facts Practice and procedure Application to amend statement of claim and orders of primary judge in relation to date from which interest accrued on amount claimed Turns on own facts
Legislation:	Acts Amendment (Jurisdiction of Courts) Act 1981 (WA) District Court of Western Australia Act 1969 (WA), s 50(1), s 52, s 55, s 57 Supreme Court Act 1935 (WA), s 24, s 25, s 32
Case References:	Attorney-General v Churchill (1841) 10 LJ Ex 314; 151 ER 997 Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 Chianti Pty Ltd v Leume Pty Ltd; WASC; 13 October 2004 Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual (Workers' Compensation) Ltd (1991) 5 WAR 208 Commissioner of Inland Revenue v Ward (1969) 69 ATC 6050 Edwards v Lowndes (1852) 1 E & B 81; (1852) 118 ER 367 Euroasian Holdings Pty Ltd v Ron Diamond Plumbing (in liq) (1996) 64 FCR 147 Forsyth v Deputy Commissioner of Taxation [2007] HCA 8; (2007) 81 ALJR 662 Harmonic Resonator Ltd v Walton (1927) 27 SR (NSW) 81 Hondros v Chesson [1981] WAR 146 Jones v Bellgrove Properties Ltd [1949] 2 KB 700 Jones v Moylan (No 2) [2000] WASCA 361; (2000) 23 WAR 65 Kearns v Hill (1990) 21 NSWLR 107 Ledingham v Bermejo Estancia Co Ltd [1947] 1 All ER 749 Leume Pty Ltd v Chianti Pty Ltd [2005] WADC 212 Leume Pty Ltd v Chianti Pty Ltd [2006] WADC 95 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 Pearson v Federal Commissioner of Taxation [2006] FCAFC 111; (2006) 64 ATR 109 R v Brown (1912) 14 CLR 17 Re Baron Vestey's Settlement; Lloyds Bank Ltd v O'Meara [1951] Ch 209; [1951] 2 All ER 891 Re Brookers (Australia) Ltd (in liq); Brooker v Pridham (1986) 41 SASR 380 Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146 Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516 The Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535 Tindon Pty Ltd v Adams [2006] VSC 172 Turner v The New South Wales Mont De Piete Deposit and Investment Co Ltd (1910) 10 CLR 539 Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702 Webb v Stenton (1883) 11 QBD 518

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : CHIANTI PTY LTD -v- LEUME PTY LTD [2007] WASCA 270 CORAM : MARTIN CJ

PULLIN JA

BUSS JA

HEARD : 2 AUGUST 2007 DELIVERED : 12 DECEMBER 2007 FILE NO/S : CACV 89 of 2006 BETWEEN : CHIANTI PTY LTD

Appellant

AND

LEUME PTY LTD

Respondent

ON APPEAL FROM:

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Coram : EATON DCJ

Citation : LEUME PTY LTD -v- CHIANTI PTY LTD [2006] WADC 95

File No : CIV 91 of 2005

(Page 2)

Catchwords:

Jurisdiction - District Court - District Court of Western Australia Act 1969 (WA), s 50(1) - Claim by beneficiary against trustee for nonpayment of distributed trust income - Whether claim is at law or in equity - Liability of trustee to beneficiary in debt or for money had and received - Character of distributions of trust income - Whether claim is a 'personal action' within s 50(1) of the District Court of Western Australia Act - Whether financial statements of trustee contained admissions of money owing to beneficiary

Counterclaim - Whether a finding that there was a serious question to be tried on trustee's counterclaim is inconsistent with a finding that the trustee had no reasonably arguable defence, or right of setoff, in relation to beneficiary's claim - Turns on own facts

Practice and procedure - Application to amend statement of claim and orders of primary judge in relation to date from which interest accrued on amount claimed - Turns on own facts

Legislation:

Acts Amendment (Jurisdiction of Courts) Act 1981 (WA)

District Court of Western Australia Act 1969 (WA), s 50(1), s 52, s 55, s 57
Supreme Court Act 1935 (WA), s 24, s 25, s 32

Result:

Appeal dismissed

Respondent's application refused

Category: A

Representation:

Counsel:

Appellant : Mr M D Cuerden

Respondent : Mr N D C Dillon

Solicitors:

Appellant : Gibson & Gibson

Respondent : Taylor Smart

(Page 3)

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

Attorney-General v Churchill (1841) 10 LJ Ex 314; 151 ER 997
Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662
Chianti Pty Ltd v Leume Pty Ltd, WASC, 13 October 2004
Commercial Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual (Workers' Compensation) Ltd (1991) 5 WAR 208
Commissioner of Inland Revenue v Ward (1969) 69 ATC 6050
Edwards v Lowndes (1852) 1 E & B 81; (1852) 118 ER 367
Euroasian Holdings Pty Ltd v Ron Diamond Plumbing (in liq) (1996) 64 FCR 147
Forsyth v Deputy Commissioner of Taxation [2007] HCA 8; (2007) 81 ALJR 662
Harmonic Resonator Ltd v Walton (1927) 27 SR (NSW) 81
Hondros v Chesson [1981] WAR 146
Jones v Bellgrove Properties Ltd [1949] 2 KB 700
Jones v Moylan (No 2) [2000] WASCA 361; (2000) 23 WAR 65
Kearns v Hill (1990) 21 NSWLR 107
Ledingham v Bermejo Estancia Co Ltd [1947] 1 All ER 749
Leume Pty Ltd v Chianti Pty Ltd [2005] WADC 212
Leume Pty Ltd v Chianti Pty Ltd [2006] WADC 95
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Pearson v Federal Commissioner of Taxation [2006] FCAFC 111; (2006) 64 ATR 109
R v Brown (1912) 14 CLR 17
Re Baron Vestey's Settlement; Lloyds Bank Ltd v O'Meara [1951] Ch 209; [1951] 2 All ER 891
Re Brookers (Australia) Ltd (in liq); Brooker v Pridham (1986) 41 SASR 380
Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
The Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535
Tindon Pty Ltd v Adams [2006] VSC 172
Turner v The New South Wales Mont De Piete Deposit and Investment Co Ltd (1910) 10 CLR 539
Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702
Webb v Stenton (1883) 11 QBD 518

(Page 4)

1 MARTIN CJ: I have had the advantage of reading the reasons to be given by Buss JA. I agree with those reasons and with his conclusions. I will, however, add a few observations of my own.

2 This case provides a vivid and unfortunate example of the way in which time and money can be dissipated by pursuing legal processes which are not focused upon the determination of the substantive issues in a case. In this case, the substantive issues were:

(a) was Chianti Pty Ltd (Chianti) obliged to pay Leume Pty Ltd (Leume) the amount of $175,519 which was the total of the amounts distributed to Leume under the SJRF Trust, together with interest on that amount?;

(b) did Chianti have a claim against Leume based on the matters alleged in Chianti's counterclaim?

However, in the period of more than three years since the dispute between these parties arose, much of the time and expense which they have incurred has been directed at legal and procedural issues other than those substantive issues.

3 The first step in the litigation of the dispute occurred on 16 July 2004, when Leume issued a statutory demand against Chianti, under the Corporations Act 2001 (Cth) foreshadowing that unless the amount it claimed was paid, it would move to wind up Chianti under the Corporations Act 2001. On 2 August 2004, Chianti applied to the Supreme Court to set aside the statutory demand which had been served by Leume. On 13 October 2004, Acting Master Chapman set aside the statutory demand, on the ground that there was a genuine dispute as to whether or not the money was due and owing (ex tempore judgment, Chianti Pty Ltd v Leume Pty Ltd, WASC, 13 October 2004). Those proceedings did not therefore determine whether or not the money was in fact due and owing. Rather, the sustainability of the statutory demand depended on the question of whether or not there was a genuine dispute on the question of whether the money was due and owing.

4 On 18 January 2005, Leume commenced these proceedings in the District Court. On 12 July 2005, it applied for summary judgment. Much of the argument on the hearing of Leume's application for summary judgment was directed to the question of whether or not Leume's claim came within the jurisdiction of the District Court. When that issue arose, it would have been open to Leume to apply to have the proceedings remitted to the Supreme Court pursuant to s 77 of the District Court of Western Australia Act 1969 (WA). Through this means, arid and

(Page 5)

pointless debate about the characterisation of the cause of action, and the extent of the jurisdiction of the District Court would have been avoided. That arid debate has been the dominant feature of the litigation between these parties for the last two years. In the result, Registrar Kingsley dismissed Leume's application for summary judgment on the ground that Chianti had made out an arguable case that the District Court did not have jurisdiction (

Leume Pty Ltd v Chianti Pty Ltd

[2005] WADC 212). So, Leume's application was determined on the basis of a procedural issue, and not upon its substantive merits.

5 Instead of overcoming the procedural issue which had caused its application for summary judgment to fail by applying to transfer the proceedings to the Supreme Court, Leume instead appealed from the decision of Registrar Kingsley to a Judge of the District Court. That appeal was heard on 15 February 2006. Much of the argument at that hearing was directed to the question of the proper characterisation of Leume's claim and whether or not it fell within the jurisdiction of the District Court. The judgment of Eaton DCJ delivered on 30 June 2006, is mostly concerned with those issues. In the result, Eaton DCJ concluded that Leume's claim was a 'personal action' and therefore within the jurisdiction of the District Court, and that Leume was entitled to summary judgment (Leume Pty Ltd v Chianti Pty Ltd [2006] WADC 95 at [34]). However, Eaton DCJ also concluded that Chianti's counterclaim was arguable, and should be allowed to proceed, and accordingly ordered a stay of execution on Leume's judgment. It follows, that unless the matter is resolved by agreement, there will have to be a trial of the matters raised by Chianti in its counterclaim.

6 Chianti then appealed to this Court. Much of the argument in this Court, and the bulk of the reasons given by Buss JA, focus upon the proper characterisation of the cause of action advanced by Leume, and the question of whether that cause of action comes within the jurisdiction of the District Court. That issue, which is entirely separate and discrete from the substantive question of whether Chianti is obliged to pay Leume the money in question, could have been entirely avoided if Leume had either commenced its proceedings in the Supreme Court or, when the point arose, applied to transfer the proceedings from the District Court to the Supreme Court.

7 In the event, we have concluded that Leume's claim is properly characterised as a 'personal action' and therefore falls within the jurisdiction of the District Court. We have also concluded that Leume was entitled to summary judgment on its claim. However, we have also

(Page 6)

concluded that Eaton DCJ was correct to conclude that Chianti's counterclaim was arguable, and that, in the circumstances, it was appropriate to stay execution upon Leume's claim until that counterclaim had been heard and determined.

8 The consequence of these conclusions is that there will still have to be a trial of the issues arising on Chianti's counterclaim. Until that trial has been heard and determined, Leume will not be entitled to enforce its judgment. So, almost three years after the commencement of the proceedings in the District Court, the parties will now have to return to that court and prepare for a trial. That trial will not be significantly shorter because of Leume's success on its application for summary judgment, because it is unlikely that the issues arising on Leume's claim would have occupied any significant time at trial.

9 A number of obvious conclusions emerge from this unfortunate chronology. The first is that if Leume had answered the jurisdictional point taken against it by applying to transfer the proceedings to the Supreme Court, that point would have disappeared and the parties could have concentrated their efforts upon the real issues in the proceedings. The second is that by pursuing a claim for summary judgment, Leume has delayed the ultimate resolution of its claim by a number of years. After Chianti indicated its intention to take the jurisdictional point, if Leume had applied to transfer the proceedings to the Supreme Court, and proceeded to a trial of the issues on the claim and counterclaim, that trial would have been conducted and those issues determined years ago. The costs incurred by the parties in the resolution of the substantive issues between them would probably have been less than the costs which they have incurred to date in debating the arid questions of the proper characterisation of Leume's claim and the jurisdiction of the District Court.

10 Another observation which emerges from this unfortunate history is the undesirability of defining the jurisdiction of courts by reference to the taxonomy of causes of action which evolved in 19th century England (as to which, see the observations of Kirby J in Forsyth v Deputy Commissioner of Taxation [2007] HCA 8; (2007) 81 ALJR 662 at [98]). The definition of the jurisdiction of the courts, and the practices and procedures adopted by the courts, should facilitate parties addressing the substantive issues which arise in their dispute, without distraction by technical and procedural issues.

11 PULLIN JA: I agree with Buss JA.

(Page 7)

12 BUSS JA: The appellant appeals against the decision of Eaton DCJ allowing summary judgment for the respondent/plaintiff against the appellant/defendant in a District Court action.

Relevant background

13 On 18 January 2005, the respondent filed a writ of summons with a general indorsement in which it claimed $175,519, being money allegedly owing by the appellant as trustee of a trust pursuant to a 'distribution of trust income' made by the appellant, but not paid to the respondent, in or about 2002.

14 On 25 February 2005, the respondent filed a statement of claim. Subsequently, the appellant filed a defence and counterclaim, and the respondent filed a defence to the counterclaim.

15 On 13 July 2005, the respondent made application for an extension of time to apply for summary judgment on its claim, and summary judgment on the appellant's counterclaim. Registrar Kingsley heard and dismissed the application. The respondent sought to appeal from the registrar's decision. On 15 February 2006, Judge Eaton heard the appeal.

The indorsement of claim

16 The indorsement of claim on the writ of summons, as amended pursuant to an order of Registrar Kingsley made 6 December 2005, reads:

The [respondent/plaintiff] claims from the [appellant/defendant] the sum of $175,520, being payment of a distribution of trust income made in or about 2002 by the [appellant/defendant] in its capacity as the trustee of the S & J Ryan Family Trust to the [respondent/plaintiff] in its capacity as a trustee of the Ryan Family Trust and as a beneficiary of the S & J Ryan Family Trust, plus interest.

In these reasons, I will refer to the S & J Ryan Family Trust as the 'SJRF Trust' and the Ryan Family Trust as the 'RF Trust'.

Statement of claim, defence and counterclaim

17 The statement of claim (as amended pursuant to an order of Registrar Kingsley made 6 December 2005) pleads that:

(a) by a deed of trust dated 7 March 1989, the SJRF Trust was established;

(b) the respondent is a beneficiary of that trust;

(Page 8)

(c) the appellant as trustee of the SJRF Trust made a distribution to the respondent of a portion of the annual income of that trust in respect of each of the financial years ended 30 June 1995 through to 30 June 2002;

(d) the total of each of the distributions of SJRF Trust income referred to in (c) was $175,519;

(e) the respondent has an indefeasible, absolutely vested, beneficial interest in possession in the distributed SJRF Trust income; and

(f) the appellant has failed to pay the distributed SJRF Trust income to the respondent.

The respondent claims payment of $175,519, costs, and interest on the $175,519 at the rate of 6.5% per annum from 18 January 2005 to the date of judgment.

18 The defence admits that:

(a) the SJRF Trust was established by a deed of trust dated 7 March 1989; and

(b) the respondent is a beneficiary of that trust.

The defence further pleads that:

(i) the trustee may determine to pay, apply or set aside income of the SJRF Trust to any one or more of the general beneficiaries;

(ii) such determination shall be effectually made and satisfied by placing an amount to the credit of a beneficiary in the books of account of the SJRF Trust; and

(iii) any amount set aside for any beneficiary shall cease to form part of the SJRF Trust fund and, upon the setting aside, shall be held by the trustee as a separate trust fund on trust with power to the trustee, pending payment over, to invest, apply or deal with the whole or any part of the fund in the trustee's absolute discretion.

(d) The appellant has distributed SJRF Trust income in accordance with the terms of the SJRF Trust deed, and all and any distributions made by the appellant to the respondent have been fully satisfied in accordance with the terms of the SJRF Trust deed.

(Page 9)

(e) The appellant denies that the respondent has made demand for payment of distributed income, and says further that the respondent is not entitled to payment either on demand or at all. The appellant says that any payment of distributed income is at the discretion of the trustee.

(f) In the alternative, it would be unconscionable for the respondent to demand or assert an entitlement to payment of any distributions made by the appellant, and any such payment would result in the respondent receiving an unjust enrichment.

(g) The distributions referred to in the statement of claim are distributions of profits generated by the services, labour and efforts of Stephen Frederick Ryan, without any contribution by the respondent. The particulars of this paragraph are:

(i) the appellant is a partner of the farming business which trades as Ryan Rural Enterprises;

(ii) Stephen Frederick Ryan, a director of the appellant, is the de facto manager of Ryan Rural Enterprises;

(iii) between 7 March 1989 and 30 June 2002, Stephen Frederick Ryan provided his personal services as a manager and farm labourer to Ryan Rural Enterprises for no remuneration or reward;

(iv) as a result exclusively of the personal services, efforts, labour and endeavours of Stephen Frederick Ryan to the business of Ryan Rural Enterprises between 7 March 1989 to 30 June 2002, Ryan Rural Enterprises earned income and profit; and

(v) the profits of Ryan Rural Enterprises generated by Stephen Frederick Ryan, and to which the appellant was entitled as a partner of Ryan Rural Enterprises, were paid to the appellant and formed the exclusive income of the SJRF Trust available for distribution.

(h) By virtue of the contributions made by Stephen Frederick Ryan to the assets of the SJRF Trust, any legal interest the respondent may have in the trust assets is held by the respondent as constructive trustee for the appellant, or alternatively Stephen Frederick Ryan, and the respondent's conduct in demanding payment of distributions from the trust is, in all of the circumstances, unconscionable.

(Page 10)

19 The appellant's counterclaim repeats (f), (g) and (h) of [18] above, and pleads that the appellant is entitled, by virtue of the contributions made by Stephen Frederick Ryan, to the benefit of the trust income and assets, and is entitled in equity to be compensated in the sum of the distributions claimed by the respondent. The appellant claims a declaration that the respondent holds its interest in the trust assets of the SJRF Trust on trust for the appellant pursuant to a constructive trust, an order that the respondent pay to the appellant compensation in the sum of the distributions claimed by the respondent, and an order that the respondent pay the appellant's costs of the proceedings to be taxed.

20 In later affidavits, referred to below, Stephen Frederick Ryan describes Thomas Lindsay Ryan as his 'stepfather', and Thomas Lindsay Ryan describes Stephen Frederick Ryan as his 'adopted son'.

SJRF Trust

21 The SJRF Trust was created by a deed of trust dated 7 March 1989. The appellant is the trustee. The directors of the appellant (as stated in an historical company extract dated 30 July 2004) are Stephen Frederick Ryan and Jennifer Irene Ryan. The primary beneficiaries of the trust are the children of Stephen Frederick Ryan and Jennifer Irene Ryan. The additional member of the class of general beneficiaries are Stephen Frederick Ryan and Jennifer Irene Ryan. The additional income beneficiaries include the parents, grandparents, brothers, sisters, brothers-in-law, sisters-in-law, nieces, nephews, cousins, second cousins, uncles and aunts of Stephen Frederick Ryan and Jennifer Irene Ryan (other than the settlor).

22 Clause 3 of the trust deed deals with the distribution of income. Clause 3.1 provides:

3.1 At any time before the expiration of any accounting period, the Trustee may determine with respect to all or any part or parts of the net income of the Trust Fund for that accounting period:

(a) to pay, apply or set aside the income to or for any one or more of the General Beneficiaries living or in existence at the time of the determination; or

(b) to accumulate the income.

In clause 1, the word 'pay' is defined to include 'transfer, convey and assign', the word 'set aside' is defined, in relation to a beneficiary, to

(Page 11)

include 'placing sums to the credit of the beneficiary in the books of account of the Trust', and the word 'apply' is not defined.

23 Clause 3.3 delineates the manner in which a determination may be made. It provides, relevantly:

3.3 The following provisions shall apply to any determination made pursuant to this clause:

(a) A determination to pay, apply or set aside any income may be effectually made and satisfied -

(i) by placing the amount to the credit of the beneficiary in the books of account of the Trust;

(ii) by drawing a cheque for the amount made payable to or for the credit or benefit of the beneficiary;

(iii) by paying the amount over to or for the benefit of the beneficiary in such manner and to such person on behalf of the beneficiary as the Trustee thinks fit; or

(iv) by a resolution of the Trustee that a sum out of or portion of the net income of the Trust Fund or the net income as defined by section 95 of the Income Tax Assessment Act 1936 of the Trust Fund for the accounting period be paid, applied or set aside to or for the beneficiary or otherwise dealt with for the benefit of the beneficiary AND any resolution of the Trustee as provided in this sub-paragraph shall be irrevocable and the income of the Trust Fund shall be dealt with as required by the resolution.

...

(f) Without limiting the ability of the Trustee to make a determination by other means and notwithstanding anything contained in clause 6, the Trustee may effect a determination for the purpose of this clause by an oral declaration, written statement or a resolution of the Trustee whether or not published to any person and a certificate by the Trustee as to any determination shall be prima facie evidence that the determination was made as and when set out in the certificate.

24 Clause 3.5 provides, relevantly:
(Page 12)

3.5 Any amount set aside for any beneficiary ... shall cease to form part of the Trust Fund and upon the setting aside or becoming subject to the trust shall thenceforth be held by the Trustee as a separate trust fund on trust for that person absolutely with power to the Trustee pending payment over to the person to invest, apply or deal with the whole or any part of the fund or any resulting income from it in the manner provided for in clause 5(e).

25 Clause 5(e) provides:

5. The Trustee may:

...

(e) invest any amount held by the Trustee as a separate trust fund pursuant to clause 3.5 on behalf of the person entitled to it by investing it and its resulting income in any of the investments authorised by this Deed and, while that person is under any legal disability, at any time and from time to time resort to that amount and its income and pay, apply or deal with the whole or any part of that amount or its income in such manner as the Trustee thinks fit for the benefit of that person in the terms of the powers contained in the preceding paragraphs (c) and (d);

RF Trust

26 The RF Trust was created by a deed of trust dated 25 October 1981. The respondent is the trustee. The sole director of the respondent (as stated in an historical company extract dated 4 May 2005) is Thomas Lindsay Ryan. The primary beneficiaries of the trust are the children of Thomas Lindsay Ryan and Jean Lendrum Ryan. The additional members of the class of general beneficiaries are Thomas Lindsay Ryan and Jean Lendrum Ryan. The additional income beneficiaries include the parents, grandparents, brothers, sisters, brothers-in-law, sisters-in-law, nieces, nephews, cousins, second cousins, uncles and aunts of Thomas Lindsay Ryan and Jean Lendrum Ryan (other than the settlor).

Distributions by the SJRF Trust to the RF Trust

27 Thomas Lindsay Ryan swore an affidavit on 12 May 2005, which states that Stephen Frederick Ryan is his adopted son. The affidavit annexes, amongst other things, copies of the income tax returns and accounts of the appellant as trustee of the SJRF Trust for the financial years ended 30 June 1996 through to 30 June 2002. The financial statements evidence the distributions made each year by the SJRF Trust to the RF Trust. The statements for the year ended 30 June 1996 also

(Page 13)

contain information as to the distributions made in the financial year ended 30 June 1995. The distributions comprise $175,519 in total, which is the amount claimed in the statement of claim.

28 Thomas Lindsay Ryan swore a further affidavit on 12 July 2005, which annexes, relevantly, the only discovered copies (discovered by the appellant) of resolutions (signed and unsigned) by the appellant distributing income as trustee of the SJRF Trust for the financial years ended 30 June 1999 through to 30 June 2002. Each of those resolutions (except for the resolution for the year ended 30 June 2000 which was unsigned) was signed by Stephen Frederick Ryan as director, Jennifer Irene Ryan as director, and Stephen Frederick Ryan on behalf of the appellant as trustee of the SJRF Trust. The resolution for the year ended 30 June 1999 did not make a distribution to the RF Trust. That resolution (which refers, relevantly, to the Ryan Rural Trust) is inconsistent with the financial statements for the year ended 30 June 1999 which refer to a distribution having been made in that year to the RF Trust. The resolutions for the years ended 30 June 2000 through to 30 June 2002 each showed distributions made to each of Stephen Frederick Ryan and Jennifer Irene Ryan of specified amounts, and distributions to the RF Trust of the 'balance'. The amounts of the distributions for those years are the same as those reflected in the financial statements (although, as I have noted, the resolution for the year ended 30 June 1999 was different from the financial statements relating to that year).

29 The affidavit of 12 July 2005 sworn by Thomas Lindsay Ryan also annexes a copy of the financial statements of the appellant for the year ended 30 June 2003. No distribution was made to the RF Trust in that financial year, but note 4 of the financial statements, entitled 'Unpaid Beneficiary Entitlements', showed that $175,519 (or $175,520) was owing to the RF Trust.

30 In summary, no funds have been paid to the respondent in its capacity as trustee of the RF Trust, or in any other capacity. According to the financial statements, although the relevant amounts have been distributed, they remain under the control of the appellant as trustee of the SJRF Trust. The notes to the financial statements show that the funds distributed to the RF Trust were accumulated in a 'Beneficiaries' Loan Account' for the financial years ended 30 June 1996 and 30 June 1997, in a 'Beneficiaries' Current Account' for the financial years ended 30 June 1998 through to 30 June 2002, and as an 'Unpaid Beneficiary Entitlement' thereafter.

(Page 14)

Statutory demand

31 On 16 July 2004, Thomas Lindsay Ryan served on the appellant a creditor's statutory demand for payment of debt pursuant to the Corporations Act 2001 (WA) in respect of the $175,520. The debt was described in the statutory demand as:

An amount due and owing as at 30 June 2002 by the company [that is, the appellant] to the Creditor [that is, the respondent] as is apparent from the books of account of the creditor [sic].

32 Stephen Frederick Ryan swore an affidavit on 2 August 2004 in support of the appellant's application to set aside the statutory demand. He deposed, relevantly:

(a) The appellant as trustee of the SJRF Trust is a partner with Bretti Pty Ltd (Bretti) as trustee of the Ryan Rural Trust in a farming partnership which trades as Ryan Rural Enterprises.

(b) Bretti is a company controlled by his stepfather, Thomas Lindsay Ryan.

i. SJRF Trust.

ii. Stephen Frederick Ryan Property Trust. (The farming land is held by the appellant as trustee of this trust, and until 1 July 2004 was available to Ryan Rural Enterprises rent free.)

iii. Riverbends Trust. (This trust was established in September 1997 as a vehicle to receive assignments of assets from Thomas Lindsay Ryan, Jean Lendrum Ryan and associated entities.)

iv. S & J Ryan Subscription Unit Trust.

v. S & J Ryan Superannuation Fund.

(d) Stephen Frederick Ryan worked on the farm full time from about 1975, when he was 14 or 15 years of age.

(e) In about 1982, Thomas Lindsay Ryan left the farm to live in Perth and pursue other business endeavours. Stephen Frederick Ryan continued to work on the farm, on a subsistence basis, until 1 July 1989, when the Ryan Rural Enterprises partnership was established. Since that time, Stephen Frederick Ryan has managed

(Page 15)

the farm and provided his labour to Ryan Rural Enterprises for the payment of only minimal wages.

(f) Thomas Lindsay Ryan has not lived on the farm since about 1982, but has remained, through Bretti, a partner, and has had intermittent involvement with the farming business. Since 1982, Thomas Lindsay Ryan has pursued other business endeavours, mostly through the respondent as trustee of the RF Trust.

(g) From time to time, on the advice of Stephen Frederick Ryan's accountant, amounts were distributed and set aside by the SJRF Trust for the benefit of the RF Trust in accordance with clause 3 of the SJRF Trust deed. The amounts set aside were generated from the profits which Ryan Rural Enterprises derived and distributed to the SJRF Trust. They were set aside on the basis that the appellant retained complete discretion as to when these amounts would be paid to the RF Trust, and the trustee of the RF Trust would not be entitled to call upon or demand payment without the approval of the trustee of the SJRF Trust. It was Stephen Frederick Ryan's intention that in the event those amounts were paid to the RF Trust, they would be applied by the RF Trust to his benefit as a beneficiary of the RF Trust.

33 Thomas Lindsay Ryan swore an affidavit on 25 August 2004 in opposition to the appellant's application to set aside the statutory demand. He said, relevantly:

At no time have I made any agreement with Stephen Ryan or any other person to the effect that the debt could not be called on without the approval of the [appellant/defendant] as trustee of the S & J Ryan Family Trust.

34 On 13 October 2004, Acting Master Chapman heard the application to set aside the statutory demand. He ordered that it be set aside.

The primary judge's reasons

35 Judge Eaton identified, at [8], a threshold question to be decided, namely, whether the District Court had jurisdiction to grant the relief sought by the respondent. His Honour recorded, at [15], that counsel for the appellant submitted that the relief sought was equitable and, being principal relief, must be sought from the Supreme Court.

36 Judge Eaton found that the respondent as trustee of the RF Trust was 'absolutely entitled' to payment of the distributions in question, and therefore entitled to require the appellant to make payment to it:

(Page 16)

[T]he amounts distributed by the [appellant/defendant] to the RFT in successive years pursuant to its power of distribution under the terms of the trust deed, although credited in the accounts of the SJRFT to a beneficiary's loan account in the name of the RFT, had been alienated from the SJRFT and were then held for the benefit of the RFT absolutely pending payment. It follows that the RFT, not being a person or entity under a disability was absolutely entitled to payment and could call upon the [appellant/defendant] to make payment to it.

The [respondent/plaintiff], in its statement of claim, pleads that it has an 'indefeasible, absolutely vested, beneficial interest in possession in the distributed trust income' which, the [respondent/plaintiff] pleads, the [appellant/defendant] has failed to pay.

The [appellant/defendant] pleads that it has distributed trust income in accordance with the terms of the trust deed and all and any distributions made by it to the [respondent/plaintiff] have been fully satisfied in accordance with the terms of the trust deed. The [appellant/defendant] denies that the [respondent/plaintiff] has made demand for payment of distributed trust income and says that the [respondent/plaintiff] is not entitled to a distribution of trust income either on demand or at all. Any payment of trust income is, says the [appellant/defendant], at the discretion of the trustee [23] - [25].

37 Judge Eaton then turned to whether the respondent's claim was at law or in equity, and concluded, after a review of cases and commentary, that it was at law. His Honour concluded that he had jurisdiction to hear and determine the respondent's claim.

38 Judge Eaton then considered the merits of the respondent's applications for summary judgment on its claim, and summary judgment on the appellant's counterclaim. As to the application for summary judgment on its claim, his Honour found, at [71], that the appellant had no defence to the respondent's claim, and entered summary judgment for $175,519. As to the application for summary judgment on the appellant's counterclaim, his Honour was satisfied that the counterclaim was not frivolous or vexatious. He found, at [86], that the counterclaim should not be disposed of summarily.

39 On 30 June 2006, Judge Eaton made, relevantly, these orders:

(a) There be final judgment for the respondent against the appellant in the sum of $175,519 plus interest thereon at the rate of 6% per annum calculated from 18 January 2005 to 30 June 2006.

(b) There be a stay of execution on the judgment conditional upon the appellant prosecuting its counterclaim without delay.

(Page 17)

Grounds of appeal

40 On 20 July 2007, the appellant applied for orders that it have leave to file supplementary submissions and a supplementary list of legal authorities, that the respondent have leave to do the same in reply, and that the appellant pay the respondent's costs thrown away by reason of the appellant abandoning grounds 1, 3 and 8 of its grounds of appeal, but otherwise that the costs of the application be in the cause. The respondent consented to the proposed orders and, on 24 July 2007, I made orders in those terms.

41 The appellant having abandoned grounds 1, 3 and 8, the remaining grounds of appeal are:

2. The learned judge erred in fact and in law in failing to find that:

2.1 the respondent's pleaded claim was not in debt, but, in equity for, in effect, a vesting order compelling the appellant to convey trust property to the respondent and, therefore, that the claim was outside the jurisdiction of the District Court; and in any event

2.2 none of the facts alleged to give rise to a cause of action in debt are pleaded.

...

4. The learned judge erred in law in failing to find on a proper construction of clauses 3.3, 3.5 and 5(e) of the [SJRF Trust deed] that, where a distribution is set aside by the trustee, the trust fund constituted by that distribution is more than a bare trust, in that the trustee remains obliged to exercise powers of investment in respect of that trust fund, and, therefore, the remaining duties of the trustee are more than merely holding an identifiable sum of money on trust pending payment over to the beneficiary.

5. The learned judge erred in fact and in law in failing to find that:

5.1 in the absence of a demand by the respondent for the appellant to transfer to it the assets of the relevant trust, the appellant is not obliged to transfer any assets or pay any funds to the respondent; and

5.2 no demand has been made by the respondent for the appellant to terminate the relevant trust and convey the trust property to the respondent.

(Page 18)

6. The learned judge erred in law wherein he found that in the absence of an admission by a trustee of an express trust to the effect that it holds an identifiable sum of money subject to an immediate and unconditional duty to pay it to the beneficiary a trustee may be regarded as the debtor of a beneficiary.

7. The learned judge erred in fact and in law wherein he found that the private accounts and resolutions of the appellant contained and constituted admissions by the appellant that it was indebted to the respondent in the sum of $175,519, whereas his Honour ought to have found:

7.1 there was no evidence of any admission or statement by the appellant to the respondent to the effect that the appellant held an identifiable sum of money subject to an immediate and unconditional obligation to pay it to the respondent.

7.2 the accounts of the appellant did not constitute admissions of debts due and payable as at the date the accounts were signed, and therefore, were not capable of constituting admissions of debts presently due and payable.

7.3 to the extent the accounts could be regarded as admissions of any debt there was no evidence of the accounts having been communicated to the respondent as, in effect, admissions of the accounts stated therein.

7.4 the resolutions of the appellant were not admissions of any debts, but merely evidence of the appellant's intention to make certain distributions.

7.5 the respondent failed to discharge its onus of proof.

...

9. The learned judge erred in fact and in law in failing to find, if the proper construction of the [SJRF Trust deed] is not that for which the appellant contends, then there is a real question to be tried as to whether the appellant exercised its powers under the [SJRF Trust deed] under the mistaken belief that:

9.1 any distributions made to the respondent, as trustee of the [RF Trust], do not have to be paid until as and when the appellant decides to make the payment; and

9.2 at the time any payment is made the trustee of the [RF Trust] is obliged to distribute the payment to, or otherwise hold the payment on trust for, Mr Stephen Frederick Ryan; and

(Page 19)

therefore, the appellant, if payment were made to the respondent, would be entitled to repayment of that sum on the grounds of restitution for unjust enrichment.

10. The learned judge erred in fact and in law wherein, after having correctly found that he could not be satisfied that there was no serious question to be tried on the counterclaim on the grounds that:

10.1 there was an underlying family arrangement with several proprietary limited companies and discretionary trusts brought into existence for the purpose of estate planning and tax minimisation considerations;

10.2 the family arrangements were part of a broad agreement for the mutual benefit of all members of the family;

10.3 there was some form of common understanding or intention between Thomas Lindsay Ryan and Stephen Frederick Ryan; and

10.4 there has been a disruption of a previously harmonious situation;

he failed to find, for the same reasons, that those facts give rise to a real question to be tried as a defence and set-off to the respondent's claim, or at the very least, provide good reason for not granting the respondent summary judgment on its claim.

The respondent's application in the appeal

42 On 1 August 2007, the respondent applied, in the appeal, for orders, as follows:

(a) Leave to re-amend the statement of claim in terms of a minute of proposed re-amended statement of claim (the minute).

(b) The minute stand as the respondent's re-amended statement of claim, and service on the appellant be dispensed with.

There be final judgment for the [respondent] against the [appellant] in the sum of $175,519 plus interest thereon at the rate of 6% per annum

calculated from the date of each distribution until the date of payment or judgment

. (emphasis added)

(d) The costs of the application be in the cause.

(Page 20)

Order 2 had allowed interest for the period specified in the respondent's existing pleading, namely, from 18 January 2005 (the date the writ of summons was filed) to 30 June 2006 (the date of judgment).

43 The respondent's application was supported by an affidavit of Thomas Lindsay Ryan, sworn 1 August 2007, on behalf of the respondent as its sole director. He deposed, relevantly, that:

(a) At the time he instructed his solicitors to commence legal proceedings against the appellant to recover the sum of $175,519, he assumed that the respondent's claim included interest from the date each distribution was recorded until the date of payment or judgment.

(b) At all times before Judge Eaton delivered judgment on 30 June 2006, he assumed that the respondent's claim against the appellant included a claim for interest as stipulated in (a).

(d) The respondent would be prejudiced if it is unable to recover in the manner set out in (a).

(e) He only recently became aware that the Court of Appeal has the power to vary his Honour's orders.

Ground 2: the jurisdiction of the District Court: statutory provisions

44 Section 50(1) of the District Court of Western Australia Act1969 (WA) ('the Act') provides:

Subject to section 51 the Court has the same jurisdiction to hear and determine and may exercise all the powers and authority that the Supreme Court has and may exercise from time to time, in relation to -

(a) all personal actions, other than those of the kind referred to in subsection (2), where the amount, value or damages sought to be recovered is not more than the jurisdictional limit, whether on the original claim or demand or a balance after allowing payment on account, or the amount of any set off admitted by the plaintiff;

(aa) an action brought claiming an indemnity where the action arises from or relates to another action that is before the Court or that has been heard and determined by the Court;

(b) an action brought to recover a sum of not more than the jurisdictional limit which is the whole or part of the unliquidated balance of a partnership account, including in any such action

(Page 21)

jurisdiction, powers and authority relating to declaration of partnership or dissolution of partnership;

(ba) an action brought to recover a sum of not more than the jurisdictional limit which is the amount or part of the amount of the distributive share under an intestacy or of a legacy under a will;

(bb) an action for specific performance of or for the rectifying, delivering up, or cancelling of any agreement whatever, where the amount in dispute or the value of the property affected is not more than the jurisdictional limit;

(d) an action of ejectment to recover possession of any land, where the value of the land does not exceed one half of the jurisdictional limit by the year or where the rent exclusive of ground rent, if any, payable in respect of the land does not exceed one half of the jurisdictional limit by the year;

(e) any action, whether commenced in the Court or the Supreme Court, in which the amount, value or damages sought to be recovered exceeds the jurisdictional limit in which the parties thereto agree by a memorandum signed by them or by their respective solicitors, that the Court has power to hear and determine;

(f) all other actions or matters in respect of which jurisdiction is given to the Court by or under this or any other Act.

45 The provisions of s 50(1) which I have set out include the amendments made by the Courts Legislation Amendment and Repeal Act 2004 (WA), which came into operation on 1 May 2005 (that is, after the commencement of the District Court action the subject of this appeal). The amendments are not, however, material for present purposes. Sections 50(2) and 51 are also irrelevant for present purposes.

46 By s 52 of the Act:

In all respects, except as expressly provided by or under this Act, the practice and procedure of the Court as a court of civil jurisdiction including the trial of certain cases with or without a jury, shall be the same as the practice and procedure of the Supreme Court in like matters.

47 By s 55 of the Act:

The Court or a District Court judge has, as regards any action or matter within its or his jurisdiction for the time being, power -

(Page 22)

(a) to grant, and shall grant, in the action or matter such relief, redress or remedy, or combination of remedies, either absolute or conditional

;

and

(b) to make any order that could be made in regard to any action or matter, and shall in each such action or matter give such and the like effect to every ground of defence or counterclaim equitable or legal,

in a full and ample manner as might and ought to be done in the like case by the Supreme Court or a judge thereof.

48 Section 57 of the Act provides:

(1) The several rules of law and equity enacted and declared by the

Supreme Court Act 1935

, shall, unless express provision is otherwise made in this Act, be in force and take effect in the Court, as far as the matters to which those rules relate are respectively cognizable by the Court.

(2) Without affecting the generality of subsection (1), but subject to the express provisions of any other Act, in every action or matter commenced in the Court, law and equity shall be administered according to the provisions of section 25 of the Supreme Court Act 1935 as though that section were enacted in this Act and in terms made applicable to the Court.

49 The reference in s 57(1) of the Act to the several rules of law and equity enacted and declared by the Supreme Court Act1935 (WA) are, primarily, to ss 24 and 25 of that Act. Section 24 provides, relevantly:

Subject to the express provisions of any other Act, in every civil cause or matter commenced in the Supreme Court, law and equity shall be administered by the Court according to the rules following:-

(1) If any plaintiff or petitioner claims to be entitled to any equitable estate or right, or to relief upon any equitable ground against any deed, instrument, or contract, or against any right, title, or claim whatsoever asserted by any defendant or respondent in such cause or matter, or to any relief founded upon a legal right, which before the commencement of the Supreme Court Act 1880, could only have been given by a court of equity, the Court, and every Judge thereof, shall give to such plaintiff or petitioner such and the same relief as ought to have been given by the Court in its equitable jurisdiction in a suit or proceeding for the same or the like purpose properly instituted before the commencement of the said Act.

(2) If any defendant claims to be entitled to any equitable estate or right or to relief upon any equitable ground against any deed, instrument, or contract, or against any right, title or claim asserted

(Page 23)

by any plaintiff or petitioner in such cause or matter, or alleges any ground of equitable defence to any claim of the plaintiff or petitioner in such cause or matter, the Court, and every Judge thereof, shall give to every equitable estate, right, or ground of relief so claimed, and to every equitable defence so alleged, such and the same effect, by way of defence against the claim of such plaintiff or petitioner, as the Court in its equitable jurisdiction ought to have given if the same or the like matters had been relied on by way of defence in any suit or proceeding instituted in the Court for the same or the like purpose before the commencement of the

Supreme Court Act 1880

(3) The Court, and every Judge thereof, shall have power to grant to any defendant in respect of any equitable estate or right, or other matter of equity, and also in respect of any legal estate, right, or title claimed or asserted by him -

(a) all such relief against any plaintiff or petitioner as such defendant shall have properly claimed, by his pleading, and as the Court, or any Judge thereof, might have granted in any suit instituted for that purpose by the same defendant against the same plaintiff or petitioner;

and

(b) all such relief relating to or connected with the original subject of the cause or matter, and in like manner claimed against any other person, whether already a party to the same cause or matter or not, who shall have been duly served with notice in writing of such claim pursuant to any rule of court or any order of the Court, as might properly have been granted against such person if he had been made a defendant to a cause duly instituted by the same defendant for the like purpose. …

…

(7) The Court, in the exercise of the jurisdiction vested in it by this Act, in every cause or matter pending before it, shall have power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as shall seem just, all such remedies whatsoever as any of the parties thereto may appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them in such cause or matter; so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided.

It is unnecessary, in these reasons, to reproduce s 25.

50 Sections 50, 55 and 57 of the Act were considered by Malcolm CJ (with whom Pidgeon and Rowland JJ agreed) in Commercial
(Page 24)

Developments Pty Ltd (t/as Don Rogers Motors Pty Ltd) v Mercantile Mutual (Workers' Compensation) Ltd

(1991) 5 WAR 208.

51 In Commercial Developments, Malcolm CJ appears to have held, at 219 - 220, that 'personal actions' in s 50(1)(a) of the Act should bear the meaning ascribed to that expression by Parke B in Attorney-General v Churchill (1841) 10 LJ Ex 314, 319; (1841) 151 ER 997, and in Blackstone's Commentaries on the Laws of England (vol 3) 117. His Honour said:

An action on a contract of insurance claiming a declaration of entitlement to an indemnity by way of equitable relief is not a personal action of a kind described in s 50(1)(a). Such an action for a declaration is not one by which any amount is sought to be recovered. It is merely an equitable claim for a declaration of right as principal relief which is beyond the jurisdiction of the District Court (219).

His Honour also said, at 220, that unless 'money or property of the appropriate nature or value is sought to be recovered', the District Court has no jurisdiction to grant a declaration as principal relief.

52 Malcolm CJ explained, in Commercial Developments, at 217, that the District Court has limited jurisdiction to grant equitable relief pursuant to ss 55 and 57 of the Act and, in particular, by virtue of s 25 of the Supreme Court Act, in relation to a matter which is within jurisdiction. His Honour then added:

Thus, the power to grant such equitable remedies is in the nature of an ancillary or auxiliary power to be exercised in the determination of claims otherwise within the jurisdiction of the court: see

R v Cheshire County Court Judge

[1921] 2 KB 694.

Although Malcolm CJ referred, in this context, only to s 25 of the

Supreme Court Act

, s 24 of that Act is also relevant.

53 Section 50(1)(bb) of the Act was added by the Acts Amendment (Jurisdiction of Courts) Act 1981 (WA). This provision conferred upon the District Court jurisdiction in:

an action for specific performance of or for the rectifying, delivering up, or cancelling of any agreement whatever, where the amount in dispute or the value of the property affected is not more than fifty thousand dollars.

Commercial Developments

, Malcolm CJ held, at 217, that apart from s 50(1)(bb), and the provisions relating to partnerships in s 50(1)(b) and deceased estates in s 50(1)(ba), claims for other equitable relief as principal relief in the District Court are beyond jurisdiction. Also see

(Page 25)

Hondros v Chesson

[1981] WAR 146, 147 (Burt CJ);

Jones v Moylan

(No 2)

[2000] WASCA 361; (2000) 23 WAR 65 [23] - [24] (Kennedy J), [58] - [64] (McKechnie J).

54 Malcolm CJ noted in Commercial Developments, in relation to ss 55 and 57 of the Act:

[N]othing in s 55 or s 57 of the District Court Act gives the District Court jurisdiction to grant equitable relief against a third party which the court would be unable to grant against the third party if it were sued in a separate action. Section 55 operates with respect to any action in matters within the jurisdiction of the District Court. Section 57(1) applies only to 'matters ... cognizable by the Court'. Hence the provisions of s 57(3) and (7) [sic: s 24(3) and (7) of the

Supreme Court Act

] apply only to such matters. In particular s 57(3) [sic: s 24(3) of the

Supreme Court Act

] only applies to 'an equitable estate or right, or other matters of equity' otherwise within the jurisdiction of the District Court. It has no application to a personal action for damages for death or bodily injury so as to enable relief to be given 'against any other person whether already a party to the same cause or matter or not' as described in s 24(3)(b) of the

Supreme Court Act.

Section 24(7) of the

Supreme Court Act

applies to the administration of law and equity in relation to the court 'of the jurisdiction vested in it' in respect of 'any and every legal or equitable claim properly brought forward by them'. In my opinion this does not apply so as to give the District Court jurisdiction, in respect of a claim for damages for an amount in excess of $80,000 properly brought under s 50(2) of the District Court Act, to grant to the defendant equitable relief against a third party by way of a declaration that he is entitled to an indemnity in respect of the damages awarded to the plaintiff, where the amount of the indemnity sought, measured by the damages claimed by the plaintiff against the defendant would be beyond the jurisdiction of the District Court (219).

55 In Vale v TMH Haulage Pty Ltd (1993) 31 NSWLR 702, the Court of Appeal of New South Wales construed the expression 'any personal action at law' in s 44(1) of the District Court Act 1973 (NSW), which conferred jurisdiction on the District Court of New South Wales in 'any personal action at law where the amount claimed does not exceed' a specified amount. Priestley JA (with whom Meagher and Sheller JJA agreed) refused to construe the expression by reference to authorities dating back to well before Blackstone. The approach to construction of Priestley JA is to be compared to and contrasted with the approach of Malcolm CJ in Commercial Developments at 219 - 220, notwithstanding that the expression in the New South Wales legislation is 'any personal action at law' whereas the expression in s 50(1)(a) of the Act is 'personal actions'. Priestley JA said:
(Page 26)

In my view, parliament must have intended in legislating in 1973 in regard to the District Court, whose jurisdiction had become steadily more important throughout this century, to describe its jurisdiction in the legal language of the present day; and, in my opinion the way the term 'personal action at law' was understood in 1973 in New South Wales was substantially that described in

The Oxford Companion to Law

, (Professor DM Walker, (1980)) as follows (at 949):

'Personal action. At common law in England, personal actions were distinguished from real actions (qv) and mixed actions (qv). They were claims against persons arising out of contracts or out of torts, the former comprising the actions of account, assumpsit, covenant, debt and certain others, the latter comprising attaint, case, deceit, champerty, conspiracy, detinue, replevin, trespass, trover, and certain others. All these were abolished in the nineteenth century together with their individual original writs and distinct forms of procedure. The term is now frequently given to an action in personam, where the judgment of the court is a personal one, normally for payment of money, as contrasted with an action in rem, where the plaintiff seeks to make good a claim to or against certain property in respect of which, or in respect of damage done by which, he alleges that he has an actionable demand.' (707)

Priestley JA held that the District Court of New South Wales had jurisdiction with respect to the recovery of a debt against former directors of a company under s 556 of the

Companies (Victoria) Code

and the

Companies (New South Wales) Code

. A claim under s 556 was a 'personal action at law'. It was not a claim of an equitable kind, or a claim in rem.

56 The observations of Priestley JA in Vale, in relation to the expression 'any personal action at law', were referred to, with apparent approval, in Forsyth v Deputy Commissioner of Taxation [2007] HCA 8; (2007) 81 ALJR 662 [21] (Gleeson CJ, Gummow, Hayne, Callinan, Heydon & Crennan JJ), [98] (Kirby J).

Ground 2: the jurisdiction of the District Court: when is a trustee liable to a beneficiary in debt or for money had and received?

57 In Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, Brennan J (who dissented in the result) explained, at 230 - 232, that the action for money had and received developed from the action of indebitatus assumpsit. Originally, the action of indebitatus assumpsit led to a judgment in damages, whereas the action of debt resulted in a judgment for the precise amount of the debt. In time, however, the action of indebitatus assumpsit substantially replaced the action of debt. Brennan J noted:

(Page 27)

The first extension of indebitatus assumpsit to allow recovery on a quantum meruit for work done embraced only those cases where the debt on which the action was based arose out of a contract. However, at some later date, which Maitland puts between 1673 and 1705 (

The Forms of Action at Common Law

(1968 reprint), p 57), the action of indebitatus assumpsit was extended to actions in which the element of contract was purely fictitious: an obligation was imposed by law on the defendant and had nothing contractual about it: see Holdsworth,

History of English Law

(1966 reprint), vol. VIII, pp 96 - 97. Thenceforward the action of indebitatus assumpsit embraced both actions founded on debts arising out of executed contracts and actions which were not contractual but quasi-contractual. The Statute of Frauds, when it was enacted in 1677, presented no impediment to the prosecution of actions in quasi-contract, for there was no contract on which the Statute might fasten. For the same reason, the modern equivalents of the Statute of Frauds do not impede the prosecution of modern actions which are not contractual but quasi-contractual (232).

58 Subsequently, in Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, Mason CJ, Wilson, Deane, Toohey and Gaudron JJ reviewed the nature of the common law action for moneys had and received. Their Honours said:

The common law right of action may arise in circumstances which also give rise to a resulting trust of specific property or funds or which would lead a modern court to grant relief by way of constructive trust. However, notwithstanding that the grounds of the action for recovery are framed in the traditional words of trust or use and that contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience, the action itself is not for the enforcement of a trust or for tracing or the recovery of specific money or property. It is a common law action for recovery of the value of the unjust enrichment and the fact that specific money or property received can no longer be identified in the hands of the recipient or traced into other specific property which he holds does not of itself constitute an answer in a category of case in which the law imposes a prima facie liability to make restitution. Before that prima facie liability will be displaced, there must be circumstances (e.g, that the payment was made for good consideration such as the discharge of an existing debt or, arguably, that there has been some adverse change of position by the recipient in good faith and in reliance on the payment) which the law recognizes would make an order for restitution unjust (673).

For an analysis of the doctrinal basis for the action for money had and received, see

Roxborough v Rothmans of Pall Mall Australia Ltd

[2001] HCA 68; (2001) 208 CLR 516 [62] - [100] (Gummow J).

59 In Meagher Gummow & Lehane's, Equity Doctrines & Remedies (4th ed, 2002) it is stated, relevantly:
(Page 28)

Frequent attempts were made at law by

cestuis que trust

to recover, in actions of debt, moneys owing to them by their trustee. The courts again repeatedly held that such actions, prima facie, could not be maintained: if a trustee was accountable, he should be made to account in the Court of Chancery:

Pardoe v Price

(1847) 16 M & W 451; 153 ER 1266;

Phillips v Hewston

(1856) 11 Ex 699; 156 ER 1012. But if the trustee admitted to the

cestui que trust

that he owed the money, he was debarred from setting up his office as trustee as a defence against the

cestui que trust

, who could then hold him accountable at law:

Remon v Hayward

(1835) 2 Ad & E1 666; 111 ER 256;

Roper v Holland

(1835) 3 Ad & E1 99; 111 ER 351;

Edwards v Lowndes

(1852) 1 E & B 81; 118 ER 367;

Howard v Brownhill

(1853) 23 LJQB 23;

London & North-West Rly Co v Glyn

(1859) 1 E & E 652; 120 ER 1054. It is important to note that in these latter cases the plaintiff's entitlement is simply based on the defendant's admission of debt: the fact that he made it in his character as trustee is irrelevant, as is the fact that the plaintiff was a

cestui que trust

[1-215].

60 In Edwards v Lowndes (1852) 1 E & B 81; (1852) 118 ER 367, Lord Campbell CJ, who delivered the judgment of the court, said:

It may be taken as settled that, where the parties stand to each other in the relation of trustee and cestui que trust, and the trustee is under no other legal liability than that which arises from that relation, no action at law for money had and received can be maintained against him, though he has money in his hands which under the terms of the trust he ought to pay over to the cestui que trust, but which he still holds in the character of trustee only. It is unnecessary to refer upon this proposition to other authorities than that of the well considered judgment delivered by Baron Rolfe in

Pardoe v Price

(16 M & W 451). If, indeed, the trustee, by appropriating a sum as payable to the cestui que trust, or otherwise, admits that he holds it to be paid to the cestui que trust, and for his use, the character of the relation between the parties is changed; and the trustee does not hold it as a trustee properly so called, but as a receiver for the plaintiff's use, who may maintain an action at law for money had and received, founded on the approbation to his use and the liability thence arising. There are many cases that are founded upon this principle, from

Allen v Impett

(8 Taunt 263), to

Roper v Holland

(3 A & E 99); and these have reference to earlier decisions (370).

61 In R v Brown (1912) 14 CLR 17, Griffith CJ noted:

The action for money had and received lay whenever the defendant had received money which in justice and equity belonged to the plaintiff and when nothing remained to be done except pay over the money. Even in the case of an express trust, if nothing remained to be done but pay over money, the trustee by his conduct, as for instance by admitting that he had money to be paid over, might make himself liable to this action: See

Pardoe v Price

(16 M & W 451), at p. 458. When money is paid by one person to another to be retained by him until the happening of a given

(Page 29)

event and no longer, an implied obligation arises to repay it when that event happens. This may be called a 'trust' in one sense. But it is none the less a legal obligation to pay the money, and may be enforced as such. I do not know any definition of debt that does not include such an obligation (25).

Also see

Webb v Stenton

(1883) 11 QBD 518, 526 (Lindley LJ), 528 (Fry LJ);

Turner v The New South Wales Mont De Piete Deposit and Investment Co Ltd

(1910) 10 CLR 539, 545 - 546 (Griffith CJ);

Harmonic Resonator Ltd v Walton

(1927) 27 SR (NSW) 81, 82 - 84 (Street CJ).

62 In Roxborough, Gummow J observed, in the context of a discussion of the action for money had and received:

With respect to express trusts it was settled by 1852, when

Edwards v Lowndes

((1852) 1 El & Bl 81 at 89 [118 ER 367 at 370]. See also

Bartlett v Dimond

(1845) 14 M & W 49 at 56 [153 ER 385 at 387 - 388];

Pardoe v Price

(1847) 16 M & W 451 at 458 - 489 [153 ER 1266 at 1269];

R v Brown

(1912) 14 CLR 17 at 25; Bullen and Leake,

Precedents of Pleadings

, 3rd ed (1868), pp 46 - 47; Rath,

Principles and Precedents of Pleading

(1961), p 28.)

was decided, that it was only at the stage when there remains nothing to the trustee to execute except the payment over of money to the beneficiary, or the trustee admits the debt, that an action for money had and received might lie at the suit of the beneficiary against the trustee; in other respects, in the courts of law the trustee was treated as the absolute owner and the beneficiary's remedy was exclusively in a court of equity which might give effect to equitable set-offs and other equitable defences available to the trustee. The trust which had not been wholly performed was treated as analogous to the "open" contract, that is to say, one not discharged (footnote omitted)

; at that earlier stage, the action for money had and received did not lie [67].

Ground 2: the jurisdiction of the District Court: the nature or character of the distributions of SJRF Trust income made to the respondent

63 By cl 3.1(a) of the SJRF Trust deed, relevantly, the appellant, as trustee, was empowered to pay, apply or set aside all or any part of the net income of the trust fund to or for any one or more of the general beneficiaries (including, relevantly, the respondent) living or in existence at the time of the determination. Clause 3.3(a) provides, relevantly, that a determination to pay, apply or set aside any income may be effectually made and satisfied by placing the amount to the credit of the beneficiary in the books of account of the trust. By cl 3.5, relevantly, any amount set aside for any beneficiary shall cease to form part of the trust fund and, upon the setting aside, shall henceforth be held by the trustee as a separate trust fund on trust for that person absolutely, with power to the trustee,

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pending payment over to the person, to invest, apply or deal with the whole or any part of the fund or any resulting income from it in the manner provided for in cl 5(e). Clause 5(e) provides, relevantly, that the trustee may invest any amount held by the trustee as a separate trust fund pursuant to cl 3.5 on behalf of the person entitled to it by investing it and its resulting income in any of the investments authorised by the trust deed.

64 Each of the resolutions of the appellant, pursuant to which the appellant distributed SJRF Trust income for the financial years ended 30 June 1999 through to 30 June 2002, were identical, save for dates and the amounts distributed. They were in these terms:

TRUSTEES RESOLUTION RELATING TO INCOME

That so much of the income of the [SJRF Trust] for the year to end 30 June [relevant year] as has not hitherto been paid or applied pursuant to the relevant clause of the Trust Deed be dealt with as follows -

The total income for the period be applied pursuant to the relevant clause of the Trust Deed for the benefit of the beneficiaries listed below and in the amounts and proportions beside their names:-

[Beneficiaries and distributed amounts listed]

This application being effected by crediting the said amounts to such beneficiaries in the books of the trust.

65 In my opinion, by virtue of cl 3.5, upon the appellant resolving, on each occasion in question, to distribute a specified amount of the SJRF Trust income to the respondent, the appellant held the relevant amount (being part of the income which the appellant had derived) upon trust for the respondent absolutely.

66 It appears from the financial statements of the SJRF Trust for each of the financial years ended 30 June 1996 through to 30 June 2003, which were in evidence before Judge Eaton, that the appellant placed to the credit of the respondent in the books of account of the SJRF Trust, each amount which the appellant had resolved to distribute to the respondent. The relevant amounts were recorded in those financial statements as 'current liabilities' and were described in the balance sheets and in the notes to the financial statements as being accumulated in a 'Beneficiaries' Loan Account', in a 'Beneficiaries' Current Account' or as an 'Unpaid Beneficiary Entitlement'.

67 It is established, by the financial statements of the SJRF Trust and the evidence of Stephen Frederick Ryan (a director of the appellant) that,

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in apparent breach of cl 3.5 of the SJRF Trust deed, the amounts distributed to the respondent were not held by the appellant as a separate trust fund. Further, it is established, by that evidence, that the appellant did not invest the distributed amounts pursuant to cl 3.5 and cl 5(e) and in consequence no income was derived from those amounts. The evidence of Stephen Frederick Ryan, to which I have referred, is contained in his affidavit, sworn 2 August 2004, in the proceedings to set aside the statutory demand. He deposed, relevantly:

(a) In par 9, the appellant as trustee of the SJRF Trust made distributions, from time to time, to the beneficiaries of that trust 'by payment or by setting aside amounts in account for the beneficiaries'.

(b) In par 11, the amounts set aside were set aside 'on the basis that [the appellant] retained complete discretion as to when these amounts would be paid to [the relevant beneficiaries], and that [the relevant beneficiaries] would not be entitled to call upon or demand payment without the approval of [the appellant]'.

The 'basis', as alleged in par 11, on which the distributed amounts were supposedly set aside, is not authorised by the SJRF Trust deed and, in any event, the so-called 'basis' is not referred to in the resolutions, the financial statements or any other documents produced by or on behalf of the appellant.

68 In my opinion, if, when the District Court action was commenced (that is, 18 January 2005), there remained nothing for the appellant to execute in respect of the trust on which it held the amounts distributed to the respondent, except the payment of those amounts to the respondent; or if, when the District Court action was commenced, the appellant had admitted the existence of a debt owing to the respondent on account of the distributed amounts in question, then the respondent was entitled to recover those amounts from the appellant by an action for money had and received. Such an action would be 'a personal action' within s 50(1)(a) of the Act in that the relevant amounts would be money which the appellant had and received and which the respondent was entitled to recover. Any cause of action of the respondent for money had and received would be against the appellant personally in respect of its receipt of the relevant amounts and its failure to make payment to the respondent.

69 I turn, first, to consider whether, as at the date of commencement of the District Court action, there remained nothing for the appellant to execute in respect of the trust created pursuant to cl 3.5 of the SJRF Trust

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deed, except the payment over of the amounts distributed to the respondent.

70 In my opinion, cl 3.5 of the SJRF Trust deed, the resolutions, the financial statements of the SJRF Trust and the evidence of Stephen Frederick Ryan, which I have mentioned at [24], [27] - [30], [32] and [64] above, establish that as at the critical date, the appellant held the distributed amounts upon trust for the respondent absolutely. The respondent's interest in the distributed amounts was not subject to any contingency or condition which might defeat its entitlement. Rather, the respondent's interest in the distributed amounts was vested in interest and possession. The statutory demand dated 16 July 2004 was effective to require the appellant to pay the distributed amounts to the respondent, notwithstanding that the demand was, in form, made as a creditor against a debtor for the payment of a debt rather than by a beneficiary against a trustee for the payment of amounts in respect of which the beneficiary had an absolutely vested entitlement. The court should not adopt a construction of the statutory demand which is narrow or unreal. Compare, in a contractual context, the observations in Kearns v Hill (1990) 21 NSWLR 107, 109 (Meagher JA, Mahoney & Clarke JJA agreeing). It is plain, on a reasonable construction of the statutory demand in the context of the factual and legal background against which it was made, that the demand sought payment of the distributed amounts. In my opinion, at the critical date, the appellant was obliged to pay the relevant amounts to the respondent. There remained nothing for the appellant to execute in respect of the trust on which it held the distributed amounts, except payment over of the relevant amounts to the respondent and, in consequence, on the authorities referred to by Gummow J in Roxborough [67], the respondent was entitled to recover those amounts from the appellant by an action for money had and received.

71 Although it is not essential to the determination of the appeal, I will give some consideration to the alternative basis for recovery referred to by Gummow J in Roxborough [67], namely, whether as at the date of commencement of the District Court action, the appellant had admitted that the distributed amounts were owing to the respondent.

72 In Commissioner of Inland Revenue v Ward (1969) 69 ATC 6050, the Court of Appeal of New Zealand considered a trust deed which conferred on the trustee a discretionary power under the Trustee Act 1956 (NZ) to 'pay … or otherwise apply' trust income for the benefit of various infant contingent beneficiaries. Before the end of the income year in question, the trustee executed a declaration in respect of the trust income

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in which she determined, relevantly, that part of the income was to be held to the credit of four contingent beneficiaries in equal shares. Subsequently, appropriate entries were made in the trust's books, but the relevant amounts were not actually separated from the general trust funds until some years later. The Commissioner assessed the trustee on the whole of the trust income and the question at issue was whether, as a matter of law, the steps taken by the trustee were sufficient to support her contention that there was an application of the trust income within the second proviso to s 155(b) of the

Land and Income Tax Act 1954

(NZ) so as to render the beneficiaries (and not the trustee) taxable on the income. The Court of Appeal held, by majority (North P & McCarthy J, Turner J dissenting) that a resolution deliberately arrived at and recorded is sufficient of itself to effect an immediate vesting of a specific part of the trust income. Accordingly, there was a change in the title of the four contingent beneficiaries, from a contingent to an absolute interest, in the amounts allocated to them. There had been an application of the relevant trust income within the meaning of the applicable statutory provisions. The Commissioner argued that the trustee's declaration should not be regarded as an application of the trust income unless it imposed a trust on the trustee in favour of the relevant beneficiaries or created a debtor/creditor relationship between them. McCarthy J rejected the argument. His Honour said:

The moneys covered by the resolution were of course held on trust both before and after the resolution; held, basically, under the trusts created by the original deed. The effect of the resolution was to fix the beneficiaries to whom payment would eventually have to be made and to that extent one could perhaps speak of a new trust, but this is by no means an unusual occurrence in the administration of trust deeds. A power of appointment, though in many respects different from a power to apply, does supply a like illustration in this respect. To suggest that a trustee may not in such circumstances hold a particular amount in trust for a particular beneficiary unless the moneys are identifiably separate from the remaining trust assets is, I think, unsound. No such separation was effected in

Vestey's

case

. There the resolution applied only to part of a sum of money standing to the credit of the trustees at their bank; the balance was to be held as before. The moneys were not in hand and capable of physical division; there was instead a credit in a current banking account. I fail to see any difference in principle between that situation and that which pertains in the present case. Incidentally, it is very doubtful whether the accounts in the present case establish that there was insufficient cash in the different accounts available on 29 March 1963 to cover the amounts mentioned in the resolution. Mr McKay argues strongly that there was sufficient, but for myself, I don't think this aspect important for clearly cash could have been raised (6071).

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Also see

Re Baron Vestey's Settlement; Lloyds Bank Ltd v O'Meara

[1951] Ch 209; [1951] 2 All ER 891. McCarthy J then dealt with the Commissioner's contention relating to the creation of a debtor/creditor relationship. His Honour said:

I believe, too, that it is misleading to speak of debtor-creditor relationship. The rights of the beneficiaries here do not arise out of debt or contract. They arise out of the trusts created by the deed, and the beneficiaries are entitled to invoke the powers of the court by reason of a new title 'consisting of the exercise of the trustees' discretion in the infant's favour' (6071).

73 In Euroasian Holdings Pty Ltd v Ron Diamond Plumbing (in liq) (1996) 64 FCR 147, the applicant was the trustee, and the respondent a beneficiary, of a discretionary trust. In 1988, the respondent created a floating charge in favour of a third party which would crystallise upon the making of an application to wind up the respondent. In 1992, the respondent commenced winding up. In 1994, the applicant resolved, by two resolutions, to distribute moneys to the respondent. On 1 August 1995, the respondent served a statutory demand on the applicant in which it made demand for payment of the moneys the subject of the resolutions. On 21 August 1995, the applicant paid the holder of the floating charge an amount not exceeding the moneys it had resolved to distribute to the respondent. The applicant applied to set aside the statutory demand on the ground that there was a genuine dispute and Heerey J, in the Federal Court of Australia, made an order to that effect. His Honour set aside the statutory demand for two reasons. Relevantly, for present purposes, he held that there was not a 'debt' which s 159E of the Corporations Law required as the foundation of a statutory demand. His Honour said:

The resolutions in question did not bring about the relationship between the applicant and respondent of debtor and creditor. Whether or not the respondent may have been 'presently entitled' for the purposes of the

Income Tax Assessment Act 1936

(Cth), it seems to be the position that rights of the respondent were enforceable in equity only. I rely on what was said in

Commissioner of Inland Revenue v Ward

(1969) 69 ATC 6,050 at 6,071 (150).

Heerey J then cited the passage from the reasons of McCarthy J in

Ward

which I have set out at [72] above.

74 In Ward and Euroasian Holdings no reference was made to Edwards v Lowndes or any of the other cases in the line of authority referred to in Meagher, Gummow & Lehane's, Equity Doctrines & Remedies (4th ed, 2002) [1-215] or in Gummow J's reasons in Roxborough [67].

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75 In Tindon Pty Ltd v Adams [2006] VSC 172, the first defendant was the trustee of the Port Side Trust. The plaintiff and the second defendant each held one half of the issued units in that trust. The net income of the Port Side Trust for the year ended 30 June 2005 was $110,703. One half of that amount was distributed to each unitholder and was then the subject of a loan from the unitholder to the trustee in the sum of $55,351.50. The loans were included in the financial accounts of the Port Side Trust for the year ended 30 June 2005 as current liabilities. The plaintiff claimed a declaration that the loan it made to the trustee was repayable on demand and that a demand had been made. The plaintiff also sought an order that the trustee repay the loan. The trustee argued, relevantly, that the relief sought by the plaintiff should be refused in that there was no debtor/creditor relationship between them under which the plaintiff was entitled to demand repayment whenever it chose to do so. Hargrave J said:

On behalf of the plaintiff, reliance was placed upon the following statement by the learned authors of Ford and Lee,

Principles of the Law of Trusts

, at [1440]:

'In its common law sense "creditor" does not ordinarily comprehend a beneficiary in relation to the trustee. But a trustee under an existing trust can become a debtor at common law to the beneficiary by stating an account, or, in other words, admitting to the beneficiary that a certain sum of money is held by the trustee subject to an immediate and unconditional duty to pay it to the beneficiary.' (Citations omitted.) (Emphasis added.)

One of the cases cited by Ford and Lee for the above statement is Bartlett v Dimond [(1845) 14 M & W 49 at 56 - 7; 153 ER 385 at 387] in which Pollock CB stated:

'So long as a trust continues, a bill in equity is the only remedy. We think that the moneys received were originally received in trust; and that the trust had not determined at the testator's death. If that trust was ended, and the testator had stated an account, or, in other words, had admitted himself to the plaintiff that he held any sum of money in his hands payable to him absolutely, he would, with respect to that sum, be a debtor, not properly a trustee, and then an action would have been maintainable against him.' (Emphasis added.)

In my view, the principle stated in Ford and Lee and in Bartlett v Dimond does not support the plaintiff's case. In the first place, the Port Side Trust is a continuing trust. Secondly, the 2005 Port Side accounts are not capable of constituting an admission to the unitholders of the kind referred to in Bartlett v Dimond, so as to give rise to a debtor/creditor relationship

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between the trustee and the unitholders. The accounts do not contain an admission that any sum of money is held by the trustee subject to an immediate and unconditional duty to pay it to the unitholders in respect of the Delprop [sic Port Side] loans. Indeed, the accounts disclose that the trustee did not at that time have sufficient cash on hand to be the subject of an immediate and unconditional duty to repay the Port Side loans. Accordingly, the matter is to be determined by reference to equitable principles [50] - [52].

76 Numerous authorities have considered, in the context of acknowledgements of debt for the purposes of limitation statutes, whether a corporation's financial statements can constitute an acknowledgment of debt. The authorities establish that financial statements (including the balance sheet and the notes to the accounts) can constitute an acknowledgement of debt, and that individual creditors comprised in the aggregate sums shown in the financial statements can be identified by extrinsic evidence, where the financial statements have been received by the creditor who sues in reliance on them. See The Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535, 543 - 544, 549, 554 - 563; Jones v Bellgrove Properties Ltd [1949] 2 KB 700, 704 - 705; Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1980] Ch 146, 154, 193; Ledingham v Bermejo Estancia Co Ltd [1947] 1 All ER 749, 753; Re Brookers (Australia) Ltd (in liq); Brooker v Pridham (1986) 41 SASR 380, 385 - 386, 393 - 394. In Brooker, King CJ (with whom Mohr J agreed) said:

A balance sheet can be an acknowledgment of debt (

The Stage Club Ltd v Millers Hotels Pty Ltd

(1981) 150 CLR 535), and individual creditors comprised in the aggregate sums shown therein can be identified by extrinsic evidence: see

Jones v Bellgrove Properties Ltd

(

[1949] 2 KB 700

The acknowledgment operates, of course, at the date at which the balance sheet speaks, namely the end of the relevant financial period. I see no reason why the ordinary rule should not apply, namely that the acknowledgment implies a promise to pay. I do not think that the difference between the date of signature of the Balance Sheet and the date at which it speaks precludes the ordinary implication. If, of course, the debt has been discharged between those dates, there is nothing upon which the promise can operate. If the debt has not been discharged, the implied promise is operative. If there existed an immediate liability to repay, I do not think that the use of the expression 'deferred liability' in the Balance Sheet or the company's financial position could negative the implication of the promise to pay.

I consider that the acknowledgments were communicated to the appellants for the reasons given by Olsson J.

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The remaining question is whether the Balance Sheets could operate as an acknowledgment and promise to J P Brooker by reason of his being a director and a signatory. J P Brooker, at the material times, was one of six directors. His interest as a Shareholders' Account depositor would have been well known to his co-directors. There can be no doubt, therefore, that the decisions of the Board to adopt the Balance Sheets containing the acknowledgment of debt and promise to pay J P Brooker were valid decisions. The case is therefore distinguishable from

Re The Coliseum (Barrow) Ltd

(

[1930] 2 Ch 44

). It may also be distinguishable on the same ground from

Re Transplanters (Holding Co) Ltd

(

[1958] 2 All ER 711

) because in that case there were only two directors and it is not stated whether the concurrence of both was required for the adoption of the Balance Sheet. The signature of J P Brooker, together with the co-director Allan, to the Balance Sheets did no more than give effect to the valid decisions of the Board. There was no question of abuse of his fiduciary position for his own benefit. He, like Mr Allan, was a mere instrument of the Board and his signature was the means of complying with the statutory requirement. The acknowledgment and promise were contained in the Balance Sheets validly adopted by the Board (385 - 386).

77 In the present case, I am of the opinion that the financial statements of the SJRF Trust and the evidence of Stephen Frederick Ryan, which I have mentioned at [27] - [30] and [32] above, when considered in the context of the relevant factual and legal background including cl 3.5 of the SJRF Trust deed and the resolutions, constitute admissions by the appellant that the distributed amounts were owing by the appellant to the respondent, for the purposes of the principle referred to in Gummow J's reasons in Roxborough [67]. The latest financial statements before Judge Eaton, namely, those for the year ended 30 June 2003, described the distributed amounts as an 'Unpaid Beneficiary Entitlement'. When that description is read with cl 3.5, the resolutions and Stephen Frederick Ryan's evidence, the proper conclusion is that the appellant's admission was of an obligation to pay on demand. Although it is unnecessary to determine this point, my examination of Edwards v Lowndes and the other cases in the line of authority referred to in Meagher, Gummow & Lehane's, Equity Doctrines & Remedies (4th ed, 2002) [1-215] and Gummow J's reasons in Roxborough [67], does not indicate that it is essential, for there to be a binding admission in relation to an amount owing by a trustee to a beneficiary, that the relevant amount is held as, or represented by, cash at bank or some other monetary sum when the alleged admission is made.

Ground 2: the jurisdiction of the District Court: conclusion

78 In my opinion, the District Court had jurisdiction to entertain the respondent's claim in the District Court action. The respondent's claim is

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properly to be characterised as an action for money had and received, and jurisdiction in relation to such an action is conferred on the District Court by s 50(1)(a) of the Act. Although the amended statement of claim is not a model pleading of a cause of action for money had and received, it adequately alleges the material facts which are necessary to establish this particular cause of action.

79 Ground 2 fails.

Ground 4

80 The appellant contends that Judge Eaton erred in failing to find, on a proper construction of cl 3.3, cl 3.5 and cl 5(e) of the SJRF Trust deed, that, where a distribution is set aside by the trustee, the trust fund constituted by that distribution is more than a bare trust, in that the trustee remains obliged to exercise powers of investment in respect of that trust fund and, therefore, the remaining duties of the trustee are more than merely holding an identifiable sum of money on trust pending payment to the beneficiary.

81 In my opinion, the existence of the appellant's duty and power of investment in relation to the distributed amounts, did not preclude the respondent from making demand for payment of those amounts or entitle the appellant to refuse to make payment. As I have mentioned, the evidence discloses that the distributed amounts were not, in fact, invested for the benefit of the respondent. In any event, the appellant's duty and power of investment did not derogate from the respondent's absolutely vested interest in the relevant amounts.

82 Ground 4 is without merit.

Ground 5

83 The appellant contends that Judge Eaton erred in failing to find that:

(a) in the absence of a demand by the respondent for the appellant to transfer to it the assets of the relevant trust, the appellant was not obliged to transfer any assets or pay any funds to the respondent; and

(b) no demand had been made by the respondent for the appellant to terminate the relevant trust and convey the trust property to the respondent.

84 For the reasons I have given, at [63] - [70] above, at all material times the appellant held the distributed amounts upon trust for the
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respondent, and the respondent had full legal capacity and an absolutely vested interest in the relevant amounts. Also, for the reasons I have given, at [70] above, the statutory demand constituted a demand made by the respondent for the appellant to pay to the respondent the amount of its entitlement.

85 Ground 5 fails.

Grounds 6 and 7

86 The appellant contends, in ground 6, that Judge Eaton erred in finding that in the absence of an admission by a trustee of an express trust to the effect that it holds an identifiable sum of money subject to an immediate and unconditional duty to pay it to the beneficiary, a trustee may be regarded as the debtor of a beneficiary.

87 The appellant contends, in ground 7, that Judge Eaton erred in finding that the appellant's accounts and resolutions contained and constituted admissions by the appellant that it was indebted to the respondent in the sum of $175,519. According to the appellant, his Honour should have found that:

(a) there was no evidence of any admission or statement by the appellant to the respondent to the effect that the appellant held an identifiable sum of money subject to an immediate and unconditional obligation to pay it to the respondent;

(b) the accounts of the appellant did not constitute admissions of debts due and payable as at the date the accounts were signed, and therefore, were not capable of constituting admissions of debts presently due and payable;

(c) to the extent the accounts could be regarded as admissions of any debt there was no evidence of the accounts having been communicated to the respondent as, in effect, admissions of the accounts stated therein;

(d) the resolutions of the appellant were not admissions of any debts, but merely evidence of the appellant's intention to make certain distributions; and

(e) the respondent failed to discharge its onus of proof.

88 For the reasons I have given, at [63] - [70] above, when the District Court action was commenced there remained nothing for the appellant to execute in relation to the trust over the distributed amounts, except the
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payment over of those amounts to the respondent. Grounds 6 and 7 do not, therefore, advance the appellant's case.

Ground 9

89 The appellant contends that Judge Eaton erred in failing to find, if the proper construction of the SJRF Trust deed is not that asserted by the appellant, then there was a real question to be tried as to whether the appellant exercised its powers under the SJRF Trust deed under the mistaken belief that:

(a) any distributions made to the respondent, as trustee of the RF Trust, do not have to be paid until as and when the appellant decides to make the payments; and

(b) at the time any payment is made, the trustee of the RF Trust is obliged to distribute the payment to, or otherwise hold the payment on trust for, Stephen Frederick Ryan; and

therefore, the appellant, if payment were made to the respondent, would be entitled to repayment of that sum on the ground of restitution for unjust enrichment.

90 The appellant did not submit that the SJRF Trust deed was a sham. That is, it was not asserted, on behalf of the appellant, that the trusts and provisions of the SJRF Trust deed were not genuine or intended to take effect in accordance with their terms. The appellant's position, in relation to sham, is unsurprising. A significant purpose in the settlement of the trust was the obtaining of prospective income tax benefits for some of the persons or entities associated with the trust. Serious consequences would undoubtedly arise if the trust relationship created by the SJRF Trust deed, and resolutions made or transactions effected under the deed, were not intended to create valid and binding rights and obligations.

91 At all material times, the appellant, by virtue of its status as trustee, was a member of the 'excluded class' (as defined in cl 1.1 of the SJRF Trust deed) and, as a result, was not a beneficiary. In other words, at all material times the appellant did not have a beneficial interest in the trust fund, except to the extent that it had an equitable lien to secure its right of indemnity or exoneration out of the trust fund (either pursuant to cl 12 of the deed or in equity) in respect of liabilities properly incurred in the execution or attempted execution of its powers and duties as trustee.

92 At all material times, the appellant was under a duty of fidelity to the trust instrument. Its obligation was to adhere strictly to the terms of the

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deed. See

Jacob's Law of Trusts in Australia

(7th ed, 2006) [1704] and the cases there cited.

93 The appellant's distribution of SJRF Trust income to the respondent had income tax consequences for the respondent. At all material times, the respondent was 'presently entitled' to the distributed amounts (see Pearson v Federal Commissioner of Taxation [2006] FCAFC 111; (2006) 64 ATR 109 [14]) and was not under a legal disability. A beneficiary who is an Australian resident at the end of a year of income, and who is 'presently entitled' to income from a trust estate, and who is not under a legal disability, is assessed under s 97 of the Income Tax Assessment Act 1936 (Cth) on a corresponding share of the net income of the trust estate.

94 In the circumstances I have described, at [63] - [70] and [90] - [93] above, even if the appellant was under the mistaken belief alleged in ground 9, I am unable to discern a reasonably arguable case for the appellant to be relieved in equity, by way of defence to the respondent's claim, from the consequences of that mistake in the manner contended for on its behalf.

95 Ground 9 fails.

Ground 10

96 The appellant contends that Judge Eaton erred, in that, after having found, correctly, that he could not be satisfied that there was no serious question to be tried on the counterclaim on the grounds that:

(a) there was an underlying family arrangement with several proprietary limited companies and dicretionary trusts brought into existence for the purpose of estate planning and tax minimisation considerations;

(b) the family arrangements were part of a broad agreement for the mutual benefit of all members of the family;

(d) there had been a disruption of a previously harmonious situation,

he failed to find, for the same reasons, that those facts gave rise to a real question to be tried as a defence and set-off to the respondent's claim, or at the very least, provided good reason for not granting the respondent summary judgment on its claim.

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97 Judge Eaton entered summary judgment for the respondent against the appellant, but ordered that execution on the judgment be stayed subject to the condition that the appellant prosecute its counterclaim without delay.

98 The appellant alleged, in its counterclaim, in essence:

(a) it would be 'unconscionable' for the respondent to demand or assert an entitlement to payment of any of the distributions made by the appellant to the respondent, and that any such payment would result in the respondent receiving 'an unjust enrichment';

(b) distributions made by the appellant were distributions of profits generated by the services, labour and efforts of Stephen Frederick Ryan, without any contribution by the respondent; and

(c) in the circumstances, having regard to the contributions made by Stephen Frederick Ryan to the assets of the SJRF Trust, 'any legal interest [the respondent] may have in the trust assets is held by [the respondent] as constructive trustee for [the appellant] or alternatively Stephen Frederick Ryan'.

99 In my opinion, the issues of fact and law joined by the amended statement of claim and the defence do not coincide with the issues of fact and law joined by the counterclaim and the defence to counterclaim. For the reasons I have given, Judge Eaton decided, correctly, that the appellant had no reasonably arguable defence to the respondent's claim (based on the terms of the trust deed, the amounts distributed by the appellant as trustee to the respondent as beneficiary under the trust, and the other facts and circumstances I have mentioned at [63] - [70] and [90] - [93] above). Further, it was open to his Honour to hold that, on the evidence before him, the appellant had a reasonably arguable claim as alleged in its counterclaim. The existence of a reasonably arguable counterclaim does not, of course, mean that the defendant necessarily has a reasonably arguable defence or a right of set-off in relation to the plaintiff's claim. It was open to his Honour to hold that, in the circumstances, justice was best served by granting the respondent summary judgment on its claim, but staying execution on the judgment pending the determination of the counterclaim, subject to the counterclaim being prosecuted without delay.

The merits of the respondent's application in the appeal

100 In my opinion, the respondent's application for leave, in essence, to re-amend its statement of claim and to amend the orders of Judge Eaton to

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claim interest on each distributed amount from the date of the distribution, instead of from 18 January 2005, should be dismissed. I am of that opinion for these reasons. First, the respondent's application does not allege (and could not properly allege) that the amendment to his Honour's orders is required in consequence of judicial error or a 'slip' made by his Honour. Secondly, counsel for the respondent below did not overlook claiming interest. Interest was claimed from the date on which the writ of summons was filed, namely, from 18 January 2005. Counsel may well have taken the view that the fair exercise of the court's discretion to award interest pursuant to s 32 of the

Supreme Court Act

would be likely to have resulted in an order for interest from that date. Thirdly, an award of interest pursuant to s 32 is discretionary,

and it is not apparent that his Honour would (or should) have awarded interest from an earlier date if the point had been raised and argued before him. Fourthly, the SJRF Trust deed does not make provision for the payment of interest on distributed amounts which have been placed to the credit of a beneficiary in the books of account of the trust. Fifthly, the respondent has not made application to his Honour for the orders sought in its application before this court.

Conclusion

101 I would dismiss the appeal. I would also dismiss the respondent's application of 1 August 2007 in the appeal.