Council Club Pty Ltd v Paradise Island Pty Ltd
[2020] WASC 218
•15 JUNE 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: COUNCIL CLUB PTY LTD -v- PARADISE ISLAND PTY LTD [2020] WASC 218
CORAM: MASTER SANDERSON
HEARD: ON THE PAPERS
DELIVERED : 15 JUNE 2020
PUBLISHED : 15 JUNE 2020
FILE NO/S: CIV 1214 of 2020
BETWEEN: COUNCIL CLUB PTY LTD
Plaintiff
AND
PARADISE ISLAND PTY LTD
Defendant
Catchwords:
Trusts - Caveat lodged by unit holder over asset of unit trust - Whether caveatable intent
Legislation:
Transfer of Land Act 1893
Result:
Application dismissed
Category: A
Representation:
Counsel:
| Plaintiff | : | No appearance |
| Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Haydn Robinson |
| Defendant | : | GV Lawyers |
Case(s) referred to in decision(s):
Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325
MASTER SANDERSON:
By originating summons the plaintiff seeks, pursuant to s 138(2) of the Transfer of Land Act 1893, the removal of a caveat lodged by the defendant over certain property in Midland. A copy of the statutory declaration which accompanied the caveat is found as part of attachment CAA1 to the affidavit of Carlo Antonio Aloi sworn 13 February 2020 and filed in support of the application. The statutory declaration reads as follows:
1.I am a director of Paradise Island Pty Ltd ACN 059 182 017 which is unit holder in the Council Club Unit Trust ('the Trust').
2.The Trust was established pursuant to the terms of a trust deed dated 27 August 1991 between Mell‑Fin Securities Pty Ltd ACN 008 700 436 as trustee and Aloi Holdings Pty Ltd ACN 008 947 340, Neil John Aloi, Cosimo Zannino and myself as trustee for the Rex Family Trust as the original unit holders. A copy of the trust deed is annexed hereto and marked 'A' which specifies in the first schedule that I was the holder of twenty out of one hundred ordinary units in the Trust in my capacity as trustee for the Rex Family Trust.
3.Subsequently, I retired as the trustee for the Rex Family Trust and Paradise Island Pty Ltd ACN 059 182 017 was appointed as trustee of the Rex Family Trusst and the 20 units in the Trust were transferred to Paradise Island Pty Ltd ACN 059 182 017 as the new trustee for the Rex Family Trust.
4.Pursuant to a deed of removal and appointment of trustee dated 15 March 2016, Mell‑Fin Securities Pty Ltd ACN 008 700 436 was replaced as trustee of the Trust by Council Club Pty Ltd ACN 610 948 911 as incoming trustee and a copy of the deed of removal and appointment of trustee is annexed hereto and marked 'B'.
5.Council Club Pty Ltd ACN 610 948 911 is the registered proprietor of the land in Certificate of Title Volume 2092 Folio 435 which it holds in its capacity as trustee of the Trust and I make this declaration in support of the caveat lodged herewith for registration.
The caveat itself is what is known as a 'subject to claim' caveat. The caveat purports to forbid the registration of any instrument affecting the defendant's estate or interest 'unless such instrument be expressed to be subject to the caveator's claim'. The claim itself is said to be an equitable interest in fee simple as beneficiary and/or unit holder.
The plaintiff says the defendant, as the holder of a unit in the Council Club Unit Trust does not have an equitable interest in the property which is part of the trust. The plaintiff wishes to use the trust assets to secure a loan which will be used to pay out unpaid present entitlements of the unit holders. It is the defendant's position, based upon the terms of the trust, it is entitled to lodge a caveat.
Both parties accept that any proprietary interest recognised at law or equity will constitute a caveatable interest. The crucial question in this case therefore is whether, under the terms of the Trust Deed, the plaintiff as a unit holder in the trust has a proprietary interest in the item of trust property which is subject to the caveat.
Turning then to the Trust Deed, the defendant says the relevant clauses are cl 3.1 and cl 3.3. These read as follows:
3.1The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being;
…
3.3Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and subject to Clause 10 no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund;
The definition of the term 'Trust Fund' is found in cl 1.1 of the Deed. It reads as follows:
'Trust Fund' means the Original Unit Holders contribution all moneys paid to and accepted by the Trustees upon the issue of Units pursuant to Clause 3 hereof the accumulations of income hereinafter directed or empowered to be made all accretions to the Trust Fund and the investments and property from time to time representing the said money and accumulations or any part or parts thereof respectively
The defendant's opposition to this application rests entirely on the decision of White J in Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325. There his Honour was dealing with a similar question – did the plaintiff's interest as holder of a unit in a unit trust deed entitle it to lodge a caveat. The relevant clauses in the Jonsue decision were almost identical to the relevant clauses in this case. White J in his judgment recorded them as follows:
6.The trust deed of the Balweb Trust was made on 24 February 1995. Clauses 6, 7 and 8 relevantly provide:
'DECLARATION OF TRUST
6. IN consideration of the premises the Settlor HEREBY DECLARES that the Trustee shall and the Trustee HEREBY DECLARES that it will henceforth stand possessed of the Trust Fund and the income thereof upon the trusts and with and subject to the powers and provisions herein expressed concerning the same.
TRUST FUND
7.
(a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being.
(b) Each person who becomes registered as a Unit Holder shall be entitled to the benefit of and shall be deemed to be bound by the terms and conditions of this Deed and of any supplemental Deed.
8.
(a) Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund other than in accordance with the provisions hereinafter contained
(b) The Trust Fund as originally constituted by the initial sum shall be divided into the number of Units and be of such value as is set out in the First Schedule each of which Units shall be:
(i) held in the first instance by the Original Unit Holders the names and addresses of whom are set out in the First Schedule; and
(ii) divided into the classes (if any) set out in the Second Schedule.
...'
…
8.Clause 1(k) defines the 'Trust Fund' as follows:
'"Trust Fund" means the initial sum all moneys paid to and accepted by the Trustee upon the issue of Units pursuant to Clause 8 hereof the accumulations of income hereinafter directed or empowered to be made all accretions and additions to the Trust Fund and the investments property and other assets from time to time representing the said money accumulations and accretions or any part or parts thereof respectively.'
The argument put by the plaintiff in Jonsue was in all respects identical to the argument put in this case. That is, although a beneficiary under a unit trust may have an interest in the property of the trust, that interest is not sufficient to found a caveat. White J exhaustively considered all of the authority and the relevant texts. With respect there is nothing I could usefully add to his Honour's detailed analysis of the case law. His reasoning seems to me to be compelling. His Honour then concluded:
48.Accordingly, I conclude that the plaintiff does have an equitable interest in the individual assets making up the Trust Fund, including the subject land. It does not follow that the plaintiff would be entitled to maintain the caveat if the defendant proposed to deal with the land in a way which was a proper execution of the trustee's duties. But the defendant did not suggest that any such dealings were in contemplation. The defendant's only contention was that the plaintiff lacked a caveatable interest. For the reasons I have given, I do not accept that contention.
There is one further aspect of this application which requires comment. As I mentioned above it would seem the intention of the plaintiff to raise a loan against the assets of the trust and use the funds to pay out unpaid present entitlements arising under cl 11.10 of the Trust Deed. Mr Aloi's affidavit does not provide direct evidence of this fact. A letter to that effect appears as attachment CAA4 to Mr Aloi's affidavit. The defendant raised as an objection whether the letter is properly verified. However, for the purposes of this application, I am satisfied it is reasonable to assume the plaintiff wishes to obtain a loan and wishes to pay out unpaid present entitlements.
The defendant appears to concede, at least by implication, that if a caveat prevented the trustee from properly executing the trust that would be grounds for ordering the caveat's removal. It is the defendant's position that unpaid present entitlements do not form part of the trust fund. That is made clear by cl 11.10. The unpaid present entitlements are a separate fund held by the trustee for each unit holder absolutely. Distributing those funds would not be part of the due execution of the trust. Therefore, there is no basis for suggesting that due execution of the trust requires the removal of the caveat.
For these reasons the plaintiff's application will be dismissed. The parties should file an agreed minute of orders. If agreement as to costs cannot be reached, short submissions should be filed by both parties within seven days of the publication of these reasons.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson15 JUNE 2020
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