Craggs IW Pty Ltd v Darrell Crouch & Associates Pty Ltd
[2023] WASC 402
•24 OCTOBER 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: CRAGGS IW PTY LTD -v- DARRELL CROUCH & ASSOCIATES PTY LTD [2023] WASC 402
CORAM: ACTING MASTER MCDONALD
HEARD: 21 MARCH 2023, SUBMISSIONS FILED ON 4 APRIL 2023
DELIVERED : 24 OCTOBER 2023
FILE NO/S: CIV 2073 of 2022
BETWEEN: CRAGGS IW PTY LTD
Plaintiff
AND
DARRELL CROUCH & ASSOCIATES PTY LTD
Defendant
Catchwords:
Trusts - Sale of land - Deposit paid by purchaser - Deposit held by vendor's real estate agent - Application for release of deposit - General Conditions of Sale cl 1.2 - Plaintiff one of 32 sellers - Orders sought for release of deposit to plaintiff's lawyers pursuant to s 93 of the Trustees Act 1962 (WA) - Statutory construction - Deposit as property subject to a trust - Practice and procedure - Joinder of relevant parties
Legislation:
Interpretation Act 1984 (WA)
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Trustees Act 1962 (WA)
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | T B Bradley |
| Defendant | : | A M Prime |
Solicitors:
| Plaintiff | : | CS Legal |
| Defendant | : | Anthony Prime Legal Services |
Case(s) referred to in decision(s):
Abraham v Johns [No 2] [2010] VSC 212
Barrington v Lee [1972] 1 QB 326
Burt v Claude Cousins & Co Ltd [1971] 2 QB 246
Harold Joseph Martin Cadwallender by his next friend Stavroulla Cadwallender v The Public Trustee [2003] WASC 72
Hastingwood Property Ltd v Saunders Bearman v Anselm [1991] Ch 114
Manzanilla Ltd v Corton Property & Investments Ltd (Court of Appeal, EWCA Civ, 13 November 1996, unreported)
Mohammadi v Bethune [2018] WASCA 98
Ngarluma Aboriginal Corporation RNTBC v The Attorney General of Western Australia [2014] WASC 245; (2014) 14 ASTLR 164
Ooranya Pty Ltd v ISPT Pty Ltd [No 2] [2019] WASC 453
Potters v Loppert [1973] Ch 399
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Re Burman (1993) 1 Qd R 49
Re the Honourable G D Kierath, Minister for Heritage; ex parte City of Fremantle [2000] WASCA 156; (2000) 22 WAR 342
Riabkoff v Abernergy Properties Pty Ltd [2012] NSWSC 724
Rockeagle Ltd v Alsop Wilkinson [1992] Ch 47
Romanus v Saleh [2008] NSWSC 656
Sea Shepherd Australia Ltd v The State of Western Australia [2014] WASC 66; (2014) 313 ALR 184
Skinner v Trustee of the Property of Reed (A Bankrupt) [1967] Ch 1 194
Tambakis v Ferluga [2010] SASC 122; (2010) 107 SASR 246
Trans Petroleum (Australia) Pty Ltd v United Petroleum (WA) Pty Ltd [No 2] [2022] WASC 460
Wurth Australia Pty Ltd v Burgess [2012] WASC 504
ACTING MASTER MCDONALD:
This is an application by the plaintiff for orders for the release of $100,000 plus interest paid as deposit by the Buyer to the seller's real estate agent (the defendant) following a terminated sale of land contract. The contract is for the sale of a strata complex which comprises 32 properties. The seller in this case is constituted by 32 strata title holders (the Sellers). The plaintiff is one of those strata title holders. The plaintiff seeks the release of the deposit from the defendant into the trust account of his lawyers, CS Legal, who were initially instructed in relation to the sale on behalf of all the Sellers. The plaintiff contends that as one of the persons beneficially entitled to the deposit, he can seek an order that the deposit be released to his lawyers to be held on trust to be distributed to the remaining 31 strata title holders in proportion to their respective unit holdings. The application is brought pursuant to s 93 of the Trustees Act 1962 (WA).
For the reasons that follow, I have refused the application on the grounds that s 93 of the Trustees Act does not provide the statutory basis for the orders sought; there is no evidence that any of the other 31 sellers authorised the plaintiff to receive and distribute the deposit on their behalf; and, neither the Sellers nor the Buyer, whose legal rights are clearly impacted by the application, were joined to the action.
Application
The originating summons filed 13 October 2022, seeks orders directing the defendant to release the deposit to CS Legal Trust Account for distribution to the Sellers after payment of any costs and expenses for the sale and that the defendant pay the plaintiff's costs of the proceedings on an indemnity basis.
The plaintiff's application is supported by two affidavits:
(a)the affidavit of Christopher Joseph Craggs, director of the plaintiff, sworn 12 October 2022 (Mr Craggs' affidavit); and
(b)the affidavit of Timothy Burton Bradley, lawyer for the plaintiff, sworn 24 November 2022 (Mr Bradley's affidavit).
The defendant relies on the affidavit Darrell John Crouch, director of the defendant, sworn 9 December 2022 (Mr Crouch's affidavit).
Mr Craggs' Affidavit
The following facts are deposed to by Mr Craggs, the sole director and shareholder of the plaintiff company in these proceedings.[1]
[1] Mr Craggs' affidavit [1].
The plaintiff is the owner of a strata property described as Lot 3 on Strata Plan 4782 as shown on Certificate of Title Volume 2630 Folio 719, being 1 of 32 lots within a strata complex located in East Perth.[2]
[2] Mr Craggs' affidavit [6].
Pursuant to a written contract for the sale of land or strata title by offer and acceptance (commercial) dated 8 May 2021 (the Contract):[3]
(a)Parkeggio Pty Ltd (the Buyer) agreed to buy all of the strata properties from all of the Sellers for a purchase price of $7.5 million;
(b)$100,000 was deposited into an interest-bearing account as the deposit under the Contract;
(c)the defendant was confirmed as the Sellers' agent in the sale;
(d)the defendant was confirmed as Deposit Holder for the sale under the Contract;
(e)the sale was completed by 3 January 2022.
[3] Mr Craggs' affidavit [8].
On or around 8 November 2021, some but not all Sellers had executed written documents purporting to vary the contract to extend the settlement date to 8 May 2022.[4]
[4] Mr Craggs' affidavit [10] - [11], Attach 'CJC3'.
On 11 May 2022, the Buyer was notified the Sellers were ready, willing and able to complete the sale.[5]
[5] Mr Craggs' affidavit [12] - [13], Attach 'CJC4'.
On 8 July 2022, the Sellers' lawyers, CS Legal, issued a Notice of Default under the Contract to the Buyer. It states the Contract provided for settlement to take place on 5 January 2022 (the Settlement Date) and the Buyer, in breach of the Contract, had failed or neglected to complete the settlement by the Settlement Date. As at 8 July 2022, the Sellers remained ready, willing and able to complete the settlement in accordance with the Contract.[6]
[6] Mr Craggs' affidavit [14] - [15], Attach 'CJC5'.
On 4 August 2022, the Sellers' lawyers, CS Legal, issued a Notice of Termination to the Buyer.[7] The Notice of Termination claimed that the Buyer had failed to remedy the default the subject of the Notice of Default and gave notice that the Sellers were terminating the Contract pursuant to cl 24.2(d) of the General Conditions.[8]
[7] Mr Craggs' affidavit [16] - [17], Attach 'CJC6'.
[8] Mr Craggs' affidavit [8] - [9], Attach 'CJC6'.
On 9 August 2022, the Sellers' lawyers issued a Deposit Holder Notice to the defendant and the Buyer by email, that included the following:[9]
9.NOW TAKE NOTICE THAT:
(a)The Contract has been terminated by the Sellers following Default by the Buyer;
(b)The Sellers are entitled to the Deposit paid by the Buyer under the Contract, including under clause 24.3(a) of the General Conditions;
(c)The Buyer has not terminated the Contract and is not entitled to the Deposit, and the Sellers dispute any entitlement or release to the Buyer; and
(d)The Sellers now request the Deposit, including pursuant to clause 1.2(c) of the General Conditions.
[9] Mr Craggs' affidavit [18] - [19], Attach 'CJC7'.
On 9 August 2022, CS Legal sent a copy of the Buyer's read email confirmation receipt to the defendant in relation to service of the Deposit Holder Notice on the Buyer.[10]
[10] Mr Craggs' affidavit [20], Attach 'CJC8'.
On 2 September 2022, CS Legal wrote to the defendant on behalf of the Sellers a letter of demand for release of the deposit to CS Legal.[11] After outlining the events deposed to above, the letter stated:[12]
7.The Buyer did not serve on the Sellers a Notice responding to the Deposit Holder Notice contemplated by clause 1.2(e) of [the] 2018 Joint Form General Conditions within the 5 business days allowed or at all.
8.From Saturday 20 August 2022, [Darrell Crouch & Associates Pty Ltd] became obliged to release the Deposit to the Sellers.
9.Despite repeated requests to release the Deposit to Sellers as provided by the Contract, [Darrell Crouch & Associates Pty Ltd] has refused to do so - seemingly taking instructions from the Buyer to retain the Deposit despite the Contract, and so the Buyer can consider advance an unspecified claim in the future.
In our view, the failure to release the Deposit is a clear and obvious breach of [Darrell Crouch & Associates Pty Ltd's] duties and obligations to the Sellers, both as their agent and as the trustee for the Deposit pursuant to the terms outlined in the Contract and statute.
Mr Bradley's Affidavit
[11] Mr Craggs' affidavit [22] - [23], Attach 'CJC9'.
[12] Mr Craggs' affidavit [22] - [23], Attach 'CJC9'.
The following facts are deposed to by Timothy Burton Bradley, a lawyer employed by CS Legal, who has the conduct of this matter on behalf of the plaintiff.[13]
[13] Mr Bradley's affidavit [1].
On 5 August 2022, the defendant emailed the Buyer 'confirming 'instructions' to seek permission from the Sellers for release of the deposit to the Buyer.'[14]
[14] Mr Bradley's affidavit [4] - [5], Attach 'TBB1'.
On 5 August 2022, the defendant emailed the Sellers asking for instructions in relation to the Buyer's request for receipt of the deposit.[15] Mr Bradley, on behalf of the Sellers, replied on the same date advising of his understanding:[16]
1.That email request does not qualify as the required notice under the contract;
2.The Buyer is not entitled to the deposit, whereas the Sellers are; and
3.Our office is currently seeking instructions to give the required notice to allow you (as Deposit Holder) to release the deposit for the benefit of the Sellers.
[15] Mr Bradley's affidavit [6] - [7], Attach 'TBB2'.
[16] Mr Bradley's affidavit [7], Attach 'TBB2'.
Subsequent to the issue of the Deposit Holder Notice on 9 August 2022, Mr Bradley wrote to the defendant on 17 August 2022, outlining the steps taken up to and including serving the Deposit Holder Notice on the Buyer.[17] He further wrote:[18]
As the Buyer has not served a Deposit Respondent Notice within the time allowed by clause 1.2(e) of the Contract, it is no longer possible for there to be any dispute about the release of the deposit to the Sellers.
From Saturday 20 August 2022, Darrell Crouch & Associates Pty Ltd (as Deposit Holder) is required to release the deposit to the following account for the Sellers …
[17] Mr Bradley's affidavit [7], Attach 'TBB2'.
[18] Mr Bradley's affidavit, Attach 'TBB3'.
On 18 August 2022, the defendant forwarded Mr Bradley an email chain between the defendant and the Buyer. That email chain indicated the Buyer advised the defendant that the matter is in dispute and there is no approval to release the funds to the Sellers. There is a further email from the defendant to the Buyer indicating the Buyer's email does not satisfy the requirements 'under the Act' and a later email to the Sellers' lawyers that the defendant is 'ready to release the deposit ASAP'.[19]
[19] Mr Bradley's affidavit [10] - [11], Attach 'TBB4'.
On 14 October 2022, the defendant emailed the Sellers about its related interpleader proceedings and finalising the 'deposit disbursement'.[20]
Mr Crouch's Affidavit
[20] Mr Bradley's affidavit [12] - [13], Attach 'TBB5'.
Mr Crouch is the director of the defendant company and has filed an affidavit on behalf of the defendant.[21] After outlining the details of the contract of sale and the parties as already referred to above, Mr Crouch deposes to the following facts.
[21] Mr Crouch's affidavit [1].
The Buyer paid into the defendant's Trust Account a deposit of $100,000 on or about 17 May 2021, pursuant to the terms of the Contract.[22] Since that time the defendant has always held the deposit as stakeholder for the parties to the Contract.[23]
[22] Mr Crouch's affidavit [7].
[23] Mr Crouch's affidavit [28].
The defendant agrees that the lawyers for the Sellers issued a Default Notice to the Buyer on 8 July 2022,[24] a Termination Notice to the Buyer on 4 August 2022,[25] and a Deposit Holder Notice to the defendant and the Buyer on 9 August 2022.[26]
[24] Mr Crouch's affidavit [8].
[25] Mr Crouch's affidavit [8].
[26] Mr Crouch's affidavit [9].
The defendant says:[27]
Under the terms of the General Conditions, the Buyer was able to issue a Deposit Respondent Notice within 5 business days of service of the Deposit [H]older [N]otice, which would have been 16 August 2022, and in the absence of doing so, the earliest [the defendant] could then release the Deposit was after 8 business days, which would have been 20 August 2022.
[27] Mr Crouch's affidavit [10].
Prior to receiving the Deposit Holder Notice on 9 August 2022, the defendant was aware that the Buyer disputed any entitlement of the Sellers to the deposit.[28]
[28] Mr Crouch's affidavit [11] - [13], Attach 'DC2'.
The defendant was the recipient of competing emails from the Sellers and the Buyer with the Sellers seeking the release of the deposit and the Buyer denying the Sellers entitlement to the deposit.[29] Following legal advice, the defendant brought interpleader proceedings in the District Court in relation to the deposit.[30]
[29] Mr Crouch's affidavit [14] - [18], Attach 'DC3', 'DC4', and 'DC5'.
[30] Mr Crouch's affidavit [19] - [21], [24].
The Contract
The contract is attached to Mr Craggs' affidavit.[31] It is in the form of the REIWA standard Contract for Sale of Land or Strata Title by Offer and Acceptance (Commercial) incorporating the 2018 Joint Form of General Conditions, insofar as they are not varied by other conditions or special conditions of the contract.[32] The contract includes two annexures. Annexure A is entitled 'Special Conditions'.[33] Annexure B is entitled 'Annexure of Changes to the 2018 General Conditions Caused by Changes to the Strata Titles Act'.[34] Annexed to the Contract are the executions of the Buyer and all 32 sellers. The signatures on the executions are undated but the parties to this proceeding agree that the contract is dated 8 May 2021.[35]
[31] Mr Craggs' affidavit [9], Attach 'CJC2'.
[32] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 4.5).
[33] Mr Craggs' affidavit [9], Attach 'CJC2'.
[34] Mr Craggs' affidavit [9], Attach 'CJC2'.
[35] Mr Craggs' affidavit [8]; Mr Crouch's affidavit [4].
It is worth noting the following terms. Clause 4 of Annexure A to the Contract is entitled 'General Conditions' and stipulates that the General Conditions (defined as the Law Society of Western Australia (Inc) and Real Estate Institute of Western Australia (Inc) 2018 Joint Form of General Conditions for the Sale of Land)[36] are incorporated into the Contract except that:[37]
(a)A provision of the General Conditions for the Sale of Land does not apply if that provision is inconsistent with the express terms of this Offer and Acceptance Contract.
(b)The Offer and Acceptance Contract is subject to all of the 32 Lot Owners within Strata Title Plan 47482 agreeing to sell, contract and then settle simultaneously on or before 60 days after the Due Diligence Satisfaction Date.
(c)The Offer and Acceptance Purchase Contract is to be accepted or rejected by the Sellers within a reasonable time from receipt of the Offer and Acceptance Purchase Contract.
[36] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 1).
[37] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 4).
Settlement of the transaction of the particular lot is to be simultaneous with the other 32 lots within the Strata Plan.[38]
[38] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 7.1(b)).
The Buyer is not obliged to settle if all the titles are not in dealing or if any person who constitutes the Seller is not ready to settle on the Settlement Date.[39]
[39] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 7.3).
Nothing in the contract obliges the Buyer to complete Settlement on time, and (without affecting the Buyer's rights under the Contract or at law) the Buyer will not be in default under the Contract if it does not complete Settlement unless each person who constitutes the Seller is ready to settle in accordance with the terms of the Contract.[40]
[40] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 7.3).
Upon settlement, the deposit is to be distributed to the Lot Owners according to their unit entitlement.[41] In this instance, the plaintiff's unit entitlement is 24/1000 of the strata plan worth $189,445.88 of the $7.5 million sale price.[42]
[41] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 7.6).
[42] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, sch 4).
General Conditions
The mechanism relied upon by the plaintiff for the release of the deposit arises under cl 1.2(b) of the General Conditions.[43] If a party contends that the Contract has been terminated and that party is entitled to payment of the deposit the subsequent provisions of cl 1.2 apply:[44]
[43] Mr Craggs' affidavit [9], Attach 'CJC2'.
[44] Mr Craggs' affidavit [9], Attach 'CJC2' (General Conditions cl 1.2).
1.Deposit
1.1Payment
Subject to clause 1.3, the Buyer must pay the Deposit to:
(a)the Seller Agent; or
(b)the Seller Representative; or
(c)if the Seller has not appointed a Seller Agent or a Seller Representative, the Seller.
1.2Deposit Holder - Stakeholder
(a)Subject to this clause 1.2, if the Deposit is paid to a Deposit Holder, the Deposit Holder must hold the Deposit as a stakeholder.
(b)If a party contends that:
(1)the Contract has been terminated; and
(2)that Party is entitled to payment of the Deposit, the following provisions of this clause 1.2 apply.
(c)The Deposit Claimant must:
(1)serve on the Deposit Holder and the Deposit Respondent the Deposit Holder Notice; and
(2)provide proof to the Deposit Holder of the service of the Deposit Holder Notice on the Deposit Respondent.
(d)Unless the Deposit Respondent serves a Notice on the Deposit Holder in accordance with subclause (e), the Deposit Holder must after:
(1)the expiry of 8 Business Days after the last to occur of service of the Deposit Holder Notice on the Deposit Respondent and the Deposit Holder; and
(2)the Deposit Holder has received proof as required by subclause (c) that the Deposit Holder Notice has been served on the Deposit Respondent,
pay the Deposit to the Deposit Claimant.
(e)The Deposit Respondent may, within 5 Business Days after service on the Deposit Respondent of the Deposit Holder Notice, serve a Notice on the Deposit Holder and the Deposit Claimant:
(1)stating that the Deposit Respondent disputes that the Deposit Claimant is entitled to receive the Deposit; and
(2)specifying the reasons why the Deposit Respondent contends that the Deposit Claimant is not entitled to receive the Deposit.
(f)If the Deposit Respondent serves a Notice on the Deposit Holder and the Deposit Claimant under subclause (e), the Deposit Holder may:
(1)obtain legal advice as to the action to be taken by the Deposit Holder;
(2)institute interpleader proceedings in a court; and
(3)deduct from the Deposit the legal cost and expense incurred by the Deposit Holder in connection with obtaining that legal advice and those interpleader proceedings.
(g)Each Party:
(1)directs the Deposit Holder to comply; and
(2)releases the Deposit Holder from liability for complying, with this clause 1.2.
(h)Payment by the Deposit Holder of the Deposit in accordance with:
(1)subclause (d); or
(2)interpleader proceedings referred to in subclause (f)(2) discharges the Deposit Holder from any further liability in respect to the Deposit.
(i)The failure by a Party to serve a Deposit Holder Notice or a Notice under subclause (e):
(1)does not affect; and
(2)is not treated as a waiver of, any right as between the Parties.
(j)In this clause 1.2, a reference to the Deposit includes:
(1)any money in addition to the Deposit, paid to the Deposit Holder by the Buyer in accordance with the Contract; and
(2)interest earned on the Deposit or on any other money specified in subclause (j)(1) invested by the Deposit Holder with a Deposit Financial Institution.
It is the plaintiff's submission that as no notice was given disputing the Deposit Claimant being entitled to the deposit in response to the Deposit Holder Notice, the Deposit Holder must release the deposit to the Deposit Claimant. The fact the Buyer disputed the Sellers' entitlement to the deposit is irrelevant. The General Conditions, in particular cl 1.2, sets out the process to be followed in the event of a dispute, and that process was not followed by the defendant, as the Deposit Holder.[45]
[45] Plaintiff's submissions filed 4 April 2023 [4(a)].
The defendant submits the purpose of cl 1.2 of the General Conditions is that if the responding party does not respond to the claimant's notice, then the agent is at liberty to pay out the deposit if he/she is not aware of any dispute by the other party about the entitlement to the deposit and is entitled to assume therefore that there is none.[46]
[46] Defendant's submissions filed 4 April 2023 [26.1].
However, where the agent is clearly put on notice that the Buyer is disputing the other party's entitlement to the deposit, even if the formal requirements of a response have not been followed, the defendant submits that it is not appropriate for the agent to then simply pay out the deposit. The agent is clearly on notice of a dispute between the Buyer and the Sellers and an interpleader is the appropriate course of action.[47]
[47] Defendant's submissions filed 4 April 2023 [26.2].
That is because, according to the defendant, an agent has obligations in relation to trust monies under the Real Estate and Business Agents Act 1978 (WA) and a Code of Conduct, outside of the provisions of cl 1.2 of the General Conditions, which must be followed.[48]
[48] Defendant's submissions filed 4 April 2023 [26.3].
The defendant further submits that, even if the agent is protected from legal action by simply strictly complying with cl 1.2 of the General Conditions, that protection does not extend to, for example, responding to a complaint that might be made by the responding party to the Department of Mines, Industry Regulation and Safety that the agent, knowing there is a dispute about the deposit, paid it out anyway to one of the parties.[49]
[49] Defendant's submissions filed 4 April 2023 [26.4].
Legislation
The plaintiff does not bring this action in contract. Rather, the plaintiff seeks orders pursuant to s 93 of the Trustees Act. Section 93 of the Trustees Act provides:
93. Applications to Court, who may make
(1) An order under this Act for the appointment of a new trustee, or concerning any property subject to a trust, may be made on the application of any person beneficially interested in the property, whether under a disability or not, or on the application of any person duly appointed trustee of the property or intended to be so appointed.
(2) An order under this Act concerning any interest in any property subject to a mortgage may be made on the application of any person beneficially interested in the property, whether under a disability or not, or of any person interested in the money secured by the mortgage.
Issues
The parties proceeded on the basis that the question to be determined is whether cl 1.2 of the General Conditions required the release of the deposit. In the absence of any submissions filed prior to the hearing, the parties were given the opportunity to file submissions after the hearing including but not limited to whether s 93 of the Trustees Act applies to this matter. It appears to have been assumed that the deposit is property subject to a trust and therefore could be the subject of an order under s 93 of the Trustees Act (although the defendant raises the issue of whether the plaintiff alone is entitled to the release of the entirety of the deposit).[50]
[50] Defendant's submissions filed 4 April 2023 [21].
At the hearing a number of other issues were raised, namely:
1.Does s 93 of the Trustees Act apply?
2.Is the deposit 'property subject to a trust'?
3.On what basis can the court order the deposit be paid to only one of the lot holders for distribution to the remaining 31 lot holders comprising the Sellers?
4.Have the appropriate parties been joined?
Section 93 of the Trustees Act
The threshold issue is whether s 93 of the Trustees Act applies.
Plaintiff's submissions
The plaintiff submits that the defendant is not entitled to retain the deposit pursuant to cl 1.2 of the General Conditions because no Deposit Respondent Notice was served.[51] It is the plaintiff's submission that s 93(1) of the Trustees Act is a general relief provision allowing the court to make any orders for appointing a new trustee or concerning the trust property as it thinks fit, provided the application is made by a beneficiary, trustee or intended trustee.[52]
[51] Plaintiff's submissions filed 4 April 2023 [4(a)].
[52] Plaintiff's submissions filed 4 April 2023 [7].
The plaintiff contends, the use of the words 'An order under this Act … may be made' in s 93 provides the court with a discretionary power to make orders relating to the appointment of a new trustee and concerning trust property.[53] Similarly, the plaintiff contends 'concerning any property' allows the court to give direction about the trust property as it thinks appropriate in the circumstances.[54]
[53] Plaintiff's submissions filed 4 April 2023 [12].
[54] Plaintiff's submissions filed 4 April 2023 [13].
That construction, according to the plaintiff, is consistent with its context within the Trustees Act. Section 93 of the Trustees Act arises in 'Part VII Further Powers of the Court' which clarifies the powers of the court to resolve issues. While s 93 is not commented upon specifically in the Second Reading Speech, the plaintiff relies on the reference made in relation to pt VII as follows:[55]
Part VII deals with the further powers of the court. These provisions give the court greater supervisory powers over the trustee without, however, tying his hands in the first instance. It can authorise variations in the trust itself where necessary. It may make orders in the absence of parties that are binding on them, thus eliminating the possibility of its stultification through the absence or unavailability of parties.
[55] Plaintiff's submissions filed 4 April 2023 [18]; Hansard, Assembly, Second Reading on Thursday 18 October 1962 at pages 1853 - 1854. Note for reference, the second reading was completed on Thursday 1 November 1962 at Hansard pages 2294 - 2300.
The plaintiff also states a broad construction is consistent with breadth of the provisions that surround s 93.[56] Section 92 allows trustees to apply for directions concerning any trust property or respecting the management, administration of the property or the exercise of power or discretion vested in the trustee. Similarly, s 94 allows any person with an interest in trust property aggrieved by actions, omissions or a decision of the trustee to seek review or directions.[57]
[56] Plaintiff's submissions filed 4 April 2023 [19].
[57] Plaintiff's submissions filed 4 April 2023 [19].
In summary, s 93, according to the plaintiff, is a broad, discretionary, standalone power which gives the court discretion to appoint a new trustee and give directions about trust property where an appropriate person has applied, even where other interested parties are not involved.[58]
Defendant's submissions
[58] Plaintiff's submissions filed 4 April 2023 [11], [20].
The defendant does not take issue with the application of s 93 save that the plaintiff's interest in the trust property is limited to the plaintiff's share of the deposit in accordance with the plaintiff's unit entitlement.[59] According to the defendant, s 93 refers to persons beneficially interested in the property, not part thereof.[60] This is not a case where the plaintiff, as perhaps one of several beneficiaries, has an undefined interest in specific trust property. Instead, the plaintiff has a defined interest in the deposit and no interest in the balance of the deposit with no evidence of any authority by the other Sellers that the plaintiff obtain the transfer of the entirety of the deposit on behalf of all the Sellers to the plaintiff's lawyer's trust account.[61]
Applicable law - s 93
[59] Defendant's submissions filed 4 April 2023 [21].
[60] Defendant's submissions filed 4 April 2023 [24].
[61] Defendant's submissions filed 4 April 2023 [21], [25].
The starting point in statutory construction is to consider the words of the provision. The natural and ordinary meaning of the words provides a presumptive and persuasive meaning.
Regard must then be had to the context in which the statutory provision appears, that is regard must be had to the language and purpose of the statute as a whole: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69].
In Mohammadi v Bethune [2018] WASCA 98, the Court of Appeal held:[62]
… While the task of construction begins and ends with the statutory text, throughout the process the text is construed in its context. Statutory construction, like any process of construction of an instrument, has regard to context. As Kiefel CJ, Nettle and Gordon JJ recently explained in SZTAL:
The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.
The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute.
The objective discernment of the statutory purpose is integral to contextual construction. The statutory purpose may be discerned from an express statement of purpose in the statute, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose must be discerned from what the legislation says, as distinct from any assumptions about the desired or desirable reach or operation of relevant provisions.
Discernment of statutory purpose is particularly significant in cases, commonly encountered, where the constructional choice presented is from 'a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural'. In such a case, the choice 'turns less on linguistic fit than on evaluation of the relevant coherence of the alternatives with identified statutory objects or policies'. As we will explain later in these reasons, we think this is such a case.
Thus, the material provisions of the Act must be understood, if possible, as parts of a coherent whole.
[62] Mohammadi v Bethune [2018] WASCA 98 [31] - [35] (footnotes omitted).
Section 93 begins '[a]n order under this Act for the appointment of a new trustee, or concerning any property subject to a trust, may be made on the application …' of the persons described in the section (emphasis added).
There is no doubt the section is directed to the identity of those who may apply for an order for the appointment of a new trustee or concerning any property subject to a trust. Examples of such orders occur throughout the Act; in relation to the appointment of a new trustee see s 14(2)(b) and s 77; and, in relation to trust property see s 15(2)(e), s 30(1)(c) and s 78.
Section 93 is headed 'Applications to Court, who may make'. Section headings are not considered part of the statute law.[63] However, if a heading is not part of the written law, it may nevertheless be 'extrinsic material' which may be taken into account pursuant to s 19(1) of the Interpretation Act 1984 (WA).[64]
[63] Interpretation Act 1984 (WA) s 32(2).
[64] Re the Honourable G D Kierath, Minister for Heritage; ex parte City of Fremantle [2000] WASCA 156; (2000) 22 WAR 342 [62].
To be of any assistance the heading to the section should be authenticated by having been contained in the Bill which was passed by Parliament, otherwise the assistance to be gleaned from the heading as extrinsic material is likely to be, at best, limited.[65]
[65] Sea Shepherd Australia Ltd v The State of Western Australia [2014] WASC 66; (2014) 313 ALR 184 [115].
Section 93 of the Trustees Act is in identical terms to that which was introduced and passed by Parliament. The heading to the section as contained in the Bill introduced and passed appears as a side note and is entitled 'Persons entitled to apply to Court'. The heading has since changed to 'Applications to Court, who may make'. The heading can be taken into account pursuant to s 19(2)(a) and s 19(2)(h) of the Interpretation Act. It is proper to refer to the heading to ascertain the 'drift' or main idea of the section.[66] In this instance the heading both in its original form and as amended suggests s 93 is directed to who can apply for the types of orders specified in s 93 under the Trustees Act.
[66] Re the Honourable G D Kierath, Minister for Heritage; ex parte City of Fremantle [2000] WASCA 156; (2000) 22 WAR 342 [63].
The issue is whether s 93 confers on the court the power to make the orders referred to in s 93, namely for the appointment of a new trustee, or concerning any property subject to a trust, independently of any other provision in the Act. The section itself does not by its language confer a power on the court to make an order. Rather it refers to an order under this Act. It is necessary to compare that language to that in other provisions which expressly empower the court to make orders.
The statutory purpose of the Trustees Act is an Act to consolidate and amend the law relating to trustees.[67] Section 93 is found in div 3 of pt VII of the Trustees Act. Part VII is entitled - 'Further Powers of the Court'. While the preceding Parts deal with regulating trustees and trusts, pt VII is concerned with the powers of the court.
[67] Long title, Trustees Act 1962 (WA).
Division 1 of pt VII relates to appointment of new trustees and comprises solely of s 77. Section 77(1) provides '[t]he Court may, whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient, difficult or impracticable so to do without the assistance of the Court, make an order for the appointment of a new trustee or new trustees …'.
Section 77(2), without limiting s 77(1), sets out the circumstances when the court may make an order appointing a new trustee in substitution for a trustee. Section 77(3) limits the operation of an order made under s 77 or any consequential vesting order.
Division 2 relates to vesting orders. Section 78(1) provides '[t]he Court may make an order, in this Act called a vesting order, that has effect as provided in section 85.' Again, like s 77, the language expressly confers on the court the power to make such an order. Section 78(2) provides when a vesting order may be made. The remainder of div 2 sets out the terms of any vesting order,[68] the effect of a vesting order[69] and the powers of the court where the persons entitled have specific characteristics, such as an unborn person with contingent rights,[70] a mortgagee under a disability[71] and infants beneficially entitled to property.[72] There are specific provisions relating to the conveyance or vesting of land and stock as well as the application of vesting orders to charities.[73]
[68] Trustees Act s 79.
[69] Trustees Act s 85.
[70] Trustees Act s 80.
[71] Trustees Act s 81.
[72] Trustees Act s 82.
[73] Trustees Act s 83, s 84 and s 88.
Division 3, in which s 93 is contained, is entitled 'Jurisdiction to make other orders'. Section 89 in express terms provides '… the Court may by order confer upon the trustee … the necessary power' to effect specific dispositions or transactions. Section 89(4) provides that an application to the court under s 89 may be made by the trustees, or by any of them or by any person beneficially interested under the trust.
Section 90 provides '… the Court may, if it thinks fit, by order approve on behalf of' designated categories of individuals, any arrangement varying or revoking all or any of the trusts or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts. There are limits imposed on the arrangements that may be approved,[74] the trusts to which the section applies[75] and those who are bound.[76]
[74] Trustees Act s 90(2).
[75] Trustees Act s 90(3).
[76] Trustees Act s 90(4).
Section 91 confers on the court the power to vary periodic payments. It provides '… the Court may, on the application of any trustee or of any person beneficially interested under the trust, by order, vary from time to time the amount of any payment ... being made periodically to any beneficiary, if the Court is of the opinion, having regard to all the circumstances of the case, that it is just and equitable that the amount be varied'.
Section 92 permits any trustee to apply to the court for directions concerning any property subject to a trust or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee. Section 92(2) stipulates who should be served with such an application.
Leaving consideration of s 93 aside for the present, s 94 of the Trustees Act permits the court to review the decision of a trustee in the exercise of a power conferred under the Act and provides what orders the court may make upon such review. Section 95 provides protections to trustees acting under a direction of the court. Section 96 permits the court to proceed in the absence of parties or appoint representatives for parties when certain conditions are met. Section 97 permits the court to make cost orders and s 98 allows the court the remunerate trustees. Section 99 deals with payment into court by trustees and gives the court power to order payment into court.
Section 93 differs from the other provisions in div 3 in that it does not refer to the court at all or to the court's powers. It simply states who can apply for '[a]n order under this Act'. Despite being given the opportunity to file further submissions on the application of s 93 to the present action, neither party took issue with s 93 providing the basis upon which to make an order appointing a new trustee of the monies held by deposit or to make orders about the release of those monies or who should hold those monies.
Despite the apparent breadth of s 93 of the Trustees Act as contended for by the plaintiff, it has been the subject of very limited judicial consideration.
In Ngarluma Aboriginal Corporation RNTBC v The Attorney General of Western Australia [2014] WASC 245; (2014) 14 ASTLR 164 (Ngarluma Aboriginal Corporation), Allanson J heard an application for the appointment of a new trustee in substitution for the trustee of two trusts which held and administered funds paid under an Indigenous Land Use Agreement. The application arose in circumstances where the terms of office for the existing directors of the trustee had expired and no replacement directors had been appointed. The application for the appointment of a new trustee was brought under s 77 of the Trustees Act. The plaintiff in the action was a beneficiary in relation to one of the trusts. Allanson J found the plaintiff had standing pursuant to s 93 as a person beneficially interested in the trust property to bring the application. The second trust was a charitable trust. As a charitable trust is for purpose and does not have beneficiaries, Allanson J held that unless statutory exception provided for in s 93 of the Trustees Act or s 21 of the Charitable Trusts Act 1962 (WA) applied, the plaintiff had no standing to seek the appointment of a new trustee.
The interpretation of s 93 of the Trustees Act given in Ngarluma Aboriginal Corporation is consistent with one that confers standing on those who wish to seek an order under the Act for the appointment of a new trustee or in respect of trust property. However, the power of the court to make such an order, as was the case in Ngarluma Aboriginal Corporation, was found elsewhere in the Trustees Act.
In Harold Joseph Martin Cadwallender by his next friend Stavroulla Cadwallender v The Public Trustee [2003] WASC 72 (Cadwallender v The Public Trustee), Heenan J considered an application by a beneficiary of a court appointed trust fund for orders that he was no longer a person under a disability and that monies held by the Public Trustee pursuant to the court appointed trust vest in the plaintiff and be transferred to him absolutely. His Honour considered those authorities in which similar orders had been made. The power was variously considered to be in the exercise of the parens patriae jurisdiction conferred under s 16(1)(d) and s 23 of the Supreme Court Act 1935 (WA), or as deriving from the delegation of the prerogative of the Crown. In considering the jurisdiction to terminate the trust and vest the property in the plaintiff it was submitted that the Supreme Court had the power to act under s 93 of the Trustees Act or to make a vesting order under s 78 of the Trustees Act. His Honour held:[77]
… While accepting that s 93 of the Trustees Act contains a power upon which the court may act, I do not consider that it is only such power or jurisdiction which this Court possesses and that, the power recognised by McKechnie J under s 16 of the Supreme Court Act conferring the parens patriae jurisdiction continues.
[77] Cadwallender v The Public Trustee [2003] WASC 72 [37].
Later, his Honour considered whether the court retains any jurisdiction over the parties in respect of the administration of the trust once the proceedings that gave rise to the court appointed trust have terminated by way of judgement or settlement. His Honour held:[78]
As it is the parens patriae jurisdiction which confers the power on the court to supervise the trust and to deal with questions arising from its administration, then that same jurisdiction must empower the court to determine whether or not the circumstances which have prompted the necessity for the establishment of the trust have disappeared so that the person, whose interests the court was until that point protecting, may take over the control of property which has been held under supervision for his or her benefit. It is difficult to see how this could be anything but the last act in the exercise of that protective jurisdiction.
[78] Cadwallender v The Public Trustee [2003] WASC 72 [42].
Finally, his Honour considered whether the Supreme Court has the power to make orders in respect of the trust when the trust was created by an order of another court which retains the jurisdiction to supervise that order. His Honour determined:[79]
… The short answer to this question is that such a power is expressly conferred upon this Court by s 93 of the Trustees Act 1962. However, the authorities plainly establish that the court also has the 'parens patriae' jurisdiction which also enables it to determine the application.
[79] Cadwallender v The Public Trustee [2003] WASC 72 [51].
In Cadwallender v The Public Trustee, there is no consideration of the terms of s 93 of the Trustees Act. It is not clear if his Honour considered whether s 93 provided the basis of the orders ultimately made, given Heenan J's view the orders could be made within the parens patriae jurisdiction.
Disposition - application of s 93
I consider the words of the text, specifically '[a]n order under this Act' in both ss 93(1) and (2) specify the subject to which the section relates, namely who can apply for an order under the Act. The language is distinguishable from those other provisions in pt VII which confer a power to make orders on the court.
Contextually, it would be an odd result that s 93 allows for the appointment of a new trustee or orders to be made in relation to trust property unconstrained by any of the conditions that apply to the court's powers in pt VII. For example, the test applicable in s 77 for the appointment of a new trustee '… whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient, difficult or impracticable so to do without the assistance of the Court …' would not apply to the appointment of a new trustee under s 93. Nor would the protections afforded to the incoming trustee under s 77 apply. It is not clear why it would be necessary for pt VII to provide a specific power subject to a number of conditions to appoint a new trustee under s 77 together with a broad unconditional power in s 93. In what circumstances would s 77 be required if s 93 confers the same power? Likewise, if s 93 confers a power on the court, orders could be made to vest the trust property without any of the limitations imposed by s 78 or without reference to the effect of a vesting order as defined in s 78 and s 85.
One counter argument might be that div 3 is entitled 'Jurisdiction to make orders'. However, not all provisions in div 3 involve the conferral of power. For example, s 95 is an example of a provision that moderates the conferral and exercise of power. In any event, s 93 in identifying those who can apply for an order under the Act, is capable of falling within the description 'Jurisdiction to make orders.'
It is also instructive that both s 77 and s 78 are silent as to who may apply for the appointment of a new trustee or for orders relating to trust property. That gap in my view is addressed by s 93. It is not necessary to decide whether s 93 provides standing to those identified as part of a wider list or limits those who might apply for an order under the Act.
In my view, s 93 is not a standalone power to make orders for the appointment of a new trustee or concerning property subject to a trust. That construction is supported by the language of the section in that s 93 relates to orders under the Act and does not expressly confer on the court the power to make orders. Further, the fact that s 93 provides no guidance as to when such an order should be made or the effect of any such order suggests that it is not intended to be a power at large where the power to make the same orders elsewhere is subject to limitations. The construction is also supported by the heading to the section when the Bill was introduced and as currently amended.
For the reasons I have given above, I am of the view that s 93 simply identifies who can apply for the orders sought. It does not empower the court to make orders appointing a new trustee or make orders in relation to property subject to a trust. It confers standing on those described to seek orders where there is a power to make such orders expressly conferred on the court under the Trustees Act. That construction is consistent with the decision of Allanson J in Ngarluma Aboriginal Corporation. I have preferred this construction over the view given in Cadwallender v The Public Trustee, that s 93 might provide the power to vest trust property, as it is not clear that s 93 was in fact the basis for the orders made in that case and the application of s 93 was not referred to in any detail.
For these reasons, this application ought to be dismissed as it has been brought without identifying the statutory basis for the orders sought.
Is the deposit property the subject of a trust?
The plaintiff seeks the release of the deposit to his solicitors. Therefore, the orders sought concern property subject to a trust. It appears to be assumed by both parties that the deposit is trust property. Mr Crouch, the director of the defendant, deposes the deposit was put into the defendant's trust account.[80] Whether the deposit is property the subject of a trust as required under s 93 of the Trustees Act was not raised or developed by either party. In light of my finding that s 93 does not empower the court to make the orders sought, I do not need to determine if the application concerns property subject to a trust.
[80] Mr Crouch's affidavit [7].
Nevertheless, as Gray J in Tambakis v Ferluga [2010] SASC 122; (2010) 107 SASR 246 stated, the legal capacity in which a stakeholder holds a deposit is vexed:[81]
… One line of authority suggests that a stakeholder holds the deposit as trustee. Another line of authority concludes that a stakeholder is paid a deposit, not as a trustee, but on a contractual or quasi-contractual basis.
[81] Tambakis v Ferluga [2010] SASC 122 [19]; (2010) 107 SASR 246.
The authorities were conveniently summarised by Gray J and show a divergence of views as to whether a deposit is held on trust[82] or as an agent of the vendor[83] or pursuant to a contractual or quasi‑contractual obligation to pay the deposit to the parties according to some event.[84]
[82] Skinner v Trustee of the Property of Reed (A Bankrupt) [1967] Ch 1 194; Burt v Claude Cousins & Co Ltd [1971] 2 QB 246, Denning LJ dissenting.
[83] Burt v Claude Cousins & Co Ltd [1971] 2 QB 246.
[84] Potters v Loppert [1973] Ch 399; Barrington v Lee [1972] 1 QB 326 in relation to pre-contract deposits; Hastingwood Property Ltd v Saunders Bearman v Anselm [1991] Ch 114; Manzanilla Ltd v Corton Property & Investments Ltd (Court of Appeal, EWCA Civ, 13 November 1996, unreported); Romanus v Saleh [2008] NSWSC 656.
Shortly after Gray J's decision in Tambakis v Ferluga, Mukhtar AsJ in Abraham v Johns [No 2] [2010] VSC 212 in dealing with the parties' rights to a deposit held:[85]
(b)At common law, if the deposit is paid to the seller's agent as stakeholder. It is conjectural whether a stakeholder holds the money as trustee or in contract or quasi contract: see Skinner v Reed; Burt v Claude Cousins; Re Kimberley; Re Burman and Rockeagle v Alsop Wilkinson (footnotes omitted).
[85] Abraham v Johns [No 2] [2010] VSC 212 [29].
In Riabkoff v Abernergy Properties Pty Ltd [2012] NSWSC 724, Stevenson J was determining the question of costs following an interpleader application. The solicitor sought his costs to be paid from funds held by him in his trust account as a stakeholder for the parties. The solicitor claimed he was the trustee of funds in his trust account and therefore was entitled to reimburse himself for his costs by reason of s 59(4) of the Trustee Act 1925 (NSW) (NSW Act) which permitted a trustee to reimburse himself or pay or discharge out of the trust property all expenses incurred in or about the execution of the trustees trust or powers. Alternatively, the solicitor sought an order pursuant to s 93(3) of the NSW Act, which provided:
In any proceedings with respect to the management or administration of any property subject to a trust …, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings.
The solicitor claims he was precluded from reimbursing himself by virtue of s 255 of the Legal Profession Act 2004 (NSW) (Legal Profession Act) which obliged the solicitor to hold trust money in a general trust account of the practice exclusively for the person on whose behalf it is received and disburse the trust money only in accordance with a direction given by the person, subject to an order of a court.
Against the solicitor it was argued he was not a trustee of the funds, but a mere stakeholder relying on Rockeagle Ltd v Alsop Wilkinson [1992] Ch 47 in which Farquharson LJ held:[86]
It is clear from the authorities, and in particular Potters v Loppert [1973] Ch 399, that the duties and authority of a stakeholder lie in contract or quasi-contract and not as trustee.
[86] Rockeagle Ltd v Alsop Wilkinson [1992] Ch 47 at 52.
Stevenson J found that their Lordships in Rockeagle Ltd v Alsop Wilkinson were dealing with a situation where a solicitor was holding a deposit in a trust account as stakeholder, and thus bore some resemblance to the facts before him. However, as the monies paid into the trust account were subject to the Legal Profession Act which defined 'trust money' as transit money received by the practice which included 'money received by a law practice subject to instructions to pay or deliver it to a third party, other than an associate of the practice' the monies were therefore held as trust money on trust for the parties. It followed that the solicitor had a right of indemnity pursuant to the NSW Act.
Finally, in Re Burman (1993) 1 Qd R 49, the applicant sought declarations that the respondents, the vendors' solicitors into whose trust account money was paid, were 'trustees' as defined in the Trust Accounts Act 1974 (Qld) and were therefore obliged to pay into the court the deposit moneys and interest accrued thereon.
Ryan J, after reviewing the authorities and relying on Potters v Loppert [1973] Ch 399, held:[87]
I consider that it is impossible, in light of this statement, to conclude that a stakeholder of a contract deposit is a trustee of the deposit for the parties to the contract. He does not receive the deposit on trust, but he does, in my opinion, receive it upon terms requiring him to account to one or other of the parties to the contract depending upon the outcome of an event. I consider also that where a stakeholder is named in the contract as the solicitor for the vendor, he receives the money in the course of his practice as a solicitor. I accept, as is stated in Hastingwood Property Ltd v Saunders Bearman & Anselm (a firm) at 126, that the fact that a stakeholder is a solicitor does not alter the nature of the stakeholder's obligations, but the fact that it is a solicitor who receives the deposit does have the effect that he becomes a 'trustee' of the money as defined in s 4 of the Trust Accounts Act. I consider also that the moneys are 'trust moneys' since they are received by the trustee in the course of the practice of his profession as a solicitor, and in my opinion they are received 'for or on behalf of any person', even though they are received by him as a principal, since he is obliged to pay the moneys (including the interest) to another person depending upon the outcome of an event.
Disposition - is the deposit property subject to a trust?
[87] Re Burman (1993) 1 Qd R 49, 54.
As stated above, the capacity in which the defendant held the deposit was not an issue raised by the parties. However, whether the deposit is 'property subject to a trust' would need to be considered in light of the authorities together with any interaction with s 68 of the Real Estate Agents and Business Agents Act 1978 (WA).
I cannot determine this issue in the absence of any submissions on the matter and nor do I have to in light of my previous finding that s 93 of the Trustees Act does not empower the court to make the orders in any event.
Are the relevant parties joined?
Finally, I note that none of the 31 other strata title holders who comprised the Sellers and who are entitled to a share of the deposit were joined to the action. Nor was the Buyer. The reason given as to why the Sellers were not joined to the action is that, according to the plaintiff, s 93 empowers the court to deal with an application by any person beneficially entitled to the trust property, regardless of whether they are entitled to the whole of the property or not. This enables the court to hear the matter without the requirement to join others that might be beneficially entitled.[88]
[88] ts 9 - 10, 14.
There was no evidence that the plaintiff in this action was authorised to bring the application on behalf of the other Sellers or that they were served with the application. Nor was the submission made that the remaining sellers provided or needed to authorise the plaintiff to bring the application on their behalf. The submission was the breadth of s 93 allowed any person beneficially entitled to the trust property, although not entitled to all of it, to seek an order in relation to the entirety of the trust property.[89]
[89] ts 14.
In relation to the Buyer, the plaintiff submits that the mechanism in the Contract contemplates that following the receipt of the specified notices, the Deposit Holder is bound to pay the deposit to the Sellers. The dispute under the Contract is one between the Deposit Holder and the Seller, not the Buyer.
One factual issue not completely resolved on the affidavit evidence is that on 8 November 2021, some of the Sellers executed written documents purporting to vary the Contract to extend the settlement date to 8 May 2022.[90] Those variations are signed by some of the Sellers and the Buyer. The Notice of Default, Termination Notice and Deposit Holder Notice all refer to the Settlement Date as 5 January 2022. The Contract provides the Buyer is not obliged to settle if all the titles are not in dealing or if any person who constitutes the Seller is not ready to settle on the Settlement Date,[91] and the Buyer will not be in default under the Contract if it does not complete Settlement unless each person who constitutes the Seller is ready to settle in accordance with the terms of the Contract.[92]
[90] Mr Craggs' affidavit, [10] - [11], Attach 'CJC3'.
[91] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 7.3).
[92] Mr Craggs' affidavit [9], Attach 'CJC2' (Annexure A, cl 7.3). Clause 7.3 of Annexure A to the Contract.
It is the plaintiff's submission that the variations were not effective given they were not executed or agreed to by all the Sellers.[93] In any event the variation to the Settlement Date was to 8 May 2022 and the Buyer was notified on 11 May 2022, the Sellers were ready, willing and able to complete the sale. If the Buyer wishes to allege a breach of contract, it is open to the Buyer to bring an action. However, once the relevant notices were provided under cl 1.2, of the General Conditions, the Deposit Holder could have issued a Deposit Respondent Notice and did not.[94]
Disposition
[93] ts 19.
[94] ts 19-20.
Order 18 r 4(2) of the Rules of the Supreme Court 1971 (WA) (RSC) provides:
Where the plaintiff in any action claims any relief to which any other person is entitled jointly with him, all persons so entitled must, subject to the provisions of any Act and unless the Court gives leave to the contrary, be parties to the action and any of them who does not consent to being joined as a plaintiff must, subject to any order made by the Court on an application for leave under this subrule, be made a defendant.
This subrule shall not apply to a probate action.
In circumstances where the plaintiff seeks orders to distribute the deposit to the other Sellers to which the plaintiff accepts are jointly entitled, subject to any costs and expenses of the sale, the Sellers should have been joined.
In relation to the Buyer, its rights will clearly be affected in respect of the subject matter of the action. In Wurth Australia Pty Ltd v Burgess [2012] WASC 504,[95] Corboy J set out the principles to be applied in a joinder application under O 18 r 6 of the RSC. Relevantly, Corboy J held:[96]
[95] Applied in Ooranya Pty Ltd v ISPT Pty Ltd [No 2] [2019] WASC 453 [44] and Trans Petroleum (Australia) Pty Ltd v United Petroleum (WA) Pty Ltd [No 2] [2022] WASC 460.
[96] Wurth Australia Pty Ltd v Burgess [2012] WASC 504 [57].
(e) The rule requires the court to consider whether the proposed parties' rights against or liabilities to any existing party in respect of the subject matter of the action will be directly affected by any order that may be made in the action: Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52, 55 - 56; News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410, 524 and Homestyle Pty Ltd v City of Belmont [1999] WASCA 59 (Templeman J, with whom Malcolm CJ and Owen J agreed). In a passage that was cited with approval in Homestyle and more recently by the Court of Appeal in Cheng Chih Tiao v Sheng Chin Lai [No 2] [2010] WASCA 189, the Full Court of the Federal Court in News Ltd v Australian Rugby Football League observed, in relation to the test identified by the Privy Council in Pegang Mining, that (525):
'The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent. This is particularly so with remedies in the nature of an injunction: see Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 at 322 per Kirby P. The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential.'
(f) The focus in considering an application to join a defendant is on the rights and liabilities of the proposed defendant and not on 'some looser concept of "interests"': Alinta Asset Management Pty Ltd v Essential Services Commission [2007] VSC 32 (Hollingworth J) (and see Amon at 379 and the comments of Edelman J in Martin Bruce Jones as Receiver and Manager of Miami Waterfront Developments Pty Ltd v Miami Waterfront Developments Pty Ltd [2012] WASC 483 [13] - [14]). An order that directly affects a third person's rights against or liabilities to a party should not be made unless the person is also joined as a party: News Ltd (524). Consequently:
'Where, before trial, a question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceedings. It is the effect of the orders upon the third party that must be determined. The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties. (News Ltd at 525).'
In my view, the application having proceeded as it did pursuant to the Trustees Act and not as a contractual claim between the plaintiff and the Deposit Holder, the Buyer should also have been joined. Clearly, the Buyer's rights as against the plaintiff are directly impacted by the orders sought in the proceedings. Section 96 of the Trustees Act which allows the matter to proceed in the absence of parties in certain circumstances does not apply.
Conclusion
For the reasons stated above s 93 of the Trustees Act does not confer on the court the power to make orders for the appointment of a new trustee or in respect of property subject to a trust. It simply identifies the class of persons entitled to seek such orders under the Act. As such, the application did not identify any basis upon which the orders could be made.
Even if s 93 did empower the court to make the orders sought, in my view the question of whether the deposit is property subject to a trust was not developed or explored and in light of the divergence of authorities on the issue, should have been.
Finally, the proceedings were not properly constituted. The Sellers as persons jointly entitled to the relief sought should have been joined and the Buyer was a party who ought to have been joined to be heard in relation to whether the order sought for the release of the deposit subject to costs and expenses of the sale should be made to the plaintiff.
I will hear the parties in relation to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TM
Associate to Acting Master McDonald
24 OCTOBER 2023
0
20
4