CSR Building Products Ltd v Jonco Imports P/L
[2013] QMC 9
•18 February 2013
MAGISTRATES COURTS OF QUEENSLAND
CITATION:
CSR Building Products Ltd v Jonco Imports P/L [2013] QMC 9
PARTIES:
CSR BUILDING PRODUCTS LTD ACN 008631356
(plaintiff)
v
JONCO IMPORTS PTY LTD ACN 115 376 390
(defendant)
FILE NO/S:
M7496/11
DIVISION:
Magistrates Courts
PROCEEDING:
Application by Plaintiff/Enforcement Creditor to be subrogated to the rights of the Defendant/Enforcement Debtor as trustee
ORIGINATING COURT:
Magistrates Court at Brisbane
DELIVERED ON:
18 February 2013
DELIVERED AT:
Brisbane
HEARING DATE:
11 February 2013
MAGISTRATE:
Springer BL
ORDER:
Application filed 13 December 2013 is dismissed.
CATCHWORDS:
CIVIL LAW – PRACTICE AND PROCEDURE - application for enforcement creditor to be subrogated to the rights of the enforcement debtor as trustee – whether the Magistrates Court has jurisdiction
COUNSEL:
SOLICITORS:
Background
On 9 November 2011, the court gave judgment in favour of the plaintiff in the sum of $64,188.40. To-date the plaintiff has had no success in attempting to enforce that judgment.
On 13 December 2013, the Plaintiff/Enforcement Creditor applied to this Court to be subrogated to the rights of the Defendant/Enforcement Debtor (Jonco) “as trustee of the Jones Family Trust and pursuant to Chapter 198 (sic) of the Uniform Civil Procedure Rules 1999 (as amended) the Plaintiff/Enforcement Creditor be permitted to issue and execute an Enforcement Warrant against the assets of the Jones Family Trust”. The reference to Chapter 198 should be chapter 19.
In the original proceeding, the Jones Family Trust was not mentioned, nor was the fact that the defendant was a trustee pleaded. The current application was argued on 15 February 2013. The defendant opposes the application on the ground that this court does not have jurisdiction because first, the Magistrates Courts Act 1921 (the MCA), does not provide the jurisdiction and second, that any matter involving the Trusts Act must be dealt with by the Supreme Court.
The Trust Deed
The Discretionary Trust Deed appointing Jonco is exhibited to an affidavit by Pranil Chandra and filed on behalf of the applicant. Clause 8.8 of the Trust Deed provides:
Trustee’s Indemnity
Provided the Trustee shall have acted in good faith, the Trustee and, where the Trustee is a company, any director of the Trustee:
(a) shall be entitled to be indemnified out of the Trust Fund for all debts, damages, obligations or other liabilities incurred, arising or awarded by or against the Trustee, a director of the Trustee, through any act or omission in the exercise or attempted exercise of any power, duty, discretion, or authority hereunder, whether original or substituted, and in respect of allocations, claims, demands and costs whatsoever relating to, or concerning the Trust Fund;
(b) it shall be entitled to reimbursement from the Trust Fund for all moneys expended and debts incurred in or about the administration of the Trust; and
(c) it may apply the Trust Fund or any moneys or property comprised therein as it may decide to satisfy the rights of reimbursement or indemnity to which it may hereunder or otherwise by law be entitled.
The Law
It seems established that unsecured creditors (as is the plaintiff):
“… do not have a direct claim against the trust property in respect of unsecured liabilities incurred by trustees in the administration of the trust, and cannot levy execution upon the trust property, [although] they may by subrogation have a right to stand in the place of the trustee and enforce their liabilities against the property to the extent that the trustee would be so entitled. The trustee’s right of indemnity is an asset of the trustee, and the trustee’s creditors are entitled by subrogation to reach this asset and so enforce their claims against the trust property.” (emphasis added)[1]
That right of subrogation only exists where the trustee is entitled to indemnity.[2] The right to indemnity only exists “in respect of expenditure reasonably incurred” in identifying, recovering, realising and protecting trust assets (or attempting to do so” (per Daubney J in Robsyn Pty Ltd (in liquidation) v O’Brien [2012] QSC 285 (emphasis in original).
The respondent/debtor relies on Australasian Conference Assoc Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 348 which considered that a right of subrogation arises by force of equity.[3]
The Magistrates Court Jurisdiction
Section 4 of the MCA states:
4 Jurisdiction of Magistrates Courts
Subject to this Act—
(a) every personal action … and
(b) … and
(c) every action in which a person has an equitable claim or
demand against another person in respect of which the
only relief sought is the recovery of a sum of money or
of damages, whether liquidated or unliquidated, and the
amount claimed is not more than the prescribed limit;
may be commenced in a Magistrates Court, and all Magistrates Courts shall within their respective districts have power and authority to hear and determine in a summary way all such actions.
The defendant submits that what is being sought in this application (subrogation) “is a species of relief far beyond [what section 4(c) allows] – it is relief of itself and it is pure equitable relief.”
The plaintiff submits that the relief sought that it is a step on the way to recovery of a sum of money and having regard to a purpose of the MCA and, taking into account rule 5 of the Uniform Civil Procedure Rules, the MCA should be read as permitting an order for subrogation.
The words of section 4(c) of the MCA include “every action in which a person has an equitable claim or demand against another person in respect of which the only relief sought is the recovery of a sum of money or of damages … may be commenced …”.
Further, the defendant submits that it will be necessary for the court to determine that the right to indemnity exists and that necessarily involves applying the Trusts Act 1973 and that is something that only the Supreme Court has power to do. Subsection 4(4) of the Trusts Act 1973 provides that the powers conferred by the Act are “in addition to the powers given by any Act and by the instrument (if any) creating the trust”. The defendant submits that because the Trusts Act applies in addition to the powers given by the instrument, the Trusts Act applies in any event. Section 72 of that Act provides:
A trustee may reimburse himself or herself for or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers.
Although I have some doubts about the validity of that submission, I need not decide the issue.
In this matter, I consider that the order sought that the plaintiff be subrogated to the rights of the defendant in its capacity as trustee, is a step along the way to recovery of a sum of money where the liability for and amount of the sum of money has already been decided. I accept for present purposes that the order sought is based in equity. However, when section 4 is read as a whole, in my view the section contemplates that the action involves an equitable claim at the time the proceeding is commenced; the section does not include an equitable claim or demand which arises after commencement of the proceeding but before judgment, nor does it, on an ordinary reading, refer to an equitable claim or demand to assist in enforcement of a judgment.
While there was always a right of the trustee to be indemnified out of the assets (assuming the amount for which indemnification may have been sought related to the circumstances set out in clause 8.8 of the Trust Deed), there was no certainty that the respondent/debtor was obliged to pay any amount at the commencement of the proceeding which might have enlivened the equity (ie the right to an indemnity) which is now sought to be enlivened. In any event, there is nothing before me which shows that the incurring of the judgment debt was within clause 8.8, which makes plain that there must be some connection to the Trust.
Conclusion
Although the interpretation I have taken of section 4(c) MCA might be viewed as a narrow one, in my opinion where an equitable jurisdiction is granted to an inferior court, the legislation should be considered closely. I am not satisfied that when reading the whole of section 4 MCA, the Magistrates Court has jurisdiction to make the order sought in the application filed 13 December 2012. The application is dismissed.
As to the costs of the application, my preliminary view is that there should be no order as to costs because this matter was brought in an attempt to progress enforcement of a judgment. The applicant has not been successful and although costs would ordinarily follow the event, there is evidence that no amount has been paid in reduction of the judgment debt.
However, as the parties were not heard on the question of costs, I allow the parties 14 days from the date of delivery of these reasons to provide written submissions on whether there should be a costs order. Consideration of any submissions will be done on the papers and the decision notified to the parties. If submissions on the question of costs are not received, the order will be “There is no order as to costs”.
[1] Mowbray, J et al. Lewin on Trusts 18th Ed. Thomson Sweet & Maxwell 2008, p684, para 21-38.
[2] See also General Credits Limited v Tawilla Pty Ltd [1984] 1 Qd R 388 and Zen Ridgeway Pty Ltd v Adams [2009] 2 Qd R 298
[3] Para 6 of the respondent’s submissions refers to the statement by Gibbs J at p. 348:
It was said by Lord Eldon that a right of subrogation arises by force of “that equity, upon which it is considered against conscience, that the holder of the securities should use them to the prejudice of the surety; and therefore there is nothing hard in the act of the Court placing a surety in the situation of the creditor”.
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