Dover v Lewkovitz (RLD) - [2013] NSWADTAP 22

Administrative Decisions Tribunal

New South Wales

Medium Neutral Citation: Dover v Lewkovitz (RLD) [2013] NSWADTAP 22
Hearing dates: 4 March 2013
Decision date: 17 May 2013
Jurisdiction: Appeal Panel - Internal
Before: M Chesterman, Deputy President
D Bluth, Judicial Member
M Foldi, Non-judicial Member
Decision:
1. The appeal is dismissed.
2. Any application by the Respondent for the costs of the appeal must be filed and served within 21 days, along with supporting submissions. Any submissions in reply by the Appellant must be filed and served within a further 21 days. The matter of costs will then be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997, unless the Appeal Panel decides that a hearing is required.

Catchwords: Retail lease - validity of assignment of lessor's claim for amount due from lessees following termination of lease - whether claim was for debt or damages - when termination of lease occurred
Legislation Cited: Administrative Decisions Tribunal Act 1997
Conveyancing Act 1919
Retail Leases Act 1994
Cases Cited: Arnold v Mann (1957) 99 CLR 462
Ascot Investments Pty Ltd v Harper [1981] HCA 1; (1981) 148 CLR 337
In the Marriage of Ashton [1986] FamCA 20; (1986) 11 Fam LR 457
Re Atkinson [1971] VR 613
Australian Securities & Investments Commission, Re Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey [2006] FCA 814
Beatty v Brashs Pty Ltd [1998] 2 VR 201
Campbell's Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386; [2006] HCA 41
Craig v Federal Commissioner of Taxation [1945] HCA 1; (1945) 70 CLR 441
In Marriage of Davidson (No 2) (1990) 101 FLR 373
Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547
In the Marriage of Goodwin (1990) 101 FLR 386
Janos v Chamas Motors Pty Ltd [2011] NSWCA 238
Kumaragamage v Rallis [2001] NSWSC 466
Lewkovitz v Dover [2012] NSWADT 227
Monk v Australian and New Zealand Banking Group Ltd (1994) 34 NSWLR 148
National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514
Project 28 Pty Ltd v Tim Barr Pty Ltd [2005] NSWCA 240
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267
Sarker v World Best Holdings Pty Ltd (No 2) [2004] NSWADT 15
Shepherd v Felt and Textiles of Australia Ltd (1978) 141 CLR 378
Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245
Re Timothy Pty Ltd and the Companies Act [1981] 2 NSWLR 706
Trendtex Trading Corporation v Credit Suisse [1982] AC 679
Vimblue Pty Ltd v Toweel [2009] NSWSC 494
World Best Holdings Ltd v Sarker [2009] NSWADTAP 13
World Best Holdings Ltd v Sarker [2010] NSWCA 24
Texts Cited: Jacobs' Law of Trusts in Australia (ed JD Heydon and MJ Leeming, Lexis Nexis Butterworths, 2006)
Meagher, Gummow and Lehane's Equity: Doctrine and Remedies (4th edn, ed RP Meagher, JD Heydon and MJ Leeming, Butterworths Nexis Lexis, 2002)
Young P, Croft P, and Smith M, On Equity (Thompson, 2008)
Category: Principal judgment
Parties: Tom Dover (Appellant)
George Lewkovitz (Respondent)
Representation: Counsel
C Stomo (Appellant)
L Doust (Respondent)
Klonis & Co (Appellant)
Norbert Lipton & Co (Respondent)

File Number(s): 129038
Decision under appeal

Citation:

Lewkovitz v Dover [2012] NSWADT 227

Date of Decision:

2012-11-05 00:00:00

Before:

Retail Leases Division

File Number(s):

115138, 115180

reasons for decision

Introduction

This is an appeal against a decision by the Retail Leases Division of theTribunal (Lewkovitz v Dover [2012] NSWADT 227) upholding in part a claim against one of the three lessees of retail shop premises brought by a party alleging entitlement as an assignee of the lessor.

The lessor was a company called Tolicar Pty Ltd ('Tolicar' or 'the lessor'). The lessee against whom these proceedings were instituted, and who is now the Appellant, was Tom Dover. The other two lessees played no significant part in the dealings between the parties and are not involved in these proceedings.

The purported assignee, being the Respondent to this appeal, is Dr George Lewkovitz. He contended that under a Deed of Assignment ('the Deed') between himself and Tolicar, Tolicar assigned to him all the debts and causes of action to which it was entitled under the Lease.

In his Application, filed on 11 October 2011 (matter 115138), Dr Lewkovitz claimed from Mr Dover the sum of $168,232.12 plus interest, comprising outstanding rent and outgoings payable by the lessees as at the date of termination of the Lease, and liquidated damages for the losses sustained by Tolicar because this date (being in July or September 2009) preceded the date of expiry of the Lease (23 August 2010).

In replying to this Application, Mr Dover maintained (inter alia) that the Deed was ineffective to assign to Dr Lewkovitz any entitlement of Tolicar to bring proceedings against the lessees in order to enforce rights arising under the Lease.

The proceedings before the Tribunal also involved a cross claim by Mr Dover (matter 115180). In his Application, filed on 12 December 2011, he sought (inter alia) a declaration, on grounds including unconscionable conduct and estoppel, to the effect that the amount that Dr Lewkovitz claimed to be payable as arrears of rent should be reduced by the sum of $28,445.22.

The Tribunal's orders included an order to Mr Dover to pay to Dr Lewkovitz a total of $118,215.21, comprising a principal sum of $109,967.74 and interest amounting to $8,247.57. Its subsequent orders made it clear that these amounts were calculated on the basis that Mr Dover's claim for reduction of any award on account of arrears of rent had succeeded.

In this appeal, two issues have arisen for determination. The first and most important is whether the Deed, in so far as it purported to assign to Dr Lewkovitz any entitlement of Tolicar to bring proceedings under the Lease against the lessees, was valid and effective to an extent sufficient to entitle Dr Lewkovitz to seek the relief set out in his Application. The second is whether the Tribunal was correct in rejecting Mr Dover's assertion that the Lease was terminated on 23 July 2009, as asserted in the Notice of Termination, and in ruling that it came to an end because the lessees, in vacating the premises on 22 September 2009, breached and repudiated the Lease and this repudiation was accepted in the letter dated 25 September 2009 from the agents to Mr Dover's solicitors.

The appeal was argued before us on 4 March 2013. Mr Stomo appeared for Mr Dover and Ms Doust for Dr Lewkovitz.

Outline of relevant facts

Much of the following outline of facts relevant to this appeal is drawn or adapted from the Tribunal's decision at first instance (Lewkovitz v Dover [2012] NSWADT 227).

The lease between Tolicar and the three lessees (hereafter 'the Lease') was governed by the Retail Leases Act 1994. It was for a term of five years commencing on 24 August 2005. The premises were a shop situated, along with three other shops in a building in Coogee Bay Road, Coogee ('the building').

The initial rent was stipulated in the Lease as $153,414.40, payable in advance by equal monthly instalments of $12,784.53. There was provision for annual adjustment in line with the CPI. The lessees were also liable to pay 28% of 71% of the outgoings on the building. Pursuant to a Variation of Lease dated 20 January 2006, the monthly rent was reduced to $12,407.09 and the lessees' liability for outgoings was increased to 36.55% of 71%.

Clause 19 of the Lease contained the following passage:-

Should the Lessor terminate this Lease following any such fundamental breach or otherwise then without prejudice to any other right or remedy of the Lessor herein contained or implied IT IS EXPRESSLY AGREED AND DECLARED that the Lessor shall be entitled to recover from the Lessee (or the Guarantor as the case may be) as and by way of liquidated damages for such breach the Lessor's reasonable costs of re-letting together with the difference between the aggregate of the annual rent, the Lessee's proportion of the outgoings of the building or increases in outgoings of the building, the cleaning charge, and other monies which would have been payable by the Lessee for the unexpired residue of the term but for such determination, calculated from the date of such determination to the due date of termination of this Lease LESS the aggregate of the several rentals outgoings and other monies which the Lessor by taking proper steps to re-let the premises shall obtain or could reasonably be expected to obtain by re-letting the premises for the unexpired residue of the term (if any) PROVIDED THAT in so doing the Lessor shall not be required or be obliged to offer or accept in respect of such re-letting terms covenants conditions or stipulations which are the same or similar to the terms covenants conditions or stipulations herein contained or implied.

Management of the leased premises, along with the rest of the building, was conducted on Tolicar's behalf by Steven Krulis Real Estate Agency ('the agents').

The circumstances in which the Lease came to an end were outlined as follows in paragraphs [19] to [25] of the Tribunal's decision:-

19 There was served on Mr Dover a Notice of Termination of Lease addressed to the lessees dated 23 July 2009, signed by Mr Peter O'Donnell, a director of the agents, on behalf of the lessor:

"WHEREAS

Clause 38 of the Lease obligates you to pay outgoings to Tolicar Pty Limited.

Clause 7(b)(i) of the Lease provides that, if the rent or any other moneys payable under the Lease shall be unpaid for a period of fourteen days after any of the days on which same ought to have been paid, Tolicar Pty Limited shall be entitled to terminate the Lease.

Outgoings in respect of the Lease ought to have been paid on 24 September 2008 and on the 24th of each succeeding month up to and including 24 June 2009 and remain unpaid.

NOW Tolicar Pty Limited hereby gives you notice of termination of the Lease effective forthwith and requires you to vacate the premises forthwith."

20 Mr Dover's solicitors responded to the Notice of 23 July 2009 by a letter to the agents dated 24 July 2009 which said:

"We respectfully submit that notwithstanding clause 7 of the Lease, the Notice is invalid on the basis that at no time has the Lessor or their agents served notice on the Lessee specifying the particular breach and requiring the Lessee to remedy the breach and specifying in clear terms the amount claimed in relation to the breach.

Further the terms of the Lease does not expressly negative Section 129 of the Conveyancing Act 1919."

The letter set out the provisions of s129(1) and (2) of the Conveyancing Act and concluded:

"We place you on notice that if any steps are taken by the Lessor to re-enter the leased premise without proper and reasonable notice to the Lessee we are instructed to immediately apply to the Supreme Court for the appropriate relief and also claim any damages which the Lessee may suffer from the Lessor's forfeiture of the Lease and all the Lessee's rights pursuant to the Lease and at law are expressly reserved."

21 Mr Dover says in his affidavit:

"Following the receipt of the Notice of Termination Of Lease negotiations were entered into between myself and the landlord to try to resolve our differences but as these did not come to any concluded agreement, I left the premises on 22 September 2009.

On 22 September 2009 the landlord took possession of the premises.'

22 Mr Danny Sankey, the applicant's solicitor, says in an affidavit:

"Between 27 July 2009 and 21 August 2009 certain 'Without Prejudice' communications passed between the parties.

On 21 August 2009, the lessor's agent served on the lessees a Notice of Breach of Covenant..."

That Notice of Breach of Covenant stated:

"TOLICAR PTY LIMITED ("the Lessor") refers to the above Lease and in particular to the following:

Schedule One to the Lease contains a covenant by you to pay rent to the Lessor.

Clause 38 of the Lease contains an agreement by you to pay outgoings (as therein defined) to the Lessor.

Clause 17 of the Lease contains an agreement by you to pay to the Lessor interest on unpaid moneys as provided in such Clause.

The Lessor notes that you have breached the above covenant and each of the above agreements in that you have failed to pay to the Lessor the undermentioned moneys...

The Lessor hereby gives you notice and requires you to remedy the said breaches within twenty-one days of the date hereof which the Lessor considers to be a reasonable time."

23 On 10 September 2009 the agents forwarded to Mr Dover a tax invoice/statement itemising an amount of $74,304.27 claimed as a balance due under the lease.

24 Mr O'Donnell says in an affidavit that on 22 September 2009, having been told something by an employee of the agents, he telephoned Mr Dover and had a conversation with him to the following effect:

"I: 'I've been told your premises are closed and have been stripped out.'

Mr Dover: 'That's right. We've left.'

I: 'You'll need to return the keys if you've vacated.'

Mr Dover: 'I'll bring them in today.'"

He says that the keys to the shop were returned later that day.

25 On behalf of the agents, Mr O'Donnell wrote to Mr Dover's solicitors on 25 September 2009:

"We refer to our brief conversation with both yourself and Tom Dover on the 22nd September and confirm that the keys for the abovementioned premises were returned to our office on that date. The Lessees' conduct in abandoning the premises is a repudiation of the Lease and the Lessor accepts such repudiation and terminates the Lease forthwith.

The Lessor holds your clients liable for all damages sustained by it as a result of your clients' breach of the Lease. When the Lessor is in a position to quantify such damages the Lessor will make a claim against your clients.

As at 22nd September 2009, your clients are indebted to the Lessor in the sum of $81,558.79 and the Lessor seeks payment of such sum.

We have inspected the abandoned premises and see that only part of the Lessees' Fitout has been removed and a substantial part has been left behind.

If you have any queries in regard to this please do not hesitate to contact myself."

Mr Dover's solicitors responded by letter dated 1 October 2009:

"Thank you for your letter dated 25 September 2009.

We are instructed that the Lessee refutes your clients claim that the Lessee is indebted to your client in the amount of $81,558.79 and any claim for damages will be defended...."

As at 22 September 2009, the amount owed by the lessees to Tolicar for rent and outgoings was calculated (at [64]) by the Tribunal at $44,969.90, after crediting them with the rent reductions totalling $28,445.22 with which Mr Dover's cross application was concerned. On or about 6 October 2009, Tolicar received the sum of $42,188.94 from the bank guarantee that the lessees had given at the commencement of the Lease. This left only $2,780.96 owing for rent and outgoings relating to the period of operation of the Lease.

In or about November 2009, Tolicar sold the building. The sale was settled on 10 May 2010.

The Deed purporting to assign Tolicar's rights under the Lease to Dr Lewkovitz was dated 20 June 2011. It stated that in consideration of a payment of $1.00 by Dr Lewkovitz, Tolicar assigned to him all its right, title and interest in debts and causes of action including "all moneys jointly and severally owed' to it by the lessees for 'rent, outgoings and damages pursuant to' the Lease.

Tolicar Pty Ltd was de-registered on 16 February 2012.

For reasons explained below, the relationship between Dr Lewkovitz and Tolicar at the time of execution of the Deed bears directly on the question whether the Deed effected a valid assignment and is therefore of major significance in this litigation. The Tribunal outlined a number of significant aspects of this rather complex relationship at [40 - 45]:-

40 The shareholders in Tolicar Pty Limited at all relevant times were Solrose Investments Pty Ltd, Lewkovitz Nominees Pty Ltd and Mr David Stern. Solrose Investments Pty Ltd held, beneficially, 2 ordinary shares, Lewkovitz Nominees Pty Ltd held, not beneficially, one R1 preference share, Lewkovitz Nominees Pty Ltd held, not beneficially, one R2 preference share and David Stern held, beneficially, three R3 preference shares. The directors of Tolicar Pty Ltd were Dr Lewkovitz, his wife, and his sister, Ms Caroline Lieberman.

41 There are two ordinary shares issued in Lewkovitz Nominees Pty Ltd, one which is held beneficially, by each of Mr Norbert Lipton and Mr David Stern. Messrs Lipton and Stern are the directors.

42 Lewkovitz Nominees Pty Ltd is the trustee of the Solomon Lewkovitz Testamentary Trust ("the Trust"). The late Solomon Lewkovitz, who was the father of the applicant, died on 4 January 1999 and by his Will dated 23 February 1996, after some specific devises and bequests, he gave the balance of his estate to the Trust. Under the Trust the Principal Beneficiaries are the applicant and his sister and the Beneficiaries include the Principal Beneficiaries and a wide range of their relatives, and subject to any earlier discretionary applications by the Trustee for the benefit of Beneficiaries of parts of the income or capital, the income and capital of the Trust are to be held at the ultimate Vesting Day for the Principal Beneficiaries or the survivor of them or the children of the deceased Principal Beneficiaries.

43 The shareholding in Solrose Pty Ltd is held:

10 R1 preference shares, beneficially by Barak Pty Ltd

10 R2 preference shares, beneficially by Barak Pty Ltd

10 R3 preference shares, beneficially by Barak Pty Ltd

10 R4 preference shares, beneficially by Barak Pty Ltd

1 R1 preference share, beneficially by Lewkovitz Nominees Pty Ltd

1 R2 preference share, beneficially by Lewkovitz Nominees Pty Ltd

2000 unclassified shares, beneficially by Lewkovitz Nominees Pty Ltd

The directors of Solrose Pty Ltd are Dr Lewkovitz, his wife and his sister.

44 Barak Pty Ltd was deregistered on 16 February 2012. The issued shares in Barak Pty Ltd were 12 A Group 1 shares and 8 Group 2 shares, held beneficially by Lewkovitz Nominees Pty Ltd. The directors of Barak Pty Ltd were Dr Lewkovitz, his wife and his sister.

45 There is affidavit evidence from Dr Lewkovitz as follows:

"...the shareholders in Solrose Investments Pty Ltd were Barak Pty Ltd and Lewkovitz Nominees Pty Ltd... the shareholder of Barak Pty Ltd was Lewkovitz Nominees Pty Ltd. Lewkovitz Nominees remained a shareholder of Barak Pty Ltd as at 22 June 2011 and until the company was deregistered on 16 February 2012. ... the ultimate holding company of Tolicar Pty Ltd was Lewkovitz Nominees Pty Ltd. ... Lewkovitz Nominees Pty Ltd was at all times the trustee of the Solomon Lewkovitz Testamentary Trust ('Trust') in respect of which my sister Caroline Libermann and I were the sole Principal Beneficiaries as at 22 June 2011. ...Since the establishment of the Trust, the net income earned by Tolicar Pty Ltd has been distributed to Solrose Investments Pty Ltd which distributed its income to my sister and me as the Principal Beneficiaries. ...It is my intention to disburse any moneys found to be payable by the respondent, less any costs not recovered from the respondent, to my sister and me in equal amounts."

There were tendered with that affidavit documents including:

A memorandum of resolutions of members of Tolicar Pty Ltd, and a dividend statement of Tolicar Pty Ltd, in respect of a dividend declared and paid on 30 June 2011 by Tolicar Pty Ltd to Solrose Investments Pty Ltd totalling $4,611,373.00 in respect of 2 ordinary fully paid shares.

A memorandum of resolutions of members of Solrose Investments Pty Ltd, and a dividend statement of Solrose Investment Pty Ltd, in respect of a dividend declared and paid on 30 June 2011 by Solrose Investments Pty Ltd to Lewkovitz Nominees Pty Ltd totalling $7,021,373.00 in respect of 2,000 unclassified fully paid shares.

Minutes of a meeting of the Solomon Lewkovitz Testamentary Trust on 30 June 2011 resolving that all the income of the trust for the year ended 30 June 2011 be appropriated, set aside and applied to the beneficiaries Dr Lewkovitz and his sister in the proportions of 50% each.

Having regard to arguments that were put to us in the appeal and to case law that we summarise below, three additional features of the Trust created by Dr Solomon Lewkovitz are also significant. It is convenient to describe them here.

First, the Beneficiaries (as opposed to the Principal Beneficiaries) were defined in clause 2 as a very much wider range of persons than the Tribunal's description (at [42]) implies. They included, for example, 'any company in which any of the Beneficiaries may have some interest'; any charitable entity (whether or not incorporated) that did not 'carry on business for the purpose of profit or gain to its individual members'; and any person existing before the Vesting Day (whether corporate or unincorporated) that the Trustee nominated.

Secondly, distribution of the income of the trust fund was regulated as follows in clause 3. Under paragraph (a), the Trustee was authorised to distribute as much as it determined, in its absolute discretion, of the net income of the trust fund in any year to any one or more of the Beneficiaries in such proportions as it should, in its absolute discretion, think fit, to the exclusion of the others or other of the Beneficiaries. But under paragraph (b), it was bound to hold any income that it had not distributed pursuant to paragraph (a) on trust for such of the Principal Beneficiaries as were living at the end of the year, and if more than one in equal shares.

Thirdly, clause 8(a) empowered the person or persons designated by the Trust as 'the Appointor' to remove an existing trustee from office, provided that if in consequence the office of trustee became vacant a new trustee was to be appointed simultaneously. 'The Appointor' was defined in clause 2 to mean (i) Dr Lewkovitz and his sister Caroline Lieberman, acting jointly; or (ii) Mr Lipton and Mr Aslan Moses, or the survivor of them, and either of Dr Lewkovitz and Ms Lieberman, acting jointly; or (iii) the survivor of Dr Lewkovitz, Ms Lieberman, Mr Lipton and Mr Moses.

Relevant aspects of the Tribunal's decision

On the two questions arising in this appeal, the Tribunal reached the following conclusions.

Whether Tolicar's claim against the lessees was effectively assigned to Dr Lewkovitz. In its decision, the Tribunal held that the lessees were liable to Tolicar for an amount comprising 'outstanding rent, outgoings, liquidated damages and interest' (to quote from Dr Lewkovitz's Application) on account of their conduct leading to premature termination of the Lease. It assessed this amount at $118,251.21.

The Tribunal further held that Tolicar's right to claim this amount had been validly assigned to Dr Lewkovitz under the Deed. It reached this conclusion by the following steps.

It treated Tolicar's claim for this amount as falling within the range of the 'debts and causes of action' purportedly assigned by the Deed. It gave no express consideration to this issue, since the relevant clause of the Deed specifically referred to 'all moneys jointly and severally owed' by the lessees to Tolicar pursuant to the Lease.

At [83], in line with submissions by counsel for Dr Lewkovitz that it quoted in the preceding paragraph, the Tribunal observed that Tolicar's claim against the lessees for arrears of rent and outgoings payable as at the date of termination of the Lease clearly constituted a 'debt', not a 'cause of action'. It held that there was 'merit' in Dr Lewkovitz's submission that this 'debt' was effectively assigned to him by the Deed, 'consistently with' section 12 of the Conveyancing Act 1919 (which it reproduced at [77]). The Tribunal did not pursue this matter further, as it was apparently not in dispute.

In the present context, the question occupying most of the Tribunal's discussion was the assignability of Tolicar's claim for damages sustained by it as a consequence of the termination of the Lease. This claim was based on clause 19 of the Lease. On the footing (initially) that it fell to be classified as a 'cause of action', not a 'debt', the Tribunal examined the principles of common law, forming part of the law relating to maintenance and champerty, that determine whether a 'bare right of action' is assignable.

At [77], it quoted the following statement of principle from P Young, C Croft and M Smith, On Equity (Thompson, 2008) at [10.60]:-

The assignment of what was termed a 'bare right of action', whether legal or equitable, was not permitted either at law or in equity concerns that 'it savoured of or was likely to lead to maintenance' or the related evil of champerty.

It went on to point out at [78], however, that this principle had been qualified by a number of decisions in recent decades, commencing with Trendtex Trading Corporation v Credit Suisse [1982] AC 679. It quoted the following important dictum of Lord Roskill in that case, at 699:-

If the assignment is of a property right or interest and the cause of action is ancillary to that right or interest, or if the assignee had a genuine commercial interest in taking the assignment and in enforcing it for his own benefit, I see no reason why the assignment should be struck down as an assignment of a bare cause of action or as savouring of maintenance.

Observing that the significant part of this dictum for present purposes was the second part - 'if the assignee had a genuine commercial interest in taking the assignment and in enforcing it for his own benefit' - the Tribunal then referred (at [78 - 82]) to four Australian cases in which the principles stated in Trendtex had been followed. These included the High Court decision in Campbell's Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386; [2006] HCA 41, in which the Court indicated (at [79] to [81] and [258]) that these principles were applicable in Australia. In the other three cases, the summaries of the facts provided by the Tribunal were along the following lines and the passages that it quoted included the following extracts.

In Monk v Australian and New Zealand Banking Group Ltd (1994) 34 NSWLR 148, a number of cheques were alleged to have been converted by their presentation to the bank by, and payment by the bank to, a third party. The payee assigned its rights of action against the bank to the plaintiff, who was one of its directors. The bank had recovered judgment and instituted bankruptcy proceedings against the plaintiff in respect of a debt by the plaintiff to it arising out of a separate matter. In taking the assignment, the plaintiff sought to establish a debt against the bank in his favour for the purpose of setting it off against the judgment debt due by him to the bank. Applying the Trendtex decision, Cohen J held that the purported assignment by the payee of its rights of action against the bank was ineffective, since (a) there had been no assignment of any property right and (b) the plaintiff, having only a possibility of becoming a creditor of the bank, had no 'genuine commercial interest' in taking the assignment and enforcing it for his own benefit. A long passage that the Tribunal quoted from the judgment of Cohen J at 152-153 included the following observations:-

In considering the question of whether the plaintiff had a genuine commercial interest in taking the assignment there is very little evidence available. It is known that he is a director of [the payee] and I assume from the minutes of the meeting approving the assignment that he may also be a shareholder, although that is not clear from the evidence. It was submitted on his behalf that he has a genuine commercial interest, namely that obtaining a judgment in his favour will enable him to satisfy the debt upon which the bankruptcy notice is based.

In my opinion that is not a genuine commercial interest in the way that the phrase has been used in the judgments. Examples may be given from the facts in the various cases concerned. For instance it was held that there was such an interest where the assignee was already a substantial creditor of the assignor with a right to enforce the debt ... or where the assignee was the sole shareholder who was a guarantor of the overdraft of the assignor ... or where the assignee was a debenture holder with an interest in protecting the value of its security...

In the authorities where the Trendtex test has been applied, the commercial interest has gone beyond a mere personal interest in profiting from the outcome of the proceedings and has required an interest by the assignee in the assignor or its business affairs or activities which the assignment may in some way protect. In my opinion it has not been shown that the plaintiff has a relationship to Coutts Morgan to the extent that he has an interest to protect by taking an assignment of the cause of action.

In National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514 at 540, Lindgren J said:-

The genuine commercial interest referred to in Trendtex is not a nebulous notion of the general commercial advantage of the assignee but something more specific and limited. In particular, it does not embrace an interest arising from an arrangement voluntarily entered into by the assignee of which the impugned assignment is an essential part, like the arrangement in the present case. Rather, the expression refers to a commercial interest which exists already or by reason of other matters, and which receives ancillary support from the assignment.

In Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267, claims had been made against a designer and a technical consultant in respect of the failure of a pavement within a container depot. The plaintiff had been the builder of the depot including the pavement and had subsequently rectified the pavement. The owner of the container depot assigned to the plaintiff its interest in the building contract. McDougall J held that while there may have been some commercial advantage to the plaintiff in taking the assignment, the plaintiff had no interest sufficient to validate the assignment.

At [86], the Tribunal held that the criterion stated by Lord Roskill in Trendtex was satisfied in the present case. It explained this ruling as follows:-

In my opinion, Dr Lewkovitz did have a genuine commercial interest in taking the assignment of the causes of action against the lessees and enforcing it for his own benefit (and through him, for the benefit of his sister). An ultimate interest of Dr Lewkovitz (and through him, his sister) in the assets and income of Tolicar Pty Ltd, the assignor, can be followed through into the Solomon Lewkovitz Testamentary Trust as demonstrated by the material set out above in the Assignment - Evidence section of this Decision. Similarly demonstrated is the interest of Dr Lewkovitz, and that of his sister, in the Trust, as the Principal Beneficiaries thereunder. The Trust was in operation from the death of the testator on 4 January 1999, so these interests were in existence at all relevant times, particularly at the date of the Deed assigning the causes of action. Dr Lewkovitz was also a director of the lessor. The interest of Dr Lewkovitz (and through him, that of his sister) in taking the assignment thus goes beyond merely obtaining some personal benefit from causes of action in relation to which he (or they) had no pre-existing involvement. In these circumstances the "genuine commercial interest" criterion is, in my opinion, satisfied. I appreciate that the assignment did not directly put the benefit of the causes of action into the Trust whether through Lewkovitz Nominees Pty Ltd or otherwise. Nevertheless Dr Lewkovitz' stated intention (which I accept) is that the net proceeds of the causes of action will be held by him for the benefit of himself and his sister equally, what would have been the probable outcome had those net proceeds been processed through the Trust, will have been achieved. The assignments expressed in the Deed of 20 June 2011, were, therefore, effective.

In two earlier paragraphs, [83] and [84], the Tribunal expressed the opinion that an alternative way of reaching the same result was 'arguable'. But because the parties had not addressed this matter in their submissions, the Tribunal stated that it could not 'become decisive in these proceedings'.

According to this approach, Tolicar's claim for damages caused by the premature termination of the Lease, being based on clause 19 (quoted above at [13]), was a claim for 'liquidated damages' and therefore should be classified as a debt, not a 'bare right of action'. On this footing, the limitations on assignment imposed by the criterion stated in Trendtex would not be applicable. In expressing the opinion that a claim for liquidated damages would constitute a debt, the Tribunal relied on passages (which it quoted) in the judgment of Barrett J in Vimblue Pty Ltd v Toweel [2009] NSWSC 494 at [13 - 19]. It suggested that although these passages related to 'the concept of a debt for the purposes of a statutory demand' under companies legislation, they were applicable in the present context. It then stated (at [84]):-

To use language within these passages, the subject claims by the applicant in respect of the re-letting of the shop, are "definite" and ascertained by "positive data" as distinct from "opinion or conjecture". In my opinion, the claims are therefore appropriate to be designated, as they are in Clause 19 of the lease, "liquidated" and as such they constitute a debt assignable as such (and not as a cause of action).

Ultimately, therefore, the Tribunal outlined two different reasons for concluding that Tolicar's claim for damages caused by the premature termination of the Lease was effectively assigned to Dr Lewkovitz under the Deed. The first, on which it founded its decision in his favour, was that by virtue of the considerations that it identified at [86], he had a 'genuine commercial interest' of the kind required by Trendtex and subsequent Australian authorities to validate the assignment of a 'bare cause of action'. The second, which was obiter only, was that because under clause 19 of the Lease this was a claim for liquidated damages, it should be classified as a debt, not a 'bare cause of action', and was therefore assignable irrespective of whether the Trendtex test was satisfied.

The date and circumstances of the termination of the Lease. At [63], the Tribunal held, after considering the competing arguments of the parties and its factual findings that we have quoted above (at [15]), that the circumstances of termination of the Lease were as follows:-

63 ... the lessees breached and repudiated the lease by vacating the shop on 22 September 2009 and... the repudiation was accepted by the lessor by the letter from the agents to Mr Dover's solicitors on 25 September 2009.

In so ruling, the Tribunal rejected (at [61]) Mr Dover's contention that the Notice of Termination dated 23 July 2009 effected immediate termination. Its reasons were as follows: (a) the ground of termination stated in this Notice was default in the payment of outgoings; (b) although a lease may stipulate that outgoings are to be regarded as a component of the rent, the Lease in this case had not done so; (c) termination of a lease by a lessor on a ground other than non-payment of rent is subject to the requirement to serve a notice under section 129(1) of the Conveyancing Act 1919; (d) as at 23 July 2009, no such notice had been served. In support of the second of these propositions, the Tribunal quoted a passage from the decision of Austin J in Kumaragamage v Rallis [2001] NSWSC 466 at [44].

At [62], the Tribunal rejected an argument put in the alternative by Mr Dover. This was that service of the Notice of 23 July 2009 constituted repudiation of the Lease by Tolicar because it contravened section 129 and that the lessees accepted this repudiation by vacating the premises on 22 September 2009. The Tribunal made the following points: (a) this was contrary to the position stated by Mr Dover's solicitors in their letter of 24 July 2009 to the agents; (b) there was no evidence of conduct by him amounting to acceptance of any such repudiation; (c) according to his own evidence he left the premises because his negotiations with Tolicar following service of the Notice had fallen through; and (d) there was no evidence to suggest that his departure was by mutual agreement.

We will now set out the parties' submissions and our conclusions regarding each of the two matters raised in the appeal.

The Appellant's submissions regarding the assignment

The principal contention urged by Mr Stomo on Mr Dover's behalf was that the Tribunal erred in holding that the purported assignment to Dr Lewkovitz of Tolicar's claim for losses caused by the termination of the Lease was effective.

This error, he maintained, arose principally because of the Tribunal's erroneous ruling that what we have called the Trendtex test was satisfied. The Tribunal formed the view that at the time of the purported assignment the interest already held by Dr Lewkovitz in Tolicar's claim amounted to a 'genuine commercial interest'. But this was not the case, according to Mr Stomo, because any such pre-existing interest was no more than that of a possible beneficiary under a discretionary trust, which in turn had no immediate right to any part of the proceeds of the claim.

In seeking to make good these contentions, Mr Stomo placed particular emphasis on the following aspects of the Australian cases on the Trendtex test that were cited and discussed in the Tribunal's decision:-

(a) Cohen J's insistence in Monk v Australian and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 at 153 that the 'commercial interest' being asserted must go 'beyond a mere personal interest in profiting from the outcome of the proceedings' and must amount to 'an interest by the assignee in the assignor or its business affairs or activities which the assignment may in some way protect'.

(b) The warnings given by Lindgren J in National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514 at 540 to the effect that the 'genuine commercial interest referred to in Trendtex is not a nebulous notion of the general commercial advantage of the assignee but something more specific and limited' and that it must be a commercial interest that 'exists already or by reason of other matters, and... receives ancillary support from the assignment'.

(c) The fact that in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267, Mc Dougall J based his conclusion that the assignment failed on his findings (at [64 - 65]) that the 'genuine commercial interest' claimed by the plaintiff was 'an interest arising under and by virtue of the instrument of assignment' and that prior to the date of the purported assignment there was no evidence to suggest that the plaintiff had any interest in any action brought by the owner of the container depot against the designer of the defective payment or the technical consultant.

We will now outline relevant aspects of three further cases on which Mr Stomo relied.

The first of these was Re Timothy Pty Ltd and the Companies Act [1981] 2 NSWLR 706. In this case, the assignor company was indebted to the assignee. The assignor had brought a claim for damages against its former lessor. It purported to assign this claim to the assignee. Subsequently, it was deregistered. In proceedings brought by the assignee to restore the assignor to the companies register, a question to be resolved was whether the assignee was a 'person aggrieved' by the deregistration. The lessor argued that it was not a 'person aggrieved' because the assignee had not had a 'genuine commercial interest' in the assignor's claim against the lessor within the meaning of the Trendtex test.

Needham J held that the assignee did have a 'genuine commercial interest'. He held that an alternative formulation of the test to be applied, contained in the judgment of Lord Wilberforce in Trendtex, was also satisfied. According to this formulation (see [1982] AC 697 at 694), an assignment will not infringe the law relating to maintenance and champerty if at the time of assignment the assignee had 'a genuine and substantial interest in the success of' the cause of action being assigned.

The passage in Needham J's decision (at 712) to which Mr Stomo drew our attention was as follows:-

... it seems to me that the principle of the Trendtex case can be applied to an assignment of a right of action by a debtor to a creditor where the evidence shows that, without that assignment, the creditor is not likely to be paid his debt. In such a case the rule of public policy would be inapplicable because the assignment would not be champertous.

Mr Stomo argued that this statement was clearly inapplicable to the present case because Dr Lewkovitz had no entitlement to receive, via the Trust, any part of the proceeds of Tolicar's claim against the lessees for damages. Dr Lewkovitz, he said, had only a mere hope or expectation of deriving benefit from the success of this claim.

Mr Stomo submitted that the Victorian case of Beatty v Brashs Pty Ltd [1998] 2 VR 201 involved a similar pattern of events and was therefore also distinguishable. In his judgment at pp 214-215, Smith J stated the applicable principles as follows:-

The review of the above authority supports the conclusion that a person will not infringe the law of maintenance and champerty in assigning a mere right of action in tort or for breach of statutory duty where, inter alia, it can be demonstrated that:

(a) the assignee had a genuine substantial interest (Lord Wilberforce, Trendtex, at 694) or a genuine commercial interest (Lord Roskill, Trendtex at 703) in maintaining that cause of action and

(b) that interest existed prior to the assignment.

Mr Stomo argued that the following passage (at 216) illustrated what was required for an assignment of a cause of action to be valid and that these requirements were not satisfied in the present case:-

It becomes a question of applying the test enunciated in Trendtex to the facts of the case. In this case, prior to the purported assignment embodied in the deed, the participating creditors [the assignees] were owed sums by Brashs [the assignor] and it appears that their only prospect of recovering the whole or a significant portion those debts lay in Brashs successfully suing persons such as the auditors or the directors to recover the losses that Brashs had suffered. If those losses were recovered then there was a prospect of Brashs receiving funds out of which the creditors might be paid. Thus the participating creditors in my view had a genuine substantial interest and a genuine commercial interest in the rights of action in tort and for breach of statutory duty and which were assigned to the deed administrators on trust for their benefit. Their interest existed prior to the assignment.

The third of these additional cases cited by Mr Stomo was Project 28 Pty Ltd v Tim Barr Pty Ltd [2005] NSWCA 240. Its rather complex facts included the following events. TBPL (a company) was the lessee from Narui (also a company) of a large parcel of land called Cudgen Park. The lease included a clause conferring on TBPL an option to purchase this land. Narui purported to terminate the lease on the ground that TPBL had used part of the land for a tree plantation without acquiring the necessary statutory approval. TPBL brought proceedings ('the Lease Proceedings') in which it sought an order restraining Narui from retaking possession of Cudgen Park. While the Lease Proceedings were current, TPBL and a development company called Austcorp entered into a deed by which TBPL granted to Austcorp an option both to acquire the lease and to purchase Cudgen Park. Both TBPL and Austcorp (nominating a subsidiary) exercised the options that they had acquired. TPBL then purported to assign to Austcorp the conduct of the Lease Proceedings against Narui.

At first instance, Palmer J in the Supreme Court held that Austcorp had a 'genuine commercial interest' in acquiring Cudgen Park, that it therefore had a 'genuine commercial interest' in funding the Lease Proceedings and that accordingly the assignment of the right to conduct these proceedings was not an abuse of process and did not 'savour of maintenance'.

In the Court of Appeal, this ruling was set aside. In his judgment at [40], Ipp JA, with whom Hodgson JA and Campbell AJA agreed, quoted Lord Roskill's formulation of the criterion of 'genuine commercial interest' in Trendtex. At [41 - 42], being the passage in his judgment on which Mr Stomo specifically relied, he said:-

41 Such an interest must be a "legitimate interest". It must be distinct from the benefit that the person supporting the action seeks to derive from the litigation: Giles v Thompson [1994] 1 AC 142. It must be something beyond a mere personal interest in profiting from the outcome of the proceedings: Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148; Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2004] NSWSC 1041 at [59].

42 In my opinion, the mere wish on the part of Austcorp to acquire Cudgen Paddock was far too insubstantial and tenuous to qualify as the kind of commercial interest that would have the effect contemplated in Trendex and the cases that have followed it. Such an interest must, at least, be rights-based and not a mere hope. In my opinion, his Honour erred in deciding otherwise.

In developing his argument that, prior to the assignment, any interest that Dr Lewkovitz had in Tolicar's claim against the lessees did not satisfy the Trendtex test, Mr Stomo relied on two passages in authoritative texts on the law of trusts. He referred to the following proposition in Jacobs' Law of Trusts in Australia (ed JD Heydon and MJ Leeming, Lexis Nexis Butterworths, 2006) at [314]: 'The chief jurisprudential interest of discretionary trusts is that a member of the class of possible objects of appointment has no proprietary interest in the trust assets (unless there is no other discretionary object), although the member does have standing to compel the proper administration of the trust.' He referred also to paragraph [4-025] of Meagher, Gummow and Lehane's Equity: Doctrine and Remedies (4th edn, ed RP Meagher, JD Heydon and MJ Leeming, Butterworths Nexis Lexis, 2002). It is stated here that the interest of a beneficiary in a share of the residue of an unadministered deceased estate does not constitute a proprietary interest in any particular assets of the estate, but comprises only a right to compel the personal representative of the testator to administer the estate correctly and to 'obtain the assistance of a court of equity to that end'.

Mr Stomo argued also that at the time of the assignment, by virtue of the complex structure of shareholdings described by the Tribunal at [40 - 44] (see [20] above), no more than two fifteenths of the amount recoverable by Tolicar as rent or damages for lost rent from the lessees could, at most, have been transferred, via the two intervening companies (Solrose and Barak), into the trust fund held by Lewkovitz Nominees as trustee. Furthermore, any distribution by Tolicar would not have been of the amount recovered from the lessees. It would have taken the form of one or more dividends declared out of Tolicar's profits for the time being. The same would apply to distributions by the two intervening companies.

In Mr Stomo's written outline of submissions, filed before the hearing of the appeal, the following useful summary of these contentions appears at paragraph 24:-

The logical conclusion from the above is that Dr Lewkovitz:-

a. only had an expectation under a bare trust AND not an interest which presently exists;

b. of the rent only 2/15 could... be expected to be passed down the line of companies and then subject to the companies declaring a profit distribution;

c. was only, at the highest, entitled to what profit distribution Tolicar Pty Ltd, Solrose and Barak Pty Ltd may have made, of which Dr Lewkovitz (and/or other beneficiaries) may have received on a distribution by the trustee;

d. only had an expectation of the trustee receiving a distribution of profits from the other companies, which only gave him (and other beneficiaries) a possible entitlement to a distribution made by the trustee, if any; and

e. was in effect obtaining a mere personal interest in profiting from the outcome of the proceedings.

It followed, according to Mr Stomo, that Dr Lewkovitz's interest in Tolicar's claim against the lessees was neither 'rights-based' nor 'presently existing'. Because he had no more than a hope or expectation of receiving any such benefit, this interest was 'insubstantial' and 'nebulous'. It was not an interest in 'the assignor or its business affairs or activities which the assignment may in some way protect'.

A further submission made by Mr Stomo, but not strongly pressed, was that the Tribunal erred (at [86]) in suggesting that in some sense Dr Lewkovitz's sister (Ms Liebermann) maintained her claims as a beneficiary under the Trust through him.

Mr Stomo's arguments also addressed the Tribunal's ruling that, by virtue of clause 19 of the Lease, Tolicar's claim for losses suffered after the termination of the Lease was a claim for 'liquidated damages' and therefore constituted a debt, which was assignable irrespective of whether the assignee had a pre-existing 'genuine commercial interest'. He maintained that the decision on which the Tribunal relied, Vimblue Pty Ltd v Toweel [2009] NSWSC 494, was inapplicable because it related to a totally distinct question, namely, the concept of a debt for the purposes of a statutory demand under companies legislation. He relied on a number of authorities (the most recent being Janos v Chamas Motors Pty Ltd [2011] NSWCA 238) indicating, in his submission, that a lessor's claim in this situation was for unliquidated damages, not for a debt.

We do not need to explore Mr Stomo's submissions on this question in any detail, for two reasons. The first is that the Tribunal's ruling with regard to it was obiter only. The second and more significant reason is that this question need not be determined, in view of our conclusion on the question whether Tolicar's claim against the lessees, characterised not as a debt but as a claim for damages, was validly assigned to Dr Lewkovitz under the Deed.

The Respondent's submissions regarding the assignment

In arguing that Dr Lewkovitz did have a 'genuine commercial interest' such as would satisfy the Trendtex test, Ms Doust pointed out that the policy underpinning this test stemmed from a perceived need to prevent 'trafficking in litigation' and the 'stirring up' of unjust claims. She referred to a lengthy passage in the judgment of Gummow, Hayne and Crennan JJ in Campbell's Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386; [2006] HCA 41 at [48] to [82], in which their Honours described the development of this policy within English case law over many centuries. The question to be decided, she submitted, when considering the validity of any assignment of a 'bare right of action' was whether it amounted to mere 'trafficking' and therefore could encourage the 'stirring up of litigation'.

Ms Doust did not question the proposition that the Trendtex test, as formulated by Lord Roskill or Lord Wilberforce, was applicable to these proceedings. But she suggested that the interpretation given to it by Ipp JA in Project 28 Pty Ltd v Tim Barr Pty Ltd [2005] NSWCA 240 might be open to some doubt. The reason, she said, was that the High Court in Campbell's Cash & Carry Ltd v Fostif Pty Ltd had reversed the Court of Appeal's decision in the same proceedings, being a decision on which Ipp JA in Project 28 had placed some degree of reliance (at [38], [39] and [43]).

It followed, in her submission, that Ipp JA's insistence that the assignee's interest be 'rights-based' should be treated with some caution and that the more policy-oriented approach adopted by Smith J was preferable. In this connection, she said, the following further extract from his judgment (at p 215) merited consideration:-

The Trendtex test seems to me to be a satisfactory one which directly addresses the policy objectives of the law of maintenance and champerty while enabling a flexible approach to be taken. It will enable courts to strike down any agreement that smacks of trafficking in litigation while enabling genuine commercial transactions to be saved. It should be applied in this case.

With reference to the extract quoted from Lindgren J's judgment in National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514, Ms Doust argued that the observations made by his Honour were obiter, but that in any event the requirements that he stipulated were satisfied in the present case. At the time of the assignment, Dr Lewkovitz's interest in the outcome of any proceedings brought by Tolicar against the lessees already existed, and although it was contingent upon particular steps being taken by intermediate entities it was not 'nebulous'.

In response to Mr Stomo's submissions relating specifically to the nature of Dr Lewkovitz's interest in such proceedings, Ms Doust put forward six arguments, as follows.

First, the proposition that no more than two fifteenths of any amount recovered in these proceedings could be received by the Trust was incorrect, because it failed to take account of the shares held by the Trustee, Lewkovitz Nominees Pty Ltd, in Tolicar.

Secondly, the 'reality of the evidence' was that, although Dr Lewkovitz had no absolute right to any distribution from the Trust (this being a matter left to the Trustee in its absolute discretion), he and his sister consistently shared between them all the profit generated by Tolicar's activities. His affidavit included the following statement (see the Tribunal's decision at [45], quoted at [20 above):-

Since the establishment of the Trust, the net income earned by Tolicar Pty Ltd has been distributed to Solrose Investments Pty Ltd which distributed its income to my sister and me as the Principal Beneficiaries

This was exemplified by the transfers of substantial sums on a single day, 30 June 2011, by the three entities involved - Tolicar, Solrose and the Trust. Ms Doust submitted that the making of these transfers demonstrated that there was a 'close interrelationship between the entities, and a unity of purpose'. She also relied on the provision in the Trust (clause 3(b), quoted above at [23]) to the effect that if at the end of any year the Trustee had not distributed all the income amongst the large number of people designated as Beneficiaries, it was obliged to hold the undistributed income 'on trust for such of the Principal Beneficiaries [i.e., Dr Lewkovitz and his sister] as were living at the end of the year, and if more than one in equal shares'.

Thirdly, the right of beneficiaries of discretionary trusts to 'compel the proper administration of the trust' (being a right that Mr Stomo acknowledged in his submissions) was a matter of significance in the present context. Ms Doust relied at this point on a case, Re Atkinson [1971] VR 613, that is cited in the paragraph ([4-025]) in Meagher, Gummow and Lehane's Equity: Doctrine and Remedies to which Mr Stomo referred us. The proposition for which Re Atkinson stands, relating to an unadministered deceased estate, is formulated in that paragraph as follows:-

... in the absence of action by a personal representative to recover assets wrongly withheld from the estate by third parties, a beneficiary has sufficient interest to seek recovery of the assets. The beneficiary, it is said, proceeds on behalf of the estate in that he asserts his right of remedy but the estate's right of property.

Fourthly, the case law on the Trendtex test did not require that the pre-existing interest held by the assignee should be of the same nature or the same scale as the interest being assigned. It did not matter, therefore, that Dr Lewkovitz's interest at the time of the assignment was that of a trust beneficiary, not a lessor, nor that 'the extent of this interest was something less than that held by the lessor, being transformed as a consequence of the distribution of the monies through several entities'. These differences did not justify characterising Dr Lewkovitz as a 'stranger' engaged in the purchase of 'litigation rights' and in 'stirring up litigation'.

Fifthly, the fact that the consideration paid by Dr Lewkovitz for the assignment was nominal only ($1.00) was consistent with his being 'recognised by Tolicar as having the ultimate beneficial interest in the monies owing in respect of the Lease'.

Sixthly, the fact that Ms Liebermann, Dr Lewkovitz's sister, possessed a similar interest did not render his interest 'any less real, any less genuine or any less commercial'.

Ms Doust sought also to support the Tribunal's ruling that, by virtue of clause 19 of the Lease, Tolicar's claim for losses suffered after its termination was a claim for 'liquidated damages' and therefore constituted a debt. She maintained that the principles stated in Vimblue were relevant and applicable even though the question before the court was a different one, and that the authorities cited by Mr Stomo either supported her contentions (when properly interpreted) or were distinguishable.

As with Mr Stomo's submissions on this question, we do not consider it necessary to describe in detail how Ms Doust developed her argument.

Our decision regarding the assignment

On the main question arising in this connection - whether Tolicar's claim against the lessees, when viewed as a 'bare right of action' for damages - was effectively assigned by the Deed, our decision is that the appeal fails, broadly for the reasons advanced by Ms Doust. At the time of the assignment, Dr Lewkovitz did, in our opinion, have both a 'genuine commercial interest' and a 'genuine and substantial interest' in the enforcement of this claim. His interest was sufficient to satisfy both of the formulations that are to be found in the House of Lords's judgments in Trendtex and have been applied, with some degree of elaboration, in later Australian cases.

We attach particular weight to two aspects of Ms Doust's submissions. One is her emphasis on the policy underlying the Trendtex test: namely, that 'trafficking in litigation' should be prevented. The other is her reliance on Dr Lewkovitz's evidence that in the period of more than twelve years between 4 January 1999 (the date of creation of the Trust) and 30 June 2011, he had consistently received, via Solrose, one-half of the dividends declared by Tolicar. Although the latest distribution to take place within this period (on 30 June 2011) occurred after the Deed had been executed, it is still relevant that this distribution occurred and that the amounts distributed were very large. We should add that nothing in the Tribunal's decision or in the submissions in the appeal suggested that Dr Lewkovitz's evidence on these matters was disputed.

We would add four observations, all of which support this conclusion.

First, it is important to bear in mind that according to Trendtex and the decisions following it, the pre-existing 'interest' that a would-be assignee of a 'bare right of action' must possess need not be an interest in any property or proprietary interest to which the right of action relates. Lord Roskill regarded it as sufficient that the assignee had 'a genuine commercial interest in taking the assignment and in enforcing it for his own benefit' (our emphasis). Lord Wilberforce's phrase was 'a genuine and substantial interest in the success of [the assignor's] litigation' (again our emphasis). This aspect of their formulations of principle must be borne in mind when interpreting Ipp JA's statement (in Project 28 Pty Ltd v Tim Barr Pty Ltd [2005] NSWCA 240) that the assignee's pre-existing interest must be 'rights-based'.

Secondly, the consistent pattern of distribution of Tolicar's profits between 1999 and 2011 makes possible only one answer to the question whether, immediately before the assignment, Dr Lewkovitz had a 'genuine commercial interest', or alternatively a 'genuine and substantial interest', in the success of any claim that Tolicar might bring against the lessees. If the past pattern of distribution continued into the future, the half-share of Tolicar's profits that would in due course devolve upon him would be materially greater than if Tolicar's claim failed.

Dr Lewkovitz's expectation, at that time, of receiving a more substantial sum if Tolicar's claim were upheld was of course subject to contingencies. These included, as Mr Stomo emphasised, the contingency that the Trustee, in its absolute discretion, might decide to distribute all of the income of the Trust to beneficiaries other than Dr Lewkovitz in the year (or years) when the proceeds of Tolicar's claim formed part of the moneys received as income by the Trust. But a 'commercial' interest may be subject to contingencies. Frequently, this is a characteristic of interests that are labelled 'commercial'. What matters is that from a practical point of view Dr Lewkovitz's expectation of receiving a larger sum of money from the Trust in due course if Tolicar's claim succeeded was distinctly greater than a mere 'hope' of a 'nebulous' nature. It was the likely outcome.

Thirdly, a clause in the Trust which received no attention in the parties' submissions reveals that the extent to which Dr Lewkovitz could influence the distribution of trust income was greater than Ms Doust maintained.

This clause, to which we drew the parties' attention at the hearing, was clause 8(a). As indicated above at [24], it empowered the person or persons designated as 'the Appointor' to remove an existing trustee from office, provided that if in consequence the office of trustee became vacant a new trustee was to be appointed simultaneously. Three alternative definitions of 'the Appointor' appeared in clause 2, of which the first was Dr Lewkovitz and his sister Ms Lieberman, acting jointly.

Fourthly, the significance of a clause of this nature, along with a number of the other questions of principle, was discussed in a lengthy review of the law relating to discretionary trusts in a judgment of French J (as he then was) in the Federal Court. The case in question, Australian Securities & Investments Commission, Re Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey [2006] FCA 814, was not cited at the hearing and only came to our attention during the preparation of these reasons. The questions to be decided by the Court included whether the 'interests' possessed by certain directors and officers of a corporate group by virtue of their status as beneficiaries under a number of discretionary trusts were 'contingent' interests in 'property' and could for that reason fall within the scope of an order under companies legislation appointing a receiver of their property.

Although this case is not concerned in any way with the assignment of 'bare rights of action', three passages in his Honour's discussion of discretionary trusts (at [19 - 21], [30 - 34] and [36 - 39]) provide useful guidance in the present context. They are as follows:-

19... The term 'discretionary trust' has been said in the High Court to bear a meaning 'disclosed by a consideration of usage rather than doctrine' and to be used in a way that is 'descriptive rather than normative'. It has 'no fixed meaning and is used to describe particular features of certain express trusts' - Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226 at [8]. In Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547 at 552, Gummow J said that the expression 'discretionary trust' is used to identify a species of express trusts in which, unlike a fixed trust, the entitlement of the beneficiaries to income, or to corpus, or both, is not immediately ascertainable (at 552):

'...the beneficiaries are selected from a nominated class by the trustee or some other person and this power may be exercisable once or from time to time.'

His Honour described the power of the trustee as a 'special or hybrid power'. Thus (at 552):

'... a power exercisable in favour of any person including the donee of the power would be a general power and thus would be tantamount to ownership of the property concerned, whilst the objects of a special power would be limited to some class, and the objects of a hybrid power would be such that the donee might appoint to anyone except designated classes or groups.'

At least by analogy it may be observed that a beneficiary who effectively controls the trustee of a discretionary trust may have what approaches a general power and thus a proprietary interest in the income and corpus of the trust.

20 Gummow J described as 'purely discretionary' a trust in which income and capital can be withheld altogether. This kind of trust fits within the classification of non-exhaustive discretionary trusts discussed below. A trust will not be purely discretionary '... where the donee of the power of selection had a discretion only as to the time or method of making payments to the beneficiaries'. This corresponds with the category of exhaustive discretionary trust.

21 As appears from the preceding discussion discretionary trusts take a variety of forms. The trustee may be required by the terms of the trust deed to distribute the entire income at specified intervals. This has been called 'an exhaustive discretionary trust' - Thomas G and Hudson A, The Law of Trusts, (Oxford University Press, 2004) at 184 ff. On the other hand a discretionary trust is called 'non-exhaustive' when the trustee has a discretion to distribute any part or perhaps none of the income of the trust as he thinks fit. Similar classifications would apply according to the basis upon which the corpus of a trust is distributed. The beneficiaries may form a defined and closed class of persons. Alternatively, the class may be open. By way of example of the latter case, a discretionary trust intended primarily to benefit a family may nevertheless name as beneficiaries not only its living members, but also relatives born or yet to be born into the extended family, charities and other classes of entity. The naming of these species of discretionary trusts, like the term 'discretionary trust' itself, is a matter of taxonomical convenience rather than expository of principle.

30 I accept that there are some rights enjoyed, even by the beneficiaries of a non-exhaustive discretionary trust with an open class of beneficiaries. They include the right to inspect the trust documents - Re Londonderry's Settlement [1965] Ch 918 and the right to require the trustee to provide information about management of the trust fund - Spellson v George (1987) 11 NSWLR 300; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405. There is also a right to enforce the proper management of the trust by the trustee - Commissioner of Stamp Duties (Qld) v Livingston [1964] UKPC 2; [1965] AC 694; Re Atkinson [1971] VR 613.

31 ASIC submitted that the beneficiary under a discretionary trust has a 'contingent interest' within s 9 of the Act. It was submitted that the Court could make the orders sought on the basis that any of the defendants who is a beneficiary of a discretionary trust has a 'contingent interest' in the property of the trust which therefore constitutes property as defined in s 9 of the Act.

32 ASIC submitted that a contingent interest in property equates to a proprietary interest. It cited Craig v Federal Commissioner of Taxation [1945] HCA 1; (1945) 70 CLR 441. That case concerned the application of s 8(4) of the Estate Duty Assessment Act 1914 (Cth). The Act levied estate duty on the value of the estate of deceased persons. Included in the property brought into the estate for the purposes of the assessment of estate duty was property 'comprised in a settlement made by the deceased person under which he had any interest of any kind for his life...'.

33 Latham CJ, discussing the scope of the term 'interest' said (at 446):

'It has frequently been held in relation to various taxing Acts that the word "interest" is not necessarily to be taken as a technical term, and that it is frequently used in such Acts in a popular sense... Also see Attorney-General v Heywood [(1887) 19 QBD 326], approved in Attorney-General v Farrell [(1931) 1 KB 81], where the prospect of an object of a discretionary trust sharing in income the subject matter of the discretionary trust was held to be an interest of a person in the property from which the income was derived.'

Dixon J, at 452, referred to the word 'interest' as '... a word itself of very comprehensive meaning'. McTiernan J, at 454, observed that the word is not a technical term and that the law does not give it the same specific application in all contexts in which it is used. He said:

'In its ordinary or popular sense, the word "interest" as applied to property may include a contingent interest.'

He adopted the definition of a contingent interest as 'merely the prospect or possibility of a future estate'. A contingent interest, however, was contrasted with the category of 'bare possibilities and expectations'. Williams J, at 456, made observations to similar effect.

34 A contingent interest may be described broadly as the possibility that a right of a proprietary character will come into existence at a future time if some event occurs. In Stroud's Judicial Dictionary reference is made to Watkins on Conveyancing (8th ed) in which two classes of possibilities are identified (at 529):

'(a) possibilities coupled with an interest, eg 'contingent remainders, executory devices, springing or shifting uses';.

(b) bare or naked possibilities, eg the hope of inheritance entertained by the heir.'

Of the latter, Watkins as quoted in Stroud, states (at 529):

'The former class may, perhaps, with more propriety be denominated contingent interests, and the latter mere expectancies; for a possibility coupled with an interest is more than a possibility - it is a present interest and may be devised.... On the other hand the expectancy of an heir apparent during the lifetime of his ancestor is less than a possibility, being but a mere hope or anticipation.'

36 The difficulty with applying the notion of contingent interests to beneficiaries of a discretionary trust lies partly in the uncertain scope of the distribution be it income or capital, which may be made in favour of any given beneficiary. I am inclined to think that a beneficiary in such a case, at arms length from the trustee, does not have a 'contingent interest' but rather an expectancy or mere possibility of a distribution. In some discretionary trusts... charities as a class are included in the class of beneficiaries. It could hardly be said that every charity in Australia has thereby acquired a contingent interest in that trust. On the other hand, where a discretionary trust is controlled by a trustee who is in truth the alter ego of a beneficiary, then at the very least a contingent interest may be identified because, to use the words of Nourse J, 'it is as good as certain' that the beneficiary will receive the benefits of distributions either of income or capital or both.

37 As discussed earlier, the beneficiary who effectively controls the trustee's power of selection because he is the trustee or one of them and/or has the power to appoint a new trustee has something approaching a general power and the ownership of the trust property. There are cases in the Family Law jurisdiction which have dealt with like circumstance. In Ascot Investments Pty Ltd v Harper [1981] HCA 1; (1981) 148 CLR 337, Gibbs J said (at 354-355):

'... if a company is completely controlled by one party to a marriage, so that in reality an order against the company is an order against the party, the fact that in form the order appears to affect the rights of the company may not necessarily invalidate it.'

Stephen, Aickin and Wilson JJ agreed.

38 The Full Court of the Family Court of Australia in In the Marriage of Ashton [1986] FamCA 20; (1986) 11 Fam LR 457 considered a case in which the husband was appointor of a family trust. He had the power to remove and appoint the trustee and could appoint himself. The trustee had the power to alter the terms of the trust at will. He was not a beneficiary of the trust but had received income from it. He was found to be 'in full control of the assets of the trust'. There were 'good grounds for saying the trust is no more than the husband's alter ego'. Strauss J said (at [14]):

'In the result, having regard to the powers and discretions which the husband has, and having regard to what had in fact taken place, for the purposes of s 79 [of the Family Law Act 1975 (Cth)], the husband's power of appointment, and all the attributes it carries with it, amounts to de facto ownership of the property of the trust.'

39 A similar trust arrangement existed in In the Marriage of Goodwin (1990) 101 FLR 386. The trial judge had found that the reality in that case was that no person other than the husband had any real interest in the property or income of the trust except at the will of the husband. In upholding the trial judge, the Full Court said (at 392):

'... we have no doubt that his Honour was entitled to find that the trust property was in reality the property of the husband in the present case. The husband had the sole power of appointment of the trustee which was a creature under his control and he was a beneficiary to whom the trustee could make payments exclusive of other beneficiaries as the husband saw fit.'

In the case of In Marriage of Davidson (No 2) (1990) 101 FLR 373 the Full Court observed (at 382):

'Whatever may have been the position 100 years ago Australian courts today have to look at the reality of the situation and the purpose which family trusts serve today.'

Support for the conclusion that we have reached is to be found, we believe, in His Honour's observations on each of the following topics, and in particular the last of them: (a) the distinction between exhaustive discretionary trusts (in which, like the Trust in this case, the income must be distributed each year) and non-exhaustive discretionary trusts; (b) the flexible and non-technical nature of the term 'interest'; (c) the recognition that 'contingent' interests differ from 'mere' hopes or expectancies; and (d) the proposition that if a beneficiary under a discretionary trust has the power to appoint the trustee, he or she 'has something approaching a general power and the ownership of the trust property'.

Since Re Richstar was not the subject of submissions by the parties at the hearing, we do not base our decision on it. We treat it instead as providing strong confirmation for this decision, which we would have reached in any event.

In view of this decision, it is not necessary for us to rule on the Tribunal's determination - which was in fact given obiter - that Tolicar's claim for the losses that it sustained on account of the early termination of the Lease, being a claim for 'liquidated damages' under clause 19, amounted to a debt, not a 'bare right of action'. We will simply say that we are inclined, with respect, to differ from this determination.

Our reason for taking this view is that we do not agree with the proposition, stated by the Tribunal at [84], that 'the subject claims by the applicant in respect of the re-letting of the shop, are "definite" and ascertained by "positive data" as distinct from "opinion or conjecture"'. An assessment of the damages payable under clause 19 of the Lease calls, amongst other things, for determinations of (a) whether any amount claimed for the Lessor's costs of re-letting is 'reasonable' and (b) the total amount of the 'several rentals outgoings and other monies which the Lessor by taking proper steps to re-let the premises shall obtain or could reasonably be expected to obtain by re-letting the premises for the unexpired residue of the term' (our emphasis). In our opinion, the scope for disputation and value-judgment inherent in these two aspects of the process of calculating the amount payable under the clause is enough of itself to preclude the application of terms such as 'definite' and 'certain' to this amount.

The date of termination of the Lease

Like the question that we have just discussed (briefly), the question of the date of termination of the Lease is not crucial to the outcome of this appeal. Irrespective of whether this date was in July 2009 (as argued by Mr Stomo) or September 2009 (as argued by Ms Doust), Tolicar's right of action included an amount representing the instalments of rent and outgoings, both before and after termination, that were due but unpaid under the Lease, and this right of action was assigned in full to Dr Lewkovitz.

This question was, however, the subject of both a formal ruling by the Tribunal and submissions at the appeal hearing. It is appropriate, therefore, that we briefly record our views relating to it.

Once again, we respectfully differ from the conclusion reached by the Tribunal. As far as we can tell, the parties did not cite to the Tribunal any authority for the proposition that a party to a contract, who purports to terminate the contract that was not available to him or her at the time, may subsequently rely, in seeking to justify the termination, on another ground that was in fact available. This principle, stated in general terms by the High Court in Shepherd v Felt and Textiles of Australia Ltd (1978) 141 CLR 378 and Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 276-278), was applied in the Tribunal's decision in Sarker v World Best Holdings Pty Ltd (No 2) [2004] NSWADT 15 at [45] to circumstances closely resembling the present case. In appeals both to the Appeal Panel (World Best Holdings Ltd v Sarker [2009] NSWADTAP 13) and to the Court of Appeal (World Best Holdings Ltd v Sarker [2010] NSWCA 24), no doubts were expressed about that component of the Tribunal's decision.

It is common ground that rent, as well as outgoings, had been due and unpaid under the Lease for at least 14 days on the date (23 July 2009) when the Notice of Termination was served on the lessees. Although section 129(1) of the Conveyancing Act 1919 precluded reliance on the ground stated in it - failure to pay outgoings - because the requirement of notice set out in this provision had not been complied with, the Notice of Termination was still effective to terminate the Lease on the ground of default in the payment of rent. This follows from subsection (8) of section 129, which exempts termination on this ground from the requirement in subsection (1), and from the principle of contract law that we have just stated. Finally, as was held by the High Court in Arnold v Mann (1957) 99 CLR 462 (a case to which Mr Stomo referred us), a lease once terminated cannot be revived.

Our orders

For the foregoing reasons, this appeal must be dismissed.

Ms Doust indicated to us that if the appeal was unsuccessful, her client wished to be heard on the matter of costs. We accordingly direct as follows. Any application by the Respondent for the costs of the appeal must be filed and served within 21 days, along with supporting submissions. Any submissions in reply by the Appellant must be filed and served within a further 21 days. The matter of costs will then be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997, unless the Appeal Panel decides that a hearing is required.

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Decision last updated: 17 May 2013

Medium Neutral Citation:	Dover v Lewkovitz (RLD) [2013] NSWADTAP 22
Hearing dates:	4 March 2013
Decision date:	17 May 2013
Jurisdiction:	Appeal Panel - Internal
Before:	M Chesterman, Deputy President D Bluth, Judicial Member M Foldi, Non-judicial Member
Decision:	1. The appeal is dismissed. 2. Any application by the Respondent for the costs of the appeal must be filed and served within 21 days, along with supporting submissions. Any submissions in reply by the Appellant must be filed and served within a further 21 days. The matter of costs will then be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997, unless the Appeal Panel decides that a hearing is required.
Catchwords:	Retail lease - validity of assignment of lessor's claim for amount due from lessees following termination of lease - whether claim was for debt or damages - when termination of lease occurred
Legislation Cited:	Administrative Decisions Tribunal Act 1997 Conveyancing Act 1919 Retail Leases Act 1994
Cases Cited:	Arnold v Mann (1957) 99 CLR 462 Ascot Investments Pty Ltd v Harper [1981] HCA 1; (1981) 148 CLR 337 In the Marriage of Ashton [1986] FamCA 20; (1986) 11 Fam LR 457 Re Atkinson [1971] VR 613 Australian Securities & Investments Commission, Re Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey [2006] FCA 814 Beatty v Brashs Pty Ltd [1998] 2 VR 201 Campbell's Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386; [2006] HCA 41 Craig v Federal Commissioner of Taxation [1945] HCA 1; (1945) 70 CLR 441 In Marriage of Davidson (No 2) (1990) 101 FLR 373 Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547 In the Marriage of Goodwin (1990) 101 FLR 386 Janos v Chamas Motors Pty Ltd [2011] NSWCA 238 Kumaragamage v Rallis [2001] NSWSC 466 Lewkovitz v Dover [2012] NSWADT 227 Monk v Australian and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514 Project 28 Pty Ltd v Tim Barr Pty Ltd [2005] NSWCA 240 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267 Sarker v World Best Holdings Pty Ltd (No 2) [2004] NSWADT 15 Shepherd v Felt and Textiles of Australia Ltd (1978) 141 CLR 378 Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 Re Timothy Pty Ltd and the Companies Act [1981] 2 NSWLR 706 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 Vimblue Pty Ltd v Toweel [2009] NSWSC 494 World Best Holdings Ltd v Sarker [2009] NSWADTAP 13 World Best Holdings Ltd v Sarker [2010] NSWCA 24
Texts Cited:	Jacobs' Law of Trusts in Australia (ed JD Heydon and MJ Leeming, Lexis Nexis Butterworths, 2006) Meagher, Gummow and Lehane's Equity: Doctrine and Remedies (4th edn, ed RP Meagher, JD Heydon and MJ Leeming, Butterworths Nexis Lexis, 2002) Young P, Croft P, and Smith M, On Equity (Thompson, 2008)
Category:	Principal judgment
Parties:	Tom Dover (Appellant) George Lewkovitz (Respondent)
Representation:	Counsel C Stomo (Appellant) L Doust (Respondent) Klonis & Co (Appellant) Norbert Lipton & Co (Respondent)
File Number(s):	129038
Decision under appeal	Citation: Lewkovitz v Dover [2012] NSWADT 227 Date of Decision: 2012-11-05 00:00:00 Before: Retail Leases Division File Number(s): 115138, 115180