Edmunds & Ors v Pickering & Ors (No. 4) No. Scgrg-88-2452

EDMUNDS & ORS V PICKERING & ORS (NO. 4)

[2000] SASC 267

Civil

LANDER J.

History

In December 1999 I published my reasons for concluding that the plaintiffs, apart from Mr and Mrs Edmunds, should succeed against the defendants, apart from Mrs Pickering. At that time I dismissed the claim against Mr and Mrs Edmunds against all defendants. I also made an order dismissing the plaintiffs’ claim against Mrs Pickering.
I published my reasons to allow the parties to address me on the remedies which ought to be afforded to the plaintiffs consistent with those reasons. [1620/1621]
Since that time the parties have provided me with both written and oral submissions in relation to the orders and declarations which they say ought to be made.

Procedural Orders

Before I deal with the matters of substance I shall address the procedural orders which need to be made.
The plaintiffs have sought an extension of time within which to bring these proceedings. In my reasons [1220] I concluded it would be just to allow Smoothpool Nominees Pty Ltd an extension of time against the third and fourth defendants, Greg Pickering Investments Pty Ltd and Silver Glow Pty Ltd.
I also concluded that Dadeeton Pty Ltd should be entitled to an extension of time within which to bring these proceedings against the third and fourth defendants and so I will make an order in the same terms:
“1.... I extend the time within which the plaintiffs, Smoothpool Nominees Pty Ltd and Dadeeton Pty Ltd have to commence proceedings against the third and fourth defendants until 13 May 1999.”
In my reasons I refused Dadeeton Pty Ltd an extension of time within which to bring these proceedings against Mr Gregory Pickering [1609]. For reasons which I will come to the failure of Dadeeton Pty Ltd to obtain that extension will not disadvantage it in the relief it has sought.

The Parties’ Contentions

I will not set out in detail the competing orders and declarations which are sought and which are many and varied. It is enough to note that the parties have contended for quite different remedies.
On the one hand the plaintiffs argue that as a result of my reasons they are entitled to declarations and orders, which would vest the Abalone Authority in the plaintiffs, and entitle the plaintiffs to the proceeds of exploitation of that authority since 1982. That would involve the defendant Mr Gregory Pickering parting with the Authority valued by Mr Holland, whose evidence I accept, as at 30 June 1997 at $3.2 million, and the defendants paying to the plaintiffs some millions of dollars by way of compensation.
Mr Pickering, on the other hand, contends that as a result of my reasons the plaintiff, Smoothpool Nominees Pty Ltd, would be entitled to damages against Mr Gregory Pickering in the sum of $61,666 for the failure of the defendant Mr Gregory Pickering to pay fair value for the Authority on 25 October 1982, plus interest fixed at $61,666. The plaintiff, Dadeeton Pty Ltd, would be entitled to damages against Mr Gregory Pickering and Greg Pickering Investments Pty Ltd in the sum of $54,636 for the proceeds of exploitation of the Authority for the period 18 June 1982 until 30 June 1984, plus interest fixed at $54,636. The defendant, Mr Pickering, argues that the plaintiffs would be entitled to no other orders.
The third and fourth defendants support the second of Mr Pickering’s proposed orders.
The Deed of Trust of 21 October 1980 (the Deed of Trust) created an express trust of which Mr Gregory Pickering was trustee and Smoothpool Nominees Pty Ltd was beneficiary. The Deed of Settlement of 25 October 1982 (the Deed of Settlement) effectively dissolved that trust and united the legal and beneficial interest in Mr Gregory Pickering.
Sometime after 25 October 1982 but before 30 June 1983 Smoothpool Nominees Pty Ltd retired as the trustee of the Cliff Edmunds Family Trust and assigned all its assets to Dadeeton Pty Ltd which consented to become trustee of that trust and accepted the assignment. That transaction is evidenced by a Deed of Appointment of New Trustee dated 1 July 1982 (the Deed of Appointment).
On 22 December 1982 Greg Pickering Investments Pty Ltd became the trustee of the Pickering Family Settlement. At or about the same time the defendant Mr Gregory Pickering transferred the beneficial interest that he claimed he held in the Abalone Authority by operation of the Deed of Settlement to Greg Pickering Investments Pty Ltd.
Since that date there have been some changes to the legal ownership of the Abalone Authority which are not important because, at trial, the legal ownership remains with Mr Gregory Pickering and the beneficial ownership with Greg Pickering Investments Pty Ltd as trustee for the Pickering Family Settlement.
The plaintiffs seek an order rescinding the Deed of Settlement.
They claim that if the court agrees that the Deed of Settlement should be rescinded the express trusts created by the Deed of Trust revive. They also seek a declaration that Smoothpool Nominees Pty Ltd was beneficially entitled to the Abalone Authority until the execution of the Deed of Appointment when Dadeeton Pty Ltd became beneficially entitled. They seek an order setting aside the transfer of the beneficial interest by Mr Gregory Pickering to Greg Pickering Investments Pty Ltd in December 1982. Lastly, they seek an order requiring Mr Gregory Pickering to transfer the Abalone Authority to Dadeeton Pty Ltd.
The plaintiffs also claim that, after rescission of the Deed of Settlement, Mr Gregory Pickering remained the trustee of the business undertaken for the exploitation of the Abalone Authority. As such he is obliged to account to the plaintiffs for all profits consequent upon the exploitation of the Authority since 18 June 1982. They do recognise, however, that the plaintiffs’ delay in the commencement and prosecution should be taken into account in any account of profits.
They claim that the second and third defendants are obliged to account for any moneys they have received from Mr Gregory Pickering having knowingly participated in the breach of trust by Mr Pickering.
The plaintiffs’ submissions give little recognition to the following matters. First the defendant, Mr Gregory Pickering, paid about two thirds of the value of the Authority on 25 October 1982. He paid $110,000 to $115,000 for the Authority which then had a value of $160,000-$180,000. [1064 paras (pp) and (qq)] (I have assumed for the purpose of calculations which I have later made that he paid $112,500). Secondly, he has exploited that Authority continuously since 1982 and up until the present time. Thirdly, he has preserved the Authority. Fourthly, the plaintiffs took no action until these proceedings were commenced on 25 October 1988. After commencing proceedings they remained supinely inactive, probably because of the fault of their solicitors, but in any event a fault for which they are responsible, for eight to nine years. [1084] If the plaintiffs had exercised their rights appropriately this matter could have been disposed of within three to four years. [1084] Fifthly, the value of the Authority, has during the period, increased from $160,000-$180,000 to $.3.2 million.
The plaintiffs say that having regard to my findings those matters are not relevant.
The defendants have made further submissions which, if accepted, would lead to the dismissal of most of the plaintiffs’ claim. Those contentions, it seems to me, are inconsistent with my reasons.
The defendant, Mr Gregory Pickering, has submitted that the court should not order rescission of the Deed of Settlement. If, contrary to that submission, the court does order rescission it is argued that the court should not order transfer of the Abalone Authority W17, because at all material times since 1 July 1984 Smoothpool Nominees Pty Ltd could not have owned a beneficial interest in that Authority. The defendant has argued that the proper relief available to the plaintiffs is compensation/damages in respect of the shortfall in the purchase price found to have been paid by Mr Gregory Pickering and compensation/damages for any other breaches of trust which have caused loss to the trust estate. He has also argued that the plaintiffs’ compensation should be assessed at no more than the amounts mentioned above for the same reasons.
It was put on behalf of the defendant, Mr Gregory Pickering, that the relevant breach did not induce Smoothpool Nominees Pty Ltd to enter into the Deed of Settlement. Specifically it was put that Smoothpool Nominees Pty Ltd did not enter into the Deed because Mr Gregory Pickering had failed to pay full value or to inform Smoothpool Nominees Pty Ltd of any fact.
I think that submission ignores my findings. I attempted to explain in my judgment that in my opinion the plaintiff, Smoothpool Nominees Pty Ltd, did what it did because of the conduct of Mr Gregory Pickering. Mr Gregory Pickering failed to carry out his obligations as a trustee and then created a situation wherein he obtained the Authority without paying full value. I therefore reject that submission.
Mr Gregory Pickering argued, in the alternative, that if either of the plaintiffs, Smoothpool Nominees Pty Ltd or Dadeeton Pty Ltd, had a legal or equitable interest in the Abalone Authority as at 1 July 1984 that interest would have been lost, because after 1 July 1984 when the new Act and Regulations came into effect Smoothpool Nominees Pty Ltd could not have owned a legal or beneficial interest in the Authority because of its interest in the Bird/Holmes licence.
Of course I have found that Smoothpool Nominees Pty Ltd retired as the trustee of the Cliff Edmunds Family Trust sometime between 25 October 1982 and 30 June 1983. I have found that at some time between those dates, Smoothpool Nominees Pty Ltd executed a deed appointing a new trustee of the trust, Dadeeton Pty Ltd. By that deed Smoothpool Nominees Pty Ltd also assigned all its assets to Dadeeton Pty Ltd. The defendant, however, contends that Smoothpool Nominees Pty Ltd’s retirement and assignment is unimportant in a consideration of the effect of the 1984 legislative changes.
It argued that after 30 June 1984 Mr Gregory Pickering could not have remained as a trustee for either Smoothpool Nominees Pty Ltd or Dadeeton Pty Ltd.
The defendant, Mr Gregory Pickering, submitted that if the relevant plaintiff had elected to rescind the Deed of Settlement or, if the court ordered the rescission of the Deed of Settlement, the express trusts which arose by reason of the execution of the Deed of Trust would continue to operate. That would mean that Mr Pickering held the Authority on trust for Smoothpool Nominees Pty Ltd and later Dadeeton Pty Ltd in the financial years ended 1982, 1983 and 1984.
In that respect the defendant Mr Gregory Pickering’s submission is consistent with the plaintiffs’ submission. It seems that both parties agree that if I ordered rescission of the Deed of Settlement the express trusts in the Deed of Trust would be revived.
An order for rescission would have the consequence that the defendant, Mr Gregory Pickering, would continue to hold the Abalone Authority on trust for Smoothpool Nominees Pty Ltd. That consequence arises because the setting aside of the Deed of Settlement means that the Deed of Trust would continue to operate. The parties to the transaction would be put back to the position they would have been in had the transaction never occurred. No order would be necessary to revive the operation of the Deed of Trust. It would continue to operate by its own terms.
Paragraph 3 of the Deed of Trust would operate such that the defendant, Mr Gregory Pickering, would hold the Authority and would be required to conduct the business “pursuant to the Licence and the Authority as the agent and trustee of and for the Principal (Smoothpool Nominees Pty Ltd) absolutely and beneficially”.
If rescission was ordered there is no doubt that the defendant, Mr Gregory Pickering, would hold the Authority on trust for one or other of the plaintiffs, Smoothpool Nominees Pty Ltd or Dadeeton Pty Ltd. Not only would rescission of the Deed of Settlement give rise to the revival of that trust so also would the trustee’s obligations in respect of the exploitation of the Authority be revived.
Clause 4 of the Deed of Trust requires the defendant, Mr Gregory Pickering, to hold all abalone and abalone shell taken by him pursuant to the Authority and all of the proceeds of sale of that abalone or abalone shell in trust absolutely for Smoothpool Nominees Pty Ltd. The clause obliges the defendant to deal with all abalone and all abalone shell in such manner as Smoothpool Nominees Pty Ltd may from time to time direct and request.
The Deed of Trust also provides that the defendant, Mr Gregory Pickering, shall carry on the business in accordance with the directions of Smoothpool Nominees Pty Ltd and shall do all such things as may be necessary to carry on the business to the best advantage.
The effect of rescission therefore would not only be to revive the Deed of Trust so as to entitle one or other of the plaintiffs’ to the equitable interest in the Authority, perhaps even to the legal interest (see clause 12).
I agree with the parties that the consequence of rescission of the Deed of Settlement would be the revival of the express trusts created by the Deed of Trust.
However as I have said the defendant argued that if rescission was ordered and the trusts revived, the relevant plaintiff, who was entitled to the beneficial interest in the Authority as at 30 June 1984, would cease to be entitled to a beneficial interest in that Authority by reason of legislation which came into effect on 30 June 1984.
On 1 July 1984 the Fisheries Act 1982 came into operation. On the same day the Scheme of Management (Western Zone Abalone Fishery) Regulations 1984 (the 1984 Regulations) took effect.
It was submitted by the defendant, Mr Pickering, that the 1984 Regulations implemented a “one person one licence” policy.
The defendant argued that Smoothpool Nominees Pty Ltd was, at the relevant time, that is from 1 July 1984, the beneficial owner of the Bird/Holmes licence. That is so. [421]
The defendant argued that if two separate licences were held on separate trusts by each of Mr Gregory Pickering and Mr Holmes as trustees for Smoothpool Nominees Pty Ltd, Reg 5 of the 1984 Regulations deemed each of Mr Gregory Pickering and Mr Holmes to have an interest in each of the respective Authorities. That arose, so it was argued, because of the provisions of Reg 5(6) and Reg 5(7).
It was submitted, that would be contrary to Reg 3(4)(c), which precluded a person having an interest in more than one fishery licence.
Because of the 1984 Regulations, it was argued, neither Smoothpool Nominees Pty Ltd nor Dadeeton Pty Ltd could have an interest in more than one Abalone Authority.
The defendant submitted that in making an order for restitution I ought to take into account whether “the trustee” could actually have held Licence/Authority W17 on Smoothpool Nominees Pty Ltd. It was submitted that the trustee could not hold that interest on trust for Smoothpool Nominees Pty Ltd after 1 July 1984. Therefore it was submitted restitution should not be ordered and the trustee should be allowed to assume the beneficial interest in the Authority.
Putting aside whether or not Smoothpool Nominees Pty Ltd or Dadeeton Pty Ltd could hold or have an interest in an Abalone Authority after 30 June 1984, in my opinion, the submission is untenable. If neither plaintiff could hold any sort of interest in the trust property after 30 June 1984 then the relevant plaintiff would have had to dispose of the trust property. It cannot be assumed that the plaintiffs would have, if they had been vested with either a legal or equitable interest in the Abalone Authority as at that date, allowed the law to operate to lose whatever interest they had. It could be supposed that they would have ordered their affairs so that the ultimate beneficiary of the Abalone Authority, Mr and Mrs Edmunds, would have continued to hold an interest in the Authority and to obtain the proceeds from it. But even if the plaintiffs had not structured their affairs so as to comply with the Regulations that does not mean that the trustee of the trust would thereby become entitled to the beneficial interest in the trust property. The beneficial interest in the trust property would not have reverted to the trustee. It may have meant that the trust property would have perished, i.e. the Authority would have been cancelled. However the trustee would not have become beneficially entitled to the trust property because the beneficiary was no longer entitled to hold that beneficial interest.
In my opinion the defendant’s argument must be rejected. It follows that changes to the legislation by the introduction of the Fisheries Act and the 1984 Regulations are not relevant for the purpose of determining whether rescission or some other remedy should be granted.
Therefore there is no need to determine whether or not the relevant plaintiff was or was not entitled to hold an interest in the Abalone Authority after 30 June 1984.
I therefore reject Mr Gregory Pickering’s contentions that no order for rescission should be made based on the ‘causation’ argument and based on the 1984 legislation and Regulations.
I should first address the period between 18 June 1982 and 25 October 1982.

An Account For The Period 18 June 1982 to 25 October 1982

In my reasons I concluded that Mr Gregory Pickering was in breach of trust between 18 June 1982 and 25 October 1982. In that period he failed to exploit the Authority in accordance with the obligations under the Deed of Trust. The appropriate remedy in respect of those breaches of trust would be to order an account. The party entitled to an account of profits would be Smoothpool Nominees Pty Ltd. However it has not sought an account in respect of that period and so I make no order.

The Remedies In Relation To The Authority

The plaintiffs seek an order that the Deed of Settlement dated 25 October 1982 be set aside. I have concluded that the transaction was liable to be set aside unless Mr Gregory Pickering could satisfy a number of matters to which I have referred. [1301] I concluded that he could not. [1372]
The beneficiary, Smoothpool Nominees Pty Ltd, seeks effectively the re-conveyance of the beneficial interest. That will be achieved by setting aside or rescinding the Deed of Settlement.
The defendant accepts that the court has a discretion as to whether or not rescission of the Deed of Settlement should be ordered.
I concluded that Mr Gregory Pickering so conducted himself that Smoothpool Nominees Pty Ltd, at the direction of Mr and Mrs Edmunds, believed it had to sell the beneficial interest it held in the trust property to Mr Gregory Pickering. Mr Gregory Pickering purchased Smoothpool Nominees Pty Ltd’s beneficial interest at other than full value.
The question of the remedy in respect of that transaction, which was evidenced by the Deed of Settlement, has to be considered in the light of a trustee having acquired the trust property, in circumstances where the trustee was in breach of trust, and where the trustee did not pay full value.
The trustee was not permitted to purchase the beneficiary’s interest in the trust property without complying with the obligations to which I referred in my reasons [1288]. He has not discharged the onus of establishing that he did so.
In those circumstances the transaction will set aside at the election of the beneficiary: Tito v Waddell [1977] Ch 106 at 241; Harris v Jenkins (1922) 31 CLR 341 at 356. Such an election has been made by the issue of these proceedings and the claim for the relief.
In Jacobs Law of Trusts in Australia 6th Edtn at para 1748 the authors say:
“Where a trustee purchases trust property and the transaction is set aside by the court on the application of a beneficiary, the latter may elect either to have the property reconveyed at the price for which the trustee purchased, with interest added and the trustee accounting for profits, or an occupation rent, or to have the property resold, the upset price in the latter case being the price paid by the trustee plus the value of any improvements made by the trustee.
...
If, on the other hand, the property is taken back at the price paid, with interest, an allowance is made to the trustee for money spent in effecting permanent improvements, while he is charged with any loss in value due to him.
Where the court sets aside a purchase of trust property by a trustee from himself and orders a reconveyance to the beneficiaries, it is not the practice to charge the trustee with interest on the rents and profits received by him since the date of the sale.”

The principle that the trustee is liable to restore trust property if purchased from a beneficiary other than in accordance with a trustee’s obligations is consistent with the obligation generally of a defaulting trustee to restore trust property; Maguire v Makaronis (1997) 188 CLR 449; Re Dawson (dec’d) (1966) 2 NSWR 211.
It was argued by the defendant, Mr Gregory Pickering, that rescission of the Deed of Settlement could only be granted if restitutio in integrum can be achieved. It was submitted that restitution cannot be achieved and therefore rescission should not be granted. It was put in the alternative that substantial restitution was required which could only be achieved by acknowledging that Mr Gregory Pickering had, in effect, paid the equivalent of two thirds interest in the Authority and requiring the plaintiff, Smoothpool Nominees Pty Ltd, to repay to Mr Gregory Pickering two thirds of the current value of the licence. It was put that it should be recognised that the plaintiffs sat by whilst inflation caused the price to escalate significantly.
Of course before rescission can be ordered the parties seeking rescission must be able to restore the other party to the position that party was in. Precise restitutio in integrum is not necessary: as long as the court can do justice between the parties Alati v Kruger (1955) 94 CLR 216.
There must be a substantial restitution: McKenzie v McDonald [1927] VLR 134 per Dixon AJ at 146; A H McDonald & Co Pty Ltd v Wells (1931) 45 CLR 506 at 512.
I agree that if rescission was ordered the plaintiff, Smoothpool Nominees Pty Ltd, would have to make restitution. The payment made by Mr Gregory Pickering in October 1982 could not be ignored. It would have to be brought into account and he would have to be compensated for that payment if I were to rescind the Deed of Settlement.
I do not agree that the plaintiff would have to pay Mr Pickering a sum equal to two thirds of the present day value of the authority. If the defendant was entitled to payment of that amount it would mean that the defendant would profit by his failure to observe his obligations as a trustee. The plaintiffs would lose the benefit of the increase in value of the Authority which they would have enjoyed if the defendant had observed his obligations. It would not be appropriate to call upon the plaintiffs or either of them to compensate the defendant for the loss of increase in value of an asset to which he was never entitled.
Therefore the question of restitution must be addressed in some other way.
The plaintiffs called Mr Holland who is a chartered accountant and who prepared an expert’s report for the assistance of the court. In my reasons I indicated that I found Mr Holland to be an impressive witness and I indicated that I would accept his evidence where the appropriate assumptions have been made out [56]. The defendants called no evidence on the question of compensation or an account of profits. They asked me to refer this matter to a Master for an inquiry.
That seems to me to be an unnecessary procedure. The defendants had been provided with Mr Holland’s report and they were aware that he had addressed the value of the Authority and had addressed the question of an account of profits. The defendants had available to them evidence which they could have called if they had wished.
It was for the defendants, of course, to establish the payments made by the defendant. In October 1982 and if the defendants wished this Court to have regard to the present day value of the payments made in 1982 to lead evidence in that regard. In any event the 1982 payments were established.
As it happened Mr Holland also addressed the question of the present day value of those payments made in 1982.
In that regard Mr Holland assumed that Mr Pickering had paid $80,000 on 25 October 1982, $10,000 in October 1982, $10,000 in October 1983 and $11,405 over 12 months making a total of $111, 405. He rounded that figure up to $112,500 and then carried out a calculation having regard to bank bill interest rates between 1983 and 1999 and calculated interest on a compounding basis.
In his calculation he has allowed for the incidence of income tax on that compound interest on an annual basis. After calculating taxation of $201,022, he has arrived at a figure of $313,522 being the present day value of the payment of $112,500 in 1982.
In my opinion whilst his calculations are correct one assumption he has made is not maintainable. It is not appropriate to have regard to the incidence of income tax in respect of the compound interest earned between 1982 and trial on an annual basis because, if Mr Pickering was repaid the sum paid in 1982 in the equivalent money value at the time of repayment, tax may be payable at the time of receipt of that money, i.e. after judgment.
In my opinion it would be appropriate to add back in the taxation which Mr Holland has deducted, and if that calculation is carried out then the present day value of a payment of $112,500, upon the other assumptions made by Mr Holland, would be $514,544.
In my opinion, if restitution was to be ordered then the plaintiff Smoothpool Nominees Pty Ltd, would have to compensate Mr Pickering in respect of the payments by him in 1982/83 in the sum to which I have referred and that payment would have to be a condition of the order: Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 at 114; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 per Deane J at 481); Bank of Victoria Ltd v Mueller [1925] VLR 642 at 659.
In my opinion, having regard to the circumstances in which the defendant, Mr Gregory Pickering, obtained the execution of the Deed of Settlement and having regard to the fact that he failed to pay full value for the Authority, justice can only be done between the parties if I was to order restitution.
Whilst I appreciate the plaintiffs have been guilty of delay, in my opinion, this should not disentitle them to restitution. That delay will have an adverse effect in their claim for an account of profits but that is another matter. Indeed the plaintiffs have accepted that they will not be entitled to the whole of the profits and interest made by the defendants in the period to trial.
I therefore reject the defendant Mr Gregory Pickering’s arguments and I will make orders and declarations which will ultimately vest the legal and equitable interests in the Authority in Dadeeton Pty Ltd.

Setting Aside The Deed Of Settlement

There therefore must be a declaration in the following terms:
“2.... On 21 October 1980 the defendant, Gregory James Pickering became the trustee of Abalone Authority No. 17 issued by the South Australian Department of Fisheries which he held on trust for Smoothpool Nominees Pty Ltd.”
There will be an order that upon payment by the plaintiff, Smoothpool Nominees Pty Ltd, to the defendant Mr Gregory Pickering of the sum of $514,544 the Deed of Settlement of 25 October 1982 is set aside.
“3.... Upon payment of the sum of $514,544 by Smoothpool Nominees Pty Ltd to the defendant Mr Gregory Pickering the Deed Of Settlement of 25 October 1982 is set aside.”

After 25 October 1982

As my reasons disclose, sometime after 25 October 1982 and probably before 30 June 1983, Smoothpool Nominees Pty Ltd executed the Deed of Appointment. This Deed is dated 1 July 1982, but for the reasons given earlier, that could not be the date on which it was executed. By virtue of that Deed Smoothpool Nominees Pty Ltd retired as trustee of the Cliff Edmunds Family Trust in favour of Blanche Port Fisheries Pty Ltd (Dadeeton Pty Ltd) and at the same time assigned to that company all of its assets. Its assets would include its equitable interest in the Abalone Authority, the subject of the trust of 21 October 1980. By reason of that transaction it must follow that the defendant, Mr Gregory Pickering, has held the Abalone Authority on trust for Dadeeton Pty Ltd since the execution of the Deed of Appointment.
Both plaintiffs have specifically sought a declaration that the defendant Mr Pickering has held the Authority on trust since the execution of the Deed of Appointment. In the declarations proposed by the plaintiffs they sought a declaration that the Authority has been held on trust for Smoothpool Nominees Pty Ltd until about November 1982 and thereafter Dadeeton Pty Ltd. I do not think the evidence is so precise that the declaration can identify the change in beneficial ownership as at November. I would prefer to express the declaration a little more widely.
Upon compliance by the plaintiff Smoothpool Nominees Pty Ltd with the payment to the defendant in paragraph 3 hereof there will be a declaration in the following terms:
“4.... Since a date sometime after 25 October 1982 and before 30 June 1983 Gregory James Pickering has held Abalone Authority W17 issued by the South Australian Department Of Fisheries on trust for Dadeeton Pty Ltd.”
A declaration in these terms has other consequences. The plaintiffs also seek an account of profits. Consistent with the declaration just made only the plaintiff, Smoothpool Nominees Pty Ltd, could be entitled to an account of profits to a date between 25 October 1982 and before 30 June 1983. I have already dealt with the period between 18 June and 25 October. No account was sought and none will be ordered. The next period is between 25 October 1982 and whenever the Deed of Appointment was executed. It is impossible to know the precise period. That would be a reason for refusing an account for that period. However for reasons which I will give later Smoothpool Nominees Pty Ltd is not entitled to an account for that period for other reasons. The only plaintiff entitled to an account after a date between 25 October 1982 and 30 June 1983 could be Dadeeton Pty Ltd.
That must inevitably follow from the declarations which the plaintiffs sought. After the Deed of Appointment the plaintiff, Smoothpool Nominees Pty Ltd, had no beneficial interest in the Authority. Indeed it had no assets of any kind.
However I have refused Dadeeton Pty Ltd an extension of time within which to bring proceedings against Mr Gregory Pickering although I have allowed it an extension of time to bring proceedings against the third and fourth defendants.
Dadeeton Pty Ltd did not commence its proceedings against any party until 25 September 1997 [1130]. In my opinion, because of its directors, it was aware of the breaches of trust and that Mr Pickering had acquired the Authority for less than full value since it came under the control of the Edmunds family. Mrs Edmunds became a director and secretary of Dadeeton Pty Ltd on 1 July 1982 and Mr Pickering on 1 July 1984. In my opinion Dadeeton Pty Ltd has been aware since 1 July 1982 of all of the matters of which Mr and Mrs Edmunds were aware. Dadeeton Pty Ltd was incorporated for the sole purpose of holding assets for the Edmunds family. The company’s mind was that of Mr and Mrs Edmunds: Tesco Supermarkets Ltd v Nattrass [1972] AC 153; Hamilton v Whitehead (1988) 166 CLR 121; Bernard Elsey Pty Ltd v Federal Commissioner of Taxation (1969) 121 CLR 119.
Having made the declaration in paragraph 4 the other relief sought by the plaintiffs has to be approached on the basis that, apart for the short period to which I have referred, the only plaintiff entitled to relief is Dadeeton Pty Ltd, which did not bring its proceedings against any defendant until 25 September 1997 and which did not bring its proceeds against the third and fourth defendants until during the trial, although it was well aware for the sixteen and a half years that had passed, that the defendant, Mr Gregory Pickering, had been guilty of breaches of trust and had acquired the Authority for less than full value.
In December 1982 Mr Gregory Pickering purported to transfer the beneficial interest in the Licence and Authority to Greg Pickering Investments Pty Ltd, the third defendant, for no consideration.
As I have set aside the Deed of Settlement it would be appropriate to make a declaration that the transfer of that interest is void and of no effect.
I make that declaration on the application of Smoothpool Nominees Pty Ltd upon the basis that it might have been the beneficial owner at the time of that transaction. If it was the beneficial owner at that time Dadeeton Pty Ltd would be entitled to the declaration because I have extended the time within which it may bring proceedings against the third defendant and it is the third defendant which is affected by the declaration.
Again on compliance by the plaintiff Smoothpool Nominees Pty Ltd with the payment to the defendant in paragraph 3 hereof there will be a declaration:
“5.... The transfer of the beneficial interest in December 1992 of the Licence and Authority by the defendant Gregory Pickering to Greg Pickering Investments Pty Ltd is void and of no effect.”
Those orders lead to the result that Mr Gregory Pickering presently holds the Abalone Authority on trust for Dadeeton Pty Ltd.
The plaintiffs seek further orders requiring the defendant, Mr Pickering to transfer the legal interest in the Abalone Authority to Dadeeton Pty Ltd.
Dadeeton Pty Ltd seeks an order that Mr Pickering execute all of the necessary documents under the scheme of Management (Abalone Fisheries Regulations) 1991 (the Regulations) to transfer the Abalone Authority to Dadeeton Pty Ltd.
It seems to me it would be appropriate to make such orders so as to unite the legal and equitable interests in the Abalone Authority. Mr Pickering has his legal interest, as I have explained, because of the provisions of the Deed of Trust. Dadeeton Pty Ltd has its equitable interest because that equitable interest was assigned to it by Smoothpool Nominees Pty Ltd by the Deed of Appointment of New Trustee dated 1 July 1982.
Having regard to the relationship of the parties to each other it would be appropriate to make such an order.
I believe that the orders can be made because they are consequential upon the declaration in paragraph 5. Whilst I have not extended the time for Dadeeton Pty Ltd to bring action against Mr Pickering it would still be appropriate, as a consequence of the declaration in paragraph 5 hereof, to make these orders.
I think it can be said that the defendants would not have opposed such orders if I was minded to make the orders and declarations already made. That is not to say they have consented to those orders and declarations, but if the transaction of 25 October 1982 was reversed then I do not think it was argued that it would be inappropriate to effectively dissolve the trust by merging the legal and equitable interests.
The orders which I propose to make do not include any order for the defendant Mr Gregory Pickering to transfer to the plaintiff, Dadeeton Pty Ltd, the boat which was used by the defendant for the purpose of exploiting the Authority in 1980/82. The preamble to the Deed of Trust acknowledges that Mr Pickering was the absolute and beneficial owner of the boat. Clause 7 provides that the boat shall remain his absolute property and that Smoothpool Nominees Pty Ltd had no proprietary interest in the boat nor was entitled to acquire any interest. The boat was in fact leased. After the execution of the Deed of Settlement Mr Gregory Pickering assumed the obligations under the lease. Smoothpool Nominees Pty Ltd did not ever obtain any interest in the boat.
I am not satisfied that either plaintiff ever had any equitable interest in the boat and therefore I am not prepared to make the boat the subject matter of the orders. Of course Dadeeton Pty Ltd could not have had any interest in the boat unless Smoothpool Nominees Pty Ltd had an interest.
Upon compliance by the plaintiff, Smoothpool Nominees Pty Ltd, with the payment to the defendant in paragraph 3 hereof I will make the following orders:
6.     Gregory James Pickering at his expense in all things:-
6.1... Execute the following documents to effect the registration of the transfer of the legal interest in Abalone Authority W17 to Dadeeton Pty Ltd:-
......... 6.1.1         Application to Transfer Abalone Fishery Licence;
6.1.2Statutory Declaration;
6.1.3Application for Revocation of Registration as Master;
6.1.4Other documents required by the Director of Fisheries, and;
6.2    Do all such things and provide such information as is necessary to Dadeeton Pty Ltd to effect the registration of the transfer of the legal interest free of encumbrances in Abalone Authority W17 to Dadeeton Pty Ltd, pursuant to Regulation 9 of the Regulations, subject to the consent of the Director of Fisheries of the Department of Primary Industries and Resources in the State of South Australia.
6.3In the event Gregory James Pickering refuses or neglects to carry out the steps referred to in paragraph 7 herein within fourteen (14) days of any request by Dadeeton Pty Ltd, Dadeeton Pty Ltd be at liberty to deliver such documents to the Registrar of this Court and the Registrar be appointed to execute the documents for and on behalf of the defendant Gregory James Pickering pursuant to Section 13 of the Enforcement of Judgments Act 1991 (SA).

Other Relief

Both plaintiffs have sought other relief. I can deal quickly with Smoothpool Nominees Pty Ltd’s further claims. In my opinion, it cannot have any claim for any further relief against any defendant after the Deed of Appointment. At that time it transferred all its assets to Dadeeton Pty Ltd including any beneficial interest in the Authority and any chose in action against any of the defendants.
In theory it would be entitled to an account for the two periods from 18 June 1982 to 25 October 1982 and from that date to the date of execution of the Deed of Appointment.
However it has not sought an account in respect of the first period and the second period cannot be ascertained such as to conduct an account. In any event Smoothpool Nominees Pty Ltd’s delay in bringing and presenting these proceedings would disentitle it to an account of profits for that period.
I turn therefore to the further relief sought by Dadeeton Pty Ltd. Hereafter I shall refer only to the claims of the plaintiff, Dadeeton Pty Ltd. That plaintiff is the only plaintiff entitled to any further relief.
The plaintiff, Dadeeton Pty Ltd, has also sought a declaration that on and from 21 October 1980, Mr Pickering has continued to hold the proceeds of exploitation Abalone Authority W17 on trust for it. Clearly enough it is not entitled to a declaration in those terms. It did not become entitled to the beneficial interest in the Authority until the execution of the Deed of Appointment which was subsequent to 25 October 1982. Further it has sought a declaration that Greg Pickering Investments Pty Ltd holds the proceeds of exploitation of Abalone Authority W17 subject to a constructive trust in favour of it. Next it has sought an order that all moneys received by Silver Flow Pty Ltd from Greg Pickering Investments Pty Ltd in respect of the exploitation of Abalone Authority W17 are held by Silver Glow Pty Ltd subject to a constructive trust in favour of Dadeeton Pty Ltd.
Not only has Dadeeton Pty Ltd sought those declarations and orders it has also sought an order that it recover from Mr Gregory Pickering and Greg Pickering Investments Pty Ltd the sum of $3,127,835 and that it recover from Silver Glow Pty Ltd the sum of $3,096,499.
Dadeeton Pty Ltd has not made it clear whether it claims to be entitled to damages, equitable compensation or an account of profits.
However the methodology used for the calculations suggests that Dadeeton Pty Ltd is claiming an account of profits.
However, in my opinion self evidently the plaintiff could not be entitled to both the declarations and the compensation which it has sought.
Whilst it would be patently unfair to Mr Gregory Pickering to allow the plaintiff to have both the trust property and all of the proceeds of exploitation since either 18 June 1982 or 25 October 1982 it seems to me that Dadeeton Pty Ltd is entitled to an account of profits for some of the period between 1982 and trial. The plaintiff, in my opinion, is entitled to a pecuniary sum to compensate it for the inability to exploit the Authority over part of the period of time to trial. In this case I think that sum can be best calculated by having reference to the profits made by the defendants over a limited period of time: Maguire v Makaronis (supra). In this case it is easy enough to identify what it was that the trustee acquired and the beneficiary lost: Warman International Ltd v Dwyer (1995) 182 CLR 544 at 565. If one has regard to the expenses incurred in the carrying on of the business, of the exploitation of the Authority and makes proper allowance for the efforts of the trustee in carrying on the business, an account of profits will not produce a result much different from an assessment of the plaintiff’s loss. I think to have regard to the defendant’s profits over a limited period would do justice between the parties.

In my opinion, however, it would not be appropriate to order compensation to be paid to Dadeeton Pty Ltd unless Smoothpool Nominees Pty Ltd complied with its obligation to make restitution to the defendant for it to obtain the rescission of the Deed of Settlement.
My orders in due course will, like the orders and declarations in paragraphs 3-6 hereof, be dependant upon the plaintiff, Smoothpool Nominees Pty Ltd, paying to Mr Gregory Pickering the sum of $514,544 by way of restitution.
The defendants argued during the trial that none of the plaintiffs ought not to have any remedies because of delay on the plaintiffs’ part. They pleaded laches. I have found against the defendants in respect of that plea. [1488] However that does not mean, in my opinion, that Dadeeton Pty Ltd is thereby entitled to an account of profits for the whole of the period between 1982 and trial and indeed after trial. Plaintiffs who stand by or delay in seeking an account of profits may be deprived of a remedy for the whole or part of the period during which the trustee has profited: Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 35; Kalamazoo (Australia) Pty Ltd v Compact Business Systems Pty Ltd (1985) 84 FLR 101; Warman International Ltd v Dwyer (supra).
It would be convenient at this point to mention one other matter to which I have briefly adverted. I refused Dadeeton Pty Ltd an extension of time within which to bring proceedings against Mr Gregory Pickering. In my opinion the failure of Dadeeton Pty Ltd to obtain an extension of time does not disadvantage it in its action against Mr Gregory Pickering because its action against Mr Gregory Pickering is an action to recover trust property and the proceeds thereof of the trust property still retained by the trustee. In that regard s 32 of the Limitations of Actions Act 1936 will apply and there is no time limit within which Dadeeton Pty Ltd must bring its proceedings.
Section 31 of that Act applies only to express trusts which, of course, this case is concerned with. Section 31(b) provides that no claim of a beneficiary against his trustee, in respect of any property held on any express trust, or in respect of any breach of an express trust, shall, subject to the next following subsection, be barred by any statute of limitations.
In my opinion the Limitations of Actions Act does not prescribe a time limit within which a beneficiary under an express trust might claim against a trustee to recover trust property held pursuant to that express trust or the proceeds of the express trust which are still retained by the trustee.
Dadeeton Pty Ltd is therefore entitled to obtain an account of profits against Mr Gregory Pickering. It has obtained an extension of time within which it might bring these proceedings against the third and fourth defendants. Such an extension of time was required in respect of those defendants because s 31 of the Limitations of Actions Act applies only to express trusts and s 32 of that Act would have no application, because the third and fourth defendants are said to be constructive trustees and do not hold the proceeds of trust property upon an express trust.
In any event, for those reasons, Dadeeton Pty Ltd is entitled to whatever relief would be appropriate against the first, third and fourth defendants.
I turn now to calculations provided by the plaintiffs. The plaintiffs tendered their calculations and addressed upon them on the basis that the defendant’s profits could be calculated with mathematical exactness. In a sense, by relying on the defendants’ financial statements, a relatively exact figure can be calculated. However, for reasons which I will mention, in my opinion, after the calculations are carried out regard must be had to intangible matters so as not to be unfair to the defendants.
The plaintiff tendered a report prepared by Mr Holland in which he calculated, by reference to Mr Pickering’s tax returns and financial statements, the gross sales in the financial year 1983 and every year thereafter to and including the financial year ended 1997. He also calculated, by reference to the same information, the total expenses incurred in generating that income. Next he has assumed that the net profit would be invested in each year and interest would be earned on it in accordance with interest rates prevailing in the market from year to year. Further he has assumed that interest would be payable on interest i.e that the money would have earned compound interest.
Mr Holland indicated in his report and also his evidence that, in his opinion, regard should be had to the income tax which was paid by Mr Pickering during each of the financial years and the income tax should be deducted from the net profit and the notional interest income so that a net income after tax is arrived at.
He said that that was the appropriate method of calculation of the true loss because the amount to be paid will be taxable in the corporate plaintiff’s hand at the rate of tax applicable to a corporation at the time of receipt. The present rate is 36 per cent.
If the award is taxable in the hands of the plaintiff then regard should be had to the amount of taxation which will be payable and the defendant must compensate the plaintiff for that sum unless, of course, the plaintiff would have paid income tax on that amount in any event; British Transport Commission v Gourley [1956] AC 185; Atlas Tiles Ltd v Briers (1978) 144 CLR 202.
I accept Mr Holland’s opinion.
As I have said the defendants did not seek to call any expert evidence in relation to the question of compensation. They sought to have me refer the matter to a Master for an account. I can see no reason why this matter should be referred to a Master. The defendants did not really take issue with Mr Holland’s report. In those circumstances I intend to assess the compensation for myself.
During submissions I pointed out to plaintiff’s counsel that perhaps Mr Holland had not been asked to make the appropriate assumptions. He had not been asked to assume the income available to the sheller, that is, in this case, Mr Pickering in accordance with the Deed of Trust.
The plaintiff obtained further calculations from Mr Holland which were handed up to me after submissions were completed in May this year. In those further calculations Mr Holland assumed that immediately prior to 18 June 1982 the sheller, Mr Pickering, would receive 25 per cent of the gross catch. From July 1982 that would increase by 2.5 per cent. There would be a further increase of 2.5 per cent in July in each of the years 1983, 1984 and 1985 such that after July 1985 the sheller would receive 35 per cent of the gross catch.
The defendant has not objected to me having reference to those further calculations.
Mr Holland calculated gross sales during that period of $6,283,713, expenses of $3,572,244 making in all a net profit of $2,711,469.
He added to that the notional interest income of $831,034 making a total of $3,542,503.
He assumed that income tax would have been payable on that amount in the sum of $1,348,826. That assumes income tax rates which would have been payable on the income from year to year.
He calculated further loss of profits for the year 1997-98 and 1998-99 assuming the same net income as was earned for the years in 1996-97. He calculated a loss for those two further financial years of $659,778 including notional interest income for those two years, but after deducting the income tax payable by Mr Pickering, and before adding back the 36 per cent income tax which would be payable by the plaintiff on receipt of that sum.
By that way he calculated total loss of profits at $2,853,454. That figure assumed that Dadeeton Pty Ltd would be entitled to all of the profits of the exploitation of the Authority between 1983 and trial.
The figure did not include an amount for the taxation which would be payable by Dadeeton Pty Ltd on receipt of those profits. If that amount was awarded to either plaintiff the amount would be taxable in the plaintiff’s hands and the plaintiff would pay tax at the rate of 36 per cent.
He made three further adjustments to that figure. First he deducted the sum of $313,522 being, on the assumptions he made, the present day value of $112,500 paid by Mr Pickering in October 1982.
In my opinion it would not be appropriate to set off the amount Mr Pickering paid in October 1982 against an account of profits. For the reasons I have already given I do not accept one of the assumptions relied upon by Mr Holland for the expression of his opinion. I believe the present day value of the Authority is, on the correct assumptions, $514,544.
But that aside, in my opinion, that payment made by Mr Pickering should be taken into account in the claim for the setting aside of the Deed of Settlement. It should not be taken into account against an account of profits. Moreover the sum is payable by Smoothpool Nominees Pty Ltd to Mr Pickering not by Dadeeton Pty Ltd. For all of those reasons it would not be appropriate to bring into account, in the account of profits, the amount paid by Mr Pickering in October 1982.
The second adjustment made by Mr Holland was to make a reduction in the total claim for delay. He made a deduction of $415,517 by allowing only half of the compound interest for the period 1983-1997. He made a further reduction of $122,600 to the compound interest which would otherwise be applicable for the period 1997/99. He therefore made a reduction of $548,117 to the total claim.
I have no doubt Mr Holland was asked to assume that it would be appropriate to reduce the claim by half of the interest over the periods to which I have referred.
He thereby reduced the figure of $2,853,454 by $851,639 (that figure includes the $313,522 for the present day value of the payment of $112,500). He arrived at a figure of $2,001,815. He then added in the income tax of 36 per cent which would be payable by Dadeeton Pty Ltd. That amount totals $1,126,020 and he thereby calculated Dadeeton Pty Ltd’s total claim at $3,127,835.
Mr Holland also offered an alternative method of calculating the amount due by Mr Gregory Pickering and Greg Pickering Investments Pty Ltd based on other assumptions.
In the alternative method he left out of account the profits in the year 1988/1990 and the period after 30 June 1993 to represent the plaintiff’s delay. He calculated net income after tax including interest to 30 June 1993 at $1,090,424 and then made some adjustments to that figure for income tax and interest savings.
After making those adjustments he arrived at a figure of $900,758 to which he applied a compound interest factor and again allowed for tax. Using this method he arrived at a total claim of $1,186,085. He then deducted the sum of $313,522 and then added back in tax at the rate of 36 per cent assuming the money to be taxable in the hands of Dadeeton Pty Ltd. That alternative method resulted in a total calculation of loss of profits to Dadeeton Pty Ltd upon those assumptions of $1,363,379.
The purpose of setting out the alternative claims presented by the plaintiff in support of its claim for an account of profits is to show the marked effect that the plaintiff’s delay has upon the plaintiff’s claim for an account of profits. It also demonstrates the very substantial effect which compound interest has upon any of these calculations.
I think those figures show the unrealistic nature of the plaintiff’s claim for an account of profits.
To be fair to the plaintiff it recognised that there must be deducted some sum to recognise the delay of the plaintiffs in the commencement and the prosecution of these proceedings.
It would be appropriate for me firstly to determine the period over which compensation should be paid by the defendant.
The plaintiff was aware from the date of execution of the Deed of Settlement that the defendant, Mr Gregory Pickering, had not paid full value for the Authority. The plaintiffs received legal advice at that time, but elected not to pursue proceedings against the defendant for fear of jeopardising whatever interests they had in the Authority.
That was a commercial decision made by the plaintiffs, but a decision which should not disadvantage the defendant.
It has to be remembered that the defendant, as I have said, paid two thirds of the value of this Authority and since that time has worked the Authority for 18 years, with the interruption of a short period, when he effectively leased the Authority to another party.
He has preserved the Authority and enhanced its value. If at any time during the 18 years he had failed to comply with any regulation or had ceased to fish and exploit the Authority the Authority might have been lost to the real disadvantage of the plaintiffs.
The defendant has earned a good income from the Authority but in doing so he has attracted very large income tax liabilities which he has discharged as I have noted above to the year ended 1997. He has paid something of in the order of $1.8 million in income tax. That money cannot be recovered from the Commissioner of Taxation and, in the event that the plaintiff obtained a full account of profits, would be lost to the defendant.
It would not be appropriate to allow the plaintiff to make a commercial decision to sit on its hands but require the defendant to pay all of the profits over that period of time when it elected not to bring these proceedings.
In my opinion it would not be appropriate to compensate the plaintiffs for the period between the date of settlement and the service of these proceedings.
These proceedings were commenced on 25 October 1988 but the proceedings were not served until October 1989. Indeed in an affidavit sworn on 20 October 1989 and filed in this Court the plaintiff’s solicitor deposed that the defendants were not then aware of the proceedings. In that same affidavit he said that the Statement of Claim would need to be amended.
The plaintiffs, therefore, seven years after the event, were not able to finalise the Statement of Claim and had not served the proceedings.
The second defendant, who is no longer a party was served on October 1989 and Mr Gregory Pickering was ‘served’ on 26 October 1989.
The fact is, however, no attempt was made to serve the defendants for about a year.
The plaintiffs delayed in the prosecution of these proceedings and as I already noticed in my reasons it was not until October 1998 that the plaintiffs certified that the matter was ready for trial. Of course, most of the delay was due to the plaintiffs’ solicitors but this plaintiff must be held responsible for that. It is also to be noted that this plaintiff did not bring its proceedings until 25 September 1997.
I believe that if the plaintiffs had asserted their rights in a timely fashion the trial of this action could have been completed by 1993.
In my opinion the plaintiffs ought to be entitled to an account of profits for the four years for the loss of profits in the financial years 1990 to 1993 inclusive.
They should not be entitled to an account of profits before that time, because they made a commercial decision not to proceed in the matter. They should not be entitled to an account of profits after that time because they did not prosecute this matter appropriately. In my opinion to allow an account of profits as claimed would be unfair. The remedy in equity must fit the particular facts and circumstances of the case. In Warman International Ltd v Dwyer (supra) at 561 the Court said:
“In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or his exploitation of the principal’s goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal’s property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff’s property but the product of the fiduciary’s skill, efforts, property and resources. This is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a useful part to play; it is simply to say that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff.”
Therefore I would allow the plaintiff an account of the defendant, Mr Gregory Pickering’s profits for the years ended 1990, 1991, 1992 and 1993.
The period over which I believe the plaintiff should be entitled to an account of profits recognises that if the plaintiff had commenced its proceedings in or about 1989 the matter would have been completed within about four years.
In that respect I am making similar but not the same assumptions made by Mr Holland in his alternative calculation.
I shall identify how I would calculate the account of profits over that period of time but it would be appropriate at this stage to make one further matter clear. Mr Holland assumed that the plaintiff should have compound interest over that period of time to the date of trial. That is not an assumption I would make. In my opinion it would be appropriate to allow the plaintiff to have an account of profits for the years which I have mentioned together with compound interest on those profits over those years. Thereafter because the plaintiff did not prosecute its claim in a timely fashion it would be appropriate to award simple interest on the calculation arrived from 1994 to trial.
An account of profits would carry interest: Warman International Ltd v Dwyer (supra) at 570. In some instances equity might allow compound interest in other instances simple interest: The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 at 316. In this case compound interest should be allowed over the period for which the account is taken and simple interest thereafter. I think to allow interest in that way would do justice between the parties. Interest is awarded in equity for compensatory purposes: Re Dawson (dec’d) at 407. The plaintiff should not be compensated in interest during the period it sat on its rights.
Even if equity would refuse an award of interest the plaintiff would be entitled to statutory interest. Section 30C of the Supreme Court Act provides for an award of interest to be included in the judgment “unless good cause is shown to the contrary ...” upon the application of a party in favour of whom a judgment for the payment of damages, compensation or any other pecuniary amount has been or is to be pronounced.
An order for payment of a sum of money on an account of profits would be a pecuniary amount and the plaintiff would be thereby entitled to interest unless good cause to the contrary was shown. Delay may disqualify a party from receiving interest for the whole period where the party has been guilty of inexcusable delay: Duke Group Limited (In Liquidation) v Pilmer & Ors (1999) 73 SASR 64 at 178.
I shall proceed on the some basis as did Mr Holland. I shall calculate the total gross sales for those years and deduct the total expenses. I shall arrive at a net profit to which I shall add a notional interest income for each of those years.
I will thereby arrive at a net income from which I will deduct the income tax expense for each of those particular years. That will give a net income for those four years to which I shall add simple interest to the date of trial. I shall then add to that calculation the income tax expense which would be borne by Dadeeton Pty Ltd on receipt of those moneys. In other words I shall gross up those figures by 36 per cent.

I set out my calculations to arrive at the net income after taxation.

1990	1991	1992	1993	TOTAL
Total Gross Sales	$455,927	$355,801	$601,530	$655,785	$2,069,043
Less Expenses	263,724	213,672	323,201	370,006	1,170,603
Net Profit	192,203	142,129	278,329	285,779	898,440
Notional Interest 1, 2	Nil	23,621	29,531	37,685	90,837
Income	(N/A)	(12.29%)	(8.25%)	(5.66%)
Net Income	192,203	165,750	307,860	323,464	989,277
Income Tax 3 Expense	74,959	64,642	120,065	126,150	385,816
(Corporate Rates)	(39%)	(39%)	(39%)	(39%)
Net Income After Tax	117,244	101,108	187,795	197,314	603,461

Assumes that profit is struck at 30 June.
No interest would be earned until the next year.
Further assumes that the defendant earned compound interest on the net profit in 1991, 1992 and 1993.

Assumes that income tax would be payable on notional interest income.

Before I add back the income tax that would be payable by the plaintiffs on the receipt of the money I have to consider the question of simple interest on the amount of $603,461 which would have been awarded in 1993 if the plaintiff had pursued its remedies in a timely way. The simple interest earned between 1993 and trial would also attract income tax.
Interests rate varied between 1994 and trial in 1999. Mr Holland’s schedule of interest rates show that interest rates on commercial bills varied between 4.89 per cent and 7.5 per cent.
It would be appropriate, in my opinion, to allow simple interest at the rate of 6.5 per cent on the net income after tax for a period of five years. Interest calculates at $196,124.
In my opinion the simple interest, which I have awarded in lieu of the compound interest, which was sought, will also attract income tax in the plaintiff’s hands. Therefore the income tax payable has to be added to the total sum of $799,585 at the rate of 36 per cent which gives rise to a further figure of $287,850.
The total of the account therefore is $1,087,433.
But that calculation is made with complete mathematical exactitude and does not take into account one important factor. Some allowance has to be made for the skill, expertise and other effort which the defendant has exerted in preserving the trust property and exploiting the Authority. This is an appropriate case, in my opinion, to make some allowance for skill, expertise and other expenses; Warman International Ltd v Dwyer (supra) at 562. Such an allowance cannot be made with any exactitude. The sum to be allowed for that skill, expertise and other effort could only be allowed over the same period for which compensation is to be awarded. The defendant’s efforts in the other years must be ignored. I think an allowance of $150,000 would be appropriate to recognise those matters.
Of course like the orders and declarations made in paragraphs 3-6 hereof no order for payment of compensation should be made unless the plaintiff, Smoothpool Nominees Pty Ltd, makes restitution of the amount paid by Mr Gregory Pickering in October 1982.
Upon that basis, in my opinion, Dadeeton Pty Ltd is entitled to a sum of $937,433 from the defendant Mr Gregory Pickering.
There will be an order:
“That upon payment by the plaintiff, Smoothpool Nominees Pty Ltd, to the defendant of the sum referred to in paragraph 3 hereof, the defendant, Mr Gregory Pickering, pay to the plaintiff, Dadeeton Pty Ltd, the sum of $937,433, being a sum inclusive of interest.”
I turn to the claims against the third and fourth defendants.
The plaintiff also seeks orders against the third and fourth defendants. It rightly points out that the third defendant has received all of the benefits of the exploitation of the Authority since 1982 and that the fourth defendant has received distributions from the third defendant since 30 June 1993.
In my reasons I concluded that both the third and fourth defendants were the agents of Mr Gregory Pickering and both had been formed for the specific purpose of receiving the proceeds of the exploitation of the Authority [1556]. I also found that both the third and fourth defendants had been aware from the date in which Mr Pickering had become a director of each of those entities of his breaches of trust. It follows that third and fourth defendants acquired their assets during the relevant period between 1990 and 1993 in circumstances where they were aware of Mr Gregory Pickering’s breach of trust and aware that he had acquired the Authority for less than full value.
In those circumstances the third and fourth defendants are liable to be declared constructive trustees in respect of those assets which represent distributions to the third and fourth defendants over that period of time.
The court must decide before imposing a constructive trust upon a party whether there is an equitable remedy which would be sufficient to do justice between the parties but which falls short of the imposition of a trust; Giumelli v Giumelli (1999) 196 CLR 101 at 113.
In this case the plaintiff’s rights against the third and fourth defendants are no greater than the rights it enjoys against Mr Gregory Pickering. Indeed in respect of the fourth defendant its claim for compensation against that defendant is significantly less than that which it has against the first and third defendants. That is because during the relevant period Silver Glow Pty Ltd only received one distribution from the trust, of which the third defendant is trustee.
In this case, in my opinion, it would be appropriate to simply order the third and fourth defendants to pay to the plaintiff compensation. It is not necessary, in my opinion, to impose a constructive trust upon either defendant. The imposition of a trust upon the assets of the third and fourth defendants would be unduly burdensome, especially so in circumstances where the third and fourth defendants are in a position to satisfy the claim for compensation.
The third defendant received all of the gross sales of the abalone in each of the years 1990 to 1993. It had very little other income except some interest income. It incurred all of the expenses.
In my opinion it is in exactly the same position as the first defendant and liable to the plaintiff, Dadeeton Pty Ltd, for the same amount.
I would make an order subject to the same condition as before:
“That the third defendant pay to the plaintiff, Dadeeton Pty Ltd, the sum of $937,433.”
Of course the payment by either defendant will discharge the other defendant to the extent of the payment.
Silver Glow Pty Ltd is in a different position. It had received, by 30 June 1993, the sum of $200,000 in one distribution on 30 June 1993 from the Pickering Family Settlement. As the Pickering Family Settlement’s sole income was from the proceeds of exploitation of the Authority that sum of $200,000 is also the product of the exploitation of the Authority. It would have to pay simple interest on that amount for five years at the rate of 6.5 per cent, $65,000.
In my opinion it would be appropriate to make an order again subject to that condition:
“That Silver Glow Pty Ltd pay to the plaintiff, Dadeeton Pty Ltd, the sum of $265,000.”
Again, of course, the payment by Silver Glow Pty Ltd of that sum would discharge the first and third defendants to the extent of that payment.
I therefore make the following orders:
1...... I extend the time within which the plaintiffs, Smoothpool Nominees Pty Ltd and Dadeeton Pty Ltd have to commence proceedings against the third and fourth defendants until 13 May 1999.
2...... There will be a declaration that on 21 October 1980 the defendant, Gregory James Pickering, became the trustee of Abalone Authority No. 17 issued by the South Australian Department of Fisheries which he held on trust for Smoothpool Nominees Pty Ltd.
3...... Upon payment of the sum of $514,544 by Smoothpool Nominees Pty Ltd to the defendant, Mr Gregory Pickering, the Deed of Settlement of 25 October 1982 is set aside.
4...... Upon compliance by the plaintiff, Smoothpool Nominees Pty Ltd, with the payment to the defendant in paragraph 3 hereof it is declared:
4.1Since a date sometime after 25 October 1982 and before 30 June 1983 Gregory James Pickering has held Abalone Authority W17 issued by the South Australian Department of Fisheries on trust for Dadeeton Pty Ltd.
4.2The transfer of the beneficial interest in December 1992 of the Licence and Authority by the defendant Gregory Pickering to Greg Pickering Investments Pty Ltd is void and of no effect.
5...... Upon compliance by the plaintiff, Smoothpool Nominees Pty Ltd, with the payment to the defendant in paragraph 3 hereof it is ordered:
Gregory James Pickering at his expense in all things:-
5.1... Execute the following documents to effect the registration of the transfer of the legal interest in Abalone Authority W17 to Dadeeton Pty Ltd:-
......... 5.1.1         Application to Transfer Abalone Fishery Licence;
5.1.2Statutory Declaration;
5.1.3Application for Revocation of Registration as Master;
5.1.4Other documents required by the Director of Fisheries, and;
5.2    Do all such things and provide such information as is necessary to Dadeeton Pty Ltd to effect the registration of the transfer of the legal interest free of encumbrances in Abalone Authority W17 to Dadeeton Pty Ltd, pursuant to Regulation 9 of the Regulations subject to the consent of the Director of Fisheries of the Department of Primary Industries and Resources in the State of South Australia.
5.3In the event Gregory James Pickering refuses or neglects to carry out the steps referred to in paragraphs 5.1 and 5.2 herein within fourteen (14) days of any request by Dadeeton Pty Ltd, Dadeeton Pty Ltd be at liberty to deliver such documents to the Registrar of this Court and the Registrar be appointed to execute the documents for and on behalf of the defendant Gregory James Pickering pursuant to Section 13 of the Enforcement of Judgments Act 1991 (SA).
6...... Upon compliance by the plaintiff, Smoothpool Nominees Pty Ltd, with the payment to the defendant in paragraph 3 hereof it is ordered:
6.1... That the defendant, Mr Gregory Pickering, pay to Dadeeton Pty Ltd the sum of $937,433 inclusive of interest.
6.2    That the defendant, Greg Pickering Investments Pty Ltd, pay to the plaintiff, Dadeeton Pty Ltd, the sum of $937,433 inclusive of interest.
6.3... That the defendant, Silver Glow Pty Ltd, pay to the plaintiff, Dadeeton Pty Ltd, the sum of $265,000 inclusive of interest.

[2000] SASC 267

10 August 2000