FAI Developments P/L & Anor v Noosa Waters P/L
[1997] QSC 193
•20 March 1997
IN THE SUPREME COURT
OF QUEENSLAND
No. 8176 of 1996
Brisbane
Before Mr Justice J.A. Dowsett
[FAI Developments P/L & Anor v. Noosa Waters P/L & Ors]
BETWEEN:
FAI DEVELOPMENTS PTY LTD
(ACN 010 567 647)
and MOWETE PTY LTD
(ACN 002 099 729)
Plaintiffs
AND:
NOOSA WATERS PTY LTD
(ACN 010 979 414)
First Defendant
AND:
NOOSA WATERS DEVELOPMENTS PTY LTD
(ACN 006 364 745)
Second Defendant
AND:
CALABRO PARTNERS
Third Defendant
REASONS FOR JUDGMENT - DOWSETT J.
Judgment delivered 20 March 1997
CATHWORDS: PROPERTY - PROCEEDS - DISPOSITION - whether a right to further advances may be characterised as property.
COUNSEL:Mr F L Harrison QC and Mr J Sullivan for the plaintiffs
Mr W Sofronoff QC and R O Bain QC for the defendants
SOLICITORS: Purcell, Chadwick and Skelly for the plaintiffs
Clayton Utz for the defendants
HEARING DATE: 30 October 1996
REASONS FOR JUDGMENT - DOWSETT J.
Judgment delivered 20 March 1997
The first defendant is trustee of the Noosa Waters Syndicate Unit Trust, which was created by deed dated 1 November 1989. As trustee, it is developing property in the Noosa area. The plaintiffs, with others, are unitholders in the trust. Until recently, the development was funded by FAI Leasing Pty Ltd (the "financier"). The evidence does not disclose details of the financial arrangements prior to 31 July 1992, but thereafter, advances were secured by a mortgage and a charge, both bearing that date. There had been a restructuring of the arrangements surrounding the development which led to the first defendant, the plaintiffs and the other unitholders entering into an agreement called the "Unitholders Agreement", also dated 31 July 1992. To understand what follows, it is necessary to appreciate that the Unitholders Agreement recorded the "current percentages", being the percentages of units held by unitholders since 23 November 1990 and the "original percentages", being the percentages of units held by them prior to that date.
The following recitals are relevant:
"A. For the purposes of this Deed the term ‘relevant proportions’ shall mean the proportions which the current percentages bear to each other provided however that in relation to any thing done or deemed done prior to November 23, 1990 it shall mean the proportions which the original percentages bear to each other.
B. ...
C. ...
D. FAI Leasing Finance Pty Ltd (hereinafter called the "Financier") has entered into and/or shall enter into separate loan agreements (hereinafter called the "concurrent loan agreements") between itself as Financier and each of the Unitholders under which the Financier has extended and may from time to time extend financial accommodation to each Unitholder as a borrower from the Financier to enable such Unitholder to provide funds to the Trustee (and the separate financial accommodation provided thereunder to any Unitholder is hereinafter called its "concurrent loan" and "concurrent loans" shall have a corresponding meaning).
E. The parties contemplate that amounts will be advanced to the Unitholders under their respective concurrent loans in development proportions.
F. ...
G. The parties intend that each Unitholder will provide funds to the Trustee (using funds provided to it under its concurrent loan agreement or as required by item 4) by applying for additional units in the Unit Trust provided however that each of the other Unitholders makes application for additional units such that if all such applications are accepted and units allotted in accordance with such applications the Unitholders would continue to hold the issued units in the relevant proportions (and applications and allotments collectively having the consequence referred to in this recital are hereinafter called ‘concurrent applications' and ‘concurrent allotments' respectively).
H. ...
I. The Financier has security over the assets of the Unit Trust (hereinafter called the ‘Financier's Security') and may receive proceeds of sales of property of the Unit Trust to be applied in reduction of each concurrent loan made to each Unitholder.
J. ...".
It is common ground that the effect of the documentation was that the first defendant guaranteed repayment by the unitholders of advances made to them by the financier. Such advances had been or would be made available to the first defendant for the purposes of the project.
Paragraphs 5 and 6 of the agreement provide as follows:
"5. To the extent to which the Financier receives or has received (pursuant to the Financiers security) any proceeds of sale or other disposition of property of the Unit Trust or any other proceeds from property of the Unit Trust such proceeds shall be applied or deemed applied in reduction of each of the concurrent loans (or any interest or other charges in respect of such concurrent loan) and in the relevant proportions and any rights of Indemnity which the Trustee has or shall have arising from any such payment or receipt or application shall be deemed to be separate rights against each Unitholder and in each case such rights against a Unitholder shall not exceed in amount the amount applied in reduction of that Unitholders concurrent loan, and any interest or other charges in respect of such concurrent loan.
6. Any rights of indemnity which the Trustee has or shall have against a Unitholder referred to in paragraph 5 shall be offset against the amounts otherwise distributable to such Unitholder upon redemption of units or upon vesting of the Trust, and each Unitholder shall not be personally liable to the Trustee for any of the amounts claimable under such rights of Indemnity to any further or greater extent than the value of the amounts so distributable to such Unitholder and each Unitholder shall not be liable to pay satisfy or contribute any such amount excepting by way of such offset."
Clause 7 provides for redemption of units, provided that the various unitholders continue to hold the remaining issued units in the relevant proportions.
On 28 February 1996, the chief executive of FAI Insurance Group, Rodney Adler, wrote to Mr John Haseler indicating that FAI (presumably the financier) was not willing to allow the funding arrangements to continue past 1 June 1996. As a result, the first defendant sought to arrange alternative sources of finance, and eventually entered into a facility agreement with Queensland Industry Development Corporation ("QIDC"). The first defendant paid $4,630,994.99 obtained from QIDC to discharge the indebtedness of the first plaintiff to the financier and $2,315,497.40 to discharge the debt of the second plaintiff. The first defendant now claims to recover those sums from the plaintiffs who deny any obligation to pay. I am asked to determine whether or not the moneys so received by the financier were proceeds of sale or other disposition of property of the unit trust or other proceeds from the property of the unit trust within the meaning of cl.5 of the Unitholders Agreement. The plaintiffs submit that if so, cl.6 operates to bar any claim for indemnity against them as there are no funds distributable to unitholders at the present time, or at least this was implicit in the arguments advanced by both sides.
The operation of cl.6 is limited to "... rights of indemnity ... referred to in paragraph 5 ...". The rights of indemnity referred to in cl.5 are those "... arising from any such payment or receipt or application ...". This, in turn, is a reference to receipts by the financier of "proceeds of sale or other disposition of property ... or any other proceeds from property ...." and to the application or deemed application of such proceeds in reduction of the various concurrent loans.
Cll.5 and 6:
do not themselves create any right of indemnity but operate upon rights of indemnity arising from the receipt by the financier of moneys from certain prescribed sources;
do not, by virtue of the Unitholders Agreement, bind the financier because it is not a party to that agreement;
do not necessarily apply to all rights of indemnity against the unitholders vested in the first defendant. (Clause 5, and therefore cl.6 apply only to rights of indemnity arising in specified circumstances. It is therefore conceivable that there may be other rights of indemnity to which the clauses do not apply.)
Broadly speaking, the effects of cll. 5 and 6 are as follows:
(a)In the circumstances to which it applies, cl.5 regulates the way in which moneys received by the financier are to be applied in reduction of the respective debts of the various unitholders, inter se.
(b)Clause 5 limits the first defendant's rights of indemnity against the unitholders as a result of such moneys being received by the financier to the respective amounts applied in reduction of the various concurrent debts of the unitholders, including interest and other charges.
(c)Clause 6 requires that any such rights of indemnity be offset against amounts distributable to the relevant unitholders upon redemption of units or vesting of the trust. The clause also provides that a unitholder shall not be liable to pay any amount pursuant to such an indemnity except by way of offset against amounts so distributable, meaning that payment cannot be enforced until a distribution is due, and then only to the extent of that distribution.
For present purposes, the critical problem is to identify the circumstances in which cl.5 operates. The opening words limit such operation:
"To the extent to which the Financier receives or has received (pursuant to the Financiers security) any proceeds of sale or other disposition of property of the Unit Trust or any other proceeds from property of the Unit Trust ...".
The operation of the clause is firstly limited to circumstances in which the financier has received funds pursuant to its security, presumably a reference to the mortgage and charge previously mentioned. Secondly, the receipt must be of:
proceeds of sale of property of the unit trust; or
proceeds of some other disposition of property of the unit trust; or
any other proceeds from property of the unit trust.
Pursuant to the mortgage and the charge, the advances were repayable either as agreed in writing between the parties or on demand by the mortgagee. It is common ground that the moneys were received by the financier "pursuant to the Financiers security" and that such moneys were due for repayment. Certain other concessions were made in supplementary submissions, but it is not necessary that I complicate these reasons by recording them.
The expressions, "proceeds of sale or other disposition of property of the Unit Trust" and "any other proceeds from property of the Unit Trust" are very broad. Recital I records that the financier, "... may receive proceeds of sale of property of the Unit Trust to be applied in reduction of each concurrent loan made to each Unitholder." This appears to be a reference to the financier's securities, both of which contemplate partial release of the securities for the purpose of sale in exchange for receipt of the net sale price as defined in other documentation. Both securities provide that in the event of default, the financier may go into possession of the property, receive profits from it and, of course, sell it. It may be that cl.5 was primarily intended to refer to the receipt of moneys pursuant to these arrangements, but the words used are much wider.
The words "proceeds" and "disposition" have been the subject of much judicial interpretation but generally, the cases have been concerned with interpretation of the words in question in particular contexts. A good example of that is provided by a case referred to in argument, Northumberland v. Attorney-General [1905] AC 406 at p.411 where, as appears from the outline of submissions, it was said that the expression "disposition" is wide enough to cover every conceivable mode by which property can pass. A reference to the report discloses, however, that this statement was made in the context of the Act in question. The full passage is as follows:
"There are two things plain on the face of the Act. In the first place, it is clear that the terms ‘disposition' and ‘devolution' must have been intended to comprehend and exhaust every conceivable mode by which property can pass...".
This is of little assistance in determining the meaning of the words for present purposes. It is, I think, better to start with the dictionary definitions of the words in question and then to see how the context in which they occur may flavour those meanings.
The Shorter Oxford Dictionary defines "proceed" as "that which proceeds from something; produce, outcome, profit". The reference then notes that the word is usually used in the plural form. This is, I think, consistent with legal usage. As to "disposition", the same authority defines the word relevantly as "the action of disposing of; specifically in Law, the action of disposing; power of disposing: ...". The word "dispose" is said to mean "to dispose of" and in Scottish Law "to make over or convey officially or in legal form".
Clearly, the moneys paid to the financier were not the proceeds of sale of trust property. It is therefore necessary to consider whether there was any other disposition of property from which those funds proceeded. Repayment of the QIDC advances is secured by various mortgages over trust property. A mortgage may, in some circumstances, be described as a disposition of property, and the plaintiffs submitted that moneys advanced upon the security of such mortgages would be proceeds of them. It is more usual to describe such a mortgage as securing repayment of an advance. In the present case, QIDC is obliged by the facility agreement to make advances to the first defendant. The mortgages have been granted to secure the due performance by the first defendant of its obligations to QIDC, including the repayment of such advances. Although there are numerous documents evidencing the relationship between the first defendant and QIDC or securing the performance of obligations pursuant thereto, the better view is that the advances and the mortgages were part of one larger transaction. In those circumstances the advances used to pay out the financier's debt cannot be described as proceeds of the mortgages given to QIDC.
An alternative approach urged by the plaintiffs was that the payment to the financier was a disposition of property of the unit trust within the meaning of cl.5 in that the moneys paid were held by the first defendant as trustee and therefore were trust property. This is no doubt true. However the receipt of such moneys did not constitute the receipt of the proceeds of a disposition of such property. This phrase contemplates there being a disposition of property which yields proceeds. It is the subsequent receipt of such proceeds which attracts the provisions of cl.5. Whilst to pay money to the financier may involve a disposition of property, it involves the financier in receiving, not the proceeds of such disposition, but the property itself.
This leaves the third limb of cl.5, namely the receipt of any other proceeds from property of the unit trust. As I have previously mentioned, the contractual arrangement between the first defendant and the financier provided that if the former were in default, the latter might go into possession of the mortgaged property and receive the income from that property. It is possible that the expression, "other proceeds from property of the Unit Trust" was primarily intended to cover such income. It is, however, capable of bearing a wider meaning and seems, on its face, to have been intended to have the widest possible meaning. It was submitted that payment to the financier of the funds obtained from the creation of mortgages in favour of QIDC was within the expression, "any other proceeds from property of the Unit Trust". See para.13 of the plaintiffs' outline of argument. The paragraph is ambiguous in that it then goes on to mount an argument based upon the proposition that such moneys were proceeds of the disposition of trust property. I have already rejected that proposition. I also cannot see any basis for saying that moneys derived pursuant to a loan are proceeds from property simply because that property is made available to secure repayment of the loan. That is not common usage, and I do not think that it was intended by cl.5.
The final argument advanced on behalf of the plaintiffs was that the first defendant had a right to "accommodation" conferred upon it by the facility agreement with QIDC which right was trust property. Cl.2.1(a) of the QIDC facility agreement provides:
"Subject to all of the terms of this Agreement, the Corporation must advance drawdowns to the borrower during the availability period in accordance with the terms of this Agreement."
It was submitted that moneys so advanced were proceeds of the right conferred by this clause. I consider that funds advanced in discharge of the obligation undertaken by QIDC may reasonably be described as being the outcome or product of that obligation. Further, it is consistent with common usage to describe the corresponding right vested in the first defendant as being its property and therefore trust property. It seems appropriate to describe the moneys advanced as proceeds of such property.
After some consideration of this argument I formed the tentative view that it may have substance. Because it was raised in a fairly oblique way at the hearing and because there had been no response to it by counsel for the first defendant, I gave them the opportunity to make further submissions. Written submissions were provided in response to that invitation. I turn now to consider them.
The first defendant submitted that the right to borrow was not property. This submission does not accurately reflect the plaintiff's submission, although the distinction may be little more than semantic. The plaintiffs' submission was based upon the proposition that QIDC had contractually bound itself to make advances and that the first defendant was entitled to the benefit of that promise.
I have already implied that I do not consider the term "property" to be a legal term of art. It is rather a word which is used in many legal and non-legal contexts with a meaning which can only be derived from the context in question. Nonetheless, the first defendant submitted that to be property it is necessary that the right in question be capable of assignment. Reference was made to Halsbury's Laws of England (4th ed.) vol.44 para.657. That paragraph certainly makes the assertion that "property" is that which "belongs to a person exclusively of others, and can be the subject of bargain and sale". However, this statement occurs in that part of Halsbury which deals with stamp duties, and a perusal of the cases shows that the meaning was derived in the context of the relevant stamp duty legislation. This is demonstrated by the case cited as authority for the proposition, Potter v IRC (1854) 10 Exch. 147. The case was concerned with whether or not an assignment of goodwill attracted ad valorem stamp duty. The relevant stamp duty heading had the effect of imposing such duty on "the sale of any lands, tenements ... or other property, real or personal ...". The court held that an assignment of goodwill was subject to ad valorem stamp duty. Referring to the decision in Warren v Howe 2 B & C 281, the court observed that it was authority for the proposition that:
"An assignment of a judgment debt did not require an ad valorem stamp as a mortgage of property, because it did not fall within the definition of a mortgage in the Stamp Act, and that it was not within the clause as to conveyance, for that only applied to such descriptions of property as are usually the subject of sales."
That statement of principle follows from the fact that the statute imposed duty only upon "the sale" of property. Clearly, a transfer of property unable to be sold could not attract duty. The stamp duty cases, in my view, offer no assistance in solving the present problem.
Secondly, counsel drew my attention to a passage from Sykes and Walker's "The Law of Securities" (5th ed.) at p.9 where the authors discuss the nature of proprietary and other interests. In seeking to draw a distinction between the concept of a proprietary right and a right in rem, it is suggested that the capacity to assign may be a relevant consideration. It is not clear to me that the authors were there discussing anything of relevance to the present problem, namely the meaning of the word "property". I will, however, return to this aspect at a later stage.
It was then submitted that the first defendant did not have a "proprietary right to compel QIDC to lend. A contract to lend money (with or without security) cannot be specifically enforced by the proposed borrower or proposed lender ....". It seems to me that this proposition confuses rights and their enforcement. That a particular legal right may not be enforced by specific performance does not, in my view, make it any less a right. It is true that equities are sometimes characterised according to the availability of the remedy of specific performance, or at least historically, that was the case. I cannot see the relevance of that for present purposes, where we are talking about a contractual right. The fact that specific performance may not be available against QIDC does not lead to the conclusion that the first defendant's rights under the facility agreement with QIDC are not property.
It was submitted that "the benefit of a contract to make a loan of money is not assignable". This is no doubt true. I will return to this matter at a later stage.
It was submitted that "the term 'property' is inapposite to cover the right to borrow or other rights to collect money". This is an extraordinary proposition as it would mean that it is inaccurate to describe debts owed to a bank as being property of the bank. This seems unlikely to be correct. Some support for the proposition, though, was said to lie in a line of cases concerned with uncalled share capital. In Stanley's Case (1849) 4 De.G.J.S. 407 the court was concerned to determine whether a debenture assigning to the lender by way of security "all and singular the capital, stock, moneys, securities for money, estate and effects of the company whatsoever and wheresoever and whether in hand or afloat" was a valid exercise of a power to secure borrowings on the funds or property of the company. In particular, the question was whether or not subscribed but unpaid capital constituted property of the company for this purpose. Lord Justice Turner said at p.414:
"It is clear from the latter part of the section that the 'funds or property' which are here referred to are funds or property which may be assigned, transferred, conveyed or surrendered. What is the nature of the unpaid calls due from the subscribers to companies of this description? They are property, not of the society immediately, but which may be called up by the directors of the society at their discretion. What are the duties of directors in the present case with respect to such calls? Plainly - upon the construction of the two hundred and twentieth clause of this deed, to make these calls at their discretion, and to exercise their discretion and judgment upon the question whether the calls should or should not be made. And how can they possibly assign calls which are to be made by them in the exercise of their discretion as part of the funds or property of the society? The consequence would be that the discretion which they are bound to exercise would be wholly defeated and put to an end."
In other words, the power was to convey by way of security all property which could be assigned, transferred, conveyed or surrendered. This qualification was inferred from the wording in question. In the absence of such limiting words in the present clause, the case gives no relevant guidance. Counsel referred to the decision of the Privy Council in Bank of South Australia v Abrahams (1875) LR 6 PC 265 at pp.267-271. It is clear, however, that the Judicial Committee was there endorsing the decision in Stanley's Case which had by then been widely followed in the limited context of a company's power to assign its uncalled capital by way of security. James LJ observed at p.271 that:
"... the right of the company is, strictly speaking, more in the nature of power than of property; and, although that which a man has power to make his own may be charged, as well as that which is actually his, it requires apt and proper words, or a sufficient context, to have this effect"
In Re Streatham and General Estate Company [1896] 1 Ch. 15, was a case in which a company authorised by its articles to charge "property both present and future, including its uncalled capital" purported to charge the undertaking and all its "property whatsoever and wheresoever both present and future". Chitty J concluded that notwithstanding the power of the company to charge its uncalled capital, the debenture had not done so, the basis of this conclusion being that since Stanley's Case, it was well settled that:
"The word 'property' in debentures of this kind includes present and future property of the company down to the commencement of the winding‑up, but not capital then uncalled ....".
This decision was approved by the Court of Appeal in In Re Russian Spratts Patents, Limited (1898) 2 Ch. 149 at p.152 where Lindley MR said:
"We have been considering this matter, and we have all come to the conclusion that although, in a sense, uncalled capital may be called property, yet it is property of a very peculiar description. After all, it is not a debt. It is a right to make a call and create a debt; and it is rather stretching the meaning of the word 'property' to make it include such a right as that. When we look at the decisions we see that for years past, and in all the textbooks to which professional men have recourse, it has been considered that in this class of document, namely debentures of limited companies, the word 'property' will not include uncalled capital. We are not prepared to depart from that line of decision."
Lindley MR thought that uncalled capital might well be property although "of a very peculiar description". Further, the decision was based upon a line of cases concerned specifically with the meaning of the word "property" in company debentures. I am presently seeking to construe the word "property" in an agreement which cannot in any sense be equated to a company debenture. Once again, it is clear that these cases do not give any indication of the general meaning to be attributed to the word "property". They relate to the word considered in a specific context.
It was then submitted that the agreement between QIDC and the first defendant, "... considered as a whole, ... is clearly a contract which, in substance, creates a liability on the part of the (first defendant) to make repayment". This is undoubtedly true. It is then suggested that as the funds actually advanced are "properly characterised" as consideration for the promise to repay, they cannot also be characterised as proceeds of any right vested in the first defendant. I do not understand this submission. It is a natural consequence of the doctrine of consideration that there will be some benefit and some detriment in most, if not all, contracts. That the first defendant may have undertaken an obligation to repay does not logically exclude the possibility that it also has rights under the same contract and that those rights may be accurately described as property. There can be no doubt that QIDC promised to make advances to the first defendant and that it subsequently did so. That the first defendant promised to repay the advances does not change that position. If those rights can accurately be described as property, and if moneys paid by the financier are proceeds of such property, then cl.5 applies.
It was submitted that even if the first defendant had a right to receive such a loan then the right cannot properly be described as property. The argument advanced in support of this assertion is simply that the only remedy for a failure to make the loan would be to sue for damages. Once again, I do not understand why the proper description of the right should be affected by the remedy at law or in equity for the infringement of such a right.
The first defendant then asserted that the loan funds could not be proceeds of a right to claim damages for breach of contract by QIDC because QIDC did not breach the contract. Both propositions are clearly true, but I do not understand the plaintiffs to have made such a submission. The assertion was that the proceeds were the proceeds of the right derived by the first defendant to enforce the obligation undertaken by QIDC to make the advances.
The first defendant then said that because the advance was in consideration of the covenant to repay, the funds were "... proceeds flowing from the giving of a promise to repay the loan". I have already dealt with this argument. The loan funds might well be described as the proceeds of the promise to repay, but that does not mean that they may not also be described, in a different context, as the proceeds of the promise to pay made by QIDC in exchange for the promise to repay and the various other covenants by the first defendant contained in the facility agreement.
This same argument was put in a number of ways throughout the first defendant's submissions, including in the form of an assertion that the contractual relations between QIDC and the first defendant must be seen as a total contract "the substance of which is the creation of a liability on the part of the first defendant to repay the funds advanced". Once again, I do not see why such a description of the contract should exclude the possibility that the first defendant also had rights under the contract. It was suggested that if this characterisation of the contract be adopted, then there may be a distinction "between situations in which a binding contract to lend precedes the making of a loan and situations in which there is no such contractual right antecedent to the actual provision of finance". I see no difficulty attendant upon this proposition. The need for such a distinction arises from the peculiar wording of the Unitholders Agreement and the peculiar factual circumstances which have arisen. Clauses 5 and 6 either apply or they do not. That is the question for determination.
It was submitted that cl.2.1(a) of the facility agreement provides only that QIDC must advance drawdowns "during the availability period". The availability period is defined to mean "the period commencing on the date of the first drawdown and expiring on 31 March 1998 or such later date as the corporation in its absolute discretion specifies ....". The submission then is that as the availability period commenced on the date of the first drawdown, there was no pre‑existing obligation to make it because there was no obligation until the availability period commenced with that first drawdown. It appears that the funds paid to the financier came from the first drawdown.
With all respect, this argument is clearly without substance. It is true that the obligation is to make advances during a period which commenced with the first drawdown, but the obligation to make that drawdown was dependent only upon the borrower (the first defendant) giving an appropriate notice (see cl.2.3) and satisfaction of the conditions precedent specified in cl.8.1. There was a pre‑existing contractual right to demand the first drawdown subject to fulfilment of the various conditions or waiver thereof by QIDC. The making of the first drawdown commenced the period during which further drawdowns might be demanded but was nonetheless in discharge of a contractual obligation undertaken by QIDC.
The first defendant sought to rely upon the provisions of recital I as governing the proper construction of cll.5 and 6. The recital makes provision for the financier to receive "proceeds of sales of property of the unit trust to be applied in reduction of each concurrent loan .... ". Accepting the proposition that reference may be had to the recitals in order to resolve questions of construction concerning the operative parts of the deed, this does not lead to the conclusion urged by the first defendant. It was submitted that because recital I refers to "proceeds of sales of property", this demonstrates "that the only property relevantly contemplated by the deed was property which was to be [or at least could be] the subject of sales". The argument, even if otherwise attractive, fails because cl.5 contemplates the receipt of funds other than as proceeds of sale of property. As I have previously pointed out, it also refers to "other disposition of property" and "any other proceeds from property". Thus recital I cannot be seen as an exhaustive exposition of the circumstances in which the financier may receive moneys derived from property of the unit trust. As it is not exhaustive in that respect, there seems little reason for assuming that its reference to the sale of property is to be taken as meaning that wherever the word "property" is used in the deed, it is referring to property which is saleable. No doubt the recital sets out the most likely source of money to be paid to the financier, namely proceeds from the sale of properties in the course of the development, but it is impossible to use recital I to limit the meaning of the term "property" where it is used in cl.5.
It was then submitted as follows:
"There is not the slightest reason to suppose that the parties intended that the word 'property', when used in the operative part of the deed, would include amounts borrowed to pay out the respective indebtedness of two FAI subsidiaries to their parent. There is every reason to suppose that the parties intended to refer to the proceeds of sale of assets of the trust and not money receive by incurring a liability."
With the greatest of respect, little point is served by merely asserting in a polemical way the proposition sought to be established. If other provisions of the deed shed light upon the construction of cll.5 and 6, then I should have been referred to them. With the exception of the reference to recital I, there was no attempt to suggest that other parts of the deed assist in the exercise with which I am presently concerned. I should add that there was also no suggestion that assistance might be found in any of the other security documents referred to in the recitals.
The written submissions also asserted that:
"The agreement is properly to be construed as a commercial document which was evidently designed to ensure:
(a) that the proceeds of land sales were to be used first to pay off debt before payment of dividends;
(b) that such payments should have the effect of reducing each unitholder's personal indebtedness to FAI proportionately;
(c) that although such payments would respectively have the effect of proportionately increasing each unitholder's obligation to indemnify the trustee, the trustee's right of indemnity would be constrained; and
(d) that in the event an adverse party took control of the trustee, no claim to be indemnified against the relevant payments could be made in advance of completion of the development and the calculation of amounts which were to be distributed to unitholders."
Again, I am not sure that such general statements are of much assistance in construing cll.5 and 6. Some of them may be valid descriptions of the intention of the document, but if they are to be spelled out from the agreement as a whole, I would expect there to be some detailed references in the argument to the relevant passages.
It was submitted that the word "property" cannot be read in an unlimited way; that its meaning must be governed by "the context of the Unitholders Agreement (including the terms of the Recital, namely Recital I)". It is said to be clear in that context that the Unitholders Agreement "is dealing with the proceeds of assets which are the property of the trust, and is not dealing with amounts advanced to the trust in consideration of the incurrence of a liability". This merely restates the problem in an argumentative way without assisting in resolving it.
It was submitted that the Unitholders Agreement makes no mention of any intention to govern the parties' relations in the events which have happened. Again, that is to beg the question which is whether or not the agreement applies in the circumstances which have happened.
I earlier referred to a submission that the right in question could not be property because it is not assignable. In another form, the same argument was that the benefit of an agreement for loan is not assignable.
Curiously, I was not referred to the decision of the High Court in Health Insurance Commission v Peverill (1993-1994) 179 CLR 226, especially per Brennan J (as his Honour then was) at p.241 and the cases there referred to. Those cases address the meaning of the word "property" in a context which renders the various observations of some assistance for present purposes. The cases establish that the assignability of a right may be an indicative characteristic of property, but not an essential one. This is consistent with the first defendant's argument. However, the argument fails to appreciate that the right in question is only the right to receive money from QIDC. I can see no reason why the first defendant could not assign that right although it would, of course, remain liable to repay the advance and to fulfil all other obligations assumed under the facility agreement.
I was also not referred to the decision of the Full Court in Bailey v The Uniting Church in Australia [1984] 1 Qd.R. 42. In that case at p.58, McPherson J said:
"Divorced from the context of taxing statutes, the word 'property', standing by itself, has been said to 'include property, rights and powers of any description' .... It includes a claim or right of action: ... . 'Property' was long ago said to be 'the most comprehensive of all terms which can be used, in as much as it is indicative and descriptive of every possible interest that a party can have' ... In so far as 'property' includes 'right' ... the word 'right' is said to mean 'a capacity residing in one man of controlling, with the assent and assistance of the State, the actions of others'. ... In so far as 'property' includes 'interest', the latter is a word of equally extensive import. It has, even in a case involving taxing statutes, been said to be 'capable of different meanings, according to the context in which it is used or the subject matter to which it is applied' ...
In the context of the Emmanuel College constitution the matter to be determined is whether a right to appoint five counsellors is a 'right' or 'interest' within the context of the 1971 and 1977 Acts. ... When pressed for a meaning of 'proprietary' in this context Mr Davies submitted that the subject matter must be capable of alienation and/or have a money value. But a right to vote in union affairs has been held to be a property right ... and so has a right to vote in a parliamentary election ... . A parliamentary vote is not alienable, although the decision in that case may perhaps be distinguishable on the somewhat limited ground that such a vote is (or was) incidental to ownership of freehold property. The same cannot, however, be said of an advowson or perpetual right of presentment to a benefice or ecclesiastical office. Such a right is property; indeed, it is an incomporial hereditament and therefore real property. But it is severable from the manor to which it is appended, and is alienable, although ordinarily not for a money consideration because of the prohibitions imposed by the statutes against simony ... ."
His Honour rejected the test of alienability as a necessary criterion of property and endorsed a broad approach to the meaning of the word and the need to consider it in context.
In summary, the relevant wording is very broad. there is nothing curious about that in the context of this case. The unitholders would reasonably have expected to benefit from any proceeds flowing from trust property. There is therefore no reason to give a narrow meaning to the word "property". I can see no reason why the right bargained for with QIDC, namely to receive advances from that company, was not part of the property of the unit trust after execution of the facility agreement. Moneys paid pursuant to that right were proceeds thereof. Upon publishing these reasons I will stand the matter over for further consideration as to the relevant forms of order.
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