Gadsdon v Gadsdon

[2003] WASC 48

GADSDON & ORS -v- GADSDON & ANOR [2003] WASC 48

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2003] WASC 48
Case No:	CIV:1916/2001	Heard:	29-31 JANUARY 2003
Coram:	PULLIN J	Delivered:	18/03/03
No of pages:	31	Judgment Part:	1 of 1
Result:	Claim allowed in part Declaration of constructive trust
Category:	A
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Parties:	GEOFFREY JOHN GADSDON DAVID WILLIAM GADSDON JUDITH ANN HAVERCROFT MARGARET JUNE GADSDON GEOFFREY JOHN GADSDON AS EXECUTOR OF THE ESTATE OF GEOFFREY FRANK GADSON
Catchwords:	Trusts Constructive trust Breach of trust Real property Torrens system Indefeasibility of title Fraud Whether indefeasibility provisions apply to volunteer Caveat Claim for property settlement not a caveatable interest
Legislation:	Transfer of Land Act, s 68, s 82, s 134 Trustees Act 1962, s 65
Case References:	Bahr v Nicolay (No 2) (1988) 164 CLR 604 Baumgartner v Baumgartner (1987) 164 CLR 137 Clay v Clay (2001) 202 CLR 410 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 Conlan v Registrar of Titles (2001) 24 WAR 299 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Durbin v Perpetual Trustee Co Ltd [1995] ANZ ConvR 280 Forbes v Git [1922] 1 AC 256 Foskett v McKeown [2001] 1 AC 102 Hayes v O'Sullivan (2001) 24 WAR 40 Ioppolo v Ioppolo (1978) 4 Fam LR 124 LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291 Lindsay Petroleum Company v Hurd, Farewell & Kemp (1874) LR5PC 221 Lloyd v Tedesco (2002) 25 WAR 360 Maile v Jennings [1956] VLR 45 Metcalf & Kerr v Permanent Building Society (in liq) (1993) 10 WAR 145 Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109 Tokenhouse Enterprises Pty Ltd v Commissioner of Stamp Duties (Qld) [1986] 1 Qd R 155 Truesdale v Federal Commissioner of Taxation (1970) 120 CLR 353 Allen v Snyder [1977] 2 NSWLR 685 Assets Co Ltd v Mere Roihi [1905] AC 176 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Guarantee Co Ltd v Balding (1930) 43 CLR 140 Baburin v Baburin (No 2) [1991] 2 Qd R 240 Baburin v Baburin [1990] 2 Qd R 101 Baird v BCE Holdings Pty Ltd (1996) 40 NSWLR 374 Barry v Heider (1914) 19 CLR 197 Boranga v Flintoff (1997) 19 WAR 1 Breskvar v Wall (1971) 126 CLR 376 Butler v Fairclough (1917) 23 CLR 78 Calverley v Green (1984) 155 CLR 242 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 City of Belmont v Link Interiors Pty Ltd, unreported; SCt of WA (Wheeler J); Library No 990114; 12 March 1999 Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 Constandinidi v Ralli [1935] Ch 427 Ex parte Goodlet & Smith Investments Pty Ltd [1983] Qd R 792 Forster v Hale (1798) 3 Ves 696; 30 ER 1226 Hide & Skin Trading v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 IAC (Finance) Pty Ltd v Courtnay (1963) 110 CLR 550 King v Smail [1958] VR 273 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 Milne Feeds Pty Ltd v Bride (1993) 10 WAR 542 Mountain v Styak [1922] NZLR 131 Municipal District of Concord v Coles (1906) 3 CLR 96 Muschinski v Dodds (1985) 160 CLR 583 Orr v Ford (1989) 167 CLR 316 Permanent Trustee Co v Scales (1930) 30 SR(NSW) 391 Perry v Commissioner of Stamps (1913) 32 NZLR 1194 Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 Rasmussen v Rasmussen [1995] 1 VR 613 Re Hoyle; Hoyle v Hoyle [1893] 1 Ch 84 Re P T Stevens Earthmoving Pty Ltd's Caveat [1975] Qd R 69 Rochefoucauld v Boustead [1897] 1 Ch 196 Ryder v Taylor (1935) 36 SR (NSW) 31 Scott v National Trust [1998] 2 All ER 705 Sexton v Horton (1926) 38 CLR 240 Shephard v Cartwright [1955] AC 431 Smith v Matthews (1861) 3 De G F & J 139; (1861) 45 ER 831 Sulinmo Properties Pty Ltd v Maloney [1985] ANZ ConvR 25 Swan v Perpetual Executors & Trustees Association of Aust Ltd (1897) 23 VLR 293 Valoutin Pty Ltd v Furst (1998) 154 ALR 119 Vandyke v Vandyke (1976) 12 ALR 621 Victoria Gardens Developments Pty Ltd v Commissioner of State Revenue (1999) 99 ATC 4683 Wheeler v Baldwin (1934) 52 CLR 609 White v Australian & New Zealand Theatres Ltd (1943) 67 CLR 266

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION : GADSDON & ORS -v- GADSDON & ANOR [2003] WASC 48 CORAM : PULLIN J HEARD : 29-31 JANUARY 2003 DELIVERED : 18 MARCH 2003 FILE NO/S : CIV 1916 of 2001 BETWEEN : GEOFFREY JOHN GADSDON

DAVID WILLIAM GADSDON
JUDITH ANN HAVERCROFT
Plaintiffs

AND

MARGARET JUNE GADSDON
First Defendant

GEOFFREY JOHN GADSDON AS EXECUTOR OF THE ESTATE OF GEOFFREY FRANK GADSON
Second Defendant

Catchwords:

Trusts - Constructive trust - Breach of trust

Real property - Torrens system - Indefeasibility of title - Fraud - Whether indefeasibility provisions apply to volunteer

Caveat - Claim for property settlement not a caveatable interest

(Page 2)

Legislation:

Transfer of Land Act, s 68, s 82, s 134

Trustees Act 1962, s 65

Result:

Claim allowed in part

Declaration of constructive trust

Category: A

Representation:

Counsel:

Plaintiffs : Mr K J Mony de Kerloy
First Defendant : Mr M L Bennett
Second Defendant : Mr M W Hutchings

Solicitors:

Plaintiffs : Freehills
First Defendant : Bennett & Co
Second Defendant : Butlers

Case(s) referred to in judgment(s):

Bahr v Nicolay (No 2) (1988) 164 CLR 604
Baumgartner v Baumgartner (1987) 164 CLR 137
Clay v Clay (2001) 202 CLR 410
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Conlan v Registrar of Titles (2001) 24 WAR 299
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Durbin v Perpetual Trustee Co Ltd [1995] ANZ ConvR 280
Forbes v Git [1922] 1 AC 256
Foskett v McKeown [2001] 1 AC 102
Hayes v O'Sullivan (2001) 24 WAR 40
Ioppolo v Ioppolo (1978) 4 Fam LR 124


(Page 3)

LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291
Lindsay Petroleum Company v Hurd, Farewell & Kemp (1874) LR5PC 221
Lloyd v Tedesco (2002) 25 WAR 360
Maile v Jennings [1956] VLR 45
Metcalf & Kerr v Permanent Building Society (in liq) (1993) 10 WAR 145
Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109
Tokenhouse Enterprises Pty Ltd v Commissioner of Stamp Duties (Qld) [1986] 1 Qd R 155
Truesdale v Federal Commissioner of Taxation (1970) 120 CLR 353

Case(s) also cited:

Allen v Snyder [1977] 2 NSWLR 685
Assets Co Ltd v Mere Roihi [1905] AC 176
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Guarantee Co Ltd v Balding (1930) 43 CLR 140
Baburin v Baburin (No 2) [1991] 2 Qd R 240
Baburin v Baburin [1990] 2 Qd R 101
Baird v BCE Holdings Pty Ltd (1996) 40 NSWLR 374
Barry v Heider (1914) 19 CLR 197
Boranga v Flintoff (1997) 19 WAR 1
Breskvar v Wall (1971) 126 CLR 376
Butler v Fairclough (1917) 23 CLR 78
Calverley v Green (1984) 155 CLR 242
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353
City of Belmont v Link Interiors Pty Ltd, unreported; SCt of WA (Wheeler J); Library No 990114; 12 March 1999
Composite Buyers Ltd v Soong (1995) 38 NSWLR 286
Constandinidi v Ralli [1935] Ch 427
Ex parte Goodlet & Smith Investments Pty Ltd [1983] Qd R 792
Forster v Hale (1798) 3 Ves 696; 30 ER 1226
Hide & Skin Trading v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
IAC (Finance) Pty Ltd v Courtnay (1963) 110 CLR 550
King v Smail [1958] VR 273
Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265
Milne Feeds Pty Ltd v Bride (1993) 10 WAR 542
Mountain v Styak [1922] NZLR 131
Municipal District of Concord v Coles (1906) 3 CLR 96
Muschinski v Dodds (1985) 160 CLR 583
Orr v Ford (1989) 167 CLR 316


(Page 4)

Permanent Trustee Co v Scales (1930) 30 SR(NSW) 391
Perry v Commissioner of Stamps (1913) 32 NZLR 1194
Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188
Rasmussen v Rasmussen [1995] 1 VR 613
Re Hoyle; Hoyle v Hoyle [1893] 1 Ch 84
Re P T Stevens Earthmoving Pty Ltd's Caveat [1975] Qd R 69
Rochefoucauld v Boustead [1897] 1 Ch 196
Ryder v Taylor (1935) 36 SR (NSW) 31
Scott v National Trust [1998] 2 All ER 705
Sexton v Horton (1926) 38 CLR 240
Shephard v Cartwright [1955] AC 431
Smith v Matthews (1861) 3 De G F & J 139; (1861) 45 ER 831
Sulinmo Properties Pty Ltd v Maloney [1985] ANZ ConvR 25
Swan v Perpetual Executors & Trustees Association of Aust Ltd (1897) 23 VLR 293
Valoutin Pty Ltd v Furst (1998) 154 ALR 119
Vandyke v Vandyke (1976) 12 ALR 621
Victoria Gardens Developments Pty Ltd v Commissioner of State Revenue (1999) 99 ATC 4683
Wheeler v Baldwin (1934) 52 CLR 609
White v Australian & New Zealand Theatres Ltd (1943) 67 CLR 266

(Page 5)

1 PULLIN J: This case involves a dispute over a home unit, Unit 29 on the 14th floor of "Strathhearn", which is located in Kings Park Road, Crawley. The protagonists are the first defendant ("Mrs Gadsdon"), who was the second wife and now the widow of a deceased man Geoffrey Frank Gadsdon (Mr Gadsdon senior), on the one hand and the plaintiffs, who are the children of Mr Gadsdon senior and his first wife. The plaintiffs are beneficiaries of a family discretionary trust. The plaintiffs allege that their father, Mr Gadsdon senior, was guilty of fraud in that he instigated, and participated in, a fraudulent breach of trust by the trustee when the home unit was transferred from the trustee of the family trust to Mr Gadsdon senior.

2 Mrs Gadsdon lodged a caveat prohibiting any transfer of the home unit by Mr Gadsdon senior. The plaintiffs have commenced these proceedings, seeking declarations that:

(a) Mr Gadsdon senior, and since his death Mrs Gadsdon, who claims to be the executor and trustee of Mr Gadsdon senior's estate, holds the home unit on trust for the plaintiffs, and that

(b) Mrs Gadsdon has no caveatable interest in the home unit.

The Facts

3 Most of the evidence is not in dispute. The following are my findings of fact.

4 Mr Gadsdon senior was married to his first wife until she passed away on 17 April 1983. Mr Gadsdon senior and his first wife lived in the home unit. Mr Gadsdon senior was the registered proprietor of the home unit. The plaintiffs are the three children of that marriage. About six months after the death of the first Mrs Gadsdon, Mr Gadsdon senior spoke to his son, Geoffrey Frank Gadsdon (Mr Gadsdon junior), and asked if his son would assist him in creating a family trust. Mr Gadsdon junior was an accountant and was experienced in the conduct of commercial enterprises and familiar with the operation of family trusts. Mr Gadsdon senior said that he wanted to divest himself of his assets because he was concerned that death duties might be introduced and that he wanted to ensure that the plaintiffs received the benefit of his estate. Mr Gadsdon junior told his father that once assets were gifted to a trust, he would not be able to get them back, or words to that effect. At the time of this conversation, Mr Gadsdon senior was the owner of the home unit. Mr Gadsdon senior prepared some notes concerning the formation of the family trust. In

(Page 6)

those notes he indicated that GFG Pty Ltd should be the trustee and that Henry Maxwell Kitson should be the settlor. The notes indicated that Mr Gadsdon senior wanted himself and his three children to be included in the class of beneficiaries entitled to income, and that his three children should be beneficiaries as to capital. I will refer in more detail to the contents of this note later in these reasons.

5 Stone James Stephen Jaques were instructed and a shelf company acquired. It was renamed GFG Pty Ltd ("GFG"). There were two subscriber shares held by partners in Stone James Stephen Jaques. They later ceased to be shareholders. Mr Gadsdon senior was allotted one share on 2 May 1984. Between 22 May 1994 and deregistration of GFG, the shareholders were Mr Gadsdon senior, who held two shares, the first defendant and Mr C Coldicutt, who lived in Melbourne. Mr Gadsdon senior and Mr Gadsdon junior were appointed as the only directors on 2 November 1983. Later the other two plaintiffs also became directors.

6 On 16 November 1983, a deed of settlement ("Trust Deed") was executed by Mr Kitson, the settlor, and GFG Pty Ltd as Trustee of the Geoffrey Gadsdon Family Trust ("Trust"). The settlor settled $20 on the trustee to be held on the trusts set out in the Trust Deed. The "Trust Fund" was defined to mean the settled sum of $20 and any additional property which might thereafter be vested or settled by any person in and on the trustee. "Property" was defined to include real property.

7 The Trust Deed defined "Beneficiaries" as comprising Mr Gadsdon senior and the three plaintiffs, their spouses, their lineal descendants, related trustees and companies and other related legal entities, but the definition contained a proviso which read:

"PROVIDED HOWEVER that the following persons namely:

(1) the Settlor or any person claiming under or in right of the Settlor;

(2) the Trustee;

(3) any corporation in which and the trustee of any trust or settlement in or under which and any other legal entity in which any of the persons referred to in paragraphs (1) and (2) of this proviso have any beneficial interest of whatsoever nature so long as such interest continues,

(Page 7)

notwithstanding that they may otherwise be or be qualified to be included in the class of Beneficiaries shall be excluded from the class of Beneficiaries …"

8 Clause 3 of the Trust Deed stated that the settlor declared that the trustee should, and that the trustee declared that it would, henceforth stand possessed of the Trust Fund and of the income thereof upon the trusts and subject to the powers and provisions contained in the Trust Deed.

Clause 5 of the Trust Deed read:

"5. AS FROM the Vesting Day the Trustee shall stand possessed of the Trust Fund and the income thereof:

(a) in trust for the following Beneficiaries in the proportions hereinafter set forth:


Name of BeneficiaryProportion

Geoffrey John Gadsdon 30%

David William Gadsdon 33%

Judith Ann Havercroft 37%

PROVIDED THAT if any one or more of the aforementioned Beneficiaries dies before the Vesting Day leaving a spouse or lineal issue then that spouse and lineal issue shall take equally as tenants in common that share which such aforementioned Beneficiary would otherwise have taken;


(b) insofar as in the events which happen or for any reason whatsoever any part or parts of the Trust Fund shall not have been validly or effectively disposed of by the trusts declared by this Deed or by any Deed from time to time in force varying altering or adding to such trusts then the Trustee shall stand possessed of such part or parts of the Trust Fund in trust for the next-of-kin on the Vesting Day of the Beneficiaries as are living at the Vesting Day (and if more than one as tenants in common in equal shares) absolutely and if there shall be no such next-of-kin then upon trust for such charitable objects or purposes as the Trustee shall determine any resulting trust to the Settlor

(Page 8)

or any person claiming under or in right of the Settlor being hereby expressly negatived."

9 The "Vesting Day" was defined to mean "the first to occur of … 30 June 2052 or such date being earlier than 30 June 2052 as the Trustee may appoint …"

10 I should also set out in full, two clauses in the Trust Deed which are of critical importance and which the first defendant ("Mrs Gadsdon") contends are in conflict. Mrs Gadsdon submits that the first of these clauses, cl 7(a), is paramount and that it authorised the trustee to transfer the home unit to Mr Gadsdon senior. The plaintiffs submit that the two clauses are not in conflict, that the power in cl 7(a) could not be exercised to effect the transfer, and that cl 22 prohibited the transfer.

11 Clause 7(a) reads:

"7. THE TRUSTEE may in its absolute discretion notwithstanding anything to the contrary herein contained or provided:

(a) at any time or times and from time to time before the Vesting Day transfer the whole or any part of the Trust Fund or out of the capital of the Trust Fund but not out of any moneys referred to in sub-clause (e) of this Clause pay any sum or sums (either in addition to or in substitution for any share of income) to any beneficiary for his own use and benefit or apply the same to or for the maintenance education advancement or benefit of such beneficiary in such manner as it shall think fit and for that purpose may raise any such sum or sums out of the said capital in such manner as it shall think fit;"

12 Clause 22 reads:

"22. NOTWITHSTANDING anything herein expressed or implied:

(a) the Trust Fund and the income thereof shall henceforth be possessed and enjoyed to the entire exclusion of the Settlor and of any benefit to the Settlor or any person claiming under or in right of the Settlor whether by contract or otherwise;

(Page 9)

(b) no part of the capital or income of the Trust Fund shall be paid or lent to or applied for the benefit either directly or indirectly of the Settlor or any spouse of the Settlor to any person claiming under or in right of the Settlor in any manner or in any circumstances whatsoever;

(c) no power hereby or by any appointment made hereunder or by law conferred upon the Trustee shall be capable of being exercised in such manner that the Settlor or any spouse of the Settlor will or may become entitled either directly or indirectly to any benefit in any manner or in any circumstances whatsoever;

(d) in the event of any addition to the Trust Fund being made by some person other than the Settlor then subject and without prejudice to any express direction to the contrary contained in the instrument or instruments by which the same is added this Clause shall apply in relation to such addition and the property from time to time representing the same and the income thereof respectively as if the references to the Settlor and any spouse of the Settlor had included the person by whom the said addition was made and any spouse of such person."

13 After acquiring the trustee company and the Trust Deed having been executed, Mr Gadsdon senior then executed a transfer of land recording the transfer of an estate in fee simple in the home unit from himself to GFG. The transfer recorded the consideration as "gift". The transfer of land form was lodged at the Office of Titles, and GFG became the registered proprietor on 9 January 1984. As a result of this transfer, the home unit became part of the "trust fund" of the Trust.

14 Finally, I should mention that the Trust Deed provided for an appointor who has power to remove or appoint new trustees. Mr Gadsdon senior was the appointor, and he had power in that capacity to appoint a new appointor. Thereafter, until about June 1986, Mr Gadsdon junior worked closely with his father in maintaining the records of GFG.

15 In 1986, Mr Gadsdon senior proposed marriage to the first defendant. I will refer to Mrs Gadsdon throughout these reasons either as Mrs Gadsdon or the first defendant. Mr Gadsdon senior was then 76 years old, and Mrs Gadsdon was 62 years old. Mr Gadsdon junior expressed disapproval about the proposed marriage and suggested that, or

(Page 10)

(as he said) asked his father if, the first defendant was not marrying him for his money. Mr Gadsdon senior answered and rejected that suggestion, saying that the first defendant was aware that he had no assets because they were all in the Trust, or words to that effect.

16 Mr Gadsdon senior married the first defendant on 6 September 1986. About eight months later, Mr Gadsdon senior said to Mr Gadsdon junior that he wanted to give Mrs Gadsdon a life tenancy in the property and that the plaintiffs should pay three-quarters of the rates, taxes and maintenance of the property. Mr Gadsdon junior disagreed with this. He told his father he thought it was not in accordance with the Trust Deed. Mr Gadsdon senior persisted in expressing his wish to provide a life tenancy for his wife. As a result, Mr Gadsdon junior then resigned from his position as director of GFG on 22 April 1987. The other two plaintiffs who had become directors at some earlier stage ceased to be directors on the same date. The first defendant became a director on 11 March 1987, and from that date until deregistration of GFG, the directors of GFG were Mr Gadsdon senior, the first defendant and Mr Coldicutt.

17 After that, Mr Gadsdon junior had no further involvement with the Trust and he did not know, and the other plaintiffs did not know, of any of the following events relating to the Trust until about early March 2001.

18 On 3 May 1987, a lease was executed by GFG and Mrs Gadsdon which provided for the grant of a lease to Mrs Gadsdon for her life or until she was unable to reside in the leased premises. The proviso to this lease was that it was to take effect on the death of Mr Gadsdon senior, only if Mr Gadsdon senior and Mrs Gadsdon were living together as man and wife as at the date of his death. Having mentioned the existence of the lease, it can now be forgotten because as at the date of Mr Gadsdon senior's death, he and Mrs Gadsdon were not living together as man and wife.

19 On 25 July 1987, under the provisions of the Trust Deed, Mr Gadsdon senior appointed the first defendant to be the appointor upon Mr Gadsdon's death.

20 This history resumes about seven years later, when on 22 May 1994 Mr Gadsdon senior instructed his solicitor Mr John Wheatley, of Wheatley & Sons, to transfer the home unit from the Trust to the first defendant. This instruction was in written form, and it read in part:

"2. There have been changes in the Directorship of the Trust confirmed by John after and effected by the sudden death

(Page 11)

of my wife Marjorie Ella who died on the 17th April 1983 The current Directors are G.F.G. Chairman, Margaret June Gadsdon, my newly married second wife and Colin Coldicutt retired., I hold 2 shares, Margaret holds 1 share and Coldicutt has 1 share. There are only 4 shares on issue and they are all the same value $1 each.

3. With the reasons for the trust and its protection of my assets in view of the then prevailing likelihood of savage new rates being enforced at death - - now vitally changed in view of my financial losses from the collapse of Geneva Finance Pty Ltd, there is little to lose in a taxwise position in returning to having all assets returned to me under my sole name. subject to the existing law enabling it to be done, and of course the Stamp Duty possibly such a transfer would attract. However after we have talked of the possibilities of such actions, I would like to make these additions and variations for my estate for the future.

4. a I would like to wind up the Company G.F.G. Pty Limited


b. Cancel the Family Trust made between myself and children Geoffrey John Gadsdon, Judith Havercroft, and David William Gadsdon

c. Revert the ownership of the Unit No 29 at Strathearn 16 Kings Park Avenue to my name only as sole owner.

d. In a new will to be made by you, I will bequeath this property to my 3 three children and my present wife Margaret June Gadsdon in equal shares, with consideration to the current Life time lease of the unit free of rent given to Margaret by the current owners G.F.G. Pty Liminted (sic) to ensure its continured (sic) validity and protection. I do not wish the terms of this agreement to be disturbed.


5. I need the four partners owning the unit to be liable equally for the local Government rates, City Council Water Rates etc and any deviation therefrom, in addition any Capital Charges made by the Body Corporate of

(Page 12)

Strathearn The current quarterly mainenance (sic) charges will be paid by Margaret June Gadsdon

Any furniture maintenance will also be equally shared"

21 On 21 June 1994, Mr Wheatley wrote to Mr Gadsdon senior. The letter was about the Trust and his affairs generally. The letter read:

"On the assumption that there were no legal obstacles and revenue reasons why the net assets of the trust could not be vested in your name as beneficiary, the trust wound up and the company, G.F.G. Pty Ltd, struck off as defunct, we prepared a draft of your proposed new Will and enclose a copy for your perusal.

After re-examining the provisions of the trust, in particular, clause 22(d) of that document, in the light of Mr Colin Gardiner's latest written comments to us prior to his departure overseas, it would seem extremely unwise to continue with the above proposal.

For your information, clause 22(d) of the trust deed states as follows:


'in the event of any addition to the Trust Fund being made by some person other than the Settlor then subject and without prejudice to any express direction to the contrary contained in the instrument or instruments by which the same is added this Clause shall apply in relation to such addition and the property from time to time representing the same and the income thereof respectively as if the references to the Settlor and any spouse of the Settlor had included the person by whom the said addition was made and any spouse of such person.'

We are of the opinion that since the bulk of the assets of the trust were gifted by you then it could well be successfully argued that you yourself are precluded from being a beneficiary of the trust. If you were then to continue with the proposal to vest the net assets of the trust in yourself as beneficiary and your children had a copy of the trust deed or were aware of the contents of clause 22(d) of the trust deed, your children could be in the position to take legal action to set aside the transaction

(Page 13)

and furthermore, to seek a declaration that you are precluded from the beneficiary class.

At this stage then we strongly recommend that you either 'shelve' the proposal to vest the assets of the trust in yourself or you instruct us to obtain Counsel's opinion as to whether the provisions of clause 22(d) of the trust deed would prohibit the proposal and if not, to give express written reasons why such a transaction would be exempt from this provision.

You will appreciate our caution as we did not draw up the trust deed (it was apparently drawn up by a firm of solicitors in Sydney 'C.R. Fieldhouse'). Furthermore, the proposal is one of great significance to you and your wife and you can not afford any chance that the proposal could be set aside by your children."

22 On 31 August 1994, Mr Wheatley wrote again to Mr Gadsdon senior. The letter was headed "Vesting of Unit by GFG Pty Ltd as trustee of your family trust to yourself". Part of the letter read:

"We … confirm our previous written advice to you on the 21st June, 1994 that because of the contents of clause 22(d) of your family trust deed then any attempt by you to vest the assets of the trust in yourself as a beneficiary could lead to a possible challenge by your children with the result that the subsequent vesting could be set aside however that notwithstanding our advice you were still prepared to proceed with the transaction with all its inherent risks.

We have now prepared and enclose herewith vesting transfer for the unit to be signed by not only you as transferee but the Trustee G.F.G. Pty Ltd as trustee of the trust."

23 On the bottom of the letter, by someone in Wheatley & Sons' office, was written in handwriting the words:

"PS. Could you please acknowledge receipt of this letter and its contents by signing and returning to us the attached duplicate of this letter."

24 The duplicate was signed and returned and on the top of the original letter there was written in Mr Gadsdon senior's handwriting "Original

(Page 14)

returned to John Wheatley together with Cert Title VOL 600 Folio 157A on 1/9/94". Mr Gadsdon senior's signature followed that note.

25 On 1 September 1994, the transfer of land form was executed. The form showed the transferee as Mr Gadsdon senior. The transferor was GFG. The consideration was set out in the transfer document as follows:

"1. The land being transferred was acquired by the Transferor in its capacity as trustee of 'the Geoffrey Gadsdon Family Trust' constituted by a Deed of Settlement made the 16th day of November, 1983 by Registered Transfer C687431.

2. The Transferee is a member of the Beneficiaries under the said Deed of Settlement and the Transferee was named as a member of the Beneficiaries at the time of the creation of the said Deed of Settlement on the 16th day of November, 1983.

3. To give effect to the exercise by the Transferor of the discretion conferred on the Transferor by clause 7(a) of the said Deed of Settlement to transfer the said land to the Transferee as being a member of the Beneficiaries under the said Deed of Settlement.

4. The Transferee is identical with the Geoffrey Frank Gadsdon of 16 Kings Park Avenue, Crawley named as a member of the Beneficiaries in the said Deed of Settlement."

26 The transfer was executed by Mr Gadsdon as transferee, with the first defendant as witness, and the common seal of GFG was affixed in the presence of Mr Gadsdon senior and the first defendant. The transfer was registered at the Office of Titles on 23 January 1995.

27 On 9 March 1995, a resolution was passed by GFG in the following terms:

"1. That in exercise of the powers and discretions vested in the Trustee by the Deed of Settlement and all other powers it thereunto enabling the loan of THIRTY NINE THOUSAND SEVEN HUNDRED AND SEVENTY THREE DOLLARS ($39,773.00) made by the said Trust to GEOFFREY FRANK GADSDON and which is payable by GEOFFREY FRANK GADSDON to the

(Page 15)

said Trust free of interest, be and is hereby transferred to and vested in the said GEOFFFREY FRANK GADSDON (a member of the Beneficiaries of the said Trust) and his executors and administrators for his absolute use and benefit discharged from the trusts of the said Deed of Settlement.

2. That the sum of TWENTY DOLLARS ($20.00) now belonging to the said Trust and held in a savings bank account in the name of the said Trust (subject to the addition thereto of any accrued interest and deduction therefrom of any bank fees or government charges) be withdrawn and applied towards the legal and accounting costs in connection with the termination of the said Trust.

3. That the said Trust be and is hereby terminated.

4. That the appropriate entries be made in the books of account of the said Trust to give effect to the foregoing results."

28 The parties informed me that (putting aside the issue about the home unit) there was no other property held by the trustee after that resolution was passed. On 28 August 1995, GFG was deregistered pursuant to s 574 of the Corporations Law.

29 There is another gap in the history for five years. Towards the end of February 2001, the first defendant and Mr Gadsdon senior separated. On 27 February 2001, the first defendant filed an application in the Family Court seeking a settlement of property.

30 In March 2001, Mr Gadsdon senior asked Mr Gadsdon junior to assist with his affairs. Mr Gadsdon senior asked Mr Wheatley for the file held by the firm and asked Mr Gadsdon junior to review the file. Either shortly before this or as a result of reviewing the file, Mr Gadsdon junior came across the letter which had been sent by Mr Wheatley to Mr Gadsdon senior in August 1994. This issue, raised in cross-examination of Mr Gadsdon junior about whether he saw the letter before or after he read the Wheatley file, does not seem to me to be very important, but I find that Mr Gadsdon junior saw the letter and then arranged for his father to obtain the Wheatley file. Having seen this information, Mr Gadsdon junior told his father that he had transferred the unit "illegally", and his elderly father said that steps should be taken to try and "fix it up".

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31 On 9 March 2001, Mr Gadsdon junior instructed Freehills to write to Paterson & Dowding, solicitors for the first defendant, on behalf of the plaintiffs in the following terms:

"We act on behalf of Geoffrey John Gadsdon, David William Gadsdon and Judith Ann Havercroft, as the beneficiaries of the Geoffrey Frank Gadsdon Family Trust.

We understand that proceedings are being commenced by Margaret June Gadsdon against Geoffrey Frank Gadsdon under the Family Law Act.

Please be advised that Geoffrey Frank Gadsdon holds Unit 29, Strathearn Appartments (sic), Crawley, on trust for our clients as tenants in common.

If you intend to take any action in respect of the Unit please forward written notice of your intentions so that we may take the appropriate action.

If you have any queries please contact John Pickering on 9211 7829."

32 From 15 March 2001, Mrs Gadsdon obtained a court order in the Family Court proceedings against Mr Gadsdon senior in terms that:

"In his personal capacity and in any other capacity, be restrained and an injunction is hereby granted restraining him from selling, alienating, or encumbering the former matrimonial home at 'Strathearn' …"

33 On 16 March 2001, Mrs Gadsdon lodged a caveat forbidding the registration of any instrument affecting the estate or interest claimed by her in the caveat in relation to the home unit. The estate or interest claimed was described in the caveat as an estate "in fee simple as beneficial co-owner". The caveat stated that the first defendant claimed the estate or interest by virtue of: "A Statutory Declaration declared on the 16th day of March 2001".

34 The statutory declaration of the 16th March 2001 read:

"1. I am the wife of GEOFFREY FRANK GADSDON who is the registered proprietor of property situated at Unit 29/16 Kings Park Avenue Crawley being more particularly described as Lot 29 on Strata Plan 1082 and

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being the whole of the land comprised in Certificate of Title Volume 2003 Folio 691.

2. The property above described is the former matrimonial home.

3. I married my husband in September 1986 but the marriage has broken down and cohabitation has ceased.

4. Proceedings are on foot in the Family Court of Western Australia for property settlement.

5. I have spent a considerable amount of money on improving the former matrimonial home and I seek to protect my interest therein by lodging a caveat against the property pending the outcome of the Family Court proceedings.

6. I claim an interest in the property as beneficial co-owner and make this declaration in support of the aforesaid caveat."

35 On 16 March 2001, Mr Gadsdon junior arranged for Freehills (his solicitor) to prepare a deed of appointment, revoking the appointment of the first defendant as appointor upon Mr Gadsdon senior's death and, pursuant to cl 16 of the Trust Deed, appointing Mr Gadsdon junior to be appointor upon his death. Mr Gadsdon junior then took this deed to his father and had him execute it. Mr Gadsdon junior also arranged for Mr Gadsdon senior to change his Will so that under this Will made on 16 March 2001 he revoked an earlier Will which had left his estate to the first defendant and instead left his estate to the plaintiffs. (The validity of the 16 March 2001 Will is in dispute.) An enduring power of attorney was also executed by Mr Gadsdon senior in favour of Mr Gadsdon junior.

36 Three days later, on 19 March 2001, Mr Gadsdon senior died.

37 On 2 July 2001, the plaintiffs commenced these proceedings.

Effect of Registration of Title in Mr Gadsdon Senior's Name

38 Upon registration of the transfer of the home unit from GFG to Mr Gadsdon senior in January 1995, he then became the "proprietor" of the home unit. See s 82 of the Transfer of Land Act 1893.

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39 Section 68(1) of the Transfer of Land Act reads:

"Notwithstanding the existence in any other person of any estate or interest whether derived by grant or transfer of the fee simple from the Crown or otherwise which but for this Act might be held to be paramount or to have priority the proprietor of land or of any estate … in land under the operation of this Act shall except in the case of fraud hold the same subject to such encumbrances as may be notified on the registered certificate of title for the land; but absolutely free from all other encumbrances whatsoever …"

40 Section 4(1) of the Act defines "encumbrances" to include "all prior estates interests rights claims and demands which can or may be had made or set up in to upon or in respect of the land".

41 Section 134 of the Act reads:

"Except in the case of –

(a) fraud;

…


no person contracting or dealing with or taking or proposing to take a transfer or other instrument from a person who is … the proprietor of any registered land … shall be required or in any manner concerned to inquire or ascertain the circumstances under or the consideration for which such proprietor … was … registered … or shall be affected by notice actual or constructive of any trust or unregistered interest any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud."

42 The effect of these provisions was that upon registration of the transfer of an estate in fee simple in the home unit, Mr Gadsdon senior became the registered proprietor of a title which was defeasible only if it could be shown that there was "actual fraud personal dishonesty or moral turpitude" on the part of Mr Gadsdon senior: LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291.
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Does s 68 of the Transfer of Land Act Apply to Protect a Volunteer?

43 The home unit was transferred to Mr Gadsdon senior by GFG without the payment of any consideration. The question then arises as to whether s 68 applies (absent fraud) to confer indefeasible title on Mr Gadsdon senior as a volunteer. The plaintiffs submit that it does not. The reasons of Owen J in Conlan v Registrar of Titles (2001) 24 WAR 299 at pars [177]-[200] persuades me that a volunteer who becomes a registered proprietor of an estate or interest in land does gain the benefit of s 68, and I so hold.

Was there a Breach of Trust by GFG? – The Construction Issues

44 Mrs Gadsdon alleges that Mr Gadsdon senior instigated, and participated in, a fraudulent breach of trust by GFG when GFG executed the transfer of the home unit to Mr Gadsdon senior on 1 September 1994.

45 Mrs Gadsdon submits that not only was there no fraudulent breach of trust but also that there was no breach of trust at all. She submits that cl 7(a) of the Trust Deed conferred a power on the trustee to effect such a transfer. If on a proper construction of the Trust Deed this power was exercisable in the circumstances, then that is an end of the plaintiffs' case. The plaintiffs submit that the power was not exercisable in favour of Mr Gadsdon senior in the circumstances and that cl 22 expressly prohibited the transfer of the home unit to Mr Gadsdon senior.

46 Mrs Gadsdon responds to that submission by arguing that the two provisions are inconsistent and that the opening words of cl 7 "notwithstanding anything to the contrary herein contained or provided", means that that clause prevails over cl 22. Mrs Gadsdon argues that there is no provision in the Trust Deed other than cl 22 which is inconsistent with cl 7(a) (and the plaintiffs do not identify any such clause), and therefore to give the opening words to cl 7 which I have quoted above a meaning, they must be taken to be referring to cl 22. Of course, the existence of the opening words in cl 7 does not mean that cl 22 is necessarily inconsistent. In any event, the difficulty is that cl 22 itself opens with the words "notwithstanding anything herein expressed or implied". If there is inconsistency between the two clauses, then both clauses have opening words competing to defeat the other.

47 The first defendant submits that, in those circumstances, the rule is that the earlier clause prevails over the latter. She cites Forbes v Git [1922] 1 AC 256 at 259 and Maile v Jennings [1956] VLR 45 at 46. That

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rule is one of last resort (Durbin v Perpetual Trustee Co Ltd [1995] ANZ ConvR 280) and only applies if there is repugnancy between the two clauses.

48 To determine whether the two clauses are repugnant, the starting point must be to consider the effect of the whole document. The two clauses must not be considered in isolation. See Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109 at 119 (affirmed in Metcalf & Kerr v Permanent Building Society (in liq) (1993) 10 WAR 145). If there is ambiguity, then the court is entitled to know the commercial purpose or "aim" of the contract, and if facts are notorious, knowledge of them will be presumed: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 351-352.

49 The first defendant sought to bolster its argument about the paramountcy of cl 7(a), by reference to evidence about statements made by Mr Gadsdon senior at the time the instructions were given to prepare the Trust Deed. In the alternative, the first defendant sought to rely upon the conduct of Mr Gadsdon senior and the trustee after the establishment of the Trust to support their submissions concerning the proper construction of the Trust Deed. In my opinion, Mr Gadsdon senior's statements about what he intended to achieve, and his conduct and the conduct of the trustee before and after execution of the Trust Deed, must be disregarded. The statements or actions of the parties which are reflective of their actual intentions, are not admissible as evidence: Codelfa (supra) at 352. In any event, the conduct and statements of Mr Gadsdon senior were statements and actions of a person who was a beneficiary of the Trust but not a party to the Trust Deed at all. The parties to the Trust Deed were Mr Kitson and GFG. Even if Mr Gadsdon senior's actions and statements could be seen to be actions and statements by him in his capacity as a director of GFG, and therefore actions and statements by GFG, that evidence is not admissible in determining the intention of the parties, which must be ascertained by reading the words of the parties used in the Trust Deed.

50 I now refer to material relating to the genesis and aim of the parties in executing the Trust Deed. The Trust Deed was prepared by a solicitor, who can be taken to have been well aware of provisions in the Income Tax Assessment Act 1936,which explains to some degree the way in which discretionary trust deeds have been drafted for many years. Legal draftsmen often seek to avoid adverse income tax outcomes, and it would not be unreasonable to accept that the settlor and the trustee would have

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wanted the solicitor preparing the documents to seek to achieve that outcome.

51 Section 102(1) of the Income Tax Assessment Act confers on the Commissioner of Taxation a discretion to assess a trustee to pay income tax under that section in circumstances where a person has created a trust in respect of any income or property, and that person has the power, whenever exercisable, to revoke or alter the trusts so as to acquire a beneficial interest in the income derived by the trustee during the year of income. That section explains why it is standard practice to see discretionary trust deeds drafted in the way this Trust Deed was drafted. The power to revoke or alter the trusts in this and similar trust deeds is vested in the trustee. The settlor has no such power, and in this case (and usually) an independent person is chosen, whose role is only to settle a small sum (in this case $20) to form the initial trust fund. The trust fund will usually grow by the addition of monies borrowed by the trust or by gifts of property from those interested in the trust. At the time of the creation of this Trust, there was likely to have been in the mind of the draftsman, the thought that if a beneficiary gifted property to the Trust so that it became part of the Trust Fund, the circumstance may arise where s 102 might be infringed. Such a draftsman would have noticed that this would not be a risk if the judgment of Menzies J in Truesdale v Federal Commissioner of Taxation (1970) 120 CLR 353 continued to be good law, but would also have noticed that there was New Zealand authority suggesting there was such a risk. The decision in Truesdale's case has been "much debated" (Tokenhouse Enterprises Pty Ltd v Commissioner of Stamp Duties (Qld) [1986] 1 Qd R 155 at 165). It seems that to guard against the possibility that Truesdale's case might have been overturned, cl 22 was inserted in the Trust Deed.

52 The appointor of the Trust Deed (the person with power to remove and appoint new trustees and the power to make new appointments) was Mr Gadsdon senior. He was a beneficiary along with his children and their spouses, and hence the name of the Trust "Geoffrey Gadsdon Family Trust". The trustee was given extensive discretionary powers and general powers in cls 7, 8 and 9. Clause 11 stated that those discretionary powers vested in the trustee should be absolute and uncontrolled. By cl 19, the trustee was authorised to revoke, add to, or vary the Trust, but (perhaps driven once again by concerns about s 102 of the Income Tax Assessment Act) could not do so if the new or other Trust powers, discretions, alterations or variations should be in favour of, or for the benefit of, the settlor or the trustee.

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53 Having considered these notorious background facts, I now turn to construe the Trust Deed. It is trite law that the powers conferred on the trustee were exercisable for the purposes of the Trust, and therefore for the benefit of the "Beneficiaries".

54 The question then arises as to who are the "Beneficiaries" under the Trust Deed.

55 The "Beneficiaries" up until the Vesting Day are as described in the definition of "Beneficiaries" which I have referred to above. Some persons and entities were excluded from the class of Beneficiaries by the proviso, notwithstanding that they may otherwise have been qualified to be included in the class of Beneficiaries. I agree with the plaintiffs' submission that cl 22 is concerned with the identification of other persons or entities who, or which, were also to be excluded from the class of "Beneficiaries". Clause 22(a) states that the Trust Fund and income are to be possessed and enjoyed to the "entire exclusion of the Settlor". Clause 22(b) provides that no part of the capital or income of the Trust Fund should be paid or applied for the benefit, either directly or indirectly, of the settlor. That reinforces the exclusion in cl 22(a). Clause 22(c) provides that no power conferred upon the trustee should be capable of being exercised in such manner that the settlor would become entitled, directly or indirectly, to any benefit. That also reinforces the exclusion of the settlor as stated in cl 22(a). The first three subclauses of cl 22 therefore make it clear beyond any question (and repeats what is already achieved in the proviso to the definition of "Beneficiaries") that the settlor is to be excluded from the class of Beneficiaries by stating that the settlor is excluded from any enjoyment of the Trust Fund and income, that no part of the capital or income should be paid directly or indirectly for his benefit, and that none of the powers conferred upon the trustee should bring about that result.

56 Clause 22(d) then brings about the same result concerning any person who adds any property to the Trust Fund. That person is to be excluded as a Beneficiary in relation to such added property in the same way as the settlor is excluded under cl 22(a), (b) and (c). Clause 22(d) expressly deals with the circumstance which may lead to the adverse application of s 102 of the Income Tax Assessment Act if Truesdale's case should be overturned.

57 In my opinion, cl 22 is a clause which identifies persons who are to be excluded from the list of "Beneficiaries" in relation to added property.

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58 The powers conferred on the trustee in cl 7(a) can be exercised so as to benefit "Beneficiaries" but not exercised in favour of persons who are excluded by the proviso to the definition of "Beneficiaries" or by the provisions of cl 22.

59 Viewed in that way, there is no conflict between cl 7(a) and cl 22.

60 In the circumstances of this case, Mr Gadsdon senior, by gifting and transferring the home unit to the Trust, made an "addition to the Trust Fund", to use words from cl 22(d). He was not the settlor, but the consequence of his "addition" to the Trust Fund was that references to the "Settlor" in cl 22(a), (b) and (c) applied to Mr Gadsdon senior, and as a result the home unit which had become part of the Trust Fund was to be enjoyed to the entire exclusion of Mr Gadsdon. Thereafter, the home unit could not be applied for his benefit, cl 7(a) was not "capable of being exercised in such manner that (Mr Gadsdon senior) (could) become entitled … directly or indirectly to any benefit (in the home unit) in any manner or in any circumstances whatsoever", and the home unit was to be enjoyed to the "entire exclusion" of Mr Gadsdon senior.

61 The result is that I conclude that cl 7(a) did not apply and did not authorise GFG to transfer the home unit to Mr Gadsdon senior. Clause 22 prohibited the transfer to Mr Gadsdon senior. Clause 7 is not in conflict with cl 22.

Was Mr Gadsdon Senior Guilty of Fraud?

62 The plaintiffs allege that their father became the registered proprietor of the property by his own fraud, or alternatively by reason of the fraud of GFG in which he knowingly participated. The facts which are pleaded and particularised to ground the allegation of fraud by Mr Gadsdon senior are that:

(a) GFG was the trustee of the Trust with fiduciary duties to the plaintiffs, which included (as I find they did) a duty to act in the best interests of the beneficiaries of the Trust, a duty to preserve the property of the Trust, and a duty to observe the terms of the Trust Deed.

(b) Mr Gadsdon senior was a director of GFG at all material times.

(c) The transfer of the home unit to Mr Gadsdon senior on 1 September 1994 was initiated by Mr Gadsdon senior, and

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the transfer was undertaken by GFG at his direction and under his influence.

(d) The transfer of the property by GFG at the direction of Mr Gadsdon senior, and the receipt by him, was a transfer to, and receipt by, Mr Gadsdon senior, knowing that such transfer was in breach of GFG's fiduciary duties to the plaintiffs and in contravention of cl 22(d) of the Trust Deed.

(e) Mr Gadsdon senior knew that GFG would be acting in breach of cl 22 and in breach of its fiduciary duties if the home unit was transferred to him by GFG, by reason of the letters of 21 June 1994 and 31 August 1994 sent by Wheatley & Sons to Mr Gadsdon senior.

(f) Mr Gadsdon senior knew that he did not give value for the property, receiving it, as he did, as a volunteer.

63 With knowledge of all those facts, Mr Gadsdon senior then registered the transfer and became the registered proprietor.

64 Alternatively, the plaintiffs allege that Mr Gadsdon senior knowingly participated in the fraud of GFG. Mr Gadsdon senior's knowledge of the above facts was knowledge of GFG.

65 The onus of proving fraud is on the plaintiff: LHK Nominees Pty Ltd v Kenworthy (supra) at [218] and [277]. The receipt of property knowing that it is breach of trust alone, is insufficient to impugn the title of a registered proprietor: LHK Nominees Pty Ltd v Kenworthy (supra) at [185-186], [211], [213] and [275]. To show fraud, it is necessary to show actual fraud, personal dishonesty or moral turpitude: Bahr v Nicolay(No 2) (1988) 164 CLR 604.

66 The fraud which must be proved in order to invalidate the title of a registered proprietor must be brought home to the person whose registered title is impeached: Conlan v Registrar of Titles (supra) at 328.

67 The facts as I have found them to be, reveal that by his letter of 22 May 1994, Mr Gadsdon senior initiated the taking of steps to gain for himself the ownership of the home unit. He was personally advised by Wheatley & Sons in a letter of 21 June 1994 of the provisions of cl 22(d), and he was advised that it would be "extremely unwise" to continue with his proposal. He was advised that "it could well be successfully argued that you yourself are precluded from being a beneficiary of the trust". He was advised that if he continued with his proposal to vest the assets of the

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Trust in himself as beneficiary, then the children could be in a position to take legal action to set aside the transaction. He was advised that he should "shelve" the proposal to vest the assets of the Trust in himself, and that if he did not accept that advice then he should instruct Wheatley & Sons to obtain counsel's opinion.

68 This advice was repeated in a letter dated 31 August 1994 from Wheatley & Sons to Mr Gadsdon senior. They confirmed the advice they gave in the letter of 21 June 1994. Wheatley & Sons required Mr Gadsdon senior to acknowledge receipt of the letter, which he did.

69 There is no evidence before the Court that any of this advice was provided by Mr Gadsdon senior to the other directors of GFG. Mr Gadsdon senior ignored the advice from Wheatley & Sons and instructed them to proceed with the transfer of the home unit to himself. It appears that Mr Gadsdon senior had control of the certificate of title, because he sent it to Wheatley & Sons so that they could complete the transfer.

70 In my opinion, fraud by Mr Gadsdon senior is established because an honest person would not take the active steps taken by him to bring about the transfer of the land to himself, without consideration, when he had been advised about the content of cl 22 and given legal advice to "shelve" the proposal unless he obtained counsel's opinion approving the proposed transaction, which advice he ignored.

Laches

71 The term laches is a word which can be traced back through Anglo-French into Latin. It is jargon for a type of delay which may result in the defeat of a plaintiff's claim to a remedy in courts of equity. Laches is established when two conditions are fulfilled. The first is unreasonable delay in commencing or prosecuting proceedings, and the second is where the delay occurs in circumstances which render the grant of relief unjust: Lindsay Petroleum Company v Hurd, Farewell & Kemp (1874) LR5PC 221 at 240; Spry Equitable Remedies (3rd ed) 220.

72 The statutory limitation period for this type of claim has not yet expired. Section 4 of the Limitation Act applies to a claim of this kind (Clay v Clay (2001) 202 CLR 410), and the 12-year period specified in that section does not expire until 2006.

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73 The plaintiffs submit that a laches defence cannot succeed if there is an unexpired statutory limitation period.

74 In my view, it is not necessary to consider that submission because there was no unreasonable delay in this case. While the acts of transferring the unit occurred in 1994, there is no evidence that the plaintiffs became aware of this fact until 2001. My finding is that the plaintiffs found out about the transfer in early March 2001.

75 Mrs Gadsdon submits that even if that be my finding, the delay from early March 2001 until proceedings were commenced in July 2001 was unreasonable delay and that "by reason of" the delay, Mr Gadsdon senior died. He did not, of course, die "by reason of" the delay.

76 Mrs Gadsdon submits that there was delay because Mr Gadsdon senior could, between early March and his death, have taken some step to retransfer the home unit to the Trust. It was submitted, for example, that he could have signed a declaration of trust stating that the home unit was held on trust for the Trust or that he could have executed a transfer to transfer the legal title back to the Trust. Alternatively, it was submitted that he could have revoked the Trust pursuant to cl 19. I do not agree that he could have revoked the Trust pursuant to cl 19. Clause 19(c) prohibits the exercise of any powers for the benefit of "any person who has disposed of any property to the Trustee" in any event.

77 Mr Gadsdon senior could not have taken any steps to have dealt with the property, because of the injunction which had been granted on 15 March 2001.

78 There was no lack of promptitude on the part of the plaintiffs. In some families, Mr Gadsdon senior's conduct might have been ignored. Some families might have reasoned that the home unit was originally the property of the father and that if he put the property into the Trust and took it out again, then whether it be in breach of trust or not, he should be permitted to do that if that was his wish. The point is, however, that legal structures, if they are put in place, do have legal consequences which cannot be ignored if someone insists that the legal structure be adhered to. The plaintiffs did not lack assiduity in pursuing their claim. Mr Gadsdon junior, as soon as he found out about the impugned transaction, inter alia, accused his father of acting illegally, took legal advice, asserted the plaintiffs' claim, and arranged for his father to revoke the appointment of Mrs Gadsdon as appointor. Whether that revocation was effective or not, is a matter on which I will invite further submissions. Mr Gadsdon junior

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asserted these rights and spent his time attending to these matters in the last few days of his father's life.

79 The plaintiffs cannot be successfully accused of a failure to look after and ascertain the property rights of the Trust.

80 I find that there was no delay, and the defence of laches cannot succeed.

The First Defendant's Submission that the Plaintiffs do not Have "Clean Hands"

81 Counsel for Mrs Gadsdon also submitted that relief should be denied because of the maxim that "he who comes into equity must come with clean hands": Meagher Gummow and Lehane, "Equity Doctrines and Remedies", 3rd ed par 322. This maxim will be applied if a party to a transaction has been guilty of improper conduct, leading the court to decline to grant relief. The impropriety in this place is pleaded by the first defendant as follows:

(a) At the time of the creation of the Trust, Mr Gadsdon senior entrusted to Mr Gadsdon junior, the responsibility for ensuring the Trust Deed embodied his instructions.

(b) Mr Gadsdon junior accepted the responsibility entrusted to him by Mr Gadsdon senior.

(c) At the time, Mr Gadsdon junior was a director of GFG, and he negligently failed to adequately ensure that the Trust Deed embodied the instructions of Mr Gadsdon senior in that the inclusion of cl 22(d) in the Trust Deed is, and was, directly contrary to the written instructions of Mr Gadsdon senior dated 20 October 1983.

82 The written instructions of 20 October 1983 were signed by Mr Gadsdon senior and were headed "Notes on formation of a Family Trust for Geoffrey Frank Gadsdon". It contained one page of instructions, identifying GFG as the trustee, Mr Gadsdon senior and the plaintiffs as directors, specified the name of the Trust, specified Mr Kitson as a settlor, and then identified the Beneficiaries as to income being Mr Gadsdon senior and the plaintiffs and "grandchildren and others as you think fit". Under the heading of "Capital", the instruction was that the plaintiffs were to be entitled to the percentages which were ultimately set out in cl 5(a). An instruction was given on vesting, namely that the Trust could be "vested or liquidated at any time at the sole discretion of the Trustee".
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83 The transaction was unsatisfactory from Mr Gadsdon senior's point of view if his intent was to continue living in the home unit. However, that is not the issue in this case. I do not have to concern myself with the argument about what responsibility Mr Gadsdon junior owed to Mr Gadsdon senior. I am here concerned with the propriety of the transfer of the home unit from GFG to Mr Gadsdon senior, and not about whether or not Mr Gadsdon junior was negligent or failed in some responsibility he owed to Mr Gadsdon senior (I note that it is not pleaded that the other plaintiffs owed any such duty to Mr Gadsdon senior). The plaintiffs are bringing this suit on behalf of all of the Beneficiaries of the Trust, as they are entitled to do pursuant to s 65 of the Trustees Act 1962.

84 As will be seen shortly in these reasons, my conclusion is that the Beneficiaries who are entitled to due administration of the Trust are the plaintiffs and their spouses and lineal descendants and other related entities.

85 I should add in closing on this point that Mr Gadsdon junior expressly warned his father that "once your assets are gifted to the trust there is no way you can get them back", or words to that effect.

86 As a result, it is my view that there was no relevant improper conduct on the part of the plaintiffs warranting the application of the maxim. Furthermore, this case involves a proprietary claim. Property rights are determined by fixed rules and settled principles. The Court has no discretion to exercise once the claim has been made out: Foskett v McKeown [2001] 1 AC 102 at 127F.

Caveatable Interest

87 The plaintiffs seek a declaration that Mrs Gadsdon does not have any interest in the home unit, and seek an order that the caveat be removed.

88 Mrs Gadsdon submits that there are two bases for sustaining the caveat. The first is that she has an application on foot for a property settlement under the Family Law Act and that until the property settlement proceedings have been disposed of, the caveat should remain to prevent any dealing with the land.

89 That is not a proper foundation for sustaining a caveat. To sustain a caveat, it must be shown that the caveator has "an estate or interest" in the land. A claim for a property settlement does not create an estate or interest in the land: Ioppolo v Ioppolo (1978) 4 Fam LR 124.

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90 Secondly, it is argued that because Mrs Gadsdon expended money on improving the home unit, then, on the authority of Baumgartner v Baumgartner (1987) 164 CLR 137, Mrs Gadsdon has an interest in the land. In my view, there are two reasons why that submission cannot be upheld. First, Baumgartner's case does not stand for the proposition that if a person expends money on improving a property, that the person is entitled without more to an interest in the land. The principle is that a constructive trust may be decreed where there has been a contribution to a joint endeavour concerning property which fails. Equity intervenes to restore to any party, contributions which were made in circumstances where, because of the joint endeavour, it was not intended that the other party should enjoy them if the joint endeavour came to an end. It is not enough to argue that it would be fair to hold that Mr Gadsdon senior's estate was an owner of the home unit as trustee for himself and Mrs Gadsdon, merely because Mrs Gadsdon had made payments in relation to improvement of the home unit: Lloyd v Tedesco (2002) 25 WAR 360. There is no evidence of any joint endeavour.

91 Secondly, although some invoices were tendered into evidence, there was no evidence that the monies were, in fact, expended on improvement of the home unit.

92 As a result, there is no foundation for the caveat, and the plaintiffs are entitled to the declaration they seek.

93 However, the plaintiffs have no standing under s 138 of the Transfer of Land Act to apply for an order that the caveat be removed. If that is to happen, then the second defendant will have to seek such an order. I will hear from the second defendant as to whether it wishes to seek leave to counterclaim to obtain such an order. The first defendant submits that the Court has no jurisdiction to order a removal of the caveat and cites Hayes v O'Sullivan (2001) 24 WAR 40 in support. I will hear submissions from the second defendant about this if it seeks leave to counterclaim.

Was the Vesting Date 9 March 1995?

94 Clause 5 of the Trust Deed provides that:

"As from the Vesting Day the Trustee shall stand possessed of the Trust Fund and the income thereof;

(a) in trust for the following Beneficiaries in the proportions hereinafter set forth:

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Name of Beneficiary	Proportion
Geoffrey John Gadsdon	30%
David William Gadsdon	33%
Judith Ann Havercroft	37%"

95 The plaintiffs submit that the resolution which was passed on 9 March 1995 terminating the Trust should be declared to be the "Vesting Day" and that the trustee then stood possessed of the home unit on trust for the plaintiffs in the proportions specified in cl 5. On 9 March 1995, of course, the trustee, GFG, did not think that it had any property left, and hence it resolved to "terminate" the Trust. As far as Mr Gadsdon senior was concerned (as a director of GFG), the home unit had passed out of the Trust in January 1995 when the transfer was registered at the Office of Titles.

96 My reasons for decision, however, reveal that GFG still owned the beneficial interest in the home unit on trust for the Beneficiaries, even though the legal title had passed to Mr Gadsdon senior.

97 On 28 August 1995, GFG was deregistered, and as far as Mr Gadsdon senior was concerned that was the end of the Trust. It is true that GFG no longer exists, and therefore there is no trustee of the Trust.

98 The importance of the issue about whether or not 9 March 1995 was the Vesting Day or not is this. The plaintiffs seek a declaration that the home unit is, and has been since 9 March 1995, held by Mr Gadsdon senior and then his estate on a constructive trust for the plaintiffs in accordance with the proportions specified in cl 5(a) of the Trust Deed. That would be the declaration to be made if 9 March 1995 was the Vesting Day. If, however, 9 March 1995 was not the Vesting Day, then the declaration sought cannot be made. Instead, the home unit would be held by the estate on constructive trust for the persons who are the Beneficiaries before the Vesting Day.

99 The defined term "Vesting Day" is nothing more than a date. It is either 30 June 2052 or such earlier date as the trustee may appoint. The significance of the Vesting Day is simply that as from that date, the trustee then holds the Trust Fund on trust for the Beneficiaries designated

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in cl 5(a) in lieu of the Beneficiaries referred to in the definition of "Beneficiaries".

100 Clearly, 30 June 2052 has not been reached and the trustee never appointed an alternative Vesting Day. In my opinion, the resolution passed on 9 March 1995, which I set out at the beginning of these reasons, cannot be construed (as the plaintiffs contend) as being "the Vesting Day". GFG, through its directors, did not think there was any property left to be dealt with in accordance with cl 5(a). As a result, it did not appoint a Vesting Day earlier than 30 June 2052. In my opinion, the plaintiffs are not entitled to a declaration that the Vesting Day of the Trust is 9 March 1995.

Declarations to be Made

101 In my opinion, the appropriate declaration to make is that the home unit has been, since January 1995, held by Mr Gadsdon senior (and then after his death held by his personal representative) on a constructive trust for those persons who are the Beneficiaries before the Vesting Day but subject to the same terms and conditions which applied in the Trust Deed before the resolution to terminate the Trust on 9 March 1995. I will allow the parties to make further submissions about the proper formulation of this declaration and the form of relief generally. In particular, I will want to hear submissions from the parties about the identity of the person who should be treated as having the powers of appointor.

102 Secondly, the plaintiffs are entitled to a declaration that the first defendant does not have any estate or interest in the home unit.

103 I will consider any application which might be made by the second defendant for leave to counterclaim under s 138 of the Transfer of Land Act for an order removing the caveat lodged by Mrs Gadsdon.