Global Custodians Ltd v Mesh

[2002] NSWSC 47

CITATION:	Global Custodians Ltd v Mesh [2002] NSWSC 47
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 2539/98; 3156/99; 3354/99
HEARING DATE(S):	3, 4 and 5 December 2001
JUDGMENT DATE:	14 February 2002
PARTIES :	Global Custodians Ltd (P1) John Healy Speight and Jesse Barrie Marr Speight (P2) Archie Greenlees and Norma Patricia Greenlees (P3) Pamela Ann Mesh and Helen Chuproff (D1 & 2) Hari Bhagat (D3)
JUDGMENT OF:	Young CJ in Eq

COUNSEL :	R F Margo SC and A P Spencer (P) L K Robinson (D1 & 2) Third defendant in person
SOLICITORS:	Holding Redlich (P)
CATCHWORDS:	EQUITY [109]- Trusts- Investment before trust deed signed. EQUITY [223]- Trusts- Beneficiary's right to inspect trust documents.
CASES CITED:	Bhagat v Global Custodians Ltd [2000] NSWSC 321 Collins v AMP Superannuation Ltd (1997) 147 ALR 243 Commissioner of Taxation v Everett (1980) 143 CLR 440 Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101 Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547 Glegg v Bromley [1912] 3 KB 474 Gra-Ham Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65 Hanrahan v Ainsworth (1990) 22 NSWLR 73 Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 Hawks v McArthur [1951] 1 All ER 22 Hunters Beach Investments Pty Ltd v Braams [2001] NSWSC 577 King v Victoria Insurance Co Ltd [1896] AC 250 Manfred v Maddrell (1950) 51 SR (NSW) 95 Morris v Morris (1993) 9 WAR 150 O'Rourke v Darbishire [1920] AC 581 Re Londonderry's Settlement [1965] Ch 918 Re Simersall (1992) 108 ALR 375 Trustees of Estate Mortgage Fighting Fund Trust v Federal Commissioner of Taxation (2000) 175 ALR 482 Whakatane Paper Mills Ltd v Public Trustee (1939) 39 SR (NSW) 426 Williams v Spautz (1992) 174 CLR 509 Yuill v Kidman (1910) 11 CLR 601
DECISION:	Orders made

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

THURSDAY 14 FEBRUARY 2002

2539/98 – GLOBAL CUSTODIANS LTD v MESH
3156/99 – GLOBAL CUSTODIANS LTD v MESH
3354/99 - BHAGAT v GLOBAL CUSTODIANS LTD

JUDGMENT

These proceedings have undergone a curious history.

2 By summons filed 22 May 1998 and amended on 17 June 1998, the first plaintiff sought a declaration that it was entitled to inspect all books of account of the Estate Mortgage Fighting Fund Trust established by deed made 2 August 1990 between Hari Bhagat as settlor and Pamela Ann Mesh and Helen Chuproff as trustees. Various ancillary orders were sought.

3 After voluminous affidavits were filed on both sides, the matter found its way into what might loosely be called "the Estate Mortgage Case Management List" of which I am in charge. On hearing the matters in that list on 9 December 1998 I ordered that the questions in Schedule A to the first plaintiff's notice of motion be decided separately and before all the other issues in the proceedings. I then listed for 18 and 19 May 1999 the hearing of these separate issues

4 On 18 May Mr R F Margo SC appeared for the first plaintiff, Dr L Robinson with Mrs B Macrae appeared for the first and second defendants, and the third defendant, Mr Bhagat, appeared in person. Mr Margo SC said that he now only sought the determination of three questions. However, the defendants objected to this and in the end, rather than lose the hearing date, Mr Margo SC agreed that the original questions would be before the court, but he indicated that he would only be seeking to argue questions which were the equivalent of 3 to 8 in Schedule A.

5 The dispute was then resolved by me adding a new question 2A and posing the following as questions to be answered separately and before the trial of the proceedings.

6 For the present hearing, the questions were slightly amended by adding Question 1A and amending Question 7.

7 With these amendments the questions I have to consider are as follows:

1. Whether Mr John Healey Speight (also known as Jack Speight) and Mrs Jessie Barrie Marr Speight ("the Speights") were beneficiaries of the Estate Mortgage Fighting Fund Trust ("the Trust")?

1A. Whether Mr Archie Greenlees and Mrs Norma Patricia Greenlees were such beneficiaries?

2. If the answer to question 1 is in the affirmative, whether the deed of assignment dated 17 February 1998 between the Speights as assignors and the first plaintiff as assignee was valid to assign the Speights' rights as beneficiaries of the Trust to the first plaintiff? (I have called this the "Speight Assignment").

2A. If the answer to question 1 or 2 is in the negative, whether it was competent for the first plaintiff to amend the summons on 17 June 1998 and continue this litigation?

3. Whether the amending deed dated 6 April 1998 between the third defendant as settlor of the Trust and the first and second defendants as trustees of the Trust purporting to amend the trust deed of the Trust by amending the definition of "Beneficiaries" in the trust deed retrospectively to the effect that beneficiaries in the Trust will not be entitled to assign their rights as beneficiaries ("the Amending Deed"):

(a) was made in breach of fiduciary obligations owed to the beneficiaries, further or alternatively to the first plaintiff beneficiary, by the settlor and the trustees respectively?
(b) is ineffective?
(c) should be set aside?


4. If the answers to questions 1, 2 and 3(b) or 3(c) are in the affirmative, whether or not the first plaintiff until further order and by its external legal advisers and independent professional accountants, who have given confidentiality undertakings to the court, should be permitted to inspect the books of account of the Trust and lists of its beneficiaries ("the interim relief")?

5. If the answers to questions 1 and 2 are in the affirmative, and the answer to question 3(b) and 3(c) are in the negative, whether or not the amending deed operated retrospectively to invalidate the assignment by the Speights to the first plaintiff?

6. If the answer to question 5 is in the negative, whether or not the first plaintiff should be given the interim relief?

7. If Question 1A is answered in the affirmative, whether the deed of assignment dated 30 May 1998 between Mr Archie Greenlees and Mrs Norma Patricia Greenlees ("the Greenlees") as assignors and the first plaintiff as assignee was valid to assign the Greenlees' rights as beneficiaries of the Trust to the first plaintiff?

8. If the answer to question 7 is in the affirmative, whether or not the first plaintiff should be given the interim relief?

8 On 25 June 1999, I delivered reasons for decision which answered the questions ([1999] NSWSC 624). Essentially, I found that on the evidence then before me, the questions should be answered as follows:

1. Yes.
2. Yes, but only to a limited extent.
2A No, without further amendment.
3-6 Do not arise.
7. Yes, to a limited extent.
8. Does not arise.

9 I then stood the matter over for counsel and the third defendant to consider the reasons.

10 In summary, none of the parties was happy. The first plaintiff wished to amend by adding the Speights and the Greenlees as additional plaintiffs. As a back up measure, they commenced a new suit, 3156 of 1999 in which the Speights and the Greenlees were additional plaintiffs seeking the same relief as sought in 2539 of 1998. On 29 July 1999, I ordered that these two sets of proceedings be heard together.

11 Shortly thereafter, Mr Bhagat commenced still further proceedings 3354 of 1999 about the same matters. In this third set of proceedings Mr Bhagat claimed damages because the plaintiffs in the other two sets of proceedings had instituted those proceedings for a collateral purpose. This third set of proceedings has been considered together with the other two.

12 Mr Bhagat made it clear that, in his opinion, there should have been an opportunity to give further evidence himself and to cross-examine Messrs Speight and Greenlees and that he had been hard done by because the decision had been made without that opportunity.

13 To cut a long story short, at a directions hearing, I withdrew my reasons and set the matter down for rehearing with the additional plaintiffs being added and with the view of hearing the additional evidence of Messrs Greenlees and Speight, cross-examination of that evidence and any additional evidentiary material the parties wished me to consider to which the opponent did not reasonably object.

14 The rehearing took place on 3, 4 and 5 December 2001, Mr RF Margo SC and Mr A Spencer appeared for the plaintiffs, Dr L Robinson of counsel for the first two defendants in proceedings 2539/98 and Mr Bhagat appeared in person.

15 I should note that, at the commencement of the rehearing, Mr Bhagat submitted: (1) that I should disqualify myself from further hearing the case; and (2) that the proceedings had become otiose. For the reasons I gave in a short judgment on 3 December 2001, I declined to accede to those submissions. I should also note that, throughout the proceedings, Mr Bhagat has constantly made applications for me to be disqualified.

16 In addition to the evidence received earlier, I read affidavits of Mr Greenlees, many voluminous affidavits of Mr Bhagat and Mrs Betty Humphrey. These people were all cross-examined.

17 I should note that, although the evidence of the plaintiffs was received in the conventional manner, the evidence supplied by Mr Bhagat had to be treated unconventionally. This evidence consisted of a series of affidavits by Mr Bhagat obviously prepared by himself to which every piece of paper which could possibly assist his case was exhibited. The affidavits were often not in proper form and it was impossible to segregate the relevant from the irrelevant.

18 My solution was to admit all this material (about 3000 pages) and to pay particular attention to those pages which were referred to in addresses. I do not believe that this procedure prejudiced the plaintiffs (or the defendants) and saved considerable time in dealing with objections to admissibility.

19 The basal question is whether the Speights and the Greenlees were members or beneficiaries of the Fund of which the first two defendants are the trustees.

20 The background facts are more or less undisputed. In June 1990 concern was felt amongst a lot of investors in a series of property trusts which can conveniently be described as "the Estate Mortgage Trusts". There were many small investors in these trusts including many pensioners. A Mr Van Breugel in Melbourne and Mr Hari Bhagat in Sydney, concerned themselves in organising unit holders into groups for the purpose of bringing recovery actions.

21 At a meeting in Melbourne on 8 July 1990, a national committee was elected to represent unit holders and the Estate Mortgage Fighting Fund was formed. Messrs Galbally and O'Bryan were appointed solicitors to that Fund.

22 On 16 July 1990, Mr Bhagat placed advertisements in newspapers, for a meeting to be held at the Hordern Pavilion in respect of the Estate Mortgage Fighting Fund. The advertisement bore the names Hari and Pamela Bhagat. Pamela Bhagat is the wife of Hari Bhagat and is identical with the first defendant, Pamela Anne Mesh. Mr Van Breugel, who by that stage called himself the chairman of the national committee, gave that meeting his goodwill, but indicated that any money collected should be sent to Melbourne, that the NSW committee would be considered a sub-committee of the national committee, and that careful arrangements should be made to record the names of subscribers so that they could receive the news releases.

23 At the Hordern Pavilion on 22 July, Mr Bhagat made a speech, the text of which is in evidence. A hundred dollars was collected from each of a series of people and was banked by Brambles Security with the Westpac Bank, initially in Brambles own bank account.

24 However, even by the next day, a dispute arose between the national committee and the NSW group as to various matters. It was initially proposed that the NSW moneys would be covered by a trust deed in which there would be six trustees including a Mr Clout. This deed was executed on 25 July 1990. On the same day a bank account was opened at the Westpac Bank Royal Exchange Branch and Brambles transferred the moneys collected at the Hordern Pavilion into that account.

25 The settlor named in the trust deed was Hari Bhagat. Clauses 2.1 to 2.3 of the trust deed were as follows:

"2.1. The Settlor declares and directs that the Trustees shall act and the Trustees agree to act as Trustees of the Trust Fund and will hold the Trust Fund upon the trusts subject to the provisions of this deed.
2.2. The Trustees may in their absolute discretion at any time or times during the continuance of the Trust accept or reject any moneys, investments and property which may be donated or otherwise given or offered to the Trust by any person.
2.3. The Trustees shall stand possessed of the Trust Fund in trust for the Beneficiaries in proportion to their respective contributions to the Trust Fund."

26 "Beneficiaries" was defined in clause 1.2 as:

"Those parties who have, at any time, been represented by the Settlor and Pamela Mesh/Bhagat in the Proceedings and any other person who has contributed moneys, investments or property to the Trust which has been accepted by the Trustees."

27 Paragraph 9.1 of the trust deed is as follows:

"At the direction of the Settlor, the Trustees must by deed alter, modify, add to or cancel all or any of the provisions of this deed (including this clause) in such manner and to such extent that the Settlor thinks fit on the condition that the Settlor is and the Trustees are satisfied that such alteration, modification, addition or cancellation does not, unless all the Beneficiaries agree, prejudice the interests of the Beneficiaries at the time of such alteration, modification, addition or cancellation."

28 Clause 10.1 permitted the settlor by instrument to remove any trustee in his absolute discretion and without giving any reason for the removal.

29 On 27 July 1990, Mr Bhagat indicated to Mr Van Breugel, that as far as he was concerned, the Estate Mortgage Fighting Fund Trust NSW was not a party to the national committee. He stipulated his terms for co-operation with the national committee. On 29 July, there was a purported removal of Mr and Mrs Bhagat from their office in the NSW Estate Mortgage Fighting Fund with them being replaced by Messrs Priddy and Joyce.

30 On 30 and 31 July, the six trustees directed Westpac to freeze the account until further notice.

31 On 31 July Mr Bhagat as settlor, purported to remove all the trustees and to appoint instead his wife and a Mrs Chuproff (who it is suggested is his mother-in-law) who are the present first and second defendants. Mrs Chuproff appears to be an elderly person. Although she at all times was represented in these proceedings by counsel, she at no stage gave any evidence and the material before the court suggests that she is a mere figurehead in this dispute.

32 A new trust deed was then executed on 2 August 1990 with Mr Bhagat as settlor and Ms Mesh and Mrs Chuproff as trustees. Apart from the change of trustees, the only difference was the omission of clause 10.4 which had required the trustees to give notice of the fact of removal of a trustee to all beneficiaries.

33 On 5 August 1990, Mr Bhagat as settlor, purported to amend the 25 July 1990 deed to delete clause 10.4.

34 In November 1990, a settlement was reached between the Melbourne group and Mr Bhagat. The settlement was that if a donor requested his or her money to be returned that would happen, where there was a request that a fund go to either the Sydney or Melbourne fund that would be implemented; otherwise the funds would be divided one-third to Melbourne and two-thirds to Sydney.

35 I should also note here that, although it is not relevant for this set of reasons, it would seem that the Melbourne group settled with the persons involved with the Estate Mortgage Funds whereas the Sydney group is still very much in battle with them. The first plaintiff, which is closely connected with the current trustees of the Estate Mortgage Funds is very much interested in the activities of the NSW group. Mr Bhagat has been its very vocal opponent in various pieces of litigation now before the court.

36 The Speights, it would appear, attended the Hordern Pavilion meeting and a cheque butt has been produced dated 20/7/1990 with the notation "Estate Mort Fighting Fund $100". Although Exhibit DX218 gives a list of the people who had contributed at the Hordern Pavilion and elsewhere, there is no mention of this $100 having been banked.

37 On 7 August, J & B Speight wrote to the Westpac Bank alleging that they had subscribed $100 by cheque, that they understood the money had been deposited with Westpac and under no account did they want their money removed by Mr Bhagat.

38 Although the evidence is fairly slim, it would seem that Mr Clout's copy of the Westpac list confirmed a payment by the Speights and that Mr Clout's recollection is that that payment eventually found its way to Melbourne. Neither Mr Clout nor Mr or Mrs Speight gave evidence.

39 In March 1992, the Speights wrote to Mrs Chuproff requesting a meeting of beneficiaries to consider and determine the Trust pursuant to clause 8.3 of the trust deed and asking for a full audited account to be sent to the beneficiaries prior to the meeting. There is no evidence as to what happened following this letter.

40 My duty is to find the facts on the material that I have. So far as the Speights are concerned, on the material before the court it is clear that the Speights paid their $100 at the Hordern Pavilion, it was collected by Brambles and banked to the Westpac account in the name of the six trustees and then transferred to Melbourne. The Speights were, in due course, refunded their $100.

41 It is convenient at this point to consider the facts about the Greenlees’ contribution.

42 Mr Greenlees did give evidence. He says that on about 15 August 1990 he purchased a bank cheque for $100 from the ANZ Bank at Panania. He posted that cheque to the address shown on the defendants’ newsletter though he did not include any stamped addressed return envelope. The address appears to be that of Stapleton Denning, the Sydney accountants for the NSW branch of the Trust. He made a contemporaneous note ”Bank cheque $100 No 387025” and “C.S. 15.8.90” on the envelope in which he received the defendants’ newsletter. The letters “C.S.” denoted “cheque sent”. The envelope is in evidence.

43 Mr Greenlees said that several days later, a radio identity, Alan Jones told his audience that anyone who had made a contribution to the trust was wasting their money and should ask for their money back.

44 Mr Greenlees then attended the office of Stapleton Denning accountants and saw a women who introduced him to the first defendant, Pamela Bhagat. Mr Greenlees asked for his money back. Mrs Bhagat said that he ought not to do that as the fund was the only way that there could be any hope of recovery of investor funds in the Estate Mortgage Trust. Mr Greenlees says that he was impressed with this and left his money in the Fund.

45 Mr Greenlees then says that on 20 August 1990, he again attended the office of Stapleton Denning and Mrs Bhagat introduced him to her team of volunteer workers including Mrs Betty Humphrey. Mr Greenlees worked as a volunteer for three days each week for some time. He was appointed a member of the committee in August 1990 and in September 1990 became Vice-President of the committee. He resigned about 13 May 1991.

46 Mr Greenlees says that he was told by Mrs Bhagat not to issue receipts for contributions unless the contributor had included a stamped addressed envelope for the return of a receipt.

47 Mr Greenlees never received a receipt for his contribution.

48 Mr Bhagat says that there are no records of the Trust showing Mr Greenlees' money having been received and that whilst it is acknowledged he was Vice-President of the committee, it must have been because everyone assumed that a man of such profile in the organisation had in fact made a donation.

49 Mr Bhagat said that there was no record of any contribution having been received from the Greenlees couple or either of them. At one stage he produced some photostat records in an attempt to show that this was so. However, as it seemed that the vital page had been rephotostatted with an embarrassing gap near where the Greenlees name might have occurred, these records were not in the ultimate relied upon. Mr Bhagat said (T126) “I wish to inform the court that we concede the anomalies in the list of beneficiaries and … the third defendant, and I think the trustee will probably confirm this, that we will not be relying on the list of beneficiaries for either the Speights or Greenlees and we wish to withdraw the list.”

50 Mr Margo SC submitted that that concession amounts to a very severe dent in the defendants’ case. There is much force in that submission.

51 Mrs Humphrey gave evidence and was cross-examined. She appears to have been Mrs Bhagat’s second in command in the Stapleton Denning office. She swore that when Mr Greenlees came to the office of Stapleton Denning, he asked for his money back which he said that he had contributed at the Hordern Pavilion. She says that she remembered Mr Greenlees because he was the first person who had come in and demanded his money back.

52 I regret to say that after Mrs Humphrey’s cross-examination, I could not prefer her evidence to that of Mr Greenlees when the two were in conflict. Mrs Humphrey seemed almost to have programmed herself to keep saying “at the Hordern Pavilion”. She appeared to have reconstructed her evidence and I did not consider her a reliable witness.

53 Mrs Bhagat did not give evidence. Mr Bhagat said in his cross-examination that she was not in good health. However, this did not really explain why she did not answer Mr Greenlees’ statements about her.

54 Mr Greenlees was cross-examined both by Dr Robinson and by Mr Bhagat. The general tone of the cross-examination was on Mr Greenlees’ bias and prejudice against Mr Bhagat. However, there was a conflict between Mr Greenlees and Mr Bhagat as to whether the latter had rung Mr Greenlees on Christmas Day, 1990. I found Mr Greenlees’ evidence most credible that he had been telephoned by Mr Bhagat as his wife was preparing Christmas dinner and asked to attend at Mr Bhagat’s residence in Liverpool Street Sydney forthwith. Mrs Greenlees told her husband in no uncertain terms her ire on the matter and Mr Greenlees stayed at home. The suggestion that this was an invention is hard to accept.

55 Mr Greenlees was not shaken in his evidence by that cross-examination. There is no reason for me to disbelieve any of Mr Greenlees’ evidence and I accept him as a witness of truth. His evidence was not answered by the fact that Mr Bhagat did not have confirmatory records.

56 I will deal with the defendants’ submissions in detail shortly. However, much of them consisted of Mr Bhagat submitting that things could have happened otherwise or at different times than people like Mr Greenlees said they did happen. This is always possible. However, my task is to find what more likely than not did happen

57 In my view, it is more likely than not, especially in view of the inadequacy of many of the records of the Sydney Trust, that Mr Greenlees did make a payment of $100 by bank cheque as he has said.

58 The submissions made by the defendants on the principal factual question may be summarised as follow:

(1) The evidence is insufficient to show that either the Speights or the Greenlees were contributors. There is no evidence of any bank statement showing that the cheques concerned were paid.

(2) The Speights were always hostile to the Bhagat interests: there is no way “we would have accepted their money”.

(3) In order to be a beneficiary, the propositus must both pay his or her contribution and have the same accepted by the trustee. There is no evidence of acceptance in the case of either the Speights or the Greenlees.

(4) The return of the Speights’ money terminated any interest they may have had in the Trust.

(5) Any contributions made at the Hordern Pavilion pre-dated the inception of the present Trust which only occurred on 2 August 1990.

59 I will deal with these submissions in turn. However, it should be noted that there is no suggestion that Mr Greenlees ever received his money back.

60 As to the first submission, for the reasons I have already set forth, the balance of probabilities are that both the Speights and the Greenlees made $100 contributions. The fact that bank statements were not produced does not to my mind affect this conclusion. I mention this as Mr Bhagat said that it was a major point in his case.

61 I do not consider the second submission has substance. At the time contributions were being received, there was no material to show animosity and, even if there were, all moneys at that time were being gratefully received from anybody.

62 As to the third submission, its correctness is manifest. However, the fact of acceptance in the case of Greenlees is established by the acceptance of his evidence. As to the Speights, except as dealt with under the fourth submission, the same comment applies.

63 The fourth and indeed the fifth submissions are of greater substance.

64 As to the fourth submission, which only applies to the Speights, I have already set out the definition of “beneficiaries”. On the facts as I have found them, there is a literal compliance with the definition even if the Speights' money was contributed at the Hordern Pavilion and it was banked in the name of the six trustees with Westpac Bank. Only later did it go to Melbourne either as a result of the Speights' letter of August 1990 or because of some formal or informal distribution of contributions. There does not appear to be any qualification on the definition as to a person who has been a beneficiary but who has ceased to have any involvement with the Trust. That this is so is reinforced by the words "at any time" in the definition.

65 However as has been seen, under clause 2.3 the Trust Fund is held in trust for the beneficiaries in proportion to their respective contributions to the Trust Fund. This would seem inequitable if, pursuant to the settlement with the people in Melbourne, people who had their money in the Westpac Bank account returned to them were still able to claim as beneficiaries.

66 On the other hand, it is to be noted that the rights of beneficiaries are incidentally noted throughout the deed. The most important reference is clause 8.3 that the Trust may be determined by a two-third majority vote of the beneficiaries which suggests that there is a definable number of beneficiaries and that a list is kept of them. There are other provisions dealing with the consent of all the beneficiaries.

67 The rules of law and equity as to when one ceases to be a beneficiary under a trust can be complex. Of course, the trust deed may make provision for withdrawal. The present deed does not do so.

68 It seems to me that, if the trustee and the beneficiary come to an agreement that the beneficiary should get his money back, the better view is that he then ceases to be a member of the trust and his rights cease. This is reinforced by provisions like clause 8.3.

69 The fifth submission has a degree of instant appeal. However, there are situations where a person can invest money in anticipation of a trust being properly instituted. I analysed some of these situations in Hunters Beach Investments Pty Ltd v Braams [2001] NSWSC 577. See also Hawks v McArthur [1951] 1 All ER 22. The present case, with the very quick reconstitution of trusts, seemingly, with little consultation with the contributors makes the present a classic case where the contributors’ money, although paid before 2 August 1990, must be considered part of that Trust Fund.

70 It follows that, after considering the further evidence, the views taken in my reasons of June 1999 have been reinforced rather than diminished and I should now reach the same conclusions on the whole of the evidence.

71 What was not covered in the earlier reasons was whether Mr and Mrs Greenlees are entitled to the order that they seek to inspect the books of the trust or at least whether some interim order should be made.

72 Mr Bhagat made it clear in his submissions that he had no objection at all to any genuine contributor having access to the trustees’ books, but he objected to Mr and Mrs Greenlees seeing the books as they were, so to speak, in the enemy camp.

73 I must now briefly examine the rights of the beneficiaries to examine the trustees’ books.

74 In Trustees of Estate Mortgage Fighting Fund Trust v Federal Commissioner of Taxation (2000) 175 ALR 482, Hill J examined the legal and equitable position of the beneficiaries under the present Trust for the purposes of income tax. No-one in the present case cavils with his Honour’s conclusions.

75 His Honour concluded that the beneficiaries had the indefeasible property in the capital and income of the Trust Fund. They were each entitled to an aliquot portion of the income of the Fund. Thus, the trustees were not assessable. The beneficiaries were in the position where they could each apply to the court for payment out to them of their aliquot share. His Honour approved of the authorities in this court which supported that proposition, viz Whakatane Paper Mills Ltd v Public Trustee (1939) 39 SR (NSW) 426, 440 and Manfred v Maddrell (1950) 51 SR (NSW) 95, 97.

76 It should be noted that the finding that the beneficiaries had an indefeasible vested interest runs contrary to the view I took in this case in my previous judgment now withdrawn. I have set out the previous reasoning in the first part of the appendix for record purposes.

77 If the beneficiaries or any of them has the right to put an end to the Trust or receive his or her aliquot share of income and capital, it is difficult to see how they are not entitled to receive the information as to what the capital is and what the income is to see if it is worthwhile winding up the Trust. Furthermore, if the interest of the beneficiary is indefeasible, the motive in asking for the information would seem to be irrelevant.

78 Alternatively, if there is a present right to capital and income, that right may be assigned and it would carry with it the incidental rights to be informed of the nature and extent of the trust property.

79 In O’Rourke v Darbishire [1920] AC 581, 619, Lord Parmoor said:

“A cestui que trust, in an action against his trustees, is generally entitled to the production for inspection of all documents relating to the affairs of the trust.”

This is a good general statement of the law, although subsequent authorities make it plain that this principle is generally limited to the documents relating to the trust property which are truly documents of the trust itself and it does not entitle the beneficiaries to the trustees’ confidential documents; see eg Re Londonderry’s Settlement [1965] Ch 918 and Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 432-3.

80 Insofar as the inspection seeks access to the accounting records of the Trust, it would seem to fall within the category of “trust documents”. Outside this area, there may be room for debate.

81 If, however, provisions such as clause 7.2 of the trust deed, set out below, mean that the trust must be treated almost as if it were a discretionary trust, the assignee would only get the right to bring proceedings for due administration and accordingly there could be no assignment of the proprietary interest.

82 Clause 7.2 of the trust deed reads as follows:

"7.2. A Beneficiary is not entitled to require the transfer to him of any of the property comprised in the Trust Fund nor (subject to the Beneficiaries’ rights created by this deed and by law) is he entitled to interfere with or question the exercise or non-exercise by the Trustees of any of the trusts, powers, authorities or discretions conferred upon them by this deed or in respect of such property."

83 As Ford and Lee show in their Principles of the Law of Trusts (LBC, Sydney, 1996) at para [9290] as substituted in 1999, it is misconceived to think of the right of the beneficiary to inspect documents in terms of a proprietary right of the beneficiary. Although that thought has passed through the minds of various Judges who have given recent decisions in this area, as those learned authors say, that theory gives rise to more problems than it solves. All the beneficiary really has is rights against the trustee: Re Simersall (1992) 108 ALR 375, 381. See also Morris v Morris (1993) 9 WAR 150, 153.

84 In any event, individual ancillary rights of beneficiaries cannot be assigned in isolation. The only equitable chose in action which is capable of assignment is the complete package of rights against the trustee or at least a share in such rights. Thus the "right" to call for accounts or to inspect documents is a mere procedural right which has not passed to the assignee.

85 I have not as yet dealt with the fact that, on 17 February 1998, the Speights executed a deed of assignment of their interest in the Trust to the first plaintiff. The first plaintiff claims that that assignment gives it locus to commence these proceedings (alternatively if this assignment does not, then the Greenlees assignment, which is in the same form as the Speight assignment has that effect).

86 In my reasons of 25 June 1999, I held that the right of the beneficiaries to assign their interests in the Fund were subject to quite severe limitations. However, because the Speights and the Greenlees have now been joined as parties, it is quite unnecessary to delve into these limitations. Those conclusions may also need reconsideration in the light of the judgment of Hill J.

87 Whatever be the precise nature of the assignment, either the first plaintiff is entitled to the information as an assignee or Mr and Mrs Greenlees are entitled to it as an original beneficiary.

88 I also dealt with the problems relative to amendment of trust deeds in my earlier reasons. Likewise these are of little current significance. However, I will repeat at the end of the appendix my reasons on this aspect of the case.

89 The principal argument of the trustees and Mr Bhagat has been to the effect that the first plaintiff is an enemy of the Trust. The whole purpose of the Trust is to recover moneys from those whom the Estate Mortgage depositors claim culpably lost their investments. To allow the defendant to an action brought by the trustees to become a member of the Trust, to attend meetings of members and to examine the records of the Trust would frustrate the whole object of the Trust.

90 Unfortunately, the submission was not really made in this form. Had it been, it would have required close examination as the court goes a long way to ensure that the purpose of the trust is fulfilled even if the trust instrument does not cover the situation that has arisen.

91 However, in case Mr Bhagat becomes too carried away with the above comment, it must be said that where, as Hill J held in the case of the present Trust against the Taxation Commissioner referred to later, that the beneficiaries had an indefeasible right to the capital and income of the Fund, it would be difficult to deny access to anyone who was a beneficiary, friend or foe, to access to information as to what was in the Trust Fund.

92 However, Mr Bhagat obviously fears that if and when representatives of the first plaintiff gain access to what has happened to the Trust Fund they will mount some counter-action against him and/or the trustees to deflect attention from the actions he has taken against the first plaintiff and its associates.

93 He thus says that proceedings 2539/98 and 3156/99 are fraudulent and are brought for a collateral purpose and should be summarily dismissed.

94 Over the last year or so, Mr Bhagat has constantly submitted that proceedings have been brought against him for a collateral purpose. I thoroughly examined the law in this area in my judgment in Bhagat v Global Custodians Ltd [2000] NSWSC 321. I there said that it was only in rare cases that such an action can succeed. It is not enough that the plaintiff hopes to win so that his commercial ancillary aim may be achieved. Thus it is permissible to bring an action against a councillor with the ultimate aim of having that person disqualified from holding office: Williams v Spautz (1992) 174 CLR 509, 526. See, generally, Hanrahan v Ainsworth (1990) 22 NSWLR 73, 112.

95 In the instant case, any collateral purpose is in the ultimate commercial purpose, not in the immediate legal purpose. The plaintiffs genuinely want to exercise their rights to see the Trust’s accounts. Thus, this defence must fail.

96 Before concluding, I need to record the formal order I must now make and also note some general remarks about the conduct of the litigation.

97 The present hearing is designed to have specific questions answered. I have done this. The answers remain as before with the addition that Question 1A is answered, “Yes.” The only formal order that I need make at this stage is that the matter stand over for short minutes to be brought in.

98 Mr Bhagat has indicated that he will be in India until 25 March 2002. He has given an overseas email address and I will direct that a copy of these reasons be emailed to that address.

99 I will direct the plaintiffs to bring in short minutes, to email a draft to Mr Bhagat at the overseas email address by 25 February and have the matters listed before me for mention on 4 April 2002 at 9.30 am.

100 Under Part 31 of the Supreme Court Rules, the short minutes should, by order, answer the questions and then make the appropriate consequential orders.

101 My initial view is that it must follow from what I have said above that proceedings 3354 of 1999 must be dismissed with costs, proceedings 3156 of 1999 dismissed as otiose with no order as to costs and orders made in 2539 of 1998 declaring the plaintiffs’ rights of access accompanied by the appropriate executive order.

102 Although Mr Bhagat is correct when he submits that one does not make interim orders in the nature of final relief, it seems to me that the issues between the parties have been so thoroughly canvassed that only one result can follow. Furthermore, the making of final orders will permit anyone aggrieved to appeal as of right.

103 Although I have made sure that it did not influence my assessment of the evidence and the submissions, I should record that I became weary of Mr Bhagat’s constant rudeness in casting his submissions in the form, “In order that your Honour does not further pervert the course of justice it must now be found by your Honour …” which occurred five times between pages 128 and 136 of the transcript of 5 December 2001. I am not intending to do anything about this matter in the instant case. However, rereading the transcript makes me state for the future that if a litigant in person chooses to make statements in this form particularly if he or she does so in an endeavour to disqualify the judge by getting a thundery reaction, that litigant may well find the judge listening patiently and unaffected by the insults, but, after the case has concluded, forwarding the papers to the appropriate authorities to consider whether criminal charges of contempt should be laid in order to preserve the dignity of the court system.

104 I must note, in conclusion, that there appears to be a gap in the State's protection of funds raised at a public meeting. Probably, though not certainly, as funds were raised from Estate Mortgage investors there was no fund raising from "the public" under the Corporations Act 2001. As the funds were not raised for any charitable, benevolent, philanthropic or patriotic purpose, the Charitable Fundraising Act 1991 (NSW) is inapplicable. Thus it would not appear that any public official could intervene to ensure that the fund is, as promised, controlled by trustees, rather than being used at the settlor's sole discretion. However, there is some control as a beneficiary may obtain relief if he or she can show a breach of trust or otherwise good cause for the court to involve itself in the administration of the trust. Experience with other public funds tends to show that this is insufficient as only very few beneficiaries will spend their own moneys to take this step. I thus draw the matter to the attention of Law Reform bodies.

APPENDIX

105 As noted earlier, there was considerable debate at the initial hearing as to whether the present Trust was a fixed trust or a discretionary trust and what were the nature of the beneficiaries’ rights. In view of the decision of Hill J, this debate was not repeated at the recent hearing. However, I set out the reasoning given earlier as it may be of assistance should this matter go further.

106 The defendants submitted that the distinction between the two types of trust is that with a discretionary trust the trustee has a discretion as to when any payment from the trust fund will be made and as to who in a definite class of beneficiaries will receive it, whilst in a fixed trust the trustee has no such discretion. They cite Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547. However, I must note that at p 552 in that report Gummow J, when a Federal Court Judge, said that the meaning of the term "discretionary trust" is "primarily a matter of usage, not doctrine."

107 The argument then proceeded that as none of the beneficiaries had an interest in the capital or income of the Trust until the time of distribution, their entitlement was merely to due administration of the Trust and so they did not have an interest in the benefit under the Trust and thus had no standing. Collins v AMP Superannuation Ltd (1997) 147 ALR 243, 251, was cited in this connection, but that was a case as to standing before the Commonwealth Superannuation Tribunal.

108 There is no element of discretion in the instant Trust. Clause 2.3 is quite clear. The Trust Fund is held for the beneficiaries in proportion to their contributions. However, in the meantime it is to be utilised for the common purpose of recovering moneys from what Mr Bhagat calls "the Estate Mortgage debacle".

109 However, this does not necessarily mean that a beneficiary's interest is assignable. All that happens to a person who purports to assign his or her interest is that he or she ceases to be a beneficiary.

110 For practical purposes, as the Speights are not plaintiffs, what must be shown is the assignment of a legal chose in action within the meaning of s 12 of the Conveyancing Act 1919. The reason for this is that it would only be such an assignment which would have the effect of enabling the plaintiff to sue in its own name or at least enabling the plaintiff to sue in its own name without naming the Speights as defendants.

111 A legal chose in action within s 12 comprehends all assignable legal rights: King v Victoria Insurance Co Ltd [1896] AC 250, 254. However as Starke says in his Assignments of Choses in Action in Australia (Butterworths, Sydney, 1972) p 3, "An essential criterion of a chose in action is that the right concerned is one of a proprietary character; a purely personal right, however valuable it may be from the standpoint of the person entitled thereto, cannot be of the nature of a chose in action ...".

112 In the instant case it is only when the Trust has been terminated, the beneficiaries and their respective shares known, that there could be a situation where a legal chose in action existed. Up until that time there is either an equitable chose in action or an equitable right short of a chose in action. In either case s 12 of the Conveyancing Act would not be applicable.

113 It follows that the present suit cannot be properly constituted without the assignors being parties.

114 The problem that presents itself is whether the right of a beneficiary under this Trust at its present stage is something which can be assigned?

115 I believe that it is useful to start with the case of a discretionary trust, even though the present is not a discretionary trust. Although there is very little learning on the point, the better view is that one cannot assign one's interest as a possible object of a discretionary trust in such a way as to give the assignee the benefit accruing to the object of the trust in the form of appointed property; see Grbich and others Winding Up Trusts (CCH, Sydney, 1984) p 56. At the most, what would be able to be assigned would be the right to have the Fund properly administered. That is the right to apply to a court of equity to have the Fund properly administered.

116 It is clear that a bare right of action cannot be either a chose in action or assignable under s 12 or otherwise; see eg Glegg v Bromley [1912] 3 KB 474 and Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101, 120. The test is, in the words of Parker J in Glegg's case at p 490, "Whether the subject-matter of the assignment was, in the view of the Court, property with an incidental remedy for its recovery, or was a bare right to bring an action either at law or in equity."

117 It follows that at least unless the trustee has committed an actual breach of trust or the Trust is at home, all that the beneficiary has is a right of action in equity. This is not the subject of an assignment.

118 There seems to be no provision made in the deed for assigning the right to receive a pro rata payment at the termination of the Trust. However, prima facie all species of property legal or equitable present or future can be assigned at least in equity. However, an assignment of a right to receive proceeds at the end of the Trust does not transfer the right to interfere with the Trust itself. An analogy is an assignment of a share in a partnership. Unless the partnership agreement makes special provision, an assignment of a partner's interest merely assigns the share of capital or income otherwise payable to the assignor. Although the assignment of the interest of a partner is now dealt with by s 31 of the Partnership Act 1892, that section is merely declaratory of the rules of law and equity before the Act was commenced.

119 The assignment of an interest in the partnership operates to assign the income and capital of the partnership in such a way as to make the partner a trustee of the assignee, but it in no way entitles the assignee to interfere with partnership affairs: Commissioner of Taxation v Everett (1980) 143 CLR 440. Furthermore in partnership it is clear that the assignee is bound to accept the account of profits as agreed by the original partners and the partnership books of account are conclusive in the absence of contrary agreement: Yuill v Kidman (1910) 11 CLR 601 and see Higgins and Fletcher, Law of Partnership in Australia and New Zealand 7th ed (LBC, Sydney, 1996) pp 67 and 68.

120 Thus, although the deed in the instant case purports to be an absolute assignment of all the legal and beneficial rights title and interests of the Speights, it operates only to transfer the ultimate interest in the Trust Fund.

121 It should be noted that the way the deed is drawn the ultimate benefit in the Trust Fund will not include any of the moneys that may be recovered from those responsible for the so-called Estate Mortgage debacle. All that will be left is what is left in the Fund after the action is completed or the Trust terminated, augmented if need be by any recovery from the present trustees of the Estate Mortgage Fighting Fund Trust.

122 As to amendments of trust deeds, there are various provisions of trust law which are so basic to the concept of a trust that a court of equity is loath to see them by-passed. These principles include:

(1) When a settlor parts with the trust property either by conveyance or declaration of trust the settlor thereby relinquishes all right title and interest in the trust property save and except that which is reserved to the settlor under the trust deed (Underhill and Hayton Law of Trusts and Trustees 15th ed (Butterworths, London, 1995) p 6).

(2) Up until the repeal of the Statute of Uses, the only effective way of reserving to the settlor any power to alter the trusts was to limit the trust property in such a way that the trustees held to the use of the settlor in certain circumstances or there were shifting uses to take effect on certain acts of the settlor. Unless the power given to the settlor was explicitly conferred to occur from time to time the power could be exercised once only.

(3) Essentially, a power to amend is part of the declaration of trust by the settlor which is to be construed along with all the other trusts in the document.

(4) It is difficult for a settlor to maintain that a power to amend or any other power which prima facie contradicts other trusts in the trust deed should be permitted because a subsidiary trust repugnant to the main trust will be considered to be void in equity.

(5) The exercise of a power to amend cannot affect any vesting which has already taken place. This is because the power to alter the trusts is itself an interest in the Trust and its exercise cannot affect an already vested interest.

(6) Subject to principle (5), if a trust deed is drafted in a sufficiently wide way a retrospective amendment will be valid: Gra-Ham Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65.

123 What happened in this particular Trust does not measure up particularly well against some of these principles.

124 There are also a series of other problems with this particular deed amongst which are:

(1) The trust deeds of 25 July and 3 August 1990 are not precisely in accordance with what was told to the people contributing money in the Hordern Pavilion and it was on the basis of what they were told at that meeting that they contributed their money on trust.

(2) The scheme of the deed is that the trustees make the amendment on the demand of the settlor, but at least one amendment was not so made because the trustees declined to do so and the settlor purported to put in new trustees and make a new trust deed.

(3) There are problems with the phrase "Unless all the beneficiaries agree" in clause 9.1. This has been interpreted by the settlor as meaning that if one beneficiary considers that the alteration does not prejudice the interests of the beneficiaries, then the stage can never be reached where all the beneficiaries agree that it does so. There would be good arguments for other constructions.

(4) The absence of the words "from time to time" in clause 9.1 and their presence in clause 9.2 may mean that there can only be one amendment to the deed and not subsequent amendments whenever the settlor thinks it appropriate.

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Last Modified: 02/15/2002