Halford v Halford [No 2]
[2018] WASC 303
•5 OCTOBER 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: HALFORD -v- HALFORD [No 2] [2018] WASC 303
CORAM: ALLANSON J
HEARD: 7 AUGUST 2018
DELIVERED : 5 OCTOBER 2018
FILE NO/S: CIV 2106 of 2016
BETWEEN: KAI PHILLIP HALFORD
Plaintiff
AND
JEFFREY GEORGE HALFORD
First Defendant
PAMELA DOROTHY HALFORD
Second Defendant
EWART EVAN HALFORD
Third Defendant
Catchwords:
Practice and procedure - Application for judgment on admission in pleadings - Where money held in trust pursuant to agreement pending determination - Whether proper exercise of discretion
Legislation:
Rules of the Supreme Court 1971 (WA), O 30 r 3
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr M L Bennett |
| First Defendant | : | Dr P R MacMillan |
| Second Defendant | : | Dr P R MacMillan |
| Third Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | Bennett + Co |
| First Defendant | : | Pacer Legal |
| Second Defendant | : | Pacer Legal |
| Third Defendant | : | No appearance |
Case(s) referred to in decision(s):
Chief Commissioner of Stamp Duties for New South Wales v Buckle [1998] HCA 4; (1998) 192 CLR 226
Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298
In the Matter of the Trade Marks Act 1955-1958 and In the Matter of Registered Trade Marks 'Certina' and 'Certina DS' (1970) 44 ALJR 191
Moon v Mun [2013] NSWCA 217
Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360
ALLANSON J:
The plaintiff brings this application for judgment on admissions, pursuant to O 30 r 3 of the Rules of the Supreme Court 1971 (WA).
The plaintiff, the first defendant and the third defendant are brothers. The second defendant is the first defendant's wife.
Until the death of their father in 1996, the plaintiff and the first defendant were members of the Halford Bros Partnership. The other partners were their parents (Mr and Mrs Halford) and two companies. Halford Bros Partnership carried on a farming business at two properties, Glen Iris Farms and Credo Station.
By his will, Mr Halford bequeathed his property on trust for Mrs Halford for life, and after her death for such of his children as survived him as tenants in common in equal shares.
These proceedings stem from a dispute between the plaintiff and the defendants about the plaintiff's entitlements following the death of Mrs Halford.
Only the first and second defendants participated in this application, and I refer to them collectively as 'the defendants'.
The claim
For the purposes of these reasons, it is not necessary to detail the relatively complicated claim brought by the plaintiff. Some specific elements of the claim are:
(1)in 1999, Mrs Halford, as trustee of the Trust, appointed the first defendant as a trustee;[1]
(2)the first defendant accepted the appointment;[2] and
(3)from 1999, the first defendant took upon himself and assumed the role of trustee with respect to the Glen Iris Farms Properties and, if not validly appointed, became a trustee de son tort with respect to those properties.[3]
[1] Statement of claim [23].
[2] Statement of claim [24].
[3] Statement of claim [25] ‑ [26].
The plaintiff alleges various breaches of trust.
He further alleges that, from the death of Mrs Halford in September 2014, the first defendant was the sole trustee of the trust, alternatively, took upon himself and assumed the role of sole trustee.[4]
[4] Statement of claim [31] ‑ [33].
In par 34, the plaintiff pleads:
… upon Mrs Halford's death, the plaintiff became absolutely beneficially entitled to a one-third share of the Glen Iris Farms Properties as tenant in common with the first defendant.
In September 2015, the first defendant entered two contracts for the sale of the Glen Iris Farm Properties. The contracts settled in February 2016.[5]
[5] Statement of claim [36] ‑ [37].
The plaintiff claims to be entitled to $1,541,970.94 - the amount of one third of the net sale price of the Glen Iris Farm Properties, after payment of costs and expenses associated with the sale.[6]
[6] Statement of claim [42].
The first defendant used the net proceeds of sale to pay the mortgage debt on the properties and to pay to the plaintiff an agreed amount of rent.[7]
[7] Statement of claim [43].
At [45], the plaintiff pleads:
Prior to settlement of the Contracts for Sale, it was agreed between the plaintiff and the first defendant that the first defendant would cause the balance of the net proceeds after payment of the mortgage debt to be paid into an interest-bearing trust account held by the first defendant's solicitors … pending determination of the plaintiff's and the first defendant's respective beneficial interests in those monies.
The plaintiff claims that the first defendant did not pay the whole of the amount into the trust account, but deducted an amount.[8]
[8] Statement of claim [47].
The plaintiff claims that he is beneficially entitled to the entire sum held in the trust account as well as other relief.
The defence
For the purposes of this application, it is only necessary to deal with limited aspects of the defence.
First, the defendants do not admit that the first defendant was appointed trustee, or that he took upon himself and assumed the role of trustee, and do not admit that on Mrs Halford's death the first defendant became sole trustee or took upon himself and assumed the role of sole trustee.[9] The defendants admit that the Glen Iris Farm Property was registered in the name of Mrs Halford jointly with the first defendant, and after her death was registered in his name.[10]
[9] Defence [17] ‑ [20].
[10] Defence [19] ‑ [20], [35] ‑ [36].
In response to [34] of the statement of claim, the defendants plead:
In the premises the first and second defendants:
(a)say that the plaintiff became absolutely beneficially entitled as a tenant in common with the first defendant to a one-third share of the property of the Trust subject to the encumbrances pleaded in paragraph 6 hereof;
(b)say that the first defendant became absolutely beneficially entitled as a tenant in common with the plaintiff to a two-thirds share of the property of the Trust subject to the encumbrances pleaded in paragraph 6 hereof;[11]
and otherwise deny the further allegations in paragraph 34 of the SSOC.
[11] Defence [38].
The defendants admit the agreement pleaded in the statement of claim.[12]
[12] Defence [44].
The application for judgment
On those pleas, the plaintiff applies for orders:
1.The plaintiff is beneficially entitled to an amount equal to a one-third share of the property of the Trust (as defined in the plaintiff's substituted statement of claim dated 3 November 2017), comprising the net proceeds of the sale of Glen Iris Farms held in Pacer Legal's trust account, together with the interest income accrued thereon during the period that those funds have been held by Pacer Legal in a controlled monies trust account.
2.One-third share of the net proceeds of the sale of Glen Iris Farms held in Pacer Legal's trust account, together with the interest income accrued thereon during the period that those funds have been held by Pacer Legal in a controlled monies trust account, be paid to the plaintiff.
3.The first and second defendants pay the plaintiff's costs of the application to be taxed if not agreed
Two questions arise on an application for judgment on admissions. First, has the defendant made a clear and unambiguous admission that the plaintiff is entitled to the judgment he claims. Second, the power to order judgment on admissions being discretionary, would the order sought by the plaintiff be a proper exercise of the power.[13]
[13] Moon v Mun [2013] NSWCA 217 [40] ‑ [44].
In the present matter, the admission is made on the pleadings, so no question arises whether the court accepts or rejects evidence of the alleged admission.
In opposing the application, the defendants do not submit that the admission was made under a misapprehension about the relevant facts, or that there is some other reason why the court should not accept that the admission states truly the matter admitted. They rely, in substance, on three matters.
First, having regard to the agreement pleaded in the statement of claim [45], and admitted, it would not be an appropriate exercise of the court's discretion to order that any part of the funds be disbursed before the court has resolved the dispute as to the beneficial entitlements of both the plaintiff and the first defendant to those funds.
Second, from the commencement of the proceedings until 2 November 2017, the first defendant was sued in his capacity as trustee and incurred costs during the period which he paid from his own resources. The first defendant has an arguable claim to reimbursement of those costs, and an equitable lien or charge over the trust assets for that purpose.[14] That charge or lien has precedence over the claims of the beneficiaries and may affect the quantum of assets available for distribution. As a result, the amounts payable to the plaintiffs and first defendant cannot, at present, be ascertained.
[14] Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360, 367; Chief Commissioner of Stamp Duties for New South Wales v Buckle [1998] HCA 4; (1998) 192 CLR 226 [47] - [50].
Third, the partial judgment would not result in saving of time or expense. The plaintiff claims the whole of the funds in the account, and other relief. The only thing that will change is the amount held in trust pending judgment.
The plaintiff accepts that the partial judgment will not substantially alter the length or complexity of the trial. But he submits that, as a result of the admission, the beneficial interest of the plaintiff in one third of the funds in the account has been determined. No evidence would be admissible at trial as to the facts admitted.
The plaintiff submits that he continues to be kept out of the use of money rightfully his and as to which there is no dispute. The effect of the defendants' position is to hold the funds in the trust account as security for the unquantified claim for costs thrown away and a contingent claim for the costs of the action.
Disposition
The power to grant judgment on admissions should be exercised with great caution and only in a clear case.[15]
The power to award judgment on admissions on the pleadings is properly exercisable only where the court can see that a clear and unanswerable case is advanced on the pleadings, with the position so decisively depicted and the correct outcome so unambiguously obvious that there is simply no need for any issue to go to trial. The evaluative question relevant to exercise of the discretion is whether it is just to award judgment without regard to the merits of the parties' contentions.[16]
[15] In the Matter of the Trade Marks Act 1955-1958 andIn the Matter of Registered Trade Marks 'Certina' and 'Certina DS' (1970) 44 ALJR 191, 192.
[16] Moon v Mun [43] (Basten JA).
The admission is clear that the plaintiff is entitled to one third of the property of the trust, subject to specified encumbrances (none of which is relevant).
The defendants' reliance on the trustee's right to indemnification from the trust assets is, of course, at odds with their non-admission that the first defendant was a trustee. The parties did not address whether a person who assumes the role of trustee is entitled to indemnification out of the trust assets for expenses incurred in good faith. I am not aware of any authority on the point, although there is a body of authority on whether just allowance should be made to an 'errant fiduciary'.[17] This application is not the occasion to consider whether the first defendant acted honestly and in good faith. My preliminary view is that the first defendant is not necessarily denied reimbursement for any expenses he honestly incurred in defending the claim while he was sued as a trustee. That amount cannot now be quantified, but it is likely to be considerably less than the funds held.
[17] See generally Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; (2003) 56 NSWLR 298 [311] ‑ [336].
Counsel for the plaintiff sought to overcome this objection by suggesting that the court make an allowance for possible costs of the first defendant as trustee and order that part only of the amount claimed be paid.
I am not, however, satisfied that is the proper course to follow. On the matters pleaded, and not in issue, the plaintiff is entitled to a one third share of the property of the trust. But by agreement of the parties,[18] the whole amount is held pending determination of the parties' respective beneficial interests in those monies. That requires a determination of what is the net amount available for distribution, and I am not satisfied that costs properly incurred by the first defendant while defending the matter as trustee would not first be deducted. Whether the first defendant did act properly and reasonably will need to be considered.
[18] Pleaded in statement of claim [45].
It is also at least arguable that the agreement pleaded in statement of claim [45] requires the money to be held until the whole of the claim has been determined. Only then will the respective beneficial interests of the parties be known.
I also take into account that the orders sought by the plaintiff would not reduce the issues for trial, or the length or complexity of any hearing.
For those reasons, I am not satisfied this is an appropriate case for the exercise of the power to order judgment on admissions and, in my discretion, I would refuse the application.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ZW
ASSOCIATE TO THE HONOURABLE JUSTICE ALLANSON5 OCTOBER 2018
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