Hunt v. Summerharvest Pty Ltd & Anor

[2007] QSC 210

SUPREME COURT OF QUEENSLAND

CITATION:

Hunt v Summerharvest Pty Ltd & Anor [2007] QSC 210

PARTIES:

JOAN OLIVE HUNT

(applicant)

V

SUMMERHARVEST PTY LTD (ACN 010 679 311) AS TRUSTEE FOR THE SUMMERHARVVEST UNIT TRUST

(respondent)

FILE NO/S:

BS2273/07

DIVISION:

Trial division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

16 August 2007

DELIVERED AT:

Brisbane

HEARING DATE:

18 April 2007

JUDGE:

Moynihan J

ORDER:

1.  Application refused.

CATCHWORDS:

EQUITY – TRUSTS AND TRUSTEES – APPLICATIONS TO THE COURT ON ORIGINATING PROCESS – GENERAL MATTERS – where the court has inherent jurisdiction to supervise trusts - whether the respondent as trustee should produce for inspection and copying books of account and other documents.

Property Law Act 1974 (Qld) Pt 19
Uniform Civil Procedure Rules 1999 (Qld) Ch 7, Pt 2
Hayim v Citibank NA [1987] AC 730, considered.

In re Fields [1971] 1 WLR 555, considered.

Rogers & Ors v Wentworth & Anor (unreported NSWSC, Holland J, September 1981, 3288/81), considered.

COUNSEL:

KA Barlow counsel for the applicant.

N Ferrett counsel for the respondent.

SOLICITORS:

Piper Alderman for the applicant.

Jones & Company for the respondent.

1. MOYNIHAN J: The applicant (Joan Olive Hunt) seeks an order that the respondent (Summerharvest Pty Ltd as trustee for the Summerharvest Unit Trust) produce for inspection and copying books of account and other documents held by it as trustee from 1 July 1998 to 30 June 2005.

1. The applicant does not rely on any statutory right to advance the application but relies on general equitable principles reflecting the court’s inherent jurisdiction to supervise trusts summarised as follows:[1]

   [1] See applicant’s outline of argument dated 18 April 2007, paragraph 12.

(a)a beneficiary of a trust has a clear right to inspect the trustee’s records;

(b)even a contingent beneficiary (such as the object of a power under a discretionary trust) has a right to inspect the trustee’s records;

(c)the beneficiary of a trust (the “sub-trust”), the trustee of which is itself a beneficiary of another trust (the “head-trust”), may be entitled to inspect the records of the heat trust, particularly where the trustee of the sub-trust refuses to do so and to report to the beneficiary or has a conflict of interest.

1. The application is based on the following circumstances deposed to the applicant and other deponents in her case.  None of the deponents were cross-examined.  Much of the factual basis is contentious and these issues cannot be resolved on this application. 

1. The applicant was in a de facto relationship with Michael Robert Friend Streeten (Streeten) from May 1998 to August 2001 and has commenced proceedings against him under Pt 19 of the Property Law Act 1974 (Qld).[2]  Those proceedings are substantially concerned with, but are not confined to, the issues raised by the transactions giving rise to this application.[3]

   [2] See Hunt v Streeten, file number BS 7684 of 2003.

   [3] UCPR, Ch 7, Pt 2 - Non Party Disclosure is applicable in those proceedings.

1. The respondent conducted a wholesale fruit and vegetable business at the Brisbane Markets at Rocklea.  The applicant and Streeten acquired an interest in the respondent through a series of complex transactions.[4]   

   [4] Exhibit 1 – a copy is schedule 1 to these reasons.

1. Relevantly for present purposes, the applicant’s position can be summarised, at the risk of oversimplification, as follows:

·     During the relevant period the applicant owned 50 per cent of the units in the Jigsaw Unit Trust, the trustee of which is Kimor Services Pty Ltd (Kimor).  Kimor owned 50 per cent of the units in the respondent.  The applicant was also the owner of 50 per cent of the shares in Kimor.

·     The sole director and shareholder of Kimor and one of the directors of Summerharvest was Terry Williams (Williams) who held 50 per cent of the shares on trust for Streeten.

·     The applicant provided the security for the loan that Streeten obtained to buy into the business.  It may be accepted for present purposes that they agreed that she would, through the Jigsaw Unit Trust, be entitled to 50 per cent of Streeten’s share of the profits of the business.

·     As a consequence of these arrangements, the applicant claims to be entitled, as a beneficiary of the Jigsaw Unit Trust, to have an interest in the due administration of Summerharvest Unit Trust, the respondent.

·     The Jigsaw Unit Trust profits were nominally distributed, to the applicant from the 1999/2000 financial year they were paid to Hunt and Stretton in equal shares, reflecting their unit entitlements.  Kimor accounted for the distributions by appropriate entries in the accounts, including the beneficiaries’ loan accounts.

·     The applicant sold her interest in the Jigsaw Unit Trust, with effect from the end of the 2003/2004 financial year to Teraba Pty Ltd (Teraba) a company associated with Williams. 

·     Teraba is the owner of the other 50% of the units in the respondent.  Kimor sold its units in the respondent to Teraba.  Streeten and Hunt agreed that the sale proceeds would be paid to them separately in accordance with their respective agreements with Williams. 

1. The applicant has obtained access to the accounts of the Jigsaw Unit Trust.  Her and Streeten’s loan accounts reflect distributions treated as loans to Kimor as trustee.  Having reviewed these accounts, the applicant has noted apparent discrepancies affecting her interest, particularly relating to distributions made to her. 

1. The applicant contends that there are discrepancies in accounts as to the following:[5] 

   [5] See applicant’s outline of argument dated 18 April 2007, paragraph 9.

(a)         The Jigsaw Unit Trust accounts should have reflected an entry in 2003 that was supposed to equalise unequal distributions that had         been made in the 1998/1999 financial year in favour of Mr Streeten.  The draft accounts for the 2003 year (p. 152 of the exhibits to the applicant’s affidavit) show such an entry.  Signed accounts (which were only signed in August 2005, after the applicant asked for them) do not have such an entry and, on the contrary, show an adjustment in Mr Streeten’s favour (exhibits p. 207).

(b)    There are material differences between the accounts and the income tax return for the Summerharvest Unit Trust and between the accounts of the Summerharvest Unit Trust and the Jigsaw Unit Trust in the 2004 year, in that:

(i)   the tax return shows a profit of $111,190 and a distribution         to the Jigsaw Unit Trust of $55,595 (exhibits, pp.294,297);    but

(ii)the Summerharvest Unit Trust accounts show a loss of $3,702, after deducting from income an alleged bad debt of $70,583 and alleged holiday pay and long service leave of $44,309 (exhibits pp.287-288);

(iii)the Summerharvest Unit Trust accounts show no profit distribution to the Jigsaw Unit Trust and an outstanding loan balance due to the Jigsaw Unit Trust of $42,529 (p.291);

(iv)The accounts for the Jigsaw Unit Trust show no income in that year (p.213) and a loan due from the Summerharvest Unit Trust of only $20,659 (p.217).

1. The applicant contends that Kimor is controlled by Streeten who is a director of the respondent and controls 50 per cent of its shares.  She has been disadvantaged to the benefit of Streeten in the conduct of both trusts and therefore Streeten and Kimor have a conflict of interest – it is not in Streeten’s interest to assist the applicant.

1. As a consequence the applicant, it is contended, has reason to believe that she may have the following causes of action:[6]

(a)    against Kimor and Mr Streeten, for payment of her loan account and of any distributions that ought to have been made to her but were made to Mr Streeten;

(b)    against Summerharvest, if it has wrongly manipulated its accounts in order to deprive her of the benefit of a distribution from the Summerharvest Unit Trust  to the Jigsaw Unit Trust.

[6] Ibid, paragraph 10.

1. The applicant has retained a forensic accountant to investigate her concerns and to provide an expert report on the accounting treatment of certain transactions reflected in the transactions in [6] involving the respondent, Kimor and Jigsaw Unit Trust.  The accountant deposes that he is unable to fulfil his obligations as an expert accounting witness without the information the subject of this application. 

1. There are, in my view, a number of obstacles in the applicant’s path to the relief sought.  The applicant is not a beneficiary of the respondent.  Her rights arise from her status as a unit holder in the Jigsaw Unit Trust which, it must be established, was obliged to make a distribution, that is a contentious issue.  The respondent has not specified any specific power breached.

1. The applicant’s complaint, on the facts in evidence, seems to be confined to the 2004 financial year.  The respondent says that the application is an abuse of process.  It is too wide and it deals with issues already before the court in action BS7684/03.  The respondent’s complaints are general. 

1. The applicant’s claim to interest in the due administration of the Summerharvest Unit Trust as a beneficiary of the Jigsaw Unit Trust, in my view, is not supported by Rogers & Ors v Wentworth & Anor.[7]

   [7] (unreported NSWSC, Holland J, September 1981, 3288/81).

1. Kimor, as a beneficiary of the Summerharvest Unit Trust, it is contended has a right to seek an order directing the furnishing of accounts in circumstances of, for example, a clear conflict of interest and obligation in the trustees what is conveniently referred to as the sub trust.  It is not clear that this is so.

1. Whether there has been any breach of trust is contentious.  Weight to the proposition that a substantial case is important to the foundation of an application such as this is provided by In re Fields.[8] 

   [8] [1971] 1 WLR 555, 560.

1. In Hayim v Citibank NA[9] the Privy Council reviewed the authorities relevant to the circumstances in which a beneficiary might sue on a cause of action accruing to a trustee.  A trustee’s refusal is not sufficient to found a claim for relief, a trustee for example might have properly decided there was no substance to the claim.  In any event cases such as Hayim suggest that a beneficiary’s entitlement to sue on a cause of acting accruing in a trustee is an exception founded on special circumstances. 

   [9] [1987] AC 730.

1. In my view the respondent’s submission that Rogers & Ors v Wentworth & Anor[10] follows a line of authority establishing that in special circumstances a beneficiary might sue on a legal right held by the trustee.  It does not support an interest in the due administration of the respondent trust so as to found the relief sought.

   [10] (unreported NSWSC, Holland J, September 1981, 3288/81).

1. Special circumstances giving rise to a cause of action may arise from a trustee failing to protect the trust estate, or a beneficiary’s interest.  In those circumstances however a beneficiary is in no better position to sue a third party than the trustee.[11]

   [11]Hayim v Citibank NA [1987] AC 730, 747-748.

1. In this case, as I have said whether special circumstances arise is contentious and cannot be resolved in this application.

1. It follows that, in my view, Rogers & Ors v Wentworth & Anor[12] does not provide a basis for concluding that the applicant has standing to bring this application.  If it did the factual basis for there being special circumstances founding intervention are contentious and cannot be resolved in this application.

   [12] (unreported NSWSC, Holland J, September 1981, 3288/81).

1. There is moreover a point to the respondent’s submission to the effect that the relief is too widely framed and that the issue as to the applicant’s entitlement for payment of her loan account and as to Streeten and others wrongful manipulation are in issue in action BS7684/03 and should be pursued there.  Those proceedings have been on foot for a number of years.

1. The respondent raises, as a matter of discretion, that the applicant, who was the bookkeeper of the relevant accounts during the period in respect of which relief is sought, has given no explanation for delay. 

1. Moreover it is submitted that the applicant’s claim is essentially for breach of contractual arrangements entered into between her and Streeten.  Since limitations in equity follow the common law the plaintiff is outside the six year limitation period.[13]  These points are not without merit but on the view I take of the matter it is unnecessary to rely on them.

   [13] Lexis Nexis Butterworths, Equity Doctrines and Remedies (4^th ed, 2002), [34075].

1. In my view the applicant has not made out a case of standing to bring the application.  The case of a breach is not strong nor is that for special circumstances if that arises for consideration.

1. I refuse the application.

SCHEDULE ONE