Hunter Water Corporation v Landmarque Holdings Pty Ltd

[2021] NSWSC 1233

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Hunter Water Corporation v Landmarque Holdings Pty Ltd [2021] NSWSC 1233

Hearing dates:

28 September 2021

Date of orders:

28 September 2021

Decision date:

28 September 2021

Jurisdiction:

Equity - Real Property List

Before:

Kunc J

Decision:

Declarations and consequential orders made

Catchwords:

EQUITY — Trusts and trustees — Powers, duties, rights and liabilities — Indemnity, lien and reimbursement — Resulting trustee to sell trust property instead of receiver to enforce trustee’s lien

Legislation Cited:

Land Acquisition (Just Terms Compensation) Act 1991 (NSW)

Trustee Act 1925 (NSW)

Cases Cited:

Calverley v Green (1984) 155 CLR 242; [1984] HCA 81

Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4

Davies v Littlejohn (1923) 34 CLR 174

Iscorp Investments Pty Ltd v Yohana [2011] NSWSC 1387

Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61

Category:

Principal judgment

Parties:

Hunter Water Corporation (Plaintiff)

Landmarque Holdings Pty Ltd (First Defendant)
Hunter Valley Estates Pty Ltd (Second Defendant)
Hanham Management Pty Ltd (Third Defendant)
Errol Investments Pty Ltd (Fourth Defendant)
Christopher Meredith (Fifth Defendant)
Anthony Meredith (Sixth Defendant)
Ian Meredith (Seventh Defendant)

Representation:

Counsel:

L T Livingston (Plaintiff)

Solicitors:

Clayton Utz (Plaintiff)

File Number(s):

2021/196946

Publication restriction:

No

Judgment

Summary

1. The plaintiff, Hunter Water Corporation (Hunter Water), is the registered proprietor of a parcel of land at Rothbury in the Hunter Valley (the Land). Hunter Water purchased the Land with funds provided by the first defendant, Landmarque Holdings Pty Ltd (Landmarque).

2. Hunter Water has brought these proceedings for declarations and related relief to identify the beneficial ownership of the Land and, in effect, to enable the Land to be sold so that Hunter Water can recoup its costs incurred in holding the Land.

3. For the reasons which follow, the Court is satisfied that Hunter Water holds the Land for Landmarque on resulting trust and is entitled to relief, albeit on terms contained in an undertaking to the Court as to the sale process for the Land. I acknowledge with gratitude the assistance which the Court has received from the clear and comprehensive written and oral submissions of Mr L T Livingston of Counsel, who appeared for Hunter Water, which as I will next explain was the only active party in the proceedings.

The parties

4. As it was properly bound to do, Hunter Water sought to identify and join as a defendant to these proceedings any party who may have an interest in the Land. That is why there are seven named defendants to the Summons. The Court is satisfied that each of those defendants was properly served. None of those defendants has formally appeared, whether by submitting appearance or otherwise. Nevertheless, each of them has disavowed an interest in the Land or these proceedings (subject only, perhaps, to what I have recorded in [14] – [15] as to the position of the seventh defendant).

5. Ms Susan Devereaux is a director of both Landmarque and the second defendant, Hunter Valley Estates Pty Ltd. By email dated 4 August 2021 to Hunter Water’s solicitor, Ms Deveraux wrote:

“Having now carefully considered the Summons served on LH and HVE and your affidavit in support, both LH and HVE concede that they have no interest in the Land (as defined in the Summons) or any entitlement to the Resumption Money (as also defined in the Summons).

Accordingly, and on the agreed basis that Hunter Valley Water Corporation does not and will not seek a costs orders [sic] against LH and HVE in respect to its costs of and incidental to the Summons, LH and HVE take no position in relation to the Summons, will not appear in response to the Summons and assert no rights in relation to the Land or the Resumption Money.”

6. The Court accepts Mr Livingston’s submission that it is not bound by Ms Devereaux’s apparent concession that Landmarque does not have an interest in the Land. For the reasons which follow, the Court has concluded that Landmarque is the beneficial owner of the Land.

7. The third defendant is Hanham Management Pty Ltd. On 13 July 2021, Ms Vivienne Hanham wrote to Hunter Water’s solicitor:

“Hanham Management has no intention of claiming any part of this monies or lands.

We acquired this Company after this transaction originally entered into by the old director”.

8. The fourth defendant is Errol Investments Pty Ltd. It currently has a caveat registered over the Land. On 13 May 2021, a representative of the holding company of Errol Investments Pty Ltd wrote to the solicitor for Hunter Water:

“Errol Investments does not wish to make a claim in relation to the land in Rothbury.”

9. Based on that response, the Court will order the fourth defendant to withdraw its caveat over the Land.

10. The seventh defendant is Mr Ian Meredith. His two sons are the fifth and sixth defendants. At the time Hunter Water purchased the Land, the Meredith family had an interest in Landmarque. Mr Livingston informed the Court that there was evidence which suggested that another company controlled by the Meredith family had advanced funds to Landmarque which were used by the latter to fund Hunter Water to purchase the Land.

11. The evidence included a series of emails between Mr Ian Meredith and the solicitor for Hunter Water. These include an email from Mr Meredith in which he stated:

“I therefore withdraw any ongoing involvement in this matter, and I assume HVWC will sell Lot 21 on the open market.”

12. In a later email, Mr Meredith said:

“I have decided that I will be filing a submitting appearance and Chris and Anthony [the fifth and sixth defendants] will be filing same.”

13. No submitting appearances were filed. By email on 15 July 2021 to Hunter Water’s solicitor, Mr Meredith said:

“Have spent further time reading the summary of events to date re HWC and Lot 21 Rothbury, N.S.W., and I’ve decided not to proceed any further with submitting appearance form.

I assume in due course I will be notified of the Court’s decision as to the rightful owner.”

14. Finally, two business days before the present hearing, on 24 September 2021 at 5.05pm, Mr Meredith emailed my chambers. My chambers subsequently forwarded Mr Meredith’s email to the other parties. At the conclusion of his email, Mr Meredith said:

“We, the Meredith’s, look forward to receiving confirmation, once vesting orders in relation to the HW Land have been determined by the Supreme Court of NSW, that any net financial benefits from the sale of Lot 21, in DP XXXXX , (the HW Land) flow to us.”

15. It is because Mr Meredith’s last sentence can be read as suggesting a nascent dispute in relation to who is entitled to the net proceeds of any sale of the Land that the orders which the Court will make will include a further opportunity for both Landmarque and Mr Meredith to be heard on that question if they wish.

Legal principles

16. Hunter Water’s application depends upon these basic principles of equity and trusts:

1. If someone advances the purchase price for a property which is registered in the name of another, that other will be presumed to hold the property upon resulting trust in favour of the person who provided the purchase price: Calverley v Green (1984) 155 CLR 242; [1984] HCA 81.

2. A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee’s trust or powers: s 59(4), Trustee Act 1925 (NSW).

3. A trustee who incurs liabilities in the discharge of his or her trust is entitled to be indemnified against those liabilities from the trust assets which he or she holds, and for the purposes of enforcing the indemnity, the trustee has an equitable lien over those assets: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61.

4. The right of indemnity extends to resulting trusts: Iscorp Investments Pty Ltd v Yohana [2011] NSWSC 1387 at [39] per Rein J.

5. “A court of equity may authorise the sale of assets held by the trustee so as to satisfy the right to reimbursement or exoneration. In that sense, there is an equitable charge over the “trust assets” which may be enforced in the same way as any other equitable charge”: Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4 at [50].

Consideration

17. The evidence makes clear, and the Court finds, that Hunter Water purchased the Land at the request of Landmarque and with the entirety of the purchase price (including incidental costs) provided by Landmarque. The position is concisely summarised in this letter from Hunter Water’s legal officer to the development project manager of Landmarque on 27 June 1990:

“Please find attached the Board’s receipt for the funds forwarded by Telegraphic Transfer on Thursday 14 June 1990.

Settlement of the land transfer took place on Friday 15 June 1990.

This now completes the Board’s undertaking to your Company to purchase the subject land.”

18. There is nothing in the evidence in relation to the circumstances in which Hunter Water purchased the Land that would rebut the presumption that the Land is held by Hunter Water on resulting trust for Landmarque. This means that at all material times Landmarque was and remains the beneficial owner of the Land. While nothing turns on it, I note for completeness that when Hunter Water purchased the Land it was under old system title but has since been converted to Torrens title.

19. There is evidence that Hunter Water has incurred land tax and council rates on the Land since it was purchased in 1990 up to 22 June 2021 totalling $222,878.72. Those costs, and any other such costs incurred before the Land is sold, are costs in respect of which Hunter Water is entitled to be indemnified against the Land as costs incurred as resulting trustee. Other such costs will include legal fees and other liabilities incurred by Hunter Water in relation to the Land (including inquiries about the beneficial ownership of the Land and the costs of the present application on the indemnity basis), costs properly incurred incidental to the sale of the Land, and any other taxes or duties incurred by Hunter Water as the legal owner of the Land. On any sale of the Land, on the evidence before the Court, Landmarque is entitled as beneficial owner to payment of the balance of the sale proceeds after payment to Hunter Water of those various costs.

20. Before turning to the question of sale of the Land, I record one other matter. In February 2004, part of the Land was resumed by the Roads and Traffic Authority for use as a public road, in respect of which $53,000 is held by NSW Treasury in relation to the resumption (the Resumption Moneys). Under s 37 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), the entitlement to compensation is vested in the “owner” of the land, which is defined by s 4 to be “any person who has an interest in the land”. As the legal owner of the Land, Hunter Water is entitled to the Resumption Moneys, but subject to its obligations as resulting trustee to Landmarque. While a declaration could be made that Landmarque is, as the beneficial owner, entitled to the Resumption Moneys, the most straightforward course is to declare that Hunter Water is entitled to the Resumption Moneys, which may then be applied by it towards its right of indemnity and exoneration as resulting trustee of the Land.

21. Finally, how should the Land be sold to enable Hunter Water to enforce its equitable lien and satisfy its entitlement to an indemnity for its costs and expenses incurred as resulting trustee?

22. The proposed short minutes of order propounded by Hunter Water included:

“Order pursuant to s 71(2)(o) of the Trustee Act 1925 (NSW) that the plaintiff’s estate in fee simple, as registered proprietor, in the Land be vested in [Landmarque], subject to satisfaction of the plaintiff’s right of indemnity referred to in order 6 below.”

23. During the course of argument, I indicated to Mr Livingston that the Court would not be prepared to make such an order for two reasons. First, and most importantly, the order would be uncertain in its terms, not least because it would not be clear on its face as to when the Land vested in Landmarque. Second, it would be an unnecessary departure from the way in which an equitable lien is usually enforced, being by a declaration of the existence of the lien with the appointment of a receiver to sell the land over which the lien exists: see, for example, Davies v Littlejohn (1923) 34 CLR 174 (albeit in that case referring to a vendor’s lien).

24. However, in the circumstances of this case, it did not seem to me to be in the interests of anyone, not least Landmarque as beneficial owner, for more costs to be incurred by appointing a receiver to sell the Land. The relevant circumstances are that, first, the plaintiff is a public utility and, second, there is evidence that even just the land tax and council rates that have been incurred by Hunter Water represent a very substantial proportion of the value of the Land. In the interests of minimising the further costs to be incurred, instead of the usual course of appointing a receiver, the Court will make declarations and orders to give effect to these reasons upon an undertaking to the Court by Hunter Water to the effect that it will sell the Land by an open, arm’s length process and disburse the proceeds in accordance with these reasons.

Orders

25. The orders of the Court are:

“Upon the undertaking given by the plaintiff, through its Counsel, to the Court, as set out in the Schedule to these orders, the Court orders as follows:

1.   Declare that the plaintiff, as trustee, holds on resulting trust for the first defendant, as beneficiary, the land comprising Lot 21 in DP XXXXX XX in Rothbury, Hunter Valley, New South Wales (“Land”).

2. Declare that the plaintiff is entitled to the payment of funds from the Consolidated Fund under ss 37 and 51(5) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), in respect of the resumption by the Roads & Traffic Authority of part of the Land on 13 February 2004 (“Resumption Money”).

3. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the caveat having dealing number XXXXX XXT, and lodged by the fourth defendant in respect of the Land, be withdrawn by the fourth defendant no later than 19 October 2021.

4.   The plaintiff is entitled to its costs of the proceedings, on an indemnity basis, such costs to be paid out of the assets held on trust (being the Land and the right to the Resumption Money).

5.   Declare that the plaintiff is entitled to indemnity, out of the assets held on trust (being the Land and the right to the Resumption Money), for the following costs and expenses:

(a)   council rates;

(b)   land tax;

(c)   the costs of obtaining legal advice regarding the competing claims of beneficial ownership in the Land and the costs of corresponding with those making such claims;

(d)   the plaintiff’s costs of these proceedings in accordance with order 4 above;

(e)   the costs of sale of the Land; and

(f)   any taxation, duty or other impost consequent upon the ownership or sale of the Land;

(collectively, “Indemnity Entitlement”).

6.   Direct the plaintiff to give notice of these orders and a copy of the Court’s reasons, by email, forthwith to the first defendant and the seventh defendant.

7.   Reserve liberty to the first defendant and to the seventh defendant to apply to the Court, by email to the Associate to Kunc J, on or before 19 October 2021, in the event that they wish to be heard in relation to the terms of these orders or of the undertaking contained in the Schedule to these orders.

8.   Reserve liberty to the plaintiff to apply to the Court, by email to the Associate to Kunc J, in relation to the implementation of these orders or of the undertaking contained in the Schedule to these orders.

9.   Direct that these orders be entered forthwith.

Schedule

The plaintiff undertakes to the Court that it will sell the Land on the open market, in an arm’s-length transaction, whether by public tender, by expression of interest or by public auction, and then to apply the sale proceeds as follows:

(a)   first, to pay the third-party costs of selling the Land;

(b)   secondly, to apply the Resumption Money in reduction of its Indemnity Entitlement and thereafter to apply the sale proceeds to pay to itself the remaining Indemnity Entitlement; and

(c)   thirdly, to pay the net balance of the sale proceeds to the first defendant.”

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Amendments

29 September 2021 - Jurisdiction changed to Equity - Real Property List

Decision last updated: 29 September 2021