Jackson v Jackson
[2000] QCA 322
•8 August 2000
SUPREME COURT OF QUEENSLAND
CITATION: Jackson v Jackson & Anor [2000] QCA 322 PARTIES: KELLIEGH MARIE JACKSON
(applicant/appellant)
v
COLLEEN MARGARET JACKSON
(respondent)
MICHELLE LEANNE JACKSON
(respondent)FILE NO/S: Appeal No 9538 of 1999
SC No 575 of 1999DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Townsville
DELIVERED ON: 8 August 2000 DELIVERED AT: Brisbane HEARING DATE: 20 July 2000 JUDGES: Davies and Thomas JJA, Mullins J
Judgment of the CourtORDER: The appeal is allowed. The order below is set aside and in its place it is ordered as follows:
1. Leave to appeal against the award of the arbitrator is granted;
2. The appeal is allowed;
3. The order below is set aside and in lieu it is ordered that the award be varied by deleting paragraph 43(a) thereof and in lieu stating that Kelliegh Marie Jackson is entitled to a one-third interest in the partnership known as Bakers Creek Car Wreckers and Panel Shop and the associated real property;
4. The appellant recover from the partnerships one-half of her legal representatives' costs of the arbitration, one-half of her costs of the proceedings before the chamber judge and one-half of her costs of this appeal assessed on a party and party basis;
5. The respondents recover from the partnerships the costs of their legal representatives in the conduct of the arbitration and of the application filed in the Townsville registry on 27 July 1999 and of this appeal as assessed on the standard basis.
CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL - GENERAL PRINCIPLES – POINTS AND OBJECTIONS NOT TAKEN BELOW – WHEN ALLOWED TO BE RAISED ON APPEAL – OTHER MATTERS - whether point raised below – relevance to costs
APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – INTERFERENCE WITH JUDGE’S FINDINGS OF FACT – FUNCTION OF APPELLATE COURT – WHERE FINDINGS CLEARLY WRONG - whether misconduct by arbitrator who fails to fully determine dispute
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSIDERATION – WHAT AMOUNTS TO CONSIDERATION – GENERAL
EQUITY – TRUSTS AND TRUSTEES – CONSTITUTION AND CLASSIFICATION OF TRUSTS GENERALLY – CLASSIFICATION OF TRUSTS IN GENERAL – IMPLIED TRUSTS – RESULTING TRUSTS – WHERE INTENTION PRESUMED - REBUTTAL OF PRESUMPTION – PRESUMPTION OF ADVANCEMENT – arbitration of dispute relating to interest in partnership assets – transfer of interest in partnership and in two lots of land by respondent/mother to appellant/daughter – whether gift or carrying out of contract – arbitrator holding respondent’s intention to be that no beneficial interest would pass until her death and declared that appellant held no beneficial interest – whether award inconsistent with findings – prior agreement between parties supported by consideration – transfers gave effect to it – no basis for resulting trust - failure to give effect to agreement an error of law
PARTNERSHIP – GENERALLY – WHAT CONSTITUTES PARTNERSHIP – FACTS AND AGREEMENTS EVIDENCING PARTNERSHIP – PARTNERSHIP IN FACT – OTHER MATTERS
Commercial Arbitration Act 1990 (Qld), s 38, s 42
Calverly v Green (1984) 155 CLR 242, considered
Nelson v Nelson (1995) 184 CLR 538, considered
COUNSEL: D B Fraser QC with M E Pope for the applicant/appellant
P E Hack for the respondentsSOLICITORS: Connolly Suthers (Townsville) for the applicant/appellant
Bill Cooper & Associates (Mackay) for the respondents
THE COURT: The appellant, Kelliegh Jackson, appeals against the order of a Supreme Court judge refusing leave to appeal[1] against an arbitrator's award and against his dismissal of an alternative claim to have the award set aside for misconduct of the arbitrator[2].
[1]Commercial Arbitration Act 1990, s 38(2).
[2]ibid s 42.
Initially the appellant commenced proceedings in the Supreme Court for dissolution of partnerships between her and the respondents. She then filed a motion for the appointment of a receiver and manager. Further court proceedings were averted by the parties entering into an arbitration deed. The dispute which an arbitrator was appointed to decide was defined as a determination of:
"the nature and extent of the plaintiff's interest in partnerships (between the parties hereto whether in their own capacities or as trustees or beneficially) known as Jackson Spare Parts, Baker's Creek Car Wreckers and Panel Shop and any other partnership, trust or arrangement between the plaintiff and the defendants including any property whether real or personal acquired by the defendants with property of any of the partnerships."
There was and is little contention in relation to the partnership known as Jackson Spare Parts. Since the early 1980s Colleen Jackson held a five-ninths interest in Jackson Spare Parts and her daughters Kelliegh and Michelle had each held a two-ninths interest. The arbitrator determined that the appellant's interest in it was of a present value of $166,940.50 and that she was also entitled to a further small interest in an associated service company. The main contention was and is in relation to the partnership known as Bakers Creek Car Wreckers.
By early 1990 Colleen Jackson purchased Bakers Creek Wreckers as a further business. She then had discussions with her accountant (Mr Casey) and her solicitor (Mr Kelly) in relation to transferring an interest in this business and in certain land that she had acquired ("the associated land") to her daughters. These led to the drawing up and execution of a memorandum of agreement signed by Colleen Jackson on 31 August 1990 and by Kelliegh and Michelle Jackson on 4 September 1990. Reference was made by the arbitrator to these discussions between Colleen Jackson and her advisers and to a further discussion in May 1991 when the land transfers were executed in favour of Kelliegh and Michelle Jackson to give effect to the agreement. There was no evidence of any contemporaneous statements by Colleen Jackson of any personal reservation or intention to restrict the benefit provided by such transfers which were on their face simple and unconditional. The arbitrator found that there was no limitation or condition expressed by Colleen Jackson in relation to the transfers either to the accountant or to the solicitor or to Michelle Jackson at any material time.
The arbitrator then proceeded to consider the personal intention of Colleen Jackson in making the "gifts" of property to her daughters. It is common ground that the daughters obtained equal one-third shares in the partnership known as Bakers Creek Car Wreckers, including plant, equipment, goodwill and stock in trade upon the making of the written agreement. It acknowledged an earlier arrangement between the parties of 1 July 1990, and it deemed entitlement and possession to have been obtained on that date. Similarly the agreement provided that consequent upon completion of the transfers of the associated land (which seem to have been effected in May 1991), possession should be deemed to have been taken on 1 July 1990. The legal entitlement of each daughter to a one-third interest in the partnership of Bakers Creek Car Wreckers, and a similar legal interest in the associated land is not in question.
The arbitrator found that Colleen Jackson gave express instructions to her solicitor that a one-third interest in the business and associated land was to be transferred to each of Kelliegh and Michelle. He also found that despite Colleen Jackson's failure to mention to her accountant or to Kelliegh any limitations or conditions she had only intended the beneficial interest in the partnership and the properties to pass to her daughters upon her own death. The arbitrator said, "I accept her evidence that that was in fact her intention in making the gift". He also referred to the evidence of Michelle Jackson that her mother informed her that the purpose of the "gift" was to avoid problems on her death, that her intention was that there would not be any argument and that her three children (including her son) would all get an equal share. The arbitrator described this evidence as "inconclusive" but observed that "it seems on balance to be more consistent with the evidence of Mrs [Colleen] Jackson that her intention was the beneficial interest was not to be transferred until her death". Having discussed equitable principles concerning presumptions and the passing of beneficial interests and having referred to Calverley v Green[3] and Nelson v Nelson[4], the arbitrator concluded that, "the end result is that Kelliegh and Michelle hold their interest in the property on a resulting trust for Mrs Jackson". He then proceeded to find against certain additional monetary claims asserted on behalf of Colleen Jackson. In the end he resolved the dispute in the following terms:
"(a)Kelliegh Marie Jackson and Michelle Leanne Jackson hold their interest in Bakers Creek Car Wreckers and the associated real property beneficially for Colleen Margaret Jackson. The plaintiff thus has no interest in Bakers Creek Car Wreckers;
(b)Kelliegh Marie Jackson's interest in Jackson's Spare Parts and Jacksons (Qld) Pty Ltd has a present value of $176,511.50."
[3](1984) 155 CLR 242, 246.
[4](1995) 184 CLR 538, 548.
It will be noted that those declarations seem to be at odds with the arbitrator's own finding that a settlement had occurred under which beneficial interests would pass to the daughters upon the death of Colleen Jackson. In the event the arbitrator received further submissions on costs and on whether amendment of the order should be made, but declined to add the words "for life" to the description of the resulting trust on which the daughters held their interests in the partnership and the associated real property. His essential reasoning is in the following sentences:
"My finding is that the gift of the interest in the partnership was not absolute. Whether or not the gift could be revoked prior to becoming absolute was not something it was necessary to determine in these proceedings. It would not be appropriate in those circumstances to make a declaration which might impact on that question which is entirely unresolved."
Accordingly, the declaratory orders were left in their original terms.
Plainly the absolute negative declaration of the arbitrator was too wide and erred against the daughters. It was inconsistent with the arbitrator's own findings. During hearing of the present appeal various qualifications to the order were suggested including expressly reserving the question of the precise nature of any present or future interest that the daughters may have. However were such a reservation to be introduced into the order, it could hardly be said that the arbitrator had dealt with the dispute that had been entrusted to him.
Even more fundamental than the unsatisfactory form of order and its failure to determine the nature of any lesser interest that the daughters might have, was the failure to refer to and to give effect to the agreement between the parties out of which the daughters' interests arose.
The memorandum of agreement describes Colleen Jackson as the "donor", Kelliegh Jackson as "the first donee" and Michelle Jackson as "the second donee". It includes the following provisions:
"1.The donor did on the first day of July 1990 agree to transfer to the first donee a one-third share or interest in the freehold lands described in the Schedule hereto together with the fixed improvements thereon and together with a one-third share in the business carried thereon known as "Bakers Creek Car Wreckers" including all plant and equipment used in connection with the carrying on of such business, the goodwill of the business and the stock-in-trade of the business.
2.The donor did on the first day of July 1990 agree to transfer to the second donee a one-third share or interest in the freehold lands described in the Schedule hereto together with the fixed improvements thereon and together with a one-third share in the business carried thereon known as "Bakers Creek Car Wreckers" including all plant and equipment used in connection with the carrying on of such business, the goodwill of the business and the stock-in-trade of the business.
3.The donees shall take the benefit of the sundry debtors of the business and the burden of the sundry creditors of the business as and from the first day of July 1990.
4.No consideration whatsoever shall be payable by the donees to the donor in respect of the aforesaid transfers.
…
7.Consequent upon completion as referred to above, possession of the property hereby sold shall be deemed to have been given and taken on the first day of July 1990 and all debts, liabilities, outgoings and expenses of the lands, improvements and the business shall be borne by these parties hereto in equal shares as and from the first day of July 1990 and the parties shall in like shares be entitled to all rents and profits from such property as and from such date.
8.The parties hereto agree to carry on the aforesaid business as partners in equal shares as and from the first day of July 1990.”
It is inescapable that clauses 3, 7 and 8 reveal that consideration was provided on the part of Kelliegh Jackson and Michelle Jackson. The fact that the daughters are described as "donees" cannot alter the substance of the agreement under which all three parties agreed to assume certain obligations. Clause 4 is merely a positive statement that nothing was "payable" by the daughters in respect of the transfers. Undoubtedly it was a generous provision on the part of Colleen Jackson, but there can be no doubt that this was a contract entered into between three parties who became bound by its terms. The daughters expressly accepted the burden of the sundry creditors of the business and agreed to become partners who would be liable for future trading obligations of the partnership.
The interests to be transferred under the agreement were not in any way qualified. Neither were the transfers when they were executed in due course. In her statutory declaration in relation to her agreement to transfer the above interests (dated 24 December 1990), Colleen Jackson stated "the property the subject of the transfer is transferred to my said daughters for themselves and not as trustee, agent or nominee for any other person or persons". From the time stated in the agreement, the financial statements of the partnership recorded the interests of the three partners as one-third each, including the allocation of their profit shares. Each of the partners was assessed to income tax based upon those statements. The tax assessed in respect of Kelliegh and Michelle Jackson's shares was paid direct by the partnership. Although the major burden of running the partnership was carried by Colleen Jackson, the daughters, when available, did work in the partnership. Other property was later purchased by the three parties and the debt serviced by the partnership. The business has continued to operate for more than eight years, over which period its assets and liabilities have fluctuated. Plainly an agreement was made between Colleen Jackson and her daughters, supported by executory consideration which was then carried into effect.
There is no allegation of fraud, duress or unconscionable dealing. It is impossible to see any basis for the intervention of equity, or any reason why the property entitlements of the parties should not have been determined according to common law. The holding by Colleen Jackson of an intention that although the legal interests should vest, no beneficial entitlement should pass until her own death, was irrelevant.
Counsel for the respondent was unable to offer any submission why the memorandum of agreement should not be given full effect. His main submissions, as we understood them, were that the parties failed to expose the above legal point to the arbitrator, or to the judge from whose order the present appeal is brought, and that the court would be reluctant to interfere with an arbitrator's decision. It is true that the Points of Claim and Points of Defence do not expressly articulate the point in question. Kelliegh Jackson's Points of Claim however assert an absolute entitlement to the property in question as from 1 July 1990 "acknowledged by deed". In turn the Points of Defence denies beneficial interest on Kelliegh's part and asserts that the daughters hold their interest as trustees for the benefit of Colleen Jackson. The arbitrator's task was to identify the nature and extent of Kelliegh Jackson's interest in the partnership and real property. The relevant agreement and surrounding circumstances were before the arbitrator.
It is very surprising that despite proceedings over two days before the arbitrator, a further application to the judge below, and the preparation of extensive written outlines of argument, the real point can only be found buried in other submissions, and never clearly articulated. Examination of the transcript reveals two occasions on which Mr Pope for Kelliegh Jackson may have obliquely raised such a point. The first of these includes the words "we in fact gave consideration for that agreement" but that was in the context of dealing with the question of tax on the financial adjustment claimed by Colleen Jackson. The other statement is the bare sentence "What we have here is a legal relationship", but again that was in reply to a question from the arbitrator as to whether Nelson v Nelson[5] had any bearing on the situation, that is to say on the subject of unequal contributions. Counsel for the other parties, Mr Hack, at one stage expressly referred to the legal obligations imposed upon the daughters as partners by paragraphs 6 and 8 of the memorandum of agreement. That submission was in the context of developing the alternative argument of entitlement on Colleen Jackson's part to compensation for her labours in the event that the arbitrator was against him on his principal submission of invalidity or deferment of gift. In the proceedings before the chamber judge once again it would seem that the point was not clearly exposed, although again the memorandum of agreement was mentioned. Certainly no mention of the point is made in his Honour's reasons in dealing with the submissions. Even in the present appeal, the appellant's outline of argument and further submissions in reply fail clearly to identify the true point.
[5](1995) 184 CLR 538.
There is therefore some substance in Mr Hack's submission that the point was not clearly articulated. The relevant agreement however was at all material times clearly before the arbitrator as a primary document. Failure to give effect to it constitutes a fundamental flaw in the proceedings and produces a result at odds with the parties' true entitlements. The conduct of the parties does not reach the position of parties who have deliberately chosen some different basis for the determination of their rights and liabilities and limited themselves to it, in which case they may be bound by that determination[6]. The conduct of the case is suggestive of oversight rather than abandonment. All available evidence of the relevant dealings and transactions was called, and it was not suggested that other evidence could have been presented on any relevant question. The failure to articulate the correct legal point sooner than it was may be relevant to costs, as considerable costs would probably have been avoided had it been raised at the appropriate time. However it is not in our view a matter that should deprive the appellant of review of the arbitrator's decision for legal error under s 38 of the Commercial Arbitration Act. The error clearly satisfies the requirements of s 38(5) of the Act.
[6]Banque Commerciale SA (in liquidation) v Akhil Holdings Limited (1990) 169 CLR 279, 286-287.
Quite apart from error as to the legal effect of the memorandum of agreement, and the further question whether on the findings of the arbitrator effect could properly be given to Colleen Jackson's personal reservations and intentions concerning the transfers, error is revealed in the arbitrator's order because it is inconsistent with a finding of fact made by the arbitrator[7]. That error is on the face of the record and would satisfy the requirements of s 38(5) of the Act.
[7]See paragraphs [7] and [8] above.
It is unnecessary to address the arguments that were mounted to the effect that the arbitrator in any event erred in finding and giving effect to Colleen Jackson's intention, which had not been communicated to Kelliegh Jackson or to others to whom it would naturally have been expected to be communicated at the time of making of the alleged gift[8]. There is some divergence between the authorities in the United Kingdom[9] and in Australia[10] on the effect of uncommunicated intentions of donors. None of these cases however supports the giving of effect to a unilateral reservation or an uncommunicated intention in a case where consideration has been given.
[8]Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353, 365-366; Shepherd v Cartwright [1955] AC 431, 445.
[9]Gissing v Gissing [1971] AC 886, 906; Shepherd v Cartwright [1955] AC 431, 445; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 703, 718, 738.
[10]Martin v Martin (1959) 110 CLR 297; Calverly v Green (1984) 155 CLR 242; Nelson v Nelson (1995) 184 CLR 538.
The alternative claim to set aside the award on the basis of misconduct on the part of the arbitrator was misconceived. Misconduct is established under s 42 of the Act when an arbitrator makes an award partly in respect of a matter not referred to arbitration pursuant to the arbitration agreement[11] but the converse is not covered by the section. The complaint here is essentially that the arbitrator, in declining to declare an estate in remainder in favour of the claimant, failed to decide something that was referred to arbitration. That amounted to an error of law under s 38, but was not misconduct under s 42.
[11]Section 42(2).
Costs
The arbitration agreement included the following provision in cl 10(6):
"Upon the determination of the arbitration the partnerships shall pay … the costs of the arbitrator, the independent accountant, the valuers and the legal representatives of the parties hereto in the conduct of the arbitration and any appeal relating thereto."
There was a further provision that the parties might make offers subject to order 26 of the Supreme Court Rules and that the arbitrator should decide costs pursuant to that order if applicable.
The question as to the orders that should be made for costs at each level of proceeding is more complex than might initially appear. A preliminary question arises as to the basis upon which the costs are to be assessed. Unless otherwise specified costs are ordinarily borne on a party and party basis, and we do not think that the arbitration agreement goes beyond this so as to entitle any party to indemnity costs payable by the partnerships. The arbitrator so held, and no complaint was raised on this score. Accordingly the costs to be awarded under cl 10(6) are party and party costs, or as they are now called, "costs on the standard basis".[12]
[12]UCPR 703.
The next question is whether the proceedings before the judge and in turn the appeal to this court should be regarded as "any appeal relating thereto", that is to say relating to the conduct of the arbitration. If these further proceedings are not covered by cl 10(6), the parties will personally be liable for such costs orders as are made. In our view the application for leave to appeal, which has now been granted, followed by an order allowing that appeal, fairly fits the description of an appeal relating to the conduct of the arbitration, notwithstanding that the heading to s 38 is "Judicial Review of Awards" and notwithstanding that there was an alternative claim to set aside the award for misconduct. The reference within s 38 is to an appeal subject to leave of the court. The further appeal to this court against that decision is also in our view an appeal relating to the conduct of the arbitration.
It was within the power of the arbitrator and in turn the chamber judge and now this court to make orders requiring the costs of each particular stage of the proceedings to be borne by the partnerships. In each instance a costs order is sought, in effect, against a "non-party". As all members of the partnerships in question are before the court there is no need for the joinder of any additional party or of notice to the partnership as would be necessary in other cases involving costs orders against non-parties[13]. The relevant proceedings were between the partners inter se, but in signing the arbitration deed the partners bound their partnerships to a liability in respect of the costs referred to in cl 10.6. In dissolution actions costs may be ordered to be paid out of partnership assets, but where the action is really for the determination of some disputed right the unsuccessful party may be ordered to pay the costs[14].
[13]Knight v F P Special Assets Limited (1992) 174 CLR 178; Symphony Group PLC v Hodgson [1993] 4 All ER 143.
[14]Haimer v Giles (1879) 11 Ch D 942.
In the present matter the ruling factor is the agreement between the litigants which binds the partnership. Because Colleen Jackson has by far the greater interest in the partnerships, her share would bear the major portion of the incidence of any payment of costs by the partnerships. At this point the concern of the court is in relation to the costs of "the legal representatives of the parties in the conduct of the arbitration and any appeal relating thereto". When there is a fund out of which the parties have agreed the costs of litigation are to be paid, the court will as a general rule order that costs be recovered from the fund rather than from the other party. There remains however a residual discretion to control the amount that a party may recover from the fund. Therefore, despite the obligation of the partnerships to pay the costs of the legal representatives of any appeal relating to the arbitration, the court is entitled, as an aspect of the control it maintains over legal representatives in litigation, to limit the payment of such costs to costs reasonably incurred.
In our view having regard to the conduct of the relevant proceedings, the costs orders in favour of the appellant should be limited. Had the true point been exposed to the arbitrator there is a strong likelihood that the arbitration would have been shorter and that appeals may not have been necessary. In the event an appeal has been necessary, and the appellant has succeeded in obtaining alterations to the orders made by the arbitrator and the chamber judge, to neither of whom was the true point exposed. In the circumstances we would be disposed to order that the applicant should recover from the partnerships only one-half of her legal representatives' costs of the arbitration, the application to the chamber judge and the appeal to this court. We would not however place any similar limitation upon the costs of the arbitrator, the independent accountant, the valuers, or the legal representatives of the respondents. It was not their duty to articulate the claimant's case.
Orders
The appeal should be allowed. The order below should be set aside and in its place it should be ordered as follows:
1.Leave to appeal against the award of the arbitrator be granted;
2.The appeal be allowed;
3.The order below be set aside and in lieu it be ordered that the award be varied by deleting paragraph 43(a) thereof and in lieu stating that Kelliegh Marie Jackson is entitled to a one-third interest in the partnership known as Bakers Creek Car Wreckers and Panel Shop and the associated real property;
4.The appellant recover from the partnerships one-half of her legal representatives' costs of the arbitration, one-half of her costs of the proceedings before the chamber judge and one-half of her costs of this appeal assessed on a party and party basis;
5.The respondents recover from the partnerships the costs of their legal representatives in the conduct of the arbitration and of the application filed in the Townsville registry on 27 July 1999 and of this appeal as assessed on the standard basis.
0
6
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