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Kent v SS “Maria Luisa” (No 2)

Kent v SS “Maria Luisa” (No 2)

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Case Copied 16 May 2003 60 min read

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FEDERAL COURT OF AUSTRALIA
Kent v The Vessel “Maria Luisa” as Surrogate for the Vessels “Monika” and “Boston Bay” [2003] FCAFC 93
ADMIRALTY – appeal from single Judge setting aside application for want of jurisdiction – appellant sustained injury while employed as a diver on vessel owned by Australian Fishing Enterprises Pty Ltd (“AFE”) – in rem proceedings against surrogate vessel (“Maria Luisa”) – registered owner of surrogate vessel (“Everdene”) sought dismissal of application – Everdene is trustee of Maria Luisa Unit Trust – “Maria Luisa” an asset of Unit Trust – AFE held all shares in Everdene and all units in Unit Trust – terms of Trust Deed – nature of Unit-holders interest – interest to beneficiary defeasible – whether AFE is owner of “Maria Luisa” – nature of ownership – title – par 19(b) of Admiralty Act 1988 (Cth) concerned with proprietorship – whether primary Judge erred in dismissing the application for lack of jurisdiction
WORDS and PHRASES – “owner”, “ownership”, “beneficial ownership”
Admiralty Act 1988 (Cth) s 4(3)(c), 4(3)(d), 4(3)(d)(i), 19(a), 19(b)
International Convention for the Unification of Certain Rules Relating to the Arrest of Seagoing Ships 1952 Brussels Article 3
Supreme Court Act 1981 (UK), s 21
Administration of Justice Act 1956 (UK), subs 3(4)
Admiralty Rules r 15(1)
Shipping Registration Act 1981 (Cth)
Corporations Law 2000 (Cth) s 249B
Laemthong International Lines Co Ltd as Owners of the Ship Laemthong Pride v BPS Shipping Limited (1997) 190 CLR 181 referred to
The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Co Inc (1994) 181 CLR 404 followed
The Owners of the Motor Vessel “Iran Amanat” v KMP Coastal Oil Pte Ltd (1999) 196 CLR 130 discussed
Medway Drydock & Engineering Company Ltd v The “Andrea Ursula” (Owners) [1973] QB 265 discussed
I Congreso del Partido [1978] QB 500 discussed
Yulianto v The Ship “Glory Cape” (1995) 134 ALR 92 cited
The “Nazym Khikmet” [1996] 2 Lloyd’s Rep 362 cited
The “Aventicum” [1978] 1 Lloyd’s Rep 184 discussed
Malaysia Shipyard and Engineering Sdn Bhd v The “Iron Shortland” as the surrogate for the ship “Newcastle Pride” (1995) 59 FCR 535 followed
Commissioner of Taxation v Linter Textiles Australia Ltd (in liquidation) [2003] FCAFC 63 cited
McIlwraith McEacharn Ltd v Shell Co of Australia Ltd (1945) 70 CLR 175 referred to
Bellinz Pty Ltd v Commissioner of Taxation (1998) 84 FCR 154 discussed
Yanner v Eaton (1999) 201 CLR 351 referred to
Wily v St George Partnership Banking Ltd (1999) 84 FCR 423 cited
Macaura v Northern Assurance Co Ltd [1925] AC 619 followed
Re Webster (1975) 132 CLR 270 followed
Charles v Federal Commissioner of Taxation (1954) 90 CLR 598 applied
Read v The Commonwealth of Australia (1988) 167 CLR 57 referred to
MSP Nominees Pty Ltd v Commissioner of Stamps(SA) (1999) 198 CLR 494 applied
Commissioner of Stamp Duties(Qld) v Livingston (1964) 112 CLR 12 referred to
Official Receiver in Bankruptcy v Schultz & Anor (1990) 170 CLR 306 cited
Costa…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2003] FCAFC 93
Decision Date: 16 MAY 2003

CaseChat Overview and Summary

The case of Kent v SS “Maria Luisa” (No 2) involved a dispute regarding the ownership and equitable interest of the Maria Luisa Unit Trust, specifically concerning the ship named “Maria Luisa”. The primary issue was whether AFE, the sole unit-holder of the trust, had an equitable interest in the ship as of 24 April 2001. The case was heard in the Australian court system, with the decision eventually reaching the appellate court. The appellant argued that AFE, as the sole unit-holder, held the beneficial ownership or equitable title of the ship. The respondent contended that AFE’s interest was limited to the trust fund as a whole, without a specific interest in the ship or any other asset. The court had to determine the correct interpretation of the trust deed and the equitable interest of AFE in the ship.

The court examined the terms of the trust deed, particularly Clause 2(c), and referred to previous cases such as MSP Nominees Pty Ltd v Commissioner of Stamps (SA) and Commissioner of Stamp Duties(Qld) v Livingston, to clarify the nature of interests in unit trusts. The court found that while AFE had an equitable interest in the trust fund, this did not necessarily translate to an equitable interest in each specific asset of the trust, including the ship. The court upheld the primary judge’s finding that AFE’s rights under the trust deed did not confer upon it equitable ownership in the individual assets of the trust.

After considering the arguments and relevant authorities, the court concluded that the trust deed’s provisions, coupled with the High Court’s decision in MSP Nominees, supported the interpretation that AFE’s interest was in the trust fund as a whole rather than in specific assets. Therefore, the appeal was dismissed, and AFE did not hold the equitable ownership of the ship “Maria Luisa” as contended. The court’s decision emphasised the importance of the terms of the trust deed in determining the nature of interests in a unit trust.

Orders

Orders of the court

1. The appeal is dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Financial statements were prepared for the Maria Luisa Unit Trust for the year ended 30 June 2001. Those statements record that the trust had total assets of $11,784,332, total current liabilities of $2,771,543 with net assets of $9,012,789. The liability is described as a borrowing from AFE.The decision of the primary judge The greater part of the primary judge’s decision was devoted to the second and third contentions referred to above which were not pursued on the hearing of this appeal. The primary judge’s reasons for decision in relation to the first of these contentions were confined to the following:“38.AFE’s rights under the trust deed constituting the trust do not confer upon it equitable ownership in the Trust’s individual assets (see e.g. Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 313-314; MSP Nominees Pty Ltd v Commissioner of Stamps (SA) (1999) 198 CLR 494 at 509).”The submissions on appeal In the appellant’s submission the “remedial provision” in s 19 should be construed expansively. On 24 April 2001:–AFE was the holder of all the units comprising the Maria Luisa Unit Trust;–AFE had a proprietary interest in all the trust property;–AFE held all the shares in Everdene;–AFE had power to cause Everdene to specify the vesting day;–Everdene engaged in no activity and held no assets other than as trustee of the fund;–Everdene, while the owner of the “Maria Luisa” at law, was not her beneficial owner (or, put another way, her owner in equity); and–there was no person other than AFE who had or could have had the equitable title to the vessel on that day,hence AFE was the beneficial owner or the owner in equity of the ship. Counsel for the appellant, Mr Grieve QC, submitted in his oral argument that it cannot be doubted, for so long as the trust subsists as such, that the sole Unit-holder continues to be the sole owner in equity of the totality of the trust fund. Clause 2(c) of the trust deed is irrelevant either because the ship is not an investment or a security, or because cl 2(c) only applies if there is more than one Unit-holder. In such a case “the Unit-holders do not obtain severally any discrete interest in any specific asset that may form part of the Trust Fund”. In the respondent’s submission, the terms of the trust deed are such that AFE’s interest as a Unit-holder in the trust was in the trust fund as an entirety, subject to the obligations that have to be met from the fund, and to the discretion vested in the trustee. As such, it is not an interest in the particular assets of the trust, including the “Maria Luisa” (MSP Nominees Pty Ltd v Commissioner of Stamps(SA) (1999) 198 CLR 494 at 509 par [34] (“MSP Nominees”) and by analogy Commissioner of Stamp Duties(Qld) v Livingston (1964) 112 CLR 12, Official Receiver in Bankruptcy v Schultz & Anor (1990) 170 CLR 306 at 313-314). Clause 2 of the trust deed is submitted to be to the same effect as cl 4 of the deed that was the subject of the decision in MSP Nominees (see p 500 par [3]) which was found at par [34] to deny any specific interest in any item of property held in the trust fund. The submission accords with the primary judge’s finding that AFE’s rights under the trust deed do not confer upon it equitable ownership in the individual assets of the trust.

Ratio Decidendi

Legal Principle Established

In response, Mr Grieve QC submitted that the issue of whether the trustee had a beneficial interest in the vessel had not been argued at first instance, hence the respondent is precluded from raising the issue on appeal: Coulton v Holcombe (1986) 162 CLR 1.Consideration Clause 2(c) operates in accordance with its terms. The ship is an “investment” comprised in the Trust Fund. The meaning or operation of cl 2(c) does not vary depending on whether there is only one Unit-holder, or more than one Unit-holder. There is a body of authority which establishes in the case of unit trusts whose trust deeds contain provisions broadly corresponding with the relevant provisions in the present trust deed referred to above, that a Unit-holder has an equitable proprietary interest in all of the property the subject of the trust, and in each of the assets which comprise the entirety of the trust fund. Provisions such as cl 2(c) of the present trust deed are not construed as denying that a Unit-holder has a beneficial interest in each asset of the trust. Rather, such clauses recognise that no Unit-holder can claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed: see Costa and Duppe Properties Pty Ltd v Duppe [1986] VR 90; Suncorp Insurance & Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285; Chief Commissioner of Stamp Duties (NSW) v ISPT Pty Ltd (1998) 45 NSWLR 639; Karingal 2 Holdings Pty Ltd v Commissioner of State Revenue [2002] VSC 431; Ford & Lee Principles of the Law of Trusts [1800]. In Karingal (supra), it was submitted that the decision of the High Court in MSP Nominees was inconsistent with these decisions and should be taken as having overruled them, even though none of the decisions are referred to in the judgment of the High Court. Nettle J rejected this submission. In his Honour’s view, the decision in MSP Nominees simply reflects the distinction between a unit trust, which of its nature has been held to confer on a Unit-holder an interest in the trust fund, and a discretionary trust strictly so called, which of its nature has been held to confer on objects no more than a right of due administration. We agree. We note that Goldberg J followed Karingal in Lock v Commissioner of Taxation [2003] FCA 309. It should be noted that Karingal, as Nettle J emphasised, was concerned with a definition of “owner” as every person entitled to any land for any estate of freehold in possession. In Commissioner of State Taxation (WA) v Merifield Cooksey Holdings Pty Ltd & Anor (1994) 94 ATC 4774 Kennedy J pointed out that it can be a little misleading simply to accept that for all purposes the Unit-holders in a particular trust have a proprietary interest in each of the assets comprised in the trust. In that context his Honour recalled the passage in the judgment of Fullagar J in Livingston v Commissioner of Stamp Duties (Qld) (1960) 107 CLR 411 at 438. That case raised a question as to the interest of a Mrs Coulson as one of the residuary beneficiaries in the residue of a deceased estate which had not been fully administered. Fullagar J said:“Probably no one would deny that Mrs. Coulson here had an ‘equitable interest’ in the entire mass of the testator’s estate, and some may think it follows that she had an equitable interest in every part of that mass. We may call it a proprietary interest, if we wish, or equity may call it ‘property’ (Smith v Layh (1953) 90 CLR 102; at pp. 108, 109), but whether it should have this dignity conferred upon it seems to me to be little more than a matter of ‘words and names’, capable to leading to the kind of strife which moved Gallio to say that he ‘cared for none of these things’. To say that Mrs. Coulson had an equitable interest in the estate is to say something that requires explanation and analysis …”See also, on the appeal to the Privy Council, Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12 at 22-23. Hence it may be unsafe to proceed from the premise that because each Unit-holder has an equitable interest in each asset of the Fund to a conclusion that the sole Unit-holder must be the equitable owner of each asset. It all depends upon the terms of the trust. The ultimate question is whether AFE was the owner of the “Maria Luisa” at the relevant date. That is not the same question as whether AFE had an equitable interest in the ship as at that date, although there may be some inter-relationship between the two questions: see Karingal. Section 19(b) of the Act has as its focus ownership of the ship, rather than ownership of some interest in the ship: cf Lawson & Rudden, The Law of Property 2nd ed. 1982, at 116.