| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : LEUME PTY LTD -v- CHIANTI PTY LTD [2005] WADC 212 CORAM : REGISTRAR KINGSLEY HEARD : 16 & 24 AUGUST 2005 DELIVERED : 9 NOVEMBER 2005 FILE NO/S : CIV 91 of 2005 BETWEEN : LEUME PTY LTD Plaintiff
AND
CHIANTI PTY LTD
Defendant
Catchwords: Practice - Application under O 14 Rules of the Supreme Court - Jurisdiction issue - Claim against trustee of trust
Legislation: Rules of the Supreme Court 1971, O 14, O 16
The Trustees Act 1978
Result: Application dismissed
(Page 2)
Representation:
Counsel:
Plaintiff : Mr R C Ioppolo
Defendant : Ms R Cosentino
Solicitors:
Plaintiff : Wojtowicz Kelly
Defendant : Gibson & Gibson
Case(s) referred to in judgment(s):
Burns Philp Trustee Co. Ltd v Viney [1981] 2 NSWLR 216
Inland Revenue Commissioners (NZ) v Ward (1969) ATC 6050
Wendt and Ors v Orr and Anor [2004] WASC 28
Case(s) also cited:
Casella v Costin Pty Ltd, unreported; SCt of WA; Library No 5416; 22 June 1984
Commercial Developments Pty Ltd v Mercantile Mutual Insurance Ltd (1991) 5 WAR 208
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Esanda Finance Corporation Ltd v Snowlake Holdings & Ors, unreported; SCt of WA; Library No 920586; 30 October 1992
Fancourt v Mercantile Credit Ltd (1983) 154 CLR 87
Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397
Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40
Jacka Nominees Pty Ltd (in liquidation) & Ors v Edwards Karwacki Smith & Co Pty Ltd & Ors, unreported; SCt Court of WA; Library No 920512; 12 October 1992
Jones v Moylan (2000) 23 WAR 65
Morgan & Son Ltd v S Martin Johnson & Company [1949] 1 KB 107
Morgan v Pallister [2004] WASC 188
(Page 3)
O'Dare v Commissioner of Police, unreported; SCt of WA; Library No 940048; 17 December 1993
Perth Pallets v QA Pallets & Packaging Pty Ltd (2002) 29 SR (WA) 275
Southern Resources Ltd v Technomin Australia NL [1990] WAR 72
Thompson v White [1970] 3 All ER 678
Re Vestey's Settlement; Lloyds Bank Ltd v O'Meara [1950] 2 All ER 891
(Page 4)
1 REGISTRAR KINGSLEY: The plaintiff (Leume), by application dated 12 July 2005, has sought leave to amend the writ and statement of claim, seeks leave to apply for summary judgment out of time, and seeks judgment against the defendant (Chianti).
Leave 2 The writ was issued in January 2005 to which, in January 2005, the defendant entered a conditional appearance. In February 2005, the plaintiff filed and served a statement of claim to which, in early March 2005, the defendant filed a defence. It is the defendant's submission that leave ought to be refused. 3 Order 14 r 1 of the Rules of the Supreme Court ("RSC") requires any application for summary judgment to be filed within 21 days of service of the memorandum of appearance. The defendant's conditional memorandum of appearance was filed on 25 January 2005 and, no application by the defendant having been made, became unconditional at the expiration of 14 days (O 12 r 6 RSC). The plaintiff's application for summary judgment is dated 12 July 2005 and is well outside the 21 days provided in O 14. The time limits in O 14 reflect a policy that an application for summary judgment should be brought early and before significant expense is incurred. In this matter, the proceedings are well advanced in that both the plaintiff and the defendant have requested further and better particulars of the statement of claim and the defence and counterclaim, both parties have given discovery and, the defendant has applied for security for costs. 4 The time limits in O 14 reflect the policy of the rules that a summary judgment application "should be brought in early and before significant expense is incurred". Whilst there is power to extend time, this power should be exercised with caution, on good cause and should not be exercised if the defendant will be seriously prejudiced. 5 The plaintiff's counsel submits that it was not until the defendant gave discovery of documents in June 2005 that it became clear to the plaintiff that this matter could proceed by way of summary judgment. This is because the claim could be determined on documentary evidence. Chianti's discovery confirmed the existence of documents being the minutes of meetings and written resolutions relating to some of the distribution of trust income of the S & J Ryan Family Trust ("SJRF Trust"). Once those documents became evident, the plaintiff then brought on its application.
(Page 5)
6 In my opinion, for the most part, applications for summary judgment should be brought at an early stage of the proceedings. However, there are occasions when it is only after discovery of documents that the plaintiff forms an opinion the defendant has no defence to a claim. In those circumstances, the objective of an O 14 application is still being maintained; the early appropriate determination of the proceedings.
7 In regard to the fact that the plaintiff's submissions do rely considerably on discovered documentation, I am of the opinion that, in this case, it is appropriate to give leave to bring the application.
The claim 8 The plaintiff pleads that by Deed of Trust dated 7 March 1989 ("the Trust Deed") a trust known as the S & J Ryan Family Trust was established. The Trust Deed was executed by Chianti as trustee and Leume as beneficiary of the trust. The plaintiff pleads Chianti made a distribution to Leume of a portion of the annual income of the SJRF Trust in respect of the financial years ending 30 June 1995 through to 30 June 2002. By reason of the distributions made by Chianti to Leume, Leume pleads it has an indefeasible absolutely vested beneficial interest in the distributed trust income which totals $175,519. 9 Chianti is a partner with Bretti Pty Ltd in a farming partnership which trades as Ryan Rural Enterprises ("RRE"). Chianti is the trustee for the SJRF Trust. Chianti is also trustee of a number of trusts. 10 Leume is the trustee of the Ryan Family Trust ("RF Trust"). Leume is a beneficiary of the SJRF Trust.
Leume's claim 11 Counsel for Leume submits that Chianti has made distributions of trust income to Leume in each of the financial years 30 June 1995 to 30 June 2002. The distributions of trust income total $175,519. 12 Pursuant to cl 3.1 of the Deed of Trust for the SJRF Trust, Chianti may determine to pay, apply or set aside the trust income for a beneficiary or to accumulate the trust income. Cl 3.3 of the Deed of Trust for the SJRF Trust provides that a determination to pay, apply or set aside any income may be effectually made and satisfied by placing the amount to the credit of the beneficiary in the books of account of the Trust or by resolution of Chianti that a sum out of the net income of the Trust Fund be paid, applied or set aside for the beneficiaries.
(Page 6)
13 Counsel for Leume submits that Chianti applied the trust income of the SJRF Trust to Leume by placing amounts to the credit of the RF Trust in the books of account of SJRF Trust and making written resolutions that trust income be applied for the benefit of Leume.
14 There is support for the plaintiff's counsel's submissions, though an issue of doubt arises in relation to the financial year ending 30 June 1999. 15 For the financial years ending 30 June 1995, 1996, 1997 and 1998, it would appear that there were no trustee resolutions relating to the income of the SJRF Trust. However, it would appear that in Chianti's tax return and financial accounts for those years, an amount has been placed to the credit of the RF Trust in the books of account of the SJRF Trust. 16 For the financial year ending 30 June 1999, there is an amount placed to the credit of the RF Trust. However, the trustee's resolution dated 22 June 1999 refers to an entity "Ryan Rural Trust". Plaintiff's counsel submits that this is patently an error. All that needs to be said at this stage is that an amount stands to the credit of the RF Trust in the books of account of the SJRF Trust. For the years ending 30 June 2000, 2001 and 2002, there was both a trustee's resolution relating to the income of the SJRF Trust as well as evidence of monies standing to the credit of the RF Trust in the books of account of the SJRF Trust.
Leume's cause of action 17 Plaintiff's counsel's submissions, both written and oral, state that Leume's cause of action is not in debt. The cause of action arises out of the trusts created by the Deed of Trust. Referring to Case E 47 (73 ATC 385), plaintiff's counsel submits that the exercise of the trustees of the SJRF Trust in applying income in favour of the RF Trust, is to deliberately and distinctly destroy Leume's contingent expectation in the income of the trust and convert it into an absolute title. 18 It is the plaintiff's case that the resolutions of SJRF Trust, and the books of account of SJRF Trust showing monies standing to the credit of the RF Trust, is an application of monies to immediately and irrevocably vest a specific portion of the income of the trust to the RF Trust so that contingent interest in the trust income has become an absolute interest in income. Plaintiff's counsel goes on to submit that in Inland Revenue Commissioners (NZ) v Ward(69) ATC 6050 ("Wards case") a document declaring that a trustee had determined that part of the income of the trust is "to be held for the credit of" several beneficiaries, amounted to an
(Page 7)
application of the income for their benefit so that the contingent interest became an absolute interest in the sums allocated. 19 As Chianti had not paid the distributions to Leume, and as Leume has acquired an indefeasible and vested interest in possession in the trust income, Counsel for Leume submits Leume has a right to demand immediate payment of the distributed trust income.
The jurisdictional issue 20 Chianti's counsel submits that the plaintiff's claim is against the trustee of the SJRF Trust in relation to entitlements it alleges it has as beneficiary of that trust. Chianti's counsel goes on to say that the statement of claim does not spell out the basis of the plaintiff's claim. Nor does the statement of claim plead why Leume is presently entitled to be paid the distribution. That claim is developed in its submissions. 21 Chianti's counsel raises two issues in relation to jurisdiction. Firstly, the action by Leume can be characterised as an action by beneficiary against a trustee and, secondly, the cause of action is equitable. Section 94 of The Trustees Act 1978 provides that a person who has an interest whether vested or contingent in any trust property and who is aggrieved by any act or omission or decision of a trustee in the exercise of any power conferred by the Act, may apply to the court to review the act, omission or decision. The court referred to in s 94 is the Supreme Court of Western Australia. 22 As the plaintiff's claim is simply that the defendant has failed to pay to the plaintiff distributed trust income, it is Chianti's counsel's submission that the interest of Leume remains an equitable proprietary interest as beneficiary. Relying on Burns Philp Trustee Co. Ltd v Viney[1981] 2 NSWLR 216, Chianti's counsel submits that the proprietary interest of the beneficiary being equitable, this Court has no jurisdiction to deal with the plaintiff's claim or make any orders sought by the plaintiff.
The issue whether monies are due and payable 23 Chianti's counsel submits that the Trust Deed gives the trustee power to pay, apply or set aside income of the trust to beneficiaries. Distributions can be effectually made and satisfied by placing an amount to the credit of the beneficiary in the books of account of the trust. Chianti's counsel submits that the distributions have been set aside and, accordingly, the trustee retains a discretion as to when it will pay those amounts. Chianti's counsel refers me to cl 3.5 of the Trust Deed which
(Page 8)
provides that "where an amount is set aside for any beneficiary, and any amount is held by the trustee in trust under cl 3.2 – cl 3.2 is not relevant here – shall cease to form part of the trust fund and upon the setting aside shall be held by the trustee as a separate trust fund on trust for that person absolutely with power to the trustee pending payment to invest, apply or deal with the fund or resulting income in the manner provided in cl 5(e) of the Trust Deed."
Equitable set off 24 In addition to the above, Chianti's counsel raised an issue of equitable set off. However, whilst the issue was raised it was not, in my opinion properly, pressed with vigour. The evidence does not disclose any factual basis upon which a court could conclude that the defendant has an equitable right to be protected from the plaintiff's claim.
Conclusion 25 In my opinion, there is an argument that the actions by Chianti as trustee in the distribution of funds to the books of account of the RF Trust falls within s 94 of The Trustees Act. Section 94 of The Trustees Act was carefully analysed by, as she then was, Commissioner Johnson QC, in Wendt and Ors v Orr and Anor [2004] WASC 28. The issue in Wendt's case was whether the power conferred on the Supreme Court by s 94 is limited to circumstances in which the trustee is exercising a power conferred by the Act and does not extend to the exercise of powers conferred by the trust instrument. Support for the latter proposition could be found in a number of legal texts, particularly, in Dal Ponts "Anotated Trustee and Trustee Companies Legislation" where at par 8.10 the learned author comments "If the trustee is exercising only the power conferred by the trust instrument, the section (being s 94 of The Trustees Act)cannot be invoked." 26 After a careful analysis of the competing authorities, Commissioner Johnson concludes that the focus of attention is on the conduct of the trustees. In Wendts' case, the conduct which the Wendts complained was the distribution of the profits as income from the estate. Commissioner Johnson commented that distribution of the funds of the estate is a fundamental aspect of the executor's role, and integral to the various powers and duties contained in The Trustees Act. Further, Commissioner Johnson goes on to say that even if she was wrong in that conclusion, the Supreme Court has inherent jurisdiction to supervise trusts and trustees and make appropriate orders to protect the interests of beneficiaries of a trust, including making orders compensating for breaches of trust. Having
(Page 9)
regard to that authority, and to the fact that plaintiff's counsel categorises the cause of action as arising out of the Deed of the Trust, I am unable to state that Chianti's argument is not a bona fide defence. 27 Chianti's Counsel also submits that the interest which the plaintiff relies on remains an equitable proprietary interest as beneficiary. Chianti's counsel is fortified in this submission by the plaintiffs pleaded case where, at par 7 of the Statement of Claim, the plaintiff pleads it has a beneficial interest in possession. Leumes counsel submits that Leume has a complete and perfect ownership of the distributed trust funds, and therefore a legal entitlement to possession. This reflects Leumes assertion that the trust distributions are an application of trust income, not a setting aside, and thus the legal property in the distributed income passes to Leume (see Wards Case, p6061). 28 Whilst that may be the case, the question still remains; which court has the power to enforce the obligation owed to a beneficiary by a trustee. Thus whilst there may have been an application of moneys by the trustee, which court can give aid to the beneficiary to enforce payment. In my opinion it remains arguable that it is not this Court. 29 Having regard to the above, I am of the opinion that the defendant has made out an arguable case that this Court does not have jurisdiction and, accordingly, I refuse the application for a summary judgment. 30 I will hear counsel as to the form of orders and on costs.
|