Marigold Pty Ltd v Belswan (Mandurah) Pty Ltd - [2001] WASC 209

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MARIGOLD PTY LTD -v- BELSWAN (MANDURAH) PTY LTD [2001] WASC 209

CORAM: WHITE AUJ

HEARD: 6 JULY 2001

DELIVERED : 10 AUGUST 2001

FILE NO/S: CIV 1385 of 2001

BETWEEN: MARIGOLD PTY LTD (ACN 054 920 928)
Plaintiff
AND
BELSWAN (MANDURAH) PTY LTD (ACN 069 443 607)
Defendant

Catchwords:

Trusts - Rights of a beneficiary to inspect trust documents - Whether Trustee may regulate the beneficiary's right to inspect in order to protect the Trust as a whole and to protect confidentiality - Scope of the documents to be inspected - Turns on own facts

Legislation:

Corporations Law, s 289(9)

Result:

Direction that beneficiary is entitled to inspect certain documents
Trustee may comply by having copies of the documents, with confidential matters deleted therefrom, delivered to it, with liberty to apply if necessary for further inspection of orders

Category: B

Representation:

Counsel:

Plaintiff: Mr M L Bennett
Defendant: Mr D M Stone

Solicitors:

Plaintiff: Bennett & Co
Defendant: Williams & Hughes

Case(s) referred to in judgment(s):

Bell & Anor v Lever Brothers Limited & Ors [1932] AC 161
Breen v Williams (1996) 186 CLR 71
Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499
Butt v Kelson [1952] Ch 197
Deluge Holdings Pty Ltd & Ors v Bowlay & Ors (1991) 6 ACSR 36
Hartigan Nominees Pty Ltd v Ridge (1992) 29 NSWLR 405
Morris v Morris (1993) 9 WAR 150
O'Rourke v Darbishire [1920] AC 581
Re Fairbairn [1967] VR 633
Re Geneva Finance Ltd; Quigley v Cook (1991) 7 ACSR 415
Re Simersall; Blackwell v Bray (1992) 35 FCR 584
Rouse & Ors v IOOF Australia Trustees Ltd (1999) 73 SASR 484
Tsimidopoulos v Mulson Holdings Pty Ltd (1989) 1 WAR 359
Zytan Nominees Pty Ltd v Laveton Gold NL (1989) 1 WAR 227

Case(s) also cited:

Savings & Investment Bank Ltd v Grasco Investments (Netherlands) BV & Ors [1984] 1 All ER 296

WHITE AUJ: This is an application by the plaintiff for an interlocutory mandatory injunction in the following terms:
"1.Upon the Plaintiff giving at least 3 working days written notice of its wish to do so, Belswan (Mandurah) Pty Ltd and/or Belswan (Management) Pty Ltd are to allow the Plaintiff, by Ian Tuxworth or any other person duly authorised on its behalf, to inspect each and all of the documentary records of the Belswan (Mandurah) Unit Trust and in particular:-
1.1Quarterly profit and loss statements or statements of account which relate to any period commencing on or after 30 June 2000;
1.2Any sales reports, or other documents dated on or after 30 June 2000 which show the number of enquiries, the number of deposits received, the number of houses under construction, the completion date for the houses or the value of the house/land packages;
1.3Any lists prepared on or after 30 June 2000 of accommodation bonds held by the Greenfields nursing home; and
1.4Any statements dated on or after 30 June 2000 which relate to the trading of the Greenfields nursing home and which show the sources of ingoings and the recipients of outgoings.
2.Costs reserved."
The plaintiff is a unit holder (to the extent of 18-20 per cent) in the Belswan (Mandurah) Unit Trust ("the Trust") of which the defendant is the trustee. The Trust was established for the purposes of developing the Greenfields Retirement Village and aged care facility in Mandurah and pursuing the establishment of additional retirement villages.
The plaintiff was entitled to nominate one director to the Board of each of Belswan (Management) Pty Ltd and the defendant.
The plaintiff nominated Ian Tuxworth as such director. On 3 March 2000, Mr Tuxworth was removed as a director from both Boards. Since that date, he has indicated that he is unable to inform himself about the financial affairs of the Trust and has expressed concern that the Trust is not being managed in the "expressed interests" and in the interests of the beneficiaries as a whole. The plaintiff now applies for an order requiring the defendants to allow it to inspect and take copies of the Trust documents of the Trust.
The plaintiff submits that:
"6.There is no doubt that a beneficiary is entitled to inspect, and to take copies of the trust documents of his or her trust Morris v Morris (1993) 9 WAR 150 @ 152‑3; Hartigan Nominees Ply Ltd v. Ridge (1992) 29 NSW LR 405 @ 421‑422, 431 ‑ 432 and 446; Ford & Lee 'Principles of the Law of Trusts' (Loose Leaf Ed. 1996) [9110].
7.To the extent that such considerations are relevant (which is disputed), the concerns expressed by David Pringle at paragraph 28 of his affidavit are without basis. There is no basis for the proposition that Mr Tuxworth could use the information in the documents to pursue other retirement village developments, or to destabilise the operation of Belswan (Mandurah) Pty Ltd or Belswan (Management) Pty Ltd: Affidavit of Ian Tuxworth sworn 14/6/01: para 36.
8.It is not in the interests of Ian Tuxworth or of Marigold to destabilise the Belswan (Mandurah) Unit Trust: Affidavit of Ian Tuxworth sworn 14/6/01: para 37.
9.The inspection regime proposed by Mr Pringle at paragraph 29 of his affidavit is not acceptable to Marigold Pty Ltd: Affidavit of Ian Tuxworth sworn 14/6/01: para 38: nor is it workable or necessary.
10.Mr Tuxworth has not behaved in any way, which would give the directors of Belswan (Mandurah) Pty Ltd and Belswan (Management) Pty Ltd any grounds to believe that he had in the past misused his position at Belswan, or attempted to destabilise its operations: Affidavit of Ian Tuxworth sworn 14/6/01. Nor do they have any reason to believe that he would do so in the future."
The defendant opposes the grant of the orders sought and submits:
"3As a beneficiary of the Trust, the Plaintiff does not have an absolute right to inspect the documents of the Trust. The right of inspection is only a prima facie right which may be excluded 'where the circumstances are such that an inspection should not be made' (re Fairbairn [1967] VR633 at 635.45).
4The Plaintiff's application is an application for an interlocutory mandatory injunction. An interlocutory mandatory injunction should only be granted where there is a high degree of assurance the Plaintiff would succeed at trial (Tsimidopoulos v Mulson Holdings P/L (1988‑90) WAR 1 359 at 369. 10).
Threshold Issues
5The Defendant was removed as the trustee of the Trust on 20 February 1998 and replaced as trustee by Belswan (Management) Pty Ltd ('Belswan Management'). (See paragraph 8 and annexure 'B' of the affidavit of Mr Pringle. See also paragraph 4 of the affidavit of Mr Tuxworth sworn 14 June 2001, which accepts the accuracy of paragraph 8 of Mr Pringle's affidavit.) For that reason alone, the application against the Defendant fails.
6The stated background to the Plaintiff's application is that it has been excluded from having a representative on the Board of the Defendant and of Belswan Management. That is not the case. Mr Tuxworth of the Plaintiff was removed as a director of the Defendant and of Belswan Management in circumstances where, in the view of the other directors of the Defendant and of Belswan Management, he had engaged in serious misconduct as a director. Those circumstances are set out at paragraphs 1 to 23 of Mr Pringle's affidavit. Since then, the Plaintiff has not challenged the removal of Mr Tuxworth as a director nor has the Plaintiff sought to nominate any other person as a director to either the Defendant or       Belswan Management. Therefore, the Plaintiff's contention that is has been improperly excluded from management is without foundation.
Plaintiff's Application
7It is plain from the Plaintiff's Minutes of Order dated 22 May 2001 and from the affidavit of Mr Tuxworth that the Plaintiff intends that any inspection that is     ordered be carried out by Mr Tuxworth himself. In the circumstances outlined below, Mr Tuxworth should not be granted the right to inspect the documents of the Trust.
Mr Tuxworth's conduct
8Mr Tuxworth has previously engaged in serious breach of his duties as a director of both the Defendant and of Belswan Management (Affidavit of Pringle, paragraphs 17 to 23). Mr Tuxworth was removed as a director of those companies to ensure no further breaches occurred and to protect the business      undertakings carried on by those companies. Mr Tuxworth's misconduct arose in circumstances where he and the Plaintiff participated in retirement village projects without obtaining the prior consent of the Defendant or of Belswan Management to do so. At least some of those projects were pursued by Mr Tuxworth in conjunction with Mr Le Coultre, the General Manager of the Greenfields Village. Mr Tuxworth and Mr Le Coultre seek to justify their conduct by suggesting the Trust had rejected the new projects taken on by them. Even if that were the case, Mr Tuxworth was in breach of his fiduciary duties by participating in such projects without first obtaining the appropriate consents to do so from the Defendant and Belswan Management.
9Additionally, in light of Mr Tuxworth's position as a competitor to the Trust, if he inspected the documents of the Trust, he would retain in his mind the details of those documents and it would be impossible for him to 'forget' that knowledge in making decisions about the other projects he and the Plaintiff are involved in. (See Mobil Oil v Guina [1996] 2 VR 34 at page 38.35 per Hayne JA).
10There also remains a legitimate concern as to what use Mr Tuxworth will make of the information contained in the documents of the Trust. Mr Pringle has testified at paragraphs 24 to 26 of his affidavit as to comments made by Mr Tuxworth that were quite clearly designed to place commercial pressure on the Defendant and on Belswan Management.
11.The conversation between Mr Tuxworth and Mr Stalker of the Bank of Adelaide (the principal banker to the Belswan Group) was of sufficient concern to Mr Stalker for him to raise it directly with Mr Pringle. Mr Tuxworth's own version of his conversation with Mr Stalker demonstrates an intent on Mr Tuxworth's part to agitate against the interests of the Defendant and of Belswan Management (see paragraph 32 of Mr Tuxworth's affidavit).
Alternative proposal
12The stated concern of the Plaintiff is that it wishes to review the performance and management of the Trust. The Defendant has proposed a regime which more than adequately addresses that concern. The regime is set out at paragraph 29 of Mr Pringle's affidavit and allows a Chartered Accountant to review the records of the Trust and then inform the Plaintiff's solicitor of any concerns the Chartered Accountant may have arising from the review. The proposed regime reserves to the Plaintiff the right to apply to the Court to inspect any particular documents which may be of specific concern to the Chartered Accountant. This regime is more than adequate to address the Plaintiff's alleged concerns.
Conclusion
13The Plaintiff cannot establish a high degree of assurance that its application for access to the documents of the Trust would succeed at trial. The Defendant against whom the application is brought is not now the trustee of the Trust. Additionally, there is sufficient evidence (if accepted at trial) of serious misconduct on the part of Mr Tuxworth to justify his being excluded from undertaking an inspection of the Trust documents."
Mr Stone, for the plaintiff, submitted that an order will be made unless there is clear proof adduced by the trustee that the application is for an improper purpose or is likely to lead to the misuse of the information documents or that the order will cause material injury to the trustee. He submitted that the onus to provide clear proof is on the trustee. He submitted that the trustee was already in breach of trust in the provision of information to the plaintiff, in that the financial statements for the trust for the year to 30 June 2000 should have been prepared and distributed before the end of October, 2000 but this has not been done.
Mr Stone then submitted that the opposition to the orders based upon the allegation that the Trust's documents are confidential is ill‑founded.
In par 7 of the further affidavit of David Warren Pringle, the deponent states:
"7.The documents that the Plaintiff seeks to inspect are documents that are not in the public domain. The documents sought by the Plaintiff at paragraphs 1.2, 1.3 and 1.4 of the Minute of Proposed Orders contain information as to:
(a)the names of the current occupants of the Greenfields Retirement Village;
(b)the names of people who have made enquiries to become occupants of the Greenfields Retirement Village;
(c)the endeavours made by the Defendants to obtain new occupants for the Greenfields Retirement Village; and
(d)the rate of new sales per month for the Greenfields Retirement Village.
In its totality, that information is confidential to the Defendants."
My attention was then drawn to the Trust Deed itself, par 15.2, which provides:
"15.2Promptly after the close of each Accounting Period the Trustees shall prepare a written accounting report (prepared in accordance with the normally accepted accounting procedures) for such period consisting of a balance sheet and statement of income and expenditure and a list of assets held at the close of such year and a copy thereof shall be furnished to the Unit Holders not less than fourteen days before the annual general meeting if any is to be held and if none is to be held before 31st October in each year."
The plaintiff complains that the defendant has not complied with the requirements of that clause.
In his affidavit of 6 July 2001, Mr Pringle says, simply, that "the Trust did not make any distribution for the financial year ended 30 June 2000. The Trust continues to meet its financial obligations as and when they fall due."
Counsel referred to Deluge Holdings Pty Ltd & Ors v Bowlay & Ors (1991) 6 ACSR 36, a decision of Murray J in this Court. At 39, Murray J, citing Zytan Nominees Pty Ltd v Laveton Gold NL (1989) 1 WAR 227 at 232 and Tsimidopoulos v Mulson Holdings Pty Ltd (1989) 1 WAR 359 at 368 ‑ 369, per Malcolm CJ, summarised the principles applicable to the determination of interlocutory injunctions, as follows:
"It is sufficient, I think, having regard to those cases to simply note the general test to be whether there is a serious question to be tried in relation to either of the limbs in this case upon which interlocutory relief is sought and, if so, whether the balance of convenience is for or against the grant of an interlocutory injunction."
I think that his Honour's summary of the relevant test was common cause in the case before me.
Murray J went on, at 39, to say:
"In relation to the fact that the injunction sought in each case is of a mandatory nature, though expressed in prohibitory terms, I think there is little in the authorities to suggest that the court ought to take a radically different approach from that which I have expressed. Perhaps the most useful authority on this area is the decision of Gibbs CJ in Queensland v Australian Telecommunications Commission (1985) 59 ALR 243; 59 ALJR 562 at 563 and following, where there is a reference to the well‑known House of Lords decision in Redland Bricks Ltd v Morris (1970) AC 652, the final outcome of which is the expression of the view by his Honour the chief justice that rather more certainty ought to be apparent in relation to the result which will be derived at trial, upon the evidence remaining as it is, than would ordinarily be the case in relation to a prohibitory injunction."
His Honour then referred with approval to the approach taken by Gummow J in the Federal Court in Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 where Gummow J concluded that it was sufficient for the court to bear in mind that a mandatory injunction will often deal with a subject matter or be expressed in terms which carry a higher risk of injustice than in prohibitory terms and will be more intrusive in its influence upon the conduct and the affairs of the litigants than a prohibitory injunction; so rather more certainty might then be required in relation to the issue of the balance of convenience.
Deluge was a case similar in many respects to that now before me, save that the applicant in that case was a director of the company whose books he wished to inspect and reliance was placed there on both the common law and the provisions of s 289(9) of the Corporations Law.
Counsel referred to the decision of Owen J in Re Geneva Finance Ltd; Quigley v Cook (1991) 7 ACSR 415, also a case concerned with the entitlement of a director to inspect the financial records of the company of which he was a director.
In the present case, of course, the applicant is not a director of the trustee company.
Counsel referred to the decision in Breen v Williams (1996) 186 CLR 71 - a case concerned with the right of a patient to inspect her medical records in her doctor's possession. At 89, Dawson and Toohey JJ said:
"No analogy can be drawn between her situation and that of a beneficiary under a trust. Of that relationship Lord Wrenbury said in O'Rourke v Darbishire:
'If the plaintiff is right in saying that he is a beneficiary, and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desire to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access to them.'
Those remarks were accepted or referred to without demur in In re Londonderry's Settlement and have been accepted in this country. But the right of access of a beneficiary to trust documents arises because of the beneficial interest of the beneficiary in the trust property and it is in that sense that the right may be described as proprietary."
In Re Simersall; Blackwell v Bray (1992) 35 FCR 584, Gummow J referred at 587 ‑ 588 to a passage in Scott on Trusts (4th ed 1987), par 173, under the heading "Duty to Furnish Information" reading:
"The trustee is under a duty to the beneficiaries to give them on their request at reasonable times complete and accurate information as to the administration of the trust. The beneficiaries are entitled to know what the trust property is and how the trustee has dealt with it. They are entitled to examine the trust property and the accounts and vouchers and other documents relating to the trust and its administration. Where a trust is created for several beneficiaries, each of them is entitled to information as to the trust. Where the trust is created in favour of successive beneficiaries, a beneficiary who has a future interest under the trust, as well as a beneficiary who is presently entitled to receive income, is entitled to such information, whether his interest is vested or contingent." [Emphasis supplied.]
At 588 ‑ 589, Gummow J said:
"One of the essential elements of a private trust is that the trustee is subject to a personal obligation to hold and deal with the trust property for the benefit of the beneficiaries, and a necessary incident of that obligation is the liability of the trustee to account to the beneficiaries for his stewardship of the trust property."
It was held in Rouse & Ors v IOOF Australia Trustees Ltd (1999) 73 SASR 484, a decision of the Full Court of the Supreme Court of South Australia, that the right of a beneficiary to inspect trust documents, whether founded on proprietary right or fiduciary duty is not unqualified. Confidentiality or privilege are circumstances in which a discretion to refuse inspection may arise - see Londonderry's Settlement [1965] Ch 918.

Counsel referred to Bell & Anor v Lever Brothers Limited & Ors [1932] AC 161 for the proposition, derived from Lord Blanesburgh's speech at 195, that:
"It not appearing from the regulations of the company that a director's services must be rendered to that company and to no other company, he was at liberty to become a director even of a rival company, and it not being established that he was making to the second company any disclosure of information obtained confidentially by him as a director of the first company he could not at the instance of that company be restrained in his rival directorate. What he could do for a rival company, he could, of course, do for himself."
That proposition may since have been questioned, counsel submitted, but remains the basic statement of the law relating to directors.
In concluding his submissions, Mr Stone said:
"We put the case in this way: we have a right to inspect, we accept that in certain very limited circumstances inspection may be denied us. They're exceptional circumstances, they are the circumstances of the sort referred to by Murray J in Deluge and by Doyle CJ in Rouse. That is not this case. It is certainly not this case that the trustee has got anywhere near showing the sort of exceptional circumstances which are required to deny us access to the documents. Perhaps the clearest or one of the clearest signposts in the case is the way in which the trustee has behaved. That's not to say, 'Well, look, we don't want you to look at these two or three documents because they contain confidential information' or 'We'll white out the parts that contain what we say is confidential information. Until we get into court with an application you're not going to see any documents at all.' If your Honour pleases, those are our submissions."
Mr Bennett, of counsel, for the defendant submitted that the issue in this application is whether the trustee in granting access to the documents can impose in the interests of the beneficiaries as a whole and of the trust as a whole a regimen for inspection that accords protection for the interests of the beneficiaries as a whole in circumstances where the trustee regards it as appropriate and reasonable.
The defendant's objection to Mr Tuxworth is based upon the following evidence in pars 17 ‑ 26 of the affidavit of David Warren Pringle sworn on 28 May 2001:
"Conduct of Mr Tuxworth as a Director
17.1 am informed by Mr Phillips and verily believe that in or about February 2000 Mr Phillips became aware that:
(a)Mr Tuxworth was pursuing the development of alternative retirement village projects in his own right and was not referring those opportunities to the Belswan (Mandurah) Unit Trust; and
(b)for the purpose of pursuing those alternative projects, Mr Tuxworth had offered Mr Le Coulter [sic Coultre] employment with the Plaintiff.
18.Mr Phillips prepared a paper setting out his concerns about Mr Tuxworth's activities and circulated that paper to the directors of Belswan Mandurah and Belswan Management. Annexed to this my affidavit marked 'D' is a true copy of the paper circulated by Mr Phillips.
19.On 16 February 2000 a board meeting was held to discuss the matters raised in Mr Phillips' paper. In attendance at that board meeting were Mr Tuxworth, Mr Horgan, Mr Phillips and myself (then, all directors), Mr Le Coultre and Mr Justin Horgan (alternative director). Annexed to this my affidavit marked 'E' is a true copy of the Minutes of that meeting.
20.The Minutes accurately reflect my recollection of what occurred at the Directors' meeting. I have excluded from the Minutes material over which legal professional privilege is maintained. During the course of the Directors' meeting, Mr Tuxworth described his conduct as being of 'great impropriety'. Mr Tuxworth signed a Heads of Agreement at the meeting undertaking to provide by no later than 23 February 2000 'full and frank disclosure of his total involvement with any other Aged Care operator or parties associated with such organisations during his period as a director of Belswan, including all documentation, reports, letters, agreements etc.' Annexed to this my affidavit marked 'F' is a true copy of that Heads of Agreement.
21.To the best of my knowledge and information, Mr Tuxworth has not made disclosure as required by the Heads of Agreement. In particular, Mr Tuxworth has not provided any documentation relating to his involvement with other Aged Care Operators.
22.A further meeting of directors of Belswan Management was held on 3 March 2000 to consider further the consequences of Mr Tuxworth's conduct. Annexed to this my affidavit marked 'G' is a true copy of the Minutes of the meeting of directors held on 3 March 2000. At that meeting it was resolved, inter alia:
(a)to remove Mr Tuxworth as Chairman of the Board of Directors;
(b)to convene a Shareholders' meeting to remove Mr Tuxworth as a director of Belswan Management and Belswan Mandurah; and
(c)to appoint me as Chairman of Directors of Belswan Management and Belswan Mandurah.
23.A meeting of shareholders of Belswan Management and Belswan Mandurah was held on 10 April 2000. Annexed to this my affidavit marked 'H' is a true copy of the Minutes of that Shareholders' meeting, at which it was resolved to remove Mr Tuxworth as a director of Belswan Management and Belswan Mandurah. Annexed to this my affidavit marked 'I' is a true copy of the Minutes of Directors' Meetings of Belswan Management and Belswan Management held 4 May 2000 at which it was resolved that the resolution to remove Mr Tuxworth as a director take effect from the close of the meeting.
Conversation between Mr Tuxworth and the Adelaide Bank
24.The principal banker to the Belswan Group is the Adelaide Bank. In or about February 2000, the Belswan Group was in the process of restructuring the facilities it held with the Bank of Adelaide. While the restructuring was being put in place, I received a telephone call from Mr John Staker of the Adelaide Bank. Mr Staker informed me and I verily believe that he had received a telephone call from Mr Tuxworth and had a conversation with him in words to the effect:
Mr Tuxworth: 'I have received an offer which is laughable and will be stirring things up. The residents and potential residents are aware of the dispute and are steering away from purchasing. The place has had a smell about it since November'.
Mr Stalker:'What do you mean?'
Mr Tuxworth: [No answer]
Mr Stalker:'I will be advising David Pringle of this conversation'.
Conversation between Mr Tuxworth and Mr Ayres
25.In or about December 2000, I had a personal conversation with Mr Ayres, the Sales Manager for the Greenfields Retirement Village. The conversation took place in Mr Ayres' home located within the Village. Mr Ayres informed me and I verily believe that he had recently had a conversation with Mr Tuxworth who had said to him words to the effect: 'Unless the directors sort out a deal with me, I'll stir things up'.
26.After relaying his conversation with Mr Tuxworth to me, Mr Ayres said to me words to the effect: 'I am extremely concerned at the effect this may have on prospective purchasers for the village'."
The defendant has, from the outset, offered to allow the plaintiff to assess the performance of the Trust in the following way:
"29.Accordingly, Belswan Mandurah opposes the order sought. Belswan Mandurah proposes the following regime to allow the Plaintiff to assess the performance of the Belswan (Mandurah) Unit Trust:
(a)access is granted to a Chartered Accountant appointed by the Plaintiff to inspect the documents described at paragraphs 1.1, 1.2, 1.3 and 1.4 of the Minute of Order;
(b)the Chartered Accountant may disclose the contents of the documents inspected to a solicitor nominated by the Plaintiff, but to no other person. The nominated solicitor must not disclose to any person the information disclosed by the Chartered Accountant;
(c)If as a result of the inspection by the Chartered Accountant, the Plaintiff wishes to be granted access to inspect specific documents, the Plaintiff may relist its Summons on 72 hours prior written notice, such notice to:
(I)identify the specific documents the Plaintiff wishes to inspect;
(II)set out the reasons why the Plaintiff contends it needs to inspect the identified documents;
(III)identify the person it proposes inspect the documents; and
(IV)propose a confidentiality regime restricting disclosure of the contents of the documents to be inspected."
Mr Tuxworth has refused this offer for the following stated reasons, namely:
1.His extensive experience with health administration, and with the Mandurah Project puts him in a better position to understand and evaluate the content of documents, than a chartered accountant - even if the chartered accountant were instructed by him on what to look for in documents; and
2.The matter is of great importance to the plaintiff which has a substantial investment in the project. It is, he says, for that reason, very important to him to satisfy himself that the Unit Trust is being conducted properly in the best interests of the plaintiff (and of all the beneficiaries), a matter which he has cause to doubt - given the manner of his removal as a director on what, in his view, was no more than a pretext and in breach of the agreements between the shareholders. While he does not doubt the competence of his solicitors and accountants, he is reluctant to delegate a matter of such importance.
Mr Bennett said that the plaintiff's application, as reflected in a minute of proposed orders, was for the inspection of "every document of a trading trust, so the whole of the business of the trading trust has to stop and all documents be collected in one place so that every document could be inspected - no discrimination as to what is important or what's unimportant. The receipt books from two years ago, all the source documents for all the accounts historically - every document has to be accumulated in a place for inspection by Mr Tuxworth; not by Marigold but by Mr Tuxworth."
Mr Bennett stressed the fact that the unit holder is the plaintiff, Marigold Pty Ltd, and not Mr Tuxworth. The plaintiff, he submitted, has not been refused access to the financial records of the trust - the defendant's objection is to Mr Tuxworth, not to the plaintiff.
In his affidavit sworn on 14 June 2001, Mr Tuxworth deposes to a somewhat strange telephonic conversation he had with Mr John Staker of Adelaide Bank. Paragraphs 31 ‑ 33 of that affidavit are as follows:
"31. … On the morning of 8 February 2001 I sent a facsimile to John Staker of the Adelaide Bank asking him to advise me on progress with the release of my guarantee. Now produced and shown to me and marked with the letters 'ILT2' is a true copy of that facsimile. John Staker responded to my facsimile by telephoning me in the mid afternoon of the same day. Mr Staker said to me words to the effect of 'I am sorry that we have not kept you briefed on progress with the release of the guarantees, I had assumed that the Belswan directors were keeping you informed'. He also said (words to the effect of):-
'Adelaide Bank's lawyers will forward (the release) it to you in the near future. If you have not received the documentation by the 19 of February, please telephone me and let me know'.
I replied with words to the effect of:-
'Thank you for your call and for your advice, I will call you on the 19 of February if nothing has happened before then'.
John Staker then said to me words to the effect of:-
'Have you settled your arrangements with the Belswan Board?'
I replied with words to the effect of:-
'I have received an offer from the Belswan Board, but it is so low that I am having trouble distinguishing whether it is an insult or a joke. We are now moving into the next phase of proceedings'.
At this point John Staker cut into the conversation and said to me words to the effect of:-
'I don't really want to get involved in any of the detail, but what do you mean by the next phase of proceedings?'
32.1 said to him words to the effect of:-
'I feel the litigation is inevitable, but there is no need for you to know anything about it'.
He then said to me words to the effect of:-
'I agree, the proceedings are of no interest to the bank'.
I said to him words to the effect of:-
'I think that the proceedings will affect everyone in the course of time'.
Mr Staker asked me to clarify what I meant by that and I said to him words to the effect of:-
'There is a history in the industry that demonstrates that where an aged care project becomes the subject of litigation in any form, village sales diminish proportionately with the extent of the dispute and period of litigation, and in some cases it has taken years to re‑establish a normal sales pattern'.
John Staker said to me words to the effect of:-
'I feet very uncomfortable about this conversation'.
I replied to him words to the effect of:-
'This is off the record and you should forget about it.
33.We then said 'goodbye' and just as he was about to hang up Mr Staker said to me words to the effect of:-
'I would like to touch on the discussion of the litigation and its consequences again'.
He then said to me words to the effect of:-
'Do you feel that any damage had been done to the project so far?'
I said to him me words to the effect of:-
'There have been rumours in Mandurah since November. The rumour mongers are suggesting that the project is in financial trouble and that there is a dispute between the owners. I believe that the people who are most likely to be pushing the rumours are real estate agents who regard the village as opposition to what they are promoting and selling in other parts of Mandurah'.
John Staker then said to me words to the effect of:-
'Do you mind if I raise these issues with David Pringle?'
I said to him words to the effect of:-
'I would be happy to tell David Pringle myself if he could bring himself to have a conversation with me'.
The conversation then terminated with me saying 'If I haven't received the documentation by the 19th I will give you a call'."
The defendant submits that that evidence suggests an intention on the part of Mr Tuxworth to damage the interests of the Trust.
It appears that the plaintiff advanced $221,000 to the Trust pursuant to an agreement that the loan would be repaid at the expiry of 10 years and would not bear interest.
The plaintiff has pleaded the implication of a term to the effect that, if it is excluded from management, the loan should thereupon be repayable on demand. It is alleged that such a term is required to give business efficacy to the agreement.
According to a diary of events prepared by Mr Kevin Phillips, a director of Belswan Holdings Pty Ltd, on 28 January 2001, the directors of Belswan Holdings Pty Ltd, of which Mr Tuxworth was one, held a meeting at which Mr Tuxworth reported "that he had been made several offers within the Aged Care Industry, and that he had to make decisions regarding them. Other Board members suggested his future should be based on his active involvement in Belswan both as a director and full time consultant. It was agreed by the Board that [Mr Tuxworth] prepare a paper for distribution to the directors on the future direction of Belswan."
Mr Bennett said (t/s 41):
"Can I go to the nub of the dispute between the parties? I said to you in opening, there are two issues only that are of concern to the trustee. One is the scope of what is sought from it and there has been no attempt by the plaintiff, despite requests from the defendant, to narrow the scope of inspection to something less than all documents. In fact my friend's concession in submissions to you that he wouldn't call for the instructions that instruct me to oppose Marigold's claim in these proceedings is the first narrowing that has occurred despite solicitor‑solicitor discussion and correspondence in the history of the application, so we have approached this on the basis that this beneficiary under the guise of saying, 'I'm concerned about the financial management,' seeks in effect the production of everything.
The second point of concern is whether there should be access permitted in a fashion - access provided in a fashion that excludes Mr Tuxworth from participation."
He quoted the passage from par 18 of Mr Tuxworth's affidavit of 14 June 2001 which I have set out above and added:
"Interestingly, the first part - he says, 'I'm better placed to understand the contents of a document than an accountant' - in my respectful submission carries no weight as a proposition. The fact that he, as a minister in the Northern Territory - and ultimately as the chief minister in the Northern Territory - was responsible for the government building aged care facilities doesn't make him an expert. I think the proposition that a politician is an expert in his portfolio area would be a proposition debated hotly in the community generally, I would have thought.
The second proposition - that he says that it's important to satisfy himself that the unit trust is being conducted properly - is a matter that a solicitor can consider. His suggestion that 'the manner of my removal as a director on what, on my view, was no more than a pretext' reflects a cavalier lack of acceptance for his responsibilities as a director in circumstances that have been outlined in the evidence and the suggestion is not that as a director he was precluded from engaging in some other activity. The suggestion was as the executive director and full‑time consultant to a trust which had as its formation purpose - identified by him - the searching out and development of retirement village projects generally that he procured for himself private advantage, utilising the executive staff of the trust, Mr Le Coultre and Ms White, is a point of fundamental importance.
He says that's a pretext and he says it's a breach of the agreement between the Belswan shareholders and that's not even arguable, not even arguable, we would have thought, to say removing Tuxworth is a breach of the agreement. Marigold can still nominate a director, just he, with all the arrogance, I think, of somebody who says, 'No, I'm not going to let anyone else be nominated. It's me or nobody,' and it flies in the face of the letter that he sent saying, 'I accept my removal as a director.' That's the evidence, the reason, why Marigold rejects the regimen that's promoted."
In Rouse, Doyle CJ referred to the two different approaches to the basis of a beneficiary to inspect trust documents. One is traced to the words of Lord Wrenbury in O'Rourke v Darbishire [1920] AC 581 in the passage quoted above.
Doyle CJ doubted whether his Lordship intended to hold that the beneficiary has an actual proprietary interest in trust documents and considered that the true position is as stated by Dawson and Toohey JJ in Breen v Williams (supra) in the passage quoted above.
Doyle CJ said, at 498:
"The other approach is that the right of a beneficiary to inspect trust documents is founded not upon any equitable proprietary right but upon the fiduciary duty of a trustee to keep the beneficiary informed and to render accounts."
His Honour found it unnecessary to resolve that dispute, because the issue in the case before him was whether "a trustee has a discretion to refuse to permit inspection of trust documents under certain circumstances". That issue arose whatever the basis of the right might be.
Mr Bennett submits that, by analogy, the same principle applies to the determination of the question whether the trustee has a discretion to regulate the conditions under which an inspection by a beneficiary may be conducted.
Doyle CJ referred to a number of authorities in which the right of a beneficiary to inspect trust documents has been qualified, namely, Hartigan Nominees Pty Ltd v Ridge (1992) 29 NSWLR 405; Butt v Kelson [1952] Ch 197; Re Fairbairn [1967] VR 633 at 635, 638 and Morris v Morris (1993) 9 WAR 150.

His Honour gives a brief description of the nature of each of those cases at 498 and, at 499 goes on to say:
"These decisions do recognise that the right of a beneficiary to inspect trust documents is not unqualified. They do not identify any underlying principle by reference to which the refusal of access may be justified."
Doyle CJ then discussed several of the considerations which might justify a refusal by a trustee to permit the inspection of trust documents by a beneficiary and added:
"Ultimately, I would rest the existence of the relevant discretion upon the need to reconcile the undoubtedly duty of a trustee to make disclosure to beneficiaries of information about the trust, and the undoubted duty to permit the inspection of trust accounts and trust documents, with the equally fundamental obligation of a trustee to conduct the affairs of a trust, and particularly a trust which involves the conduct or management of a business, in the interests of the beneficiaries as a whole. I consider that on occasions the reconciliation of these interests may entitle a trustee to decline to provide information to particular beneficiaries, when the trustee has reasonable grounds for considering that to do so will not be in the interests of the beneficiaries as a whole, and will be prejudicial to the ability of the trustee to discharge its obligations under the trust. It may be that the ultimate foundation of the discretion is the obligation of the trustee to discharge its duties to manage the affairs of the trust in the interests of the beneficiaries.
I wish to make it clear that the discretion that I envisage is a limited one, and must always be limited by the general duty of disclosure by a trustee to which I have referred. The existence of the discretion cannot be used as an excuse for paternalism or to disregard the interests of beneficiaries. Its existence depends upon the need to protect the trustee's ability to discharge its obligations. The availability of the discretion will depend very much upon the circumstances of the particular case.
I therefore conclude that the right of a beneficiary to inspect trust documents is qualified by the existence of the discretion to which I have referred. It is impossible and pointless to state the scope of the discretion with any precision. All that can be said is that there may be circumstances in which the trustee can properly claim that there are trust documents of a confidential nature that a trustee may refuse to disclose to particular beneficiaries in the interests of the discharge of the trustee's duties to the beneficiaries as a whole. Once again, lest I should be misunderstood, there is one other qualification that I would make. I do not, in what I have said, contemplate the use of that discretion to enable a trustee to deal in a partial or discriminatory manner as between beneficiaries or groups of beneficiaries, except to the extent that the necessary result of a proper exercise of the discretion may be that particular beneficiaries are not given access to a document."
I would respectfully adopt what his Honour there said.
It appears that Mr Tuxworth has a "financially assisted 20 per cent interest" in what is called the "St Louis project", apparently an aged home project which is thought by the defendant to be in competition with the Trust's business. The defendant objects, on the grounds of confidentiality, to disclose to Mr Tuxworth the names of persons making inquiries of the Trust.
There is some basis in the evidence which I have set out above for a suspicion that Mr Tuxworth may be seeking information which may be damaging to the Trust and to the other beneficiaries thereof, if divulged to him. I put it no higher than that.
Although the application, as framed, is in very wide terms - "… each and all of the documentary records of" the Trust - an affidavit sworn by Cristin Cecilia Toman, a solicitor employed by the plaintiff's solicitors and acting for the plaintiff, indicates that the plaintiff does not in fact require to see every document. She refers to par 7 of Mr Pringle's affidavit which I have quoted above and says:
"6.During the first conversation and the second conversation Mr Tuxworth told me the following things which I verily believe to be true:
6.1he is not interested in knowing the names of the current occupants at the Greenfields Retirement Village;
6.2he is not interested in knowing the names of people who have made enquires to become occupants of the Greenfields Retirement Village. He does, however, want to know the rate at which people are making enquiries about becoming occupants of the Greenfields Retirement Village. Information about the rate of enquiries in combination with information about the rate at which contracts are being signed and the rate of settlement will be important in ascertaining the financial performance of the project;
6.3as he reads it paragraph 7(c) is a reference to the marketing activities of the Defendants. He expects that these would include advertising on television, radio and in the print media and conducting mail‑outs. He does not believe that there is anything secret about these, any old person living in Mandurah would have been aware of the Defendants marketing endeavours;
6.4the units in the retirement village are strata titled;
6.5the information referred to in paragraph 7(d) of Mr Pringle's affidavit could be obtained by conducting a search at the Land Titles Office, but it would not show up on a title search for several months."
In the course of his final address, Mr Stone told me that what the plaintiff really wants are the documents described in a letter dated 28 February 2001 from Williams & Hughes to the defendant, namely:
"1.Quarterly profit and loss statements or statements of account which relate to the period 30 June 2000 to the present day. I understand that these documents are prepared quarterly to be sent to the Adelaide Bank in accordance with the Adelaide Bank's lending agreement with Belswan (Management) Pty Ltd.
2.Any sales reports, or other documents which show the number of enquiries, the number of deposits received, the number of houses under construction, the completion date for the houses or the value of the house/land packages, with dates in the period 30 June 2000 to the present.
3.Any lists of accommodation bonds held by the nursing home prepared in the period 30 June 2000 to the present.
4.Any statements which relate to the trading of the nursing home and which show the sources of ingoings and the recipients of outgoings, for the period 30 June 2000 to the present."
In my opinion, the plaintiff is entitled to inspect the documents listed in that letter, subject to the defendant's right to provide copies with the deletion of the names of any persons in respect of whom confidentiality is claimed. The provision of copies of those documents, rather than the inspection of the originals in the possession of the defendant would probably meet the wishes of both parties. If, in the result, the plaintiff contends that it requires consequential further inspection, that can be the subject of an application in due course.
At this stage, I am prepared to make an order accordingly and I shall invite counsel to provide a minute of orders to give effect to the aforegoing and to include liberty to apply. I shall also hear counsel in relation to the question of costs.