Markham v Commonwealth Bank of Australia
[1991] TASSC 70
•4 July 1991
Serial No 51/1991
List "A"
COURT: SUPREME COURT OF TASMANIA
CITATION: Markham v Commonwealth Bank of Australia [1991] TASSC 70; A51/1991
PARTIES: MARKHAM, Lyla May
HENRAY PTY LTD
v
COMMONWEALTH BANK OF AUSTRALIA
REES, Martin Maxwell
FILE NO/S: 428/1991
DELIVERED ON: 4 July 1991
JUDGMENT OF: Zeeman J
Judgment Number: A51/1991
Number of paragraphs: 33
Serial No 51/1991
List "A"
File No 428/1991
LYLA MAY MARKHAM and HENRAY PTY LTD
v COMMONWEALTH BANK OF AUSTRALIA
and MARTIN MAXWELL REES
REASONS FOR JUDGMENT ZEEMAN J
4 July 1991
I have before me two interlocutory applications seeking injunctions. The plaintiffs seek an injunction restraining the defendants from possessing or dealing with certain real and personal property, an order that the defendants deliver up possession of that property to the first plaintiff, and an injunction restraining the defendants from further proceeding or seeking to enforce any powers and/or authority claimed by them over or in respect of that property. The second defendant applies for orders that until further order the plaintiffs be restrained from entering upon certain property situate at Bundalla Road, Margate comprised in folios of the Register volume 4507 folios 59 and 60, and an order that the first plaintiff deliver up to him possession of a 10 metre Devil Cat boat. The property in respect of which the second defendant seeks orders appears to be part of the property the subject of the plaintiffs' application.
A preliminary question which requires consideration is what it is that the relevant applicant needs to show in order to obtain the relief sought. In Beecham Group Ltd v Bristol Laboratories Pty Ltd (1967–1968) 118 CLR 618, at pp622–623, the Full High Court expressed the following statements of principle:
"The Court addresses itself in all cases, patent as well as other, to two main inquiries. The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief: .... How strong the probability needs to be depends, no doubt, upon the nature of the rights he asserts and the practical consequences likely to flow from the order he seeks.
...
The second inquiry ... is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted."
The second of those inquiries referred to by the court may be divided into two distinct requirements:
(a)that the applicant will suffer irreparable injury for which damages will not provide adequate compensation unless the injunction is granted; and
(b)that the balance of convenience favours the granting of an injunction.
The first form of inquiry referred to by the High Court was not favoured by the House of Lords in American Cyanamid Co v Ethicon Ltd [1975] AC 396, where it was suggested that the appropriate inquiry was whether there is "a serious question to be tried". Senior counsel for the defendant submitted that I ought to apply that test rather than the test as to whether or not the relevant applicant has made out a prima facie case in the sense that that expression was used by the High Court. He relied upon AustralianCoarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; and Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148, all decisions of single justices of the High Court. In each case, the test as formulated in AmericanCyanamid Co v Ethicon Ltd (supra) was preferred to the test formulated in Beecham Group Ltd v Bristol Laboratories Pty Ltd (supra). By way of contrast, it is appropriate to refer to the judgment of Stephen J in Firth Industries Ltd v Polyglas Engineering Pty Ltd (1975) 132 CLR 489, at p491, where his Honour said:
"On the hearing of this application a considerable body of affidavit evidence was tendered on both sides and I heard argument as to the validity of the letters patent, their alleged infringement and the principles which should govern the grant or refusal of interlocutory relief, with particular reference to the decision of this Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 and what was said to be the rather different approach of their Lordships in the very recent case of American Cyanamid Co v Ethicon Ltd [1975] AC 396. Much of what was said in the Beecham Group Case (supra) relates to principles applicable only where there exists a substantial issue to be tried as to validity of a patent; the Court held that no such issue in fact existed in the case before it and its enunciation of principle was to that extent obiter. However I believe that I should not on this application disregard that careful enunciation of principle by a unanimous Court; nor do I regard what is there said merely as a description of then existing practice on applications for interlocutory relief in cases where substantial issues exist as to validity of a patent but rather as express approval of that practice. The practice may now be otherwise in the United Kingdom following the decision in the American Cyanamid Case (supra) but as a single judge of this Court I should, I think, adhere to the practice approved of by this Court in the Beecham Group Case (supra)."
Whilst the decision of the High Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd (supra) stands, I consider that I am bound by it, notwithstanding disapproval thereof by single justices of the High Court. I will follow that case as explained in Magna Alloys and Research Pty Ltd v Ten Haaf [1978] Tas SR 136.
It is appropriate to refer, in general terms, to the relief sought by the plaintiffs by their Statement of Claim and by the second defendant by his counterclaim, and to the issues as they appear from the pleadings. The first defendant took an equitable mortgage (registered as a charge under the Companies (Tasmania) Code) from G & A Investments Pty Ltd ("the company") whereby the company purported to mortgage, in its own capacity and in its capacity as trustee of the Channel Craft Unit Trust, the whole of its assets whether held by it on its own behalf or as trustee for the Channel Craft Unit Trust. In addition, by way of collateral security, on later occasions it gave two registered freehold mortgages over the land comprised in folios of the Register volume 4507 folios 59 and 60. The first defendant claimed that the company defaulted in the repayment of moneys owing to it and secured by those mortgages. In purported exercise of its powers, the first defendant appointed the second defendant as its agent for the purpose of exercising powers purportedly conferred by the mortgages. The second named defendant thereupon obtained possession of at least some of the mortgaged property. The plaintiffs assert that the first plaintiff is entitled to the mortgaged property. They assert that the first defendant acquired no interest therein because all the mortgaged property was subject to the trusts of the Channel Craft Unit Trust, that the company was never the trustee thereof and that at all times the first plaintiff has been the trustee thereof. In essence the plaintiffs say that the company mortgaged property in which it had no legal or beneficial interest. The relief sought by the plaintiffs as expressed in the Statement of Claim may be summarized as follows:
(a)A declaration that the first defendant has no interest as mortgagee in the subject property.
(b)A declaration that the grant of rights and powers to the second defendant was ultra vires as being in excess of the powers, authorities, discretions, rights and remedies conferred upon the first defendant.
(c)An injunction restraining the defendants from taking possession of or dealing with the subject property.
(d)A mandatory injunction requiring the defendants to deliver up possession of the subject property to the first plaintiff.
(e)An injunction restraining the defendants from further proceeding or seeking to enforce any of the powers claimed by them under the mortgages to which I have referred.
(f)An order for an account.
(g)Damages.
By his counterclaim, the second defendant asserts that pursuant to his appointment as agent by the first defendant, he exercised control over and took possession of a 10 metre Devil Cat boat, being part of the property mortgaged to the first defendant, that the first plaintiff has taken possession thereof and that she has failed to comply with a demand for its return. The relief sought by the second defendant as expressed in his counterclaim may be summarized as follows:
(a)A mandatory injunction requiring the return of the boat.
(b)Damages.
(c)An injunction restraining the first plaintiff from taking or attempting to take possession of the boat or any other of the subject property.
It appears to be common ground that all the property the subject of the action (including the counterclaim) was purported to be mortgaged by the equitable mortgage and that such of it as consists of real property purported to be mortgaged by one or other of the registered freehold mortgages.
In order to succeed in their action, the plaintiffs must necessarily establish some interest in the subject property. The effectiveness of the securities given to the first defendant, the efficacy of the authority given to the second defendant, and the rights of either of the defendants to the mortgaged property or possession thereof, are matters entirely irrelevant to a determination of the plaintiffs' action unless they have such an interest. I can deal at once with the position of the second plaintiff. It asserts to be the holder of all the issued units in the Channel Craft Unit Trust. It does not assert to have any other form of interest in the subject property. There is no evidence whatsoever that it has ever been the holder of any units in the Channel Craft Unit Trust. Leaving aside questions of its standing to bring the action in any event, claiming as it does a beneficial interest but no legal interest, the material before me does not establish, or point to the existence, of any interest on the part of the second plaintiff in any of the subject property. The evidence does not disclose that the second plaintiff has any prospects for success in the action, nor indeed does it disclose any serious issue to be tried in so far as its claims are concerned. Its application for relief must fail.
The position of the first plaintiff requires further consideration.
The relevant pleadings are contained in paras3 to 7 (inclusive) of the Statement of Claim. Those paragraphs are in the following terms:
"3By document dated the 1st October, 1987 ('the said Declaration of Trust') the firstnamed plaintiff as settlor intended, inter alia, to establish a trust to be known by the name Channel Craft Unit Trust and to transfer to a body corporate named Channel Craft Pty Ltd as trustee, various assets and property subject to the trusts specified in the said Declaration of Trust.
PARTICULARS
The said Declaration of Trust is in the possession of the solicitors for the Plaintiffs and may be inspected thereat by appointment.
4The said trust thereafter traded, conducted business and acquired and accumulated trust assets.
5There has never been in existence, at any time material to these proceedings, a body corporate by the name of Channel Craft Pty Ltd
6It was and at all times material has been the manifest intention of the firstnamed Plaintiff as settlor:
(a)to establish a trust to be known by the name 'Channel Craft Unit Trust';
(b)that the initial sum paid pursuant to the said Declaration of Trust should be held on trust subject to the terms otherwise contained in the said Declaration of Trust;
(c)that the benefits of the trusts and powers declared in the said Declaration of Trust should inure for the benefit of every unit holder from time to time to the extent provided in the said Declaration of Trust;
(d)that the trusts should be enforced.
7In the premises the firstnamed Plaintiff stands possessed of the trust property, inclusive of the accumulation of income and all accretions and additions thereto subject to the trusts specified in the said Declaration of Trust."
The allegations contained in para5 are admitted by each of the defendants. As to para3, each defendant purports to admit that by the declaration of trust, a trust known by the name of "Channel Craft Unit Trust" was established, but otherwise they do not admit the allegations contained in para3. It may be doubted whether that pleading makes any admission at all. Probably the better view is that the allegations in para3 of the Statement of Claim are not admitted, but that in answer to it, the defendants make some assertions of fact. Save as aforesaid, all the allegations contained in those paragraphs of the Statement of Claim which I have set out are put in issue by the defendants.
It might be considered that there is some obscurity about what it is that is intended to be alleged by certain of those paragraphs. The draftsman appears to have proceeded upon the erroneous assumption that a trust is an independent legal entity. It is appropriate to consider those paragraphs in conjunction with the relevant evidence before me. That largely consists of affidavits, but also includes the oral evidence given by the first plaintiff when she was cross–examined upon her affidavits.
The declaration of trust referred to in para3 of the Statement of Claim is in evidence. Some of its provisions require examination. I will refer to it as "the trust deed" although, whilst it is expressed to be a deed, it is not a deed. It is expressed to have been made on 1 October 1987 between the first plaintiff as settlor and Channel Craft Pty Ltd as trustee. The trust deed recites an intention thereby to establish a trust to be known by the name of Channel Craft Unit Trust; that the first plaintiff had paid, or intended on the execution thereof to pay, to the trustee the initial sum of $100.00 which was to form part of the trust fund; that the trustee had consented to hold the trust fund upon the trusts and powers and subject to the terms thereinafter contained; that the deed was made with the intention that the benefits of the trusts and powers therein declared should inure to the extent therein provided for the benefit of every unit holder from time to time; and that it was desired that the trustee should have the most absolute discretion possible in relation to the administration of the trust fund.
By the trust deed, the trust fund is defined in the following terms:
"'Trust Fund' means the initial sum all moneys paid to and accepted by the Trustee upon the issue of Units pursuant to Clause 8 hereof the accumulation of income hereinafter directed or empowered to be made all accretions and additions to the Trust Fund and the investments property and other assets from time to time representing the said money accumulations and accretions or any part or parts thereof respectively;"
The trust deed also contains the following provisions:
"DECLARATION OF TRUST
6In consideration of the premises the Settlor HEREBY DECLARES that the Trustee shall and the Trustee HEREBY DECLARES that it will henceforth stand possessed of the Trust Fund and the income thereof upon the trusts and with and subject to the powers and provisions herein expressed concerning the same.
TRUST FUND
7(a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being.
(b)Each person who becomes registered as a Unit Holder shall be entitled to the benefit of and shall be deemed to be bound by the terms and conditions of this Deed and of any supplemental Deed.
8(a) Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund other than in accordance with the provisions hereinafter contained.
(b)The Trust Fund as originally constituted by the initial sum shall be divided into the number of Units and be of such value as is set out in the First Schedule each of which Units shall be:
(i)held in the first instance by the Original Unit Holders the names and addresses of whom are set out in the First Schedule; and
(ii)divided into the classes (if any) set out in the Second Schedule.
(c)The Original Unit Holders shall hold the number of Units of the classes (if any) set out respectively opposite their names in the First Schedule."
The first schedule to the deed provides that the original unit holders are as follows:
G Rumney Family Trust 60 Units
Allan Francis Gordon 20 Units
Vicki Ann Gordon 20 Units
The power to remove a trustee, appoint an additional trustee, or appoint a trustee in the place of a trustee who dies, retires or is disqualified or removed from office is vested in the unit holders. The trust deed contains provisions usual in deeds of similar nature and entirely consonant with the recited desire that the trustees should have the most absolute discretion possible in relation to the administration of the trust fund. The form of deed made provision for it to be signed, sealed and delivered by the first plaintiff and for the common seal of Channel Craft Pty Ltd to be thereunto affixed. It is in fact signed, although not sealed, by the first plaintiff. It does not purport to be executed under the common seal of Channel Craft Pty Ltd In the place provided for that purpose appears the common seal of the company and two signatures, presumably intended to attest the affixing of that seal. The fact that the common seal of the company is affixed to the deed is central to the plaintiff's argument.
In her first affidavit, the first plaintiff deposes to the following:
"2In approximately September 1987 I was desirous of establishing a Trust. It was intended by me that the Trust should be upon the trusts and with and subject to the powers and provisions as expressed and embodied in the document which is now shown to me at the time of swearing this my affidavit and marked 'LMM1', (which said document is hereafter refered (sic) to as 'the said Declaration of Trust'). The Trust was to be known by the name 'Channel Craft Unit Trust'. The Channel Craft Unit Trust was to be the vehicle by which Channel Craft Pty Ltd as trustee was to carry on the business of boat manufacturer and repairer and fibreglass manufacturer, on the trusts and subject to the trusts and powers specified in the said Declaration of Trust. It was my desire that the trust assets should be transfered (sic) to Channel Craft Pty Ltd I never intended or desired to transfer the initial assets to any person or entity other than Channel Craft Pty Ltd
3In furtherance of the creation of the Channel Craft Unit Trust, Carl Rooke accountant of the firm Horwath and Horwath accounted to me in the settlement of the sum of $100.00 as the initial part of the trust fund thereby created.
4I signed the said Declaration of Trust at the offices of the said Horwath and Horwath in or about October 1987 on a date which I am currently unable to specify exactly. My signature appears on exhibit 'LMM1' opposite the attestation clause bearing the name L. M. Markham.
5By reference to exhibit 'LMM1' I am able to say that Channel Craft Pty Ltd did not execute the said declaration of trust. Furthermore it has only recently brought to my attention that there has never been in existance (sic) any body corporate by the name Channel Craft Pty Ltd ...
6By reference to exhibit 'LMM1' I am able to say that the common seal of a company G & A Investments Pty Ltd affixed its seal to the said Declaration of Trust. I was not present when G & A Investments Pty Ltd so purported to execute the said Declaration of Trust. It was never my intention to establish the trust by transfer of the trust assets to G & A Investments Pty Ltd to be held by it as trustee subject to the trusts and powers pursuant to the said Declaration of Trust.
7Despite the foregoing, it was and at all times has been my intention as Settlor;
(a)to establish a trust to be known by the name Channel Craft Unit Trust;
(b)that the said initial sum paid pursuant to the said declaration of trust should be held on trust subject to the terms otherwise contained in the said declaration of trust;
(c)that the benefits of the trusts and powers declared in the said declaration of trust should inure for the benefit of every unit holder from time to time to extent provided in the said declaration of trust;
(d)that the trusts should be enforced."
It is appropriate to make some observations on what appears in those paragraphs of the first plaintiff's affidavit. It is uncertain as to what was intended to be conveyed by the first plaintiff's statement in para2 of her affidavit that she intended that the trust should be upon the trusts and with and subject to the powers and provisions contained in the trust deed. It may be that the first plaintiff intended to convey no more than that such an intention is disclosed by the trust deed upon a proper construction thereof. If so, the paragraph was unnecessary. It is more likely that it was intended to convey what was the first plaintiff's state of mind at the time she signed the trust deed or at some prior time. The proposition that the first plaintiff had such a state of mind was substantially contradicted by her oral evidence. She told me that her son–in–law, one Rumney, proposed acquiring a boat–building business and set himself up in such a business. She said that Rumney "must have" asked her to become the settlor, but that it mattered not to her how he conducted her business. She said that no one had mentioned the name of Channel Craft to her, and that it didn't matter to her if G & A Investments Pty Ltd were to hold the trust assets. The irresistible conclusion to be drawn from the first plaintiff's evidence is that it was Rumney who was setting up in business, that Rumney determined that that business would be conducted using a unit trust as the vehicle, that Rumney or some professional adviser considered that it was appropriate that the unit trust be constituted by a settlor paying an initial sum to a corporate trustee (although the reasons for having a settlor in circumstances such as the present escape me), that Rumney was to arrange for some person to act as settlor, that Rumney asked the first plaintiff to act as settlor, and that Rumney asked her to sign the trust deed for that purpose. The first plaintiff did sign the trust deed. She did so because Rumney had asked her to do so for his purposes without the first plaintiff being aware of the effect of the trust deed and without having any interest in what its legal effect might be. I do not consider that any reasonable tribunal of fact could come to any other conclusions upon the material before me. I reject the proposition that the first plaintiff ever had the state of mind suggested by para2 of her affidavit. She is an elderly lady who appeared to me to be quite unsophisticated in matters of business. She gave her evidence honestly and frankly. I am at a loss to understand how she ever came to swear her first affidavit. I cannot but have the suspicion that this action has been brought by her at the instigation of others who might have an interest in seeking to defeat the first defendant's securities.
I do not know what para3 of the affidavit is supposed to mean. One thing is clear. The first plaintiff was unable to say, in her oral evidence, that she ever paid over the sum of $100.00. There is no evidence before me upon the basis of which I am able to find that the first plaintiff ever dealt with $100.00 or any other property by way of making it subject to the trusts set forth in the trust deed. The first plaintiff contradicted the first sentence of para4 of her affidavit during her oral evidence when she said that she did not sign the trust deed at the offices of Horwath and Horwath. She did not appear to know at what place she had signed it.
The affidavit conveys the clear impression that the first plaintiff was determined to settle the sum of $100.00 on a company called Channel Craft Pty Ltd and upon no other company. The plaintiff's oral evidence wholly contradicts the existence of any such intention. The reality of the situation is, to put it at its highest from the first plaintiff's point of view, that she intended to transfer the sum of $100.00 to a trustee to be arranged by Rumney. I say that that is putting it at its highest because I doubt that the first plaintiff even realized that by signing the trust deed she was establishing any form of trust. It was not of the slightest concern to the first plaintiff whether that company was called Channel Craft Pty Ltd, G & A Investments Pty Ltd, or anything else. Assuming that the trustee was to be a corporate body, it was to be a corporate body provided for by Rumney. Such a corporate body did execute the trust deed as trustee. Rumney was at all times a director of the company. It was incorporated shortly before the date upon which the trust deed purports to be executed. I infer that he arranged for the incorporation of that company so that it could act as trustee of the unit trust.
Senior counsel for the plaintiffs put the first plaintiff's case in this way. The first plaintiff settled property upon what she believed to be a company called Channel Craft Pty Ltd No such company has ever been in existence. She settled it upon the terms of the trust deed. As the trustee upon which she purported to settle the property did not exist, the law will presume that she holds the property herself upon the trusts expressed by the trust deed.
Counsel relied upon the following passage appearing in Ford and Lee, Principles of the Law of Trusts, 2nd ed., at para810, which is in the following terms:
"It is accepted that, subject to what is said below, where property is transferred upon trust to a trustee who lacks the capacity to exercise the discretions of a trustee – whether by reason of want of natural capacity or by reason of constitutional impediment – the trust will not fail. The property will be regarded as subject to the trusts intended and a new trustee will be found and the property transferred to her or him (Sonley v Clockmakers' Co (1780) 1 Bro CC 80; 28 ER 998; A–G v Hickman (1732) W Kel 34; 25 ER 482; see also [336]). Where property is transferred to a person upon trust but that person refuses to accept the property so that it revests in the settlor, the settlor will be regarded as holding the property upon the trusts declared (Mallott v Wilson [1903] 2 Ch 494; cf. Matthews, 'The constitution of disclaimed trusts' [1981] Conv 141; see also [134]). A more difficult question arises where the intended trustee is incapable because he or she was dead at the date of the attempted transfer. It is arguable on the one hand that since a trust must be completely constituted by the transfer of the trust property to somebody at least (even a refusing trustee) then a transfer which is totally ineffective, as a transfer to a deceased person is, cannot have any effect at all and the trust will fail. On the other hand it is arguable that a trust should not fail for want of a trustee and that the intention of the settlor being manifest, the trust should be enforced. The law has never been tested where the attempted transfer has been by a live settlor. In the case or (sic) a will, however, it is settled that the death of the trustee named in the will before the testator does not affect the validity of the trust: the personal representatives, or others in whom the estate vests, will, subject to the administration, hold the property on the trusts of the will (Re Smirthwaite's Trusts (1871) LR 11 Eq 251). However, where the intention of the settlor is that a particular person only must undertake the trust, then the incapacity or refusal of that person will entail the failure of the trust, that being the settlor's presumed intention (Harris v Skevington [1978] 1 NSWLR 176)."
That passage provides only tentative support for the proposition which was argued. It may be doubted whether a purported transfer of property to a corporation which does not exist, with the settlor intending that such property be held by such non–existent corporation upon certain trusts, creates any trust at all. A trust may be said to come into existence even where the trustee is initially unwilling (see Butler & Baker's Case (1591) 3 rep 25a). In such a case the trust does not fail but upon the trustee signifying his dissent, the law revests the trust estate in the settlor and the settlor thereupon holds the trust property upon the terms of the initial declaration of trust (see Mallott v Wilson [1903] 2 Ch 494, at pp502–503). No question of revesting can arise where there has been no divesting. There can be no divesting by purported transfer to an entity which does not exist. Nevertheless, if the facts of this case were such that it could be said that the first plaintiff purported to transfer property to a non existent entity to be held by such entity upon certain trusts it might be that I should not seek to determine the legal effect of such a purported transfer upon the present application. However there is no evidence of any such purported transfer. There is no evidence upon which a tribunal of fact could conclude that the first plaintiff has ever purported to transfer any property to Channel Craft Pty Ltd There is no evidence upon which such a tribunal could be satisfied that the initial sum of $100.00, or any other sum of money, was ever paid by the first plaintiff. She was unable to say whether she did or not. No evidence was called from either the firm of accountants who appear to have had some involvement in setting up the purported unit trust, nor from the firm of solicitors who also appear to have had some involvement. There is no evidence that any other property which the company has purported to hold as trustee of the Channel Craft Unit Trust was provided, either directly or indirectly, by the first plaintiff.
As the first plaintiff cannot establish that she provided any money or other form of property to be held upon the trusts expressed by the trust deed, then the very basis of her action disappears. That being the position, the many other questions raised become irrelevant. I am not concerned with the efficacy of the first defendant's securities in considering the plaintiff's application. There is no basis upon which the first plaintiff can establish any possible interest in the subject property. That being so, she has no standing to challenge the first defendant's securities or any action taken or proposed to be taken by either of the defendants in purported reliance upon those securities. In so far as the application by the plaintiffs is concerned, I am not satisfied that their action has any prospect of success, nor indeed do I consider that there is any serious issue to be tried. No sufficient reason for granting the injunctions sought has been made out.
I turn now to the second defendant's application. The second defendant's counterclaim is based upon his assertion that he is entitled to have returned to him the boat (which, it is common ground, is in the first plaintiff's possession) and upon an apprehension that the first plaintiff will interfere with other of the subject property. It is appropriate to consider the relevant evidence, which appears to be uncontradicted. On 7 August 1987, Messrs. Horwath and Horwath, chartered accountants, wrote to the first defendant on behalf of Rumney, who was described as being "of Channel Craft Pty Ltd", for a working overdraft facility of $10,000.00. That letter indicated that Rumney and one Gordon intended to go into business manufacturing fibreglass boats and other associated products, and that they had been successful in renting what was described as the Channel Craft factory, previously owned by Hazell Bros., and in obtaining an option to purchase that property. The first defendant made a formal offer to Channel Craft Pty Ltd offering it an overdraft having a limit of $10,000.00 by way of the provision of working capital. The first defendant requested that it be provided with a copy of the Memorandum and Articles of Association of the relevant company, a copy of the Certificate of Incorporation, the full name of any trust involved, and the name of the company solicitor. Messrs. Horwath and Horwath responded to that by enclosing copies of the Certificate of Incorporation and Memorandum and Articles of Association of G & A Investments Pty Ltd, and advising that their client's solicitor was Mr. Damien Egan at Murdoch Clarke Cosgrove & Drake. An internal bank memorandum recorded on 16 October 1987 that there having been problems in registering the name Channel Craft Pty Ltd (for obvious reasons, as the evidence discloses that Channel Craft was a name registered pursuant to the provisions of the Business Names Act 1962), the applicants for the advance had decided to operate facilities under the title, "G & A Investments Pty Ltd as Trustee for the Channel Craft Unit Trust". The matter then proceeded. It was a condition of the grant of the overdraft facility that the company provide security to the first defendant. This was provided by way of an equitable mortgage expressed to have been made on 26 October 1987 between the company as mortgagor of the first part, the company as debtor of the second part, and the first defendant of the third part. By that equitable mortgage it was provided that "the Mortgagor does hereby charge all and singular its undertaking property and all its assets whatsoever and wheresoever both present and future including its uncalled capital for the time being AND all and singular the undertaking property and all the assets whatsoever and wheresoever both present and future held by the Mortgagor as Trustee for the Channel Craft Unit Trust under Deed of Trust made the day of 19 " with the payment to the first respondent of various moneys and interest thereon, set forth in comprehensive terms, no doubt intending to give effective security for whatever sums of money for which the company might then or thereafter be indebted to the first defendant. Thereafter the first defendant provided further accommodation and facilities to the company. Included amongst those was a Bills Endorsement Facility of $105,000.00 to assist the company to purchase the land comprised in folios of the Register volume 4507 folios 59 and 60. The first defendant did not entirely rely upon the equitable mortgage. It took registered freehold mortgages Nos B237027 and B295000 over the land purchased by the company. Those mortgages were expressed to be collateral to the equitable mortgage. By 6 March 1991, the company was indebted to the first defendant in the sums of $488,227.39 and US$50,444.44. Upon that day the first defendant demanded repayment of those amounts, together with current interest, indicating that if payment was not effected by 7 March 1991 the first defendant would exercise its powers conferred on it by the three mortgages to which I have referred, and other securities provided by third parties. The company did not comply with this demand. A deed expressed to have been made on 8 March 1991 between the defendants recited the mortgages to which I have referred; that default had occurred whereby those mortgages had become enforceable and the first defendant was entitled to possession of the mortgaged property; that the first defendant had requested the second defendant to act as the agent of the mortgagee in possession of all and singular the undertaking, property and assets of the company including the undertaking, property and assets held by it as trustee of the Channel Craft Unit Trust; and that the second defendant had agreed to accept the appointment on the terms and conditions contained in the deed. After those recitals the deed provided that the first defendant thereby appointed the second defendant to act as the agent of the first defendant as mortgagee in possession of the said property and as its agent to exercise certain rights and powers of the first defendant. The second defendant thereby accepted the appointment.
The powers conferred included the following:
"(a)To take possession of collect and get in the whole or any part of the property specified in the First Schedule hereto, that property (hereinafter called 'the specified property') being part of the property charged by the Securities;
.....
(c)To carry on or concur in carrying on any business heretofore conducted by the Mortgagor and to make and effect all repairs purchases and insurances and to erect or make any new building or improvement upon any land forming part of the mortgaged premises and to pull down alter rebuild or add to any existing building thereon and to do all acts which the Mortgagor might do in the ordinary conduct of any such business for the protection or improvement of the mortgaged premises or any of them or for obtaining income or returns therefrom.
.....
(k)To bring or defend any action, suit or legal proceedings in the name of the Mortgagee or otherwise for all or any of the purposes aforesaid;
(l)To do all things necessary to perform or observe any of the covenants on the part of the Mortgagor contained in any of the Securities;
(m)To do all such other acts and things without limitation as the Agent shall think expedient in the interests of the Mortgagee;"
On 8 March 1991 Mr. Rees took possession of all the property in relation to which his appointment related. I infer that this included the 10 metre Devil Cat boat. It included the freehold property to which I have referred. Until 4 May 1991, the boat was moored at a jetty at Margate. I infer that it was so moored at the direction and under the control of the second defendant. On 5 May 1991, the boat was removed. It was so removed at the direction of the first plaintiff. A preliminary question arises as to the standing of the second defendant to bring the counterclaim and consequentially his standing to obtain the interlocutory relief sought. The powers conferred upon the second defendant by the deed of appointment are the same powers conferred upon any receiver appointed by the first defendant pursuant to the equitable mortgage, subject to two exceptions, namely the power to lease and the power to bring or defend legal proceedings in the name of the mortgagor are expressed to be exercisable, but in the name of the mortgagee, and no power to borrow is conferred. The equitable mortgage declares that at any time after any moneys thereby secured have become payable the first defendant may exercise any of the powers which it may confer on such a receiver. It may be presumed that any such power is exercisable by agent. To the extent that the second defendant was granted powers other than those which may be conferred on a receiver, they are powers clearly exercisable by the first defendant as mortgagee in possession and which it may exercise by agent.
The second defendant has no proprietary interest in the subject property. In so far as that property consists of chattels, it is strongly arguable that the second defendant is the bailee thereof (see the discussion in Palmer on Bailment, at p245) and if so, that he could establish an action in detinue and where appropriate, obtain an order requiring the return of the goods to him (see City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477 at p485 and Kahler v Midland Bank Ltd [1950] AC 24 at p56). I consider that the second plaintiff has a prima facie case for the relief sought in relation to the boat in the sense referred to in Beecham Group Ltd v Bristol Laboratories Pty Ltd (supra). In so far as the second defendant's counterclaim relates to real property, I do not consider he has established such a prima facie case nor indeed is there any serious issue to be tried. The second defendant's possession of the real property is no more than the first defendant's possession. The second defendant has not chosen to sue in the name of the first defendant as he is empowered to do. He has no interest in the freehold enabling him to maintain the counterclaim.
It follows that the only relief which might be appropriate is the injunction sought in relation to the boat, but that raises one further question as the injunction sought is mandatory in its terms. It is undoubted that I have jurisdiction to grant such an injunction, but on the other hand, such an injunction is rarely granted at an interlocutory stage. I have concluded that this is such a rare case. The second defendant took possession of the boat in purported exercise of his powers as the first defendant's agent. Prima facie he exercised a power properly vested in him. The boat is in the possession of the first plaintiff. There is no evidence that she has any interest in it whatsoever. Had she not unilaterally taken the boat out of the second defendant's possession, but had he applied for an interlocutory injunction to restrain her from doing so upon an attempt by her to remove the boat, then I would have granted such an injunction. Her actions constitute a species of self–help. She has not tendered the slightest evidence that she has any interest in the boat. She claims no beneficial interest, but merely the bare legal title as trustee upon certain trusts, the sole beneficiary of which trust she asserts to be the second plaintiff. Not the slightest evidence has been put before me suggesting that the second plaintiff has any such interest. No officer of the second plaintiff has filed any affidavit. The only basis upon which the order sought is resisted is that upon which the first plaintiff sought relief. I have rejected that as being unarguable. The act sought to be performed is the simple one of returning the boat.
It follows from these reasons that I should make the orders which follow. I record that the second defendant, by his counsel, has given me the required undertaking. The orders therefore will be as follows:
1That the application for injunctive relief made by the plaintiffs by application filed 15 April 1991 be dismissed.
2That within forty–eight hours, the first plaintiff deliver up to the second defendant possession of the 10 metre Devil Cat boat presently in her possession or control and moored at the Port Huon Holiday Boat Marina.
3That save as aforesaid, the second defendant's application for injunctive relief by application filed 8 May 1991 be dismissed.
I will hear the parties as to costs.
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