Montevento Holdings Pty Ltd & Anor v Scaffidi & Anor

[2012] HCATrans 150

[2012] HCATrans 150

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P35 of 2011

B e t w e e n -

MONTEVENTO HOLDINGS PTY LTD

First Applicant

EUGENIO SCAFFIDI

Second Applicant

and

GIUSEPPE DIEGO SCAFFIDI

First Respondent

MARIA SCAFFIDI BY GUARDIAN AD LITEM THE PUBLIC TRUSTEE

Second Respondent

Application for special leave to appeal

FRENCH CJ
HEYDON J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO PERTH

ON FRIDAY, 22 JUNE 2012 AT 10.30 AM

Copyright in the High Court of Australia

__________________

MR F.A. ROBERTSON:   May it please the Court, I appear for the applicants in this matter.  (instructed by Butcher Paull & Calder Barristers & Solicitors)

MR C.L. ZELESTIS, QC:   May it please the Court, I appear for the first respondent.  (instructed by Oldfield Legal)

FRENCH CJ:   There is a submitting appearance, I think, for the second respondent.

MR ROBERTSON:   Yes, your Honour, that is correct.

FRENCH CJ:   Yes, Mr Robertson.

MR ROBERTSON:   If your Honours please, this application, we contend, comes to this Court as a result of some disagreement within the Supreme Court of Western Australia.  Essentially, Eugenio Scaffidi is the appointor of a trust.  He cannot appoint himself as a trustee; that is not in dispute.  He instead appointed a company as trustee.  He was the sole director and shareholder of that company.  The question that arises is did the court below err in holding that the language of clause 11.03 is wide enough to preclude this from occurring.  In our submission, we say that clause 11.03 is not wide enough to preclude this.  Relevantly, the clause provides:

If, and so long as any individual Appointor is a Beneficiary, that individual shall not be eligible to be appointed as a Trustee.

Your Honours, we would submit that the crucial question here is whether that clause unambiguously refers to the ineligibility of an individual appointor being appointed to the office of trustee.  It is our submission that with respect to the court below there is no ambiguity in the clause and that the clause should have the construction given to it by his Honour Justice of Appeal Buss in the dissenting decision in the Court of Appeal.

FRENCH CJ:   Why should we not simply treat this as a question of disputed construction, not raising any question of general principle?

MR ROBERTSON:   Well, your Honours, we say that the general principle here goes to construction of a trustee, in particular.  The court essentially resolved to construe the deed by, we would submit, going too far in looking at what the intention of and going too far behind the words, in particular, looking at such a technical definition of a word such as “as” and then once again defining a word within the definition goes too far.  The High Court in Toll (FGCT) Pty Limited v Alphapharm Pty Limited, which is referred to in the judgment, (2004) 219 CLR 165 at paragraph 40 it was Chief Justice Gleeson, Justices Gummow, Hayne, Callinan and Heydon who all concurred that the propositions relating to the construction of trust deeds in these circumstances should be looked at with what a reasonable person would understand the clause to mean.

In this deed the deed specifically draws a distinction between individuals and corporations or companies.  The phrase “individual” is used twice within the clause itself and, therefore, to suggest that that extends to having control as a sole director and sole shareholder of a company, in our submission, we say goes too far. 

Essentially, this position only arose because this trust deed was settled in 1977.  Pursuant to the amendments to the Corporations Act in 1995, that is what essentially has allowed the situation that has occurred to occur.  Prior to that, as your Honours will be well aware, a company could only have two directors and two shareholders.  Therefore, in our submission, there was no need to refer to that in the trust deed at first instance.  However, as a result of the change of the law, this situation has arisen, and was not contemplated by the original drafters of the deed.  But in any event, your Honours, we submit that the clause itself is so clear that it cannot be construed in the way as proposed by the Court of Appeal.

FRENCH CJ:   Is it correct to say that the purpose of the clause is defeated if, notwithstanding the clause, where an ineligible person is the sole controller of a company that company can be appointed as trustee?

MR ROBERTSON:   I am sorry, your Honour, I do not understand the question.

FRENCH CJ:   The question is, is the purpose of the clause defeated by what your client has done?

MR ROBERTSON:   We submit it is not, your Honours, and we say that because the clause was included to prevent the situation where for some statutory purposes, if the appointor is also able to appoint himself as trustee, the property of the trust is effectively treated as the property of the appointor, where in this case – and we say that this could not be the case

because of the doctrine of separate legal entities that upon appointing a company, the property would vest in the company which is and of itself a separate legal entity, if that answers your Honour’s question.

FRENCH CJ:   Yes.

MR ROBERTSON:   Your Honours, I am content to keep my oral submissions on this point rather brief and rely primarily on our written submissions, so unless your Honours have any particular questions, those are my submissions.

FRENCH CJ:   Yes, thank you.  Yes, Mr Zelestis.

MR ZELESTIS:   May it please your Honours.  In our submission there is more to clause 11.03 than the status of a trustee.  One has to understand what is involved in the concept of somebody being appointed as a trustee and it is helpful to go through the steps that are involved.  In the first place, of course, there must be a communication by the appointor to the proposed appointee. 

There must be an acceptance by the appointee and if that occurs then more is involved than the attainment of a status.  It is not like being awarded a medal or a position of some honour.  It is an investiture with powers and the purpose of the appointment is to enable the powers to become available to be exercised by the appointee and for the appointee to assume duties that come with the powers. 

In our submission, the error of the dissentient was to focus too narrowly on two things, that is the occupation of the office, or having the status of trustee, and to focus on the purpose said to arise out of taxing statutes which Justice Buss, with respect, attributed primary significance to.  That purpose may have been an element of the purpose underlying the clause, but there was no foundation for giving it the significance which his Honour did in contrast to the more evident purposes which the majority attributed to the clause in their reasons at paragraph 158. 

Now, in understanding what is involved in an appointment, it is also important to appreciate a particular provision of the clause which, although not set out directly, is referred to in Justice Buss’ decision at paragraph 87(c) where his Honour refers to clause 12.11 and says that it deals with:

the manner in which such Trustee –

that is a corporate trustee –

may exercise or concur in exercising any discretion or power conferred –

What 12.11 says is that the trustee which is a corporation may do so by a resolution of such corporation, meaning of course by the members, or by a resolution of its board of directors.  So this trust instrument, itself, does not leave to the general law the manner in which a corporate trustee may exercise powers.  The instrument takes the step of saying the powers may be exercised by a member resolution or a director resolution.

So when one reads 11.03 one must read it in the context that where a corporation is appointed, the instrument itself gives the natural persons, in this case, the natural person singular, the ability to exercise the power that is formerly invested in the trustee.  So it brings even into sharper focus the absence of any real distinction between the one‑man corporation and the one man. 

So, in our submission, the words were plainly broad enough to permit of a purposive construction.  The purpose could not be in any doubt and the purpose was, as I have said, described by the majority.  So, in our submission, no question of principle arises.  It was really a question about the application of the principle.  We also are content to rest upon our written submissions in other respects, your Honours.

FRENCH CJ:   Do you accept that this kind of clause is fairly common in trust deeds that were settled some years ago?

MR ZELESTIS:   Yes, it is common to have this kind of separation so that the appointor and the beneficiary and the trustee do not become the same person, certainly common.  But we say, as I have said, it is for more than taxing related reasons, particularly in a family setting and this often, of course, occurs in a family setting. 

FRENCH CJ:   Yes, all right.  Thank you.  Yes, in reply?

MR ROBERTSON:   Nothing in particular, your Honours.

FRENCH CJ:   There will be a grant of special leave in this matter.  Would this take more than half a day, Mr Robertson?

MR ROBERTSON:   Your Honours, I do not know if my learned friend seeks to file any notice of contention or anything like that, but in the circumstances, we do not consider it will take more than half a day.

FRENCH CJ:   Mr Zelestis?

MR ZELESTIS:   No, your Honour.

FRENCH CJ:   All right, thank you.  I just draw the attention of the parties to the time limits for filing, which are now pursuant to High Court Amendment Rules 2012, which come into effect as of 1 July.  So I think there is a sheet which should be available to you which points out those.

AT 10.43 AM THE MATTER WAS CONCLUDED