Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd

[2014] NSWSC 1846

Supreme Court

New South Wales

Medium Neutral Citation:	Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1846
Hearing dates:	17 December 2014
Decision date:	17 December 2014
Jurisdiction:	Equity Division - Commercial List
Before:	Stevenson J
Decision:	Freezing order varied
Catchwords:	EQUITY - trusts and trustees - trust funds - trustees maximum entitlement to fees now established - whether balance of trust should be paid to beneficiary - whether undisputed amount of trustee's fees should be paid to trustee
Legislation Cited:	Independent Public Business Corporation of Papua New Guinea Act 2002 (Papua New Guinea)
Cases Cited:	Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26 Chief Commissioner of Stamp Duties v Buckle [1998] HCA 4; (1998) 192 CLR 226 CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503 Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360 Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319
Category:	Consequential orders
Parties:	Motor Vehicles Insurance Limited (Plaintiff) Woodlawn Capital Pty Ltd (First Defendant) Timothy Patrick Breen (Second Defendant) Timothy James McNamara (Third Defendant)
Representation:	Counsel: J Giles (Plaintiff) J C Kelly SC with D O'Connor (Defendants) Solicitors: Gadens Lawyers (Plaintiff) Uther Webster & Evans (Defendants)
File Number(s):	SC 2012/83573

EX TEMPORE Judgment (REVISED)

1. I heard these proceedings between 3 and 12 September 2014 and delivered judgment on 30 October 2014 (MotorVehiclesInsuranceLtdvWoodlawnCapitalPtyLtd [2014] NSWSC 1503). That judgment dealt with most, but not quite all, of the issues that divided the parties. There is to be a further hearing, currently set for 30 and 31 March 2015, to deal with the remaining issues.

1. In these reasons I will use the same abbreviations as in the 30 October 2014 judgment.

1. As I set out in that judgment, when the relevant agreements came to an end on 17 November 2011, Woodlawn held on trust for MVIL funds equivalent to approximately $A30.5 million. Prior to the hearing Woodlawn had repaid to MVIL approximately $A4.2 million.

1. On 20 March 2012 McDougall J, by consent, made a freezing order the effect of which is that Woodlawn is now holding in trust for MVIL funds denominated both in Australian dollars and in Papua New Guinea Kina. As at 31 October 2014 Woodlawn held $A7,465,910.78 and K41,965,150.85.

1. In the proceedings Woodlawn claimed that it was owed some $A23 million for fees accrued to 17 November 2011 and thereafter.

1. Although no orders have yet been made, the effect of my reasons is that Woodlawn is only entitled to fees accrued to the date of termination of the agreements on 17 November 2011 (which fees are now agreed to be $A3,591,155 excluding interest) and is not entitled to fees thereafter.

1. In those circumstances the maximum amount that Woodlawn would be entitled to retain from the fund it holds can now be identified. Making every assumption in Woodlawn's favour, that sum is a little over $A5 million. That figure is calculated in accordance with tables 1 and 2 from MVIL's submissions which I attach to these reasons.

1. Accepting that Woodlawn has a right of indemnity from the funds it holds on trust, now that the maximum amount of its entitlement can be identified, and subject to what I say below concerning payment to Woodlawn of the undisputed amount of accrued fees, I can see no reason why it should be permitted to retain any greater sum pending the final resolution of these proceedings.

1. I see no evidence of any danger of dissipation of the funds by MVIL. MVIL is a Majority State Owned Enterprise for the purpose of the PNG IPBC Act. It is the PNG compulsory third party motor vehicle insurer. On the evidence before me, it holds very substantial assets. An Australian judgment can be registered in force in PNG.

1. If it be relevant to consider, at this stage of the proceedings, what might happen for Woodlawn to bring an appeal against my decision, Woodlawn's position has not been shown to be insecure.

1. I appreciate that what MVIL is seeking to do is to, in effect, vary a freezing order which was made with its consent. But circumstances have changed since McDougall J made the orders in March 2012.

1. Woodlawn seeks to have paid from the funds an amount of $A2,957,521, being its accrued fees of $A3,551,155 less an amount of $A633,634 which it accepts is a claim by MVIL for an adjustment of those fees (including $A199,916 in respect of "fees on fees" issue).

1. Woodlawn submits that the quid pro quo for a payment out to MVIL of the funds it seeks is that this net sum be paid to it.

1. Woodlawn submits, and MVIL does not dispute, that as trustee it has the right of indemnity out of the fund. Mr Kelly SC, who appeared with Mr O'Connor for Woodlawn, drew my attention to the observations of Barrett JA in AgustaPtyLtdvProvidentCapitalLtd [2012] NSWCA 26 at [41] as follows:

"The right of a trustee to be indemnified out of trust property is often described as a charge or lien: see, for example, Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360. In Chief Commissioner of Stamp Duties v Buckle [1998] HCA 4; (1998) 192 CLR 226, the High Court preferred to regard it as a proprietary right constituting a beneficial interest enjoying priority over the beneficial interests of the beneficiaries. It is anomalous to refer to a person having a charge or lien over property of which the person is the owner. And as was emphasised by the High Court subsequently in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98, the "trust fund" enjoyed by the beneficiaries cannot be identified or quantified until the trustee's superior beneficial interest has been quantified and satisfied. The trustee's right is inseparable from and co-extensive with the trustee's obligations, both those already discharged but not yet reimbursed and those incurred but not yet discharged."

1. In that passage Barrett JA, with whom Campbell JA and Sackville AJA relevantly agreed, held that the claim by a beneficiary to a trust fund is subordinated to what is described as the "superior beneficial interest" of the trustee for payment of its fees until such time as those fees have been "quantified and satisfied".

1. Woodlawn submits that MVIL's entitlement to the trust fund should not be preferred to its entitlement for fees until such entitlement has been "quantified and satisfied".

1. Woodlawn's entitlement has now been "quantified" in the manner that I have set out above. Woodlawn accepts that, were the payment it seeks made from the fund its fees, its entitlement to fees would also be relevantly "satisfied".

1. I accept this submission and consider I should permit Woodlawn to draw from the fund $A2,957,251 on account of its accrued fees.

1. In coming to this conclusion, I am comforted by the fact that Woodlawn, but also Mr Breen and Mr McNamara, are prepared to offer an undertaking to the Court to restore any funds released in the event that the Court was to so order.

1. I have also been informed that in return MVIL would offer a similar undertaking.

1. In those circumstances I make following orders:

(1)   Order 1, of the orders made on 20 March 2012 by His Honour Justice McDougall as varied by Order 3 of the orders made on 14 September 2012 by His Honour Justice Stevenson, restraining the Funds, be varied so as to be in the following terms with effect from the date of this order:

(a)   The First Defendant is to release to the Plaintiff A$20,000,000 (denominated in PNG Kina) from the "Funds" (as defined in the Orders) directly into the following account:

XXX

(b)   The First Defendant is to release AUD $2,957,521 from the Fund to the First Defendant to pay accrued fees owed to the First Defendant.

(c)   The balance of the Funds, remain restrained on the terms set out in order 3 of the orders made by His Honour Justice Stevenson on 14 September 2012.

(2)   The remaining issues between the parties including the issue as to costs are listed for hearing on 30 and 31 March 2014.

(3)   Order that the costs will be the plaintiff's costs in the cause.

1. I also note the undertaking given to the Court by the parties as follows:

(4)   Each party will restore any funds which have been so released if and when the Court so orders.

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Decision last updated: 19 December 2014