National Australia Bank Limited v Thorp - [2019] WASC 394

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   NATIONAL AUSTRALIA BANK LIMITED -v- THORP [2019] WASC 394
CORAM:   MASTER SANDERSON
HEARD:   21 OCTOBER 2019
DELIVERED          :   5 NOVEMBER 2019
FILE NO/S:   CIV 1515 of 2019
BETWEEN:   NATIONAL AUSTRALIA BANK LIMITED
Plaintiff

AND

DOUGLAS HENRY ALBERT THORP
First Defendant

PAUL DOUGLAS HUDSON
Ninth Defendant

Catchwords:

Practice and procedure - Application by ninth defendant to have money in court paid to him - Whether first defendant and ninth defendant in fiduciary relationship - Turns on own facts

Legislation:

Limitation Act 2005 (WA)
Partnership Act 1985 (WA)

Result:

Money ordered to be paid out to ninth defendant

Representation:

Counsel:

Plaintiff	:	No appearance
First Defendant	:	Mr B W Duckham
Ninth Defendant	:	Mr C Williams

Solicitors:

Plaintiff	:	No appearance
First Defendant	:	B W Duckham & Co
Ninth Defendant	:	Solomon Brothers

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

Giacci v Giacci Holdings Pty Ltd [2010] WASC 349
Lydon v Ryding [2002] WASC 308
Netline Pty Ltd v QAV Pty Ltd [No 2] [2015] WASC 113

MASTER SANDERSON:

This matter has a tortured history. At all material times the first defendant and the ninth defendant were registered proprietors as tenants in common of a property in East Fremantle. From 27 November 1997 the property was mortgaged to the plaintiff. The monthly repayments were in the order of $1,500. As found in the judgment in District Court proceedings 1678 of 1999 delivered on 14 December the property was tenanted to Mr and Mrs Ridgway for a rent of $1,000 per month with Mr and Mrs Ridgway to pay the outgoings.[1]
[1] [2000] WADC 326 as annexure 'DHAT-2' to the affidavit of Douglas Henry Albert Thorp sworn 23 July 2019.
It is the first defendant's position there was an agreement between the first defendant and the ninth defendant the rent payable by Mr and Mrs Ridgway would be collected by the ninth defendant. For the purposes of this application it can be assumed such an agreement existed.
These proceedings were commenced by originating summons filed on 22 March 2019 by the plaintiff. The primary relief sought in the originating summons was removal of a caveat which had been lodged by the first defendant over the East Fremantle property. There were numerous other encumbrances lodged in respect of the first defendant's interest in the property. The plaintiff sold the property consequent upon a possession order made after default under the mortgage. Leaving to one side the ninth and tenth defendants, the other defendants had lodged encumbrances in respect of the first defendant's interest in the property. Arrangements have been made to withdraw those encumbrances to allow settlement to take place. These reasons concern issues between the first defendant and the ninth defendant.
Orders were made on 26 March 2019 removing the caveat and providing for the net proceeds of sale of the property to be paid into court. As a consequence of those orders an amount of $345,581.11 was paid into court. The ninth defendant says he is entitled to half of that fund – he was owner of a half interest in the property and the encumbrances which were lodged against the property related solely to the first defendant. On the face of it that appears to be the case.
The ninth defendant now seeks payment of the sum remaining in court to him as representing his net interest in the property. Counsel for the first defendant maintained throughout his submissions the ninth defendant was not entitled to the money held in court because there had been no determination that he was so entitled. With respect, that cannot be right. The ninth defendant held a half interest in the property. He held that interest as a tenant in common. Prima facie he is entitled to be paid the net proceeds relating to his half interest. That is the starting point.
It is the first defendant's position that the money in court should not be paid to the ninth defendant because the first defendant may have an interest in those funds. Counsel for the ninth defendant maintained that could only be the case if the first defendant had a proprietary interest in the funds – that is to say, a right in rem as distinct from a right in personam. Somewhat reluctantly counsel for the first defendant accepted that position. He maintained the first defendant did have a proprietary interest and until the extent of that proprietary interest was determined the money should remain in court.
So, the question then for determination was whether or not the first defendant did actually have a proprietary interest in the funds in court justifying the refusal of an order to pay the funds to the ninth defendant. It was the ninth defendant's position that even accepting a version of the facts most favourable to the first defendant no such proprietary interest could be established. This was, in effect, the ninth defendant's application to summarily dispose of the first defendant's claims insofar as those claims sought to establish a proprietary interest. The ninth defendant was content to either have these proceedings modified so as to establish the first defendant's in personam rights or make orders allowing for separate proceedings. Either way the aim of the ninth defendant was to have the moneys held in court paid to the ninth defendant forthwith.
It was the ninth defendant's submission that the first defendant was contending that the ninth defendant received rent from the occupants of the property for which he had not accounted to the first defendant or that the ninth defendant failed to collect rent from Mr and Mrs Ridgway. The ninth defendant says a claim of that nature attracts the relief of the taking of an account to determine the extent to which the ninth defendant received more than his proportionate share of rents and profits generated by the property. This account is taken either pursuant to the Statute of Anne 1705 or possibly in equity.[2] Reference was made to the judgment of EM Heenan J in Giacci v Giacci Holdings Pty Ltd [2010] WASC 349 [85] – [90].
[2] Ninth defendant's written submissions filed 6 September 2019 par 10.
Counsel submitted such a claim is merely a personal claim. It did not create any proprietary interest in the ninth defendant's share of the property in favour of the first defendant. It therefore could not result in the first defendant having any proprietary interest in the ninth defendant's share of the fund. Further, (and although it was not necessary for present purposes) it was submitted the account would be confined to rents and profits actually received, not what might have been received, had the ninth defendant managed the property properly. Reference was made again to the Giacci decision, particularly at [90]. Counsel also pointed out that any claim by the first defendant against the ninth defendant would be subject to a six year limitation period pursuant to s 26 of the Limitation Act 2005 (WA).
At the hearing of this application, counsel for the first defendant appeared to accept those submissions – that is to say he accepted that if the first defendant's claim was simply to an account based upon a failure to collect rent then the claim would be personal and would not offer the first defendant a proprietary interest in the fund. However, counsel maintained there was a fiduciary relationship between the first and the ninth defendant which could give rise to a trust which would be imposed on the fund. That fiduciary relationship was said to arise because there was either a partnership between the first defendant and the ninth defendant or they were in an agency relationship. In his submissions filed 21 October 2019 counsel also suggested that the first defendant might be a beneficiary under a constructive trust.[3] With respect that puts the arrangement the wrong way round. If there is a fiduciary relationship a trust might be imposed on the fund and the first defendant might then be a beneficiary of that trust. But, unless and until the fiduciary relationship is established, no trust can arise and the first defendant cannot be recognised as a beneficiary.
[3] First defendant's written submissions filed 21 October 2019 at par 13(a).
It was the ninth defendant's position the evidence did not support there being any fiduciary relationship between the first and ninth defendant. The relevant evidence is found in five documents. First, the statutory declaration made by the first defendant in support of the caveat. There are then four affidavits sworn by the first defendant. The first dated 23 July 2019, the second dated 12 August 2019, the third dated 6 September 2019 and the fourth dated 14 October 2019.
In his written submissions counsel for the ninth defendant objected to portions of Mr Thorp's affidavits. Dealing first with the 23 July 2019 affidavit, objection was taken to the last two sentences of paragraph 7, paragraph 8, the second sentence of paragraph 15 and paragraph 17. The objections were on the basis these parts of the affidavit were bald assertions or statements of conclusion. The same objection was made to the final two sentences of paragraph 7 of the 12 August 2019 affidavit. With respect to the 6 September 2019 affidavit the same objection was made with respect to paragraph 5, paragraph 6, paragraph 14(c) and the last sentence of paragraph 15. [4]
[4] Supplementary written submission of the ninth defendant filed 11 October 2019 at par 8.
These objections were well founded. They really are statements of conclusion, and while they would have been given no weight in any event, to regularise the position, they were struck out.
It was the position of the ninth defendant that what the first defendant was seeking was a remedial constructive trust. It was said that such a remedy is granted by the court in exercise of its discretion and not the recognition by the court of a pre‑existing right. Put in another way, there can be no proprietary interest in the property in respect of which the constructive trust is imposed unless and until such time as the court orders the imposition of the constructive trust: Lydon v Ryding [2002] WASC 308.
That proposition can be accepted. At present no constructive trust exists. But, given the nature of these proceedings, if I was satisfied that a court might in the exercise of its discretion determine a constructive trust ought be imposed on the fund, or part of it, then I would not order funds be paid out to the ninth defendant. In part, that reflects a cautious approach which, given the nature of these proceedings, I am satisfied is warranted. The question then is whether on the facts the first defendant has an arguable case there exists either a partnership or an agency relationship between these two defendants.
Dealing first with partnership, s 8(1) of the Partnership Act 1985 (WA) provides that joint tenancy or tenancy in common does not create a partnership as to anything held or owned whether the tenants or owners do or do not share any profits made by the use thereof. So mere joint ownership of the property cannot create a partnership. There is simply nothing in the evidence which provides any possible foundation for the existence of a partnership. A partnership requires individuals to come together to carry on business with a view to profit. None of the material relied on by the first defendant in any way establishes that was the case here. Two individuals owned a property as tenants in common and, on the first defendant's version of the facts, the ninth defendant was to collect the rent. That was the extent of their relationship. Nothing on those facts can give rise to a partnership.
Turning then to agency. For the relationship of agency to arise the first defendant must have expressly or impliedly manifested his assent that the ninth defendant should act on his behalf so as to effect his relations with Mr and Mrs Ridgway. For his part the ninth defendant had to manifestly assent to so act.
There is no evidence of any express or implied manifestation of the first defendant's assent to the ninth defendant acting on his behalf. It is true that on the first defendant's case the ninth defendant did collect the rent to which the first defendant was entitled. That might give rise to a duty to account which I have referred to above. But, in and of itself it does not establish an agency relationship. The facts simply do not go so far as to establish that such a relationship could arguably exist. Of course, collecting rent can form part of a relationship of agency. But there must be more. For instance, finding tenants, the discretion to undertake repairs and so on. That was the position in Netline Pty Ltd v QAV Pty Ltd [No 2] [2015] WASC 113. But here, there was a simple agreement to collect rent – nothing more.
In summary then, I am not satisfied that it is arguable there was a fiduciary relationship between the first and ninth defendants which could give rise to a right in the first defendant to have the court impose a constructive trust on the fund. Accordingly there is no basis to refuse an order the money be paid out of court to the ninth defendant. Subject to hearing from the parties I will make orders accordingly.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
Associate to Master Sanderson
4 NOVEMBER 2019