Owens v Lofthouse

[2008] HCATrans 216

[2008] HCATrans 216

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M165 of 2007

B e t w e e n -

SUZANN JANET OWENS

Applicant

and

DAVID LOFTHOUSE (AS TRUSTEE OF THE PROPERTY OF SUZANN JANET OWENS, A BANKRUPT)

Respondent

Application for special leave to appeal

HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 23 MAY 2008, AT 3.22 PM

Copyright in the High Court of Australia

MR C. TRUONG:   Your Honours, if it please the Court, I appear with my learned friend, MR D.M. YARROW, on behalf of the applicant.  (instructed by Margot Foster Lawyer)

MR S.P. GARDINER:   I appear on behalf of the respondent, your Honour.  (instructed by Aitken Walker & Strachan)

HEYDON J:   Yes, Mr Truong.

MR TRUONG:   Your Honours, our special leave point is this.  We say that the 1920 High Court decision of CSD v Jolliffe was wrongly decided.  That was Justices Duffy and Knox in majority in that decision.  We say that primarily for two reasons.  First, we say that only Justice Isaacs’ dissenting view in that decision is able to adequately identify and prevent the moral hazard of allowing someone who has undertaken a solemn undertaking from resiling from that undertaking later on.  As Justice Isaacs said at 187:

It is just as improper morally to permit a man who has openly undertaken such a trust to escape his conscientious obligation by reason merely of a secret mental reservation not to fulfil what he has openly undertaken.

The effect of allowing the admission of evidence of Mr Jolliffe’s mental reservation was to allow Mr Jolliffe to declare himself trustee for his wife, which was for an illegal purpose of extracting additional interest under the relevant Queensland legislation, but which allowed Mr Jolliffe to resile from that declaration later on merely because he had that secret mental reservation, as Justice Isaacs put it.  We say in a similar vein, a recent Privy Council decision of Choithram has held similarly to Justice Isaacs that it would be unconscionable and contrary to the principles of equity to allow a donor to resile from a gift.

Secondly, we say, your Honours, in our respectful submission, there appears to be an emerging jurisprudence, particularly in England, where courts have upheld the validity of trusts, namely, resulting trusts, even though the trust has arisen out of a legal transaction.  The other reason why the courts in England have upheld such resulting trusts has been to prevent the putative trustee from obtaining the full fruits of a trust property at the expense of the putative beneficiary, and we cite and rely on the cases of Tinsley v Milligan and Lowson v Coombes in that regard, which are part of your bundle of authorities, your Honours.

We say with respect to this second reason, your Honours, particularly that the second reason provides or means that the basis upon which the High Court majority in Jolliffe is on an unsecure footing, we say that because their Honours in that case relied on an early edition of Lewin on Trusts, as you would know, your Honour, an 11th edition of Lewin on Trusts, which has since been disavowed by the learned authors, and which has since found or labelled the decision of Jolliffe as troublesome.

In an article which is part of your bundle of authorities, your Honours, there is an article by Mr Mowbray, and he refers to a discovery by a co-author of Lewin on Trusts, Mr Edwin Simpson, who labelled the decision in Jolliffe as troublesome.  He also cites in that article the decision in Tinsley v Milligan as authority for the movement in England in upholding trusts despite the impropriety which led to the trust.

We say in view of these developments, your Honours, it is an opportune time within which the Court should revisit and reconsider the correctness of Jolliffe and ‑ ‑ ‑

KIEFEL J:   If that was undertaken though you do not have findings about objective intention in your favour, do you?

MR TRUONG:   No, your Honour.  Justice Weinberg in the proceeding below relied purely on evidence of – subsequent evidence of subjective intention as to Ms Owens ‑ ‑ ‑

KIEFEL J:   What about the evidence provided by the 20 December document ‑ ‑ ‑

MR TRUONG:   Yes.  Well, that is principally the device which we seek to rely on, and we say on its face it manifests an express declaration of trust.  Of course, Justice Weinberg made a contrary finding to that effect.  But we say on its face – and I was going to go to that in a moment, but whilst you have raised it, your Honour, we say that this document clearly manifests an express declaration of trust, and it is not relevantly ambiguous in any sense of that term.  We say that equity looks to the intent in substance rather than form, and that was an equitable maxim which was relied on recently by the High Court in Associated Alloys, which was the most recent occasion in which this High Court has looked at Jolliffe.

We also say that no special form of words is necessary.  To the extent that there are special words, we have three references to declaration of trust.  We have what we say are four provisions at the beginning of the document which are in the nature of recitals.  We say the operative provision really is the second clause 4, which says:

The Trustee declares that the Trustee holds the trust estate for the benefit of THE RICHARDSON TRUST and its beneficiaries the children of the Trustee.

We say that it is plain on its face in this document that that gives rise to an express declaration of trust in the manner that Justice Isaacs’ reasons in Jolliffe and that further we say that you can have a validly created trust even though it is susceptible to a number of meanings.  The decision of Re Lamshed [1970] SASR 224 where Justice Bray found that there were five possible interpretations on the evidence as to the construction of the trust document, we say that is also supported, your Honours, in Kauter, the first occasion within which this Court looked at Jolliffe, where the judge at first instance – this is at 97 of that decision where the High Court quoting the trial judge said:

I have some doubt of just what the present trust would have been, but I have no doubt that it was a present trust.

We say that there is ample evidence in that document to manifest an express declaration.  Also Kauter is authority, we say, for the proposition that a trust may not be as extensive as the one claimed, so you can have a trust on the evidence which is narrower than the one that you seek.

If one looks at the document in question, we say that it could only be fairly and reasonably construed as a declaration of trust.  As I said previously, your Honours, the first four provisions are really in the nature of recitals, which is not uncommon where you have a deed that has been executed, and the operative provision is clause 4, as I have already quoted.

We say that the references to transfer – and that was a point of contention in the proceeding below before Justice Weinberg – we say it should be construed in accordance with its common parlance, which is a change in beneficial ownership.  It should not be construed as in any way purporting to create a trust by transfer.  It speaks of “has agreed to transfer” in the first clause 4, which is evincing a present intention, not a future one.  We say that in any event purported trust by transfers usually take the shape of an instrument of transfer at the same time as the deed of trust.  We say this document clearly manifests an immediate intention to dispose by way of declaration.

The last provision, clause 5, your Honours, should be looked at carefully.  We say that provision there may give rise to a number of ways in which the trustee’s obligations arise.  It could be construed as a bare trust, for example.  It could be construed as a discretionary trust in the nature of the Richardson Trust for which the intended beneficiary was consummated.  We say that that clause is exactly the same, or relatively identical, to the one that was in an earlier decision of B & M Properties, a South Australian decision, your Honours, to which Justice Weinberg referred.  In that case the relevant provision was:

shall request transfer pay or deal with the said property of other benefits and exercise all rights in respect thereof in such manner as the Beneficiary shall from time to time direct.

We say that is essentially the same as what clause 5 says, and in that case the decision did not turn on the wording of the document, it turned on the subsequent evidence of intention, the subjective intention, relying on Jolliffe.

If I can get back to the second reason – sorry, the correctness of Jolliffe and why this is, we say, an appropriate vehicle to reconsider Jolliffe.  It is a case or a principle which will be referred to time and time again.  The cases of Hyhonie and B & M Properties, to which I just referred, are evidence of that.  Jolliffe has been quoted extensively throughout State courts since 1920.  It is opportune, we say, that the High Court since Associated Alloys looked at it in 2001 to fully thrash out the correctness of Jolliffe.

Of course, in Associated Alloys the High Court first looked at the dissent of Isaacs in its discussion of intention, and then looked at the majority.  We say that should be given some emphasis.  Secondly, the High Court in Associated Alloys said that Kauter, the first High Court which looked at Jolliffe, treated Jolliffe for a limited way, that is, that you could look at all the relevant circumstances for the purpose of that particular legislation.  So if one looks at the most recent occasion within which Jolliffe has been looked at, the High Court, in our respectful submission, treated it with some caution, and we say opened the door to a special leave of this nature.

It was not the right vehicle on that occasion, of course, to look at Jolliffe, firstly, because the question of Jolliffe was not raised, and secondly, it was a bilateral transaction.  Here, as in Jolliffe, it was a unilateral expression of a declaration of trust which is in question.  We say this proceeding and this case is the right vehicle within which to revisit and reconsider the correctness of Jolliffe because both the proceeding before Federal Magistrate McInness at first instance and before Justice Weinberg solely relied on the question of intention, subjective intention, to find that it was a not a validly created trust.  So we say this is the right vehicle to reconsider Jolliffe.

If I can just quickly supplement the written submissions which you have, your Honours?  The question of ambiguity I have already touched on, and the construction of that particular instrument, or the document, we say that – I will not say any more about the ambiguity point, save to say that we

say it is manifest and clear on the face on the document that there is an express declaration of trust.

The other point we say about the ambiguous finding that was made by Justice Weinberg is that we say he erred in law in making that finding because that is not the relevant question.  The relevant question, of course, your Honours, is whether there is a relevant intention to create a declaration of trust.  Justice Weinberg made a finding at paragraph 75 that this document is “ambiguous and uncertain”.  We say that was the wrong question and wrong finding.  In any event, we say that it is not relevantly ambiguous in any way because it manifests a clear intention to declare.

On the question of parol evidence, your Honours, we say that has not been adequately dealt with by courts since Jolliffe.  We say that, firstly, the case of Jolliffe and the many savings account cases which followed Jolliffe, including Re Armstrong, Kauter, Paul v Constance and Re Lamshed, did not require a document to be evidenced in writing, as in this case where the disposition of real property requires it to be evidence in writing in accordance with section 53(1)(b) of the Property Law Act.

We say that Jolliffe was not authority for any proposition concerning the parol evidence rule.  Justice Isaacs did touch upon the parol evidence rule in his dissent, but we say that the majority did not discuss the parol evidence in any way, and therefore any proposition that arises from their reasoning should be construed as being subject to ordinary rules of evidence, including the parol evidence.

The cases of Starr v Starr and B & M Property Enterprises, to which my friend will rely and to which Justice Weinberg relied, follow Jolliffe, and we say wrongly because we say Jolliffe was not authority for any proposition concerning parol evidence.  In any event, we say Jolliffe, on our first contention was wrongly decided, so those cases of Starr v Starr and B & M Property Enterprises should not stand.

Further, on the question of parol evidence, there was a reference to a recent Court of Appeal decision of Hyhonie, and in that case as in this case there were no arguments made about parol evidence, except that there was initially at least an allegation of a sham that the document in that case was a sham.  There was no finding though in that case that there was a sham document, as in this case there has been no finding of any sham, and we say that that is the only appropriate exception to the parol evidence rule which allows you to admit extrinsic evidence to contradict the terms of a document.  So we say that the parol evidence is another reason why the High Court should revisit Jolliffe, and that is all I have to say.

HEYDON J:   Yes, thank you, Mr Truong.  Mr Gardiner, we need not trouble you.

The applicant seeks special leave in order to have Commissioner of Stamp Duties (Queensland) v Jolliffe (1920) 28 CLR 178 overruled. Even if it were, that would not assist the applicant in this case. It would leave the applicant in the evidentiary difficulty described by Justice Weinberg at paragraph 76 of his judgment, which is the subject of this application. Without cogent extrinsic evidence it is not possible for the applicant to overcome the contradictions and obscurity of the declaration of trust purportedly made on 20 December 2000. Accordingly, the application should be dismissed.

Mr Gardiner, you want a costs order in the form which is set out in paragraph 4.1 of your written submissions?

MR GARDINER:   Yes, we do, your Honour.

HEYDON J:   Mr Truong, do you have anything to say against that costs order?

MR TRUONG:   No, I have nothing to say.

HEYDON J:   The order of the Court as to costs is that the costs of the respondent of this application should be taxed and paid out of the bankrupt estate of the applicant, those costs to be part of the respondent’s costs and expenses as trustee of bankrupt estate No 1587 of 2005.  Is that satisfactory?

MR GARDINER:   Yes, your Honour.

AT 3.40 PM THE MATTER WAS CONCLUDED