Pollicino v Pollicino

[2000] NSWCA 4

CITATION:	Pollicino v Pollicino [2000] NSWCA 4 revised - 02/05/2007
FILE NUMBER(S):	CA 40356/98; CA 40405/98; ED 3801/87
HEARING DATE(S):	03/02/2000 and 04/02/2000
JUDGMENT DATE:	22 March 2000
PARTIES :	Francesco Pollicino & 2 Ors v Salvatore Pollicino Salvatore Pollicino v Francesco Pollicino & 2 Ors
JUDGMENT OF:	Mason P at 1-5; Powell JA at 6-9; Foster AJA at 10-64

LOWER COURT JURISDICTION :	Supreme Court
LOWER COURT FILE NUMBER(S) :	3801/87 3801/87
LOWER COURT JUDICIAL OFFICER :	Windeyer J

COUNSEL:	D.L. Williams for the respondents G.J. McVay for the appellant
SOLICITORS:	Garrett, Walmsley, Madgwick for the respondents Sparke Helmore for the appellant
CATCHWORDS:	Discretionary trust - partnership relief sought differs from that sought before the trial judge - judgment under appeal interlocutory - fiduciary duty - declaration of trust in property - just allowances - trust property used as security for loans - beneficiaries' interests in later properties - breach of trust - ND.
LEGISLATION CITED:	Daniels Chancery Practice 5 Ed 1233
CASES CITED:	Scott v Scott (1963) 109 CLR 649 Hagan v Waterhouse [1983] 2 NSWLR 395 Giumelli v Giumelli 161 ALR 473 Cummings v Lewis (1993) 113 ALR 285 at 293 Derrawee Pastoral Company Pty Ltd v McConochie CA 24 February 1995 unreported. Kara Kar Holdings Pty Ltd v Brookton Holdings Pty Ltd CA 27 March 1997 unreported. Hall v The Nominal Defendant (1966) 117 CLR 423 Licul v Corney (1976) 50 ALJR 438 Port of Melbourne Authority v Anschun Pty Ltd (1980) 147 CLR 35 Carr v Finance Corporation of Australia Limited (No. 1) (1980-1981) 147 CLR 246 Sanofi v Parke Davis Pty Ltd (No. 1) (1982) 149 CLR 147 A Hudson Pty Ltd v Legal & General Life Australia Limited (1985) 1 NSWLR 701 Dousi v Colgate Palmolive Pty Ltd (1987) 9 NSWLR 374 Re Tillett (1886) LR 32 Ch. D. 639 Haverland v McCleary (1894) 15 NSWLR (Eq) 22
DECISION:	Appeal dismissed with costs.

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40405/98
CA403565/98
ED 3801/87
MASON P
POWELL JA
FOSTER AJA
Wednesday, 22 March, 2000



SALVATORE POLLICINO v FRANCESCO POLLICINO & ORS

JUDGMENT

1    MASON P: I have read in draft form the judgments of Powell JA and Foster AJA.

2    I incline to the view that the 1997 judgment under appeal was interlocutory for the reasons given by Powell JA. But I find it unnecessary to resolve that issue, because I would in any event grant leave to appeal (both parties contending that the appeal was competent) and dismiss the appeal with costs.

3    Accordingly, I agree with the orders for dismissal of the appeal with costs proposed by Foster AJA.

4    The matter proceeded in 1997 on the basis that the 1993 judgment presented no obstacle to the Court, upon “further consideration”, doing what was just in the circumstances. For that reason, the correctness of the 1997 orders should be considered on their merits, in the light of the issues then fought, and without any constraint based upon the Court’s powers in 1997 being narrower than the parties assumed. But this cuts both ways, because the way that the issues were fought in 1997 is very significant.

5    The appeal should be dismissed for the reasons given by Foster AJA.

6    POWELL JA: I have read in draft the Judgment which has been prepared by Foster AJA, in which Judgment his Honour records both the history giving rise to the proceedings and the various stages taken in the proceedings leading up to the delivery by Windeyer J in August 1997 of the Judgment from which the Appellant claims the right to appeal.

7    Contrary to the view expressed by Foster AJA in his Judgment, I am of the view - for the reasons expressed by Handley JA in Derrawee Pastoral Company Pty. Limited v. McConochie [1]; see also Kara Kar Holdings Pty. Limited v. Brookton Holdings Pty. Limited[2] - that the final Judgment in the proceedings was that delivered by Windeyer J on 31 March 1993 and that the Judgment in respect of which the Appellant now claims the right to appeal was an interlocutory Judgment. In this regard it is to be noted that the test of whether or not an order is a final, rather than an interlocutory, one is, not what are the practical consequences of the order which has been made, but the nature of the order and, in particular, whether the order finally determines the rights of the parties inter se (see Hall v. The Nominal Defendant[3]; Licul v. Corney[4]; Port of Melbourne Authority v. Anshun Pty. Limited (No. 1) [5]; Carr v. Finance Corporation of Australia Limited (No. 1) [6]; Sanofi v. Parke Davis Pty. Limited (No. 1) [7]; A. Hudson Pty. Limited v. Legal & General Life Australia Limited [8]; Dousi v. Colgate Palmolive Pty. Limited [9]. That a Judgment such as that delivered by Windeyer J in March 1993 is a final Judgment is demonstrated by the facts:

1. that the Master has no power to certify matters foreign to the account or inquiry directed ( Re Tillett [10] ) and a certificate purporting to be made in such circumstances, even by the consent of all the parties, cannot be regarded as a certificate; and

2. the Court will not, on the hearing of further consideration, make an order varying, or impugning, the original decree, even although it would not have given the directions contained in the original degree if at the date of that degree it had known the facts stated in the certificate ( Daniels Chancery Practice 5 Ed 1233 ) ; nor will it deal with a matter which should be the subject of a fresh suit ( Haverland v. McCleary [11] ).

8    In the event, however, it matters not whether the Appellant needs leave to appeal or whether, as he claims, the Appellant has a right to appeal, for, as Foster AJA has pointed out, it is clear that, in the Judgment which he delivered in March 1993, Windeyer J rejected the Appellant’s claim that a constructive trust should be imposed in his favour on the later properties, and no appeal was then brought against that part of Windeyer J’s Judgment. That being so, it was not open to the Appellant on the appeal to Windeyer J from the Master to formulate his claim upon the basis that the later properties ought to be treated as subject to a constructive trust, or to reformulate his claim as a money claim of the type dealt with by the High Court in Giumelli v. Giumelli [12]).

9    Since the final result is the same whether or not, as I would have it, the appeal be dismissed as incompetent or, as Foster AJA proposes, the appeal be dismissed as lacking in substance, I am content to agree with the order proposed by Foster AJA.

10    FOSTER AJA: This is an appeal from a decision of Windeyer J given on 14 August 1997 after a previous judgment in the proceedings between the parties given on 31 March 1993. The previous judgment had directed certain accounts and enquiries to be taken and made by Master Macready, pursuant to which the Master had provided his Certificate dated 18 October 1996. In the decision under appeal Windeyer J dismissed certain appeals brought by the present appellant from findings made by the Master in the course of judgments which he had given leading up to the making of his Certificate. Additionally, his Honour gave further consideration to the whole of the proceedings and refused to grant to the present appellant any further relief following upon the enquiries before the Master.

11    A question was raised during the hearing before this Court as to whether leave was necessary for the bringing of the present appeal, on the basis that the decision of Windeyer J of 14 August 1997 was interlocutory only. I shall deal with that question later in these reasons. Before coming to the questions raised in this appeal, it is necessary to set-out briefly the prior history of the dispute between the parties and of the proceedings, as they have occurred before Windeyer J and Master Macready.

HISTORY

12    The appellant is the brother and brother-in-law respectively of the first and second respondents. In all previous proceedings he has been referred to as "Sam" and the first respondent has been referred to as "Frank". The second respondent has been referred to as "Teresa" and the third respondent as "Vaiela". I shall adopt the same nomenclature in these reasons. The third respondent, a company, is the Trustee of a discretionary trust of which the first and second respondents and their children are beneficiaries. The third respondent is under the control of the first and second respondents. The appellant is not and never was a beneficiary of the Trust.

13    Sam migrated to Australia from Italy in 1952 and Frank migrated in 1962. The brothers worked together in Australia in the building industry in circumstances where Sam, in the proceedings before Windeyer J, claimed the existence of a partnership between them. This claim failed, except in respect of certain work performed by them at Kooragang Island, where it was held a partnership existed. All other work undertaken by the two brothers involved, as found by Windeyer J, Sam's working for Frank on wages. Frank had a far better grasp of business matters than did Sam. Additionally, he spoke English far better than Sam. It is clear that, generally speaking, Frank and Teresa cared for Sam. They looked after his financial affairs including the management of his wages, which were not paid to him directly. They paid for all his requirements and his outgoings from the wages that they retained and from other monies and, in effect, gave him whatever he asked for.

14    In 1971 a property, 148 Teralba Road, Adamstown was purchased by Frank in the names of himself and Sam as tenants-in-common in equal shares. Frank provided the purchase money. However, there is no dispute that it was his intention to provide a half-share in the property to Sam, in circumstances where no resulting trust could occur. In 1971 twelve flats were constructed upon this property, after which the flats were let and all the rent was collected by Frank and Teresa and paid into their bank accounts or to lenders who advanced money for the construction of the flats. Sam was not credited directly with the proportion of the rents attributable to his half interest.

15    In 1975 an adjoining property, 146 Teralba Road, Adamstown was purchased in the names of Sam, Frank and Teresa as tenants-in-common in equal shares. It was purchased by borrowings and monies provided by Frank and Teresa, although, arguably, some of the monies provided by them may have included monies of Sam. Again, there was no question of a resulting trust. Sam was a co-owner of the property with the other two.

16    On 13 March, 1978 both these properties were transferred to Vaiela as trustee. 148 Teralba Road was transferred at a price of $150,000.00 and 146 Teralba Road at a price of $260,000.00. Another property at Lismore, in which Sam had no interest was transferred at the same time for a price of $115,000.00. It was held by Windeyer J that it was represented to Sam by Frank, at the time of the transfer, that he would be entitled to a one-third interest in the whole of the Vaiela Trust. This was a misrepresentation: Sam received no interest in the trust at all and his proprietary interest in the two properties in Teralba Road was converted into an unsecured and interest-free entitlement in the loan account of the company.

17    Thereafter, Sam was not credited with any share in the rental income of the properties, nor with any accretion in their capital value. As before, he was provided with monies by Frank and Teresa for his needs.

18    After 1978 other properties were acquired by the Trust and, in two instances, developed by the construction upon them of blocks of flats. Flats were also constructed upon the property 146 Teralba Road. The subsequently purchased properties were 127 Victoria Street, Adamstown, purchased in August 1979, 137 Teralba Road, Adamstown, purchased in July 1981, 169 Brunker Road, Adamstown, purchased in February 1982 and 115 Teralba Road, Adamstown, purchased in April 1982 ("the later properties"). By 30 June 1986 the construction of flats had been completed. The purchases of these properties were accomplished through borrowings from lending institutions, to some extent secured by mortgages from time to time on the properties 146 and 148 Teralba Road, the rentals from these properties going towards the repayment of borrowings. Frank's concreting business was also conducted through Vaiela.

19    In 1986 there was a falling-out between Sam and Frank concerning an incident at a local soccer club. As a result of this dispute, Sam was made aware that he was not a one-third beneficial owner of the properties in the Vaiela Trust. He commenced the proceedings which were heard and determined by Windeyer J on 31 March 1993. It is necessary to refer to his Honour's findings and consequential orders.

The 1993 decision

20    Windeyer J found the misrepresentation to which I have already made reference. He found that Frank and Teresa were in breach of a fiduciary duty owed to Sam in misrepresenting the effect of the transfers to Vaiela, and, thereby, acting contrary to his interests and in their own interests. As Vaiela was controlled by Frank and Teresa, he found that it acquired the properties 146 and 148 Teralba Road with knowledge of the breach.

21    His Honour consequently held that there should be a declaration that Vaiela held a one-half interest in 148 Teralba Road and a one-third interest in 146 Teralba Road on trust for Sam as from 13 March 1978. He further said:

"That would of course mean that the fruits attaching to those interests would go to the plaintiff. In so far as those fruits were used to purchase other properties or the properties were mortgaged so as to provide development monies for other properties that will have to be taken into account and appropriate orders for a Master's inquiry formulated."


He also indicated that an account should be taken of the defendants' dealings with Sam's monies prior to 1978 and thereafter, with a recognition that the accounting in relation to the Kooragang Island work should be on the basis of a partnership, in which Sam was entitled to one-third of the profits.

22    His Honour said in relation to the later properties:

"I do not consider the claim for a trust in respect of the later properties has been made out. I do accept the plaintiff's evidence on the conversations which took place at the time of purchase which may have been intended to mislead him but they do not give him an interest in those properties."

23    After making these findings his Honour stood the matter over for the bringing in of short minutes, noting that it would be necessary to take into account an amount of $166,000.00 previously paid to Sam by way of interim order, being the balance then shown in his favour in Vaiela's loan account.

24    The orders as finally entered on 30 September 1993 made the declarations of trust already referred to and appointed trustees for sale of 146 and 148 Teralba Road, which orders were stayed until further order of the Court. The stay was later lifted and the sales made. The proceedings were referred to a Master in the Equity Division as follows:-

5. (a) To take an account of all moneys received and disbursed in
respect of the land since March, 1978.
(b) To enquire whether any and, if so, what property has been purchased in whole or in part, with moneys secured by way of mortgage over the land or part thereof and if part which part.
(c) To enquire as to whether any and, if so, what property has been purchased, in whole or in part, from money received from the rent of the land or any other properties as may be found to have been purchased pursuant to the enquiry in Order 6 of this Order
(d) To take an account of all moneys received and disbursed in respect of the properties as may be found to have been purchased pursuant to the enquiries in Orders 6 and 7 hereof.
(e) To take an account of all money received and disbursed for or on account of the plaintiff between 1961 and 18 March 1978 by the First and/or Second Defendants.
(f) To take an account of all moneys received and disbursed for or on account of the plaintiff by the defendants or one or more of them from 13 March 1978 to date and declare that as to the Contract involving construction at Kooragang Island that in such account the plaintiff should be entitled to be credited with one-third (1/2) of the net profits derived from such Contract."

25    After giving further directions in relation to the taking of the accounts his Honour stood the matter over to a date before Master Macready for the purpose of further directions, his Honour reserving to himself "further consideration".

26    Thereafter accounts and enquiries were conducted before the Master. These involved fourteen hearing days and three judgment of the Master given 21 March 1996, 15 May 1996 and 12 August 1996, after which the Master provided his Certificate on 18 October 1996 covering accounts up to 31 March 1995. It is necessary to refer to the proceedings before the Master and to his judgments.

Proceedings before the Master

27    It is accepted that the references in Orders 5 (c) and (d) to Orders 6 and 7 are misprints. "Order 6" refers to Order 5(b) and "Order 7" refers to Order 5(c). The Master was required by the orders, then, to take accounts pursuant to orders 5 (a), (d), (e) and (f) and to make the enquiries referred to in Orders 5 (b) and (c).

28    It was accepted by Windeyer J, in the judgment appealed from, that an observation made by the Master in the course of his judgment, that the matter was far more complex than had been originally thought, was correct. It was not possible to take the accounts in the discrete manner required by the orders. The allocation of items between the separate headings became too difficult. Accordingly, the parties accepted that the accounts ordered by 5 (a), (e) and (f) should be taken in composite form. The necessity so to do was acknowledged by Windeyer J, in the judgment under appeal.

29    In receiving evidence in relation to the taking of these accounts, as is clear from his judgments, the Master formed an adverse view of the credibility of Sam, which was, to an extent, in contrast to the view formed by Windeyer J in the initial proceedings. This affected findings of the Master in relation to the accounts. Also, he was satisfied that not inconsiderable "just allowances" should be made to Frank and Teresa in relation to work done in the organising of the construction of the properties and in their management. Moreover, he found that they had been far from niggardly in the moneys that had been provided to Sam over the years, albeit that his share of the rentals of the Teralba Street properties formed part of the fund from which these amounts had been provided. The moneys provided significantly exceeded Sam's share of the rents. In the upshot, and taking into account the amount of $169,695.90 paid to him under the interim order in respect of the loan account, the Master found that Sam was indebted to the respondents in the amount of $109,048.54. It is clear that this was an unexpected result It was, obviously, of some significance to his Honour when he entered upon the further consideration of the matter in 1997.

30    The account required by order 5 (d) was not undertaken by the Master. Windeyer J in his judgment of 1997 accepts that the Master was not required to do so, before the question of what further orders should be made upon further consideration of the matter had been determined.

31    It should be noted, also, that in arriving at the figure of Sam's indebtedness, the Master allowed interest in respect both of amounts awarded to Sam and to the defendants. Accordingly, in the computation, Sam was credited with all amounts that he should have received by way of rent from the Teralba Street properties together with interest on those amounts.

32    The enquiries enjoined by orders 5 (b) and (c) obviously occasioned difficulty. Sam relied upon the evidence of an expert, Mr Ludowici who prepared two sets of accounts which became known, in the litigation, as Pollcash and Pollprop. It is convenient to set-out what the Master said of these two exercises, in his judgment of 21 March 1996.

"The first exercise, Pollcash, was one in which he for the years from 1978 to 1988 sought to determine whether there was income available to the Trust from its other income producing activities, i.e. the building business, and receipt of rents from flats other than 146 and 148 Teralba Road. In the event that there was no such income or that there was a loss, then the conclusion inherent in the exercise is that the rents received from 146 and 148 Teralba Road have gone towards the purchase and acquisition of the four properties with which we are concerned.
The second exercise Pollprop is one which looks at the properties held by the Trust and properties purchased by the Trust from third parties. Relevantly the properties held by the Trust are, of course, 146 Teralba Road, 148 Teralba Road and College Street, Lismore. The schedule uses what Mr Ludowici had determined was the purchase price and construction costs in respect of these properties (which will be quite different from what I have determined in this judgment) and then applies a proportion for Sam being his share in respect of the two Teralba Road properties and no interest in respect of College Street, Lismore. This results in Sam having an interest of 30.36 percent which Mr Ludowici says was increased by the withdrawal of some monies from the Trust by Frank and Teresa of $77,069 making the proportion of Sam's entitlement to the assets of the Trust at 38.45 percent. The logic of the schedule then is that this is the foundation for all the subsequent purchases and that Sam should be entitled to share in the subsequent purchases to the extent of 38.45 percent. There is an assumption that mortgages on 146 and 148 Teralba Road allowed the later purchases and also an assumption that the whole of the rents from those properties were used for the subsequent purchases and construction."

33    The Master was critical of these exercises saying that there were a number of fundamental problems with them. He went on to point out that a number of matters were left out of account. These are set-out in detail in his judgment. There is no need to repeat them here. He indicated that a large number of other matters would have to be taken into consideration before any determination could be reached as to what was Sam's proportionate interest in the Trust assets before the purchase of the later properties. The judgment was necessarily inconclusive and no findings were made in relation to orders 5 (b) and (c).

34    On 15 May 1996 the matter was before the Master for further directions. Directions were given in relation to accounting records and further references made to the Pollprop and Pollcash exercises, but nothing conclusive occurred.

35    On 12 August 1996 after receiving further evidence and submissions the Master made a number of findings in respect of outstanding matters including appropriate rates of interest. He also dealt with the Pollcash and Pollprop exercises, having regard to further work that had been done following on the previous discussions. He recorded the fact that there was a dispute as to whether the exercises, even in a more refined form, were the appropriate way to approach the enquiries required by order 5 (b) and (c). There was very clearly an issue between the parties as to whether the percentage of interest approach was the correct way of dealing with the problem, rather than a detailed specific consideration of the history of the use of the two properties in the purchase of the later properties. The Master indicated that the problem was "far more complex than anticipated by the parties and by his Honour Mr Justice Windeyer at the time the directions were formulated." He also noted that order 5 (c), unlike order 5 (b) did not conclude with the words "and if part which part?" He noted that Windeyer J had not, in his judgment "given detailed consideration as to how the results of the Master's enquiry would be applied by him in formulating any final orders." In these circumstances, he determined that it would be appropriate for him to "make findings in respect of these two areas of enquiry (which are not an account) which would give his Honour flexibility in the final result."

36    He then had regard to the new versions of Pollprop and Pollcash which had been placed before him. He noted that a reworking had produced the result that the plaintiff's share in the Trust assets before the acquisition of the later properties was 24.88 percent. He noted that the exercise did not take into account certain matters and that, if they were taken into account, the proportion would be reduced to 23.12 percent.

37    However, he noted that the exercise had been the subject of considerable criticism through an expert called on behalf of the respondents, who had concluded that the exercise "did not have any integrity in relation to accounting practice."

38    Similarly, the exercise Pollcash was subject to fundamental objections. The Master considered these matters in some detail. He stated his opinion that the exercise contained some underlying assumptions which he thought were fallacious. It turned out that the exercise had some inherent reliability problems and did not assist in answering the question imposed by order 5 (c).

39    The Master then referred to the fact that there had been strenuous objection by the defendants to the use of the Pollprop and Pollcash exercises, firstly on the basis that they were unreal, in failing to have regard to the fact that Sam owed the defendants money in respect of funds advanced by them for his benefit and that this indebtedness extended over many years and was particularly in evidence at the time of the acquisition of the later properties. The second objection noted was that the exercises failed to take any account of "the nature and the quantitative assessment of the use to which the properties were put to borrow or acquire later properties." It is clear that this posture to Pollprop and Pollcash had been maintained on behalf of the defendants throughout the hearing before the Master.

40    In order to accommodate this latter objection the Master made detailed findings in respect of each of the later properties indicating the source of funding, security given and period of borrowings. These are in considerable detail and were accepted in full by Windeyer J in the judgment under appeal. He set them out in his reasons. It is necessary to set them out here. They are as follows:-

" 127 Victoria Street
This property was purchased for $38,000 on or about 3 August 1979 and $30,000 of these funds came from a bill facility from the National Australia Bank secured on 146 Teralba Road. The bill facility was reduced by $5,000 on 11 February 1980 and was repaid in full on 5 August 1980. Although the evidence does not indicate the cost of construction it does indicate that these costs were met from the proceeds of the sale of Lismore and this is supported by the evidence of Mr Frank Pollicino in cross-examination.
137 Teralba Road
This was purchased on 24 July 1981 for $52,000. These funds came from the funds of Vaiela and at that stage the only overdraft was $10,000 as I have noted in my earlier judgment. The evidence does not show whether this was utilised for the purchase.
169 Brunker Road
This was purchased on 17 February 1982 for $72,000. Finance came from a bill facility from the National Australia Bank in the sum of $50,000 and an overdraft of $20,000. The bill facility was reduced and it was cleared on 11 December 1985. An additional bill facility of $25,000 was approved in April 1983 and was rolled over on a reducing basis until it was cleared on 27 June 1984. From 1983 it was also secured by personal guarantees of Frank and Teresa.
115 Teralba Road
This was purchased in about April 1982 for $180,000. $150,000 of this came from a commercial loan from the C.B.F.C. as collateral security. In due course finance for the construction was provided by the Commonwealth Bank of Australia and also by Mr Santi Pollicino. The Commonwealth Bank security included 148 Teralba Road and an unregistered mortgage over Frank and Teresa's home together with their personal guarantees. In 1985 the Commonwealth Bank facility appears to have been $200,000 for the construction of the flats rising in June 1986 to $470,000. By March 1988 this had reduced to $440,000. The facility remained in place and by December 1989 increased to $540,000. In late 1991 it was reduced to $380,000. In June 1992 it increased again to $480,000."

41    The Master then returned to question 5 (b). He noted that he had already found that all the properties were purchased in part with monies secured by way of mortgage over 146 and 148 Teralba Road. He said it was not possible "because of the nature of the question which has been asked" to determine what was the part purchased. He said that it was not clear in what precise way his Honour would use the information from the enquiries for the purpose of his final determinations, as the complications which had occurred were not then known to him. He indicated that, accordingly, he would not make any further findings and that the findings made should assist his Honour "in the final resolution of the matter." As to question 5 (c) he noted that it did not require any quantification of the extent to which the rent had been used to purchase the later properties. The question could be answered by stating that the properties had been purchased in part from money received from the rents of 146 and 148 Teralba Road.

42    On 18 October 1996 the Master provided his Certificate in which he recorded the finding that the plaintiff was indebted to the defendants in the sum of $109,048.54. He appended 37 pages of accounts indicating how this figure was arrived at. In relation to question 5 (b) he certified that each of the later properties had been purchased in part with money secured by way of mortgage over 146 and 148 Teralba Road. He stated that he had not, due to the nature of the question, been able to determine what part of each of the properties was so purchased but he referred to the findings in his judgment in this regard. He noted that he had not taken the account required by order 5 (d), for the reasons set-out in his judgment. In respect of paragraph 5 (c) he certified that each of the later properties had been purchased in part by monies received from the rents of 146 and 148 Teralba Road and he referred to his findings in his judgment.

43    The proceedings then came back before Windeyer J, the following year.

The 1997 hearing and judgment

44    There was no appeal against the Master's Certificate. However, Sam appealed to Windeyer J against certain of the findings of the Master in relation to the Pollprop and Pollcash exercises. It would appear that, basically, what was sought was a ruling that the Master should have found that the plaintiff's share of the value of the properties transferred to the Trust in 1978 was 24.88 percent of the total value of those properties. It seems that the Notice of Appeal was aimed at considerations adopted by the Master which had reduced that figure. It does not appear to claim, with precision, that the Master should, in principle, have adopted in answering questions 5 (b) and (c), the approach involved in these exercises

45    The written submissions provided to his Honour by Sam developed the theme that the plaintiff should receive additional relief, upon further consideration, by way of a Declaration of Trust in the later properties based upon the percentage that the value of Sam's interest in the original properties of the Trust bore to their total value. Indeed, a figure higher than 24.88 percent is claimed. The major contention appears to be that the Master erred in calculation of this percentage. It must also be noted that the claim, as so made, appears to be at odds with the decision of Windeyer J in his first judgment of 31 March 1993, where his Honour had, as already indicated, refused to find any Trust in the later properties in favour of Sam.

46    In his judgment of 14 August 1997 his Honour referred to certain "procedural problems". He noted that the Master had correctly considered that he had never come to a conclusion as to what would be the appropriate orders based on the outcome of the enquiries. He had expected that the matter would come back to him on a motion for further consideration, although he had not expected that such difficulties would have arisen. He noted that he had before him an appeal against some of the Master's findings and a cross-appeal filed by the defendants relating to the Master's finding on interest. (The cross-appeal is now of no consequence). His Honour further noted that both parties had envisaged that the hearing before him would determine not only the specific appeals but also the future conduct of the proceedings "to bring them to a final conclusion." After referring to the Master's Certificate his Honour said:

"There is no appeal by either side against the determinations in the Certificate, nor is there any real claim that the findings which the Master has made are incorrect. It is what ought to be done as a result of those findings which has been to a large extent, the subject of the hearing before me. To a large extent that is a matter for further consideration, there being no appeal about the Certificate. In any event it was accepted that the appropriate way forward was to deal so far as was necessary with the particular subjects referred to in the notice of appeal and cross-appeal and then determine what result should follow from that and from that part of the Master's Certificate not under challenge. It is, I think, fair to say that the plaintiff seeks that accounts be taken in respect of the subsequently acquired properties on the basis that the plaintiff has a particular proportionate interest in the combined fund, and the defendants resist this on the basis that this would be quite inequitable having regard to the continuing state of accounts between the parties at the relevant times up to the present time."

47    Having dismissed the defendants' cross-appeal on interest, his Honour then turned to other matters which he dealt with under the heading "Appeal and Further Consideration." I consider it necessary to set-out the whole of this part of his Honour's judgment. It reads as follows:

"There are a number of complaints made about the Master's findings in his judgments, although not about his Certificate. It is perfectly clear that his Certificate is correct or perhaps that it is accepted by the parties as correct. Thus it does not seem to me to be appropriate to set aside the findings of the Master because the findings of the Master so far as they are certified by his Certificate are not challenged. What is challenged are some of the matters referred to such as the proportionate value of the plaintiff's share in the total trust fund of Vaeila but the difficulties referred to by the Master just point to the need for further consideration.
I have come to the conclusion that it is not necessary to deal with these matters the subject of complaint. On a number of occasions during the hearing of the appeal before me I asked counsel for the plaintiff on what basis it was claimed that there should be a tracing order into the subsequently acquired properties, if the accounts had been prepared by agreement to take into account all the income to which the plaintiff was entitled from the two properties the subject of the constructive trust order. In other words I suggested that this would involve an element of double dipping claiming both proprietary and personal rights which could not be allowed and therefore questioned whether the plaintiff wished to maintain his acceptance of the amount in the Master's Certificate and his attitude of not challenging it. On each occasion counsel for the plaintiff stated that he did not wish to challenge that amount or to have the Certificate varied in any way but he wished to have a tracing order as well.
I have come to the conclusion that such a claim is not maintainable and that there has been an election by the plaintiff to accept his share of the rents. That would mean that if those rents were used, either in the acquisition of the subsequently acquired properties or in discharge of mortgage over those properties then the plaintiff had nevertheless been credited with his share. It is not available to him to claim both.
I should add that had this not been the position it would, in my view, have been almost impossible to adopt a fair basis for the taking of accounts. It could not have been a just outcome to take just the original contributions made to the trust fund by the parties as quite clearly there were substantial alterations to what would be called the capital accounts and various individually owned assets of the individual defendants were charged or mortgaged as security for loans obtained for the acquisition of new properties by Vaeila or for the construction of buildings on them. While it is clear enough on the authority of Scott v Scott (1963) 109 CLR 649 and Hagan v Waterhouse [1983] 2 NSWLR 395 that in appropriate cases where the proportions are reasonably identifiable a tracing order can be made even though the assets are not capable of easy division I do not think it would have been possible in this case. To some extent I am fortified by my view that a fair result is obtained without tracing because the parties have accepted one account and had the plaintiff used his share of the rents to repay to individual defendants moneys he owed to them those rents could not have been used to acquire other properties: but that in itself is not a reason to disallow tracing."

48    It should be noted that earlier in his judgment his Honour had set-out in full that part of the Master's judgment which dealt with criticisms of the Pollcash and Pollprop exercises to which I have already made reference, and the respondents' objections to the validity of the whole exercise. Also included were the Master's analysis of the financing and provision of security in relation to each of the later properties, which I have set out above, together with his indication that the information and findings should be of assistance to his Honour in the final resolution of the matter. It is clear, of course, that Windeyer J had had that material in mind when making the observations which I have just set out. It is also important to bear in mind that those observations were made in the context of submissions on behalf of the respondents that Sam had already received, as a result of the sale of the Teralba Street properties and payment to him of his proportionate share of the proceeds, together with the full amount of his rents from the properties plus interest, all that, in the circumstances, he could reasonably be entitled to in equity. I am satisfied that Windeyer J took this view. In effect, although this position is not precisely articulated in the judgment, his Honour was clearly accepting the respondents' proposition that the Pollcash and Pollprop approach was inappropriate; i.e. that, in the circumstances of this case, equity did not require that Sam be given an interest in the later properties based upon the percentage of his contribution to the original Trust properties. There were too many other factors involved. It was not a case which could be resolved in accordance with Scott v Scott (1963) 109 CLR 649. It was on the basis of these considerations that his Honour made his observations about "double dipping", dismissed Sam's appeal and refused Sam any further relief.

49    I come then to consider the present appeal.

The Appeal

50    As I have already indicated, the question was raised during the hearing whether the orders made by Windeyer J in his second judgment should be treated as interlocutory, with the result that leave to appeal was required. The question was whether his Honour's original judgment given in 1993 was the final judgment in the matter with the result that the decision on further consideration must be regarded as interlocutory in nature. Since the hearing concluded, the Court has received submissions, from both sides, to the effect that, in the circumstances of the case, his Honour's decision and orders given and made in August 1997 were final in nature. The situation is unusual. His Honour's judgment in 1993 was the subject of an appeal by the respondents, who claimed that his Honour had erred in his imposition of the constructive trust upon the Teralba Street properties. The Court of Appeal dismissed the appeal and confirmed his Honour's decision. It is clear, however, that both his Honour and the Court of Appeal recognised that the question whether any further relief should be granted to Sam in respect of the use of his interests in the Teralba Street properties, including the rent derived from them, should await the results of the enquiries ordered in paragraphs 5 (b) and (c). This was clearly the view taken by Windeyer J himself as appears from the passages from his judgment cited above. For my part, whilst acknowledging the strength of the contrary arguments, I am prepared to regard the orders made by Windeyer J in August 1997 as being orders finally disposing of Sam's claims for relief. In the special circumstances of the case, I do not consider that leave is necessary. If I am in error in this, I would consider it appropriate to grant leave.

51    However, it is clear that Windeyer J, in his judgment in 1993, rejected Sam's claim that a constructive trust should be imposed in his favour on the later properties. In so far as submissions were made to Windeyer J, in the 1997 hearing, to the effect that such a trust interest should be imposed, it is submitted that they were, in the circumstances, misconceived and not open. In view of the fact that his Honour found that no further relief was required, it would appear that this question did not arise in the hearing before him. However, as the same claim for relief has been made in this appeal, the question has arisen here and has been the subject of debate.

52    I am quite firmly of the view that, as no appeal was brought against his Honour's finding in 1993, it is not open to Sam to claim, in these proceedings, that he should receive a trust interest in the later properties.

He has, in light of this difficulty, which was raised in argument, sought to reformulate his claim as a money claim of the type dealt with in Giumelli v Giumelli 161 ALR 473. It is conceded that the claim in this form was not previously made.

53    Indeed there has been great difficulty in ascertaining the precise relief sought by Sam in the present appeal. The notice of appeal (RB 206) is quite unhelpful. Attempts to reformulate the relief in oral argument tended to produce confusion and rising levels of judicial frustration rather than clarity. When judgment was reserved, the appellant was directed to serve notice specifying exactly what is now sought. A letter from the appellant’s counsel indicates that it is the following:

"2. Order that the properties known as 129-131 Victoria Street, Adamstown, 137 Teralba Road, Adamstown, 169 Brunker Road, Adamstown and 115 Teralba Road, Adamstown ("the further properties") be valued to obtain their current market value by an independent valuer to be agreed upon between the parties and failing agreement to be appointed by the President for the time being of the Australian Property Institute (New South Wales Division).
3. Order that the proceedings be referred to a Master in the Equity Division to take an account of all disbursements incurred in the acquisition, construction, financing, operating and maintenance of each of the said further properties including just allowances to the respondents for management of each of the said further properties.
4. A declaration that the appellant is entitled to a sum which represents 24.88% of the difference between the current market value of each further property as determined by the valuer pursuant to Order 2 hereof and the amount of all disbursements incurred including just allowances in respect of each of the further properties as may be found on the accounting taken pursuant to the orders in paragraph 3 hereof.
5. Order that each of the further properties be subject to a charge in favour of the appellant to secure payment of any sum found to be payable to the appellant pursuant to the declaration in paragraph 4 hereof."

54    The reasons why an appellate Court needs a precise formulation of the relief sought in any appeal is obvious. It provides a focus for argument and it is the minimal level of assistance which the Court is entitled to receive. In the present case, the matter has additional importance because of the issue which emerged during argument as to the position taken by the appellant in the Court below.

55    As already indicated Sam concedes, as he must, that the relief now sought differs from that sought before the learned trial judge. However Sam contends that the difference is not significant, that less is now sought than was sought before Windeyer J, and that the respondents will suffer no prejudice if the Court of Appeal entertains the reformulated claim for relief. Counsel for the appellant relies upon Cummings v Lewis (1993) 113 ALR 285 at 293.

56    Sam’s present claim can be summarised in the following propositions:

• The 1993 order declared that Vaiela held the trust properties upon trust
for Sam as to one-third and one-half respectively. The trust was constructive but nevertheless proprietary in the sense discussed in Giumelli .

• The Master’s response to pars 5(b) and 5(c) of the 1993 Orders (par.

above) concludes that these equitable interests of Sam were in part used by Vaiela in the acquisition of the after-acquired properties.


• The Master’s task stemming from the 1993 Orders was to ascertain that
part.

• The value thereby determined would represent the profit which the
(constructive) trustee made from its use of the trust property.

• Orders made by Windeyer J in 1993 and 1997 had the effect of
returning to Sam the capital value of his trust interest in the trust properties (through the appointment of trustees for sale and the distribution of the appropriate share of the sale proceeds) as well as Sam’s share of the net rental income of the trust properties.

• However, the Master’s finding that the trust properties were used in
part to finance the acquisition of the after-acquired properties means that a further profit or gain made by the trustee (Vaiela) by use of the trust properties before they were sold must also be reflected in an award by way of account of profits in Sam's favour.

• Sam is entitled to a sum which represents 24.88% of this further profit

or gain.

57    It is to be observed that, whether or not leave to present this reformulated claim should be granted, it contains the assertion that Sam's entitlement to the gain made by the errant fiduciary, through the use of his interests in the Teralba Street properties, should be calculated in accordance with the Pollprop and Pollcash exercises. What is now sought is no longer a 24.88 percent interest in the current value of those properties but an identical proportionate interest in the increase in value of those properties, after appropriate allowance has been made for the deductions under the various headings referred to..

58    It is important to recognise that this is the only claim made in respect of the gain in value in the later properties. Reliance is placed upon the 28.44 percent evaluation stemming from the Pollcash and Pollprop analyses. No other approach is envisaged or espoused.

59    In particular, no claim is based upon an evaluation of any gain which might be found to have resulted from the periodic and temporary use of Sam's interest in the Teralba Street properties as security for borrowings used by Vaiela in the acquisition and/or construction of the later properties, in accordance with the findings made by the Master. Such an undertaking would, obviously, be extremely difficult. I consider that it is this difficulty which was adverted to by his Honour in portion of his judgment cited above. Also, an enquiry, along these lines, as to the use made of Sam's share in the rentals from the properties, would require that allowance be made for the interest on those rentals credited to Sam in the composite accounts. The difficulty would, of course, be increased if rental from the later properties should also be taken into account in determining any relevant gain from the original breaches.

60    Having regard to the principle that an errant fiduciary should account for profit or gain made by a breach of trust, it is, of course, theoretically possible that an enquiry of the type I am discussing could take place. Having regard to the length of time involved in the enquiries undertaken to date, it might be thought that enquiries consequent upon the Master's findings in respect of the later properties, would be even lengthier. Moreover, after all proper allowances had been made for the contribution of the respondents to the acquisition and development of the later properties, the ascertained gain attributable to the breach of trust might well be very small, even negligible.

61    The significant matter however, in my view, is that it has never been Sam's case that an enquiry along these lines should be instituted. It has always been, and still is, his case that he is entitled to a percentage share (be it of capital or capital profits) based upon the reasoning of Pollcash and Pollprop. The question before Windeyer J was whether, in view of the Master's findings, he should make such orders. I am inclined to the view, with great respect, that his Honour's reference to "double dipping", whilst it might well apply to the claim based on the use of Sam's rents, when the rents had been returned to him with interest, was, nevertheless, an inappropriate description of the use of Sam's interests as security. However, in view of the way Sam put his case, this is not to the point.

62    His Honour was required to make a discretionary judgment as to whether he should grant relief in accordance with the formulation put to him by Sam. Having regard to the Master's findings in respect of the individual later properties, set-out above, he was, in my view, fully justified in rejecting the claim as so framed and, in the circumstances, there being no alternative claim, refusing any further relief over and above the quite significant awards which Sam had already received.

63    In the circumstances I would refuse the amendment sought as it does not overcome this problem.

64    In my opinion, the appeal should be dismissed with costs.

END NOTES
1. Court of Appeal 24 February 1995 (unreported)
2. Court of Appeal 27 March 1997 (unreported)
3. (1966) 117 CLR 423
4. (1976) 50 ALJR 438
5. (1980) 147 CLR 35
6. (1980-1981) 147 CLR 246
7. (1982) 149 CLR 147
8. (1985) 1 NSWLR 701
9. (1987) 9 NSWLR 374)
10. (1886) LR 32 Ch. D. 639
11. (1894) 15 NSWLR (Eq) 22
12. (1998-1999) 73 ALJR 547; 161 ALR 473

Revision Reasons
Hyperlinked End Notes added - 2/05/07