R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd; Lenby Pty Ltd (In Liquidatiion) v Lombardo

[1993] HCATrans 256

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P2 of 1993

B e t w e e n -

R & I BANK OF WESTERN

AUSTRALIA LTD

Applicant

and

ANCHORAGE INVESTMENTS PTY LTD

First Respondent

OCEAN SHIPYARDS (WA) PTY LTD

Second Respondent

OCEAN TRAWLERS PTY LTD

Third Respondent

MICHELE LOMBARDO

Fourth Respondent

1 27/8/93

CAMBIO PTY LTD

Fifth Respondent

Office of the Registry

Perth No P3 of 1993

B e t w e e n -

LENBY PTY LTD (In Liquidation)

Applicant

and

MICHELE LOMBARDO and

FREDA JESS LOMBARDO

First Respondents

MARBLE DYNASTY PTY LTD

Second Respondent

ANCHORAGE INVESTMENTS PTY LTD

Third Respondent

Application for special leave

to appeal

MASON CJ
DEANE J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 27 AUGUST 1993, AT 2.04 PM

Copyright in the High Court of Australia

R&I	2	27/8/93
MR M.J. BUSS:	May it please Your Honours, I appear for the applicant in each of these matters.	(instructed by
Salter Power and Parker & Parker)

MR M.J. McCUSKER, OC:  May it please the Court, I appear

with my learned friend, MR M.J. HAYTER, for the

respondents. (instructed by M.J. Hayter & Co)

MR BUSS:  Your Honours, I turn first to make submissions as

to the reasons why special leave ought to be

granted. A limited liability company, with nominal

paid-up capital, acting as trustee of a

discretionary trust, is a common business

structure. Although the structure in form involves

a trust relationship, the articles of association

of the trustee company, and the terms of the

trust deed usually facilitate an individual

exercising complete control over the trust assets,

without any material fiduciary obligations.

This point was emphasized by Justice Rowland

dissenting, at page 58 of the application book, at

about line 23, where His Honour said:

It can be seen from this brief outline

that, notwithstanding that there is a family

trust controlled by a corporate trustee, there

is absolutely no impediment standing in the

way of Lombardo from dealing with the assets

of Anchorage in any way he sees fit, including

vesting all of those assets in himself. That

is, he has complete and unrestricted powers to

deal with those assets as he chooses. At its

highest, the only fiduciary duty owed by the

trustee is to one of the named proposed

beneficiaries that the trust is being

administered properly and, as there is no

liability on the trustee for breach of trust,

it might be thought that that duty is

illusory.

Your Honours, this same point was taken up by

Justice Owen at page 101 of the application book.

There His Honour said, at line 12:

There is much to be said for the

argument advanced by counsel for R & I that

the combination of powers conferred on

Lombardo constituted a general power of

appointment. These powers are so far reaching

that it might properly be said that Lombardo

is "for all practical purposes in the position

of beneficial owner of property" holding "a

right of disposition which is in many respects

the equivalent of property": see Tatham v

Huxtable.· It might also be argued that in

27/8/93

view of the provisions of the Trust Deed (in

particular els 7(34) and 9 which severely

limit the consequences for a trustee of a

breach of duty) that the arrangement

represented by the Trust is so devoid of the
normal fiduciary incidents and obligations

that it is not a trust arrangement at all.

Your Honours, in my submission, the determination

of the legal character of the rights, powers and

entitlements, which confer control on Mr Lombardo,

or did confer control in this case, involves

questions of law of public importance. First, what

are the rights, if any, of a judgment creditor, or

a trustee in bankruptcy of the individual in
relation to those rights, powers and entitlements?

Secondly, can those rights, powers and entitlements properly be the subject of a Mareva injunction.

GAUDRON J:  The question is not whether they can, it is

whether they were, is it not, Mr Buss?

MR BUSS:  Your Honour, in one sense the second question is

linked with the first question in this way, and

that is, first one needs to address whether or not

the rights, powers and entitlements in this case

could, in the events which might happen, properly

be available to a judgment creditor or a trustee in

bankruptcy.

GAUDRON J:  Why does one need to do that?

MR BUSS: Simply this, Your Honour, that if those rights,

powers and entitlements are not so available, then

it would seem that they could not be the subject of

a Mareva injunction, because the philosophy

underpinning that jurisdiction is concerned with

the preservation of assets so as to avoid any

ultimate judgment in favour of the plaintiff being

stultified by the defendant disposing of assets

that could properly be available to satisfy the

judgment. It is in that sense, in my submission,

that the second question I have raised is relevant

and important.

Your Honours, in my submission, the present

case is a suitable vehicle for the determination of
these issues in consequence of the material facts

being few and not in dispute. There is a further

reason, in my submission, justifying the grant of

special leave, and that is one which relates to the

provision in section 35A of the Judiciary Act,
concerning the interests of the administration of

justice.

This point is touched on at page 124 of the

application book in the affidavit of Mr Power, and

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it is at paragraph (e) at about line 40 on

page 124:

if the decision of the majority of the

Full Court is reversed, the deeds executed on

9 August 1991 -

and said by the applicant to be in breach of the

Mareva injunction order:

will be void -

At least on the authority of the judgment of

Sir Robert Megarry in Clarke v Chadburn:

and the Applicant may have recourse, pursuant

to -

Lombardo's rights, powers and entitlements:

to the trust fund of the Trust for the purpose
of satisfying any judgment it may obtain in

the -

pending proceedings. Your Honours, in supreme

court action No 1186 of 1992, which is a proceeding

referred to in the outline of submission of my

learned friends, the R & I Bank has sought a

declaration against Lombardo and Others that the

deeds executed on 9 August 1991 are void, because

their execution was in breach of the Mareva

injunction order.

The respondents, for their part, have pleaded

in their defence that the cause of action is an

abuse of process, the issue already having been

litigated and determined in the contempt

proceedings.

So, Your Honours, there is a point relating to

the administration of justice which is vital, and

it is this, in my submission, that in the event

that the R & I Bank and the liquidator of Lenby

were to be successful in the pending litigation,

claiming substantial amounts of money, then it

would appear, if the point of the respondents is a

good one, that is, that there is in effect, an

issue estoppel, or in some other way there is an

abuse of process, then the Bank and the liquidator
of Lemby would be cut off from seeking recourse

against the assets of this Caleta Family Trust to

satisfy their judgments.

MASON CJ:  Mr Buss, there is another consideration in this

case, and that is this, that the contempt charge

was a criminal contempt - on any view it would be

quasi criminal, but I would have thought it would

R&I 27/8/93

be criminal - and there have now been two decisions

in the courts below at first instance and,
admittedly, with a dissent in the Full Court, in

effect acquitting the respondent for the contempt.

Is it right in those circumstances that this Court

should grant special leave to appeal, bearing in

mind that some members of the Court have gone so

far as to say there should be no appeal against an

acquittal, even a judgment of acquittal?

MR BUSS:  Your Honour, in my submission this type of case

that we are dealing with today does involve other
considerations. In particular, it involves

considerations relating to the interests of the

applicant which go beyond the normal interests

which would exist in the case of a truly criminal

prosecution. In this instance, in my submission,

the impact of what was done by Lombardo by

disposing of his various rights, powers and

entitlements relating to this trust will go to the

very heart of the prospects of the applicants in

this application for special leave being able to

satisfy their judgments in the event that the

pending proceedings are successful. So in that

sense, Your Honour, there is an evaluation of
public policy interests and, in this instance, the

interest of the applicants in the pending

proceedings is such, in my submission, as to put

this case in a special position and to

differentiate it from that which would apply in a

normal prosecution.

Your Honours, if I can turn now to make

submissions as to why the majority of the Full

Court, with respect, were wrong in the decision they reached, in my submission the word "asset" in the Mareva injunction order is not a technical

legal term. It bears its ordinary meaning, namely

a thing of value capable of application to satisfy

debts.	Your Honours, this was the definition which
was accepted by Justice Owen at page 94 of the

application book. If I can take Your Honours to

that page, His Honour said at about line 11:

This appeal falls to be decided on the meaning

of the word "asset" in the context in which it

is used in the Injunction. It will be

apparent from what I have already said that

the context is a Mareva injunction.

Both the Concise Oxford Dictionary and

the Macquarie Dictionary define "asset" as

"property available to meet debts". There is

implicit in this definition, when applied to

the context of a Mareva injunction, that an

"asset" must be a thing of value and it must

be capable of application to satisfy debts.

R&I 6 27/8/93

Your Honours, nowhere else in the judgment of

Justice Owen is there any alternative definition

which is set out. The same submission is to be

made in relation to the judgment of Justice Ipp,

the other member of the majority.

Your Honours, Justice Rowland, dissenting,

applied the same definition and that this is so

appears from the application book at page 60, at

about line 20:

The injunction, in terms, prohibited Lombardo

from disposing of his assets. "Assets" is a word of wide definition. It is a word well

known is a person or company which may be

to most people. It defined in the property of

made liable for his or their debts". In my

opinion, it requires no reference to authority

to find that Lombardo has in fact disposed of

assets.

Now, that being so Your Honours, in my submission,

the terms of the order were clear and unambiguous.

There being no competing definition of "asset"

demanding acceptance. The decision of this Court

in Australian Consolidated Press v Morgan is

distinguishable, in my submission. The undertaking

in Morgan relevantly restrained the appellant from

publishing, in any form whatsoever, "any Gallop

Poll results in respect of which the plaintiffs or

either of them have the copyright". In Morgan

Justice Owen said, at page 514 of the report, that there were:

several possible meanings to be given to the

words "Gallup Poll results" as used in the

undertaking.

His Honour Justice Windeyer, at page 505 of

the report, expressed the same view, that is, it

was uncertain as to what was meant by "Gallup Poll"

results. The term "Gallup Poll" possibly having a

generic meaning, possibly having other meanings to

be ascribed to it.

MASON CJ: Well, that case does not help us very much, does

it? It is very different.

MR BUSS:  Yes it is, Your Honour, it is quite

distinguishable, in my submission. In my

submission, the rights, powers and entitlements of

Lombardo together constituted a general power of

appointment and an asset as defined. For all

practical purposes, he was the beneficial owner of

the trust property. This general power was not

R&I 7 27/8/93

subject to any material fiduciary obligations at

all, in fact no fiduciary obligations at all - - -

GAUDRON J: That really is a different - if you say, "No

fiduciary obligations at all," you are really

asserting that the whole structure was a sham?

MR BUSS: With respect no, Your Honour. I mentioned

earlier, in my submissions, the fact that the trust

deed, itself, conferred very few, if any, material

fiduciary obligations, except the ones identified

by Justice Rowland, but in this context,

Your Honour, I am looking at the character of a

general power of appointment, and the general power

of appointment of itself involves no sham, but

simply this proposition that because the holder of

the general power is able to appoint the property

to himself, it cannot be said that he has fiduciary

obligations to the class amongst whom appointment

might be made as would be the case with, for

example, a special power. So, the point I am

endeavouring to make there, Your Honour, is that
his general power was not subject to fiduciary

obligations because he could effectively appoint

the property to himself.

In my submission, the general power would have

equitable doctrine enunciated in Lord

been available to a judgment creditor and, in this,

Townshend v Windham and applied in Re Phillips.

Under this doctrine, if an appointment is made

under a general power in favour of a volunteer,

creditors of the appointer can, in equity, satisfy

their claims out of the appointed fund to the

extent to which the other assets of the appointer

prove insufficient for this purpose.

The basis of the rule is that the appointer could have exercised the power in favour of his

creditors and, in equity, their claims are

paramount to the claims of a volunteer. It is inequitable that the appointer should confer a

benefit upon a volunteer while his creditors remain

unsatisfied.

Your Honours, in my submission, Lombardo's

general power also would have been available to a

trustee in bankruptcy under section 116(l)(b) of
the Bankruptcy Act, it being a power over, or in

respect of, property which might have been

exercised by Lombardo for his own benefit.

Your Honours, Justic~ ",,,en, having defined the

word "asset" for the purpot	of the order,
answered the question wheth8c.	ertain things of

Lombardo constituted an asset as defined. And that

R&I 27/8/93

that is so can be seen from page 98 of the

application book. His Honour said, at line 14:

In my opinion the expectation which a beneficiary has that the trustee might appoint income or capital of the trust fund in his or her favour lacks the requisite aspect of

"value" for it to be regarded as an "asset".

Similarly the chose in action to due administration of the Trust is so qualified or limited in its connection with the property

making up the trust fund that it too is devoid

of value to the extent necessary to constitute

it an asset.

So, to the extent that His Honour there focused on two, and two elements only, each in isolation, and found that they were not to be regarded as an

asset, clearly suggested that, at least in that

part of the judgment, His Honour had no doubt that

the term "asset" was clear and unambiguous.

However, His Honour failed to answer the critical

question, and that really was the question in

relation to Lombardo's rights, powers and

entitlements together which His Honour had

previously indicated were submitted on behalf of

the applicants to constitute an asset.

Justice Ipps, similarly, also failed to answer this

critical question.

In my submission, there being no ambiguity as

to the meaning of the term "asset" in the order, it

was necessary for Their Honours to answer this

critical question as to whether all of these

things, all of these powers, rights and

entitlements of Lombardo, together constituted an

asset and, in doing so, no doubt, to embark upon

some analysis of their proper legal

characterization. Your Honours, those are my

submissions.

MASON CJ: Yes, thank you, Mr Buss. The Court need not

trouble you, Mr Mccusker.

There is, in the view of the Court, an

undoubted ambiguity in the wording of the

injunction in relation to the powers enjoyed by Mr

Lombardo. In that context, in a case in which he

has been, in effect, acquitted of a quasi criminal

charge of contempt by the Full Court dismissing an

appeal from the decision of the primary judge, it

would be inappropriate to grant special leave to

appeal. The application is therefore refused.

MR McCUSKER:  May it please Your Honours, I ask for costs.

R&I 9 27/8/93

MASON CJ: Yes. You do not oppose that application,

Mr Buss?

MR BUSS:	No, Your Honour.
MASON CJ:	The application is refused with costs.

AT 2.28 PM THE MATTER WAS ADJOURNED SINE DIE

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