Re Association for Visual Impairment The Homeless and The Destitute Inc. (in liquidation) (No 2)
[2014] VSC 183
•29 April 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2013 02308
| IN THE MATTER of ASSOCIATION FOR VISUAL IMPAIRMENT THE HOMELESS AND THE DESTITUTE INC. (A0036914T) (in liquidation) | |
B E T W E E N: | |
| BRUNO ANTHONY ROBERT SECATORE and DANIEL PETER JURATOWICH | Plaintiffs |
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JUDGE: | FERGUSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 17–18 March 2014 | |
DATE OF JUDGMENT: | 29 April 2014 | |
CASE MAY BE CITED AS: | Re Association for Visual Impairment The Homeless and The Destitute Inc. (in liquidation) (No 2) | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 183 | |
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EQUITY – Properties registered in name of Association for purposes of assisting the Association to obtain finance – Property to be re-transferred within 10 years – Association placed into liquidation – Claim by transferor that properties held on resulting or constructive trust – Transfer included substantial consideration – Payment never made nor demanded – No intention that money would be paid – No intention to relinquish beneficial ownership of properties – Properties held on resulting trust.
CONTRACT – Settlement deed – Reference to title particulars of land in definition – Proper construction of definition should exclude reference to those particulars to avoid absurdity – Construction of term that released ‘any claim or cause of action whatsoever’ – Proper construction limits general words to release of disputes existing at time of entry into settlement deed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Styring | Robert James Lawyers |
| For Ms L Stewart | Mr M Gronow | Davies Moloney |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Are the Niddrie properties held on trust for Ms Stewart?.......................................................... 2
Did Ms Stewart release her interest in the Niddrie properties?................................................ 8
Conclusion......................................................................................................................................... 12
HER HONOUR:
Introduction
The Association for Visual Impairment the Homeless and the Destitute Inc is in liquidation. This proceeding concerns the beneficial ownership of land at Niddrie that is registered in the name of the Association. The background to this application is set out in ReAssociation for Visual Impairment The Homeless and The Destitute Inc. (in liquidation).[1]For convenience, I will repeat some of that background.
[1][2013] VSC 673.
The Association was purportedly set up as a charitable organisation. The purported objects of the Association included promoting the welfare of persons who experienced blindness and using the net proceeds from any subdivision of land acquired or part of such land to provide shelter or occupation for homeless or destitute persons as a refuge.
On 29 June 1999, Ms Lois Stewart agreed to transfer her properties, now known as 5 Grandview Road, Niddrie and 45 Moushall Avenue, Niddrie (together ‘the Niddrie properties’), to the Association for $450,000 to enable the Association to use the properties as security. No money was paid to Ms Stewart at any stage. Under the terms of the agreement, Ms Stewart was entitled to repurchase the Niddrie properties for $450,000 within 10 years.
On the same day, the Association purchased land at Bacchus Marsh (‘Bacchus Marsh land’) which was to be subdivided and sold. In mid‑2006, freezing orders were made against the Association on the application of the Deputy Commissioner of Taxation in one proceeding and, in a separate proceeding, on the application of Elizabeth Mary Rowe (the ‘Rowe proceeding’). One effect of the freezing orders was that the development of the Bacchus Marsh land came to a halt.
In mid‑December 2007, the Association was wound up by court order and Bruno Anthony Secatore and Daniel Peter Juratowich (‘Liquidators’) were appointed as liquidators for the purposes of the winding up.[2]
[2]The Association was wound up pursuant to s 34 of the Associations Incorporation Act 1981 (Vic). Part 5.4B of the Corporations Act2001 (Cth) applies to the winding up of the Association: originally Associations Incorporation Act 1981 (Vic) s 36D(2) and following repeal of that legislation, Associations Incorporation Reform Act 2012 (Vic) s 150.
The Liquidators sought directions as to whether the Association holds the Niddrie properties on a presumed resulting trust for Ms Stewart as the sole beneficiary of the trust, or would be justified in conducting the winding up of the Association on the basis of that trust. The Court declined to give directions on an earlier hearing, but left open the possibility of doing so at a later stage. However, Ms Stewart now seeks relief herself. Among other things, Ms Stewart seeks a declaration that the Association holds and has always held the Niddrie properties on trust for her pursuant to a resulting or, alternatively, a constructive trust. She seeks an order that the Liquidators transfer the titles to the Niddrie properties back to her unencumbered and at no cost to her.
The central issues for determination are whether the Niddrie properties were at any stage held on a resulting or constructive trust for Ms Stewart. If they were, the second issue is whether Ms Stewart relinquished any beneficial interest she may have had in the Niddrie properties because of the effect of a deed of settlement that was entered into by her, the Liquidators and others to resolve the dispute in the Rowe proceeding.
Are the Niddrie properties held on trust for Ms Stewart?
In the early 1980s, Ms Stewart became a client of a solicitor called Ronald Silverstein. Ms Stewart was introduced to Mr Silverstein by her friend, Mr Raymond Hosking. Ms Stewart came to trust and rely on Mr Silverstein. She remained as one of his clients until about 1993. Mr Silverstein was struck off as a solicitor and could not practise from 1 January 1994 to 14 November 2005.
In June 1999, Ms Stewart had a number of discussions with Mr Silverstein. Mr Silverstein told her and some of her friends, including Mr Hosking, that he had established the Association as a charity. Ms Stewart was impressed by Mr Silverstein’s apparent charitable works. Mr Silverstein asked her if she would be willing to transfer the Niddrie properties to the Association to assist it in obtaining finance which would be used for development of the Bacchus Marsh land. Mr Silverstein also told Ms Stewart that it would help other members of the charity to recover moneys which they had invested in Bacchus Marsh and would enable a surplus of funds to develop the land which would assist the Association to donate moneys for charitable purposes. He told her that when the development was completed, the title deeds to the Niddrie properties would be returned to her and there would be no mortgage on the land. He also said that the Association would pay all legal costs and government duties. Ms Stewart was sympathetic to the charitable objectives of the Association and she wanted to help her friends recover money that they had invested with the Association.
Mr Silverstein also told Ms Stewart that as security, she would have a mortgage over the Niddrie properties. Ms Stewart accepted what Mr Silverstein told her, including that the amount of $450,000 was an appropriate amount to include in the transfer and mortgage over the Niddrie properties.
On 29 June 1999, Ms Stewart entered into a written agreement to transfer the Niddrie properties to the Association for $450,000 (‘Niddrie Agreement’). The recitals included that the Association was desirous of having additional assets to borrow in the future to fulfil its objectives and, in particular, to increase its capability of borrowing funds to proceed and complete the development at Bacchus Marsh.
A term of the Niddrie Agreement provided that the ‘property is to be transferred at a consideration of $450,000 and there shall be a mortgage in favour of McTap Pty Limited for $450,000 which shall be at the call of McTap Pty Limited and shall bear interest at a rate agreed at time to time between McTap Pty Limited and Lois Stewart’. At that time, Mr Hosking was the sole director and shareholder of McTap Pty Limited. The Niddrie Agreement also recorded that Ms Stewart was entitled to repurchase the Niddrie properties for $450,000 ‘at any time within the period of ten (10) years of the date of this Agreement’. The Association was to pay all stamp duty, registration fees and legal fees associated with this. The Niddrie Agreement recorded that Ms Stewart was entitled to retain the right to occupy the Niddrie properties without payment of rent. In addition, under the terms of the Niddrie Agreement, Ms Stewart was to have the right to lodge a caveat on the titles to the Niddrie properties ‘such Caveat being for her retention of an equitable interest in the property’. Such a caveat was lodged and registered. Finally, under the terms of the Niddrie Agreement, the Association gave Ms Stewart an irrevocable power of attorney to execute a transfer of the Niddrie properties to any party that she nominated. The power of attorney could also be used to remove any charge, caveat or other encumbrance that the Association caused to be created without having obtained the prior written consent of Ms Stewart.
The transfer of the Niddrie properties in favour of the Association was registered in the Office of Titles on 30 June 1999. The common seal of the Association was affixed to the transfer in the presence of Ms Stewart and Mr Hosking. They were both members of the Association. The Association gave a charge and registered mortgage for $450,000 over the Niddrie properties in favour of McTap Pty Limited, with the Association’s execution of the charge and mortgage being witnessed by Ms Stewart and Mr Hosking.
From their investigations of the books and records of the Association, the Liquidators do not believe that the Association paid Ms Stewart any amount, or that McTap Pty Limited paid any moneys to the Association under the charge.
Ms Stewart continued to live in one of the Niddrie properties rent free. Mr Hosking lived in the other Niddrie property and paid rent to Ms Stewart. Ms Stewart has paid all rates, charges, insurance and other outgoings on the Niddrie properties.
It is not controversial that if the Niddrie properties are held on trust for Ms Stewart, those properties are not available to the Association’s creditors.[3] The Liquidators contend though, that the Niddrie properties are not held on a resulting or constructive trust. They argued that having signed the Niddrie Agreement, Ms Stewart is bound by it.[4] The Liquidators submitted that Ms Stewart has not alleged that she was induced to sign that agreement by fraud, mistake or misrepresentation and hence, she is not entitled to say that it does not bind her.[5] It seems to me, however, that the Niddrie Agreement supports, rather than detracts from, Ms Stewart’s claim that it was intended that she would retain beneficial ownership of the Niddrie properties at all times, including whilst the properties were registered in the Association’s name. It is apparent from the terms of the Niddrie Agreement that Ms Stewart was to be in a position to exercise a degree of control over the Niddrie properties. In particular, the provision for lodgement of a caveat to protect her beneficial interest is a strong indicator that there was no intention that she would lose such an interest by transferring the Niddrie properties into the Association’s name.
[3]Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550, 552–3.
[4]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165. I note that it was not suggested that the existence of any trust in favour of Ms Stewart is affected by the operation of s 42 of the Transfer of Land Act 1958 (Vic) which gives rise to indefeasibility of title upon registration. See: Farah Constructions Pty Ltd v Say‑Dee Pty Ltd (2007) 230 CLR 89. Therefore, I have not considered the application of that section.
[5]Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, 482–483 [32]–[33].
Nevertheless, the question remains whether the Association holds the Niddrie properties on trust for Ms Stewart. In some circumstances, a resulting trust will arise where property is transferred for no consideration where there was no intention on the part of the transferor to part with the beneficial interest in the property.[6]
[6]Nelson v Nelson (1995) 184 CLR 538, 600.
In House v Caffyn,[7] land was transferred from one brother to another. The transfer stated that the consideration was £950. No money was paid. At trial, the transferee made an admission that there was a presumption of a resulting trust. By majority, the Victorian Full Court held that the land was not held on a resulting trust for the transferor. Cussen J held that the admission that had been made did not prevent the appeal court from considering whether there was a presumption of a resulting trust. His Honour held that the presumption did not arise because the expressed consideration was substantial.[8] In any event, even if there had been such a presumption, his Honour was of the view that it had been rebutted because he was satisfied that the transferor intended the beneficial interest in the land to pass to his brother.[9] In relation to this second point, Schutt J agreed and did not decide the first point as to whether it was open on appeal to consider whether the presumption arose.[10] Irvine CJ dissented. His Honour held that the admission as to the presumption having been made, it was not open for the appeal court to reconsider the issue. His Honour held that the presumption of law, that the transfer having been made without consideration gave rise to a resulting trust, was not rebutted on the evidence.[11]
[7][1922] VLR 67.
[8]Ibid 75, 80.
[9]Ibid 84.
[10]Ibid 85.
[11]Ibid 73.
Cussen J’s reasons were referred to by Dixon CJ in Wirth v Wirth.[12]The Chief Justice observed that:
it must be remembered that if the consideration expressed was one agreed upon though it was in fact unpaid or unsatisfied, the consequence is not a resulting trust but a lien in favour of the grantor. If on the other hand it is a false consideration, the reason for inserting it will bear directly upon the true character of the transaction and from that it will appear whether or not it was intended to transfer the beneficial interest as well as the legal estate. The present is not a case in which one can be sure that the consideration expressed was a mere sham. It is at least clear that before a presumption of a resulting trust can arise upon a transfer expressing a consideration, it must be shown that the expression of the consideration was false and the transfer was intended as a voluntary assurance. I am not prepared to say that the meagre evidence on the subject satisfactorily establishes so much.[13]
[12](1956) 98 CLR 228, 236.
[13]Ibid 236–237.
In this case, the $450,000 consideration expressed in the transfer was false. It was never intended that it would be paid, nor was it ever offered nor demanded. The intention was that the Niddrie properties could be used as security for loans to the Association, with Ms Stewart to remain beneficially entitled to the land throughout. As I have said above, the Niddrie Agreement supports Ms Stewart’s claim to retention of the beneficial interest. She was entitled to lodge a caveat to protect her interest. Ms Stewart was permitted to call for the re‑transfer of the Niddrie properties at any time within 10 years, although in all likelihood she would not do so until the properties were no longer required for use as security by the Association. That was the tenor of the discussions between Ms Stewart and Mr Silverstein. Ms Stewart relied on him. He devised the structure for the transaction. Ms Stewart gave evidence that Mr Silverstein was the controlling force behind the Association. She could not remember an occasion where the members of the Association had failed to take and act on his advice about what the Association should do. The members of the Association would sign whatever documents he placed in front of them. The Liquidators came to similar conclusions about Mr Silverstein and his role in relation to the Association. They described the Association as having been established by him, with his role being that of project manager for the development of the Bacchus Marsh land.
The amount of $450,000 was used in both the transfer and the mortgage given by the Association in favour of McTap Pty Limited. That figure was chosen because Mr Silverstein advised Ms Stewart that that sum was appropriate. McTap Pty Limited did not pay any money to the Association, nor did the Association demand it. Mr Silverstein told Ms Stewart that the mortgage would protect her. It seems likely that the expression of the sum of $450,000 in the transfer was to match the same figure in the mortgage.
Taking into account all of the circumstances, it seems to me that there was never any intention that Ms Stewart, as the transferor, would part with the beneficial interest in the Niddrie properties. She received no payment for them. It follows that the Niddrie properties were held on a resulting trust by the Association for Ms Stewart.
If I am wrong about that, I would nevertheless find that the Niddrie properties were held upon a constructive trust for Ms Stewart. When property is acquired in circumstances where, in good conscience, the recipient cannot keep the beneficial interest, equity intervenes by means of a constructive trust.[14] The circumstances are construed as the recipient holding the property on trust. Here, good conscience would prevent the Association from retaining the Niddrie properties because of the circumstances that I have set out above.
[14]Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 108 (Mason J).
Did Ms Stewart release her interest in the Niddrie properties?
The settlement deed in respect of the proceedings brought by Ms Rowe was entered into in February 2011. Ms Stewart is a party to the settlement deed, along with a number of other persons. The question is whether Ms Stewart relinquished her claim to the Niddrie properties, or the trust was extinguished because of the effect of the settlement deed.
The Rowe proceeding concerned the Bacchus Marsh land. No claim was made in respect of the Niddrie properties. Nevertheless, a plea of accessorial liability was made against Ms Stewart in respect of an alleged breach by the Association of the Associations Incorporation Act 1981 (Vic). The particulars of Ms Stewart’s conduct in this regard read:
On or about 29 June 1999 the second defendant [the Association] obtained the security use of 2 properties belonging to the tenth defendant [Ms Stewart] situated at Niddrie in the said State and having an approximate value of $450,000 to $500,000 each, that were each pledged by or for the benefit of the [the Association] by way of second mortgage to the Commonwealth Bank of Australia to enable it to obtain further ….
The settlement deed contained a number of releases. Relevantly, clause 21 provided:
(a) The First Defendant;
(b)The Fourth to Tenth Defendants, save for any payment due to be made by them by the liquidators in accordance with clause 14 of this deed, in relation to which, any remaining right or rights of the Fourth to Tenth Defendants are confined to that payment;
(c) The Eleventh Defendant;
(d) McTap
upon making this deed, unconditionally, absolutely and irrevocably release and forever discharge the Association and the Liquidators, and each of them, from all claims, suits, actions, causes of action, liabilities, obligations, damages, losses, costs, costs orders, reserved costs and expenses of whatsoever nature which they and each of them now have, have had, or but for the execution of this deed, may have had:
(i)arising out of or incidental to the Proceeding or the subject matter of the Proceeding;
(ii)in relation to the Land or to the Proceeds; and
(iii)in relation to any claim or cause of action whatsoever.
The ‘Proceeding’ was defined to mean the Rowe proceeding and the ‘Proceeds’ was defined to mean the net proceeds of sale of the ‘Farm Land’ and the ‘Remaining Land’. The ‘Farm Land’ did not include the Niddrie properties. ‘Remaining Land’ was defined to mean:
Part of the Land as contained in certificates of title volume —
(i)10465 folios 614 and 615 [that is, the Niddrie properties]; and
(iii)10939 folios 282, 285, 286, 290, 298, 300 and 539
and being the Land remaining after the sale of the Farm Land and excluding the land contained in certificate of title volume 10928 folio 483 and certificate of title volume 10939 folio 693.
‘Land’ was defined to mean:
the land standing off the Western Highway and Bences Road, Bacchus Marsh in Victoria registered in the name of the Association, and contained in certificates of title —
(i)10928 folios 483, 484, 485, 486, 487, 488, 490, 489, 491 and 492; and
(ii)10939 folios 282, 285, 286, 290, 298, 300, 539 and 693.
It can immediately be noted that the certificates of title for the Niddrie properties (being volume 10465 folios 614 and 615) were not included in the definition of ‘Land’.
Whether Ms Stewart’s claim to the Niddrie properties was released or the trust was extinguished is a question of the proper construction of the settlement deed. Whilst contracts are construed using an objective approach to ascertain the intention of the parties as they have expressed it (not their subjective intention),[15] courts are nevertheless careful to construe contracts in a manner that avoids inconsistency or absurdity.[16]
[15]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, 461–462; Byrnes v Kendle (2011) 243 CLR 253, 284 [98]. See also Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 and Western Export Services Inc v Jireh International Pty Ltd(2011) 282 ALR 604.
[16]Fitzgerald v Masters (1956) 95 CLR 420.
Here, the parties cannot have intended to include the Niddrie properties in the definition of ‘Remaining Land’. A good indicator of this is that the ‘Remaining Land’ is defined to be only part of the ‘Land’ yet, as I have observed above, the title particulars for the Niddrie properties are not included in the ‘Land’ definition. In construing the settlement deed, I would give more weight to the descriptive words ‘Part of the Land’ than to the numerical title particulars. It is unlikely that the parties were familiar with the volume and folio numbers for the various pieces of land. More likely, they would know the location or description of each property. The definition of ‘Land’ includes its location in Bacchus Marsh. So, ‘Part of the Land’ cannot have been intended to include land in Niddrie. Consequently, in my view, the definition of ‘Remaining Land’ should be construed as if the title particulars for the Niddrie properties were not included.
Turning then to the terms of the release, the claim by Ms Stewart to the Niddrie properties does not fall within paragraph (i). As I have said, the Niddrie properties were not subject to any claim in the Rowe proceeding, nor does Ms Stewart’s claim or entitlement under the trust arise out of nor is it incidental to that proceeding or its subject matter. The particulars to the allegation of accessorial liability against Ms Stewart that I have set out above proceed on the assumption that Ms Stewart owned the Niddrie properties. There was no dispute either before or at the time of the settlement deed about ownership of the Niddrie properties that could be caught by the release in paragraph (i).
As the Niddrie properties are not part of the ‘Land’ as defined, Ms Stewart’s claim does not fall within the first part of paragraph (ii) of the release. Nor does it fall within the second part of that paragraph relating to the ‘Proceeds’ which relate to the ‘Remaining Land’ and the ‘Farm Land’. On a proper construction, for the reasons I have given, the Niddrie properties do not form part of the ‘Remaining Land’ nor the ‘Farm Land’.
The third paragraph of the release is cast in seemingly broad terms. To recap, the release applies ‘in relation to any claim or cause of action whatsoever’. Those general words, however, should be construed in the context of the whole of the settlement deed and should be restricted to its subject matter.[17] If there was no dispute about a particular claim before or at the time of the release, then that claim will not be released by general words such as those in paragraph (iii).[18] Here, the recitals to the settlement deed disclose that the settlement was of the dispute which was the subject of the Rowe proceeding; that is, the claims in respect of the ‘Land’ which does not include the Niddrie properties. One of the recitals to the settlement deed makes clear the intention of the parties as to the scope of the release. It provides:
In order to avoid further cost and expense, including in relation to the Proceeding, the Parties have agreed to resolve all issues in dispute between them, or claims made by a party, on the terms set out below.
[17]Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112, 131.
[18]Ibid 124.
As I have said, at the time, there was no dispute between the parties about the beneficial ownership of the Niddrie properties. Consequently, in my view, the general words of the release in paragraph (iii) did not effect a release of the claim by Ms Stewart to the Niddrie properties, nor did it extinguish the trust.
On the proper construction of the settlement deed, Ms Stewart’s claim to full ownership of the Niddrie properties was not released by her, nor was the trust extinguished.
Conclusion
The Niddrie properties are and were at all relevant times held by the Association on a resulting trust for the benefit of Ms Stewart. That trust was not expunged by reason of the terms of the settlement deed in respect of the Rowe proceeding, nor did that deed have the effect of releasing the claim by Ms Stewart to the Niddrie properties. Ms Stewart is entitled to have the Niddrie properties transferred back to her by the Liquidators, at no cost to her.
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