Re Rouse

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2017 00878

IN THE MATTER of ARNAN LAWRENCE ROUSE (deceased)

-and-

IN THE MATTER of an application by ZUGLIGET INVESTMENTS PTY LTD
(ACN 617 234 563) for orders pursuant to sections 51 and 64 of the Trustee Act 1958

ZUGLIGET INVESTMENTS PTY LTD (ACN 617 234 563)	Plaintiff
-and-
KIRSTEN LLOYD	Interested Party

S ECI 2018 1693

IN THE MATTER of ARNAN LAWRENCE ROUSE (deceased)

-and-

IN THE MATTER of an application by MARY ROUSE (as trustee for the PEREGRINATION TRUST) for orders pursuant to sections 51 and 64 of the Trustee Act 1958

MARY ROUSE (as trustee for the PEREGRINATION TRUST)	Plaintiff
-and-
KIRSTEN LLOYD	Interested Party

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JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	6 February 2019
DATE OF JUDGMENT:	3 December 2019 – First revision 4 December 2019
CASE MAY BE CITED AS:	Re Rouse
MEDIUM NEUTRAL CITATION:	[2019] VSC 792

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PRACTICE AND PROCEDURE — Whether the plaintiff in the first proceeding has standing to bring the application — Meaning of the word ‘spouse’ — Byrnes v Kendle (2011) 243 CLR 253.

TRUSTS AND TRUSTEES — Whether real property and company share form part of estate or held in trusts — Property Law Act 1958 (Vic) s 53 — Where absence of documentary evidence surrounding the purported transactions.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr MA Robins QC with Mr N Rosenbaum	P&B Law
For the Interested Party	Mr J O’Bryan	Russell Kennedy Lawyers

HER HONOUR:

Introduction

Arnan Lawrence Rouse died on 1 May 2016. He was survived by his four children: Eva, Lila, Max and Vivienne Rouse, all of whom are minors. The deceased did not leave a will and his estate passes to his four children on intestacy.

Kirsten Lloyd was the deceased’s first wife and is the mother of Eva and Lila. Ms Lloyd is the interested party in proceeding S CI 2017 00878 (‘the first proceeding’) and proceeding S ECI 2018 1693 (‘the second proceeding’).

Mary Rouse was the deceased’s second wife and is the mother of Max and Vivienne. Ms Rouse is the plaintiff in the second proceeding. The matrimonial home of Ms Rouse and the deceased was the property situated at and known as

27–29 The Righi, South Yarra (‘the Righi property’).

In the first proceeding, the question is whether the Righi property is an asset of a trust known as the Zugliget Trust. Before his death, the deceased was the trustee of the Zugliget Trust. The plaintiff in the first proceeding is Zugliget Investments Pty Ltd (‘Zugliget Investments’) and is the current trustee of the Zugliget Trust. Ms Rouse is the sole director, secretary and shareholder of Zugliget Investments. Max and Vivienne are the primary beneficiaries of the Zugliget Trust.

Zugliget Investments seeks an order vesting the Righi property in the Zugliget Trust. There is also an issue as to the validity of the appointment of Zugliget Investments as trustee of the Zugliget Trust and, accordingly, a preliminary issue as to whether Zugliget Investments has standing to bring the first proceeding.

In the second proceeding, the question is whether the sole issued share in DVS Société Anonyme (BVI) (‘DVS’), a company incorporated in the British Virgin Islands, is an asset of a trust known as the Peregrination Trust. Ms Rouse is the trustee of the Peregrination Trust. Max and Vivienne are the primary beneficiaries.

If the assets in the first and second proceeding were each held on trust at the time of the deceased’s death, as Zugliget Investments and Ms Rouse contend, they are effectively controlled by Ms Rouse and are to be held and distributed in accordance with the relevant trust deeds. If the assets were held by the deceased personally, they would form part of his estate and be distributed in accordance with the intestacy provisions, pursuant to the Administration and Probate Act 1958.[1]
[1]Administration and Probate Act 1958 (Vic) ss 51(2) and 52, which is applicable for deceased persons who died intestate prior to 1 November 2017.

The first proceeding

NVS Oasis Pty Ltd (‘NVS Oasis’) was incorporated on 14 July 2004. Ms Rouse was the sole director, secretary and shareholder of NVS Oasis until it was deregistered on 30 October 2013.

On 15 July 2004, trust deeds were executed for the Oasis Trust (350/2004) (‘the Oasis Trust 350’) and the Oasis Trust (351/2004) (‘the Oasis Trust 351’). NVS Oasis was appointed trustee of both trusts. The deceased was named appointor of the Oasis Trust 350 and Ms Rouse was named appointor of the Oasis Trust 351. Eva and Lila were the primary beneficiaries of both trusts.

On 31 July 2004, Ms Rouse was appointed trustee of the Oasis Trust 351.

Ms Rouse and the deceased married on 19 October 2007.

On 1 December 2009, NVS Oasis resolved to appoint Ms Rouse to hold the Righi property as trustee on behalf of the Oasis Trust.[2] It was also resolved that Ms Rouse register in her name, in her capacity as trustee of the Oasis Trust, the Righi property on behalf of the Oasis Trust. Ms Rouse described this arrangement as one in which she appointed herself ‘as a sub-trustee’ to acquire the Righi property and to hold it on behalf of the Oasis Trust 351.
[2]It was not specified whether the beneficiary under this arrangement was to be the Oasis Trust 350 or the Oasis Trust 351.

On 2 December 2009, Ms Rouse entered into a contract of sale to purchase the Righi property for $4,800,000. The contract named the purchaser as ‘Mary Rouse & or nominee’. Settlement was to take place on 31 March 2010.

In cross-examination, Ms Rouse could not recall whether she made a declaration of trust over the Righi property. No document to this effect has been produced.

On 24 February 2010, Ms Rouse, as trustee for the Oasis Trust, entered into a consumer credit loan contract with the Commonwealth Bank of Australia (‘CBA’) in the amount of $4,240,200 to fund the purchase of the Righi property. The loan was secured by a registered mortgage over the Righi property. As part of the contract, Ms Rouse signed a ‘Trustee Declaration’, which contained, relevantly, the following declarations:

(a) Ms Rouse is the duly appointed trustee of the Oasis Trust;

(b) Ms Rouse is the only trustee of the Oasis Trust;

(c) the Oasis Trust has been validly constituted and has not been terminated; and

(d) the trust deed of the Oasis Trust gives Ms Rouse the necessary power and authority to enter into the contract.

On 5 March 2010, Ms Rouse signed a CBA schedule acknowledging that she purchased the Righi property as trustee of the Oasis Trust. CBA subsequently advanced the sum of $4,240,205.40 to fund the settlement of the Righi property. CBA also provided statements, addressed to Ms Rouse, covering the period 5 March 2010 to 3 January 2013.

Max Rouse was born to Ms Rouse and the deceased on 22 March 2010.

On 30 April 2010, the amount of $640,205 was paid to reduce the CBA loan. The funds came from the sale of the former matrimonial home of Ms Rouse and the deceased in Toorak.

On 29 April 2011, Private Equity Australia Pty Ltd (‘PEA’) was incorporated. At the deceased’s request, Simon Roy Lowe, a close friend of the deceased, became the sole director of PEA. Mr Lowe deposes that, around the time of his appointment, the deceased told him that he was concerned to protect his interests and Max’s interests in various trusts that the deceased had established. The deceased wanted Mr Lowe to become the director of PEA so that it could be appointed as replacement trustee of some of these trusts.

Vivienne was born to Ms Rouse and the deceased on 25 November 2012.

On 1 July 2012, NVS Oasis, as trustee for the Oasis Trust 351, resolved to distribute the Righi property to Ms Rouse to hold as trustee on behalf of the Oasis Trust 350. It was resolved that the distribution would take effect on 30 June 2013 and that Oasis Trust 350 would assume all liabilities related to the Righi property, including a $4 million loan from Max and Vivienne.

On 18 December 2012, the amount of $3,600,011.40 was paid to reduce the CBA loan.[3] The funds were advanced by Ms Rouse’s sister, Ann Delic, to the Oasis Trust. Ms Delic subsequently gifted Max and Vivienne a debt in the sum of $4 million, which included the payment of $3,600,011.40. That debt is yet to be repaid.
[3]The further affidavit of Mary Rouse says (at [12]) that the money was paid on 30 August 2012, but the bank statements show that it was paid on 18 December 2012.

On 8 January 2013, Ms Delic recorded a formal resolution, in her personal capacity, to gift $4 million to Max and Vivienne. The resolution provided that the amount was ‘to be held in the name of Mary Rouse as trustee in a trust for their sole benefit’. Ms Rouse deposed that the debt was owed by the Oasis Trust 350. In cross-examination, Ms Rouse gave evidence that the money was provided to Ms Rouse herself ‘as a trustee for the Oasis Trust for the benefit of Max and Vivian [sic]’.

On 1 May 2013, the deed of settlement for the Zugliget Trust (‘the Zugliget Trust Deed’) was executed. The deceased was the trustee and the appointor. Max and Vivienne were the primary beneficiaries.

On 19 June 2013, Ms Rouse and the deceased signed a deed of appointment of trustee, appointing The Righi Pty Ltd as ‘Additional Trustee’ of the Oasis Trust 350.

On 30 June 2013, Ms Rouse, as trustee for the Oasis Trust 351, executed a transfer of land recording the transfer of the Righi property to herself, as trustee for the Oasis Trust 350, for the sum of $4,800,000. Ms Rouse executed the transfer twice, as trustee for both trusts.

In September 2013, Ms Rouse and the deceased separated.[4] They remained close until the deceased’s death.
[4]Ms Rouse deposed that she and the deceased separated in September 2013, while a Binding Financial Agreement between Ms Rouse and the deceased dated 14 July 2015 records the date of separation as 1 May 2013.

The balance sheet for the Oasis Trust 350 as at 30 June 2014 recorded liabilities to Max and Vivienne of $4 million and $1,088,587.54 respectively. Ms Rouse deposed that the amount of the liability to Vivienne ‘reflected the increase of the value of equity’ of the Righi property since its purchase, and that the amount of the total debt owed to both Max and Vivienne ‘represented the entire equity’ of the Righi property. The debt has not been repaid.

NVS Oasis was deregistered on 30 October 2013.

In mid-2014, the deceased purchased the property at 47 Kensington Road, South Yarra (‘the Kensington Road property’). According to Ms Rouse, the deceased intended that all the Oasis Trusts vest in order ‘to streamline and minimize the various trusts’ and that he had established the Zugliget Trust, ‘which would own the new property, of which he was the trustee and the primary beneficiaries were Max and Vivienne’.

Ms Rouse also deposes that, at the time of the purchase, the deceased had intended to live at the Kensington Road property but that, before settlement, they agreed on a ‘property swap’ whereby Ms Rouse would move into the Kensington Road property with Max and Vivienne and the deceased would return to live in the Righi property. According to Ms Rouse, both the Righi property and the Kensington Road property were beneficially owned by trusts, but at no stage did the deceased or she ‘discuss or agree upon any change to the underlying beneficial interest in either property’. The property swap took place in October 2014.

In or about July 2014, the deceased approached Mr Ralph Farfalla, a business banking executive at National Australia Bank (‘NAB’), for the purpose of securing a loan to finance the purchase of the Kensington Road property.

On 27 July 2014, the deceased provided Mr Farfalla with a customer consent executed by him in his personal capacity and as trustee on behalf of the Zugliget Trust.

On 30 July 2014, the deceased sent an email to Mr Farfalla requesting a $2 million home loan facility and confirming the borrower as ‘Arnan Rouse as trustee for the Zugliget Trust’. Following further communications and the provision of documents by the deceased, the facility was approved in the name of ‘Arnan Rouse as trustee for the Zugliget Trust’ on 6 October 2014. The relevant documents were executed in the same name, and the loan was prepared on 14 October 2014.

Mr Lowe deposes that, in early to mid-2015, the deceased asked him whether he could appoint PEA as trustee of the Oasis Trust.[5] In cross-examination, Mr Lowe gave evidence that he did not know whether PEA was a trustee of the Oasis Trust 350 or of the Oasis Trust 351. At the time, the trustee of the Oasis Trust was Ms Rouse. The deceased told Mr Lowe that the Oasis Trust held the Righi property and that he wanted PEA to become the replacement trustee of the Oasis Trust so that the Righi property could be transferred to another trust controlled by him for the ultimate benefit of Max and Vivienne.
[5]See [19] above.

In about May 2015, Mr Lowe, as director of PEA, executed a deed of removal and appointment of trustee. The document, which is undated, provides for the removal of Ms Rouse as trustee of the Oasis Trust and appoints PEA in her place. Mr Lowe gave evidence that he read the front page of the document and the sections that required a signature and that he handed the document to the deceased soon after he executed it without making a copy. Moreover, at this time, Mr Lowe did not know what assets the Oasis Trust held or that the Righi property was registered in the name of the deceased.

Mr Lowe deposed that, not long after the execution of the deed of removal and appointment of trustee, the deceased asked him to execute documents to transfer the Righi property from the Oasis Trust to the Zugliget Trust for the ultimate benefit of Max and Vivienne. These documents are not in evidence. In cross-examination, Mr Lowe gave evidence that:

(a) he (Mr Lowe) executed the documents with ‘no hesitation’;

(b) at the time of the execution, Mr Lowe understood that the transaction had the effect of transferring the Righi property from a trust of which Eva and Lila were beneficiaries to a trust of which Max and Vivienne were beneficiaries;

(c) apart from the execution page, Mr Lowe did not read the transfer document; and

(d) Mr Lowe did not keep a copy of the transfer document.

On 31 May 2015, Ms Rouse and the deceased had a conversation, which Ms Rouse recorded with the knowledge and consent of the deceased. During the conversation, the deceased relevantly said:

Mary, you already have the money and that’s what you don’t understand. … You already have the control of [the Righi property]. You already inherit everything from me because of being the appointor of the trust. It can only get better for you, if I die. If I were to die, I can assure you that the first person the police would talk to would be you. Because you stand, you stand to be the sole beneficiary of everything. I can guarantee that. If there was one suspicious thing about my death, you would be looked at under a fine tooth comb, because you are the beneficiary of everything. The only person that benefits from my death is you. Not my sister any more, not my parents, not Eva and Lila, no one, except you.
…
But Mary, you are my favourite. You’ll never be replaced. Your [sic] it. That’s why you are always appointed as the Peregrination appointor. That’s why I’m going out of my way, you talk to anyone else who’s going through or gone through a divorce see if their spouse was be [sic] half as accepting of the benefit of the departing spouse. I didn’t want this financial agreement you wanted it. I didn’t want this divorce you wanted it. You probably didn’t understand the implications of acquiring a binding financial agreement. It’s an unfortunate thing but it’s there but I’m working with you to give you absolute security.

On 5 June 2015, the deceased left a voicemail for Ms Rouse, in which he said:

I’ve instructed Jimmy to rewrite my will that 100% of any of my assets go to Max and Viv yeah I’m actually really concerned so anyway I would like to speak to you so they go to Peregrination as we discussed you control …

On 11 June 2015, the deceased sent an email to Mr Farfalla requesting an increase to the NAB home loan facility from a limit of $2 million to a limit of $3 million. The deceased said that $2 million would be used to repay the loan on the Kensington Road property and ‘release it into [Ms Rouse’s] name unencumbered’, in effect discharging the mortgage over the Kensington Road property, and that $1 million would be used for personal investments. The deceased offered the Righi property as replacement security.

On 18 June 2015, the deceased sent an email to his solicitor, Mr Jimmy Diakou, attaching two minutes of the meetings of the Oasis Trust on 20 September 2004 and 1 December 2009. As stated above, pursuant to resolutions recorded in the second of these minutes, NVS Oasis had appointed Ms Rouse to hold the Righi property as trustee on behalf of the Oasis Trust and to register this property in her name accordingly.[6] Apart from these attachments, the email from the deceased to Mr Diakou was blank.
[6]See [12] above.

On the same date, Mr Farfalla sent an email to the deceased requesting updated information and confirming the deceased’s request in his email of 11 June 2015. Mr Farfalla noted that the Righi property was held in the name of Ms Rouse and that it would need to be held in the name of the deceased or a guarantor entity before the security swap and loan increase could take place.

On 14 July 2015, Ms Rouse and the deceased entered into a Binding Financial Agreement pursuant to s 90C of the Family Law Act 1975 (Cth) (‘the BFA’). Insofar as it relates to the Righi property, the BFA provides that:

(a) within 60 days, the deceased shall transfer all his rights, title and interest in the Kensington Road property to Ms Rouse and discharge the mortgage over that property (clause 5);

(b) Ms Rouse shall transfer all her rights, title and interest in the Righi property to the deceased (clause 6); and

(c) the deceased shall grant to Ms Rouse a second mortgage over the Righi property, the first mortgage being limited to a maximum value of $2,500,000, and shall execute and use his best endeavours to have the first mortgagee execute a priority agreement to that effect, to secure all of the deceased’s other obligations under the BFA (clause 7).

Ms Rouse deposes that she and the deceased agreed that the Kensington Road property would be transferred to the Peregrination Trust with Ms Rouse as trustee, and that the Righi property would be transferred to the Zugliget Trust with the deceased as trustee. Max and Vivienne were to be the ‘ultimate beneficiaries’ of both trusts.

Ms Rouse also deposes to a conversation between herself and the deceased shortly before they executed the BFA. According to Ms Rouse, she and the deceased agreed that they would execute a deed of variation for the Peregrination Trust providing that, on Ms Rouse’s death, the deceased would become the appointor of that trust. Ms Rouse would hold as trustee all of the property dealt with in the BFA in her name on behalf of Max and Vivienne in the Peregrination Trust. The deed of variation was executed on 14 July 2015.

Further, Ms Rouse deposes that the deceased told her that:

(a) the deceased would ‘reciprocate this step’ by making Ms Rouse the successor appointor of his various trusts and that, on his death, she would become the appointor of all the trusts that he controlled for the benefit of Max and Vivienne;

(b) the deceased had documented this arrangement and that Ms Rouse, Max and Vivienne ‘would be looked after’ if anything happened to him; and

(c) the BFA included control and protection of all the property that he controlled for the benefit of Max and Vivienne.

Ms Rouse deposes that:

(a) she and the deceased never discussed changing the beneficial interest held by Max and Vivienne in either the Righi property or the Kensington Road property;

(b) she was aware at the time of entering the BFA that both the Righi property and the Kensington Road property were trust property, and she could only transfer and receive bare legal title as trustee;

(c) she and the deceased never agreed that anything done in the BFA would alter or affect the equity of the Righi property to which Max and Vivienne were entitled or the debts due to them;

(d) in light of these matters, as well as the conversations between Ms Rouse and the deceased and the deceased’s email to Mr Diakou of 18 June 2015,[7] the deceased was also aware that the Righi property was trust property and that Ms Rouse could only transfer bare legal title as trustee; and

(e) she and the deceased never discussed any release, forgiveness or waiver of the debts owed to Max and Vivienne respectively, and no such release was recorded on the balance sheets of the Oasis Trust.

[7]See [41] above.

On 28 July 2015, Ms Rouse and the deceased executed a transfer of land recording the transfer of the Righi property from Ms Rouse to the deceased. Consideration for the transfer was stated to be ‘BREAKDOWN OF MARRIAGE’. Ms Rouse deposes that she executed the transfer in the belief that the deceased was taking title as trustee of the Zugliget Trust.

On 3 August 2015, the deceased signed and provided to NAB a privacy and confidentiality consent and a home loan application providing for a five-year redraw facility with a limit of $3 million.[8] The application was in the name of the deceased. The deceased listed the Righi property as security. Under the heading ‘Assets—What you own’, the deceased listed the Righi property and the Kensington Road property.
[8]See [42] above.

On 12 August 2015, NAB sent a letter to the deceased. It offered a $3 million home loan package to the deceased and enclosed an acceptance of credit form. The letter and form described the borrower as ‘Arnan Lawrence Rouse as trustee for Zugliget Trust’. The deceased signed the acceptance of credit form, and the date of acceptance was 26 August 2015.

On 19 August 2015, the deceased signed the credit contract for the NAB home loan. The borrower was described as ‘Arnan Lawrence Rouse as trustee for Zugliget Trust’. The loan was secured by a registered mortgage over the Righi property and a guarantee from Caravan Parks of Australia Pty Ltd (‘CPA’) as trustee for the Caravan Parks of Australia Trust. Ms Rouse is a director of CPA.

Ms Rouse and the deceased divorced on 8 October 2015. They remained social partners. Ms Rouse deposed that the deceased had frequently spent nights with her in the Kensington Road property and that they had discussed getting remarried once the deceased abstained from drinking alcohol.

By 1 December 2015, the deceased had drawn down $2,991,036.95 from the NAB redraw facility.

On 14 March 2016, the deceased left a voicemail for Ms Rouse, in which he said:

I’ll always look after you as you know, and I continue to look after you as you know, and I’ll look after our children and it’s all been set up.

On 27 April 2016, the deceased left another voicemail for Ms Rouse, in which he said:

I’ll always look after you … I reckon it’s going to take about three weeks to rectify the issues that we’ve discussed previously … But no matter what I will look after you and Max and Viv …

Between 31 August 2015 and 29 April 2016, the amount of $90,678.32 was paid to NAB on behalf of the Zugliget Trust in relation to the Righi property.

On 1 May 2016, the deceased died from complications of chronic alcohol abuse.

On 16 December 2016, orders were made appointing Ms Rouse as limited administrator ad colligendum bona of the deceased’s estate.

On 7 February 2017, Zugliget Investments was incorporated. Ms Rouse is its sole director, secretary and shareholder.

By deed of appointment dated 9 February 2017, Ms Rouse appointed Zugliget Investments as trustee of the Zugliget Trust.

In the meantime, CPA had continued to make payments towards the NAB home loan. It made the final payment on 31 July 2017.

Since the deceased’s death, the Righi property has remained vacant. Zugliget Investments wishes to sell the Righi property.

By originating motion filed 14 March 2017, Zugliget Investments commenced the first proceeding seeking an order, pursuant to ss 51 and 64 of the Trustee Act 1958, that the Righi property vest in it as trustee of the Zugliget Trust.

Ms Rouse instructed Mr Andrew Mill to prepare draft income tax returns for the Zugliget Trust for the years ending 30 June 2014 to 2018 inclusive. However, these income tax returns cannot be finalised until the resolution of the question of whether the Righi property is an asset of the Zugliget Trust.

Subsequent litigation and issues with locating documents

There are several documents to which the parties or witnesses made reference but were not in evidence. To put into context the difficulties that the parties have encountered in locating documents for the purposes of this proceeding, some further procedural background is relevant.

Ms Rouse deposes that, shortly after the deceased’s death, Mr Diakou took the deceased’s documents and refused to provide them to Ms Rouse. There was no dispute that Mr Diakou had extensive knowledge of the companies and trusts affiliated with the deceased and that he was in possession of key documents relating to those companies and trusts.

On 16 December 2016, during the hearing of Ms Rouse’s application for a limited grant of letters of administration, Mr Diakou, through his counsel, gave an undertaking in open court that:

(a) he would deliver up to the person appointed as administrator of the deceased’s estate (or their solicitors) all documents relating to the estate and any trusts and companies in which the deceased held an interest; and

(b) he would not have any further dealings with any banks who are mortgagees of the deceased or companies or trusts in which the deceased had an interest, including NAB and CBA.

On 19 and 20 December 2016, Mr Diakou delivered 21 boxes of documents to Ms Rouse. After examining those documents, Ms Rouse formed the view that numerous documents were either missing or in disarray, and Mr Diakou had not complied fully with his undertaking.

Ms Rouse commenced a proceeding seeking orders that Mr Diakou deliver to the respondent all documents and property ‘relating to the estate’ and ‘all legal files on which [Mr Diakou] was instructed by the deceased’ (‘the documents proceeding’).[9]
[9]S CI 2017 1704.

On 9 June 2017, orders by consent were made granting the relief sought by Ms Rouse in the documents proceeding.

On 17 July 2017, Mr Diakou delivered 16 boxes of documents to Ms Rouse.

After several adjournments and other interlocutory steps, the trial of the documents proceeding took place from 2 July 2018 until 5 July 2018. At the conclusion of the trial, Ms Rouse sought an order that Mr Diakou pay her costs of the documents proceeding. On 23 July 2018, orders were made that Mr Diakou pay Ms Rouse’s costs of and incidental to the documents proceeding on the standard basis.[10] The Court of Appeal later allowed an appeal from this order.[11]
[10]Rouse v Diakou [2018] VSC 396.
[11]Diakou v Rouse [2019] VSCA 199.

On 20 July 2018, the solicitors for Ms Rouse wrote to Mr Diakou seeking confirmation that he did not oppose Ms Rouse relying on his statement or transcript of proceedings in proceedings concerning the estate or any related trust proceedings. On 24 July 2018, Mr Diakou advised that he had no such objection.

Ms Rouse’s position is that she has exhausted all realistic avenues by which to obtain any further documentation or information from Mr Diakou concerning the ownership of the Righi property and of the DVS share.

During the course of oral argument, senior counsel for Ms Rouse accepted that there were key documents, such as financial documents and transfers, missing from the books and records of the trusts and companies affiliated with the deceased. Senior counsel did not offer an explanation as to the whereabouts of these documents, and submitted that the Court should consider the evidence in the state that it is.

Evidence of Mr Diakou

In the course of the documents proceedings, Mr Diakou approved a statement recording his knowledge of and dealings involving certain assets, including the Righi property and the DVS share. Mr Diakou reduced that statement into a sworn affidavit. Ms Rouse deposes that she did not receive a sworn copy of that affidavit. No objection was made to the admissibility of that affidavit in this proceeding.

In his affidavit, Mr Diakou made the following remarks with respect to the Righi property and the deceased’s practice in dealing with his assets:

(a) it was the deceased’s practice never to hold significant assets beneficially in his own name;

(b) around the time when Mr Diakou prepared the deed of removal and appointment of trustee in relation to the Oasis Trust,[12] the deceased had never instructed Mr Diakou to prepare documents providing for the vesting of the Righi property into the deceased’s own beneficial ownership;

(c) at the time of preparing the BFA, Mr Diakou was aware that the Righi property and the Kensington Road property were each subject to trusts; and

(d) Mr Diakou was never instructed to exclude assets from any trust or to include warranties by Ms Rouse and the deceased to the effect that any of the transferred assets were to be transferred absolutely or would not be subject to existing trusts.

[12]See [36] above.

Standing of Zugliget Investments

There is a preliminary issue as to whether Zugliget Investments has standing to bring the first proceeding. The resolution of this issue requires the determination of whether, on a proper construction of the Zugliget Trust Deed, Ms Rouse became the appointor of the Zugliget Trust on the deceased’s death. If so, the appointment of Zugliget Investments as trustee of the Zugliget Trust was valid and Zugliget Investments has standing to bring the first proceeding.

The Zugliget Trust Deed

Clause 1 relevantly contains the following preface and definitions:

In this Deed and in the Schedule hereto, the terms and words shall have the following meanings unless the context otherwise requires:—
…
Appointor means the Person entitled under the provisions of this Deed to appoint or remove a Trustee.
…
Beneficiary means any Person or Persons (including Primary Beneficiaries, Secondary Beneficiaries and Tertiary Beneficiaries) absolutely or contingently entitled to Net Income or capital of the Trust Fund: the terms Primary Beneficiaries, Secondary Beneficiaries and Tertiary Beneficiaries mean the Person or Persons as defined in Clause 4.1 of this Deed and specified as such in the Schedule hereto.
…
Deed means this deed and the attached Schedule which forms part of this Deed as amended, varied or supplemented from time to time.
…
Person includes a company, legal entity or body of persons.
…
Schedule means the schedule attached to this Deed as separate and distinct from this Deed.
…
Social Partner in relation to a Beneficiary means a Person who, although not legally married to the Beneficiary, has been a long term social partner of at least six (6) months’ standing with the Beneficiary, whether or not such Person has formally lived with the Beneficiary on a bona fide domestic basis, or had lived with the Beneficiary prior to the Beneficiary’s death even though living separately in a hostel, nursing home or hospital prior to the Beneficiary’s death and a Person does not cease to be a social partner.
Spouse in relation to a Beneficiary means a Person who is or was the legally married spouse, Widow, Widower or Social Partner of the Beneficiary, and a legally married spouse, Widow, Widower or Social Partner of a Beneficiary remains the Widow, Widower or Social Partner of a Beneficiary (notwithstanding that the Beneficiary subsequently remarries) and a Person does not cease to be a Spouse, Widow, Widower or Social Partner.
…
Trust means the trust constituted by and comprised in this Deed and the Schedule.[13]

[13]The bolded terms in the provisions of the Zugliget Trust Deed extracted above appear bolded in the original text.

Clause 4 is entitled ‘Beneficiaries’ and clause 4.1 provides:

The expressions the Primary Beneficiaries, the Secondary Beneficiaries, the Tertiary Beneficiaries and the Beneficiaries shall include Persons, corporations and other entities and the trustee or trustees of trusts who or which from time to time until the Termination Date come within the definitions herein contained or within any description in the Schedule hereto notwithstanding that such Persons, corporations or other entities, trustee or trustees may not be in existence or have come into the defined categories at the date of this Deed and, in the case of such trustee or trustees notwithstanding that the trust or settlement of which he is trustee or they are trustees has not been formed or come into existence or do not fall within the defined category at the date of this Deed.

The Schedule to the Zugliget Trust Deed contains the following in relation to the role of ‘Appointor’:

(a)From the date of establishment of the Trust, the office of Appointor shall be held by Arnan Rouse of 29 The Righi, South Yarra in the State of Victoria (the First Appointor) during the lifetime of, or until the legal incapacity or resignation of, the First Appointor and thereafter such person as shall by Deed or Will be appointed by the First Appointor and failing any such appointment, then
(b) Upon the death, legal incapacity or resignation of the First Appointor, the office of Appointor shall be held by the spouse of the First Appointor (the Second Appointor) during the lifetime of, or until the legal incapacity or resignation of, the Second Appointor and thereafter such person as shall by Deed or Will be appointed by the Second Appointor and failing any such appointment, then
(c)Upon the death, legal incapacity or resignation of the Second Appointor, the office of Appointor shall be held by all children resulting from the union of the First Appointor and the Second Appointor. Where a child has attained the age of eighteen (18) years (the Eligible Age) that child shall hold office as Appointor in his or her own right. Where a child has not attained the Eligible Age, the person who is:—
(i) that child’s legal guardian; or
(ii)if the child has no legal guardian, the legal personal representative(s) of the Second Appointor

shall hold office as Appointor and shall exercise the powers of that office in the best interests of that child. Upon that child attaining the Eligible Age, the person who has held office as Appointor under paragraph (i) or (ii) hereof shall automatically cease to hold the office of Appointor and the child shall be entitled to exercise the powers of an Appointor in his or her own right.
(d)If there shall be no children resulting from the union of the First Appointor and the Second Appointor, the office of Appointor shall be held by the legal personal representative(s) of the First Appointor.
(e)If at any time there shall be more than one (1) person holding office as Appointor, any purported exercise of a power of the Appointor shall be invalid unless there is approval of the proposed exercise of such power evidenced in writing by all persons holding office as Appointor at that time.

The Schedule also contains the following in relation to ‘Secondary Beneficiaries’:

Any person who is a grandparent, parent, brother, sister, child, stepchild, grandchild, stepgrandchild, uncle, aunt, Relative, Associate or Dependant of a Primary Beneficiary and the spouses, children, grandchildren, relatives, dependants and associates of those grandparents, parents, brothers, sisters, children, stepchildren, grandchildren, stepgrandchildren, uncles, aunts, Relatives, Associates and Dependants.

Clause 8 is entitled ‘Appointment and Removal of Trustee’ and clause 8.1, entitled ‘Power Vests in Appointor’, provides:

The Appointor may at any time and from time to time by deed or by notice in writing delivered to the Trustee appoint a new trustee in place of an existing trustee or in addition to and jointly with an existing trustee in his absolute and unfettered discretion. Such removal or appointment shall take effect from the date of such notice.

Clause 8.2, entitled ‘Appointor’s Power to Vest in Successor’, provides:

(a)Upon the death, resignation or inability of the Appointor to continue to hold office as appointor, the power of appointment and removal vested in the Appointor shall pass in accordance with the Schedule.
(b)If the succession of the Appointor cannot be passed in accordance with the provisions contained in the Schedule, the power of appointment and removal vested in the appointor shall vest in:—
(i)the legal personal representative of the Appointor;
(ii)if the legal personal representative of the Appointor is unwilling or unable to accept office as Appointor, the office of Appointor shall vest in the first-named Primary Beneficiary;
(iii)if the first-named Primary Beneficiary is unwilling or unable to accept office as Appointor, the office of Appointor shall vest in all named Primary Beneficiaries;
(iv)if all named Primary Beneficiaries are unwilling or unable to accept office as Appointor, the office of Appointor shall vest in all the Children (if any) of the first-named Primary Beneficiary who are willing and able to accept office as Appointor;
(v)if none of the Children of the first-named Primary Beneficiary are willing and able to accept office as Appointor, the office of Appointor shall vest in the Trustee.

Clause 8.3 contains the definition of ‘Appointor’. It provides:

The expression the Appointor shall include:—
(a)any other Person to whom the powers hereby given may be delegated in writing by the Appointor or his legal personal representative(s); or

(b) the Person who succeeds the Appointor as set out in the Schedule; or
(c)if the position is otherwise vacant, the Person who shall become Appointor in accordance with Clause 8.2(b).

Clause 8.4, entitled ‘Exercise of the Appointor’s Powers’, provides:

The Person or Persons appointed to and holding office as Appointor shall exercise their powers in the same manner as provided in Clause 10.2 hereof with the exception that wheresoever the expression Trustee appears, the expression Appointor shall be substituted therefor.

Applicable principles

The rules for the construction of contracts apply to trusts.[14] The object of construction is to ascertain and give effect to the expressed intention of the parties by reference to the words used in the document rather than the parties’ actual subjective intentions.[15] Where the words are unambiguous, a court is to give those words their ordinary or natural meaning.[16]

Zugliget Investments’ submissions on standing

[14]Byrnes v Kendle (2011) 243 CLR 253, 286 [102] (Heydon and Crennan JJ).

[15]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352–3 (Mason J, Stephen and Wilson JJ agreeing); Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, 116 [46], 117 [50] (French CJ, Nettle and Gordon JJ), 131 [106] (Kiefel and Keane JJ), 134 [120] (Bell and Gageler JJ).

[16]Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290, 299 (Santow J).

Drawing support from the definition of ‘spouse’ in clause 1 of the Zugliget Trust Deed, Zugliget Investments submits that, from 8 October 2015, being the date on which Ms Rouse and the deceased divorced, until the deceased’s death on 1 May 2016, Ms Rouse was a ‘spouse’ of the deceased on the basis that she and the deceased were social partners in a committed relationship and had made plans to remarry. Zugliget Investments submits that, as the ‘spouse’ of the deceased, Ms Rouse held the office of appointor on the deceased’s death, the deceased having not appointed a person by deed or will to hold that office.

Ms Lloyd’s submissions on standing

Ms Lloyd submits that the definition of ‘spouse’ in the Zugliget Trust Deed applies only to a ‘Beneficiary’. She contends that the definition does not apply generally but rather expands the scope of persons who are beneficiaries under the Zugliget Trust. On that basis, given that Ms Rouse and the deceased had ended their marriage, Ms Rouse was not a ‘spouse’ of the deceased within the ordinary meaning of that word at the time of the deceased’s death.

Consideration—standing

Ms Rouse and the deceased married on 19 October 2007 and separated sometime in 2013.[17] They entered into the BFA on 14 July 2015 and subsequently divorced on 8 October 2015. The deceased died on 1 May 2016. It is common ground that, until the time of his death, the deceased had been the appointor and trustee of the Zugliget Trust. Broadly speaking, the issue is whether Ms Rouse succeeded the deceased as appointor of the Zugliget Trust on his death.
[17]Ms Rouse deposed that she and the deceased separated in September 2013, while the BFA records the date of separation as 1 May 2013.

Clause 8.3 of the Zugliget Trust Deed provides that ‘the Appointor’ shall include ‘the Person who succeeds the Appointor as set out in the Schedule’. The Schedule to the Zugliget Trust Deed provides, in summary, that from the date of establishment of the Zugliget Trust, the deceased shall hold the office of appointor — being ‘the First Appointor’ — during his lifetime or until his legal incapacity or resignation. Where, as in the present case, the First Appointor has not appointed a person by deed or will to hold the office of appointor, then ‘the spouse of the First Appointor’ — ‘the Second Appointor’ — holds the office of appointor. The issue may therefore be recast with greater precision by asking whether, at the time of his death, Ms Rouse was ‘the spouse’ of the deceased.

Clause 1 defines ‘spouse’, in relation to a Beneficiary, as ‘a Person who is or was the legally married spouse, Widow, Widower or Social Partner of the Beneficiary’. It goes further to say that ‘the legally married spouse, Widow, Widower or Social Partner of the Beneficiary’ remains in that capacity and that ‘a Person does not cease to be a Spouse, Widow, Widower or Social Partner’.

Zugliget Investments submits that, on a proper construction of clause 1 and the Schedule, Ms Rouse was the ‘spouse’ of ‘the First Appointor’, being the deceased, at the time of his death. Ms Rouse falls within the definition of ‘spouse’ in clause 1, it is submitted, because she ‘was the legally married spouse’, or alternatively the ‘Social Partner’, of ‘a Beneficiary’, being the deceased. As a parent of Max and Vivienne (‘the Primary Beneficiaries’), the deceased is a ‘Secondary Beneficiary’ as set out in the Schedule, and thus falls within the meaning of ‘a Beneficiary’ as set out in clause 1.

The construction advanced by Zugliget Investments is rejected. The Schedule provides that ‘the spouse of the First Appointor’ becomes the Second Appointor on the death of the First Appointor. The meaning of ‘spouse’ in clause 1 is expressed to apply ‘in relation to a Beneficiary’. It may be true that, as the former wife of the deceased or his social partner at the time of his death, Ms Rouse falls within the definition of ‘spouse’ in clause 1 and therefore she is the ‘spouse’ of the deceased in his capacity as ‘a Beneficiary’. But it does not follow that Ms Rouse is the ‘spouse’ of the deceased in his capacity as ‘the First Appointor’, which the Schedule requires in order for Ms Rouse to hold the office of appointor on the deceased’s death.

The meaning of ‘spouse’ in clause 1 is unambiguous. It is limited in its application to relationships involving ‘a Beneficiary’. It has a specific meaning within this specific context, and it does not inform the meaning of ‘the spouse of the First Appointor’ any more than the meaning of ‘the spouses … of those grandparents, parents, brothers, sisters, children, stepchildren, grandchildren, step grandchildren, uncles, aunts, Relatives, Associates and Dependants’ in relation to Secondary Beneficiaries. The Zugliget Trust Deed does not define the word ‘spouse’ in relation to ‘the First Appointor’ as it does in relation to ‘a Beneficiary’.

The preface to the defined terms in clause 1 states that the terms and words listed in clause 1 shall have the meanings given to them in that clause ‘unless the context otherwise requires’. As Ms Lloyd observes in her submissions, the definition of ‘spouse’ in clause 1 expands the scope of persons who are beneficiaries under the Zugliget Trust. The holding of the office of appointor, who has the power to appoint and remove trustees subject to the conditions of the trust deed, is a different context altogether.

In determining whether Ms Rouse held the office of appointor on the deceased’s death, the critical question is whether Ms Rouse was ‘the spouse of the First Appointor’ at that time. The ordinary or natural meaning of the word ‘spouse’ is ‘either member of a married pair in relation to the other’,[18] or the ‘husband or wife of a person’.[19] That definition is narrower than the definition of ‘spouse’ in clause 1, which includes a former husband or wife and a current or former widow, widower or social partner.
[18]Macquarie Dictionary (online at 2 December 2019) ‘spouse’. There is a second, qualified definition, being: ‘(for some official or legal purposes, as when indicating the person to accept certain responsibilities, receive benefits, etc.) a person who is in the relation of a husband or wife to another, whether or not legally married’. However, given the Zugliget Trust Deed does not define ‘spouse’ in relation to the First Appointor, there is no reason to depart from the ordinary and natural meaning, being the first definition.
[19]Australian Law Dictionary (online at 2 December 2019) ‘spouse’. The Encyclopaedic Australian Legal Dictionary (online at 2 December 2019) defines ‘spouse’ in common usage as ‘either member of a married couple’. Section 90XD of the Family Law Act 1975 (Cth) defines ‘spouse’ as including ‘a party to a de facto relationship’. However, this definition applies to pt VIIIB of that Act, the object of which is to allow certain payments in respect of a superannuation interest to be allocated between the parties to a marriage or the parties to a de facto relationship. It has no application in this proceeding. For the same reason, it is unhelpful to examine the definition of this term in other, especially statutory, contexts.

The touchstone of whether Ms Rouse held the office of appointor on the deceased’s death is whether she was the wife of the deceased at that time. The evidence is that Ms Rouse and the deceased divorced on 8 October 2015. Even accepting that she and the deceased were social partners in a committed relationship and had made plans to remarry, as Zugliget Investments contends, they were not a married pair at the time of the deceased’s death.

It follow from this construction that, at the time of the deceased’s death, Ms Rouse was not ‘the spouse of the First Appointor’ for the purposes of the Schedule to the Zugliget Trust Deed. As a result, her purported appointment of Zugliget Investments as trustee of the Zugliget Trust was invalid and without legal force or effect. Zugliget Investments therefore does not have standing to bring the first proceeding.

In the event of this conclusion being incorrect, it is necessary to consider whether the Righi property was an asset of the Zugliget Trust.

Zugliget Investments’ submissions

Zugliget Investments submits that, before the transfer of the Righi property to the deceased, Ms Rouse held the Righi property as bare trustee in accordance with the resolution of 1 December 2009[20] and the trustee declarations that formed part of the consumer credit loan contract with CBA.[21] Zugliget Investments says that these documents constitute written instruments for the purposes of s 53(1) of the Property Law Act. It submits that the resolution of 1 July 2012 recording the transfer of the Righi property from the Oasis Trust 351 to Ms Rouse as trustee for the Oasis Trust 350 also complied with s 53(1).[22]
[20]See [12] above.
[21]See [15] above.
[22]See [21] above.

Zugliget Investments submits that, at the time the deceased received the transfer of title to the Righi property, he and Mr Diakou knew that Ms Rouse held the Righi property on an express trust for the beneficiaries of the Oasis Trust 350 and that the deceased merely had bare legal title. In support of this contention, Zugliget Investments points to the following facts:

(a) the deceased’s representations to Ms Rouse in May and June 2015;[23]
[23]See [38]–[39] above.

(b) the deceased’s email to Mr Diakou of 18 June 2015, which contained the resolution of 1 December 2009;[24]

(c) the BFA did not alter the fact that Ms Rouse held not a beneficial interest in the Righi property but bare legal title, which was the only interest she could convey to the deceased;[25] and

(d) around the time of the execution of the BFA, the deceased took steps to secure control of the Oasis Trust by replacing Ms Rouse as trustee with PEA through arranging for the execution of the deed of removal and appointment of trustee.[26]

[24]See [41] above.

[25]Zugliget Investments refers to clause 6 of the BFA. See [43(b)] above.

[26]See [36] above.

Zugliget Investments submits that the following facts weigh in favour of finding that, after the execution of the BFA on 14 July 2015, the Righi property was vested out of the Oasis Trust 350 and transferred to the Zugliget Trust:

(a) Mr Lowe’s evidence that he executed the deed of removal and appointment of trustee, which appointed PEA as trustee of the Oasis Trust in the place of Ms Rouse;[27]
[27]See [36] above.

(b) following the property swap with Ms Rouse under the BFA, the deceased used the Righi property as replacement security for the NAB home loan facility, which had been used partly to fund the acquisition of the Kensington Road property by the Zugliget Trust;

(c) the deceased used the Righi property as security for the NAB redraw facility, which the deceased had executed ‘as trustee for Zugliget Trust’,[28] and NAB did not seek a third-party guarantee from the deceased in his personal capacity;
[28]See [51] above.

(d) by 1 December 2015, the deceased had drawn down nearly the entire NAB redraw facility;[29]

(e) between 31 August 2015 and 29 April 2016, the amount of $90,678.32 was paid to NAB on behalf of the Zugliget Trust in relation to the Righi property;[30] and

(f) the evidence given by Mr Diakou, summarised above.[31]

[29]See [53] above.

[30]See [56] above.

[31]See [76] above.

Zugliget Investments submits that, if the deceased had vested the Righi property out of the Oasis Trust and transferred it to himself beneficially, or if he somehow acquired an absolute beneficial interest in the Righi Property in mid-2015, then he and PEA would have been liable for several breaches of trust arising out of subsequent dealings with the Righi property. Zugliget Investments contends that the Court should not lightly infer that the deceased committed or assisted in these breaches of trust in circumstances where there is contrary evidence suggesting an innocent explanation for these dealings.

Zugliget Investments submits, in the alternative, that an implied or resulting trust arose in favour of the Zugliget Trust. It says that such a trust arose by reason of the swap between the Kensington Road property and the Righi property and by the deceased’s subsequent conduct in using the NAB home loan facility to pay for the mortgage and other expenses associated with the Kensington Road property.

Ms Lloyd’s submissions

Ms Lloyd submits that the Righi property was never held on any trusts that were enforceable. She highlights that the resolution of NVS Oasis dated 1 December 2009 contemplated that Ms Rouse would hold the Righi property as bare trustee on behalf of the Oasis Trust rather than as trustee under the relevant trust deed.[32] Further, Ms Rouse executed the contract of sale to purchase the Righi property in her own name, and the CBA bank records show the loan in the name of Ms Rouse.
[32]See [12] above. The difference, Ms Lloyd submits, is that if Ms Rouse purchased the Righi property as trustee of the Oasis Trust, she would have held it in accordance with the relevant trust deed and her powers in relation to it would have been set out in the trust deed. On the other hand, if she held the Righi property on trust for the Oasis Trust, she would have been a bare trustee, and she would not have derived any powers under the trust deed.

Ms Lloyd points out that Ms Rouse could not recall in cross-examination whether she executed any document that declared a trust over the Righi property. No documents to this effect were produced. Ms Lloyd submits that Ms Rouse therefore did not comply with s 53 of the Property Law Act. She also submits that the trustee declarations that formed part of the consumer credit loan contract with CBA confuse the role of trustee of the Oasis Trust with the role of holding the Righi property as bare trustee for the Oasis Trust.

Ms Lloyd also points out that the transfer of land dated 28 July 2015 made no mention of any trusts.[33] In addition, consideration for the transfer was stated to be ‘BREAKDOWN OF MARRIAGE’. The effect of s 44(1) of the Duties Act 2000 is that a transfer of dutiable property is exempt from duty where the transferor and transferee are each parties to the marriage. Ms Lloyd submits that, if the transfer was made to the deceased in his capacity as trustee, it would not be exempt because the beneficiaries of that trust include persons outside the marriage. Ms Lloyd also says that the State Revenue Office was not told that the Righi property was transferred to the deceased as trustee for the Oasis Trust.
[33]See [48] above.

Ms Lloyd observes that, after the transfer, the deceased used the Righi property as security under the NAB redraw facility. The deceased used the funds borrowed under that facility to discharge the debt in relation to the Kensington Road property under the BFA and for the deceased’s personal investments. Ms Lloyd submits that no trust documents permitted this use of the Righi property.

Ms Lloyd submits that there is no document in writing evidencing that the Righi property was transferred to the Zugliget Trust.

Consideration

Section 53 of the Property Law Act 1958 provides:

Instruments required to be in writing
(1)Subject to the provisions hereinafter contained with respect to the creation of interest in land by parol—
(a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;
(b)a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c)a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will.

(2)This section shall not affect the creation or operation of resulting, implied or constructive trusts.

The starting point in the analysis is the resolution of NVS Oasis on 1 December 2009. That resolution provided that Ms Rouse would hold the Righi property as trustee on behalf of the Oasis Trust. It was not specified whether she was to hold the Righi property on behalf of the Oasis Trust 350 or the Oasis Trust 351. However, it may be inferred that she was appointed to hold the Righi property on behalf of the Oasis Trust 351 — a trust of which she was trustee.

On a plain reading of the resolution, Ms Rouse was appointed to hold the Righi property as bare trustee for the Oasis Trust 351, rather than as trustee under the trust deed for the Oasis Trust 351. Incidentally, this arrangement is consistent with what Ms Rouse understood had occurred, namely, that she had appointed herself ‘as a sub-trustee’ to acquire the Righi property and to hold it on trust for the Oasis Trust 351.[34] Once she purchased the Righi property, she held it as bare trustee for the Oasis Trust 351. Any dealings with the Righi property were not governed by the trust deed for that trust. As bare trustee, Ms Rouse had no interest in the Righi property other than those which exist by reason of the office of trustee and the holding of legal title.[35]
[34]See [12] above.
[35]CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174, 182 [36] (French CJ, Heydon, Crennan, Kiefel and Bell JJ).

There is no evidence that Ms Rouse declared a trust over the Righi property or otherwise satisfied the requirement of signing a written instrument under s 53(1)(b) of the Property Law Act. As such, the trustee declarations of 5 March 2010 that formed part of the consumer credit loan contract with CBA were misconceived to the extent that Ms Rouse declared that the trust deed of the Oasis Trust (whichever deed that was) gave her the necessary power and authority to enter into that contract.

The resolution of NVS Oasis on 1 July 2012 did not change the nature of Ms Rouse’s interest in the Righi property. The resolution provided for the distribution of the Righi property from one trust within the structure of the Oasis Trust to another. By its terms, the resolution presupposed that Ms Rouse held the Righi property as trustee on behalf of the Oasis Trust 351. However, there is no evidence that she held the Righi property in this capacity or, for that matter, that the Righi property was property of the Oasis Trust 351. She therefore retained a legal interest in the Righi property as bare trustee. The transfer dated 30 June 2013 merely gave effect to the resolution.

Ms Rouse deposed that the Righi property was beneficially owned by a trust at the time of the purchase of the Kensington Road property. She also relies heavily on evidence of previous representations made to her by the deceased to the effect that their children would hold a beneficial interest in the Righi property. However, these representations, which are precatory at best, are not substantiated by any documents to that effect, and there is no documentary evidence that the Righi property ever formed part of the Oasis Trust.

After their separation, Ms Rouse and the deceased executed the BFA. Under the BFA, Ms Rouse agreed to transfer all her rights, title and interest in the Righi property to the deceased in exchange for the transfer of the deceased’s rights, title and interest in the Kensington Road property to Ms Rouse and the discharge of the mortgage over the Kensington Road property. Ms Rouse deposes that, around this time, she and the deceased agreed, inter alia, that the Righi property would be transferred to the Zugliget Trust with the deceased as trustee and Max and Vivienne as ‘ultimate beneficiaries’. However, the BFA makes no reference to this arrangement. The BFA is otherwise comprehensive in setting out how Ms Rouse and the deceased were to deal with various property and the entitlements of Max and Vivienne. In this respect, on balance, Ms Rouse’s evidence is self-serving and unsatisfactory, particularly in light of the absence of documentary evidence detailing this arrangement.

Zugliget Investments relies on evidence in the form of several conversations between Ms Rouse and the deceased to the effect that she and the deceased had a mutual understanding that the Righi property was trust property of which Max and Vivienne were beneficiaries. The evidence, for the most part, is internally consistent, however, it carries little weight in the absence of corroborating documentary evidence. It does not detract from the fact that Ms Rouse retained a legal interest in the Righi property as bare trustee until the time of transfer, and the circumstances in which that property could be distributed were not governed by any trust deed.

The transfer of land dated 28 July 2015 does not mention any trusts. Although it would not have been determinative in and of itself, Zugliget Investments has not produced any document evidencing what had been disclosed to the State Revenue Office with respect to the transfer and whether it was told that the Righi property was held on trust.

Further, the timing of the deceased’s email to Mr Diakou on 18 June 2015, attaching the minutes of the meeting of the Oasis Trust on 1 December 2009, does not assist Zugliget Investments. There is no evidence from which to infer that the deceased considered the Righi property to be the subject of a trust, as Zugliget Investments contends. The email merely reveals the deceased’s subjective understanding of the arrangement with respect to the Righi property, as reflected in the minutes, and his desire to pass on this information to his solicitor for the purpose of preparing the BFA.

After the transfer of the Righi property in accordance with the terms of the BFA, the deceased obtained finance under the NAB redraw facility. The deceased used the moneys drawn down under that facility to repay the loan on the Kensington Road property, to discharge the mortgage over that property and to fund the deceased’s personal investments. The new loan was secured, inter alia, by a registered mortgage over the Righi property. This use of the Righi property is more consistent with the deceased’s holding that property in his personal capacity, for his own personal use, rather than in his capacity as trustee of the Zugliget Trust. It is true that the documents signed by the deceased refer to his holding the Righi property as trustee for the Zugliget Trust. However, these documents merely disclose that the deceased believed that he was holding the Righi property in this capacity. They are insufficient to impress the Righi property with the character of trust property.

Assuming for the moment that the Righi property had at some point vested in the Oasis Trust, a further problem with finding that the Righi property is property of the Zugliget Trust is the absence of any documents evidencing its transfer from the Oasis Trust to the Zugliget Trust.

The purported transfer of the Righi property from the Oasis Trust to the Zugliget Trust is the subject of Mr Lowe’s evidence. According to Mr Lowe, in early to mid-2015 the deceased asked him whether he could appoint PEA as trustee of the Oasis Trust with a view eventually to transferring the Righi property to another trust controlled by the deceased for the ultimate benefit of Max and Vivienne. After the appointment of PEA as trustee, Mr Lowe gave evidence that he executed documents to transfer the Righi property from the Oasis Trust to the Zugliget Trust. Those documents could not be located.

On balance, Mr Lowe’s evidence on this matter was unconvincing. He seemed all too ready to accept that he executed a document to transfer the Righi property from the Oasis Trust to the Zugliget Trust. When pressed about the contents of the document, he conceded that he did not read beyond the execution page. The impression of Mr Lowe was that he was intent on giving evidence that was partisan in favour of the case put forward by Zugliget Investments.

On the whole, the evidence falls well short of establishing that the Righi property was property of the Zugliget Trust. Rather, the weight of the evidence suggests that the deceased held the Righi property in his personal capacity. At the time of his death, the Righi property formed part of his estate. It follows that the Righi property, along with the other property in the estate, falls to be distributed in accordance with the intestacy provisions applicable as at 1 May 2016.

Conclusion

Zugliget does not have standing to bring the application in the first proceeding. Even if Zugliget Investments had standing, the application should be dismissed.

The second proceeding

In the second proceeding, Ms Rouse seeks an order vesting the share in DVS in the Peregrination Trust, alternatively, a declaration that, as at the date of the deceased’s death, the deceased held only a bare legal interest in that share and the full beneficial interest in the share was held on behalf of the beneficiaries of the Peregrination Trust, namely, Max and Vivienne.

DVS is the registered proprietor of the property at 4 Vintners Row, Chelsea, London, England (‘the Chelsea property’) and the owner of a bank account with Credit Suisse containing an amount of approximately £44,782.

Factual background

DVS was incorporated on 11 September 2003 in the British Virgin Islands.

On 6 May 2004, the sole issued share in DVS was transferred to Ms Rouse. At all times between 6 May 2004 until 14 July 2015, Ms Rouse was the registered holder of the DVS share.

On 15 September 2004, DVS was registered as the proprietor of the Chelsea property. It remains the registered proprietor of the Chelsea Property.

On 20 September 2004, NVS Oasis resolved to appoint Ms Rouse to hold the DVS share as trustee on behalf of the Oasis Trust. It was also resolved that Ms Rouse register in her name, in her capacity as trustee of the Oasis Trust, the DVS share on behalf of the Oasis Trust. The minutes of meeting recording these resolutions did not specify whether the beneficiary under this arrangement was to be the Oasis Trust 350 or the Oasis Trust 351. Ms Rouse’s evidence was that she held the DVS share in her capacity as trustee on behalf of the Oasis Trust 351. At trial, she gave evidence that she held the DVS share not in her personal capacity but as trustee.

On 6 December 2007, the deceased was appointed director of DVS.

On 22 March 2010, the day on which Max was born, the deed of settlement for the Peregrination Trust (‘the Peregrination Trust Deed’) was executed. Ms Rouse was the trustee and the appointor. Max was the primary beneficiary. Ms Rouse gave evidence that she and the deceased agreed that the DVS share would best be held in the Peregrination Trust.

On 22 May 2010, Ms Rouse, as trustee for the Peregrination Trust, resolved that certain assets, including the DVS share, be held in her name as trustee on behalf of the Peregrination Trust. The minutes of meeting that record this resolution also record that both Ms Rouse and the deceased were present at the meeting.

In cross-examination, Ms Rouse was asked whether she could point to any documents showing that the DVS share was transferred out of the Oasis Trust. She responded:

I do not recall at [this] stage. I mean, I have to go through my documents and see if I have anything, but I do remember signing a few documents to remove things out of Oasis Trust for the time.

On 25 August 2010, the deceased sent an email to Mr Andrew Swapp of Harneys Corporate Services Limited (‘Harneys’), who acted as the registered agent for DVS in the British Virgin Islands, advising that, ‘through a trust’, Max had become the beneficial owner of the DVS share. The email added that ‘Mary remains the shareholder holding them in trust, as Trustee for Max Rouse through his trust’.

On 17 February 2011, Ms Rouse completed an ‘Individual Client Questionnaire’ for Harneys. In the document, Ms Rouse named herself as the shareholder of the DVS share and Max as the beneficial owner of that share.

The balance sheet for the Peregrination Trust as at 30 June 2012 recorded $1,006 in ‘Shares in Unlisted Companies’. Ms Rouse deposed that, while no individual breakdown was provided, she believed that this value included the DVS share with its face value of AUD2. The balance sheet for each financial year ending 30 June 2013 to 30 June 2016 (inclusive) recorded $106 in ‘Shares in Unlisted Companies’. Ms Rouse incorrectly deposed that the value in each of these items was $1,006.

Vivienne was born to Ms Rouse and the deceased on 25 November 2012. Ms Rouse and the deceased separated in September 2013 but remained close after that time.

In early 2015, the deceased opened a bank account with Credit Suisse in the name of DVS. In addition to the Chelsea property, the bank account is the other principal asset of DVS. Ms Rouse gave evidence that the deceased, as the accountholder, controlled the bank account and that its primary purpose was to receive rental income.

On 10 March 2015, the deceased completed and signed a form provided to him by Credit Suisse entitled ‘Establishment of the Beneficial Owner’s Identity’. The deceased declared that Ms Rouse and the Peregrination Trust were the beneficial owners of the Credit Suisse bank account.

On 1 April 2015, the deceased completed and signed the same form for Credit Suisse. However, on this occasion, he declared that Ms Rouse, Max and Vivienne were the beneficial owners of the Credit Suisse bank account. The form was marked as a replacement for all previous forms of this kind.

On 21 April 2015, the deceased signed a taxation return for HM Revenue & Customs in relation to DVS for the year 6 April 2014 to 5 April 2015. In cross-examination, Ms Rouse identified the document as ‘the taxation return in relation to the rental property at Chelsea’. The document reports income of £50,391, losses brought forward of £216,956 and losses carried forward of £183,093. Ms Rouse gave evidence that she had no knowledge about these figures.

On 30 April 2015, Mr Andrew Mill of BCA (Vic) Pty Ltd, an accounting firm, provided to Credit Suisse several forms entitled ‘Tax or Legal Advisor Confirmation Regarding Tax Compliance’ in relation to DVS. The forms recorded Ms Rouse, Max and Vivienne as beneficial owners of DVS.

As stated above, on 31 May 2015, Ms Rouse and the deceased had a conversation, which Ms Rouse recorded with the knowledge and consent of the deceased. During the conversation, the deceased said that all of his assets ‘through whatever structures … flow through to Peregrination Trust’ for a ‘multitude of reasons’. Those reasons included that Ms Rouse, as appointor, would be able to ‘control those assets’.

During the conversation, the deceased said:

The assets of the Peregrination Trust remain, everything they all flow through, ok. So, all of the income, all of the capital gains … are for the benefit of the Peregrination Trust. … I’ve gifted substantial assets to Peregrination Trust in the year we met in 2003. I’ve gifted substantial assets to the Peregrination Trust over the years following. Ann Delic gifted substantial benefits to both Max and Vivienne and also the Peregrination Trust over her time her, success in her investments, investments that I assisted and as such all of the income and assets that I earned prior to meeting Mary I would like those assets put back in my name. However, I want them in my name for my use for the rest of my life, but they revert remain [sic] the assets of Peregrination Trust purely for the benefit of Max and Viv. Now you as their mother and trustee can help utilise those assets while they are there, but any future spouse or partner cannot have any access or control or benefit from those assets until after my death because I do not want any future partner of yours …

The deceased also referred to Max and Vivienne being able to invite Ms Rouse to ‘their house in London’. He continued:

So everything is owned by Peregrination. Alright that’s it, all I want is that I have the right entitlement given that I earned the money prior to even meeting you to use Chelsea as I see fit never to be sold, but if I want to go and live there and not rent it out that is my choice and I want it put in my name that’s part of the financial binding agreement [sic] so that I can go and live there and pay the rates and stay there for a month or stay there for three months, have you and max and viv [sic] visit, have friends visit that was my dream I wanted since I was 16 and to have a dream stolen you would kill me, it would kill me.
…
Your obligation is to allow me to access that property in Chelsea for the rest of my life even knowing that it still remains the property of peregrination [sic] … for the soul [sic] benefit of the children …

At the start of the conversation, the deceased said that he had not slept for 48 hours. It was suggested to Ms Rouse in cross-examination that the deceased was either intoxicated or incoherent during the conversation. Ms Rouse disagreed, stating that ‘he was coherent enough that I understood what he was trying to say’.

Ms Rouse deposed that, based on this conversation, the deceased and she, in her capacity as trustee of the Peregrination Trust, made a verbal agreement to transfer the DVS share to the deceased ‘for him to hold as custodian trustee so he could control the property for his lifetime on the basis it remained an asset of Peregrination [T]rust of which Max and Vivienne are beneficiaries’.

It is to be recalled that, on 18 June 2015, the deceased sent an email to Mr Diakou attaching two minutes of the meetings of the Oasis Trust on 20 September 2004 and 1 December 2009.

On 29 June 2015, Ms Rouse and the deceased had another conversation. During the conversation, the deceased said:

Max and Vivienne own everything, you and I own nothing … Max and Viv own everything, everything has been gifted to them. Why do you think the only reason that I wanted you to change one trust deed with peregrination [sic] trust deed to make sure that Viv is the primary beneficiary.

On 3 July 2015, the deceased sent an email to Ms Louise Smith, a solicitor in England and a friend of the deceased, asking her to contact him ‘in relation to a guarantee on DVS’.

Ms Smith deposed that, on 4 July 2015, the deceased left two voicemail messages on her mobile phone. In the first message, the deceased mentioned that he and Ms Rouse needed a document for their divorce settlement so that the children could have security of a particular British Virgin Islands asset. Ms Smith deposed that, in the second message, the deceased was difficult to understand as his speech was slurred but, as far as she could understand, the deceased said that he needed a very simple guarantee in relation to his and Ms Rouse’s divorce.

On 6 July 2015, Ms Smith responded to the deceased’s email. She asked who the registered owner of Chelsea Property was, whether there was a mortgage over the Chelsea Property, what kind of security the deceased sought and whether he wanted the Chelsea Property transferred into Ms Rouse’s name.

Ms Smith does not recall the deceased’s responding to her email or raising the Chelsea property with her until 31 March 2016, when the deceased left another voicemail message on Ms Smith’s mobile phone in relation to a different matter.

As set out above, on 14 July 2015, Ms Rouse and the deceased entered into the BFA. Insofar as it relates to the DVS share and the Peregrination Trust, the BFA provides that:

(a) Ms Rouse shall transfer the shares in DVS and another company, My Home LLC, to the deceased (clause 8); and

(b) Ms Rouse and the deceased shall do all acts and things to include Vivienne as a primary beneficiary of Peregrination and to have Ms Rouse the appointor of that trust, with the deceased as second appointor (clause 9).

On the same day, Ms Rouse and the deceased executed two more documents. The first document was a deed of variation of the Peregrination Trust. The deed had the effect of naming Max and Vivienne as sole primary beneficiaries, adding the deceased as a second appointor and preventing Ms Rouse from further altering, varying or revoking any trust or provision under the Peregrination Trust Deed without the deceased’s written consent. The second document was a transfer of the DVS share from Ms Rouse to the deceased in accordance with clause 8 of the BFA, which Ms Rouse says reflected the verbal agreement between her and the deceased after their conversation on 31 May 2015.[36] The transfer document does not mention any trusts.
[36]See [150] above.

Ms Rouse deposes that at no time prior to executing the BFA, the deed of variation or the share transfer did the deceased indicate to her that the execution of those documents would in any way affect or alter the underlying beneficial interest in the DVS share, which she understood to be for Max and Vivienne as the primary beneficiaries of the Peregrination Trust.

Ms Rouse and the deceased divorced on 8 October 2015.

Before November 2015, the Chelsea property was tenanted. The tenants vacated, and the deceased began renovating the Chelsea property in early 2016. Ms Rouse deposes that the renovations took place so that the deceased could stay at the Chelsea property and so that she, Max and Vivienne could stay there when they visited London later that year. Renovations to the Chelsea property had already begun before the deceased’s death, and it has not been tenanted since November 2015. Ms Rouse has maintained the property and, as at 27 September 2018, paid maintenance fees totalling $18,634.

On 31 March 2016, the deceased left another voice message on Ms Smith’s mobile phone. In the message, the deceased asked to speak with Ms Smith in relation to a project in London. The deceased said that he and Ms Rouse would be coming across in ‘June July August-ish’.

On 29 April 2016, the deceased called Ms Smith to discuss a redecoration of the Chelsea property. Ms Smith deposes that she took notes of the conversation. She later used the notes to prepare a detailed statutory declaration, made on 16 December 2016, setting out the conversation. She states that the conversation was ‘slightly unusual’ and that was why she took notes and retained a ‘good recollection’ of it. During the conversation, Ms Smith deposes that the deceased told her that he ‘had put the Chelsea house in trust for Max and Vivienne’. He further stated that ‘he had ensured [Ms Rouse] and the kids would looked [sic] after financially’.

The deceased died on 1 May 2016. On 16 December 2016, Ms Rouse was appointed limited administrator ad colligendum bona of the deceased’s estate.

In his affidavit made in the documents proceeding,[37] Mr Diakou deposed, inter alia, that he was never instructed to seek to vest the DVS share to the deceased personally.
[37]See [76] above.

By originating motion filed 27 September 2018, Ms Rouse seeks an order pursuant to ss 51 and 64 of the Trustee Act 1958 that the share in DVS vest in her as trustee of the Peregrination Trust or, alternatively, a declaration that, as at the date of the deceased’s death, the deceased held only a bare legal interest in that share and the full beneficial interest in the share was held on behalf of the beneficiaries of the Peregrination Trust.

Ms Rouse’s submissions

Ms Rouse submits that, at the time of the deceased’s death, the DVS share was subject to the Peregrination Trust. She observes that she and the deceased had consistently represented to Harneys that the ultimate beneficial owner of DVS was Max, and later also Vivienne, and that they occasionally referred to Ms Rouse’s interest as well. She also points out that, during the negotiations leading up to the execution of the BFA, on 31 May 2015, the deceased told Ms Rouse that the Chelsea property owned by DVS was held by the Peregrination Trust for the benefit of Max and Vivienne.

Ms Rouse also submits that the deceased and Mr Diakou both knew of Ms Rouse’s bare legal interest in the DVS share. Ms Rouse relies on the evidence of Mr Diakou summarised above.[38] She also relies on the deceased’s statement to Ms Smith to the effect that he had put the Chelsea property into trust for Max and Vivienne. Ms Rouse submits that this evidence corroborates the fact that the deceased held the DVS share as bare trustee on behalf of the Peregrination Trust.
[38]See [76] above. A copy of this affidavit forms part of the evidence in both the first proceeding and the second proceeding.

Ms Rouse submits that, under clause 8 of the BFA, the deceased received no more than a bare legal title to the DVS share. She says that clause expressly recognised the fact that she held the DVS share as trustee. All that she could, and did, transfer to the deceased under the BFA was a bare legal title.

Ms Rouse also points to the variations made to the Peregrination Trust Deed on 14 July 2015 at the insistence of the deceased. These changes included adding the deceased as a second appointor and preventing Ms Rouse from further altering, varying or revoking any trust or provision under the Peregrination Trust Deed without the deceased’s written consent. Further, the Peregrination Trust Deed did not permit the deceased unilaterally to vary or revoke any of the trusts without Ms Rouse’s consent. He was also not given any power to vest trust assets unilaterally. Ms Rouse submits that there is no evidence that the deceased took any step unilaterally to vary or revoke any part of the Peregrination Trust or to vest any of its assets, including the DVS share, away from Max and Vivienne and for his own personal benefit.

Ms Rouse submits that the absence of any declaration of trust with respect to the DVS share is immaterial. To conclude that such a declaration was necessary would be to elevate form over substance. Ms Rouse made the same submission with respect to the absence of any document evidencing the removal of the DVS share from the Oasis Trust: she was a co-trustee and an appointor of the Oasis Trust 351, and the minutes of the meeting on 22 May 2010,[39] in which she resolved that the DVS share be held in her name as trustee on behalf of the Peregrination Trust, sufficed to give effect to the transaction. According to Ms Rouse, weight should be given to the axiom that equity looks to substance rather than to form.
[39]See [135] above.

Ms Rouse submits that the documentary evidence speaks unequivocally of an intention on the part of Ms Rouse and the deceased to hold the DVS share on trust for the Peregrination Trust. She asserts that the deceased did not at any stage express a contrary intention to Mr Diakou and Ms Smith, his legal advisers. Ms Rouse also submits that, in determining whether an express trust has arisen in relation to particular assets, the essential question, as posed in Byrnes v Kendle,[40] is ‘whether in substance a sufficient intention to create a trust has been manifested’. She says that the intention to create a trust in the present case is clear.
[40](2011) 243 CLR 253, 274 [55] (Gummow and Hayne JJ).

Finally, Ms Rouse submits that, if there was any deficiency or omission with respect to the underlying documents, then it was curable by the fact that Ms Rouse was at all relevant times the sole director of NVS Oasis. Clause 10.3 of the Zugliget Trust Deed permitted her, as director, to exercise and act with the unanimous authority of the board of directors. In this capacity, and as additional trustee of the Oasis Trust 351, she could exercise the powers under clause 5 to distribute the capital of the Oasis Trust 351 to any beneficiaries, including the Peregrination Trust, being a trust of which at least one of the beneficiaries of the Oasis Trust 351 was also a beneficiary, and therefore a Tertiary Beneficiary.

Ms Lloyd’s submissions

Ms Lloyd’s submissions first address the resolution of NVS Oasis on 20 September 2004 and the resolution of Ms Rouse as trustee of the Peregrination Trust on 22 May 2010. As to the first of these resolutions, Ms Lloyd submits that, before the resolution was passed, Ms Rouse held the DVS share in her personal capacity. The resolution contemplated that Ms Rouse’s holding the DVS share as bare trustee on behalf of the Oasis Trust rather than as trustee of the Oasis Trust. Ms Lloyd contends there is no evidence showing a change in ownership of the DVS share after the resolution, as Ms Rouse did nothing to change her interest as bare trustee.

As to the second of these resolutions, which purported to gift the DVS share to Ms Rouse to hold as trustee for the Peregrination Trust, Ms Lloyd submits that there is no evidence of any gift from Ms Rouse to herself as trustee of the Peregrination Trust. Moreover, there is no evidence that the trustees of the Oasis Trust 351 resolved to distribute the DVS share to the Peregrination Trust or that the DVS share was transferred to the Peregrination Trust after the resolution.

Ms Lloyd submits that there is no evidence that the Peregrination Trust ever accounted for the DVS share as one of its assets. She points out that none of the financial statements and balance sheets for the financial years ending 30 June 2012 to 30 June 2016 refer to the DVS share. These documents also make no reference to the Chelsea property or the Credit Suisse bank account owned by DVS. In response to this submission, Ms Rouse observes that the balance sheets include unspecified ‘shares in listed companies’ and notes that the balance sheet for the financial year ending 30 June 2016 was prepared after the deceased’s death.

Ms Lloyd submits that the conversation between Ms Rouse and the deceased on 31 May 2015 shows that the deceased intended to hold the DVS share in his personal capacity. In particular, Ms Lloyd draws attention to the deceased’s statement that:

(a) he had gifted substantial assets to the Peregrination Trust and he wanted those assets put back in his name to use for the rest of his life and then to ‘revert remain [sic] the assets of Peregrination Trust purely for the benefit of Max and Viv’; and

(b) he wanted to use the Chelsea property as he saw fit and to ‘go and live there and pay the rates and stay there’.

Ms Lloyd further submits that the effect of the verbal agreement between Ms Rouse and the deceased with respect to the transfer of the DVS share was that the deceased would control the DVS share during his lifetime. This arrangement, Ms Lloyd submits, is inconsistent with the DVS share being held on trust and consistent with the way in which the deceased held most of his assets. Ms Lloyd contends that there is no evidence that the Credit Suisse bank account, which the deceased controlled, was available for trust purposes and that, based on financial statements of the Peregrination Trust, it did not appear to be property of the Peregrination Trust.

Consideration

It is common ground that between 6 May 2004 and 14 July 2015, Ms Rouse was the registered holder of the DVS share. In order to determine the nature of Ms Rouse’s interest in the DVS share at the time of its purported transfer to the deceased, it is necessary to examine the dealings with the DVS share during that period.

On 20 September 2004, NVS Oasis resolved to appoint Ms Rouse to hold the DVS share as trustee on behalf of the Oasis Trust and that Ms Rouse register in her name, in her capacity as trustee of the Oasis Trust, the DVS share on behalf of the Oasis Trust. While the minutes of meeting did not specify which of the trusts within the Oasis Trust structure was the intended beneficiary, the evidence of Ms Rouse that the reference to the Oasis Trust in the resolution was a reference to the Oasis Trust 351 is accepted.

The resolution of 20 September 2004 records a decision of NVS Oasis, as trustee of the Oasis Trust, to deal with an asset over which it has no power. As is the case with the resolution of 1 December 2009 with respect to the Righi property, the resolution of 20 September 2004 at most evinces an intention that Ms Rouse hold the DVS share as bare trustee for the Oasis Trust 351.

The resolution did not have the effect of bringing the DVS share within the property of the Oasis Trust 351. By its nature, a resolution does no more than record a decision made by the members (using that term in a loose sense) of an organisation, usually by means of a vote.[41] Ms Rouse did not adduce any evidence showing a change in ownership of the DVS share after the resolution, whether by transfer document or otherwise. While it is not strictly necessary in the case of an interest other than an interest in land, there is also no evidence that Ms Rouse made a written declaration of trust over the DVS share.
[41]See Encyclopaedic Australian Legal Dictionary (online at 2 December 2019) ‘resolution’ (def 1).

It follows that, before the resolution of 22 May 2010, Ms Rouse held the DVS share as bare trustee for the Oasis Trust 351. The resolution of 22 May 2010 recorded a decision to gift the DVS share to Ms Rouse to hold as trustee for the Peregrination Trust. Ms Rouse made the resolution in her capacity as trustee for the Peregrination Trust, which had no interest in the DVS share. The resolution is ineffective because it does not, in and of itself, constitute a transfer of the DVS share and, in any event, it is made by an entity that had no power to deal with the DVS share. Again, there is no evidence that Ms Rouse, as bare trustee for the Oasis Trust 351, executed any document that had the effect of transferring the DVS share to the Peregrination Trust after the resolution. In cross-examination, she could not point to any evidence of the transfer of the DVS share from the Oasis Trust to the Peregrination Trust. The representations made to Harneys that Max, and later Vivienne, were the ultimate beneficial owners of DVS did not have a documentary basis.

It is emphasised that this analysis does not prioritise form over substance. It is true that Ms Rouse was the trustee of each of the trusts in question, as well as the bare trustee of the DVS share at the time of the resolutions of 1 December 2009 and 22 May 2010. However, the terms of the resolution of 20 September 2004 provide for the appointment of Ms Rouse to hold the DVS share as bare trustee for the Oasis Trust 351. There is no reason to depart from the clear language of the resolution. Furthermore, the resolution of 22 May 2010, for the reasons given above, was not effective to carry out the transaction contemplated within it.

In support of her contention, Ms Rouse also relies on the conversation between the deceased and her on 31 May 2015. During the conversation, the deceased said that he had gifted substantial assets to the Peregrination Trust and that he wanted those assets put back in his name to use for the rest of his life. The deceased added that, on his death, he wished that those assets revert to the Peregrination Trust for the benefit of Max and Vivienne. It was on this footing that Ms Rouse and the deceased made the verbal agreement to transfer the DVS share to the deceased ‘for him to hold as custodian trustee so he could control the property for his lifetime’.

The evidence of this conversation should be given little weight. It is not supported by any documents evidencing the transfer of the DVS share to Ms Rouse, whether personally or in her capacity as trustee of the Peregrination Trust, and nothing said in the conversation itself evidences a declaration of trust. The same goes for the deceased’s representations to Ms Smith that he ‘had put the Chelsea house in trust for Max and Vivienne’ and that ‘he had ensured [Ms Rouse] and the kids would looked [sic] after financially’. At most, the deceased’s representations reveal either his subjective understanding of the structure in which various assets were held or his plans for how those assets would be held in the future. As far as the evidence goes, those plans had not been put in place by any documents effecting the transfer of the DVS share to a trust for the benefit of Max and Vivienne.

Nor does the transfer of the DVS share from the Oasis Trust to the deceased assist Ms Rouse. That transfer reflects the verbal agreement between Ms Rouse and the deceased to allow the deceased to control DVS during his lifetime. Such an arrangement is inconsistent with the DVS share being held on trust. The background to that agreement is that the deceased had gifted substantial assets to the Peregrination Trust and he wanted those assets put back in his name to use for the rest of his life before reverting to the Peregrination Trust. Moreover, the deceased wanted to use the Chelsea property as he saw fit and to ‘go and live there and pay the rates and stay there’. The evidence of Ms Smith suggests that the deceased had indeed moved to London and at least discussed redecorating the Chelsea property. The proposed arrangement suggests that the deceased intended to hold the DVS share in his personal capacity. It bears repeating that there is no evidence showing that the DVS share was ever transferred to the Peregrination Trust.

Ms Rouse’s focus on whether an intention to create a trust has been manifested is misplaced. The question is not whether an intention to create a trust should be inferred from all the circumstances, but whether the DVS share forms part of a trust already in existence, namely, the Peregrination Trust. The absence of documentary evidence surrounding the purported transactions weighs against finding that the DVS share forms part of the Peregrination Trust. The conversations between Ms Rouse and the deceased with respect to the DVS share fall well short of establishing this proposition.

Conclusion

The application in the second proceeding be dismissed.

Orders

The first proceeding and the second proceeding be dismissed.

If the parties are unable to agree on the question of costs, written submissions should be filed on or before 7 February 2020.

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[2019] VSC 792

3 December 2019 – First revision 4 December 2019