Reader v Fried
[1998] VSC 180
•17 December 1998
SUPREME COURT OF VICTORIA
PRACTICE COURT
Not Restricted
No. 6018 of 1998
JOHN READER AND OTHERS Plaintiffs v. TAB FRIED AND OTHERS Defendants
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JUDGE: BEACH, J. WHERE HELD: MELBOURNE DATE OF HEARING: 4 DECEMBER 1998 DATE OF JUDGMENT: 17 DECEMBER 1998 CASE MAY BE CITED AS: READER & ORS. V. FRIED & ORS. MEDIA NEUTRAL CITATION: [1998] VSC 180
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CATCHWORDS:
Proceeding first by beneficiaries of Trust - Trustee then joined as plaintiff - Same cause of action - Application to remove beneficiaries as plaintiffs - Refused.
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APPEARANCES: Counsel Solicitors For the Plaintiffs Mr. I. Jones Deacons Graham & James For the Defendants Mr. W.D. Wyles Charlesworth Josem
Partners Pty. Ltd.
HIS HONOUR:
This is an action brought originally by five beneficiaries of the TED Engineering Key Employees' Superannuation Fund Pty. Ltd. now the EVATAB Superannuation Fund Pty. Ltd. (the fund) against three former trustees of the fund and the present trustee of the fund Hawker Richardson Superannuation Fund Limited (Hawker Richardson) seeking to redress a breach of trust whereby it is alleged that two of the former trustees of the trust caused the third former trustee of the trust to acquire property at Kinwall Court, Moorabbin then owned by the two former trustees of the trust at a price substantially more than the property was worth. The plaintiffs also seek to have the trust fund restored by the payment to it by the three former trustees of the amount of the loss suffered by the trust as a consequence of the acquisition and later disposal of the property and an order that after its assets have been restored the trust be wound up.
In their original statement of claim the plaintiffs pleaded that the present trustee of the fund Hawker Richardson had refused to take the necessary steps to recover the fund's loss when requested to do so by the plaintiffs and had declined to be named as a plaintiff to the proceeding. As a consequence the plaintiffs had had no alternative but to join Hawker Richardson as a defendant to the proceeding.
In an affidavit sworn by the plaintiffs' solicitor on 6 November last, the plaintiffs' solicitor deposed to the fact that Hawker Richardson has now consented to be joined as a plaintiff to the proceeding.
On 18 November 1998, and upon the application of the original plaintiffs, Master Evans made an order that Hawker Richardson be added as the sixth named plaintiff to the proceeding and that the proceeding be carried on as so constituted.
On 23 November 1998 the three original trustees, who are the first, second and third named defendants, filed a notice of appeal to a Judge of the Court in respect of the order of Master Evans.
When the appeal came before me on 4 December different counsel appeared before me from the counsel who had appeared before Master Evans.
Counsel for the plaintiffs informed me that his understanding of the situation was that the order made by Master Evans had been made by the consent of the original trustees. Counsel for the original trustees was unable to assist me in the matter. There is no reference in Master Evans' order to the effect that the order was made by consent although the Court record of hearing for 18 November states that the orders made that day were "as per attached minutes", and the attached handwritten minutes are clearly not in the handwriting of the Master. The minutes bear no signature. One assumes that they were written out by one of the counsel who appeared before the Master.
If, of course, the order sought to be appealed against was made by consent, then the original trustees have no right of appeal to a Judge of the Court except with leave. (See R.77.05 of the Supreme Court Rules).
However, it transpired subsequently, that nothing turns upon the point. I say that because when that aspect of the matter was debated with counsel for the original trustees it soon became clear that the original trustees were not seeking to interfere with the Master's order joining Hawker Richardson as a plaintiff to the proceeding but rather were seeking to have it joined in substitution for the five beneficiaries.
Nevertheless, the point I make is that if an order is made by a Master, or for that matter a Judge of the Court by consent of the parties, that fact should appear on the face of the order.
There was no application before the Master to join Hawker Richardson as a plaintiff to the proceeding in substitution for the five beneficiaries. The application was simply to add Hawker Richardson as a co-plaintiff. Accordingly there can be no appeal to a Judge of the Court from the Master's order to that effect on the basis that the order the original trustees now contend the Master should have made, is the one they now seek.
Although any such application to have the beneficiaries removed as co-plaintiffs to the proceeding should properly be made to a Master of the Court, as the parties expressed their willingness to argue the matter before me, and with a view to saving unnecessary expenditure and inconvenience in the matter, I granted to the original trustees special leave to do so pursuant to the provisions of R.77.03(2)(b).
The basis upon which the original trustees seek to have the beneficiaries removed as plaintiffs to the proceeding is that as the beneficiaries and present trustee are seeking the same relief in the proceeding in that they are all seeking to have the trust fund restored and the trust wound up, and the beneficiaries therefore are not necessary parties to the proceeding. In that connection counsel for the original trustees placed reliance upon the observations of Brooking, J., as he then was, in Young & Others v. Murphy and Another 13 A.C.S.R. 722. At p.727 his Honour said:
"But, while the trustee in general sufficiently represents the beneficiaries' interests for the purposes of proceedings to redress a breach of trust, they should be made parties if their interests may not be properly represented by the trustee. If it can be said that for any reason the trustee should not be regarded as a party who will properly represent the interests of all beneficiaries, then he should not be regarded as able to sue without joining any beneficiary. Cases of suggested fraud or collusion or a hidden interest of the trustee may be put to one side. The proceedings which the trustee brings may be such as to raise, or be capable of raising, questions between one beneficiary and another or questions between the beneficiaries and himself. In such a case the trustee does not sufficiently represent the interests of the beneficiaries for the purposes of the proceedings. Accordingly, if in the proceedings the trustee seeks the execution or administration of the trust in addition to seeking to have the breach of trust redressed, the beneficiaries will or may be necessary parties, since their interests inter se or their rights against the trustee may have to be determined. This is not so if in the proceedings the trustee seeks only to get in the trust fund, or seeks in addition only any account necessary for that purpose. On the other hand, in proceedings for the execution or administration of the trust the interests of the beneficiaries may conflict among themselves and there may in addition be a conflict of interest between the trustee and the beneficiaries with regard to the accounting by the trustee required for the purposes of the general distribution of the trust estate which is asked for in the proceedings. So a distinction is drawn between proceedings which seek merely to get back the trust fund and proceedings for the execution or administration of the trust. The former can be maintained by the trustee without joining the beneficiaries; the latter are or may be incapable of being so maintained."
At p.730 his Honour continued:
"If a claim falls within the rule that a trustee may sue to redress a breach of trust without making any of the beneficiaries parties where he seeks only to have the trust fund restored, the trustee will have standing, without joining the beneficiaries, to require the defendant or defendants to redress in full the breach of trust, according to equitable principles, so that it will not be possible for any beneficiary in other proceedings to maintain a claim for breach of trust against the person or persons successfully sued by the trustee: the trustee's judgment swallows up the beneficiary's claim. If, on the other hand, the trustee's action is unsuccessful, then the adjudication will by the same token, in the absence of fraud or collusion, bind the beneficiaries. This must be so on principle, since the trustee and beneficiaries are privies, and authority is not wanting. In Potts v. Thames Haven Dock and Railway Co. (1851) 15 Jur 1004 a contract by a trustee for the sale of land subject to the trust was held to be specifically enforceable at the suit of the trustee without joining the persons beneficially interested."
Finally later again on that same page his Honour said:
"Where a trustee sues to redress a breach of trust, seeking only to have the trust fund restored, the trustee and the beneficiaries are in privity. This is shown by what was said in Cox v. Dublin City Distillery (1917) 1 IR 203 at 223-4 per O'Brien, LC, at 234-6 per Ronan, LJ and at 239 per Molony, CJ. In addition, one should not overlook r.16.02 of the Rules of Court, which provides that where a party sues as trustee a judgment in the proceeding shall bind the persons having a beneficial interest under the trust as it does the trustee. See further Re De Leeuw [1922] 2 Ch 540 at 550-1. Additional authority for the view that the beneficiaries will be bound by the outcome of the present proceedings will be found in what was said in Pople v. Evans [1969] 2 Ch 255 at 261 and 269. Finally, I refer to Re Defries (1883) 48 LT 703, where Pollock, B. remarked (at 704), 'Equity certainly will not allow the same matter to be tried once between the parties and over again against the trustees'.
In the present case the new trustees seek to redress in full the alleged breaches of trust; if they succeed, their judgment will, as I have said, swallow up the claim that any beneficiary might have made in respect of those breaches."
I entirely agree with his Honour's observations in the matter. But the facts in Young's case are entirely different from the facts in the present case.
Here the beneficiaries were forced to institute the proceeding against the former trustees of the fund seeking the return of the money in question or damages by way of compensation because the new trustee declined to do so; further because of the then attitude of the new trustee it was appropriate that it be joined as a defendant to the proceeding. Now, some five months down the road, the new trustee has consented to become a plaintiff in the proceeding.
In my opinion the original plaintiffs are entitled to maintain the proceeding if for no better reason than to recover their costs of the proceeding (assuming they are successful) incurred from the point at which they gave instructions to their solicitors to institute the proceeding until the date upon which the Master made his order.
This is not a case where there are two separate proceedings on foot, one brought by beneficiaries and one brought by a trustee. I find it difficult to see how any additional costs will be incurred by either side by virtue of the fact that both the beneficiaries and the new trustee are plaintiffs. Nor can I see any other prejudice to the defendants if the proceeding continues as presently constituted.
Both the appeal from the order of Master Evans made on 18 November 1998 and the defendants' application to me will be dismissed with costs to be taxed and paid by the first, second and third named defendants.
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