Scott MacRae Investments Pty Limited v Baylily Pty Limited - [2010] NSWSC 174

No judgment structure available for this case.

CITATION: Scott MacRae Investments Pty Limited & Anor v Baylily Pty Limited & Ors [2010] NSWSC 174

HEARING DATE(S): 5/03/10

JUDGMENT DATE :
12 March 2010

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Parties to bring in short minutes of order. Plaintiffs are entitled to the relief sought in prayers 1 (d), (e) and (f) of the amended summons.

CATCHWORDS: Practice and procedure - Application for orders by way of judgment on admissions under UCPR rule 17.7 and/or seeking summary judgment under rule 13.1 - Applications for judicial advice - Power in Court to grant judgment upon admissions discretionary - Court not bound to act upon admissions - Remedy of declaration of right ordinarily granted as final relief in a proceeding - Costs - Indemnity costs - Delinquency emanating from defendants conduct

LEGISLATION CITED: Acts Interpretation Act 1901 (Cth)
Corporations Act 2001 (Cth)
Evidence Act 1995
First Corporate Law Simplification Act 1995 (Cth)
Fringe Benefits Tax Assessment Act 1986 (Cth)
Interpretation Act 1987
Trustee Act 1925

CATEGORY: Procedural and other rulings

CASES CITED: Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526
Baylily Pty Ltd, Re [2010] NSWSC 6
Bluescope Steel Ltd (formerly BHP Steel Ltd) v Australian Workers' Union, NSW [2004] NSWIRComm 222; (2004) 137 IR 176
Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129
Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310
Lemery Holdings Pty Limited v Reliance Financial Services Pty Limited [2008] NSWSC 1344
Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Meehan v Glazier Holdings Pty Limited (2002) 54 NSWLR 146
Termijtelen v Van Arkel [1974] 1 NSWLR 525
Wagstaff v Fitzpatrick (1922) 39 WN (NSW) 137
Warramunda Village Inc v Pryde [2001] FCA 61, (2001) 105 FCR 437
Wright, In re [1895] 2 Ch 747

PARTIES: Scott MacRae Investments Pty Limited (First Plaintiff)
Scott Alexander MacRae (Second Plaintiff)
Baylily Pty Limited (First Defendant)
Scott Lennox Properties Pty Limited (Second Defendant)
Pacific Plantations No. 6 Pty Limited (Third Defendant)
Brooklet Pastoral Company No. 2 Pty Limited (Fourth Defendant)
Cuefax Pty Limited (Fifth Defendant)
David Robert Alexander MacRae (Sixth Defendant)

FILE NUMBER(S): SC 2009/0298683

COUNSEL: Mr AJ Grant (Plaintiffs)
Mr M Green (Defendant)

SOLICITORS: Mitchell Lawyers (Plaintiffs)
Bruce Stewart Dimarco (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Friday 12 March 2010

2009/0298683 Scott MacRae Investments Pty Limited & Anor v Baylily Pty Limited & Ors

JUDGMENT

The notices of motion

1 There are before the Court two notices of motion:

i. The amended notice of motion filed by the plaintiffs seeking orders by way of judgment on admissions under UCPR rule 17.7 and/or seeking summary judgment under rule 13.1;

a) orders for the provision by the plaintiffs of security for costs;

2 The plaintiffs’ motion unambiguously seeks final relief in relation to paragraphs C1 to C24 of the pleading.

Affidavit evidence

3 The affidavit evidence before the Court is as follows:

(i) 5 February 2010 (“Aff Mitchell”);

(ii) 17 February 2010 (“Aff Mitchell”);

(iii) 3 March 2010 (“Aff Mitchell”); and

(i) 5 February 2010 (“Aff Gorczyca”);

(ii) 12 February 2010 (“Aff Gorczyca”); and

(c) The defendants also read the affidavit of Michael Andrew Clear sworn 5 March 2010 (“Aff Clear”).

4 Each of these affidavits were provided to the Court at the hearing on 5 March 2010.

Objections to plaintiffs’ evidence

5 The defendants have objected to certain of the plaintiffs’ evidence.

6 In summary the defendants’ principal objection to such of the Mitchell Affidavits as are sought to be used in relation to the plaintiffs’ amended motion is that the evidence is objectionable as to form and is hearsay; being based upon information and belief. This is because the plaintiffs seek, in substance, final relief on their motion.

7 The defendants also object to the plaintiffs’ affidavits in that the annexures are incomplete in significant respects. For example, only the first page of a multi-page document has been copied.

Outlining the nature of the proceedings

8 The relief is sought against the 2 respondents to the amended motion, the first defendant, Baylily Pty Limited (‘Baylily’), and the second defendant, Pacific Lennox Properties Pty Limited (‘PLP’).

9 On 9 July 2009, by summons filed on that date, these proceedings were commenced by the plaintiffs (being the first plaintiff, Scott MacRae Investments Pty Limited (‘SMI’), and the second plaintiff, Mr Scott MacRae (‘Scott’)).

10 The plaintiffs bring a number of causes of action against the 6 defendants to the proceedings (being Baylily, PLP and 4 others). Although strictly not required by this List’s Practice Note (SC Eq 3), these causes of action have, in fact, been formally pleaded.

11 On 28 August 2009, the defendants filed their (original) Commercial List Response.

12 On 29 October 2009 (pursuant to leave granted by Hammerschlag J), the plaintiffs filed their amended summons.

The application for judicial advice

13 Some background to the plaintiffs’ application may be gleaned from the reasons given by Harrison J in Re Baylily Pty Ltd [2010] NSWSC 6, on an occasion where the Court furnished judicial advice. It is convenient to repeat the whole of those reasons:

1. Baylily Pty Ltd seeks judicial advice pursuant to s 63 of the Trustee Act 1925. It wishes to know whether or not it should defend Supreme Court Equity Division proceedings number 50127 of 2009 commenced against it that are currently pending in this Court.

Background

2 David MacRae and Susan MacRae operate various farming and agricultural activities through several companies and trusts, which are collectively known as Pacific Plantations. Baylily is one of the companies in that group. Mr and Mrs MacRae have two children, one of whom is Scott Alexander MacRae. Scott MacRae Investments Pty Ltd and Scott MacRae are the plaintiffs in the proceedings just referred to. Baylily is the first defendant together with other companies in the Pacific Plantation group.

3 James Mathers, the settlor, appointed Baylily as the trustee of the Scott MacRae Trust pursuant to a settlement on 12 December 1996. Some of the terms of the Trust Deed are referred to later in these reasons. Mr and Mrs MacRae and Robert Bruce are the directors of Baylily. Scott MacRae was a director of Baylily between 7 January 1997 and 9 April 2009. Scott MacRae is a discretionary beneficiary of the Scott MacRae Trust.

4 On 13 November 2008 Scott MacRae executed a Deed of Change of Trustee appointing Scott MacRae Investments Pty Ltd as a new trustee. Clause 7(1) of the Trust Deed gave Scott MacRae the power to appoint a new trustee. Scott MacRae is the sole director and shareholder of Scott MacRae Investments Pty Ltd.

5 Assets held by Baylily on the trusts created by the Scott MacRae Trust include a unit in Pacific Lennox Properties Unit Trust, an entity related to Pacific Plantations, and one half of a residential property in Queensland in which Scott MacRae currently resides. That property has since been transferred from Baylily to Scott MacRae Investments Pty Ltd. Baylily is said to remain liable for the debt secured by a mortgage over that property.

6 Baylily is sued in its capacity as trustee of the Scott MacRae Trust. In accordance with orders made by the Court on 11 December 2009 in the pending proceedings, Baylily is required to file and serve a Commercial List Response by 29 January 2010. In the course of seeking instructions and preparing a response to Baylily's amended summons in those proceedings it formed the view that it should seek judicial advice before taking further steps in the proceedings. This is because Baylily is concerned to know whether or not it is presently the trustee of the Scott MacRae Trust and what may be the scope of its duty to account to the beneficiaries of the trust in circumstances where it may no longer be the trustee, where it has no financial or other means of its own to do so and where it may not have any right of indemnity from trust property.

Questions

Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand

"[74] A necessary consequence of the provisions of s 63 of the Act is that a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings. In deciding that question a judge must determine whether, on the material then available, it would be proper for the trustee to defend the proceedings. But deciding whether it would be proper for a trustee to defend proceedings instituted about the trust is radically different from deciding the issues that are to be agitated in the principal proceeding. The two steps are not to be elided. In particular, the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings."

1. Whether upon the true construction of clause 7(5) of the Scott MacRae Trust Deed the power of appointment is validly exercised if the person exercising it then appoints his or her corporate alter ego as the trustee?

2. Whether upon the true construction of clause 7(6) of the Scott MacRae Trust Deed the reference to the expression "trustee" is restricted to the incoming trustee (as opposed to the outgoing trustee or both the incoming and outgoing trustee)?

3. Whether Baylily remains the trustee of the Scott MacRae Trust Deed?

5. If the answer to 3 is "no", is Baylily entitled to a right of indemnity or reimbursement or a charge from or over the assets of the trust for undertaking any work regarding the creation/provision of accounts pursuant to clause 11 of the Scott MacRae Trust Deed or otherwise?

Consideration

Question 1

"7(1) The power to appoint a new trustee in the place of an existing trustee or in addition to or jointly with an existing trustee and the power to remove a trustee shall subject to the following provisions of this clause be vested in:

11 The plaintiff submits that the first question should be answered "no". This is said to be for the following reasons.

12 Clause 7(5) provides that Scott MacRae shall not exercise the power of appointment of a new trustee "in favour of … the person exercising the power of appointment". By Deed Poll of Change of Trustee made on 13 November 2008 pursuant to clause 7, Scott MacRae appointed Scott MacRae Investments Pty Ltd as trustee of the Scott MacRae Trust with effect from that day, and Baylily was removed as trustee at the same time. The appointment of Scott MacRae Investments Pty Ltd was approved by resolution of its directors.

Australian Broadcasting Commission v Australian Performing Right Association Ltd

Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd

1. There was no requirement to include such a restriction on the power of appointment because the so-called "obvious" intention of the sub-clause was to prevent the appointor from being able personally to control the trust completely and absolutely. That intention would have been frustrated or defeated in the events that have occurred in the present case if the appointment of Scott MacRae Investments Pty Ltd as trustee were permitted to remain valid and effective.

2. If the appointor could overcome its terms by setting up a corporate "alter ego" and appointing such a company to take complete and effective control of the trust the clause would be deprived of its operation and effect.

Acts Interpretation Act

"22(1) In any Act, unless the contrary intention appears:

21 Interpretation Act 1987 (NSW

Corporations Act 2001

Fringe Benefits Tax Assessment Act 1986.

4. Frequently words used in the singular are taken to include the plural and vice versa. Baylily contended that it would not be an unreasonable or uncommercial construction for "person" also to mean "persons" and thereby to include a corporation of which the appointor was a sole director and shareholder.

Bluescope Steel Ltd (formerly BHP Steel Ltd) v Australian Workers' Union

NSW

14 Baylily accepted that there is no express prohibition in the Trust Deed of the appointment of Scott MacRae Investments Pty Ltd, or its equivalent, as a new trustee. Moreover, any such corporation that may be appointed as a new trustee would have the same fiduciary duties and obligations towards the beneficiaries of the trust as Scott MacRae, and they would have the same remedies against the company as they would have had against him.

15 Baylily submits that a purposive interpretation of clause 7(5), which gives effect to its apparent intent, ought therefore to be preferred.

16 In my opinion the question should be answered "yes". first, clause 1(1) of the Trust Deed defines "person" to include a company. However, the word "person" where it is used in the expression "the person exercising the power of appointment" is in the circumstances of this case an unambiguous reference to Scott MacRae. The impugned exercise by him of the power to appoint a new trustee is not a purported exercise of the power to appoint himself. If the appointor had been a company the definition of person would have extended to prohibit that company from appointing itself. The reverse does not follow. The fact that Scott MacRae is a person does not therefore mean that he and his company are the same thing by reason of the further fact that the definition of person includes a company.

17 secondly, the terms of the sub-clause are clear and unambiguous. There is no express prohibition on the appointment of companies of which the appointor is a sole director and shareholder. As Baylily concedes, if the Trust Deed had been intended to include such a provision it could have done so. Single director and shareholder companies were permitted at the time of the settlement: see First Corporate LawSimplification Act 1995, assented to on 17 October 1995.

18 Thirdly, and for the same reason that the terms of the sub-clause are clear and unambiguous, there is no apparent basis to suggest that such an intention should be ascribed to the draughtsman.

19 Baylily's arguments appear to me to be not so much reasons why its proposed interpretation of the Trust Deed should be adopted as complaints about the most likely result of their natural and ordinary meaning. They assume an intention or purpose to deprive an appointor of the power to appoint a corporation, of which he or she may be a sole director and shareholder, simply because the degrees of control exercised by a trustee personally or through the medium of such an entity are likely to be identical. The intention assumed is not obvious in the way suggested. The obvious intention was to prohibit an appointor appointing himself or herself or itself. Nothing going beyond that emerges as obvious to me. Corporations have a distinct legal character, an unremarkable fact recently reaffirmed in Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129. Scott MacRae is not Scott MacRae Investments Pty Ltd and Scott MacRae Investments Pty Ltd is not Scott MacRae.

20 There is nothing that is uncommercial, unreasonable or irrational in Scott MacRae having appointed Scott MacRae Investments Pty Ltd as trustee of the Scott MacRae Trust. Such a course was not expressly or impliedly prohibited by the Trust Deed and there is no obvious reason why it should have been.

Question 2

"7(6) The power to appoint or remove a trustee may be exercised by memorandum under hand or by deed, and where the trustee is a corporation shall be approved by resolution of its directors. Nothing within this deed shall be taken as limiting the right to appoint a corporation or a resident of a place outside New South Wales or Australia as a trustee of the Trust."

22 Baylily contended that the expression "and where the trustee is a corporation" as it appears in that subsection should be read as meaning "and where the outgoing or incoming trustee is a corporation". This question has attracted Baylily's attention in the present context because as the outgoing trustee its approval of the appointment of Scott MacRae Investments Pty Ltd as the new trustee was not sought.

23 In my opinion the expression refers only to an incoming trustee. first, the reference is to the singular "trustee" and not the plural "trustees". secondly, an incoming trustee could not be appointed without its consent. Thirdly, and decisively, any other meaning would hand to an outgoing corporate trustee the power to veto or fetter the appointor's exercise of the power to appoint a new trustee. Such an apparently or at least potentially irreconcilable conflict would be inimical to the orderly conduct and administration of the trust.

24 I would answer this question "yes".

Question 3

25 It follows from the answers to questions 1 and 2 that the answer to question 3 is "no".

Question 5

26 Baylily conceded that if the answer to question 3 was "no", then the answer to question 5 must also be "no".

Question 6

27 Baylily contended that if it remains the trustee of the Scott MacRae Trust then it would be justified in defending the proceedings, but conceded if it were no longer the trustee that any decision by it to defend the proceedings would be a commercial decision for it to make and not a question properly the subject of judicial advice. I agree.

Conclusion

Judgment on admissions

14 Part 17.7 of the UCPR is in the following terms:

(1) If admissions made by a party, whether by his or her pleadings or otherwise the court may, on the application of any other party, give any judgment or make any order to which the other party is entitled on the admissions;

15 On 21 January 2010 the defendants filed their commercial list response to the amended summons.

16 The amended summons filed by the plaintiffs made crystal clear the claims made in both:

i. the nature of dispute section [A] of the commercial list statement;

17 The defendants commercial list response to the amended summons in section [A] at paragraph 1 was in the following terms:

Trustee Act 1925

This disposes of the first two paragraphs of the plaintiffs issues.

18 Paragraphs 1, 2, 3, 4 and 6 of the amended summons correspond with Prayers 1(a) – (e) sought in the amended motion. Prayer 5 corresponds with Prayer 1(f).

19 On 8 February 2010, the plaintiffs’ (original) motion was filed.

The defendants’ position

20 The defendants have outlined their forensic stance in the following terms:

i. The position is that subject to the matters referred to in the next paragraph being properly established, then Baylily and PLP will not contest that SMI is the trustee and will agree to orders (d), (e), and (f) sought in sub-paragraph 1 of the Plaintiffs’ Amended Notice of Motion.[ The conditional concession].

a) Baylily and PLP do not accept (upon the evidence brought forward) that the Deed of Change of Trustee nor the resolution by SMI was actually made on 13 November 2008. The authenticity of those documents has not been established. The resolution did not form part of the plaintiffs’ discovery. No attempt has been made to prove the constitution of SMI.

b) If SMI or Mr S MacRae prove to the appropriate standard that those documents did come into existence on 13 November 2008 (or some other date), and that they constituted valid resolutions, then they will be accepted. This has not been done. Moreover, if, for example, the deed did not come into existence on 13 November 2008, then the purported acceptance by SMI of the appointment cannot be of any effect.

c) There is nothing in the plaintiffs’ (admissible) evidence which supports these two matters.

a) The making of declarations (sought in sub-paragraph 1(a), (b), and (c)).

b) The making of an order for the taking of accounts (sought in sub-paragraph 1(g)) and the order for an amount due on the taking of such accounts (sought in sub-paragraph 1(h)).

Scott MacRae Trust Deed

21 The Scott MacRae Trust Deed appears as annexure “C” to Aff Mitchell (5 February 2010) (pages 13 and following). A brief guide to the relevant terms throws up following matters; [the following references to “the Trust” are references to the Scott MacRae Trust created by the trust deed]:

i. By reason of the definition of “beneficiary” in sub-clause 3(c), SMI is also a beneficiary of the Trust. So too is Baylily. The removal of Baylily as a trustee does not appear to alter this position. It remains a beneficiary for as long as either of Mr S MacRae’s parents remain as a director of Baylily.

ii. The Court was taken to the Appointment and Removal provisions in clause 7 of the Deed. Relevantly, clause 7(6) requires that SMI approve, by resolution, the appointment. Necessarily it is for the plaintiffs to demonstrate that the resolution was effective. Unless the constitution of SMI is put into evidence, the Court cannot be satisfied that the requirements of the Corporations Act as to the making of resolutions has been satisfied. The ASIC search merely discloses that SMI presently has one director. It does not disclose whether SMI is a sole director corporation.

a) The liability of a trustee is limited by clause 8(3). For a trustee to be “accountable”, a mental element is required. This is not pleaded; nor could it be.

b) The right of indemnity of a trustee (which must include a former trustee) is very broadly provided in sub-clause 8(4), provided it has acted in good faith. There is no suggestion in the pleading to the contrary. Therefore, this right of indemnity is prime facie available to Baylily.

c) Baylily is entitled to exercise its rights, notwithstanding that its shareholder and/or directors may have a “direct, indirect, or personal interest”: clause 8(5)(b).

iv. Baylily is entitled to engage experts: clause 12(4)(g). This very wide power entitles it to engage experts to “do any act required to be done in connection with the administration of the trusts”. If it so does, as the plaintiffs here concede in correspondence has occurred, it is not liable.

Outlining the plaintiffs general submissions and approach

22 The plaintiffs have sought to describe and explain the two claims of present relevance in the terms which follow:

Pars C1 to C24 of the amended summons: the 2 claims

In paragraphs C1 to C24 of the amended summons, the plaintiffs bring 2 claims.

The first claim is pleaded at paragraphs C1 to C15. The second claim is pleaded at paragraphs C16 to C24.

Broadly speaking, the first claim is that:

(a) from and after 12 December 1996, Baylily was the trustee of a trust known as ‘the Scott MacRae Trust’ (‘the Scott MacRae Trust’) established by a Deed of Settlement dated 12 December 1996 (‘the Scott MacRae Trust Deed’);

(b) pursuant to a power to do so given to Scott by the Scott MacRae Trust Deed, on 13 November 2008 SMI replaced Baylily as trustee of the Scott MacRae Trust;

Broadly speaking, the second claim is that:

(a) PLP is the trustee of a unit trust known as ‘the Pacific Lennox Unit Trust’ (‘the Pacific Lennox Unit Trust’);

(b) 1 of the 2 unit holders in the Pacific Lennox Unit Trust is Baylily;

(c) Baylily holds that unit in the Pacific Lennox Unit Trust in its capacity as trustee for the Scott MacRae Trust;

(d) as SMI has replaced Baylily as trustee of the Scott MacRae Trust, SMI should now be registered in the Register of the Pacific Lennox Unit Trust as the unit holder of that unit (in place of Baylily).

The first claim: Pars C1 to C15

The amended response was filed following his Honour’s decision and it is in this context that the amended pleading in the amended response was filed (and the statement in paragraph B1 of the amended response (referred to at paragraph 12 above) made).

By paragraph 1 (p 3) of the amended response, Baylily admits the allegations in paragraphs C1 to C5 of the amended summons.

There is no significance in the non-admissions by the remaining defendants: the first claim is only brought against (and only concerns) Baylily (as the heading in bold to the first claim indicates). In any event, these matters are proved by the company searches of SMI and Baylily (Mr Mitchell’s first affidavit, pp 6, 8) and the Scott MacRae Trust Deed (Mr Mitchell’s first affidavit, p 13).

By paragraph 2 of the amended response, Baylily purports to make a limited admission and raise a non-admission. However, the allegation in paragraph C6 is specific (and particularised as cl 7(1) of the Scott MacRae Trust Deed) and there is no onus on the plaintiffs to prove something they have not pleaded. The pleading is, accordingly, non-responsive. In any event, it is proved (Mr Mitchell’s first affidavit, par 7; p 21).

By paragraph 3 (p 4) of the amended response, Baylily admits paragraphs C7 to C9 of the amended summons. Again, there is no significance in the non-admissions by the other defendants as the first claim is not made against (and does not concern) them. In any event, they are proved : Mr Mitchell’s affidavit, pars 8, 9; pp 22, 23).

By paragraph 4(a) of the amended response, Baylily again purports to make a limited admission. However, it is difficult to discern what remains not admitted. It appears to be directed at seeking formal proof of the Deed of Change of Trustee and this is done: Mr Mitchell’s first affidavit, par 10; p 38; Mr Mitchell’s second affidavit, par 6, annexure ‘A’ (p 1). (For the reasons already given, there is again no significance in the non-admissions of the other defendants).

By paragraph 5(a) of the amended response, Baylily again makes an admission that appears to be directed only at seeking formal proof of SMI’s Board resolution and again this is done: Mr Mitchell’s affidavit, par 11; p 40. (Again, there is no significance in the non-admissions by the other defendants.)

By paragraph 6(a)(i) of the amended response, Baylily purports to not admit paragraph C12. This is again non-responsive (as Baylily ought to know whether or not it has provided Scott with periodic accounting and financial statements for the Scott MacRae Trust). In any event, this is proved: Mr Mitchell’s first affidavit, par 13; Mr Mitchell’s second affidavit, pars 7, 8; annexures ‘B’ (p 6), ‘C’ (p 8). The matters raised in paragraph 6(a)(ii) & (iii) are not responsive to the allegations in paragraph C12 and, again, there is no significance in the non-admissions by the other defendants.

By paragraph 7(a) of the amended response, Baylily admits the allegations in paragraph C13 ‘subject to the matters pleaded in paragraphs 4 and 5 above’ (which concern proof of the Deed of Change of Trustee and the SMI Board resolution). Admission of the refusals and neglect alleged in paragraph C13 is not properly dependent on proof of these formal matters. In any event, for the reasons submitted above, these formal matters have been proved. Again, the non-admissions of the other defendants are of no significance.

Baylily responds to paragraphs C14 and C15 by paragraph 8(a) of the amended response.

As to these, the non-admission in paragraph 8(a)(i) (concerning registration of the Deed of Change of Trustee with the Registrar-General on 26 June 2009) is proved: Mr Mitchell’s first affidavit, par 12; pp 38-9. A copy of s 12 of the Trustee Act 1925 (NSW) is annexed to this Outline.

As to paragraph 8(a)(iii) (concerning proof of the Deed of Change of Trustee and the SMI Board resolution), for the reasons submitted above these have been proved.

‘[w]here a trustee … is appointed pursuant to the power of appointment in this clause contained, the trust fund shall at that time vest in the person … who shall thereupon be the trustee without the necessity for any vesting, declaration, transfer, conveyance or other assurance.’

Accordingly, if (as the plaintiffs contend) SMI replaced Baylily as trustee of the Scott MacRae Trust on 13 November 2008, by virtue of cl 7(4), the trust property of the Scott MacRae Trust vested in SMI at that time (without the necessity for any vesting, declaration etc).

Further or alternatively, by paragraphs C14 & C15, the plaintiffs allege that, if any of that trust property does not vest in SMI under s 9 of the Trustee Act 1925 (NSW) until transfer or registration, by s 9(7) of the Trustee Act , the execution and registration of the Deed of Change of Trustee on 26 June 2009 vested in SMI the right to call for a transfer of, and to sue for and recover, that property.

Broadly, s 9(1) provides that, where a new trustee is appointed, execution and registration of the deed of appointment serves to vest the trust property in the new trustee without any conveyance. This is, however, subject to the exceptions in s 9.

One of these exceptions is s 9(5). In the case of property only transferable in books kept by a corporation, company or other body, or in the manner directed by or under any Act (whether of NSW or otherwise), the property does not vest until it is duly transferred.

And where any property does not vest until transfer or registration, s 9(7) provides that execution and registration of the deed of appointment of the new trustee vests in the new trustee the right to call for a transfer of the property (and to sue for or recover the property).

In other words, s 9(7) gives the new trustee a statutory cause of action to recover the property: see Lemery Holdings Pty Limited v Reliance Financial Services Pty Limited [2008] NSWSC 1344 at [52]-[53] (Brereton J).

The unit held by Baylily (as trustee for the Scott MacRae Trust) in the Pacific Lennox Unit Trust may well fall within the exception in s 9(5). So may other trust property of the Scott MacRae Trust.

Accordingly, if such property did not vest in SMI on 13 November 2008 by virtue of cl 7(4) of the Scott MacRae Trust Deed, on registration of the Deed of Change of Trustee on 26 June 2009, SMI acquired the statutory cause of action or right to sue for or recover it (which it does in these proceedings by the first claim).

The second claim: Pars C16 to C24

In the second claim, SMI seeks the transfer of the unit in the Pacific Lennox Unit Trust held by Baylily (as trustee for the Scott MacRae Trust) from Baylily to it (and SMI’s registration as the new unit holder of that unit in the Register of the Pacific Lennox Unit Trust by PLP as its trustee).

The second claim is, accordingly, brought against Baylily and PLP (as the heading in bold to the second claim indicates). No other defendant or person is affected by this claim.

By paragraph 9 of the amended response, Baylily and PLP each admit the allegations in paragraphs C16 to C17.

For the reasons given above, the non-admissions by the other defendants are of no significance. In any event, they are proved by the company search of PLP and the Deed of Trust establishing the Pacific Lennox Unit Trust dated 28 March 2003 (‘the Pacific Lennox Unit Trust Deed’) : Mr Mitchell’s second affidavit, pars 11, 12; pp 14, 17).

By paragraph 10 of the amended response, each of Baylily and PLP admit the allegations in paragraphs C18 and C19. Again, the non-admissions of the other defendants are of no significance.

By paragraph 11 of the amended response, PLP admits paragraph 20(a) and purports to deny paragraph 20(b). paragraph 11 responds to paragraph C20 of the amended summons (which makes allegations against PLP only and against no other party).

The purported denial is of no effect: in the (original) response paragraph 20(b) was admitted (see Commercial List response filed 28 August 2009, par 9(a)) and no leave has been granted (or sought) to withdraw the admission. In any event, it has been proved (Mr Mitchell’s second affidavit, par 14(b)) (and whether PLP carried on the business as principal or contractor is not central (or essential) for the purpose of establishing the second claim). Again, the non-admissions of the other defendants are of no significance.

By paragraph 12 of the amended response, Baylily admits that at all times since about 28 March 2003 it has held its unit in the Pacific Lennox Unit Trust as trustee for the Scott MacRae Trust (and that the unit is trust property of the Scott MacRae Trust). This allegation (in paragraph C21) is made only against Baylily (and against no other party) and again the non-admissions of the other defendants are of no significance.

Paragraph 13 of the amended response responds to paragraph C22 (which repeats paragraphs C1 to C15). By paragraph 13, the defendants simply repeat their responses to paragraphs C1 to C15 above and, accordingly, nothing additional is raised.

By paragraph 14 of the amended response, each of Baylily and PLP admit the allegations in paragraph C21 ‘subject to the matters pleaded in paragraphs 4 and 5 above’ (proof of the Deed of Change of Trustee and the SMI Board resolution). For the reasons submitted above, these have been proved. Again, the non-admissions of the other defendants are of no significance.

By paragraph 15(a) of the amended response, Baylily purports to answer paragraph C24. Paragraph 15(a) is not responsive to the allegation in paragraph C24, which is simply that, despite demand, Baylily has refused to transfer the unit in the Pacific Lennox Unit Trust to SMI.

However, Baylily admits that SMI is entitled to become the registered holder of the unit (subject, again, to proof of the Deed of Change of Trustee and the SMI Board resolution, which, for the reasons submitted above, have been proved). In any event, demand and failure to transfer the unit have been proved: Mr Mitchell’s second affidavit, par 1(f); annexures ‘A’ (p 1), ‘B’ (pp 7, 8), ‘C’ (p 9).

Paragraph 15(a)(ii) is not responsive to any allegation made in paragraph C24 and, again, the allegation in paragraph C24 is made against Baylily only (and against no other party). Accordingly, the non-admissions of the other defendants are again of no significance.

Decision

23 It is critical to appreciate that the power given to the court to grant judgment upon admissions is discretionary. However the Court is not bound to act upon them: see Termijtelen v Van Arkel [1974] 1 NSWLR 525, at 528F (per Hope JA), regard must be had “to all the circumstances of the case” (citing In re Wright), at 529A. Moreover, it will not permit the applicant to supplement those ‘admissions’ with evidence (Termijtelen at 528F, citing Wagstaff v Fitzpatrick (1922) 39 WN (NSW) 137).

24 The defendants have pressed upon the Court a finding that the admission referred to is not one which the Court is bound to accept as true. Their contention is that in fact it has not been proven and the knowledge of the relevant facts is not within that of Baylily or any other of the defendants. Their contention is that, at most, the admission was contingent upon an event which the plaintiffs have not seen fit to satisfy: the bringing forward of evidence to demonstrate the making of the appointment and the acceptance by SMI of the trusteeship.

25 The defendants’ contention is further that the circumstances of the case, (especially the document in which the admissions are said to be found), indicate ambiguity and are in relation to matters (the making of declarations) upon which the Court must itself receive evidence. The proposition is that the plaintiffs claim to be in a position to prove their entitlements and do not resile (by the very structure of the Amended Motion, which includes resort to UCPR 13.1) from so doing. They contend that the plaintiffs should not be entitled to co-mingle their applications.

26 They further contend that on any view, the alleged admissions are insufficient to support the totality of the relief claimed in the Amended Notice of Motion.

Decision

27 There is no doubt but that the decision on the plaintiffs’ essential claims to relief is a difficult one in the current circumstances. There is a long line of authority in support of the proposition that declaratory relief is ordinarily granted as final relief in a proceeding. : In Warramunda Village Inc v Pryde [2001] FCA 61, (2001) 105 FCR 437, the Full Court of the Federal Court of Australia noted (at [8]):

The conditional concession

28 In relation to the conditional acceptance by the defendants that they will not contest that SMI is the trustee and will agree to orders (d), (e), and (f) sought in paragraph 1 of the plaintiffs’ amended notice of motion, those orders will be made if the conditions are satisfied by the plaintiffs.

29 The principled exercise of the material discretion is for the court to formulate a separate question as a useful mechanism for finally disposing of all relevant issues arising as between the plaintiffs and the relevant defendants concerning the operation of the trust. This is an appropriate case in which the court should deal with the issues which arise in relation to paragraphs C1 to C24 separately from and before all other issues in the proceedings.

30 Whilst it is strictly unnecessary to go further and to deal with the application for summary judgment, is at least appropriate observe that the orders sought by the plaintiffs are properly characterised as final ones: see, for example 1(g) and (h) (considered in Meehan v Glazier Holdings Pty Limited (2002) 54 NSWLR 146, at [34] (per Giles JA; with whom Sheller JA and Beazley JA agreed). They correspond with the relief contained in the Amended Summons. Therefore, section 75 of the Evidence Act 1995 (NSW) has no application. The summary judgment application is also dismissed.

The way forward

31 The parties are required to bring in short minutes of order. The orders will require that the defendants pay the plaintiffs’ costs of the motion on an indemnity basis. The making of costs orders is a discretionary one. The current circumstances at the least indicate the type of delinquency emanating from the defendants conduct as to warrant this order

32 I accept that the plaintiffs are entitled to the relief sought in prayers 1 (d), (e) and (f) of the amended summons.

Corrigendum

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Citations

Scott MacRae Investments Pty Limited v Baylily Pty Limited [2010] NSWSC 174

Cases Citing This Decision

0

Cases Cited

10

Statutory Material Cited

7

Re Baylily Pty Ltd [2010] NSWSC 6

Friend v Brooker [2009] HCA 21

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64

CITATION:	Scott MacRae Investments Pty Limited & Anor v Baylily Pty Limited & Ors [2010] NSWSC 174
HEARING DATE(S):	5/03/10
JUDGMENT DATE :	12 March 2010
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Parties to bring in short minutes of order. Plaintiffs are entitled to the relief sought in prayers 1 (d), (e) and (f) of the amended summons.
CATCHWORDS:	Practice and procedure - Application for orders by way of judgment on admissions under UCPR rule 17.7 and/or seeking summary judgment under rule 13.1 - Applications for judicial advice - Power in Court to grant judgment upon admissions discretionary - Court not bound to act upon admissions - Remedy of declaration of right ordinarily granted as final relief in a proceeding - Costs - Indemnity costs - Delinquency emanating from defendants conduct
LEGISLATION CITED:	Acts Interpretation Act 1901 (Cth) Corporations Act 2001 (Cth) Evidence Act 1995 First Corporate Law Simplification Act 1995 (Cth) Fringe Benefits Tax Assessment Act 1986 (Cth) Interpretation Act 1987 Trustee Act 1925
CATEGORY:	Procedural and other rulings
CASES CITED:	Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526 Baylily Pty Ltd, Re [2010] NSWSC 6 Bluescope Steel Ltd (formerly BHP Steel Ltd) v Australian Workers' Union, NSW [2004] NSWIRComm 222; (2004) 137 IR 176 Friend v Brooker [2009] HCA 21; (2009) 239 CLR 129 Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Lemery Holdings Pty Limited v Reliance Financial Services Pty Limited [2008] NSWSC 1344 Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 Meehan v Glazier Holdings Pty Limited (2002) 54 NSWLR 146 Termijtelen v Van Arkel [1974] 1 NSWLR 525 Wagstaff v Fitzpatrick (1922) 39 WN (NSW) 137 Warramunda Village Inc v Pryde [2001] FCA 61, (2001) 105 FCR 437 Wright, In re [1895] 2 Ch 747
PARTIES:	Scott MacRae Investments Pty Limited (First Plaintiff) Scott Alexander MacRae (Second Plaintiff) Baylily Pty Limited (First Defendant) Scott Lennox Properties Pty Limited (Second Defendant) Pacific Plantations No. 6 Pty Limited (Third Defendant) Brooklet Pastoral Company No. 2 Pty Limited (Fourth Defendant) Cuefax Pty Limited (Fifth Defendant) David Robert Alexander MacRae (Sixth Defendant)
FILE NUMBER(S):	SC 2009/0298683
COUNSEL:	Mr AJ Grant (Plaintiffs) Mr M Green (Defendant)
SOLICITORS:	Mitchell Lawyers (Plaintiffs) Bruce Stewart Dimarco (Defendants)