Tilli & Anor v Rampton Holdings Pty Ltd (in Liquidation)

[1991] HCATrans 205

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P2 of 1991

B e t w e e n -

MICHELE TILL! and

RADARN PTY LTD

Applicants

and

RAMPTON HOLDINGS PTY LTD

(IN LIQUIDATION)

Respondent

Application for special

leave to appeal

MASON CJ
DEANE J

.f.1:cHUGH J

Tilli 1 8/8/91

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON THURSDAY, 8 AUGUST 1991, AT 2.59 PM

Copyright in the High Court of Australia

MR M.J. McCUSKER, QC:  May it please Your Honours, I appear

with my learned friend, MS E.L. BLEWETT, for the

applicant in this case.	(instructed by Sly &
Weigall)

MR M.J. HAWKINS:  May it please the Court, I appear with my

learned friend, MR S.R. SIRETT, for the

respondents. (instructed by Marks Healy Sands)

MASON CJ: Yes.

MR McCUSKER:  Your Honour, the point raised by this

application, if I could endeavour to encapsulate

it, is this: if I pay money to an agent who tells
me that he wants it in order to pay a deposit on

behalf of a third party and tells me further that

the third party will be shortly paying the deposit

himself and I will be refunded, it is clear that at

the first stage when I pay the deposit to the agent for that purpose - and His Honour the Chief Justice here so found - that that fund at that time - the

money I pay - is impressed with a trust.

If the money is then paid for the purpose of the deposit on behalf of the third party, however,

and later the third party does complete the

purchase and the deposit is refunded, whose money

is it? The affect of the decision of this Court,

from which leave to appeal is sought, is that once

the money is paid for the original purpose, that

is, the deposit, cease to be a beneficiary of a

trust and instead I am a mere creditor of the agent

to whom the money was paid in the first instance.

Your Honours, this application, if leave is

granted, would involve no contest as regards the

facts.	It is purely an issue of law related to the
so-called Quistclose Trust principle.	The relevant

_,	findings of fact, which are not sought to be
challenged are: on 7 September 1988,
Michele Tilli, the first of the two applicants,
went to an auction of a property called "Regency
Plaza" in Perth with his brother, Mr Pietro Tilli.

Pietro Tilli was a successful bidder at that

auction, the price being $2,465,000. At

Pietro Tilli's direction given to the auctioneer,

the agent, the name of Rampton Holdings Pty Ltd or

nominee was inserted in the contract form where

provision was made for the name of the purchaser.

Pietro Tilli was the managing director of

Rampton Holdings Pty Ltd. At the auction,

Pietro asked his brother, Michele Tilli, if he

could assist in payment of the deposit.

Michele Tilli agreed to do that and on the following day drew a cheque, after arranging with

Tilli 2 8/8/91

his bank, for $115,000 which was part of the total deposit required. At his brother, Pietro Tilli's,

request that cheque was made payable to Rampton.

That cheque was banked into the account of

Rampton by Pietro Tilli - Pietro being the managing

director of Rampton, as I have said - against which

the cheque for the total deposit of $246,000 was

drawn. A portion of the total deposit, that is the

$115,000, was contributed by Michele Tilli, the

first applicant, and a further portion, to the

extent of $52,000, was contributed by a company

called Radarn Pty Ltd which is the second

applicant.

Subsequent to that, by a deed of novation, another party became the purchaser. It was, in

fact, nominated by Mr Pietro Tilli as managing

director of Rampton, the company named as purchaser or nominee. It was accepted by the vendor that the deposit which had been paid should therefore be

refunded and of that deposit $227,504 was refunded,

that being the original deposit less a deduction

which had been made for some interest charges and

expenses.

Michele Tilli claimed that of the refunded

deposit he was beneficially entitled to the
$115,000 which he had in the first place

contributed and that the refunded deposit was

impressed and had remained impressed with the trust

throughout.

Michele Tilli gave evidence which was

uncontradicted that he was told by Peter Tilli, his

brother, that a friend of the brother, not named,

had meant to be at the auction but could not be

there and that he, Peter Tilli, had bid on behalf

of the friend.

It was found by the trial judge and not sought

to be contested that at the time that Peter Tilli

went to the auction Peter Tilli had no authority to

bid on behalf of the friend and he was therefore

not acting as an agent although it was also

evidence that he had had some discussion with this

friend who was a man called Salkanovic and whose

company, J.A. Securities Pty Limited, was

ultimately the nominated purchaser.

Peter Tilli asked his brother, Michele Tilli,

the first applicant, if he would assist in payment

of the deposit and said that the friend, unnamed,

would be good for the money and on that basis

Michele Tilli agreed, the understanding clearly being that the friend or his nominated company

Tilli 8/8/91

would become the purchaser and the deposit which

was on a short term basis would be returned.

Michele Tilli was present, it should be said,

when Peter Tilli gave instructions to the
auctioneer that the name of the buyer to be put in

the contract was Rampton or nominee so that we was

aware of that.

That evidence is referred to, Your Honours, in the reasons of the Chief Justice Malcolm at

pages 31 to 32 of the application book. Although

that evidence is not set out in the reasons of the

trial judge, His Honour the trial judge made no

adverse finding as to that evidence. He simply

concluded - and if I could take Your Honours to

page 20D to E of the application book, His Honour

the trial judge concluded:

As far as M. Tilli is concerned it is not

quite so easy to answer this question.

That was the question of whether the money was impressed with a trust and remained so.

In the end I am not persuaded by either of his

affidavits that there was any special

relationship between him and Rampton

sufficient to impress upon the moneys he

advanced to Rampton a trust in his favour.

All his evidence amounts to is that he

advanced the moneys to Rampton in the
expectation that in due course he would be

repaid the moneys.

That, Your Honours, is not a finding as to

credibility, it is simply a summary by His Honour

of the legal effect of the evidence contained in
the affidavit material and it is with that
conclusion as to the legal effect which we quarrel

and seek to bring this application.

Peter Tilli gave evidence that he had had

discussions with Salkanovic before the auction
about bidding for the property on his behalf and

the trial judge held, as I have said, Your Honours,

and there is no challenge to this finding, that no

agency of any legally binding nature existed prior

to or at the time of the auction. And that finding

appears at page 9 of the application book, line B.

When Pietro Tilli bid at the auction he

therefore did not bid as the agent for Salkanovic

and that conclusion appears at 14B, and again we do

not quarrel with that conclusion. But

Mr Michele Tilli's case did not rest on the

proposition that his brother was acting as the

Tilli 8/8/91

lawful agent for Salkanovic, the unnamed friend,

but on the terms on which he provided the $115,000

to be applied as part of the deposit; that is that

according to Peter Tilli it was to be paid on

behalf of the friend who, either himself or a

nominated company, was to be the nominated

purchaser and who would in turn in due course cause

the deposit paid, which was to be paid clearly as a

temporary measure, to be refunded.

But that was a statement made to Michele Tilli

by Peter Tilli as managing director of Rampton and

it is clear that he had the authority to make the

statement and act on behalf of Rampton; no issue

turns on that.

DEANE J:  Mr Mccusker, what do you say to the statement in

Justice Wallace's judgment on page 52 in the

second-last sentence:

the learned Judge rightly did not accept -

MR McCUSKER:  Your Honour, that observation is not based on

anything which the learned trial judge in fact

said. The learned trial did not reject

Michele Tilli's evidence at all and I have taken

Your Honours to page 200 to E. I think His Honour

Mr Justice Wallace misconstrued, with respect, what was said at page 20, lines D to E, as being a

finding as to fact rather than a conclusion based

on the facts. His Honour the trial judge, in

effect, sought to summarize the legal effect of

what Michele Tilli said in his affidavit evidence.

He did not reject the affidavit evidence as being

satisfactory evidence but rather reached the

conclusion that all that it meant, in the end, was

that it was a loan and no more.

Your Honours, it is well accepted in principle

that the transaction which constitutes a loan may

co-exist with a trust, and that was clearly stated

in the Quistclose case and, it is our submission,

that in this case the court has erred in treating -

although recognizing the principle that one may

have such co-existence has in the end erred in

treating the transaction as being, although at the

threshold, a trust ceasing to be a trust and

becoming a loan and no more once the deposit was

actually paid, passed through Rampton's account and

the deposit was paid as intended.

DEANE J:  Why do you say that this case involves more and

whether, on its particular facts, the trust

terminated with the original payment of the deposit

or remained on foot to continue or re-arise when

the deposit was refunded?

Tilli	8/8/91
MR McCUSKER:	Yes. But we would put it, Your Honour, as

continuing. We say it involves more because, in

principle, it submitted the court erred in placing

such emphasis on the observations in Quistclose

which were to the effect that the trust remains

until the purpose is effected, and the question

which arose, and clearly is set out in His Honour

the Chief Justice's reasons, is whether the purpose

in this case can be said to have been given effect

to merely upon the payment of the deposit.

DEANE J: But if the contract had gone ahead the deposit

would have been accounted for to the vendor - - -

MR McCUSKER:  Yes.

DEANE J:  - - - and accounted for free of any trust. Was

the deposit held by a stakeholder pending

completion?

MR McCUSKER:  Yes, and it still is held by a different

stakeholder, Your Honour, yes.

DEANE J:  Now, if the contract had been completed would you

argue that any trust of anything remained on foot?

MR McCUSKER:  We would, but that raises a different question

which does not arise here.

DEANE J:	A trust or a charge or what?
MR McCUSKER:	Or a charge, a form of equitable lien or

charge would then exist in the circumstances.

DEANE J:  On the land?

MR McCUSKER: Yes, Your Honour. But, as I say, Your Honour,

that does not arise in this case because, from the

outset, the clear intention was not that Rampton

should be the ultimate purchaser albeit it was

named as the purchaser or its nominee, the clear

intention as expressed to the first applicant,

Michele Tilli, was that there would be some other

unnamed purchaser, the nominee, who would be good

for the money and therefore the deposit would be

refunded.

Now, it is the question of whether the trust

ceased at the point when, in those circumstances,
the deposit was paid to the vendor's agent or

whether the trust continued to attach to the

deposit so that when it was refunded it was not the

beneficial property of Rampton which by that time

was in liquidation, or whether it was still

impressed with the trust and hence became, to the

extent of the $115,000, beneficially owned by

Michele Tilli.

Tilli	6	8/8/91
DEANE J:	I can see the force in the way you put it.	One

can look at it, as it were, from another direction

and say, "Well, there's no questions of principle

involved here at all, it's simply determining when

on these facts the trust came to an end".	In one
sense it is a matter of perspective.

MR McCUSKER:  In one sense that is always the case,

Your Honour. But why we say there is an error of

principle involved here is, if I could take

Your Honours to the learned Chief Justice's reasons

at page 35 lines A to C - I am sorry, Your Honours,

I have taken you to the wrong reference there, it

is at 35D to 36E, His Honour said:

In my opinion, the learned Judge was

correct when he concluded with respect to

Michele Tilli's claim that:-

"All his evidence amounts to is that he

advanced the moneys to Rampton in the

expectation that in due course he would be

repaid the moneys. In my view that constitutes

him merely a creditor of Rampton."

And His Honour, at the next page, said,

dealing with the alternative submission which His

Honour, perhaps correctly, in our submission, with

respect, viewed as simply another side of the same

argument, that is the question of in what

circumstances equity will impress a trust said, at

B to D:

In my opinion this was not truly an

alternative submission. The first part of the

submission is merely a specific example of the

formulation of the Quistclose principle. In any event, the submission fails for the same reason as the argument expressly based upon

Quistclose failed because it wrongly brings in

as a part of the specific purpose of the loan

the capacity in which and the terms upon which

the payment of the deposit was to be made.

And it is in respect of that proposition that

we say there is an error of law, as well as with

the proposition that once the purpose, as

identified, has been fulfilled, the trust ceases to

attach. That may beg the question, Your Honour -

or it does beg the question - as to when the

purpose has been fulfilled. Considerable emphasis

was placed upon the fact that in the Quistclose

case the purpose had not been fulfilled. But the

question is whether the converse means, that is, if

the purpose is fulfilled, the trust does not

attach.

Tilli 7 8/8/91

McHUGH J: But if your proposition is right, if a bank lends

somebody $100,000 to buy a house, the bank has an

equitable charge, or an equitable lien, on the

money, does it not, on the property?

MR McCUSKER: Well, it depends on the circumstances of the

loan, Your Honour, but that may be so. It may be

an equitable lien on the sum provided. That, in

any event, is not this case, and if the decision of

the court sought to be appealed from is correct, it

would mean, as I say, that where money is paid on

the understanding that it will not be the

beneficial property of the person to whom it is
paid but will be used for the purpose of a deposit

which is to be refunded to the provider of the

money, then once the money is paid for the purpose of deposit, the provider of the money has no claim

beneficially, he simply has a claim as a creditor.

That is the end result of the decision of the

court sought to be appealed from and, in our
submission, that betrays a fundamental error in the

understanding of the Quistclose case. It

certainly, in the Quistclose case, was a factual

circumstance where the purpose of payment, that is

the payment of the dividend, had failed, and

therefore it was held that the trust continued to

attach. But it does not follow, in our submission,

that where the payment is made but later, because

of a further event, which was anticipated, the

payment is refunded, the trust is no longer

attached to it.

Your Honours, if leave is granted, as I say,

on this application, there would be no factual

issue in dispute. We would expect that the point

sought to be resolved would certainly be resolved

within half a day, and it would clearly mean a

clarification, in our submission, of this area of

the law which this Court, so far as my research

goes, has not dealt with in full but mentioned in

passing - this is the Quistclose trust principle -

and an opportunity would be given to, as it were,

marry the Quistclose trust principle in with the

other developments in equitable principle which

this Court has led the field in, with respect, in

some areas, including Hewett v Court.

MASON CJ:  What other principle is to be a party to this

marriage with the Quistclose trust principle?

MR McCUSKER:  The principle that this Court has more broadly

stated, Your Honour, in Muschinski v Dodds and in

Baumgartner v Baumgartner.

In our submission the court, that is the

supreme court, has taken too narrow a view of the

Tilli 8 8/8/91

approach of equity in this area. It has looked at

Quistclose in isolation without considering it in the context, the wider context, of equitable

principle.

May it please Your Honour, they are our

submissions on the application.

MASON CJ:  Thank you, Mr Mccusker.

The Court need not trouble you, Mr Hawkins.

In our view this case turns essentially on its

own facts, especially inferences to be drawn from

primary facts.

As such, we do not consider the case to be a

suitable vehicle for the determination of questions

of general principle, in particular the

Quistclose Trust principle.	The application is
therefore refused.

MR HAWKINS:  May it please Your Honours, I move for an order

for costs?

MASON CJ: Yes. Mr Mccusker, you do not resist an order for

costs?

MR McCUSKER:  No, I do not, Your Honour, thank you.

MASON CJ:  Thank you. The application will be refused with

costs.

AT 3.21 PM THE MATTER WAS ADJOURNED SINE DIE

Tilli 8/8/91