Tindon Pty Ltd v Adams - [2006] VSC 172

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL & EQUITY DIVISION

No. 4377 of 2006

TINDON PTY LTD (ACN 079 370 504)

Plaintiff

JOHN ADAMS

and

WINDOW CONCEPTS PTY LTD (ACN 006 814 768)

First Defendant

Second Defendant

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	27 April 2006
DATE OF JUDGMENT:	19 May 2006
CASE MAY BE CITED AS:	Tindon Pty Ltd v Adams
MEDIUM NEUTRAL CITATION:	[2006] VSC 172

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Trusts and Trustees – deed of trust providing for annual net income of the trust to be held by the trustee on a separate trust for the unitholders in proportion to their unit entitlements – whether annual net income forms part of the trust fund for the purpose of the trustee’s right to indemnity from the trust fund in respect of liabilities incurred or provided for – whether trust deed excluded trustee’s rights of indemnity against unitholders and from separate trust fund comprising net annual income of the trust – whether loan accounts in trust books of account created a common law relationship of debtor and creditor between trustee and beneficiary.

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APPEARANCES:

Counsel

Solicitors

For the Plaintiff

Mr I. Martindale

Kenna Teasdale Lawyers

For the First Defendant

For the Second Defendant

Mr M. Flynn

No Appearance

Oakley Thompson & Co

HIS HONOUR:

Parties and Introduction

The first defendant (“the trustee”) is the trustee of two unit trusts. The plaintiff and the second defendant each hold one-half of the issued units in those trusts. A dispute has arisen between the plaintiff and the trustee as to the entitlement of the plaintiff to be paid certain sums. The plaintiff has applied to the Court pursuant to the provisions of Order 54[1] or the inherent jurisdiction of the Court, for declaratory relief and orders requiring the trustee to pay to it specified sums of money.
[1]Supreme Court (General Civil Procedure) Rules 2005.

The second defendant makes no claims against the trustee and has informed the Court that it will abide the decision of the Court. It was not represented.

There are two relevant trusts (collectively “the trusts”), known as “The Delprop Unit Trust” (“Delprop Trust”) and “The Delprop (Port Side) Unit Trust” (“Port Side Trust”).

The Delprop Trust was established in May 1995 by a trust deed. The Port Side Trust was established in June 1996 by a separate trust deed.

Each of the trust deeds contains identical terms. References in this judgment to the “trust deed” are references to the trust deed for each of the trusts.

As I have said, the plaintiff and the second defendant each hold one-half of the issued units in the trusts. The plaintiff is a company representing the interests of Roydon Kim Luff. The second defendant is a company representing the interests of Gary Oliver Owen Drew.

A dispute has arisen between Mr Luff and Mr Drew. As a result, the previous trustee Delprop Pty Ltd, which is owned and controlled equally by Mr Luff and…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] VSC 172
Decision Date: 19 May 2006

CaseChat Overview and Summary

In Tindon Pty Ltd v Adams, the court addressed disputes concerning the rights and obligations of trustees under a deed of trust. The trust in question involved the annual net income being held by the trustee on a separate trust for the unitholders, proportional to their unit entitlements. The primary dispute was whether the annual net income constituted part of the trust fund for the purpose of the trustee's right to indemnity from the trust fund in respect of liabilities incurred or provided for. Additionally, the case examined whether the trust deed excluded the trustee's rights of indemnity against unitholders and from the separate trust fund comprising the net annual income of the trust. Another point of contention was whether the loan accounts in the trust books of account created a common law relationship of debtor and creditor between the trustee and the beneficiary.

The legal issues required the court to interpret the trust deed and ascertain the extent of the trustee's rights of indemnity. It needed to determine if the annual net income was part of the trust fund and if the trust deed effectively excluded the trustee's rights of indemnity against unitholders and from the separate trust fund. Furthermore, the court had to decide whether the loan accounts in the trust books of account established a debtor-creditor relationship between the trustee and the beneficiary under common law.

The court examined the terms of the trust deed and found that the annual net income did not form part of the trust fund for the purpose of the trustee's right to indemnity. The trust deed was interpreted to exclude the trustee’s rights of indemnity against unitholders and from the separate trust fund. The court also concluded that the loan accounts in the trust books of account did not create a common law relationship of debtor and creditor between the trustee and the beneficiary.

Consequently, the court ruled that the trustee was not entitled to indemnity from the trust fund or from the separate trust fund comprising the net annual income. The trustee's right of indemnity against unitholders was also excluded. The loan accounts did not establish a common law relationship of debtor and creditor.

Orders