W J Green and Co (1984) Pty Ltd v Tace Pty Ltd
[2007] WASC 107
•10 MAY 2007
W J GREEN & CO (1984) PTY LTD & ANOR -v- TACE PTY LTD & ANOR [2007] WASC 107
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2007] WASC 107 | |
| Case No: | CIV:2329/2006 | 27 APRIL & 4 MAY 2007 | |
| Coram: | HASLUCK J | 10/05/07 | |
| 19 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for the defendants Defendants' application for release from undertaking granted Defendants' application for leave to deal with assets granted | ||
| B | |||
| PDF Version |
| Parties: | W J GREEN & CO (1984) PTY LTD (ACN 008 851 867) GRAEME WILLIAM GREEN TACE PTY LTD (ACN 009 204 915) WESTERN AUSTRALIAN REAL ESTATE CUSTODIAN LIMITED (ACN 069 896 966) |
Catchwords: | Trusts Interpretation of trust deed in standard form Trustee's power of sale Application by trustee to be released from undertaking not to exercise power of sale Application for leave to exercise power of sale Whether sufficient compliance with earlier Court order Turns on own facts |
Legislation: | Transfer of Land Act 1893 (WA), s 138 |
Case References: | Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258 Ghana Commercial Bank v Chandiram [1960] AC 732 Green v Wilden Pty Ltd [2005] WASC 83 Western Australian Real Estate Custodian Ltd v W J Green & Co (1984) Pty Ltd [2006] WASC 278 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- First Plaintiff
GRAEME WILLIAM GREEN
Second Plaintiff
AND
TACE PTY LTD (ACN 009 204 915)
First Defendant
WESTERN AUSTRALIAN REAL ESTATE CUSTODIAN LIMITED (ACN 069 896 966)
Second Defendant
Catchwords:
Trusts - Interpretation of trust deed in standard form - Trustee's power of sale - Application by trustee to be released from undertaking not to exercise power of sale - Application for leave to exercise power of sale - Whether sufficient compliance with earlier Court order - Turns on own facts
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Legislation:
Transfer of Land Act 1893 (WA), s 138
Result:
Judgment for the defendants
Defendants' application for release from undertaking granted
Defendants' application for leave to deal with assets granted
Category: B
Representation:
Counsel:
First Plaintiff : Mr M L Bennett
Second Plaintiff : Mr M L Bennett
First Defendant : Mr S Owen-Conway QC, Mr M McCusker QC & Mr T Galic
Second Defendant : Mr S Owen-Conway QC, Mr M McCusker QC & Mr T Galic
Solicitors:
First Plaintiff : Lavan Legal
Second Plaintiff : Lavan Legal
First Defendant : Galic & Co
Second Defendant : Galic & Co
Case(s) referred to in judgment(s):
Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221
Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258
Ghana Commercial Bank v Chandiram [1960] AC 732
Green v Wilden Pty Ltd [2005] WASC 83
Western Australian Real Estate Custodian Ltd v W J Green & Co (1984) Pty Ltd [2006] WASC 278
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- HASLUCK J:
Introduction
1 The defendants, Tace Pty Ltd and Western Australian Real Estate Custodian Limited, have applied for certain orders pursuant to a chamber summons issued on 23 March 2007. The relief sought is for the defendants to be released from undertakings given to the Court and for leave to enter into proposed dealings in relation to trust assets. An order is sought also for removal of a caveat lodged by the plaintiff against land known as the Summerfield Shopping Centre, being Lot 4 on Diagram 52358 and being the whole of the land comprised in Certificate of Title Volume 1740 Folio 426.
2 The defendants' application is supported by the first affidavit of Sydney James Chesson sworn 15 March 2007 and the second and third affidavits of the same deponent each of which were sworn 4 May 2007. It is supported also by the affidavit of Jeanette May Chesson sworn 26 April 2007.
3 The plaintiffs oppose the defendants' application. Objection is taken to certain parts of the defendants' affidavit evidence, being objections I will turn to in more detail later. The plaintiffs' position is supported by the affidavit of Annabelle Helen Hughes sworn 27 April 2007.
4 The application arises out of a long running dispute between the parties which was the subject of my judgment in the "consolidated proceedings": Green v Wilden Pty Ltd [2005] WASC 83. The caveat, the subject of the present application, was also the subject of an earlier controversy between the parties which became the subject of my judgment in Western Australian Real Estate Custodian Ltd v W J Green & Co (1984) Pty Ltd [2006] WASC 278. I will refer to the latter proceedings as the "caveat proceedings".
5 For ease of reference and for the sake of consistency with the earlier judgments, I will call the first plaintiff "Green" and refer to the plaintiffs jointly as the "Green parties". I will refer to the defendants in these proceedings as "Summerfield/Tace" unless the context requires a more specific reference.
Background
6 More than 15 years ago the Green parties invested in three unit trust projects initiated by Mr Chesson involving the acquisition of suburban shopping centres. These events led to various controversies concerning
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- the management of the so-called Balga/Wilden Trust, the Summerfield/Tace Trust and the Kelmscott/Magenta Trust.
7 Mr Chesson played a central role in the management of the three trust entities and, in doing so, was obliged to take account of the provisions of the relevant trust deeds which were in a common form.
8 The issue the subject of the caveat proceedings and the present proceedings concerns the Summerfield/Tace Trust which is governed by a trust deed in the common form undated but stamped on 4 July 1987 ("the Tace Trust Deed"). Clause 4.3 of the subject Deed confers a beneficial interest on unit holders in the trust fund but no unit holder shall be entitled to a transfer of any part of the property. By cl 12.1 the trustee company (Tace) has power to vary or transpose investments and to sell or otherwise deal with any real property.
9 It was common ground at the hearing before me that the Green parties hold about 23.38 per cent of the entire units issued in the Summerfield/Tace Trust.
10 The judgment in the caveat proceedings at [8] to [27] sets out in summary form the events leading up to the caveat proceedings. There is no need for me to repeat at length everything I said on that occasion, although my summary should be regarded as forming part of the preface to this judgment.
11 Put shortly, the consolidated proceedings led to orders being made restraining the trustees from dealing with the assets of the trusts until a repurchase procedure had been completed. At a later stage, on 31 August 2005 orders were made which were designed to maintain the status quo as to the matters in issue until the final disposition of an appeal against the principal judgment. Clause 1.4 of the subject orders provided that Tace would give not less than 14 days written notice to the solicitors for the Green parties of any proposed dealing with any assets of the Trust. Having regard to the presence of other unit holders in the subject trusts, the commercial reality has always been that pending disposition of the appeal, it might be necessary from time to time to revisit the 31 August orders to allow for the ongoing management of the trust businesses. Hence, the orders expressly allowed for leave to be obtained to deal with trust assets.
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Earlier events
12 I digress to say that prior to the handing down of the principal judgment and the making of the 31 August cl 1.4 order, the supermarket in question had been transferred to the second defendant in the present proceedings. The second defendant, described as "WAREC" in the caveat judgement, holds the land in trust for Tace as a sub-trustee on the terms and conditions set out in the Trust Deed. WAREC is presently the registered proprietor of the subject land.
13 For ease of reference, and as an aid to exposition, I will refer to the proposed vendor of the subject land in the transaction mentioned below as Tace/WAREC, for both companies are working together and are bound by the terms of the Tace Trust Deed.
14 It is necessary to understand also that in July 2004, before the consolidated proceedings were brought to an end, the National Mutual Life Association of Australasia Ltd, known as AXA, took steps to recover moneys borrowed by two of the trust companies, namely, Magenta and Tace. A receiver and manager was appointed over the real estate assets of those and certain related companies.
15 The total secured debt due to AXA amounted to $11,442,000 of which $9,964,500 was owing by Magenta and Tace jointly. In due course the receiver sold the Kelmscott/Magenta Shopping Centre for $12.5 million and used the proceeds to pay out the debts just mentioned. This meant that the mortgages on the Kelmscott and Summerfield Shopping Centres were discharged.
16 Mr Chesson and Tace/WAREC contend that Australian Real Estate Investment Pty Ltd known as AREIL (being another company with which Mr Chesson is associated) was instrumental in carrying these arrangements into effect upon the basis that by subrogation AREIL became a secured creditor of Tace in place of AXA for the sum of $4,982,250. This is the amount that AREIL allegedly paid out to AXA on behalf of Tace.
17 Mrs Chesson refers to these events at [14] to [19] of her affidavit and says also that pursuant to a Deed of Settlement evidencing the arrangements the title documents in respect of the Summerfield Shopping Centre were delivered to her personally (in her capacity as a director of AREIL) on or about 24 March 2005. AREIL was to be paid interest on the debt at the same rate as charged by AXA (approximately 9 per cent per annum) with the debt to be repaid from the proceeds of the sale of the
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- Summerfield Shopping Centre. She said that there is insufficient rental coming from the property to cover the accruing interest.
The Green caveat
18 The evidentiary materials show that Green lodged caveat J187153C against the title to the subject land on 18 February 2005; that is, about five months prior to the handing down of the judgment in the consolidated proceedings and the making of the 31 August cl 1.4 order. The estate or interest being claimed by the caveator is as the beneficiary of a trust against land held by a trustee for the trust. The caveat forbids the registration of any instrument affecting the estate or interest "subject to the caveator's claim".
19 There is affidavit evidence before me, and it is a matter referred to in the caveat judgment, that 12 months after lodgement of the Green caveat the proprietors of Lams Oriental Supermarket ("Lam") made an offer to purchase the Summerfield/Tace Supermarket for a price of $6.5 million. The proposed purchaser is currently the main tenant at the Summerfield Shopping Centre.
20 A copy of the printed form contract of sale, dated 22 February 2006, is exhibited to Mr Chesson's first affidavit. It seems that there was a degree of ambiguity as to whether this gave rise to a binding contract of sale between Tace/WAREC as vendor on the one hand and Lam as purchaser. It is an undisputed fact that the proposed Lam transaction was left in abeyance for several months.
21 However, in due course, Lam presented Tace/WAREC with a letter dated 12 September 2006 from the ANZ Bank whereby the Bank offered to provide $5.5 million by way of finance so that Lam could complete the proposed transaction. In addition, Lam wanted the prospective vendor (Tace/WAREC) to pay at settlement the sum of $500,000 which is the sinking fund from the land. Tace/WAREC was keen to complete the sale to Lam as a means of discharging the debt formerly due to AXA but now (by subrogation) allegedly due to AREIL.
22 It was against this background that Mr Chesson on behalf of Tace/WAREC took steps to have the Green caveat uplifted so that settlement could proceed. The Green parties objected to removal of the subject caveat. They said that the proposed Lam transaction would extinguish or prejudice Green's claim to a beneficial interest in the land. Further, and more specifically, the Green parties said that Tace/WAREC had failed to comply with the terms of the 31 August cl 1.4 order which
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- required that 14 days notice in writing be given of any proposed dealing with assets of the trust.
23 This controversy obliged Tace/WAREC to commence the caveat proceedings (CIV 2153/06). The Green parties, pursuant to s 138 of the Transfer of Land Act 1893 (WA), were required to show cause why the Green caveat should not be removed.
The caveat judgment
24 It appears from the caveat judgment that, after a lengthy review of the decided cases (including Bonini v Western Australian Real Estate Custodian Ltd [2001] WASC 258 in which Pullin J dealt with a similar issue in respect of the Kelmscott/Magenta Trust) I held that Green had a caveatable interest in the Summerfield Shopping Centre land sufficient to support a "subject to claim" caveat of the kind lodged by the caveator.
25 However, following the lead given by Pullin J in Bonini's case, I observed that a valid exercise of the power of sale allowed to the trustee by cl 12 of the standard form trust deed could have the effect of extinguishing the caveator's equitable estate or interest in the land.
26 In the end, I was of the view that such an extinguishment is effected not by the trustee entering into a contract for the sale of the land but by a conveyance of the legal title to the same which, in the case of the Torrens system, is effected by registration of a transfer of the subject land. This was because the doctrine of overreaching depended upon the creation of a fund to which the beneficiary's interest was then attached in substitution for his interest in the land. In the present case, such a fund could only be created upon a settlement of the transaction, being the point at which title to the land is transferred from the trustee to the purchaser.
27 I held that as a conveyance had not yet taken place in respect of the proposed Lam transaction, the caveator (Green), prima facie, at least for the time being, had retained its caveatable interest in the land or, putting it another way, an arguable case had been disclosed that it retained a caveatable interest in the land.
28 Thus, I held that the subject caveat was to be extended subject to the Green parties commencing proceedings in order to substantiate their estate or interest in the land and their claim to maintain a caveat in the present form. The Green parties were to provide an undertaking as to damages in the usual form. The caveat was to be extended until determination of the legal proceedings to be commenced or until further order of the Court.
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29 Towards the end of the caveat judgment I also touched upon two additional factors which weighed against removal of the Green caveat. First, there was a degree of ambiguity as to whether the trustee had sufficiently exercised a power of sale in a way that might defeat the caveatable interest of the Green parties because there was a degree of ambiguity as to whether the proposed Lam transaction had given rise to a binding contract of sale.
30 Second, there had been a failure by Tace to comply with the requirements of the 31 August cl 1.4 order whereby 14 days notice in writing of any intended dealing was to be given to the Green parties. This lack of compliance could arguably be regarded as a breach of the trustee's fiduciary obligations.
31 I note in passing that in addition to the exchanges between the parties prior to the caveat proceedings Tace/WAREC delivered to the Green parties a formal Notice of Intention to Sell dated 30 November 2006 which sets out the details of the proposed Lam transaction.
The present proceedings (CIV 2329/06)
32 It was against this background that the Green parties commenced the present proceedings in which they seek a declaration that Green has a caveatable interest in the Summerfield Shopping Centre land. The Green parties provided an undertaking as to damages.
33 On 11 December 2006 the Green parties issued a chamber summons in the present proceedings, returnable before a Judge in Chambers on 12 December 2006, seeking an order that the defendants be restrained by interlocutory injunction from dealing with the assets of the Summerfield/Tace Trust or issuing further units in the Trust without prior leave.
34 The proposed hearing did not proceed because by letters dated 12 December 2006 Galic & Co as solicitors for Tace/WAREC provided undertakings that were acceptable to the Green parties. As appears from the transcript of the brief hearing on 12 December 2006, the matter was adjourned upon the basis essentially that Tace/WAREC was bound by these undertakings. This meant that, at least for the time being, the proposed Lam transaction could not proceed. The two 12 December Galic letters are exhibited to the affidavit of Ms Hughes.
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35 The first 12 December Galic letter is directed to Lavan Legal as solicitors for the Green parties and reads as follows (omitting the inessential parts):
"We have just received advice that your client's injunction application has been set down for hearing at 4.00pm today.
Our client, and its directors, undertake to the court that they will not (without leave of the court) deal in the assets of the Summerfield (1987) Unit Trust.
We intend to bring this letter to the court's attention at the commencement of this afternoon's hearing, and will send a copy of this letter to His Honour's Associate.
We have been instructed to forthwith bring an application for directions under the Trustees Act and under the Liberty to Apply Provisions currently in force, as previously foreshadowed.
Please advise whether your clients are prepared to resolve this afternoon's hearing on that basis."
36 The second 12 December Galic letter is directed to Lavan Legal also and reads as follows (omitting the inessential parts):
"We refer to your facsimile of today's date, received at 3.00pm.
For the avoidance of any doubt, our clients and its directors undertake to the Court that they will not (without leave of the Court) issue units in the Summerfield (1987) Unit Trust.
Although our clients will not act without the leave of the court, this does not change the fact that your clients have already been provided with notice of our client's intentions, in respect of which the fourteen (14) day period as contemplated by His Honour's orders has already commenced. Accordingly, our clients undertaking is not to be taken as cancelling, abridging, suspending or extending the term of the notice period that has already been given to your client's in accordance with His Honour's orders.
Our clients reserve all their rights in the meantime."
37 I pause here to observe briefly that if the Green parties had pursued their application for an interlocutory injunction then it would have been
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- necessary for me to determine whether there was a serious issue to be tried as to whether they continued to have a caveatable interest in the Summerfield Shopping Centre land, notwithstanding a purported exercise by Tace/WAREC of the trustee's power of sale in respect of trust assets. Second, I would have been obliged to give consideration to the balance of convenience.
38 It follows from this that I am obliged to give consideration to issues of this kind in dealing with an application by Tace/WAREC to be released from the 12 December undertakings, for the undertakings in question were designed to serve essentially the same purpose as the interlocutory injunction applied for by the Green parties. They were viewed by both parties in that light.
Subsequent events
39 On 23 March 2007 Tace/WAREC applied by chamber summons to be released from the 12 December undertakings. They seek leave also to enter into a proposed dealing or dealings in relation to the assets of the Summerfield/Tace Trust on such terms as the Court may direct.
40 After some discussion at the hearing before me, the final form of the orders sought by the defendants was as follows:
1. The defendants, and their directors, be released from undertakings given to this Court by letters dated 12 December 2006, whereby they undertook not to deal with the Summerfield Shopping Centre held by the Summerfield (1987) Unit Trust being the land described as Lot 4 on Diagram 52358 and being the whole of the land comprised in Certificate of Title Volume 1740 Folio 426.
2. The defendants be given leave to sell the said land to Mr Lam or his nominee at a price of $6.5 million less an adjustment of $500,000 for the sinking fund or such higher price as the defendants may be able to negotiate.
3. The balance of the proceeds of the sale (if any) of the Summerfield Shopping Centre ("property") after payment of all debts owed to Australian Real Estate Investments Ltd against the property, the settlement adjustments of rates and taxes, the sinking fund ($500,000) and the selling costs (estimated to be $186,750) be paid into an interest bearing account in the name of the second defendant, and be preserved pending the outcome of the litigation in CIV 2329 of 2006.
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- 4. There be general liberty to apply.
41 I understand that the provision for a higher price to be negotiated allows for changes in the value of the land and other factors since talks about the proposed Lam transaction began over 12 months ago. I understand also, because this was expressly confirmed to me by counsel for Tace/WAREC at the hearing, that any approval of these orders is not to be taken as a ruling upon or confirmation upon the defendants' contention that AREIL has a valid entitlement to the amount said to be due to it by way of subrogation. The orders are designed to show how the proceeds of the sale will be dealt with and to support the defendants' contention that the trustee is exercising his powers for the benefit of the trust and in accordance with the provisions of the Tace Trust Deed.
42 There is no need for present purposes to traverse all the matters of detail set out in the defendants' supporting affidavits. I will deal with the objections to certain passages in these affidavits taken by the Green parties in due course. However, for the time being, with a view to delineating the issues before me, I will speak in general terms, and draw only upon those parts of the affidavits which I consider to be admissible.
43 There is evidence before me that the proposed purchaser (Lam) is currently the main tenant at the Summerfield Shopping Centre. Lam has served a default notice dated 2 February 2007 on Tace/WAREC as the putative vendor in respect of the proposed Lam transaction. However, notwithstanding the troubled history of the transaction, Lam's solicitors, by a letter dated 8 March 2007, have indicated that Lam might still be willing to proceed with the transaction.
44 The letter from Lam's solicitors dated 8 March 2007 reads in part as follows ("Lam's 8 March letter"):
"3. Without prejudice to our client's rights contain [sic] in the Notice of Default dated 2 February and reserving all its rights accrued to it in the Notice by reason of the Seller's default, and Subject to ANZ Bank' [our client's lender] approval we propose that the settlement take place as follows;
a. Your client agrees to proceed to settlement with the five and a half million dollars ("the sum") loaned to the Buyer from the ANZ Bank to be retained by the ANZ Bank as security in the name
- of the Seller pending the withdrawal of Caveat Number J187153C ("the caveat").
- b. Settlement to take place with the caveat in place.
c. ANZ Bank will retain the sum as surety to ensure that the caveat will be eventually removed and the Bank will release the money to the Seller [and or the caveator if applicable] upon the withdrawal of the caveat.
d. After Settlement the Seller will have no further interest in the Property.
- 4. We look forward to your urgent response."
45 The defendants would like to take advantage of this proposal. They wish to complete the proposed Lam transaction on terms which will ensure that the proceeds of sale are utilised for the benefit of the Tace Trust and/or preserved pending the outcome of the present proceedings. There is evidence before me at par 45 of the first Chesson affidavit that the receiver and manager put the property out to tender and the best offer for the property during the tender process was $4.5 million provided by Mr Lam.
46 In essence, it is said by Tace/WAREC that the proposed Lam transaction providing for a purchase price of $6.5 million is the best available price for the premises and reflects market value. It is said that the condition of the shopping centre is deteriorating to such an extent that it will be difficult to keep up the rental income from tenancies. It will be difficult to find a replacement supermarket if Lam were to vacate the premises.
47 Further, and in any event, it is said, the alleged liability of Tace/WAREC to AREIL in respect of the mortgage debt formerly due to AXA will continue to increase, bearing in mind that rental income does not cover accruing interest on the debt. Unless steps are taken to discharge or reduce the AREIL debt by a sale of the premises the unit holders (other than the Green parties) will be financially prejudiced. Moreover, AREIL has served a demand for payment dated 13 December 2006. It is said that the current level of the debt with accumulated interest allegedly exceeds $5.9 million.
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The hearing
48 At the hearing before me counsel for Tace/WAREC submitted initially that an order should be made for removal of the Green caveat so that the proposed Lam transaction could proceed, notwithstanding my prior ruling to the contrary in the caveat judgment.
49 However, he submitted also, in the alternative, as allowed for by Lam's 8 March letter, that the sale could proceed with the caveat remaining in place. It was said to be entirely consistent with my ruling on the previous occasion that the trustee should be permitted to exercise its power of sale in the manner proposed. In other words, having regard to the doctrine of overreaching referred to in the caveat judgment, Green's interest in the land as beneficiary (if any) upon a transfer of the land to the purchaser, would be transposed into an equitable interest in the proceeds of the sale. This is specifically allowed for by the provisions of the Tace Trust Deed.
50 Counsel conceded, having regard to the size of the alleged debt to AREIL, that the return to the unit holders might be negligible, but the same risk was present if the sale to Lam did not proceed. The presence of the debt meant that the net equity in the land remaining to the unit holders was minimal. Mr Chesson said in his first affidavit that 76.62 per cent of the unit holders (being unit holders other than the Green parties) had requested that Tace/WAREC proceed with the proposed Lam transaction.
51 Put shortly, then, counsel for Tace/WAREC acknowledged that a transfer of the land to Lam as purchaser would undercut the claim of the Green parties to a caveatable interest in the land because the land itself would have been disposed of pursuant to the trustee's power of sale. However, this was allowed for by the Tace Trust Deed. It would be open to the Green parties to amend their pleadings in the present proceedings to make a claim to a beneficial interest in any fund that was brought into existence as a consequence of the proposed sale. They could also advance a claim for breach of trust. It was for these reasons that the proposed orders made provision for the net proceeds of the sale to be paid into an interest bearing account to abide the outcome of the appeal.
52 It was said further that the Green parties had previously been granted an extension of their subject to claim caveat until the trial of the action or "further order". Now that new arrangements had been made which allowed for the proposed Lam transaction to proceed without removal of the caveat, it was open to the Court to revisit the controversy between the parties. The caveat judgment and the reasoning in Bonini's case (supra)
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- clearly contemplated that it was open to a trustee to exercise a power of sale in a way that would override the estate or interest of a beneficiary in the property itself.
53 On the defendants' case at the hearing there were five principal advantages in proceeding in the manner proposed. First, the dispute with Mr Lam as to the enforceability of the Lam transaction would be resolved and this would avert the prospect of the Tace Trust being caught up in expensive litigation.
54 Second, the Summerfield Shopping Centre was run down and the Tace Trust did not presently have the financial capacity to reinstate the premises with the result that the property would continue to decline.
55 Third, if the sale did not proceed the best price that could be obtained was likely to be significantly less than the $6.5 million allowed for under the proposed Lam transaction.
56 Fourth, ARIEL was currently owed in excess of $5.92 million by the Summerfield/Tace Trust by way of the subrogated mortgage debt and accumulated interest. This was likely to give rise to further enforcement action in any event, bearing in mind that ARIEL held the title deeds to the Summerfield property. Exhibited to the second Chesson affidavit is a letter dated 26 April 2007 from AREIL's solicitor, Geoffrey Coad, advising that AREIL intends to sell the property as mortgagee.
57 The fifth and final point was that there was presently insufficient income being derived from the premises to support and service the increasing level of debt to ARIEL and to pay all outgoings and maintenance.
58 It was said also by counsel on behalf of Tace/WAREC that, unlike the situation when the caveat proceedings were heard, the Green parties had now been given ample notice of the proposed Lam transaction. Thus, it could not be said in any real sense that there had been a lack of compliance with the 31 August cl 1.4 order. Moreover, although there had been ample time to respond to that aspect of the matter, the Green parties had not brought any evidence before the Court which suggested that the price prescribed by the proposed Lam transaction was below market value.
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Stance of the Green parties
59 Counsel for the Green parties was strongly opposed to the relief sought. Orders of the kind proposed, he submitted, amounted to rearguing the matters decided by the ruling previously made in the caveat judgment. The orders sought, if made, would effectively dispose of the claims being advanced by the Green parties in the present proceedings. In other words, the defendants were seeking to have the primary issue in the present proceedings dealt with summarily without a proper trial of the issues.
60 According to counsel for the Green parties, the supposed support for the orders being sought by 76.62 per cent of the unit holders was meaningless. This was because the trustee company had not been able to obtain approval for the transaction by a quorum at a properly constituted meeting of the Trust owing to 23.38 per cent of the units being held by the Green parties.
61 Counsel submitted also that the proposed Lam transaction, being a transaction entered into prior to notice being given to the Green parties, was not a transaction effected in proper compliance with the 31 August cl 1.4 order. That being so, the observations contained in the caveat judgment concerning a possible breach of the trustee's fiduciary obligations continued to apply.
62 This brings me to the objections made by counsel for the Green parties to various passages in the affidavits relied upon by the defendants.
63 Various objections were taken to the first affidavit of Mr Chesson on the grounds that certain of his assertions lacked relevance, that they were argumentative and/or conclusionary, that they offended the rule against hearsay. I will allow the objections to pars 14, 16, 28, 40 to 43, 49, 52 and the final sentence of par 51. I consider that par 47 is admissible, not as to the evidence of the truth of the matter asserted but as a matter relevant to the bona fides of the trustee.
64 As to the objections to Mr Chesson's second affidavit, I proceed from the premise that as a director of the defendant companies and AREIL, Mr Chesson has personal knowledge of and can speak for the companies in respect of the matters mentioned and as to the estimated selling costs. Hence, I will dismiss the objections to this affidavit. For the same reason I will dismiss the objections to Mr Chesson's third affidavit. I am of the view that many of the objections raised to all three affidavits go to matters of weight rather than admissibility.
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65 Notwithstanding the objection of counsel for the Green parties, I consider that the evidence given by Mrs Chesson at pars 17 to 21 of her affidavit concerning delivery of the Summerfield title documents to AREIL as security for the debt in question was admissible as matters based upon her own knowledge and experience. I will allow the objections based on the hearsay rule to the second sentence of par 24 and the first sentence of par 25.
Conclusion
66 There are decided cases to the effect that a party making payments on behalf of another can assume the role of the mortgagee pursuant to the principle of subrogation. A party making a payment in such circumstances is presumed (unless the contrary appears) to have intended that the mortgage shall be kept alive for that party's benefit: see Ghana Commercial Bank v Chandiram [1960] AC 732 at 745. The remedy of subrogation is regarded in some cases as being an equitable remedy to reverse or prevent an unjust enrichment: Banque Financiere de la Cite v Parc (Battersea) Ltd [1999] 1 AC 221 at 245.
67 For present purposes, these cases are sufficient to establish that, prima facie, pursuant to the rules concerning subrogation, AREIL has a claim to the amount due. I am not required to decide that issue in these proceedings (or not at this stage) and do not purport to do so. However, I am prepared to accept that the demand of AREIL for payment is a reality, and the trustee is obliged to take steps to deal with the demand.
68 In dealing with the question of whether the defendants (Tace/WAREC) should be released from the first of their 12 December undertakings, I take account of the fact that the previous order for an extension of the caveat was until the trial of the action or "further order". In other words, allowance was expressly made for the possibility that circumstances might arise which would allow for the making of a further order bearing upon the future of the caveat and the matters in controversy between the parties.
69 Further, debate concerning the need for undertakings provided in place of a proposed injunction, means that, first, I must give consideration to whether there is a serious issue to be tried that the plaintiff can make out its claim to a caveatable interest in the land; second, I must look at the balance of convenience, and the question of whether other remedies are available to the Green parties, including claims for damages at law or in equity.
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70 In my view, as to the first of these matters, the starting point is that a power of sale has expressly been allowed to Tace/WAREC by the Tace Trust Deed. Green's claim to a beneficial interest in trust assets has always been subject to the possibility that the power of sale might be exercised, with the result that the Green's caveatable interest in the land was extinguished. This is recognised by Bonini's case (supra) and by my own reasoning in the caveat judgment concerning the doctrine of overreaching.
71 Tace/WAREC has exercised its power of sale and wishes to complete the proposed Lam transaction. I did not make any findings against the trustee company in the consolidated proceedings which permit me to infer that the power of sale has been exercised in breach of trust. There is no evidence before me that the proposed sale of the Summerfield Shopping Centre is at a price which is less than the market value of the land. It has been open to the Green parties to adduce evidence in support of such a contention, but they have not done so.
72 I am conscious also that the manner in which the proposed Lam transaction will be completed is not inconsistent with the ruling made in the caveat judgment because the caveat will remain in place until the conveyance has been effected. At that stage, the unit holder's entitlement will be converted into a claim against the proceeds of sale. This is consistent with the doctrine of overreaching.
73 In the light of recent events, I do not consider that the alleged lack of compliance with the 31 August cl 1.4 order can be characterised as a breach of trust or fiduciary obligation standing in the way of the proposed sale because sufficient notice has now been given to the Green parties. They have had an opportunity to establish whether the sale is detrimental to the Trust, or at less than market value, but they have not adduced any evidence to that effect.
74 I consider that it is open to the Green parties in the present proceedings to amend their pleadings in the manner canvassed in earlier discussion, with a view to pressing a claim against any fund into which the land is transformed, and thus it cannot be said that the effect of the proposed orders will be to abort the present proceedings. It must be kept in mind also that the subject caveat is not an absolute caveat prohibiting any dealing in the land whatsoever. It is a subject to claim caveat only. A caveat in that form allows for dealings with the land in question provided the caveatable interest of the caveator is acknowledged.
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75 When I draw all these factors together I see the matter in this light. Tace/WAREC has a power of sale under the Trust Deed. This has always had the potential to override the Green claim to a caveatable interest in the land. There is evidence before me which indicates that Tace/WAREC is acting reasonably in seeking to exercise the power of sale and complete the proposed Lam transaction in order to dispose of a steadily increasing debt to AREIL.
76 The matters that previously stood in the way of the proposed Lam transaction, being the matters mentioned in the caveat judgment, have now been addressed. First, an objection referable to the doctrine of overreaching will be overcome by proceeding to settlement without removing the caveat. The Green interest in the land will be converted into an equitable interest in the proceeds of sale. In the case of a trust deed which allows for a power of sale, the decided cases indicate that this is consistent with the beneficiary's entitlements.
77 Second, the Green parties have now been given sufficient notice of the trustee's intention to deal with assets of the Trust. To my mind, the terms of the 31 August cl 1.4 order were not intended to displace the powers of sale allowed to the trustee in the Trust Deed. The notice provision was simply a mechanism by which the Green parties would be afforded an opportunity to examine the merits of a proposed dealing. It was always open to the trustee to obtain leave if a case in favour of the dealing could be made out. In the absence of any substantive issues as to the sufficiency of the price to be paid or similar concerns, I am of the view that leave to proceed with the proposed Lam transaction should be granted in the manner expressly allowed for by the 31 August cl 1.4 order. The balance of convenience weighs against allowing the existing debt to increase.
78 It follows from all of this that I am prepared to make the orders sought by the defendants, save for an amendment to the first line of par 1 to make it clear that the release applies to the first 12 December undertaking only.
Summary
79 Orders will be made as follows:
1. The defendants, and their directors, be released from that part of the undertakings given to this Court by letters dated 12 December 2006, whereby they undertook not to deal with the Summerfield Shopping Centre held by the Summerfield (1987) Unit Trust being
- the land described as Lot 4 on Diagram 52358 and being the whole of the land comprised in Certificate of Title Volume 1740 Folio 426.
- 2. The defendants be given leave to sell the said land to Mr Lam or his nominee at a price of $6.5 million less an adjustment of $500,000 for the sinking fund or such higher price as the defendants may be able to negotiate.
3. The balance of the proceeds of the sale (if any) of the Summerfield Shopping Centre ("property") after payment of all debts owed to Australian Real Estate Investments Ltd against the property, the settlement adjustments of rates and taxes, the sinking fund ($500,000) and the selling costs (estimated to be $186,750) be paid into an interest bearing account in the name of the second defendant, and be preserved pending the outcome of the litigation in CIV 2329 of 2006.
4. There be general liberty to apply.
80 I will hear from the parties as to whether any further orders or directions are required.
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