Amwano v Parbery

REASONS FOR JUDGMENT 1 This is a class action. The named plaintiffs (one of whom is a citizen of Nauru and the other may be an Australian resident) brought this action against the Nauru Phosphate Royalties Trust (the third defendant) as well as the receivers and managers (the first and second defendants) appointed by a debenture holder to take control of the trust's Australian assets. Those assets include shares in an Australian incorporated company that at one stage owned properties in Melbourne which have now been sold. The plaintiffs and the group on whose behalf the action is brought are described as "landowners owning land in the Republic of Nauru who are also beneficiaries of the Nauru Phosphate Royalties Trust (Fund Number 2)". 2 The plaintiffs sought against the receivers an order for the inspection of their records under s 421(2) of the Corporations Act 2001 (Cth) and for orders pursuant to s 423 of the Act that the receivers pay to the beneficiaries of Fund No 2 the money the receivers hold for the mortgagor. The action against the receivers was, if I may be so bold to say based on the scant material I have before me, hopeless and it was soon discontinued. The claim under s 421(2) was founded on the proposition that, in respect of unpaid distributions of income, a beneficiary of a trust is a creditor of the trustee. This proposition is contrary to several well-known authorities, although there are cases to the effect that an unpaid beneficiary may be a creditor for the purposes of the Bankruptcy Acts. As regards the other claim, I can see no basis upon which the receivers could be ordered to pay to the beneficiaries the amounts they hold for the mortgagor even if it turns out that they have rights over the fund. The beneficiaries themselves assert no personal or proprietary claim against the receivers. 3 The claim against the Royalties Trust is for an order that the net income derived by the trust for the financial years ending 30 June 2001 to 30 June 2005 (inclusive) be paid to the beneficiaries of Fund No 2 and for an order that the Royalties Trust be wound up in insolvency. 4 Without submitting to the jurisdiction of the Federal Court, the Royalties Trust has moved to stay the action on the basis that the court has no jurisdiction to adjudicate an action against the trust. It is put that the Royalties Trust is entitled to claim sovereign immunity under the Foreign States Immunities Act 1985 (Cth). By s 9 of the Immunities Act, subject to certain exceptions a foreign State is immune from the jurisdiction of Australian courts. By s 22 that immunity is extended to "a separate entity of a foreign State". A "separate entity" is defined in s 3(1) to include "an agency or instrumentality of the foreign State". The Royalties Trust says that it is an agency or instrumentality of the Republic of Nauru. 5 The Royalties Trust also contends that the Federal Court lacks jurisdiction over the subject-matter of the dispute. The argument here is that the action requires adjudication upon the validity of acts and transactions of the Republic of Nauru within its territory. It is said that the court has no jurisdiction to deal with such matters under the "act of state" doctrine: Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888. See also Banco Nacional de Cuba v Sabbatino, 376 US 398 (1964). 6 The Royalties Trust holds in reserve (in the sense that it has not taken out a motion with supporting affidavits to raise the point) another objection to the Federal Court embarking upon this dispute. It says that this court is a clearly inappropriate forum. Although no motion was filed I was provided with a copy of the motion that might be taken out together with two affidavits in support of the proposed motion on the understanding, which was accepted by counsel for the plaintiffs, that this would not amount to a submission to the court's jurisdiction. 7 I will, first, explain how the present dispute has come about. The Royalties Trust (or perhaps a predecessor body) was established as a body corporate by the Nauru Phosphate Royalties Trust Ordinance 1968. The 1968 Ordinance was made under the Nauru Act 1965 (Cth) at a time when Nauru was administered by the Commonwealth of Australia. The 1968 Ordinance also established several funds (designated as trust funds) into which would be paid the proceeds of the sale of phosphate, the only natural resource found in Nauru. One function of the Royalties Trust was to administer those funds. 8 Nauru became an independent republic in 1968. Following independence Nauru adopted a Constitution as its "supreme law": Constitution of Nauru, Art 2. The Constitution (Arts 58 to 67, inclusive) deals with matters relating to the revenues and expenditures of Nauru. Article 62 establishes the Long Term Investment Fund, consisting of the moneys that immediately before commencement of the Constitution constituted the fund called the Nauruan Community Long Term Investment Fund. The latter fund was one of the funds established by the 1968 Ordinance. 9 Article 63 of the Constitution states that the Parliament may provide for the establishment of a fund for the benefit of persons from whose land phosphate deposits have been recovered and for the payment into that fund of amounts from the Treasury Fund and for the payment of monies out of the fund to those persons. Presumably in accordance with Art 63, the Parliament of Nauru enacted the Nauru Phosphate Royalties Trust (Amendment) Act 1990. Section 1(2) of the Amendment Act states that the 1968 Ordinance is to be referred to as the "Principal Act". Section 1(3) provides that the "Principal Act as amended by [the Amendment] Act may be cited as the Nauru Phosphate Royalties Trust Act 1968-1969." Section 4 of the Nauru Phosphate Royalties Trust Act 1968-1969 established a body corporate with perpetual succession under the name of the Nauru Phosphate Royalties Trust. By s 5 the Royalties Trust is constituted by four persons, one appointed by the Governor-General, one by the Administrator and the remaining two by the Council. By s 18 the Long Term Investment Fund, established under Art 62 of the Constitution, is to be administered by the Royalties Trust. Section 19 of the Trust Act establishes a fund known as the Nauruan Land Owners Royalty Trust Fund. This is the fund that is commonly referred to as "Fund No 2". Section 19(5) requires the Royalties Trust to pay to each beneficiary of Fund No 2, or (if there is one) a trustee of a beneficiary, his or her share of the Ronwan Interest earned on Fund No 2 in the preceding financial year. For the purposes of Fund No 2, Ronwan Interest is defined to mean the aggregate business profits, dividends, interest and rents earned by the fund in each year ending 30 June less costs and expenses. The beneficiaries are those persons who, on or after 1 July 1967, are entitled to the beneficial interest in land in respect of which royalties for phosphate that has been or is mined on the land are held in Fund No 2: s 19(6)(a). Section 19(6)(b) provides that "[a] person who is entitled to a life time interest only in any land as aforesaid is, while living, a beneficiary of the Fund … to the exclusion of the person who has the beneficial interest in the land." Section 19(10)(b) states that "[u]pon the death of a beneficiary with a life time interest only … any Ronwan Interest which is payable … shall form part of the estate of the deceased and shall be paid accordingly." In substance the entitlement of a person to an interest in Fund No 2 is to be determined by reference to the written law or any custom of the Nauruan people. By s 19(9) "[f]or the purposes of any written law and any custom of the Nauruan people, the interest of a beneficiary in the Fund is real property and the interest of a life tenant and of a beneficiary in the Ronwan Interest of the Fund is personal property." 10 Returning to the plaintiffs' case, it appears, at least at a superficial level, to be straightforward. It is in substance an action for the administration of Fund No 2. The plaintiffs claim that they are income beneficiaries of Fund No 2, that as beneficiaries they are presently entitled to receive the income derived by Fund No 2 since its inception, and that, in breach of trust, the income has not been paid to them. Accordingly, they seek an order that will require the Royalties Trust to perform the trust. 11 But appearances can often be deceptive. This action is not at all as straightforward as it seems. It raises a number of difficult questions. Those questions include the following: Did the 1968 Ordinance, the Constitution or the 1990 Amendment Act establish Fund No 2 as a true trust? If a trust was established, what is the nature of that trust? Is it a trust for persons or a trust for statutory purposes? As to the distinction under Australian law see Fouche v The Superannuation Fund Board (1952) 88 CLR 609, 640. The answer to each of these questions will depend upon the meaning to be given to the Constitution, to the 1968 Ordinance and to the Amendment Act. As regards the meaning to be placed upon a provision of the Constitution, I note that Art 54(1) provides that "[t]he Supreme Court [of Nauru] shall, to the exclusion of any other court, have original jurisdiction to determine any question arising under or involving the interpretation or effect of any provision of [the] Constitution." 12 The nature of the relief which the plaintiffs seek also gives rise to several difficult issues. One obvious issue is the need to identify the beneficiaries of Fund No 2. The identification of the beneficiaries will involve the application of Nauruan law. It will also involve a close investigation of facts that will establish who are the past and present owners of land that was mined for phosphate and in respect of which royalties were paid. This will involve witnesses most of whom are likely to be in Nauru. It may also be necessary (indeed I think it will be inevitable) for the court to consider Nauru's law of succession. In this connection reference should be made to the Custom and Adopted Laws Act 1971, by which the institutions, customs and usages of Nauruans are to be accorded recognition where applicable. Section 3(1) provides: The institutions, customs and usages of the Nauruans to the extent that they existed immediately before the commencement of this Act shall, save in so far as they may hereby or hereafter from time to time be expressly, or by necessary implication, abolished, altered or limited by any law enacted by Parliament, be accorded recognition by every Court and have full force and effect of law to regulate the following matters - (a) title to, and interests in, land, other than any title or interest granted by lease or other instrument or by any written law not being an applied statute; (b) rights and powers of Nauruans to dispose of their property, real and personal, inter vivos and by will or any other form of testamentary disposition; (c) succession to the estates of Nauruans who die intestate; and (d) any matters affecting Nauruans only. Thus, it will be necessary both on the issues of ownership and of succession to hear evidence about Nauruan institutions, customs and usage. 13 The dispute has other connections with Nauru. I have already mentioned that the persons who constitute the beneficiaries of Fund No 2 are Nauruan landowners. The Royalty Trust's principal office is in Nauru. Most of its records are in Nauru. Most of the beneficiaries of Fund No 2 are resident in Nauru. 14 How then is it that this action has been commenced in Australia? There seem to be two reasons. The first is that the Royalties Trust has assets within the jurisdiction. The assets are the surplus funds held by the receivers. I do not know, however, whether any of these funds belong to Fund No 2. The second reason is that one plaintiff, and perhaps some of the group the plaintiffs represent, are in Australia. The connection with Australia is tenuous indeed. 15 I propose in the circumstances to put to one side the Royalties Trust's argument that the Federal Court has no jurisdiction over the subject-matter of the suit or over the Royalties Trust itself. I need not determine those arguments for it is clear to me that this case should be resolved by the courts of Nauru. 16 According to the decision of the High Court in Voth v Manildra Flour Mills Proprietary Limited (1990) 171 CLR 538 forum non conveniens is to be determined on the basis of the "clearly inappropriate forum test", and not the "clearly more appropriate forum test." Under this test an Australian action will not be stayed simply because the plaintiff can point to some connection with another forum. Ultimately the court's discretion is to be exercised "based on the competing connexions of the respective forums with the subject-matter of the proceedings": (1990) 171 CLR 538, 571. 17 I accept without hesitation that a plaintiff who regularly invokes the jurisdiction of an Australian court prima facie has a right to insist upon its exercise: Adeange v The Nauru Phosphate Royalties Trust (unreported, Supreme Court of Victoria, Hayne J, 8 July 1992). I accept also that the rationale for the exercise of the power to stay a proceeding on the ground of forum non conveniens is to avoid injustice in the sense that it would be oppressive or vexatious to allow the Australian proceeding to continue: Voth v Manildra Flour Mills Proprietary Limited (1990) 171 CLR 538, 555-556, Adeange v The Nauru Phosphate Royalties Trust (unreported, Supreme Court of Victoria, Hayne J, 8 July 1992). I am in no doubt, however, that while the court's jurisdiction may have been correctly invoked the continuation of the case in Australia would be not only oppressive to the Royalties Trust, but also a wholly undesirable enterprise. 18 In the first place the resolution of this case will, as I have said, in no small measure depend on the proper construction to be placed upon several articles in Nauru's Constitution and the provisions of a number of Nauruan statutes. It need hardly be said that this court should only as a last resort, if at all, give meaning and content to the Constitution of a foreign country. I assume a foreign court would adopt the same approach as regards the Australian Constitution. It is also undesirable, but not of course to the same extent as in the case of a Constitution, for this court to interpret the statutes of a foreign country. This should only be done if the court cannot avoid the task. 19 In the second place the continuance of this action in Australia will be oppressive, in the ordinary meaning of that word, to the Royalties Trust. I have mentioned that the legal issues raised will for the most part be dependent upon the application of Nauruan law, and the factual aspects will depend on evidence from Nauruans about the position in Nauru. I have also mentioned that the Royalties Trust is run from Nauru and that is where its papers are. To run the action in Australia would place an unreasonable, some might say intolerable, burden on the Royalties Trust. 20 I propose to stay this proceeding permanently and order the plaintiffs to pay the Royalties Trust's costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.