Coolbrew Pty Ltd v Westpac Banking Corporation

Court of Appeal (NSW)|2015-03-18|Before: Leeming JA, Bergin CJ, Darke J

Solicitors: Beazley Singleton Lawyers (Appellant) K&L Gates (First Respondent) Review and Dispute Resolution, Australian Taxation Office (Second Respondent) Hicksons Lawyers (Third Respondent) File Number(s): 2014/269698 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity Division Citation: Coolbrew Pty Ltd v Westpac Banking Corporation [2014] NSWSC 1108 Date of Decision: 15 August 2014 Before: Darke J File Number(s): 2014/138918

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] Mr Swift deposited money into a bank account with the respondent (Westpac) in his own name as security for an advance by Westpac to an associated company. The appellant (Coolbrew) provided the funds to Mr Swift to pay into the bank account. The debt to Westpac having been discharged, the Deputy Commissioner of Taxation served notices on Westpac under the Taxation Administration Act 1953 (Cth) requiring Wespac to remit to the Commissioner amounts owed to it by Mr Swift. A dispute arose as to whether Mr Swift was beneficially entitled to the money or whether he held the money on trust for Coolbrew. The primary Judge held that the money was not held on trust and thus the Commissioner, was entitled to the moneys in the account. Coolbrew appealed on the ground that the primary Judge erred in finding that the parties did not intend the money to be held on trust for Coolbrew. Held, by the Court, dismissing the appeal:

Judgment

THE COURT: This is an appeal from a decision of a Judge of the Equity Division (Darke J), dismissing a summons filed by the appellant (Coolbrew). The summons seeks a declaration that certain funds placed on term deposit with the first respondent (Westpac) in the name of a third party (Mr Swift) are held by Westpac on trust for Coolbrew: Coolbrew Pty Ltd v Westpac Banking Corporation [2014] NSWSC 1108 (Primary Judgment). The primary Judge was not satisfied on the evidence that the alleged trust had been made out.

Parties

Coolbrew's summons joined two defendants: Westpac and Mr Swift. It appears that the second respondent (Commissioner) was subsequently added as the third defendant. The Commissioner is a necessary party to the proceedings because he served a number of notices on Westpac pursuant to s 260-5 of Sch 1 to the Taxation Administration Act 1953 (Cth). The notices required Westpac to remit to the Commissioner certain moneys standing to the credit of Mr Swift with St George Bank (a Division of Westpac).
There was no dispute either before the primary Judge or on the appeal that at all relevant times Mr Swift owed money to the Commissioner and that the notices served on Westpac were valid.
Coolbrew's notice of appeal named Westpac and the Commissioner as respondents, but did not name Mr Swift as a respondent. Mr Johnson, who appeared for Coolbrew, informed the Court that Mr Swift had been made bankrupt at some stage after Coolbrew filed its notice of appeal. Mr Johnson suggested that neither Mr Swift nor his trustee was a necessary party to the appeal because Westpac had paid the full amount of the deposit in Mr Swift's name to the Commissioner and thus the trustee no longer had an interest in the proceedings.
The Court's response was that, assuming that a sequestration order had been made against Mr Swift's estate, the rights of Mr Swift's trustee in bankruptcy might be affected and thus the trustee needed to be joined as a respondent. This prompted an inquiry by the appellant's solicitor of the trustee, who apparently indicated that he might wish to claim that the moneys paid to the Commissioner constituted a preference and thus should be disgorged by the Commissioner to the bankrupt estate.
Whether or not the trustee intends to make a claim, his rights are potentially affected by the appeal and he should have been joined. Accordingly, the Court directed the appellant to seek the leave of the Federal Court pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) to take further steps in the appeal. It further directed that if the Federal Court granted leave, the appellant should join the trustee in bankruptcy as a respondent to the appeal. The directions were complied with and the appellant filed an amended notice of appeal joining the trustee in bankruptcy. The trustee subsequently filed a submitting appearance.

The Appeal

Coolbrew's case, both at trial and on appeal, is that the moneys held in Mr Swift's name with Westpac, were held on trust because it (Coolbrew) had provided Mr Swift with the funds for a particular purpose, namely to enable him to provide security to Westpac in support of an advance to an associated company, Crown Property Investments Pty Ltd (Crown). According to Coolbrew, once the funds were no longer required for that purpose, Westpac was obliged to return the funds to Coolbrew on the principles stated in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 and analysed by Gummow J in Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491.
The Court is unanimously of the opinion that the primary Judge's decision was correct, essentially for the reasons his Honour gave and that the appeal raises no question of general principle. It is therefore, permissible for the Court to deliver reasons for its decision in short form: Supreme Court Act 1970 (NSW), s 45(4); Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.55. Unfortunately neither the legislation nor the UCPR explain what "short form" means. Some judgments which are said to be in short form are not especially short: see, for example, Collins v Tabart [2007] NSWCA 78 (54 paragraphs); special leave granted but revoked: Collins v Tabart [2008] HCA 23; 82 ALJR 1521.
While there is much to be said for simply expressing our agreement with the primary Judge, we set out the facts found by the primary Judge and summarise his Honour's reasons. We then give our reasons in shorter form than otherwise might have been the case.

The Facts

There was no dispute that the primary Judge set out the facts accurately in the Primary Judgment (at [11]-[34]). We reproduce below the substance of his Honour's account: "[11] … Coolbrew is the trustee of the Coolbrew Unit Trust. Its shareholders are Mr Crane and Astbury Enterprises Pty Ltd, a company associated with Mr Swift. Coolbrew owns a property at Gateshead which is mortgaged to the Bank. Crown is the trustee of Crown Property Investments Unit Trust. Its shareholders include Mr Crane and Astbury Enterprises Pty Ltd. Crown owns a property at Cooks Hill. [12] The Facility Offer given by the Bank to Crown on 24 June 2011 provided for construction finance of $9,675,000. The term was expressed to be 15 months from the first drawdown date. At least $502,000 of Crown's own money had to be used for the contemplated works before a drawdown could be requested. … The Offer had been accepted by Crown and each of its directors by about 4 July 2011. [13] … [T]he Facility Offer required further security to a value of $2,000,000 to be provided by the directors of Crown. Of that amount, $1,300,000 was to be provided by Mr Nicholson through a company, Lake Maintenance (NSW) Pty Ltd. The remaining $700,000 was to be made up of $175,000 provided personally by each of the other four directors [Mr Swift, Mr Crane, Mr Hughes and Mr Nicholson]. … [17] … [A]ll parties apparently proceeded on the basis that whilst the money to enable the directors to provide their shares of the required security was to come from Coolbrew, the cash deposits would be held in the names of the individual directors. [18] On 28 June 2011, the Bank issued a Facility Offer to Coolbrew in respect of a new commercial loan of $350,000 on top of its existing commercial bill facility of $1,170,000. The stated purpose of the loan was 'Equity contribution for Crown Property development'. The term of the commercial loan was expressed to be fifteen months from the first drawdown date. A single drawdown was permitted, such drawdown to take place within thirty days of the date of acceptance of the offer. Messrs Swift and Crane were required to provide Guarantee and Indemnity extensions in relation to their existing guarantees of Coolbrew's obligations. [19] On 6 July 2011, Coolbrew executed a Drawdown Request in relation to the commercial loan. The request was signed by both Mr Swift and Mr Crane. It was for a drawdown of $350,000 to take place on 7 July 2011. Under the heading 'Payment Instructions', two boxes for "Internal Transfers to another St George Bank account" were ticked. Under the first box, the following appears: 'Name of Beneficiary: Martin Swift Account Number: Term Deposit BSB: 332-083 Amount: $175,000' [20] Under the second box, the following appears: 'Name of Beneficiary: Douglas Crane Account Number: Term Deposit BSB: 332-083 Amount: $175,000' [21] On 7 July 2011, Messrs Swift and Crane each provided signed application forms to the Bank for the establishment of a term deposit. The parts of the forms which are to be filled out when the applicant is a trustee were in each case left blank. [22] On 12 July 2011, they each provided (as "Depositor") a signed 'Authority to Set-Off Deposits' form to the Bank (as "Depositee"). These forms included the following: '1. This agreement is entered into in consideration of us providing or continuing to provide financial accommodation to you or at your request. It sets out the terms on which we will be paying the balance at any time now or in the future standing to the credit of each of the accounts with us specified in the details and any new account opened in accordance with clause 3.2. In this agreement, these balances are called the deposits and an account includes a term deposit. 2. We need not repay the deposits: (a) until we have received all money you owe us at any time or which we determine you will or may owe us in the future; and (b) until we are satisfied that we will not be asked to refund any such money (or any part of it) to a trustee in bankruptcy, a liquidator or any other person; and (c) other than in accordance with the terms applying to each deposit. It is entirely within our discretion whether we agree to repay a deposit earlier than this. You have no right to call for an earlier repayment and agree not to do so. 3.1. Your right to receive interest on any deposit in accordance with the terms applying to it is not affected by this agreement except as described in clause 4. 3.2. In our discretion, we may require that any interest which accrues on any deposit be added to the balance of that deposit when the interest becomes due for payment. In that case, the interest then becomes part of that deposit. Alternatively, in our discretion we may require that any interest which accrues on any deposit be placed in any account in your name that we specify. In either case, you are only entitled to receive it when we repay the deposits under clause 2 unless we agree otherwise. 4. We may set-off any amount we owe you in connection with the deposits against any money you owe us. We may do this at any time and without giving you advance notice and whether or not a deposit has matured. If a deposit has not matured at the time we set-off any amount, we pay any interest on the amount set-off only until the date of set-off (this interest is payable as if you had elected to break the term of the deposit on the date we set-off the amount). 5. You declare that you hold and will continue to hold the deposits: (a) as beneficial owner, free of any interest of a third party; and (b) in the same capacity as you have entered or will enter into: (i) agreements under which we provide you with financial accommodation; and (ii) any guarantee or indemnity you give us; and (iii) arrangements under which you otherwise incur obligations to us (including but not limited to treasury transactions and international transactions). 6. Unless we consent, you may not assign, charge, declare any trust over or otherwise deal with any of your rights in connection with the deposits or this agreement. Any attempt to do any of these things is void.' [23] In the details section of the forms, the details of the accounts are not stated. However, clause 13 of the form provides that the Depositor agrees that the Depositee may fill in any blanks in the agreement. [24] Also on 12 July 2011, Mr Swift executed a Guarantee and Indemnity in respect of Crown, as required by the Facility Offer to Crown. By clause 10.2(g) Mr Swift declared that he was not signing the Guarantee and Indemnity as the trustee of any trust or settlement. [25] On 13 July 2011, Messrs Swift and Crane executed an Extension of Guarantee and Indemnity in respect of Coolbrew, as required by the Facility Offer to Coolbrew. [26] Settlement of the Coolbrew commercial loan (No. XXX XXX 801) occurred on 13 July 2011. In accordance with the Coolbrew payment instructions, $175,000 of the loan funds was used to open a term deposit in the name of Mr Crane (No. XXX XXX 957) and $175,000 of the loan funds was used to open a term deposit in the name of Mr Swift (No. XXX XXX 906 … [27] The evidence discloses that Mr Swift's term deposit matured and was renewed on a number of occasions, with accrued interest being added to the renewed deposit. There is also evidence that in March 2013, when Mr Swift's term deposit was replaced with a renewed deposit (to mature in June 2013), Mr Swift directed the Bank to credit interest of $15,905 to a trading account of Crown. The renewed term deposit (in the amount of $175,102.94) remained in Mr Swift's name. [28] Mr Swift ceased to be a director of Coolbrew on 28 June 2013. [29] Notices under s 260-5 of Schedule 1 to the Taxation Administration Act, dated 22 August 2013, 25 November 2013 and 26 February 2014 have been served upon the Bank in respect of Mr Swift. On 31 December 2013, upon the maturity of Mr Swift's term deposit, the Bank paid an amount of $5,250.99 to the Australian Taxation Office out of the funds on deposit. This was done in response to the notice dated 25 November 2013. It appears that the payment of that amount reduced the total funds on deposit to exactly $175,000. [30] The notice dated 26 February 2014 was amended by a notice dated 3 June 2014 that reduced the amount payable from $146,082.26 to $117,347.47. [31] On 5 February 2014, Beazley Singleton Lawyers, acting for Coolbrew, wrote to the Bank in terms which included the following: '…The writing of the loans were required by and directed by St George and were written in this way for the convenience of the bank. As you are well aware, our client, Coolbrew Pty Ltd is the beneficial owner of the two term deposits [...]. Upon the discharge of the loan to St George for which these terms deposits are security, the term deposits are to be credited against the Commercial Loan Account No. XXX XXX 801 …' [32] On 2 April 2014, Beazley Singleton Lawyers further stated in a letter to the Bank that in circumstances where the loan to Crown was being refinanced and the security was no longer required, the Bank was required to pay each amount of $175,000 back to Coolbrew. [33] On 7 April 2014, both Mr Crane and Mr Swift sent emails to Mr Jones of the Bank in which it was stated that 'the $175,000 in my name belongs to Coolbrew' and is to be returned by paying off the $350,000 loan to Coolbrew. [34] In the course of the correspondence that followed after the Beazley Singleton Lawyers letters, K & L Gates, solicitors acting for the Bank, stated that upon the discharge of the security, the Bank intended to comply with the notices issued by the Deputy Commissioner of Taxation in relation to moneys deposited in the name of Mr Swift."

The Primary Judgment

After setting out the principles stated in Quistclose and Re Australian Elizabethan Theatre Trust (as to which no issue arises on the appeal), the primary Judge stated (at [50]) that Coolbrew had to establish an intention to create a trust. His Honour stated (at [52]) that the focus of the inquiry had to be upon the objective indications of the parties' intention, not on any subjective intentions that may have existed, but were not apparent from what was said or done by the parties.
The primary Judge pointed out (at [57]) that a trust does not necessarily arise because money is provided for a particular purpose. It was therefore necessary: "to consider whether an intention to create a trust can be discerned from the evidence of the conduct of the parties, the nature of the transaction, and relevant circumstances attending the relationship between the parties."
The primary Judge observed (at [58]) that Coolbrew had not adduced evidence of discussions with Mr Swift or of any resolutions relating to the terms on which the funds would be held by Westpac. This contrasted with Quistclose, where there was clear evidence that the funds were to be used exclusively for a particular purpose, which had failed. In the absence of direct evidence of any discussions or agreement between Coolbrew and Messrs Swift and Crane (who constituted Coolbrew's board of directors at the relevant time) as to the ownership or use of the funds, it was necessary to focus on the documentary evidence relating to the transaction and the circumstances in which it proceeded (at [60]).
The documentary evidence not only provided no support for the alleged trust, but suggested that the funds were to be held beneficially for Messrs Swift and Crane. The matters identified by his Honour were as follows:

The authority to Set-Off Deposits form (cll 5(a), 6) proceeded on the basis that the Depositor was to be and remain the beneficial owner "free of any interest of a third party" and that any declaration of trust would require Westpac's consent (at [62]).
The deposits were to be held as security for all indebtedness of the Depositor, not merely his indebtedness in relation to the Crown Facility, and the Depositer had no right to call for early repayment of the deposits (cll 2, 4) (at [63]).
Coolbrew must be taken to have become aware of the terms of the forms when they were signed by Messrs Swift and Crane on 12 July 2011 (at [64]), even though they did so in their personal capacities and not as directors of Coolbrew.

According to his Honour, it followed (at [65]) that: "the terms upon which the Bank required the security to be given were not consistent with Coolbrew having a beneficial interest in the term deposits, and were not consistent with the holders of the deposit (or anyone else) having the right to call for repayment once the Crown loan was itself repaid. The security was to be given on the basis that the beneficial ownership of the term deposits rested with the holders, namely Messrs Swift ad Crane. That the $350,000 was borrowed only for the purpose of providing the required security does not therefore establish the existence of the alleged trust."
The primary Judge identified (at [66]) other, less clear-cut, indications that Coolbrew was not to have any beneficial interest in the deposits. For example, the Drawdown Request made pursuant to the Coolbrew Facility described Mr Swift as the "Beneficiary" and the term deposit application form contained no reference to a trust or to Mr Swift being a trustee.
His Honour considered (at [67]) that the statements made by Messrs Swift and Crane in April 2014 that the funds belonged to Coolbrew did not provide substantial support for the existence of the alleged trust: "The evidence was admitted without limitation, and was not sought to be challenged. However, the statements are conclusionary in form, and the factual basis upon which the statements were made is not apparent. They can be read as expressions of subjective belief. In my view, these statements, made well after the alleged trust is said to have arisen, do not provide any cogent evidence of an intention to create such a trust."
For these reasons, the primary Judge concluded (at [70]) that Coolbrew had not made out its case for declaratory relief.

Reasoning

The appellant's written submissions on the appeal are exceedingly brief. Brevity is not a defect. However, it is very difficult to discern from the written submissions what, if any, errors the primary Judge is said to have committed.
In his oral submissions, Mr Johnson advanced two arguments. First, the primary Judge should have accorded greater weight to emails of 7 April 2014 sent by Messrs Swift and Crane to Westpac. These purported to direct Westpac to pay each deposit of $175,000 to Coolbrew because "the money belongs to Coolbrew".
Secondly, Mr Johnson submitted that the primary Judge had given insufficient weight to the stated purpose of Westpac's Facility Offer to Coolbrew of 28 June 2011, namely "Equity contribution for Crown Property development". This was said to support Coolbrew's claim that the drawdown pursuant to the Facility and the deposit of the funds with Westpac in the names of Messrs Swift and Crane resulted in the deposits being held on trust for Coolbrew (subject to Westpac's security interest).
It is important to appreciate what Mr Johnson did not submit. He did not dispute that:

the primary Judge correctly stated the relevant principles for determining whether a trust had come into existence;
the primary Judge correctly identified the critical question to be whether Coolbrew and Mr Swift manifested an intention at the time the transactions were entered into that Mr Swift would hold the deposit on trust for Coolbrew (if the moneys were no longer required as security for St George's loan to Crown) (Re Australian Elizabethan Theatre Trust, at 502-503);
if the primary Judge was entitled to take into account the terms of the documentation between Mr Swift and St George, those terms were inconsistent with the deposit being held by Mr Swift in trust for Coolbrew; and
the finding in the Primary Judgment (at [64]), that Coolbrew must have been aware by 12 July 2011 of the terms of the authority forms, was correct.

No error has been shown in the primary Judge's treatment of the self-serving statements made by Messrs Swift and Crane in emails nearly three years after the transactions took place. The issue that the primary Judge had to determine was whether Coolbrew and Mr Swift intended to create a trust of the moneys on deposit with Westpac in favour of Coolbrew if the moneys were no longer required as security for Westpac's Facility to Crown. That was not a matter to be determined by the subjective intentions or understanding of one of the parties, much less by a manifestation of such an intention or understanding years after the relevant events. As the primary Judge found (at [67]), Mr Swift's email was not cogent evidence of an intention to create a trust at the relevant time.
Mr Johnson was correct to submit that both Coolbrew and Mr Swift were aware of the terms of Westpac's Facility Offer to Coolbrew. Coolbrew was the "Borrower" and Mr Swift executed the document both on behalf of Coolbrew and as "Guarantor". Both were therefore aware that the expressed purpose of the new Facility of $350,000 was "Equity contribution for Crown Property development". It is not clear, however, why that description of the purpose suggests that, if and when Coolbrew drew down on the Facility to enable Messrs Swift and Crane to deposit moneys with Westpac to be held as security for the Crown Facility, the deposits would be held in trust for Coolbrew, rather than held beneficially by the depositors (subject to Westpac's security).
On the unchallenged findings of the primary Judge, Coolbrew was aware of the terms of the authority forms signed by Messrs Swift and Crane on 12 July 2011. Those forms expressly stated that Mr Swift held the deposit as "beneficial owner, free of any interest of a third party" and that he was not entitled to declare any trust over or otherwise deal with the deposit without Westpac's consent. Moreover, Mr Swift agreed with Westpac that until it received all money owed by him at any time in the future, he was not entitled to call for repayment of the deposit. As the primary Judge found (and Mr Johnson did not dispute) these terms, known to Coolbrew, were inconsistent with Coolbrew's claim that the deposit in Mr Swift's name was held in trust for it once the Crown Facility had been discharged.
It is also significant that Coolbrew adduced no evidence as to the terms of any arrangement between it and Mr Swift (other than the email referred to above). The evidence is therefore entirely consistent with Coolbrew advancing funds to Mr Swift to be held by him beneficially, and with Mr Swift simply incurring an obligation to Coolbrew to repay the funds advanced to him in due course. The primary Judge was correct to conclude that the evidence did not support a finding that Coolbrew had discharged its onus of showing that, objectively assessed, the parties intended that Mr Swift would hold the deposit on trust as alleged by Coolbrew.

Orders

The appeal must be dismissed. Coolbrew must pay the costs of the appeal of Westpac and the Commissioner.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 May 2015

At a glance

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Judgment (10 paragraphs)

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Legislation Cited (4)

Cases Cited (4)

Cited By (1)