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[2025] NSWCA 108
respondent. Appeal dismissed. The appellants were ordered to pay the respondents’ costs.
The Court held that the trust deed did not let one unit holder end the trust on their own. The tax-related clause was read collectively, alongside the deed’s unanimous termination provision. The Court also held that the oppression provisions can reach the trust-related affairs of a corporate trustee, but found that the Carrs had not established oppression. Finally, the court’s power to supervise trusts and appoint receivers did not give it a general power to terminate this trust just because the families’ relationship had broken down. The appeal was dismissed with costs.
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32 cited instruments linked from this judgment.
2,271 words · generated 06/10/2026
In 2010, David and Rosalind Carr and Ivan and Marina Ritossa established the Darbalara Property Trust to acquire and operate agricultural properties near Gundagai. Darbalara Holdings Pty Ltd was appointed as corporate trustee. The families held equal unit interests, and each couple had equal representation on the trustee company’s board. The structure therefore provided no unilateral control and no tie-breaker. A 2017 change to the arrangements maintained equal voting power, and there was no chairperson with a casting vote ([22]-[24], [43]).
The parties had considered exit arrangements from the outset. The correspondence shows that Mr Carr raised the possibility that an investor might want to exit, and an accountant recommended considering a detailed unitholders’ agreement. A questionnaire identified voluntary exits and exit strategy as matters for discussion. No such agreement was completed ([10]-[21]). The trust rules did, however, provide for unit transfers subject to a pre-emption process, and cl 9 provided for the trust to continue until ended by unanimous resolution ([59], [90]).
Relations deteriorated from 2019. Several disagreements concerned how the agricultural business should operate, including management, use of the homestead, staff and budgets. The primary judge found that these issues were resolved over time and that the board continued to function, though its meetings had become formal and sometimes unpleasant ([33]-[35], [153], [162]). The unresolved issue was whether the trust itself should end. The Carrs wanted the assets sold and the proceeds distributed; the Ritossas wanted the trust to continue ([35], [169]).
The Carrs sought that outcome through three legal routes: an asserted unilateral winding-up right under cl 2; relief for oppression under ss 232 and 233 of the Corporations Act 2001 (Cth); and appointment of a receiver, relying on the Ebrahimi decision or the court’s trust jurisdiction ([3], [47], [94]-[97], [185]-[189]). The primary judge dismissed their case. The Court of Appeal dismissed the appeal and ordered the appellants to pay the respondents’ costs ([255]-[259]).
On cl 2, the Court accepted that “The Unit Holders” could, grammatically, refer to unit holders collectively or to each holder separately. Grammar alone could not determine the issue ([51]-[54], [72]). The wider text and purpose mattered. Clause 2 concerned entitlements to the whole income and capital of the trust. No single unit holder could individually be entitled to the entirety of either. Leeming JA treated this as a strong semantic reason to understand the unit holders as a group ([71]-[72]).
The wording closely followed s 3A(3B) of the Land Tax Management Act 1956 (NSW). The Court accepted that the deed’s purpose was to satisfy the statutory criteria for fixed-trust treatment for land tax purposes. But it rejected the argument that those criteria required each unit holder to be able to end the trust unilaterally. The statutory provision could operate without creating that power ([73]-[85]). The possible consequence of the appellants’ interpretation also mattered: a very small unit holder could end the entire trust, potentially bringing a commercial venture to an end and creating tax consequences ([85]).
Clause 9 reinforced the collective reading. It stated that the trust continued until ended by unanimous resolution, and specified what happened on termination. Reading cl 2 as granting an individual power would sit poorly with that arrangement. The Court treated cl 2.3, which gave cl 2 priority in the event of inconsistency, as a priority rule rather than a reason to find an inconsistency where a harmonious reading was available ([77]-[79], [90]). It also held that s 181 of the Conveyancing Act 1919 (NSW), which provides that singular and plural can include one another, did not resolve whether the plural “Unit Holders” meant the group collectively or each holder severally ([91]-[93]).
The Court distinguished Sayden. The trust considered there had a single unit holder, so the court in that case was not addressing what would happen if one of several holders could terminate a trust against the others’ wishes. The Court stressed that judgments must be read in the context of the facts decided, and Sayden could not settle a question it had not faced ([86]-[89]).
On oppression, the Court made an important statutory point. Section 53 of the Corporations Act expressly includes trustee-related affairs within the affairs of a body corporate for the purposes of s 232. Section 232 can therefore apply to a corporate trustee’s management of trust affairs. Similarly, s 233’s power to make orders “in relation to” a company is not categorically confined to matters concerning the company in isolation from its trust ([105]-[111]). The Court nevertheless emphasised that identifying statutory power does not determine whether relief is warranted ([112]).
The conduct did not meet the oppression test. Section 232 requires both conduct within one of its specified categories and an evaluative conclusion that the conduct is contrary to members’ interests as a whole or oppressive, unfairly prejudicial or discriminatory ([99]-[104]). The operational disagreements had been resolved; the board continued to function; and the parties’ equal-voting structure meant each side could block decisions. That structure could produce deadlock, but the Court said deadlock alone was not oppression. Something more, in the form of consequences sufficient to satisfy the statutory test, was required ([117]-[124], [159]-[168]).
Mr Carr’s proposed reliance on his position as a discretionary object of the Carr Family Trust also failed. The family trust held the units, not Mr Carr personally. A discretionary object’s interest was not an ownership interest in those units. The evidence did not establish relevant distributions or other effects on Mr Carr in that capacity, and the proposed pleading amendment was late and would have caused prejudice ([127]-[141]).
The remaining route, appointment of a receiver to end the trust, failed because Ebrahimi was a decision about statutory construction. It interpreted the statutory “just and equitable” ground for winding up a company. It did not establish a general equitable rule that permits termination of a trust whenever participants’ mutual confidence has broken down ([215]-[236]). The court’s inherent jurisdiction over trusts was, in contrast, directed to supervising and preserving them. It could facilitate administration, protect assets, or address trustee inability, but it did not supply an independent power to destroy the trust relationship ([237]-[249]). Section 67 of the Supreme Court Act 1970 (NSW) did not turn receivership into a substitute for a right to terminate the trust ([246]-[250]).
Before this decision, the judgment records divergent first-instance authority on whether trust operations fall within a trustee company’s “affairs” for s 232, and whether an order under s 233 can concern trust-beneficiary interests ([105]-[110]). Leeming JA resolved those questions by applying the text of s 53 and the breadth of “in relation to the company”. He considered that earlier decisions excluding trust operations from s 232 had overlooked s 53 and should not be followed ([108]). He also agreed with the broader approach to s 233 in Melrob and Wain ([109]-[111]).
The decision clarifies that this breadth is about the existence of power, not its exercise. The court may have power to make an order affecting unit holders in a trust administered by a corporate trustee, but an applicant still has to establish the s 232 ground and justify the particular order ([112]). The judgment therefore does not establish that trust-beneficiary buy-outs are routine or that the existence of deadlock itself warrants a remedy.
On cl 2-type wording, the Court declined to treat Sayden as authority that any individual holder may terminate a multi-holder trust. The distinguishing feature was that Sayden concerned a single unit holder. The judgment also rejects the proposition that s 3A(3B) requires individual winding-up rights as a condition of fixed-trust treatment ([84]-[89]).
As to trusts and receivers, the judgment affirms the distinction between winding up a company under statute and ending trust relationships. The court’s supervisory jurisdiction can preserve and administer a trust, but the decision rejects using a receiver to create a general termination power by analogy with company law ([224]-[229], [237]-[254]). It notes that legislation does provide winding-up mechanisms for certain managed investment schemes, but the Darbalara Property Trust was not such a scheme ([225], [228]-[229]).
At [71], Leeming JA said: “All of the unit holders may collectively be presently entitled to all of the trust’s income or capital, but not individually.” In plain English, the clause dealt with the unit holders’ shared entitlement to the trust fund, not an entitlement for any one holder to take the whole fund or terminate it alone.
At [88], the Court said: “Sayden is not authority for what it did not decide.” This is a reminder that a case’s result and reasoning must be read against its facts. A ruling about one unit holder did not settle the rights of one holder among several competing holders.
At [119], Leeming JA observed that “a mere ‘deadlock’ will not be oppression under ss 232.” The statutory question is not simply whether people cannot agree. The conduct and its consequences must also meet the legal test for oppression or unfair prejudice.
At [224], the judgment explains that, if trustees cannot or will not administer a trust, the court may remove or replace them, and that the purpose is to allow the trust to continue. In plain English, trustee-management problems do not automatically justify destroying the trust.
At [239], Leeming JA summarised the point: “The inherent jurisdiction is to execute, not extinguish, the terms of the trust.” The court’s trust jurisdiction is directed to carrying the trust out, not inventing a termination power absent from the instrument or legislation.
At [252], the Court concluded there was no principled basis to create the proposed power by analogy and said that if the law were to change, the legislature was the proper institution to do so. That expresses the boundary the Court drew between interpreting existing powers and creating a new trust-termination regime.
The decision is most directly relevant where a trust deed uses wording similar to cl 2 and a party argues that “the unit holders” includes each unit holder acting alone. Relevant features include the deed’s other distribution and termination clauses, whether it provides for unanimous termination, the purpose for which the disputed wording was included, and whether there is more than one holder whose interests may diverge ([71]-[93]).
It is also relevant where a corporate trustee is alleged to have acted oppressively in managing trust assets. Section 53’s definition means the trust-management context cannot be excluded categorically from s 232. But the claimant must still identify conduct and establish the evaluative statutory ground. A 50/50 structure, unpleasant meetings, personal disagreement or unresolved voting alone will not necessarily meet that test ([105]-[124]).
The standing reasoning may matter where a company member claims oppression based on an indirect connection to units held by a discretionary trust. The Court focused on the legal structure and the claimant’s actual position under that trust, rather than treating the discretionary object as beneficial owner of the units ([135]-[139]).
Finally, the decision concerns attempts to use an Ebrahimi analogy or a receiver to terminate a trust because a relationship has broken down. Its reasoning distinguishes that situation from receivership used to preserve assets, assist administration, or support some independently established right or remedy ([237]-[249]).
The judgment was delivered on 23 May 2025. The supplied judgment contains no decisions issued after that date applying or distinguishing it. It is therefore not possible, on the material provided, to describe how later courts have treated this precedent.
The judgment itself discusses earlier authorities. It approves Melrob’s reading of s 53 and the scope of s 232, and approves the broader reading of s 233 expressed in Wain ([107]-[112]). It distinguishes Sayden because that case concerned a sole unit holder ([86]-[89]). It distinguishes Basecove on the basis that the trust there faced serious financial difficulties and jeopardy that were not found in the Darbalara case ([197], [248]). It also treats Baba v Sheehan and Re Austec Wagga Wagga as consistent with the principle that the court does not generally have power to wind up a trust in the way it may wind up a company ([241]-[242], [247]).
The judgment does not decide every possible use of s 233 in a trust setting. It holds that the section can reach trustee-company affairs and may support an order concerning beneficiaries, but leaves the appropriateness and frequency of such orders to be decided in particular cases ([111]-[112]).
It also does not determine when deadlock, combined with additional consequences, could satisfy s 232(d) or (e). Its conclusion is that deadlock alone is insufficient and that the facts before it did not establish oppression. A materially different factual record could raise different issues, but the judgment does not specify a complete test for every such situation ([119]-[124]).
The Court did not determine the circumstances, if any, in which a receiver may be appointed over trust assets following the winding up of a corporate trustee. The appellants had not sought to wind up Darbalara Holdings, so the issue was unnecessary to decide ([207]-[209]).
Nor did the Court decide whether different trust terms, an express revocation power, a statutory winding-up regime, or a properly established partnership relationship could produce a different result. It noted that the trust instrument and the parties’ chosen structure mattered, and that statutory winding-up provisions apply to some categories of trust, including managed investment schemes ([225], [228]-[229], [253]).
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: David & Ros Carr Holdings Pty Ltd v Ritossa [2025] NSWCA 108
Hearing dates: 10, 11 April 2025
Decision date: 23 May 2025
Before: Leeming JA at [1];
Stern JA at [258];
Griffiths AJA at [259]
Decision: 1. Appeal dismissed.
2. Appellants to pay the respondents’ costs.
Catchwords: EQUITY – trusts and trustees – two couples established unit trust for purpose of making property investments – equal division of units – equal board representation on corporate trustee – equal shareholdings in trustee – no provision to resolve deadlocks – trust deed contained clause based on s 3A(3B) of Land Tax Management Act 1956 (NSW) deeming it to be a fixed trust – clause provided that unit holders may require the trustee to wind up the trust and distribute the trust property – whether individual unit holder entitled to wind up trust
PRECEDENT – appellate decision on similar clause in trust deed, in unit trust where one person held all units, construed to entitled unit holder to wind up trust – whether earlier decision authority for clause authorising one of a number of unit holders individually to wind up trust – decisions only authority for what was decided – Sayden Pty Ltd v Chief Commissioner of State Revenue (2013) 83 NSWLR 700; [2013] NSWCA 111 distinguished
CORPORATIONS – members’ rights and remedies – oppression – construction and background to Corporations Act 2001 (Cth), s 232 and 233 – whether applicable to members of trustee companies – whether member’s capacity as person with indirect interest in trust assets relevant – trustee conducted agricultural business – whether ongoing disputes concerning management of business amounted to oppression – whether deadlock as to whether trust should be wound up amounted to oppression
RECEIVERS – so-called “principle in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360” relied on to appoint receiver to wind up trust – nature of principle – whether principle of equity or statutory construction – nature of receivership – whether remedy interlocutory or final – differences between companies and trusts – court’s function to preserve trusts – equitable doctrines directed to preservation of trusts
Legislation Cited: Companies Act 1862 (UK), s 79
Companies Act 1948 (UK), s 222
Conveyancing Act 1919 (NSW), ss 26, 66G, 181
Corporations Act 2001 (Cth), ss 6, 53, 58AA, 201K, 232, 233, 234, 461, 601GA, 601ND
Corporations Law 1990 (Cth), ss 246AA, 260
Income Tax Assessment Act 1936 (Cth), ss 95A, 95B, 97
Income Tax Assessment Act 1997 (Cth)
Joint Stock Companies Winding Up Act 1848 (UK)
Judicature Act 1873 (UK), s 25
Land Tax Act 1956 (NSW)
Land Tax Management Act 1956 (NSW), s 3A
Partnership Act 1890 (UK)
Partnership Act 1892 (NSW), s 35(f)
Supreme Court Act 1970 (NSW), ss 23, 66, 67
Cases Cited: Accurate Financial Consultants Pty Ltd v Koko-Black Pty Ltd [2008] VSCA 86
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170; [1981] HCA 39
Arakella Pty Ltd v Paton (2004) 60 NSWLR 334; [2004] NSWSC 13
Arinson Pty Ltd v City of Canada Bay Council [2015] NSWCA 199
Baba v Sheehan [2019] NSWSC 1281
Baba v Sheehan [2021] NSWCA 58
Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11
Barron v Potter [1914] 1 Ch 895
Basecove Pty Ltd v Dolores Lavin Management Ltd [2009] NSWSC 1315
Beck v Henley [2014] NSWCA 201
Biogen Inc v Medeva plc [1997] RPC 1; [1996] UKHL 18
Bose v Bose [2013] NSWSC 327
Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95; 66 ACSR 359
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Capelli v Shepard (2010) 29 VR 242; [2010] VSCA 2
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
Carr v Carr [2022] NSWSC 166; 21 ASTLR 511
Chen v Ng (British Virgin Islands) [2017] UKPC 27
Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184; 106 ATR 151
Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11
Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960
Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286
Commissioner of Taxation v Bamford; Bamford v Commissioner of Taxation (2010) 240 CLR 481; [2010] HCA 10
Cowan v Scargill [1985] Ch 270
CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53
Davis v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 279 CLR 1; [2023] HCA 10
Delehunt v Carmody (1986) 161 CLR 464; [1986] HCA 67
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
Equititrust Ltd v Franks [2009] NSWCA 128; 258 ALR 388
Equity Trust (Jersey) Ltd v Halabi [2023] AC 877; [2022] UKPC 36
Esso Petroleum Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67
Federation Insurance Ltd v Wasson (1987) 163 CLR 303; [1987] HCA 34
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; 28 ACSR 688
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; 37 ACSR 672
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Garnham v PC [2012] JRC 050
Gartside v Inland Revenue Commissioners [1968] AC 553
Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133
Harris Health Care Pty Ltd (receivers and managers appointed) (in liq) v Hayes [2024] NSWCA 301
Hill v Zuda Pty Ltd (2022) 275 CLR 24; [2022] HCA 21
Holmes v Millage [1893] 1 QB 551
Horwath Corporate Pty Ltd v Huie [1999] NSWSC 583
House v The King (1936) 55 CLR 499; [1936] HCA 40
Howard-Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
In re Baden’s Deed Trusts [1971] AC 424
In re Hazeldine’s Trusts [1908] 1 Ch 34
In the Estate of William Just deceased (No 1) (1973) 7 SASR 508
In the matter of Cupit & Aboud as trustees of the Australian Trust [2020] NSWSC 1715
Jabbcorp (NSW) Pty Ltd v Strathfield Golf Club [2021] NSWCA 154
Jaken Properties Australia Pty Ltd v Naaman (2023) 112 NSWLR 318; [2023] NSWCA 214
JBS Australia Pty Ltd v SafeWork NSW [2024] NSWCCA 209
Kay v KRM (Vic) Pty Ltd; Classic Bet (NSW) Pty Ltd v Kay [2020] NSWCA 92
Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606
Knox v Nile [2022] NSWSC 195; 160 ACSR 357
Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344
Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27
Massey v Wales; Massey v Cooney (2003) 57 NSWLR 718; [2003] NSWCA 212
Melrob Investments Pty Ltd v Blong Ume Nominees Pty Ltd (2022) 141 SASR 1; [2022] SASCA 29
Menz v Wagga Wagga Show Society Inc (2020) 103 NSWLR 103; [2020] NSWCA 65
Miller v Cameron (1936) 54 CLR 572; [1936] HCA 13
Millsave Holdings Pty Ltd v Connective Group Pty Ltd (2023) 75 VR 239; [2023] VSCA 326
Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30
Mir v Mir [2023] NSWSC 408
MSP Nominees Pty Ltd v Commissioner of Stamps (SA) (1999) 198 CLR 494; [1999] HCA 51
Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1
Owners of Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404; [1994] HCA 54
Palmer v Ayres (2017) 259 CLR 478; [2014] HCA 5
Pini v Roncoroni [1892] 1 Ch 633
PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301; [1995] HCA 36
R v Khazaal (2012) 246 CLR 601; [2012] HCA 26
Re Admiral Cove Pty Ltd [2023] VSC 537
Re Austec Wagga Wagga Pty Ltd (in liq) [2018] NSWSC 1476
Re Gaydon [2001] NSWSC 473
Re Junior Academy ELC Pty Ltd (No 3) [2019] VSC 161
Re Munja Bakehouse Pty Ltd [2024] NSWSC 6; 384 FLR 176
Re Stacks Managed Investments Ltd [2005] NSWSC 753; (2005) 54 ACSR 466
Rosenbaum v Baidarman (No 2) [2021] NSWSC 574
Saunders v Vautier (1841) Cr & Ph 240; 41 ER 482
Sayden Pty Ltd v Chief Commissioner of State Revenue (2013) 83 NSWLR 700; [2013] NSWCA 111
Seven Network Ltd v News Ltd [2007] FCA 1062
Sky v Body (1970) 92 WN (NSW) 934
Sons of Gwalia v Margaretic Pty Ltd (2007) 231 CLR 160; [2007] HCA 1
Templeton v Leviathan Pty Ltd (1921) 30 CLR 34; [1921] HCA 55
The Owners - Strata Plan 87003 v Raysons Constructions Pty Ltd [2025] NSWSC 66
Thomas v Williams (No 2) (1883) 24 Ch D 558
Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; 288 ALR 310
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; [1988] HCA 44
Trust Company Ltd v Noosa Venture 1 Pty Ltd [2010] NSWSC 1334; 80 ACSR 485
Trustees of the Sydney Grammar School v Winch (2013) 83 NSWLR 80; [2013] NSWCA 37
Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168
Van Sandau v Moore (1826) 1 Russ 441; 38 ER 171
Vanderstock v Victoria [2023] HCA 30; 98 ALJR 208
Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282
Wain v Drapac [2012] VSC 156
Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12
(1807) 15 Ves 10; 33 ER 658
Waters v Taylor (1813) 2 V & B 299; 35 ER 333
Wayde v NSW Rugby League Ltd (1985) 180 CLR 459; [1985] HCA 68
Wharton v Masterman [1895] AC 186
White v Tyndall (1888) 13 AC 263
Whitton v ACN 003 266 886 Pty Ltd (Controller Appointed) (in liq) (1996) 42 NSWLR 123
Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666
Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300; 35 ACSR 34
Zong v Lin [2022] NSWCA 136
Texts Cited: N Angelakis, “The Intersection of Deadlock and Oppression: A ‘No-fault Divorce’ for the Members of Closely Held Corporations” (2020) 37 C&SLJ 512
A Black, Development of Corporations Law (paper presented to Francis Forbes Society for Australian Legal History, 26 October 2016)
F Callaway, The Just and Equitable Ground, (Law Book Company, 1978)
D Clarry, The Supervisory Jurisdiction over Trust Administration (Oxford University Press, 2018)
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N D’Angelo, Transacting with Trusts and Trustees (LexisNexis 2020)
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P Herzfeld and T Prince, Interpretation (3rd ed, Thomson Reuters, 2024)
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L Tucker et al, Lewin on Trusts (Sweet & Maxwell, 20th ed, 2020)
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Category: Principal judgment
Parties: David & Ros Carr Holdings Pty Ltd (First Appellant)
David Leslie Carr (Second Appellant)
Rosalind Harriet Carr (Third Appellant)
Ivan Ritossa (First Respondent)
Marina Ritossa (Second Respondent)
Darbalara Holdings Pty Ltd (Third Respondent)
Representation: Counsel:
C Birch SC, T Di Francesco, S Blackman (Appellants)
P M Wood, T E O’Brien (Respondents)
Solicitors:
Long Saad Woodbridge Lawyers (Appellants)
Arnold Bloch Leibler (Respondents)
File Number(s): 2024/356404
Publication restriction: Nil
[This headnote is not to be read as part of the judgment]
In 2010, Mr and Ms Carr and Mr and Ms Ritossa constituted Darbalara Holdings Pty Ltd as the corporate trustee of a unit trust – the Darbalara Property Trust – for the management of farmland near Gundagai, NSW. The two families are equal unit holders. Each of the Carrs and the Ritossas are directors of Darbalara Holdings. Clause 2 of the trust deed provided that “The Unit Holders are presently entitled to the Income [and Capital] of the Trust” and “may require the Trustee to wind up the Trust and distribute the Trust property or the net proceeds of the Trust property”. In 2019, disagreements emerged between the Carrs and the Ritossas, and they had a falling out in a meeting in December 2019. The Carrs expressed an intention to terminate the trust relationship; the Ritossas wished to continue their investment.
In 2020, the Carrs commenced proceedings in the Equity Division seeking the winding up of the trust relationship on the basis that (a) clause 2 of the trust deed allowed a unit holder to unilaterally call for a winding up, (b) the corporate trustee’s conduct was oppressive so as to justify orders under s 233 of the Corporations Act 2001 (Cth), and (c) a receiver should be appointed to wind up the trust given jeopardy to the trust assets.
The primary judge held that cl 2 of the trust deed did not entitle a unit holder to unilaterally call for a winding up. The primary judge found that the evidence did not establish deadlock. Even if there was deadlock, that would not be a sufficient basis for a realisation of the trust assets under s 233. Because the primary judge found that the assets were being adequately managed in monthly board meetings between the directors, there was no jeopardy to the trust assets justifying the appointment of a receiver to liquidate the trust assets and make final distributions to unit holders.
On appeal, the appellants submitted that the primary judge erred in failing to find that (a) cl 2 entitled each unit holder unilaterally to bring the trust to an end (Ground 1), (b) there was a series of deadlocks in the management of Darbalara Holdings Pty Ltd such that the conduct of the corporate trustee, including its failure to allow a redemption of units when requested, was oppressive to the Carrs and contrary to the interests of members as a whole (Grounds 2-8), and (c) a receiver could be appointed, either under s 67 of the Supreme Court Act 1970 (NSW) or in the Court’s inherent jurisdiction over trusts, to “wind up” the trust where there was an irretrievable breakdown in mutual trust and confidence between unit holders who were “quasi-partners” (Ground 9).
The Court (Leeming JA, Stern JA and Griffiths AJA agreeing) held, dismissing the appeal:
As to Ground 1:
Sayden Pty Ltd v Chief Commissioner of State Revenue (2013) 83 NSWLR 700; [2013] NSWCA 111, distinguished.
CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53; Davis v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 279 CLR 1; [2023] HCA 10; Vanderstock v Victoria [2023] HCA 30; 98 ALJR 208, considered.
As to Grounds 2-8:
Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; Trust Company Ltd v Noosa Venture 1 Pty Ltd [2010] NSWSC 1334, disapproved.
Melrob Investments Pty Ltd v Blong Ume Nominees Pty Ltd [2022] SASCA 29; Wain v Drapac [2012] VSC 156, approved.
As to Ground 9:
Mir v Mir [2023] NSWSC 408; Baba v Sheehan [2019] NSWSC 1281; Re Austec Wagga Wagga Pty Ltd (in liq) [2018] NSWSC 1476, approved.
Leeming JA - paragraph 1
Background - paragraph 6
The decision to acquire The Junction - paragraph 7
Consideration of exit rights and the choice of a unit trust - paragraph 10
The establishment of the unit trust and further consideration of exit rights - paragraph 16
The way in which the investments were held - paragraph 22
The acquisition of Bogolara - paragraph 26
The Carrs acquire Gilla Willa - paragraph 28
SouthernAg becomes manager of the properties - paragraph 29
The financial position of the Darbalara Property Trust - paragraph 30
The disputes between the parties - paragraph 33
The legal consequences of the structures established by the Carrs and the Ritossas - paragraph 36
Ground 1 – the construction of cl 2 - paragraph 47
Primary judge’s construction - paragraph 55
Appellants’ submissions - paragraph 63
Respondents’ submissions - paragraph 64
Cl 2 of the Trust Rules - paragraph 66
Section 3A of the Land Tax Management Act - paragraph 80
Sayden - paragraph 86
Clause 9 of the Trust Rules - paragraph 90
Section 181 of the Conveyancing Act - paragraph 91
Grounds 2-8 – oppression - paragraph 94
Resolving two issues where there has been a divergence of authority - paragraph 105
The evaluative judgment in s 232(d) and (e) - paragraph 113
The grounds going to oppression - paragraph 125
Grounds 4 and 5 – the pleading which went to trial - paragraph 127
Grounds 6, 7 and 8 – particular findings of fact - paragraph 142
Ground 2 – the failure to find oppression based on the findings made - paragraph 159
Ground 3 – further findings the primary judge failed to make - paragraph 178
Ground 9: The application of the doctrine referred to in Ebrahimi v Westbourne Galleries Ltd to trusts - paragraph 185
Submissions at trial - paragraph 188
Reasons of the primary judge - paragraph 193
Submissions in this Court - paragraph 200
Consideration - paragraph 213
(a) the Ebrahimi “doctrine” or “principle” - paragraph 215
(b) the inherent jurisdiction - paragraph 237
Conclusion and orders - paragraph 255
Stern JA - paragraph 258
Griffiths AJA - paragraph 259
LEEMING JA: The second and third appellants, Mr David Carr and Ms Rosalind Carr, and their company, the first appellant David & Ros Carr Holdings Pty Ltd (DRCH), appeal from the dismissal of proceedings brought by them and heard over eight days in the Equity Division of this Court. The appeal is opposed by Mr Ivan Ritossa and Ms Marina Ritossa, the first and second respondents. The third respondent, Darbalara Holdings Pty Ltd, is the trustee of a unit trust known as the “Darbalara Property Trust”, the units in which were originally issued to the Carrs and the Ritossas in equal shares. Subsequently, the Carrs and the Ritossas have continued, directly or indirectly, each to own or control 50% of the units. All four of the Carrs and the Ritossas are directors of Darbalara, and Mr Carr and Mr Ritossa each own one of its two ordinary shares.
In 2010, the Carrs and the Ritossas agreed to acquire agricultural property through the Darbalara Property Trust, which was established for that purpose. The first major purchase was a property called “The Junction” near Gundagai, to which was added in 2017 “Bogolara”, a property located between Gundagai and Yass around an hour’s drive away. Substantial numbers of cattle and sheep graze on both properties. Darbalara is a typical example of the trustee of a trading trust, that actively conducts commercial operations with a view to achieving a profit; this is common in Australia and New Zealand but much less so in the United Kingdom: Equity Trust *(*Jersey) Ltd v Halabi [2023] AC 877; [2022] UKPC 36 at [95]. Since around 2019, the Carrs and the Ritossas have disagreed on a number of issues. Many concerned the operations of the agricultural business, and were eventually resolved. However, the couples are at an impasse concerning the future of their investment. In short, the Carrs would like to realise their one half interest in the properties. There is a mechanism under the trust deed for this to occur (broadly speaking, one unit holder cannot sell without first offering the units to the others at the proposed price), but the Carrs have not invoked it, presumably because they have located no purchaser of their one half interest who is prepared to pay what they say is one half of the value of the net assets of the trust. Hence they seek orders which will have the effect of “winding up” the trust, which is to say, selling the trust assets, discharging trust liabilities and distributing the surplus to the unit holders (as will be seen, this description is somewhat elliptic).
This appeal advances three bases on which, so it is said, the trust should be wound up. They are (1) the construction of cl 2 of the Rules of the Darbalara Property Trust, (2) statutory oppression contrary to s 232(d) or (e) of the Corporations Act 2001 (Cth), and (3) the appointment of a receiver to the assets of the trust on the basis of, or by analogy with, the principles in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360.
I cannot afford them by myself so my thought is to try and get a couple of like minded thinking people to pool together and buy them. Not sure of how to put that agreement together but it cannot be that hard. We would get the properties professionally run by Growth Farms (I told you about them previously) they run my farm now. Hold them for 5yrs plus and see what happens! I know we spoke roughly about this previously so if you are potentially interested then this is genuinely a good opportunity to look at in my opinion…
In April 2010, Mr Carr sought and obtained advice from his accountants about structures through which property could be held. He provided their advice to Mr Ritossa. The advice included a document headed “Comparison of structures” which compared various features of a private company, discretionary trust, unit trust and partnership.
On 7 May 2010, the vendor sent Mr Carr a draft contract of sale, for a price of $7,250,000, on the basis that contracts needed to be exchanged by 12 May so that the auction already scheduled could be cancelled. Events over the next five days proceeded rapidly, and were uncontroversially summarised by the primary judge at [22]-[31]. Notwithstanding the speed, a deal of attention was given to the possibility that one investor might wish unilaterally to exit.
We are intending to be long term holders and to extract an income from the farming business, however should either of us need to exit the deal then please consider this for the structure.
Acquire the property through a unit trust which will also run the business. Unit trusts are the most common structure for joint property investment by separate parties.
Normally the unit trust would be established with a company as trustee
● This would enable access to the CGT discount
● It may allow access to small business CGT concessions on the future sale of the property (although full benefit of concessions may not be able to be achieved).
● Interest should be deductible to the unitholder against the business income flowing from the trust, and losses can be carried forward or offset against other income.
● If not using debt, or if debt paid down in future, it would allow flow through of all income to enable you or Ivan to utilise losses.
● It would allow another party to come in in the future, and would also allow units to be transferred between the parties without requiring the title to be transferred (although full stamp duty rates may still be payable).
We will call [the Ritossas’ accountant] to have an initial conversation and suggest that a telephone conference with all parties (ie. the Ritossas, yourselves, us and the solicitor) is absolutely essential to gather all the necessary information, determine everyone’s requirements, discuss various “exit” outcomes etc etc to then determine the most appropriate Ownership and Operating structure.
The contract is agreed, the deposit has been paid and the finance is sorted. So we just need resolution around stamp duty and the most efficient structure for the deal for Ros and I [sic] which works for Ivan and Marina.
Briefly, the choice of Corporate Unit Trust vs Personal ownership & operation of the farm will depend on a few things:
● Is the farm likely to be profitable?
● How likely you or Ivan will return to Australia? (you will not be able to deduct losses against Australian salaries anymore due to new rules)
● Individual ownership in land stronger legal title in the event of dispute
● Individual ownership cheaper to establish & operate but far more complex if another party introduced down the track
● Conversely, Corporate U/T more expensive to establish & operate but much easier to introduce new parties down the track…so, how likely will it be that you introduce another party?
● Corporate U/T more flexible in relation to distribution of profits
● One entity owning & operating the farm is simpler
I am leaning towards Corporate U/T (which Andrew agrees with) however you will need a VERY STRONG unitholders agreement to very thoroughly deal with all issues in the event of a dispute so if you go down this track, you should employ a very good lawyer to assist in this regard.
Mr Damian Scroope of Sydney Business Lawyers was retained to draft a trust deed. The deed was executed on the morning of 12 May 2010, and later that day contracts were exchanged.
At 2.49pm on the afternoon of 12 May 2010, Mr Scroope wrote to the accountants for the Carrs and the Ritossas. His email included the following:
Unit holders agreement
The unit trust has been set up without consideration of the many issues that relate to equal co-ownership of an asset (albeit through a trust). I feel that it is important that David and Ian consider those issues and whether or not they would like a more detailed unit holders agreement (akin to a shareholders or partnership agreement).
We are able to assist you with the preparation of such an agreement if it is considered necessary and David and Ian don’t have lawyers that they would use for that purpose. At the very least, if David and Ivan don’t want to use such an agreement, it is important that they make an informed decision about the problems that can arise without the safety net of an agreement.
Attached is our questionnaire that we use to take instructions for the preparation of a unitholders agreement. Whether we are asked to prepare the agreement or not, the questionnaire may be a useful reference point for you in your discussions with David and Ivan about whether or not they should have such an agreement. It is a one size fits all document so some of it will most likely not apply to David and Ivan’s situation.
Exit strategy - Some would say the most important thing to get right when entering into a unit holders agreement is the “exit strategy”. …
Voluntary exits – Can a unitholder simply exit the trust on the basis that the other unitholders have to buy out their interest? If so, on what terms?
On 14 May 2010 there was a further exchange between Mr Carr and his accountant concerning a unit holders agreement. She forwarded to Mr Carr the email and questionnaire which had been sent to her by Mr Scroope and said “The unit holders agreement should be put in place now, Damien Scroope can assist you with this”.
The issue resurfaced more than a year later, when the accountant reminded Mr Carr of the earlier advice. She re-sent the questionnaire to Mr Carr. He forwarded it to Mr Ritossa by email on 16 October 2011, saying:
Please also see the Unit Holders Agreement recommended by Sydney Business Lawyers for us. I think this makes sense in principal [sic] particularly if we expand the business. Are you guys OK with this please? If so then we should both fill it in.
Darbalara Holdings was appointed as trustee of Darbalara Property Trust on 16 November 2010, replacing the initial trustee (which had only been intended to act temporarily in that role).
At all material times, Mr Carr and Mr Ritossa have each owned one of the two issued shares of Darbalara Holdings, and at all times they have been two of the four directors of that company. The other directors have been, since 12 May 2015, Ms Carr and Ms Ritossa (in the years prior to 12 May 2015, Mr Carr’s father was a director instead of Ms Carr). At all times, the board of Darbalara Holdings has comprised four directors, with two from each family.
Initially, the Carrs and the Ritossas each held 10 units of the Darbalara Property Trust. In order to purchase The Junction, further units were issued to the Carrs and the Ritossas such that both sides became owners of 3,827,149 units. In the case of the Carrs, the units were owned by the Carrs as trustees of the Carr Family Trust, and later they were transferred to DRCH when it became trustee of that trust. In the case of the Ritossas, 106 units were owned by the Ritossas jointly, and the remaining 3,827,043 units were owned by Mr Ritossa in his own name.
In December 2013, Mr and Ms Carr returned to live in Australia after Mr Carr retired from banking. The primary judge found that from this time Mr Carr took a more immediate role in the management of his family farm, Warralong. In late 2015, Mr Carr proposed to Mr Ritossa that Carr Agricultural Capital Management Pty Ltd (CACM), a company established in June 2015 and owned and controlled by Mr and Ms Carr, take over the management of the Darbalara Property Trust’s properties, including The Junction. Mr Ritossa agreed. CACM took over in December 2015 and was paid a monthly flat fee. There was no formal written agreement between Darbalara Holdings and CACM.
On 16 December 2016, Darbalara Holdings entered into a contract to purchase another rural property, “Bogolara” for $5.7 million. Mr Ritossa lent Darbalara Holdings some $6.8 million for the purchase of the land, together with stamp duty, plant and livestock, financed from funds borrowed by him from Standard Chartered Bank and documented by a loan agreement executed by Mr Ritossa and Darbalara Holdings in August 2017. The purchase settled in February 2017. CACM managed Bogolara on the same basis as The Junction.
Darbalara Holdings’ loan from Mr Ritossa was refinanced in September 2018. Darbalara Holdings, as trustee, entered into a loan facility agreement with ANZ Bank on 3 August 2018 for loans up to a maximum amount of $4.9 million. The security comprised (a) first registered mortgages over The Junction and Bogolara; (b) a general security agreement granting a security interest over the present and after acquired property of the trust; and (c) a subordination deed which gave priority to ANZ over all amounts owed to the unit holders. In early September 2018, $3.8 million was advanced by ANZ under this facility to Darbalara Holdings and each unit holder made a loan of $1,676,233 to enable Mr Ritossa’s loan to be repaid and provide further funding for the business. The unit holder loans were not formalised in a loan agreement and are interest-free.
In 2014, 2016 and 2017 distributions were made to unit holders: (a) $180,000 on 21 April 2014 ($90,000 to each family); (b) $500,000 on 15 June 2016 ($250,00 to each family); and (c) $600,000 on around 26 March 2017 ($300,000 to each family). Although Mr Carr and Mr Ritossa referred in some email correspondence to these payments as “dividends”, that was loose language. The distributions were recorded in the trust’s financial statements as a reduction in each unit holder’s loan account.
From around mid-2017 until mid-2020 The Junction and Bogolara were affected by drought. The profit and loss statement for the unit trust for the year ended 30 June 2020 showed a net operating profit of $695,396, substantially attributable to some $2,313,080 in sales of livestock. But there had been accumulated losses of some $1,114,293 in previous years, against which that profit was offset. No distributions were made in those years.
The balance sheet for the unit trust for the year ended 30 June 2020 showed assets of just over $19 million, of which more than $15 million was The Junction, Bogolara and a homestead located on one of the properties. Livestock on hand were valued at less than $300,000 and there was about $950,000 cash at bank. There were liabilities of $7,994,451 to ANZ and $1,870,733 to each of the Ritossas and the Carr Family Trust, leaving net assets of just over $7 million. However, it is necessary to bear in mind that the properties were recorded at their acquisition price; other evidence which will be mentioned below suggests the properties had appreciated in value by the time of the trial.
There was a dramatic falling-out between the families on 7 December 2019. All four of Mr and Ms Carr and Mr and Ms Ritossa gave evidence about a meeting at breakfast. The primary judge said at [83] that it was not necessary to determine whose account, if any, was most reliable. It was common ground that there was a heated argument, during which Mr Ritossa used coarse language and walked out of the room. Thereafter the Carrs stated they wished to sell.
As will be seen below, there were various other disputes (concerning the appointment of a manager, the time when that manager and his family could live in accommodation which was also a trust asset and various other operational issues) which were contentious but which were eventually resolved. This is most apparent because from around 28 February 2020**,** directors’ meetings were recorded. Hundreds of pages of transcripts were tendered at trial. Unsurprisingly, both sides having retained lawyers and knowing that they were parties to litigation in which what was said might be tendered, the transcripts disclose at least the semblance of reasonableness and cooperation.
The issue on which there was no resolution was whether the trust should be wound up.
First, the Carrs implemented their economic aim of co-investing with the Ritossas not as joint owners, not as partners, not as shareholders in a company which owned the real property, but through a structure which distanced them from the real property in which they were investing. The Junction and Bogolara were held as assets of a unit trust, with the units of the trust being held as assets of a discretionary family trust. That evidently was done advisedly. It may have had the consequence that investment income, if any were generated, could be distributed readily to persons and entities who were discretionary objects of the Carr Family Trust in a tax effective way.
Secondly, the differences in legal structures matter, as they do in every case. The fact that the Carrs and the Ritossas sometimes styled themselves as “partners” and sometimes referred to “dividends” does not mean that their relationship ceased to be governed by the formal documents executed by them, on the basis of which accounts and (it may be presumed) taxation returns were prepared. The question of whether the Carrs can “exit” the investment cannot be meaningfully addressed without close consideration of the particular facts and circumstances of the case, and in particular, without consideration of the structure chosen to implement the investment: see for example Lumbers v W Cook Builders Pty Ltd *(*in liq) (2008) 232 CLR 635; [2008] HCA 27 at [126]-[127].
Thirdly, the fact that the assets of the Darbalara Trust were deployed commercially, with a view to achieving a profit, does not alter the position. Parties may combine as partners or unincorporated joint venturers or through a company or through a trust in order to operate a business. The fact that in all cases the goal is to operate a commercial enterprise does not detract from the proposition that the different structures carry with them quite different ways in which the parties’ interests may be separated.
Fourthly, it was not suggested that the documents did not bear their ordinary legal meaning. There was no suggestion that there was a sham, and in truth there was a partnership between the Carrs and the Ritossas. In light of the second and third points mentioned above, that was the only proper approach to take. I mention the point because some of the Carrs’ submissions, which deployed the language of partnership and indeed “winding up”, might distract from the relevant question, which is the circumstances in which the trustee of a trading trust may be compelled to cease its operations, discharge its debts, realise its assets and distribute them to its unit holders, with all personal and proprietary rights coming to an end. As will be seen when addressing ground 9, the appellants disavowed any suggestion that, contrary to the documents executed by them and on the basis of which their financial and taxation affairs had been conducted for many years, they were partners or owed each other fiduciary duties.
In Gartside, Lord Wilberforce explained the nature of a discretionary object’s interest:
“No doubt in a certain sense a beneficiary under a discretionary trust has an ‘interest’: the nature of it may, sufficiently for the purpose, be spelt out by saying that he has a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity. Certainly that is so, and when it is said that he has a right to have the trustees exercise their discretion ‘fairly’ or ‘reasonably’ or ‘properly’ that indicates clearly enough that some objective consideration (not stated explicitly in declaring the discretionary trust, but latent in it) must be applied by the trustees and that the right is more than a mere spes. But that does not mean that he has an interest which is capable of being taxed by reference to its extent in the trust fund’s income: it may be a right, with some degree of concreteness or solidity, one which attracts the protection of a court of equity, yet it may still lack the necessary quality of definable extent which must exist before it can be taxed.”
This passage was quoted with approval in Kennon v Spry.
Sixthly, one of the central differences between the various modes by which the beneficial interest in property may be co-owned is the availability, or non-availability, of individual co-owners to bring to an end the legal relations between them. For many centuries, equity has sought to uphold trusts, and, as will be seen below when dealing with ground 9, many of its doctrines are directed to ensuring that trusts will survive.
Indeed, there is reason to think that this informed some of the choices made by the Carrs at times prior to the breakdown of friendly relations with the Ritossas. On 21 August 2017, a circular resolution was passed to ensure that there would always be equality of voting power at the board level between the Carrs and Ritossas, including that in the event one director died, his or her spouse would receive an additional vote to ensure parity between the families. They also agreed that there would be no chairperson with a casting vote at board meetings. The primary judge stated at [46] that those decisions “were based on legal advice received on 20 January 2017 driven by a concern raised by the Ritossas that the Ritossa Loan, which was unsecured, exposed the Ritossas to increased risk if DPT’s business failed”. The finding was uncontroversial so far as the appeal was concerned. The legal advice does not appear to have been included in the appeal books. However, an email from Mr Ritossa to Mr Carr dated 14 February 2017 commenced:
Good news on getting the Constitution of the Trust changed. This now protected both of us in case of death of one – which is what I think we both wanted for the voting rights etc on the Trust to always be equal.
Finally, it is essential to bear steadily in mind the difference between the process of winding up an investment – ie selling the assets, discharging all liabilities and distributing any surplus to the investors – from the sale of a co-investor’s interest in the investment. The former destroys the structure, while under the latter the structure is preserved.
The difference matters because it impacts value. A co-owner who lacks control is apt to find that the value of an investment is less than that co-owner’s ratable proportion of the net realisable assets. That is because the market accords a value to control. Thus it is trite that a minority shareholder in a private company will typically only be able to sell that parcel of shares at a discount to the proportion of the net value of the company’s assets. It is also trite that the sale of a majority interest in shares in a private company will often attract a “control premium”.
In light of those principles applicable to the Darbalara Property Trust, it is convenient to address the construction of cl 2 of the Trust Rules.
By ground 1 of their Notice of Appeal, the appellants challenge the primary judge’s rejection of their contention that cl 2 of the Trust Rules entitles any individual unit holder to require the trustee to wind up the trust. They add that if their construction of cl 2 is correct, the respondents’ refusal to permit a winding up contrary to their entitlements under the trust deed is a further matter giving rise to oppression and thus enlivening the range of statutory remedies in the Corporations Act 2001 (Cth).
The trust deed recited that the Carrs and the Ritossas had each agreed to take up 10 units for an issue price of $10, and then stated in cl 1.1 that a company whose sole director was the Carrs’ accountant “must hold all the property acquired by it in its capacity as trustee of the Trust created by this deed (Fund) on the trusts set out in this Deed and in the attached rules”. Clause 1.2 provided that “The Fund must be held upon trust for the Unit Holders absolutely in proportion to the number of units held by them”. Aside from naming the trust and stating that “The attached rules have effect as part of this deed”, that was the entirety of the deed. No point was taken that the deed was ineffective to create a trust, notwithstanding that the deed on its face was wholly executory.
Clause 2 of the “Trust Rules” – which were deemed by the deed to have effect as if they were part of the deed – provided as follows:
2. Present entitlement – relevant criteria as a fixed trust
2.1 The Unit Holders are:
(a) presently entitled to the Income of the Trust, subject only to payment of proper expenses by and of the Trustee relating to the administration of the Trust;
(b) presently entitled to the capital of the Trust and may require the Trustee to wind up the Trust and distribute the Trust property or the net proceeds of the Trust property.
2.2 The entitlements referred to in sub clause 1 of this clause cannot be removed, restricted or otherwise affected by the exercise of any discretion or by failure to exercise any discretion, conferred on a person by the Trust Deed.
2.3 Sub clauses 1 and 2 of this clause operate despite anything else that is contrary to them in this deed.
“Income” was defined in cl 1.2 to mean “the income of the Trust as determined in the Trustee’s absolute discretion”, but failing such determination meant assessable income less all deductions allowed in accordance with the Income Tax Assessment Acts 1936 and 1997.
In essence, the dispute between the parties is whether the opening words of cl 2.1 (“The Unit Holders”) denote the unit holders collectively, or instead refer to each unit holder individually. If the former, the entitlements set out in paragraphs (a) and (b) are conferred only on the unit holders acting collectively. If the latter, those entitlements are conferred on each unit holder individually.
Both constructions are available as a matter of syntax. English is decidedly imprecise in this respect. The two sentences “Directors are entitled to receive notice of a board meeting”, and “Directors are entitled to approve a circulating resolution” have identical syntax, but regard to meaning makes it clear that the former refers to an entitlement that each director enjoys individually, while the latter refers to something which can only occur collectively (precisely how will turn on the company’s constitution). The difficulty posed by the imprecision of the English language when applied to co-owners of property or rights is familiar. Common law and equity have long had rules governing the effect of a conveyance to co-owners. Those rules diverged, and now s 26 of the Conveyancing Act 1919 (NSW) favours the approach in equity: see Delehunt v Carmody (1986) 161 CLR 464 at 472-473; [1986] HCA 67, although it does not always apply: Equititrust Ltd v Franks [2009] NSWCA 128; 258 ALR 388 at [54]-[56] and [84]-[85]. Likewise, the common law has developed principles of construction in order to determine whether a promise in a contract is joint: see White v Tyndall (1888) 13 AC 263 and Federation Insurance Ltd v Wasson (1987) 163 CLR 303; [1987] HCA 34. Even where drafters attend to the ambiguity of English plurals, there may be difficulties. In Kay v KRM *(*Vic) Pty Ltd; Classic Bet *(*NSW) Pty Ltd v Kay [2020] NSWCA 92 the contract included the words “collectively and individually, as the case may be”, which qualified a reference to a defined term denoting the three parties to a contract, and gave rise to an issue whether one of the three incurred a particular liability.
A further aspect in which English is imprecise is that if a group of people is entitled to do something, it is not clear whether that means by acting unanimously or by majority. The default position is that directors (subject to the corporate constitution) act by majority but trustees (subject to the trust deed) can only act unanimously: see Sky v Body (1970) 92 WN (NSW) 934 and In the Estate of William Just deceased *(* (1973) 7 SASR 508. This does not arise in the present case. However, there would be a large difference in the individual rights of each of Mr and Ms Carr and Mr and Ms Ritossa if instead of being directors of a trustee company, they were instead co-trustees of the unit trust. (I shall return to this when dealing with what was meant by “deadlock”.)
3A Special trust—meaning
(1) For the purposes of this Act, a trust is a special trust if—
(a) the trust property includes land, and
(b) the trustee of the trust is the owner of the legal estate in the land, and
(c) the trust is not a fixed trust.
(2) For the purposes of this section, a trust is a fixed trust if the equitable estate in all of the land that is the subject of the trust is owned by a person or persons who are owners of the land for land tax purposes (disregarding section 25 (3)).
(3) For the purpose of determining whether a trust is a fixed trust under this section, any equitable interest of the trustee as trustee of the trust is to be disregarded.
(3A) If a trust satisfies the relevant criteria, the persons who are beneficiaries of the trust under the trust deed are taken to be owners of an equitable estate in the land that is the subject of the trust and, accordingly, the trust is taken to be a fixed trust.
Note.
Under section 25, owners of an equitable estate or interest in land are liable in respect of land tax as if they were legal owners of the land. Owners of an equitable estate in land are treated as secondary taxpayers.
(3B) For the purposes of this section, the relevant criteria are as follows—
(a) the trust deed specifically provides that the beneficiaries of the trust—
(i) are presently entitled to the income of the trust, subject only to payment of proper expenses by and of the trustee relating to the administration of the trust, and
(ii) are presently entitled to the capital of the trust, and may require the trustee to wind up the trust and distribute the trust property or the net proceeds of the trust property,
(b) the entitlements referred to in paragraph (a) cannot be removed, restricted or otherwise affected by the exercise of any discretion, or by a failure to exercise any discretion, conferred on a person by the trust deed,
(c) if the trust is a unit trust—
(i) there must be only one class of units issued, and
(ii) the proportion of trust capital to which a unit holder is entitled on a winding up or surrender of units must be fixed and must be the same as the proportion of income of the trust to which the unit holder is entitled.
It will be seen that s 3A(3B)(a)(i) and (ii) very closely approximate cll 2.1(a) and (b), while s 3A(3B)(b) very closely approximates cl 2.2 – down to the choice and order of the verbs “remove”, “restrict” and “otherwise affect”.
The primary judge observed that the definition of “fixed trust” in sub-sections (3A) and (3B) was inserted into s 3A as a response to CPT Custodian Pty Ltd v Commissioner of State Revenue *(*Vic) (2005) 224 CLR 98; [2005] HCA 53. His Honour noted the amendments to the definition of “fixed trust” were intended to deem those beneficiaries who satisfy “relevant criteria” to be owners of the equitable estate in the land, and thus to be beneficiaries under a fixed trust eligible for the tax-free threshold.
The primary judge said of s 3A(3B)(a) that it would be satisfied if beneficiaries collectively had the relevant entitlements, as the second limb of subparagraph (ii) was directed to whether the “rule” in Saunders v Vautier applied, and it would be “an odd use of language” if the first limb were read differently as requiring that the beneficiaries have the present entitlement to capital individually and severally.
His Honour said, however, that the starting point for construing cl 2.1 was that it should be read together with cll 9, 15 and 16, which his Honour considered expanded upon the concepts in cl 2.1. His Honour said that this approach was not precluded by cl 2.3 which mandated the paramountcy of cll 2.1 and 2.2, because there was nothing in cll 9, 15 or 16 that conflicted with cll 2.1 or 2.2. Those clauses are as follows:
9. Ending the Trust
9.1 The Trust continues until it is resolved by a Unanimous Resolution to end it.
9.2 On termination of the Trust the Trustee must wind up the trust and:
(a) distribute the Trust property; or
(b) realise all the assets constituting the Fund and distribute the net proceeds; or
(c) distribute some of the Trust property and realise the balance of it and distribute the net proceeds,
to the Unit Holders in proportion to the number of Units held by them.
…
15. Distribution of Income
15.1 The Unit Holders are presently entitled to the Income of a Year of Income.
15.2 The Trustee must pay all of the Income of a Year of Income to Unit Holders in proportion to their unit holding subject only to the payment of the proper expenses by and of the Trustee relating to the administration of the Trust.
16. Distribution of capital
16.1 The Unit Holders are presently entitled to the capital of the Trust in proportion to the number of Units held by them.
16.2 Prior to the end of the Trust, the Trustee may distribute part of the capital to the Unit Holders in proportion to the number of Units held by them.
16.3 When the Trust ends, the capital of the Trust will be distributed under clause 9.
His Honour considered that cl 15 amplified the unit holders’ present entitlement to income in cl 2.1(a), that cl 16 amplified their present entitlement to capital in the first limb of cl 2.1(b), and that cl 9 dealt with the winding up referred to in the second limb of cl 2.1(b). Clause 9, by use of the word “until”, provided that the trust would continue indefinitely until a unanimous agreement to terminate, expressly recognising the Saunders v Vautier right without the qualification recognised in CPT Custodian as to the trustee’s right of indemnity.
His Honour then proceeded to consider, and reject, the arguments propounded by the appellants, as follows.
The appellants submitted that their construction of “[t]he Unit Holders” was supported by s 181(1) of the Conveyancing Act 1919 (NSW), which relevantly provides that in all deeds, “unless the contrary intention appears … The singular includes the plural and vice versa”. In his Honour’s view, that provision did not allow a construction of cl 2 whereby “[t]he Unit Holders” referred to unit holders in the singular but not the plural, and further, said that this would create a “commercial nonsense” as it would entitle each unit holder to the entirety of the income and capital of the trust. The Rules also distinguished, apparently deliberately, between unit holders in the singular and the plural which was a sufficient contrary intention that s 181(1) did not apply. Finally, the provisions of the Rules dealing with the transfer of units and rights of pre-emption, and the winding up of the trust upon unanimous resolution, would be “essentially otiose” if an individual unit holder could call for a winding up pursuant to cl 2.1(b).
His Honour noted that a clause in a trust deed which purported to satisfy ss 3A(3A) and 3A(3B), and which was similar to cl 2 of the Trust Rules here under consideration, had been construed by Gzell J (with whom Meagher JA and Tobias AJA agreed) in Sayden Pty Ltd v Chief Commissioner of State Revenue (2013) 83 NSWLR 700; [2013] NSWCA 111. In that case, Gzell J considered that that clause conferred rights on individual unit holders. The primary judge rejected the appellants’ reliance on Sayden, distinguishing it on the basis that it concerned the proper construction of a different trust deed that was “subtly different” from the deed here under consideration.
Although the appellants submitted that cl 2.1 was intended to implement the relevant criteria in s 3A(3B) of the LTMA, the primary judge considered that those criteria did not require that unit holders have individual rights to call for their share of the capital and that even so, the trust deed must be construed before determining whether it satisfied the criteria.
In respect of the primacy provision in cl 2.3, the primary judge said there was no inconsistency between cll 2.1 and 2.2 and any other provision, and thus cl 2.3 was not engaged.
The appellants advanced six arguments in support of their construction:
The appellants criticised the primary judge’s reasoning in respect of the plural “Unit Holders” in the chapeau of cl 2.1, submitting that it did include the singular and did not require unanimity, on the basis of the plain English meaning of the words and s 181 of the Conveyancing Act. In oral submissions, the appellants noted that it would be odd to describe the unit holders as being “presently entitled” if that entitlement depended on a unanimous resolution. The appellants also said that their construction would not render otiose the provisions of the trust dealing with the transfer of units and winding up (for example, cl 9.1), and that the primary judge should not have sought to read cl 2.1 consistently with cl 9.1 given cl 2.3, which provided for the paramountcy of cl 2.1 in the event of any inconsistency. In oral address, the appellants said that while cl 2.3 would only be engaged where there was a conflict, the provisions of the trust deed and Rules should be given their plain meaning rather than being read down to avoid a conflict, and that cl 2.3 would determine any conflict that did exist. To read down cl 2 to avoid conflict with cl 9 would undermine the drafter’s intention. The appellants further accepted that on their construction of cl 2, there may be few occasions where a unanimous resolution is passed pursuant to cl 9, but submitted that this was merely the result of a proper construction of the trust deed.
The appellants relied on s 3A(3B) of the LTMA as necessitating their construction. They submitted that because the objective intention of the drafter of the trust deed was to implement the criteria in the statute, that statute should be construed first, as a guide to the deed’s meaning. The primary judge had thus erred in construing the deed prior to the statute.
They relied on Sayden, submitting that the relevant clause there was “only subtly different” from cl 2 and the decision thus should have been accorded precedential value. They further said that Gzell J was determining whether the criteria had been incorporated into the deed, rather than simply construing the deed, and thus his Honour’s reasoning should have been applied. The appellants submitted that it ought not be a weighty consideration that their propounded construction would have the consequence that a 1% unit holder could call for a winding up, as this merely reflected the language of the LTMA and the precedent set in Sayden. There had been no finding by the primary judge that the trust was to be a long-term investment.
Fourthly, the appellants submitted that the primary judge erred in relying on the principles in CPT Custodian and Beck v Henley to construe cl 17.1 and to “read down” cl 2.1; they submitted that those common law principles had been overridden by the trust deed.
The respondents provided five reasons in support of the primary judge’s construction of cl 2:
It was consistent with the natural meaning of the text.
Only the unit holders collectively were entitled to the entire income and capital of the trust, which were the other present entitlements in cl 2.
The primary judge’s construction was in harmony with cl 9 and the mechanisms for transfer of units, which would otherwise be rendered otiose.
It was consistent with the commercial objective of the trust being a long-term investment, noting that it would be uncommercial for a single unit holder to be able to call for a winding up.
It was consistent with the position at general law, enunciated in Beck v Henley, where unanimity is required for absolutely entitled beneficiaries to call for the distribution of non-fungible trust assets such as land.
In response to the appellants’ arguments, the respondents relevantly submitted that s 181 did not apply in the way contended for by the appellants, as the plural “Unit Holders” could not be changed to include the singular without changing the nature of the rights in cl 2. Clause 2.3 was not engaged as cl 9 was not in conflict with cl 2. In oral address, the respondents relied on Jabbcorp *(*NSW) Pty Ltd v Strathfield Golf Club [2021] NSWCA 154 in support of the proper approach to the interpretation of paramountcy clauses such as cl 2.3, which they said was to interpret the relevant clauses and to apply cl 2.3 only in the event of conflict. Further, the respondents submitted that the L**and Tax Management Act did not require an individual entitlement on the part of unit holders to call for a winding up, and in any event, the requirements of the statute could not alter the proper construction of cl 2.1, which had to be construed prior to determining whether the statutory criteria were satisfied. Sayden was not concerned with interpreting the Land Tax Management Act, did not decide that the Act required individual entitlements to wind up a trust, and was distinguishable. The primary judge’s construction would not render cl 2.1 otiose, as the purpose of the clause was to ensure the trust met the “relevant criteria” in s 3A(3B).
Six points may be noted immediately about cl 2 of the Trust Rules.
First, cl 2.1 confers three distinct entitlements or powers on “[t]he Unit Holders”: first, a “present[] entitle[ment]” to the income of the trust, subject to the payment of the trustee’s proper expenses (cl 2.1(a)); secondly, a “present[] entitle[ment]” to the capital of the trust (limb 1 of cl 2.1(b)); and thirdly, a power to “require” the trustee to wind up the trust and distribute the property or net proceeds (limb 2 of cl 2.1(b)).
Secondly, a “present entitlement” to income of a trust estate is a familiar concept, by reference to ss 95A, 95B and 97 of the Income Tax Assessment Act 1936 (Cth) and corresponding provisions in the 1997 Act. In Commissioner of Taxation v Bamford; Bamford v Commissioner of Taxation (2010) 240 CLR 481; [2010] HCA 10 at [37] the High Court explained:
The language of present entitlement is that of the general law of trusts, but adapted to the operation of the 1936 Act upon distinct years of income. The effect of the authorities dealing with the phrase “presently entitled” was considered in Harmer v Federal Commissioner of Taxation, where it was accepted that a beneficiary would be so entitled if, and only if,
“(a) the beneficiary has an interest in the income which is both vested in interest and vested in possession; and (b) the beneficiary has a present legal right to demand and receive payment of the income, whether or not the precise entitlement can be ascertained before the end of the relevant year of income and whether or not the trustee has the funds available for immediate payment.”
The law of trusts’ interest in the topic of income emerges from the longstanding conundrum facing trustees who have to distribute income and apportion expenses between successive equitable estates. However, the interstices of those rules, which take the form of presumptions about the intention of the settlor, always yielded to the terms of the trust.
In the present trust deed, the trustee has a power to distribute part of the capital to unit holders in proportion to the number of units held by them (cl 16.2), and an obligation to distribute income (cl 15.2).
Thirdly, whatever meaning be given to “presently entitled”, it is clear enough that cl 2.1 applies in relation to the whole of the “Income of the Trust” and the whole of the “capital of the Trust”. Each individual unit holder cannot individually be presently entitled either to all of the trust’s “Income”, or to all of its capital. Individual unit holders can only be presently entitled to the unit holders’ shares, proportionate to their unit holdings, of the income or capital of the trust. All of the unit holders may collectively be presently entitled to all of the trust’s income or capital, but not individually. That is a powerful semantic consideration supporting the construction upheld by the primary judge, that “The Unit Holders” in cl 2.1 is a reference to the unit holders collectively, rather than individually.
Fourthly, the constructions propounded by the appellants and the respondents are both open on the face of the text. “The Unit Holders” could, as a matter of plain English, refer to either a group comprised of unit holders, or could refer to each unit holder severally. However, in respect of the first two of the entitlements in cl 2.1 (the entitlements to income and capital), the phrase “[t]he Unit Holders” can only be sensibly construed as referring to the unit holders collectively, in light of the previous paragraph; each unit holder cannot be individually entitled to the entirety of the income and capital of the trust. Against this, the appellants said that the phrase could be interpreted in respect of those present entitlements as conferring on individual unit holders an entitlement to the income and capital in proportion to the units held, consistently with cl 17.1, which provides that the trust property is held on trust for the unit holders “as tenants in common in proportion to the number of units held”. But rather than encourage a construction of cl 2.1 that reads the words “in proportion to the number of units held” into the present entitlements conferred, which would at the very least be an unnatural reading of the clause, cl 17.1 merely confirms that the first two entitlements conferred by cl 2.1 must be conferred on the unit holders as a group, rather than individually. That means that the appellants’ construction necessitates a distributive reading of cl 2.1, in that “[t]he Unit Holders” must denote a collective group for the first two entitlements, but individuals for the final power conferred by the clause. That is not prohibitive of their propounded construction, but weighs against it.
Fifthly, it is readily apparent — and it was not in dispute — that the language of cl 2.1, including the notion of “present[] entitle[ment]”, is taken from s 3A(3B) of the LTMA, and that the purpose of cl 2 is to ensure that the trust satisfies the relevant criteria in that subsection to allow the trust to qualify as a fixed trust for land tax purposes. That has consequences for the proper construction of cl 2.
STERN JA: Before we move on, can I just ask, so do you say that what the objective intention that would be inferred to the parties is that cl 2 simply means whatever someone finds the Land Tax Management Act clause to mean, as opposed to that they actually addressed the question of construction in any way?
BIRCH: Your Honour, what I'm saying is you still have to construe cl 2, and in a logical sense, the construction of the deed is a separate step from the construction of the statute. So one can’t simply construe the statute and say therefore, that resolves cl 2. What I’m saying though is that one must objectively presume the drafter of the deed's intention was to have the effect that the statute prescribed and has used similar language, and it would only be if there was something in the deed that was incorrigibly against attributing the same meaning to the deed language that you would conclude it had a different meaning.
That approach to construction will, of course, only have the consequence contended for by the appellants if their construction of s 3A(3B) is correct. That question is considered below.
Sixthly, cl 2.3 provides for the continued operation of cl 2.1 “despite anything else that is contrary … in this deed”. That is a provision directed to resolving inconsistency where it exists, and directs a particular resolution of that inconsistency. P Herzfeld and T Prince, Interpretation (3rd ed, Thomson Reuters, 2024) says of such clauses at [22.100] that:
… Absent an express definition of “inconsistency”, references to inconsistency in an express clause are no broader than the common law concept. Clauses are not inconsistent merely because one qualifies or modifies the effect of the other; to be inconsistent it must be impossible to read the clauses fairly together…
… It is doubtful that the inclusion of the express clause really acknowledges the likelihood of provisions being inconsistent. It is more likely that the clause was included for the avoidance of doubt – to clarify what the court should do to resolve inconsistency if it exists. For example, it is clear that the presence of words such as “Notwithstanding any other clause” merely indicates which clause is to prevail in the event of inconsistency, not whether there is an inconsistency in the first place.
That is consistent with the approach adopted in Jabbcorp *(*NSW) Pty Ltd v Strathfield Golf Club at [36] in respect of a definition commencing with “Notwithstanding any other clause”, which words were found to “only indicate the clause which prevails in the event of conflict, and say nothing as to whether there is a conflict in the first place”.
Clause 2.3 merely provides that cl 2.1 will prevail if there is inconsistency, but is silent as to whether that inconsistency exists. Clause 2.3 does not detract from something more fundamental about the construction of the deed, namely, the ordinary position that the deed and rules must be construed as a whole, harmoniously, with a presumption against surplusage, which is a step anterior to the engagement of cl 2.3. To the extent that the appellants’ submission, to the effect that the primary judge erred by “reading down” cl 2.1 so as to read it harmoniously with cl 9, is contrary to that position, that submission must be rejected. More is said in relation to cl 9 below, but what emerges from the above is that the proper starting point is s 3A(3B) of the LTMA.
The legislative history and purpose of ss 3A(3A) and (3B) is set out above. That said, it is difficult to identify a purpose, other than to ensure that a certain class of trust instruments would be, for the purposes of the assessment of land tax, regarded as fixed trusts. Although CPT Custodian prompted the provision, it is far from clear what aspect of that decision caused difficulty. In order to explain this, it is necessary to return to what CPT Custodian Pty Ltd v Commissioner of State Revenue *(*Vic) actually held.
Simplifying the four appeals slightly, assessments for land tax had been served upon the owners of 100% and 50% of the units of unit trusts of land on which certain shopping centres were constructed. Plainly the individual trustees were liable to pay land tax, but as the High Court indicated at [5] the Commissioner had served notices on the unit holders “for ease of collection of the revenue”. The question was one of statutory construction. It was whether each unit holder was an “owner” of land under the Victorian legislation, and exclusive reliance was placed on the definition that an “owner” included “every person entitled to any land for any estate of freehold in possession”. At first instance, Nettle J had held that none of the unit holders were “owners” under this definition. The Court of Appeal had held that a unit holder with less than 100 per cent of the units was not, but the owner of 100 per cent of the issued units was, such an owner. The joint judgment of the High Court affirmed the entirety of the result reached by Nettle J.
The particular unit trusts resembled those in the present case, save for the absence of cl 2, and the fact that the trustee was entitled to substantial fees in respect of which it enjoyed a right of reimbursement or exoneration from trust assets secured by a lien.
The High Court addressed the consequences of the “rule” in Saunders v Vautier at [41]-[52], this being the basis of some of the appeals being allowed by the Court of Appeal. One strand of the reasoning focussed on the fact that the “unrealised potential” of the sole owner of all issued units to bring the trust to an end did not mean that that sole owner of units was entitled to any estate of freehold in possession, for the purposes of a statutory definition in a tax act: see at [42] and [52]. Another was that the unsatisfied trustee’s right of indemnity was a charge upon the assets of the trust, and until the rights of reimbursement and exoneration were satisfied, it was not possible to say what the trust fund was: at [50]-[51]. This was on the basis of a reading of Wharton v Masterman [1895] AC 186 to the effect that the rule in Saunders v Vautier could not apply if, by reason of the charging of legacies on the fund and accumulations, the persons seeking to put an end to the accumulations were “only entitled to an undetermined and uncertain surplus (if any) which might be left of the fund after payment of the legacies”. A third was more conceptual. At [46], the joint judgment observed that the trusts were drawn conferring individual rights attached to each unit. Although all units might be held by the same unit holder, the joint judgment said that even so the units were not drawn “to provide a single right of a cumulative nature so that the whole differed from the sum of the parts” and there “could be no such single right unless held jointly or in common, but the Deed was not cast in such terms”. The position was as Lord Reid stated in [1968] AC 553 at 605-606:
Two or more persons cannot have a single right unless they hold it jointly or in common. But clearly objects of a discretionary trust do not have that: they each have individual rights: they are in competition with each other and what the trustees give to one is his alone.
How does this translate to the mischief to which s 3A of the Land Tax Management Act is directed? That history and purpose suggests that, at the very least, there is no need to construe s 3A(3B) as requiring that an individual unit holder in a unit trust have the power to call for a winding up. Specifically, the legislative overturning of CPT Custodian does not require such a power be conferred: rather, s 3A(3A) avoids the consequences of CPT Custodian by deeming persons who are beneficiaries of a trust satisfying the relevant criteria in s 3A(3B) to be owners of an equitable estate in land. There is nothing in CPT Custodian which would suggest that those criteria must include a power on the part of individual unit holders to call for a winding up, s 3A(3A) being a deeming provision in any event.
It is not necessary in order to resolve this ground of appeal, which turns on provisions in the deed establishing the Darbalara Property Trust, to give any comprehensive account of the operation of s 3A of the Land Tax Management Act, and it would be inappropriate to do so. But one thing is very clear. Acceptance of the appellants’ construction would carry with it the consequence that a 1% unit holder in a unit trust with many unit holders could bring about the winding up of the trust, even where that decision was opposed by all other unit holders and would spell the end of a potentially significant and longstanding commercial venture and cause substantial tax consequences. It would be strange indeed if the inclusion of words designed to clarify when unit holders could obtain the benefit of a threshold for land tax purposes had the effect of permitting minority unit holders to threaten the extinction of the trust (and thereby the incurring of substantial tax liabilities if, say, the result was the realisation of a capital gain by all unit holders). An intention that s 3A(3B) require trust deeds to include such a power should not be imputed to the legislature where another less unreasonable interpretation is open, as it is here.
The reference in cl 2(c) of the Deed is to Registered Holders, but cl 1(l) of the Deed provides that words importing the singular shall include the plural and vice versa.
The reference to Registered Holders in cl 2(c) of the Deed is best understood as a reference to each of them because cl 2(c)(i) and cl 2(c)(ii) describe entitlements that are held and enjoyed separately.
It follows that any Registered Holder could require the Trustee to wind up the Unit Trust under cl 2(c)(iii). That enables a realisation of the value of a unit in circumstances in which a request for redemption under cl 9 is refused or hedged around with conditions.
It would hamper the ability to gain access to the capital represented by a unit if distribution upon a winding up was only available upon a request by a majority of, or all, the Registered Holders. That could not have been the presumed intention of the parties to the Deed and its amendment.
It is true, as the respondents submitted, that Gzell J was construing a different trust deed, which differed in some respects to the trust deed here in question – for example, this trust deed has no clause providing that the singular includes the plural and vice versa. It is also true, as the appellants submitted, that the clause construed by Gzell J was substantially similar to cl 2.1 and so would ordinarily be accorded significant precedential weight in the construction of the latter.
The fundamental difficulty with relying on the precedential force of Sayden is that the unit trust there considered had a single unit holder. “There was only one joint Registered Holder, Mr and Mrs Griffin as trustees of the Griffin Super Fund”: see at [24]. Gzell J was not concerned with the circumstance where a single unit holder calls for a winding up and thereby ends a unit trust with numerous unit holders whose interests diverge. His Honour’s reasons are to be read in that context. Sayden is not authority for what it did not decide: Davis v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 279 CLR 1; [2023] HCA 10 at [42] and [182]. As Gordon J said in Vanderstock v Victoria [2023] HCA 30; 98 ALJR 208 at [274] (dissenting, but not on this basal point), citing numerous authorities: “The words of a judgment, as every word of every judgment, must be read according to their subject matter: ‘[t]hey were appropriate to their context and must be read in their context’”. Speaking for this Court in Arinson Pty Ltd v City of Canada Bay Council [2015] NSWCA 199, J C Campbell AJA said quoting Lord Halsbury LC at [65]:
“... every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found.”
Section 181 of the Conveyancing Act, which provides that the plural includes the singular and vice versa, does not greatly assist. The appellants do not seek to read “[t]he Unit Holders are” as “the Unit Holder is”; rather, they submit that the plural noun should be read as denoting each unit holder severally, akin to the position that would be clear if the chapeau read “the Unit Holders are each”. That is, the dispute is as to the meaning of the plural noun, not as to whether it should be read as including a singular noun. Whether a plural is construed as denoting every composite member of that plural as a collective, or each member severally, is a question of construction not aided by a general rule that a plural can be read as a singular. In any event, as the respondents submit, the appellants’ reading of s 181 would fundamentally alter the rights otherwise apparently conferred by cl 2.1.
It will be recalled that whilst the issued units are divided equally between the Carrs and the Ritossas with each owning 3,827,149 units, of those held by the Ritossas, 106 are owned by Mr and Ms Ritossa jointly, while the remaining 3,827,043 are owned by Mr Ritossa in his own name. The fragility of the unit trust structure which would follow from acceptance of the Carrs’ construction is well illustrated by the facts of this case. If Mr Ritossa and Ms Ritossa severed their joint ownership of the parcel of 106 units, such that Ms Ritossa became the sole owner of all of them, or of half of them, then on the Carrs’ construction she could unilaterally bring the trust to an end, despite her being the owner of a small fraction of 1% of the total units issued. The same would be true if Mr Ritossa died unexpectedly, and irrespective of whoever inherited his estate, simply by virtue of the fact that Ms Ritossa would become by right of survivorship the sole owner of 106 units.
It follows from the above that cl 2 does not confer on individual unit holders a right to require the trustee to wind up the trust. Ground 1 of the Notice of Appeal must be dismissed.
Orders the Court can make
(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order:
(a) that the company be wound up;
(b) that the company’s existing constitution be modified or repealed;
(c) regulating the conduct of the company’s affairs in the future;
(d) for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law;
(e) for the purchase of shares with an appropriate reduction of the company’s share capital;
(f) for the company to institute, prosecute, defend or discontinue specified proceedings;
(g) authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company;
(h) appointing a receiver or a receiver and manager of any or all of the company’s property;
(i) restraining a person from engaging in specified conduct or from doing a specified act;
(j) requiring a person to do a specified act.
The conferral of power is expressed very broadly: to make “any order under this section that it considers appropriate in relation to the company”, including (a) “that the company be wound up”, (d) “for the purchase of any shares by any member” and (h) “appointing a receiver or a receiver and manager of any or all of the company’s property”. However, the Carrs sought the winding up of the trust, not the trustee. There is no express power for the compulsory purchase of trust assets as opposed to a member’s shares. Accordingly, they sought the appointment of a receiver under (h) who could, so it was said, sell the trust assets, discharge liabilities and distribute the surplus to unit holders.
Section 233 must be read with s 232, which provides:
Grounds for Court order
The Court may make an order under section 233 if:
(a) the conduct of a company’s affairs; or
(b) an actual or proposed act or omission by or on behalf of a company; or
(c) a resolution, or a proposed resolution, of members or a class of members of a company;
is either:
(d) contrary to the interests of the members as a whole; or
(e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity.
For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company.
(a) the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with any other person or persons and including transactions and dealings as ... trustee), property ( ... including property held as ... trustee), liabilities (including ... liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the body; and
(b) in the case of a body corporate … that is a trustee (but without limiting the generality of paragraph (a)) - matters concerned with the ascertainment of the identity of the persons who are beneficiaries under the trust, their rights under the trust and any payments that they have received, or are entitled to receive, under the terms of the trust; and
(c) the internal management and proceedings of the body; and …
The following points about ss 232 and 233 may be noted.
First, paragraphs (a), (b) and (c) of s 232 identify various species of conduct (including actual or proposed acts or omissions or resolutions), while paragraphs (d) and (e) require the attribution of an evaluative judgment to that conduct (that it be contrary to the interests of members as a whole, or oppressive or unfairly prejudicial to or unfairly discriminatory against one or more members).
Secondly, while paragraph (d) does not mention oppression, and paragraph (e) is broader than oppression, it is customary to use the words “oppressive” and “oppression” as a shorthand to describe the evaluative judgment required by those paragraphs.
Thirdly, paragraphs (a), (b) and (c) are disjunctive. So are paragraphs (d) and (e). It is necessary in order to satisfy s 232 and thereby engage the power in s 233 for one or more of the species of conduct in paragraphs (a), (b) or (c) to be identified and for that conduct to be “oppressive” within the meaning of either paragraph (d) or (e) (or both).
Fourthly, the references to the definite article in s 233 to “the” company in its opening words and in paragraphs (a), (b), (c), (d), (e), (f), (g), and (h) reflect the fact that s 232 requires that conduct falling within one or more of the three limbs in s 232(a), (b) or (c) in relation to “a” company has been identified in relation to that company. In the event that the conduct of that company is found to be oppressive (which is to say, to answer the description of either or both of s 232(d) or (e) upon that company’s members), then the court is empowered to make any of the orders in s 233 relating to that company.
The reason to dwell for a moment on the indefinite article “a company” in s 232 and the definite article “the company” in s 233 is to identify the link between the two sections. Although if s 232 were read superficially it might appear that satisfaction of s 232 (ie, the identification of conduct falling within (a) or (b) or (c) which is oppressive within the meaning of paragraph (d) or (e)) was merely a sufficient condition to engage the power in s 233, in fact satisfaction of s 232 is a necessary condition for the exercise of the power. Generally speaking, the use of the indefinite article followed by the definite article is a fairly clear indication that the noun following the definite article is the same noun as has been earlier identified following the indefinite article: see Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133 at [18], Carr v Carr [2022] NSWSC 166; 21 ASTLR 511 at [82] and The Owners - Strata Plan 87003 v Raysons Constructions Pty Ltd [2025] NSWSC 66 at [97]. This is confirmed by the heading of s 232, “Grounds for Court order”, which is suggestive of the section being exhaustive. It is also confirmed by the legislative history (summarised in [2008] NSWCA 95; 66 ACSR 359 at [334]-[346]); in particular, there is nothing to suggest that when the single provision which had been s 260 and later s 246AA of the was split into ss 232 and 233 when the (Cth) was enacted, the change in drafting style carried with it a decoupling of the power to make orders from the criteria which had first to be satisfied. It is also consistent with what was said by French CJ in (2009) 238 CLR 304; [2009] HCA 25 at [58] and with the reasoning of the joint judgment at [173] and [182].
Two aspects of the construction of ss 232 and 233 have produced a divergence of authority at first instance, which continues to cause uncertainty and expense (an example may be seen in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; 288 ALR 310 at [301]-[306]). There is no good reason for that to be so. The uncertain aspects are the scope of “a company’s affairs” in s 232(a), and the power in s 233 to make an order “in relation to … the company”.
It is tolerably clear that the affairs of trustee companies fall within the scope of “the conduct of a company’s affairs” under s 232(a), having regard to s 53: see Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282 at [63], approved in Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168 at [62]. A line of earlier first instance decisions took a narrower view. It was said in Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606 at 612-613 that:
This company is a trustee company. It has no assets of its own. It operates a business as a trustee on the basis of loan capital. The only oppression is in relation to the operation of the trust. That oppression has not affected the value of the shares one whit. The shares … either have no value or alternatively a value of $1 being the amount paid for each share and they continue to have that value.
That reasoning approached the scope of “the affairs of the company” in s 232(a) without regard to s 53, as has been noticed in a number of more recent decisions at first instance, notably Vigliaroni v CPS Investment Holdings Pty Ltd at [68] and Trust Company Ltd v Noosa Venture 1 Pty Ltd [2010] NSWSC 1334; 80 ACSR 485 at [105]. More recently the same point was made by Bleby JA, with whom Lovell and David JJA agreed, in Melrob Investments Pty Ltd v Blong Ume Nominees Pty Ltd (2022) 141 SASR 1; [2022] SASCA 29 at [110]-[111]. His Honour thereafter at [112] considered “the impact of s 53 on ss 232 and 233 afresh” and proceeded on the basis that conduct of a named beneficiary of a discretionary trust who was also a director and member of the trustee fell within s 232 as informed by s 53 (at [125]-[127]).
In Re Munja Bakehouse Pty Ltd [2024] NSWSC 6; 384 FLR 176 at [58], Black J said, including by reference to Melrob, that “the better view is likely to be that s 232 of the Act applies to companies acting as trustees, at least in circumstances where the interests held within the trust are within the scope of a relationship of quasi-partnership between the companies”. I do not disagree, but I would go further. It is preferable that there be no room for doubt about this basic aspect of s 232. First, there is no “compelling reason” to depart from the reasoning of Melrob Investments, being a decision of an intermediate appellate court on the construction of federal legislation (cf Hill v Zuda Pty Ltd (2022) 275 CLR 24; [2022] HCA 21 at [25]). What is more, Melrob Investments is with respect correct in what it says as to the effect of s 53. Section 53 states explicitly that it applies to “the affairs of a body corporate” where that term appears in s 232. That term appears precisely once in s 232, in paragraph (a). True it is that s 6 provides that the provisions in Part 1.2 including s 53 have effect “except so far as the contrary intention appears in this Act”. However, there is no practical scope for discerning a contrary intention where the definition is expressed to apply to the section, and the defined term appears precisely once in the section. Earlier decisions including Kizquari, insofar as they exclude from the scope of s 232 the operation of the trust as opposed to the operation of the company, are to be regarded as per incuriam and should not be followed.
There is also a divergence in the authorities as to the scope of the power under s 233 to make an order “in relation to the company”. This issue arises from the fact that the conferral of power is confined to “the company” as opposed to “the affairs of the company”. It was on that basis that Windeyer AJ said “I would not consider it within power to make an order requiring one trust beneficiary to buy out the interest of the other trust beneficiary. Such an order would, I think, be an order in relation to the trust not to the company”: at [105]. That reasoning was criticised as too narrow by Ferguson J in [2012] VSC 156 at [287], relying on the considerations that “in respect of” has a very wide meaning, the difficulties in a structure comprising a mixture of companies and trusts if s 233 had such a limited application, and the fact that a court is expressly empowered to make orders regulating the conduct of a company’s affairs in the future. An appeal from the decision of Ferguson J was dismissed “without adjudication on the merits” (this was effected by order 2 made by the Court of Appeal on 17 October 2013 in proceeding S APCI 2012 0113; although that order seems not to be generally available, its effect is accurately noted in [2019] VSC 161 at [25]). Further, in , Bleby JA noted that the power to make an order “regulating the conduct of the company’s affairs in the future” is, by definition, a species of order “in relation to the company”. His Honour said at [114] that:
This speaks strongly against there being a strict division between orders “in relation to the company” and orders regulating the company’s affairs. Those affairs include, for example, the dealings conducted by the company, and property it holds, in its capacity as trustee.
I respectfully agree with their Honours. In addition to the points made by Ferguson J and Bleby JA, I would add that the dichotomy relied on in Trust Company Ltd v Noosa Venture 1 Pty Ltd between orders relating to the company and orders relating to the trust of which the company is a trustee is a false one. An order may without any artificiality or straining of language relate to both (consider for example an order that a company which is a trustee is not entitled to have recourse to its indemnity against trust assets in respect of a liability incurred by it as a trustee). It is not a valid answer to the question whether a power to make orders in relation to the company is available in respect of property held by the company as trustee to say that the order would be in relation to the trust. Such reasoning is only valid if the two categories are mutually exclusive. Various instances in a range of areas illustrating this fallacy may be seen in Menz v Wagga Wagga Show Society Inc (2020) 103 NSWLR 103; [2020] NSWCA 65 at [67].
The question posed by the statute is whether an order “in relation to the company” can extend, where the company is a trustee, to an order that one trust beneficiary buy out another. The answer to that question is that it can, for the following reasons.
The connection demanded by the words “in relation to” is contextual, turning on statutory context and purpose: R v Khazaal (2012) 246 CLR 601; [2012] HCA 26 at [31]; Trustees of the Sydney Grammar School v Winch (2013) 83 NSWLR 80; [2013] NSWCA 37 at [159]-[162].
It is well settled that ss 232 and 233 are to be read broadly and “the imposition of judge-made limitations on their scope is to be approached with caution”: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [72] (French CJ). The joint judgment confirmed that the relevant power (s 233(1)(d)) “should not be hedged about by implied limitations”: at [178], and see Zong v Lin [2022] NSWCA 136 at [77] and Millsave Holdings Pty Ltd v Connective Group Pty Ltd (2023) 75 VR 239; [2023] VSCA 326 at [1024].
Further, it is quite inappropriate to read provisions granting powers to a court by making implications or imposing limitations not found in the express words: see Owners of Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54.
Finally, s 233 only confers power upon a superior court (noting the definition of “Court” as opposed to “court” in s 58AA), as was the case in PMT Partners Pty Ltd *(*in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301; [1995] HCA 36, where it was said at 313 that “a provision conferring a power to be exercised judicially should be construed as liberally as its terms and context permit”.
I have so far passed over what to my mind is the critical aspect of ss 232 and 233 for present purposes, namely, paragraphs 232(d) and (e), which involve the evaluative judgment that the conduct identified in one or more of s 232(a) or (b) or (c) amounts to oppression.
Young J was with respect correct in Kizquari to emphasise that the complaints of oppression by the beneficiaries or unit holders of a trading trust who happen to be shareholders in the trustee fall outside the scope of the section when regard is confined to their capacity as members of the trustee. The shares in the trustee company with nominal capital of its own will not ordinarily have any significant value. The value is in the trust assets of which the company has legal title, as opposed to the company’s own assets.
In the present case, the Carrs did not abandon reliance on s 232(d), but for understandable reasons, s 232(e) was at the forefront of their submissions. Section 232(d) requires a conclusion that the conduct be “contrary to the interests of the members as a whole”. The reference to “members” in (d) is to the members in their capacity as members of the particular company in respect of which the conduct identified in one or more of paragraphs (a), (b) or (c) has been identified. The absence from (d) of the expansive words found in (e) “whether in that capacity or in any other capacity”, coupled with the fact that (d) requires an examination of members’ interests as a whole, all confirms that the term “the interests of members” bears its ordinary meaning of interests of members in their capacity as members of the company. A member of a trustee company who happens also to be a beneficiary of the trust and whose real complaint is as to what is happening with the management of the trust assets does not on that basis fall within paragraph (d).
In its application to the present case, s 232(e) presents two difficult questions. The first concerns “deadlock”, the second is based on the structure adopted by the Carrs where “their” units were held by the trustee of the Carr Family Trust.
The first issue is whether a “deadlock” per se is sufficient to answer the description of “oppressive to, unfairly prejudicial to or unfairly discriminatory against” in s 232(e). It is as well to clarify what is meant by “deadlock”. In the present case, it is not merely that, on the question of whether the Darbalara Property Trust should be wound up, there is a deadlock at board level of the corporate trustee. In the case of some board “deadlocks”, the general meeting may have power to appoint an additional director: see Barron v Potter [1914] 1 Ch 895; Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666 at 682-683; Massey v Wales; Massey v Cooney (2003) 57 NSWLR 718; [2003] NSWCA 212; Knox v Nile [2022] NSWSC 195; 160 ACSR 357 at [94]. But in the present case, the equal division at the level of the board is matched by that of the members and of the unit holders.
I agree with [the] proposition, I think your Honour Justice Leeming was putting to me, yes, we need to go further than just show the company itself is deadlocked. We need to show that the affairs of the trust aren’t able to be resolved, and that, we say, is met here because it was the clear intention of the parties that the control of this particular trust was to be one in which control was shared equally between the Carrs and the Ritossas. In other words, it was intended that its proper operation presumed continuing mutual trust and confidence.
There may have been a measure of advocacy in that response, which simultaneously acceded to the proposition that mere deadlock is insufficient but then restated that the absence of “mutual trust and confidence” would suffice; it is far from clear what “mutual trust and confidence” means, assuming it means something more than the parties’ agreement as to how the affairs of the Darbalara Property Trust would be conducted. There may be the opposite of a relationship of trust and confidence between the equal number of union and government representatives of a superannuation trust, or in many of the other occasions when a structure dividing power equally between two sides with divergent or opposed interests has been used. It is also clear that mere personal dislike will not suffice. The appellants’ submission turns on the proposition that when the Darbalara Property Trust was established, there was a relationship of trust and confidence, which has broken down. But that submission is qualified by the appellants’ disavowal of any fiduciary relationship between the Carrs and the Ritossas. I will return to these issues when addressing grounds 2, 3 and 9 below.
The second issue arises because the Carrs distanced themselves from any beneficial interest in the assets of the Darbalara Property Trust by causing “their” units to be held as assets of the Carr Family Trust. Is Mr Carr, who is one of the two members of Darbalara Holdings, able to invoke what he maintains is the oppressive and unfairly prejudicial and discriminatory conduct he claims to have sustained in his capacity as a discretionary object of the trust one of whose assets is half of the units in the Darbalara Property Trust? In principle, I could contemplate circumstances in which he might be able to do so. Take the facts of the present case, where Mr Carr is a member of the trustee company and also a discretionary object of a trust some of whose assets include units of the Darbalara Property Trust, and suppose further (and contrary to the evidence in this proceeding) that (i) the trustee of the Darbalara Property Trust had a long history of making substantial distributions, (ii) was expected to make a substantial distribution in the current year, (iii) the distributions ordinarily passed through the discretionary trust to Mr Carr, (iv) it was known to the trustee of the Darbalara Property Trust that Mr Carr had a particular need for a distribution in the current year, but (v) for no good reason and in order to spite Mr Carr, no distribution was made, the trustee incurred tax at the top marginal rate and Mr Carr who had been relying on the distribution suffered substantial losses, and all this was done because the other member of the trustee of the Darbalara Property Trust had fallen out with Mr Carr, that might answer the description of “oppressive to, unfairly prejudicial to, or unfairly discriminatory against” Mr Carr in his capacity as a discretionary object.
However, wholly absent from this appeal is any evidence about the operations and activities of the Carr Family Trust. In the absence of such evidence, I am unable to see how this aspect of the appellants’ case could be made out. I shall return to this when addressing grounds 4 and 5 below.
Grounds 2-8 challenged the ultimate conclusion reached by the primary judge, and various intermediate steps in his Honour’s reasoning, that no oppression had been established. Ground 2 identified nineteen factual matters, mostly uncontroversial, all of which had been found by the primary judge, and contended that his Honour erred in not concluding that there had been oppression within s 232(d) or (e). Ground 3 identified a number of additional matters not found by the primary judge, including the findings challenged in grounds 6, 7 and 8, and said that in consequence of those additional matters, there should have been a finding of oppression within s 232(d) or (e). Grounds 4 and 5 challenged the proper construction of the amended points of claim, and the decision to refuse an amendment made on the last day of the trial. Grounds 6, 7 and 8 identified further particular findings of fact which the Carrs said should have been made.
It is more convenient to address these grounds of appeal in a different order.
Logically, the starting point is grounds 4 and 5, both of which concern the form of the amended points of claim which went to trial. Ground 4 maintained that the primary judge erred in interpreting paragraphs 43 and 44 of the amended points of claim “as not raising oppression of Mr Carr as a unit holder in the Trust because Mr Carr as a beneficiary of the Carr Family Trust, of which DRCH is trustee, was beneficially interested in the units of the Trust held by DRCH”. Ground 5, in the alternative, maintained that the primary judge erred in declining to grant leave to amend paragraph 43 of the amended points of claim.
The pleaded case in paragraphs 43-44 of the amended points of claim, with the proposed amendment in bold, was as follows:
- Since December 2019, the conduct of the affairs of Darbalara Holdings, including its affairs as trustee of DPT have been contrary to the interests of the members as a whole, or oppressive to, unfairly prejudicial to, or unfairly discriminatory against the Plaintiffs as either a member of Darbalara Holdings and/or in relation to the capacity as a unit holder in DPT (including Mr Carr’s indirect interest in DPT) with the meaning of those terms as used in section 232 of the Corps Act.
Particulars
i. Darbalara Holdings has two shareholders, one being the First Plaintiff, Mr David Carr, the other being the First Defendant, Mr Ivan Ritossa.
ii. Darbalara Holdings has four directors, that is the Carrs and the Ritossas.
iii. The said directors are deadlocked in regard to numerous matters concerning the future affairs of Darbalara Holdings and DPT as referred to in paragraphs 21 to 23, 35 and 36 above.
iv. The plaintiffs believe that the assets of Darbalara Holdings held pursuant to the Trust Deed and Trust Rules ought be realised and distributed to the unit holders in proportion to the units held. The Ritossas believe that no steps should be taken to wind up the affairs of Darbalara Holdings and that DPT should continue to trade indefinitely.
v. The plaintiffs believe the real property at Brungle Road, held by Darbalara Holdings as potential residential accommodation for staff of DPT, ought be sold and the Ritossas disagree that it should be sold.
vi. The Carrs, on the one side, and the Ritossas, on the other, are unable to agree on the substantial long-term goals of Darbalara Holdings and its trust assets.
vii. Mutual trust and confidence between the Carrs, on the one side, and the Ritossas, on the other, has irretrievably broken down and they are engaged in the litigation constituted by these proceedings.
- By virtue of Mr Carr’s shareholding in Darbalara Holdings, and further and in the alternative, the membership of DRCH, as trustee for CFT, of DPT, the Plaintiffs, or some or one of them, are entitled to apply for relief under section 233 of the Corps Act in consequence of the conduct described in the preceding paragraph (section 234(a) of the Corps Act).
The amendment was propounded on the seventh day of the eight-day trial, orally, shortly before the morning adjournment (Tcpt 24 July 2024, 473.30). It is not clear whether and if so how much prior notice was given. The application was not supported by any affidavit evidence explaining the delay. The application was opposed by the defendants, with the primary judge indicating that he would rule upon it when judgment was delivered. His Honour did so at [199]-[206].
Paragraphs [199] and [200] recorded that the defendants had, in their opening outline of submissions, put the Carrs on notice that, despite paragraph 43 referring to the plural “Plaintiffs”, only Mr Carr had standing to seek relief under s 233. The defendants maintained that they had not but would have sought discovery of documents concerning distributions from the Carr Family Trust to Mr Carr or other discretionary objects in order to test whether he had been adversely affected in his capacity as an object, the cross-examination of the Carrs would have extended to whether they were affected in some capacity other than Mr Carr’s membership and they said they might have called another witness had Mr Carr’s other capacity been in issue.
The primary judge was satisfied that the defendants would “potentially suffer prejudice in each of the ways identified”, and “that prejudice could have been cured only by an adjournment with attendant cost and delay”. Notwithstanding that ruling, his Honour noted that it was undisputed that s 232(d) and (e) could apply to the affairs of a company which is a trustee and his Honour proceeded on the basis that that was the correct approach. His Honour explained the consequences of that approach at [203]-[204]:
The fact that Darbalara Holdings is a trustee will be relevant to how the question of oppression is approached (as well as the choice of appropriate remedy under s 233 if s 232 is satisfied) because a company which acts as a trustee has obligations both under the trust instrument and the general law which bind the manner in which it operates, which do not apply to a company which is not a trustee. In particular, by virtue of assuming the role of a trustee, it has the obligation to get in the trust property, protect it and vindicate the rights attached to it (subject to the terms of the trust instrument): CGU Insurance Ltd v One.Tel Ltd (in liq) (2010) 242 CLR 174; [2010] HCA 26 at [36]. That obligation includes the irreducible core obligation to perform the trust honestly and in good faith for the benefit of the beneficiaries: Armitage v Nurse [1998] Ch 241 at 253-254.
The defendants say Mr Carr’s standing is limited to alleged oppression of him in his capacity as a member of Darbalara Holdings and none of the pleaded matters have any oppressive effect on him as a member; in particular the realisation of the value of the units in DPT has no effect on Mr Carr as a member of the trustee, Darbalara Holdings. I do not agree that merely because Mr Carr’s standing is limited to oppression of him qua member of the trustee, none of the pleaded instances of alleged oppression could enliven s 232. For example, deadlock in the management of the trustee which meant that the trustee could not properly function to discharge its duties as trustee would be oppressive of Mr Carr qua member because Darbalara Holdings was established to perform the role of trustee of DPT. Mr Carr’s capacity as a member should take into account that his role as a member is to protect the interests of the entity which holds the 50% interest of his family in DPT. I propose to address each of the various pleaded instance of oppression, and consider the question of standing should it become necessary to do so.
The appellants’ written submissions in support of these grounds were brief. The written submissions in chief (paragraphs 41-44) occupied slightly more than one page and the written submissions in reply (paragraphs 18-19) occupied less than half a page. Likewise, the appellants’ oral submissions in support of these grounds occupied slightly more than one page of transcript (T21.18-22.33) in a two-day appeal.
The appellants’ concision was appropriate. These grounds may be disposed of with comparable concision.
The appellants submitted that the primary judge had construed their case too narrowly. They referred to the breadth of the words “and/or in relation to the capacity as a unit holder in DPT” in para 43 and “the membership of DRCH, as Trustee for CFT, of DPT” in para 44 to support the proposition that the pleaded case must have extended to Mr Carr’s indirect interest, as a “first group beneficiary” of the Carr Family Trust discretionary trust whose trustee owned 50% of the units. But that is not how the case was pleaded. Ordinarily, the issues at trial are determined by the pleadings: Banque Commerciale SA *(*en liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 287; [1990] HCA 11. Parties may depart from the issues so identified, including by way of acquiescence, but that did not occur in this litigation. Indeed, at the commencement of the opening of the trial, on 15 July 2024, counsel for the plaintiffs stated that “the opening of my learned friend indicates that he is planning to hold us closely to our pleading”. Those opening submissions, dated 10 July 2024, were a short document of four pages which stated “[o]nly Mr Carr even has standing to seek orders under s 233, being the only plaintiff who is a member of Darbalara Holdings”, and referred to disagreements which “stand outside the pleaded case”. Mr Carr had at one stage held units, but did not do so at the time the proceedings were brought.
The starting point is the nature of the structure established to govern the investments made by the Carrs and the Ritossas. It will be recalled that 50% of the units in the unit trust of which Darbalara Holdings was the trustee were held at all times by the trustee of the Carr Family Trust. Prior to November 2018, Mr and Ms Carr were the trustees but thereafter DRCH became the trustee. Paragraph 43 refers to the period after December 2019, and so the earlier time when Mr Carr was a co-trustee of the Carr Family Trust may be put to one side.
The proposed pleading referred to “Mr Carr’s indirect interest in DPT”. This is said to be his “interest” as a “first group beneficiary” of the Carr Family Trust. As mentioned earlier in these reasons by reference to MSP Nominees Pty Ltd v Commissioner of Stamps (**SA), it does not assist analysis to introduce the language of equitable or beneficial interest when dealing with a discretionary object. The Carr Family Trust was a discretionary trust with a wide range of discretionary objects, including Mr and Ms Carr, their children, their grandchildren and any further issue, the spouses of any of the above, any private company of which any of the above were members, any trustee of a trust of which any of the above was a beneficiary, and any religious institution or charity. The trustee had a broad discretion to distribute or apply capital and income, subject to the condition that if it chose not to distribute income, the “first group beneficiaries” were deemed to have the income distributed to them in equal shares.
These grounds identify particular factual findings challenged on appeal. Ground 6 asserted error at [238] when the primary judge found there was no evidence of any proposal having been put forward by the Carrs for consideration by the Darbalara board of redemption of the units for their fair value, and maintained that instead his Honour should have found that the Carrs enquired in July 2020 whether the Ritossas would allow Darbalara Holdings to redeem their units, to which the Ritossas expressed opposition, with the result that there is “no real prospect of DRCH’s units in the Trust being redeemed by Darbalara Holdings for a fair value commensurate with the realisable market value of the assets of the Trust”. Ground 7 challenged the finding at [215] that there was no evidence that if the Ritossas called a directors’ meeting the Carrs did not attend, the meeting could or would proceed and decisions would be made in the absence of the Carrs. This ground maintains that the primary judge should have found that the Ritossas indicated on 5 October 2021 by email, from which they have never retracted or resiled, that if the Carrs failed to attend a board meeting without prior notice and without what the Ritossas considered to be a genuine reason, then the Ritossas would proceed with the meeting and pass board resolutions they considered to be in the best interests of the trust. Ground 8 challenged the finding at [255] that the breakdown in the relationship between the Carrs and the Ritossas had not led to any deadlock nor caused Darbalara Holdings to cease to function properly, and maintained that instead his Honour ought to have found that there were a series of deadlocks, some of which were eventually resolved after protracted dispute, others remaining deadlocked, including importantly whether some or all of the properties should be sold, and that this “has caused Darbalara Holdings to cease to function properly and with its previous informality”.
Each of these grounds raises a relatively discrete issue. It is convenient to address each in turn.
The finding at [238] is relevantly as follows:
… it would be a matter for the directors of Darbalara Holdings at the time of a redemption request to determine whether it was appropriate to redeem the units of DRCH at their net realisable value. No doubt a relevant matter would be whether a new unit holder was prepared to subscribe for units for an amount equal to the proposed redemption amount. I note there is no evidence that any such proposal for redemption of DRCH’s units has been put forward for consideration by the directors.
Please obtain your clients instructions whether they will agree to:
a. the termination of the Trust by the orderly distribution of Trust property to the unit holders; or
b. the company redeeming the Carrs’ units for half the current net market value of the Trust’s assets.
Failing agreement to a. or b. above our clients will move the Court for the appointment of a receiver to realise and distribute the Trust property.
Termination/r****edemption request
Our clients do not agree to the termination of the Trust. Nor do our clients agree to Darbalara redeeming the Carrs’ units.
Our clients have a significant financial exposure to the Trust, and at this stage do not wish to increase that exposure. Nor do our clients have any desire to realise the Trust’s assets, particularly in circumstances where the Trust’s property has been seriously mismanaged and where, consequently, the realisable value of the Trust’s assets at this time is likely to be significantly depressed.
We also remind your clients that there is a mechanism in the Trust Deed for your clients to sell their units in the Trust if they wish to do so (see Schedule 3 of the Trust Deed) – the threat of proceedings appears nothing more than an attempt by your clients to circumvent the procedures laid down in the Trust Deed prepared by Sydney Business Lawyers.
The difference between the solicitors’ letter inviting consent to winding up or redemption, and a formal proposal for redemption to the board is significant. The latter would flesh out the dispute between the parties as to the value of the units. It would also lead to the very mechanism mentioned by the Ritossas’ solicitors’ letter, because on any view, the value of the Carrs’ parcel of units, which did not command control of the unit holders, would have been less than 50% of the realisable value of the trust assets, and that in turn would necessarily lead to investigations as to whether a third party might be interested in acquiring that parcel of units.
In further response to this ground, the respondents observe that the failure to redeem units did not form part of the Carrs’ pleaded oppression case, and they add that it could not be a breach of directors’ duty, or oppressive, for the directors to refuse to have the trustee exercise its discretion to accept a redemption request when the request would lead to the sale of the principal assets for which the trust had been created.
To this, the Carrs’ written submissions respond that the refusal to redeem was pleaded. However, the submissions reference four paragraphs in the amended points of claim, none of which refers in terms to redemption, and each of which refers to the Carrs’ request that the “joint venture” be terminated. But there is a significant difference between winding up or terminating the trust – which brings the relationship to an end – and a redemption of units, which preserves the trust relationship in relation to the trust assets that continue. This is no mere nicety of nomenclature. A redemption requires the determination of fair value, and a discretionary decision of the trustee to pay; a winding up involves a process where the amount to be received by each unit holder is determined as a result of the process, rather than by reference to a value determined at the outset.
In relation to non-attendance at board meetings, the Carrs complain of a passage at [215]:
The Carrs sought to reduce the frequency of board meetings, but the Ritossas refused. Under the Constitution of Darbalara Holdings, any director can call a meeting on giving reasonable notice to the other directors and a quorum for a meeting is two directors. Hence, if the Ritossas call a directors’ meeting and the Carrs do not attend, the meeting could proceed and make decisions in the absence of the Carrs, if they did not attend. However, there is no evidence that this has occurred and on the one occasion where the Carrs failed to attend a meeting, the Ritossas did not proceed to propose or pass any resolutions. The meeting was reconvened on 13 October 2021.
There is no challenge to the accuracy of anything said in that paragraph. Instead, the gravamen of ground 7 is an email from Mr Ritossa to the Carrs saying “if [the Carrs] do not want to attend further meetings and don’t give [the Ritossas] notice and a genuine reason, we will just proceed with the meeting and pass any resolutions we think are in the best interests of [the trust]”.
However, as the Ritossas submit, there has not been an occasion to test what would occur if the Carrs failed to attend a properly convened directors’ meeting. Further, there is nothing unreasonable in a director maintaining the stance advanced by the Ritossas. If a directors’ meeting is properly convened, and is quorate, then each director in attendance is, after all, under an obligation to act in the best interests of the company.
Finally, ground 8 concerns paragraph [255], which in turn refers to some years of transcripts of meetings of directors:
I have carefully considered all the evidence regarding the dealings between the directors since December 2019, in particular the transcripts of the meetings of directors in that period, and do not consider that the breakdown in the personal relationship has led to any deadlock or caused Darbalara Holdings to cease to function properly. To the contrary, the board has functioned properly, albeit sometimes after vigorous debate on the issues before it.
And any director can call a meeting, and if a meeting is called by the Carrs and the Ritossas don’t attend then the Carrs could put forward all sorts of resolutions, and then they could vote to liquidate the assets and distribute moneys or something like that. And likewise if the Carrs don’t attend the Ritossas could vote to do the opposite; issue more units and require a capital injection or something like this: each side holds a gun at the head of the other. There is no way out of this situation because you just have to go on attending the director’s meetings indefinitely. There is major penalty implicit if you don’t.
That submission does not grapple with the fact that the appellants need to set aside an evaluative finding of the primary judge who had the benefit of seeing the evidence unfold. Moreover, the premise of this submission is incorrect. There is no obligation for Mr or Ms Carr to attend every board meeting personally. Either or both may, subject to the Ritossas’ approval, appoint alternate directors, pursuant to s 201K of the Corporations Act (a replaceable rule which is part of the Constitution). For example, Ms Carr, who gave evidence that she felt “intimidated and bullied” by a meeting which she said “was effectively conducted by Marina” and who was not a director for the first five years of the operations of the trust, might be replaced by an alternate director. The Ritossas’ approval is required, but so far as the evidence goes, it has not been sought let alone refused. When it was raised during the hearing, the response was that there might be few people willing to act, and those who were willing would no doubt charge fees. The response may be accepted, but I am unable to accept that the result is that this contributes to a conclusion of statutory oppression. The structure of evenly divided interests, with no provision for resolving deadlock, was the parties’ informed choice at the outset.
The second response was encapsulated in the following submission:
Your Honours, there is a difference between a complete absence of functionality on the one hand, but a failure to function as a board ought properly function, and in my submission, things like the Brungle Road matter and the Darbalara Homestead matter do not show directors acting in a reasonable manner to resolve the issues.
As will be seen when addressing ground 2, the primary judge was entitled to reach the opposite conclusion, which in essence was that while there was, at least for a time, a division of opinion on a variety of operational matters, that reflected different business judgments by the Carrs and the Ritossas.
These grounds are not made out.
Ground 2 was very lengthy (it occupied almost 3 pages). It identified 19 factual propositions accepted by the primary judge and complained that his Honour erred in not concluding that oppression within the meaning of s 232(d) or (e) was established. But it fell short of identifying any particular error of fact or law, instead maintaining that the primary judge had erred in failing to reach the conclusion of statutory oppression.
The primary judge summarised the pleaded instances of oppression at [207] as follows:
The pleaded instances of oppression in paras 43-44 of the APOC, read with the affidavits of the Carrs of September 2020, which are identified in para 21 of the APOC as providing details of the disputes over management of DPT and the plaintiffs’ oral closing submissions, can be conveniently grouped as follows:
(1) Since December 2019, the directors of Darbalara Holdings have been deadlocked regarding the following matters: (a) the long-term goals of DPT; (b) whether the Brungle Road property should be sold; (c) the conduct of board meetings; (d) CACM’s role as farm manager and finding a replacement farm manager; (e) the Carrs having sole control of Darbalara Holdings’ bank accounts; (f) the use to be made of the Homestead property; (g) finalising the 2020-2021 budget; (h) staff communications and stability.
(2) The Carrs believe that the assets of DPT ought to be realised and distributed to the unit holders in proportion to the units held, whereas the Ritossas believe that no steps should be taken to wind up the affairs of Darbalara Holdings and that DPT should continue to trade indefinitely.
(3) A disagreement between the Carrs and the Ritossas as to whether Darbalara Holdings should repay unit holder loans and make income distributions to unit holders.
(4) The mutual trust and confidence between the Carrs and the Ritossas has irretrievably broken down.
Thereafter, over 14 pages of reasons, the primary judge addressed each of those matters in turn. No issue was taken when the appeal was heard with the course adopted by the primary judge, which is, with respect, an appropriate and efficient way of dealing with the wide-ranging multi-aspected complaint advanced by the Carrs.
His Honour dealt with the various minor ways in which Darbalara Holdings was said to be deadlocked by findings which may be summarised as follows.
In relation to the Brungle Rd property, there had been a difference of opinion, which amounted to a question of timing (the Ritossas wishing to wait until a new farm manager was appointed before selling it) falling into the category of a legitimate difference of opinion on a matter of business judgment.
In relation to board meetings, they were now recorded, and were much more formal affairs than had previously been the case. While it was clear that the Carrs found the meetings unpleasant, they reflected an attempt by the directors to resolve various issues, and more recently (following the appointment of SouthernAg) it was Mr Pilkington rather than the Carrs who had to report and answer questions on many operational matters. Despite the unpleasantness, the discussions do not indicate that the board was unable to function. To the contrary, all of the issues which came to the board have been resolved, save for the conflict that the Carrs wish the trust to be wound up and the Ritossas wish for it to continue.
In relation to the management of the farm, ultimately in June 2020 the Carrs agreed to have their company replaced, and this occurred in June 2023 with the appointment of SouthernAg. The delay could not be blamed on the Ritossas because the Carrs rejected each of three candidates proposed by Mr Lucas, the search consultant whom the Carrs preferred. Although there was a dispute as to the performance of the Carrs’ company CACM as farm manager, that was another matter which fell into the category of a legitimate difference of opinion as to a matter of business judgment.
In relation to the signing rights of bank accounts, the matter was resolved by the Ritossas becoming joint signatories, with a process for each family to review certain expenses being agreed in August 2020.
In relation to the homestead, there were short term disagreements in June and July 2020 concerning the terms of the lease, but these were resolved. The delay thereafter, until the managers gained possession in April 2021 was not attributable to either the Carrs or the Ritossas. After the manager resigned there was agreement that the replacement manager would move into the homestead. The primary judge was satisfied that the “few disagreements that there were in relation to the form of the lease” fell within the category of legitimate disagreement about matters of business judgment.
as the defendants submit, it is not oppressive for a non-controlling shareholder to not get their own way. This has been recognised in many cases where the person claiming oppression is a minority shareholder: Re M Dalley & Co Pty Ltd v Sims (1968) 1 ACLR 489 at 493; Australian Institute of Fitness Pty Ltd v Australian Institute of Fitness *(*Vic/Tax) Pty Ltd *(*No 3) [2015] NSWSC 1639 at [94]; Shelton at [24]. In the present case Mr Carr is not a minority shareholder, but rather a 50:50 shareholder with Mr Ritossa under a structure chosen by each of them to protect their interests through the right of veto which each has over the other. This comes about because the parties chose a structure of a unit trust with a corporate trustee, the shares of which were held by Mr Carr (one share) and Mr Ritossa (one share), each representing their respective families, and the directors of which have always been Mr and Mrs Ritossa and Mr Carr, together with his father until he was replaced by Mrs Carr in 2015.
By resolution made by the directors in 2017, no decisions at the board level can be made unless all directors agree. It is the inevitable consequence of this structure that there will be occasions when each shareholder will not get his way, but through the right of veto each is protected against decisions adverse to the interests of the family group which each member represents.
I agree. Further, I did not understand the appellants to submit that there was any error in that reasoning.
The remaining aspect of this ground concerns the acknowledged and ongoing dispute about whether the trust should be wound up. This goes to the heart of the dispute between the parties. The primary judge addressed it extensively, and his Honour’s reasons warrant extensive reproduction. His Honour said at [233]-[243]:
Whether the Trust should be wound up
It is clear that since late December 2019, the Carrs and the Ritossas have been in disagreement as to whether DPT should be wound up (as the Carrs desire) or continue indefinitely (as the Ritossas desire).
The Carrs point to what they say is Mr Ritossa’s erratic and contradictory attitude to winding up the Trust, in that in August 2019 he ‘insisted’ that DPT should sell all its assets and be wound up only to turn around in December 2019 and inform Mr Carr that he wished DPT to continue but with a new farm asset manager in place of CACM. The Carrs say that they are now in the invidious position where their equity is ‘locked up’ in DPT in circumstances where:
(1) There is no present prospect of DRCH receiving distributions of income or repayments of unit holder loans other than at the discretion of the Ritossas, contrary to the pre-2019 practice of DPT;
(2) There is no real prospect of DRCH’s units in DPT being sold to a third party for a value commensurate with the realisable market value of the assets of the Trust;
(3) There is no real prospect of DRCH’s units in DPT being redeemed by Darbalara Holdings for a fair value commensurate with the realisable market value of the assets of DPT;
(4) Should DRCH seek to sell its 50% interest in DPT by a sale of its units, this would be at a significant discount to the net asset value of DPT’s assets (as shown by the valuation evidence) and the Ritossas have a right of pre-emption which they have not waived, which will allow them to acquire DRCH’s 50% interest at that discounted price.
There are a number of difficulties with this submission. First, the question of whether the Trust should be wound up or continue is a matter for the unit holders and not the Trustee: see cl 9.1 of the Trust Rules.
Second, the proposition in (1) is not correct for the reasons explained under the next heading.
Third, the proposition in (2) is a consequence of the structure adopted by the parties to hold their interest in the assets of DPT, (that is by way of a unit holding in the unit trust), rather than a direct 50% interest in the underlying assets of the Trust. That choice of structure was made by the parties, and the resulting disadvantage in value does not involve oppressive conduct. Hence, the complaint by the Carrs that the Ritossas have refused to buy DRCH’s units in DPT for the price offered by DRCH (which reflected a percentage of the value of the net assets of the Trust) is not surprising or relevant to any question arising under s 232. The Ritossas have no obligation to purchase DRCH’s units for a price other than that reflecting the market value of the units.
Fourth, the proposition in (3) may be correct, but it would be a matter for the directors of Darbalara Holdings at the time of a redemption request to determine whether it was appropriate to redeem the units of DRCH at their net realisable value. No doubt a relevant matter would be whether a new unit holder was prepared to subscribe for units for an amount equal to the proposed redemption amount. I note there is no evidence that any such proposal for redemption of DRCH’s units has been put forward for consideration by the directors.
Fifth, in relation to (4), Mr Ritossa gave evidence that the reason he has not waived the right of pre-emption conferred under the Trust Rules is that he wants to have control over who comes in as a 50% co-owner with the Ritossas in DPT. I accept that evidence. However, I note that a decision not to waive the pre-emption right is not oppressive conduct because it is a decision of the unit holder, not conduct of Darbalara Holdings to which s 232 could apply.
There is no evidence to suggest that the Ritossas are seeking to force the Carrs out of DPT and secure a 50% interest (held through DRCH) at a discount. In particular, the Carrs have significant other assets and are not forced sellers for financial reasons. Their desire to sell comes about, on their case, because they no longer wish to be in business with the Ritossas. However, as already indicated, while the personal relationship between the Carrs and the Ritossas appears to have broken down, the working relationship has not.
Part of the complaint made by the Carrs in relation to the Ritossas’ unwillingness to wind up the Trust is that the Carrs say it is inconsistent with Mr Ritossa’s insistence during the period between 31 August 2019 to 7 December 2019 that the assets of DPT be sold and DPT be wound up. In my view, the evidence does not support the proposition that Mr Ritossa insisted on DPT’s assets being sold or that the Carrs purchase his half share.
In Mr Ritossa’s email of 4 September 2019, he explains why he wants to sell his interest and then goes on to say: ‘I’m happy for you to buy my half share if we can agree on a price. Is that something you would consider and able to do?’. There followed further discussions about a possibility of the Carrs purchasing the Ritossas’ half share, although the Carrs’ preference was that The Junction would be sold, and the Carrs would purchase Bogolara.
Ultimately, Mr Ritossa changed his mind and informed Mr Carr of this in December 2019. He explains in his evidence the reason for changing his decision to sell his interest in DPT. In my view, Mr Ritossa’s change of approach to selling his interest in DPT has no bearing on the disagreements which arose from December 2019 regarding the management of DPT’s farm assets and Mr Ritossa’s decision not to agree to wind up DPT. It is to be explained by his decision that with a change of farm asset manager, the operations of DPT would be likely to improve.
The respondents were highly critical of the approach adopted in the appellants’ written submissions of merely asserting the findings sought, and claiming that oppression was made out. That submission has force.
First, this Court is obliged to conduct “a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge’s reasons” and to undertake the task of “weighing conflicting evidence and drawing [their] own inferences and conclusions”: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [25]; Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [32]. But nonetheless, as Gageler J explained in the latter case at [30], “the existence of an error, whether of law or fact, on the part of the court at first instance is an indispensable condition of a successful appeal”. It is unnecessary in the present case to consider this in any detail (although the reasoning in JBS Australia Pty Ltd v SafeWork NSW [2024] NSWCCA 209 at [24]-[29] illustrates how those propositions may be more nuanced than they might appear). The simple point is that there is force in the criticism that merely reciting parts of the evidence and inviting this Court to reach a different conclusion is not an approach likely to result in the conclusion that there was error warranting allowing the appeal.
Secondly, it is trite that a court should be reluctant to find oppression. A mere failure to agree is usually not oppressive, and it has been observed that courts should exercise restraint in being satisfied that s 232(e) has been made out: see for example Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; 28 ACSR 688 at 740. The reason for the caution was identified in Wayde v NSW Rugby League Ltd (1985) 180 CLR 459 at 467-8; [1985] HCA 68: “in order to avoid an unwarranted assumption of the responsibility for management of the company”. To this may be added, in cases of equal ownership, the point made by one commentator:
A corporation with an even split of share capital operates on the basis of co-operation and unanimity in decision-making between its members. As the threshold is unanimity, when two people incorporate a company and disperse its share capital into two equal shares, they accept the risk at the time of incorporation that disagreements might arise at some later time. They each hold an equal stake, and their entitlement is also equal vis-à-vis one another when it comes to proposing courses of action or voting in favour of what they consider would best serve their own interests. The risk and emergence of stalemates are ordinary incidents of the democratic structure they elected. Accordingly, to constitute oppression something more is required than a simple failure to pass a particular resolution important to the company due to a difference of opinion between its two members: N Angelakis, “The Intersection of Deadlock and Oppression: A ‘No-fault Divorce’ for the Members of Closely Held Corporations” (2020) 37 C&SLJ 512 at 520.
Thirdly, it is also trite that this Court should exercise a degree of deference in reviewing the evaluative judgment of a judge who has seen the entirety of the evidence as it unfolds, including the cross-examination of all natural persons involved, and whose reasons inevitably will fail to capture every aspect: Biogen Inc v Medeva plc [1997] RPC 1 at 45; [1996] UKHL 18. As Lords Neuberger and Mance reiterated in Chen v Ng *(*British Virgin Islands) [2017] UKPC 27 at [56], the reasons of the trial judge are an inherently incomplete statement of the impression made upon his Honour by the primary evidence, which is a further factor telling against appellate interference.
That is why an inevitably selective focus on the low points of the history of the last four years between the Carrs and the Ritossas, followed by an invitation to this Court that it reach a different conclusion from that reached by the primary judge, without in terms identifying where his Honour fell into error (unlike grounds 6, 7 and 8), is unpersuasive.
It is nonetheless worth reproducing the respondents’ submissions on the key issue of value. The respondents said:
A central factual finding which is asserted is that the Carrs cannot realise DRCH’s interest in the Trust for anything other than a “considerable discount”. Such a finding is not open. The Carrs received various offers to purchase DRCH’s units, for $7.75m, $8m, a second offer for $8m and $9.1m. These last two offers were made following a sales campaign Ray White had managed for the Carrs. Thus, it is clear there is a market for the units. Importantly, at the time these offers were made the expert valuation evidence suggested that DRCH’s units were valued at between $6.1m and $8.2m [as the primary judge noted at [98]]. This expert evidence was updated at the time of the trial, and due to recent increases in rural property value, the value of the DRCH’s units increased to between $9.48m to $12.06m [as the primary judge noted at [102]]. At trial, the valuations were not challenged by the Appellants and were accepted. Further, there was no evidence adduced during the trial showing any attempt by the Carrs to negotiate for a higher sale price with any of the offerors.
There is no doubt that the value of the DRCH’s units is less than 50% of the net assets of the trust. That is a function of the structure the parties agreed to put in place for their investment, which was driven partly by the tax benefits to be derived by that structure. The expert identified that the structure reduced the pool of potential purchasers for the units, which was consistent with feedback the Carrs received from PwC and Ray White. Thus, the difference in value between the units and the net assets is no function of unfair conduct by the Ritossas. Rather, the reality is, “[h]aving chosen the structure they did, the parties must live with the consequences”.
Importantly, as the Primary Judge held at PJ [240], there was no evidence that the Ritossas were seeking to force the Carrs out of the Trust to secure their units at a discount and the Carrs have significant other assets and so are not forced to sell. Nor was such a case pleaded or put to the Ritossas (cf Appeal Ground 3(e)).
Thus, it is merely the Carrs’ preference to realise their investment for more than the value of their units in the trust, on the mistaken premise they are entitled to 50% of the net assets of the Trust on demand. [most notes omitted]
I did not understand there to be any challenge to any aspect of the above – either the actual indications of value on the evidence which emerged from the attempts to secure a purchaser, or the general proposition that the sale of a 50% interest would realise less than the amount realised on the winding up of the trust. I agree with the respondents’ submission. To be clear about the basic point, I would readily accept that the market value of the 50% parcel of units owned by DRCH is appreciably less than the proceeds which would be achieved if the trust assets were sold, debts repaid and the surplus distributed to unit holders proportionately. But there is nothing oppressive about that. It simply reflects the value that the market attributes to a parcel of units which are unable to control a meeting of unit holders.
This ground is not made out.
This ground identified further findings which, so it was said, the primary judge should have made, which in conjunction with the findings identified in ground 2 should have led to the conclusion of oppression.
The additional factual findings were identified in paragraphs (a)-(e) of this ground. Paragraph (a) was the findings in grounds 6, 7 and 8, which have been addressed above.
Paragraph (b) was the finding that there was intractable disagreement as to the continuation of the Darbalara Property Trust, to which was added that the Ritossas have refused to waive the right of pre-emption, so as to be able to acquire the appellants’ interests in the trust at a lower price. The primary judge made a finding that Mr Ritossa was not prepared to waive the right of pre-emption because the identity of a new co-owner was a matter of significance to him. There is no challenge to that finding, which in any event is one that this Court would not disturb. Otherwise, this paragraph does not go further than the legal consequences of the structure chosen by the appellants in the event of a disagreement with the Ritossas.
Paragraph (c) was a series of findings as to the cause of the breakdown in relations, namely, accusations by the Ritossas that the Carrs had “grossly mismanaged the properties throughout the drought”, had “acquired the Gilla Willa property through a conflict of interest”, unreasonably refused the Ritossas buying the homestead for their own private use, and were financially overcommitted so that they were no longer capable of acquiring new properties. These matters were not elaborated in the appellants’ written submissions. Most seem not to have been pleaded. The primary judge made no finding as to the cause of the breakdown, and it was not suggested that this Court would be able to do so.
Paragraph (d) was that since December 2020 there have been board disagreements “some of which were ultimately resolved but that has only occurred after months of disagreement between the directors, with correspondence between the directors and their respective lawyers and with the threat of this litigation hanging over the parties”. All that may be so, but it does not materially contribute to a finding of statutory oppression.
Paragraph (e) is very lengthy. Its key points are the earlier practice of distributions from the Darbalara Property Trust which had ceased, and the absence of any real prospect of the appellants exiting “for a fair value commensurate with the realizable market value of the assets of the Trust”, in circumstances where the Ritossas are aware of the Carrs’ wishes, including that they had incurred significant debt in acquiring Gilla Willa. Much of the paragraph is framed around the language of this Court’s judgment in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; 288 ALR 310 at [205]-[206]. The paragraph commences that the Ritossas “whether by design or just the effect of their actions” brought about those consequences. However, in oral submissions, Mr Birch SC acknowledged when this was raised that “we didn’t put in an affirmative case that the Ritossas acted with a particular ulterior motive, which was an improper one”. Insofar as the paragraph asserts the difference between the market value of the units held in the Carr Family Trust and what would be realised on the winding up of the trust, it seems to be that difference which drives this litigation, but far from being indicative of oppression it is the consequence of the structure chosen by the parties in an informed way in 2010.
Further, and in the alternative, the Primary Judge erred (Judgment [279] to [284]):
a. by erroneously finding, as a matter of law, that an order could not be made at all that a receiver be appointed to wind up the Trust on just and equitable grounds in Equity following the doctrine referred to in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (Ebrahimi);
b. by erroneously finding, as a matter of law in New South Wales, that even if an order could be made that a receiver be appointed to wind up the Trust on just and equitable grounds in Equity following the doctrine referred to in Ebrahimi, it could not occur in this case because an application had not also been made by the appellants under sections 461 or 601 ND of the Corporations Act 2001 (Cth); and
c. by not proceeding to find as a matter of fact and law, that the conduct of the affairs of Darbalara Holdings and the Trust were such that, a receiver should be appointed to wind up the Trust on just and equitable grounds, by realising the assets of the Trust, paying out all liabilities of the Trust (including the Trustee’s right to reimbursement or exoneration for the discharge of liabilities incurred in the administration of the Trust) and distributing thereafter the net property of the Trust to the unit holders in accordance with their unit holdings in the Trust.
Grounds 9(a) and (c) asserted that there was a basis, on or analogous to the “just and equitable ground” for winding up a company, to appoint a receiver to wind up the Darbalara Property Trust. This was at the heart of this ground as advanced in the appellants’ written and oral submissions.
Ground 9(b) is in a different category. It is directed to a particular aspect of the reasoning of the primary judge, namely, his Honour’s observation that in the absence of an application to wind up the trustee Darbalara Holdings, no relief could be ordered.
The irretrievable breakdown of the friendship, the continuing dispute between the parties, the Ritossas’ refusal to agree to terminate the joint venture, and the inability of the Carrs and the Ritossas to work together cooperatively, make the ongoing management and operation of the joint venture unworkable and thereby puts in jeopardy the assets held by Darbalara Holdings on trust for DPT warranting the appointment of a receiver to DPT and ancillary orders.
(d) An Order that, unless the Ritossas come to an arrangement satisfactory to the Carrs and Ritossas for the termination of the joint venture within 14 days, a Receiver be appointed pursuant to s67 of the Supreme Court Act 1970 (NSW) to realise the assets of DPT, discharge DPT’s liabilities and pay DPT’s expenses;
(e) Orders for the distribution of the net assets of the DPT unit trust to its unit holders and such consequential and ancillary orders as the Court considers appropriate to give effect to that purpose;
(f) An Order that the DPT unit trust be at an end.
where there is a relationship that might be described as akin to a partnership arrangement, where mutual trust and confidence is necessary for the operation of the arrangement or structure, then equity ought to intervene when that substratum has failed, and it ought not to matter whether the formal structure is a corporation, a partnership between individuals or, as in this case, a unit trust.
The irretrievable breakdown in the relationship between the parties, in circumstances where the confidence between the unit holders and directors of the trustee was material to the relationship, was said to justify the court’s power to terminate the trust, in the same way a partnership could be dissolved under s 35(f) of the Partnership Act 1892 (NSW), or a corporate “quasi-partnership” could be wound up under s 461(1)(k) of the Corporations Act, where “just and equitable”.
The respondents said, and the appellants acknowledged, that their submission elevated what was said by Lord Wilberforce in the course of construing an express statutory power to wind up a corporation on “just and equitable” grounds into a “general equitable power” to terminate a trust relationship. It was candidly acknowledged that the submission was “novel”. But the appellants submitted that the power to do so was but an instance of the Court’s “inherent equitable jurisdiction” to protect trust property from waste. They also called in aid Basecove Pty Ltd v Dolores Lavin Management Ltd [2009] NSWSC 1315 and Accurate Financial Consultants Pty Ltd v Koko-Black Pty Ltd [2008] VSCA 86, which were said to contemplate the possibility of appointing a receiver to realise trust assets and make final distributions to unit holders where the mutual trust and confidence between the managers had failed and thereby “jeopardised” the trust property.
The primary judge rejected those submissions for three reasons.
First, the primary judge emphasised that the considerations drawn from Ebrahimi – that a relationship that was in substance a “quasi-partnership” could be dissolved where the trust and confidence between the parties had failed – were made in the course of construing the words “just and equitable”, and determining the scope of a statutory power to make orders winding up a company. They were not intended to, and should not, be elevated to general propositions that could stand independently of the statutory power given by s 222(f) of the Companies Act 1948 (UK) and its counterparts.
It will be recalled that the appellants sought the dissolution of the trust relationship. In those circumstances, the primary judge held that it was “not open” to the appellants to rely on the considerations outlined by Lord Wilberforce in Ebrahimi as a sufficient basis for this Court to appoint a receiver where they had not sought final relief under s 461 of the Corporations Act. The analogies made with partnerships in Ebrahimi “provide[d] no assistance to the plaintiffs’ application for the appointment of a receiver under a different statute or the inherent jurisdiction of the Court”: at [283].
Secondly, the relief sought by the appellants misunderstood the nature and function of the Court’s power to appoint a receiver. Had the appellants sought and obtained an order winding up Darbalara Holdings under s 461 of the Corporations Act, “there would have been an argument available to them that a receiver should be appointed to the trust property under s 67 of the Supreme Court Act or the inherent jurisdiction of the court relying on the principles stated in Ebrahimi: see Re Admiral Cove Pty Ltd [2023] VSC 537 at [65]; Re Munja Bakehouse Pty Ltd [2024] NSWSC 6 at [30]; cf Mir v Mir at [121]”.
Thirdly, the primary judge held that the decisions cited by the appellants did not support the proposition for which they contended. In Basecove, Brereton J made orders appointing a receiver to wind up a unit trust not merely because the trustee was in deadlock, but because it was also shown that “the financial position of the trust was tenuous at best” and that “the relevant entities…were subject to a substantial deficiency of funds and trading at losses” as a result of that deadlock. The findings that the primary judge made about Darbalara Holdings’ continuing ability to manage the trust assets therefore meant that
Basecove is distinguishable from the present case for at least two reasons. First, the trust property is not in jeopardy. Second, the directors of the trustee are not, for the reasons already given, in deadlock and, in any event, there is a process under the Trust Deed for resolving any deadlock (being for the transfer of units through the regime contained in the Trust Rules).
In Koko-Black, the primary issue was whether minority unit holders in a unit trust could restrain the trustee from acting on a notice to compulsorily acquire their units. Although the minority unit holders invoked “the Ebrahimi principle” and pleaded that the parties owed fiduciary obligations to each other, the relief they sought was not the dissolution of the unit trust which they suggested was a “quasi-partnership”, but injunctive relief restraining the compulsory acquisition of their shares.
Further, the primary judge considered that the decision of the Victorian Court of Appeal in Koko-Black was “no more than a recognition that mutual fiduciary duties can apply, on the facts of the particular relationship, between persons who are investors in a unit trust notwithstanding that the structure they have chosen is a unit trust, rather than a partnership”. The primary judge stated at [275] that those considerations could not apply to the present case, where a fiduciary relationship between the Carrs and the Ritossas was not pleaded:
The plaintiffs have not pleaded that the relationship between the Carrs and the Ritossas was a fiduciary relationship. Nor would such an argument be open on the evidence. A fiduciary relationship requires the assumption of responsibility to act for, or on behalf of, the interests of another, in the exercise of any power of discretion affecting the interests of the principal in a legal or practical sense: Commissioner of State Taxation v Cyril Henschke Pty Ltd (2010) 242 CLR 508; [2010] HCA 43 at [21]. The evidence does not support the suggestion that the Ritossas assumed such a responsibility to the Carrs, or vice versa. Further, the Carrs and Ritossas expressly rejected the use of a partnership in May 2010 and cl 3.1 of the Trust Rules disclaims a partnership relationship.
The appellants’ submissions in this Court largely mirrored their submissions on this issue in the court below, but with one expansion. Perhaps reflecting an appreciation of the difficulties resulting from the finding by the primary judge at [266] that “there is no evidence that the trust property is in jeopardy”, the appellants extended this submission from one focussed on jeopardy to the assets of the trust to a “novel” argument that, “leaving jeopardy on the side, there [are] grounds to appoint a receiver on the just and equitable ground by analogy with the way in which the Court has wound up companies”.
In support of ground 9(a), the appellants contended that “[t]he Primary Judge ought to have held the doctrine in Ebrahimi is part of Australian jurisprudence generally” and has been “incorporated into the inherent jurisdiction” of the Supreme Court or "in the principles governing the exercise of the power in section 67 of the Supreme Court Act 1970 (NSW)”. The appellants said that “[f]undamental to the law of trusts is that Equity Courts have jurisdiction to supervise, and in appropriate circumstances intervene in, the administration of a trust” but then added, “for which one of the oldest remedies is appointing a receiver”. The respondents disputed the latter proposition, insofar as the appellants maintained that the appointment of a receiver to wind up a trust was an incident of that inherent jurisdiction. They submitted that Ebrahimi was concerned with statutory interpretation rather than with “the development of some general common law doctrine for intervention on just and equitable grounds absent statute” and that, “absent an overarching partnership, the law in Australia is clear – Courts will not appoint receivers to wind up a trust”.
The respondents maintained in oral address that the appointment of a receiver to wind up the trust “is problematic” because it is in substance “a final order”:
It’s not in support of any other order. It’s not in support of some prospective order that's going to be made. It’s not an interim preservation order of any kind. It is intended to operate finally.”
The appellants submitted that there was nothing in s 67 to suggest that a power to appoint “can only be exercised prior to the making of final orders” or that “a receiver cannot be appointed in order to give effect to final orders made by a Court”.
To a large extent this situation has arisen because of the structure the three brothers put in place, which was driven by the tax benefits to be derived from that structure rather than the need to put in place a legal structure which would enable the business as a whole easily to be passed on to their children or wound up if (as has happened) it became evident that their children, for whatever reason, could not continue the business together. Having chosen the structure they did, the parties must live with its consequences. As Young J explained in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 694-695:
Unfortunately, it very often happens in cases in this court that a person has arranged his affairs for commercial or fiscal reasons employing a particular structure, which with respect to creditors and the Government he expects to be recognized as no sham, but when it comes to a dispute with his former wife or former business associates it is not in his interests to maintain the structure and he pleads before this Court that one must not look at the structure at all but rather at the “realistic” or “practical” effect of what has happened. I do not find this sort of submission attractive. So long as the law permits people to erect structures which have meaningful legal consequences then if a person elects to erect such a structure he must take the consequences of such erection for better, for worse, for richer or poorer, in commercial sickness or commercial health.
The conclusion reached by Ball J above, and the observations made by Young J cited by his Honour, resonate with the decisions made by the Carrs and the Ritossas in 2010. However, the present litigation is very different from that involving the Mir brothers in two key respects.
First, the appellants do not invite this Court to characterise their business as being operated by a partnership or as involving fiduciary obligations between themselves. That would have required pleading, and would face very substantial obstacles having regard to the informed way in which the Darbalara Property Trust was established and its financial and taxation treatment over many years, as the primary judge observed at [275] which is reproduced above. Instead, rather than inviting this Court to override the formal structures to which they agreed so as to engage the law of partnership, the appellants invite this Court, in substance, to extend the remedies available to unit holders of a unit trust who are also jointly in control of the trustee so as to permit the winding up of the trust in a way analogous to the winding up of a partnership or company.
Secondly, there is ground 9(b), which is reproduced above. This ground was not advanced separately from ground 9(a) in the appellants’ written submissions, either in chief or in reply. Nor did I understand it to have been developed orally.
As his Honour indicated at [279], there is an uncertainty in the existing authorities whether when there is an application to wind up a trustee, there is power to appoint a receiver to the assets of the trust. Of course, one of the assets of the trustee is apt to be its right to be indemnified out of trust assets for liabilities properly incurred, which right is secured by a lien over trust assets. I do not understand it to be controversial that there may be power to appoint a receiver in order to enforce the trustee’s lien over trust assets, as Brereton J observed in Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344 at [18], and as was common ground in the more recent litigation in this Court and the High Court in Jaken Properties Australia Pty Ltd v Naaman (2023) 112 NSWLR 318; [2023] NSWCA 214 at [116]; Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1 at [28] (although it may be noted in light of the submissions addressed below that the appointment of a receiver in such a case is interlocutory, with the majority judgment describing it as a form of “interim protection”). But no part of the appellants’ case was that the trustee should be wound up and in consequence a receiver should be appointed to wind up the trust. The likely consequence upon the trust of the trustee being wound up would be its removal as trustee and the appointment of a replacement trustee: see Whitton v ACN 003 266 886 Pty Ltd *(*Controller Appointed) *(*in liq) (1996) 42 NSWLR 123 at 156, and that would not assist the appellants in their goal of causing the assets of the trust to be sold and the proceeds distributed to unit holders.
in the event that there isn’t jeopardy in the sense of an actual physical loss of an asset or a risk of substantial financial loss to the trust foreseeable in the immediate future, but that there is such a breakdown of trust in confidence, then it is appropriate that there be a receiver appointed to the trust assets.
The respondents pointed out that that submission departed from the pleaded case set out above in the Amended Points of Claim, which was that receivers should be appointed on the basis that “the joint venture [became] unworkable and thereby [put] in jeopardy the assets” held by the trustee, and that no challenge was made to the finding at [266] that the trust assets were not in jeopardy. And to the extent that the appellants’ submissions now relied as the basis for dissolution on the proposition that the directors owed fiduciary duties to one another in the manner of a partnership, the respondents reiterated the primary judge’s concerns that a fiduciary relationship had not been pleaded and would seem inconsistent with the way the parties chose to organise the trust structure for taxation purposes.
The respondents also submitted that even if this Court did have power to appoint receivers in the circumstances suggested above, the fact that the parties had agreed in the Trust Rules precisely how the trust would be wound up and had devised a means for each party to sell their units provided strong discretionary reasons to refuse such relief.
the appellants never contended appointment of a receiver is based on the existence of fiduciary duties or a partnership - such limitation on the Ebrahimi doctrine does not exist. The issue is whether this was a legal relationship with mutual obligations of trust and confidence which attract the Court’s supervision; and whether the Court should apply those equitable precepts to this relationship. A structure with equal voting rights, with the absence of a tie-breaker, clearly depends on mutual obligations of trust and confidence. Unlike in statutory oppression, where commercial unfairness is required, the Ebrahimi doctrine is enlivened where there has been a breakdown of this trust and confidence aspect of the internal structure.
In order to resolve this ground, the starting point is to identify what “the doctrine referred to in Ebrahimi v Westbourne Galleries” or “the Ebrahimi principle” actually is. Referring to a legal principle by the name of a case is apt to conceal its true nature: Harris Health Care Pty Ltd *(*receivers and managers appointed) *(*in liq) v Hayes [2024] NSWCA 301 at [110], where references to what was said by Edelman J and Gummow NPJ on this point may be found. If the change in law which the appellants seek is to be made by reference to a “doctrine” or “principle” in a case, it is vital to understand what the case decided and in what context was the “doctrine” or “principle” enunciated. For it is of course quite wrong to take the language used in reasons for judgment in one context and apply it in another context simply because the language when read in isolation seems apposite (what was said of reliance upon Sayden above illustrates this).
First and foremost, Ebrahimi is a case about statutes. Antithetically to the appellants’ submission, it illustrates what Gummow J once described as “the supreme importance of statute law”: Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160; [2007] HCA 1 at [35]. The question was the scope of s 222(f) of the Companies Act 1948 (UK) authorising an order for the winding up of a company on the “just and equitable” ground. The reasoning in Lord Wilberforce’s speech commences as follows at 374:
the petition was brought under section 222 (f) of the Companies Act 1948, which enables a winding up order to be made if “the court is of the opinion that it is just and equitable that the company should be wound up.” This power has existed in our company law in unaltered form since the first major Act, the Companies Act 1862. Indeed, it antedates that statute since it existed in the Joint Stock Companies Winding up Act 1848. For some 50 years, following a pronouncement by Lord Cottenham LC [Ex parte Spackman (1849) 1 Mac & G 170, 174] in 1849, the words “just and equitable” were interpreted so as only to include matters ejusdem generis as the preceding clauses of the section, but there is now ample authority for discarding this limitation.
His Lordship proceeded to reject as wrong “a tendency to create categories or headings under which cases must be brought if the clause is to apply”, stating that “[i]llustrations may be used, but general words should remain general and not be reduced to the sum of particular instances”. The point is a basic one: a statutory power conferred in open-ended language such as “just and equitable” should not be confined by categories. This confirms the case was about the particular statutory power, found in the Companies Act 1948 and its ancestors going back to 1848, rather than in some principle of judge-made law.
Secondly, as Gummow J observed in Sons of Gwalia at [36], there is not some “general principle of company law” divorced from statute applicable to the winding up of a company. Lord Wilberforce made the same point. At the conclusion of his account on the relevance of quasi-partnership, he said that “[t]he foundation of it all lies in the words ‘just and equitable’”. It was not the other way around. And those words do not exist at large.
Thirdly, it is true that there was an interaction between the law of partnership developed by the court of Chancery and the nineteenth century legislation authorising joint stock companies. Sir Keith Aickin observed as much in his foreword to F Callaway, The Just and Equitable Ground, (Law Book Company, 1978), p x, by reference to the title of the first edition of Lindley’s work “The Law of Partnership Including its Application to Companies”. He also noted that the insertion of “just and equitable” as a basis for dissolution of a partnership in the Partnership Act 1890 derived from s 79(5) of the Companies Ac**t 1862, rather than from principles developed in courts; see also N Lindley, A Treatise on the Law of Partnership (1893, 6th ed) p 574-575, noting the same connection. (That is not to doubt that cases now regarded as falling under the “just and equitable” ground may have occurred prior to the legislation being enacted – see for example Lord Eldon’s decision in Waters v Taylor (1813) 2 V & B 299; 35 ER 333 dissolving the partnership operating the Italian Opera House, following numerous earlier applications brought by a partner with a 7/16 share: Waters v Taylor (1807) 15 Ves 10; 33 ER 658.) If the appellants had sought some extension to the principles applicable to partnership, then they would have been on much firmer ground in drawing upon Ebrahimi, because of the link between the law of companies and the law of partnership. But the appellants disclaimed reliance on a partnership or fiduciary relation between the Carrs and the Ritossas. Of course, the law applicable to trusts, and especially the circumstances when a trust relation comes to an end, is quite different from the law applicable to partnerships.
Fourthly, deed of settlement companies preceded joint stock companies. Before 1844, most joint stock companies were unincorporated and depended on a deed of settlement vesting the property of the company in a trust for the benefit of members: L Gower, (Stevens & Sons 1954), p 136, and see A Black, Development of Corporations Law (paper presented to Francis Forbes Society for Australian Legal History, 26 October 2016), pp 3-8. There were great difficulties in bringing proceedings against deed of settlement companies (as the travails of Mr Van Sandau who sued the British Annuity Company joining some 200-300 shareholders, in the spate of interlocutory applications reported in (1826) 1 Russ 441; 38 ER 171, illustrate). One of the reasons given by Young J for refusing relief comparable to that sought by the appellants in [1999] NSWSC 583 at [14]-[15] was:
…there is a very real distinction between a corporation and a trust, in that with a corporation the property is vested in the corporation itself, but with a trust the property and the prima facie liability for the debts is vested in the trustee.
There does not appear to be any reported case before the English Joint Stock Companies Winding Up Act 1844, when many companies adopted the structure of a deed of settlement with the property held by trustees, where there was a winding up of the enterprise by the court.
The absence of authority to address an ancient problem in this way points against the existence of such a power: Jaken Properties Australia Pty Ltd v Naaman (2023) 112 NSWLR 318; [2023] NSWCA 214 at [137]-[138]. The absence of authority is consistent with what was said in Ebrahimi being tied to the particular statutory language and the absence of a more general principle applicable to trusts which performed the same function as companies.
Further, the absence of relevant decisions before 1848 tends to confirm that the “just and equitable” ground introduced by the Joint Stock Companies Winding Up Act 1848 was not a codification of principles already developed in other areas of the law.
Accepting that Ebrahimi concerns the scope of the statutory power to wind up a company, the appellants’ submissions extended to the proposition that equity is capable of developing by analogy with statute. So much is trite, as is implicit in the basic proposition that “significant elements of what now is regarded as ‘common law’ had their origin in statute or as glosses on statute or as responses to statute”: Esso Petroleum Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67 at [19]. The appellants emphasised this possibility in reply:
Where there are statutes, the doctrine of application of statute by analogy is and can be an appropriate way to develop equitable principles. So that where, for example, one has a statute, there is a just and equitable winding up ground of the sort discussed in Ebrahimi, and then where there is a trust involved with the operation of that company, and an analogous problem arises in the trust, then there is no obstacle in my submission to equity applying by analogy the Ebrahimi principles as part of its supervisory jurisdiction of trusts.
But any analogy in the present case is inapt. Where a company is dysfunctional or relations between its directors have irretrievably broken down, it may be wound up. But if the trustees cannot, or will not, administer a trust, a court may order their removal and replacement, and the point of doing so is so that the trust may be continued. As Dixon J said in Miller v Cameron (1936) 54 CLR 572 at 580; [1936] HCA 13, “The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee” (emphasis added). Likewise, if the trust assets are in jeopardy, a receiver may be appointed, but the purpose is to preserve the trust.
More fundamentally, companies and trusts are very different. One is a legal person, the other is a relationship. Companies are capable of perpetual existence, while in contrast, private trusts “do not and cannot live forever”, as is emphasised by N D’Angelo, Transacting with Trusts and Trustees (LexisNexis 2020) p 371. In part the mortality of private trusts is because a trust is a relationship, rather than a legal entity, and in part it is because of the rule against perpetuities and its statutory modifications. A private trust must vest, and it is perfectly open to the settlor of a trust to insert a power of revocation. Indeed, if the trust is to be deployed as a managed investment scheme, then it must make adequate provision for winding up the scheme: Corporations Act, s 601GA(1)(d). But it is also perfectly open to a settlor of a trust not intended to be a managed investment scheme not to include a power of revocation. A trust is a very flexible institution, as Deane J observed in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 147; [1988] HCA 44.
It is true that the appellants’ submissions were quite subtle, and well-attuned to the difficulties attending a simple translation of winding up of a company to the winding up of a trust. Thus it was said:
We understand that winding up in the usual company law sense does not apply to a trust, and I’ve certainly been in courts when judges have hounded counsel who have talked about winding up trusts. It is in one sense a kind of confusion of concepts, but that does not mean though that there cannot be something which is the equitable equivalent, and that is the appointment of a receiver to realise the assets of the trust and then distribute them to the beneficiaries.
But even so, for the reasons given above, I do not think that appointing a receiver in order to perform “the equitable equivalent” of winding up is an appropriate development of principle. I think it is contrary to principle.
Capelli v Shepard (2010) 29 VR 242; [2010] VSCA 2 does not assist the appellants. That decision concerned the construction of the phrase “just and equitable” under the express statutory power to wind up a managed investment scheme under section 601ND of the Corporations Act. That provision emphasises that in the class of structure which most resembles a company, namely a managed investment scheme, the legislature has insisted that the trust make adequate provision for winding up and has conferred a special power for that to occur, replicating the position with companies. But the Darbalara Property Trust is not a managed investment scheme, and there is nothing in the Corporations Act which undercuts from parties advisedly choosing to participate in a structure perceived to have tax or other advantages for them but which is outside the scope of managed investment schemes.
Indeed, the development of the law which this Court is invited to make would lead to incoherence with statute. The Australian Law Reform Commission considered in the 1990s whether the bases for a winding up should be carried into the trust relationship. That proposal was only enacted in limited circumstances, in respect of some managed investment schemes: see s 601ND of the Corporations Act and Re Stacks Managed Investments Ltd [2005] NSWSC 753; (2005) 54 ACSR 466 at [46]. In the CAMAC Report into Managed Investment Schemes, it was said that “under general trust law, there is no such thing as the formal winding up of a trust. The trust simply comes to an end in certain circumstances and the property is distributed among the beneficiaries”. Statute intervened to change that, but only for certain trusts: Corporations and Markets Advisory Committee, “Managed Investment Schemes” (Report, July 2012) at 29-30. Justice White, writing extra-judicially, made the same points (R W White, “Trusts – An Australian Perspective” (Speech, Higher Courts Seminar, Auckland, 24 May 2010)):
Statute may intervene to confer power on the court to wind up a trust. For instance, Chapter 5C of the Corporations Act 2001 (Cth) which governs managed investment schemes, empowers the court to wind up the scheme in various circumstances and upon certain procedures being complied with. That the court’s power to wind up is founded in statute highlights that it is not an inherent power.
there is room in company law for recognition of the fact that behind [the corporate structure], or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The “just and equitable” provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.
That is the limited sense in which the Victorian Court of Appeal’s reference to “the Ebrahimi principle” in Koko-Black should be understood. In Koko-Black, minority unit holders sought an injunction to restrain the corporate trustee from acting on a notice to compulsorily acquire their units. The appellants there contended that the trial judge erred in denying relief “on the basis of the principle of Ebrahimi, on which they relied to invoke a fiduciary duty between the investors inter se, said to justify…an injunction restraining the exercise of the power compulsorily to acquire their units”. Dodds-Streeton JA said at [112] that where there is a relationship of quasi-partnership, “it would not be equitable to permit one party to make use of his legal rights to the prejudice of his associate”. Her Honour also held, at [121], that, “whether within a corporate structure or not, the underlying relationship, rights and obligations of partnership or quasi-partnership would be recognised.”
Because termination for want of mutual trust and confidence was said to be one of the “rights and obligations of partnership”, the appellants submitted that this “suggested” that the relief they seek by the appointment of a receiver is an “available avenue”. That is to say, the decision in Koko-Black appeared to favour the proposition that breach of a fundamental understanding of mutual cooperation between the parties could “lead to the dissolution of the association”.
The decision does not support the appellants’ submissions. The relief sought by the minority unit holders in Koko-Black was not the dissolution of the trust but a restraint on the exercise of a power. As much was made clear at [122]-[123]:
As his Honour found, the invocation of Ebrahimi (or the partnership principles which informed it) was inapposite where, as in the present case, the dissolution of the parties’ association was not sought.
In the context of their Ebrahimi argument, the appellants at trial, and in written submissions on appeal, contended that the parties were partners or quasi-partners. The respondent disputed that. Before us, the appellants ultimately did not press the contention that the parties were partners or quasi-partners. Further, counsel made clear that the appellants did not seek to continue their personal participation in the management or conduct of the business, but simply to maintain their investment.
Concerned as they are with the doctrine of fraud on a power, the “equitable considerations” flowing from the subsisting fiduciary relationship that were mentioned by Lord Wilberforce and picked up by the Victorian Court of Appeal provide only for restraints on the exercise of a particular power by a director or some other fiduciary (a topic to which Lord Wilberforce returned some months later, in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821) not the dissolution of the trust relationship.
It is also telling that Ebrahimi itself adopted no such general “Ebrahimi principle”, divorced from the English equivalent counterparts to the power to wind up a company on the just and equitable ground. Lord Wilberforce indicated that the “doctrine” of “quasi-partnership” could not be a sufficient premise at general law, by analogy only with statute, to furnish relief that has the effect of “winding up” a fiduciary relationship involving the management of assets:
In re K/9 Meat Supplies (Guildford) Ltd [1966] 1 WLR 1112 there was a company of three shareholder/directors one of whom became bankrupt; the petitioner was his trustee in bankruptcy. It was contended that the company was a quasi-partnership and that since section 33 of the Partnership Act 1890 provides for dissolution on the bankruptcy of one of the partners a winding up order on this ground should be made. Pennycuick J rejected this argument on the ground that, since the ‘partnership’ had been transformed into a company and since the articles gave no automatic right to a winding up on bankruptcy, bankruptcy of one member was not a ground for winding up of itself. He then proceeded to consider whether the just and equitable provision should be applied. In my opinion, this procedure was correct and I need not express an opinion whether, on the facts, it was right to refuse an order.
The appellants also invoke the “inherent jurisdiction” of courts of equity over trusts: “Fundamental to the law of trusts is that Equity Courts have jurisdiction to supervise, and in appropriate circumstances intervene in, the administration of a trust”. So much may be accepted. But it does not follow that the appointment of a receiver to wind up the trust is, or has ever been, an aspect of that jurisdiction, and it is not difficult to appreciate why that is so. Indeed, some of what follows is implicit in, or overlaps with, what has been said above concerning Ebrahimi and development of principle by analogy.
The appellants’ application for the appointment of a receiver to wind up the trust is flawed for three fundamental reasons.
First, the appointment of a receiver does not free the receiver, or the trust assets over which the appointment extends, from the rights and obligations of the trust.
Secondly, the appointment of a receiver is ordinarily a remedy in aid of some other right. Thus, if there were a power of revocation, there might be a proper basis for the appointment of a receiver in aid of that right. But the appellants seek the appointment of a receiver in order to bring the trust to an end.
Thirdly, the foundational equitable principle is that equity preserves trusts, rather than destroying them. To that end it may remove a trustee, or appoint a new trustee, or indeed (albeit only in rare cases) administer the trust.
In truth, the appellants’ submission is inconsistent with the nature of the inherent jurisdiction. Where there is a deadlock such that the trustee cannot act or the trustees cannot act unanimously to make a particular decision, the response is not to wind up the trust, but to appoint a receiver to exercise the power, or direct how it should properly be exercised or, in exceptional cases, for the Court itself to execute the power: In re Baden’s Deed Trusts [1971] AC 424 at 451-452 (Lord Wilberforce); Cowan v Scargill [1985] Ch 270 at 297 (Sir Robert Megarry V-C). Exceptionally, there could be a suit for administration of the trust. Even so, an administration is for the continuation, not the destruction of the trust relationship and the trust powers are not extinguished as a result: Thomas v Williams *(*No 2) (1883) 24 Ch D 558 at 563. That is to say, the inherent jurisdiction is to execute, not extinguish, the terms of the trust. Hence the usual form of such an order, which commences, “It is ordered that the Trusts be performed and carried into execution”: Lord Evershed (ed) Atkin's encyclopaedia of court forms in civil proceedings (2nd ed) vol 41, p 265; Daniell’s Chancery Forms (4th ed, 1885) 108. It is no part of the court’s inherent jurisdiction to dissolve trusts in the absence of some express power in the trust instrument to do so. In (1921) 30 CLR 34 at 56, 65 and 73; [1921] HCA 55, three members of the High Court endorsed the statement of Farwell LJ in [1908] 1 Ch 34 at 40-41 that,
if the trustees cannot do it, neither can the Court, for, as Lord Chancellor Law says in Fitzpatrick v Waring: “In the exercise of its jurisdiction for the administration of trusts this Court, I apprehend, has no power to make or authorize any leases or other dispositions of the trust property which the trustee could not have made himself. The Court, in such a case, whether it assumes the place of the trustee, or guides him in the discharge of his duties, is still confined within the limits of the trust as constituted by its author, and has no authority to go beyond those limits. Its business is to execute the trusts, not to alter them.”
Order 4 is framed upon some implicit assumption that the Court may, by order, dissolve a trust in the same way as it may, for example, dissolve a partnership (Partnership Act 1892, s35). Any such assumption is, of course, unwarranted. It is the duty of the Court to uphold and protect trusts, not to destroy them, although where the terms of the trust envisage, in certain circumstances, realisation of property, winding up of the trust’s affairs and final payments to beneficiaries, the Court will, naturally enough, give effect to those “winding-up” provisions. There are no such provisions in the instrument governing the Crane Trust.
… in the absence of applicable statutory powers, it is no business of the Court to act so as to put an end to a trust.
That statement has since been endorsed in Rosenbaum v Baidarman *(*No 2) [2021] NSWSC 574 at [93] (Williams J), In the matter of Cupit & Aboud as trustees of the Australian Trust [2020] NSWSC 1715 at [23] (Ward CJ in Eq); Baba v Sheehan [2019] NSWSC 1281 at [74] (Parker J; an appeal was dismissed, with the claim for the appointment of a receiver not pressed on appeal: Baba v Sheehan [2021] NSWCA 58 at [51]); Bose v Bose [2013] NSWSC 327 at [15]-[17] (Gzell J), and by D Clarry, The Supervisory Jurisdiction over Trust Administration (Oxford University Press, 2018), pp 193-194.
Brereton J said in Re Austec Wagga Wagga Pty Ltd *(*in liq) [2018] NSWSC 1476 at [13]:
In the absence of provision in the trust instrument, a trust cannot be wound up in the same way as a company. A trust is not a legal entity, as a company is. There is no statutory right or power to wind up or terminate a trust, and generally speaking it is unconventional to speak of “winding up” a trust. Moreover, courts do not normally make declarations to resolve hypothetical issues, or in the absence of a contradictor. The application for an order or declaration that the trust be wound up or terminated misconceives the nature of a trust. Counsel was unable to identify any jurisdictional basis for such an order. (citation omitted)
The fact that a private trust is not a legal entity, but a series of relations between trustees, trust property and beneficiaries or discretionary objects, exposes the elision in the appellants’ goal of “winding up” as a process of selling assets, discharging liabilities and distributing the surplus. Critically, it is necessary to consider how the personal and proprietary relations which are central to the trust relationship are brought to an end.
The foregoing illustrates that the primary concern of the “inherent jurisdiction” which the appellants invoke is with the performance, not the destruction, of the trust.
In New South Wales, there is no power to vary the trust so as to permit its revocation. The inherent jurisdiction was described in Arakella Pty Ltd v Paton (2004) 60 NSWLR 334; [2004] NSWSC 13 at [93]-[96] and Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960 at [20] to the effect that (a) courts had no general power to alter the terms of a trust on the ground that it appeared likely to advantage the beneficiaries, although (b) in a small number of tightly confined situations courts could sanction action by a trustee which was beyond power or even contrary to the terms of the trust, but (c) even in such situations it was usually insufficient merely that such action would be advantageous – something more, usually some form of emergency, was required. This Court said in Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286 at [68]-[70]:
the reasoning and effect of the decision in Re Dion Investments is not confined to the particular matter primarily in issue in that case as to whether s 81(1) authorised the making of an order giving the trustee a general power of amendment of the trust deed. Rather, this Court disapproved of decisions which had found in s 81 an authority to alter the trusts on which trust property was held which would have been beneficial to the interests of the beneficiaries, or to the fulfilment of the trust purpose, but which were not concerned with the management or administration of the trust assets.
… For whatever reason, or perhaps for no reason except pressure of other Parliamentary business, New South Wales did not adopt the Variation of Trusts Act 1958 (UK) that substantially broadened the jurisdiction of courts to vary trusts, although such legislation was passed in all other Australian States and New Zealand (s 63A Trustee Act 1958 (Vic); s 95 Trusts Act 1973 (Qld); s 59C Trustee Act 1936 (SA); ss 13 and 14 Variation of Trusts Act 1993 (Tas); s 90 Trustees Act 1962 (WA); s 64A Trustee Act 1956 (NZ)).
P M Wood in his article “Variation of Trusts in New South Wales” (1990) 13(2) UNSW Law Journal 359 stated at 368-369:
“The position therefore is that whilst s 81 may be invoked to vary, in effect, the provisions of a trust in terms of the facultative powers for management or administration it cannot be availed of to produce substantive changes to the provisions of or beneficial interests under the trusts ...”
Supervision of administration is also an apt description of the role of a court administering equity in relation to "one of the oldest remedies" in the Court of Chancery – the appointment of a receiver, who as an officer of the court and subject to its direction is “to take possession of, get in, or recover, property for the benefit of the persons who are ultimately determined to be entitled to it”.
In truth, the starting point that the Court in its “supervision of administration” of trusts is to uphold, not destroy, the trust informs any analysis of the scope of the power to appoint a receiver, whether in the inherent jurisdiction, or where “just or convenient” under s 67 of the Supreme Court Act. In part that is because the appointment of a receiver is ordinarily interlocutory, not final, relief made in aid of the ultimate exercise of some power to wind up a company or judicial sale or some other entitlement: Yunghanns v Candoora No 19 Pty Ltd *(*No 2) [2000] VSC 300; 35 ACSR 34 at [70], [84], [92]. Hence the words “interlocutory order” in s 67.
In partnership cases, the appointment of a receiver is not an end in itself, but is only in aid of the exercise of some independent power to order the dissolution of a partnership, ordinarily by service of a notice under the terms of the partnership: T Robinson and P Walton (eds), Kerr on Receivers**hip and Administrat**ion (22nd ed, 2024, Sweet & Maxwell) at 69-70; Pini v Roncoroni [1892] 1 Ch 633. The appointment is only “to restrain the dissentient partners from executing securities in the name of the firm, and from receiving the partnership debts” to prevent frustration of the primary orders for a dissolution and an account: N Lindley, A treatise on the law of partnership: including its application to joint-stock and other companies (1860, 1st ed) at 189. All of this, not to mention the fact that s 67 speaks of appointment “by interlocutory order” is inconsistent with the order sought by the appellants. The facility for the appointment of a receiver cannot be used as a substitute for the absence of some independent power to order the dissolution of a trust. Hence the point made by Parker J in Baba v Sheehan [2019] NSWSC 1281 at [75]:
The Court has no power to order the “winding up” of the Trust on some sort of “just and equitable” ground. The Court can appoint a receiver, but only as an interlocutory step for the purpose of getting in and preserving assets so that they may be dealt with in accordance with the parties’ rights. The appointment of the receiver to liquidate the business and (even more obviously) then to distribute the assets of the Trust would not be in accordance with principle.
Although in Brereton J’s ex tempore judgment in Basecove, where a receiver was appointed to dissolve the unit trust, reference was made to the fact that the “arrangement between the parties is really that of a quasi-partnership in which the relationship between them has broken down”, it was also significant that “a financial disaster [was] looming from the deficiency of funds and ongoing losses” in the management of the unit trust: Basecove Pty Ltd v Dolores Lavin Management Pty Ltd [2009] NSWSC 1315 at [11]. No such finding was made in this case. And the absence of such a finding was not challenged in this appeal.
It is true that s 67 of the Supreme Court Act is worded very broadly. It provides “The Court may, at any stage of proceedings, on terms, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient so to do”. The same breadth may be seen in ss 23 and 66(4) of the same statute. But just as the latter sections do not confer power to order injunctions without regard to equitable principle, s 67 does not permit the jettisoning of basic principles outlined above. To the contrary, the true position is that those generally worded provisions are construed in light of equitable principle. As decisions like Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 illustrate, principle may be developed over time. But acceptance of the appellants’ submission would not be a development of principle, so much as a subversion of principle.
Lindley LJ explained in Holmes v Millage [1893] 1 QB 551 at 556-557 that what is now s 67 of the Supreme Court Act was a Judicature provision (s 25(8) of the Judicature Act 1873), and that while “receivers are appointed more readily than they were before the passing of the Judicature Acts, and some inconvenient rules formerly observed have been very properly relaxed, yet the principles on which the jurisdiction of the Court of Chancery rested have not been changed”. His Lordship, in setting aside the novel appointment of a receiver to a judgment debtor’s future income, also observed at 555:
It is an old mistake to suppose that, because there is no effectual remedy at law, there must be one in equity. But the mistake, though old and often pointed out, is sometimes inadvertently made even now. Courts of equity proceeded upon well-known principles capable of great expansion; but the principles themselves must not be lost sight of.
Much the same applies to this ground of the present appeal.
Ultimately, the appellants invite this Court to create a concededly novel principle which will detract from the parties’ autonomy, insofar as they chose to make their property investment through the structure of a trust rather than a company or partnership. It is also contrary to basal aspects of the law of trusts and the role of courts in that area. There is no principled basis for the development of the law by analogy as the appellants submit; the contrary is the case. The fact that statute has intruded in some areas – in a certain class of trusts (see ss 601GA and 601ND), and in some other Australian jurisdictions, but not in New South Wales in relation to the Darbalara Property Trust – and the fact that to wind up a company in the circumstances described in Ebrahimi is an intrinsically statutory power, reinforce the conclusion that if the law is to be changed, it is the task of a Legislature rather than this Court.
Finally, and separately from all of the above, the parties agreed to a structure which does make provision for an “exit” when one unit holder wishes to sell. The relief sought by the appellants reflects their preference for a different, and more favourable, mechanism in the same circumstance. If contrary to all of the above there were such a power, no sound reason has been put forward to entitle the Carrs to the benefit of, and to subject the Ritossas to the burden of, a different mechanism to dissolve the trust relationship. The appellants respond by saying they are unaware of any authority limiting the availability of “the Ebrahimi doctrine” to cases where no express provision has been made for the revocation of the trust. But that submission carries no weight in circumstances where there is no authority for the extension of anything that was said in Ebrahimi to the winding up of trusts. The significance of the pre-emption rights in the Darbalara Property Trust is that they emphasise that in addition to the posited “Ebrahimi doctrine” being contrary to equitable principle, it would directly undermine the parties’ autonomy if applied to the present facts.
For those reasons, grounds 9(a), 9(b) and 9(c) of the appeal should be dismissed.
The theme recurring in all of the grounds of appeal is a dissatisfaction on the part of the Carrs with the position which they would have been in had their property investment with the Ritossas been conducted through a partnership or company. But those ways of structuring their investment were expressly proposed in 2010 and rejected. The appellants are bound by the consequences of their original decision.
For those reasons, all grounds of the appeal should be dismissed. So far as appears from the appeal books, there is no reason for costs not to follow the event.
I propose that the appeal be dismissed with costs.
STERN JA: I agree with Leeming JA.
GRIFFITHS AJA: I have had the considerable benefit of reading Leeming JA’s comprehensive reasons in draft. I consider, respectfully, that they are a tour de force. I entirely agree with them and with the orders proposed by his Honour.
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'Sayden' italicised in table of contents. 26 May 2025 - [219] - changed 'been permitted' to 'occurred'. 26 May 2025 - [245] - removed paragraph formatting error.
added Waters v Taylor (1807) 15 Ves 10; 33 ER 658 to list of cases. 26 May 2025 - [219] - added '3' to end of Waters v Taylor (1813) 2 V & B 299; 35 ER 333.
[59] - capitalised “h” to be “The Unit Holders…”
David & Ros Carr Holdings Pty Ltd
Ritossa [2025] NSWCA 108
(2013) 83 NSWLR 700
(1981) 148 CLR 170
(2004) 60 NSWLR 334
(1990) 169 CLR 279
(2009) 238 CLR 304
(2010) 29 VR 242
(1999) 198 CLR 380
Appeal dismissed. The appellants were ordered to pay the respondents’ costs.
The first basis (ground 1) turns on construction. The second (grounds 2-8) is factual, and challenges the conclusion by the primary judge that the disaffection between the Carrs and the Ritossas fell short of conduct amounting to statutory oppression. The third (ground 9) is a concededly novel proposition of law. For the reasons which follow, I would accept none of those arguments, with the result that the appeal should be dismissed.
These reasons take the same course as the parties’ written and oral submissions, and deal with the three bases in order. It is most efficient to provide a streamlined overview of the factual background which is sufficient for the purposes of resolving the submissions advanced in respect of the first and third bases (which are questions of law) before giving more detail in order to address the factual submissions advanced in support of the second basis. In an appeal where the issues are considerably narrower than was the case at trial, it will not be necessary to summarise the entirety of his Honour’s reasons of 287 paragraphs, delivered on 5 September 2024, some six weeks after the conclusion of an eight day trial.
Fifthly, putting to one side the submissions based on cl 2, the structures selected by the Carrs stood in the way of the unilateral decision of one of the co-investors bringing the investment to an end. This occurred on two levels. The ordinary remedies of s 66G of the Conveyancing Act 1919 (NSW), or of dissolving a partnership, or of applying to wind up a company, were not available to a unit holder of a unit trust (subject to the “novel” submissions in support of ground 9). Further, the Carrs’ choice for “their” 50% of the units to be held as assets of their discretionary family trust, coupled with their decision to have a company controlled by them as the trustee of that trust, meant that not only did they not own the units beneficially, but they ceased even to own the legal title to the units. It is thus a little inexact to describe the 50% of units owned by DRCH as “their” units, although it is true that the Carrs controlled DRCH and could cause it to distribute those units to any discretionary object including themselves. Significantly for present purposes, those choices meant that the words of extension in s 234 of the Corporations Act “even if the application relates to an act or omission that is against (i) the member in a capacity other than as a member” were inapplicable, at least on their ordinary meaning.
It is wrong to regard the Carrs as beneficial owners of the units, or as having a “beneficial interest” in the units. To the contrary, “[t]he use of terms such as ‘beneficial interest’ is apt to mislead when applied to beneficiaries’ interests in a discretionary trust”: MSP Nominees Pty Ltd v Commissioner of Stamps *(*SA) (1999) 198 CLR 494; [1999] HCA 51 at [34]. In Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184; 106 ATR 151 at [114], Sackville AJA writing for this Court said:
The reason for dwelling on these features of language is that they reveal that the construction of cl 2 cannot be resolved by grammar or syntax alone. Instead, as will be apparent from the reasons of the primary judge and the parties’ submissions, it will be determined by context and purpose and the semantic content of the competing constructions.
The primary judge rejected the appellants’ contention that their construction should be upheld so as to allow the trust to be able to carry forward a loss for income tax purposes. His Honour said that the characterisation of a trust for income tax purposes would not assist with the proper construction of cl 2.1.
The primary judge added that cll 2.1(b) and 16.1 should be construed so as to cohere with cl 17.1, which provided that trust property was held for the unit holders as tenants in common. This clause revealed that each unit holder had an undivided 50% share in the assets but not an entitlement to any particular part of any asset of the trust, and no entitlement to call for the trustee to account to it for its share of land, relying on Beck v Henley [2014] NSWCA 201. His Honour noted that the appellants did not seek a partition or sale of the land under s 66G of the Conveyancing Act. Clauses 2.1(b) and 16.1 could be read consistently with cl 17.1 by reading the former as conferring collective rights.
Thus, the primary judge concluded that cl 2.1(b) did not entitle the appellants to call for a winding up without the agreement of the other unit holders.
Fifthly, the appellants said that the primary judge’s construction of cl 2 left no function for that clause that was separate from that of cl 9.
Sixthly, they said that the primary judge implied that they could have sought a partition or sale of the real property held by the trust under s 66G of the Conveyancing Act, and that his Honour criticised them for not having addressed cl 17, both of which criticisms the appellants challenged.
This Court’s task is to construe the trust deed, and in particular, to decide whether cl 2 confers an individual entitlement on unit holders. But that constructional task must necessarily be undertaken by reference to the intention to be imputed to the drafters of the deed, and where that intention was to satisfy the requirements of a statutory provision, it can be reasonably presumed, subject to contrary indication, that it was effective and that the meaning of the deed reflects the requirements of the statutory provision. That presumption is particularly strong where, as here, the language of the deed is almost identical to the language employed by the statute. To that extent, then, the construction of cl 2 is coloured by the construction of s 3A(3B) of the LTMA. This approach is simply a manifestation of the general purposive approach to construction of deeds, and so does not treat the statutory task as logically anterior to the construction of the deed.
That position was exemplified in the following exchange:
In short, text (including its title and the references in s 233 to “the” company), legislative history and authority all point to s 232 being treated as exhaustive of the circumstances in which an order under s 233 can be made.
Construing s 233 in accordance with those principles, I am of the view that an order that one beneficiary or one unit holder buy out another is an order in relation to the company which is the trustee of the trust, at least in the case of the Darbalara Property Trust. Under r 7.1 of the Rules, a transfer of units requires the approval of the trustee, and there is an express power to “refuse approval for any reason and [the trustee] can keep the reason secret”. Such an order has an immediate and direct effect upon the trustee, which would also be a necessary party to proceedings in which such an order is sought. Putting to one side the discretion to permit a transfer, such an order will also directly affect the relations between the company as trustee and the beneficiaries of the trust, and in particular it will bring about the result that the company as trustee will no longer owe obligations (including obligations to account, to provide information and documents and to make distributions or to consider making distributions) to the beneficiary or unit holder who has been bought out.
None of the foregoing should be understood as holding that it will be appropriate in any particular case for such an order to be made. The foregoing is about the extent of the power conferred by s 233, not the occasions for its exercise, and I would doubt that such occasions would be frequent. Similarly, this Court considered in Zong v Lin that the wide language of s 233 permitted a compulsory transfer order of a company’s shares without payment, noting that it would be an unusual form of relief against oppression, but available in an appropriate case.
Moreover, it is necessary to bear in mind the stark difference between a company board and a board of trustees. As Sir Robert Megarry VC observed in Cowan v Scargill [1985] Ch 270 at 297, “In an ordinary trust, the trustees can do nothing unless they are unanimous: a majority cannot prevail over a minority, and so the opportunities of a deadlock are even greater …”. In the present case, neither the Carrs nor the Ritossas can without the agreement of the other secure the passage of a resolution of the corporate trustee. However, if the four individuals were themselves trustees of the Darbalara Property Trust, then (absent some special provision permitting majority decisions) any of them would enjoy a right of veto of any action on the part of the trustees. In circumstances where the trustees cannot agree, the court may resolve the deadlock (the authorities may be found in Garnham v PC [2012] JRC 050 and L Tucker et al, Lewin on Trusts (Sweet & Maxwell, 20th ed, 2020) at 28-075) either by making a decision if it is a particular decision, or by removing some of the trustees or appointing new ones if the position will recur.
There is no reason to doubt what has been said on many occasions, namely, that a mere “deadlock” will not be oppression under ss 232. See, for instances in this Court, Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; 37 ACSR 672 at [89] (“Irreconcilable differences may establish a basis for winding up, they do not of themselves constitute oppression or unfair prejudice”), approved in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104 at [199], and Campbell v BackOffice Investments [2008] NSWCA 95; 66 ACSR 359 where Giles JA observed at [137] that “a breakdown in relationship in a 50/50 entity is not the same as oppression”; see also at [442]-[444]. Although it was said in Campbell v BackOffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [177] that “[t]here may be an issue about whether deadlock in the affairs of a company would fall within s 232”, as the law presently stands it would seem not merely as a matter of authority but also in point of principle that “mere” deadlock cannot suffice.
There may be very good reason to have power evenly divided in a legal structure designed to hold valuable assets. Equality is a very common mode of proceeding in a joint endeavour. An equal division of power may be especially important where co-operation is necessary but occurs between persons who have different motives and interests. A structure where no faction has a power of unilateral control is the only way of accommodating competing interests (for example a venture between two entities to exploit a mineral resource, one of whom will also be a substantial purchaser of the minerals, where the parties are diametrically opposed when it comes to price). Other examples may be seen in the trustees of superannuation trusts which have an equal number of trustees nominated by employer and employees (such as the five “union trustees” and the five “Board trustees” in Cowan v Scargill or in the structure of NRL Ltd which operated the NRL Competition and had an equal number of directors appointed by News Corporation and the ARL: see Seven Network Ltd v News Ltd [2007] FCA 1062 at [256]-[259]).
The deadlock must be one which leads to further consequences in order to reach the evaluative judgment required by s 233. Counsel for the Carrs was alert to this in his submissions:
There is nothing unusual about the trust deed establishing the Carr Family Trust. The default distribution of income avoided the trustee incurring the obligation to pay tax at a disadvantageous rate. There was no evidence as to any distributions, or if distributions had been made, whether they were made to Mr Carr or to any of the other members of the class of discretionary objects.
The Ritossas submitted that the amendments were fatally flawed in any event, because: “As a discretionary object of the Carr Family Trust, Mr Carr had no interest in Darbalara Holdings, nor the units DRCH held. All he had was an interest in the due administration of the Family Trust”. That submission is correct. In point of law, Mr Carr as a discretionary object, and even as one of two “first group beneficiaries”, had no entitlement to any of the property of the Carr Family Trust. He had an entitlement to one half of the undistributed income of the Carr Family Trust in the event that the trustee made no distribution; whether or not that ever occurred is not established on the evidence. But the main point is that if there is oppressive conduct in relation to the assets of a unit trust, then a discretionary object of a**nother trust, some of whose assets include the units of the trust in respect of which the claim of oppression is made, is not the proper plaintiff.
The previous paragraph may sound “technical”, in the sense of focussing upon the structure chosen by the parties, as opposed to what some might call the “commercial reality” of an investment by two families. But invoking “commercial reality” in order to avoid the consequences of the legal structure selected is mere rhetoric. An essential aspect of the “commercial reality” is that these families who wished to co-invest made a conscious decision with the benefit of advice not to establish a partnership or an unincorporated joint venture or a simple company. Instead they chose to establish a co-owned company which would be trustee of a unit trust the units of which would be issued equally to the families. Thereafter the Carrs chose for their half of the units to be held as assets of a discretionary trust. There may have been good reasons for all of those choices when they were made. But not lightly will a court disregard the elaborate structure to which the Carrs have subjected themselves, in order to treat them as if they had established a partnership which was dissoluble at will, or a private company in which as members they could readily fall within s 232(d) or (e).
There are further reasons, themselves sufficient, to dismiss these grounds. It is trite that the decision of the primary judge to refuse an amendment is discretionary, especially having regard to the terms on which any relief might be given, so it is necessary for the appellants to identify House v The King error, and further, the ruling on a late application to amend was procedural and on an issue in respect of which the primary judge had a considerable advantage over this Court, well-justifying this being a case where an appellate court ought to “exercise particular caution in reviewing” the decision: cf Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177; [1981] HCA 39. I see no error in the primary judge accepting each of the three instances of prejudice identified by the respondents, nor do I accept the contrary submissions made by the appellants. The appellants assert that “prior distributions are irrelevant”, but I disagree. If Mr Carr’s “indirect interest” as a default income beneficiary sought to be added to the amended points of claim means more than the entitlement to due administration, then the distributions made to him (if any) are squarely relevant. If the indirect interest is regarded as no more than the right to due administration, then the amendment goes nowhere, for there is nothing to suggest that any conduct by the Ritossas has affected the due administration of the Carr Family Trust. The appellants submit that the Carrs were “comprehensively cross-examined over 3 days of the trial” and that it was “unrealistic that the amendment would have led to any different, material cross-examination”; to the contrary, questions of cash flow and income by way of either distribution or present entitlement might well have informed the cross-examination.
These grounds are not made out.
Concerning the budget, a budget for capital expenditure was agreed on 27 July 2020 for the financial year ending the following June 2021, and after SouthernAg’s appointment, it bears the responsibility for proposing a budget, and the directors agreed on the 2022/2023 budget at a meeting on 2 August 2022.
Concerning staff, the primary judge found that this complaint was not made out.
Passing over the second instance of oppression for a moment and turning to the third matter summarised at [207], there remains substantial indebtedness to the unit holders, although it has not increased since June 2019 (thereafter there has been borrowing from ANZ). The entitlement of the unit holders as creditors is subordinated to that of ANZ. The primary judge said that the decision not to reduce unit holder loans could not be oppressive conduct in those circumstances. His Honour said that there was no evidence that ANZ had been asked to consent to a reduction of unit holder indebtedness, in response to which the Carrs pointed to testimonial evidence that the ANZ manager had only to be asked and consent would be given.
Insofar as the complaint extended to a failure to make distributions of income to unit holders, there were either deficits, or else where there was a surplus it was used to reduce ANZ indebtedness.
The primary judge said that the decision not to seek (or attempt to seek) to reduce unit holder indebtedness did not constitute oppressive conduct. That conclusion is clearly correct. A trustee was perfectly entitled, if not in fact obliged in the absence of unit holder consent, to pay down interest-bearing debt ahead of subordinated, interest-free debt.
Concerning the breakdown of mutual trust and confidence (the fourth matter summarised in [207]), the primary judge said that that did not constitute oppression, and observed that “Importantly, the working relationship between the Carrs and the Ritossas has not broken down as indicated by the many decisions which have been made by the board of Darbalara Holdings, despite the breakdown of the personal relationship between the directors”: at [252]. That observation was borne out by the evidence bearing on the numerous issues mentioned above.
His Honour continued:
For those reasons, these grounds are not made out.
Ground 9(b) misapprehends the reasoning of the primary judge. It merely reflects the fact that the appellants had not sought the winding up of the trustee, no doubt for the sensible reason that it would not assist them in achieving their goal of realising their share of the value of the trust assets through a winding up of the trust.
In those circumstances, it is not necessary to express any view as to what was said in Mir v Mir, on either of the aspects mentioned above, and in light of the pending appeal from that decision it is preferable not to do so.
The effect of ground 9(c) is that in the absence of jeopardy to the trust assets or a finding that the trustee was dysfunctional, nonetheless the power to appoint a receiver to wind up the Darbalara Property Trust was both available and should have been exercised. The gravamen of this ground is that it suffices to establish that there has been a “breakdown” in a relationship that “required material cooperation” and “a level of trust” that has ceased to exist. That position was affirmed in oral submissions:
(2018) 98 NSWLR 747
(2010) 240 CLR 481
(2005) 224 CLR 98
(2023) 279 CLR 1
(1986) 161 CLR 464
(1999) 201 CLR 49
(1987) 163 CLR 303
(2003) 214 CLR 118
(2020) 102 NSWLR 386
(2022) 275 CLR 24
(1936) 55 CLR 499
(1973) 7 SASR 508
(2023) 112 NSWLR 318
(2008) 74 NSWLR 550
(2008) 232 CLR 635
(2003) 57 NSWLR 718
(2022) 141 SASR 1
(2020) 103 NSWLR 103
(1936) 54 CLR 572
(2023) 75 VR 239
(2018) 264 CLR 541
(1999) 198 CLR 494
(1994) 181 CLR 404
(2017) 259 CLR 478
(1995) 184 CLR 301
(2012) 246 CLR 601
(2007) 231 CLR 160
(1921) 30 CLR 34
(1988) 165 CLR 107
(2013) 83 NSWLR 80
(1988) 180 CLR 491
(1985) 180 CLR 459
(1996) 42 NSWLR 123
(2010) 242 CLR 174
(2010) 242 CLR 508