Flynn v Suncorp-Metway Limited

"Orders pursuant to sections 8, 94, 96 and 98 of the Trusts Act 1973 that the property situate and known as Lot 150 Beckmans Road, Glenwood, title reference 50737630 was purchased on trust by Anthony Aaron Flynn and is held for the Flynn Family Trust."

[2] Mr Flynn was not represented by lawyers on the hearing of the application. He conducted his own case and, if I may say, with clarity and measure.

[3] Suncorp-Metway has contended that the application should be stayed because it amounts to an abuse of process. That is said to flow from the circumstance that the issue it raises will fall for determination in current proceedings in the Magistrates Court at Gympie.

[4] The earlier proceeding in the Magistrates Court was commenced on 8 January 2009. The plaintiffs are Mr Darren Flynn, the present applicant, together with his mother Valerie and sister Gayle. Their claim, against Suncorp-Metway, is for "an order for restitution of $45,000 together with interest and costs.

[5] In the amended statement of claim, the plaintiffs allege their ownership, since June 2005, of a farming property at Gympie. It was held through a family trust, of which the principal was Anthony Aaron Flynn, the present applicant's brother. Anthony Flynn owned a one-quarter beneficial interest in the property, and the plaintiffs the balance three-quarters. Some of the property was sold. Prior to completion of that sale, the present respondent lodged a caveat over the land being sold. The basis of the caveat referred back to a debt owed personally by Anthony Flynn to Suncorp-Metway. Suncorp-Metway allegedly demanded $60,000 of trust money in order to satisfy that debt, as the price for its preparedness to remove the caveat and let the sale proceed to completion.

"11. The said payment of $60,000 to the defendant (Suncorp-Metway) was wrongful as $45,000 as claimed was a 75% share of the net proceeds belonging to the plaintiffs and was paid to the defendant without the consent of the plaintiffs who had no liability to do so. It was a dishonest, wrongful and a fraudulent payment as both the defendant and the trustee Anthony Aaron Flynn knew it was trust monies belonging to the plaintiffs that should not have been paid to the defendants and he had informed the defendant well and truly of this fact.

1. The defendants beneficially received the said $45,000 knowing that it was trust property belonging to the plaintiffs or should have reasonably known it was trust property to which they were not entitled. The defendants knew or ought to have known the payment was in breach of the trustee's fiduciary duty to the trust."

[7] The claim in the Magistrates Court is thus based on "recipient liability" under the first limb of Barnes v Addy (1874) LR 9 Ch App 244.

[8] In its defence, Suncorp-Metway does not admit the existence of the alleged trust, and deals as follows with the circumstances of the payment of $60,000:

(i) Anthony Aaron Flynn was the registered proprietor of lot 150 on RP911013 in the County of March Parish of Gutchy being all that land contained in title reference 50192516 at all material times until on or about 19 September 2008 when that title reference was cancelled due to a lot reconfiguration, with the result that the land in question became:

A. lot 150 on SP208693 in the County of March Parish of Gutchy being all that land contained in title reference 50737630 (Lot 150); and

B. lot 151 on SP208693 in the County of March Parish of Gutchy being all that land contained in title reference 50737631 (Lot 151);

(ii) Lot 150 and Lot 151 are located at Beckmanns Road, Glenwood;

(iii) Anthony Aaron Flynn is and was at all material times indebted to it under a non-regulated loan account which came into existence on or about 23 September 2004;

(iv) on or about 27 September 2004 Anthony Aaron Flynn executed mortgage in favour of the defendant, which mortgage was subsequently registered as number 708132499 (the 2004 Mortgage);

(v) the applicable memorandum of provisions for the 2004 Mortgage relevantly provided:

'This Mortgage is a continuing security and won't be discharged as long as any of the Moneys Secured are owing, contingently or otherwise or in the Bank's opinion may become owing or payable.';

'(a) The Mortgagor shall at any time that the Bank requests provides security to the Bank to secure the payment of the Moneys Secured.

(b) The Mortgagor shall execute any Security required and shall do all acts necessary to ensure such security can be registered where necessary.'; and

1. in clause 1.1 of Section A thereof that "Security" included:

'This Mortgage, a Collateral Security and any deed, mortgage, encumbrance, charge or lien granted or required to be granted by the Mortgagor or any other person to secure the payment of the Moneys Secured or any part of them or the performance of any obligation arising under an Agreement ...';

(vi) on or about 30 September 2008 it made a demand in writing on Anthony Aaron Flynn to execute a mortgage in registrable form of Lot 150 and Lot 151 to secure repayment of the debt he owed to it;

(vii) on 2 October 2008 it lodged caveats claiming an equitable interest as mortgagee in Lot 150 and Lot 151;

(viii) an application (proceeding S30 of 2008 - Maryborough) by Anthony Aaron Flynn in the Supreme Court of Queensland for removal of those caveats (the Supreme Court proceeding) was dismissed with costs by Lyons J on 17 October 2008;

(ix) on or about 21 October 2008 Anthony Aaron Flynn and the defendant entered into and executed a written agreement entitled 'Deed of Settlement, Release and Discharge' (the Deed of Settlement); and

(x) on or about 27 October 2008 Anthony Aaron Flynn:

1. completed a sale of Lot 151 to Colin Raymond Higham; and
2. paid $60,000 to the defendant as he was obliged to do by the Deed of Settlement;"

[9] The Magistrates Court will have to answer the following questions, among others, in order to determine whether the plaintiffs are entitled to the monetary relief claimed:

1. whether the original farm lands were subject to the trust as alleged;

2. whether the registered proprietor, Anthony Flynn, held the land subject to the trust;

3. whether the sum of $60,000 paid to Suncorp-Metway was trust money; and if so,

[10] Lot 150, the subject of the originating application in this court, is the land remaining after the completion of the sale last year. The originating application seeks a declaration that it is trust land. That is a question which will fall for determination in the current Magistrates Court proceeding.

[11] As said in the High Court in Henry v Henry [1996] HCA 51; (1995) 185 CLR 571, 591, "it is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue."

[12] I note that Mr Flynn shows a determination to prosecute the proceeding in the Magistrates Court. The plaintiffs in that proceeding have served a notice to admit facts, an amended notice to admit facts, an amended statement of claim, and a reply. There has also been acknowledgement that disclosure should take place.

[13] This case is not dissimilar to Moore v Inglis (1976) 9 ALR 509. The plaintiff in that case had commenced proceedings in the Supreme Court of the Australian Capital Territory and then, while those remained current, commenced separate proceedings on the same subject in the High Court. While there was some differences between the claims in the respective courts, all claims arose out of changes to the plaintiff's employment, allegedly arising from conspiracies to which high level public servants and others were parties. In the High Court, the plaintiff "stated that the purpose of bringing the action in (the High Court) was to enable declarations to be made that there were criminal conspiracies on foot and that illegalities had occurred so that these declarations could then be taken into account in the assessment of damages in the Supreme Court". Mason J observed (p 514) that "viewed against this background, all the matters complained of in this court (the High Court) and the different relief sought here are subsidiary and subservient to the claim for damages for conspiracy made" in the Supreme Court of the Australian Capital Territory.

[14] The present applicant's approach before me is similar, in that - as it appeared to me - he is pursuing his claim for a declaration in the Supreme Court with a view to facilitating the determination of the issues already live in the Magistrates Court proceeding.

[15] In Inglis, Mason J referred to English authority as follows:

"In McHenry v Lewis (1882) 22 Ch D 397 at 408, Bowen LJ referred to 'the general principle that the court can and will interfere whenever there is vexation and oppression to prevent the administration of justice being perverted for an unjust end'.

After quoting this passage, Sir Gorell Barnes P in Logan v Bank of Scotland (No 2) [1906] 1 KB 141 at 150; [1904-7] All ER Rep 438 at 442, went on to say: 'For instance, in this country, where two actions are brought by the same person against the same person in different courts governed by the same procedure, and where the judgments are followed by the same remedies, it is prima facie vexatious to bring two actions where one will lie; ...'

In Slough Estates Ltd v Slough Borough Council (1968) Ch 299 at 314-5; [1967] 2 All ER 270 at 275, Ungoed-Thomas J said that 'it is prima facie vexatious and oppressive to sue concurrently in two British courts' and went on to quote Lord Esher MR's dissenting judgment in The Christiansborg (1885) 10 PD 141 at 148, where his Lordship said: 'Where both actions are in England in the same tribunals - because if they are in tribunals where the proceedings are not identical or the remedies are not equally effective the law would apply which is applicable to foreign countries - prima facie it is vexatious, and therefore it would lie on the party who brings the second action to show that it was not so.'"

[16] Mr Flynn relied, in his oral submission, on affidavits by himself and family members which uniformly support the existence of the trust, on the absence of evidence to the contrary, and on an asserted right to a declaration under the recited provisions of the Trusts Act.

[17] I mention those provisions. Section 8 concerns review of actions etc of a trustee. Section 94 concerns facilitating orders by courts in the administration of trusts. Section 96 confers a right upon a trustee to apply for directions on a written statement of facts. Section 98 concerns applications by beneficiaries. None of those provisions obliges a court to intervene, by contrast with conferring a discretion.

Alternatively, the "utility" of the declaration sought

[18] Quite apart from the significance of the current, and earlier commenced, proceeding in the Magistrates Court, throwing up for determination as it does the very question whether a trust existed, this court would not, in the exercise of its discretion, make the declaration sought against Suncorp-Metway by the originating application because that would not definitively address the overall issue between the parties.

[19] That issue goes beyond whether a trust existed, and extends to Suncorp-Metway's knowledge of the existence of the trust, and the identity of the trust's property, particularly the $60,000 paid to it. The court would not, by making a declaration as sought, thereby enter upon a merely partial or piecemeal treatment of the dispute. As said in Ainsworth and Anor v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564, 582, "declaratory relief will not be granted... 'if the court's declaration will produce no foreseeable consequences for the parties'", meaning, a definitive consequential adjudication which determines the real matter in dispute.

[20] Suncorp-Metway holds a registered mortgage over the remaining land, lot 150. The Magistrates Court proceeding does not include an express challenge to the validity of that registered security. As pointed out by Mr Wilkins, who appeared for the respondent, "even if one were to assume ... that Suncorp acquired its registered interest as mortgagee with actual or constructive notice of equitable interest affecting Lot 150 ... Suncorp's registered interest as mortgagee would not, by reason of this, be subject to, or susceptible of deferral to, those equitable interests". Recent confirmation of that may be gathered from Farah Constructions Pty Ltd and Ors v Say-Dee Pty Limited (2007) 230 CLR 89, 167-171. Hence Mr Wilkins' submission that "the question of whether the Lot 150 was 'purchased on trust by Anthony Aaron Flynn and is held for the Flynn Family Trust' will produce no foreseeable consequences as between Suncorp and the applicant insofar as concerns the quality of Suncorp's registered interest as mortgagee", a submission I accept.

[21] That being raised, Mr Flynn referred orally to the fraud exception to indefeasibility, providing further confirmation that the real issue between the applicant and Suncorp-Metway, so far as the applicant is concerned, goes well beyond whether the lands are impressed with a trust.

[22] It remains to mention Mr Flynn's emphasis on the lack of evidence disputing the existence of the alleged trust. This a case, however, where Suncorp-Metway is entitled to put the applicant to proof on this issue. The 'proof' is not limited to the present affidavits. Suncorp-Metway is entitled to test that evidence by cross-examination, such as would occur at a trial or full hearing. Even were it appropriate to deal separately with the issue of whether or not a trust existed, it is not a matter susceptible of the summary determination which the adoption of an originating application pre-supposes.

[23] For these reasons, there will be an order that further proceedings under the originating application filed on 20 May 2009 be stayed.

[25] Further, on 19 March 2009 the respondent's solicitors wrote to the applicant saying:

"We note that you intend to now proceed by way of an originating application.

There are numerous and substantial factual disputes which make that proposed course of action by you a singularly inappropriate one. If you decide to take that course of action, thereby making it necessary for Suncorp to appear to seek orders and directions under Rule 14 of the Uniform Civil Procedure Rules 1999, Suncorp will seek an order that you pay its costs of and incidental to its doing so."

The respondent seeks an order that the costs be assessed on the indemnity basis.

[26] Because of the basis on which the stay is being applied, that is, that the Supreme Court proceeding amounts to an abuse of process, such an order is appropriate, especially where the applicant was expressly warned in advance about the inappropriateness of the course he proposed.

[27] There will therefore be an order that the applicant pay the respondent's costs of and incidental to the application, to be assessed on the indemnity basis.