This is a good general statement of the law, although subsequent authorities make it plain that this principle is generally limited to the documents relating to the trust property which are truly documents of the trust itself and it does not entitle the beneficiaries to the trustees' confidential documents; see eg Re Londonderry's Settlement [1965] Ch 918 and Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 432-3.
80 Insofar as the inspection seeks access to the accounting records of the Trust, it would seem to fall within the category of "trust documents". Outside this area, there may be room for debate.
81 If, however, provisions such as clause 7.2 of the trust deed, set out below, mean that the trust must be treated almost as if it were a discretionary trust, the assignee would only get the right to bring proceedings for due administration and accordingly there could be no assignment of the proprietary interest.
82 Clause 7.2 of the trust deed reads as follows:
"7.2. A Beneficiary is not entitled to require the transfer to him of any of the property comprised in the Trust Fund nor (subject to the Beneficiaries' rights created by this deed and by law) is he entitled to interfere with or question the exercise or non-exercise by the Trustees of any of the trusts, powers, authorities or discretions conferred upon them by this deed or in respect of such property."
83 As Ford and Lee show in their Principles of the Law of Trusts (LBC, Sydney, 1996) at para [9290] as substituted in 1999, it is misconceived to think of the right of the beneficiary to inspect documents in terms of a proprietary right of the beneficiary. Although that thought has passed through the minds of various Judges who have given recent decisions in this area, as those learned authors say, that theory gives rise to more problems than it solves. All the beneficiary really has is rights against the trustee: Re Simersall (1992) 108 ALR 375, 381. See also Morris v Morris (1993) 9 WAR 150, 153.
84 In any event, individual ancillary rights of beneficiaries cannot be assigned in isolation. The only equitable chose in action which is capable of assignment is the complete package of rights against the trustee or at least a share in such rights. Thus the "right" to call for accounts or to inspect documents is a mere procedural right which has not passed to the assignee.
85 I have not as yet dealt with the fact that, on 17 February 1998, the Speights executed a deed of assignment of their interest in the Trust to the first plaintiff. The first plaintiff claims that that assignment gives it locus to commence these proceedings (alternatively if this assignment does not, then the Greenlees assignment, which is in the same form as the Speight assignment has that effect).
86 In my reasons of 25 June 1999, I held that the right of the beneficiaries to assign their interests in the Fund were subject to quite severe limitations. However, because the Speights and the Greenlees have now been joined as parties, it is quite unnecessary to delve into these limitations. Those conclusions may also need reconsideration in the light of the judgment of Hill J.
87 Whatever be the precise nature of the assignment, either the first plaintiff is entitled to the information as an assignee or Mr and Mrs Greenlees are entitled to it as an original beneficiary.
88 I also dealt with the problems relative to amendment of trust deeds in my earlier reasons. Likewise these are of little current significance. However, I will repeat at the end of the appendix my reasons on this aspect of the case.
89 The principal argument of the trustees and Mr Bhagat has been to the effect that the first plaintiff is an enemy of the Trust. The whole purpose of the Trust is to recover moneys from those whom the Estate Mortgage depositors claim culpably lost their investments. To allow the defendant to an action brought by the trustees to become a member of the Trust, to attend meetings of members and to examine the records of the Trust would frustrate the whole object of the Trust.
90 Unfortunately, the submission was not really made in this form. Had it been, it would have required close examination as the court goes a long way to ensure that the purpose of the trust is fulfilled even if the trust instrument does not cover the situation that has arisen.
91 However, in case Mr Bhagat becomes too carried away with the above comment, it must be said that where, as Hill J held in the case of the present Trust against the Taxation Commissioner referred to later, that the beneficiaries had an indefeasible right to the capital and income of the Fund, it would be difficult to deny access to anyone who was a beneficiary, friend or foe, to access to information as to what was in the Trust Fund.
92 However, Mr Bhagat obviously fears that if and when representatives of the first plaintiff gain access to what has happened to the Trust Fund they will mount some counter-action against him and/or the trustees to deflect attention from the actions he has taken against the first plaintiff and its associates.
93 He thus says that proceedings 2539/98 and 3156/99 are fraudulent and are brought for a collateral purpose and should be summarily dismissed.
94 Over the last year or so, Mr Bhagat has constantly submitted that proceedings have been brought against him for a collateral purpose. I thoroughly examined the law in this area in my judgment in Bhagat v Global Custodians Ltd [2000] NSWSC 321. I there said that it was only in rare cases that such an action can succeed. It is not enough that the plaintiff hopes to win so that his commercial ancillary aim may be achieved. Thus it is permissible to bring an action against a councillor with the ultimate aim of having that person disqualified from holding office: Williams v Spautz (1992) 174 CLR 509, 526. See, generally, Hanrahan v Ainsworth (1990) 22 NSWLR 73, 112.
95 In the instant case, any collateral purpose is in the ultimate commercial purpose, not in the immediate legal purpose. The plaintiffs genuinely want to exercise their rights to see the Trust's accounts. Thus, this defence must fail.
96 Before concluding, I need to record the formal order I must now make and also note some general remarks about the conduct of the litigation.
97 The present hearing is designed to have specific questions answered. I have done this. The answers remain as before with the addition that Question 1A is answered, "Yes." The only formal order that I need make at this stage is that the matter stand over for short minutes to be brought in.
98 Mr Bhagat has indicated that he will be in India until 25 March 2002. He has given an overseas email address and I will direct that a copy of these reasons be emailed to that address.
99 I will direct the plaintiffs to bring in short minutes, to email a draft to Mr Bhagat at the overseas email address by 25 February and have the matters listed before me for mention on 4 April 2002 at 9.30 am.
100 Under Part 31 of the Supreme Court Rules, the short minutes should, by order, answer the questions and then make the appropriate consequential orders.
101 My initial view is that it must follow from what I have said above that proceedings 3354 of 1999 must be dismissed with costs, proceedings 3156 of 1999 dismissed as otiose with no order as to costs and orders made in 2539 of 1998 declaring the plaintiffs' rights of access accompanied by the appropriate executive order.
102 Although Mr Bhagat is correct when he submits that one does not make interim orders in the nature of final relief, it seems to me that the issues between the parties have been so thoroughly canvassed that only one result can follow. Furthermore, the making of final orders will permit anyone aggrieved to appeal as of right.
103 Although I have made sure that it did not influence my assessment of the evidence and the submissions, I should record that I became weary of Mr Bhagat's constant rudeness in casting his submissions in the form, "In order that your Honour does not further pervert the course of justice it must now be found by your Honour …" which occurred five times between pages 128 and 136 of the transcript of 5 December 2001. I am not intending to do anything about this matter in the instant case. However, rereading the transcript makes me state for the future that if a litigant in person chooses to make statements in this form particularly if he or she does so in an endeavour to disqualify the judge by getting a thundery reaction, that litigant may well find the judge listening patiently and unaffected by the insults, but, after the case has concluded, forwarding the papers to the appropriate authorities to consider whether criminal charges of contempt should be laid in order to preserve the dignity of the court system.
104 I must note, in conclusion, that there appears to be a gap in the State's protection of funds raised at a public meeting. Probably, though not certainly, as funds were raised from Estate Mortgage investors there was no fund raising from "the public" under the Corporations Act 2001. As the funds were not raised for any charitable, benevolent, philanthropic or patriotic purpose, the Charitable Fundraising Act 1991 (NSW) is inapplicable. Thus it would not appear that any public official could intervene to ensure that the fund is, as promised, controlled by trustees, rather than being used at the settlor's sole discretion. However, there is some control as a beneficiary may obtain relief if he or she can show a breach of trust or otherwise good cause for the court to involve itself in the administration of the trust. Experience with other public funds tends to show that this is insufficient as only very few beneficiaries will spend their own moneys to take this step. I thus draw the matter to the attention of Law Reform bodies.
APPENDIX
105 As noted earlier, there was considerable debate at the initial hearing as to whether the present Trust was a fixed trust or a discretionary trust and what were the nature of the beneficiaries' rights. In view of the decision of Hill J, this debate was not repeated at the recent hearing. However, I set out the reasoning given earlier as it may be of assistance should this matter go further.
106 The defendants submitted that the distinction between the two types of trust is that with a discretionary trust the trustee has a discretion as to when any payment from the trust fund will be made and as to who in a definite class of beneficiaries will receive it, whilst in a fixed trust the trustee has no such discretion. They cite Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547. However, I must note that at p 552 in that report Gummow J, when a Federal Court Judge, said that the meaning of the term "discretionary trust" is "primarily a matter of usage, not doctrine."
107 The argument then proceeded that as none of the beneficiaries had an interest in the capital or income of the Trust until the time of distribution, their entitlement was merely to due administration of the Trust and so they did not have an interest in the benefit under the Trust and thus had no standing. Collins v AMP Superannuation Ltd (1997) 147 ALR 243, 251, was cited in this connection, but that was a case as to standing before the Commonwealth Superannuation Tribunal.
108 There is no element of discretion in the instant Trust. Clause 2.3 is quite clear. The Trust Fund is held for the beneficiaries in proportion to their contributions. However, in the meantime it is to be utilised for the common purpose of recovering moneys from what Mr Bhagat calls "the Estate Mortgage debacle".
109 However, this does not necessarily mean that a beneficiary's interest is assignable. All that happens to a person who purports to assign his or her interest is that he or she ceases to be a beneficiary.
110 For practical purposes, as the Speights are not plaintiffs, what must be shown is the assignment of a legal chose in action within the meaning of s 12 of the Conveyancing Act 1919. The reason for this is that it would only be such an assignment which would have the effect of enabling the plaintiff to sue in its own name or at least enabling the plaintiff to sue in its own name without naming the Speights as defendants.
111 A legal chose in action within s 12 comprehends all assignable legal rights: King v Victoria Insurance Co Ltd [1896] AC 250, 254. However as Starke says in his Assignments of Choses in Action in Australia (Butterworths, Sydney, 1972) p 3, "An essential criterion of a chose in action is that the right concerned is one of a proprietary character; a purely personal right, however valuable it may be from the standpoint of the person entitled thereto, cannot be of the nature of a chose in action ...".
112 In the instant case it is only when the Trust has been terminated, the beneficiaries and their respective shares known, that there could be a situation where a legal chose in action existed. Up until that time there is either an equitable chose in action or an equitable right short of a chose in action. In either case s 12 of the Conveyancing Act would not be applicable.
113 It follows that the present suit cannot be properly constituted without the assignors being parties.
114 The problem that presents itself is whether the right of a beneficiary under this Trust at its present stage is something which can be assigned?
115 I believe that it is useful to start with the case of a discretionary trust, even though the present is not a discretionary trust. Although there is very little learning on the point, the better view is that one cannot assign one's interest as a possible object of a discretionary trust in such a way as to give the assignee the benefit accruing to the object of the trust in the form of appointed property; see Grbich and others Winding Up Trusts (CCH, Sydney, 1984) p 56. At the most, what would be able to be assigned would be the right to have the Fund properly administered. That is the right to apply to a court of equity to have the Fund properly administered.
116 It is clear that a bare right of action cannot be either a chose in action or assignable under s 12 or otherwise; see eg Glegg v Bromley [1912] 3 KB 474 and Compania Colombiana de Seguros v Pacific Steam Navigation Co [1965] 1 QB 101, 120. The test is, in the words of Parker J in Glegg's case at p 490, "Whether the subject-matter of the assignment was, in the view of the Court, property with an incidental remedy for its recovery, or was a bare right to bring an action either at law or in equity."
117 It follows that at least unless the trustee has committed an actual breach of trust or the Trust is at home, all that the beneficiary has is a right of action in equity. This is not the subject of an assignment.
118 There seems to be no provision made in the deed for assigning the right to receive a pro rata payment at the termination of the Trust. However, prima facie all species of property legal or equitable present or future can be assigned at least in equity. However, an assignment of a right to receive proceeds at the end of the Trust does not transfer the right to interfere with the Trust itself. An analogy is an assignment of a share in a partnership. Unless the partnership agreement makes special provision, an assignment of a partner's interest merely assigns the share of capital or income otherwise payable to the assignor. Although the assignment of the interest of a partner is now dealt with by s 31 of the Partnership Act 1892, that section is merely declaratory of the rules of law and equity before the Act was commenced.
119 The assignment of an interest in the partnership operates to assign the income and capital of the partnership in such a way as to make the partner a trustee of the assignee, but it in no way entitles the assignee to interfere with partnership affairs: Commissioner of Taxation v Everett (1980) 143 CLR 440. Furthermore in partnership it is clear that the assignee is bound to accept the account of profits as agreed by the original partners and the partnership books of account are conclusive in the absence of contrary agreement: Yuill v Kidman (1910) 11 CLR 601 and see Higgins and Fletcher, Law of Partnership in Australia and New Zealand 7th ed (LBC, Sydney, 1996) pp 67 and 68.
120 Thus, although the deed in the instant case purports to be an absolute assignment of all the legal and beneficial rights title and interests of the Speights, it operates only to transfer the ultimate interest in the Trust Fund.
121 It should be noted that the way the deed is drawn the ultimate benefit in the Trust Fund will not include any of the moneys that may be recovered from those responsible for the so-called Estate Mortgage debacle. All that will be left is what is left in the Fund after the action is completed or the Trust terminated, augmented if need be by any recovery from the present trustees of the Estate Mortgage Fighting Fund Trust.
122 As to amendments of trust deeds, there are various provisions of trust law which are so basic to the concept of a trust that a court of equity is loath to see them by-passed. These principles include: