Hunter Water Corporation v Landmarque Holdings Pty Ltd

Legal principles

1. Hunter Water's application depends upon these basic principles of equity and trusts: 1. If someone advances the purchase price for a property which is registered in the name of another, that other will be presumed to hold the property upon resulting trust in favour of the person who provided the purchase price: Calverley v Green (1984) 155 CLR 242; [1984] HCA 81. 2. A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee's trust or powers: s 59(4), Trustee Act 1925 (NSW). 3. A trustee who incurs liabilities in the discharge of his or her trust is entitled to be indemnified against those liabilities from the trust assets which he or she holds, and for the purposes of enforcing the indemnity, the trustee has an equitable lien over those assets: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; [1979] HCA 61. 4. The right of indemnity extends to resulting trusts: Iscorp Investments Pty Ltd v Yohana [2011] NSWSC 1387 at [39] per Rein J. 5. "A court of equity may authorise the sale of assets held by the trustee so as to satisfy the right to reimbursement or exoneration. In that sense, there is an equitable charge over the "trust assets" which may be enforced in the same way as any other equitable charge": Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4 at [50].

Consideration

1. The evidence makes clear, and the Court finds, that Hunter Water purchased the Land at the request of Landmarque and with the entirety of the purchase price (including incidental costs) provided by Landmarque. The position is concisely summarised in this letter from Hunter Water's legal officer to the development project manager of Landmarque on 27 June 1990: "Please find attached the Board's receipt for the funds forwarded by Telegraphic Transfer on Thursday 14 June 1990. Settlement of the land transfer took place on Friday 15 June 1990. This now completes the Board's undertaking to your Company to purchase the subject land."
2. There is nothing in the evidence in relation to the circumstances in which Hunter Water purchased the Land that would rebut the presumption that the Land is held by Hunter Water on resulting trust for Landmarque. This means that at all material times Landmarque was and remains the beneficial owner of the Land. While nothing turns on it, I note for completeness that when Hunter Water purchased the Land it was under old system title but has since been converted to Torrens title.
3. There is evidence that Hunter Water has incurred land tax and council rates on the Land since it was purchased in 1990 up to 22 June 2021 totalling $222,878.72. Those costs, and any other such costs incurred before the Land is sold, are costs in respect of which Hunter Water is entitled to be indemnified against the Land as costs incurred as resulting trustee. Other such costs will include legal fees and other liabilities incurred by Hunter Water in relation to the Land (including inquiries about the beneficial ownership of the Land and the costs of the present application on the indemnity basis), costs properly incurred incidental to the sale of the Land, and any other taxes or duties incurred by Hunter Water as the legal owner of the Land. On any sale of the Land, on the evidence before the Court, Landmarque is entitled as beneficial owner to payment of the balance of the sale proceeds after payment to Hunter Water of those various costs.
4. Before turning to the question of sale of the Land, I record one other matter. In February 2004, part of the Land was resumed by the Roads and Traffic Authority for use as a public road, in respect of which $53,000 is held by NSW Treasury in relation to the resumption (the Resumption Moneys). Under s 37 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), the entitlement to compensation is vested in the "owner" of the land, which is defined by s 4 to be "any person who has an interest in the land". As the legal owner of the Land, Hunter Water is entitled to the Resumption Moneys, but subject to its obligations as resulting trustee to Landmarque. While a declaration could be made that Landmarque is, as the beneficial owner, entitled to the Resumption Moneys, the most straightforward course is to declare that Hunter Water is entitled to the Resumption Moneys, which may then be applied by it towards its right of indemnity and exoneration as resulting trustee of the Land.
5. Finally, how should the Land be sold to enable Hunter Water to enforce its equitable lien and satisfy its entitlement to an indemnity for its costs and expenses incurred as resulting trustee?
6. The proposed short minutes of order propounded by Hunter Water included: "Order pursuant to s 71(2)(o) of the Trustee Act 1925 (NSW) that the plaintiff's estate in fee simple, as registered proprietor, in the Land be vested in [Landmarque], subject to satisfaction of the plaintiff's right of indemnity referred to in order 6 below."
7. During the course of argument, I indicated to Mr Livingston that the Court would not be prepared to make such an order for two reasons. First, and most importantly, the order would be uncertain in its terms, not least because it would not be clear on its face as to when the Land vested in Landmarque. Second, it would be an unnecessary departure from the way in which an equitable lien is usually enforced, being by a declaration of the existence of the lien with the appointment of a receiver to sell the land over which the lien exists: see, for example, Davies v Littlejohn (1923) 34 CLR 174 (albeit in that case referring to a vendor's lien).
8. However, in the circumstances of this case, it did not seem to me to be in the interests of anyone, not least Landmarque as beneficial owner, for more costs to be incurred by appointing a receiver to sell the Land. The relevant circumstances are that, first, the plaintiff is a public utility and, second, there is evidence that even just the land tax and council rates that have been incurred by Hunter Water represent a very substantial proportion of the value of the Land. In the interests of minimising the further costs to be incurred, instead of the usual course of appointing a receiver, the Court will make declarations and orders to give effect to these reasons upon an undertaking to the Court by Hunter Water to the effect that it will sell the Land by an open, arm's length process and disburse the proceeds in accordance with these reasons.

Orders

1. The orders of the Court are: "Upon the undertaking given by the plaintiff, through its Counsel, to the Court, as set out in the Schedule to these orders, the Court orders as follows: 1. Declare that the plaintiff, as trustee, holds on resulting trust for the first defendant, as beneficiary, the land comprising Lot 21 in DP XXXXXXX in Rothbury, Hunter Valley, New South Wales ("Land"). 2. Declare that the plaintiff is entitled to the payment of funds from the Consolidated Fund under ss 37 and 51(5) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), in respect of the resumption by the Roads & Traffic Authority of part of the Land on 13 February 2004 ("Resumption Money"). 3. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the caveat having dealing number XXXXXXXT, and lodged by the fourth defendant in respect of the Land, be withdrawn by the fourth defendant no later than 19 October 2021. 4. The plaintiff is entitled to its costs of the proceedings, on an indemnity basis, such costs to be paid out of the assets held on trust (being the Land and the right to the Resumption Money). 5. Declare that the plaintiff is entitled to indemnity, out of the assets held on trust (being the Land and the right to the Resumption Money), for the following costs and expenses: (a) council rates; (b) land tax; (c) the costs of obtaining legal advice regarding the competing claims of beneficial ownership in the Land and the costs of corresponding with those making such claims; (d) the plaintiff's costs of these proceedings in accordance with order 4 above; (e) the costs of sale of the Land; and (f) any taxation, duty or other impost consequent upon the ownership or sale of the Land; (collectively, "Indemnity Entitlement"). 6. Direct the plaintiff to give notice of these orders and a copy of the Court's reasons, by email, forthwith to the first defendant and the seventh defendant. 7. Reserve liberty to the first defendant and to the seventh defendant to apply to the Court, by email to the Associate to Kunc J, on or before 19 October 2021, in the event that they wish to be heard in relation to the terms of these orders or of the undertaking contained in the Schedule to these orders. 8. Reserve liberty to the plaintiff to apply to the Court, by email to the Associate to Kunc J, in relation to the implementation of these orders or of the undertaking contained in the Schedule to these orders. 9. Direct that these orders be entered forthwith. Schedule The plaintiff undertakes to the Court that it will sell the Land on the open market, in an arm's-length transaction, whether by public tender, by expression of interest or by public auction, and then to apply the sale proceeds as follows: (a) first, to pay the third-party costs of selling the Land; (b) secondly, to apply the Resumption Money in reduction of its Indemnity Entitlement and thereafter to apply the sale proceeds to pay to itself the remaining Indemnity Entitlement; and (c) thirdly, to pay the net balance of the sale proceeds to the first defendant."

Amendments 29 September 2021 - Jurisdiction changed to Equity - Real Property List DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 September 2021