Jonsue Investments Pty Ltd v Balweb Pty Ltd

Judgment 1HIS HONOUR: This is an application for the extension of a caveat. The plaintiff claims to be entitled to be registered as the holder of 54 out of a total of 202 issued units, or alternatively the holder of 100 units out of a total of 452 issued units in a trust known as the Balweb Unit Trust. On 5 May 2010, it lodged a caveat on the title of a property at Bondi registered in the name of the defendant. The defendant is the trustee of the trust. By the caveat the plaintiff claimed to be entitled to an interest in the land as unitholder in the Balweb Trust. 2A Mr Paul Rose was issued units in the Balweb Trust in his capacity as trustee of a trust known as the Susan Rose Settlement Trust. It is unclear from the records provided to the plaintiff precisely how many units have been issued in the trust and how many are registered in the name of Mr Rose. The defendant did not lead evidence to clarify that question. Mr Rose was replaced as trustee of the Susan Rose Settlement Trust by the plaintiff. The deed appointing the plaintiff as trustee of the Susan Rose Settlement Trust was registered pursuant to s 9 of the Trustee Act 1925. The trust property of the Susan Rose Settlement Trust is vested in the plaintiff. 3On 5 February 2013, the plaintiff's solicitors were served with a lapsing notice. At the hearing of the application for extension of the caveat the defendant did not dispute that the plaintiff was entitled to be registered as the holder of units in the Balweb Trust. Nor did it dispute that the Bondi property was trust property. The defendant contended that a unitholder of the Balweb Trust did not have a caveatable interest. 4Section 74F(1) of the Real Property Act 1900 provides: "74F Lodgment of caveats against dealings, possessory applications, plans and applications for cancellation of easements or extinguishment of restrictive covenants (1) Any person who, by virtue of any unregistered dealing or by devolution of law or otherwise, claims to be entitled to a legal or equitable estate or interest in land under the provisions of this Act may lodge with the Registrar-General a caveat prohibiting the recording of any dealing affecting the estate or interest to which the person claims to be entitled." 5Section 74K(2) provides: "74K Power of Supreme Court to extend operation of a caveat lodged under section 74F ... (2) Subject to subsection (3), on the hearing of an application made under subsection (1), the Supreme Court may, if satisfied that the caveator's claim has or may have substance, make an order extending the operation of the caveat concerned for such period as is specified in the order or until the further order of that Court, or may make such other orders as it thinks fit, but, if that Court is not so satisfied, it shall dismiss the application." 6The trust deed of the Balweb Trust was made on 24 February 1995. Clauses 6, 7 and 8 relevantly provide: "DECLARATION OF TRUST 6. IN consideration of the premises the Settlor HEREBY DECLARES that the Trustee shall and the Trustee HEREBY DECLARES that it will henceforth stand possessed of the Trust Fund and the income thereof upon the trusts and with and subject to the powers and provisions herein expressed concerning the same. TRUST FUND 7. (a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be vested in the Unit Holders for the time being. (b) Each person who becomes registered as a Unit Holder shall be entitled to the benefit of and shall be deemed to be bound by the terms and conditions of this Deed and of any supplemental Deed. 8. (a) Each Unit shall entitle the registered holder thereof together with the registered holders of all other Units to the beneficial interest in the Trust Fund as an entirety but subject thereto shall not entitle a Unit Holder to any particular security or investment comprised in the Trust Fund or any part thereof and no Unit Holder shall be entitled to the transfer to him of any property comprised in the Trust Fund other than in accordance with the provisions hereinafter contained (b) The Trust Fund as originally constituted by the initial sum shall be divided into the number of Units and be of such value as is set out in the First Schedule each of which Units shall be: (i) held in the first instance by the Original Unit Holders the names and addresses of whom are set out in the First Schedule; and (ii) divided into the classes (if any) set out in the Second Schedule. ..." 7The first schedule provides that Mr Paul Rose held 100 units. The second schedule provides that all units have the same rights. 8Clause 1(k) defines the "Trust Fund" as follows: "'Trust Fund' means the initial sum all moneys paid to and accepted by the Trustee upon the issue of Units pursuant to Clause 8 hereof the accumulations of income hereinafter directed or empowered to be made all accretions and additions to the Trust Fund and the investments property and other assets from time to time representing the said money accumulations and accretions or any part or parts thereof respectively." 9Clause 19 provides that on termination of the Trust the Trustee shall stand possessed of the Trust Fund on trust for Unit Holders. Unless otherwise authorised by a special resolution of the Unit Holders, the Trustee is then required to sell the assets constituting the Trust Fund. Subject to any special rights or restrictions provided in the Second Schedule (and there currently are none), the Trustee on termination of the Trust is to distribute the assets of the Trust Fund in specie or in cash to the Unit Holders proportionately to their holdings. (Clause 19(b)). 10Clause 24 obliges the trustee to pay, apply or set aside the net income of the Trust Fund for each Accounting Period to or for the benefit of the Unit Holders in proportion to the number of units of which they are respectively registered as Holders at the end of the Accounting Period. With the consent of a majority of Unit Holders the Trustee has power to accumulate income (clause 24(b)). Clause 24(d) provides that the Trustee may determine to pay, apply or set aside any amount for any Unit Holder in various ways including by placing such amount to the credit of the Unit Holder in the books of the Trust Fund. Clause 24(h) provides that any amount so set aside and any amount held by the Trustee in trust for any Unit Holder shall not form part of the Trust Fund as defined in clause 1(k), but upon such setting aside or becoming subject to such trust shall thenceforth be held by the Trustee as a separate trust fund for the Unit Holder. 11The trust deed confers wide powers of investment. Clause 26(a) empowers the Trustee to invest all moneys at any time forming part of the Trust Fund in any investments as the Trustee in its absolute discretion thinks fit as if it were the absolute owner beneficially entitled thereto. 12Clause 36 provides: "WITHOUT affecting anything in Clause 5 hereof the Trustee shall be entitled to be indemnified out of the assets for the time being comprising the Trust Fund against liabilities incurred by it in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions hereof or by virtue of being the Trustee hereof but shall not be entitled to indemnity or reimbursement from the Unit Holders or any of them." 13The defendant did not call evidence. The defendant is entitled to be indemnified out of the trust assets in respect of liabilities properly incurred, either by way of reimbursement or exoneration. There is no evidence that the Trustee's right of indemnity is, or has been, or is likely to be unsatisfied. 14Clauses 7(a) and 8(a) are of critical importance. Provisions in the same terms were considered by Brooking J in Costa & Duppe Properties Pty Ltd v Duppe [1986] VR 90. After considering the authorities, in particular, the decision of the Full Court of the Supreme Court of Victoria in New Zealand Insurance Co Limited v Commissioner of Probate Duties [1973] VR 647, and the decisions of the High Court in Octavo Investments Pty Limited v Knight (1979) 144 CLR 360 and Charles v Federal Commissioner of Taxation (1954) 90 CLR 598, Brooking J concluded (at 96): "To my mind, having regard to the New Zealand Insurance Case, the Octavo Investments Case and what is said in Charles v Federal Commissioner of Taxation, the conclusion is inescapable that the unit-holders in the Costa and Duppe Properties Unit Trust have a proprietary interest in all the property which is for the time being subject to the trust deed. This proprietary interest is recognized by cl 7(a) of the deed. Clauses 7(a) and 8(a) cannot mean that the unit-holders, while having a proprietary interest in the whole, have no such interest in any of the constituent parts. If there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed: cf Smith v Layh (1953) 90 CLR 102, at pp. 108-9. What cl 8(a) recognises is that no unit-holder can claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed. ... In my opinion, cl 7(a) and cl 8(a) do no more than recognize what the effect of the trust deed would be in the absence of express provision. A unit-holder has a proprietary interest in each asset of the trust notwithstanding the possible duration of the trust, the extremely wide powers or management given to the trustee and the possibility that the trust might lose the whole or part of its capital through unprofitable trading or speculation." 15Costa & Duppe Properties Pty Limited v Duppe was followed in other cases, including by Warren CJ in Schmidt v 28 Myola Street Pty Ltd [2006] VSC 343; (2006) 14 VR 447. Counsel for the plaintiff relied upon these authorities. 16Counsel for the defendant submitted that in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 at [30]-[32] the High Court disapproved of Brooking J's decision in Duppe. In support of that submission and in support of his submission that Duppe should not be followed, counsel also referred to the decision of Mandie J in Lend Lease Funds Management Limited v Commissioner of State Revenue [2009] VSC 360, of Robson J in Re S & D International Pty Ltd; Handberg v MIG Property Services Pty Ltd [2010] VSC 388; (2010) 79 ACSR 595, and of Lyons J in Batt v Clipse (Caloundra) Pty Ltd [2011] QSC 192. 17In CPT Custodian the High Court held that on the terms of the particular trust deeds with which that case was concerned, even where there was only one unitholder of the trust, that unitholder did not have an interest amounting to ownership. In CPT Custodian, the Commissioner argued that as the trust deed conferred on each unitholder fixed and ascertainable rights in relation to the distribution of income and capital, the unitholders had an equitable estate or interest in each of the assets comprising the trust fund from time to time, and as there were no other persons having such rights, those interests satisfied the definition of an owner entitled to land for an estate of freehold in possession (at [22]). In support of that contention the Commissioner argued (at [29]) that: "... unlike shareholders with respect to the property of the company, unit holders do have beneficial interests in the assets of the trust; no other persons or class of persons has such an interest and, if not with the unit holders, where else rests the beneficial interest?" 18In support of this argument reliance was said to have been placed on Duppe. (Direct authority for the argument could be found in Pearson v Lane (1809) 17 Ves 101 at 104; 34 ER 39 at 40 per Sir William Grant MR, cited by Isaacs J in Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 at 513, by the Full Court of the Supreme Court of Victoria in New Zealand Insurance Co Ltd v Commissioner of Probate Duties at 664, and by Kearney J in Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 at 224 rather than in Duppe itself.) 19The High Court rejected the "dogma" that where property is held on trust, the equitable ownership must necessarily be vested in someone other than the trustee (at [25]). The High Court said of Duppe: "[30] Similar reasoning is manifest in what was said in Duppe concerning the interest of each unit holder in the three parcels of land comprising the assets of the unit trust considered in that case. That trust deed (in cll 7, 8) contained provisions in similar form to cl 3.2 of the Deed considered above. The issue in Duppe was whether each unit holder had an estate or interest in land within the meaning of s 89(1) of the Transfer of Land Act 1958 (Vic), which was necessary to support a caveat. Brooking J, in answering that question in the affirmative, said: 'If there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed.' (emphasis added) [31] However, in Gartside, Lord Wilberforce had said: 'It can be accepted that "interest" is capable of a very wide and general meaning. But the wide spectrum that it covers makes it all the more necessary, if precise conclusions are to be founded upon its use, to place it in a setting: Viscount Radcliffe, delivering the Board's judgment in Commissioner of Stamp Duties (Queensland) v Livingston shows how this word has to do duty in several quite different legal contexts to express rights of very different characters and that to transfer a meaning from one context to another may breed confusion.' In Livingston itself, Viscount Radcliffe had observed that: 'the terminology of our legal system has not produced a sufficient variety of words to represent the various meanings which can be conveyed by the words "interest" and "property". Thus propositions are advanced or rebutted by the employment of terms that have not in themselves a common basis of definition.' When Livingston had been before this Court, Fullagar J and Kitto J each had spoken to similar effect. Hence, perhaps, the development of the 'dogma' respecting concurrent and exhaustive legal and beneficial interests which has been referred to earlier in these reasons and which was decisively discounted by the Privy Council in Livingston. Terms are used here which lack a universal contemporary or historical meaning, divorced from the context, particularly any statutory context in which they are employed. [32] It is unnecessary for the instant appeals to determine whether Duppe correctly decided the requirements in Victoria for a caveatable interest. But what was said there provides, after Gartside and Livingston, and more recently Linter Textiles, no authority of the general significance assumed for it by the submissions here by the Commissioner." 20Whilst the High Court disapproved of the statement by Brooking J in Duppe that if there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed, the High Court did not decide whether Brooking J was correct or incorrect in finding that on the terms of the trust deed in Duppe the unitholders had a proprietary interest in the assets comprising the trust fund. The emphasis in CPT Custodian was that regard must be had to the particular terms of the individual trust deed before a decision can be made as to whether a beneficiary of a trust has a proprietary interest in the individual trust assets and, if so, what the nature of that interest is, and whether it amounts to ownership. The High Court rejected the proposition that regardless of the terms of the trust deed, a unitholder would always have a proprietary interest in each of the trust assets. The High Court's discussion of Charles v Federal Commissioner of Taxation (at [33]-[36]) emphasised that whether a beneficiary has a proprietary interest in each of the trust assets will depend on the terms of the trust deed under consideration. 21In Duppe, Brooking J cited Smith v Layh (1953) 90 CLR 102 at 108-109 where the High Court said that the right of a residuary legatee or next of kin of an estate which has not been fully administered does not have "any separate or separable property in the specific items or assets of which the estate is made up", but does have a right of property in the totality of the assets forming the residue of the estate (the beneficial interest in which was not vested in the legal personal representative subject to the right of creditors) and therefore an equitable interest in the assets of which the totality is composed. However, this passage is of no real assistance. In Commissioner of Stamp Duties (Qld) v Livingston (1964) 112 CLR 12, the Privy Council said (at 23) that while in a general way a residuary legatee may be said to have an interest in the "totality of the assets", it does not follow that such a person has an equitable interest in any particular one of those assets. Neither Duppe nor the present case involves an unadministered estate. 22Whilst it would follow from the reasoning of the High Court in CPT Custodian that the unitholders in Duppe did not have equitable interests in trust assets amounting to beneficial ownership, the High Court expressly left open the question as to whether the unitholders in Duppe had a proprietary interest in individual trust assets sufficient to support a caveat. 23In Halloran v Minister Administering National Parks and Wildlife Act 1974 [2006] HCA 3; (2007) 229 CLR 545, the plurality of the High Court held that a unitholder in that case (Sealark) did not have any interest in any particular part of the trust fund or in any investment of the trust fund (at 570, [75]), notwithstanding that the trust deed provided that the unitholders of that class were entitled to a fractional interest in the corpus of the fund (at 561, [41]). Apart from observing that this was consistent with the reasoning in CPT Custodian, this conclusion was not further elaborated upon. It appears to have been particular to the facts in Halloran. 24In CPT Manager Limited v Chief Commissioner of State Revenue [2006] NSWSC 1286; (2006) 64 ATR 654, Gzell J said (at [50]): "[50] There is nothing in CPT nor in the later decision of the High Court in Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 80 ALJR 519 to suggest that the holder of a unit in a unit trust lacks an equitable interest in the trust property." 25Properly understood, I respectfully agree with this statement. I do not understand Gzell J to have meant that the holder of a unit in a unit trust always has an equitable interest in the trust property. That would be inconsistent with the "dogma" denounced in CPT Custodian. I understand his Honour to have been saying that depending upon the terms of the trust deed, it is possible for the unitholders to have an equitable interest in the trust property. The emphasis of the High Court's reasoning in CPT Custodian was that whether or not a unitholder in a unit trust has a proprietary interest in the assets of the trust, and if so, whether the unitholder has a proprietary interest amounting to ownership, depends upon the terms of the particular trust deed. That was the basis for distinguishing Charles v Federal Commissioner of Taxation. Whilst in Halloran the High Court did hold that the holder of units in the unit trust in that case lacked a proprietary interest in the trust assets, the reasons for that conclusion are not clear. 26In Read v Commonwealth (1988) 167 CLR 57 the trust deed included a term that no holder of units was entitled to require the transfer to him of any of the investments comprised in the fund. The beneficial interest in the fund was divided into units of equal capital value. Mason, Deane and Gaudron JJ said that the deed conferred on a unitholder "a beneficial interest in the assets of the Trust, a right to have the Trust executed in accordance with the Deed, and a right to proportionate distribution of the proceeds representing the assets of the trust fund upon termination of the Trust" (at 61). 27In Lend Lease Funds Management v Commissioner of State Revenue [2009] VSC 360, Mandie J disagreed with what was said by Gzell J in CPT Manager v Chief Commissioner of State Revenue quoted at [23] above. Mandie J did not explain why he considered Gzell J's view to be wrong. In the immediately preceding paragraphs of his judgment, his Honour considered CPT Custodian and identified its rejection of the "dogma" that the existence of a trust necessitates a beneficial interest held by someone other than the trustee, that is, that there necessarily must be separate legal and equitable estates in a trust relationship. His Honour then said (at [54]): "[54] Although the High Court was concerned with the definition of 'owner' in the Land Tax Act, the above passage [the extract from CPT Custodian at 112] supports the argument put by the Commissioner that, in the case of a unit trust and depending on the terms of the Trust Deed, where no persons can be identified as entitled to an equitable estate in the land, the trustee, despite being a trustee, is entitled to the whole estate both legal and equitable." 28This is correct. But it is not inconsistent with the observations of Gzell J in CPT Manager v Chief Commissioner of State Revenue. 29In Lend Lease the trust deed included a provision that "a Unit does not confer any interest in a particular Asset but only an interest in the Assets of the Trust as a whole ...". Such a clause is significantly different from the clause considered in Duppe that a unitholder was not entitled to any particular security or investment comprised in the trust fund, or the clause in Read v Commonwealth that a unitholder was not entitled to require the transfer to him of any of the investments comprised in the fund. 30In Re S & D International Pty Ltd (No. 4) [2010] VSC 388; (2010) 79 ACSR 595, the plaintiffs contended that unitholders in a unit trust were the beneficial owners of real estate that was trust property. Robson J rejected that contention following the reasoning in CPT Custodian. In reaching that conclusion his Honour also said that on the terms of the unit trust in question in that case, a unitholder did not have a proprietary interest in the individual trust assets (at [148]). In reaching this conclusion Robson J observed (at [139]) that a clause in the trust deed that provided that the beneficial interest in the trust fund was divided into units did not mean that unitholders had a proprietary interest in individual trust assets. His Honour said that that proposition had been put by Brooking J in Duppe, but the High Court in CPT Custodian had refused to accept it, noting instead the danger of confusing different concepts of "property" and "interest". 31Robson J then reasoned that as the trust was an active trading trust, the unitholders could have no beneficial interest in the trading stock because if they did, it would have been impossible for the trustee to deal with such assets to conduct the business. His Honour said that the trustee had to be able to give both beneficial as well as legal title in the stock it sold to its customers and therefore it had to have both beneficial and legal ownership of those assets in the first place (at [140]). With respect, the fact that a trustee has power to sell trust assets does not mean that a beneficiary lacks a proprietary interest in the trust assets. It simply means that the trustee can deal with them and confer a good title to such assets on a third party. That would be so whether or not a beneficiary had a beneficial interest in the assets. A beneficiary's interest is engrafted onto, not carved out of, the legal estate. Where the trustee is empowered to sell trust property and properly executes the power, a beneficiary cannot prevent the trustee's conveying legal title free of the beneficiary's interest because the beneficiary has no equity to prevent such a dealing. That does not mean that the beneficiary has no equitable interest in the trust assets. 32Robson J further reasoned that because the trust fund available to unitholders was constituted by net and not by total trust assets, it did not confer any title on unitholders over individual assets. I do not understand why that conclusion follows. It is true that because the trustee will be entitled to be reimbursed or exonerated from trust assets in respect of liabilities properly incurred that the assets are not held on trust only in favour of the beneficiaries (Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226 at [48]), and they are not assets in which the beneficiaries would have an interest amounting to ownership (CPT Custodian). But it does not follow that because the trustee will be entitled to have resort to any of the assets to satisfy the right of indemnity that the unitholders could not have a proprietary interest in those assets. In Buckle the High Court said (at 246, [48]): "[48] Until the right to reimbursement or exoneration has been satisfied, 'it is impossible to say what the trust fund is'. The entitlement of the beneficiaries in respect of the assets held by the trustee which constitutes the 'property' to which the beneficiaries are entitled in equity is to be distinguished from the assets themselves. The entitlement of the beneficiaries is confined to so much of those assets as is available after the liabilities in question have been discharged or provision has been made for them. To the extent that the assets held by the trustee are subject to their application to reimburse or exonerate the trustee, they are not 'trust assets' or 'trust property' in the sense that they are held solely upon trusts imposing fiduciary duties which bind the trustee in favour of the beneficiaries." In my view the High Court was there saying that until the trustee's right of reimbursement or exoneration has been satisfied, it is impossible to say what are the assets that are held solely on trust in favour of beneficiaries. That does not deny the beneficiaries a beneficial interest in trust assets (if the terms of the trust would otherwise confer such an interest), albeit an interest deferred to the trustee's beneficial interest. 33Next, Robson J referred to provisions of the trust deed that empowered the trustee at its discretion to divert income that would otherwise be distributable to the unitholders to a reserve and to provisions that precluded there being any transfer of a particular trust asset in specie to a unitholder (at [143]). His Honour said that there was no possibility that the unitholder could ever receive a transfer of any particular trust asset "or obtain a direct proprietary interest" in either of the two trust properties (at [142]). These provisions are certainly material to the conclusion that the unitholder did not have an interest amounting to beneficial ownership, but they do not, with respect, lead to the conclusion that the unitholder did not have any proprietary interest in the asset. A conclusion that the unitholder could never "obtain a direct proprietary interest" in the individual trust properties begs the question as to whether a unitholder already had a proprietary interest by virtue of his ownership of units in the trust. Robson J then dealt with and rejected the argument that unitholders with more than 50 per cent of the units would be entitled to terminate the trust and obtain a distribution of the sale proceeds applying CPT Custodian. But whilst CPT Custodian supports the conclusion that the unitholder did not have an interest amounting to equitable ownership, it does not support a conclusion that the unitholder did not have any proprietary interest in the individual trust assets. Robson J's conclusion was that the trustee was both the legal and equitable owner of the fee simple estate in the two pieces of land. His Honour then added "accordingly, Mr Malhotra does not have an equitable proprietary interest in the Footscray property and the Hillside property or the product thereof if his rights were governed by the terms of the unit trust" (at [148]). But the conclusion that the trustee was both the legal and equitable owner of the trust assets does not preclude a beneficiary from having a proprietary interest in them. A person may be the owner of property notwithstanding the existence of a proprietary interest of a third party in the property. The existence of such an interest is not inconsistent with the trustee having both legal and beneficial ownership. An alternative view is that neither the trustee on the one hand, nor the unitholder on the other, was the sole equitable owner. 34Re S & D International Pty Ltd (No. 4) was followed by Lyons J in Batt v Clipse (Caloundra) Pty Ltd. Lyons J dismissed an application for the appointment of statutory trustees for sale under s 38 of the Property Law Act 1974 (Qld) in respect of real estate owned by the trustee of a unit trust. The application was brought by unitholders claiming to be equitable co-owners of the property. Lyons J held that not only were the applicants not co-owners, but they did not have a proprietary interest in the individual trust assets. Her Honour said (at [30]): "[30] ... I accept the respondent's submission that pursuant to CPT Custodian Pty Ltd v Commissioner of State Revenue (CPT's Case) and subsequent decisions it has been established that ownership of units in a unit trust does not give rise to rights in respect of individual property held within the unit trust if the unit trust deed: (a) grants to the trustee powers to deal with the unit trust property as if the trustee were the owner of the trust property at law and equity; (b) in priority to payment to unit holders: (i) contemplates payment of debts or other obligations to persons employed to administer the trust; (ii) grants to the trustee a right of remuneration and exoneration from the trust property; and (c) affords no express right to any particular property held by the trust" 35With respect, this appears to go further than is warranted by CPT Custodian. In CPT Custodian the High Court did not decide whether on the terms of a deed materially the same as that in Duppe the unitholder would lack a proprietary interest in individual trust assets. Buckle did not decide that the existence of an unsatisfied right of indemnity deprived beneficiaries of any beneficial interest in trust assets, although it did mean that the trust assets were not held solely for their benefit (at [48]). The fact that the trustee has wide powers of management should not affect the question whether a beneficiary has a proprietary interest in individual trust assets. Whether there is a proprietary interest in individual assets depends on the construction of the trust deed as a whole and not necessarily on the presence of an express provision. 36That is not to doubt the correctness of her Honour's conclusion that the applicants were not co-owners in possession of the property. But the question of whether a unitholder has any equitable interest in individual trust assets depends on the terms of the individual trust deed. 37In none of the above cases was it necessary for the Court to decide whether a unitholder had a proprietary interest in the assets of the trust as distinct from having to decide whether the unitholder was the equitable owner of the trust assets. For the reasons above, CPT Custodian did not decide that the unitholders or the sole unitholder lacked any proprietary interest in the trust assets. That might have been the position because the trust deed in CPT Custodian expressly provided that no unit conferred any interest in any particular part of the Trust Fund or any investment. There was also a clause precluding a unitholder from lodging a caveat claiming an estate or interest in any real estate (at [20]). But the High Court did not decide whether the unitholders had a proprietary interest falling short of ownership. 38The trust deed in the present case does not include a term that unitholders do not have any interest in any asset comprising the trust fund. Clause 8(a) provides that the unitholders are entitled to the beneficial interest in the trust fund as an entirety, but subject thereto no unitholder is entitled to any particular security or investment or any part thereof. To say that a unitholder is not entitled to a particular security or investment or part thereof is not the same as saying that a unitholder does not have any interest in any particular security or investment. In Duppe, Brooking J held that that provision recognised that no unitholder could claim to have any particular asset appropriated to his share or transferred to him otherwise than in accordance with the deed (at 96). I agree that that is the effect of the second part of clause 8(a). 39The question remains whether the plaintiff has an equitable estate or interest in the land. Section 74K empowers the court to extend the operation of the caveat if satisfied that the caveator's claim "has or may have substance". In Schmidt v 28 Myola Street Pty Ltd, Warren CJ concluded that it was arguable that the unitholder in that case had a beneficial interest in the trust assets but did not decide the question (at [39]). In the present case as the question was fully argued and depends purely on the construction of the trust deed, the issue should be determined. 40For a unitholder to have an "equitable estate or interest in land under the provisions of this Act" (s 74F(1)) the unitholder must have more than "a merely personal right in relation to land" (Re Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342). The unitholder must have a proprietary interest in the land to sustain the caveat. In Glenn v Federal Commissioner of Land Tax, Isaacs J said (at 503): "The right of any cestui que trust to have the property dealt with as the trust requires is regarded for the purposes of equity as equivalent to a right in the property itself, but only commensurate with his particular right in personam." 41In Meagher, Gummow and Lehane's Equity Doctrines and Remedies, LexisNexis Butterworths, 4th ed, at [4-015], the learned authors say that: "... As a starting point, any system of proprietary interest may usefully be valued by reference to at least four criteria. These are: (a) the power to recover the property, the subject of the interest or the income thereof (that is, a 'property right') compared with the recovery of compensation from the defendant payable from no specific fund; (b) the power to transfer the benefit of the interest to another; (c) the persistence of remedies in respect of the interest against third parties who thus assume the burden thereof; and (d) the extent to which the interest may be displaced in favour of competing dealings by the grantor or others with interests in the subject matter (that is, priorities)." 42In Burns Philp Trustee Co Ltd v Viney Kearney J observed (at 223): "As was pointed out by Windeyer J in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25, at p 34, there is some circuity involved in finding the starting point for the existence of such an equitable interest, the problem being to isolate as the initiating factor the proprietary interest or the right to enforce the interest of the beneficiary." 43In Mills v Ruthol [2002] NSWSC 294 Palmer J noted (at [125]) that most attempted definitions of an equitable interest have been found wanting and concurred with Kearney J in Burns Philp Trustee Co Ltd v Viney that there is probably no point in attempting a universal definition. (For recent academic discussion of the issue see R C Nolan "Equitable Property" (2006) 122 Law Quarterly Review 232 and S X Aaron "Conceptualising the Singapore real investment trust" (2010) 24 Trust Law International 155.) 44Thus, leaving aside the case of a constructive trustee under the first limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251-252, whether a unitholder could require a third party to account for trust property acquired by it otherwise than as a bona fide purchaser of the legal estate for value without notice will depend on whether the unitholder has rights amounting to a proprietary interest in the that property. One cannot answer the question whether a unitholder's right to compel due administration amounts to an equitable interest in the individual assets of the trust merely by asking whether the unitholder has an interest enforceable against third parties because the answer to each question may depend on the answer to the other. The fact that a unitholder's right is assignable indicates that the chose in action to compel due administration of the trust is itself a right of property but does not indicate that a unitholder has a proprietary interest in the trust assets. The interest of the next of kin or a residuary legatee in an administered estate is assignable or transmissible by will, but does not confer a proprietary interest in the individual estate assets. 45A unitholder would be entitled to institute proceedings to compel the trustee to perform its duty to protect the trust assets. If the trustee refused to institute proceedings to protect the trust assets, a unitholder, in exceptional circumstances, could maintain its own action to recover the trust property (Ramage v Waclaw (1988) 12 NSWLR 84). This is not sufficient to confer a proprietary interest in the trust assets. The next of kin or a residuary legatee of an unadministered estate could have the same rights. 46The key provisions are clauses 7(a) and 8(a) which provide that the beneficial interest in the Trust Fund as existing from time to time is vested in the unitholders. In Duppe, Brooking J reasoned that "if there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed". It was only the words "there must be" that were deprecated in CPT Custodian. The implication that if beneficiaries have a proprietary interest in the entirety of the trust property they must have an interest in each of the assets forming the entirety could be displaced by the terms of the trust deed (as it may have been in CPT Custodian had the question fallen for decision). But where there is no contrary provision, as in the present case, and as was apparently the case in Duppe, I do not think it wrong to reason that because the beneficial interest in the investments or other property forming the trust fund is vested in the unitholders, the unitholders have a beneficial interest in each of the assets. That is not to say that they have the sole beneficial interest in each of the assets. If the trustee incurred liabilities in execution of the trust for which it had an unsatisfied right of indemnity, the trustee would have the preferred beneficial interest. But that does not deny the fact that the unitholders also have a beneficial interest in each of the assets. 47The issue could be tested by supposing that the trustee transferred all of the trust assets in breach of trust to a third party who did not purchase the legal estate for value and without notice. The unitholders would be entitled to follow and trace their equitable interest in the trust property into that acquired by the third party, or so much of it as could be identified, by reason of their having the beneficial interest (subject to the trustee's right of indemnity) in the entirety of the trust assets (clauses 7(a) and 8(a)). (For present purposes one can ignore the consequences if the third party became registered as the proprietor of land held under the Real Property Act without fraud.) If that is the position where all of the trust assets were transferred in breach of trust, it would be surprising if the position were different if one, or all but one, of the assets was transferred in breach of trust. 48Accordingly, I conclude that the plaintiff does have an equitable interest in the individual assets making up the Trust Fund, including the subject land. It does not follow that the plaintiff would be entitled to maintain the caveat if the defendant proposed to deal with the land in a way which was a proper execution of the trustee's duties. But the defendant did not suggest that any such dealings were in contemplation. The defendant's only contention was that the plaintiff lacked a caveatable interest. For the reasons I have given, I do not accept that contention. 49At the conclusion of argument, I extended the caveat until further order and indicated that that order would be discharged when I gave judgment if I accepted the defendant's contentions. As I do not accept the defendant's contentions I do not discharge the order. 50Prima facie the defendant should pay the plaintiff's costs of the application. I will hear the parties on costs. 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: 12 April 2013