Jubilee Properties Pty Ltd v Parkview Farm Pty Ltd

Decision 16In my opinion, Parkview has not established its standing to call for the winding up of the Trust, any breach of trust or any basis upon which the Trustee should be replaced or the Trust wound up. Its claim should be dismissed.

Background 17In September 2009 Parkview owned a property at 517 Pittwater Road, Brookvale ("the Brookvale Property") as well as the properties at 697 and 699 Pittwater Road, Dee Why. 18In September 2009 Mr Ryder approached Mr Keenan with a proposal that Mr Keenan invest monies in the development of each of these properties. Mr Ryder told Mr Keenan that Parkview was in default under a facility with Bank of Western Australia Limited ("BankWest"). Mr Ryder told Mr Keenan that in the difficult market conditions then prevailing he was concerned that a "fire sale" might result if Parkview were compelled to sell those properties at discounted values. 19Between September and November 2009, Mr Keenan and Mr Ryder negotiated and agreed the terms of Mr Keenan's investment in each of the projects. Parkview had obtained development consent and presales of proposed strata units in respect of the Brookvale Property. Mr Keenan caused a company to be incorporated which lent Parkview $3.9 million to reduce part of its indebtedness to BankWest. Parkview agreed to pay interest on that loan at 20 per cent per annum net of all bank fees, interest, stamp duty and other costs. Subsequently, Parkview obtained construction funding for the Brookvale Property project, the project was built and sold and the $3.9 million loan advanced by Mr Keenan's company was repaid with interest. 20Unlike the Brookvale Property, the properties at 697 and 699 Pittwater Road were not "construction ready" in that, in late 2009, Parkview had development consent but no presales and had had only cursory dealings with potential builders. Mr Ryder told Mr Keenan that he had a valuation of $4 million in respect of 697 and 699 Pittwater Road and that BankWest had agreed to release these properties from its security in return for $4 million. 21Between late October 2009 and November 2009, Mr Keenan and Mr Ryder negotiated and agreed the terms of sale by Parkview of 697 and 699 Pittwater Road to an entity to be established by Mr Keenan. 22The following conversation took place between Mr Keenan and Mr Ryder: [Mr Keenan]: "For 697 and 699 Pittwater, I will establish a different [special purpose vehicle] which will acquire the project for $4 million to take out BankWest. The [special purpose vehicle] will then undertake the process of obtaining favourable development consent, marketing and selling proposed strata units off the plan, engaging a builder, settling the sale of strata units and distributing the profits. You and some of your staff will have to provide consultancy and other services for the project, in return for a deferred profit participation in the form of a 25% interest in the [special purpose vehicle]. [Mr Ryder]: That proposal is acceptable to me." 23On 28 October 2009 Mr Keenan sent an email to Mr Ryder which included: "My objectives are to fully refinance the site ($4 million) but to do it on a basis that preserves some equity participation for you... I propose that I provide an equity injection of $1 million and a mezzanine loan of $3 million, to provide a full take-out for BankWest... You...would retain 25% of the equity in the project at this point... The mezzanine loan would be secured by a first mortgage but giving priority to a construction loan when this is available (i.e. becoming a 2nd mortgage). It would be structured on the same terms as the loan for [the Brookvale Property], including a net return of 20% per annum. This return will be net of all bank fees, interest, stamp duty and the like incurred by me in obtaining the necessary funding... If the site of 701 Pittwater Road becomes available I believe that either I could fund this too or between us we could introduce further investors to enable us to proceed with that also." 24On 6 November 2009, Mr Ryder sent an email to Mr Keenan agreeing that the matters set forth in Mr Keenan's email of 28 October 2009 should be "included in the Shareholders Agreement". 25At some time between 6 November and 24 November 2009 it was agreed that the "special purpose vehicle" would be a trust company. On or about 24 November 2009 Mr Ryder's solicitor, Mr Greg Beattie, circulated a proposed draft trust deed. 26Mr Keenan's accountant, Mr Lawrence Myers signed the Trust Deed as settlor on 23 November 2009. Mr Keenan immediately proposed changes to the terms of the Trust Deed to implement what he described in his affidavit evidence as the "control term". 27On 24 November 2009 (the day before the Trustee executed the Trust Deed) Mr Ryder wrote to Mr Keenan (with a copy to Mr Beattie) suggesting that the arrangements between them be recorded in the following terms: "This document has arisen as a result of [Mr Keenan] purchasing 697-699 Pittwater Rd ... owned by [Parkview], the managing director of which is [Mr Ryder]. In consideration of a number of matters, [Mr Keenan] has offered for [Mr Ryder and/or Parkview] to retain a 25% equity in the property and future development at no current or future expense to [Mr Ryder or Parkview]... [Mr Ryder/Parkview] considers he has no rights in dictating the future of the property except that [Mr Ryder or Parkview] or its beneficiaries etc shall have the benefit of 25% of net increase in value in return for [Mr Ryder/Parkview's] expertise in development of the subject or enlarged site. Should no net value be gained at the time of disposal no benefit accrues to [Mr Ryder or Parkview]." (emphasis added) 28On 25 November 2009 Mr Keenan had this conversation with Mr Ryder: [Mr Keenan]: "I'm making changes to the Trust Deed to make sure that, even though Parkview holds 25% of the units, my family trust controls the unit trust and Parkview's entitlements are limited to a 25% share in the profits realised on completion of sale of the development. [Mr Ryder]: That's fine." (emphasis added) 29On 25 November 2009 Mr Keenan sent an email to a number of parties, with a copy to Mr Ryder which included: "As for the trust deed, the only corrections that I am looking for are to make it clear that my family trust is able to control the [Special Purpose Vehicle]. The only positions that have some claim to need protecting, I believe, are: · [Mr Ryder] is entitled to stay involved so as to realise a profit on his units in the [Special Purpose Vehicle] and; · I am entitled to expect that it does that! The simple truth is that I am only making these investments because I have confidence in [Mr Ryder] and his team and therefore I think these two points will happen anyway without 'protections'. Certainly I have no other way of bringing the project to a successful outcome. Having said that, what if we have a falling out? I don't think it is right that [Mr Ryder] can insist on managing a project (so far) fully funded by me if I don't want him to and I don't believe anyone can draft something to make him do it if he doesn't want to." (emphasis added) 30Mr Ryder replied: "...[Mr Keenan] and I are of the same mind on this...for some clarity, it might be best to view me as if I were a consultant who has the benefit of a 25% upside in value...if it gets too hard to draft I'm quite ok with this series of emails and a handshake." 31Thus, the agreed basis on which Mr Keenan would become involved in the Project was quite clear. Mr Ryder was to have a 25 per cent equity in the Project. But Mr Keenan, and not Mr Ryder, was to control the Project. 32The changes proposed by Mr Keenan to implement what he called the "control term" were contained in a Deed of Variation of Trust executed on 26 November 2009 and which the parties have called the "First Variation", the relevant aspects of which I discuss below.

The progress of the Project 33On 27 November 2009, the Trustee entered into a contract with Parkview to purchase 697 and 699 Pittwater Road for $4 million. In due course, the Trustee paid Parkview that purchase price with funds advanced to it by Jubilee Group. Those funds were advanced without security, interest free for the first $1 million and at 20 per cent for the balance (as set out in Mr Keenan's email of 28 October 2009; 20 per cent per annum: see [23] above). 34In January 2010, Mr Keenan had an email exchange with Mr Ryder and Mr Graham Campbell (on behalf of Parkview) relating to whether the interest payable by the Trustee to Jubilee Group was to be compounded monthly or annually. The parties agreed that interest be compounded monthly, but that the interest be 18.3714 per cent per annum (which was equivalent to 20 per cent per annum without monthly compounding). 35In order to raise the money required to fund the purchase by the Trustee of 697 and 699 Pittwater Road, Mr and Mrs Keenan sold their home, and made the proceeds available to Jubilee Group which loaned the required funds to the Trustee. 36The Trustee's purchase of 697 and 699 Pittwater Road from Parkview was completed on 20 September 2010.

Acquisition of 701 Pittwater Road 37As contemplated in Mr Keenan's email to Mr Ryder of 28 October 2009 (see [23] above), prior to September 2010, Mr Keenan and Mr Ryder negotiated with the owner of the adjoining property, 701 Pittwater Road, to purchase that property. In September 2010, Mr Ryder and Mr Keenan agreed that the Trustee should buy 701 Pittwater Road for $4.5 million and that the purchase should be funded by an increase in the existing loan from Jubilee Group to the Trustee (such funds also to be sourced from the proceeds of sale from Mr and Mrs Keenan's residence). 38On 19 September 2010, Jubilee Group as lender and the Trustee as borrower, agreed to increase the amount advanced by Jubilee Group from $4 million (see [33]) to $10 million. Under the terms of the loan, Jubilee Group was entitled to take a first registered mortgage over the Properties, but agreed to defer any such mortgage to any mortgage granted by the Trustee to a construction funder. Jubilee Group has not yet sought any mortgage and is currently an unsecured creditor of the trustee. As previously agreed, the first $1 million was interest free, with the balance, together with any costs incurred by Jubilee Group in obtaining the necessary funding, to accrue interest at the rate of 18.3714 per cent per annum compounded monthly. 39On 8 October 2010, the Trustee entered into a contract to purchase 701 Pittwater Road for $4.5 million. The purchase was completed on 5 November 2010.

Development consent and presales 40On about 14 July 2011, the Trustee lodged an application for development consent in relation to the Properties. It obtained development consent in January 2012. That development consent was modified in July 2012. The modified consent provided for the construction of a nine storey building on the Properties, comprising 85 residential apartments and four shops. In February 2013, Warringah Council commenced public exhibition of a master plan that proposed a new precinct, including the Properties, in which the limitation on permissible building heights was to be increased from 24 metres to about 50 metres. In August 2013, Council adopted the master plan. 41On 30 September 2013, the Trustee lodged a new development application in relation to the Properties. The new development application proposes a part 14 and part 15 storey building with 129 residential apartments, five shops and an office suite. The approval authority in relation to the new proposal is the Joint Regional Planning Panel, which is yet to determine whether the new development application should be approved. 42Commencing in October 2012, the Trustee entered into "off the plan" sales contracts with third party purchasers in respect of a total of 50 residential apartments contemplated by the existing development consent. Those apartments have been retained in the taller building proposed in the new development application, although five of those apartments have been altered entitling respective purchasers to rescind if the new development application is approved. 43Commencing in June 2013, the Trustee entered into "off the plan" with third party purchasers in respect of a total of 62 residential apartments contemplated by the new development application. Those sale contracts were made subject to approval of the new development application for the taller building. 44Thus, at the moment, the Trustee holds 107 exchanged and enforceable contracts of sale of residential apartments in the proposed development to third party purchasers, of which 62 are subject to approval of the new development application.

The ING facilities 45Commencing in 2011, the Trustee has progressively obtained additional finance from ING Bank (Australia) Ltd ("ING") to fund the Project. 46On 21 April 2011, the Trustee obtained a $1 million loan from ING. Interest under that advance was capitalised so that the amount available was $900,000 ("the First ING Loan"). 47On 5 July 2013, the Trustee entered into a second agreement with ING to borrow $3 million, to replace the First ING Loan ("the Second ING Loan"). Again, interest was capitalised so that the amount available was $2.8 million. 48On 28 February 2014, the trustee entered into a third loan agreement with ING, to replace the Second ING Loan, to borrow $4 million ("the Third ING Loan"). Again, interest was capitalised and the amount available was $3.66 million. 49The terms of all the ING Loans included that: (a)their purpose was to fund the ongoing costs of developing the Properties; and (b)interest on monies loaned was charged at 2 per cent above the ING Cash Rate (which has ranged between 6.2 per cent and 7.7 per cent); 50Security for the ING Loans was: (a)a first registered mortgage over the Properties; (b)a first registered fixed and floating charge over the assets of the Trustee; (c)a guarantee from Mr Keenan.

The Spring Loans 51Commencing in May 2013, Mr Keenan has caused the Trustee to obtain additional finance from a friend, Mrs Selena Spring. 52On 3 May 2013, Mrs Spring entered into two contracts with the Trustee to purchase two apartments from the Project "off the plan" for a total price of $1.5 million. Mrs Spring paid a 10 per cent deposit. As to the balance, Mrs Spring and the Trustee entered into a loan agreement dated 3 May 2013 ("the First Spring Loan") pursuant to which Mrs Spring agreed to loan the Trustee $775,000, with capitalised interest charged at 10 per cent. The Trustee and Mrs Spring agreed that, when it is time to settle the purchase of the two apartments, the balance owing under the First Spring Loan will be offset against the purchase price. 53On 23 July 2013, Mrs Spring and the Trustee entered into second loan agreement ("the Second Spring Loan") pursuant to which Mrs Spring agreed to loan the Trustee a further $1 million with interest charged at 10 per cent and payable in arrears. 54On 8 April 2014, Mrs Spring and the Trustee entered into a third loan agreement ("the Third Spring Loan") pursuant to which Mrs Spring agreed to loan the Trustee a further $500,000 with capitalised interest charged at 15 per cent. That $500,000 was actually advanced by Mrs Spring to the Trustee on 9 July 2013. Thus the recitals to the Third Spring Loan read: "A. On 9 July 2013 the Lender advanced $1.5 million to the Borrower. B. On 23 July 2013 the parties recorded the terms to govern $1 million of those monies. C. The parties had intended that the remaining $500,000 of those monies would constitute payment of the subscription price for new units to be issued in the Trust. However a dispute arose between the Borrower (as trustee) and one of the existing holders of units in the Trust. D. Although the Trustee could have issued those new units without the consent of that unit holder, it preferred not to do so. Accordingly, the parties agreed to vary the terms that govern the remaining $500,000 as set out herein."

Purchase of the Keenan residence 55During 2012 Mr and Mrs Keenan entered into a contract to purchase a home in Vaucluse ("the Vaucluse Property") for $8.2 million. Settlement of that contract took place on 20 July 2013. Part of the purchase price was paid with funds borrowed by Jubilee Group from an entity known as Eclipse. 56On 23 May 2013, Mr Keenan approached ING about loaning funds to assist in the purchase of the Vaucluse Property. ING indicated that it was not prepared to make that advance. 57On 9 July 2013, Jubilee Group called on the Trustee to repay $1,959,448.87 of the sum advanced under the amended loan agreement referred to at [38] above. The Trustee entered into the Second ING Loan to make that repayment.

The Perpetual Guarantee 58In October 2013, Mr Keenan arranged to refinance the loan taken out by Jubilee Group with Eclipse with a $5 million loan from Perpetual Trustees Pty Ltd ("Perpetual"). 59As part of this refinance, Mr Keenan caused the Trustee to provide a guarantee in respect of Jubilee Group's obligations as borrower ("the Perpetual Guarantee"). 60Also as a condition of the refinance, Mr Keenan provided a statutory declaration dated 3 October 2013 which contained the following provisions: "18. The proposed transaction is being entered into as part of the due and proper administration of the Trust and the proposed transaction is for the benefit of the beneficiaries of the Trust and for the proper purposes of the Trust. The Trust will derive a benefit as a consequence of the Trust entering into...the transaction... 21. The loan advance will be applied solely and exclusively for the purposes of the Trust and pursuant to the powers contained in the Trust Deed and not otherwise."

Parkview withdraws its services 61On 18 October 2012, Mr Keenan sent Mr Ryder an email attaching a profit projection for the development showing a projected profit of $6.59 million (of which Parkview's 25 per cent share would be $1.65 million) after repayment of the Jubilee Group loan and interest. 62Progressively during 2013, Mr Ryder expressed the view to Mr Keenan that having regard to the costs of the development, the projected 25 per cent profit distribution payable to Parkview did not adequately remunerate Parkview and its related entities for provision by them of development services. 63In mid-2013, Mr Ryder sought to renegotiate the parties' agreement. Mr Ryder proposed that Parkview would continue providing the services if Jubilee Group wrote off all interest payable to it by the Trustee. On 18 May 2013, Mr Keenan offered to write off all interest if Parkview continued to provide the services and reduced its profit share entitlement from 25 per cent to 10 per cent. Mr Keenan estimated that such a change would increase the profit distribution to Parkview by about $1 million, based on the most recent projections. 64On 27 May 2013, Mr Ryder rejected that proposal, and proposed that the Jubilee Group interest be written off but Parkview retain the 25 per cent profit share entitlement. 65No new agreement was made. Parkview ceased providing services on about 15 August 2013.

Parkview lodges the Caveat 66On 5 November 2013, Parkview lodged the Caveat on the title of the Properties. 67By November 2013, the Trustee was in the process of negotiating with several banks to obtain a loan to fund the construction of the Project. The Trustee contended that the Caveat had the effect of hindering that process. One of the banks, St George Bank, refused to proceed further with the construction loan application until the Caveat was withdrawn. The Trustee also contended that lodgement of the Caveat was contrary to the parties' agreement in November 2009 that Mr Keenan would control the Project. 68The Trustee made the Fourth and Fifth Variations to the Trust Deed (which I discuss below) as a response to the lodgement of the Caveat and with the object of defeating any entitlement Parkview may have had to a caveatable interest in the Properties. The Trustee contends that it so acted in order to protect the trust fund and the investments of unit holders as a whole. 69As I have mentioned, on 16 December 2013, following a contested hearing, McDougall J ordered that the Caveat be removed (see [10] above).

Parkview purports to exercise the right to require the Trustee to wind up the Trust 70On 10 February 2014, Parkview purported to call for the winding up of the Trust.

The Trust Deed 71As executed by the Trustee on 25 November 2009 the Trust Deed contained the following provisions. 72 "Unit holder" was defined as: "...a person for the time being registered...as the holder of a unit, and includes persons jointly so registered and also includes the Foundation Unit Holders and each and any of them". 73Clause 6 provided: "Despite any other provisions of this Deed, the Unit Holders shall be entitled to an absolute, vested and indefeasible interest in each and every asset and the income of the Trust Fund in accordance with their entitlement pursuant to this Deed and the right to require the Trustee to wind up the Trust and distribute the Trust property or the net proceeds of the Trust property." 74Clause 6 did two things. First, it stated the nature of the unit holders' entitlements to the assets and income of the Trust Fund. Second, it stated the nature of the unit holders' entitlement to require that the trust be wound up. 75As to this second aspect, there is an issue in the proceedings as to whether cl 6, when read with the definition of "unit holder", entitles a single (minority) unit holder to require that the trust be wound up, or whether such right may only be exercisable by all unit holders acting jointly (consistently with the rule in Saunders v Vautier (1841) 49 ER 282). 76Clauses 12 and 13 set out the entitlement of unit holders to the distribution of the income and capital of the Trust. 77Clause 15 of the Trust Deed provided that the Trustee is not liable or answerable or accountable for any loss not attributable to its own dishonesty or the wilful commission by it of an act known by it to be a breach of trust. It also provided that the Trustee is not liable for the wilful commission of an act known by it to be a breach of trust if such act was authorised in writing by not less than 75 per cent of unit holders. 78Clause 25 provided: "The Trustee may from time to time in its absolute discretion, but subject to clause 25.2, vary any of the provisions of this Deed (including this clause) by deed or by oral or written resolution of the Trustee. 25.2 No such variation shall be made unless consented to unanimously by the Unit Holders." 79In November 2009 (two days after execution of the Trust Deed) cl 25.2 was amended with Parkview's consent by deleting the word "unanimously" and substituting the words "holders of the majority of the Units on Issue". 80Thus at all relevant times the Trustee was authorised to vary the provisions of the Trust Deed pursuant to cl 25.1 on the authority of the majority of unit holders.

The Fourth, Fifth and Sixth Variations to the Trust Deed 81On 15 November 2013 (ten days after Parkview lodged the Caveat) the Trustee, with the authority of Jubilee Group (as majority unit holder) executed a Fourth Deed of Variation of the Trust Deed (the Second and Third Deeds of Variation are not relevant to the issues in the proceedings) that did two things. 82First it varied the definition of "unit holder" to read: "Unit Holder means a person for the time being registered...as the holder of a unit...and also includes each Foundation Unit Holder, unless and until such Foundation Unit Holder ceases to hold any such Units in accordance with the provisions of this Deed." 83The variation thus removed from the definition of Unit Holder the words "and each and any one of them" (see [72] above). 84Second, the Fourth Deed of Variation substituted the following for cl 6: "6.1 Any Unit held by any Unit Holder creates only an interest in the Trust Fund as a whole, subject to any Trust liability, and does not create in favour of that Unit Holder any specific proprietary estate or interest, equitable or other estate or interest or equity, whether caveatable or otherwise, in or in relation to any particular Trust right, asset or property that comprises any part of the Trust Fund. 6.2 Notwithstanding clause 6.1 or any statute (including without limitation the Real Property Act 1900 (NSW)) or rule of law or equity to the contrary, a Unit Holder must not at any time: (a) interfere with or affect any right or power of the Trustee, or its exercise, under this Deed or in relation to any Trust right, asset or property; (b) exercise or assert any right in relation to, lodge or permit to subsist any caveat or lodge or give any other notice affecting, or otherwise claim or continue to claim any legal or equitable right, title, estate or interest to or in, any Trust right, asset or property; or (c) require the whole or any party of any Trust right, asset or property to be transferred to or otherwise dealt with for the benefit of that Unit Holder; or to purport or attempt to perform any such action contemplated by this provision. 6.3 For the avoidance of doubt, any act, omission, matter or thing that would have constituted a breach of this clause 6 if it occurred on or after the date on which the Trust Deed was amended to introduce this clause 6 will constitute and be deemed to constitute a breach of this clause even if it occurred before such date. This clause 6.3 will also apply to (sic) if any act, omission, matter or thing occurring before such date would have constituted such a breach in combination with any act, omission, matter or thing on or occurring after such date. 6.4 Without prejudice to any other right or remedy of the Trustee or any other Unit Holder, any breach, whether subsisting or otherwise, by a Unit Holder of this clause 6 is actionable by specific performance on the application of the Trustee." (emphasis added) 85As the words emphasised make clear, the purported variations to clause 6 were directed at the Caveat. To the extent that the amendments had the effect that Parkview was not entitled to lodge a caveat on the title of the Properties, Mr Newlinds accepted that they were within the power of the Trustee and, in light of the communications between Mr Keenan and Mr Ryder prior to execution of the Trust Deed, a proper exercise of that power. However, Mr Newlinds submitted, the variations went a good deal further than was necessary to achieve such an object. I will return to this below. 86On 15 November 2013, the Trustee and Jubilee Group also executed a Fifth Deed of Variation. That document provided that a "Material Breach" of the Trust Deed would occur if there was default under cl 6 of the Trust Deed and that, in that event, the Trustee could suspend the rights and entitlements of the defaulting unit holder and, in certain circumstances, redeem the units for value. 87Fifteen days later, on 30 November 2013 the Trustee and Jubilee Group executed a Sixth Deed of Variation which inserted cl 6.5 as follows: "Despite any other provision of this Deed, the Unit Holders have the right to require the Trustee to wind up the Trust and distribute the Trust Property or the net proceeds of the Trust Property."

The credit of Mr Keenan 88As I have mentioned, the only witness called in the proceedings was Mr Keenan. He was closely cross examined by Mr Newlinds. 89Mr Keenan has degrees in law and economics and now describes himself as a developer. 90Mr Newlinds pointed to a number of matters that, he submitted, demonstrated that Mr Keenan was a person who "creates documents that are not truthful". 91First, Mr Newlinds drew attention to a statutory declaration that Mr Keenan made as a director of the Trustee on 3 October 2013 in which he deposed that a loan advance to be made by Perpetual to refinance the mortgage secured by Mr and Mrs Keenan's home at Vaucluse was to be: "...applied solely and exclusively for the purpose of the Trust and pursuant to the powers contained in the Trust Deed and not otherwise." 92Perpetual required the statutory declaration in the context of the Trustee providing the Perpetual Guarantee. 93Mr Keenan gave the following evidence in cross examination: Q. "I am asking you whether you agree that the words 'the loan advance will be applied solely and exclusively for the purpose of the Trust' are and were at the time you said them, false? A. I know what you're saying. I didn't read it that way. I still think that what I said was correct that 100% of the monies were being used for purposes which would benefit the Trust and the unit holders of the Trust. Q. That's what paragraph 18 says. You accept that, don't you? A. There may be overlap between the two paragraphs... Q. You do understand entirely what I'm putting to you about paragraph 21, don't you? A. I think I understand it completely, yes. Q. You're not prepared to answer it directly, are you? A. I'm answering by saying that I believe that 100% of the proceeds of the loan were used for the purposes which benefited the Trust. In my mind I've answered your question. I'm sorry if you don't think I have. HIS HONOUR: Q. What Mr Newlinds is putting to you is that paragraph 21 is not literally true? A. Yes, I understand what he's saying your Honour. I understand that in a sense what he says is correct. What I felt at the time, maybe I was wrong, is that if 100% of the proceeds I used for purposes which benefit the Trust [then] the statutory declaration was correct. Maybe I was wrong about that but that's what I thought when I signed it." 94By this evidence I understood Mr Keenan to be acknowledging that what he had declared at paragraph 21 of the statutory declaration was not literally true but to be contending that, overall, the making of the Perpetual advance would be for the benefit of the Trust. 95Second, Mr Newlinds referred to a paragraph in Mr Keenan's affidavit of 2 December 2013 (sworn in support of Jubilee Group's application to the Caveat) in which he stated: "Currently [the Trustee] has in place a loan facility of up to $3 million applied by [ING]. Apart from this facility, Jubilee Group has financed all costs associated with the Development incurred by [the Trustee]." 96Mr Keenan made no reference to any of the Spring Loans in this paragraph and accepted this was an "error". However, he denied he was trying to mislead the Court. I accept that evidence. Mr Keenan swore his affidavit of 2 December 2013 in support of the Trustee's application to remove the Caveat. The relevant paragraph set out background matters not relevant to that application. As Mr Kidd submitted, it is unlikely that Mr Keenan made the error deliberately. I accept that he did not. 97Third, Mr Newlinds referred to paragraphs in Mr Keenan's affidavit of 7 March 2014 in which he referred to the First and Second Spring Loans but made no reference to the Third Spring Loan. Mr Newlinds also referred to the Third Spring Loan itself which recites that although Mrs Spring had advanced $1.5 million to the Trustee on 9 July 2013, that advance had been documented as a loan of only $1 million because the difference, $500,000, had been "intended" by the parties to "constitute the subscription price for new units" (see [54] above). Mr Newlinds also pointed to a document prepared by Mr Keenan dated 2 August 2013 which showed, as a liability of the Trust, a "3.125% Equity Interest of Selina Spring" which appears to be referrable to the $500,000. 98Mr Keenan accepted that the recitals to the Third Spring Loan "may be" false insofar as they suggested that the Trustee and Mrs Spring had at all times between 9 July 2013 (when the $1.5 million was advanced) and 8 April 2014 (the date of the Third Spring Loan) agreed that Mrs Spring could or would subscribe for units in the Trust. Mr Keenan said this was so "at certain points in time" and that his intention had been to "produce an equity type of investment" for Mrs Spring. He said that the issue of units to Mrs Spring: " ...was an option that was under consideration. Are you asking me was it the only intention, then - was it the only possibility, no". 99Mr Keenan said that his understanding with Mrs Spring concerning the issue of units in the trust "changed during the course of the litigation" at "some time" prior to the date of the Third Spring Loan document (8 April 2014). 100Although this aspect of the matter was not explored in cross examination, the inference I would draw is that it was only shortly before 8 April 2014 that Mr Keenan and Mrs Spring abandoned any thought of Mrs Spring acquiring an "equity type" interest in the Project and decided instead to characterise the $500,000 advanced by Mrs Spring on 9 July 2013 (as a part of the $1.5 million advanced that day) as a loan. That would explain why Mr Keenan made no reference to the $500,000 in his affidavit of 7 March 2014. 101I will return to the significance of these matters when considering the Third Spring Loan below at [142] - [147]. 102For present purposes, the matters I have set out demonstrate that Mr Keenan has put his name to documents which, to put the matter neutrally, are not accurate. 103However, overall the impression I gained of Mr Keenan was that of an honest witness. I am not satisfied that any of the criticisms Mr Newlinds made of Mr Keenan warrant me not accepting his evidence as to his motivation concerning the events the subject of Parkview's complaints of breach of trust, to which I will now turn.

The $1,505,737.79 drawing under the Second ING Loan 104Parkview's pleaded case is that the Trustee misused monies drawn under the Second ING Loan by utilising $1,505,737.79 from that loan to fund the purchase by Mr and Mrs Keenan of the Vaucluse Property. 105The Trustee denies any misuse of trust funds. It contends that the funds drawn down by it under the Second ING Loan were all used to retire part of the Trustee's indebtedness to Jubilee Group under the (more expensive) loans outlined above, and that Jubilee Group thereafter on lent such funds to Mr and Mrs Keenan to assist with the purchase of the Vaucluse Property. 106In my opinion the evidence discloses no misuse by the Trustee of the funds it borrowed from ING. 107Parkview's apprehension that there had been a misuse by the Trustee of the $1,505,737.79 was born of two matters. First, on 9 July 2013 (shortly prior to the settlement of the purchase of the Vaucluse Property) the Trustee instructed ING to draw a bank cheque in favour of the Commonwealth Bank of Australia ("CBA") for $1,505,737.79 as part of the draw down of the Second ING Loan. The CBA was the mortgagee of the vendor to Mr and Mrs Keenan of the Vaucluse Property. 108Second, until 28 April 2014, there was no record in the Trustee's loan account with Jubilee Group of any payment by it to Jubilee Group of $1,505,737.79. 109In an affidavit sworn on 28 April 2014 (the first day of the hearing before me) Mr Keenan stated that he: (a)had mistakenly omitted to record the repayment from the Trustee to Jubilee Group of $1,505,737.79 in the intercompany loan account; (b)had discovered that error on 26 April 2014 and later that day caused Parkview's solicitors to be notified of the error; and (c)had now caused the error to be rectified and caused the loan account for the Trustee and Jubilee Group to be altered to show repayment by the Trustee to Jubilee Group of $1,505,737.79 on 10 July 2013 (with a consequential reduction of the principal and interest amounts owing on that loan account). 110In July 2013 Mr Keenan attended two meetings as director of the Trustee. As I have mentioned, Mr Keenan is the only director of the Trustee. The minutes of the meetings (which Mr Keenan composed) thus purport to record meetings that Mr Keenan had, as it were, with himself. Mr Newlinds did not, however, suggest to Mr Keenan that the minutes were not prepared on or about the dates they bore. 111The minutes of 7 July 2013 recorded the purpose of the meeting as follows: "[Jubilee Group]...had requested that [the Trustee] repay $959,398.87 of the monies that it [sic] owed to [Jubilee Group]. [Jubilee Group] intended to use the proceeds of such repayment to repay monies owed [by it] to [Mr and Mrs Keenan], who in turn intended to use the proceeds of such repayment to settle a purchase of [the Vaucluse Property]." 112The minutes continued: "The Chairman [Mr Keenan] lastly noted that if Mr and Mrs Keenan defaulted in their contractual obligation to settle the purchase of [the Vaucluse Property] by 10 July 2013 it was likely the vendor would foreclose on that property and impose whatever recoveries and penalties were available to him under that contract. This process might be protracted and may well jeopardise the [Project], possibly by rendering the Trust unable to secure a construction for completion of that project. The Chairman concluded that the proposed increase in the ING facility and part repayment to [Jubilee Group] were in the best interests of the Trust and its unit holders given that: (a) if Mr and Mrs Keenan defaulted under the contract of sale, the Trust may well be precluded from being able to complete the [Project], possibly by being unable to obtain a construction loan; (b) on the other hand, the new borrowing by the Trust would enable the Trust to retire part of its existing debt to [Jubilee Group], which in turn would enable Mr and Mrs Keenan to settle the purchase of the [the Vaucluse Property] in accordance the contract; (c) the increased ING facility would still represent a conservative of gearing against the established and possibly higher, valuation of the [Properties]; and (d) the Trust would still have sufficient resources available to it to bring the [Project] to the point where a construction loan could be put in place, and such loan should fund the project through to completion and the settlement of the sale of the units in [the Project]." 113Mr Keenan, as director of the Trustee resolved to proceed accordingly. 114Following this, in the minutes of 9 July 2013 Mr Keenan resolved to cause the Trustee to repay to Jubilee Group a further $1 million. 115Those minutes record: "The [Trustee] had already resolved to repay $959,398.87 of the amount owed by it to [Jubilee Group]...This repayment was to support [Mr and Mrs Keenan] in settling the purchase of [the Vaucluse Property]. [Jubilee Group] had other funds promised to it for this purpose, including $1 million from [a third party]. As it no longer appeared that this loan will be forthcoming, [Jubilee Group] has requested that the Trust repay an additional $1,000,050 to give a total repayment of $1,959,448.87. The [Trustee] has now agreed to increase its existing facility with [ING]...". 116These minutes do not record, in terms, the Trustee's decision to repay the $1,505,737.79 to Jubilee Group but, as Mr Newlinds, with his customary candour, conceded: "[The minutes] do support Mr Keenan's position that it was his intention that $1.5 million drawn down from the Second ING Loan would be credited against the balance [owing by the Trustee to Jubilee Group]." 117Further: (a)Mr Keenan gave unchallenged evidence that in June 2013 he informed Mr Ryder that he was looking to settle the purchase of the Vaucluse Property and for that purpose had requested ING to increase its facility with the Trustee to enable the Trustee to repay a part of its debt to Jubilee Group. As Mr Kidd submitted, that evidence was consistent with Mr Keenan having an intention to cause the Trustee to use the money borrowed by it to repay part of its indebtedness to Jubilee Group and was inconsistent with Mr Keenan having an intention to, in effect, misappropriate the money drawn down by the Trustee from ING; (b)the Jubilee Group loan ledger attached to Mr Keenan's 7 March 2014 affidavit (which did not record the $1,505,737.79 payment) was stated by Mr Keenan to be accurate to the best of his knowledge but to have not been reviewed by his accountant; (c)in his affidavit of 16 April 2014 Mr Keenan referred to the $1,505,737.79 draw down in terms which make clear that he believed that the payment had been accounted for as a payment by the Trustee to Jubilee Group. 118In those circumstances, I accept Mr Keenan's evidence that the omission of the $1,505,737.79 from the Trustee's loan account with Jubilee Group was accidental and an error which has now been rectified, and that the funds drawn down under the Second ING Loan were used to retire the Trustee's indebtedness to Jubilee Group. This was in the interests of the Trust, as the interest rate payable by the Trustee under the Second ING Loan was much less than under the Jubilee Group loan. 119Accordingly, my conclusion is that Parkview has not established misuse by Mr Keenan or the Trustee of the ING funds nor any breach of trust by the Trustee arising out of these circumstances.

The October 2013 guarantee by the Trustee of Mr and Mrs Keenan's home loan 120Parkview claims that the Trustee breached its duties as trustee by giving the Perpetual Guarantee (see [58] to [60] above). 121In his affidavit of 28 April 2014, Mr Keenan gave the following evidence concerning the Perpetual Guarantee: (a)In mid 2013, he received professional advice that any construction lender would look carefully at his financial position as "sponsor" of the Project; (b)The Eclipse loan to Jubilee Group (to fund the purchase of the Vaucluse Property and which he had guaranteed) had a relatively short term that would expire during the term of any construction loan and provided for all interest to be paid in advance, both of which features Mr Keenan understood a prospective construction lender to the Trustee would view unfavourably; (c)a $5 million loan from Perpetual Trustee would not have those features, although Perpetual Trustee would insist on the Trustee guaranteeing Jubilee Group's obligations; (d)he was advised that if Jubilee Group substituted the Perpetual loan for the Eclipse loan, that would help persuade a construction lender to the Trustee that Mr Keenan's financial position was stable and therefore would improve the Trustee's chances of obtaining construction finance; (e)additionally, the Perpetual loan would result in an estimated $400,000 being made available to Jubilee Group, which could then be on-lent to the Trustee as needed to assist it in funding the Project, in circumstances where cash available to the Trustee to fund the ongoing costs of the Project was limited; (f)he formed the opinion, having regard to a recently received valuation of the Properties, the $400,000 cash to be made available to Jubilee Group from the Perpetual loan, and the personal guarantees to be given by him and his wife, that the likelihood of the Trustee being worse off as a consequence of giving the guarantee was miniscule; (g)he believed that the Perpetual transaction, including the guarantee from the Trustee, was in the best interests of the Trust because it: (i)"stabilised" his financial position by replacing a loan that expired in July 2014 with a loan that would not expire until September 2016 (after the estimated repayment date of any construction loan), and that did not require that all interest be paid in advance; and (ii)freed up additional cash which was able to be made available to the Trustee as needed to fund costs of the Project, both of which matters improved the Trustee's chances of obtaining a favourable construction loan and completing the Project. 122I accept that evidence as a truthful account by Mr Keenan of his motivation in causing the Trustee to execute the Perpetual Loan. 123Thus Mr Keenan's commercial judgement was that such risk to the Trust as was involved in the Trustee guaranteeing Jubilee Group's obligations under the Perpetual Trustee loan was outweighed, by a considerable margin, by two benefits accruing to the Trust. 124The first benefit was the additional $400,000 funding likely to be available to the Trustee. The second, somewhat less tangible, benefit was the more favourable consideration likely to be given to the Trustee by a prospective construction funder by reason of the improvement or "stabilisation" in the financial position of Mr Keenan as "sponsor" of the Project. 125Clause 14.2(g) of the Trust Deed gave a discretionary power to the Trustee to guarantee the payment of money or debts or the due performance of any contract of any person including any unit holder. The Trustee's duties in relation to the exercise of such a discretionary power was to act in good faith, upon genuine consideration and for a proper purpose (for example Karger v Paul [1984] VR 161 at 164-6). 126Minds might differ as to whether Mr Keenan's commercial assessment of the situation, as set out above, was correct (although Parkview adduced no evidence to suggest it was not). However, I am not satisfied that Mr Keenan's decision, and thus that of the Trustee, was made otherwise than in good faith, and otherwise than with a real and genuine consideration of the Trust's interests and for a proper purpose. Mr Keenan did not need to change the loan arrangements from Eclipse to Perpetual Trustee to secure the purchase of the Vaucluse Property; that had already been achieved. I am satisfied that Mr Keenan's decision was motivated by a belief that, overall, the Trust would benefit. I do not accept Mr Newlinds's submission that the formation of such an opinion by Mr Keenan was so unreasonable as to "itself require that he be removed as Trustee". 127Alternatively, my conclusion is that if, contrary to my opinion, the Trustee's decision to enter the Perpetual Guarantee was a breach of its duty, the Trustee's decision was not dishonest nor made wilfully and knowingly in breach of trust thus entitling the Trustee to the protection of cl 15 of the Trust Deed (see [77] above).

The Trustee's utilisation of the ING Facility 128At one point, Parkview claimed that the Trustee's decision to borrow the funds necessary to purchase 697 and 699 Pittwater Road from Parkview, and later to purchase 701 Pittwater Road from a third party at the interest rates of 18.3714 per cent per annum compounded monthly was a breach of trust for the reason that funds were available from institutional lenders at lower rates of interest. 129During the course of his opening, Mr Newlinds informed me that those claims were not pressed. 130In those circumstances, Mr Kidd sought judgment for the Trustee against Parkview in relation to the relief claimed in the relevant paragraphs of the Second Cross Claim and sought a declaration that the relevant loan agreement between the Trustee and Jubilee Group was valid and not entered into by the Trustee in breach of trust. In view of my conclusion that Parkview's claim against the Trustee and Jubilee should be dismissed, my present view is that it is not necessary to take this course. 131The claim ultimately advanced by Mr Newlinds on behalf of Parkview was that the Trustee had acted in breach of trust by failing to fully utilise the ING facility to retire the Trustee's indebtedness to Jubilee Group. 132Mr Newlinds also submitted that the Trustee committed a further breach of Trust on 2 November 2011 when it drew down $730,638.54 from its loan account with Jubilee Group to retire its then indebtedness to ING to that extent. Mr Newlinds accepted that the latter allegation was one which Parkview had not pleaded. 133The evidence showed that the Trustee used the ING facilities as follows: (a)the conditions precedent to the First ING Loan (pursuant to which $900,000 was available: see [46] above) were satisfied in or about June 2011; (b)from June 2011 the Trustee drew down funds under the First ING Loan such that the loan balance was over $700,000 by September 2011 and continued to rise thereafter; (c)on 2 November 2011 the Trustee drew down the amount of $730,638.54, referred to at [132] above, from Jubilee Group to retire its indebtedness to ING, leaving a balance of $804.69 owing to ING; (d)from February 2013 on, the Trustee made further draw downs under the First ING Loan such that the Trustee owed ING an amount in the order of $500,000 from March 2013; (e)in July 2013, the conditions precedent to the Second ING Loan (with an increased available limit of $2.8 million: see [47] above) were satisfied; (f)thereafter the Trustee drew down further funds such that the loan balance was in excess of $2 million at July 2013 and continued steadily to rise thereafter such the loan balance was in the order of $2.8 million by January 2014; and (g)there was no evidence as to when conditions precedent to the Third ING Loan of 28 February 2014 (with an increased available limited of $3.66 million: see [48] above) were satisfied, but funds continued to be drawn down during March 2014 such that the balance was in excess of $3.2 million at the end of March 2014. 134In cross examination Mr Keenan gave this evidence about those matters: Q. "There's been plenty of times when there has been a lot of money available [under the ING facilities]? A. No, no actually I don't think so. There was a time when there was probably almost $900 available under the [First ING Loan]. Apart from that, I don't know too many times when there was a lot of money available. Q. What about the time that you actually drew down [$730,638.54] from [Jubilee Group]? A. Yep. Q. And used that money to actually repay the ING loan? A. Yes. Q. Let's talk about that. A. Yes. Q. How on earth was that to the benefit of the trust to replace money that was available at a much lower rate... A. Yes. Q. ...with money from a company which you were involved with... A. Yes. Q. ...at a higher rate. Explain that one? A. Yes. Q. And just to give this context, it happened in November 2011, didn't it? A. Yes, it did. Look, I think its covered by one of my affidavits. I didn't ever view the ING facility as primarily a way to minimise the interests costs to the trustee. I viewed that as a good thing. I didn't view it as the main objective. My main objectives were firstly to make sure that the trust would have money available to it to pursue the development as the money was required, and secondly, to try to establish a relationship with the bank which was very likely to be prepared to make a construction loan at the end of the time. Q. You know, don't you, from your experience, that one thing banks don't like is un-drawn facilities? A. No, not at all. My experience is... Q. Don't they cost them money? A. No, my experience is, one thing banks don't like is drawing facilities in a way that looks like you don't have control of your financial position. I've had a lot more experience that way than the way you're talking about. When the first ING facility was made available, I had not even met ING...I met them after the facility was made available. My approach at that time was to say to the bank that the financing of the development was well in hand, well under control. I was establishing the facility to establish a relationship with the Bank that would come in handy later, but that I was not needy for funds. That was the way I described it to them. I thought that was the right way to try to establish the relationship with the bank that I was looking for. I subsequently met with them. Consistent with what I told them previously, I did make a repayment in - a big repayment relative to the facility in November [2011], and the facility was left relatively un-drawn for about a year and a bit, I think. I was trying to manage the bank relationship to achieve what I considered to be the primary objectives of the relationship." 135Mr Keenan said that:

(a)retiring Jubilee Group debt was not the main objective of establishing the ING facility; (b)the main objectives of the ING facility were: (i)to make sure the Trust would have funds available to it to pursue the development as funds were required; and (ii)to try to establish a relationship with a bank that was likely to make a construction loan available in the future; and

(c)$900,000 available limit was left largely undrawn for the period from November 2011 to February 2013 to seek to achieve those objectives. 136Thus Mr Keenan's business judgement was that in order to foster a healthy relationship with ING, the prospective lender of funds needed for the construction of the Project, and a lender with whom he had had no previous dealings, he thought it wise to cause the bulk of the First ING Loan to be retired in November 2011 (albeit using more expensive funds from Jubilee Group). This was to demonstrate to ING that the Trustee, as the proposed developer of the Project, was not "needy". For the same reason, for some time thereafter, he thought it wise for the Trustee to not draw down the ING facility to its limit. 137I accept that evidence as a truthful account by Mr Keenan of his motivation in causing the Trustee to utilise the ING facilities in the manner the subject of Parkview's criticisms.

138Pursuant to cl 14.2(n) of the Trust Deed, the Trustee had the power, in its absolute discretion, to borrow money and secure the repayment of money so borrowed and any interest thereon by mortgage over any of the assets of the Trust fund.

139Again, minds might differ as to whether Mr Keenan's business judgement was correct (although, again, Parkview adduced no evidence that it was not). I see no basis to conclude that Mr Keenan's decisions about the ING facility were made otherwise than honestly, in good faith and with a real and genuine consideration of the Trust's interests. 140In these circumstances I am not satisfied that Parkview has demonstrated any breach of trust by the Trustee. Further, the Trustee is entitled to the protection of cl 15(a) of the Trust Deed (see [77] above).

141Further, as I have set out above (at [19] to [24] and [34] above) the interest rate payable by the Trustee to Jubilee Group in respect of the Project was the subject of Parkview's express consent (and was the same rate Parkview agreed to pay Mr Keenan's company in relation to the Brookvale Property project). Parkview assented to the Trustee borrowing money from Jubilee Group at those rates and, as Mr Kidd has submitted, cannot now charge the Trustee with a breach of trust as a result of such borrowing (for example see J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia, (7th ed, 2006) at [2122] and [2236]).

142Mr Newlinds made a number of submissions concerning the Third Spring Loan.

143It will be recalled that on 9 July 2013 Mrs Spring made an advance of $1.5 million to the Trustee. Of that $1.5 million, $1 million was the subject of the Second Spring Loan of 2 July 2013 and the balance, $500,000, became the subject of the Third Spring Loan of 8 April 2014. Recital C of the latter document stated that Mrs Spring and the Trustee had intended that the $500,000 constitute "payment of the subscription price for new units to be issued in the Trust" but now proposed to treat the $500,000 as a loan (see [54] above).

144Mr Newlinds first submission was that the Trustee had not accounted for the receipt of the $500,000. However, a bank reconciliation created by the Trustee showed receipt of the $500,000 by the Trustee as part of the Trustee's receipt of $1.5 million in July 2013. Mr Newlinds's riposte was to submit that the Trustee had not accounted for the sum "properly" as the $1.5 million had been accounted for as "Spring Loan" in July 2013, whereas as Recital C of the Third Spring Loan revealed that, as at July 2013, the parties did not regard the whole of the $1.5 million as a "loan".

145Mr Newlinds further submitted that Recital C of the Third Spring Loan and Mr Keenan's 2 August 2013 document (see [97] above) revealed that there was a time when the agreement between the Trustee and Mrs Spring was that she would receive units in the Trust in exchange for her advance of $500,000. 146However, none of these matters was pleaded by Parkview. Mr Newlinds made no application to amend Parkview's pleading to incorporate these claims. Indeed, he accepted that any such application was bound to fail, not least because it was clear that the Trustee may have adduced evidence from Mr or Mrs Spring to meet any such claim had it been pleaded, and because Parkview adduced no evidence from Mr Ryder that he was unaware of these matters. Ultimately Mr Newlinds submitted no more than that the unpleaded matters raised "serious questions about the arrangement" which "warrant investigation". He accepted that it would be "wrong" for me to find a breach of trust arising from the circumstances. 147In these circumstances, I am not prepared to make any adverse finding about Mr Keenan or the Trustee arising out of the Spring Loans. The complaint is unpleaded. The Trustee may well have adduced evidence to answer it, had the case been pleaded. In any event, the complaint is not that there has been a breach of trust but there is some ground for suspicion and perhaps further enquiry. I do not find that to be a sound basis upon which I could draw any conclusions adverse to Mr Keenan or the Trustee, let alone remove the Trustee.

Should the Trust be wound up? 148As I have mentioned at [70], on 10 February 2014 Parkview purported to exercise an entitlement to wind up the Trust. 149On that day its solicitors wrote to the Trustee's solicitors: "It is the position of our client that the amendments to the Deed establishing [the Trust] purportedly made by:

1. The Fourth Deed of Variation dated 15 November 2013;
2. The Fifth Deed of Variation dated 15 November 2013; and
3. The Sixth Deed of Variation dated 30 November 2013, are invalid and of no effect. Accordingly, in accordance with clause 6 of the Trust Deed, our client, in its capacity as a unit holder of the [Trust], requires your client, in its capacity as the Trustee of the Trust, to wind up the Trust and distribute the Trust property or the net proceeds from the Trust property. In the alternative, if the amendments referred to in the second paragraph of this letter have been validly made, then our client requires your client to wind up the Trust and distribute the Trust property or the net proceeds from the Trust property in accordance with clause 6.5 of the [Trust Deed]." 150An issue arises as to whether, on the proper construction of cl 6 of the Trust Deed, both before and after the Fourth and Fifth Variations, Parkview, as minority unit holder, had standing to call for the winding up of the Trust. I will deal separately with cl 6 before and after its purported variation.

Parkview standing - cl 6 before the Fourth and Fifth Amendments of November 2013 151I accept Mr Kidd's submission that, on its proper construction, the original cl 6 of the Trust Deed constituted no more than an express statement of the rule in Saunders v Vautier (see [75]), namely that all unit holders, acting jointly, could call for the winding up of the Trust. I do not accept Mr Newlinds's submission that, on its proper construction, the original cl 6 conferred on a single, or minority unit holder, such a power. 152There was no controversy before me as to the principles governing the construction of commercial contracts such as the Trust Deed. They were recently summarised by the High Court in Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd [2014] HCA 7 at [35]: "The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'." (citations omitted) 153As to the language used by the parties, the original cl 6 uses the plural "Unit Holders". On the other hand the expression "Unit Holder" is defined in the singular and includes "a person" registered as the holder of a unit and also "persons jointly so registered" (who would, together, be "a" unit holder). The definition goes on to include "Foundation Unit Holders and each and any one of them". I accept Mr Kidd's submission that the words "each and any one of them" within the definition of "Unit Holder" qualify the phrase "the Foundation Unit Holders", so as to make it clear that that plural phrase ("the Foundation Unit Holders") includes each and any (or, perhaps more accurately, "either") of Jubilee Group and Parkview, as Foundation Unit Holders. 154I also accept Mr Kidd's submission that the words in the definition of the singular term "Unit Holder" do not answer the question of whether the parties intended that the plural term "Unit Holders" when used in the Trust Deed to mean unit holders collectively or severally. 155The terms of the Trust Deed reveal that, where the parties intended that the plural expression "Unit Holders" to mean unit holders severally, explicit language was used to make that clear. For example cl 9.2(k) refers to the acquisition of life insurances policies on the life or lives of the Unit Holders "or any one or more of them". Similarly, cl 14.2(aa) refers to the Trustee's power to do whatever is needed to further the interests of the Unit Holders "or any of them". 156Further, the Trust Deed uses the phrase "any Unit Holder" and "each Unit Holder" on various occasions. For example, cl 11.1 refers to "any Unit Holder" having the ability to request the Trustee to redeem its units. Clause 14.2(g) refers to the Trustee's power to guarantee the debts of "any Unit Holder". Clause 22.10 refers to the entitlement of "each Unit Holder" to vote at meetings of unit holders. That language suggests that when the parties used the plural term "Unit Holders" in cl 6 it meant something different to "any Unit Holder" or "each Unit Holder". 157Those matters suggest to me that, when the parties provided in cl 6 that "the Unit Holders" were entitled to require the Trustee to wind up the Trust, they did not intend that "any Unit Holder" or "each Unit Holder" would have this right. Rather, they intended the right to be exercisable only by all unit holders jointly. 158In any event, it appears to me that when regard is had to the surrounding circumstances, mutually known to the parties, and the commercial purpose and object of the transaction, it is obvious that the parties did not intend that an individual unit holder could, at any time, for any reason (or indeed no reason), bring about the winding up of the Trust. 159The surrounding circumstances known to the parties included emails exchanged between the parties on 24 and 25 November 2009 in which it was agreed that "[Mr Ryder/Parkview] considers he has no rights in dictating the future of the property" (see [27] above) and in which it was agreed that the Trust Deed was to be amended (in November 2009) "to make clear that [Mr Keenan's] family trust is able to control the [special purpose vehicle]" (that is the Trustee, see [29] above). The surrounding circumstances also included the conversation between Mr Keenan and Mr Ryder on 25 November 2009 in which Mr Keenan said that he was making changes to the Trust Deed to ensure that "my family trust controls the unit trust" (see [28] above). 160The parties intended that Mr Keenan (through the Trustee) control the commercial direction of the Project. This was for the very good reason that Mr Keenan had rescued Parkview from its position of default with BankWest and funded the acquisition of the Properties with the proceeds of sale of Mr and Mrs Keenan's then home (see [35] above). It would be inconsistent with Mr Keenan having such control if Mr Ryder, through Parkview, could cause the Trust to be wound up and this bring the Project to an end whenever he chose. 161The Trust was created for the purpose of the Project that comprised the development of the Properties into a very large residential apartment complex. That development was to be expensive, doubtless risky and to take place over a considerable number of years. I cannot accept that the parties intended that an individual unit holder (especially one becoming disgruntled about the merits of the profit sharing arrangement reached at the outset: see [61] to [69] above) would have the power, at his whim, to bring down such a venture. 162In those circumstances, in my opinion, a reasonable business person would have understood that when the parties stated in cl 6 that "the Unit Holders" would have the "right to require the Trustee to wind up the Trust" they intended that that right could only be exercised by the Unit Holders jointly. In my opinion, cl 6 should be construed accordingly.

Parkview standing - cl 6.5 from 30 November 2013 163In my opinion, the same reasoning applies to cl 6.5 of the Trust Deed (inserted as a result of the Sixth Variation). If anything, the position is clearer in relation to cl 6.5 because, by then, the definition of "Unit Holders" had been altered as set out at [82] above.

Should cl 6 be rectified and is Parkview estopped from asserting standing to wind up the Trust? 164In view of my conclusions as to the proper construction of cl 6, these questions do not arise.

The purported November 2013 amendments to the Trust Deed

Did the Trustee have power to make the amendments? 165The Fourth and Fifth Variations to the Trust Deed purported to vary cl 6 of the Trust Deed. The Trustee purported to make those variations pursuant to cl 25 of the Trust Deed (set out at [78] above). 166Mr Newlinds submitted that the opening words of cl 6 ("despite any other provisions of this Deed") had the effect that cl 6 was not amenable to variation under cl 25 of the Trust Deed, notwithstanding the evident breadth of cl 25. 167That submission was not pursued with great vigour orally and I do not accept it. 168The power of amendment conferred on the Trustee in cl 25.1 of the Trust Deed is expressed to be subject only to cl 25.2 thereof (that such variation be consented to the majority of unit holders). 169I do not see the opening words of cl 6 as imposing a further qualification on the Trustee's power of amendment. 170Of course, the Trustee was obliged to exercise its power of amendment bona fide and for the purpose for which it was given: Cachia v Westpac Financial Services Ltd [2000] FCA 161; 33 ACSR 572 at [74] and [85]-[87] per Hely J; King Network Group Pty Ltd v Club of the Clubs Pty Ltd [2008] NSWCA 344; 69 ACSR 172 at [69] - [72] per Campbell JA and [255] - [259] per Young JA. 171It was common ground that, if as a matter of construction, the amendment was within power, it could not constitute an infringement of the sub-stratum of the Trust, for the reason that identification of that sub-stratum is itself determined as a matter of construction: Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 at 606-607 per Waddell CJ in Eq. 172Mr Keenan said that the Trustee's object in making the Fourth and Fifth Variations was to remove any entitlement of Parkview, as unit holder, to lodge a caveat on the title of the Properties or otherwise interfere with the proper exercise by the Trustee of its powers and discretion and to: "...put the Trustee in a position where a hostile unit holder would not be able to impede the trustee taking the Project forward." 173Mr Newlinds accepted that, if the Trustee's object was so confined, no breach of trust would arise. 174However, as Mr Newlinds pointed out, and as Mr Keenan acknowledged, the changes to the Trust Deed wrought by Fourth and Fifth Variations went further and also removed the right of unit holders to require the Trustee to wind up the Trust. 175In that regard Mr Keenan gave this evidence: "The Fourth Variation Deed had restated clause 6 of the Trust Deed in order to seek to overcome the adverse consequences for the Trust of caveats being lodged by Unit holders but in doing so had inadvertently omitted the right of the Unit holders that was contained in clause 6 of the Original Trust Deed to require the trustee to wind up the Trust and distribute the Trust property or the net proceeds of the Trust property. The omission of that right was not necessary to overcome the adverse consequences of a Unit holder lodging a caveat, and I determined that it should therefore be reinstated. When I caused [the Trustee] to enter into the Sixth Variation Deed, it was my intention that, insofar as inserted clause 6.5, the Sixth Variation Deed should reinstate the right of the Unit holders that was contained in clause 6 of the Original Trust Deed to require the trustee to wind up the Trust and distribute the Trust property or the net proceeds of the Trust property...". 176I accept that evidence. The Sixth Variation Deed did reinstate the right of a unit holder to require the Trustee to wind up the Trust, albeit in different terms to the original Trust Deed. 177Further, apart from the rights reinstated by the Sixth Variation, the Fourth and Fifth Variations did not involve any expropriation of any rights of Parkview beyond an entitlement to lodge a caveat on the title of the Properties or similar "hostile" action of unit holder (about the removal of which, as I have said, Mr Newlinds makes no complaint). Most particularly, the Fourth and Fifth Variations did not affect the entitlement of unit holders (including Parkview) to have the income and capital of the Trust distributed pursuant to cll 12 and 13 of the Trust Deed (see [76] above).

Were the amendments made in breach of trust? 178My conclusion is that the Trustee made the Fourth and Fifth Variations for the purpose only of defeating (admittedly retrospectively) Parkview's entitlement to lodge a caveat on the title of the Properties and was thus for a proper purpose. 179The existence of the Caveat: (a)was delaying the progress of the Project and application being pursued by the Trustee; (b)would likely have had consequences no prospective lender would be willing to offer construction funding to the Trustee see [67]; (c)would in any event have had the effect that the Trustee would not be permitted to draw down any construction loan that was made available; (d)put at risk the ability of the Trustee to develop the Properties, which the Trustee was unable to do without an appropriate construction loan being made available to it, and therefore risk causing the Trustee to lose substantial profits expected to be earned from the completion of the Project; (e)risked causing the presale contracts it had entered into with third party purchasers to be rescinded; and (f)put at risk the ability of the Trustee to repay the substantial amounts it owed to Jubilee Group, ING and Mrs Spring. 180In those circumstances my conclusion is that the Trustee's decision to amend the Trust Deed to remove Parkview's entitlement to lodge a caveat was not inconsistent with the Trust's interests. On the contrary, it very likely promoted those interests. 181Parkview has not demonstrated any harm or detriment suffered by it as a consequence of the amendments to the Trust Deed. In particular the accidental removal of the unit holders power to call for a winding up of the Trust had no adverse impact on Parkview because, for the reasons I have explained, it did not have the power under original cl 6 to cause the Trustee to be wound up.

Conclusion 182These findings are sufficient to dispose of Parkview's claims. Parkview has failed to establish any entitlement to call for the winding up of the Trust, any breach of Trust or other conduct such as would warrant removal of the Trustee or the winding up of the Trust. Its claim should be dismissed. 183I invite counsel to bring in short minutes to give effect to these reasons.

Amendments 21 May 2014 - Case cited in judgment added to coversheet Amended paragraphs: Coversheet 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: 21 May 2014