District Court of WA|2006-06-30

Leume Pty Ltd v Chianti Pty Ltd [2006] WADC 95 (30 June 2006)

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA

CITATION : LEUME PTY LTD -v- CHIANTI PTY LTD [2006] WADC 95

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Practice and procedure - Appeal - Whether principal relief sought is at law or in equity - Summary judgment application - Discretionary trusts

Appellant's application for summary judgment in the counterclaim dismissed

Bride v The Australian Bank Ltd & Ors, unreported, FCt SCt of WA; Library No 960565

Quinton v Proctor [1998] 4 VR 469

Re Marshall; Marshall v Marshall [1914] 1 Ch 192

Re Sandeman's Wills Trusts; Sanderman v Hayne [1937] 1 All ER 368

Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516

Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882

Angas Law Services Pty Ltd (in liq) v Carabelas [2005] HCA 23

Bucknell v Commercial Banking Co of Sydney Ltd [1937] HCA 35; (1937) 58 CLR 155

Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216

Casella v Costin Pty Ltd, unreported; SCt of WA; Library No 5416; 22 June 1984

Commercial Developments Pty Ltd v Mercantile Mutual Insurance (Workers' Compensation) Ltd (1991) 5 WAR 208

Commissioner of Inland Revenue (New Zealand) v Ward (1969) ATC 6050

Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18

Esanda Finance Corporation Ltd v Snowlake Holdings & Ors, unreported; SCt of WA; Library No 2823; 30 October 1992

Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87

Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; (1988) 81 ALR 397

Geraldton Building Co Pty Ltd v Christmas Island Resort Pty Ltd (1992) 11 WAR 40

Grundy v Townsend (1888) 36 WR 531

Hampton Goldmining Areas Ltd v Metals Exploration Ltd (1995) 17 WAR 30

Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271

Jacka Nominees Pty Ltd (in liq) v Edwards Karwacki Smith & Co Pty Ltd, unreported; SCt of WA; Library No 920512; 12 October 1992

Morgan & Son Ltd v S Martin Johnson & Co Ltd [1949] 1 KB 107

Morgan v Pallister [2004] WASC 188

O'Dare v Commissioner of Police Australian Federal Police & Anor, unreported; SCt of WA, Library Number 940048; 17 December 1993

Perth Pallets v QA Pallets & Packaging Pty Ltd (2002) 29 SR (WA) 275

Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589

Re Vesty's Settlement: Lloyds Bank Ltd & Anor v O'Meara & Ors [1950]

Renowden v McMullin [1970] HCA 24; (1970) 123 CLR 584

Saunders v Vautier [1842] All ER 58

Siqueira v Noronha [1934] AC 332

Southern Resources v Technomin Australia (1990) WAR 72

Spencer v Hemmerde (1922) 2 AC 507

Stage Club Ltd v Millers Hotels Pty Ltd [1981] HCA 71; (1981) 150 CLR 535

Taumazou v Taumazou [2002] VSC 258

Thompson v White [1970] 3 All ER 678

Turner v The New South Wales Mont De Piete Deposit & Investment Co Ltd [1910] HCA 15; (1910) 10 CLR 539

Weirs' Settlement Trusts; Macpherson and Weir (Viscount) v Inland Revenue Commissioners [1971] Ch 145

1 EATON DCJ: On 18 January 2005 the appellant filed a writ of summons with an indorsement of claim seeking the sum of $175,519 being payment by way of a distribution of trust income in or about 2002 by the respondent as trustee of a trust. On 25 January 2005 the respondent entered a conditional appearance. By reason of the respondent's failure to make application pursuant to O 12 r 6(2) the respondent's appearance became unconditional on 8 February 2005.

2 On 25 February 2005 the appellant filed a statement of claim. In due course the respondent filed a defence and counterclaim and the appellant filed a defence to the counterclaim. Both parties have sought further and better particulars and have given formal discovery.

3 On 15 April 2005 the respondent made application for security for costs and a stay of proceedings. On 31 May 2005 Registrar Hewitt dismissed that application with costs.

4 On 13 July 2005 the appellant filed an application for an extension of time within which to apply for summary judgment and for summary judgment on its claim and summary judgment on the counterclaim. That application was heard by Registrar Kingsley on 16 and 24 August 2005. On 9 November 2005 he dismissed the application delivering reasons for doing so. On 6 December 2005 he made orders that the writ be amended, that the statement of claim be amended, that the appellant have leave to apply for summary judgment out of time, that the application be otherwise dismissed and that costs be in the cause.

5 On 16 November 2005 the appellant gave notice of appeal from the judgment of Registrar Kingsley delivered on 9 November 2005. On 30 November 2005 that matter came before Registrar Hewitt who made orders granting an extension of time within which to bring the appeal should such an extension be required, adjourning the matter for hearing before a Judge and reserving the question of costs. The matter was heard by me on 15 February 2006.

6 The appellant originally filed its application by chambers summons on 13 July 2005. It sought summary judgment pursuant to O 14, summary judgment on the counterclaim pursuant to O 16 and, in the alternative, that the counterclaim be struck out.

7 An O 14 application for summary judgment must be brought within 21 days after appearance or at any later time by leave of the court. Order 16 allows a respondent to make an application for summary judgment within 21 days after appearance or at any later time by leave of the court. Both applications require leave.

8 During the course of the hearing it became clear that there was, in effect, a threshold question to be decided concerning whether there was jurisdiction in the District Court of Western Australia to grant the relief sought by the appellant in its action at all. The relief sought is the payment of the sum of $175,519. According to the statement of claim filed on 22 February 2005 that amount is the sum of distributions of trust income made in each of the financial years ending on 30 June from 1975 to 2002, inclusive. On the pleadings it is common ground as between the appellant and the respondent that both were, at all material times, duly incorporated companies. It is also common ground that by a deed of trust dated 7 March 1989 executed by the respondent as trustee a trust known as the "S & J Ryan Family Trust" (SJRFT) was established and that the appellant is a beneficiary of that trust. The statement of claim, in par 7, asserts that by reason of the distributions being made by the respondent to the appellant the appellant had an "indefeasible, absolutely vested, beneficial interest in possession in the distributed trust income". Finally, the pleading asserts that the respondent has failed to pay the distributed trust income to the appellant.

9 The SJRFT was created by deed of trust executed on 7 March 1989. The respondent is the trustee. The primary beneficiaries are the children of Stephen Frederick Ryan and Jennifer Irene Ryan of Kojonup. Additional members of the class of general beneficiaries are Stephen Frederick Ryan and Jennifer Irene Ryan. Additional income beneficiaries are the parents, grandparents, brothers, sisters, brothers-in-law, sisters-in-law, nieces, nephews, cousins, second cousins, uncles and aunts of Stephen Frederick Ryan and of Jennifer Irene Ryan other than the settlor who was one Ian Peirce of Duranillin.

10 The appellant, too, is the trustee of a trust. By a deed of trust dated 25 October 1981 a trust known as the Ryan Family Trust (RFT) was created. The primary beneficiaries of that trust are the children of Thomas Lindsay Ryan and Jean Lendrum Ryan of Kojonup. Additional members of the class of general beneficiaries are Thomas Lindsay Ryan and Jean Lendrum Ryan. Additional income beneficiaries are the parents, grandparents, brother, sisters, brothers-in-law, sisters-in-law, nieces, nephews, cousins, second cousins, uncles and aunts of Thomas Lindsay Ryan and of Jean Lendrum Ryan other than the settlor who was one David Woolcott of Kojonup.

11 Thomas Lindsay Ryan is the sole director of the appellant. Stephen Frederick Ryan is his adopted son.

12 Thomas Lindsay Ryan has sworn an affidavit on 12 May 2005 in support of the appellant's applications. Annexed to that affidavit are, inter alia, copies of the trust deeds with respect to the RFT and the SJRFT and copies of the tax returns and financial statements of the respondent as trustee for the SJRFT for the years ended 30 June 1996 to 30 June 2002, inclusive. The profit and loss distribution statement for that trust for the year ended 30 June 1996 disclosed under the heading "Distribution to Beneficiaries" that $15,959 had been distributed to the RFT in that year and that $21,675 had been distributed to the RFT in the previous year that being the year ended 30 June 1995. The remainder of the financial statements and tax returns annexed to the said affidavit evidence distributions by the respondent to the RFT in subsequent years in the amounts stipulated in par 6 of the appellant's statement of claim.

13 Those distributions have not been paid to the appellant in its capacity as trustee of the RFT or in any other capacity. The funds, though said to have been distributed, according to the financial statements, remain with the respondent as trustee of the SJRFT. According to the notes to the financial statements of the SJRFT each amount was accumulated in what was referred to as a "Beneficiaries' Loan Account" in the financial statements for the years ended 30 June 1996 and 30 June 1997 which was thereafter referred to as the "Beneficiaries' Current Account" until the financial statements for the year ended 30 June 2002 when the accumulated amounts were referred to as "Unpaid Beneficiary Entitlement". In that year the accumulated amount for the RFT was $175,519.

14 In simple terms, the appellant seeks that the respondent, in its capacity as trustee, pay to it funds said in the books of account of the SJRFT to have been distributed to the RFT but which have been never actually paid but rather held by the respondent as trustee of the SJRFT. It seems that the distributed amounts are no longer held by the respondent pursuant to the terms of the discretionary trust but must be said to be held by the respondent as trustee for the RFT. The appellant, as trustee of the RFT, seeks payment.

15 Counsel for the respondent submits that the relief sought is equitable relief and, being principal relief, must be sought from the Supreme Court of Western Australia there being no jurisdiction in the District Court of Western Australia to grant equitable relief as principal relief. Counsel for the appellant submits that the relief sought is not in equity and that the District Court of Western Australia does have jurisdiction by reason of the amount sought being within this Court's monetary jurisdiction. That question is the threshold question referred to. Counsel agreed that it should be decided first and that, in the event that I decide that there is no jurisdiction in this Court to grant the relief sought, I should remit the action to the Supreme Court pursuant to s 77 of the District Court of Western Australia Act 1969. That section provides:

"Where it appears to a District Court judge that any action or matter brought before the Court ought from its nature, or magnitude, or by reason of the question of law involved to be heard and determined by the Supreme Court, he may make an order, remitting the action or matter to the Supreme Court."

16 If I decide the threshold question against there being jurisdiction in the District Court of Western Australia to grant the relief sought it seems that I should remit the action pursuant to that section without deciding the appeal from the decision of Registrar Kingsley as to do so would be superfluous.

17 The Deed of Trust dated 7 March 1989 creating the SJRFT provides, inter alia, for distribution of income. The trustee, at any time before the expiration of any accounting period, may determine with respect to all or any part or parts of the net income of the trust fund for that accounting period -

(a) to pay, apply or set aside the income to or for any one or more of the general beneficiaries living or in existence at the time of the determination; or

18 Clause 3.3 of the deed provides that a determination to pay, apply or set aside any income may be effectually made and satisfied by, inter alia, placing the amount to the credit of the beneficiary in the books of account of the trust or by drawing a cheque for the amount made payable to or for the benefit or credit of the beneficiary. Clause 3.3(f) provides that the trustee may make a determination by oral declaration, written statement or a resolution of the trustee whether or not published to any person and a certificate by the trustee as to any determination shall be prima facie evidence that the determination was made as and when set out in the certificate. Finally, cl 3.5 provides that any amount set aside for any beneficiary shall cease to form part of the trust fund and upon the setting aside shall thenceforth be held by the trustee as a separate trust fund on trust for that person absolutely with power to the trustee pending payment over to the person to invest, apply or deal with the whole or any part of the fund or any resulting income from it in the manner provided for in cl 5(e).

19 In the present case it is clear that the respondent, in successive years exercise its power of distribution, the practice being to evidence that exercise by the creation of a trustee's resolution relating to income. For example, the trustee's resolution for the year ending 30 June 2000 was as follows:

"That so much of the income of the S & J Ryan Family Trust for the year to end 30th June 2000 as has not hitherto been paid or applied to the relevant clause of the trust deed be dealt with as follows -

The total income for the period be applied pursuant to the relevant clause of the trust deed for the benefit of the beneficiaries listed below and in the amounts and proportions beside their names:-

This application being effected by crediting the said amounts to such beneficiaries in the books of the trust."

20 The financial report for the SJRFT for the year ended 30 June 2002 indicates a distribution to beneficiaries in that year in the sum of $49,919. The notes to the financial statements pertinent to that year indicate distribution to beneficiaries in that year in the following terms:

21 In that year, also under the heading of "Beneficiaries' Current Accounts" is a reference to the Ryan Family Trust. The balance brought forward from previous years in respect of the Ryan Family Trust is said to be $62,979 and, added to that, is the share of the profit being the sum of $49,719.

22 The financial statements of the SJRFT clearly demonstrate that the respondent exercised its power under the trust deed to make a distribution of income in favour of certain beneficiaries in the year ended 30 June 2000. One of those beneficiaries was the RFT. Pursuant to the trust deed the amount of $49,719 was not, as it might have been, the subject of a cheque made payable to the RFT but rather was placed to the credit of the RFT in the books of account of the SJRFT. That being the case, the amount was set aside and, pursuant to the provisions of the deed, ceased to form part of the trust fund, becoming the subject of a separate trust for the RFT absolutely with power to the respondent, pending payment to the RFT, to invest, apply or deal with the whole or any part of the fund or any resulting income from it in the manner provided for in the deed.

23 It follows from the foregoing that the amounts distributed by the respondent to the RFT in successive years pursuant to its power of distribution under the terms of the trust deed, although credited in the accounts of the SJRFT to a beneficiary's loan account in the name of the RFT, had been alienated from the SJRFT and were then held for the benefit of the RFT absolutely pending payment. It follows that the RFT, not being a person or entity under a disability was absolutely entitled to payment and could call upon the respondent to make payment to it.

24 The appellant, in its statement of claim, pleads that it has an "indefeasible, absolutely vested, beneficial interest in possession in the distributed trust income" which, the appellant pleads, the respondent has failed to pay.

25 The respondent pleads that it has distributed trust income in accordance with the terms of the trust deed and all and any distributions made by it to the appellant have been fully satisfied in accordance with the terms of the trust deed. The respondent denies that the appellant has made demand for payment of distributed trust income and says that the appellant is not entitled to a distribution of trust income either on demand or at all. Any payment of trust income is, says the respondent, at the discretion of the trustee.

26 What is the nature of the appellant's claim? Where a beneficiary is entitled absolutely and indefeasibly to an aliquot share of a trust fund, unless a contrary intention appears, that beneficiary is entitled to terminate the trust so far as concerns that aliquot share and to call for a transfer of the share. ("Principles of the Law of Trusts" by Ford & Lee, Vol 2 [16170]). In Re Marshall (supra) Cozens-Hardy MR said:

"Speaking generally, the right of a person, who is entitled indefeasibly in possession to an aliquot share of property, to have that share transferred to him is one which is plainly established by law."

27 In Quinton v Proctor [1998] 4 VR 469 Kellam J dealt with an originating motion for a vesting order to affect a distribution of part of a trust estate. The trust was that of the residuary estate of a testator who died on 19 December 1985. The assets, at the time of the hearing, consisted of two investments, the first being an amount of $190,000 in Telstra bonds and the second being a sum of $39,000 held in a trust account in consequence of another investment having matured. The beneficiaries agreed that they did not wish the sum of $39,000 to be reinvested but rather to have it paid to them in full in equal shares. One of the trustees refused to agree to the distribution. The appellants sought orders pursuant to the Trustee Act 1958 (Vic) vesting the sum of $39,000 in them as tenants in common in equal shares. Kellam J, in his judgment at p 471, said:

"It is clear law that if all the beneficiaries of a trust are of full age and capacity and between them entitled to the entire beneficial interest under the trust, the rule is that they may terminate the trust by requesting the trustee to transfer the trust assets to them or by their direction."

"The further rule is that where one beneficiary is entitled absolutely to an aliquot share of a trust fund, unless a contrary intention appears, that beneficiary is entitled to call for payment or transfer of that share to him. The effect of this is to terminate the trust, but only in relation to that share. Otherwise the trust is unaffected."

29 Kellam J referred to Stephenson v Barclays Bank Trust Co Ltd [1975] 1 WLR 882 at 889 where Walton J said:

"When the situation is that a single person who is sui juris has an absolutely vested beneficial interest in a share of the trust fund, his rights are not, I think, quite as extensive as those of the beneficial interest holders as a body. In general, he is entitled to have transferred to him (subject, of course, always to the same rights of the trustees as I have already mentioned above) an aliquot share of each and every asset of the trust fund which presents no difficulty so far as division is concerned. This will apply to such items as cash, money at bank or an unsecured loan, stock exchange securities and the like."

30 In the case before Kellam J he held that as to the beneficiaries who were absolutely entitled, having reached agreement between them as to the payment to them of part of the trust property which consisted of cash, there was no reason of principle why they should be precluded from achieving that result. He referred also to the authority of Re Marshall; Marshall v Marshall [1914] 1 Ch 192 and Re Sandeman's Wills Trusts; Sanderman v Hayne [1937] 1 All ER 368. He ordered that the trustee transfer the sum of $39,000 held on trust in equal shares to each beneficiary who was then absolutely entitled.

31 Dalpont & Chalmers in "Equity and Trusts in Australia" 3rd ed at [27.195] say:

"A beneficiary absolutely and indefeasibly entitled to an aliquot ('several') share of the trust fund may, absent contrary intention in the trust deed, terminate the trust in respect of that share and call for payment. As beneficiaries entitled in succession may combine to terminate the trust in its entirety, there is no reason in principle why they should not be entitled to combine to terminate a trust in respect of its aliquot shares or parts.

However, where a beneficiary owes a liability to the trust of this State, the trustee may refuse to distribute to the beneficiary his or her share of the fund except to the extent that the amount distributed exceeds the amount of the liability. This practically means that the trustee should deduct the amount of the liability from the beneficiary's distributive share before paying the beneficiary. Also, the right to terminate a trust of an aliquot share is subject to practical considerations where the nature of the trust's property is not conveniently divisible..."

32 In each of the years referred to in the appellant's statement of claim the respondent distributed income and rather than pay the appellant by drawing a cheque for the amount of the distribution in each year it placed the amount to the credit of the appellant in the books of account of the SJRFT. The amounts set aside, by the terms of the trust, are then held by the trustee as a separate trust fund for the beneficiary absolutely with power in the trustee "pending payment over to the person" to invest, apply or deal with the whole or any part of the fund or any resultant income from it in the manner provided for in cl 5(e). The latter clause gives power to the trustee to invest any amount held as a separate trust fund on behalf of the person entitled to it by investing it and its resulting income in any of the investments authorised by the SJRFT deed. That clause provides that while the beneficiary for whom such funds are held is under any legal disability the trustee may resort from time to time to the amount and its income to pay, apply or deal with the whole or any part of that amount or its income in such manner as the trustee thinks fit for the benefit of that person. The appellant is not under a disability. It seeks payment of the distributed funds referred in the statement of claim but does not, it seems, seek interest or an accounting by the respondent in respect of income generated by those funds over the years.

33 In my opinion, there can be no argument that the appellant is presently entitled to be paid the amount claimed subject of course to it being presently available. It is not clear, on the material before me, whether the distributed amounts have been reinvested and if so, in what form such investment has taken.

34 Further, in my opinion, the appellant's claim is one at law. It is a personal action. This Court has the same jurisdiction to hear and determine and may exercise all the powers and authority that the Supreme Court has and may exercise from time to time in relation to all personal actions where the amount sought to be recovered is not more than the jurisdictional limit.

35 In terms of the submissions of the parties a good deal of time and effort has been spent attempting to define a cause of action. The respondent submits that the appellant's statement of claim fails to disclose any cause of action in debt or for an account stated complaining that the statement of claim does not allege that the appellant has a legal possessory interest in distributed trust income or that the respondent is indebted to the appellant or that the respondent is liable to the appellant on an account stated. By O 20, r 8 of the Rules of the Supreme Court 1971 a statement of claim must contain only a statement in summary form of the material facts on which the party pleading relies for his claim. Of course, the facts pleaded in the statement of claim must disclose a cause of action. A cause of action comprises: "simply a factual situation the existence of which entitles one person to obtain from the Court a remedy against another." (Letang v Cooper [1965] Qd 322 per Diplock LJ at 242).

36 It does seem very clear to me that the facts pleaded in the appellant's statement of claim amount to a factual situation which, if proven, would entitle the appellant to obtain from the Court a remedy against the respondent. The respondent, having alienated the distributed funds from the corpus of the SJRFT by the terms of the deed holds the distributed funds with power to reinvest pending payment to the beneficiary. It follows, in my view, that if the beneficiary seeks payment of the amount stated very clearly by the respondent to be the present entitlement of the appellant the appellant is entitled to seek payment of that amount and be paid subject to the ready availability of the amount. Quite clearly, if the funds are held in cash on a deposit amenable to immediate withdrawal then they would be amenable to payment by the respondent to the appellant by means of a cheque. A debt is a sum of money due from one person to another. An account stated is an admission of a sum of money being due from one person to another. The admission of the sum of money being due by the respondent to the appellant is found in its own financial statements and in the form of resolutions of the trustee as to successive distributions in favour of the appellant. Quite clearly, the appellant accepts the respondent's accounting in that regard.

37 The following passage appears in "Principles of the Law of Trusts" by Ford & Lee, Vol 1 par [1440]:

"Although a beneficiary is not ordinarily a creditor of his or her trustee (Dimos v Willetts [2000] 2 VR 170; [2000] VSCA 145 at [107]) a trustee under an existing trust can become a debtor at common law to the beneficiary by stating an account, or, in other words, admitting to the beneficiary that a certain sum of money is held by the trustee subject to an immediate and unconditional duty to pay it to the beneficiary: Roper v Holland (1835) 3 Ad & E1 99; [1835] EngR 646; 111 ER 351; Bartlett v Diamond [1845] EngR 642; (1845) 14 M & W 49; 153 ER 385; Howard v Brownhill (1853) 23 LJQB 23. But the relationship of debtor and creditor does not arise merely because the beneficiary is, or all the beneficiaries are, able under the rule in Saunders v Vautier [1841] EngR 765; (1841) Cr & Ph 240; 41 ER 482, to call for a transfer of the property: Re Bliss (1984) 3 DLR (4th) 425. If the trustee does become a debtor, the beneficiary may recover the amount as a debt in a common law action for money had and received; R v Brown [1912] HCA 6; (1912) 14 CLR 17 at 25; [1912] HCA 6; 18 ALR 111 at 113; Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; 76 ALJR 203; 185 ALR 335; [2001] HCA 68 at [67]."

38 In Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 Gummow J said at p 541:

"With respect to express trusts it was settled in 1852, when Edwards v Lowndes (95) was decided, that it was only at the stage when there remains nothing to the trustee to execute except the payment over of the money to the beneficiary, or the trustee admits the debt, that an action for money had and received might lie at the suit of the beneficiary against the trustee; in other respects, in the Courts of law the trustee was treated as the absolute owner and the beneficiary's remedy was exclusively in a court of equity which might give effect to equitable set-offs and other equitable defences available to the trustee. The trust which had not been wholly performed was treated as analogous to the "open" contract, that is to say, one not discharged (96); at that earlier stage, the action for money had and received did not lie."

39 The authors of "Principles of the Law of Trusts" (op cit) said further in paragraph referred to earlier:

"The Income Tax Assessment Act 1936 (Cth) Pt III, Div 6 uses the concept of a beneficiary of a trust estate being 'presently entitled' to a share of the income of a trust estate as a criterion for including that income in the assessable income of a beneficiary, even though the income was not received, rather than treating it as being taxable in the hands of the trustee. To be presently entitled to a sum of money a beneficiary must be able to demand immediate payment of it: FCT v Whiting [1943] HCA 45; (1943) 68 CLR 199 at 215-6; [1943] HCA 45; [1943] Argus LR 186 at 189-90; Spry ICF 'Present Entitlement to Trust Income' (1973) 2 Aust Tax Rev 43; Giugni PD 'Present Entitlement: Legal Theory & Accounting Practice' (1991) 20 Aust Tax Rev 20. If a trustee has become a debtor to a beneficiary in respect of a certain amount of income, the beneficiary will be 'presently entitled'.

40 The respondent submits that the appellant's claim as pleaded can only be a claim in equity. In my opinion it is very clearly a claim at law. The debate over the nature of the cause of action is an arid one given that the pleaded facts clearly give rise to a present entitlement vested in the appellant to be paid the funds set aside by the respondent. In such circumstances the respondent has become a debtor to the appellant in respect of the amount of money claimed.

41 It is true that counsel for the appellant, in his written submissions filed 8 August 2005 submitted that the appellant's cause of action was not in debt. In his written submissions filed 24 February 2006 counsel for the respondent seized upon his opponent's submission to the effect that the appellant's claim was not in debt submitting that if that were so then the claim could only be a claim by a beneficiary brought against the trustee. In that respect submitted counsel for the respondent, the appellant would be limited to an order for an account to be taken of the separate trust fund created by the setting aside of distributions under cl 3.5 of the SJRFT trust deed for the purposes of identifying that fund and, perhaps, an order for payment of that fund to the appellant. Such remedies submitted counsel for the respondent, are purely equitable and not within the jurisdiction of this Court.

42 I do not agree with the submissions of either counsel on the point for the reasons outlined above.

43 In the respondent's submissions dated 24 February 2006 counsel for the respondent referred to the terms of the SJRFT, in particular referring to the definition of "general beneficiaries" and the provision enabling the nomination of an entity as a beneficiary under cl 1.12(b)(v). Counsel submitted in that regard that the appellant had failed to adduce any evidence of a notice of appointment whereby the appellant was nominated as a beneficiary with the SJRFT. On the pleadings there is an admission that the appellant is a beneficiary of the SJRFT.

44 Given my conclusion that there is jurisdiction in this Court to entertain the appellant's claim I must now consider the merits of the appeal before me. As mentioned, the appellant gave notice of appeal from the judgment of Registrar Kingsley delivered on 9 November 2005. The District Court Rules 2005 apply to every case before the Court other than a case that was commenced by writ before 30 May 2005 and in which an appearance was entered before 30 May 2005. In the absence of an order under r 5(2)(b) the District Court Rules 1996 apply. As such the appeal before me is by way of a complete review de novo dealt with by way of an actual re-hearing of the application which led to the order under appeal. I am to treat the matter as though it has come before me for the first time.

45 Having considered the appellant's application for an extension of time within which to make an O 14 summary judgment application Registrar Kingsley was of the opinion that it would be appropriate to give leave to bring the application and did so. He observed that for the most part applications for summary judgment should be brought at an early stage of proceedings. He went on to say that there would be occasions when such an application might be brought after discovery of documents leading to a conclusion on the part of the appellant that there was no defence to its claim. I have considered the circumstances of this matter afresh. I accept that in this case an O 14 application brought before discovery and inspection of documents might well have been premature. In my view, it is appropriate in the circumstances of this case to grant the appellant leave to bring its O 14 application.

46 It is well settled that the discretion to dispose of an action summarily should be exercised with great caution and should be reserved for cases which are really not arguable or where it is clear that there is no real question to be tried. If there is no triable issue and the appellant is clearly entitled to the amount claimed the appellant will be granted summary judgment. The applicant for summary judgment assumes the burden of persuading the Court that the claim made is a good one, that there is no defence to it, that therefore leave to defend should not be granted and that judgment should be given for the appellant.

47 In this matter on the pleadings there is no issue that the SJRFT was established by a deed of trust dated 7 March 1989 and that the appellant is a beneficiary of that trust. Although the respondent does not expressly admit that it made a distribution to the appellant of a portion of the annual income of the trust in respect of each of the financial years ending 30 June 1995 through to 30 June 2002 and that the total of those distributions of trust referred to is $175,519 it does seem to me that the respondent's own financial statements would suggest that with respect to those two matters there is also no issue.

48 By pars 7 and 8 of the statement of claim the appellant pleads that it has an indefeasible, absolutely vested beneficial interest in possession in the distributed trust income referred to and that the respondent has failed to pay the distributed trust income to the appellant. In response to that claim the respondent says that it has distributed trust income in accordance with the terms of the trust and that all and any distributions made by the respondent to the appellant have been fully satisfied in accordance with the terms of the trust deed. The respondent says further that the appellant is not entitled to a distribution of trust income either on demand or at all and that any payment of trust income is at the discretion of the trustee. Further, says the respondent, it would be unconscionable for the appellant to demand or assert an entitlement to payment of any distributions made by the respondent and any such payment would result in the appellant receiving an unjust enrichment. The respondent then pleads that by virtue of certain alleged contributions made by Stephen Frederick Ryan to the assets of the SJRFT any legal interest which the appellant may have in the trust assets is held by the appellant as constructive trustee for the respondent or, alternatively, Stephen Frederick Ryan and that the appellant's conduct in demanding payment of distributions from the trust is, in all the circumstances, unconscionable.

49 The question that arises for consideration is as to whether there is a question to be tried. If there is there should be leave to defend.

50 The respondent argues that having, by way of distribution, set aside income the trustee retains a discretion as to when it will pay the amounts set aside. If that be the case it follows, firstly, that there is no absolute entitlement in a beneficiary for whom income has been set aside and, secondly, that the trustee, in the exercise of its discretion, may never do more than set aside the funds. In other words, the trustee need not pay the funds set aside to the beneficiary.

51 Clause 3.1 of the SJRFT provides as follows:

"At any time before the expiration of any accounting period, the trustee may determine with respect to all or any part or parts of the net income of the trust fund for that accounting period -

(a) to pay, apply or set aside the income to or for any one or more of the General Beneficiaries living or in existence at the time of the determination; or

52 It follows from the foregoing that the trustee may determine before the expiration of any accounting period to deal with all or part or parts of the net income of the fund for that period in two ways. It can either pay, apply or set aside the income to or for any one or more of the beneficiaries or it may accumulate the income.

53 The word apply is not defined within the terms of the trust deed but "pay" includes transfer, convey and assign and "set aside" in relation to a beneficiary includes placing sums to the credit of the beneficiary in the books of account of the trust. "Apply" must mean to put or administer the income for one or more of the beneficiaries. In any event, the trust deed provides how a determination to pay, apply or set aside may be effectually made and satisfied. That may be done by placing the amount to the credit of the beneficiary in the books of account of the trust, by drawing a cheque for the amount payable to or for the credit or benefit of the beneficiary, by paying the amount over to or for the benefit of the beneficiary in such manner and to such person on behalf of the beneficiary as the trustee thinks fit or by a resolution of the trustee that a sum out of or portion of the net income of the trust fund be paid, applied or set aside to or for the beneficiary or otherwise dealt with for the benefit of the beneficiary. Any such resolution of the trustee shall be irrevocable and the income of the trust fund shall be dealt with as required by the resolution.

54 The resolutions of the SJRFT for the years ended 30 June 1999 to 30 June 2002, inclusive, as to distribution of income are annexed and marked TLR26 to TLR29, inclusive, in the affidavit of Thomas Lindsay Ryan sworn 12 July 2005. For the year ended 30 June 1999 the resolution of the trustee was to the effect that the total income for the period be applied pursuant to the relevant clause of the trust deed for the benefit of the beneficiaries listed in the amounts and proportions beside their names and that the application be effected by crediting the said amounts to such beneficiaries in the books of the trust. The resolutions passed in the following years are in similar terms. In each of those years and, I infer, for each of the years referred to in the appellant's statement of claim, the trustee made a determination not to accumulate income but rather to apply it to or for the specified general beneficiaries referred to in each of those resolutions in the amounts referred to in each of those resolutions by crediting the said amounts to those beneficiaries in the books of the trust. By doing so the trustee chose to adopt the method stipulated by cl 3.3(a)(i) as a means of giving effect to each determination.

55 Importantly, once the amounts referred to have been set aside for any beneficiary cl 3.5 provides that the amount so set aside shall cease to form part of the trust fund and upon the setting aside shall be held by the trustee as a separate trust fund on trust for that person absolutely with power to the trustee pending payment over to the person to invest, apply or deal with the whole or any part of the fund or any resulting income from it in the manner provided for in cl 5(e). It follows from that provision that once an amount is set aside it ceases to be part of the discretionary trust and is held for the benefit of the beneficiary absolutely. The powers and discretions which the trustee may then exercise are powers and discretions which it may exercise pending payment to the beneficiary. I conclude that it might well exercise such powers and discretions in the case of a beneficiary under a disability. In the case of an infant beneficiary, in accordance with cl 5(e), the trustee may invest any amount held as a separate trust fund on behalf of the person entitled to it by investing it and its resulting income in any of the investments authorised by the deed and, while that person is under any legal disability, at any time and from time to time resort to that amount and its income and pay, apply or deal with the whole or any part of that amount or its income in such manner as the trustee thinks fit for the benefit of that person in terms of the powers contained in sub-clauses 5(c) and (d). Such discretions and powers may be exercised while that person is under any legal disability. In the case of an infant beneficiary, once the beneficiary is no longer an infant there is, in my view, an absolute entitlement to payment there being no purpose in holding the fund set aside other than for payment to the beneficiary.

56 It follows from the foregoing that there is no merit in the pleaded case as set out in pars 4 and 5 of the defence to the effect that distributions made to the appellant by way of money being set aside have been fully satisfied in accordance with the trust deed. The appellant is not under a disability and as such payment to the appellant pursuant to the terms of the trust is no longer at the discretion of the trustee.

57 The background to this matter is that the appellant Leume Pty Ltd is the trustee of the RFT and the respondent Chianti Pty Ltd is the trustee of the SJRFT. It appears that the former is controlled by Thomas Lindsay Ryan and that the latter is controlled by Stephen Frederick Ryan and Jennifer Irene Ryan. Stephen Frederick Ryan in an affidavit sworn 2 August 2004 in proceedings before the Supreme Court of Western Australia relating to a statutory demand described Thomas Lindsay Ryan as his stepfather. Thomas Lindsay Ryan in an affidavit filed in this Court on 12 May 2005 says that Stephen Frederick Ryan is his adopted son. Stephen Frederick Ryan is the son of Jean Lendrum Ryan who is married to Thomas Lindsay Ryan. It appears that Thomas Lindsay Ryan and Jean Lendrum Ryan farmed at a farming property at Moodiarrup. Stephen Frederick Ryan says that he worked on that farm from about the age of 14 or 15 years. Thomas Lindsay Ryan is currently aged 66 years. Jean Lendrum Ryan is aged 81 years. According to an affidavit of Stephen Frederick Ryan his mother is a pensioner. His adoptive father holds his wife's power of attorney.

58 Stephen Frederick Ryan and his wife Jennifer Irene Ryan are presently 46 years old and 44 years old respectively. In the affidavit filed by Stephen Frederick Ryan in the Supreme Court he deposed to the fact that Thomas Lindsay Ryan, at the age of about 42 years in about 1982, left the farm to live in Perth and pursue other business interests. Stephen Frederick Ryan himself was then about 22 years old. He and his wife appear to be resident at the farm known as "Riverbends". It appears that Thomas Lindsay Ryan and Jean Lendrum Ryan are presently resident in the metropolitan area although not, it seems, together, he apparently having an address in Marlow Street, Wembley and she apparently having an address in Cambridge Street, Wembley.

59 It appears to be common ground that Leume Pty Ltd conducts the business of "Kojonup Grain Handlers". A company called Bretti Pty Ltd is trustee of the Ryan Rural Trust. Bretti Pty Ltd and the appellant Chianti Pty Ltd traded as Ryan Rural Enterprises. According to Stephen Frederick Ryan Bretti Pty Ltd is controlled by Thomas Lindsay Ryan. Ryan Rural Enterprises was, it seems, a partnership which commenced on 1 July 1989. It appears from the material before me that Bretti Pty Ltd and Chianti Pty Ltd traded as Ryan Rural Enterprises in the business of farming in partnership at Moodiarrup. The former is controlled by Thomas Lindsay Ryan and the latter by Stephen Frederick Ryan. In his affidavit of 2 August 2004 in the Supreme Court Stephen Frederick Ryan said that from time to time Chianti Pty Ltd would make distributions to the beneficiaries of the SJRFT by paying or setting aside amounts for particular beneficiaries. He agreed in that affidavit that from time to time amounts were set aside for the benefit of the RFT. Those funds distributed were, he said, the profits of Ryan Rural Enterprises which had been distributed to the SJRFT. In that affidavit Stephen Frederick Ryan deposed that the amounts were set aside on the basis that the RFT would not be entitled to call upon payment without the approval of the SJRFT. In making that claim he referred to cl 3 of the relevant trust deed. He further deposed that it was his intention when distributing funds to the RFT that if they were ever paid to the RFT they would be applied by the RFT for his benefit as a beneficiary of the RFT.

60 It is true that the primary beneficiaries of the RFT are the children of Thomas Lindsay Ryan and Jean Lendrum Ryan both, as at the date of that deed, 25 October 1981, of Riverbends, Moodiarrup, Kojonup. An additional income beneficiary of that trust was specified to be the Ryan Rural Trust of which Bretti Pty Ltd was trustee. I assume that Stephen Frederick Ryan is indeed the adopted son of Thomas Lindsay Ryan and is therefore a primary beneficiary of the RFT.

61 As already discussed above, cl 3 of the deed creating the SJRFT does not support the contention advanced by Stephen Frederick Ryan that amounts distributed to the RFT were set aside on the basis that the RFT would not be entitled to call upon payment without the approval of the SJRFT. In fact, there is no such provision.

62 As to the intention stated by Stephen Frederick Ryan when making distributions to the RFT, his own state of mind would not, alone, necessarily support any defence to the claim brought by the appellant. By par 7 of its defence the respondent alleges that the distributions made by it were distributions of profits generated by the services, labour and efforts of Stephen Frederick Ryan without any contribution by the appellant. The respondent alleges that Stephen Frederick Ryan is the de facto manager of Ryan Rural Enterprises, that between 7 March 1989 and 30 June 2002 he provided his personal services as manager and farm labourer to that entity without remuneration or reward, that as a result, exclusively, of his personal services, efforts, labour and endeavours to that entity during that period it earned income and profit and that the profits of Ryan Rural Enterprises were paid to the SJRFT and formed the exclusive income of that trust available for distribution. As a result of those alleged facts the respondent claims that any legal interest that the appellant may have in the trust assets is held by it as constructive trustee for the respondent or, in the alternative, Stephen Frederick Ryan. The respondent further asserts in its defence that the appellant's conduct in demanding payment of distributions from the trust is, in all the circumstances, unconscionable. Those alleged facts are the basis of the respondent's counterclaim for compensation.

63 When making the distributions the subject of the claim the resolutions of the trustee of the SJRFT specifically referred to the RFT. Although it was common ground on the pleadings that Leume Pty Ltd was a beneficiary of the SJRFT counsel for the respondent, Mr Feutrill, before me submitted that the distributions, on a proper construction of the SJRFT trust deed could only be held by the RFT for the benefit of Stephen Frederick Ryan. If, he submitted, the funds were intended to be solely held by Leume Pty Ltd on behalf of the RFT such a distribution would not be a distribution which could be perfected because it would be contrary to the express terms of the SJRFT trust deed. That is, he submitted, if the funds were held by Leume Pty Ltd in its capacity as trustee of the RFT then those funds "would not fall in the class of beneficiary to whom distribution can be made."

64 Under the SJRFT trust deed dated 7 March 1989 "general beneficiaries" means, inter alia, the trustees (in their capacity as such) of any trust or settlement under which any interest is held by a general beneficiary and all interests vest within the perpetuity period. "Interest" includes any interest, contingent interest or expectant interest of any nature and whether liable to be defeated or diminished by the exercise of any power or by reason of any other matter. According to the schedule to the SJRFT trust deed additional income beneficiaries are, inter alia, the parents of Stephen Frederick Ryan and Jennifer Irene Ryan. "Additional income beneficiaries" means the person or persons (if any) named and described or defined as such in the schedule. Those persons should be treated as general beneficiaries for the purpose of cl 3 and any consequential provisions but shall not by reason only of being included as additional income beneficiaries be treated as general beneficiaries for any other purpose. By cl 3 the trustee may distribute income to any one or more of the general beneficiaries. The person meeting the definition of an additional income beneficiary clearly may be treated, for the purposes of cl 3, as a general beneficiary. Stephen Frederick Ryan is a primary beneficiary of the RFT. He is, along with his wife, an additional member of the class of general beneficiaries of the SJRFT. As such, the appellant, in its capacity as trustee of the RFT, is the trustee of a trust under which an interest (as defined) is held by a general beneficiary of the SJRFT. I conclude, therefore, that the trustee of the SJRFT may make, in accordance with its powers and discretions, a distribution to the RFT such a distribution being made to the trustee in its capacity as trustee.

65 It follows from the foregoing that I do not accept the submission made to me by counsel for the respondent that on a proper construction of the SJRFT deed the appellant can only hold the funds distributed to it on trust for Stephen Frederick Ryan as a general beneficiary under the Ryan Family Trust. Mr Feutrill further submitted that the SJRFT could not distribute income to a discretionary trust, that it could only distribute income to a trust in which Stephen Frederick Ryan has an interest. In order to make good that proposition Mr Feutrill suggested that to hold an interest it must be "a present interest". I prefer to adopt the definition, not exclusive, of "interest" mentioned above and found in cl 1.1 of the deed.

66 In his oral submissions Mr Feutrill seemed to rely upon his contended construction of the SJRFT trust deed rather than upon the contention that the facts outlined in the defence filed by his client gave rise to an entitlement to relief based on unconscionability or unjust enrichment.

67 In his written submissions dated 23 February 2006 counsel for the respondent returned to par 11 of the affidavit of Stephen Frederick Ryan sworn 2 August 2004 referred to above. To reiterate, the deponent said that the funds distributed were set aside on the basis that Chianti Pty Ltd retained complete discretion as to when those amounts would be paid to the RFT and that the RFT would not be entitled to call upon or demand payment without the approval of the SJRFT. He deposed to his intention that in the event that those amounts were paid to the RFT they would be applied by the RFT for his benefit as a beneficiary of the RFT. Counsel for the respondent said, in his written submissions that:

"The uncontroverted evidence of Stephen Ryan, is to the effect that the amounts were set aside on the basis that at the time they were paid over to the appellant they would be settled on the appellant to be held on trust for the benefit of Stephen Ryan absolutely."

That submission misconstrues the evidence of Stephen Frederick Ryan. The deponent refers, in that affidavit, to "the basis" and calls in support of that proposition cl 3 of the SJRFT deed. As I have already observed, that clause does not support his contention. The deponent also refers to his own intention in the event that the amounts were paid to the RFT. Clearly, he contemplated that funds would be paid to the RFT. It is clear that he knew that the RFT was a discretionary trust controlled by Leume Pty Ltd which was, in turn, controlled by his adoptive father. To state his intention is to, with the benefit of hindsight, reflect on his state of mind or what it would have been had the various distributions been paid direct to the RFT or held and then paid after a period of time to the RFT. To state one's intention is one thing. To suggest that the evidence of Stephen Frederick Ryan's intention, as stated in his affidavit, affords a basis for the proposition that the funds, when distributed to the appellant would be settled on the appellant to be held on trust for the benefit of Stephen Frederick Ryan absolutely is entirely another. Both trusts were discretionary trusts. The distributions were made to the Ryan Family Trust having regard to the books of account of the SJRFT. They were not made to Leume Pty Ltd. There is no basis for concluding that the funds, if they were to be paid to Leume Pty Ltd, would be held in any capacity other than as trustee for the RFT in accordance with the powers and discretions of the deed of which it was a creature.

68 In his submissions to me both in writing and orally counsel for the respondent did not take the respondent's pleadings as to unconscionability and unjust enrichment beyond his contentions as to the construction of the SJRFT trust deed and the statements of Stephen Frederick Ryan's intention as set out in his affidavit sworn 2 August 2004. Further, given that the RFT is a discretionary trust with a corporate trustee bound by the terms of a trust deed, those terms being almost identical to that which binds the trustee of the SJRFT, it is impossible to see how, on the material before me, it could be said that there is an arguable contention of unconscionability or unjust enrichment by reason of the appellant's claim to be paid monies distributed to the trust of which it is the trustee. Stephen Frederick Ryan contends that his management and labour has generated the funds being the income of the Ryan Rural Trust. Those funds were it seems distributed to the SJRFT. The trustee of the SJRFT is Chianti Pty Ltd. He and his wife are directors of that company. In the exercise of their discretion they made distributions of income to the appellant in its capacity as trustee of the RFT. They did so presumably knowing that the RFT was a discretionary trust. On the material before me it would not appear to be arguable that, in making a determination in favour of the RFT, that determination for a distribution of funds to the RFT was made on the basis that either the funds would never be paid or, if they were they would be held by the corporate trustee of the RFT in some capacity other than that of trustee of the RFT. It is the case that, in the books of account of the SJRFT the distribution is clearly made to the RFT and not to the appellant.

69 Finally, the respondent submits that by O 6, r 5 of the Supreme Court Rules a plaintiff is required to identify, if the plaintiff sues in a representative capacity, the capacity in which the plaintiff sues. It submits that in the present matter the appellant has failed to do so in the writ of summons and therefore it must be assumed that the appellant sues in its personal capacity as opposed to its capacity as trustee. In its writ of summons filed 18 January 2005 the appellant indorsed its claim in the following terms:

"The appellant claims from the respondent the sum of $175,520 being payment of a distribution of income made in or about 2002 by the respondent in its capacity as the trustee of the S & J Ryan Family Trust to the appellant in its capacity as a trustee of the Ryan Family Trust and as beneficiary of the S & J Ryan Family Trust."

70 By par 4 of its statement of claim filed on 22 February 2005 the appellant asserted it was the beneficiary of the SJRFT. By its defence filed 9 March 2005 the respondent admitted that the appellant was indeed a beneficiary of the SJRFT. In Bride v The Australian Bank Ltd & Ors, unreported, FCt SCt of WA; Library No 960565; 25 September 1996, Heenan J said at p 6:

"There is a difference between the personal capacity of the party and the capacity of that party as trustee. Judgment against a party in one capacity does not bar any claim by that party in the other capacity (see Bride v Peat Marwick Mitchell [1989] WAR 383 per Malcolm CJ at 389). If a party sues in a representative capacity a statement to that effect should appear on the record, if only to show what estates or interests are affected by the proceedings. As a matter of practice the statement usually appears in the title, not because it signifies a different party but because it would be of less use if it were buried 'somewhere in the statement of claim' (per North J in In Re Tottenham, Tottenham v Tottenham [1896] 1 Ch 628 at 629). As it happens, in the Chancery Division the capacity in which a party sues or is sued is not mentioned in the title but is stated only in the body of the pleading. ... Thus, in my opinion, the proposed amendments would not have introduced a new party. They would have altered the capacity in which the appellants sue from that of trustees to their personal capacity. The applications before the learned Master truly were applications for amendment of the statements of claim and O 21, r 5 applied to them."

71 By O 21, r 5 subject to certain conditions, the Court may at any stage of the proceedings allow the appellant to amend his writ or any party to amend his pleading on such terms as to costs or otherwise as may be just and in any such manner (if any) as the Court may direct. Given the indorsement of the appellant's claim at the time when the writ was filed there could not have been any mistake as to the capacity in which the appellant commenced the action. Clearly the distributions referred to are distributions made, in accordance with the respondent's books of account, to the RFT. It follows that there could be no misunderstanding or prejudice arising out of the failure of the appellant to be properly described, in the title to this action, as the trustee of the RFT. It clearly sues in that capacity. It follows from the foregoing that, in my opinion, the respondent has no defence to the claim included in the writ. I therefore allow the appeal and grant summary judgment for the appellant on its claim which is for judgment in the sum of $175,519.

72 The appellant seeks summary judgment on the respondent's counterclaim pursuant to O 16 of the Rules of the Supreme Court 1971. That order provides that a respondent may apply to the Court for summary judgment. Such judgment may only be given if the Court is satisfied that the action brought by the claimant is frivolous or vexatious or that the respondent to the claim has a good defence on the merits or that the action should be disposed of summarily without pleadings.

73 By its counterclaim the respondent repeats pars 6 to 8 of its defence. Paragraph 6 alleges that it would be unconscionable for the appellant to demand or assert an entitlement to payment of any distributions made by the respondent and that any such payment would result in the appellant receiving an unjust enrichment.

74 Paragraph 7 pleads that the distributions made by the respondent referred to in the statement of claim are distributions of profits generated by the services, labour and efforts of Stephen Frederick Ryan without any contribution by the appellant. That claim is particularised by reference to the respondent being a partner in the farming business trading as Ryan Rural Enterprises, Stephen Frederick Ryan being a director of the respondent and the de facto manager of Ryan Rural Enterprises, that between 7 March 1989 and 30 June 2002 Stephen Frederick Ryan provided his personal services as manager and farm labourer to Ryan Rural Enterprises for no remuneration or reward, that as a result exclusively of those personal services, efforts, labour and endeavours Ryan Rural Enterprises earned income and profit and that the profits generated by Stephen Frederick Ryan were paid to the respondent and formed the exclusive income of the SJRFT available for distribution.

75 Paragraph 8 alleges that by virtue of the contributions made by Stephen Frederick Ryan to the assets of the SJRFT any legal interest that the appellant may have in those assets is held by the appellant as constructive trustee for the respondent or, in the alternative, Stephen Frederick Ryan.

76 Paragraph 8 further asserts that the appellant's conduct in demanding payment of distributions from the trust is, in all the circumstances, unconscionable. Paragraph 10 alleges that by virtue of the matters pleaded in pars 7 and 8 of the defence the respondent is entitled, by virtue of the contributions made by Stephen Frederick Ryan, to the benefit of the SJRFT income and assets and is entitled in equity to be compensated in the sum of the distributions claimed by the appellant. The respondent claims relief being a declaration that the appellant holds its interest in the assets of the trust on trust for the respondent pursuant to a constructive trust; an order that the appellant pay to the respondent compensation in the sum of the distributions claimed by the appellant and that the appellant pay the respondent's costs of the proceedings to be taxed.

77 It will be apparent immediately that the principal relief sought in the counterclaim is equitable relief. Section 58 of the District Court of Western Australia Act 1959 provides that where in an action before the Court any defence or counterclaim of the defendant involves matters beyond the jurisdiction of the Court, that defence or counterclaim does not affect the competence of the Court to dispose of the whole matter in controversy, so far as it relates to the demand of the plaintiff and the defence thereto, but no relief exceeding that which the Court has jurisdiction to administer shall be given to the defendant upon that counterclaim. The relief sought is in the form of a declaration that the appellant holds its interest in the assets of the trust on trust for the respondent pursuant to a constructive trust and an order that the appellant pay to the respondent compensation in the sum of the distributions claimed by the appellant. Given my finding that the appellant's claim is one in law and that the counterclaim relates to the appellant's demand for the amount of money sought to be paid to it the respondent is not, in its counterclaim, seeking relief in excess of that which the Court has jurisdiction to administer.

78 The appellant sues in its capacity as trustee of the RFT. On the pleadings it is common ground that the appellant is a beneficiary of the SJRFT. By its counterclaim the respondent seeks a declaration that the appellant holds its interest in the assets of the SJRFT on trust for the respondent pursuant to a constructive trust. On the facts the appellant is the trustee of a discretionary trust.

79 The appellant seeking a declaration that a constructive trust exists over property alleged to be unjustly retained must show that some legal or equitable principle operating in its favour justifies treating the retention as unconscionable. (Ford & Lee "Principles of the Law of Trusts" Vol 2 par [22020]). In the matter before me the respondent having over several years distributed income from the SJRFT for the benefit of the RFT now seeks a declaration that the beneficiary, namely the RFT, holds that distributed income or its interest in it as constructive trustee for the respondent. In effect, the respondent asserts that it would be unconscionable for the appellant to seek payment of the funds distributed to it. Clearly, a recipient of property from a trustee or other fiduciary who is acting beyond power or in an abuse of power, where the recipient is not a bona fide recipient of the legal title for value in good faith may give rise to a declaration of the existence of a constructive trust. (Op. Cit. [22020]. In the present case it is not alleged that in the making of the distributions there was an action beyond power or an abuse of power. Given that there has been a distribution of income to the RFT it would seem to be entirely appropriate for the appellant, as trustee of the RFT, to call upon those funds and to deal with them in accordance with the powers and discretions conferred by its own trust deed.

80 The evidence suggests that the funds were, at source, the income of a farm managed by Stephen Frederick Ryan. Those funds, according to Stephen Frederick Ryan were the profits of Ryan Rural Enterprises distributed to the SJRFT and, in turn, distributed to the RFT. He, being a director of the corporate trustee of the SJRFT was instrumental in the making of resolutions giving effect to those distributions. In his affidavit sworn 2 August 2004 he said, as mentioned earlier, that it was his intention that in the event of distributed funds being paid to the RFT they would be applied by the RFT to his benefit as a beneficiary of the RFT. Putting his intention to one side it could not be said that the distribution of funds to the RFT by the SJRFT or the payment of those funds to the RFT would involve an unjust enrichment by receipt of the funds. There was no mistake in payment or distribution. Given that there was no unconscientious conduct involved in the making of the distributions it is difficult to see how the payment of such distributions could be said to unjustly enrich the appellant. The appellant is, after all, the trustee of a discretionary trust. It seems more likely that Stephen Frederick Ryan never contemplated that the appellant would seek payment of the distributed funds. He now says, in the light of a claim for payment, that if the funds are to be distributed then the funds will be held by the appellant for his benefit alone.

81 A constructive trust is a remedy deriving from an order of the Court. As such the remedy is not resultant upon the objectively ascertained intention of a settlor as in the case of an express trust. (op cit [22030]). Effectively, what Stephen Frederick Ryan is saying is that it was his intention that if the distributed funds were ever paid to the RFT the RFT would hold those funds on trust for him alone.

82 He does not assert a common intention, that is an intention held or shared by he and others as to the use to which distributed funds might be put. The whole point of a discretionary trust is that the trustee has a discretion to make distributions to members of various classes of beneficiaries and may, in the exercise of that discretion make no distribution to any particular beneficiary or at all. A bare allegation that a person has been unjustly enriched will not suffice to found recovery in restitution in Australian courts. Whether an enrichment is unjust is not to be determined by subjective considerations of what is fair or unconscionable but by reference to some vitiating or qualifying factor, such as mistake, duress, illegality or failure of consideration. (op cit [22040]).

83 The respondent in its counterclaim, in addition to a declaration, seeks an order that the appellant pay to the respondent compensation in the sum of the distributions claimed by the appellant. That is a claim for equitable compensation. Such compensation is usually imposed where there has been a breach of a fiduciary obligation. Tadgell J said in Hill v Rose [1990] VicRp 13; [1990] VR 129 at 144:

"The obligation imposed by courts of equity upon defaulting trustees and other fiduciaries is of a more absolute nature than the common law obligation to pay damages for tort or breach of contract. It follows that the obligation is not limited or influenced by common law principles governing the remoteness of damage, foreseeability or causation."

No breach of fiduciary duty is alleged by the respondent. There does not appear to be any foundation in the material before me, whether pleadings or on affidavit, for the imposition of equitable compensation.

84 Although there may be no basis on the material before me for an order for equitable compensation there has been quite clearly an underlying family arrangement. The arrangements that have been put in place in the form of several proprietary limited companies and discretionary trusts were probably put in place on the advice of accountants for estate planning and taxation minimisation considerations. The farm which, it seems, has been worked more recently by Stephen Frederick Ryan and was worked years before by Thomas Lindsay Ryan appears to have been the source of income which has been paid to the SJRFT and, in turn, distributed to the RFT. As mentioned earlier, both the appellant and the respondent are trustees of discretionary trusts in almost identical terms. Thomas Lindsay Ryan is a director of the appellant and Stephen Frederick Ryan is a director of the respondent. The arrangements that were put in place by them for estate planning and tax minimisation purposes were, no doubt, part of a broad agreement for the mutual benefit of all concerned. The fact that there is now litigation as between the two corporate trustees of the respective trusts does suggest some disruption to what was previously a harmonious situation. That scenario suggests the pre-existence of a common understanding or intention.

85 On an application under O 16 the onus is on the applicant, the appellant in this case, to show that there is no serious question to be tried on any cause of action raised by the respondent in its counterclaim. The appellant will succeed if it can demonstrate that there is no serious question to be tried upon any cause raised by the respondent. The appellant relies upon the affidavit of Thomas Lindsay Ryan sworn 12 May 2005 in support of its application for summary judgment against the respondent on its claim pursuant to O 14. The deponent deposes to there being no defence to the action brought by the appellant but makes no reference to the O 16 application.

86 I am satisfied that the claim made by the respondent in its counterclaim is not frivolous or vexatious. Having regard to the foregoing I am not satisfied that the counterclaim should be disposed of summarily. Quite clearly Thomas Lindsay Ryan in his affidavit sworn 12 May 2005 does not turn his mind to the O 16 application nor make any reference to it. In par 9 of his affidavit Thomas Lindsay Ryan refers to his:

"mutual business dealings with Stephen through our respective companies concerning a partnership established in 1989 relating to a farming business operating on land in the district of Moodiarrup in the State of Western Australia, including the operation of a bank account on which me and Stephen were both signatories..."

That excerpt does suggest that there was an arrangement in place which involved a degree of harmony as between the appellant and the respondent and those who controlled those entities. As mentioned earlier, that harmony appears to have dissipated. That reference appears to be the only reference in the affidavit of Thomas Lindsay Ryan which deals with the underlying arrangements. Order 16, r 1(2) provides that an application for summary judgment by a defendant shall be made by summons supported by affidavit verifying the facts upon which the application is based. There is no such affidavit. The application can only succeed on the basis that the appellant has a good defence on the merits. The defence to counterclaim filed by the appellant is no more than a general denial of the respondent's claim against it.

87 Having regard to the state of material before me including the affidavit referred to I do not grant summary judgment to the appellant pursuant to O 16. I am prepared to grant summary judgment on the appellant's claim but not on the counterclaim. I do not strike out the respondent's counterclaim but will give leave to amend it should the respondent seek to do so.

88 Registrar Kingsley did order that the writ be amended to include the words "plus interest" and ordered that the statement of claim be amended by adding to the prayer for relief a claim for interest at the rate of 6.5 per cent on the sum of $175,519 from 18 January 2005 to the date of judgment. My assumption is that the appellant does not seek, in its appeal, to disturb those orders but only to appeal the dismissal of the application insofar as summary judgment was refused.

89 I propose that pursuant to O 47, r 13 there will be a stay of execution on the appellant's judgment. There are several considerations involved in arriving at that conclusion. Firstly, I am, as presently informed, unaware of whether the funds distributed are presently available and if not, in what form, they are held. Secondly, I consider that the stay of execution should be conditional upon the respondent prosecuting its counterclaim without delay. There will be liberty to the appellant to apply to revoke the stay of execution in the event of there being a failure, without reasonable cause, to prosecute the counterclaim. I will hear counsel as to any subsidiary orders that may be required in the light of my judgment and as to costs.

Court of Western Australia Act 1959

Court of Western Australia Act 1969

Tax Assessment Act 1936

Leume Pty Ltd v Chianti Pty Ltd [2006] WADC 95

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Judgment (89 paragraphs)

Leume Pty Ltd v Chianti Pty Ltd [2006] WADC 95 (30 June 2006)

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Legislation Cited (5)

Cases Cited (16)