Conclusion
116None of the bases said to give rise to the conclusion that BankWest should account for the residual (or notional) retention moneys was made out. No error has been shown on the part of his Honour in that regard. Accordingly, the appeal should be dismissed with costs.
117LEEMING JA: I agree with the reasons and conclusions of Ward JA, but wish to add the following. Either Fortia held no property on trust prior to its being wound up, or else it did. Parkview's submissions addressed both alternatives, but either way they should be rejected.
118If Fortia held no property on trust, then the most favourable position for Parkview was that clause 5.10 gave rise to an enforceable obligation on the part of Fortia to constitute a trust, of which Fortia was in breach.
119On that hypothesis, Parkview relied on the maxim that equity regards as done that which ought to be done, in order to convert Fortia's breach of clause 5.10 into a property right. Parkview's reliance on the maxim is misplaced. That maxim (no differently from other maxims of equity) is not a specific rule or principle of law. Instead it is, as Mason CJ and McHugh J said, a summary statement of a broad theme which underlies equitable concepts and principles: Corin v Patton (1990) 169 CLR 540 at 557. It operates at a higher level of generality from a rule or principle of law forming part of a legal argument. When James Edelman (provocatively) advocated the abolition of this and other equitable maxims (in ch 5 of the 32nd edition of Snell's Equity (Sweet & Maxwell, 2010)), his first complaint was that they could be used as a substitute for transparent reasoning. Parkview's submission is an example of this. It is wrong to invoke the maxim as the basis for a legal conclusion that a party in breach of a promise is to be regarded in equity as though it had performed its promise; a more specific rule or principle is needed.
120On the hypothesis that clause 5.10 was a promise made for valuable consideration to create a trust, then had retention monies been drawn down by Fortia, a completely constituted trust would have arisen: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; 202 CLR 588 at [29]. It is at least arguable that even if those monies had been paid to a general bank account, Parkview as beneficiary would enjoy a tracing remedy: Associated Alloys at [31]. Once a trust has been constituted, the beneficiaries enjoy proprietary rights even when there has been a breach of trust. The maxim was invoked in Legal Services Board v Gillespie-Jones [2013] HCA 35; 87 ALJR 985 at [123] to characterise money paid to a solicitor on account of defence costs, which the solicitor misappropriated.
121However, as the High Court said in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 at [52], "[e]quity often regards as done that which ought to be done, but not necessarily that which merely could be done". In CPT Custodian, the fact that an existing trust could have been brought to an end at a particular time, but in fact had not been, was held to be something which did not engage the maxim. The position is similar in the present case.
122Where as here there is not a completely constituted trust, the relevant equitable principle is much narrower than Parkview submitted. As was said in Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252, the occasions where equity will treat an agreement to do something (such as the grant of a lease as in Chan or the sale of land as in KLDE Pty Ltd v Commissioner of Stamp Duties (Q) (1984) 155 CLR 288 at 296-297) as if it had been performed "rests upon the specific enforceability of the agreement". If the agreement is not specifically enforceable, the maxim can have no application. In Central Trust and Safe Deposit Company v Snider [1916] 1 AC 266 at 272, in a passage referred to with approval in Chan at 251, Lord Parker of Waddington in giving the advice of the Judicial Committee of the Privy Council said of a promise given for valuable consideration to settle existing property on trust, that:
"If for some reason equity would not enforce specific performance, or if the right to specific performance has been lost by the subsequent conduct of the party in whose favour specific performance might originally have been granted, the vendor or covenantor either never was, or ceased to be, a trustee in any sense at all."
123There is no need to pause to say anything about the meaning of "specific performance" in this context (see Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315 at [56]-[57]). Even on the widest view of "specific enforceability", it is plain that the promise was not specifically enforceable once external management was appointed to Fortia. Receivers were appointed on 13 August 2010 and Fortia was wound up on 20 September 2010.
124The foregoing supports the reasoning of Scott LJ in comparable circumstances in Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) [1992] BCLC 350 at 359, where the comparable clause was construed to require the setting aside as a separate trust fund the various amounts retained, which was not done. Scott LJ dealt expressly with the case where the employer was insolvent, whether or not in liquidation. His Lordship said:
"there is no reason at all for treating the employer as having set aside the retention fund when it has not in fact done so and no reason for treating the contractor as other than an unsecured creditor."
125The present case is no different from that described by Campbell J in White v Shortall [2006] NSWSC 1379; 68 NSWLR 650 at [187]:
"I can readily accept that there was no trust property at all, because the fund had not been constituted. It was not as though there was even a specific fund of money, part of which was said to be held on trust."
126The alternative way in which Parkview advanced its case relied upon the Bank assuming the office of trustee. The premise of that submission was that there was trust property in the Bank's "control", which word was deployed to pick up the language in In re Barney [1892] 2 Ch 265.
127Parkview advanced two formulations in support of this alternative case. The first was that the Bank assumed the office of trustee when it obtained possession of the guarantee, and thereafter became obliged to get in the other monies and hold them on trust. Parkview gave emphasis in its submissions to the direct dealings between it and the Bank between 15 and 30 July 2009. However, there had been negotiations between Parkview and Fortia from December 2008. During those negotiations, the terms of the bank guarantee (save for the favouree and the description of the contract) were finalised. Those negotiations concluded with Parkview's letter of 2 July 2009, "since all are now okay with the bank guarantee...". The precise terms by which the Bank maintained possession of the ANZ guarantee were a matter between it and its customer Fortia, and were not in evidence. But, as Ward JA has said, there is no reason to conclude that the Bank was a trustee, or was to be treated as a trustee, of the bank guarantee, and even if that be wrong, that would not give rise to an obligation to take steps to draw down the funds to be held on the Retention Moneys trust.
128The second formulation was that Fortia had the right to draw down the balance of its facility, that it could have declared itself a trustee of that chose in action, that the Bank was in the position of control of those monies, in the sense that it could make those monies available, and was therefore to be regarded as a trustee de son tort. The argument is subtle; it was expressed by Mr Parker SC as follows:
"The other way in which we put it is that it is possible to see that as an asset ... it's a chose in action where Fortia has the right to draw it down. Now, there's no difficulty with being a trustee of a promise. Fortia could have declared itself trustee of that right, and the trustee would have been required to draw those monies down. If BankWest has in effect assumed the position of being the trustee or looking after the security, we would say that BankWest was in a position of control over those monies, 'control' in the sense that it was able to make those monies available."
129The submission should be rejected. There is no doubt that a contractual right can be held on trust. As Lord Shaw said in Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108 at 124, "There can be a trust of a chattel or of a chose in action, or of a right or obligation under an ordinary legal contract, just as much as a trust of land."
130There is nothing in the evidence to suggest that Fortia did in fact declare itself, and little to suggest that it should be taken to have declared itself, a trustee of the right, although it may be acknowledged that a trust may be inferred in circumstances stated in Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-619 and in Legal Services Board v Gillespie-Jones at [118]-[119]. But the decisive point is that even if it had done so, the right Fortia had to draw down funds was a right against the Bank. In a loose sense, it might be said that the Bank "controlled" the extent to which funds were made available to Fortia pursuant to the facility. But that is very different from the use of "control" invoked by Parkview in order to render the Bank a trustee de son tort. On Parkview's argument, the property held on trust is the chose in action being the Bank's contractual promise to Fortia to make funds available. The Bank did not have "control" in the relevant sense over that chose in action; to the contrary, the Bank was the person against whom that chose in action could be vindicated.
131In other words, it is trite that the benefit of a promise may be held on trust. But the promisor is not to be regarded as "controlling" that property (namely the promise) and thereby becoming a trustee merely because the promisor is the person bound to perform it. That in substance is the result obtaining from accepting Parkview's argument.