Plaintiff v Defendants

LIMITATION OF ACTIONS - Whether s 5(7) of the Limitation of Actions Act 1958 (Vic) applies to limit interest payments on discharge of mortgage where no proceedings for recovery of interest commenced - Limitation provision bars the remedy but does not extinguish the right to interest - Mortgagor entitled to payment of interest in full without limitation - Australia and New Zealand Banking Group v Douglas Morris Investments Pty Ltd [1992] 1 Qd R 478; Commonwealth Bank of Australia v Sammut [2000] VSC 374 applied.

No appearance for or on behalf of the Second to Fifth Defendants

1 The first defendant ('Thomas Hall') applies by summons for orders varying undertakings given by him to the Court on 2 March 2016, as extended ('undertaking'), and orders made by the Court on 24 October 2017.[1] The variation is to enable him to sign and give effect to a discharge of the mortgage over the property at 40 Stanley Street, Blackrock, Victoria ('Stanley Street Property') registered in favour of Rhyse Holdings Pty Ltd ('Rhyse') as mortgagor upon payment of the sum of $674,130.40 to Rhyse to be held by it pursuant to the undertaking as varied (the 'Proposed Transaction').[2]

2 Thomas Hall and his wife, Katrina Cudmore, are registered proprietors of the Stanley Street Property and they have entered into a mortgage to secure a litigation loan made and to be made by La Redoute Pty Ltd ('La Redoute') to Tylssiany Pty Ltd, the trustee of the TL Hall Succession Trust ('Tylssiany'). The purpose of the loan is to pay out the existing mortgage in favour of Rhyse and to advance sufficient funds to enable Thomas Hall to pay past and future legal costs of this proceeding. The proceeding has been fixed for trial to commence on 1 May 2018.[3]

3 Rhyse is the second defendant in this proceeding and the trustee of the Scott Forrest Trust ('SF Trust'). The SF Trust is a discretionary trust settled by Deed dated 29 August 1986.[4] Rhyse has been its trustee since June 1991. The plaintiff, Robert Thomas Hall and Thomas Hall are brothers. They are the sons and only issue of their late parents, Thomas William Hall ('Father') who died on 11 December 2006 and Heather Joyclyn Hall ('Mother') who died on 8 December 2014. Each of the brothers and the estate of the Father are beneficiaries of the SF Trust.

4 Thomas Hall is the sole director and secretary of Rhyse and owns the majority of issued voting shares in it. On 23 August 2004, Thomas Hall and his wife executed a loan agreement with Rhyse ('Loan Agreement'). The principal sum of the loan is recorded in the Loan Agreement to be $428,408.00,[5] and that is the amount that was advanced.[6] On the same day as the execution of the Loan Agreement, Thomas Hall and his wife executed a mortgage which gave Rhyse a mortgage to secure the moneys advanced under the Loan Agreement and interest ('Mortgage').[7] The Mortgage specifies the principal sum, how and when it is to be repaid and the rate of interest and how it is to be paid by reference to the Loan Agreement.

5 The plaintiff commenced this proceeding on 19 February 2016 claiming, in summary, the appointment of new trustees to three trusts (including the SF Trust), restraining the conduct of the defendants in relation to those trusts, the recovery of damages for losses caused to the trusts and to the estate of the Mother and to set aside invalid transactions. More particularly, the plaintiff seeks to have a new trustee appointed to the SF Trust and the claims against Thomas Hall include claims arising from alleged wrongful dealings by him with the assets of the SF Trust including allegations that:

(a) Thomas Hall's conduct in connection with the Loan Agreement and the Rhyse mortgage, including by failing to take steps to recover the amount owing to Rhyse, was contrary to the interests of Rhyse;[8]

(b) Thomas Hall wrongfully paid $283,557.00 from the funds of the SF Trust into superannuation funds of which he or his immediate family were beneficiaries;[9]

(c) Thomas Hall wrongfully paid or procured payments totalling $3,722,221.00 out of the funds of the SF Trust for his and his immediate family's personal expenses unrelated to the operation of the SF Trust.[10]

6 One of the allegations made by the plaintiff is that, in August 2004 Thomas Hall procured the discharge of a mortgage then registered in favour of another trustee company, Garth Investments Pty Ltd, over a property at 29 Haydens Road, Beaumaris, Victoria, registered in the name of Thomas Hall without paying to the mortgagee (the trustee of the Garth Unit Trust) the amount secured by the mortgage.[11] It is admitted by the first defendant that that mortgage was discharged without consideration flowing to Garth Investments Pty Ltd.[12]

7 Shortly after the commencement of the proceeding an application was made for interlocutory relief, to maintain the status quo. It came on before Vickery J, and on 2 March 2016 the first to fourth defendants undertook, until 15 April 2016, that Thomas Hall, whether by himself, his servants, his agents or otherwise, would not without first providing ten days written notice to the plaintiff's solicitors:

(a) exercise voting rights as a shareholder of the second defendant, the third defendant or the fourth defendant or deal with the shares held by him in those companies;

(b) deal with the assets of the trust known as the Scott Forrest Trust pursuant to Deed dated 29 August 1986 (SF Trust) or the trust known as the Reid Street Unit Trust (Formerly known as the Flowmaster Hall Unit Trust) pursuant to Deed dated 28 January 1971 (RS Unit Trust);

(c) distribute any income of the SF Trust or the RS Unit Trust; or

(d) wind up the SF Trust,

save that this undertaking does not prohibit the first defendant from continuing to draw his wage in the sum of $800 per week and paying up to $250 a week for expenses.

8 The order of 2 March 2016 also recorded that the plaintiff gave the usual undertaking as to damages.

9 The defendants' undertaking has been continued through successive orders and presently operates until 20 April 2018.[13] In the meantime, by order made on 24 October 2017, McMillan J ordered by consent that Thomas Hall be restrained from taking any steps to cause Rhyse to discharge the Mortgage in its favour over the Stanley Street Property until the determination of the plaintiff's summons dated 19 October 2017 or further order.[14]

10 The circumstances in which the order of 24 October 2017 came to be made by consent are relevant to the current application. On 10 October 2017 the solicitor for the plaintiff, Mr Leung of Strongman & Crouch, received an email letter from Thomas Hall's solicitors, HWL Ebsworth ('HWLE') stating that HWLE were instructed that there was a Mortgage in favour of Rhyse over the Stanley Street Property under which no amount was owing. Accordingly, Thomas Hall thereby gave the plaintiff ten days written notice of his intention to lodge a discharge of the Mortgage.[15] The letter informing the plaintiff of the proposal was brief, to the point and, as the plaintiff pointed out in response to the letter, quite wrong.

11 On 11 October 2017 the plaintiff's solicitors wrote to Thomas Hall's solicitors enclosing a copy of the Mortgage and the Loan Agreement and pointed out that there was moneys owing under the Mortgage and the plaintiff did not consent to its discharge. The plaintiff requested a response by 16 October 2017, but none was forthcoming. The plaintiff then made an application by summons filed on 19 October 2017 to restrain the discharge of the Mortgage. The consent order made on 24 October 2017 referred to above was the result.

12 The existence of the Loan Agreement was disclosed to the plaintiff in the course of the proceeding. The books and records of Rhyse are said to contain no reference to a loan.[16] The Loan Agreement itself was provided by the solicitors for Mr Ian Morrison, the administrator of the estate of Heather Hall.[17] In the copy Loan Agreement exhibited to Thomas Hall's affidavit in support of this application, the original specification of the principal sum was $628,700.00. It has been crossed out and replaced in handwriting with the sum of $428,408.00.[18] In his outline of evidence filed 23 February 2018, Thomas Hall is anticipated to give evidence that the sum of approximately $428,000.00 required to complete the purchase of the Stanley Street Property in 2004 was advanced by Heather Hall.[19]

13 A search of the title to the Stanley Street Property undertaken on behalf of the plaintiff after this application was launched shows that on 12 February 2018 a second mortgage was registered in favour of La Redoute. This must have required the production of the Certificate of Title to the property to facilitate registration of the La Redoute mortgage.

14 The La Redoute mortgage secures a loan agreement dated 1 February 2018 pursuant to which Thomas Hall has secured funding to discharge the existing Mortgage and pay outstanding legal costs and to pay further legal costs of defending the proceeding to trial ('the Litigation Loan Agreement').[20] The loan is to be made available in two tranches. First, the sum of $504,795.50 (Tranche One) advanced on the registration of a second mortgage on the properties. Secondly, $858,204.50 (Tranche Two) which will only be advanced if the undertaking is varied so that Rhyse can discharge the Mortgage on payment of the amount owing of $674,130.40.

15 On 27 November 2007, Mr Christopher Caleo QC provided a written memorandum of advice to Thomas Hall in relation to the principal sum owing together with interest under the Loan Agreement. The thrust of the advice was that in the circumstances described in the memorandum, the unpaid arrears of interest due under the Loan Agreement would be subject to the limitation period provided in s 5(7) of the Limitation of Actions Act 1958 (Vic) ('LAA').

16 Thomas Hall contends that under the terms of the Loan Agreement and Mortgage the loan is repayable on demand and interest on the loan is capitalised annually throughout the term and is payable upon repayment of the loan.[21]

17 Thomas Hall submits that he has acted properly by obtaining Queens Counsel's advice as to the ability of Rhyse to recover the interest under the Loan Agreement, subject to the provisions of the LAA. He submits that if Rhyse were to commence proceedings to recover the loan and interest, Thomas Hall and his wife, as borrowers, would be able to plead s 5(7) of the LAA as a bar to recovery of all interest save for interest accruing within the last six years. The effect of that is that the interest would commence as at November 2011. Rhyse's accountant (Moore Stephens) has calculated the amount of interest accruing under the Loan Agreement of the last six years, but up to 30 June 2018, which together with the principal amounts to the sum of $674,130.40.[22]

18 Thomas Hall proposes to execute a discharge of the Mortgage on behalf of Rhyse in return for the payment of that sum into Rhyse's bank account. Thomas Hall submits that he is authorised under the terms of the SF Trust to execute such a discharge notwithstanding his personal interest in the subject matter.[23] The funds to pay the amount outstanding will come from Tranche Two under the Litigation Loan Agreement. The balance of Tranche Two is necessary to pay Thomas Hall's legal costs of defending the claim in the proceeding.

19 There is no dispute that the Court has power to amend its interlocutory orders, including varying undertakings given which in substance reflect an injunction.[24] The Court has the inherent power to release a party from an interlocutory undertaking given to the Court even where there was no mistake operative at the time the undertaking was given.[25] The onus of proof is on the party seeking a release or a variation of such an undertaking to establish by evidence that the new facts which have been discovered, or have come into existence, render the continued enforcement of the undertaking unjust.[26]

20 In the context of freezing orders, the Court ordinarily allows a defendant to pay their reasonable legal expenses as an exclusion to the order.[27] In DGL Mobile Computer Services Pty Ltd v Lichtenstein Gordon J said:[28]

It is now well established that where a Mareva has been granted, it cannot extend to prevent a respondent from having access to his own assets to the extent necessary to meet legitimate expenses such as ordinary living and business and legal expenses: see in particular, Clout (Trustee) v Anscor Pty Ltd [2001] FCA 174 at [19]-[21] and Practice Note CM9 - Freezing Orders, para 5.

21 There are instances of freezing orders having been varied in the past to enable a defendant to enter into a transaction to borrow funds to enable the payment of legal costs.[29]

22 At the time of making the application, Thomas Hall deposed that his only material asset was his interest in the Stanley Street Property and that his weekly income was $800.00 received from Rhyse. He does not have sufficient funds to pay for his legal costs of defending this proceeding.[30] By an affidavit filed after the hearing, pursuant to leave, Thomas Hall reveals a small amount standing to his credit in a bank account and even smaller amounts in the TL Hall Succession Trust, a tiny amount in a company called Hallthorne Pty Ltd and very little in a superannuation account. He swears that apart from the trusts the subject of this proceeding and the trusts and companies just mentioned, he is not a shareholder or director of any other companies and not a beneficiary of any other trusts.[31]

23 It is clear from the volume of material that has been generated so far in this proceeding, and the extent of the documents to which reference is made in an independent expert's report, that Thomas Hall's legal costs of preparing to defend the matter at trial will be very substantial, as will the legal costs of the trial itself. On 17 November 2017, after disputes regarding an expert report of a Mr Lom, a revised report was served supported by documents occupying 64 lever arch folders. No doubt, much of that material will not itself ultimately be relevant, but it must be considered by Thomas Hall's legal representatives.

24 If the application by Thomas Hall is refused, he will not have the funds to continue to retain his legal representation and this will prejudice his defence of the proceeding. Similarly, if the relief sought is refused, Thomas Hall will have to represent himself at trial of the proceeding and this will not only prejudice him but the plaintiff and other defendants, and will cause considerable expenditure of time by the Court.

25 It was not contested that the complex nature of the subject matter, the work which has been done by Thomas Hall's practitioners so far and the proximity of the trial gave rise to significant prejudice to him if he could not continue to retain his present lawyers.

26 Thomas Hall submits that there can be no real prejudice to the plaintiff because the balance outstanding under the Loan Agreement will be paid into the bank account of Rhyse and be held there subject to the undertakings as varied pending the hearing and determination of this proceeding. It is submitted that the Proposed Transaction merely converts the amount outstanding which is secured by the Mortgage into its equivalent in cash.

27 The plaintiff contends that the interest for the period in excess of six years would be due on an application by Thomas Hall and his wife to compel a redemption or discharge of the Mortgage.[32] But, Thomas Hall submits, the principles applicable to equitable actions for redemption are not applicable to Torrens Title land. He submits that in contrast to the position applicable to general law land, where the mortgagee takes the legal title to the land, the mortgagor of Torrens Title land retains legal title and has a right to obtain a discharge upon payment of the amounts secured by the Mortgage.[33]

28 If, as it turns out, Thomas Hall is incorrect in so submitting, he contends that there will be no prejudice if the relief sought is granted because if it is established at trial that the Mortgage should not have been discharged unless and until interest for the period in excess of six years was paid in full, the plaintiff can claim the loss on behalf of Rhyse from Thomas Hall and the Court will be able to set off the amount against Thomas Hall's entitlements under the trusts the subject of the proceeding. In this way the plaintiff will in effect have security for any claim for interest in excess of six years from the full amount of Thomas Hall's share in the trusts. Counsel for Thomas Hall referred to this contention as his 'trump point'.

29 On the plaintiff's pleaded case, Thomas Hall maintains that the asset pool of Rhyse and the two other trustee companies is worth approximately $7,000,000.00 as at 2006-2007.[34] That asset pool does not include the proceeds of the sale of the family home at 9 Holroyd Street, Kew, Victoria, comprising approximately $5,000,000.00 held by the executor of the Mother's estate and the assets of the trust which include cash deposits of approximately $4,900,000.00.

30 The plaintiff submits, however, that the proposition that Rhyse, as mortgagee, would be unable to recover any interest outstanding for more than six years because of s 5(7) of the LAA is plainly wrong, because, first, the Proposed Transaction is not of the kind considered by Mr Caleo QC, namely a creditor suing a debtor on a simple debt for moneys lent. Rather, it is a mortgagor (Thomas Hall and his wife) seeking to compel a mortgagee to discharge a mortgage and that is not a circumstance in which s 5(7) of the LAA applies. Second, the transaction the subject of the Loan Agreement entails Rhyse, as a trustee controlled by Thomas Hall, lending funds to himself. This transaction constituted self-dealing and having regard to the operation of ss 21 and 27 of the LAA, s 5(7) does not apply to preclude Rhyse from recovering all of the principal and interest payable by Thomas Hall and his wife.

31 The plaintiff also submits that the Proposed Transaction would be materially disadvantageous to the beneficiaries of the SF Trust (which includes the plaintiff). He maintains that the amount secured by the Mortgage is not limited to the amount of $674,130.40 that the first defendant proposes to tender in return for discharge of the Mortgage, but was as at 30 June 2017 the sum of $1,014,469.00 (assuming that the principal advanced was only $428,408.00).[35]

32 The plaintiff also submits that the considerations affecting a freezing order are not applicable in the circumstances of this application. Here the restraints are not in respect of Thomas Hall's own funds or assets but the funds and assets of the several trusts. Freezing orders, or asset preservation orders, have a different juridical base than an injunction to protect trust property.[36] In this case, the funds sought to be used for legal costs are trust property, and the Court should protect that trust property.

33 With respect to Thomas Hall's 'trump point',[37] the plaintiff submitted:

(a) the quantum of the claims against Thomas Hall in respect of trust property is likely to exceed $4 million, not including interest, which the plaintiff will claim at the penalty interest rate on the basis that the trusts were entitled in equity to receive interest for loss of the use of the money;[38]

(b) the value of the asset pool of the family entities and the deceased estate of the Mother and Father is estimated to be approximately $12,645,779.00, and assuming Thomas Hall has a one third entitlement, his entitlement is about $4.2 million.[39] The asset pool may be further reduced by pending tax issues;

(c) there is therefore doubt as to whether the entitlements of Thomas Hall will be sufficient to cover the unpaid interest to which Rhyse is entitled as of right under the Loan Agreement and Mortgage, amounting to about $340,000.00;[40]

(d) in any event it has not been demonstrated that there is a vested entitlement of Thomas Hall to a one third share in any of the trust assets or the estates. The SF Trust is a discretionary trust. The trust established for Thomas Hall by the will of the Mother is also a discretionary trust.[41] Under the will of the Father, in the events that have happened, each of the brothers share equally, but it is unclear what assets are in that estate; no probate having been sought to be granted because it was initially thought the estate was without assets.[42]

(e) even though in cl 4.2 of the Mother's will there are precatory words that the assets of the SF Trust be realised and distributed equally between the three brothers, there are impediments to giving effect to such a wish. They are not binding on Rhyse as trustee of the SF Trust and although the trustee of a trust may be entitled to give effect to the wishes expressed by the deceased it is not required to do so.[43] It is not binding as a direction to the trustee;[44]

(f) there is an inherent risk and considerable uncertainty associated with Thomas Hall being able to assert a set off sufficient in value to meet the diminution of trust assets caused by the discharge of the Mortgage for less than the amount secured;

(g) that risk and uncertainty should not be cast upon the beneficiaries of the SF Trust.

34 Thomas Hall contends that the plaintiff's calculation of the plaintiff's claims, and of the amount to which he should be entitled under the trusts and the parents wills, are flawed. The quantum of the plaintiff's claims are flawed because:

(a) the plaintiff's expert, Mr Lom, cannot possibly say whether the funds referred to in his report were advanced in breach of the alleged fiduciary duties;

(b) the plaintiff's analysis inflates the plaintiff's claim by one third. This is because even if Thomas Hall is held liable and required to repay the funds the subject of the plaintiff's claim, he will ultimately be entitled to a one third share of the same funds as beneficiary.

35 The terms of the Loan Agreement are relevant to the obligation to pay interest. Thomas Hall maintains that the loan is repayable on demand and interest on the loan is capitalised annually throughout the term and is payable upon repayment of the loan. The relevant provisions are as follows:

(a) clause 2, 'the Borrower shall repay the principal sum at the times and in the manner set out in the Schedule'. The Schedule specifies that the loan is repayable on demand. This means, as Mr Caleo QC points out in his advice, that it is to be read as immediately due, unless there are express words or necessary implication to establish a contrary intention. There are no express words or necessary implication to establish a contrary intention, so that the principal sum advanced under the Loan Agreement was repayable on the date it was advanced and a cause of action for its repayment accrued immediately.[45] The plaintiff did not dispute that this is the correct analysis of the date of accrual of the cause of action available to the lender/mortgagee.

(b) interest payable is governed by clause 3. Clause 3.1 provides:

The Interest payable under this Agreement is to be computed monthly (the 'Interest Date') from the Commencement Date. Such Interest shall be payable by the Borrower on the due date for payment of the Principal Sum. The Borrower agrees that the Interest shall be capitalised annually throughout the term of the Loan.

The capitalisation of the interest annually does not make it a part of the Principal Sum, which is defined to mean the sum of $428,408.00.

(c) clauses 3.2 and 3.3 govern the interest rate and are not presently in issue;

(d) clause 4 concerns collateral securities and provides for a simultaneous execution by Thomas Hall and his wife of a first mortgage over the Stanley Street Property, for default under the Mortgage to be default under the Loan Agreement and vice versa;

Upon final repayment to the Lender of the Principal Sum and interest thereon in accordance with the covenants agreements provisions and conditions herein contained the Lender shall at any time thereafter at the request and cost of the Borrower discharge re-assign re-transfer withdraw or otherwise terminate all collateral securities.

36 The interest due under the Loan Agreement has been calculated by Moore Stephens using the variable home loan rate, plus 2%, and including the principal sum with interest for 6 years prior to 30 June 2018 amounts to $674,130.40.[46] The interest calculated by Moore Stephens is $245,728.40, being interest for 6 years to 30 June 2018. The total payable, principal sum and interest, for the whole period of the Loan Agreement (23 August 2004 to 30 June 2018), is approximately $1,380,846.44.[47] The calculation for the total interest for that period is approximately $952,438.64.[48] The extra quantum of interest that would be payable on the basis that all interest accrued under the Loan Agreement was payable to discharge the Mortgage is therefore approximately $706,710.00.[49]

37 The Mortgage provides that the mortgagor covenants with the mortgagee as follows:

1. To pay the Principal Sum in the manner and at the times specified.

1. To pay the Mortgagee so long as the Principal Sum or any part shall remain unpaid interest on the sum or on so much as for the time being remains unpaid at the rate and in the manner and at the specified time.

However where no interest is payable on the moneys secured the covenants relating to interest implied by s 75(a) of the Transfer of Land Act 1958 are expressly excluded.

1. That this Mortgage is collateral to a Loan Agreement dated at or intended to bear even date herewith between the parties hereto and that an event of default pursuant to this Mortgage is an event of default pursuant to the Loan Agreement and vice versa enabling the Mortgagee to exercise all remedies available to it pursuant to this Mortgage, the Loan Agreement and at law.

38 The Mortgage is expressed to incorporate a Memorandum of Common Provisions ('MOCP') kept by the Registrar under s 91A of the Transfer of Land Act 1958 (Vic) ('TLA'). The solicitors for the plaintiff put that MOCP into evidence.[50] There is nothing in the MOCP to detract from the proposition that the interest is payable as a condition of the redemption or discharge of the Mortgage. Indeed, there may be an argument that the MOCP imposes a condition that interest be paid on unpaid interest.[51] This was not canvassed in argument, so I will not take the matter further at this stage.

39 The rights of the mortgagee under the Mortgage thus turn first on the terms of the Loan Agreement, the relevant terms of which I have set out above, in particular cl 9. That clause entitles the mortgagor to a discharge of the Mortgage upon payment of the principal sum and interest 'in accordance with the covenants agreements provisions' of the Loan Agreement. The principal sum is immediately due and by tender of that sum and all interest accrued under the terms of the Loan Agreement, Thomas Hall and his wife are entitled to require a discharge of the Mortgage in registerable form.

What sum is payable on discharge of the Mortgage?

40 Section 5 of the LAA sets out the primary limitation periods applicable to contracts and torts. Subsection 5(7) provides:

Save as otherwise expressly provided an action shall not be brought to recover any arrears of interest in respect of any sum of money whether payable in respect of a speciality, judgment, legacy, mortgage or otherwise, or any damages in respect of such arrears, after the expiration of six years after they became due.

41 The limitation period applicable to the recovery of any principal sum secured by a mortgage is 15 years from the date when the right to receive the money accrued.[52] In the decision of Australia and New Zealand Banking Group v Douglas Morris Investments Pty Ltd[53] the Full Court of the Supreme Court of Queensland considered the application of the equivalent provision to s 5(7) of the LAA in that State.[54] McPherson J, with whom Connolly and Williams JJ agreed, had to consider the rights of the plaintiff Bank under scrip liens, and said:

If amounts of principal and interest due to the bank under the scrip lien have become statute-barred, the next question is what, if any, effect this has on the bank's charge over or in respect of the Pioneer shares and share certificates subject to the scrip lien. The answer is, I consider, that it has no effect. The charge created by the lien operated to vest in the bank an equitable proprietary interest in those shares. The barring of proceedings to recover the debt which the charge was intended to secure does not touch that interest. Few rules were better settled than that under the original Statute of Limitations, which was the Act of 1623; 21 Jac. I., c. 16, it was the remedy only that was lost and not the right. In the case of a debt, that meant that an action could not be brought to recover it; but the debt itself was not extinguished. In Courtenay v. Williams [1844] EngR 763; (1844) 3 Hare 539, 552; [1844] EngR 763; 67 E.R. 494, 552; affirmed (1846) 15 L.J.Ch. 204, Wigram [1844] EngR 763; 3 Hare 539, 552; [1844] EngR 763; 67 E.R. 494, 552; affirmed (1846) 15 L.J.Ch. 204, Wigram 10 V.-C. said that ''the Statute of Limitations that governs the present case is the 21 Jac. I., c. 16, which takes away the remedy against the debtor unless the action be brought within six years after the cause of action arose; but it leaves the right untouched ...''. See also Re Rownson; Field v. White (1885) 29 Ch.D. 358, 364, per Bowen L.J. Because the debt remained, the proprietary interest of a mortgagee under a mortgage of the property survived. Hence it was possible to have a case ''in which the personal remedy was barred, but not the remedy against the land''. See Barnes v. Glenton [1899] 1 Q.B. 885, 890, per Romer L.J. The same result follows in the case of provisions like those in s. 10 of the Act of 1974, which are introduced by the words ''action shall not be brought ...''. See Jones v. Bellgrove Properties Ltd [1949] 2 K.B. 720, 724. The introductory words of s. 26(1) are the same. They do no more than proscribe the bringing of an action to recover the money.

Following the passage in Courtenay v. Williams referred to, Wigram V.-C. went on to observe that the old Statute of Limitations differed from the more recent Statutes of Limitations ''by which the right as well as the remedy is barred''. His Honour was referring principally to the Real Property Limitation Act 1833, 3 & 4 Will. IV, c. 27, containing various provisions whose effect was to extinguish the right and not merely to bar the remedy. For present purposes its most notable provisions were that an action to recover land should be brought within 20 years after accrual of the right: s. 2; and that at the determination of that period the right and title to the land was to be extinguished: s. 34. Section 24 extended those provisions to a suit in equity to recover the land. The result was that after 1833 it was possible for the proprietary interest of a mortgagee under a mortgage of land to be extinguished by effluxion of time, and that was so whether the mortgage subsisted at law or only in equity.

42 Thomas Hall contends, as I have said, that the principles relating to equitable actions for redemption are not applicable to Torrens Title land.[55] This, in my view, involves a misunderstanding of the applicable law. Although the application to discharge a mortgage registered under the TLA is not strictly speaking a redemption action of the kind applicable in relation to general law land, the authorities on the principles applicable under the TLA commonly use similar terminology as was used in relation to general law land. In doing so they make it clear that similar principles are applicable.

43 The TLA itself uses the expression 'redeemed' in s 75 (which sets out the covenants to be implied in every mortgage) in the covenant:

that the mortgagee may at all reasonable times until the mortgage is redeemed enter into and upon the land with or without surveyors or others to view and inspect the state of repair of such buildings or improvements. (Emphasis added)

44 The Torrens system assumes the existence of general law principles and the TLA should not, and indeed is not, read as working some fundamental change to those principles.[56] In the High Court decision in Groongal Pastoral Company Limited (In Liquidation) v Falkiner,[57] the Court (Isaacs ACJ, Gavan Duffy and Starke JJ) said in relation to the New South Wales Torrens Title legislation:

The Real Property Act 1900 is an Act the purpose of which is to simplify and facilitate dealings with land, including its mortgage to secure repayment of debts. But, except so far as may be inconsistent with its provisions (see sec. 2 (4)), it does not interfere with the ordinary operation of contractual or other personal relations, or the effect of instruments at law or equity. In Barry v. Heider, as a result of the decisions cited, Isaacs J. said: - "They have long, and in every State, been regarded as in the main conveyancing enactments, and as giving greater certainty to titles of registered proprietors, but not in any way destroying the fundamental doctrines by which Courts of equity have enforced, as against registered proprietors, conscientious obligations entered into by them". "The Land Transfer Act does not touch the form of contracts. A proprietor may contract as he pleases, and his obligation to fulfil the contract will depend on ordinary principles and rules of law and equity, except as expressly or by necessary implication modified by the Act".

45 The decision relied upon by Thomas Hall makes the point as well as any decision. In ASIC v GDK Financial Solutions Pty Ltd (In Liq) (No 3),[58] Finkelstein J noted:

The action in which the orders were made was not in the nature of a redemption action as asserted by the second mortgagees. Such an action is not available in respect of Torrens land: Perry v Rolfe [1948] VicLawRp 51; [1948] VLR 297, 300-301, 303; Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) [1965] HCA 17; (1965) 113 CLR 265, 275; Anderson v Liddell [1968] HCA 12; (1968) 117 CLR 36, 48; cf In the Matter of C L Forrest Trust [1953] VicLawRp 37; [1953] VLR 246; Ex parte Prackert [1987] 2 Qd R 560. In my view a mortgagor of Torrens land has a legal right to obtain a discharge of mortgage on payment of the amount secured by the mortgage (or, subject to any rights of foreclosure, a lesser sum if the proceeds are insufficient to cover the debt) and equity applies the appropriate remedy, usually in the form of a mandatory injunction or specific performance....

46 As Fisher and Lightwood's Law of Mortgage put the position:[59]

Although the basic theoretical position with respect to legal mortgages of real estate under the general law and under the Torrens system differ so markedly, in practice there is little difference in the rights of the parties thereunder. This is because contractual rights flow from standard documents and the philosophic approach to the Torrens system has been that only the system of conveyancing is altered...

Despite the fundamental juristic differences between Torrens and other mortgages of land, the courts have applied the same equitable doctrines to each so that, as a practical matter, one can assume that the general principles of the law of mortgages applies to mortgages of Torrens system land...

47 Counsel for Thomas Hall relied on s 84(2) of the TLA. However that sub-section concerns cases where a discharge of the mortgage cannot be obtained for one or other of the reasons set out in s 84(2)(b) of that Act. Its application to the present circumstances is by analogy. In speaking of payment of 'interest due' it does no more than beg the question in this case. Section 84(1) is applicable, but any consideration of its terms shows that its operation turns on the application of the general law principles (legal and equitable) that lead to a discharge of a mortgage being executed.

48 Thus the most important feature of the general law applicable is that to obtain the discharge of the registered mortgage, just as to obtain redemption of a mortgage over general law land (transfer of the legal title in the name of the mortgagee back to the mortgagor) it is necessary for the mortgagor to pay the principal and all the interest that has accrued due in accordance with the terms of the relevant mortgage. In this case, the Mortgage is collateral to the Loan Agreement and cl 9 of that Agreement, and the general law, govern the rights of Thomas Hall and his wife, as mortgagors, to demand a discharge of the Mortgage. The legal right to obtain the discharge of mortgage of land registered under the TLA requires a payment of the amount secured by the mortgage.[60] Because under s 5(7) of the LAA the right to interest is not extinguished, merely the remedy in an action for the recovery of interest is barred, it follows that in order to obtain a discharge of the Mortgage, Thomas Hall needs to tender the whole of the sum due in respect of the principal sum and all interest payable under the Loan Agreement.

49 The transaction proposed by Thomas Hall is not one of the kind considered by Mr Caleo QC in his advice, that is a case of a creditor suing a debtor on a simple debt for moneys lent. The transaction proposed is equivalent to the mortgagors (Thomas Hall and his wife) seeking to compel the mortgagee (Rhyse) to discharge a mortgage. That circumstance is not one to which the limitation under s 5(7) of the LAA applies. The fact that Thomas Hall controls the mortgagee and thus, subject to a variation of the undertaking and order, the mortgagee agrees to the discharge on the terms proposed, does not change the underlying right of the mortgagee, properly advised as trustee of the SF Trust, to require payment of the whole of the interest accrued under the Mortgage. Because the purposes of the undertaking and order are to preserve the assets of the SF Trust, amongst others, pending the hearing and determination of the proceeding, it would be contrary to the purpose of the undertaking and order to permit the Proposed Transaction without securing the rights of Rhyse as trustee to all that is properly payable under the Loan Agreement and Mortgage.

50 This approach to the application of s 5(7) of the LAA was also taken by Hansen J in Commonwealth Bank of Australia v Sammut,[61] where the defendant mortgagor faced with a mortgagees claim for possession attempted to rely on s 5(7) of the LAA in answer to the plaintiff Bank's claim. One of the answers given was that the action was not one brought to recover arrears of interest 'in respect of any sum of money ... payable in respect of a ... mortgage ... after the expiration of six years after they became due'. It was an action for possession under a mortgage and for other relief not of a kind mentioned in s 5(7) of the LAA.[62]

51 Similarly, Edelman J in Netglory Pty Ltd v Caratti[63] made the same point in relation to moneys due under a guarantee where the primary obligation on the principal debtor was statute barred, referring to what Cotton LJ said in Curwin v Milburn[64] that statute barred debts are 'due', though payment of them cannot be enforced by action.

52 Thomas Hall submitted that it is not necessary or appropriate for the Court to determine whether all interest accrued under the Loan Agreement should be paid to discharge the Mortgage for the purposes of this application because:

(a) the point is not directly raised in the application. Whilst the Proposed Transaction will involve Thomas Hall causing the mortgagor to discharge the Mortgage, he is not seeking the Court to compel this action. Rather, he seeks to vary interlocutory orders and injunctions to effect the Proposed Transaction. If the Court ultimately decides that Thomas Hall was wrong to take this course of action, then he can be held liable as trustee in this proceeding. This a matter for trial;

(b) this is an interlocutory application seeking to vary interlocutory orders and undertakings given to the Court. The Court can decide to grant the relief sought on the grounds that it would be just and convenient without needing to finally determine the point. To that end, it would be sufficient for the Court to merely note that the point is reasonably open;

(c) the point is a difficult one. The only authority cited by the plaintiff for the proposition relates to equitable actions for redemption in respect of general law land[65] and 'scrip liens'[66] rather than Torrens Title land. The principles in relation to equitable actions for redemption are not applicable to Torrens land.[67] As far as the first defendant is aware, there is no authority on point - that is, whether a mortgagor of Torrens Title land is required to pay statute barred interest in order to compel a discharge of mortgage.

53 The proposition in paragraph 52(a) above is a little startling. The only reason Thomas Hall is not seeking the Court to compel the discharge of the Mortgage upon payment of only six years interest is that he controls the mortgagee. He thus takes the point against the interests of the beneficiaries generally of the SF Trust. The preservation of the assets of the trust is an object of the undertaking and order. Thus, the sum due to be paid to discharge the Mortgage is directly raised in the application. If less than the full amount of interest under the Loan Agreement and Mortgage is paid, the assets of the SF Trust are depleted to the extent of that shortfall.

54 Put another way, if the trustee were not controlled by Thomas Hall, would the Court make an interlocutory order to compel the trustee to discharge the Mortgage for only six years interest so that Thomas Hall could have funds to finance his defence of the proceeding? The answer is no unless the so called 'set-off' has value, a matter to which I will return.

55 Another way of approaching the issue is to suppose the mortgagee were an independent person, say a Bank, and that the mortgagee sought a declaration as to the amount of interest that must be paid under the Mortgage for the mortgagee to be compelled to give a discharge. Given the state of the law as I have set it out, the answer must be that the amount of interest is interest for the whole period of the Loan Agreement.

56 In my view, for the reasons I have expressed above, the position is sufficiently clear at this interlocutory level to provide a weighty factor against variation of the undertaking and order. The right of Rhyse to interest under the Loan Agreement and Mortgage is very likely to survive. It is not likely to be extinguished by the passage of the time applicable under s 5(7) of the LAA. The contrast provided by the LAA is the operation of s 18, which extinguishes the title of the person whose right of action for the recovery of land is barred by s 8 (amongst other things).

57 It is therefore unnecessary to come to any firm conclusion as to the application of ss 21 and 27 of the LAA. Indeed, at this interlocutory level, before any trial of the issues raised in the proceeding, it is impossible to come to any conclusion as to the application of either of these sections in the present circumstances. I was not taken to all the facts that would be necessary to be considered, nor all of the arguments. Nevertheless, in the course of counsel for the plaintiff mounting the argument, facts relevant to the exercise of the Court's discretion were identified, to which I now refer.

58 First, I note that Mr Caleo QC qualified his advice in these terms:

I note that the foregoing advice does not address the question whether any circumstances exist which would postpone the applicable limitation period or disentitle the client from relying upon it. Further, no consideration has been given to the provisions of s 21 of the Act which address limitation of actions in respect of trust property.

59 The plaintiff's reliance on ss 21(1) and 27 of the LAA was said to arise out of Thomas Hall's conduct, in connection with the Loan Agreement and Mortgage, constituting a breach of the self-dealing rule, because he:

(a) was, at the date of the Loan Agreement, both one of the borrowers and a director of Rhyse, and with his Mother executed the Loan Agreement on behalf of Rhyse;[68]

(b) took no steps to ensure that the existence of the loan was properly disclosed in the books and records of Rhyse;

(c) failed to ensure that the loan was repaid prior to the expiration of any limitation period;

(d) asserted (via his solicitors) as recently as October 2017, that no amount was owing in respect of the loan;

(e) has recently facilitated the registration of a second mortgage by La Redoute over the Stanley Street Property without providing notice of that course to beneficiaries of the SF Trust, such as the plaintiff.

60 Thomas Hall's conduct in connection with the Mortgage is already the subject of the plaintiff's pleaded claim. It is alleged in the SFASOC that despite requests to do so he has failed to:

(a) provide details of any repayment of the loan secured by the Mortgage;

(b) provide an explanation for the assertion that no amount was owing in respect of the loan secured by the Mortgage; and

(c) cause Rhyse to make a demand for repayment of the amount owing under the Loan Agreement.[69]

61 The plaintiff submitted that these circumstances attracted the operation of s 21(1) of the LAA, which excludes limitation periods prescribed by the LAA from applying to certain actions by a beneficiary under a trust, including actions in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy. Justice Applegarth, in the Supreme Court of Queensland, recently concluded that there is strong authority for the view that a breach of the self-dealing rule is a breach of trust for the purpose of the equivalent provision in the Limitation of Actions Act 1974 (Qld).[70]

62 The plaintiff submitted that s 27 of the LAA is also engaged in the present case. It provides, so far as relevant, that where an action is based upon the fraud of a defendant or the right of action is concealed by fraud, the period of limitation 'shall not begin to run until the plaintiff has discovered the fraud or the mistake...or could with reasonable diligence have discovered it'. The phrase 'is concealed by fraud' does not confine fraud to its common law sense. The term 'fraud' in this context has been construed as comprehending conduct which is 'unconscionable having regard to the relationship between the parties'.[71] As I have said, I cannot come to any view, even a preliminary view, regarding this contention.

63 It is of course true that this is an interlocutory application seeking to vary interlocutory orders and undertakings given to the Court. This involves the exercise of a discretion in the area of practice and procedure. Nevertheless, the application is of great importance to the parties. What is involved is a balancing of the competing interests in attaining a just result. The Court can decide to grant or refuse the relief sought on the grounds that it would be just and convenient, without necessarily finally determining whether, for example, to discharge the Mortgage, Thomas Hall and his wife must pay interest for the whole period since entry into the Loan Agreement and Mortgage. It is not disputed that there is a serious question to be tried as to the entitlement of Rhyse to the full amount of interest for the whole of the period of the Loan.

64 There is some force in considering the matter as if it were an application for the grant of an interlocutory injunction by the plaintiff to restrain the discharge of the Mortgage unless all the interest for the term of the Loan Agreement were paid, where Thomas Hall proposed to pay only six years of that interest, but with a reversal of the onus of proof. The reversal of the onus of proof is brought about by the purpose of the undertaking originally given being to maintain the status quo. The consent order of 24 October 2017 supported that position in the face of notice given by Thomas Hall that he proposed to discharge the Mortgage without making any payment to the SF Trust because, as his solicitor maintained in their letter of 10 October 2017, there was no money owing under it.[72]

65 This is a case where, prima facie, the discharge of the Mortgage that Thomas Hall seeks requires the payment of about $700,000.00 more than is proposed to be tendered under the Proposed Transaction. The strength of that prima facie case or serious question to be tried is a relevant factor. If the plaintiff were seeking to restrain the discharge of the Mortgage on the footing that its discharge would cause irreparable harm to the several trusts and estates the subject of the proceeding, then the relationship between the strength of the plaintiff's case in establishing a serious question to be tried and the extent to which the plaintiff must establish that the balance of convenience favours the grant of the injunction, is material. The stronger the case in establishing a serious question, the more readily the balance of convenience might be satisfied. It is sufficient that the plaintiff show a sufficient likelihood of success that in the circumstances justifies the practical effect which the injunction will have on the ability of Thomas Hall to raise moneys on security of his and his wife's property.[73]

66 If a variation is not allowed, the evidence at present indicates that Thomas Hall will not have the ability to continue to retain his solicitors and counsel at the trial and for preparation for it. That trial is to start on 1 May 2018 and retention of the solicitors who have been retained by Thomas Hall for some time and who are familiar with the matter is important. The inability to retain his solicitors will have a significant impact on the ability of Thomas Hall to conduct his defence of the proceeding. This in turn will cause prejudice to him, the other defendants and the plaintiff, and will cause considerable expenditure of time by the Court. The result will not facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute in civil proceedings.[74]

67 On the other hand, there is no evidence that has been brought to my attention as to the value of the Stanley Street Property so as to show that the Proposed Transaction will exhaust the equity in it that might be available to secure further borrowings.

68 Further, the trial was fixed by order made on 1 September 2017. It is clear that Thomas Hall first proposed to raise money on security of the Stanley Street Property in October 2017 when notice was given pursuant to the undertaking on 10 October 2017. Then, when faced with the realisation that there were moneys owing under the Mortgage advice was sought from Mr Caleo QC in November 2017. The Loan Agreement with La Redoute is dated 1 February 2018 and the mortgage securing that loan was registered on 12 February 2018, the day before the present application was made by summons. There has been no proper explanation for the timing of the application. To the extent that the prejudice to Thomas Hall is attributable to the proximity of the trial it is, therefore, a product of Thomas Hall bringing the application so late.

69 On the other side of the prejudice ledger, if the variation is allowed there is likely to be a depletion of the assets of the trusts contrary to the undertaking given at the outset of the proceeding. This is a matter of great concern to the plaintiff and, no doubt, the other beneficiaries of the several trusts.

70 In this regard, the principles applicable to the payment of Thomas Hall's legal costs where a freezing order is made need to be distinguished from the present circumstances. In this case, by the mere fact of the giving of the undertaking, Thomas Hall must be taken to accept there is a prima facie case in support of the claims made by the plaintiff in the proceeding. Given that proposition, if the effect of the variation of the undertaking and order is to deplete the assets of the SF Trust, that means that such depletion is, in effect, a use by Thomas Hall of trust funds for his legal costs. In those circumstances, the Court should protect the trust property.[75]

71 My conclusion, albeit at an interlocutory rather than a final level, that for a discharge of the Mortgage, all the interest for the whole period of the loan should be paid, results in the potential shortfall under the Proposed Transaction being in the order of $700,000.00. Whether this can be covered, as Thomas Hall submits, by some set-off of his entitlements is on the present material doubtful, because it has not been demonstrated that there is a vested entitlement of Thomas Hall to a one third share in any of the trust assets:

(a) the SF Trust is a discretionary trust and the majority of the losses claimed arise in that trust;[76]

(b) the Reid Street Unit Trust is a fixed trust and the unit holders are the plaintiff and the estates of the Mother and Father;[77]

(c) the Garth Unit trust's unit holders are Rhyse, both personally and as trustee of the SF Trust and Garth Investments Pty Ltd and Camback Pty Ltd in their personal capacities;[78]

(d) the T.S. Hore Settlement Trust is a discretionary trust the beneficiaries of which are each of the brothers, and the estates of the Mother and the Father;[79]

(e) the trust established for Thomas Hall by the will of the Mother is also a discretionary trust;[80]

(f) under the will of the Father, in the events that have happened, each of the brothers share equally, but it is unclear what assets are in that estate, no probate having been sought to be granted because it was initially thought the estate was without assets.[81] In this proceeding, the plaintiff claims that debts owed to the Father by the SF Trust ($416,184.00 and $1,943,368.00), the Reid Street Unit Trust ($27,435.00) and the T.S. Hore Settlement Trust ($705,139.00) were eliminated, transferred and/or treated as not owing to the Father's estate by or at the direction of Thomas Hall.[82] These allegations are either denied or not admitted by Thomas Hall in his defence.[83]

72 The principal basis for the identification of any entitlement to distributions from the trusts is the precatory provisions in the wills of the Mother and, perhaps, the Father. As the plaintiff submitted, these are not binding. The discretion of the trustee under the discretionary trusts is absolute and unfettered.

73 It is not explained how the Court could reach into the discretionary entitlement of Thomas Hall in the SF Trust, the TS Hore Settlement Trust or the Thomas Hall discretionary will trust established by the Mother's will, or what value can be attributed to his entitlement under the unit trusts, in order to accomplish such a set-off.

74 It is therefore, at this stage, entirely speculative whether the plaintiff can claim the loss of interest under the Mortgage by the SF Trust, if it is discharged, from Thomas Hall or that the Court will be able to set off the amount against Thomas Hall's entitlements under the trusts the subject of the proceeding. The 'trump point' advanced by Thomas Hall is, in short, a statement 'in the air'. It provides no real security to the plaintiff for any claim for interest in excess of six years from the full amount of Thomas Hall's 'share' in the trusts for the simple reason that he has no such share, only a wishful expectation that the several trustees will honour his Mother's wishes expressed in her will.

75 There are other difficulties in the so called 'trump point' advanced by Thomas Hall, as the plaintiff submitted. Bearing in mind that in this application I cannot determine the likelihood or the quantum of the claims made in the proceeding against Thomas Hall, because they are matters for trial, the very fact that there is a basis for uncertainty as to whether the entitlements of Thomas Hall will be sufficient to cover the unpaid interest to which Rhyse may be entitled under the Loan Agreement and Mortgage, amounting to about $700,000.00, is itself a reason to refuse to vary the undertaking and order as sought.

76 The onus is on Thomas Hall to discharge the burden of satisfying the Court that the balance of justice, or even convenience, favours the variation sought. It is incumbent upon him to overcome in some way the uncertainty associated with his inability to actually secure assets, whether they be assets of the trusts or otherwise, to which he is presently entitled, of sufficient value to meet the diminution of trust assets caused by the discharge of the Mortgage for less than the amount secured. Otherwise that uncertainty results in the risk of loss through non-payment of all sums due under the Mortgage being cast upon all the beneficiaries of the SF Trust rather than on Thomas Hall alone.

77 If, contrary to the present position arising under the trusts and wills, the Court could be assured that Thomas Hall were able to provide a present assignment in equity, of the requisite value,[84] of his rights as a discretionary object under, for example, the will trust established under his Mother's will,[85] and I were able to be satisfied that such an assignment were enforceable against him as trustee of the will trust established for his and his family's benefit, then that might suffice. But there is no such assurance. The law as to binding the exercise of the discretion of a trustee has not been addressed.

78 There are also some discretionary factors that should, in my view, bear negatively upon the exercise of the discretion. These have been identified above and include that Thomas Hall:

(a) was, at the date of the Loan Agreement, both one of the borrowers and a director of Rhyse, and with his Mother executed the Loan Agreement on behalf of Rhyse;

(b) has, on the present evidence, taken no steps to ensure that the existence of the loan was properly disclosed in the books and records of Rhyse;

(c) has asserted (via his solicitors) as recently as October 2017, that no amount was owing in respect of the Loan Agreement and Mortgage;

(d) has failed, or refused, as the person in control of Rhyse, to cause Rhyse to demand repayment of the moneys due under the Loan agreement and Mortgage despite being requested to do so.[86]

79 Notwithstanding the hardship that this may cause Thomas Hall, I am not satisfied on the present material that the assets of the SF Trust are sufficiently preserved and protected by the Proposed Transaction, given that it is not proposed to pay out all moneys that Rhyse has a right to demand for a discharge of the Mortgage.

80 Consistently with the application for a variation of the undertaking and order being interlocutory, Thomas Hall may make a further application for such a variation, either on fresh evidence or (subject to any abuse of process considerations) on the evidence already filed, or if there is a basis to say that he has a present entitlement as a beneficiary of any trust to funds or assets, or can give a binding assignment in equity of his interest as a discretionary object of, for example, the will trust established in his name by his Mother's will, which will secure the shortfall in interest accrued under the Loan Agreement and Mortgage. I express no view, one way or the other, as to whether such an application would then be successful. I merely note that the nature of the application does not preclude some further application being advanced.

81 For the reasons set out above, the application to vary the undertaking and the order of 24 October 2017 is refused.

RHYSE HOLDINGS PTY LTD (ACN 051 910 500) (INCLUDING IN ITS CAPACITY AS TRUSTEE OF THE SCOTT FORREST TRUST)

CAMBACK NOMINEES PTY LTD (ACN 006 611 954) (INCLUDING IN ITS CAPACITY AS TRUSTEE OF THE REID STREET UNIT TRUST)

GARTH INVESTMENTS PTY LTD (ACN 006 943 111)(INCLUDING IN ITS CAPACITY AS TRUSTEE OF THE GARTH UNIT TRUST)

DAVID RONALD DAVIS (INCLUDING IN HIS CAPACITY AS THE EXECUTOR OF THE ESTATE OF HEATHER JOYCLYN HALL, DECEASED)

[1] Thomas Hall's application is made by summons filed on 13 February 2018.

[2] The hearing and determination of the summons was referred to me pursuant to r 77.05 of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules') by order of McMillan J made on 13 February 2018.

[3] Order of McMillan J made on 1 September 2017.

[4] A copy of the Deed is exhibit TH-5 to the affidavit of Thomas Lynden Hall made 12 February 2018 ('Thomas Hall's affidavit in support').

[5] Thomas Hall's affidavit in support [5], exhibit TH-2.

[6] Affidavit of Thomas Lynden Hall sworn 27 February 2018, [4] ('Thomas Hall's second affidavit').

[7] Thomas Hall's affidavit in support [6], exhibit TH-3.

[8] Second Further Amended Statement of Claim [47A]-[48] ('SFASOC').

[12] First defendant's defence dated 15 December 2017 [34D].

[13] Order of McMillan J made 10 November 2017.

[14] Paragraph 2 of the Order of McMillan J made 24 October 2017.

[15] Affidavit of Jonathan Chung Wa Leung made 19 October 2017 [6], exhibit JCWL-1 ('Leung affidavit 19 October 2017').

[16] Affidavit of Jonathan Chung Wa Leung made 23 February 2018, exhibit JCWL-8 ('Leung affidavit 23 February 2018').

[17] Leung affidavit 23 February 2018 [7].

[18] Thomas Hall's affidavit in support, exhibit TH-2.

[19] Outline of evidence of Thomas Hall dated 23 February 2018 [51].

[20] Thomas Hall's affidavit in support, exhibit TH-6.

[21] Thomas Hall's affidavit in support, exhibit TH-2.

[22] Thomas Hall's affidavit in support, exhibit TH-8.

[23] Deed of Settlement made 29 August 1986, cl 6.26; Thomas Hall's affidavit in support, exhibit TH-5.

[24] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170, 178 (Gibbs CJ, Aickin, Wilson and Brennan JJ).

[25] Ibid; ACD Tridon Inc v Tridon Australia Pty Ltd [2004] NSWSC 480 [65]-[66].

[26] Hall v Mercury Information Technology (South Australia) Pty Ltd [2003] FCA 645 [6].

[27] Practice Note SCGen17: Freezing Orders, 30 January 2017.

[28] [2011] FCA 313 [4].

[29] Deputy Commissioner of Taxation v Karas [2012] VSC 68.

[30] Thomas Hall's affidavit in support [9]-[10].

[31] Affidavit of Thomas Lynden Hall sworn 2 March 2018 ('Thomas Hall's third affidavit').

[32] Holmes v Cowcher [1970] 1 All ER 1224.

[33] ASIC v GDK Financial Solutions Pty Ltd (In Liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580 [4].

[36] Distinctive FX Pty Ltd v Van Der Slot [2015] VSCA 328 [43]; See also His Eminence Metropolitan Petar [2006] NSWCA 277 [59]-[61]; Palmer v MacDonnell Shire Council [2011] NTCCA 2; (2011) 29 NTLR 90.

[37] That any loss arising from the discharge of the Mortgage can be claimed on behalf of Rhyse from Thomas Hall in this proceeding via a set off of the amount of that claim against his entitlements in respect of the assets that are the subject of the trusts in this proceeding.

[38] Plaintiff's outline of submissions dated 26 February 2018, [36] ('Plaintiff's outline of submissions'); Talacko v Talacko [2009] VSC 579 [10]-[32].

[39] Plaintiff's outline of submissions [36].

[40] Ibid [37]. This figure does not accurately reflect the evidence given by Hong Cuong La in his affidavit made 21 February 2018 of the full amount of the interest payable for the whole period of the Loan Agreement.

[41] Thomas Hall's third affidavit, exhibit TH-1.

[42] The will is exhibit TH-2 to Thomas Hall's third affidavit.

[43] Monaghan v Monaghan [2016] NSWSC 1316 [49].

[44] Downing v Downing [2003] VSC 28 [24].

[45] Thomas Hall's affidavit in support, exhibit TH-7 [11], referring to VL Finance Pty Ltd v Legudi [2003] VSC 57 [46] (Nettle J).

[46] Thomas Hall's affidavit in support, exhibit TH-8.

[47] Affidavit of Hon Cuong La made 21 February 2018, exhibit HL-2.

[48] Affidavit of Hon Cuong La made 21 February 2018, exhibit HL-2. The interest rate used is the Reserve Bank, Housing Loans - Banks - Variable - Standard - owner-occupier, entitled F5 Indicator Lending Rates, plus 2% to accommodate the higher rate under the Loan Agreement.

[49] Thomas Hall's counsel calculates the extra sum to be, $471,144.14: First Defendant's Reply Submissions dated 27 February 2018 [13].

[50] Leung affidavit 23 February 2018, exhibit JSWL-8, 242-261.

[53] [1992] 1 Qd R 478.

[54] Limitation of Actions Act 1974 (Qld) s 26(5).

[55] Thomas Hall's submissions dated 19 February 2018 [18]; ASIC v GDK Financial Solutions Pty Ltd (In Liq) (No 3) (2008) ALR 580 [4].

[56] Groongal Pastoral Company Limited (In Liq) v Falkiner [1924] HCA 54; (1924) 35 CLR 157 ('Groongal'); Fink v Robertson [1907] HCA 7; (1907) 4 CLR 864, 891; Citibank Savings Ltd v Stergiou (1996) 66 FCR 587,589.

[57] Groongal [1924] HCA 54; (1924) 35 CLR 157, 163.

[58] [2008] FCA 448 [4].

[59] ELG Tyler, PW Young and CE Croft (Lexis Nexis Australia, 3rd edition, 2013) [4.2].

[60] ASIC v GDK Financial Solutions Pty Ltd (In Liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580 [4].

[61] [2000] VSC 374.

[62] [2000] VSC 374 [133].

[63] [2013] WASC 364 [294]-[297].

[64] (1889) 42 Ch D 424, 434.

[65] Plaintiff's outline of submissions [22]; see Holmes v Cowcher [1970] 1 All ER 1224.

[66] Plaintiff's outline of submissions [21]; see Australian and New Zealand Banking Group Limited v Douglas Morris Investments Pty Ltd [1992] 1 QR 478.

[67] Thomas Hall's submissions dated 19 February 2018 [18]; see ASIC v GDK Financial Solutions Pty Ltd (In Liq) (No 3) [2008] FCA 448; (2008) 246 ALR 580 [4].

[68] Thomas has been a director of Rhyse since 16 October 2002: company search at 'TH-4' to Thomas Hall's affidavit in support.

[70] Menegazzo v Pricewaterhousecoopers (A Firm) & Ors [2016] QSC 94 [89]. The authority being the decision of the English Court of Appeal in Gwembe Valley Development Co Ltd v Koshy [2003] EWCA Civ. 1048.

[71] Menegazzo v Pricewaterhousecoopers (A Firm) & Ors [2016] QSC 94 [97] and the authorities cited at fn 51.

[72] Leung affidavit 19 October 2017, exhibit JSWL-1.

[73] See Sylina v Solanki [2014] VSC 2 [43].

[74] Civil Procedure Act 2010 (Vic) s 1(1)(c).

[75] His Eminence Metropolitan Petar [2006] NSWCA 277 [59]-[61]; Palmer v MacDonnell Shire Council [2011] NTCCA 2; (2011) 29 NTLR 90; Distinctive FX Pty Ltd v Van Der Slot [2015] VSCA 328 [25], [43].

[76] Plaintiff's outline of submissions, Annexure A, which identifies that $3,772,221 has been identified by the plaintiff's expert as funds of the SF Trust that have been improperly paid to Thomas Hall or members of his family. The counsel for Thomas Hall accepts for the purposes of argument that this calculation is the plaintiff's best case: Transcript, 28 February 2018, 45, L28-30.

[80] Thomas Hall's third affidavit, exhibit TH-1.

[81] The will is exhibit TH-2 to Thomas Hall's third affidavit.

[84] The plaintiff maintains that the Mother's estate may be insolvent (T50, L5) by reason of a debt owed to the SF Trust (T80-2).

[85] Thomas Hall's third affidavit, exhibit TH-1, clause 12.3.