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[2001] WASC 277
Supreme Court of WA
2001-10-10
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : POWERS & ANOR -v- HAYES & ORS [2001] WASC 277
Contract - Deed of Declaration of Trust - Whether refusal to perform obligations under such a Deed justified by alleged repudiation of other agreements - Turns on own facts
Declaration that Deed is binding and should be performed
1 WHITE AUJ: This is an action in which the parties who are still concerned are the plaintiffs ("Mr and Mrs Powers"), the second defendant ("Mr Price") and the third defendant ("the Company"). The plaintiffs' claims against the first defendant ("Mr Hayes") have been settled as will appear hereunder. I set out below the facts I find to have been established.
2 In September 1988, Mr Hayes and Mr Price were the two directors of, and the two shareholders in, the Company that was the corporate trustee of the Denmark Unit Trust ("the Trust"). Each held two of the four issued shares in the Company. In addition, each of Mr Hayes and Mr Price held 10 units in the Trust.
3 In November 1988, the Company purchased 33 hectares of land at a purchase price of $42,500 which amount, together with the stamp duty on transfer and the conveyancing costs in connection with that purchase, was paid by Mr Price.
4 In May 1990, there was a meeting attended by Mr Hayes, Mr Price, a Mr Ryan, Mr and Mrs Powers and others at which it was agreed that Mr and Mrs Powers and Mr Ryan would pay the purchase price of a piece of land to be bought by the Company, in consideration of which 10 units would be issued to each of Mr and Mrs Powers (jointly) and Mr Ryan. It was agreed that each of Mr Hayes and Mr Price would transfer one of their shares in the Company to Mr and Mrs Powers (jointly) and Mr Ryan, respectively. This agreement was carried into effect and settlement of the land purchased took place on 14 August 1990.
5 Thereafter, Mr Price fell into financial difficulties and on 2 July 1991, he became bankrupt.
6 By documents which are dated August 1990 (the actual date of execution is disputed, as will appear hereunder), it was agreed that Mr Price would exchange his 10 ordinary units in the Trust for 13,125 special units, in consideration of the promise by Mr and Mrs Powers, Mr Hayes and Mr Ryan that, when Mr Price was cleared of bankruptcy, he would be reinstated as a director of the Company and would have his special units converted back into 10 ordinary units in the Trust.
7 This agreement was executed to the extent that the Company issued the special units as agreed and repurchased Mr Price's 10 units accordingly. The terms of the agreement were, on 16 April 1996, reduced to writing in the form of a Deed of Declaration of Trust of that date (Ex 16) executed by Mr and Mrs Powers and Mr Price, respectively and witnessed by Mr Bazeley, which contained, inter alia, the following provisions (and in which Mr and Mrs Powers are together referred as "Powers"):
G. On or about 9 August 1990 Price exchanged his 10 ordinary units in the trust for 13,125 special par units in the trust in consideration of a promise by the company, Powers, Hayes and Ryan that the special par units would be converted back to 10 ordinary units if he should personally request them to do so and in consideration of a declaration by Powers, Hayes and Ryan that they each hold the ordinary units in the Trust issued to them for one another and for Price as tenants in common in equal shares.
...
1 ...
2. Powers hereby acknowledge and confirm the promise referred to in recital G above and declare that they hold the 10 ordinary units in the trust issued to them in trust for themselves and for Price and that they will take all steps and do all things necessary to convert the special par units issued to Price to 10 ordinary units in the trust and appoint Price a director of the company as soon as they are able to do so and hereby undertakes not to deal with the units or exercise the powers attached to them without the knowledge and consent of Price."
8 As a consequence of his bankruptcy, all Mr Price's rights and interest in the special units and his shares in the Company vested in his trustee in bankruptcy.
9 On 25 April 1992, Mr Ryan died, leaving the residue of his estate to the Trust.
10 In proceedings in this Court in CIV 2114 of 1995, Mr and Mrs Powers and the executor of Mr Ryan's estate made certain claims against Mr Hayes and Mr Price, seeking the transfer to them of the shares in the Company as previously agreed. Mr Price consented to the orders sought, but Mr Hayes defended the claims.
11 On 14 February 1997, Mr Price wrote to Mrs Powers a letter (Ex 17) confirming his support for the claims made against Mr Hayes and saying, inter alia:
"At the end of these actions we will share all costs and legal fees incurred in this pursuit and hopefully move onward into forever and really establish the dream at Denmark that we created at the outset of this project."
12 The undertaking to share the costs was understood by both Mr Price and Mr and Mrs Powers as an agreement that, if and when they had control of the Trust, following a successful claim against Mr Hayes, the costs would be paid from trust funds. Mrs Powers said this in her evidence and I find that to be so. Neither Mr and Mrs Powers nor Mr Price had any moneys from which the costs could be paid, other than their loan accounts in the Trust.
13 In due course, the claims against Mr Hayes were tried, there was an unsuccessful attempt to resolve the differences by mediation and the matter was dealt with by Templeman J who delivered a written judgment on 13 May 1998 pursuant to which his Honour made declarations that Mr Hayes held one share in the Company in trust for the executor of Mr Ryan's estate and that Mr Price held one share in trust for Mr and Mrs Powers jointly. There were consequential orders for the transfer of the shares accordingly. The shares have since been transferred in compliance with his Honour's orders.
14 Mr Price has asked Mr and Mrs Powers to implement the agreement exchanging his special units for 10 ordinary units and reinstating him as a director of the Company, but Mr and Mrs Powers have refused to comply.
"1. Whether on 2 July 1991, the date on which the second defendant (Price) was declared bankrupt, he was the holder of 10 ordinary units in the Denmark Trust or 13,125 special units.
2. Was the date on which Price's 10 ordinary units in the Denmark Trust were converted into special units, before or after 2 July 1991, being the date he was declared bankrupt.
3. Whether on the date on which Price's 10 ordinary units in the Denmark Trust were converted into 13,125 special units, there was an agreement that Price could request that the special units back to ordinary units when he was discharged from bankruptcy.
4. If there was such an agreement:
.1 what were the terms of that agreement,
.2 was it intended to have legal effect,
.3 was it supported by consideration.
5. Whether there was an agreement made between Price, Bazeley and Powers in the terms pleaded in paragraph 17 of the plaintiffs' defence to the second defendant's counterclaim and cross claim.
6. If there was such an agreement:
.1 what were the terms of that agreement,
.2 does the deed of declaration of trust dated 16 April 1996 incorporate that agreement, or part only of that agreement,
.3 did Price repudiate that Agreement in August 1998.
7. Is Price entitled to the relief sought by him."
16 The second defendant contends that the issues for resolution are:
1. Whether there was an agreement as pleaded by the plaintiffs in par 17 of the defence;
4. Whether Mr Price has breached the agreement so as to entitle the plaintiffs to rescind or repudiate the agreement.
17 As I see it, therefore, those issues are not significantly different from the issues set out in pars 5 and 6 of the plaintiffs' list of issues for determination.
18 Paragraph 17 of the plaintiffs' defence to the second defendant's counterclaim is as follows:
"17. In about March/April 1996 the plaintiffs and Price orally agreed (the oral agreement) that:
.1 They and Robert Bazeley, another commune member, had a common purpose namely the preservation and expansion of the commune and to prevent Hayes from winding up the trust.
.2 They and Robert Bazeley would act in concert to achieve that common purpose.
.3 Price would assist the plaintiffs in their action against Hayes in CIV 2114 of 1995.
.4 Price would indemnify the plaintiffs for and pay one half of the legal costs incurred by them in CIV 2114 of 1995.
.5 If and when the plaintiffs were in a position to do so they would assist Price convert his 13,125 special units in the trust for 10 ordinary units.
.6 If and when the plaintiffs were in a position to do so they would support Price's nomination for a position on the board of directors of the company.
.7 If and when Price was in a position to do so he would support the application of Robert Bazeley for the issue to him of one ordinary share in the company and 10 ordinary units in the trust.
.8 If and when Price was in a position to do so he would support the nomination of Robert Bazeley to a position on the board of directors of the company.
.9 If and when he was in a position to do so Price would transfer one of his shares in the company to the plaintiffs jointly.
.10 Price would not deal with his shares in the company or the powers attached to them without the knowledge and consent of the plaintiffs.
.11 The plaintiffs would not deal with the units in the trust or exercise the powers attached to them without the knowledge and consent of Price."
19 In the closing submissions by counsel for the plaintiffs, it was said:
"6. In 1995 the Powers, Bazeley and Price agreed to work together to resist Hayes' attempts to break up the trust.
7. They also agreed that if and when they were successful Price would be restored to the position in the trust and the commune that he enjoyed before his bankruptcy and that Bazeley would be admitted to the trust on the same terms as the Powers and Price, as soon as they were able to do so.
8. In paragraph 17 of the defence the Powers allege that this agreement was reached in March/April 1996. However in their evidence they said that it was reached in November/December 1995.
9. The exact date of the agreement is not critical and the Powers seek leave to amend paragraph 17 of their defence by substituting the words 'November/ December 1995' for the words 'March/April 1996'."
20 This application was not referred to by Mr Clyne in his closing submissions and I will allow that amendment.
21 In the course of his written closing submissions, Mr Caine said, inter alia, that there was no evidence at the trial as to whether the Powers are able to appoint Mr Price as a director of the Company. No attempt was made to show that the Articles of Association of the Company empowered the Powers to appoint him as such, nor proof that the trust deed empowers the Powers as the holders of one half of the ordinary units in the Trust to convert the special par units issued to Mr Price to 10 ordinary units in the Trust.
22 The fact that the Powers were parties to the agreement, recorded in the Deed of Declaration of Trust to do both of those things is, in my opinion, sufficient evidence on a balance of probabilities to establish that they were so empowered. If, in fact, they were not so empowered, I would have expected the point to be taken by the plaintiffs. In my opinion, this submission is an example of "clutching at straws".
23 I accept Mr Caine's submissions that no orders should be made in these proceedings against the first defendant in the light of subsequent developments. No orders are sought against Mr Bazeley.
24 The second defendant is a business management consultant. He has been in financial difficulties in the past, having executed a deed of assignment, a deed of arrangement or a composition under the Bankruptcy Act in 1973. During 1990, he became aware of the danger that he would be declared bankrupt and informed the other beneficiaries of the Trust. This caused Mr Hayes to be angry and concerned about the possible threat to the Trust in the event that Mr Price was declared bankrupt. Accordingly, steps were taken to reduce that threat by the following stratagem. By agreement between the parties, Mr Price requested that the Company repurchase from him his 10 ordinary units in the Trust, in exchange for the issue to him of 13,125 special units therein, which units carried no voting rights and were permanently limited to their nominal value of $1 each. It was further agreed that, if and when Mr Price was released from bankruptcy, he would be entitled to exchange the 13,125 special units for 10 ordinary units and to be reinstated as a director of the Company, thus restoring him to his former position as soon as it was lawful to do so.
25 Included in Exhibit 3 are the minutes of a meeting of the directors of the Company, dated 7 August 1990 recording the Company's acceptance of the offer by Mr Price to have his 10 units repurchased in exchange for 13,125 special $1 units and of a meeting of the unit holders of the Trust, dated 9 August 1990 recording the unit holders' ratification thereof.
26 It is common cause that the dates appearing on those minutes were not true and that the minutes had been back dated. What is in dispute is the date when the minutes were in fact executed. Mrs Powers was adamant that it was on 9 August 1991, after Mr Price had been declared bankrupt, that the minutes were produced by him for execution and executed.
27 Mr Price said that the minutes were signed in February 1991, prior to his bankruptcy.
28 It is apparent that the significance of Mrs Powers' evidence in this regard was the effect of his bankruptcy on Mr Price's ownership of his assets. If her evidence is correct, Mr Price would have been divested of his ownership of the 10 ordinary units in the Trust on 2 July 1991 and, therefore, in her opinion, he could not have exchanged them for the special units. Mrs Powers said that the significance of this had become known to her only about three months before the hearing.
"Can I ask you this: when you were told by Mr Caine that the transfer or the assignment of the 10 ordinary shares to 13,000-odd shares by Mr Price was illegal, did you then understand that at the time Mr Price went bankrupt, as you understood it, that the 10 ordinary shares became the trustee's property?---Well, I understood that what we had been led to believe was different. The way it came up was Mr Caine rang me while we were doing this particular case and he said, 'So let me get this right. April' - I said, 'No, Corrin, August' and he said, 'No, no, no, Sheila, listen to me.' I said, 'I am listening' and he said, 'It's April when you signed them.' I said, 'No, I told you constantly it was August 91 and I can't alter that' and so he said, 'I wish you would have a look again' and I said, 'I already have looked and I have already explained to you.' I said, 'Why don't you, if you don't mind me suggesting' - because I'm very polite to Mr Caine. I said, 'If you don't mind me suggesting, if you check my chronology and if it's April, then I will concede to April.' He said, 'What a good idea' and I said, 'Okay. Well, if it's then - if I said April back in 97, then I apologise, but I have always known what date we signed them.' So he came back and he went, 'Sheila, listen to this: I'm going to send you a fax and I want you to confirm if this is what is so' and that's where we started to look at the fact that from the beginning this hasn't been a right deal.
All right. Well, if you thought it wasn't a right deal and therefore these units were still held by Mr Price when he went bankrupt, have you taken steps to bring that to the attention of the insolvency people so that those 10 shares can go to them, the 10 units can go to them?---Yes. I believe ITSA is aware that we now - - -
You have done that, have you?---I haven't done it.
You see, if what you're saying is correct - - -?---ITSA is aware.
ITSA is aware, and so are you going to pay to ITSA one-half of the profit or a third of the profit?---I don't know what the outcome will be, but ITSA is aware and we will have to face that afterwards apparently.
Afterwards? I see. So you're going to pay this money to ITSA, are you?---I'm not sure who's going to be paid.
Why didn't you do it in 1999?---What about that?
When did you become aware of this particular allegation?
---About 3 months ago.
I see. So it's only 3 months ago that you suddenly - - -?
---Sorry interrupting you, but I was not aware of the - not the consequences, but the significance of the fact that it was August, and I didn't particularly want to bring that significance up. I know that Mr Price did what he did for the best of the company, but since then he's not working to the best of our company.
So this is something you say you became aware of 3 months ago?---Would it be 3? When we were getting ready for this case and Mr Caine wanted my chronology, he wanted me to put down that in April we signed. I said, 'No, we did not.' By the way, I was thrown off the original case after working for 18 months through a dispute with Mr Price where Mr Price in his evidence said that we decided between August, which I demanded it be said, and his February. We chose the middle date April - never. What I said to Mr Price was, 'David, I can't do that again, I've lied for you once, but if I must on oath, I would have to say, and Colin Hayes has already dobbed you in. If he asks me, "When were the documents signed?" under oath I would have to say August,' and he let me have it."
30 On her evidence, the 10 units owned by Mr Price would have vested automatically in his trustee in bankruptcy. It follows that she must have been of the view that the units belonged to that trustee at all material times. Despite that, she was, as a director of the Company, a party to the removal of those units from the records of the Company. There was no satisfactory explanation from her of this situation - she claimed to have been acting at all times on the advice of her accountant and her lawyer. It is significant that neither was called as a witness for the plaintiffs and it was not suggested that either was unavailable. Of course, in the case of Mr Caine, he could not have been a witness at the same time as being counsel but that fact does not establish that he was not available to be called as a witness on the basis that another advocate be appointed to act as counsel. In accordance with the decision in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, I infer from the fact that neither was called that the evidence of neither would have been of assistance to the plaintiffs.
31 On some basis, never explained, the Company caused the extinction or transfer of Mr Price's share in the Company and units in the Trust, without his knowledge or consent. Furthermore, Mr Price's loan account to the Trust was written out and, it seems, absorbed into the Trust.
32 As I have indicated, the plaintiffs' position is that, while it is true that they executed the Declaration of Trust (Ex 16) to which I have referred above, the agreement recorded therein was a part only of the whole agreement between the parties, the rest of which was oral and partly recorded in the letter from Mr Price of 14 February 1997 (Ex 17) the relevant passage from which I have quoted above.
33 While denying that there was an agreement as pleaded in par 17 of the defence, Mr Price's position was that the Declaration of Trust recorded the agreement between the parties according to its tenor, but that there were oral agreements along the lines set out in the plaintiffs' defence to counterclaim (quoted above) in pars 17.1, 17.2, 17.3 and 17.9 thereof. Paragraphs 17.5, 17.6, 17.10 and 17.11 were part of the agreement recorded in Ex 16. Mr Price denied the agreements alleged in pars 17.4, 17.7 and 17.8 and, as to par 17.4, his contention was that he had agreed that if the actions against Mr Hayes were successful and he were reinstated as a director and ordinary unit holder in the Trust, he would support the payment of the legal costs from the trust funds, being the only source of funding available to him.
34 Mrs Powers said (at p375 of the transcript), that Mr Baseley "came on the scene" in 1992. It is apparent, therefore on Mrs Powers' evidence, that the alleged agreement, in so far as it related to Mr Bazeley, could not have been contemporaneous with the 1991 agreement concerning the repurchase of the 10 units from Mr Price. In fact, Mrs Powers said (T409-410) that the agreement concerning the admission of Mr Bazeley as a member of the commune and as a director of the Company was reached in September or October 1995, when Mr Price came back from Melbourne. Mrs Powers claimed to have an excellent memory for dates.
35 When were the documents dated August 1990 in fact executed?
36 In relation to the question of the date upon which the documents, back-dated to August 1990 had in fact been signed, the following evidence was relevant.
37 (1) In the statement of facts (Ex 23) which was recorded by the solicitor acting at the time for Mr and Mrs Powers and which Mrs Powers said (T375) was, she thought at the time to be "very correct", there is the following passage:
"Price told them that he had issued and stamped the shares in Imagination Enterprises and that they only needed to be lodged with their accountant when the books were done. They thought Price would be declared bankrupt. Hayes was very angry because he believed this would affect them. Thus Price resigned at a meeting and took 13,000 ordinary shares (sic). Because the trust was their central concern they promised to reinstate him when he was cleared of bankruptcy as both a director and shareholder of 25% of the whole trust.
About 6 months later Hayes and Price disagreed at a training session. Hayes tried to get Price to take whatever he had put into the trust, plus inflation, and leave."
38 Mrs Powers' evidence was that the training session took place on 16 and 17 August 1991. If that evidence is true, the meeting, at which Mr Price resigned and the agreement was made as to the exchange of units, was held about mid-February 1991 and not 9 August 1991 as Mrs Powers said. The February date accords with Mr Price's evidence as to when the meeting was held.
39 (2) In Mr Powers' evidence-in-chief on 14 October 1997 in the trial before Templeman J,(Ex 44) he said, inter alia:
"In April 1991, certain documents were signed in anticipation of David Price going bankrupt. The effect of the documents were (sic) that David's 10 ordinary units in the trust were converted to special units."
40 That evidence is inconsistent with Mrs Powers' averment that the documents were executed after Mr Price's bankruptcy. Whatever Mr Powers might have said as to his recollection of dates, the statement that the documents were "signed in anticipation of David Price going bankrupt " is consistent only with the documents having been executed before 2 July 1991.
41 Accordingly, in relation to the first four issues submitted by the plaintiffs, I find that on 2 July 1991, Mr Price was the holder of 13,125 special units in the Trust, having reached an agreement that his 10 ordinary units in the Trust would be repurchased by the Company in consideration of the issue of the special units to him prior to 2 July 1991.
42 I find also that, on the date when the repurchase took place, there was an agreement that Mr Price would be entitled to have his special units replaced by the re-issue to him of 10 ordinary units in the Trust upon his request after discharge from bankruptcy.
43 The terms of the agreement were as recorded in the Deed, Ex 16, executed in April 1996. I hold that that deed was intended to have legal effect and that it was executed as a deed. The question of consideration may therefore be irrelevant, but, clearly, the 10 units were to be issued in consideration of the surrender of the 13,125 special units.
44 Why have Mr and Mrs Powers refused to perform under the Deed?
45 While Mr and Mrs Powers accepted that there was an agreement as recorded in the Declaration of Trust (Ex 16), they have refused to give effect to that agreement. The reasons for that refusal were stated by Mrs Powers to be (T374):
"Because he hasn't kept the other part of the agreement that we made when he came back, which was that we would have an equal partner with Robert Baseley. When I asked him for that, he just lost it big time and has never spoken to me since."
46 Mrs Powers' evidence was frequently difficult to follow and at times not responsive to the questions posed to her. I found her evidence unconvincing in many respects and, particularly in relation to the allegations of Mr Price's breaches of the agreement alleged to have been made by him.
47 In the defence to Mr Price's claims, it is alleged in par 21 that:
"Between June and August 1998, Price repudiated the oral agreement, and the implied term, by making it clear to the plaintiffs that he did not intend to perform his obligations thereunder.
PARTICULARS
1. Price refused to pay one half of the legal costs incurred by the plaintiffs in CIV 2114 of 1995
2. Price refused to support the application of Robert Bazeley for the issue to him of one ordinary share in the company and 10 ordinary units in the trust.
3. Price refused to support the nomination of Robert Bazeley as a director of the company.
4. Price declared his intention to disband the commune and wind up the trust."
48 In relation to the issue of the sharing of the costs, Mrs Powers' evidence (T420) was:
"Later when you instituted proceedings to get the shares in Imagination Enterprises or the share - it was only one share for yourself you were after, wasn't it?---And for Ryan, yes.
And for Mr Ryan's estate. It was only then that there was this discussion because of what Mr Caine told you about your exposure to potential costs. Is that right?---Yes. When we sat down and I kept asking, 'Why is it always in our name? I thought we were fighting for the trust' he said, 'Well, it's you that he's suing.' Then I said to David, 'Well, we're in the same position we were before. We can't afford it' and he said, 'Yes, you can. It will come out of the trust and I will share that cost with you.'
That was said in the presence of Mr Caine?---Yes."
49 I find that the agreement between Mr and Mrs Powers and Mr Price in relation to the legal costs was that, if they acquired control of the Company and the Trust, the legal costs would be borne by the Trust, so that each beneficiary would, in effect, contribute a like amount. Mrs Powers certainly understood that to be the agreement with Mr Price.
50 It appears from the evidence of both Mr and Mrs Powers that it was on 19 June 1998 that Mr Price said that Mr Bazeley would never be appointed as a director of the Company and that he would not be issued with 10 units in the Trust. Within a short time thereafter, Mr Price informed Mr and Mrs Powers that, so far as he was concerned, the Trust was over, by which Mr and Mrs Powers understood that he intended to wind up the Trust.
51 Accordingly, in relation to the four particulars of the alleged repudiation, the position is as follows:
1. Mr Price never had an obligation to pay one half of the legal costs of Mr and Mrs Powers - his obligation was to arise only when and if he and they acquired control of the Company so that such costs could be paid out of trust funds, by agreement of the beneficiaries.
2. and 3. On the evidence of Mrs Powers, it was on 19 June 1998 that Mr Price informed them that he would not support the appointment of Mr Bazeley as a director or shareholder of the Company or as a unit holder in the Trust.
4. It was a day or two later that Mr Price informed Mr and Mrs Powers that "it is over", which she interpreted as an indication of his intention to wind up the Trust.
52 Despite that, on 20 August 1998, Mr Caine wrote a letter (Ex 24) to Mr Price which contained, inter alia, the following passages:
"Logically the next step to be taken is for you to demand that Colin Hayes and Alan and Sheila Powers honour the promise referred to in paragraph G of the deed dated 16 April 1996 so that your special units may be converted back to 10 ordinary units.
It will be necessary for you to instruct your own solicitor to make that demand and to take whatever action may be necessary if the demand is not complied with.
My instructions from Alan and Sheila Powers are to assure you that you have their full support in that regard.
As the holder of 10 ordinary units you would be entitled to the same benefits as those to which Colin Hayes and Alan and Sheila Powers are entitled in respect to the Trust.
Until your units are converted your benefits are limited to those of the holder of special units.
In the meantime it is necessary and desirable that Imagination Enterprises Pty Ltd carry out its function as the trustee of the Trust. In the expectation that you are now established in your new home at Denmark and fully occupied with your own activities, but recognising that there are other matters unresolved, Alan and Sheila Powers propose that the Cottesloe properties be sold and that the net proceeds be applied firstly toward the settlement of the claims of Walter Widmer, Willie Harman and Lydia Docherty and secondly towards the establishment of an interest bearing term deposit pending the outcome of your claim for the conversion of your special units to ordinary units ..."
53 It is difficult to reconcile that letter with the later letter dated 12 October 1998, (Ex 21) that Mr Caine wrote to Mr Price's solicitor rejecting a suggestion that there be a meeting between the parties to determine whether they could thereby make any difference to the relationship between them.
54 Mr Caine stated in that letter (Ex 21) that Mr Price had now declared that he wanted the trust wound up and to thereby gain some benefit for himself. As I have indicated above, this was inaccurate as such declaration, if it is appropriate so to describe it, was, according to the plaintiffs' evidence, made in June 1998, prior to the letter of 20 August 1998 (Ex 24) from which I have quoted extracts above.
55 He added that Mr Price had failed to honour the promises and representations made in respect of the sharing of costs in relation to the proceedings against Hayes and had failed to "conduct himself in a co-operative manner since taking up residence in Denmark". I have already dealt above with the evidence of Mrs Powers on the question of the agreement as to costs.
56 Mr Powers gave somewhat confused evidence as to the agreement. His evidence was as follows (T497-501):
"There was no discussion about costs until, I think, June, July 1996 when you and your wife were with Mr Caine. Correct?---That's correct, yes. I stand by - I'm not sure of the date, but that would be when we were with Mr Caine.
...
At that stage you and your wife signed a costs agreement with Mr Caine?---Yes.
You pledged your 70,000 loan account as security?---That's correct.
Mr Price couldn't because he had not been readmitted to the trust, had he?---That's correct.
Yes, and of course at that stage he had no capacity to pay costs, had he?---As far as I know, no.
So if he was ever going to be able to assist you to pay costs, it had to be if and when he ever got back into the trust?---Or if he became financial as he was before.
Yes, and at that stage it was entirely speculative? ---Everything was at that particular time, yes.
Can I take you to your affidavit of 2 February 2000? ...
Can I take you to page 4? Do you have that?---Yes, I have it.
There's a heading Deed of Declaration of Trust?---Yes.
It says, 'In or about March-April 1996, we agreed with Price that (1) he would continue to assist us in our action against Hayes because we had a common purpose; namely, the future of the commune at Denmark.' Is that correct? ---That's correct, yes.
That arrangement happened, you say, late 95?---Like I just said to you, I wasn't quite sure of the actual dates of that particular one.
Are you not sure on some dates?---On some dates unless something specific had happened at that time.
Right, '(2) he would indemnify us for one half of the costs we incurred in breaking the stalemate with Hayes.' That's not true, is it?---Yes.
In March-April 96 you have just said there was no discussion with Mr Price about costs until you went to see Mr Caine in June-July of 96?---This is talking before it, before when we - - -
You just told me - - -?---I'm getting confused here with the actual dates. This was discussed when we were down in Denmark before we went and put the ashes on Peter Ryan's grave; not his grave, I'm sorry, in the forest. This was all discussed.
So you discussed costs when you were putting the ashes around?---We said that we would share the costs as Mr Price had said, yes.
Sorry, I thought a moment ago you had said that there was no discussion about costs, sharing costs, until you had the conversation in Mr Caine's office?---This is where I'm getting a little confused actually to the dates. I'm talking now. I can tell you now about the one where we went down to see the grave or shall I say where we spread the ashes. This was made then, but as to the particular date I wouldn't be quite sure.
Do you agree with me that you just said a moment ago there was no discussion about costs?---I agree with you a moment ago I said that and then I'm losing the actual sequence of events and I can tell you a moment ago that when - I can pick them out by the sequence of what had happened, not by the actual dates.
When did you scatter the late Mr Ryan's ashes?---This is when we made the arrangements.
When?---This is why I'm trying to tell you that I am not sure of the particular dates.
So when you were scattering the ashes, you say there was an agreement about sharing costs?---Yes, this was talked about before at the kitchen table and we went all around.
You didn't mention that, you see. I took you quite carefully through what was agreed and now you're coming back when I put to you what you said on a prior occasion, you have changed what you have told us already today?
---This is as it comes, as I say, into a sequence from where I can tell you these sort of things had happened.
Let's go back again. Are you telling us now that there was an agreement about sharing costs before you scattered Mr Ryan's ashes?---Yes, and this was also clarified by Mr Price by sending the letter following that.
The letter was in February 1997, 10 months after you signed the declaration of trust and something like 7 or 8 months after you signed a costs agreement with Mr Caine, so let's go back. Before you scattered Mr Ryan's ashes, what was the agreement as to sharing costs?---That we would work together, all of us, to defeat Mr Hayes and bring the company back to equilibrium and also that we would share in all the costs and details and everything else to do this, so this was some of the - it was like general agreements that were made in that particular time as well.
...
The parties to the general agreement were you and your wife, Mr Price and I assume Mr Bazeley?---That's correct, yes.
What did you then understand? How did you then understand that Mr Price was going to pay for it?---This wasn't even discussed at the time as regards how he would pay for it.
He had no money, did he?---I didn't know. At the time I know that he came from Melbourne - he hadn't got - but he told us he had got prospects over there.
He had prospects?---Yes, and he was going to run a health club or a health farm or something, as well as selling real estate.
As I understood your evidence, he was so poor that you and your wife were having to care for him?---We did at that time but he said he had prospects and Mr Price over the years we had known him had been up and down in business and as far as we know, that he could possibly get back into business again but we also said that if the money came - that we had the money, it came through - we would try and pay it out of the trust."
"What was the exact terms of the agreement you say was agreed between you and Mr Price?---It was a general agreement that came in there.
Yes, what?---That we would share in the fight against Mr Hayes, that we would do our best to bring Mr Price back into where he was before, that Mr Baseley, who was helping us, would also come in it and quite a few of the things that - we talked in general.
But not specifically about costs?---We said we would share everything we could to be able to do it.
And at that stage you knew Mr Price had nothing?---He had no money as far as I knew at that time.
And the only way he might ever have been able to help you with the costs would be if he got his share of the trust?
---I don't know about that because I didn't know what Mr Price's prospects were after that.
Wasn't that discussed?---He told us he was a good businessman, so we don't know.
Wasn't it discussed that when you won you would use the trust to pay the costs?---We could use the trust money to pay costs, yes."
58 In relation to the letter from Mr Caine dated 12 October 1998, Mr Powers gave the following evidence in cross-examination (T507):
"I suggest to you that the primary complaint was that he wanted, firstly, the trust wound up?---That's correct.
That he wouldn't pay the costs, half share in the costs?---That's correct.
Well, he couldn't, could he, because he wasn't back in the trust and he hadn't been cooperative?---That's correct.
So was it then that you decided to do whatever you could to kick him out of the trust?---No, not at all.
No?---No, because of his action that he refused totally to reinstate Mr - sorry, not to reinstate, but instate Mr Bazeley.
Where is Mr Bazeley referred to in there?---Well, I suppose you could put it in there:
'My client's purpose has always been to - that the objects to which Mr Peter Ryan' - - -
Well, Mr Ryan's object was to leave a lot of money to the trust?---During the duration of the trust, yes.
He just left it to the trust?---That's correct."
59 It is noteworthy that there is no reference in the letter to the position as regards Bazeley, which was later to assume considerable importance in the eyes of the parties when they came to draw up subsequent minutes.
60 In relation to the complaint that Mr Price had failed to conduct himself in a co-operative manner since taking up residence in Denmark, there is nothing to suggest that Mr Price had agreed to be co-operative with Mr and Mrs Powers, save in respect to the claims against Hayes for the transfer of one of his shares in the Company. In reference to his affidavit, sworn on 2 February 2000, Mr Powers' evidence under cross-examination was (T516-517):
"Let me go to number 3, 'He refused to cooperate with us in breaking the deadlock with Hayes,' but he did everything he could. He helped you in the action with Hayes. Correct?---Yes, yes.
He didn't oppose your application in that action to get a share?---No.
What else could he do?---I would have to think about that particular one.
Yes, please do?---Yes, put like that, I can't really think why it was there.
It's your affidavit, would you agree?---Yes. I'm just trying to think. I'm afraid my memory has just gone a little bit blank on that particular one.
But you do agree that he was your agent and spent many hours liaising between you, your wife and Mr Caine to assist you in the action against Hayes?---Please define 'agent'?
He went and spoke to Mr Caine on many occasions to help prepare the evidence in that case?---Yes, he did.
Many hours?---Yes.
He would then come down and talk to you and your wife and go back again?---Yes, but I - - -
What else could he have done in that action to get you your share?---I am not sure about that particular one myself, I'm sorry.
You always had your 10 units, didn't you?---Yes, we did.
The only thing you never had was your one share in Imagination?---That's correct, because the paperwork wasn't done correctly in the first place.
Yes, and that action was simply about that share and Mr Price consented at the very start that he would transfer that share to you?---That's correct.
Then he helped you prepare your case?---Yes.
To give you your share?---Yes.
In fact, the transfer of the share was what he agreed to do in the declaration of trust, wasn't it?---That's correct.
The written one?---Yes.
He wanted his part of that agreement, didn't he?---He did, but he didn't honour the rest of it.
So you got your share."
61 In their defence to the claim of Mr Price to be reinstated as shareholder and holder of 10 units in the Trust, the plaintiffs say the agreement is void as it was made after Mr Price became bankrupt. If it were void, the result would be that the 10 special units which had belonged to Mr Price would have vested in his trustee in bankruptcy on 2 July 1991. The trustee subsequently sold to Mr Price the chose in action, namely his entitlement to be reinstated as a director and unit holder in the Trust, but the actions of the Powers and Bazeley have devalued that entitlement by the distribution of the trust funds. Whether or not that chose in action ever vested in the trustee in bankruptcy is not of importance in view of the fact that, to the extent, if any, that it did, the trustee sold it to Mr Price. In the final submissions by counsel for Mr Price it is submitted that the right to enforce a chose in action is not property for the purposes of s 58 of the Bankruptcy Act and reference was made to McDonald Henry & Meeks; "Bankruptcy Law and Practice", par 116.170 and to Re Inkson's Trusts [1855] EngR 845; (1855) 21 Beav 310; 52 ER 878. This question was not argued by Mr Caine and I think it is unnecessary for me to reach a conclusion in respect of it. The right to enforce the chose in action either remained throughout that of Mr Price or it became his when the trustee sold it to him. In neither event is the plaintiffs' case advanced.
62 I formed the opinion that much of Mrs Powers' evidence was probably a comparatively recent invention in an attempt to evade the plaintiffs' obligations under the Deed of Declaration of Trust (Ex16). I shall set out hereunder the reasons for the formation of that view.
63 When asked in cross-examination about the date of execution of the documents that were dated August 1990, the following questions and answers were exchanged (T378-379):
"I accept the papers may have been signed after the agreement but I'm putting to you that they were signed well and truly before his bankruptcy?---No. I wish they had been.
Why do you wish they had been?---Well, we wouldn't be sitting here now.
What difference does it make to you?---The difference it makes to me is that from my point of view in this instance we're telling you that Mr Price never does anything on time and never keeps his agreements and in this case has put us through this entire misery, through this, and I don't know what else to say to you.
What entire misery? He asked you to give him back what he was due. You are refusing it?---I've never refused to give him his share.
What has this got to do with why we've got these proceedings on foot?---Mr Price told us when he was going bankrupt he would take protective action and he did but we didn't have a meeting about it again until 9 August. That's all I've ever said.
What difference does it make to you as to whether it happened before or after his bankruptcy?---It makes a difference now.
Tell me why?---Because he is now trying to split the trust up.
And what difference does it make to you whether he signed this before or after his bankruptcy?---I didn't know that it made a difference until Mr Caine showed me that that was an illegal thing and I said, 'Well, Rohan Skea always maintained that.'
Mr Caine told you it was an illegal thing?---It should have been done before the bankruptcy, I believe now.
So therefore you are refusing, using that as a ground, to not honour your agreement. Is that right?---It's one of the grounds that show that Mr Price has not honoured his agreements.
It shows he hasn't honoured his agreement?---Mm.
How does it do that please?---Because he has put us in this predicament from day one. He didn't register our shares. He didn't so a legal document here, ITSA started chasing us back in - whatever - because Mr Hayes dobbed him in. It just became a nightmare.
Mr Price was happy to transfer his share to you, wasn't he? He consented to the action involving Mr Hayes?---Yes, he did.
You are simply using this allegation as a means of avoiding your obligations to him?---I've never tried to avoid my obligations to him. I just asked him to keep his obligations to us.
And what hasn't he kept - the ones about Mr Bazeley, is it?
---That's correct. Those obligations were my obligations, just like I said to Colin when he said to me, 'Price will never get back in.' I said, 'That's not true, Colin, because my word is my bond.' I also told David Price in 95 that our word had been given to Rob - would he abide by that? He said, 'No worries, absolutely. We couldn't live without Bazeley here because it's him that does all the work.'
Tell me, has Mr Bazeley got 10 units now?---Yes, he has.
And you gave them to him?---They were transferred from Mr Hayes to Mr Bazeley and that was part of the agreement.
So why won't you then transfer back Mr Price's 13,000 to 10?---We were never asked to do that after the thing. We would transfer them back to him but now he's trying to say that he wants to split the trust up - it's over."
64 She was asked how it had come about that the one share in the Company which had remained with Mr Price after he had transferred his second share was no longer recorded in the Company's books in his name and the following exchange took place (T380):
"Why has his share gone out of his name to Imagination Enterprises?---It has never been registered in David Price's name according to our accountant and we can only go with accountants - we're not accountants.
"Well, if he was a shareholder of two shares in '95 and '96, how is he not now a shareholder, unless you and your husband and Mr Bazeley as directors took the share from him somehow?---We haven't taken any share from anyone.
Well, why is it in Imagination Enterprises' name?---I can't answer that. On a professional basis I wouldn't know why that is done."
65 As I understood her evidence, Mrs Powers was suggesting that, because her accountant had said that Mr Price's shares had never been "registered", he never was entitled to such shares. The fact was that Mr and Mrs Powers had acquired from Mr Price one of his two shares. It would surely follow that, if Mr Price's shares were invalidly held, so would the share transferred by him to Mr and Mrs Powers. However, inconsistently enough, while removing from Mr Price his remaining share, on the specious grounds that it had never been registered in his name, Mr and Mrs Powers were satisfied to maintain the validity of the transfer by him of one of his shares to them.
66 Neither Mr Powers nor Mr Bazeley could explain how it came about that Mr Price's share in the Company had ceased to be recorded as held by him and suggested that their accountant (whom they did not call as a witness) could offer an explanation. As directors of the Company, these three persons made the decisions and managed the affairs of the Company. I did not believe their evidence that they had no idea as to what had happened and that they had left everything to their accountant.
67 It is apparent from what is set out above that there is no dispute about the fact that Mr Price did transfer one share to Mr and Mrs Powers. In his closing submissions, Mr Caine says:
"49. Paragraph 1 of the deed says:
Price hereby declares that he holds one share in the company in trust for Powers and that he will transfer that share to them as soon as the company will permit him to do so and hereby undertakes not to deal with the shares or exercise the powers attached to them without the knowledge and consent of Powers.'
50. Price does not claim in his counterclaim and cross action that he has performed his side of the bargain by transferring a share to the Powers and neither can he. Price transferred one share in the company to the Powers pursuant to the orders made against him by the honourable Justice Templeman on 13 May 1998 as pleaded in paragraph 25 of the counterclaim and cross-action."
68 It is, however, common cause that Mr Price was at all material times ready and willing to transfer the share in accordance with his agreement to do so and he supported the claim by the Powers in the action which resulted in his Honour's decision. That position was accepted by both parties throughout the trial.
69 I am not persuaded that there was any firm agreement between Mr and Mrs Powers and Mr Price in relation to the admission of Mr Bazeley to the Trust and as a director and shareholder of the Company.
70 Even if there were such an agreement, it did not form a part of the original agreement concerning the repurchase of the special units in exchange for the re-issue to Mr Price of his 10 units in the trust. Accordingly, if there were such an agreement, contrary to my finding, a breach of that agreement would not have afforded a defence to Mr and Mrs Powers against a claim under the Deed of Declaration. At best, it could have been raised as a counterclaim, perhaps.
71 I find it difficult, on a balance of probabilities, to avoid the conclusion that the allegations against Mr Price of breaches of the agreement by him may well have been fabricated in an attempt to answer his claim that Mr and Mrs Powers perform their obligations under the Deed of Declaration of Trust. I found both Mr and Mrs Powers and Mr Bazeley generally unconvincing as witnesses and in particular in relation to their evidence concerning the disappearance of Mr Price's share and loan account, and where there is a conflict between their testimony and that of Mr Price, I preferred the evidence of the latter.
72 It became apparent at the hearing before me that the relief sought in the claim by Mr Price was no longer entirely appropriate, having been overtaken by events. In these circumstances, it would be appropriate to make a declaration that the Deed of Declaration of Trust is binding upon Mr and Mrs Powers and should be performed by them. I shall make that declaration and grant leave to Mr Price to apply for consequential or facilitative orders to give effect to that declaration. Costs should follow the event.
# Powers & Anor
Hayes & Ors \[2001\] WASC 277
(1959) 101 CLR 298