TRUSTS ― Trustee ― Foreign trustee corporation ― Trustee deregistered under foreign law ― Application by beneficiaries in Victoria to appoint new trustee ― Absence of trust instrument and any documentation ― Secondary evidence ― Intention of proposed trustee to immediately extinguish trust and distribute to beneficiaries ― Ability of beneficiaries to extinguish trust ― Rule in Saunders v Vautier ― Vesting order ―

2 The application is brought under s 48 of the Trustee Act 1958 (Vic). That section empowers the Court "whenever it is expedient to appoint a new trustee...and it is found inexpedient difficult or impracticable to do so without the assistance of the Court". The power under that section can be exercised, it says, "although there is no existing trustee" and in particular where a corporation is in liquidation or has been dissolved.

3 The application also seeks a vesting order under section 51 of the Trustee Act in order to pass the legal estate to Mr Dobrotwir as the new trustee. Such an order, which can also be made under the Court's general equitable jurisdiction, has the effect of passing the legal estate as though it had been conveyed by the person in whom it was previously vested, and is made when the person who should convey is not in a position to do so. Thus, under s 51(2)(h), a vesting order can be made where a corporate trustee has been dissolved. But the Court's power can also be exercised where it appears to the Court to be expedient to make a vesting order: see s 51 (2) (o).

4 The plaintiffs' stated object is to have the first plaintiff appointed as new trustee for no other purpose than to immediately extinguish the trust, and to then transfer the trust estate to the plaintiffs as sole beneficiaries. In addition to their pre existing half interest, that would give them the whole legal title to their home. As the trustee company is defunct and there are said to be no other beneficiaries or interested persons as contradictors, the application was undefended.[1]

5 When the application first came before the Court, in circumstances I shall expose below, I questioned the strength and adequacy of the evidence, and the suitability of the legal means being used in the application. All of the trust documentation said to have been created to establish "The Dobrotwir Trust" was lost or missing and there was exiguous secondary evidence to prove the existence of the trust. It was mainly assertion or supposition. And, the Court's assistance for the appointment of a new trustee was not being sought to enable the continuing administration of the trust as would be ordinarily expected, but in order to facilitate its planned immediate extinction. To add to the complications, there was a foreign trustee and no evidence at all about the effect of the law of the place of incorporation (Liberia) when a company as trustee is deregistered. What has happened to the trust property under the law of the place of incorporation?

6 The question became whether a different or additional course should be pursued by the plaintiffs to obtain the trust estate directly by the exercise of their right (or power) as beneficiaries to terminate the trust in accordance with the celebrated rule in Saunders v Vautier[2] as recently considered by the High Court in CPT Custodian v Commissioner of State Revenue.[3] That is, as the beneficiaries are of full age and capacity they can call for a transfer of the trust assets because it really belongs to them. But even that course requires proof of the existence of a trust and its precise terms, and an understanding about the legal state of affairs under the law of the place of incorporation.

7 I gave the plaintiffs the opportunity to consider their position and to adduce any further evidence. More affidavits were filed and the application was broadened to in effect call for a termination of the trust. But there were infirmities and oddities in the evidence and a real need for analysis in a peculiar case. Having reserved my decision, I see sufficient inadequacies or unresolved questions to the extent that I am unwilling, yet, to grant the application on the evidence. I do not say there is dubiousness or some avoidance in the plaintiffs' object here. Of course, the Court has powers in its equitable jurisdiction to overcome difficulties to do what is just and convenient in the administration of trusts. But there has to be sound evidence and a clear principled basis for the Court to intervene and alter legal relations especially where I discern there is an unrecognised element of foreign law.

8 What follows is quite a disquisition, but there is a predicament here. The Court cannot provide an advisory opinion but this is published is an interlocutory judgment to expose the state of the evidence facts and identify the legal issues. The plaintiffs may consider it, and adduce any further evidence as they may be advised. The matter may then be reactivated for further submissions.

9 The following facts were adduced in the first round of affidavits.

10 The first plaintiff says that in 1982 he and his wife returned to Australia to take up residence. They purchased the Toorak property in 1985 together with their friends Henry Maurice Siwka and Jadwiga Siwka. There were two townhouses on the land and the plan was to convert them into a single residence, and to then sell. Title searches show that each couple was registered on title as having one equal undivided half share of the property as tenants in common.

11 In 1986 the Dobrotwirs changed their thinking and wished to live in the property. They say they determined to buy out the Siwkas' interest "through use of Fielden [that is, Fielden Petroleum Development Inc] in its capacity as corporate Trustee". They say Fielden was incorporated in the Republic of Liberia on 3 August 1979 under the Liberian Business Corporation Act. Mr Dobrotwir says the company was incorporated for the purposes of his employment as a physicist in the oil industry in the Middle East. That is a little vague but it sounds like a service type company arrangement as part of his fiscal planning, which is nothing unusual. He does not say that he or his wife has ever been a director or shareholder of the company, and it does not appear they were.

12 Under the company's Articles of Association (which are in evidence), it could have an office anywhere. Mr Dobrotwir says the company's registered office was moved to St Helier, Jersey in the Channel Islands. It appears its administrative affairs were handled in Jersey by a company known as Volaw Trust and Corporate Services Limited. There is no evidence that Fielden was ever registered as a foreign corporation in Victoria, or ever doing business here. But an unregistered foreign corporation has power to hold land in Australia despite s 601CY of the Corporations Act: see Nygh's Conflict of Laws in Australia[4] and Sykes & Pryles, Australian Private International Law.[5]

13 Although the plaintiffs say they had determined to use Fielden as corporate trustee, they do not demonstrate how or in what way Fielden was constituted trustee for the transaction, and how it made the purchase as trustee ― if it truly did. That is, they do not demonstrate the half interest in the land was acquired by Fielded as trustee for them. They do not produce any documentation proving the creation of the trust, or any other evidence to identify it, or any associated documentation at all. They do not say what steps were taken by or in consultation with professional advisors to implement a trust arrangement. Trust creations are commonplace in people's domestic or financial affairs but it is a legal relationship with ramifications which the Court has to consider clinically when it comes to intervening. At the very least there must be evidence of the instrument of trust. Just because Fielden was "his" company does not therefore mean it was legally constituted as trustee for the purchase. The trust and its terms must be proved.

14 The contract of sale by which Fielden purchased the Siwka's interest in the land is not in evidence. But a photocopy of the mortgage is. On 12 May 1986, the Dobrotwirs and Fielden mortgaged the property to the ANZ Bank as security for an advance of $755 000. There is no banking documentation showing the involvement of Fielden in its capacity as trustee. Mr Dobrotwir says that moneys borrowed for the land have been repaid but the mortgage remains in place as security for other loans.

15 A title search proves that on 4 June 1986 a transfer of the Siwka's interest in the land was registered and Fielden became proprietor of a one equal undivided half share of the land under a separate certificate of title. Section 37 of the Transfer of Land Act says that the Register does not show trusts, but a declaration of trust can be deposited with the Registrar for safe keeping and reference. There is no evidence that was done.

16 Mr Dobrotwir gives no evidence at all explaining the deregistration of Fielden. There is a responding e-mail to him dated 1 June 2006 from the Volaw Trust Company telling him that Fielden was "annulled" on 1 February 1994. He was told he could petition the Liberian authorities for reinstatement, and that fees to do that would be US$12 200 plus resumption of administration fees and directors' fees thereafter. He was told that if the petition was allowed, the reinstatement would operate retroactively to the date of annulment. The plaintiffs have taken no such steps. I take it the plaintiffs do not wish to reregister the company. They wish to replace the defunct trustee with Mr Dobrotwir as trustee, and then dissolve the trust (what trust?) and vest the property in his and his wife's name as sole beneficiaries of the trust. That way, they become proprietors of the property in whole.

17 What Mr Dobrotwir says about his personal affairs can be accepted but it is surprising that he has no knowledge of the company or the trust affairs or does not have any documentation himself, especially as the company owned half his home, and he has had dealings with a bank. Moreover he can give no evidence at all to prove the trust, yet he is a beneficiary. If the Court is going to appoint a replacement trustee, it is essential to identify the trust and its terms in accordance with which the new trustee will be bound to act. If the Court is to make a vesting order it is necessary to identify the trust property by reference to the trust.

18 Mr Slowko Tomyn, the solicitor who acts for the Dobrotwirs, swore an initial affidavit saying that Fielden purchased the Siwka's interest for full consideration and paid the applicable stamp duty on the transfer. That may be accepted. But he says (with my emphasis as shown)

6. For asset protection reasons, I advised the Dobrotwirs subsequent to the 1986 transfer that is was desirable that Fielden Petroleum hold its equal undivided half share in the St George's Road property as Trustee for them. Now produced and shown to me ...is a preliminary draft of that Trust.

19 This is saying, inconsistently with the plaintiffs or their understanding, that Fielden did not acquire the half interest as trustee. The idea of a trust came afterwards. That is, I suppose, Fielden would declare itself subsequently as trustee. I do not know but that difference might have some bearing on whether State duties are exigible on a transfer form trustee to beneficiary. That is, if the land had been acquired as trustee, duties may not be payable on a transfer from trustee to beneficiary. I had no submissions on this and do not yet concern myself with it. If it becomes an issue the Court will have to consider whether the State Revenue Office ought be notified or joined as a party.

20 The "preliminary draft" of the trust deed produced by Mr Tomyn appears to me to be a standard form or drafting precedent for a deed to constitute a unit trust. There are insertions to be made in many blank places. There are no insertions or markings. There is no evidence, as one would expect, to show probably that he was working on this precedent as the basis for the deed that was eventually executed when he was setting up a trust for the asset protection of clientele. I would come to expect from a solicitor who was advising a client about asset protection and the creation of a trust to be able to give assiduous evidence about steps taken to work over a drafting precedent and to arrange for ancillary documents. Moreover, where the trustee was a foreign corporation I would expect evidence about the way in which Fielden executed the deed.

21 A unit trust can take many forms: see Jacobs' law of Trusts in Australia.[6] It is usually a form of collective investment, or created as an alternative to investment in a company. In its typical formation, property is purchased; vested in a trustee; separately managed; and the trust property is divided up into a number of units. For present purposes, it is enough to say that if there is no power to transpose investments, it is called a fixed trust. But if there are wide powers of investment it is known as a flexible trust.

22 I shall not recite details of the "preliminary draft", but say only that the precedent deed produced has these expectable provisions:

(a) a Fund is established on execution of the deed by a payment of money by an Original Unit Holder to be invested by the trustee in an array authorised investments;

(b) persons become registered as unitholders , and the trust fund is held on trust for the unit holders (clause 4(1));

(b) no unit holder can get a transfer of the Fund investments unless permitted by the deed (clause 4.2);

(c) the unit holders are beneficially entitled to the trust fund in proportion to the units held (as shown in a register and in certificates) and no unit holder is entitled to any individual investment forming part of the fund or a transfer of any property comprised in the fund (clause 8);

(d) there may be an annual distribution of income (clause 17);

(e) units may be redeemed by the trustee who can sell assets to pay the unit value or if requested, by transferring in specie investments of the Fund to the unit holder (clause 9);

(f) the unit holders can terminate the trust by passing a special resolution (clause 10);

(g) upon termination of the trust, and subject to any directions of the unit holders, the trustee sells the investments and makes a distribution to the unit holders ( clause 11);

(h) the proper law of the deed is Victoria (clause 2); and

(i) the trustee can delegate trustee powers and execute a power of attorney for that purpose (clause 23).

23 Mr Tomyn does not in his first affidavit say that document became the completed and executed trust deed. Curiously, he says "a Deed of Fixed Trust" was prepared by him with the assistance of Mr John Halat, a solicitor and accountant, and was executed by Fielden Petroleum in July or August of 1986. By appellation at least, I understand that to mean something different to the unit trust in the form produced, but in any case I do not see the unit trust precedent deed as being a fixed trust, as it has wide powers of investment. Mr Tomyn asserts that "Fielden Petroleum thereby undertook to hold the St Georges property as Trustee for the Dobrotwirs ... ". The deed (of fixed trust) and its counterparts, he says, was stamped with State duty and he believes they were stored in his office safe on the fifth floor, 414 Lonsdale Street.

24 John Halat died on 9 September 1992. Mr Tomyn took over his practice. The documents and files from that practice were delivered to him. In 1993 he had a substantial clearing out of his old files and deeds together with Halat's files. He says that reduced the contents of his documents kept for safe keeping and the files of Halat were destroyed. He says he has conducted exhaustive searches and that the trust deed and its counterparts are missing. He believes those documents were lost, I suppose inadvertently put aside and destroyed, at the time he was clearing out what he thought were old or useless files and deeds in 1993. Yet I cannot see how this could have been regarded as an old or useless file.

25 Mr Tomyn then says Mr Dobrotwir discovered in June 2006 that Fielden was "annulled" on 1 February 1994. This is said to have occurred because the Dobrotwirs had not paid annual fees to the Liberian authorities. Mr Tomyn's first affidavit [7] then makes the following assertion:

By operation of law, I submit, Nicholas Dobrotwir became Trustee of the Trusts of the Deed when Fielden Petroleum went out of existence. Nicholas Dobrotwir is now Trustee and has served as Trustee of the Trusts of the Deed since the deregistration of Fielden Petroleum.

26 I do not see the legal basis for such a submission. There are no facts to demonstrate how or in what recognisable way the first plaintiff has served as trustee since the company annulment. This was not pursued by counsel and I can only think it is based on a misconception from the law of constructive trusts where a stranger purporting to act as trustee may incur liability as trustee de son tort.

27 That was the initial evidence. It suffices to say that the Court was not willing to act on that state of evidence, but it allowed an adjournment to enable more and better evidence to be adduced including making enquiries of the ANZ Bank as lender and mortgagee.

28 In addition what had been overlooked was the important question about the effect of the company's annulment. Under the Corporations Act an Australian registered company not only ceases to exist on deregistration but all property held by that company on trust before deregistration vests in the Commonwealth[8] which can either continue to act as trustee or apply to the Court for the appointment of a new trustee.[9] But Australian law is immaterial. The plaintiffs chose to buy an interest in and through a foreign corporation. Under choice of law rules in private international law, this Court proceeds on the legal principle that a company's capacity, powers, functions, constitution, internal affairs and registration are all governed by the law of the place of incorporation: see Nygh's Conflict of Laws in Australia and Sykes & Pryles, Australian Private International Law.[10] That must include the law that governs the consequences of deregistration. This is simply not a situation where the foreign law is presumed to be the same as the lex fori: see the extensive survey of cases in Damberg v Damberg.[11] That is because the law of incorporation is of a localised or regulatory character to which this Court must give full faith and credit. What does Liberian law say about the fate of the trust estate on deregistration if, as is said, the company held the land as trustee? The content of the Liberian corporations law has not been proved and the Court cannot act without it.

29 In a subsequent affidavit of Mr Tomyn sworn 23 June 2011, he says Fielden was incorporated as the plaintiffs' trustee vehicle. He re-reasserts that the Toorak property was purchased by Fielden in its capacity as a trustee for the plaintiffs. But there are no facts to support this at all, and, his statement does not appear to be a matter of personal knowledge because he says this (with my emphasis):

1. ...However I received no formal trust documents setting out Fielden's role. Subsequent to the purchase I advised the plaintiffs that Fielden's role as a Trustee ought to be formalised by the way of a Trust Deed in accordance with Australian law.
2. Between 1984 and 1987 I had several telephone conversations with Mr Mungo Connor, a Director of Fielden, who confirmed to me that Fielden was established as a Trustee company for the Plaintiffs and that the Plaintiffs were the sole beneficiaries of the Trust of which Fielden was the Trustee and that Fielden had no other activity.

30 This is unclear. Mr Connor has not sworn an affidavit. What is the trust institution of which Mr Connor speaks? When and how was it constituted? An acquisition by a company which has a power, amongst many other powers, to act as trustee does not therefore mean the interest in the Toorak property was held on trust at least not expressly. Bearing in mind Fielden bought the half interest in June 1986, doing my best to reconcile the two affidavits, perhaps Mr Tomyn is saying that the land was not bought on trust expressly but subsequently (in or after 1987) the advice was to make a trust deed in accordance with Australian law because it involved Australian land.

31 In his first affidavit Mr Tomyn said he had prepared a trust deed with Halat and had it stamped. In his second affidavit, Mr Tomyn returns to the unit trust document previously described as a preliminary draft. He has modified his evidence to say something that I would have expected to have been said the first time around. He says ("I say") that a deed in that form was completed "with the same terms and conditions", without alteration, and it was a "fixed unit trust". He says Fielden was appointed the original trustee. He says that the plaintiffs each held one of the two issued units in the trust but the certificates for the units cannot be located. He goes on to say (again, I would have expected to have been said the first time around) it was intended to appoint the first plaintiff as trustee of the trust; documents were prepared; and he believes they may have been executed but he has been unable to locate such documents. He says it was on that basis that he had previously asserted that Mr Dobrotwir had become trustee by operation of law. But this is still not clear. He seems to be saying Mr Dobrotwir was actually appointed as trustee. Mr Dobrotwir does not say such a thing.

32 Mr Tomyn confirms that he has written to the ANZ Bank as mortgagee of the land, enquiring whether it held a copy of the trust deed. A letter from the bank dated 18 May 2011 states it cannot locate any such document. Before then, on 12 April 2011, the bank had been served with the legal process in this proceeding and had given their consent to the application to have the first plaintiff appointed as trustee of the Dobrotwir Trust.

33 It is clear enough that both the first plaintiff and Mr Tomyn are closely connected with the affairs of Fielden, as they had to be for its landowning purposes in Victoria. I have no evidence from its ex-directors but there is a general power of attorney made on 23 October 1987 under the law of Victoria in which Fielden appointed the first plaintiff and Mr Tomyn jointly and severally as its attorneys with authority to do anything that it may lawfully authorise its attorneys to do. Before then, a similar Power of Attorney dated 9 July 1984 was given by the company to both of them in a form which shows itself to be general in form and as having been executed in the Channel Islands.

34 I had no submissions on this but it strikes me as strange that a corporation can in effect abdicate its responsibilities in this way. Of course a company can act by an agent but under s 107(2) of the current Instruments Act of Victoria a general power of attorney cannot operate to delegate to the attorney any trusts, powers or discretion vested in the donor as donor. The only source of power could be clause 23 of the preliminary draft deed of unit trust. This evidence may be doing no more than trying to show that Fielden was real, had real operatives, and was concerned with nothing more than the Dobrotwirs interests in the Toorak property. Consistently with that, there is in evidence a notice given to the State Revenue Office by both the plaintiffs on 27 June 2006 that Fielden Petroleum Development Inc was the trustee of the Dobrotwir Trust and for the purposes of the Land Tax Act 2005, the plaintiffs held a beneficial interest. That is significant. But it tells us no more about the "Dobrotwir Trust."

35 Finally Mr Tomyn exhibits correspondence with the Volaw Trust Company which says that organisation has destroyed all documents concerning Fielden since its deregistration in 1994.

36 The first question is an evidentiary one. I cast no aspersions, but I am bound to say it is very strange that a trust is said to have been established by design, to suit Australian law, with a foreign corporation as trustee for half ownership of land and for there to not be a remnant of the documentation created to establish the trust. It is also strange that that the trustee company was allowed to become "annulled" in 1994 and nothing done since then to reinstate it.

37 Cross on Evidence reminds that the brands on a sheep could be described to the jury without the sheep being brought to Court.[12] But if the Court is to accede to a request to appoint a new trustee to what has been called "the Dobrotwir Trust" the Court and the new trustee must know the identity and the terms of the trust. If the beneficiaries of a trust are to terminate the trust, and if a vesting order is to be made, the trust has to be properly identified. The original document rule at common law is abolished under s 51 of the Evidence Act, and the Court can act on secondary evidence under s 48(4). But the most the Court has here is Mr Tomyn's recollection or supposition without anything at all to support it, and even then there seems to be confusion about it being a fixed trust. It could be Mr Tomyn is looking to say and emphasise this was not a discretionary trust.

38 Courts confront these evidentiary problems in the field of probate in applications to propound a lost will: see for example Di Gregorio v Di Gregorio.[13] Proof of the contents of a lost will can take place by oral evidence and that may be received from a single witness, even if interested, assuming there is no basis to impeach the veracity or credibility of the witness. But there has to be clear and convincing proof, on the balance of probabilities: see Cahill v Rhodes.[14] On that standard, I can accept that somewhere along the way, but after the purchase in June 1986, an intention was formed to "formalise" things by having a trust. I can also accept that the Dobrotwirs were the only beneficiaries or objects and no one else stands to lose if the Court overlooks the evidentiary problems. And true it is, the exercise of the Court's power under s 51(2) especially where the original trustee has been dissolved is approached by the Court with the principles of practicality, flexibility and expediency in mind and the courts have to take a pragmatic approach: see Bloomingdale Holdings Pty Ltd v 87 Stevedore Pty Ltd.[15] In most cases, the dominant considerations are the preservation of the trust property and the welfare of the beneficiaries because the principal duty of the Court is to ensure that the trusts are being properly executed: see Deutsh v Deutsh.[16]

39 But where, as here, there is no intention for the first plaintiff to continue on with the administration of the trust, but to be appointed with the view to immediately bringing it to an end, I do not see it as quite the right case to appoint a new trustee or to terminate a trust as matter of expediency where I cannot be satisfied about the creation and moreover terms of the trust. And there is the added complication of a foreign corporation. The powers of attorney only go so far. I truly mean no disservice to a legal practitioner whose client has obtained a predicament, but the evidence causes this Court much apprehension. On the current state of the evidence I cannot be satisfied about the creation of the so called Dobrotwir Trust.

40 In any event I would not be willing to take any step without evidence of Liberian law. There is no contradictor, and the Court is being asked to divest. As things stand I do not know in whom the trust estate has vested under the law of Liberia. If it is a Liberian authority or the Republic itself, thought would then have to be given to what appropriate action is to be taken. If the property is vested in the Republic, should it be joined? Is the unavoidable or better course to reregister Fielden? In that case the company will regain the alleged trusteeship; it will be separately represented and by its directors can consider the company's position as trustee. If the trust can be proved by evidence than presently exists, it will be a matter for the trustee and beneficiaries acting under the trust to take whatever steps or conduct whatever meetings are necessary under the trust to change the trustee, or terminate the trust or redeem the units and call for an in specie distribution.

41 As I would emphasize, the Court cannot act as advisor. It is entirely now a matter for the plaintiffs. I realise this will involve legal steps and labours. But that is the unavoidable consequence of the plaintiffs having chosen to use a Liberian corporation to purchase an interest in the land, using a foreign corporation as the trustee of their interests, and allowing it to be deregistered, and having abstained from re-registering the company. The Court is being asked to put all that to one side, assume no harm will be done, make allowances for the evidentiary problems and simply vest the trust estate land in the plaintiffs. I do not think this Court's inherent and statutory jurisdiction for the administration of trusts should be available in such circumstances. What the Court is willing to do is to give the plaintiffs another opportunity to adduce further evidence in the light of this interlocutory judgment.

42 Finally, given the course of this application it is appropriate to say something about the principles concerning the extinguishment of a trust as a right of a beneficiary: see generally Jacobs Law of Trusts in Australia.[17] This is something else the plaintiffs will have to consider again. As stated by McLean, Trusts and Powers:[18]

It is a long-standing principle of the law of trusts that where a sole beneficiary's interest is vested (and the beneficiary is sui juris) then that beneficiary may put an end to the trust by directing the trustees to transfer the trust property concerned to her or him absolutely or by way of settlement of it on further trusts or otherwise at the beneficiary's direction. This is known as the rule in Saunders v Vautier [(1841) [1841] EngR 629; 4 Beav. 115; 41 ER 482] and it is of importance for trust powers and discretionary trusts generally.

43 The rule was the subject of the High Court's decision in CPT Custodian v Commissioner of State Revenue,[19] a case that was not examined in argument. In that case, this was stated to be the modern formulation of the rule:

Under the rule in Saunders v Vautier, an adult beneficiary (or a number of adult beneficiaries acting together) who has (or between them have) an absolute, vested and indefeasible interest in the capital and income of property may at any time require the transfer of the property to him (or them) and may terminate any accumulation.[20]

44 The CPT Custodians is important because it specifically concerned a unit trust. The Court denied the application of the rule in the unit trust in question. The case involved the Land Tax Act 1958 (Vic) which imposes a tax on the value of land of which a tax payer was "the owner". The Act defines an "owner" to be amongst other things "every person entitled to any land for any estate or freehold in possession". Land tax assessments were made by the Commissioner on the footing that the unit holders were the owners of equitable estates of freehold in possession in the lands held by the trustees of unit trusts.

45 The High Court held that the units in the trust did not confer an estate of freehold in possession in any land held for the unit holders, hence no unit holder was assessable as the "owner" within the meaning of the statute. More pertinently for present purposes, the Court held that the unit holders, whether or not sole unit holders, did not have an absolute, vested and indefeasible interest in the capital and income of the trust property, and hence were not entitled to require the transfer of the property to them under the rule in Sanders v Vautier.

46 At first instance and in the Court of Appeal, both courts proceeded on the basis that the holder of a unit in a unit trust has a proprietary interest in each of the assets which comprise the entirely of the trust fund. But, so the High Court proceeded, that did not assist in construing the definition of "owner" in the Land Tax Act, which looks to an entitlement to any land for any estate of freehold in possession. In that context, it might be thought this case was not directly applicable and has to be seen in a peculiar statutory (taxation) context.

47 The Commissioner in CPT Custodians made three submissions. First, the trust deeds conferred upon each unit holder fixed and ascertainable rights in relation to the distribution and income which did not depend upon the exercise of discretion. Therefore the trust deeds conferred upon the unit holder in equitable estate in each asset comprising the trust funds. Secondly, no other person had any such rights or interest. Thirdly, (and this seems to be the controversy in the case) those equitable estates answered the statutory requirement in the definition of "owner". These first two arguments were said to be the hallmark of any unit trust. The conclusion in the intermediate courts was that an estate in possession necessarily denotes an estate of which some person has a present right of enjoyment. Thus, the holders of the unit trust could not be regarded as being entitled to "an estate of freehold and possession" and therefore were not owners.

48 The Court regarded Saunders v Vautier as being a case which has given its name to a rule although such a rule was not explicitly formulated in the case itself. The rule was seen to embody a "consent principle":

The principle recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor to subject property to the continuing trusts, powers and limitations of a will or trust instrument.[21]

49 The Court regarded this as a power within the beneficiaries rather than as a right. But the Court held that on the facts of that case at least they did not answer the rule in Saunders v Vautier. The rule only applies if the beneficiaries were entitled to wind up the trust and require the trustee to assign to them the subject matter of the trust. As I understand the case, if it is the case that the unit holders are not the only people in whose favour alone the trust property might be applied, then the rule has no application, and a Court will refuse to make vesting orders. In CPT Custodians an unsatisfied liability to the trustee to meet a right of indemnity or exoneration meant there were others apart from the beneficiaries in whose favour the trust property might be applied. The principle is that if a trustee incurs liabilities in the performance of a trust, then that is a first charge on the trust property and a Court of equity will never take trust property out of his hands without legal protection: see Octavo Investments v Knight,[22] and the authorities discussed in Hayman v Equity Trustees.[23] Presumably, if that is satisfied, then the rule applies.

50 I say no more about CPT Custodians. It may be that the case will be seen as very much confined to conceptions of ownerships and rights of unit trusts all in the context of the operation of statutory criteria, and the terms of the unit trusts in question in that case. But I mention it now, for the reactivation of this application of this case will likely require submissions on the question.

(1) The Court's adjudication of this application be suspended until further order or application.

(2) The plaintiffs be allowed to re-open the application by adducing such further affidavit evidence as they desire, and be allowed to make further submissions on the application on a date to be fixed.

(3) The plaintiffs have liberty to apply for any other procedural directions.

[1] Therefore, the trial of the application is justiciable before an Associate Justice under r 77.01(2)(f).

[2] 49 ER 482.

[3] [2005] HCA 53; (2005) 224 CLR 98 at [41] ff.

[4] (LexisNexis, 8th ed) at [35.40] - [35.41]

[8] See s 601AD of the Corporations Act.

[10] Part VII and Chapter 9 respectively.

[11] [2001] NSWCA 87; (2001) 52 NSWLR 492 at 505ff.

[12] Heydon, Cross on Evidence (7th ed) at 1300

[13] [2007] VSC 156 at [14].

[14] [2002] NSWSC 561 at [53] to [59].

[15] [2010] VSC 268.

[16] [2011] VSC 345.

[19] [2005] HCA 53; (2005) 224 CLR 98 at [41] ff.

[21] At [43], quoting Goulding v James (1997) 2 All ER 239 at 247.

[22] [1979] HCA 61; (1979) 144 CLR 360 at 369-70.

[23] [2003] VSC 353.