Westfield QLD No. 1 Pty Limited & Anor v Lend Lease Real Estate Investments Limited & Ors

Westfield QLD No. 1 Pty Limited & Anor v Lend Lease Real Estate Investments Limited & Ors - [2008] NSWSC 516 - NSWSC 2008 case summary — Zoe

[122]

The Trustee's manifest purpose in making the application, consistently with the purposes for which the Trading Trust was formed, is to conduct the stationery and office supply business, effectively as a co-operative business, for the benefit of the "members" of the "co-operative", who will retain that commercial status after they are transformed from unitholders to shareholders. This is not a case where the sole or principal purpose of the application is to alter beneficial interests or in any way subvert the beneficial dispositions in the trust instrument. It is therefore a proper case for the making of an order under s 81 giving the Trustee the power to implement the transaction. 62 Hence the Court found it necessary to affect a 'fundamental reorganisation of the trust' in order to better achieve its objectives. This is quite different to what is being sought here, which is an order which would bring the trust to an end and permanently dissolve the relationships between the parties. 63 As is apparent from the observations made by the learned authors of Jacobs' Law of Trusts in Australia [7th edition by J D Hayden and M J Leeming at 1706], the statutory jurisdiction is far more expansive than the court's inherent jurisdiction, the prescribed test being one of expediency resulting in orders being made approving a wide variety of transactions. As the authors point out, usually the court is not inclined to confer on trustees generally, rather than in a particular instance, the power to carry out some purpose otherwise in breach of trust, although there is jurisdiction under the section to do so, and this jurisdiction will be exercised in a proper case. The authors also emphasise that the provision does not authorise the court to do that which would alter the substantive nature of the trust or determine the trust; nor can it be used as a substitute for an application to apply the property cy-pres. 64 Clearly enough the jurisdiction of the Court under s 81 depends upon there being an absence of power in the instrument, if any, creating the trust. Here, the Trust Deed contains specific provisions giving the Trustee power to wind-up the Trust. It also contains provisions permitting the sale of the Shopping Centre and any other trust property. As the defendants contend, in reality the plaintiffs are seeking to alter those provisions of the Trust to effect the sale of the Shopping Centre, and subsequent winding up of the Trust, in circumstances wholly contrary to the provisions of the Trust Deed and in circumstances sans a benefit to the whole of the trust.

[123]

65 Even if s 81 permitted the Court to authorize the winding up of the Trust, the jurisdiction is discretionary. As the defendant has contended, it would be an inappropriate exercise of the Court's discretion to amend the powers of the Trustee to wind up the Trust where the first plaintiff voluntarily acquired its units knowing of the provisions of the Trust Deed and where it is free to dispose of its units on the same basis upon which it acquired them. 66 Even given the widest ambit of the Court's jurisdiction under section 81 to confer additional power, it would not be expedient, at least in the present state of the position which obtains between these parties, to order such a winding up to take place: to do so would amount to achieving a fundamental alteration to the trust, that is to say, to in effect, furnish the Trustee with power to do something which it otherwise would not have been permitted to do. 67 The power sought by the plaintiffs is simply, in the current circumstances, not one which could be said to be expedient in the sense referred to in Ku-Ring-Gai Municipal Council v The Attorney-General (supra). 68 There is nothing in the inherent powers of the Court which further assists the Westfield contentions. Whether the Court should exercise its discretion to make orders in the instant circumstances 69 Ultimately, even if the Court had jurisdiction to grant the relief sought by the plaintiff, this is not an appropriate case for the exercise of the Court's discretion. 70 This conclusion is based on a number of considerations, including: i. The fact that the 'dead-lock' suggested by the plaintiff has not yet, and may not ever, come to pass. ii. The fact that, should such a dead-lock exist, there are mechanisms under the trust by which it may be resolved without the intervention of the Court. iii. The likely detriment to the interests of the Unit Holders if the relief sought is granted. iv. The fact there is an alternative exit for the plaintiffs which does not require the drastic intervention of the Court. The alleged 'dead-lock' between the parties 71 The plaintiffs maintain that there is simply no question but that as at 30 June 2008 a deadlock will have occurred, as the management board of CCL will be unable to reach the consensus required to appoint a property manager. . However in my view and notwithstanding the past inability of the parties to reach an accord, that expectation may not come to pass. Both groups of parties are involved in a commercial endeavour and it is surprising what the pressure of an ultimatum can achieve at the last minute. Notwithstanding the evidence given by Mr Walsh and by Mr Miles as to their current expectations of the positions which they will take as at 30 June 2008 concerning the continuance of the current property manager, the overriding imperative for both the litigating groups will always sound in what they regard at the time as their commercial imperative [that is to say in terms of their best commercial interests]. Mechanisms for the resolution of such a dead lock pursuant to the Trust Deed 72 More importantly, even if the Court were to accept that such an impass is likely to result on 30 June 2008, the finding is that there are mechanisms available under the Trust Deed by which such a deadlock between the parties may be resolved. 73 The role of Perpetual and its powers as Trustee must be taken into account. Significantly, Perpetual has authority under the Trust Deed to require the Manager to retire from the management of the Trust in certain circumstances. These include [as set out above in clause 20.1]: i) where the Manager fails or neglects to carry out or satisfy or has contravened any obligation imposed on the Manager by this deed that in the reasonable opinion of the Trustee adversely affects the interests of Unit Holders and fails to remedy the contravention within such period as is specified by the trustee in a written notice to the manager (sub para (4)); or

[142]

"I think the documents demonstrate that our client recognizes that there is an obligation on it to perform its duties and that it needs to form an opinion as to what is happening the best interests of the unit holders before it takes any action. The evidence that has been given yesterday is something our client will take into account and that will inform it when it is trying to work out whether or not [inaudible] has been breached. I just don't want to leave your honour with the impression that our client is not going to do anything at all." 81 A little later he said that to the extent that the Court may need to rely on evidence, there were facsimiles from his firm to the plaintiffs and to the defendants which demonstrated to some extent that his client had issued various documents. He submitted that, as he understood it, those documents were part of an exhibit and that in his submission they demonstrated that his client was taking into account all the matters that had been raised by the parties in determining whether or not it had formed or would form an opinion that would require it to intervene in the dispute. 82 Ultimately, there is nothing to suggest that the Trustee is not and would not perform its obligations in the manner required under the Trust Deed. The fact that the Trustee has not yet formed the opinion or belief required by clause 20.1 does not established that it will inevitably fail to do so when appropriate. If and when a situation arises whereby it is necessary, in the interests of Unit Holders, for action to be taken in connection with the conduct of the Manager, the Court would assume that the Trustee would take such action. The detriment to the Unit Holders if relief is granted or withheld 83 Based on the conclusions drawn above, it appears that there is no great detriment likely to be suffered by the Unit Holders if the Court refuses to grant the relief sought by the plaintiff. This is because, even if a deadlock eventuates, there are mechanisms under the Trust Deed by which such conflicts may be resolved and through which the Centre may continue to be managed effectively. 84 No case has been pleaded or proved to the effect that the property manager put forward by the Westfield parties is objectively superior to LLPMA with the result that CCL has breached its duties by not appointing Westfield, nor that retention of LLPMA as manager of the Centre has caused and will cause detriment to the Trust. The disagreement as to the appointment of a property manager is one of judgment, involving a choice between two competent property managers. 85 On the other hand, it is clear that there will be detriment to Unit Holders if relief is granted. The relief will involve potentially depriving beneficiaries of their beneficial interests in a highly sought after asset, contrary to the terms of the Trust Deed. 86 Mr Gupta, fund manager of APPF, gave evidence that "if APPF Retail were forced to sell its interest in Cairns Central… it would be extremely difficult to find an alternative major regional retail shopping centre to invest in". He expressed the view that it would not be in the interests of APPF to be forced to sell its interest at the present time, as the funds obtained could only be used to retire debt or return capital to Unit Holders and these options were not in the commercial interest of the fund [or of its constituent Unit Holders]. The existence of an alternative exit for the Westfield parties 87 Finally, the principled exercise of the discretion is not to order the drastic remedy of winding up, when there is an alternative exit for Westfield No. 1. 88 Westfield No. 1 and Westfield No. 2 are entitled to sell their interests. There is an available market. APPF has offered to acquire Westfield No. 1's interests for $203.5 million, being half of the value of the Shopping Centre as determined by an independent valuation. Other elements put forward as part of the discretionary decision but not relied upon 89 It is unnecessary to deal with the defendant's contention that the Court should refuse to grant the drastic remedy sought in view of the following suggested matters:

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