whiggs – Page 2 – Legal & Tech Blog

05/04/2018

Beneficiary actions – ‘Special Circumstances’

Source: Colin R Price & Associates Pty Ltd v Four Oaks Pty Ltd [2017] FCAFC 75

Where “special circumstances” exist, a beneficiary under a trust such as Grovan may bring proceedings that ordinarily should be brought by the trustee in his, her or its own right against a third party or other beneficiary on any cause of action, legal equitable or statutory, that the trustee has against that defendant. The beneficiary must join the trustee and the third party as defendants if such special circumstances exist: TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 (TAL) at [54] (Leeming JA with whom Beazley P and Emmett AJA agreed); Lidden v Composite Buyers Ltd (1996) 67 FCR 560 (Lidden) at 563-564 (Finn J); Ramage v Waclaw (1988) 12 NSWLR 84 (Ramage) at 91-93 (Powell J); Sharpe v San Paulo Railway Co (1873) LR 8 Ch App 597 at 609-610 (James LJ). See too: Heydon JD and Leeming MJ, Jacobs’Law of Trusts in Australia (7^th ed, Butterworths, 2006) at [2303].
In Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109; [2004] HCA 7 (Alexander) at [55]-[56] Gleeson CJ, Gummow and Hayne JJ (and see also Callinan J at [163]-[164] with whom McHugh J agreed at [67]) said that one reason for the restriction – to where there are “specialcircumstances” of a beneficiary’s right to sue a third party directly on a cause of action that ought to be properly brought by a trustee – was to avoid the vexation of the third party by multiple suits. Their Honours approved what Powell J said in Ramage at 91-92, that the “special circumstances” were not confined to collusion between the trustee and the third party or the insolvency of the trustee. Their Honours went on to say that the general principle was to be found in the following passage from Scott on Trusts (4^th ed, 1989) Vol 4 at [282]:

The interests of the beneficiaries of a trust are protected against a third person acting adversely to the trustee through proceedings brought against him by the trustee and not by the beneficiaries. As long as the trustee is ready and willing to take the proper proceedings against the third person, the beneficiaries cannot maintain a suit against him.
In Alexander, Gleeson CJ, Gummow and Hayne JJ (at [56]) and Callinan J (at [163]) referred, with apparent approval, (as did Leeming JA in TAL at [54]) to the advice of the Privy Council given by Lord Templeman in Hayim v Citibank NA [1987] AC 730 at 748, namely:

[The] authorities demonstrate that a beneficiary has no cause of action against a third party save in special circumstances which embrace a failure, excusable or inexcusable, by the trustee in the performance of the duty owned by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate.

(Emphasis added.)
In Lidden (at 563-564) Finn J explained that the requirement for “special circumstances” should not be limited to claims that a trustee has against the third party for equitable relief, and that such action could also be brought by a beneficiary in respect of claims at common law or under statute. His Honour said:

…it is not at all apparent to me why, today, we should insist on a multiplicity of suits – as the older equity rule, unmodified, would require – for the purpose of resolving a matter which gives rise to claims for other, as well as equitable, relief: cf Federal Court of Australia Act 1976 (Cth), s 22.

The distinction between claims for equitable and for other relief has not commended itself to United States courts or text writers. Likewise it seems to have been ignored in observations made in Privy Council cases. So, for example, it is said in Scott and Fratcher, The Law of Trusts (4th ed), Vol 4, par 282.1:

“If the trustee improperly refuses to bring an action against a third person who commits a tort with respect to the trust property, the beneficiaries can maintain a suit in equity against the trustee to compel him to do his duty and to bring the proper action against the third person. In the earlier law this was all that the beneficiaries could do. It was later held, however, that the whole controversy can be settled in a single suit, and in order to avoid multiplicity of suits the beneficiaries were permitted to join the third person as a co-defendant with the trustee, thus avoiding the necessity of two suits, one in equity by the beneficiaries against the trustee and another at law by the trustee against the third person. In such a proceeding the trustee is a necessary party defendant if he can be subjected to the jurisdiction of the court.”

To illustrate this approach, this time in a contractual setting, the authors refer to observations of Lord Wright in the Privy Council in Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70 at 79:

“a party to a contract can constitute himself a trustee for a third party of a right under the contract and thus confer such rights enforceable in equity on the third party. The trustee then can take steps to enforce performance to the beneficiary by the other contracting party as in the case of other equitable rights. The action should be in the name of the trustee; if, however, he refuses to sue, the beneficiary can sue, joining the trustee as a defendant.”

I should add that to like effect in my view are the comments of the Privy Council in Hayim v Citibank NA [1987] AC 730 at 748, though the relief there sought was equitable. See also G G Bogert, G T Bogert and W K Stevens, The Law of Trusts and Trustees (Revised 2nd ed, 1977), par 869 where the subject is considered at length.

In the absence of any compelling reason in a Judicature Act system to limit the right of a beneficiary to claim equitable relief alone, in light of the approach taken in the authorities I have referred to, and given the undesirability of adhering to an approach which promotes multiplicity of suits, I am prepared to hold that, provided the other – the “exceptional” or “special” circumstances – requirement of the rule is met, it is not necessary in a Judicature Act system that the relief be equitable or equitable alone that is sought by the beneficiary instituting proceedings for a trust.

05/04/2018

Joint Obligations

A joint promise by two or more persons creates a single obligation upon both or all. The theory of a joint and several promise is that it creates both a joint obligation incumbent upon all and a number of several obligations respectively incumbent upon each one; but the several obligations are non cumulative, so that (as with purely joint obligations) performance by any one will discharge all. The presumption is that a contract made by two or more persons is joint, express words being necessary to make it joint and several: Glanville Williams, Joint Obligations (1949), Butterworths at 24; see too Re Hodgson (1885) 31 Ch D 177 at 188.

The fact that an obligation is joint does not mean that a joint obligor is only partly liable for the amount of the obligation.

A successful plaintiff is entitled to enter judgment for the full amount of its proven claim but is not entitled to double recovery. Payments effect a reduction in the amount of the liability of each defendant.

Junker v Hepburn [2010] NSWSC 88 [52]-[54]

04/04/2018

Actual and Ostensible authority

See the principles in relation to actual and ostensible authority in Junker v Hepburn [2010] NSWSC 88 (Junker) at [39]-[48] (Hammerschlag J)

Agency

39 The authority of an agent may be:

actual (either express or implied) where it results from a manifestation of consent that the agent should represent or act for the principal expressly or impliedly made by the principal to himself; or
apparent, where it results from such a manifestation made by the principal to third parties: Bowstead and Reynolds on Agency, 17th ed (2001) Sweet & Maxwell at Ch 3, Art 22.

40 The rules concerning actual and apparent authority apply where the principal is a company. They are supplemented by provisions of the Act where companies are concerned. The usual starting point in any consideration of a director’s actual authority is the constitution of the company, which invariably provides for directors’ powers. Express actual authority of a director usually derives from the constitution of the company or from some antecedent act such as a resolution of the board of directors: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 205; Perkins v National Australia Bank Ltd (1999) 30 ACSR 256 at 262.
41 Implied actual authority is the authority which the law regards as having been given to an agent because of the interpretation put by the law on the relationship and dealings of the two parties: Bowstead and Reynolds on Agency, 17th ed (2001) Sweet & Maxwell par 3-003. The Court’s inquiry concerns the intention of the principal in conferring authority on the agent: Gino Evan Dal Pont, Law of Agency, 2nd ed (2008) LexisNexis Butterworths par 8.1.
42 Ordinarily, where a company has more than one director, a single director does not have authority to bind it. A director’s normal power is to bind the company only by joining with other directors in a collective resolution of the board of directors: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 198, 205.
43 An implied grant of actual authority can result from acquiescence in the course of behaviour by persons who have actual authority to delegate. For example, if directors as a board stand by whilst a single director enters into transactions outside his or her authority, the board’s acquiescence in that course of dealing can constitute the grant, by implication, of actual authority to enter into those transactions.
44 In Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 134, Clarke JA and Cripps JA said in relation to implied actual authority:

A recent example of the application of the principle in Australia is to be found in Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279, where (at 360-361) the Appeal Division of the Supreme Court of Victoria applied Hely-Hutchinson v Brayhead Ltd . In the joint judgment there was a finding of implied actual authority in relation to one Goldberg to manage the business and to hold out a person as secretary who was in fact not the secretary. The facts and circumstances there relied upon to justify such a finding included the following: Goldberg had actual control over the group of companies and invariably asserted control over each of the companies in the group; Goldberg was known as the alter ego of group companies; Goldberg made decisions for the group companies; there was no evidence that he found it necessary to refer to any board to seek approval for the course of action he proposed; the boards in question had never previously attempted to interfere with his action; Goldberg had obtained board approval of transactions to which he had already committed Brick and Pipe without first seeking authorisation from the board; and that individual directors in evidence confirmed the acquiescence of board members in the activity of Goldberg which culminated in completed transactions for which the board gave no prior approval. One final and, perhaps, decisive element in the scope of the authority the court was prepared to find vested in Goldberg, was that: “… in most, if not all, cases, the transactions committed assets of Brick and Pipe or its subsidiaries as security for borrowings by other Goldberg companies”.

Whether authority is to be implied and, if so, the scope of the authority implied is, in our view, to be found in a close analysis of the evidence before the court which is relied upon to support the implication of actual authority.

45 The authors of Company Directors: Principles of Law and Corporate Governance (2005), LexisNexis Butterworths at par 3.41, citing Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 opine that to confer implied actual authority there would have to be not only the acquiescence of the individual board members but evidence of communication by word or conduct of their respective consents to one another and to the agent.
46 Apparent or ostensible authority is conferred where a principal represents that another has authority. The principal will be bound as against a third party by the acts of that other person within the authority which that person appears to have, though the principal had not in fact given that person such authority or had limited the authority by instructions not made known to the third party: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 466; Bowstead and Reynolds on Agency, 17th ed (2001) Sweet & Maxwell par 3-005.
47 Ostensible authority often coincides with, but sometimes exceeds, actual authority. For instance, when a board appoints a managing director, they may expressly limit his authority, but his ostensible authority will include all the usual authority of a managing director. The company is bound by his ostensible authority in his dealings with those who do not know of the limitation: Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 at 583 per Lord Denning M.R.
48 An ordinary individual director of a company does not have ostensible authority to bind it. Directors can act only collectively as a board and the function of an individual director is to participate in decisions of the board. In the absence of some representation made by the company, a director has no ostensible authority to bind it: Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 205.

06/12/2017

Time to tart-up one’s Pleadings?

Is this the new normal when pleading claims under the MACA/Civil Liability Act?

From Fairall v Hobbs [2017] NSWCA 82; 347 ALR 151

A fundamental problem in the way the respondent (the plaintiff below) and the primary judge approached the issue of the existence and scope of the duty of care in this case is that each failed to address the requirements of s 5B of the Civil Liability Act which applied to the MACA in this case: s 3B(2) Civil Liability Act.
In Adeels Palace Pty Ltd v Moubarak (2009) 239 CLR 420; [2009] HCA 48 at [11] it was emphasised by the plurality that it was of the “first importance” to identify the proper starting point, which, both in that appeal and here, was the Civil Liability Act, without which there was a “serious risk that the inquiries about duty, breach and causation will miscarry”.
As Meagher JA said in Garzo v Liverpool / Campbelltown Christian School. [2012] NSWCA 151 at [22]:

“To address the questions and considerations in s 5B, it is necessary to formulate a plaintiff’s claim in a way which takes account of the precautions which it is alleged should have been taken and identifies the risk or risks of harm which the plaintiff alleges eventuated and to which those precautions should have been directed.”

What was required in this case was that the primary judge should clearly identify the risk (or risks) of harm in respect of which the second defendant below was obliged to take precautions. It is against that risk of harm that the court would then have been in a position to determine the second defendant’s knowledge of a specified risk of harm, to assess the probability of that risk occurring, and to evaluate the reasonableness of the second defendant’s response, or lack of response, to that risk: see RTA v Dederer (2007) 234 CLR 330; [2007] HCA 42 at [59]-[61] per Gummow J.
The need to identify the “risk of harm”, and to satisfy each of the requirements in s 5B, has been emphasised in numerous subsequent cases in this Court: Shoalhaven City Council v Pender [2013] NSWCA 210 at [55]-[72] and [83] ff; Reid v Commercial Club (Albury) Ltd [2014] NSWCA 98 at [139]-[160]; and Uniting Church in Australia Property Trust (NSW) v Miller; Miller v Lithgow City Council(2015) 91 NSWLR 752; [2015] NSWCA 320 at [100]-[129].
The failure by the primary judge to identify the relevant risk of harm means grounds 9-11 of the notice of appeal should succeed. The failure to identify the risk (or risks of harm) left the court below in no position to determine the second appellant’s knowledge of a specified risk of harm, to assess the probability of that risk occurring, and to evaluate the reasonableness of the second appellant’s response, or lack of response, to that risk or those risks. The steps taken or not taken by the second appellant relating to the speed and proximity of the vehicle to the respondent and his horse could not be tested in this case, as they must, against a properly identified risk of harm. It was of no assistance to reason that the second appellant failed in her duty by moving her car two or three metres from the kerb, as that was “insufficient”. It is relevant to observe “insufficient” when compared to what standard? The primary judge’s reasoning, by omitting a properly identified risk of harm against which to test the second appellant’s conduct, begs the question relevant question.
It was also no answer to the failure properly to identify the duty of care and the relevant risk of harm to point to evidence of the second appellant “seeking to exculpate herself” or evidence said to constitute an admission by the second appellant that to drive past a horse safely she should drop her speed to somewhere below the speed limit. At best that evidence could have gone to the question of the second appellant’s knowledge of a specified risk of harm. Having failed to identify any risk of harm, as his Honour was required to do, the primary judge fell into error.

22/05/2017

WSLSA International Humanitarian Law Moot Competition

Honored to be invited by the Western Sydney Law Students’ Association (WSLSA) to judge the final of the WSLSA International Humanitarian Law Moot Competition on Saturday 20 May 2017 at the Supreme Court of New South Wales. The winner will represent Western Sydney University, and the WSLSA, at the Australian Law Students’ Association Conference to be held in Canberra in July 2017.
Capture

22/05/2017

Contract law series – seminar 13 – illegality and remedies

Seminar 13 in the Contract Law Series – illegality and remedies

This is a presentation to unversity-level students in Contract Law by Dr William Higgs, Barrister-at-law, Elizabeth Street Chambers, Sydney, Australia.