Fischer & Ors v Nemeske Pty Ltd & Ors [2015] HCATrans 262 (16 October 2015)

Last Updated: 20 October 2015

[2015] HCATrans 262

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S38 of 2015

B e t w e e n -

ROBERT WILLIAM FISCHER

First Applicant

JOHN JULES FISCHER

Second Applicant

ANDREA JULIANA FISCHER MUSSER

Third Applicant

SYLVIA BETH FISCHER KRAMER

Fourth Applicant

and

NEMESKE PTY LTD

First Respondent

LORAND LOBLAY

Second Respondent

KAREN LOBLAY

Third Respondent

LAURA MUSSER SLOAT

Fourth Respondent

TOBIAS MUSSER

Fifth Respondent

EVE FISCHER GREGG

Sixth Respondent

SETH DAVID FISCHER

Seventh Respondent

TODD MUSSER

Eighth Respondent

KATHLEEN ELIZABETH FISCHER

Ninth Respondent

WILLIAM GEORGE MARCEL FISCHER

Tenth Respondent

CORINNE AYERS

Eleventh Respondent

AARON KRAMER

Twelfth Respondent

MARIANNE FISCHER

Thirteenth Respondent

Application for special leave to appeal

FRENCH CJ
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 16 OCTOBER 2015, AT 9.52 AM

Copyright in the High Court of Australia

____________________

MR N.C. HUTLEY, SC: If your Honours please, I appear with my learned friends, MR R.A. YEZERSKI and MR A.B. EDINGTON, for the applicant. (instructed by S. Moran & Co Solicitors)

MR C.J. BIRCH, SC: May it please the Court, I appear with my learned friend, MR B. DeBUSE, for the second and third respondents, the executors. (instructed by Curwoods Lawyers)

FRENCH CJ: I note there is a submitting appearance for the first and the fourth to the thirteenth respondents.

MR BIRCH: Yes.

FRENCH CJ: Yes, Mr Hutley.

MR HUTLEY: Thank you, your Honours. Your Honours, the trust was established by the deed, which your Honours will find at application book 233. Before that, might I hand up, with your Honours’ leave, a small bundle of authorities, parts of which I might take your Honours to?

FRENCH CJ: Yes, very well.

MR HUTLEY: Thank you, your Honours. Under clause 2 of that deed, at about line 35, together with Schedule 1(a)(i) and (d) at pages 245 to 246, the assets were held upon discretionary trusts. The powers of the trustee included a discretionary power to alter investments, which your Honours will see in clause 1, and to sell investments at clause 8 at 238. The power which formed the principal focus is clause 4(b), which your Honours will see at 235 at about line 34, being to:

At any time or times to advance or raise any part or parts of the whole of the capital or income of the Trust Funds and to pay or to apply the same –

The assets of the trust, as appears from application book 62, paragraph 8, consisted of 10 B class shares in a company known as Aladdin, which in turn held shares in various companies which in turn owned real property. Those shares were re-valued and that was recorded in the books of the account of the company as an asset revaluation reserve of some $3.9 million odd.

FRENCH CJ: There was a debate about the significance of that - - -

MR HUTLEY: Quite, your Honour, and the way that the Court of Appeal ultimately dealt with the matter was different to the way it was conducted, and that came out of their approach to the resolution which your Honours will find at paragraph 9 of the judgment on page 62 and – I will come back to that if I might. Just to complete the central factual matters, on 30 August, the trustees executed a mortgage and your Honours will see the relevant paragraphs at 14 and 15 on page 64 and 65 and particularly recital D.

FRENCH CJ: This was after the creation of the loan account?

MR HUTLEY: Yes, your Honour. This was after – the loan account was raised, as your Honour will see from paragraph 11, consequent upon the declaration of the 23rd.

FRENCH CJ: Yes.

BELL J: The loan account wrongly, at the time it was raised, characterised it as a secured loan - - -

MR HUTLEY: Quite.

BELL J: - - - and then we are coming to the mortgage that is referable to it. Is that right?

MR HUTLEY: Precisely, your Honour, and your Honours will see from clause 9, and this is adverted to by the court, I think at paragraph 56 of 76 and the way it was run at trial and on appeal, that what was the respondents’ case was that there was, in effect, a distribution of funds and a loan back - in effect, a round robin. The court set that aside and dealt with it on a different basis and that basis is what we seek to challenge. To return then, there was the mortgage and the mortgage that matters is, your Honours see, it recites the fact of a debt at D.

FRENCH CJ: The covenant in the mortgage became of some significance, did it not?

MR HUTLEY: Quite. Your Honours, the way the Court of Appeal dealt with it, they concluded that there was at all material times before the mortgage a debt because there was a common law action for money had and received. Then they said, well, that being the case, all this is doing is, in effect, promising to pay that which is promised; no problem arises. Effectively, that is what happened and then there was an issue about whether time had expired in relation to that - - -

FRENCH CJ: Subsequent acknowledgements, but that is not before us.

MR HUTLEY: That is not before your Honour. Your Honours are concerned with the two first questions, that is, the character of the resolution - did it engage clause 4(b) to advance and apply the corpus of the fund, whether income of the fund or otherwise; and, secondly, if it did, having regard to the fact that the asset with which it was concerned was shares which were not held upon a fixed trust - and the court did not find that there was a declaration of trust in respect of the shares and therefore the discretionary obligation still remained with respect to it - did the fact that there had been an admission of an obligation mean that the trust was no longer an active trust but was one which gave rise to a debt? With respect, we say the Court of Appeal was wrong on both questions and both questions are important questions because - - -

FRENCH CJ: I can understand the importance of the first because, in terms of your argument, you point to the statutory formula pay or apply, which appears in a number of trust acts around the country but what about the second?

MR HUTLEY: Your Honour, if it is correct that a trust company, for example, when it resolves to distribute money in respect of a trust where the assets for example have to be actively managed, such as real property of share assets, then becomes a common law debtor, if those assets decrease in value, because it is a common law debt the trustee will be liable to the full extent of its assets beyond the trust assets. Once it becomes a common law debt, the trustee, in effect, is fully liable to the extent of any of its assets. It also removes the possibility as here, where, for example, a long period goes by whereby the distribution does not take place - - -

FRENCH CJ: One can understand that might affect a decision a trustee would make as to whether it exposes itself to that - - -

MR HUTLEY: But, with respect, we would say a trustee has no power to convert an equitable obligation to a legal obligation for the very reason that it is apt to prejudice the other beneficiaries because it is taken from them - if there is a competition later on, for example, let it be assumed this was allowed to stand for years and the assets had gone enormously up in value and the trustee had failed to make a decision to realise the assets at that point and thereby be able to meet the obligation to the respondent and distribute to other beneficiaries, the trustee could be in breach of trust.

A defence to the competing actions by the respondents and the other beneficiaries might be you, the respondent, sat by and participated in this delay, so you acquiesced in my failure to distribute the assets and you should be deferred to the other beneficiaries.

In other words, as the cases - and I will take your Honours to them in a little while – say, the fundamental question about becoming a common law debtor is it removes all equitable defences of the trustee and equitable defences do not solely inure for the benefit of the trustee. They inure in a competition between beneficiaries because the trustee is obliged to raise them if they are for the benefit of other competing beneficiaries. We say that this - the second question goes to a fundamental issue as to when a trustee by the act of resolving to distribute, but not distributing, a fund ceases to act as a trustee and becomes a common law debtor.

BELL J: Going back to the construction of clause 4(b), the power conferred in the circumstances of this trust, you say could only be exercised by a transfer of some of the shares. Is that right?

MR HUTLEY: Or a declaration and creation of a fixed trust - - -

BELL J: Yes, all right.

MR HUTLEY: - - - because the cases, and your Honours, the leading case in relation to this, where it all starts, is in Re Baron Vestey’s Settlement - - -

BELL J: Yes.

MR HUTLEY: - - - and your Honours will find that behind tab 5 and your Honours can see - it is in [1951] Ch 209. Your Honours will see from the headnote at the first paragraph, there is a reference to “a power to pay or apply” and there were then, if your Honours go down to about point 8 on the page, there was a declaration in respect of some income that it was said to belong to the infant beneficiaries, some interim income, and the question arose as to the character of the relation and there was a statutory question associated too, which I do not need to trouble your Honours.

But it is quite clear that the court held that that resolution resulted in those moneys being held upon, in effect, bare trust for the beneficiaries and that was fundamental to the question of whether there was a pay or apply and one can see that at 224 in the judgment of Lord Justice Jenkins at about point 7, the infant becoming entitled to the sum allocated to him, et cetera, down to the end of that paragraph. His Lordship’s judgment was agreed to by Lord Justice Asquith at 221 and it is quite clear that the Master of the Rolls took exactly the same view at, if your Honours go to page 220 and go to the last sentence of the first full paragraph:

I think that the effect of –

and we say, that is clear. Now, the only other two cases which have dealt with them is one in New Zealand, which is the decision of the Commissioner of Inland Revenue v Ward and your Honours will find that at tab 3. In this decision the majority consisted of the President, Mr Justice North and Mr Justice McCarthy and if your Honours go to page 15 in the report, your Honours will see that there was “pay and apply” involved there. If your Honours go to about line 25, the President adverted to the judgment of the Master of the Rolls and Lord Justice Jenkins, and made clear that, in effect, there was a fixed trust and he then sets out at about line 45:

it is immaterial whether the income is immediately used for the benefit of the infants and is sufficient if it is allocated to them in terms which makes the parts of the income so allocated the separate property of each infant.

This gets back to the concept of applying the corpus of the trust. You are applying the corpus and, with respect, the Court of Appeal - - -

BELL J: Now, the Court of Appeal considered Ward - - -

MR HUTLEY: Quite

BELL J: Yes, your contention is, misapplied it.

MR HUTLEY: Quite, and I will come to what is said, and your Honours will see how Justice Barrett dealt - and the principle Justice Barrett came to is explained at paragraph 62 on page 78, if your Honour please. He accepts that there is no trust. There is no alteration in the asset, the position of the assets, but what he says is - this is about line 28:

The specific setting aside or appropriation that the resolution effected by means of the words “be distributed to” – which carried precisely the same connotation as the words “shall belong to” in Vestey’s case – did not result in any cash payment or change in ownership of specific property.

So, in other words, did not do that very thing which we say was fundamental to the Vestey’s Case:

But it did cause the trustee’s obligation with respect to the trust assets to change so that, to the extent of $3,904,300, the trustee was required to recognize and accommodate an immediate and absolute vested interest of Mr and Mrs Nemes.

We say that, with all due respect, is legally meaningless. In effect, the fundamental question is, if you resolve to distribute, that may bring you under obligations as to how to deal with the trust fund, of a variety, but a completely different question is has the trust fund been applied and that has a precise meaning we say and, except for a possible view, if I could return to Ward in this regard, Mr Justice Turner, who was in the minority, agreed with the President as to the principle but disagreed as to the effect of the particular resolution as having been sufficient to create the trust relationship which the President thought it did.

That is apparent - I will not take your Honours through it - it is apparent from his conclusion at page 17 at about line 30 – I am sorry, I do apologise, I have the wrong one out, page 22, I am sorry, where he says:

I reject out of hand any argument that the document can be read as impressing pro tanto a trust -

and that was the reason for his dissent. It was a dissent on the facts, but he agreed with the President as to the principles and then the other member of the majority was Justice McCarthy and he expressed the view at page 30, lines 10 to 15:

I would like to add something regarding the argument that the resolution of 29 March 1963 should not be regarded as applying income unless it acted as a declaration of trust imposing a trust –

et cetera, and then he went to take the view that it was unsound and he differed on that basis. So that is the one view in all the cases which differs from what we say - Vestey’s Case. The other case, if I can just remind your Honours of that, is the case of Chianti v Leuma Pty Ltd which was the Western Australian decision which his Honour, the Court of Appeal, referred to and the judgment here is that of Mr Justice Buss. There his Honour found, at that is apparent from paragraph 65 - tab 2, your Honours - and this was fundamental to his aim:

In my opinion, by virtue of cl 3.5 –

I will take your Honours shortly to that in a moment –

upon the appellant resolving, on each occasion in question, to distribute a specified amount of the SJRF Trust income to the respondent, the appellant held the relevant amount (being part of the income which the appellant had derived) upon trust for the respondent absolutely.

Clause 3.5 your Honours will find at paragraph 24 and that in terms is exactly what that clause does and that was central to the reasoning, that is, you apply the corpus of the trust fund either by paying it away or taking some part of it and altering the trust relationship such that it is held upon, in effect, bare trust, and that is what we say the cases are and with respect to his honour, the Court of Appeal confused coming under obligations by reason of any resolution about distribution and applying.

We have made our submissions in writing about advance at application book 126 to 127 and having regard to the time, I will not say any more about those. Could I turn to the second question? Now, the exposure of a trustee to an action of money had and received means, firstly, that the trustee is liable to meet the obligation out of its assets or his or her assets, whether they are held in trust or not because they become a common law debtor.

Secondly, the trust is debarred from raising equitable defences such as acquiescence, laches, unclean hands to any claim upon it. That consequence, we say, arises in very limited circumstances. It has never included, in our respectful submission, a situation where a trustee has continuing duties with respect to the trust property which is to be the source of the discharge of the equitable obligation.

That, we say, is apparent from the authorities, including authorities in this Court, which appear at paragraphs 79 to 81 in the Court of Appeal’s judgment which your Honours will find at pages 82 and 83 of the application book where reference is made to Lord Campbell’s judgment in Edwards v Lowndes and the decision in Sir Samuel Griffith’s judgment in R v Brown, just checking the year, and the judgment of Justice Gummow in Roxborough.

Now, we say it is instructive to look at the authorities referred to in footnote 95 to the judgment of the judgment of Justice Gummow. We have set out the relevant paragraph from Justice Gummow’s judgment in Roxborough behind tab 8 and the authorities for the principle which he states are set out in footnote 95 and can I take your Honours through shortly those because they are instructive as to just how limited this principle is for

good reason. If I could take your Honours firstly to tab 1, to Bartlett v Dimond, and if your Honours would kindly go over to 387 and go down to about point 8, or point 9 where it says:

So long as a trust continues –

and over to the top of the next page and if your Honours would also note that there is a reference there to Remon v Hayward because that becomes a little important in a moment?

FRENCH CJ: I think we have your point on this, Mr Hutley. We might hear from you in reply in relation to that.

MR HUTLEY: If your Honour pleases.

FRENCH CJ: Yes, Mr Birch.

MR BIRCH: If Your Honours please, we characterise the case in a different way. The resolution was passed in September of 1994 and the deed that purported to charge assets of the trust in favour of Mr and Mrs Nemes was executed in August of 1995 and in between times the accounts were prepared that recorded a loan by Mr and Mrs Nemes to the trustee. We accepted at all stages below that no straightforward action could be brought upon the resolution alone because it would face an insuperable time bar problem and we sued on the fifth covenant in the deed.

If I might just quickly take your Honours to the terms of it, because it was expressed in a very general fashion - it is in many places but on page 13 of the application book at about line 40 the clause is there set out:

“[The Trustee] covenants with [Mr and Mrs Nemes] that [the Trustee] will be pay to [Mr and Mrs Nemes] the principal monies –

and your Honours will see above in paragraph 47 recital D defined the principal moneys as the sum of $3.9 million odd. So, there was an express covenant in a deed to pay that money to Mr and Mrs Nemes by the trustee and we sued on that express covenant.

The only way we say we can lose is, well, firstly, that covenant must be for some reason unenforceable. It would be unenforceable if, for example, it might have been wholly beyond the power of the trustee to execute the deed. It is implicit in part in, certainly implicit in what Mr Hutley says, that there must have been an underlying action that already existed before the covenant was given in the deed and certainly Justice Barrett and the Court of Appeal found there was, that the resolution itself gave rise to an action enforceable by a claim for moneys had and received.

It was never the sole way that we put the case that had to be the way it operated. From our perspective, so long as we could support the fifth covenant in the deed, then we were entitled to our judgment and that could be - - -

FRENCH CJ: The covenant turned upon the correctness of recital D because it takes the “principal monies” from - - -

MR BIRCH: The deed contained a number of errors and the parties accepted in the course of the litigation that they were errors of expression and that the deed should be read as one would have naturally thought, so your Honour is right to point out that there is a literal miswording but it was not a point that was taken against us and it would have been possible for any court of construction to find that what was properly intended was that it was an acknowledgment, it was a covenant by the trustee to pay the moneys to Mr and Mrs Nemes.

FRENCH CJ: Not dependent upon, you say, the existence of a prior debt.

MR BIRCH: That is what we say. Now, what happened was that the primary judge found that the covenant was just enforceable according to its terms - - -

FRENCH CJ: Yes.

MR BIRCH: In the Court of Appeal, Justice Barrett engages in a detailed analysis of the effect of the resolution together with the accounts and concludes that that gave rise to a pre-existing cause of action. He says in consequence of that reasoning that it was not necessary to proceed to determine whether there was a possibility of enforcement on its face alone.

I should further add this. Justice Barrett had concluded that there was no power to charge the assets. He concluded that in the application book at page 87 at approximately point 4, where he concluded that it was the case that there was not a power to grant the security “merely to cause some pre-existing unsecured obligation”. Then in paragraph 92, just below it, he then says:

For present purposes, that consequence is unimportant. The covenant in clause 5 of the instrument of 30 August 1995 existed independently of the charge.

Now, his Honour went on to say this:

It cannot be suggested that the trustee lacked power to confirm by separate covenant the debt obligation already owed by it.

Now, this is where we get to the nub of it all because what we say is this. This is a fascinating issue as to precisely what the resolution of September gave rise to in juristic terms but that we say it is not something that practically determines this case. So long as we can find - - -

FRENCH CJ: It depends on what effect you give to the covenant.

MR BIRCH: Correct.

FRENCH CJ: If the covenant operates as you say, it subsumes everything else.

MR BIRCH: Correct and we say there are four pathways that we can get to a success here and we embrace the reasoning of Justice Barrett. We say that that is correct, that it is true, the assets in this trust were not as liquid as they were in Re Vestey and Ward and that is a distinguishing feature but we say the reasoning in those cases can go further. We say, in any event, Justice Barrett himself was conscious of that and he, in fact, if your Honours go to page 78 in the application book, in paragraph 63 he dealt expressly with this - - -

BELL J: Before you come to paragraph 63, what is your submission respecting the last sentence of paragraph 62?

MR BIRCH: Well, we say there is nothing wrong with the reasoning, the conclusion that it gave rise to an obligation on the trustee to now account to the beneficiaries for the sum it had resolved to distribute to them. Now, at that stage, I put it in fairly neutral terms as an obligation to account to them. I am not going to say the precise type of cause of action because for our purposes, it does not matter and there is no reason why, when one reads decisions like Ward and Re Vestey one cannot conclude that there was an equitable obligation on the trustee to now make good what the trustee had resolved to do, namely to distribute to them a sum of $3.9 million from the trust.

It is true that in order to do that, they were going to have to take further action. The assets were in shares in a company that in turn held property. They were going to have to find in some way the liquidity to fulfil the declaration. That is really the only matter that is significantly different and what my learned friend’s case comes down to is this, that if they have the money sitting in cash in the bank, they could have resolved to do it, whereas if their assets were illiquid, they could not resolve to distribute.

It is, in our submission, a somewhat radical, novel proposition in trust law that the resolution to distribute by trustees can only be made when they have ensured that they have liquid distributable assets in their hands that allow them to forthwith make the distribution.

FRENCH CJ: If there had been no resolution, could the trustees have, and I think I understand this to be your case, entered into a covenant in terms of 5 and that covenant been effective?

MR BIRCH: They could if what they were doing was indeed making a distribution. It might be that, for example - - -

FRENCH CJ: By the covenants, you mean?

MR BIRCH: Yes, by the covenant. If the covenant itself was a clear exercise of a power to distribute income or capital they could and what we say they did was this - they announced the intention, so to speak, to make a distribution which may have had the legal effect that Justice Barrett attributed to it but whether it did or did not, they then go on to perform further legal acts which further perfect and give rise to actual legal obligations.

So, your Honours, one might think of it this way. Imagine that they had resolved to distribute, that they had moneys in a bank account they were intending to distribute by writing a cheque. The writing of the cheque gives rise to legal obligations upon its signing and delivery which are in fulfilment of the intention announced in the resolution.

Now, one does not need to ever go back and slice it all up and ask, prior to the moment of delivery of the cheque, had they created a binding obligation upon them when they resolved, when they put it in the accounts, when they wrote the cheque out but had not delivered it. These are academic curiosities which do not resolve the matter.

FRENCH CJ: Sorry, can I understand, do you say the covenant is effective as a covenant and is within the power of the trustees because it amounts, even standing by itself, to an exercise of the 4(b) power?

MR BIRCH: Well, your Honour, I have to say there has to be a raising and advancing or a paying or applying and so because what we say is that the raising and advancing and paying or applying is found in the sequence of events, the resolution, the entry in the accounts and the execution of the covenant, we have never addressed whether the covenant without the two prior steps would have been sufficient - - -

FRENCH CJ: I am sorry, I just want to understand, you are not saying a covenant dropped out of the sky and where the happy cargo - - -

MR BIRCH: No, in response to your Honour’s question, I suppose I am saying, well, it might be after deep thought one would conclude you could sustain it alone but I would have to decide whether it was possible to argue that that could alone constitute a raising, advancing, paying and applying and that might be debatable but we say that it is not debatable when you have the two prior steps of the resolution and the acknowledgment in the accounts.

Your Honours, could I just say then - I indicated there were four pathways and I have indicated two, Justice Barrett’s pathway and no prior legally enforceable obligations but a legally enforceable obligation created by the covenant. The other two possibilities are these, that there could be an equitable obligation created which does not sound in an action for moneys had and received, and this is really my learned friend’s second point.

Let us assume for example, that they would have had to go to equity and obtain some form of equitable relief to compel the trustees to account to them in the fashion they did and it was an action for equitable debt, for instance. We say, so what. It was an obligation sufficient to sustain the acknowledgment of money owing when they came to execute the clause 5 covenants so it does not matter what the type of obligation was. If it was an obligation to transfer over a fixed sum of money of $3.9 million odd dollars, that is all that we need.

The third way was not embraced by Justice Barrett. Indeed, I have to say, we pressed it upon the court in the Court of Appeal and it was not dealt with. At page 81, this third path is the notion that what occurred was that there was a notional distribution and then a lending back of the money by the beneficiary and that is what the accounts recorded and this might be called the accountant’s understanding of what occurred.

So, there would have been no obstacle to the trustee obtaining liquidity in some fashion, borrowing the money, making the distribution. The beneficiary lends the money back, creating a debt obligation by the trustee to the beneficiary and then the money is repaid. At page 81 in the application book at 76, it is about just below line 40, Justice Barrett said:

Submissions that the trustee somehow exercised a power to borrow and, in some figurative sense, agreed to pay money to Mr and Mrs Nemes do not need to be pursued.

Subject to directions of this Court, if there was to be an appeal in this matter, we would press that as another means by which the transaction could have been understood and explained and would have supported the granting of the covenant in clause 5 of the deed.

So for those reasons we say the clause 5 covenant is easily defensible, that it will not matter which of the many ways it could be defended might succeed. What your Honours are being invited to do is to resolve an idle academic and theoretical question and you ought not to accept that invitation. To the extent that it was different from earlier cases, that the trust was illiquid, we say that does not matter at the theoretical level and there was never an attack on the basis that it was an improvident decision of the trustees to make this resolution.

Your Honours might look and think, well, that is almost the entire corpus but there is no way of knowing whether they thought that the valuation was conservative and there was ample moneys left or anything of that sort and the case is run on a fairly formal basis. Could I just say, your Honour, if the Court was going to grant special leave, we have indicated that we would want to raise by way of a notice of contention, other arguments, including our estoppel argument.

FRENCH CJ: Yes. Yes, thank you, Mr Birch. Yes, Mr Hutley.

MR HUTLEY: Can I take your Honours to application book page 64. I did not take your Honour to recital E:

For the purpose of securing repayment of the principal moneys –

The whole basis upon which the case was conducted was as per the reference to there being a debt, is indebted. That was not, in effect, an infelicity which was, in effect, everybody agreed was an infelicity. It was fundamental to the way the case was run and that is apparent from paragraph 89 of the judgment of the Court of Appeal at page 86 where it says:

This is not a case in which a charge was created to secure a loan that was never made. The charge was created in August 1995 in order to secure what was said to be a pre-existing indebtedness of $3,904,300. The question is whether that indebtedness then existed.

That was the central question. That was what the whole case was about and that is why his Honour came to the conclusion it was fundamental to find that there was money had and received because if it had been purely an equitable obligation, it was absolutely futile for his Honour to undertake an exercise of going through and determining that it was essential it was money had and received because the whole agreement was premised upon, you were repaying a debt.

Now, we say no power has been identified at all in this trust whereby one could take an equitable obligation which is described as being a repayment and then convert it into a debt by promise. In the same way there was no power to mortgage, there would be no power to do that and our learned friends say we have not raised an argument that there was an improvident event at the time.

True it is, that is the case, but that is not our point. If this had been run as an equitable case as opposed to a common law debt, there would have been a necessary and an opportunity to inquire as to the conduct of the trustee over the period from the incursion of the debt, the equitable obligation until the time of death and there may have been a whole series of questions about the rise in value of the asset and possible breaches of trust in not disposing of the asset.

That of course was rendered utterly irrelevant, if there was a common law debt and that is what was sued upon and that is how it was conducted. So, in our learned friend’s alternates, is running a wholly new case. This case is and was always, as dependent upon the agreement, the mortgage, that recited and stated that there was a debt and this was done to secure the repayment of it and the promise was a promise in respect of that debt which was apt to be repaid.

If we are right, and my learned friend really has not addressed the points which he agrees are interesting, what he calls academic points, we say that they are very interesting legal points. There is simply no argument that this was conducted on what was a common law debt because that was the only thing which was open on the deed.

There is no mistake in the recitals. It made it perfectly clear what was done. That is how it was run and that is why my learned friend ran his round robin case. The problem with the round robin case was there was never any money. There could not be a round robin. It was completely illiquid. There was no cheque, there was no payment, it was just entry and we said that simply and the Court of Appeal basically put that aside because, frankly, it was an impossible argument to maintain.

We say that this case is absolutely ripe for determination of two important questions and it basically considered they are important but it has tried to, in effect, deflect it by saying there was a power which, in our respectful submission, to be exercised, is utterly inconsistent with the terms of the deed itself which was premised on there being a debt. If your Honours please, those are our submissions.

FRENCH CJ: Thank you. There will be a grant of special leave in this case. Having regard to the foreshadowed contentions, what is your estimate, Mr Hutley?

MR HUTLEY: Your Honour, I would have normally said half a day easily for the points we wish to agitate. If your Honours might direct it to my learned friend, I have not really concentrated on his notice of contention what would be involved in it, I will be quite frank. It would comfortably – within half a day the points with proper written submissions, your Honours, for most of the case.

FRENCH CJ: A day to be safe, Mr Birch?

MR BIRCH: Your Honour, I would not think it was comfortably within half a day, I am afraid. Once one says a half day plus then there is not really much point. The estoppel argument involves estoppel by deed and promissory estoppel. It does not involve very much factual material but - - -

FRENCH CJ: I understand that, yes.

MR BIRCH: - - - the legal issues are distinct from what we have canvassed this morning.

FRENCH CJ: Now, there is a possibility that we could list this case in the December sittings which would be perhaps the second week of December. Would there be any difficulty with that from the point of view of either party?

MR HUTLEY: There may be a difficulty from counsel but not from the party, your Honour.

FRENCH CJ: Well, maybe counsel and their instructors can consult fairly promptly with Registry about that. It is just that if the matter does go forward in the December list then there is a truncated timetable, otherwise there is another timetable. So the directions as to the timetabling of the submissions will depend upon whether it can be listed in December but I would ask you to consult with Registry. Thank you.

AT 10.34 AM THE MATTER WAS CONCLUDED