Franz Boensch as trustee of the Boensch Trust v Pascoe [2019] HCATrans 133 (21 June 2019)

Last Updated: 25 June 2019

[2019] HCATrans 133

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S29 of 2019

B e t w e e n -

FRANZ BOENSCH AS TRUSTEE OF THE BOENSCH TRUST

Applicant

and

SCOTT DARREN PASCOE

Respondent

Application for special leave to appeal

NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 21 JUNE 2019, AT 10.59 AM

Copyright in the High Court of Australia
MR D.A. PRIESTLEY, SC: May it please the Court, I appear with my learned friend, MR M. F. NEWTON, for the respondent. (instructed by Gilchrist Connell)

NETTLE J: Thank you, Mr Bevan. Call the matter outside please.

MR PRIESTLEY: I have not seen my opponents, your Honours.

NETTLE J: Thank you, Mr Bevan.

COURT OFFICER: No applicant, your Honours.

NETTLE J: I see Mr Priestley was apparently briefed to appear, Mr Bevan.

MR PRIESTLEY: I am sorry, your Honour, Mr Bevan is briefed to appear for the applicant, your Honour.

NETTLE J: I beg your pardon, Mr Priestley.

MR PRIESTLEY: With Mr Sethi, I think.

NETTLE J: I am sorry to inconvenience you. What I might do is stand the matter down for a moment, have some inquiries made outside as to whether or not the applicant is likely to appear and we will deal with the next matter.

MR PRIESTLEY: May it please the Court.

NETTLE J: Thank you very much, Mr Priestley.

AT 11.00 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.35 AM:

MR C.J. BEVAN: If it please the Court, I appear with my learned friend, MS I. SETHI, for the applicant. (instructed by John D. Bingham Solicitor)

NETTLE J: Yes, Mr Bevan.

MR BEVAN: I apologise for our late arrival.

MR D.A. PRIESTLEY, SC: I appear for the respondent with my learned friend, MR M.F. NEWTON, may it please the Court. (instructed by Gilchrist Connell)

NETTLE J: Mr Bevan, is there any reason you were not here on time?

MR BEVAN: I am sorry, your Honour.

NETTLE J: Is there any reason you were not here on time?

MR BEVAN: No good reason, your Honours. We underestimated the queue to get through security. There was a queue of tradesmen in front of us.

NETTLE J: Yes, I see; thank you.

MR BEVAN: Your Honours, just a preliminary point. My client in the application for special leave to appeal filed a couple of weeks late because of timing

GORDON J: Do you need an extension of time

MR BEVAN: We do. I do not understand it to be opposed, but I do not want to be seen to be taking anything for granted, your Honours.

NETTLE J: What is the position, Mr Priestley?

MR PRIESTLEY: It is not opposed, may it please the Court.

NETTLE J: Thank you.

MR BEVAN: Your Honours, our first question raises the question about the vesting of property held by a bankrupt in trust for other persons. The first question turns on the proper interpretation of 58(1)(a) of the Bankruptcy Act.

NETTLE J: Do you accept that if the trustee had a right of indemnity there would have been a basis sufficient to lodge the caveat?

MR BEVAN: Yes, because that follows from the second limb of 5(1)(a)(ii) of the definition of the property of the bankrupt in the Bankruptcy Act and of course your Honours so held two days ago in Carter Holt Harvey Woodproducts.

NETTLE J: Do you accept that if the trustee had a reasonable basis to believe that there was in existence a right of indemnity you had a basis to lodge the caveat?

MR BEVAN: Our case is twofold. Firstly, belief has no role in 74P(1) of the Real Property Act. It is an objective test.

NETTLE J: That is to say he must have reasonable grounds which are objectively reasonable?

MR BEVAN: Correct.

NETTLE J: All right, then. Were there, then, facts sufficient to base an objectively reasonable point of view that there was a caveatable interest?

MR BEVAN: At the time he lodged the caveat he knew there was a trust in place. He had been provided with the memorandum of trust and he had been provided with the first page of the trust document and the primary judge and the Full Court found that the caveat was lodged the day after that. It was 25 August 2005 and it was 24 August 2005 when Mr Boensch and Mr Pascoe, and Mr Moretti, who was Mr Pascoe’s assistant, had a meeting with Mr Boensch, and he disclosed the existence of the trust.

Now, the way Mr Pascoe, as we understood his evidence, put it, the caveat was lodged as part of the standard practice and, of course, the standard practice would not deal with a bankrupt who was a trustee but would rather just deal with a bankrupt who owns an estate in fee simple. At the time of lodgement of the caveat the existence of the trust was known and the right of indemnity only really became an issue at the heel of the hunt. And the highest the primary judge put his findings there, which were upheld on appeal, was by May 2009 Mr Pascoe, at the latest, believed that there might be a right of indemnity. Now, that was three months before the caveat lapsed. There was a lapse notice in August and it lapsed on 15 September 2005.

Now, one of the reasons Mr Pascoe gave for allowing the caveat to lapse was he had concluded that, if there was a right of indemnity – he put it no higher than a mere possibility – it was of limited value. That is to say, it was of insufficient value to warrant continuing the maintenance of the caveat into its fifth year.

Now, of course, we say, taking that back to 25 August 2005, there is a trust in place over the Rydalmere property, the trust is an express trust, it is created by a memorandum of trust which is subsequently confirmed by a deed of trust. The trust is for the benefit of the two children of Mr and Mrs Boensch. Our case is that nothing – leaving aside the right of indemnity, which I will come to in a moment – could have vested when 58(1)(a) is read with 5(1)(a)(i) of the definition of “the property of the bankrupt” in the Act. The only possibility of there being any vesting would be if there were indeed

NETTLE J: Some beneficial interest in the trustee.

MR BEVAN: Yes, if there were a right of indemnity in place at the date of lodgment of the caveat. That flows, apart from the clear terms of 5(1)(a)

NETTLE J: Just pausing there, do you perceive there to be any dispute between you and the opposition as to the correctness of that proposition of law?

MR BEVAN: Yes, because the opposition maintain that, consistently with the judgment of the primary judge and the Full Court, the entire fee simple, subject to the trusts, vested in Mr Pascoe on the date of the sequestration order

NETTLE J: Because of the legal estate in the trustee?

MR BEVAN: Well, because there was a legal estate in the trustee subject to the trust and following the

NETTLE J: So that is the point of principle? Whether a bad trust in which the trustee has no beneficial interest, even a right of indemnity, is capable of vesting in the trustee in bankruptcy?

MR BEVAN: Yes, that is the principal point. Could I just qualify the – I am just careful about the phrase “a bare legal estate” because this was an express trust with active trust duties in Mr Boensch and of course

GORDON J: So is there a right of indemnity? I do not understand your answer to Justice Nettle’s question.

MR BEVAN: No, we dispute that there is a right of indemnity and, indeed

NETTLE J: What, because there were no debts?

GORDON J: That is what I am trying to understand. Why is there no right of indemnity?

MR BEVAN: There was no right of indemnity because our case was that there was a mutually beneficial arrangement in place, the terms of which were – and there is a finding to this effect in the Full Court’s judgment, although there was no concluded determination of it because that was one of the reasons the Full Court said, “We are not going to determine the notice of contention and find a right of indemnity”, because a right of indemnity was never determined by either the primary judge or the Full Court. The Full Court

GORDON J: So we are driven back to the proposition put to by Justice Nettle and that is whether or not a bare trust in these circumstances is sufficient to give rise to a caveatable interest?

MR BEVAN: Correct, and we say it is not. We say that

GORDON J: So this Court does not consider whether or not there is a right of indemnity?

MR BEVAN: We would say the right of indemnity does not come into it because there is a finding in the Full Court that no right of indemnity was claimed in the caveat. That comes from

GORDON J: That is a separate question. That is not the question, is it?

MR BEVAN: Well, there are no findings in either the primary judge or the Full Court that there was a right of indemnity. That was only raised in the Full Court on a notice of contention. The Full Court specifically declined to decide the contention in respect of the right of indemnity for two reasons. Booklet, page 101, paragraph 155 in the Full Court’s decision:

We do not propose to resolve these arguments

GORDON J: Sorry, just one moment. Page101

MR BEVAN: Sorry, your Honour. Page 101, paragraph 155. If you just go back to the previous page, “A trustee’s right of indemnity,” which was raised on a notice of contention, because there were no findings on this by Justice Darke at first instance:

We do not propose to resolve these arguments for two reasons considered cumulatively. First, there is no need to do so in order to decide this appeal. Secondly, to resolve the issues, this Court would first be required to make findings of fact about the “mutually beneficial arrangement” and possibly, whether the indemnity had any value.

Now, the mutually beneficial arrangement was the arrangement which was referred to

GORDON J: At 143.

MR BEVAN: Correct. And, in effect, you cannot have a right of indemnity where the trustee, as the custodial parent who is in possession of the whole property, either to care for the beneficiaries of the trust in his care or to conduct a business on the ground floor of the premises generating income to support them so, in effect, he is occupying the premises as trustee and the quid pro quo is he is paying the mortgage payments and the rates.

Now, the trial judge did not decide as a fact whether there was a right of indemnity and the Full Court has declined to decide as a fact whether there is a right of indemnity. The reason this Court would need to decide whether there is a right of indemnity in order for what I call the second limb of 5(1)(a)(ii) of the Bankruptcy Act to fly without any findings of fact at first instance or in the Full Court is that the primary judge said this really only became an issue at the heel of the hunt. In fact, the Full Court said, at 156:

the findings his Honour did make about the right of indemnity. It is important to note the limits of the finding. It went no further than a finding that by May 2009 at the latest, Mr Pascoe had reasonable grounds to believe that Mr Boensch might have a right of indemnity out of trust assets. At some point, probably shortly before or after being served with a lapsing notice on 23 August2009, he decided that the right was likely to have little value and he would not pursue it. Quite independently, Mr Pascoe had an honest belief based on reasonable grounds that the trust would be set aside or declared void up to 13 August 2009. In those circumstances, it is difficult to see how a successful challenge to the primary judge’s findings about the right of indemnity will affect the outcome of the case. The finding does not affect the lodging of the Caveat and only relates to its maintenance of the Caveat between May and August 2009.

That is to say, it could only have an impact on the quantification of Mr Boensch’s entitlement to compensation by converting what is currently a fouryear closed period for the life of the caveat into three years and nine months. But the fundamental problem, we say – well, there are two fundamental problems there is just simply no finding as a fact, in either of the courts below, that there was a right of indemnity. And keeping in mind that this a caveat case, your Honours, you have to do more than have a right of indemnity, you must claim it in the caveat and that was affirmatively decided in the Full Court against Mr Pascoe, at 142 – that is, booklet 99. The second sentence of 142:

Mr Pascoe did not claim a right of indemnity in the Caveat.

So that, quite apart from the fact that if there was a right of indemnity, according to Mr Pascoe, it is de minimis because his sworn evidence is, one of the three or four reasons I allowed the caveat to lapse after four years was if there was a right of indemnity it was of limited value.

Now, of course, we rhetorically ask: well, if it is not worth maintaining the caveat beyond four years, then it cannot have been worth maintaining the caveat on day one. But, ultimately, the principal point of principle here is that the primary judge and the Full Court have decided on the authority of Ritchie – decided by Justice Powell, in which his Honour rejected an argument put to him by the then SolicitorGeneral, Mr Mason QC, which is pretty much the same argument we are putting in this Court – and also the Court of Appeal in Lewis v Condon said, the whole of the trust property vests but subject to the terms of the trust.

Now, of course, one of our complaints is, apart from the fact that that is just completely contrary to the terms of the definition of the property of the bankrupt in 5(1)(a)(i) and 5(1)(a)(ii) of the Bankruptcy Act, it is contrary to what this Court decided two days ago in the twoplurality judgments in Carter Holt Harvey – I think paragraphs 24 to 27 of the senior plurality and the junior plurality is paragraph 94.

Now, both of those decisions, particularly the plurality in which Justice Bell was the senior Justice – that is, paragraph 94 of Wednesday’s judgment – said, nothing vests in the trustee in bankruptcy where the property is held solely for the benefit of other persons.

Now, we say to the knowledge of Mr Pascoe, this property was owned by Mr Boensch solely for the benefit of his two children and he had no right of indemnity in the property. So that, on any view of it, there is simply nothing to vest in Mr Pascoe. And that is the only consistent outcome on the primary point of principle in this case in order for this decision to be consistent with what was determined two days ago in Carter Holt Harvey.

Our other complaint is that, when you look at the test of “without reasonable cause” the three acts which are qualified by “without reasonable cause” in 74P(1) are lodging a caveat; relevantly to this case, refusing to remove it when requested; or failing to remove it when requested. There is simply no other conduct which is the subject of a test of “without reasonable cause”. And 30 years of case law, all single judge and Court of Appeal decisions, have said that the test is in fact a test of honest belief based on reasonable cause.

Now, of course, in the Full Court, one of the arguments we put, which we do not maintain if an appeal to this Court moved forward, was failure to establish a caveatable interest is fatal. And, of course, the Full Court, we now accept, quite rightly said, but that is rewriting “without reasonable cause” to be without a caveatable interest. We agree. But the corollary of that is they have also rewritten “without reasonable cause” to read “without an honest belief” based on reasonable cause because they have simply read “honest belief” into an objective test, which is simply not fair.

In the Full Court we cited this Court’s decision in Taylor’s Case, from about 12 years ago, which looked at a “reasonable cause” phrase in section 151A(5)(c) of the Workers Compensation Act (NSW) and this Court said, that is an objective test and it overruled the Court of Appeal in this State, where it said you look at the state of mind of the worker.

Now, of course, we say, well, if reasonable cause is an objective test in a workers compensation statute, why would it not be an objective test in a conveyancing statute? Now, that is very important in this case, your Honours, because the whole of the analysis of the facts, in particular of Mr Pascoe’s excuse for lodging and maintaining the caveat for a fouryear period, was undertaken in the context of his honest belief and the Full court affirmed that. Now, if that is wrong it means that most of the facts analysed in this case are irrelevant because this case comes down to: what did you know at the date the caveat was lodged? And those facts are uncontroversial, objective facts. Those facts are set out by Justice Darke in his judgment at first instance

GORDON J: It is paragraph 11 and following, is it not?

MR BEVAN: Well, probably the best place to start is booklet, page 12, paragraph 23:

a title search for the Rydalmere property was undertaken

At paragraph 24, there is a meeting on 24 August. Mr Boensch provided a memorandum of trust, 23 August 1999. That has got the ad valorem duty stamp on it and the front page of the deed of trust. The deed of trust was the longer document that confirmed the shorter memorandum of trust. This is the trial judge:

I accept that Mr Boensch said that the Rydalmere property was held by him on trust for his children.

Now, there is a finding of fact that this property, the day before the caveat is lodged, is held solely on trust for other persons:

The caveat was prepared on 25 August 2005.

And then there is evidence about 27, 28 and 29 – about this being effectively a standard practice. It concludes, relevantly, at 29, booklet 14:

Mr Pascoe further deposed that he did not think he should depart from his usual practice in Mr Boensch’s case.

Effectively, he said:

he was not satisfied about Mr Boensch’s claims of a trust –

notwithstanding that he had been given the trust document:

he suspected that he may be making such a claim as a means of putting the asset beyond the reach of his creditors. I accept that the instructions for the lodgement of the caveat were given in accordance with the usual practice –

Now, the usual practice, obviously, does not take into account a trust. It is just a bankrupt who happens to own “Blackacre” or “Whiteacre”, not “Blackacre” or “Whiteacre” held on an express trust for the sole benefit of other persons.

Now, we say that goes to the heart of – if it be the fact that 74P(1) is an objective test – reasonable cause.

NETTLE J: That is the substance of your ground 6 of appeal, is it?

MR BEVAN: It is, your Honour.

NETTLE J: Yes, I see.

MR BEVAN: If we are wrong, your Honours, you could never get compensation for a caveat that was lodged that should not have been lodged not only by a trustee in bankruptcy in this case, keeping in mind that on his sworn evidence as accepted he is doing it under a standard practice which does not take into account a trust, but for that purpose any registered proprietor, unless this decision of the Full Court is reversed, keeping in mind this is an appeal from the Supreme Court of New South Wales under the Jurisdiction of Courts (Crossvesting) Act, it means that the caveator in every case will come along and say, “Well, I honestly believed I had it. My solicitor was wrong”. Or “I got the facts wrong, terribly sorry”. And, of course, we say, “Why is the registered proprietor bearing the loss, as distinct from the caveator or the caveator’s legal advisers?”

It should not be an honest belief test; it should be a test of “What did you know as a fact on the day you lodged the caveat? What did you know as a fact on each day you received a request to withdraw it?” In this case, three occasions a request to withdraw it over a fouryear period.

NETTLE J: I see the time, Mr Bevan.

MR BEVAN: I am sorry, your Honours.

NETTLE J: Mr Priestley.

MR PRIESTLEY: Thank you, your Honours. The difficulty with the application is that, whilst the first point raised has, in isolation, some attractiveness as a special leave point – that is, can and does, if you like, bear legal title, vest in the trustee in bankruptcy in this situation, succeeding on that point would not be sufficient for the applicant and they would then have to establish that alone was enough. And we would say they would need to, having succeeded on that difficult point, proceed to satisfy this Court that not only was, if you like, Lewis v Condon wrongly decided and the Octavo point is resolved, but what follows from that, and we would say that they would need to show that without reasonable cause then it is resolved.

NETTLE J: Objective.

MR PRIESTLEY: So in this case what we know is – I have heard what my learned friend said but Mr Pascoe “did not know” that there was a trust at the time that he lodged the caveat. He had been told that. He took legal advice from solicitors and counsel, and both lawyers had told him that that would probably be set aside, as a matter of law. And that was the contest that then ran right through the court system.

GORDON J: Including to this Court.

MR PRIESTLEY: That is so. And even though Mr Pascoe was unsuccessful in that

GORDON J: You say those objective facts are still the facts relevant for that to question determination?

MR PRIESTLEY: That is so. However one looks at the test – and the test is well established; it was even described recently by Justice Basten in New Galaxy as an unimpeachable statement of a twostep test, that is, that the applicant for compensation needs to establish that there was no interest and that there were no reasonable grounds based on an honest belief

NETTLE J: It is the honest belief gloss which is the interesting point, is it not?

MR PRIESTLEY: Well, there are some interesting aspects to it, but it would not save the applicant in this case, we say, because, objectively, however one interprets reasonable grounds in this case there clearly were reasonable grounds.

NETTLE J: Inasmuch as there was reasonable ground to conclude that the trust would be set aside if it existed?

MR PRIESTLEY: Yes, and the legal advice that Mr Pascoe received does not just go to his honest belief. That is, we would say, reasonable grounds or reasonable cause, to use the language of the statute.

NETTLE J: It goes to the reasonability of the position.

MR PRIESTLEY: Yes. And so that would, we anticipate, probably invite an illsuited factual inquiry

NETTLE J: So even if he succeeds on both questions of principle, still he would fail, you would say.

MR PRIESTLEY: Possibly, and this in a context where it has not even been established that this case is of any substance or value. Causation, quantum have not been determined. This was a bankrupt who says he would have developed the property

NETTLE J: If you will forgive me for saying so and, not being thought unduly cynical, I see that you are here, Mr Priestley.

MR PRIESTLEY: That is so, your Honours, but we take the point and it is not necessarily a suitable vehicle, but we do not need to get to that. I think your Honours have my earlier two points, which is that this is not a matter when one could look at what I might concede is the interesting point – the point left open by Octavo about whether or not a bare legal title can or should vest in the situation but the Court would have to get into a situation where the Court would be asked to be setting aside authority about the proper test – there a twostage test.

NETTLE J: I am not always averse to that.

GORDON J: Could I ask this question about the first of those propositions. Is it truly – I am not quite clear even now, having read both the judgments – that this right of indemnity is not an issue?

MR PRIESTLEY: We would say it still is an issue.

GORDON J: Well, could you explain to me why it is still an issue because that is of concern, I must say.

MR PRIESTLEY: Yes. Well, it was always our position at first instance and throughout that there was evidence that established, prima facie, if you like, a right of indemnity.

NETTLE J: There was no finding by the judge, nor by the Court of Appeal.

MR PRIESTLEY: There was not, but the evidence did establish that there had been payments made – the mortgage, not only.

NETTLE J: Yes. We could not resolve these questions of fact, could we?

MR PRIESTLEY: Well, our inclination would probably be to file some notice of contention.

GORDON J: That is why I am asking.

MR PRIESTLEY: On the facts as found, on the very meagre evidence that was before the court – that was our side of the evidence. Their side of the evidence was this mutually beneficial arrangement, and so the primary judge felt he did not need to resolve it.

NETTLE J: It would tend to suggest that your contention would fail in that we would not be able to be satisfied on the balance of the existence of the right of indemnity.

MR PRIESTLEY: What we would say, as a matter of onus, it would be the difficulty for the applicant. If there was prima facie evidence, could the Court be satisfied that the applicant was entitled to compensation for the wrongful lodging of a caveat when there is this potential right of indemnity floating around there, unresolved by the lower courts but available as a finding on the evidence?

GORDON J: I just want to get this point clear because it is of concern to me. Is that the reason why, when the Court of Appeal comes to deal with the trustee’s right of indemnity, at pages 99 and following, is that as a result of a filing of a notice of contention?

MR PRIESTLEY: Yes, it was.

GORDON J: By you?

MR PRIESTLEY: Yes.

GORDON J: What was the substance of that notice of contention?

MR PRIESTLEY: It was that the primary judge should have found that there was a right of indemnity or that it was unresolved and therefore the applicant should not succeed on that basis. Yes, my learned junior has reminded me it was very much a question of onus and, because it has not been discharged by the applicant, that was a reason in itself to find against the applicant on the separate questions that were before his Honour.

GORDON J: Thank you very much.

MR PRIESTLEY: Just one moment, your Honours.

NETTLE J: Certainly, Mr Priestley.

MR PRIESTLEY: They are my submissions.

NETTLE J: Thank you. Mr Bevan, what do you say to the proposition that, even if you succeed on the two questions of principle, nonetheless you would fall short at the final bell?

MR BEVAN: Firstly, the reliance on legal advice is misplaced because the legal advice – the primary judge’s evidence of the legal advice is dealt with at 21, booklet page 12:

Mr Pascoe spoke to Ms McLean –

she was the petitioning creditors’ solicitor:

shortly after the orders had been made on that day.

That is, the sequestration order:

Mr Pascoe initially deposed that it was a conversation over the telephone. In a later affidavit, Mr Pascoe referred to some Sims Partners billing records –

He then sets out the source of the evidence. And the evidence that he gave, from the file note, was “Jim”, who is a barrister:

Jim says lay down to set aside.

Mr Pascoe deposed that Ms McLean told him in substance that Mr Johnson believed that there were strong prospects of defeating the trust claim or having any purported trust set aside.

And “lay down misere” was, supposedly, the advice from the barrister. Now, at this stage, the totality of the evidence is that the petitioning creditors’ solicitors are aware of a trust claim, but that is all. They do not have any other knowledge. Paragraph 23:

on 23 August 2005 a title search for the Rydalmere property was undertaken –

There is a RegistrarGeneral’s caveat on title, disclosing the existence of the trust and precluding dealings contrary to the trust and, of course, it would have been open to anyone to access the trust documents at the Land Titles Office. At paragraph 24, Mr Moretti and Mr Pascoe had their meeting with Mr Boensch. He hands over the memorandum of trust and the first page of the trust deed and he tells them that the trust is for the benefit of his two children and that he owns Rydalmere property.

Now, at no stage (a) does Mr Pascoe give the trust documents to the lawyers and say, “Well, look, can you take this into account when you say it is a lay down misere. How is that consistent with the instructions I have got from the bankrupt and the trust documents”. And, secondly, there is no attempt to go and retain his own solicitor. He is just going into this caveat based on what the petitioning creditors’ solicitors are telling him. Indeed, the caveat was lodged – paragraph 25, “The caveat was prepared” and paragraph 30, on page14:

The caveat was lodged promptly, even before Mr Pascoe had received official notification of his appointment from Insolvency and Trustee Service Australia –

Now, the haste with which this caveat is lodged on advice from lawyers acting for the petitioning creditor, not the lawyers for Mr Pascoe, and on the findings of fact made by the primary judge, nothing affecting that in the Full Court, there is no advice from lawyers acting for Mr Pascoe.

So we have lawyers who are not retained by Mr Pascoe and who do not have the trust documents, and they have not been given an account of the meeting with Mr Boensch on 24 August, saying, “Look, this is a lay down misere”. And we would say, “Well, this is not any old caveator; this is a professional trustee in bankruptcy. He does this for a living”.

NETTLE J: I take your point. Could I ask you this? If leave were granted and Mr Priestley sought to file a notice of contention and argue, as he has suggested, that we should make a finding that there was indeed a right of indemnity, what would you say?

MR BEVAN: We would meet it as we met it in the court below on the evidence that was made available to the primary judge. But I have to say we would meet it on the merits but we would also make contentions consistently with the reasons of the Full Court as to why they were not prepared to do it which was, when you scratch the surface, this was really a rear guard action in the trial. Because the real case at trial was Mr Pascoe saying, “I own the fee simple”. That then became, “I own the property subject to the trust because my various attempts to impeach the trust failed”. And that explains why the primary judge, in the Full Court’s conclusion at booklet, page 101, paragraph 156, acknowledges the right of indemnity only became an issue to Mr Pascoe three months before the caveat was lodged.

GORDON J: I know, but the difficulty is that your arguments are set out at paragraph 149 through to 153 in relation to the response to the notice of contention. The reason why the Full Court do not go on is because they do not want to enter into a factfinding exercise which we would, in effect, have to do if that is what we are left at.

MR BEVAN: Correct.

GORDON J: You accept that, do you not? In other words, if we get to the end – in other words, you have lost, and we have to deal with this right of indemnity question, then we would have to undertake the very exercise at 155 that the Court of Appeal did not want to undertake.

NETTLE J: Unless you are successful, as you were before the Full Court, in saying that the contention should not be entertained.

MR BEVAN: Well, I would go back to the finding in the Full Court, at 142, which is:

Mr Pascoe did not claim a right of indemnity in the Caveat.

This is a caveat case. This is not a dispute between the beneficiaries of the trust and the trustee in bankruptcy. And if he did not claim a right of indemnity when he lodged the caveat, the fact that he wants to bring a right of indemnity in at the heel of the hunt is not good enough. He must be able to have a right of indemnity there from day one which, under an objective test of “without reasonable cause”, saves the day for him. In my submission, your Honours, the right of indemnity is not going to get him anywhere for the reasons that the Full Court said is not going to get him anywhere.

NETTLE J: Thank you very much, Mr Bevan.

MR BEVAN: But if they file a notice of contention, we will meet it on its merits.

NETTLE J: Thank you, Mr Bevan.

In this matter there will be a grant of special leave. What is the estimate, Mr Bevan?

MR BEVAN: I would say a day. I would say two hours for each of us, 20 minutes in reply.

NETTLE J: Do you agree with that, Mr Priestley?

MR PRIESTLEY: Yes, if it please the Court.

NETTLE J: Thank you. Gentlemen, you will need to attend to the directions in the standard form, which have been issued by the Registrar today, and comply with those. The Court will now adjourn to Monday, 5 August, at 10.00 am, in Canberra.

AT 12.13 AM THE MATTER WAS CONCLUDED