No. 7215 of 1999
- Paul Dwyer, the appellant and plaintiff, sued Circuit Finance
Pty Ltd, the second defendant and respondent, for damage done to the
engine
(and, to a small extent, the structure) of a vessel by name Tirpitz II. The
vessel was formerly named the Sir Reginald.
- The damage was done when an agent of Circuit, on its behalf,
seized the vessel in early May 1998. The plaintiff claimed $35,685,
this being
the estimated cost of repairs.
- The plaintiff alleged, by his Complaint, that he was the owner
of the vessel at the relevant time. He laid his claim in trespass.
Ownership denied
- The defendant (it is convenient so to describe Circuit) denied
that the plaintiff was the owner of the vessel as at May 1998. It
denied
wrongful seizure.
Baran
- The denial of ownership had to do with the dishonest conduct of
a man named Baran, who had owned the vessel in 1988. He had then
sold some
interest in it to a man named Carboon, who had in 1992 onsold to the
plaintiff.
- The sale in 1988 and the further transaction in 1992 did not
mean that Baran disappeared from the scene. The vessel continued to
be
registered "in his name" until May 1997. The evidence at trial showed that
this was done to protect a fishing licence or licences
which were held to the
benefit of the vessel.
- The fact that the vessel and the licence (I will describe the
latter in the singular, although the papers do not make the matter
very clear)
remained in Baran's name up to and beyond September 1996, together with other
evidence suggesting that Baran treated
the vessel and its operations as his
own, gave rise to an important question at trial. What interest did Carboon,
and thereafter
the plaintiff, acquire in the vessel?
- In September 1996, apparently representing himself to be the
owner of the vessel, Baran sold either the vessel or simply its engine
-
documentary evidence admitted at trial was not consistent upon the matter - to
the defendant. When I say that Baran made the sale,
I put to one side for the
moment apparent difficulties about the precise identity of the vendor and the
subject-matter of the sale.
In any event, on the face of documents admitted in
evidence, Baran then leased the engine from the defendant, and as the
"beneficial
owner" of the vessel gave the defendant a mortgage over it to
secure his obligations under the lease.
Seizure and return
- Baran defaulted on his obligations under the lease. It was in
those circumstances that Circuit's agent seized the vessel in early
May
1998.
- Not long after the vessel was seized the plaintiff
successfully demanded it back - asserting his ownership of it. At that time
Baran signed a letter, drafted by the plaintiff's solicitor, in which he
asserted that the "lawful owner" of the vessel from about
1 May 1992 had
been the plaintiff.
- The vessel remained in the plaintiff's possession when he
initiated his claim in the Magistrates' Court. It continued to be in
his
possession when the matter came to trial in May 1999.
The counterclaim
- When the matter came to trial there was an amended
counterclaim on foot. It alleged that pursuant to either or both of the lease
and mortgage the defendant was entitled to take possession of the vessel. It
sought damages, and as well declaratory relief and
an order for possession.
What happened at trial?
- There is a very regrettable dispute about the course of
evidence and submissions at trial. The trial was apparently tape recorded,
consonant with a practice note issued by the Chief Magistrate. In reliance, it
was said, upon the proceeding being recorded, the
plaintiff's solicitor did not
take full notes of evidence or submissions.
- The tape was somehow lost - that is, within the Magistrates'
Court system.
- Against that background, the main affidavits filed on behalf
of the plaintiff describe in summary form only the course of events,
including
the evidence which was given, below. This is not satisfactory. The
observations set out in Williams, Civil Procedure
Victoria, at paragraphs
58.06.75-80 are in point. Further, an affidavit late sworn by counsel who
appeared for the plaintiff at
trial contained contentious material that should
not have been the subject matter of an affidavit in a proceeding such as this.
- I do not criticise the plaintiff's side only. The solicitor
who instructed counsel for the defendant in the Magistrates' Court
twice
deposed that she attended the trial and took detailed notes of the evidence
given and submissions made. Her affidavits, however,
record the evidence given
in the Magistrates' Court essentially in point form only. It is true that it
is for an appellant to make
good his or her complaint. But in the unusual
circumstances in this case, where the appellant's solicitor explained why his
ability
to give a full account of events was impaired, I consider that the
respondent's side, if it had detailed notes, and if it wished
to controvert the
truncated account of evidence and submissions deposed to by the appellant's
side, should not merely have aped that
truncated form of presentation.
- I have been left, then, with a regrettable dispute as to the
course of events, including the evidence given, below. Looking at
the main
affidavits filed for the parties, it hardly seems that the deponents could have
attended the same hearing. That said, I
have nonetheless been able to
determine the substance of the matter.
- Concerning the course of events at trial, it is at least clear
that the plaintiff, Carboon and Baran gave evidence viva voce; and
that there
were introduced into evidence from the plaintiff's side two documents which
were created by solicitors who acted for the
plaintiff in 1992. First, an
undated document described as an agreement, made between the plaintiff and
Carboon, and executed in
the form of a deed. Second, a document described by
the learned magistrate as "the trust document", again undated, and executed
in
the form of a deed by the plaintiff and Baran (the latter being described as
"Barron").
- Clear also it is that the defendant put various documents into
evidence in the course of the plaintiff's case - including a receipt
for the
1996 sale to the defendant, the lease and the mortgage. Concerning the 1996
sale, I note, the plaintiff put into evidence
an invoice the terms of which did
not coincide with the receipt to which I referred a moment ago.
- At the conclusion of the plaintiff's case counsel for the
defendant submitted, without being required to elect, that the plaintiff
had
not made out a case for his client to answer. Thereafter the learned
magistrate was provided with written submissions by the
parties. Having
reserved upon the application for several months his Worship, in detailed
reasons which reveal obviously careful
attention to the matter, ruled that the
no case submission "should be upheld as the plaintiff has no valid claim".
- It seems that his Worship did not pronounce final orders on 18
August 1999, that being the day on which the reasons were handed
down. He did,
however, on that day grant leave to the defendant to file a further amended
counterclaim; and leave to the plaintiff
to file a defence thereto.
- The matter returned before the learned magistrate on 7 October
1999. In the interim a further amended counterclaim and a defence
thereto had
been filed; and the plaintiff had commenced an appeal - which proved to be
abortive for want of a final order in the
Magistrates' Court.
- On 7 October the learned magistrate ordered that the
plaintiff's claim be dismissed with costs. He also made an order for
possession
on the counterclaim. He made the latter order without any further
evidence being adduced, but in circumstances where, according
to an affidavit
filed on the defendant's behalf, counsel for the defendant announced that he
was relying upon the evidence so far
adduced, closed his client's case, and
submitted that the counterclaim had been made out.
- An affidavit filed on the plaintiff's behalf deposes that
counsel for the plaintiff sought an adjournment of the hearing of the
counterclaim pending an appeal against the order made on the claim; and that
the order on the counterclaim was made despite his protestations.
The import
of that affidavit is that counsel for the plaintiff did not address the merits
of the counterclaim. That is contrary,
I think, to the import of the material
filed on the defendant's behalf. Be that as may, it is nowhere suggested in
the material
that his Worship gave any reasons for finding that the
counterclaim was made out.
Questions of law for consideration on the
appeal
- The orders made by the learned magistrate on 7 October 1999
led on to the institution of the present proceeding - an appeal brought
pursuant to s.109 of the Magistrates' Court Act 1989.
- A number of questions were stated by Master's order made on 14
October 1999. It would not advance matters to discuss the merits
or otherwise
of the language in which the questions were framed. It is enough to say that
they exposed certain issues which assumed
particular importance in argument
before me. Those issues, expressed as questions, were as
follows:
* Was the learned magistrate's finding that Baran held the
vessel and licence on trust for the plaintiff infected by error?
* Did the learned magistrate err in concluding that the plaintiff could not
hope to establish (on the footing that he never held
a legal interest in the
vessel) that in May 1998 he was a bailee, and entitled to bring a claim for
damages in respect of the bailed
goods; and did that conclusion effectively
render futile any application to amend the Complaint to allege a bailment?
* Did the learned magistrate consider the defendant's no case submission, in
substance if not in form, in an inappropriate manner?
* Did the learned magistrate err in making an order favourable to the defendant
on the counterclaim?
- Counsel, particularly for the plaintiff, made submissions
which addressed other issues. It is not necessary for me to consider
those
submissions in order to decide the appeal, and I will not do so.
The Reasons
- The issues encapsulated in the four questions that I set out a
moment ago can only be understood when reference is had to his Worship's
Reasons given upon the no case submission, and the events which followed the
Reasons being handed down.
- At the outset, his Worship identified the "preliminary issue"
for his determination as follows:
" ... Who is the legal owner of the 'Tirpitz II'".
- It is clear that the learned magistrate understood the
plaintiff's case - that is, in the course of the evidence - to be that "Baran
was holding a vessel in trust for him"; that the plaintiff was disavowing a
legal interest in it. So, at p.7 of the Reasons, the
learned magistrate said
that he had "referred to the documentation that the plaintiff tendered in order
to prove that Baran was holding
the vessel in trust for him".
- Before me, counsel for the plaintiff submitted that this had
not been his client's case at all; and that the so-called "trust document"
had
been tendered for a quite different purpose - that is, for the purpose of
explaining a fishing arrangement said to have been
entered into between the
plaintiff and Baran.
- I suppose it can be said that the plaintiff might have essayed
to prove a trust in order to get over a perceived problem that at
the critical
time the vessel was registered in Baran's name; as was the licence. But to
take that course must have exposed the plaintiff
to the difficulty that a
purchaser for value without notice could acquire good title from the assumed
trustee - good title being
the necessary precursor to the lease.
- The course which the learned magistrate understood the
plaintiff to have taken would have been, I think, an odd course to take.
Moreover, it was not a course which was compatible with the plaintiff's claim
as alleged by his Complaint. Perhaps it was not by
intent the course taken.
But the learned magistrate could not be criticised for so understanding it -
particularly in light of the
documents tendered by the plaintiff's side.
- I return to the Reasons. His Worship set out evidence
concerning the transactions involving Baran, Carboon and the plaintiff.
He
noted the evidence that in the first transaction - that is, between Baran and
Carboon - a shark fishing licence had remained in
Baran's name because it was
non-transferable; and that the plaintiff had been approached by Baran to
"purchase the vessel from Carboon,
then to leave the vessel in Baran's name in
order that they could go commercial fishing". His Worship further noted
Carboon's evidence
that the vessel had been sold by him to the plaintiff at a
substantial discount because the licence was in Baran's name.
- Then the learned magistrate referred to the undated sale
agreement between the plaintiff and Carboon. The document recited that
Carboon
was the beneficial owner of the licence and the vessel, and that he wished to
sell and the plaintiff wished to buy his interest
in the licence and the
vessel. Those interests were, according to the document, the subject of the
sale. It is to be observed,
however, that paragraph 2 of the document
identified the time at which "property in the said licences and boat shall
pass". Counsel
for the defendant rightly conceded, before me, that the
language of paragraph 2 was apt to describe a transaction in which legal
title
to goods was transferred.
- The learned magistrate next described the manner in which the
plaintiff financed his purchase. After this he addressed "the trust
arrangement", doing so by reference to the "trust document". He said
this:
"The trust document is unusual, there is no settlor of the trust,
nor any appointment by a settlor of the trustee, and the document
is not dated.
Baran (spelt Barron) declares himself as trustee of the licences and the vessel
for Dwyer, such trusteeship to take
effect from the production of a contract
between Carboon and Dwyer transferring the beneficial ownership of the licence
and the vessel.
The effect of the undated agreement between Carboon and Dwyer
was that Dwyer purchased the beneficial interest held by Carboon in
the shark
licence and the vessel. The legal owner of both the licence and the vessel is
Baran. The oral evidence of Carboon, Dwyer,
and Baran support the proposition
that at most Dwyer acquired a beneficial rather than a legal interest in the
vessel and the licence,
and that at all material times legal ownership remained
with Baran."
and
this:
"In order for an express trust to be valid
and enforceable, the three certainties of intention, subject matter and objects
must be
present. An intention to create a trust must be shown. The wording
used in the document exhibits a clear intention by the parties
to create a
trust. The subject matter of the trust namely the 'Sir Reginald' and the shark
licence were certain, as were the objects
of the trust, Dwyer, 'his heirs,
administrators, executors and transferees', who were all named as persons to
benefit from the trust."
- Having referred to legal advice that the plaintiff was given
by his now solicitor in 1993 that "the trust document may not have
created a
valid trust" and to the solicitor's file notes showing "the confusion and
distress Dwyer suffered when he found out that
the vessel had been re-possessed
for a debt he knew nothing about" his Worship said this:
"In these circumstances I find that notwithstanding that the trust
document was deficient in a number of respects, the intention of
the parties
was to create a trust, I therefore find that an express trust was created, with
Baran holding the legal ownership of
the vessel on trust for Dwyer who was the
beneficial owner."
- It is quite clear that the finding that an express trust had
been created was central to the learned magistrate's resolution of
the no case
submission. It necessarily flowed from that finding that Baran (leaving aside
for the moment the prospect that a Baran
company held legal interest in the
vessel) held the legal interest in the vessel, and that a purchaser for value
without notice could
acquire good title from him. According to the argument
for the defendant a further consequence was that the plaintiff, having in
May
1998 only a beneficial interest in the vessel, could not maintain an action in
trespass against it.
- His Worship's finding that an express trust had been created
and that the plaintiff held only a beneficial interest in the vessel
involved
rejection of the case advanced for the plaintiff by his counsel's submissions
on the no-case application. Counsel's preferred
analysis was undoubtedly that
his client held the legal interest in the vessel as at September 1996. Counsel
for the defendant,
to the contrary, argued that the plaintiff held only a
beneficial interest in the vessel at that time (though he was seemingly wary
of
contending that a trust had been created - see for example paragraph 8(a) and
(b) of Exhibit TFG15; but compare paragraphs 2 and
3 of Exhibit
TFG13).
- In the event, the learned magistrate found as a fact, in the
passage to which I referred a few moments ago, that an express trust
had been
created. It is not, I consider, very clear whether his Worship found that the
trust had been constituted by "the trust
document" or rather that it had been
created in some other way, consistent with what his Worship found was the
intention of the parties
to create a trust. Counsel for the defendant in the
end submitted that his Worship had found that the trust was created by the
"trust
document" and the Reasons read overall suggest that this was the case.
- Next in his Reasons the learned magistrate referred to "other
evidence, both documentary and oral, relating to the use of the vessel
by Baran
that may allow inferences to be drawn that in fact Baran was at all times the
legal owner of the vessel". His Worship identified
matters which led him to
conclude that "it is obvious that Baran used the vessel as if it was his own
possession".
- Then his Worship focussed upon Baran's application for
finance, made in 1996. In this connection his Worship said that he accepted
Baran's "evidence as to the events leading up to, and surrounding re-possession
of the vessel". He noted that Baran had made an
application for finance, in
support of which he had listed the vessel as an asset "at a grossly inflated
value of $180,000" and had
provided a fishing certificate and a licence related
to the vessel.
- His Worship said this at p.8 of the Reasons:
"The second defendant has not as yet commenced to call evidence in
support of its defence and counterclaim, however it is I believe
accepted that
Baran did sell and lease back the engine of the vessel and at the same time
mortgaged the vessel to Circuit Finance."
- Counsel for the plaintiff disputed, before me, that there was
any such acceptance. Exhibit MLH1 to the affidavit of Ms Hooper sworn
7
March 2000 is a receipt dated 23 September 1996. The subject matter of
the sale is the engine, the sale price is $25,000, and
the vendor is said to be
Baran Nominees Pty Ltd. Exhibit DL1 to the affidavit of Mr Imberger sworn
8 March 2000 is an invoice dated
25 September 1996 which was also before
his Worship. According to that document, the subject matter of the sale was
the vessel including
its engine, the consideration was $37,000 and the vendor
was Mr Baran. According to the mortgage, another document in evidence,
Baran was or was entitled to become the registered owner of the vessel; and he
mortgaged the vessel as "beneficial owner".
- It seems to me improbable indeed that the plaintiff, by his
counsel, accepted the matters to which the learned magistrate referred.
It
seems likely to have been a misunderstanding.
- The variations in the documents were not unimportant.
Potentially, they impacted upon the finding that his Worship made that an
express trust had been created by which Baran was trustee. Potentially, also,
they had implications in connection with the mortgage
upon which the defendant
relied (though not exclusively) in pursuing its counterclaim.
- His Worship next noted that the defendant had returned the
vessel to the plaintiff's possession after the plaintiff made representations
to one of its employees. By the return, the learned magistrate said, the
defendant "could be said to have recognised (the plaintiff's)
ownership of the
vessel." His Worship noted, in connection with another aspect of this issue
that he did "not have the benefit of
hearing evidence ... from the
defendant."
- Thereafter the learned magistrate summarised the submissions
of the parties. He noted that the plaintiff "having tendered the agreement
which he said created a trust" now submitted that the court could not rely upon
the document to find that there was a trust, denied
that there was any
intention to create a trust, but contended in any event (if there was a trust)
then the plaintiff was a bailee
and was able to sue for the full cost of
replacement or repair.
- His Worship noted the defendant's contention that the
plaintiff was merely the beneficial owner of the vessel and so could not sue
in
trespass. That right was said to reside in the legal owner who was the
defendant because "a trustee can pass good title to someone
who acquires legal
ownership bona fide for value without knowledge of the trust". He further
noted the submission that "there was
no evidence to establish a bailment".
- Then his Worship said this:
"I find it bizarre that the plaintiff should attempt to argue in
its (sic) written submissions that the evidence which he led should
not be
accepted. Not only has the plaintiff submitted that evidence he has tendered
be disregarded, he has argued a fresh cause
of action which has not been
pleaded. The proper course would have been to seek leave to amend the
pleadings before the closing
of his case. This was not done, nor was leave
sought in his written submissions, although in paragraph 5 of the written
submission
the following is put;
'The uncontradicted evidence establishes a bailment. Uncontradicted evidence
should be accepted unless there
are relevant reasons for rejecting it in which
case they must be stated: Read v Nerey Nominees Pty Ltd. If the facts
establish bailment then the court cannot non suit the plaintiff. If the court
considers the particulars of claim
do not support a bailment but the evidence
does, it should permit amendment if necessary: Banque Commercial SA, en
liquidation v Akhil Holdings. Water Board v Moustakas."'
The second defendant has made its no case submission on the pleadings as they
stood and the evidence as adduced by the plaintiff
before he closed his case.
The plaintiff did not avert (sic) to 'the uncontradicted evidence establishing
bailment' in his submissions,
so the second defendant and the court is left in
the dark as to the evidence said to establish the bailment.
The second defendant
in its submissions has not made a point of objecting to
the plaintiff's actions, rather it has met the submissions by drawing attention
to the obvious flaws in the plaintiff's submissions."
- The learned magistrate resolved the issue of bailment that had
been raised by the plaintiff's submissions in this way:
"I reject the plaintiff's contention that there was a bailment, the
plaintiff has not set out in its submissions any scenario consistent
with the
bailment of the vessel, nor has he suggested who were the bailor and bailee
respectively of the vessel. All the evidence
suggests that Baran was the legal
owner of the vessel as a consequence of the creation of a trust. He was the
trustee of the vessel
for Dwyer as the beneficial owner."
- Having found that Baran was the trustee of the vessel in
September 1996 his Worship dealt with the defendant's acquisition of the
engine. This is what he said:
"Dwyer did not take legal steps to protect his interest such as
registering the vessel in his name with the Registrar of Ships at
the
Australian Maritime Safety Authority, despite advice from Grundy that he should
protect his interest. He took no steps to obtain
a court order that the trust
be terminated, with the consequence that, when Baran as trustee on 23 September
1996 sold 1 x Rolls
Royce Diesel engine Model A29/16 Engine no. 45011M to
Circuit Finance Pty Ltd, and on 25 September 1996 executed a mortgage over
the
vessel in favour of the finance company, he transferred title in that property
which was trust property to the second defendant
who became a bona fide
purchaser/mortgagee for value without notice."
- It is only necessary to refer to two other aspects of the
learned magistrate's Reasons. First, his Worship concluded that as beneficial
owner the plaintiff could not pursue a claim in respect of trespass to the
vessel against the defendant as mortgagee in possession.
Second, he identified
as applicable to his consideration of the defendant's no case submission the
approach set out in Protean (Holdings) Limited (receivers and managers
appointed) & Ors v American Home Assurance Co [1985] VicRp 18; [1985] VR 187.
Concerning the second of those matters, both counsel submitted before me that
the Protean approach was correct in a non-jury case, nothing said by the
High Court in Naxakis v Western General Hospital and Anor (1999) 75 ALJR
782 bearing upon that situation. I accept, in the absence of detailed
submissions to the contrary, that that is so.
Resolution of the appeal
The claim
- Notwithstanding the obvious care that the learned magistrate
gave to the matter, in my opinion his Reasons disclose more than one
error.
- First, I consider that it was not possible for his Worship to
conclude, whether in the context of a no case submission or otherwise,
that the
so-called trust document constituted a trust as between Baran and the
plaintiff. That is so for at least three reasons.
- The first reason is this: on the face of the document Baran
was not, at the time of its execution, the beneficial owner of the vessel.
Yet
he purported to declare a trust in respect of that interest in favour of the
plaintiff. If Baran became a trustee and the plaintiff
a beneficiary of a
trust, it was not by operation of that document.
- The second reason is this: his Worship found that Baran, as
trustee, had sold the engine of the vessel to the defendant on 23 September
1996. That involved reliance on the receipt exhibited to Ms Hooper's
affidavit. According to that receipt the vendor was not Baran
but Baran
Nominees Pty Ltd. If Baran Nominees Pty Ltd held legal interest in the vessel,
then Baran did not. I add that the mortgage
probably described Baran as
beneficial owner of the vessel in order to reflect the distinction between
Baran and Baran Nominees,
a distinction of which the defendant was apparently
aware.
- The third reason is this: the submission made for the
plaintiff reliant upon the Stamps Act 1958, although it did not identify
all the relevant sections, was not capable of being summarily dismissed.
- By s.17(1) of that Act duties are chargeable upon instruments
specified in the Third Schedule, subject to exemptions contained in
that
schedule.
- "Instrument" is defined by s.3 of the Act to include every
written document.
- By s.18(2) the Third Schedule is to be read and construed as
part of Part 2 of the Act.
- Section 30 reads as follows:
"Save and except as aforesaid, no instrument executed in any part
of Victoria or relating wheresoever executed to any property situate
or to any
matter or thing done or to be done in any part of Victoria shall except in
criminal proceedings be pleaded or given in
evidence or admitted to be good
useful or available in law or equity unless it is duly stamped in accordance
with the law in force
at the time when it was first executed."
- The means by which an omission or insufficiency of stamping
may be brought to the attention of the court is described by s.29(1).
- The effect of s.29(2) is to ameliorate the effect of s.30.
The sub-section reads as follows:
"(2) If the instrument is one (other than a bill of exchange or
promissory note) which may legally be stamped after the execution
thereof, it
may on payment to the appropriate officer of the amount of the unpaid duty and
the penalty payable by law on stamping
the same as aforesaid and of a further
sum of $2 be received in evidence, saving all just exceptions on other
grounds."
- The reference to an instrument "which may legally be stamped
after the execution thereof" takes the reader to s.28. Sub-section
(1) applies
in the ordinary case.
- Heading IX of the Third Schedule is entitled "Instrument of
Settlement". That term is defined to include
"(b) Any instrument declaring that the property vested in the
person executing the same shall be held in trust for the person or persons
mentioned therein".
- If the so-called trust document had created a trust, it met
the description in paragraph (b).
- Section 85 provides that the stamp duty upon any instrument of
settlement shall be payable by the settlor.
- Section 84 defines "settlor" in inclusive terms. To make
sense of sub-paragraph (b) of the definition of instrument of settlement
in the
Third Schedule, the word should be read to include, I think, a person executing
an instrument declaring that property vested
in that person shall be held in
trust for another person or persons.
- The situation that unfolded before the learned magistrate was
not, I think, uncomplicated. If the plaintiff had sought to rely
upon the
document to evidence a trust, he could not have done so unless stamp duty had
been paid upon it before trial, or unless
there was recourse to payment in
accordance with s.29(2). Supposing that a trust had been constituted by the
document, the Act did
not impose the obligation to pay duty upon the plaintiff.
But that may not have prevented the plaintiff, had he so wished, taking
action
pursuant to s.32 of the Act before trial; or from taking action at trial under
that section if s.29(2) did not itself authorise
the plaintiff to pay the stamp
duty.
- Again, the obligation to pay duty did not reside with Circuit.
But again, had Circuit wished to rely upon the document as constituting
a
trust, it may have been able to act under s.32 before trial; or under one or
other of ss.29(2) or 32 at trial.
- The complication arose because, it seems, there was confusion
as to the basis upon which the document was tendered in the first
place. If it
was not tendered by the plaintiff as evidence that a trust had been
constituted, and if the plaintiff's true position
at all times was that no
trust had been constituted, it would seem strange that the plaintiff could have
been under an obligation
(if he wanted to get the document into evidence) to
pay duty on the footing that the document was of a character which he said it
was not.
- However that may be, at the point where one party contended,
more or less strongly, and where the magistrate proposed to conclude,
that the
document created a trust, I cannot see that the strictures of the Stamps
Act could simply be overlooked. The deficiency was capable of remedy; but
it was not remedied. The observations of Isaacs J in The Commissioners
of Stamps (Queensland) v Wienholt & Ors [1915] HCA 49; (1915) 20 CLR 531 at 542,
referred to by Anderson J in Comptroller of Stamps v B.H. South Ltd
[1984] VicRp 37; [1984] VR 463 at 466 are in point.
- Counsel for the plaintiff raised a number of other points
concerning his Worship's finding that an express trust had been created.
He
contended that in all the circumstances, and despite later reference to
Protean, his Worship had not in fact considered the evidence as on a
no-case submission. I think that there was substance to the submission,
but I
do not find it necessary to resolve the matter.
- Next counsel submitted that what was relevant, as to
intention, was Baran's intention; and that his Worship's reference to the
"intention
of the parties" involved, in part, an extraneous consideration.
- It was Baran's intention that was pertinent. But whilst his
Worship's reasons travelled beyond Baran's intention only, they necessarily
involved a finding as to Baran's intention.
- Then counsel relied upon there being an absence of a settlor.
His Worship described the trust document as being unusual, there being
no
settlor of the trust nor any appointment by a settlor of a trustee.
Regardless, the plaintiff's submission that the absence of
a settlor meant that
a trust could not be constituted was incorrect.
- Again, counsel relied upon there being an absence of
consideration. But that did not gainsay creation of a trust, so long as it
was
executed and not executory. The document addressed a situation which would not
necessarily occur, and whose timing was in any
event unknown (so far as the
document revealed it). But if the document had declared a trust, arguably it
was not executory.
- The second problem with his Worship's reasons, in my
respectful opinion, was this: the starting point of the defendant's assertion
that the plaintiff could not maintain a claim against it in trespass and the
starting point of the defendant's claim to possession
of the vessel lay in its
contention that Baran held the legal interest in the vessel as at September
1996, that he had then sold
the engine to it, and that it had leased the engine
to Baran, his obligation to make the lease payments being secured by a
mortgage.
His Worship held that Baran did indeed hold the legal interest in
the vessel as at September 1996 - as trustee by virtue of the
trust document.
That made relevant the question whether the defendant was a purchaser for value
without notice. But his Worship's
finding that Baran held the legal interest
as a trustee - that is, by reason of the trust document - was not available.
Once I remove
that finding, the conclusion that the defendant was a purchaser
for value without notice could not stand. Moreover, once remove
that finding
it seems to me impossible to say that his Worship must have concluded that
Baran held the legal interest in the vessel
at a pertinent time; or, if he did
so, then whether it was by reason of trust or some other relationship. The
question of purchaser
for value without notice may never have arisen.
- I should add this: even if a trust had been constituted by the
trust document it does not follow that his Worship's finding that
the defendant
was a purchaser for value without notice could survive. It must be remembered
that the issue had to considered as
on a no case submission. In that
connection, inconsistent documentation relating to the sale was before his
Worship. Indeed, upon
his Worship's findings the vendor was not the supposed
trustee.
- Further, notice in the present connection "implies knowledge
and may be actually (sic) imputed or constructive. ... A person is
said to
have constructive knowledge when the circumstances are such that the court will
impute to him knowledge of the equitable
interest even though he has no
personal knowledge of it. Thus he may have failed either purposely or
negligently to make some enquiry,
or may have had notice of one fact which
would lead to notice of other facts": Jacobs, Law of Trusts in Australia,
3rd ed., paragraph 2719; see also Meagher Gummow and Lehane, Equity:
Doctrines and Remedies, 3rd ed., paragraphs 854-860.
- The learned magistrate appears to have concluded that because
the plaintiff did not register the vessel in his name, or seek a court
order
that the trust be terminated, it followed that when (as his Worship found)
Baran sold the engine to the defendant the latter
thereby became a bona fide
purchaser for value without notice. It seems to me, with respect, that this
conclusion did not follow
from the matters relied upon.
- In that connection, I do not understand the law to be that
registration of a vessel - essentially requiring a declaration by the
person
obtaining the registration - stands as conclusive evidence that the registrant
holds a legal interest in the vessel.
- This also may be said: Whilst his Worship was critical of the
plaintiff's failure to take action to protect his assumed interest,
and whilst
the two matters to which his Worship referred might be some evidence of the
defendant not having actual knowledge of the
supposed trust, they did not
address in a comprehensive way the question of constructive notice.
- Obviously one must be careful not to extend the boundaries of
constructive notice beyond the point that is permitted by the authorities.
Even so, the documentary material emanating from the defendant and Baran was
not unambiguous, Baran was revealed by his statement
of assets - which grossly
inflated the value of the vessel - not to be a reliable individual in
connection with the subject matter
of the transaction, and one would have
expected the defendant in the circumstances to have made an inspection of the
vessel and its
engine upon which (or the latter of which) it proposed to lend a
not insubstantial amount. There was evidence to the effect that
the vessel was
in the plaintiff's possession in September 1996, and was being used as a
pleasure craft. Any inspection was likely
to have thrown up questions, if that
had proved to be the situation. Apparently the plaintiff was not
cross-examined to suggest
that there had been any inspection.
- Perhaps, had the defendant gone into evidence, it would have
been disclosed that an inspection had been made of the vessel in September
1996, and that it had been in Baran's possession. Upon the assumption that the
issue whether the defendant was a purchaser for value
without notice was a live
issue, such evidence might well have been significant. But the defendant did
not go into evidence - that
is, other than by adducing material in the course
of the plaintiff's case.
- This was a case of fraud. True it is that it was a fraud
worked on the defendant, as his Worship in substance found, as well as
upon the
plaintiff. But it might well be thought that it was unsafe, upon a no case
submission, to conclude that the defendant's
officers ought not to have become
alerted to the fraud and thus to the plaintiff's assumed equitable interest by
reasonable enquiry.
As I have pointed out a moment ago, there were some
incongruities in the evidence that had been adduced; and there was, so far as
the evidence revealed it, a somewhat surprising failure of inspection of the
vessel by any employee of the defendant. Whilst it
would have been wrong for
his Worship to draw any inference adverse to the defendant by reason of its not
adducing evidence (other
than the evidence which emerged in the course of the
plaintiff's case) - see Protean supra at 215 per Young CJ - yet the
matters to which I have referred required consideration and, I think, the
exercise of considerable
caution before acceding to a no case
submission.
- The matter may be summarised this way: his Worship's
conclusion with respect to notice was based on two matters from which that
conclusion did not evidently follow. It involved a finding, in respect of the
overall transaction between the defendant and Baran,
that someone other than
the supposed trustee had sold the engine to the defendant. It did not
obviously consider, apropos constructive
knowledge, the implications of
conflicting documentation or the apparent absence of inspection of the
vessel.
- In the circumstances his Worship's conclusion might be thought
to have been at least bold; and perhaps impermissible.
- I turn to what was, in my opinion, a third error in the
learned magistrate's Reasons. It concerns the submission made on the
plaintiff's
behalf that even if the evidence disclosed a trust, it also
disclosed a bailment - in which circumstances the plaintiff was entitled
to sue
for the cost of repairs; and the subsidiary submission that, the evidence
disclosing bailment, amendment of the complaint
should be
permitted.
- His Worship concluded, in substance, that trust and bailment
were irreconcilable concepts and he was unpersuaded that counsel for
the
plaintiff had set out in his submissions "any scenario consistent with a
bailment of the vessel, nor ... who were the bailor
and bailee
respectively".
- His Worship's approach to the question of bailment proceeded
from the starting point that a trust had been constituted by the so-called
trust document. That was an impermissible starting point. It appears to have
assumed that a beneficiary could never be a bailee.
That was too broad a
statement. Counsel for the defendant did not seek to support that proposition
before me. It did not recognise
that there was some evidence capable of
sustaining a conclusion that the plaintiff had become a bailee of the vessel
(that is, on
the assumption that there was a trust) by mid 1996; albeit that
the submissions made below on the plaintiff's behalf did not identify
when and
in what way the alleged bailment came into existence. The question of
attornment never came to be considered. Resolution
of the bailment issue in
the way that his Worship approached the matter necessarily meant that any
application to amend to alleged
bailment must have been hopeless. No amendment
would be permitted which was necessarily futile.
- His Worship's reasons concerning the issue of bailment may
thus be criticised. Certainly their effect was to preclude the application
to
amend at which counsel's submissions hinted. But had his Worship not
determined the substance of the matter straightway, rather
entertaining an
application to amend, common sense dictates that he would have refused the
application as being hopeless for the
very reasons which he in fact advanced.
Those reasons, in that context, would have been equally subject to
criticism.
- No doubt the tide is running strongly in favour of permitting
amendment so that issues arising between the parties may be litigated:
Queensland & Anor v J.L. Holdings Pty Limited [1997] HCA 1; (1997) 189 CLR 146,
Howarth v Adey [1996] VICSC 4; [1996] 2 VR 535. It should not necessarily have been
refused if it was made, in substance, in response to a no case submission,
particularly if its
effect was to formulate a cause of action revealed by the
evidence. But counsel for the defendants submitted before me, in effect,
that
amendment would have been futile (and refused) because, if a bailment had been
constituted, it could not have outlived the sale
and/or mortgage to his client
- for the plaintiff had not attorned; see Palmer on Bailment, Chapter 21,
pp.1368-1371.
- The plaintiff's foreshadowed amendment took as its starting
point an assumption, contrary to his preferred case, that there had
been a
trust. On that assumption a purchaser could have acquired good title in the
vessel from the person who held the legal interest
in it so long as the
purchaser acquired for value and without notice. Suppose, then, that there had
been application to amend, should
leave to amend have been refused on the
footing that, there having been no attornment, any bailment could not have
survived beyond
sale and/or mortgage in 1996?
- I think that the answer is no. There were, as the evidence
stood when the no-case submission was made, a number of uncertainties
as to
what had been sold, and by whom. It could not be safely concluded that the
defendant was a purchaser for value without notice;
and, if it was, then of
what and from whom. Moreover, according to the mortgage deed Baran mortgaged
the vessel as its beneficial
owner. That assertion could not stand with one of
the two sale documents. It could stand with the other. But if it be regarded
as an accurate statement of the situation, had any occasion arisen which
required attornment failing which the assumed bailment would
end?
The counterclaim
- I turn to consider the order made by the learned magistrate on
the counterclaim. It can only be sensibly understood, no discrete
reasons
being given, as being founded on conclusions - upon matters in respect of which
the defendant carried an onus of proof -
that Baran held legal interest in the
vessel as at September 1996 by virtue of a trust constituted by the trust
document; and that
the defendant had been a purchaser for value without notice.
For reasons outlined those conclusions could not survive.
Another basis for sustaining the orders made
below?
- In the course of argument before me counsel for the defendant
submitted that it was not essential to his client's case that Baran
had held
the legal interest in the vessel as a trustee, the plaintiff holding the
beneficial interest. It was enough, he submitted,
that his client held the
legal interest and that the plaintiff held no more than a beneficial
interest.
- That was not the way in which the learned magistrate resolved
the matter. It is true that a respondent may rely upon a new argument
to
support a decision from which there is an appeal. But in the case of appeals
from the Magistrates' Court the authorities show
that such reliance will only
achieve a favourable outcome if the new argument is, in effect, unanswerable.
In the present case, even
if the proposition advanced by counsel for the
defendant was sound in principle, the evidence did not compel a conclusion that
Baran
held the legal interest in the vessel as at September 1996; or that the
plaintiff then held only a beneficial interest in it.
Orders
- The appeal must be allowed. The orders made on 7 October
1999 must be set aside. Both the claim and counterclaim must be remitted
for
re-hearing by the Magistrates' Court, differently constituted. Subject to
anything that counsel may wish to submit, the plaintiff
should have the costs
of the appeal. The costs of the first trial should be in the discretion of the
magistrate who re-hears the
matter. The respondent should have, if it seeks
it, a certificate under the Appeal Costs Act 1998.
---
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