- Notable Unreported Decision
SUPREME COURT OF QUEENSLAND
Hack & Ors v Kettering Pty Ltd & Ors  QSC 27
ROSEMARY DAWN HACK & NIGEL ROGER HACK
RICHARD WILLIAM HACK
KETTERING PTY LTD ACN 010 014 150
HACK NOMINEES PTY LTD ACN 010 014 141
HACK PTY LTD ACN 115 617 788
HACK LAND PTY LTD ACN 116 758 760
HACK CONSTRUCTIONS PTY LTD ACN 118 839 526
HONE PTY LTD ACN 129 710 863
HACKIN PTY LTD ACN 115 671 282
HACKOFF PTY LTD ACN 114 800 190
HAYDEN ELLOWAY WINN
PETER DAVID KANE
PETER RUSSELL GRIFFIN
POGH PTY LTD ACN 123 808 024
POLONIUS PTY LTD ACN 131 899 995
ROGER WILLIAM HACK
Supreme Court Brisbane
27 February 2009
27 February 2009
EQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES – TRUSTEE-BENEFICIARIES – whether trust deed authorised distribution of capital only upon determination of the trust
Mr M Stewart SC and with him Mr I Erskine for the first and second plaintiffs
Mr P Freeburn SC and with him Ms M Lucich for the first, second, third, fourth, fifth and seventh defendants
Mr R Traves SC and with him Ms S Brown for the sixth, eighth, ninth, tenth, twelfth and thirteenth defendants
Mr R Jackson for the eleventh defendant
Mr P O’Shea SC and with him Mr J O’Regan for the fourteenth defendant
Carl Blumen for the first and second plaintiffs
Schweikert Lawyer for the first, second, third, fourth, fifth and seventh defendants
Allens Arthur Robinson for the sixth, eighth, ninth, tenth, twelfth and thirteenth defendants
DLA Phillips Fox for the eleventh defendant
Mullins Lawyers for the fourteenth defendant
- A question has been raised by new pleadings concerning the proper construction of a trust deed. It is appropriate that I determine that question.
- In September 2005, the fourteenth defendant (“Roger Hack”) was the sole director of the first defendant (“Kettering”). Kettering was trustee of “the Noosa Trust”, which was created by a Deed of Trust dated 1 September 1977 (“the Deed”).
- Paragraphs 87A, 87B, and 87C of the second further amended statement of claim plead as follows:
“87A.On 5 September 2005, Roger Hack as sole director and secretary of Kettering Pty Ltd signed a resolution in the following terms:
“Resolution made 5th September 2005
- The company resolves to confirm distributions of all income and capital of the Noosa Trust for the financial years 2003, 2004 and 2005 (being the period 1st July 2002 to 30th June 2005) to Hack Nominees Pty Ltd ACN 010 014 141 in its capacity as trustee of the Roger Hack Trust, the Rita Hack Trust No.1, the Rita Hack Trust No.2 and Rita Hack Trust No.3”.
87B.(a)The Trust Deed for the Noosa Trust permitted distribution of capital of the trust only upon determination of the trust and then only after payment of all debts and liabilities of the trust including all costs and expenses associated with the termination and winding up of the trust pursuant to clause 28 thereof.
(b) Prior to 5 September 2005 there had been no resolution of Kettering Pty Ltd as trustee of the Noosa Trust resolving to distribute the income of the Noosa Trust for the financial years 2003, 2004 and 2005.
(c) Consequently, pursuant to clause 7 of the trust deed of the Noosa Trust, the income of the trust in those years was retained and became capital.
(d)The sums so retained were as follows:
(i) 2003 - $155,449;
(ii) 2004 - $ 922,374;
(iii) 2005 - $293,166;
in total $1,370,989.
87C. In the premises:
(a)the resolution referred to in paragraph 87A herein was void and of no effect;
(b)no sum was validly distributed pursuant to the resolution to Hack Nominees Pty Ltd;
(c)alternatively, the resolution was effective to distribute only the sums which had been income in the financial years 2003, 2004 and 2005 totalling $1,370,989.”
- These and other allegations were the subject of an oral application by the plaintiffs to amend at a review on 23 February 2009. I granted leave that day to include paragraphs 87A, 87B and 87C in the plaintiffs’ pleading. The parties were agreed that resolution of the issues raised in those paragraphs in the plaintiff’s favour would have implications for the further conduct of the litigation. It is unnecessary to presently canvas at length why this is so. It is sufficient to observe that a critical issue in the litigation is the effectiveness of a resolution dated 5 September 2005 by which Roger Hack as sole director of Hack Nominees Pty Ltd purported to resolve to appoint all the income and capital of the “Hack Nominees Trusts” for the financial years 2003, 2004 and 2005 to himself. Because of the implications that the determination of the questions raised by paragraphs 87A, 87B and 87C would have on that issue and the conduct of the litigation in general, I directed on 23 February that the questions raised by those paragraphs and the defences to them be the subject of separate, prior determination pursuant to rule 483 of the Uniform Civil Procedure Rules. The parties appeared to accept that this was an appropriate course in circumstances in which preparation for trial, including the filing and service of affidavits and witness statements, is due to take place in the next few weeks and a six day trial is due to commence on Monday 23 March 2009.
- At the start of the hearing today Senior Counsel for the plaintiffs (who has not previously appeared in the matter and who did not settle the pleading) advised that the plaintiffs abandoned reliance upon paragraph 87B(c) and (d) of the plaintiffs’ pleading. That course was appropriate given the terms of cl 7 of the Deed and the defendants’ pleadings in relation to it.
- At today’s hearing the plaintiffs requested me to not determine the questions raised by paragraphs 87A, 87B and 87C and to vacate the directions that I had made on Monday for their determination. The defendants did not oppose this suggested change of plan. However, after hearing submissions, I concluded that it was appropriate to determine today the question of construction raised by paragraph 87B(a). I considered that there was utility in determining that question. The proper interpretation of the Deed is a matter in dispute and it is possible to determine the question of construction based upon the document. The question can be determined conveniently today so as to “quell a controversy” between the parties. There is no dispute that the resolution pleaded in paragraph 87A was made. I considered there was utility in determining the question of construction raised by paragraph 87B(a) since its determination was likely to narrow the issues for trial and to inform the plaintiffs’ consideration about whether to renew their adjourned application for leave to make further late amendments. These allege, amongst other things, that certain defendants knew that the resolution was beyond the power of Kettering. There is also a need to comply with the philosophy of civil procedure in this court in circumstances in which the parties prepared written submissions on the point of construction and were ready to argue the point today. To adjourn the determination of the point of construction would lead to unnecessary costs and delay.
The Deed of Trust
- In 1977 Roger Hack and his mother were the owners of land at Noosa Heads. The land exceeded 21 hectares in area. The Deed appointed Kettering to be the trustee of “Trust Property” that included the land. Clause 2(a) of the Deed provides that the beneficial interest in the Trust Property is divided into 400 units. Each unit confers an equal interest in the Trust Property, but does not confer any interest in any particular part of the Trust Property.
- Kettering was given “full and unfettered power” to act as if it were the absolute owner of the Trust Property and to exercise all other rights and powers conferred by or incident to the legal ownership of it. A specific power of sale was conferred in relation to any real and personal estate forming part of the Noosa Trust.
- Certain provisions of the Deed are especially relevant to the determination of the question in issue. I shall set them out, noting that the Deed states that the marginal notes are for convenience only and shall not affect the interpretation of the Deed.
- The Trustee shall have in addition to any powers conferred by law or otherwise the following powers in respect of the trust hereof that is to say:
- To distribute the Trust Property or any part thereof to the beneficiaries entitled thereto in the specie in which the Trust Property or part thereof consists at the time of such distribution with power to fix the value of any real or personal estate appropriated to answer the share of any beneficiary as the Trustee thinks fit every such valuation being binding on all persons interested.
- Unless previously determined by resolution the Trust shall cease and determine on the Thirtieth day of June in year Two Thousand and Thirty (2030).
DISTRIBUTION UPON DETERMINATION
- Upon the determination of the Trust and subject to the terms of any resolution of Unitholders in that behalf the Trustee shall distribute the Trust Property amongst the Unitholders in proportion to the number of units of which they are respectively registered as holders either in specie or by sale calling in and conversion into money or by partly applying one method and partly the other and then only after payment of all the debts and liabilities of the trust including all costs and expenses associated with the termination and winding up of the Trust.”
- The issue for determination is that pleaded in subparagraph 87B(a) of the plaintiffs’ pleading. Clause 28 of the Deed makes specific provision for distribution of the Trust Property “upon the determination of the Trust”. The plaintiffs contend that the Deed permits distribution of capital of the trust “only upon determination of the Trust”. The defendants contend that cl 9(e) permits distribution of capital in other circumstances.
- The plaintiffs submit that “clause 9(e) merely permits distribution in specie where there is otherwise a power given under the Trust Deed to distribute”. They contend that cl 9(e) is “not a discrete source” of a power to distribute capital and is “simply a machinery provision” I do not accept this submission. It is not supported by the language of cl 9(e), the context in which it appears or the terms of the Deed as a whole. It also seems at odds with the apparent intention of those who created the trust.
- Clause 9(e) is the source of a power to distribute the Trust Property or any part thereof to the beneficiaries entitled thereto. The power conferred by cl 9(e) to distribute is not expressly limited to the circumstance of the determination of the Trust, and there is no proper basis in the terms of the Deed to imply such a limitation. Clause 28 obliges the Trustee to distribute the Trust Property upon the determination of the Trust. Clause 9(e) permits the Trustee to distribute the Trust Property or any part thereof.
- The plaintiffs submit that the words “to the beneficiaries entitled thereto” in cl 9(e) suggest that the entitlement to a distribution has to be found elsewhere in the Deed. I do not agree. Those words refer to the persons entitled to the Trust Property, rather than persons entitled to a distribution by virtue of the exercise of some other power. The words serve to identify the persons to whom the Trust Property or any part of it may be distributed. Their inclusion may be out of an abundance of caution, so as to remove any doubt that may have arisen had they not been included. The words serve to direct attention to cl 2 in which the entitlement to Trust Property is addressed. The distribution permitted by clause 9(e) is to persons who hold units.
- The plaintiffs further submit that the construction of cl 9(e) for which the defendants contend would produce the “strange result” that a capital distribution could be made under cl 28 either “in specie or otherwise”, whereas a distribution from capital under cl 9(e) could occur only if its satisfied the requirements of that clause, with the possibility of a balance of capital not being dealt with. It was submitted that there is no sensible reason why this would be the case. I do not regard the operation of cl 9(e) as producing a strange result.
- Clause 9(e) requires a distribution made pursuant to the power conferred by cl 9(e) to be “in the specie in which the Trust Property or any part thereof consists at the time of such distribution”. The expression “in the specie” refers to the form in which the relevant property exists at the time of such distribution. The clause makes clear that the relevant property may be real or personal property. The Trust Property is not limited to the land that was owned in 1977. The clause gives effect to a presumed intention of the parties to the Deed that the land, or part of it, might be sold and the proceeds of sale distributed in the proportions in which units are held by the beneficiaries.
- If the Trust Property or any part thereof is capable of being distributed to the beneficiaries entitled thereto, then cl 9(e) confers a power to do so. The clause is not tied to the determination of the Trust.
- The Deed should be construed as a whole. There is no basis in the Deed to interpret cl 9(e) as merely permitting distribution where there is otherwise a power given under the Trust Deed to distribute. The plaintiffs’ argument, if accepted, would limit the power to distribute the Trust Property to the determination of the Trust. Such an interpretation would deprive the beneficiaries of the opportunity to have distributed to them any part of the Trust Property, such as the proceeds of sale of part of the land that originally became the Trust Property, until the trust was determined on 30 June 2030 or by earlier resolution. There is no reason to suppose that the trust was intended to operate in such a manner. An interpretation which permits the sale of all or part of the land and the distribution to beneficiaries of part of the proceeds of such sale would appear to accord with the parties’ apparent intention.
- The terms of the Deed do not suggest that the parties intended that Trust Property would be incapable of distribution for up to 53 years, and that the only circumstance upon which capital might be distributed would be if the Trust was determined. Clause 9(e) should be interpreted accordingly. The interpretation contended for by the defendants accords with the ordinary meaning of cl 9(e). Clause 9(e) permits all or part of the Trust Property to be distributed during the life of the Trust. This may be to the advantage of the beneficiaries, particularly if the trust is not producing income and the beneficiaries’ interests are served by the sale of part of the land and the distribution of the proceeds of sale to them. This is not a strange result even in a circumstance in which the balance of the capital is in a form which is not able to be distributed pursuant to cl 9(e).
- It is possible to imagine circumstances in which clause 9(e) does not permit a distribution. It may not be available to distribute the Trust Property amongst many different beneficiaries where the Trust Property consists of a Rembrandt. However, that does not mean that cl 9(e) cannot operate in many other situations to distribute capital in advance of the determination of the trust. Senior Counsel for the plaintiffs acknowledged in the course of the hearing that cl 9(e) had a potential operation in a case in which the trust had a large sum of money available for distribution, but also had an asset that was not in a form capable of being distributed in accordance with cl 9(e). The cash, or part of it, might be distributed pursuant to cl 9(e) and the asset would remain in the trust.
- Construing cl 9(e) as permitting the distribution of capital prior to the determination of the trust produces a sensible result. If the plaintiffs’ interpretation was correct the cash (and the remaining asset) could only be distributed upon the determination of the trust. A more sensible result, and one more likely to accord with the intentions of the parties to the Deed, is that capital capable of being distributed pursuant to cl 9(e) be available for distribution during the life of the trust. This result accords with the language of cl 9(e), its place in the Deed as a source of the trustee’s powers and the terms of the Deed as a whole.
- Clause 28 of the Deed deals with the determination of the trust and governs the distribution of the Trust Property upon that event.
- Clause 9(e) is not a “machinery provision” which permits a distribution only where there is otherwise a power given under the Deed to distribute. Clause 9(e) confers a power to distribute the Trust Property or part of it.
- If the Trust Property, or part of it, is capable of being distributed pursuant to cl 9(e), then it must be distributed in the specie or form that it exists at the date of distribution. Such a distribution is permitted during the life of the trust.
- The determination of the trust is not the only circumstance in which Trust Property might be distributed. Clause 9(e) empowers the trustee to distribute Trust Property, subject to the provisions of that clause, the other provisions of the Deed and the duties imposed upon a trustee.
- I determine the question raised by paragraph 87B(a) of the plaintiffs’ pleading by determining that the Trust Deed for the Noosa Trust did not permit distribution of capital of the Trust “only upon determination of the Trust”.
- I indicated at the end of argument on the issue of construction that I had reached the conclusion that I have indicated, and intended to publish my reasons later today.
- This enabled the parties to consider the future conduct of the matter, including the plaintiffs’ adjourned application for leave to amend. The matter was stood down to this afternoon. Based on my indication of the view that I took on the point of construction, Senior Counsel for the plaintiffs subsequently informed the court and the parties that:
- an appropriate order was to strike out paragraphs 87A, 87B and 87C.
- the plaintiffs would not seek leave to make the numerous other amendments contained in the draft second further amended statement of claim.
- The striking out of paragraphs 87A, 87B and 87C is an appropriate order as a result of my determination of the point of construction and the position adopted by the plaintiffs after I indicated my decision. The practical result is that the plaintiffs’ pleading remains in the form that it was before Monday’s application for leave to amend. There is no need for the plaintiffs to engross a second further amended statement of claim and to then strike through paragraphs 87A, 87B and 87C. To do so would generate unnecessary costs. The matter may proceed to trial on the basis of the further amended statement of claim flied 7 November 2008.
- I confirm the orders made by me earlier today:
1.Paragraphs 87A, 87B and 87C of the second further amended statement of claim be struck out.
2.The plaintiffs pay the defendants’ costs of and incidental to the application to amend the further amended statement of claim.
3.The plaintiffs pay the defendants’ costs of and incidental to today’s hearing.
 Exhibit 3.
 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 355, ; Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 at 498, .
 Uniform Civil Procedure Rules, r 5.
 Clause 5.
 Clause l 9(a); and see also Trusts Act 1973 (Qld) s 32.
 Transcript 1-20.
 The expression “in the specie” is used in cl 9(e), not “in specie”: cf cl 28. According to the Oxford Dictionary “specie” means, amongst other things: (i) in a manner or form properly belonging to a species or class; (ii) in respect of a form or manner as opposed to generally; (iii) of sum or amounts; (iv) of coin or money: in the actual form of minted pieces of metal; (v) coin; coined money; a commodity served as a means exchange or trade.
 Clause 5 of the Deed confers “full and unfettered” powers on the Trustee, and the Trustee was given the power to sell the land in whole or in stages over the term of the trust.
 Such a distribution of sale proceeds would be a distribution of capital: Charles v Federal Commissioner of Taxation (1953-54) 90 CLR 598 at 609.
 My conclusion concerning the meaning and operation of cl 9(e) makes it unnecessary to address the additional arguments of some defendants that cl 5 also provides a source of power to distribute. Also, it is unnecessary to address the issue of the plaintiffs’ standing, a matter that was raised in the defendants’ pleading and certain submissions.
 Exhibit 1.
- Published Case Name:
Hack & Ors v Kettering Pty Ltd & Ors
- Shortened Case Name:
Hack v Kettering Pty Ltd
 QSC 27
27 Feb 2009
- White Star Case:
No Litigation History