Cowley v Murphy[2020] QDC 231

DISTRICT COURT OF QUEENSLAND

1. [1]
   The defendant seeks summary judgment pursuant to r 293 of the Uniform Civil Procedure Rules 1999 (UCPR), or alternatively, that the statement of claim be struck out pursuant to r 171(1)(a), (b) or (e) of the UCPR.
2. [2]
   The plaintiff seeks various orders concerning further disclosure, inspection of documents, an electronic bundle of documents and mediation.

Background

3. [3]
   Pursuant to s 38 of the Property Law Act 1974, in 2013 the defendants were appointed by the Supreme Court of Queensland as statutory trustees to sell the following properties that were, by the order, vested in them upon trust:

   1. (a)
      Lot 34 on RP 846362 (Halliday Bay); and
   2. (b)
      Lot 5 on RP 8098555 and Lots 100 and 101 on SP 28224 (Seaforth);

(collectively, the land).

4. [4]
   Frank Cowley owned the land until his death in February 2011.  By his last will, the plaintiff acquired a 10% interest in Halliday Bay and a 20% interest in Seaforth.  The balance of the interest in the land was acquired by a number of other beneficiaries.
5. [5]
   In October 2015, the plaintiff applied to the Supreme Court for an order that the defendants be removed as statutory trustees for sale and be substituted by new trustees.  The basis for that application was, in summary, that the trustees had failed to take steps to sell the land.  The application was opposed by the other beneficiaries, who were the respondents to the application.  The statutory trustees were not named as respondents to the application, but they appeared (by their solicitor) and made submissions in opposition to the application.  The Court noted that this was because some of the allegations by the applicant there may have amounted to allegations of breach of trust.  The application was unsuccessful, although orders were made to manage the sale of the land.^[1]  The land was eventually sold in May 2016.
6. [6]
   In this proceeding, the plaintiff claims damages from the defendant statutory trustees for breach of statutory duty or, alternatively, for breach of trust.  He pleads that, when the defendants were appointed in 2013, Halliday Bay was worth $2,275,000 and Seaforth was worth $2,319,000.  When the properties were sold in 2016, Halliday Bay was sold for $1,000,000 and Seaforth was sold for $940,000.  The plaintiff claims that the defendants breached their statutory duties and duties as trustees as, among other things, they failed to act with reasonable diligence and to sell the land within a reasonable time and deferred the sale of the land in accordance with the wishes of the other beneficiaries.
7. [7]
   The defendants contend that the issues raised in the present proceeding are materially identical to those decided in the Supreme Court’s judgment.  In that application, a substantive issue was whether the delay in selling the land was in breach of the defendants’ duties as statutory trustees and the Court determined that it was not in breach.  The defendants also contend that the judgment was final and conclusive on the merits, extinguished the application for removal and was completely effective unless and until rescinded, altered or amended.  Therefore, the issue whether the defendants were in breach of their duties was determined by the Court, as a necessary fact that was legally indispensable in reaching its decision not to remove the defendants as trustees.  On this basis, the defendants apply for summary judgment or, in the alternative, for an order that the claim be struck out.
8. [8]
   The plaintiff contends that there is no issue estoppel because the questions requiring determination in this proceeding differ from those in issue before the Supreme Court.  In that proceeding, the question was whether there was a sufficient basis for removal of the trustees in the interests of the beneficiaries, which involved the regulation of the trustees’ conduct.  The facts and issues relevant to that dispute included facts having nothing to do with a breach of trust, such as the willingness of the trustees to get on with selling the land.  The consideration of matters such as delay, the reason for the delay and whether the trustees had favoured the other beneficiaries were merely part of the reasoning, but not the legal and factual foundation for the conclusion that it was in the best interests of all the beneficiaries that the trustees remain in that position.  The Court did not finally determine whether the delay sounded in damages for breach of trust.  That is the question in this proceeding:  a cause of action that was not complete until the land was sold in 2016.  This proceeding involves the conclusive determination of whether there was a breach of trust and, if so, whether it caused the plaintiff loss.  Neither of those matters was determined by the Court in the earlier proceeding.
9. [9]
   The plaintiff also contends that the defendants were not parties to the removal proceeding, nor were they privies to the parties (the parties being only the other beneficiaries of the statutory trust for sale) and therefore, as between them and the plaintiff, no estoppel can arise.  He also contends that the decision was not final and therefore it did not decide any issue in a final and determinative manner:  thus, again no estoppel can arise.
10. [10]
    The real question in the removal proceeding was whether the delay and the reasons for it were such that it was appropriate, in the Court’s discretion, to remove the trustees.  The trustees’ reason for the delay was that they had received advice that, if the land could be rezoned, its value might increase substantially, so they applied for rezoning and awaited a decision on that application.  His Honour found that the explanation for the delay up to April 2015 was satisfactory^[2] and no inference adverse to the trustees could be drawn from that delay.^[3]  But he did so in the context of determining the question he had to decide:  that is, whether to remove the trustees. 
11. [11]
    His Honour recorded that there was no evidence before him about the possible benefit of a rezoning.  He went on to say that trustees risk a suit for breach of their duty if they ignore expert advice that the sale price could be markedly bettered by what might be expected to be a not unreasonable delay for the purpose of pursuing an application to rezone.^[4]  Of course, the converse is also true:  trustees risk such a suit if they delay selling in order to pursue such an application without obtaining appropriate advice about the likelihood of the application being successful and the likely benefit if it were.  But his Honour did not decide whether the delay in this case was or was not a breach of trust for which damages may be a remedy.  It was not necessary (nor indeed possible on the evidence before him) for him to reach a concluded view on that issue.
12. [12]
    What has become known as issue estoppel was described by Dixon J in the following seminal passage:^[5]

A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that … an act be commanded … .  [It applies where], for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order.

Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded.  In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action … .  Where the conclusion is against the existence of a right or claim … the estoppel covers only the actual ground upon which the existence of the right was negatived.  …  the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not directly the point at issue.

13. [13]
    In the Supreme Court decision, it was not necessary for McMeekin J to find that the trustees were or were not in breach of their duties, in order for him to determine whether or not to remove them.  Even if a delay was not in breach of those duties, it could result in a loss of confidence in trustees that merited their removal.  Conversely, even if he found that they had breached their duties in some respects, he still may or may not have removed them, depending on all the circumstances.  Therefore, even if he had made a finding that the trustees were (or were not) in breach of their duties, it was still open to him, in his discretion, to decide whether or not to remove them in the light of all relevant circumstances.  Thus it can be seen that such an issue was not legally indispensable to his conclusion.  Nor was an alleged breach of trust a necessary ingredient in the “cause of action” constituted by the right to make the application.
14. [14]
    Indeed, his Honour found that the delay in selling since April 2015 was not satisfactorily explained and was inconsistent with the trustees’ duties.^[6]  That appears to be a finding that the trustees had breached their duties in that further period of delay, but again it was not indispensable to his decision.
15. [15]
    So, although the applicant in the removal proceeding based his application on the trustees’ delay in selling the land and contended that the delay in the circumstances constituted a breach of trust, it was not necessary that the delay constitute a breach of trust for the Court to determine whether the trustees ought to be removed.  His Honour’s findings in that respect^[7] were not, therefore, the actual grounds on which the “right” claimed by the applicant on that occasion was negatived.
16. [16]
    I agree with the plaintiff’s submission here that the legal and factual foundation for his Honour’s conclusion was that it was in the best interests of all parties to persist with the trustees and to put in place directions as to how they should go about their task.^[8]  As the plaintiff’s counsel submitted before me, that was consistent with the defendants’ submission before his Honour, that the first issue for him to determine was “whether or not there are sufficient circumstances, or a breach sufficient, to give rise to a concern that the welfare of the beneficiaries is opposed to [the trustees’] continuation.”  The question whether the trustees had breached their duties was a relevant question, but not necessary to answer in order to resolve the ultimate issue of whether they should continue in office.  Nor did his Honour determine whether the delay sounded in damages for breach of trust.
17. [17]
    Therefore, in my view the decision in the removal proceeding does not give rise to an issue estoppel that prevents the plaintiff, in this proceeding, alleging that the defendants, by delaying the sale of the land from 2013 to 2016, breached their duties as trustees, causing him loss.
18. [18]
    As I have found that no issue estoppel arises on the basis of the matters decided by the Supreme Court, there is no need to consider the plaintiff’s other submissions.  However, as they were fully argued before me, I shall briefly express my views.
19. [19]
    I consider that the judgment of the Supreme Court was a final decision on the application before it, which was to remove the trustees:  it refused to do so.  Its decision not to remove the trustees was completely effective unless it was rescinded, altered or amended.^[9]  The same could have been said if the court had removed the trustees.  If, later, any additional facts arose that merited another application, that could have been made, but that would properly have been by way of a fresh application for their removal.  The fact that directions were also made by his Honour for the future conduct of the sale of the land by the trustees does not render the decision that they not be removed an interlocutory decision.  Therefore, if I had found that an issue necessary to this proceeding had been necessarily decided for the purpose of that decision, the fact that it was a final decision would have meant that an issue estoppel arose between the parties to that application and their privies.
20. [20]
    I also consider that the defendants in this proceeding were parties to the removal proceeding for the purpose of considering whether there is an issue estoppel that binds them.  Even though they were not named as parties, orders were sought against them, they were served with the application and supporting material and they participated fully in the hearing.  They should have been named as respondents to the application, as they were persons whose presence before the court was necessary, or would be desirable, just and convenient, to enable the court to adjudicate effectually and completely on all matters in dispute in or connected with the proceeding.^[10]  Indeed, they were treated as parties and his Honour even made an order concerning the payment of their costs of and incidental to the plaintiff’s application.^[11]  I do not consider it necessary that a person be named in a document as a party to a proceeding in order for the person to be considered a “party” bound by an issue estoppel arising from that proceeding.  If a person participates fully in a proceeding, as if the person were a named party, that is sufficient for that person to be bound by such an estoppel.^[12] 
21. [21]
    But if I were wrong in that regard, if I had found that the Supreme Court had relevantly decided, in a final way, that the trustees had or had not breached their duties as trustees, then even if there were no issue estoppel as between the plaintiff and the defendants, it would have been an abuse of process for the plaintiff or the defendants to seek to challenge that finding in this proceeding, even though the defendants were not parties to that proceeding.^[13] 
22. [22]
    Finally, it seems to me that, if the defendants were not parties to the earlier proceeding, they were nevertheless privies to the respondents in that proceeding.  The trustees had a legal interest in the outcome of that proceeding that was represented by the respondents formally named in the proceeding.  Their interest was in remaining trustees and owners of the land in that capacity.  The respondents’ interest was also in retaining the trustees’ appointment.  That places the trustees in the position of being privies of the respondents in that proceeding.^[14]  This is particularly so where the trustees in fact had control (on their part) over the presentation of evidence and the making of arguments in that proceeding.^[15]
23. [23]
    Given his Honour’s findings, one might suspect that the plaintiff in this proceeding has little prospect of success in claiming that the delay up to April 2015 was a breach of trust that caused him loss.  However, as I have recorded above, his Honour said that there was no evidence about what the possible benefit of a rezoning might be.  That remains the case today.  If evidence were to demonstrate in this case that there was never a realistic possibility that rezoning would be granted or that, even if the land were rezoned, its value would not increase substantially or at all, then there may well be sufficient evidence to satisfy this court that the trustees breached their duties by not obtaining more detailed and considered advice and by delaying the sale in the hope of a rezoning.  In these circumstances, it cannot be said that the plaintiff has no real prospect of success in this proceeding.
24. [24]
    Therefore, I shall dismiss the defendants’ application for summary judgment.  For the same reasons, I shall dismiss their application to strike out the statement of claim.
25. [25]
    By his application, the plaintiff sought orders that the defendants give further disclosure and other orders to prepare the proceeding for trial.  While the plaintiff’s counsel made submissions on these issues, the defendants’ counsel did not.  If it be necessary, that application can be determined by the court in due course, but one would hope that the parties could resolve those matters without the court’s intervention.  I shall therefore adjourn that application to a date to be fixed.
26. [26]
    I will hear the parties about the costs of the defendants’ application.