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[2014] QCA 296
Court of Appeal (Muir and Fraser JJA, and Mullins J)
21 November 2014
This is an important decision addressing how and when property, purchased ostensibly on trust, vests. In this matter the appellants, Ham and his company Canehire, were acting as trustees for the Holzapfel Property Trust (the “HPT”). Canehire, acting as trustee of the HPT, acquired the lessee’s interest in a Crown lease, and subsequently acquired the freehold in the same property using money advanced by another company, SEPD, controlled by Ham. The property was later sold and the proceeds were used to discharge indebtedness to Canehire’s secured lender and the balance was paid to SEPD. None of the proceeds were paid to the HPT or its beneficiaries. [6]–[17]. At trial, Holzapfel, one of the beneficiaries of the HPT, gave evidence that, prior to the “freeholding” of the property, it was agreed between himself and Ham that the freehold interest was to be acquired on trust for the HPT, [21]. The court accepted this evidence and this ruling was not challenged on appeal, [3]. The trial court ordered Ham/Canehire pay the respondent equitable compensation in an amount equal to the net sale proceeds of the property. The appellants submitted that the trial court’s order was predicated upon a finding not open to it; namely that the freehold interest had been acquired by Canehire on an express trust for the HPT. [4]. The main issues on appeal were whether “the freehold interest vested in Canehire in its capacity as trustee of the HPT immediately upon the deed of grant taking effect and, if not, did Canehire hold the freehold interest from that time until sold on a constructive trust”. [5].
As to the question of whether the freehold interest was purchased on trust for the HPT, the Court initially considered the circumstances giving rise to its purchase. Pursuant to ss 166 and 165A of the Land Act 1994 Canehire, as lessee, had the exclusive right to apply to convert the lease to freehold. This right, however, had accrued to Canehire by virtue of its capacity as trustee of the HPT, [29]. That was unaffected by any intention held by Ham prior to the issue of the deed of grant, to ignore the rights of the beneficiaries of the HPT and to purport to authorise or cause Canehire to act in breach of its duties as trustee. Such an intention held by Ham did not affect the rights and interests of the beneficiaries of the HPT or the capacity in which Canehire held the land. [29], [32]–[33]. Further, that the profit derived by Canehire in acquiring the freehold interest pursuant to the Land Act would have been otherwise unavailable to the HPT, due to their financial constraints, was irrelevant. [38]; Furs Ltd v Tomkies; see also [62]–[63]. Its conclusion, the Court stated, was supported by the general principle that “a court of equity will presume that a person acts pursuant to and not in violation of his obligations as trustee”. [35], see also [36]–[42].
Further, the Court concluded that even if, contrary to its holding, the freehold interest, when acquired by Canehire, was not held by it in its capacity as trustee of the HPT, it was held on constructive trust for the beneficiaries of the HPT and that all rights and duties remained the same. [43]; see also [45]–[50]. The Court concluded that the name given to the trust claimed by the respondent was “a matter of semantics”. [52] In the circumstances even were it characterised as a constructive trust it arose in precisely the same manner as the trust described by the respondent, coming into existence immediately upon the freehold interest being acquired by Canehire, as even if Canehire had acquired the property other than as trustee of the HPT, it would have done so in breach of its fiduciary duty. [53]–[54].
For these reasons the Court considered that none of the grounds of appeal were made out and ordered that the appeal be dismissed. [73].