Byrnes v Kendle
[2011] HCA 26(Decision by: Heydon J, Crennan J)
Byrnes
vKendle
Judges:
French CJ
Gummow J
Hayne J
Heydon J
Crennan J
Subject References:
Acquiescence
bare trust
consent
estoppel
express trust
in-tention
upon trust
Legislative References:
Law of Property Act 1936 (SA) - s 29(1)(b); s 41
Trustee Act 1936 (SA) - s 6; s 7; s 8; s 25A; s 25C
Judgment date: 3 August 2011
Decision by:
Heydon J
Crennan J
[90] The questions which this lamentable and ill-starred litigation throws up are as follows.
Was there a trust?
[91] Background . Did the "Acknowledgment of Trust" executed in 1997 create a trust? The trial judge held that it did not, because in his opinion evidence extrinsic to that Acknowledgment of Trust revealed that the alleged settlor did not intend to create a trust. For the legitimacy of taking that evidence into account he cited B & M Property Enterprises Pty Ltd (in liq) v Pettingill . [120] That case relied on Starr v Starr , [121] which in turn treated Commissioner of Stamp Duties (Qd) v Jolliffe [122] as authority for the proposition that evidence was admissible to show that a written instrument alleged to constitute a trust was not intended so to operate.
[92] The Full Court of the Supreme Court of South Australia disagreed. It declined to read Jolliffe's case as requiring an examination of the alleged settlor's subjective intentions not recorded in the Acknowledgment of Trust.
[93] In this court the respondent submitted that it was necessary for the appellants to establish a subjective intention by the respondent to create a trust, that the trial judge was best placed to assess the respondent's subjective intention in the light of his testimony, and that the Full Court should not have overturned the trial judge's finding of fact.
[94] This submission is incorrect. The trial judge's estimate of the respondent's evidence about subjective intention, and the evidence itself, was irrelevant. The submission rests on a fundamental but very common misconception.
[95] Constitutional construction . It is material, in exposing that misconception, to consider some words of Charles Fried. He is a former Solicitor-General of the United States. He is a distinguished scholar. He is the conservative at the Harvard Law School. He expressed scorn for the notion that "in interpreting poetry or the Constitution we should seek to discern authorial intent as a mental fact of some sort." He said: "we would not consider an account of Shakespeare's mental state at the time he wrote a sonnet to be a more complete or better account of the sonnet than the sonnet itself." He disagreed "with the notion that when we consider the Constitution we are really interested in the mental state of each of the persons who drew it up and ratified it." On that false notion, he said, the "texts of a sonnet or of the Constitution would be a kind of second-best; we would prefer to take the top off the heads of authors and framers -- like soft-boiled eggs -- to look inside for the truest account of their brain states at the moment that the texts were created." He continued: [123]
The argument placing paramount importance upon an author's mental state ignores the fact that authors writing a sonnet or a constitution seek to take their intention and embody it in specific words. I insist that words and text are chosen to embody intentions and thus replace inquiries into subjective mental states. In short, the text is the intention of the authors or of the framers.
[96] That approach to constitutional construction is consonant with s 109 of our Constitution. It provides in part: "When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail ...". There is an inveterate linguistic usage in many of the cases on s 109 purporting to direct attention to what the intention of the Federal Parliament was in enacting a federal law said to be inconsistent with a law of a State. But the cases mean only the intention as revealed in the words of the law. That is because s 109 does not provide: "When what a law of a State was intended to say is inconsistent with what a law of the Commonwealth was intended to say, the latter shall prevail ...".
[97] Statutory construction . These approaches to constitutional construction are matched by approaches to statutory construction. That is not surprising, given that the Constitution is contained in an Imperial statute. Soon after the Constitution came into force, O'Connor J correctly propounded a theory of statutory construction which stressed the irrelevance of the subjective intention of legislators. The construction of the statute depended on its intention, but only in the sense of the intention to be gathered from the statutory words in the light of surrounding circumstances. [124] Even if it were possible to establish the actual mental states of those drafting and voting for a Bill, the inquiry would be irrelevant. The correct approach is also seen in an extra-curial pronouncement by Mr Justice Holmes, only five years before O'Connor J: "we do not deal differently with a statute from our way of dealing with a contract. We do not inquire what the legislature meant; we ask only what the statute means." [125] In the words of the Seventh Circuit of the United States Court of Appeals: "Congress did not enact its members" beliefs ; it enacted a text." [126] Similarly, Lord Hoffmann described statutory construction as "the ascertainment of what ... Parliament would reasonably be understood to have meant by using the actual language of the statute." [127] However, in recent times in England [128] and in New Zealand, [129] through similar common law developments, and in Australia by statute, [130] extrinsic materials have been routinely examined to ascertain what the legislature meant. It is but one of several objections to that usually unprofitable course that it does not comply with Fried's approach.
[98] Contractual construction . The approach taken to statutory construction is matched by that which is taken to contractual construction. Contractual construction depends on finding the meaning of the language of the contract -- the intention which the parties expressed, not the subjective intentions which they may have had, but did not express. [131] A contract means what a reasonable person having all the background knowledge of the "surrounding circumstances" available to the parties would have understood them to be using the language in the contract to mean. [132] But evidence of pre-contractual negotiations between the parties is inadmissible for the purpose of drawing inferences about what the contract meant unless it demonstrates knowledge of "surrounding circumstances". [133] And in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd this court said: [134]
It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe.
[99] One reason why the examination of surrounding circumstances in order to decide what the words mean [135] does not permit examination of pre-contractual negotiations is that the latter material is often appealed to purely to show what the words were intended to mean, which is impermissible. The rejected argument in Chartbrook v Persimmon Homes Ltd was that all pre-contractual negotiations should be examined, not just those pointing to surrounding circumstances in the mutual contemplation of the parties. The argument purported to accept that contractual construction was an objective process, and that evidence of what one party intended should not be admissible. But other parts of the argument undercut that approach. Mr Christopher Nugee QC submitted: "The question is not what the words meant but what these parties meant ... Letting in the negotiations gives the court the best chance of ascertaining what the parties meant ." [136] It would have been revolutionary to have accepted that argument.
[100] These conclusions flow from the objective theory of contractual obligation. Contractual obligation does not depend on actual mental agreement. Mr Justice Holmes said: [137]
[P]arties may be bound by a contract to things which neither of them intended, and when one does not know of the other's assent ...
[T]he making of a contract depends not on the agreement of two minds in one intention, but on the agreement of two sets of external signs, -- not on the parties' having meant the same thing but on their having said the same thing.
[101] In consequence the actual state of mind of either party is only relevant in limited circumstances, for example, where one party relies on the common law defences of non est factum or duress; where misrepresentation is alleged; where one party is under a mistake and the other knows it; [138] where the contract is liable to be set aside by reason of equitable doctrines of undue influence, unconscionable dealing or other fraud in equity; where the equitable remedy of rectification is available; where a question of estoppel arises; or where there is a question whether the "contract" is a sham. [139]
[102] The construction of trusts . The rules for the construction of contracts apply also to trusts. Although the two institutions are distinct, that is not surprising.
[103] For one thing, as Mason and Deane JJ said: [140] "The contractual relationship provides one of the most common bases for the establishment or implication and for the definition of a trust." By "establishment" their Honours referred to deciding whether a trust existed. By "definition" they referred to ascertaining its terms. The two inquiries are closely related: for the terms of a document or oral dealing determine whether it creates a trust.
[104] For another thing, the same considerations which limit recourse to surrounding circumstances and oral testimony in relation to contracts applies in relation to trusts. In 1877 Lord Gifford said: "The very purpose of the written contract was to exclude disputes inevitably arising from the lubricity, vagueness, and want of recollection, or want of accurate recollection, of mere oral conversations occurring in the course of negotiations more or less protracted." [141] And three centuries earlier Popham CJ said: [142]
it would be inconvenient, that matters in writing made by advice and on consideration and which finally import the certain truth of the agreement of the parties should be controlled by averment of the parties to be proved by the uncertain testimony of slippery memory.
The goal of excluding disputes of this kind from litigation is thwarted by recourse to the same material in order to discover the background, and that is so whether the disputes are about whether a particular contract was created or a particular trust.
[105] The authorities establish that in relation to trusts, as in relation to contracts, the search for "intention" is only a search for the intention as revealed in the words the parties used, amplified by facts known to both parties. Thus in 1881 Sir George Jessel MR said: [143]
The settlement is one which I cannot help thinking was never intended by the framer of it to have the effect I am going to attribute to it; but, of course, as I very often say, one must consider the meaning of the words used, not what one may guess to be the intention of the parties.
[106] In 1934 Lord Wright said, speaking of a failed attempt to settle property on trust: [144]
the Court, while it seeks to give effect to the intention of the parties, must give effect to that intention as expressed, that is, it must ascertain the meaning of the words actually used. There is often an ambiguity in the use of the word "intention" in cases of this character. The word is constantly used as meaning motive, purpose, desire, as a state of mind, and not as meaning intention as expressed. The words actually used must no doubt be construed with reference to the facts known to the parties and in contemplation of which the parties must be deemed to have used them: such facts may be proved by extrinsic evidence or appear in recitals: again the meaning of the words used must be ascertained by considering the whole context of the document and so as to harmonize as far as possible all the parts: particular words may appear to have been used in a special sense, which may be a technical or trade sense, or in a special meaning adopted by the parties themselves as shown by the whole document. Terms may be implied by custom and on similar grounds. But allowing for these and other rules of the same kind, the principle of the common law has been to adopt an objective standard of construction and to exclude general evidence of actual intention of the parties; the reason for this has been that otherwise all certainty would be taken from the words in which the parties have recorded their agreement or their dispositions of property.
[107] In 1970, in Gissing v Gissing Lord Diplock made it plain that a trust between spouses could be inferred from the conduct of the parties. He said: [145]
the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party's words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. On the other hand, he is not bound by any inference which the other party draws as to his intention unless that inference is one which can reasonably be drawn from his words or conduct.
Among the conduct relevant to inferring the trust was "what spouses said and did which led up to the acquisition of a matrimonial home". He took into account, as relevant to the inquiry, financial aspects of the transaction by which the matrimonial home was purchased, and the financial contributions of the parties. These are instances of "background circumstances".
[108] In 1986, in Eslea Holdings Ltd v Butts , another background circumstance, "commercial necessity", was held relevant to the inferring of a trust. It was a case where guarantees were held on trust, and the relevant "commercial necessity" turned on the scope of the business which the party guaranteed was engaging in. [146] In 1988 Mason CJ and Wilson J followed that approach when they said in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd : [147]
the courts will recognize the existence of a trust when it appears from the language of the parties, construed in its context, including the matrix of circumstances, that the parties so intended. We are speaking of express trusts, the existence of which depends on intention. In divining intention from the language which the parties have employed the courts may look to the nature of the transaction and the circumstances, including commercial necessity, in order to infer or impute intention: see Eslea Holdings Ltd v Butts .
The reference to "matrix of circumstances" is plainly a reference to well-known decisions of Lord Wilberforce on contractual interpretation. [148] Similarly, Deane J said that where it was said that a contract had created a trust of a promise, the contractual terms had to be construed "in context". [149]
[109] In 1990, Priestley JA said in Walker v Corboy that, in deciding whether an agent for the sale of farm produce was a trustee of the proceeds or whether he and the principal stood only in the relationship of debtor and creditor, it was necessary to evaluate the "circumstances" and "background". [150] He cited a decision of Sir George Jessel MR in which, in deciding against the existence of a trust or equitable duties, he took into account the nature of one party's business which was necessarily known to the others. [151] And Meagher JA said that in deciding whether there was a trust, it was necessary to look not only at "the particular provisions of the agreement of the parties", but also "the whole of the circumstances attending the relationships between the parties." [152]
[110] In 1991, Gummow J said that the relevant intention to create a trust "is to be inferred from the language employed by the parties in question and to that end the court may look also to the nature of the transaction and the relevant circumstances attending the relationship between them". [153]
[111] In England these principles have been applied to the construction of trust deeds controlling pension funds -- first in the language of Lord Wilberforce's "matrix of fact", [154] later without that reference. In that area one relevant aspect of the background is the fiscal background, [155] and the practice and requirements of the tax authorities at the relevant time. [156] Another relevant aspect is that the beneficiaries under a pension scheme are usually not volunteers, but have rights with contractual and commercial origins in their contracts of employment which they pay for by their service and contributions. [157] Another relevant aspect is common practice in the field of pension schemes generally, as evinced in the evidence of actuaries and textbooks by practitioners in the field. [158]
[112] In 2000 Gaudron, McHugh, Gummow and Hayne JJ said that even if "the language employed by the parties ... is inexplicit", the court can infer an intention to create a trust "from other language used by them, from the nature of the transaction and from the circumstances attending the relationship between the parties." [159]
[113] Neither in England nor in Australia has the application of the principles for establishing and defining a trust been analysed with the sophistication devoted in England to their application in contract. However, in both English and Australian law the surrounding circumstances are material to the questions whether the words used created a trust and what its terms are. Accordingly, Conaglen was correct to say: [160]
The court's focus when construing the terms of [a] bilateral arrangement [creating a trust] is on the objective meaning that those terms would convey to a reasonable person, just as it is when construing contractual arrangements.
The question is what the settlor or settlors did, not what they intended to do.
[114] That truth tends to be obscured by constant repetition of the need to search for an "intention to create a trust". That search can be seen as concerning the first of the three "certainties" -- what Dixon CJ, Williams and Fullagar JJ called in Kauter v Hilton : [161]
the established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries.
But the "intention" referred to is an intention to be extracted from the words used, not a subjective intention which may have existed but which cannot be extracted from those words. This is as true of unilateral declarations of alleged trust as it is of bilateral covenants to create an alleged trust. It is as true of alleged trusts which are not wholly in writing as it is of alleged trusts which are wholly in writing. In relation to alleged trusts which are not wholly in writing, the need to draw inferences from circumstances in construing the terms of conversations may in practice widen the extent of the inquiry, but it does not alter its nature.
[115] As with contracts, subjective intention is only relevant in relation to trusts when the transaction is open to some challenge or some application for modification -- an equitable challenge for mistake or misrepresentation or undue influence [162] or unconscionable dealing or other fraud in equity, a challenge based on the non est factum or duress defences, an application for modification by reason of some estoppel, an allegation of illegality, [163] an allegation of "sham", [164] a claim that some condition has not been satisfied, [165] or a claim for rectification. But subjective intention is irrelevant both to the question of whether a trust exists and to the question of what its terms are.
[116] Jolliffe's case . The majority in Jolliffe's case relied on a passage in the eleventh edition of Lewin on Trusts [166] stating that the court will not impute a trust where the settlor did not mean to create one. In the light of the authorities discussed above, that statement is wrong. The majority denied that "by using any form of words a trust can be created contrary to the real intention of the person alleged to have created it". [167] Denials to that effect are incorrect as statements of the law generally. They can only be correct in particular statutory contexts which might justify them. In 2000 Lewin on Trusts [168] stated that Isaacs J's "powerful dissent" would be preferred in England, and in 2008 that work again described Isaacs J's dissent as "powerful". [169] His dissent is indeed powerful, and as a statement of trusts law generally it is to be preferred in Australia as well as England to the majority's statement in Jolliffe's case and the cases which have followed it.
[117] The 1997 Acknowledgment of Trust. Did the 1997 Acknowledgment of Trust create a trust? The opening language twice described it as a trust. Clause 1, a key operative provision, used the language of trust. These indications, not countered by any other aspect of the document, are more than sufficient to support the conclusion that it was a trust. But there are surrounding circumstances known to the parties pointing to that conclusion as well. By Recital D the parties acknowledged that their respective entitlements to interests in the Original Property which was the subject of the 1989 Acknowledgment of Trust were transferred into interests in the New Property at Rachel Street, which had been purchased with the proceeds of sale of the Old Property. The 1989 Acknowledgment of Trust had the same references to trust as the 1997 Acknowledgment of Trust, and cll 1-3 of the two Acknowledgments of Trust were close to identical. Nothing in either the 1997 Acknowledgment of Trust or the 1989 Acknowledgment of Trust to which it refers and which it replaces points against the existence of a trust. The oral evidence of the respondent was inadmissible on this question, and in any event was extremely obscure.
[118] Thus the 1997 Acknowledgment of Trust created a trust.
Was it the duty of the respondent as trustee to let the property?
[119] Both the trial judge and the Full Court denied that the respondent was under a duty to let the property. That was correct while the respondent and the second appellant lived in the property. But it ceased to be correct in 2001, when they moved elsewhere. The respondent submitted that the 1997 Acknowledgment of Trust imposed no other duties on himself as trustee, and, in particular, no duty to recover rent. The submission fails, because the duty existed independently of the terms of the 1997 Acknowledgment of Trust. Even if there is no direction in the trust instrument that the trust property be invested, it is the duty of the trustee to invest the trust property subject to the limits permitted by the legislation in force under the proper law of the trust and subject to any limits stated in the trust document. [170] If there are no limits of that kind, a trustee who receives a trust asset, like an executor of a deceased estate, must "lay it out for the benefit of the estate." [171] That is, it is the duty of a trustee to obtain income from the trust property if it is capable of yielding an income. If the property is money, it should be invested at interest or used to purchase income-yielding assets like shares. If the property consists of business assets, it should be employed in a business. If the property is lettable land, it should be let for rent. [172] And if the intended means of gaining an income turn out to be unsatisfactory, those means must be abandoned and others found.
[120] Were any limits on the duty of the respondent as trustee created by the legislation in force under the proper law of the trust (ie the law of South Australia)? s 6 of the Trustee Act 1936 (SA) relevantly provides:
A trustee may, unless expressly forbidden by the instrument creating the trust--
- (a)
- invest trust funds in any form of investment ...
The letting of land is an "investment" within the meaning of s 6(a). Sections 7-9 and 25C create or preserve other rules relating to investment, but it was not submitted that any of them prevented the trustee from having a duty to let the property. Thus the letting of land was not restricted. And there were no limits stated in the trust instrument which cut down the respondent's duty to invest the trust property (the land) by letting it.
[121] The Full Court held that if the "device" of a trust had not been used, Mrs Byrnes and Mr Kendle would have been co-owners, and this would have excluded any duty to let the property. The Full Court then appeared to hold that, even though Mr Kendle was a trustee, the co-ownership displaced the trust duties. That is not so. Whatever the position at law if there had been no trust, the position in equity once the trust was created was that Mr Kendle's duty as trustee prevailed.
[122] Counsel for the respondent also submitted that the respondent was a fiduciary, and that the law did not impose positive legal duties on fiduciaries. In the first place, that is a very over-simplified proposition in relation to fiduciaries. And, in the second place, the respondent was not just a fiduciary: he was a trustee.
[123] The respondent then submitted that if the respondent was a trustee, he was only a bare trustee, and a bare trustee had no active duties to perform and no duty to recover rent. But this is a circular and question-begging argument.
[124] Thus it was the duty of the respondent to let the property.
Did the respondent as trustee breach his duty to let the property?
[125] The respondent attempted to carry out his duty to let the property by letting it to his son on a promise to pay rent. Subject to questions about the legitimacy of letting it to a close family member, particularly one as financially embarrassed as the son, this, at least initially, fulfilled the duty. However, the son paid hardly any rent. The respondent thereafter fell into breach of duty as trustee by failing either to ensure that the rent was paid, or, in default, to procure that the son be evicted much more speedily than he was and replaced by a more satisfactory tenant.
Did the conduct of the second appellant disentitle her from complaint about the respondent's breach of trust?
[126] Neither the pleading of this issue nor what the courts below said about it is clear. This is not surprising in view of the unclarity of the applicable law.
[127] The trial judge found, after analysing the problem in terms of an inquiry about "cooperation", that "although unwillingly, [the second appellant] consented to her husband's decision not to press for rent." The Full Court found that she "concurred or acquiesced" in it. It also described her as having given "consent". The Full Court also said that the trial judge's "clear finding of fact" was "not really challenged on appeal". In fact it was, by ground 6 of both the original and the supplementary notice of appeal, and by argument.
[128] The respondent supported the reasoning of the Full Court. That reasoning accepted that the second appellant would not be disentitled from relief unless she knew the legal effect of what she was doing. It was not established that she did know the legal effect of what she was doing.
[129] In his evidence the respondent said:
[The second appellant] and I hoped that [the son] would pay rent arrears to us eventually, but he did not. [The second appellant] and I did not take any action until 2007 when we with help of my family ... caused [the son] to leave the property.
In cross-examination the respondent confirmed that evidence. He also accepted that at no stage did he say to the son that the son did not have to pay the rent. These answers establish that there was no abandonment of the trust's claim against the son and no consent, concurrence or acquiescence in any abandonment of it by the second appellant. The evidence of the second appellant does not contradict that position. Nor was she ever asked whether she consented to the respondent's inactivity.
[130] But it is desirable to examine the position more fully.
[131] The respondent was in breach of trust on every occasion the respondent declined to sue the son for failure to pay rent. The respondent, on whom the burden of proof lay, took the court to no evidence that the second appellant consented to or "concurred" in any of those breaches of trust in advance.
[132] Was there contemporaneous or subsequent conduct by the second appellant disentitling the appellants from relief?
[133] In Orr v Ford Deane J set out various meanings of "acquiescence". It is convenient to consider the circumstances of this case in the light of his analysis.
[134] Deane J said: [173]
Strictly used, acquiescence indicates the contemporaneous and informed ("knowing") acceptance or standing by which is treated by equity as "assent" (ie consent) to what would otherwise be an infringement of rights ...
There was no evidence to support contemporaneous consent by the second appellant.
[135] Deane J then said that the word "acquiescence" is commonly used also to refer "to a representation by silence of a type which may found an estoppel by conduct". [174] The respondent did not attempt to establish the ingredients of an estoppel by silence.
[136] Deane J further said that "acquiescence" is commonly used to refer to "acceptance of a past wrongful act in circumstances which give rise to an active waiver of rights or a release of liability". [175] The conditions for "active waiver" were not established. Nor were the conditions for a "release of liability". Lord Westbury LC described those conditions thus in Farrant v Blanchford : [176]
Where a breach of trust has been committed, from which a trustee alleges that he has been released, it is incumbent on him to shew that such release was given by the cestui que trust deliberately and advisedly, with full knowledge of all the circumstances, and of his own rights and claims against the trustee; for it is impossible to allow a trustee who has incurred personal liability to deal with his cestui que trust for his own discharge upon any other ground than the obligation of giving the fullest information, and of shewing that the cestui que trust was well acquainted with his own legal rights and claims, and gave the release freely and without pressure or undue influence of any description.
The evidence does not establish that the second appellant was acting deliberately and advisedly or with knowledge of her own rights and claims against the respondent.
[137] Deane J then said that "acquiescence" is commonly used to refer to "an election to abandon or not enforce rights". [177] The evidence does not support election.
[138] Deane J then referred to two usages of the word "acquiescence" which he found unhelpful: [178]
First, it is sometimes used as an indefinite overlapping component of a catchall phrase also incorporating "laches" or "gross laches" and/or "delay" ... Secondly, acquiescence is used as a true alternative to "laches" to divide the field between inaction in the face of "the assertion of adverse rights" ("acquiescence") and inaction "in prosecuting rights" ("laches").
He then gave a third meaning: [179]
Thirdly, and more commonly, acquiescence is used, in a context where laches is used to indicate either mere delay or delay with knowledge, to refer to conduct by a person, with knowledge of the acts of another person, which encourages that other person reasonably to believe that his acts are accepted (if past) or not opposed (if contemporaneous).
There is no evidence of that encouragement, and the respondent did not give evidence that he had that belief.
[139] Finally, Deane J said that the expression "gross laches" referred to: [180]
circumstances where inaction or standing by (with knowledge) by a plaintiff over a substantial period of time assumes an aggravated character in that it will, if the plaintiff is granted the relief which he seeks, give rise to serious and unfair prejudice to the defendant or a third party.
The grant of relief to the plaintiff appellants here will cause no prejudice to third parties and no prejudice (beyond the justice of the case) to the respondent.
[140] The respondent also contended, but did not plead, that the first appellant, who was assignee of the second appellant's rights, had waived his entitlement. That contention must be rejected. The supposed waiver was the first appellant's offer to "let go of" the relevant claims if the Rachel Street property was sold and he received a fair price for his half share. In short, he was seeking to settle a dispute. The offer was not accepted by the respondent and the dispute was not settled.
Relief
[141] What relief should be granted in the light of the outgoings paid by the respondent as trustee which he was entitled to have taken into account? The appellants wavered between submitting that that question should be referred to the Full Court, and submitting that this Court should deal with it. In view of the small sums in dispute, the heavy costs already incurred and the litigious mishaps which have taken place, the parties should not be exposed to the expense and trouble of a further trip to the Full Court.
[142] The parties differ on whether the respondent ought to have obtained rent for the property in the 29 weeks between when the son left the premises in January 2007 and the grandson came in in July 2007. That difference is to be resolved in favour of the respondent. Taking into account the probable difficulties of tenanting the property, there was no breach of duty by the respondent in relation to that 29 week delay.
[143] The total figure for rent which ought to have been, but which was not, received is $44,550. The total figure for rates, insurance, mortgage payments and water charges for which the respondent, as trustee holding the legal title, was liable was $22,162.60.
[144] The appellants submitted that the correct approach was to take the figure which should have been received for rent; deduct the figure for outgoings, halve the difference, and give one half to the appellants.
[145] The respondent submitted that it is not correct to take that course because, although the rent was never paid, the outgoings were actually paid, and paid only by the respondent. It was said to be wrong that the appellants should get "half of the net rent without contributing anything by way of the outgoings".
[146] The flaw in the respondent's contention is that, while he paid the whole of the outgoings, he also failed to ensure receipt of any of the relevant rent. It is necessary to take the net figure derived by comparing what the respondent ought to have received ($44,550) with what he actually paid ($22,162.60), and giving the appellants half that net figure ($11,193.70). If that is done, full allowance is given for what, on the one hand, the respondent paid, and, on the other hand, the respondent failed to ensure the receipt of. The appellants obtain half the rent which the respondent should have got (less half the outgoings) because they are entitled to be compensated for the respondent's breach of trust; the respondent does not obtain the other half of the rent because he breached his trust in failing to get it in.
[147] There was a controversy whether, by reason of s 42(2) of the District Court Act 1991 (SA), no order as to costs should be made in favour of the appellants. Whether or not the other conditions stipulated in that provision are satisfied, it is clear that it is just in the circumstances to make the costs order proposed by Gummow and Hayne JJ. Among those circumstances are the complete failure of the respondent on all substantive points agitated on appeal, and the erroneous denial at all stages by the respondent of his trusteeship.
[148] The other orders proposed by Gummow and Hayne JJ should be made. The appellants submitted in effect that in O (2)(b)(i) line 2 there should not be inserted after "liberty" the words ", and to be obliged,". That submission may be accepted on the ground that the solicitors may be expected to pay in accordance with the reasoning of this Court.