Coolbrew Pty Ltd v Westpac Banking Corporation

1. [1]

   The primary Judge was correct to conclude that Coolbrew had not discharged its onus of showing that, objectively assessed, the parties intended Mr Swift to hold the deposit on trust for Coolbrew: (at [26])

2. [2]

   THE COURT: This is an appeal from a decision of a Judge of the Equity Division (Darke J), dismissing a summons filed by the appellant (Coolbrew). The summons seeks a declaration that certain funds placed on term deposit with the first respondent (Westpac) in the name of a third party (Mr Swift) are held by Westpac on trust for Coolbrew: Coolbrew Pty Ltd v Westpac Banking Corporation [2014] NSWSC 1108 (Primary Judgment). The primary Judge was not satisfied on the evidence that the alleged trust had been made out.

Parties

1. [3]

   Coolbrew’s summons joined two defendants: Westpac and Mr Swift. It appears that the second respondent (Commissioner) was subsequently added as the third defendant. The Commissioner is a necessary party to the proceedings because he served a number of notices on Westpac pursuant to s 260-5 of Sch 1 to the Taxation Administration Act 1953 (Cth). The notices required Westpac to remit to the Commissioner certain moneys standing to the credit of Mr Swift with St George Bank (a Division of Westpac).

2. [4]

   There was no dispute either before the primary Judge or on the appeal that at all relevant times Mr Swift owed money to the Commissioner and that the notices served on Westpac were valid.

3. [5]

   Coolbrew’s notice of appeal named Westpac and the Commissioner as respondents, but did not name Mr Swift as a respondent. Mr Johnson, who appeared for Coolbrew, informed the Court that Mr Swift had been made bankrupt at some stage after Coolbrew filed its notice of appeal. Mr Johnson suggested that neither Mr Swift nor his trustee was a necessary party to the appeal because Westpac had paid the full amount of the deposit in Mr Swift’s name to the Commissioner and thus the trustee no longer had an interest in the proceedings.

4. [6]

   The Court’s response was that, assuming that a sequestration order had been made against Mr Swift’s estate, the rights of Mr Swift’s trustee in bankruptcy might be affected and thus the trustee needed to be joined as a respondent. This prompted an inquiry by the appellant’s solicitor of the trustee, who apparently indicated that he might wish to claim that the moneys paid to the Commissioner constituted a preference and thus should be disgorged by the Commissioner to the bankrupt estate.

5. [7]

   Whether or not the trustee intends to make a claim, his rights are potentially affected by the appeal and he should have been joined. Accordingly, the Court directed the appellant to seek the leave of the Federal Court pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth) to take further steps in the appeal. It further directed that if the Federal Court granted leave, the appellant should join the trustee in bankruptcy as a respondent to the appeal. The directions were complied with and the appellant filed an amended notice of appeal joining the trustee in bankruptcy. The trustee subsequently filed a submitting appearance.

The Appeal

1. [8]

   Coolbrew’s case, both at trial and on appeal, is that the moneys held in Mr Swift’s name with Westpac, were held on trust because it (Coolbrew) had provided Mr Swift with the funds for a particular purpose, namely to enable him to provide security to Westpac in support of an advance to an associated company, Crown Property Investments Pty Ltd (Crown). According to Coolbrew, once the funds were no longer required for that purpose, Westpac was obliged to return the funds to Coolbrew on the principles stated in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 and analysed by Gummow J in Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491.

2. [9]

   The Court is unanimously of the opinion that the primary Judge’s decision was correct, essentially for the reasons his Honour gave and that the appeal raises no question of general principle. It is therefore, permissible for the Court to deliver reasons for its decision in short form: Supreme Court Act 1970 (NSW), s 45(4); Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.55. Unfortunately neither the legislation nor the UCPR explain what “short form” means. Some judgments which are said to be in short form are not especially short: see, for example, Collins v Tabart [2007] NSWCA 78 (54 paragraphs); special leave granted but revoked: Collins v Tabart [2008] HCA 23; 82 ALJR 1521.

3. [10]

   While there is much to be said for simply expressing our agreement with the primary Judge, we set out the facts found by the primary Judge and summarise his Honour’s reasons. We then give our reasons in shorter form than otherwise might have been the case.

The Facts

1. [11]

   There was no dispute that the primary Judge set out the facts accurately in the Primary Judgment (at [11]-[34]). We reproduce below the substance of his Honour’s account:

The Primary Judgment

1. [12]

   After setting out the principles stated in Quistclose and Re Australian Elizabethan Theatre Trust (as to which no issue arises on the appeal), the primary Judge stated (at [50]) that Coolbrew had to establish an intention to create a trust. His Honour stated (at [52]) that the focus of the inquiry had to be upon the objective indications of the parties’ intention, not on any subjective intentions that may have existed, but were not apparent from what was said or done by the parties.

2. [13]

   The primary Judge pointed out (at [57]) that a trust does not necessarily arise because money is provided for a particular purpose. It was therefore necessary:

3. [14]

   The primary Judge observed (at [58]) that Coolbrew had not adduced evidence of discussions with Mr Swift or of any resolutions relating to the terms on which the funds would be held by Westpac. This contrasted with Quistclose, where there was clear evidence that the funds were to be used exclusively for a particular purpose, which had failed. In the absence of direct evidence of any discussions or agreement between Coolbrew and Messrs Swift and Crane (who constituted Coolbrew’s board of directors at the relevant time) as to the ownership or use of the funds, it was necessary to focus on the documentary evidence relating to the transaction and the circumstances in which it proceeded (at [60]).

4. [15]

   The documentary evidence not only provided no support for the alleged trust, but suggested that the funds were to be held beneficially for Messrs Swift and Crane. The matters identified by his Honour were as follows:

5. [16]

   According to his Honour, it followed (at [65]) that:

6. [17]

   The primary Judge identified (at [66]) other, less clear-cut, indications that Coolbrew was not to have any beneficial interest in the deposits. For example, the Drawdown Request made pursuant to the Coolbrew Facility described Mr Swift as the “Beneficiary” and the term deposit application form contained no reference to a trust or to Mr Swift being a trustee.

7. [18]

   His Honour considered (at [67]) that the statements made by Messrs Swift and Crane in April 2014 that the funds belonged to Coolbrew did not provide substantial support for the existence of the alleged trust:

8. [19]

   For these reasons, the primary Judge concluded (at [70]) that Coolbrew had not made out its case for declaratory relief.

Reasoning

1. [20]

   The appellant’s written submissions on the appeal are exceedingly brief. Brevity is not a defect. However, it is very difficult to discern from the written submissions what, if any, errors the primary Judge is said to have committed.

2. [21]

   In his oral submissions, Mr Johnson advanced two arguments. First, the primary Judge should have accorded greater weight to emails of 7 April 2014 sent by Messrs Swift and Crane to Westpac. These purported to direct Westpac to pay each deposit of $175,000 to Coolbrew because “the money belongs to Coolbrew”.

3. [22]

   Secondly, Mr Johnson submitted that the primary Judge had given insufficient weight to the stated purpose of Westpac’s Facility Offer to Coolbrew of 28 June 2011, namely “Equity contribution for Crown Property development”. This was said to support Coolbrew’s claim that the drawdown pursuant to the Facility and the deposit of the funds with Westpac in the names of Messrs Swift and Crane resulted in the deposits being held on trust for Coolbrew (subject to Westpac’s security interest).

4. [23]

   It is important to appreciate what Mr Johnson did not submit. He did not dispute that:

5. [24]

   No error has been shown in the primary Judge’s treatment of the self-serving statements made by Messrs Swift and Crane in emails nearly three years after the transactions took place. The issue that the primary Judge had to determine was whether Coolbrew and Mr Swift intended to create a trust of the moneys on deposit with Westpac in favour of Coolbrew if the moneys were no longer required as security for Westpac’s Facility to Crown. That was not a matter to be determined by the subjective intentions or understanding of one of the parties, much less by a manifestation of such an intention or understanding years after the relevant events. As the primary Judge found (at [67]), Mr Swift’s email was not cogent evidence of an intention to create a trust at the relevant time.

6. [25]

   Mr Johnson was correct to submit that both Coolbrew and Mr Swift were aware of the terms of Westpac’s Facility Offer to Coolbrew. Coolbrew was the “Borrower” and Mr Swift executed the document both on behalf of Coolbrew and as “Guarantor”. Both were therefore aware that the expressed purpose of the new Facility of $350,000 was “Equity contribution for Crown Property development”. It is not clear, however, why that description of the purpose suggests that, if and when Coolbrew drew down on the Facility to enable Messrs Swift and Crane to deposit moneys with Westpac to be held as security for the Crown Facility, the deposits would be held in trust for Coolbrew, rather than held beneficially by the depositors (subject to Westpac’s security).

7. [26]

   On the unchallenged findings of the primary Judge, Coolbrew was aware of the terms of the authority forms signed by Messrs Swift and Crane on 12 July 2011. Those forms expressly stated that Mr Swift held the deposit as “beneficial owner, free of any interest of a third party” and that he was not entitled to declare any trust over or otherwise deal with the deposit without Westpac’s consent. Moreover, Mr Swift agreed with Westpac that until it received all money owed by him at any time in the future, he was not entitled to call for repayment of the deposit. As the primary Judge found (and Mr Johnson did not dispute) these terms, known to Coolbrew, were inconsistent with Coolbrew’s claim that the deposit in Mr Swift’s name was held in trust for it once the Crown Facility had been discharged.

8. [27]

   It is also significant that Coolbrew adduced no evidence as to the terms of any arrangement between it and Mr Swift (other than the email referred to above). The evidence is therefore entirely consistent with Coolbrew advancing funds to Mr Swift to be held by him beneficially, and with Mr Swift simply incurring an obligation to Coolbrew to repay the funds advanced to him in due course. The primary Judge was correct to conclude that the evidence did not support a finding that Coolbrew had discharged its onus of showing that, objectively assessed, the parties intended that Mr Swift would hold the deposit on trust as alleged by Coolbrew.

Orders

1. [28]

   The appeal must be dismissed. Coolbrew must pay the costs of the appeal of Westpac and the Commissioner.