David & Ros Carr Holdings Pty Ltd v Ritossa

1. [1]

   LEEMING JA: The second and third appellants, Mr David Carr and Ms Rosalind Carr, and their company, the first appellant David & Ros Carr Holdings Pty Ltd (DRCH), appeal from the dismissal of proceedings brought by them and heard over eight days in the Equity Division of this Court. The appeal is opposed by Mr Ivan Ritossa and Ms Marina Ritossa, the first and second respondents. The third respondent, Darbalara Holdings Pty Ltd, is the trustee of a unit trust known as the “Darbalara Property Trust”, the units in which were originally issued to the Carrs and the Ritossas in equal shares. Subsequently, the Carrs and the Ritossas have continued, directly or indirectly, each to own or control 50% of the units. All four of the Carrs and the Ritossas are directors of Darbalara, and Mr Carr and Mr Ritossa each own one of its two ordinary shares.

2. [2]

   In 2010, the Carrs and the Ritossas agreed to acquire agricultural property through the Darbalara Property Trust, which was established for that purpose. The first major purchase was a property called “The Junction” near Gundagai, to which was added in 2017 “Bogolara”, a property located between Gundagai and Yass around an hour’s drive away. Substantial numbers of cattle and sheep graze on both properties. Darbalara is a typical example of the trustee of a trading trust, that actively conducts commercial operations with a view to achieving a profit; this is common in Australia and New Zealand but much less so in the United Kingdom: Equity Trust (Jersey) Ltd v Halabi [2023] AC 877; [2022] UKPC 36 at [95]. Since around 2019, the Carrs and the Ritossas have disagreed on a number of issues. Many concerned the operations of the agricultural business, and were eventually resolved. However, the couples are at an impasse concerning the future of their investment. In short, the Carrs would like to realise their one half interest in the properties. There is a mechanism under the trust deed for this to occur (broadly speaking, one unit holder cannot sell without first offering the units to the others at the proposed price), but the Carrs have not invoked it, presumably because they have located no purchaser of their one half interest who is prepared to pay what they say is one half of the value of the net assets of the trust. Hence they seek orders which will have the effect of “winding up” the trust, which is to say, selling the trust assets, discharging trust liabilities and distributing the surplus to the unit holders (as will be seen, this description is somewhat elliptic).

3. [3]

   This appeal advances three bases on which, so it is said, the trust should be wound up. They are (1) the construction of cl 2 of the Rules of the Darbalara Property Trust, (2) statutory oppression contrary to s 232(d) or (e) of the Corporations Act 2001 (Cth), and (3) the appointment of a receiver to the assets of the trust on the basis of, or by analogy with, the principles in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360.

4. [4]

   The first basis (ground 1) turns on construction. The second (grounds 2-8) is factual, and challenges the conclusion by the primary judge that the disaffection between the Carrs and the Ritossas fell short of conduct amounting to statutory oppression. The third (ground 9) is a concededly novel proposition of law. For the reasons which follow, I would accept none of those arguments, with the result that the appeal should be dismissed.

5. [5]

   These reasons take the same course as the parties’ written and oral submissions, and deal with the three bases in order. It is most efficient to provide a streamlined overview of the factual background which is sufficient for the purposes of resolving the submissions advanced in respect of the first and third bases (which are questions of law) before giving more detail in order to address the factual submissions advanced in support of the second basis. In an appeal where the issues are considerably narrower than was the case at trial, it will not be necessary to summarise the entirety of his Honour’s reasons of 287 paragraphs, delivered on 5 September 2024, some six weeks after the conclusion of an eight day trial.

Background

1. [6]

   Mr Carr and Mr Ritossa met in 1987 when both worked for Bankers Trust in Sydney. They became friends in 2007, when the men held senior roles at different banks in Singapore. The Darbalara Property Trust was established in 2010, after Mr Ritossa told Mr Carr that he was interested in diversifying his investment portfolio and Mr Carr suggested Australian rural property.

2. [7]

   On 10 March 2010, Mr Carr emailed Mr Ritossa about the possibility of purchasing two rural properties, located side by side, one of which was The Junction, saying it presented “the chance for good returns and good gains”. He added:

3. [8]

   In April 2010, Mr Carr sought and obtained advice from his accountants about structures through which property could be held. He provided their advice to Mr Ritossa. The advice included a document headed “Comparison of structures” which compared various features of a private company, discretionary trust, unit trust and partnership.

4. [9]

   On 7 May 2010, the vendor sent Mr Carr a draft contract of sale, for a price of $7,250,000, on the basis that contracts needed to be exchanged by 12 May so that the auction already scheduled could be cancelled. Events over the next five days proceeded rapidly, and were uncontroversially summarised by the primary judge at [22]-[31]. Notwithstanding the speed, a deal of attention was given to the possibility that one investor might wish unilaterally to exit.

5. [10]

   Mr Carr’s email to the Ritossas on 7 May expressed concern about a company acquiring the property and “what we would do if either of us wanted to sell at a time when the other didn’t, and the new owner had to be integrated”. An email from Mr Carr to his accountant the following day introduced her to the Ritossas’ accountant, and included the statement:

6. [11]

   The Ritossas’ accountant proposed a unit trust structure, stating:

7. [12]

   On the morning of 10 May 2010 (2 days before the date on which contracts had to be exchanged to prevent an auction), Mr Carr’s accountant responded to his email of 8 May 2010, expressing concern about the short time frame required and making the following suggestion:

8. [13]

   Instead of the telephone conference with all parties, Mr Carr responded later that day asking her to speak directly with the Ritossas’ accountant. His email concluded:

9. [14]

   Mr Carr’s email of 11 May included the following:

10. [15]

    There was no direct testimonial evidence on what occurred immediately thereafter, but there was no challenge to the inference drawn by the primary judge at [30] that it was decided that a unit trust be used.

11. [16]

    Mr Damian Scroope of Sydney Business Lawyers was retained to draft a trust deed. The deed was executed on the morning of 12 May 2010, and later that day contracts were exchanged.

12. [17]

    At 2.49pm on the afternoon of 12 May 2010, Mr Scroope wrote to the accountants for the Carrs and the Ritossas. His email included the following:

13. [18]

    The questionnaire addressed matters which might be included in a unit holders agreement, including the following:

14. [19]

    On 14 May 2010 there was a further exchange between Mr Carr and his accountant concerning a unit holders agreement. She forwarded to Mr Carr the email and questionnaire which had been sent to her by Mr Scroope and said “The unit holders agreement should be put in place now, Damien Scroope can assist you with this”.

15. [20]

    The issue resurfaced more than a year later, when the accountant reminded Mr Carr of the earlier advice. She re-sent the questionnaire to Mr Carr. He forwarded it to Mr Ritossa by email on 16 October 2011, saying:

16. [21]

    However, so far as the evidence adduced at trial goes, neither man filled in the questionnaire and the matter went no further. No unit holders agreement was executed.

17. [22]

    Darbalara Holdings was appointed as trustee of Darbalara Property Trust on 16 November 2010, replacing the initial trustee (which had only been intended to act temporarily in that role).

18. [23]

    At all material times, Mr Carr and Mr Ritossa have each owned one of the two issued shares of Darbalara Holdings, and at all times they have been two of the four directors of that company. The other directors have been, since 12 May 2015, Ms Carr and Ms Ritossa (in the years prior to 12 May 2015, Mr Carr’s father was a director instead of Ms Carr). At all times, the board of Darbalara Holdings has comprised four directors, with two from each family.

19. [24]

    Initially, the Carrs and the Ritossas each held 10 units of the Darbalara Property Trust. In order to purchase The Junction, further units were issued to the Carrs and the Ritossas such that both sides became owners of 3,827,149 units. In the case of the Carrs, the units were owned by the Carrs as trustees of the Carr Family Trust, and later they were transferred to DRCH when it became trustee of that trust. In the case of the Ritossas, 106 units were owned by the Ritossas jointly, and the remaining 3,827,043 units were owned by Mr Ritossa in his own name.

20. [25]

    In December 2013, Mr and Ms Carr returned to live in Australia after Mr Carr retired from banking. The primary judge found that from this time Mr Carr took a more immediate role in the management of his family farm, Warralong. In late 2015, Mr Carr proposed to Mr Ritossa that Carr Agricultural Capital Management Pty Ltd (CACM), a company established in June 2015 and owned and controlled by Mr and Ms Carr, take over the management of the Darbalara Property Trust’s properties, including The Junction. Mr Ritossa agreed. CACM took over in December 2015 and was paid a monthly flat fee. There was no formal written agreement between Darbalara Holdings and CACM.

21. [26]

    On 16 December 2016, Darbalara Holdings entered into a contract to purchase another rural property, “Bogolara” for $5.7 million. Mr Ritossa lent Darbalara Holdings some $6.8 million for the purchase of the land, together with stamp duty, plant and livestock, financed from funds borrowed by him from Standard Chartered Bank and documented by a loan agreement executed by Mr Ritossa and Darbalara Holdings in August 2017. The purchase settled in February 2017. CACM managed Bogolara on the same basis as The Junction.

22. [27]

    Darbalara Holdings’ loan from Mr Ritossa was refinanced in September 2018. Darbalara Holdings, as trustee, entered into a loan facility agreement with ANZ Bank on 3 August 2018 for loans up to a maximum amount of $4.9 million. The security comprised (a) first registered mortgages over The Junction and Bogolara; (b) a general security agreement granting a security interest over the present and after acquired property of the trust; and (c) a subordination deed which gave priority to ANZ over all amounts owed to the unit holders. In early September 2018, $3.8 million was advanced by ANZ under this facility to Darbalara Holdings and each unit holder made a loan of $1,676,233 to enable Mr Ritossa’s loan to be repaid and provide further funding for the business. The unit holder loans were not formalised in a loan agreement and are interest-free.

23. [28]

    On 28 November 2018 DRCH (as trustee for the Carr Family Trust) entered into a contract to purchase a rural property called Gilla Willa for a total price of $13.8 million. The purchase settled on 18 December 2018. The acquisition was financed by debt. The Carrs borrowed $12.8 million from ANZ and the remainder from Mr Carr’s Singapore pension fund. The significance of this acquisition is that the Ritossas alleged that it placed significant financial strain upon the Carrs, explaining their subsequent desire to pay “dividends” to unit holders despite the absence of profits (because of drought) and their eventual desire to sell their interest in the trust assets.

24. [29]

    In 2023, CACM was replaced by Benview Farms Pty Ltd, trading as Southern Ag Management (SouthernAg), which remains the current farm manager. The replacement of CACM by SouthernAg was one of the issues of disagreement between the Carrs and the Ritossas.

25. [30]

    In 2014, 2016 and 2017 distributions were made to unit holders: (a) $180,000 on 21 April 2014 ($90,000 to each family); (b) $500,000 on 15 June 2016 ($250,00 to each family); and (c) $600,000 on around 26 March 2017 ($300,000 to each family). Although Mr Carr and Mr Ritossa referred in some email correspondence to these payments as “dividends”, that was loose language. The distributions were recorded in the trust’s financial statements as a reduction in each unit holder’s loan account.

26. [31]

    From around mid-2017 until mid-2020 The Junction and Bogolara were affected by drought. The profit and loss statement for the unit trust for the year ended 30 June 2020 showed a net operating profit of $695,396, substantially attributable to some $2,313,080 in sales of livestock. But there had been accumulated losses of some $1,114,293 in previous years, against which that profit was offset. No distributions were made in those years.

27. [32]

    The balance sheet for the unit trust for the year ended 30 June 2020 showed assets of just over $19 million, of which more than $15 million was The Junction, Bogolara and a homestead located on one of the properties. Livestock on hand were valued at less than $300,000 and there was about $950,000 cash at bank. There were liabilities of $7,994,451 to ANZ and $1,870,733 to each of the Ritossas and the Carr Family Trust, leaving net assets of just over $7 million. However, it is necessary to bear in mind that the properties were recorded at their acquisition price; other evidence which will be mentioned below suggests the properties had appreciated in value by the time of the trial.

28. [33]

    There was a dramatic falling-out between the families on 7 December 2019. All four of Mr and Ms Carr and Mr and Ms Ritossa gave evidence about a meeting at breakfast. The primary judge said at [83] that it was not necessary to determine whose account, if any, was most reliable. It was common ground that there was a heated argument, during which Mr Ritossa used coarse language and walked out of the room. Thereafter the Carrs stated they wished to sell.

29. [34]

    As will be seen below, there were various other disputes (concerning the appointment of a manager, the time when that manager and his family could live in accommodation which was also a trust asset and various other operational issues) which were contentious but which were eventually resolved. This is most apparent because from around 28 February 2020, directors’ meetings were recorded. Hundreds of pages of transcripts were tendered at trial. Unsurprisingly, both sides having retained lawyers and knowing that they were parties to litigation in which what was said might be tendered, the transcripts disclose at least the semblance of reasonableness and cooperation.

30. [35]

    The issue on which there was no resolution was whether the trust should be wound up.

The legal consequences of the structures established by the Carrs and the Ritossas

1. [36]

   First, the Carrs implemented their economic aim of co-investing with the Ritossas not as joint owners, not as partners, not as shareholders in a company which owned the real property, but through a structure which distanced them from the real property in which they were investing. The Junction and Bogolara were held as assets of a unit trust, with the units of the trust being held as assets of a discretionary family trust. That evidently was done advisedly. It may have had the consequence that investment income, if any were generated, could be distributed readily to persons and entities who were discretionary objects of the Carr Family Trust in a tax effective way.

2. [37]

   Secondly, the differences in legal structures matter, as they do in every case. The fact that the Carrs and the Ritossas sometimes styled themselves as “partners” and sometimes referred to “dividends” does not mean that their relationship ceased to be governed by the formal documents executed by them, on the basis of which accounts and (it may be presumed) taxation returns were prepared. The question of whether the Carrs can “exit” the investment cannot be meaningfully addressed without close consideration of the particular facts and circumstances of the case, and in particular, without consideration of the structure chosen to implement the investment: see for example Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635; [2008] HCA 27 at [126]-[127].

3. [38]

   Thirdly, the fact that the assets of the Darbalara Trust were deployed commercially, with a view to achieving a profit, does not alter the position. Parties may combine as partners or unincorporated joint venturers or through a company or through a trust in order to operate a business. The fact that in all cases the goal is to operate a commercial enterprise does not detract from the proposition that the different structures carry with them quite different ways in which the parties’ interests may be separated.

4. [39]

   Fourthly, it was not suggested that the documents did not bear their ordinary legal meaning. There was no suggestion that there was a sham, and in truth there was a partnership between the Carrs and the Ritossas. In light of the second and third points mentioned above, that was the only proper approach to take. I mention the point because some of the Carrs’ submissions, which deployed the language of partnership and indeed “winding up”, might distract from the relevant question, which is the circumstances in which the trustee of a trading trust may be compelled to cease its operations, discharge its debts, realise its assets and distribute them to its unit holders, with all personal and proprietary rights coming to an end. As will be seen when addressing ground 9, the appellants disavowed any suggestion that, contrary to the documents executed by them and on the basis of which their financial and taxation affairs had been conducted for many years, they were partners or owed each other fiduciary duties.

5. [40]

   Fifthly, putting to one side the submissions based on cl 2, the structures selected by the Carrs stood in the way of the unilateral decision of one of the co-investors bringing the investment to an end. This occurred on two levels. The ordinary remedies of s 66G of the Conveyancing Act 1919 (NSW), or of dissolving a partnership, or of applying to wind up a company, were not available to a unit holder of a unit trust (subject to the “novel” submissions in support of ground 9). Further, the Carrs’ choice for “their” 50% of the units to be held as assets of their discretionary family trust, coupled with their decision to have a company controlled by them as the trustee of that trust, meant that not only did they not own the units beneficially, but they ceased even to own the legal title to the units. It is thus a little inexact to describe the 50% of units owned by DRCH as “their” units, although it is true that the Carrs controlled DRCH and could cause it to distribute those units to any discretionary object including themselves. Significantly for present purposes, those choices meant that the words of extension in s 234 of the Corporations Act “even if the application relates to an act or omission that is against (i) the member in a capacity other than as a member” were inapplicable, at least on their ordinary meaning.

6. [41]

   It is wrong to regard the Carrs as beneficial owners of the units, or as having a “beneficial interest” in the units. To the contrary, “[t]he use of terms such as ‘beneficial interest’ is apt to mislead when applied to beneficiaries’ interests in a discretionary trust”: MSP Nominees Pty Ltd v Commissioner of Stamps (SA) (1999) 198 CLR 494; [1999] HCA 51 at [34]. In Chief Commissioner of State Revenue v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184; 106 ATR 151 at [114], Sackville AJA writing for this Court said:

7. [42]

   Sixthly, one of the central differences between the various modes by which the beneficial interest in property may be co-owned is the availability, or non-availability, of individual co-owners to bring to an end the legal relations between them. For many centuries, equity has sought to uphold trusts, and, as will be seen below when dealing with ground 9, many of its doctrines are directed to ensuring that trusts will survive.

8. [43]

   Indeed, there is reason to think that this informed some of the choices made by the Carrs at times prior to the breakdown of friendly relations with the Ritossas. On 21 August 2017, a circular resolution was passed to ensure that there would always be equality of voting power at the board level between the Carrs and Ritossas, including that in the event one director died, his or her spouse would receive an additional vote to ensure parity between the families. They also agreed that there would be no chairperson with a casting vote at board meetings. The primary judge stated at [46] that those decisions “were based on legal advice received on 20 January 2017 driven by a concern raised by the Ritossas that the Ritossa Loan, which was unsecured, exposed the Ritossas to increased risk if DPT’s business failed”. The finding was uncontroversial so far as the appeal was concerned. The legal advice does not appear to have been included in the appeal books. However, an email from Mr Ritossa to Mr Carr dated 14 February 2017 commenced:

9. [44]

   Finally, it is essential to bear steadily in mind the difference between the process of winding up an investment – ie selling the assets, discharging all liabilities and distributing any surplus to the investors – from the sale of a co-investor’s interest in the investment. The former destroys the structure, while under the latter the structure is preserved.

10. [45]

    The difference matters because it impacts value. A co-owner who lacks control is apt to find that the value of an investment is less than that co-owner’s ratable proportion of the net realisable assets. That is because the market accords a value to control. Thus it is trite that a minority shareholder in a private company will typically only be able to sell that parcel of shares at a discount to the proportion of the net value of the company’s assets. It is also trite that the sale of a majority interest in shares in a private company will often attract a “control premium”.

11. [46]

    In light of those principles applicable to the Darbalara Property Trust, it is convenient to address the construction of cl 2 of the Trust Rules.

Ground 1 – the construction of cl 2

1. [47]

   By ground 1 of their Notice of Appeal, the appellants challenge the primary judge’s rejection of their contention that cl 2 of the Trust Rules entitles any individual unit holder to require the trustee to wind up the trust. They add that if their construction of cl 2 is correct, the respondents’ refusal to permit a winding up contrary to their entitlements under the trust deed is a further matter giving rise to oppression and thus enlivening the range of statutory remedies in the Corporations Act 2001 (Cth).

2. [48]

   The trust deed recited that the Carrs and the Ritossas had each agreed to take up 10 units for an issue price of $10, and then stated in cl 1.1 that a company whose sole director was the Carrs’ accountant “must hold all the property acquired by it in its capacity as trustee of the Trust created by this deed (Fund) on the trusts set out in this Deed and in the attached rules”. Clause 1.2 provided that “The Fund must be held upon trust for the Unit Holders absolutely in proportion to the number of units held by them”. Aside from naming the trust and stating that “The attached rules have effect as part of this deed”, that was the entirety of the deed. No point was taken that the deed was ineffective to create a trust, notwithstanding that the deed on its face was wholly executory.

3. [49]

   Clause 2 of the “Trust Rules” – which were deemed by the deed to have effect as if they were part of the deed – provided as follows:

4. [50]

   “Income” was defined in cl 1.2 to mean “the income of the Trust as determined in the Trustee’s absolute discretion”, but failing such determination meant assessable income less all deductions allowed in accordance with the Income Tax Assessment Acts 1936 and 1997.

5. [51]

   In essence, the dispute between the parties is whether the opening words of cl 2.1 (“The Unit Holders”) denote the unit holders collectively, or instead refer to each unit holder individually. If the former, the entitlements set out in paragraphs (a) and (b) are conferred only on the unit holders acting collectively. If the latter, those entitlements are conferred on each unit holder individually.

6. [52]

   Both constructions are available as a matter of syntax. English is decidedly imprecise in this respect. The two sentences “Directors are entitled to receive notice of a board meeting”, and “Directors are entitled to approve a circulating resolution” have identical syntax, but regard to meaning makes it clear that the former refers to an entitlement that each director enjoys individually, while the latter refers to something which can only occur collectively (precisely how will turn on the company’s constitution). The difficulty posed by the imprecision of the English language when applied to co-owners of property or rights is familiar. Common law and equity have long had rules governing the effect of a conveyance to co-owners. Those rules diverged, and now s 26 of the Conveyancing Act 1919 (NSW) favours the approach in equity: see Delehunt v Carmody (1986) 161 CLR 464 at 472-473; [1986] HCA 67, although it does not always apply: Equititrust Ltd v Franks [2009] NSWCA 128; 258 ALR 388 at [54]-[56] and [84]-[85]. Likewise, the common law has developed principles of construction in order to determine whether a promise in a contract is joint: see White v Tyndall (1888) 13 AC 263 and Federation Insurance Ltd v Wasson (1987) 163 CLR 303; [1987] HCA 34. Even where drafters attend to the ambiguity of English plurals, there may be difficulties. In Kay v KRM (Vic) Pty Ltd; Classic Bet (NSW) Pty Ltd v Kay [2020] NSWCA 92 the contract included the words “collectively and individually, as the case may be”, which qualified a reference to a defined term denoting the three parties to a contract, and gave rise to an issue whether one of the three incurred a particular liability.

7. [53]

   A further aspect in which English is imprecise is that if a group of people is entitled to do something, it is not clear whether that means by acting unanimously or by majority. The default position is that directors (subject to the corporate constitution) act by majority but trustees (subject to the trust deed) can only act unanimously: see Sky v Body (1970) 92 WN (NSW) 934 and In the Estate of William Just deceased (No 1) (1973) 7 SASR 508. This does not arise in the present case. However, there would be a large difference in the individual rights of each of Mr and Ms Carr and Mr and Ms Ritossa if instead of being directors of a trustee company, they were instead co-trustees of the unit trust. (I shall return to this when dealing with what was meant by “deadlock”.)

8. [54]

   The reason for dwelling on these features of language is that they reveal that the construction of cl 2 cannot be resolved by grammar or syntax alone. Instead, as will be apparent from the reasons of the primary judge and the parties’ submissions, it will be determined by context and purpose and the semantic content of the competing constructions.

9. [55]

   The primary judge noted, and it was not in dispute, that the purpose of cl 2 was to ensure the characterisation of the trust as a “fixed trust” pursuant to s 3A of the Land Tax Management Act 1956 (NSW), for the purposes of claiming a tax-free threshold under the Land Tax Act 1956 (NSW). Section 3A relevantly provides as follows:

10. [56]

    It will be seen that s 3A(3B)(a)(i) and (ii) very closely approximate cll 2.1(a) and (b), while s 3A(3B)(b) very closely approximates cl 2.2 – down to the choice and order of the verbs “remove”, “restrict” and “otherwise affect”.

11. [57]

    The primary judge observed that the definition of “fixed trust” in sub-sections (3A) and (3B) was inserted into s 3A as a response to CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53. His Honour noted the amendments to the definition of “fixed trust” were intended to deem those beneficiaries who satisfy “relevant criteria” to be owners of the equitable estate in the land, and thus to be beneficiaries under a fixed trust eligible for the tax-free threshold.

12. [58]

    The primary judge said of s 3A(3B)(a) that it would be satisfied if beneficiaries collectively had the relevant entitlements, as the second limb of subparagraph (ii) was directed to whether the “rule” in Saunders v Vautier applied, and it would be “an odd use of language” if the first limb were read differently as requiring that the beneficiaries have the present entitlement to capital individually and severally.

13. [59]

    His Honour said, however, that the starting point for construing cl 2.1 was that it should be read together with cll 9, 15 and 16, which his Honour considered expanded upon the concepts in cl 2.1. His Honour said that this approach was not precluded by cl 2.3 which mandated the paramountcy of cll 2.1 and 2.2, because there was nothing in cll 9, 15 or 16 that conflicted with cll 2.1 or 2.2. Those clauses are as follows:

14. [60]

    His Honour considered that cl 15 amplified the unit holders’ present entitlement to income in cl 2.1(a), that cl 16 amplified their present entitlement to capital in the first limb of cl 2.1(b), and that cl 9 dealt with the winding up referred to in the second limb of cl 2.1(b). Clause 9, by use of the word “until”, provided that the trust would continue indefinitely until a unanimous agreement to terminate, expressly recognising the Saunders v Vautier right without the qualification recognised in CPT Custodian as to the trustee’s right of indemnity.

15. [61]

    His Honour then proceeded to consider, and reject, the arguments propounded by the appellants, as follows.

    1. (1)

       The appellants submitted that their construction of “[t]he Unit Holders” was supported by s 181(1) of the Conveyancing Act 1919 (NSW), which relevantly provides that in all deeds, “unless the contrary intention appears … The singular includes the plural and vice versa”. In his Honour’s view, that provision did not allow a construction of cl 2 whereby “[t]he Unit Holders” referred to unit holders in the singular but not the plural, and further, said that this would create a “commercial nonsense” as it would entitle each unit holder to the entirety of the income and capital of the trust. The Rules also distinguished, apparently deliberately, between unit holders in the singular and the plural which was a sufficient contrary intention that s 181(1) did not apply. Finally, the provisions of the Rules dealing with the transfer of units and rights of pre-emption, and the winding up of the trust upon unanimous resolution, would be “essentially otiose” if an individual unit holder could call for a winding up pursuant to cl 2.1(b).

    2. (2)

       His Honour noted that a clause in a trust deed which purported to satisfy ss 3A(3A) and 3A(3B), and which was similar to cl 2 of the Trust Rules here under consideration, had been construed by Gzell J (with whom Meagher JA and Tobias AJA agreed) in Sayden Pty Ltd v Chief Commissioner of State Revenue (2013) 83 NSWLR 700; [2013] NSWCA 111. In that case, Gzell J considered that that clause conferred rights on individual unit holders. The primary judge rejected the appellants’ reliance on Sayden, distinguishing it on the basis that it concerned the proper construction of a different trust deed that was “subtly different” from the deed here under consideration.

    3. (3)

       Although the appellants submitted that cl 2.1 was intended to implement the relevant criteria in s 3A(3B) of the LTMA, the primary judge considered that those criteria did not require that unit holders have individual rights to call for their share of the capital and that even so, the trust deed must be construed before determining whether it satisfied the criteria.

    4. (4)

       In respect of the primacy provision in cl 2.3, the primary judge said there was no inconsistency between cll 2.1 and 2.2 and any other provision, and thus cl 2.3 was not engaged.

    5. (5)

       The primary judge rejected the appellants’ contention that their construction should be upheld so as to allow the trust to be able to carry forward a loss for income tax purposes. His Honour said that the characterisation of a trust for income tax purposes would not assist with the proper construction of cl 2.1.

    6. (6)

       The primary judge added that cll 2.1(b) and 16.1 should be construed so as to cohere with cl 17.1, which provided that trust property was held for the unit holders as tenants in common. This clause revealed that each unit holder had an undivided 50% share in the assets but not an entitlement to any particular part of any asset of the trust, and no entitlement to call for the trustee to account to it for its share of land, relying on Beck v Henley [2014] NSWCA 201. His Honour noted that the appellants did not seek a partition or sale of the land under s 66G of the Conveyancing Act. Clauses 2.1(b) and 16.1 could be read consistently with cl 17.1 by reading the former as conferring collective rights.

16. [62]

    Thus, the primary judge concluded that cl 2.1(b) did not entitle the appellants to call for a winding up without the agreement of the other unit holders.

17. [63]

    The appellants advanced six arguments in support of their construction:

    1. (1)

       The appellants criticised the primary judge’s reasoning in respect of the plural “Unit Holders” in the chapeau of cl 2.1, submitting that it did include the singular and did not require unanimity, on the basis of the plain English meaning of the words and s 181 of the Conveyancing Act. In oral submissions, the appellants noted that it would be odd to describe the unit holders as being “presently entitled” if that entitlement depended on a unanimous resolution. The appellants also said that their construction would not render otiose the provisions of the trust dealing with the transfer of units and winding up (for example, cl 9.1), and that the primary judge should not have sought to read cl 2.1 consistently with cl 9.1 given cl 2.3, which provided for the paramountcy of cl 2.1 in the event of any inconsistency. In oral address, the appellants said that while cl 2.3 would only be engaged where there was a conflict, the provisions of the trust deed and Rules should be given their plain meaning rather than being read down to avoid a conflict, and that cl 2.3 would determine any conflict that did exist. To read down cl 2 to avoid conflict with cl 9 would undermine the drafter’s intention. The appellants further accepted that on their construction of cl 2, there may be few occasions where a unanimous resolution is passed pursuant to cl 9, but submitted that this was merely the result of a proper construction of the trust deed.

    2. (2)

       The appellants relied on s 3A(3B) of the LTMA as necessitating their construction. They submitted that because the objective intention of the drafter of the trust deed was to implement the criteria in the statute, that statute should be construed first, as a guide to the deed’s meaning. The primary judge had thus erred in construing the deed prior to the statute.

    3. (3)

       They relied on Sayden, submitting that the relevant clause there was “only subtly different” from cl 2 and the decision thus should have been accorded precedential value. They further said that Gzell J was determining whether the criteria had been incorporated into the deed, rather than simply construing the deed, and thus his Honour’s reasoning should have been applied. The appellants submitted that it ought not be a weighty consideration that their propounded construction would have the consequence that a 1% unit holder could call for a winding up, as this merely reflected the language of the LTMA and the precedent set in Sayden. There had been no finding by the primary judge that the trust was to be a long-term investment.

    4. (4)

       Fourthly, the appellants submitted that the primary judge erred in relying on the principles in CPT Custodian and Beck v Henley to construe cl 17.1 and to “read down” cl 2.1; they submitted that those common law principles had been overridden by the trust deed.

    5. (5)

       Fifthly, the appellants said that the primary judge’s construction of cl 2 left no function for that clause that was separate from that of cl 9.

    6. (6)

       Sixthly, they said that the primary judge implied that they could have sought a partition or sale of the real property held by the trust under s 66G of the Conveyancing Act, and that his Honour criticised them for not having addressed cl 17, both of which criticisms the appellants challenged.

18. [64]

    The respondents provided five reasons in support of the primary judge’s construction of cl 2:

    1. (1)

       It was consistent with the natural meaning of the text.

    2. (2)

       Only the unit holders collectively were entitled to the entire income and capital of the trust, which were the other present entitlements in cl 2.

    3. (3)

       The primary judge’s construction was in harmony with cl 9 and the mechanisms for transfer of units, which would otherwise be rendered otiose.

    4. (4)

       It was consistent with the commercial objective of the trust being a long-term investment, noting that it would be uncommercial for a single unit holder to be able to call for a winding up.

    5. (5)

       It was consistent with the position at general law, enunciated in Beck v Henley, where unanimity is required for absolutely entitled beneficiaries to call for the distribution of non-fungible trust assets such as land.

19. [65]

    In response to the appellants’ arguments, the respondents relevantly submitted that s 181 did not apply in the way contended for by the appellants, as the plural “Unit Holders” could not be changed to include the singular without changing the nature of the rights in cl 2. Clause 2.3 was not engaged as cl 9 was not in conflict with cl 2. In oral address, the respondents relied on Jabbcorp (NSW) Pty Ltd v Strathfield Golf Club [2021] NSWCA 154 in support of the proper approach to the interpretation of paramountcy clauses such as cl 2.3, which they said was to interpret the relevant clauses and to apply cl 2.3 only in the event of conflict. Further, the respondents submitted that the Land Tax Management Act did not require an individual entitlement on the part of unit holders to call for a winding up, and in any event, the requirements of the statute could not alter the proper construction of cl 2.1, which had to be construed prior to determining whether the statutory criteria were satisfied. Sayden was not concerned with interpreting the Land Tax Management Act, did not decide that the Act required individual entitlements to wind up a trust, and was distinguishable. The primary judge’s construction would not render cl 2.1 otiose, as the purpose of the clause was to ensure the trust met the “relevant criteria” in s 3A(3B).

20. [66]

    Six points may be noted immediately about cl 2 of the Trust Rules.

21. [67]

    First, cl 2.1 confers three distinct entitlements or powers on “[t]he Unit Holders”: first, a “present[] entitle[ment]” to the income of the trust, subject to the payment of the trustee’s proper expenses (cl 2.1(a)); secondly, a “present[] entitle[ment]” to the capital of the trust (limb 1 of cl 2.1(b)); and thirdly, a power to “require” the trustee to wind up the trust and distribute the property or net proceeds (limb 2 of cl 2.1(b)).

22. [68]

    Secondly, a “present entitlement” to income of a trust estate is a familiar concept, by reference to ss 95A, 95B and 97 of the Income Tax Assessment Act 1936 (Cth) and corresponding provisions in the 1997 Act. In Commissioner of Taxation v Bamford; Bamford v Commissioner of Taxation (2010) 240 CLR 481; [2010] HCA 10 at [37] the High Court explained:

23. [69]

    However, “present entitlement” to the capital of the trust is much less familiar. That said, the distinction between income and capital of a trust is basic. In Bamford at [17], the High Court endorsed what had been said by Stone and Perram JJ in the Court below at [67]:

24. [70]

    In the present trust deed, the trustee has a power to distribute part of the capital to unit holders in proportion to the number of units held by them (cl 16.2), and an obligation to distribute income (cl 15.2).

25. [71]

    Thirdly, whatever meaning be given to “presently entitled”, it is clear enough that cl 2.1 applies in relation to the whole of the “Income of the Trust” and the whole of the “capital of the Trust”. Each individual unit holder cannot individually be presently entitled either to all of the trust’s “Income”, or to all of its capital. Individual unit holders can only be presently entitled to the unit holders’ shares, proportionate to their unit holdings, of the income or capital of the trust. All of the unit holders may collectively be presently entitled to all of the trust’s income or capital, but not individually. That is a powerful semantic consideration supporting the construction upheld by the primary judge, that “The Unit Holders” in cl 2.1 is a reference to the unit holders collectively, rather than individually.

26. [72]

    Fourthly, the constructions propounded by the appellants and the respondents are both open on the face of the text. “The Unit Holders” could, as a matter of plain English, refer to either a group comprised of unit holders, or could refer to each unit holder severally. However, in respect of the first two of the entitlements in cl 2.1 (the entitlements to income and capital), the phrase “[t]he Unit Holders” can only be sensibly construed as referring to the unit holders collectively, in light of the previous paragraph; each unit holder cannot be individually entitled to the entirety of the income and capital of the trust. Against this, the appellants said that the phrase could be interpreted in respect of those present entitlements as conferring on individual unit holders an entitlement to the income and capital in proportion to the units held, consistently with cl 17.1, which provides that the trust property is held on trust for the unit holders “as tenants in common in proportion to the number of units held”. But rather than encourage a construction of cl 2.1 that reads the words “in proportion to the number of units held” into the present entitlements conferred, which would at the very least be an unnatural reading of the clause, cl 17.1 merely confirms that the first two entitlements conferred by cl 2.1 must be conferred on the unit holders as a group, rather than individually. That means that the appellants’ construction necessitates a distributive reading of cl 2.1, in that “[t]he Unit Holders” must denote a collective group for the first two entitlements, but individuals for the final power conferred by the clause. That is not prohibitive of their propounded construction, but weighs against it.

27. [73]

    Fifthly, it is readily apparent — and it was not in dispute — that the language of cl 2.1, including the notion of “present[] entitle[ment]”, is taken from s 3A(3B) of the LTMA, and that the purpose of cl 2 is to ensure that the trust satisfies the relevant criteria in that subsection to allow the trust to qualify as a fixed trust for land tax purposes. That has consequences for the proper construction of cl 2.

28. [74]

    This Court’s task is to construe the trust deed, and in particular, to decide whether cl 2 confers an individual entitlement on unit holders. But that constructional task must necessarily be undertaken by reference to the intention to be imputed to the drafters of the deed, and where that intention was to satisfy the requirements of a statutory provision, it can be reasonably presumed, subject to contrary indication, that it was effective and that the meaning of the deed reflects the requirements of the statutory provision. That presumption is particularly strong where, as here, the language of the deed is almost identical to the language employed by the statute. To that extent, then, the construction of cl 2 is coloured by the construction of s 3A(3B) of the LTMA. This approach is simply a manifestation of the general purposive approach to construction of deeds, and so does not treat the statutory task as logically anterior to the construction of the deed.

29. [75]

    That position was exemplified in the following exchange:

30. [76]

    That approach to construction will, of course, only have the consequence contended for by the appellants if their construction of s 3A(3B) is correct. That question is considered below.

31. [77]

    Sixthly, cl 2.3 provides for the continued operation of cl 2.1 “despite anything else that is contrary … in this deed”. That is a provision directed to resolving inconsistency where it exists, and directs a particular resolution of that inconsistency. P Herzfeld and T Prince, Interpretation (3rd ed, Thomson Reuters, 2024) says of such clauses at [22.100] that:

32. [78]

    That is consistent with the approach adopted in Jabbcorp (NSW) Pty Ltd v Strathfield Golf Club at [36] in respect of a definition commencing with “Notwithstanding any other clause”, which words were found to “only indicate the clause which prevails in the event of conflict, and say nothing as to whether there is a conflict in the first place”.

33. [79]

    Clause 2.3 merely provides that cl 2.1 will prevail if there is inconsistency, but is silent as to whether that inconsistency exists. Clause 2.3 does not detract from something more fundamental about the construction of the deed, namely, the ordinary position that the deed and rules must be construed as a whole, harmoniously, with a presumption against surplusage, which is a step anterior to the engagement of cl 2.3. To the extent that the appellants’ submission, to the effect that the primary judge erred by “reading down” cl 2.1 so as to read it harmoniously with cl 9, is contrary to that position, that submission must be rejected. More is said in relation to cl 9 below, but what emerges from the above is that the proper starting point is s 3A(3B) of the LTMA.

34. [80]

    The legislative history and purpose of ss 3A(3A) and (3B) is set out above. That said, it is difficult to identify a purpose, other than to ensure that a certain class of trust instruments would be, for the purposes of the assessment of land tax, regarded as fixed trusts. Although CPT Custodian prompted the provision, it is far from clear what aspect of that decision caused difficulty. In order to explain this, it is necessary to return to what CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) actually held.

35. [81]

    Simplifying the four appeals slightly, assessments for land tax had been served upon the owners of 100% and 50% of the units of unit trusts of land on which certain shopping centres were constructed. Plainly the individual trustees were liable to pay land tax, but as the High Court indicated at [5] the Commissioner had served notices on the unit holders “for ease of collection of the revenue”. The question was one of statutory construction. It was whether each unit holder was an “owner” of land under the Victorian legislation, and exclusive reliance was placed on the definition that an “owner” included “every person entitled to any land for any estate of freehold in possession”. At first instance, Nettle J had held that none of the unit holders were “owners” under this definition. The Court of Appeal had held that a unit holder with less than 100 per cent of the units was not, but the owner of 100 per cent of the issued units was, such an owner. The joint judgment of the High Court affirmed the entirety of the result reached by Nettle J.

36. [82]

    The particular unit trusts resembled those in the present case, save for the absence of cl 2, and the fact that the trustee was entitled to substantial fees in respect of which it enjoyed a right of reimbursement or exoneration from trust assets secured by a lien.

37. [83]

    The High Court addressed the consequences of the “rule” in Saunders v Vautier at [41]-[52], this being the basis of some of the appeals being allowed by the Court of Appeal. One strand of the reasoning focussed on the fact that the “unrealised potential” of the sole owner of all issued units to bring the trust to an end did not mean that that sole owner of units was entitled to any estate of freehold in possession, for the purposes of a statutory definition in a tax act: see at [42] and [52]. Another was that the unsatisfied trustee’s right of indemnity was a charge upon the assets of the trust, and until the rights of reimbursement and exoneration were satisfied, it was not possible to say what the trust fund was: at [50]-[51]. This was on the basis of a reading of Wharton v Masterman [1895] AC 186 to the effect that the rule in Saunders v Vautier could not apply if, by reason of the charging of legacies on the fund and accumulations, the persons seeking to put an end to the accumulations were “only entitled to an undetermined and uncertain surplus (if any) which might be left of the fund after payment of the legacies”. A third was more conceptual. At [46], the joint judgment observed that the trusts were drawn conferring individual rights attached to each unit. Although all units might be held by the same unit holder, the joint judgment said that even so the units were not drawn “to provide a single right of a cumulative nature so that the whole differed from the sum of the parts” and there “could be no such single right unless held jointly or in common, but the Deed was not cast in such terms”. The position was as Lord Reid stated in Gartside v Inland Revenue Commissioners [1968] AC 553 at 605-606:

38. [84]

    How does this translate to the mischief to which s 3A of the Land Tax Management Act is directed? That history and purpose suggests that, at the very least, there is no need to construe s 3A(3B) as requiring that an individual unit holder in a unit trust have the power to call for a winding up. Specifically, the legislative overturning of CPT Custodian does not require such a power be conferred: rather, s 3A(3A) avoids the consequences of CPT Custodian by deeming persons who are beneficiaries of a trust satisfying the relevant criteria in s 3A(3B) to be owners of an equitable estate in land. There is nothing in CPT Custodian which would suggest that those criteria must include a power on the part of individual unit holders to call for a winding up, s 3A(3A) being a deeming provision in any event.

39. [85]

    It is not necessary in order to resolve this ground of appeal, which turns on provisions in the deed establishing the Darbalara Property Trust, to give any comprehensive account of the operation of s 3A of the Land Tax Management Act, and it would be inappropriate to do so. But one thing is very clear. Acceptance of the appellants’ construction would carry with it the consequence that a 1% unit holder in a unit trust with many unit holders could bring about the winding up of the trust, even where that decision was opposed by all other unit holders and would spell the end of a potentially significant and longstanding commercial venture and cause substantial tax consequences. It would be strange indeed if the inclusion of words designed to clarify when unit holders could obtain the benefit of a threshold for land tax purposes had the effect of permitting minority unit holders to threaten the extinction of the trust (and thereby the incurring of substantial tax liabilities if, say, the result was the realisation of a capital gain by all unit holders). An intention that s 3A(3B) require trust deeds to include such a power should not be imputed to the legislature where another less unreasonable interpretation is open, as it is here.

40. [86]

    In support of their construction of s 3A(3B) and cl 2.1, the appellants relied on Sayden, emphasising [54]-[57] which concern cl 2(c), which is substantially similar to cl 2 of the Darbalara Property Trust. That portion of the reasons is as follows:

41. [87]

    It is true, as the respondents submitted, that Gzell J was construing a different trust deed, which differed in some respects to the trust deed here in question – for example, this trust deed has no clause providing that the singular includes the plural and vice versa. It is also true, as the appellants submitted, that the clause construed by Gzell J was substantially similar to cl 2.1 and so would ordinarily be accorded significant precedential weight in the construction of the latter.

42. [88]

    The fundamental difficulty with relying on the precedential force of Sayden is that the unit trust there considered had a single unit holder. “There was only one joint Registered Holder, Mr and Mrs Griffin as trustees of the Griffin Super Fund”: see at [24]. Gzell J was not concerned with the circumstance where a single unit holder calls for a winding up and thereby ends a unit trust with numerous unit holders whose interests diverge. His Honour’s reasons are to be read in that context. Sayden is not authority for what it did not decide: Davis v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 279 CLR 1; [2023] HCA 10 at [42] and [182]. As Gordon J said in Vanderstock v Victoria [2023] HCA 30; 98 ALJR 208 at [274] (dissenting, but not on this basal point), citing numerous authorities: “The words of a judgment, as every word of every judgment, must be read according to their subject matter: ‘[t]hey were appropriate to their context and must be read in their context’”. Speaking for this Court in Arinson Pty Ltd v City of Canada Bay Council [2015] NSWCA 199, J C Campbell AJA said quoting Lord Halsbury LC at [65]:

43. [89]

    Accordingly, while the words at [56] “any Registered Holder could require the Trustee to wind up the Unit Trust” on their ordinary meaning extend to a 50% unit holder (or a 1% unit holder), the decision may not be relied upon as having any precedential weight for that proposition. Gzell J was not confronted by the obvious practical difficulty which would flow from construing the clause to mean that any individual unit holder, however small its holding, could unilaterally bring the entire unit trust to an end. His Honour’s reasons cannot properly be regarded as authority for that proposition. Reliance on Sayden is in fact a prime example of the danger of taking words from reasons for judgment out of context.

44. [90]

    Clause 9 of the Trust Rules also supports construing “[t]he Unit Holders” as referring to a group acting collectively. The appellants accepted that if cl 2.1 allowed individual unit holders to call for a winding up, there would be few instances where the mechanism in cl 9 would be utilised. That understates the effect of cl 9. Clause 9 does not merely provide a mechanism for ending the trust (namely, “Unanimous Resolution”), but also insists that the Trust will continue in operation “until” that mechanism is utilised. That is quite contrary to the notion that an individual unit holder could call for a winding up under cl 2.1(b). Were that the proper construction of cl 2.1(b), cl 2.3 would resolve the inconsistency in favour of cl 2.1(b). But the principle of harmonious construction supports an interpretation of cl 2.1 that confers the power to call for a winding up on the unit holders acting as a group, consistently with cl 9. That interpretation of cl 2.1, which is at the very least open on the text, leaves no room for the engagement of cl 2.3, which is only engaged in the event of inconsistency and, as said above, cannot speak to the existence of that inconsistency.

45. [91]

    Section 181 of the Conveyancing Act, which provides that the plural includes the singular and vice versa, does not greatly assist. The appellants do not seek to read “[t]he Unit Holders are” as “the Unit Holder is”; rather, they submit that the plural noun should be read as denoting each unit holder severally, akin to the position that would be clear if the chapeau read “the Unit Holders are each”. That is, the dispute is as to the meaning of the plural noun, not as to whether it should be read as including a singular noun. Whether a plural is construed as denoting every composite member of that plural as a collective, or each member severally, is a question of construction not aided by a general rule that a plural can be read as a singular. In any event, as the respondents submit, the appellants’ reading of s 181 would fundamentally alter the rights otherwise apparently conferred by cl 2.1.

46. [92]

    It will be recalled that whilst the issued units are divided equally between the Carrs and the Ritossas with each owning 3,827,149 units, of those held by the Ritossas, 106 are owned by Mr and Ms Ritossa jointly, while the remaining 3,827,043 are owned by Mr Ritossa in his own name. The fragility of the unit trust structure which would follow from acceptance of the Carrs’ construction is well illustrated by the facts of this case. If Mr Ritossa and Ms Ritossa severed their joint ownership of the parcel of 106 units, such that Ms Ritossa became the sole owner of all of them, or of half of them, then on the Carrs’ construction she could unilaterally bring the trust to an end, despite her being the owner of a small fraction of 1% of the total units issued. The same would be true if Mr Ritossa died unexpectedly, and irrespective of whoever inherited his estate, simply by virtue of the fact that Ms Ritossa would become by right of survivorship the sole owner of 106 units.

47. [93]

    It follows from the above that cl 2 does not confer on individual unit holders a right to require the trustee to wind up the trust. Ground 1 of the Notice of Appeal must be dismissed.

Grounds 2-8 – oppression

1. [94]

   The second basis on which the Carrs sought to have the Darbalara Property Trust wound up was by an order under s 233 of the Corporations Act. Section 233(1) provides:

2. [95]

   The conferral of power is expressed very broadly: to make “any order under this section that it considers appropriate in relation to the company”, including (a) “that the company be wound up”, (d) “for the purchase of any shares by any member” and (h) “appointing a receiver or a receiver and manager of any or all of the company’s property”. However, the Carrs sought the winding up of the trust, not the trustee. There is no express power for the compulsory purchase of trust assets as opposed to a member’s shares. Accordingly, they sought the appointment of a receiver under (h) who could, so it was said, sell the trust assets, discharge liabilities and distribute the surplus to unit holders.

3. [96]

   Section 233 must be read with s 232, which provides:

4. [97]

   Section 232 must in turn be read with s 53 which provides that, for the purpose of (amongst other sections) ss 232 and 233, “the affairs of a body corporate” include:

5. [98]

   The following points about ss 232 and 233 may be noted.

6. [99]

   First, paragraphs (a), (b) and (c) of s 232 identify various species of conduct (including actual or proposed acts or omissions or resolutions), while paragraphs (d) and (e) require the attribution of an evaluative judgment to that conduct (that it be contrary to the interests of members as a whole, or oppressive or unfairly prejudicial to or unfairly discriminatory against one or more members).

7. [100]

   Secondly, while paragraph (d) does not mention oppression, and paragraph (e) is broader than oppression, it is customary to use the words “oppressive” and “oppression” as a shorthand to describe the evaluative judgment required by those paragraphs.

8. [101]

   Thirdly, paragraphs (a), (b) and (c) are disjunctive. So are paragraphs (d) and (e). It is necessary in order to satisfy s 232 and thereby engage the power in s 233 for one or more of the species of conduct in paragraphs (a), (b) or (c) to be identified and for that conduct to be “oppressive” within the meaning of either paragraph (d) or (e) (or both).

9. [102]

   Fourthly, the references to the definite article in s 233 to “the” company in its opening words and in paragraphs (a), (b), (c), (d), (e), (f), (g), and (h) reflect the fact that s 232 requires that conduct falling within one or more of the three limbs in s 232(a), (b) or (c) in relation to “a” company has been identified in relation to that company. In the event that the conduct of that company is found to be oppressive (which is to say, to answer the description of either or both of s 232(d) or (e) upon that company’s members), then the court is empowered to make any of the orders in s 233 relating to that company.

10. [103]

    The reason to dwell for a moment on the indefinite article “a company” in s 232 and the definite article “the company” in s 233 is to identify the link between the two sections. Although if s 232 were read superficially it might appear that satisfaction of s 232 (ie, the identification of conduct falling within (a) or (b) or (c) which is oppressive within the meaning of paragraph (d) or (e)) was merely a sufficient condition to engage the power in s 233, in fact satisfaction of s 232 is a necessary condition for the exercise of the power. Generally speaking, the use of the indefinite article followed by the definite article is a fairly clear indication that the noun following the definite article is the same noun as has been earlier identified following the indefinite article: see Haertsch v Whiteway (2020) 102 NSWLR 386; [2020] NSWCA 133 at [18], Carr v Carr [2022] NSWSC 166; 21 ASTLR 511 at [82] and The Owners - Strata Plan 87003 v Raysons Constructions Pty Ltd [2025] NSWSC 66 at [97]. This is confirmed by the heading of s 232, “Grounds for Court order”, which is suggestive of the section being exhaustive. It is also confirmed by the legislative history (summarised in Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95; 66 ACSR 359 at [334]-[346]); in particular, there is nothing to suggest that when the single provision which had been s 260 and later s 246AA of the Corporations Law was split into ss 232 and 233 when the Corporations Act 2001 (Cth) was enacted, the change in drafting style carried with it a decoupling of the power to make orders from the criteria which had first to be satisfied. It is also consistent with what was said by French CJ in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [58] and with the reasoning of the joint judgment at [173] and [182].

11. [104]

    In short, text (including its title and the references in s 233 to “the” company), legislative history and authority all point to s 232 being treated as exhaustive of the circumstances in which an order under s 233 can be made.

12. [105]

    Two aspects of the construction of ss 232 and 233 have produced a divergence of authority at first instance, which continues to cause uncertainty and expense (an example may be seen in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; 288 ALR 310 at [301]-[306]). There is no good reason for that to be so. The uncertain aspects are the scope of “a company’s affairs” in s 232(a), and the power in s 233 to make an order “in relation to … the company”.

13. [106]

    It is tolerably clear that the affairs of trustee companies fall within the scope of “the conduct of a company’s affairs” under s 232(a), having regard to s 53: see Vigliaroni v CPS Investment Holdings Pty Ltd [2009] VSC 428; (2009) 74 ACSR 282 at [63], approved in Tzavaras v Tzavaras & Sons Pty Ltd [2023] NSWCA 168 at [62]. A line of earlier first instance decisions took a narrower view. It was said in Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606 at 612-613 that:

14. [107]

    That reasoning approached the scope of “the affairs of the company” in s 232(a) without regard to s 53, as has been noticed in a number of more recent decisions at first instance, notably Vigliaroni v CPS Investment Holdings Pty Ltd at [68] and Trust Company Ltd v Noosa Venture 1 Pty Ltd [2010] NSWSC 1334; 80 ACSR 485 at [105]. More recently the same point was made by Bleby JA, with whom Lovell and David JJA agreed, in Melrob Investments Pty Ltd v Blong Ume Nominees Pty Ltd (2022) 141 SASR 1; [2022] SASCA 29 at [110]-[111]. His Honour thereafter at [112] considered “the impact of s 53 on ss 232 and 233 afresh” and proceeded on the basis that conduct of a named beneficiary of a discretionary trust who was also a director and member of the trustee fell within s 232 as informed by s 53 (at [125]-[127]).

15. [108]

    In Re Munja Bakehouse Pty Ltd [2024] NSWSC 6; 384 FLR 176 at [58], Black J said, including by reference to Melrob, that “the better view is likely to be that s 232 of the Act applies to companies acting as trustees, at least in circumstances where the interests held within the trust are within the scope of a relationship of quasi-partnership between the companies”. I do not disagree, but I would go further. It is preferable that there be no room for doubt about this basic aspect of s 232. First, there is no “compelling reason” to depart from the reasoning of Melrob Investments, being a decision of an intermediate appellate court on the construction of federal legislation (cf Hill v Zuda Pty Ltd (2022) 275 CLR 24; [2022] HCA 21 at [25]). What is more, Melrob Investments is with respect correct in what it says as to the effect of s 53. Section 53 states explicitly that it applies to “the affairs of a body corporate” where that term appears in s 232. That term appears precisely once in s 232, in paragraph (a). True it is that s 6 provides that the provisions in Part 1.2 including s 53 have effect “except so far as the contrary intention appears in this Act”. However, there is no practical scope for discerning a contrary intention where the definition is expressed to apply to the section, and the defined term appears precisely once in the section. Earlier decisions including Kizquari, insofar as they exclude from the scope of s 232 the operation of the trust as opposed to the operation of the company, are to be regarded as per incuriam and should not be followed.

16. [109]

    There is also a divergence in the authorities as to the scope of the power under s 233 to make an order “in relation to the company”. This issue arises from the fact that the conferral of power is confined to “the company” as opposed to “the affairs of the company”. It was on that basis that Windeyer AJ said “I would not consider it within power to make an order requiring one trust beneficiary to buy out the interest of the other trust beneficiary. Such an order would, I think, be an order in relation to the trust not to the company”: Trust Company Ltd v Noosa Venture 1 Pty Ltd at [105]. That reasoning was criticised as too narrow by Ferguson J in Wain v Drapac [2012] VSC 156 at [287], relying on the considerations that “in respect of” has a very wide meaning, the difficulties in a structure comprising a mixture of companies and trusts if s 233 had such a limited application, and the fact that a court is expressly empowered to make orders regulating the conduct of a company’s affairs in the future. An appeal from the decision of Ferguson J was dismissed “without adjudication on the merits” (this was effected by order 2 made by the Court of Appeal on 17 October 2013 in proceeding S APCI 2012 0113; although that order seems not to be generally available, its effect is accurately noted in Re Junior Academy ELC Pty Ltd (No 3) [2019] VSC 161 at [25]). Further, in Melrob Investments, Bleby JA noted that the power to make an order “regulating the conduct of the company’s affairs in the future” is, by definition, a species of order “in relation to the company”. His Honour said at [114] that:

17. [110]

    I respectfully agree with their Honours. In addition to the points made by Ferguson J and Bleby JA, I would add that the dichotomy relied on in Trust Company Ltd v Noosa Venture 1 Pty Ltd between orders relating to the company and orders relating to the trust of which the company is a trustee is a false one. An order may without any artificiality or straining of language relate to both (consider for example an order that a company which is a trustee is not entitled to have recourse to its indemnity against trust assets in respect of a liability incurred by it as a trustee). It is not a valid answer to the question whether a power to make orders in relation to the company is available in respect of property held by the company as trustee to say that the order would be in relation to the trust. Such reasoning is only valid if the two categories are mutually exclusive. Various instances in a range of areas illustrating this fallacy may be seen in Menz v Wagga Wagga Show Society Inc (2020) 103 NSWLR 103; [2020] NSWCA 65 at [67].

18. [111]

    The question posed by the statute is whether an order “in relation to the company” can extend, where the company is a trustee, to an order that one trust beneficiary buy out another. The answer to that question is that it can, for the following reasons.

    1. (1)

       The connection demanded by the words “in relation to” is contextual, turning on statutory context and purpose: R v Khazaal (2012) 246 CLR 601; [2012] HCA 26 at [31]; Trustees of the Sydney Grammar School v Winch (2013) 83 NSWLR 80; [2013] NSWCA 37 at [159]-[162].

    2. (2)

       It is well settled that ss 232 and 233 are to be read broadly and “the imposition of judge-made limitations on their scope is to be approached with caution”: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [72] (French CJ). The joint judgment confirmed that the relevant power (s 233(1)(d)) “should not be hedged about by implied limitations”: at [178], and see Zong v Lin [2022] NSWCA 136 at [77] and Millsave Holdings Pty Ltd v Connective Group Pty Ltd (2023) 75 VR 239; [2023] VSCA 326 at [1024].

    3. (3)

       Further, it is quite inappropriate to read provisions granting powers to a court by making implications or imposing limitations not found in the express words: see Owners of Ship “Shin Kobe Maru” v Empire Shipping Company Inc (1994) 181 CLR 404 at 421; [1994] HCA 54.

    4. (4)

       Finally, s 233 only confers power upon a superior court (noting the definition of “Court” as opposed to “court” in s 58AA), as was the case in PMT Partners Pty Ltd (in liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301; [1995] HCA 36, where it was said at 313 that “a provision conferring a power to be exercised judicially should be construed as liberally as its terms and context permit”.

    5. (5)

       Construing s 233 in accordance with those principles, I am of the view that an order that one beneficiary or one unit holder buy out another is an order in relation to the company which is the trustee of the trust, at least in the case of the Darbalara Property Trust. Under r 7.1 of the Rules, a transfer of units requires the approval of the trustee, and there is an express power to “refuse approval for any reason and [the trustee] can keep the reason secret”. Such an order has an immediate and direct effect upon the trustee, which would also be a necessary party to proceedings in which such an order is sought. Putting to one side the discretion to permit a transfer, such an order will also directly affect the relations between the company as trustee and the beneficiaries of the trust, and in particular it will bring about the result that the company as trustee will no longer owe obligations (including obligations to account, to provide information and documents and to make distributions or to consider making distributions) to the beneficiary or unit holder who has been bought out.

19. [112]

    None of the foregoing should be understood as holding that it will be appropriate in any particular case for such an order to be made. The foregoing is about the extent of the power conferred by s 233, not the occasions for its exercise, and I would doubt that such occasions would be frequent. Similarly, this Court considered in Zong v Lin that the wide language of s 233 permitted a compulsory transfer order of a company’s shares without payment, noting that it would be an unusual form of relief against oppression, but available in an appropriate case.

20. [113]

    I have so far passed over what to my mind is the critical aspect of ss 232 and 233 for present purposes, namely, paragraphs 232(d) and (e), which involve the evaluative judgment that the conduct identified in one or more of s 232(a) or (b) or (c) amounts to oppression.

21. [114]

    Young J was with respect correct in Kizquari to emphasise that the complaints of oppression by the beneficiaries or unit holders of a trading trust who happen to be shareholders in the trustee fall outside the scope of the section when regard is confined to their capacity as members of the trustee. The shares in the trustee company with nominal capital of its own will not ordinarily have any significant value. The value is in the trust assets of which the company has legal title, as opposed to the company’s own assets.

22. [115]

    In the present case, the Carrs did not abandon reliance on s 232(d), but for understandable reasons, s 232(e) was at the forefront of their submissions. Section 232(d) requires a conclusion that the conduct be “contrary to the interests of the members as a whole”. The reference to “members” in (d) is to the members in their capacity as members of the particular company in respect of which the conduct identified in one or more of paragraphs (a), (b) or (c) has been identified. The absence from (d) of the expansive words found in (e) “whether in that capacity or in any other capacity”, coupled with the fact that (d) requires an examination of members’ interests as a whole, all confirms that the term “the interests of members” bears its ordinary meaning of interests of members in their capacity as members of the company. A member of a trustee company who happens also to be a beneficiary of the trust and whose real complaint is as to what is happening with the management of the trust assets does not on that basis fall within paragraph (d).

23. [116]

    In its application to the present case, s 232(e) presents two difficult questions. The first concerns “deadlock”, the second is based on the structure adopted by the Carrs where “their” units were held by the trustee of the Carr Family Trust.

24. [117]

    The first issue is whether a “deadlock” per se is sufficient to answer the description of “oppressive to, unfairly prejudicial to or unfairly discriminatory against” in s 232(e). It is as well to clarify what is meant by “deadlock”. In the present case, it is not merely that, on the question of whether the Darbalara Property Trust should be wound up, there is a deadlock at board level of the corporate trustee. In the case of some board “deadlocks”, the general meeting may have power to appoint an additional director: see Barron v Potter [1914] 1 Ch 895; Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666 at 682-683; Massey v Wales; Massey v Cooney (2003) 57 NSWLR 718; [2003] NSWCA 212; Knox v Nile [2022] NSWSC 195; 160 ACSR 357 at [94]. But in the present case, the equal division at the level of the board is matched by that of the members and of the unit holders.

25. [118]

    Moreover, it is necessary to bear in mind the stark difference between a company board and a board of trustees. As Sir Robert Megarry VC observed in Cowan v Scargill [1985] Ch 270 at 297, “In an ordinary trust, the trustees can do nothing unless they are unanimous: a majority cannot prevail over a minority, and so the opportunities of a deadlock are even greater …”. In the present case, neither the Carrs nor the Ritossas can without the agreement of the other secure the passage of a resolution of the corporate trustee. However, if the four individuals were themselves trustees of the Darbalara Property Trust, then (absent some special provision permitting majority decisions) any of them would enjoy a right of veto of any action on the part of the trustees. In circumstances where the trustees cannot agree, the court may resolve the deadlock (the authorities may be found in Garnham v PC [2012] JRC 050 and L Tucker et al, Lewin on Trusts (Sweet & Maxwell, 20th ed, 2020) at 28-075) either by making a decision if it is a particular decision, or by removing some of the trustees or appointing new ones if the position will recur.

26. [119]

    There is no reason to doubt what has been said on many occasions, namely, that a mere “deadlock” will not be oppression under ss 232. See, for instances in this Court, Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; 37 ACSR 672 at [89] (“Irreconcilable differences may establish a basis for winding up, they do not of themselves constitute oppression or unfair prejudice”), approved in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104 at [199], and Campbell v BackOffice Investments [2008] NSWCA 95; 66 ACSR 359 where Giles JA observed at [137] that “a breakdown in relationship in a 50/50 entity is not the same as oppression”; see also at [442]-[444]. Although it was said in Campbell v BackOffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [177] that “[t]here may be an issue about whether deadlock in the affairs of a company would fall within s 232”, as the law presently stands it would seem not merely as a matter of authority but also in point of principle that “mere” deadlock cannot suffice.

27. [120]

    There may be very good reason to have power evenly divided in a legal structure designed to hold valuable assets. Equality is a very common mode of proceeding in a joint endeavour. An equal division of power may be especially important where co-operation is necessary but occurs between persons who have different motives and interests. A structure where no faction has a power of unilateral control is the only way of accommodating competing interests (for example a venture between two entities to exploit a mineral resource, one of whom will also be a substantial purchaser of the minerals, where the parties are diametrically opposed when it comes to price). Other examples may be seen in the trustees of superannuation trusts which have an equal number of trustees nominated by employer and employees (such as the five “union trustees” and the five “Board trustees” in Cowan v Scargill or in the structure of NRL Ltd which operated the NRL Competition and had an equal number of directors appointed by News Corporation and the ARL: see Seven Network Ltd v News Ltd [2007] FCA 1062 at [256]-[259]).

28. [121]

    The deadlock must be one which leads to further consequences in order to reach the evaluative judgment required by s 233. Counsel for the Carrs was alert to this in his submissions:

29. [122]

    There may have been a measure of advocacy in that response, which simultaneously acceded to the proposition that mere deadlock is insufficient but then restated that the absence of “mutual trust and confidence” would suffice; it is far from clear what “mutual trust and confidence” means, assuming it means something more than the parties’ agreement as to how the affairs of the Darbalara Property Trust would be conducted. There may be the opposite of a relationship of trust and confidence between the equal number of union and government representatives of a superannuation trust, or in many of the other occasions when a structure dividing power equally between two sides with divergent or opposed interests has been used. It is also clear that mere personal dislike will not suffice. The appellants’ submission turns on the proposition that when the Darbalara Property Trust was established, there was a relationship of trust and confidence, which has broken down. But that submission is qualified by the appellants’ disavowal of any fiduciary relationship between the Carrs and the Ritossas. I will return to these issues when addressing grounds 2, 3 and 9 below.

30. [123]

    The second issue arises because the Carrs distanced themselves from any beneficial interest in the assets of the Darbalara Property Trust by causing “their” units to be held as assets of the Carr Family Trust. Is Mr Carr, who is one of the two members of Darbalara Holdings, able to invoke what he maintains is the oppressive and unfairly prejudicial and discriminatory conduct he claims to have sustained in his capacity as a discretionary object of the trust one of whose assets is half of the units in the Darbalara Property Trust? In principle, I could contemplate circumstances in which he might be able to do so. Take the facts of the present case, where Mr Carr is a member of the trustee company and also a discretionary object of a trust some of whose assets include units of the Darbalara Property Trust, and suppose further (and contrary to the evidence in this proceeding) that (i) the trustee of the Darbalara Property Trust had a long history of making substantial distributions, (ii) was expected to make a substantial distribution in the current year, (iii) the distributions ordinarily passed through the discretionary trust to Mr Carr, (iv) it was known to the trustee of the Darbalara Property Trust that Mr Carr had a particular need for a distribution in the current year, but (v) for no good reason and in order to spite Mr Carr, no distribution was made, the trustee incurred tax at the top marginal rate and Mr Carr who had been relying on the distribution suffered substantial losses, and all this was done because the other member of the trustee of the Darbalara Property Trust had fallen out with Mr Carr, that might answer the description of “oppressive to, unfairly prejudicial to, or unfairly discriminatory against” Mr Carr in his capacity as a discretionary object.

31. [124]

    However, wholly absent from this appeal is any evidence about the operations and activities of the Carr Family Trust. In the absence of such evidence, I am unable to see how this aspect of the appellants’ case could be made out. I shall return to this when addressing grounds 4 and 5 below.

The grounds going to oppression

1. [125]

   Grounds 2-8 challenged the ultimate conclusion reached by the primary judge, and various intermediate steps in his Honour’s reasoning, that no oppression had been established. Ground 2 identified nineteen factual matters, mostly uncontroversial, all of which had been found by the primary judge, and contended that his Honour erred in not concluding that there had been oppression within s 232(d) or (e). Ground 3 identified a number of additional matters not found by the primary judge, including the findings challenged in grounds 6, 7 and 8, and said that in consequence of those additional matters, there should have been a finding of oppression within s 232(d) or (e). Grounds 4 and 5 challenged the proper construction of the amended points of claim, and the decision to refuse an amendment made on the last day of the trial. Grounds 6, 7 and 8 identified further particular findings of fact which the Carrs said should have been made.

2. [126]

   It is more convenient to address these grounds of appeal in a different order.

3. [127]

   Logically, the starting point is grounds 4 and 5, both of which concern the form of the amended points of claim which went to trial. Ground 4 maintained that the primary judge erred in interpreting paragraphs 43 and 44 of the amended points of claim “as not raising oppression of Mr Carr as a unit holder in the Trust because Mr Carr as a beneficiary of the Carr Family Trust, of which DRCH is trustee, was beneficially interested in the units of the Trust held by DRCH”. Ground 5, in the alternative, maintained that the primary judge erred in declining to grant leave to amend paragraph 43 of the amended points of claim.

4. [128]

   The pleaded case in paragraphs 43-44 of the amended points of claim, with the proposed amendment in bold, was as follows:

5. [129]

   The amendment was propounded on the seventh day of the eight-day trial, orally, shortly before the morning adjournment (Tcpt 24 July 2024, 473.30). It is not clear whether and if so how much prior notice was given. The application was not supported by any affidavit evidence explaining the delay. The application was opposed by the defendants, with the primary judge indicating that he would rule upon it when judgment was delivered. His Honour did so at [199]-[206].

6. [130]

   Paragraphs [199] and [200] recorded that the defendants had, in their opening outline of submissions, put the Carrs on notice that, despite paragraph 43 referring to the plural “Plaintiffs”, only Mr Carr had standing to seek relief under s 233. The defendants maintained that they had not but would have sought discovery of documents concerning distributions from the Carr Family Trust to Mr Carr or other discretionary objects in order to test whether he had been adversely affected in his capacity as an object, the cross-examination of the Carrs would have extended to whether they were affected in some capacity other than Mr Carr’s membership and they said they might have called another witness had Mr Carr’s other capacity been in issue.

7. [131]

   The primary judge was satisfied that the defendants would “potentially suffer prejudice in each of the ways identified”, and “that prejudice could have been cured only by an adjournment with attendant cost and delay”. Notwithstanding that ruling, his Honour noted that it was undisputed that s 232(d) and (e) could apply to the affairs of a company which is a trustee and his Honour proceeded on the basis that that was the correct approach. His Honour explained the consequences of that approach at [203]-[204]:

8. [132]

   The appellants’ written submissions in support of these grounds were brief. The written submissions in chief (paragraphs 41-44) occupied slightly more than one page and the written submissions in reply (paragraphs 18-19) occupied less than half a page. Likewise, the appellants’ oral submissions in support of these grounds occupied slightly more than one page of transcript (T21.18-22.33) in a two-day appeal.

9. [133]

   The appellants’ concision was appropriate. These grounds may be disposed of with comparable concision.

10. [134]

    The appellants submitted that the primary judge had construed their case too narrowly. They referred to the breadth of the words “and/or in relation to the capacity as a unit holder in DPT” in para 43 and “the membership of DRCH, as Trustee for CFT, of DPT” in para 44 to support the proposition that the pleaded case must have extended to Mr Carr’s indirect interest, as a “first group beneficiary” of the Carr Family Trust discretionary trust whose trustee owned 50% of the units. But that is not how the case was pleaded. Ordinarily, the issues at trial are determined by the pleadings: Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 287; [1990] HCA 11. Parties may depart from the issues so identified, including by way of acquiescence, but that did not occur in this litigation. Indeed, at the commencement of the opening of the trial, on 15 July 2024, counsel for the plaintiffs stated that “the opening of my learned friend indicates that he is planning to hold us closely to our pleading”. Those opening submissions, dated 10 July 2024, were a short document of four pages which stated “[o]nly Mr Carr even has standing to seek orders under s 233, being the only plaintiff who is a member of Darbalara Holdings”, and referred to disagreements which “stand outside the pleaded case”. Mr Carr had at one stage held units, but did not do so at the time the proceedings were brought.

11. [135]

    The starting point is the nature of the structure established to govern the investments made by the Carrs and the Ritossas. It will be recalled that 50% of the units in the unit trust of which Darbalara Holdings was the trustee were held at all times by the trustee of the Carr Family Trust. Prior to November 2018, Mr and Ms Carr were the trustees but thereafter DRCH became the trustee. Paragraph 43 refers to the period after December 2019, and so the earlier time when Mr Carr was a co-trustee of the Carr Family Trust may be put to one side.

12. [136]

    The proposed pleading referred to “Mr Carr’s indirect interest in DPT”. This is said to be his “interest” as a “first group beneficiary” of the Carr Family Trust. As mentioned earlier in these reasons by reference to MSP Nominees Pty Ltd v Commissioner of Stamps (SA), it does not assist analysis to introduce the language of equitable or beneficial interest when dealing with a discretionary object. The Carr Family Trust was a discretionary trust with a wide range of discretionary objects, including Mr and Ms Carr, their children, their grandchildren and any further issue, the spouses of any of the above, any private company of which any of the above were members, any trustee of a trust of which any of the above was a beneficiary, and any religious institution or charity. The trustee had a broad discretion to distribute or apply capital and income, subject to the condition that if it chose not to distribute income, the “first group beneficiaries” were deemed to have the income distributed to them in equal shares.

13. [137]

    There is nothing unusual about the trust deed establishing the Carr Family Trust. The default distribution of income avoided the trustee incurring the obligation to pay tax at a disadvantageous rate. There was no evidence as to any distributions, or if distributions had been made, whether they were made to Mr Carr or to any of the other members of the class of discretionary objects.

14. [138]

    The Ritossas submitted that the amendments were fatally flawed in any event, because: “As a discretionary object of the Carr Family Trust, Mr Carr had no interest in Darbalara Holdings, nor the units DRCH held. All he had was an interest in the due administration of the Family Trust”. That submission is correct. In point of law, Mr Carr as a discretionary object, and even as one of two “first group beneficiaries”, had no entitlement to any of the property of the Carr Family Trust. He had an entitlement to one half of the undistributed income of the Carr Family Trust in the event that the trustee made no distribution; whether or not that ever occurred is not established on the evidence. But the main point is that if there is oppressive conduct in relation to the assets of a unit trust, then a discretionary object of another trust, some of whose assets include the units of the trust in respect of which the claim of oppression is made, is not the proper plaintiff.

15. [139]

    The previous paragraph may sound “technical”, in the sense of focussing upon the structure chosen by the parties, as opposed to what some might call the “commercial reality” of an investment by two families. But invoking “commercial reality” in order to avoid the consequences of the legal structure selected is mere rhetoric. An essential aspect of the “commercial reality” is that these families who wished to co-invest made a conscious decision with the benefit of advice not to establish a partnership or an unincorporated joint venture or a simple company. Instead they chose to establish a co-owned company which would be trustee of a unit trust the units of which would be issued equally to the families. Thereafter the Carrs chose for their half of the units to be held as assets of a discretionary trust. There may have been good reasons for all of those choices when they were made. But not lightly will a court disregard the elaborate structure to which the Carrs have subjected themselves, in order to treat them as if they had established a partnership which was dissoluble at will, or a private company in which as members they could readily fall within s 232(d) or (e).

16. [140]

    There are further reasons, themselves sufficient, to dismiss these grounds. It is trite that the decision of the primary judge to refuse an amendment is discretionary, especially having regard to the terms on which any relief might be given, so it is necessary for the appellants to identify House v The King error, and further, the ruling on a late application to amend was procedural and on an issue in respect of which the primary judge had a considerable advantage over this Court, well-justifying this being a case where an appellate court ought to “exercise particular caution in reviewing” the decision: cf Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177; [1981] HCA 39. I see no error in the primary judge accepting each of the three instances of prejudice identified by the respondents, nor do I accept the contrary submissions made by the appellants. The appellants assert that “prior distributions are irrelevant”, but I disagree. If Mr Carr’s “indirect interest” as a default income beneficiary sought to be added to the amended points of claim means more than the entitlement to due administration, then the distributions made to him (if any) are squarely relevant. If the indirect interest is regarded as no more than the right to due administration, then the amendment goes nowhere, for there is nothing to suggest that any conduct by the Ritossas has affected the due administration of the Carr Family Trust. The appellants submit that the Carrs were “comprehensively cross-examined over 3 days of the trial” and that it was “unrealistic that the amendment would have led to any different, material cross-examination”; to the contrary, questions of cash flow and income by way of either distribution or present entitlement might well have informed the cross-examination.

17. [141]

    These grounds are not made out.

18. [142]

    These grounds identify particular factual findings challenged on appeal. Ground 6 asserted error at [238] when the primary judge found there was no evidence of any proposal having been put forward by the Carrs for consideration by the Darbalara board of redemption of the units for their fair value, and maintained that instead his Honour should have found that the Carrs enquired in July 2020 whether the Ritossas would allow Darbalara Holdings to redeem their units, to which the Ritossas expressed opposition, with the result that there is “no real prospect of DRCH’s units in the Trust being redeemed by Darbalara Holdings for a fair value commensurate with the realisable market value of the assets of the Trust”. Ground 7 challenged the finding at [215] that there was no evidence that if the Ritossas called a directors’ meeting the Carrs did not attend, the meeting could or would proceed and decisions would be made in the absence of the Carrs. This ground maintains that the primary judge should have found that the Ritossas indicated on 5 October 2021 by email, from which they have never retracted or resiled, that if the Carrs failed to attend a board meeting without prior notice and without what the Ritossas considered to be a genuine reason, then the Ritossas would proceed with the meeting and pass board resolutions they considered to be in the best interests of the trust. Ground 8 challenged the finding at [255] that the breakdown in the relationship between the Carrs and the Ritossas had not led to any deadlock nor caused Darbalara Holdings to cease to function properly, and maintained that instead his Honour ought to have found that there were a series of deadlocks, some of which were eventually resolved after protracted dispute, others remaining deadlocked, including importantly whether some or all of the properties should be sold, and that this “has caused Darbalara Holdings to cease to function properly and with its previous informality”.

19. [143]

    Each of these grounds raises a relatively discrete issue. It is convenient to address each in turn.

20. [144]

    The finding at [238] is relevantly as follows:

21. [145]

    True it is, as ground 6 contends, that an informal proposal was made which extended to redemption. On 24 July 2020, many months after both sides had retained lawyers, and only a few months before proceedings were commenced, the Carrs’ solicitors wrote in connection with attempts to find a replacement manager stating that the Carrs were concerned that the Ritossas were jeopardising the trust property, and making the following request:

22. [146]

    The response from the Ritossas’ solicitors, dated 27 July 2020, included a lengthy refutation of the Carrs’ solicitors' complaints, and concluded with the following:

23. [147]

    The difference between the solicitors’ letter inviting consent to winding up or redemption, and a formal proposal for redemption to the board is significant. The latter would flesh out the dispute between the parties as to the value of the units. It would also lead to the very mechanism mentioned by the Ritossas’ solicitors’ letter, because on any view, the value of the Carrs’ parcel of units, which did not command control of the unit holders, would have been less than 50% of the realisable value of the trust assets, and that in turn would necessarily lead to investigations as to whether a third party might be interested in acquiring that parcel of units.

24. [148]

    In further response to this ground, the respondents observe that the failure to redeem units did not form part of the Carrs’ pleaded oppression case, and they add that it could not be a breach of directors’ duty, or oppressive, for the directors to refuse to have the trustee exercise its discretion to accept a redemption request when the request would lead to the sale of the principal assets for which the trust had been created.

25. [149]

    To this, the Carrs’ written submissions respond that the refusal to redeem was pleaded. However, the submissions reference four paragraphs in the amended points of claim, none of which refers in terms to redemption, and each of which refers to the Carrs’ request that the “joint venture” be terminated. But there is a significant difference between winding up or terminating the trust – which brings the relationship to an end – and a redemption of units, which preserves the trust relationship in relation to the trust assets that continue. This is no mere nicety of nomenclature. A redemption requires the determination of fair value, and a discretionary decision of the trustee to pay; a winding up involves a process where the amount to be received by each unit holder is determined as a result of the process, rather than by reference to a value determined at the outset.

26. [150]

    In relation to non-attendance at board meetings, the Carrs complain of a passage at [215]:

27. [151]

    There is no challenge to the accuracy of anything said in that paragraph. Instead, the gravamen of ground 7 is an email from Mr Ritossa to the Carrs saying “if [the Carrs] do not want to attend further meetings and don’t give [the Ritossas] notice and a genuine reason, we will just proceed with the meeting and pass any resolutions we think are in the best interests of [the trust]”.

28. [152]

    However, as the Ritossas submit, there has not been an occasion to test what would occur if the Carrs failed to attend a properly convened directors’ meeting. Further, there is nothing unreasonable in a director maintaining the stance advanced by the Ritossas. If a directors’ meeting is properly convened, and is quorate, then each director in attendance is, after all, under an obligation to act in the best interests of the company.

29. [153]

    Finally, ground 8 concerns paragraph [255], which in turn refers to some years of transcripts of meetings of directors:

30. [154]

    The Carrs made no written response to the Ritossas’ submissions that the findings of the primary judge were expressly based upon a consideration of all the evidence, including the cross-examination of the witnesses. Orally, the appellants made two main points. One turned on the finding by the primary judge at [214] that “The Carrs find the board meetings unpleasant and stressful”. It was said that “that is a very significant finding”, because there was no tiebreaker mechanism, and in fact the constitution was modified to ensure that each family always had a 50% control in the management of the trustee company. Counsel added:

31. [155]

    That submission does not grapple with the fact that the appellants need to set aside an evaluative finding of the primary judge who had the benefit of seeing the evidence unfold. Moreover, the premise of this submission is incorrect. There is no obligation for Mr or Ms Carr to attend every board meeting personally. Either or both may, subject to the Ritossas’ approval, appoint alternate directors, pursuant to s 201K of the Corporations Act (a replaceable rule which is part of the Constitution). For example, Ms Carr, who gave evidence that she felt “intimidated and bullied” by a meeting which she said “was effectively conducted by Marina” and who was not a director for the first five years of the operations of the trust, might be replaced by an alternate director. The Ritossas’ approval is required, but so far as the evidence goes, it has not been sought let alone refused. When it was raised during the hearing, the response was that there might be few people willing to act, and those who were willing would no doubt charge fees. The response may be accepted, but I am unable to accept that the result is that this contributes to a conclusion of statutory oppression. The structure of evenly divided interests, with no provision for resolving deadlock, was the parties’ informed choice at the outset.

32. [156]

    The second response was encapsulated in the following submission:

33. [157]

    As will be seen when addressing ground 2, the primary judge was entitled to reach the opposite conclusion, which in essence was that while there was, at least for a time, a division of opinion on a variety of operational matters, that reflected different business judgments by the Carrs and the Ritossas.

34. [158]

    These grounds are not made out.

35. [159]

    Ground 2 was very lengthy (it occupied almost 3 pages). It identified 19 factual propositions accepted by the primary judge and complained that his Honour erred in not concluding that oppression within the meaning of s 232(d) or (e) was established. But it fell short of identifying any particular error of fact or law, instead maintaining that the primary judge had erred in failing to reach the conclusion of statutory oppression.

36. [160]

    The primary judge summarised the pleaded instances of oppression at [207] as follows:

37. [161]

    Thereafter, over 14 pages of reasons, the primary judge addressed each of those matters in turn. No issue was taken when the appeal was heard with the course adopted by the primary judge, which is, with respect, an appropriate and efficient way of dealing with the wide-ranging multi-aspected complaint advanced by the Carrs.

38. [162]

    His Honour dealt with the various minor ways in which Darbalara Holdings was said to be deadlocked by findings which may be summarised as follows.

    1. (1)

       In relation to the Brungle Rd property, there had been a difference of opinion, which amounted to a question of timing (the Ritossas wishing to wait until a new farm manager was appointed before selling it) falling into the category of a legitimate difference of opinion on a matter of business judgment.

    2. (2)

       In relation to board meetings, they were now recorded, and were much more formal affairs than had previously been the case. While it was clear that the Carrs found the meetings unpleasant, they reflected an attempt by the directors to resolve various issues, and more recently (following the appointment of SouthernAg) it was Mr Pilkington rather than the Carrs who had to report and answer questions on many operational matters. Despite the unpleasantness, the discussions do not indicate that the board was unable to function. To the contrary, all of the issues which came to the board have been resolved, save for the conflict that the Carrs wish the trust to be wound up and the Ritossas wish for it to continue.

    3. (3)

       In relation to the management of the farm, ultimately in June 2020 the Carrs agreed to have their company replaced, and this occurred in June 2023 with the appointment of SouthernAg. The delay could not be blamed on the Ritossas because the Carrs rejected each of three candidates proposed by Mr Lucas, the search consultant whom the Carrs preferred. Although there was a dispute as to the performance of the Carrs’ company CACM as farm manager, that was another matter which fell into the category of a legitimate difference of opinion as to a matter of business judgment.

    4. (4)

       In relation to the signing rights of bank accounts, the matter was resolved by the Ritossas becoming joint signatories, with a process for each family to review certain expenses being agreed in August 2020.

    5. (5)

       In relation to the homestead, there were short term disagreements in June and July 2020 concerning the terms of the lease, but these were resolved. The delay thereafter, until the managers gained possession in April 2021 was not attributable to either the Carrs or the Ritossas. After the manager resigned there was agreement that the replacement manager would move into the homestead. The primary judge was satisfied that the “few disagreements that there were in relation to the form of the lease” fell within the category of legitimate disagreement about matters of business judgment.

    6. (6)

       Concerning the budget, a budget for capital expenditure was agreed on 27 July 2020 for the financial year ending the following June 2021, and after SouthernAg’s appointment, it bears the responsibility for proposing a budget, and the directors agreed on the 2022/2023 budget at a meeting on 2 August 2022.

    7. (7)

       Concerning staff, the primary judge found that this complaint was not made out.

39. [163]

    Passing over the second instance of oppression for a moment and turning to the third matter summarised at [207], there remains substantial indebtedness to the unit holders, although it has not increased since June 2019 (thereafter there has been borrowing from ANZ). The entitlement of the unit holders as creditors is subordinated to that of ANZ. The primary judge said that the decision not to reduce unit holder loans could not be oppressive conduct in those circumstances. His Honour said that there was no evidence that ANZ had been asked to consent to a reduction of unit holder indebtedness, in response to which the Carrs pointed to testimonial evidence that the ANZ manager had only to be asked and consent would be given.

40. [164]

    Insofar as the complaint extended to a failure to make distributions of income to unit holders, there were either deficits, or else where there was a surplus it was used to reduce ANZ indebtedness.

41. [165]

    The primary judge said that the decision not to seek (or attempt to seek) to reduce unit holder indebtedness did not constitute oppressive conduct. That conclusion is clearly correct. A trustee was perfectly entitled, if not in fact obliged in the absence of unit holder consent, to pay down interest-bearing debt ahead of subordinated, interest-free debt.

42. [166]

    Concerning the breakdown of mutual trust and confidence (the fourth matter summarised in [207]), the primary judge said that that did not constitute oppression, and observed that “Importantly, the working relationship between the Carrs and the Ritossas has not broken down as indicated by the many decisions which have been made by the board of Darbalara Holdings, despite the breakdown of the personal relationship between the directors”: at [252]. That observation was borne out by the evidence bearing on the numerous issues mentioned above.

43. [167]

    His Honour continued:

44. [168]

    I agree. Further, I did not understand the appellants to submit that there was any error in that reasoning.

45. [169]

    The remaining aspect of this ground concerns the acknowledged and ongoing dispute about whether the trust should be wound up. This goes to the heart of the dispute between the parties. The primary judge addressed it extensively, and his Honour’s reasons warrant extensive reproduction. His Honour said at [233]-[243]:

46. [170]

    The respondents were highly critical of the approach adopted in the appellants’ written submissions of merely asserting the findings sought, and claiming that oppression was made out. That submission has force.

47. [171]

    First, this Court is obliged to conduct “a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge’s reasons” and to undertake the task of “weighing conflicting evidence and drawing [their] own inferences and conclusions”: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [25]; Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [32]. But nonetheless, as Gageler J explained in the latter case at [30], “the existence of an error, whether of law or fact, on the part of the court at first instance is an indispensable condition of a successful appeal”. It is unnecessary in the present case to consider this in any detail (although the reasoning in JBS Australia Pty Ltd v SafeWork NSW [2024] NSWCCA 209 at [24]-[29] illustrates how those propositions may be more nuanced than they might appear). The simple point is that there is force in the criticism that merely reciting parts of the evidence and inviting this Court to reach a different conclusion is not an approach likely to result in the conclusion that there was error warranting allowing the appeal.

48. [172]

    Secondly, it is trite that a court should be reluctant to find oppression. A mere failure to agree is usually not oppressive, and it has been observed that courts should exercise restraint in being satisfied that s 232(e) has been made out: see for example Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [1998] NSWSC 413; 28 ACSR 688 at 740. The reason for the caution was identified in Wayde v NSW Rugby League Ltd (1985) 180 CLR 459 at 467-8; [1985] HCA 68: “in order to avoid an unwarranted assumption of the responsibility for management of the company”. To this may be added, in cases of equal ownership, the point made by one commentator:

49. [173]

    Thirdly, it is also trite that this Court should exercise a degree of deference in reviewing the evaluative judgment of a judge who has seen the entirety of the evidence as it unfolds, including the cross-examination of all natural persons involved, and whose reasons inevitably will fail to capture every aspect: Biogen Inc v Medeva plc [1997] RPC 1 at 45; [1996] UKHL 18. As Lords Neuberger and Mance reiterated in Chen v Ng (British Virgin Islands) [2017] UKPC 27 at [56], the reasons of the trial judge are an inherently incomplete statement of the impression made upon his Honour by the primary evidence, which is a further factor telling against appellate interference.

50. [174]

    That is why an inevitably selective focus on the low points of the history of the last four years between the Carrs and the Ritossas, followed by an invitation to this Court that it reach a different conclusion from that reached by the primary judge, without in terms identifying where his Honour fell into error (unlike grounds 6, 7 and 8), is unpersuasive.

51. [175]

    It is nonetheless worth reproducing the respondents’ submissions on the key issue of value. The respondents said:

52. [176]

    I did not understand there to be any challenge to any aspect of the above – either the actual indications of value on the evidence which emerged from the attempts to secure a purchaser, or the general proposition that the sale of a 50% interest would realise less than the amount realised on the winding up of the trust. I agree with the respondents’ submission. To be clear about the basic point, I would readily accept that the market value of the 50% parcel of units owned by DRCH is appreciably less than the proceeds which would be achieved if the trust assets were sold, debts repaid and the surplus distributed to unit holders proportionately. But there is nothing oppressive about that. It simply reflects the value that the market attributes to a parcel of units which are unable to control a meeting of unit holders.

53. [177]

    This ground is not made out.

54. [178]

    This ground identified further findings which, so it was said, the primary judge should have made, which in conjunction with the findings identified in ground 2 should have led to the conclusion of oppression.

55. [179]

    The additional factual findings were identified in paragraphs (a)-(e) of this ground. Paragraph (a) was the findings in grounds 6, 7 and 8, which have been addressed above.

56. [180]

    Paragraph (b) was the finding that there was intractable disagreement as to the continuation of the Darbalara Property Trust, to which was added that the Ritossas have refused to waive the right of pre-emption, so as to be able to acquire the appellants’ interests in the trust at a lower price. The primary judge made a finding that Mr Ritossa was not prepared to waive the right of pre-emption because the identity of a new co-owner was a matter of significance to him. There is no challenge to that finding, which in any event is one that this Court would not disturb. Otherwise, this paragraph does not go further than the legal consequences of the structure chosen by the appellants in the event of a disagreement with the Ritossas.

57. [181]

    Paragraph (c) was a series of findings as to the cause of the breakdown in relations, namely, accusations by the Ritossas that the Carrs had “grossly mismanaged the properties throughout the drought”, had “acquired the Gilla Willa property through a conflict of interest”, unreasonably refused the Ritossas buying the homestead for their own private use, and were financially overcommitted so that they were no longer capable of acquiring new properties. These matters were not elaborated in the appellants’ written submissions. Most seem not to have been pleaded. The primary judge made no finding as to the cause of the breakdown, and it was not suggested that this Court would be able to do so.

58. [182]

    Paragraph (d) was that since December 2020 there have been board disagreements “some of which were ultimately resolved but that has only occurred after months of disagreement between the directors, with correspondence between the directors and their respective lawyers and with the threat of this litigation hanging over the parties”. All that may be so, but it does not materially contribute to a finding of statutory oppression.

59. [183]

    Paragraph (e) is very lengthy. Its key points are the earlier practice of distributions from the Darbalara Property Trust which had ceased, and the absence of any real prospect of the appellants exiting “for a fair value commensurate with the realizable market value of the assets of the Trust”, in circumstances where the Ritossas are aware of the Carrs’ wishes, including that they had incurred significant debt in acquiring Gilla Willa. Much of the paragraph is framed around the language of this Court’s judgment in Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; 288 ALR 310 at [205]-[206]. The paragraph commences that the Ritossas “whether by design or just the effect of their actions” brought about those consequences. However, in oral submissions, Mr Birch SC acknowledged when this was raised that “we didn’t put in an affirmative case that the Ritossas acted with a particular ulterior motive, which was an improper one”. Insofar as the paragraph asserts the difference between the market value of the units held in the Carr Family Trust and what would be realised on the winding up of the trust, it seems to be that difference which drives this litigation, but far from being indicative of oppression it is the consequence of the structure chosen by the parties in an informed way in 2010.

60. [184]

    For those reasons, these grounds are not made out.

Ground 9: The application of the doctrine referred to in Ebrahimi v Westbourne Galleries Ltd to trusts

1. [185]

   It is desirable to reproduce ground 9 verbatim:

2. [186]

   Grounds 9(a) and (c) asserted that there was a basis, on or analogous to the “just and equitable ground” for winding up a company, to appoint a receiver to wind up the Darbalara Property Trust. This was at the heart of this ground as advanced in the appellants’ written and oral submissions.

3. [187]

   Ground 9(b) is in a different category. It is directed to a particular aspect of the reasoning of the primary judge, namely, his Honour’s observation that in the absence of an application to wind up the trustee Darbalara Holdings, no relief could be ordered.

4. [188]

   At trial, the appellants submitted that they were at an impasse in that they could not “exit” from their investment in any commercially feasible way. That, together with the alleged deadlocks in the ongoing management of the trust assets, formed part of the pleaded case for the appointment of a receiver in the Amended Points of Claim, based on jeopardy to the trust assets:

5. [189]

   The relief sought was threefold:

6. [190]

   The appellants characterised the close association between the unit holders as a “company trust structure which was a form of quasi-partnership”. The reference to “quasi-partnership” picked up what the appellants called “the Ebrahimi principle” arising from Lord Wilberforce’s speech in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360. That “principle” was pressed into service by the appellants to justify their submission that:

7. [191]

   The irretrievable breakdown in the relationship between the parties, in circumstances where the confidence between the unit holders and directors of the trustee was material to the relationship, was said to justify the court’s power to terminate the trust, in the same way a partnership could be dissolved under s 35(f) of the Partnership Act 1892 (NSW), or a corporate “quasi-partnership” could be wound up under s 461(1)(k) of the Corporations Act, where “just and equitable”.

8. [192]

   The respondents said, and the appellants acknowledged, that their submission elevated what was said by Lord Wilberforce in the course of construing an express statutory power to wind up a corporation on “just and equitable” grounds into a “general equitable power” to terminate a trust relationship. It was candidly acknowledged that the submission was “novel”. But the appellants submitted that the power to do so was but an instance of the Court’s “inherent equitable jurisdiction” to protect trust property from waste. They also called in aid Basecove Pty Ltd v Dolores Lavin Management Ltd [2009] NSWSC 1315 and Accurate Financial Consultants Pty Ltd v Koko-Black Pty Ltd [2008] VSCA 86, which were said to contemplate the possibility of appointing a receiver to realise trust assets and make final distributions to unit holders where the mutual trust and confidence between the managers had failed and thereby “jeopardised” the trust property.

9. [193]

   The primary judge rejected those submissions for three reasons.

10. [194]

    First, the primary judge emphasised that the considerations drawn from Ebrahimi – that a relationship that was in substance a “quasi-partnership” could be dissolved where the trust and confidence between the parties had failed – were made in the course of construing the words “just and equitable”, and determining the scope of a statutory power to make orders winding up a company. They were not intended to, and should not, be elevated to general propositions that could stand independently of the statutory power given by s 222(f) of the Companies Act 1948 (UK) and its counterparts.

11. [195]

    It will be recalled that the appellants sought the dissolution of the trust relationship. In those circumstances, the primary judge held that it was “not open” to the appellants to rely on the considerations outlined by Lord Wilberforce in Ebrahimi as a sufficient basis for this Court to appoint a receiver where they had not sought final relief under s 461 of the Corporations Act. The analogies made with partnerships in Ebrahimi “provide[d] no assistance to the plaintiffs’ application for the appointment of a receiver under a different statute or the inherent jurisdiction of the Court”: at [283].

12. [196]

    Secondly, the relief sought by the appellants misunderstood the nature and function of the Court’s power to appoint a receiver. Had the appellants sought and obtained an order winding up Darbalara Holdings under s 461 of the Corporations Act, “there would have been an argument available to them that a receiver should be appointed to the trust property under s 67 of the Supreme Court Act or the inherent jurisdiction of the court relying on the principles stated in Ebrahimi: see Re Admiral Cove Pty Ltd [2023] VSC 537 at [65]; Re Munja Bakehouse Pty Ltd [2024] NSWSC 6 at [30]; cf Mir v Mir at [121]”.

13. [197]

    Thirdly, the primary judge held that the decisions cited by the appellants did not support the proposition for which they contended. In Basecove, Brereton J made orders appointing a receiver to wind up a unit trust not merely because the trustee was in deadlock, but because it was also shown that “the financial position of the trust was tenuous at best” and that “the relevant entities…were subject to a substantial deficiency of funds and trading at losses” as a result of that deadlock. The findings that the primary judge made about Darbalara Holdings’ continuing ability to manage the trust assets therefore meant that

14. [198]

    In Koko-Black, the primary issue was whether minority unit holders in a unit trust could restrain the trustee from acting on a notice to compulsorily acquire their units. Although the minority unit holders invoked “the Ebrahimi principle” and pleaded that the parties owed fiduciary obligations to each other, the relief they sought was not the dissolution of the unit trust which they suggested was a “quasi-partnership”, but injunctive relief restraining the compulsory acquisition of their shares.

15. [199]

    Further, the primary judge considered that the decision of the Victorian Court of Appeal in Koko-Black was “no more than a recognition that mutual fiduciary duties can apply, on the facts of the particular relationship, between persons who are investors in a unit trust notwithstanding that the structure they have chosen is a unit trust, rather than a partnership”. The primary judge stated at [275] that those considerations could not apply to the present case, where a fiduciary relationship between the Carrs and the Ritossas was not pleaded:

16. [200]

    The appellants’ submissions in this Court largely mirrored their submissions on this issue in the court below, but with one expansion. Perhaps reflecting an appreciation of the difficulties resulting from the finding by the primary judge at [266] that “there is no evidence that the trust property is in jeopardy”, the appellants extended this submission from one focussed on jeopardy to the assets of the trust to a “novel” argument that, “leaving jeopardy on the side, there [are] grounds to appoint a receiver on the just and equitable ground by analogy with the way in which the Court has wound up companies”.

17. [201]

    In support of ground 9(a), the appellants contended that “[t]he Primary Judge ought to have held the doctrine in Ebrahimi is part of Australian jurisprudence generally” and has been “incorporated into the inherent jurisdiction” of the Supreme Court or "in the principles governing the exercise of the power in section 67 of the Supreme Court Act 1970 (NSW)”. The appellants said that “[f]undamental to the law of trusts is that Equity Courts have jurisdiction to supervise, and in appropriate circumstances intervene in, the administration of a trust” but then added, “for which one of the oldest remedies is appointing a receiver”. The respondents disputed the latter proposition, insofar as the appellants maintained that the appointment of a receiver to wind up a trust was an incident of that inherent jurisdiction. They submitted that Ebrahimi was concerned with statutory interpretation rather than with “the development of some general common law doctrine for intervention on just and equitable grounds absent statute” and that, “absent an overarching partnership, the law in Australia is clear – Courts will not appoint receivers to wind up a trust”.

18. [202]

    The respondents maintained in oral address that the appointment of a receiver to wind up the trust “is problematic” because it is in substance “a final order”:

19. [203]

    The appellants maintained that the decision of the Victorian Court of Appeal in Koko-Black suggested the possibility that remedies ordinarily available for the winding up of a partnership can follow in a quasi-partnership styled as a unit trust, and also relied upon dicta in Mir v Mir [2023] NSWSC 408, where although no such order was made, that was said to be a result of the failure to join all beneficiaries and a failure to establish that the trust assets were in jeopardy. Judgment in an appeal from Mir v Mir is presently reserved. However, its focus is whether despite the elaborate corporate and trust relations formally established by the three brothers, the business conducted by them should be treated as a partnership. Ball J observed at [155], in his conclusion, that:

20. [204]

    The conclusion reached by Ball J above, and the observations made by Young J cited by his Honour, resonate with the decisions made by the Carrs and the Ritossas in 2010. However, the present litigation is very different from that involving the Mir brothers in two key respects.

21. [205]

    First, the appellants do not invite this Court to characterise their business as being operated by a partnership or as involving fiduciary obligations between themselves. That would have required pleading, and would face very substantial obstacles having regard to the informed way in which the Darbalara Property Trust was established and its financial and taxation treatment over many years, as the primary judge observed at [275] which is reproduced above. Instead, rather than inviting this Court to override the formal structures to which they agreed so as to engage the law of partnership, the appellants invite this Court, in substance, to extend the remedies available to unit holders of a unit trust who are also jointly in control of the trustee so as to permit the winding up of the trust in a way analogous to the winding up of a partnership or company.

22. [206]

    Secondly, there is ground 9(b), which is reproduced above. This ground was not advanced separately from ground 9(a) in the appellants’ written submissions, either in chief or in reply. Nor did I understand it to have been developed orally.

23. [207]

    As his Honour indicated at [279], there is an uncertainty in the existing authorities whether when there is an application to wind up a trustee, there is power to appoint a receiver to the assets of the trust. Of course, one of the assets of the trustee is apt to be its right to be indemnified out of trust assets for liabilities properly incurred, which right is secured by a lien over trust assets. I do not understand it to be controversial that there may be power to appoint a receiver in order to enforce the trustee’s lien over trust assets, as Brereton J observed in Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; [2008] NSWSC 1344 at [18], and as was common ground in the more recent litigation in this Court and the High Court in Jaken Properties Australia Pty Ltd v Naaman (2023) 112 NSWLR 318; [2023] NSWCA 214 at [116]; Naaman v Jaken Properties Australia Pty Ltd [2025] HCA 1 at [28] (although it may be noted in light of the submissions addressed below that the appointment of a receiver in such a case is interlocutory, with the majority judgment describing it as a form of “interim protection”). But no part of the appellants’ case was that the trustee should be wound up and in consequence a receiver should be appointed to wind up the trust. The likely consequence upon the trust of the trustee being wound up would be its removal as trustee and the appointment of a replacement trustee: see Whitton v ACN 003 266 886 Pty Ltd (Controller Appointed) (in liq) (1996) 42 NSWLR 123 at 156, and that would not assist the appellants in their goal of causing the assets of the trust to be sold and the proceeds distributed to unit holders.

24. [208]

    Ground 9(b) misapprehends the reasoning of the primary judge. It merely reflects the fact that the appellants had not sought the winding up of the trustee, no doubt for the sensible reason that it would not assist them in achieving their goal of realising their share of the value of the trust assets through a winding up of the trust.

25. [209]

    In those circumstances, it is not necessary to express any view as to what was said in Mir v Mir, on either of the aspects mentioned above, and in light of the pending appeal from that decision it is preferable not to do so.

26. [210]

    The effect of ground 9(c) is that in the absence of jeopardy to the trust assets or a finding that the trustee was dysfunctional, nonetheless the power to appoint a receiver to wind up the Darbalara Property Trust was both available and should have been exercised. The gravamen of this ground is that it suffices to establish that there has been a “breakdown” in a relationship that “required material cooperation” and “a level of trust” that has ceased to exist. That position was affirmed in oral submissions:

27. [211]

    The respondents pointed out that that submission departed from the pleaded case set out above in the Amended Points of Claim, which was that receivers should be appointed on the basis that “the joint venture [became] unworkable and thereby [put] in jeopardy the assets” held by the trustee, and that no challenge was made to the finding at [266] that the trust assets were not in jeopardy. And to the extent that the appellants’ submissions now relied as the basis for dissolution on the proposition that the directors owed fiduciary duties to one another in the manner of a partnership, the respondents reiterated the primary judge’s concerns that a fiduciary relationship had not been pleaded and would seem inconsistent with the way the parties chose to organise the trust structure for taxation purposes.

28. [212]

    The respondents also submitted that even if this Court did have power to appoint receivers in the circumstances suggested above, the fact that the parties had agreed in the Trust Rules precisely how the trust would be wound up and had devised a means for each party to sell their units provided strong discretionary reasons to refuse such relief.

29. [213]

    The appellants’ submission based on Ebrahimi is broader than was put at trial, but raises a pure question of law, doing so in a fashion which is, to my mind, sufficiently closely linked to the case advanced at first instance that it is “expedient” to permit its being advanced on appeal: Water Board v Moustakas (1988) 180 CLR 491 at 497; [1988] HCA 12. If an element of the case advanced on appeal turned on the existence of a fiduciary relationship between the Carrs and the Ritossas, that could not be permitted, because it was not pleaded and would have affected the cross-examination and findings at first instance. But the appellants disavowed any such contention, saying:

30. [214]

    Bearing in mind what was said in Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11 at [18] that “second thoughts are sometimes good thoughts, and that the appellant is entitled to justice; but extending justice to an appellant who has failed to take a point at the trial may work an unacceptable injustice on the respondent”, the appellants should be permitted to advance the broader case in grounds 9(a) and (c). But as will be seen, this is not a case where second thoughts are good thoughts. To the contrary.

31. [215]

    In order to resolve this ground, the starting point is to identify what “the doctrine referred to in Ebrahimi v Westbourne Galleries” or “the Ebrahimi principle” actually is. Referring to a legal principle by the name of a case is apt to conceal its true nature: Harris Health Care Pty Ltd (receivers and managers appointed) (in liq) v Hayes [2024] NSWCA 301 at [110], where references to what was said by Edelman J and Gummow NPJ on this point may be found. If the change in law which the appellants seek is to be made by reference to a “doctrine” or “principle” in a case, it is vital to understand what the case decided and in what context was the “doctrine” or “principle” enunciated. For it is of course quite wrong to take the language used in reasons for judgment in one context and apply it in another context simply because the language when read in isolation seems apposite (what was said of reliance upon Sayden above illustrates this).

32. [216]

    First and foremost, Ebrahimi is a case about statutes. Antithetically to the appellants’ submission, it illustrates what Gummow J once described as “the supreme importance of statute law”: Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160; [2007] HCA 1 at [35]. The question was the scope of s 222(f) of the Companies Act 1948 (UK) authorising an order for the winding up of a company on the “just and equitable” ground. The reasoning in Lord Wilberforce’s speech commences as follows at 374:

33. [217]

    His Lordship proceeded to reject as wrong “a tendency to create categories or headings under which cases must be brought if the clause is to apply”, stating that “[i]llustrations may be used, but general words should remain general and not be reduced to the sum of particular instances”. The point is a basic one: a statutory power conferred in open-ended language such as “just and equitable” should not be confined by categories. This confirms the case was about the particular statutory power, found in the Companies Act 1948 and its ancestors going back to 1848, rather than in some principle of judge-made law.

34. [218]

    Secondly, as Gummow J observed in Sons of Gwalia at [36], there is not some “general principle of company law” divorced from statute applicable to the winding up of a company. Lord Wilberforce made the same point. At the conclusion of his account on the relevance of quasi-partnership, he said that “[t]he foundation of it all lies in the words ‘just and equitable’”. It was not the other way around. And those words do not exist at large.

35. [219]

    Thirdly, it is true that there was an interaction between the law of partnership developed by the court of Chancery and the nineteenth century legislation authorising joint stock companies. Sir Keith Aickin observed as much in his foreword to F Callaway, The Just and Equitable Ground, (Law Book Company, 1978), p x, by reference to the title of the first edition of Lindley’s work “The Law of Partnership Including its Application to Companies”. He also noted that the insertion of “just and equitable” as a basis for dissolution of a partnership in the Partnership Act 1890 derived from s 79(5) of the Companies Act 1862, rather than from principles developed in courts; see also N Lindley, A Treatise on the Law of Partnership (1893, 6th ed) p 574-575, noting the same connection. (That is not to doubt that cases now regarded as falling under the “just and equitable” ground may have occurred prior to the legislation being enacted – see for example Lord Eldon’s decision in Waters v Taylor (1813) 2 V & B 299; 35 ER 333 dissolving the partnership operating the Italian Opera House, following numerous earlier applications brought by a partner with a 7/16 share: Waters v Taylor (1807) 15 Ves 10; 33 ER 658.) If the appellants had sought some extension to the principles applicable to partnership, then they would have been on much firmer ground in drawing upon Ebrahimi, because of the link between the law of companies and the law of partnership. But the appellants disclaimed reliance on a partnership or fiduciary relation between the Carrs and the Ritossas. Of course, the law applicable to trusts, and especially the circumstances when a trust relation comes to an end, is quite different from the law applicable to partnerships.

36. [220]

    Fourthly, deed of settlement companies preceded joint stock companies. Before 1844, most joint stock companies were unincorporated and depended on a deed of settlement vesting the property of the company in a trust for the benefit of members: L Gower, Principles of Modern Company Law (Stevens & Sons 1954), p 136, and see A Black, Development of Corporations Law (paper presented to Francis Forbes Society for Australian Legal History, 26 October 2016), pp 3-8. There were great difficulties in bringing proceedings against deed of settlement companies (as the travails of Mr Van Sandau who sued the British Annuity Company joining some 200-300 shareholders, in the spate of interlocutory applications reported in Van Sandau v Moore (1826) 1 Russ 441; 38 ER 171, illustrate). One of the reasons given by Young J for refusing relief comparable to that sought by the appellants in Horwath Corporate Pty Ltd v Huie [1999] NSWSC 583 at [14]-[15] was:

37. [221]

    The absence of authority to address an ancient problem in this way points against the existence of such a power: Jaken Properties Australia Pty Ltd v Naaman (2023) 112 NSWLR 318; [2023] NSWCA 214 at [137]-[138]. The absence of authority is consistent with what was said in Ebrahimi being tied to the particular statutory language and the absence of a more general principle applicable to trusts which performed the same function as companies.

38. [222]

    Further, the absence of relevant decisions before 1848 tends to confirm that the “just and equitable” ground introduced by the Joint Stock Companies Winding Up Act 1848 was not a codification of principles already developed in other areas of the law.

39. [223]

    Accepting that Ebrahimi concerns the scope of the statutory power to wind up a company, the appellants’ submissions extended to the proposition that equity is capable of developing by analogy with statute. So much is trite, as is implicit in the basic proposition that “significant elements of what now is regarded as ‘common law’ had their origin in statute or as glosses on statute or as responses to statute”: Esso Petroleum Resources Ltd v Commissioner of Taxation (1999) 201 CLR 49; [1999] HCA 67 at [19]. The appellants emphasised this possibility in reply:

40. [224]

    But any analogy in the present case is inapt. Where a company is dysfunctional or relations between its directors have irretrievably broken down, it may be wound up. But if the trustees cannot, or will not, administer a trust, a court may order their removal and replacement, and the point of doing so is so that the trust may be continued. As Dixon J said in Miller v Cameron (1936) 54 CLR 572 at 580; [1936] HCA 13, “The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee” (emphasis added). Likewise, if the trust assets are in jeopardy, a receiver may be appointed, but the purpose is to preserve the trust.

41. [225]

    More fundamentally, companies and trusts are very different. One is a legal person, the other is a relationship. Companies are capable of perpetual existence, while in contrast, private trusts “do not and cannot live forever”, as is emphasised by N D’Angelo, Transacting with Trusts and Trustees (LexisNexis 2020) p 371. In part the mortality of private trusts is because a trust is a relationship, rather than a legal entity, and in part it is because of the rule against perpetuities and its statutory modifications. A private trust must vest, and it is perfectly open to the settlor of a trust to insert a power of revocation. Indeed, if the trust is to be deployed as a managed investment scheme, then it must make adequate provision for winding up the scheme: Corporations Act, s 601GA(1)(d). But it is also perfectly open to a settlor of a trust not intended to be a managed investment scheme not to include a power of revocation. A trust is a very flexible institution, as Deane J observed in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 147; [1988] HCA 44.

42. [226]

    It is true that the appellants’ submissions were quite subtle, and well-attuned to the difficulties attending a simple translation of winding up of a company to the winding up of a trust. Thus it was said:

43. [227]

    But even so, for the reasons given above, I do not think that appointing a receiver in order to perform “the equitable equivalent” of winding up is an appropriate development of principle. I think it is contrary to principle.

44. [228]

    Capelli v Shepard (2010) 29 VR 242; [2010] VSCA 2 does not assist the appellants. That decision concerned the construction of the phrase “just and equitable” under the express statutory power to wind up a managed investment scheme under section 601ND of the Corporations Act. That provision emphasises that in the class of structure which most resembles a company, namely a managed investment scheme, the legislature has insisted that the trust make adequate provision for winding up and has conferred a special power for that to occur, replicating the position with companies. But the Darbalara Property Trust is not a managed investment scheme, and there is nothing in the Corporations Act which undercuts from parties advisedly choosing to participate in a structure perceived to have tax or other advantages for them but which is outside the scope of managed investment schemes.

45. [229]

    Indeed, the development of the law which this Court is invited to make would lead to incoherence with statute. The Australian Law Reform Commission considered in the 1990s whether the bases for a winding up should be carried into the trust relationship. That proposal was only enacted in limited circumstances, in respect of some managed investment schemes: see s 601ND of the Corporations Act and Re Stacks Managed Investments Ltd [2005] NSWSC 753; (2005) 54 ACSR 466 at [46]. In the CAMAC Report into Managed Investment Schemes, it was said that “under general trust law, there is no such thing as the formal winding up of a trust. The trust simply comes to an end in certain circumstances and the property is distributed among the beneficiaries”. Statute intervened to change that, but only for certain trusts: Corporations and Markets Advisory Committee, “Managed Investment Schemes” (Report, July 2012) at 29-30. Justice White, writing extra-judicially, made the same points (R W White, “Trusts – An Australian Perspective” (Speech, Higher Courts Seminar, Auckland, 24 May 2010)):

46. [230]

    There is another aspect of Ebrahimi – quite different from what has been mentioned so far – which bears upon the appellants’ submissions, and perhaps underlay their invocation of the “principle” or “doctrine” in that appeal. Equity can intervene to prevent the exercise of powers in circumstances that amount to fraud or are contrary to conscience. Lord Wilberforce said at 379:

47. [231]

    That is the limited sense in which the Victorian Court of Appeal’s reference to “the Ebrahimi principle” in Koko-Black should be understood. In Koko-Black, minority unit holders sought an injunction to restrain the corporate trustee from acting on a notice to compulsorily acquire their units. The appellants there contended that the trial judge erred in denying relief “on the basis of the principle of Ebrahimi, on which they relied to invoke a fiduciary duty between the investors inter se, said to justify…an injunction restraining the exercise of the power compulsorily to acquire their units”. Dodds-Streeton JA said at [112] that where there is a relationship of quasi-partnership, “it would not be equitable to permit one party to make use of his legal rights to the prejudice of his associate”. Her Honour also held, at [121], that, “whether within a corporate structure or not, the underlying relationship, rights and obligations of partnership or quasi-partnership would be recognised.”

48. [232]

    Because termination for want of mutual trust and confidence was said to be one of the “rights and obligations of partnership”, the appellants submitted that this “suggested” that the relief they seek by the appointment of a receiver is an “available avenue”. That is to say, the decision in Koko-Black appeared to favour the proposition that breach of a fundamental understanding of mutual cooperation between the parties could “lead to the dissolution of the association”.

49. [233]

    The decision does not support the appellants’ submissions. The relief sought by the minority unit holders in Koko-Black was not the dissolution of the trust but a restraint on the exercise of a power. As much was made clear at [122]-[123]:

50. [234]

    Concerned as they are with the doctrine of fraud on a power, the “equitable considerations” flowing from the subsisting fiduciary relationship that were mentioned by Lord Wilberforce and picked up by the Victorian Court of Appeal provide only for restraints on the exercise of a particular power by a director or some other fiduciary (a topic to which Lord Wilberforce returned some months later, in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821) not the dissolution of the trust relationship.

51. [235]

    It is also telling that Ebrahimi itself adopted no such general “Ebrahimi principle”, divorced from the English equivalent counterparts to the power to wind up a company on the just and equitable ground. Lord Wilberforce indicated that the “doctrine” of “quasi-partnership” could not be a sufficient premise at general law, by analogy only with statute, to furnish relief that has the effect of “winding up” a fiduciary relationship involving the management of assets:

52. [236]

    That is to say, the arrangement was either a partnership or it was not. If it was a partnership, the aggrieved partner could avail itself of the dissolution remedy in the Partnership Act 1890 (UK). If it was not, it could not rely on an analogy at general law with the statutory ground of winding up for the bankruptcy of a partner based only on a loose characterisation of the relationship as a “quasi” partnership. In that situation, the only opportunity would be for the aggrieved party to satisfy the court that a dissolution would be “just and equitable” within the meaning of s 222(f) of the Companies Act 1948 (UK). That binary “procedure” of reasoning was evidently endorsed by Lord Wilberforce. The reasoning which the appellants invite this Court to adopt, purportedly based on Ebrahimi, is in fact contrary to Lord Wilberforce’s own reasons.

53. [237]

    The appellants also invoke the “inherent jurisdiction” of courts of equity over trusts: “Fundamental to the law of trusts is that Equity Courts have jurisdiction to supervise, and in appropriate circumstances intervene in, the administration of a trust”. So much may be accepted. But it does not follow that the appointment of a receiver to wind up the trust is, or has ever been, an aspect of that jurisdiction, and it is not difficult to appreciate why that is so. Indeed, some of what follows is implicit in, or overlaps with, what has been said above concerning Ebrahimi and development of principle by analogy.

54. [238]

    The appellants’ application for the appointment of a receiver to wind up the trust is flawed for three fundamental reasons.

    1. (1)

       First, the appointment of a receiver does not free the receiver, or the trust assets over which the appointment extends, from the rights and obligations of the trust.

    2. (2)

       Secondly, the appointment of a receiver is ordinarily a remedy in aid of some other right. Thus, if there were a power of revocation, there might be a proper basis for the appointment of a receiver in aid of that right. But the appellants seek the appointment of a receiver in order to bring the trust to an end.

    3. (3)

       Thirdly, the foundational equitable principle is that equity preserves trusts, rather than destroying them. To that end it may remove a trustee, or appoint a new trustee, or indeed (albeit only in rare cases) administer the trust.

55. [239]

    In truth, the appellants’ submission is inconsistent with the nature of the inherent jurisdiction. Where there is a deadlock such that the trustee cannot act or the trustees cannot act unanimously to make a particular decision, the response is not to wind up the trust, but to appoint a receiver to exercise the power, or direct how it should properly be exercised or, in exceptional cases, for the Court itself to execute the power: In re Baden’s Deed Trusts [1971] AC 424 at 451-452 (Lord Wilberforce); Cowan v Scargill [1985] Ch 270 at 297 (Sir Robert Megarry V-C). Exceptionally, there could be a suit for administration of the trust. Even so, an administration is for the continuation, not the destruction of the trust relationship and the trust powers are not extinguished as a result: Thomas v Williams (No 2) (1883) 24 Ch D 558 at 563. That is to say, the inherent jurisdiction is to execute, not extinguish, the terms of the trust. Hence the usual form of such an order, which commences, “It is ordered that the Trusts be performed and carried into execution”: Lord Evershed (ed) Atkin's encyclopaedia of court forms in civil proceedings (2nd ed) vol 41, p 265; Daniell’s Chancery Forms (4th ed, 1885) 108. It is no part of the court’s inherent jurisdiction to dissolve trusts in the absence of some express power in the trust instrument to do so. In Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 at 56, 65 and 73; [1921] HCA 55, three members of the High Court endorsed the statement of Farwell LJ in In re Hazeldine’s Trusts [1908] 1 Ch 34 at 40-41 that,

56. [240]

    Thus it is said in one text that there is no inherent power to destroy a trust relationship: Young, Croft and Smith (eds) On Equity (LawBook, 2009) p 502. As Barrett J explained in Re Gaydon [2001] NSWSC 473 at [29],

57. [241]

    That statement has since been endorsed in Rosenbaum v Baidarman (No 2) [2021] NSWSC 574 at [93] (Williams J), In the matter of Cupit & Aboud as trustees of the Australian Trust [2020] NSWSC 1715 at [23] (Ward CJ in Eq); Baba v Sheehan [2019] NSWSC 1281 at [74] (Parker J; an appeal was dismissed, with the claim for the appointment of a receiver not pressed on appeal: Baba v Sheehan [2021] NSWCA 58 at [51]); Bose v Bose [2013] NSWSC 327 at [15]-[17] (Gzell J), and by D Clarry, The Supervisory Jurisdiction over Trust Administration (Oxford University Press, 2018), pp 193-194.

58. [242]

    Brereton J said in Re Austec Wagga Wagga Pty Ltd (in liq) [2018] NSWSC 1476 at [13]:

59. [243]

    The foregoing illustrates that the primary concern of the “inherent jurisdiction” which the appellants invoke is with the performance, not the destruction, of the trust.

60. [244]

    In New South Wales, there is no power to vary the trust so as to permit its revocation. The inherent jurisdiction was described in Arakella Pty Ltd v Paton (2004) 60 NSWLR 334; [2004] NSWSC 13 at [93]-[96] and Cisera v Cisera Holdings Pty Ltd [2017] NSWSC 960 at [20] to the effect that (a) courts had no general power to alter the terms of a trust on the ground that it appeared likely to advantage the beneficiaries, although (b) in a small number of tightly confined situations courts could sanction action by a trustee which was beyond power or even contrary to the terms of the trust, but (c) even in such situations it was usually insufficient merely that such action would be advantageous – something more, usually some form of emergency, was required. This Court said in Cisera v Cisera Holdings Pty Ltd (2018) 98 NSWLR 747; [2018] NSWCA 286 at [68]-[70]:

61. [245]

    Contrary to the tenor of the appellants’ submissions, the power to appoint a receiver does not reveal any more expansive view. As the respondents neatly put it, one cannot achieve what otherwise cannot be achieved by being “powered by the back door through the appointment of a receiver”. That is why none of the above is doubted by the proposition from Palmer v Ayres (2017) 259 CLR 478; [2014] HCA 5 at [85] and invoked by the appellants that

62. [246]

    In truth, the starting point that the Court in its “supervision of administration” of trusts is to uphold, not destroy, the trust informs any analysis of the scope of the power to appoint a receiver, whether in the inherent jurisdiction, or where “just or convenient” under s 67 of the Supreme Court Act. In part that is because the appointment of a receiver is ordinarily interlocutory, not final, relief made in aid of the ultimate exercise of some power to wind up a company or judicial sale or some other entitlement: Yunghanns v Candoora No 19 Pty Ltd (No 2) [2000] VSC 300; 35 ACSR 34 at [70], [84], [92]. Hence the words “interlocutory order” in s 67.

63. [247]

    In partnership cases, the appointment of a receiver is not an end in itself, but is only in aid of the exercise of some independent power to order the dissolution of a partnership, ordinarily by service of a notice under the terms of the partnership: T Robinson and P Walton (eds), Kerr on Receivership and Administration (22nd ed, 2024, Sweet & Maxwell) at 69-70; Pini v Roncoroni [1892] 1 Ch 633. The appointment is only “to restrain the dissentient partners from executing securities in the name of the firm, and from receiving the partnership debts” to prevent frustration of the primary orders for a dissolution and an account: N Lindley, A treatise on the law of partnership: including its application to joint-stock and other companies (1860, 1st ed) at 189. All of this, not to mention the fact that s 67 speaks of appointment “by interlocutory order” is inconsistent with the order sought by the appellants. The facility for the appointment of a receiver cannot be used as a substitute for the absence of some independent power to order the dissolution of a trust. Hence the point made by Parker J in Baba v Sheehan [2019] NSWSC 1281 at [75]:

64. [248]

    Although in Brereton J’s ex tempore judgment in Basecove, where a receiver was appointed to dissolve the unit trust, reference was made to the fact that the “arrangement between the parties is really that of a quasi-partnership in which the relationship between them has broken down”, it was also significant that “a financial disaster [was] looming from the deficiency of funds and ongoing losses” in the management of the unit trust: Basecove Pty Ltd v Dolores Lavin Management Pty Ltd [2009] NSWSC 1315 at [11]. No such finding was made in this case. And the absence of such a finding was not challenged in this appeal.

65. [249]

    It is true that s 67 of the Supreme Court Act is worded very broadly. It provides “The Court may, at any stage of proceedings, on terms, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient so to do”. The same breadth may be seen in ss 23 and 66(4) of the same statute. But just as the latter sections do not confer power to order injunctions without regard to equitable principle, s 67 does not permit the jettisoning of basic principles outlined above. To the contrary, the true position is that those generally worded provisions are construed in light of equitable principle. As decisions like Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 illustrate, principle may be developed over time. But acceptance of the appellants’ submission would not be a development of principle, so much as a subversion of principle.

66. [250]

    Lindley LJ explained in Holmes v Millage [1893] 1 QB 551 at 556-557 that what is now s 67 of the Supreme Court Act was a Judicature provision (s 25(8) of the Judicature Act 1873), and that while “receivers are appointed more readily than they were before the passing of the Judicature Acts, and some inconvenient rules formerly observed have been very properly relaxed, yet the principles on which the jurisdiction of the Court of Chancery rested have not been changed”. His Lordship, in setting aside the novel appointment of a receiver to a judgment debtor’s future income, also observed at 555:

67. [251]

    Much the same applies to this ground of the present appeal.

68. [252]

    Ultimately, the appellants invite this Court to create a concededly novel principle which will detract from the parties’ autonomy, insofar as they chose to make their property investment through the structure of a trust rather than a company or partnership. It is also contrary to basal aspects of the law of trusts and the role of courts in that area. There is no principled basis for the development of the law by analogy as the appellants submit; the contrary is the case. The fact that statute has intruded in some areas – in a certain class of trusts (see ss 601GA and 601ND), and in some other Australian jurisdictions, but not in New South Wales in relation to the Darbalara Property Trust – and the fact that to wind up a company in the circumstances described in Ebrahimi is an intrinsically statutory power, reinforce the conclusion that if the law is to be changed, it is the task of a Legislature rather than this Court.

69. [253]

    Finally, and separately from all of the above, the parties agreed to a structure which does make provision for an “exit” when one unit holder wishes to sell. The relief sought by the appellants reflects their preference for a different, and more favourable, mechanism in the same circumstance. If contrary to all of the above there were such a power, no sound reason has been put forward to entitle the Carrs to the benefit of, and to subject the Ritossas to the burden of, a different mechanism to dissolve the trust relationship. The appellants respond by saying they are unaware of any authority limiting the availability of “the Ebrahimi doctrine” to cases where no express provision has been made for the revocation of the trust. But that submission carries no weight in circumstances where there is no authority for the extension of anything that was said in Ebrahimi to the winding up of trusts. The significance of the pre-emption rights in the Darbalara Property Trust is that they emphasise that in addition to the posited “Ebrahimi doctrine” being contrary to equitable principle, it would directly undermine the parties’ autonomy if applied to the present facts.

70. [254]

    For those reasons, grounds 9(a), 9(b) and 9(c) of the appeal should be dismissed.

Conclusion and orders

1. [255]

   The theme recurring in all of the grounds of appeal is a dissatisfaction on the part of the Carrs with the position which they would have been in had their property investment with the Ritossas been conducted through a partnership or company. But those ways of structuring their investment were expressly proposed in 2010 and rejected. The appellants are bound by the consequences of their original decision.

2. [256]

   For those reasons, all grounds of the appeal should be dismissed. So far as appears from the appeal books, there is no reason for costs not to follow the event.

3. [257]

   I propose that the appeal be dismissed with costs.

4. [258]

   STERN JA: I agree with Leeming JA.

5. [259]

   GRIFFITHS AJA: I have had the considerable benefit of reading Leeming JA’s comprehensive reasons in draft. I consider, respectfully, that they are a tour de force. I entirely agree with them and with the orders proposed by his Honour.