Alexander v Perpetual Trustees Wa Ltd

• Jurisdiction: Australia Federal only
• Court: High Court
• Judge: Gleeson CJ,Gummow,Hayne,McHUGH J,Kirby J,Callinan J
• Judgment Date: 12 February 2004
• Neutral Citation: 2004-0212 HCA A,[2004] HCA 7
• Docket Number: S509/2002
• Date: 12 February 2004

Charles Delius Somerville Alexander & Ors trading as Minter Ellison

Appellants

and

Perpetual Trustees Wa Limited & Anor

Respondent

[2004] HCA 7

Gleeson CJ, McHugh, Gummow, KirbyHayne and Callinan JJ

S509/2002

HIGH COURT OF AUSTRALIA

Alexander v Perpetual Trustees WA Limited

Contribution — Statutory right of — Trusts — Money received by firm of solicitors from respondent trustees to be held for a specific purpose and in accordance with specific conditions — Misapplication of funds by firm — Breach of trust by firm — Respondent trustees sued by beneficiaries — Firm sued by respondent trustees — Cross-claim by firm against respondent trustees — Whether contribution available — Whether firm liable to beneficiaries for damage — Whether respondent trustees liable to beneficiaries for same damage — Nature of beneficiaries' rights against firm — Proper construction of Wrongs Act 1958 (Vic), Pt IV.

Contribution — Statutory right of — Trade practices — Misleading and deceptive conduct — Money received by firm of solicitors from respondent trustees to be held for a specific purpose and in accordance with specific conditions — Misapplication of funds by firm — Misrepresentations by firm — Respondent trustees sued by beneficiaries — Firm sued by respondent trustees — Cross-claim by firm against respondent trustees — Whether contribution available — Whether firm liable to beneficiaries for damage — Whether respondent trustees liable to beneficiaries for same damage.

Fair Trading Act 1985 (Vic), ss 11, 37.

Wrongs Act 1958 (Vic), Pt IV.

1 Gleeson CJ, Gummow, and Hayne. This appeal is brought from the New South Wales Court of Appeal (Stein JA, Davies AJA, Ipp AJA)1 which upheld the decision of the Supreme Court (Rolfe J)2. The proceedings at trial and in the Court of Appeal involved a range of issues but in this Court the appeal turns upon the construction of Pt IV of the Wrongs Act 1958 (Vic) (‘the Act’) and its application to a claim for contribution under the statute made by trustees.

Gleeson CJ

2 Part IV of the Act (ss 23A-24AD) is headed ‘CONTRIBUTION’ and ss 23B and 24 operate to create both a new right and a remedy for the recovery of what s 23B identifies as contribution from any person ‘liable in respect of the same damage’ as the claimant for contribution3. The Act has its provenance in British legislation, the Civil Liability (Contribution) Act 1978 (UK) (‘the UK Act’), and reference will be made to decisions construing that statute.

3 It is essential to recognise at the outset that both the Act and the UK Act provide for contribution where the claimant and the person from whom contribution is sought are each liable to a common plaintiff. Neither Act provides for contribution between those who may have had some role in an interconnected set of transactions but who are not both liable to a common plaintiff. Nothing in the text of either the Act or the UK Act, or any law reform or other material which preceded either Act, suggests that the aim of the legislation was to provide for contribution between those who were parties to the same transaction or a series of related transactions. It is, therefore, wrong to proceed, whether from general notions of ‘distributive justice’ or otherwise, as if the legislative purpose or object were wider than providing for contribution between those liable to a common plaintiff. These reasons demonstrate that the parties to the appeal in this Court were not liable to a common plaintiff.

4 The Act has no precise analogue in other Australian jurisdictions. The litigation giving rise to this appeal was conducted in the courts of New South Wales, not in those of Victoria. It is not now disputed that Pt IV of the Act was applicable in the New South Wales litigation if its terms otherwise were satisfied. Section 23B(6) states that references in the section to liability in respect of any damage are to liability which has been or could be established in an action

brought in Victoria, and that it is immaterial that any issue in that litigation would be determined, in accordance with the rules of private international law, by reference to the law of a place outside Victoria. The various breaches of trust which were committed appear to have occurred in Victoria4 and, in any event, there are no relevant differences in the principles of trust law in Victoria and New South Wales.

The facts

5 The relevant facts are not disputed and may shortly be stated. However, for a proper appreciation of the issues of law which arise it is necessary to bear in mind that there were transactions involving what may be described as two different levels of trusts. There were trusts of which the respondents were trustees, and trusts of which the appellants were trustees.

6 The first respondent, Perpetual Trustees WA Limited (‘PTWA’), was a trustee company enjoying special status conferred by theTrustee Companies Act 1987 (WA)5 and the second respondent, Perpetual Trustee Company Limited (‘PT’), had that status under the Trustee Companies Act 1964 (NSW)6. The companies were members of what was described in the evidence as the Perpetual Group.

7 PTWA and PT were trustees of certain managed superannuation funds. These trusts may be identified as the first level trusts. Some of the beneficiaries thereunder may themselves have been acting as trustees, for example, of family trusts, but with that level of trusts (if any) we are not concerned. Between 1993 and 1995 a number of beneficiaries under the managed funds directed that moneys be invested by the trustees in EC Consolidated Capital Limited (‘ECCCL’). The total amounts so invested were $2,377,400 (by PTWA) and $7,179,700 (by PT). Each investment by PTWA and PT was in the sum of $500,000 or a greater amount; the refusal by ECCCL of investments in a sum less than $500,000 removed the requirement of compliance by ECCCL with the prospectus provisions of the then Corporations Law7. However, the sums

provided by the individual beneficiaries, before they were pooled by PTWA and PT for investment with ECCCL, in each case were less than $500,000.

8 The terms on which the moneys were to be invested by PTWA and PT called for the provision of security by the issue of a bearer certificate of deposit. In breach of their duties as trustees, PTWA and PT failed to ensure that the manner in which the moneys were invested conformed with these terms and, in particular, PTWA and PT did not ensure that the investments were secured by bearer certificates of deposit. On 15 July 1997, ECCCL was placed in liquidation. As a result of the absence of the certificates, the investments were lost.

The plaintiffs sue PTWA and PT

9 Forty of the beneficiaries under the managed funds (‘the plaintiffs’) successfully sued PTWA and PT for breach of trust. The plaintiffs' case was that PTWA and PT had failed in their duties to exercise the same degree of skill and diligence as an ordinary prudent person would exercise in dealing with the property of another, and to ensure that their duties and powers were exercised in the best interests of the members of the managed funds. Rolfe J ordered the relevant respondent to pay to each plaintiff the amount of the plaintiff's investment. The amounts recovered by the plaintiffs in their action against the respondents were, against PTWA $1,744,683, and against PT $2,112,135.

10 No challenge is made in this Court to these findings and orders respecting the liability of the respondents to the plaintiffs.

11 The respondents had paid the investment moneys on each occasion to the appellants (‘Minters’), a well-known national firm of solicitors. Minters acted as solicitor for ECCCL. At all relevant times, a partner in Minters' Melbourne office had the carriage of the matter. Minters was obliged to hold the moneys received from the respondents upon trust for, and to the account of, the relevant respondent, with the power (and duty) to disburse the moneys in accordance with the subscription agreements executed by the respondents. The agreements were governed by the law of Victoria. Minters later released the funds to ECCCL in breach of the terms on which it held them. The trust relationship, with respect to these funds, was between Minters as trustee and the respondents as beneficiaries and constituted the second level trusts. It should, however, be noted that the funds paid by the respondents were derived from the first level trusts, of which the respondents were trustees.

12 The particular respects in which, in the action against them by the plaintiffs, the respondents were found to have acted in breach of their duties to the plaintiffs under the first level trusts were:

• (a) their appointment of Minters as their agent, notwithstanding the potential conflict of interest;

• (b) the failure of the respondents to make any inquiry from Minters as to whether settlement had been completed regularly and, in particular, whether a bearer certificate of deposit had been obtained as required by the subscription agreements;

• (c) the failure to seek to inspect the required bearer certificates of deposit.

PTWA and PT cross-claim against Minters

13 The respondents each brought successful cross-claims against Minters, which acted in the investment transactions both as agent for the respondents (in which capacity it received the investment funds from the respondents, held them on trust for the respondents, and wrongly disbursed them to ECCCL) and as solicitor for ECCCL. The cross-claim by PTWA was the second cross-claim in the proceedings and that by PT was the third cross-claim.

14 Several points should be noted here. First, no claim in the litigation was made by the plaintiffs against Minters; nor were the plaintiffs joined in either the second or the third cross-claim. Secondly, PTWA and PT sued Minters for breaches of the second level trusts, of...