New South Wales Supreme Court CITATION : Cypjayne Pty Ltd v Sverre Rodskog [2009] NSWSC 301 HEARING DATE(S) : 2-3 April 2009 JUDGMENT DATE : 24 April 2009 JURISDICTION : Equity Division Expedition List JUDGMENT OF : Brereton J DECISION : Because Bonvale is neither a Partner nor an Associated Person, Mr Rodskog is not obliged to permit the Partnership Assets to be used as security for advances to Bonvale for purposes associated with Durham Green, being the facilities described in the 4 December Adelaide Bank letter of offer. Proceedings for declaration and mandatory order dismissed. CATCHWORDS : EQUITABLE REMEDIES – Declarations – where declaration would quell present controversy, though potentially leaving some further issues to be resolved – where failure to intervene would enable to defendant to prevail by default – whether relief should be refused on grounds of hypotheticality, or lack of utility – held, Court should not decline relief – - EQUITABLE REMEDIES – Specific Performance – where order sought that defendant execute a consent to a security – where no contractual obligation to give a consent as distinct from giving the security – where ultimate form of security not established – whether order should be made – held it should not – Defences – Hardship – alleged hardship to defendant's ex-spouse – Adequacy of damages – where alleged that there would be no damage – Unclean hands – where alleged that one partner seeking relief has committed breaches of fiduciary duty as partner – where other partners seeking relief not implicated – - INSTRUMENTS – Construction – Partnership Deed – where Partners obliged to permit assets to be used a security for specified purposes in certain circumstances – the circumstance that the proposed Lender stipulates for a personal guarantee that defendant cannot be compelled to give does not detract from any obligation he might otherwise have to permit the Assets to be used as security – whether a refinance of existing facilities for the specified purpose is itself for the specified purpose – held, it is – - TRUSTS – Discretionary trusts – nature of interest of member of class of objects – - WORDS AND PHRASES – "Beneficiary" – whether a member of the class of objects of a discretionary trust is a "beneficiary of a trust" within the definition of "related person" in the Duties Act – held, it is not. (CTH) Family Law Act 1975, ss 79, 106B LEGISLATION CITED : (NSW) Duties Act 1997 (NSW) Supreme Court Act 1970, s 63 CATEGORY : Separate question Bailey & Bailey (1989) 98 FLR 1; (1989) 13 Fam LR 652; (1990) FLC 92-117 Biltoft & Biltoft (1995) 19 Fam LR 82 Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; (1998) 151 ALR 1; [1998] HCA 4 Coles v Wood [1981] 1 NSWLR 723 Commonwealth of Australia v BIS Cleanaway Limited [2007] NSWSC 1075 FCT v Vegners (1989) 90 ALR 547 Gartside v IRC [1968] AC 553 Harrigan v Brown [1967] 1 NSWR 342; In the Estate of Leahy [1975] 1 NSWLR 246 CASES CITED : Integrated Lighting & Ceilings Pty Ltd v Phillips Electrical Pty Ltd (1969) 90 WN (Pt 1) (NSW) 693 Lohar Corp Pty Ltd v Dibu Pty Ltd (NSWCA, 11 May 1976, unreported) Marra Developments Ltd v B W Rofe Pty Ltd [1977] 2 NSWLR 616 Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 Official Trustee in Bankruptcy v Donovan (1996) 20 Fam LR 802 Prince & Prince (1984) 54 ALR 467; (1984) 69 FLR 150; (1984) 9 Fam LR 481; (1984) FLC 91-501 Re Smith [1928] Ch 915 Rowell & Rowell (1989) 96 FLR 449; (1989) FLC 92–026 Semmens v Commonwealth (1989) 13 Fam LR 715; (1990) FLC 92–116 Smart v Allen (1970) 91 WN(NSW) 241 Trans Realties Pty Ltd v Grbac [1975] 1 NSWLR 170 TEXTS CITED : Jacob's Law of Trusts in Australia, 5th ed. Cypjayne Pty Ltd (first plaintiff/cross-defendant) B&L Trading Pty Ltd (third plaintiff/cross-defendant) D&C Properties Pty Ltd (fourth plaintiff/cross-defendant) PARTIES : Maurice Tulich (fifth plaintiff/cross-defendant) Curtis Jack Mann (sixth plaintiff/cross-defendant) David Brodie (seventh plaintiff/cross-defendant) Sverre Rodskog (first defendant/cross claimant) Paul Edwin Cayzer (second defendant) FILE NUMBER(S) : SC 1494/09 COUNSEL : A P Spencer (plaintiffs/cross-defendants) J C Kelly SC (first defendant/cross-claimant) Addisons (plaintiffs/cross-defendants) SOLICITORS : Bamford Associates (first defendant/cross-claimant) Paul Bard Lawyers (second defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST BRERETON J Friday 24 April 2009 1494/09 Cypjayne Pty Limited & ors v Sverre Rodskog & anor JUDGMENT 1 HIS HONOUR: The plaintiffs Cypjayne Pty Limited, B & L Trading Pty Limited, D & C Properties Pty Limited, Maurice Tulich, Curtis Jack Mann and David Brodie, and the defendants Sverre Rodskog and Paul Edwin Cayzer, are the parties to a Deed of Partnership, entitled the Blue Hills Partnership Agreement, dated 20 May 2004. Cypjayne, B&L, D&C, Mr Rodskog and Mr Cayzer are the partners. Mr Tulich, Mr Mann and Mr Brodie respectively guarantee the obligations of Cypjayne, D&C and B&L, each being the principal of the corresponding company. Mr Tulich and Mr Mann are also, by the Partnership Deed, appointed the Chief Executive Officers of the Blue Hills Partnership, in which capacity they are given extensive powers of management. The Partnership Deed provided that the Partnership Assets (of which a retirement village development at Prestons, called Blue Hills Village, is the main one) could be used to secure borrowings for the development or acquisition of other retirement villages by some or all of the Partners (or their Associated Persons), provided that all the partners were given an opportunity to participate in that development or acquisition. Bonvale Pty Limited, a company in which all of the Partners other than Mr Rodskog have a direct or indirect interest, is developing a retirement village near Menangle, called Durham Green Village. In these proceedings, the plaintiffs (pursuant to a Summons filed on 12 February 2009, as subsequently amended), claim: 1. A declaration that on the true construction of the Deed dated 20 May 2004 between the Plaintiffs and the First Defendant … ("the Partnership Deed") the First Defendant is obliged to permit the Partnership Assets (as defined in the Partnership Deed) to be furnished as security for the finance facilities specified in the letter of offer dated 4 December 2008 from the Adelaide Bank to the Directors of Bonvale Enterprises Pty Limited ("the Facilities"). 2. An order that within 24 hours of the making of the order, the First Defendant provide to the Plaintiffs (by delivering same to the offices of their solicitors Addisons), a written consent address to the Bendigo & Adelaide Bank Limited consenting to the grant of a second mortgage over the Partnership Assets (as defined in the Partnership Deed) as security for the Facilities. 2 (A third claim, relating to the validity of an alleged notice to perform under the Partnership Agreement, was not pressed). Mr Cayzer has filed a submitting appearance. However, Mr Rodskog opposes the relief claimed, on four principal bases: · First , that the dispute is hypothetical, that the declaration sought would be of no utility and would not resolve the whole dispute but leave further matters to be litigated, and that the mandatory order is insufficiently specific in the absence of ascertained terms of the "second mortgage". I reject these submissions; · Secondly , that upon the proper construction of the Partnership Deed, he is not obliged to permit the Partnership Assets to be used as security for the proposed borrowings by Bonvale from the Adelaide Bank, because: o The Bank's offer does not conform to the terms which the Partnership Deed obliges him to accept, in particular in relation to the personal guarantee. While I agree that Mr Rodskog could not be required to accept the Bank's present offer because, at least in respect of the guarantee, it is more disadvantageous to him than the terms which the Partnership Deed stipulate, I do not accept that this affects Mr Rodskog's obligation to permit the Partnership Assets to be used as security; o Preconditions to the use of Partnership Assets as security, including that Mr Rodskog be given an opportunity to participate in the relevant development, have not been satisfied. I reject this submission; o The proposed refinance is not the type of transaction for which the Partnership Assets may be used as security. I reject this submission; and o Bonvale is neither a Partner nor an Associated Person as defined, and the Partnership Assets may thus not be used as security for facilities for Bonvale. I uphold this submission, which is fatal to the plaintiffs' case. · Thirdly , that relief should be declined on grounds of hardship to Mr Rodskog (and his estranged wife). I reject this submission; · Fourthly, that relief should be refused because, far from damages being an inadequate remedy, there is no damage. I reject this submission; · Fifthly , that the plaintiffs are disentitled to equitable relief by unclean hands. I reject this submission. Background 3 From about 1999, Allatech Pty Ltd (a company owned as to 50% by Mr Tulich's company Cypjayne, and as to 50% by Whitehall Pty Limited, in which the shareholders were Mr Cayzer's company Cayzer Corporation Pty Limited, Mr Rodskog's company Redwood Properties Pty Limited, Mr Mann's company Fencross Pty Limited, and Mr Brodie), was engaged in the development of the Blue Hills Village as a retirement village on land at Prestons. On 13 November 2002, Redwood advanced to Bonvale (whose shareholders were Fandale Holdings Pty Limited – a company controlled by Mr Tulich – as to 50%, and Whitehall as to the other 50%), the sum of $150,000 to provide part of the funding Bonvale required to complete the acquisition of land at Menangle for the purpose of developing on it a retirement village, to be known as the Durham Green Village. On 13 December 2002, Bonvale entered into a contract to purchase the Menangle land. A deed made on 21 February 2003 documents Redwood's advance to Bonvale, and Redwood's right to negotiate with Bonvale concerning an investment by Redwood in the development of the Durham Green Village. In August 2003, in response to an invitation to invest further funds in the Durham Green Village project, Mr Rodskog indicated that he did not wish to do so and that he would like Redwood's loan to be repaid. 4 In July 2003, the opportunity arose for the Partners to participate in a further retirement village development at Mayfield. Subsequently, a company was incorporated for the purpose of exploiting the Mayfield opportunity. The beneficial interests in that company were held, through various corporate entities, by Mr Cayzer, Mr Tulich, Mr Mann, and Mr Brodie. 5 By late November 2003, Allatech had completed the construction of the Blue Hills Village, and, by early 2004, Mr Cayzer, Mr Tulich, Mr Mann, Mr Rodskog and Mr Brodie had agreed that they would form a partnership to purchase Blue Hills Village from Allatech, and – although, by this time, Mr Rodskog had made it known that he did not want to participate in the development or acquisition of other retirement Villages – that they would allow Blue Hills Village to be used as security for borrowings by the Partners or some of them for the development and acquisition of other retirement villages. 6 Mr Rodskog executed the Partnership Deed on 16 April 2004. Although at first he claimed that he had not read it, I am satisfied from contemporaneous correspondence written by him and by a solicitor before whom he executed it that he had considered its terms, including a draft, carefully, as he ultimately conceded. The Agreement recited that Mr Rodskog "had elected not to participate in the development or acquisition of other Retirement Villages but had agreed to … the Partnership Assets [being made] available as security for the development or acquisition of other retirement villages by the Partners …". Clause 17 provided that the Partnership Assets (of which Blue Hills Village was the chief) could be used to secure borrowings for the development or acquisition of other retirement villages by some or all of the partners, provided that all the partners were given an opportunity to participate in that development or acquisition. In the days immediately preceding the execution of the Partnership Deed, Mr Rodskog had been advised that Redwood would be repaid the amount that it had advanced to Bonvale to assist in the purchase of the Durham Green Village land, and on 20 April 2004, the loan to Bonvale was in fact repaid, together with interest of $60,000; thereupon Redwood's interest in Whitehall – through which Mr Rodskog had indirectly held an interest in Bonvale – was redeemed. 7 At all times since his execution of the Partnership Deed, Mr Rodskog has consistently maintained that he does not wish to be part of any further development or acquisition of other retirement villages. On 22 March 2005, Mr Rodskog was asked whether he wished to participate in the Mayfield project, which he declined. 8 In September 2005, Bonvale and the Partnership (including Mr Rodskog) accepted an offer from the ANZ Bank of various facilities, including advances to both the Blue Hills Partnership and Bonvale, the security for which were mortgages over the assets of both the Partnership and Bonvale and cross-guarantees, so that the assets of Bonvale secured the borrowings of the Blue Hills Partnership and vice versa. 9 The ANZ facilities were replaced, in about September 2007, with facilities provided by Adelaide Bank separately to Bonvale (of $27.5 million) and to Blue Hills Partnership (of $6.7 million); these were secured only by the assets of the relevant borrower and, unlike the previous ANZ facilities, were not cross-collateralised. These facilities provided by the Adelaide Bank to both Bonvale and the Partnership have expired, and both Bonvale and the Blue Hills Partnership (through its Chief Executive Officers) have been negotiating for new facilities. On 3 December the Bank issued a letter of offer of replacement facilities to the Blue Hills Partnership, and on 4 December 2008 the Bank issued a letter of offer of replacement facilities to Bonvale, stipulating as a condition of the proposed advances that the Blue Hills and Durham Green facilities be cross-collateralised and supported by an (unlimited) guarantee by the Partners, including Mr Rodskog. Mr Rodskog has categorically refused to participate in any provision by the partnership of its assets as security for advances to Bonvale for purposes associated with Durham Green. On 12 January 2009, Mr Mann as CEO of the Partnership suggested that there be a meeting on 21 January to discuss, inter alia, provision of security by the Partnership in favour of Bonvale for Durham Green. On the same day, Mr Rodskog responded with his "total disagreement with any proposal in connection with the partnership providing security in favour of Bonvale …". 10 Bonvale has, in letters by its solicitors dated 20 and 24 February 2009, sought to obtain from the Bank certain variations to the 4 December offer – including in respect of the personal guarantees. The Bank has replied that it would consider those variations only if all of the partners agree to the grant of a second mortgage over the Blue Hills property to secure the Bonvale facilities. Negotiations with the Bank have thus reached an impasse in the absence of Mr Rodskog's consent to any such second mortgage. Hypotheticality, utility and specificity of relief claimed 11 For Mr Rodskog, Mr Kelly SC submits that the dispute is hypothetical, that the declaration sought would be of no utility and would not resolve the whole dispute but leave further matters to be litigated, and that the mandatory order is insufficiently specific in the absence of ascertained terms of the "second mortgage". 12 The Court will generally decline, as a matter of discretion, to exercise its undoubted jurisdiction to grant a declaration, where the issue involved is "purely theoretical", or where no good purpose would be served by granting declaratory relief. It is generally inappropriate to grant declaratory relief if it will be inconclusive, in the sense that the proposed declaration would leave unresolved issues, with the parties still in dispute as to the consequences, so that further litigation would be required to resolve the controversy [Smart v Allen (1970) 91 WN(NSW) 241; Integrated Lighting & Ceilings Pty Ltd v Phillips Electrical Pty Ltd (1969) 90 WN (Pt 1) (NSW) 693, 702; Commonwealth of Australia v BIS Cleanaway Limited [2007] NSWSC 1075, [26]-[28], and the cases there cited]. A suit for a declaration should not be, in substance, the determination of a question anterior to a further suit for substantive relief [Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286; Commonwealth of Australia v BIS Cleanaway Limited, [29]; Trans Realties Pty Ltd v Grbac [1975] 1 NSWLR 170; In the Estate of Leahy [1975] 1 NSWLR 246; Lohar Corp Pty Ltd v Dibu Pty Ltd (NSWCA, 11 May 1976, unreported); Coles v Wood [1981] 1 NSWLR 723]. In Trans Realties, Glass JA, having referred to the utility of the practice that had developed of granting declarations that covered only some of the disputed ground, said (at 176): Be that as it may, the High Court has emphatically laid down that the practice of incomplete adjudication requires reconsideration: Neeta (Epping) Pty Ltd v Phillips. The declaratory jurisdiction now derived from s. 75 of the Supreme Court Act , 1970 is subject to the admonition in s. 63 that, in the interest of avoiding multiplicity of proceedings, all matters in controversy should be finally determined. Where equitable relief is concerned, in particular, the public interest in finality will generally override the private interest in selective litigation. 13 In Coles v Wood, Hutley JA, with whom Samuels JA agreed, said (with reference to Supreme Court Act, s 63; Neeta v Phillips; Trans Realties v Grbac; and Marra Developments Ltd v B W Rofe Pty Ltd [1977] 2 NSWLR 616; and pointing out that in Lohar Corp v Dibu the majority had not said otherwise) emphasised the importance of adherence to the philosophy of s 63, and added (at 728-9): Where substantive remedies can be sought, the Supreme Court should insist on their being sought in addition to declarations. Where money is owing, a mere declaration is of less utility than a judgment. For example, it does not carry interest, as does a judgment, and will have to be followed by further proceedings to enable the remedies available to a judgment [creditor] to be obtained. … The Supreme Court, in my opinion, should refuse to entertain proceedings for declarations in a case of this kind, unless the appropriate substantive remedies are sought in the proceedings. 14 Mr Kelly SC argued that this was a case of hypotheticality, in which further proceedings would be necessary to resolve the dispute. In particular, it was emphasised that the 4 December offer admittedly included terms which Mr Rodskog could not be required to accept; that what if any terms the Bank would ultimately be prepared to accept was unknown; and that in those circumstances there was nothing to be gained by a declaration to the effect sought. Additionally, it was said that an order to give a consent to a second mortgage was too vague, because the terms of the proposed mortgage were unknown, and it could not be ascertained whether it would contain only terms that Mr Rodskog would be obliged to accept. It was submitted the case was a fortiori Commonwealth v BIS, attention being drawn to the observations of Ipp JA in the Court of Appeal [Commonwealth of Australia v BIS Cleanaway Limited [2008] NSWCA 170]: 18. It is also not possible to foresee if the declarations formulated by the Commonwealth would be sufficiently wide or precise to apply to and be capable of resolving disputes that may arise. There are likely to be difficult problems concerning the time from when any obligations, if any, that BIS may have under the licensing agreement arose, and the time when those obligations cease. There may be difficult problems in determining whether obligations owed under the licence agreement are owed by the original licensor or by BIS. The declarations as sought would not cover these kind of issues. Problems may arise in construing declarations which are made so as to determine whether they apply to unforeseen factual circumstances. Different and new declarations may have to be sought to provide for unexpected breaches or indemnities. 15 Although Mr Kelly SC's arguments in this respect are not without force, I have concluded that this is a case in which the Court should entertain and determine the application for declaratory relief. First, the issue is not hypothetical: there is a live controversy between the parties as to whether Mr Rodskog is obliged to permit the Blue Hills Partnership Assets to be used as security for advances to Bonvale for purposes associated with Durham Green, which Mr Rodskog disputes regardless of the precise terms of the advances. The gravamen of the dispute pertains to the proposed use of Blue Hills Partnership assets for the purposes and benefit of another entity (in which Mr Rodskog has no interest), which he now categorically refuses to permit. As a consequence, the Adelaide Bank will not negotiate further with Bonvale, unless and until it can be assured that Blue Hills Village will be offered as security. The negotiations are thus at a stalemate. If Mr Rodskog's position is incorrect and he is obliged to permit the Blue Hills Partnership Assets to be used as security for Bonvale's facilities, then he will nonetheless obtain the result he seeks –unless the Court intervenes – as a result of the Bank's refusal to negotiate until it is informed that the Blue Hills assets will be made available as security. 16 Secondly, the resolution of the controversy will have practical consequences. The declaration will quell the present controversy, by establishing whether or not Mr Rodskog must allow the Blue Hills Partnership Assets to be used as security for Bonvale's facilities. This is not a case of resolution of only one step in litigation. It is true that it is conceivable that the Bank might nonetheless demand terms which exceed those that Mr Rodskog is obliged to accept. If so, there may be a further dispute, but it will involve issues different from those immediately under consideration. Absent intervention, the partners cannot progress their negotiations with the Adelaide Bank. The declaratory relief sought at this stage will, if granted, permit the negotiations with the Adelaide Bank to move forward. 17 Thirdly, if Mr Rodskog's position is incorrect, he will nonetheless achieve his purpose by default if the court does not now intervene. With the Bank unwilling to negotiate unless and until it is confirmed that it will be offered security over Blue Hills Village, Mr Rodskog effectively prevents the refinance proceeding – regardless of the merits of his position – by refusing to permit the Partnership Assets to be used as security. In this way, if he is incorrect, and if the Court were to decline to determine the issue now for "hypotheticality", he will nonetheless prevent the refinance, and stymie any opportunity for authoritative resolution of the issue, since the Bank will proceed no further. 18 So far as the mandatory order is concerned, its purpose would be to have Mr Rodskog inform the Bank that he will permit the Partnership Assets to be made available as security for Bonvale's facilities, against the background of his refusal so far to do so having been communicated to the Bank – first, by Mr Tulich, and subsequently by Mr Rodskog himself. However, no proposed form of "consent" for this purpose has been proffered. Although the Bank has stipulated that all partners must agree to give the security, it has not indicated that it requires any such "consent" as is sought in the Summons. Mr Spencer, for the Partners and CEOs, pointed to a number of clauses in the Partnership Deed as potentially supporting an obligation to execute such a document, but ultimately it does not appear to me that execution of any such document is a necessary step in the discharge of Mr Rodskog's obligations under the agreement, such as might trigger clause 6.1(d) or (e) – assuming for present purposes that he is bound to permit the Partnership Assets to be used as security for Bonvale's borrowings. Nor has any requirement been made by the CEOs that he do so, so as to invoke an obligation under clause 6.1(g). 19 In those circumstances, it would not be appropriate to order Mr Rodskog to execute a "consent", even if it were or became appropriate to order him to execute the mortgage itself; and the position is accentuated by the circumstance that the terms of the second mortgage that Adelaide Bank will require remain unknown. The declaration, if otherwise appropriate, should suffice to establish to the Bank what are the obligations of the Partners, and in particular of Mr Rodskog. Construction of clause 17 20 Clause 17 of the Partnership Agreement provides as follows: 17. PARTNERSHIP ASSETS MAY BE USED AS SECURITY 17.1 The Partners acknowledge that the Partners (except Sverre), or Associated Persons of the Partners (except Sverre) will be:- (a) developing or acquiring other retirement villages; and (b) in order to obtain funding to undertake such developments or acquisitions it may be necessary or desirable to offer security over the Partnership Assets. 17.2 The Partners agree that the Partnership Assets may be used as security in accordance with this clause 17. 17.3 The Partnership Assets may only be used as security for the acquisition or development of other retirement villages (but may include other acquisitions or developments which are incidental to the acquisition or development of a retirement village) by some or all of the Partners or Associated Person of some or all of the Partners or third parties who have jointly agreed with any of the Partners or Associated Persons of any of the Partners (such persons referred to in this clause as "the Borrowers"). 17.4 The Partnership Assets may only be used as security in accordance with clause 17.3 if all the Partners have been given an opportunity to participate in the acquisition or development of the retirement village for which the security is being provided. The terms and conditions of any offer to the Partners shall be as determined by the Chief Executive Officers. 17.5 Any decision to use the Partnership Assets as security and the terms and conditions of such security shall be made by the Chief Executive Officers. 17.6 The Partners must promptly sign such documents and do such acts as shall be required by the Chief Executive Officers to provide security over the Partnership Assets to the party taking security (called in this clause 17 "the Lender"). 17.7 The Partners acknowledge they must guarantee any loan or obligation by the Borrower in favour of the Lender provided such guarantee for each Partner is limited in recourse to that Partner's interest in the Partnership Assets and to a maximum fixed amount. 17.8 The Partners acknowledge that the Partnership Assets may be used as security more than once and may be used as security in favour of more than one Lender at the same time. 17.9 If the Partnership Assets are used as security in accordance with this clause 17 then the Borrower must pay to the Partners as income to the Partnership a once only guarantee fee payable at the time the guarantee is released by the Lender in an amount equal to 5% of the maximum fixed amount secured by the particular guarantee given over the Partnership Assets. 17.10 If:- (a) the Partnership Assets are used as security in accordance with this clause 17; and (b) The security is called upon by the Lender and the Partnership Assets are sold by the Lender exercising its power of sale then clause 17.11 will apply. 17.11 The Partners (excluding Sverre) agree to pay Sverre a proportion of the sale price of the Partnership Assets (less both the costs incurred in the sale and any amount paid or payable by the Lender to Sverre) being the then proportion that Sverre is entitled to share in (or contribute to) the profits (or losses) of the Partnership. The obligation of each of the Partners to pay Sverre in accordance with this clause is several and not joint and the proportion that each Partner shall be liable to pay Sverre shall be the proportion that the particular Partner's Entitlement bares to the total interest of all the Partners" Entitlements (excluding the Partners' Entitlement of Sverre). 21 On behalf of Mr Rodskog, it was argued that, properly construed, this clause does not obliged him permit the Partnership Assets to be used as security for the proposed borrowings by Bonvale from the Adelaide Bank, because: · The terms of the proposed facilities do not conform with clause 17.7 – because they stipulate for personal guarantees not limited in the manner therein specified – and so Mr Rodskog could not be bound to permit the Partnership Assets to be used as security for them; · A condition precedent to any obligation on his part to permit the Partnership Assets to be used as security was unsatisfied, in that there has been no offer to Mr Rodskog of an opportunity to participate in the Durham Green development; · That the purpose of the proposed security was not the acquisition or development of a retirement village, but the refinance of existing facilities, and as such fell outside clause 17.3 · That Bonvale was neither a Partner nor an Associated Person as defined, so that under clause 17.3 the Partnership Assets could not be used as security for facilities for Bonvale. 22 Clause 17.7. The Adelaide Bank 4 December offer stipulates for a "Cross-Collateralisation Deed supported by a Cross-Guarantee and Indemnity Limited to $39,000,000" from, inter alia, each of the Partners; the guarantee is not expressed to be limited in recourse to the relevant partner's interest in the Partnership Assets, and it is not in dispute that Mr Rodskog cannot be compelled to give such a guarantee - there is no controversy in this respect, and this aspect of the guarantee is one of the matters that Bonvale is endeavouring to negotiate with the Bank. 23 However, a declaration in the form or to the effect of that sought would be silent on the question of any guarantee: it addresses only the use of the partnership assets – not personal guarantees – as security. If granted, it will say nothing as to the existence or extent of any obligation to give a personal guarantee. In the form sought, the declaration refers to permitting the Partnership Assets to be used as security for the facilities described in the Bank's 4 December letter of offer. In that letter, Schedule 1 lists the various facilities, which are described by reference to their amount, type, purpose, and terms; while Schedule 2 separately lists the stipulated securities required for them (including the "Cross-Collateralisation Deed supported by a Cross-Guarantee and Indemnity" from the Partners) – called the "transaction documents". The declaration sought says nothing as to any obligation to give those securities (other than the Partnership Assets) – it would speak only of the obligation to permit Partnership Assets to be used as security for the relevant facilities. 24 The circumstance that the Bank is presently stipulating for a personal guarantee which Mr Rodskog cannot be compelled to give does not detract from any obligation he might otherwise have to permit the Partnership Assets to be used as security. Thus the fact that the 4 December offer does not conform to clause 17.7 does not mean that Mr Rodskog is not obliged to permit the Partnership Assets to be used as security for the Durham Green facilities. At the highest, the circumstance that the obligation to give a personal guarantee and any limit on it has not been resolved might provide a discretionary reason for withholding declaratory relief – on the basis that there may be no utility in granting a declaration, because there may never be terms agreed between Adelaide Bank and the Partners which conform with clause 17.7, notwithstanding that there appears to be no controversy between the parties about it. But in the circumstances of this case, for reasons already advanced, there is utility in granting a declaration, because it will permit negotiations with the Bank, which are otherwise at an impasse, to proceed. 25 Clause 17.4. Mr Rodskog is the only one of the Partners who is not now, directly or indirectly, a participant in the Durham Green development, his interest having been redeemed when his initial investment was repaid. On his behalf, it is argued that clause 17.4 has the effect that before Partnership Assets can be used as security for another development, the CEOs must make an identical offer to all the Partners, including Mr Rodskog, of an opportunity to participate, and that no such offer has been made to him. This raises two main questions: (1) must an opportunity be given to Mr Rodskog as well as the other Partners, and (2) must that opportunity involve a formal offer settled by the CEOs and made to all the Partners, after the date of the Partnership Agreement? 26 Must an opportunity be given to Mr Rodskog as well as to all the other Partners? There is significant textual support for a construction of clause 17.4 that requires that Mr Rodskog as well as the other partners have been given an opportunity to participate in the acquisition or development of the relevant retirement village: in particular, the use of the words all the Partners, and the omission of words such as "(except Sverre)" – which appear in clause 17.1 – or "(excluding Sverre)" – which appear in clause 17.11. However, there are also contrary indicators. In particular: · Clause 17.1 clearly contemplates that only the other Partners, and not Sverre, will be involved in developing or acquiring other retirement villages. It is improbable that the parties intended that there be an obligation to offer Mr Rodskog an opportunity to participate when he had made manifest that he had no intention of doing so; · This is reinforced by clause 17.2, which authorises the use of Partnership Assets as security for the purposes envisaged by clause 17.1, namely developments or acquisitions of other retirement villages by the partners except Mr Rodskog. · Clause 17.11 provides protection only for Mr Rodskog if the Partnership Assets are used as security for such developments or acquisitions; it provides no protection for any other Partner who might decide not to participate in any such development or acquisition. It is even more unlikely that the parties would have intended that there be an obligation to offer Mr Rodskog an opportunity to participate, when he was the beneficiary of this protective provision; · I do not accept that the force of this is significantly affected by the provision of clause 17.10 to the effect that clause 17.11 applies only if Partnership Assets are being used as security in accordance with clause 17 . In my view, that means no more than that they are used, as contemplated by clause 17, as security for another development, as provided by clause 17.2 As it was for Mr Rodskog's benefit, it is unlikely to have been intended to make strict compliance by the other Partners with each element of clause 17 a precondition to his entitlement. Moreover, if (as contended for Mr Rodskog) he were still to be offered an opportunity to participate, then there would be the improbably intended result that if Mr Rodskog, having been offered – along with the others partners – an opportunity to participate, he accepted the offer, then while the Partnership Assets could be used as security, Mr Rodskog would be in the extraordinarily advantaged position of continuing to enjoy the protection of clause 17.11. This cannot have been intended; · Recital D records that Mr Rodskog "has elected not to participate in the development or acquisition of other Retirement Villages but has agreed" to make the Partnership Assets available as security for such activities by the Partners. While this is expressed to be "on the terms and conditions of this Deed", there remains a striking inconsistency between having "elected" not to participate and any entitlement to receive an offer to participate. 27 Notwithstanding the prima facie strong textual indications, in the context of clause 17 (and the Deed) as a whole, it is clear that the parties did not intend that Mr Rodskog be a participant in any further development or acquisition, and in recognition of that afforded him the special protection of clause 17.11. As he was not to be a participant, affording him an opportunity to participate would be a pointless exercise, and one that the parties cannot have intended. In my view, properly construed in its context, clause 17.4 does not require that Mr Rodskog have been given the opportunity to which it refers. 28 Must the opportunity involve a formal offer settled by the CEOs and made to all the Partners after the date of the Partnership Agreement? Mr Rodskog was afforded an opportunity to participate in the Durham Green development in August 2003, and declined by letter dated 4 August 2003, in which he told Mr Mann that, rather than taking an additional interest in the project, he wished to exit and recover his initial investment; his initial investment was repaid to him with interest almost concurrently with execution of the Blue Hills Partnership Deed in May 2004. (I am not persuaded to the requisite standard to accept Mr Mann's oral evidence to the effect that there was also a subsequent offer or invitation to participate made to Mr Rodskog). 29 Although at first I inclined to the view that the "offer" referred to in the last sentence of clause 17.4 must be of the "opportunity" referred to in the preceding sentence, I do not think it follows that compliance with clause 17.4 necessarily involves a formal offer settled by the CEOs to all the Partners. The essential requirement is that all the Partners have been given an opportunity to participate. If a partner is invited to participate and declines, without any formal offer having first been made, that partner has nonetheless been given (and declined) an opportunity to participate. If a partner, having been invited to participate, indicates interest, then it may be necessary for a formal offer to be settled by the CEOs. Use of the words "any offer" in the last sentence of clause 17.4 lends some support to this view, as does the contrast between the apparent informality of clause 17.11 with the more complex and formal requirements of clauses 24 (Terms of Option to Purchase) and 25 (First Right of Refusal). 30 When the Blue Hills Partnership Deed was negotiated and executed, the partners other than Mr Rodskog were involved in the Durham Green development, and the Mayfield development, which must have been at the forefront of everyone's mind when contemplating clause 17 and the reference to providing security for other developments. As participation in them was already settled, and Mr Rodskog had declined to participate, it is unlikely that they contemplated that he would be given a further opportunity. This both reinforces my conclusion that it was not contemplated that, having elected not to participate, there was no requirement that Mr Rodskog be afforded yet another opportunity to do so, and suggests that even if there were an intention that in respect of new developments he be given such an opportunity, it was not intended that he be given still further opportunities in respect of those developments in which he had already declined to participate. 31 Accordingly, in my view, clause 17.4, properly construed, does not require that Mr Rodskog be given an opportunity to participate in any relevant development or acquisition; but if it does, he was given such an opportunity in respect of both the Durham Green and the Mayfield developments. All the other partners are participants. The requirements of clause 17.4 are satisfied. 32 Clause 17.3. For Mr Rodskog, it was submitted that clause 17.3, in limiting the use of Partnership Assets as security under clause 17 to "the acquisition or development of other retirement villages", was not satisfied if the security was to refinance existing facilities in respect of such a village. 33 The concept of "development or acquisition of other Retirement Villages" is one that is used repeatedly throughout relevant parts of the Partnership Deed, apparently compendiously to describe an activity in which it was anticipated that the Partners (except Mr Rodskog) would engage: Recitals C(b), D, Clauses 17.1(a), (b), 17.3, 17.4. As already mentioned, the Partners cannot then have been blind to the circumstance that they had already embarked upon the Mayfield and Durham Green developments; indeed those must have been at the forefront of their minds when contemplating the requirement for use of Partnership Assets as security. What was contemplated by the phrase "security for the acquisition or development of other retirement villages" was that the assets in question be used as security for financial accommodation for the purpose of the acquisition or development of other retirement villages. Development is an ongoing activity, and includes holding the property during the period of development. Moreover, the concept of securing financial accommodation for a particular purpose in my view extends to securing financial accommodation that replaces existing facilities for those purposes, by way of refinance. 34 For all those reasons, I do not accept that the proposed facilities are not "for the acquisition or development of other retirement villages" within clause 17.3. 35 However, a question also arose as to whether Bonvale was one of the "Partners", or an "Associated Person of some or all of the Partners", within clause 17.3. 36 "Partners" is defined by clause 1.1(k) to mean Cypjayne, Mr Cayzer, Mr Rodskog, B&L and D&C. Bonvale is therefore not one of the Partners. 37 "Associated Person" is defined by clause 1.1(a) as having the same meaning as in the Dictionary to the Duties Act, 1997. In that Dictionary, its meanings include: (a) persons are associated persons if they are related persons, … 38 In turn, the definition of "related person" includes: (e) a private company and a trustee are related persons if the company, or a majority shareholder or director of the company, is a beneficiary of the trust … of which the trustee is a trustee. 39 Mr Tulich and Mr Mann are the directors of Bonvale. Mr Mann is the first named "beneficiary" in the trust deed of a discretionary trust, of which B&L is the trustee, and as such is one of the class of persons to whom income and capital of the trust may at the trustee's discretion be distributed. Similarly, Mr Tulich is the first named "beneficiary" of a discretionary trust, of which Cypjayne is the trustee, and as such is one of the class of persons to whom income and capital of the trust may at the trustee's discretion be distributed. Whether Bonvale and Mr Mann, and Bonvale and Mr Tulich, are related persons within the definition and, it follows, Associated Persons within the meaning of the Partnership Deed, depends upon whether an object of a discretionary trust is within the meaning of "beneficiary" in the definition of "related person" in the Duties Act. For the following reasons, I have concluded that it is not. 40 First, in principle, a member of a class of persons in whose favour a trustee may exercise a discretion to appoint trust property is not strictly speaking a beneficiary, and even though it is common drafting practice to describe such persons as "beneficiaries" in the trust deed, this cannot change their true character as objects of a trust power into beneficiaries properly so-called. A "discretionary trust" such as those in question here is a trust coupled with a special power of appointment: the beneficiaries are not determined at the moment of creation of the trust – either as to identity or quantum of interest – and the choice of beneficiary, or determination of the extent of his or her interest, or both, is left to the trustee to decide [Jacob's Law of Trusts in Australia, 5th ed, 736 [2916]]. In Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226; (1998) 151 ALR 1; [1998] HCA 4, the High Court explained (at [8]) that the meaning of the term "discretionary trust" was a matter of usage rather than of doctrine, and the usage was descriptive rather than normative; a "discretionary trust" is not a component of the doctrinal divisions by which there is determined the formal and essential validity of trusts. This reflected what had been written by Gummow J in the Federal Court in FCT v Vegners (1989) 90 ALR 547, where his Honour wrote (at 551-2): There was some discussion by counsel of the term "discretionary trust" and related terms. A fixed trust is used to describe a species of express trust where all the beneficiaries are ascertainable and their beneficial interest are fixed, there being no discretion in the trustee or any other person to vary the group of beneficiaries or the quantum of their interests. The expression "discretionary trust" is used to identify another species of express trust, one where the entitlement of beneficiaries to income, or to corpus, or both, is not immediately ascertainable. Rather, the beneficiaries are selected from a nominated class by the trustee or some other person and this power may be exercisable once or from time to time. The power of selection is a special or hybrid power; a power exercisable in favour of any person including the donee of the power would be a general power and thus would be tantamount to ownership of the property concerned, whilst the objects of a special power would be limited to some class, and the objects of a hybrid power would be such that the donee might appoint to anyone except designated classes or groups. … . It will be apparent that, unlike the division of trusts between purpose trusts and non-purpose trusts, and between express trusts, implied or resulting trusts and constructive trusts, and the classification of powers between general, special and hybrid powers, and between trust and bare powers, the usage of the term "discretionary trust" is essentially descriptive rather than normative. The meaning of the term is primarily a matter of usage, not doctrine. 41 Thus a discretionary trust does not have beneficiaries in the traditional sense, whose interests together aggregate the beneficial ownership of the trust property. Instead, there is a class of persons, usually described in wide terms, who are the objects of a trust power to appoint either income or corpus or both to selected members of the class. The members of the class are objects of a trust power, rather than beneficiaries in the strict sense. They do not have a proprietary legal or equitable interest in the trust fund, though they have a right to due administration of the trust [Re Smith [1928] Ch 915; Gartside v IRC [1968] AC 553; Jacob's Law of Trusts in Australia, 5th ed, 649 [2315]]. They have no beneficial interest in the trust property; they are not persons for whose benefit the trust property is held by the trustee; at the highest they are members of a class of persons for the benefit of some one or more of whom the trustee may in due course hold property if it so determines. At best, they are potential beneficiaries, not beneficiaries. 42 Secondly, the Duties Act embraces this concept of a discretionary trust, as is apparent from the definition in the Dictionary of "Discretionary Trust": discretionary trust means a trust under which the vesting of the whole or any part of the capital of the trust estate, or the whole or any part of the income from that capital, or both: (a) is required to be determined by a person either in respect of the identity of the beneficiaries, or the quantum of interest to be taken, or both, or (b) will occur if a discretion conferred under the trust is not exercised, or (c) has occurred but under which the whole or any part of that capital or the whole or any part of that income, or both, will be divested from the person or persons in whom it is vested if a discretion conferred under the trust is exercised. 43 Thirdly, notwithstanding that the concepts of "associated persons" and "related persons" were intended to widen the reach of provisions of the Duties Act, it is difficult to conceive – given the notoriously extensive range of classes of persons who are included as potential beneficiaries of discretionary trusts – that Parliament intended that every potential beneficiary of a discretionary trust be caught by the definition, so as effectively to attribute to the object of a discretionary trust power a beneficial interest. Where it was desired to achieve that result, specific provision was made. Thus, in Chapter 4A (Acquisition of Interests in Land Rich Landholders), s 163U provides: Constructive ownership of land holdings and other property: discretionary trusts (1) A person or a member of a class of persons in whose favour, by the terms of a discretionary trust, capital the subject of the trust may be applied: (a) in the event of the exercise of a power or discretion in favour of the person or class, or (b) in the event that a discretion conferred under the trust is not exercised, is, for the purposes of this section, a beneficiary of the trust. (2) A beneficiary of a discretionary trust is taken to own or to be otherwise entitled to the property the subject of the trust. (3) For the purposes of this Chapter, any property that is the subject of a discretionary trust is taken to be the subject of any other discretionary trust: (a) that is, or (b) any trustee of which (in the capacity of trustee) is, a beneficiary of it. (4) Subsection (3) extends to apply to property that is the subject of a discretionary trust only by the operation of that subsection. (5) In this section, person includes a landholder. 44 The deeming provision in s 163U(1) applies only for the purpose of s 163U. It does not apply for the purposes of the definition of "related persons" in the Dictionary. This special and limited deeming provision in s 163U(1) supports the view that the term "beneficiary" in the Duties Act does not otherwise catch a member of a class of objects of a discretionary trust. 45 In my view, therefore, a potential beneficiary of a discretionary trust is not a "beneficiary of a trust" within the definition of "related person" in the Duties Act, and Bonvale is therefore not a "Related Person" of Mr Mann or Mr Tulich on that basis. No other basis having been advanced upon which Bonvale might be an "Associated Person" of any Partner within the meaning of the Partnership Deed, Bonvale is therefore not an "Associated Person" as defined of any Partner, and is not eligible to be a "Borrower" under clause 17.3. 46 It follows that, by clause 17.3, the Partnership Assets may not be used for the purposes of Durham Green by Bonvale. Mr Rodskog is therefore not obliged to permit the Partnership Assets to be used as security for facilities for Bonvale. Hardship? 47 For Mr Rodskog, it was submitted that enforcement of any obligation to permit the Partnership Assets to be used as security would involve such disproportionate hardship as to warrant refusal of specific relief. 48 This argument proceeded largely on the misconceived basis that any order would have required Mr Rodskog to give a personal guarantee, not limited in recourse to his interest in the Partnership Assets, coupled with reference to current economic circumstances. As already explained, the relief sought would have been silent as to any personal guarantee, and would not have required Mr Rodskog to give any such guarantee. 49 This is not a case in which the relief sought would inflict disproportionate hardship of Mr Rodskog. Not only would the declaration hold Mr Rodskog bound to do no more than he had agreed to do, but recourse is in any event limited to his interest in the Partnership Assets, and he is given the protection of clause 17.11. On a previous occasion (in 2005), he permitted the Partnership Assets to be used as security for accommodation from ANZ for Bonvale for purposes connected with Durham Green. 50 It was also argued that hardship would be occasioned to Mr Rodskog's wife – from whom he is now divorced – by depleting the pool of matrimonial property available for division between them. However, there is no hardship to one spouse in requiring the other to perform his ordinary legal obligations. It is well-established that a spouse's claim to discretionary matrimonial property adjustment, under (CTH) Family Law Act, s 79, does not prevail over the other spouse's obligations to third parties, and that the pool of divisible property is ordinarily calculated by deducting from the gross assets the liabilities of the spouses and each of them to third parties [Prince & Prince (1984) 54 ALR 467; (1984) 69 FLR 150; (1984) 9 Fam LR 481; (1984) FLC ¶91-501; Bailey & Bailey (1989) 98 FLR 1; (1989) 13 Fam LR 652; (1990) FLC ¶92-117; Rowell & Rowell (1989) 96 FLR 449; (1989) FLC ¶92–026; Semmens v Commonwealth (1989) 13 Fam LR 715; (1990) FLC ¶92–116; Biltoft & Biltoft (1995) 19 Fam LR 82; Official Trustee in Bankruptcy v Donovan (1996) 20 Fam LR 802]. The present obligation could not be said to be one incurred for the purposes of defeating a claim by Mr Rodskog's wife and thus liable to be set aside under Family Law Act, s 106B; the obligation was incurred long before (in 2004) at the time of execution of the Partnership Deed. 51 I would not have declined relief on the ground of hardship. Damages not inadequate? 52 There was a further submission on behalf of Mr Rodskog to the effect that, far from damages being an inadequate remedy, there was no damage, Bonvale having no legal right to be supported by the Partnership. Had I concluded that Bonvale was an "Associated Person", I would have rejected this submission, for at least three reasons. First, a case in which nominal or no damages are recoverable is not a species of case in which damages are an adequate remedy; to the contrary, such cases are often paradigms of damages being inadequate. Secondly, cases of contractual obligations for the benefit of third parties – where it may not be possible for a party to the contract to demonstrate damage – are classic cases for the intervention of equity with specific relief, precisely because damages would not be an adequate remedy. Thirdly, it is far from apparent that there would be no damage here: the other partners may well suffer considerable loss, indirectly if not directly, via their interests in Bonvale – such as penalty interest while the existing facility remains out of order, and/or a diminished price upon a mortgagee sale. Unclean hands? 53 Finally, it was submitted that relief should be declined on the footing that the plaintiffs did not come to the Equity court with clean hands, in that Mr Mann has committed breaches of his fiduciary obligations as a partner and CEO by: · Increasing existing facilities of the Blue Hills Partnership with the Adelaide Bank from $6.7 million to $9.1 million in August 2008, to support the development of Durham Green (and thus not for the proper purposes of the Partnership); · Paying his own company Patterson Building Group (the builder at Durham Green) from the funds of the Blue Hills Partnership; and · Negotiating the proposed refinance with the Adelaide Bank upon terms that involve cross-collateralisation of the Partnership Assets to support Bonvale's liabilities, for no benefit for the Partnership. 54 A partner who commits breaches of his duties as a partner may on that account be declined equitable relief on the basis of want of clean hands, notwithstanding that the breach may not be such as to amount to a repudiation of the partnership agreement [Harrigan v Brown [1967] 1 NSWR 342, 349]. Thus the alleged misconduct is sufficiently related to the equity sued for, for the unclean hands defence to operate. Whether misconduct is sufficient to justify refusal of relief on this basis is ultimately a matter of discretion [Harrigan v Brown [1967] 1 NSWR 342, 347]. 55 The first two matters complained of prima facie appear to involve conduct in which Mr Mann has preferred the interests of Bonvale (and his own company Patterson) to those of the Partners. But they were done overtly, and the transactions are treated in the books of the Partnership and of Bonvale as loans from the Partnership to Bonvale. They are broadly consistent with the concept of the Partnership Assets being available to support acquisition and development of other retirement villages. Moreover, there were at times loans in the opposite direction, from Bonvale to Blue Hills. If these transactions were breaches of Mr Mann's duties as a partner, I am unpersuaded that they were sufficiently grave to disqualify him from seeking equitable relief. More importantly, however, even if "unclean hands" debarred Mr Mann from seeking relief, the other plaintiffs' rights are unaffected, and they remain entitled to claim equitable relief. 56 The third matter complained of is expressly contemplated and permitted by the Partnership Deed. It is not correct that no benefit to the Partnership is involved: clause 17.9 provides remuneration to the Partnership for permitting its assets to be used as security. This matter cannot amount to "unclean hands". 57 I would not have refused relief on the basis of "unclean hands". Summary and conclusion 58 My conclusions may be summarised as follows. 59 The dispute is not hypothetical, and the declaration sought would have utility. There is a live controversy, and its resolution will have practical consequences. The declaration will quell the present controversy. Absent intervention, the partners cannot progress their negotiations with the Adelaide Bank. Although, if a declaration to the effect sought were made, it is conceivable that the Bank might nonetheless demand terms that exceed what Mr Rodskog is obliged to permit, this is not a case of resolution of only one step in litigation: there would then be a further dispute, involving issues different to those presently under consideration. The declaratory relief sought at this stage would, if granted, permit the negotiations with the Adelaide Bank to move forward. Failure to intervene would enable Mr Rodskog to secure, by default, the result which he seeks, by leaving negotiations with the Bank at an impasse. 60 If Mr Rodskog were bound to permit the Partnership Assets to be used as security for Bonvale's borrowings, execution of a form of "consent" to a second mortgage of the Partnership Assets would not be a necessary step in the discharge of Mr Rodskog's obligations under the agreement, such as might be required by clause 6.1(d) or (e) of the Partnership Deed. Nor has any requirement been made by the CEOs that he do so, such as might invoke clause 6.1(g). The ultimate form of any second mortgage remains unknown. In those circumstances, it would not be appropriate to order Mr Rodskog to execute a "consent". 61 The circumstance that the Bank is presently stipulating for a personal guarantee that Mr Rodskog cannot be compelled to give does not detract from any obligation he might otherwise have to permit the Partnership Assets to be used as security. Thus, the fact that the 4 December offer does not conform to clause 17.7 does not mean that Mr Rodskog is not obliged to permit the Partnership Assets to be used as security for advances to Bonvale for purposes associated with Durham Green. 62 Notwithstanding the prima facie strong textual indications, in the context of clause 17 (and the Deed) as a whole, it is clear that the parties did not intend that Mr Rodskog be a participant in any further development or acquisition, and in recognition of that afforded him the special protection of clause 17.11. As he was not to be a participant, affording him an opportunity to participate would be a pointless exercise, and one that the parties cannot have intended. Properly construed in its context, clause 17.4 does not require that Mr Rodskog be given an opportunity to participate in any relevant development or acquisition. 63 Moreover, if it were necessary that he be given such an opportunity, clause 17.4 does not require a formal offer settled by the CEOs and made to all the Partners after the date of the Partnership Deed. Mr Rodskog was afforded an opportunity to participate in Durham Green, which he declined by letter dated 4 August 2003. All the other partners are participants. The requirements of clause 17.4 were satisfied 64 I do not accept that the proposed facilities are not "for the acquisition or development of other retirement villages" within clause 17.3; the facilities to be refinanced were for that purpose and a refinance of such facilities is for the same purpose as the original facilities. 65 However, Bonvale is not one of the Partners. A member of the class of objects of a discretionary trust is not a "beneficiary of a trust" within the definition of "related person" in the Duties Act. Bonvale is not an "Associated Person", within the meaning of the Partnership Deed, of any Partner, and thus is not a person qualified to be a "borrower" under clause 17.3. It follows that, by clause 17.3, the Partnership Assets may not be used for the purposes of Durham Green by Bonvale. 66 I would not have declined relief on the ground of hardship, nor on the basis that there was no damage, nor on account of unclean hands. 67 However, because Bonvale is neither a Partner nor an Associated Person, Mr Rodskog is not obliged to permit the Partnership Assets to be used as security for advances to Bonvale for purposes associated with Durham Green, being the facilities described in the 4 December Adelaide Bank letter of offer. 68 I therefore order that the proceedings be dismissed. As the ground on which the defendant has succeeded arose only in the course of the hearing, I will afford the parties an opportunity to be heard on the question of costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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