New South Wales Supreme Court CITATION : The Uniting Church in Australia Property Trust (NSW) v David Grant Vincent & Anor [2009] NSWSC 375 HEARING DATE(S) : 8/05/09 JURISDICTION : Equity Division Commercial List JUDGMENT OF : Einstein J EX TEMPORE JUDGMENT DATE : 8 May 2009 DECISION : Declaration made that defendants hold their interest in subject property subject to equitable charge in favour of the plaintiff. Earlier orders varied. CATCHWORDS : Resulting trusts - Thief holds stolen funds or property under presumed or resulting trust for the benefit of the rightful owner - Consideration of occasions when such a trust arises - Property is trust property in the hands of the thief because the thief is bound in conscience to hold the property on behalf of its true owner - Where trustee mixes own money with trust money in bank account the money remains subject to the trust - Charges - Where fund mixed with trust money is used to acquire other property, beneficiary entitled to charge both the fund and any property acquired from that fund - Tracing - Where trust money used to affect the value of the property, such as by the repayment of loans secured over the property, it can be traced into the property - Volunteers without notice receive the trust property subject to the trust CATEGORY : Procedural and other rulings Addstead Pty Ltd (in liq) v Liddan Pty Ltd (1997) 70 SASR 21; 25 ACSR 175 Boscawen v Baiwa [1996] 1 WLR 328 French Caledonia Travel Service Pty Ltd (in liq), Re (2003) 59 NSWLR 361 Hallett's Estate, Re (1880) 13 Ch D 696 Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 CASES CITED : Oatway, In re; Hertslet v Oatway [1903] 2 Ch 356 Robb Evans v European Bank Ltd (2004) 61 NSWLR 75 Stephens Travel Service International Pty Ltd v Qantas Airways Ltd (1988) 13 NSWLR 331 Strang v Owens (1925) 42 WN (NSW) 183 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 Westpac Banking Corporation v Ollis [2007] NSWSC 956 TEXTS CITED : Jacob's Law of Trusts in Australia (7th ed), Heydon JD, Leeming MJ, Lexis Nexus, 2006 The Uniting Church in Australia Property Trust (NSW) (Plaintiff) PARTIES : David Grant Vincent (First Defendant) Jenny Vincent (Second Defendant) FILE NUMBER(S) : SC 50019/09 COUNSEL : Mr D A McLure (Plaintiff) Mr J Heazlewood (Second Defendant) SOLICITORS : HWL Ebsworth (Plaintiff) Michael Jokovic & Associates (Second Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Friday 8 May 2009 ex tempore Revised 11 May 2009 50019/09 The Uniting Church in Australia Property Trust (NSW) v David Grant Vincent & Anor JUDGMENT 1 In proceedings number 50019 of 2009 by notice of motion filed on 3 April 2009 the second defendant, Mrs Vincent, seeks an order permitting the sale of a property at 27 Gungah Bay Road, Oatley (the Oatley property). The sale of that property is presently prevented by freezing orders made by this court on 27 February 2009. 2 The plaintiff consents to the variation of the freezing orders to permit the sale on certain conditions set out in the short minutes of order which have been passed to the court. So as to facilitate the sale, the plaintiff and Mrs Vincent are desirous of the Court making a declaration as to the plaintiff's charge over the property. Although the first defendant, Mr Vincent, will be affected by the charge he filed a submitting appearance in these proceedings on 15 April 2009 and is not present today. 3 On 7 April 2009 Mr Vincent consented to a judgment in favour of the plaintiff against the first defendant in the sum of $1,430,839.03 in respect of the plaintiff's claim set out in paragraphs 6 and 7 of the amended summons filed on 7 April 2009. In so doing Mr Vincent admitted to fraudulently receiving payments from the plaintiff in the sum of $1,142,841.79. A list of those payments is annexed to the amended Commercial List statement filed on 8 April 2009. 4 From that money fraudulently received Mr Vincent: (a) made loan repayments in respect of a loan secured over the Oatley property totalling $80,245.77 (see the annexure B to the further amended Commercial List statement), (b) made various payments for the improvement of the Oatley property totalling $122,441. The total of those payments is $202,686.77. 5 With the addition of interest the plaintiff seeks a charge over the Oatley property in the sum of $257,411.00. 6 As against Mr Vincent, the foundation for the charge is that he fraudulently received money from the plaintiff. A thief holds stolen funds or property under a presumed or resulting trust for the benefit of the rightful owner. Such a trust arises immediately upon acquisition of the property and is equivalent to an express trust for the purpose of the duty to get in the trust estate, Robb Evans v European Bank Ltd (2004) 61 NSWLR 75 at 99 [111]–[116], Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 at [155]-[156]. The property is trust property in the hands of the thief because the thief is bound in conscience to hold the property on behalf of its true owner. The trust may also be characterised as a constructive trust, Westdeutsche Landesbank v Islington London Borough Council [1996] AC 669 per Lord Browne-Wilkinson at 716. 7 Where a trustee mixes his own money with trust money in a bank account the money remains subject to the trust, Stephens Travel Service International Pty Ltd v Qantas Airways Ltd (1988) 13 NSWLR 331 at 345F-348A. 8 Mr Vincent deposited the fraudulently obtained monies into his Commonwealth Bank account. Where a trustee acquires property using exclusively trust money, the beneficiary has a proprietary interest in the property acquired, however, where a trustee acquires property using trust money mixed with his own the beneficial owner does not have a proprietary interest in the property because it was not acquired only with trust property. Instead the beneficiary is entitled to a charge over the property to secure the amount of the fiduciary's liability, Re Hallett's Estate (1880) 13 Ch D 696 at 708–709. The charge gives rise to an entitlement to have the property restored to the beneficiary by restitution and arises as soon as the wrongful conversion or mixing occurs, Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361 at 386 [83]. 9 Where a fund mixed with trust money is used to acquire other property, the beneficiary is entitled to charge both the fund and any property acquired from that fund, Re Oatway [1903] 2 Ch 356 at 361; Re French Caledonia Travel Service Pty Ltd (in liq) (2003) 59 NSWLR 361 at 386 [83] - [84]. The charge may be asserted over both the fund and the property to its full value in the sense that the beneficiary must exhaust either first before recouping the full balance out of the other, see Jacob's Law of Trusts in Australia (7th ed) at [2707] p675, 677. The rationale for this is that until the trustee has fulfilled his fiduciary duty to restore the trust property he will not be heard to claim his own interest in the acquired property, Westpac Banking Corporation v Ollis [2007] NSWSC 956 at [58], Einstein J. 10 Where trust property has been used to effect the value of the property, such as by the repayment of loans secured over the property it can be traced into the property, Boscawen v Baiwa [1996] 1 WLR 328. 11 As against Mrs Vincent, the foundation for the charge is her receipt of the benefit of the funds for no consideration. Volunteers without notice receive trust property subject to the trust, Strang v Owens (1925) 42 WN (NSW) 183; Addstead Pty Ltd (in liq) v Liddan Pty Ltd (1997) 70 SASR 21; 25 ACSR 175. 12 In all of the circumstances and bearing in mind the materials that are now before the court, the principled exercise of the relevant discretion is to make a judgment/order in the form of the document which the parties have provided which the plaintiff and the second defendant have provided to the court. 13 The court makes orders in terms of the document entitled "Judgment/Order" which I have initialled and dated 8 May 2009. Each of the orders provided for in paragraphs 1, 2, 3 inclusive are now made, and I order that the orders be entered forthwith on Monday next. 14 The court further notes the undertaking of Michael Jokovic to the court and to the plaintiff that he will do all things reasonably necessary to give effect to paragraph 2(i) of the orders. ******* DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.