FEDERAL COURT OF AUSTRALIA

Swishette Pty Ltd v Australian Competition and Consumer Commission [2017] FCAFC 45

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Paragraphs 10 to 17 of the orders made on 23 March 2016 in proceeding VID 252 of 2015 and the direction made pursuant to paragraph 10 of those orders be set aside.

3.    All of the funds held in the respondent’s solicitors’ trust account (being the proceeds of sale of the property of the first appellant situated at 5 Maroona Road Brighton, VIC, more particularly described in certificate of title Volume 4249 Folio 755) pursuant to the freezing order made on 4 August 2015 (as extended or varied on 12 August 2015, 10 September 2015, 14 October 2015, 22 October 2015 and as consolidated on 9 March 2016) (“the Freezing Order”) be released, and the Freezing Order be discharged.

4.    The operation of paragraph 3 of these orders be suspended for a period of 21 days.

5.    The respondent pay the appellants’ costs of and incidental to the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The application for an extension of time within which to seek leave to appeal be granted.

2.    The applicant have leave to appeal.

3.    The appeal be allowed.

4.    The respondent pay the applicant’s costs of and incidental to the application and the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

introduction

1    This appeal concerns the scope of the power of the Court in respect of the orders that the Court may make under s 239 of Schedule 2 to the Competition and Consumer Act 2010 (Cth), the Australian Consumer Law (“Australian Consumer Law”). Section 239 is a remedial provision that is enlivened when a person has engaged in conduct in contravention of consumer protection provisions in the Australian Consumer Law and the section empowers the Court, on the application of the respondent regulator (“ACCC”), to make orders against the person who engaged in the contravening conduct, or a person involved in that conduct, to redress the loss or damage suffered, by affected consumers who are not parties to the proceeding, without the need for those persons to be joined as parties (the “non-party consumers”).

the decision below

2    The primary judge made such an order against Clinica Internationale Pty Ltd (in liquidation) (“Clinica”) and its managing director Radovan Laski (“Mr Laski”). The order was made in an action brought against them by the ACCC for contraventions of ss 18, 21, 29 and 31 of the Australian Consumer Law with respect to the “Clinica program” in falsely representing that people on temporary visas would obtain permanent residency under the Subclass 187 visa – Regional Sponsored Migration Scheme (“section 187 visa”): Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62 (“Clinica (No 2)”). The contraventions were admitted by Clinica and Mr Laski admitted that he had been knowingly involved in those contraventions. The primary judge held that Clinica’s advertised program did not entitle, and could never have entitled, its clients to apply for a section 187 visa. At [150] of Clinica (No 2), the primary judge stated:

This was a scheme aimed at vulnerable people, desperate to gain secure migration status in Australia. It was a scheme promoted, advertised and conducted on the basis that people would secure a permanent residence visa. That is why large sums of money could be charged, and were paid. That is why people such as Messrs Uppal, Azad and Gill begged and borrowed, and worked long hours, to put together the instalment payments. The prize which they had been led to believe awaited them was an Australian permanent residence visa. Conveying the value of that migration status to those in the Australian community fortunate enough never to have had to be concerned about not being able to stay in Australia is not an easy exercise. It is something most people take for granted. To those who do not have it, it is precious. The way Clinica and Mr Laski preyed on the dreams of people about obtaining secure and long term residency and employment in Australia, is one of the features of this scheme most deserving of the Court’s condemnation.

3    Orders declaring the contraventions by Clinica and Mr Laski’s involvement in those contraventions were made, along with other related orders, including a non-party redress order against Clinica and Mr Laski (“Order 9”) pursuant to s 239 of the Australian Consumer Law. The non-party redress order was in the following terms:

9.    Clinica and Mr Radovan Montague Laski, jointly and severally, refund to clients of Clinica any moneys paid by the clients which were paid under, referrable to or which were otherwise used in relation to the Regional Sponsorship Agreements and/or the Clinica Program and/or the Cleaning Course, together with interest, calculated from the time when the clients made the payments until the refunds are provided, at the rate set out in s 2 of the Penalty Interest Rates Act 1983 (Vic).

4    In addition, the primary judge, on the application of the ACCC, made an order pursuant to s 239 of the Australian Consumer Law “for the purposes of complying with paragraph 9 of these orders” that Mr Laski give a direction on behalf of “his companies”, Swishette Pty Ltd (“Swishette”) and Letore Pty Ltd (“Letore”), to the ACCC in relation to the application of the proceeds of sale of a property owned by Swishette which were held on the trust by the ACCC’s solicitors pursuant to a freezing order (“Order 10”). Order 10 was as follows:

10.    For the purposes of complying with paragraph 9 of these orders, on or before 5:00pm on the day after the making of these Orders, Mr Radovan Montague Laski must execute and submit to the applicant a written direction in the form of Annexure A to these Orders, on behalf of his companies Swishette Pty Ltd ACN 094 286 085 and Letore Pty Ltd ACN 005 733 013.

5    Annexure A was in the following terms:

DIRECTION TO BE GIVEN BY RADOVAN MONTAGUE LASKI IN FEDERAL COURT OF AUSTRALIA PROCEEDING VID 252 OF 2015

I, Radovan Montague Laski, hereby direct on behalf of Swishette Pty Ltd ACN 094 286 085 (Swishette) and Letore Pty Ltd ACN 005 733 013 (Letore), that the whole of the funds held in the applicant’s solicitors’ trust account (being the proceeds of sale of the property of Swishette situated at 5 Maroona Road, Brighton, better described in certificate of title Volume 4249 Folio 755) pursuant to the freezing order made on 4 August 2015 (as extended or varied on 12 August 2015, 10 September 2015, 14 October 2015, 22 October 2015 and as consolidated on 9 March 2016) be:

(a)    maintained in the applicant’s solicitors’ trust account; and

(b)    subject to any further orders of the Court, withdrawn and applied only to effect the refunds referred to in paragraph 9 of the orders of the Court made on 23 March 2016.

6    Section 239 relevantly provides as follows:

(1)    If:

(a)    a person:

(i)    engaged in conduct (the contravening conduct) in contravention of a provision of Chapter 2, Part 3-1, Division 2, 3 or 4 of Part 3-2 or Chapter 4; or

(ii)    …; and

(b)    the contravening conduct or declared term caused, or is likely to cause, a class of persons to suffer loss or damage; and

(c)    the class includes persons who are non-party consumers in relation to the contravening conduct or declared term;

a court may, on the application of the regulator, make such order or orders (other than an award of damages) as the court thinks appropriate against a person referred to in subsection (2) of this section.

Note 1:    For applications for an order or orders under this subsection, see section 242.

Note 2:    The orders that the court may make include all or any of the orders set out in section 243.

(2)    An order under subsection (1) may be made against:

(a)    if subsection (1)(a)(i) applies—the person who engaged in the contravening conduct, or a person involved in that conduct; or

(b)    ….

(3)    The order must be an order that the court considers will:

(a)    redress, in whole or in part, the loss or damage suffered by the non-party consumers in relation to the contravening conduct or declared term; or

(b)    prevent or reduce the loss or damage suffered, or likely to be suffered, by the non-party consumers in relation to the contravening conduct or declared term.

(4)    …

7    The combined effect of ss 239(1) and (2) is that s 239, in unqualified terms, only empowers the Court to make an order against the person who engaged, or was involved, in the contravening conduct. Whilst neither Swishette nor Letore was involved in the contravening conduct of Clinica and Mr Laski, the primary judge held that Order 9 and Order 10 were consistent with this requirement.

8    The background to Order 10 is that Mr Laski is the sole director and the controller of both Swishette and Letore. Swishette’s principal activity is to act as trustee of a discretionary trust called the Second Rodney Laski Family Trust (“the Trust”), of which Mr Laski and Letore are both beneficiaries, but not the only beneficiaries. Mr Laski is also the appointor of the Trust. Swishette in its capacity as trustee of the Trust owned a property in Brighton at which Mr Laski had resided. The property was sold in 2015 and the ACCC obtained a freezing order against Swishette which covered the proceeds from the sale of that property. Pursuant to the freezing order, the net proceeds were paid into a trust account in the name of the ACCC’s solicitors to be held until the hearing and determination of the proceeding or further order.

9    The primary judge held at [294] of Clinica (No 2) that, in exercising a power of the kind conferred by s 239, the Court was able to address “the reality of Mr Laski’s financial circumstances and access to the assets of corporate vehicles that he controls”. Her Honour reasoned that there was nothing in the text or context of s 239 to indicate that the Court’s powers could not be exercised in such a circumstance by reference to other assets or funds to which the contravener has access. Her Honour stated that the purpose of s 239 orders is to have those responsible for the contravention make good the past loss they have caused and “in order to do that, orders may have to reach funds held by, or on behalf of, third parties, especially where those third parties are controlled by a contravener”.

10    The primary judge was satisfied on the evidence that “the trust property of the Second Rodney Laski Family Trust can and should be regarded as the property ‘of’ Mr Laski”. Amongst other findings, the primary judge found that Mr Laski had used the assets of the corporate and trust entities that he controlled for his own purposes and that “[i]n that sense, the legal structures were meaningless to him”.

11    Her Honour considered that there was no limit or requirement in the power conferred by s 239 that restricts the orders the Court can make to assets, or property, that is “owned” legally or beneficially by the person responsible for the contravention. Her Honour stated at [291]–[292] of Clinica (No 2):

There is no limit or requirement in the power conferred by s 239 that restricts the orders the Court can make to assets, or property, that is “owned” legally or beneficially by the person responsible for the contravention. Indeed, on the evidence in this case, without an order of the kind set out in paragraph 9, the Court could not be satisfied that the remaining orders will achieve the redress, in whole or in part, of the loss and damage suffered because it is plain there will be no available funds to make any repayments to Clinica clients.

Section 239 is a remedial power. It is designed to allow the Court to undo damage to third parties caused by contravening conduct. The manner in which damage caused might need to be undone will inevitably need to be tailored to the circumstances of the contravening conduct, to the loss or damage suffered, and to the circumstances of the contravener and those involved in the contravention. There are no boundaries drawn in express terms in the way the power is conferred. The terms of s 243 provide examples of the way power might be exercised but should not be construed as confining s 239: Acts Interpretation Act 1901 (Cth), s 15AD. Rather, the use of the standard of appropriateness is a clear indicator that the legislature intends the Court to be able to fashion orders to suit the circumstances of a given case. It is precisely the kind of power where what is important is to look at the “reality” of the financial circumstances of the contraveners, and those involved in the contravention.

12    Her Honour held that s 239 conferred the requisite power to make Order 9 and Order 10 by reason that Mr Laski is in effective control of the proceeds from the sale of the Brighton property through his role as appointor of the Trust and his control of Swishette as the sole director. Her Honour stated at [294]:

While it may be acknowledged that Mr Laski, as a beneficiary of the discretionary trust over the Brighton property, did not have a legal or beneficial proprietary interest in that property but rather something the nature of a mere expectancy, in my opinion in exercising a power of the kind conferred by s 239, the Court is able to address the reality of Mr Laski’s financial circumstances and access to the assets of corporate vehicles he controls. That reality includes the fact that he is in effective control of the proceeds of sale from the Brighton property, through his role as appointor of the Trust and sole director of Swishette.

13    Her Honour held that Order 9 and Order 10 were justified on the basis that the evidence demonstrated that without the funds from the sale of the Brighton property being applied to the making of non-party redress payments, there was no real prospect of the non-party redress orders being effective.

14    In making the orders, the primary judge took into account “the effects of these orders on the interests of” two other beneficiaries of the Trust, namely Ms Laski (Mr Laski’s former wife) and Ms Hatch (Mr Laski’s cousin). The primary judge concluded that their interests would not be adversely affected by those orders, reasoning that, as discretionary beneficiaries of the Trust, they “have nothing more than a contingent interest at best” in the proceeds from the sale of the Brighton property.

15    Following the publication of the reasons for decision in Clinica (No 2) but before the pronouncement of the orders, Swishette applied to be joined as a party to the proceeding and to be heard on the proposed orders. Its application was successful on the basis that its proprietary interest in the proceeds from the sale of the Brighton property would be affected by the orders that the Court proposed to make: Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (in liq) (No 3) [2016] FCA 284 (“Clinica (No 3)”). Letore also applied to be joined, but its application was refused on the basis that, as a discretionary beneficiary of the Trust, Letore had nothing more than a mere expectancy to be considered to receive a distribution from the Trust: Clinica (No 3). Swishette has appealed Order 10, and also orders 11–17 which are ancillary to Order 10 and relate to the process by which a former client may claim a refund. Letore has applied for an extension of time to seek leave to appeal the refusal of the joinder application and the making of orders 10–17.

Consideration

16    It was submitted for Swishette and Letore that the primary judge did not have the power under s 239 of the Australian Consumer Law to make Order 10. We accept that submission for the following reasons.

17    The primary judge’s reasoning that, for the purposes of s 239, the trust property of the Trust can and should be regarded as the property “of” Mr Laski was based on Australian Securities and Investment Commission v Carey (No 6) [2006] FCA 814; 153 FCR 509 (“Carey (No 6)”). Carey (No 6) concerned s 1323 of the Corporations Act 2001 (Cth) (“Corporations Act”) which authorised the appointment of a receiver to the “property or a part of the property” of the relevant person. “Property” was defined in the Corporations Act to include “any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action”. The question in Carey (No 6) was whether it was within the scope of s 1323 to appoint a receiver to property held by a third party as trustee for a discretionary trust in which the defendant was a beneficiary. It was held by French J (as his Honour then was) that a beneficiary who effectively controls the trustee’s power of distribution has at least a contingent interest within the meaning of that term as used in the definition of “property” in s 9 of the Corporations Act and thus, even in the absence of a legal or equitable interest in the trust property, could be said to be the “property of” that beneficiary for the purposes of s 1323 and within the scope of the power under s 1323 to appoint a receiver to that property. His Honour reasoned that such a beneficiary has “something approaching a general power and the ownership of the trust property”, and in such a case, a contingent interest (which His Honour described “broadly as the possibility that a right of a proprietary character will come into existence at a future time if some event occurs”) may be identified because “it is as good as certain that the beneficiary would receive the benefits of distributions either of income or capital or both”. In holding that the defendant had a contingent interest in the trust property amenable to an order under s 1323, French J also drew on cases decided in the family law jurisdiction which had held that the effective control of a discretionary trust by one party to the marriage amounted to “de facto ownership of the property of the trust” and was thus “property of” that party for the purposes of s 79 of the Family Law Act 1975 (Cth) (“Family Law Act”), which confers the power on the Court to vary the legal interests in any “property of the parties to a marriage or either of them”.

18    The primary judge considered that Deputy Commissioner of Taxation v Vasiliades [2014] FCA 1250; 99 ATR 799 also provided support for making Order 10. In Deputy Commissioner of Taxation v Vasiliades, Gordon J, in the context of an application for a freezing order against a third party company, held on the basis of Carey (No 6) that there was a good arguable case that the defendant, who was the appointor of a discretionary trust, a beneficiary of the trust and the sole director and shareholder of the third party company which was the trustee of the trust, had a contingent interest of the kind identified by French J in the property of the trust.

19    The primary judge also referred to Public Trustee v Smith [2008] NSWSC 397; 1 ASTLR 488. In that case, White J said that the approach taken by French J in Carey (No 6) needed to be assessed in the context of the nature and purpose of s 1323 of the Corporations Act. In a passage cited by the primary judge, White J stated at [138]:

French J did not say that it followed from the defendants’ positions as beneficiaries of discretionary trusts and their control of the trustees that this amounted to actual ownership as distinct from “effective ownership”. As with the reference to “de facto ownership” I take the phrase “effective ownership” to mean that the defendants had such control of the affairs of the trust that they were in as good a position as if they were the beneficial owners, but not to mean that they were the beneficial owners of the trust property. In my view, there is very sound reason for construing the expression in s 1323(1)(h)(i) “an order appointing a receiver or trustee of the property of [the relevant person]” as extending not only to property actually owned by the relevant person but property effectively owned by him or her, for the same reasons as discussed in the family law cases concerning s 79 of the Family Law Act. However, I do not understand ASIC v Carey (No. 6) to establish that because a beneficiary of a discretionary trust controls the appointment or removal of the trustee, or controls the exercise of the trustee’s powers and can appoint trust property to himself or herself, that the holder of such a power is the beneficial owner of the trust property irrespective of the terms of the trust deed. In the construction of statutory powers such trust property might be regarded as the property “of” such a person (depending of course upon the statute in question) if something short of ownership provides the necessary connection between the person and the property denoted by the word “of”.

The primary judge, in reliance on that passage, said at [290]:

I am satisfied on the evidence that, to adopt and adapt the terminology of White J, the trust property of the Second Rodney Laski Family Trust can and should be regarded as the property “of” Mr Laski, provided that (as White J observed) something short of ownership provides the necessary connection between the person and the property denoted by the word “of”. The answer to that question, as White J observed, will depend on the statutory context, and statutory text. The question of power will be answered, one way or the other, by reference to the statute.

Her Honour concluded at [294] that the Court, in exercising the power pursuant to s 239, “is able to address the reality of Mr Laski’s financial circumstances and access to the assets of corporate vehicles he controls”. Her Honour stated that the reality included “the fact that [Mr Laski] is in effective control of the proceeds of sale from the Brighton property, through his role as appointor of the Trust and sole director of Swishette”.

20    Her Honour’s conclusion that an order in the terms of Order 10 was authorised by s 239 was based on reasoning that s 239, as a remedial power, “is precisely the kind of power where it is important to look at the ‘reality’ of the financial circumstances of the contraveners, and those involved in the contravention”. Whether that is the case must, however, depend on the particular statutory provision under consideration and, as White J said in Public Trustee v Smith, on whether, on the construction of the particular statutory power in question, it is sufficient for the purposes of that legislation to identify some interest “short of ownership”.

21    Whilst Carey (No 6) is authority that an object of a discretionary trust may have a “property” interest for the purpose of s 1323 of the Corporations Act, the decision turned on the defined sense of the word “property” appearing in that section. So too, whilst there are decisions in the family law jurisdiction which have held that orders can be made under s 79 of the Family Law Act in respect of trust property held on the terms of a discretionary trust, those cases have also turned on the defined sense of the word “property” appearing in s 79. Section 239 is cast in different terms, though, to s 1323 of the Corporations Act and s 79 of the Family Law Act. The word “property” does not appear in s 239, nor is there a defined meaning of that word for the purposes of Sub-Division B of Division 4 of Part 5-2 of the Australian Consumer Law in which s 239 is contained.

22    The power of the Court under s 239 is a power to make such orders (other than an award of damages) as the Court thinks appropriate “against the person” engaged or involved in the contravening conduct. Section 243 of the Australian Consumer Law sets out the kinds of orders which the Court may make. The section provides as follows:

Kinds of orders that may be made

Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of those sections against a person (the respondent ) include all or any of the following:

(a)    an order declaring the whole or any part of a contract made between the respondent and a person (the injured person ) who suffered, or is likely to suffer, the loss or damage referred to in that section, or of a collateral arrangement relating to such a contract:

(i)    to be void; and

(ii)    if the court thinks fit – to have been void ab initio or void at all times on and after such date as is specified in the order (which may be a date that is before the date on which the order is made);

(b)    an order:

(i)    varying such a contract or arrangement in such manner as is specified in the order; and

(ii)     if the court thinks fit – declaring the contract or arrangement to have had effect as so varied on and after such date as is specified in the order (which may be a date that is before the date on which the order is made);

(c)    an order refusing to enforce any or all of the provisions of such a contract or arrangement;

(d)    an order directing the respondent to refund money or return property to the injured person;

(e)    except if the order is to be made under section 239(1) – an order directing the respondent to pay the injured person the amount of the loss or damage;

(f)    an order directing the respondent, at his or her own expense, to repair, or provide parts for, goods that had been supplied by the respondent to the injured person;

(g)    an order directing the respondent, at his or her own expense, to supply specified services to the injured person;

(h)    an order, in relation to an instrument creating or transferring an interest in land, directing the respondent to execute an instrument that:

(i)    varies, or has the effect of varying, the first mentioned instrument; or

(ii)     terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the first mentioned instrument

23    Section 240 sets out the matters to which the Court may have regard in determining whether to make an order under s 239(1). Section 240 provides:

(1)    In determining whether to make an order under section 239(1) against a person referred to in section 239(2)(a), the court may have regard to the conduct of the person, and of the non-party consumers in relation to the contravening conduct, since the contravention occurred.

(2)    In determining whether to make an order under section 239(1) against a person referred to in section 239(2)(b), the court may have regard to the conduct of the person, and of the non-party consumers in relation to the declared term, since the declaration was made.

(3)    In determining whether to make an order under section 239(1), the court need not make a finding about either of the following matters:

(a)     which persons are non-party consumers in relation to the contravening conduct or declared term;

(b)     the nature of the loss or damage suffered, or likely to be suffered, by such persons.

24    Pursuant to s 241, a non-party redress order under s 239 is binding on a non-party consumer if loss or damage suffered by the non-party consumer has been redressed in accordance with the order and the non-party consumer has accepted the redress. Section 241 provides:

(1)    A non-party consumer is bound by an order made under section 239(1) against a person if:

(a)    the loss or damage suffered, or likely to be suffered, by the non-party consumer in relation to the contravening conduct, or the declared term, to which the order relates has been redressed, prevented or reduced in accordance with the order; and

(b)    the non-party consumer has accepted the redress, prevention or reduction.

(2)    Any other order made under section 239(1) that relates to that loss or damage has no effect in relation to the non-party consumer.

(3)    Despite any other provision of:

(a)    this Schedule; or

(b)     any other law of the Commonwealth, or a State or a Territory;

no claim, action or demand may be made or taken against the person by the non-party consumer in relation to that loss or damage.

25    These provisions were discussed by White J in Australian Competition and Consumer Commission v AGL South Australia Pty Ltd [2015] FCA 399; 146 ALD 385. White J, after referring to ss 239 to 241, said as follows at [80]–[81]:

Section 239 is, in substance, the counterpart of s 87AAA of the Trade Practices Act 1974 (Cth) (the TPA). Section 87AAA was inserted into the TPA by the Trade Practices Amendment (Australian Consumer Law) Act (No 1) 2010 (Cth). A counterpart provision, s 12GNB, was inserted into the Australian Securities and Investments Commission Act 2001 (Cth) at the same time. The Explanatory Memorandum accompanying the Second Reading Speech indicates that the intention was to vest this Court with power to make orders for the redressing of the loss caused to nonparty consumers resulting from contraventions of provisions in the TPA, given that this Court had held in Medibank Private Ltd v Cassidy [2002] FCAFC 290; (2002) 124 FCR 40 that s 87 of the TPA did not permit compensatory orders to be made in respect of persons who were not parties to the proceedings.

In the Second Reading Speech, the Minister said:

The redress for non-parties provisions of the Bill will allow the ACCC and ASIC to act more effectively where, for instance, thousands of consumers suffer small losses on which each of them might not take action individually because of cost and inconvenience. Businesses should not profit from consumer detriment, just because the amount is small or the harm spread widely.

…

This reform will allow a court to order the payment of refunds and similar forms of redress without the need for all consumers affected to be named as parties to the regulator’s court proceedings.

This is not a general power to award damages, but a power to order redress where that loss or damage is clearly identifiable and there is no need to adjudicate the merits of each particular case. It could be used to order redress of a standard form, such as the making of an apology, the exchange of goods or the payment of a refund.

It is clear that s 239 is a remedial provision enabling consumers to obtain redress for loss or damage suffered as a result of a person’s contravening conduct without having to take action themselves against that person. For that purpose, the Court is given a wide power with respect to the kind of orders that can be made under s 239, subject to the limitation that it be an order “against” the contravener.

26    Order 10, however, was an order affecting assets in respect of which Mr Laski, as an object of the discretionary trust, has no legal or beneficial interest but only the right to due consideration and due administration of the Trust: Kennon v Spry; Spry v Kennon [2008] HCA 56; 238 CLR 366; In re Gulbenkian’s Settlements [1970] AC 508; McPhail v Doulton [1970] UKHL 1; [1971] AC 424. The fact that Mr Laski may control the Trust both as appointor and as director of the trustee company, does not give him an interest in the trust property amounting to ownership: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties [1980] 1 NSWLR 510; Gartside v Inland Revenue Commissioners [1967] UKHL 6; [1968] AC 553 at 617–618. Objects of a discretionary trust have no beneficial interest in the property of the trust and their only interest is characterised as a mere expectancy coupled with a right to due administration of the trust. Whilst the right to due administration includes a right to due consideration in the exercise of the trustee’s discretionary power to distribute capital and income, until the exercise of the trustee’s power in favour of Mr Laski, Mr Laski has no entitlement to such capital or income. Moreover, Swishette as trustee is not free to exercise rights in respect of the trust property for its own benefit as if no trust existed. It has fiduciary and equitable obligations to administer the Trust in accordance with its terms, which the beneficiaries have the right to enforce.

27    The effect of Order 10 was to require Swishette and Letore, neither of which was engaged or involved in the contravening conduct, to apply the proceeds from the sale of the Brighton property to the repayment of client moneys. The proceeds from the sale of the Brighton property are, however, trust funds held by Swishette pursuant to the terms of the deed of the Trust. The primary judge accepted that the Trust was not a sham and that Swishette had owned the Brighton property in its capacity as trustee of that trust and that, following the sale, Swishette holds the sale proceeds as trustee pursuant to the terms of the Trust. In consequence, the sale proceeds were not available to be dealt with as the “property of” Mr Laski for the purposes of an order under s 239 and it was not open to the primary judge to make Order 10, disregarding the existence of the Trust and the obligations on Swishette, as trustee, with respect to the application of trust funds. Section 243 of the Australian Consumer Law does not authorise the making of such an order. Nor does the remedial nature of the power conferred by s 239 compel a different conclusion on the proper construction of the section.

28    We accordingly conclude that Order 10 went beyond the scope of s 239(1) by requiring third parties to apply trust property in which Mr Laski has no legal or beneficial interest to the repayment of client moneys, and the primary judge fell into error in concluding that she had the power to make such an order. Furthermore, we cannot see how an order under s 239 could have been directed at Letore in any event. The fact that Mr Laski may control Letore does not alter the position that Letore’s only interest under the Trust is that of a beneficiary with a right to due administration of the Trust but with no proprietary interest in the trust assets. We would accordingly grant an extension of time to Letore to apply for leave to appeal the making of the order against it, grant leave to appeal and would allow Letore’s appeal.

29    In view of our conclusion, it is unnecessary to consider the appellants’ alternative argument that if the power under s 239 extended to making an order in the terms of Order 10, the scope of the power is in breach of s 51(xxxi) of the Constitution because the order constituted an acquisition of property other than on just terms.

Associate:

Dated:    15 March 2017