Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWCA 422
• Hearing dates: 15 October 2013
• Decision date: 11 December 2013
• Before: Meagher JA at [1]; Ward JA at [2]; Leeming JA at [117]

Decision

Appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: EQUITY - trusts and trustees - where retention moneys under a building and construction contract were to be held on trust - where retention moneys not separately retained - whether financier is constructive trustee of retention moneys - whether financier is trustee de son tort - whether failure to set aside retention moneys meant that no relevant trust assets or equitable obligations existed; EQUITY - trust and trustees - maxims - equity regards as done that which ought be done
• Legislation Cited: Building and Construction Industry Payment Act (Qld); Uniform Civil Procedure Rules 2005 (NSW)
• Cases Cited: Barnes v Addy (1873-74) LR 9 Ch App 244; De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52; [1911-13] All ER Rep 883; In re Barney [1892] 2 Ch 265; Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) [1992] BCLC 350 at 353; Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWSC 79; Rayack Construction Ltd v Lampeter Meat Co Ltd (1980) 12 BLR 30; Re Anstis (1886) 31 Ch D 596; Re Arthur Sanders Ltd (1981) 17 BLR 125
• Texts Cited: Austin, Constructive Trusts, Finn (ed), Essays in Equity (1985) Law Book Co.; McGhee, Snell's Equity, 32nd edn (2010) Sweet & Maxwell; Meagher, Heydon and Leeming, Meagher, Gummow & Lehane's Equity, Doctrines & Remedies, 4th ed (2002) LexisNexis
• Category: Principal judgment
• Parties: Parkview Qld Pty Ltd (Appellant); Commonwealth Bank of Australia (Respondent)
• Representation: Counsel: T G R Parker SC with A R R Vincent (Appellant); S R Donaldson SC with W A D Edwards (Respondent); Solicitors: Salim Rutherford Lawyers (Appellant); Henry Davis York (Respondent)
• File Number(s): CA 13/078662

Decision under appeal

• Jurisdiction: 9111
• Citation: Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWSC 79
• Date of Decision: 2013-02-14 00:00:00
• Before: Stevenson J
• File Number(s): SC 11/289953

Judgment

1 MEAGHER JA: I agree for the reasons given by Ward JA that this appeal should be dismissed with costs.

2 WARD JA: Parkview Qld Pty Ltd is a building contractor. It undertook the construction of a residential property development in Townsville pursuant to a standard form building contract entered into with the developer, Fortia Funds Management Limited, in 2007. The construction was financed by Bank of Western Australia Limited (BankWest), the successor to which is the Commonwealth Bank of Australia. Fortia went into receivership some months after practical completion occurred and was subsequently placed in liquidation. The present dispute between Parkview and BankWest, in essence, is as to whether BankWest is obliged to account to Parkview for moneys that Fortia had been contractually obliged to retain out of progress payments payable to Parkview during the course of the building contract ("retention moneys"). In breach of its contractual obligations, Fortia did not separately retain any such funds and failed to pay (or "release") any retention moneys to Parkview after practical completion of the building works occurred in 2010.

3 With the consent of the parties, Bergin CJ in Eq made orders under Rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) for the 'building' issues in the Equity Division proceedings to be determined separately and after the determination of all other issues in dispute between the parties. The liability issues were heard by Stevenson J. His Honour held that BankWest was not obliged to account to Parkview for the retention moneys and accordingly dismissed the proceedings (Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWSC 79). It is from his Honour's judgment that Parkview now appeals. For the reasons set out below, I consider that the appeal should be dismissed.

Background

4 Under the standard form building contract entered into between Fortia and Parkview in 2007, the Contract Sum payable to Parkview for the construction of the apartments was in the order of $45 million and payment claims were to be made progressively by Parkview as work under the contract progressed. As certified progress claims were paid, 5% of the value of the work certified to have been performed was required to be deducted and retained up to a maximum retention amount of 5% of the Contract Sum (i.e., $2.25 million), reducing to $1.125 million on practical completion (clauses 5.5, 5.8, 42.4, 42.5 and Items 15 and 17 of Annexure Part A to the contract).

5 Pursuant to clause 5.7 of the contract, Parkview was entitled at any time to provide security, in lieu of retention moneys, in a form permitted by the contract. Parkview exercised that right in July 2009 but only in respect of part of the amount comprising the total that had by then been deducted from its progress payments as "retention moneys". I will refer to the circumstances in which this substitution occurred shortly.

6 Following the issue of a Final Certificate, Parkview was entitled to the release of the remaining retention moneys or any replacement security, pursuant to clause 42.10 of the contract.

7 Clause 5.10 of the contract, relevantly, provided as follows:

...The parties [i.e., Fortia and Parkview] shall hold the retention, security or the proceeds of the security on trust.

At the request of the Contractor [Parkview], the Principal [Fortia] agrees to provide reasonable information to confirm the security or retention monies are held in trust at all times.

8 Parkview contended, and it does not seem to have been disputed, that the trust contemplated by clause 5.10 was to be for the benefit of whichever party proved ultimately to be entitled under the terms of the building contract to the retention fund, security or the proceeds of security the subject of the trust. (The provision for Parkview to hold any of that amount on trust does not at first blush make sense, unless it had been contemplated that any retention moneys "released" to it were to be the subject of a trust pending any final adjustment of the amounts due under the building contract. Nothing, however, turns on this for present purposes.)

9 Funding for the project was provided by BankWest pursuant to a Facility Agreement it entered into with Fortia. It does not appear to be disputed that, at the relevant time, the facility limit was $55 million.

10 From about October 2007, BankWest retained a firm (WT Partnership) to act for it as quantity surveyors and construction cost consultants in relation to the project. Representatives of WTP participated (with representatives of Parkview and Fortia) in the Project Control Group committee that was responsible for overseeing the project development (Blue 1/155a). From August 2009, a representative of BankWest was also in attendance at Project Control Group meetings (Blue 1/195).

11 On 11 June 2008, BankWest, Fortia and Parkview entered into a Builder Tripartite Deed under which BankWest was entitled to pay Parkview directly all amounts certified as payable by Fortia to Parkview and to take over the building contract if Fortia defaulted in performance of the contract. Relevantly, there was no obligation on the part of BankWest so to do.

12 From at least September 2008, BankWest funded the progress payments to Parkview, once approved by the superintendent nominated under the building contract and WTP, by effecting successive draw-downs on Fortia's facility. The amounts paid to Parkview were net of the amount required to be retained as retention moneys in accordance with the contract. However, there was no draw down on the facility for the amounts required to be retained as retention moneys and no separate fund or account for those moneys was ever brought into existence.

13 In late 2008, Parkview advised Fortia that it wished to exchange the cash retention "accumulated so far" into a bank guarantee. This did not occur until July 2009, by which time the amount that had been deducted from the progress payments made to Parkview, as certified by the superintendent, was around $1.96 million (Blue 1/243P).

14 Parkview initially negotiated with Fortia in relation to the substitution of the bank guarantee from December 2008. During those negotiations, the terms of the bank guarantee (save for the favouree and the description of the contract) were finalised (Blue 293-328). Those negotiations concluded with Parkview's letter of 2 July 2009 noting that "since all are now okay with the bank guarantee..." (Blue 328G). From around that time (July 2009), Parkview's officers also dealt directly with BankWest in relation to the arrangements for substitution of the bank guarantee (the provision of which had by then been agreed directly with Fortia) (Blue 1/330-349). Presumably, BankWest's approval, as financier, to the form of the guarantee to be provided by way of security was necessary (at least as between it and its customer) for it to permit Fortia to draw down on the facility for the amount necessary to be paid in exchange for the substitute guarantee. Parkview's emphasis on the dealings directly between it and BankWest between 15 and 30 July 2009 (Blue 330-349) seeks to minimise the import of the negotiations that had taken place with Parkview and Fortia from December 2008.

15 On 30 July 2009, Parkview delivered to BankWest a bank guarantee in the sum of $1.2 million and BankWest issued a bank cheque in favour of Parkview for that amount. BankWest retained custody of the bank guarantee until it was discharged in February 2010.

16 In August 2009, according to the evidence of Mr Emile Tabet, a director of Parkview, discussion took place with Fortia in relation to claims for variations which had been made by Parkview and which had not yet been approved. Mr Tabet sought, from Fortia, confirmation by BankWest that there were sufficient funds available from BankWest to cover the contract works and variations (Mr Tabet's affidavit sworn 3 May 2012 at [30]). Fortia confirmed by email on 27 August 2009 that BankWest's quantity surveyor would issue a letter "confirming adequate funds exist to cover your contract works and approved variations".

17 On 31 August 2009, WTP wrote to Fortia (Blue 1/351), in a communication copied to both Parkview and BankWest, confirming that:

... there is [sic] sufficient funds within the current BankWest facility for value of works up to and including [$47,696,881.34, excluding GST being the amount then certified as to the value of the works]

18 In March 2010, prior to certification of practical completion, Parkview sought the release of the sum of $1.05 million, contending that practical completion had already been reached. The release of that amount in cash would have left the existing bank guarantee for $1.2 million as security until issue of the Final Certificate. Fortia did not accede to that request, contending that it had a claim against Parkview based on alleged delay and non-performance; a contention that Parkview disputed. BankWest was aware that Parkview had requested release of the $1.05 million at practical completion (Blue 3/1354). At that time the facility limit had not been reached and there remained approximately $3.4 million available to be drawn down under the BankWest facility (Blue 3/1398).

19 On 30 April 2010, Parkview wrote to BankWest (Blue 2/430), seeking confirmation that BankWest was "presently holding the full amount of the retention and security'' under the building contract and would not release it to Fortia without prior notice. The letter also demanded that BankWest exercise its power under the Builder Tripartite Deed to remedy Fortia's defaults by releasing "50% of the retention and security held in accordance with the terms of the Contract". BankWest neither provided the confirmation sought nor acceded to the demand for the release of the retention moneys and security.

20 On 6 May 2010, Fortia gave notice to Parkview under the building contract that it intended to have recourse to "the retention monies and security" (Blue 2/434). Parkview sought and obtained an interlocutory injunction restraining Fortia from so doing (Blue 2/507).

21 On 10 May 2010, Parkview's solicitors wrote to BankWest (Blue 2/435), seeking confirmation that "BankWest presently holds the retention monies and/or the security under the Contract" and directing BankWest not to release such retention moneys or security to Fortia. There appears to have been no response to this letter.

22 Practical completion was certified on 14 May 2010. Under the terms of the contract, the total amount required to be retained as retention moneys then reduced to $1.125 million and Parkview became entitled to the release of the sum of $1.125 million (though it only claimed release of the sum of $1.05 million at that time).

23 Once practical completion had been certified, Parkview commenced an adjudication process under the Building and Construction Industry Payment Act (Qld) to determine the amounts payable to it, subsequently obtaining a certificate in its favour for the sum of $1,966,918.24. That certificate, registered as a judgment, took into account (as a credit due to Parkview) the sum of $1.05 million as the amount representing the retention moneys retained out of the progress payments due to Parkview (Blue 2/517). Parkview demanded payment of the retention moneys from both Fortia and BankWest.

24 On 28 May 2010, Parkview's solicitors again wrote to BankWest (Blue 2/454). They said that they were instructed that BankWest was "presently holding on trust for our client under the Contract retention and security in the amount of $2,115,615 excluding GST". On 2 June 2010, Parkview's solicitors wrote to BankWest's solicitors (Blue 2/478) seeking the "immediate release of the retention monies held on its behalf" and asserting, among other things, that the retention moneys and security had been assigned to BankWest under the Builder Tripartite Deed and that it held $1.05 million on trust for Parkview.

25 The response from BankWest's lawyers on 7 June 2010 (Blue 2/508) referred to the terms of the Builder Tripartite Deed and confirmed that "the Bank has significant duties to both parties", stating also that the Bank "cannot act solely at the request of one party and reserves its rights under the Deed". Parkview places weight on this response as, in effect, a tacit admission that BankWest had assumed the role of trustee in respect of the trust for which provision was made in clause 5.10 of the contract. Further, the reference in this letter to security "held" under the building contract is said to have conveyed the impression that the retention moneys had in some way been set aside.

26 On 13 August 2010, BankWest appointed receivers and managers to Fortia (Blue 2/550). Not long thereafter, a winding up order was made in relation to Fortia (on 20 September 2010). On 21 February 2011, Fortia's liquidator notified ANZ (who had provided the bank guarantee in July 2009) that the bank guarantee was no longer required and released ANZ from its obligations under that guarantee. BankWest at no time elected to take over the building contract nor, despite Parkview's assertions in June 2010 to the contrary, was there any actual assignment to BankWest of the security (i.e., the bank guarantee) provided for performance of Parkview's obligations.

Proceedings

27 Proceedings were commenced by Parkview against BankWest by way of summons in the Technology and Construction List of the Equity Division in September 2011. The principal relief that Parkview sought in its summons was an order that BankWest account to it for what it described as the residual retention moneys in the sum of $1.05 million, together with interest.

28 In its Further Amended Technology and Construction List Statement filed on 5 February 2013, Parkview made the following allegations:

(i) that it was a term of the building contract between Parkview and Fortia [to which BankWest was not a party] that "the retention monies, security or proceeds thereof" be held by the parties on trust in accordance with their entitlements under the contract ([5] of the List Statement, referring to clause 5.10 of the contract), which was defined in the List Statement as the "Retention Monies Trust";

(ii) that, by the conduct identified in [9]-[11] of the List Statement (broadly, BankWest's awareness of the parties' obligations under the building contract; its retention of a firm of quantity surveyors and construction cost consultants in relation to the project; its representation on the Project Control Group overseeing the project; its payment of progress payment claims after submission of those claims by Parkview to the quantity surveyors and project superintendent and approval of those claims by the quantity surveyors and/or BankWest; and the arrangements pursuant to which in July 2009 BankWest "released" some of the "retention moneys" on delivery to it of a bank guarantee), BankWest constituted itself, or was to be treated as if it were, the trustee of the Retention Monies Trust ([10] of the List Statement);

(iii) alternatively, BankWest received the retention moneys, or the benefit thereof, with knowledge or notice of the Retention Monies Trust ([13] of the List Statement); and

(iv) Parkview was entitled to, and BankWest was obliged to account to it for, the residual retention moneys "the subject of the Trust", together with interest ([16] of the List Statement).

29 Parkview's claim thus appeared to be based on a constructive trust having arisen in its favour, with BankWest as constructive trustee, either because BankWest had become a trustee de son tort of the Retention Monies Trust (the nub of the allegation in [10]) or based on knowing receipt of trust property (the thrust of the allegation in [13], there seemingly invoking the first limb of Barnes v Addy (1873-74) LR 9 Ch App 244).

30 Emphasis is placed on the fact that in its summons what Parkview sought was an order that BankWest account to it for the residual retention moneys together with interest. There was no assertion of a claim based on a vested entitlement on the part of Parkview to receive a sum of money in 2010 at a time when practical completion had been achieved and there was a contractual entitlement to release of 50% of the retentions.

31 By its Amended Technology and Construction List Reply, filed in Court on the same day, Parkview contended, among other things, that Fortia had no claim or entitlement to the retention moneys and that BankWest could not object to the payment "of any retention monies which it holds on trust" to Parkview ([2](l)). It also raised an allegation that BankWest had impliedly made certain representations to Parkview, which had induced certain assumptions and expectations by Parkview and on which Parkview had relied to its detriment; as a result of which it alleged that BankWest was estopped from denying that it held the retention moneys on trust for the parties under the building contract ([3]-[8] of the Reply). This was the third basis on which Parkview contended that BankWest should be treated as, or had become, a constructive trustee of the so-called Retention Monies Trust.

32 The alleged representations were that:

(i) BankWest held the retention moneys under the contract "which had been deducted from" payments made to Parkview in respect of the Progress Claims made by Parkview ([3(a)]);

(ii) BankWest would hold the retention moneys which were deducted from future payments made to Parkview in respect of the Progress Claims under the contract "or would make the retention monies available when the time came for such monies to be paid out" ([3(b)]); and

(iii) BankWest would distribute the retention moneys in accordance with the parties' entitlements under the building contract ([3(c)]).

33 On appeal, reliance was placed by Parkview on the alternative representation alleged in [3(b)] of the Reply, namely that BankWest would make the retention moneys available (to Parkview) when the time came for them to be paid out - in effect, a promise by it to release the retention moneys (presumably by effecting a drawdown on Fortia's facility) as opposed to a representation that there were sufficient funds able to be drawn down from the facility for Fortia to pay out the retention moneys in due course.

Primary judgment

34 The primary judge found (at [29]) that it was an implied term of the building contract that Fortia was obliged to set aside, and retain, a separate trust fund equal to the funds it retained from progress payments (referring to Rayack Construction Ltd v Lampeter Meat Co Ltd (1980) 12 BLR 30 at 37 and Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) [1992] BCLC 350 at 353). His Honour further found that Fortia had not complied with that contractual obligation, not having set aside the amounts retained from the progress payments due to Parkview ([30]). There is no challenge to those findings.

35 His Honour went on to find (at [33]) that, because of Fortia's breach of its (implied) contractual obligation to set aside the "retention moneys", there were no identifiable assets of Fortia referable to the amounts that had been deducted out of the progress payments that were impressed with the trust referred to in clause 5.10 of the contract.

36 His Honour characterised Parkview's trust case against BankWest as involving a pleaded case that BankWest was liable as constructive trustee (having received the ANZ bank guarantee knowing that it was trust property) by virtue of being a trustee de son tort (described at [35]-[40] of his Honour's reasons) and an unpleaded case that BankWest had knowingly assisted fraudulent conduct of Fortia (that conduct being Fortia's failure to comply with its equitable duty to get in and secure the trust assets) (described at [41]-[42] of his Honour's reasons).

37 His Honour held that the unpleaded "knowing assistance" (or second limb Barnes v Addy) case could not be raised ([44]) but commented that in any event there was nothing in the evidence to justify the conclusion that BankWest had participated in any "fraudulent conduct" of Fortia, there being no evidence that BankWest had any knowledge that Fortia had failed to set aside funds to meet its potential obligation to pay to Parkview funds retained from progress payments ([45]).

38 As to the pleaded trust case, his Honour did not accept that BankWest had played any role other than as lender to Fortia ([53]); inferred that BankWest had held the bank guarantee in safe custody for Fortia ([65]); inferred (and said that it was clear) that BankWest drew the July 2009 bank cheque in exchange for the bank guarantee on Fortia's instructions and with its authority ([67]); and did not accept that BankWest had intermeddled in the Retention Monies Trust or had acted as if it were a trustee of that trust or had dealt with trust assets inconsistently with that trust ([68]). In obiter, his Honour observed that it would not follow, from a conclusion that BankWest did constitute itself a trustee of the ANZ bank guarantee, that it thereby became a trustee of the Retention Monies Trust generally ([69]).

39 As to the alternative estoppel claim, pleaded in Parkview's reply, his Honour held that BankWest's conduct in relation to the bank guarantee conveyed no more than a correct representation that BankWest was authorised by Fortia to receive the guarantee and, in return, to draw down $1.2 million under the facility and make that available to Parkview ([72]). His Honour (at [89]) did not accept Parkview's submission that BankWest had made the further representations alleged to have been made by it, either in the August 2009 correspondence sent by WTP to which I have referred (at [17] above) or in a subsequent construction cost certification provided by WTP on 9 October 2009 that showed the retention moneys as a credit in the "cost to complete".

40 His Honour concluded that the natural reading of the 31 August 2009 letter from WTP conveyed no more than a representation that the amount currently not drawn under the facility would be sufficient to fund the works and said that there was no suggestion that this was not the case ([78]). His Honour further said that Mr Tabet (of Parkview) did not understand the letter as conveying a representation that BankWest would advance funds sufficient to fund the cost of the project come what may, referring to certain of the evidence given by Mr Tabet in the witness box ([80]-[82]). As to the October construction cost certificate, his Honour found that this did not certify that the $1.05 million retention moneys were "in credit" but, rather, showed that there was included in the "draw down to complete" an amount on account of retention ([86]).

Grounds of Appeal

41 In its Notice of Appeal filed on 14 March 2013, Parkview contends that his Honour erred:

(i) in concluding that Fortia's failure to set aside a retention fund meant that no relevant trust assets "(nor, implicitly, any relevant equitable obligations)" existed (ground 1);

(ii) in concluding that it was not open to Parkview to advance the contention set out at [41] of his Honour's reasons (referred to by his Honour as the unpleaded knowing assistance case) and in concluding that this contention was not made out (grounds 2 and 3); and

(iii) in finding by inference that BankWest held the ANZ bank guarantee only in safe custody for its customer, Fortia, and that, in paying the sum of $1.2 million to Parkview in exchange for that guarantee BankWest had acted only on the instructions of its customer (ground 4);

and that his Honour ought to have concluded that:

(iv) in paying the sum of $1.2 million and thereafter holding the ANZ bank guarantee, BankWest was acting as principal and that, having regard to BankWest's conduct and the other circumstances pleaded by Parkview, BankWest had constituted itself as, or should be treated as if it were, trustee of the Retention Monies Trust (ground 5); and

(v) BankWest represented by implication to Parkview that the retention moneys were held available "or at least had been earmarked in the sense that BankWest had promised to make them available when the time came to pay them out" (ground 6).

42 Senior Counsel appearing for Parkview, Mr Parker SC, disclaimed any suggestion that Parkview had sought at first instance to maintain a knowing assistance (second limb Barnes v Addy) claim. He explained that what Parkview had sought to argue (in the second way its constructive trust claim was put) was that BankWest was liable as a constructive trustee to account for the retention moneys because, knowing of the obligations of Fortia to constitute a trust of the retention moneys (which obligations it is said that equity would have enforced), BankWest's conduct in accepting delivery of the ANZ bank guarantee amounted to the assumption by it of the role of trustee in respect of the assets which the contract contemplated would constitute the retention moneys fund, whether or not those assets were separately in existence.

43 As so put, this alternative ("knowing receipt") argument involved a rather novel application of the principle that equity regards as being done that which ought to have been done.

44 It was contended by Parkview that, where contracting parties (here, Fortia and Parkview) had agreed that a trust would be established, equity would not permit one party (here, Fortia), by failing to establish the trust (or by breaching its contractual obligation to set aside moneys that would then become impressed with the agreed trust), to avoid the equitable obligations that it would have had if the trust had been established. Hence, it is said that Fortia would have been specifically compellable (at the suit of Parkview) to draw down or otherwise secure the retention moneys in a form in which they would then have become subject to the trust.

45 It is then submitted that BankWest cannot deny the existence of that trust where to do so would be unconscionable. The unconscionability to which Parkview points in this regard seems to be the reliance by BankWest on the cancellation of Fortia's facility as a basis for refusing to account for the retention moneys, in circumstances where it knew of the contractual obligations owed by its customer (and its customer's failure to honour those obligations).

46 As to the second basis on which Parkview puts its claim, it is submitted that his Honour adopted too narrow a view of Parkview's argument when dismissing it as an unpleaded knowing assistance claim.

47 Mr Parker accepts that there is a degree of overlap between the second way in which the trust argument is put and the contention that BankWest became a trustee de son tort by conduct including its acceptance of the bank guarantee. Both arguments involve the proposition that BankWest acted in relation to the bank guarantee in such a way as to assume obligations in relation to the so-called Retention Monies Trust.

48 In essence, therefore, what Parkview contends is that there are three ways in which it argued at first instance, and his Honour should have found, that BankWest became liable as constructive trustee to account to Parkview for the amounts that had been deducted from (but not separately retained or set aside) progress payments made under the contract: first, that, by its conduct BankWest became a trustee de son tort and thus had an obligation to ensure that the retention moneys became impressed with the trust contemplated in the building contract; second, that BankWest otherwise should have been treated as a trustee by application of the principle that equity looks on done that which ought to be done (in the sense outlined above); and, third, that BankWest was estopped by its conduct from denying that it is a trustee.

Ground 1 - did the failure to set aside a retention fund mean that no relevant trust assets (or equitable obligations) existed?

49 This ground of appeal raises an issue that appears to be a necessary first step in the argument that BankWest became a constructive trustee of a trust in respect of the "retention moneys", namely whether any such trust ever came (or should be treated as having come) into existence. His Honour concluded that no funds had become impressed with the trust for which provision was made in clause 5.10 of the contract, since no moneys had in fact been set aside by Fortia when the respective progress payments were made.

50 His Honour noted that this conclusion accorded with the result in the Mac-Jordan case. There, as in the present case, the relevant building contract created a retention moneys trust but no funds had been actually appropriated to the trust. It was apparently common ground in that case that there were no identifiable assets impressed with the trusts applicable to the retention fund. The principal had gone into liquidation and the dispute was as to whether the contractor had an equitable entitlement to funds held on deposit for the principal in a separate bank account in priority to the rights of a financier under a floating charge that post-dated the building contract. The Court held that the financier was not bound in equity to subordinate its interest in the fund to the contractor's contractual right to have the retention moneys set aside nor was it bound in equity to give effect to the provisions of the building contract which had made provision for a retention money trust. Scott LJ noted (at p 356) that, as the retention funds had not in fact been set aside, there were no identifiable assets impressed with the trusts applicable to the retention fund.

51 Mr Parker contends that there is a relevant distinction between the present case and that decided in Mac-Jordan because in the latter all that was relied upon to bind the financer was knowledge (there being no suggestion that the financier had in any way dealt with the contractor or had made any representations to the contractor or had undertaken any responsibilities to the contractor or had asserted that it had any responsibilities to the contractor). In response to that submission, Senior Counsel appearing for BankWest, Mr Donaldson SC, maintains that Mac-Jordan is applicable to the present case since the assertion of priority in relation to the charge by the bank in Mac-Jordan (the bank there seeking to enforce a charge over an asset of the proprietor) gave rise to the issue as to the impact of the bank's knowledge of breaches of the proprietor's obligation to set aside the retention fund upon its entitlement to assert its rights under the charge.

52 Nothing here turns on whether or not Mac-Jordan is relevantly analogous to the present case. His Honour's decision was not dependent on Mac-Jordan. There was no error by the primary judge in finding that no trust came into existence pursuant to clause 5.10 of the contract until such time as there were identifiable assets that were referable to and impressed by such a trust. Until that time, there was no more than an implied contractual promise by Fortia to set aside retention moneys deducted from the progress payments and an obligation on its part to hold those moneys on trust once they were set aside. Furthermore, until that time the identity of the party obliged to act as trustee would not be known.

53 Although there was a suggestion, in the course of the appeal, that the chose in action comprised by the benefit of Fortia's implied contractual promise to set aside retention moneys in a separate fund was capable of constituting trust property, this was not something that had been pleaded in the proceedings at first instance. Rather, the case for Parkview was that the trust property was comprised of the retention moneys that Fortia had been obliged to (but had not) set aside, as well as the bank guarantee subsequently provided by it.

54 Until retention moneys were physically set aside by Fortia (or drawn down from the facility) for the purpose of compliance by Fortia with its obligations under clause 5.10 of the contract or security was provided in lieu of the "retention moneys", there was nothing to be held on the trust contemplated by clause 5.10 of the contract. Neither Fortia nor Parkview had any obligations as trustee until the trust was constituted.

55 Once Parkview exercised its contractual right to provide security in lieu of a portion of the amount that Fortia had been required to retain by way of retention moneys, by delivery of the ANZ bank guarantee, there was for the first time identifiable property capable of being impressed with the trust provided for in clause 5.10 of the contract. At that point, there is no dispute that Fortia's obligation under clause 5.10 of the contract was to hold that security (i.e., the bank guarantee) on trust for whichever of the parties (Fortia or Parkview) were to become entitled to have recourse thereto.

56 Whether BankWest, by accepting delivery of, and holding custody of, the bank guarantee (or by the other conduct as pleaded by Parkview) became a constructive trustee thereof is a quite different issue to be considered in relation to the matters raised under grounds 4 and 5 of the grounds of appeal.

57 To the extent that Parkview's first ground of appeal raises the contention that his Honour erred in (implicitly) not finding that relevant equitable obligations existed, it appears that what Parkview here contends is that, once the bank guarantee was provided, the entity then holding it as trustee (BankWest) had an equitable obligation to ensure that the trust contemplated by clause 5.10 was fully constituted; i.e., to set aside the retention moneys. Consistent with its argument that once BankWest accepted the delivery of the bank guarantee it became a trustee of the Retention Monies Trust, Parkview argues that it was obliged to get in the balance of the retention moneys (say, by effecting a draw down, on Fortia's behalf, of the facility in respect of the amounts required to be deducted and retained from the progress payments).

58 BankWest owed no contractual obligation to Parkview to constitute the Retention Monies Trust. Therefore, the question whether BankWest should have been found to have had any relevant equitable obligations (i.e., any obligations other than in respect of the holding of the bank guarantee itself - an issue to be considered in addressing grounds 4 and 5 of the grounds of appeal) must be answered by reference to the position of BankWest after the provision to it of the bank guarantee in July 2009, at which time property capable of constituting the trust under clause 5.10 of the contract first came into existence.

59 His Honour was of the view that, even if BankWest had held the bank guarantee on constructive trust for Parkview, BankWest had no obligation to get in and secure the amount required to have been retained out of the progress payments as retention moneys. I agree. It was the contractual obligation of Fortia (not BankWest) to set aside the fund comprising the retention moneys. Until Fortia did so, the amounts that it had not paid in respect of progress payments (i.e., the amounts deducted in respect of the notional retention moneys) did not exist in any real sense and did not become impressed with a trust.

60 I do not consider that the mere holding of the bank guarantee, even if that was in the alleged capacity as constructive trustee for Fortia and Parkview, gave rise to an obligation on the part of BankWest to take steps to bring into existence other property that would then be impressed with a trust (whether by acting on its own motion to draw down on its customer's facility or, assuming it could have done so, to require Fortia to comply with its contractual obligations to bring into existence the retention moneys fund). At most, BankWest, if it held the bank guarantee as trustee, had an obligation to ensure it was kept secure and dealt with for the purposes specified in the contract. As it is, for the reasons I set out in relation to Grounds 2 and 3 below, I do not agree that BankWest held the bank guarantee as trustee.

61 In my opinion, ground 1 of the notice of appeal has not been made out.

Grounds 2 and 3 - Reliance on maxim that equity regards as done that which ought to be done

62 Grounds 2 and 3 of the grounds of appeal relate to the second basis on which Parkview contends that BankWest became liable as a constructive trustee - namely, the pleaded "knowing receipt" ground (although that phrase is here not used in the strict sense of a first limb Barnes v Addy claim).

63 As adverted to earlier, Parkview's contention in this regard rests on the assertion that BankWest's conduct (largely that of accepting delivery of the bank guarantee) involved the assumption by BankWest of the role of trustee of the Retention Monies Trust, as contended for in grounds 4 and 5 of the grounds of appeal. The argument then proceeds on the basis that, since equity regards as done that which ought to have been done, BankWest cannot deny that it was a constructive trustee of the moneys that Fortia should have (but did not) set aside as a retention fund.

64 Whether the principle that equity looks on that as done which ought to have been done is properly to be regarded as a maxim of equity or a mere aphorism (see Meagher, Heydon and Leeming, Meagher, Gummow & Lehane's Equity, Doctrines & Remedies, 4th ed (2002) LexisNexis at [3-005]), and without entering into the debate as to whether the so-called maxims of equity should be abolished altogether (as advocated in John McGhee, Snell's Equity, 32nd edn (2010) Sweet & Maxwell, at [5-001]), the only context in which that principle could be relevant in the present instance is that of the attitude that equity takes to contracts and its use there is limited to circumstances where that which ought to be done can be done.

65 It is recognised that the principle can be invoked only by those who would have the right to seek in equity the specific enforcement of the contract in question (which in this case would mean that the principle could only be availed of by Fortia). In Re Anstis (1886) 31 Ch D 596, Lindley LJ explained (at 605-6) that the rule is not one of universal application and that "[w]here the obligation to do what ought to be done is not an absolute duty, but only an obligation arising from contract, that which ought to be done is only treated as done in favour of some person entitled to enforce the contract as against the person liable to perform it".

66 There is no relevant contractual obligation on the part of BankWest to which this principle could apply since, under the Builder Tripartite Deed, BankWest was not obliged to pay any money to Parkview. As made clear in De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52; [1911-13] All ER Rep 883, application of the principle that equity regards as done that which ought to be done does not permit the Court to make for the parties contracts different from those they have made for themselves.

67 In the present case, the implied contractual obligation to retain a fund in respect of the retention moneys was one that was imposed on Fortia. Even if (as Parkview contends), as between Fortia and Parkview, Fortia could not have denied the existence of the Retention Monies Trust by saying that no assets had been appropriated to it and even if it could be said that, had an application been made at the relevant time for Fortia specifically to perform its obligations under the contract, equity would have granted such relief, Parkview's argument involves a further proposition: namely that equity would have compelled BankWest to take action in Fortia's place or would have compelled Fortia to comply with its contractual obligations in a particular way that would necessarily have resulted in BankWest holding trust assets.

68 For Parkview, it is contended that, in circumstances where Fortia had no immediately available cash, equity would have required Fortia to exercise its rights against BankWest to draw down or otherwise secure the retention moneys under or through Fortia's facility agreement with BankWest. It thus requires the assumption to be made that Fortia would have complied with its contractual obligation in a particular fashion (i.e., by drawing down on its facility with BankWest). I see no basis to conclude that, had an application been made by Parkview against Fortia in 2008 or 2009, the Court would have granted relief requiring that BankWest provide finance to enable Fortia to create a retention moneys fund or requiring Fortia to fulfil its obligations in a particular way that would necessarily have this effect.

69 In my opinion, that is sufficient to dispose of these grounds of appeal but, in any event, I do not consider that the principle sought to be invoked by Parkview extends to require BankWest to be treated as having obligations that depended on what another party (Fortia) should have done but did not do.

70 Mr Parker placed weight on Re Arthur Sanders Ltd (1981) 17 BLR 125 for the proposition that BankWest should be treated as a trustee of the notional retention moneys (even though no actual fund of retention moneys was set aside and even though it had no contractual obligation to do so), on the basis that this is appropriate to forestall unconscientious conduct on BankWest's part.

71 In Re Arthur Sanders, an issue had arisen as to whether the principal under a building contract could set off, against net retentions under one contract (which included sums owing to subcontractors), sums due to it on another contract. Nourse J held that the principal could be treated as a trustee of sums that should have been set aside by it, out of moneys due to the contractor, as retention moneys, treating those as notionally having been set aside as retention moneys; and denied its claim for a set off in respect of those amounts against unsecured obligations owing by the contractor. Nourse J said that:

... equity, looking on that as done which ought to be done, will not allow [the solvent Council] any advantage from his [the principal's] failure to set aside a fund. Accordingly, it seems to me that I must proceed on the footing that the Council did from time to time set aside as a separate fund sums equivalent to the retention money under the interim certificates ...Next, it seems to me that the sums thus notionally set aside became held by the [Council] as a trustee.

72 Parkview emphasises that, in the present case BankWest had knowledge of Fortia's contractual obligations. It contends that equity should not allow BankWest to derive a benefit, at Parkview's expense, from Fortia's failure to comply with those obligations. In this regard, Mr Parker notes that his Honour was prepared to assume that BankWest was "aware" of the parties' obligations under the building contract and points to the fact that BankWest was directly involved in the Project Control Group and in the making of progress payments to Parkview after review and approval by WTP. He submits that his Honour erred in suggesting that BankWest could have led evidence that it was unaware that the retention moneys had not been set aside, noting that the records of BankWest demonstrated that the whole cost of the construction was funded through the facility, and referring to the WTP construction cost certificate showing the remaining accrued retention moneys as part of the cost to complete under the facility (Blue 1/356).

73 Mr Donaldson distinguishes the position in Re Arthur Sanders on the basis that that was a case where equity would not permit the Council to rely on its own breach to deny the existence of a trust (and thereby to improve its position). Mr Donaldson submits that, absent a request by Fortia to draw down on its facility for the retention moneys, there was no obligation on BankWest to advance funds and therefore, BankWest has not failed to do that which it ought to have done and is not setting up, in answer to some claim by Parkview, its own wrongdoing. I agree.

74 Grounds 2 and 3 are not made out.

Grounds 4 and 5 - conduct of BankWest in relation to the Bank Guarantee

75 Parkview contends that, in taking delivery of the bank guarantee (and in its dealings in relation to the provision of that security), BankWest was acting as principal and that his Honour was incorrect in inferring that BankWest had acted only as agent for Fortia in that regard.

76 First, it is submitted that such an inference should not have been drawn in BankWest's favour since it depended on the bank's dealings with Fortia as to which BankWest was in a position to have called direct evidence but did not do so.

77 As to the first suggestion (that there was a Jones v Dunkel inference arising from the failure of BankWest to call direct evidence of any instruction from Fortia), Mr Donaldson points to the documentary evidence from which he submits it would be concluded that BankWest was acting in accordance with what it understood to be its client's authorisation. BankWest's internal "Commercial Advance Progress Payment Instruction Account Information" document (Blue 1203) recorded progress payment instructions in relation to the $1.2 million payment from which it is submitted by BankWest that the cash that was handed over in exchange for the guarantee was by way of a draw down on the facility.

78 A Jones v Dunkel inference would only permit the Court more comfortably to rely on one of two competing and available inferences. The evidence that BankWest accepted delivery of the bank guarantee (and had provided details for its completion) does not, in my view, lead to the inference that BankWest had assumed the role of principal in relation to the substitution of the bank guarantee by way of security for the performance of its customer's obligations. It is consistent with BankWest acting in its admitted role as financier in relation to the development.

79 The document to which Mr Donaldson refers is evidence from which an inference can comfortably be drawn that BankWest had authority as financier to issue the $1.2 million bank cheque and no competing inference. His Honour did not err in reaching the view he did on this issue. That conclusion was clearly open to him.

80 Second, it is submitted for Parkview that in the absence of evidence of any actual instruction by Fortia (other than the reference in the bank's documents to Fortia's authority being held), it is more likely that BankWest released the money to Parkview (and debited the amount released as a draw down under the facility), as it was entitled to do under its arrangements with Fortia, without any direct instruction from Fortia to do so. However, to argue from that premise that BankWest acted as principal requires one to ignore BankWest's role as Fortia's financier.

81 Insofar as it is submitted that there was no justification for his Honour to infer a "more complicated agency" in relation to the holding of the ANZ bank guarantee, when BankWest had a direct interest as lender in holding the guarantee and was entitled to do so under the Builder Tripartite Deed, it is by no means the case that his Honour inferred a complicated agency relationship at all.

82 BankWest's role in the negotiations for the substitution of the security occurred at a late stage. BankWest's involvement followed lengthy dealings between Parkview and Fortia and an obvious clear reluctance on behalf of BankWest to enter into the discussions (see Blue 310; 328; 332 and 226). The correspondence is consistent with there having been an agreement struck between Fortia and Parkview as to the substitution of the security followed by reference to BankWest for finalisation of the details of the exchange.

83 After its assistance in finalising the arrangements was sought, BankWest, not surprisingly given its role as financier, notified Parkview that the bank guarantee was to be changed to reflect the fact that Fortia (not BankWest) was the favouree and exchange of the bank cheque for the bank guarantee was effected directly with it. That does not, in my view, support the conclusion that BankWest was there acting as a principal in relation to the delivery of the guarantee. It is hardly surprising that the exchange was effected through the offices of the party providing the funds. Nor does the fact that, as between Fortia and BankWest, the guarantee was physically retained by BankWest require the conclusion that it was acting as a principal. It is consistent with BankWest holding the guarantee on behalf of its customer.

84 Mr Parker submits that Parkview was in effect being invited to deal directly with BankWest as the "paymaster", when the bank guarantee was exchanged for a release of part of the retention moneys, and that the relevance is not how the communications in relation to the substitution of the guarantee began but how they ended up. Nevertheless, seen as a whole, the course of communications does not suggest that BankWest was stepping in as principal in relation to the security arrangements.

85 Insofar as Parkview's understanding is relevant to this issue (and I cannot see that it is), Mr Tabet's evidence at Black 58M-Q, is inconsistent with an understanding on the part of Parkview that BankWest was acting as principal in the negotiations in relation to the exchange of the bank guarantee: the discussions were principally with Fortia; there was concern about the delay; and Parkview wanted to facilitate the approval of BankWest to the terms of the guarantee and for that purpose started dealing with BankWest directly.

86 Reliance is next placed by Parkview on the subsequent correspondence in 2010, between the solicitors acting for Parkview and those acting for BankWest, as being inconsistent with BankWest acting solely as agent for Fortia in relation to the holding of the bank guarantee. In particular, weight is placed on the statement by BankWest's solicitors (in response to Parkview's assertion that BankWest had assumed possession of the retention moneys, including the guarantee, under the Builder Tripartite Deed and was holding it on trust) that BankWest had "significant duties to both parties". Such an assertion is said to be consistent only with an acknowledgment that BankWest had assumed the position of trustee.

87 Mr Donaldson raises in essence a pleading point in this regard, pointing to the final version of Parkview's List Statement (at Red 60) and noting that there was no particularisation of the 2010 solicitors' correspondence as supporting the contention that BankWest had assumed the role of trustee of the Retention Monies Trust (nor was this raised in relation to the estoppel basis on which Parkview's claim was brought in the alternative). The List Statement, as amended, based Parkview's claim on the fact that in the period between 2007 and 2009 retentions were deducted by BankWest, not that it had admitted acting as a trustee of the retention moneys.

88 It is not necessary to determine this submission on the pleading point. The 2010 correspondence cannot convert what was done in 2009 to some other arrangement unless it operated in some way as an admission by BankWest against its interest from which it could not resile.

89 For the statement acknowledging that BankWest had "significant duties" to amount to an admission that BankWest had obligations in relation to the guarantee that went any higher than those of a party physically holding the bank guarantee for its client or that went beyond the guarantee to extend to a trust of the notional retention moneys themselves, the admission would in my view have had to have been in far clearer terms.

90 The 2010 correspondence does not contain an unequivocal admission that could be relied upon to hold BankWest to the proposition that it had in 2009 assumed the role of trustee when it took delivery of the bank guarantee. There is simply no way of knowing what was meant by the reference to the "significant duties". It may well be that this should be read in context as limited to a reference to the fact that BankWest could be regarded as in the position of a stakeholder or physical custodian of the guarantee. The fact that the statement was in response to an assertion that BankWest was a trustee having regard to the provisions of the Builder Tripartite Deed does not in my view compel acceptance of Parkview's contention as to the significance of this correspondence.

91 Mr Donaldson submits that, in the absence of any evidence of intent on the part of either Fortia or Parkview that the rights under the bank guarantee were to be assigned (or title thereto conveyed) to BankWest, the proper conclusion is that BankWest merely took possession of the security; and that even if it did so for the purpose of better securing its own position that would not necessarily mean that BankWest had assumed title to the rights created by the guarantee, as trustee or otherwise. I agree.

92 Ground 4 is not made out.

Ground 5 - Trustee de son tort?

93 Parkview submits that, in its dealings with respect to the ANZ bank guarantee and thereafter, BankWest intermeddled with assets of the Retention Monies Trust or acted in a way that was characteristic of it assuming the office of trustee of that trust.

94 It contends that, as a matter of commercial substance, the security it provided (for performance of its contractual obligations) was a "single asset made up of a potentially fluctuating mix of retention money and non-cash security" and that BankWest's action in accepting the ANZ bank guarantee "in exchange for retention moneys" carried with it the implication that BankWest "held or controlled" the retention moneys.

95 The fact that the security under this contract was a "fluctuating" combination of retention money and other securities does not lead to the conclusion that possession of one form of security gave rise to duties as trustee in respect of other assets not then in existence.

96 The submission, in effect, seems to be that BankWest assumed the position of trustee of a then unconstituted trust when it accepted delivery of the bank guarantee and that it then, as a trustee de son tort, became obliged to take steps fully to constitute the trust (by drawing down on the facility to permit the retention moneys to be set aside and become impressed by the trust).

97 There are no doubt many examples where a trustee of a validly constituted trust has an obligation to get in and secure the trust assets (such as a trustee appointed under a will). However, what seems here to be argued is that one can conclude that from acceptance of a delivery of an instrument that was the subject of a trust that there was then an obligation fully to constitute the trust. It was suggested, with force in my opinion, that there is an element of circularity in that reasoning insofar as it presupposes an obligation in relation to a trust over more than the bank guarantee itself. However, what Mr Parker submits is that the obligations of a trustee de son tort may go beyond the administration of trust assets in the trustee de son tort's hands and may extend to getting assets in or dealing with them in a particular way. He emphasises that Parkview's case was that BankWest here became a trustee de son tort by assuming an office (namely, the office contemplated by clause 5.10), and that that office then carried with it the obligations of the trustee (not being limited to property in its hands).

98 Support for that submission is drawn from the test that was applied in In re Barney [1892] 2 Ch 265 at 276 as to the question whether property (over which it was suggested that a trustee de son tort had responsibilities as a result of its intermeddling) was under the control of the trustee de son tort. (Reference was also made to what was said by Professor Austin in Constructive Trusts, Finn (ed), Essays in Equity (1985) Law Book Co. at 207-8, 210). In re Barney, a widow had carried on her deceased husband's business in breach of trust. It was contended that persons who had acted as counter-signatories on the relevant bank account (being persons without whose consent the widow could not draw on that account) were liable as trustees de son tort for the loss sustained in carrying on the business. It was held that they were not as the bank account was not under their control.

99 Insofar as reliance was placed on what was said in In re Barney, Kekewich J accepted that the obligations of a trustee de son tort could extend beyond property actually vested in the trustee de son tort to property that was "so far under his control that he has nothing to do but require that, perhaps by one process, perhaps by another, it should be vested in him", saying at p 276:

I apprehend that when the law says that a man is responsible as a trustee for money under his control, it means money which he can, if he will, put into his own pocket or pay away as he pleases to some one else. That appears to be the test.

100 Mr Parker submits that in the present case BankWest had "control" over the residual (or perhaps better described as notional) retention moneys in that, for practical purposes, it could have exercised its rights (without Fortia's consent) under the Builder Tripartite Deed to draw down from the facility the moneys required to be set aside in accordance with Fortia's obligation under the building contract to set aside or otherwise secure the retention moneys. Reference was made in this regard to BankWest's rights under clause 3.2(a) of the Builder Tripartite Deed, as well as its rights under clause 5.1(g), although the latter were dependent on there being notification of a contractual default and no such notification was expressly given in the present case.

101 A trustee de son tort is one who takes it upon himself or herself to act on behalf of another person by intermeddling with that person's assets or by holding himself or herself out in a manner characteristic of the assumption of the office of trustee. The intermeddler is taken to be in the position of a trustee because he or she was not authorised so to act.

102 Someone acting as a mere agent of a trustee, within the authority afforded to him or her as agent, does not by so doing become a trustee de son tort (Barnes v Addy at 251). Mr Parker emphasises that Parkview has not sought to make a case that BankWest was acting as agent. Rather, its contention is that, given BankWest's knowledge of the contract and the breach by Fortia of its obligations under the contract, and given BankWest's involvement as principal (through the Builder Tripartite Deed and its dealings directly with Parkview), BankWest has attracted liability to itself as principal.

103 The operation of the principles relating to trustee de son tort proceeds on the basis that there is a wrong. As already noted, BankWest's involvement in the substitution of a bank guarantee in respect of part of the amount required to be retained as retention moneys was limited. Mr Donaldson submits, and I agree, that in whatever capacity BankWest received possession of the bank guarantee this did not involve intermeddling in the Retention Moneys Trust. It did no more than hold the guarantee whether or not if BankWest took possession of this instrument in some way to advance its own interests or in the exercise of its rights under the Tripartite Deed.

104 There was in my opinion no error by his Honour in finding that BankWest's involvement indicated nothing more than the provision of agency services. The conduct of BankWest did not involve any intermeddling with any trust property or trust obligation on the part of Fortia. All BankWest relevantly did was to confirm what it required before it would release a bank cheque on behalf of Fortia in exchange for the bank guarantee and then to accept the delivery of and hold the bank cheque again on behalf of its customer. (The fact that its lawyers later said what they did in the 2009 correspondence does not amount to any "intermeddling".)

105 In my opinion, BankWest's conduct in accepting delivery and retaining custody of the bank guarantee did not involve an "intermeddling" in the affairs of any trust with which the security was impressed as a result of clause 5.10 of the contract and did not create a trust in respect of the notional retention moneys. It follows that I consider his Honour was not wrong in concluding that BankWest did not become a trustee de son tort.

106 Ground 5 is not made out.

Ground 6 - Claim based on representations

107 His Honour found that Mr Tabet did not understand the letter from WTP as conveying a representation that BankWest would advance funds sufficient to cover the cost of a project come what may ([80]), referring to the evidence of Mr Tabet to the effect that he had no belief and no basis for any belief that retention moneys were being set aside, and had no belief and no basis for any belief other than that at the time inquiries were made there was sufficient capacity in the facility to complete the project ([81]).

108 The representation or promise now relied upon to found the estoppel was that BankWest had promised to lend the retention moneys to Fortia or to provide the retention moneys to Fortia to be dealt with in accordance with the terms of the contract and then the time came for that to happen. This was pleaded as an implied representation (Red 39-41).

109 Mr Parker points to Mr Tabet's evidence that he understood from the time of provision of the ANZ bank guarantee onwards that BankWest held the retention moneys and would pay those monies to Parkview when Parkview became entitled to them under the building contract (para [26] of his affidavit sworn 3 May 2012) and that he relied upon this understanding by causing Parkview to go ahead with the variations and by not taking any immediate action against Fortia to suspend the contract or pay over the retention monies.

110 In cross-examination, Mr Tabet accepted that the assurances did not cover Fortia's capacity to pay if there were "further unanticipated expenses" (Red 87K-L). Mr Parker accepts that there was some uncertainty as to whether Mr Tabet believed that there was actually a fund set aside containing the retention moneys (T 59.29-47) but relies on Mr Tabet's evidence that "BankWest promised to lend Fortia an amount of money which at that time would be enough to cover the retention" (Red 89Q-R). Mr Parker submits that there was no challenge to Mr Tabet's evidence that, without those assurances, Parkview would not have proceeded as it did.

111 The difficulty with the representation argument is that the letter issued by WTP in my view went no further than a confirmation as to there being sufficient funds within the facility (i.e., within the amount that BankWest had promised to make available to Fortia) to pay for all the variations up to a specified variation and for all the other works including the retention. On its face, this did no more than address the limit of the facility. It did not represent that funds would necessarily be made available to Parkview. I read this letter as saying no more than that there was a facility out of which there were sufficient funds left available to be drawn down by Fortia which would be sufficient to cover the retention moneys.

112 That is consistent with the exchange at Black 58X being read as demonstrating that Mr Tabet understood that BankWest had promised Fortia that it would lend Fortia the amount in question. Any such representation was correct in that BankWest had promised to lend Fortia an amount of money and at that time the facility limit remained sufficient to cover the retention.

113 Mr Parker emphasises the involvement of BankWest as a party to these arrangements through the tripartite deed; not simply providing finance for Fortia to comply with its obligations but dealing directly with Parkview and giving it an assurance as to there being an amount of money that the bank had promised to make available to its customer for the remainder of the contract. It is submitted that when Parkview sought to have BankWest set aside the moneys (in April and June 2010) no qualification to the representations was relevantly applicable, since Parkview's works were complete and no "further unanticipated expenses" had arisen, and that it would be unconscientious to allow BankWest to depart from the expectation created by its representations and that BankWest should be estopped from denying that it is trustee of the retention moneys and thereby frustrating that expectation.

114 The correspondence does not in my view support a finding that there was a representation by BankWest that was tantamount to a promise by it to Parkview that moneys would be made available to Parkview (out of the Fortia facility) when the time came for them to be made available. Mr Donaldson submits, and I agree, that the only assurances that were given in the relevant correspondence were as to the current level of the facility (namely that if the project remained within budget then Fortia would have or be likely to have sufficient funds to pay for the building project) and that this was accurate. His Honour did not err in rejecting the alternative claim based on an estoppel of this kind.

115 Ground 6 is not made out.

Conclusion

116 None of the bases said to give rise to the conclusion that BankWest should account for the residual (or notional) retention moneys was made out. No error has been shown on the part of his Honour in that regard. Accordingly, the appeal should be dismissed with costs.

117 LEEMING JA: I agree with the reasons and conclusions of Ward JA, but wish to add the following. Either Fortia held no property on trust prior to its being wound up, or else it did. Parkview's submissions addressed both alternatives, but either way they should be rejected.

118 If Fortia held no property on trust, then the most favourable position for Parkview was that clause 5.10 gave rise to an enforceable obligation on the part of Fortia to constitute a trust, of which Fortia was in breach.

119 On that hypothesis, Parkview relied on the maxim that equity regards as done that which ought to be done, in order to convert Fortia's breach of clause 5.10 into a property right. Parkview's reliance on the maxim is misplaced. That maxim (no differently from other maxims of equity) is not a specific rule or principle of law. Instead it is, as Mason CJ and McHugh J said, a summary statement of a broad theme which underlies equitable concepts and principles: Corin v Patton (1990) 169 CLR 540 at 557. It operates at a higher level of generality from a rule or principle of law forming part of a legal argument. When James Edelman (provocatively) advocated the abolition of this and other equitable maxims (in ch 5 of the 32nd edition of Snell's Equity (Sweet & Maxwell, 2010)), his first complaint was that they could be used as a substitute for transparent reasoning. Parkview's submission is an example of this. It is wrong to invoke the maxim as the basis for a legal conclusion that a party in breach of a promise is to be regarded in equity as though it had performed its promise; a more specific rule or principle is needed.

120 On the hypothesis that clause 5.10 was a promise made for valuable consideration to create a trust, then had retention monies been drawn down by Fortia, a completely constituted trust would have arisen: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd [2000] HCA 25; 202 CLR 588 at [29]. It is at least arguable that even if those monies had been paid to a general bank account, Parkview as beneficiary would enjoy a tracing remedy: Associated Alloys at [31]. Once a trust has been constituted, the beneficiaries enjoy proprietary rights even when there has been a breach of trust. The maxim was invoked in Legal Services Board v Gillespie-Jones [2013] HCA 35; 87 ALJR 985 at [123] to characterise money paid to a solicitor on account of defence costs, which the solicitor misappropriated.

121 However, as the High Court said in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 at [52], "[e]quity often regards as done that which ought to be done, but not necessarily that which merely could be done". In CPT Custodian, the fact that an existing trust could have been brought to an end at a particular time, but in fact had not been, was held to be something which did not engage the maxim. The position is similar in the present case.

122 Where as here there is not a completely constituted trust, the relevant equitable principle is much narrower than Parkview submitted. As was said in Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 252, the occasions where equity will treat an agreement to do something (such as the grant of a lease as in Chan or the sale of land as in KLDE Pty Ltd v Commissioner of Stamp Duties (Q) (1984) 155 CLR 288 at 296-297) as if it had been performed "rests upon the specific enforceability of the agreement". If the agreement is not specifically enforceable, the maxim can have no application. In Central Trust and Safe Deposit Company v Snider [1916] 1 AC 266 at 272, in a passage referred to with approval in Chan at 251, Lord Parker of Waddington in giving the advice of the Judicial Committee of the Privy Council said of a promise given for valuable consideration to settle existing property on trust, that:

"If for some reason equity would not enforce specific performance, or if the right to specific performance has been lost by the subsequent conduct of the party in whose favour specific performance might originally have been granted, the vendor or covenantor either never was, or ceased to be, a trustee in any sense at all."

123 There is no need to pause to say anything about the meaning of "specific performance" in this context (see Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; 217 CLR 315 at [56]-[57]). Even on the widest view of "specific enforceability", it is plain that the promise was not specifically enforceable once external management was appointed to Fortia. Receivers were appointed on 13 August 2010 and Fortia was wound up on 20 September 2010.

124 The foregoing supports the reasoning of Scott LJ in comparable circumstances in Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) [1992] BCLC 350 at 359, where the comparable clause was construed to require the setting aside as a separate trust fund the various amounts retained, which was not done. Scott LJ dealt expressly with the case where the employer was insolvent, whether or not in liquidation. His Lordship said:

"there is no reason at all for treating the employer as having set aside the retention fund when it has not in fact done so and no reason for treating the contractor as other than an unsecured creditor."

125 The present case is no different from that described by Campbell J in White v Shortall [2006] NSWSC 1379; 68 NSWLR 650 at [187]:

"I can readily accept that there was no trust property at all, because the fund had not been constituted. It was not as though there was even a specific fund of money, part of which was said to be held on trust."

126 The alternative way in which Parkview advanced its case relied upon the Bank assuming the office of trustee. The premise of that submission was that there was trust property in the Bank's "control", which word was deployed to pick up the language in In re Barney [1892] 2 Ch 265.

127 Parkview advanced two formulations in support of this alternative case. The first was that the Bank assumed the office of trustee when it obtained possession of the guarantee, and thereafter became obliged to get in the other monies and hold them on trust. Parkview gave emphasis in its submissions to the direct dealings between it and the Bank between 15 and 30 July 2009. However, there had been negotiations between Parkview and Fortia from December 2008. During those negotiations, the terms of the bank guarantee (save for the favouree and the description of the contract) were finalised. Those negotiations concluded with Parkview's letter of 2 July 2009, "since all are now okay with the bank guarantee...". The precise terms by which the Bank maintained possession of the ANZ guarantee were a matter between it and its customer Fortia, and were not in evidence. But, as Ward JA has said, there is no reason to conclude that the Bank was a trustee, or was to be treated as a trustee, of the bank guarantee, and even if that be wrong, that would not give rise to an obligation to take steps to draw down the funds to be held on the Retention Moneys trust.

128 The second formulation was that Fortia had the right to draw down the balance of its facility, that it could have declared itself a trustee of that chose in action, that the Bank was in the position of control of those monies, in the sense that it could make those monies available, and was therefore to be regarded as a trustee de son tort. The argument is subtle; it was expressed by Mr Parker SC as follows:

"The other way in which we put it is that it is possible to see that as an asset ... it's a chose in action where Fortia has the right to draw it down. Now, there's no difficulty with being a trustee of a promise. Fortia could have declared itself trustee of that right, and the trustee would have been required to draw those monies down. If BankWest has in effect assumed the position of being the trustee or looking after the security, we would say that BankWest was in a position of control over those monies, 'control' in the sense that it was able to make those monies available."

129 The submission should be rejected. There is no doubt that a contractual right can be held on trust. As Lord Shaw said in Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108 at 124, "There can be a trust of a chattel or of a chose in action, or of a right or obligation under an ordinary legal contract, just as much as a trust of land."

130 There is nothing in the evidence to suggest that Fortia did in fact declare itself, and little to suggest that it should be taken to have declared itself, a trustee of the right, although it may be acknowledged that a trust may be inferred in circumstances stated in Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-619 and in Legal Services Board v Gillespie-Jones at [118]-[119]. But the decisive point is that even if it had done so, the right Fortia had to draw down funds was a right against the Bank. In a loose sense, it might be said that the Bank "controlled" the extent to which funds were made available to Fortia pursuant to the facility. But that is very different from the use of "control" invoked by Parkview in order to render the Bank a trustee de son tort. On Parkview's argument, the property held on trust is the chose in action being the Bank's contractual promise to Fortia to make funds available. The Bank did not have "control" in the relevant sense over that chose in action; to the contrary, the Bank was the person against whom that chose in action could be vindicated.

131 In other words, it is trite that the benefit of a promise may be held on trust. But the promisor is not to be regarded as "controlling" that property (namely the promise) and thereby becoming a trustee merely because the promisor is the person bound to perform it. That in substance is the result obtaining from accepting Parkview's argument.

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Decision last updated: 20 May 2020