Re Australian Elizabethan Theatre Trust

30 FCR 491
102 ALR 681

(Judgment by: Gummow)

Re Australian Elizabethan Theatre Trust

Court:
Federal Court of Australia - General Division

Judge:
Gummow J

Subject References:
Trusts
Gifts to Australian Elizabethan Theatre Trust
Attracting deduction under s 78(1)(a)(viii) of the Income Tax Assessment Act 1936
Gifts stated to be 'unconditional' but with 'preference' for 'allocation' to particular arts organisation
Moneys banked in overdrawn operating account
No 'allocation'yet made
Provisional liquidator appointed
Whether express or constructive trust
Nature of Quistclose trust

Legislative References:
Income Tax Assessment Act 1936 - section 78(1)(a)(viii); section 78(1)(a)(xiii)
Corporations Law - section 475(7); section 479; section 266
Trade practices Act 1974 - section 52
Companies Act 1947 (UK) - section 95
Bankruptcy Act 1966 (Cth) - section 122

Case References:
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd - 165 CLR 107; 80 ALR 574
Walker v Corboy - 19 NSWLR 382
Barclays Bank Ltd v Quistclose Investments Ltd - [1970] 1 AC 567
Re Associated Securities Ltd and the Companies Act - [1981] 1 NSWLR 742
Re Multi Guarantee Co Ltd - [1987] BCLC 257
Stephens Travel Service International Pty Ltd v Qantas Airways Ltd - 13 NSWLR 331
Muschinski v Dodds - 160 CLR 583; 62 ALR 429
Baumgartner v Baumgartner - 164 CLR 137; 76 ALR 75
FCT v McPhail - 117 CLR 111
Bray v FCT - 19 ALR 309; 140 CLR 560; (1978) 78 ATC 4179; (1978) 8 ATR 569
Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) - 141 CLR 335; 22 ALR 1
Rose v Rose - 7 NSWLR 679
Re Veli; Ex parte AE Developments Pty Ltd v Scott - 18 FCR 204
Re Miles; Ex parte National Australia Bank Ltd v Official Reciever in Bankruptcy - 20 FCR 194; 85 ALR 216
Ausintel Investments Austrlia Pty Ltd v Lam - 19 NSWLR 637
General Communications Ltd v Development finance Corp of New Zealand Ltd - [1990] 3 NZLR 406
Re Rolls Razor Ltd (No 2) - [1970] 1 AC 576; [1967] 1 Ch 910; [1967] 1 Ch 912; [1968] 1 Ch 540; [1967] 1 Ch 930
Commissioner for Stamp Duties (NSW) v Perpetual Trustee Co Ltd - [1943] 1 AC 425; 64 CLR 492
Vandervell's Trusts (No 2) - [1974] 1 Ch 269
Carreras Rothmans Ltd v Freeman Matthews Treasure Ltd - [1985] 1 Ch 207
Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) - 1 CLR 353
Tidex v Trustees Executors and Agency Co Ltd - [1971] 2 NSWLR 453
Re Wall; Ex Parte Official Reciever v Kemmis - 25 ALR 615
Trident General Insurance Co Ltd v Mc Niece Bros Pty Ltd - 80 ALR 574; 165 CLR 107
Bahr v Nicolay (No 2) - 164 CLR 604; 78 ALR 1
Countess of Bective v FCT - 47 CLR 417
Perpetual Trustee Co Ltd v Godsall - [1979] 2 NSWLR 785
Re EVTR - [1987] BCLC 646
Dean v Cole - 30 CLR 1
Barnes v Addy - [1874] 9 Ch App 244
British America Elevator Co Ltd v Bank of British North America - [1919] 1 AC 658
Australia and New Zealand Banking Group Ltd v Westpac Banking Corp - 164 CLR 662; 78 ALR 157
Lipkin Gorman v Karpnale Ltd - [1991] 3 WLR 10
Le Compte v Public Trustee - [1983] 2 NSWLR 109
Re Crest Realty Pty Ltd (in liq) and the Companies Act - [1977] 1 NSWLR 664
Re Sharpe (a bankrupt); Ex parte Trustee of the Bankrupt v Sharpe - [1980] 1 All ER 198

Suggested reading:


Halbury's laws of England, 4th ed Vol 20
"The Romalpa Clause and the Quistclose Trust", ed "Equity and Commercial Relationships"
"The Quistclose Trust: Who Can Enforce it?"
"Different Views on the Scope of the Quistclose Analysis: English and Antipodean Insights"
The Law of Trusts, 4th ed 1987 Hearing date: 10, 11 July 1991
Judgment date: 2 August 1991

Sydney


Judgment by:
Gummow

The Australian Elizabethan Theatre Trust and the tax deductibility program

The Australian Elizabethan Theatre Trust (AETT) was incorporated on 29 September 1954 under the Companies Ordinance 1931-49 (ACT). It is a company limited by guarantee, and was established to commemorate the visit to this country in 1954 of HM the Queen and HRH the Duke of Edinburgh. The AETT had the object, inter alia, of promoting in Australia drama, opera, ballet and any other art of the theatre. In 1980, the objects of the AETT were expanded so as to extend to the promotion and fostering of all the arts in Australia. The powers and duties of the board of directors include, as provided by Art 52(i), the power:


To make gifts and donations of cash to such person or persons, bodies of persons, Company or Companies, Corporation or Corporations as the Directors may think fit, and to receive gifts and donations of cash or real or personal property from such person or persons, bodies of persons, Company or Companies, Corporation or Corporations as the Directors may think fit to accept.

At all material times, s 78(1)(a)(xiii) of the Income Tax Assessment Act 1936 (Cth) (the Tax Act) has provided for certain gifts to the AETT to be allowable deductions. The gifts in question are gifts made by the taxpayer in the year of income, not being testamentary gifts, of the value of $2 and upwards of money or of property other than money which was purchased by the taxpayer within 12 months immediately preceding the making of the gift. The section makes provision to like effect in respect of a number of other institutions, but a number of well known arts bodies are not given this special treatment. Hence, as will become apparent, the utility to donors of deductible gifts to the AETT which would or might be passed on by the AETT to one or more of these other bodies.

In 1972, the AETT had discussions with the Commissioner of Taxation concerning an appeal then being made by the AETT for funds to support opera in this country. In that year, the Commissioner ruled that he would accept as deductible under s 78(1)(a)(xiii) of the Tax Act donations received by the AETT in support of the performing arts only where they were received by the AETT unconditionally. However, the Commissioner accepted that where the donor indicated a "preference", the "wishes" of the donor might be taken into account by the AETT when the directors, pursuant to Art 52(i), made grants to various bodies associated with the performing arts. Further, in FCT v McPhail (1968) 117 CLR 111 at 116, Owen J had held that to constitute a "gift" within the meaning of s 78(1)(a) of the Tax Act, it must appear that the property transferred was transferred voluntarily and not as the result of a contractual obligation to transfer it and that no advantage of a material character was received by the transferor by way of return. The importance of that decision was stressed by a further ruling issued by the Commissioner on 13 August 1987. (I should add that counsel also referred me to Bray v FCT (1978) 19 ALR 309; 140 CLR 560 at 564-5, 574-5, but what is there said throws little light upon the issues in the present case.)

The evidence indicates that at all material times the AETT has endeavoured so to act as to encourage the making of donations to it which would attract the deduction to the donor provided for in s 78(1)(a)(xiii) of the Tax Act. A practice arose whereby gifts would be made to the AETT with a request by the donor that the gift be allocated by the AETT to an arts organisation indicated by the donor. To that end, the AETT approved over the years a large number of bodies as what it described as "preferred arts organisations". In giving approval to such a body, the AETT required (in accordance with the stipulations of the Commissioner) that the constituent documents of the body provide that its funds be applicable only for or in support of one or more of the arts, and that on dissolution the assets of the organisation not be distributed to members but be passed over to another such organisation. On 1 March 1989, the Commissioner reaffirmed to the AETT that:


To constitute a gift within the meaning of s 78(1)(a) of the [Tax Act], it must appear that the property was transferred voluntarily and no advantage of a material character was received by the transferor by way of return. 'Preference' donations are tax deductible provided the AETT receives them in its own right and has an unfettered discretion whether to apply money in accordance with the preference expressed by the donor. Such a payment would not be accepted as a gift for income tax purposes if it was apparent that the AETT had guaranteed or promised that the donor's preference would be honoured. The payment would not be an unfettered gift.

As late as 20 March 1991, the AETT received a ruling by the Commissioner as to what changes needed to be made by the Australian Chamber Orchestra in its advertising if certain donations to the AETT were to be deductible under s 78(1)(a)(xiii).

The AETT identified the activities I have described as its "tax deductibility program". In 1976, it "processed" about $95,000 in donations, and the program grew to large proportions. Under the above heading, the following appears in the 1989 Annual Report of the AETT:


This service has enabled over 700 arts bodies to solicit donations from individuals and corporations by offering tax deductibility when the donations are processed through the trust.

The size of donations processed in 1989 fell by 4 per cent from the all time high in 1988, the bicentennial year. However, at $6,330,990, this remains a significant part of arts funding.

The evidence includes examples of forms used for the making of gifts to the AETT, in respect of which a deduction would be claimed by the donor pursuant to s 78(1)(a)(xiii) of the Tax Act. One such form, issued by the AETT, is headed, in large print, "Tax Deductibility Program" and states that a donation of $2 or more given unconditionally to the AETT is tax deductible. The form (the AETT standard form) is drafted as a statement addressed to the AETT by the donor and provides for the stipulation of a sum as "representing my donation to the Australian Elizabethan Theatre Trust". It goes on to state:


This donation is given unconditionally, however, it would be appreciated if, when considering your appropriations to the performing companies, preference in the allocation of this donation could be given to...

The evidence also includes material whereby gifts were solicited by such bodies as the Australian Opera (the Opera) and the Victoria State Opera. The form used by the Opera is headed "Tax Deductibility for your Contribution" and states:


The Australian Opera welcomes contributions from corporations of $1000 and over. Support given to the Australian Opera is tax deductible if it falls into either of the following categories:

Promotions and Advertising expenditure: Support may be claimed as a deduction under s 51(1) of the Income Tax Act, 'expenditure necessarily incurred for the production of assessable income'.

Donations: Donations made unconditionally through the Australian Elizabethan Theatre Trust are allowable deductions in terms of s 78(1)(a)(xiii) of the Income Tax Act. No benefit can accrue to the donor other than acknowledgment in programs.

Donations through the Trust must be accompanied by the form provided.

The form in question is addressed to the general manager of the AETT and includes words taken from the AETT standard form: "This donation is given unconditionally. However, it would be appreciated if, when considering your appropriations to the performing companies, preference in the allocation of this donation could be given to the Australian Opera."

The present proceeding

By order made 28 March 1991, this court appointed the applicant as provisional liquidator of the AETT. The appointment was made on the application of the AETT. The provisional liquidator is considering propounding a scheme of arrangement between the AETT and its creditors. The Report as to Affairs of the AETT submitted pursuant to s 475(7) of the Corporations Law on 19 April 1991 shows, as at 28 March 1991, total realisable assets of $2,115,650, and preferential claims of $3,625,693 (being a deficiency to preferential creditors of $1,510,043); unsecured creditors are reported at $815,114, leaving a total deficiency of $2,325,157.

The AETT had conducted at least four accounts at the Goulburn Street, Sydney, branch of the Commonwealth Bank of Australia (the bank). One of them was styled "Australian Elizabethan Trust Trustee Account", but the moneys in question in this proceeding were not paid into that account. The bank had been banker to the AETT since its incorporation. It is the principal preferential creditor shown in the Report as to Affairs, and holds, inter alia, a charge over the assets and undertaking of the AETT.

The Opera, the Australian Ballet Foundation (the Ballet) and the Victorian Tapestry Workshop (the Workshop) are all incorporated bodies. The Opera and the Ballet are well known throughout the country. The Workshop is a company incorporated in the State of Victoria and limited by guarantee. It has as one of its primary objects the encouragement of the production and marketing of tapestries, and the fostering of interest in the community in tapestry as an art form.

In the period between 14 February 1991 and 7 March 1991, the AETT had banked moneys totalling $28,407 received from donors who, in accordance with the procedures I have described above, had indicated a preference for appropriation of their gift in favour of the Ballet. These moneys had been deposited by the AETT with the bank in its account No 2013 0011 0152. This was a cheque account used as the operating account of the AETT. On 28 March 1991, when the provisional liquidator was appointed, that account stood in debit in the sum of $929,856.05. At all material prior times the account had been in overdraft, in a fluctuating amount. The practice was for moneys comprising these donations, together with other moneys received by the AETT in respect of its activities, to be banked using deposit slips which did not differentiate between these donations and other moneys. These included receipts from the AETT's commercial activities and gifts outside the tax deductibility program. All went into the operating account. A cheque in the sum of $500 from a donor indicating a wish for preference to be given to the Ballet had been received but not banked before 28 March. It was later placed in an account operated by the provisional liquidator. In respect of none of these moneys had there been, before the appointment of the provisional liquidator, any appropriation or purported appropriation by the AETT in favour of the Ballet or any other body.

A similar situation applied in respect of the Opera, although larger sums were involved. Between 18 February 1991 and 11 March 1991, a total of $53,467 was paid by the AETT into the operating account. The value of cheques held by the AETT and later placed in the provisional liquidator's account was $22,725, giving a total of "unallocated" gifts of $76,192.

The Workshop is in a somewhat different position. On 25 January 1991, the Elisabeth Murdoch Trust drew a cheque for $100,000 upon its account with National Australia Bank Ltd, in favour of the AETT. The cheque was accompanied by a completed AETT standard form stating a "preference" for allocation to the Workshop. On 29 January 1991, the AETT wrote to the donor enclosing a receipt, referring to the provisions for a deduction under s 78 of the Tax Act, and also stating that the AETT might be assured that its preference "will be taken into account" when the board of the AETT made its appropriations to assist the arts in Australia. On 22 February 1991, the administration manager of the AETT wrote to the director of the Workshop stating:


We write to advise that the board of the Trust has approved payment of $100,000 being donations received and made available to the Victorian Tapestry Workshop.

Accordingly, our cheque for $99,365 is enclosed, representing the approved payment less the levy of $635 which is used to partially offset the costs directly associated with the donations processing scheme operated by the Trust. Please note that this levy may be adjusted should it prove to be in excess of the direct costs incurred, or should funding for the scheme be forthcoming from another source.

It will be necessary to refer later in these reasons and in more detail to the "levy" in respect of the "donations processing scheme" operated by the AETT. The point of immediate importance is that payment of the cheque was stopped before it had been honoured. The AETT took this course because it became aware that the memorandum and articles of association of the Workshop had not been altered so as to comply with guidelines approved by the Commissioner, something which would be necessary for it to become a preferred arts organisation in the sense I have earlier described. Steps then were taken by the Workshop to make the necessary changes to its constituent documents, but the appointment of the provisional liquidator intervened before any decision was taken by the AETT to issue a fresh cheque in favour of the Workshop. No question arises in the present proceeding as to any action in damages which the Workshop might have upon the cheque enclosed with the AETT's letter of 22 February 1991.

In the Report as to Affairs, the provisional liquidator has included in the $815,114 for unsecured creditors the sum of $386,274 for donations received by the AETT but not "allocated" to preferred arts organisations before his appointment. Further, the value of cheques held by the AETT and later banked by the provisional liquidator amounted to $67,038. These sums have been included in his statement of the total deficiency of $2,325,157. This judgment concerns claims as to the existence or otherwise of trusts in respect of the "unallocated" donations where a preference had been expressed by the donor, in the manner I have described, in favour of the Opera, the Ballet or the Workshop.

The provisional liquidator seeks a declaration that the moneys I have described received by the AETT pursuant to a donation on a form in which the donor stated a preference that such donation be allocated by way of grant to the Opera, the Ballet or the Workshop, did not constitute moneys held by the AETT upon trust for those parties or any of them. The bank supports the making of that declaration.

The three arts organisations seek relief to contrary effect, but in terms that are somewhat lacking in clarity. The nature of the relief sought was further explained in their submissions. They seek declarations that, in the events that have happened, the AETT and the bank hold respectively the sum of $76,192 for the Opera, $28,907 for the Ballet and $100,000 for the Workshop, these moneys being held on express trust or constructive trust. The constructive trust binding the AETT is said to have arisen upon receipt of the payments or the making by the AETT of an "allocation" in favour of the relevant preferred arts organisation, and the terms of that trust are said to provide for payment to that organisation. The three organisations also seek a declaration that if for any reason, in the events which have happened, the AETT is unable to pay any of the three sums in question, as sought in the earlier declaration, the AETT and the bank hold that sum on a resulting trust for the respective donors. Implicit in this approach to the matter is the contention that when the bank received from the AETT payments representing the donations I have described and applied them in reduction of the overdraft in the operating account, it dealt with trust moneys and remains accountable in respect of them to the Opera, the Ballet and the Workshop.

On 11 July 1991, I ordered, pursuant to O 29 of the rules, that the issues as to which, if any, of the above declarations should be made be tried separately. However, it should be noted that the issues as so isolated did not embrace certain other issues. I have mentioned the action the Workshop might have upon the cheque. Other issues are whether, even if there is no proprietary claim in respect of the relevant unallocated donations, nevertheless (i) the donors have a money claim against the AETT for recovery of their gifts (with or without an adjustment in respect of any income tax deductions already allowed in respect of the gifts), thereby qualifying them as unsecured creditors as mentioned in the Report as to Affairs (cf Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (1978) 141 CLR 335 at 349-50; 22 ALR 1), or (ii) the preferred arts organisations have money claims against the AETT in respect of unallocated donations where the "preference" indicated by a donor identified the organisation in question, thereby qualifying the organisation as an unsecured creditor of the AETT. Those questions remain open for subsequent decision, if need be. I express no views upon those questions. I should also add that counsel for the three arts organisations outlined a claim of contravention of s 52 of the Trade Practices Act 1974 (Cth) (the TP Act) against the AETT and the bank. He sought to introduce this claim only in opening at the hearing and I indicated that the trial of any such issue would have to be held over. However, certain evidence was admitted on the footing that, as between the parties concerned, it could be read at any trial of the s 52 claim.

The making of one or other of the declarations sought will have the effect of declaring the proprietary rights of the immediate parties rather than merely leaving the provisional liquidator in the position where he has received no more than judicial advice given on an application under s 479 of the Corporations Law, not in inter partes litigation. But as I have said, in the period before the appointment of the provisional liquidator, the AETT had received (but not "allocated") other donations under the tax deductibility program with an expression of preference for allocation, in the sense I have described, to organisations other than the Ballet, the Opera and the Workshop. However, only the three preferred arts organisations I have mentioned are parties to the present proceeding. I am conscious also that no representative order has been made in respect of donors to the AETT. However, the practical effect of the declarations I will make and reasons for making them will be to assist the provisional liquidator to decide what is to be done in other cases. I should add that directions were given, and complied with, for the notification of the present proceeding to be given to a number of other preferred arts organisations and donors, together with certain unsecured creditors. But the only appearances were by those who have become parties to the present proceeding. However, Mr Jack Kennedy, who swore an affidavit filed for the Workshop, is both a director of the Workshop and a trustee of the Elisabeth Murdoch Trust, a donor. As will appear, the bank, in the past, has been a donor.

The first submission of the Opera, the Ballet and the Workshop was that, before the appointment of the provisional liquidator, each had become a beneficiary of a fully constituted express trust of the respective sums I have mentioned, and that in so far as moneys had been paid by the AETT into its operating account with the bank those moneys nevertheless were earmarked as trust moneys and the bank took with notice of those trusts. On this footing, there are thus two questions, the first whether express trusts arose and the second, if so, whether the bank took subject to those trusts.

Express trust and "purpose" trust

I turn to consider the first question. It is plain that conditions precedent or subsequent may be attached to a gift: Halsbury's Laws of England, 4th ed, vol 20, pp 29-32. Property may also be transferred without consideration to be held by the transferee upon trust: Halsbury pp 23-4. In neither case is the gift unfettered. But in present case it is to be observed that the donations were expressed by the donors as being given "unconditionally" to the AETT. There was also a statement that the donor would appreciate a particular "preference" being given by the AETT in its allocation of the donation. But the system which had operated for some years had been posited upon the obtaining by donors of the deduction provided for in s 78(1)(a)(xiii) of the Tax Act, and therefore, in a practical sense, upon observance of rulings given from time to time by the Commissioner as to what he regarded as requisite for the obtaining of such a deduction. It was not for nothing that the AETT standard form was headed in bold letters "Tax Deductibility Program". The essence of the attitude consistently taken by the Commissioner was that, in order to qualify, a donation must be "unconditional" and "unfettered ".

Further, the donations were not received on terms that they be earmarked by the AETT and, for example, kept separate from its other funds and placed in an account kept for the particular purpose. Nor, in practice, did the AETT segregate the donations by placing them in a separate bank account. This is a significant factor tending against the conclusion that a trust arose: see Re Associated Securities Ltd and the Companies Act [1981] 1 NSWLR 742 at 749; Re Multi Guarantee Co Ltd [1987] BCLC 257 at 266; Walker v Corboy (1990) 19 NSWLR 382 at 385, 389, 397-8. What was done was to show in the balance sheets of the AETT as "Current Liabilities", "donations received in advance". In a note to the accounts, the accounting method was described as follows:


Donations received for the support of activities carried out in the financial period are included as income in the profit and loss account whereas donations received in support of future activities are deferred until such time as expended.

Gifts under the tax deductibility program which had been received by the AETT but not "processed" and "allocated" were included (with other moneys) as "donations received in advance".

There was discussion in submissions of the conclusions to be drawn from Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. Recent Australasian decisions, in which the House of Lords decision is considered and applied, include Re Associated Securities Ltd and the Companies Act; Rose v Rose (1986) 7 NSWLR 679 Re Veli; Ex parte AE Developments Pty Ltd v Scott (1988) 18 FCR 204; Re Miles; Ex parte National Australia Bank Ltd v Official Receiver in Bankruptcy (1988) 20 FCR 194; 85 ALR 216 Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637 and General Communications Ltd v Development Finance Corp of New Zealand Ltd [1990] 3 NZLR 406, a decision of the New Zealand Court of Appeal. Reference may also be made to the extra-judicial writings of Mr Justice Priestley, "The Romalpa Clause and the Quistclose Trust", Ch 8 in Finn, ed, Equity and Commercial Relationships, and of Sir Peter Millett, "The Quistclose Trust: Who Can Enforce It?" (1985) 101 LQR 269.

It will be recalled that in Quistclose, as part of its endeavours to deal with its acute financial difficulties, Rolls Razor had borrowed money from Quistclose to enable payment of a dividend which Rolls Razor had declared on 2 July. The directors of Rolls Razor contemplated payment of the dividend on 24 July. The declaration of the dividend had given rise to a debt owed by Rolls Razor to its shareholders. As Lord Wilberforce put it, the "mutual intention" of Quistclose and Rolls Razor and "the essence of their bargain" was that the sum advanced should not become part of the assets of Rolls Razor but should be used exclusively for payment of a particular class of creditors, namely those entitled to the dividend: Re Rolls Razor Ltd (No 2) [1970] AC 576 at 580. The liquidation of Rolls Razor supervened. The directors resolved on 17 July to put the company into voluntary liquidation and an effective resolution for liquidation was passed on 27 August. The dividend could not then have been paid since the shareholders had now been postponed to ordinary creditors. The cheque drawn by Quistclose in favour of Rolls Razor and representing the moneys borrowed by Rolls Razor had been paid into a special account with Barclays Bank Ltd. The bank had been informed by Rolls Razor that the money in the account was to be used only for the purpose of meeting the dividend. After the company went into liquidation, the bank claimed to set-off the sum in the dividend account against other indebtedness to it of Rolls Razor. Three issues arose: (a) whether the arrangement between Quistclose and Rolls Razor produced the result that Rolls Razor was a trustee in respect of the money advanced to it by Quistclose; (b) if so, whether it now being impossible to pay the dividend, the money was part of the free assets of Rolls Razor and Quistclose was left merely as a general creditor in respect of the amount lent, and (c) if Rolls Razor had been constituted a trustee and remained such even after the commencement of the liquidation, whether the rights of Rolls Razor against the bank in respect of the credit in the special account were held on trust for Quistclose, and whether the bank had notice of that trust such that it could not now effect a set-off.

Before Plowman J [1967] Ch 910, the parties to the action were Quistclose as plaintiff, Rolls Razor as first defendant and Barclays Bank as second defendant. There was a third defendant representative of the shareholders, but the third defendant played no active part in the proceeding: [1967] Ch at 912. The liquidator of Rolls Razor opposed the claim of Quistclose on the footing that the bank was allowed the set- off it sought to make, the debt of Rolls Razor to the bank would accordingly be decreased.

Plowman J was prepared to assume issue (a) in favour of Quistclose, but held against it on issue (b) and therefore did not deal with issue (c). An appeal to the Court of Appeal was allowed: [1968] Ch 540. Issues (a) and (b) were decided in favour of Quistclose, but as to issue (c) it was held that the bank on the facts had taken the cheque from Rolls Razor with knowledge of the circumstances which made the money represented by the cheque in law trust money, so that the bank could not effect a set-off. That decision was affirmed by the House of Lords. The gravamen of Plowman J's decision had been that since Rolls Razor had had a contractual obligation to repay the loan to Quistclose, there was no need to find a trust, his Lordship saying ([1967] Ch at 930) that he did not see why, if a lender pays money to a borrower for a specific purpose which fails, the borrower's contractual obligation to repay the money should have engrafted upon it some additional equitable obligation.

It is that proposition which the Court of Appeal was particularly concerned to refute. This then made it necessary to consider the position of the bank, issue (c). Reference was made in the Court of Appeal (per Sachs LJ, supra, at 567) and in argument of successful counsel before the House of Lords ([1970] AC at 574) to the undoubted proposition that a resulting trust in favour of the settlor arises as to that part of the beneficial interest of the property in question which has not been disposed of by the express trust created by the settlement. Authority for this basic proposition was found in the citation of Commissioner for Stamp Duties (NSW) v Perpetual Trustee Co Ltd [1943] AC 425 at 441, a passage in which their Lordships had spoken to similar effect as had the High Court in the same case, (1941) 64 CLR 492 at 507, 511, 513. The outcome of the Vandervell litigation is a celebrated illustration of that proposition: see Re Vandervell's Trusts (No 2) [1974] Ch 269.

However, in the House of Lords, Lord Wilberforce said (supra, at 580, 582) that a necessary consequence of the mutual intention of Quistclose and Rolls Razor to create arrangements which gave rise to a "primary" trust in favour of those entitled to the dividend was that if the dividend could not be paid for any reason, the money, as a "secondary" trust, was to be returned to Quistclose; the intention was clear to create the secondary trust for the benefit of the lender, to arise if the primary trust, to pay the dividend, could not be carried out. This characterisation of what occurred is indicative of an express trust with two limbs rather than an express trust in favour of the shareholders and a resulting trust in favour of Quistclose which arose by reason of an incomplete disposition by Quistclose of the whole of its interest in the money lent to Rolls Razor. But on either characterisation, Quistclose had a beneficial interest (although not at all relevant times an exclusive beneficial interest) in the money in question. Thus, it was not merely in the position of a lender with the benefit of a promise to repay. Nor was Quistclose a settlor who had fully settled a fund upon other parties and did so not retain for itself a beneficial interest sufficient for it to ensure performance of the trust.

Of course, the effect of the transaction, on either footing, was that the only benefit Rolls Razor could obtain from the loan would be that received from the use of the funds lent to discharge the particular indebtedness of Rolls Razor to the shareholders in respect of the dividend. The suggestion has been made by Professor Finn (as set out in footnote 58 to Mr Justice Priestley's paper) that in substance the trust was a security device operating for the benefit of the lender ("borrower" appears to be a mis-type); the device safeguarded its position vis-a-vis the other creditors of the financially embattled borrower, unless and until the money was applied by the borrower in the authorised manner, by payment of the dividend. Sir Peter Millett makes a related point in his article (supra, at 290-1). Hence, perhaps, the force in the caution by counsel for the bank in address to the House (supra, at 572) that if Quistclose succeeded (as proved to be the case) there would be revealed a gap in the protection given general creditors by s 95 of the Companies Act 1947 (UK), which provided that unregistered charges were void against any liquidator or creditor (cf Corporations Law, s 266). As Mr Justice Priestley pointed out in his paper (supra, at 224-5) similar concerns have attended the development of Romalpa clauses: see also the observations by Pincus J in Re Miles Ex parte National Australia Bank v Official Receiver in Bankruptcy (1988) 20 FCR 194 at 199; 85 ALR 216.

But the essential reason the insolvency law did not strike at the transaction in question in Quistclose was that the moneys represented by the cheque drawn by Quistclose in favour of Rolls Razor and banked in the special account of Rolls Razor never at any stage became the beneficial property of Rolls Razor. It acquired no more than what Dixon J called a dry legal interest: see Commissioner for Stamp Duties (NSW) v Perpetual Trustee Co Ltd, supra, at 510. On its part, Quistclose had both contractual right to repayment out of the general assets of Rolls Razor, as a general creditor, and the beneficial interest in a fund, whether by way of resulting trust or as the second limb of an express trust.

A somewhat different situation is presented by Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207. This decision supports the proposition that a debtor of company A can discharge the debt by paying the amount to A on terms that A hold it on trust for payment to creditors of A nominated by that debtor. This trust is enforceable by the debtor despite the supervening winding up of A. It was held that A never acquired any beneficial interest in the moneys paid to it by A. But A had bargained away any discharge for full value of the debt owed to it, in return for an arrangement whereby one class of its creditors was to be satisfied from the moneys received from the debtor. In Australia, as Mr Justice Priestley has pointed out (supra, at 235-6) such an arrangement would encounter the operation of the preference provision in the Bankruptcy Act 1966 (Cth) s 122.

The Quistclose decision has been the subject of criticism as a departure from basic trust law and, on the other hand, seen as providing the welcome foundation for a new species of trust. The range of responses is surveyed by Mr Rickett in his forthcoming article, "Different Views on the Scope of the Quistclose Analysis: English and Antipodean Insights" (1991) 107 LQR p 608. Some of these doctrinal tensions were apparent in counsel's submissions in this case. Thus, it was suggested that the donations were given to the AETT with a purpose in mind, and that this "purpose" characterised the trusts which allegedly arose in favour of the Opera, the Ballet and the Workshop.

However, in my view, it would be an error to treat the references by Lord Wilberforce in Quistclose (and by Gibbs ACJ in Australasian Conference Association Ltd v Mainline Constructions Pty Ltd (in liq) (CLR at 353) to "purpose" as characterising an express trust which did not have to satisfy the ordinary requirements for any private (as distinct from public) trust. There was, on Lord Wilberforce's analysis of the facts, a trust fund held by a trustee on certain terms for a class of ascertained beneficiaries, with a limitation (whether as an express or resulting trust) back to the settlor in specified circumstances. The expression "purpose" was apt to describe the end sought to be achieved by the settlor, Quistclose, and accepted by the trustee, Rolls Razor. This was formulated in the terms stipulating the conditions upon which the shareholders might take a beneficial interest in the fund. The use of the expression "purpose" should not be read as heralding a new era for the non-charitable purpose trust. This is a concept which has not struck deep roots in this country: see, for example, Tidex v Trustees Executors and Agency Co Ltd [1971] 2 NSWLR 453 at 465-6.

In Quistclose, it appears to have been a condition of the primary trust that the shareholders acquire and retain vested equitable rights in the fund only to the extent to which they had a present right to payment of the dividend by Quistclose in the ordinary course, that is to say before 24 July. That condition to their entitlement could not be fulfilled after the company went into liquidation. The gift over, the "secondary" trust then operated in favour of Quistclose. Hence, Hodgson J's comment in relation to the conditions attaching to the primary trust that to speak of the trust as one for a specific "purpose" may be merely another way of putting the same thing: Rose v Rose (1986) 7 NSWLR 679 at 685-6. Interestingly enough, the letters outlining the arrangement in Quistclose used the term "conditions": see the text set out [1968] Ch at 549-51.

The striking feature of the Quistclose litigation was that whilst previously it might have been thought that debt and trust were distinct and disparate norms, it was thereafter clear that in a given case the transaction under analysis might bear a dual character.

The question as to the existence of any express trust will always have to be answered by reference to intention. An example of that basic proposition at work in this court is the decision of Lockhart J in Re Wall; Ex parte Official Receiver v Kemmis (1979) 25 ALR 615 at 624-5. Ordinarily, the relevant intention is that of the alleged settlor, but where the subject matter of the trust is contractual rights against the settlor, conferred by the settlor upon the alleged trustee, the objective (or "purpose") of the transaction being to benefit third parties,, it may be appropriate to look to the mutual intention of settlor and trustee. This is consistent with the approach by Deane J to a similar question in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 80 ALR 574; 165 CLR 107 at 149, but cf Mason CJ, Wilson J at 121. At all events, and as I have said, in Quistclose, supra, at 580, Lord Wilberforce looked to "the mutual intention" of Quistclose and Rolls Razor and to "the essence" of their bargain.

The relevant intention is to be inferred from the language employed by the parties in question and to that end the court may look also to the nature of the transaction and the relevant circumstances attending the relationship between them: Walker v Corboy (1990) 19 NSWLR 382; Scott, The Law of Trusts, 4th ed, 1987, s25.2. There is no need for particular caution in drawing the inference that a trust was intended: Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618-19; 78 ALR 1. However, it also is important to appreciate both the flexibility of the institution of the express trust and the range of equitable institutions which fall short of but have some of the characteristics of a trust.

In Quistclose, the debate was whether that material disclosed a trust with the terms I have described or merely a loan; no other result was suggested. But the facts in such cases are susceptible of infinite variation and the trust is a supple instrument. Hence, the suggestion by Professor Finn that, if the facts disclosed no contractual obligation by the borrower to the lender to pay the creditors, there could hardly be present a concurrent intention to create a trust in their favour; rather, the borrower would hold the moneys borrowed as trustee of an express trust for the lender, subject to a mandate for the lender to use the fund to pay the creditors. On that footing, there would be but one trust, created to give the lender security for its rescue operation of the financially unhealthy borrower, but not to render the creditors beneficiaries under any trust. Hence, also the suggestions by Sir Peter Millett, supra, at 290-1, now accepted by the New Zealand Court of Appeal in General Communications Ltd v Development Finance Corp of New Zealand Ltd [1990] 3 NZLR 406 at 432-3. One of these is that where the lender has a distinct interest of his own in seeing that the money is applied to pay the creditors of the borrower, the borrower will be obliged, at the suit of the lender, to make these payments; if the creditors are notified by the lenders of the arrangements between the lender and the borrower, this may amount to an assignment to them of the lender's rights against the borrower, thereby giving the creditors an equitable interest in the fund, in place of that of the lender.

It also is to be borne in mind, as I have said, that dealings between two parties may give rise to equitable rights in a third party, falling short of those of a beneficiary against a trustee. Some examples are given by Dixon J in the judgment to which counsel for the bank relied: Countess of Bective v FCT (1932) 47 CLR 417 at 418-19. They include equitable charges and liens and equitable personal obligations, the latter being considered in such recent authorities as Perpetual Trustee Co Ltd v Godsall [1979] 2 NSWLR 785 at 792 and Muschinski v Dodds (1985) 160 CLR 583 at 605-6, 624- 5; 62 ALR 429. In this field, the legal system in truth teems with established norms, and there is scarcely the need for another, dignified as the Quistclose trust.

To speak of a Quistclose trust as if it were a new legal institution, rather than an example of the particular operation of principle upon the facts as found, is to set the listener or reader off on a false path. So it is that one sees what in truth are pointless debates in some of the commentaries as to whether a Quistclose trust may arise where the money is lent not to pay the borrower's debts, but to buy equipment (as in Re EVTR [1987] BCLC 646), or not lent but paid to subscribe for shares, as in Re Associated Securities Ltd and the Companies Act, supra.

No express trust or other equitable obligation

In the present case, counsel for the Opera, the Ballet and the Workshop first submitted that, on the facts, the AETT received the relevant donations in circumstances such that it was an express trustee "for the purposes of" what was called the tax deductibility program in favour of "preferred arts organisations". The terms of the trusts were, as I understood the primary submission in its final formulation, that upon receipt by the AETT the beneficial interest would vest forthwith in the organisation specified by the donor on the AETT standard form, to be payable after "allocation" and other "processing" by the AETT. It was said that in a sense the AETT was the conduit through which the gifts passed to the specified organisations; cf Re Veli; Ex parte AE Developments Pty Ltd v Scott, supra, at 209. Alternatively, it was submitted, as I understood it, that the property in the donation would remain in the donor until "allocation" by the AETT, when it would be held for the arts organisation to which it was so allocated; if the AETT was no longer able in law to make and apply such an allocation, the donation would be held upon trust for the donor. Upon the first submission, the three arts organisations should have declarations made by the court as to trusts in their favour; and upon the second, as to trusts in favour of the donor. Further, it was contended that the events I have described had the consequence that there had been an allocation actually made by the AETT in favour of the Workshop, before the appointment of the provisional liquidator, thereby strengthening its case that there was a vested trust in its favour.

In addition, and in the alternative, it was submitted that the facts showed not unfettered gifts but the creation, by the expression of preference by donors and the receipt of donations by the AETT, of a trust power in the AETT, which the provisional liquidator should now be obliged to exercise; the objects of the power were said to be the preferred arts organisations (semble as the list stood when the provisional liquidator was appointed) but with the power to be exercised having regard to the particular donor's expression of preference. It was said that this expression should be seen as a precatory not a mandatory statement, even though the power was a trust power.

Then it was submitted by counsel for the three arts organisations that the bank was obliged to make funds available for the exercise of any of the equitable proprietary rights found to exist upon acceptance of one or other of the above submissions. This was because the bank took the donations banked by the AETT with sufficient notice of these equitable rights, and because to deny the proprietary claims made against it would be unjustly to enrich the bank. On this branch of the case, counsel for the provisional liquidator took the position that if, contrary to his (and the bank's) submission, the moneys were received by the AETT on trust, then the bank had sufficient notice of that trust or other equitable rights.

The fundamental issue is whether the donations in question in this proceeding were received by the AETT and banked by it, impressed with any of the equitable proprietary obligations contended for by counsel for the three organisations. As I have indicated, each case is to be determined in accordance with the language used as interpreted in the light of the circumstances. It is well settled that formal words are not necessary for the creation of a trust. But if the statement of "preference" by the donors upon the AETT standard form or its adaptations were but a statement of the donor's motive or expectation, then the AETT bore no legal or equitable obligation to fulfil that expectation: see Countess of Bective v FCT, supra; Dean v Cole (1921) 30 CLR 1 at 8; Scott, The Law of Trusts, supra.

Mr Salzer, the chief executive of the AETT since July 1988, gave evidence of various meetings with the bank in the period before the provisional liquidator was appointed. It was after such a meeting on 12 March 1991 that the AETT deferred depositing cheques received from donors under the tax deductibility program, and these later came into possession of the provisional liquidator. Mr Salzer said that at the meeting on 12 March between himself, other officers of the AETT and officers of the bank, it was said on behalf of the representatives of the AETT that at no stage "did we consider [the donations] to be part of the [Trust's general] funds". But that statement cannot of itself resolve the issue.

The procedures followed by the AETT involved the sorting of donations to the tax deductibility scheme and the entry of details into the AETT's computer system as to show both the donor and the preferred arts organisation indicated by the donor. Periodically, a consolidated report was submitted to the board of the AETT and cheques drawn in favour of the various organisations to be released upon board approval. The board usually questioned the financial controller "as to whether all donations met the requirements of the Australian Taxation Office regulations"; resolutions would be passed ratifying grants approved for payment by the board, acting apparently under Art 52(i). The financial controller would then direct release of the cheques. It will be apparent from the above that the board was most anxious to ensure that matters were so administered as to ensure the availability of the income tax deduction for donors.

In March 1988, the AETT introduced a "levy" for this "processing" of donations under the tax deductibility scheme. The "levy" was fixed at 2 per cent against all donations in the tax deductibility scheme (with a maximum of $150 per donation in excess of $7500) and this was described by the chairman of the AETT as "a user pays basis". By September 1989, the AETT was "processing" up to 5000 individual donations each week. The levy was then increased, and the changes notified by a press release on 27 September 1989. Counsel for the provisional liquidator stressed that a trustee would ordinarily act gratuitously. But the AETT publicised the existence of and reasons for the levy from a time before the making of the donations here in question. I would place little weight upon the existence of the levy as tending against acceptance of the submissions by counsel for the three arts organisations.

On the other hand, it is, in accordance with the authorities to which I have earlier referred, of considerable significance that the donations were placed in the operating account of the AETT (which was overdrawn) and that cheques for grants were then drawn upon that account, not upon any earmarked account. Counsel sought to lessen the force of that circumstance by referring to what was said in Stephens Travel Service International Pty Ltd v Qantas Airways Ltd (1988) 13 NSWLR 331 at 349, 365-6. But Hope JA was there dealing with a situation where initially there had been an express trust, the question being whether that trust had been revoked by subsequent conduct, and this, as Meagher JA pointed out in Walker v Corboy, supra, at 397-8, makes what his Honour said of limited use when the question, as here, is whether any trust arose at all.

I have referred to the treatment given in the accounts of the AETT to donations received under the tax deductibility program but in respect of which no "allocation" had been made. They were included as "Current liabilities" under the sub-heading "donations received in advance". If held on trust, one would have expected an indication to that effect in the accounts of the AETT. But so to treat these donations would have been to act inconsistently with and so to imperil the whole system based upon the availability of a deduction under s 78(1)(a)(xiii). And this the AETT was scrupulous to avoid.

Counsel for the three arts organisations said that no donor would have made a gift to the AETT if told "not only could the expressed preference be ignored but the AETT could use the money to pay its own debts". But this puts the case somewhat out of focus.

The present proceeding arises not because the AETT has chosen to ignore the expressed preferences of donors. The parties are before the court because the AETT is insolvent, a provisional liquidator has been appointed and it is necessary to ascertain the rights of the parties as a step to formulating one or other form of insolvent administration under the aegis of the court and the Corporations Law. It is a reasonable assumption that donors did not turn their minds to the possibility of a supervening insolvent administration of the affairs of the AETT. It is not the correct approach to reason that because, if they had foreseen what has come to pass, donors may have decided to retain their money, the donors should be held to have made their gifts upon trust for one or other of the preferred arts organisations. Would they have made their gifts if told that because they were made on trust there would be no deduction under s 78(1)(a)(xiii)? That is the more pertinent question. The evidence as to the manner in which the tax deductibility program was promoted to prospective donors suggests that the availability of the deduction was of great concern to donors.

In Quistclose, supra, Lord Wilberforce emphasised that the form of words used indicated that the loan moneys were to be used "exclusively" or "only" in a particular way. Here, the word "unconditionally" as used in the AETT standard form has a primary meaning calculated to lead to the opposite result. It suggests an absence of qualification or obligation. The promotion and use of the tax deductibility program was premised upon donors obtaining the income tax deduction and that required gifts to be made outright. The most that was permissible if the deduction was not to be imperilled was a statement of "preference". In the circumstances, this was to indicate motive or expectation, in the light perhaps of past experience of the handling of gifts by the AETT, but not to impose a legal or equitable obligation. Likewise, the phrase in the AETT standard form "it would be appreciated" is precatory rather than imperative. Even then, the obtaining of the deduction was not assured because the Commissioner had certain requirements as to the characteristics to be possessed by an arts organisation before it might be considered a "preferred arts organisation" within the ambit of the tax deductibility program. As I have indicated, the manner of administration and handling by the AETT of donations when received is suggestive also that no trust came into being.

Nor, in my view, would funds be given to the AETT "unconditionally" if subjected to a trust power exercisable by the AETT in favour of one or other of the preferred arts organisations. Likewise, a gift would not have been made unconditionally to the AETT if made on terms that the money in question be held by the AETT on trust for the AETT until "allocated" by the AETT.

The position of the Workshop requires further consideration. It was told on 22 February 1991 that the board of the AETT had "approved payment of $100,000 being donations received and made available to [it]". A "levy" of $635 was deducted and a cheque for the balance drawn and sent off by the AETT. Upon the hypothesis that the gift by the Elisabeth Murdoch Trust of $100,000 to the AETT was unconditional, and no trust was created in respect of the receipt by the AETT, was there nevertheless a trust created by the AETT, of its own volition, subsequently, that is to say, when the board approved payment of $100,000 and the letter of 22 February 1991 and enclosed cheque were sent off to the Workshop? I have set out the text of Art 52(i) which conferred the power upon the board to make the necessary grant to the Workshop. In my view, it would be a fanciful interpretation of the procedures of the AETT to treat them as involving the creation at that stage of any trust. The AETT was not constituting itself as trustee of any rights it had against the bank for the bank to honour a cheque drawn upon the overdrawn operating account. It was making a grant by drawing and sending the cheque and the payee of the cheque had whatever rights it acquired from the drawing and delivery of the cheque.

It follows that upon none of the bases propounded did there arise any of the express trusts or kindred rights contended for by the three arts organisations. Therefore, there is no footing upon which the bank is to be held accountable as constructive trustee by reason of it taking trust moneys with notice of the beneficial rights of the three: Barnes v Addy (1874) 9 Ch App 244 Nor is the bank to be regarded as a constructive trustee within the second limb as an assistant with knowledge in a dishonest and fraudulent design on the part of the AETT as a trustee; cf British America Elevator Co Ltd v Bank of British North America [1919] AC 658 at 663.

Constructive trust

But that is not the end of the matter. It was further submitted that constructive trusts in favour of the three arts organisations should be imposed upon the AETT and the bank "to prevent the [AETT] and the bank retaining, as a windfall, the donations (other than the levy) and not dealing with them as in the past", and that having encouraged organisations such as the Opera to solicit payments to the tax deductibility program operated by the AETT, it could not be just and equitable for the AETT to "ignore the donees so that it and the bank retain the benefit on the basis of an asserted 'unconditional' entitlement to the money". The present facts illustrated, so it was submitted, the payment of money on the basis of a consensual joint relationship or endeavour between donors, the AETT and the three arts organisations which had failed without attributable blame. Therefore, it was said, there were brought into play equitable principles regulating the proprietary rights of the parties inter se upon the premature collapse of a joint enterprise: Muschinski v Dodds (1985) 160 CLR 583 at 618-23 per Deane J; 62 ALR 429; Baumgartner v Baumgartner (1987) 164 CLR 137 at 149; 76 ALR 75 per Deane J.

It should be observed that in both the authorities referred to, Deane J was not dealing with a collapse brought upon by a financial failure for which statute had for long provided by specifying an insolvent administration. Nor, it should be emphasised, does it necessarily follow that to deny the existence of a constructive trust such as that propounded for is to leave the claimants without any remedy against the AETT or the bank. That, as I have indicated, may be a question yet to be resolved. What the denial does mean is that the claimants are not to be advanced to the position, in substance, of secured creditors of AETT and the bank.

Nor was Deane J dealing with a case where, as here, there are manifold equitable principles whereby consensual arrangements may give rise to proprietary interests. There is force in the submission that constructive trusts should not readily be imposed in favour of parties which have failed in their attempts to show the necessary facts for a consensual arrangement by way of express trust binding the AETT.

It was also submitted in support of the imposition of constructive trusts that this would produce a result which reflected the role of the AETT as "merely a conduit through which the public passed donations". I have endeavoured earlier to show that this was not the legal complexion borne by the facts. It may be said that in substance, as a practical matter, that is what occurred. But to impose constructive trusts for such a reason would have the consequence of leaving the donors with their income tax deductions and the preferred arts organisations with legally enforceable rights in respect of the gifts, when the availability of the deductions had been pre-conditioned upon the absence of such rights.

Counsel for the Opera, the Ballet and the Workshop referred to what was said in Australia and New Zealand Banking Group Ltd v Westpac Banking Corp (1988) 164 CLR 662 at 673; 78 ALR 157. The High Court was there discussing the basis of the common law action of money had and received, for recovery of an amount paid under fundamental mistake of fact. It emphasised that the action was a common law action for recovery of the value of the unjust enrichment, not one for the enforcement of a trust or for tracing or for the recovery of specific money or property, as is the case with the relief now sought against the bank. Likewise, the action with which the House of Lords dealt in Lipkin Gorman v Karpnale Ltd [1991] 3 WLR 10 was one for money had and received, something made clear by Lord Goff at 25. It was held that the gambling club, being a volunteer, had been unjustly enriched at the expense of the solicitors from whom the money had been stolen by one of their partners and that the claim for money had and received lay accordingly. In fact the moneys misappropriated had been taken from the clients' trust account, but no equitable tracing claim was advanced and the plaintiffs were "content to proceed at law by a personal action" (at 27). It is idle to speculate upon the reasons why no tracing claim was advanced in what, at this distance, appears a clear case.

As to the position of the bank, on the facts, the bank did not take the deposits in the operating account knowing of and accepting an obligation to be bound by any later "allocation" by the AETT; still less did it accept any obligation to be answerable itself to whomever it might transpire were the "preferred" arts organisations, if the AETT were disabled by supervening events from making any further allocations; cf Bahr v Nicolay (No 2) (CLR at 637-8, 654). As is indicated by these judgments of Wilson and Toohey JJ and Brennan J respectively, in such circumstances grounds might exist for the imposition of a constructive trust. The facts are not in this realm of discourse.

As I have said, there was one account of the AETT with the bank which was styled as a trustee account. At all material times this was in credit. But the evidence is that it was not used for any purposes related to the tax deductibility scheme. Between July 1987 and October 1990, the bank made, through its head office in Sydney, at least 11 donations using that scheme. Only one of the forms used by the bank is in evidence, but I would infer from the other material that use was made of the expressions set out in the AETT standard form, in all cases. The practice of the chief executive of the AETT, Mr Salzer, and its director of finance, Mr Cottam, was to have monthly meetings with an officer of the bank to review the monthly financial and cash flow statements of the AETT. These meetings followed a proposal put to the bank in October 1989. It is clear enough, at least as a result of the written material provided in support of that proposal, that the bank is to be treated as having known that in addition to its other activities, the AETT operated the tax deductibility scheme as I have described it. But to say that is to stop far short of accepting any case for the imposition of a constructive trust as sought in this proceeding.

I have referred to the meeting between officers of the bank and the AETT on 12 March 1991. It was submitted that, even if it had none before, the bank thereafter had sufficient notice "of how it came to have received the donations in suit". But all such moneys which were deposited to the current account by the AETT had been deposited before 11 March 1991 and had gone, quite properly and in accordance with long practice, to reduce the amount of the overdraft. Further, the statement at the meeting to the effect that the AETT had not considered the donations to be part of its general funds was both contrary to the legal premise upon which the tax deductibility program had been allowed by the Commissioner to operate and inconsistent with the conduct of the AETT's operating account, in debit. The deeper significance of the meeting of 12 March was that the AETT then, for the first time, sought approval of the bank to the opening of a new account, to keep separate from its other activities, donations received by the AETT. The bank did not agree, and the AETT stopped banking donations, whether received as part of the tax deductibility program or otherwise. The appointment of the provisional liquidator came 16 days later.

It would be quite misleading to describe the situation as one in which the bank was engaged in a joint enterprise with other donors, and with the AETT and the preferred arts organisations, in the sense I have discussed in dealing with the authorities upon which reliance was placed. It was the banker to the AETT and from time to time a donor. The position of the provisional liquidator is, in a sense, even stronger because to impose upon the AETT a constructive trust would be to cut across the ordinary principles as to pari passu ranking of claims in insolvency administrations.

What is said above is not to deny the proposition that in certain limited circumstances a constructive trust may be imposed to perfect what otherwise would be an imperfect gift: Le Compte v Public Trustee [1983] 2 NSWLR 109. Nor is it to deny that, in general, property held as a trustee by an insolvent party stands outside an insolvent administration; cf Re Crest Realty Pty Ltd (in liq and the Companies Act [1977] 1 NSWLR 664. Nor does property subjected to such an administration include property impressed with a constructive trust: Re Sharpe (a bankrupt); Ex parte Trustee of the Bankrupt v Sharpe [1980] 1 All ER 198. To impose such a constructive trust may not be forbidden by statute. Nevertheless, in the present case the reasons advanced in favour of the imposition of such a trust undercut the well settled principles founding insolvency law. It is not a question, in the events that have happened, of imposing a constructive trust where the AETT as a going concern seeks to retain the benefit that flows from the application of moneys received by it to reduce the amount of the overdraft on the operating account for the bank.

Whilst it is indubitably correct that the law as to constructive trusts is not to be forced into closed categories, in the present case there is in my view no sufficient footing made out for equitable intervention of this kind.

Conclusion

I should determine the separate questions by declaring that the moneys received by the Australian Elizabethan Theatre Trust (the AETT), in respect of which the donor expressed a preference for allocation in favour of the Australian Opera (the Opera), the Australian Ballet Foundation (the Ballet) and Victorian Tapestry Workshop (the Workshop) being the moneys identified in Annexure B to the affidavit of the provisional liquidator, sworn 5 June 1991 and filed herein, do not constitute moneys held by the AETT or the Commonwealth Bank of Australia upon trust for the Opera, the Ballet, the Workshop or any of them.

I will hear the parties on costs.

Solicitors for the provisional liquidator and the Australian Elizabethan Theatre Trust: Allen Allen & Hemsley.

Solicitors for the Australian Opera, Australian Ballet Foundation and Victorian Tapestry Workshop: Mallesons Stephen Jaques.

Solicitor for the Commonwealth Bank: L E Taylor.


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