Solicitors:
Pigott Stinson Lawyers - for the plaintiffs
Diamond Conway - for the defendant
File Number(s): 2015/334526
[2]
Introduction
This is a summons by trustees for orders pursuant to Sections 70 and 63 of the Trustee Act 1925 (NSW). The defendant, Perpetual Trustee Company, did not appear and consented to the relief sought. Although the proceedings came to me in the Applications List, I reserved my decision partly because of the complexity of the issues and partly to enable me to better consider an opinion by a Professor Conaglen which, in one material respect, differed from the advice on which the trustees propose to act
Notwithstanding the opinion of Professor Conaglen, who is a member of the extended family, there is substantial unanimity among all persons with a direct or indirect interest in the outcome. The solicitor for the plaintiffs has written to everyone who may be entitled to take a share, or may have a contingent interest, in the fund in question. Almost all have given their unqualified consent to the course proposed by the trustees. Several specifically, but unnecessarily, requested that the judge be provided with all relevant opinions obtained by the trustees.
Only one, George Macdonald, withheld his consent and proffered his own opinion. He is content however so long as 'all advices and letters and views of the beneficiaries, including those of Professor Conaglen, Mr Hutley and my own, will be properly, fully and unbiasedly (sic) placed before the presiding Judge in Court proceedings which seek judicial advice and sign off'. If I declined to give judicial advice, it appears likely that no interested person would wish to take on the role of being an active defendant in a construction suit.
In those circumstances, there is utility in giving judicial advice, notwithstanding that the principal question involves a disputed issue of construction that affects the rights of beneficiaries. The question as to whether any particular case is an appropriate vehicle for judicial advice is ultimately a matter for the exercise of the Court's discretion and depends very much on the particular circumstances. In this case, I do not think that the interests of justice would be served if I refrained from giving advice to the trustees, simply because the central issue is a question of construction on which minds have differed. Compare Re Application of Perpetual Trustee Co Ltd [2003] NSWSC 1185 AT [15] - [18]; Harrison v Mills [1976] 1 NSWLR 42 at 45; Auspac Corporate Managers Pty Ltd v J Noble Pty Ltd [2003] NSWSC 548 at [20]; and Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42 (2008) 237 CLR 6 at [60]. See also Beck v Henley [2014] NSWCA 201 at [54] and Re Estate late Chow Cho-Poon [2013] NSWSC 844 at [188].
That is not to say however, that I am required to resolve the question of construction - as if this were a final hearing in contested proceedings in which one party seeks a declaration as to the proper construction of the trust instrument. The relevant question before me is whether the trustees 'would be justified' in acting in accordance with the advice of senior counsel. The procedure on such an application is summary, ex parte and non-binding - in the sense that any advice that I give will not prevent further litigation on the issue of construction. This is not an adversarial proceeding, but a facility for giving private advice, the principal function of which is to ensure the personal protection of the trustees: Macedonian Orthodox Community Church St Petka Inc at [54] - [76] but cf [72].
In an application for judicial advice pursuant to Section 63 of the Trustee Act, even one regarding 'the interpretation of the trust instrument', the Court does not finally determine the question of construction. And it does not finally determine the rights of the beneficiaries. That is partly because there is no contradictor. I did not have the benefit of a professional advocate who could have developed and presented the argument in favour of the contrary construction to that on which the trustees propose to act. I had only the dry words of Professor Conaglen's 'note' and George Macdonald's vigorous expression of his own personal opinion. Even on a question of construction however, what is 'right' can often be a matter on which reasonable minds differ, including - perhaps especially - reasonable judicial minds. The issue on this application is simply whether the choice made by the trustees is justified. If it is justified, the trustees will be deemed to have discharged their duty. That is so, even if, in the unlikely event of a future challenge, another court takes a different view of the question of construction. With that introduction, I should consider the facts.
[3]
Factual Background
The difference of opinion that requires judicial intervention arises out of two trusts created in 1926 and 1934 by George Richmond (the settlor) for his children and grandchildren. He was a grazier from Goodooga and formerly held the rank of Major in the Royal Highland Regiment, better known as the Black Watch. He had five children - James, Elizabeth, Grizel, Catherine (known as Mary) and Jean. Only Jean is still alive. The plaintiff, Christopher Dawson, is the son of Grizel. The plaintiff, Hannah Alexander, is the daughter of Jean. And the plaintiff Charlotte is a daughter of Hannah.
The 1926 Trust provided for a fund in five equal parts. The settlor's son, James, was to obtain his share on turning 24. His four daughters, Grizel, Jean, Mary and Elizabeth were to enjoy life interests with remainders to such of their children as they appointed by will, or otherwise their shares were to go to all of their children equally.
In 1934 the settlor established a number of further trusts - three for each of the elder children and another for his twin daughters, Jean and Mary. I am only directly concerned with the 1934 Trust for Jean and Mary (1934 Trust). The 1934 Trust conferred life interests on each of Jean and Mary and created a contingent interest if one or both of them died without children or before reaching the age of 24 years. Mary died on 20 February 2015 without children. In consequence, Clause 13 of the 1934 Trust required her half share of the fund to be transferred to the trustee of the 1926 Trust, to be dealt with on 'the same trusts as those contained in a settlement dated the Tenth day of December 1926'.
On 31 May 2011 Perpetual wrote to Jean in connection with the 1926 Trust and advised her that the 'administration processes required to finalise this trust have now been completed'. A sum of $17,072.13 was deposited directly into her bank account. A similar deposit was apparently made in January 2011 in relation to Mary's share of the 1926 Trust fund.
If Mary's half-share of the 1934 Trust fund is now transferred to the trustees of the 1926 Trust, there will be a sum of approximately $3 million available for distribution. The trustees of the 1934 Trust have obtained advice as to the distribution of these monies, including as to the proper construction of both the 1934 Trust and the 1926 Trust. They consulted Dr Christopher Birch SC, Mr Noel Hutley SC and Professor Matthew Conaglen. Unusually for an application such as this, there is a substantial difference of opinion as to the proper construction of the trust deeds. The difference is material to the financial interests of members of the family.
[4]
Substitution of Trustees
There is however one logically anterior issue with which I should deal before turning to the issues requiring the judicial advice. Perpetual is the trustee of the 1926 Trust. The trustees of the 1934 Trust have requested Perpetual to consent to its retirement as trustee of the 1926 Trust so that they can be appointed also as trustees of the 1926 Trust. Their object is to ensure a more efficient and cheaper resolution of any residual issues relating to both trusts. Perpetual has indicated its preparedness to retire from the role of trustee but requested that an additional trustee, experienced in law and trust matters, be appointed in addition to the first two named plaintiffs. The third plaintiff, Charlotte Alexander, who is suitably qualified, has consented to be appointed. And Perpetual consents to her appointment.
There is however a question as to whether the 1926 Trust terminated when Perpetual transferred the balance of the fund to Jean and Mary in 2011. If it did, no utility would be served by appointing new trustees to it. The Court has a broad power to appoint new trustees under Section 70 of the Trustee Act. An appointment may be made 'whenever it is expedient to appoint a new trustee and it is inexpedient, difficult or impractical so to do without the assistance of the Court'. It is obviously expedient in a general sense to make an order for the appointment of the plaintiffs as trustees of the 1926 Trust. The three plaintiffs are fit and proper persons; two of them have been trustees of the 1934 Trust since 1997; the third plaintiff is a solicitor and an officer of this Court; and I infer that she is well acquainted with her obligations relating to the administration of trusts. In the events that have occurred, the administration of the 1926 Trust and 1934 Trust has become entwined, so that it is more efficient, and likely to involve less expenditure, if the same persons are appointed as the trustees of each trust. Finally, of course, only one child (Jean) of the settlor remains alive and she is 92 years of age. This is therefore the inexorable final stage of the administration of the trusts which George Richmond established so long ago.
I do not think that Perpetual's transfer of the then outstanding account balances to Jean and Mary in 2011 constitutes a legal impediment to the appointment of the plaintiffs as trustees of the 1926 Trust. In 2011 it should have been apparent that the trustee of the 1926 Trust would become entitled to substantial funds from the 1934 Trust. That contingent interest involved a right to demand the proper administration of the 1934 Trust and constituted valuable property. A mistaken clerical decision by an administrative officer of Perpetual, who was apparently unaware of the existence of a contingent right to property accruing under the 1934 Trust, could not constitute the termination of the 1926 Trust. This is not a case where, for example, a trustee has knowingly and deliberately taken steps to terminate a trust by exercising a power 'to decant all of the trust assets out of the trust to another trust or to individuals as absolute beneficial owners': Hayton, Matthews and Mitchell, Underhill and Hayton's Law Relating to Trusts and Trustees, 18th ed, 2010 at [21.2] - [21.3].
[5]
Judicial Advice - 1934 Trust
The second issue involves an uncontroversial application for judicial advice in relation to an aspect of the 1934 Trust. There is little difficulty about this question. Upon the death of Mary, Clause 13 of the 1934 Trust Deed became applicable. There is really only one plausible relevant construction of that clause, namely, that upon the death of either Jean or Mary, her half-share of the fund was to be transferred to the trustee of the 1926 Trust to hold on those trusts. There is no sound basis for the contention that the whole of the fund is required to be transferred.
On this issue, both Dr Birch and Professor Conaglen agreed that the proper construction of Clause 13 of the 1934 Trust Deed was that 'upon the death of Mrs Mary Becke, one-half of the fund of the 1934 Trust should be transferred to the trustee of the 1926 Trust to be held on the trusts of that settlement'.
Mr Hutley also provided an opinion in which he generally agreed with Professor Conaglen. He did not say so, but I infer that his concurrence extended to the proper construction of this aspect of Clause 13 of the 1934 Trust Deed. There was therefore no contrary legal opinion and no reason to doubt the shared opinions of Dr Birch and Professor Conaglen.
[6]
Judicial Advice - 1926 Trust
The third issue involves an application for judicial advice in relation to the 1926 Trust. The receipt by the trustees of the 1926 Trust of Mary's half-share of the 1934 Trust fund gives rise to a question as to the manner in which they should deal with it. Dr Birch and Professor Conaglen differed on this issue.
[7]
Dr Birch SC
Dr Birch's opinion is that the trustees should deal with that sum by distributing it equally to the estates or heirs of the settlor's five children pursuant to the terms of the 1926 Trust. This would mean that each of the estates or heirs of James, Elizabeth, Grizel and Jean receive a one-fifth share plus one-quarter of the one-fifth share that would have accrued to Mary.
[8]
Professor Conaglen
Professor Conaglen came to a different, more complicated, and less attractive, view. The result, on his analysis, is that Mary's half-share of the 1934 Trust fund, should not be divided five ways among the settlor's five children or their heirs. Instead, it should be held only for Jean, the sole survivor, and her heirs. He acknowledged that 'this creates some difficulty in working out how the 1926 Trust Deed, which divides property into five separate funds, is to be applied where there is only one child remaining'. But such an outcome is the consequence, he thought, of the language of the last few words of Clause 13 of the 1934 Trust Deed, namely 'for the benefit of the Settlor's surviving children'.
The problem is that the 1934 Trust Deed really has nothing to do with the issue. As I have made clear, Clause 13 directs that Mary's half-share of the fund be held 'upon the same trusts' as those contained in the 1926 Trust Deed. The 1926 Trust was established for the settlor's children and grandchildren. Clear words would be required to indicate that the settlor intended that the straightforward phrase 'upon the same trusts' should be construed in a qualified manner.
I do not regard the concluding words of Clause 13 of the 1934 Trust Deed as amounting to a direction to deal with the property contrary to the trusts of the 1926 Trust Deed. Those words do not, in my view, amount to a form of modification of the trusts under the 1926 Trust Deed. I doubt whether they are truly ambiguous, but even if the language of the concluding words of Clause 13 is open to two constructions, I prefer that 'which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust': Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99 at 109; [1973] HCA 36.
It is therefore appropriate that Mary's half-share of the remainder of the 1934 Trust should be treated as accruals to the separate shares provided for the settlor's five children under the 1926 Trust. It is certainly an approach on which the trustees are justified in acting.
[9]
George Macdonald
George Macdonald is the youngest son of Jean. I respect and understand his enthusiastic support for Professor Conaglen's opinion; and his lengthy written submissions were cogently and vigorously expressed. But although he obtained a number of legal qualifications in the 1980s, George Macdonald holds no current practising certificate and has not done so for several decades. I carefully reviewed his submissions but ultimately, they rise no higher than Professor Conaglen's analysis, which he embraced and sought to develop, but with which I differ.
[10]
Mr Hutley SC
I did not find Mr Hutley's opinion conclusive. His brief written advice stated that he had been asked a series of unspecified questions, each of which remains a mystery to me. He then deferred to the need for a court hearing, stating that 'it is appropriate that there be a summons for judicial advice … [or] a construction summons'. At the conclusion of his advice, he added that he 'agreed generally' with the views of Professor Conaglen, without identifying what those views were. Professor Conaglen's 'note' was, I am afraid to say, replete with multiple views. But on the critical issue of the distribution of Mary's half-share of the 1934 Trust fund, I prefer the view proposed by Dr Birch.
[11]
Distribution under 1926 Trust Deed
Dr Birch's analysis is one on which the trustees are justified in acting. As I have made clear, I am not expressing a concluded view on the question of construction. But given the constraints of a Section 63 application, I am satisfied that there are sound reasons why the trustees are justified in preferring Dr Birch's analysis to that of Professor Conaglen.
This means that the trustees are justified in dealing with Mary's half-share of the 1934 Trust fund in accordance with the terms of the 1926 Trust Deed, in the following manner:
After payment of any expenses in regard to the administration of the 1926 Trust:
(a) to pay one-fifth of the said sum to the Estate of the late James Richmond;
(b) to pay one-fifth of the said sum to the children of the late Grizelda Richmond (Dawson) as have been appointed by her will to receive such sums, or in the event that no such appointment is made under her will between her children equally;
(c) to pay one-fifth of the said sum to the children of Elizabeth Richmond (Way) as by her will she has appointed to receive such sum or in the event that her will makes no such appointment to her children equally;
(d) to hold the one-fifth share upon trust for Jean Margaret Macdonald for her life, and upon her death to distribute the balance of the corpus of that trust after payment of any expenses of the trust to such of her children as she may have appointed under her will to receive such payment, or in the absence of any such appointment to her children equally;
(e) as to the one-fifth which would have accrued to Mary Catherine Becke as follows:
(i) to pay one-quarter of the said sum to the Estate of the late James Richmond;
(ii) to pay one-quarter of the said sum to the children of the late Griselda Richmond (Dawson) as have been appointed by her will to receive such sums or in the event that no such appointment is made under her will between her children equally;
(iii) to pay one-quarter of the said sum to the children of Elizabeth Richmond (Way) as by her will she has appointed to receive such sum, or in the event that her will makes no such appointment to her children equally;
(iv) to hold the remaining quarter share upon trust for Jean Margaret Macdonald for her life and upon her death to distribute the balance of the corpus of that trust after payment of any expenses of the trust to such of her children as she may have appointed under her will to receive such a payment or in the absence of any such appointment to her children equally.
[12]
Orders
I therefore make orders in accordance with Prayers 1 - 5 of the summons filed on 13 November 2015.
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Decision last updated: 04 December 2015