(11) Subject to subsection (10), and subject to any appeal, any person on whom notice of any application under this section is served, or to whom notice is given in accordance with subsection (8), shall be bound by any opinion advice direction or order given or made under this section as if the opinion advice direction or order had been given or made in proceedings to which the person was a party."
15 Mr Blake SC says that s.63 is a beneficial provision and should be given a liberal construction. He points to the definition of "trustee" in s.5 of the Act, namely, "trustee … includes legal representative and the public trustee and a trustee company" . He says that by defining "trustee" in inclusive terms the legislature has left open for judicial interpretation in the circumstances of each case the scope of the word "trustee" for the purposes of the Act.
16 Mr Blake submits that there will be a substantial gap in the beneficial application of s.63 if "a trustee" as used therein is limited to a person who either admits to being a trustee or else is found to be so by a court. He says that "trustee" must include "alleged trustee": a person who denies in good faith that he or she is a trustee should be able to guard against the costs consequences of being found to be wrong by seeking the advice of the Court that he or she is justified in defending the proceedings.
17 Alternatively, Mr Blake says, if s.63 applies only to a trustee so admitted or found, there is no such restriction on the general jurisdiction of the Equity Court to give judicial advice.
18 The researches of Counsel and my own researches have found no case in which the Court, in exercise of either its statutory jurisdiction or its general jurisdiction to give judicial advice, has given advice concerning a trust to a person who positively asserts that he or she is not a trustee. More to the point, no case can be found in which the Court has given advice to such a person as to whether he or she is justified in having recourse to the alleged trust assets for the purpose of funding a case in which he or she seeks to establish that there is no trust at all.
19 An examination of the antecedents of s.63 Trustee Act shows that the advisory jurisdiction of the Equity Court now encapsulated in this section was never intended to be exercised where there was any doubt as to whether the person applying for advice was a trustee administering a trust estate.
20 Formerly, under the old Chancery practice, if a trustee wished to obtain the direction or opinion of the court on a matter of administration or management or as to a question of construction of the trust instrument, the trustee had to commence an administration suit. The trustee would raise on the pleadings in the suit the particular point upon which the court's advice was sought. Having obtained the court's direction or advice on that point, the trustee would then obtain a stay of all further proceedings in the administration suit. To commence a general administration suit was, however, often a cumbersome and expensive exercise as all persons interested in the estate had to be brought before the court, accounts had to be taken and enquiries had to be ordered, none of which was necessary if all that was in question was a point of construction of the trust instrument or what should be done in the management or administration of the trust assets in a particular situation.
21 By Order LV , Rule 3 of the English Rules of the Supreme Court 1883, it was provided that the trustees under any deed or instrument "may take out, as of course, an originating summons returnable in the Chambers of a Judge of the Chancery Division for … the determination, without an administration of the estate or trust, of … any question arising in the administration of the estate or trust" . That Rule seems to reflect s.30 of the Trust Property Act 1862 . It is clear that this streamlined advisory jurisdiction, invoked by originating summons, was in substitution for an administration suit and that, of course, an administration suit could never have been contemplated unless it was first established that there was in existence a trust estate to be administered: see generally In re Medland; Eland v Medland (1889) 41 Ch D 476; Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547.
22 The course of the development of the advisory jurisdiction from its primitive origins has been outlined by Young CJ in Eq in Re Application of Perpetual Trustee Company Ltd [2003] NSWSC 1185. As his Honour points out, the procedure now has great flexibility and utility. Yet, it has its limits.
23 The advisory jurisdiction is an exception to the Court's ordinary function of deciding disputes between competing litigants. An application for judicial advice, whether under s.63 or under the general jurisdiction of equity, is in nature essentially a request for private advice: see e.g. Harrison v Mills [1976] 1 NSWLR 42, at 45 per Needham J; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, at 440 per Sheller JA. This exceptional jurisdiction, which is derived from the practice of the Court of Chancery under the general law in giving directions to those entrusted with the administration of property under the control of the Court, may now be regarded as affording special assistance to those, such as trustees, liquidators, bankruptcy trustees and receivers, who have no direct pecuniary interest in a fund but have assumed the onerous obligation of administering it for the benefit of others: see e.g. Re G.B. Nathan & Co Pty Ltd (in liq) (1991) 24 NSWLR 674, at 677; Gardner v London Chatham & Dover Railway Company (No 1) (1867) LR 2 Ch App 201, at 211.
24 To avail oneself of that special assistance from the Court, one has to show that one is entitled to it. In my opinion, the Court has no power to give judicial advice under s.63 Trustee Act to a person who does not establish to the Court's satisfaction that he or she is, in fact, a trustee and that the advice sought relates to the management or administration of trust property or the interpretation of a trust instrument.
25 As the definition of "trust" in s.5 indicates, the trust in respect of which advice is sought may be an express trust created by instrument or the trustee may show that the trust is implied or constructive. If the trust is constructive, generally the trustee will show that the trust has been imposed as a result of proceedings in Court and that there is now doubt as to how the constructive trust should be administered. However, although that situation is theoretically possible, it is likely to be very rare indeed in reality as the Court, in imposing a constructive trust, usually provides in consequential orders how the trust is to be performed. If there is any remaining doubt, the Court may be approached to work out the orders further.
26 The words of s.63 and of the definitions of "trustee" and "trust" in s.5 do not naturally encompass "alleged trustee" and "alleged trust" and the historical origins of the advisory jurisdiction generally show that alleged trustees were never contemplated as being entitled to invoke that jurisdiction. I cannot see in the language of the Trustee Act or in the decisions of the Court relating to the advisory jurisdiction in general any justification for extending the meaning of the word "trustee" in s.63, or in the general law, so as to include "alleged trustee".
27 What, then, is a person in the position of the Association to do when a case is brought against it claiming that it is a trustee? If the case cannot be defended except by recourse to the alleged trust assets, how can the defendant avoid the consequences of an honest, but mistaken, denial of trusteeship and an honest, but mistaken, recourse to trust assets?
28 I would begin by observing that, probably, in the vast majority of litigation the party who loses will honestly, but mistakenly, have believed that he or she ought to have won. An honest but mistaken belief that one ought to have won does not, in itself, usually avoid the consequences of losing nor does it alter the costs order which follows. Why should the situation be any different because the issue in a proceeding is whether or not the defendant is a trustee? Why should a defendant who wrongly denies that he is a trustee be better able to protect himself from the cost consequences than a defendant who wrongly denies that he has driven his car negligently?
29 What is to happen if a defendant alleged to be a trustee cannot defend himself without recourse to the alleged trust assets? The defendant says that the assets belong to him beneficially and that he can do what he likes with them. Surely, the best procedure to determine whether or not the defendant should be allowed to have recourse to the alleged trust assets is an application by the plaintiff for an interlocutory injunction restraining the defendant from having recourse to the assets pending a final determination of the proceedings.
30 In an interlocutory application the Court will have to consider, first, whether there is a serious question to be tried as to whether the defendant is a trustee. It will receive evidence and hear argument from both sides. It may even permit cross examination. It may be able to form a view about the strength of the defendant's denial of trusteeship and that view may have a bearing on the exercise of discretion.
31 On the other hand, in an application for judicial advice the Court usually acts only upon the Statement of Facts provided by the applicant. It is rare for other parties to be heard at all before advice is actually given and it would be highly exceptional for the Court to permit any other party to adduce evidence or to cross examine. That is because, as I have noted, the nature of the procedure is essentially a request for the Court's private advice.
32 Second, in an application for an interlocutory injunction the Court will have to consider where the balance of convenience lies in restraining or permitting the defendant's recourse to the alleged trust assets. The Court will take into account the question of hardship and whether, for example, the defendant will be able to have a fair trial if he cannot fund his defence by recourse to the assets.
33 Again, evidence from both sides may be led on this issue. The defendant's assertion of hardship may be tested by cross examination, if the Court permits. There will be a much fuller investigation of the justice of the defendant's claim to have recourse to the alleged trust assets than would be the case in an application by the defendant for judicial advice.
34 In short, where an alleged trustee seeks to have recourse to alleged trust assets for the purpose of conducting his defence, by far the better procedure for determining that question is an application by the plaintiff for an interlocutory injunction.
35 That is the course which the Objectors have taken in the present case in relation to attempts by the Association to have recourse to alleged trust assets to pay legal costs already incurred in the Main Proceedings. If the Association indicates that it intends to have recourse to the Other Property to pay legal costs, whether already incurred or to be incurred, then the interlocutory battle already joined will have to be escalated.
36 It is well settled that the Court has a wide jurisdiction as to whether or not, in the particular circumstances of a case, it will give advice at all: see e.g. Re Application of Perpetual Trustee Co Ltd (supra); Auspac Corporate Managers Pty Ltd v J. Noble Pty Ltd [2003] NSWSC 548 (Gzell J); Harrison v Mills (supra). I think that the Court will be better able to do justice between the parties on the question whether the Association may have recourse to the Other Property in contested injunction proceedings rather than in an application for judicial advice. For this reason, if the Court had had jurisdiction to give judicial advice under s.63 or under the general law to an applicant who denies being a trustee, I would refuse, in the exercise of discretion, to give such advice to the Association in relation to the Other Property.