The deceased died on 5 August 2015 (the date appearing in submissions on the present application is inconsistent with the grant of probate and I rely on the latter). Up until his death, the deceased was a director of the Company (see the affidavit sworn 11 April 2019 by the deceased's brother, Mr Michael Tunchon, who is one of the three executors of the deceased's Will - at [3]). The deceased was pre-deceased by his wife, Joan Tunchon, who had been the secretary of the Company up until 2 August 1993.
[2]
The deceased's Will
By his Will dated 3 June 2015, the deceased appointed his brother, Michael Tunchon, and two friends (Margaret Anne Hodgkinson and Timothy John Edmondson) as his executors and trustees, each of those being the plaintiffs on the present application. (Capitalised terms that follow are as defined in the Will.)
By cl 2 of the Will, the deceased made a number of specific bequests, including, relevantly, a gift of "my block of land at [xxx], Wahgunyah, Victoria and all improvements thereon" to his grandson. By cl 3 of the Will, the deceased gave to his godson in London a pecuniary legacy.
As to the residue of the deceased's estate, after the gift of a 3% share upon trust for each of his three trustees (in lieu of commission) (see cl 4(a)) and a substantial sum to be held upon trust for his daughter (see cl 4(b)), cl 4(c) of the Will provided as follows:
(c) As to the balance thereof upon the trusts in the Schedule hereto AND for the guidance of my Trustees I DECLARE that my principal intention is to provide funds for the secondary education of indigenous students who demonstrate a work ethic.
I interpose here to note that the executors submit that the gift provided by cl 4(c) of the Will is a gift for a charitable purpose (of providing funds for the secondary education of indigenous students and, in particular, indigenous students "who demonstrate a work ethic"). For present purposes, no issue arises as to the charitable status of the gift. It is relevant simply to note that Counsel for the executors made clear that a decision had been taken not to seek approval for the commencement of these proceedings from, nor to join as a party to these proceedings, the Attorney-General (see s 6 of the Charitable Trusts Act 1993 (NSW) (the Charitable Trusts Act)) on the basis that these proceedings (and in particular, the claim for relief under prayer 1 of the summons) are not "charitable trust proceedings" (referring to s 5(2)(b) of the Charitable Trusts Act), as the proceedings relate to the construction of a trust instrument. They do, however, extend beyond the mere construction of the trust instrument - to questions as to the administration or operation of the trust (in particular, the claims for relief under prayers 2 and 3 of the summons), as will be seen in due course.
The Schedule to the Will, headed "TRUST IN RESPECT OF BALANCE OF RESIDUE OF ESTATE (Clause 5(c) [sic]", relevantly contained the following definitions in cl 1: (cl 1.1) "Named Beneficiary" means the Australian Indigenous Education Foundation (ABN 13 127 908 187) (the Foundation); and (cl.1.2), "Beneficiaries" means:
… the Named Beneficiary [i.e., pursuant to cl 1.1, the Foundation] and foundations schools institutions and trusts providing for the secondary education of Aboriginal children including but not in any way limited to Thamarrurr Catholic College, Mary McKillop Foundation, Dulwich Hill High School, Nowra Anglican College, and also includes Aboriginal children selected by my Trustee for assistance with their secondary education.
Clause 2 of the Schedule to the Will contained provision for the trust as to income. Clause 2.1 obliges the trustee, until the Vesting Date (defined in cl 1.8 as the earliest of 30 June 2090 and any other date the trustee may nominate), to pay the income derived in each Year of Income in the manner provided by the remainder of the clause. Clauses 2.2 and 2.3 go on to provide that:
2.2 The Trustee may pay or apply the Income to any one or more of the Beneficiaries as the Trustee thinks fit without any obligation to make payment to all the Beneficiaries or to ensure equality among those to whom payments are made or to continue payments made to that Beneficiary in any previous Year of Income.
2.3 In default of any determination by the Trustee as to the payment or application of the whole or any part of the Income for any Year of Income prior to midnight on 30 June of that year the Trustee must hold the undistributed Income upon trust for the Named Beneficiary.
Clause 3 of the Schedule to the Will, contained provision as to the trust as to capital. Pursuant to cl 3.1, the trustee may at any time appoint pay or transfer any part of the Capital to or for any Beneficiary. Clause 3.2 of the Schedule to the Will obliges the trustee to pay or transfer the Capital and any income accumulated on the Vesting Date occurring, to the Named Beneficiary (i.e., Australian Indigenous Education Foundation). Clause 3.3 provides that the trustee may transfer assets instead of paying money in satisfaction of any amounts payable to any Beneficiary out of Capital.
[3]
The Codicil
By Codicil dated 11 June 2015 (the Codicil), the deceased deleted sub-cl 2(c) of the Will and substituted therefor the following:
To my grandson DARRELL BRIGGS:-
* all my shares in Nina Clothing Pty Ltd [i.e., the Company], or if, at the date of my death, the block of land hereafter mentioned has been transferred to me as a distribution in liquidation of the said company, then
* my block of land at [xxx] Wahgunyah, Victoria [i.e., the Property].
I note that the deceased's grandson's first name is spelt differently in the Will from the spelling of his name appearing in other documents but, as I understand it, there is no issue as to his identity and he has been made aware of these proceedings (though not a party thereto).
[4]
Probate
The executors obtained a Grant of Probate of the Will and the Codicil in March 2016. The Inventory of Property certified by the executors' solicitor in connection with the application for probate included, in item 4, as property owned solely by the deceased, two fully paid ordinary shares in the Company with an estimated value of $84,000; and, in item 5, estimated the balance owing on loan account by the Company as $373,235. That is consistent with information provided by the deceased's former accountant (Mr John Carson) to which I refer in due course later in these reasons.
[5]
The Property
At the time of his death, the deceased was the registered proprietor of the Property (see [7] of Mr Tunchon's affidavit). He was also, as noted earlier, the sole shareholder (owning the two ordinary shares on issue) of the Company (see Annexure "B" to Mr Tunchon's affidavit). Mr Tunchon has deposed to his belief that the Property has (as an improvement on it) a workshop, which is leased to Wahgunyah Automotive Repairs Pty Ltd (see [10] of Mr Tunchon's affidavit) and that the sole shareholder and director of Wahgunyah Automotive Repairs Pty Ltd is the deceased's grandson (see Annexure "F" of Mr Tunchon's affidavit).
The Property was acquired in the deceased's name on or about 30 November 2011 (see Annexure "E" to Mr Tunchon's affidavit) pursuant to a contract for sale executed by the deceased on 16 November 2011. The purchase price was $150,000 (see the copy of the particulars of sale annexed to the affidavit sworn 7 May 2019 of the executors' solicitor, Mr Robert Monahan; those particulars of sale forming part of Annexure "E" to that affidavit).
Enquiries made by the executors' solicitor of the solicitor that attended on the conveyance of the Property in late 2011 (Mr David Kotthoff) produced the following information (see [6] and annexures "B" and "C" to Mr Monahan's affidavit): Mr Kotthoff said that at all times he believed that he was acting for the deceased personally in relation to the purchase of the Property; Mr Kotthoff initially advised that there was nothing in his file to indicate other than that the deceased purchased the land in his personal capacity but subsequently advised that a "more thorough" search of his records had produced a copy of a letter dated 23 November 2011 to the deceased, enclosing a settlement sheet for the purchase of the Property, which indicated that (amongst other things) the balance payable on the purchase of the Property for settlement was $149,769.48; and Mr Kotthoff also found in his records copies of three cheques (each drawn on the bank account of the Company) - one, dated 11 October 2011, for $15,000 (identified as the deposit cheque) made payable to the vendor; one dated 26 November 2011 also made payable to the vendor, for $149,769.48; and the third, also dated 26 November 2011, in the sum of $806.14, made payable to the solicitors acting for the vendor on the conveyance.
Accordingly, it appears from the cheques retrieved by Mr Kotthoff that the whole of the purchase money for the acquisition of the Property was drawn on the Company's account. Settlement of the purchase of the Property occurred in November 2011. The accountant retained to advise the executors, Mr Jolyon Dare, has deposed that he has reviewed the books and records of the Company and that there are no loan agreements or any other documentation relating to the expenses paid by the Company in relation to the Property (both its acquisition and subsequent improvements) (see [5] of Mr Dare's affidavit sworn 7 May 2019). From this, I understand the position to be that there are no arrangements between the Company and any third party in relation to the Property; certainly there is no mortgage or charge registered over the Property.
This accords with the Company's records. Mr Dare has annexed to his affidavit a copy of a trial balance for the Company for the period ending 30 June 2012, which discloses, as expenses, the following items: "[l]and at Wahgunyah" at $171,102.33; and "Wahgunyah improvements under construction" of $15,680.07 (see Annexure "B" to Mr Dare's affidavit).
Mr Dare has also annexed to his affidavit various copies of the Company's general ledgers. The general ledger for the Company for the financial year ended 30 June 2013 includes an item for "[p]roperty improvement Wahgunyah" and there is also an entry for "Depreciation on Wahgunyah Improvements" with a beginning balance showing a depreciation expense at 30 June 2013 of $777.11 for "Wahgunyah Improvements" (Annexure "C" to Mr Dare's affidavit).
The general ledger for the Company for the financial year ended 30 June 2014 discloses expenditure by the Company that relates to the Property (see the ledger item "[p]roperty Improvement Wahgunyah", Annexure "D" to Mr Dare's affidavit); and there are similar entries in the general ledger for the Company for the financial year ended 30 June 2015.
Mr Tunchon has deposed to a conversation with the deceased a few months before the deceased's death, when he says the deceased gave him a copy of his draft Will and said that ''Darryl [the deceased's grandson] will inherit the company which owns the property at Wahgunyah" (see [8] of Mr Tunchon's affidavit)
[6]
Previous property acquisition
There is evidence that at some time prior to the acquisition of the Property, the deceased was the registered proprietor of two adjacent properties at Dulwich Hill in New South Wales, which were used as the Company's warehouse (and to which I will refer as the Warehouse properties) (see [4]-[5] and Annexure "C" to Mr Tunchon's affidavit).
Mr Tunchon has deposed to his belief that the funds used to acquire the Warehouse properties were funds provided by the Company (see [6] of Mr Tunchon's affidavit). Mr Tunchon has annexed to his affidavit a copy of a letter dated 28 June 2011, found amongst the records of the Company, from GouldRalph Accountants, in which the accountants state their understanding that, among other things, the Warehouse properties, though held in the deceased's personal name, were owned by the deceased as a bare nominee or bare trustee for the Company (on the basis of which understanding, advice was given by the accountants as to the GST required to be charged on the sale of the said properties - in particular, that the Company would be liable for GST in relation to the sale of the Warehouse properties) (see Annexure "D" to Mr Tunchon's affidavit).
The accountants' letter also conveyed the understanding that, while the funds for the purchase of the Warehouse properties could have been covered by moneys in the deceased and his wife's joint loan account (a reference, as I understand it, to a shareholders' loan account recorded in the Company's books), "no adjustment was made to this loan account as a result of the purchase of the Properties"; and that the Warehouse properties had always been included in the balance sheet of the Company.
Insofar as the accountants' letter expresses their "understanding" of certain matters in relation to the Warehouse properties, it should be noted that the letter commences by reference to a note from the deceased dated 20 June 2011, from which it might be inferred that the understanding was based on instructions from the deceased given in some form or another. However, there is no evidence of this.
[7]
Enquiries made of various persons in relation to the ownership of the Property
The executors' solicitor has deposed to other enquiries that have been made in order to ascertain the position in relation to the ownership of the Property.
In response to enquiries made of the solicitor that drafted the Will and Codicil, Mr Bryan Neilson of Diamond Conway, (see Annexure "E" to Mr Monahan's affidavit), Mr Neilson advised Mr Monahan that over a four year period up to the date of the deceased's death he had prepared for the deceased numerous Wills and Codicils, for which instructions were given to him by the deceased "direct" or by Mrs Margaret Hodgkinson (one of the co-executors) and that "[u]p until the 2015 Codicil, the instructions always were that the land and cars were [the deceased's] property - in fact, [Mr Neilson] had not heard of Nina Clothing Pty Ltd until the 2015 Codicil". Mr Neilson's recollection is that Mrs Hodgkinson had (at some time) instructed him that:
* [the deceased] had instructed John Carson [the deceased's former accountant], many years ago, to wind up Nina Clothing Pty Ltd and to transfer assets in specie to him as the sole shareholder.
* in mid-2015, [the deceased] learned or found out that this liquidation and distribution had not been completed, but this could be expected soon; and that accordingly, and to [the deceased]'s surprise, title to the land was still in the name of Nina Clothing Pty Ltd but would soon be made over to [the deceased]'s name.
* hence, the purpose of the Codicil was to ensure that his grandson Darrell acquired the land or acquired the company (if the company were still to own the land at the date of [the deceased]'s death).
Mr Monahan has annexed to his affidavit copies of documents provided by Mr Neilson in response to enquiries made by Mr Neilson of Mr Carson, the deceased's former accountant (see Annexure "E" to Mr Monahan's affidavit) as to the position in relation to ownership of the Property. Mr Carson said he had been "going through" a box of documents and expressed the view that the "land ownership issue is not as straightforward as I believed", stating that: the property was purchased with the Company's bank account; improvements had been made from the Company's bank account; GST input credits had been claimed by the Company for its purchases; deductions "for repairs, water etc." had been claimed by the Company; and rent on the property had been declared as income by the Company (but that the property purchase was actually in the deceased's name). Mr Carson also stated that the view had been taken in relation to the previous Warehouse properties that the deceased held the title deeds as a bare nominee or bare trustee and that the Company was the beneficial owner (thus, it was the Company that was assessed on the capital gain, not the deceased, which was a considerable taxation advantage; but there was GST on the sale, which was a disadvantage).
[8]
The Debt
As noted earlier, the inventory of property attached to the grant of probate, indicates an item noted "[b]alance owing of loan account by Nina Clothing Pty Ltd", estimated at $373,235 (see Annexure "A" to Mr Tunchon's affidavit). Consistently with this, the general ledger for the Company for the financial year ended 30 June 2015 indicates an ending (credit) balance for that financial year for the deceased's loan account of $368,778.38 (see Annexure "E" to Mr Dare's affidavit).
Mr Monahan has annexed to his affidavit (forming part of Annexure "E" to Mr Monahan's affidavit) copies of correspondence with Mr Carson as to the deceased's loan account in the Company records. In an email dated 15 December 2015, Mr Carson advised that there were transactions on the loan account every year and that it went from $1,659,924 at 30 June 2011 to $883,932 at 30 June 2012 "because the Nina Clothing factory was sold for $1.8 million plus GST during that financial year, and a substantial part of the proceeds went toward paying off the loan". A balance sheet for the Company as at 30 June 2012 was attached, which recorded "[l]oans from directors", under the heading "Non-current liabilities", for the 2011 and 2012 financial years in roughly those amounts.
Mr Carson also advised that his earliest records were for the 2000 financial year (those not being in evidence before me) and stated that "[t]he loan existed then and has existed continuously ever since". Mr Carson referred to a deed signed in May 2013 between the deceased and the Company (the May 2013 Deed), a copy of which was in evidence, stating that this deed provided for retrospective interest on the loan from the beginning of the loan at a rate of 8%; and that a charge was lodged against the Company's assets in relation to the loan. Mr Carson stated that no interest on the loan had ever been paid (calculating interest, if it were to be payable, at compound interest at around $1.6 million or, as simple interest, around $900,000). In an email dated 23 January 2016 to Mr Neilson, Mr Carson observed that although the "loan agreement" stated that it was executed in accordance with s 127 of the Corporations Act 2001 (Cth), it had been signed by the deceased alone; and that the document contained a statement to the effect "[t]hat in consideration of the loan not being recalled …" (expressing the opinion that this was past consideration). Mr Carson also speculated that the "loan agreement" had been signed as a strategic move in light of a then tax audit (but said that the loan agreement had no effect on the outcome of that audit). Mr Carson confirmed in that email that the principal balance of the deceased's loan account with the Company was $373,235.
From the calculations prepared by Mr Carson, it appears clear that the value attributed by the executors in the inventory of property to the shares in the Company (of $84,000) is on the basis that the Company owes a sum of $373,235 to the estate (see the calculation prepared by Mr Carson, which forms part of Annexure "E" to Mr Monahan's affidavit).
[9]
Proposed establishment of a private ancillary fund
The executors (following the receipt of advice from their accountants) are proposing to establish a "private ancillary fund", the proposed terms of which are contained in the trust deed annexed to Mr Dare's affidavit (the proposed trust deed).
Private ancillary funds are provided for, as a form of deductible gift recipient, in Item 2 of the table contained in s 30-15 of the Income Tax Assessment Act 1997 (Cth) (the 1997 Act). Such funds are, therefore, subject to endorsement by the Commissioner of Taxation. Since 1 January 2014, private ancillary funds, as "income tax exempt funds" are deemed "charities" (see the Charities (Consequential Amendments and Transitional Provisions) Act 2013 (Cth)), and therefore private ancillary funds are also automatically registered with the Australian Charities and Not-For-Profit Commission (ACNC).
Item 2 of the table contained in s 30-15 of the 1997 Act provides for certain types of "deductible gift recipients" as follows:
An ancillary fund established and maintained under a will or instrument of trust solely for:
(a) the purpose of providing money, property or benefits:
• to a fund, authority or institution gifts to which are deductible under item 1 of [the] table; and
• for any purpose set out in the item of the table in Subdivision 30-B that covers the fund, authority or institution; or
(b) the establishment of such a fund, authority or institution.
Guidelines for "private ancillary funds" (the Private Ancillary Fund Guidelines 2009 (Cth)) have been made pursuant to s 426-110 of Sch 1 of the Taxation Administration Act 1953 (Cth).
The executors have sought an "Early Engagement Advice Request" from the Commissioner of Taxation, for confirmation from the Commissioner of Taxation as to whether the draft terms for the Foundation will meet the "private ancillary fund" conditions (see Annexure "F" to Mr Dare's affidavit). The response to that request, in April 2017, was to confirm that the proposed meaning of "eligible entity" in the proposed trust deed was consistent with the purpose of an ancillary fund provided in item 2 of the table in s 30-15 of the 1997 Act and that if the current instrument of trust is replaced by the proposed trust deed for a private ancillary fund with the proposed meaning of "eligible entity" then a private ancillary fund will be established by the amended instrument of trust. (That email noted that, to be eligible for a refund of franking credits the trust would need to be endorsed as a deductible gift recipient or endorsed as exempt from income tax as a registered charity.)
The executors have corresponded with the Foundation as to the proposed establishment of the "private ancillary fund" (see Annexures "G" and "H" of Mr Tunchon's affidavit). The Foundation, by letter of 25 January 2019 (Annexure "H" to Mr Tunchon's affidavit), has advised that:
I also confirm that we have no objections to the Supreme Court of NSW making the orders to establish a Private Ancillary Fund through which the trustees of his Estate intend to manage the charitable trust; and that should the trustees decide at any time to make any further donations to A[i.e., the Foundation], we are happy to discuss and consider any wishes expressed by the trustees as to how the donation is applied to the benefit of the beneficiaries named in Mr Tunchon's Will.
Pausing here, it is not clear the reliance sought to be placed on the above indication of lack of objection by the Foundation to the establishment of a private ancillary fund; nor is it clear that the Foundation appreciates that the effect of a distribution of the whole of the capital of the trust to the Fund would be that there would be no potential operation in future of what Counsel for the executors refers to as the "taker in default of appointment" provisions of the Will. It would then simply be an eligible entity to whom income might be distributed out of the Fund.
[10]
Counsel's opinion
Though framed as submissions, Counsel's opinion on the issues for determination on the present application was expressly provided on the basis that it was advice for the benefit of the Court for the purposes of the judicial advice application (as contemplated by the procedure referred to by Lindsay J at [107]-[121] of Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 (Chow Cho-Poon)).
Counsel's opinion, in summary, is as follows as to the questions on which judicial advice is sought:
(i) that the question posed in prayer 1 of the summons should be answered in the affirmative, on the basis that a "private ancillary fund" (or, more precisely, the Fund proposed to be established pursuant to the terms annexed to Mr Dare's affidavit) will meet the definition of "Beneficiary" contained in cl 1.2 of the Schedule of the Will; and
(ii)-(iii) that, in relation to the questions posed in prayers 2 and 3 of the summons, the deceased has expressed a "manifest intention" that the Property is to pass to his grandson and that, in such circumstances, and consistent with the Ireland as Executor of the Estate of the late Charles Stuart Gordon v Retallack [2011] NSWSC 846 (Ireland v Retallack) line of authority, the executors would be justified in transferring the Property directly to the deceased's grandson or, alternatively, transferring the shares in the Company to the deceased's grandson, and disregarding the Debt.
For the reasons set out below, I agree with some but not all of those conclusions.
[11]
Relevant principles
The relevant principles applicable in relation to applications for judicial advice pursuant to s 63 of the Trustee Act are well known. The jurisdiction is enlivened where there is a question with respect to the management or administration of trust property (see the observations by Brereton J, as his Honour then was, in BTA lnstitutional Services Australia Ltd & BNY Trust (Australia) Registry Ltd [2009] NSWSC 1924 at [6] in that regard); or as to the interpretation of the trust instrument.
The term "management or administration" of trust property has been construed to refer both to the manner in which trust property is "managed, administered, handled, directed or controlled, and to the actual carrying out of those functions" (see Application of Gnitekram Marketing Pty Limited [2010] NSWSC 1328 per Hallen AsJ, as his Honour then was, at [13]).
Here, Counsel for the executors has opined, and I accept, that the application brought pursuant to s 63 of the Trustee Act relates both to the interpretation of the trust instrument (that is, the Will) (prayer 1) and as to how the estate is to be managed and administered (prayers 2 and 3).
Once the jurisdiction is enlivened, there remains a discretion as to whether to provide judicial advice (see the observations of the plurality in the High Court in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (the Macedonian Church Case) at [59]; and of Kiefel J, as her Honour then was, at [196], her Honour there noting the observations as to the jurisdictional bar to s 63 relief made by the plurality in the Court of Appeal (His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Inc [2007] NSWCA 150) as to the purpose of s 63). It was recognised by her Honour that the principal purpose of s 63 is the protection of the interests of the trust but that another relevant purpose is the protection of a trustee acting upon such advice (which may ensure the attainment of the principal purpose, by removing the concern of a trustee about exposure beyond the usual indemnity).
Counsel for the executors notes that in Chow Cho-Poon (at [45]), Lindsay J observed that, in considering the Court's jurisdictional discretion, the "Court must be guided by what it perceives to be in the best interests of the trust estate" (his Honour there citing with approval the decision in Application by Marilyn Joy Cottee; Estate of Gwenyth Shirley Smith [2013] NSWSC 47 at [35]).
Counsel for the executors considers (and I broadly accept) that the present application is consistent with the principal purpose of protecting the interests of the trust and is consistent with the subject matter, scope and purpose of s 63 of the Trustee Act as articulated in the authorities referred to above. That said, as I explain below, some of the questions in respect of which judicial advice is sought (particularly that raised by prayer 2) seem to me to require factual findings that go beyond the proper scope of a judicial advice application insofar as they would involve a determination of the rights of parties to the relevant transactions (see, for example, NSW Trustee and Guardian v Wardy [2017] NSWSC 1466 at [3]-[6] per Slattery J).
[12]
Determination
I have set out already the particular issues on which judicial advice is sought and to the opinion put forward by Counsel for the executors as to the advice that should be proffered. I now turn to each of the prayers for relief.
[13]
Prayer 1 of the summons - the "private ancillary fund"
The first question (prayer 1 of the summons) is as to whether the executors would be justified in distributing the income and capital of the trust created in cl 4(c) of the Will (as amended by the Codicil), pursuant to the powers to appoint income in cl 2 of the Schedule of the Will and/or capital in cl 3 of the Schedule of the Will to a "private ancillary fund" (the Fund) to be established (if the advice is that the executors would so be justified) in the terms which are contained in Annexure "G" of Mr Dare's affidavit.
As to the first question that has been posed, Counsel for the executors has opined that a private ancillary fund in terms of the Fund that has been proposed will fall within the definition of "Beneficiary" under cl 1.2.
Under the provisions of the Schedule to the Will, as set out earlier, the Foundation (being the "Named Beneficiary") is the beneficiary that will take, in default of appointment, both income and capital of the trust. Thus, the Foundation has an interest in both the income and capital of the trusts, with that interest being: vested in interest (but not in possession); defeasible (and, in particular, defeasible while the power of appointment is in existence); and contingent (in terms of its interest in the capital, the interest is contingent on the Foundation being in existence as at the Vesting Date occurring; and, in terms of the income, contingent on the Foundation being in existence as at 30 June each year) (reference being made by Counsel for the executors to Stein v Sybmore Holdings [2006] NSWSC 1004 on this point).
Counsel for the executors notes that the term "Beneficiaries", as defined in cl 1.2 of the Schedule to the Will, includes both "foundations" and "trusts"; and is of the opinion that it is not necessary that the foundation or trust "actually (and directly) provide for the funding of secondary education of Aboriginal children", as opposed to providing in some way "for the secondary education of Aboriginal children".
I consider that, on the proper construction of the Will, a foundation or trust which provides funds to other foundations or charities that in turn provide for the funding of the secondary education of Aboriginal children, falls within the definition of "Beneficiaries" under cl 1.2 of the Will. In other words, although there is reference in cl 1.2 of the Will to a number of educational institutions, I do not consider that it is necessary (in order to fall within the class of beneficiaries) that the relevant entity or organisation be an educational institution. So much is apparent, in my opinion, from the inclusion in the list of Beneficiaries of the Named Beneficiary (i.e., the Foundation) (which is not a school or educational institution as such) and from the fact that the definition is not limited to "schools" (or "institutions") but expressly contemplates "foundations" and "trusts" (without any express qualification that they be involved directly in the provision of education). Such an interpretation is also consistent, in my opinion, with the inclusion in the definition of (individual) Aboriginal children who may be selected by the trustee for assistance with their secondary education (which contemplates not that the trustee will have a direct educational role but, rather, a role in the provision of assistance - presumably financial - with their secondary education).
The terms of the proposed trust deed for the Fund (see Annexure "G" to Mr Dare's affidavit, which appears to be a pro forma or "model trust deed" document, with instructions for its completion), relevantly include the following provisions.
Clause 4.1 ('Payment and application of the Trust Fund') provides that:
(a) The Trustee must pay or apply the Trust Fund solely for the purpose of providing money, property or benefits to or for Eligible Entities or the establishment of Eligible Entities as the Trustee decides, in accordance with the Private ancillary fund guidelines.
(b) Where gifts to an Eligible Entity are deductible only if, among other things, the conditions set out in the relevant table item in Subdivision 30-B of [the Income Tax Assessment Act 1997 (Cth)] are satisfied, a payment or application of the Trust Fund must be made in accordance with those conditions.
…
The term "Eligible Entity" under the proposed trust deed is to be defined as including:
a fund, authority or institution:
1 which is Charitable [or:
a) would be a charity within the meaning of the Charities Act 2013 (Cth) if it were not a 'government entity' as defined in that Act; and
b) would, but for its connection to government, be a charity as set out in section 69D of the Trustee Act 1936 (SA)] and meets a requirement in c)
c) is a
- foundation
- school
- institution or trust
that provide for the secondary education of Aboriginal children including but not in way limited to Thamurrur Catholic College, Mary McKillop Foundation, Dulwhich [sic] Hill High School, Nowra Anglican College, or
Aboriginal children selected by Patrick Ambrose Tunchon's Trustee for assistance with their secondary education, and
2 gifts to which are deductible under item 1 of the table in section 30-15 of [the Income Tax Assessment Act 1997 (Cth)].
As Counsel for the executors notes, the definition of "Eligible Entity" includes charities that are defined consistently with the term "Beneficiaries" as contained in cl 1.2 of the Schedule to the Will. Given that it is a requirement (in order to fall within the definition) that the relevant entity be a foundation, school, institution or trust as described in (c) (or Aboriginal children as selected by the deceased's trustee for assistance with their secondary education), the effect of the definition is to narrow eligible entities (at least those which are funds, authorities or institutions) to those that satisfy the additional requirements of (1) (i.e., in effect that they be a charity or that gifts to them be deductible). Thus, any entity falling within the definition of "Eligible Entity" in the Fund trust deed would necessarily satisfy the description of "Beneficiaries" under the Will.
I interpose here to note that there is some doubt in my mind as to how an Aboriginal child selected by the trustee as contemplated under the Will would satisfy the definition of "Eligible Entity" under the terms of the proposed trust deed; but that does not gainsay the proposition that an "Eligible Entity" under the trust deed must necessarily include entities that satisfy the definition of "Beneficiaries" under the Will.
Clause 17 of the proposed trust deed contains provision for the winding up of the Fund on the earliest of the date of it ceasing to be a private ancillary fund or the Fund's endorsement as a deductible gift recipient being revoked (and in those circumstances after satisfaction of debts and liabilities and compliance with any transfer obligations to which the clause there refers, the trustee must pay or apply the assets of the Fund to or for Eligible Entities, as the trustee decides).
Counsel for the executors has opined that the executors would be justified in distributing the income and capital of the trust created in cl 4(c) of the Will (and as amended by the Codicil), pursuant to the powers to appoint income in cl 2 of the Schedule of the Will and/or capital in cl 3 of the Schedule of the Will to a "prescribed ancillary fund" (and in particular, the Fund).
On the basis that the Fund satisfies the definition of Beneficiaries under the Will, I agree (subject only to the executors being satisfied that, in accordance with the trust deed ultimately adopted for the establishment of the Fund, the income and capital so distributed will be used for the provision of assistance for the secondary education of Aboriginal children, as the Will contemplated), that the executors would be justified in making a distribution of income and/or capital to the Fund.
[14]
Prayer 2 of the summons - beneficial ownership of the Property
Pursuant to prayer 2 of the summons, the executors seek advice as to whether they are justified in transferring the Property on the basis that the deceased held the Property subject to a resulting trust in favour of the Company.
Counsel for the executors notes in this regard that, while the Will made a gift of the Property to the deceased's grandson, the Codicil gave the shares in the Company to the grandson and provided that if the Property has been transferred to the deceased as a distribution in a liquidation of the Company, then the Property would be left to the grandson. The grandson's company (i.e., Wahgunyah Automotive Repairs Pty Ltd) is the lessee of the Property (as noted above at [14]). It is submitted that this explains why the deceased intended the property to pass to the grandson.
It is the opinion of Counsel for the executors that, in circumstances where the evidence indicates that the purchase price (and outgoings after acquisition) for the Property have all been sourced from the Company, that the deceased held the Property as a trustee on resulting trust in favour of the Company.
The presumption of resulting trust was articulated in Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 (Calverley) (at 266) by Deane J (see also to similar effect Gibbs CJ at 246-247 and Mason and Brennan JJ at 258) as arising where two or more persons advance the purchase price of property in different shares, it being presumed that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it.
As noted in Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 (Amit Laundry) (at [162]), the theoretical basis of resulting trusts and the possibility or desirability of identifying clear-cut categories of resulting trust (and even the reason for the appellation "resulting") have been the subject of much judicial and academic debate, there referring to Kerr v Baranow [2011] 1 SCR 269; [2011] SCC 10 at [16] (as noted by Edelman J, sitting as his Honour then was in the Supreme Court of Western Australia, in Anderson v McPherson [No 2] [2012] WASC 19 (Anderson v McPherson) at [89]) and more generally to the discussion on this topic by PW Young, C Croft and ML Smith in On Equity (Lawbook Co, 2009) at [6.930]).
The presumption of resulting trust involves a legal presumption (see J D Heydon and M J Leeming, Jacobs' Law of Trusts (7th ed, 2006) (Jacobs' Law of Trusts) at [1201] and [1210]; W Swadling, "Explaining Resulting Trusts" (2008) 124 Law Quarterly Review 72), namely the presumption of a declaration of trust (see Anderson v McPherson where Edelman J referred to the rebuttable presumption as being "of the fact of a manifest declaration" (at [106]); see also, Jacobs' Law of Trusts (at [1210])), i.e., the resulting trust is premised on a presumed intention to create an equitable (beneficial) interest in the acquired property in someone other than, or in addition to, the person in whom legal title is vested.
Once the primary fact giving rise to the presumption is established (i.e., that part or all of the purchase price has been provided by one party but legal title is vested in another), the burden falls on the party disputing the existence of a resulting trust to rebut the presumed fact on the balance of probabilities (see Ryan v Ryan [2012] NSWSC 636 (Ryan v Ryan) at [57]; Weige v Cupton Pty Ltd [2012] NSWCA 414 (Weige v Cupton) at [46]; Jacobs' Law of Trusts at [1210]). Where that party fails to rebut the presumption, the court "upon consideration of all circumstances presumes there was a declaration [of trust], either by word or in writing, though the plain and direct proof thereof be not extant" (Cook v Fountain (1733) 3 Swans 585 at 591; (1733) 36 ER 984 at 987 (Lord Nottingham LC)).
It has been made clear in the authorities that the presumption of resulting trust is the "starting point of a factual enquiry" about the intention of the party (or parties) who provided the funds for the purchase in question (see Black Uhlans Incorporated v New South Wales Crime Commission [2002] NSWSC 1060 (Black Uhlans) at [136]; Dyer v Dyer (1788) 2 Cox Eq Cas 92; (1788) 30 ER 42 at 43; Fowkes v Pascoe (1875) LR 10 Ch App 343 at 352; Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76 at 83); that the presumption operates "to place the burden of proof [on the party disputing the trust], if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds for the purchase" (Nelson v Nelson (1995) 184 CLR 538 at 547; [1995] HCA 25 (Deane and Gummow JJ)); and that the search for the intention of the relevant party (or parties) is as to a "definite" not "nebulous" intention (see Weige v Cupton at [46], referring to Drever v Drever [1936] ALR 446 at 450 (Dixon J)) or, in other words, the "objective, or manifest, intention ... not a subjective, uncommunicated intention but [an intention] to be inferred from what the parties do or say" (see Anderson v McPherson at [156] (Edelman J citing Calverley at 261 (Mason and Brennan JJ) and at 270 (Deane J))).
The relevant intention is to be found as at the date of purchase (or immediately thereafter) (Calverley at 251 (Gibbs CJ); and at 262 (Mason and Brennan JJ)), although evidence of later acts and declarations are admissible (as admissions against interest) against the party who made them (Black Uhlans at [138] (Campbell J, as his Honour then was)).
As noted in Amit Laundry (at [166]-[167]), establishing on the balance of probabilities that a contribution of the requisite character has been made is a factual precondition to a successful assertion that there is a presumption of resulting trust (see Hamed v Elddin [2016] NSWCA 9 at [23] (Meagher JA and Gleeson JJA, Sackville AJA); Elddin v Hamed (No 2) [2015] NSWSC 654 at [83] (Button J); Ong v Lottwo Pty Ltd (in Liq) [2013] SASCFC 57 (Ong v Lottwo) at [40] (Nicholson J, with whom Kourakis CJ and Stanley J agreed)); it is essential that the alleged contribution bears the character of purchase moneys (Calverley at 246 (Gibbs CJ); Ong v Lottwo at [28]-[30]); and, in identifying the purchase price, a "broader concept" is to be applied than simply the stipulated consideration for the purchase (Black Uhlans at [144]; Campbell J) - rather, the incidental costs of the purchase, such as legal expenses, stamp duty and registration may be taken into account (see Murtagh v Murtagh [2013] NSWSC 926 at [81] (Hallen J); Ryan v Ryan at [46]; Martech Energy Systems Pty Ltd (in liq) v Bell [2005] VSC 198 at [8] (Hollingworth J); Shepherd v Doolan [2005] NSWSC 42 at [24] (White J, as his Honour then was); Black Uhlans at [144] (Campbell J); Ryan v Dries [2002] NSWCA 3 at [52]-[53] (Sheller JA); Currie v Hamilton [1984] 1 NSWLR 687 (Currie v Hamilton) at 691 (McLelland J, as his Honour then was)); what is significant being "the cost to the purchasers rather than the benefit to the vendor" (Currie v Hamilton at 691).
Contributions to the acquisition of the property after its acquisition (such as mortgage repayments) will not necessarily (nor ordinarily) be relevant for the purposes of the resulting trust presumption (see Calverley at 262-263 (Mason and Brennan JJ); Amit Laundry at [168] and the authorities there referred to at [188]-[208]).
In the present case, what Counsel for the executors points to, as giving rise to the presumption of a resulting trust, is the evidence of payment of the whole of the purchase price for the Property out of the Company's funds (and the fact that the title to the Property was registered in the deceased's name). The evidence of the payment by the Company of amounts referable to the subsequent improvement of the Property cannot be relevant to the question as to whether there is a presumed resulting trust that arose at the time of acquisition (at least in the absence of any evidence of an agreement between the parties at the time of the acquisition of the Property to the effect that such expenditure would be reflected in the beneficial ownership of the Property). Nor is the evidence as to the previous accounting treatment of the ownership of the Warehouse properties of any assistance in establishing the relevant intention at the time of the acquisition of the Property (and I note that Counsel for the executors disavowed any reliance on this as some kind of evidence of tendency).
If the presumption has arisen, then (as Counsel for the executors submits) no question of any "presumption" of advancement would apply as an exception to (or in qualification of) the presumption of resulting trust, the relationship between the Company and the deceased not being a relationship of the kind capable of attracting the so-called presumption of advancement (and, hence, it is not necessary to enter into the debate as to the precise nature of the so-called presumption of advancement - see the discussion in Amit Laundry at [230]-[231]).
There is little difficulty in concluding, on the evidence before me, that the purchase moneys were paid out of the Company's funds (the copies of the cheques drawn on the Company's bank account make that clear). There is, however, little evidence as to the intention of the deceased (who was the sole director and shareholder of the Company at the time and whose intention would presumably be attributable to the Company), other than the manner in which the Property was treated in the (incomplete) financial statements of the Company and the payment of expenses for and improvements to the Property out of the Company's funds (apart from the evidence of his own understanding being that the Property was an asset of the Company - in his conversation with his brother at the time of the draft will to which Mr Tunchon has referred). (As the relevant Company records are not to hand, it is impossible to ascertain whether there was any adjustment made to the deceased's loan account as a result of the purchase of the Property that would be consistent with it being the intention that the beneficial ownership of the Property be other than as reflected in the legal title. The highest that the evidence goes in that regard is that no adjustment was made to the deceased's loan account when the previous purchased of the Warehouse properties occurred.)
There is certainly, therefore, a basis on which it could be concluded, on the balance of probabilities, that the presumption of resulting trust did arise and that it has not been rebutted (the onus of rebuttal falling on the deceased). That said, as adverted to earlier, it is not the function of the Court when giving judicial advice on an application such as this to determine factual controversies of the kind that could have arisen as between the Company and the deceased's estate had the issue as to the beneficial ownership of the Property arisen in the context of contested litigation.
The Company clearly has an interest in the determination of the issue as to where the beneficial interest in the Property lies (not least because it would then be an asset available to be sold in order to discharge any liability to the estate as to the Debt) (and the opinion formed by Counsel for the executors as to that issue is not inconsistent with the Company's interest; hence there is no contradictor on this question). The deceased himself appears (by reference to the conversation to which his brother has deposed) to have understood that the Property was owned by the Company (notwithstanding that he was the registered proprietor) but also (by reference to the instructions that his former accountant recalls having been given by one of the co-executors on the deceased's behalf) that he was able to bring about a position in which he held both the legal and beneficial interest in the Property (by winding up the Company and a transfer of any interest it had in the Property to him). Further, the tax treatment referable to expenses paid for or in relation to the Property is consistent with an understanding that it was the asset of the Company.
Counsel for the executors notes that the legal personal representative of a deceased has an obligation, where property is held by the deceased as a bare trustee, to ascertain the terms of the trust and to carry out those terms. In Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370, for example, it was noted that a trustee who does not have active duties to perform may be bound immediately to transfer the trust property to the beneficiary absolutely entitled (see at 398); and see In the matter of NL Mercantile Group Pty Ltd [2018] NSWSC 1337 and In the matter of Houben Marine Pty Ltd (in liq) [2018] NSWSC 745, where Gleeson JA, sitting at first instance in the Corporations List, recognised that a bare trustee has an obligation to safeguard the trust property. Here, it is noted that the executors have knowledge that causes them to be concerned that the Property is held on resulting trust for the Company (see T 39/40). Hence, the executors accept they have an obligation to ascertain how they would be justified in dealing with the Property, and hence the need for judicial advice.
However, I do not consider it appropriate to make any concluded finding, in the context of a judicial advice application, as to where the beneficial interest in the Property presently lies (certainly in the absence of a proper contradictor). That said, the conclusion I have reached (see [77] above) is that there is a reasonable basis on which it could be concluded on the balance of probabilities that a presumption of resulting trust does arise (and has not been rebutted), on the evidence before me. Thus, I consider that, unless and until there were to be a determination otherwise, the executors would not be justified in treating the Property as an asset beneficially owned by the estate. In circumstances where it seems likely that the Company has a claim to the beneficial ownership of the Property on the basis of a resulting trust in its favour and where (assuming there to be no further factual material relevant to that issue than is presently before the Court), I consider that the executors would be justified in not disputing that claim, I have concluded (and will so advise) that the executors would be justified in transferring the Property, for no consideration, to the Company on the basis of an acceptance by the executors that the Property is held by them on a resulting trust in favour of the Company.
[15]
Prayer 3 - the Debt recorded in the Company records as owing to the deceased
Finally, the executors seek advice as to whether they are justified in releasing the Debt. The practical issue that arises with respect to the Debt is that, if the Property is held subject to a resulting trust for the Company, then the intended gift by the deceased of the Property to his grandson may be defeated - since the grandson would obtain the shares in the Company (which on this hypothesis is the beneficial owner of the Property) but if the Company owes a debt to the estate in the amount recorded in the Company records (which, as the executors submit, there would be a duty to call in) the Company might be required to sell the Property in order to discharge that debt.
Counsel for the executors notes that the terms of any loan as recorded in the deceased's loan account are unclear and that, if the loan terms are silent on the issue, then the loan may be considered as repayable "on demand", with the result that the limitations period is reckoned from the time of receipt of the loan by the borrower (that is, upon the advance occurring) (see Young v Queensland Trustees Ltd (1956) 99 CLR 560; [1956] HCA 51 (Young v Queensland Trustees)). The limitation period in such circumstances is six years from the date of the advance (see s 14(1)(a) of the Limitation Act 1969 (NSW) (Limitation Act)), subject to the operation of s 54 of the Limitation Act. In that regard, Counsel for the executors says that it is unclear whether the Debt has relevantly been confirmed (and, hence, whether the limitation period has been extended or refreshed) whether by the May 2013 Deed or by reference to the acknowledgments in the general ledger of the Company). Counsel for the executors says that, even if there has been a confirmation of the Debt, then it is still unclear whether such confirmation has occurred within the six year limitation period.
Counsel for the executors notes that, leaving aside the Debt and the shares in the Company, the value of the estate according to the inventory of property, is $3,336,286.92; and that taking into account the Debt (but not the shares in the Company), the value of the estate is $3,709,521.92. Thus, it is noted that the Debt (at $373,235) is approximately 10% of the value of the estate (and not including the value of the shares in the Company). Having regard to the gifts in the Will, and particular, the gift of the residuary provided for in cl 4 of the Will, the effect of disregarding the Debt is, therefore, to reduce the "balance" payable pursuant to cl 4(c) of the Will (being the charitable trust for the purpose of providing funds for the secondary education of indigenous students, and in particular, indigenous students who demonstrate a work ethic).
Counsel for the executors considers that, given the lack of evidence (including documentary evidence) concerning the Debt, and particularly on the basis that one may infer that the Debt is an on demand/ at call loan and subsisted prior to the 30 June 2000 financial year, the executors would be justified in disregarding the Debt. It is said that this view is confirmed when one considers the evidence surrounding the deceased's intention to gift the Property to his grandson and it is submitted that the principles outlined by Pembroke J in Ireland v Retallack, to which I refer below are relevant in the current circumstances.
In Ireland v Retallack, the will provided for a gift of real property but that property was not held by the deceased; rather, the property was held by a company of which the deceased had 989 of the 990 shares on issue. There was a clause in a will that expressly permitted the executor to "manipulate" the assets of the deceased's estate in order to give effect to the gift of certain real property. Pembroke J (at [10]-[16]) considered a line of authorities standing for the proposition that, where a deceased arms an executor with control of entities that hold property, then the executor ought to use that control to give effect to a gift of property where that property does not prima facie form part of the estate, but is held by the entity (see for example Hendry v Perpetual Executors and Trustees Association of Australia Ltd (1961) 106 CLR 256; [1961] HCA 44, Re Bowcock; Box v Bowcock [1968] 2 NSWR 697 and Re O'Callaghan [1972] VR 248).
Counsel for the executors notes that in Ireland v Retallack, there was a debt to the National Australia Bank for an amount that exceeded $1.5 million (see [24] in Ireland v Retallack); and that, at [22], Pembroke J said:
The Company was effectively the alter-ego of the Testator. He caused it to acquire its assets. He was the principal borrower from the bank and the Company was his guarantor. The Company served his purposes. He made the decision on its behalf. Whether or not the minority shareholder holds a different view, there could hardly be any oppression in this case if the executor exercises control of the Testator's former shareholding to give effect to the Testator's manifest intention. The inability in argument to postulate any actual oppression that could conceivably arise on the facts of this case tends to illustrate the artificiality of the submission.
In the present case, Counsel for the executors considers that the Company could be considered the "alter-ego" of the deceased; particularly where (as seen in the Will), the deceased treated the Property as his (but varied this by the Codicil), where the Debt was as between the deceased and Company (with no third party lender involved), and where the deceased held all of the shares in the Company (i.e., unlike the position in Ireland v Retallack, there is no minority shareholding). It is noted that (at [16]) in Ireland v Retallack, Pembroke J observed that:
The reasoning in all of these cases is compelling. However, there is said to be a point of distinction in this case because the Testator does not hold the beneficial interest in all of the issued shares in the Company. He only holds 99.9% of the shares. For my part, I do not see why this should make a difference. The Testator, and hence his executor, controls the Company. By reason of that control, the executor is in a position to give effect to the manifest intention of the Testator. In my view, subject to what follows, he is under a legal duty to do so.
Counsel for the executors in the present case considers that the deceased has expressed a "manifest intention" that the Property is to pass to his grandson and that, in such circumstances, and consistent with the Ireland v Retallack line of authorities, the executors would be justified in transferring the Property directly to the grandson, or alternatively, transferring the shares in the Company to the grandson and disregarding the Debt.
The issues thrown up by this third question are, thus, as to: whether the loan recorded in the books of the Company is statute-barred; and, if not (or if there is uncertainty as to that issue), whether the executors would be justified in either treating it as statute-barred or releasing it in order to give effect to the manifest intention of the deceased.
The starting point in addressing those issues must be that the books of the Company (in particular the balance sheet of 2012 and the general ledgers that were in evidence for the period from 2012-2015), consistently record a loan owing to the deceased (under his loan account with the Company).
There is evidence from the deceased's former accountant that the loan was recorded in the accounts of the Company (though in what amount is unclear) from at least 2000. It is unclear what the terms of the loan recorded in the loan account were. If the accounts properly record a loan by the deceased to the Company, then in the absence of an agreement as to the time at which that loan would be paid, then the authorities (to which Counsel for the executor has pointed) would suggest that this was a loan repayable on demand.
In Ogilvie v Adams [1981] VR 1041, Fullagar J (holding that, when money is advanced on terms that it is to be repayable "on demand", then the cause of action for recovery accrues on the date of the advance without the need for any demand) said (at 1043):
The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor's money, and this whether the creditor brought an action of debt or an action in indebitatus assumpsit. Therefore if A lends money to B, then instantly B is detaining A's money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call) is not sufficient to contract out of that situation where all else that is known of the terms of the contract is that A has paid money to B by way of loan. The lender's cause of action still arises instanter on the receipt of the money by the borrower, so that the lender's cause of action becomes statute barred at the expiry of six years after the receipt of the money. (my emphasis)
That prima facie position was noted in Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWSC 222, by Hodgson CJ in Eq (as his Honour then was), where there were loans by a company to associated companies and persons, and there was no evidence that this money was not immediately due and payable, i.e., that such loans would be immediately payable, without demand (see also Brott v Grey [2000] FCA 1727 per Cooper J; applied by me in Chidiac v Maatouck [2010] NSWSC 386 (Chidiac) at [183]).
There is no evidence in the present case from which any inference could be drawn that the loan account did not correctly record the position as between the Company and the deceased in relation thereto. Nor is there any evidence from which it could be inferred that the loan there recorded was not repayable on demand. The evidence indicates that the deceased drew down on company funds from time to time and that those amounts were credited in the Company records against the amount owing to him by the Company.
Thus, the evidence supports the conclusion, from the (albeit incomplete) financial records of the Company, that there was a Debt repayable to the deceased as reflected in the end balance of his loan account at the time of his death.
The executors clearly have a duty to call in the assets of the estate (and to uphold the Will). In The Trustees of The Christian Brothers In Western Australia (Inc) v Attorney-General (WA) [2006] WASC 191, Templeman J said (at [37]) that, "[o]ne of the important duties of a newly appointed trustee is to get in the trust property". The assets of the estate would include the amount payable to the deceased on his Company loan account, assuming that it is not statute-barred.
Section 14(1)(a) of the Limitation Act provides as follows:
An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom he claims:
(a) a cause of action founded on contract (including quasi contract) not being a cause of action founded on a deed,
Section 63(1) of the Limitation Act extinguishes the right and title of the person formerly having the cause of action:
… on the expiration of a limitation period fixed by or under this Act for a cause of action to recover any debt damages or other money, the right and title of the person formerly having the cause of action to the debt damages or other money is, as against the person against whom the cause of action formerly lay and as against his successors, extinguished.
Where there is a cause of action based upon an obligation to repay a loan that was repayable on demand, then, unless the making of the demand was a condition precedent to the obligation to pay arising (or the limited exception in banker/customer cases arises), the cause of action accrues when the loan is advanced. In Young v Queensland Trustees Ltd , to which Counsel for the executors has referred, the High Court, noting that a loan of money payable on request creates an immediate debt, said (at 566):
Speaking of a promissory note payable on demand Parke B. in Norton v Ellam, said: "It is the same as the case of money lent payable upon request, with interest, where no demand is necessary before bringing the action. There is no obligation in law to give any notice at all; if you choose to make it part of the contract that notice shall be given, you may do so. The debt which constitutes the cause of action arises instantly on the loan. Where money is lent, simply, it is not denied that the statute begins to run from the time of lending". This was settled at the end of the seventeenth century, as appears from the report of Collins v Benning … [footnotes omitted]
In Chidiac, I addressed this issue as follows (from [236]):
In Ogilvie v Adams, which I have referred to earlier, Fullagar J made it clear that the consequence of a loan being repayable on demand was that the cause of action became statute barred six years from the receipt of the money. The Queensland Court of Appeal, in Haller v Arye [2005] QCA 224; (2005) 2 Qd R 410, analysed the reasoning in Ogilvie v Adams; at [26] - [30] and canvassed a number of authorities which had accepted the ratio in that decision as a correct statement of the law (including CE Heath Underwriting & Insurance (Australia) Pty Ltd v Daraway Constructions Pty Ltd per Batt J, Drinkwater v Caddyrack Pty Ltd (No 3), per Young J (as his Honour then was), Brott v Grey, Switz Pty Ltd v Glowbind Pty Ltd, and Mackenzie & Anor v Albany Finance Ltd, per McLure J).
Consideration was given, in Haller, at [31] to an argument advanced before Nettle J in VL Finance Pty Ltd v Legudi [2003] VSC 57; (2003) 54 ATR 221, to the effect that the position adopted in Ogilvie should now be taken to have been relaxed and that the appropriate test was to consider whether it was reasonably open to infer that the parties would have agreed that the cause of action to recover the money loaned would not accrue until a demand had been made (reference having been made to the decision of Bryson J (as his Honour then was) in Gleeson v Gleeson [2002] NSWSC 418 as well as to the decision of the Full Court of South Australia in Re Brookers; Brooker v Pridham (1986) 41 SASR 380, at 382).. The Queensland Court of Appeal noted that Nettle J had rejected the submission and it adopted his Honour's analysis in that regard, concluding that the review of the case law by Nettle J confirmed that "the principle in Ogilvie, in its full rigour, remains securely established in our commercial law".
More recently, in Faraday v Rappaport [2007] NSWSC 34, White J stated at [102]:
Had I been of the view that the moneys were advanced as a loan, the loan would have been repayable on demand. A cause of action for its repayment would have arisen immediately the advance was made, not when demand was made for it on the service of the amended statement of claim (Young v Queensland Trustees Ltd (1956) 99 CLR 560; Ogilvie v Adams [1981] VR 1041; Haller v Ayre [2005] 2 Qd R 410).
In Chidiac, I also considered (albeit in the context of whether there had been confirmation by reference to s 54(2)(b)), the operation of s 54 of the Limitation Act which provides, relevantly, that:
(1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation.
(2) For the purposes of this section:
(a) a person confirms a cause of action if, but only if, the person:
(i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or
(ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made, (my emphasis)
…
Thus, by reference to s 54(1), read with s 54(2)(a)(i), the commencement of the relevant limitation period will have been extended if, within the original limitation period, there is an acknowledgment, in writing, of the cause of action, right or title of the person against whom the cause of action for recovery of the Debt lies to the person having the right of action (i.e., here, an acknowledgement by the Company to the deceased of the Debt).
Here, the position is complicated by the lack of evidence as to when the loan recorded in the Company's records was first made or acknowledged. The evidence as to the enquiries made of the deceased's former accountant suggests that the loan account was in existence at least as at 2000. On the assumption that it was then a loan repayable on demand, the limitation period would have expired in respect of that loan by no later than 2006. However, there are two possible acknowledgements of the loan for the purposes of s 54 of the Limitation Act - first, any acknowledgment contained in the May 2013 Deed (and which would only have extended the period if it was made before the expiry of the period - which assumes a loan made no later than May 2007); and, second, any acknowledgement represented by the statements contained in the Company's financial accounts or financial records (presumably signed by the deceased in his capacity as director) (and of which there are only copies from June 2012, which would extend the period for loans made prior to 2006, or 2005 to the extent that the 2012 documents record the loan balance as at 2011).
In Chethams v Remington & Co [1999] 3 VR 258; [1999] VSC 150, reference was made to the observation by Kerr J, in Surrendra Overseas Ltd v Government of Sri Lanka (The Apjakash) [1977] 2 All ER 481, (at 490) that "[a] part payment, like an acknowledgment, can only revive the cause of action and start time running afresh if it provides evidence in the form of an admission by the debtor that the debt remains due despite the passage of time" and (at 491) that an acknowledgement must be evidence of an admission of liability for the debt claimed.
In Stage Club Ltd v Miller Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71, Gibbs CJ (at 544), considering a question as to whether the reference in the balance sheet of the debtor to the creditor as a secured creditor constituted an acknowledgement of the debt under the Limitation Act, noted that, under the Act, it was "not necessary that any promise to pay should be expressed or implied" but that what was necessary was that there be a recognition of the present existence of the debt (i.e., "an admission that there is a debt outstanding and unpaid", citing Good v Parry [1963] 2 QB 418 at 423.). This was held to be the position under the Western Australian counterpart to s 54 in Cameron (as Executrix of the Will of Alexander Donald Robert Gordon Cameron (Dec)) v Murdoch (as Administratrix of the Estate of James Cameron (Dec)) [2003] WASC 264.
In the present case, there is a clear acknowledgement by the Company in the financial records of the Company (presumably signed by the deceased in his capacity as director) that there was a debt due to the deceased in the amount reflected in the loan account as at 2012 (and by reference to the 2011 balance as at 2011). It is the recollection of the deceased's former accountant that there were adjustments from time to time of the loan account and that there was a substantial reduction of the loan account when the Warehouse properties were sold (and there is also reference in the former accountant's material to a Company Loan Account in the names of the deceased and his wife jointly - which as at the time of acquisition of the Warehouse properties was said to be in funds).
The relevant entries in the Company accounts would amount to sufficient confirmation only if made within six years of the relevant loan and if there was a succession of such acknowledgements from the relevant time. It is impossible to know, on the material before me, what the missing Company financial records would reveal. However, it seems unlikely that there would not have been loan account entries in the Company records for earlier years similar to those that appeared in 2012. If the advance in question was made in the 2000 year, for example, and there was a confirmation in the financial statements of the Company at any period up to 30 June 2006, then Counsel for the executors accepts that the 30 June 2011 confirmation in the Company balance sheet would mean that the Debt would not be statute-barred (see T 30.17).
I am not persuaded that the executors would be justified in treating the Debt as statute-barred in those circumstances. It seems to me that it would be open to infer that the Company's former accountants would have prepared accounts in the same format as those that are now in evidence for earlier years and, while the balance of the loan account cannot be determined for the missing accounting years, any debt existing prior to or as at 2000 would seem likely to have been recorded in the accounts prior to the 2011 accounts. There is nothing to suggest, for example, that the opening balance of the deceased's loan account suddenly sprang into existence in 2011 and did not comprise amounts referable to an earlier loan account. Rather, the evidence suggests that the deceased's practice was to utilise the loan account to meet expenses and that this was recorded in the accounts on a yearly basis.
Nor do I consider that the Ireland v Retallack line of authorities is of assistance in the present context. The suggestion that the deceased armed his executors with the ability to make good his manifest intention to benefit his grandson by way of control of the Company seems to me to be problematic. There is no provision in the Will on which reliance can be placed for that proposition - simply the fact that when the deceased died he was the sole shareholder of the Company. The deceased did not arm the executors with control of the Company in any conscious way - rather, the shares formed part of his estate and with the shares comes control of the Company.
I accept that the deceased's intention was that his grandson would acquire the Property, as reflected in the Codicil which was clearly intended to provide the mechanism for this to occur if (as the deceased clearly thought was then the case) the Property was in the ownership of the Company, i.e., by transferring the shares in the Company to his grandson.
However, it is not the role of the executors to take it upon themselves to effect the distribution of assets that they consider (albeit with ample justification) the deceased intended, if that is not what the Will provides. The reasoning that his Honour found compelling in Ireland v Retallack (namely that "where a testator conveys to his executor a direction to reduce into possession an asset not owned by the testator and the executor is armed by the testator with the power to get it in, he is bound to do so, and to deal with it by way of disposition in the way that the testator directs") is not to my mind apt in the present circumstances (where the deceased's wishes can readily be carried out, as the executors are bound to do, but the effect of realisation of other assets of his estate is that the benefit of the gift may in practical terms be defeated),
[16]
Conclusion
Accordingly, I answer the questions posed for judicial advice as follows:
1. On the proper construction of the deceased's Will, a foundation established in terms of the proposed trust deed annexed marked "G" to the affidavit sworn 7 May 2019 of Mr Jolyon Dare will satisfy the definition of Beneficiaries under the Will and, hence, subject only to the executors being satisfied that, in accordance with the trust deed ultimately adopted for the establishment of the Fund, the income and capital so distributed will be used for the provision of assistance for the secondary education of Aboriginal children, as the Will contemplated, the executors would be justified in distributing the income and capital of the trust created by cl 4(c) of the deceased's Will dated 3 June 2015 (as amended by the Codicil dated 11 June 2015), pursuant to the powers to appoint income in cl 2 of the schedule of the Will and/or capital in cl 3 of the Schedule of the Will, to such a private ancillary fund.
2. There is a reasonable basis on which it could be concluded, on the balance of probabilities, that a presumption of resulting trust does arise (and has not been rebutted). Accordingly, on the evidence before me (and unless and until there were to be a determination otherwise), the executors would not be justified in treating the Property as an asset beneficially owned by the estate. In circumstances where it seems likely that the Company has a claim to the beneficial ownership of the Property on the basis of a resulting trust in its favour and where (assuming there to be no further factual material relevant to that issue than is presently before the Court) the executors would be justified in not disputing that claim; the executors would be justified in transferring the Property, for no consideration, to the Company on the basis of an acceptance by the executors that the Property is held by them on a resulting trust in favour of the Company.
3. The executors would not be justified in releasing a debt recorded in the general ledger of the Company as being owed by the estate to the Company, in the amount of approximately $373,235.
[17]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 28 June 2019
(in liq) v Bell [2005] VSC 198
Murtagh v Murtagh [2013] NSWSC 926
Nelson v Nelson (1995) 184 CLR 538; [1995] HCA 25
NSW Trustee and Guardian v Wardy [2017] NSWSC 1466
Ogilvie v Adams [1981] VR 1041
Ong v Lottwo Pty Ltd (in Liq) [2013] SASCFC 57
Re Bowcock; Box v Bowcock [1968] 2 NSWR 697
Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844
Re Kerrigan; Ex parte Jones (1946) 47 SR (NSW) 76
Re O'Callaghan [1972] VR 248
Ryan v Dries [2002] NSWCA 3
Ryan v Ryan [2012] NSWSC 636
Shepherd v Doolan [2005] NSWSC 42
Stage Club Ltd v Miller Hotels Pty Ltd (1981) 150 CLR 535; [1981] HCA 71
Stein v Sybmore Holdings [2006] NSWSC 1004
Surrendra Overseas Ltd v Government of Sri Lanka (The Apjakash) [1977] 2 All ER 481
Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWSC 222
The Trustees of The Christian Brothers In Western Australia (Inc) v Attorney-General (WA) [2006] WASC 191
Texts Cited: J D Heydon and M J Leeming, Jacobs' Law of Trusts (7th ed, 2006) 234
Private Ancillary Fund Guidelines 2009
PW Young, C Croft and ML Smith, On Equity (Lawbook Co, 2009)
W Swadling, "Explaining Resulting Trusts" (2008) 124 Law Quarterly Review 72
Category: Procedural and other rulings
Parties: Michael Tunchon (Plaintiff)
Margaret Anne Hodgkinson (Second Plaintiff)
Timothy John Edmondson (Third Plaintiff)
Representation: Counsel:
D Barlin (Plaintiffs)