Anna Katherine Szozda & Ors v NSW Trustee & Guardian & Ors

Judgment 1By their amended notice of motion of 14 February 2012, the plaintiffs seek an order under s 74K Real Property Act 1900 (the Act) extending the operation of caveat no. AG643965 and caveat no. AG643979 until further order. 2The first plaintiff (Anna), second plaintiff (Mark), and third plaintiff (Greg) are children of the fourth plaintiff (Teresa) and the late Andrew Szozda who died on 3 March 2006. 3The first defendant (NSW Trustee & Guardian) is a corporation constituted under s 5 NSW Trustee and Guardian Act 2009. The second defendant (Mr Fowler) is the person appointed to manage the estate of the sixth defendant (Aniela) under s 25M Guardianship Act 1987 as she is a person of legal incapacity. The third defendant (Barbara) is the daughter of Aniela and the sister of Andrew. The fourth defendant (Szozda Holdings Pty Ltd) is a company duly incorporated. The fifth defendant (Mr Jirsch) is a chartered accountant, who was appointed to the board of directors of Szozda Holdings on 24 November 2011. 4As a preliminary matter, on behalf of Mr Fowler it was submitted that the application should not proceed as Aniela, being an interested party, had not been served with the application as required by s 74K(3) of the Act. It was put that Mr Fowler did not consent to act as Aniela's tutor under UCPR Pt 7, r 7.16 having regard to the claims against him. However, in my opinion, the complaint is without substance. Mr Fowler is the manager of Aniela's estate, and service upon him is sufficient for present purposes (r 10.12(6)(a)). In any event, in the circumstances, it would be appropriate to dispense with service in the exercise of discretion under s 74K(3), and I do so. 5Szozda Holdings is the trustee of the Szozda Trusts namely, Szozda Holdings Trust No.1 (Trust No. 1), Szozda Holdings Trust No. 2 (Trust No. 2), and Szozda Holdings Trust No. 3 (Trust No. 3). Szozda Holdings is the registered proprietor of a property at Clarence Street, Burwood for Trust No. 1, and of a property at Raymond Road, Neutral Bay for Trust No. 2, and of a property at Robertson Street, Kogarah for Trust No. 3. The trusts derive income from the rent of these properties. 6The members of Szozda Holdings are Aniela (6 shares), Barbara (3 shares), and Anna, Mark, and Greg (1 share each). 7The trusts are discretionary trusts governed by the provisions of a trust deed dated 11 August 1975. Under cl 1(d) the present beneficiaries are Aniela, Anna, Mark, Greg, Teresa, Barbara and "... any religious scientific charitable or public educational institution". The vesting date is 1 August 2025. 8Relevantly, the terms of the trust deed are: "2.1 The Trustee may at any time prior to the expiration of each year until the vesting day determine with respect to the whole or such part (if any) as the Trustee thinks fit of the net income of the trust fund to pay apply or set aside the same to or for the benefit of or for all or such one or more exclusive of the other or other of the beneficiaries living or in existence at the time of the determination in such proportions and such manner as the Trustee thinks fit. 2.2 Notwithstanding anything contained in clauses 2.1 and 2.3 hereof the Trustee may in its absolute discretion prior to the expiration of any year prior to the vesting day determine to accumulate all or any part of the income of such year and such accumulation shall be dealt with as an accretion to the trust fund. 2.3 In default of any determination having been made by the Trustee pursuant to clauses 2.1 or 2.2 as to the distribution of the whole or any part of the net income of the trust fund (hereinafter called "the undistributed income") for a current year prior to midnight on the 30 th day of June in that year the Trustee shall hold the undistributed income in trust for such of the persons described in clause 1(d) hereof (except sub-clause (viii)) as shall then be living and if more than one as tenants in common in equal shares. ... 5 The trustee shall subject to clauses 2 and 7 hereof stand possessed of the trust fund on the vesting day in trust as to income and capital to pay and transfer the same in the absolute discretion of the trustee to all of the beneficiaries as are then living ... or to such one or more of them to the exclusions of the other or others and in such shares and proportions as the trustee in its absolute discretion may determine on or within a period of 14 days before the vesting day and in default of any such determination as aforesaid shall stand possessed of the trust fund for such of the persons enumerated in clause 1(d) as shall then be living ... and if more than one as tenants in common in equal shares PROVIDED THAT should any child of the said Boleslaw Szozda have died before the vesting day leaving a child or children him or her surviving such child or children shall take, and if more than one as tenants in common in equal shares, the share which their parent would have taken if living at the vesting day. ... 7 The trustee shall until the vesting day and during such further period if any that the law may allow have the following additional powers; ... (c) power in its absolute discretion to raise and/or apply at any time the whole or any part of the capital of the trust fund and pay or apply the same for or towards the maintenance education advancement or benefit of any one or more of the beneficiaries without being responsible for the application thereof; ... 13 In the event of the failure either as to capital or income of the trust funds vesting absolute under the foregoing provisions of this deed the trustee shall hold the same and income thereof or so much of the same as shall not have become absolutely vested or been applied under the trusts and powers herein contained or under any statutory power UPON TRUST for such person or persons who would have become entitled to the same at the death of the said Boleslaw Szozda if he had died absolutely entitled thereto intestate domiciled in New South Wales and if there shall be more than one such person for those persons as tenants in common in the shares in which they would have taken under such intestacy." 9On 9 June 2011 Mr Fowler was appointed to manage Aniela's estate by order of the Guardianship Tribunal of NSW. On 4 July 2011 directions and authorities were issued to him for the management of the estate. On 11 October 2011 an additional direction and authority was issued authorising him to exercise Aniela's voting rights in respect of her shareholdings in each of the trusts, including voting at extraordinary general meetings. 10On 24 November 2011 an extraordinary general meeting of Szozda Holdings took place when Barbara and Mr Fowler voted in favour of resolutions which removed Anna and appointed Mr Jirsch to the board. Immediately afterwards, Barbara and Mr Jirsch held a board meeting which purported to deal with the vesting of each of the Szozda Trusts and the distribution of their assets. With regard to Trust No. 1 resolutions were passed: (1)to advance the vesting day to 24 November 2011; (2)to distribute the accumulated income of the trust until 24 November 2011 (if any) equally among Mark, Anna, and Teresa; (3)to sell the property at Clarence Street and after payment of liabilities of the trust, to distribute the capital of the trust as follows: (a)an amount of $500,000 be paid to Aniela; (b)an amount of $1,115,000 be paid to Barbara; (c)the residue (if any) be divided equally between Mark, Anna, Teresa, and Barbara; (d)to do all things necessary to give effect to resolution (3) above. 11With regard to Trust No. 2, resolutions were passed: (1)to advance the vesting day to 24 November 2011; (2)to distribute the accumulated income of the trust until 24 November 2011 (if any) to Barbara; (3)to distribute the capital of the trust to Barbara. 12On 25 November 2011 Mark, as caveator in each case, caused to be lodged caveats AG643965 and AG643979 in respect of the properties at Raymond Road, and Clarence Street respectively. In each case the caveator is Mark, and the estate or interest claim is described in schedule 1 in identical terms, namely as an equitable estate in fee simple by virtue of the trust deed of 11 August 1975. The facts relied upon in support of caveat AG643979 against the Clarence Street property (Trust No. 1) are set out in Annexure A to the caveat in the following terms: "Annexure A