Application of Murray Irrigation Ltd [2024] NSWSC 186

Supreme Court of NSW|2024-02-29|Before: Hmelnitsky J

Horne Legal (Applicant) File Number(s): 2023/465552

JUDGMENT

By summons filed on 22 December 2023, Murray Irrigation Ltd (the plaintiff) seeks: 1. an order pursuant to s 70 of the Trustee Act 1925 (NSW), or the Court's inherent jurisdiction, that Riverina Sustainable LWMP Pty Ltd (Riverina Sustainable) be appointed as trustee of any funds referrable to the implementation of the NSW Murray Irrigation District Landholder Association Land and Water Management Plan 2022 (2022 LWMP) in substitution for itself (i.e., MIL), the existing trustee thereof; 2. an order pursuant to s 71 of the Trustee Act 1925 (NSW) that the funds referrable to the 2022 LWMP vest in Riverina Sustainable; 3. an order that the plaintiff's costs of the summons be paid out of the funds referrable to the 2022 LWMP on an indemnity basis and on a pro-rata basis as between the balance of funds standing to the credit of: 1. the Berriquin Community's Land and Water Management Plans; 2. the Cadell Community's Land and Water Management Plans; 3. the Denimein Community's Land and Water Management Plans; 4. the Wakool Community's Land and Water Management Plans;

The 2022 LWMP

In around late 2021 or early 2022, the plaintiff considered whether the LWMP Funds could be spent consistently with the terms of each LWMP. The Board of the plaintiff encountered difficulties with identifying appropriate projects under the LWMPs in circumstances where the LWMPs, originally implemented in December 1995 and later revised in 2001, no longer addressed the current environmental issues affecting the region.
After engaging in wide consultation with the communities concerned, the board of the plaintiff resolved to draft a new LWMP (the 2022 LWMP), the drafting process for which was also subject to community consultation.
On 25 May 2022, Lindsay J ordered that judicial advice by given to the plaintiff pursuant to s 63 of the Trustee Act that, inter alia: 1. The plaintiff held any funds referrable to the implementation of the LWMPs on trust for the current and former customers who contributed to them by payment of the LWMP Charges; 2. The plaintiff was justified in spending the funds to reimburse itself for costs of implementing the replacement 2022 LWMP rather than implementing each of the LWMPs originally drafted in December 1995 and later amended in 2001; and 3. The plaintiff's costs of the proceedings were to be paid out of the funds referable to the LWMPs on the indemnity basis, with such costs to be apportioned between the trusts on a pro rata basis.
It follows that the plaintiff is the trustee of the LWMP Funds and may be reimbursed for costs associated with the implementation of projects in accordance with the 2022 LWMP. The plaintiff is also the Implementation Authority or Implementation Body of approved projects under the 2022 LWMP. The 2022 LWMP also established a Land and Water Management Plan Fund Advisory Committee (LAC) which has responsibility for developing actions and plans for the implementation of projects in accordance with the 2022 LWMP. Membership of the LAC consists of representatives from the LHAs.
The process for the approval and implementation of projects under the 2022 LWMP is that any LWMP project proposal must be submitted to the LAC for consideration. If the LAC approves of the project proposal, it is then to be provided to the Trustee to consider whether the proposed project is consistent with the 2022 LWMP. If the Trustee is satisfied that the project is so consistent, then the Trustee may approve and fund the action or plan (or part thereof). While the Trustee also has the responsibility of implementing the approved project, the LAC may appoint a subcommittee to oversee the implementation of the project and to ensure that the funds provided are applied appropriately and fairly in respect of the project.
As at 30 June 2023, the plaintiff holds $7,615,856.17 in LWMP Funds.

Appointment of a new trustee in relation to the 2022 LWMP

The board of the plaintiff favours the appointment of a corporate trustee dedicated to administering the 2022 LWMP. The plaintiff makes the following particular submissions as to the suitability of Riverina Sustainable: 1. The appointment of Riverina Sustainable is supported by the LAC; 2. Each of the LHAs, as representative of the local landholders who form the beneficiaries of the LWMP Funds, is a member of Riverina Sustainable; 3. Riverina Sustainable has, as its stated purpose, to act as Trustee for the oversight and implementation of the LWMPs; 4. Riverina Sustainable has as its first director, Mr Peter Mogg, a practising accountant with over 40 years of experience, and intends to appoint another two directors in due course; 5. Riverina Sustainable has taken the following steps to ensure that it is prepared to take on the role of trustee following the plaintiff's retirement: 1. Set up a Riverina Sustainable trust account for receipt of the LWMP Funds; 2. Prepared an Investment Scope by Moggs Accounting + Advisory in respect of the LWMP Funds; and 3. Obtained a quote for trustee management liability insurance which the LAC has agreed to obtain upon Riverina Sustainable being appointed Trustee.
Mr Mogg states that he is familiar with the roles and responsibilities which Riverina Sustainable would be required to discharge as trustee, including the trustee's obligations to manage and use the trust funds consistently with the 2022 LWMP, the trustee's legal and auditing obligations as set out under the 2022 LMWP, and the trustee's obligations as the Implementation Body/Implementation Authority within the meaning of the 2022 LWMP.
The plaintiff has not joined any defendant to the summons and the application is consequently unopposed. The plaintiff has however taken the step of contacting each member of the community who made a submission to the Court in the proceedings in which Lindsay J gave judicial advice in connection with the 2022 LWMP. Those community members have been advised of the plaintiff's intention to retire as trustee of the 2022 LWMP and for a corporate trustee to be appointed in its place. The evidence shows that no objections were raised in respect of this course.
I note that the constitution of Riverina Sustainable contains language which may suggest that it would hold funds vested in it for charitable purposes. It is not necessary for me to determine the precise terms of the trusts on which funds are presently held. The effect of the orders sought is that Riverina Sustainable will stand in the same position as the plaintiff so far as those trusts are concerned. It will hold funds vested in it pursuant to s 71 on the same trusts as identified by Lindsay J.

Section 70 of the Trustee Act 1925

Section 70 of the Trustee Act 1925 relevantly provides as follows: "(1) The Court may make an order for the appointment of a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee. (2) The appointment may be made whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient difficult or impracticable so to do without the assistance of the Court."
In Re Estate of Roberts (1983) 20 NTR 13 O'Leary J said at 17-18: ""Expedient" here, I think, may be taken to mean "conducive to advantage in general, or to a definite purpose; fit, proper, or suitable to the circumstances of the case": OED, vol III, v 426. In the context of appointing a new trustee in substitution for an existing one, I take it to mean then conducive to, or fit or proper or suitable having regard to, "the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee": Miller v Cameron, supra. As was said in Re Tempest (1866) 1 Ch App 485 at 488, one of the questions to which the court will have regard in deciding whether or not to appoint a new trustee is whether the appointment "will promote or impede the execution of the trust, for the very purpose of the appointment is that the trust may be better carried into execution"."
This passage has been referred to and adopted on numerous occasions. See also JD Heydon and MJ Leeming (eds), Jacob's Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths) at 15‑46 (p 305).
I am satisfied that it is expedient for the Court to appoint Riverina Sustainable in substitution for the plaintiff as trustee of the 2022 LWMP and the LWMP Funds. The plaintiff no longer wishes to continue in that role and Riverina Sustainable has been established for the specific purpose of acting in its place. Its members and shareholders are the LHAs which represent the local landholders who are the beneficial owners of the LWMP Funds. It has the support of the LAC.
Riverina Sustainable, through Mr Mogg, has already taken appropriate steps to ensure that it will be in a position to accept the LWMP Funds and to perform its functions as trustee.
I accept that it is impracticable for Riverina Sustainable to be appointed in substitution for the plaintiff without the assistance of the Court. The plaintiff has no express power to appoint a new trustee in substitution for itself and the materials before the court do not suggest any basis for concluding that it has an implied power to do so.
As I have already noted, the application is brought ex parte. Rule 7.12(2) of the Uniform Civil Procedure Rules 2005 states that in proceedings relating to a trust, "all persons having a beneficial interest under the trust need not be parties". As Slattery J said in Dulhunty v Dulhunty [2010] NSWSC 1465 at [21]: "The appropriateness of joining the beneficiaries will usually depend on the extent to which their interests are likely to be adequately represented by existing parties to the proceedings."
In the present matter, I am satisfied that it is not necessary to join the beneficiaries or some class of them. The evidence shows that Riverina Sustainable is, in effect, a creature of the organisations that represent the landowners whose funds will be held by it. The evidence also shows that all persons who took an interest in the earlier judicial advice proceeding which led to the adoption of the 2022 LWMP have been informed of this application and none of them has any objection to the plaintiff being replaced by a corporate trustee.
I am also satisfied that it is appropriate to make a vesting order in the terms sought pursuant to s 71 of the Trustee Act 1925.
It is for these reasons that I made orders as follows: 1. Pursuant to s 70 of the Trustee Act 1925 (NSW), Riverina Sustainable LWMP Pty Ltd (Riverina Sustainable) shall be appointed as trustee of any funds referrable to the implementation of the NSW Murray Irrigation District Landholder Association Land and Water Management Plan 2022 (2022 LWMP) in substitution for the plaintiff, the existing trustee thereof; 2. Pursuant to s 71 of the Trustee Act 1925 the funds referrable to the 2022 LWMP shall vest in Riverina Sustainable; 3. The plaintiff's costs of the summons shall be paid out of the funds referrable to the 2022 LWMP on the indemnity basis and on a pro-rata basis as between the balance of funds standing to the credit of: 1. the Berriquin Community's Land and Water Management Plans; 2. the Cadell Community's Land and Water Management Plans; 3. the Denimein Community's Land and Water Management Plans; and 4. the Wakool Community's Land and Water Management Plans. 1. Reserve to the plaintiff liberty liberty to apply for further or consequential orders in relation to the summons.

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: 29 February 2024

Trustee Act 1925(NSW)ss 63, 70-71

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