Solicitors:
Deutsch Miller (Plaintiffs)
File Number(s): 2023/00035159
[2]
JUDGMENT
Before the Court is the second stage of an application by the plaintiffs by an Amended Summons filed on 12 April 2023 for orders arising out of the circumstance that original trust deeds for four trusts cannot be found. Under the first stage, the plaintiffs sought judicial advice to establish that they are justified in managing and administering the four trusts on particular terms. This was resolved by the decision of Henry J in Application of DEK Technologies Pty Ltd as trustee for DEK Technologies Unit Trust & Ors [2023] NSWSC 544 (First Judgment). The relevant trusts are identified in her Honour's judgment at [2].
This second stage seeks orders conferring on the trustees of the four trusts various powers to implement, first, a restructure of the entities within the DEK Technologies group of companies (Restructure) and, second, the disposal by the trusts of their equity in three members of that group, being DEK Corporation Pty Ltd, DEK Technologies Sweden AB and DEK Technologies Vietnam Co Ltd to a third party for a very significant sum (Third Party transaction). On the evidence, there is no certainty that if the sale to that third party does not occur, that the trusts will be able to realise an equivalent amount in any other transaction.
The orders sought for the Restructure comprise prayers 8 to 20 of the Amended Summons and the orders sought for the Third Party transaction comprise prayers 21 to 26 of the Amended Summons.
There was some urgency for the orders to be made by 30 May 2023 in order to enable completion of the Third Party transaction to occur, as scheduled, on 31 May 2023. I made the orders sought on 29 May 2023 on the basis that my reasons would follow later.
The four trusts to which the proposed orders relate are the DEK Technologies Unit Trust (DEK Unit Trust) of which the first plaintiff is trustee, the Mulla Trust of which the second plaintiff is trustee, the Tanovic Trust of which the third plaintiff is trustee and the Yim Tang Family Trust (Yim Tang Trust) of which the fourth plaintiff is trustee.
The evidence before the Court as to the nature of the transactions for which relief is sought comprises (a) the affidavit of Mr Denis William Larkin affirmed on 31 March 2023, which sets out the nature of the Restructure, (b) an affidavit of Alistair Francis Jaque sworn on 31 March 2023, a solicitor at Deutsch Miller which sets out the nature of the Third Party transaction, and (c) confidential exhibits including the form of the relevant transaction documents.
The first question which arises is what is the source of jurisdiction for this Court to make the orders sought. In the First Judgment, Henry J concluded that the governing law of the Mulla Trust and the Tanovic Trust is the law of Victoria and that the governing law of the Yim Tang Trust is the law of Queensland: see First Judgment at [14(a)], [42] - [44], [60] - [61] and [99]. It follows that the relevant provisions of the trustee legislation for the purposes of the relief sought is s 63 of the Trustee Act 1958 (Vic) (Vic Act) in the case of the powers to be conferred on the Mulla Trust and the Tanovic Trust and s 94 of the Trusts Act 1973 (Qld) (Qld Act) in the case of the powers to be conferred on the Yim Tang Trust.
The position is not so clear in the case of the DEK Unit Trust as Henry J did not reach a conclusion as to the governing law of that trust. However, based on her Honour's findings at [14], [42] - [44] and [61] of the First Judgment, the DEK Unit Trust is administered in Victoria and accordingly, s 63 of the Vic Act is also the appropriate provision for the DEK Unit Trust: see In the Estate of Webb (dec'd) (1992) 57 SASR 193 at 195; Re Dion Investments Pty Ltd [2013] NSWSC 1941 at [32]-[33].
This Court has jurisdiction to make the proposed orders under and in accordance with s 63 of the Vic Act and s 94 of the Qld Act, as appropriate, through the operation of the cross-vesting laws of Victoria, Queensland and New South Wales: see First Judgment at [65].
Section 63 of the Vic Act provides:
(1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure or other transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument (if any) or by law, the Court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose on such terms and subject to such provisions and conditions (if any) as the Court thinks fit and may direct in what manner any money authorized to be expended, and the costs of any transaction are to be paid or borne as between capital and income.
(2) The Court may from time to time rescind or vary any order made under this section, or may make any new or further order.
(3) An application to the Court under this section may be made by the trustees, or by any of them, or by any person beneficially interested under the trust.
Section 94 of the Qld Act provides:
(1) Where in the opinion of the court any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, retention, expenditure or other transaction is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons, or the majority of the persons, beneficially interested under the trust, but it is inexpedient or difficult or impracticable to effect the disposition or transaction without the assistance of the court, or it or they cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instrument (if any) or by law, the court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the court may think fit, and may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne, and as to the incidence thereof between capital and income.
(2) The court may from time to time rescind or vary any order made under this section, or may make any new or further order; but such a rescission or variation of any order shall not affect any act or thing done in reliance on the order before the person doing the act or thing became aware of the application to the court to rescind or vary the order.
(3) An application to the court under this section may be made by the trustees, or by any of them, or by any person beneficially interested under the trust.
I note that both provisions are in substantially the same form as each other, and also s 81 of the Trustee Act 1925 (NSW) (NSW Act), except that s 94(1) of the Qld Act is broader in that it gives as an alternative basis for exercising the power conferred by it that the transaction is "in the best interests of the persons, or the majority of the persons, beneficially interested under the trust". I accept the submission of Mr Barlin, counsel for the plaintiffs, that this difference is not significant in the present matter because reliance can be placed on the expediency test contained in both provisions and also in s 81 of the NSW Act.
Under both s 63 and s 94, the following requirements must be met before the Court can grant the relevant power:
1. there needs to be a proposed dealing, which falls into either of two categories being "any sale, lease, mortgage, surrender, release or other disposition"; or "any purchase, investment, acquisition, retention (Qld Act only), expenditure or other transaction";
2. the proposed dealing must be, in the Court's opinion, "expedient" in the management or administration of the trust property; and
3. the dealing cannot be effected due to the absence of any power for that purpose vested in the trustee or, in the case of Queensland, "it is inexpedient or difficult or impracticable to effect the disposition or transaction without the assistance of the Court".
Where these requirements are met, the Court has a discretion to make orders which directly confer specific powers on the trustee which supplement and, as necessary, override the provisions of the trust instrument: Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367 (Re Dion (CA)) at [97], [98] and [109]; Stein v Sybmore Holdings Pty Ltd [2006] NSWSC 1004; 64 ATR 325 at [65].
In relation to the proposed dealing requirement referred to at [13(1)] above, the first category ("any sale, lease, mortgage, surrender, release or other disposition"), describes various dispositive acts of an owner of property by which the property or some interest in it passes or accrues to another person: Re Dion (CA) at [89]. The second category ("any purchase, investment, acquisition, …, expenditure or other transaction") is very broad given the reference to "other transaction" which is a very wide expression: Re Dion (CA) at [87] and [92]. The only substantive limitation on its operation is that the power may only be supplied if, in the management or administration of the trust property, the transaction is, in the Court's opinion expedient: Re Dion (CA) at [92].
It is clear that a series of steps which form part of an integrated and preordained course of action may properly be regarded as a "transaction": e.g. Birks v Commissioner of Taxation (1953) 10 ATD 266 at 270 per Kitto J. I consider that the steps involved in the Restructure should be regarded as a series of integrated steps which, together, constitute a "transaction" and that the same is true for the steps which comprise the Third Party transaction. Alternatively, I consider that each of the individual steps in the Restructure and the Third Party transaction for which the conferral of specific powers is sought may also be regarded as a transaction, if not also one of the other enumerated types of dealing.
In relation to the second requirement referred to in [13(2)] above "expediency" in its ordinary meaning is "advantageous", "desirable", "suitable to the circumstances of the case": Riddle v Riddle (1952) 85 CLR 202 at 222; [1952] HCA 12. The criterion of expediency is of the widest and most flexible kind (Riddle at 214 and 220) with the only apparent limitation being that it must be tied to the management or administration of the trust property (Re Dion (CA) at [92]). I consider that the making of the proposed orders is expedient in the management or administration of the trust property of each trust. First, each of the powers is sought to enable the plaintiffs to enter into transactions which will enable the sale of the underlying business of the DEK Technologies group for a very significant sum which is likely to be for the financial advantage of the trust fund and the beneficiaries of the trusts (cf. Riddle at 214 and 220). Second, there is no other way of ensuring that the trustees have the power to enter into the proposed transactions apart from an order pursuant to s 63 or s 94, as appropriate. Third, the purchaser under the Third Party transaction requires that orders be obtained to confirm that it will acquire good title to the property being sold (which is not surprising given the particular circumstances of this case).
In relation to the third requirement, it is necessary that the relevant dealings cannot be effected due to an absence of power vested in the trustees or by law (except in the case of the Yim Tang Trust where the alternative requirement under s 94 of the Qld Act that it is inexpedient, difficult or impracticable to proceed without the assistance of the Court is also applicable). The ordinary meaning of "absence" is "the non-existence or lack of". As the trust deeds for the four trusts cannot be located, the exact nature of the powers of the trustees cannot be determined. While each trustee will have the powers conferred on trustees by statute, they are not adequate to implement all the steps in the Restructure and the Third Party transaction. The judicial advice provided in the First Judgment only protects the trustees to the extent that they act in conformity with the advice, and does not operate to confer any powers on the trustees: Harrison, Jones & Devlin Ltd v Indian Bank of Australia Ltd (1909) 10 SR (NSW) 266 at 279-280. Hence, in my view, as matters presently stand, there is an absence of power to effect the Restructure and the Third Party transaction without orders of the Court.
As Mr Barlin submits, the making of the orders will supplement (and to the extent of any inconsistencies override) the express terms of the trusts if the express terms are subsequently established (for example, by discovery of the trust deeds) and are inconsistent.
Finally, in my opinion, the Court having jurisdiction to confer the powers sought, it is an appropriate case to do so for the reasons given at [17] above.
For these reasons I made the orders sought in the Short Minutes of Order provided by Mr Barlin to the Court.
[3]
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Decision last updated: 02 June 2023