Bullas v Public Trustee

Supreme Court of NSW|2023-02-17|Before: Kunc J

The application under s 86A

As I observed in In the application of NSW Trustee and Guardian [2014] NSWSC 423 at [24], an order giving judicial advice "is permissive and not mandatory, hence it is usually in the form that the trustee "is justified" in acting in a particular way". In addition to its permissive character, Mr Barlin submitted, correctly in my respectful view, that an order pursuant to s 63 of the Act: 1. Is an order not provided in the context of adversarial proceedings; 2. Does not create a res judicata; 3. Does not carry with it the resolution of the consequences of a breach of some kind; and 4. Does not finally determine the rights of parties.
During the course of submissions, Mr Barlin and I discussed the possibility of whether a more conclusive and binding outcome was possible in the case of a lost trust deed. As Mr Barlin submitted, while a trustee would have the protection of administering the relevant trust in accordance with the document identified in the Court's order (including exercising the trustee's express power to amend the trust deed), it remained theoretically possible that if the original trust deed was found and contained other provisions, the trustee would have to revert to administering the trust in accordance with the rediscovered deed.
While such an outcome was unlikely in a case such as the present, where there had been very thorough searches, it remained the fact that the trustee would not be able to point to a document identified in the Court's order and say that it was in fact the actual trust deed. This could, for example, lead to inconvenience when dealing with financial and similar institutions, who would probably require further explanations about what had occurred and the fact of the Court's advice.

Consideration of the application under s 86A

The starting point of Mr Barlin's submissions in relation to the application of s 86A was that if the Court was satisfied to the requisite standard of "clear and convincing proof not only of the existence but also of the relevant contents" of the missing trust deed (Barp Nominees at [6]), then the Court would be satisfied (assuming there was proof of property held by the trustee) for the purposes of s 86A(1) that there was property "held in trust under any instrument creating the trust". This, he submitted, opened up the possibility of the Court approving an "arrangement" that the Trust be administered in accordance with amended terms of the trust deed as contemplated in either of the subsections of section 86A(1). It would have the practical effect of the Court identifying a definitive form of the trust deed by reference to which the trust would be administered into the future. The result would be a more certain, final and binding outcome as to the terms of the Trust than the trustee acting in accordance with judicial advice.
I have no difficulty with the argument to that point. I also accept that the trustee is a person who could bring the application (especially in a case such as the present where the trustee is controlled by beneficiaries in what is a closely held family trust) and that an agreement as to how a trust would be administered, for example, modernising the terms of an old form of trust deed and, if thought appropriate in the best interests of the beneficiaries, expanding the classes of possible investment to take account of recent developments, could constitute an "arrangement" for the purposes of s 86A(1).
As a practical matter for the administration of trusts, this would seem a highly desirable outcome. In this case, the document in relation to which approval of the arrangement is sought is in the terms of the Lost Trust Deed (which the Court has found are the terms of the Trust), but then with the arrangement to be approved being its administration in accordance with variations, being the addition of terms familiar in more modern trust deeds giving greater flexibility of management and investment, together with provisions tailored to the present family circumstances in relation to what is to occur upon vesting of the Trust.
The next issue is on whose behalf the Court is giving consent to the proposed arrangement. In this case, as Mr Barlin submitted, it was on behalf of all of the discretionary objects of the Trust, such that there were persons who fell within each of the categories of s 86A(2).
As a child of Mr John Canfield, Ms Cassandra Canfield (and Ms Wendy Canfield) is a "Primary Beneficiary" under the Lost Trust Deed, and her own children are "General Beneficiaries". General Beneficiaries are discretionary objects for the appointment of both income and capital. While they have no interest in the trust property, their status as potential recipients would be protected in equity and, in my respectful opinion, gives them an indirect interest in the Trust for the purposes of s 86A(2)(a). Hugh is not yet 18 years old and is therefore a minor for the purposes of the Act (see s 5) who by reason of that status cannot assent to the arrangement. The approval order may therefore be made on behalf of Hugh.
Second, the General Beneficiaries (which includes the Primary Beneficiaries) other than Hugh are also discretionary objects of income and capital with no interest in the Trust property and only a right to due administration. They have an interest in the property only when and to the extent that a discretion will be exercised in their favour by the trustee on a future occasion. This brings them within s 86A(2)(b).
Third, there is the question of unborn persons (see s 86A(2)(c)), in this case future General Beneficiaries, including children of the Primary Beneficiaries. For example, Ms Cassandra Canfield is a Primary Beneficiary (and therefore also a General Beneficiary) and any future grandchildren of hers are also General Beneficiaries. Given that her sons are aged between 17 and 25 years old, the Court is prepared to infer as matter of ordinary human experience that there is a likelihood she will have grandchildren who will be General Beneficiaries.
Even in the cases of Ms Wendy Canfield and Ms Cassandra Canfield (see [10(1)] above), I accept Mr Barlin's submission that the Court cannot completely exclude the possibility that one of them may adopt an as yet unborn child who would then have all the rights of a child born to her (see Adoption Act 2000 (NSW), s 95 and like categories identified by Kearney J in Bullas v Public Trustee [1981] 1 NSWLR 641).
I therefore accept Mr Barlin's submission that the Court can give consent to the proposed arrangement on behalf of all relevant persons, being all of the discretionary objects, including Hugh as a minor and any unborn General Beneficiaries.
The final issue is whether the Court is satisfied that the carrying out of the order approving the arrangement would be for the benefit of the persons referred to in the preceding paragraph. Whether something is for the benefit of a particular person is a fact sensitive exercise to be approached in a practical way having regard to the beneficial nature of s 86A. I am satisfied that that the proposed variations to the terms of the Lost Trust Deed are in themselves beneficial to Hugh and all of the other putative beneficiaries by giving the Trustee more modern, flexible powers of investment and administration.
In addition, and critically in the present case, I accept this submission made by Mr Barlin: "Here, the "… most important duty of a trustee is to obey the terms of the trust …", which would require the trustee to know the terms of the trust (Youyang Pty Ltd v Minter Ellison (2003) 212 CLR 484 at 498 at [32]). When the terms of the trust are definitively known, not only will the trustee of the Trust Estate definitively know what the terms of the trusts and powers are; but so too will the beneficiaries know what their interests and rights are."
Approval of the arrangement will leave Hugh, the other discretionary beneficiaries and the Trustee a definitive form of trust deed, being a more certain outcome than the Trustee proceeding in accordance with judicial advice. In my respectful opinion, it follows from this that carrying out an order which achieves that result is for the benefit of all of the relevant persons within the meaning of s 86B(1).
Finally, I should record that because it is apparent from the various affidavits that this application has been brought with the knowledge of all relevant members of Mrs Rosemary Canfield's family, and the proposed variations would not have any adverse impact on third parties such as current creditors of the Trust (assuming there are any), I have not considered it necessary to direct that notice of the application under s 86A be given to any person under s 86C of the Act.

Conclusion

The issues which led the plaintiff in this case to make an alternative application under s 86A in preference to seeking judicial advice, are real. There is a potential, genuine practical benefit to trustees in cases of lost trust deeds to be able to approach the Court to be able to obtain a generally binding and conclusive determination as to the terms of a trust deed which would govern the future administration of the trust.
While the Court has accepted the submission that s 86A is available in this case, that may not always be so. In any event, a simpler and more straightforward solution would be desirable. This would require an amendment to the Act. I will refer these reasons to the Attorney-General as the responsible minister with the recommendation that consideration be given to conferring such a power on the Court, being to declare on a final and binding basis what are the terms of a particular trust where the trust deed has been lost.
However, because the Court is satisfied that s 86A is available in this case, the final orders are: 1. Order pursuant to s 86A of the Trustee Act 1925 (NSW) that the arrangement specified in the Schedule to these orders is hereby approved. 2. Order that the costs of these proceedings be borne and paid out of the income or capital of the Trust on an indemnity basis. Schedule The variation of the terms of the R J Canfield Family Trust (the Trust) and the enlargement of the powers of the plaintiff as the trustee for the purpose of managing or administering any of the property subject to the purpose of the Trust, such that the terms of the Trust are those set out in the document marked "A" annexed to these orders.

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: 30 May 2023

Summary

This proceeding began as an application pursuant to s 63 of the Trustee Act 1925 (NSW) (the Act) for judicial advice that the plaintiff trustee, Nyasa No. 19 Pty Ltd (the Trustee), is justified in managing and administering a trust estate known as the "R.J. Canfield Family Trust" (the Trust) on particular terms in circumstances where, despite extensive searches, the original trust deed (or copies) settling the Trust have not been able to be found.
As with a similar case that has come before me (In the application of Brailey Holdings Pty Ltd ACN 001 190 441 [2018] NSWSC 1493), the basis of the application is that, at the time the original trust deed was settled, at least one other trust (the terms of which are in evidence) was settled for the benefit of another member of the same family. The Court is satisfied that the Trustee has brought clear and convincing proof not only of the existence, but also of the contents, of the missing trust deed - namely that they are relevantly in the same terms as the other trust deed which is in evidence. However, that is not the end of the matter.
The Court has been considerably assisted by the detailed opinion and oral submissions of Mr D Barlin of Counsel, who appeared for the Trustee, together with further written submissions provided in response to issues raised by the Court in subsequent email correspondence. During the course of the hearing, Mr Barlin sought an opportunity to amend the summons to seek, in the alternative, relief under s 86A of the Act in an endeavour to bring about a binding and final outcome otherwise to substantially the same result as the judicial advice application. This involved the Court approving an arrangement including variation of the original trust deed (in this case by modernising some of its provisions) so as to produce a definitive form of the trust deed by reference to which all interested parties accepted the Trust would be administered into the future. For the reasons advanced by Mr Barlin, and substantially reflected in these reasons, the Court is satisfied that can and should be done.

Consideration of judicial advice application

I accept Mr Barlin's submission that the present case is on all fours with the circumstances considered by Pembroke J in Barp Nominees Pty Ltd [2016] NSWSC 990 (Barp Nominees) in which two trust estates were established at the same time for two children. His Honour said: "2. The circumstances which give rise to this application are that the evidence clearly and unequivocally satisfies me that two trusts were established by Giovanni Barp and Gilda Barp. They had two children, Giselda Sandrin and Clelia Cisera. The trusts were established for the Sandrin family and the Cisera family. The trust deed for the Cisera trust remains in existence and there is no issue about it. The trust deed for the Sandrin trust has been lost. Once again, the evidence is clear about this. 3. The evidence explains that the two family trusts were set up at the same time and that they shared equally in certain property interests which I assume were originally acquired by Mr and Mrs Barp or entities owned or controlled by them. I am satisfied that the two trusts mirrored each other and that the only differences were as to the beneficiaries and the person who controls the trust."
I am indebted to Pembroke J's consideration of the relevant authorities in Barp Nominees, which I respectfully adopt. His Honour concluded (at paragraph [6]) that a party in the position of the Trustee had to satisfy the burden of demonstrating "clear and convincing proof not only of the existence but also of the relevant contents" of the missing trust deed.
The trust deed for the Labode Trust was in evidence and is dated 27 June 1979. On the basis of Mr Walter Eilbeck's evidence (see [7] above), the Court has no hesitation in concluding that on the same day the Trust was settled for the benefit of Mrs Rosemary Canfield and her side of the Eilbeck family and that the terms of the Trust were in identical terms to those of the Labode Trust, save for the identity of the particular beneficiaries (the Lost Trust Deed). In my respectful view, that conclusion is almost irresistible given the use of the same professional advisors and the "standard form" appearance of the Labode Trust deed. There is no evidence that would suggest there was anything particular about the circumstances of Mrs Rosemary Canfield's side of the family that would have necessitated any material difference between the terms of the Labode Trust and the Lost Trust Deed.
Given the ex parte nature of the application, I should record one matter which Mr Barlin quite properly raised. That was that while Labode Pty Ltd was incorporated on 16 May 1979, with the Labode Trust being settled on 27 June 1979, the Trustee was not incorporated until 30 April 1980 notwithstanding that it appears the Trust was also settled on 27 June 1979. Furthermore, Mrs Rosemary Canfield and her late husband were not, according to ASIC records, appointed as directors of the Trustee until 1 December 1980. However, there is also in evidence a registered transfer of real property from Benvista Pty Ltd to the Trustee dated 30 May 1980 (and registered on 11 July 1980) with the affixation of the Trustee's common seal witnessed by Mrs Rosemary Canfield, who is described as its director. The transfer is for the property described as the "factory complex in Warrane Road" referred to in [7] above.

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