Cadell v Palmer

Background facts

1. The settlor it appears on the evidence, decided in 1975, to establish a trust estate primarily for the benefit of his wife, Else and two daughters Doris and Jennifer. The deed was originally between the settlor and a company called Raw Material Trading Pty Ltd. In 2004 the trustee became trustee of the estate by the deed of variation.
2. Clause 16 provides the process by which variations to the trust deed may be made: The trustee with the consent of the person from time to time having the power to appoint a new trustee pursuant to the last preceding clause shall have power by Deed to alter revoke or add to any of the provisions in this Trust Deed and make new provisions to the exclusion of or in addition to any of the provisions at the time being in force and any such alteration revocation or addition to the provisions of this Trust Deed shall be subject in like manner to be altered revoked or added to be a subsequent Deed PROVIDED THAT no such alteration revocation or addition shall result in the assets compromised in the Trust or the income thereof being payable to the Settlor or the trustee, AND FURTHER PROVIDED THAT no such alteration revocation or addition shall have the effect of divesting or modifying in any way whatsoever the interest of any beneficiary in the income of the Trust Fund or investments representing such income to which such beneficiary has become absolutely entitled AND PROVIDED FURTHER THAT no such alteration revocation or addition shall be such as to extend the distribution date as hereinafter defined beyond the latest date mentioned in such definition.
3. Clause 15, that is the preceding clause, provides who can give consent to vary the deed under cl 16. Clause 15 was amended by deed in 2017, it now provides: … and after the death of the last to die of the said Frederic Josef Kien and Else Kien the second corpus beneficiaries jointly shall have such power PROVIDED HOWEVER THAT if either of the second corpus beneficiaries shall die then the survivor of them (if being of sound mind) shall have such power AND PROVIDED FURTHER THAT after the death of the said survivor then Simone Ingird Hatherly…and Angela Nicole Lenn…or the survivor of them and if more than one jointly (if being of sound mind) shall have such power AND PROVIDED FURTHER THAT the survivor of the said Simone Ingrid Hatherly and Angela Nicole Lenn (if being of sound mind) may nominate their successor/s by Deed or Will
4. Clause 19(b) provides that the distribution date shall mean: The date twenty-one (21) years from the death of the last surviving descendant of King George VI living at the date of this Deed or twenty-one (21 years from the death of the last survivor of the first and second corpus beneficiaries living at the date of this Deed whichever is the later or the first day of January in the year two thousand and twenty whichever first occurs or such earlier date as the trustee in its absolute discretion shall determine
5. Clause 19(d) and (e) define the first and second corpus beneficiary to be the wife and daughters of the settlor.
6. The settlor passed away in August 1998 and Else Kien died in June 2002. Both Jennifer and Doris are still alive.

Legal principles

1. As a preliminary question the Court must determine the proper law as applying to the trust in question. The proper law will then determine who has jurisdiction to hear the matter and further what relevant laws apply to the trust.
2. In this case there is no particular applicable law identified by the deed. In such circumstances it is a question of fact as to determining the proper law of the trust, factors such as where the trust is administrated and the location of the trustee will be relevant as will the objects and purpose of the trust (Re Dion Investments Pty Ltd [2013] NSWSC 1941 at [7]-[31]).
3. It is further clear however, that this Court can have jurisdiction to hear a case notwithstanding the proper law of the trust in question, on other bases. For example if a trustee has commenced proceedings in the NSW Supreme Court (see e.g. Dawson v Perpetual Trustee Co (Ltd) (1953) 89 CLR 138 at 151) or because the trust has been administered in NSW (see eg Re BTA Institutional Services [2009] NSWSC 1294 at [5]).
4. As to judicial advice, s 63 of the Trustee Act 1925 (NSW) provides: (1) A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument. (2) If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction.
5. The plurality of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, at [59]-[60] described s 63 as a discretionary power that is confined only by the "subject matter, scope and purpose" of the Act. At [55], their Honours also explained that no implications should be read into s 63 and that the section must only be taken for its express words. The only "jurisdictional bar" to be satisfied is that the applicant must point to a "question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument" (at [56]-[58]).
6. The plurality also noted that, where a trustee seeks judicial advice as to the conduct of litigation, the stage that the litigation has reached may be a relevant consideration. Their Honours remarked at [106]: [W]hile the time and cost involved in giving judicial advice at an early stage of litigation, when the issues involved in disputes about rights may not be fully sharpened and it may not be possible for the factual position to be as efficiently exposed as in a trial, may be factors relevant to a decision not to grant judicial advice but to let the matter be examined in conventional litigation, they are not factors which either automatically bar judicial advice or are so weighty as generally to compel the court not to grant the advice.
7. In Macedonian Orthodox at [69], Gummow ACJ, Kirby, Hayne and Heydon JJ noted a purpose of s 63 is to enable trustees "to take advice before embarking on any course which might carry a risk of incurring costs that might be outside the indemnity". Their Honours continued at [71] and [74]: [71] In short, provision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee's duties. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be subordinated to the trustee's fear of personal liability for costs. … [74] A necessary consequence of the provisions of s 63 of the Act is that a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings. In deciding that question a judge must determine whether, on the material then available, it would be proper for the trustee to defend the proceedings. But deciding whether it would be proper for a trustee to defend proceedings instituted about the trust is radically different from deciding the issues that are to be agitated in the principal proceeding. The two steps are not to be elided. In particular, the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings.
8. When amending the distribution date of a trust and changing when the trust will potentially vest it is essential to consider how the rule against perpetuities may apply. This trust predates the commencement of the Perpetuities Act 1984 (NSW), and therefore the general rule against perpetuities applies to the trust estate. The rule against perpetuities as stated in Cadell v Palmer (1833) 6 ER 956 is that any disposition is void for remoteness of vesting even if it is merely possible, when the matter is viewed from the time of the disposition or the property purportedly disposed of to vest in the intended disponee beyond the period of a human life or lives in being plus twenty-one years, such life or lives in being to include any actual period(s) of gestation.

Issues

1. Before giving judicial advice, based on the authorities as outlined above, the Court must be satisfied of certain matters. First, as made clear in the Macedonian Church Case, whether the jurisdictional hurdle had been met and second, whether the Court should exercise its discretion to give such advice.
2. Further in considering the content of the advice, the Court had to consider the proper law of the Trust to determine; first whether this Court had jurisdiction to grant the relief sought and second to determine the relevant rule against remoteness of vesting as applicable to the Trust.

Consideration

1. As is clear from the High Court in Macedonian Orthodox, the Court may hear and give advice under s 63 only where there is a real question to be answered concerning the management or administration of the trust property or the proper interpretation of the trust instrument.
2. I am of the view that there is clearly a real question to be answered with respect to the operation of the trust instrument.
3. I am of the view that cl 16 does allow for changes to be made to the distribution provided that the provisos are met. In my view, it is clear in these circumstances that all the provisos have been met and therefore the trustee can and does have consent to make such amendments as it sees fit for the benefit of the trust. In particular, it is apparent that the changes to the distribution date will not in fact give a benefit to the settlor nor will it change the interest of a beneficiary in income in which they have become absolutely entitled. It is further quite obvious, that by removing the words "….or the first day of January in the year two thousand and twenty whichever first occurs…" will not extend the distribution date beyond the latest contemplated date. The distribution date will still be the later of 21 years from the last surviving descendant of King George VI at the date of the deed or 21 years of the last survivor of the first or second corpus beneficiaries living at the date of the deed.
4. I note that the power to vary is subject to the consent of the person with the power to appoint a new trust. There is of course the possibility that either one or both may die and be unable to give consent. In my view, this means that 'consent' is not required and would not be applicable in that case, not that the power to vary can never be exercised now that there is no longer a person left to consent. I am of the view that only one person must give consent under cl 16.
5. I note further that it is clear that the proper law is that of NSW given that the settlor, most of the beneficiaries and trustee are or were domiciled in the state. I further note that the Perpetuities Act does not apply to the trust and therefore the general law relating to perpetuities applies. It is clear to me, that the amendments as sought would not make disposition so remote as to make the clause void.

Amendments 28 November 2019 - para [27] addition of word Not 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 November 2019