Chang v Tjiong

The evidence

1. Tzer read his affidavit affirmed on 3 November 2020 and the affidavits of Timothy Heesh and Stephen Hall affirmed on 26 November 2021. Mr Heesh and Mr Hall are chartered accountants and consent to being appointed by the Court to act as trustee of the Burwood Trust.
2. Katrina read her affidavit sworn on 26 November 2020 and an affidavit from Lindsay sworn 26 November 2020, as well as other documents tendered at the hearing. She also read an affidavit from her solicitor, Mr Andrew O'Brien dated 4 March 2022, which was relied on primarily in relation to her application to file an amended defence.
3. Tzer, Katrina and Lindsay were each cross-examined. I did not form an adverse view of the credit of any of the witnesses and note that no submissions were advanced that adverse credit findings should be made.
4. Objection was taken to parts of the evidence sought to be adduced by Katrina, some of which were resolved by orders limiting the evidence as read as submission or background only. Some of the relevance objections to documents were upheld on the basis that they related to other legal proceedings or dealings between members of the Tjiong family that I did not consider to be relevant to the issues for determination which, in the main, concern whether George had exercised his power of appointment under the Burwood Trust.
5. The parties also relied on written submissions that were supplemented by oral submissions and further written submissions during the course of the hearing.

Facts

1. The following is a summary of the salient facts and evidence. Many of the facts are not in dispute. Unless otherwise indicated, I am satisfied of the following matters.
2. The Unit was purchased in 1976 for $25,000 with George named as the sole registered proprietor: Chang v Tjiong at [9].
3. After Hok's death in 1981, Kwat continued to reside at the Unit until she moved out to live with family members in 1994. George rented out the Unit until it was sold in December 1996: Chang v Tjiong at [2].
4. On 23 and 31 December 1996, George deposited the net proceeds of sale of the Unit, totalling $168,331.06, into a Macquarie Bank Cash Management Trust account number xx55 that was in his name (MacBank Account).
5. On 19 July 1999, George made two withdrawals from the MacBank Account totalling $199,972.05, by way of two bank cheques in the amounts of amounts of $199,542.05 and $430.
6. On or around 21 July 1999, Lindsay received a letter from George and the two bank cheques, one made out to the Commonwealth Bank and the other to Territory Conveyancing Service. The letter stated that the cheques were "to honour my agreement with you", stated "Do not tell anyone about this news, keep this to your selves [sic]", and ended with the statement "Now I can die in peace". It is these payments that Katrina asserts amounted to an exercise of George's power of appointment under the Burwood Trust and resulted in its determination.
7. Lindsay gives evidence that George gave him the money to assist him to purchase property in Darwin. He says that, in or around 1977, he was injured in a motor vehicle accident that impacted upon his behaviour and learning abilities, struggled with depression and had an aimless lifestyle until moving to Darwin in late 1993. Lindsay deposes that in late 1993, before leaving for Darwin, George told him that if he could get his life together, George would "help [him] purchase a property".
8. Lindsay deposes to a discussion he had with George in or around 1999 in which he informed George of an opportunity to buy a property in Humpty Doo for $200,000 and that George said to him words to the effect: "You have shown me that you can keep down a job and save your money. I am going to honour the promise that I made to you before you move to Darwin and purchase a property for you. I have some money set aside for the care of Oma. However, Oma is well cared for by the family. Now I am happy for the money to go to you as the eldest male. There will be no strings attached, the house will be in your name. I can now die in peace. Please keep it to yourself and leave it up to me to tell Katrina."
9. On 24 December 2001, George had a stroke and was rendered incapable of looking after his affairs. George had executed a Power of Attorney on 29 March 1996 in favour of Richard and Katrina jointly. Katrina's evidence, which I accept, is that Richard was the "effective controller" of George's financial affairs while he was incapable of looking after his affairs from 24 December 2001 until his death (affidavit sworn 26 November 2020 at [14]). Her evidence is not inconsistent with the finding made by Palmer J in Tjiong & Anor v Tjiong [2010] NSWSC 578 at [2] (Tjiong v Tjiong) that Richard took over management of George's investments.
10. According to Katrina's evidence, Richard told her about the money that George had advanced to Lindsay after George became incapacitated (Katrina Affidavit at [24]; T66.10-16).
11. By a will dated 23 December 2001, George left the whole of his estate to Katrina and Lindsay in equal shares and Richard was named as the executor. On 18 March 2004, probate of George's will was granted to Richard.
12. George had made a previous will on 8 February 1992. By cl 2 of the 1992 will, George gave the Unit (which he described as his home unit) to his trustee on trust to permit Kwat to reside there on certain conditions, after which, the Unit was to be dealt with by his trustee in accordance with cl 3, which provided that George's property or proceeds would go to Katrina and Lindsay in equal shares.
13. Kwat died on 28 December 2006. Probate of her will was granted to her daughter, Soei Lan Chang, who is the mother of Tzer.

2009 Burwood Trust proceedings: Chang v Tjiong

1. In 2007, Soei (in her capacity as executrix of Kwat's estate) commenced proceedings against Richard (in his capacity as executor of George's estate) which led to Palmer J's decision in Chang v Tjiong. Soei claimed that the Unit was held by George on trust for Hok and that Hok's beneficial interest passed on intestacy to Kwat. She sought an order that Richard, as executor of George's estate, account to Kwat's estate for the net proceeds of sale of the Unit and for rent received by George. Katrina and Lindsay, as sole beneficiaries of George's estate, were joined as parties to the proceedings.
2. In Chang v Tjiong, Palmer J found that the Unit was the subject of a trust that had been initially created by a letter written by Hok to George in 1976, and varied by a letter Hok wrote in 1978, stating as follows: "[32] … It is clear from [Hok's] letters, from the solicitors' correspondence and from George's affidavit that the unit was held upon an express trust. There is a clear, unequivocal and emphatic direction in [Hok's] letter of 1976 that the unit and the proceeds of its realisation are for [Kwat's] benefit during her lifetime and for no other purpose during that time. … [36] I accept Mr Evans' submission that the terms of the trust as contained in the 1978 letter were to hold the trust property and its proceeds for the benefit of [Kwat] during her lifetime and, thereafter, to apply it according to George's discretion for the benefit of Roy or other members of [Hok's] family according to their needs. Such a power of appointment is a limited or special power. The class of beneficiaries - that is, [Hok's] family - is loosely defined but not to the extent that the core objects cannot be ascertained: see, for example, Re Baden's Deed Trusts (No 2) [1973] Ch 9. …"
3. Palmer J also found that the corpus of the trust fund (being the proceeds of sale of the Unit) ought to have been, but was not, kept separate by George for use in meeting Kwat's needs, if required, and that the funds were mingled with George's own property in breach of trust: at [37]. Nevertheless, His Honour concluded that it had not been demonstrated that Kwat's needs after the sale of the Unit required recourse to that capital and, as a consequence, the executrix of her estate could not call for the trust fund to be restored because the need for its existence had ceased with Kwat's death. His Honour observed that while George had committed a breach of trust, it was a breach for which no remedy was presently required: at [39]. Palmer J went on to state: "[40] I have concluded that the terms of the trust upon which George held the property included a limited power of appointment of whatever remained in the trust fund after [Kwat's] death. The power was to appoint amongst George's family, according to need. Whether the power has been exercised by George and, if so, how, arose in discussion between myself and Counsel only towards the end of final submissions. [41] I am satisfied from the terms of the father's letters establishing the trust that he intended that George was to be under a duty to exercise the power of appointment, and that the father had no intention that the trust property should revert to him or to his estate if George failed to exercise that power. Accordingly, the power of appointment was a "trust power"; if George failed to exercise it, there would be no resulting trust in favour of the father or of his estate, but the Court would exercise the power in a manner best calculated to give effect to the father's intention: see McPhail v Doulton [1971] AC 424, at 441B-442B, 456G, 457B. [42] If George has not exercised the power of appointment in favour of Katrina and Lindsay by his last will, or in some other way - none of these issues were explored in these proceedings - then how the power must now be exercised is a matter arising in the administration of George's estate. Soei, in her personal capacity as a member of the father's family, may have an interest in that issue but not, it would seem, in her character as executrix of the mother's estate. If no resolution can be reached between the relevant members of the family as to the fate of the funds subject to the power of appointment, then new proceedings will have to be commenced by Richard as executor of George's estate."

2005 removal proceedings: Tjiong v Tjiong:

1. On 11 February 2005, Katrina and Lindsay commenced proceedings against Richard seeking to have him removed as administrator of George's estate and trustee of the George Tjiong family trust (GT Trust). The GT Trust had been set up by Richard in December 2003 after he took over the management of George's financial affairs.
2. The removal proceedings were heard by Palmer J. On 3 June 2009, during the course of oral submissions, Katrina and Lindsay's counsel, Mr Evans (who appeared for Katrina and Lindsay in Chang v Tjiong and for Katrina in these proceedings) referred to the Burwood Trust in the following terms (T160:16-28): "It would seem there are two questions. One is to identify a sum of money that can be seen today as representing in [George's] estate the proceeds of sale of the Burwood unit and then perhaps seeing as the discretionary trust set up, one where George was trustee and the objects of the trust deed were descendants of the grandfather … my understanding of it is that the appropriate way would be, having identified that fund to then set up a scheme of arrangement and perhaps one might employ one of the trustee companies, perhaps an experienced solicitor in matters of trusts who could then receive as it were submissions from the various descendants and make decisions as to the appropriate distribution which would then perhaps come back before your Honour who was familiar with the matter and be approved by the court."
3. On 16 June 2009, consent orders were made in the removal proceedings that provided for Katrina to replace Richard as trustee of the GT Trust, for the grant of probate of George's will to Richard to be revoked and the appointment of Katrina as the administrator of his estate, as well as an order that required Richard to transfer all the assets and records from George's estate and the GT Trust to Katrina. Katrina and Lindsay also gave an undertaking to the Court that they would not sell, encumber, dispose of, deal with or distribute the assets of George's estate other than to satisfy the payment of costs pursuant to orders in the removal proceedings, the Burwood Trust proceedings or pursuant to any orders or directions made pursuant to any summons for judicial advice in respect of the matters the subject of the Burwood Trust proceedings.
4. According to the Probate document, George's estate had a value of around $860,089.74 as at 30 January 2004 (Exhibit 1, Tab 5). Katrina's counsel submits that the GT Trust had a value of around $1.349 million, relying on the handwritten notes on a document headed 'Asset Transactions from 19 December 2003 to 31 December 2003' for the GT Trust (Exhibit D; T150.33-35 and T153.19-21). According to Mr O'Brien's affidavit, the total value of George's estate and the GT Trust, as at 11 August 2009, was $2,686,518.70 (at [13]). Based on that evidence, I have proceeded on the basis that this amount represented the value of George's estate and the GT Trust when Katrina replaced Richard as the administrator of George's estate and trustee of the GT Trust in June 2009.
5. On 29 June 2010, the hearing of the removal proceedings resumed. During the course of the hearing there was discussion about the "Burwood issue" that referred to the net proceeds of the sale of the Unit in 1996 for $168,331.06 and the funds that "today should be set aside that represents the net proceeds of Burwood" (T12.17-20 and T12.49-50). There was then the following exchange between Katrina and Lindsay's counsel, Mr Evans, and Palmer J (T13.12-T15.9): "EVANS: … Your Honour found on the basis of the document that was preferred that the Burwood property was held, or the proceeds were held on a trust to provide for the mother while she was alive and thereafter for the descendants of the grandfather in what would appear a discretionary trust. The finality of that matter still awaits. In dealing with the final orders, I have sought to identify a fund that would properly represent today safely the proceeds of the sale of the Burwood property to await final orders in that case. … HIS HONOUR: I don't think it is really part of these short minutes at all. This is a matter for the present executor of George's estate whoever it is now-- EVANS: Katrina HIS HONOUR: That is something she has to deal with in the course of administration of the estate. It is not part of these proceedings. … EVANS: It would seem that there would need to be an application for judicial advice as to the manner in which the Burwood Trust should be disposed of, but the purpose of the drafting of clause 15 and the purpose of my submissions is to say that when one traces the proceeds of Burwood through to Terrey Hills and the subsequent investment of those moneys, the sum we would say today that would represent the proceeds of sale of Burwood is a number of the order of 250 to $260,000… HIS HONOUR: It is too hard and shouldn't be dealt with in these proceedings. I will release the undertaking previously given because I don't think it was appropriately given anyway. That leaves Katrina as trustee of George's estate in the position of "how do I administer the estate bearing in mind that there is a judgment finding that part of the estate funds are in fact owed to somebody else". EVANS: Or subject to a discretionary trust and your Honour must assume she will act correctly"
6. Pausing here, the reference to "Terrey Hills" is to a property at Coreen Avenue, Terrey Hills that Katrina asserts George purchased in November 1997 and which appears, from the bank statements in evidence, was paid for by George using money from the MacBank Account.
7. On 4 June 2010, Palmer J delivered judgment in the removal proceeding, Tjiong v Tjiong, in which he declared that the GT Trust was obtained by fraud, undue influence and unconscionable conduct on the part of Richard and made an order that Richard deliver to Katrina, as trustee of the GT Trust and administrator of George's estate, all of George's assets, books and records: at [21] and [138]. The orders made on that occasion noted that Katrina was released from the undertakings she gave on 16 June 2009.
8. Katrina's evidence, which I accept, is that an incomplete set of estate records were delivered to her solicitor's office by Richard in late 2010 which did not include records relating to the MacBank Account.
9. Richard appealed Palmer J's decision in Tjiong v Tjiong, which appeal was dismissed by the Court of Appeal on 29 June 2012: Tjiong v Tjiong [2012] NSWCA 201 (Tjiong Appeal).
10. Katrina gave evidence in cross-examination that she knew the terms of the Burwood Trust as early as 4 March 2009; she knew the proceeds of the Burwood Trust may have been held by George (as trustee) when she became administrator of his estate and that she might have to commence new proceedings as administrator of his estate if a resolution could not be reached with family members as to the fate of the Burwood Trust funds; and that part of her role as trustee was to establish what happened to the Burwood Trust funds (T47:23-27, T47:32-34, T47:47-T48.10, T57:40-43 and T56:15-22). She deposes that she did not commence looking into what had occurred to the Burwood Trust property until after the Tjiong Appeal and then she waited to see if Richard would make an application to the High Court for leave to appeal (which he did not do).
11. In a letter dated 10 July 2013, O'Brien Lawyers (acting on behalf of Katrina), wrote to Richard's lawyers and, amongst other things, referred to the Burwood Trust as a trust "of moneys or assets that formed part of the whole assets of George Tjiong as at December 2001" and as a "discretionary trust in favour of such members of the family of … Hok … as George in his discretion might appoint having regard to their needs". It was asserted in the letter that Katrina must now be the trustee of the Burwood Trust, given that Katrina had replaced Richard as executor of the estate.
12. Katrina gave evidence in cross-examination that she distributed George's estate to herself and Lindsay and wound up the estate in 2013 (T65.5-10; T68:15-17). She also gave evidence that there was money kept aside in the family trust "just in case for all of this" and referred to "sufficient funds in the family trust", which I understand to be a reference to the GT Trust (T65.5-10; T69.20-25). She also gave evidence in re-examination that she regarded the money in the family trust as money from George's estate (T72.4-6).
13. On 20 May 2014, Katrina wrote to Macquarie Bank Group in her capacity as the executor of George's estate and asked for copies of records relating to the MacBank Account for the period of 1996 to 2001, which she subsequently received.
14. The bank statements in evidence show that the balance of the MacBank Account fluctuated during the period between December 1996 (just prior to the deposit of the Unit sale proceeds) and December 2001 (when George became incapacitated by his stroke), with various deposits and withdrawals made by George in addition to the withdrawals to make the payments to Lindsay in 1999, and that the account had a nil balance on 18 June 2004 (presumably, when the account was closed by Richard). In particular, they show the following: 1. between 20 November 1995 and 28 November 1996, the balance of the MacBank Account fluctuated from $43,755.70 (at 20 November 1995) to $308,204.77 (at 12 February 1996), $158,204.77 (at 14 February 1996), $226,521.82 (at 5 June 1996) and $180,516.41 (at 28 November 1996), with various deposits and withdrawals made during that period; 2. immediately prior to the deposit of the sale proceeds of the Unit on 23 and 31 December 1996, the credit balance of the MacBank Account was $141,005.25. After the deposit, the credit balance was $309,336.31. 3. between 24 January 1996 and 25 November 1997, the balance fluctuated between $186,642.01 (at 24 October 1997), $360,208.04 (at 7 November 1997) and $36,798.60 (at 25 November 1997), the later balance which is said by Katrina to reflect the balance after George's purchase of the property at Terrey Hills; 4. on 19 December 1997, the credit balance went up to $292,119.56, which Katrina asserts reflects the deposit of the sale proceeds of property owned by George at Briar Hill, Victoria; 5. the credit balance remained at around $300,000, until 24 August 1998, when it reduced to $101,152.95 (following a withdrawal of $200,000, which Katrina alleges related to an investment in the NRMA trust), dropped to $84,317.52 (at 12 November 1998), increased to $163,481.20 (at 6 January 1999, with a $50,054.60 deposit that day) and remained at around that level until 12 July 1999, when the balance increased to $322,074.93, as a consequence of an unidentified deposit made that day of $151,500.60; 6. immediately prior to the payments to Lindsay on 19 July 1999, the credit balance of the MacBank Account was $322,074.93. After the payments, the credit balance was $122,102,88; 7. by 20 August 1999, the credit balance of the account increased to $173,132.93, dropped to $74,089.65 (at 27 September 1999) rose to $110,858.50 (at 12 November 1999) and then reduced to $10,858.50 (at 17 November 1999); 8. from the end of 1999, the balance slowly increased (with fluctuations) and was at just under $100,000 in December 2001, and in January 2002 it increased to over $100,000; and 9. from 4 February 2002, the balance fluctuated from a high of $283,996.49 to the nil balance on 18 June 2004.

Mid-2014 to 2019: correspondence referring to the Burwood Trust and further proceedings relating to George's estate and the Burwood Trust

1. Between July 2014 and 2019, there were further disputes and proceedings involving Katrina and Richard in relation to George's estate and the Burwood Trust. It is unnecessary to detail them other than to note the following.
2. In a letter dated 10 July 2014 to Peter Kennedy Lawyers (solicitors for Richard), O'Brien Lawyers referred to preparing an application under s 63 of the Trustee Act in the context of Katrina making enquiries to attempt to trace what George did with the net proceeds of sale of the Unit in 1996 and thereafter. They also asked Richard's lawyers to provide copies of all the relevant financial records and other documents.
3. In a letter dated 25 August 2014 to Peter Kennedy Lawyers, O'Brien Lawyers asserted that the proceeds of sale of the Unit or what was left of that money was, upon Kwat's death, to be held on trust subject to a power of appointment and referred to the decision of Chang v Tjiong. The letter referred to a tracing exercise that needed to be done and the fact that Richard had failed to do anything to attempt to identify or trace what actually happened to the sale proceeds. It also rejected any attempts by Richard to advise or instruct Katrina in the administration of the estate and the GT Trust.
4. On 14 December 2017, Griffins Lawyers (who were acting for Soei) sent a letter to O'Brien Lawyers concerning the Burwood Trust. That letter referred to the decision in Chang v Tjiong and, in essence, asserted that George committed various breaches of trust. It also asserted that Soei was concerned that Katrina had taken no steps since being appointed as George's executor to make an application for directions from the Court for the purposes of administering the Burwood Trust and asked for an explanation, failing which, legal proceedings may be commenced seeking orders of a similar nature to those sought by Tzer in these proceedings.
5. Katrina gives evidence that she undertook an extensive examination of George's financial records and that her findings from that examination were explained in a letter dated 16 January 2018 letter that O'Brien Lawyers sent to Griffins Lawyers (January 2018 letter).
6. The January 2018 letter is 45 pages long. It is not necessary to set out all the detail of what is alleged in that letter. Suffice to say that much of it refers to the history of various legal proceedings involving members of the family. It refers to Richard's conduct of the administration of George's estate and the GT Trust (asserting that Richard transferred $1.3 million of George's assets from his estate into the GT Trust), and the balance of the accounts operated by Richard as executor of George's estate, trustee of the GT Trust and trustee of the "so-called Oninama Charitable Foundation" as having been paid over to Katrina, in her representative capacity, by bank cheque on or about 7 July 2009. It also takes issue with the claims in Griffins Lawyers letter and suggests that Soei was acting in concert with Richard.
7. As to the Burwood Trust, according to her counsel, the January 2018 letter sets out Katrina's position on the factual and legal issues before the Court in these proceedings. It refers to George being the "only trustee of [the Burwood Trust] of the proceeds of sale" of the Unit for five years, from about 24 December 1996 until 24 December 2001, when he became totally incapacitated. It also states that until 16 June 2009, Richard was effectively trustee of George's estate ([23] of the letter). Later, the letter posits that the relevant enquiry is what happened to the sale proceeds of the Unit, whether they can now be traced, what did George do with the proceeds and trust ([105] of the letter), and then attempts to answer those questions, noting that Katrina turned to the question of the Burwood Trust in 2013 to determine the legal position, having been assisted by the material received from Macquarie Bank (at [112]-[114] of the letter). The letter purports to undertake a tracing exercise from the bank records, and refers to the Unit sale proceeds being deposited into the MacBank Account, withdrawals made from the MacBank Account to complete a purchase by George of property at Terrey Hills in November 1997, deposit of sale proceeds of George's property in Briar Hill in December 1997, details of other withdrawals and deposits made in 1998 and 1999, and the payments made in 1999 by George to Lindsay.
8. The letter refers to various legal authorities and argues, in summary, the following: the MacBank Account was a cash management trust account rather than a general trading account; the deposit of the Briar Hill proceeds and later deposits reflected an intention to restore the balance of the Burwood Trust funds after the purchase of the Terrey Hills property; the payments to Lindsay were made in the exercise of George's power of appointment under the Burwood Trust as he was a person in need and a beneficiary of the trust; by doing so, George had appointed the whole of the Burwood Trust funds to Lindsay which effectively terminated the Burwood Trust by a final distribution of those funds; and that there were no trust funds nor any need for Katrina to make any application to the Court in respect of the Burwood Trust.
9. The January 2018 letter also enclosed a copy of a memorandum of fees of counsel in the sum of $21,000 and requested they be paid within 30 days in circumstances where the necessary advice had been obtained from counsel, a tracing exercise had been undertaken and it was found that George had distributed all of the moneys held by him under the trust identified by Palmer J, thereby determining the Burwood Trust.
10. There is no evidence of any response by Soei to the January 2018 letter.
11. In 2019, Richard commenced three sets of proceedings in the Supreme Court of New South Wales, to which Katrina was a party. The first proceedings (2019/0061979) sought to set aside Tjiong v Tjiong and the Tjiong Appeal and were dismissed by orders made by consent by Rein J on 5 July 2019. The second proceedings (2019/00211113) sought similar orders to those sought by Tzer in these proceedings and were summarily dismissed by Parker J in circumstances where Richard had been declared bankrupt. The third proceedings (2019/00278508) also sought to set aside Tjiong v Tjiong and the Tjiong Appeal and were summarily dismissed by Parker J: Tjiong v Tjiong [2021] NSWSC 1389.

2020: Events leading to these proceedings

1. On 7 July 2020, Commlex Pty Ltd (solicitors acting on behalf of Tzer) wrote to O'Brien Lawyers asserting that Tzer was a beneficiary of the Burwood Trust as found by Palmer J, that Katrina (as the trustee of the Burwood Trust) was under a duty to keep proper accounts, and that she was required to provide Tzer with a comprehensive account of the assets of the Burwood Trust . The letter sought her proposal for the distribution in accordance with the terms of the Burwood Trust within seven days, failing which legal proceedings would be commenced against her.
2. The next day, O'Brien Lawyers responded by referring to the January 2018 letter. O'Brien Lawyers' letter also stated that should Tzer wish to press his request for information about the trust, the trustee was entitled to request an advance payment of the costs of supplying the information and that they were instructed to request advance payment of the trustee's costs of providing the information sought, being $16,500. Tzer submits, and I accept, that the reference to "trustee" in this letter should be read as a reference to Katrina as the relevant trustee, which is not consistent with the assertion that the Burwood Trust had been determined by the payments to Lindsay.
3. By letter sent to O'Brien Lawyers dated 17 July 2020, Commlex stated that Tzer had no obligation to meet Katrina's demand for any payment in respect of the provision of the information demanded, referring to s 100A(2) of the Trustee Act, which relevantly provides that a beneficiary under a trust is not liable to indemnify the trustee or make any payment to the trustee for any act, default, obligation or liability of the trustee arising on or after the commencement day unless the beneficiary has agreed in writing to be liable or s 100A(3) applies.
4. On 24 July 2020, Tzer commenced these proceedings.

The hearing, issues for determination and amended defence application

1. The hearing commenced on 29 November 2021, was adjourned part-heard to 9 March 2022 and continued on 16 March 2022.
2. At the start of the resumed hearing on 9 March 2022, Katrina moved on a notice of motion that she had filed on 4 March 2022 seeking leave to file an amended defence. After hearing argument, I dismissed the motion, indicating at the time that I would provide further reasons for that decision, which I have provided below.
3. In addition to her defence which pleads that the Burwood Trust had been determined in 1999 by distribution to Lindsay, Katrina had filed a cross-claim that sought declaratory and other relief to the same effect and costs. At the hearing, Katrina's counsel informed the Court that she no longer pressed her cross-claim (T175.6-17) and relied only her defence.
4. Based on the pleadings and submissions advanced at the hearing, the key issue for determination is whether the payments made by George to Lindsay on 19 July 1999 constituted an exercise of the power of appointment conferred on George under the terms of the Burwood Trust and resulted in the termination of the Burwood Trust by distribution.
5. By the end of the hearing, the parties were agreed that if the Court concludes that the Burwood Trust has not been determined by the payments to Lindsay, orders should be made regarding the Burwood Trust and the appointment of independent trustees. The proposed orders are largely agreed.
6. If the court concludes that the payments were to Lindsay was a distribution of the Burwood Trust funds in the exercise of Georges' power of appointment, the issue for determination is this was in breach of the Burwood Trust. If it was, the question arises as to whether Tzer has established that the orders he seeks should be made in the circumstances of the case.
7. Relevant to the relief sought, during the hearing, Tzer agreed to fund the appointment of an independent trustee in the amount of $30,000 and Katrina maintained that she is entitled to be indemnified and has a lien over any funds left in the Burwood Trust in respect of legal and other fees incurred by her in these and other legal proceedings involving members of the Tjiong family.

Amended defence application

1. The proposed amendments to Katrina's defence fell into two categories.
2. First, there were amendments which sought to plead aspects of the Burwood Trust including allegations that the letters were written in Dutch by a man not possessed of knowledge of the law; that in creating the trust, Hok was giving confidential instructions to George to deal with the trust in his discretion for the benefit of Kwat and thereafter to Roy and other members of his family according to their need; in the events that happened, Kwat was adequately provided for the remainder of her life; and, that if George had distributed the whole of the funds of the Burwood Trust and in doing so committed a breach of trust, the Court should not impose any order for restitution on the estate to remedy the breach because of certain matters pleaded: Amended Defence at [28A-E]. During the hearing of the application to amend, Katrina's counsel confirmed that she no longer pressed her application to amend to introduce those paragraphs (T119.5-9).
3. The second category of amendments (Amended Defence [29]-[91]) sought to plead that Katrina is entitled to be indemnified out of the assets or funds of the Burwood Trust for costs she and Lindsay have incurred in proceedings or claims in relation to George's estate, the GT Trust, the Burwood Trust and other legal advices relating to the proceeds of sale of the Unit, as well as that the right of indemnity is a first charge on, and a lien over, the property of the GT Trust and George's estate. It also sought to plead that those costs represent 9.14% of the value of the assets of George's estate and the GT Trust as a whole and they exceed the proportion of the assets and funds of the Burwood Trust. Further, it sought to plead that, by reason of those matters, the claims brought against Katrina as administrator of George's estate and trustee of the GT Trust and in her personal capacity should be dismissed in their entirety.
4. Katrina's application for leave to file an amended defence was supported by an affidavit of Andrew O'Brien, her solicitor, affirmed 4 March 2022.
5. Mr O'Brien deposes that he has been acting for Katrina, either as an employed solicitor with a firm or as a principal solicitor, in proceedings involving George's estate and the GT Trust since 1 May 2004. He provides details of the various costs, proceedings and advices that are the subject of the indemnity claim, and purports to calculate the amounts which are subject to the claimed indemnity and lien by Katrina.
6. Tzer opposed leave being granted to the second category of amendments. In summary, he argued that the amendments should be refused because they did not go to the issues in dispute between the parties in the context of the relief sought (namely an account and the appointment of an independent trustee to the Burwood Trust); there had been an absence of any explanation for the delay in making the amendments; and there would be prejudice suffered as a consequence of the advanced state of the proceedings, noting that most of the evidence had been completed; and, the case had been adjourned part-heard with an expectation that closing submissions would be made on the next occasion.
7. In response, Katrina's counsel submitted that the issues raised by the proposed defence were relevant to the matters the Court had to decide in the ultimate resolution of the issues in the case, contending that it was an alternative defence in the event the Court finds that the payments to Lindsay were not distributions of the Burwood Trust funds, with Katrina being entitled to a lien over funds held by George's estate or the GT Trust (T96.38-45).
8. I approached Katrina's application by reference to the Court's power to grant leave to amend pursuant to s 64(1)(b) of the Civil Procedure Act 2005 (NSW) (CPA), and the principles applicable to the grant of leave to amend under s 64 of the CPA which (subject to the Court to seeking to act in accordance with the dictates of justice (s 58(1)) and having regard to the overriding purpose of the CPA and the rules of Court (s 56(1))), requires that "all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings".
9. The Court must also have regard to the objects stated in s 57 of the CPA. Those objects are the just determination of the proceedings, the efficient disposal of the business of the Court, the efficient use of the available judicial and administrative resources, and the timely disposal of the proceedings, and all other proceedings in the Court, at a cost affordable to the respective parties.
10. As observed by the High Court in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [5], [24], [30] (French CJ), [93], [95], [100], [102], [105], [108], [112], [114] (Gummow, Hayne, Crennan, Kiefel and Bell JJ), the weighing of the factors in the exercise of the discretion to grant leave to amend includes, in particular, a consideration of: 1. the nature and importance of the amendments to the party seeking them; 2. the extent of the delay in applying for leave to amend and the explanation for that delay; 3. the prejudice that is assumed to follow from the amendment, and that which is shown; 4. the parties' choices to date in the litigation; and 5. the detriment to other litigants, the need to avoid waste and inefficient use of public resources, and the potential loss of public confidence in the legal system which arises where a Court is seen to accede to applications made without adequate explanation or justification.
11. Having applied those principles to this case, I concluded that leave to amend to plead the second category of amendments should be refused.
12. As the moving party seeking leave to amend, Katrina was expected to bring the circumstances giving rise to the amendments to the Court's attention in her application, yet no explanation was provided in Mr O'Brien's affidavit (T99.16-19). When the Court asked Katrina's counsel about the delay, he indicated that the amendments arose from a question raised by the Court as to what had happened to the Burwood Trust funds and consideration of what would happen with accounting. As was put, "looking at that … it became clear that the trust would be swamped effectively by this indemnity" (T99.19-38).
13. I was not persuaded by that submission. The question of what had happened to the Burwood Trust and what would be required as part of taking an account were plainly in issue since the proceedings were first commenced in 2021. There was always a possibility that the Court would not accept Katrina's claim that the Burwood Trust had been determined by the payments to Lindsay and no sensible explanation was given as to why the application to amend was made mid-hearing. While not determinative, I also considered it relevant that the application to amend would not have been made if the hearing had proceeded to completion (as initially scheduled) for the second day in November last year.
14. Relevantly, granting leave to amend to plead the second category of amendments would inevitably have led to a further adjournment of the hearing. As her counsel acknowledged, appropriately in my view, if the amended defence was filed the matter could not have proceeded on that day as Tzer would want to put on some evidence in reply and he would incur costs thrown away (T101.5-11).
15. The significance of the absence of any explanation for the delay and the impact of the proposed amendments on the trial needed to be weighed against the nature and importance of those amendments. On that aspect, Katrina's counsel conceded that the issues sought to be raised by the proposed amendments could be determined in separate proceedings, on a later occasion (T93.17-18), although it was submitted that there was a question of the utility of the orders being sought by Tzer if, on the facts, it is shown that the Burwood Trust moneys were exhausted due to being subject to an indemnity in respect of costs incurred (T98.17-20).
16. While accepting there was some force to that submission, I was nevertheless unpersuaded that a further adjournment of the hearing was warranted. Relevantly, Tzer's counsel also accepted that the costs issue sought to be raised by the proposed defence could be dealt with in the future, including in the account and enquiry process undertaken by any independent trustee (T118.24-30), which was also acknowledged during submissions in reply by Katrina's counsel (T118.39-40).
17. In my view, the proposed amendments sought to raise matters which had been within Katrina's knowledge for a number of years, were not critical to her primary defence (namely that the Burwood Trust had already been determined) and could be raised in the course of and as part of any account and enquiry process undertaken by new trustees in the event the Court concluded that the Burwood Trust had not been determined. In those circumstances, I was not satisfied that the proposed amendments were essential or necessary for the purposes of resolving the issues now before the Court.
18. Weighing up these matters, and in circumstances where Tzer was prepared to fund the appointment of an independent trustee in the amount of $30,000, I concluded that it would not facilitate the just, quick and cheap resolution of the real issues in the proceeding or be consistent with the dictates of justice in s 57 of the CPA to grant leave to Katrina to file and serve the amended defence at this stage of the proceedings.
19. I deferred making any costs order at that time as the parties indicated that they wished to be heard on that issue. On 16 March 2022, Katrina's legal representatives sent an email to my chambers consenting to an order that Katrina pay his costs of the notice of motion, and I have so ordered.

Was the Burwood Trust determined by the payments by George to Lindsay in 1999?

1. As they provide context for assessing the evidence relied on by Katrina and the issue for determination, it is appropriate to start by recording some of the key facts and matters that are not in dispute.
2. It is common ground that the sale proceeds of the Unit (which totalled $168,331.06) were deposited into the MacBank Account on 23 and 31 December 1996, were the object of the Burwood Trust and were to be held by George, as trustee, in accordance with the terms of the trust as found by Palmer J in Chang v Tjiong (as referred to above at [2]).
3. It is also common ground that George had a limited power of appointment under the Burwood Trust and if he did not exercise that power by his last will or in some other way, then how the power must be exercised is a matter arising in the administration of George's estate: Chang v Tjiong at [41] and [42].
4. Katrina did not advance a submission that George exercised his power of appointment by the terms of his last will. Rather, her defence to the relief sought by Tzer rests on the contention that George exercised the power of appointment prior to Kwat's death by distribution of the Burwood Trust funds to Lindsay in July 1999.
5. In support of that contention, Katrina relies on Lindsay's evidence that George paid him the money to help fund the purchase of a property using funds put aside for the care of "Oma" (as set out at [21]-[22] above), the fact that the payments came from the MacBank Account into which the sale proceeds were deposited, the various deposits and withdrawals into and from that account, and the terms of George's wills (referred to at [25]-[26] above) which she says give rise to an inference that George had disposed of the property the subject of the Burwood Trust prior to his death.
6. Katrina places emphasis on the tracing exercise in relation to the funds in the MacBank Account, as set out in the January 2018 letter. She submits that the Court should infer that on each occasion the credit balance in the MacBank Account went below $168,331.06 (being the sum of the Unit sale proceeds) George intended to, and did in fact, restore the Burwood Trust funds until 19 July 1999, when George made the payments to Lindsay, arguing that the MacBank Account was a trust account, not a general trading account. She relies on authorities dealing with tracing principles, referring in particular to the summary by Ward J (as Her Honour then was) in Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) & ors [2011] NSWSC 1306 (Australian Receivables v Tekitu) at [144]-[159], where Her Honour refers to the applicable principles where there has been mixing of trust funds and other funds.
7. She submits that the lowest intermediate balance rule cannot apply in this case and places reliance on the reasoning of Sargent J in James Roscoe (Bolton) Limited v Winder [1915] 1 Ch 62 at 69 (James Roscoe), where His Lordship stated: "Of course, if there was anything like a separate trust account, the payment of the further moneys into that account would, in itself, have been quite a sufficient indication of the intention of the debtor to substitute those additional moneys for the original trust moneys, and accordingly to impose, by way of substitution, the old trusts upon those additional moneys."
8. Katrina argues that the Court should find that the payments to Lindsay in July 1999 comprised the whole of the Burwood Trust funds (and some additional money from George) and were made in the exercise of George's power of appointment under the Burwood Trust as Lindsay was an object of the Burwood Trust as a person who had needs. She contends that there is no longer any trust in existence and thus, no need for her (as bare trustee) to make any account or to appoint other trustees in her place.
9. Tzer submits that the evidence, particularly that from Lindsay, is insufficient to establish that the payments made to Lindsay by George in 1999 constituted an exercise of the power of appointment conferred on George under the terms of the Burwood Trust. I agree.
10. The termination of a trust involves the performance of the trust so as to result in its discharge. Performance involves the transfer of trust property to those beneficially entitled under and in accordance with the trust instrument with the consequence that, there being no longer any trust property in the hands of the trustee, the trust is extinguished: In the matter of Austec Wagga Wagga Pty Limited (in liquidation) [2018] NSWSC 1476 at [14] (Austec Wagga Wagga) and the cases there cited.
11. In this case, George as trustee, was empowered in his discretion to exercise his power of appointment and transfer the Burwood Trust property after Kwat's death to one or more of the identifiable beneficiaries, based on an assessment of needs. Upon a due exercise of that discretion and the vesting of all the trust property in any such beneficiary (or beneficiaries), the Burwood Trust would be terminated: HAJ Ford and WA Lee, The Law of Trusts (4th ed, Thomson Reuters, loose-leaf) at [16.150].
12. In my view, the evidence overall falls short of establishing that George intended to, and did in fact, distribute the Burwood Trust property to Lindsay pursuant to George's power of appointment when he made the payments to Lindsay in July 1999.
13. Having regard to the almost 20 years that have passed and the frailty of human memory, I place greater weight on the contemporaneous documents than on the terms of the conversation to which Lindsay deposes (as referred to at [21]-[22]), which is relied on as contemporaneous evidence that suggests that the money Lindsay received in July 1999 was from the Burwood Trust funds held by George: Watson v Foxman (1995) 49 NSWLR 315 at 319. A connection between the money paid to Lindsay and the Burwood Trust property or funds held by George for the benefit of Kwat is not recorded in any document and is seemingly inconsistent with various assertions made on behalf of Katrina (and Lindsay) in legal proceedings and correspondence to which I have referred above (see in particular at [32], [35], [40], [41], [46], [47] and [57]), as well as Lindsay's evidence in cross-examination that George never told him where the money came from (T125:32-33).
14. The letter sent by George to Lindsay (referred to at [20]) makes no reference to the sale proceeds of the Unit, that George was using money he held on trust for Kwat's benefit or that the funds were being paid to Lindsay as a potential beneficiary of a trust or as a member of Hok's family who had "needs". To my mind, the terms of George's letter, together with Lindsay's evidence at [21], also strongly suggest that the payments were made to him pursuant to a promise made by George in 1993 to assist Lindsay in purchasing a property. That promise was made well before George had access to the sale proceeds and unrelated to any determination by George that Lindsay was a person in need and was to be the subject of the distribution of the Burwood Trust property.
15. Even accepting Lindsay's evidence that George said he had money set aside to care for Oma, as Tzer submitted, that could have been a reference to money held by George personally, rather than to the sale proceeds of the Unit which had been deposited into the MacBank Account more than two years prior. In my view, the transactions recorded in the MacBank Account statements supports that submission, as they indicate that the bulk of the sale proceeds and other moneys held in the MacBank Account had been depleted by November 1997 and a deposit of $151,500.60 had been made by George into the account on 12 July 1999 (from unidentified funds seemingly unrelated to the Unit sale proceeds), just prior to the payments to Lindsay.
16. As noted above, Katrina relies on tracing principles and the various presumptions that may arise in relation to the mixing of trust funds in accounts. In the present context, the question that arises is whether the flow of funds in the MacBank Account supports Katrina's contentions that the payments to Lindsay were an exercise of George's power of appointment and a distribution of the Burwood Trust property. I accept that the legal principles to which Katrina and Tzer referred may provide guidance for assessing that question. However, this is not a case where tracing into any particular account or asset has been sought in aid of any legal or equitable remedy. In that context, I do not consider that the Court is required to make a positive finding as to what has happened to the Burwood Trust funds. Nor it is appropriate to seek to do so based on the limited evidence before the court and in circumstances where I have concluded that Katrina has not established that the Burwood Trust has been terminated by distribution to Lindsay and orders should be made for the appointment of independent trustees.
17. Both parties' submissions referred to Re Hallett's Estate; Knatchbull v Hallett (1880) 13 Ch D 696 (Re Hallett), a case in which the Court considered a situation where trust money had been mixed in an account with the trustee's own money and deposits and withdrawals were made. In Re Hallett, the Court's conclusion was based on the presumption that where a trustee places trust funds into an account with their own money and then withdraws money from that account, the trustee is acting honestly and withdraws their own money first.
18. As Ward J (as Her Honour then was) observed in Australian Receivables v Tekitu (at [145]) by reference to J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (7th ed, 2006, LexisNexis), the principles laid down in Re Hallett have been elaborated and qualified; in particular, it being said that there is no presumption that a trustee having manifestly committed a breach of trust intends by its subsequent acts to repair it, and where there is no balance remaining in the account but the trustee has obtained assets by withdrawing money from that account, it is assumed that the trustee intended the investment to be for the benefit of the fund, irrespective of the order of withdrawals.
19. Her Honour observed that where a fiduciary, after depleting a mixed fund, pays into it further moneys of his or her own, there is no presumption that the further payments into the fund replace the lost moneys of the beneficiary. However, if an intention of the fiduciary to restore the depleted fund with subsequent payments can be found, that intention cannot be ignored: at [155]. Proof of express intention is required if payments that are made into a general account are to be appropriated to be the replacement of trust money which has been improperly mixed with that account and drawn out: at [157] and [159], citing Re Global Finance Group Pty Ltd [2002] WASC 63 at [102]-[103].
20. It is not disputed that the sale proceeds were impressed with the Burwood Trust when they were deposited into that Account. In my view, at that stage, George had a duty to maintain the MacBank Account in such a way that the Burwood Trust funds would be readily identifiable, it being a breach of trust to mix his own property with the trust property: Chang v Tjiong at [37]; Australian Receivables v Tekitu at [147], citing Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588; [2000] HCA 25. Based on the MacBank Account statements in evidence, George did not maintain the account in that way. The deposit of the sale proceeds of the Unit into the MacBank Account had the consequence that George mixed the trust funds with his other funds, there being no suggestion that his other funds were held on trust by George.
21. As to the nature of the MacBank Account, I accept Katrina's submission that it was not a general trading account. It was an account with Macquarie Investment Management Limited, described as a "Cash Management Trust" account, that appears from the transaction details to have been used by George to receive income of an investment nature, such as dividends or income from shares and sale proceeds of properties, and may be distinguished from the Commonwealth Bank "Streamline Account", that seems to have been a more general bank account that was maintained by George during the same period.
22. That said, the frequency and range of withdrawals and deposits made by George from the MacBank Account and the unidentified nature of some of the transactions, together with the varying credit balances in the account over the period from late 1996 to December 2001 (as referred to at [44] above]), make it plain that the money in the account was used by George for his own non-trust purposes. I do not accept Katrina's submission that the MacBank Account should be characterised as a "separate trust account", in the sense considered by Sargant J in James Roscoe.
23. In my view, the mixing of the funds, the volume and variety of transactions and the various credit balances also suggests that the various deposits into the MacBank Account after the initial depletion in late 1997 (purportedly for the purchase of the Terrey Hills property) that brought the credit balance to an amount that was, at times, over $168,331.06, do not reflect an intention on the part of George to make restitution or to replenish the Burwood Trust. To my mind, they simply reflected deposits of investment income and other funds to which George had access into an account that he maintained for payments related to investments, property purchases and other purposes. Accordingly, I am not persuaded that the moneys paid to Lindsay from the account in July 1999 were impressed with the Burwood Trust and constituted a purported exercise of Lindsay's powers of appointment under that trust: James Roscoe at 69; Australian Receivables v Tekitu at [161].
24. In my view, it is more likely that the funds in the MacBank Account had already lost their character as Burwood Trust moneys by the time the payments were made to Lindsay. This in circumstances where most of the Unit sale proceeds appear to have been used by George for his own needs to acquire the Terrey Hills property in late 1997 (which was manifestly in breach of the terms of the Burwood Trust) and to make subsequent transactions.
25. To the extent that any funds in the MacBank Account in July 1999 remained impressed with the Burwood Trust, in my view, the principle from Re Hallett should be applied. That is, it should be assumed that George intended to act rightfully and honestly and that he first used his own moneys to pay Lindsay from that account, rather than distributing the Burwood Trust moneys prior to Kwat's death in breach of the express terms of the Burwood Trust. In that event, I accept that the payments to Lindsay would have brought the balance of the MacBank Account down below the full amount of the Burwood Trust proceeds. However, if the moneys in the MacBank Account at that time were trust moneys as a consequence of George's prior restorations, I see no reason why the same position should not attend to the deposits made subsequently by George, such that by 20 August 1999, there had been a full restoration of the Burwood Trust moneys, an interpretation that Katrina's counsel accepted at the hearing was open (T158.40).
26. Katrina also relies on the secrecy surrounding the payments to Lindsay and the terms of George's wills as evidence that the payments to Lindsay were a distribution of the Burwood Trust funds. I am not persuaded by those matters.
27. In my view, it is equally open to draw the inference that George wanted to keep the payments to Lindsay secret from Katrina as the equal beneficiary under his will, rather than inferring that the secrecy was suggestive of the distribution of the Burwood Trust funds to Lindsay. The changes to the terms of George's wills are also explicable on the basis that the Unit had been sold by the time that George's last will was made, noting that George's 1992 will referred to the Unit as his "own unit" and not the subject of a trust in favour of Kwat (initially) and the family. I am also unconvinced that the reference in George's letter that he "can now die in peace" (having made the payments to Lindsay) can be attributed to George acknowledging that he has discharged his burden or obligation to deal with the Burwood Trust money to help a family member in need, as Katrina's counsel contended (T163:14-24), in circumstances where the evidence makes clear that George had other funds available to him.
28. In conclusion, Katrina has failed to satisfy me that the payments made to Lindsay on 19 July 1999 constituted an exercise by George of the power of appointment conferred on him by Hok and effectively terminated the Burwood Trust by distribution. Based on the evidence overall, I am persuaded by Tzer's submission that, on the balance of probabilities, the payments to Lindsay were most likely a gift from George from his personal funds and were not a distribution of or from the corpus of the Burwood Trust.

Consequence of finding

1. As a consequence of my finding, the issue of whether George breached the terms of the Burwood Trust by making the payments to Lindsay does not arise. I should record that if I had found that the payments amounted to an exercise by George of his power of appointment to distribute the Burwood Trust property in full, I was satisfied that the payments were made in breach of the express terms of the Burwood Trust (as found by Palmer J and accepted by Katrina in her defence) as the distribution of the trust property was made during Kwat's lifetime.
2. Initially, Katrina had contended that George was entitled to exercise his power of appointment under the Burwood Trust by distribution to Lindsay prior to Kwat's death, having pleaded that what happened to the Burwood Trust was within the scope of the matters addressed by Palmer J (Defence at [25]). However, at the hearing, Katrina's counsel accepted (appropriately in my view) that if the payments made to Lindsay were a purported exercise of his power of appointment from the Burwood Trust funds, then the distribution was in breach of trust (T159.47-48, T161.26-32). Katrina submitted that the breach was of no consequence and did not warrant the making of any of the orders sought by Tzer. She argued that the Court should not find that George acted dishonestly in making the payments to Lindsay and should conclude that the breach was technical, no demonstrable loss had been suffered by any potential beneficiary and the breach does not now call for orders to be made or for the reconstitution of the Burwood Trust out of George's estate. This is in circumstances where, she argued, Palmer J found that Kwat's estate had not been diminished by expenses which George should have paid by resorting to the capital of the Burwood Trust fund, Lindsay fell within the class of objects of the Burwood Trust and George had assessed him to be in need.
3. Based on my conclusion at [113], it is not necessary to make any findings about George's conduct or whether any such breach warranted the making of any orders, as sought by Tzer. However, I note that Katrina's pleading and her submissions at the hearing did not raise any defence under s 85 of the Trustee Act that might have rendered George's breach excusable.
4. Under s 85 of the Trustee Act, the Court may relieve George, as a defaulting trustee of liability, if the Court is satisfied that he had acted honestly and reasonably and ought fairly to be excused for the breach of trust and for omitting to obtain the direction of the Court in the matter in which the trustee committed the breach.
5. The difficulty is that there is very little evidence from which to make a positive finding that George acted honestly and reasonably at that time he made the payments to Lindsay in 1999, so as to excuse him from any breach. While accepting there is evidence to suggest that Kwat was looked after by members of her family and had no need for the Burwood Trust after she moved out of the Unit and her death in 2006, in the absence of any evidence as to George's consideration of the terms of the Burwood Trust and Kwat's ongoing needs, I would have it found it difficult to conclude that he acted reasonably by distributing the funds prior to her death.

What orders should be made?

1. The parties were agreed that if, as I have found, the payments made to Lindsay on 19 July 1999 did not constitute an exercise by George of the power of appointment conferred on him by Hok and terminate the Burwood Trust by distribution, orders should be made regarding the Burwood Trust. Competing versions of orders were provided by Tzer and Katrina. By the end of the hearing, the orders were largely agreed. I deal with the three issues that were not agreed below.
2. The parties also proceeded on the basis that if the Court concludes that the payments to Lindsay were not an exercise by George of his power of appointment, then the corpus of the Burwood Trust must have remained part of George's assets after July 1999 and were mingled in his estate when he died. As was accepted by Katrina's counsel, there were funds or investments within George's estate and probably also the GT Trust that represented the Burwood Trust funds (T168.1-6). It was also common ground that George continued as trustee of the Burwood Trust from July 1999, at least until his stroke on 24 December 2001.
3. Upon the death of a trustee, the office of trustee does not devolve to the trustee's legal representative. The office of trustee, where the trust is an active trust, will became vacant but the trust will not fail. Instead, there will be a bare trust until the appointment of a replacement trustee. In that situation, the legal representative of the deceased trustee has no power to act in the execution of the trust unless the trust instrument indicates they are a person capable of executing the trust: Ballenden v Bryant (No 1) [2012] NSWSC 1471 at [10]-[11]; J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis) at [15-75]; Laycock v Registrar General of New South Wales [2012] NSWSC 248 at [16] (Rein J).
4. In my view, upon George's death, Richard became the bare trustee of the Burwood Trust and remained in that position after George's death until 16 June 2009, when he was removed as the executor of George's estate and the trustee of the GT Trust. It follows that, on and 16 June 2009, Katrina became bare trustee of the Burwood Trust when she was appointed administrator of George's estate and she remains so today. As to the position when George was rendered incapable of managing his affairs by his stroke on 24 December 2001, Richard's and Katrina's appointment as joint and several attorneys under the enduring Power of Attorney dated 29 March 1996 did not cause them to become trustee in George's place, although I accept the evidence indicates that Richard took over effective control of George's affairs from that time.
5. The first declaration proposed by Tzer identifies who has held the income and corpus of the Burwood Trust and initially referred only to the role of Katrina in her capacity as bare trustee since 16 June 2009. There was agreement at the hearing that the declaration should also include references to the period when Richard was trustee. I have made a declaration to that effect, which also refers to the period when George was trustee, reflects my findings at [122] and is in terms of the declaration finally proposed by Tzer.
6. There is no dispute that the objects of the power to appoint under the Burwood Trust are the remaining members of Hok's family, and a declaration to that effect will be made. The two declarations to be made should provide clarity as to the terms of the Burwood Trust for the new trustees and objects of the Trust.
7. At the hearing, the parties also agreed on orders for the appointment of independent trustees of the Burwood Trust. I am satisfied that this is a case where new and independent trustees should be appointed to the Burwood Trust pursuant to s 70 of the Trustee Act. Based on my findings, there has not been a proper exercise of the power to appoint the income and capital of the Burwood Trust, which was to take effect after Kwat's death. The appointment of new independent trustees will enable proper inquiries to be made to ascertain the corpus (including any choses in action) of the Burwood Trust and the due administration of that trust.
8. In my view, independent trustees should also be appointed as it is apparent from Katrina's evidence in cross-examination that she may be in a position of conflict by reason of her various roles, as a bare trustee and potential beneficiary of the Burwood Trust and beneficiary of George's estate. In particular, she acknowledged that she would have previously agreed to the relief sought by Tzer for the appointment of an independent trustee (T52.5-38), had changed her view as to the appointment of an independent trustee when her position in relation to the Burwood Trust shifted from being a beneficiary to being its trustee (T52.50-T53.14) and (as noted at [33], [42] and [43]) had received the assets from George's estate and the GT Trust in 2009 and distributed George's estate to herself and Lindsay in 2013, prior to obtaining the MacBank Account statements (T32.6-39; T58.7-10).
9. Relevantly, Tzer has agreed to fund the cost of an independent trustee in the amount of $30,000, which is to be held by his solicitor, on account of the trustees' fees and costs. There is also evidence that Mr Hall and Mr Heesh are experienced liquidators, have been appointed by the Court to act as trustee in a number of matters and no objection was raised by Katrina as to their suitability for that role.
10. The parties agree that orders should be made for the vesting of the property of the Burwood Trust (income, corpus and any choses in action) in the new trustees, that the property would also include the books and records of the Burwood Trust and should include the documents and instructions obtained by Katrina relating to seeking judicial advice (as referred to at [41] of the affidavit of Mr O'Brien).
11. It is common ground that some of the books and records of the Burwood Trust may also be books and records of George's estate and the GT Trust, and that the new trustees will need access to those books and records. Katrina has agreed to orders that facilitate the provision of the books and records to the new trustees. The dispute between the parties is whether the trustees or Katrina should be liable to pay for photocopies of the books and records that Katrina obtains to the extent that they relate to George's estate or the GT Trust.
12. Tzer submits that Katrina should pay for the photocopying as the costs are part of the incidence of the action having to be taken to seek the appointment of independent trustees and should be seen as an expense of a defaulting trustee (namely Katrina). Pausing here, in my view, it is not appropriate to make any finding as to whether or not Katrina is in the position of a defaulting trustee since taking over as administrator of George's estate. No relief is sought of that nature. To the extent that issue is pressed by Tzer, it will be a matter to be investigated by the newly appointed trustees. The issue on this application was whether orders should be made for a new trustee to be appointed in circumstances where I have found the power of appointment under the Burwood Trust was not exercised by George by distribution to Lindsay in July 1999, the trustee of the Burwood Trust has died and no steps were taken by Richard or Katrina to appoint a replacement trustee or seek judicial advice in relation to the Burwood Trust after George's death.
13. As to who should be liable for the photocopying costs, I have concluded that Katrina should (at least initially) pay them to the extent she, in fact, needs copies of the books and records for the purposes of her ongoing administration of George's estate or the GT Trust. In that regard, I note that Katrina claims that George's estate has already been distributed. Based on the documents referred to in these proceedings, I would also expect that Katrina already has multiple copies of some of the books and records in her possession.
14. The parties agree that the new trustees should be directed to prepare a report that seeks to identify what become of the funds that were the subject of the Burwood Trust, the dealings with those funds, and the actual corpus and income of that Trust. That report will likely need to examine whether particular investments were made using the Burwood Trust funds during George's lifetime and after his death.
15. In my view, that report should also identify any claims that Katrina makes against the Burwood Trust funds, noting that she asserts a lien over the funds based on a right of indemnity from the assets of the Burwood Trust in relation to the costs she has incurred in dealing with issues relating to the Burwood Trust (T172.35-46), which may or may not include any photocopying costs she incurs, as referred to above. Katrina's claims are not to be determined by the trustees but they should be put on notice of the extent of her claims and include them as part of their report to the Court, with any ruling on her claim for indemnity to be dealt with by the Court at a later stage.
16. I will, therefore, make orders (in accordance with the terms finally agreed) regarding the scope of the trustee's report, service of the report on Tzer and any other object of the Burwood Trust, and the relisting of the proceedings for consideration of the report, and to enable the trustee to seek further directions from the Court if needed.
17. The remaining issue in relation to the orders to be made concerns the costs of the application.
18. Tzer seeks an order that Katrina pay his costs on an ordinary basis with Katrina having no right of indemnity or exoneration from the income and/or capital of the Burwood Trust. He submits that this order is appropriate as he succeeded on his application. He also submits that Katrina should have been indifferent to the identity of the trustee of the Burwood Trust, was a trustee and an accounting party and under a duty to account and it is also relevant that she did not seek a "discharge" of the process of the trusteeship, referring to the observations by Brereton JA in Austec Wagga Wagga at [29] and [36] and Kunc J in Gibson v G & A Cork Memorial Company Ltd [2021] NSWSC 945 at [8]-[10].
19. Katrina initially submitted that it was premature to make a final order for costs and contended that the costs should be determined in due course, after the independent trustees have provided their report to the Court. However, during closing submissions, her counsel accepted that costs should "probably" follow the event and that Katrina should "probably not" be entitled to a right of indemnity or exoneration from the Burwood Trust if the Court finds against her on the termination of the trust by reason of the payments, but said that he wanted the opportunity to consider the issue of costs in light of the Court's reasons (16 March 2022, T13.28-5T14.6).
20. In this case, Tzer has succeeded in obtaining relief for the appointment of independent trustees and for a report to be provided (akin to an accounting process) after a contested hearing in which the Court has found that Katrina failed in her defence that the Burwood Trust has already been determined by distribution to Lindsay. To my mind, that outcome warrants an order that Katrina pay Tzer's costs of the application to date, with no right of indemnity or exoneration from the Burwood Trust. While I am not persuaded of the significance of the authorities to which I was referred by Tzer relating to the discharge of the Burwood Trust, it is a relevant factor in my consideration that no steps were taken by Katrina in relation to the Burwood Trust of the nature described to the Court in June 2009 and June 2010 (as referred to above at [32] and [35]).
21. Accordingly, I propose to make the costs order that Tzer seeks. I have however, deferred entry of the order to enable Katrina to consider these reasons and the issue of costs, as she requested at the hearing. If after consideration of these reasons, Katrina wishes to apply for a different costs order, her legal representatives should confer with Tzer's and, before the orders take effect, notify my Associate by email of such, together with their written submissions on that issue (of no more than three pages) and an agreed date for submissions in response, with a view to the issue of costs being determined on the papers.
22. Finally, and as to the objects of the Burwood Trust, Annexure A to these orders lists the persons identified by Tzer in his affidavit (at [17], Annexure D) as the members of Hok's family, noting that I was informed that Emma Indris had died a few weeks before the last day of the hearing. The parties indicated that they would provide an updated version of Annexure A but have not done so. They have liberty to apply to my Associate in the event that further changes need to be made to Annexure A to reflect the current position in relation to the objects of the Burwood Trust.
23. For these reasons, I make the following orders: 1. Declare that the income and corpus of the trust (Burwood Trust) that was identified by Justice Palmer in the decision of 4 March 2009 in Chang v Tjiong [2009] NSWSC 122 (Decision) has been held by: 1. George Tat Loek Tjiong (Deceased) from 1976 until the Deceased's death on 30 January 2004, noting that the Deceased lost capacity on or about 24 December 2001, after which time Richard Tjiong (Richard) and the Defendant were joint and several attorneys under an enduring Power of Attorney dated 29 March 1996 which had effect until the Deceased's death; 2. Richard as bare trustee from 18 March 2004, being the date he was granted Probate over the estate of George Tjiong, until 16 June 2009; and 3. the Defendant as bare trustee since her appointment as the administrator of the estate of George Tjiong on 16 June 2009. 1. Declare that the objects of the power to appoint the income and corpus of the Burwood Trust (Objects) are the persons living and identified in Annexure "A" of these orders, with such power to be exercised having regard to the needs of the Objects, as found by Justice Palmer in the Decision at [36]. 2. Order pursuant to section 70 of the Trustee Act 1925 (NSW) that Stephen Neville Hall and Timothy Paul Heesh (Trustees) be appointed as trustees of the Burwood Trust. 3. The Court notes that upon the appointment of the Trustees pursuant to Order 3, the Trustees are active trustees of the Burwood Trust. 4. Order pursuant to section 71 of the Trustee Act 1925 (NSW) that all of the property (whether income or corpus, including any choses in action) of the Burwood Trust be vested in the Trustees (for the avoidance of doubt, including all of the books and records) of the Burwood Trust: 1. with the Trustees to provide an inventory of property (including any book and record) to the Plaintiff and the Defendant within 30 days of receipt by the Trustees; and 2. subject to the proviso that in the event that any such "book or record" or other "property" is also a book or record or property of the Estate of the Deceased or of the trustee of the George Tat Loek Tjiong Family Trust, then the Defendant shall be entitled to obtain a photocopy of the said book or record or property from the Trustees at her request as needed, and at her expense as to photocopying. 1. Order that all documents, including instructions given and advice(s) obtained by the Defendant with respect to the matters deposed to in [41] of the affidavit of Andrew Michael O'Brien affirmed on 4 March 2022 be delivered up to the Trustees within 14 days of these Orders. 2. Note that the Plaintiff is to pay the amount of $30,000 (Fund), to be held by the Plaintiff's solicitor on trust, on account of the Trustees' fees and costs (Fees). 3. Order that Mr Hall is to provide a report to the Court (Report) with respect to the Burwood Trust from 20 December 1996 by 16 November 2022. 4. The Report is to identify: 1. the corpus (including any accretions) of the Burwood Trust and the income (including any accumulations) of the Burwood Trust from the date of the receipt of the proceeds of sale of xx Street, Burwood in the state of New South Wales (Burwood Unit) being 31 December 1996 (the date of receipt of the final payment with respect to the proceeds of sale of the Burwood Unit) to date; and 2. any claims by the Defendant for indemnity in relation to expenditures said to have been incurred with respect to the management, administration or otherwise related to the Burwood Trust. 1. The Court notes that the Report will be served by the Trustees on the parties of these proceedings as well as any Object who wishes to receive the Report. 2. The Trustees be given liberty to apply on three (3) days' notice to the Court and to the parties prior to delivery of the Report to seek directions with respect to any matter relating to the Report. 3. The matter be relisted before the Equity Registrar for further directions on 7 December 2022, with the intent that the directions to be made will facilitate a further hearing to consider the determination of the amount (if any) to be paid to the Trustees (Amount) and which is to be held by the Trustees subject to the terms of the Burwood Trust. 4. The Court notes that the Amount is to be determined by the Court after delivery of the Report and that in arriving at its determination, the Court may decide any matter relevant, being questions concerning the corpus, income and any claims for indemnity out of the Burwood Trust funds. 5. Order that the Plaintiff be entitled to be indemnified from the Amount with respect to the Fees paid to the Trustees from the Fund. 6. Order that the Trustees be indemnified for their costs from the Amount on the trustee basis. 7. Order that the Statement of Claim filed 24 July 2020 be otherwise adjourned to 7 December 2022. 8. Unless the Defendant makes an application for a different costs order by no later than 7 October 2022, order that the Defendant pay the Plaintiff's costs of the proceedings to date on the ordinary basis, with the Defendant having no right of indemnity or exoneration from the income and/or capital of the Burwood Trust. 9. Order that the Defendant pay the Plaintiff's costs of the Notice of Motion filed by the Defendant on 4 March 2022 on the ordinary basis. 10. The parties have liberty to apply on three (3) days' notice.

ANNEXURE A Hok's Children Hok's Grandchildren Hok's Great Grandchildren #1 Margarita TAN Franciskus Tan (age 62 in 2020) David TAN, age 35 (Died 1986) Alicia TAN, age 34 Elizabeth TAN (Age 66) 0 #2 George Tat Loek Tjiong Katrina Tjiong (57), MLB 0 (Died 2004) Lindsay Tjiong (54), Darwin 0 #3 Helen KHOUW Steven KHOUW (60) Fernando KHOUW (21) (Died 2019) Brendon KHOUW (23) Victoria KHOUW (17) Ferdie KHOUW (59) Alex KHOUW (26) Jennifer KHOUW 17 (23) Nicholas KHOUW (21) Wendy ANNABEL (56) JADE ANNABEL (20) Joshua ANNABEL Jasmine ANNABEL Jemma ANNABEL Angela KHOUW (50) 0 Eileen KHOUW (47) 0 #4 Harry Tjiong (86) Michelle THEUNISSEN (50) Matthew THEUNISSEN (17) Deborah PRIDDLE (47) Emily PRIDDLE (15) Ryan PRIDDLE (11) #5 Emmawati INDRA (84) Djoko JOEDAATMADJA (deceased) Derek JOEDAATMADJA (19) Jakarta, Indonesia (Died 2022) Handoko JOEDAATMADJA (53) Singapore Patrick LIU (17) Hannah LIU (15) #6 Soei Lan CHANG (83) Tzer Chin CHANG (50) 0 Tzer Ming CHANG (46) 0 #7 Stella LIM (80) Xavier Chiang LIM (52) Yie Li LIM (Minor) Yie Ling LIM (Minor) Yie Liang LIM (Minor) Theresa LIM (47) Christian Mascarenhas (Minor) Joseph Mascarenhasn (Minor) Alexander LIM (45) Tze Chuin LIM (Minor) Tze En LIM (Minor) Tze Hoi LIM (Minor) Mark LIM (43) NSW 2136 #8 Richard TJIONG (78) Meisha CARLSON (49) Nyah CARLSON (17) Kayla CARLSON (14) Marcus Tjiong (46) 0 #9 Elizabeth SMITH (76) Warrick SMITH (47) 3 (Minor) Brisbane Jason SMITH (45) 2 (1 Minor) London #10 Roy GRANT (68) 0 (Not known otherwise) 0 The Netherlands

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