Colquhoun v Dronpane Pty Ltd & Ors

Supreme Court of NSW|2021-11-26|Before: Sackar J, Sheller JA, In Sanwick P

Judgment

Budumu Pty Ltd ("Budumu") holds the position of trustee of the George Hardi Family Trust ("the Trust Estate"). The terms of the trust are contained in a trust deed dated 11 April 1974 and made between Leo Hardi (as settlor) and the Trustee as trustee.
The Plaintiff filed a summons on 14 December 2020 seeking five prayers for relief. Four of these have been dealt with (see Budumu Pty Ltd (ACN 001 216 397) [2021] NSWSC 522) leaving the fifth which seeks to have the Trust Deed rectified. In particular there is sought a rectification of the "vesting day" as contained in paragraph 1(c) of the Trust Deed by deleting the words "…the period of fifty years after the execution of this settlement or…", as well as the words "…whichever shall be shorter…"
If provided, the effect of the order rectifying the Trust Deed would be to have the Royal lineage provision apply. It is unclear on the evidence why the 50 year period was chosen, along with the Royal lineage provision.
The Trust Estate was established on 11 April 1974 which date was prior to the application of the Perpetuities Act 1984 (NSW) which applied from 31 October 1984. As a result the 80 year perpetuities period does not apply to the Trust Estate and the Trust Estate is subject to the general law perpetuities period of a life in being plus 21 years which is satisfied by the Royal lineage position.
The Trustee relies upon two affidavits. One of Tobor Louis Varnay (19 October 2020) together with exhibits and that of Geoffrey Mark Robertson (13 August 2021).
There is no Contradictor to the relief sought.

Rectification of deeds that evidence a voluntary settlement - intent of the person providing the instructions

The Trust Deed evidences a voluntary settlement.
4.2 Equity may rectify deeds (see for example Carlenka), including those which evidence a voluntary settlement (Brightman J in Re Butlin's Settlement Trusts [1976] Ch 251 ("Butlin's Settlement"), Roper J in Kent v Brown (1942) 43 SR (NSW) 124 ("Kent v Brown"), Sanwick, Public Trustee v Smith and Meagher, Gummow & Lehane at [27-145].
As discussed above, rectification requires an assessment of the subjective (i.e. actual) intention of the party (or parties) to the document, and the person behind the arrangement (i.e. Hardi and possibly Stephen, who would have caused the instructions for the drafting of the Trust Deed to have been provided to any solicitor).
In the case of a voluntary settlement, which has been established without any active bargain, the question as to whose intention is relevant as to rectification depends on the circumstances and the substance of the matter.
Where the settlor has the active and operative intention as a matter of fact, as to the terms of the trust which is declared, then the question is one of the settlor's intention (see Brightman J in Butlin's Settlement at 262F - 263B and Roper J in Kent v Brown at 128).
In other cases, it may be the trustee whose intention is relevant to the terms of the trust (Sheller JA in Carlenka at 344-5).
However, there is a further category of case, to which the present case includes, where there is another party (apart from the trustee), and whom the trustee (initially at least) instructs. In such circumstances, it is the intention of the Trustee (via Hardi) that is relevant (see for example White J in Public Trustee v Smith [2008] NSWSC 397; (2008) 1 ASTLR 488 at [13] and [71] to [73], Martin CJ in Kirkham as Trustee of the Kirkham Family Trust [2010] WASC 106 at [8] to [10] and White J in Colquhoun v Dronpane Pty Ltd & Ors [2011] NSWSC 1500 at [15]).
The evidence outlined indicates that the words "…the period of fifty years after the execution of this settlement or…" should not have been included in the definition of "the vesting day" contained in paragraph 1(c) of the Trust Deed.
That is, the subjective intent has not been properly reflected in paragraph 1(c) of the Trust Deed, and in particular the inclusion of the words "… the period of fifty years after the execution of this settlement or …" in the definition of "the vesting day". Those words therefore ought to be deleted via an order rectifying the Trust Deed.

Consideration:

In my view on the available evidence there is ample support for the proposition that on Hardi's understanding the Trust Estate would last forever.
The Varnay affidavit deposes to the standard practice of the firm and that in his experience the trust deeds routinely drafted within the practice contained the Royal lineage clause which provided that the trust would last as long as there were descendants of King George V are alive.
Varnay also deposes to a discussion with Hardi not long after Varnay took over Hardi's accountancy work where the structure was discussed. In those conversations the question of keeping the assets in the family forever was referenced. I find that evidence entirely plausible and the very type of conversation a professional would have.
Further support for that evidence is I am satisfied to be found in Hardi's will, in particular clause 14.
On the basis of the evidence which I am satisfied is the best evidence available I am of the view that the requisite subjective intent has been made out.
Having carefully read the materials beforehand I made the orders on 29 November. These reasons confirm the orders made.

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: 14 December 2021

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