Crowle Foundation v NSW Trustee & Guardian

Judgment - Ex Tempore (Revised)

The plaintiff, Darryl Ian Browne, is the executor of the estate of the late Peter Russell (the deceased) who died on 12 September 2018 leaving a will made on 16 July 2015.
By summons filed on 2 June 2021, the executor seeks an order pursuant to s 6 or s 70 of the Trustee Act 1925 (NSW), or otherwise pursuant to the inherent jurisdiction of the Court, that Equity Trustees Ltd be appointed as trustee of the 'Special Needs Fund' on the terms set out in the will. The order is sought because the initial trustee nominated under the will in relation to the Special Needs Fund has refused to accept the appointment.
The executor relies on his affidavit dated 1 June 2021 and written submissions which have been of assistance to the Court and from which some of what follows is taken.
There is no contradictor. I am satisfied that a contradictor is unnecessary in this case based on the nature of the application and the other matters to which I will refer.

The Executor's Application

The executor submits, and I accept, the effect of the correspondence from Perpetual is that it has disclaimed its appointment as trustee of the Special Needs Fund. As Counsel for the executor submitted, a trustee cannot be compelled to accept a trust (Tucker, Le Poidevin and Brightwell, Lewin on Trusts (20th ed, 2020, Sweet & Maxwell) at 13‑007) and steps need to be undertaken to ensure that a new trustee is appointed in Perpetual's stead.
Section 6 of the Trustee Act 1925 (NSW) provides that a new trustee may be appointed in place of an original or substituted trustee by the Court or otherwise, including in circumstances where a trustee refuses to act in such trusts or powers: ss 6(1), 6(2)(e).
Section 70 of the Trustee Act empowers the Court to appoint a new trustee. It provides: 70 New trustees (1) The Court may make an order for the appointment of a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee. (2) The appointment may be made whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient difficult or impracticable so to do without the assistance of the Court. … (8) Every trustee appointed under this section shall, as well before as after the trust property becomes vested in the trustee, have the same powers authorities and discretions, and may in all respects act as if the trustee had been originally appointed a trustee by the instrument, if any, creating the trust.
Counsel for the executor raised the issue of whether the Court's power under s 70 of the Trustee Act is enlivened in circumstances where the named trustee has disclaimed its appointment and funds have not yet been settled on the trust. He drew my attention to two cases.
The first case is Re Will of Orloff; Terracall v Churkovich (2010) 24 VR 603; [2010] VSC 48 in which Robson J expressed, at [33], a preliminary view in relation to a similar Victorian provision, but without having heard argument on the issue, that "the exercise of such a power would require the existence of an existing trustee or the creation of a trust."
The second case is Crowle Foundation v NSW Trustee & Guardian [2010] NSWSC 647 where Ball J referred, at [41], to a submission that the Court may not have power under s 70 of the Trustee Act to replace a trustee in circumstances where the trust property has not vested in the trustee. His Honour rejected that submission and considered that where a trust is clearly established by the creation of a testamentary trust in a will and it is simply an administrative matter to transfer the trust assets, s 70 may enable the appointment of a replacement trustee notwithstanding that no property had yet been vested in the trustee.
I accept the submission that Ball J's reasoning is apt to this case. From the time the executor decided to distribute the deceased's estate to a Special Needs Fund, in respect of which Perpetual was nominated as the initial trustee, a trust was created: Mallott v Wilson [1903] 2 Ch 494 at 502-3. The disclaimer by Perpetual did not negate the creation of that trust. To my mind, the fact that the estate may not have formally vested in the trustee or been settled in the Special Needs Fund does not prevent a replacement trustee being appointed pursuant to s 70 of the Trustee Act or the inherent power of the Court. This is particularly as s 70(1) of the Trustee Act provides that the appointment may be made "although there is no existing trustee", and s 6(2)(e) recognises that an appointment may be made where a trustee refuses to act.
The test to be applied under s 70(2) of the Trustee Act is whether it is expedient to appoint a new trustee. I am satisfied that it is expedient to appoint Equity Trustees in this case. It is necessary to appoint a new trustee to enable the Special Needs Fund to be administered and it is in the interests of the deceased's son, the sole beneficiary of that Fund, that a trustee be appointed. Equity Trustees is a licensed trustee company of long standing with experience in managing private trusts and has provided the necessary consent.
If an appointment cannot be made under s 70 of the Trustee Act, the Court has the power to appoint Equity Trustees in its inherent jurisdiction. As the executor's submissions observed, it is a principle of equity that a trust will not be allowed to fail for want of a trustee. If the creator of the trust has not appointed trustees to carry out the trust, or if the nominated trustees are dead or refuse to act, the Court will appoint trustees to carry out the trust: J D Heydon and M J Leeming, Jacobs' Law of Trusts (7th ed, 2006, LexisNexis Butterworths) at [1502]. While the question to be asked in satisfying the test under the Court's inherent jurisdiction is in slightly different terms to that under s 70, focussing as it does on the best interests of the beneficiary and the administration of the trust, I am satisfied it is satisfied in this case for the reasons already referred to.
It follows that I am satisfied that the orders sought in the summons should be made. As this application relates to the management or administration of a trust created by a will, it is appropriate to order that the executor's costs be paid out of the deceased's estate on an indemnity basis.
For these reasons, I make the following orders. 1. Order that pursuant to s 70 of Trustee Act 1925 (NSW), or otherwise pursuant to the inherent jurisdiction of the Court, that the Equity Trustees Limited be appointed as trustee of the Special Needs Fund constituted by clause 11 of the will of the late Peter Russell dated 16 July 2015. 2. Order that the costs of the executor, Darryl Ian Browne, be paid out of the estate of the late Peter Russell, calculated on the indemnity basis.

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (4 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (3)

Cited By (1)