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[2009] VSCA 284
respondent. Appeal dismissed; trial judge's finding that the exclusion deed was valid and not shown to have been exercised for an improper actuating purpose was upheld (see [50]).
The Court of Appeal dismissed the appeal. The appellants alleged the trustee excluded two grandchildren from a discretionary trust to prevent them inspecting trust documents, an improper purpose that would invalidate the exclusion. The Court held denial of access can be an improper purpose, but the appellants failed to prove it. Crucially, they chose not to test the trustee's motive in cross-examination and produced no direct evidence of an improper motive. The Court therefore upheld the exclusion deed as valid.
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1,931 words · generated 10/07/2026
This case concerned whether a deed of appointment executed by Vanbreck Pty Ltd (the trustee) on 20 December 2006, which purported to exclude two grandchildren (Nigel and Hamish) from the class of beneficiaries of the W S & N R Harvey Family Trust, was void because it was motivated by an improper purpose. The appellants (Sandra, her husband Charles, and their sons Nigel and Hamish) had sought inspection of trust documents after family disputes and concerns about the late William Harvey's welfare and financial affairs (see [22], [26]-[29]). Shortly after requests for inspection were pressed by solicitors, draft notices and an exclusion deed were prepared and the trustee executed the exclusion deed on 20 December 2006; correspondence of the trustee's solicitors also sought to delay inspection (see [31]-[39]).
No linked legislation citations have been extracted yet.
At first instance an originating motion seeking production and inspection was refused: the trial judge found the exclusion valid and on the facts was not satisfied that the trustee was actuated by an improper purpose to deny inspection (see [1], [15]). On appeal the appellants contended (in essence) that the exclusion was void ab initio because Prudence Riddell (the sole director of the trustee company) acted in bad faith or with an ulterior motive to prevent access to the trust documents; they also argued the trial judge misapplied the rule in Browne v Dunn by not drawing an adverse inference from the failure to cross-examine Prudence on motive (Ground 1), and that the trial judge was compelled to infer the improper purpose from the sequence and timing of events (Grounds 2–4) (see [2]-[4], [16]).
The Court of Appeal (Redlich and Bongiorno JJA and Hansen AJA) dismissed the appeal. The court accepted as a matter of law that denying beneficiaries access to trust documents could constitute an improper purpose that would vitiate an appointment, but concluded the appellants failed to establish on the evidence that such a purpose actuated the trustee. The court emphasised the appellants ran a tactical risk by not exploring Prudence's state of mind in cross-examination and that pre-trial notice did not shift the onus of proof (see [21]-[31], [36], [42], [49]).
Three interlocking reasons underpin the Court of Appeal's decision.
Legal threshold: improper purpose can invalidate a trustee appointment, but the improper purpose must be an operative or actuating purpose, that is, a purpose without which the appointment would not have been made. The Court adopted this standard and rejected the respondent's narrower contention that the improper purpose must be the dominant or primary purpose (see [40]-[42]). The Court therefore recognised that denial of inspection, if proven as an operative purpose, would be a fraud on the power and would render the exclusion void (see [36], [42]).
Evidential burden and the Browne v Dunn context: despite accepting that pre-trial notice might in some cases qualify the Browne v Dunn obligation to put an adverse case to a witness, the Court emphasised that notice does not discharge the burden of proof (see [22]-[23], [27]). The appellants elected not to cross-examine Prudence on motive, a tactical choice conceded at trial, and that choice meant the tribunal lacked direct testimony on the essential subjective element. The Court explained that the absence of cross-examination on motive materially reduced the cogency of any adverse inference drawn from circumstantial evidence and therefore made it reasonable for the trial judge not to infer improper motive (see [21], [25], [27]-[31]).
Circumstantial evidence insufficient: while timing and correspondence (request for documents, drafting of exclusion deed and correspondence delaying inspection) made an inference of improper motive available, the court held that an alternative innocent explanation was equally open on the evidence, namely, that the trustee only realised Nigel and Hamish remained beneficiaries and, having regard to historical settlement terms and family disputes, decided exclusion was appropriate; the request for documents may have been impetus or occasion rather than an operative motive (see [81]-[82], [38], [44], [49]). Moreover, the appellants did not advance direct evidence of mismanagement or malfeasance which might have made an inference of concealment more probable (see [47]).
Hence, on the facts as found and the evidence actually led, the appellants failed to discharge the onus of proving an improper actuating purpose. The appeal was dismissed (see [50]).
Before this decision, the established principles included:
Curwen reaffirms and clarifies these points:
Thus Curwen sits comfortably within established trust law but gives practical guidance on proof and tactics where motive is in dispute.
Paragraph 24 (Karger summary): "A court will not review a trustee's discretionary decision unless the trustee acted in bad faith, for an improper purpose, or failed to give the decision real and genuine consideration; also, if the trustee voluntarily gives reasons, the court can examine those reasons."
Paragraph 25: "No amount of notice ... could require Prudence ... to state her reasons for decision. As a matter of law she was entitled not to do so."
Paragraph 42: "The improper purpose will constitute a fraud on the power if it be an operative or actuating purpose - one without which it cannot be said the appointment would have been made."
Paragraphs 81–82: Trial judge's observation that while an inference of improper motive was available, it "can hardly be drawn when Prudence was given no opportunity to deal with the allegation" and an alternative innocent explanation is open.
Curwen is engaged where:
Under those fact patterns, Curwen indicates that:
This deep dive confines itself to the materials in the judgment. The Curwen reasons themselves rely upon established authorities (Karger, Hooke v Robson, Vatcher v Paull, Browne v Dunn) and elaborate evidential practice in admiring detail. The judgment does not canvass subsequent appellate treatment (it is the Court of Appeal decision). To assess later treatment empirically would require searching reported cases and citators post-2009. Practitioners should check citators (e.g. AustLII, Westlaw, LawCite) for subsequent citation history to determine whether Curwen has been followed, distinguished, or applied in later trust disputes and evidence rulings.
Threshold for 'mala fides' or bad faith: the Court expressly declined to resolve the precise content of mala fides (whether it requires 'conscious impropriety' or a broader mental state) (see [37]). That remains an open doctrinal question for future cases where bad faith, as opposed to an improper purpose, is alleged.
Quantifying 'operative' or 'actuating' purpose: while Curwen endorses the actuating-purpose test, the facts required to establish that an improper reason was one 'without which' the appointment would not have been made remain fact-intensive. How strongly circumstantial evidence must point to that counterfactual will continue to generate litigation.
The interaction between pre-trial notice and Browne v Dunn: Curwen accepts the qualification that pre-trial notice may relieve the need for cross-examination in some cases, but it emphasises that notice does not shift the evidential burden. Tensions remain about practical limits: when is notice alone sufficient to permit a court to draw adverse inferences without cross-examination?
Extent to which tactical litigation choices (like electing not to cross-examine) should influence appellate review: Curwen treats tactical choices as legitimate risks for a party who fails to test the crucial fact witness. Future appellate courts will need to balance procedural fairness and the need to avoid rewarding tactical omissions with manifest injustices.
Remedies where a trustee exercises an exclusion to defeat inspection: Curwen confirms that exclusion to prevent inspection can be an improper purpose, but it does not exhaustively catalogue remedies or procedural mechanisms (e.g. interlocutory relief, compelled disclosure orders) that might be available where a challenger can adduce evidence of mismanagement. Practitioners should consider urgent interlocutory steps (discovery orders, applications for disclosure) where there is real concern about destruction or concealment of documents.
Practical takeaway for practitioners: where motive is central, secure direct evidence or test the decision-maker in cross-examination; do not assume pre-trial notice will substitute for an absence of cross-examination; if there are allegations of mismanagement, develop and adduce supporting evidence as that materially strengthens the inference that the trustee sought to conceal.
Sandra Stuart Curwen & Ors v Vanbreck Pty Ltd (as Trustee for the W S and N R Harvey Family Trust) [2008] VSC 338 (Mandie J)
TRUST - Discretionary trust - Beneficiaries seeking access to trust documents - Appointment excluding beneficiaries - Whether exclusion for improper purpose - Trustee on notice that improper purpose alleged - Non-disclosure of trustee's reasons - Whether adverse inference arises - No cross-examination of trustee as to its purpose - Whether trial judge found breach of rule in Browne v Dunn - Fraud on power - Purpose inferred from circumstantial evidence - Improper purpose need not be dominant purpose - Failure to establish actuating or operative improper purpose.
1 This appeal concerns the validity of a deed of appointment that purported to exclude the third and fourth appellants as beneficiaries under a discretionary trust. Each appellant applied, by originating motion, for a declaration that they are entitled to the production and inspection of documents relating to the W S & N R Harvey Family Trust ('the Trust'). The trial judge refused the application on the ground that each of the appellants had been validly excluded as beneficiaries and were consequentially unable to rely upon their right as a beneficiary to production and inspection of trust documents.
2 The appellants contend that the trial judge erred in not finding that the deed that purported to exclude the third and fourth appellants was void ab initio by reason of bad faith or, in the alternative, an ulterior motive or purpose on the part of the Trustee. The bad faith or improper purpose was that the exclusion was based wholly or in part on the desire of the Trustee to prevent the appellants from gaining access to certain documents of and relating to the Trust ('the Trust Documents').
3 The appellants submit that the events which occurred immediately before the Trustee executed the deed of appointment support the inference that Prudence Riddell, the sole Director of the trustee company ('the Trustee'), acted with the intention of preventing the beneficiaries from gaining access to the Trust Documents. The trial judge was said to have erred in not drawing this inference by wrongly applying the rule of professional practice in Browne v Dunn[1] (Ground 1). The appellants further submit that his Honour's finding was against the weight of evidence, particularly given his Honour's legal conclusion that the deed of appointment would have been declared invalid if one (among others) of the Trustees purposes was to deny the then beneficiaries access to the Trust Documents. It was an irresistible conclusion, it was said, that the denial of access to Trust Documents was a reason for the Trustee's decision to exercise the power to exclude the beneficiaries (Grounds 2, 3 and 4).
4 The respondent sought to uphold the findings of the trial judge by a Notice of Contention that challenged his Honour's legal finding that a denial of access to trust documents was capable of constituting an improper purpose or bad faith. It was submitted that, even if the Trustee's purpose was to resist a request to inspect trust documents, that would not vitiate the exercise of the power of exclusion. In oral submissions, two general propositions were advanced. First, it was said that a broad power of exclusion of the kind conferred under the Trust Deed had the effect that the Trustee was unconstrained in the matters that might be taken into account. Consequentially, consideration of whether the appellants, who were then beneficiaries, should have access to trust documents could not, it was said, constitute an improper purpose. Second, it was submitted that denial of access to these documents was not a motive that could rise to the level of bad faith. That was because it did not contain an element of dishonesty or malfeasance. Alternatively, it was submitted, even if the motive of denying access to trust documents was capable of vitiating the discretion as being either an improper purpose or bad faith, this case involved a mixed purpose and in such a case the Court should look to the actuating or dominant purpose of the Trustee in order to determine whether the power had been properly exercised.
5 To resolve these issues, it is necessary to undertake some elaboration of the terms of the Trust Deed and the circumstances leading up to the deed of appointment.
6 The Trust is in the form of a discretionary trust and was established by deed of settlement dated 5 June 1881. Vanbreck Pty Ltd was and remains the trustee of the Trust and is the respondent to this appeal. The Directors of Vanbreck at the date of settlement were William Strathern Harvey ('William') and his wife Nancy Rosemary Harvey ('Nancy').
7 The Trust Deed lists both 'Principal Beneficiaries' and 'Secondary Beneficiaries' who the Trustee may appoint in its absolute discretion, from time to time by deed whether revocable or irrevocable. The Principal Beneficiaries are named as the children and grandchildren of William and Nancy. The Secondary Beneficiaries are defined, so far as is relevant for present purposes, as the descendants of the Principal Beneficiaries, the spouse, widow or widower of any Principal Beneficiary, or descendant thereof, and William and Nancy. The 'Guardian' is defined, so far as relevant, as William and Nancy jointly, during their lifetime and thereafter the survivor of them. The 'Vesting Day' is defined as the 80th anniversary of the date of the deed or such earlier date as the Trustee may appoint.
8 William and Nancy had two children, the elder daughter Prudence, as we have said, being the sole director of Vanbreck. Their younger daughter ('Sandra') is the first appellant. The second appellant ('Charles') is Sandra's husband. Sandra and Charles have two children Nigel and Hamish, who are the third and fourth appellants in this appeal.
9 By deed of exclusion executed in 1990, Sandra and Charles were excluded from the class of beneficiaries under the trust. Sandra and Charles did not challenge the validity of their exclusion before the trial judge, nor did they claim any right to access to the trust documents on the basis that they were once beneficiaries. This position was not altered on appeal.
10 As the children of a Primary Beneficiary, Nigel and Hamish fell within the definition of a Secondary Beneficiary under the Trust. By the deed of exclusion, dated 20 December 2006, the trustee purported to exclude Nigel and Hamish from the class of beneficiaries under the Trust. Before the trial judge, Nigel and Hamish (and their parents Sandra and Charles) challenged the validity of this exclusion in order to establish the entitlement of Nigel and Hamish to claim the right of access sought in the originating motion.
11 The remaining terms of the Trust Deed were described in the reasons of the trial judge as follows:
[6] Clause 3(1) of the Trust deed empowers the Trustee to pay apply or set aside the whole or such part (if any) as it shall think fit of the net income of the Trust Fund to or for the benefit of or for all or such one or more exclusive of the others or other of the Beneficiaries in existence in such proportions as the Trustee in its absolute discretion and without being bound to assign any reason therefor shall think fit. Clause 3(2) empowers the Trustee in its absolute discretion to accumulate all or any part of the net income. Clause 3(3) provides that the Trustee shall hold such net income as is not paid or applied under cl 3(1) or accumulated under cl 3(2) upon trust for such of the Principal Beneficiaries who are in existence at the expiration of the relevant accounting period in equal shares.
[7] Clause 4 of the Trust deed provides that, as from the Vesting Day, the Trustee shall stand possessed of the Trust Fund and the income thereof in trust for such of the Beneficiaries in existence for such interests and in such proportions and for one or more to the exclusion of the other or others as the Trustee may by instrument in writing revocable or irrevocable before the Vesting Day appoint, and, in default of and subject to any such appointment, upon trust for such of the Principal Beneficiaries as shall be in existence at the Vesting Day in equal shares.
[8] Clause 17 of the Trust deed provides:
Subject always to any express provision to the contrary herein contained every discretion vested in the Trustee shall be absolute and uncontrolled and every power vested in it shall be exercised at its absolute and uncontrolled discretion and the Trustee shall have the like discretion in deciding whether or not to exercise any such power ...
[9] Clause 20(1) of the Trust deed, importantly for present purposes, provides:
The Trustee for the time being may at any time and from time to time prior to the Vesting Day by deed whether revocable or irrevocable appoint that any person who would otherwise be a Beneficiary for the purposes of this Deed shall be excluded from the class of Beneficiaries.
[10] However, by cl 22(2) of the Trust deed, it is provided that, notwithstanding any other provisions thereof, the Trustee may not, inter alia, make any appointment or determination for the purposes of or pursuant to cl 20(1), without first giving to the Guardian two clear days notice in writing of its intention so to do, such notice containing full and complete details of the specific manner in which the Trustee intends to make such an appointment. Clause 22(3) provides that, if at any time there is no Guardian in existence, the Trustee shall not, inter alia, make any appointment or determination for the purposes of or pursuant to cl 20(1) without first obtaining the consent in writing of all the Principal Beneficiaries who are still sui juris.
12 A significant part of the oral submissions made in this appeal concentrated upon the circumstances leading up to the execution of the deed of exclusion of Nigel and Hamish as beneficiaries under the Trust. These circumstances, and in particular the proximity in time between the request for access to the trust documents by Nigel and the execution of the deed of exclusion, were said by the appellants to support the conclusion that the Trustee was motivated by the imperative of denying access to relevant trust documents. In response, the respondent referred to circumstances that were said to demonstrate that Nigel and Hamish had inadvertently remained beneficiaries following the deed of appointment excluding their parents in 1990. This view of their status was relied on to support the submission that the request for access to the fresh documents was the occasion for the Trustee to execute the Deed of exclusion but was not a reason for deciding to do so.
13 On the appeal it was conceded that the facts as found by the trial judge were not disputed.[2] Only the inference to be drawn from those facts was in issue between the parties. It is therefore necessary to refer at some length to the facts as found by the trial judge. Those facts, with some interpolation by the trial judge, were as follows:
[11] In or about 1987 Sandra brought proceedings in this Court and also in the Supreme Court of South Australia against her parents, William and Nancy, and her sister, Prudence, and against various family companies including Vanbreck. On or about 5 March 1990, those proceedings were settled by Terms of Settlement ('the 1990 Terms') by which certain land and other property was to be transferred to Sandra and the total sum of $800,000 was agreed to be paid to Sandra within stipulated times. Sandra testified that she had received both the property and the money in accordance with the 1990 Terms. In cl 4 of the 1990 Terms, there were mutual releases and it was further provided:
... and in particular [Sandra] hereby irrevocably disclaims any interest in the Trust, and agrees that Vanbreck may deal with the Trust assets as it sees fit and may exercise its powers under the Trust Deed as it sees fit without owing any obligation or duty of any kind to her and further [Sandra] disclaims and waives any entitlement or future right or claim which she may have on the estates of any of the Harveys including any rights arising under relevant testator's family maintenance legislation.
[12] At some later date in 1990 the Trustee (the directors then being William and Nancy) executed a deed pursuant to cl 20(1) of the Trust deed, with the consent of William and Nancy as Guardians, irrevocably exercising its power of appointment to exclude Sandra and Charles from the class of Beneficiaries.
[13] On 5 June 1990, Prudence was appointed as a director of Vanbreck.
[14] On 24 March 2000, Nancy ceased to be a director of Vanbreck.
[15] The evidence suggests that in June 2005 Hamish was involved in discussions with William, Nancy and Prudence in relation to his becoming 'more involved in the family activities and businesses.' Although the parties were in dispute concerning precisely how his role should be described, it seems that Hamish was indeed heavily involved with some of the farming and business activities of the family, both prior to and after June 2005, and was on good and trusted terms with Nancy and Prudence, until an argument took place with them in about March 2006 (see later below). He had also resided with them at Beckworth Court for some period.
14 The appellants' primary submission at trial and on appeal was that the Trustee's exercise of the exclusion power under the Trust deed was shown to have been exercised in bad faith or for an improper purpose. They pointed to a long and venerable line of authority which confirms the Trustee's duty to keep proper accounts and furnish information as required by beneficiaries.[4] This duty has been expressed to apply in the context of a discretionary trust, such as the trust in the present case.[5] It was said that the principles which enliven that duty would be undermined if a trustee of a discretionary trust, faced with a request for access to trust documents, could refuse by simply excluding the requesting beneficiary.
15 His Honour accepted the submission of the appellants that the exercise of an exclusion power would be invalidated if the intention of Prudence, or 'one of the [her] purposes', was to prevent access by a beneficiary to trust accounts or other information relating to a trust. His Honour did not consider whether the beneficiaries' right to inspect rested upon an equitable proprietary right in those documents or whether the better view was that the right flowed from the trustee's fiduciary duty to keep the beneficiaries informed.[6] However, his Honour held that he was not convinced, to the requisite standard, that such an improper purpose was one of the Trustee's purposes in exercising the exclusion power. He upheld the validity of the deed of appointment and dismissed the appellant's originating motion.
16 This ground concentrated upon the following two paragraphs in his Honours reasons:
[81] The improper purpose, if there was one, could only have been an intent or purpose formed or adopted by Prudence, as she was the sole director of Vanbreck. Yet it was not put to Prudence that this was her intention or purpose, nor was her mental process investigated in cross-examination. It seems to me therefore that, although the inference is open, having regard to the sequence of events and the timing of the decision, that Nigel and Hamish were excluded in order to prevent them from having access to trust documents or information, the inference can hardly be drawn when Prudence was given no opportunity to deal with the allegation.
[82] Furthermore, it seems to me that an alternative inference is equally open on the evidence, namely, that Vanbreck (ie Prudence), realising that Nigel and Hamish were beneficiaries and having regard to the nature of the settlement with Sandra or to the later argument with Hamish, or to both of these matters, or to other undisclosed considerations, decided that it was appropriate to exclude Nigel and Hamish as beneficiaries. The demand to inspect trust documents might reasonably be viewed, in that light, as merely the occasion that brought these matters to a head.[7]
17 Counsel for the appellants submitted that these passages disclosed an error in the approach of the trial judge. In particular, attention was drawn to his Honour's conclusion that the inference of an improper purpose 'can hardly be drawn when Prudence was given no opportunity to deal with that allegation'. It was submitted on behalf of the appellants that this statement constituted a misapplication of the rule in Browne v Dunn.[8]
18 Prudence had not been cross-examined as to her intention, purpose or mental process in reaching her decision to execute the deed of appointment.[9] His Honour observed that only one aspect of Prudence's state of mind was raised in cross-examination. That exchange was extracted in his Honour's reasons:
Q - And as you've said in your evidence-in-chief, Sandra ... was estranged until 2005 from her father, correct?
A - M'mm.
Q - And indeed estranged from you, correct?
A - Yes.
Q - And Sandra's other son, Nigel, had not been involved much in the affairs of his grandfather, had he?
A - No, he hadn't been.
Q - No?
A - Not at all.
Q - But he was a beneficiary of the Harvey Family Trust, wasn't he?
A - M'mm.
Q - As was Hamish?
A - Yes, but we didn't realise it at that time, either, ...
19 This failure to cross-examine her as to her motivations in executing the Deed of Appointment, in combination with her testimony, led the trial judge to conclude:
So, in substance, Prudence appeared to be saying that, from 1990 (when Sandra executed the Terms) until the present dispute arose, she had not been aware that Nigel and Hamish remained beneficiaries of the Trust. One possibility, that is therefore suggested by Prudence's statement, is that her realisation that Nigel and Hamish were still beneficiaries of the Trust may have led to her consideration of the exercise of the exclusion power and her decision to exercise it. In other words, it is possible that the demand to access trust documents and other information was the occasion for her decision but not otherwise a reason for her decision.[10]
20 The appellants submitted that his Honour's refusal to draw the inference that Prudence was influenced by an improper purpose was based upon a misconception of the rule in Browne v Dunn.[11] This argument asserts two conclusions by the trial judge. First that he found that there had been non-compliance with the rule. Second that as a consequence of its breach the appellants were not entitled to have the trial judge draw an inference of improper motive against the trustee. We reject the contention that the trial judge reached either conclusion.
21 The rule in Browne v Dunn has been expressed as an obligation to put to an opponent's witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of the witness's evidence.[12] It is a rule of law and practice[13] which requires the cross-examining party to provide the witness with the opportunity to deal with such evidence - or such inferences as may be drawn from the evidence - as the other party proposes to rely upon and which contradict the testimony of the witness.[14]
22 It was submitted that the trial judge failed to have regard to the qualification to the rule, that it will not be applied to the detriment of a party where the other party has been given adequate notice of the case that is intended to be put.[15] In support of that qualification the appellants pointed to the joint judgment of Gummow, Kirby and Callinan JJ in MWJ v R[16] in which it was observed:
the rule is essentially that a party is obliged to give appropriate notice to the other party, and any of that person's witnesses, of any imputation that the former intends to make against either of the latter about his or her conduct relevant to the case, or a party's or a witness' credit.
One corollary of the rule is that judges should in general abstain from making adverse findings about parties and witnesses in respect of whom there has been non-compliance with it ...
Reliance on the rule in Browne v Dunn can be both misplaced and overstated. If the evidence in the case has not been completed, a party genuinely taken by surprise by reason of a failure on the part of the other to put a relevant matter in cross-examination, can almost always, especially in ordinary civil litigation, mitigate or cure any difficulties so arising by seeking or offering the recall of the witness to enable the matter to be put.[17]
23 Counsel for the appellants placed emphasis on the fact that the respondents had been placed on notice of the allegations that were to be made against the Trustee. We would leave open the question whether 'notice' relieves a party from any compliance with the rule but for present purposes are prepared to assume that it does. The respondent submitted that there could have been no doubt at trial that the appellants' were alleging that Prudence had acted with the purpose of denying the beneficiaries access to the Trust documents and that the trustee had 'appropriate notice' of the allegation and the opportunity to deal with it. The Court was referred to the appellants' 'Statement of Facts and Contentions' filed in the trial which included the allegation that the Trustee executed the deed '... for the deliberate purpose of resisting their [the beneficiaries] requests to inspect the Trust accounts and other documents'. That document had been filed more than six months prior to the trial.[18]
24 It is convenient to pause here to say something of the context in which an issue concerning a trustee's reasons for the exercise of a discretion is to be judged. It was not in issue that the circumstances in which a Court may review a discretionary decision by a Trustee are those set out by McGarvie J in Karger v Paul.[19] His Honour said:
... with one exception, the exercise of a discretion in these terms will not be examined or reviewed by the courts so long as the essential component parts of the exercise of the particular discretion are present. Those essential component parts are present if the discretion is exercised by the trustees in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. The exception is that the validity of the trustees' reasons will be examined and reviewed if the trustees choose to state their reasons for their exercise of discretion.
...
As part of the process of, and solely for the purpose of, ascertaining whether there has been any such failure, it is relevant to look at evidence of the inquiries which were made by the trustees, the information they had and the reasons for, and manner of, their exercising their discretion. However, it is not open to the Court to look at those things for the independent purpose of impugning the exercise of discretion of the grounds that their inquiries, information or reasons or the manner of exercise of the discretion, fell short of what was appropriate and sufficient. Nor is it open to the Court to look at the factual situation established by the evidence, for the independent purpose of impugning the exercise of the discretion on the grounds the trustees were wrong in their appreciation of the facts or made an unwise or unjustified exercise of discretion in the circumstances. The issues which are examinable by the Court are limited to whether there had been a failure to exercise the discretion in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion was conferred. In short, the Court examines whether the discretion was exercised but does not examine how it was exercised.
I regard it as an inherent requirement of the exercise of any discretion that it be given real and genuine consideration ... it seems to me that it is in this sense only that the Court can examine whether the trustees gave 'proper' consideration to the exercise of the discretion ... the Courts will examine whether a discretion has been exercised irresponsibly, capriciously or wantonly ... This is another way of saying that there may be an examination as to whether trustees have exercised their discretion on real and genuine consideration ...
25 The limitation on the issues which are examinable by the Court[21] are thus subject to the qualification that the validity of the trustees' reasons for the exercise of discretion will be examined if the trustee chooses to state those reasons. But it is to be borne in mind that as a trustee, Vanbreck was not obliged to give reasons for the decision to exclude Nigel and Hamish as beneficiaries. A discretionary trustee is not obliged to disclose to objects the reasons actuating them in arriving at a decision.[22] Hence no amount of notice of the appellants' allegation could require Prudence (as the mind of the trustee and by whom the Trustee gave evidence), either in her affidavit or in any additional evidence in chief at the trial, to state her reasons for decision. As a matter of law she was entitled not to do so. That entitlement could not be affected by the appellants giving notice of their allegation.[23] Counsel for the appellants was right to eschew any suggestion in oral argument that the absence from Prudence's evidence of any reasons for the trustee's decision could found an inference that the trustee was actuated by the purpose of which notice had been given. No adverse inference of any improper purpose could be drawn from the non- disclosure in her evidence of the trustee's reasons.
26 Returning then to the operation of the rule, this Court said in Rees v Bailey Aluminium Products Pty Ltd:[24]
The rule rests upon notions of fairness and is designed to give the witness and the party calling that witness an opportunity to meet that challenge. The rule facilitates the tribunal's assessment of the reliability and accuracy of the witness. Consequently if matters in controversy are not 'put' to the witness in cross examination the tribunal's capacity to assess the merit of the allegation subsequently to be made and the credit of the witness is likely to be impeded.[25]
27 If the appellants' submission is accepted without qualification, the fact that the party calling the witness is on notice that it is intended to challenge the witness's evidence or impugn the witness or party's conduct in a particular way means that compliance with the rule in that circumstance is no longer obligatory. But whatever the effect of 'notice', the burden of persuasion as to that fact does not shift.[26] It remains upon the party who seeks to establish the allegation. The cross-examiner who because of 'notice' refrains from 'putting' the allegations to the witness embarks upon a potentially dangerous forensic course.[27] The tribunal may not be persuaded of the fact in issue if there is no cross-examination on the issue.[28] That risk increases where the party who makes the allegation can adduce no direct evidence as to it and the other party, having adduced no evidence in chief as to the issue, is not cross-examined.
28 The rule facilitates the tribunal's assessment of the issue. If the tribunal's capacity to properly assess the merit of the allegation has been impaired because the issue was not explored with the witness, the cogency and weight to be attached to the allegation is likely to be affected.[29] As Redlich J stated in Johnson Matthey (Aust) Pty Ltd v Dascorp Pty Ltd:
Credit issues need to be identified when the witness is cross-examined and the trial unfolds. The judge's capacity to assess the credibility of witnesses ought not to be impeded. Any relaxation of the obligation to comply with the rule in Browne v Dunn has the potential to do so, thereby increasing the risk of injustice to a witness or party.[30]
29 Where, because there is 'notice', it is not considered necessary that the witness be cross-examined, the risk arises that the tribunal will not be able to reach an affirmative conclusion on the issue. That is to say, the consequence of the forensic choice to abstain from challenging the witness may leave the tribunal unpersuaded as to the truth of the allegation so that it will decline to reach a conclusion adverse to the witness.
30 The critical factual issue was the state of mind of Prudence. The appellants, during cross-examination of Prudence, chose not to explore the allegation that she acted with the intention of preventing access to the Trust Documents. Counsel for the appellant conceded that the failure to put these matters to Prudence was a tactical decision by counsel. In making this choice counsel ran the risk that the appellants would fail to meet their positive burden to prove that her state of mind was as they alleged. The present case provides a particularly clear illustration of this forensic danger.
31 The trial judge found that there was no direct evidence of an improper purpose. As the trustee's purpose was not explored with Prudence, the trial judge was unpersuaded that an improper purpose could be inferred from the sequence of events leading up to the date of exclusion. His Honour observed that any improper purpose could only have been an intent or purpose formed or adopted by Prudence, as the sole Director of the Trustee, and that he was not satisfied that such a purpose had been demonstrated. The trial judge held that the appellants had failed to discharge their burden of proof. The trial judge was not concerned with whether there had been compliance with the rule but with whether the appellants had established the improper purpose alleged. There was no error in the manner in which the trial judge approached this issue. This ground is not made out.
32 Each of the remaining grounds on the Notice of Appeal contend, in essence, that on the evidence it was not open to the trial judge to conclude that the purposes of Prudence in exercising the power of appointment did not include the purpose of preventing the appellants from accessing Trust documents.
33 It is convenient to deal at this point with the matters raised in the Notice of Contention that an exclusion for the purpose of resisting a request by beneficiaries to inspect trust documents and other documents would not vitiate the exercise of the Trustee's discretion. The trustee's contention was that even if the inference should be drawn that it was motivated by that purpose, the power was not invalidly exercised. If the sole purpose had been to prevent the appellants, who were beneficiaries, from access to the trust documents, that was not a fraud on the power as it was not exercised in bad faith. Moreover it submitted that even if that purpose was an improper one, it was not the dominant purpose, the other purposes being 'good' purposes. The power was then validly exercised.
34 The trustee submitted that even had it been motivated by a desire to prevent a beneficiary from accessing trust documents, this would not be an improper purpose in the Karger sense as it had been exercised in good faith, upon real and genuine consideration and in accordance with the purposes for which the discretion has been conferred (and not for some ulterior purpose). We note that the trial judge refused the appellants' application at trial to challenge the Trustee's decision upon broader grounds that it was not exercised in good faith and upon real and genuine consideration. This was not the subject of any complaint on appeal.
35 The Trustee submitted its discretion in exercising the exclusion power was absolute and uncontrolled as the Trust deed provided no relevant restriction upon how the Trustee ought exercise its power. While acknowledging that cl 20 provided a 'notice' procedure in relation to the Guardian, it was contended that this did not act as any kind of 'fetter' on the matters which might be taken into account in the exercise of the power.
36 Where the discretion is unconfined by any restriction contained in the Trust Document a court will not intervene, even where it seems that the discretion has been exercised for a poor or questionable reason, so long as it is in pursuit of the purpose of the grant. Hence even where the power of exclusion is unfettered, it is still necessary to exercise that power for the purpose for which it has been conferred.[31] The purpose must be inferred from the Trust Deed. A power of exclusion is conferred to enable to the Trustee to determine whether each of the listed beneficiaries ought to be entitled to a possible distribution of trust property. The power is not conferred for the purpose of determining whether one or more of the beneficiaries ought to be entitled to trust documents. The trial judge rightly concluded that such a purpose would be improper.
37 The trustee sought to characterise mala fides as equivalent to 'conscious impropriety'[32] and contended that, even if the trustee had such an ulterior or improper purpose as was alleged, it did not amount to mala fides.[33] These matters were not the subject of any substantial attention in the appeal. We find it unnecessary to determine those questions.
38 The trustee also contended that if it had the improper purpose alleged, then so long as it was not the dominant purpose, the power would have been validly exercised. It relies upon the notion that it must be the primary intention of the trustee to defeat the terms of the power and that such a purpose is not to be equated with an actuating purpose. As a search for each may yield a different result, the Trustee contended that the improper purpose must be the dominant, substantial or primary purpose of an appointment for it to be bad as a fraud on the power.[34] The expression 'fraud on a power' is used in recognition of an equitable limitation on the power conferred by the trust instrument. It arises where the power is exercised for a purpose, or with an intention which extends beyond the scope of the terms of the trust[35] so as to be a 'purpose foreign to the power'.[36]
39 The appellants' submitted that an improper purpose, whether single or mixed (one of a number of purposes), will invalidate the exercise of power if it was one of the 'actuating or operating' purposes. A purpose which accomplishes or carries into effect an object which is beyond the purpose and intent of the power invalidates it. The appellant submitted that where it is an actuating purpose the appointer will not have exercised the power 'with an entire and single view to the real purpose and object of the power.[37] The appellants' submission finds support in the legal text 'Trusts and Powers', the author suggesting that the improper purpose need not satisfy any special test of substantiality or the like.[38]
40 There will be circumstances in which a fraud on a power can be found in the case of an appointment that has been made for a combination of proper and improper purposes. For example, in Hooke v Robson[39] Jacobs J said:
A purpose or intention to benefit himself or a stranger makes a donee's exercise of power fraudulent, but it is not, in my view, any intention or purpose to benefit himself or a stranger which has this effect. That intention or purpose must be a primary one; that is to say an actuating purpose without which it cannot be said that the appointment would have been made.
The Court searches both within the instrument itself and from extrinsic evidence to determine whether the appointor would ever have exercised the power, if it had not been for a purpose of benefiting himself; or whether the purpose of benefiting himself was merely incidental to a primary purpose of benefiting valid objects. In the former case, the exercise is fraudulent; in the latter case it is excessive. It is not sufficient to find an intention or purpose to make an excessive execution in favour of the appointor or stranger unless it can also be said that the intention or purpose infects the art of the appointment which would otherwise be valid.
42 If the Trustee in deciding to exercise the power acted upon the dual consideration of whether the beneficiaries ought to be entitled to a potential distribution of trust assets and whether those beneficiaries ought to be given access to trust documents, so that the latter consideration should be regarded as part of the trustee's primary intention, it would be an invalid exercise of power. We find no support in the cases referred to by the Trustee for the proposition that the improper purpose must be the primary or dominant purpose. In our view the improper purpose will constitute a fraud on the power if it be an operative or actuating purpose - one without which it cannot be said the appointment would have been made.[40] However, on the assumption that the appellants' submission as to the inference to be drawn from the facts is correct and the circumstantial evidence demands that such an improper purpose be inferred, then the conclusion is inescapable that such a reason was primary to the exercise of the power. Hence the Trustee's arguments under cover of its notice of contention could not provide an alternative basis for the trial judge's decision.
43 Returning then to the grounds of appeal, it was the appellant's submission that the sequence of events required the trial judge to infer that the trustee's purposes included the purpose of preventing access to the trust documents. In seeking to vitiate the discretion of a Trustee on any of the bases articulated in Karger, the onus will be on those that allege an improper purpose. The onus of showing the invalidity of an appointment rests with the person alleging it.[41] The question is therefore whether the appellants have satisfied the burden of proving that the Trustee acted with the purpose of denying the beneficiaries access to Trust documents or that it was a purpose that materially influenced the trustee's decision.
44 The appellants sought to rely upon an inference that was said to arise primarily by virtue of the proximity in time between the request for documents by Nigel and the execution of the Deed of Appointment. The time differential was just under one month (between 24 November 2006 and 20 December 2006). The appellants emphasised that in the intervening period the solicitors acting for the trustee company sought to delay access to the Trust Documents until the time at which the Deed of Appointment might be finalised and executed. They point to the fact that the Deed of Appointment was executed on the same day the trustee's solicitors wrote saying that inspection would not be granted as none of the appellants was any longer a beneficiary of the trust. We observe that any suspicions the appellants may have held in relation to the reasons for the Trustee's decision could only have been exacerbated by the course adopted by the Trustee's solicitors who concealed the Trustee's intentions until they communicated the fact of the deed of exclusion. The Trustee was said to have acted with undue haste in executing the deed of exclusion. As no beneficiary accrued any fixed entitlement to income or capital over time in the discretionary trust, it was said that the only time imperative arose from the need to deny the request for access to the Trust Documents. It was said that the 'haste' therefore could only speak of one thing, a conscious desire to prevent access.
45 The respondent maintained the argument put before the trial judge that there was no direct evidence to support the conclusion that the Trustee had at any time turned its mind to the question whether Nigel and Hamish ought not be beneficiaries of the Trust. It submitted that it was the request for trust documents that alerted the Trustee to the fact that they had remained beneficiaries following the exclusion of their mother in the 1990 settlement. Against that, the appellants submitted that there was no material before the trial judge to support the conclusion that the 1990 terms of settlement were intended to affect Nigel or Hamish's status as beneficiaries.
46 The respondents point to the fact that there was no request by Hamish to access the documents. This was said to speak against the inference that the exclusion was motivated by a desire to deny him access to trust documents. We doubt that one can attach such significance to this fact. The exclusion of Hamish came in the context of the attempt by his family and the formal attempt by his brother Nigel to obtain access to the Trust Documents.
47 There were numerous arguments both ways, but none of them telling. But one significant difficulty for the appellants was the absence of any evidence that the Trustee may have wished to conceal information contained in the Trust Documents. In oral argument it was conceded by the appellants that there was no suggestion made at trial of mismanagement or misfeasance which might have motivated a decision to withhold access to the trust documents. This concession was made despite some allegations made in the affidavit of Hamish dated 14 May 2007 that the Trustee had misled William in relation to his resignation from certain family companies including the trustee company. These allegations were not developed on trial or on appeal, nor were they relied upon as establishing any reason why the Trustee would wish to withhold access to the Trust Documents. If such an argument, supported by evidence, had been pursued, the tribunal of fact might more readily have been prepared to draw the inference sought by the appellants.
48 The appellants rely upon circumstantial evidence to establish a fraudulent or improper purpose on the part of the trustee. A subjective intention or purpose may be inferred from objective or circumstantial matters which may include the exercise of a power of appointment. But the fact that an appointment is consistent with an improper purpose will not necessarily lead to the drawing of such an inference. So in Vatcher v Paull[42] it was said that 'it is not enough that an appointor or some person not an object of power may conceivably derive some benefit'. An intention by an appointor to obtain an improper end is not necessarily to be inferred because the effect of an appointment is consistent with there having been an improper purpose in the making of the appointment. It will be a question of fact in each case.[43]
49 It does not follow from the fact that a trustee recognises a consequence of their actions, that the consequence constitutes a reason or purpose for its action. Neither at trial nor on the appeal did the appellants' case rise higher than the suggestion that, because the Trustee's decision was made in the context of the beneficiary's request for access to the documents, that must have been a reason for the exercise of the power of exclusion. The trial judge was unpersuaded that the request for access to the documents was anything more than the occasion for the Trustee to consider the exercise of power of appointment. His Honour was right to conclude that it had not been shown that it was a reason for the manner in which the power was exercised. We see no error in the trial judge's conclusion that it had not been established that the trustee was actuated by an improper purpose. The appellants failed to prove that the Trustee was materially influenced by the request for access to trust documents in exercising the power to exclude the third and fourth appellants
[2] Warren v Coombs [1979] HCA 9; (1979) 142 CLR 531; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 [25] (Gleeson CJ, Gummow and Kirby JJ).
[4] Kemp v Burn [1863] EngR 162; (1863) 66 ER 740; Re Tillott [1892] 1 Ch 86; Re Dartnall [1895] 1 Ch 474; Manning v Federal Commissioner of Taxation [1928] HCA 9; (1928) 40 CLR 506, 509; Re Fairbairn [1967] VicRp 72; [1967] VR 633, 635-639; Spellson v George (1987) 11 NSWLR 300, 315-316; Re Simersall [1992] FCA 221; (1992) 108 ALR 375, 378-381; Skaftouros v Dimos [2002] VSC 198 [11].
[5] Spellson v George (1987) 11 NSWLR 300, 315-316 and Jacobson v Dafna Nominees Pty Ltd [1999] VSC 529 [92]-[96].
[6] Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 421-2 (Kirby P); Schmidt v Rosewood Trust Ltd [2003] UKPC 26; [2003] All ER (D) 442, [52] (Lord Walker).
[12] Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1, 16; R v Demiri [2006] VSCA 64 [35].
[13] Zoneff v R (2000) 200 CLR 234, [49].
[14] Advanced Wire & Cable Pty Ltd & Anor v Abdulle [2009] VSCA 170 [13].
[16] [2005] HCA 74; (2005) 222 ALR 436. See also R v MG [2006] VSCA 264; (2006) 175 A Crim R 342, [54]-[55] and in R v Thompson [2008] VSCA 144; (2008) 187 A Crim R 89, [60].
[17] [2005] HCA 74; (2005) 222 ALR 436, [38]-[40].
[21] Discretionary Trusts, I Hardingham, R Baxt, Butterworths (2nd ed), 114 [514].
[22] Re Londonderry's Settlement [1965] Ch 918; Tierney v King [1983] 2 Qd R 580.
[23] Karger v Paul [1984] VicRp 13; [1984] VR 161, 165-6; Discretionary Trusts, I Hardingham, R Baxt, Butterworths (2nd ed), 94 [502]
[25] Ibid [21]. See also R v Thompson [2008] VSCA 144; (2008) 187 A Crim R 89, [111]. In Johnson Matthey (Aust) Pty Ltd v Dascorp Pty Ltd [2003] VSC 291; [2003] 9 VR 171, 200.
[26] Neither does the onus of proving a fraudulent purpose shift. See Discretionary Trusts, I Hardingham, R Baxt, (2nd ed), 109 [511].
[27] If the allegation the subject of notice goes only to a matter of credit, the witness would not have been able to give evidence in chief about such matters. If the matter was relevant to a fact in issue, it may have been objectionable for the witness to be invited in chief to seek to deny matters about which other witnesses may later testify.
[28] Advanced Wire & Cable Pty Ltd & Anor v Abdulle [2009] VSCA 170 (Redlich JA and Beach AJA); Bulstrode v Trimble [1970] VicRp 104; [1970] VR 840; Reid v Kerr (1974) 9 SASR 367, [373]-[374] (Wells J).
[29] R v Demiri [2006] VSCA 64, [36]; R v Thompson [2008] VSCA 144; (2008) 187 A Crim R 89, [111], [122]; Johnson Matthey (Aust) Pty Ltd v Dascorp Pty Ltd [2003] VSC 291; [2003] 9 VR 171, 200.
[31] Karger v Paul [1984] VicRp 13; [1984] VR 161, 163, 164, 166.
[32] Royal Brunei Airlines v Tan Kok Ming [1995] UKPC 4; [1995] 2 AC 378, 389.
[34] Re Holland [1914] 2 Ch 595, 602; Re Burton's Settlements [1955] Ch 82.
[36] Commonwealth v The Colonial Combing, Spinning and Weaving Company Ltd [1922] HCA 62; (1922) 31 CLR 421, 471 (Higgins J).
[37] Duke of Portland v Topham [1864] EngR 339; (1864) 11 HL Cas 32, 54; [1864] EngR 339; 11 ER 1242, 1251 (Westbury LC).
[38] Trusts and Powers, David Maclean, Law Book Company Ltd, (1989) 118-119.
[40] Ibid 609. It is unnecessary to consider in this case whether an improper purpose which materially influences the decision would be sufficient.
[41] Discretionary Trusts, I Hardingham, R Baxt, Butterworths (2nd ed), 109 [511].
[42] [1915] AC 372, 379.
[43] Trusts and Powers, David Maclean, Law Book Company Ltd, (1989), 102.
Curwen & Ors
Vanbreck Pty Ltd [2009] VSCA 284
(1979) 142 CLR 531
(2003) 214 CLR 118
(1928) 40 CLR 506
(1987) 11 NSWLR 300
(1992) 108 ALR 375
(1992) 29 NSWLR 405
(2000) 200 CLR 234
(1977) 19 NSWLR 219
(1984) 3 FCR 168
(1993) 42 FCR 206
(1998) 156 ALR 169
(2005) 222 ALR 436
(1974) 9 SASR 367
(1922) 31 CLR 421
Appeal dismissed; trial judge's finding that the exclusion deed was valid and not shown to have been exercised for an improper actuating purpose was upheld (see [50]).
[16] In August 2005, William moved into the Kirralee Residential Aged Care Facility in Ballarat ('the nursing home').
[17] According to Prudence, she attended a meeting in or around December 2005 with Peter Kennedy of Madgwicks ('Kennedy'), Bill Price of Price Gibson, Vanbreck's accountants ('Price') and Hamish and at that meeting 'it was decided that [William] should resign as director of [Vanbreck].' After the paperwork had been prepared, Prudence and Hamish went to the nursing home. According to Prudence, she explained to William in the presence of Hamish that Nancy, Hamish, Price and she were concerned about his ability to make decisions in the event that his condition worsened and that being a director of Vanbreck would place unnecessary stress on him. Prudence deposed that her father agreed and, accordingly, on 7 December 2005, William signed a letter of resignation as director of Vanbreck.
[18] A different version of these events is recounted in Hamish's affidavit. Hamish deposed that, at the meeting, Prudence 'produced some documents that were bound in purple and asked [William] to sign them', saying 'words to the effect that they were to roll over his superannuation.' Hamish deposed that William then 'signed the documents without appearing to read them.' They then left. Hamish further deposed that at around the same time Prudence produced similar looking documents to Nancy, which Nancy signed. He deposed that he later asked Prudence what the documents were about and she told him that William had resigned from the family companies including Vanbreck.
[19] Hamish's affidavit continued:
That evening (after having procured [William's] resignation as director of the Trustee), [Prudence] prepared what appeared to be a celebratory dinner for herself, with a special roast and an aged bottle of red wine and her favourite white wine ...
[20] In an affidavit sworn 17 July 2007, Prudence refuted Hamish's account. She denied, inter alia, Hamish's version of what occurred when William signed his resignation as director and the allegation that she thereafter had a celebratory dinner. Prudence further deposed that, in about March 2006, she and Nancy had a serious argument with Hamish. After that argument, Hamish left the property and ceased working there.
[21] The ASIC records show William's resignation on 7 December 2005 as both director and the secretary of Vanbreck and that Nancy was reappointed as a director and appointed as the secretary on the same date.
[22] Sandra became aware of William's admission to the nursing home. On 3 May 2006 Sandra wrote to Kennedy of Madgwicks requesting that she be immediately informed of the conferring of any powers of attorney by William. Having received no reply, she wrote again to Kennedy on 28 June 2006. As Sandra deposed:
For approximately the last 20 years, I have been estranged (until recently) from my father and (continuing to the present day), from my mother and sister. In recent times, having heard of my father's condition and circumstances, I have reconciled with him and visited him on a number of occasions at said nursing home. I have become increasingly concerned at the seeming neglect of his personal welfare and the failure, as I regard it, to adequately provide for him, given what I believe to be his undoubted assets and needs. On the occasions when I first saw him at the nursing home, his clothing was ill-fitting and unbecoming and it would appear that he had allowed to him, only a small and inadequate sum of money to provide for his personal wants.
As a consequence of our concern about his health and wellbeing my husband and I initially considered inviting my father to leave the nursing home and reside with us at our home at Breadalbane. However, given his seeming physical and mental circumstances, we decided that it was more appropriate to seek to ensure that the level of care provided for him was adequate and appropriate. To this end, we endeavoured to ascertain his medical condition by enquiries of the nursing home, and by requesting an appropriate specialist medical examination, but were frustrated in these endeavours, by what I regard as the negative attitude of the nursing home and the estrangement of my mother and sister.
In addition to my concern, as to my father's health and physical wellbeing, I also have been concerned, given the seeming deterioration in his medical and physical condition, of the risks which I see my father now being exposed to, of financial exploitation. To this end, I have also sought advice from the Trustee and the Trustee's solicitors, in particular Mr Peter Kennedy of that firm, who has for a considerable period handled the legal affairs of my father and the Trustee, as to the financial position of the family trust. However, as with my attempt to ascertain information about my father's medical and physical condition I was similarly frustrated in my attempts to obtain information about my father's financial affairs.
Having been unable to achieve, by my personal efforts, any satisfactory response to my enquiries and concerns regarding my father's position as aforesaid, I instructed my solicitor Graeme Efron of Efron and Associates to endeavour to obtain the relevant information on my behalf ...
[23] In a letter dated 12 July 2006 from Sandra's then solicitors (Efron and Associates - 'Efron') to Madgwicks, her solicitors said:
We are instructed that you represent members of the Harvey family.
Please advise as to the existence of any Enduring Power of Attorney or Guardianship regarding Mr Harvey. We also request that you inform as to who is managing or exercising control over the personal affairs and financial affairs respectively of Mr Harvey. We note that on previous occasions our client has sought similar information from you and has received no response ...
[24] On the same date, Efron also wrote to the nursing home, in part stating:
[Sandra] recently visited her father in Kirralee. In order to be satisfied as to her father's physical and mental well being she wishes him to be examined by a medical practitioner of her choice ...
[25] The nursing home replied, with copies to Prudence and to Madgwicks, to the effect that William's affairs were managed by Prudence and by his solicitor, Kennedy, that he was well cared for and that it would be inappropriate to have an additional general practitioner examine him and also that Nancy and Prudence had objected to the same. She was asked to direct any further comments to Madgwicks.
[26] At that stage, as she deposed, Sandra took legal advice and decided 'in an endeavour to allay my concerns about the conduct of my father's financial affairs and about the family trust to seek access, as a beneficiary, to the relevant Trust documents.'
[27] By letter dated 6 October 2006, Efron wrote to Vanbreck, Prudence and Madgwicks in part as follows:
[Sandra] instructs us that she is a beneficiary under [the Trust] ... As a beneficiary, our client is concerned as to the conduct and administration of the Trust. Accordingly, our client has instructed us on her behalf to obtain access to the Trust documents including the Trust Deed and the relevant books of account, including, in particular, the balance sheet of assets and liabilities ...
[28] Madgwicks replied by letter dated 10 October 2006 in which they advised that any rights that Sandra had in relation to the Trust were expunged pursuant to the 1990 terms, that they did not believe that Sandra had any rights and that, accordingly, no access would be permitted. A copy of the 1990 Terms was attached to the letter.
[29] Efron replied by letter dated 24 November 2006. In the letter, Efron denied that Sandra had validly disclaimed her interest in the Trust but then continued:
In any event, we further advise that we are instructed to act on behalf of Sandra's husband, Charles and her son, Nigel, each of whom believes that they are a beneficiary ... Accordingly, we now also make the same request ... on their behalf as we have previously made on behalf of Sandra ...
In the circumstances, we require a positive response to our said request within 7 days from the date hereof. In the event that the same is not received within the period specified, we have instructions to proceed to make the Application to the Court without further notice ...
[30] On 1 December 2006, Nancy ceased to be a director and the secretary of Vanbreck. According to Prudence, Nancy resigned because she had medical problems with her hands and had 'trouble signing'. As secretary, she was replaced by Prudence who then also became the sole director.
[31] On 4 December 2006, Prudence consulted Kennedy in relation to the Trust. Apparently following on from that, on 6 December 2006, Alexandra Farrar, a lawyer employed by Madgwicks, emailed to Prudence and to Price a draft notice to Guardian and a draft 'deed of appointment', asking them to read over the documents and advising that Kennedy would be in touch shortly to discuss the matter with them. The draft documents dealt with the exclusion of Hamish and Nigel as Beneficiaries of the Trust.
[32] Efron wrote again to Madgwicks on 8 December 2006 noting that they had received no response and indicating that they were in the process of preparing an application to the Court. They also said that they proposed to make a complaint to the Legal Services Commission because they had received no acknowledgment of their previous letter.
[33] On the same date, Madgwicks faxed to Prudence a letter attaching a Notice to Guardians, and a Deed of Appointment, dealing with the exclusion of Hamish and Nigel as Beneficiaries (ie the exclusion Deed), and asked her to arrange for two copies of the Notice to be executed by Vanbreck and for a copy to be sent to each of William and Nancy. The fax went on to state that the exclusion Deed could be executed on the third day after William and Nancy had received the Notice.
[34] On 11 December 2006, Madgwicks forwarded to Prudence a copy of the letter from Efron dated 8 December 2006 and stated: 'We will await instructions in relation to the demands made, but note that, as per our fax and email to you on 8 December 2006, we should be able to effect removal of Nigel and Hamish before the end of the week.' Later that day, Farrar of Madgwicks sent an email Prudence stating:
Following our conversation this morning, and bearing in mind that we are trying to have the Deed of Appointment executed as quickly as possible, I believe it would be best if the Notice was sent directly by you to the Guardians, rather than via us ...
[35] On the same day, Madgwicks replied to Efron's letter of 8 December by letter dated 11 December 2006 as follows:
We refer to your letter dated 8 December 2006.
We are currently seeking instructions and will be in a position to respond to your request shortly.
If you have any queries, please feel free to contact Alex Farrar.
[36] Having received no further communication, Efron again wrote to Madgwicks by letter dated 14 December 2006, insisting that a time for inspection be set no later than the close of business on Friday 15 December 2006. To this letter, Madgwicks replied by letter dated 15 December 2006 stating:
We are in the process of obtaining instructions but advise that we will not be in a position to provide access to the Trust within the timeframe you have specified.
In these circumstances it would be prudent to wait until next week before issuing proceedings in this matter ...
[37] It would seem that, on the same day (15 December 2006), the Notice from the Trustee was sent to the Guardians.
[38] On 20 December 2006, Madgwicks wrote again stating:
We will not provide the Trust Deed to you for inspection on your clients' behalf, as your clients are not beneficiaries of [the Trust].
Even if your clients were beneficiaries of [the Trust], which we deny, there is no provision in the Trust Deed that grants a right of inspection to beneficiaries ...
[39] On the same day (20 December 2006) the Trustee executed the exclusion Deed.
[40] Prudence, in her affidavit sworn 17 July 2007, said that she had determined on behalf of the Trustee to execute the exclusion Deed '[f]ollowing consideration by me of the correspondence and matters referred to' in specified paragraphs of her affidavit. The 'correspondence' so referred to by Prudence was the correspondence passing between Efron and Madgwicks in the period July 2006 to December 2006 and the 'matters' referred to principally consisted of the proceedings instituted by Sandra in 1987 and the settlement of those proceedings and the argument with Hamish in about March 2006.
...
..., in January 2007, the first, second and third plaintiffs instructed Efron to commence proceedings. Apparently, Madgwicks' letter of 20 December 2006 was mislaid by Efron and they requested Madgwicks, on 16 January 2007, to provide a further copy. Madgwicks faxed to them on that day a copy of the letter together with two further documents. The first document was a copy of an undated notice executed by Vanbreck and addressed to William and Nancy. By the document, the Trustee notified the Guardians that it intended to irrevocably exclude Hamish and Nigel (and any trust, company or other body in which either of them had an interest and any descendant, spouse, widow or widower of either of them) from the class of Beneficiaries as defined in the Trust deed. The second document was a copy of the exclusion Deed. In addition to excluding Hamish and Nigel (and related persons and entities), the exclusion Deed also excluded Sandra and Charles (and any related entity) 'for the avoidance of any doubt'. The exclusion Deed recited that the Trustee confirmed that it had given two clear days' notice in the form abovementioned to William and Nancy.
[45] Later that day, Madgwicks wrote to Efron as follows:
The Notice and Trust Deed sent to you this morning ... were not intended to be transmitted to you, but were accidentally enclosed with the letter dated 20 December 2006. It is clear from the contents of that letter that you were not intended to be a recipient of that Deed or Notice.
You must destroy both the Deed and the Trust. We advise that you are not to rely on either document, nor are you to produce them in Court under any circumstances.
[46] An exchange of correspondence then followed on the topic of the plaintiffs' entitlement to rely on the documents said to have been inadvertently disclosed (and related issues). The content of this correspondence is not presently relevant save that Efron indicated the intent to rely on the documents and stated, in a letter dated 17 January 2007, inter alia:
... What concerns us, on behalf [of] our clients, is that when we requested access to Trust documents, to which a beneficiary is entitled to inspect pursuant to the General Law, you neglected to provide such access, or even respond to our letters. When we persisted, you proceeded to stall the issue on the basis of awaiting instructions, when in fact your clients were proceeding to purportedly exclude [Nigel] as a beneficiary. It seems clear to us that at the time of our request (leaving aside the entitlement of [Sandra and Charles]) Nigel was indeed a beneficiary and entitled to inspect the requested Trust documents and that the Trustee's neglect to provide this was an intentional breach of Trust.
[47] As I have said, this proceeding was commenced on 13 February 2007. Sandra deposed, in a supporting affidavit, that Prudence, who was aged 63, was presently residing at 'the family home' with her mother and that she (Sandra) was aged 61. She said that William was then suffering from the apparent onset of dementia and reduced capacity and was then residing at the nursing home. Sandra further deposed that she believed that her father was or had been a person of considerable personal wealth and that his assets had for a considerable time been largely held by the Trust of which the trustee was Vanbreck, of which company Nancy and Prudence were the directors. Sandra deposed that each of the first, second, and third plaintiffs was 'properly a beneficiary' of the Trust and entitled to all the rights of a beneficiary.
[48] As indicated earlier, Hamish was added as a plaintiff in May 2007. According to Hamish's affidavit, he had always been led to believe by William that he would inherit the property known as Beckworth Court at Clunes, the interest in certain property development companies and a share of the balance of his estate. Hamish deposed that Beckworth Court was a substantial grazing and cropping property of about 5000 acres. He deposed that, ever since he was a young child, he had regularly visited, and at times, lived at Beckworth Court and that, during those times, William had instructed and taught him how to manage the property and he had worked closely with him and his staff in both the day to day operations and the running of the farm. Hamish deposed that his exclusion as a Beneficiary of the Trust, of which he had been informed by Sandra in February or March 2007, was 'completely at odds with what [William] had always told me about what he wants to occur with his estate.' I note here that Prudence deposed that Beckworth Court 'is not owned by Vanbreck but is owned by Scapp Nominees [Pty Ltd].'
[49] On 14 June 2007, after this proceeding had commenced, William died. It did not appear to be disputed that he had suffered from Alzheimer's type dementia for about two years and that by December 2005 his mental state had been such that he was considered incapable of executing a power of attorney.[3]
It is an established general principle that unless trustees choose to give reasons for the exercise of a discretion, their exercise of the discretion cannot be examined or reviewed by a Court so long as they act in good faith and without an ulterior purpose ... For reasons given above, I would add the further requirement, so obvious that it is often not mentioned, that they act upon real and genuine consideration.[20]