136 It is true that at first sight, the redundancy payment is striking, representing something like four year's salary, and the legal or industrial basis of his entitlement to it was not explained. However, the payment was negotiated at arm's length between two firms of solicitors, based upon a formula which took into account his level of remuneration and years of service. Although the plaintiffs complain that Moramba's decision to pay him that amount was compromised while he remained on the board, Mr Au did not participate in any board meetings in relation to his own redundancy payment. The plaintiffs sought to contrast the defendants' consultation with and deference to the views of the children in relation to the negotiations with Ms Tripp, with their failure to discuss with them the termination payment to Mr Au. The short answer is that the trustees are entitled but not bound to consult with the beneficiaries. Moreover, in the case of Mrs Tripp, what was involved was potentially a frustration of the wishes of Mr Fay to make provision for her; whereas what was involved with Mr Au was consistent with Mr Fay's wish that he retain his position and responsibilities until he was 65 or even later.
137 Even if -which I do not accept - the defendants bore some evidentiary onus on this issue, the evidence that the redundancy was negotiated at arm's length, and Mr Pettman's report as to the various payments, would sufficiently discharge it, and it would remain for the plaintiffs to show that the payments were unjustified. That they have signally failed to do. Despite the apparent enormity of the redundancy payment, there is no basis for me to conclude that it was inappropriate.
138 It is appropriate to address two other matters pertaining to Mr Au's fitness which, although not pleaded, arose in the course of his cross-examination.
139 First, Mr Au was unable to answer why, for the first time since 2006, very recently (after the judgment on the judicial advice application) the Moramba companies had declared dividends, and Leerac had made a distribution to the children - when it is plain enough that the Court's advice must have been an instrumental consideration. His answer that he was unable to remember why they now felt able to do so, when they had not done so since 2006, is very surprising; the obvious answer is the outcome of the judicial advice application. But there does not appear to be any conceivable advantage to Mr Au in not being frank on this issue, if he in fact recalled the reason for the change in position. In addition, it must also be acknowledged that Mr Au was upset and humiliated, first by having been made redundant, and subsequently by having been charged with misconduct as a trustee. During his cross-examination he became visibly upset at the attack upon him, and at the constraints that were placed upon his ability to give fulsome, not necessarily responsive, answers. In that light of those matters, I am unable to conclude his answer was dishonest.
140 Secondly, Mr Au demonstrated some difficulty in appreciating the concept of conflict of interest and duty. However, there is force in the submission that while the questions directed to him (by the Bench) were addressed to the intellectual concept of conflict of interest and duty, his answers rather addressed his own particular fact situation, so that they did not in fact bespeak a failure to comprehend the concept, but were a denial that there was one in his situation. In any event, this is not a pleaded matter.
141 Mr Fay plainly had confidence in Mr Au, particularly as a manager. He appointed a diverse group of persons as his executors, no doubt recognizing that each had his own strengths and weaknesses. Mr Au is not expected to have the same acute appreciation of legal concepts as Mr Halliday, for example. I am unpersuaded that Mr Au's evidence demonstrates that he cannot be expected properly to play his part in the administration of the will trust in the future.
Leerac's payments to Corrs Chambers Westgarth
142 By a late amendment, the plaintiffs added a complaint that the defendants have caused Leerac to act in breach of the Barnes Settlements and the Lorraine Settlements by paying money to their solicitors to fund their defence in these proceedings. The raising of this complaint, and the allowance of the amendment involved, required an adjournment and reopening of aspects of the evidence. The evidence that emerged ultimately established that Moramba Services had paid some $413,294.95 to the defendants' solicitors on account of their costs in the main proceedings, and some $260,355.85 on account of its own costs in the mortgage proceedings (to which Moramba Services is a party). The mechanism used was that Moramba Services made loans to Leerac. The essential question then is whether Leerac was entitled to use moneys so borrowed to fund the defence of these proceedings by persons who are its directors, and who are sought to be removed in their capacity as trustees of the will trusts (no longer in their capacity as directors of Leerac). The gravamen of the plaintiffs' complaint is that assets of the inter vivos settlements have been improperly used for a purpose foreign to those settlements and for the benefit of the defendants, namely to fund the defence of the defendants in their capacity as trustees of the will.
143 Until an amended statement of claim was filed on 7 April 2008, a month before the commencement of the final hearing, the proceedings were brought against the defendants in their capacity as directors of Leerac as well as in their capacity as trustees of the will trusts. The earlier version of the statement of claim sought an order that in their capacity as directors of Leerac they give due consideration to winding up the inter vivos settlements. After the statement of claim was amended, that was no longer so; only their removal as trustees of the will was sought. At least until the abandonment of the claim for an order, that in their capacity as directors of Leerac they give due consideration to winding up the inter vivos trusts, it was at least arguable that the defendants were sued inter alia as their capacity as directors of Leerac, and might well have been entitled to look to Leerac for an indemnity. However, that claim was abandoned on the first day of the trial.
144 The defendants were legally advised that they could have resort to the assets of the inter vivos settlements for their costs of defending the proceedings, and that Moramba Services could advance funds to Leerac to fund their costs of the proceedings.
145 The defendants justified the expenditure on the basis that while the relief claimed against them was in their capacity as trustees of the will, much of the evidentiary material relied upon pertained to their conduct in their capacity as directors of Leerac; it was therefore in Leerac's interests to secure a finding that its directors were not guilty of any misconduct which might give rise to a claim against Leerac; and Leerac could reasonably conclude that the funding of its directors' defence was a proper trust expense within the (NSW) Trustee Act, s 59(4), or Article 113 of its Articles (which provides that the directors are entitled to an indemnity for costs incurred by them in defending proceedings where they are successful).
146 I doubt that Article 113 is engaged; it could only refer to the defence of proceedings against them in their capacity as directors. However, the reality is that the facts upon which the case against the defendants was based were facts which arose in large part from their conduct as directors of Leerac.
147 It is unnecessary (and, given that Leerac is not a party, undesirable) to decide definitively in this proceeding whether or not Leerac was in breach of trust by making the payments in question. The issue for me is whether the circumstance that the defendants concurred in permitting those payments to be made is illustrative of an attitude which makes it inappropriate for them to remain as trustees of the will trusts. For those purposes, it suffices that I conclude that it is arguable that it was in the interests of Leerac to have a finding that, as its directors, the defendants had not engaged in improprieties, and thus that for Leerac to use moneys borrowed from Moramba to fund their defence was the meeting of expenses incurred in or about the execution of the trusts, within (NSW) Trustee Act 1925, s 59(4). It is also significant for these purposes that the defendants had advice that they could resort to those funds in order to fund the defence. Leerac has since filed an application for judicial advice in respect of these payments, which is yet to be heard.
148 As a result of those considerations, the defendants' concurrence in the expenditure of Leerac's funds on their defence does not persuade me that the defendants will not duly administer the will trusts in the future.
Other Matters
149 There are a number of other considerations which inform an ultimate judgment as to whether, in the interests of the administration of the will trusts, the defendants ought to be removed as trustees.
150 Foremost amongst them is the circumstance that while two of the children - the plaintiffs Garrick and Dallas - wish to have the defendants removed, the other two children, Louisa and Sioned, oppose that course and wish them to remain in office. Before the proceedings were instituted, the defendants offered to retire as trustees and appoint the four children in their place, but this course was opposed by Sioned and Louisa, who asked the defendants to remain. They continue to support the defendants remaining in office. Their wishes are entitled to at least as much weight as the wishes of the plaintiffs. One of them expressed the view that she believed that the defendants were doing the best job possible in circumstances which were very difficult.
151 Secondly, there is the circumstance that it was plainly the wish of Mr Fay that the defendants administer his estate, and he had confidence in their judgment and discretion to do so appropriately. Letters written by Mr Fay to his children on 3 April 1998, and to the defendants on 3 March 1998, and his statements to Mr Halliday and Mr Pollitt, make plain that he had confidence in the defendants' judgement and ability to administer his estate and resources; it may be doubted that he had any such confidence in the ability of his sons to do so.
152 Thirdly, the plaintiffs' arguments tended to overlook that the children are not the only potential beneficiaries. There are already a number of grandchildren of Mr Fay, who fall within the class of eligible beneficiaries under both the clause 3 will trust and the inter vivos settlements. The plaintiffs' arguments seem to proceed on the basis that only the four children require consideration, and that they can be relied on to look after their own children. But although that it is a view that might be open to the defendants to adopt, it is not a view that they must take.
153 Fourthly, Mr Fay plainly intended that the defendants have wide powers and immunities, as reflected in the "non-contest" clauses and exculpatory provisions of the inter vivos trust deeds, and the "absolute" and "uncontrolled" discretions given by the clause 3 will trust.