Gillespie v Gillespies Cranes Nominees Pty Ltd

Motion filed 20 June 2022 by Second to Seventh Defendants I Jackman SC/J Hewitt (First to Sixth Applicants/Second to Seventh Defendants) HK Insall SC/AJ Macauley (Respondent/Plaintiff)

Motion filed 20 June 2022 by Plaintiff HK Insall SC/AJ Macauley (Applicant/Plaintiff) JR Willis (First Respondent/First Defendant) I Jackman SC/J Hewitt (Second to Seventh Respondents/Second to Seventh Defendants)

Written submissions HK Insall SC/AJ Macauley (Plaintiff) JAC Potts SC/JR Willis/AR Langshaw (First Defendant) I Jackman SC/J Hewitt (Second to Seventh Defendants)

Solicitors: Motion filed 20 June 2022 by First Defendant Speed and Stracey Lawyers (Applicant/First Defendant) Hugh & Associates - Lawyers (First Respondent/Plaintiff) Pitcher Partners Legal NSW Pty Limited (Second to Seventh Respondents/Second to Seventh Defendants)

Motion filed 20 June 2022 by Second to Seventh Defendants Pitcher Partners Legal NSW Pty Limited (First to Sixth Applicants/Second to Seventh Defendants) Hugh & Associates - Lawyers (Respondent/Plaintiff)

Motion filed 20 June 2022 by Plaintiff Hugh & Associates - Lawyers (Applicant/Plaintiff) Speed and Stracey Lawyers (First Respondent/First Defendant) Pitcher Partners Legal NSW Pty Limited (Second to Seventh Respondents/Second to Seventh Defendants) File Number(s): 2021/88721 Publication restriction: Nil

Judgment

1. This matter came before the Court as a result of three interlocutory applications concerning the plaintiff's statement of claim in the proceedings. Following argument on 29 July, on 12 August I announced my conclusions and invited the parties to agree on orders to reflect those conclusions. They did so and I made those orders on 16 August.
2. This judgment sets out the reasons for the conclusions which I announced on 12 August. It incorporates some supplementary research undertaken after that date (including reference to a decision of the Court of Appeal delivered since then) and some further thoughts designed to assist the parties in the further conduct of the proceedings.
3. The competing interlocutory applications were: 1. the plaintiff's motion to make further amendments to his existing statement of claim; 2. the first defendant's motion to have certain of the plaintiff's claims against it summarily dismissed, or the statement of claim struck out in whole or part; 3. a motion by the other defendants for similar orders on the plaintiff's claims against them.

Background and procedural history

1. The proceedings concern a discretionary family trust called the Gillespie Family Trust ("the Trust"). The individual parties are related to each other, and without intending any disrespect I will refer to the family members, whether party to the proceedings or not, by their given names.
2. The Trust was established by trust deed dated December 1981. Before a distribution which is the subject of one of the claims in the proceedings, its assets were worth more than $55 million.
3. The Trust was established for the family of the late Bill Gillespie ("Bill"). His wife was Betty Gillespie ("Betty"). Together they had four sons: John William Gillespie ("John"); Peter Timothy Gillespie ("Peter"); Robert Michael Gillespie ("Robert"); and David John Gillespie ("David"). John died in August last year. Betty and her other sons are all still alive.
4. Gillespie Cranes Nominees Pty Limited ("the Trustee") is the trustee of the Trust. Until John's death, he and Peter owned the shares in the Trustee equally and were its directors.
5. John was, until his death, the second defendant. His widow ("Helen") is his executor and was substituted as the second defendant in December last year. Peter is the third defendant. The fourth, fifth and sixth defendants are companies apparently associated with John, or Peter, or both of them. I will refer to these parties collectively as the "Director Defendants".
6. Robert is the plaintiff. Essentially, he complains about the way in which John and Peter (through the Trustee) have administered the affairs of the Trust. The Trustee is the first defendant. Neither Betty nor the remaining brother, David, is a party.
7. As is conventional for a discretionary trust, the trust deed gave the Trustee wide discretionary powers to appoint the income and the capital of the trust among the beneficiaries. The beneficiaries fell into two classes. There were five "Principal Beneficiaries", namely Betty; John; Peter; Robert; and David. The trust deed also identified additional "Beneficiaries". They included identified relatives of Bill and also two daughters of Betty, presumably from a previous marriage, namely Karen Benjafield and Susan O'Keefe. The trust deed also provided that children or spouses of Beneficiaries or Principal Beneficiaries, and companies belonging to those Beneficiaries, were also to have the status of Beneficiaries.
8. As a result of directions I made at an earlier stage of the proceedings, a claim summary was filed on behalf of Robert as the plaintiff. This summary identified seven separate claims for relief. The motions which are the subject of this judgment were argued by reference to the claim summary and I will use the numbering in the summary for the purpose of summarising Robert's claims.
9. Claim 1 concerns the way in which the income of the Trust for twelve financial years, beginning in 2008-2009 and ending in 2019/2020, was distributed. The trust deed contained the usual provision giving the Trustee the power to distribute the income to such of the Beneficiaries as it, in its discretion, selected. The Trustee was required to record in writing any resolution or exercise of a power or discretion in a minute book. In default of any exercise of the discretion, the income was to be distributed among the Principal Beneficiaries.
10. For the years in question, none of the Principal Beneficiaries, including Robert, received any income distributions. Instead, the income was distributed by the Trustee to various other Beneficiaries. Some of the recipients were closely related to John and Peter. The total distributions over the period from 2009 to 2017 were $2.88 million. This included: $1.47 million to Gilljo Pty Limited ("Gilljo"), the sixth defendant, which is (or is at least alleged to be) a company controlled by John and $400,000 to Ainley Pty Limited ("Ainley"), the seventh defendant in which David, John and Peter have a 10 per cent interest.
11. Robert challenges these distributions on two bases. First (and this applies to the distributions from 2008-2009 through to 2016-2017), Robert disputes there were any resolutions at all, or at least any resolutions passed in accordance with the trust deed before the end of the financial year, to support the relevant distributions. The second challenge, which apparently applies to all of the years in question, is that if any resolutions were passed in accordance with the terms of the trust deed, those resolutions were not passed in good faith and for proper purposes and were invalid for that reason. If Robert is correct, it would follow that, in accordance with the terms of the trust deed, the income should have been paid to the Principal Beneficiaries, and the distributions to the other Beneficiaries were in breach of trust.
12. On Robert's behalf, various prayers for relief are made under Claim 1. Judgment is sought against the Trustee for one-fifth of the income for each of the years, on the footing that this represents Robert's entitlement under the trust deed. Interest is also claimed. In addition, the statement of claim seeks a declaration that the distributions made were invalid and in breach of trust, and an order that the Trustee "make good" the trust fund.
13. There are also Barnes v Addy (1874) LR 9 Ch App 244 claims. Robert seeks orders that Gilljo and Ainley account for the moneys that they have received, on the basis that they received the money with knowledge of breach of trust on the part of the Trustee. Claims are made against John's estate, and Peter, for compensation on a second limb basis.
14. Claim 2 is financially by far the largest of Robert's claims. It concerns the compensation to which the Trust was entitled as a result of the compulsory acquisition by the New South Wales Government of a property at Lilyfield Road, Rozelle, which was an asset of the Trust. The compulsory acquisition appears to have taken place at some point during the 2017-2018 financial year. But the quantum of the compensation was not determined until November 2018 when the Trustee received proceeds of $58.5 million together with $1.6 million in interest.
15. In anticipation of this, on 29 June 2018, John and Peter caused the Trustee to take two steps. First, the Trustee, purporting to exercise its power to vary the terms of the trust, resolved to amend the trust deed so as to introduce a provision entitling it to appropriate what was described as the "compensation right" for the Rozelle property to such of the Beneficiaries as the Trustee should, in its discretion, select. Ten minutes later, the Trustee resolved to distribute the compensation right unequally among various Beneficiaries. John and Peter were each to receive 44 per cent. Robert and David were to receive 3 per cent each. Betty's daughters, Karen and Susan, also received 3 per cent. As the other Principal Beneficiary, Betty received nothing.
16. Again, Robert attacks what was done on two grounds. First, it is contended that the purported amendment to the trust deed was invalid because it fell foul of a limitation in the trust deed on the trustee's power to amend the trust deed. That limitation was that any amendment should not alter the "substratum" of the trust. Alternatively, Robert contends that the ensuing resolution was invalid because it was not passed in good faith and for a proper purpose. The purported amendment is also challenged on the basis that it was not made upon real and genuine consideration.
17. Under this claim, Robert seeks for the Trustee to recoup the moneys paid through the distribution of the "compensation right". There are Barnes v Addy knowing receipt claims against John and Peter seeking them to account for the moneys they received through the "compensation right" distribution. Robert also seeks equitable compensation and interest.
18. If these claims fail, then Robert contends that he has still not received his full entitlement to 3 per cent of the "compensation right" in accordance with the resolution of 29 June 2018. He contends that there has been a shortfall of $170,000. This is Claim 7.
19. Robert makes three further claims about the conduct of the Trustee which, it is alleged, has resulted in assets of the Trust being misapplied or wasted. In the case of claims 4 and 5, the relief sought by Robert consists of an order that the Trustee make good the trust fund; claims against recipient entities on the basis of the first limb of Barnes v Addy; and claims against John's estate and Peter under the second limb of Barnes v Addy for participating in the breach of trust. The conduct, or alleged conduct, complained of is: 1. a resolution by the Trustee in June 2018 to appropriate shares in a company called Darwin Clean Fuels Pty Limited ("DCF") to companies associated with John and Peter: Claim 3; 2. allowing the cranage business of the Trust to be appropriated by interests associated with John and Peter: Claim 4; 3. the making of loans to a company called SRC which was a subsidiary of Ainley. SRC was later deregistered and the loan "forgiven": Claim 5.
20. Under claim 3, Robert seeks a declaration the Trustee had no power to make or give effect to the DCF Resolution, and alternatively an order setting the DCF Resolution aside.
21. Finally, Robert seeks the removal of the Trustee as the trustee of the Trust: Claim 6. Among other things, it is contended on Robert's behalf that the Trustee's conduct shows that it is unfit to be trustee of the Trust. The conduct relied upon includes the subject matter of Claims 1, 2, 3, 4 and 5. It also includes other conduct, in the form of related party loans made to entities associated with John and Peter which are said to have been improvident and outside the proper scope of the Trust's activities. No monetary claim however is made about those loans.
22. The proceedings were begun in March last year. The current version of the statement of claim is the second amended version filed in March this year. Defences, and then replies, were filed in April. Robert's claim summary was lodged on 26 May. The three notices of motion (the plaintiff's motion to amend the statement of claim and the defendants' motions for summary dismissal or strike-out) were filed on the same day, 20 June.

Pleading applications

1. Claim 1 (so far as it involves a claim that Robert was entitled to a one-fifth share of the income for the relevant years) and claim 7 (the claim that Robert's 3 per cent of the "compensation benefit" was underpaid) are personal claims of his. On the other hand, claims 2, 3, 4 and 5 (and possibly claim 1, to the extent that it may extend beyond a claim to a one-fifth share of the relevant income) are derivative: those claims seek relief for the benefit of, or affecting, the Trust as a whole.
2. The defendants naturally accept that it is open to Robert to bring the personal claims against them in these proceedings. They also accept, consistently with established practice, that Robert has standing to pursue claim 6 (for the removal of the Trustee) in his own name. The principal area of debate on the applications concerned the other, derivative, claims.
3. The Trustee, and the Director Defendants, contended, in support of their motions, that it was not open to Robert to bring any of the derivative claims. The contention was that such claims could only be brought by using the procedure under Part 2F.1A of the Corporations Act 2001. That procedure has not been followed. Alternatively, it was argued on behalf of both the Trustee and the Director Defendants that Robert still needed to obtain the Court's leave before proceeding further with any of the derivative claims.
4. Counsel for the Trustee advanced several further complaints about the pleading of Robert's claims. These concerned the prayers for relief in the statement of claim (especially so far as they relate to the derivative claims) and the application for the removal of the Trustee.

Availability of derivative action

1. The first argument for the defendants was based on the Corporations Act, s 236(3). That enactment provides: The right of a person at general law to bring, or intervene in, proceedings on behalf of a company is abolished.
2. Counsel for the Director Defendants, whose submissions were adopted on this point by counsel for the Trustee, submitted that the terms of this section are satisfied in the present case. The causes of action which are the subject of the derivative claims are vested in the Trustee. Because the Trustee is a company, they are causes of action of "a company" for the purposes of s 236(3).
3. This may be accepted so far as it goes, but s 236(3) abolishes "the right" to bring proceedings, or intervene in proceedings, on behalf of a company. The Parliament had a specific legal doctrine in mind. It is necessary to identify and analyse that doctrine to decide whether it encompasses the bringing of a derivative claim in trust law.
4. The starting point is of course the famous decision in Foss v Harbottle (1843) 2 Hare 461; 67 ER 189. But that case was decided during the infancy of company law. In fact it was decided a year before the first general company law statute, the Joint Stock Companies Act 1844 (7 & 8 Vict c 110), was even enacted. Not until more than fifty years later was a line definitively drawn between a company incorporated under such a statute and its shareholders: Salomon v A Salomon & Co Ltd [1897] AC 22.
5. The origin and nineteenth century development of the derivative action in company law is discussed by A J Boyle in 'The Minority Shareholder in the Nineteenth century: A Study in Anglo-American Legal History' (1965) 28(3) Modern Law Review 317 at 318-320; see also, for a mid-twentieth century description of the doctrine and discussion of associated policy issues, Wedderburn, K W, 'Shareholders' Rights and the Rule in Foss v Harbottle' (1957) 15(2) Cambridge Law Journal 194 and Boyle at 325-329.
6. In the course of argument in the present case, I was referred by counsel for the Director Defendants to the decision of the English Court of Appeal in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204. That decision sufficiently describes for present purposes the judge-made doctrine, as it had developed by the time the statutory derivative action was introduced to replace it in Australia.
7. The Court of Appeal began by stating (at 210D-E, citation omitted): A derivative action is an exception to the elementary principle that A cannot, as a general rule, bring an action against B to recover damages or secure other relief on behalf of C for an injury done by B to C. C is the proper plaintiff because C is the party injured, and, therefore, the person in whom the cause of action is vested. This is sometimes referred to as the rule in Foss v Harbottle when applied to corporations, but it has a wider scope and is fundamental to any rational system of jurisprudence.
8. There was a second strand to the rule. This related to the internal management of companies. Someone other than the company could not be permitted to bring an action on its behalf where, under the company's constitution, ultimate control of the company's affairs rested with the shareholders acting by majority in general meeting.
9. There was an exception to the rule, which the Court of Appeal stated (by reference to the "classic definition" in Edwards v Halliwell [1950] 2 All ER 1064) as applying: where what has been done amounts to fraud and the wrongdoers are themselves in control of the company. In this case the rule is relaxed in favour of the aggrieved minority, who are allowed to bring a minority shareholders' action on behalf of themselves and all others. The reason for this is that, if they were denied that right, their grievance could never reach the court because the wrongdoers themselves, being in control, would not allow the company to sue.
10. The Court of Appeal also referred to some other exceptions, or apparent exceptions. These may only have been apparent exceptions because, on analysis, they simply described circumstances in which the second strand of the rule did not apply and the plaintiff's own rights as shareholder were in issue: see Wedderburn at 203ff. It is not necessary to say anything more about them for present purposes.
11. Whether the derivative action doctrine in company law was exhaustively stated as a set of exceptions to a fixed rule was controversial. In Scarel Pty Ltd v City Loan & Credit Corporation Pty Ltd (1988) 17 FCR 344 at 349-350, Gummow J noted that there was "some support" for the broader proposition that, beyond the recognised exceptions, a shareholder could bring or continue an action against the wrongdoer where the company would not, and the interests of justice demanded it.
12. I turn now to the derivative action in equity between the beneficiary of a trust and a third party who is alleged to be liable for a wrong done to the trust estate. I will refer to the relevant doctrine as one of trust law, although it applies equally to estates.
13. The doctrine was referred to by the High Court in Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109. See also the decisions of the Privy Council in Hayim v Citibank NA [1987] AC 730 and of the United Kingdom Supreme Court in Roberts v Gill [2011] 1 AC 240.
14. The High Court in Alexander (at [55]) expressed the doctrine in the form of "the proposition that, where relief is sought in the equitable jurisdiction of the Supreme Court against a third party, a beneficiary may sue in his own name, joining as defendants the trustee and any other beneficiaries, but only where there are 'special circumstances'.'' This proposition operates as an exception to the general rule which the Court quoted from Scott on Trusts: The interests of the beneficiaries of a trust are protected against a third person acting adversely to the trustee through proceedings brought against him by the trustee and not by the beneficiaries. As long as the trustee is ready and willing to take the proper proceedings against the third person, the beneficiaries cannot maintain a suit against him.
15. The use of a derivative action is however only one means among several which are available for dealing with the problem of a trustee refusing to take action on behalf of a trust. The trustee may be directed by the Court to pursue the action, perhaps retaining new solicitors in order to do so. Or the trustee may be directed to consent to someone else bringing the action in the trustee's name, provided a proper indemnity is given for the costs. Or a receiver may be appointed for the purpose of bringing the action. See Sharpe v San Paulo Railway Co (1873) LR 8 Ch App 597 at 609-610. The bluntest solution is to replace the recalcitrant trustee with a new trustee who can be expected to pursue the action: Heydon, J D and Leeming, M J, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) at [23-03].
16. Orders directing a trustee to sue, or directing the trustee to consent to someone else bringing the action in the trustee's name, or appointing a receiver to sue, are all orders which the Court has power to make in the exercise of its jurisdiction over the administration of trusts (the power to appoint a new trustee, although supplemented by statute, likewise originates from that jurisdiction). It is therefore desirable to say something about the foundation for, and reach of, the Court's powers in that regard.
17. The historical development of the administrative jurisdiction was described (in the context of judicial advice, which is another aspect of it) in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at [37]-[45] and [61]-[63]. Initially the exercise of the jurisdiction was procedurally cumbersome because it was necessary to bring an administration suit in which the court assumed control of all aspects of the administration and required full accounts to be taken. But procedural reforms in the mid-nineteenth century allowed the court to make, individually, any order which might previously have been made in the course of full administration proceedings.
18. That reform, as noted by the High Court at [45], is now reflected in Part 54 of the Uniform Civil Procedure Rules 2005. Rule 54.3 gives the Court broad power to give directions to the trustee, and otherwise as to the execution of a trust. Such directions would cover the bringing of proceedings by the trustee, or by a beneficiary in the trustee's name, or by a receiver (see in particular sub-rr 54.3(1), 54.3(3)(d), 54.4(c)).
19. The litigation process which is set in train by an application for orders of this type has two parts. The first part involves making (in the exercise of the administrative jurisdiction) the necessary order for the action to be brought in the interests of the trust. The second part is the bringing of the action itself against the alleged wrongdoer. The two parts of the process have distinct features.
20. In the first part, the necessary parties are the plaintiff beneficiary and the trustee. As the Court is considering the interests of the trust as a whole, consideration of the views and interests of other beneficiaries (and creditors) may be required. But in the ordinary course the alleged wrongdoer would not necessarily be entitled to be heard.
21. In the second part of the process, the trustee (or plaintiff beneficiary suing in the trustee's name, or receiver) institutes an action against the alleged wrongdoer in the ordinary way. This action need not necessarily take place in the court exercising administrative jurisdiction. In pre-judicature times, that would generally not have been possible when the action against the alleged wrongdoer was an action at law. Today, it may still not be possible if the action is one within the exclusive jurisdiction of another court.
22. The court exercising administrative jurisdiction over the trust nevertheless retains effective control over the conduct of the action against the alleged wrongdoer and the recovery of any proceeds for the benefit of the trust, through the court's power to give directions to the plaintiff (trustee, beneficiary suing in the trustee's name, or receiver). In that sense, the first part of the process continues until the second part is resolved.
23. The affinities between this process and a derivative action are obvious. A derivative action differs only from an action brought pursuant to administrative directions of the court in that, in a derivative action, the claim is brought by the beneficiary in the beneficiary's own name, albeit in a representative capacity. Functionally, a derivative action is just another way of ensuring that the underlying claim is pursued in the interests of the trust. Thus a derivative action will not be permitted where the trustee can be directed to take the action, or to authorise the bringing of the action in the trustee's name (see Harmer v Armstrong [1934] Ch 65 at 84).
24. In a derivative action, the plaintiff beneficiary may, as the High Court noted in Alexander, bring the action directly against the alleged wrongdoer and join the trustee as an additional defendant. But there remain procedural parallels with the two-part process involved in orders under the Court's administrative jurisdiction. One is that, as will be seen below, a formal representative order must be made, authorising the plaintiff beneficiary to bring the claim on behalf of the trust, even if that order may be made after the proceedings have begun, or even after the trial. Another is that, if the claim succeeds, judgment will be given in favour of the trustee who then distributes the proceeds in accordance with the terms of the trust: Re Field [1971] 1 WLR 555 at 558.
25. In my view, the affinities with the other types of orders which I have discussed are so great that a derivative action should be recognised as likewise deriving from the Court's administrative jurisdiction. On this analysis, a representative order authorising the bringing of such an action on behalf of the trust is simply another form of order which the Court may make in the exercise of that jurisdiction when the interests of the trust justify it. Joining both the alleged wrongdoer and the trustee as defendants just telescopes the two conceptually discrete parts of the process together. But if for some reason a distinction must be maintained between a derivative action and an action resulting from the exercise of the Court's administrative jurisdiction, coherence requires that the applicable rules should, as much as possible, be the same.
26. I return now to the immediate issue in these proceedings. Counsel for the Director Defendants submitted that a derivative action in company law is the same thing as a derivative action in trust law. In abolishing one, s 236(3) necessarily abolished the other. Counsel relied in particular on the statement in Prudential about the "rule in Foss v Harbottle" being only a particular emanation of a more fundamental rule applying throughout "any rational system of jurisprudence".
27. Counsel also relied on the decision of Gordon J (then of the Federal Court) in Re Cemcon [2009] FCA 696. That was an application under the statutory procedure for leave to commence derivative proceedings on behalf of a company (HCC), against one of the company's directors. The company's assets were held by it as trustee of a unit trust (HFUT). The application was opposed on the ground that a corporate trustee was "not amenable to sections 236-237" of the Corporations Act as it fell outside the definition of a "company" referred to in s 236.
28. Gordon J rejected this contention, reasoning as follows (at [12]): First, there is nothing in the legislation, and nothing in any authority to which I have been directed, that would support such a contention. The words of the Act are clear. The Act makes no relevant distinction between a company that is a trustee and any other form of company. Secondly, as a practical matter, I do not accept that it is inappropriate for a corporate trustee to use ss 236 and 237 of the Act in an attempt to recover trust property. The relevant trust property is the business of HCC, and the Derivative Proceeding is an attempt to recover that property for the benefit of HCC (in its capacity as trustee of the HFUT). Moreover, Courts have in the past granted leave under s 237 where the company in question was a corporate trustee - see e.g. Vigliaroni v Concrete Precast Systems Pty Ltd [2009] VSC 253 at [8]; Showtime Management Australia Pty Ltd v Showtime Presents Pty Ltd [2008] NSWSC 618 at [83] and [110]; Vanmarc Holdings Pty Ltd v P W Jess and Associates Pty Ltd (2000) 34 ACSR 222 at [36].
29. Counsel accepted that the point before Gordon J was not the same as the point which arises in the present case. But counsel submitted that her Honour's decision lent support to the view that s 236(3) is designed to apply uniformly to all derivative actions on behalf of companies, whether trustees or not.
30. The defendants' point does not appear to be the subject of direct authority. In Chahwan v Euphoric Pty Ltd [2009] NSWSC 805 at [33], Brereton J (as his Honour then was) made an order authorising a trust law derivative action where the trustee was a company, and a previously unsuccessful application had been made for leave to bring a statutory derivative action. The outcome in that case thus directly contradicts the argument by counsel. But the point about the effect of s 236(3) does not seem to have been raised.
31. In my view, the reference in Prudential to a fundamental rule applicable in "any rational system of jurisprudence" is not relevant for present purposes. In enacting s 236(3) the Parliament did not abolish the "rule in Foss v Harbottle" in the sense in which that term was used in Prudential. What s 236(3) abolished was the exceptions to that rule. It is not necessary for present purposes to explore the extent to which the abolition was intended to apply to apparent exceptions to the rule which were not true exceptions.
32. In Scarel, Gummow J said (at 349): Representative actions were the product of equity procedures and the rule in Foss v Harbottle and its exceptions have generally been considered part of the powers and procedures of modern courts of equity of which this Court (in respect of matters otherwise within its jurisdiction) is one: Federal Court of Australia Act 1976, s 5 (2).
33. There is clearly a resemblance between the derivative action doctrines in trust law and company law. But that does not mean they are the same. The trust law doctrine existed long before the company law doctrine did. And the trust law doctrine is grounded in the Court's administrative jurisdiction. The Court has no equivalent supervisory jurisdiction over the affairs of companies: Burland v Earle [1902] AC 83 at 93.
34. Another distinction concerns the plaintiff's entitlement to bring the action. Where a derivative action was brought in company law, the plaintiff was, it seems, entitled to bring the action as of right, at least if it fell within one of the defined exceptions: Chahwan v Euphoric Pty Ltd [2008] NSWCA 52 at [124(k)] per Tobias JA; see also Oates v Consolidated Capital Services Pty Ltd (2009) 76 NSWLR 69 at [105] per Campbell JA. This may be contrasted with a derivative action in trust law, where an order authorising the action is, at some point, required from the court.
35. It is therefore questionable whether the bringing of a derivative action is properly characterised as a "right" at all for the purposes of s 236(3). It is not a right in the sense of a right to relief derived from the occurrence of specified factual circumstances in the past. It is only a procedural entitlement which the Court may choose to confer in the exercise of its control of the affairs of a trust.
36. Clearly the company law doctrine concerning derivative actions bore the marks of equitable influence. This is hardly surprising when company law has traditionally been administered by equity judges. But the legal relationships between a company, its shareholders and its officers are, at bottom, common law relationships. They are based on contract and statute.
37. I therefore think it may be going too far to say that derivative actions in company law were equitable in nature, if that is what Gummow J intended to say in Scarel. The common law context may have been obscured by the environment in which company law was administered, especially where the cause of action which was the subject of the derivative action was an equitable one. But what equitable jurisdiction was involved where a shareholder used the exception to the rule in Foss v Harbottle to bring an action on behalf of a company on a common law cause of action?
38. Even if I am wrong about this, and the derivative action doctrine in company law did involve an exercise of equitable jurisdiction, in my view that was still conceptually distinct from the derivative action doctrine in trust law. According to Boyle (at 318-19, 325), the immediate formative influence for the derivative action doctrine in company law came from partnership law, not trust law. I think that the relationship between the two doctrines is best described by Browne-Wilkinson LJ in Nurcombe v Nurcombe [1985] 1 WLR 370 at 378G, who said that the company law doctrine was "analogous" to the trust law doctrine.
39. There is another point about the construction of s 236(3). If the defendants' argument is correct, a derivative action on behalf of a trust would be impermissible wherever the trustee of the trust is a company. Counsel for Robert submitted that this would leave the potential for a wrong to the trust to be unremedied if no shareholder or officeholder applied for the necessary leave. That might not be completely correct, as there would be no reason to think that other remedies in the court's administrative jurisdiction would be caught by s 236(3) even if authorising a derivative action by a beneficiary was. But at best the abolition of that particular alternative form of relief would be an unnecessary and inconvenient restraint. There is no reason to attribute such an intention to Parliament.
40. In my view s 236(3), properly understood, does not affect the Court's power to authorise a trust law derivative action where the trustee is a company. What s 236(3) abolishes is (as described in the Explanatory Memorandum: see Explanatory Memorandum, Corporate Law Economic Reform Program Bill 1998 at 6.23) the "common (general) law derivative rights under the exceptions to the 'proper plaintiff' rule in Foss v Harbottle".
41. There is no inconsistency between this view and those expressed by Gordon J in Cemcon. The power to authorise a statutory derivative action on behalf of a company may certainly be used where the benefit of the action is held by the company in trust. In a case where the shareholders and directors are not beneficiaries there may be no financial advantage to them in bringing the action, but this is a matter which goes to discretion, not power.
42. I reject the defendants' primary submission. The Court has power in the present case to authorise a derivative action by Robert on behalf of the Trust notwithstanding the fact that the Trustee is a company.

Timing of Court's authorisation of derivative action

1. Counsel for the Director Defendants (whose submissions on this point also were adopted by counsel for the Trustee) submitted that, until leave is granted by the Court, an action in which a beneficiary purports to claim relief against an alleged wrongdoer for the benefit of a trust is liable to be struck out as improperly constituted. It was not however suggested that the Court could not later grant leave nunc pro tunc to validate the proceedings.
2. It was thus common ground that a representative order could be made. The difference between the parties was that counsel for the Director Defendants urged that Robert's standing to bring the derivative claims be determined now. But counsel for Robert insisted that, at least in the ordinary course, entitlement to sue on behalf of the trust was an element of the claim to be pleaded, and dealt with at trial, along with the other issues raised by the claim.
3. In support of his submission, counsel for Robert relied on the following statement by Brereton J (as his Honour then was) in Chahwan v Euphoric Pty Ltd [2009] NSWSC 805 at [33]: … it does not appear to be the law, and there certainly does not appear to be any practice, that in respect of proceedings brought in the "exceptional circumstances" jurisdiction, the plaintiff must first apply for leave or permission to bring those proceedings. What a plaintiff bringing such proceedings has to establish, is that the trustee will not do so, such as to amount to exceptional circumstances; if the plaintiff fails to establish that, then the plaintiff will fail at the final hearing. But in none of the cases to which reference has been made does there appear to have been any interlocutory application for permission to bring the proceedings on behalf of the delinquent trustee. In Ramage, an order was made at the final hearing appointing the plaintiff to sue on behalf of the trustee and deeming him to have done so.
4. His Honour's reference in the last sentence was to the decision of Powell J in Ramage v Waclaw (1988) 12 NSWLR 84 (at 94A). The issue in that case, however, concerned the Court's power to sanction a derivative action by a discretionary beneficiary. Powell J did not discuss when the representative order should be made, although, as Brereton J noted, it was not in fact made until the final hearing.
5. To the contrary is the decision of Sifris J in Randa Lee Investments Pty Ltd v Ballan [2015] VSC 178. At [37] his Honour said: In my opinion, it is clear from a review of the authorities that leave is required. Where, as in this case, a cause of action is truly that of another party, namely a Trustee, special and exceptional circumstances must be shown before a unitholder is permitted to proceed. In my view, and despite certain authority to the contrary …, it must be established prior to the issue of proceedings, or at the time of issue, that the party that otherwise does not have standing should be permitted to proceed because the party that does have standing is unable or unwilling to do so. There is no point in doing this at the end as part of the case. Issues of standing are fundamental and foundational and must or should be addressed first. Finally, although the position of a shareholder and unitholder may differ, in the context of the present discussion they are similar. Both seek to agitate a cause of action of another party. Logic, principle and of course authority suggest that leave must be sought.
6. The issue was referred to by Barrett AJA in Treadtel International Pty Ltd v Cocco [2016] NSWCA 360. His Honour noted (at [73]) the difference of opinion between Brereton J and Sifris J. He stated that the judgment of the Court of Appeal in El-Sayed v El Hawach at [56]-[57] favoured the opinion of Sifris J. That passage had emphasised the need to establish the existence of "special circumstances", including the possibility that evidence might be required.
7. Barrett AJA continued (at [74]): I suspect that there is no hard and fast rule and that much depends on context. The need for a safeguard by way of screening by the court as a prelude to a derivative suit by a beneficiary upon a cause of action maintainable by the trustee is understandable where certain conditions prevail - for example, where there are several beneficiaries one of whom purports to act for the estate as a whole; where there is a question about the benefit that the estate will derive from pursuit of the proceedings; or where it is necessary to discover whether the trustee's decision not to proceed has some sound basis. In straightforward cases, there will be no need for such a safeguard.
8. I have already explained why I consider that the derivative action in trust law should be seen as stemming from, or being closely allied to, the Court's administrative jurisdiction over trusts. That circumstance of itself supports the conclusion by Barrett AJA that the matter is one which depends on the circumstances. The administrative jurisdiction is characterised by great procedural flexibility. A fixed rule about when the Court may or may not make a representative order would not be consistent with that flexibility.
9. In my view, proving the existence of "special circumstances" is not an element of a "cause of action" between the beneficiary and the alleged wrongdoer. Rather, it is the pre-condition for a separate discretionary decision by the Court to make a representative order in the interests of the trust. I think that is so, whether or not the power to make such an order is, strictly speaking, part of the administrative jurisdiction.
10. It follows that the timing of the application for a representative order is likewise a discretionary decision for the Court. The Court may defer the issue until the hearing of the claim against the alleged wrongdoer, but it is not obliged to do so. And, if I am wrong in thinking that "special circumstances" are not an element of the beneficiary's "cause of action", the Court can always order a preliminary determination of that element as a separate question.
11. Counsel for Robert complained that the defendants had delayed in raising the question of standing and having the existence of "special circumstances" determined. That may be so, but the Court must make its decision on the basis of the circumstances as a whole, and as they now are. The claims which are (currently) pleaded as derivative ones will obviously give rise to extensive factual and legal contest. If the Court ultimately does not sanction those derivative claims, there will be a huge waste of costs.
12. In Prudential, the trial judge was criticised by the Court of Appeal for permitting the entire case to proceed to a hearing on the merits and dealing with the question of the plaintiff's standing at the end. That was a company law derivative action, but the same considerations are in my view applicable here. I think that the interests of the trust, and indeed of all the parties, require the issue to be determined now.

Prayers for relief

1. I turn now to the points argued by counsel for the Trustee. The first point concerned the prayer for orders requiring the Trustee to "account to and make good the Trust Fund". Such an order was sought under claims 1, 2, 4 and 5. Counsel for the Trustee first submitted that the Trustee would be the target of such an order and its beneficiary. Counsel submitted that this was incoherent and unworkable. Counsel also made a specific complaint about this prayer under claim 1, which I explain in more detail below.
2. Counsel's second point fastened on a prayer for "equitable compensation". This prayer does not specify the claims to which it relates. Counsel submitted that it was unclear what claim was being made for equitable compensation and against which defendants. Counsel submitted the claim should not be permitted in a general form.
3. Counsel's third point concerned the declarations sought in the statement of claim. Counsel invoked the principle that declaratory relief should only be given if it has real utility and deals with a specific issue in dispute. Counsel submitted that the declarations sought would have no utility and should not be permitted.
4. Orders to "account to and make good" the Trust Fund: Counsel's submissions require some analysis of the various types of claim which result if trust assets are distributed by the trustee in breach of the terms of the trust. What follows was not directly addressed in argument. It is therefore somewhat tentative.
5. In the first place, there may be a right of recoupment from the recipient. It is not necessary for present purposes to consider the possibility of recovery from the recipient at law (for instance, in an action for recovery on the ground of fraud or for restitution on the ground of mistake). It is sufficient to consider equitable claims.
6. A recipient who is a volunteer can be required to account for the asset, or any traceable proceeds of the asset, which the recipient retains. This is so even if the recipient did not know, and could not reasonably have been expected to know, that the distribution was in breach of trust. And if the recipient did have such knowledge, then liability attaches under the first limb of Barnes v Addy. The recipient will be required to account for the full amount received; that is, to the extent that the asset or its traceable proceeds cannot be identified in the recipient's hands, the recipient will be personally responsible for the shortfall. See Re Montagu's Settlement Trusts [1987] Ch 264 at 272A-B, 276B-C; Super 1000 v Pacific General Securities [2008] NSWSC 1222 at [214].
7. The trustee is also liable to recoup the trust estate for any loss which has been suffered as a result of the wrongful distribution: Re Dawson [1966] 2 NSWR 211 at 214-16. In principle, any recovery from the recipient would be taken into account. The ultimate measure of the trustee's liability, then, is the net loss to the estate after recoveries (I put aside the question whether the trustee can be compelled to restore the trust estate fully in the meantime and be left with the proceeds of the recovery action: see Conaglen, M, 'Equitable Compensation for Breach of Trust: Off Target (2016) 40(1) Melbourne University Law Review 126 at 142-143, 154-155).
8. Finally, in the case of a dishonest and fraudulent breach by the trustee, compensation can be recovered from an accessory to the breach under the second limb of Barnes v Addy. Again, in principle, it seems that the measure of compensation for which such a recipient may be liable will be the shortfall in the trust estate after any recovery from the recipient is taken into account.
9. If the trustee responsible for the wrongful distribution has been removed, his or her make-good obligation may be enforced by the new trustee for the benefit of the trust. But where the trustee is still in office, I do not think that any conceptual problem arises with an order requiring the trustee to "account to", or "make good", the trust estate. As a general rule, one of a trustee's most basic duties is to keep assets belonging to the trust separate from the trustee's own assets. There is no difficulty with the Court, in the exercise of its administrative jurisdiction, ordering the trustee to replenish the trust assets from the trustee's own assets. Of course, if the trustee proves recalcitrant, then it may be necessary to appoint a new trustee, or perhaps a receiver, to pursue formal enforcement processes.
10. Similar considerations apply where claims are available against recipients and accessories. Such claims may be brought by a replacement trustee. But if the trustee remains in office there is no reason why he or she cannot bring them. Indeed it would usually be the trustee's obligation to do so, once the breach has been pointed out.
11. This brings me to claim 1. Under this claim the potential claims for relief become more complicated.
12. Where a trustee distributes an asset which, according to the terms of the trust, should be distributed to a particular beneficiary, and the trustee distributes that asset to someone else, then the entitled beneficiary can simply sue the trustee for the unpaid amount. It is an "equitable debt", analogous to a contractual claim for payment of a liquidated sum.
13. If the trustee has sufficient assets to meet the liability, no further problem arises from the beneficiary's point of view. Recoupment becomes the trustee's problem. But where, as appears to be the case here, the trustee will not have sufficient assets to meet the claim, then the beneficiary has an interest in recoupment. On the face of it, this may justify a derivative action.
14. But counsel for the Trustee argued that this was not the case so far as claim 1 was concerned. Counsel submitted that once the income for the year in question was determined, each beneficiary was entitled to a separate one-fifth share. Counsel submitted that on no view would any moneys recouped from a recipient form part of the trust. Instead, those moneys would be held under a bare trust for the beneficiaries. Thus, Robert's claim was limited to a one-fifth share of the income and no question of "restoring the trust estate" could arise.
15. It seemed initially from the submissions made by counsel for Robert that this was common ground. The relief sought on behalf of Robert, both by way of "equitable debt" and under each limb of Barnes v Addy, was limited to a one-fifth share of the allegedly unauthorised or wrongful distributions of income. But I am not sure that such a limitation is correct.
16. I accept of course that Robert may sue, and obtain judgment against, the Trustee for a one-fifth share of the income as an "equitable debt" without involving the other Principal Beneficiaries. But I think it is less clear that the benefit of the claims against recipients and accessories can be divided up in the way which is implicit in the relief sought on Robert's behalf.
17. If Robert's share of the income in a particular year had been set aside, and had then been separately appropriated to a non-entitled Beneficiary instead, such an individualised claims might be made against that Beneficiary as recipient and against any accessory to that appropriation. But there is no sign of that on the facts of this case as they currently appear.
18. I have already explained that where a Re Montagu claim or a Barnes v Addy claim is available, the trustee may repent and pursue a recovery claim on the trust's behalf. In the present case, allowing an individualised claim to be made by Robert would cut across such a claim on behalf of the Trust. Robert could pursue full recovery for "his" one-fifth share against all of the third-party defendants, leaving the other Principal Beneficiaries to scrabble over what was left. That seems wrong in principle when all of the Principal Beneficiaries have an equal claim. It could also encourage multiplicity of proceedings.
19. In its recent decision in Cassaniti v Ball [2022] NSWCA 161, the Court of Appeal touched on the relationship between claims against a trustee and claims against an accessory under the second limb of Barnes v Addy. The immediate question before the Court was whether the release of a trustee results in the release of the accessory.
20. The question had previously been referred to by the Court in Yeshiva Properties No 1 Pty Ltd v Marshall [2005] NSWCA 23. Bryson JA, who gave the judgment of the Court, said (at [80], emphasis added): To my mind it is doubtful whether an equitable remedy against an alleged accessory should be granted to a plaintiff who has given the alleged defaulting trustee or fiduciary a release, or has decided not to sue the trustee or fiduciary. Doing equity as between the plaintiff and the accessary, who is not the person principally liable, seems to me to be possible only if the plaintiff also pursues his claim against the person principally liable. A plaintiff who seeks an equitable remedy commits himself to a suit in which all equities in the controversy will be resolved together, and the Court should not allow the plaintiff to decide which party to sue and which party to ignore or give a release, perhaps for forensic advantages related to assessed readiness to contest the claim. If the party principally liable has a release under bankruptcy or some other legislation there may be no purpose in requiring it to be joined as a party; except perhaps to obtain discovery. Even so, any dividend or other advantage obtained in the bankruptcy would obviously have to be brought into account.
21. In Cassaniti, the Court indicated that if the plaintiff accepts an account of assets from the trustee as sufficient, that may bar a claim against the accessory: see at [97]. But otherwise, the proposition that release of the trustee will release an accessory was rejected, at least as a hard and fast rule (see at [117]).
22. But the Court did not reject Bryson JA's procedural comments, including the passage that I have emphasised. At [77] in Yeshiva Bryson JA explained: When claims based on alleged accessory liability and the second limb of Barnes v Addy are made it is usual, in my experience, that the trustee or fiduciary whose liability is alleged to be the principal liability is joined in the suit and that appropriate equitable remedies are claimed against that person. This accords with the usual approach taken by Courts of Equity in which, so far as is practicable, all aspects of the controversy are brought under consideration and resolved in the same suit. This approach is sometimes expressed in the obscure maxim 'Equity delights to do justice," which alludes to the Courts' wish to resolve the whole controversy and give effect to all equities of all persons involved in the controversy. The same policy is expressed in ss.60 and 63 of the Supreme Court Act 1970. Except when the principal cannot be found, is insolvent, has a bankruptcy discharge, or is unavailable to be sued for some other reason, it is appropriate that that person should be joined as a defendant. There may be advantages for the attainment of justice if that person can be required to produce documents on discovery, answer interrogatories or otherwise to participate in the proceedings. It is not safe to assume that all relevant aspects of the principal persons' conduct are known to an accessary.
23. His Honour's observations fit comfortably within the exercise of the Court's administrative jurisdiction, with its characteristic procedural flexibility and emphasis on the interests of the trust as a whole. Another characteristic concern is to avoid multiplicity of actions. That has been identified as an important feature of the general rule referred to by the High Court in Alexander that action for a wrong done to a trust must be taken by the trustee; see also El Sayed at [56].
24. I accept that any funds recovered in a recoupment action would not go back into the corpus of the Trust. But it does not follow that such funds would have to be treated as if they were held under five individualised bare trusts for the separate benefit of the five Principal Beneficiaries. On the face of it the funds should be managed collectively, deducting the costs of recovery, with the net proceeds then being shared out equally among those Beneficiaries.
25. What this means is that, if Robert wishes to pursue recovery from the Director Defendants under claim 1, he may have to do so by way of derivative action for the benefit of all of the Principal Beneficiaries. It will be necessary for his legal advisors to consider this, and, if they accept it, to clarify the prayers for relief accordingly.
26. Equitable compensation: The prayers for equitable compensation add yet another layer of complexity. Again it is necessary to say something about the development of that remedy.
27. As I have already described, the traditional way of enforcing a trustee's obligations, including the obligation to restore the trust fund in the event of breach of trust, was by administration suit. Then in the nineteenth century, the courts began to permit a beneficiary to sue the trustee directly for loss suffered by the beneficiary individually from a particular breach of duty. Alternatively, the beneficiary could elect to claim an account of profits. See Heydon, J D, Leeming, M J and Turner, P G, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2015) at [23-030].
28. This remedy was particularly useful if there was only one beneficiary involved. It was also particularly useful in cases where, rather than merely failing to receive their entitlements from the trust, plaintiff beneficiaries had suffered their own losses as a result of the trustee's conduct. The remedy received additional impetus because of its ready application to cases involving non-trustee fiduciaries, especially fiduciary advisors, where claims were more usually for losses of that type.
29. The remedy is probably now the remedy most often resorted to, even in claims against defaulting trustees. It also seems to be accepted that the remedy is also available against accessories liable under the second limb of Barnes v Addy.
30. But I think counsel for the Trustee was right to question, or at least to seek clarification of, the use of the remedy in this case. The Trustee is, apparently, already subject to a claim for recoupment of the full losses suffered by the trust estate. There may also be an "equitable debt" claim. An individual claim by Robert for equitable compensation against the Trustee would appear to be redundant. And, for the reasons I have given above, an individual claim for equitable compensation against a third party allegedly liable on Barnes v Addy grounds risks cutting across the Trust's rights.
31. It must be remembered that equitable compensation arose as an alternative to a full account. Properly analysed, the availability of the remedy may be another consequence of the opening up of the administrative jurisdiction in the nineteenth century: see Conaglen at 146-150. In any event, the relief is discretionary and there may be circumstances in which the Court will not entertain it. One of those would, in principle, be where it would lead to a multiplicity of actions.
32. In my view, if derivative claims for recovery are to be pursued against the Trustee, the alleged recipients of trust monies and alleged accessories, the principles in Yeshiva may prevent Robert from bringing individual claims for equitable compensation. Again, this is something which Robert's legal advisors will have to consider.
33. Declarations: The argument by counsel for the Trustee touched on a problem which is encountered not infrequently in this Division. Statements of claim are sometimes festooned with prayers for declarations as to elements of the cause of action (for example, that the defendant has engaged in misleading or deceptive conduct). This is of course unnecessary, because if the substantive relief (in the example given, damages) is granted, then there will be an issue estoppel as to all of the elements of the cause of action. All the declarations do is obscure what it is the plaintiff is really seeking. In some cases, the approach can even lead to the substantive relief being left out entirely.
34. But that does not mean that prayers for declarations can never usefully be combined with prayers for substantive relief. Counsel instanced, as lacking in utility, declarations that certain resolutions of the Trustee were absent or invalid. But such declarations might prove useful, given that administration of the trust will continue after the challenges have been determined in the proceedings.
35. Counsel also submitted, in support of his attack on the utility of the declarations, that they would apply only between the parties named in the proceedings (and, presumably, their successors in title). At present only three of the Principal Beneficiaries have been joined.
36. I am not sure that the premise of counsel's submission is correct. Of course, it is wrong if parties whose interests will be affected by the Court's decision on an issue are not joined to the proceedings. But the solution is to join those parties so that they may, if they wish, contribute to the determination of that issue.
37. In the present case, if any individual claims are to be made by any of the other Principal Beneficiaries it is vital to ensure that they are made in these proceedings so that the issue is dealt with only once. Seeking declarations as to the absence or invalidity of the relevant resolutions and joining the other Principal Beneficiaries could be an effective way of ensuring that that happens.
38. It may nevertheless be, on analysis, that the statement of claim contains superfluous declarations of the type I have criticised above. But I do not propose to go through the pleading at this point. Having drawn attention to the problem, I will leave it to counsel for Robert to review the prayers for relief and consider whether all of the declarations which are sought really are necessary.

Pleading of removal claim

1. I have described the allegations made against the Trustee at [12]-[24] above. They include the subject matter of Claims 1, 2, 3, 4 and 5. They also include allegations concerning loans which are not the subject of any monetary claims but are evidently relied upon as additional misconduct to support the removal application.
2. These allegations are pleaded in the course of 111 paragraphs of the statement of claim, which plead all of the facts upon which Robert relies for the claims made in the proceedings. Then in [112] the statement of claim avers that Robert as plaintiff "is entitled to have" the Trustee removed as trustee of the Trust. That entitlement is said to arise "by reason of the whole of the above matters", "and in particular by reason of" eight specified matters, which expressly include the misconduct allegations to which I have referred.
3. The complaint made by counsel for the Trustee fastened on the reference to "the whole of the above matters". Counsel pointed out that, taken literally, the phrase would pick up every fact alleged in the statement of claim, including facts which are purely formal and have nothing to do with the removal application. Counsel submitted that the statement of claim needed to specify the particular facts, and only the particular facts, relied upon for the removal claim.
4. As with other exercises of the administrative jurisdiction, an application to remove a trustee is normally made by way of originating summons. Usually there will be no pleadings at all. Like other applications for the exercise of powers in that jurisdiction, an application for removal of a trustee requires a discretionary judgment which depends ultimately on the Court's perception of what is, in the particular circumstances, in the best interests of the estate. It does not lend itself to formal pleading in the way in which a claim based on a cause with defined factual elements does.
5. To the extent that the claim for removal is based on misconduct, Robert's application will be limited to the misconduct which is pleaded. But whether an order should be made for removal will ultimately depend upon practical considerations, not least the outcome of Robert's other claims for relief. If liability is established against the Director Defendants, who in effect control the Trustee, that in itself may be a reason why it will be impractical for the Trustee to continue in its office. This only emphasises how the outcome will depend upon the circumstances at the time the application comes to be decided. I do not think that counsel's criticism is of sufficient weight to warrant any further action about this aspect of the pleading at this stage.

Amendment of statement of claim

1. There was little if any debate about the amendment motion as such. Having rejected the summary dismissal or strike-out of the statement of claim, I will allow the amendments proposed in that motion.
2. But it will be apparent from what I have already said that the statement of claim requires some further consideration. It will also be necessary for Robert's legal representatives to give some thought about how the matter is to proceed in this List, and in particular which aspects of the case will be determined in an expedited hearing and which (such as the conduct of accounts, if Robert is successful) will be deferred to a later point.

Orders

1. The orders made by the Court on 16 August were: 1. By 22 August 2022, the Plaintiff is to: 1. file and serve a Notice of Motion ("Leave Motion") and any evidence in support seeking determination of a preliminary question(s) whether he should be granted leave to bring derivative proceedings in the special (or exceptional) circumstances jurisdiction in equity; and 2. serve any proposed further amended pleading as he might be advised to propound in light of the Reasons for Judgment to be delivered. 1. By 29 August 2022, the Defendants are to file and serve any evidence in respect of the Leave Motion. 2. By 2 September 2022, the Plaintiff is to file and serve his submissions (maximum 15 pages) in respect of the Leave Motion. 3. By 6 September 2022, the Defendants are to file and serve their submissions (maximum 15 pages) in respect of the Leave Motion. 4. The 3 Notices of Motion filed 20 June 2022 are adjourned to 8 September 2022. 5. All questions of costs are reserved. 6. The Leave Motion is listed for hearing on 8 September 2022.

Amendments 20 September 2022 - [22(3)] insert the words "Claim 5" 16 February 2023 - At [51] change "party" to "plaintiff" DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 February 2023