Ireland v Retallack; Retallack v Ireland

Background Facts 6It is necessary to refer to some background facts about which there is no dispute. There have been different proceedings involving the estate before the Court. Pembroke J has delivered three judgments in relation to the Will of the deceased, the neutral citations of which are, respectively, [2011] NSWSC 846, [2011] NSWSC 1096 and [2011] NSWSC 1510. Most gratefully, I have taken some of what appears below from his Honour's reasons for judgment. 7The deceased died on 11 September 2008. He made a will on 19 December 2007 and a codicil on 16 April 2008. 8By Clause 2 of the deceased's Will, the deceased appointed his children Hugh Gordon and Sandra Retallack as joint executors but that appointment was withdrawn if either predeceased him or was unable or unwilling to act, in which case the Plaintiff was appointed executor. Hugh Gordon renounced his executorship on 20 March 2009. The Court granted Probate of the deceased's Will and the codicil to the Plaintiff, as substituted executor appointed under the Will, on 8 September 2009. 9In the Plaintiff's affidavit of executor filed in support of the Probate application, he disclosed that the estate, at the date of death, had an estimated gross value of about $9 million, and a net estimated value of $6,140,682. The estate was said to consist of real property known as "Glengowan" ($3,750,000), interest as a shareholder in Glengowan (Moorilda) Pty Ltd ("the Company") ($1,298,626), real property known as "Morris Vale" with dwelling sheds and stockyards ($1,925,000), real property known as "Sunnyside" ($1,300,000), real property known as "Fairview South" ($350,000), furniture and personal effects ($63,000), cash in bank ($23,000), proceeds of life insurance policies ($430,161), an input tax credit ($105,197), cattle ($758,740), various items of farm equipment and machinery ($99,370), a car ($5,000), monies held in an estate bank account ($177,246), monies held in the Plaintiff's solicitors' trust account ($35,093), monies in credit union accounts ($4,687) and shares in the Company ($1,978). (I have omitted any reference to cents in amounts referred to. This may result in what might appear to be minor mathematical miscalculations.) 10By Clause 4 of the Will, the deceased devised to Mrs Retallack "Glengowan" and all improvements on that property as well as rights attaching to it. The devise was "free of any mortgage, charge or lien" and "for her own use and benefit absolutely". In the event that she pre-deceased him, that property was to go to such of her children as survived the deceased. It was as clear and unqualified a gift as one could expect. A problem arose because the deceased did not own Glengowan; the Company did. 11The issued capital of the Company was 990 ordinary shares of which the deceased owned 989. The deceased's wife had held the sole remaining share but she predeceased him, having died in 1997. At the date of the deceased's death, Mrs Retallack held that share. 12By Clause 5 of the Will, the deceased gave the remainder of his estate, both real and personal, first to his executor and trustee to pay all debts, funeral and testamentary expenses and second to hold the residue then remaining on trust for a company known as "Gordon Family Corporation Pty Ltd". The discretionary objects of the testamentary trust included Hugh Gordon, his wife, Dianne, and their three children. The trustee company has one director, Mr Gareth Phillips, who cannot be located. 13In the first of the reasons for judgment, Pembroke J declared that the gift of "Glengowan" in Clause 4 of the deceased's Will, and the gift of the residue of the estate in Clause 5 of the Will, was each valid and effectual. 14In the third of the reasons for judgment, Pembroke J referred to the first, in which he had concluded that in the deceased's later years, after the death of his wife, the deceased moved into the home of Mrs Johnstone, in Blayney and that as a result the homestead at "Glengowan" became unoccupied. Mrs Retallack then moved from "Binnaway", where she and her husband conducted a farming business, to "Glengowan" where they occupied the homestead and conducted a farming business from the deceased's property. He also held that not only was Mrs Retallack the holder of her mother's share in the Company, but that following her mother's death, she and the deceased were its only directors. He also held that Mrs Retallack was obviously close to the deceased. 15His Honour also referred to the deceased's Will as demonstrating that the gift of "Glengowan" to Mrs Retallack was given on the basis that it was not meant to necessarily represent equity in value "but to secure her a viable grazing property being the property on which she has lived and has had the benefit for a number of years prior to [the deceased's] death". It had seemed to his Honour that the deceased clearly wanted to ensure that Mrs Retallack received "Glengowan" without any additional cost burden. 16In none of the reasons for judgment, did his Honour refer to, or have to deal with, Mrs Retallack's claim against the estate in the nature of equitable or proprietary estoppel over "Glengowan" or "Sunnyside", for the furniture and effects at the homestead on Glengowan, and under the Family Provision Act 1982. Those claims were made in a Statement of Claim in proceedings 2010/59108. The claims were supported by an affidavit of Mrs Retallack filed in July 2010. 17Paragraph 22 of the Statement of Claim alleges that the Plaintiff is "subject to the principles of equitable and propriety estoppel and ... bound by the representations of the deceased". The pleaded representation in respect of the land claimed is: "6. In or about 2004, the deceased represented to [Mrs Retallack] that if [she] (and her family) moved to and occupied part of the deceased's farming operation and the homestead thereupon and maintained and improved the land, the deceased would so arrange his testamentary affairs that upon his death, [Mrs Retallack] would inherit that part of the property known as "Glengowan", being the property (together with the land shown as "Sunnyside East" and "Sunnyside South") ... and the land shown ... as "Sunnyside House", Sunnyside West", "Front Burkes", "Back Burkes" and "The Scrubby". 18Now, as a result of his Honour's judgment, the remaining part of that claim will be limited to Mrs Retallack's entitlement to "Sunnyside" and the furniture and effects on one or other basis alleged. 19On 30 March 2012, a without prejudice settlement conference, attended by legal representatives acting for the Plaintiff (but not the Plaintiff, himself, who was in Court interstate), and Mrs Retallack and her legal representatives took place. The Plaintiff communicated with his legal representatives several times, by telephone, during the course of the settlement meeting. 20The parties exchanged settlement offers at the meeting on 30 March 2012, and subsequently have exchanged further settlement offers in May and June 2012. 21The Plaintiff has obtained a detailed written advice dated 18 June 2012 from Mr M Dempsey SC. That advice considered the prospects of success of Mrs Retallack's claims against the deceased's estate and whether it was appropriate for the Plaintiff to obtain judicial advice. 22After due consideration of all matters, the Plaintiff has formed the view that it would be reasonable and appropriate to settle the proceedings on the basis set out in a letter of 19 June 2012 from the Plaintiff to the Defendant, having regard in particular to the following matters: "a.the desirability of preserving so far as practicable the estate for distribution to the testamentary trust under clause 5 of the 2007 Will, b.the desirability of avoiding further substantial legal costs at a contested hearing of the equitable estoppel/family provision claims and related applications, c.the desirability of resolving the proceedings at a relatively early stage, avoiding the costs of discovery, preparation of evidence and any other interlocutory arguments (see below), d.the uncertainty of the future conduct and complexity of the proceedings, e.the advice of senior counsel on the merits of the proceedings, f.unless the proceedings are settled, it will be necessary to sell some or all of Sunnyside, in respect of which the plaintiff claims an equitable interest, to fund the defence of the proceedings and the administration of the estate, which may lead to a contested application by Mrs Retallack to restrain the sale. g.the proposed settlement presents the opportunity of a quick, simple transaction with the plaintiff, and h.the proposed sale of Sunnyside and Fairview South to Mrs Retallack (an adjoining owner) would avoid a number of complications (such as registration of an easement for water flow, realignment of boundary fences and the registration of an access easement or construction of an access road: ... which would otherwise have to be completed in connection with the sale to another purchaser, and which would in turn involve additional expense, complexity and uncertainty)." 23For these reasons, the Plaintiff seeks the advice of the Court on the following questions (as contained in the further amended Summons filed 19 July 2012): "(a)Whether the plaintiff would be justified in settling Supreme Court proceedings 59108 of 2010 (the "Estoppel/Family Provision Proceedings"): (i)on terms in accordance with the letter from the solicitors for the plaintiff to the solicitors for the first defendant dated 19 June 2012; and (ii)by entry of orders in or to the effect of those set out in Parts A or B of the two-page letter from the solicitors for the defendant to the solicitors for the Plaintiff dated 3 July 2012. (b)If the answer to question (a) is in the negative, or if such an offer was not accepted, whether the plaintiff would be justified in doing all things necessary, or reasonably incidental, to conduct the defence of the Estoppel/Family Provision Proceedings. (c)If the answer to question (a) is in the negative, whether, for the purposes of administering the estate including the conduct of the defence of the Estoppel/Family Provision Proceedings, the plaintiff is entitled forthwith to: (i)sell the property known as "Fairview South"; (ii)sell one or more lots of the properties known collectively as "Sunnyside". (d)If the answer to question (a) is in the negative, whether, for the purpose of effecting the gift to the defendant in clause 4 of the Will of the late Charles Stuart Gordon, the plaintiff may do all things necessary to procure a transfer of the real property known as "Glengowan" from Glengowan (Moorilda) Pty Ltd to her including paying all costs of the transfer, including any stamp duty, from the estate."

The Hearing of the judicial advice Application 24On 9 August 2012, the matter was listed for hearing of the application for judicial advice. When it commenced, senior and junior counsel appeared for the Plaintiff and senior counsel appeared for Mrs Retallack. Mr I Sinnadurai, solicitor, appeared for Mr d'Apice, the third Defendant, who had agreed to assume the role of representative of the Trust created by Clause 5 of the deceased's Will. However, he did not play any significant role, announcing his appearance and stating that he wished to be excused as no directions were being sought against Mr d'Apice. 25At the commencement of the hearing, Mr Gordon appeared, confirmed that he had been provided with various affidavits to which reference was going to be made, and stated in answer to a question from the Bench, that he had not had any opportunity to obtain legal advice. 26The affidavits relied upon by the Plaintiff were then read by senior counsel for the Plaintiff. All affidavits were read without objection. 27An affidavit containing the written advice of senior counsel was also read but all accepted that the advice was confidential. The affidavit and a copy of the advice were provided only to the Court. 28There was then discussion between the Bench and those who appeared at the Bar table as to the current nature and value of the deceased's estate and the alternative results that were available if the matters proceeded. This was done, principally to ensure that Mr Gordon understood the alternatives and the financial implications of those alternatives. 29Subject to what I shall say about Mr Gordon's submissions, the parties appeared to be agreed on the following: (a) The current total gross value of the three parcels of real estate in issue at the date of his death was $5,315,000. "Glengowan" has a value of $3,750,000; "Sunnyside" has a value of $1,170,000; and "Fairview South" has a value of $395,000. (b) If Mrs Retallack is completely unsuccessful, Mrs Retallack would still be entitled to "Glengowan", leaving the estimated gross value of the residue of $1,154,872, from which liabilities of the estate ($416,000) would have to be paid. Some of the Plaintiff's costs of the proceedings might be recovered from her, but if those costs were calculated on the ordinary basis, there would be likely to be an amount equal to the difference between those costs and costs calculated on the indemnity basis to be paid out of residue. In that event, the residuary beneficiaries would receive the amount of the net residuary estate after the payment of costs and expenses of sale of land that falls into the residuary estate. (c) If Mrs Retallack were successful in one, or other, of her claims, she would still receive "Glengowan" as well as "Sunnyside", but she would not, necessarily, receive "Fairview South". The sale proceeds of that property would bear the burden of Mrs Retallack's costs of the proceedings as well as the Plaintiff's costs of the proceedings. It is likely that the total of all those costs would be equal to, or would exceed, the estimated value of "Fairview South". In that event, the residuary estate would be valueless. (d) The effect of the alternative offers made is that Mrs Retallack would pay to the estate $895,000, which would form the gross residue of the estate. She would also bear the stamp duty costs ($192,000) of the transfer of "Glengowan". In other words, instead of the gross residuary estate having a value of $1,154,872, it would have a gross value of $895,000. The difference, therefore, would be $259,872, which is said to be "the cost, to the estate, of compromising the proceedings". 30Having established these matters, I permitted Mr Gordon to make submissions. He submitted that he disputed the values of the properties referred to above. He said that the Court had not been provided with independent current valuations, which the Plaintiff had obtained, or with any sales of comparable properties, from which the value of the estate's properties might be determined. He had concerns, particularly about the value attributed to "Sunnyside", which he said had a much greater value than that attributed to it by the Plaintiff. 31He later added, presumably to justify his statement as to the inadequacy of the value, that he would be prepared to pay more than that suggested as the value of "Sunnyside". When asked how much more, he indicated an additional $350,000. 32Mr Gordon could not state how he would raise the purchase price of "Sunnyside" and simply said raising funds might require the co-operation of the Plaintiff. He then acknowledged that he did not, himself, have sufficient funds to enable him to pay what would be the purchase price, but that the purchasers "would be associates, associates of mine". He also admitted that no offer had been made by him, or by any of these associates, to purchase "Sunnyside" prior to that day. 33Mr Gordon also pointed out that one of the valuations attributed a discount of $60,000 for the creation of an access road, which would not be necessary if the advice that the Plaintiff was justified in compromising the proceedings was given, since Mrs Retallack would own the land which would provide such access. 34Later, when Mr Gordon was shown another valuation, he said that it "probably causes more concern" and that "the trail of valuations appears to represent the documents they messaged to suit the purposes of the day". 35The Court then asked Mr Gordon whether he, or the four other objects of the Trust, had offered an indemnity to the Plaintiff to pay his costs and Mrs Retallack's costs in the event that she was successful should the Plaintiff litigate and not settle. All that he said was that it had been discussed between them but that no offer had been made to the Plaintiff. 36Mr Gordon also raised the prospect of him making a claim for further provision out of the estate under the Family Provision Act. He appreciated that he would need to obtain an order extending the time to make such a claim. He later said, however, that he did not want the cost or stress of that litigation. 37Mr Gordon also submitted that the real reason for the Plaintiff's application was to obtain the Court's imprimatur to the resolution of the proceedings and, thereby avoid any complaint by the residuary beneficiary that the Plaintiff, as executor, had acted improperly in relation to the estate. 38Finally, Mr Gordon submitted that he had never considered "litigation as a practical outcome" in resolving the issues that existed in relation to the deceased's estate. 39Having heard Mr Gordon's submissions, I indicated that I would be likely to reserve my decision, although before doing that I would allow him, and the other objects of the Trust, an opportunity to see if he, or they, could find a satisfactory way to indemnify the Plaintiff in the defence of Mrs Retallack's proceedings. 40Mr Gordon was asked how long he would need to put together funds or provide such satisfactory security necessary to indemnify the Plaintiff not only for his own costs but also for the costs of Mrs Retallack. Those costs might total about $250,000. He was unable to answer this question. 41Finally, I enquired of Mr Gordon what would be achieved if the Court refused to give advice. His answer was "Well, we [would] negotiate something that is acceptable to all parties". 42I then raised with senior counsel for the Plaintiff whether the Plaintiff would be prepared to undertake to the Court that he would not rely upon the fact of obtaining judicial advice to compromise should Mr Gordon, or others, wish to commence proceedings against the Plaintiff asserting that he had resolved the proceedings upon the basis of an undervalue of the properties, or for some other reasons. (I did this because of the concerns, raised by Mr Gordon, that the Plaintiff was, seeking, inappropriately, the comfort of judicial advice so that the circumstance of obtaining judicial advice could be relied upon in proceedings that might be brought against him.) 43Having considered all of the matters raised, and despite opposition from senior counsel for Mrs Retallack, I then adjourned the matter to allow Mr Gordon, and others, an opportunity to provide an indemnity satisfactory to the Plaintiff, to provide any evidence of the value of any of the properties in the estate, and to allow the Plaintiff to consider whether it would give the Court an undertaking not to rely upon the fact of having obtained judicial advice in the event that Mr Gordon, or others, commenced proceedings upon the basis of his improper conduct in settling the proceedings. 44Subsequently, I made directions and stood the proceedings over until 5 September 2012. 45On 5 September 2012, the appearances of the parties were as previously noted. Mr Gordon again appeared. The Plaintiff relied upon a further affidavit to which were annexed copies of correspondence that had passed between Mr Gordon and the Plaintiff's solicitors. 46Mr Gordon then confirmed that he had not provided to the Plaintiff any valuations, or other evidence, of the current value of either "Sunnyside" or "Fairview South"; that the indemnity that he had offered to the Plaintiff was not satisfactory to the Plaintiff; that none of the other objects of the Trust had offered to provide any indemnity (although Mr Gordon suggested that "discussions are ongoing"); that neither he, nor any other person, had offered the amount that had previously been suggested might be offered for "Sunnyside"; and that no correspondence had been entered into between any other objects of the Trust and the Plaintiff to his knowledge. 47Mr Gordon also confirmed that he had further considered filing a claim for an order under the Family Provision Act but had not done so. His final statement was as follows: "What I am saying is that my sister has lodged a caveat over those properties. Obviously my position is directly opposed to her position and I see the next step for me would be to lodge a caveat and then have that matter heard separately in this Court." 48Senior Counsel for the Plaintiff stated that he had instructions to provide a written undertaking to the Court relating to the use to be made of the judicial advice proceedings in the event that proceedings were commenced against the Plaintiffs. The undertaking provided was as follows: "The plaintiff will not rely on section 63(2) of the Trustee Act 1925 (NSW) should a question arise in any future proceedings as to whether the plaintiff has discharged his duty as trustee in respect of the subject matter of the application." 49Having heard from senior counsel and from Mr Gordon, I reserved my decision.

The Legislation 50Section 49(1)(d) of the Trustee Act 1925 provides: "(1) The trustee or the majority acting together, or a sole trustee where by the instrument, if any, creating the trust, or by statute, a sole trustee is authorised to execute the trusts and powers thereof, may, if and as the trustees or the majority, or the sole trustee, may think fit: ... (d) compromise, compound, abandon, submit to arbitration, or otherwise settle any debt, account, claim, or thing whatever relating to the estate or trust..." 51Section 63 of the Trustee Act relevantly provides: "(1) A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument. (2) If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction." 52"Management or administration of property" includes taking steps to preserve the property: Stein v Sybmore Holdings [2006] NSWSC 1004 at [59]. The expression, "trustee" is defined in s 5 of the Trustee Act to include a legal representative, so there is no question of the Plaintiff's standing to seek advice under s 63. 53In Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, the High Court considered s 63. The plurality (Gummow ACJ, Kirby, Hayne and Heydon JJ) made some general points about the section. Relevantly, these included, at 89, that there is no implied limitation on the power to give advice; at 90, that there are no implied limitations on discretionary factors and that the procedure is summary in character; at 91, that the advice is private, because its function is to give personal protection to the trustee and operates as an exception to the court's ordinary function of deciding disputes between litigants; and at 94, that a proper purpose for seeking judicial advice includes relief aimed at resolving doubts held by the trustee as to the proper course of action and protecting the trust and those entitled to it. 54In Re Perpetual Investment Management Limited [2011] NSWSC 133, White J, at [46], described the section as "beneficial legislation for the protection of trustees and should not be narrowly construed". 55Under s 63, the Plaintiff should place all relevant circumstances before the Court and seek an opinion, advice or direction that in those circumstances the trustee would be justified in taking a certain course. 56It has been said that it "is a mistake to think that the trustee must 'prove' facts according to a certain standard of proof to enable findings of fact to be made as would be the case in adversarial litigation": Crnjanin v Ioos; Ioos v Crnjanin [2010] NSWSC 750, per Lindgren AJ, at [28]. 57Uniform Civil Procedure Rules 2005, rule 55.2, provides that an opinion, advice or direction given under s 63 "must be given by order". However, such an order is permissive in nature, its usual form being that the trustee "would be justified" in taking certain action. As such, the order does not carry with it the usual consequences of an order made by the Court in adversarial proceedings, whether parties have been given notice of the application under s 63(4). Thus, it does not create a res judicata. It does not finally determine the rights of parties. Indeed, it does not, of itself, determine any rights, although, it has the potential to affect the rights of the parties given notice. It does not carry with it the consequences of breach, including, e.g. the exposure to contempt proceedings should an order be disobeyed: Macedonian Orthodox Community Church St Petka Inc v Petar [2006] NSWCA 160; (2006) 66 NSWLR 112 at [41]. 58In Watson v Yore [2004] QSC 339, Holmes J (as her Honour then was), at [15], held, in dealing with an application for directions under s 96 of the Trusts Act 1973 (Qld): "Essentially, what must be determined on this application is whether retention of funds to enable an action against the first respondent is in the interests of the beneficiaries of the estate as a whole. There are a number of competing considerations: the prospects of success, the potential for substantial depletion of the estate in costs should the action be unsuccessful, the proportions of what might be gained if it were to succeed, and, peculiar to this case, the fact that there is at present no cause of action ..." 59It is important to remember that the present application is not one in which the Court is being asked to approve a compromise already reached by the Plaintiff. In this case, the Court is being asked, firstly, to provide advice and direction to enable the Plaintiff to properly discharge the duties of his office, one such duty, being to protect the interests of the residuary beneficiary as best as that can be done in all the circumstances. The principal advice relates to whether the Plaintiff would be justified in compromising legal proceedings in which he is the Defendant representing the estate. 60In Re Beddoe [1893] 1 Ch 547, Bowen LJ said at 562: "If there be one consideration again more than any other which ought to be present in the mind of a trustee, especially the trustee of a small and easily dissipated fund, it is that all litigation should be avoided, unless there is such a chance of success as to render it desirable in the interests of the estate that the necessary risk would be incurred." 61In McKinnon v Samuels [2000] VSC 393, which involved an application for approval of a proposed compromise by trustees, Eames J explained the role of the Court in a case such as the present one: "[14] It is the trustees who have the absolute discretion to determine whether a compromise should be reached and as to what the terms of any compromise should be. The court can do no more than state whether it is proper for the trustees to exercise the powers of compromise as they intend. The terms of the compromise are solely the concern of the trustees. It is not proper for the court to approve the compromise in terms of assessing the wisdom of the terms of compromise, whether from the point of view of the trustees or those of any beneficiaries of the estate. What the court can properly be called upon to do is to advise the trustees whether it is proper for them to agree to the compromise and, if appropriate, to rule that they be at liberty to enter the agreements contained in the terms of settlement. [15] The relevant principles are very helpfully discussed in a recent decision of Debelle J in the South Australian Supreme Court in IOOF Australia Trustees Ltd v the Trustee Act 1936 [1999] SASC 461. See, too, Re Green (supra) at 850 per Crockett J and the judgment of Lord Cairns cited by Crockett J in Gisborne v Gisborne (1877) 2 App Cas 300 at 307. In the case first mentioned, Debelle J was exercising statutory power to give advice and directions to a trustee, but I agree with the submissions of Mr Boaden that the same considerations apply when the court is exercising its inherent power as apply in the statutory regime with which Debelle J was concerned. [16] In Re Green, Crockett J adopted passages from the judgment of Lord Cairns in Gisborne v Gisborne. Lord Cairns said this, at 307: "My Lords, in a case like this, where the Court of Chancery recognises that the trustees, and not the court, are to be the judges of the quantum to be allowed, where the trustees are willing to exercise the discretion which they claim to exercise, and where the court allows and declares their right to exercise that discretion, I do not understand it to be the habit of the court to go on and express any opinion as to whether the exercise of the discretion by the trustees is a wise or an unwise exercise of that discretion. I understand that in such a case the Court of Chancery steps aside and recognises the trustees as the persons to exercise the discretion, and in its decree does nothing more than, with regard to payments which may be necessary, act upon the exercise of the discretion of the trustees so made." In Re Green, Crockett J adopted that approach and held, at 850: "However, wisdom or lack of it in relation to the proposed exercise of the discretion is not something upon which I have been asked in this originating summons to express an opinion. What I have been asked in the relevant part of question 4 is to say whether it is improper for the plaintiffs to exercise the power which they possess in the postulated manner. As to that, I think it is something on which the Court has jurisdiction to give an answer if it is in fact satisfied as to there being no impropriety. This much, I think, appears from what was said by Buckley J in Re Allen-Meyrick's Will Trusts [1966] 1 WLR 499, at p 503." In IOOF Australia Trustees Ltd & the Trustee Act 1936, Debelle J said this: "It is important to note that the application for advice and directions does not proceed to a final determination of the rights of parties. The procedure is not available for the determination of substantive issues between parties: Re: Hunter (supra), and Re: Union Trustee Co of Australia Ltd (1936) QWN 6. The procedure enables the court to advise the trustee whether it is lawful to exercise its discretion in a certain way but it cannot tell the trustee how to exercise that discretion or whether a proposed exercise of discretion is necessarily correct: see Gisborne v Gisborne (1877) 2 App Cas 300 per Lord Cairns at 307; Re: Osborne (1863) 2 SCR (NSW) Eq 89; Re: Driller and Nebneson [1972-1973] ALR 735; Re: Allen-Meyricks Will Trusts [1966] 1 WLR 499 at 503; and Re: Green [1972] VR 848 at 850. There may be instances where the court will decide what will be in the best interests of the trust estate. Marley v Mutual Security Merchant Bank & Trust Co Ltd [1991] 3 All ER 198 is an example. But, where the court is being asked for advice and direction concerning a compromise of litigation, the court can do no more than consider whether it is proper for the trustee to consider a compromise. The terms of the compromise will be for the trustee to determine. One instance of the use of the procedure is where a trustee is faced with litigation, either as plaintiff or defendant, and desires advice whether he should institute proceedings or defend them: Re: Atkinson [1971] VR 612, 615-616; Re: England's Settlement [1918] 1 Ch 24 at 31; and Chettiar v Chettiar (No 2) [1962] 2 All ER 238 at 245. If the trustee fails to obtain the advice of the court, the trustee is at risk of being personally liable to pay the costs: Re: Brogden (1888) 38 Ch D 546 at 556 and Re: Atkinson (supra). The power may be used also to approve a compromise or any other transaction. The court, therefore, has power to determine whether it is lawful or proper for a trustee to compromise litigation. It is, of course, a matter for the trustee as to what it is willing to accept by way of compromise. I have already mentioned that the procedure of seeking advice and direction enables the court to advise a trustee whether it is lawful to exercise its discretion in a certain way. The court does not go so far as to tell the trustee how to exercise that discretion. For that reason and for the reasons which follow, I do not think that it is proper for the court to approve the compromise. Instead, the function of the court is to advise IOOF whether, in its opinion, it is proper for IOOF to agree to the compromise, the terms of the compromise being a matter for IOOF to determine. The additional reasons for my conclusion are these. The court does not have available to it all of the evidence which the parties might adduce. It is not aware of all of the facts. Questions of law have not been argued. The question whether it is prudent to agree to the compromise is, therefore, a matter for IOOF to decide. IOOF has a better understanding of, and a better appreciation for, the factual issues and its prospects of success than the court could have at this stage. In deciding whether to agree to the compromise, IOOF will have regard to those matters as well as to other issues such as the uncertainty of and risks inherent in litigation, the length of the trial so far, the manner in which the trial has been conducted by the parties, the likely length of the trial, the costs which have been incurred, the costs yet to be incurred and, as well, any potential liability IOOF may have to pay part or all of the defendants' costs. The costs for all parties to this point have been very substantial. There is another very important factor, which in one sense overrides all others. The parties are, by terms of their commercial arrangements and, in particular, by the Tripartite Agreement, placed in a commercial relationship which must continue for a number of years yet. It is desirable that parties who must deal together almost on a daily basis be able to resolve their differences and reach an understanding as to the manner in which they will regulate their future dealings. In short, IOOF will be called upon to make a commercial judgment having regard to all of these factors. The court can do no more than examine whether IOOF has had regard to those factors. The responsibility for making the decision whether to agree to the compromise is a matter for IOOF and not the court. It is important to remember that the court exists to determine disputes which parties cannot themselves resolve. IOOF has decided that it is desirable to resolve this long and complex litigation on certain terms. It has been able to reach this compromise assisted by the services of a mediator. The court would be very reluctant to suggest that IOOF was wrong in agreeing to the compromise. For all of these reasons, I am satisfied that it is proper for IOOF to agree to a compromise of these actions. It is, however, for IOOF to determine what should be the terms of the compromise. The court should not descend to examine the question whether each of the separate terms of the compromise is an appropriate compromise of that particular aspect of the dispute. For all these reasons, I am satisfied that an order should be made that IOOF is at liberty to enter into the compromise." [17] I have cited extracts from the judgment of Debelle J at some length because they are, with respect, both helpful and entirely appropriate to the case before me. In this case I am quite prepared to approve the actions of the trustees on the basis discussed in the judgments cited." 62In Chamberlin v Spry [2008] VSC 562, at [14], Pagone J, after referring to some of the authorities quoted above, said: "As these passages show it is critical to distinguish between the Court being asked to make "a decision as to the wisdom of the proposed course of conduct" with it being "asked to consider whether there was no impropriety". The particular approval said to be sought from the Court is that the trustees would be acting within power if, in the trustees discretion, they decided to act in the way proposed or contemplated. The Court is being asked only whether the proposed decision is within their power to make if they consider it appropriate to do so. The order made by the Court should reflect, and be expressed in terms which does reflect, the particular "sense" in which the approval is sought and obtained. A person reading the order should be able to tell on the face of the order what the Court has determined without ambiguity. It would not be right for a person affected by the order to be left with the impression that the Court had itself formed the view that the proposal was wise unless, of course, that is what occurred and there was sufficient material upon which the Court could give its approval in that "sense"."

Determination 63Important to remember is that, firstly, the parties to the dispute, namely the Plaintiff and Mrs Retallack are of the view that the proceedings ought to be compromised. Mr Gordon is not, and never has been, a party to the proceedings. Nor is Mr Gordon a beneficiary of the deceased's estate. As set out above, he is one of the discretionary objects of the Trust. Nor has he commenced any proceedings in which he would be entitled to any part of the estate, for example, by way of a family provision order. 64Secondly, a judgment on the question whether the Plaintiff is justified in entering a compromise, is founded upon considerations such as the nature of the case, the issues raised, the amounts involved, including likely costs, whether costs are proportionate to the issues, and the consequences of litigation: Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247, per Palmer J, at [62]. 65Thirdly, as recently said (albeit in a different context) in Wade v State of Victoria (No 2) [2012] FCA 1080 by Bromberg J, at [5]: "The settlement of litigation should normally be welcomed. There are a multitude of reasons why the interests of an applicant are better served by the security of a reasonable compromise than the vicissitudes of litigation. Not only does litigation impose financial burdens and potential risks upon an applicant, litigation will also likely be a significant stressor upon an applicant's life and that of his or her family. There are both tangible and intangible benefits to an applicant making a reasonable comprise (sic)." 66In the present case, it is clear that continued litigation will diminish the limited assets of the estate whether the Plaintiff is successful in defending Mrs Retallack's proceedings or not. As has been set out above, continuing the proceedings to judgment may, if the Plaintiff is unsuccessful, result in the residuary estate being valueless. 67From what I have read, which includes the Advice of senior counsel provided to him, the Plaintiff has considered a wide range of matters in determining whether to compromise Mrs Retallack's claims. I am satisfied that he is most anxious to protect the residuary estate from the potential costs of continuing the proceedings and to avoid any further diminution of the estate and that the compromise of the proceedings would, in all probability, do so. 68I am also satisfied that the written advice of senior counsel carefully analyses the strengths and weaknesses of the proceedings. As has recently been repeated by Davies J, in Jax Quickfit Franchising Systems Pty Ltd as Trustee for the Jax Quickfit Franchising Systems Unit Trust [2012] NSWSC 1114, at [28] "I cannot engage in any analysis of the Opinion because to do so would destroy its confidentiality". 69As his Honour was in that case, I am satisfied, in the present case, that the issues have been thoroughly and competently considered by learned senior counsel. 70There is power given to a trustee to compromise litigation. As stated above, the Court should do no more than state whether it is proper for the Plaintiff, as trustee, to exercise the powers of compromise as he intends. The terms of the compromise are solely the concern of the Plaintiff. In other words, it will be for the Plaintiff to determine which offer, of the alternative offers, he accepts. 71From what I have read, I am prepared to advise that the Plaintiff is justified in compromising the proceedings. I am not prepared to provide advice on the terms of that compromise which, as is clear from what I have written above, is a matter entirely for the Plaintiff to determine. 72Thus, pursuant to the Trustee Act, s 63, I order that the Plaintiff would be justified in settling the Supreme Court proceedings 59108 of 2010 (the "Estoppel/Family Provision Proceedings"). 73It is unnecessary to answer questions (b), (c) and (d). 74Order that the Plaintiff's costs of the proceedings, calculated on the indemnity basis be paid out of the residue of the estate of the deceased. 75The Court notes the undertaking of the Plaintiff, by senior counsel, to the Court, that the Plaintiff will not rely on section 63(2) of the Trustee Act should a question arise in any future proceedings as to whether the Plaintiff has discharged his duty as trustee in respect of the subject matter of the application. 76The Exhibits should be dealt with in accordance with the Uniform Civil Procedure Rules 2005. 77Senior Counsel's written advice, which is annexed to an affidavit of the Plaintiff, read on the hearing, is to be placed in an envelope and is not to be opened without an order of the court. 78I note that the relief sought in the Summons did not seek an order under UCPR, rule 54.4, approving the compromise by the Plaintiff (although there is a hint of that in the submissions filed by senior counsel for Mrs Retallack). However, in the proceedings commenced by Mrs Retallack, which have been listed with the current proceedings, I am to be asked to make orders in terms of one, or other, of the proposed Short Minutes of Order. For the assistance of the parties, it seems to me, at least based on what I have read in these proceedings, and without having considered all of the matters necessary to ultimately determine that issue, or heard submissions, the Court may have some difficulty in finding "jurisdiction" under the Family Provision Act in view of the provision made for Mrs Retallack as found by Pembroke J in the Will of the deceased (ie there has not been inadequate provision for her proper maintenance and support). 79I stand the proceedings over to a convenient date for the making of orders to finalize all of the proceedings.

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: 05 October 2012