Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand

Relief sought

1. The questions posed in the further amended Summons are: "2 That the Court indicate, by way of advice pursuant to s 63 of the Trustee Act 1925 (NSW), whether the plaintiffs would be justified in giving effect to the Deed of Settlement and Release dated 11 December 2017 entered into with Albert & May Pty Limited, PAMW Pty Limited, and certain other parties. … 2A If not, that the Court indicate, by way of advice pursuant to s 63 of the Trustee Act 1925 (NSW), whether the plaintiffs would be justified in: a. Commencing proceedings seeking confirmation that, on the proper construction of the Will and Codicil of the late Clement Joseph Maloof (the deceased), the property owned by the deceased at 7 Harrow Rd, Bexley fell into residue; b. Commencing proceedings against Albert & May Pty Limited (A&M) and PAMW Pty Limited (PAMW) seeking Orders under ss. 461(1)(k) and 467(4) of the Corporations Act 2001 (Cth) that PAMW purchase the shares in A&M owned by the deceased at the date of his death, or alternatively that A&M be wound up; c. Commencing proceedings against A&M seeking Orders under ss. 232 and 233 of the Corporations Act 2001 (Cth) that have the effect of providing compensation to the estate of the deceased in respect of the conduct of A&M which has been oppressive to, unfairly prejudicial to, or unfairly discriminatory against, the estate. 3 An order that the plaintiffs' costs of these proceedings be paid out of the assets of the estate of the late Clement Joseph Maloof on the indemnity basis."
2. In light of the advice given, it was unnecessary to deal with the relief sought in Paragraph 2A of the further amended Summons.
3. As is well known, s 63 of the Act enables trustees (including the executors of an estate: s 5 of the Act) to apply to the Court for an opinion, advice or direction, relevantly, on any question respecting the management, or administration, of the trust property.
4. In this case, it can be seen from the relief sought, that the advice concerns the administration of the trust property. Provided the trustees act in accordance with the advice or direction given, and provided the trustees have not been guilty of fraud, wilful concealment or misrepresentation, they will be protected against any future claim asserting that they have failed, to discharge their duties as trustees (s 63(2)).
5. "Management or administration of property" includes taking steps to preserve the property, and taking steps to make the property financially productive. The words refer to both the manner in which trust property is managed, administered, handled, directed or controlled, and the actual carrying out of those functions. In addition, the words include transferring part, or all, of it, as required, to those who have become entitled to it. The words are not confined to the continued holding of the property in question: Stein v Sybmore Holdings (2006) 64 ATR 325; [2006] NSWSC 1004, at [59].
6. The discretion under s 63 of the Act is not expressed to be subject to limitations. One purpose in providing judicial advice is to determine what ought to be done in the best interests of the trust estate: 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) 237 CLR 66 at 102; [2008] HCA 42, at [105] - [106], ("Macedonian Orthodox"). At [69]-[71], the plurality also recognised that a proper purpose for seeking judicial advice includes to enable trustees "to take advice before embarking on any course which might carry a risk of incurring costs that might be outside the indemnity" and to resolve legitimate doubts held by the trustees as to the proper course of action thereby protecting the trust and those entitled to it.
7. In the earlier reasons for judgement to which I have referred, I identified Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") rule 55. UCPR rule 55.2 provides that an opinion, advice or direction given under s 63 of the Act "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. That is what is sought in the relief claimed by the Plaintiffs.
8. This sort of application is thought to provide a summary procedure, intended to enable questions arising in the administration of an estate, or a trust, to be resolved cheaply and simply: Macedonian Orthodox, at 90 - 91; [61].

Background Facts

1. I shall repeat a number of facts that cannot be regarded as confidential or controversial, and to which I referred in my earlier reasons.
2. The Plaintiffs are the two remaining executors of the Will dated 17 July 2006, and a codicil, dated 4 November 2009, of the deceased, who died in November 2009, and who was survived by eight children, all of whom are now adults.
3. The administration of the deceased's estate, to date, has been protracted and difficult. There was a challenge to the deceased's testamentary capacity, which delayed the grant of Probate for three years. It was only after contested Probate proceedings were commenced, but resolved, that this Court, on 28 May 2012, granted Probate in solemn form, of the Will, and of the codicil, to the Plaintiffs.
4. In the Inventory of Property attached to, and placed inside, the Probate document, the estimated, or known, value of the property owned solely by the deceased was said to be about $6.4 million. The current value of the estate is less, and estimated to be between $4.6 and $4.7 million. (However, that is on the basis that the value of the shares in various companies is noted as being unverified.)
5. There has been other litigation between the deceased's children relating to trusts that the deceased had established during his lifetime, and other trusts which were to be established under his Will, as well as a claim made against the estate by four of the deceased's children, being Helen Pernice, Tiba Maloof, Sarah Maloof and Frances Maloof, each of whom sought an order for additional provision out of the estate pursuant to s 59 of the Succession Act 2006 (NSW). The last of these claims was resolved, by compromise, in about November 2015.
6. Each of the daughters who brought a claim entered into a different Deed with the first Plaintiff, Mr Kellert, as the representative of the deceased's estate. As a condition of the settlement of the claim, Helen disclaimed all of her interest in, and released, all of her rights to the assets of the estate, apart from her entitlement to the shares in Einasleigh Nominees Pty Ltd ("Einasleigh") in the Codicil; Tiba disclaimed all of her interest in, and released, all of her rights to the assets of the estate, apart from her entitlement to the shares in Einasleigh in the Codicil and the pecuniary gift provided in the Will; Sarah disclaimed all of her interest in, and released, all of her rights to the assets of the estate, apart from her entitlement to the shares in Einasleigh provided in the Codicil and the pecuniary gift provided in the Will; and Frances disclaimed all of her interest in and released all of her rights to the legacy in the Will.
7. It has become clear that the specific gifts in the estate will have to abate by some proportion, to enable all administration, and other estate expenses, to be paid, because the expenses of the estate are such that the residue has been exhausted. Further additional legal costs would result in the beneficiaries of specific gifts, most of whom are minors, seeing his, or her, entitlement further reduced to pay for those costs.

The specific matter now before the Court

1. What is now before the Court arises because a conditional agreement has been reached, to compromise all remaining disputes, albeit not currently the subject of litigation, that exist between the deceased's estate and Albert & May Pty Limited ("A&M"). It is a company in which the deceased held 3 of 12 ordinary shares beneficially. (The shares are now registered in the names of the Plaintiffs.) However, the deceased was the registered legal owner of all 12 ordinary shares in A&M. There seemed to be no dispute that the remaining 9 shares, which remain registered in the name of the deceased, are held by the Plaintiffs on bare trust for the C J Maloof Trust.
2. The disputes with A&M relate to: 1. the entitlement under the Will of the deceased to the proceeds of the sale of a property situated at Harrow Road, Bexley; 2. the realisation of the estate's shares in A&M and the value of 3 of those shares; and 3. possible claims against A&M, under s 232 and s 233 of the Corporations Act 2001 (Cth), the substance of which were that the shares of that company had been operated in a way that was oppressive to the estate.
3. Each of those issues would, if not resolved by compromise, require the commencement of legal proceedings. For example, the issue in (i), would require an application to have the Will construed so as to determine whether A&M was entitled to the Harrow Road, Bexley property, or whether the property falls into the residue of the estate. The issues in (ii) and (iii) would require other proceedings, to be commenced in the Corporations List, to obtain an order to procure the realisation of the shares owned beneficially by the deceased in A&M, if necessary by the winding up of A&M, or by requiring the major shareholder in the company (PAMW Pty Limited) to purchase those shares for such amount as might be agreed, or failing agreement, at their fair value as determined by the Court.
4. The relief sought on the basis of oppression, at least currently, raises issues of fact. Because the Plaintiffs have not had access to all of A&M's documents, it was accepted that it was not entirely clear whether an order for the winding up of A&M would be made. It is more than likely that any such proceedings would be strenuously defended.
5. The agreement that has been reached is expressly conditional on the Court granting orders to the effect that the Plaintiffs would be justified in entering into the Deed of Settlement and Release that has been prepared recording that agreement ("the Deed").
6. The negotiations for the preparation of the Deed followed a settlement conference on 29 June 2017, at which the parties came to an in principle resolution of a number of issues documented in a document described as "Heads of Agreement". In the subsequent months, the terms of the Deed were closely negotiated and it was executed, and exchanged, on 11 December 2017.
7. The Deed expressly states, in Clause 2, that it "is a fundamental condition precedent to this Deed that the Court grants orders in the form of the …Amended Summons for Judicial Advice…". In the event that the judicial advice is not given, the Deed and the Heads of Agreement "will be rescinded automatically with effect ab initio".
8. The Deed has been executed by the parties, who, or which, include, the two Plaintiffs, A & M, PAMW Pty Limited ("PAMW") a company that asserts it is the current trustee of the C J Maloof Trust, Einasleigh Nominees Pty Ltd, a former trustee of the CJ Maloof Trust, Uncle's Joint Pty Ltd, also a former trustee of the CJ Maloof Trust, Darren Pernice, a son of Helen Pernice, who is also a party, and Anthony Joseph Maloof. (The Deed also addresses some other incidental issues not the subject of the judicial advice application).
9. In very broad summary, the Deed, relevantly, provides for the purchase of the shares in A&M for an agreed value as calculated under the Deed. It also provides for a compromise in relation to how the Harrow Road property is to be treated under the Will.
10. There is evidence in the affidavits to which I have referred that in accordance with the Court's concern that the beneficiaries be given the opportunity to consent to the settlement, a letter (dated 16 January 2018) has been sent to all of the beneficiaries, including the parents of minor beneficiaries, of the estate. The suggestion was made with what Lindsay J noted in Re Estate of Chow Cho-Poon (2013) 10 ASTLR 251, at 282-3; [2013] NSWSC 844 at [198]-[199], namely that "even if (as s 63 contemplates) the rights of a person potentially affected by a provision of judicial advice will not necessarily be affected without notice of the advice or of pending s 63 proceedings, the ability of the court to provide well measured advice may be affected to the extent that it is not given the benefit of a full appreciation of what competing interest might say if allowed an opportunity to inform the Court of a perspective different from that presented by a trustee appearing ex parte".
11. The letter that was written refers to the Deed, a copy of which was enclosed with the letter, the hearing date of the judicial advice application, a copy of the Further Amended Summons filed on 18 December 2017, and an explanation of the effect of the Deed on beneficiary interests. There was also reference made in the letter to the fact that advice has been provided to the Plaintiffs by Mr Willmott SC (although the nature of the advice was not disclosed and it remains confidential).
12. There was also a statement made in the letter that "if you do not respond to this letter, the Court will be informed that we have not received a response from you, and the Court may draw the inference that you consent to the Executors giving effect to the Deed" and that "If you wish to oppose the Deed, you should appear in Court on the Hearing Date (with legal representation should you wish)".
13. Attached to the letter, as Annexure "A", was a list of beneficiaries of the estate. Also attached to the letter, as "Annexure B", was a list of the "specific gifts of the Estate (as modified by the Deed) as at 30 June 2017".
14. There was an amendment to the letter by letter dated 24 January 2018, provided to the beneficiaries, but this amendment is not relevant. On the same date, it having been ascertained that an incorrect email address had been used for Tiba Maloof, the correspondence was re-sent.
15. On 28 January 2018, Clement George Maloof requested further information regarding the contents of the Deed, to which a response was sent on 31 January 2018.
16. There was also a letter dated 30 January 2018, sent to all beneficiaries, which identified "a query on behalf of a beneficiary regarding the Clement & Peter Trust", which the letter then sought to address and another letter, dated 31 January 2018, which identified 5 questions raised by Clement Georg Maloof, and the response to each of those questions.
17. There is also evidence of the written consent by Helen Pernice, in her own capacity and as guardian of her minor children, Ella, Chelsea, Sophia and Lucy; by Dr Anthony Joseph Maloof, in his own capacity and as guardian of his minor children, Gabrielle and Deanne; by Alberta Jane Rasheed, in her own capacity and as guardian of her minor children, Leroy and George; her third child, Sydney is now an adult, and has provided consent separately; by Darren Pernice; by Joshua Anthony Maloof; by Clement George Maloof (in his own capacity, and as guardian of his minor child, Alexander); his second child, Madeleine, who is no longer a minor, has provided her written consent separately; by A&M; and by Frances Rita Maloof (as a signatory to the Deed) and on behalf of her minor child, Caroline.
18. The beneficiaries, at the date of the hearing, who had not provided consent are Michael Maloof, Tiba Maloof (either in her own right, or as guardian of her three minor children), and Sarah Maloof.
19. In an affidavit affirmed 12 February 2018, of Ms S Vojvodic, a partner in the firm of the solicitors acting for the Plaintiffs, sent to the Court on that date, there was annexed a copy of an email, dated 1 February 2018, in which Michael Maloof consented. Apparently, this email was not received by Ms Vojvodic or by Ms Vijayaraj. In any event, Michael had not given notice of any intention to appear at the hearing.
20. Although the affidavit was sent to the Court after the conclusion of the hearing, it simply provides support for the order that I made at the conclusion of the hearing. No prejudice could be suffered if the affidavit is read and the consent of Mr Michael Maloof noted.
21. In relation to Sarah Maloof and Tiba Maloof, I have already stated that each disclaimed her interest, respectively, in the estate of the deceased as part of the settlement of her family provision proceedings. Thus, it is submitted that her interests, respectively, are not affected by the terms of the Deed. This submission appears to be supported by the evidence. In any event, each has been advised of the hearing and neither has given notice of any intention to appear at the hearing.
22. Tiba's minor children are within the class of beneficiaries and/or discretionary objects who benefit directly and indirectly under the Deed and fall within the class of minor beneficiaries considered by Mr Willmott SC.
23. Despite the matter being called before the commencement of the hearing, and once again, before the orders were made, there was no appearance by any of the beneficiaries. I am satisfied that the adult beneficiaries have been given information sufficient to enable each to express consent, or otherwise, should each wish to do so. The result has been that the majority have responded with express written consent, and the others have not taken up the suggestion that if there is opposition, to appear at the hearing.
24. In relation to minor beneficiaries, I have read the opinion of a very experienced and, if I may say, well-respected, senior counsel, who has considered their position.

Determination

1. Overall, I am satisfied that the Plaintiffs should be given the advice they seek. Because the application is supported by two confidential opinions of senior counsel, and evidence that, at least in part, is also confidential, it is difficult to provide reasons that are as full as would otherwise be given: Macedonian Orthodox, at 118; [161].
2. There can be no doubt that the Plaintiffs, as trustees, have a duty to protect and preserve the trust estate for the benefit of the beneficiaries. Having reviewed the documents that are relied upon by the Plaintiffs, it is clear that their legal representatives have given very detailed consideration to the likely factual, and legal, issues, which will confront the Plaintiffs in the potential claims to which reference has been made. They have also considered whether it is in the best interest of the beneficiaries to resolve potential disputes on the terms of the Deed, rather than pursuing those disputes by litigation.
3. It is not possible to identify all of the matters that are relevant in reaching a view that it would be in the best interests of all of the beneficiaries, including the minor beneficiaries, to have the disputes involving the estate of the deceased resolved. What may be stated, however, are the following matters: 1. There has already been a significant delay, caused by different litigation, in relation to completing the administration of the deceased's estate. It is to be noted that the deceased died in 2009. More than 8 years later, the administration of the deceased's estate has not yet been completed. 2. Significant costs have already been incurred in defending the different proceedings to which reference has been made above, with the result that there has been a diminution of the deceased's estate on account of legal costs. 3. There has been significant familial discord, and disharmony, between the eight children of the deceased, as evidenced by the past litigation. To keep them financially intertwined any more than is absolutely necessary will not benefit any of them. 4. There has also been some discord between the beneficiaries and the Plaintiffs. If the matter is resolved on the basis of the Deed, steps can be taken to complete the administration of the estate once the terms of the Deed have been complied with. 5. There would be, in all probability, a further delay, of one might think no less than 12 months, and possibly much longer, in having the proceedings referred to be heard and determined (leaving aside any appeal), which would further delay the completion of the administration of the estate. For example, the estate cannot be administered until the three shares in A&M have been realised and there is, certainly, a restricted group of potential purchasers, with the result that the Plaintiffs might find it difficult to obtain reasonable market value for those shares. Otherwise, there may be no practical way of realising the value of those shares. 6. There is also a problem, perhaps, insoluble without a settlement, that the estate owns shares in A&M, but A&M is also a beneficiary of the estate, the value of whose gift depends upon the size of the estate. In other words, the value of the estate's shares in A&M depends upon the amount distributed to A&M by the estate, but the amount to be distributed by the estate depends upon the value of the shares in A&M. 7. There would be significant costs and disbursements incurred, some, or all, of which, might not be able to be recovered, even if the proceedings were successful. 8. There is always uncertainty in the conduct of contested litigation. Resolution by agreement of complex succession, and commercial, litigation will always involve some compromise. To settle the disputes would avoid the uncertainty and risk associated with the Trustees commencing, and continuing, litigation to a conclusion. These are legitimate aims in the interests of the beneficiaries. 9. There has also been consideration of the fact that a settlement may well enable the Plaintiffs to put into effect the Trust in the Will and ensure that it is managed in accordance with the wishes of the deceased. 10. The majority of beneficiaries have consented to the settlement of the disputes upon the terms of the Deed. Some of those have consented on behalf of minor children as well. None of the others have provided to the Plaintiffs' legal representatives, or to the Court, any rational, or for that matter, any, basis for opposing the settlement. None have appeared, despite having been told of the hearing date and of the utility in appearing to advance any grounds of opposition.
4. Finally, there is no suggestion in anything that I have read that could lead to the view that the compromise that has been reached is unreasonable, or that it is not a proper one. To the contrary, as stated, the Plaintiffs have reached the settlement as a result of careful consideration of the issues likely to arise and the overall prospects in each of the proceedings.
5. Accordingly, the Court made the following orders: 1. By way of advice, pursuant to s 63 of the Trustee Act 1925 (NSW), that the Plaintiffs would be justified in giving effect to the Deed of Settlement and Release dated 11 December 2017 entered into with Albert & May Pty Limited, PAMW Pty Limited, and certain other parties. 2. The Plaintiffs' costs, calculated on the indemnity basis, of these proceedings, be paid, or retained as the case may be, out of the estate of the deceased, Clement Joseph Maloof.

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: 13 February 2018