17 Mr Madden reported that he was unable to complete various tasks because of lack of information. Nevertheless, in addition to his general conclusion he found a large number of specific deficiencies in the materials that he reviewed, and his report listed them in detail. Many of the specific deficiencies concerned related party transactions."
57 After referring to the application for judicial advice, his Honour continued -
"19 I decided that it was appropriate to give judicial advice to Mr Madden that he would be justified in taking no further steps as trustee and receiver, until further order of the Court. In the course of my lengthy reasons for this decision delivered on 3 April 2000 ([2000] NSWSC 253), I examined Mr Madden's report in detail and considered the criticisms of it advanced by Messrs Meehan and Murphy and the administrator of AMH.
20 I accepted the report, as amended by a subsequent affidavit by Mr Madden, as a balanced and accurate review of the information and materials presented to him, and I rejected the criticisms made on behalf of Messrs Meehan and Murphy and the administrator (at para 62 of my judgment). This finding implies that I accepted the general conclusions reached by Mr Madden, which I had summarised at paragraphs 56-59 of my judgment. I should emphasise that those general conclusions included Mr Madden's finding that AMH had failed to maintain adequate books and records which would enable true and fair accounts to be produced, and had failed to comply with the requirement of the unitholders' deed that monthly management accounts be prepared, and that financial records be maintained for that purpose. Mr Madden's general conclusions on these matters imply that AMH was in breach of its duties as trustee.
21 I then reviewed the specific findings in Mr Madden's report. Having considered his findings about the way income from consultations and the sale of medication was accounted for, I rejected the contention that the trust deed and the unitholders' deed authorised the intermingling of funds that had occurred. I said that while it would not be appropriate for me to make any firm finding of breach of trust on such a specific matter in an application for judicial advice such as was before me, there were at least reasonable grounds for apprehension that the intermingling of trust money with other money as recorded by Mr Madden was in breach of trust (at para 69).
22 I then considered Mr Madden's findings with respect to transactions between the trust and the service companies. Mr Madden had made it clear that he was hampered by a significant inadequacy of information. I found that Mr Madden's conclusions raised serious doubts as to whether breaches of trust may have occurred with respect to the service companies, and it would be reasonable to expect the parties who were in a position to remove those doubts (namely, Messrs Meehan and Murphy) to undertake the burden of doing so (para 75).
23 I then dealt with various other findings by Mr Madden which, in my view, raised serious concerns as to whether there had been breaches of trust. I reached the overall conclusion that the specific facts presented by Mr Madden provided reasonable grounds for concern that there had been breaches of trust and duty, but that there may be explanations which would overcome those concerns (para 141).
24 For present purposes, two things are significant about the conclusions that I reached in my judgment 3 April 2000. First, I found that in his report, Mr Madden had time and again identified serious grounds for concern about breaches of trust by AMH in which Messrs Meehan and Murphy may have been implicated. I thought it inappropriate to go beyond that finding by deciding that there had been breaches of trust with respect to specific matters, given the nature of the application before me. Secondly, I accepted Mr Madden's general conclusion about the inadequacy of the trust's accounting records. In that respect, I accepted that there was evidence of a breach of trust."
58 In dealing with the significance of his reasons published on 3 April 2000 his Honour said -
"The relevance of my earlier reasons for judgment is that they may assist me to determine now, for the purposes of the present applications, whether the plaintiff has proven at least one instance of wilful default so that an order can be made for the taking of accounts on that basis. The question is whether the evidence that has been adduced in the present applications (including Mr Madden's report) satisfies me that there has been at least one instance of wilful default in circumstances raising a reasonable prima facie inference that there may have been other defaults. My reasons for judgment of 3 April 2000 are highly relevant to that question, because they set out the conclusions that I was able to draw upon Mr Madden's report after it had been vigorously challenged by the defendants, and I see no justifiable reason for not referring to them and taking them into account in the present application."
59 In due course his Honour posed the question, "Must at least one act of wilful default be established, and if so, is that requirement satisfied here?" He answered the first limb of the question in the affirmative. He then said -
"78 In my opinion the plaintiff has satisfied the requirement to prove at least one instance of wilful default in the present case. I do not agree with the plaintiff that the consent orders imply any such finding. However, the Madden report is in evidence. After hearing evidence about that report including the cross-examination of Mr Madden, I reviewed the report extensively in my reasons for judgment of 3 April 2000. I accept the findings in the Madden report, for the reasons given earlier in this judgment and more fully set out in my previous judgment. Mr Madden's general conclusions included his finding that AMH had failed to maintain adequate books and records which would enable true and fair accounts to be produced, and had failed to comply with the requirement of the unitholders' deed that monthly management accounts be prepared, and that financial records be maintained for that purpose. My acceptance of these conclusions now constitutes a finding of wilful default, for the purpose of making an order for the taking of accounts on that basis."
60 Austin J concluded this section of his reasons -
"My view that the Madden report disclosed numerous occasions giving rise to real concern as to breach of trust is more than enough to satisfy the requirement that the past conduct of the trustees must be such as to give rise to a reasonable prima facie inference that other breaches of trust have occurred: cf Re Tebbs at 863."
61 What did Austin J mean when he said that he accepted the findings in the Madden report?
62 Other than in the passages which I have set out above, his Honour did not in his reasons published on 22 January 2001 address the findings in the report. It is clear from those passages that his Honour did not mean that he accepted each and every finding in the Madden report. In the reasons of 3 April 2000 he had, as he said in the reasons of 22 January 2001, thought it inappropriate to go beyond finding serious grounds for concern about breaches of trust by deciding that there had been breaches of trust about specific matters, the specific matters plainly were the detailed findings in the report. The reasons of 22 January 2001 did not consider or explain moving from grounds for concern to actual breaches in relation to the detailed findings in the report.
63 Rather, as I read his Honour's reasons he meant that he accepted the findings to which here thereafter specifically referred, namely, the findings "that AMH had failed to maintain adequate books and records which would enable true and fair accounts to be produced, and had failed to comply with the requirement of the unitholders' deed that monthly management accounts be prepared, and that financial records be maintained for that purpose". Those findings were part of Mr Madden's general conclusions, and had been extracted in the reasons of 3 April 2000 (see the underlined parts of the paragraphs earlier set out). In the reasons of 3 April 2000 his Honour had not specifically accepted the general conclusions, but nor had he treated them as only raising serious grounds for concern. Then in the reasons of 22 January 2001 his Honour did accept general conclusions to which he specifically referred, and said that his acceptance of those conclusions constituted a finding of wilful default.
64 My reading of his Honour's reasons is, I believe, confirmed by regard to the concluding paragraph of that part of the reasons in which he regarded the Madden report as disclosing "numerous occasions giving rise to reasonable concern as to breach of trust", satisfying the requirement of "a reasonable prima facie inference that other breaches of trust have occurred". That is, the detailed findings were still no more than grounds for concern, and his Honour did not accept them as established breaches of trust.
65 It is then necessary to return to what amounts to wilful default, and to ask whether the matters found by Austin J were instances of wilful default. In an accounting by a trustee, the underlying concept is that through breach of trust the trustee has failed to obtain for the trust that which would have been obtained if the trustee's duties had been discharged. There may be simple failure to get in an asset of the trust; sale of a trust asset at an undervalue has been treated as wilful default, presumably because of failure to obtain for the trust the full value of the asset (re Tebbs); failure to obtain rent for a stranger's occupation of a trust property has been treated as wilful default (Bartlett v Barclays Bank Trust Co Ltd (No 2) (1980) 1 Ch 515). The breach of duty need not be conscious wrongdoing (Bartlett v Barclays Bank Trust Co Ltd (No 2) at 546). But wilful default is not coextensive with breach of trust: there may be a breach of trust which is not wilful default (see in re Wrightson: Wrightson v Cooke (1908) 1 Ch 789 at 799-800; Russell v Russell (1891) 17 VLR 729 at 732; In re Wood; Ebert v Union Trustee Company of Australia Ltd (1961) Qd R 375 at 378).
66 It is not necessary to explore in any more detail what may or may not amount to wilful default. It may be accepted that failure to maintain adequate books and records, to prepare monthly management accounts, and to maintain financial records for that purpose, were breaches of trust. It does not follow from the breaches that something was not received by the Trust or otherwise lost to it, on any reasonable amplitude of the concept of wilful default. Although there was a failing in record keeping, all assets of the Trust may have been got in and properly dealt with. I do not think that the matters found by Austin J were instances of wilful default.
67 Glazier did not by notice of contention put forward other instances of wilful default, or seek to have the proceedings remitted for further findings.