Mir v Mir

The J&M Trust

The most contentious issue between the parties is whether John and Marie should be removed as trustees of the J&M Trust.
The Court has jurisdiction under s 70 of the Trustee Act 1925 (NSW) to appoint a new trustee to a trust "whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient difficult or impracticable so to do without the assistance of the Court". It also has an inherent power of the Court to remove a trustee and to appoint a new one in its place where that is necessary for the proper administration of the trust. As Dixon J (with whom Evatt and McTiernan JJ agreed) explained in Miller v Cameron (1936) 54 CLR 572 at 580-1: The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.
Although protection of the trust property is an important consideration, that is only one aspect of the proper administration of the trust. Consequently, if the Court is satisfied that the trustee does not understand the nature of his or her fiduciary obligations or has manifested an inclination to act contrary to them that may be sufficient to justify removal even if there is no evidence that the trust property is in jeopardy: Welker v Rinehart [2012] NSWSC 1330 at [10] per Brereton J.
A consideration of these issues in this case is complicated by the fact that there is an over-arching agreement governing the relationship between the parties and the ultimate complaint made by Leo (and the other defendants) is that John and Marie have not complied with that agreement in respect of the Blairmount land. It is not clear why John and Marie should be removed as trustees of the J&M Trust as a means of securing their compliance with that agreement. If they have breached an agreement, the appropriate remedies are those available for breach of contract.
The defendants point to five matters which they say justify the removal of John and Marie as trustees of the J&M Trust.
First, they submit that John and Marie are bound by the over-arching agreement governing the Mir Group in their capacities as trustees of the J&M Trust as well as their personal capacities and that they have breached that agreement in their capacities as trustees by asserting that that agreement does not bind them as trustees because the assets of the trust do not form part of the assets of the Mir Group. The defendants accept that not every breach of contract by a trustee amounts to a breach of trust or conduct that would justify removal of the trustee. But here they submit that the trust and agreement are inextricably linked and that the trust itself was established to give effect to the agreement so that a breach of the agreement goes to the heart of the purpose for which the trust was established.
Second, they submit that on occasions John and Marie have denied that the Blairmount land forms part of the trust assets. The clearest example is a letter dated 24 February 2021 that John and Marie wrote to the Campbell City Council in relation to a sub-division application that had been lodged in respect of the Blairmount land. In that letter they said: We are the sole and legal beneficial owners of the land that is the subject of the Subdivision Application (Land). The detail of the Subdivision Application has just recently come to our attention. The Subdivision Application was made by our son, Mr Sam Mir, in the name of the Mir Group of Companies. We have also been informed that our nephew, Mr Leo Mir, has recently written to the Council seeking to intervene in the Application, purporting to have rights over the land and authority to deal with the Subdivision Application. The Subdivision Application should not have been made in the name of Mir Group of Companies. The land is owned by us in our personal capacities and should have been made in our names. …
Third, the defendants submit that John and Marie by their conduct have demonstrated that they are unsuited to remain as trustees of the trust. John asserted that the Blairmount land was acquired for the personal benefit of himself and his family in circumstances where he knew that the land the subject of the J&M Trust had been acquired for the Mir Group, with the result that the trust ought to have been administered in accordance with the agreement governing the group. The assertion was dishonest in the sense that John knew that it was not true. More recently, in connection with the hearing that occurred on 30 May 2024, John swore an affidavit it which he suggested that the decision to distribute the whole of the income of the J&M Trust for the financial year ending 30 June 2021 to his private company, John Mir Holdings Pty Ltd, was taken by Mannions (the Mir Group's accountants) and that Sam obtained legal advice on the issue from the plaintiffs' solicitors before the distribution was made. Although John was not cross-examined on this evidence, the defendants submitted that this was an example of John, even in the face of the Court's findings, giving false evidence to support his case, which illustrated his unsuitability to remain as trustee. Although it was not suggested that Marie was involved in John's dishonesty, it was plain that she did not exercise any independent judgment in relation to the administration of the trust and was for that reason unsuitable to remain as trustee.
Fourth, the defendants assert that John and Marie have a conflict of interest which makes it unsuitable for them to remain as trustees. The conflict arises from their ownership in their own right of the balance of the Blairmount land with the result that they may have a personal interest in developing the land owned by the trust in a way which benefits their personal interest to the detriment of the trust.
Fifth, the defendants point to the fact that as discretionary beneficiaries of the trust, they are at a disadvantage because they may not be able to obtain access to documents relevant to the development of the land and the distribution of profits and income, although they have a vital interest in those matters.
In my opinion, little weight can be attached to the last two matters. The conflict has existed since the J&M Trust was established, but it could not be suggested that John and Marie should never have been the trustees of the trust. The trust itself was established with John and Marie as trustees with the agreement of George and Tony and no doubt on the basis of legal and taxation advice obtained at the time. It might well have been anticipated that John and Marie would be entitled to consider the effect of any development of the J&M trust land on their personal land. Moreover, it has not been suggested that John and Marie have taken decisions in relation to the development of the J&M Trust land for their personal benefit and to the detriment of the J&M Trust that would of itself justify their removal.
The right and expectation of the defendants to obtain information about the J&M Trust arises from the fact that the trust is a Mir Group entity. The consequence is that the right to obtain information in relation to the trust arises from the agreement which defines and regulates the Mir Group. That issue was not investigated as part of the hearing, although it is to be expected that the right would be substantially more extensive than the right of a beneficiary of a discretionary trust. In any event, I do not think John and Marie should be replaced as trustees simply to aid the provision of information to Tony and Leo when their interest in being provided with that information and the extent to which they are entitled to it arises not as potential beneficiaries of the trust but as parties to the over-arching agreement governing the group.
The other considerations identified by the defendants carry more weight. John and Marie's principal response to them is to say (in the case of John, in an affidavit) that they accept the findings of the Court, that they intend to comply with them and that there is no reason now to think that they will not do what they say. Their appropriateness to remain trustees should not be judged by reference to conduct that occurred at a time when they asserted that the J&M Trust did not form part of the Mir Group and no finding on that issue had been made by the Court.
In my opinion, there is another consideration that is also relevant and that is the fact that the context in which the issue arises remains unclear. It is unlikely that the agreement governing the Mir Group will continue indefinitely. Absent novation of the agreement by the conduct of the parties, it is arguable that the agreement will come to an end on the death of John or Tony. It is also arguable that the agreement is capable of termination on reasonable notice by any one of John, Tony and now Leo. However, neither of those possibilities was investigated during the hearing, and the position remains uncertain. Certainly, the Court should not be understood as expressing any view on those questions.
If the agreement is capable of termination and is terminated, there is a question of what follows from termination. One possibility is that it is an implied term of the agreement that the assets of the business will be sold and the net proceeds distributed equally between the three families. Another possibility is that each entity that forms part of the Mir Group will continue to operate in accordance with its own constituent documents and agreements - such as the relevant trust deeds and company constitutions and any agreement that may govern the conduct of the sub-partnerships. But again, none of that was investigated as part of the original hearing or the hearing that occurred on 30 May 2024. Yet the answer to those questions may be relevant to the exercise of the Court's discretion to remove John and Marie as trustees of the J&M Trust. It would, for example, be one thing to remove them while the over-arching agreement remains in place. It would be another thing to remove them if the result was to give control of the trust to Tony and Leo (who would control the new trustee).
Implicit in the submissions made by the defendants is that the J&M Trust is a Mir Group entity, that all other Mir Group entities are controlled by representatives of the three families and that consequently the J&M Trust should be controlled by an entity which itself is controlled by a representative of each of the three families. This submission would have had considerable force if it were made at a time when relations between the parties had not broken down. It has less force now. Whether it is their intention or not, the effect of the orders sought by Tony and Leo would be to cement their control of the whole group in the event that the agreement governing the group is terminated but the individual entities continue to operate. In my opinion, a better approach is only to make orders that are necessary to resolve the existing disputes between the parties and otherwise to preserve the status quo.
Obviously, one of the disputes between the parties was whether the assets of the J&M Trust formed part of the Mir Group. That dispute has been resolved in favour of the defendants. The parties accept that the Court should make declarations to give effect to that conclusion. I accept that in some respects John's conduct has been reprehensible since he has claimed for himself benefits that he knew or must have known also belonged to his brothers. Most recently, John has compounded the problem by seeking to blame others for what must have been his own decisions. If they were the only issues to be considered, they may well justify removing him and Marie as trustees of the J&M Trust. But as I have indicated, there are other issues to be considered. John and Marie have said that they will comply with the declarations that the Court makes. I accept that they are likely to do so, and removal of them as trustees of the J&M Trust remains a possibility if they do not. Taking those matters into account, I am not satisfied that the circumstances justify removal of them as trustees now.

At a glance

Court

Decision date

Before

Source

Judgment (8 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (3)

Cited By (1)