Solicitors:
NSW Trustee & Guardian - for the plaintiff
RMB Lawyers - submitting appearance for defendant
File Number(s): 2018/196846
[2]
Introduction
This is an application by a trustee and executor for judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW). The High Court of Australia has comprehensively explained the basis of the jurisdiction to give such advice in Macedonian Church v Eminence Petar [2008] 237 CLR 66 at [54] to [76]. Among other things, the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument. The effect of s 63 (2) is to preclude any trustee who acts in accordance with the advice of the Court from being held liable for breach of trust in the event of a later claim against it.
There are circumstances where it may not be appropriate to give the advice sought to a trustee at all. This is such a case. However, the discretion is confined only by the subject matter, scope and purpose of the legislation and there are no implied limits that make some factors more significant or controlling than others: Macedonian Church at [59].
What is clear is that the purpose of the jurisdiction is to provide protection to a trustee. The need for protection usually arises because there is a conflict between beneficiaries or because there is a suggestion, sometimes only faint, that there may be an alleged breach of trust if the trustee adopts a certain course of action. The conflict between beneficiaries or the possible breach of trust must arise out of some 'question' respecting the management or administration of the trust or in relation to the interpretation of the trust instrument.
The advice which the Court gives on an application for judicial advice is 'private' because its function is to give protection to a trustee in advance of, and having regard to the possibility of, a claim against it for breach of duty. It is normal to accompany the application for advice with an opinion by an experienced counsel who practices in the jurisdiction. The opinion should set out the facts explaining the dilemma confronting the trustee and provide reasons why it is appropriate for the trustee to approach the Court for advice in the circumstances.
In application of Perpetual Trustee Company Limited [2003] NSWSC 1185 Young CJ in Eq stated at [9] that the jurisdiction is concerned with the trustee 'who is in a difficult situation because of his or her duties to hold the scales equally between the beneficiaries'. His Honour added that 'if the trustee had sought proper advice and if the trustee had taken into account the relevant factors in making a decision then it was appropriate for the Court to protect the trustee by giving advice that the trustee would be justified in acting in the way it proposes'. Section 63 (4) provides that unless the Court otherwise directs, it shall not be necessary to serve notice of the application on any person. However, this may sometimes occur.
In this case, the testator's will provides that the whole of the estate should go to a sole beneficiary. The substantive issue is whether the interest of the beneficiary should be forfeited in circumstances where he caused the death of the testator. Unfortunately, the form of the question propounded is not one that is appropriate for an application for judicial advice. It is in the following terms:
Taking into account counsel's advice, would the trustee be justified in distributing the estate to the children of Lenore Cusack as tenants in common in equal shares:
(a) Is the death of a testator which is caused by the negligent driving of a beneficiary ('the negligent act') an 'unlawful killing' as defined in section 3 Forfeiture Act 1995?
(b) If the answer to (a) is 'yes', is the negligent act an act which would fall within section 5 Forfeiture Act 1995?
(c) If the answer to (b) is 'yes', would the Court grant an extension of time in which to commence an application to vary the effect of the forfeiture rule under section 7 Forfeiture Act 1995?
(d) If the answer to (c) is 'no', having regard to the will of Lenore Joy Cusack dated 10 March 2014, does the gift in clause 3.1 of the will dated 10 March 2014 take effect?
It is one thing to seek advice whether the trustee is justified in distributing the estate in a certain way. It is quite another thing to condition that justification for distribution by reference to a series of questions that require the determination of substantive questions of fact and law. The central questions that confront the trustee are whether the death of the testator was caused by the 'unlawful killing' of the sole beneficiary and whether the forfeiture rule thereby applies. These issues underpin the formulation of the question for judicial advice.
Whether the death of the testator was caused by an unlawful killing is a complex question of fact and law. Whether the forfeiture rule applies is a finely-balanced question of law. These issues can only be resolved satisfactorily at a substantive hearing in which one party seeks a declaration that the death of the testator was caused by an unlawful killing and that the forfeiture rule thereby applies. There must be a contradictor. Any such hearing would need to join all interested parties and the facts would have to be formally proved. The Court would be required to form a conclusion having regard to the evidence and the competing submissions. That is precisely what does not happen on an application for judicial advice.
As Young CJ in Eq has pointed out, and as I also stated in Joan McPherson Settlement Trust [2016] NSWSC 1927, historically applications for judicial advice were usually made in chambers in private. This is because the application frequently requires the presentation of sensitive information which is not appropriate to disclose in circumstances where there may be beneficiaries with different contentions and interests.
From time to time on an application for judicial advice the Court will form the view that it is better to allow the issue to be determined in a substantive proceeding at which the rights of the parties can be determined on a final basis. Frequently this will involve a construction suit, so that a contentious question of construction may be finally determined. Such a contentious question would rarely be determined on an application for judicial advice. All that the Court usually does is to give advice to the trustee that it would be justified in acting in a certain way. It does not determine rights and resolve disputed questions on a final basis.
If this application were simply for judicial advice that the trustee would be justified in commencing proceedings - namely, proceedings for a declaration that the death of the testator was caused by an unlawful killing and that in the particular circumstances the forfeiture rule applied to the interest of the sole beneficiary - that would be a question in a form appropriate for the exercise of this jurisdiction. It would enable the Court to consider the question whether the commencement of substantive declaratory proceedings was appropriate given the advice of counsel as to the competing questions of law and the likelihood of the facts being found in a certain way. It would also give rise to a question as to whether the commencement of such a proceeding would be justified having regard to the modest amount of the estate.
That is not what is sought in this case. Counsel has provided a comprehensive and informative opinion as to the varying legal considerations arising on the substantive question as to whether the death of the testator was caused by an unlawful killing and whether the forfeiture rule should apply to the interest of the sole beneficiary. That is a question on which opinions may differ. Unfortunately counsel has not arrived at a final opinion. The conclusion of the advice is simply that it is 'unclear whether the forfeiture rule should apply to the deceased's death'. And importantly, I have not heard from the party who contends that the forfeiture rule should apply.
It is not for the Court in these circumstances - on a judicial advice application - to go further. It is not appropriate for me, in the absence of a substantive proceeding in which all interested parties have put submissions and all admissible evidence has been elicited, to reach a final conclusion as to the essential underlying questions. That is the problem with the formulation of the question for advice sought set out in the statement of facts.
It is possible that the solicitors for the testatrix's daughter, the party who asserts that the interest of the sole beneficiary should be forfeited, may commence proceedings. If they do so, the question will then be whether the trustee is justified in defending those proceedings. On the limited information currently before me, including the inconclusive opinion of counsel, the trustee would not itself be justified in commencing proceedings; certainly at this stage. This is especially so when regard is had to the modest amount of the estate and the fact that the claim that the forfeiture rule applies has merely been threatened by the solicitor for the testatrix's daughter, but has not materialised.
The position may change if the solicitors for the testatrix's daughter furnish a reasoned and credible opinion to the trustee that the death of the testator was caused by an unlawful killing. In that case it would be incumbent on the trustee to obtain its own opinion as to whether that is the correct view or not. In the current situation, given that the trustee's counsel has only said that the position is unclear, and there is little more than a bare assertion from the solicitor for the testatrix's daughter that the forfeiture rule applies, there is no justification for the trustee performing its duty other than in accordance with the terms of the will.
For those reasons, the only advice that is appropriate at this stage is that having regard to counsel's opinion, the trustee would not be justified for the time being in distributing the estate to the children of Lenore Cusack as tenants in common in equal shares. As I have endeavoured to make clear, it is not appropriate to go on and consider the four substantive questions that follow from that preliminary question.
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Decision last updated: 07 November 2018