Pascoe (in his capacity as administrator of the Estate of the Late Kut Sze Tu and as constructive trustee) [2024] NSWSC 738

FACTUAL BACKGROUND

1. Mary is the daughter of the Deceased. Geoffrey is her husband.
2. Mary, but not Geoffrey, is a beneficiary of the Estate. Other beneficiaries are children of the Deceased, including children of a second marriage to the late Fung Chun Chow (FC Chow) (who died on 11 January 1994, intestate) being Stella, Shiu Shing (Sunly) and Shui How (Gordon).
3. The source of the present debate can be traced to the original problem which was that the Deceased, who was in a partnership with various family members, stole partnership money and used it to buy three properties in co-ownership, namely: 1. 105A Haig Street, Maroubra; 2. 229-231 Maroubra Road, Maroubra; and 3. 42-44 Queen Street, Campbelltown 4. (collectively, the Properties).
4. The Lowes each had a 10% share in the partnership, the Deceased had a 20% share, and other members of the family had the remaining 60%.
5. The death of the Deceased was followed by a burgeoning litiscrescence as the various protagonists claiming an interest in the proceeds of, and profits derived from, the Properties sought to stake their claims. The scale of the warfare can be gauged from the fact that the disputes about, or in connection with, this Estate have spawned no less than 14 first instance decisions of this Court (excluding this one), two decisions of the Court of Appeal and two failed applications (including one by the Lowes) to the High Court for special leave to appeal, over a period of nearly a quarter of a century. Its effect can be gauged from the fact that a large part of the kitty has been spent on legal costs. More is likely to be spent.
6. The first suit was brought by Mary in 2000, alleging that two other children of the Deceased who had obtained probate of a will purporting to be that of the Deceased and under which they were appointed executors, were acting under a false will. By all accounts, the will was indeed false.
7. By consent, the grant of probate was revoked and, by order dated 26 March 2001, the Administrator was appointed receiver of real estate and administrator of the personal estate, limited in operation until determination of the proceedings and any appeal.
8. The proceedings were brought to an end by consent orders made on 22 November 2002 together with a Deed of Family Arrangement which the Court ordered be specifically performed.
9. The consent orders provided that Letters of Administration be granted to the Administrator. Letters of Administration were granted on 22 November 2002.
10. The Administrator proceeded to realise the Properties. The Deceased had a 1/3rd interest in 105A Haig Street which was sold to Sunly and Gordon. He had a 4/5th interest in 229-231 Maroubra Road which was sold to an unrelated third party and he had a 6/10th interest in 42-44 Queen Street which was sold to one of his daughters from his first marriage, Margaret.
11. The Administrator operated an account with the ANZ Bank (the Estate Account) into which all the proceeds of assets realised by him were paid.
12. Some of the funds were invested by the Administrator in interest bearing term deposits.
13. In 2005, the Lowes initiated proceedings (the Partnership Proceedings) seeking to determine their entitlements in connection with the Deceased's defalcations in breach of his partnership duties. These Partnership Proceedings were ultimately determined by Gzell J (after Smart AJA who had embarked on hearing them became ill).
14. Gzell J described the case as one of "an errant fiduciary stealing trust money and mixing it with his own". [2] He found that the Deceased took money from the partnership, that it was trust money, and that it could be traced into the Deceased's family's interests in the Properties and into the proceeds of sale. [3] Gzell J found that partnership funds accounted for 90% of the purchase price of each of the properties, and that 90% of the family interests in the Properties was held on trust for the partners in proportion to their interests in the partnership. [4] This trust has been, and will be, described as the Net Proceeds Trust.
15. Various of the defendants to the Partnership Proceedings appealed. The Lowes were the only active respondents to the appeal.
16. Gzell J had found that the trust prevailed against the co-owners of the Properties. The Court of Appeal reversed this finding, holding that the registered co-owners were protected by indefeasibility under s 42 of the Real Property Act 1900 (NSW).
17. The Court of Appeal declared that the partnership was dissolved on 1 July 1989, and that 90% of the profits (if any) derived from the Properties, after just allowances, were held on constructive trust for the partnership (the Profits Trust).
18. The Court of Appeal directed that an inquiry be held (the Inquiry) to identify what (if any) monies the Lowes were entitled to by way of an account of profits from the Deceased, after taking into account any just allowances, of benefits obtained by the Deceased through his ownership, possession and or use of his respective interests in the Properties.
19. It is appropriate to observe that there were other assets in the Deceased's Estate and that his legitimately acquired share in the Properties also fell into it.
20. One consequence of the Court of Appeal judgment was that the Administrator was, for the first time, declared to be holding assets in an amount then unknown which were impressed with a constructive trust, making him both Administrator of the Estate and constructive trustee. Hence, the dual capacities referred to in this application.
21. It is also to be borne in mind that the Administrator had sold the Properties in 2004 and 2005, long before the Court of Appeal declared the constructive trust.
22. After the Court of Appeal judgment, the Administrator embarked on a process of progressing the Inquiry, which process initially bore no fruit. He then filed an application seeking that the Court proceed with the Inquiry. [5]
23. On 31 August 2017, this Court ordered the Administrator to file and serve a report setting out his opinion as to the profits (if any), after just allowances, in respect of the benefits (if any) obtained by the Deceased through his ownership, possession and or use of his respective interests in the Properties.
24. The Administrator produced a report dated 8 February 2018. It stated that the funds held by him were mixed, comprising the Net Proceeds Trust, part of the Net Profits Trust (profits received after 26 March 2001) and the residual Estate (net proceeds and profits from non-partnership properties and other assets).
25. The report included a spreadsheet of all receipts and payments made as an interim receiver and administrator which reconciled bank statements to enable allocation of the funds between the trusts and the residual estate. At that time, the sum of the Estate Account and term deposit balances was $3,561,691.
26. The Administrator made the following pertinent observations (the Plaintiffs referred to are the Lowes): As noted in section 3.2 above, the Profits Trust, Net Proceeds Trust and residual estate are presently part of a single mixed fund. The Orders creating the Trusts were made by the Court of Appeal on 23 December 2014 (more than 13 years after my appointment as interim receiver) and more than 9 years after the funds were mixed. It is not possible to separate these funds until the Inquiry has been concluded. Allocating a receipt to one fund increases the value of that fund and reduces the value of another, the reverse is true for payments. The interests of the Plaintiffs and other Partners in the Trusts is different to the interests of the Beneficiaries in the residual estate. In determining an allocation of receipts and payments, particularly interest earned, income tax paid, legal fees and Administrator's remuneration, it is necessary to balance the interests of the Partners without unfairly prejudicing the interests of the Beneficiaries and vice versa.
27. On 17 September 2017, Sunly and Gordon initiated proceedings (FC Chow Proceedings) claiming that the Administrator pay the estate of FC Chow a percentage of the benefits obtained by the Deceased through his ownership of the Properties and a declaration that the Estate of FC Chow was entitled to 150% of the amount to which the Lowes are entitled.
28. On 1 July 2019, the Administrator obtained judicial advice from Robb J that it was reasonable for him to defend both the Partnership Proceedings and the FC Chow Proceedings. [6]
29. Significantly, at [26], his Honour referred to the fact that the judgment of the Court of Appeal established that the Lowes are beneficiaries of a constructive trust but the subject of the trust was not identified and there was a necessity for judicial identification of the property held on constructive trust by the Administrator.
30. The FC Chow Proceedings and the Inquiry directed by the Court of Appeal were heard by Emmett AJA in August 2020. At the Inquiry, the Lowes sought an account of profits out of the partnership. Judgment was handed down on 4 March 2021. [7]
31. Subsequently, Emmett AJA delivered a series of further judgments. [8] In a number of them, his Honour dealt with aspects of the Administrator's claim to remuneration. I think it is fair to say that his Honour's conclusion was that the Administrator was entitled to have recourse to the mixed fund for payment (that is, from both the Net Proceeds Trust and the Profits Trust).
32. On 21 April 2022, final orders were made in the Partnership Proceedings and the FC Chow Proceedings.
33. The Lowes appealed against both. The appeal was heard by the Court of Appeal on 29 May 2023 and determined on 27 November 2023. [9]
34. Relevantly, the Court of Appeal ordered that the sum of $486,623 was payable from the Net Proceeds Trust to the Lowes in respect of a costs order made by the Court of Appeal in their favour, together with interest but without preference over any entitlement of the Administrator to any right of indemnity for costs reasonably and properly incurred that may otherwise be available to the Administrator.
35. On 12 December 2023, the Administrator's solicitors informed the beneficiaries that, by reason of the calculation, the Administrator had formed the view that $664,825 is due and payable to the Lowes, and that he intended to pay the Lowes out of the funds pooled in the Estate and trusts on 2 January 2024, once the 28 days for appeal had lapsed.
36. The time for appeal lapsed without an appeal or, more accurately, an application to the High Court for special leave to appeal, and on 2 January 2024, the Administrator paid the amount into the trust account of the Lowes' solicitors.
37. The Lowes sought an extension of time to seek special leave to appeal to the High Court, which was refused on 9 May 2024, with costs. Their liability for costs to the Administrator remains outstanding.
38. As at 13 May 2024, the whole of the assets (all cash) under the Administrator's control amounted to $1,190,529.28.

PREVIOUS APPLICATIONS CONCERNING REMUNERATION

1. It is not in issue that the Administrator has dealt with property in his hands from time to time as a mixed fund, that is, not distinguishing between those assets which fell into the Estate by virtue of its interest in the partnership, and those assets held on constructive trust. This mixing extended to the Administrator recovering from the mixed fund his costs, expenses and remuneration, from time to time, approved by the Court.
2. There have been various determinations that the Administrator's costs be paid out of the mixed fund. [10] On 14 July 2023, Henry J permitted an uplift in the Administrator's rates. Her Honour remarked, after referring to Lowe v Pascoe (No 12) (see fn 10), that the Administrator performs one role, namely, the Administrator of the Estate and that, in that capacity, he is a constructive trustee of the Net Proceeds Trust and the Profits Trust (which Her Honour referred to as 'the partnership fund') and it is for the work that he performs in that role in respect of which he is entitled to remuneration. Her Honour considered that the Administrator is entitled to be reimbursed for all costs and expenses reasonably and properly incurred in the performance of his duties as Administrator of the Estate, including his dealing with and management of the partnership fund.

THE LOWE PROCEEDINGS

1. On 17 August 2023, the Lowes commenced the Lowe Proceedings.
2. The gravamen of their complaint is that, by dealing with the property held by him as a mixed fund and not keeping partnership property separate from constructive trust property, the Administrator breached his duty as trustee of property of the partnership.
3. They seek a declaration to that effect and a declaration that the Administrator has breached his duties as constructive trustee of the property of the partnership by applying it in payment of expenses incurred and fees charged by him in respect of the administration of the Deceased's Estate. They ask for an order for the taking of accounts and that the Administrator restore to the partnership the amount certified on the taking of such accounts, as owing by him to the partnership. In the alternative, they seek equitable compensation or an account of profits. Importantly, they also seek an order that the Administrator pay the costs of the proceedings without recourse to any assets held on trust for the benefit of the Lowes.
4. Their claim is articulated in Points of Claim filed on 22 March 2024. In economic terms, their claim is that the assets held on constructive trust have been depleted by the payment of costs strictly referable to the administration of the Deceased's Estate (in contrast to administration of property held on constructive trust) which itself would not have been able to meet any costs, with the consequence that the Estate has been unlawfully benefitted by the Administrator's alleged breach of trust.

THE AMBIT OF SECTION 63(1)

1. The Lowes argue that, where the sole concern of a trustee is with a question of potential personal exposure of the trustee because of past acts and a completed course of conduct on the part of the trustee, the question whether it would be proper for a trustee to defend proceedings where such a claim made against the trustee is not, and cannot be, one "respecting the management or administration of the trust property" within the meaning of those words in s 63(1). This is a submission that the Court lacks power to answer such a question.
2. In support of it, the Lowes place significant reliance on Re Application of Eurolinx Pty Ltd (in its capacity as trustee for the Colbert Security Trust) [2017] NSWSC 1306 (Eurolinx) where Emmett AJA said at [25]: An application under s 63 of the Trustee Act must concern the management or administration of the trust property or the interpretation of the trust instrument or both. If a trustee is minded to seek judicial advice on a question related to the defending of legal proceedings, the trustee may properly do so only if the legal proceedings are themselves concerned with those matters. Where the concern of a trustee is with the question of potential personal exposure of the trustee because of past acts and a completed course of conduct on the part of the trustee, that requirement will not be satisfied. If the determination of the question of whether particular proceedings should be defended will not contribute to any particular outcome related to the management or administration of the assets of the relevant trust, there will be no basis for the Court to give judicial advice under s 63. Where the question confronting a trustee is how it should deal with an allegation of past misconduct that, if established, will entail personal liability for breach of trust, it would not be appropriate for advice to be given under s 63. Section 63 assumes that the matter on which judicial advice is sought would involve some aspect of a trustee's duty as trustee, as it relates to the future conduct of that trustee in relation to the relevant trust. A trustee who is alleged by a beneficiary to have committed a breach of trust or statutory wrong, and who defends legal proceedings in which that allegation is advanced, is not performing a duty as trustee. The decision by a trustee accused of a breach of trust whether to contest the allegation is not related to any aspect of that trustee's duty as trustee. Rather, the matter at stake is the personal liability of the individual trustee.
3. They also cite Australian Pipeline Ltd (2006) 60 ACSR 625; [2006] NSWSC 1316 (Australian Pipeline) in which Barrett J (as His Honour then was), after citing a passage from Palmer J's judgment at first instance in Application of Macedonian Orthodox Community of St Petka Inc (No 2) (2005) 63 NSWLR 441, said: [23] The concluding words of this passage are of particular importance. The pre-occupation of the court is with those who have the stewardship of property for the benefit of others. In terms of s 63, the court's role, consistently with that pre-occupation, is concerned with "the management or administration of the trust property" and "the interpretation of the trust instrument". It follows that, if a trustee is minded to seek judicial advice on a question related to the bringing or defending of legal proceedings, the trustee may properly do so only if the legal proceedings are themselves concerned with the management or administration of the trust property or the interpretation of the trust instrument. [24] The case before me is not of that kind. The trustee's concern, upon the present application, is with the question of potential exposure of the trustee personally because of past acts and a completed course of conduct of the trustee. Determination of the question whether the Federal Court proceedings should or should not be defended by APL will not contribute to any particular outcome related to the management or administration of the assets of the trust. The question now confronting APL is how it should deal with an allegation of past misconduct which, if established, will entail personal liability for breach of trust or statutory wrongdoing. The trust property of which APL has stewardship will in no way be protected or enhanced by defence of the claim. If the beneficiaries, as plaintiffs in the Federal Court, are fully successful, the trust property will be seen to have been dealt with in the past in an impermissible way and the trustee will be brought to account accordingly. If the beneficiaries, as plaintiffs, are unsuccessful, the trust property will be seen not to have been misapplied by the trustee in the past. Either way, the result, so far as the trust estate is concerned, will do no more than reveal an historical position. The only consequence of an immediate kind having future implications will be as to the liability of the trustee (or the absence of liability). [25] It is necessary to bear in mind that an order under s 63 of the Trustee Act by which the court gives to a trustee its opinion, advice or direction produces the statutory consequence stated in s 63(2). If the trustee, having received judicial advice, acts in accordance with it, the trustee is "deemed to have discharged the trustee's duty as trustee in the subject matter of the application". The statute thus assumes that the matter on which judicial advice is sought will be one that involves some aspect of "the trustee's duty as trustee" as it relates to future conduct of the trustee. A trustee who is alleged by a beneficiary to have committed a breach of trust or statutory wrong and who defends legal proceedings in which that allegation is advanced does not thereby perform any "duty as trustee". A decision by a trustee accused of breach of trust whether to contest the allegation is unrelated to any aspect of "the trustee's duty as trustee". The matter at stake is the personal liability of the individual; and the course the individual follows will be dictated by a personal decision regarding the individual's own interests.
4. Australian Pipeline was cited with approval by Hallen AsJ (as His Honour then was) in Application of Gnitekram Marketing Pty Ltd [2010] NSWSC 1328 at [12].
5. For his part, the Administrator relies on three decisions: Northey v Juul [2014] NSWSC 464 (Slattery J); Re Perpetual Trustee Company Limited as trustee for the Joseph Babington Davis Settlement [2020] NSWSC 1574 (Robb J); and Re Application of Macedonian Orthodox Community Church St Petka Inc [2023] NSWSC 918 (Meek J).
6. In Northey v Juul, Slattery J said, in considering the proposition that if the conduct constituting the breach of trust has been completed and the only question is whether the trustee is or is not liable for breach of trust, the issues that arise on the claim are not in respect of the management or administration of the trust property, at [107]: Established authority is the answer to this point. As Jessel MR explained in Walter v Woodbridge (1878) 7 Ch D 504, where an action, brought against a trustee in respect of the trust estate, "is defended by the trustee, not for his own benefit, but for the benefit of the trust estate, he is entitled to indemnity". In this statement of principle, the words, "not for his own benefit but for the benefit of the trust estate" are words clarifying that the action is defended by the trustee, as trustee: Re Spurling's Will Trusts, at 933 B-C. The relevant benefit to the estate does not have to be a pecuniary benefit and may include successfully defending a suit for breach of trust on the ground that the trust had been properly and prudently administered: Barnes at p 275-6 and 279, per Williams J. This is consistent with the broader principle that a trustee sued by beneficiaries who complain of some act or omission by the trustee is entitled to defend his or her conduct as an incident of his administration of the estate: Re Llewellin; Llewellin v Williams (1887) 37 Ch D 317 at 327. To the extent that Barrett J (as his Honour then was) might be thought to be speaking to the contrary of this reasoning in Re Australian Pipeline Ltd [2006] NSWSC 1316 at [25], his Honour had not been referred to the passages from Barnes identified here.
7. In Davis Settlement, Robb J, in dealing with the point and having been referred to Eurolinx and Australian Pipeline, preferred the approach taken by Slattery J and followed it. Part of His Honour's reasoning, following the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (Macedonian Church), was that there was no warrant to read down or impose limitations on the operation of the section which were not found in its express words: see Macedonian Church at [55]-[58].
8. In Re Application of Macedonian Orthodox Community Church, Meek J said: [85] There is no necessary implication that excludes a question from the ambit of the power of the Court to give advice because the subject of the question is the liability of the trustee for a breach of trust, when the potential basis for that liability is a matter of the management or administration of the trust property; Re Perpetual Trustee Company Ltd as trustee for the Joseph Babington Davis Settlement [2020] NSWSC 1574 (Davis Settlement) at [89] per Robb J citing Macedonian Church Case (HCA) at [55]-[58]. [86] Whilst it is possible to find conflicting caselaw statements regarding the issue as to whether a trustee is precluded from seeking judicial advice in circumstances where the subject of the question is the liability of the trustee for a breach of trust, it is important not to approach the provisions of s 63 with implied limitations on power: Macedonian Church Case (HCA) at [55]-[57]. [87] In particular, the fact that the conduct allegedly constituting the breach of trust has already occurred is not a definitive answer to the question as to whether the Court ought to give advice: Davis Settlement at [85], [91].
9. It seems to me that, whether any particular question is one "respecting the management or administration of the trust property" within the meaning of that phrase in s 63(1), is to be determined by the application of conventional canons of statutory construction to the facts.
10. The exercise is to ascertain whether there is sufficient connection between the question, on the one hand, and the management or administration of the trust property, on the other, to make the question one "respecting" the management or administration of that property. Patently, each case will turn on its own facts.
11. The starting point is consideration of the meaning of the term "respecting", in the context in which it appears.
12. Apart from whatever limitation there may be inherent in the term "respecting", the words of the section contain no other limits, express or implied, on the types of cases in which judicial advice may be given.
13. The term is undoubtedly of wide operation, conveying the notion of "in respect of" a particular subject-matter and provides a broad frame of reference: Attorney-General (Vic) (Ex rel Black) v Commonwealth (1981) 146 CLR 559 at 653 per Wilson J.
14. In State Government Insurance Office (Qld) v Rees (1979) 144 CLR 549 at 560, of the meaning of "in respect of", Mason J (as the Chief Justice then was) held: The crucial question, then, is the meaning to be given to the words "in respect of workers' compensation". The expression "in respect of" denotes a relationship or connection between two things. In State Government Insurance Office (Queensland) v Crittenden (1966) 117 CLR 412 at 416, Taylor J quoted, with evident approval, the remarks of Mann CJ in Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111: "The words 'in respect of' are difficult of definition, but they have the widest possible meaning of any expression intended to convey some connection or relation between the two subject-matters to which the words refer." The same view was taken later in Club Motor Insurance Agency Pty Ltd v Sargent (1969) 118 CLR 658. But, as with other words and expressions, the meaning to be ascribed to "in respect of" depends very much on the context in which it is found. [Emphasis added]
15. The words "in respect of" have been referred to having the widest possible meaning of any expression intended to convey some connexion or relation between two matters: Trustees, Executors & Agency Co Ltd v Reilly [1941] VLR 110; Rogers v Wentworth (1986) 7 NSWLR 88; McDowell v Baker (1979) 144 CLR 413.
16. In R v Khazaal (2012) 246 CLR 601 at [31], French CJ described "in respect of" and other "relational terms" such as "connected with", "in relation to" and "in connection with" as follows: They may refer to a relationship between two subjects which may be the same or different and may encompass activities, events, persons or things. They may denote relationships which are causal or temporal or relationships of similarity or difference. The task of construing such terms does not involve the resolution of ambiguity. They are ambulatory words and may be designed to cover a variety of subjects and a variety of relationships between those subjects. The nature and breadth of the relationships they cover will depend upon their statutory context and purpose. See too South West Helicopters Pty Ltd v Stephenson; Parkes Shire Council v South West Helicopters Pty Ltd; Essential Energy v South West Helicopter Pty Ltd (2017) 98 NSWLR 1 at [274]-[275] per Leeming JA and the authorities cited there.
17. Before examining whether the necessary relationship exists in this case, it is apt to make some observations about Eurolinx and Australian Pipeline.
18. First, Emmett AJA's holding in Eurolinx at [25] quoted earlier is, strictly speaking, obiter. His Honour did not decline to give, but indeed gave, the advice sought. It follows that His Honour could not have concluded that the concern of the trustee was with the question of potential personal exposure because of past acts and a completed course of conduct. Second, if Eurolinx is to be read as authority for the unconditional proposition that the necessary "respecting" relationship between the question and the management or administration of the trust property will never be satisfied where the question concerns potential personal exposure of the trustee because of past acts and a completed course of conduct, I consider that Eurolinx is plainly wrong because it does not recognise the wide ambit of the term "respecting".
19. Australian Pipeline is in a somewhat different category. It turned on a narrow situation where, as Barrett J described it, the result of the proceedings, so far as the estate was concerned, would do no more than reveal an historical position and the only consequence of an immediate kind having future implications would be as to the liability of the trustee. Determination of the question whether proceedings which had been brought against the trustee should or should not be defended would not have contributed to any particular outcome related to the management or administration of the assets of the trust.
20. His Honour's approach, with respect, correctly, was to analyse the relationship between the question and the management and operation of the trust property to reveal whether the nexus of "respecting" was there, and his Honour concluded that it was not. His Honour's finding did not amount to one that the nexus will immutably not be there where the question is one of potential exposure of the trustee personally because of past acts and a completed course of conduct of the trustee.
21. Barrett J considered, having regard to the statutory consequence stated in s 63(2), that the Act assumes that the matter upon which advice is sought will be one that involves some aspect of the trustee's duty as trustee as it relates to future conduct of the trustee. His Honour considered that a trustee who is alleged by a beneficiary to have committed a breach of trust and defends the proceedings in which that allegation is advanced does not thereby perform any duty as trustee. In the particular circumstances of the alleged breach and remedy sought in Australian Pipeline, this finding is perhaps unexceptional. But, if it is to be read as saying that the question whether a trustee may properly defend an alleged breach of trust will never be one "respecting the management and administration of the trust property", I respectfully take a different view.
22. Relevantly, of Australian Pipeline, the High Court remarked in Macedonian Church at [110], that: In understanding that passage, it must be remembered that Barrett J had earlier said in his reasons that a trustee could properly seek judicial advice relating to defending legal proceedings "if the legal proceedings are themselves concerned with the management or administration of the trust property or the interpretation of the trust instrument" (as the main proceedings are). It is also necessary to remember that Barrett J found support for that last statement in an observation by Palmer J in judgment No 2, which, in turn, had in part been approved by Beazley and Giles JJA.
23. I respectfully agree with the pertinent respective observations of Slattery, Robb and Meek JJ in Northey v Juul, Davis Settlement and Re Application of Macedonian Orthodox Community Church as to the wide operation that is to be given to s 63(1).
24. There is no warrant to read down the operation of s 63(1).
25. It should be borne in mind that whether the Court accedes to an application under s 63(1), even where the nexus is present, is within its discretion: Re Estate Law Chow Cho-Poon; Application for judicial advice (2013) 10 ASTLR 251; [2013] NSWSC 844 at [198]; In the application of NSW Trustee & Guardian (2014) 12 ASTLR 513; [2014] NSWSC 423 at [25]; Aurora Australasia Pty Ltd v Hunt Prosperity Pty Ltd [2024] NSWSC 680 at [68]-[69]. This provides a control mechanism over the wide operation of the section. For example, in a case where the nexus is extremely tenuous or in a case resembling Australian Pipeline, the Court might decline nevertheless to accede to the application as a matter of discretion.
26. In my opinion, whether a trustee charged with a breach of duty in that capacity by misusing trust property should defend the charge, is a question respecting the management and administration of that property.
27. Whether the Court should answer the question is, however, a different matter.
28. When a trustee asks whether he, she or it should defend such a charge, the question pertains to something to be done in the future. Wrongly defending such a charge could itself well be a breach of fiduciary duty, depending on the circumstances.
29. The principal question here is whether the Administrator is justified in defending the Lowe Proceedings. Is this a question respecting the management or administration of the trust property? This is to be ascertained by examining the ambit of the proceedings to assess whether to defend them is a question with respect to the management or administration of the trust property. In my opinion, it plainly is.
30. The Points of Claim plead, relevantly: 1. the existence of the partnership and the interests in it; 2. the Deceased's breach of fiduciary duties owed to the members of the partnership, including the Lowes; 3. the constructive trusts, referred to as the Profits Trust and Net Proceeds Trust; 4. notice on the part of the Administrator of the existence of those trusts; 5. the Administrator's duties as trustee, including to hold the assets of the Net Proceeds Trust and Profits Trust separately from other property held by him, including other property forming part of the Deceased's Estate, and to preserve the property of the trusts and to apply it only in distribution to members of the partnership in accordance with their entitlements and in payment of expenses properly and reasonably incurred, and his reasonable remuneration as trustee of those trusts; and 6. breach by the Administrator of those duties by applying property of the Net Proceeds Trust and the Profits Trust in payment of expenses incurred and fees charged in respect of his administration of the Estate generally, rather than for work done or expenses incurred in his capacity as constructive trustee. In the alternative, it is pleaded that he breached a duty to exercise reasonable care and skill.
31. The Points of Claim end with the following description of the relief sought: 26 In the premises, including the matters pleaded in paragraphs 3 and 12, the defendant is liable to render an account of his dealings with the Net Proceeds Trust and the Profits Trust. 27 In the premises, the plaintiffs are entitled to an order that the defendant restore to the Net Proceeds trust and/or the Profits Trust the amount certified on the taking of an account. 28 Further or in the alternative, in the premises, the plaintiffs are entitled to equitable compensation or an account of profits from the defendant, at their election, for the breaches of trust pleaded in paragraphs in 23 to 25.
32. It will immediately be observed that the Lowes are seeking that the Administrator render an account of his dealings with trust property. It is somewhat difficult to see how the question whether he should defend that claim is not one respecting the management or administration of trust property.
33. The first point of departure between the situation described by Emmett AJA in Eurolinx at [25] and the situation considered by Barrett J in Australian Pipeline is that this is not a case where: 1. the question concerns only potential personal exposure of the trustee because of past acts and a completed course of conduct; 2. the outcome of the Lowe Proceedings will not contribute to any particular outcome related to the management or administration of the trust assets; or 3. trust property of which the Administrator has stewardship will in no way be protected or enhanced by defence of the claim.
34. At a minimum, each of the following features reveals not only that the questions whether the Administrator should defend the Lowe Proceedings and whether he is entitled to be reimbursed and exonerated out of the assets held in the Estate are with respect to the management and administration of the trust property, but that the connection is close: 1. there are still significant trust assets in the hands of the Administrator and the trust is ongoing. The Administrator still has important tasks to fulfill such as, for example, recovering costs from the Lowes in relation to their failed application to the High Court; 2. the outcome of the Lowe Proceedings may, and almost inevitably will, have an effect on how the Administrator deals with assets already in his hands and future assets to come into his hands, such as the costs owed by the Lowes in relation to their failed application to the High Court; 3. the Lowes are claiming that the Administrator is liable to render an account of his dealings with the Net Proceeds Trust and the Profits Trust and seeking an order that he restore to those trusts the amount certified on the taking of accounts. This has a direct potential effect on what assets constitute those trusts; 4. the Administrator will be entitled to be remunerated for his work and the question will be live whether, not only the present assets in his control, but also additional assets which will come into his control, such as those costs referred to above will be available to pay for attendances in relation to the Estate; 5. the interests of the beneficiaries of the Estate may be significantly affected by the outcome of the proceedings; and 6. it cannot be said that the Lowe Proceedings fall into the category of being about past acts and a completed course of conduct by the trustee without any element of prospectivity (even if one were to assume that defending a past breach does not involve any element of prospectivity - which I think it does).
35. I record that it was submitted on behalf of the Lowes that, despite them seeking an accounting, no accounting will actually be necessary because success by the Lowes in the Lowe Proceedings will result in a simple arithmetic calculation and reallocation of assets to the Net Proceeds Trust or the Profits Trust. I do not accept this submission. The recovery of the High Court costs itself will undoubtedly give rise to arguments of allocation and, as was pointed out on behalf of the Administrator, the only parties to the Lowe Proceedings are the Lowes and the Administrator. The beneficiaries have not been joined, and they might well have something to say.
36. I conclude that the questions posed in the Summons are questions respecting the management or administration of the trust property.
37. I conclude that the Court has power to give the advice sought and that this is a case where it should do so.

DISCRETION

1. The Lowes argue, first, that if they are successful in the Lowe Proceedings, then the Administrator, as a defaulting trustee, would ordinarily not be entitled to an indemnity from the trust with respect to the costs of the proceedings. They observe that in Davis Settlement, Robb J deferred the question of indemnity for the trial judge.
2. They argue, second, that the Court should either decline to answer the second question or answer it in terms that do not summarily predetermine the Administrator's right of indemnity. They argue that, if they succeed, the result of answering the second question in the affirmative is that they are likely to be denied at least a substantial part of the benefit of their success because the amount of any recovery for the trusts will need to be set-off against the costs and remuneration paid to the Administrator for his defence of the Lowe Proceedings.
3. I do not uphold the Lowes' first submission for a number of reasons. The Administrator is an officer of the Court who has performed the functions of his office under the close supervision of the Court for going on a quarter of a century. No claim of lack of probity is made against him. The Lowe Proceedings are the newest of the series of earlier proceedings which the Administrator has defended and where the Court has approved his remuneration without any opposition from the Lowes.
4. As the High Court remarked in Macedonian Church, an application under s 63(1) for advice by a trustee for alleged breach of trust should be seen as a standard instance to which the section can, in the appropriate circumstances, apply: [70]. The present are appropriate circumstances in which to give that advice. The Administrator's conduct in defending the proceedings will be under the supervision of the Court as much as his previous actions as Administrator have been.
5. Having regard to the extensive history of this dispute, I consider that an inhibition on the application of trust monies in the Administrator's defence of the allegations of breach of trust would raise the possibility that the proceedings would be a vehicle for his oppression.
6. I endorse the remarks of Henry J that he performs one role being the Administrator and, in that capacity, he is a constructive trustee. The orders I am about to make will operate accordingly.
7. As to the second submission, I uphold it in part, in that I consider that the word "properly" should be inserted in the judicial advice before the word "incurred" in the answer to the question. I raised this with counsel for the Lowes as a possibility, but it did not find favour.

CONCLUSION

1. It may be inferred from the outcome of this application that I am satisfied that there are sufficient grounds of defence available to the Administrator to justify him defending the Lowes Proceedings, including on their merits.
2. The Court makes the following orders: 1. the Plaintiff Administrator is justified in defending proceedings no 2023/00261930 brought against him by Geoffrey Lowe and Mary Lowe; and 2. the Plaintiff Administrator is entitled to be reimbursed and exonerated out of the assets held in the Estate of the Late Kut Sze Tu for his costs, charges, expenses and remuneration properly incurred in taking any steps in relation to order (1).

Endnotes

1. Section 63(3) provides: Rules of court may provide for the use, on an application under this section, of a written statement signed by the trustee or the trustee's Australian legal practitioner, or for the use of other material, instead of evidence. UCPR r 55.1 sets out the requirements a Statement of Facts must meet.
2. Lowe v Pascoe (No 4) [2012] NSWSC 1493 at [315].
3. Ibid [316].
4. Ibid [317]-[318].
5. Lowe v Pascoe (No 9) [2021] NSWSC 163.
6. Pascoe as administrator of the Estate of Kut Sze Tu [2019] NSWSC 817, particularly at [3]-[11] and [25]-[32].
7. Lowe v Pascoe (No 9) [2021] NSWSC 163.
8. Lowe v Pascoe (No 10) [2021] NSWSC 1232; Lowe v Pascoe (No 11) [2021] NSWSC 1375; Lowe v Pascoe (No 12) [2021] NSWSC 1576; Lowe v Pascoe (No 13) [2022] NSWSC 320; Lowe v Pascoe (No 14) [2022] NSWSC 1591.
9. Lowe v Sze Tu as Administrator of the Estate of the late Fung Chun Chow; Lowe v Pascoe as Administrator of the Estate of the late Kut Sze Tu [2023] NSWCA 282.
10. See, eg, Lowe v Pascoe (No 12) [2021] NSWSC 1576 at [60].

Amendments 26 June 2024 - [71] - corrected paragraph numbering issue 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: 26 June 2024