Plaintiff v Defendants

Supreme Court of Victoria|2012-05-15|Before: HABERSBERGER J

TRUSTS - Variation of Deed of Settlement - Extension of Vesting Date - Variation of class of beneficiaries - Foreign element - Tax advantage - Court's jurisdiction - Distributions in breach of trust - Trustee excused - Trustee Act 1958, ss 63A, 67.

2 By a Deed of Settlement dated 25 June 1976 ("the Deed") and made between DKLR Holding Co Pty Limited, as settlor, and Thomas Hare Investments Limited, as the trustee ("the trustee"), a discretionary family trust to be known as the Hare Family Trust ("the Hare Family Trust") was established. The appointer was one Thomas Hare.

3 The "Beneficiary or Beneficiaries" of the Hare Family Trust were defined in clause 1(5) of the Deed to mean:

those persons described as same in the Schedule hereto and shall include persons who from time to time until the vesting date come within the category described in the Schedule respectively notwithstanding that such persons may not be in existence or have come into the defined category at the date of this Deed.

The following persons were listed as beneficiaries in the Schedule to the Deed:

Thomas Hare, Ruby Joyce Hare, Raymond Thomas Hare, Robyn Yvonne Hare, Stephen Mark Hare, Kylie Ann Hare, Mathew John Hare, Robert John Hare, Betty Anne Hare, Sharron Joyce Hare, Lynette Lisa Hare, Wayne John Hare, Alan Francis Hare, Dorothy Mary Hare, Michael Benjamin Hare, Bradley David Hare, John Edward Hare, Janet Anne Hare, Adam James Hare and Benjamin John Hare and any company in which any of the beneficiaries hold shares.

4 The mechanism by which the class of beneficiary could be expanded was contained in clause 3(a) of the Deed. It allowed the trustee to appoint any person "to be a Beneficiary and may with the like consent revoke such appointment prior to the Vesting Day" provided that the person to be appointed "must be a relative by blood or marriage or adoption of some one of [sic] more of the Beneficiaries for the time being" and was not otherwise disqualified.

5 Clause 4(1) of the Deed provided that the trustee:

shall in each accounting period until the Vesting Day pay apply or set aside the whole of the net income of the Trust Fund of that accounting period to or for the benefit of ... one or more ... of ... the Beneficiaries living from time to time in such proportions and in such manner as the Trustees in their absolute discretion ... shall think fit ...

6 Upon the Hare Family Trust reaching its "Vesting Day", clause 5(a) of the Deed provided that the trustee was to stand possessed of the Trust Fund and its income for the beneficiaries in such proportions as it may appoint before the Vesting Day. The clause also provided that, in default of appointment by the trustee, the Trust Fund and its income were to be held for the beneficiaries who were alive as tenants in common in equal shares. But if a beneficiary died before the Vesting Day, that beneficiary's children (and the descendants of any such children who died before the Vesting Day) were to take as tenants in common a share calculated per stripes which such a deceased beneficiary would have received had he or she survived to the Vesting Day. Clause 5(a) further provided that the trustee might pay a part of the Trust Fund to a lawfully married widow, living at the Vesting Day, of a deceased male beneficiary, and in doing so, the trustee was to take into account any assets and income of the widow. Finally, by clause 5(b), if any part of the Trust Fund was not effectively disposed of, the trustee was to stand possessed of such part for the statutory next of kin, who were living, of the last surviving member of the class of Beneficiaries as tenants in common in equal shares. If there were no living statutory next of kin, the Trust Fund was to be held on trust for such charitable purposes as the trustee might determine.

7 The "Vesting Day" of the Hare Family Trust was defined in clause 1(4) of the Deed to mean:

the day upon which shall expire the period of fifty years after the execution of this Settlement or the death of the last survivor of the descendants now living of his Late Majesty King George Vl whichever shall be the shorter or such earlier date as the Trustees may at any time ... appoint ...

8 The Deed also contained the customary exculpation clause in respect of the acts of the trustee and a trustee's right of indemnification in the following terms:

15(a) The Trustees shall not be personally liable for the consequence of any error of forgetfulness whether of law or of fact on the part of any of the Trustees or their legal or other advisor or generally for any breach of duty or trust whatsoever unless it shall be proved to have been committed made or omitted in personal conscious fraudulent bad faith by the Trustees charged to be so liable, and accordingly all persons claiming any beneficial interest in over or upon the property subject to this settlement shall be deemed to take with notice of and subject to the protection hereby conferred on the Trustees.

(b) The Trustees shall not in any circumstances be entitled to indemnify [sic] reimbursement or recompense from the beneficiaries or any of them but if acting in good faith shall be entitled to be indemnified out of the Trust Fund in respect of all liabilities incurred relating to the execution of any powers duties authorities or discretions vested in them under the provisions of this Deed and in respect of all actions proceedings costs claims and demands relating to any matter or thing done or omitted to be done concerning the Trust Fund.

9 Amendments to the Deed could be made pursuant to clause 21. It provided as follows:

THE Trustees for the time being may at any time and from time to time by deed of appointment or other deed revoke add to or vary all or any of the trusts hereinbefore limited or the trusts limited by any variation or alteration or addition made thereto from time to time an (sic) may be (sic) the same or any other deed or deeds declare any new or other trusts or powers concerning the Trust Fund or any part or parts thereto the trusts whereof shall have been so revoked added to or varied but so that the law against perpetuities is not thereby infringed and so that such new or other trusts powers discretions alterations or variations:

(I) may relate to the management or control of the Trust Fund or the application or investment thereof or to the Trustees' power or discretions in these presents contained;

(II) shall not be in favour of or for the benefit of the Settlor or result in any benefit to the Settlor but shall otherwise be for the benefit of all or any one or more of the Beneficiaries hereunder or, if these shall be more, for the benefit of all or any one more of the statutory next of kin of the last surviving Beneficiary;

(III) shall not affect the beneficial entitlement of any amount set aside for any Beneficiary prior to the date of the variation alteration or addition.

10 On 1 July 2001, the trustee, in reliance on the power of amendment in clause 21, executed a Deed Poll to vary the terms of the settlement ("the Variation Deed"). In addition to other amendments, which are of little moment for present purposes, clause 13 of the Annexure to the Variation Deed purported to broaden "the group of beneficiaries" by entitling the trustee "to benefit any trust estate of which any named beneficiary is a vested or contingent beneficiary".

11 This amendment was considered necessary because, as described above, the beneficiaries in the Schedule to the Deed only referred to the named individuals and "any company in which any of the beneficiaries hold shares". It was thought that the latter class of beneficiary only encompassed such companies acting in their own capacity and did not extend to such companies acting as trustees of a discretionary trust of which a beneficiary under the Deed was a beneficiary thereof.

12 In reliance on the Variation Deed, the trustee, in each income tax year from 30 June 2004 onwards, made distributions to companies acting as trustees of a trust estate of which a son of Thomas Hare was a vested or contingent beneficiary.

13 However, the trustee was subsequently advised that such distributions could be called into question because, so it was said, on a proper construction of clause 21 of the Deed, the ambit of the power to amend was confined to "the management or control of the Trust Fund" or to "the application or investment" of the Trust Fund, or to the "Trustees' powers or discretions" under the Deed. On that understanding, the purported amendment to broaden the class of beneficiaries under clause 13 of the Annexure to the Variation Deed was arguably beyond the trustee's power and, accordingly, invalid with the result that the distributions by the trustee might constitute a breach of trust by it. No argument was advanced to the contrary of this proposition and it seems to me that the better view is that clause 13 was invalid and, therefore, that the distributions thereafter by the trustee were a breach of trust by it.

14 Against this factual background, by an originating motion and summons on originating motion both filed on 14 March 2012, the trustee sought a number of orders and declarations concerning the Deed. All of the individual beneficiaries were named as defendants to the originating motion, including Ruby Joyce Hare, the wife of Thomas Hare, despite the fact that, as I was informed, she is dead. An appearance was entered by a firm of solicitors for all of the defendants. The summons was returnable on 12 April 2012. The defendants' solicitors signed minutes of consent orders. After some amendments to overcome typographical errors the relief sought by the trustee was as follows:

An order, nunc pro tunc, extending the vesting date of the Trust to a day being two days less than 80 years after the settlement date.
An order, nunc pro tunc, in relation to the objects of the Trust varying the terms of the Trust such that the definition of excluded person as contained therein and of the parties capable of benefiting thereunder should not extend to and include any company of which a son or daughter of Thomas Hare are and were legal and beneficial shareholders and which was the trustee of a trust estate of which that son and daughter of Thomas Hare received a share of the net income of the trust estate in the relevant year of income.
A declaration that in any year in which the net income of the trust estate (as defined in s 95A(1) of the Income Tax Assessment Act 1936) was distributed by the Trustee of the Trust to a company acting as trustee of a trust estate of which any son or daughter of Thomas Hare were potential or vested beneficiaries was a distribution not constituting a breach of trust but was and continues to be a distribution within the powers of the trustee.
An order that, notwithstanding the fact that distributions of income have been made or may have been made to companies acting as trustees of a trust estate of which a son or daughter of Thomas Hare was a vested or contingent beneficiary in some year or years following the income tax year ending 30 June 2001 such a distribution was within the powers of the trustee.
A declaration that there will and has been no breach of the Trust by the Trustee in making any distribution as aforesaid such as to deny to the Trustee a right of indemnity out of the income of the trust estate.
An order that the costs of and incidental to this Summons be borne by the Trust and paid out of the assets of the Trust Fund on an indemnity basis.
A declaration pursuant to s 67 of the Trustee Act 1958 that in making distributions of income to the Trusts of which any child of Thomas Hare is an object constitutes an act of the trustee, which was in the interest of and for the benefit of the objects of the trust estate and that the trustee has acted honestly and reasonably and ought fairly to be excused.
An order in terms of s 67 of the Trustee Act 1958 that in making distributions of income to trustees of trusts of which a son or daughter of Thomas Hare is an object, the trustee acted honestly and reasonably and ought fairly to be excused any breach of trust in doing so.

I refer hereafter to these eight orders and declarations as "the proposed orders".

15 The application was supported by two affidavits. The first affidavit was sworn on 4 April 2012 by Thomas James Halbert, the solicitor retained by the trustee. He exhibited the Deed, the Variation Deed and three opinions of Mr Raphael of counsel. The second affidavit was sworn on 2 March 2012 by Raymond Thomas Hare, a son of Thomas Hare and a beneficiary under the Hare Family Trust. He stated that he consented to the orders sought by the trustee. Mr Hare deposed that he had been informed by Mr Halbert that it was in the best interests of him and his siblings and his father that the vesting date of the Hare Family Trust be extended as set out in the proposed orders and that it was possible that the past distributions of income to companies which were trustees of trusts of which a beneficiary was an object could have constituted breaches of trust. Mr Hare also deposed that he had decided to consent after consulting a solicitor who was not a member of Mr Halbert's firm.

16 At the hearing on 12 April 2012, the only appearance was by Mr Raphael of counsel for the plaintiff. There was no appearance for the defendants who, as previously stated, consented to the orders and declarations sought by the trustee. The Court is not, however, a rubber stamp and counsel for the plaintiff accepted that he had to persuade me that the orders and declarations he sought were appropriate.

17 During the hearing, I indicated to counsel that there was no factual material upon which I could conclude that the trustee had acted honestly and reasonably so as to justify it being excused under s 67 of the Trustee Act 1958 ("Trustee Act"). There were other factual matters which should have been evidenced in the proper way. Accordingly, I allowed the plaintiff to file further material in support of its application.

18 A further affidavit by Raymond Hare, sworn on 20 April 2012 was subsequently filed. In that affidavit, Mr Hare deposed that he and his three brothers, Robert John Hare, Alan Francis Hare and John Edward Hare were the only directors of the trustee. The ASIC company extract showed that Raymond Hare and Alan Hare have been directors since 20 May 1976, and that Robert Hare and John Hare have been directors since 18 December 1988. Raymond Hare deposed that the trustee was a resident of New South Wales as it was incorporated in that State, its directors were all resident in that State and all board meetings and decisions taken occur in that State. Mr Hare also deposed that all beneficiaries of the trust, and the defendants in the proceeding, were residents of New South Wales.

19 At the hearing, counsel had informed the Court that all of the Trust's assets were located in New South Wales. Although this matter was not deposed to by Mr Hare, I will assume that all of the assets of the Hare Family Trust are located in New South Wales.

20 Raymond Hare further deposed in his second affidavit that he and his fellow directors had believed that, by virtue of the terms of paragraph 13 of the Annexure to the Variation Deed, the trustee could distribute income of the Hare Family Trust to trusts of which each of the four brothers were directors of the respective companies which acted as the trustees of their respective discretionary trusts. He further deposed that from the 30 June 2004 income tax year onwards, on the advice of the trustee's accountant that the proposed resolutions were in order, distributions had been made to the brothers' discretionary trusts which would otherwise have been made to the brothers personally. He deposed that he and his three brothers, the other directors of the plaintiff, were unaware that the distributions were or would be a breach of trust as they believed that those distributions could be made in view of the amendments to the Hare Family Trust.

21 I turn first to the application for a variation of the Deed by extending the Vesting Day from 50 years to 2 days short of 80 years after the settlement date (paragraph 1 of the proposed orders). The order was sought in reliance on s 63A of the Trustee Act, which relevantly provides as follows:

Power of Court to vary trusts

(1) Where property, whether real or personal, is held on trusts arising, whether before or after the commencement of this Act, under any will settlement or other disposition, the Court may if it thinks fit by order approve on behalf of-

(a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of minority or incapacity is incapable of assenting; or

(b) any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of a specified description or a member of any specified class of person, so however that this paragraph shall not include any person who would be of that description, or a member of that class (as the case may be) if the said date had fallen or the said event had happened at the date of the application to the Court; or

(c) any person unborn;

...

any arrangement (by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees or managing or administering any of the property subject to the trusts...

22 At the hearing, counsel frankly conceded that, despite the Hare Family Trust having a more substantial connection with New South Wales, the reason for invoking the Court's power under s 63A of the Trustee Act was because there was no cognate provision in New South Wales. It was also conceded that the extension of the vesting date was sought to delay the operation of the capital gains tax provisions in the Income Tax Assessment Act 1997 (Cth) that would otherwise occur at an earlier date when the Hare Family Trust vests.

23 Counsel informed the Court that all the individual beneficiaries in the Schedule to the Deed are sui juris, but that Mr Thomas Hare suffered from Alzheimer's disease. It was unclear from whom the defendants' solicitors had received Mr Thomas Hare's consent to the orders sought in the present application. I was subsequently informed that Mr Hare had died after the hearing.

24 In Re McDonald Trust No 1,[1] Judd J held that when the Court is entertaining an application under s 63A of the Trustee Act, it "would look for some connection between the trust, its beneficiaries and jurisdiction". There, the jurisdictional nexus was satisfied on the basis that the trustee was a Victorian resident company.

25 The Trustee Act does not contain an express provision that seeks to localise its operation and effect by reference to certain statutory criteria. Absent an attempt to identify some nexus with Victoria, it may appear to have universal application and the Court could be invited to vary a settlement that is totally unconnected with the State save for the fact that its jurisdiction was invoked and invited by the parties to apply the lex fori.

26 Nevertheless, counsel submitted that the Court's jurisdiction to vary a trust under s 63A of the Trustee Act is neither limited to property within the jurisdiction nor to trusts governed by the law of Victoria. He referred to and placed reliance on four decisions in support of that conclusion.

27 In Re Ker's Settlement Trust,[2] Ungoed-Thomas J held that the court had jurisdiction to vary a settlement under the English Variation of Trusts Act 1958 where the trust property and trustee were in England, notwithstanding the fact that the proper law of the settlement was that of Northern Ireland. Importantly, Ungoed-Thomas J construed the effect of the English provision in the following way:

What section 1 in terms does is to confer on the court power, if it thinks fit, to approve a variation of the settlement: it confers jurisdiction on the court.[3]

28 In Re Paget's Settlement,[4] Cross J approved a settlement even though it had "substantial foreign elements"[5] to it. There, the settlement was governed by the law of New York, the trustees were residents of the United States of America and the assets, for practical purposes, were located and managed in New York. The jurisdiction of the English court was invoked to approve a variation because there was no corresponding legislative provision in New York. Cross J followed the approach of Ungoed-Thomas J in Ker in rejecting the proposition that the Court's power is restricted to varying English settlements. His Honour said:

Another reason for not confining this jurisdiction to settlements governed by English law is that the court would then be unable to vary a settlement made (say) in 1920 and governed by (say) Australian law, even though the beneficiaries, the trustees and the trust property had been for many years in this country. It would be unfortunate if the court had no jurisdiction in such a case.

Therefore, I concur with the decision of Ungoed-Thomas J, that the jurisdiction is unlimited.[6]

However, his Honour also observed that, notwithstanding the existence of the jurisdiction, the court may, in an appropriate case, decline to exercise it. In particular, his Honour said:

Obviously, however, where there are substantial foreign elements in the case, the court must consider carefully whether it is proper for it to exercise the jurisdiction. If, for example, the court were asked to vary a settlement which was plainly a Scottish settlement, it might well hesitate to exercise its jurisdiction to vary the trusts simply because some of, or even all, the trustees and beneficiaries were in this country.[7] [Emphasis added]

Taking into account the fact that the settlor, the applicant, who was the life tenant under the settlement, and the majority of the beneficiaries were all domiciled in England, Cross J held that it was appropriate to exercise the jurisdiction to approve the scheme.[8]

29 The decisions in Ker and Paget were, evidently, concerned with the English Variation of Trusts Act. These decisions were, however, considered and followed by Lavan J in Faye v Faye[9] which concerned the application of the Western Australian equivalent of s 63A of the Victorian Trustee Act. There, the settlement was made in England by a deed executed in England by a settlor and all of the original trustees resident in England. At the time of the application all of the assets of the trust were in Australia, all of the trustees resided in Australia, the office administering the business of the trust was situated in Australia and with one exception all of the persons presently entitled to the income of the trusts of the settlement resided in Australia.

30 His Honour held that he had "no hesitation in the circumstances in coming to the conclusion that this Court has jurisdiction to vary the trusts of the settlement".[10] It may at once be noticed that the notion of "foreign element" that was applied by Lavan J in considering the appropriateness of exercising the court's jurisdiction in an application of the present kind was that of an "international element" rather than an "interstate element".

31 In Salkeld v Salkeld (No 2),[11] there was only an "interstate element". In considering the application of the South Australian equivalent provision of s 63A of the Victorian Trustee Act, Perry J concluded that the Court had jurisdiction notwithstanding the fact that proper law of the trusts in question there was that of New South Wales. His Honour held that there was no reason why the Court should refrain from exercising the jurisdiction if "it otherwise seemed appropriate to do so".[12] It should be noted, however, that the application was in fact decided on an alternative basis as his Honour held that "the preferable course" was to exercise the inherent jurisdiction of the Court to approve a compromise involving persons under a legal disability.[13]

32 Ultimately, it is the words of s 63A of the Victorian Trustee Act which must be construed in their statutory context. Nevertheless, I have derived considerable assistance from these foregoing decisions in that construction exercise. Section 63A is a provision which seeks to confer jurisdiction on the Court as emphasised by Ungoed-Thomas J in Ker. The jurisdiction conferred by s 63A, although subject to the statutory integers contained in it, is ample in its terms and limitations ought not to be introduced unnecessarily to limit its reach. However, that jurisdiction once engaged is only exercised by the Court, as s 63A(1) provides, "if it thinks fit". The presence of substantial foreign elements in the case is but only one of the considerations that would weigh in the Court's assessment as to whether it was appropriate to exercise the jurisdiction.

33 As has already been noted, pursuant to clause 3(a) of the Deed, the trustee may appoint any person to be a beneficiary of the Hare Family Trust provided that the person is a relative by blood or marriage or adoption of some one or more of the Beneficiaries for the time being. The class of beneficiaries is therefore not closed. This application was made in reliance on s 63A(1)(b) on the basis that such a person could become a beneficiary upon satisfaction of the condition that the trustee appoints him or her to be a beneficiary. Apart from the fact that the Hare Family Trust is essentially local in the sense discussed by Lavan J in Faye, there is every possibility that, under the terms of this Deed at least, the court is exercising power to approve the extension of the Vesting Day on behalf of such a person who is or may become resident in Victoria. I, therefore, consider that the Court can exercise the jurisdiction to vary the Deed, if it is otherwise appropriate to do so.

34 Counsel submitted that the extension of the Vesting Day, which achieves the effect of deferring the payment of any capital gains tax that may otherwise arise, does not constitute a mischief that is against public policy such that the Court ought not to make that order sought.

35 In Thomson v Thomson and Whitmee,[14] Davies J considered an application for a variation of a settlement where it was frankly pointed out that one of the objects of the proposed variation was to reduce the amount of tax that would otherwise be payable on the income of the settlement. His Honour said:

Is this court to hesitate to exercise the power by reason of the fact that one of the incidents of the exercise of the power will be a reduction in the amount of tax which would otherwise be payable to the Crown ...? It seems to me that it would be absolutely wrong that this court, if it has power to resettle these funds, should be deterred from exercising that power on some ground of public policy of this kind. The proposed variation will preserve for the benefit of the beneficiaries some of the funds which would otherwise be paid away in tax; and I cannot see that the express power given to the court ... ought to be abandoned for that consideration.[15]

36 This notion that the court should not decline to exercise its power to approve a variation, if it be otherwise appropriate to do so, merely because one of the objects of the variation was to obtain some tax advantage was followed by Lavan J in Faye, where his Honour, after referring to Thomson, said:

This opinion has since been followed in a number of cases and is I believe correct.[16]

37 Accordingly, if it is otherwise appropriate that I should exercise the jurisdiction to approve the extension of the Vesting Day of the Hare Family Trust, then I should not hesitate to do so merely because one of the objects is to defer the crystallisation of capital gains tax liabilities.

38 The manner in which the court is to exercise the power in an application of the present kind was described by Lavan J in Faye in the following way:

A function of the Court on an application of this nature is to act as a substitute for the persons who are incapable either because they lack capacity or because they are not born to signify their consent. Its jurisdiction is limited to authorizing an arrangement which such beneficiaries themselves could have authorized if they had all been ascertained and sui juris. [17]

39 Here, the extension of the Vesting Day for the Hare Family Trust could only benefit the unascertained class of potential beneficiaries because there would then be a longer period of time by which they could become a beneficiary. The deferral of capital gains tax liabilities could cause no detriment to them. Therefore, I am satisfied that had the potential class of beneficiaries been ascertained and sui juris, they would have consented to the extension of the Vesting Day of the Hare Family Trust.

40 I will consider next the question as to whether the order in paragraph 2 of the proposed orders ought to be made before considering whether these two orders, if the second is to be made, ought to be made on a nunc pro tunc basis. The order in paragraph 2 of the proposed orders effectively allows a discretionary trust to be interposed between the Hare Family Trust and the beneficiaries of that Trust. However, the interposed discretionary trust is qualified by the requirements that the children of Thomas Hare must be the shareholders of the interposed trustee company and that the children of Thomas Hare, who are already beneficiaries of the Hare Family Trust, must receive a share of the net income of the discretionary trust in the relevant year of income.

41 What this variation will achieve is greater flexibility in distributing the benefit, and tax burden, of the income from the Hare Family Trust than would otherwise be the case, as at present the income is to be distributed personally to the children of Thomas Hare in their individual capacity.

42 I am therefore satisfied that the proposed order does not cause detriment to the unascertained class of potential beneficiaries and that, had they been ascertained and sui juris, they would have consented to the limitation of the classes of persons who are to be excluded from being a beneficiary in the manner that has been proposed.

43 Having concluded that the orders in paragraphs 1 and 2 of the proposed orders ought to be made, I turn next to the question as to whether those orders should be made "nunc pro tunc". The powers of the Court to make orders "nunc pro tunc" was discussed in considerable detail by Ormiston JA in Hartley Poynton Ltd v Ali,[18] where his Honour said:

[W]ith a few minor exceptions, nunc pro tunc judgments and orders, whether dependent on Cumber v Wane or Turner (or Ecroyd or any other decisions in this line of authority), have not been granted to alter the substantive rights of parties but only to overcome procedural irregularities and difficulties.

...

The conclusions I would suggest should be drawn from common law and Chancery practice as to antedating, as developed by Australian courts (but overlooking certain misconceptions which appear to have crept in inadvertently), are as follows. First, the power of the courts to antedate orders and judgments, which comprehends from its terms the making of orders nunc pro tunc, is derived from the Court's inherent jurisdiction or, as expressed in the courts of common law, was a power derived from the common law ... . Secondly, as Parke, B. said for the Court of Exchequer in Heathcote v Wing (a case frequently cited, e.g in Clarke) that, in making an order nunc pro tunc, "it is only for a delay of the Court in doing justice that the judgment can be so entered". ... Fifthly, the power of the courts exercising equitable jurisdiction to deliver judgment as at the last day of trial or hearing date must be confined by the requirement of Hall VC that it can only be done if no prejudice will be caused to any party.[19]

44 After discussing the common law and Chancery lines of authority respecting the making of a nunc pro tunc order, his Honour concluded that there was no inconsistency between them and that "neither rule was intended to affect substantive rights or otherwise cause prejudice in its effectuation".[20] Each rule, as his Honour held, "was designed to overcome procedural difficulties of a kind which rarely if ever surfaced again in the English (or Australian) courts".[21]

45 In this instance, the settlor had evinced a clear intention to select fifty years, rather than 2 days short of 80 years, as one of earlier dates by which the Hare Family Trust was to vest. That intention having been given effect, but subsequently proved to be unattractive from a taxation point of view because of substantial changes to the law, is the Court's power to make a nunc pro tunc order to extend the Vesting Day engaged? Similarly, the settlor had evinced an intention that a person can be included as a beneficiary of the Hare Family Trust but only upon satisfaction of the criteria stated in clause 3(a) of the Deed. That intention having been given effect, but subsequently proved to be unduly confined, is the Court's power to make a nunc pro tunc order to expand the potential class of beneficiaries likewise engaged?

46 In my view, these circumstances do not enliven the Court's power to make those orders nunc pro tunc. They do not answer the description of being to "overcome procedural difficulties" in the sense discussed by Ormiston JA in Hartley Poynton because the postponing of when beneficiaries may become absolutely entitled to the trust assets, and the deferral of potential tax liabilities, by the extension of the vesting date, and the bringing of a previously disqualified person into the class of beneficiaries, are clearly matters that are substantive in nature. Neither do they fall within the description of "[remedying] a situation by dating an order in a way which could give effect to the justice of the case" in the sense discussed by Ormiston JA in that case.[22] Accordingly, I do not propose to make the orders in paragraphs 1 and 2 of the proposed orders nunc pro tunc. Indeed, in a subsequent written submission counsel for the plaintiff, having considered Ormiston JA's judgment in Hartley Poynton, conceded that it was "possible" but "unlikely" that these variations would be considered to be procedural and therefore that it would be difficult to justify making the two orders nunc pro tunc.

47 During the hearing, counsel stated that he would no longer seek the making of the declaration in paragraph 3 of the proposed orders. Accordingly, I need not address the question as to whether, in the circumstances, such a declaration ought to be made.

48 Next, as I am not prepared to make the order sought in paragraph 2 of the proposed orders on a nunc pro tunc basis, it follows that it is inappropriate that the orders sought in paragraphs 4 and 5 should be made.

49 As has already been recounted above, in reliance on clause 13 of the Annexure to the Variation Deed, the trustee had in income years 2004 onwards made distributions to companies acting as trustees of a trust estate of which a son of Thomas Hare was a vested or contingent beneficiary. Section 67 of the Trustee Act empowers the Court to relieve a trustee wholly or partly from personal liability for a breach of trust if it appears to the Court that the trustee has acted honestly and reasonably and ought fairly to be excused.[23] The plaintiff placed reliance on this power in support of the orders sought in paragraphs 7 and 8 of the proposed orders. For the reasons given above respecting the application of s 63A, I am prepared to consider the plaintiff's reliance on s 67 of the Trustee Act to absolve it of personal liability in this instance. The trustee had relied on clause 13 of the Annexure to the Variation Deed, which was prepared and considered by its legal advisers. The resolutions effecting the distributions were made upon the advice of the trustee's accountants that they were all in order. I am therefore satisfied that the trustee has discharged its onus to demonstrate that it has acted honestly and reasonably and ought fairly to be excused. Accordingly, I will make orders 7 and 8 in the terms sought.

50 Finally, I will make the order sought in paragraph 6 of the proposed orders that the costs of and incidental to this application be paid out of the assets of the Hare Family Trust on an indemnity basis.

[15] [1954] P 384, 393-394.

[18] [2005] VSCA 53; (2005) 11 VR 568 (Buchanan and Eames JJA agreed with Ormiston JA).

[23] Re Turner; Barker v Ivimey [1897] 1 Ch 536; National Trustees Company of Australasia, Limited v General Finance Company of Australasia, Limited [1905] AC 373; Partridge v Equity Trustees Executors and Agency Company Limited [1947] HCA 42; (1947) 75 CLR 149.

Tax Assessment Act 1936

Tax Assessment Act 1997