Plaintiff v Defendants [2021] VSC 771 | Case summary

Supreme Court of Victoria|2021-11-25|Before: McMillan J

TRUSTS - Express trust - Resulting trust - Lost trust deed - Evidence of trust - Whether trust fails for uncertainty - Whether resulting trust arises due to failure of express trust.

EVIDENCE - Whether original trust deed existed - Whether original trust deed unavailable - Contents of original trust deed - Admission of secondary evidence - Insufficient proof of contents of lost deed - Presumption of regularity.

For the First Defendant, Second Defendant and Third Defendant (in his personal capacity)

For the Third and Fourth Defendants (in their capacity as executors of the will of Teresa Mantovani)

VANTA PTY LTD (ACN 005 190 965) (as trustee of the MANTOVANI FAMILY TRUST)

SALVATORE ROCCO MANTOVANI (personally and as executor of the will of TERESA MANTOVANI)

CARMINE VINCENZO MANTOVANI (personally and as executor of the will of TERESA MANTOVANI)

1 Giovanni Mantovani ('the plaintiff'), Nicola Mantovani ('Nicola'), Salvatore Mantovani ('Salvatore') and Carmine Mantovani ('Carmine') are the adult children of Vincenzo Mantovani ('Vincenzo') and Teresa Mantovani ('Teresa'). Vincenzo died on 20 July 1974. Teresa died on 14 October 2015.

2 In 1976, the Mantovani Family Trust (the 'Family Trust') was established. On 19 May 1976 Vanta Pty Ltd ('Vanta') was incorporated. Vanta was appointed trustee of the Family Trust. Over the years Vanta has been controlled by members of the Mantovani family. Vanta's current directors and shareholders are Nicola and Salvatore. Teresa and Carmine are former directors of Vanta. Since the Family Trust was established a number of properties owned by Vincenzo and Teresa have been transferred to the Family Trust.

3 Despite extensive searches, the original deed for the Family Trust (the 'Deed') has not been located. The parties agree that the Deed has been lost. The only document in the parties' possession relating to the Family Trust is a document entitled 'Schedule' (the 'Schedule'), which sets out some information pertaining to the trust.

4 Since April 2017 the plaintiff has sought details of the Family Trust from Vanta, Nicola and Salvatore ('the defendants') and has made numerous requests for access to trust documents and accounts.

5 There is ongoing disagreement between the plaintiff and the defendants as to entitlement to the assets and the terms of the Family Trust and, as a corollary, in relation to the distribution of Teresa's estate.

6 By amended originating motion filed 14 November 2019, the plaintiff seeks orders and declarations, pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 ('the Rules'), against Vanta as the trustee of the Family Trust, and Nicola, Salvatore and Carmine. Salvatore and Carmine are sued both personally and as executors of Teresa's estate.

7 The proceeding was commenced by originating motion filed on 21 February 2019 with the plaintiff seeking orders and declarations against the defendants. The plaintiff sought production of certain documents concerning the Family Trust from 2008 to the present from Vanta, including the Deed. In the event that the Deed could not be located, the plaintiff sought a declaration that all assets held by Vanta are held subject to a resulting trust in favour of Teresa's estate, and an order for the taking of accounts and payment by the defendants of any amounts found to be due to Teresa's estate.

8 By summons filed 14 November 2019, the plaintiff then sought leave, pursuant to r 36.01 of the Rules, to file and serve an amended originating motion seeking: (a) to expand the period of time for which documents are sought to those dating back to 27 July 1976; and (b) to expand the range of documents to be produced, by adding the word 'all' before each category of documents. In addition, by oral application during the appeal hearing, the plaintiff sought to add the words 'and any reconstituting deed' after the words 'a copy of the Mantovani Family Trust' in para 1(a) of the originating motion.

9 Pursuant to r 84.04 of the Rules, the plaintiff's summons was referred to Judicial Registrar Caporale for hearing and determination. At the hearing on 11 December 2019, the defendants opposed the plaintiff's application for leave to amend and sought orders that the proceeding continue as if commenced by writ and that pleadings be filed and served. On 17 December 2019, leave was granted to the plaintiff to file and serve an amended originating motion in the form annexed to his summons filed 14 November 2019.

10 By notice of appeal filed 8 January 2020 the defendants appealed the decision of Judicial Registrar Caporale and sought orders that the proceeding continue as if commenced by writ and that the plaintiff be required to file a statement of claim. Pursuant to r 84.05(4) of the Rules, the appeal proceeded as a hearing de novo before this Court. [1]

11 The defendants' appeal was dismissed and the plaintiff was granted leave to file and serve an amended originating motion in the form annexed to his summons filed 14 November 2019.

12 On 16 July 2021, the defendants agreed to provide the plaintiff with access to any documents sought in the amended originating motion that are in their possession. The documentary components of the plaintiff's amended originating motion having been addressed, in the event that the Mantovani Family Trust Deed cannot be located the plaintiff now seeks:

(a) a declaration that all assets held by Vanta are held subject to a resulting trust in favour of the estate of Teresa Mantovani; and

(b) an order for the taking of accounts and the payment by the defendants of such amounts found to be due to the estate of Teresa Mantovani.

13 Teresa and Vincenzo Mantovani were married on 16 August 1952. They had four children: Nicola, born in 1954; Salvatore, born in 1956; Carmine, born in 1958; and the plaintiff, born in 1960.

14 During their lifetimes, Teresa and Vincenzo purchased various commercial and residential properties in Cobram, including:

(c) the land described in Certificate of Title Volume 2734 Folio 642 being a residential property located at 5 William Street Cobram ('Pine and William Street Property');

(d) the land described in Certificate of Title Volume 7518 Folio 150 being a residential property located at 20 Broadway St, Cobram ('Broadway Street Property'); and

(e) two parcels of land described in Certificate of Title Volume 8623 Folio 323 and Volume 8634 Folio 885 located at 20-24 William Street, Cobram ('Commercial Properties'). The Commercial Properties were developed into three commercial units and adjoining vacant land.

15 The Pine and William Street Property was the home of Teresa and Vincenzo. Teresa and Vincenzo purchased the Broadway Street Property in around 1958, and moved into it shortly afterwards. Vincenzo operated the family business, a shoe store, out of one of the commercial units, and the other two commercial units were let out. After Vincenzo's death on 20 July 1974, Teresa inherited the Pine and William Street Property, the Broadway Street Property, and the Commercial Properties. The dwelling on the Pine and William Street Property was demolished soon after.

16 The plaintiff has lived in the Broadway Street Property for the entirety of his life. His wife has been living in the Broadway Street Property with him since 1982. They assert to having spent substantial sums of money maintaining and improving it. The plaintiff deposed that Teresa told him that the Broadway Street Property would be his upon her death. There is disagreement between the plaintiff and the defendants as to when the plaintiff began paying rates, water, electricity and insurance for the Broadway Street Property. The plaintiff states that he has covered such expenses since 1979, while the defendants assert that the plaintiff did not commence paying rates until the mid-1990s. In about 2018, the plaintiff ceased living at the Broadway Street Property on a full-time basis, but he continues to reside there for approximately three months of each year. The plaintiff's furniture and belongings are located at the Broadway Street Property, and his son also resides there from time to time.

17 The Family Trust was created sometime in 1976. Vanta was appointed trustee of the Family Trust. Teresa and Carmine were originally named as the directors and shareholders of Vanta. The parties agree that the Deed creating the Family Trust has now been lost and cannot be located, despite extensive searches. The only document in the possession of the parties relating to the Family Trust is the Schedule. There is no suggestion from any party that the Schedule is inaccurate, or that it was not attached to the Deed.

18 The Schedule provides the following information about the Family Trust:

(a) The 'date of making this deed' is listed as 27 July 1976;

(b) The name of the trust is the Mantovani Family Trust;

(c) The settlor is Teresa's father, Rocco Orsida ('Rocco');

(d) The trustee is Vanta Pty Ltd;

(e) The settled sum is fifty dollars;

(f) The appointer is Teresa, and on her death, whoever is named in her will;

(g) The beneficiaries are:

(i) Teresa;

(ii) the plaintiff;

(iii) Carmine;

(iv) Salvatore;

(v) Nicola; and

(vi) any child or grandchild of Teresa, the plaintiff, Carmine, Salvatore and Nicola.

19 The plaintiff stated that, in about 1981, Teresa handed him a copy of the Schedule and told him to keep it in a safe place. According to the plaintiff, Teresa did not explain much about the document at the time. The plaintiff stated that he had never seen a copy of the Deed, however, there have been regular discussions between the members of the Mantovani family about the Family Trust.

20 The plaintiff further deposed that, over an unspecified range of years, Teresa and Carmine would make distributions from the Family Trust to Teresa's grandchildren, being the children of Nicola, Salvatore, Carmine and the plaintiff. The plaintiff recalled that this amount was around $600 each per year, and was distributed at tax time. The plaintiff stated that, when giving out the money, Teresa and Carmine would say that it was a trust distribution.

21 Teresa's father, Rocco, died on 19 November 1982. Probate of Rocco's will was granted to Teresa on 11 April 1983. By his will, Rocco devised and bequeathed his estate to his wife, Catrina, if she survived him. If Catrina did not survive him, Rocco left $2,000 to each of his grandchildren, $200 to the parish priest and the residuary estate to Teresa. Catrina pre-deceased Rocco, leaving Teresa as beneficiary of her father's residuary estate.

22 In 1976, Teresa transferred her interest in the Pine and William Street Property to Vanta. In consideration of the transfer, Teresa received the sum of $5,600. The true value of the Pine and William Street Property at the time of the transfer was $33,400. In Vanta's financial records, the transfer of the Pine and William Street Property was treated as a loan from Teresa. Vanta subsequently made an application to subdivide the Pine and William Street Property into four separate residential units ('Residential Units') on 4 April 1977, namely:

(a) Unit 1, 5 William Street (Certificate of Title Volume 9200 Folio 993);

(b) Unit 2, 5 William Street (Certificate of Title Volume 9200 Folio 994);

(c) Unit 3, 5 William Street (Certificate of Title Volume 9200 Folio 995); and

(d) Unit 4, 5 William Street (Certificate of Title Volume 9200 Folio 996).

23 On 31 December 1980, Teresa transferred her interest in the Commercial Properties to Vanta in exchange for a sum of $108,500. Again, the transfer was treated as a loan from Teresa to Vanta in the company's financial records. Vanta subsequently made an application to subdivide the Commercial Properties into six separate commercial units ('Commercial Units') on 19 December 1989, namely:

(a) 20 William Street, Cobram (Certificate of Title Volume 9922 Folio 662);

(b) 22 William Street, Cobram (Certificate of Title Volume 9922 Folio 663);

(c) 24 William Street, Cobram (Certificate of Title Volume 9922 Folio 664);

(d) 26 William Street, Cobram (Certificate of Title Volume 9922 Folio 665);

(e) 28 William Street, Cobram (Certificate of Title Volume 9922 Folio 666); and

(f) 30 William Street, Cobram (Certificate of Title Volume 9922 Folio 667).

24 The plaintiff deposed that at the time of the construction of the Residential Units, Teresa told him that he, Nicola, Salvatore and Carmine were each entitled to one of the Residential Units. The plaintiff further asserts that when the Commercial Units were built, Teresa told him that he, Nicola, Salvatore and Carmine had an equal entitlement to them. The plaintiff deposed that further conversations he had with Teresa over the years were consistent with these comments.

The defendants' control of the trust property

25 Subsequent to the creation of the Family Trust, Vanta became registered on the titles of the Commercial and Residential Properties, retained accountants, made trust distributions and prepared and filed financial documentation, including financial statements and tax returns. Since the Residential and Commercial Units were developed, they have been rented. Vanta has managed the leasing out of these properties as assets of the trust, and has maintained control of the income derived through such.

26 Vanta has two issued ordinary shares. From 1976 until 2010, Teresa and Carmine were directors and shareholders of Vanta. In 2010 and 2011, various changes were made in respect of the directors, secretary and shareholders. On 29 August 2010, Teresa resigned as a director and Salvatore was appointed in her place. On 19 August 2011, Teresa's one share was transferred to Nicola, and Carmine transferred his one share to Salvatore and resigned as secretary and director. On the same date, Salvatore was appointed secretary. Nicola and Salvatore are the current directors and shareholders of Vanta, and Salvatore is the current secretary.

27 On 14 October 2015 Teresa died. On 25 June 2018 probate of Teresa's will dated 3 April 1992 was granted to Salvatore and Carmine. Her will appoints and nominates Carmine as 'Appointer of the Mantovani Family Trust'. The inventory of assets filed with the application for the grant of probate lists the Broadway Street Property as an asset of Teresa's estate. Pursuant to Teresa's will this property was devised to the plaintiff. Teresas will purports to devise the Commercial and Residential Properties to Nicola, Salvatore, Carmine and the plaintiff in roughly equal shares and the residue of her estate to her four sons in equal shares.

28 The inventory of assets values the Broadway Street Property at $208,000 and a managed fund is valued at $22,892.64. The only liability listed on the original inventory was an amount of $26,644.75 owing to Cobram District Health. On 5 March 2019, Salvatore swore an amended inventory of assets and liabilities which included a further liability of the estate of $13,200, stated to be a 'loan from the Mantovani Family Trust.'

29 The estate, as currently set out in the inventory, has insufficient funds to cover its liabilities. The plaintiff has stated that Salvatore and Carmine, as the executors of Teresa's estate, have declared an intention to sell the Broadway Street Property to satisfy the estate's debts. In 2020, the plaintiff ceased paying rates and water bills for the Broadway Street Property because the addressee on the notices was changed to the legal personal representatives of Teresa's estate and were no longer being delivered to him.

30 Since Teresa's death, there has been dispute between the plaintiff and the defendants as to entitlements to assets, the terms of the Family Trust and the administration of Teresa's estate.

31 Correspondence relating to the lost Deed and the efforts made to locate it dates back to 2017. The plaintiff's solicitor, Mr Craig Healy of SMR Legal Pty Ltd ('SMR Legal'), confirmed that correspondence between him and the solicitors for the defendants, Whyte, Just & Moore Lawyers ('WJM'), the solicitors for Carmine in his personal capacity, and Cassidys Morrison & Teare ('CMT'), the solicitors for Carmine and Salvatore in their capacity as executors of Teresa's estate, about the missing Deed took place over several years. All parties allege to have carried out extensive searches for the Deed, to no avail.

32 By e-mail dated 25 May 2017, Mr Aaron Jolly of WJM observed that the issues surrounding Vanta and the Family Trust were 'yet to be significantly progressed'. In the correspondence, Mr. Jolly stated that his understanding of the circumstances was that Vanta, 'at least initially and most likely still does', hold the properties in its capacity as trustee of the Family Trust, but that no formal documents relating to the trust or recording the vesting of the Family Trust had been located.

33 By e-mail dated 15 October 2017, the plaintiff's former solicitors, Deane & Associates contacted Perta Thomson Partners ('Perta Thomson'), the former accountant to Vanta and the Family Trust, to request documents relating to the Family Trust. By reply dated 18 October 2017, Perta Thomson confirmed that it did not hold a copy of the Deed or any other documents or records relating to the Family Trust.

34 On 2 February 2018, Mr Alex Sheed-Finck of SMR Legal informed the plaintiff's solicitors that 'after long and meticulous searches there has been no success in locating the trust deed'. Mr Sheed-Finck noted that the Schedule to the Family Trust had been produced by the plaintiff in 2017, but 'no further documents that might assist with the terms or existence of the trust to date'.

35 On 17 April 2018, Mr Sheed-Finck again contacted the plaintiff's solicitors to inform him that the Deed could not be located and attached a letter from M+S Group Accountants Pty Ltd ('M+S Group Accountants') dated 28 March 2018. In the letter, Mr Raymond Warren, accountant at M+S Group Accountants, confirmed that the firm was the current accountant for the Family Trust. Mr Warren advised that the firm had carried out extensive searches for the Deed on numerous occasions and set out the specific actions taken in an attempt to locate it, including referring to document storage systems, searching their Trust Deed strong room and checking their Trust Deed register, to no avail.

36 The plaintiff deposed that he has 'never seen a copy of the trust deed'. By e-mail dated 26 October 2018, the solicitors for the plaintiff responded to a request from SMR Legal that the plaintiff confirm he had made 'all searches at the family home as are necessary to satisfy himself that there is absolutely no way a copy of the trust deed' was there. The plaintiff's solicitors reiterated that the plaintiff had never been given a copy of the Deed and had never been in possession of such.

37 By affidavit sworn 26 June 2019, Salvatore deposed that he had searched documents in his and Teresa's possession and instructed his accountants to do likewise and, despite these searches, it had not been possible to locate the Deed or a copy of it. Salvatore also stated that he had visited the Centrelink office in Shepparton to enquire as to whether they held a copy of the Deed on file and was told by a staff member that there was no copy in Centrelink's possession.

38 In his affidavit, Salvatore also deposed that in mid-2010 he witnessed Teresa tearing up pieces of paper that she said constituted the Deed for the Family Trust. According to Salvatore, Teresa complained about the length of time that the trust was said to exist and the '99-years' in the Deed. Salvatore deposed that he did not understand what provoked Teresa to tear up the pieces of paper.

39 Salvatore further explained that shortly after this, in about August 2010, Teresa had said she wanted to apply for a pension, but had received advice from her accountants to the effect that she would be ineligible to receive a pension from Centrelink whilst she was a beneficiary of the Family Trust. According to Salvatore, steps were thus taken by Teresa's accountants to formalise what he understood to be the end of the Family Trust as it was then constituted. Salvatore understood that the Family Trust 'was to be brought to an end and re-started', and that 'those of us who wanted to manage the Trust property and perhaps one day benefit from it would sign in as its beneficiaries'.

40 Salvatore deposed to signing a piece of paper given to him by Teresa's accountants for the purpose of 'signing in' to the purportedly reconstituted trust. According to Salvatore, Nicola also signed this piece of paper, but Carmine did not, allegedly stating that he wanted 'nothing to do with the management of the Trust assets'. Salvatore also deposed to asking the plaintiff to 'sign in' to the purportedly reconstituted trust on three occasions in late 2010. According to Salvatore, the plaintiff refused to sign the documents on each occasion.

41 Nicola similarly provided evidence as to his belief that the Family Trust had been reconstituted in 2010. He asserted that the plaintiff 'was asked on many occasions to "sign into"' the purportedly reconstituted trust, but that the plaintiff 'did not do so and said words to the effect that, "he did not want any part of it"'.

42 By affidavit dated 19 July 2019, the plaintiff disputed Salvatore and Nicola's version of events. He stated that, to his knowledge, all of Teresa's 'important documents' were kept in a safe deposit box at the Cobram branch of the ANZ Bank, and it was therefore unlikely that Teresa would have torn up the Deed in the manner described by Salvatore. The plaintiff further deposed to having had a conversation with the manager of the Cobram branch of the ANZ Bank in 2015, sometime after Teresa's death, who told him that two male family members had removed all documents from Teresa's safe and closed her bank account.

43 The plaintiff also recounted a conversation with Mr George Cattermole, solicitor to Vincenzo and Teresa, that took place in 2013 or 2014. According to the plaintiff, Mr Cattermole told him that 'his brothers had come and taken documents'.

44 The plaintiff also stated that he was visited by Salvatore in the winter of 2010. The plaintiff was in an orchard at the time. He deposed that Salvatore gave him a document and said words to the effect of 'sign this, it's for the trust'. No further explanation was provided by Salvatore and the plaintiff deposed that there was no discussion as to the content or effect of the document. The plaintiff stated that he was not wearing his glasses at the time and could not read the document. He deposed that he understood that he was already a beneficiary of the Family Trust and therefore did not think he needed to sign another document.

45 No documentation or evidence to substantiate the claim that the Family Trust was reconstituted in 2010 has been produced by the defendants. Submissions from the defendants now provide that any allegation that the Family Trust had been reconstituted has effectively been abandoned.

The defendants' refusal to provide trust documentation

46 The plaintiff deposed that he has 'very limited information as to how the trust assets have been dealt with'. By his solicitors, the plaintiff has sought production of trust documents and financial records pertaining to the Family Trust from the defendants since April 2017. The plaintiff's solicitors have made repeated requests to the defendants' solicitors for access to the Deed and related documents and information about the administration of the Family Trust.

47 Despite these requests, the defendants refused to provide the plaintiff with any documents or records relating to the Family Trust until very recently. Between April 2017 and mid-2019, that refusal was founded on assertions that, in the absence of the Deed, it was unclear whether the plaintiff was a beneficiary of the Family Trust and thus it was inappropriate to grant him access to trust documentation. Between mid-2019 and 2021, the defendants' refusal to supply documentation relating to the Family Trust was based on allegations that the Family Trust had been reconstituted in 2010, such that the plaintiff was no longer a beneficiary.

48 On 18 December 2020, the defendants provided the plaintiff's solicitors with financial statements and tax returns for the Family Trust for the years 2012 to 2020. On 15 July 2021, the solicitors for the defendants agreed to provide the balance of trust documents in their possession, as sought in the plaintiff's amended originating motion.

Financial statements and tax records for the Family Trust

49 The financial statements and tax returns for the Family Trust for the years 2012 to 2020, as provided by the defendants, show that rental income generated by the Commercial and Residential Units, and expenses incurred in relation to the management of such, have been treated as assets and liabilities of the Family Trust.

50 The financial statements for the Family Trust provided for the years 2012 to 2020 also record annual trust beneficiary distributions to Nicola and Salvatore. The total value of distributions made between 2012 and 2020 is $124,147.53. No distributions are recorded for any other individuals in any of the financial statements provided for the Family Trust.

51 At this stage of the proceeding, the defendants' initial claim that the Family Trust had been brought to an end and reconstituted in 2010 has been abandoned by the defendants. Accordingly, there is no longer any significant factual controversy between the parties. Both the plaintiff and the defendants agree that the Family Trust was created, that Vanta holds the Residential and Commercial units in its capacity as trustee of the Family Trust and that the Deed which created the Family Trust has now been lost.

52 The main question to consider is what, if any, legal consequences flow from the loss of the Deed. In order to answer this question, the Court must first be satisfied that the Deed is lost and therefore no longer available. The Court must then consider whether, in the absence of the Deed, secondary evidence can be relied upon to prove both its existence and its contents. Though not explicitly raised in the defendants' submissions, the question of whether the presumption of regularity will apply to 'save' the Family Trust, may also be relevant. If both of these questions are answered in the negative, it will be necessary to determine whether the Family Trust fails for uncertainty as a result and, whether as a consequence of this, Vanta holds the trust property on a resulting trust for Teresa's estate. Finally, it must be determined whether an order for the taking of accounts and payment of moneys owed is appropriate in the circumstances.

53 Determining the legal consequences of the loss of the Deed therefore necessitates consideration of a series of discrete questions as follows:

(a) Question 1: Is the Deed lost?

(b) If yes to question 1 - Question 2: Can secondary evidence be relied upon to prove the existence and contents of the Deed?

(c) If no to question 2 - Question 3: Can the presumption of regularity be relied upon to save the Family Trust?

(d) If no to questions 2 and 3 - Question 4: Does the Family Trust fail for uncertainty?

(e) If yes to question 4 - Question 5: Should a declaration be made that Vanta holds the trust property on resulting trust for Teresa's estate?

(f) If yes to question 5 - Question 6: Should an order for the taking of accounts and payment of monies owed to Teresa's estate be made?

54 To make any determinations in relation to the consequences of the loss of the Deed, the Court must first be satisfied that the Deed is unavailable and reasonable searches have been conducted for it.

55 Pursuant to pt 2 cl 5 of the Evidence Act 2008 (Vic) ('Evidence Act'), a document is taken to not be available where it cannot be found after reasonable inquiry and search by the party.[2] The evidence provided in support of this must be sufficient to satisfy the Court that the Deed is lost or destroyed and cannot be recovered.[3]

56 The plaintiff submits that all reasonable searches for the Deed have been undertaken, such that the Court can be satisfied that the Deed is lost. Likewise, the defendants agree that the Deed is lost and confirm that extensive searches for the Deed have been carried out.

57 The plaintiff and defendants all depose to having carried out extensive searches for the Deed in their family residences and personal files, without success. Evidence has also been provided by the plaintiff and the defendants as to the inquiries that have been made with financial institutions, government agencies, accountants and solicitors that have acted for Vanta, the Family Trust, or other members of the Mantovani Family, to no avail.

58 On the basis of the evidence, the Court is satisfied that reasonable searches and inquiries have been made with all persons, legal and accountancy firms and authorities, that could reasonably be expected to hold a copy of the Deed. The Court is satisfied that the Deed is lost.

Question 2: Can secondary evidence be relied upon to prove the existence and contents of the Deed?

59 The Evidence Act does not specifically contemplate how the existence of a document is to be proved. Instead, this depends on common law principles as modified by the general provisions of the Evidence Act.[4]

60 Section 48(4) of the Evidence Act sets out how a party may adduce evidence of the contents of a document:

A party may adduce evidence of the contents of a document in question that is not available to the party, or to the existence and contents of which are not in issue in the proceeding, by -

(a) tendering a document that is a copy of, or an extract from or summary of, the document in question; or

(b) adducing from a witness evidence of the contents of the document in question.[5]

61 Thus, where a document cannot be found after reasonable searches and inquiries by a party, its existence and contents may be proved by secondary evidence. Such secondary evidence may be sourced from a person who has seen the document and can provide evidence of its contents, or it may take the form of another document that purports to record the contents of the unavailable document.[6]

62 The secondary evidence must provide 'clear and convincing proof' of not only the existence, but also the contents of the original document, in the same order as the proof required to establish an entitlement to rectification of a written instrument.[7] As stated by McLelland J in Maks v Maks:[8]

I am of opinion that where the original writing is not produced and secondary evidence is relied on, there must be clear and convincing proof not only of the existence, but also of the relevant contents, of the writing, of the same order as the proof required to establish an entitlement to the rectification of a written instrument ... the two classes of case being to my mind in relevant respects analogous.[9]

63 The evidentiary standard of 'clear and convincing proof' expounded in Maks v Maks has been specifically adopted in a number of cases involving the use of secondary evidence to prove the existence and contents of lost deeds of trust in recent years.[10]

64 Exactly what is required to meet this standard will vary from case to case, depending on the nature and complexity of the missing document.[11] However, the threshold would appear to be relatively high. In Chase v Chase,[12] Rein J made the following observation about the use of secondary evidence to establish the existence and contents of a missing document:

where secondary evidence was successfully used to prove the existence of a missing document, the typical factual scenario in the successful cases is where the text of the missing document was able to be reproduced in full (e.g. Barp Nominees[13]) or there was sufficient corroborating evidence to be sure of the terms of the missing document (e.g. Palmer[14] at [567]-[584]), such that the need for clear and convincing proof of the terms of the document was met.[15]

65 A relatively stringent interpretation of this standard is supported by a survey of the specific documents and types of evidence that have been held to provide clear and convincing proof of the existence and contents of a lost trust deed in past decisions.

66 For instance, in Re Porlock Pty Ltd,[16] secondary evidence in the form of a letter written by an accountant that set out in full the details of a trust was accepted as providing clear and convincing proof of the existence, terms and content of the original trust deed, which had since been lost.

67 In D.R. McKendry Nominees Pty Ltd,[17] Digby J accepted that secondary evidence from a solicitor who had authored a missing trust deed and was able to depose that its terms were identical to a standard precedent, a copy of which was available, provided clear and convincing proof of the missing deed.

68 Similarly, in Barp Nominees,[18] Pembroke J declared a trustee to be justified in continuing to manage and administer a trust notwithstanding the loss of the original deed where there was evidence that identical trusts had been established for siblings. A witness who had seen the missing trust deed deposed that its terms were identical to the deed establishing the other sibling's trust, which was still available. In reaching this conclusion, his Honour emphasised:

this is not a case of reconstruction of a trust and it is far more than mere guesswork or an exercise of the imagination. The application is based upon the actual personal observation and remembrance of the contents of the lost document.[19]

69 In Sutton v NRS(J) Pty Ltd,[20] a photocopy of an original deed was accepted to provide clear and convincing proof of the original deed in circumstances where there was evidence that the trust had been administered on the terms set out in that photocopy for many years.

70 Finally, in Re M & L Richardson Pty Limited,[21] an unexecuted copy of a missing trust deed, in conjunction with evidence of continuous administration of the trust on the terms set out in that copy, was held to offer the requisite clear and convincing proof of the contents of the missing deed.

71 While the threshold of what will amount to clear and convincing proof of the existence and contents of an original instrument would appear to be relatively high, the standard of proof applicable to such determinations remains the balance of probabilities.[22] However, in applying the balance of probabilities standard:

the Court must be vigilant, being fully cognisant of the dangers of error and fraud, and the gravity of the consequences flowing from any finding made.[23]

72 The plaintiff submits that there is no indication that any evidence possessed by the defendants as to the terms of the Family Trust would reach the threshold of 'clear and convincing'. The plaintiff cites s 48(4) of the Evidence Act and the decisions in Maks v Maks,[24] D. R. McKendry Nominees Pty Ltd,[25] and Yap v Lee[26] in support of this standard of proof.

73 The defendants submit that, notwithstanding the loss of the Deed, there is 'compelling proof of the essential elements of the trust'. In support of this submission, they submit that the Schedule identifies the beneficiaries and appointer of the trust. They submit that on the basis of the tax returns dating back to 2011, and prepared by a professional accountancy firm, and which describe the 'Mantovani Family Trust' as a 'discretionary trading trust', the Family Trust can be identified as a discretionary trust. As such, the defendants submit, the trust could continue to operate as a discretionary family trust and would not need to be wound up. Finally, the defendants argue, it can be inferred that the land owned by Vanta constitutes the trust property.

74 In first applying the standard of clear and convincing proof of the existence of the Deed to the available secondary evidence - namely, the Schedule, the financial records and tax returns provided by the defendants in relation to the Family Trust for the years 2012-2020, and, to a lesser degree, Teresa's will - the Court is satisfied that, in 1976, the Deed establishing the Family Trust was created.

75 The Schedule takes the form of a document that would be attached to a deed of trust, and lists details that are characteristic of a trust arrangement, including the Family Trust's name, beneficiaries, settlor, appointer and settled sum. The financial records similarly refer to the 'Mantovani Family Trust' and indicate that trust property has been managed as such and that Vanta has operated on the basis that it is trustee to the Family Trust for some years. The fact that Teresa's will, dated 1992, nominates Carmine as 'Appointer of the Mantovani Family Trust' provides further proof of the Deed's existence.

76 Further, the parties do not dispute the Deed's existence. Although little direct evidence is available about the creation and execution of the Deed, evidence provided by the plaintiff and the defendants about the establishment and operation of both Vanta and the Family Trust is consistent with the Deed's existence and execution. The Deed's existence is likewise supported by evidence of correspondence with accountants and solicitors about the Family Trust. On this basis, the Court is satisfied that the available secondary evidence pertaining to the Deed provides clear and convincing proof of its existence.

77 However, in considering whether the Deed's contents can be established by this secondary evidence, it is clear that the threshold of 'clear and convincing proof' is not reached. The Schedule, whilst offering some basic information about the Family Trust, falls far short of providing clear and convincing proof of the contents of the Deed. It does not describe the nature of the trust as fixed or discretionary. It does not elucidate the basis upon which trust distributions are to be made, nor does it provide evidence of whether, how or when the vesting of the Family Trust is to occur. The Deed itself may contain any number of terms concerning the means by which the trustee is to manage and administer the trust property. It may also list additional beneficiaries, specify further trust property, or describe charitable objects of the trust, the details of which are not set out in the Schedule.

78 Nor does the other secondary evidence - namely, the financial statements and tax returns provided by the defendants for the years 2012-2020 - provide clear and convincing proof of the contents and terms of the Deed. The Court does not accept the defendants' submission that financial records describing the Family Trust as discretionary, which are dated over 30 years after the creation of the Deed, provide clear and convincing proof of the contents of the original document. It is not clear that the accountant who prepared these financial statements had sighted the Deed, or that any of the information contained in the statements is an accurate reflection of the contents of the Deed, especially in light of the defendants now-abandoned allegations of reconstitution of the Family Trust.

79 The available secondary evidence therefore cannot be said to provide clear and convincing proof of the contents of the Deed. No record exists of the Deed's terms, and no evidence of its contents has been provided by any person who has sighted the Deed. The circumstances in this proceeding can be clearly distinguished from past decisions where secondary evidence has been found to provide clear and convincing proof of a lost trust deed. In each of the authorities considered above, cogent and persuasive evidence was provided of the full contents of a missing trust deed, usually in the form of a replica or copy of the original deed itself.

80 As the secondary evidence that is available in the present case falls far short of establishing the Deed's contents and thus, the terms of the Family Trust, making a declaration that Vanta is justified in continuing to administer the trust on the basis of such evidence would necessarily involve a degree of 'mere guesswork'. In the absence of clear and convincing proof of the Deed's contents, the Court is not able to make such a declaration.

Question 3: Can the presumption of regularity be relied upon to save the Family Trust?

81 The presumption of regularity is a rebuttable presumption which establishes due appointment and capacity to act. It has been expressed as establishing that:

where an act is done which can be done legally only after the performance of some prior act, proof of the later act carries with it a presumption of due performance of the prior act.[27]

82 In Kingham v Sutton,[28] Wilcox and Marshall JJ explained:

As Wigmore, in Evidence in Trials at Common Law Vol 9, reveals at para 2534, the presumption of regularity is:

...more often mentioned than enforced; and its scope as a real presumption is indefinite and hardly capable of reduction to rules.

It may be said that most of the instances of its application are found attended by several conditions; first, that the matter is more or less in the past and incapable of easily procured evidence; second, that it involves a mere formality or detail of required procedure in the routine of a litigation or of a public officer's action; third, that it involves to some extent the security of apparently vested rights so that the presumption will serve to prevent an unwholesome uncertainty; and finally, that the circumstances of the particular case add some element of probability.[29]

83 In other words, the presumption will only operate in relation to 'some formal act' or 'mere formality'. In Burnside v Mulgrew; Re the Estate of Grabrovaz,[30] Brereton J considered the application of the presumption of regularity and drew a distinction between cases where 'what is in question is compliance with formal requirements' and those involving a 'substantive issue'.[31] The presumption may potentially apply in cases of the former, but not the latter.

84 Considering specifically its application in relation to lost deeds of trust, the presumption of regularity has been applied in cases involving questions about adherence to formal requirements and due execution,[32] but expressly rejected in cases where the substantive content of a deed of trust was in issue.[33]

85 Neither party makes explicit submissions in relation to the presumption of regularity. However, the defendants cite Re Thomson,[34] where the presumption of regularity was used to render an unsigned deed the operative deed for a superannuation fund, in support of the contention that the Court should treat the Family Trust as continuing to subsist, albeit with the complication that the trust deed is missing. As such, for the sake of completeness, it is prudent to consider the presumption's application in the circumstances.

86 The issues arising from the loss of the Deed clearly extend beyond mere adherence to formal requirements to encompass substantive concerns. What is at issue here is not whether the formal steps to execute the Deed and thus create the Family Trust were duly taken. What is at issue is the substance of that Deed - its contents, its terms and its effect. The presumption of regularity therefore cannot be relied upon to overcome the lack of evidence as to the content of the Deed and the terms of the Family Trust.

Question 4: Does the Family Trust fail for uncertainty?

87 As the Deed's contents cannot be proven by secondary evidence, and the presumption of regularity does not apply, it is necessary to consider whether, as a consequence, the Family Trust has failed.

88 The office of trustee carries with it a number of strict obligations and duties, many of which are fiduciary in nature. Amongst these are the duty to become thoroughly acquainted with the terms of the trust and all documents relating to or affecting the trust property,[35] to adhere rigidly to the terms of the trust and conform to and carry out the wishes of the settlor as expressed in the deed of trust,[36] and to keep and render proper accounts and report to beneficiaries or to a court regarding the administration of the trust.[37] A trustee also has a duty to act fairly and impartially between beneficiaries and to administer the trust property in a way so as to avoid benefiting one beneficiary or set of beneficiaries at the expense of another.[38]

89 The obligation to act in strict conformance with the terms of a trust has been described as 'perhaps the most important duty' of a trustee.[39] Where it requires advice or direction in relation to the management or administration of trust property or the interpretation of a trust instrument, a trustee should make an application for judicial advice.[40] A failure to seek advice is done at the trustee's own peril, as any departure from the terms of the trust and any negligence in the performance of the duties of the trust will amount to a breach of trust,[41] as will acts in contravention of the duties imposed on the trustee by the trust or in excess of its powers.[42]

90 Where the contents of a trust deed cannot be ascertained, the trustee cannot discharge its obligation to act in strict conformance with the terms of the trust. As a result, the trust necessarily cannot continue to operate, and therefore fails. In Yap v Lee,[43] McDonald J considered the loss of a deed to a family trust in similar circumstances to this proceeding. After accepting that a trust had existed but the deed had since been lost, and finding that there was insufficient secondary evidence to prove the deed's contents, his Honour made a declaration that the trust in question had failed for uncertainty.[44]

91 Drawing the conclusion that a trust has failed for uncertainty due to a lack of clear and convincing proof of its terms would appear to be generally consistent with the approach that has been taken where the contents of a lost document cannot be proven by secondary evidence, that is, any legal obligations and rights that the lost document purports to create are voided.

92 For instance, in Maks v Maks,[45] while McLelland J found that it was more probable than not that a document creating a trust agreement existed, he was not satisfied that the available secondary evidence provided clear and convincing proof of the terms of that trust agreement. As such, his Honour was unwilling to make any declaration of trust over the property in question. Similarly, in cases where secondary evidence has proven the existence of a lost will, but failed to provide clear and convincing proof of its contents, courts have been unwilling to make any declarations in respect of the lost document.[46]

93 On this basis, it can be concluded that a dearth of clear and convincing proof of the contents of a trust deed, such that the terms and nature of the trust in question cannot be ascertained, will render a trustee incapable of fulfilling its obligations to give effect to the terms of the trust and therefore cause the trust to fail for uncertainty.

94 The plaintiff submits that Vanta, as trustee of the Family Trust, has an obligation to ascertain the terms of trust and administer it in accordance with those terms. However, the loss of the Deed and resulting absence of clear and convincing proof of the terms of the Family Trust has made it impossible for Vanta to fulfil this obligation. Citing Yap v Lee,[47] the plaintiff asserts that the result of this is that the Family Trust fails for uncertainty.

95 The plaintiff further notes that for the preceding several years, Vanta has had the option of applying to the Court to propound a trust deed pursuant to which the Family Trust can be administered. However, the plaintiff submits that such an application would likely have been fruitless in any case, as it would require the defendants to produce 'clear and convincing proof' of the contents of the Deed.

96 Finally, the plaintiff submits that there is 'no credible or reliable evidence' of any reconstitution of the Family Trust, as initially alleged by the defendants, and thus at all material times, Vanta has been trustee of the Family Trust and the trust has not been reconstituted.

97 The defendants abandoned the submissions made earlier in proceeding relating to the alleged reconstitution of the Family Trust in 2010. Instead, they submit that 'there was and is a discretionary trust' in existence, with Vanta as trustee. They dispute the plaintiff's submission that the Family Trust has failed for uncertainty as a result of the loss of the Deed, arguing that it is fallacious to equate the loss of a trust deed with the failure of a trust.

98 The defendants further submit that the Family Trust has been operating and can continue to operate, in the absence of the Deed. They point to the fact that accountants have been preparing the Family Trust's financial documents without the Deed; that Vanta's articles of association permit it to occupy the office of trustee; that the Commercial and Residential Units owned by Vanta have been maintained and leased to tenants to generate income for the Family Trust; and that trust property and income has been dealt with separately to the property and income of 'the trustee's directors and beneficiaries'.

99 The defendants submit that past decisions in cases involving lost trust deeds where putative trustees have applied for declarations of the terms of nominal trust deeds in the absence of the original deed, such as Re Thomson[48] and Application by South Melbourne Continental Pty Ltd,[49] have not proceeded upon an assumption that the trust has failed. Instead, the defendants submit, such cases have treated the trust as continuing to subsist, albeit with the complication that the trust deed is missing.

100 Almost all past cases involving lost deeds of trust have taken the form of applications for judicial advice made by trustees that have diligently and proactively sought the Court's input and assistance in relation to the administration of a trust in the absence of a deed, rather than the type of relief sought by the plaintiff in the present circumstances.

101 These cases have typically resulted either in a finding that the available secondary evidence provided clear and convincing proof of both the existence and contents of the missing deed of trust,[50] or alternatively that the secondary evidence was incapable of establishing either the existence or the contents of the deed.[51] As such, it has scarcely been necessary to consider an order such as that sought by the plaintiff, or the consequences that flow from a finding as has been made in this proceeding, that secondary evidence provides clear and convincing proof of the existence, but not the contents, of a lost trust deed.

102 In contrast, Vanta has, for many years, administered the Family Trust and dealt with trust property in the absence of the Deed, with either disregard to or oblivion of the terms set out in the Deed. For many years, it has failed to seek advice as to the proper administration of the Family Trust, instead leaving the plaintiff, a beneficiary of the trust, with no option but to apply to this Court for assistance. In addition, the defendants refused to provide documentation and information about the Family Trust until ordered to do so, and also mounted and subsequently abandoned unsubstantiated contentions about an alleged reconstitution of the Family Trust.

103 Given the paramountcy of a trustee's duty to ascertain and strictly adhere to the terms of a trust, there is no doubt that in doing this, Vanta has acted in breach of trust. To permit Vanta to continue to deal with trust assets and administer the trust in this manner would effectively amount to sanctioning further breaches of trust.

104 Further, in considering the full extent of what is not, and cannot be known about the terms of the Family Trust and the manner in which Teresa intended for the trust property to be managed, it is clear that there is no basis upon which the Family Trust can continue to operate. As set out above, the Deed may contain any number of terms concerning the means by which the trustee is to manage and administer the trust property. The loss of the Deed has meant that there is no way that Vanta, as trustee, can be cognisant of and adhere to these terms in its dealings with trust property, and no way that the Family Trust can be administered in accordance with the intentions of those who established it.

105 Applying Yap v Lee,[52] the consequence of this must be that, notwithstanding the Deed's existence at some point in the past, and Teresa's clear intention to create a trust, the Family Trust fails. The content, terms and nature of the Deed are unknown, and thus the Family Trust is, both in a general and a specific sense, uncertain. Without being able to ascertain the terms of the trust, the Court is unable to declare that Vanta is justified in continuing to manage and administer the trust property.

106 As a result of the loss of the Deed and the lack of clear and convincing proof of its contents that is available from secondary evidence, the Family Trust has failed for uncertainty.

Question 5: Should a declaration that Vanta holds the trust property on resulting trust for Teresa's estate be made?

107 With the Family Trust failing for uncertainty, it is necessary to consider whether the order sought by the plaintiff should be made, that is, a declaration that all assets held by Vanta are subject to a resulting trust in favour of Teresa's estate.

108 A resulting trust, sometimes referred to as an implied trust, is a trust that arises in favour of the settlor or those taking through the settlor.[53] There are two broad categories of resulting trust.[54] The first, 'automatic resulting trusts', arise when the settlor has transferred the legal interest in property but failed to dispose of the whole of the beneficial interest in that property. The second category, termed 'presumed resulting trusts', arise where a person purchases property in the name of another, or in their joint names, but the other person contributes none of the purchase money. It is the former category, automatic resulting trusts, that is of relevance in this proceeding.

109 Where an express trust 'fails... or is ineffectually declared, or becomes incapable of taking effect',[55] an automatic resulting trust arises by operation of law, such that the trustee holds the trust property on trust for the settlor or the settlor's estate.[56]

110 The learned authors of Jacobs' Law of Trusts explain:

A resulting trust arises upon a disposition of the legal estate without any disposition of the beneficial interest. It arises by reason of a mistake or an oversight in the drafting of a document evidencing an express trust or a failure to make provision for the particular contingency which has later occurred.

...

The same rule applies where express trusts fail because of the death of the beneficiary before the death of the testator, or because of uncertainty, or because of the trust's illegality, or because of the total failure of the purposes for which the trust was constituted, or because of the trust's unenforceability through non-compliance with the provisions of the Statute of Frauds or its modern equivalent.[57]

111 In such circumstances, the resulting trust arises by operation of law, as an 'automatic re-direction of the failed express trust to return any remaining trust property to the provider',[58] in recognition of the fact that the provider of the property did not intend to benefit the recipient.[59] In this way, the failure of an express trust can be understood as giving rise to a new equitable interest in the trust property, which vests in the settlor by way of resulting trust. The failure of the express trust causes the new equitable interest to be 'engrafted' upon the legal interest in the trust property.[60]

112 The loss of a trust deed and consequential failure of a trust has been recognised as giving rise to a resulting trust. In the similar circumstances considered in Yap v Lee,[61] after finding that the trust in question had failed for uncertainty due to the loss of the original trust deed, McDonald J made a further declaration that the trustee held all property, rights and assets it had acquired in its capacity as trustee, as well as any further income arising from the trust property, on resulting trust for those who had contributed property to the trust.

113 Citing Re Vandervell's Trusts (No 2),[62] the plaintiff argues that where an express trust fails for uncertainty, the trust property will be held on a resulting trust for the settlor (or his heirs or assigns). In this case, the plaintiff submits that Teresa is the residuary beneficiary of her father's (the settlor's) estate and she transferred all the properties to Vanta. As such, the plaintiff submits, the trust properties are held by Vanta on a resulting trust for Teresa.

114 The defendants dispute the plaintiff's submission that the loss of the Deed gives rise to a resulting trust. Though recognising that an automatic resulting trust may arise in circumstances where an express trust fails due to uncertainty, the defendants submit that 'uncertainty' in this context does not encompass 'a general sense of uncertainty as to the terms of the trust', and is instead limited to failure of an express trust due to one of the 'three certainties': certainty of intention, subject or object.

115 The defendants further submit that the declaration of resulting trust sought by the plaintiff would, in effect, 'destroy the existing trust and create a new trust'. They posit that the Court has no power to wind up or terminate a trust, citing Re Gaydon,[63] Westfield QLD No. 1 Pty Limited & Anor v Lend Lease Real Estate Investments Limited & Ors,[64] and Baba v Sheehan[65] and argue that the order sought by the plaintiff would be in contravention of this principle.

116 The evidence that is available in relation to Teresa's intention to create the Family Trust and that she transferred the trust property to Vanta is relevant. The secondary evidence, namely, the Schedule, the financial records for the Family Trust, and Teresa's will - clearly evinces an intention on Teresa's part to create a trust. Teresa's (albeit invalid) devising of the Residential and Commercial Units to the plaintiff, Nicola, Salvatore and Carmine under her will is particularly persuasive in this regard. In transferring the trust property to Vanta, Teresa clearly did not intend for it to retain the beneficial interest in that property, nor did she intend that it would take such property absolutely.

117 With this in mind, and in light of McDonald J's declaration of a resulting trust in similar circumstances in Yap v Lee,[66] the result of finding that the Family Trust has failed for uncertainty is that Vanta holds the trust property, that is, the Residential and Commercial Units, on a resulting trust for Teresa's estate. Although the settlor of the Family Trust is Teresa's father, Rocco, the evidence shows that it is Teresa who established the Family Trust and transferred the trust property to Vanta. As the provider of the trust property, it is Teresa in whom the equitable interest vests and in whose favour the resulting trust has arisen. It is also worth noting that the end result would be the same even if it found that the resulting trust had arisen in Rocco's favour. As Teresa is the residuary beneficiary of Rocco's estate, the trust property would be held by Vanta, subject to a resulting trust in favour of Teresa's estate in either case.

118 It is not accepted that an automatic resulting trust only arises upon the failure of an express trust for uncertainty where that uncertainty is in respect of one of the 'three certainties'. As the passage from Jacobs' Law of Trusts quoted above indicates, a resulting trust is a legal device that is enlivened in any circumstance where an express trust fails due to a 'mistake... oversight... or failure to make provision'. The resulting trust is, in essence, equity's solution to the express trust's failure, where that failure is caused by a reason or event that was unforeseen by those who established the trust at the time it was made: in this case, the loss of the Deed and consequential uncertainty of the Family Trust. It automatically revests in the settlor an equitable interest in the trust property, to ensure that the failure, mistake or oversight that causes the express trust to fail does not permit the trustee to retain the beneficial interest in the trust property.

119 In this proceeding, there is sufficient evidence that the Deed existed, and the Court is satisfied that Teresa intended that Vanta hold the Residential and Commercial Units on trust rather than absolutely. However, the loss of the Deed and the consequential uncertainty of its terms and contents has caused the Family Trust to fail. Rather than Vanta retaining both the legal and beneficial interest in the trust property, a resulting trust has arisen by operation of law and thereby created a new equitable interest in the trust property, which has vested in Teresa's estate. To make any other finding would be contrary to principles of equity, and incongruent with Teresa's intention in transferring the property to Vanta.

120 The defendants' submission that finding that a resulting trust in favour of Teresa's estate has arisen, is akin to making an order winding up or terminating the Family Trust and creating a new trust, and therefore beyond the powers of the Court is rejected. No such order is being made, neither explicitly nor effectually. What the Court is doing is recognising that because the terms of the Family Trust cannot be ascertained in the absence of the Deed, the Family Trust cannot be administered and therefore must fail.

121 The resulting trust that arises as a result is not 'a new trust'; it arises automatically, by operation of law, in recognition of Teresa's intention that Vanta not take the trust property beneficially. Indeed, the making of an order that Vanta is justified in continuing to administer and manage the trust property on terms that are not sourced from the original Deed would be far more akin to the creation of a new trust, one that necessarily cannot accurately reflect Teresa's intentions.

122 Accordingly, as a result of the failure of the Family Trust, Vanta holds the trust property subject to a resulting trust in favour of Teresa's estate.

Question 6: Should an order for the taking of accounts and payment of amounts found to be due to Teresa's estate be made?

123 In addition to a declaration of resulting trust, the plaintiff also seeks an order for the taking of accounts and payment of amounts found to be owed to Teresa's estate.

124 There are two bases for the equitable remedy of taking accounts: accounts in common form, where the accounting party accounts only for what has actually been received and disposed of; and wilful default, where the accounting party must account not only for what has actually been received, but also for what should have been received.[67] Before an order for taking accounts on the basis of wilful default can be made, at least one instance of wilful default must be established.[68] As no such wilful default is alleged in the present circumstances, the order sought would appear to be for accounts in common form.

125 In the relationship of trustee and beneficiary, the trustee is the accounting party. An order for accounts requires a trustee (as the fiduciary) to account to the beneficiaries for the transactions undertaken in the discharge or purported discharge of the trustee's powers and duties.[69] Encompassed within a trustee's fundamental obligation to keep and render to beneficiaries a full and candid record of their stewardship is a duty to keep records, a duty to report to beneficiaries and/or a court, and a duty to pay amounts owed to the beneficiaries.[70]

126 In this way, a claim for accounts in common form merely enforces a trustee's obligation to account which arises from the relation of trustee and beneficiary, and does not depend on alleging or establishing any breach or default on the part of the trustee.[71] In Torlonia v Wright,[72] Brereton J made the following observation:

In the context of trustee and beneficiary, the duty to account is founded in the mere relationship of trustee and beneficiary, and all the ingredients of the cause of action for an account exist from the moment of the creation of the trust, with the consequence that at any time the beneficiaries have a cause of action for accounts[73]

127 The duty to account applies equally to trustees holding property subject to a resulting trust. In The Law of Trusts, Ford and Lee state:

Beneficiaries under a resulting trust enjoy the same proprietary rights to the trust property, and the same personal right to ensure that the trust fund is reconstituted ... as beneficiaries under an express trust.[74]

128 Under r 52.01 of the Rules, the Court is empowered to make an order for the taking of accounts at any stage of a proceeding, and may order payment of any amount found to be due on taking the account.[75] However, a limitation period of six years is imposed by statute in relation to an order for the taking of accounts in respect of a breach of trust.[76]

129 The plaintiff submits that an order for the taking of accounts and payment of amounts found owed to Teresa's estate is a necessary corollary to the finding that a resulting trust has arisen in favour of the estate. The plaintiff points to the fact the defendants have had control over and management of trust assets, and that the financial statements provided by the defendants show tens of thousands of dollars' worth of distributions made in the last decade.

130 The plaintiff also submits that the taking of accounts is necessary to resolve the issues surrounding such distributions, and to assess the veracity of the defendants' allegations that these distributions are reflective of the fact that their efforts have improved the value of trust assets.

131 The defendants submit that the plaintiff's application for an order of account and consequential order for the payment of money owed is premature, and that the remedy sought is unavailable. The defendants posit that the remedy of account is available only after a plaintiff satisfies the Court that an equitable cause of action exists, to measure what must be disgorged following a breach of equitable duties.

132 The defendants submit that the plaintiff has not led evidence of any breach or default by the individual defendants, and there is no basis for the making of an order for an account of profits and the payment of money only because a deed cannot be located. According to the defendants, the application amounts to a 'fishing expedition' on the part of the plaintiff in that rather than satisfying the Court that such a cause of action exists and then seeking an accounting of that entitlement, the plaintiff seeks to use the accounting to locate the entitlement and use it as a basis for an order for the payment of money.

133 The defendants submit that an order for an account would be complicated by the difficulties with ascertaining the precise moment as to when the Family Trust failed for uncertainty. Further, they note that it is unclear how an order for accounting would address the history of financial transactions that Vanta has entered into on behalf of the Family Trust, and the efforts made by Nicola and Salvatore as directors of Vanta to maintain the value and productivity of the trust assets. Citing Warman International Ltd v Dwyer,[77] they submit that if an account is ordered, these matters will need to be taken into consideration.

134 As the Family Trust has failed, such that Vanta holds the trust property subject to a resulting trust in favour of Teresa's estate, it is an accounting party and holds a duty to account to the beneficiaries of that trust, that is, the estate. Contrary to the defendant's submissions, this duty exists from the moment of the creation of the trust and is not contingent on establishing any breach of trust on the part of the trustee. By virtue of its capacity as trustee, Vanta holds an ongoing duty to account and pay amounts owed. This aside, the Court has been presented with evidence of numerous breaches of trust on Vanta's part.

135 It is acknowledged that there is some difficulty ascertaining the precise point in time when the Deed was lost and, thus, when the Family Trust failed and the resulting trust in question was enlivened. However, on the available evidence, the Court is satisfied that this occurred prior to 2011 which is prior to the commencement of the accounting period. The financial statements provided and the defendants' submissions establish that Vanta appears to have been administering the Family Trust and managing trust property either on the assumption that the trust was somehow terminated and reconstituted, or simply without regard to the absence of the Deed, since at least 2011.

136 These financial statements show that distributions totalling more than $120,000 have been made in favour of Nicola and Salvatore in the past ten years, yet no distribution has been made to any other individual listed as a beneficiary on the Schedule. The Court does not accept the defendants' submission that these distributions are 'modest sums' that are justified by the work Nicola and Salvatore have done in maintaining the value and productivity of the trust assets, while the plaintiff 'not only did nothing but... positively elected to take that course'. While it may be accepted that a trustee has an entitlement to remuneration for work performed in the administration of the trust and management of trust property, these payments are not made as such, but instead labelled 'distributions to beneficiaries'.

137 The making of such distributions in the absence of the Deed and, therefore, without regard to the terms of the Family Trust, is in breach of Vanta's duties as a trustee. The fact that these distributions were not made fairly and impartially and had the effect of improperly benefiting some beneficiaries at the expense of others, is in further contravention of Vanta's obligations as trustee. The Court is satisfied that an order for an account is necessary to ascertain the full extent of financial transactions undertaken by Vanta in its capacity as trustee and to determine the amounts due to Teresa's estate.

138 An order for the taking of accounts by Vanta and payment of amounts found to be owed to Teresa's estate is justified in the circumstances. However, for limitation reasons, accounts can only be ordered for the period commencing six years before the proceeding was instituted, that is, from 21 February 2013 to the present.

(a) the Mantovani Family Trust has failed for uncertainty due to the loss of the trust deed;

(b) Vanta Pty Ltd holds all of the Family Trust's property, rights and assets acquired by it as trustee of the Family Trust subject to a resulting trust for the estate of Teresa Mantovani; and

(c) Vanta Pty Ltd holds any further income arising from the assets of the Family Trust on the same resulting trust or trusts.

(a) an account be taken of all moneys received and disbursed by Vanta Pty Ltd in respect of the Residential and Commercial Units for the period from 21 February 2013 to date;

(b) all amounts found to be due to the estate of Teresa Mantovani upon the taking of accounts be paid; and

(c) by 4pm on 16 December 2021 the parties file and serve short written submissions as to the costs of the proceeding.

[1] Mantovani v Vanta Pty Ltd [2020] VSC 736, [11] (McMillan J).

[2] Evidence Act 2008 (Vic) Dictionary pt 2 cl 5.

[3] D.R. McKendry Nominees Pty Ltd [2015] VSC 560, [22] (Digby J); Payten v Perpetual Trustee Company [2005] NSWSC 345, [97] (Austin J).

[4] Minassian v Minassian [2010] NSWSC 708, [45] (Ball J).

[6] Minassian v Minassian (n 4) [49] (Ball J), citing Lewis v Nortex Pty Ltd (in liq) [2002] NSWSC 337.

[7] Maks v Maks (1986) 6 NSWLR 34, 36 (McLelland J); Mack v Lenton (1993) 32 NSWLR 259, 261 (Young J); Chapman v Luminis Pty Ltd (No 2) [2000] FCA 1010, [29] (von Doussa J); Minassian v Minassian (n 4) [44] (Ball J).

[8] See generally Maks v Maks (n 7).

[9] Ibid, citing Pukallus v Cameron [1982] HCA 63; (1982) 43 ALR 243, 247 (Wilson J), 250-1 (Brennan J).

[10] D.R. McKendry Nominees Pty Ltd (n 3) [7] (Digby J); Barp Nominees Pty Limited [2016] NSWSC 990, [6] (Pembroke J); In the application of Brailey Holdings Pty Limited [2018] NSWSC 1493, [13] (Kunc J); Application by South Melbourne Continental Pty Ltd [2018] VSC 398, [5] (McMillan J); Chase v Chase [2020] NSWSC 1689, [25] (Rein J); Application by Barry McMahon Nominees Pty Ltd [2021] VSC 351, [12] (McMillan J); The application of M & L Richardson Pty Limited [2021] NSWSC 105, [4] (Kunc J).

[11] Mack v Lenton (n 7).

[12] See generally Chase v Chase (n 10).

[13] See generally Barp Nominees Pty Limited (n 10).

[14] [2015] NSWSC 1856; (2015) 336 ALR 372, [567]-[584] (Hammerschlag J).

[15] Chase v Chase (n 10) [43] (Rein J).

[16] [2015] NSWSC 1243 ('Re Porlock Pty Ltd').

[17] See generally D.R. McKendry Nominees Pty Ltd (n 3).

[18] See generally Barp Nominees Pty Limited (n 10). See also, In the application of Brailey Holdings Pty Limited (n 10).

[19] Barp Nominees Pty Limited (n 10) [6] (emphasis added).

[21] The application of M & L Richardson Pty Limited (n 10).

[22] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170, 171 (Mason CJ, Brennan, Deane and Gaudron JJ); Cahill v Rhodes [2002] NSWSC 561, [56] (Campbell J); Payten v Perpetual Trustee Co Ltd (n 3) [90]-[92] (Austin J); see generally Application by Barry McMahon Nominees Pty Ltd (n 10).

[23] Orifici v Orifici & Ors [2007] WASC 74, [59] (Hasluck J), citing Dalton v Dalton (Supreme Court of Western Australia, Parker J, 24 September 1997) 4; see also Elton v Public Trustee [2014] SASC 149, [40] (Stanley J).

[24] Maks v Maks (n 7).

[25] D.R. McKendry Nominees Pty Ltd (n 3) [7], [10] (Digby J).

[26] [2019] VSC 743, [21] (McDonald J) ('Yap v Lee').

Plaintiff v Defendants

At a glance

Court

Decision date

Before

Source

Judgment (249 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (11)