MATTER : The Trustees Act 1962 (WA), s 92 and

Trustees - Directions under s 92 of the Trustees Act 1962 (WA) - Turns on own facts

Trustees Act 1962 (WA), s 92

Direction given under s 92 of the Trustees Act 1962 (WA)

Trustee at liberty to make further submissions in relation to other directions sought, but not granted

1 MARTIN CJ: Saunders Nominees Pty Ltd ("the Trustee"), in its capacity as trustee of the R M Rowell Family Trust ("the Trust"), has applied for directions under s 92 of the Trustees Act 1962 (WA) ("the Act"). The directions sought relate to:

(a) the payment of the sum of $3.5 million to Angela Joan Rowell ("Mrs Rowell"), pursuant to the terms of a settlement agreement reached in respect of other proceedings; namely, CIV 1922 of 2006;

(b) rejection of a proposal made by a number of beneficiaries of the Trust in respect of the distribution of a portion of the assets of the Trust of those beneficiaries;

(c) the adoption of guidelines by the Trustee in relation to the exercise of their discretion with regard to the distribution of the income of the Trust as between its various beneficiaries, to be applied absent other considerations arising; and

(d) the proposal of the Trustees to not make any distributions to a class of beneficiaries, being the great grandchildren and other remoter issue of Robert Mitford Rowell ("Mr Rowell"), absent other considerations arising.

Trustees Act 1962 (WA), s 92

2 Section 92 of the Act provides:

"(1) Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.

(2) Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient."

3 This jurisdiction has been described in the following terms by Dal Pont GE and Chalmers DRC, Equity and Trusts in Australia and New Zealand (2nd ed, 2000) 668:

"This statutory jurisdiction is attended essentially for private advice by the court to trustees as to what course of action they should follow where they are in doubt as to the propriety of the action contemplated. The applicant must place before the court all relevant evidence such that the court is fully informed as to the matter in issue. Three situations in which approach to the court is particularly useful are where:

(a) the issue is whether legal proceedings ought to be instituted or defended;

(b) it is desired to effect an early distribution of an estate; and

(c) the trustee is in doubt as to the extent of her or his powers under the trust instrument.

Types of advice which may be sought include questions in connection with the rights and interests of beneficiaries or creditors, jurisdictional queries, whether further enquiry should be made in certain circumstances, the ascertainment of any class of beneficiaries or creditors, the furnishing of accounts, the settling of minor administration problems, and the approval of dealings with the trust property.

The procedure should not be used to determine substantive issues, such as issues of interpretation of the trust document which involved the question of breach of trust by any of the trustees; for the purpose of securing additional powers for the trustees; and for resolving a contest between the trustees or other parties to a trust. Nor should it be used to determine respective rights of beneficiaries. These are matters in respect of which beneficiaries are entitled to initiate proceedings." (footnotes omitted)

(See also the observations of Parker J in Featherby v Grljusich, unreported; SCt of WA; Library No 980238; 1 May 1998.)

4 The directions sought are of a kind which fall within the statutory jurisdiction conferred upon the court. They do not involve the determination of substantive issues as to rights or powers, but rather the provision of guidance by the court to the Trustee in the exercise of the discretionary powers conferred upon it by the trust instrument.

5 The Trust was created by deed on 9 February 1976. The terms of the Trust have been varied on five occasions since then. The various deeds effecting those amendments are in evidence. It is not necessary to refer to the history of those amendments.

6 The original appointor of the Trust, and its operative founder, was Mr Rowell. He is now 92 years of age and in declining health. The beneficiaries of the Trust include his wife, Angela Joan Rowell, his children, grandchildren, any remoter issue and a number of specified companies.

7 The Trust has a term of 40 years and will therefore terminate in 2016.

8 In order to satisfy the requirements of s 92 in respect of service upon beneficiaries, directions were made by the court in respect of such service. I am satisfied that service has been effected on all persons interested in the application. The court further directed that a solicitor be appointed to represent the interests of the remoter beneficiaries. This includes a number of infants and potentially includes children not yet born. Submissions have been received from that solicitor. Those submissions do not oppose the grant of the directions sought.

9 Under the various instruments creating and amending the Trust, the Trustee is given an unrestricted discretion with regard to the distribution of capital and income amongst the beneficiaries of the Trust.

10 The Trust has net assets valued at over $13,000,000. Over the years, the Trustee has exercised its discretion as between the various beneficiaries of the Trust in differing ways. The major beneficiary of the exercise of the Trustee's discretion has been Mr Rowell. Another significant beneficiary of the exercise of the Trustee's discretion has been Mrs Rowell.

11 Mr and Mrs Rowell commenced action CIV 1922 of 2006 in this court against various parties including the Trustee in its capacity as trustee of the Trust. It is unnecessary to canvass the various claims made in those proceedings, other than to observe that they included claims by each of Mr Rowell and his wife to the effect that the Trustee had failed to exercise its fiduciary obligation to consider their interests at the time of exercising its discretion in relation to distribution of the assets and income of the Trust. They claimed a greater entitlement to the exercise of that discretion. Other claims were made in the same proceedings in respect of an interest in a family company with substantial assets; the shareholders of which, were all beneficiaries of the Trust.

12 Those proceedings were settled by agreement. Because Mr Rowell is under a disability associated with his advanced years, the approval of the court to the terms of settlement, insofar as they related to his interests, was necessary. After an amendment to the terms of settlement, that approval was given.

13 One of the terms of settlement required an amount of $3.5 million to be paid by the family company, and the Trust, in portions not specified, to Mrs Rowell. The Trustee seeks a direction from the court to the effect that it should make payment of that entire amount.

14 The Trustee submits that there are two alternative bases upon which the Trustee can properly exercise a power to pay the entire amount of $3.5 million required to be paid to Mrs Rowell in settlement of the proceedings to which I have referred. The first is the power of the Trustee to settle claims made against the Trust. The second is the power of the Trustee to distribute the capital of the Trust amongst its beneficiaries, including Mrs Rowell.

15 In relation to the first asserted basis for payment, it will be noticed that under the terms of settlement, the amount of $3.5 million was to be paid by the Trust and the family company, but no provision is made in the settlement agreement as to the proportions of that liability which will be discharged by the Trust of the family company. There is not identity of interest between the shareholders in the company and the beneficiaries of the Trust, although there is a significant overlap between those interests. All persons with an interest in both the family company and the Trust are Mr Rowell's family members. While it would have been possible for the Trustee to assert that some portion of the settlement sum should be borne by the family company, it is of some significance that despite having been served, none of the beneficiaries of the Trust have participated in these proceedings to assert that the Trustee should take that course. Given the relationships between the shareholders in the company and the beneficiaries in the Trust, this is perhaps not surprising. I also take into account in this context that the Trust was itself a significant beneficiary of the settlement of the proceedings which had been commenced by Mr and Mrs Rowell, because of the settlement of the claims which were made against the Trust.

16 But in any event, in my opinion, on the information available to me, there is no reason to think that the Trustee would not be justified in exercising its discretionary power to distribute $3.5 million of the assets of the Trust to Mrs Rowell. She is the wife of the substantive founder of the Trust and, with Mr Rowell, has been a major recipient of the exercise of the discretion of the Trustee over the years in which the Trust has been in operation. She is in advanced years herself and requires a capital sum to be financially secure for the remainder of her life. She also requires some capital with which to improve the living circumstances of Mr Rowell. These are all entirely legitimate and appropriate considerations to be taken into account by the Trustee in the exercise of the discretion conferred upon it under the Trust instruments. Nor is there any evidence to suggest that any other beneficiary of the Trust has a greater claim or need for the exercise of the Trustee's discretion in their favour.

17 The breadth of the discretionary power conferred upon Trustees in a discretionary trust of this nature is well established by authority - see Re Gulbenkian's Settlements [1970] AC 508 (Whishaw v Stephens); Re Baden's Deed Trusts [1970] UKHL 1; [1971] AC 424 (McPhail v Doulton); R & I Bank of Western Australia v Anchorage Investments (1993) 10 WAR 59. Those authorities also establish that the Trustee is obliged to consider all relevant circumstances and determine whether or not to exercise the discretionary power conferred, having regard to those circumstances, without any fetter or pre-determination of the manner in which the power will be exercised.

18 On the evidence before me, there is no reason to think that the Trustee is not exercising its discretionary powers in accordance with the principles to which I have referred, having regard to all relevant circumstances including the competing interests of the various beneficiaries and the particular interests of Mrs Rowell. Accordingly, as, on the evidence before me, the Trustee is acting properly and within power, there is no reason why the court should not grant the direction sought in relation to the payment of $3.5 million to Mrs Rowell.

19 During the course of argument, I was advised by counsel for the Trustee that, for financial reasons, a direction was sought in respect of the payment of the amount of $3.5 million prior to 30 June 2007. There has therefore been a degree of urgency attached to the determination of that issue. I have been advised that a similar degree of urgency does not attend the remaining directions sought. I am therefore disposed to provide an opportunity for the Trustee to present further argument in relation to those directions. However, it may assist in the formulation of that argument if I was to indicate my tentative views.

20 In relation to the directions sought in respect of rejection of a proposal made by three beneficiaries with regard to the distribution of the assets of the Trust to them, those beneficiaries have not entered an appearance to these proceedings, nor advanced any submissions in relation to the proposal which they advanced. It therefore seems to me that there is a real question as to whether they maintain that proposal. Therefore, a real question as to whether the relief sought is moot. Further and in any event, because they have not chosen to advance any argument in support of their proposal, the court has not had the benefit of any substantial argument to the contrary of that advanced by the Trustee, in a circumstance in which the issues raised go to the specific interests of identified beneficiaries. In those circumstances, I am loathe to make any directions dealing with this topic at all and I am tentatively of the view that the making of such directions would be inappropriate.

21 Turning now to the directions sought with regard to the adoption of guidelines by the Trustee and the present position of the Trustee in relation to the distribution of capital and income to the remoter issue of Mr Rowell, it is my tentative view that the giving of any directions by the court in relation to these subjects would be contrary to the principles to which I have referred, which preclude the Trustee from fettering the exercise of its discretion by the adoption of a predetermined view. The Trustee seeks to avoid the application of that principle by adding the qualification "absent any other relevant considerations arising". However, it is my tentative view that notwithstanding that qualification, the adoption of guidelines or a present statement of an attitude, in respect of future dispositions to the remoter issue of Mr Rowell, constitutes an unacceptable predetermination or fetter on the free and complete exercise of the discretion, as it arises to be exercised from time to time, in the light of all relevant circumstances then pertaining.

22 Alternatively, the qualification to which I have referred may produce the consequence that the Trustee will be required, from time to time, to consider whether to exercise the powers conferred upon it under the Trust instruments, having regard to all relevant circumstances at that time, without any predetermined view or fetter upon the exercise of its discretion (as I think is required by law). If it does, then the guidelines and directions sought are meaningless and serve no point or purpose.

23 For these reasons, I am not presently disposed to make the directions sought, other than the direction in respect of the payment of the sum of $3.5 million to which I have referred. However, I will not dismiss the application in relation to those other directions at this stage, but will invite further argument from the Trustee, should it wish to pursue that opportunity.