Consideration
42The duty postulated in this case is a positive duty requiring the trustee to inform a beneficiary of his or her entitlement to a distribution under the trust. It was put that the duty to inform arises on an occasion-by-occasion basis once it has been determined to make a distribution to that person. It was also argued that, either as an extension of this duty, or as a separate duty, the trustee was required to ensure that the beneficiary received the moneys paid by way of distribution for his or her use and benefit. In this case the Court is not concerned with the question whether a beneficiary has a right, on request, to disclosure of documents or information in relation to the trust.
43The issue of duty must be resolved by reference to the obligations imposed upon EYS as trustee by the terms of the Trust Deed. Its most important duty is to obey the terms of the trust (Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 para 32) so as to carry out the wishes of the settlor (Jacobs' Law of Trusts in Australia, 7th Ed, para 1704).
44In this case the trust is a discretionary trust. The class of beneficiaries under clause 1.1 of the Trust Deed is open, and extends (clause 1.1(a)) to the spouses for the time being of the partners of Ernst & Winney. Absent the specification of trust capital or income to one of the objects of the trust there is no equitable interest in its assets held by anyone (Kennon v Spry (2008) 238 CLR 366 para 49).
45By recital E of the Trust Deed EYS has "the most absolute discretion possible in relation to the administration of the Trust Fund" and in the distribution of its capital and income. The scope of the discretion is similarly described in various other provisions, including clause 6 which specifies the "absolute powers and discretions" which may be exercised, and clause 7.1 which, in limiting liability to acts of wilful neglect or dishonesty, states that it is the settlor's intention that:
"the Trustee shall have the widest possible powers and discretions in the administration investment and management of the Trust Fund and the execution of the trusts contained in this Deed without being liable for the consequences of exercising those powers and discretions or executing or administering any of those trusts".
46Clause 2.1 provides:
"To apply in any Financial year, prior to the 30th day of June in that Financial Year, so much of the income arising from the Trust Fund in that Financial Year, between the Beneficiaries in all respects as the Trustee thinks fit as follows:
(a) by paying so much of the income as the Trustee thinks fit to any Beneficiary or to a bank account in the name of any Beneficiary (whether solely or jointly with that of any other person including the Trustee) or in the name of a parent or guardian as trustee for any Beneficiary and any such payment shall with or without the execution of a receipt by such Beneficiary or any person on his behalf constitute a full and final discharge therefore to the Trustee in relation to the trusts of this Deed,"
47By amending deed 30 April 1998, clause 6.26 provides:
"Without limiting its powers under clause 2.1, to make interim distributions of the income arising from the Trust Fund in the then current Financial Year, at any time determined by the Trustee, in the same manner and to the same extent as the income arising from the Trust Fund for the whole of that Financial Year may be paid, applied or invested or may be the subject of a resolution of the kind referred to in paragraph 2.1(d)."
48For the avoidance of any doubt as to the scope of EYS' discretion in undertaking its obligation under clause 2.1(a), clause 1.11 provides:
"The expressions "as the Trustee thinks fit" and "the Trustee as it thinks fit" shall give the Trustee the widest possible discretion including where applicable the power to prefer one or other Beneficiary to the total exclusion of any other or others of them".
49With regard to Segelov, EYS carried out its task under clause 2.1(a) and clause 6.26 in the following way.
50EYS received from Mr Joseph the Nomination Form dated 8 June 2006 in which Segelov was nominated as a beneficiary. The Nomination Form provided details of the joint bank account in the name of Mr Joseph and Segelov (the St George Account) into which it was recommended that distributions should be paid. From 11 July 2006 to 8 June 2007 EYS made payments including interim distributions in the total amount of $51,625 into the St George Account.
51On 9 July 2007 EYS was requested in an email from Mr Joseph to thereafter pay the distributions into a joint bank account in the name of himself and Segelov (the Westpac Account). From 26 July 2007 to 12 March 2012 EYS made payments including interim distributions in the total amount of $417,370.39 into the Westpac Account.
52During the Relevant Period, shortly before the end of each Financial Year, EYS resolved to make distributions to certain discretionary objects, including Segelov. After the end of each Financial Year, EYS and E&Y prepared and provided a document with the financial information concerning payments made to each partner of E&Y which was required for the purpose of completing income tax returns for the corresponding Financial Year. The documents also included a section setting out payments made by EYS to the beneficiaries of the Trust associated with that partner. This material was provided to each partner in the expectation that relevant portions of the documents would be provided to the partner's spouse where appropriate. Statements in this form were provided to Mr Joseph in each of the Financial Years 30 June 2007 to 30 June 2012.
53It is common ground that each payment involved an exercise of discretion. In compliance with clause 2.1(a) each payment was made into a bank account in the name of Segelov jointly with Mr Joseph. As a consequence, the right and title to the amount deposited vested immediately in Segelov and Mr Joseph. The effect of a deposit into a joint account was described in Russell v Scott (1936) 55 CLR 440 at 448 by Starke J as follows:
"A person who deposits money in a bank on a joint account vests the right to the debt or the chose in action in the persons in whose names it is deposited, and it carries with it the legal right to title by survivorship (Standing v Bowring (9); In re Shields; Corbould-Ellis v Dales (10); Re Reid (11); Lindley on Partnership, 7th ed. (1905), p380). The vesting of the right and title to the debt or chose in action takes effect immediately, and is not dependent upon the death of either of the persons in whose names the money has been deposited. In short it is not a testamentary disposition. There is nothing in the law to forbid a person depositing moneys in the joint names of himself and his family, or strangers: it is a form of gift, the effect of which has already been stated".
...
and by Dixon, Evatt JJ (p 450):
"...The relation between the bank and its customers is that of debtor and creditor. The aunt and the nephew upon opening the joint account became jointly entitled at common law to a chose in action. The chose in action consisted in the contractual right against the bank, i.e., in a debt but a debt fluctuating in amount as moneys might be deposited and withdrawn".
54The vesting of the right in the holders of the account takes place when the deposit is made, irrespective of knowledge that it has been made. In Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394 at 402 Latham CJ referred, with approval, to Standing v Bowring (1885) 31 Ch. D. 282 (p 288):
"...where it was held that, when there is a transfer of property to a person, it vests in him even before he knows of the transfer, "subject to his right when informed of it to say, if he pleases, 'I will not take it'. When informed of it, he may repudiate it, but it vests in him until he so repudiates it"".
55An entitlement under a trust is valid notwithstanding that the beneficiary has had no knowledge of it (Vegners v Federal Commissioner of Taxation (1991) 91 ATC 4213 at 4215).
56Acceptance of a gift is presumed until disclaimer has been signified, even when the donee is unaware that a gift has been made (Federal Commissioner of Taxation v Clendon Investments (1977) 7 ADR 493 at 500). In J W Broomhead (Vic) Pty Ltd (In Liq) v J W Broomhead Pty Ltd (1985) VR 891 at 930 McGarvie J held:
"The general principles which apply to the making and acceptance of gifts, apply where the gift is of a beneficial interest made by way of declaration of trust. Thus in Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394, at pp. 401-2 Latham CJ applied to the alleged provision of a benefit under a trust, principles which had been held to apply to a devise of land. See also Jacobs, Law of Trusts in Australia, 4th ed., pp. 289-90, para. 1539. Positive acceptance by the words or conduct of a donee is not necessary to complete a gift. Acceptance may be presumed unless the donee disclaims the gift. The strength of the presumption is illustrated by Demar v Demar (1975) 1 W.L.R. 1532 and Federal Commission of Taxation v Clendon Investments Pty. Ltd. (1977) 7 A.T.R. 493, at pp. 500-1. Knowing of the gift, the donee, unless he disclaims it, is ordinarily treated as tacitly accepting it: Standing v Bowring (1885) 31 Ch D 282. During the period that the donee remains entitled to disclaim, the gift is treated as vested in the donee subject to repudiation: Standing v Bowring. See generally Halsbury's Laws of England, 4th ed., vol. 20, pp. 28-9, paras 47-8 and the note by MC Cullity in (1978) 56 Canadian Bar Review 317.
There are statements which indicate that, to be effective, a disclaimer should be made within a reasonable period having regard to the circumstances of the particular case.
...
In the absence of positive conduct by which the donee indicates acceptance, the right to disclaim is lost because the court makes a presumption of fact or draws an inference. The presumption or inference is that by remaining silent beyond the time when he would be expected to decline the gift if not accepting it, the donee has tacitly accepted. The inference in the case of a donee is easy to draw because it is human nature to accept gifts. With a gift such as one under a trust deed or a will it is not normally considered necessary to indicate acceptance, but a beneficiary who desires not to receive what is given would commonly indicate that desire. Inaction by the beneficiary is consistent with acceptance...
The test for whether a beneficiary is entitled to disclaim is whether in the circumstances he has accepted by words or other conduct or has remained silent for so long that the proper inference is that he has determined to accept the interest".
57On 2 May 2012, Segelov's solicitors wrote to EYS disclaiming beneficial interest in further trust distribution for the year ending 30 June 2012 and for future tax years.
58In my opinion, it follows from the above that by making the payments into the St George Account, and subsequently into the Westpac Account, EYS fulfilled its obligations under clause 2.1(a) of the Trust Deed. Furthermore, the rights in respect of each payment immediately vested jointly in Segelov and Mr Joseph as joint holders of the accounts, whereupon Segelov received her beneficial interest under the trust, just as the settlor intended. Until such time as it was disclaimed EYS was entitled to rely on the presumption that Segelov accepted the payment. Necessarily, upon payment, EYS relinquished its rights over the amount deposited.
59Nevertheless, the question remains whether EYS owed Segelov a duty to inform her of her entitlement to a distribution.
60The rights of a beneficiary to have information about a trust were considered by the Court of Appeal in Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405. Mahoney JA (p 431) expressed the view that, in general, a trustee is not obliged to volunteer documents or information to beneficiaries or possible beneficiaries. (See also, Jacobs' Law of Trusts in Australia, para 1715). He doubted whether one of a large number of possible beneficiaries was entitled to request documents or information in relation to a discretionary trust (p 432). He said (p 432):
"For myself, I doubt whether it is the duty of a trustee to inform all persons who may possibly take under a discretionary power of the nature and extent of that possibility. As I have indicated, a class of possible beneficiaries under a discretionary trust may be wide and may be capable, as in this case, of significant extension. I doubt that it is the duty of a trustee to seek out such persons and inform them of the possibility that, in certain circumstances, they may acquire rights under the trust. I do not think that, for example, where property may be appointed among a group of employees, past, present and future, of a company, the trustee has a duty to seek out and convey information of this kind".
...
and (p 436):
"In deciding questions of disclosure, it is important in my opinion to have regard to the essential nature of such discretionary trusts. Such a trust is not a mere commercial document in which the public may have an interest. It is a private transaction, a disposition by the settlor of his own property, ordinarily voluntarily, in the manner which he is entitled to choose. Special cases apart, it is proper that his wishes and his privacy be respected".
61In SAS Trustee Corporation v Cox [2011] NSWCA 408 the Court of Appeal addressed the issue whether a trustee had a duty to advise beneficiaries of potential rights. McColl JA (Campbell JA agreeing) held (para 103) that regard must be had to the nature of the fund in seeking to identify the duties which devolved on the trustee, a principle which I take to be of general application. Campbell JA (McColl, Sackville JJA agreeing) said:
"148. As I have endeavoured to explain elsewhere, the duty of any particular trustee depends on what is involved in faithfully carrying out the office of being trustee of that particular trust (JC Campbell, "Should the 'Rule in Hastings-Bass ' Be Followed in Australia? - Trustees' Duties to Enquire and Trustees' Mistakes" (2011) 34 Australian Bar Review 259 at 270-277). There may be a core of duties that would always, or nearly always, be involved in faithfully carrying out a trust, regardless of its individual peculiarities. Beyond that, any additional duties of a particular trustee come to be understood through considering the practical exigencies of the types of decision that that particular trustee has to make, in the particular social or business environment in which that trustee is operating. To those factual matters one applies the standards of faithful performance of those duties that are laid down in the trust instrument, and of faithfully attempting to achieve the objectives articulated in the trust instrument. Because that is the way in which trustees' duties arise, one cannot say that trustees always are, or always are not, under a duty to inform a potential beneficiary of his or her entitlements under the trust.
149. ... There was no positive duty to provide information in the trust instrument. Absent such a positive duty, I cannot see how a trustee is in breach of a duty it owes to a beneficiary by failing to give the beneficiary information that the trustee has no reason to believe will be of the slightest practical use to the beneficiary".
62Segelov argues that EYS was under a positive duty to inform her of her entitlement upon determination, in the exercise of its discretion, of the amount for payment. If such a duty exists, presumably it is, and was, owed to all beneficiaries who become entitled to a distribution.
63Analysis of the Trust Deed demonstrates that no duty of the kind claimed is expressed or implied by its terms. If Segelov's claim is to be accepted EYS would be obliged to undertake an additional duty not required of it under the Trust Deed. Similarly, it may be observed that there is no requirement to inform or consult a possible beneficiary prior to the exercise of discretion under clause 2.1(a).
64In my opinion, whether EYS is subject to such an additional duty is to be considered with regard to "...the practical exigencies of the types of decision (EYS) has to make in the particular social or business environment in which that trustee is operating" (SAS Trustee Ltd para 148). The practical exigencies of notification of entitlement raise many questions as to what would be required of EYS to discharge the duty if owed to all beneficiaries whose entitlement arises on an occasion by occasion basis e.g. when, and by what means, is the information to be conveyed to the beneficiaries? must EYS locate the beneficiaries each time in order to provide each with the information? should the beneficiaries be consulted for instructions as to payment of the distribution? In my opinion, these considerations tell firmly against such an additional duty which, in any event, was one beyond the settlor's contemplation.
65The settlor requires no more of EYS than it should it pay the amount of distribution either to any beneficiary or to a bank account in the beneficiary's name, and such payment shall constitute a full and final discharge of its obligation to do so. I would accept that the underlying rationale is that the rights in respect of the payment immediately vest in the beneficiary. Entitlement to it is valid notwithstanding that the beneficiary is ignorant of it. Furthermore, that no receipt by or on behalf of any beneficiary is required indicates that it is not necessary for EYS to seek or obtain some acknowledgement of payment. This is a consideration which, in my opinion, also tells against a duty to inform.
66In any event, the question whether to provide information to any beneficiary concerns the administration of the trust, in respect of which EYS has the most absolute discretion possible. Assuming consideration was given to the practicalities of providing information and, in the exercise of discretion, EYS decided that notification of the beneficiary was unnecessary because payment is to be made to an account in the beneficiary's name, it is difficult to see any plausible basis of criticism for so deciding.
67The question whether EYS has a duty to ensure that a beneficiary received the benefit of any distribution may be answered as follows. Clause 2.1(a) imposes a duty to pay, as EYS thinks fit, any beneficiary or into a bank account in the beneficiary's name. When payment is made into the bank account the rights in respect of it vest in the beneficiary. There was nothing more to be done by EYS to ensure that Segelov received her entitlement. EYS was not to be accountable in respect of the payment thereafter. Upon making the payment EYS was discharged from liability in relation to the trusts.
68For these reasons I reject Segelov's claims that EYS owed her a duty to inform her upon becoming entitled to a distribution that she was beneficiary under the trust, and that EYS also owed her a duty to ensure that she received the benefit of any distribution to her.
69During argument attention was given to the decision of Havers J in Hawkesley v May (1956) 1 QB 304. In my opinion it affords no support for Segelov's claim in this case. Havers J held (p 322) that the trustees of the settlement were under a duty to inform the plaintiff on attaining 21 that he had an interest in the trust funds. He also held, "A fortiori, if the trustees did not hand over to the plaintiff on attaining 21 income to which he was entitled, it would be their duty to explain to him that he was entitled to call for and have the interest paid to him".
70The decision has been the subject of judicial analysis of varying extent (e.g. SAS Trustee para 98, 99 per McColl JA; Hawkins v Clayton (1987-1988) 164 CLR 539 pp 553, 554 per Brennan J; Hartigan Nominees p 432 per Mahoney JA). However, I am unaware of any authoritative statement that Hawkesley states a principle of general application that a trustee has an obligation to explain to a beneficiary what his rights are, and that such duty arises irrespective of the terms of the trust deed in a particular case. In my opinion, in this case, the operation of clause 2.1(a) negates such a duty. In the present case a possible beneficiary has no entitlement until a determination to make a payment to him has been made. Once determined, EYS is required to make the payment to the beneficiary or to a bank account in his name, the effect of which is to transfer the property in it to him. Without more, I think that payment to an account in the name of a beneficiary would be a reasonable ground for the trustees' assumption that the beneficiary became aware of the payments. Unlike the situation in Hawkesley, EYS does not continue to hold the property of the beneficiary after entitlement has been determined. It then has a positive duty to hand it over to the beneficiary. In the circumstances it is difficult to see the basis of a duty to inform of the kind identified in Hawkesley. I also fail to see that a failure to inform a beneficiary that a payment under clause 2.1(a) has been made infringes any right the beneficiary has.
71Segelov also attacked EYS for making payments into the joint bank accounts, being accounts the details of which were provided by Mr Joseph in the Nomination Form and his email of 9 July 2007. The criticism should not be sustained. The information provided by Mr Joseph identified genuine joint accounts in the name of Segelov and himself. It was within the discretion of EYS to make the payments into the joint accounts. It was within its discretion to act upon the information provided by Mr Joseph; indeed, as he was a partner and the husband of a possible beneficiary, it would be curious had it not done so.