TRUSTS AND TRUSTEES - Judicial advice - Trustee's duty to obtain expert opinion in support of its application for judicial advice - Court's consideration of advice - Re Atkinson [1971] VicRp 73; [1971] VR 612 - Marley v Mutual Security Merchant Bank

For the Applicant, Neil Morrison and Dale Christensen (individuals are beneficiaries of the Perrot Mill Trust)

For Gallan Pty Ltd (the former trustee of the Gallan Trust) and Morrison Pty Ltd (as the trustee of the Gallan Trust) (30 July 2013, 9 August 2013)

For Sylvia Morrison, Leigh Morrison, Ian Morrison and Slalom Pty Ltd (persons interested in the proceeding and having notice of it)

**1 This application is brought by an Originating Motion dated 18 July 2013 whereby Perrot Mill Pty Ltd ("Perrot Mill"), in its capacity as trustee of the Perrot Mill Trust, applies to the Court for judicial advice and directions under order 54, paragraph 2, of the Supreme Court (General Civil Procedure) Rules 2005. In so doing it seeks orders that it would be justified to have recourse to the assets of the Perrot Mill Trust to pay its reasonable costs of: (a) this application; and (b) the defence of Supreme Court Proceeding SCI 2012 6939 ("the Proceeding"). Such further order as the Court deems fit is also requested by way of relief.

2 In relation to applications of this type, I repeat by way of background the observations of Gillard J in Re Atkinson,[1] where his Honour said:[2]**

On an originating summons seeking such direction, the court is not bound to investigate the evidence in order to make a finding that on the material before it the proposed proceedings will or will not be successful, it is merely to determine whether or not the proceedings should be taken.

His Honour referred then to Fitzgerald v Smith[3] and Re Kay's Settlement:[4]

On the other hand the matter should be sufficiently investigated to determine whether or not the proceedings would be fruitless.

His Honour also referred to Re Brogden.[5]

3 In relation to the exercise of the Court's discretion in giving judicial advice, reference was helpfully made in the Supplementary Joint Opinion to the advice of Lord Oliver in Marley v Mutual Security Merchant Bank:[6]

... It follows that, if the discretion which the court is now called upon to exercise in place of the trustee is one which involves for its proper execution the obtaining of expert advice or valuation, it is the trustee's duty to obtain that advice and place it fully and fairly before the court, for it cannot be right to ask the judge in effect to assume the burdens of a trustee without the information which the trustee himself either has or ought to have to enable him to carry out his duties personally. The court ought not to be asked to act upon incomplete information and, if it is so asked, the proper course is either to dismiss the application or adjourn it until full and proper information is provided.

... it should be borne in mind that in exercising its discretion to give directions on a trustee's application the court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate and not in determining the rights of adversarial parties. That is not always easy, particularly where, as in this case, the application has been conducted as if it were hostile litigation; but it is essential that the primary purpose of the application - indeed, its only legitimate purpose - be not lost sight of in academic discussion regarding the discharge of burdens of proof. Where beneficiaries oppose a proposal of a trustee with a host of objections of more or less weight, the court is, of course, inevitably concerned to see whether these objections are or are not well founded, but that must not be permitted to obscure the real questions at issue, which are what directions ought to be given in the interests of the beneficiaries and whether the court has before it all the material appropriate to enable it to give those directions.

**4 Unsurprisingly, there are in the Proceeding contested factual and legal issues (in the broad sense of law and equity), but in an application such as this, to invite the court to embark on investigation of evidence and/or to make findings of fact or law in the Proceeding would, having regard to the nature of the present application and its ambit as indicated by the authorities to which reference has been made, be both inappropriate and potentially compromise the process of exhaustive investigation of evidence and findings of fact and law at trial.

5 Again, harking back to the statement of Gillard J in Re Atkinson,[7] I note specifically that in my opinion there is no basis to suggest that defence of the Proceeding by Perrot Mill could be regarded as fruitless. Indeed, the carefully reasoned Joint Opinion and Supplementary Joint Opinion of Ms Loughnan SC and Ms Harris of counsel indicates the contrary, though in making this observation I should and do stress that this does not indicate any view on my part as to whether or not the defensive proceedings proposed, by way of the Proceeding, are likely to be successful.

6 Without detracting from this position there are, however, issues arising with respect to a letter from Harris Nelson Lawyers to Aitkin Lawyers dated 6 June 2011 ("the 6 June 2011 letter") which were raised by Mr Wotherspoon of counsel on behalf of Gallan Pty Ltd[8] ("Gallan") and Morrison Nominees Pty Ltd[9] ("Morrison") at the hearing on 9 August 2013. At that hearing, by leave of the court, Gallan and Morrison filed and read the affidavit of Louise Claire Tolsen sworn 8 August 2013 which exhibited the 6 June 2011 letter. The author of the 6 June 2011 letter, Ms Harris, is now retained as junior counsel for Perrot Mill. Ms Harris was, when she wrote the letter, the principal of Harris Nelson Lawyers. In broad terms, the submission on behalf of Gallan and Morrison on 9 and 16 August 2013 and in written submissions dated 15 August 2013[10] was that the contents of the 6 June 2011 letter raised issues of importance in the Proceeding which might impinge on the desirability of defence of the Proceeding and, consequently, were matters which should have been brought to the attention of the Court by Perrot Mill and have been the subject of consideration in the Joint Opinion.[11]

It is neither necessary nor desirable in the course of this application, having regard to the nature and purpose of the application as indicated in the authorities to which reference has been made, to consider in any detail the issues raised by Gallan and Morrison with respect to the 6 June 2011 letter, save to indicate that it was submitted that its contents tended to cast doubt on the veracity of arguments and submissions in favour of the invalidity of the 1998 Option Agreement, an issue in the Proceeding.

7 In my view, the issues now canvassed in relation to the 6 June 2011 letter are matters which should have been canvassed in the Joint Opinion in support of the Perrot Mill application. The contents of this letter and related correspondence was clearly within the knowledge of Perrot Mill and its advisers well before the significance of the letter was raised by Gallan and Morrison the day before the last occasion on which this application was to be heard - on 9 August 2013.

8 The failure to raise these issues in the Joint Opinion, however much it might be thought by the present applicant and its advisers that they were insignificant in terms of Perrot Mill's case, does not, in my view, meet the requirement that the Court be provided with complete information on an application such as the present one. As I stressed in my earlier ruling in this application on 30 July 2013[12] it is for the applicant in a Beddoe[13] application, such as the present application, to provide a considered opinion on all immediately or potentially relevant issues together with an assessment of the prospects of success on these issues - and overall in the subject proceedings. It is not the role of the Court to provide such an advice and assessment itself.

9 Further, I do no accept that the issues raised by Gallan and Morrison in relation to the 6 June 2011 letter are necessarily unfounded. Even if, as opined in the Supplementary Joint Opinion, the contents of the 6 June 2011 letter do not raise an issue or issues in terms of the rule in Saunders v Vautier[14] or otherwise, the issues canvassed are matters which, in my view, may as the Proceeding progresses, assume significance and become the subject of argument and, possibly, findings at variance with the views expressed in the Supplementary Joint Opinion with respect to this letter. In any event, the possible significance of the 6 June 2011 letter in the context of the Proceeding as discussed at some length in the Supplementary Joint Opinion does, in my opinion, lend support to the view that, without full investigation of the matters raised, one could not readily dismiss the 6 June 2011 letter and issues said by Gallan and Morrison to arise with respect to it as necessarily irrelevant to the Proceedings.

10 The requirement for full disclosure of all information and matters of possible relevance to a proceeding in an application such as the present one was emphasised in the passage from the advice of Lord Oliver in Marley[15] to which reference has been made.[16] Consequently, and for the reasons indicated, I do not regard the raising of issues with respect to the 6 June 2011 letter by Gallan and Morrison on 9 August 2013 as being in the nature of intermeddling or at odds with the role of the court in applications such as this as enunciated by Lord Oliver.

11 I turn now to the question of costs of the 9 August 2013 hearing and related matters. On this question, I am of the view that, had the original opinion delivered in support of the present application, the Joint Opinion, addressed the issues that were raised at that hearing with respect to the 6 June 2011 letter, there would have been no necessity for the adjournment of the application on that day, with a resumption today with orders made on 9 August 2013 securing the benefit of the Supplementary Joint Opinion. Consequently, it would be entirely inappropriate to allow recourse to the assets of the Perrot Mill Trust in order to meet the costs of the hearing of 9 August 2013.

12 Issues were also raised with respect to the 30 July 2013 hearing of the Perrot Mill application in written submissions by Gallan and Morrison dated 15 August 2013.[17] The relevant parts of these submissions are as follows:[18]**

1. On 18 July 2013 the Plaintiff commenced its Judicial Advice proceeding. By paragraph 2(a) of its Originating Motion the Plaintiff seeks an order that it be entitled to have recourse to the assets of the Perrot Mill Trust to pay its reasonable costs of the application. The Plaintiff therefore makes a claim for costs against a fund, within RSC 63.01(2)(b) and RSC 63.26.
2. The Plaintiff's Judicial Advice application was commenced without the Plaintiff having obtained an opinion of counsel as to the likelihood of success or otherwise of its defences and claims. Those defences and claims are set out in its Defence and Counterclaim filed on 13 March 2013 in Supreme Court proceeding No. S CI 2012 6939 ("the Main Proceeding").
3. The application was pressed on 30 July 2013, notwithstanding the 29 July 2013 email communication to the Plaintiff's solicitors from the Associates to the Honourable Justice Croft.
4. The failure to obtain an opinion was unreasonable The authorities make clear that an opinion "is highly desirable and is the usual practice".[19]
5. The failure necessitated an adjournment of the 30 July 2013 hearing without any useful progress being made. The costs of and incidental to the 30 July 2013 hearing were incurred unreasonably and have been wasted. The Plaintiff should be denied its claims against the fund in respect of these costs.

**13 For the reasons contained in these submissions of Gallan and Morrison I am of the opinion that it would also be entirely inappropriate to allow recourse to the assets of the Perrot Mill Trust in order to meet the costs of the hearing on 31 July 2013.

14 In the case of Gallan and Morrison, reasonable costs should be allowed for the 9 August 2013 hearing itself and also for preparation of submissions and supporting materials with respect to that hearing; because, as I have indicated, the issues they raised were quite properly raised, Perrot Mill not having done so.

15 Perrot Mill, on the other hand, needed to prepare submissions and supporting materials for that hearing, so the reasonable costs of so doing should be allowed out of the assets of the Perrot Mill Trust. In my view the same position follows with respect to the 30 July 2013 hearing because although the material was deficient to the extent I have indicated the preparatory work that was undertaken for that hearing would have been required in any event.

16 The same is, in my view, substantially true with respect to the reasonable costs of preparing submissions and supporting materials for this hearing, except that a significant proportion of the submissions and the Supplementary Joint Opinion do, in my view, simply seek to justify the failure to deal with the issues raised with respect to the 6 June 2011 letter in the course of the original opinion, the Joint Opinion. As I said on 9 August 2013 - in effect echoing the words of Lord Oliver in Marley[20] - the Court is only interested in an application like the present one in being provided with complete information and a considered opinion on this basis. Arguments as to what was or was not discovered or produced are matters for the trial judge, not for this application - particularly where it is clear that the 6 June 2011 letter and the circumstances surrounding it were well known to the advisers Perrot Mill; and unusually so - to the extent that junior counsel for Perrot Mill was the author of the letter.

17 Consequently, I will allow recourse to the Perrot Mill Trust assets to meet the reasonable costs of the application today, 16 August 2013, together with the costs of preparing submissions and supporting material, including the Supplementary Joint Opinion. The reasonable costs of preparing these submissions and supporting material will, however, be reduced by 25% to take account of what amounts to irrelevant material for the purposes of the present application insofar as it seeks to justify the omission to deal with the issues raised with respect to the 6 June 2011 letter in the original opinion relied upon in support of its application, the Joint Opinion.

18 In conclusion, for these and for the reasons advanced in Ms Harris's submissions at the hearing of the application today, 16 August 2013, and on the basis of the Joint Opinion of Ms Loughnan SC and Ms Harris of counsel dated 6 August 2013 and the Supplementary Joint Opinion of Ms Loughnan SC and Ms Harris of counsel dated 15 August 2013, I determine that it is proper for Perrot Mill Pty Ltd (in its capacity as trustee of the Perrot Mill Trust) to defend the Proceedings on the basis of the position set out in the Joint Opinion and the Supplementary Joint Opinion with respect to the present position as analysed in these opinions.

19 As with the similar application made by Gallan and Morrison on 30 July 2013, there is the possibility that as matters develop it may be necessary for Perrot Mill to seek to exercise liberty to apply, in effect, to continue its Beddoe[21] application in response to changes in the scope of the case. As I indicated with respect to the earlier application, I have no difficulty with that course and, in my view, such a course is well supported by the decision of the High Court in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand.[22]

20 Having now had the benefit of the Supplementary Joint Advice as well as the Joint Opinion and the submissions by Perrot Mill with respect to both pieces of advice, I will, for these reasons, make the orders sought in the Originating Motion, but subject to the modification with respect to costs, as I have indicated. I will also hear submissions with respect to an appropriate formulation of liberty to apply arrangements should a further application or applications of this type become necessary as the proceeding progresses.

21 The parties will bring in orders to give effect to these reasons.**

[1] [1971] VicRp 73; [1971] VR 612.

[3] [1889] VicLawRp 94; [1889] 15 VLR 467 at 473.

[4] [1939] Ch 329 at 339.

[5] [1888] Ch D 546.

[6] [1991] 3 All ER 198 (PC) at 201.

[7] [1971] VicRp 73; [1971] VR 612; and see above, paragraph 2.

[8] In its capacity as former trustee of the Gallan Trust.

[9] In its capacity as trustee of the Gallan Trust.

[10] Submissions on behalf of Gallan Pty Ltd and Morrison Nominees Pty Ltd dated 15 August 2013 (in respect of costs).

[11] The relevant parts of these written submissions are as follows (at [6]-[9]):

"6. In making an application for judicial advice, a trustee is obliged to make a full disclosure of the strengths and weaknesses of its case to the Court (citing McDonald v Forn [1995] 1 All ER 671 at 970; Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 432 at 435; G. E. Dal Pont, Law of Costs (2nd ed. 2009 Lexis Nexis) p 282 [10.4].)

7. On 6 June 2011 solicitors for three of the adult beneficiaries of the Perrot Mill Trust wrote a letter to solicitors for the appointor of the Perrot Mill Trust. (The letter is an exhibit to LCT-1 of the affidavit of Louise Clare Tolson sworn 8 August 2013.) It concerned the 1998 Option Agreement. One of the adult beneficiaries, Ian Keith Morrison, was a director of the Plaintiff at that time. Ian Morrison was subsequently appointed as the Trustee's delegate for the purposes of conducting the Plaintiff's defence and counterclaim in the Main Proceeding. (See exhibit KMP-16 to the affidavit of Kristy Maree Pattison sworn 17 July 2013). The delegation is still effective.

8. It is arguable that the letter contains admissions against the interests of the three adult beneficiaries, and though them (and by reason of Ian Morrison's directorship of the Plaintiff), the Plaintiff itself. Further, in its counterclaim in the Main Proceeding, the Plaintiff seeks equitable relief setting aside the 1998 Option Agreement. Given the equitable maxim that "he who comes to equity must come with clean hands" it was obvious that the 6 June 2011 letter was required to be disclosed.

9. The 6 June 2011 letter was not brought to the Court's attention by the Plaintiff of its own volition. This omission led to the further adjournment of the Plaintiff's judicial advice application from 9 August 2013 to 16 August 2013. The costs of the 9 August 2013 hearing that the correspondence between solicitors respecting the disclosure issue have been wasted. The Plaintiff should be denied its claim against the fund in respect of these costs."

[12] Re Perrot Mill Pty Ltd (No 1) [2013] VSC 427.

[13] Re Beddoe; Downes v Cottam [1893] 1 Ch 547.

[14] [1841] EngR 629; (1841) 4 Beav 115; 49 ER 282.

[15] Marley v Mutual Security Merchant Bank [1991] 3 All ER 198 (PC) at 201.

[16] See above, paragraph 3.

[17] Submissions on behalf of Gallan Pty Ltd and Morrison Nominees Pty Ltd dated 15 August 2013 (in respect of costs).

[19] Ford and Lee, The Law of Trusts (loose-leaf, Vol. 2) at p. 17-1057 [17.200] says "It is highly advisable and is the usual practice that, before applying to the court, the trustees have counsel's opinion as to the likelihood of success of proposed litigation and whether costs out of the trust fund can be allowed to obtain it: Metropolitan Local Aboriginal Land Council v Metropolitan Aboriginal Assoc Inc [2003] NSWSC 104; Application of Macedonian Orthodox Community Church St Petka Inc [2004] NSWSC 388. A trustee who acts without such advice may lose costs: Re Beddoe [1893] 1 Ch 547 per Lindley LJ at pp 557 and 558, quoted in 3 Individual Present Professional Trustees v Infant Prospective Beneficiary [2007] EWHC 1922 (Ch); [2007] WTLR 1631 per Lindsay J at paragraphs 3 and 4." See also Wallersteiner v Moir (No 2) [1975] 1 Q.B. 373 at 392 (Lord Denning M.R.).

[20] Marley v Mutual Security Merchant Bank [1991] 3 All ER 198 (PC) at 201; and see above, paragraph 3.

[21] Re Beddoe; Downes v Cottam [1893] 1 Ch 547.

[22] [2008] HCA 42; (2008) 237 CLR 66.