[2021] VSC 771 (McMillan J)

TRUSTS - Discretionary trust - Original and copies of trust deed lost - Schedule to trust deed available - Whether sufficient proof of essential terms of trust deed - Whether trust fails for lack of certainty - Whether resulting trust arises on failure of express trust - Whether directions should be given for administration of trust - Whether taking of accounts should be ordered - Trust remains valid and subsists - Leave to appeal granted - Appeal allowed.

Evidence Act 2008 ss 48(4), 140; Supreme Court (General Civil Procedure) Rules 2015 r 54.02; Trustee Act 1958 s 63.

Knight v Knight [1840] EngR 862; (1840) 49 ER 58 applied; Anderson v McPherson (No 2) [2012] WASC 19, Bosanac v Commissioner of Taxation [2022] HCA 34; (2022) 405 ALR 424, GP Building Holdings Pty Ltd v Voiton [2022] VSCA 210, Maks v Maks (1986) 6 NSWLR 34 discussed; Davis v White [2016] NZHC 1626; [2016] NZAR 985, Palmer v Ayres [2017] HCA 5; (2017) 259 CLR 478, Yap v Lee [2019] VSC 743 distinguished.

No appearance - Form 64E filed (Notice of intention not to respond or contest)

1. The parties to this application for leave to appeal are the adult sons of Vincenzo Mantovani ('Vincenzo') and Teresa Mantovani ('Teresa'), who are now deceased. Two of the sons, Nicola ('Nic') and Salvatore ('Rocky'), are directors of Vanta Pty Ltd ('Vanta'). Vanta is the trustee of the Mantovani Family Trust ('Trust'). Vanta, Nic and Rocky are the applicants for leave to appeal.
2. Giovanni ('John'), Nic and Rocky's brother, is neither a shareholder nor a director of Vanta. He is the first respondent to the application for leave to appeal. The remaining brother Carmine ('Carmine') has, sensibly, absented himself from this dispute.[1]
3. The four brothers, Teresa's grandchildren, and any grandchildren of the brothers are the beneficiaries of the Trust.
4. Vanta owns multiple residential and commercial properties in Cobram, from which it derives income. In one way or another, the properties were transferred by Teresa to Vanta, as trustee of the Trust.
5. In the 10 years preceding November 2021, Vanta made distributions solely to the directors, Nic and Rocky. It made no distribution to John or his children. He, understandably, became dissatisfied and sought access to the Trust's records. Vanta denied this, prompting John to commence a proceeding in the Trial Division.
6. In the course of the proceeding, and well before it reached trial, it became clear that the original trust deed ('Deed'), and any true copy, had gone missing. Vanta, as a responsible trustee, should have possessed a copy. It did not. Nor did it come to the Court, as it could have, to seek directions under the Trustee Act 1958 as to how to continue to operate the Trust in the absence of the Deed.
7. John sought declarations that, in the event the Deed could not be located, all assets held by Vanta were held subject to a resulting trust in favour of Teresa's estate. He also sought an order for the taking of accounts.
8. The judge upheld John's claims and made declarations and orders to the effect sought by John.[2]
9. For the reasons that follow, we have concluded that:

(a) notwithstanding criticisms of Vanta's behaviour (which in the main were valid), her Honour's declaration that the Trust had failed was incorrect and that the consequential declaration of a resulting trust and the order for the taking of accounts should not have been made; and > > (b) the appropriate course is for the declarations and orders to be set aside, and for a new proceeding to be instituted in the Trial Division to determine what orders should be made pursuant to the Trustee Act to enable the Trust to continue to be administered in a proper fashion or (if an application is made and the Court so determines) to be wound up.

10. Accordingly, subject to the applicants giving the undertaking set out at [117] below, the application for leave to appeal will be granted and the appeal will be allowed.

1. During their lifetime, Teresa and Vincenzo owned a number of commercial and residential properties in Cobram, including:

(a) two parcels of land at 20-24 William Street, which were developed into commercial units and adjoining vacant land ('Commercial Properties'); > > (b) a residential property at the corner of Pine and William Street ('Pine and William Street Property'); and > > (c) a residential property at 20 Broadway Street ('Broadway Street Property').

2. Vincenzo died on 20 July 1974. Teresa died on 14 October 2015.
3. Vanta was incorporated on 19 May 1976 with two issued shares. Teresa, Nic and Carmine were the initial directors. Vanta's current directors and shareholders are Nic and Rocky.
4. The Trust was created on 27 July 1976 by the Deed, which it is now agreed has been lost. The Deed was last seen in 2010 and, on Rocky's recollection, may have been destroyed by Teresa. John has never sighted either the original or a copy of the Deed.
5. The only extant part of the Deed is its schedule ('Schedule'), which sets out the following information:

(a) the date of making the Deed, 27 July 1976; > > (b) the name of the trust, 'Mantovani Family Trust'; > > (c) the settlor, Rocco Orsida ('Rocco');[3] > > (d) the trustee, Vanta; > > (e) the settled sum, $50; > > (f) the appointor, Teresa, and on her death, whoever is named in her will; and > > (g) the beneficiaries: > > > (i) Teresa; > > > > (ii) John; > > > > (iii) Carmine; > > > > (iv) Rocky; > > > > (v) Nic; > > > > (vi) any child or grandchild of Teresa; > > > > (vii) any child or grandchild of John; > > > > (viii) any child or grandchild of Carmine; > > > > (ix) any child or grandchild of Rocky; and > > > > (x) any child or grandchild of Nic.

6. The Pine and William Street Property was originally Teresa and Vincenzo's marital home. Teresa and Vincenzo moved into the Broadway Street Property after it was purchased in 1958.
7. After Vincenzo's death, Teresa inherited the Commercial Properties, the Pine and William Street Property, and the Broadway Street Property.
8. In 1976, Teresa transferred her interest in the Pine and William Street Property to Vanta. The consideration was $5,600, recorded as a loan in Vanta's accounts.
9. On 4 April 1977, Vanta subdivided the Pine and William Street Property into four residential units which are still held by Vanta, namely:

(a) Unit 1, 5 William Street; > > (b) Unit 2, 5 William Street; > > (c) Unit 3, 5 William Street; > > (d) Unit 4, 5 William Street -

1. On 31 December 1980, Teresa transferred the Commercial Properties to Vanta. By the transfer document, Teresa received the sum of $108,500, recorded as a loan in Vanta's accounts.
2. On 19 November 1982, Teresa's father, Rocco, died leaving a will dated 12 August 1975.
3. Probate of the will was granted to Teresa on 11 April 1983. By his will, Rocco devised and bequeathed his property to his wife, Catrina, if she survived him, but if she did not, then as follows:

(a) $2,000 to each of his grandchildren, being Nic, Rocky, Carmine, and John; and > > (b) $200 to the parish priest.

4. The residuary estate went to his daughter, Teresa.
5. Catrina died two months before Rocco died. Teresa, as residuary beneficiary, received the bulk of Rocco's deceased estate.
6. On 19 December 1989, Vanta subdivided the Commercial Properties into six separate commercial units, namely:

(a) 20 William Street, Cobram; > > (b) 22 William Street, Cobram; > > (c) 24 William Street, Cobram; > > (d) 26 William Street, Cobram; > > (e) 28 William Street, Cobram; > > (f) 30 William Street, Cobram -

1. On 29 August 2010, Teresa resigned as a director of Vanta and Rocky was appointed a director.
2. On 19 August 2011, Teresa's one share in Vanta was transferred to Nic. Carmine resigned as a director, with the result that Nic and Rocky have since then been the sole directors and shareholders of Vanta. Rocky is also the company secretary.
3. Teresa died on 14 October 2015, leaving a will dated 3 April 1992 ('Will').
4. Pursuant to the Will, Teresa:

(a) appointed Rocky and Carmine as her executors and nominated Carmine to be the appointor of the Trust; > > (b) gave the Broadway Street Property to John; > > (c) gave one of the four Residential Units (which were described as 'presently being in the name of Vanta Pty Ltd') to each of her four sons, Nic, Rocky, Carmine and John; > > (d) gave the Commercial Units (which were described as 'presently in the name of Vanta Pty Ltd') as follows: > > > (i) two units to her four sons to be held as tenants in common in equal shares; > > > > (ii) one unit to Nic; > > > > (iii) one unit to John; > > > > (iv) one unit to Rocky; > > > > (v) one unit to Carmine; and > > (e) gave her residuary estate to her four sons in equal shares.

5. On 25 June 2018, probate of the Will was granted to Rocky and Carmine.
6. On 15 June 2018, Rocky and Carmine prepared an inventory of assets and liabilities. As at the date of Teresa's death, the assets and liabilities of Teresa's estate pursuant to the inventory were stated to be:

Cobram District Health - 24-32 Broadway Street, Cobram

1. Since its incorporation, Vanta has operated, and continues to operate, as a trading trust. It has prepared financial statements and filed tax returns annually. It has made annual distributions to the beneficiaries. In the 10 years preceding November 2021, those distributions were solely to Nic and Rocky, the two directors of Vanta.
2. Since April 2017, John has sought to obtain trust accounts and documents from Nic, Rocky and Vanta in relation to the operations of the Trust. No information was forthcoming until December 2020, when only a partial disclosure was made.
3. Between 2017 and February 2019:

(a) John and the applicants conducted extensive searches for the Deed; > > (b) the applicants refused to provide John with trust documentation on the basis that, in the absence of the Deed, it was unclear whether he was a beneficiary of the Trust; and > > (c) the accountants for the Trust prepared (as they had in the past) financial statements and tax returns on behalf of the Trust, which revealed that: > > > (i) the Trust recorded a gross profit of $22,471.45 in 2018, and $32,232.57 in 2019; and > > > > (ii) in both years, distributions were made to Rocky and Nic (as had been the case for the 10 years preceding November 2021).

4. Having been informed that Vanta's accountants did not possess a copy of the Deed, John's solicitors sent an email to Vanta's solicitors on 17 April 2018 as follows:

We confirm that only the Schedule was able to be located ... As Vanta Pty Ltd is the trustee of the Trust, it reasonably had been expected that a copy of the Deed would be retained with all documentation pertaining to the Trust.

Please advise when copies of the following will be provided to us:

1. Details of all assets held by the Company in its capacity as the trustee of the Trust;
2. Copies of all bank statements and financial statements relating to the Trust (Profit and Loss Statements as well as income distribution details) for the last 10 years;
3. Copies of all Trust Tax Returns lodged in the last 10 years;
4. Full and comprehensive details of all income and/or capital distributions made during the last 10 years and to whom the distributions were made.

1. John's solicitors subsequently sent two further emails seeking a response to the request. On 3 June 2018, the applicants' solicitor provided the following response:

The question that is holding up a ready answer to your client's requests for 10 years of books and records is whether or not it is permissible to satisfy that request without the trust deed. Unfortunately, I have not been able to find a ready answer to this and would appreciate any law you may be able to direct me to that might answer the question.

1. Also on that date, John's solicitors responded as follows:

As you act for the Trustee, and as we act for Mr John Mantovani, we do not consider [it] appropriate that we provide what is tantamount to advice to your client.

We note your concern that the inability to locate any copies of the Trust Deed could prevent your client from providing the requested information. However, we presume that the missing deed has not been an impediment to your client dealing with Trust assets or making capital and/or income distributions notwithstanding that it cannot be certain who are beneficiaries under the terms of the Deed.

1. The applicants continued to stonewall what we consider to be the reasonable requests of John's solicitors.

1. On 21 February 2019, John filed an originating motion in the Trial Division pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 ('Rules'), naming the applicants and Carmine as defendants and seeking:

(a) orders for the production of trust accounts and documents from 2008;[4] > > (b) in the event that the Deed could not be located, a declaration that all assets held by Vanta are held subject to a resulting trust in favour of the estate of Teresa; and > > (c) an order for the taking of accounts and the payment by Vanta, Nic, Rocky and Carmine of such amounts found to be due to the estate of Teresa.

2. From that time until the end of 2020, the applicants:

(a) asserted that the Trust had been terminated and reconstituted in 2010; and > > (b) refused to provide trust accounts to John on the basis that the Trust had been reconstituted in 2010, such that he was no longer a beneficiary of the Trust.

3. On 6 November 2020, the judge noted in a ruling on procedural issues:

The [applicants] submitted that [John] has approached this proceeding with 'a high degree of suspicion, which is unfounded'. The [applicants] reject [John's] submission that they have been concealing documents, instead noting that they consider there is evidence that [John] is not a beneficiary of the trust, which means trust documents cannot be provided to him.[5]

1. Her Honour then made the following accurate observations:

[John] has sought details of the Family Trust for almost three years. The searches conducted by the [applicants] were for the purpose of finding the trust deed for the Family Trust. The searches conducted by Vanta's lawyers and accountants were also for the trust deed. It was not until June 2018 that the [applicants] informed [John] that the trust deed had been lost. Up until that date, there was no dispute that the Family Trust existed and that [John] was a beneficiary.

After [John] was informed that the trust deed was lost, the [applicants] suggested that the Family Trust had been brought to an end and 'reconstituted' and alleged that the reconstituted deed did not include [John] as a beneficiary. The alleged 'reconstituting' document has not been produced by the [applicants] despite it being said that it came into existence [in] around 2010 or 2011, nor have the [applicants] produced any other documents that might give some substance to their recent assertion of a reconstituted trust. The suggestion that the trust was reconstituted is irreconcilable with the earlier searches for the trust deed, as well as with the accountant's letter stating in 2018 that they do not have the trust deed.[6]

1. On 18 December 2020, the applicants provided to John's solicitors, financial statements and tax returns of the Trust for the years 2012 to 2020.
2. On Friday 16 July 2021, the last business day prior to the trial commencing on Monday 19 July 2021, the applicants abandoned the allegation that the trust had been terminated in 2010 and agreed to provide the balance of the trust accounts and documents to John's solicitors.
3. Also on that date, the parties filed an agreed statement of facts. It was agreed, amongst other things, that:

(a) the Trust's property included four residential units and six commercial units; > > (b) the Deed has been lost and cannot be located despite extensive searches; and > > (c) the only document in the parties' possession regarding the Trust is the Schedule.

1. As previously noted, the proceeding was brought pursuant to r 54.02 of the Rules. The trial took place on 19 July 2021 and proceeded on the basis of affidavits filed by the parties and submissions made by counsel. There was no cross-examination of the deponents and the agreed statement of facts was relied upon by the parties.
2. The applicants' opening submissions identified the only remaining issues for determination as follows:

(a) whether the Trust failed for uncertainty, and accordingly the Trust's assets were then held by Vanta on a resulting trust in favour of Teresa's estate; and > > (b) whether there should be a taking of accounts.

(a) financial reports of the Trust; > > (b) tax returns of the Trust; > > (c) certificates of titles for the Cobram properties; and > > (d) the Schedule.

4. Her Honour delivered her reasons for judgment and made orders and declarations on 25 November 2021.

1. The reasons of the judge are comprehensive.
2. Her Honour discussed in detail the circumstances in which the Trust arose, the accumulation of Trust assets, the applicants' control of the Trust assets, the details of Teresa's estate, the parties' efforts to locate the Deed and the applicants' refusal to provide Trust documentation to John.[7] Her Honour noted that although it had been asserted by the applicants that the Deed had been destroyed, and that the Trust had been brought to an end and reconstituted, those claims had been abandoned.[8]
3. The judge observed that it was common ground that the Trust had been created, that the Residential and Commercial Units were held by Vanta as trustee and that the Deed which created the Trust had been lost.[9] Thus, the central issue was what, if any, legal consequences flowed from the loss of the Deed and, in particular, whether the Trust failed for uncertainty.[10]
4. In order to determine this issue, the judge stated that she had to consider a series of discrete questions.[11] Those questions, together with her Honour's conclusions, are as follows:
   • (1) Question 1: Is the Deed lost?

The judge was satisfied that the Deed had been lost, given that there was ample evidence that John and the applicants had carried out extensive searches for the Deed without success, and made inquiries of financial institutions, government agencies, accountants and solicitors to no avail.[12]

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

The judge held that, where a document is missing, its existence and contents may be proved by secondary evidence.[13] That evidence may be given by a person who has sighted the original document and can provide evidence as to its contents, or it can be in the form of some other document that records the contents of the lost item. However, the evidence will only be sufficient if it provides 'clear and convincing proof' of the existence, terms and content of the missing document.[14] Her Honour said that 'the threshold would appear to be relatively high'.[15]

The judge held that, while the Schedule (and other evidence) made plain the existence of the Deed (which was not, in any case, in issue), it '[fell] far short of providing clear and convincing proof of the contents of the Deed'.[16] It did not identify the type of trust which the Deed was said to create or the basis on which trust distributions were to be made, nor did it make appropriate provision for the vesting of the Trust. Moreover, it could not be ascertained from the Schedule whether the Deed made provision for how the Trustee was to manage and administer trust property or whether it listed any additional beneficiaries or charitable objects.[17] Moreover, the financial statements and tax returns provided by Vanta were dated 30 years after the creation of the Trust by an accountant who had not sighted the Deed.[18] Thus, '[t]he available secondary evidence ... cannot be said to provide clear and convincing proof of the contents of the Deed'.[19]

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

The judge described the presumption of regularity as 'a rebuttable presumption which establishes due appointment and capacity to act'.[20] The presumption operates only in relation to mere formalities (such as compliance with a formal requirement), as distinct from matters of substance.[21] Her Honour concluded that what was in issue in the present case was the substance of the Deed (specifically its contents, terms and effect), rather than whether there had been compliance with any formal steps to execute the Deed. In that context, the presumption of regularity had no work to do.[22]

• (4) If no to Questions 2 and 3 - Question 4: Does the Trust fail for uncertainty?

The judge concluded that the Trust failed for lack of certainty as a result of the loss of the Deed and the lack of clear and convincing proof of its contents.[23]

• (5) 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?

The judge held that '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'.[24] Her Honour said that '[t]he loss of a trust deed and consequential failure of a trust has been recognised as giving rise to a resulting trust',[25] referring to Yap v Lee.[26] Having found that the Trust failed, the judge concluded that Vanta held the trust property subject to a resulting trust in favour of the estate of Teresa.[27]

• (6) 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?

As a result of the judge's conclusion that an automatic resulting trust arose in favour of Teresa's estate, she concluded that it was appropriate to make an order for the taking of accounts by Vanta and the payment of amounts found to be owed to Teresa's estate.[28] That was because distributions had been made in the absence of the Deed to Nic and Rocky in a manner that was neither fair nor impartial, and which resulted in some beneficiaries being improperly benefited at the expense of others (and clearly in breach of Vanta's obligations as trustee).[29] However, s 21 of the Limitation of Actions Act 1958 imposed a limitation period of six years in relation to an order for the taking of accounts where there has been a breach of trust.[30] Consequently, the Court could only order accounts to be taken for the period commencing on 21 February 2013 to the present, being six years before the commencement of the proceeding.[31]

1. On 25 November 2021, the judge made the following declarations:

(a) the Trust failed for uncertainty due to the loss of the Deed; > > (b) Vanta holds all of the Trust's property, rights and assets acquired by it as trustee of the Trust subject to a resulting trust for the estate of Teresa; and > > (c) Vanta holds any further income arising from the assets of the Trust on the same resulting trust(s).

2. On the same day, the judge relevantly made the following orders:

(a) an account be taken of all moneys received and disbursed by Vanta in respect of the Residential Units and Commercial Units for the period from 21 February 2013 to date; and > > (b) all amounts found to be due to the estate of Teresa upon the taking of accounts be paid.

1. The proposed grounds of appeal raise the following issues:

(a) whether the judge erred in holding that the Trust had failed by reason of uncertainty as to its terms, due to the loss of the Deed ('proposed ground 1'); > > (b) whether the judge erred in holding that a resulting trust could arise from the loss of the Deed ('proposed ground 2'); and > > (c) whether the judge erred in finding that there was a sufficient basis to order the taking of accounts by Vanta and the payment of amounts found to be owed to Teresa's estate ('proposed ground 3').

Proposed ground 1: Should the Trust fail for uncertainty?

1. On this issue, the relevant questions and answers posed by her Honour are Questions 2, 3 and 4 (set out at [53] above), and particularly Question 4.
2. The submissions of the parties can be stated succinctly. The applicants argued that the clear and convincing proof test applied by her Honour as to proof of the terms of the Deed was too strict. They submitted that once the centuries-old test of the 'three certainties' was satisfied (as they said it was) then the judge should have held that the Trust was valid and did not fail for uncertainty.[32] Once that finding was made, the decision in relation to the resulting trust was said to fall away, as did the order for the taking of accounts.
3. John, understandably, supported the judge's conclusion, emphasizing that there was insufficient clear and convincing proof of the terms of the Deed and therefore her Honour's decision was unimpeachable.

Was it necessary for there to be clear and convincing proof of the terms of the Deed?

1. The judge noted that the standard of proof required in respect of the existence of the relevant parts of the Deed was on the balance of probabilities, in resolving the answers to Questions 2 and 4. However, her Honour applied what is, on its face, a different test: that there needed to be 'clear and convincing proof' of the terms of the Deed before a court would act upon it.[33]
2. So, in relation to Question 2, whilst her Honour was satisfied that there was clear and convincing proof of the Deed's existence, in reliance on the decision of McLelland J in the New South Wales Supreme Court of Maks v Maks,[34] she said as follows in relation to the contents of the Deed:

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. As stated by McLelland J in Maks v Maks:

• 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.[35]

1. Her Honour then dealt with the need to prove the contents of the Deed:

[I]n 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.

...

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.[36]

1. On the basis that there was no clear and convincing proof of the Deed's contents, the judge refused to make a declaration that Vanta was justified in continuing to administer the Trust.[37]
2. In considering the answer to Question 4, the judge again relied upon Maks v Maks (and subsequent decisions applying it) and the decision of McDonald J in Yap v Lee,[38] which her Honour considered involved circumstances that were similar to the present case:[39]

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.

For instance, in Maks v Maks, 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.[40]

1. The judge concluded as follows in relation to Question 4:

Applying Yap v Lee, 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.

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.[41]

1. Although the point was not raised in the parties' written cases, at the hearing of the application for leave to appeal, the Bench asked counsel whether a 'clear and convincing proof' test was appropriate given the provisions of the Evidence Act 2008. The parties were invited to file, and the applicants subsequently filed, written submissions on this point.
2. Part 2.2 of the Evidence Act is entitled 'Documents'. Section 48 deals with proof of the contents of documents. Relevantly, s 48(4) provides as follows:

A party may adduce evidence of the contents of a document in question that is not available to the party, or 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.

1. Part 4.1 of the Evidence Act is entitled 'Standard of proof'. Section 140 sets out the applicable test in civil proceedings as follows:

140 Civil proceedings - standard of proof

• (1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.

• (2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account -

  (a) the nature of the cause of action or defence; and

  (b) the nature of the subject-matter of the proceeding; and

  (c) the gravity of the matters alleged.

1. It is trite to observe that the words 'clear and convincing proof' appear nowhere in the section. As mentioned earlier, the source of this test is Maks v Maks, a case concerning a claim based upon a document that was said to establish a trust, which document could not be produced. The case was heard in the Trial Division of the New South Wales Supreme Court, with judgment delivered in August 1986.[42]
2. This test has been adopted by judges of this Court and the New South Wales Supreme Court on a number of occasions.[43] The judge described the test as 'relatively stringent',[44] having noted that:

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.[45]

1. However, two things ought to be noted about Maks v Maks.
2. First, it was a decision under the common law prior to the introduction of the Evidence Act 1995 (NSW), which is, for present purposes, identical to the Victorian Act. Both statutes give effect to the Uniform Evidence Law.[46]
3. Second, judges of the Supreme Court of New South Wales, after the introduction of the Evidence Act 1995 (NSW), cautioned against glosses on the clear provisions of the statute.
4. In Pedler v Richardson, Young J observed that in a missing document case, ultimately 'it remains incumbent on the trial judge to determine the issue by reference to the balance of probabilities'.[47]
5. In Re Ralston, Hodgson J referred to the clear and convincing proof test and stated:

[The test] does not mean that what is required is other than proof on the balance of probabilities ... In a case such as this, I believe that what is required is that the party bearing the onus of proof must be sufficiently diligent in calling available evidence, because the Court will not be prepared to act on material which it considers inadequate.[48]

1. In Payten v Perpetual Trustee Co, Austin J said:

In the present case, while it is necessary for the court to take into account, inter alia, the gravity of the conclusion that the only will found after Ms Payten's death has been defeated on the basis of oral evidence by the plaintiff's children and one of the deceased's carers of her statements about the existence and some of the contents of the will, in the last analysis the case is to be assessed by the application of the civil standard of balance of probabilities.[49]

1. The other basis for the clear and convincing test was said to be the decision of Yap v Lee, in which McDonald J stated:

Where a trust deed is lost, in order to prove a trust deed by secondary evidence, there must be clear and convincing proof, not only of the existence of the deed, but also of its contents.[50]

1. However, McDonald J did not consider the issue except for the above conclusionary statement. This is understandable for two reasons.
2. First, the proceeding had been settled and a declaration was made by his Honour by consent that the trust failed for uncertainty in circumstances where the trust deed had been lost (the parties having accepted that a trust existed) and there was insufficient secondary evidence capable of proving the contents of the lost deed.[51] It was also agreed by the parties that the trust, having failed for uncertainty, the trust property was held by the appointor on a resulting trust. Second, the ruling made by McDonald J was solely concerned with costs.
3. Thus, McDonald J's observation set out at [77] above was not a considered one. There is no discussion in his Honour's reasons of the basis for the asserted evidentiary test or of the principles governing the circumstances in which a trust fails for uncertainty. We doubt whether his Honour intended that his one sentence proposition advanced in the context of an argument about costs would later be used to buttress an argument to qualify the provisions of the Evidence Act, or for that matter, stand as a statement of principle in a case concerning the terms of a trust deed in the context of an argument about uncertainty.
4. The end result is that the decision in Yap v Lee, like that in Maks v Maks, does not gainsay the clear terms of s 140 of the Evidence Act.
5. If there was any doubt about the inappropriateness of the 'clear and convincing proof' test, it was laid to rest last year by this Court's decision in GP Building Holdings Pty Ltd v Voitin.[52] This was a case in which the application of the Briginshaw test was at issue.[53] However, the Court also dealt with the scope of s 140 of the Evidence Act and the necessity to prove a case on the balance of probabilities. The Court said:

Relevantly to the present application, the critical issue on which the appeal turns is whether the judge was correct to find that the respondent did not knowingly receive the trust monies. In our view, that was a serious matter, albeit that it did not require proof of fraud or deceit and it did not involve an allegation of criminal wrongdoing. Of course, the judge had to be satisfied, in the sense of an 'actual persuasion of the occurrence or existence' of the thing in issue, and the gravity of the allegation was a relevant factor. It may be accepted that people do not lightly obtain and retain money that they know has been paid to them in breach of trust. However, care must be taken that the use of epithets such as clear, cogent, or compelling do not distract from the correct standard, being the balance of probabilities.[54]

1. There can be no doubt about the end result here: the clear and convincing test of the proof of the contents of a lost document (whatever its nature) is misconceived. Rather, in terms of proof of a particular fact or facts (or inferences to be drawn from them) relating to the existence or contents of a document, the burden upon the party attempting to establish that fact is no more and no less than that imposed by s 140 of the Evidence Act - proof on the balance of probabilities, as elaborated upon in the section itself.
2. Moreover, the adoption of the clear and convincing proof test, as this case demonstrates, produces two anomalies.
3. First, it imposes too high a burden on the party endeavouring to prove the existence of the relevant fact. In truth, the Evidence Act allows a party to rely upon many forms of secondary evidence (oral and written) in establishing the contents of a missing document, provided the facts and inferences to be drawn from them are established on the balance of probabilities.
4. Second, in a number of the judgments (including the judge's judgment in the present case) the emphasis on the strictness of this test conveys that, in the case of a missing document, only a facsimile or duplicate of the original document will suffice in establishing sufficient proof of the terms of the document.
5. The vice of this approach, particularly on the question of uncertainty, is that it leads to an incorrect and conflated approach as to what, as a matter of law, needs to be proved to establish the existence of a discretionary trust.
6. In answer to Question 2, her Honour held that there was no clear and convincing proof of all the terms of the Deed. This was undoubtedly correct but, as we have discussed, the test applied in reaching that conclusion was flawed.
7. It would seem that this conclusion then coloured her Honour's answer to Question 4 - regarding uncertainty - that as the contents, terms, and nature of the Deed are unknown, without being able to ascertain all the terms of the Trust, the Court is unable to declare that Vanta is justified in continuing to manage and administer trust property.
8. This is demonstrated by the following statement of principle by the judge in relation to Question 4:

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.[55]

1. This statement, at least on our reading, implies, if not expressly states, that it was necessary for Vanta to provide clear and convincing proof of almost all (if not all) of the terms of the Deed to avoid a finding that the Trust failed for uncertainty.
2. In fact, the real question to be determined by the combination of Questions 2, 3 and 4 was whether in accordance with the authorities (to be discussed below) there was sufficient proof of the essential terms of the Deed such that the Trust did not fail for uncertainty. In the absence of the Deed, proof of the relevant facts and inferences (to be drawn from those facts) was to be established on the available secondary evidence. Those facts and inferences were, in turn, to be determined on the balance of probabilities applying s 140(1) of the Evidence Act and, if necessary, the criteria set out in s 140(2).
3. It is to this question that we now turn.

1. The primary reasoning of the judge was as follows:

(a) a trustee has a paramount duty to ascertain and strictly adhere to the terms of a trust, which Vanta breached, so to allow the Trust to continue to operate in the absence of the Deed would amount to sanctioning further breaches of trust;[56] > > (b) the loss of a trust instrument and the failure to otherwise prove its terms means that a trustee cannot be cognisant of and adhere to the terms of the trust in its dealings with trust property and, as a result, the trust cannot be administered in accordance with the intentions of those who established it;[57] and > > (c) as the contents, terms, and nature of the Deed are unknown, 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.[58]

2. Nearly two centuries ago, in Knight v Knight, Lord Langdale MR said:

As a general rule, it has been laid down, that when property is given absolutely to any person, and the same person is, by the giver who has power to command, recommended, or entreated, or wished, to dispose of that property in favour of another, the recommendation, entreaty, or wish shall be held to create a trust.

First, if the words are so used, that upon the whole they ought to be construed as imperative;

Secondly, if the subject of the recommendation or wish be certain; and

Thirdly, if the objects or persons intended to have the benefit of the recommendation or wish be also certain.[59]

1. So, the essential terms of a valid and subsisting express trust require what are described as the three certainties:

(a) certainty of intention; > > (b) certainty of subject matter; and > > (c) certainty of object.[60]

2. The continued application of this long-standing test is not in doubt. In Korda v Australian Executor Trustees (SA) Ltd,[61] French CJ said that '[c]ertainty of intention is one of the three certainties necessary to an express trust - the others being certainty of subject matter and certainty of object'.[62]
3. It is well established that these principles apply to discretionary trusts.
4. For example, in Schuhmacher v Emmerson,[63] a dispute arose as to whether money held in a particular bank account was held on trust or fell to be dealt with as part of the deceased's estate. Daubney J applied the three certainties test.[64] His Honour held that the deceased's intention to create a trust was to be inferred from his conduct in creating the bank account.[65] He found that the subject matter of the trust was the funds held in the account.[66] In reaching these conclusions, his Honour said that he was 'mindful of the fact that the Deceased obviously created this [t]rust in the context of "private family dealings where some imprecision of thought and expression might perhaps be expected".'[67]
5. In Wright v Stevens,[68] an issue arose as to whether a trust was charitable or discretionary and whether the trust was required to satisfy the three certainties, in particular whether there was certainty of object.[69] Hallen J, in applying the 'three certainties' test, concluded that the trust satisfied the requirement for certainty of object because the beneficiaries were capable of being ascertained from a schedule to the deceased's will.[70]
6. On the other hand, Davis v White[71] provides an example of where a discretionary trust failed for lack of certainty of object. In that case, an application was made for directions under s 66 of the Trustee Act 1956 (NZ) that the trustees of a family trust exercise their discretion to apply the whole of the trust fund to a charity. It was common ground that the trust deed had been lost for some time.
7. The issue was whether the trust existed as a valid and subsisting trust, or whether it failed for lack of certainty by reason of the loss of the trust deed and an absence of other reliable evidence of its terms. Davison J held that:

[t]he Court can have no confidence or certainty as to the actual terms of the executed deed, and particularly, the terms identifying the beneficiaries and the ultimate beneficiary or beneficiaries. That being the case, the [trust] does not have the essential certainty of objects that it must exhibit in order to remain valid, and it will fail.[72]

1. Returning to the facts of the present case, it was not in issue that the Schedule and Vanta's records could be relied upon as providing secondary evidence of the contents of the Deed. We have set out the details of the Schedule at [15] above. However it bears repeating that the Schedule is satisfactory evidence of the following matters:

(a) the date of making the Deed, 27 July 1976; > > (b) the name of the trust, 'Mantovani Family Trust'; > > (c) the settlor, Rocco;[73] > > (d) the trustee, Vanta; > > (e) the settled sum, $50; > > (f) the appointor, Teresa, and on her death, whoever is named in her will; and > > (g) the beneficiaries: > > > (i) Teresa; > > > > (ii) John; > > > > (iii) Carmine; > > > > (iv) Rocky; > > > > (v) Nic; > > > > (vi) any child or children of Teresa; > > > > (vii) any child or children of John; > > > > (viii) any child or children of Carmine; > > > > (ix) any child or children of Rocky; and > > > > (x) any child or children of Nic.

2. The records of the Trust (financial reports and tax returns) establish that:

(a) it was a discretionary trading trust; > > (b) it has operated for many years as a trading trust and has filed financial reports and tax reports annually; > > (c) the properties owned by Vanta are trust property; and > > (d) it made regular distributions to beneficiaries, namely to Rocky and Nic.

3. We are satisfied that the secondary evidence identifies the essential terms of the Trust and meets the 'three certainties' test.
4. As to certainty of intention, it is clear that it was Rocco's intention to establish a discretionary trust for the benefit of the beneficiaries identified in the Schedule, and it was Teresa's intention that the properties she transferred to Vanta be held by it for the benefit of those beneficiaries in accordance with the terms of that discretionary trust.
5. As to certainty of subject matter, it is equally clear that the assets Vanta was to hold on trust for the benefit of those beneficiaries included the properties transferred to it by Teresa.
6. As to certainty of object, unlike in Davis v White, it is also clear that there is an ascertainable and defined class of beneficiaries. There is no evidence to suggest any other class of beneficiaries exists.
7. In our view, once these essential requirements are satisfied, the remaining question is whether there is sufficient clarity of the terms of the Trust to avoid the draconian remedy of declaring that a family trading trust fails for uncertainty (when it has carried on business for many years) on the basis that it is not a competent and lawful trading trust.
8. It can be readily accepted (as the judge noted) that there is a lack of secondary evidence as to the management powers of the trustee and the date of vesting of the Trust. But does that mean the Trust should fail for uncertainty? For the following reasons, we think not.
9. First, a court should be hesitant in declaring a trust void for uncertainty because in doing so, it is likely that the settlor's intentions will be frustrated.[74] In this case, when the Trust has carried on business for many years, that hesitancy is well founded, as annulling the Trust would have significant implications for the Trust and its beneficiaries.
10. Moreover, in this case, because it is not known when the Deed was lost, it is not possible to determine a precise time as to when the trust failed for uncertainty.
11. Second, the certainties necessary for the continuance of the Trust as an extant body have been established.
12. Third, there is scope for the Court (pursuant to statute, the Rules and the inherent jurisdiction of the Court) to 'fill the gap' in cases where there is uncertainty as to the exact non-essential terms of the Trust.
13. The role of the Court in endeavouring to give effect to the settlor's intentions was made clear by Lord Wilberforce in McPhail v Doulton:

I respectfully adopt ... the statement in Lord Upjohn's opinion. I would venture to amplify this by saying that the court, if called upon to execute the trust power, will do so in the manner best calculated to give effect to the settlor's or testator's intentions. It may do so by appointing new trustees, or by authorising or directing [a] representative person of the classes of beneficiaries to prepare a scheme of distribution, or even, should the proper basis for distribution appear by itself directing the trustees so to distribute. The books give many instances where this has been done, and I see no reason in principle why they should not do so in the modern field of discretionary trusts.[75]

1. As was pointed out in discussion with counsel, it has been and remains open to Vanta to apply to the Court for judicial guidance as to the administration of the Trust notwithstanding the loss of the Deed.
2. Indeed, as the result of observations by the Bench, the applicants filed an undertaking that they would give in the event that the application for leave to appeal is granted and the appeal is allowed. The proposed undertaking is in the following terms:

The applicant undertakes, by its counsel, that within 2 months of the Court's delivery of judgment in this matter, it will commence a proceeding in the Supreme Court of Victoria under Rule 54.02 of the [Rules] and s 63 of the Trustee Act 1958 (Vic), and on such further bases as it might be advised, in which orders shall be sought for the effective administration of the Mantovani Family Trust, and will prosecute that proceeding until final orders are obtained for the resolution of the proceeding (if such orders are required).

1. Rule 54.02(1) of the Rules provides as follows:

A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.[76]

1. Section 63 of the Trustee Act provides:

63 Power of Court to authorize dealings with trust property

• (1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure or other transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument (if any) or by law, the Court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose on such terms and subject to such provisions and conditions (if any) as the Court thinks fit and may direct in what manner any money authorized to be expended, and the costs of any transaction are to be paid or borne as between capital and income.
• (2) The Court may from time to time rescind or vary any order made under this section, or may make any new or further order.
• (3) An application to the Court under this section may be made by the trustees, or by any of them, or by any person beneficially interested under the trust.

1. These or cognate provisions have been utilised in the past where it was necessary to fill a gap owing to a deficiency in ascertaining all the terms of a trust. Two examples suffice.
2. In Re Porlock Pty Ltd,[77] the trustee sought judicial guidance under s 63 of the Trustee Act 1925 (NSW), as to whether it would be justified in dealing with trust property in a particular way where the trust deed could not be located. An accountant who once possessed the trust deed and had direct involvement in the administration of the trust gave evidence as to the operative provisions of the trust as he understood them, and how the income and capital of the trust were to be distributed. Young AJA held that the accountant had provided the 'best evidence' of the terms of the deed and that the trustee would be justified in acting in accordance with those terms as recalled by the accountant.[78]
3. In Re Cleeve Group Pty Ltd, the trustee sought judicial advice that it could 'operate its business on the basis that an unexecuted trust deed ... was in fact executed and that that deed continue[d] to govern that trust'.[79] Gorton J noted that the trust deed had been executed but later lost.[80] His Honour found that the executed deed was probably in the form of an unexecuted deed prepared by solicitors.[81] His Honour made an order pursuant to r 54.02 of the Rules to the effect that the trustee 'is and has been justified in managing and administering the [trust] according to the terms of the unexecuted trust deed prepared by [the solicitors]'.[82]
4. The Court also has an inherent jurisdiction to intervene where the circumstances are exceptional or urgent in nature.
5. In Re Downshire Settled Estates; Marquess of Downshire v Royal Bank of Scotland, the scope of this power was described as follows:

It is a power or jurisdiction to confer upon trustees ... administrative powers to be exercised by them as the persons in whom the property is vested (notwithstanding that such powers were not conferred by the trust instrument) where a situation has arisen in regard to the property (particularly a situation not originally foreseen) creating what may be fairly called an 'emergency' - that is a state of affairs which has to be presently dealt with, by which we do not imply that immediate action then and there is necessarily required - and such that it is for the benefit of everyone interested under the trusts that the situation should be dealt with by the exercise of the administrative powers proposed to be conferred for the purpose. The power or jurisdiction does not, in our view, extend to changes or re-arrangements of the beneficial interests inter se under the trust, as distinct from re-arrangements or reconstructions of the trust property itself.[83]

1. John, in his written case, submitted that the Court may not exercise its powers to supervise, or otherwise intervene in, the administration of a trust, including by making orders under the Trustee Act, unless it has found that there is a valid trust.
2. He relied upon the following statement of Gageler J in Palmer v Ayres:

Fundamental to the law of trusts is that the court has jurisdiction to supervise, and in appropriate circumstances to intervene in, the administration of a trust. Indeed, a test of the validity of a trust is that it must be of such a nature that it can be administered by a court.[84]

1. This statement was made in the context of a challenge to the constitutional validity of s 596A of the Corporations Act 2001 (Cth), which is markedly different from the facts of this case.
2. For the reasons we have already stated, there is sufficient evidence available as to the essentials of the Trust to hold that it subsists and remains valid. The Court has the power to make orders or give directions as to the further administration of the Trust. It can consider, if necessary upon the adducing of further evidence, the likely duration of the Trust and make orders as to the scope of the trustee's management powers. It may also make any other orders to ensure that the Trust is administered as intended. This is a far more preferable approach - consistent with Rocco's intention to establish the Trust, Teresa's intention for the properties in issue to be the subject of the Trust and the Court's reluctance to declare a trust as failing for uncertainty - than that of declaring that the Trust has failed.
3. Proposed ground 1 is established. Provided the proposed undertaking set out at [117] above is given, the application for leave to appeal will be granted and the appeal will be allowed on this ground.

Proposed ground 2: Should a resulting trust arise due to the loss of the Deed?

1. In view of our decision in relation to proposed ground 1, it is not strictly necessary to deal with proposed ground 2. Nevertheless, in deference to the submissions made by the parties and in case the matter goes further, we will briefly state our views on this proposed ground.
2. It is unnecessary to rehearse the written and oral submissions made by the parties in relation to the applicability and appropriateness of the resulting trust remedy. The arguments will be referred to where necessary.
3. It is convenient to repeat Question 5 as formulated by the judge:

Question 5: Should a declaration be made that Vanta holds the trust property on resulting trust for Teresa's estate?[85]

1. After dealing with the applicable principles and the submissions of the parties, the judge held that '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'.[86] Her Honour said:

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 [John, Nic, Rocky] 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.

With this in mind, and in light of McDonald J's declaration of a resulting trust in similar circumstances in Yap v Lee, 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.

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'. ... [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.

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.

The [applicants'] 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.

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.[87]

1. In other words, her Honour concluded that the loss of the Deed (and the failure to produce evidence of the contents of the Deed) meant that the terms of the Trust could not be ascertained. This, in turn, caused the Trust to fail and a resulting trust to arise by operation of law, thereby creating a new equitable interest in the Trust property. Such interest had vested in Teresa's estate on the basis that Teresa had transferred the properties in issue to Vanta and intended that they be held by it on trust.
2. As we will endeavour to explain, and with respect, we do not accept the reasoning of the judge, even if we had found that the Trust failed. The resulting trust remedy is unnecessary in the present circumstances and its application is inconsistent with established legal principles to which we now turn.
3. Although there are considerable doctrinal, practical and phraseological issues associated with resulting trusts, the issues raised in this case are relatively straightforward. The applicable principles were not in dispute and, by their proper application, the remedy has no work to do here.
4. The remedy of a resulting trust applies in relation to real property in two circumstances. First, it may apply where the transferor or settlor of property is presumed not to intend to transfer or convey beneficial ownership to the transferee. In such a case, the holding by the transferee is qualified and conditional. Second, it may apply in other circumstances not dependent on intention and arises automatically, the most relevant of which, for our purposes, is the failure of an express trust. In such a case, the settlor or creator of a trust has failed to take a step that is essential to the creation of a trust in respect of the property in issue. As we explain below, neither circumstance arises in this case.
5. Both parties placed reliance upon the decision of Edelman J in Anderson v McPherson [No 2].[88] His Honour referred to some of the controversial issues relating to resulting trusts and the two circumstances to which we have referred, in the following lengthy but necessary extract:

The Supreme Court of Canada has recently observed that 'there is not much one can say about resulting trusts without a well-grounded fear of contradiction. There is debate about how they should be classified and how they arise, let alone about many of the finer points': Kerr v Baranow [2011] SCC 10; [2011] 1 SCR 269 [16] (Cromwell J for the court).

The view of Professor Chambers in Resulting Trusts (2007) 4, following the late Professor Birks, is that the label 'resulting trust', from the Latin resalire, invokes a metaphor of rights 'jumping back' to the settlor: see also J D Heydon and M J Leeming Jacobs' Law of Trusts (7th ed, 2006) 234 [1201].

The metaphor of jumping back is misleading. For instance, where a legal right of ownership of land is transferred and a resulting trust arises, a new equitable interest is created in favour of the settlor. The absolute owner in fee simple who transfers title did not previously hold both legal and equitable estates. He held only a legal estate; no equitable estate existed prior to the transfer which could 'jump back': DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431, 463 (Aickin J); Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) [2005] HCA 20; (2005) 220 CLR 592, 606 [30] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ); Peldan v Anderson [2006] HCA 48; (2006) 227 CLR 471, 485 [37] (Gummow ACJ, Kirby, Hayne, Callinan & Crennan JJ).

An alternative view which does not invoke this metaphor suggests that 'resulting' ought merely to be understood as 'resulting' from the circumstances of the case: Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060 [131] (Campbell J, as his Honour was then).

If 'resulting' is understood as arising from the circumstances of the case then there is little difference, as a matter of labelling, between 'resulting' and 'constructive'. Quoting from Professor Scott, a joint judgment in the High Court of Australia has said that for a constructive trust, a court 'construes the circumstances in the sense that it explains or interprets them': Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 at 111 [2] (Gleeson CJ, McHugh, Gummow and Callinan JJ).

Indeed, the historically close association between resulting and constructive trusts meant that they were originally used interchangeably, particularly by Lord Nottingham LC. For instance, in Grey v Grey (1677) 2 Swan 594, 598; [1677] EngR 86; (1677) 36 ER 742, 743, Lord Nottingham LC spoke interchangeably of a use by implication (now, resulting trust) and a constructive trust; see also M McNair 'Coke v Fountaine (1676)' in C Mitchell and P Mitchell (eds) Landmark Cases in Equity (forthcoming) ch 2. Historical separation may have occurred with the epexegetical interpretation of the word 'construction' in the expression in the Statute of Frauds 1677 'by the implication or construction of law': W Holdsworth, A History of English Law (1924) VI, 643.

Therefore, whether the label 'resulting trust' is concerned with a trust which 'jumps back' or 'results from the circumstances of the case', the label does not assist in understanding why the trust arises. However, two matters are well established for resulting trusts inter vivos (amongst the living). First, the resulting trust is a trust in favour of the settlor himself or herself. Secondly, resulting trusts are not mono-causal. In other words, resulting trusts arise for a number of different reasons.

For centuries, the most common instance in which resulting trusts have arisen has been where the settlor's objectively manifested intention is that the rights which the settlor transferred to another, or purchased in the name of another, should be held on trust for the settlor. If this intention is proved by evidence the trust is usually described as an express trust. But where the intention is proved by presumption the trust is described as a resulting or implied trust.

In this sense, resulting trusts have been described as 'intent enforcing' like express trusts: Black Uhlans Inc v New South Wales Crime Commission at [133] (Campbell J). Campbell J's decision was described by Young CJ in Eq as 'the latest authoritative discussion' in Salvo v New Tel Ltd [2005] NSWCA 281 at [92].

The intention to be discerned in a resulting trust is an objective, manifest intention; it is not an unexpressed subjective intention: Calverley v Green (261) (Mason & Brennan JJ), (270) (Deane J); Byrnes v Kendle (286-287) [105]-[106] (Heydon & Crennan JJ); Re Vandervell's Trusts (No 2) [1974] Ch 269 at 294 (Megarry J).

But resulting trusts also arise for reasons other than (presumed) manifestations of intention to create a trust. There are numerous examples where a resulting trust has been imposed by law even despite clear and manifest evidence that the settlor did not intend that the rights be held on trust for him or her. Sometimes these resulting trusts which are imposed by law are described as 'automatic' resulting trusts.

A well recognised example of a resulting trust which is imposed by law is where an attempt to create an express trust fails: see the discussion in Knudsen v Kara Kar Holdings Pty Ltd [2000] NSWSC 715 [49] (Austin J); and Yard v Yardoo Pty Ltd [2006] VSC 109 [298] (Cummins J), discussion not considered on appeal in either Yard v Yardoo Pty Ltd [2007] VSCA 35 or Kara Kar Holdings Pty Ltd v Knudsen [2001] NSWCA 276. See also J D Heydon and M J Leeming Jacobs' Law of Trusts (7th ed, 2006) 236 [1205].

Another example of a resulting trust imposed by law is where a transfer of legal title occurs 'about which the transferor was entirely unaware': Robb Evans of Robb Evans & Associates v European Bank Limited [2004] NSWCA 82; (2004) 61 NSWLR 75 at 99-100 [111]-[113] (Spigelman CJ).

In these cases of resulting trusts imposed by law, the justification for the trust sometimes proceeds on the flawed basis ... that the transferor held both a legal and equitable interest and divested only the legal interest: W Swadling 'Explaining Resulting Trusts' (2008) 124 LQR 72, 99-100 discussing Vandervell v Inland Revenue Commission [1966] UKHL 3; [1967] 2 AC 291, 313 (Lord Upjohn), 329 (Lord Wilberforce).

A better explanation for the imposition of a resulting trust in these cases focuses upon the lack of intention, usually by the immediate transferor, to benefit the recipient: Robb Evans of Robb Evans & Associates v European Bank Limited (99-100) [111]-[113] (Spigelman CJ) citing R Chambers Resulting Trusts (1997); Air Jamaica Ltd v Charlton [1999] UKPC 20; [1999] 1 WLR 1399 at 1412 (Lord Millett). These resulting trusts are imposed as a legal response to prevent the recipient having the use and enjoyment of rights for his or her own benefit where that use and enjoyment was not intended.[89]

1. In Bosanac v Commissioner of Taxation, Gordon and Edelman JJ discussed the circumstances in which a resulting trust may arise, as follows:

Like a constructive trust, which arises by operation of law, a resulting trust sometimes describes a trust in favour of a transferor that is imposed independently of the manifested intention of the transferor to create a trust. But, like an express trust, which arises due to objective or manifested intention to create a trust, a resulting trust sometimes describes a trust that was objectively intended by the transferor of property. These disparate categories are treated alike as 'resulting' trusts merely by the pattern of their effect. From the Latin, resalire or resultare, the equitable interest is said to 'jump back' to the settlor or those taking through the settlor.

Examples of resulting trusts that have been held to arise by operation of law, irrespective of any objective intention to create a trust, are trusts that arise upon the failure of an express trust or by a transfer of a person's legal rights without their consent or knowledge. Examples of resulting trusts that arise from objective intention to create a trust are trusts that arise in favour of a transferor of property ('voluntary conveyance resulting trust') or a contributor of purchase money ('purchase money resulting trust').[90]

1. The parties in the present case agreed that the first category of resulting trust referred to at [137] above, which depends upon presumed intention, does not apply. Teresa, the transferor of the properties in issue, intended to transfer those properties to Vanta to be held on trust by it. No circumstances were said to suggest that some sort of qualification must be presumed, other than that the properties were to be held by Vanta on trust in accordance with the terms of the Deed. There was no reservation or qualification so far as Teresa was concerned. Her divestment of the properties was absolute.
2. The second category of resulting trust referred to at [137] above, which does not depend upon any presumed intention, also does not apply. The Trust was established not by Teresa, but by her father Rocco. The initial trust property was the settled [91]m of $50.91 The nature of the transaction between Teresa and Vanta was not that of a settlement. Rather, it was a transaction involving consideration and thus, in effect, a sale of the properties in issue. The evidence establishes that the purchase price for the properties was paid by crediting the loan account of Teresa in the books of the Trust. She was a creditor. The Trust owed her the amounts credited. Questions concerning how, when, and if the specified sums were paid and whether they represented the market value of the properties do not affect the critical nature of the transaction. Once this is understood, there is no basis to engage with the resulting trust remedy.
3. Teresa was not in the position of either a settlor or benevolent transferor of real property to a trust which, contrary to the intention behind the transfer, failed. In such cases, it is not surprising that the real property should automatically 'jump back'. This position is far removed from a transfer or sale for consideration based on an underlying contractual arrangement.
4. Vanta, as purchaser and transferee for value, and in its capacity as trustee of the Trust, was intended to have (and did have) the legal title to the properties and the right to exercise proprietary rights in relation to them in accordance with the terms of the Trust.
5. There has been no suggestion that the Trust was ineffective or inoperative or had failed at the outset. Accordingly, the former ownership of the properties by Teresa is purely historical and of no relevance following the proper completion of the transaction just described. The notion that something did happen automatically, albeit with retrospective recognition, is entirely inapt. The nature and manner of implementation of the transfers effectively forecloses any notion that, close to half a century later, the events may be retroactively reconfigured to achieve a result that was not only unintended, but is the opposite of what was intended and satisfactorily implemented. The use and enjoyment of the properties by the Trust was clearly intended and that intention was realised.
6. It is also important to repeat that the Trust is and was an extant trust. As we have explained, there was certainty about all the essential elements for a valid trust. The uncertainty arose after the Trust was established and concerns terms of the Trust which relate to matters that are able to be dealt with, are usually dealt with and are preferably dealt with, without resorting to the resulting trust remedy.
7. A further difficulty relates to the date that the assets of the Trust are to be treated as automatically reverting back to Teresa, not as settlor, as in the usual case, but as vendor. No specific date was identified by the judge.
8. Accordingly, even if the Trust failed at some unidentified point in time, but within a potentially large timespan - a proposition and conclusion that we do not accept - the notion that a resulting trust automatically arose, without more, at some entirely unspecified and imprecise time, is erroneous for the reasons we have given.
9. As the authorities make clear, the reason why property reverts back automatically to the settlor is because the settlement cannot be given effect according to the intention and wishes of the settlor. The settlor may wish to settle assets on a trust. If the trust cannot be effectuated, the settlement fails, it being the intention of the settlor to settle legal and beneficial interests in real property to a trust and not otherwise. These features are absent in the present case. As we have already stated, the Trust was established by the settlor (not Teresa) and she transferred the properties in issue to Vanta for valuable consideration.
10. There are mortgages by Vanta to the ANZ Bank in 1981 and 1982, after the properties were transferred to Vanta. There is no dispute that the properties were held by Vanta on trust. It is reasonable to assume that the Bank would have asked for a copy of the Deed and would not have granted any loans to Vanta unless the Bank was satisfied with the terms of the Deed.
11. Finally, Yap v Lee resolved nothing relevant to the issues in the present proceeding. The resulting trust in that case was consequent upon the making of orders by consent, as we have previously explained.
12. For the above reasons, proposed ground 2 is made out.

Proposed ground 3: Should there be a taking of accounts?

1. The judge ordered the taking of accounts on the basis that Vanta had breached its duty as trustee in making distributions to Nic and Rocky in circumstances where the terms of the Trust could not be ascertained due to the loss of the Deed. Underpinning the order were the conclusions that the Trust failed and that Vanta held the trust property subject to a resulting trust in favour of Teresa's estate.[92]
2. Given that we do not agree with her Honour's conclusion as to the existence of a resulting trust and that, in our view, the Trust subsists, the immediate need for the order for the taking of accounts falls away. It is therefore not necessary to deal with proposed ground 3.
3. Consistent with our conclusions that the Trust did not fail upon the loss of the Deed and that a resulting trust did not then arise in favour of Teresa's estate, the loss of the Deed did not, in and of itself, mean that Vanta breached its duties as trustee by continuing to administer the Trust. However, we have not been required to determine whether Vanta committed any other breaches of trust and whether John has any remedies against Vanta - such as an order for the taking of accounts or an order for the removal of Vanta as trustee - if any such breaches can be established in a proceeding where these issues are properly raised. It suffices for us to say that our reasons do not affect the rights and obligations of the parties or the remedies available to them beyond the specific findings we have made and the orders we will make to give effect to them.

(a) The Trust does not fail for uncertainty. It remains a valid trust that is in urgent need of judicial direction, which should have been sought in the past and is now the subject of a proposed undertaking by the applicants.[93] > > (b) Vanta does not hold the Trust property subject to a resulting trust in favour of Teresa's estate. Consequently, there is no basis, at the present time, for the taking of accounts. > > (c) Although our decision affirms the continued existence of the Trust, it remains open to John to take whatever steps he deems appropriate in relation to the past or future administration of the Trust. > > (d) Subject to the proposed undertaking being given by the applicants, we will make orders granting leave to appeal and allowing the appeal.

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] In the Trial Division proceeding to which the application for leave to appeal relates, John was the plaintiff and the applicants were the defendants. Carmine was not a party to the proceeding and took no part in the trial. He was the second respondent to the application for leave to appeal and was represented by solicitors but made no appearance at the hearing of the application. He filed a Form 64E notice of intention not to respond or contest.

[2] Mantovani v Vanta Pty Ltd [No 2] [2021] VSC 771 ('Reasons'). See [50]-[55] below.

[4] The originating motion was later amended to seek production of documents from 1976.

[5] Mantovani v Vanta Pty Ltd [2020] VSC 736, [58].

[13] Ibid [61]. See generally [59]-[71].

[14] Ibid [62], citing Maks v Maks (1986) 6 NSWLR 34, 36 (McLelland J).

[20] Ibid [81], citing McLean Bros & Rigg v Grice [1906] HCA 1; (1906) 4 CLR 835, 850 (Griffith CJ).

[21] Ibid [83], citing Burnside v Mulgrew; Re the Estate of Grabrovaz [2007] NSWSC 550, [25] (Brereton J).

[26] [2019] VSC 743.

[27] Reasons, [122]. Her Honour found that the case was one of an 'automatic resulting trust': ibid [108], [118]- [122].

[30] See ibid [128]. Her Honour noted that the Court has the power to order the taking of accounts under r 52.01 of the Rules but that a claim for accounts does not depend on there being a breach of the trustee's obligations: ibid [126], [128].

[32] See [95]-[98] below.

[34] (1986) 6 NSWLR 34.

[35] Reasons, [62] (citations omitted).

[36] Ibid [77], [79] (emphasis in original).

[38] [2019] VSC 743.

[39] Reasons, [105], [112], [117].

[40] Ibid [91]-[92] (citations omitted).

[41] Ibid [105]-[106] (citations omitted).

[42] (1986) 6 NSWLR 34.

[43] In Victoria, see: D R McKendry Nominees Pty Ltd [2015] VSC 560, [7] ('D R McKendry'); Application by Barry McMahon Nominees Pty Ltd [2021] VSC 351, [12]. In New South Wales, see: Chase v Chase [2020] NSWSC 1689, [27]; Barp Nominees Pty Ltd [2016] NSWSC 990, [6].

[46] See James D Metzger, 'Review Essay: Critical Perspectives on the Uniform Evidence Law' [2018] SydLawRw 6; (2018) 40(1) Sydney Law Review 147, 148; Australian Law Reform Commission, Uniform Evidence Law: The Uniform Evidence Acts (Report No 102, 5 December 2005), 49-50 [2.1].

[47] Supreme Court of New South Wales, Young J, 16 October 1997, 11, citing Cross on Evidence (5th ed), 249-250 [9050].

[48] Supreme Court of New South Wales, Hodgson J, 12 September 1996, 9.

[49] [2005] NSWSC 345, [93] (emphasis added).

[50] [2019] VSC 743, [21], citing D R McKendrey [2015] VSC 560, [7] (Digby J).

[52] [2022] VSCA 210 (Niall, Sifris and Walker JJA) ('GP').

[53] See Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336.

[54] GP [2022] VSCA 210, [89] (emphasis added) (citations omitted).

[59] [1840] EngR 862; (1840) 3 Beav 148, 172-3; [1840] EngR 862; 49 ER 58.

[60] Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62, 71 [7] (French CJ); Pascoe v Boensch [2008] FCAFC 147; (2008) 250 ALR 24, 29 [20] (Finn, Dowsett and Edmonds JJ).

[61] (2015) 255 CLR 62.

[62] Ibid 71 [7]. See also Kinsela v Caldwell [1975] HCA 10; (1975) 132 CLR 458.

[63] [2013] QSC 205.

[67] Ibid [64], quoting Herdegen v Federal Commissioner of Taxation [1988] FCA 419; (1988) 84 ALR 271, 277.

[68] [2018] NSWSC 548.

[71] [2016] NZAR 985; [2016] NZHC 1626.

[73] As stated at n 3 above, Rocco is Teresa's father.

[74] Re Sayer [1957] Ch 423.

[75] [1970] UKHL 1; (1971) AC 424, 457 (emphasis added) (citations omitted).

[76] An 'administration proceeding' is defined by r 54.01 of the Rules to mean 'a proceeding for the administration of an estate or the execution of a trust under the direction of the Court'.

[77] [2015] NSWSC 1243 (Young AJA).

[79] [2022] VSC 342, [2] (Gorton J).

[83] [1953] Ch 218, 235 (Evershed MR, Romer LJ), cited in Gonzales v Claridades [2003] NSWCA 227; (2003) 58 NSWLR 211, 219 [39] (Mason P, Beazley JA agreeing at [54], Foster AJA agreeing at [55]).

[84] [2017] HCA 5; (2017) 259 CLR 478, 510 [84].

[87] Ibid [116]-[121] (citations omitted).

[88] [2012] WASC 19.

[90] [2022] HCA 34; (2022) 405 ALR 424, 442-3 [93]-[94] (citations omitted).

[91] See [15] above.

[93] See [117] above.