Walker v Romano

Background 1 The plaintiffs are the trustees of a settlement known as the G Romano Family Trust created by a deed apparently made on 31 October 1981 between William Norman Douglas Michie of Sydney, solicitor, and Giacomo Giuseppe Romano, who was the original trustee. The plaintiffs became the trustees in succession to G G Romano by order made by the court in 2000 when G G Romano had, through advanced age and infirmity, come to lack the requisite capacity. The plaintiffs seek, by summons filed on 11 October 2001: "An order or direction that the plaintiffs, as trustees of the G Romano Family Trust, should distribute the moneys held by them as such trustees in such way or upon such terms as the Court thinks appropriate." 2 It was made clear by Mr C R C Newlinds of counsel, who appeared for the plaintiffs, that they intended to apply for the opinion, advice or direction of the court on the extent of the interests of beneficiaries in the trust assets as they presently stand. The plaintiffs did not, however, adopt the course generally taken by trustees seeking judicial advice of placing undisputed facts before the court and seeking its guidance by reference to those facts. Rather, beneficiaries or potential beneficiaries were named as defendants in the plaintiffs' summons and the proceedings became, in substance, a contest between the first defendant and the second defendant, both of whom are within the class of persons described as beneficiaries, as to certain factual matters and as to the course the trustees should take. No real part was played in the proceedings by the trustees as plaintiffs. 3 It may be said at once that no answer can be given to the question the plaintiffs pose without the court engaging in a process of finding facts. It may also be said that the evidence was meagre. G G Romano is no longer living. He died in June 2001. Much of the evidence about relevant contemporary dealings and events - indeed, the vast bulk - came directly or indirectly from a solicitor and an accountant. The solicitor, Mr Shehadie, is the principal of the firm Michie Shehadie & Co of which the settlor, Mr Michie, was a member when the deed was executed. Mr Michie prepared the trust deed. He retired some years ago and has since died. The accountant, Mr Thomas, attended to G G Romano's tax affairs for a considerable period and was involved in the establishment of the trust. 4 Mr Shehadie and Mr Thomas had not necessarily made all the investigations that it was possible to make into relevant matters of record. Mr Shehadie was re-called on the second day of the hearing to be examined about investigations he had made overnight. He said, among other things, that he had found some old computer discs which might contain relevant trust account entries but that he had not been able to find a computer which could read these old discs. Mr Thomas, when asked whether there were any withholding tax deduction forms in addition to those which became exhibit 1D3, said that other forms existed or had existed, that they were either in his Fairfield office or had been destroyed and that he had made no attempt to find any other forms. 5 Were this a case in which rights and duties were to be determined in ordinary adversarial proceedings, a party would, as it were, have to live with its failure or inability to adduce relevant evidence and the court would decide between the competing contentions by reference to such evidence as the parties to the controversy put before it. Here, however, the position is different. The court is asked to advise the trustees in such a way that, if they follow the advice, they are protected against the eventuality that, by so doing, they have failed to discharge their duty in relation to the relevant matter. The absence of potentially relevant evidence in this kind of case has a different connotation. The family 6 When the trust deed was executed, G G Romano had two sons, Edward (to whom I shall refer as "E A Romano") and John ("J J Romano"). G G Romano died in June 2001. J J Romano pre-deceased his father, having died in 1995 leaving surviving a wife, Jeanette Romano (the second defendant), and two children, all of whom are living. E A Romano is living. He is the first defendant and gave evidence, in the course of which he referred to his wife. The evidence does not seem to indicate whether he has children and for present purposes nothing turns on that. The trust deed 7 I turn to the trust instrument which is, as I have said, a deed which appears to have been made on 31 October 1981. I say "appears" because the copy in evidence contains "31 October 1981" in typewritten form in the place reserved for the date of the deed, but shows that the typewritten words have been ruled through and "30 November 1990" has been added in handwriting above. That is not the only apparent alteration. There is another to which I shall come in due course. 8 I have referred to the fact that the deed purports to be made between Mr Michie and G G Romano. It is to be noted, however, that it is signed by G G Romano alone. In the end, I think that nothing really turns on the absence of execution by Mr Michie. His only involvement is stated in the recitals which refer to his desire to make provision for the benefit of certain persons and to his having already paid to the original trustee (that is, G G Romano) the sum of $10.00 to be held on the trusts of the deed. The operative provisions are confined to matters binding upon the trustee and, although the deed is expressed to be made inter partes, it is, in my view, sufficient that it is executed by Mr Romano who, by his unilateral execution, undertook the trusts and subjected himself to the covenants expressed to bind the trustee. 9 Turning to the content of the trust deed, I observe at once that it is what might be generally regarded as a standard discretionary trust deed, although not well drawn and giving rise to some anomalies. There is created by the deed a fund ("the trust fund") consisting of the initial sum settled by the settlor on the trustee, being the sum of $10, together with all moneys, investments and property afterwards vested in the trustee upon the trusts of the deed or otherwise accruing to the trustee upon those trusts, and accumulations of income directed by the deed to be made. 10 Clauses 2 and 3 deal with the income of the trust fund. Clause 2 is in the following terms: "Until the vesting day the trustee shall stand possessed of the trust fund UPON TRUST as to the income thereof for the beneficiaries PROVIDED ALWAYS subject to Clause 3 the trustee may in each accounting period until the vesting day pay, apply or set aside the whole or such part (if any) as the trustee thinks fit of the nett income of the trust fund of that accounting period to or for the benefit of or for all of such one or more exclusive of the other or others of the beneficiaries in such proportion and in such manner as the trustee thinks fit." 11 Clause 3 deals with a special situation, namely: "Where only one person has been appointed as trustee and the trustee is also a beneficiary."