[2006] FCA 814
Attorney-General (NSW) v Perpetual Trustee Co (Ltd) (1940) 63 CLR 209
Avanes v Marshall (2007) 68 NSWLR 595
[2007] NSWSC 191
Brady Street Developments Pty Ltd v M E Asset Investments Pty Ltd [2013] NSWSC 1755
Breen v Williams (1996) 186 CLR 71
[1996] HCA 57
Byrnes v Kendle (2011) 243 CLR 253
[2011] HCA 26
Chaine-Nickson v Bank of Ireland [1976] IR 393
Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226
Source
Original judgment source is linked above.
Catchwords
[2006] FCA 814
Attorney-General (NSW) v Perpetual Trustee Co (Ltd) (1940) 63 CLR 209
Avanes v Marshall (2007) 68 NSWLR 595[2007] NSWSC 191
Brady Street Developments Pty Ltd v M E Asset Investments Pty Ltd [2013] NSWSC 1755
Breen v Williams (1996) 186 CLR 71[1996] HCA 57
Byrnes v Kendle (2011) 243 CLR 253[2011] HCA 26
Chaine-Nickson v Bank of Ireland [1976] IR 393
Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226[1998] HCA 4
College of Law Pty Ltd v Attorney General of NSW [2009] NSWSC 1474
Commissioner of Taxation (Cth) v Bargwanna (2012) 244 CLR 655[2005] HCA 53
Crociani & Ors v Crociani & Ors (Jersey) [2015] WTLR 975[1989] 89 ATC 5274
Fell v Fell (1922) 31 CLR 268[1922] HCA 55
Fischer v Nemeske Pty Ltd (2016) 257 CLR 615[2008] FCA 1454
Kauter v Hilton (1953) 90 CLR 86[1953] HCA 95
Kennon v Spry (2008) 238 CLR 366[2008] HCA 56
King v Perpetual Trustee Company Limited (1955) 94 CLR 70[1955] HCA 70
Kinsela v Caldwell (1975) 132 CLR 458[1975] HCA 10
Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 6232 ER 656
Newell
Muriniti v De Costi [2018] NSWCA 49
O'Rourke v Darbishire [1920] AC 581
Palmer v Ayres (2017) 259 CLR 478
[2014] NSWCA 367
Re Estate Schwartz, Deceased
Application of Gellert
Gellert v Bentwood and Schwartz [2015] NSWSC 1484
Re Fairbairn [1967] VR 633
Re Hodgson
Nowell v Flannery [1936] 1 Ch 203
Re Lauer
Corby v Lyttleton [2017] VSC 728
Re Londonderry's Settlement [1965] Ch 918
Re Williams
Williams v Williams [1897] 2 Ch 12
Rinehart v Welker (2011) 93 NSWLR 311
[2011] NSWCA 403
Rouse v IOOF Australia Trustees Limited (1999) 73 SASR 484
[1999] SASC 181
Russo v Aiello (2003) 215 CLR 643
[2003] HCA 53
Schmidt v Rosewood Trust Ltd [2003] 2 AC 709
[2004] FCA 650
Stamoulos v Constantinidis
Judgment (22 paragraphs)
[1]
Background Facts
An analysis of the legal issues, to be more meaningful, requires a general overview of the surrounding facts and the events giving rise to the Plaintiff's claim. The following facts are not the subject of any dispute (to the extent that they are identified in Ex. B), or are clearly established, otherwise, by the uncontested evidence of the Plaintiff and/or of Mr Hinchcliffe.
The deceased lived in Dorrigo, New South Wales. He was a well-known Dorrigo identity. He died on 6 November 2007. He was never married, and, so far as is known, he had no children. He had no other next of kin (entitled to his estate by operation of the intestacy rules that applied at the date of the deceased's death).
The deceased left a duly executed Will that he made on 29 October 2007 (shortly before his death). It appointed "the solicitors at the date of my death of the firm Barwick Stevens Lawyers to be one of my joint executors and direct[ed] that only one of them need prove the will and act initially in respect of its Trusts" and "my accountant Timothy John Christiansen": Clause 2 of the Will.
On 17 April 2008, this Court granted Probate of the deceased's Will to the first Defendant, who is a solicitor at the firm Barwick Stevens Lawyers, and to Timothy John Christiansen. I shall return to the other relevant terms of the Will later in these reasons.
Mr Christiansen retired as a trustee of the Trust on about 14 August 2013. (Any document that related to his retirement is not in evidence.) Since then, and currently, the first Defendant has remained the sole trustee of the Trust.
In the Inventory of Property, a copy of which was attached to, and placed inside, the Probate document, the deceased's estate was disclosed as having an estimated, or known, value of $5,540,921 (which appears to be incorrect). The estate was said to consist of real property ($4,790,000), as well as cash at bank, and personalty (in total $475,921). (When calculating the total of the estimates or known values of the property disclosed in the Inventory of Property, the actual estimated total value of the estate was $5,265,921.)
The nature, or value, of the deceased's estate, at the date of hearing, was not disclosed in the evidence. There is no evidence about whether the estate has been fully administered. (The Court was informed by senior counsel for the first Defendant, from the bar Table, that the estate of the deceased has been fully administered However, that is not an agreed, or an otherwise established, fact: T2.17 - T2.23.) There is also no evidence that the first Defendant has verified, filed, and passed, any accounts, relating to the estate: T20.00 - T20.05.
[2]
The Terms of the deceased's Will
No party disputed that the deceased's Will was, at least in part, a badly drafted document. A reference to a "Trust Deed", several times, demonstrates that it is unnecessary to say more. There was, of course, no Trust Deed. However, the First Schedule to the Will, comprising some 22 pages, set out the terms of the testamentary Trust.
Clause 4 of the Will provided a gift of "the whole of my estate of whatsoever kind and wheresoever situate, after payment of all due debts and testamentary expenses, to my trustees UPON TRUST, as set out in the Schedules to this my Will".
Clause 5 of the Will directed that "the said trust be a discretionary trust in memory of my parents, George and Annie Cork".
Clause 6 of the Will gave the Trustees powers "in addition to those powers as set out in the Trust Deed":
"(a) To sell, lease, exchange or otherwise dispose of assets in [the] estate on such terms as the Trustee considers expedient as though the Trustee were the absolute beneficial owner thereof;
(b) To carry on … any business which [the deceased] was engaged as at the date of … death, and to employ … [people] upon such terms and conditions as the Trustee shall think fit and generally to act in all respects in relation to such business as if the Trustee where [sic] the absolute owner thereof and [directed] that the Trustee shall not be liable for any loss occasioned by the carrying on of the said business…;
(c) To call in and convert to money such part or parts of [the] estate and property as may not consist of money; and
(d) To amend the Trust Deed to comply with the Australian Taxation laws from time to time and to apply to the Australian Taxation Office for charitable status when and if required".
Before referring to the terms of the First Schedule, I shall refer to the Second Schedule of the Will because it is short and what follows, thereafter, will be more comprehensible.
Item 1 of the Second Schedule to the Will, identified "Barwick Stevens Lawyers" and Timothy John Christiansen as the first Trustee.
Item 2 of Schedule 2 provided that:
"The Beneficiary or Beneficiaries referred to in Clause 1.3 of the First Schedule is or are:
Such persons, Trustees of Trusts (but excluding any Trusts which would result in a breach of the rule against perpetuities or the rule against accumulations) companies or charities, residing in or otherwise carrying on business in Dorrigo in New South Wales or surrounding areas as defined by the postcode 2453 as the Trustees shall before the vesting date appoint in writing to be beneficiaries for the purposes of this Deed."
[3]
Additional Undisputed Facts
The Plaintiff is not a specifically named beneficiary of the Trust. However, he is a person who is a resident living within the Dorrigo postcode area 2453. He has lived within the Dorrigo postcode area since 1999. Before that, he was a farmer engaged in business within the postcode area for about 40 years. He is a retired Fellow of the Securities Institute of Australia and a former member of the Sydney Stock Exchange and the Australian Stock Exchange. He has been a member of the Grafton Rural Lands Protection Board.
In the circumstances, the Plaintiff is a person with a genuine legitimate expectation of benefitting from the Trust as one of the "persons" whom the first Defendant, as Trustee, is bound to have in mind when exercising the discretion to appoint "a person" in writing to be a Beneficiary for the purposes of the Trust.
A person who is also not a named beneficiary of the Trust, but who has been living within the Dorrigo post code area since 1994, is Mr Hinchcliffe, a retired accountant and business analyst (and formerly a management accountant): T2.45 - T3.04. He is not a party, but, as stated, a witness in the proceedings.
The Plaintiff met with the first Defendant and Mr Christiansen at the first Defendant's office, on 15 April 2014 where they had a conversation about the administration of the Trust.
The Plaintiff called a public meeting in Dorrigo on 28 May 2014 at which about 80 people, including the Plaintiff and Mr Hinchcliffe, attended. Subsequently, the Plaintiff wrote a letter, dated 29 May 2014, to the first Defendant referring to the public meeting and what, he said, had occurred thereat. He requested a response to the letter from the first Defendant but he received no reply.
The Plaintiff sent an open letter, addressed to the first Defendant, which was published in the Don Dorrigo Gazette of 4 June 2014. Also published in the same edition of the newspaper, was a letter to the Editor, from Mr Christiansen, and a series of questions about the Trust that had been posed to, and the answers said to have been given by the first Defendant.
Mr Christiansen's letter prompted a lengthy letter from the Plaintiff to the editor of the newspaper and an "open letter" to the editor from Mr Hinchcliffe, both of which letters were published on 18 June 2014. A further letter to the editor, from the Plaintiff, was published on 6 August 2014.
[4]
The Plaintiff's Submissions
By way of introduction, it was pointed out, in the Plaintiff's written Submissions, that the Plaintiff does not challenge the validity of the Trust; that he "does not (nor could he) say anything about whether the Trust instrument is valid as a private trust"; that he brings the proceedings upon the basis that the Will establishes a private discretionary trust; and that he "neither supports nor opposes the position taken by" the second Defendant.
In Submissions in reply, counsel for the Plaintiff wrote:
"The Plaintiff has brought these proceedings because of concerns about the due administration of the trust … at substantial cost and risk sought in the public interest to bring these concerns to the attention of the Court".
Whilst the submissions go on to point out the concerns of the Plaintiff regarding the administration of the Trust, it is not necessary to repeat all of these concerns, since there is no person seeking to remove the first Defendant as the trustee of the Trust. The Amended Summons does not seek any relief consequent upon establishing the validity of those concerns. In addition, that was not an issue for consideration identified by the parties. It is sufficient to say that there are concerns, which, on proper investigation, may, or may not, be real.
I shall quote, verbatim, the thrust of the Plaintiff's written submissions:
"17. The central contention of the Plaintiff is that on the proper construction of the Will of the Deceased, and the Trust constituted by that Will, the Trustee has extensive powers of investment and management, but those powers must be exercised in furtherance of the expressed trusts and obligations relating to the application and appropriation of Trust Funds to a Beneficiary.
18. Appointment as a Beneficiary is the gateway to the distribution of benefits under the Trust. The accounting information maintained by the Trust does not appear to provide any separate accounting in respect of 'grants' that have been made to date, and does not disclose whether or not any Beneficiaries are in existence. If there is no accounting under these proceedings, and there are no Beneficiaries, there is no other basis on which the Court may supervise the administration of the Trust, assuming it to be a valid private trust.
19. The plaintiff contends that on the proper construction of the trust instrument, the Trustee may deal with the assets of the Trust Fund, but may not make donations or grants from the Fund otherwise than to persons or entities who have been appointed as Beneficiaries. The grants by the Trustee to community groups and unincorporated organisations must be supported, to be authorised by the Trust instrument, by written appointments or memoranda of appointments as a Beneficiary. The accounts must therefore reflect the distinction between the exercise of powers of management, and the exercise of powers of appointment. There is no indication that the accounts do disclose this separate treatment."
[5]
The second Defendant's Submissions
I shall deal next with the submissions of the second Defendant before turning to the first Defendant's submissions in response to the submissions.
It was pointed out that the Plaintiff and the first Defendant had conducted the case on the shared premise that the Trust was a private discretionary trust. The second Defendant, who, it was said, "rarely files a pleading in such matters", had filed the Cross Summons, at the request of the Court, so that the private discretionary trust analysis could be contradicted, and a "third way" could appear on the pleadings.
In oral submissions, counsel for the second Defendant accepted that if the Court came to the conclusion that the Trust was not a charitable trust, then the claim advanced in the Cross-Claim failed: T55.00 - T55.08.
The second Defendant joined with the Plaintiff in raising concerns surrounding the administration of the Trust. Counsel pointed to:
1. A poorly drafted testamentary trust instrument constituted by the Schedules to the deceased's Will.
2. Assets with a substantial value, held by the first Defendant as co-trustee since Probate on 17 April 2008; and as sole Trustee since 14 August 2013.
3. That there was no evidence that a Beneficiary has, or Beneficiaries have, ever been formally appointed ("appointed in writing"). Prima facie, it was said, the evidence suggested that Trust funds have been applied to persons who, or entities which, may, or may not, be within the class of objects prescribed by the Second Schedule Item 2.
4. The concerns about the proper administration of the Trust have been expressed by the Plaintiff and by Mr Hinchcliffe, both of whom fall within the class of potential discretionary objects.
5. The Plaintiff had no greater right to be considered than any other member of the class of objects, being "persons, Trustee of Trusts… companies or charities residing in or otherwise carrying on business in Dorrigo… or surrounding areas as defined by postcode 2458". (However, he did have that right.)
Counsel raised the possibility that the potential objects of the Trust, as expressed in Second Schedule, Item 2, may be subject to "criterion uncertainty" or may fail the "loose class" or "administrative workability" criterion in McPhail v Doulton [1971] AC 424; T75.14 - T75.32.
Counsel then submitted that if the Plaintiff, as a person residing within the Dorrigo 2453 postcode, cannot enforce the Trust, then nobody could, with the result that the Trust would then fail, since one test of the validity of a trust is that it must be of such a nature that it can be administered by a court.
[6]
The first Defendant's Submissions
The first Defendant began by dealing with the arguments of the second Defendant.
It was submitted that it was not necessary to descend into the issue of whether there was a charitable trust (or general charitable purpose) because when one considered when the Trust first became operative, it would not have been considered to be invalid. In particular, it was submitted that there was no uncertainty as to the Trust's objects and that uncertainty did not arise merely because in advance of distribution the beneficiaries were not identified: Kinsela v Caldwell (1975) 132 CLR 458, at 461; [1975] HCA 10.
Nor could there be uncertainty about whether a person was, or was not, a member of the class of persons who may be appointed to be a Beneficiary because the definition of "Beneficiary" in the Second Schedule, Item 2, looked to the eligibility of a particular person or entity by reference to objectively applicable criteria. It was put that, in other areas of law, the place of residence, or the place of business, is each a readily understood concept to apply. If the Plaintiff (or any other potential object) had an appropriate residence, or place of business, there was no administrative unworkability in relation to the application of that criterion.
Alternatively, the first Defendant submitted that there was no charitable trust (or general charitable purpose) in the Schedules to the Will of the deceased because the objects of the Trust, gleaned from the terms of the Schedules to the Will and, in particular, the Second Schedule, Item 2, made it clear that, regardless of how beneficial the exercise of powers in appointing, and then exercising the discretion to provide funds to charities in Dorrigo, such objects were not peculiarly within one, or more, of the four categories, described in the Statute of Charitable Uses 1601 (43 Eliz 1 c 4): namely, the relief of poverty; the advancement of education; the advancement of religion; and other purposes beneficial to the community not falling under any of the preceding headings.
Importantly, the first three categories could have no application because the objects are persons, trustees of trusts, companies or charities "residing in or otherwise carrying on business in Dorrigo", which implies a private or business purpose. There was no necessary requirement of general public utility of the Trust to satisfy the fourth category of "other purposes beneficial to the community".
[7]
The Determination of the Issues
I shall next deal with the issues identified by the parties and express the answers to the questions posed.
[8]
Should the George and Annie Cork Trust be construed as a charitable trust or a private discretionary trust or is it invalid?
This question involves some basic questions as to whether a trust of any kind was validly constituted and, if so, on what terms. In determining the answer, it is necessary to construe the terms of the deceased's Will and the First and Second Schedules to the Will. (None of the parties suggested that there was evidence extrinsic to the Will that should be admitted to assist in interpretation of the language used in the Will.) There was no dispute that the principles for construction of a testamentary trust are those for the construction of a will.
In Towns v Wentworth [1858] 11 Moo PC 526, at 542-543; (1858) 14 ER 794, at 800:
"The rules of construction … do not seem open to any doubt.
In order to determine the meaning of a Will, the Court must read the language of the Testator in the sense which it appears he himself attached to the expressions which he has used, with this qualification, that when a rule of law has affixed a certain determinate meaning to technical expressions, that meaning must be given to them, unless the testator has by his Will excluded, beyond all doubt, such construction.
When the main purpose and intention of the Testator are ascertained to the satisfaction of the Court, if particular expressions are found in the Will which are inconsistent with such intention, though not sufficient to control it, or which indicate an intention which the law will not permit to take effect, such expressions must be discarded or modified; and, on the other hand, if the Will shows that the Testator must necessarily have intended an interest to be given which there are no words in the will expressly to devise, the Court is to supply the defect by implication, and thus to mould the language of the Testator, so as to carry into effect, as far as possible, the intention which it is of opinion that the testator has on the whole Will, sufficiently declared.
The application of these rules is often attended with very great difficulty, as the number of cases found in the books upon the subject, not always very easily reconcilable with each other, sufficiently testifies …
The principles were also conveniently set out by Isaacs J in Fell v Fell (1922) 31 CLR 268, at 273-276; [1922] HCA 55. Relevantly, they included the following:
"(1) 'Every will must by law be in writing, and it is a necessary consequence of that law that the meaning must be discovered from the writing itself, aided only by such extrinsic evidence, as is necessary in order to enable us to understand the words which the testator has used'.
(2) 'The instrument … must receive a construction according to the plain meaning of the words and sentences therein contained. But … you must look at the whole instrument, and, inasmuch as there may be inaccuracy and inconsistency, you must, if you can, ascertain what is the meaning of the instrument taken as a whole in order to give effect, if it be possible to do so, to the intention of the framer of it.'" (Omitting citations)
[9]
If the Trust is a charitable trust, is it necessary to settle an administrative or cy-près scheme?
It is not necessary to determine this question in light of the conclusion that the Trust is not a charitable trust.
[10]
If an administrative or cy-près scheme should be settled, what are the terms on which that should occur?
It is not necessary to determine this question in light of the conclusion that the Trust is not a charitable trust.
[11]
If the Trust is a private discretionary trust, is the Plaintiff eligible to be appointed as a Beneficiary within the terms of Schedule 2 Item 2 of the Will?
As there is no dispute that the Plaintiff is a "person…residing in Dorrigo in New South Wales or surrounding area as defined by post code 2453", he is eligible to be appointed in writing as a Beneficiary within the terms of the Second Schedule Item 2.
This conclusion, however, does not mean any more than that the Plaintiff is a discretionary object, who, before the vesting date, has the right to be considered by the Trustee to be appointed, in writing, by her, as a "Beneficiary" for the purposes of the Trust. In other words, he is an object of a bare power of appointment.
Importantly, the conclusion also does not mean that he is a "Beneficiary" (or a beneficiary in the traditional sense of that word) of the Trust. Having a mere hope, or expectation, that an appointment as a Beneficiary would be made in his favour, does not mean that the Plaintiff has any interest in the Trust. Indeed, it is clear that "the object of a bare power of appointment out of assets has no proprietary interest in those assets, but only has a mere expectancy or hope that one day the power will be exercised in that object's favour": Jacobs' Law of Trusts in Australia at 41 [3-14] and 569 [23-15]; and see, Gartside v Inland Revenue Commissioners at 607. In this regard, he may be called "an eligible object" of the Trust.
Only after the appointment in writing by the first Defendant, as a Beneficiary, would the Plaintiff become a discretionary object, with no more than an equal right, with any other discretionary object so appointed, to be considered by the Trustee, as a potential recipient of distributions from the Trust, or be entitled to annual income (or capital on the vesting date) in default of application or payment.
There is no evidence that the Plaintiff has, in fact, been so appointed. It is when he is so appointed, in writing, that the Plaintiff becomes a member of a class ("the Beneficiaries") and is then the object of a trust power in the Trustee to appoint either, or both, income or capital, and to do so, periodically, between those members who are selected from the designated class on each such occasion, but reserving in the Trustee a discretion as to the quantum of income, or capital, appointed or paid to any particular Beneficiary and a discretion to declare the exercise of the power on any occasion.
[12]
What test should the Court apply to determine whether the Plaintiff has (as a person eligible to be appointed as a Beneficiary) an entitlement to access to the documents sought in the Amended Summons?
The Australian position on whether a discretionary object has an entitlement to access documents remains unsettled.
In AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Limited, at [66], Bergin CJ in Eq noted that there are "two streams of authority". The first stream has been called the "proprietary approach": Deutsch v Trumble [2016] VSC 263, at [46]. The proprietary approach was adopted by Lord Wrenbury in O'Rourke v Darbishire [1920] AC 581, who wrote, at 626-627:
"The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in a sense his own."
In the subsequent case of Re Londonderry's Settlement, a decision of the Court of Appeal of England and Wales, Salmon LJ found, at 937, that beneficiaries have a proprietary interest in, and right to see, all trust documents. He went on to write, at 938:
"The category of trust documents has never been comprehensively defined. Trust documents have these characteristics in common: (1) they are documents in the possession of the trustees as trustees; (2) they contain information about the trust which the beneficiaries are entitled to know; (3) the beneficiaries have a proprietary interest in the documents and, accordingly, are entitled to see them. If any parts of a trust document contain information which the beneficiaries are not entitled to know, I doubt whether such parts can truly be said to be integral parts of a trust document."
The other stream that has been considered is the "discretionary approach", which has been adopted by the Privy Council in Schmidt v Rosewood Trust Ltd. The discretionary approach considers that an order to disclose trust documents is one aspect of the Court's inherent jurisdiction to supervise, and if necessary intervene in, the administration of trusts, however, such an order for access to documents will depend on the Court's discretion: at [51].
Whether the right of inspection of trust documents arises in some cases because the discretionary object has an equitable proprietary right or interest in trust documents, or whether it rests upon the exercise of a discretion based upon the fiduciary duty of a trustee to keep the discretionary object informed when requested to do so, and to render accounts, was the subject of dispute by the parties, and so it would seem, not entirely clear from the authorities.
[13]
If the correct test requires that the Court must be satisfied the Plaintiff has a proprietary interest in the Trust assets, what is his entitlement, if any, to access the documents sought in the Amended Summons?
I do not consider that the Court must be satisfied the Plaintiff has a proprietary interest in the Trust assets. It is accordingly, unnecessary to answer this question.
[14]
If the correct test requires that the Court has a discretion to grant or withhold access, should the discretion be exercised in favour of the Plaintiff?
In Rouse v IOOF Australia Trustees Limited (1999) 73 SASR 484; [1999] SASC 181, at [100] - [101], the Court of Appeal wrote about the discretionary considerations:
"There must be various situations in which a trustee, particularly a trustee conducting a business, would be put in an impossible position if the beneficiary of the trust could, as a matter of right, claim to inspect documents in the possession of the trustee and relevant to the conduct of the business. It is readily conceivable that there will be situations in which an undertaking of confidentiality is not sufficient protection. The fact that the trust is one in which numerous beneficiaries have an interest, and the further fact that those beneficiaries may have differing views about the wisdom of the course of action being pursued by the trustee, only serve to emphasise, in my opinion, the need for the law to recognise some scope for a trustee to refuse to disclose information on the grounds that it is confidential and on the further ground that the disclosure is not in the interests of the beneficiaries as a whole…
Ultimately, I would rest the existence of the relevant discretion upon the need to reconcile the undoubted duty of a trustee to make disclosure to beneficiaries of information about the trust, and the undoubted duty to permit the inspection of trust accounts and trust documents, with the equally fundamental obligation of a trustee to conduct the affairs of a trust, and particularly a trust which involves the conduct or management of a business, in the interests of the beneficiaries as a whole. I consider that on occasions the reconciliation of these interests may entitle a trustee to decline to provide information to particular beneficiaries, when the trustee has reasonable grounds for considering that to do so will not be in the interests of the beneficiaries as a whole, and will be prejudicial to the ability of the trustee to discharge its obligations under the trust…"
Mahoney JA, in Hartigan Nominees v Rydge, at 436, wrote that it was important in resolving that case to have regard to "the essential nature of ... discretionary trust[s] [which] ... is not a mere commercial document in which the public may have an interest [but] ... is a private transaction, a disposition by the settlor of his own property, ordinarily voluntarily, in the manner which he is entitled to choose [and] [s]pecial cases apart, it is proper that his wishes and his privacy be respected." Sheller JA, at 442, expressed similar concerns.
[15]
What is his entitlement to access the documents sought in the Amended Summons and to which documents?
In answering this question, I cannot do better than refer to what was written by J C Campbell, whilst a judge of the Court of Appeal of the Supreme Court of New South Wales and a Visiting Fellow of Wolfson College, Cambridge, in an article headed "Access by trust beneficiaries to trustees' documents information and reasons", in (2009) 3 J Eq 97, at 108 - 110:
"Extent of information required to be disclosed
The duty to account relates to the provision of information, not merely of such information as happens to exist in writing. In Clarke v Earl of Ormonde the way Lord Eldon explained the rights of the Marquis during his life was in terms of an entitlement to have questions answered. Similarly in Walker v Symonds, Lord Eldon said:
'It is the duty of trustees to afford to their cestui que trust accurate information of disposition of the trust-fund; all the information of which they are, or ought to be in possession: a trustee may involve himself in serious difficulty, by want of the information which it was his duty to obtain.'
Similarly in Ottley v Gilby Lord Langdale MR said:
'a legatee has a clear right to have a satisfactory explanation of the state of the testator's assets, and an inspection of the accounts, but he has no right to require a copy of the accounts at the expense of the estate.'
The 'satisfactory explanation' is a separate thing to the inspection of the accounts.
Holland J in Randall v Lubrano, Powell J in Spellson v George and Hodgson J in Janango, all accepted that the potential object of the power had a right to information, as well as to documents.
Several cases have decided that a beneficiary is entitled to see cases for opinion of counsel, and advices of counsel, that were obtained by a trustee in administering the trust, though not cases for opinion and advices that the trustee obtained for the purpose of defending his own position, once it was known that an allegation that he had breached the trust was being made against him.
The right of a beneficiary to receive information concerning the trust is not merely a right to be provided with what are said to be statements of fact concerning the trust assets and dealings. As well, cases have held that a beneficiary is entitled to a degree of proof that the information that has been given is correct. Thus, in Clarke v Earl of Ormonde Lord Eldon held that the successors in title of the Marquis were entitled to not only have a set of accounts produced to them, but also to have an inspection of 'the vouchers' - which I take to mean documentary proof of the individual transactions that were summarised in the accounts.
Similarly in In Re Tillott Chitty J said:
'a trustee is bound to give his cestui que trust proper information as to the investment of the trust estate, and where the trust estate is invested on mortgage, it is not sufficient for the trustee merely to say, 'I have invested the trust money on a mortgage', but he must produce the mortgage deeds, so that the cestui que trust may thereby ascertain that the trustee's statement is correct, and that the trust estate is so invested. The general rule, then, is what I have stated, that the trustee must give information to his cestui que trust as to the investment of the trust estate. Where a portion of the trust estate is invested in Consols, it is not sufficient for the trustee merely to say that it is so invested, but his cestui que trust is entitled to an authority from the trustee to enable him to make proper application to the Bank, as has been done in this case, in order that he may verify the trustee's own statement; there may be stock standing in the name of a person who admits he is a trustee of it, which at the same time is incumbered, some other person having a paramount title may have obtained a charging order on the stock or placed a distringas upon it.'
In that case the plaintiff, who had a one-twelfth interest in remainder subject to a life estate in a trust fund that was invested in consols, was held entitled to have the trustee sign an authority enabling the plaintiff to ascertain the amount of the consols held by the estate and any encumbrances on those consols. The trustees had opposed that order on the basis that granting it would enable the plaintiff to ascertain information as to the dealings of the other cestui que trust with their shares, and that even if the other cestui que trust had encumbered their shares that would not affect the plaintiff's interest in the consols. Chitty J made such an order, even though there was no suggestion that the trustee's statement was incorrect. Chitty J continued:
'that the cestui que trust is entitled to the further information that he now asks for, which will enable him to go back with an authority from the trustee, on which the bank will shew that the fund is either clear of all distringases and the like or that it is not. I quite agree with what fell from counsel for the defendant that this may give the plaintiff more information than he is entitled to ask, because as there are twelve shares in this fund, it may be that there are several distringases on the fund obtained by persons who have charges on the contingent interest of the other persons, and it is clear that the trustee is not bound to give the cestui que trust of one share any information as to the dealings of the other cestui que trust in whose share he has no interest, shewing whether those shares are or are not incumbranced. I think, then, for these reasons, that there ought to be a further order in the terms the plaintiff asks for, but the plaintiff must pay the costs of the motion.'
That initially puzzling statement might, perhaps, be justified on the basis that, if the plaintiff could be fully informed concerning his own interest in the trust fund only by adopting a course of action that incidentally involved disclosing matters relating to the interests of other beneficiaries in the trust fund, it was necessary for the information relating to the other beneficiaries to be disclosed. Even if that is the correct explanation, the decision on costs seems strange."
[16]
What conditions, if any, should be imposed on the Plaintiff's access to or use of the documents?
I am prepared to hear the parties on the conditions, if any, that should be imposed on the Plaintiff's access to or use of the documents. If the documents are limited to those sought in the Amended Summons, it is difficult to see why conditions should be imposed, but, as sought by the first Defendant, I shall allow the parties to discuss this aspect and try to reach agreement.
I shall stand the matter over to a date convenient to the Court and to the parties following the delivery of these reasons.
[17]
Who may currently enforce the Trust?
Had I found that the Trust was a charitable trust, at general law, the second Defendant, the Attorney-General of New South Wales, is "the proper and ... the only competent party to protect the charitable trusts and to seek to enforce them and to look after the interests of the public in those trusts": Ku‑ring‑gai Municipal Council v The Attorney‑General (1954) 55 SR (NSW) 65, at 69‑70.
Since I have not made that finding, nothing else need be said about it.
The question, then, is answered, in part, by what was written by the High Court in CPT Custodian Pty Ltd v Commissioner of State Revenue at [17], approving the statement in Schmidt v Rosewood Trust Ltd, that:
"the right to seek the intervention of a court of equity to exercise its inherent authority to supervise and, if necessary, to intervene in the administration of trusts, 'does not depend on entitlement to a fixed and transmissible beneficial interest'."
In the circumstances, any of the discretionary objects could seek the intervention of the Court, assuming that there was a proper basis for that application.
[18]
Can the class of objects stated in Schedule 2 Item 2 be identified independently of the exercise of the trustee's discretion?
In my view, for the reasons expressed earlier, the class of objects identified in the Will, can be identified as such persons, Trustees of Trusts (but excluding any Trusts which would result in a breach of the rule against perpetuities or the rule against accumulations) companies or charities, residing in or otherwise carrying on business in Dorrigo in New South Wales or surrounding areas as defined by the postcode 2453 as the Trustees shall before the vesting date appoint in writing to be beneficiaries for the purposes of the Will.
However, as also stated earlier, none of the class becomes a "Beneficiary" until the first Defendant appoints in writing any member of the class to be a "Beneficiary" for the purposes of the Will.
[19]
Is the Plaintiff entitled to an order for accounts?
In Chaine-Nickson v Bank of Ireland [1976] IR 393, the trustees of a discretionary trust refused to render accounts of the trust property to the plaintiff who was a potential beneficiary. The trustees were ordered by the High Court to render such accounts but no question was ever raised that they might be removed as such trustees by reason of their unwarranted refusal to render accounts.
In Hancock v Rinehart [2015] NSWSC 646, it was said, at [338] - [340]:
"The plaintiffs seek orders for the taking of an account of the Trust, in common form. A plaintiff who seeks the remedy of an account must prove that the defendant is an accounting party, and that the plaintiff is entitled to some (uncertain) sum from the defendant [Juul v Northey [2010] NSWCA 211, [185]; Mulherin v Quinn Villages Pty Ltd [2007] QSC 231; Re Sharpe (unreported, FCA, Drummond J, 11 December 1992), [5]; Meagher, Gummow & Lehane, Equity Doctrines and Remedies 4th ed (2002) LexisNexis (at [25-025]), citing Doss v Doss (1843) 3 Moo Ind App 175, 196-7; 18 ER 464, 472 (Dr Lushington)].
In the relation of trustee and beneficiary, the trustee is an accounting party. It is a fundamental obligation of a trustee to keep and render to the beneficiaries a full and candid record of their stewardship, including all appropriate financial accounts [Burrows v Walls (1855) 5 De G M & G 233; 43 ER 859, 866 (Cranworth LC); Low v Bouverie [1891] 3 Ch 82, 99 (Lindley LJ); Armitage v Nourse [1998] Ch 241, 261 (Millett LJ); Waterhouse v Waterhouse (1998) 46 NSWLR 449, 494 (Windeyer J)]. That duty to account encompasses a duty to keep records, a duty to report to the beneficiaries and/or the court, and a duty to pay amounts the trustee is obliged to pay to the beneficiaries [Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26, [42]].
Except where an account on the wilful default basis is sought - and it is not sought here - a beneficiary's entitlement to an account does not depend on alleging or establishing any default or breach of trust. As Powell J (as he then was) put it in Spellson v George (1987) 11 NSWLR 300 (at 315-316):
'This being the essential nature of the position of a trustee, and the liability to account being an essential ingredient in it, it seems to me that it is inescapable that the cestuis que trust, or any one of the cestuis que trust, have, or has, a correlative right to approach the Court for its assistance in enforcing the personal obligation of the trustee, and, in particular, in enforcing the trustee's obligation to account. Since that right is, as it seems to me, a fundamental right of the cestuis que trust, or of a cestui que trust, it seems to me that it is not correct to say that its enforcement by the court is dependent upon the cestuis que trust, or the cestui que trust in question, first raising an allegation, or establishing a prima facie case, of fraud or some other like breach of trust. On the contrary, so it seems to me, where the court's assistance in enforcing the trustee's obligation to account is invoked, the court should be concerned with only two questions, they being, first, whether the plaintiffs are, or the plaintiff is one of the, cestuis que trust, and, second, whether the defendant trustee has failed to observe his obligation to account.'"
[20]
Does UCPR rule 54 provide a basis for relief
UCPR rule 54 is instructive in providing an answer to the question. The rule allows for proceedings to be brought for "any relief which could be granted in administration proceedings": UCPR r 54.3(1). The term "administration proceedings" is defined to mean "proceedings for the administration of an estate, or for the execution of a trust, under the direction of the Supreme Court": UCPR rule 54.1.
Relevantly, the rule also provides that proceedings may be brought for "the determination of any question which could be determined in administration proceedings": rule 54.3(2). (The rule then provides a list of questions that the Court may determine, although, this list is not exhaustive.)
Also relevant, UCPR r 54.3(3) provides:
"54.3 Relief without general administration
(3) Proceedings may be brought for an order directing any executor, administrator or trustee:
(a) to furnish accounts, or
(b) to verify accounts, or
(c) to pay funds of the estate or trust into court, or
(d) to do or abstain from doing any act."
UCPR rule 54.3(4)(c) includes proceedings that could be brought for "directing any act to be done in the execution of a trust that the Supreme Court could order to be done if the trust were being executed under the direction of the Court".
This sub-rule does not expressly limit who may bring the application for an order directing the executor, administrator or trustee. One can also see that the language of the rule, referring as it does to "any relief" and "any question", is extremely broad.
In Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz [2015] NSWSC 1484, at [12], Lindsay J described UCPR rule 54 as a "procedural expedient" that is "designed to provide [a] summary, cost-effective alternative to an application for general administration of a trust by the Court".
In Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808, at [50] - [52], Parker J in discussing the rule, stated:
"Under UCPR Pt 54, the Court has power to grant relief of the type which could formerly have been granted in what were known as administration proceedings. The Court has wide powers to direct acts to be done in the administration of the estate and to determine questions arising in the administration of the estate, including questions as to the rights or interests of a person who claims to be a creditor of the estate: r 54.3(2)(c).
These powers are amply wide enough to ensure that the interests of the estate can be protected. But, of course, the making of such orders is not a matter of right on the part of the beneficiary who applies for them. Ultimately, it is a matter for the Court to consider whether the orders should be made and, in doing so, the Court will take into account such questions as to the strength of potential claims or arguments available to the estate as against creditors or other third parties, and other practical questions such as the degree of likely recovery.
UCPR Pt 54 also contains specific rules directed towards the provision of accounts by executors or others: r 54.3(3)(a). But, again, these are not matters of right and it is always a matter for the Court as to whether it should require an account and, if so, the scope of the account, the detail involved and the extent to which supporting documents or other material needs to be produced."
[21]
Summary of conclusions
In summary then, the following answers are given to the questions posed as issues:
1. Should the George and Annie Cork Trust be construed as a charitable trust or a private discretionary trust or is it invalid?
The Trust should be construed as a private discretionary trust.
1. If the Trust is a charitable trust, is it necessary to settle an administrative or cy-près scheme?
It is not necessary to determine this issue since the Trust is not a charitable trust.
1. If an administrative or cy-près scheme should be settled, what are the terms on which that should occur?
It is not necessary to determine this issue since the Trust is not a charitable trust.
1. If the Trust is a private discretionary trust, is the Plaintiff eligible to be appointed as a Beneficiary within the terms of Schedule 2 Item 2 of the Will?
Yes.
1. If yes to 4, what test should the Court apply to determine whether the Plaintiff has (as a person eligible to be appointed as a Beneficiary) an entitlement to access to the documents sought in the Amended Summons?
The jurisdictional basis to decide whether the Plaintiff is entitled to access the documents sought is not whether the Plaintiff has a proprietary interest in the Trust. One commences with the obligation of the Trustee to administer the Trust in accordance with the terms of the Will. The right to seek disclosure of trust documents "is one aspect of the Court's inherent jurisdiction to supervise, and if necessary to intervene in, the administration of the Trust". The power to order inspection is discretionary in the sense that it involves assessment and judgment. The Court exercises its jurisdiction as a court of equity, exercising its own judgement as to whether disclosure ought to be made at all, and, if so, to what extent and on what conditions.
A person who may be appointed as a "Beneficiary" may seek access to documentation necessary to assess whether the trustee has acted in accordance with the terms of the Trust, and in this way, may ensure the trustee's accountability, albeit limited by the type of concerns raised in Erceg v Erceg.
1. If the correct test requires that the Court must be satisfied the Plaintiff has a proprietary interest in the Trust assets, what is his entitlement, if any, to access the documents sought in the Amended Summons?
It is not necessary to answer this question.
1. If the correct test requires that the Court has a discretion to grant or withhold access, should the discretion be exercised in favour of the Plaintiff?
The Court should exercise its discretion in favour of the Plaintiff.
1. If yes to 7, what is his entitlement to access the documents sought in the Amended Summons and to which documents?
As requested by the first Defendant, the parties should be given the opportunity to agree upon the documents to be provided to the Plaintiff, failing which agreement the Court will determine the documents to be provided.
1. What conditions, if any, should be imposed on the Plaintiff's access to or use of the documents?
The conditions, if any, to be imposed upon the Plaintiff, will depend upon the nature of the documents to be provided. The parties should be given the opportunity to agree upon the conditions, if any, to be imposed on the Plaintiff's access to, or use of, the documents, failing which agreement the Court will determine the conditions, if any.
1. Who may currently enforce the Trust?
Any of the discretionary objects, or any of the "Beneficiaries" appointed could seek the intervention of the Court, assuming that there was a proper basis for that application.
1. Can the class of objects stated in Schedule 2 Item 2 be identified independently of the exercise of the trustee's discretion?
Yes, if falling within "such persons, Trustees of Trusts (but excluding any Trusts which would result in a breach of the rule against perpetuities or the rule against accumulations) companies or charities, residing in or otherwise carrying on business in Dorrigo in New South Wales or surrounding areas as defined by the postcode 2453 as the Trustees shall before the vesting date appoint in writing to be beneficiaries" for the purposes of the Will.
1. Does UCPR rule 54 provide a basis for relief
Yes. The power conferred by UCPR rule 54.3 is wide enough to be capable of compelling the provision of documents sought by the first Plaintiff in the Amended Summons.
[22]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 04 May 2018
[2016] HCA 11
Gartside v Inland Revenue Commissioners [1968] AC 553
Goodman v Mayor of Saltash (1882) 7 App Cas 633
Hancock v Rinehart [2015] NSWSC 646
Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405
Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40
Kafataris v Deputy Commissioner of Taxation [2008] 172 FCR 242; [2008] FCA 1454
Kauter v Hilton (1953) 90 CLR 86; [1953] HCA 95
Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56
King v Perpetual Trustee Company Limited (1955) 94 CLR 70; [1955] HCA 70
Kinsela v Caldwell (1975) 132 CLR 458; [1975] HCA 10
Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62; [2015] HCA 6
Ku‑ring‑gai Municipal Council v The Attorney‑General (1954) 55 SR (NSW) 65
Latimer v Commissioner of Inland Revenue [2004] 3 NZLR 157
Lea v Mo-Mont Pacific [2016] NSWSC 809
Lewis v Tamplin [2018] EWHC 777 (Ch)
Marley v Rawlings [2015] AC 129
McDonald v Ellis (2007) 72 NSWLR 605; [2007] NSWSC 1068
McGarvie Smith Institute v Campbelltown MC (1965) 11 LGRA 321
McNeill v Hearing & Balance [2007] NSWSC 942
McPhail v Doulton [1971] AC 424
Morice v Bishop of Durham (1804) 9 Ves Jun 399; 32 ER 656
Newell; Muriniti v De Costi [2018] NSWCA 49
O'Rourke v Darbishire [1920] AC 581
Palmer v Ayres (2017) 259 CLR 478; [2017] HCA 5
Perpetual Trustee Co Ltd v Wright (1987) 9 NSWLR 18
Radmanovich v Nedeljkovic [2001] NSWSC 492
Randall v Lubrano (Supreme Court (NSW), Holland J, 31 October 1975, unrep)
Rauch v Maguire [2010] 2 NZLR 845
Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367
Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz [2015] NSWSC 1484
Re Fairbairn [1967] VR 633
Re Hodgson; Nowell v Flannery [1936] 1 Ch 203
Re Lauer; Corby v Lyttleton [2017] VSC 728
Re Londonderry's Settlement [1965] Ch 918
Re Williams; Williams v Williams [1897] 2 Ch 12
Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403
Rouse v IOOF Australia Trustees Limited (1999) 73 SASR 484; [1999] SASC 181
Russo v Aiello (2003) 215 CLR 643; [2003] HCA 53
Schmidt v Rosewood Trust Ltd [2003] 2 AC 709; [2003] UKPC 26
Silkman v Shakespeare Haney Securities Ltd [2011] NSWSC 148
Spellson v George [1987] 11 NSWLR 300
Spellson v Janango Pty Ltd (Supreme Court (NSW), Hodgson J, 8 December 1987, unrep)
Spotlight Stores Pty Ltd v Federal Commissioner of Taxation (2004) 55 ATR 745; [2004] FCA 650
Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808
Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315
Towns v Wentworth [1858] 11 Moo PC 526; (1858) 14 ER 794
Trust Co (Nominees) Ltd v Banksia Securities Ltd (recs and mgrs apptd) (in liq) [2016] VSCA 324
Vegners v Federal Commissioner of Taxation (1991) 21 ATR 1347; (1991) 91 ATC 4213
Verge v Somerville [1924] AC 496
Viljoen v Hayes [2017] NSWSC 801
Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15
Texts Cited: I Hardingham and R Baxt, in Discretionary Trusts (2nd ed, 1984)
J C Campbell, "Access by trust beneficiaries to trustees' documents information and reasons" (2009) 3 J Eq 97
J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (LexisNexis, 8th ed, 2016)
P Brereton, "A Trustee's Lot Is Not a Happy One", [2010] NSWJSchol 23
Category: Principal judgment
Parties: Nicholas Delpratt Wright (Plaintiff)
Beryl Joan Stevens (first Defendant)
Attorney-General of New South Wales (second Defendant)
Representation: Counsel:
Ms P M Lane (Plaintiff)
Mr P Blackburn-Hart SC and Mr S Fitzpatrick (first Defendant)
Dr C Mantziaris and Ms K Boettcher (second Defendant)
The Evidence
In the Plaintiff's case, an affidavit from the Plaintiff, and one from Mr William Hinchcliffe, was each read. Neither of the deponents was cross-examined.
An affidavit of Ms C E Drummy, a solicitor in the Office of the Crown Solicitor, was read in the second Defendant's case, which affidavit was a formal affidavit. The circumstances in which the second Defendant came to be a party to the proceedings were set out. The deponent, also, was not cross-examined.
An affidavit by the first Defendant, affirmed on 10 August 2016, that had been filed, and served, was not read at the hearing. The Court was informed, without objection, and without contradiction, by counsel for the second Defendant, that until the day before the commencement of the hearing, the affidavit was to be read; that the legal representatives of the second Defendant had given notice for the first Defendant to attend for cross-examination; and that late on the day before the hearing commenced, the first Defendant's legal representatives informed the other parties, that the affidavit of the first Defendant that had been served was not to be read: T121.36 - T121.45.
Thus, at the hearing, there was no affidavit read, or evidence tendered by, the first Defendant, going to the issues to which reference has been made. The failure by the first Defendant to disclose information to the Court led to some criticism of her. Counsel for each of the Plaintiff, and of the second Defendant, emphasised that the first Defendant, as the trustee of the Trust, was the only person who could "tell this Court … basic things about the operation of the Trust and, to be clear, that is whether a Beneficiary has been appointed, whether the distributions made to those 13 organisations, to the persons who built, or had built for them, the medical centre and the retirement village, whether those people are recipients of grants or Beneficiaries. Nowhere in the first Defendant's submissions is it asserted that those persons are Beneficiaries": T57.05 - T57.13.
Another matter about which the first Defendant may have been able to give evidence would have been whether the information sought by the Plaintiff would be difficult or expensive to generate, or collate, which matter may be a factor against requiring its disclosure. There may be other features of the administration of the Trust, also, that could prompt questions to which the first Defendant could provide answers, but these have not been the subject of submissions.
During the first day of the hearing, during the submissions being made on behalf of the second Defendant, the first Defendant was given the opportunity to consider, overnight, whether she wished to make an application to re-open her case and provide further evidence: T68.14 - T70.45.
Prior Proceedings
It is next necessary to say something about the background to this litigation and earlier proceedings in which the Court was involved.
In proceedings 2016/286033, heard by Stevenson J, on 26 October 2016, the first Defendant (as the Plaintiff in those proceedings), sought the Court's advice, under s 63 of the Trustee Act 1925 (NSW), on the question whether or not she was justified in (a) defending proceedings brought by the Plaintiff (in these proceedings); (b) pursuing a notice of motion that she had filed on 15 August 2016, in the proceedings, seeking to have them dismissed under UCPR rule 13.4; and (c) drawing on funds of the Trust to pay her legal costs of defending the proceedings and pursuing the notice of motion. She also sought an order that she be indemnified from the Trust for the costs of the application for judicial advice. (Neither the Plaintiff, nor the second Defendant, in the current proceedings, was a party to the judicial advice proceedings.)
In an ex tempore judgment, which bears the medium neutral citation Application by Stevens [2016] NSWSC 1523, Stevenson J concluded, at [10] - [14]:
"Based on the opinion of counsel and my own consideration of the matter, I have serious doubts as to Mr Wright's standing to bring the Proceedings and, if he does, as to whether the Court would exercise its discretion in [his] favour as to grant the orders he seeks. That provides a basis for me to conclude that the Trustee would be justified in defending the Proceedings and drawing on the Trust for her costs for that purpose.
However, I am not satisfied that the Trustee's position in the Proceedings is so clear, and that Mr Wright's claim in the Proceedings is so weak, that I should go further and find that the Trustee would be justified in prosecuting the Motion.
It is true that, on the Motion, it is unlikely that there will be any dispute as to the facts. However, that would be the beginning and not the end of the inquiry on the Motion as the Trustee would have to establish that the Proceedings brought by Mr Wright are either frivolous or vexatious, are an abuse of process of the Court or that no reasonable cause of action is disclosed.
A possible, if not likely, result of the Motion is that the judge hearing it will conclude that the matter is not sufficiently clear to warrant summary dismissal.
It may be that the Trustee will come to the view that the more practical approach will be simply to seek to have Mr Wright's claim brought on for early final hearing."
It is unnecessary to refer to what are said to be "criticisms", made by counsel for the second Defendant, regarding the failure to involve the second Defendant in the prior proceedings. In my view those criticisms, valid or otherwise, are not relevant to the proceedings with which this Court is now concerned.
(The use of the term "beneficiaries" is inapt in so far as it suggests the existence of any vested beneficial interest in the assets held on the Trust.)
Clause 1 of the First Schedule defined several concepts:
1. The first Trustee, named in Item 1 of the Second Schedule, and the Trustee is defined as "the trustee or trustees for the time being of the Trust set up under this Schedule": Clause 1.1.
2. The "vesting date" means the first to occur of the date being the last day within seventy years after the day of the deceased's death, or such earlier date as the Trustee may, in his absolute discretion, determine to be the vesting date: Clause 1.2.
3. The "Beneficiary/ies" shall means "the person or persons named in Schedule 2 Item 2: Clause 1.3.
4. The "Trust Fund" includes any money, securities, property or proceeds of sale given by the deceased under the Will, or accepted by the Trustee as additions to that money etc, or any part or parts thereof: Clause 1.6.
5. "Income" of the Trust "includes all profits or gains taken into account in calculating the net income of the Trust and exempt income, as defined in s 95(1) of the [Income Tax Assessment Act 1936 (as amended)], notwithstanding that the whole or any part thereof may otherwise constitute capital of the Trust": Clause 1.9.
6. Clause 1.11 states, "The plural number shall include the singular number."
7. Clause 1.13 provides that "[w]ords importing "persons" shall include bodies corporate".
(It is the identification of the "Beneficiary/ies" and how each is to be identified that lies at the centre of at least one of the questions of construction agitated by the parties.)
The primary trust obligation, with respect to income of the Trust Fund, until the vesting date, was dealt with in Clause 2. It is "subject to the provisions of paragraph 4.3" (which gives the Trustee power to appropriate capital for any Beneficiary and so remove that capital amount from the Trust Fund).
Under Clause 2.1, the Trustee may, prior to the expiration of any year, pay, or apply, the whole, or any part, of the income of the Trust Fund for the year, to, or for the benefit of, all, or such one or more, of the Beneficiaries, living or in existence at any time during the year of income, in his absolute discretion may, from time to time during the year, determine. The manner of exercise of discretions conferred on the Trustee is not set out.
Clause 2.2 provides that in default of that exercise of discretion, and subject to any application pursuant to Clause 2.1, on, or before, the last day of the year of income, the Trustee shall "subject as hereinafter provides", hold the income, to pay or to apply it for the benefit of the Beneficiaries that are "living on the last day of that year".
Clause 3 deals, primarily, with the manner in which the Trustee may apply any income for the benefit of a Beneficiary, namely, by expending the income for the "maintenance education, advancement in life, benefit or support" of the Beneficiary, or otherwise expending the income in such manner as the Trustee may in his "absolute discretion"' decide (Clause 3.1.1); or by determining that the Beneficiary has an immediate vested indefeasible interest in such income, whereupon the Beneficiary shall have an immediate vested indefeasible interest thereto (Clause 3.1.2). Again, the manner of exercise of discretions conferred on the Trustee is not set out.
Clauses 3.2 and 3.3, respectively, deal with the manner of applying income to an infant Beneficiary under Clause 3.1.1, or the way in which a determination of a vested interest works under Clause 3.1.2. That includes, in the case of an infant Beneficiary, the payment of income to the parent, or guardian, of the Beneficiary, or the person with whom the Beneficiary is, for the time being, residing. If the Trustee applies the income of the Trust Fund for the benefit of a Beneficiary who is an infant, then, the income shall be invested, and the Trustee holds the income that accrues for that infant Beneficiary. The Trustee may use the income accrued for the maintenance, education advancement in life, benefit or support, of the infant Beneficiary. The Trustee must pay over the income (and any income accrued thereon not expended) "immediately upon the Beneficiary ceasing to be an infant or upon the Beneficiary's prior death" to such Beneficiary or to his legal personal representative.
Clause 3.4 gives the Trustee power "[I]n lieu of paying or expending income in cash … to transfer any property of like value forming part of the Trust Fund … to the person entitled to that income in whole or in part satisfaction thereof…".
The capital of the Trust Fund is held under Clause 4.1 and Clause 4.2, subject to Clause 4.3 (which gives the Trustee power to appropriate capital for any Beneficiary and so remove that capital amount from the Trust Fund).
Clause 4 of the First Schedule should be set out verbatim:
"4.1 the Trustee shall hold the Trust Fund (or such part as the Trustee shall in his absolute discretion determine) upon trust for all or such one or more of the Beneficiaries as shall be living or be in existence on the vesting date and in such shares or proportions as the Trustee shall revocably or irrevocably before the vesting date appoint and at such age or time or respective ages or times and with such trusts for their respective benefit and provision for their respective maintenance advancement education and benefit as the Trustee shall determine at the time of such appointment provided that a revocable appointment under this sub-clause may be revoked by the Trustee at any time prior to but not on or after the vesting date:
AND
4.2 In default of and subject to any appointment pursuant to paragraph 4.1:
4.2.1. the Trustee shall hold the Trust Fund upon trust for the Beneficiary/ies.
4.3 Notwithstanding anything herein contained the Trustee may at any time and from time to time prior to the vesting date in his absolute discretion appropriate any part of the capital of the Trust Fund and hold the same upon trust absolutely for any Beneficiary who or which shall be living or in existence at the date of such appropriation and thereupon such appropriated capital shall cease to be part of the Trust Fund."
Clause 5 provides that the Trustee may, in his absolute discretion, apply any capital of the Trust Fund, for the benefit of an infant Beneficiary, by expending the Trust Fund for the maintenance, education, advancement in life, benefit or support of that infant Beneficiary, and the provisions of Clauses 3.2 and 3.4 (concerning the application of income) apply to that application. The manner of exercise of discretions conferred on the Trustee is not set out.
Clause 6 provides that any "determination, appropriation or appointment" by the Trustee shall be "oral, or in writing, as the trustee may determine" but if the Trustee makes an oral determination, "a record of such determination in a minute [not necessarily signed by the Trustee] shall be kept with the accounts and records of the fund and such minutes shall be deemed good and sufficient evidence of the determinations, appropriations and appointments which they purport to record".
Clause 7 deals with the Trustee's ability to deduct any tax payable on a distribution of capital out of that capital, or pay it from other trust moneys or property as the Trustee may decide.
Clause 8 deals with the manner in which the Trustee may structure the books of account and records of the Trust. The Trustee may identify, and separately record, identified categories of income received into the Trust Fund (Clause 8.1); may identify and separately record income or capital, having individual or unique characteristics, other than those identified in the categories of income earlier referred to, as by resolution, the Trustee shall determine (Clause 8.2); if a resolution, or determination, of the Trustee, by which income of the Trust Fund is distributed, or accumulated pursuant to Clause 2, the Trustee may separately deal with the whole, or part of the income, so that the same, or any part thereof, may be specifically paid, applied or set aside, for the benefit of any one or more of the Beneficiaries (Clause 8.3); has a discretion to distribute all, or any part of capital in accordance with Clause 4 (Clause 8.4); allocate expenses and outgoings of the Trust Fund against, and deduct those expenses and outgoings from, income or capital of any one or more categories "in such manner as the trustee sees fit" (Clause 8.5); if the Trustee does not exercise the discretion in relation to expenses and outgoings of the Trust Fund in respect of a financial year, those expenses and outgoings are to be allocated and deducted firstly, from income which is not income from a category, and if that income is not sufficient, then the expenses and outgoings not so absorbed, shall be allocated in such a manner as the Trustee may decide against income of a category or categories, to which a tax credit or rebate does not attach, and thereafter against the remaining income of the Trust Fund (Clause 8.6); income or capital of the Trust Fund to which a "default beneficiary" (a term which is not defined) becomes entitled, and which can be identified from the books and records of the Trust as being of a category, retains its separate identity when it passes to, or is received by, the default beneficiary, or when the default beneficiary otherwise become entitled thereto (Clause 8.7).
Clause 9 specifies the Trustee's powers. It is not necessary to refer to this Clause in detail, but it includes powers of investment, reinvestment, or remaining as invested for as long as the Trustee thinks fit, whether or not such investment is authorised by law for the investment of trust funds, including selling, transposing, or varying, investments, and re-investing moneys, of any nature authorised by the terms of the Trust Instrument (Clause 9.2 and Clause 9.4); and employing moneys for the time forming part of the Trust Fund in carrying on any business, or businesses, as the Trustee may in his discretion deem to be fit and desirable (Clause 9.3). Clause 9 also includes powers to apply the Trust Fund to the benefit of Beneficiaries and other powers of management. Clause 9.27 provides that "[G]enerally the Trustee may manage or deal with the Trust Fund as fully as if the Trustee legally and beneficially owned the same". Clause 9.39 permits the Trustee to divide assets, in specie, between the Trust Fund and other trust funds in such manner as the Trustee thinks fit.
Clause 10 prohibits the Trustee from doing anything that would be rendered void or ineffective by any rule or law against remoteness of vesting, or any rule or law restricting the right or power to accumulate income, and requires the powers to be read so as not to authorise any such actions, including to ensure that the Trust Fund vests in interest not later than the vesting date described in Clause 1.2.2.
Clause 11 provides for protection to persons dealing with the Trustee that "except in the case of fraud" no person dealing with the Trustee needs to ascertain whether the Trustee is acting in accordance with the Will or whether the transaction is for the benefit of Beneficiaries, and that no person shall be affected by knowledge, or notice, that any contract has not been authorised, or that any transaction is not for the benefit of Beneficiaries, and all such contracts will be valid and effectual.
Under Clause 12, the Trustee has power, in his absolute discretion, to pay or transfer the whole, or any part, of the Trust Fund, or income from it, to the Trustee/s, for the time being, of any settlement, "whereunder all or any of the Beneficiaries are beneficiaries whether absolutely contingently presumptively or prospectively, to be held by such Trustee/s as an addition to" that settlement. If that payment, or transfer, is made, the property so paid, or transferred, is discharged from the trusts of the Trust created by the Will. However, the payment or transfer "shall not be made unless the persons entitled to the capital of the other settlement must become entitled to a vested interest therein prior to" the vesting date in Clause 1.2.2.
Under Clause 13, the Trustee is entitled to release any power, including the power to make an appointment under Clause 4.1.
Under Clause 14, the Trustee may (with the consent of the person entitled to exercise the powers under Clause 15) revoke, or add to, or vary, the trusts and may declare any "new or other" trusts or powers, but so as not to infringe the rule against perpetuities, and so that such new trusts may relate to the management or control of the Trust Fund or the investment thereof, or the Trustee's powers and discretions, but such new trusts, powers, discretions, alterations or variations, "shall not be in favour, or for the benefit of, the Trustee, or result in any benefit to the Trustee, but shall be for the benefit of one or more of the Beneficiaries", and "shall not affect the beneficial entitlement to any amounts set aside for any Beneficiary prior to the date of the variation, alteration or addition".
In addition, the Trustee has power, before the vesting date, by deed or deeds, revocable or irrevocable, to revoke all or any of the trusts or powers other than this power of variation "to such ends intents and purposes as the Trustee may in his absolute discretion … think fit", but not so that "the Trustee shall require or be enabled to acquire any benefit out of or connected with the Trust Fund or its income or have any possession enjoyment or benefit … whatsoever enforceable at law or equity … of or from the Trust Fund or its income", or so as to extend the vesting date, and not so as to exercise any such power in respect of income derived earlier than the date of variation.
Under Clause 15, the Trustee may appoint a new Trustee (Clause 15.1) and on appointment the Trust Fund vests in the new Trustee (Clause 15.2). The power to appoint must not be exercised in favour of the Settlor, a person who is solely entitled to exercise the power of appointment for the time being, or any person who settles money on the Trust (Clause 15.3).
The appointment of a new Trustee may be exercised by memorandum under hand, or by deed, and the new Trustee may be a corporation or a resident outside Australia (Clause 15.4). On the resignation, or retirement, of the Trustee, the retiring Trustee must promptly hand to the new Trustee all books, records, documents and other property of or pertaining to the Trust, do all things necessary to transfer the legal title in the assets of the Trust Fund to the new Trustee, sign all necessary authorities, and give the new Trustee such assistance as is reasonably required to put the new Trustee into full knowledge of the affairs of the Trust (Clause 15.5).
(The Second Schedule, Item 3, provides that the person or persons with the power of removal and appointment under Clause 15 are "Barwick Stevens Lawyers" and Mr Christiansen.)
Clause 16 provides that in respect of future payments, transfers, gifts, devises and bequests to the Trustee, the money, securities, or other property, real or personal to which the Trustee has assented, the Trustee is to hold the property paid, transferred or conveyed, "as if the same had been paid, transferred, or conveyed, to the Trustee at the time of execution of" the Will, and it is "to be included in the meaning of the term 'the Trust Fund'".
Clause 17, relevantly, permits the Trustee, if temporarily out of, or if intending to be temporarily out of, Australia, or if the Trustee deems it for any reason to be desirable in the administration of the Trust, to delegate, or revoke any such delegation, the trusts, in whole or in part, or subject to limitations or restrictions, to such person or persons as he thinks fit. The Trustee may execute such instruments or powers of attorney to effect the delegation as he shall think proper, and the person receiving the delegation is not bound to enquire whether the delegation is valid.
Clause 18 deals with exemptions from liability and the indemnity of the Trustee. Under it, the Trustee is not liable for any loss that may be suffered from investing in any of the modes of investment authorised by the Trust instrument (Clause 18.1); the consequences of any error of judgment or any forgetfulness, whether of law or fact, on the part of the Trustee or his legal or other advisers, or any servants or agent generally, "for any breach of duty or trust committed, given or omitted, by the Trustee charged to be so liable", or for "any loss arising out of any act or omission in the execution or management and administration of this trust, so long as the Trustee … has acted in good faith". The Trustee is also not personally liable for the acts of any officer or agent, servant, employee, or nominee, and "all persons claiming any beneficial interest in, over, or under, the property for the time being subject to the trusts hereby created shall be deemed to take notice of and subject to the protection hereby conferred on the Trustee" (Clause 18.3).
The Trustee is entitled to be indemnified from the Trust Fund in respect of "costs, charges and expenses and any personal liability incurred in the administration of or intended or purported administration of this trust except such liability as may be proved affirmatively to have been incurred in personal conscious bad faith by the Trustee seeking or claiming to be so indemnified." (Clause 18.2). The Trustee is entitled to protection if the Trustee acts upon a document he believes to be genuine and to be signed by the proper party (Clause18.4). The Trustee is not required to interfere or exercise rights in respect of any company in which the Trust Fund is invested if the Trustee has no notice of any mismanagement of the company, and "no Beneficiary shall be entitled to require the distribution of any dividend" by any company, or require the Trustee to exercise any powers he may have to compel any distribution of dividends, unless there is proved affirmatively to have been an act of dishonesty in the management of the company (Clause 18.5).
Under Clause 19, there may be only one, and no more than three, Trustees (Clause 19.1). The Trustee is entitled to reimbursement "of all moneys properly expended by him and chargeable against the Trust Fund" (Clause 19.2); if the Trustee is a solicitor, the Trustee may charge professional fees (Clause 19.3); the Trustees may act by majority if there are more than two Trustees (Clause 19.4); the Trust is to be interpreted in accordance with the law of New South Wales, but where a new Trustee resides outside Australia, the appointor may direct that the law of the place of residence of the Trustee, or one of the Trustees if more than one, to be the proper law for the administration of the trust (Clause 19.5); the Trustee is not disqualified from acting in a fiduciary position in a company in which the Trust Fund is invested, and may retain remuneration received for so acting (Clause 19.7); and "[a]ll the Trustee's powers may be exercised notwithstanding that there may be a conflict between his duty as a Trustee and any personal interest which he may have." (Clause 19.8).
Clause 20 deals with the Trustee's remuneration. Relevantly, it provided that the Trustee "may charge and be paid out of the Trust Fund and the income thereof such remuneration as the Trustee in his absolute discretion shall consider reasonable". One added proviso was that, in any financial year, the total remuneration paid to the Trustee was not to exceed "the aggregate of five per centum of the gross income of the Trust Fund during that year and two per centum of the value of any portion of the Trust Fund that the Trustee may during the year have transferred or paid to or applied to or for any of the Beneficiaries or …towards satisfaction of a share in the Trust Fund".
Clause 21 prohibits the Trustee from satisfying any deficiency, or loss, arising in any annual accounting period from the corpus of the Trust Fund, and must have resort only to any profits arising out of a subsequent accounting period out of such activity carried on in such subsequent accounting period.
Clause 22 is not relevant.
Clause 23 refers to the title of the Trust, to which reference has earlier been made.
Clause 24 deals with the name of the Trust by reference to Schedule 2, Item 4, to which reference has earlier been made.
There is nothing in the deceased's Will that imposes a duty upon the Trustee to provide information to a discretionary object or to a "Beneficiary". However, the Court was not directed to any condition of confidentiality in the Will, or that identifies any level of secrecy with regard to the affairs of the Trust, or any Clause that requires aspects of the Trust's administration to be dealt with in confidence. Nor is there anything in the Will that limits a discretionary object, or a "Beneficiary", seeking to obtain information from the Trustee.
Thus, there is nothing in the Will that suggests that the deceased wanted to impose limitations of disclosure upon the first Defendant, as Trustee, although, of course, she was given an absolute discretion which, in the events that have happened, she can exercise alone.
Mr Hinchcliffe communicated with the first Defendant, by telephone, on 26 September 2014, seeking to obtain access to the financial information of the Trust. He also made similar requests to her by email.
Mr Hinchcliffe was permitted to inspect some financial documents relating to the Trust on 26 November 2014, for a limited amount of time. These documents were the Profit & Loss Statements and Balance Sheets for the Trust for each of the financial years ending 30 June 2009, 2010, 2011, 2012 and 2013. He was not permitted to take a copy of any of these documents but was permitted to make notes about their contents.
The Plaintiff was also given an opportunity to inspect some of the financial information, provided by the first Defendant: T9.49 - T10.00. He did so on, or about, 3 December 2014: T14.25 - T15.03. He stated that these included "what appeared to be" balance sheets and profit and loss statements apparently relating to the Trust for the five financial years from the year ending June 2009 to the year ending June 2013. He, also, was not provided with a copy of any documents, but was permitted to take notes of their contents.
A second public meeting concerning the Trust was held on 11 December 2014, at which meeting 30 to 40 people attended.
A response, dated 15 December 2014, to other correspondence sent by Mr Hinchcliffe to the first Defendant, or her solicitors, from the first Defendant's solicitors, simply stated: "We do not intend to enter into any further correspondence with you."
On 3 December 2015, the Plaintiff's solicitors wrote to the first Defendant and to Mr Christiansen, seeking information about the nature and condition of the Trust assets and details concerning the nomination of Beneficiaries under the Trust. Mr Christiansen sent a written reply, dated 9 December 2015. (Although a reply dated 9 February 2016, from the first Defendant, was identified, a copy of that document was not annexed as suggested.)
The first Defendant has not provided, to the Plaintiff, a statement of the assets and liabilities of the estate, in a complete form, or provided to him the documents, or the accounts, that he has sought: T3.18 - T3.25. It is said that this has caused him to have a real concern as to the administration of the Trust assets.
The involvement of the second Defendant in relation to the estate of the deceased commenced in about November 2014, when information, from the Plaintiff, was received, raising, what were said to be, concerns that the Trust was not properly being administered by the first Defendant.
In a letter dated 16 February 2016 to the Crown Solicitor's Office, the Plaintiff's solicitors stated that "at no time has our client asserted that the …[T]rust is a charitable trust" and that "[O]ur client's foreshadowed proceedings are predicated on the basis that the [T]rust is a private trust."
On 29 February 2016, a legal representative of the second Defendant sought further information about the Trust from the first Defendant, which information was provided on 20 May 2016.
Following the commencement of the proceedings, the second Defendant sought to be joined as a party and that order was made, consensually, by this Court on 4 April 2017.
There are about 2,600 people who reside within the Dorrigo post code area. (The number of Trustees of Trusts, companies that conduct business, or the charities, in the Dorrigo area, was not the subject of any evidence.)
The first Defendant has invited "submissions for grants for local projects which can demonstrate a net benefit to the community with an emphasis on creating local employment/training and/or providing community facilities and services". A copy of a document headed "The George and Annie Cork Memorial Trust - Grant Guidelines and Conditions 2011" is in evidence.
The Trust has made grants from the Trust to the following entities:
1. Dorrigo Cricket Club;
2. Dorrigo Swimming Club;
3. Dorrigo RSL Golf Club;
4. Dorrigo Historical Museum;
5. the Dorrigo Rotary Club.
6. The Dorrigo Showground and Public Reserve Trust Inc;
7. the Dorrigo Youth Clinic;
8. the Dorrigo Men's Shed;
9. the Dorrigo Recreation Ground Committee;
10. the RSL Sub Branch;
11. the Dorrigo Guy Fawkes Historical Museum;
12. the Dorrigo Chamber of Commerce; and
13. the Dorrigo Girl Guides.
Evidence, in the form of searches, revealed the following entities are, or were at some point, registered as an association:
1. The Dorrigo Cricket Club Incorporated is a registered association, first registered on 6 September 1996 (Ex. C/1-2).
2. The Dorrigo Swim Club Incorporated is a registered association, first registered on 1 December 2006 (Ex. C/3-4).
3. The Dorrigo Social Golf Club Incorporated was a registered association, first registered on 22 March 1996, but was deregistered on 23 August 2003 (Ex. C/5-6).
4. The Don Dorrigo & Guy Fawkes Historical Society Inc is a registered association, first registered on 24 June 1992 (Ex. C/14-15).
5. The Dorrigo Chamber of Commerce Incorporated is a registered association, first registered on 16 October 1998 (Ex. C/16).
Searches have not revealed whether the Dorrigo Rotary Club, the Dorrigo Youth Clinic, the Dorrigo Recreation Ground Committee, the Dorrigo Men's Shed, the RSL Sub-Branch, the Dorrigo Chamber of Commerce, and the Dorrigo Girl Guides, is each registered with the Australian Securities & Investments Commission as an association (whether incorporated or unincorporated), or that any of those entities is a proprietor of a business name, or company: Ex. C.
(It was submitted that this raises a question whether funds from the Trust have been paid to entities that do not fall within the class of "Beneficiary/ies".)
Funds from the Trust have also been expended for the construction, in Dorrigo, of a medical centre, as a memorial to George and Annie Cork (the deceased's parents), and for the construction of retirement accommodation.
There is no evidence of an appointment, in writing, by the first Defendant, of any person, Trustees of Trusts, companies, or charities, residing in, or otherwise carrying on business, in Dorrigo, or surrounding area as defined by post code 2453, to be beneficiaries.
In fact, senior counsel for the first Defendant conceded, at T105.40 - 105.42:
"I am instructed to make the following concession, if that's an appropriate concession. There are no documents confirming or formally appointing a Beneficiary."
He added, at T106.00 - T106.08:
"However, I would invite your Honour to make an inference that the payments being made to those parties and individuals who are the members of those parties set out in para 7 of the agreed statement of facts, those payments would be the basis for an inference that your Honour could draw that they were properly made within the power and that, notwithstanding there is no written evidence of their appointment in a formal way, they are relevantly Beneficiaries."
The Plaintiff also submitted that he is a discretionary object of the Trust because he is a "person" who resides within the surrounding area of Dorrigo as defined by postcode 2453. Therefore, he is within the class of persons identified in the Second Schedule, Item 2, who may be appointed, in writing, by the first Defendant, as Trustee, to be "a Beneficiary" for the purposes of exercising the powers under the Trust. He accepted that he has no greater, or lesser, right than any one of the other persons who fall, or entity which falls, within the description of "the Beneficiary" in the Second Schedule, Item 2, to exercise rights under the First Schedule to the Will.
The Plaintiff asserted that one of the rights that he seeks to compel is the due administration of the Trust by requiring the first Defendant, as the Trustee, to provide an accounting of the nature and value of the assets of the Trust Fund. He contended that the First Schedule to the Will provides that the Trustee must keep proper accounts, and that the extensive powers of the Trustee cannot be interpreted so as to render the Trustee free of the fundamental obligations of a trustee to hold the assets of the Trust for the objects of the Trust on the terms of the Will, or to prevent the Court exercising jurisdiction to supervise the due administration of the Trust, and/or of the estate of the deceased. Other rights that the Plaintiff seeks to compel are the right to have the first Defendant considers whether to appoint him as a "Beneficiary", and if appointed, to consider him in respect of the distribution of the income and/or capital of the Trust Fund.
It was put, in oral submissions that:
"As a person entitled to be considered by the Trustee as one who may be appointed in writing to be a Beneficiary for the purposes of the deed (sic), he has a right to approach the Court to exercise a discretion to have documents provided to him by the Trustee": T37.36 - T37.44.
…
It is the exercise of the Court's discretion upon which the Plaintiff relies, as a person entitled to be considered by the Trustee, who may be appointed in writing to be a Beneficiary [to obtain the relief that he seeks]: T38.07 - T37.10."
It seems to have been accepted then, that if there were no discretion in the Court to have documents provided by the Trustee to the Plaintiff as a person entitled to be considered to be appointed in writing by the Trustee to be a "Beneficiary", or if there was no evidence of him having been appointed in writing to be a Beneficiary, then his claim for relief would fail.
The Plaintiff also submitted that the first Defendant's exercise of discretion to pay out, or to apply, income and/or capital from the Trust Fund, depended upon the existence of a Beneficiary, or Beneficiaries, as defined. The Trustee was not constrained by the need to identify any particular characteristics of the proposed recipient of the income, or capital, of the Trust Fund, other than that the person to whom, or the entity to which, income or capital was to be paid out, or in respect of who, or which, it was to be applied, fell within the definition of "Beneficiary/ies" under the Second Schedule, Item 2. It followed, so it was submitted, that the Trustee, first, must have appointed, in writing, the person, or entity, residing in, or otherwise carrying on business, in Dorrigo in New South Wales or its surrounding area as defined by postcode 2453.
The submission, in other words, was that the Schedules to the deceased's Will drew a clear distinction between the first Defendant's power with respect to the appointment of a Beneficiary or Beneficiaries (Second Schedule, Item 2 and First Schedule, Clause 6), the power to apply income and/or capital of the Trust Fund for the benefit or provision of the Beneficiary or Beneficiaries (First Schedule, Clauses 2, 3, 4 and 5), and her powers to administer the Trust Fund (First Schedule, Clause 9).
The matters that suggest that the first Defendant was required to exercise the power to appoint a Beneficiary or Beneficiaries were:
1. There is no gift over, which suggests that the deceased intended that the Trustee would be required to determine who were to be appointed as beneficiaries, rather than giving a complete discretion as to appointment with a provision if no appointment were made;
2. Clause 4, which concerned the distribution of capital, required the Trustee to hold the fund at the vesting date for "such one or more of the Beneficiaries as shall be living or be in existence on the vesting date and in such shares or proportions as the Trustee shall 'revocably or irrevocably' before the vesting date appoint…". There was, thus, a duty to make an appointment before the vesting date as defined in Clause 1.2. However, if there were no appointment in respect of capital before the vesting date under Clause 4.1, the Trustee was to hold the Trust Fund, on trust, for the Beneficiary/ies.
3. If there were no duty to exercise the power of appointment, and the first Defendant, as Trustee, did not make any appointment, she would continue to hold the Trust Fund, making investments of the Trust property, until the vesting date (whether it is the date referred to in Clause 1.2.1 or Clause 1.2.2), at which date the Trust would fail for want of objects. This was not how the Court would construe the power to appoint which should be construed as a trust power.
Upon the construction advanced by the Plaintiff:
1. The Trustee had power to use, and to deal with, the Trust Fund, but only for the benefit of the Beneficiary, or Beneficiaries, appointed under Schedule 2, Item 2.
2. The Trustee had no power to appropriate, or apply, the income, or the capital, of the Trust Fund, other than to a Beneficiary or Beneficiaries, and the powers to use and manage the Trust Fund would be read subject to that primary obligation.
3. In order for the Trustee to appropriate, or apply, the Trust Fund to the benefit of a Beneficiary, or Beneficiaries, the Trustee must have made an appointment in writing, or must have created a memorandum in writing, of the appointment.
4. The accounts kept by the Trustee must contain sufficient information to enable the Trustee to distinguish between the investments of the Trust Fund, and the application of the income, or the capital, of the Trust Fund, for the benefit of Beneficiary or Beneficiaries. The accounts, therefore, must clearly distinguish between the accounting in respect of the powers to appoint and to manage.
5. The provisions regarding Trustee's remuneration clearly contemplated that there would be information in the accounts which enabled the formula set out in Clause 20.2 to be applied to the amounts paid to the Trustee by way of remuneration.
The Plaintiff also submitted that the Court does not know whether there is any "Beneficiary or Beneficiaries" appointed by the Trustee, under the Trust instrument, only because the first Defendant, as Trustee, had not identified any such person, or entity. If there is, are, or were, any such persons, or entities, he, she or it, may have a vested interest in the Trust Fund, and so would be in a better position than the Plaintiff to seek the relief.
In reply, the Plaintiff also submitted that the most basic investigation of the identity of the persons to whom the first Defendant had provided "grants", revealed questions about whether some of those recipients satisfied the Schedule 2, Item 2, definition of "Beneficiaries", particularly, any entity not registered as an association (whether incorporated or unincorporated), as a proprietor of a business name, or a company. If any were unincorporated associations, investigation of the residence of all members would be required to demonstrate that the unincorporated association comprised "persons residing" in the Dorrigo post code area.
It was put that the evidence showed that the first Defendant may have made a grant to organisations that were either not registered, or that did not exist as a registered business entity, at the time distributions were made. Further, if any recipient was a "Beneficiary", the accounts of the Trust should show how the income or capital of the Trust was applied to the Beneficiaries under Clause 2 or Clause 4 of the First Schedule, once nominated under the Second Schedule, Item 2 of the Will.
(In relation to unincorporated associations, the Plaintiff pointed to the Associations Incorporation Act 2009 (NSW), s 19 of which refers to the legal capacity and powers of an "association", which means "an association registered under this Act": s 4.)
In relation to the dispute whether the appointment of a "Beneficiary" must be in writing, the Plaintiff submitted that the Second Schedule, Item 2, required that to be done by the use of the words "shall … appoint in writing". He disputed that the first Defendant could rely upon the First Schedule, Clause 6, to appoint a Beneficiary or Beneficiaries orally, stating that the Second Schedule, Item 2, specifically required the appointment to be in writing.
Also, it was put that there was a temporal obligation on the first Defendant to distribute income to a Beneficiary or Beneficiaries in default of any decision to favour one, or more, Beneficiaries under Clause 2.1. Accordingly, in order for the Trustee to exercise any power under Clause 2.1, there must have been a sufficient record of the appointed Beneficiary or Beneficiaries to enable that decision to be made.
The Plaintiff also submitted that in order for any incoming Trustee, under Clause 15, to account for the distribution of income or capital to any "Beneficiary" or "Beneficiaries", the incoming Trustee would need to know the identity of the Beneficiary or Beneficiaries in respect of any given year of income. It would be difficult, if not impossible, to ensure that the Trust was properly administered without a contemporaneous written nomination of a "Beneficiary".
Accordingly, the Plaintiff submitted, if the contention of the first Defendant that the Plaintiff had no standing to seek relief as he is not a "Beneficiary" within the definition of that term in Schedule 2, Item 2, there being no evidence that he had been appointed to be a "Beneficiary" for the purposes of the Trust instrument, then, for the same reason, there was no other person who, or entity which, had a better right than the Plaintiff to enforce the terms of the Trust. The consequence was that the first Defendant, as the Trustee, effectively, was immune from the scrutiny of the Court in administering the Trust.
In this regard, the Plaintiff pointed to the fundamental aspect of the jurisdiction of a Court of equity to supervise, and, in appropriate circumstances, to intervene in, the administration of a trust: Morice v Bishop of Durham (1804) 9 Ves Jun 399, at 404-405; 32 ER 656 at [658]; Palmer v Ayres (2017) 259 CLR 478; [2017] HCA 5, Gageler J, at [84].
He also submitted that the proper administration of trusts is a matter of public interest, the proper conduct of trustees warranting close public scrutiny: Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403, at [52], with the result that the question whether the first Defendant, as Trustee, should provide the information sought, must be answered in the affirmative.
The Plaintiff pointed to the following matters:
1. The Trust administered property which was likely to be of substantial value;
2. The Trustee's powers, with respect to the management and administration of the Trust Fund, were extensive;
3. There was no indication whether there are Beneficiaries, as defined by the Schedules to the deceased's Will;
4. The Trustee had made public statements that "grants" had been made to various bodies and individuals, without disclosing whether they are Beneficiaries, and with no indication how they fall within the definition of a "Beneficiary" under the Trust.
1. To the extent that any recipient was an unincorporated association, it was not clear how the Trustee determined that the conditions in the Trust for that recipient's appointment had been met.
2. The Plaintiff was not acting frivolously or vexatiously. He was a person with a sound financial background, and knowledge of financial management, who was acting in the interests of all of the discretionary objects of the Trust.
The Plaintiff also submitted that whether or not he is a "Beneficiary" appointed by the first Defendant, as a person residing in Dorrigo or the surrounding area as defined by postcode 2453, he was a "potential Beneficiary", and, as such, was entitled access to trust documents, or to trust information. He placed reliance on, amongst other cases, Schmidt v Rosewood Trust Ltd [2003] 2 AC 709; [2003] UKPC 26, as well as AIT Investment Group Pty Ltd v Markham Property Fund (No 2) Pty Ltd [2015] NSWSC 216. He also relied upon Kafataris v Deputy Commissioner of Taxation [2008] 172 FCR 242; [2008] FCA 1454, Lindgren J, at [44], in which it was stated that:
"…Provided it can be said with certainty that any particular person is or is not within the class of discretionary beneficiaries, there is a trust, due administration of which can be enforced by discretionary beneficiaries: see Re Gulbenkian's Settlements [1970] AC 508; McPhail v Doulton [1971] AC 424."
The Plaintiff submitted that the minimum obligations imposed upon the Trustee, by the terms of the Trust, would include the obligation to keep accounts and records, a duty to report to the Beneficiary or Beneficiaries and/or to the Court, and a duty to pay amounts that the Trustee was obliged to pay to any Beneficiary or Beneficiaries appointed. Merely keeping annual financial statements, albeit audited, was not enough.
In relation to the claim to pass accounts, the Plaintiff relied upon s 85 of the Probate and Administration Act 1898 (NSW). It was put that s 85(2) permitted a "person interested" to apply to the Court for accounts and that as a person entitled to be appointed as a Beneficiary, he was "a person interested".
Finally, the Plaintiff submitted that once a "person, trustees of a Trust, companies or charities residing in or otherwise carrying on business in Dorrigo in New South Wales or surrounding area as defined by post code 2453" was appointed, in writing, to be a Beneficiary, the first Defendant had no power to remove that Beneficiary, other than by variation or alteration of the Trust. He, she or it, would continue to be entitled, in default, to income or capital as well as to income or capital that the Trustee had "set aside" for that Beneficiary: T46.39 - T47.19.
In relation to the UCPR Part 54, the Plaintiff submitted that the rule operates "as an independent source of power to enable the Court to make orders in a range of matters, including applications by beneficiaries and applications by trustees for advice". Yet, it was accepted that the Plaintiff was not relieved "from demonstrating standing" and that "the same issues concerning standing arise in respect of the plaintiff's application as in the inherent jurisdiction".
Then it was contended that, rather than permitting the Trust to fail, the Court should construe it as "a charitable trust for the benefit of the people of the Dorrigo postcode 2453 - the locality stated in Schedule 2, Item 2 of the Trust Deed" and by making adjustments to the Trust Deed to achieve this simpler expression of purpose by an administrative, or cy-près, scheme. In this way, the rule regarding certainty of objects would be relaxed as the trust purpose would be a charitable one, and as a charitable trust, it could be enforced by the second Defendant, or by any person authorised to bring "charitable trust proceedings" pursuant to s 6 of the Charitable Trusts Act 1993 (NSW).
By way of example, it was pointed out that the first Defendant may face a number of difficulties, including:
1. that the persons identified in Schedule 2 Item 2, is an ever-fluctuating population and also that the "residence" criterion is not defined. (Is it to be determined by electoral registration, a property registration requirement, business registration or empirical presence within the postcode and over what period of time or frequency);
2. how are Trustees of any trust residing, or carrying on a business, within the relevant postcode to be identified;
3. what test will be applied to determine whether a person or entity is "carrying on a business"; and
4. how practical is it for the first Defendant to determine such questions; will the Trustee be expected to consider competition law cases addressing the phenomenon of e-commerce?
Yet, the second Defendant did not submit that the Trust, if a discretionary non-charitable trust, would fail. Rather, counsel stated that the question posed was whether the better characterisation of the Trust was one for a charitable purpose, being a trust to confer a public benefit on the people of Dorrigo postcode 2453. (If this were done, some of the issues, to which he had referred, would effectively disappear.)
The second Defendant reserved his position on the recommendation of a scheme until he had an opportunity to consider the first Defendant's position.
Also, notwithstanding the reference to charities, the first Defendant submitted there cannot be a general charitable intention where its promotion is not the direct and necessary object of the Trust, but one side effect only.
Furthermore, the deceased did not make a gift, collectively, to the people of the Dorrigo area. Rather, consistent with its nature as a private discretionary trust, the Trust provisions permitted a gift, or gifts, to be made to one, or more, persons, or entities (including charities), from the Dorrigo area, including to a person who, or entity which, carries on business in that area. Importantly, so it was submitted:
1. the first Defendant had a discretion to expend income and capital for the maintenance, education, advancement in life, benefit or support of a living person if appointed as a "Beneficiary", with powers which were clearly directed to private individuals and entities, who were appointed as "Beneficiaries" and which had little, or no, application to charities.
2. the Trust did not tend towards perpetuity, that is, enduring forever, because of the definition of "vesting date" in Schedule 1. The longest time it could exist was 70 years after the death of the deceased.
3. the mere reference to Dorrigo and its surrounding areas in a definitional provision did not necessitate a finding that "the Trust falls into a category of gift already judicially recognised as creating a trust for charitable purposes", being "the category of charitable 'locality cases'". The operative provisions of the First Schedule provided a discretion to confer benefits of various kinds on "Beneficiaries". It is only by reference to the Second Schedule, Item 2, for the meaning of "Beneficiaries" that the geographical criterion for appointment is introduced.
As a general submission, it was put that there was no discernible general charitable purpose. On that basis, the Cross-Summons should be dismissed.
In relation to the Plaintiff's claims, the first Defendant submitted that persons and entities in the position of the Plaintiff were merely objects of a discretionary power of appointment to the category of "Beneficiary". When appointed, the person or entity became entitled to be considered by the Trustee as the recipient of income, or capital, or both, in such amount and proportions, and at such times, as she in her complete discretion, decided. Following appointment, each Beneficiary would also be entitled, on default of the first Defendant's exercise of discretion, in relation to capital or income. However, it was put that Clause 8.3, read with Clause 2, and the reference to "or any part" enabled the Trustee to accumulate income and not distribute it. (Counsel for the second Defendant identified as relevant Clause 10.)
It was submitted by the first Defendant that once a "Beneficiary" had been appointed by the Trustee, he, she, or it, became immediately capable of enforcing the terms of the Trust. Hence, there was no requirement for the Trust to be identified as one of the anomalous purpose trusts which can exist without a beneficiary to enforce it.
Having conceded that "there is no document in existence which records the appointment of any Beneficiary" (T109.35 - T109.36), the first Defendant contended that so long as a person, Trustee of a trust, a company, or a charity, residing in or otherwise carrying on business in Dorrigo in New South Wales or the surrounding area as defined by post code 2453, was appointed, before the vesting date, then that person was capable of enforcing the Trust: T67.32 - T67.35.
Even if the requirement to be appointed, in writing, as a Beneficiary was mandatory, it was not mandatory to have the writing available contemporaneously with the appointment, or the relevant payment or application of income or capital to such Beneficiary, as long as the writing was created before the vesting date: T106.00 - T106.31; T109.38 - T106.39.
The first Defendant submitted, in writing, at [75], that the "proprietary approach [to inspection of trust documents] remains the law in Australia and should be applied in this case". She also contended that if the so-called "proprietary approach" to the entitlement to access trust documents were to be applied, the Plaintiff, was merely the potential object of a power of appointment as a "Beneficiary" under the Trust, and that status did not assist him to obtain the information sought. There was no evidence of him having been appointed by the first Defendant as a Beneficiary.
Alternatively, if the so-called "discretionary approach" to the entitlement to trust documents were to be applied, the Court, in the circumstances, should deny the relief which the Plaintiff sought because:
1. The Plaintiff was not a "Beneficiary" but was merely the object of a discretionary power of appointment to the category of Beneficiary;
2. The Plaintiff is but one of a very large number of persons, Trustees of trusts, companies or charities, with a remote interest in the administration of the Trust and to allow all, or any, at perhaps different times, to make such an application would impose a burden on the first Defendant;
3. Because the class of potentially appointed beneficiaries was also capable of extension and variation, access to the documents by the Plaintiff would set a precedent of indeterminate scope;
4. The Schedule to the Will did not expressly, or impliedly, require the Trustee to make available to any "Beneficiary" the information sought in the Amended Summons. The asserted duty to make the information available, therefore, would involve the imposition, by the Court, of a duty not required by the terms of the Trust;
5. A Beneficiary appointed under the Trust may have an interest in his, her, or its, appointment being kept confidential, which is a well understood consideration;
6. By constituting the Trust as a discretionary trust, the deceased intended that the Trustee exercise the conferred discretions in relation to the administration of the Trust, including as to the appointment of "Beneficiaries" and whether to disclose information concerning the Trust a requirement of disclosure may undermine the proper exercise of the Trustee's discretion;
7. The exercise of a trustee's discretion, with respect to the administration of a trust is a matter for the trustee and not for the Court, provided that the trustee acts within power, without mala fides, and in accordance with the purpose for which the trust was created. The Plaintiff had not pleaded, let alone established, sufficient cause to justify the Court's interference with the first Defendant's discretion to withhold the information sought; and
8. The Trust had been administered in a transparent manner, in particular in relation to the recipients of Trust funds, and the manner in which they were selected.
The first Defendant submitted that none of the discretionary matters relied upon by the Plaintiff compelled the exercise of the Court's discretion. Nor was it relevant for the Court to conclude that if the Summons and the Cross-Claim were to be dismissed, the Court had no course available to supervise the Trust: T119 - T120.
In relation to the Plaintiff's claim for the verifying, filing and passing accounts, the first Defendant submitted that the Plaintiff was not a "person interested". As such, he was not entitled to the relief sought. Alternatively, it was submitted, that if the Plaintiff was such a person, the Court should not, as a matter of discretion, make such an order, for similar reasons to those set out above, but also because:
1. The Plaintiff has delayed over nine years before making the present application;
2. The passing of accounts is really only of relevance if an executor or trustee were seeking commission - the procedure has really no other utility, and the information sought would in substance be the same as the other material sought;
3. Whilst allegations have been made against the first Defendant, there is an absence of any evidence of deficiencies in the manner in which the accounts of the estate have been prepared and kept; and
4. The time and cost required to verify, file and pass the accounts would likely outweigh any potential benefit to gained from such an order.
In Re Hodgson; Nowell v Flannery [1936] 1 Ch 203, at 206, Farwell J described the approach the Court should take in this way:
"I think that it comes to this: the duty of the Court in the first place is to read the will itself. The Court is bound in the first instance to read it, giving the words used their primary and proper meaning. The Court is then entitled to look at the surrounding circumstances. If the surrounding circumstances are such that the words of the will, if construed in accordance with their primary meaning, are not apt to apply to any of the circumstances, then the Court is entitled, having regard to the surrounding circumstances, to see whether the language used is capable of some meaning other than its ordinary meaning, not for the purpose of giving effect to what the Court may think was the intention of the testator, but for the purpose of giving effect to what the intention of the testator is shown to be from the language used having regard to the surrounding circumstances. In other words, the Court is not entitled to disregard the language which the testator has used in order to give effect to what the Court may think to have been the intention, but the Court is entitled to say that the words which the testator has used were not intended to have their primary meaning if the surrounding circumstances are such as to lead inevitably to that conclusion."
The principles of construction have been expounded by the Supreme Court of the United Kingdom in Marley v Rawlings [2015] AC 129 in which (per Lord Neuberger) the court unanimously held, at [19] - [23], as follows:
"When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions. […]
When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context. […]
[…] the well known suggestion of James LJ in Boyes v Cook (1880) 14 Ch D 53, 56, that, when interpreting a will, the court should "place [itself] in [the testator's] arm-chair", is consistent with the approach of interpretation by reference to the factual context."
Similar principles apply in relation to the construction of the First and the Second Schedule to the Will. As was stated in Trust Co (Nominees) Ltd v Banksia Securities Ltd (recs and mgrs apptd) (in liq) [2016] VSCA 324, by the Court of Appeal in Victoria, at [35]-[37]:
"The proper approach to the interpretation of the trust deed is not in doubt. In short, the rules of construction of contracts apply also to trusts. For present purposes, two statements of principle regarding the construction of contracts will suffice. In Electricity Generation Corporation v Woodside Energy Ltd four members of the High Court said:
The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties … intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making a commercial nonsense or working commercial inconvenience.
Gibbs J stated in Australian Broadcasting Commission v Australasian Performing Right Association Ltd:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority cited in Locke v Dunlop, which, although spoken in relation to a will, are applicable to the construction of written instruments generally …
The principles stated by Gibbs J are not in doubt, notwithstanding that they were enunciated in a dissenting judgment. It will immediately be apparent that the task of rendering the trust deed in the present matter entirely harmonious is beset with difficulty. However, it may be noted that Gibbs J did not suggest that harmony can always be achieved, rather that it is the object to be pursued in the course of construction." (Omitting citations)
The search for "intention" in relation to a testamentary trust is also for the intention as revealed in the words used by the deceased. The expressed intention of the deceased is to be found in the answer to the question, "[w]hat is the meaning of what he, or she, has written?", and not to the question, "[w]hat did the deceased mean to write?": Byrnes v Kendle (2011) 243 CLR 253; [2011] HCA 26, Gummow and Hayne JJ, at [53] (also, see Heydon and Crennan JJ, at [102]-[107]).
Thus, ultimately, then, "one's task is, first, if it be possible, to ascertain, what was the basic scheme which the deceased had conceived for dealing with his estate, and, then, so to construe the will as, if it be possible, to give effect to the scheme so revealed": Coorey v George (Supreme Court (NSW), Powell J, 27 February 1986, unrep, at 14); Perpetual Trustee Co Ltd v Wright (1987) 9 NSWLR 18, at 33; Fairbairn v Varvaressos (2010) 78 NSWLR 577, at 581-582 [19].
Finally, it is to be remembered that in construing the words of a Will, it is permissible to take into account all the surrounding circumstances known to the testator or testatrix: King v Perpetual Trustee Company Limited (1955) 94 CLR 70, at 78-9; [1955] HCA 70.
None of the parties asserted that a gift of residue to the trustee for the time being of the Trust set up under the First Schedule to the deceased's Will was not a valid gift. There was a dispute about whether the Schedule was effective to declare a trust, the second Defendant contending that unless a charitable purpose was identified, there was no certainty of beneficiaries, such that the Trust could be administered, with the result that the Trust would fail.
The debate on this issue necessitates remembering that an express trust requires certainty of intention on the part of the settlor to create the trust; certainty of subject matter, so that the trust property is clearly defined; and certainty of object, that is certainty as to who are the beneficiaries of the trust: Kauter v Hilton (1953) 90 CLR 86, at 98; [1953] HCA 95; Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62, at 69 [3], 71 [7]; [2015] HCA 6. These crucial elements are to be established objectively, by reference to the document relied on as creating the trust.
In the present case, the only argument, raised by the second Defendant related to "certainty of object". There was no complaint that the geographical ambit of "in Dorrigo in New South Wales or the surrounding area as defined by post code 2453" was impossible to ascertain.
The objects of the Trust created in the Will must be determined by looking at the whole of the Will: Re Williams; Williams v Williams [1897] 2 Ch 12, per Lindley LJ, at 18. It must be possible to determine, with certainty, the limits of the class, i.e. whether a particular person or body is or is not within the class.
"Certainty of object" requires that there be a beneficiary to enforce the trust and, in the case of a discretionary trust, that the trustee is able to identify, who, or which, persons exhibit the criteria specified by the testator in the trust instrument. Yet, a trust can be created in favour of beneficiaries not specifically named in the trust instrument and not ascertainable from facts existing at the time of the creation of the trust, if they are ascertainable at some future time, as identified in the trust instrument. A trust can also be created in favour of the members of a class where the class is defined enough so that its membership can be ascertained.
As stated in Kinsela v Caldwell, at 461, by McTiernan, Stephen and Mason JJ:
"A trust is not uncertain merely because the actual persons to whom the distribution will be made cannot be known in advance of the date of distribution; it is sufficient if the provisions of the trust ensure that upon that date, the beneficiaries can be ascertained with certainty."
The trust will fail, of course, if the membership of the class cannot be ascertained within the period of the rule against perpetuities. But if the membership can be ascertained within that period, the trust is valid although the members of the class are not individually named in the instrument but are designated by description of the class. Of course, the trustee or someone else must be given the power to make a selection among the members of the class.
In Re Lauer; Corby v Lyttleton [2017] VSC 728, at [100], McMillan J wrote:
"Turning to certainty of objects, excluding trusts for a purpose, the beneficiaries of an express trust must be capable of being ascertained. In the context of fixed trusts, list certainty is required, that is, the requirement is that 'that the creator of the trust provides a description of the objects precise enough to enable the whole range of objects to be listed'."
In this case, the Second Schedule, Item 2 of the deceased's Will identifies members of a definite class to be ascertained, those members being "[S]uch persons, Trustees of Trusts (but excluding any Trusts which would result in a breach of the rule against perpetuities or the rule against accumulations) companies or charities, residing in or otherwise carrying on business in Dorrigo in New South Wales or surrounding area as defined by post code 2453". In addition, the Will gave the Trustees the power to make the selection - "as the Trustees shall before the vesting date appoint in writing to be beneficiaries".
In addition, even though, at the date of the establishment of the Trust, a member of the defined class of discretionary objects could only become a "Beneficiary" upon the occurrence of a future event (the appointment in writing), the Trust is still valid: Spotlight Stores Pty Ltd v Federal Commissioner of Taxation (2004) 55 ATR 745; [2004] FCA 650, Merkel J, at 762, [48]. His Honour gave, as an example, a trust for the unborn children of a particular marriage did not fail merely because the beneficiaries are not in existence when the trust is established.
I am satisfied that there is certainty of object as described in the Second Schedule of the deceased's Will. The deceased designated, with sufficient certainty, the class who, or which, may be included by appointment, but left it to the Trustees to select one, or more, objects, from whom, or from which, they may appoint income, or capital, even though it may not have been possible to list all members of the class of discretionary objects. Clearly, it was possible to say, with certainty, in a particular case, whether a person, Trustees of Trusts (excluding any Trusts which would result in a breach of the rule against perpetuities or the rule against accumulations) companies, or charities, were residing in, or otherwise carrying on business, in Dorrigo in New South Wales, or surrounding area as defined by post code 2453 was, or was not, a member of the class.
(If the trust is a charitable trust, certainty of objects is not required but certainty that all potential objects are charitable is required.)
Once a trust is created, there are significant, and generally irreversible, consequences. For example, the trustee holds the legal title to the trust property for the benefit of the beneficiaries of the trust and becomes subject to exacting duties, usually fiduciary, owed to them in relation to that trust property.
As has recently been reiterated in Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40, by Allsop CJ, at [31]:
"Subject to statute, a trust has no legal personality, being an equitable institution comprised of rights, duties and obligations, personal and proprietary, constituting (in private trusts) the relationship between beneficiaries, trustee and property. The institution involves the equitable obligation binding on the trustee to deal with the trust property for the benefit of the beneficiaries and for the purposes of the trust."
The Trust created was labelled, in Clause 5 of the deceased's Will, "a discretionary trust". That label does not dictate any particular conclusion about the nature of the Trust, the obligations it imposed on the first Defendant as the Trustee, and the entitlement it conferred on "Beneficiaries". However, the use of that term, by the deceased, may reveal the deceased's intention as it is considered to be a descriptive term.
The term, "discretionary trust", however, does not have a constant, fixed, normative meaning: CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98; [2005] HCA 53, at [15].
The label "discretionary trust" was described as bearing a meaning "disclosed by a consideration of usage rather than doctrine" and to be used in a way that is "descriptive rather than normative". It was said to have "no fixed meaning and is used to describe particular features of certain express trusts": Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4, at [8]; Fischer v Nemeske Pty Ltd (2016) 257 CLR 615; [2016] HCA 11, at [118] (per Gordon J).
Brereton J, in Cypjayne Pty Ltd v Sverre Rodskog [2009] NSWSC 301, at [41], described such a trust in this way:
"Thus, a discretionary trust does not have beneficiaries in the traditional sense, whose interests together aggregate the beneficial ownership of the trust property. Instead, there is a class of persons, usually described in wide terms, who are the objects of a trust power to appoint either income or corpus or both to selected members of the class. The members of the class are objects of a trust power, rather than beneficiaries in the strict sense. They do not have a proprietary legal or equitable interest in the trust fund, though they have a right to due administration of the trust [Re Smith [1928] Ch 915; Gartside v IRC [1968] AC 553; Jacob's Law of Trusts in Australia, 5th ed, 649 [2315]]. They have no beneficial interest in the trust property; they are not persons for whose benefit the trust property is held by the trustee; at the highest they are members of a class of persons for the benefit of some one or more of whom the trustee may in due course hold property if it so determines. At best, they are potential beneficiaries, not beneficiaries."
The description was adopted by Pembroke J, in Brady Street Developments Pty Ltd v M E Asset Investments Pty Ltd [2013] NSWSC 1755 at [53]. At [54], his Honour wrote:
"To the same effect is a statement frequently made in this area of the law, that the object of a bare power of appointment has no proprietary interest in the trust but only a 'mere expectancy or hope of consideration by the trustee': Gartside v Inland Revenue Commissioners; Kennon v Spry at [156] - [161]. See also Jacob's Law of Trusts in Australia, 7th ed. (2006) at [314] and [2315]; Spellson v George (1987) 11 NSWLR 300 at 316."
Brereton J, in a paper delivered extra-judicially headed, "A Trustee's Lot Is Not a Happy One", published in [2010] NSWJSchol 23, wrote:
"A 'discretionary trust' is a trust coupled with a special power of appointment: the beneficiaries are not determined at the moment of creation of the trust - either as to identity or quantum of interest - and the choice of beneficiary, or determination of the extent of his or her interest, or both, is left to the trustee to decide."
Thus, with a discretionary trust there is a class, usually described in wide terms, who, or which, are the objects of a power to appoint either income, or capital, or both, to selected members of the class. The members of the class are objects of a power, rather than beneficiaries in the strict sense.
The first Defendant submitted, and the Plaintiff did not dispute, that the Trust was of a character which may, conveniently, be described as a private discretionary trust, that is to say, "another species of express trust, one where the entitlement of beneficiaries to income, or to corpus, or both, is not immediately ascertainable. Rather, the beneficiaries are selected from a nominated class by the Trustee or some other person and this power may be exercisable once or from time to time": Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547, at 552; [1989] 89 ATC 5274 (Gummow J); affirmed on appeal in Vegners v Federal Commissioner of Taxation (1991) 21 ATR 1347; (1991) 91 ATC 4213.
The position of an individual discretionary object under a discretionary trust was considered in ASIC v Carey (No 6) (2006) 153 FCR 509; [2006] FCA 814, by French J (as the former Chief Justice then was). His Honour, first, at [21], distinguished between "exhaustive" and "non-exhaustive" discretionary trusts. He stated that the first category includes trust deeds in which the trustee is given a discretion to distribute income among a class of beneficiaries, but requires the trustee to distribute the entire income of the trust at specified intervals. The second category includes trust deeds that confer a discretion on the trustee to distribute any part, or perhaps none, of the income of the trust as he or she thinks fit.
At [26] - [27]; [29] - [30], his Honour wrote:
"The position with respect to an individual beneficiary of a non-exhaustive discretionary trust was also set out in a recent Australian text:
'Since the trustees of a discretionary trust have no duty to make a particular distribution, or indeed any distribution to a specific individual, the rights of the beneficiaries are limited to compelling the trustees to consider whether or not to make a distribution in their favour and to ensuring the proper administration of the trust. This is true even if the discretionary trust only has one beneficiary (Re Weirs Settlement Trusts [1971] Ch 145).'
P Parkinson and D Wright, "Equity and Property" in The Principles of Equity, 2nd ed (ed P Parkinson), Law Book Co, Sydney, 2003, p 60.
Gartside v Inland Revenue Commissioners [1967] UKHL 6; [1968] AC 553 concerned a trust under which the trustees had a discretion to apply the income of a fund for the maintenance or benefit of all or any of the testator's son, daughter-in-law or children (if any) and to accumulate surplus income. A principal issue in the case was whether the potential beneficiaries of the trust had 'interests in possession' in the trust fund for estate duty purposes. The House of Lords rejected that contention. Lord Wilberforce said (at 617):
'No doubt in a certain sense a beneficiary under a discretionary trust has an "interest": the nature of it may, sufficiently for the purpose, be spelt out by saying that he has a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity.'
Lord Wilberforce also made the point that the term 'interest' may have different meanings according to the context in which it is used (at 618):
'... it may be a right, with some degree of concreteness or solidity, one which attracts the protection of a court of equity, yet it may still lack the necessary quality of definable extent which must exist before it can be taxed.'
...
... [I]n my opinion, in the ordinary case the beneficiary of a discretionary trust, other than perhaps the sole beneficiary of an exhaustive trust, does not have an equitable interest in the trust income or property which would fall within even the most generous definition of 'property' in s 9 of the Act and be amenable to control by receivers under s 1323. I distinguish the 'ordinary case' from the case in which the beneficiary effectively controls the trustee's power of selection. Then there is something which is akin to a proprietary interest in the beneficiary.
I accept that there are some rights enjoyed, even by the beneficiaries of a non-exhaustive discretionary trust with an open class of beneficiaries. They include the right to inspect the trust documents - Re Londonderry's Settlement [1965] Ch 918 and the right to require the trustee to provide information about management of the trust fund - Spellson v George (1987) 11 NSWLR 300; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405. There is also a right to enforce the proper management of the trust by the trustee: Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694; Re Atkinson [1971] VR 613."
A discretionary object, prior to any appointment to him, her or it, under a power contained in the trust instrument, has no entitlement to any fixed beneficial interest, or proprietary interest, in the assets held on trust: Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56. He, she or it, does not have a legal, or equitable, interest in any of the trust's assets unless the provisions of the trust instrument create that result: see, CPT Custodian Pty Ltd v Commissioner of State Revenue. Any given discretionary object has no more than the equal right, with any other discretionary object, to be considered, by the trustee of the relevant trust, as a potential recipient of distributions from the relevant trust.
In this case, any person, "Trustees of Trusts (excluding any Trusts which would result in a breach of the rule against perpetuities or the rule against accumulations) companies, or charities, [that was or] were residing in, or otherwise carrying on business, in Dorrigo in New South Wales, or surrounding area as defined by post code 2453", had, at least, an expectancy or mere possibility of appointment as a "Beneficiary", and after that appointment, an expectancy or mere possibility of a distribution. (I shall return to the right of a Beneficiary appointed in writing where the Trustee did not appoint income or capital i.e. as a default Beneficiary, later in these reasons.)
But as a discretionary object, there is a right to enforce the Trustee's obligation properly to exercise her, his or its, discretionary powers, and to compel proper administration of the trust, including the right to compel the trustee to act in good faith and to give due consideration to the exercise of her discretionary powers: Gartside v Inland Revenue Commissioners [1968] AC 553, at 617-618; Spellson v George (1987) 11 NSWLR 300; Schmidt v Rosewood Trust Ltd; Avanes v Marshall (2007) 68 NSWLR 595; Lea v Mo-Mont Pacific [2016] NSWSC 809, at [20].
French CJ, at [60] and [62], in Kennon v Spry, accepted that it was the trust assets, coupled with the trustee's power to appoint them to her, that founded Mrs Spry's "equitable right to due consideration that [was to be] be regarded as the relevant property" of the parties to the marriage.
Because the second Defendant submitted that the Trust should be regarded as a charitable trust, it is next necessary to deal with that submission.
In Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531, at 583, Lord Macnaghten wrote:
"… 'Charity' in its legal sense comprises four principal divisions: trusts for the relief of property, trusts for the advancement of education, trusts for the advancement of religion, and trusts for other purposes beneficial to the community, not falling under any of the preceding heads. The trusts last referred to are not the less charitable in the eye of the law, because incidentally they benefit the rich as well as the poor, as indeed, every charity that deserves the name must do, either directly or indirectly."
In order for a trust to be a valid charitable trust, (a) the trust must be "of a public nature, that is, for the benefit of the public" (or a section of it) as distinct from having a "private" purpose: J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (LexisNexis, 8th ed, 2016) at [10-04] and [10-06]; and (b) the carrying out of its objects must be of benefit to the public: Jacobs' Law of Trusts in Australia at [10-10]. That is to say, a purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community.
In Commissioner of Taxation (Cth) v Bargwanna (2012) 244 CLR 655, at 661; [2012] HCA 11, at [8], the High Court adopted the observations of the Privy Council in Latimer v Commissioner of Inland Revenue [2004] 3 NZLR 157, at 168, [24], as to the identification of the nature of charitable trusts and how a trust instrument is interpreted to ascertain whether the charitable nature exists:
"It is of the essence of a charitable trust that it is a trust for the promotion or advancement of social purposes rather than a trust for individual beneficiaries. Of course, individuals may benefit from the application of trust moneys, but they are not, as individuals, the beneficiaries of the trust and may not enforce its terms. If the purposes of the trust are charitable, they may be enforced by the Attorney-General; if they are not charitable then, with certain anomalous exceptions, they are not enforceable and the trust is not valid. Whether the purposes of the trust are charitable does not depend on the subjective intentions or motives of the settlor, but on the legal effect of the language he has used. The question is not, [w]hat was the settlor's purpose in establishing the trust? [B]ut, [w]hat are the purposes for which trust money may be applied?"
All charitable trusts are trusts for purposes not persons. This is a fundamental difference between charitable trusts and conventional private trusts: Attorney-General (NSW) v Perpetual Trustee Co (Ltd) (1940) 63 CLR 209, at 222. In the case of a conventional private trust, the persons entitled to benefit either have a fixed interest in the corpus of the trust, or rights as discretionary objects of a discretionary trust.
There is a very real difference between a trust for a charitable institution and a trust for a charitable purpose: see McGarvie Smith Institute v Campbelltown MC (1965) 11 LGRA 321, at 323, referred to in Radmanovich v Nedeljkovic [2001] NSWSC 492 at [110].
The second Defendant referred to the Trust as one for the purposes of the community of Dorrigo, and submitted that it should be classified as a trust for a public purpose within the fourth class of the categories listed by Lord Macnaghten in Commissioners for Special Purposes of Income Tax v Pemsel. As stated above, the fourth class is "trusts for other purposes beneficial to the community", being trusts not for the relief of poverty or the advancement of religion or education.
However, it is to be noted that in Verge v Somerville [1924] AC 496, Lord Wrenbury wrote, at 499, on behalf of the Privy Council:
"To ascertain whether a gift constitutes a valid charitable trust so as to escape being void on the ground of perpetuity, a first inquiry must be whether it is public - whether it is for the benefit of the community or of an appreciably important class of the community. The inhabitants of a parish or town, or any particular class of such inhabitants, may, for instance, be the objects of such a gift, but private individuals, or a fluctuating body of private individuals, cannot."
I have also borne in mind Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315, in which Dixon CJ wrote, at 321:
"The tendency of the trust must be to benefit the public, a condition that is satisfied if it tends to the benefit of the public at large, or a class or section of the public. The trusts may be limited in their operations by reference to locality, to conditions of people, to their disabilities, defects or misfortunes and by reference to many other attributes of men and things, yet the trusts may retain their 'public' character. Not a little difficulty has been felt in defining the conception of 'public', 'public charity' or 'public benefit' which this involves but the contrast is, of course, to private advantage."
Furthermore, it is not enough that the trustee of the trust may apply the trust property for purposes charitable, but whether she is bound so to apply it for charitable purposes. If the gift is such that the trustee is not bound to apply it to purposes strictly charitable, it is not a charitable gift.
In this case, the purpose of the Trust can be ascertained by considering the terms of the deceased's Will, and how the Trust property is required to be held by the Will. Other than including "charities" as one of the discretionary objects in Schedule 2 Item 2, there is very little, if anything, in the deceased's Will to suggest a charitable purpose.
Even if the first Defendant had, or was to, exercise her discretion by appointing, in writing, a charity, the trust would not, on that basis alone, be a charitable trust, since she was not obliged to do so. As was written by Hall VC in Re Jarman; In re; Leavers v Clayton (1878) 8 Ch D 584, at 587:
"The court is not to wait and see whether the executors will appoint to charitable objects or not, but to look at the will as at the date of the death of the testator, and at once say whether the gift is definite or indefinite, and if the latter, that it is inoperative."
Furthermore, the objects of the Trust clearly include a fluctuating body of private individuals ("persons"). Thus, it would be in the power of the first Defendant, as Trustee, to appoint an object, as a "Beneficiary" that is not a charity. Furthermore, she could exercise her discretion completely by not appointing a charity as a "Beneficiary" to which income or capital may be distributed.
As stated, and in my view, importantly, the use of income for the "benefit" of the Beneficiary, which "benefit" includes expending the income for the maintenance, education or advancement in life, or support, of the Beneficiary, which might be other than a charity, and in lieu of paying or expending income in cash, by transferring property of like value, including securities in any company and policies of life and/or casualty assurance to the Beneficiary, is incongruous with a disposition of substantially the whole of the deceased's estate to charity and leads me to the view that the Trust created by the Will of the deceased was not a charitable trust.
Similarly, the holding of capital for the maintenance, advancement, education, and benefit of a Beneficiary or Beneficiaries suggests extension beyond solely charitable objects and purposes other than charitable ones. Clearly, the deceased contemplated that the Trustee might advance distributions to individuals, amongst others.
This conclusion is also reached by reference to the terms of the Second Schedule, Item 2, which, whilst including "charities" as an object, connects them to "residing in, or otherwise carrying on business, in Dorrigo", which implies a private, or business, purpose in Dorrigo. (That the institution conducts business, and commercial activities, does not, necessarily, deprive it of its charitable character, so long as those activities are associated with or ancillary to the charitable purpose: College of Law Pty Ltd v Attorney General of NSW [2009] NSWSC 1474, per Brereton J at [4].) There is nothing in the Second Schedule Item 2, which requires the permissible objects of appointment to undertaking operations that are charitable, for example, for the primary benefit of the community, to the exclusion of non-incidental benefit for individuals.
I have considered the principle that "a gift subject to …a trust for the benefit of the inhabitants of a parish or town, or any particular class of such inhabitants" has been construed as being limited in its scope to charitable objects: Goodman v Mayor of Saltash (1882) 7 App Cas 633, at 642. This principle does not apply, it seems to me, in circumstances where there is no gift, but merely, one of the classes of discretionary objects falls within the class within a locality, and where the gift is not to the locality but, includes discretionary objects within the locality.
Section 10 of the Charitable Trusts Act 1993 (NSW) provides that a general charitable intention is to be presumed unless there is evidence to the contrary in the instrument establishing the charitable trust. Even assuming the Charitable Trusts Act applies, I am satisfied that there is sufficient evidence against the presumption of charitable intention and I find that there is no charitable trust.
In all the circumstances, I am of the view that the Trust is a private discretionary trust and not a charitable trust.
Yet, under the terms of the deceased's Will, the members of the class ("the Beneficiaries") are also takers in default of the exercise of the power by the Trustee. In this regard, the Beneficiaries will take a share in the corpus or a share in the income of a year if the trustee does not exercise a power to appoint or pay elsewhere.
It seems to have been accepted by all of the parties in this case that no member of the nominated class of objects referred to in the Second Schedule Item 2, before being appointed in writing by the first Defendant, has a beneficial, or proprietary, interest in any of the capital or income of the Trust and could not be regarded as a taker on default. What an object referred to had, was a mere expectancy; an expectation or hope that the first Defendant, as Trustee, may exercise her discretion in his, her, or its favour, appointing him, her or it, in writing, before the vesting date, to be a beneficiary for the purposes of the Will. Then, the discretionary object could be described as a "Beneficiary" and taker in default of appointment of income and capital.
When so appointed as a Beneficiary, Clauses 3 and 4 of the First Schedule set out the manner in which the first Defendant, as Trustee, may apply income or capital. If the first Defendant exercised the discretion prior to the end of a given income year, she could expend the income for the maintenance, education, advancement in life, benefit or support of the Beneficiary, or otherwise expend the income in such manner as she decided, or the first Defendant could determine that the Beneficiary had an immediate vested indefeasible interest in the income, whereupon that Beneficiary would have that immediate vested indefeasible interest in such income.
Similarly, if the first Defendant exercised the discretion as to capital, she could appropriate that part of the capital of the Trust Fund, and hold the same absolutely for the Beneficiary then living, or in existence, at the date of such appropriation, following which the capital so appropriated would cease to be part of the Trust Fund.
In addition, once appointed in writing as a Beneficiary, if there were default by the first Defendant not exercising her discretion as to the payment, or application, of the whole, or any part, of the income of the Trust Fund for the relevant year, then the first Defendant, as Trustee was to hold and stand possessed of the income of the Trust Fund for that year, for the Beneficiary, or Beneficiaries, if living, or in existence, on the last day of that year, and was entitled to pay, or apply, it to the benefit of the Beneficiary, or Beneficiaries, living on the last day of that year.
Similarly, once appointed in writing as a Beneficiary, if there was default by the first Defendant in exercising her discretion as to appropriating any part of the capital at any time, and from time to time, prior to the vesting date, then if living, or in existence, at the vesting date, the Beneficiary was entitled to the capital, or an equal share of the capital (if more than one Beneficiary).
Despite the above, the Plaintiff does have a right to take legal proceedings to prevent the appointment as a Beneficiary, "persons, Trustees of Trusts…companies or charities" who, or which, do not fall within the definition of Beneficiary or Beneficiaries referred to in Clause 1.3 of the First Schedule, and, in this way seek to prevent the disposal of income, or capital, by the Trustee, "to persons, Trustees of Trusts…companies or charities" outside the class of designated objects. That is a chose in action which a court of equity will protect.
The question, then, is whether the right includes, or implies, a right to inspect trust documents. In my view, it does include a right to inspect trust documents so long as what is sought to be produced relates to those matters to which reference has been made above. The right is not an absolute one.
In Spellson v George, Powell J had written, at 315-16:
"At the risk of being regarded as overly simplistic, it is as well to start with the fundamental proposition that one of the essential elements of a private trust, be it a discretionary trust or some other form of trust, is that the trustee is subject to a personal obligation to hold, and to deal with, the trust property for the benefit of some identified, or identifiable, person or group of persons … It is, so it seems to me, a necessary corollary of the existence of that obligation that the trustee is liable to account to the person, or group of persons for whose benefit he holds the trust property … and, that being so, the trustee is obliged not only to keep proper accounts and allow a cestui que trust to inspect them, but he must also, on demand, give a cestui que trust information and explanations as to the investment of, and dealings with, the trust property...
This being the essential nature of the position of a trustee, and the liability to account being an essential ingredient in it, it seems to me that it is inescapable that the cestuis que trust, or any one of the cestuis que trust, have, or has, a correlative right to approach the Court for its assistance in enforcing the personal obligation of the trustee, and, in particular, in enforcing the trustee's obligation to account. Since that right is, as it seems to me, a fundamental right of the cestuis que trust, or of a cestui que trust, it seems to me that it is not correct to say that its enforcement by the court is dependent upon the cestuis que trust, or the cestui que trust in question, first raising an allegation, or establishing a prima facie case, of fraud or some other like breach of trust. On the contrary, so it seems to me, where the court's assistance in enforcing the trustee's obligation to account is invoked, the court should be concerned with only two questions, they being, first, whether the plaintiffs are, or the plaintiff is one of the, cestuis que trust, and, second, whether the defendant trustee has failed to observe his obligation to account.
The question then is, whether a person whose status is only that of a potential object of the exercise of a discretionary power can properly be regarded as one of the cestuis que trust of the relevant trustee. I do not doubt that he can, and should, properly be so regarded, for although it is true to say that, unless, and until, the trustee exercises his discretion in his favour, he has no right to receive, and enjoy, any part of the capital or income of the trust fund, it does not follow that, until that time arises, he has no rights against the trustee. On the contrary, it is clear that the object of a discretionary trust, even before the exercise of the trustee's discretion in his favour, does have rights against the trustee - those rights, so it seems to me, are not restricted to the right to have the trustee bona fide consider whether or not to exercise his (the trustee's) discretion in his (the object's) favour, but extend to the right to have the trust property properly managed and to have the trustee account for his management …" (Omitting citations)
In Spellson v Janango Pty Ltd (Supreme Court (NSW), Hodgson J, 8 December 1987, unrep at 11-12) in dealing with the right of a potential object of a power of appointment to information:
"the right of a beneficiary to information concerning a trust is not one which can only be exercised … for the purpose of investigating possible breaches of that trust, obtaining advice in relation to them and bringing proceedings pursuant thereto. …[A] beneficiary's right is related to the trustee's duty to account to the beneficiary and is related to the trustee's obligation not to commit breaches of trust. However … a beneficiary has a right to know what the trust property is and how it has been and is being administered by the trustee, which is not conditioned on any purpose to investigate breaches of trust and to enforce the trust against the trustee."
Hodgson J, by way of example, at 13, considered the right could be exercised "by the plaintiff to find out if there has in the past been an exercise of discretion in his favour in relation to property which he has not received".
Hammerschlag J, also, in McNeill v Hearing & Balance [2007] NSWSC 942, at [35], thought that there was such a right in the potential object when he wrote:
"A person who is one of the potential objects of the exercise of a discretionary power of appointment in respect of a trust fund, has the right to seek, and obtain, from the trustee of that trust fund, information concerning the trustee's management of that trust fund. The exercise of such right does not depend upon it being alleged that the trustee of that trust fund has, in the course of his or her management of that trust fund, been guilty of fraud or other breach of trust: Spellson v George (1987) 11 NSWLR 300 at 315 per Powell J."
The first Defendant contended that the ability to invoke the court's supervision depended on the nature of the interest the applicant enjoyed. A differentiation between a fixed and discretionary beneficiary, on the one hand, and the object of powers of appointment on the other was made. The former enjoyed rights enabling him, her or it, to seek an accounting, whilst the latter did not, unless those rights were specifically conferred by the trust instrument. This view conforms with the "proprietary approach". As stated, the Plaintiff contended that the Court should follow Schmidt v Rosewood Trust Ltd, in what is described as the "discretionary approach".
It is necessary to consider the answer to this question from the conclusion that the Plaintiff is no more than an eligible object who, before the vesting date, has the right to be considered by the first Defendant, as Trustee, to be appointed, in writing, by her as a "Beneficiary" for the purposes of the Trust. He does not have any fixed, or contingent, proprietary interest, or even any expectation in relation to the assets of the Trust.
Schmidt v Rosewood Trust Ltd was an appeal from the Staff of Government Division of the High Court of Justice of the Isle of Man. It was in this case that Lord Walker of Gestingthorpe, who delivered the advice of the Board, concluded, at [51]:
"Their Lordships considered the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the court's inherent jurisdiction to supervise, and if necessary to intervene in the administration of trusts. The right to seek the court's intervention does not depend on entitlement to a fixed and transmissible beneficial interest. The object of a discretion (including a mere power) may also be entitled to protection from a court of equity, although the circumstances in which you may seek protection, and the nature of protection you may expect to obtain, will depend on the court's discretion …"
Remembering that it is the duty, "[p]erhaps, the most important duty", of a trustee to adhere to and carry out the terms of the trust: Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15, at [32]-[33] (Gleeson CJ, McHugh, Gummow, Kirby & Hayne JJ), and that a trustee's function is "to take the trusts as it finds them and to administer them as they stand": Re Dion Investments Pty Ltd (2014) 87 NSWLR 753; [2014] NSWCA 367 at [94] (Barrett JA; Beazley P and Gleeson JA agreeing), it is a cardinal principle of trust law that the Court has an inherent jurisdiction to supervise the administration of trusts.
In Schmidt v Rosewood Trust Ltd, Lord Walker wrote at [36]:
"It is fundamental to the law of trusts that the court has jurisdiction to supervise and if appropriate intervene in the administration of a trust, including a discretionary trust."
However, this "is not to suggest that a court has some freewheeling unfettered discretion to do whatever seems fair when it comes to trusts": Crociani & Ors v Crociani & Ors (Jersey) [2015] WTLR 975; [2014] UKPC 40, at [36].
In Schmidt v Rosewood Trust Ltd, the applicant's status, as a beneficiary was questionable. At [54], Lord Walker continued:
"It will be observed that Kirby P said that for an applicant to have a proprietary right might be sufficient, but was not necessary. In the Board's view it is neither sufficient nor necessary. Since In re Cowin 33 Ch D 179 well over a century ago the court has made clear that there may be circumstances (especially of confidentiality) in which even a vested and transmissible beneficial interest is not a sufficient basis for requiring disclosure of trust documents; and In re Londonderry's Settlement and more recent cases have begun to work out in some detail the way in which the court should exercise its discretion in such cases. There are three such areas in which the court may have to form a discretionary judgment: whether a discretionary object (or some other beneficiary with only a remote or wholly defeasible interest) should be granted relief at all; what classes of documents should be disclosed, either completely or in a redacted form; and what safeguards should be imposed (whether by undertakings to the court, arrangements for professional inspection, or otherwise) to limit the use which may be made of documents or information disclosed under the order of the court."
At [66] - [67], Lord Walker concluded:
"…[A] beneficiary's right to seek disclosure of trust documents, although sometimes not inappropriately described as a proprietary right, is best approached as one aspect of the court's inherent jurisdiction to supervise, and where appropriate intervening, the administration of trusts. There is therefore in their Lordship's view no reason to draw any bright dividing line either between transmissible and non-transmissible (that is, discretionary) interests, or between the rights of an object of a discretionary trust and those of the object of a mere power (of a fiduciary character). The differences in this context between trusts and powers are… a good deal less significant than the similarities.
However, the recent cases also confirm … that no beneficiary (and least of all a discretionary object) has any entitlement, as of right, to disclosure of anything which can plausibly be described as a trust document. Especially when there are issues as to personal or commercial confidentiality, the court may have to balance the competing interests to different beneficiaries, trustees themselves, and third parties. Disclosure may have to be limited and safeguards may have to be put in place. Evaluation of the claims of a beneficiary (and especially of a discretionary object) may be an important part of the balancing exercise which the court has to perform on the materials placed before it. In many cases the court may have no difficulty in concluding that an applicant with no more than a theoretical possibility of benefit ought not to be granted any relief."
It follows that Lord Walker's view was that disclosure was not mandatory. Other considerations, including confidentiality (particularly commercial or personal confidentiality), would also play a part in answering the questions that his Lordship posed and, ultimately, the Court may have to balance competing interests.
In the 2003 Withers Lecture, delivered at King's College in London, Mr Justice Lightman, formerly of the High Court of England and Wales, delivered a speech entitled "The Trustees' Duty to Provide Information to Beneficiaries" in which he summarised the effect of Schmidt v Rosewood Trust Ltd as follows:
"In summary (a) the right of a beneficiary is not a right to access to trust documents or information, but an equity incident to his beneficial interest entitling him to invoke the discretionary jurisdiction of the court to require the trustee to make disclosure …; (b) a beneficial interest carries with it this incident whether it is transmissible or non-transmissible (ie, discretionary) and whether it is the interest of the object of a discretionary trust or that of the object of a power; (c) if the existence of the interest is uncertain, eg, if it depends upon the resolution of an issue of construction of the settlement by the court, the court will (at any rate in any ordinary circumstance) defer any decision whether to give any direction to the trustees to make disclosure until the issue of construction has been decided."
Dawson and Toohey JJ in Breen v Williams (1996) 186 CLR 71, at 89; [1996] HCA 57, stated:
"…the right of access of a beneficiary to trust documents arises because of the beneficial interest of the beneficiary in the trust property and it is in that sense that the right may be described as proprietary."
In Dura (Australia) Constructions Pty Ltd v SC Land Richmond Pty Ltd [2007] VSC 272, at [10], it was said that determining the question of the beneficiary's entitlement by "reference to a proprietary interest of the beneficiary in the trust documents", was "generally viewed as an oversimplified analysis".
In Avanes v Marshall (2007) 68 NSWLR 595; [2007] NSWSC 191 at [15], Gzell J followed Schmidt v Rosewood Trust Ltd, subject to one qualification, which was:
"The decision [in Schmidt v Rosewood Trust Ltd] should not be regarded as abrogating the trustee's duty to keep accounts and to be ready to have them passed, nor the trustee's obligation to grant a beneficiary access to trust accounts. But when it comes to inspection of other documents there should no longer be an entitlement as of right to disclosure of any document. It should be for the court to determine to what extent information should be disclosed."
In McDonald v Ellis (2007) 72 NSWLR 605; [2007] NSWSC 1068, at [51], Bryson AJ considered that it was better to have a rule, rather than leaving it to judicial discretion, because it "promotes resistance and debate in substitution for a rule which is relatively concrete". His Honour also considered that the views expressed in Schmidt v Rosewood Trust Ltd were not a binding source of law in New South Wales.
His Honour wrote, at [47] - [49], and [51]:
"A decision that all access to trust documents should be in the discretion of the Court is a drastic solution to whatever problems might be perceived in supposing a proprietary basis for discretionary interests, and whatever problems may be perceived in delimiting which documents should be treated as trust documents and in protecting from access documents accessed to which involves some conflicting principles.
…
Their Lordships' conclusion at 734-5 ([66] and [67]) would make the beneficiary's right to seek disclosure of trust documents an aspect of the Court's inherent jurisdiction to supervise, and where appropriate intervene in the administration of trusts. Although the reasons say that that right is 'sometimes not inappropriately described as a proprietary right' it is plain that their Lordships did not treat the right as a proprietary right.
The history of Equity and the nature of its remedies mean that the treatment of equitable interests as proprietary, and the development of rules based on that treatment, can never be entirely logical or satisfactory; but if this is perceived as a problem, it is an inherent problem and should not be regarded as a basis for discarding a well-established rule.
…
…In my opinion it is not a better rule, because it introduces discretion and promotes resistance and debate in substitution for a rule which is relatively concrete. The tendency will be that only the determined and litigious beneficiary will find out about his own affairs. Where there is a judicial discretion, there is room for litigious debate about the exercise of the discretion. There is no certainty on so elementary a matter on whether or not a beneficial owner is entitled to information about property in which the beneficial owner has an equitable interest. In the previous rule, in my interpretation Equity followed the law in treating as proprietary an equitable entitlement to trust property. Treating the equitable interest as proprietary brings with it an entitlement to information, unless there is a conflict with some other principle which Equity must recognise, such as the principle protecting the trustee's discretionary considerations. Treating the entitlement to information as an aspect of the Court's discretionary exercise of its supervising over trusts is a departure from the relatively concrete concept of equitable interests in trust property which has been adopted for some centuries."
Bryson AJ disagreed with Avanes v Marshall, although he conceded, at [52]:
"It might be that the approach of Schmidt is appropriate where the interest of the beneficiary is no higher than those of the potential objects of a discretionary trust, although opinion in New South Wales is otherwise."
In Fay v Moramba Services Pty Ltd [2009] NSWSC 1428, at [99], Brereton J wrote:
"A potential beneficiary of a discretionary trust has no entitlement as of right to disclosure of information concerning the trust, except for the trust accounts [Avanes v Marshall; Hartigan Nominees Pty Ltd v Rydge; Schmidt v Rosewood Trust Limited]. There is doubt even as to whether the object of a discretionary trust has a right to see trust accounts, or whether the Court merely has a discretion, in the exercise of its supervisory jurisdiction over trustees, to order the provision of accounts [Schmidt v Rosewood Trust Limited; contra McDonald v Ellis, and cf Avanes v Marshall in relation to trust accounts where the trust is not discretionary]. But, for present purposes, I shall assume that a potential beneficiary of a discretionary trust is entitled to see the trust accounts."
In Rauch v Maguire [2010] 2 NZLR 845, at [24] - [30], there was a useful summary of the competing positions (one calling for the exercise of discretion by the Court rather than the adjudication upon a proprietary right). Whilst lengthy, I shall quote the passages:
"The leading decision on the duties of trustees to disclose is Schmidt v Rosewood Trust Ltd. The issue had long exercised courts of equity. In the earlier leading decision of O'Rourke v Darbishire at least some of the Law Lords took the view that the right of beneficiaries to obtain copies of trust documents derived from their proprietary interest in the documents. Lord Wrenbury stated:
'If the plaintiff is right in saying that he is a beneficiary and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desires to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access to them. This has nothing to do with discovery. The right to discovery is a right to see someone else's documents. The proprietary right is a right to access to documents which are your own.'
Lord Wrenbury's observations demonstrated the distinction between the right of a beneficiary arising under the law of trusts, and the right of a litigant to disclosure of the documents of the opposing party. One derived from the laws of equity and the law of property, and the other from the law of procedure. The statements also demonstrated a view that the beneficiaries' right to documents is a proprietary right in the documents themselves, and not just derived from any rights a beneficiary has to the assets of the trust.
In the English Court of Appeal decision of In Re Londonderry's Settlement, caution was expressed by the majority of the Court towards adopting a proprietary test in relation to the disclosure of documents, and a discretionary approach was favoured. The Privy Council in Schmidt v Rosewood Trust Ltd adopted the majority view in In Re Londonderry's Settlement, and stated that although a beneficiary's right to seek disclosure of trust documents could be described as a proprietary right, it was best approached as one aspect of the court's inherent and fundamental jurisdiction to supervise and, if appropriate, intervene in the administration of a trust, including a discretionary trust. The Privy Council agreed with the minority observations of Kirby P and Sheller JA in the Court of Appeal of New South Wales decision of Hartigan Nominees Pty Ltd v Rydge, where Kirby P observed at 421 that a beneficiary's access to documents should not be limited to those in which a proprietary right may be established. He observed that all the beneficiaries had were equitable rights against the trustees, and the legal title and rights to possession were with the trustees. Kirby P preferred to base the right to inspect "... upon the trustee's fiduciary duty to keep the beneficiary informed and to render accounts".
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In New Zealand the approach to a beneficiary's right to disclosure is that the duty arises from a beneficiary's right to ensure that trustees are properly carrying out their duties and accounting to the beneficiaries, the court's jurisdiction arising from its inherent jurisdiction to supervise the administration of trusts: Kain v Hutton, Kane v Hutton & Ors, Manukau City Council v Lawson, The Cats' Protection League v Deans and Sullivan. In particular, the principles set out in Schmidt v Rosewood Trust Ltd were applied by Potter J in Foreman v Kingstone. She noted that a trust creates fiduciary obligations on trustees who owe duties to beneficiaries, and that this gives beneficiaries co-relative rights. She stated:
'Beneficiaries are entitled to receive information which will enable them to ensure the accountability of the trustees in terms of the trust deed ...
These are fundamental rights of beneficiaries. They are not absolute rights ... They will be subject to the discretion of the Court in its supervisory jurisdiction when the trustee seeks directions, or beneficiaries seek relief against refusal by the trustees to disclose.'
Foreman v Kingstone, amongst many other decisions, was considered in a scholarly review of the authorities in the recent English decision of Breakspear v Ackland. Briggs J concluded that it was best to approach requests for disclosure as calling for the exercise of a discretion, rather than adjudication upon a proprietary right. The discretion would be exercised in accordance with what was judged to be the best interests of the beneficiaries and the due administration of the trust, and on the basis of an assessment of the objective consequences of disclosure rather than by reference to the subjective purpose for which the disclosure was sought. He emphasised that disclosure should not be assumed to be automatic. The exercise of discretionary dispositive powers by trustees is inherently confidential, and this confidentiality exists for the benefit of beneficiaries rather than merely for the protection of the trustees. Certain documents, particularly memoranda of wishes, are brought into existence for the sole purpose of facilitating an inherently confidential process. He disagreed with the proposition that the general trend was towards disclosure, at least in relation to memoranda of wishes.
In fact there is far from unanimity in Australia on the applicability of Schmidt v Rosewood Trust Ltd. In McDonald v Ellis, Bryson AJ held that a beneficiary is entitled to an interest in the remainder under a testamentary trust and has a right to information about the trust and to see documents because it is about the beneficiary's own property. He noted that a claim by a beneficiary under a discretionary trust with no vested interest provided a less clear and compelling basis for access to the documents. Bryson AJ left open the question of whether it would be appropriate to follow Schmidt v Rosewood Trust Ltd. Because the plaintiff beneficiary had a vested interest he concluded that it would be 'a departure from clearly established opinion in New South Wales not to treat the claim for information as based on a proprietary interest ...'. He was supported in his view by the approach of the majority of judges in New South Wales Court of Appeal in Hartigan Nominees Pty Ltd v Rydge.
In this application the distinction between vested and discretionary beneficiaries is relevant. It is difficult to see how a discretionary beneficiary of a New Zealand discretionary trust can be said to have a proprietary interest in a particular asset or, indeed, a particular document. By discretionary trust, I mean a trust where the entitlement of the beneficiaries to income or to the corpus (or both) is not immediately ascertainable, but rather the trustee or some other person may select beneficiaries from a nominated class. While it is possible to conceptualise the discretionary beneficiary's rights in terms of a limited or contingent interest resting on their chose of action against the trustees, the preferable approach is to consider the beneficiary's rights to access trust documents as arising from a trustee's duty to account for its actions to the beneficiaries and adhere to the terms of the trust. As part of that duty to account, the trustee must on a reasonable request, disclose trust documents to a vested or discretionary beneficiary, unless there are good reasons not to do so. On this basis the accounts of a trust would be generally disclosed on the direct request, as would documents relating to the assets of the trust and the trustee's actions in relation to those assets. However, a confidential memorandum of wishes might not be disclosed if an intention on the part of the settlor that they not be disclosed may be discerned, or viewed objectively, such disclosure may not be in the interests of the beneficiaries as a whole. If a trustee is in doubt, it can apply to the court for a direction under s 66 of the Trustee Act 1956. If a beneficiary's request is refused by a trustee and the beneficiary considers that refusal to be wrong, the beneficiary can apply for an order from the court. The court will consider that application in its supervisory jurisdiction."
Hammerschlag J in Silkman v Shakespeare Haney Securities Ltd [2011] NSWSC 148, at [27], proffered reasons why Schmidt v Rosewood Trust Ltd should be followed:
"A consideration of the authorities reveals that the Londonderry approach has jurisprudential difficulties which the Schmidt approach does not have, including:
[a] in ascribing a workable and principled definition of the term 'trust documents';
[b] in divining the nature of the beneficiary's so-called proprietary interest in such documents … ;
[c] that on the Londonderry approach a discretionary beneficiary who has no lesser interest in the due administration of the trust (but who has no proprietary interest in the assets) should, illogically, be denied disclosure;
[d] that authorities which have taken the Londonderry approach have limited the beneficiary's right to disclosure by reference to the interests of third parties in maintaining confidentiality. It is difficult to reconcile this limitation with the principle for which Londonderry stands; and
[e] reconciling a beneficiary's entitlement to documents such as a settlor's statement of intention or a constituent trust deed (which undoubtedly a beneficiary should properly have) with the fact that these instruments are themselves not assets or appurtenant to assets of the trust."
In AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Limited, at [66], Bergin CJ in Eq was "not convinced that a single judge of this Division is bound to follow Londonderry's Settlement". Her Honour, at [90], then applied the Schmidt v Rosewood Trust Ltd approach.
Subsequent authority, from the Supreme Court of Victoria, has rejected the Schmidt v Rosewood Trust Ltd discretionary approach. In Deutsch v Trumble [2016] VSC 263. Hargrave J, at [66], considered himself "bound to apply the proprietary approach".
274 Recently, Gageler J cited Schmidt v Rosewood Trust Ltd in Palmer v Ayres (2017) 259 CLR 478; [2017] HCA 5. That case involved whether the power of a court to summon a person for examination under s 596A of the Corporations Act 2001 (Cth) ("the s 596A power") was invalid as contrary to Ch III of the Constitution.
Although his Honour did not consider the issue of document access in particular detail, at [84], he cited Schmidt v Rosewood Trust Limited as authority for the jurisdiction of the Court "to compel the provision of information by a trustee". Relevantly, his Honour also noted that "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".
In Erceg v Erceg [2017] 1 NZLR 320; [2017] NZSC 28, the Supreme Court of New Zealand, constituted by Elias CJ, William Young, Glazebrook, Arnold and O'Regan JJ, authoritatively re-examined the issue, and after a consideration of various authorities in New Zealand, and overseas, concluded, at [18], that "the Court's jurisdiction on an application for the exercise of the supervisory jurisdiction is not limited to the grounds of review of a discretionary decision by the trustees". Rather, "the Court must exercise its jurisdiction as a court of equity, exercising its own judgement as to whether disclosure ought to be made at all and, if so, to what extent and on what conditions". In exercising the discretion, there was no presumptive response either in favour of, or against, it and "the starting point … being the obligation of a trustee to administer the trust in accordance with the trust deed and the duty to account to beneficiaries".
Yet, the Court also stated at [68]:
"We do not see the supervisory jurisdiction as discretionary: it is better seen as a jurisdiction. [It then referred to an earlier paragraph ([50]) that stated 'we think it is better seen as a jurisdiction that must be exercised in accordance with principle, after careful assessment of the factors relevant to the disclosure sought by the particular beneficiary'.] For example, there will be little to debate about a case where the Court forms the view that disclosure of basic documents such as the trust deed and accounts is necessary to allow a beneficiary with a clear interest to hold the trustee to account and finds that no countervailing factor such as confidentiality arises. In such a case, it is hard to see how the Court could say it would, despite those factors, exercise its 'discretion' to refuse a disclosure order in relation to those documents. Rather, the Court's obligation to intervene in its supervisory jurisdiction would be engaged. In less clear cut cases, however, the decision will require consideration of a wide range of factors. We see such consideration as involving assessment and judgment [sic]."
Then, it is necessary to consider what the inherent supervisory jurisdiction entails.
In Randall v Lubrano (Supreme Court (NSW), Holland J, 31 October 1975, unrep), which concerned the right of a potential beneficiary to information about the trust under which the trustee had discretions "in the widest of terms and in the case of a number of important clauses the discretion expressed as equivalent to that of an absolute owner of the trust property". In circumstances where all potential beneficiaries consented to the information being provided, his Honour considered, and rejected, an argument that the extraordinarily wide discretions of the trustee excused him from accounting. His Honour wrote, at 1:
"…no matter how wide the trustee's discretion in the administration and application of a discretionary trust fund and even if in some or all respects the discretions are expressed in the deed as equivalent to those of an absolute owner of the trust fund, the trustee is still a trustee."
At 2, his Honour considered an argument that the plaintiffs had no relevant interest in the trust entitling them to an account because they were merely potential objects of a power, but rejected it, writing:
"It may be that if he exercised a discretion given him by the trust in a particular way that was within the scope of his discretion he could not be called upon to explain why he so exercised it: see Re Londonderry's Settlement (1964) 3 All ER 855; but if he misapplied the trust fund or failed to perform a duty imposed on him by the trust there is no doubt in my mind that the plaintiffs would be proper parties to seek relief in this court."
At 3, his Honour considered the argument that the extraordinarily wide discretion of the trustee excused him from accounting, but rejected the argument, concluding:
"If the argument for the trustee is correct, he could do as he pleases with the trust property and commit any breach of trust that he cared to commit. There may be no way of detecting it and no person could require him to reveal what he had been doing. It may be that with such wide powers as here the trustee may not be obliged to account to discretionary beneficiaries in the sense of justifying investments of the trust property or recouping the trust fund for losses but it is quite a different matter to say that he cannot be required to give an account of the trust property and what he has done or is doing with it.
In my opinion, on elementary principles of justice and on the basic principles on which trusts rest and are supervised by this court, the plaintiffs have a right to know what the trust property is and how it has and is being administered by the trustee."
I also am of the view that the jurisdictional basis to decide whether the Plaintiff is entitled to access the documents sought is not whether the Plaintiff has a proprietary interest in the Trust. One commences with the obligation of the Trustee to administer the Trust in accordance with the terms of the Will. The right to seek disclosure of trust documents "is one aspect of the Court's inherent jurisdiction to supervise, and if necessary to intervene in, the administration of the Trust". The power to order inspection is discretionary in the sense that it involves assessment and judgment. The Court exercises its jurisdiction as a court of equity, exercising its own judgement as to whether disclosure ought to be made at all and, if so, to what extent and on what conditions.
In the present case, the first Defendant should not be entitled to carry on the administration of the Trust in secret, in the sense of without any supervision and without accountability. The presentation of her case was pregnant with the suggestion that she should be allowed to do so. Her failure to disclose, in any affidavit, in the proceedings, matters of significance, which could not be confidential, concerning the Trust, and to not read such an affidavit, thereby exposing herself to cross-examination, is also a relevant consideration. There are circumstances where distributions have been made, but how, and when, each of the recipients was "appointed" as a "Beneficiary" is not disclosed.
In my view, conducting the Trust in this way should not be allowed to continue. Submitting, somewhat disingenuously, bearing in mind the way the case has proceeded, that the only questions for determination are whether the Plaintiff has the standing to bring the application that is brought, not whether the Trust is going to stand or fail on a question of the presence or absence of a beneficiary to enforce it, is not an answer to the issues to be determined.
Whether or not the discretion of the Court should be exercised is said to involve a "balancing of competing interests": Avanes v Marshall, at [14]. It is the Court's role to determine what extent information should be disclosed through this "balancing process": at [15], [26].
In AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Limited, at [85], Bergin CJ in Eq formulated the following principles:
"(a) the object of discretion, including a mere power, may apply to the Court for access, as well as beneficiaries with a 'fixed' interest;
(b) the power to order disclosure is 'one aspect of the court's inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts';
(c) the power to order inspection is discretionary; and,
(d) the Court may have to 'balance' the competing interests of different beneficiaries, the trustees and third parties, with disclosure being limited and safeguards being put in place."
The line of authority suggests that the Court, in exercising its discretion, has an obligation to balance the interests of the applicant and the Trustee.
In Erceg v Erceg, at [56], the Court identified the factors that may be considered in the balancing exercise, stating:
"Drawing these threads together, we consider the matters that need to be evaluated in relation to an application for disclosure of trust documents include the following:
(a) The documents that are sought. Where a number of documents are sought, each document (or class of document) may need to be evaluated separately, given that different considerations may apply to basic documents such as the trust deed and more remote documents such as the settlor's memorandum of wishes.
(b) The context for the request and the objective of the beneficiary in making the request. The case for disclosure will be compelling if meaningful monitoring of the trustee's compliance with the trust deed in the administration of the trust could not otherwise occur. In this regard, it may be relevant that disclosure has been made to other beneficiaries. However, assuming no improper motive on the part of the beneficiary seeking information, the fact that disclosure has previously been made to other beneficiaries will rarely be a decisive factor against disclosure.
(c) The nature of the interests held by the beneficiary seeking access. The degree of proximity of the beneficiary to the trust (or likelihood of the requesting beneficiary or others in the same class of beneficiaries benefitting from the trust) will also be a relevant factor.
(d) Whether there are issues of personal or commercial confidentiality. Recognition should be given to the need to protect confidential matters of a personal or commercial nature. The Court should also take into account any indications in the trust deed itself about the need for confidentiality in relation to commercial dealings or private matters in relation to particular beneficiaries.
(e) Whether there is any practical difficulty in providing the information. If the information sought by the person requesting the information would be difficult or expensive to generate or collate, that may be a factor against requiring its disclosure.
(f) Whether the documents sought disclose the trustee's reasons for decisions made by the trustees. It would not normally be appropriate to require disclosure of the trustees' reasons for particular decisions.
(g) The likely impact on the trustee and the other beneficiaries if disclosure is made. In particular, would disclosure have an adverse impact of the beneficiaries as a whole that would outweigh the benefit of disclosure to the requesting beneficiary? In the case of a family trust, this may include the possibility that disclosure would embitter family feelings and the relationship between the trustees and beneficiaries to the detriment of the beneficiaries as a whole. However, on the other hand, non-disclosure may have a similar effect.
(h) The likely impact on the settlor and third parties if disclosure is made. The impact that disclosure will have on the settlor and/or on third parties will need to be considered.
(i) Whether disclosure can be made while still protecting confidentiality. This may require that copies of documents supplied to a beneficiary are redacted to ensure nondisclosure of confidential information.
(j) Whether safeguards can be imposed on the use of the trust documentation. Examples would include undertakings and inspection by professional advisers only and other safeguards to ensure the documentation is used only for the purpose for which it was disclosed."
The Supreme Court, in that case, was sceptical of applications which are not based on a particular concern about the administration of the Trust, but which instead seek to try to find a basis for challenging the actions of a trustee which the applicant considers not in his, or her, favour.
In Lewis v Tamplin [2018] EWHC 777 (Ch), Matthews J, when considering whether a beneficiary was entitled to document disclosure on the basis of the Court's inherent jurisdiction to supervise the activities of trustees, wrote at [43]:
"It was not suggested in argument that the claimants were in cahoots with the potential developers of the land, and anxious to see confidential advice to the trustees so that it could be passed to such developers (cf Rouse v IOOF Australia Trustees [1989] SASC 181 ), or that they were carrying on some kind of business in competition with the trustees, so that sensitive commercial information might be used for their personal gain (Morris v Morris (1993) 9 WAR 150 ), or that there might have been dealings by other beneficiaries with their shares which the claimants were not entitled to know about (Re Tillott [1892] 1 Ch 82 , 89), or that the beneficiary's conduct gave 'genuine reason for concern as to what he would do with the information if he received it' (Erceg v Erceg, [96], [99]). On the material before me, no special circumstances pointing against giving such assistance have been shown. On the contrary, the evidence is that the claimants want the information for precisely the right reasons, namely, to hold the trustees to account, and thus to vindicate their own beneficial interests, by way of an action for breach of trust if need be."
Having considered the authorities, I am of the view, the general trend of the more recent authorities suggests that the question of disclosure of documents being treated as an issue of enforcement of the trust, thereby ensuring the is trustee's accountability, albeit limited by the type of concerns raised in Erceg v Erceg. The Court appears to be determining the issue based on the trustee's obligation and the power of enforcement.
In the present case, there is no suggestion that the Plaintiff wishes to challenge the actions of the first Defendant that are not in his favour. He has made it clear that he is concerned about the administration of the Trust and that he wants the information "for precisely the right reasons, namely, to hold the trustees to account, and thus to vindicate their own beneficial interests, by way of an action for breach of trust if need be". The documents that are sought seem to corroborate that he has such concerns.
I am satisfied that factors that warrant the disclosure of documents outweigh any competing concerns as raised by the first Defendant, and, accordingly, the Court's discretion should be exercised in favour of the Plaintiff.
His Honour went on to write, at 145:
"What the court is doing, when it intervenes in favour of such a potential beneficiary to require information to be provided, is taking the view that diligent performance of the settlor's intention and the office the trustee has undertaken requires that such a potential beneficiary be provided with certain information. It seems to me that when the equity court requires information concerning a trust to be provided to someone who happens to have a proprietary right in the trust fund, it is proceeding on exactly the same principles. In the case of a person with a proprietary right in some particular trust fund, it may be easier to conclude that carrying out of the settlor's intention and the office the trustee has undertaken would require that person to be provided with particular types of information, but that is a matter about what is involved in performance of that particular trust.
However, even in relation to a person with a vested right of property in the trust fund, the circumstances of the particular trust might make clear that the trustee is obliged not to provide information, even to someone with a vested interest. That was exactly what was held to be the case in Hartigan Nominees v Rydge. If a parent, in setting up a family trust, took the view that it would sap a child's initiative if the child knew it was due to come into a sizeable fortune, and thus forbade the trustee to disclose anything about the trust to the child until the child reached a particular age, that child would have no right to information about the trust, notwithstanding that it had a vested right of property, until it reached that age.
The principle that the manner in which trustees are required to account depends on the constitutive documents of the trust is well established: Attorney-General v Earl of Stamford. More recently, Tierney v King shows how the provisions of the deed, even in relation to a superannuation plan, could result in the intention of the settlor being that only limited information concerning the trust be provided to members, notwithstanding that members of a superannuation plan would ordinarily have vested rights of property."
Yet, the Plaintiff, as a discretionary object, is not entitled to see everything. For example, he has not sought, nor would he be entitled to see, documents private to the first Defendant which may evidence the reasons why she has made her decisions.
As requested, I shall allow the parties to consider the documents that should be provided, failing agreement in respect of which I shall specify the documents.
Until Schmidt v Rosewood Trust Ltd, the accepted view had been that the ability to invoke the court's supervision depended on the nature of the interest the applicant enjoyed. A differentiation between a fixed and discretionary beneficiary, on the one hand, and the object of powers of appointment on the other, was made. The former enjoyed rights enabling him, her or it, to seek an accounting, whilst the latter did not, unless those rights were specifically conferred by the trust instrument.
However, as stated previously, at [51], the following passage appeared in Schmidt v Rosewood Trust Ltd:
"Their Lordships considered the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the court's inherent jurisdiction to supervise, and if necessary to intervene in the administration of trusts. The right to seek the court's intervention does not depend on entitlement to a fixed and transmissible beneficial interest. The object of a discretion (including a mere power) may also be entitled to protection from a court of equity, although the circumstances in which you may seek protection, and the nature of protection you may expect to obtain, will depend on the court's discretion …"
It is to be noted that some accounts have already been provided to the Plaintiff. In addition, the first Defendant stated, in relation to the question of UCPR rule 54, that "the Trustee indicated that if the Court finds that the Plaintiff has such standing, she will provide an accounting and other information to which a beneficiary is ordinarily entitled".
I shall leave it to the parties, at least initially, to work out whether the documents to be provided will include the accounts of the Trust.
In Viljoen v Hayes [2017] NSWSC 801, at [16], Parker J described the ambit of UCPR rule 54, which description is also instructive:
"The power under UCPR r 54.3(3) is wide. But it is confined to the proper administration of the trust or estate in question: Gonzales v Claridades (2003) 58 NSWLR 211 at 217-8. The plaintiff must therefore show that the production of the documents in question is an appropriate step to take in the interests of the proper administration of the estate."
The Plaintiff has sought to rely on UCPR rule 54.3 as an independent source of power, either in the event that the Court found that the provision of the Trust documents required him to have a proprietary interest, or, alternatively, in the event that the Court had the power to grant access to the Trust documents through its inherent jurisdiction, but did not exercise its discretion in granting these documents to him. Whilst accepting that he must have standing, it was submitted that he had the necessary standing to enable him to rely on the rule.
I consider the power conferred by UCPR rule 54.3 is wide enough to be capable of compelling the provision of documents sought by the first Plaintiff in the Amended Summons.
As will be remembered, the Plaintiff has sought a schedule of Trust assets showing the nature, documentation, status and value of all assets of the trust estate, as well as certain profit and loss balance sheets for the Trust, and such other accounting records as are necessary to understand the financial position of the Trust and its asset. Such documents would, at the very least, fall within the scope of requiring the Trustee to "verify accounts" (UCPR rule 54.3(3)(b)), but also could fall within the Court's power to order a Trustee "to do … any act" (UCPR rule 54.3(3)(d).
The Plaintiff also sought each nomination, or written record of nomination, as a person or entity as a Beneficiary of the trust as the same is defined in the Trust, which falls within the scope of "relief which could be granted in administration proceedings": UCPR rule 54.3(1).
In respect to the additional order sought by the Plaintiff to verify, file and pass accounts relating to the estate, I am also satisfied that this order is within the scope of UCPR r 54.3(3).
The relevant question is whether an order made pursuant to the rule would be confined to the proper administration of the trust or estate in question. Put another way, the question is whether the proceedings brought by the Plaintiff concerned the proper administration of the Trust. If answered in the affirmative, the Plaintiff has met the question of standing required for relief in respect of UCPR rule 54.3.
In my opinion, the Plaintiff has established a proper basis for the relief he has sought from the Court. Interpreting the rule broadly and flexibly, I am satisfied that a person such as the Plaintiff, who is a "person" who could be appointed as a "Beneficiary", has a sufficient interest in ensuring the proper administration of the Trust to provide the necessary standing to seek relief and an order requiring the first Defendant (the trustee) to provide documents.
I also consider, as a matter of practicality, the documents sought are not in nature onerous to produce. (Such documents, being necessary for the proper administration of the Trust, should already be in existence). Finally, the production of the specified documents does not unduly interfere with the rights of third parties.
The Court stands the matter over to a date to be appointed to make final orders and to determine any outstanding issues, including the issue of how the costs of the proceedings should be borne.
The next day, the Court was informed, from the bar Table, by senior Counsel, that the first Defendant did not wish to re-open her case: T71.29 - T71.30; T75.05 - T75.12.
Senior counsel for the first Defendant argued, T62.08 - T62.14, that:
"there is not an issue, because, if the Plaintiff is not found to have the relevant standing to make the complaint, and if the Trust is not a charitable trust, that's the end of the proceeding because we would be inviting your Honour to say it is a private discretionary trust and that is the end of it. To go the next step and say there has to be somebody available to enforce it, when, if your Honour makes these findings, both cases are, in effect, dismissed, is to go beyond what this case is concerned with".
Despite making the above submission, senior Counsel for the first Defendant accepted that if the first Defendant did not have a legal justification for not providing documents, then "apart from wanting an opportunity to consider what has to be supplied, she will supply it": T11.20 - T11.36. She would want an opportunity to provide, "or enter into appropriate negotiations with the Plaintiff and others, to deal with that": T17.08 - T17.12; T26.06 - T26.11.
In Russo v Aiello (2003) 215 CLR 643; [2003] HCA 53, Gleeson CJ wrote, at [11]:
"Lord Mansfield said that 'all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted'. This is a fundamental precept of the adversarial system of justice, and is treated as axiomatic in the day to day operations of courts."
In Newell; Muriniti v De Costi [2018] NSWCA 49, Beazley P (with whom Gleeson and White JJA agreed), wrote, at [78]:
"The rule in Jones v Dunkel applies where there is an unexplained failure of a party to give evidence or to call a witness. Such failure may have either or both of the following consequences in the fact finding process. It 'may lead rationally to an inference that the evidence would not help that party's case': Jones v Dunkel at 321; Holloway v McFeeters (1956) 94 CLR 470; [1956] HCA 25 at 480-481. It also enables the court more readily to draw an affirmative inference in support of the opposing party's case: Commonwealth of Australia v McLean (unreported, NSW Court of Appeal, 31 December 1996); Manly Council v Byrnes [2004] NSWCA 123 at [51]; Carolyn Sappideen and Prue Vines, Fleming's Law of Torts (10th ed, 2011, Lawbook Co) at 13.50."
In Re Fairbairn [1967] VR 633, at 639, Gillard J wrote:
"If the trustees do not choose to put before the Court any information about the documents in their possession, or give any evidence of circumstances to justify their non-production, the Court may be more bold and would more readily draw inferences in favour of the plaintiff as to the contents of the documents than it might otherwise do. From the correspondence which passed between the trustees and the solicitors, it can be inferred that there are some relevant documents. But what they are and what they contain and what justification there may be for their non-production for inspection, the trustees have either failed or refused to inform the Court. These are matters peculiarly within the knowledge of the trustees. I, therefore, find that on the balance of probabilities they do contain information about the trust which the plaintiff is entitled to know."
Whilst senior Counsel for the first Defendant did attempt to explain the reasons for not providing documents, he did not provide any explanation for her not giving evidence.
Whether to draw any inference, and also, if there is a discretion to be exercised by the Court in relation to the Plaintiff's application for disclosure of documents relating to the Trust, the approach of the first Defendant in failing to give any evidence, and the explanation for that approach, must be evaluated.