Ainsworth v Davern
[2018] VSC 80
•23 February 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2017 05184
IN THE MATTER of the DAVERN FAMILY SUPER FUND
-and-
IN THE MATTER of an application pursuant to sections 48 and 51 of the Trustee Act 1958
-and-
IN THE MATTER of an application by ELIZABETH AINSWORTH pursuant to rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015
| ELIZABETH AINSWORTH | Plaintiff |
| v | |
| PAMELA JOY DAVERN | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 February 2018 |
DATE OF JUDGMENT: | 23 February 2018 |
CASE MAY BE CITED AS: | Ainsworth v Davern |
MEDIUM NEUTRAL CITATION: | [2018] VSC 80 |
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TRUSTEES — Application to remove trustee — Conflict of interest and duty —Trustee removed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Mah | Dwyer & Co Legal |
| For the Defendant | Ms S Whiteman | Farrar Gesini Dunn |
HER HONOUR:
Introduction
This proceeding involves two primary questions: which of two trust deeds governs a superannuation fund and who should act as the trustees of the fund. On 23 February 2018, the Court determined who should now act as trustees of the fund and made orders removing the defendant as trustee of the fund and appointed two independent trustees to administer the fund. The defendant required the Court to provide written reasons for the decision. The following are the reasons for the decision.
Background
Kevin William Davern died on 6 April 2016 (‘the deceased’), leaving a will dated 14 December 2007. The deceased is survived by the plaintiff, who was his domestic partner, and his three children from a previous relationship, one of whom is the defendant.
Probate of the deceased’s will was granted to his executor, Mr Matthew McCrory, on 16 August 2016. The deceased’s gross estate is approximately $214,000. By his will, the deceased bequeathed a legacy of $50,000 to his executor and then left the residue of his estate to the plaintiff as to one half and the remaining half to his three children.
By a trust deed dated 17 September 2003 (‘the 2003 deed’), the deceased established the Davern Superannuation Fund. The 2003 deed named the deceased and the defendant as trustees. The deceased was the sole member of the fund.
On 20 June 2008, the deceased, in his capacity as the trustee of the fund, adopted a trust deed dated 20 June 2008 (‘the 2008 deed’). The 2008 deed changed the name of the fund to the Davern Family Super Fund and named the deceased as the sole trustee of the fund.
On 18 December 2014, the deceased signed a binding death benefit nomination form that gave the whole of the deceased’s death benefits to the plaintiff.
The plaintiff has limited savings, receives the pension and has a mortgage of $256,801. In November 2016, the plaintiff requested the defendant that she be paid a certain amount from the fund on a monthly basis. In accordance with the request, the plaintiff received three payments of $4,000 between November 2016 and January 2017. Since January 2017, the plaintiff has not received any distributions or benefits from the fund. She was informed by the deceased’s son that he and his siblings were unhappy with the amounts they received from the deceased’s estate and they wanted $100,000 each.
On 24 March 2017, the defendant’s solicitors raised the issue that the fund did not comply with the Superannuation Industry (Supervision) Act 1993 (Cth) (‘the Superannuation Act’) in that it had only one trustee. On 4 April 2017, the defendant’s solicitors raised the further issue that the 2008 deed had not been validly adopted and that the death benefit nomination may be of no effect.
On 3 May 2017, the defendant’s solicitors informed the plaintiff’s solicitors that she intended to seek judicial advice. A draft originating motion and draft affidavit was forwarded to the plaintiff’s solicitors on 15 September 2017. On 22 September 2017, the plaintiff’s solicitors responded to the proposed application explaining the reasons for their view that it was ‘fundamentally flawed’ and that the plaintiff would commence a separate application for the appointment of new trustee to the fund.
Plaintiff’s application
By originating motion filed 20 December 2017, the plaintiff seeks orders declaring that the fund validly adopted the 2008 deed and appointed the deceased as its sole trustee on 20 June 2008, alternatively, an order pursuant to s 48(1) of the Trustee Act 1958 that the defendant be removed as a trustee of the Fund and an order appointing proper persons as trustees of the fund.
In respect of the removal application, the plaintiff proposed that new trustees should be appointed to administer the fund and proposed the executor of the deceased’s estate and Ms Susan Pelka as suitable candidates based on their qualifications and experience in acting as trustees. Both candidates stated they would not charge remuneration for their services. The executor of the estate was not prepared to accept the appointment if the other trustee was a beneficiary of the deceased’s estate.
The defendant resisted her removal and the appointment of two substitute trustees to the fund on the following grounds:
(a) the issue was premature pending the defendant seeking judicial advice that she is justified in defending the removal application and whether in doing so she may have recourse to the assets of the fund;
(b) there is no utility in appointing new trustees as her two siblings do not wish the defendant to be removed;
(c) the defendant and her siblings do not want any trustees who charge remuneration for their services; and
(d) retaining the defendant as trustee does not present any danger to the fund.
Before the plaintiff issued this proceeding in December 2017, the defendant had informed the plaintiff she intended to seek judicial advice on issues concerning the fund. As at December 2017, the defendant had not made any such application. After the plaintiff issued this proceeding, the defendant filed a summons on 15 February 2018 that raised a number of procedural issues and the further conduct of certain matters concerning the two deeds. These matters included that the defendant be named as defendant in the proceeding in her capacity as trustee of the fund instead of personally, that the application proceed by way of pleadings, that the defendant be granted leave to rely on the two affidavits filed in support of the plaintiff’s application for the purpose of the defendant’s application for advice, pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’), and that the plaintiff’s application be stayed so that the defendant could seek judicial advice as to whether she is justified in defending the plaintiff’s proceeding and in commencing a cross claim.
The defendant has apparently now issued an originating motion seeking judicial advice listed for 13 April 2018. The reasons given by the defendant for not doing so earlier were the plaintiff’s failures to clarify her allegation that the 2008 deed governed the fund and to respond to the defendant’s requests for particulars.
Rule 45.05 provides that a proceeding may be commenced by originating motion where it is unlikely that there will be any substantial factual dispute. Where the defendant seeks to rely on the plaintiff’s affidavits in seeking the direction of the Court, it is unlikely that there will be any substantial dispute on the facts and it would be inappropriate to proceed by way of pleadings or discovery.
A trustee’s application to seek judicial advice and directions from the Court concerning the management of a trust is not treated as a trial of the issues to be agitated in the principal proceeding. Any application seeking advice or directions as to the removal of a trustee would likely be declined as it would resemble a trial of the removal application.
The defendant’s concern about any new trustees charging remuneration for their services is resolved by the fact that the proposed new trustees will not charge any remuneration. Equally, just as the defendant contends that she does not present any danger to the fund, neither would the fund be in any danger under new trustees.
The defendant’s siblings do not wish her to be removed as trustee, however, it is axiomatic that the children’s interests conflict with the plaintiff’s interests. The defendant stopped the plaintiff’s recurring payment from the fund, and the plaintiff was told that the deceased’s children wanted more money as they were unhappy with the amounts they received from the deceased’s estate. The deceased’s intention was that the plaintiff should receive benefits from the fund and she falls under the definition of ‘dependant’ in both deeds. She has limited financial means and should be considered by the trustees of the fund to receive the death benefits. The defendant’s failure to consider the plaintiff’s position since the payments stopped in January 2017 is not explained other than by these circumstances. The legal principles concerning the removal of a trustee are well established.[1] Where there is a conflict between interest and duty, it is in the interests of all that the fund be administered by independent trustees. The appointment of independent trustees will provide an independent view untainted by conflict of interest. The removal of the defendant as trustee does not preclude her from remaining as a defendant and defending her position in relation to the fund.
[1]Wales v Wales [2013] VSC 569 (24 October 2013) [37]–[43] citing Letterstedt v Broers (1884) 9 App Cas 371; Miller v Cameron (1936) 54 CLR 572, Monty Financial Services v Delmo [1996] 1 VR 65, Manocchio v Wilson [2012] VSC 76 (8 March 2012).
It also removes the problem of the fund not being compliant with the governing deed, irrespective of whether that is the 2003 deed or the 2008 deed, and the Superannuation Act. Both the 2003 deed and the 2008 deed require the appointment of two trustees.[2] The relevant legislation for a self-managed superannuation fund also requires a fund to have two trustees.[3]
[2]The 2003 deed, cl 1.3(1); the 2008 deed, cl 14.
[3]Superannuation Industry (Supervision) Act 1993 (Cth) s 17A.
On the death of the deceased, his office as trustee of the fund became vacant.[4] The deceased’s executor does not automatically become a trustee of the fund upon the deceased’s death. Neither the 2003 deed nor the 2008 deed provides a mechanism by which a new trustee can be automatically appointed. Currently, the fund has one trustee, being the defendant.
[4]The 2003 deed, cl 1.3(3)(b); the 2008 deed, cl 15(iv).
The fund has been non-compliant for around 16 months, with the grace period of six months after the death of a person in which the necessary steps can be taken to appoint a new trustee in his or her place under the Superannuation Act having expired on 7 October 2016.
In the event that new trustees were appointed to the fund, the defendant proposed that the new trustees be appointed on a temporary basis until the conclusion of the proceeding or for their temporary appointment to commence after the judicial advice proceeding, with the temporary trustees not having powers to appoint or distribute any of the fund’s assets. No authority was relied on to support such a proposal and it does not accord with principle.
Conclusions
Both the executor and Ms Pelke are suitably qualified and experienced to be appointed as trustees, they have no interest in the fund and will not charge remuneration for their services. Their appointment will ensure that the fund is compliant and the assets of the fund are preserved pending the determination of which trust deed is the governing trust deed of the fund.
Orders
Accordingly, the Court ordered, inter alia, the defendant be removed as the trustee of the Davern Family Super Fund, and Matthew McCrory and Susan Pelka be appointed as the trustees of the Fund in substitution for the defendant.
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