Application by Gainer Associates Pty Ltd

[2024] NSWSC 1437

Supreme Court

New South Wales

Medium Neutral Citation:

Application by Gainer Associates Pty Ltd [2024] NSWSC 1437

Hearing dates:

11 November 2024

Date of orders:

11 November 2024

Decision date:

12 November 2024

Jurisdiction:

Equity

Before:

Kunc J

Decision:

Judicial advice given that trustee justified in paying trust assets to estate of the late Gail Thelen

Catchwords:

EQUITY — Trusts and trustees — Judicial advice — Lost trust deed — Express trust fails for uncertainty — Assets held subject to resulting trust

Legislation Cited:

Trustee Act 1925 (NSW) s 63

Cases Cited:

Application of DEK Technologies Pty Ltd as trustee for DEK Technologies Unit Trust & Others [2023] NSWSC 544

Clarke v Hilton (1866) LR 2 Eq 810

In the application of Brailey Holdings Pty Ltd (ACN 001190441) [2018] NSWSC 1493

Vanta Pty Ltd v Mantovani (2023) 72 VR 19; [2023] VSCA 53

Category:

Principal judgment

Parties:

Gainer Associates Pty Ltd (Plaintiff)

Representation:

Counsel: A Cheshire SC (Plaintiff)
Solicitors: Carroll & O’Dea (Plaintiff)

File Number(s):

2024/362510

JUDGMENT

Summary

1. This is an application for judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW) (TA) by the plaintiff trustee Gainer Associates Pty Ltd.

2. The following facts are not in doubt:

1. Gainer is the trustee of the Werner Thelen Family Trust;

2. The late Werner Thelen and his late wife Gail Thelen were beneficiaries of the Trust (and to whom I shall refer without disrespect by their given names);

3. Gail survived Werner and was the sole beneficiary of Werner’s estate;

4. The trust deed constituting the Trust has been lost.

3. Gainer brings this application because while the TA and the general law may supply some terms of the Trust, there is no evidence to enable Gainer or the Court to be certain about who, other than Werner and Gail, are beneficiaries of the Trust, when the Court is satisfied the trust deed must have specified other beneficiaries. In these circumstances, the Court concluded that the Trust had failed for uncertainty and gave the judicial advice set out in [30] below about how Gainer would be justified in dealing with the Trust’s assets. These are the reasons for that advice.

4. The Court acknowledges the considerable assistance it has received from the written opinion of Mr A Cheshire of Senior Counsel, which was admitted into evidence, and from his submissions to the Court on behalf of Gainer.

Facts

5. Gainer was registered on 15 April 1982, its memorandum and articles of association having been executed on 10 March 1982. Gail and Werner were Gainer’s sole directors and shareholders.

6. The best evidence available about the formalities of the Trust appears from documents creating a fixed and floating charge in favour of the Bank of Western Australia by Gainer and executed by Werner and Gail on 23 April 2001. The charge is expressed to be given by Gainer “in its own capacity and as trustee of the Werner Thelen Family Trust” and includes these particulars:

“Date of deed creating trust (including variations): 1 April 1982

Parties to deed creating trust: Gainer Pty Ltd and Narelle Margaret Mayes.”

7. Ms Mayes has affirmed an affidavit in these proceedings in which she deposed:

2   I worked as Werner's secretary in the late 1970s and early 1980s at American Express and Visa.

3    I have not had any contact with Werner or his family since that time.

4   Ms Brophy explained that she acted for Gainer Associates Pty Ltd in a matter concerned with the distribution of assets from the Werner Thelen Family Trust.

5   To my knowledge, I was not a party to any trust deed relating to the Werner Thelen Family Trust or to any trust relating to Werner or his family. I was not involved in the setting up of any such trust; I was not the settlor of any such trust; and I did not provide money or any other asset for setting up any such trust.

6   Indeed, I am not aware of any trust or any trust deed relating to the Werner Thelen Family Trust or relating to Werner or his family.

7   I did witness Werner's signature from time to time on various documents, although I have no recollection of witnessing his signature on any trust deed.

8. On 15 May 2001, Gainer (as trustee of the Trust) purchased a service station at Beenleigh in Queensland. Based on the available records, the only other asset of the Trust has been cash in a bank account. The most recent financial statements for the Trust (as at 30 June 2024) record a net value of the Trust of $2.8 million.

9. The charge was subsequently released by satisfaction of the debt on 29 September 2006.

10. The evidence included documents obtained from the Australian Taxation Office for the period 1 July 2008 to 30 June 2021 which refer to the Trust as “discretionary trust (investment activities)”, and record that Gainer was the trustee of the Trust and that distributions were made to Werner and Gail. There is no evidence to suggest that anyone else received distributions from the Trust.

11. Gail and Werner were married. They had no children. Werner died on 10 September 2014. Gail was the sole beneficiary under Werner’s last will.

12. Gail died on 27 April 2021. NSW Trustee and Guardian (TAG) has been appointed interim administrator of Gail’s estate.

13. At the time of her death, Gail was the sole director and shareholder of Gainer, which is also the trustee of the Gainer Associates Superannuation Fund.

14. On 14 June 2022, TAG appointed Mr Timothy Heesh, an independent insolvency practitioner, as the director of Gainer.

15. Mr Heesh’s affidavits, read on the present application, attest to the numerous searches and inquiries which have been made (and which the Court finds were more than adequate) to find out any further information about the Trust including, most importantly, the location of the trust deed or its terms. Those searches have been to no avail.

Consideration

16. Applications for judicial advice by trustees in relation to lost trust deeds are not unusual. One example is my decision In the application of Brailey Holdings Pty Ltd (ACN 001190441) [2018] NSWSC 1493. In that case, advice was able to be given concerning the terms of a lost trust deed where there was evidence that the lost deed had been executed at the same time and in the same family context as another trust deed, the terms of which were in evidence. However, unlike that case (and the authorities to which I refer in that decision), there is no evidence at all in this case about the terms of the trust deed including, and most importantly for present purposes, how the class of discretionary beneficiaries of the Trust is described.

17. For the reasons which follow, the Court accepts these submissions advanced by Mr Cheshire SC:

1. Because the trust deed cannot be located and there is no other evidence as to its terms, the class cannot be identified and the Trust therefore fails for want of certainty of object;

2. On the failure of the Trust, its assets are subject to a resulting trust in favour of Werner; and

3. Because Gail is Werner’s sole beneficiary, the assets of the Trust can be paid directly into Gail’s estate.

18. Before proceeding further, it is necessary to note the decision of the Court of Appeal of the Supreme Court of Victoria in Vanta Pty Ltd v Mantovani (2023) 72 VR 19; [2023] VSCA 53. As I discussed in Brailey, for cases concerning missing trust deeds the law in this State has been for many years that “clear and convincing proof” of the terms of the deed was required. Vanta decided that “clear and convincing proof” was not required and that the burden upon the party seeking to prove the contents of a lost trust deed was simply that imposed by s 140 of the Evidence Act 2008 (Vic) (the NSW equivalent giving effect to the uniform evidence law being the Evidence Act 1995 (NSW) (EA)).

19. Vanta was applied by Henry J in Application of DEK Technologies Pty Ltd as trustee for DEK Technologies Unit Trust & Others [2023] NSWSC 544. Because, unlike Vanta, in this case there is no evidence about the relevant terms of the Trust, it is not necessary for me to consider Vanta or DEK. Without disrespect either to the Court of Appeal of the Supreme Court of Victoria or Henry J, I expressly do not do so.

20. The financial records in evidence (see [10] above) disclose, as might be expected, that distributions were made from the Trust to Werner and Gail. On the basis of that evidence, the Court finds they were beneficiaries of the Trust. However, the Court also has no difficulty in accepting as a matter of common knowledge (EA, s 144) that a trust deed for a family trust, by reason of the descriptor “family”, will inevitably contain a class of beneficiaries wider than the persons who, without disrespect, might be referred to as the “husband and wife” or main beneficiaries.

21. It is also a matter of common knowledge that the breadth of the class of beneficiaries in trust deeds for family trusts will vary from trust deed to trust deed. The evidence in this case establishes that there are living people who might be potential beneficiaries depending on how widely the class was defined, including: a person with whom Gail had a de facto relationship after Werner’s death; Werner’s sister; Gail’s brother and sister-in-law; Gail’s nieces and others. There is in this case, however, no evidence upon which the Court can conclude which of those relatives falls within the class.

22. It is a Hornbook proposition that an express trust can fail for uncertainty. It is equally basic trust law that a trustee has an obligation to familiarise itself with the terms of its trust and administer the trust in accordance with those terms. Where the trustee is no longer able to ascertain any of the terms of the trust from the trust deed, or by reference to other evidence, then it is an equally unremarkable conclusion that the trust can fail because of uncertainty. The Court finds that is what has occurred in relation to the Trust.

23. It is also clear from the evidence, including evidence that the Trust was administered as such by Gainer as a trustee for a number of years in accordance with a trust deed that once existed, that Gainer was never intended to have a beneficial interest in the assets of the Trust. As Sir John Stuart V-C said in Clarke v Hilton (1866) LR 2 Eq 810 at 815 in relation to failed trusts, “Where, however, an estate is given to a man in the character of a trustee, without anything to indicate that a beneficial interest is intended, then there is a resulting trust”.

24. The Court accepts Mr Cheshire SC’s submission and finds that in this case there is a resulting trust in favour of Werner, such that Gainer now holds the assets of the Trust on a resulting trust in favour of Werner’s estate. This conclusion is reached by two alternative analyses. Because the Court is satisfied that on no view would Ms Mayes have been intended to have a beneficial interest in the Trust’s assets (see [28] below), it is sufficient for the Court to find, as it does, that either analysis yields the same result and the evidence does not support any other possibility.

25. The first analysis is that Werner was the settlor of the Trust and, therefore, the person to whom the assets of the Trust would revert through the mechanism of a resulting trust upon the failure of the Trust. This is consistent with Ms Mayes’ evidence that she was not the settlor of the Trust. However, it is arguably inconsistent with the details recorded in the charge (see [6] above). Mr Cheshire SC submitted that, given Ms Mayes’ evidence, the Court could comfortably conclude that what was recorded in the charge was a mistake, most likely someone recording Ms Mayes as a party when she was no more than a witness.

26. The alternative analysis is that even if Ms Mayes was the settlor of the Trust, because her position was secretarial the Court should conclude that Werner provided the settled property and that he did not intend to divest himself of any rights he had in that property in the Trust in favour of Ms Mayes.

27. Either of these analyses would result in Werner (or now his estate) being the beneficiary of the resulting trust which has arisen on failure of the Trust. That is sufficient to determine the present question but to the extent it is necessary, the Court finds in accordance with the alternative analysis.

28. The Court finds, based on Ms Mayes’ evidence about the work she did for Werner, that insofar as she may have contributed property to the Trust, it would have been provided by Werner and that he (and she) would not have intended Ms Mayes to have had any beneficial interest in the Trust’s assets. Without any criticism of Ms Mayes, the Court prefers the evidence in the charge over Ms Mayes’ recollection of many years before, and finds that Ms Mayes was the settlor identified in the trust deed. However, the Court also finds that she was the settlor in name only, with any initial settled property provided to her by Werner (for example, the generally nominal amount paid to the trustee as the initial corpus of the trust). This finding is based on the Court’s experience with family trust deeds and common knowledge to the effect that it is not unusual for the named settlor to be someone such as the family solicitor or accountant, or a secretary or clerk in the employ of such a person. Whatever their position, there could be no doubt that they were never intended to have any beneficial interest in the relevant trust.

Conclusion

29. The effect of the Court’s findings is the assets of the Trust are held by Gainer on resulting trust for Werner’s estate. However, Werner’s estate has otherwise been fully administered and its executor (Mr John Lakos, Werner’s solicitor) has since died. Given that circumstance, and the fact that Gail was the sole beneficiary of Werner’s estate, the Court determines that Gainer is justified in paying its proper expenses out of the Trust assets and then paying the balance directly to Gail’s estate by its interim administrator, TAG.

30. For these reasons, the Court made these orders at the conclusion of the hearing:

The Court:

1   Orders that the plaintiff is justified in proceeding on the basis that:

a   the Werner Thelen Family Trust fails for uncertainty;

b   the assets held by the plaintiff as trustee for the Werner Thelen Family Trust form part of the estate of the late Werner Thelen and should be paid to the administrator of the estate of the late Gail Margaret Thelen who was the sole beneficiary of the estate of the late Werner Thelen.

2   Orders that the plaintiff would be justified in paying itself for its costs, fees and disbursements of acting as trustee of the Werner Thelen Family Trust from those assets.

3   Orders that the plaintiff’s costs be paid on an indemnity basis from those assets.

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Decision last updated: 12 November 2024