Application by Jayne Elizabeth Beaumont

[2018] NSWSC 1705

Supreme Court

New South Wales

Medium Neutral Citation:	Application by Jayne Elizabeth Beaumont [2018] NSWSC 1705
Hearing dates:	25, 26 October 2018
Decision date:	09 November 2018
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	The advice and direction sought by the Plaintiff pursuant to s 38 of the Powers of Attorney Act 2003 (NSW) is given. The undertakings to the Court and Mrs Margaret Peel given by the Plaintiff and Mr David Peel are noted.
Catchwords:	AGENCY – powers of attorney – application for advice and direction under s 38 of the Powers of Attorney Act 2003 (NSW) – where attorneys appointed by enduring power of attorney have personal interest in any decision made in respect of the exercise of options by principal – where evidence supports the attorneys’ view that exercise of options is not in the principal’s best interests – whether the Court will give the advice and direction sought.
Legislation Cited:	- Civil Procedure Act 2005 (NSW) s 76 - Powers of Attorney Act 2003 (NSW) 9, 11, 12, 38
Cases Cited:	- Taheri v Vitek (2014) 87 NSWLR 403
Category:	Principal judgment
Parties:	Jayne Elizabeth Beaumont (Plaintiff)
Representation:	Counsel: R Dick SC/J Buncle   Solicitors: Maddocks Lawyers
File Number(s):	2018/324655

Judgment

Application heard on 25 October 2018

1. By Summons filed on 23 October 2018, the Plaintiff, Mrs Jayne Beaumont, seeks advice and directions pursuant to s 38 of the Powers of Attorney Act 2003 (NSW) in her role as attorney for her mother, Mrs Margaret Peel (“Mrs Peel”). That section relevantly permits an attorney under a power of attorney to seek the Court’s advice or direction as to a matter relating to the exercise of any function by the attorney under that power of attorney, and authorises the Court to give such advice or direction as it considers appropriate. The effect of such advice or direction is that no proceedings lie against the attorney “for or on account of any act, matter or thing done or omitted to be done by the attorney in good faith and in accordance with any approval, advice or direction given under this section”.

2. The application was heard ex parte on 25 October 2018 in circumstances of urgency and I gave advice and directions on that date in the form then sought by Mrs Beaumont. I indicated that I would deliver my reasons for doing so thereafter and these are my reasons for giving that advice and making those directions. I have drawn on the helpful written submissions of Mr Dick, who appeared with Ms Buncle for Mrs Beaumont, in these reasons. I also address, at the end of these reasons, additional matters which arose when the matter was then relisted before me on 26 October 2018.

Matters on which Mrs Beaumont relied

3. In support of the application, Mrs Beaumont relied on her affidavit dated 23 October 2018 and exhibit JEB-1 to that affidavit; a statement of facts dated 23 October 2018; and a letter dated 24 October 2018 from Mr David Rohr, a tutor appointed to represent Mrs Peel’s interests, to which I refer below. Mr Rohr did not seek to be heard at the hearing, although he was present in Court, and he consented to Mrs Beaumont making the application and did not oppose her proposed course of action on the basis set out in his letter. Mrs Beaumont also relied on opinion of a Counsel with particular expertise in tax issues, to which I refer below.

4. By way of background, Mrs Peel and Len Peel Holdings Pty Ltd (“LPH”) are parties to a Share Option Agreement dated 14 August 1996 (“Option Agreement”). Under the Option Agreement, Mrs Peel was granted options which, if exercised, would bring about the allotment of ten "E" 5% redeemable preference shares in LPH to her. The options must be exercised by 27 October 2018 or they lapse and other steps must be taken (Beaumont [23]–[24]). That matter explains the urgency of the application. If Mrs Peel, by her attorneys Mrs Beaumont and Mr David Peel (“Mr Peel”), exercised the options, she would obtain equal shareholding rights, including on the winding up LPH, to those of Mr Peel and Mrs Beaumont, who are each presently 50% shareholders in LPH (Beaumont [8], [24]).

5. Mrs Beaumont, Mr Peel and Mrs Peel are also parties to an agreement signed on 14 August 1996 (“1996 Agreement”) (Beaumont [25]). Clause 3.1 of the 1996 Agreement provides that, if the options are not exercised by Mrs Peel, and unless Mrs Peel otherwise directs, Mrs Beaumont and Mr Peel must procure the winding up of LPH by no later than 27 October 2019 and make such gifts to each other and to Mrs Peel so that each of them receive, after payment of any capital gains tax, an amount equal to one third of the net assets of LPH (Beaumont [26]). Mrs Peel no longer has the capacity to give such a direction herself (Beaumont [21]) and any such direction would need to be made by Mrs Beaumont and Mr Peel acting as Mrs Peel's attorneys if, in that capacity, they did not cause her to exercise the options.

6. An explanatory statement accompanied the Option Agreement and the 1996 Agreement and indicates that its purpose was to assist the directors of LPH, then Mrs Beaumont and Mr Peel, in understanding the arrangements under the Option Agreement and the 1996 Agreement (Ex JEB-1, 827, cl 1.1). That explanatory statement identifies the purpose of the arrangements under the Option Agreement and the 1996 Agreement as to ensure that Mrs Peel had certainty as to her financial position after the death of her late husband, Mr Leonard Peel, by receiving one third of the value of the Peel Group (Ex JEB-1, 827, cl 1.4).

7. Mrs Beaumont was also appointed joint attorney for Mrs Peel with her brother, Mr Peel, pursuant to an enduring power of attorney dated 5 November 2010 (“POA”). This application was brought by Mrs Beaumont with Mr Peel's consent. Mrs Peel currently lacks capacity and the POA has taken effect. Clause 1 of the POA states that Mrs Beaumont and Mr Peel, as Mrs Peel's attorneys, may do on her behalf anything she may authorise any attorney to do (Ex JEB-1, 814–819, cl 1). Mr Dick also points out that the Powers of Attorney Act applies to the POA as it is an instrument that was executed after the commencement of that Act on 2 December 2008. Section 9(1) of the Powers of Attorney Act confers authority on attorneys, subject to the terms of the Act, to do on behalf of the principal anything the principal may lawfully authorise them to do. The POA provides that Mrs Beaumont and Mr Peel are authorised to give reasonable gifts, as provided in s 11 of the Powers of Attorney Act (Ex JEB-1, 814–819, cl 5). Mr Dick also recognises that Mrs Beaumont and Mr Peel owe fiduciary duties in their role as attorneys for Mrs Peel, and must avoid putting themselves in a position of conflict in relation to Mrs Peel, or taking any unauthorised benefits as attorneys: Taheri v Vitek (2014) 87 NSWLR 403 at 427. Mr Dick also points to s 12 of the Powers of Attorney Act which provides that a power of attorney does not generally authorise an attorney to act in a manner that would result in the attorney being conferred a benefit, unless the instrument expressly authorises the conferral of that benefit.

8. Disputes subsequently arose between Mrs Beaumont and Mr Peel as to the conduct of the affairs of the Peel Group and, in May 2017, Mrs Beaumont commenced proceedings in relation to Mr Peel and Mrs Beaumont's interests as shareholders and directors of the Peel Group. Those proceedings were settled on 1 February 2018 by consent (“February Orders”) (Beaumont [12], Ex JEB-1, 791–795). Order 12 of the February Orders provides for all of the assets of the Peel Group to be sold and the net proceeds of sale be distributed to LPH as soon as reasonably practicable (Beaumont [13]). In the February Orders, the Court also notes an agreement between the parties (“February Agreement”) which, inter alia, provides for steps to be taken to maintain and continue the good care of Mrs Peel and her quiet enjoyment of her home at a specified property that was her family home; for a trust to be established for Mrs Peel's benefit to hold funds of $10 million to be used for her comfort and care; and for LPH, Mrs Beaumont and Mr Peel jointly and severally to indemnify Mrs Peel against any claims made against her in relation to, amongst other things, any debt or claim by the Australian Taxation Office. That indemnity may plainly be relevant if, for example, a disposal of assets of the Peel Group gives rise to tax liabilities for Mrs Peel. There is evidence that the sale and distribution of the assets of the Peel Group is being undertaken and the Trust Deed for Mrs Peel, as contemplated by the February Agreement, has been finalised (Beaumont [17]; Ex JEB-1, 800–813).

9. On or about 17 October 2018, Mrs Beaumont and Mr Peel signed an Option Exercise Deed, as joint attorneys, regarding the arrangements in relation to the Option Agreement and the distribution of the assets of the Peel Group (“Option Exercise Deed”) (Beaumont [31]; Ex JEB-1, 832–840). The Option Exercise Deed provides that Mrs Beaumont and Mr Peel will not exercise the options granted to Mrs Peel under the Option Agreement; and, as Mrs Peel's joint attorneys, Mrs Beaumont and Mr Peel will otherwise direct, pursuant to clause 3.1 of the 1996 Agreement that LPH be wound up as soon as practicable after the sale of the Peel Group assets in accordance with the February Orders and in any event no later than 2 years after expiry of the option, being 27 October 2020, and cl 3.1 of the 1996 Agreement (to which I referred above) otherwise remains unaffected. That Option Exercise Deed does not take effect until the “Effective Date” (as defined), which is the date on which the Court makes appropriate directions. There is therefore a real utility in determining the question whether the directions sought should be given.

10. By his letter dated 24 October 2016 (Ex P3), Mr Rohr expressed his agreement with Mrs Beaumont’s evidence as to the possible consequences of exercising or not exercising the options, other than as to tax as to which, relevantly, he had not obtained independent tax advice in relation to the operation of the Option Agreement, and noted the indemnity provided to Mrs Peel under the February Orders. Mr Rohr indicated that he accepted Mrs Beaumont’s position that it was not desirable for the parties to be required to wind up LPH within 12 months from the expiry of the options, in the context of the broader sale of assets and liquidation of entities within the corporate group, and that a 24 month period was more suitable. Mr Rohr indicated that he did not object to the conduct proposed by Mrs Beaumont, including the proposal that the options not be exercised, and observed that:

“… I consider that Mrs Peel is presently suitably financially protected and secure by reason of:

(a)   Paragraph 24 of the February Orders, which requires $10 million to be paid by LPH into a trust for her ongoing care and maintenance (that sum is yet to be paid);

(b)   Paragraph 26 of the February Orders, pursuant to which Mrs Peel is indemnified in respect of debts or claims by any third parties or any of the Second to Ninth Defendants in the 2017 Proceedings (being the Defendant Companies), in relation to the operations or affairs of the Defendant Companies, or any benefits conferred upon her by them; and

(c)   Mrs Peel’s life tenancy at Kemsley Park, which has been granted and registered pursuant to paragraph 21(b) of the February Orders.”

11. Mr Rohr also noted that, if the Court gave the advice and direction that was sought, Mrs Peel would then receive further funds equal to one third of the assets in LPH upon winding up, by no later than 27 October 2020. Having regard to those matters, he indicated his view that Mrs Peel’s interests were unlikely to be adversely affected by the conduct proposed by Mrs Beaumont and Mr Peel. He noted that, in forming that view, he had assumed that the amount of $10 million to be paid by LPH “is paid shortly”. I will return to the significance of that matter below. It seems to me that considerable weight should be given to Mr Rohr’s views, where he is not affected by any conflict of interest affecting Mrs Beaumont and Mr Peel in that respect.

12. As I noted above, Mrs Beaumont also relied on an opinion from Counsel as to the tax consequences for Mrs Peel of exercising or not exercising the options (Beaumont [38]). The tax issues addressed in Counsel’s opinion were of some complexity and it expressed qualified and preliminary views in respect of them. It appears that a capital gains tax event will arise for Mrs Peel whether or not the options are exercised, and any assessment as to Mrs Peel's financial interests in respect of taxation, in the longer term, would need to take into account other factors. It is not practicable to defer any decision as to the exercise of the options to resolve any remaining uncertainty as to tax issues, where the effect of the option arrangements is that the options will lapse and other steps will need to be taken if they are not exercised. Mr Dick points out, and I accept, that the tax effect of the decisions for Mrs Peel would in any event need to be weighed in respect of other significant discretionary factors, including her age, health and financial position generally.

Mrs Beaumont’s submissions

13. Mrs Beaumont and Mr Peel are aware that they have a personal interest in any decision that is made in respect of the exercise of the options or otherwise under the 1996 Agreement, as a result of their position as shareholders in the Peel Group, and that any decision could place them in a position of conflict between their own interests and the duties they owe as attorneys to Mrs Peel (Beaumont [33]). Mrs Beaumont seeks the Court’s advice and direction in that situation.

14. Mr Dick refers to Mrs Beaumont’s view that the exercise of the options is not in Mrs Peel’s best interests, and that Mrs Peel's interests would be best served by Mr Peel and Mrs Beaumont performing the terms of the 1996 Agreement with the amendment contained in the Option Exercise Deed, on the basis that those arrangements have the dominant purpose of ensuring that Mrs Peel has financial certainty and will receive one third of the value of the Peel Group on the winding up.

15. Mr Dick points to several matters supporting that view. First, he submits that, in view of Mrs Peel's age and health, her primary interests are in her ongoing care and living arrangements, and significant provision has been made for her ongoing care in the February Agreement through the $10 million that will be held on trust for her, as well as a lease preserving her life interest in her home at Kemsley Park. Second, he submits that Mrs Peel is entitled to a one third share in the value of LPH as realised by the winding up, which she will receive by 27 October 2020 as a result of the amendments to the 1996 Agreement in the Option Exercise Deed. Mr Dick submits that the practical effect of these amendments is to extend the period in which LPH will be wound up from 12 months to 24 months, and that is desirable where the Peel Group has a complex corporate structure and its winding up will require the sale of various rural properties.

16. Third, Mr Dick submits that there is no practical benefit to Mrs Peel being issued shares in LPH, and that she could not then exercise her voting rights (given the issues as to her capacity) without Mrs Beaumont and Mr Peel acting jointly as her attorneys. There is plainly a risk that they would not be willing or able to do so, given their historical differences, although they have reached an agreement not to exercise the options in what they perceive as Mrs Peel’s best interests. In her affidavit evidence, Mrs Beaumont also refers to the additional complexities which would arise if Mrs Peel were to become a shareholder, having regard to the difficulties in the existing shareholder relationship between Mrs Beaumont and Mr Peel. It seems to me that that is a significant factor, where Mrs Peel may then be required to take steps to protect her position as shareholder in the event of a dispute between other shareholders; her ability to do so would be constrained by her lack of capacity and her dependence on Mrs Beaumont and Mr Peel as her attorneys to make decisions in that respect, and their possible inability to do so by reason of conflicts affecting those decisions; and she would be exposed to the risk of incurring further costs if she sought to protect her position as a shareholder in any further litigation which may arise between Mrs Beaumont and Mr Peel. In these circumstances, there may be a real advantage for Mrs Peel in retaining the right to one third of the value of the assets of the companies, in preference to becoming a shareholder in LPH and taking upon herself the risk of such a shareholding.

17. Fourth, so far as Mrs Peel’s tax position is concerned, Mr Dick points out that all tax payable on the winding up of LPH will ultimately be borne by Mrs Beaumont and Mr Peel, inter alia, by reason of their agreement (paragraph 26 of the February Agreement) to indemnify Mrs Peel against any tax obligations. Fifth, Mr Dick submits that the Option Agreement and the 1996 Agreement do not contemplate the present position where Mrs Peel does not have legal capacity, and that the purpose of the Option Agreement can be fulfilled with far less cost and complication than the exercise of the options. Mr Dick notes that the explanatory statement to the Option Agreement and the 1996 Agreement itself recognised that the family assets are held within corporate entities and that it would be preferable for Mrs Peel not to exercise the options, but reach other arrangements with Mr Peel and Mrs Beaumont (Ex JEB-1, 829, [5.2]). Mr Dick also submits that the arrangements under the 1996 Agreement, as amended by the Option Exercise Deed, preserve Mrs Peel’s entitlement to one third of the Peel Group's assets and also provide for her ongoing care and that the directions sought in the Summons would be consistent with her entitlement to one third of the Peel Group and allow her financial certainty.

Advice and direction

18. It seems to me that the matters to which Mr Dick refers support the view that Mrs Beaumont and Mr Peel had formed. For all these reasons, I was satisfied that I should give the advice and direction sought by Mrs Beaumont, namely, pursuant to s 38 of the Powers of Attorney Act, that she be advised and directed that she and Mr Peel, as attorneys for Mrs Peel, would be justified in not exercising the options granted to Mrs Peel under clause 1.1 of the Share Option Agreement dated 14 August 1996 (“the Option”); they would be justified, as attorneys for Mrs Peel, in otherwise directing, pursuant to clause 3.1 of the agreement between Mrs Beaumont, Mr Peel and Mrs Peel dated 14 August 1996 (“1996 Agreement”), that LPH be wound up as soon as practicable after the sale of the assets of the Third to Ninth Defendants in the Supreme Court of New South Wales proceedings no. 2017/00142978 (“2017 Proceedings”) in accordance with the orders made by this Court on 1 February 2018 and in any event no later than 2 years after the expiry of the Option, being 27 October 2020; and that cl 3.1 of the 1996 Agreement otherwise remains unaffected. I also made several consequential orders, including as to costs of the application.

Matters arising on relisting on 26 October 2018

19. By email dated 26 October 2018, Mr Dick advised my Associate that, in the course of submissions on 25 October, and in response to a question I had raised, he had informed the Court that the date on which the payment of $10 million to Mrs Peel would be made under paragraph 24 of the February Orders was 26 November 2018, and that date was in error, and the correct date was 31 October 2018. He also noted that:

“The parties to the Deed of Variation, Mrs Beaumont and Mr David Peel, have now agreed that the distribution date for payment of the $10m to Mrs Peel will be 23 November 2018. This date has been notified to the solicitors for [LPH] and for Mr Rohr.”

My Associate responded, at my request, noting the matters indicated in Mr Dick’s email and advising the steps which could be taken to relist the matter, if Mrs Beaumont wished to do so.

20. The matter was relisted later that day. I heard further submissions and delivered an ex tempore judgment, which I have also incorporated (with minimal revision) in these reasons for judgment.

21. As Mr Dick’s email recognised, I had sought information in the course of the hearing on 25 October as to the date on which the payment to which I referred above was to be made to Mrs Peel, pursuant to orders previously made and agreements previously noted by the Court, and had been advised that date was 23 November 2018. As I noted above, it appears that advice was in error and that the correct date for such a payment was 31 October 2018. I am satisfied that that error was inadvertent. That date of 31 October 2018 reflected the position, as it arose through an agreement noted in the orders I made in February 2018, as purportedly varied by a Deed of Variation of that agreement between Mrs Beaumont and Mr Peel (which is undated but I have been informed was made on 17 October 2018) and (I have been informed) has now been amended by a further agreement between Mrs Beaumont and Mr Peel extending the date for payment to 23 November 2018. Mr Dick fairly recognised that a question might arise as to whether that error, in the course of an ex parte application, would affect the status of the advice and direction that had been given to Mrs Beaumont and Mr Peel. Notice of the restoration of the matter today was given to Mr Rohr, who has not formally appeared but has been involved in the way in which matters have developed before the Court.

22. An issue then arose in the course of submissions as to whether the mechanism which had been adopted to extend the date of payment to Mrs Peel, by agreement between Mrs Beaumont and Mr Peel, to which Mrs Peel was not party, if effective, had the capacity to permit a further extension of the time for payment to Mrs Peel to be agreed between Mrs Beaumont and Mr Peel without her consent. That would potentially have been a material matter so far as the judgment delivered on 25 October 2018 is concerned, because information as to Mrs Peel's position put before the Court by Mr Rohr had proceeded on the basis that payment was due to be made to Mrs Peel shortly. I had proceeded on the basis that Mrs Peel (by her attorneys, Mrs Beaumont, and Mr Peel) did not need to take into account any risk of deferral of that payment, without her consent, in determining whether or not to exercise the options to acquire shares in LPH.

23. I should pause to note that there is no suggestion that either Mrs Beaumont or Mr Peel in fact intend to extend the time for payment to Mrs Peel beyond 23 November 2018, and Mr Dick made clear in submissions that their position was that such a payment would be made prior to that date, and before any payment was made to them by way of loans or otherwise. That in turn appears to be the basis on which Mr Rohr, in representing Mrs Peel's interests, was proceeding. However, the statement of that intention made by Counsel from the bar table would not have bound Mrs Beaumont and Mr Peel, and any doubt as to whether that payment would be made promptly could have undermined a significant basis of the judgment delivered on 25 October 2018.

24. In the event, it is not necessary to address that question further. Each of Mrs Beaumont and Mr Peel has now offered undertakings to the Court and Mrs Peel that they will cause LPH, several of its subsidiaries, and an entity, Peel Mungerie Pty Ltd, in which Mrs Peel has an economic interest, to make the relevant payment by 23 November 2018. Mr Dick rightly points out that there are several differences between the form of those undertakings and the form of the agreement previously noted by the Court, so far as the undertakings contemplate that payment may be made by any of the named defendants in the 2017 proceedings, insert a specified date for payment, and provide for payment to be made on a trust for the ongoing care and maintenance of Mrs Peel. It seems to me that none of those amendments are adverse to Mrs Peel, particularly in circumstances where, as is common ground, the undertaking provides assurance to the Court and Mrs Peel that these steps would be taken, but also leaves Mr Peel and Mrs Beaumont to comply with the earlier agreement that was noted by the Court, and such obligations as they may have pursuant to orders that have previously been made.

25. Mr Dick has also drawn attention to several other matters, which have emerged from submissions, including the possibility that, subject to discussions with Mrs Peel's representatives, payment may be made from one of the companies in the group, Peel Mungerie Pty Ltd, if that course is acceptable to Mrs Peel's representatives, and that a further application to the Court may be brought under s 76 of the Civil Procedure Act 2005 (NSW) in that respect.

26. It seems to me that the undertakings now given by Mrs Beaumont and Mr Peel confirm the basis on which the advice and direction was previously given to Mrs Beaumont on 25 October 2018. That advice and direction had as a significant premise that a payment would be made to Mrs Peel shortly, and I am satisfied that the undertakings confirm that will occur. As has been explored in submissions, Mr Peel and Mrs Beaumont at least have the control of LPH as shareholders, and could bring about a payment by that entity to comply with the undertakings, if necessary, by an amendment to its constitution to cause that payment to be made. It is very likely that, in a practical sense, they could also cause such a payment to be made by one of its subsidiaries, again if necessary by constitutional amendments, but that is not material where they have in any event undertaken to cause LPH to make that payment, if none of the other subsidiaries do so. That is sufficient to have the result that Mrs Peel, and the attorneys acting for her, would not need to take into account the risk of further deferral of the payment to her, in determining whether to acquire or whether to exercise the options to acquire shares, and the basis on which I formed the view that the relevant advice and direction should be made to Mrs Beaumont and Mr Peel remains intact.

27. Accordingly, I note the undertakings to the Court and Mrs Peel given by Mrs Beaumont and Mr Peel by their Counsel, and also note the matters to which my attention has been drawn, and, on that basis, need take no further action in respect of the advice and direction that was given on 25 October 2018.

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Decision last updated: 12 November 2018