Application of Browne as executor of the estate of Russell

[2021] NSWSC 1340

Supreme Court

New South Wales

Medium Neutral Citation:

Application of Browne as executor of the estate of Russell [2021] NSWSC 1340

Hearing dates:

15 October 2021

Date of orders:

15 October 2021

Decision date:

15 October 2021

Jurisdiction:

Equity

Before:

Henry J

Decision:

See [23]

Catchwords:

EQUITY – Trusts and trustees – Court’s supervision of – Appointment and removal of trustees – where nominated trustee of testamentary trust refused appointment – whether new trustee should be appointed under s 70 of the Trustee Act 1925 (NSW) or the Court’s inherent jurisdiction – new trustee appointed

Legislation Cited:

Trustee Act 1925 (NSW), ss 6, 70

Cases Cited:

CrowleFoundationvNSWTrustee & Guardian [2010] NSWSC 647

Mallott v Wilson [1903] 2 Ch 494

Re Will of Orloff; Terracall v Churkovich (2010) 24 VR 603; [2010] VSC 48

Texts Cited:

J D Heydon and M J Leeming, Jacobs' Law of Trusts (7th ed, 2006, LexisNexis Butterworths)

Tucker, Le Poidevin and Brightwell, Lewin on Trusts (20th ed, 2020, Sweet & Maxwell)

Category:

Principal judgment

Parties:

Darryl Ian Browne (Plaintiff)

Representation:

Counsel:
S Chapple (Plaintiff)

Solicitors:
Browne Linkenbagh Legal Services (Plaintiff)

File Number(s):

2021/157984

Publication restriction:

Nil

Judgment – Ex Tempore (Revised)

1. The plaintiff, Darryl Ian Browne, is the executor of the estate of the late Peter Russell (the deceased) who died on 12 September 2018 leaving a will made on 16 July 2015. 

2. By summons filed on 2 June 2021, the executor seeks an order pursuant to s 6 or s 70 of the Trustee Act 1925 (NSW), or otherwise pursuant to the inherent jurisdiction of the Court, that Equity Trustees Ltd be appointed as trustee of the ‘Special Needs Fund’ on the terms set out in the will. The order is sought because the initial trustee nominated under the will in relation to the Special Needs Fund has refused to accept the appointment.

3. The executor relies on his affidavit dated 1 June 2021 and written submissions which have been of assistance to the Court and from which some of what follows is taken. 

4. There is no contradictor. I am satisfied that a contradictor is unnecessary in this case based on the nature of the application and the other matters to which I will refer.

Background

5. The deceased is survived by his 55 year old son who has a moderate level of intellectual disability. He resides in supported accommodation and requires assistance in respect of his personal care and the management of his affairs. 

6. By his will, the deceased directed the executor to divide his estate in such proportions and amounts as the executor decides, in his absolute discretion, amongst a ‘Contribution Fund’ (cll 8.1, 9.1 and 10), a ‘Special Needs Fund’ (cll 8.1, 9.2 and 11) or any trust of which the deceased’s son is the principal beneficiary that has been approved as a Special Disability Trust under federal legislation. 

7. In relation to the Special Needs Fund, the will provides that it is to be administered in accordance with cl 11 and Part B of the will and, in particular:

1. for the appointment of Perpetual Trustee Company Ltd (Perpetual) as the initial trustee of the Special Needs Fund: cl 11.3.1;

2. that the trustee has the power to nominate any person or company to act together with or in place of the trustee: cl 11.3.2; and

3. that the trustee must apply trust funds for the benefit of the deceased’s son in accordance with the directions set out in cl 11.4.

8. For the purpose of this application, it is not necessary to refer to the balance of the terms of the will other than to observe that the effect of the will is that the deceased’s son is the principal beneficiary.

9. On 1 November 2018, probate of the deceased’s will was granted to the executor. 

10. The executor has obtained advice concerning the options available under the will and, in accordance with cll 8 and 9, determined in his sole discretion to distribute the whole of the deceased's estate to the Special Needs Fund. 

11. On 9 February 2021, Perpetual notified the executor that it refused to accept its appointment as trustee of the Special Needs Fund, including an appointment solely for the purpose of nominating a replacement trustee.  That refusal means that the Special Needs Fund is left without a trustee or a mechanism by which a replacement trustee might be appointed. 

12. The executor has made inquiries and Equity Trustees Ltd has consented to act as trustee of the Special Needs Fund.

The Executor’s Application

13. The executor submits, and I accept, the effect of the correspondence from Perpetual is that it has disclaimed its appointment as trustee of the Special Needs Fund.  As Counsel for the executor submitted, a trustee cannot be compelled to accept a trust (Tucker, Le Poidevin and Brightwell, Lewin on Trusts (20^th ed, 2020, Sweet & Maxwell) at 13‑007) and steps need to be undertaken to ensure that a new trustee is appointed in Perpetual’s stead. 

14. Section 6 of the Trustee Act1925 (NSW) provides that a new trustee may be appointed in place of an original or substituted trustee by the Court or otherwise, including in circumstances where a trustee refuses to act in such trusts or powers: ss 6(1), 6(2)(e).

15. Section 70 of the Trustee Act empowers the Court to appoint a new trustee. It provides:

70 New trustees

(1)  The Court may make an order for the appointment of a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

(2)  The appointment may be made whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient difficult or impracticable so to do without the assistance of the Court.

…

(8)  Every trustee appointed under this section shall, as well before as after the trust property becomes vested in the trustee, have the same powers authorities and discretions, and may in all respects act as if the trustee had been originally appointed a trustee by the instrument, if any, creating the trust.

16. Counsel for the executor raised the issue of whether the Court's power under s 70 of the Trustee Act is enlivened in circumstances where the named trustee has disclaimed its appointment and funds have not yet been settled on the trust. He drew my attention to two cases.

17. The first case is Re Will of Orloff; Terracall v Churkovich (2010) 24 VR 603; [2010] VSC 48 in which Robson J expressed, at [33], a preliminary view in relation to a similar Victorian provision, but without having heard argument on the issue, that "the exercise of such a power would require the existence of an existing trustee or the creation of a trust."

18. The second case is Crowle Foundation v NSW Trustee & Guardian [2010] NSWSC 647 where Ball J referred, at [41], to a submission that the Court may not have power under s 70 of the Trustee Act to replace a trustee in circumstances where the trust property has not vested in the trustee. His Honour rejected that submission and considered that where a trust is clearly established by the creation of a testamentary trust in a will and it is simply an administrative matter to transfer the trust assets, s 70 may enable the appointment of a replacement trustee notwithstanding that no property had yet been vested in the trustee.

19. I accept the submission that Ball J’s reasoning is apt to this case. From the time the executor decided to distribute the deceased's estate to a Special Needs Fund, in respect of which Perpetual was nominated as the initial trustee, a trust was created: Mallott v Wilson [1903] 2 Ch 494 at 502–3. The disclaimer by Perpetual did not negate the creation of that trust. To my mind, the fact that the estate may not have formally vested in the trustee or been settled in the Special Needs Fund does not prevent a replacement trustee being appointed pursuant to s 70 of the Trustee Act or the inherent power of the Court. This is particularly as s 70(1) of the Trustee Act provides that the appointment may be made “although there is no existing trustee”, and s 6(2)(e) recognises that an appointment may be made where a trustee refuses to act.

20. The test to be applied under s 70(2) of the Trustee Act is whether it is expedient to appoint a new trustee. I am satisfied that it is expedient to appoint Equity Trustees in this case.  It is necessary to appoint a new trustee to enable the Special Needs Fund to be administered and it is in the interests of the deceased’s son, the sole beneficiary of that Fund, that a trustee be appointed.  Equity Trustees is a licensed trustee company of long standing with experience in managing private trusts and has provided the necessary consent. 

21. If an appointment cannot be made under s 70 of the Trustee Act, the Court has the power to appoint Equity Trustees in its inherent jurisdiction. As the executor's submissions observed, it is a principle of equity that a trust will not be allowed to fail for want of a trustee.  If the creator of the trust has not appointed trustees to carry out the trust, or if the nominated trustees are dead or refuse to act, the Court will appoint trustees to carry out the trust: J D Heydon and M J Leeming, Jacobs' Law of Trusts (7^th ed, 2006, LexisNexis Butterworths) at [1502]. While the question to be asked in satisfying the test under the Court’s inherent jurisdiction is in slightly different terms to that under s 70, focussing as it does on the best interests of the beneficiary and the administration of the trust, I am satisfied it is satisfied in this case for the reasons already referred to.

22. It follows that I am satisfied that the orders sought in the summons should be made.  As this application relates to the management or administration of a trust created by a will, it is appropriate to order that the executor's costs be paid out of the deceased’s estate on an indemnity basis.

23. For these reasons, I make the following orders.

1. Order that pursuant to s 70 of Trustee Act 1925 (NSW), or otherwise pursuant to the inherent jurisdiction of the Court, that the Equity Trustees Limited be appointed as trustee of the Special Needs Fund constituted by clause 11 of the will of the late Peter Russell dated 16 July 2015.

2. Order that the costs of the executor, Darryl Ian Browne, be paid out of the estate of the late Peter Russell, calculated on the indemnity basis.

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Decision last updated: 20 October 2021