Artcam Enterprises Pty Ltd v Campbell McLaren

Case •

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•

18 April 2023
IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
TRUSTS EQUITY AND PROBATE LIST

S ECI 2023 00612

ARTCAM ENTERPRISES PTY LTD
(ACN 009 871 818) 		Plaintiff
v
CAMPBELL McLAREN & ORS Defendants

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JUDGE:

DELANY J

WHERE HELD:

Melbourne

DATE OF HEARING:

5 April 2023

DATE OF JUDGMENT:

18 April 2023

CASE MAY BE CITED AS:

Artcam Enterprises Pty Ltd v Campbell McLaren & Ors

MEDIUM NEUTRAL CITATION:

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TRUSTEE – Removal and replacement of trustee – Inherent jurisdiction – Amendments to trust deed of uncertain validity – Unclear who has power to appoint – Existing trustee holds shares in continuing contravention of s 259D of the Corporations Act 2001 (Cth) – Existing and potential uncertainty regarding the administration of the trust – Removal and replacement order made.

TRUSTEE’S REMUNERATION – Section 63 of the Trustee Act 1958 (Vic) – Replacement trustee proposing to charge at an hourly rate – Replacement trustee a solicitor – Remuneration satisfactorily dealt with by the trust deed – Application for orders pursuant to s 63 refused.

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APPEARANCES:

 Counsel Solicitors
For the Plaintiff Mr PE Anastassiou KC with Mr JP Carney Gadens
For the First and Second Defendants Mr JT Rush AO RFD KC KHQ Lawyers
For the Third Defendant Mr P Cash, solicitor Norton Rose Fulbright
For the Fourth Defendant Dr KP Hanscombe KC with Mr AP Dickenson Atticus Lawyers

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Material relied upon.......................................................................................................................... 5

The BF McLaren Family Trust..................................................................................................... 5

The inherent power to remove and replace Artcam as trustee.................................................. 9

Considerations in support of the exercise of the inherent jurisdiction................................ 12

Uncertainty about who has the power to remove and to appoint a new trustee.............. 12

BM Holdings and s 259D of the Corporations Act 2001 (Cth)................................................ 16

The need to investigate and act as appropriate in relation to disputed payments........... 18

Allegations in the Breach of Trust Proceeding....................................................................... 19

The Identity of the Replacement Trustee.................................................................................... 20

Remuneration of the Trustee......................................................................................................... 20

Professional Indemnity Insurance................................................................................................ 28

Conclusion......................................................................................................................................... 29

HIS HONOUR:

Introduction

  1. These reasons are provided in relation to orders sought either by consent or which were not opposed by all parties who appeared on 5 April 2023 on the application by the plaintiff, Artcam Enterprises Pty Ltd (‘Artcam’) in relation to the BF McLaren Family Trust (‘the Trust’).  Although the orders that were sought were advanced on the basis of the consent/non-opposition of all parties, Senior Counsel for Artcam requested that reasons be provided.  In view of the unusual nature of the application, the fact that not all of the ‘General Beneficiaries’ of the Trust were heard on the application and the peculiar fact-specific circumstances informing the content of the orders, I agreed that it is appropriate to provide reasons. 

  1. The orders which were sought by Artcam in the exercise of the inherent jurisdiction of the Court and pursuant to s 63 of the Trustee Act 1958 (Vic) include the following:

1.The Plaintiff be discharged as trustee of the B.  F. McLaren Family Trust established by Deed dated 4 February 1978 between Clive Brewster as settlor and Swunalla Pty Ltd and of any trusts arising under that Deed (the ‘Trusts’) and that the Hon. John Eric Middleton AM KC (the ‘New Trustee’) be appointed trustee in its place.

2.Pursuant to sub-section 51(2)(a) of the Trustee Act 1958 (Vic) the property of the Trusts be vested in the New Trustee.

…

4.Pursuant to s. 63 of the Trustee Act 1958 (Vic) the Court confers upon the New Trustee as trustee of the Trusts the power to charge and retain out of the Trust Fund his fees charged at a rate of $2,000 per hour as recompense and remuneration for his acting as trustee, which fees are in addition to all moneys properly expended by him and chargeable against the Trust Fund.

5.That pursuant to s. 63 of the Trustee Act 1958 (Vic) the Court confers upon the New Trustee as trustee of the Trusts the power to enter into any contract of trustee’s liability or other professional indemnity insurance he deems it desirable to enter into in connection with his administration of the Trusts and to charge and pay out of the Trust Fund any premiums or other sums payable in relation to any such insurance.

…

8.There be liberty to apply.

  1. In the course of providing reasons, new information and issues emerged concerning proposed order 4.  In light of those matters it is not appropriate to make proposed order 4.  For the reasons set out below it is appropriate to make the other orders sought.

  1. As I trust will be apparent from these reasons, the orders that I will make are driven by the particular factual circumstances and by the fact that key beneficiaries who appeared on the application, whilst engaged in internal disputation concerning the Trust and its administration over many decades, all either consent to or do not oppose the orders sought. 

  1. Artcam is trustee of the Trust, a discretionary trust established by deed dated 4 February 1978 (‘the 1978 Deed’).  The beneficiaries of the Trust include members of the family of the late Bruce McLaren. 

  1. Bruce McLaren died on 17 July 2003 aged 78.  His wife Lorraine died on 26 February 2016 aged 86.  A family tree of the McLaren family is set out below:

  1. The 1978 Deed has been subject of four amending deeds, the effect of at least some of which are open to considerable doubt.

  1. The 1978 Deed provides for a wide class of discretionary beneficiaries including all of Bruce McLaren’s children, their spouses and Bruce’s grandchildren.  Following and in apparent reliance upon amending deeds, there have been additions to the ‘General Beneficiaries’ of the Trust.  Since 2013, there have also been very substantial payments made to some of those additional ‘General Beneficiaries’, the validity of whose eligibility is now known to the trustee, Artcam, to be open to question.

  1. The scope of the present proceeding is limited to Artcam seeking its own removal as trustee of the Trust and its replacement by a new trustee, the Hon. John Eric Middleton AM KC, and for associated orders.  There are three other proceedings relating to the McLaren family; disputes between family members primarily concerning the Trust, that provide context.  Those proceedings may be described as follows:

(a)‘The Documents Proceeding’ S ECI 2022 01916 issued on 25 May 2022 in which Candace McLaren is the plaintiff and Campbell McLaren and Rodney Blackburn as the executors of the will and estate of Stuart McLaren/trustees of the Candace Testamentary Trust are the first and second defendants.  Artcam in its capacity as trustee of the Trust is the third defendant, SFM Holdings Pty Ltd as trustee for the Stuart McLaren Family Trust is the fourth defendant, Katecam Pty Ltd as trustee for the SF McLaren Family Trust No 3 is the fifth defendant, and JP Plastic Distributors Pty Ltd as trustee for the Plastic Unit Trust is the sixth defendant.  Orders have been made by consent in the Documents Proceeding for the production of documents and documents have been produced.  That proceeding was otherwise adjourned to 26 May 2023, when, absent any further issues regarding production, only the issue of costs remains to be determined.

(b)‘The Unpaid Present Entitlements Proceeding’ S ECI 2022 02886, a proceeding issued by Candace McLaren on 7 June 2022 seeking the payment of unpaid present entitlements recorded in the accounts of the Candace McLaren Testamentary Trust and the Stuart McLaren Family Trust.  The defendants in that proceeding are Campbell McLaren and Rodney Blackburn as Stuart McLaren’s executors/trustees of the Candace McLaren Testamentary Trust, and SFM Holdings Pty Ltd as trustee of the Stuart McLaren Family Trust.  The amounts owing to Candace as deposed to in her affidavit dated 26 July 2022 have since been paid to her.  Outstanding issues in the Unpaid Present Entitlements Proceeding are confined to questions of costs.

(c)‘The Breach of Trust Proceeding’ S ECI 2022 05245, a substantive proceeding issued by Candace McLaren on 20 December 2022.  In that proceeding, Candace seeks relief against Artcam and against Campbell McLaren, a director of Artcam, in respect of various alleged breaches of trust and Campbell McLaren’s alleged involvement in those breaches.  Amongst the relief sought is an order for the removal of Artcam as trustee of the Trust and the appointment of a suitable trustee.  The original statement of claim was served on 20 December 2022 and defences have not yet been filed.  At a directions hearing on 3 March 2023, Candace informed the Court of her intention to file an amended statement of claim incorporating amendments based on documents provided as a result of the Documents Proceeding.

  1. Each of the individuals primarily involved in the related proceedings are defendants in this proceeding.  Campbell McLaren is the first defendant, Pamela McLaren is the second defendant, Kate Louise McLaren is the third defendant, and Candace Dawn Georgia McLaren is the fourth defendant.

  1. At the directions hearing on 3 March 2023 involving all four proceedings, the third defendant, Kate McLaren, opposed the appointment of Mr Middleton as the replacement trustee and indicated her possible intention to nominate another person.  As events later transpired, no alternative to Mr Middleton was put forward.  The opposition by Kate McLaren to Mr Middleton’s appointment as the replacement trustee was withdrawn at the hearing on 5 April 2023.

  1. Each of the defendants is legally represented.  The parties are agreed that all proceedings should be adjourned until 13 October 2023.  That is, to enable the new trustee to acquaint himself with the affairs of the Trust and with the disputes concerning it.

Material relied upon

  1. In support of its application Artcam relied on affidavits of the following persons:

(1)Nicholas McKenzie-McHarg sworn 17 February 2023;

(2)Nicholas McKenzie-McHarg sworn 2 March 2023;

(3)David Charles Coombes sworn 2 March 2023; and

(4)Nicholas McKenzie-McHarg sworn 31 March 2023.

  1. Prior to the hearing, Artcam filed written submissions cross-referenced to a confidential opinion of Senior and Junior Counsel dated 16 February 2023 (‘the Joint Advice’), previously made available to each of the defendants on a confidential basis, and an updated opinion dated 14 March 2023 (‘the Further Advice’).

  1. Written submissions were filed in advance of the hearing on behalf of the first and second defendants (Campbell and Pamela McLaren), the third defendant (Kate McLaren)[1] and the fourth defendant (Candace McLaren).

    [1]The third defendant initially withdrew her consent to the appointment of Mr Middleton in order to seek further documents from the trustee. At the hearing on 5 April 2023, the matter of further documents was resolved and the third defendant consented again to the appointment of Mr Middleton.

  1. The widow of Stuart McLaren, Maria McLaren, was informed about the application but elected not to participate in the hearing.

  1. At the later invitation of the Court, Artcam provided further factual information via email and written submissions concerning proposed order 4.  Those submissions are dated 13 April 2023.

The BF McLaren Family Trust

  1. Since the 1978 Deed, there have been various instruments that have either actually or purportedly varied the terms of the 1978 Deed and, from time to time, the identity of the Appointor, Guardian and Trustee and the beneficiaries of the Trust.

  1. Artcam was appointed trustee of the Trust on 15 May 1984 pursuant to a Deed of Appointment between Bruce McLaren in his capacities as appointor and guardian of the Trust, and Jalna Dairy Foods Pty Ltd, the retiring trustee.

  1. Artcam has issued capital of nine ordinary shares, eight of which are held by a McLaren family company, Bruce F McLaren Holdings Pty Ltd (‘BM Holdings’) and one of which is held by Rodney Blackburn, Campbell McLaren and David Coombes, non-beneficially as executors of the estate of Lorraine McLaren.

  1. From 27 August 2012, the directors of Artcam have been Campbell McLaren, Pamela McLaren and, until 18 October 2022, Rodney Blackburn, Campbell’s accountant, who resigned as director as a result of his poor health.

  1. On 21 May 1991, Artcam, described as the Trustee, entered into a Deed of Variation (‘the 1991 Deed’) with Bruce McLaren (as Appointor and Guardian), Campbell McLaren and Stuart McLaren.  The 1991 Deed contains a single clause:

Pursuant to Clause 18 of the Trust Deed the Trustee hereby varies the Schedule to the Trust Deed to insert STUART FARQUHARSON McLAREN of 34 Holyrood Drive, Vermont in the State of Victoria, Company Director, and CAMPBELL ROBERT FARQUHARSON McLAREN of 42 Canterbury Road, Camberwell, in the State of Victoria, Company Director, as joint Guardians and Appointors of the Trust upon the death of the Guardian and Appointor.  (emphasis added)

  1. On 14 April 1999, a second Deed of Variation (‘the 1999 Deed’) was entered into by Artcam as Trustee and Bruce McLaren as the guardian, Stuart and Campbell McLaren as the appointors, Lorraine McLaren, David Coombes and Rodney Blackburn.  Clause 1 of the 1999 Deed purports to amend and vary the Trust Deed to appoint the following persons:

(1)       Bruce;

(2)       Lorraine;

(3)       David Coombes; and

(4)       Rodney Blackburn,

as joint appointors under the Trust Deed with Campbell and Stuart.

  1. Clause 2 of the 1999 Deed purports to amend and vary the Trust Deed to appoint the following persons:

(1)       Lorraine;

(2)       Campbell;

(3)       Stuart;

(4)       David Coombes, a solicitor; and

(5)       Rodney Blackburn, an accountant,

as joint guardians under the Trust Deed, with Bruce McLaren.

  1. Also on 14 April 1999, a revocable Deed of Appointment was made between Artcam as Trustee and Bruce McLaren, Lorraine McLaren, Stuart McLaren, Campbell McLaren, David Coombes and Rodney Blackburn as the ‘Guardians and Appointors’.  Bruce made a will dated 14 April 1999 which is referred to in the revocable Deed of Appointment.

  1. On 13 March 2011, a Deed of Amendment was made between Artcam, Lorraine McLaren, Campbell McLaren, Stuart McLaren, David Coombes and Rodney Blackburn by which Artcam as Trustee made various amendments to the provisions of the Deed concerning income (‘2011 Deed’).  Recital E to the 2011 Deed is in the following terms:

Bruce Farquharson McLaren died on [#insert date#] and accordingly the joint Appointors and Guardians of the Trust as at the date of this Deed are Lorraine, David, Rodney, Campbell and Stuart.

  1. Prior to 29 April 2022, the primary assets of the Trust consisted of shares and unitholdings in companies and trusts concerned in the Jalna Dairy Business (‘the Business’), a business principally involved in making and selling the ‘Jalna’ brand of yoghurt.  Prior to 29 April 2022, Jalna Dairy Foods Pty Ltd, the original trustee of the BF McLaren Family Trust, was the principal operating company of the Business.

  1. The sale of the Business was completed on 29 April 2022.  Prior to the sale, the Trust owned 66.66 per cent of the issued shares in Jalna Dairy Foods Pty Ltd.  The Trust received approximately $65m as a result of the sale.

  1. As at 29 April 2022, BM Holdings served as a holding company for the remaining 33 per cent shareholding in Jalna Dairy Foods Pty Ltd and for various property, plant and equipment utilised in the operations of the business.  BM Holdings sold its assets as part of the sale of the Business.  It currently holds net assets of approximately $61m.

  1. BM Holdings has three classes of issued share capital, but only the A class shares, all of which are owned by Artcam, have voting rights. The holding of those shares is in contravention of s 259D of the Corporations Act 2001 (Cth).

  1. Now that the Business has been sold, the possibility has arisen of the trustee exercising its power to accelerate the vesting of the Trust and making substantial distributions of capital. 

  1. A business chart showing the various McLaren family holdings prior to the 29 April 2022 sale is set out below:

  1. A separate chart showing the various McLaren family holdings after 29 April 2022 is set out below:

The inherent power to remove and replace Artcam as trustee

  1. Sections 41 and 44 of the Trustee Act 1958 (Vic) (‘Trustee Act’) are concerned with the retirement of a trustee and the appointment of a new trustee.  Those sections relevantly provide as follows:

41Power of appointing new or additional trustees

(1)Where a trustee is dead, or remains out of Victoria for more than one year without having properly delegated the execution of the trust, or desires to be discharged from all or any of the trusts or powers reposed in or conferred on him or refuses or is unfit to act therein, or is incapable of acting therein, or is a minor, then, subject to the restrictions imposed by this Act on the number of trustees—

(a)the person or persons nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust; or

(b)if there is no such person or no such person able and willing to act, then the surviving or continuing trustees or trustee for the time being, or the personal representatives of the last surviving or continuing trustee—

may, by writing, appoint one or more other persons (whether or not being the persons exercising the power) to be a trustee or trustees in the place of the trustee so deceased, remaining out of Victoria, desiring to be discharged, refusing, or being unfit, or being incapable, or being a minor as aforesaid.

…

44Retirement of trustee without a new appointment

(1)This section applies where a trustee declares by writing that he is desirous of being discharged from all or any of the trusts reposed in him, and after his discharge there will be either a trustee company or at least two individuals to act as trustees to perform the trusts from which that trustee desires to be discharged.

(2)In any case to which this section applies if the co-trustees and such other person (if any) as is empowered to appoint trustees consent by writing to the discharge of the trustee, and to the vesting in the co-trustees alone of the trust property, the trustee desirous of being discharged—

(a)shall be deemed to have retired from the trusts from which he has declared he desires to be discharged; and

(b)subject to subsection (3) of this section, shall, by the writing by which consent is given to his discharge, be discharged from the trusts under this Act—

without any new trustee being appointed in his place.

…

  1. There are limitations to the scope of operation of both statutory provisions. In the case of s 41, s 41(a) confers power upon the person ‘nominated for the purpose of appointing new trustees by the [trust] instrument’. If that person is unknown or their identity is uncertain then no appointment can be made relying upon s 41 until the identity of the person who is ‘nominated’ is first ascertained.

  1. Section 44 is subject to a different limitation. For it to be relied upon there must be either a trustee company or two individual persons to act as trustees after the retirement of a trustee.

  1. In addition to the jurisdiction conferred by the Trustee Act, the Court has an inherent jurisdiction to remove a trustee and appoint a new trustee where it considers it expedient to do so. [2] 

    [2]J D Heydon and M J Lemming, Jacob’s Law of Trusts (LexisNexis Butterworths, 8th Ed, 2016) [15-46].

  1. In the context of the removal of a trustee, ‘expedient’ is taken to mean conducive to, or fit and proper having regard to the interests of the beneficiaries, the security of the trust property and efficient and satisfactory execution of the trusts.[3]

    [3]Re Estate of Roberts (1983) 20 NTR 13, 17.

  1. There is no general rule which can be laid down for the removal of trustees from office[4] and the Court’s judgment is largely discretionary.[5]  Circumstances in which the Court has exercised its discretion to remove a trustee include:[6] bankruptcy or insolvency of a trustee,[7] where the trustee cannot be located,[8] incapacity of the trustee[9] and conflict of interest between the trustee and beneficiaries.[10]

    [4]Miller v Cameron (1936) 54 CLR 572, 579 (‘Miller’).

    [5]Miller (1936) 54 CLR 572, 580-1.

    [6]See L Tucker et al, Lewin on Trusts,(Sweet & Maxwell, 20th ed, 2019) 667-8 [14-081] for a full list of circumstances where a trustee may be removed by the Court under its inherent jurisdiction.

    [7]Bainbrigge v Blair (1839) 48 ER 1032; Re Barker’s Trusts (1875) 1 Ch D 43; Re Adams’ Trusts (1879) 12 Ch D 634, 636; see also Miller (1936) 54 CLR 572, 575.

    [8]Re Graham (1938) 55 WN (NSW) 168.

    [9]Re Harrison’s Settlement Trusts [1965] 3 All ER 795.

    [10]Monty Financial Services Ltd v Delmo [1996] 1 VR 65.

  1. The Court is guided by the general principle of the welfare of the beneficiaries and the competent administration of the trust in their favour.[11]  The matters that the Court can take into account have been described as ‘large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office’.[12]  Of these matters there are three ‘main considerations’, being: the wishes of the person who created the trust, the need to ensure that a new trustee should not be appointed to promote the interests of some beneficiaries in opposition to others, and that an appointment of a new trustee should promote the execution of the trust.[13]

    [11]Miller (1936) 54 CLR 572, 575; see also L Tucker et al, Lewin on Trusts,(Sweet & Maxwell, 20th ed, 2019) 665 [14-076].

    [12]Miller (1936) 54 CLR 572, 580.

    [13]Hancock v Rinehart (2015) 106 ACSR 207, 241–2 [120] – [124]; [2015] NSWSC 646.

Considerations in support of the exercise of the inherent jurisdiction

  1. There are four matters that establish that it is expedient in this case to exercise the inherent jurisdiction to remove Artcam as trustee and to appoint a new and independent trustee in its place.  The first two matters of themselves would justify the making of proposed order 1.  The other two matters provide support for the making of such an order.

Uncertainty about who has the power to remove and to appoint a new trustee

  1. The power of appointment and removal of a trustee under the Trust Deed is governed by clause 19(a) of the 1978 Deed. 

  1. Clause 19(a) is in the following terms:

19.(a)THE Appointor if named or described in the Schedule (and on the death of the last surviving individual Appointor then his or her legal personal representatives and in the case of a company named as Appointor then any person or company duly appointed by it so to act) shall have power to appoint in writing a new or additional Trustee or Trustees hereof (but not including the Settlor or any Appointor or Guardian named or described in the Schedule) and to remove any Trustee hereof provided that if there is no Appointor named or described in the Schedule or if at the time in question there is no Appointor the power to appoint a new or additional Trustee or Trustees and to remove any Trustee shall be exercisable by the Trustees name in the Schedule or the survivor of them and from and after the death of the survivor of the Trustees named in the Schedule his or her legal personal representatives and in the case of a company the liquidator shall have the said powers.

  1. It can be seen that clause 19(a) contemplates that the power to appoint a new trustee is to be exercised by:

(a)        the appointor named in the Schedule to the trust instrument; then

(b)       upon the death of the individual appointor, his or her legal personal representative; but

(c)        if there is no appointor, the power to appoint and to remove a trustee shall be exercisable by the trustees named in the Schedule or the survivor of them; and

(d)       after the death of the survivor of the trustees named in the Schedule, his or her legal personal representatives. 

  1. Clauses 1(g) and 1(h) of the 1978 Deed provide:

Clause 1(g):

‘the Guardian’ means successively the person or persons (if any) named and described us such in the Schedule.

Clause 1(h):

‘the Appointor’ means successively the person or persons named and described as such in the Schedule and any person or persons nominated as Appointor by the Appointor or Appointors by instrument in writing or by a sole Appointor or by the last surviving appointor by will.

  1. Clause 19(a) was purportedly varied by the 1991 and 1999 Deeds of Variation in the respects set out at paragraphs 22 to 24 above.  Artcam is concerned that those deeds were ineffective as they were not expressed as an exercise of power by the appointor but were instead (incorrectly) expressed to be an exercise of power by the trustee.[14]  In the Joint Advice, Senior and Junior Counsel conclude that in those circumstances it is unclear who exactly has the power to appoint a new trustee.  The Joint Advice identifies the possibilities as Campbell McLaren and Rodney Blackburn (as executors of Bruce’s estate, Bruce being the original appointor), nobody, Lactalis Australia as the purchaser of Jalna Dairy Foods Pty Ltd or Campbell McLaren, David Coombes and Rodney Blackburn.

    [14]Advice of P Anastassiou KC and J Carney, p 32.

  1. Artcam is concerned to regularise the position of the trustee and to put in place an independent trustee who is able to deal with issues concerning or arising from the 1991 and 1999 Deeds of Variation, including the correct identification of eligible beneficiaries.  Artcam is concerned that, where there is the possibility of the trustee needing to consider vesting the Trust and/or making substantial capital distributions, any such distributions may be challenged for being beyond the power of the trustee.

  1. The concerns expressed in the Joint Advice about the identity of the person with power to remove and appoint a new trustee are well founded.  So much may be demonstrated by a consideration of issues arising concerning the 1991 Deed.  Two issues are identified in the Joint Advice concerning the effect of the 1991 Deed.  The first issue is whether clause 18 of the 1978 Deed enabled a change of guardian from Bruce, who entered into that deed as appointor and guardian, to Bruce, and then to Campbell and Stuart jointly upon Bruce’s death.  If it did, the second issue is whether the effect of the amendment was that, when Stuart died on 27 August 2012, there ceased to be a guardian.

  1. Both issues have a significant practical consequence because the Trustee’s power to add beneficiaries to the Trust ceases once the Trust ceases to have a guardian.  As earlier mentioned, a number of entities were added as beneficiaries after 27 August 2012.  From 2013, substantial distributions were made in favour of those added beneficiaries, including Weslan Holdings Pty Ltd as trustee for the McLaren Property Family Trust and Camrob Pty Ltd as trustee for the Campbell McLaren Family Trust.

  1. Bruce is named as guardian in the Schedule to the 1978 Deed.  The 1991 Deed expressly placed reliance on clause 18 as the source of power to vary the Schedule to the 1978 Deed to insert Stuart McLaren and Campbell McLaren as joint guardians and appointors of the Trust upon the death of the guardian and appointor. 

  1. Clause 18 of the 1978 Deed, which is concerned with the power of variation, is in the following terms:

SUBJECT to Clause 10 hereof the Trustee for the time being may at any time and from time to time by deeds revoke add to or vary all or any of the trusts hereinbefore limited or the trusts limited by any variation or alteration or addition made thereto from time to time and may by the same or any other deed or deeds declare any new or other trusts or powers concerning the Trust Fund or any part or parts thereof but so that any law against perpetuities is not thereby infringed and so that such new or other trust powers discretions alterations or variations –

(a)may relate to the management or control of the Trust Fund or the investment thereof or to the Trustees’ powers or discretions in these presents contained;

(b)shall not be in favour of or for the benefit or result in any benefit to any person from time to time being the Settlor Guardian Appointor or Trustees or any of them except a person named or described in the Schedule as a Specified Beneficiary but shall otherwise be for the benefit of all or any one or more of the General Beneficiaries….;

  1. The language of clause 18 is in substantially the same terms as a variation clause considered in Re Owies Family Trust (‘Owies’).[15]  In that case, it was held that the clause in question did not include a power to amend the persons identified in the schedule as a guardian or appointor.[16]

    [15][2020] VSC 716 at [28] and [72] – [92].

    [16]Although Re Owies went on appeal [2022] VSCA 142, there was no appeal in relation to this issue. (At [27]).

  1. While in light of the decision of the NSW Court of Appeal in Commonwealth of Australia v Chubb Security of Australia Pty Ltd,[17] to which reference is made in the Joint Advice, Owies provides no binding precedent as to how clause 18 should be construed, the proposition that upon Bruce’s death the 1991 Deed validly effected a change so that Stuart and Campbell McLaren became joint guardians and appointers is, in the opinion of the authors of the Joint Advice, ‘attended by significant doubt’.

    [17][2004] NSWCA 77 at [11].

  1. The Joint Advice continues, noting that, if the 1991 Deed was effective, that raises a further issue.  The 1991 Deed refers to the Schedule being varied such that, on the death of Bruce, Stuart and Campbell become ‘joint Guardians’.  This poses another unresolved question identified in the Joint Advice; whether, notwithstanding the appointment of Stuart and Campbell as ‘joint Guardians’, Campbell nevertheless continued to be the guardian of the Trust after Stuart’s death.

  1. Having given detailed consideration to the 1991 and 1999 Deeds, Counsel concluded in the Joint Advice that the most likely conclusion is that both Amending Deeds were ineffective.  If that conclusion is correct, then the executors of the will of Bruce McLaren are the holders of the powers of appointment and removal of the Trustee under clause 19 of the 1978 Deed.

  1. The desirability of removing doubt as to the validity of the appointment of the new trustee was, and remains, a principal reason advanced in support of the present application.  I agree that, given the significant uncertainties that have been identified, these issues alone warrant the exercise of the inherent jurisdiction to remove Artcam as the trustee and to appoint a new trustee who is both independent and in a position to promote the execution of the Trust.

  1. It is also relevant to note Counsel’s advice to Artcam that, in the present circumstances, if the powers under the 1978 Deed were to be employed by it to appoint a new trustee, prudently, judicial advice to approve the exercise of the relevant powers should be sought.  They advised and I agree that, there is significant doubt that the Court would approve Artcam exercising the relevant powers having regard to the uncertainty of the holder of that power caused by the 1991 and 1999 amending Deeds without first seeking to resolve the issues raised by those deeds.

  1. I accept as submitted by Artcam that the present application for the Court to remove Artcam and to appoint a new trustee is both more explicit and will ensure there is no doubt as to the validity of the appointment of the new trustee.  It is appropriate for the reasons discussed to make order 1.

BM Holdings and s 259D of the Corporations Act 2001 (Cth)

  1. There is a separate substantive reason why it is expedient and appropriate to make the removal and replacement trustee orders sought.

  1. Artcam acquired 2 ‘A’ class shares in BM Holdings on 29 February 2004.  On 26 February 2016, it acquired a further 2 ‘A’ class shares.  Artcam continues to hold those shares.  The 2004 shares were acquired as a result of a bequest in Bruce McLaren’s will.  The 2016 shares were acquired as a result of a bequest in Lorraine McLaren’s will.

  1. There are two consequences of Artcam holding those shares, the only voting shares in BM Holdings. The first is that, having retained such shares beyond the 12 month anniversary of acquisition, Artcam has committed and continues to commit an offence contrary to s 259D(4) of the Corporations Act 2001 (Cth). The second is that, for so long as Artcam continues to control BM Holdings, Artcam is prohibited by s 259D(3) from exercising any voting rights attaching to the shares.

  1. Section 259D is relevantly in the following terms:

259DCompany controlling entity that holds shares in it

(1)If any of the following occur:

(a)a company obtains control of an entity that holds shares (or units of shares) in the company;

(b)a company’s control over an entity that holds shares (or units of shares) in the company increases;

(c)a company issues shares (or units of shares) to an entity it controls in the situation covered by paragraph 259C(1)(c);

(d)shares (or units of shares) in the company are transferred to an entity it controls in the situation covered by paragraph 259C(1)(d);

then, within 12 months after it occurs either:

(e)the entity must cease to hold the shares (or units); or

(f)the company must cease to control the entity.

ASIC may extend this period of 12 months if the company applies for the extension before the end of the period.

…

(3)Any voting rights attached to the shares (or units of shares) cannot be exercised while the company continues to control the entity.

(4)If, at the end of the 12 months (or extended period), the company still controls the entity and the entity still holds the shares (or units of shares), the company commits an offence for each day while that situation continues.

(4A)An offence based on subsection (4) is an offence of strict liability.

Note:For strict liability, see section 6.1 of the Criminal Code.

…

(6)A contravention of this section does not affect the validity of any transaction.

  1. Section 259D(6) is to be noted. That is, a contravention of the section does not affect the validity of any transaction.

  1. The removal of Artcam as trustee puts an end to the contravention of s 259D(4). Upon the transfer of the four A class shares to the new trustee pursuant to order 2 of the proposed orders, the new trustee will be able to exercise those voting rights.

  1. Taken in isolation, the desirability of bringing to an end the contravening conduct by Artcam and of freeing up the ability of the Trust to deal with the shareholding in BM Holdings with an estimated value exceeding $61m, particularly in the context of the possibility of accelerating the vesting of the Trust, are powerful considerations in support of the exercise of the jurisdiction to remove Artcam as trustee and appoint a new trustee in its place.

The need to investigate and act as appropriate in relation to disputed payments

  1. There are two further reasons why orders for removal of Artcam and the appointment of a new trustee are expedient.  Both concern past events and conduct which may in the future, or which has already been, called into question, in which Artcam may be said to have been involved.

  1. The first matter concerns payments/distributions made after completion of the sale of the Business.  The solicitor for Artcam, David Coombes, has given evidence that, following the sale of the Business on or about 19 May 2022, $7.5m and, on or about 3 November 2022, $24.439m was paid to or for the benefit of Campbell McLaren.  On 11 November 2022, $100,000 and on 16 December 2022, $50,000 was paid to or for the benefit of Wesley McLaren.  Following the payment of the $24.439m to Campbell McLaren on or about 3 November 2022, interests associated with Campbell McLaren purchased a residential property in Noosa for a contract price of $27m.  There are contested issues concerning the payments mentioned and also as to the possible entitlement of others to equitable relief concerning the Noosa property.

  1. The Further Advice reports that enforceable undertakings have been provided, supported by a registered first mortgage in favour of the Trust to ensure that property is not sold or encumbered. 

  1. The Further Advice refers to the probability that in due course any matters in dispute or difference between the contending beneficial interests, such as concerning those payments and the Noosa property, may be mediated under the auspices of the new trustee.  Clearly a mediation of all disputes concerning the administration of the Trust is desirable.  It is likely to be of assistance to all beneficiaries if the new and independent trustee is an informed participant in such a process to be conducted by an arms’ length mediator.

Allegations in the Breach of Trust Proceeding

  1. The second further reason concerns the allegations made by Candace McLaren in the Breach of Trust Proceeding.

  1. The existing statement of claim in the Breach of Trust Proceeding alleges breaches of trust by Artcam in relation to income resolutions made concerning the income of the Trust in each of the 2013 – 2021 financial years.  That is, by reason of Artcam’s alleged failure to give real and genuine consideration as to whether to pay, apply or set aside any of the income in each of those years to or for the benefit of Candace McLaren.  In each of those years, the net profit of the Trust before tax was substantial.  By way of example, $9,797,644 in 2014 and $4,217,160 in 2021.

  1. In addition to complaints of breach of trust in relation to those financial years, the statement of claim includes allegations of improper purpose and breach of trust by Artcam, at that time allegedly controlled by Campbell McLaren, in relation to a resolution at a meeting of Artcam on 28 June 2022.  The resolution concerned what should take place following the sale of the Business.  These and other allegations are relied on by Candace McLaren in support of relief that includes that the trustee, Artcam, is liable and should be removed.

  1. Candace alleges that Artcam could and should have consented to its removal under s 48 of the Trustee Act.  In light of the present application, that contention is no longer pressed.  Nor is any allegation pressed of abuse of process arising from Artcam seeking effectively the same remedy in this proceeding.  While those claims are not pressed, the existence both of the claims made against Artcam in the Breach of Trust Proceeding and the relief sought concerning its removal are further factors in favour of the removal and replacement orders.

The Identity of the Replacement Trustee

  1. Artcam submitted that the appointment of Mr Middleton would maintain the status quo following the sale of the Business and would both create an opportunity for resolution of disputes and enhance the probability of resolution of those disputes.  Artcam submitted that the appointment would promote the execution of the Trust, that its ongoing administration involves the consideration of legal issues of some complexity and that there is a clear and present danger that the affairs of the Trust provide the occasion for litigation between beneficiaries spanning many years.  It submitted that such an outcome remains a risk depending on the approach taken by the beneficiaries and their respective lawyers.  However, the appointment of Mr Middleton was considered to provide the best chance of avoiding such an outcome.

  1. Further submissions in favour of the appointment of Mr Middleton focused on the enhanced prospects of a global resolution of all disputes between and claims by beneficiaries should he be appointed the replacement trustee.

  1. I have no doubt that Mr Middleton, a former judge of the Federal Court, is a suitable person to be appointed as the replacement trustee in the unusual and complex circumstances that surround this Trust.  Having regard to the considerations that inform the exercise of the inherent jurisdiction earlier identified, I have no hesitation in ordering that Mr Middleton be appointed as the replacement trustee.

Remuneration of the Trustee

  1. The usual position is that trustees act gratuitously unless a special arrangement to the contrary is made.[18] One of the circumstances in which a trustee may be permitted to charge remuneration is where it is authorised by the Court either under the Court’s inherent jurisdiction, the Court’s jurisdiction under s 63 of the Trustee Act, or under s 77 of the Trustee Act.

    [18]Macedonian Orthodox Community Church St Petka Inc v His Eminence Peter the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, 93 [69].

  1. Artcam submitted that the Trust Deed does not adequately deal with the remuneration of the trustee or his professional indemnity insurance, and that orders should be made pursuant to s 63 of the Trustee Act providing for those matters.

  1. Section 63 provides:

63       Power of Court to authorize dealings with trust property

(1)Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure or other transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument (if any) or by law, the Court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose on such terms and subject to such provisions and conditions (if any) as the Court thinks fit and may direct in what manner any money authorized to be expended, and the costs of any transaction are to be paid or borne as between capital and income.

(2)The Court may from time to time rescind or vary any order made under this section, or may make any new or further order.

(3)An application to the Court under this section may be made by the trustees, or by any of them, or by any person beneficially interested under the trust.

(emphasis added)

  1. Clauses of the 1978 Deed relevant to these issues are clauses 14, 17 and 20.  

  1. Clause 14 provides:

THE Trustee shall be entitled to be indemnified out of the assets for the time being comprising the Trust Fund against liabilities incurred by them in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts authorities powers and discretions hereof or by virtue of being the Trustees hereof.

  1. Clause 17 provides:

ANY Trustee hereof who may be a solicitor or accountant or any firm of which he may be a member shall be entitled to make all usual and proper charges for both his professional and other services in the administration of the trusts hereof and for his time and trouble that he would have been entitled to make if not a Trustee and so employed.

  1. Clause 20 provides:

ANY Trustee not being one of the first named Trustees or to any persons who have made additions to the Trust Fund hereunder may from time to time charge and retain out of the Trust Fund such Trustee’s commission as is reasonable but not exceeding a fee equal to the commission chargeable from time to time by a Trustee Company pursuant to the Trustee Companies Act 1958 if such Trustee Company were the Trustee hereof.

  1. In its written submissions filed in advance of the hearing, Artcam submitted that, of these three provisions, only clause 20 deals with remuneration by the trustee for his own services.

  1. Artcam submitted that proposed order 4 is both necessary and appropriate because there is, at the very least, uncertainty about whether the powers under the Trust Deed concerning the remuneration of the trustee would permit payment of the trustee’s fees charged on an hourly basis and at the rate required by Mr Middleton.

  1. In relation to clause 20, Artcam referred in its submissions to s 3(1) of the Trustee Companies Act 1984 (Vic) (‘the 1984 Act’) and Schedule 1 of that Act by which the whole of the Trustee Companies Act 1958 (‘the 1958 Act’) to which clause 20 of the Trust Deed refers was repealed.[19]  There is no transitional provision, either in the 1984 Act or in the Interpretation of Legislation Act 1984 (Vic), which provides a pathway to construing clause 20 by reference to the 1984 Act.

    [19]For the sake of completeness, it may be noted that the 1984 Act itself was substantially amended on 11 May 2010 by the Trustee Companies Legislation Amendment Act 2010 (Vic) which inserted s 61(2) into the 1984 Act, which provided that: ‘(2) Despite the commencement of the Trustee Companies Legislation Amendment Act 2010, any entitlement of a trustee company to fees or commissions that existed under this Act immediately before that commencement continue to exist and may be dealt with as if this Act, as in force before that commencement, continued to apply.’

  1. Artcam submitted that it might be said that, following the repeal of the 1958 Act, the ‘commercial approach’ would then require clause 20 to have its meaning fixed by reference to the provisions of the 1958 Act immediately in force prior to its repeal.

  1. I accept Artcam’s submission that a review of the (now repealed) provisions of the 1958 Act discloses that, even if incorporated by reference into clause 20 of the Trust Deed, those provisions do not provide a practical mechanism for the payment of fees by a trustee who wishes to be remunerated for his work by the hour.

  1. Concerning both the basis on which Mr Middleton proposes to render fees and the level of the hourly and daily rate, Artcam submitted:

(a)        First, though Mr Middleton’s appointment was initially opposed by Kate and Candace, they have each now expressed their support for his appointment.  That support has not been qualified by reference to the matter of Mr Middleton’s fees.  The consent of Kate and Candace to Mr Middleton’s appointment must be taken as consent also to the terms upon which Mr Middleton is prepared to undertake the onerous task of trustee.  The present position is therefore that each of the individuals who are takers in default upon the vesting of the Trust, Campbell, Kate and Candace, and through them their families, who between them hold the predominant economic interest in the Trust, have agreed to Mr Middleton’s appointment on the above conditions.  Their support for the appointment of Mr Middleton thus impliedly conveys an appreciation on their part that his appointment is in their interests.

(b)       Secondly, the circumstances of the Trust and interests held in other related entities are at a stage where the Trust should be vested, or its capital distributed to beneficiaries in accordance with the discretion to be exercised by Mr Middleton as the new trustee.  This circumstance has arisen, or more accurately has been accelerated, because of the sale of the principal business of the Trust.  In effect, the Trust is to be ‘wound up’ and accordingly Mr Middleton’s role will be akin to that of a liquidator.  Mr Middleton will need to consider the Venn diagram of inter-relationships between the Trust and related entities.  In due course it may be necessary for Mr Middleton to be appointed as a receiver, or possibly liquidator, of other related entities.

(c)        This is not a case of appointing a trustee to manage the investment of funds held in the Trust in authorised trustee investments, or to supervise the routine distribution of fixed entitlements under a trust.  Mr Middleton’s tasks will be many and will ultimately involve the exercise of the trustee’s discretion to distribute very substantial sums among the beneficiaries; assuming agreement cannot be reached between all the beneficiaries concerning the distribution of the assets in the Trust, possibly considering the value of interests held outside the Trust by related entities on behalf of one or more of the beneficiaries.  These are potentially difficult questions, which require detailed analysis and fine judgment.

  1. The defendants do not oppose proposed order 4 concerning Mr Middleton’s remuneration or proposed order 5 concerning professional indemnity insurance.

  1. During the hearing, I expressed concern about the level of overall fees that might be charged if I made proposed order 4 relying upon the power conferred by s 63 of the Trustee Act but without also imposing an overall cap on Mr Middleton’s fees. I drew attention to s 77 of the Trustee Act which provides as follows:

Commission allowable to trustee of a settlement

It shall be lawful for the Court or an Associate Judge of the Court to allow out of the trust funds to the trustee of a settlement such commission or percentage not exceeding five per centum for his pains and trouble as is just and reasonable.

  1. Attention was drawn during the hearing to the current net asset summary of Artcam in its capacity as trustee of the Trust as at February 2023.  The net asset summary itemised total current assets of $32,721,761, total non-current assets of $15,418,994 for total assets of $48,140,755.  The financial liabilities of the Trust as at February 2023 are recorded as $46,065,214 including a liability to Campbell McLaren of $46,047,487, noted as ‘unpaid present entitlement’.  In the result, net assets of $2,075,541. 

  1. As noted in the Further Advice, the net asset summary may be incorrect to characterise the sum of $46,047,487 as a liability of the Trust.  It is also the case that the amount in question appears attributable to resolutions of Artcam on 28 June 2022, the validity of which Candace seeks to impugn in the Breach of Trust Proceeding.

  1. I accept that, given the disputes concerning what properly comprises the Trust assets, an investigation may be required in order to determine that issue. This is not a case where it can be said with confidence what comprises the Trust assets and therefore what comprises 5 per cent of the Trust assets for the purposes of s 77 of the Trustee Act.  In those circumstances, it is not possible to impose a cap in relation to the trustee’s remuneration by reference to a percentage of Trust assets as might otherwise have been the case.

  1. In any event, the case law on s 65 of the Administration and Probate Act 1958 (Vic), which is similar terms to s 77 of the Trustee Act, makes it clear that an award of commission is not based upon a trustee’s hourly rate and only permits commission for a trustee’s past and not future conduct.[20] For those reasons, s 77 of the Trustee Act does not provide an appropriate jurisdiction for proposed order 4.  

    [20]Re Will and Estate of Macleod [2017] VSC 67, [47].

  1. Section 77 of the Trustee Act does not limit the Court’s jurisdiction to order that a trustee be paid remuneration under s 63 or in its inherent jurisdiction.[21]  The Court’s inherent jurisdiction to order remuneration can be exercised when the duties undertaken by the trustee are extensive, can only be performed where the trustee seriously sacrifices his own interests and where the trustees are not prepared to act without being remunerated.[22] Given the extensive work that will be involved in administering the Trust, and the lack of any alternative trustee,[23] I would be satisfied, but for the matters set out below that only emerged after the hearing upon enquiry by the Court, that it would be appropriate to make an order to permit Mr Middleton to receive remuneration, at an hourly rate, from the Trust Fund.  During the course of the hearing there was discussion that, if there is concern about the overall level of Mr Middleton’s fees, then there is liberty to apply reserved to each of the defendants which may be exercised in those circumstances. 

    [21]Re Queensland Oil Shale Mining Industry (Superannuation) Ltd [1999] 2 Qd R 524; Re the Will of Stratton [1981] WAR 58.

    [22]R e Creditors Trust of Jackgreen (International) Pty Ltd [2011] NSWSC 748, [43].

    [23]See [89] above.

  1. Following the hearing, in response to a request for further information concerning whether, following Mr Middleton’s retirement as a judge, he had returned to the Bar or obtained a practicing certificate as a solicitor, the Court was informed that Mr Middleton is in practice as a solicitor.

  1. As indicated in correspondence with the parties following the provision of further information, as Mr Middleton is a solicitor, it would appear on its face that any fees Mr Middleton would charge would fall within the scope of clause 17.  It would therefore not be appropriate to authenticate an order, as had been my intention when the matter was heard, which would confer upon Mr Middleton as new trustee of the Trust power pursuant to an order of the Court to charge and retain out of the Trust Fund his fees at a rate of $2,000 per hour.  That issue having been raised, Artcam provided a short supplementary submission which contended that order 4 remained appropriate as there is some doubt as to whether clause 17 would permit Mr Middleton to be remunerated for all his time and trouble as trustee.

  1. I do not agree with Artcam’s submission.  For the reasons that follow I am satisfied that clause 17 permits Mr Middleton to be remunerated on an hourly basis at the rate he would otherwise charge as a solicitor.  That is provided that; the remuneration is usual and proper, is incurred for services done in the administration of the Trust and is an amount that Mr Middleton would have been entitled to charge if not acting as trustee. 

  1. Artcam contended that it was appropriate for the Court to make orders pursuant to s 63 of the Trustee Act in order to avoid any doubt that Mr Middleton may charge his professional fees independently of whether the work he undertakes may be properly characterised as legal work.

  1. Artcam submitted that clause 17 must be read together with clause 15 which provides:

THE Trustee shall not be bound in any case to act personally but shall be at full liberty to act as managers or to employ any contractors manager solicitor accountant clerks workmen employees or servants or any agents to transact all or any business of whatever nature required to be done in the premises including their receipt and payment of money and the Trustee shall decide the remuneration to be allowed and paid all charges and expenses so incurred.

  1. Artcam argued in relation to clause 17:

(a)        the phrase ‘usual and proper’ charges would involve a factual investigation into the solicitor-trustee’s usual and proper charges.  Artcam suggests that it may be a fine question as to whether there is a ‘usual charge’ for the non-professional work as a trustee; and

(b)       ‘usual charges’ suggests the usual charges of a solicitor and does not extend to charges for other services not usually performed by a solicitor.

  1. In support of those arguments, Artcam referred to Chick v Grosfeld (No 3) [2012] NSWSC 1536 and Clarkson v Robinson [1900] 2 Ch 722, which involved trust instruments with language that Artcam submits is similar to the Trust Deed in this case. Artcam accordingly contended that clause 17 limits recovery of remuneration to time and trouble that is expended in the course of acting as a solicitor only and would therefore not include remuneration for any time Mr Middleton spends carrying out non-legal work while acting as trustee.[24]

    [24]Artcam gave the examples of overseeing the management of an investment portfolio, exercising a discretion and making any investigations of the needs of beneficiaries incidental to the exercise of those discretions.

  1. I do not agree.  While comparable cases can be useful, the Court’s task is to construe the trust instrument in order to give effect to the settlor’s intention[25] and the language used in instruments in other cases is little guide.[26]  It is plain that the inclusion of both ‘professional’ and ‘other services’ in clause 17 is designed to permit a solicitor-trustee to receive remuneration for legal as well as non-legal work done in the administration of the Trust.

    [25]J D Heydon and M J Lemming, Jacob’s Law of Trusts (LexisNexis Butterworths, 8th Ed, 2016) [8-02].

    [26]Clarkson v Robinson [1900] 2 Ch 722, 725.

  1. Clause 17 recognises that, in performing non-legal work in the administration of the Trust, the trustee is forgoing the opportunity to perform other legal work for which the trustee would otherwise be remunerated.  I interpret clause 17 as permitting the trustee to receive similar remuneration for work done in the administration of the Trust, as reasonably requires the attention of the trustee personally, as the trustee would receive in performing their day to day role as solicitor.  That is, subject to the overarching restraint in clause 17 that such charges must be ‘proper’.

  1. In short, because Mr Middleton is a solicitor and because clause 17 deals with the issue of the remuneration of a solicitor for both his professional and other services in the administration of the Trust, there is no reason to make an order relying upon s 63. It is not appropriate and it is unnecessary to make an order in the form set out in proposed order 4. The Trust Deed already permits Mr Middleton to receive his fees from the Trust Fund at the rate he would have been entitled to charge as a solicitor. The Court does not have evidence about whether his usual charge out rate as a solicitor is $2,000 per hour or some other rate. If issues or concerns arise concerning the “usual” hourly rate, there remains liberty to apply.

  1. To ensure there is an appropriate flow of information to enable the informed exercise of liberty to apply by any of the parties, in addition to the orders made on 5 April 2023, I will order that, within 14 days of the end of each month, the replacement trustee, Mr Middleton, provide information to each of the defendants about his remuneration and also his costs and expenses in acting as Trustee for the preceding month. 

Professional Indemnity Insurance

  1. Concerning professional indemnity insurance, Artcam relied upon the following passage from Lewin at 713, [15-085]:

The evidence should confirm that the proposed new trustee is covered by professional indemnity insurance for the usual risks.  If and to the extent that the trust instrument does not authorise the remuneration proposed, it may be necessary to seek a remuneration order from the court under the statutory or inherent jurisdiction.

  1. At the time of the hearing, professional indemnity insurance had not been organised but was proposed to be arranged with the assistance of an insurance broker.  While in his capacity as a solicitor Mr Middleton may be expected to hold professional indemnity insurance, I proceed on the basis that such cover may not extend to all categories of work Mr Middleton is required to perform as trustee and also the level of such cover may not be sufficient having regard to the complexity of the issues that concern the Trust and the potential magnitude of disputed claims.  Order 5 will facilitate the making of arrangements for suitable professional indemnity insurance.  It is an order that is either consented to or not opposed by all parties.

  1. If there are any disputes concerning the type of cover obtained or its terms and conditions or its cost, there is liberty to apply.

Conclusion

  1. The present circumstances in which an existing trustee seeks its own removal and the replacement by another are unusual.  The orders that are sought arise in the context of the detailed Joint Advice of Senior and Junior Counsel.  The Joint Advice and the Further Advice have been made available on a confidential basis to the parties.

  1. Those persons who comprise the individual family members who represent the main economic interests in the BF McLaren Family Trust, and related entities, including Candace McLaren, either agree to or do not oppose the orders that are sought.

  1. For the reasons earlier discussed, the importance of removing Artcam as the trustee and of appointing a new and independent trustee of the Trust of the calibre and experience of Mr Middleton is apparent.  I will make proposed orders 1, 2 and 5.

  1. I will not make proposed order 4.  The question of Mr Middleton’s remuneration is adequately dealt with in clause 17 of the Trust Deed.  If there are issues that arise concerning Mr Middleton’s remuneration in the future, there is liberty to apply.  I will expand that liberty to apply in the authenticated orders to include express references to any application by or on behalf of Mr Middleton.

SCHEDULE

ARTCAM ENTERPRISES PTY LTD ACN 009 871 818

Plaintiff

CAMPBELL MCLAREN

First Defendant

PAMELA MCLAREN

Second Defendant

KATE LOUISE MCLAREN

Third Defendant

CANDACE DAWN GEORGIA MCLAREN

Fourth Defendant


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Miller v Cameron [1936] HCA 13
Miller v Cameron [1936] HCA 13
Hancock v Rinehart [2015] NSWSC 646