Astor-Smith v Bazicus Pty Ltd

[2019] NSWSC 239

Supreme Court

New South Wales

Medium Neutral Citation:	Astor-Smith v Bazicus Pty Ltd [2019] NSWSC 239
Hearing dates:	5 March 2019
Date of orders:	05 March 2019
Decision date:	08 March 2019
Jurisdiction:	Equity
Before:	Ward CJ in Eq
Decision:	1. Order pursuant to s 70 of the Trustee Act 1925 (NSW) that the defendant be appointed as trustee of the residuary estate of the late Barry Allen Jones under the Will dated 12 April 2012 (the Trust) in place of the original trustees, Susan Frances Astor-Smith and Robert George Pettener. 2. Order pursuant to s 71 of the Trustee Act 1925 (NSW) that the property now subject to the Trust vests in the defendant. 3.   Order that the plaintiffs’ costs of these proceedings be paid out of the estate of the late Barry Allen Jones on the indemnity basis.
Catchwords:	EQUITY — Trusts and trustees — Court’s supervision of — Appointment and removal of trustees –– Circumstances where the original trustee wishes to retire and there will be adverse stamp duty consequences to the Trust if the alternate trustee named in the Will is appointed –– Order that defendant be appointed as trustee of the residuary estate under the Will in place of the original trustees
Legislation Cited:	Duties Act 1997 (NSW), s 54(3) Real Property Act 1900 (NSW) Trustee Act 1925 (NSW), ss 6, 70, 71
Cases Cited:	Pope v DPR Nominees Pty Ltd (1999) 74 SASR 78 Re Fauntleroy (1839) 59 ER 610 Re Foxhall (1847) 41 ER 951 Re The Estate of Roberts (1983) 20 NTR 13; (1983) 70 FLR 158 Re Watson (1899) 18 NZLR 368
Category:	Principal judgment
Parties:	Susan Frances Astor-Smith (First Plaintiff) Robert George Pettener (Second Plaintiff) Bazicus Pty Ltd (Defendant)
Representation:	Counsel: M Bennett (Plaintiffs) Defendant – submitting appearance   Solicitors: Munro Lawyers (Plaintiffs)
File Number(s):	2018/00361444
Publication restriction:	Nil

Judgment

1. HER HONOUR: By summons filed 23 November 2018, the plaintiffs (Susan Frances Astor-Smith and Robert George Pettener) who are the joint trustees appointed under the will dated 12 April 2012 of the late Barry Allen Jones (the Will), have sought relief including relief pursuant to s 70 of the Trustee Act 1925 (NSW) to appoint the defendant, Bazicus Pty Limited (ACN 628 345 380), as trustee for the residuary estate of the late Barry Allen Jones under the Will in place of the original trustees (i.e., the plaintiffs). The defendant has filed a submitting appearance and consents to its appointment as trustee.

2. Briefly, by way of background, under the Will each of the plaintiffs was appointed as executor and trustee of the Will. Mr Jones, the deceased, died on 26 August 2013 and probate was granted to the plaintiffs on 23 October 1913. The evidence before me is that the duties of the plaintiffs as executors have been completed but that they continue in their role as trustees of the residue of the estate. Ms Astor-Smith was the deceased's spouse as at the date of his death; Mr Pettener was the deceased's accountant at the date of his death.

3. Pursuant to the Will, the residue of the estate is to be held on trust to pay the income to Ms Astor-Smith during her life (cl 8(a)), and on and from the date of the death of Ms Astor-Smith, (that being defined in cl 8(b) as the “vesting date”), the trustees are to hold the residuary estate (as to both the capital and future income thereof) upon trust for such of the deceased's three sons (Bryn David Edgar Jones, Owen Barry Edwin Jones and Huw Robert Henry Jones) as shall be living at the vesting date, and, if more than one, equally between them as tenants in common (with the proviso that if any of the three sons shall not be living at the vesting date, leaving a child or children living at the vesting date, then such child or children who live to attain the age of 21 shall take, and if more than one, then take equally between them, the share of the residuary estate that his, her parent, or their parent would have taken had such parent survived the vesting date) (cl 8(b)).

4. The Will provides that if the income is, in the opinion of the trustees, insufficient to maintain Ms Astor-Smith in reasonable comfort or to meet expenditure of an onerous nature (including medical and/or nursing charges), then the trustees may apply capital to provide income for Ms Astor-Smith (see cl 9).

5. The initial property in the Trust included the property in which the deceased and Ms Astor-Smith resided at the date of his death, being a property in Balmain. Clause 10 of the Will authorised the deceased's trustees to permit Ms Astor-Smith to have the use, occupation and enjoyment of that property free of rent and the right to request the sale of the property and purchase of a substitute property. Pursuant to cl 10, the Balmain property has been sold and a substitute property also in Balmain was purchased in 2017. There is evidence as to the assets currently held in the Trust. It is not necessary to summarise those in these reasons; however, I note that part of the assets of the Trust include ownership of all the issued share capital in an investment company which holds various investments producing income for the Trust.

6. The substitute residence purchased in Balmain is the only asset in the Trust that is subject to the Real Property Act1900 (NSW). Ms Astor-Smith has deposed in her affidavit affirmed 7 September 2018 that this property is held in the name of the trustees and the Trust is the sole owner of the property. Each of the remainder beneficiaries (Bryn Jones, Owen Jones and Huw Jones) has affirmed an affidavit which has been read in these proceedings. Each of those affidavits is dated 27 September 2018. Each of the sons, relevantly, has deposed to his belief that it is in the interests of the beneficiaries of the Will that the new trustee be appointed in place of the original trustees and each gives his consent to the proposed orders. The Will does not contemplate, nor does it provide for, what is to occur if an alternate trustee does not accept appointment as trustee or if for some reason there is to be only one trustee.

7. Ms Astor-Smith has, by affidavit affirmed 7 September 2018, set out much of the background to the current application and has, at [23], deposed to her wish to retire as trustee and to appoint as the new trustee the defendant, a corporate entity of which she is a director, “to facilitate passing control of the Trust in the event of my incapacity or death”. The Will names a substitute trustee for each of the original trustees in the event that one or both of the original trustees refuses or is unable to act. The substitute trustee named for Ms Astor-Smith is Mr Huw Robert Henry Jones, the deceased's son (see cl 3(c) of the Will). The substitute trustee for Mr Pettener is Mr John Baker (see cl 3(b) of the Will). Before his retirement Mr Baker's address was care of Baker & Pettener, from which I infer that Mr Baker was also an accountant with Mr Pettener’s firm. Ms Astor-Smith has deposed in her affidavit at [21] to her understanding that John Baker has retired and has moved interstate and she considers it unlikely that he will act as trustee in the event that Mr Pettener retires or dies.

8. Mr Pettener, in his affidavit affirmed 7 September 2018, has deposed to the fact that his firm, Pettener Business Services Pty Limited, has provided the accounting services for the Trust since inception.

9. In evidence is a copy of an ASIC extract of the defendant, printed as at 15 February 2019, which indicates that the current shareholding of the defendant is comprised of six ordinary shares, three of those shares held by Ms Astor-Smith and one each by the three remainder beneficiaries. The defendant currently has three directors: Ms Astor-Smith, Mr Pettener and Mr Huw Jones. The constitution of the defendant is also in evidence. It provides that there must be at least three directors of which one must be Ms Astor-Smith or her nominee; one must be Mr Huw Jones or his nominee; and one must be Mr Pettener or an independent director. It further provides that upon her death Ms Astor-Smith's shares are cancelled such that the remainder beneficiaries will become the only shareholders of the company in equal shares.

10. The present application is made pursuant to s 70(1) of the Trustee Act 1925 (NSW), which provides that 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. Section 70(2) provides that 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.

11. The plaintiffs have referred to authority for the proposition that the power to appoint new trustees is so broad that it may be exercised even where the trust terms provide to the contrary, citing Re Fauntleroy (1839) 59 ER 610 and Re Foxhall (1847) 41 ER 951 (although there is, in the present case, no provision in the Will to the contrary of what is here proposed).

12. I have also been taken to authority as to the meaning of the word "expedient" (see Re The Estate of Roberts (1983) 20 NTR 13; (1983) 70 FLR 158 at 162). There it was said that "expedient" means conducive to, or fit or proper or suitable, having regard to “the interests of the beneficiaries, to the security of the trust property and to a sufficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee”. It is noted by the plaintiffs that the words "expedient" and "inexpedient" are words of wide meaning and that it has been said that they may mean advantageous or appropriate or suitable to the circumstances of the case, or the contrary, depending on whether one is looking at the meaning of "expedient" or "inexpedient" (see Pope v DPR Nominees Pty Ltd (1999) 74 SASR 78 at [33]).

13. It is noted that instances where it has been held expedient to appoint a new trustee include where a trustee that would otherwise act resides outside of the jurisdiction (see Re Watson (1899) 18 NZLR 368) (relevant having regard to Mr Baker’s retirement and residence outside the jurisdiction). The plaintiffs note that, as I have said, there is no provision in the Trust to deal with the present application and that s 6 of the Trustee Act is not available to them in the present circumstances. Section 6(6) provides that by the appointment of a trustee in place of whom the new trustee is appointed shall be discharged from the trust, provided that, except where only one trustee was originally appointed, a trustee shall not be so discharged unless there will be left after the discharge at least two trustees, or the NSW Trustee, or a trustee company, to perform the Trust.

14. It is submitted that the appointment of the defendant in substitution for the existing trustees is expedient for the following reasons. First, that Ms Astor-Smith's interests as the life beneficiary are advanced by the appointment as the trustee of the new trustee, as it provides continuity and certainty over who will be trustee in the event that either of the existing trustees is unable to act due to incapacity or otherwise wishes to retire. Second, that the remainder beneficiaries' interests are advanced as they are each represented as a director of the trustee company during Ms Astor-Smith's lifetime and are party to the decisions of the trustee but in a manner that does not give them control of the trustee. This is referred to as giving the remainder beneficiaries a voice in the decisions of the trustee. Third, it is said that the appointment removes the risk of conflict between Ms Astor-Smith and the remainder beneficiaries if Mr Pettener resigns and Mr Baker is unable to act, with the effect that Ms Astor-Smith, or her alternate trustee, becomes the sole trustee. Fourth, that the Trust property is secured as it is held by a company and has perpetual succession. Fifth, that the efficient administration of the Trust is facilitated in the event that an individual trustee becomes incapable of acting as a trustee and can be replaced in an expedient manner. Sixth, that the appointment is faithful to the executor's intentions as Mr Huw Jones is the alternate original trustee if Ms Astor-Smith is unable to act. And, seventh, that the wishes of the testator to provide for Ms Astor-Smith during her lifetime and to benefit his three sons on her death are given effect.

15. A further reason that is put forward in support of the proposition that the appointment is expedient is the stamp duty consequence which will flow if Ms Astor-Smith were to continue as trustee but Mr Pettener were to retire as trustee, or if Ms Astor-Smith were to be replaced by the alternate trustee, Mr Huw Jones. That is because, by s 54(3) of the Duties Act1997 (NSW), the change of any trustee will only benefit from a nominal duty of $50 (rather than ad valorem duty), where both the continuing and the new trustee(s) are precluded from benefitting under the Trust. It is submitted that, other than by way of the appointment of a new trustee, s 54(3) of the Duties Act will not be applicable to benefit the Trust because on any outcome under the current terms of the Trust an ongoing or new trustee will benefit under the Trust.

16. It is submitted that it is inexpedient to achieve the change of trustee other than by Court order as neither the Trust nor the statutory power under s 6(6) of the Trustees Act is available to the existing trustees.

17. I am satisfied that it is expedient to appoint the defendant as the new trustee in circumstances where Ms Astor-Smith wishes to retire as trustee and in circumstances where there will be adverse stamp duty consequences to the Trust if the alternate trustee (Mr Huw Jones) is to be appointed in her place. I am not persuaded that it is expedient to appoint the new trustee on the basis that this will give the remainder beneficiaries a voice in the decisions of the trustee, although it was urged upon me that “expedient” in this context could include something conducive to the interests of the remainder beneficiaries. But in any event, it is not necessary to form a concluded view on that as I am of the view that the adverse stamp duty consequences to the Trust, in the event that Ms Astor-Smith retires as trustee, (as she wishes to do) are sufficient to make it expedient for there to be the new appointment of the trustee and it is not inexpedient to do so. I note that this is a course which has the consent of each of the remainder beneficiaries.

18. Ms Astor-Smith is elderly. I note this because I gave some consideration during the course of submissions as to whether it might be necessary to consider the position of the class of beneficiaries who would take an interest in the residuary estate if his or her parent were to die before the vesting date (namely any children of the three sons of the deceased). However, I am not aware that any of the sons currently has a child or children; and it is seems reasonable to assume that their interest in the residuary estate will vest sooner rather than later. (Hence, I add, the prospect of contingent beneficiaries in respect of the remainder interest was not such to cause me to suggest that independent advice be sought as to the interests of that potential class of remainder beneficiaries.)

19. In the circumstances I make the following orders:

1. Order pursuant to s 70 of the Trustee Act 1925 (NSW) that the defendant be appointed as trustee of the residuary estate of the late Barry Allen Jones under the Will dated 12 April 2012 in place of the original trustees, Susan Frances Astor-Smith and Robert George Pettener.

2. Order pursuant to s 71 of the Trustee Act 1925 (NSW) that the property now subject to the trust vest in the defendant.

3. Order that the plaintiffs’ costs of these proceedings be paid out of the estate of the late Barry Allen Jones on the indemnity basis.

**********

Decision last updated: 08 March 2019