Australian Executor Trustees Limited v Balnaves

[2008] SASC 12

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

AUSTRALIAN EXECUTOR TRUSTEES LIMITED & ORS v BALNAVES & ORS

[2008] SASC 12

Reasons of Judge Lunn a Master of the Supreme Court

29 January 2008

PROCEDURE

Beneficiaries of a trust applying to be joined as additional defendants to the action - 6R 83 - uncertainty as to who was the current trustee of the trust - persons claiming to be beneficiaries, and an entity claiming to be the trustee, joined as defendants.

AUSTRALIAN EXECUTOR TRUSTEES LIMITED & ORS v BALNAVES & ORS
[2008] SASC 12

AUSTRALIAN EXECUTOR TRUSTEES LIMITED & ORS –v- BALNAVES & ORS

File 1095 of 2007

Reasons on joinder of additional defendants.

1. JUDGE LUNN:     The plaintiff is the executor of the will of Jean Balnaves, deceased.  A beneficiary named in the will is the “The Balnaves Family Trust”.  There have been six trusts having the name of “The Balnaves Family Trust” established between 15 December 1978 and 1 October 2004, which for convenience have been designated as the Trusts A, B, C, D, E and F.  The plaintiff seeks a determination under 6R 206 as to which of the six trusts is the beneficiary designated in the will.

2. The 1^st defendant is the son of the deceased and the trustee of Trusts B, D and F.  The 2^nd defendant is the trustee of the Trusts C and E.  The issues now before me concern the Trust A.

3. The brief history which follows is confined to the matters to which I need to have regard in deciding the applications before me but I make no determination about any of the contentious issues.  There are a number of contentious issues about Trust A which will need to be determined either in this action or in other proceedings.

4. By a deed of settlement dated 15 December 1978 made between the 1^st defendant as settlor and Moriden Nominees Pty Ltd (ACN 007 883 972) (“the old Moriden”) as trustee, Trust A was established as the Balnaves Family Trust.  The 1^st defendant was also the appointor under that deed of settlement.  The specified beneficiaries named in that trust deed were Mark Balnaves, Lucretia Balnaves and Rachel Balnaves (“the specified beneficiaries”) who are children of the 1^st defendant but are now estranged from him.  There are also other potential beneficiaries who are descendants of the specified beneficiaries at a vesting date of 30 June 2075.

5. On 30 March 1995 the old Moriden was de-registered by ASIC and by virtue of the Corporations Law any assets of the old Moriden vested in ASIC.  On 4 July 2007 ASIC refused a request from the specified beneficiaries to re-instate the old Moriden. 

6. On 4 April 2007 the 1^st defendant caused a new company named Moriden Nominees Pty Ltd (ACN 124 762 643) (“the new Moriden”) to be incorporated.  Its sole director is now Jane Reynolds who is associated with the 1^st defendant.  By a deed of variation made on 4 April 2007 the 1^st defendant, purporting to act as the appointor under the deed of settlement of 15 December 1978, “re-appointed” the new Moriden as trustee of Trust A.  (I need not enter into whether this was in breach of any orders of the Family Court).

7. An undated document signed by the 1^st defendant as “settler” and as appointor under the deed of 15 December 1978, and by Jane Reynolds as director of the new Moriden, purported to remove the specified beneficiaries as specified beneficiaries from Trust A.  The legal effectiveness of this document was challenged by counsel for the specified beneficiaries.  (There are apparently other beneficiaries under this trust being children born since 15 December 1978, but on the evidence before me it is unclear who they might be).

8. By an application, FDN 5, the specified beneficiaries applied under 6R 83 to be joined as parties to this action.  The plaintiff did not oppose the application.  It was opposed by the 1^st and 2^nd defendants.

9. By an application, FDN 10, the new Moriden also applied to be joined as a party to the action.  This was not opposed by any other party or applicant provided its joinder was not taken as an implicit recognition that it is now the trustee of Trust A.  The question of Jane Reynolds being permitted as the director of the new Moriden to act as its representative under 6R 27 in this action still needs to be resolved.

10. 6R 83 provides:

    83Representative actions by or against executors, administrators and trustees

    (1)An action may be brought by or against the executors or administrators of the estate of a deceased person as representatives of all persons interested in the estate.

    (2)An action may be brought by or against trustees as representatives of all persons interested in a trust.

    (3)However, the Court may, on its own initiative or on application, join a person with a beneficial interest or potential beneficial interest as a party to such an action.

    (4)The Court may appoint a person to represent the estate of a deceased person in an action.

11. It is to similar effect to R 30.01 of the repealed Supreme Court Rules 1987 and to earlier Rules.  The Rule does not affect the substantive rights of the parties, but is “merely a rule for convenience of procedure”:  Connolly v Maccartney (1908) 7 CLR 48 at 50. 6R 83(1) and (2) is only permissive and does not stipulate that it is mandatory for a trust to be sued by naming the trustee as the defendant. Its purpose is to avoid unnecessary costs in having both the trustee and the beneficiaries before the Court when there is no good reason why the trustee on behalf of the beneficiaries cannot properly defend the action. 6R 83(3) is to allow for the special case where the naming of the trustee as the defendant will not be an adequate protection for the interests of the beneficiaries of the trust. I can find no reported authority on such a use of 6R 83 and its predecessors, but it is to ensure that the interests of the trust, both the trustee and the beneficiaries, are adequately protected in litigation where the trust is a proper defendant without incurring unnecessary costs in over-representation. 6R 83(3) is a special instance of the power in 6R 74 where the Court can join any person as an additional defendant who is interested in the subject matter of the action and where that is in the interests of justice. By 6R 38(4) any person whose interests may be directly and adversely affected by a judgment is to be made a defendant to the proceedings.

12. Here the plaintiff seeks by these proceedings a binding determination against all entities bearing the name “Balnaves Family Trust” as to which of them is the beneficiary under the will of the deceased.  It is trite that anyone who may possibly be that beneficiary is not to be excluded from taking under the will without them having proper opportunity to put their case to the Court before the issue is determined.  I do not accept the proposition propounded by counsel for Tebs, for which he cited no authority, that an additional defendant should not be joined under 6R 83(3) unless the applicants showed that they had an arguable case to put to the Court.  It may be that the plaintiff could oppose the joinder of an additional defendant on this basis, but I do not see that it can be done by another defendant.  In interpreting the will the Court has to look to what is the most probable meaning of “The Balnaves Family Trust”.  Even accepting the argument of the 2^nd defendant that case for Trust A is very weak, it still has to be looked at in conjunction with the cases of the other Trusts B-E but I have no evidence on which to assess the comparative weight of their cases.  If the eligible beneficiaries cannot put up a sufficiently cogent case at trial that Trust A is the designated trust they run a considerable risk that the trial Judge will penalise them in costs.  It is in the interests of justice that there should be a contradictor to the interests of the 2^nd and 3^rd defendants to advance whatever case can be made that Trust A is the designated trust in the will and not Trusts B-E. This can be facilitated by joining the specified beneficiaries as additional defendants in the action. The specified beneficiaries indicated they intended to pursue possible legal proceedings for the re-instatement of the old Moriden and/or the appointment of a new trustee for Trust A. If and when the old Moriden is re-instated or a new trustee is appointed for Trust A, it may be necessary for the Court to review whether these specified beneficiaries should continue as defendants in the action. However, there is no condition precedent to be imposed on the specified beneficiaries of obtaining the re-instatement of the old Moriden or the appointment of a new trustee under s 36 of the Trustee Act  before they can be joined under R 83(3).

13. I accept that the locus standi of the specified beneficiaries to be additional defendants in this action depends upon them continuing to be beneficiaries under Trust A.  Having read the Trust deed I am not satisfied that the 1^st defendant as the settlor or the appointor had the power under that deed to remove the specified beneficiaries as beneficiaries.  Insofar as the trustee under the Trust deed may have  the power to do so I consider there is sufficient doubt about the new Moriden being the trustee of Trust A that the point should not be decided on this interlocutory issue.  It may be that the trial Judge will have to determine the point if it becomes material to what he or she has to decide.

14. In the summons the plaintiff named the 3^rd defendant as “the Trustee of the Balnaves Family Trust established 15-12-1978”.  This is not a proper designation of a party as it does not name a recognised legal entity.  The joinder of the specified beneficiaries and the new Moriden as defendants should ensure that the interests of all of the possible beneficiaries and the trustee of that trust are properly presented to the Court in the determination of the issue sought by the statement of claim.  The 3^rd defendant as designated in the summons is to be struck out.  If the plaintiff does not consider that all necessary parties are before the Court it can apply to join any other defendant.  (No one has suggested that ASIC in which any assets of the old Moriden are presently vested should be made a party to the action).

    I have today made the following orders:

    1      That under R 83(3) Mark Neilson Balnaves, Lucretia Anne Graves (nee Balnaves) and Rachel Jean Neumann (nee Balnaves) be joined as additional defendants to this action.

    2      That Moriden Nominees Pty Ltd (ACN 123 762 643) be joined as an additional defendant to this action.

    3      That the existing 3^rd defendant “the Trustee of the Balnaves Family Trust established 15-12-1978” be struck out.

    4      That the plaintiff make the necessary consequential amendments to the summons within 14 days.

    5      That the defendants named in paragraph 1 above be appointed to represent the interests all the beneficiaries under the trust established by the Trust Deed of 15 December 1978.

    6      The question of the costs of FDN 5 and FDN 10 be reserved to the trial Judge.

    7      Hearing on 20 December 2007 certified fit for counsel.

    8      Further directions hearing to be held on 11 February 2008 at 9.15 am.