Benaroon Pty Ltd v Larmar

Case [2020] QCA 62

SUPREME COURT OF QUEENSLAND

CITATION:

Benaroon Pty Ltd v Larmar & Ors [2020] QCA 62

PARTIES:

BENAROON PTY LTD
ACN 009 990 381
(appellant)
v
YVONNE MARGARET LARMAR
(first respondent)
EAGLE II PTY LTD
ACN 095 769 725
(second respondent)
EARL HOWARD LARMAR
(third respondent)
NARELLE LARMAR
(fourth respondent)
ANNA O'LEARY
(fifth respondent)
ZACHARY O'LEARY
(sixth respondent)
CALEB COULTER
(seventh respondent)
ASHEN O'LEARY
(eighth respondent)
ROWAN HILL
(ninth respondent)

FILE NO:

Appeal No 14224 of 2018
SC No 9647 of 2018

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:


Supreme Court at Brisbane – [2018] QSC 274 (Martin J)

DELIVERED ON:

3 April 2020

DELIVERED AT:

Brisbane

HEARING DATE:

30 May 2019

JUDGES:

Fraser and Morrison and Philippides JJA

ORDER:

The appeal be dismissed with costs.

CATCHWORDS:

EQUITY – GENERAL PRINCIPLES – MISTAKE – EQUITABLE REMEDIES – RECTIFICATION – WHERE UNILATERAL MISTAKE – where the directors of the trustee appellant caused a family trust to be created – where the settlor of the trust had no independent intention as to how the trust was to operate and the settlor’s only intention was whatever the directors of the trustee appellant wanted – where the primary judge dismissed an application for rectification of the trust that was made on the basis that the trust deed (and its practical effect) did not conform with the actual intention of the directors of the trustee appellant – whether the primary judge erred in failing to find that the evidence before the Court provided clear and convincing evidence as to the trustee’s intention when the trust was created – whether the primary judge erred in not finding that there was sufficiently clear and convincing evidence that, when the trust deed was executed, the directors of the appellant trustee and the First Appointor, intended that he and his then wife should have been listed as beneficiaries of the family trust

Franklins Pty Ltd v Metacash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407, cited
Lister v Hodgson (1867) LR 4 Eq 30, cited
Public Trustee v Smith [2008] NSWSC 397, cited
Sanwick Pty Ltd v Kalyk [2016] NSWSC 100, cited

COUNSEL:

F L Harrison QC, with A J Anderson, for the appellant
R T Whiteford for the first respondent
No appearance for the second to ninth respondents

SOLICITORS:

Tobin King Lateef Lawyers for the appellant
McCullough Robertson Lawyers for the first respondent
No appearance for the second to ninth respondents

  1. FRASER JA:  I agree with the reasons for judgment of Philippides JA and the order proposed by her Honour.

  2. MORRISON JA:  I have read the reasons of Philippides JA and agree with those reasons and the order her Honour proposes.

  3. PHILIPPIDES JA: Background This is an appeal by Benaroon Pty Ltd (Benaroon) who, in its capacity as trustee of the Larmar Family Trust (the LFT), brought an unsuccessful application for rectification[1] of the trust deed of the Larmar Family Trust (the trust deed).

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Details
AGLC
Benaroon Pty Ltd v Larmar [2020] QCA 62
Case
[2020] QCA 62
Decision Date

CaseChat Overview and Summary

Benaroon Pty Ltd, the trustee of the Larmar Family Trust, appealed against the primary judge's dismissal of its application for rectification of the trust deed. The trust was established by Mr Earl Larmar, a director of Benaroon, and the settlor, Mr Reeves. The primary judge dismissed Benaroon's application on the basis that there was insufficient evidence to demonstrate that the trust deed did not conform to the actual intention of Benaroon's directors when the trust was created. Benaroon sought to have the trust deed rectified to include Mr Larmar and his then wife as beneficiaries. The primary judge found that while Mr Larmar intended for the trust to benefit himself, his spouse, their children, and grandchildren, there was no clear and convincing evidence to support that the trust deed should have included them as beneficiaries. The appeal was before the court to determine whether the primary judge erred in his findings.

The court considered whether the primary judge erred in failing to find that the evidence before the Court provided clear and convincing evidence as to the trustee's intention when the trust was created, and whether the primary judge erred in not finding that there was sufficiently clear and convincing evidence that, when the trust deed was executed, the directors of the appellant trustee and the First Appointor intended that he and his then wife should have been listed as beneficiaries of the family trust. The court found that the primary judge did not err in his findings. The court held that the primary judge was correct to conclude that there was no evidence as to what interests either Mr Larmar or his wife intended that they would have under such a trust, and there was no clear and convincing evidence about Ms Larmar's intention concerning who would benefit from capital and who would benefit from income. The court also found that the primary judge did not err in failing to find that there was clear and convincing evidence that Ms Larmar intended the trust to include Mr Larmar's future spouses as beneficiaries.

The appeal was dismissed with costs.

Orders

Orders of the court

The appeal be dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The primary judge set out the following evidence concerning Mr Larmar’s intention:[14][14]Reasons at [19]-[26].“[19] [Mr] Larmar’s evidence was that he intended that the trust would be for the benefit of himself, his spouse, his children, grandchildren and ‘the usual remaining beneficiaries’.[20]His explanation for the deed not naming him as a beneficiary is as follows.[21]At the relevant times, Mr Larmar was an accountant and a partner of the firm of White & Hancock. He would, in the ordinary course of his practice, assist clients to create trusts. Mr Larmar’s firm used the services of a firm of solicitors called Smith & Fitzgerald. Smith & Fitzgerald developed a precedent for a trust deed which was used frequently by Mr Larmar.[22]In 1975 Margaret Ryan became Mr Larmar’s personal secretary and has remained in that position since then.[23]He said that when a client required the creation of a trust he would follow the practice of dictating a standard form letter to Smith & Fitzgerald requesting the preparation of a trust deed. The letter would ordinarily include: the proposed name of the trust, the details of the trustee, details of the settlor, details of the appointors, particulars of the discretionary nature of the trust, and details of the beneficiaries of the trust. He said that Margaret Ryan would type the letter which would be then sent to Smith & Fitzgerald.[24]In his first affidavit, Mr Larmar said that, in or around early 1977, he had a conversation with Suzanne Larmar to the following effect: ‘Earl Larmar: “I want to establish a family trust as we have discussed previously for the benefit of ourselves and our family”.Suzanne Larmar: “I think that this is a good idea”.’[25]Mr Larmar also says that he had an intention to ensure effective tax distributions for the benefit of himself, his wife and their family and so wanted to establish a family trust. He says that he recalled that in or about early 1977 he said words to the effect to Margaret Ryan: ‘I want to establish a family trust for the benefit of myself my wife, our children, and grandchildren …’ and he gave Margaret Ryan the instructions: ‘to use the Smith & Fitzgerald precedent deed to include me, my wife, my children and grandchildren and the remaining usual beneficiaries.’[26]Ms Ryan says that Mr Larmar gave her a Smith & Fitzgerald precedent together with a list of beneficiaries which included Mr Larmar, his wife, his children and any grandchildren. She says that she typed the trust deed and gave it to him.”Whether clear and convincing evidence In considering whether he was able to be satisfied that there was clear and convincing evidence that the actual intention as to the effect of the deed was different from the effect which the instrument did have, his Honour made the following observations:[15]“[27] For the purposes of this application I am content to assume that Suzanne Larmar did, in fact, think it was a good idea to establish a family trust for the benefit of [Mr] Larmar, herself and their family. But there is no evidence as to what interests either she or Mr Larmar intended that they would have under such a trust. Were they to be beneficiaries of capital or income or both? Nor is it clear that she intended that any trust would be so worded that a future spouse of Mr Larmar would become a beneficiary. The only evidence is that she agreed with the proposition that the trust would be for the benefit of ‘ourselves and our family’.[28]Ms Ryan, while saying that she was given a Smith & Fitzgerald precedent and a list of beneficiaries, does not identify the precedent. In one of her affidavits she referred to a particular precedent but it could not have been used because it had a reference to an Australian Corporations Number and, thus, was too recent. In a later affidavit she produces an earlier version of that precedent letter but does not identify it as being the precedent she was given. She does not give evidence as to what she was told about who, if anyone, was to be a capital beneficiary or an income beneficiary or a default beneficiary. She does not say that she was told that the trust deed was to be worded in such a way that it would include a future spouse of Mr Larmar.[29]Other trust deeds were produced by the applicant including one for the Reeves family. Mr Larmar is the settlor of that trust. There are significant differences in the two trust deeds and the Reeves Family Trust deed does not support the case for the applicant.[30]It is submitted on behalf of the applicant that, notwithstanding the evidence of both [Mr] Larmar and Margaret Ryan that it was intended to use a Smith & Fitzgerald deed, the deed from which Margaret Ryan typed was not, it is argued, a Smith & Fitzgerald deed. That, it is said, is evident from the fact that the Larmar Family Trust deed contains references to New South Wales legislation which was and is irrelevant to the trust which was established.[31]The applicant submits that an inference should be drawn that, when typing up the trust deed, Margaret Ryan did not realise that she should have included the names of Earl and Suzanne Larmar in the second schedule. Further, it is submitted that she did not realise that she needed to type specifically words to the effect of ‘any companies and trusts in which they [the beneficiaries] have an interest including the trustee company’.”[15]Reasons at [27]-[31].

Decision

Reasons for decision

While initially seeking before the primary judge and in submissions before this Court that rectification not include Suzanne Larmar, by correspondence dated 7 June 2019, Benaroon now seeks orders for rectification that include her as a beneficiary, as can be seen at subpara 7(e) of the Further Amended Originating Application extracted at para [11] above.The primary decisionRelevant principles There was no contest at trial that Mr Reeves, as settlor, had no relevant intention and the primary judge inferred that the parties were content to proceed on the basis that it should be taken that the settlor’s intention was whatever Mr Larmar wanted.[6] Accordingly, his Honour considered[7] the case fell within the special class of case mentioned in Sanwick Pty Ltd v Kalyk,[8] where rectification may be ordered on the basis of a unilateral mistake. His Honour cited[9] the following statement of principle by Stevenson J:[10]“An example of the ‘special class’ to which Mason J [in Maralinga Pty Ltd v Major Enterprises Pty Ltd[11]] referred is a voluntary settlement creating a trust where the settlor has no independent intention as to how the trust is to operate and who acts on the instruction of, or at the request of the proposed trustee; or, as here, the person who in substance stands behind the trustee.”[6]Reasons at [11].[7]Reasons at [11].[8][2016] NSWSC 100.[9]Reasons at [6].[10][2016] NSWSC 100 at [16].[11](1973) 128 CLR 336. His Honour proceeded[12] on the basis, accepted by the parties, that in order that the trust deed be rectified, Benaroon was required to meet the following criteria referred to in Public Trustee v Smith:[13] “… there must be clear and convincing evidence that at the time the trust deed was executed the trustee and the settlor had an actual intention as to the effect which the deed was intended to create which was different from the effect which the instrument did have in a clearly identified way. It must be demonstrated with clarity that the parties had a sufficiently precise intention that the court can determine both the substance and the detail of the precise variation to be made to the wording of the instrument.” (emphasis added; citations omitted)[12]Reasons at [8].[13][2008] NSWSC 397 at [71].Evidence as to intention The primary judge set out the following evidence concerning Mr Larmar’s intention:[14][14]Reasons at [19]-[26].“[19] [Mr] Larmar’s evidence was that he intended that the trust would be for the benefit of himself, his spouse, his children, grandchildren and ‘the usual remaining beneficiaries’.[20]His explanation for the deed not naming him as a beneficiary is as follows.[21]At the relevant times, Mr Larmar was an accountant and a partner of the firm of White & Hancock. He would, in the ordinary course of his practice, assist clients to create trusts. Mr Larmar’s firm used the services of a firm of solicitors called Smith & Fitzgerald. Smith & Fitzgerald developed a precedent for a trust deed which was used frequently by Mr Larmar.[22]In 1975 Margaret Ryan became Mr Larmar’s personal secretary and has remained in that position since then.[23]He said that when a client required the creation of a trust he would follow the practice of dictating a standard form letter to Smith & Fitzgerald requesting the preparation of a trust deed. The letter would ordinarily include: the proposed name of the trust, the details of the trustee, details of the settlor, details of the appointors, particulars of the discretionary nature of the trust, and details of the beneficiaries of the trust. He said that Margaret Ryan would type the letter which would be then sent to Smith & Fitzgerald.[24]In his first affidavit, Mr Larmar said that, in or around early 1977, he had a conversation with Suzanne Larmar to the following effect: ‘Earl Larmar: “I want to establish a family trust as we have discussed previously for the benefit of ourselves and our family”.Suzanne Larmar: “I think that this is a good idea”.’[25]Mr Larmar also says that he had an intention to ensure effective tax distributions for the benefit of himself, his wife and their family and so wanted to establish a family trust. He says that he recalled that in or about early 1977 he said words to the effect to Margaret Ryan: ‘I want to establish a family trust for the benefit of myself my wife, our children, and grandchildren …’ and he gave Margaret Ryan the instructions: ‘to use the Smith & Fitzgerald precedent deed to include me, my wife, my children and grandchildren and the remaining usual beneficiaries.’[26]Ms Ryan says that Mr Larmar gave her a Smith & Fitzgerald precedent together with a list of beneficiaries which included Mr Larmar, his wife, his children and any grandchildren. She says that she typed the trust deed and gave it to him.”Whether clear and convincing evidence

Ratio Decidendi

Legal Principle Established

Finally, his Honour erred by failing to have any, or any proper, regard to trust distribution resolutions made by Benaroon in the evident belief that the trust deed included Mr Larmar and the above companies, trusts and charities, and the tax returns recording the effect of those distributions.Consideration As accepted at trial, the question in the present case was what the intention of the appellant was, and not that of the settlor, Mr Reeves. The appellant’s case is that it is Mr Larmar’s intention alone which is relevant in terms of ascertaining the intention of Benaroon. While it was maintained that it was Mr Larmar who was the “governing mind and will” of Benaroon, Mr Larmar was not Benaroon’s managing director and it could act only by its directors. Benaroon’s intention, as the first respondent submitted, was thus that of both of its directors at the relevant time, which included Suzanne Larmar. Further, the appellant’s submission that, at all material times, Mr Larmar made all of Benaroon’s decisions is at odds with the evidence that Mr Larmar sought Suzanne’s agreement prior to establishing the LFT. Further, both Ms Ryan and Mr Larmar’s evidence was that Mr Larmar took the trust deed home for the specific purpose of discussing it with Suzanne. The trust deed was not taken home by Mr Larmar simply to be executed by Suzanne Larmar. It may reasonably be inferred that there was some discussion. However, Mr Larmar did not depose to the effect of those discussions. In particular, Mr Larmar did not state that there was any discussion or agreement that he and Suzanne be named beneficiaries or whether it was discussed that she be a named beneficiary or benefit as the spouse of a named beneficiary. Mr Larmar did not depose to having gone through the trust deed or any part of it with his then wife. Nor was there evidence from Mr Larmar as to whether Suzanne read the trust deed or any parts thereof. Further, as the primary judge was correct to conclude, there was no clear and convincing evidence about Suzanne Larmar’s intention concerning who would benefit from capital and who would benefit from income, that is, which names should appear in the second and third schedules. Nor did his Honour err in failing to find that there was clear and convincing evidence that Suzanne Larmar intended the LFT to include Mr Larmar’s future spouses as beneficiaries. As the primary judge observed, Mr Larmar’s evidence was that he intended the LFT to be for the benefit of “our family”.[29] The primary judge did not err in overlooking that “the trust deed which was executed relevantly encompassed future spouses”.[30] Such a submission is misconceived in that, on the evidence, the trust deed which was executed was simply never intended by Mr Larmar to be executed. Further, the Smith & Fitzgerald deed which he intended to be used contained no reference to spouses of beneficiaries.[29]Affidavit EH Larmar, paras 22- 23; AB2 at 67-68.[30]Appellant’s outline at [33](a).