Benson v Doloraine Pty Ltd
[2025] TASSC 25
•16 April 2025
[2025] TASSC 25
| COURT: | SUPREME COURT OF TASMANIA |
| CITATION: | Benson v Doloraine Pty Ltd [2025] TASSC 25 |
| PARTIES: | BENSON, Christopher Ian |
| BENSON, Mark Andrew | |
| BENSON, David Anthony | |
| v | |
| DOLORAINE PTY LTD | |
| FOREST HILL FARM (TASMANIA) PTY LTD | |
| BENSON, Ian | |
| BENSON, Gloria | |
| HERNYK, Steven Allan | |
| ALGERI, Salvatore | |
| FILE NO: | 70/2015 |
| DELIVERED ON: | 16 April 2025 |
| DELIVERED AT: | Hobart |
| HEARING DATE/S: | 19, 20, 21 August 2024 and written submissions |
| JUDGMENT OF: | Pearce J |
| CATCHWORDS: |
Equity – Equitable remedies – Accounts and inquiries – Generally – Account in common form – Challenge by beneficiaries of fixed trusts to payments made by trustees – Payments made to personal benefit of trustees –Family conflict in operation of farming business.
Aust Dig Equity [1271]
REPRESENTATION:
Counsel:
Applicants: A Walker Respondents: P King, P Lunn
Solicitors:
Applicants: Terracall and Associates Respondents: Simmons Wolfhagen
| Judgment Number: | [2025] TASSC 25 |
| Number of paragraphs: | 94 |
Serial No 25/2025
File No 70/2015
CHRISTOPHER IAN BENSON, MARK ANDREW BENSON and DAVID ANTHONY BENSON v DOLORAINE PTY LTD,
FOREST HILL FARM (TASMANIA) PTY LTD, IAN BENSON, GLORIA BENSON,
STEVEN ALLAN HERNYK and SALVATORE ALGERI
| REASONS FOR JUDGMENT | PEARCE J 16 April 2025 |
1 On 31 August 2015 Porter J, (as he then was), ordered that an account be taken of the property of six fixed trusts which his Honour found to exist. As will be explained, the order was for an account for the period between 5 December 2014 and the date of the order, that enquiries be made, and that the respondents pay any amount found to be due on taking the account: Benson v Doloraine Pty Ltd [2015] TASSC 41, 26 Tas R 252. Almost nine years later the taking of the account was referred to me.
The background
2 The following narration of the circumstances which led to the making of the order for an account is summarised from the reasons of Porter J at [1]-[46]. The applicants, Christopher Benson, Mark Benson and David Benson, are the three sons of Ian Benson and Gloria Benson. The family was involved in a farming business in north west Tasmania engaged in the production, packing and marketing of organic vegetables and the farming of sheep and cattle. Until 31 August 2015, Doloraine Pty Ltd (Doloraine) was the trustee of the I R & G M Benson Family Trust, a discretionary trust. Doloraine was the registered proprietor of two properties in Ulverstone held on trust. Until 31 August 2015 Forest Hill Farm (Tasmania) Pty Ltd (FHFT) was the trustee of the Benson Family Trust, another discretionary trust. FHFT was the registered proprietor of five separate properties in the Don and Forth areas which it held as trustee and as the vehicle for the operations of the farming business. Ian and Gloria Benson were the principals, and in control, of both companies. In these reasons, references to Mr and Mrs Benson are references to Ian and Gloria Benson. Mr and Mrs Benson were also the joint owners of three properties near Latrobe, Forth and Don. They were the only partners in a partnership known as IR & GM Benson, which provided land for the use of FHFT for the conduct of the farming business.
3 Until September 2013, all members of the family were involved in running the business. As a result of an irreconcilable conflict between the sons and their parents about their respective interests in the assets of the properties and business, the applicants commenced proceedings in the Federal Court against Doloraine, FHFT and Ian and Gloria Benson. The applicants sought declarations of their asserted interests and other ancillary relief. The proceedings went to hearing before Pagone J but, at the end of the evidence, the parties reached agreement. On 5 December 2014 his Honour made consent orders in these terms:
"The Court orders by consent that:
1 Upon Forest Hill Farm (Tasmania) Pty Ltd, as Trustee of the Benson Family Trust pursuant to a Deed of Trust dated 1 July 2001, having advised the Court that it has resolved to exercise its power to pay or apply 20 per cent of the net value of the Trust Fund to each of the Applicants pursuant to clause 5.1 of the Trust Deed,
The Court declares that 20 per cent of the net value of the Trust Fund is
beneficially held by the Trustee for each of the Applicants.2 No 25/2025
2 Upon Doloraine Pty Ltd, as Trustee of the I R & G M Benson Family Trust pursuant to a Deed of Trust dated 21 July 1998, having advised the Court that it has resolved to exercise its power to pay or apply 20 per cent of the net value of the Trust Fund to each of the Applicants pursuant to clause 5 of the Trust Deed,
The Court declares that 20 per cent of the net value of the Trust Fund is
beneficially held by the Trustee for each of the Applicants."
4 Almost immediately after the orders were made a dispute arose about their meaning and consequence. Applications and cross-applications were made in this Court, central to which was the effect of the trustee resolutions referred to in the orders and the declarations made by the court, including what was meant by the reference to the "net value of the Trust Fund". Porter J, at [10] of his Honour's reasons, stated:
"I have uncontested evidence that for the purposes of the Federal Court proceedings, the parties agreed the value of the assets held by the trustees and by the partnership, and the amount of the trustees' liabilities. Precise figures were agreed for each item in detailed lists, but I will use approximations of the totals. The assets the subject of agreement extended to plant and equipment, livestock, crops in ground and cool storage, consumables and the business goodwill. The total figure was approximately $12.9 million. The trustees' liabilities for bank loans and equipment finance were agreed at approximately $5.92 million. The parties also agreed the quantum of the partnership bank liability in the sum of approximately $1.59 million. The bulk of the liabilities of the trustees and of the partnership was indebtedness to a bank. Although I have no evidence about this, it seems to have been common ground that the liabilities to the bank were charged against all trust and partnership assets."
5 His Honour's central finding, at [73], was that "'the net value of the Trust Fund' meant the value of the assets as agreed in the proceedings, as offset by the liabilities as agreed." His Honour then, at [82] and [84], found:
"I am satisfied that the effect of the consent orders was that each applicant obtained a vested interest in 20 per cent of the net value of each trust fund as it stood at that time in terms of the agreed values. What that means is that, in respect of each discretionary trust and each applicant, there is an 'imperative trust for distribution' of the relevant amount, to use the words of the court in Queensland Trustees Limited v Commissioner of Stamp Duties (1952) 88 CLR 54 at 64.
…
The simple end result is that the trustees must recognise that each applicant has a vested beneficial interest in the net value of the trust fund as ascertained by reference to the agreed values on 5 December 2014, and comply with their obligations accordingly. All of the machinery to enable the trustees to deal with fixed trusts for distribution seems to be exclusively within the terms of the deeds."
6 Porter J also ordered the removal of Doloraine and FHFT as trustees respectively of the I R & G M Benson Family Trust and the Benson Family Trust. His Honour found a high level of hostility on the part of Mr and Mrs Benson to their sons and that the trustees, controlled by Ian and Gloria Benson, were irretrievably in a conflict of interest. More specifically, his Honour found at [108] that the trustees, since the Federal Court order on 5 December 2014, had:
• failed to acknowledge the interests of the applicants in the trust assets; •
utilised the amounts to which the applicants were entitled by continuing to carry on the business without any recognition in the books of account that amounts were owed to the applicants;
• used all assets of the trust funds in which the applicants had an interest; • not accounted to the applicants for use of their entitlements. 3 No 25/2025
The order and the accounting period
7 The order for removal of trustees applied to both the discretionary trusts and the fixed trusts which Porter J found to exist from the time of the Federal Court orders. As to the order for an account, his Honour stated at [123] that "the trustees have had the benefit of the applicants' vested interests since 5 December 2014", and that "an order for an account in common form should be made." The orders made by his Honour were, relevantly, that:
"7(a) An account be taken of trust property, including transactions entered into by the first and second respondents, in respect of the fixed trusts … for the period 5 December 2014 to date inclusive, and inquiries be made. (b) … (c) The respondents pay any amount found to be due on taking the account."
8 Thus, the relevant accounting period is between 5 December 2014, the date of the Federal Court orders, and 31 August 2015, the date of Porter J's order and the date from which the trustees were removed.
9 Pursuant to the order that the respondents file accounts, Gloria Benson swore an affidavit on 24 May 2016. The affidavit annexed general ledgers which, according to Mrs Benson, listed all of the transactions entered into during the accounting period by Doloraine on behalf of the IR and GM Benson Family Trust and by FHFT on behalf of the Benson Family Trust. At that stage, according to Mrs Benson, she did not have access to all of the "source documentation" which by then was in the possession of the new trustees, Steven Hernyk and Salvatore Algeri.
10 For some reason, not fully explained by the material available to me, it was not until 2 May 2018 that Holt AsJ made the formal order for the filing and service of accounts. The order required the respondents, as former trustees of the IR and GM Benson Family Trust and the Benson Family Trust respectively, to file and serve "an account of the Trust property including transactions entered into by the relevant Trust in respect of the Fixed Trusts so created" for the period 5 December 2014 to 31 August 2015 inclusive. The accounts were, amongst other things, to state what the respective directors of the respondent companies claimed to be the assets and liabilities of the relevant trusts as at 31 August 2015 and set out the dealings and transactions of the Trusts for the accounting period. On 18 September 2018 Mrs Benson swore a further affidavit which annexed financial statements for the trusts as at 5 December 2014 and June 2015 which she said had been provided by the new trustees. Further affidavits were then filed on behalf of the respondents, respectively an affidavit sworn by Ian Benson on 24 October 2018, affidavits sworn by Mrs Benson on 12 December 2018, 29 January 2019 and 16 May 2019, and a further affidavit of Ian Benson sworn 16 May 2019.
11 Porter J's order was for taking accounts in common form. As counsel for the respondents correctly submitted, such an order is to be distinguished from taking accounts on the basis of wilful default. Under an order for accounts on the basis of wilful default, an accounting party must not only account for what has actually been received, but also for what should have been received if the duties of the accounting party had been properly discharged: Meehan and Ors v Glazier Holdings Pty Ltd [2002] NSWCA 22, 54 NSWLR 146 at [13]-[14]. However, nothing turns on the distinction in this case because the applicants seek only to challenge payments made by the respondents from funds actually received.
The claimed falsifications
12 Mark Benson, on behalf of all three applicants, prepared affidavits in response to the accounts annexed to Gloria Benson's affidavits. Mark Benson's first affidavit was sworn 30 January 2020. For
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present purposes, no issue arises about whether Doloraine and FHFT prepared accounts in compliance with the order. However, the applicants challenge the accounts. In an account in common form, the account may be challenged on the basis of surcharge or falsification. If a party can show that more was in fact received, that is a surcharge. If a party shows that disbursements were not properly incurred and should be disallowed, they are falsifications: Meehan and Ors v Glazier Holdings Pty Ltd at [13]; Rowe v National Australia Bank Ltd [2019] WASCA 140, 56 WAR 1 at [97]. In this case, no surcharge is claimed. However, the applicants claim falsifications: that the accounts are erroneous because they disclose payments made by the trustees during the accounting period which should not have been made to the detriment of the fixed trusts. They seek an order that the total amount of those payments be reinstated to the fixed trusts.
13 In response to the challenges to the account made by the applicants, Mrs Benson filed a further affidavit, sworn 21 September 2020, and delivered reports by a forensic chartered accountant, Daniel Rands respectively dated 3 August 2020, 16 September 2020 and 22 December 2022. Mark Benson then swore a further affidavit on 29 September 2021.
14 Mr Rands prepared a consolidated expert witness statement dated 2 August 2024 delivered just before the hearing. In his report, Mr Rands reviewed the records of the respondent companies and, based on material provided to him with adjustments he thought appropriate, provided a general ledger, compiled balance sheets and profit and loss statements for the period of accounting, set out his opinion about "disbursements to beneficiaries" during the period of accounting, commented on the matters raised by Mark Benson, gave an opinion about "the entitlements to trust assets of Ian and Gloria Benson and the applicants as represented by their loan balances at the start and end of the period of accounting" and determined a "notional loan account". It is the final form of accounts contained in Mr Rands' report on which the respondents rely as their account. I will return to the issue, but the admissibility of Mr Rands' opinion evidence concerning the accounting treatment of some of the disputed items, and the entitlements or otherwise of the beneficiaries of the trusts, was objected to by the applicants as irrelevant.
15 In all, the court books contain in excess of 3000 pages of material. However, my task in undertaking the account and enquiry was greatly assisted by the agreement of the parties to the production of a spreadsheet, initially prepared by Mark Benson, which lists the disputed payments and the reasons for the dispute in each case. The document, and a schedule of remaining falsifications agreed by the parties during the course of the hearing, greatly narrowed the areas of dispute and identified the disputed payments. The disputed items are to be considered on the basis of the evidence in the various affidavits and the oral evidence given in court during the hearing over the course of about three days. The disputed items fall into a number of different categories and may be conveniently considered accordingly.
Claimed allowances
16 A further area of dispute arises. In the accounts which accompany Mr Rands' report, the respondents claim allowances for costs or effort which they assert should fairly be credited to them for their dealings with the trust property during the accounting period; allowances in the nature of wages for undertaking work for the business, a fee acknowledging stewardship of the business analogous to directors' fees, and rent for the lease of properties owned by Mr and Mrs Benson and used in the business. All of the claimed allowances are disputed by the applicants.
The nature of the trusts
17 Underlying all of the opposing contentions in the account was the meaning and combined effect of the Federal Court orders made on 5 December 2014, and the findings of Porter J about the terms of the respective trusts. These reasons can only be sufficiently understood when read with the
5 No 25/2025
full reasons of Porter J. What follows is a simplified version but which will hopefully provide a
sufficient explanation.18 The deeds of settlement for the IR and GM Benson Family Trust and the Benson Family Trust provided for Doloraine and FHFT respectively, as trustees, to hold the trust fund created by the deed on the trusts and subject to the powers and duties expressed in the deed. In each case, the trustee was empowered to, at its discretion, pay, apply or set aside all or part of the capital or net income of the trust fund to the benefit of one or more of the beneficiaries, effectively Ian and Gloria Benson, their children, grandchildren and great grandchildren and their respective spouses. As Porter J pointed out in his reasons at [68], "each trust deed [in varying terms] gave the trustee powers of sale, expenditure, business management engagement and employment, and allocation of asset valuation fluctuation to income or capital."
19 The proceedings before Porter J were, as were the proceedings in the Federal Court, conducted in a highly adversarial manner. The respondents submitted to his Honour that it was not possible to determine the "net value" of each trust fund at the time the Federal Court declaration was made because the net value was "yet to be ascertained." The submission was rejected by his Honour who, as I have already pointed out, found at [73], that "the 'net value of the Trust Fund' meant the value of the assets as agreed in the proceedings, as offset by the liabilities as agreed." (My emphasis.) His Honour found at [79] that the resolutions "of themselves operate to vest absolute interests in the proportion of net value". He also, at [79], rejected the respondent's submission that the declarations did not create a beneficial interest greater than the usual interest held by a beneficiary of a discretionary trust. He found that the purpose of the declarations was that they be declarations of beneficial interest in something which was then ascertainable. His Honour made the findings set out in full above at [7] of these reasons of the creation for each applicant of "a vested interest in 20 per cent of the net value of each trust as it stood at the time in terms of the agreed values." The result, as his Honour stated at [83], was that there were "fixed trusts in favour of the applicants, and it is recognised that new trusts occur within the administration of discretionary trusts".
20 Those findings are not to be revisited on an account and inquiry and are, in my view, of particular importance in determining how the account and inquiry is to be approached.
21 The evidence given in this account makes clear that, following the Federal Court declarations, the respondents did nothing to recognise the vested beneficial interest of each applicant in the net value of the trust funds as ascertained by reference to the agreed values on 5 December 2014. No separate funds were created in the books of account either to the credit of the beneficiaries of the fixed trusts, or to reflect liabilities of the trust. In effect, the respondents continued to operate the farming business in an unaltered way. The substance of the submission advanced by the respondents in these proceedings is that their powers and duties under the trust deeds, including to operate the farming business, continued without substantial alteration except perhaps that there was a fixed proportionate entitlement to the income of the trusts during the accounting period. In her affidavit of 21 September 2020, Mrs Benson advanced the contention that the valuation was obtained "as if the assets were sold to a third party as a going concern including goodwill (underlining in original)". In her evidence Mrs Benson, when describing the position of her sons, consistently maintained that when the business was sold, "they would have got their share then."
22 The submissions and contentions advanced by the respondents and by Mrs Benson in her affidavit cannot be accepted. In my view, the position advanced is contrary to the finding of Porter J. The effect of the finding is that the powers and duties of the respondents, as trustees of the discretionary trusts were, as a result of the resolutions and declarations of 5 December 2014 and for the remainder of the accounting period, burdened by and impressed with their obligations as trustees of the fixed trusts which his Honour found to exist. During the period of accounting the assets of the trusts were used in the conduct of the farming business. However, during that period, the duty of
6 No 25/2025
Doloraine and FHFT, as trustees of the fixed trusts, was to obey the terms of those trusts: Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15, 212 CLR 484 at [34]. What had been, for each applicant, an interest in mere expectancy in the capital and income of a discretionary trust, after 5 December 2014 became a vested beneficial interest in the net agreed value of the trust fund, subject to a "fixed trust for distribution" according to that agreed value. Thereby, the nature of the obligation to administer the trust, and the power to make payments to either the trustees themselves or to Mr and Mrs Benson as beneficiaries of the discretionary trust or in some other capacity, was fundamentally changed. The duty of the trustee to avoid conflict between their own interests and their duties as trustees of the fixed trusts, and to not favour the interests of Ian and Gloria Benson, was brought into sharp focus.
The trustees were bound to deal with the trust property for the benefit of the beneficiaries in
such manner as "is prudent and right": Khoo Tek Keong v Ch'Ng Joo Tuan Neoh [1934] AC 529 at 536-537. Included in the reasons which led Porter J to remove Doloraine and FHFT as trustees of the trusts were what his Honour found to be:
• the high level of hostility on the part of Mr and Mrs Benson towards their sons; • a situation of irretrievable conflict of interest in which the trustees were placed. The trustees, controlled by Mr and Mrs Benson who, as primary beneficiaries of the discretionary trusts which were "now represented by 40 per cent of the net value as things stood at 5 December 2014.", had the duty to the beneficiaries of the fixed trusts to administer assets in accordance with those fixed trusts.
24 In his reasons, Porter J recorded the evidence of Ian Benson that, amongst other things, he had not consulted his sons nor obtained their consent since 5 December 2014 for the continued use of a 60 per cent interest in the net assets of the trust, and after 5 December 2014, he had simply continued to conduct the business under each trust as usual utilising all of the assets of the business. Whilst Mr Benson did not give evidence before me, other than in the form of affidavits substantially adopting the evidence of his wife, the evidence of Gloria Benson and the manner in which the accounts were prepared on behalf of the respondents is to the same effect. It is in that context that purported exercise of trustee powers during the period of accounting, and the disputed items in the accounts and the claimed allowances, are to be considered. I turn to consideration of the contentious account items.
Loan Accounts
25 Section D of Mark Benson's spreadsheet concerns payments of "drawings" to Ian and Gloria Benson. The accounts record that, by 38 separate bi-monthly payments, the first of which was on 11 December 2014, and the last of which was on 20 August 2015, the trustees paid a total of $176,000 to Ian and Gloria Benson listed as "drawings"; funds they claim were owed to them by the Benson Family Trust and paid in reduction of their loan accounts. Those payments are listed in Section D of the spreadsheet of items objected to by the applicants.
26 According to the terms of both trust deeds, to set aside income for a beneficiary means to place sums to the credit of a beneficiary in the books of the trust fund. As was explained by Mr Rands in his report and in his evidence, it is necessary to track applications of trust income made by a trustee, referred to by him as distributions, to a beneficiary but not paid to that beneficiary. The record is commonly, and was in this case, called a beneficiary loan account. Amounts recorded in the loan account as owed to a beneficiary are liabilities of the trust. The loan account also records reduction of the liability by payments actually made by the trustee to or on behalf of a beneficiary, or payments or charges by the trustee for the beneficiary's benefit. The loan account typically comprises, for a particular period, an opening balance, adjusted by amounts of income added to the account usually by
7 No 25/2025
distributions of income, and amounts deducted from the account for amounts paid to or on behalf of
the beneficiary and trustee charges or reimbursements, to reach a final balance.27 Amounts paid by a trustee to a beneficiary in reduction of the amount owed by the trustee to the beneficiary are sometimes referred to as drawings, as they are here, and are recorded in the loan account.
28 The accounts prepared by Mr Rands on which the applicants rely, record liabilities of the trusts to Ian and Gloria Benson, and to each of the applicants. In her affidavit, Mrs Benson claims that she and her husband were owed a large amount in respect of their respective loan accounts. Mr Rands prepared an appendix to his report stating the loan account balances at the start and end of the period of accounting. According to Mr Rands' report, there were, across the two trusts, combined loan account balances at 5 December 2014, that is, trust liabilities to the I and G Benson Partnership, to Ian Benson and Gloria Benson of $69,016, $307,777 and $362,041 respectively. To that liability was added, in the case of Mr and Mrs Benson, Mr Rands' calculation of one fifth of the profit of the trusts for the period of accounting. The appendix then recorded the disbursements to or on behalf of each beneficiary to reach a notional loan account balance at the end of the period. The result, for Ian and Gloria Benson was a balance loan account on 31 August 2015 of $276,038 and $334,276 respectively.
29 All of the calculations made by Mr Rands are appropriate for taxation, compliance, regulatory and management purposes. Were the loan accounts being considered only from that perspective, there is no reason, for present purposes at least, to question Mr Rands' calculations and opinion. However, to the extent that payments or appropriations were made by the trust to or to the benefit of Ian and Gloria Benson in purported reduction of a liability from the trusts, they should not, in this account, be allowed. The payments recorded in the account assume such a liability when the agreed net value of the trust funds as found by Porter J contained no allowance for any such liability and resulted in a certain value. Thus, payments from the trust funds during the period of accounting purportedly in reduction of a liability of the trusts to Mr and Mrs Benson's loan account, would impermissibly burden the vested interests of the applicants in the trust funds. Whatever the position for the funds remaining in the discretionary trusts, the vested interests of the applicants reflected in the fixed trusts are not burdened by any liability to Mr and Mrs Benson's loan account. Counsel for the applicants submitted that, by reducing the beneficiary loan accounts, the trustees misapplied trust monies under the fixed trusts to the equivalent of 60 percent of every payment made. I would find that payments made in purported reduction of Mr and Mrs Benson's loan account, are not properly attributable to the interests of the respondents in the respective fixed trusts. As a consequence the payments not properly made must be repaid by the trustee as to 20 percent each to the present trustees of the fixed trusts.
30 One of the arguments advanced by the respondents was that payments in reduction of the loan accounts was a justified use of trust funds to enable Mr and Mrs Benson's use of funds they "otherwise didn't have access to". It was submitted that "[t]hey had no wages, no rent … and the trustees were not getting any … commission or stewardship fees … in recognition of the work that they had done conscientiously and properly throughout the accounting period." Those matters may have justified payments from the discretionary trusts, but did not justify payments against the fixed trusts. The present trustee of the discretionary trusts, the Public Trustee, is not a party to these proceedings. I am informed that the Public Trustee was notified of the proceedings and did not wish to be heard, but that position is not formalised. As a result, I say nothing about whether any part of the impugned payments should have been made from the funds of the discretionary trusts and whether any part should now be repaid.
31 For the same reasons, I reject the respondent's contentions that I should order payment by the applicants of sums due on the loan accounts, or authorise the respondents to seek to "recover" any sum from the applicants based on their respective loan account balances, or to somehow set off or adjust an
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amount found to be payable on the account against those loan account balances. There should be no
adjustment for beneficiary loan accounts.
ATO Payments
32 Section F of Mark Benson's spreadsheet concerns income tax payments made by FHFT as trustee of the Benson Family Trust to the Australian Taxation Office on behalf of Ian and Gloria Benson. The total amount paid was $126,301.44.
33 During the period of accounting the distributions of trust income to Ian and Gloria Benson were made in the manner in which has been explained. Although the distributions were not paid, a liability to pay income tax on the amount of the distribution immediately arose. Between 2 January 2015 and 17 August 2015 payments were made by FHFT to the Australian Taxation Office on behalf of Ian and Gloria Benson in discharge of their personal taxation liability. Those payments were recorded in the accounts as being in reduction of their respective loan accounts. Counsel for the applicants submits that any reduction in the beneficiary loan account to Mr and Mrs Benson "misapplies the … trust funds, to the extent of 60 percent of every payment made". That submission should be accepted. For reasons analogous to those given for disallowance of the loan account reductions, the taxation payments are not properly attributed to the vested interests of the applicants in the funds represented by the fixed trusts.
34 Disallowance of those payments in this account may result in a taxation consequence for Mr and Mrs Benson, but that is not relevant to the matter of principle which this Court is determining.
Legal Fees
35 Section C of Mark Benson's spreadsheet concerns legal fees. Between 31 January 2015 and 26 August 2015 FHFT, as trustee of the Benson Family Trust, made 19 separate payments for legal fees totalling $128,506. Some of those payments, those made between 31 January 2015 and 27 March 2015, at items 187 to 194, are not challenged by the applicants. Those items total $55,000 and related to the Federal Court proceedings. In closing submissions counsel for the applicants indicated that the applicants could not demonstrate that items 202 and 205 "related to the Supreme Court" so, erring on the side of caution, I will leave aside the $4,078.70 which is the total of those two payments. The remaining items are challenged. They total $69,427.30. The challenge should be accepted and the payments disallowed.
36 The evidence establishes to my satisfaction that the legal fees were paid by FHFT for costs incurred in the Supreme Court proceedings before Porter J. The respondents were parties to the litigation but Ian and Gloria Benson were not. In a subsequent decision on costs dated 13 April 2016 and published to the parties only, Porter J ordered that Doloraine and FHFT pay the applicants' costs effectively on a solicitor and own client basis. His Honour found that a special costs order was justified. In the course of his reasons, at [12], the first three matters he referred to as founding the special costs order were:
"• The respondents' refusal to acknowledge the applicants' vested beneficial interests. That involved a refusal to accord the Federal Court declarations any effect or meaning: see pars [79]-[81] of the principal reasons;
•
The conduct of the respondents after the Federal Court orders. That included using the trust funds and receiving income without consultation with the applicants in regard to their interests. The respondents' position was that all trust assets were to be liquidated without reference to the applicants who had been told to leave their homes.
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• The conflict of interest situation. This arose when Mr and Mrs Benson arranged a retrospective lease agreement of partnership property owned by them, and previously used by FHFT rent free. The second aspect is that Mrs Benson arranged for FHFT to enter into an agreement to pay them both a salary: see pars [106], [113]-[116]."
37 His Honour concluded, particularly in light of what he found to be an obstinate and unjust refusal on the part of the trustees controlled by Mr and Mrs Benson to acknowledge the applicants' vested beneficial interests, and a high degree of hostility on the part of Mr and Mrs Benson towards their sons manifesting itself in the administration of the trusts, that there had been pursuit and protection of personal interests and a failure to maintain the trusts in the interests of the beneficiaries. His Honour also found that the factors which justified the special costs order also disentitled the trustees from an entitlement to indemnity from any trust funds, including both the funds of the discretionary trusts and the fixed trusts, in respect to the costs ordered against the trustees in the proceedings.
38 I think that counsel for the respondents is correct when submitting that Porter J's costs order has direct application only to the applicants' costs ordered to be paid by the respondents. It does not have direct application to the costs incurred by the respondents. However the matter does not end there.
39 Clause 11.1 of the Benson Family Trust deed provides, as to the exercise of any power or discretion conferred on the Trustee, in that case, FHFT:
"(f) the Trustee shall not in any circumstances be entitled to any indemnity, reimbursement or recompense from the Beneficiaries or any of them but if acting in good faith shall be entitled to be indemnified out of the Trust Fund in respect of all liabilities incurred relation to the execution of any powers, duties, authorities or discretions vested in the Trustee under the provisions of this Deed and in respect of all actions, proceedings, costs, claims and demands relating to any matter or thing done or omitted to be done concerning the Trust Fund."
40 The respondents submit that, in effect, that they are entitled to be indemnified from the trust funds in respect of their own costs incurred in the proceedings. I do not agree. In Porter J's costs decision, his Honour stated at [19]-20]:
"[19]
In Miller v Cameron (1946) 55 CLR 572 at 578-579 (citation added), Latham CJ said that in the ordinary case, a trustee brings or contests legal proceedings on behalf of the trust and not on his own behalf. In such a case he receives his costs, except where there is misconduct. In that case, although there was no misconduct in the management of the trust, his Honour too the view that the trustee would have acted wisely and properly in resigning as soon as he was asked; 'In defending this action and in prosecuting this appeal the defendant has been representing and supporting his own interests and not those of the trust estate'. The trustee was required to pay the costs of the action and of the appeal without indemnity.
[20]
In the present case, the cumulative effect of the first three matters which I have set out in par [12] above, is that the trustees misconducted themselves in the relevant sense. When the hostility of those controlling the trustees is factored in, there ought to have been acceptance that the trustees were in an impossible position and their resignation would to have been brought about. The resistance to the application for their removal was unreasonable. Overall the conduct of the entire litigation can be described as adversarial, as distinct from involving true questions relating to the administration of the trusts; Garrett v Yiasemides [2004] NSWSC 828 at [32]."
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41 Those observations have application in the present context. I find that, to the extent that payment by FHFT of Mr and Mrs Benson's legal costs burdens the interests of the respondents in the fixed trusts, the payments should be disallowed. To the remarks of Porter J, I would add that it would be a perverse and unjust result to permit the trustees to be indemnified from the funds subject to the fixed trusts for costs incurred in litigation in which they contended, in direct opposition to the beneficiaries of those trusts, that the fixed trusts did not exist. An argument that the trustees incurred those legal costs in the proper exercise of powers in the administration of the fixed trusts cannot be accepted. The funds of the fixed trusts should not be burdened with any such payments and should be reimbursed for them.
Other disputed account transactions
42 The remainder of the payments from the trust accounts which are challenged by the respondents fall into nineteen categories. For each category I have used the same name as that was used by Mark Benson in his spreadsheet. Within each category in the spreadsheet individual items are allocated numbers which have been used by the parties and which I will also use.
43 One issue underlying the consideration of these expenses concerns the duties of the trustees in the ongoing management of the trust businesses. As before, the starting point is Porter J's finding that the vested beneficial interest of each of the applicant's in the Trust Fund was based on the agreed value at 5 December 2014. In cross-examination of Mark Benson, counsel for the respondents put to him that the consent declaration in the Federal Court "did not entitle [him] to any immediate payment of money", and that the respondent's resolution to "pay or apply 20 per cent of the net value" was "something that had to be done in the future". Mark Benson agreed with the second proposition though not the first, but, with respect to counsel, the questions and answers are not to the point. The value which Porter J found to be applicable is to be distinguished from an asset value and liabilities susceptible to change over time. What is to be inferred from the questions put by the respondents is that, although the application dealt with by Porter J was determined adversely to them, the trustees nevertheless had an ongoing obligation to conduct the trust business so as to preserve and maintain its value, not only for the benefit of the beneficiaries of the discretionary trusts, but also for the benefit of the beneficiaries of the fixed trusts, and that it was proper for them to incur expenses in doing so. They rely on the terms of the trust deeds empowering the trustees to, amongst other things, conduct business, employ persons, pay costs and expenses incidental to management of the trust fund and to pay outgoings and professional fees.
44 In response to that claim, the applicants advance two broad assertions. Firstly, they assert that the disputed expenses were not incurred for the benefit of the trust business at all, rather they were solely for the benefit of Mr and Mrs Benson. Consideration of that question requires analysis of the individual items or classes of items. Secondly, the applicants assert that, to the extent that the expenses were incurred in the operation of the business, the powers and duties under the deeds were impressed with the obligations to act in the interests of the beneficiaries of the fixed trusts. The applicants assert that the expenses were not properly incurred in the administration of the fixed trusts, in distinction to the interests of the beneficiaries of the discretionary trusts. As to that question, I have concluded that it is proper to apply something of a broad brush such as to advance the interests of equity, justice and good faith informed by the circumstances. While the vested interests of the applicants were subject to an agreed value, it would likely have been a breach of the trustees' duty to the beneficiaries of the fixed trusts to waste the value of the assets underlying the agreed value by not incurring expenses reasonably necessary for the proper maintenance and conduct of the business.
45 For these categories of expenditure, counsel for the respondents submitted that the expenditure fell within the proper exercise of the discretion of the trustees provided for by the trust deeds. It was submitted also that once allowances were made there was a set-off for such claims. For
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reasons already given concerning the nature and terms of the fixed trusts, those submissions must be
rejected.
Category 1 – Groceries and alcohol expenses
46 Between 12 December 2014 and 1 April 2015, the trustees paid a total of $936.57 from trust funds for groceries and alcohol purchased by Mr and Mrs Benson. The respondents accept that $788.67 of that sum was paid to their personal benefit, but was attributed to their respective loan accounts. For reasons previously expressed, payments to the benefit of Mr and Mrs Benson and taken in reduction of their loan accounts were not properly attributed to the fixed trusts and should be reimbursed.
47 Given that the balance sum is only $147.90 I am sufficiently satisfied that it was for expenses incurred by the trustees in the conduct of the trust business and would not require it to be repaid.
Category 2 – Restaurant and café expenses
48 Between January and July 2015 FHFT, as trustee, paid a total of $1,121.31 for restaurant and
café expenses.
49 Payments totalling $137.41, listed at items 141 to 144 inclusive, were incurred between 28 and 30 July 2015 when Mr and Mrs Benson were in or travelling to or from Hobart for the proceedings before Porter J. They should be reimbursed. It would be perverse and unjust for those expenses to be attributed to the fixed trusts for the same reasons given concerning the claim for legal costs.
50 Payments totalling $66.40 listed at items 69 and 76 were said by Gloria Benson to be payments from the loan account, presumably because they were a personal benefit. They should be reimbursed for reasons already given.
51 Those reimbursements total $203.81. As to the remaining payments, totalling $917.50, the respondents assert that they concern meetings with customers and suppliers of the business. I suspect some were personal expenses but, having regard to the nature and amount of the payments, I am sufficiently satisfied that they were expenses incurred by the trustees in the conduct of the trust business and would not require that sum to be repaid.
Category 3 - Personal Holidays
52 In January, February, March and July 2015, FHFT paid a total of $11,466.38 from trust funds for accommodation in Hobart and Melbourne for Mr and Mrs Benson. The payments listed at items 162, 163, 180, 110, 112, 120 and 121 totalling $5,002.41, are no longer claimed as falsifications.
53 Amounts totalling $2,447.03 at items 19, 65 and 68 were said by Gloria Benson to be payments applied in reduction of their loan account, presumably because they were a personal benefit. Other payments at items 21 and 43 totalling $623.68 are said by Mrs Benson to be mistakenly not applied in reduction of their loan account. For reasons already given the payments were not properly attributed to the fixed trusts and $3,070.71 should accordingly be reimbursed to the fixed trusts.
54 Amounts totalling $760.13 at items 142 and 143 were incurred on 30 July 2015 for Mr and Mrs Benson's attendance in Hobart for the proceedings before Porter J. That sum should be reimbursed. It would be perverse and unjust for those expenses to be attributed to the fixed trusts for the same reasons given concerning the claim for legal costs.
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55 Those reimbursements total $3,830.84. The remaining payments total $3,256.81. They were made mostly in February and March 2015. The respondents assert that they concern travel for meetings with a potential customer of the business. I suspect some were personal expenses but again, having regard to the nature and amount of the payments, I am sufficiently satisfied that they were expenses incurred by the trustees in the conduct of the trust business and would not require that sum to be repaid.
Category 4 - Animal expenses
56 Between December 2014 and 14 July 2015 FHFT paid a total of $4,648.84 in respect to the care of animals. The largest payment was $3,008 on 18 May 2015 at item 71 for feed grain. Another payment on 1 July 2015 of $204 at item 108 is also attributed to feed grain. The applicants assert that the grain was to feed Mr and Mrs Benson' personal chickens, which were not part of the business. Some of the grain was used for that purpose but only a small part. I am sufficiently satisfied that most was used, as Mrs Benson suggested, for occasional supplemental food for farm sheep. The total quantity involved seems to be more consistent with that purpose. Those payments should be allowed.
57 The rest of the payments totalling $1,436.24 relate to Mr and Mrs Benson's dogs. The respondent's claim that their care and maintenance was a business expense because they accompanied Ian Benson when moving stock and helped with vermin control. I do not accept that evidence. These were not farm dogs, either by temperament or breed. They were personal pets. The fixed trusts should not be burdened with those payments and they should be reimbursed.
Categories 5, 6, 7, 8 and 9 – Works at 1 Forest Hill Road
58 These categories of expense can conveniently be dealt with together because they raise issues of a similar nature. They concern payments made by the trustees for works connected with Mr and Mrs Benson's house at 1 Forest Hill Road, Latrobe. Mr and Mrs Benson began living in the house in 1995 and still live there. The land on which the house was situated was owned by them. The house was adjacent to the farm. It was accessed by a long driveway. Behind the house there were a number of large sheds, separated from the house by a large roughly square shaped sealed area. Forest Hill Farm itself comprised about 90 hectares. It was also owned by Mr and Mrs Benson but leased to the farming business. I would accept that immediately prior to the accounting period, the area and buildings immediately behind the house were, to some extent, integrated into the conduct of the business. Roads were used not only for private access but also for access for farm machinery. The sheds were used for storage of farm vehicles and machinery and to store other things associated with the farm. Mrs Benson's evidence was that she and her husband did not "have any farming at all", so the "whole area" was used by the trust business. Other infrastructure, aspects of the water supply for example, served a dual domestic and agricultural purpose. According to Mrs Benson's affidavit, the sheds needed maintenance from time to time, the fences were often damaged by livestock or employees using equipment, and farm vehicles and machinery caused wear and tear to the road leading to the shed and to other internal roads.
59 The evidence establishes, to my satisfaction, that shortly after the Federal Court order was made on 5 December 2014 Mr and Mrs Benson formed the intention to sell the business. However, they intended to retain and continue to live in the house. Their expectation was that the business was to be sold as a "going concern", with the result that the balance of the Forest Hill Farm beyond the house and immediate surrounds would continue to be leased by a prospective purchaser. According to Mrs Benson's evidence the house, at that time, was not on a separate title, although by the time of the hearing, it was. The title to the house, when it was separated, included all of the sheds, roads, garden and curtilage to which I have referred. I find, contrary to Mrs Benson's evidence, that the buildings around the house would "hopefully" be leased to a purchaser of the farming business, but what
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subsequently occurred in relation to the title gave a good indication of what land and buildings Mr and
Mrs Benson intended to retain and to use personally.60 Between December 2014 and August 2015 the trustees spent $116,150.47 on repairs and improvements to the house, the garden, the fencing, the sheds and the roads. A total of $47,654.91 was expended on the house, $3,493.60 on the garden, $26,269.08 on fences, $7,604.80 on sheds and $31,128.08 on roadworks. It may be stated at once that the timing of these payments, involving the expenditure of substantial sums on "repairs and maintenance", commencing almost immediately upon the making of the Federal Court order on 5 December 2014, and during a relatively concentrated period thereafter, gives rise to a strong suggestion that Mr and Mrs Benson took the opportunity available to them to undertake works which were of benefit to them. All of the works were either to the house or to the garden, fences, sheds and roads in the immediate curtilage of the house, and all within the area which fell subsequently, albeit much later, within the boundaries of the separate title to their home.
61 As to the house expenses, Mark Benson identified 23 items as claimed falsifications. Of those, items 178 and 179, which total $10,840.00 were personal expenses of the directors and Mr and Mrs Benson accept that the accounts should be adjusted accordingly. The payments attributed to those items should be reimbursed to the fixed trusts. The applicants no longer pursue items 33, 41, 99, 106, 151, 159 for FHFT and item 3 for Doloraine, which total $1,692.15. The amount remaining in dispute, $35,122.76, was expenditure incurred for the most part in improvement of the outbuildings and other infrastructure around the house. I would accept that it was within the duty of the trustees to conduct such repairs and maintenance as would, in the normal course, maintain the value of assets which were, or would be, used as part of the farming business, or form part of the value of the farming business. However, a good deal of the expenditure has the distinct flavour of work which was intended to improve the buildings for personal use. Installing roller doors on outbuildings is one such example. Internal lining of an outbuilding is another. In one instance, more than $9,000 was spent on what was said to be a "repair" of an outbuilding. Again, the timing of this expenditure suggests that this was not work which was carried out as it became necessary from time to time, and carries the inference of an opportunity for some personal benefit, outside the duty of the trustees to the beneficiaries of the fixed trusts. For these expenses I would adopt a broad brush and find that of the total remaining in dispute, $20,000 should be reimbursed to the fixed trusts.
62 The amount spent on gardening expenses totalled $3,493.60. The applicants no longer pursue items 17, 164 and 154 as falsifications. Those items total $828.73. The remaining $2,664.87 should be reimbursed to the fixed trusts. Mrs Benson attributed those expenses, in the main, to create an understorey for a shelter belt for stock. I reject that explanation. There were plants which by appearance and variety were ornamental plants for a domestic garden.
63 The amount spent on fencing totalled $26,269.08. The applicants do not press items 77, 113, 114, 125, 158 and 161 which total $3,849.59. The applicants submit that the balance of $22,419.49 should not have been paid because they benefitted Mr and Mrs Benson by improvement to their property and were not to the benefit of the fixed trusts. Mrs Benson conceded in cross-examination that one of the accounts, for $6,831 should have been a personal expense. In my view, another invoice for $4,625 falls into the same category. Another invoice was for a paling fence around the house. It was appropriate for the trustees to fence the house so as to prevent stock from encroaching upon the house and domestic garden. Ordinarily that would require only a stock proof fence and not a paling fence. That additional expense should be reimbursed to the trust. Again, taking a relatively broad brush I would order that $15,000 be reimbursed to the fixed trusts.
64 Item 8 concerns expenditure for repairs and maintenance on sheds totalling $7,604.80. Item 70, a payment of $4,048.80, is not pressed. I am not satisfied that the remaining items, which concern a different property, should be disallowed and would not order reimbursement.
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65 Item 9 concerns payments for roadworks which total $31,128.08. Mrs Benson's evidence was that wear and tear on the roads near the house and around the farm at Forest Hill meant that road maintenance was required, annually or whenever needed. The substance of the applicants' contention is that the amount spent on roadworks during the accounting period was not regular maintenance but, rather, an irregular expense incurred to personally benefit the trustees. That inference, it is contended, is to be drawn from the amount of work done and the timing of it. The amount of road base purchased was over 500 tonnes at a time when it was intended that the business be sold. Conversely, I would regard it as unlikely that all of such a substantial amount would be required for personal rather than agricultural purposes.
66 I would accept that the payment of a reasonable and proportionate sum for road maintenance work would prevent wastage of the value of trust assets and thus would have been properly incurred. I have concluded that there is merit in the argument that the respondents took the opportunity to do work at this time which was motivated by personal benefit to them, but not to the full extent of the works. I would find that the sum of $10,000, about a third of the total sum should be reimbursed to the fixed trusts.
67 The total to be paid under these categories is $47,664.87.
Category 10 – Personal phone use
68 Category 10 refers to personal phone expenses. The claimed falsification is in the total sum of $1,440 which was debited against Mr and Mrs Benson's loan account for the use of private phones for the financial year ended 30 June 2015. That expense may properly have been attributed to the discretionary trusts but not the fixed trusts, which are to be reimbursed proportionally.
Category 11 – Personal electricity use
69 Category 11 refers to personal electricity use. The claimed falsification is in the sum of $6,004.21 which was debited against Mr and Mrs Benson's loan account for the cost of electricity. Mrs Benson was not cross-examined about this but that expense, even if it may properly have been attributed to the discretionary trusts, was not to be attributed against the fixed trusts, which are to be reimbursed proportionally.
Category 12 – Personal vehicle expenses
70 The total vehicle expenses identified in the spreadsheet against this item are $60,576.56. That total sum suggests strongly that the expenditure did not concern personal use. In any event, the claimed falsification identified in the applicant's written submissions is limited to the sum of $5,903, which was the sum debited against Mr and Mrs Benson's loan account for private motor vehicle use. Even if that expense may properly have been attributed to the discretionary trusts, it was not to be attributed against the fixed trusts, which are to be reimbursed proportionally.
Category 13 – Personal Insurance
71 The total of the items claimed under this item is $18,402.26. Items 22, 23, 24 and 100 are not pressed. The remaining items, respectively $2,718.54 and $3,173.52, a total of $5,892.06, were for Mr and Mrs Benson's personal life insurance and are plainly not properly attributable against the fixed trusts. That was apparently recognised because those sums were applied against their personal loan accounts. The fixed trusts should be proportionally reimbursed.
Category 14 – Water expenses
72 This category is not pressed by the applicants.
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Category 15 – Council Rates
73 This category is not pressed by the applicants.
Category 16 – Personal wills
74 The sum of $841.50 was paid by FHFT to solicitors for the preparation of wills for Mr and Mrs Benson. It is a personal expense which should not be attributed to the fixed trusts, which should be proportionally reimbursed.
Category 17 – Personal plant and equipment
75 The total sum claimed in this item is $4,319.00. The only item which is pressed concerns the costs of service and repair of a ride on mower in the total sum of $1,413.00. I am not persuaded that the amount should be treated as a solely personal expense and would not order any reimbursement.
Category 18 – Personal loan account transactions
76 There are five items in this category, each of which, except one, record loan account entries respectively for $454,575 for "partnership property lease, $120,000 for Ian and Gloria Benson's salary, $7,322.00 of hire of equipment and $15,600 for transfer of other rent." According to Mrs Benson's affidavit, loan account entries were drafts and were reversed prior to finalisation of the accounts. Mrs Benson's undisputed evidence was that no rent was ever paid to the trusts for use of their personal properties.
77 The remaining item, Item 128, can be dealt with separately. It partly concerns an apparent payment by Forest Hill Farm of $11,400 for Mr and Mrs Benson's superannuation. On the face of it, this was an actual expense. However, Mrs Benson's evidence and the respondents' written submissions assert that the sum was never paid and was also "reversed in the loan account". The situation remains unclear to me. It should suffice to find that, if any such payment was in fact made it was a personal benefit to them. It was not an expense for which the assets of the fixed trusts should be burdened, and they should be reimbursed.
78 I will return to the treatment of wages and rent when considering the respondents' submissions
concerning allowances.
Category 19 - Miscellaneous
79 In this category only one item, Item 93, is pressed by the applicants. It concerns a payment of $6,011.50 on 12 May 2015 from the Forest Hill Farm account to a firm of accountants. I am satisfied that this invoice was not properly incurred against the fixed trusts. It most likely related to assistance to Mr and Mrs Benson concerning a "family dispute". The fixed trusts should not be burdened with it and should be proportionally reimbursed.
Acquiescence and laches
80 In respect to the falsifications claimed by the applicants, the respondents submit that the claim is defeated by the related equitable defences of laches and acquiescence: Warman International Ltd v Dwyer [1995] HCA 18, 182 CLR 544 at 557-558. The onus to establish the defences is on the respondents. In this case, neither defence can succeed.
81 A plea of laches may arise in this case if the respondents were to establish that the applicants had, by delay, created or allowed a situation in which it would be unjust or unreasonable to order the respondents to pay a sum found to be due on account: Orr v Ford [1989] HCA 4, 167 CLR 316, per
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Deane J at 341. There is no such delay on the part of the applicants. They expeditiously sought the relief ultimately granted by Porter J. Then, as counsel for the applicants correctly submits, it was not until mid-2019 that the respondents filed the affidavits which formed the basis of the account which Porter J ordered. That followed applications to the Court by the applicants seeking to enforce compliance. There may have been explanations for the delay but none were attributable to the applicants. Mark Benson filed a response without undue delay. That prompted a further exchange of extensive material and a further delay before a final hearing. Again, however, the delay was not attributable to the applicants.
82 It was also submitted that there was acquiescence by the applicants. As the submission was put: "Acquiescence is an equity against the applicants; the manifest injustice to the respondents of clawing back further funds from the respondents having purchased property of the fixed trusts under an arrangement with the replacement trustees without the consent of the respondents is, it is submitted, fatal to … their claims."
83 In Halford v Halford [2022] WASCA 1, 58 WAR 254 the Court of Appeal of Western Australia explained at [147]:
"The term 'acquiescence' itself has been used in at least two senses. The first is where the plaintiff has stood by whilst his or her right is being violated by the defendant and made no objection whilst the defendant's act is in progress, with the result that the plaintiff is taken to have abandoned the right or is estopped from asserting it. Acquiescence in this context may be understood as requiring calculated (that is, deliberate and informed) inaction by the beneficiary standing by, which encouraged the trustee reasonably to believe that the trustee's omissions were accepted and not opposed by the beneficiary. The second is where an equitable right has been violated and subsequently the plaintiff, after this violation has been brought to his or her knowledge, takes no steps for some time to remedy it - in which case, the lapse of time without bringing proceedings may allow an inference of waiver to be drawn." (Citations removed.)
84 There is no evidence here of acquiescence in either sense. There is no evidence that the applicants knew of, and failed to object to, the challenged payments as they were being made, giving rise to an inference that they abandoned the right to do so. Nor is there evidence that the applicants stood by and, with full knowledge of what the respondents had done, refrained from exercising their rights to challenge those payments in circumstances where it can properly be inferred that they had abandoned those rights, or that it would now be inequitable to challenge them. The reference in the respondents' submission to the purchase of the property of the fixed trusts from the replacement trustees is no evidence of acquiescence in the payment of funds by the trustees during the accounting period which were not in accordance with their duties as trustees of the fixed trusts. There is no evidence to support the contention that the applicants acquiesced in any way in those payments. The contrary is true. The applicants did not, and have not since, sit idly and knowingly by and allow the respondent to proceed. They were faced with what Porter J found to be an obstinate refusal on the part of the respondents and Mr and Mrs Benson to recognise their interests. Details of the payments emerged only as a result of this account and inquiry.
Allowances
85 The respondents submit that the amount found payable on the account should be adjusted by making just allowances "in favour of the respondents and the directors". They rely on the Supreme Court Rules 2000, r 599, which provides that, in taking an account, "any just allowance is to be made without a direction for that purpose". The respondents rely on the following passage from the reasons of the High Court in Warman International Ltd v Dwyer (above) at 562:
"In the case of a business it may well be inappropriate and inequitable to compel the errant fiduciary to account for the whole of the profit of his conduct of the business or
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his exploitation of the principal's goodwill over an indefinite period of time. In such a case, it may be appropriate to allow the fiduciary a proportion of the profits, depending upon the particular circumstances. That may well be the case when it appears that a significant proportion of an increase in profits has been generated by the skill, efforts, property and resources of the fiduciary, the capital which he has introduced and the risks he has taken, so long as they are not risks to which the principal's property has been exposed. Then it may be said that the relevant proportion of the increased profits is not the product or consequence of the plaintiff's property but the product of the fiduciary's skill, efforts, property and resources. This is not to say that the liability of a fiduciary to account should be governed by the doctrine of unjust enrichment, though that doctrine may well have a useful part to play; it is simply to say that the stringent rule requiring a fiduciary to account for profits can be carried to extremes and that in cases outside the realm of specific assets, the liability of the fiduciary should not be transformed into a vehicle for the unjust enrichment of the plaintiff."
86 For the reasons which follow, I do not consider that this passage assists the respondents. Warman concerned a claim for an account of profits earned by the former managing director of a company dishonestly and in breach of his fiduciary duty. The High Court found it appropriate to permit an allowance for expenses, skill, expertise, effort and resources contributed by the fiduciary. What is in issue here is not the profits of a business, but the interests of the beneficiaries in an "imperative trust for distribution".
87 The allowances which the respondents submit should be made are for stewardship by the respondents of the trust funds, wages for Mr and Mrs Benson and for rent said to be payable to the partnership. As was also stated in Warman, "[I]t is necessary to keep steadily in mind the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts." I will consider each claimed allowance in turn.
88 Counsel for the respondents submit that an amount should be paid to the trustees in the nature of commission, variously called stewardship or directors fees, for their conduct of the trust businesses during the accounting period. The respondents submit that equity requires such an allowance, which on the basis of Mr Rands' report, should be $75,000. It was submitted that the applicants were "quite happy" to approve an equivalent allowance for the replacement trustees when they were appointed. The submission should not be accepted. Equity does not favour payment of such an allowance. As was earlier explained, Porter J found, consistent with my own views based on the evidence before me, that the respondents, by their directors, failed to acknowledge the interests of the applicants in the trust assets, utilised the amounts to which the applicants were entitled by continuing to carry on the business without any recognition in the books of account that amounts were owed to the applicants, used all assets of the trust funds in which the applicants had an interest and did not account to the
applicants for use of their entitlements.
89 As to the claim for wages and rent claimed as allowances for Mr and Mrs Benson, I would first record and accept the submission of counsel for the applicants concerning the conflict of interest which the submission discloses. This account and inquiry concerns the obligations of the respondents as trustees of the fixed trusts. In that capacity, their duty is to the beneficiaries of the fixed trusts. A submission that the fixed trusts should be subject to a claim for wages and rent payable to Mr and Mrs Benson, to my mind is a continuation of the failure to distinguish between the roles and interests of Mr and Mrs Benson and the obligations and duties of the trustees.
90 In any event, the claims should not be allowed. Both are based on the expressions of opinion by Mr Rands in his report about what arrangements may be fair, and appropriate claims by Mr and Mrs Benson against trust assets. In this context, Mr Rands' opinion is, with greatest respect to him, irrelevant.
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91 As to wages, Mr Rands' report records that he was told by Ian Benson that he "frequently worked up to seven days a week" in the business, and Gloria Benson worked "seven or eight hour days for five days a week". Based on other accounting and actuarial material he took into account, Mr Rands calculated what he thought to be an appropriate allowance of $90,000 for Mr Benson and $39,488 for Mrs Benson, a total of $129,488. No such wage was ever paid. There is no evidence that wages were ever previously paid. There was no evidence of any employment agreement. In my view, in all of the circumstances which have been outlined, there is no proper basis, in equity, for the fixed trusts to be burdened with a claim of this nature.
92 The other allowance claimed is for rent. It was submitted by the respondents that an allowance in the account should be made for rental which should be paid to Mr and Mrs Benson's partnership for use during the accounting period of the farming properties at Forest Hill, Cymbrook and Strathdon. Rent is now claimed on a notional basis derived from applying a percentage figure to the market value of the properties. The calculation is set out in Appendix 22 of Mr Rands' report. It expressed the notional rental allowance at $341,719 reduced by interest already charged, resulting in a claimed allowance of $250,478. I would not make any such allowance. Equity does not require it. Prior to the accounting period no rent was ever paid by the farming business to Mr and Mrs Benson's partnership. There was no lease agreement. Payment of such a notional sum by the trustees would be contrary to the interests of the beneficiaries of the fixed trusts and in conflict with the nature of the trust. It should not be authorised, permitted or ordered on this account.
Result and order
93 The result is that there is a sum found due to the applicants by the respondents on taking the account, and the respondents will be required to pay it. Subject to one qualification, my calculation of the amounts to be proportionally reimbursed to the fixed trusts is:
Loan Accounts $ 176,000.00
ATO Payments 126,301.44 Legal Fees 69,427.30
Category 1 – Groceries and alcohol expenses 788.67 Category 2 – Restaurant and café expenses 203.81
Category 3 - Personal Holidays 3,830.84 Category 4 - Animal expenses 1,436.24 Categories 5, 6, 7, 8 and 9 – Works at 1 Forest Hill Road 47,664.87 Category 10 – Personal phone use 1,440.00 Category 11 – Personal electricity use 6,004.21 Category 12 – Personal vehicle expenses 5,903.00 Category 13 – Personal Insurance 5,892.06
Category 14 – Water expenses NIL Category 15 – Council Rates NIL 19 No 25/2025
Category 16 – Personal wills 841.50 Category 17 – Personal plant and equipment NIL Category 18 – Personal loan account transactions 11,400.00 Category 19 – Miscellaneous 6,011.50 $ 463,145.44
94 The qualification concerns the superannuation sum claimed in Category 18. If these reasons are not sufficient to enable the parties to agree whether the sum should be included, then I will hear further submissions. In any event, I will allow the parties an opportunity to consider these reasons. If the terms of the final orders cannot be agreed I would hear further from them.
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