Cihan v Cihan (No 2) - [2022] NSWSC 962

Supreme Court

New South Wales

Medium Neutral Citation: Cihan v Cihan (No 2) [2022] NSWSC 962
Hearing dates: On the papers; final date for evidence and submissions 6 July 2022
Date of orders: 19 July 2022
Decision date: 19 July 2022
Jurisdiction: Equity
Before: Parker J
Decision:
See [33]

Catchwords:
COSTS – trusts and trustees – discretionary family trust – nominator purports to remove trustee – without notice of purported removal trustee purports to amend trust deed to appoint additional nominators – trustee’s action upheld – costs inter partes – costs out of the trust assets

Legislation Cited:
Uniform Civil Procedure Rules 2005, rr 42.1, 42.25, Pt 7

Cases Cited:
Cihan v Cihan [2022] NSWSC 538
Dixon v Dixon (No 2) [2022] NSWSC 944
Miller v Cameron (1936) 54 CLR 572
National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268

Category: Costs
Parties: Mehmet Cihan (Plaintiff)
Kadir Cihan (First Defendant)
Cihan Property Pty Limited (Second Defendant)
Representation:
Written submissions:
T McGrath (Solicitor) (Plaintiff)
Solicitors:
Hitch Advisory (Plaintiff)
Cleary Hoare (Defendants)

File Number(s): 2018/391788
Publication restriction: Nil

Judgment

These are proceedings involving a discretionary family trust on which I delivered judgment on 5 May: Cihan v Cihan [2022] NSWSC 538. This judgment assumes familiarity with my May judgment to which I will refer as “J1”. It also uses abbreviations and terms used in the May judgment.
The parties in these proceedings are related; the plaintiff (“Mr Cihan”) is the father of the first defendant (“Kadir”). The subject trust is called the “Cihan Family Trust” (“the Trust”). Under the Trust Deed, Mr Cihan was the Trustee and Kadir was the Nominator.
The dispute arose out of near-simultaneous attempts by Mr Cihan and Kadir to remove or neutralise the other. Kadir purported to exercise his power as Nominator under the Trust to remove Mr Cihan as Trustee and replace him with the second defendant (“CPPL”). Mr Cihan purported to exercise his power as Trustee to appoint himself and his other son, Memduh, as additional Nominators alongside Kadir.
In my May judgment, I concluded that the steps purportedly taken by Mr Cihan were effective, and those purportedly taken by Kadir were not. I adjourned the proceedings to allow the parties to agree, if possible, on the form of orders to give effect to my judgment, and on costs. The parties later agreed on the form of declarations to be made. Costs remain in dispute and are the subject of this judgment.

Background, procedural history and decision

The background to the case is set out at J1 [14]-[50]. The Trust was established by deed executed in May 1997 and its assets consists of six properties with a total value of around $40 million. Some of the properties were purchased using bank finance from the NAB.
Under the original Trust Deed, Mr Cihan was appointed Trustee for the Trust which gave him the power to add and remove persons from the list of beneficiaries and to amend the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Cihan v Cihan (No 2)

Details

AGLC: Cihan v Cihan (No 2) [2022] NSWSC 962
Case: [2022] NSWSC 962
Decision Date: 19 July 2022

CaseChat Overview and Summary

The case of Cihan v Cihan (No 2) involved a dispute between family members regarding the management and administration of a discretionary family trust. The primary issue was whether the removal of a trustee by a nominator, without notice of the purported removal, was valid, and whether the trustee's subsequent action to amend the trust deed to appoint additional nominators was justified. The court had to determine the enforceability of these actions and their implications for the trust's administration.

The legal issues before the court included the validity of the nominator's action to remove the trustee without notice, the authority of the trustee to amend the trust deed in response to the purported removal, and the allocation of costs in the proceedings. The court needed to consider the principles of trust law, particularly those relating to the powers and duties of trustees, the role of nominators, and the circumstances in which a trust deed may be altered. Furthermore, the court was tasked with deciding whether the costs of the litigation should be borne by the parties individually or by the trust.

In its decision, the court held that the nominator's action to remove the trustee was ineffective as it was conducted without notice. The court found that the trustee's subsequent action to amend the trust deed by appointing additional nominators was a reasonable and appropriate response to the situation. The court rejected the contention that the trustee had acted in breach of trust and upheld the trustee's actions. Regarding costs, the court ruled that the costs of the litigation should be paid out of the trust assets, as the dispute arose from the administration of the trust and affected the trust's operations. The court found that an inter partes costs order was not appropriate in this context.

The final orders of the court included upholding the trustee's actions in amending the trust deed, directing that the costs of the litigation be paid from the trust assets, and dismissing the claims brought by the nominator against the trustee. The court's decision emphasised the importance of proper communication and notice in the management of discretionary family trusts and the trustee's discretion to act in the best interests of the trust.

Orders