Fay v Moramba Services Pty Ltd

In the case of Fay v Moramba Services Pty Ltd, the applicants, who were beneficiaries of the Moramba Family Discretionary Trust, sought various declarations and orders against the respondent, the trustee of the trust, in the Supreme Court of New South Wales. The applicants were in dispute with the trustee over the future distributions of trust assets. They sought declarations and orders to compel the trustee to fund their litigation against third parties, to provide advice on future distributions, and for costs of the proceedings.

The legal issues before the court included whether the trustee would be justified in funding the defence of proceedings to which it was not a party, whether the burden of funding litigation should be borne by the beneficiaries in the context of a discretionary trust, and whether the court should provide advice on future distributions when it did not have knowledge of all the relevant circumstances when the discretion falls to be exercised. The court also considered whether the hardship to the beneficiaries justified a departure from the ordinary rule regarding costs in proceedings between trustees and beneficiaries or third parties.

The court held that the trustee was not required to fund the applicants' litigation against third parties, as it was not a party to those proceedings and was not involved in any wrongdoing. The court also held that it was not appropriate to provide advice on future distributions, as the exercise of the discretion was a matter for the trustee and not the court. The court further held that, in the absence of any special circumstances, the ordinary rule was that the costs of proceedings between trustees and beneficiaries or third parties should be borne by the party who initiated the proceedings. However, in this case, the court found that the applicants' claims against the trustee were unsuccessful and that there was no special circumstance to justify a departure from the ordinary rule.

The final orders of the court were that the trustee was not required to fund the applicants' litigation against third parties, the court would not provide advice on future distributions, and the applicants were to pay the trustee's costs of the proceedings.