Gandy v Gandy - [2023] WASC 446

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   GANDY -v- GANDY [2023] WASC 446
CORAM:   HOWARD J
HEARD:   20 NOVEMBER 2023
DELIVERED          :   22 NOVEMBER 2023
FILE NO/S:   CIV 1741 of 2023
BETWEEN:   KIMBERLY NEIL GANDY
Plaintiff
AND
GLYNN TREVOR GANDY
First Defendant
STEPHEN WALLACE MCCLOUD
Second Defendant

Catchwords:

Construction of Trust Deed - Whether resolutions of meeting of majority of trustees was a nullity

Legislation:

Rules of the Supreme Court 1971 (WA)
Trustees Act 1962 (WA)

Result:

Declaration that the resolutions passed by defendants on 6 July 2023 are not in accordance with Trust Deed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr M L Bennett
First Defendant	:	Mr E M Heenan SC
Second Defendant	:	Mr E M Heenan SC

Solicitors:

Plaintiff	:	Bennett
First Defendant	:	Pragma Lawyers
Second Defendant	:	Pragma Lawyers

Case(s) referred to in decision(s):

Nil

HOWARD J:

By an originating summons dated 12 July 2023, the plaintiff claims:
… orders in respect of the Gandy Family Trust that:
1Any purported meeting of the trustees of the Gandy Family Trust held on Thursday, 6 July 2023 was of no force and effect.
2Any purported resolution passed by the first and second defendants at any purported meeting of the trustees is a nullity.
3Costs of this application be provided for.
The originating summons invoked s 92 of the Trustees Act 1962 (WA). That provides:
(1)Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
(2)Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the Court thinks expedient.
The procedure adopted by the plaintiff would also be within O 58 of the Rules of the Supreme Court 1971 (WA) which relevantly provides:
[rule 2] … the trustees under any deed or instrument or any of them … may take out, as of course, an originating summons returnable in chambers for such relief of the nature or kind following, as may by the summons be specified and as the circumstances of the case may require (that is to say) the determination, without an administration of the estate or trust, of any of the following questions or matters:
…
(g)the determination of any question arising in the administration of the estate or trust.
[rule 10] Any person claiming to be interested under a deed, will, or other written instrument, may apply by originating summons for the determination of any question of construction arising under the instrument, and for a declaration of the rights of the persons interested.
There are presently at least four other proceedings on foot in this Court in relation to the Gandy Family Trust or related businesses, namely:
(1)CIV 1299 of 2019 - Gandy v Gandy Timbers Pty Ltd & Ors;
(2)CIV 1844 of 2023 - Gandy v Gandy & Ors;
(3)CIV 1857 of 2023 - Gandy v Patterson & Ors; and
(4)CIV 2214 of 2023 - Gandy v Gandy & Anor.
The bitterness which may be readily inferred between the plaintiff and, at least, the first defendant (who are brothers), may have provided the temptation for the parties' solicitors[1] to file more than 1,200 pages of affidavit material in this application. Whatever the temptation, it ought to have been resisted on both sides in the proper discharge of the solicitors' obligations to the Court in this application.
[1] The defendants retained their present solicitors on 7 November 2023.
It was common ground that there were no disputed questions of fact and that the matter could proceed, effectively, as a construction summons on the interpretation of a few provisions of the Trust Deed.
The procedure invoked by the plaintiff, whether under s 92 of the Trustees Act or under O 58, is only available if there are no contested facts. If there are to be factual contests, a matter should proceed by pleadings.
The following facts were agreed between the parties:
1.The Gandy Family Trust was established by a deed made 1 February 1994 and the Trust Deed was annexed as 'KNG-1' to the plaintiff's first affidavit.[2]
[2] Duplicated as annexure 'GTG-1' to the first defendant's affidavit.
2.The Trust Deed was varied by a deed which was undated but stamped on 22 May 2000 - annexed as 'KNG-2' to the plaintiff's first affidavit.[3]
[3] Duplicated as annexure 'GTG-2' to the first defendant's affidavit.
3.The Trust Deed was further amended by a deed undated but stamped on 9 July 2002 - annexed as 'KNG-3' to the plaintiff's first affidavit.[4]
[4] Duplicated as annexure 'GTG-3' to the first defendant's affidavit.
4.The plaintiff and the first and second defendants are, together, the trustees of the Gandy Family Trust.
5.By a notice dated 20 June 2023 (June 2023 Notice) - annexed as 'KNG-17' to the plaintiff's first affidavit,[5] the first defendant, as a trustee of the Gandy Family Trust, gave notice of a meeting of the trustees to be held on 6 July 2023 and stated the business of the meeting to be:
[5] Duplicated as annexure 'GTG-45' to the first defendant's affidavit.
To consider and, if thought fit, pass the following resolutions:
(a)The Trustees acknowledge the urgent need to arrange for payment of the debt owed by Gandy Timbers Pty Ltd (Gandy Timbers) to Rabobank pursuant to Gandy Timbers All in One Account 1297568-00 (Rabobank Debt);
(b)Glynn Gandy be authorised to:
i.Engage a real estate agent on behalf of the Trust to market for sale any real property owned by the Trust, with the proceeds of any such sale be provided (by loan or other reasonable arrangement) to Gandy Timbers to satisfy the Rabobank Debt.
ii.Obtain taxation advice from MKT Taxation Advisors on behalf of the Trust in relation to Gandy Timbers to satisfy the Rabobank Debt; and
iii.Liaise with Rabobank in relation to the payment of the Rabobank Debt.
(c)All trustees are to sign all necessary documents to give effect to these resolutions, including but not limited to:
i.Documents appointing real estate agents to act;
ii.Contracts of sale by offer and acceptance;
iii.Land transfers; and
iv.Other documents to give effect to the sale of real property.
6.The plaintiff did not attend the meeting on 6 July 2023.
7.On 6 July 2023, two of the three trustees (being the first and second defendants) met and purported to pass resolutions (July 2023 Vote).
8.Minutes of the July 2023 Vote appear at page 308 of the plaintiff's first affidavit (as part of annexure 'KNG-25')[6].
9.The resolutions purportedly passed by the July 2023 Vote are in materially the same terms as the proposed resolutions in the June 2023 Notice.
[6] Duplicated as annexure 'GTG-47' to the first defendant's affidavit.
At the hearing, it was also common ground that:
1.prior to June there were disagreements between the parties as to matters to do with the Gandy Family Trust;
2.there was no disagreement as to the matters specified in the June 2023 Notice prior to its date of issue; and
3.emails passed between the solicitors for the plaintiff and the defendants on 27 June 2023[7], and then on 4 - 5 July[8] prior to the 6 July 2023 meeting.
[7] GTG-46 at page 345 of the first defendant's email.
[8] KNG-18 ‑ KNG-21; which are duplicated at pages 347 - 355 as part of GTG-46 for the first defendant's affidavit.

The relevant provisions of the Trust Deed

Clauses 13.8, 13.9 and 13.10 provide:
13.8The Trustee (if at any time there is more than one) shall act jointly and the Trustee may delegate the exercise of all or any of the powers or discretionary authorities conferred on the Trustee and execute any power of attorney or other instrument necessary to effectuate such purpose.
13.9Any exercise by the Trustee of any power discretion or authority conferred on the Trustee by this Deed may be made:-
13.9.1in writing signed by the Trustee or all the persons (if more than one) who are Trustee; or
13.9.2by a resolution duly passed at a meeting of all the persons who are Trustee; or
13.9.3in the case of a single corporate Trustee by a duly nominated resolution of its Board of Directors or in writing and sealed in accordance with its Articles of Association.
13.10In the event of disagreement between the persons acting as Trustee as to any matter affecting the Trust Fund or as to the exercise or omission or abstention from exercising any of the Trustee's powers and discretions hereunder:-
13.10.1the matter for decision shall be referred to a vote of all of the persons acting as Trustee;
13.10.2in the event of there being a majority for or against the proposal the wishes of such majority shall be accepted as though it were a decision by all the persons acting as the Trustee;
13.10.3in the event of deadlock the matter shall if any Trustee member so requires be referred for decision to arbitration pursuant to any arbitration law currently in force under the proper law of this Deed and all the Trustee members shall give effect to the award of the arbitrator under such arbitration as though it were a decision by all the persons acting as the Trustee.

The competing constructions

The plaintiff contends that:
1.the June 2023 Notice did not refer a 'disagreement' to a vote of all the persons acting as trustee;
2.rather, the relevant 'disagreement' occurred after the June 2023 Notice;
3.there could not be a vote under cl 13.10.1 or cl 13.10.2 unless all trustees were present; and
4.because the plaintiff did not attend the July 2023 Vote, there was not 'a majority for or against' within the meaning of cl 13.10.2.
The defendants contend that:
1.no notice provisions are included within the Trust Deed to condition a 'meeting' of the trustees within cl 13.9.2;
2.after the June 2023 Notice there was a 'disagreement' between the trustees which was sufficient to bring it within cl 13.10.1;
3.the emails from the defendants' solicitors prior to the 6 July 2023 meeting were sufficient to 'refer' the disagreement to a vote of the trustees within cl 13.10;
4.there could be a majority for a proposal even if the plaintiff did not attend the 6 July 2023 meeting.
The parties are agreed that:
1.at general law, trustees must act unanimously; but
2.that position may be displaced by the terms of the trust instrument; and
3.the starting position in the Trust Deed is that the trustees are to act jointly (cl 13.8).
The parties did not (I say without criticism) address the Court on the principles of construction to be applied. The parties were content to argue their competing constructions from the text against the agreed facts, the starting propositions at general law that trustees were to act unanimously and were each bound by decisions made qua trustee. I have taken the same approach.

Consideration and disposition

Here, the resolutions in dispute were purportedly passed at a meeting of the trustees within cl 13.9.2.
In my view, the chapeau to cl 13.10 is significant. I read it as requiring that before a matter can be referred to a vote of all the persons acting as Trustee within the meaning of cl 13.10.1 there must be a 'disagreement' of the kind set out in the chapeau.
I consider that the words of cl 13.10 set out a sequence to be followed which requires, prior to a matter being referred to a vote, there being a disagreement (of a particular kind).
That construction, in my view, is consistent with the prima facie or the starting position that trustees must act unanimously. Clause 13.10 then sets out when the trustees might act by a majority.
As submitted, and accepted in the hearing, a dissenting trustee would, nonetheless, remain as liable for a majority decision as they would be if they were in the majority in adopting the position.
As noted, it is common ground that there was no 'disagreement' prior to the issuing of the June 2023 Notice on the matters it referred to. In my view, then, the Notice could not 'refer' the matters (in the June 2023 Notice) for decision by a vote of the trustees under cl 13.10.1.
I accept the defendants' submission that there is no notice provision within the Trust Deed nor a provision as to how a matter is to be referred to a vote. The full out-workings of that might be left to a different day. I say that because here I am deciding a very narrow question of construction which is no wider than whether the July 2023 Vote was within cl 13.10.2.
I consider that the matters were purportedly referred to a vote by the June 2023 Notice and at that time there was no 'event of disagreement'.
The plaintiff argued that the fact of his non‑attendance on 6 July 2023 meant that there could not be a majority for or against the proposal within the meaning of cl 13.10.2.
I do not accept that construction. In my view, if the balance of cl 13.10 is satisfied, then there may be a 'majority for or against' a proposal even if all the trustees do not attend. I take the reference to 'majority' to be calculated against the trustees as a whole, and not just the trustees who attend the vote.
That result, in my view, is consistent with the sequence of the provisions, the words' ordinary meaning and placement of cl 13.10.2 which require only a majority for a proposal. If a trustee abstained from the vote, or from attending on the vote, there may nonetheless be a majority for the proposal.
As noted, the defendants contended that the correspondence which passed between the parties' solicitors in the immediate run-up to the 6 July 2023 meeting could and did suffice to be a referral to a vote under cl 13.10.1.
Essentially, this submission proceeded on the following bases:
1.the June 2023 Notice proposed certain resolutions;
2.the plaintiff by his solicitors did not agree with the resolutions;
3.the email exchanges between the solicitors, then, included a referral by the defendants of that disagreement to the meeting which had been previously called by the June 2023 Notice;
4.there could be a majority vote on the disagreement referred by email to the meeting already called by the June 2023 Notice.
In my view, a problem with that submission in this case is that I would read cl 13.10.1 as requiring, on its proper construction, a requirement of reasonable notice of the referral.
I say that because cl 13.10 is concerned with the circumstances of trustees not acting unanimously in the exercise of the Trustee's powers and discretions, and where a dissenting trustee would become equally liable for the consequences of any decision reached by a majority.
From the facts of this case, I would not consider the email exchanges in the immediate lead-up to the 6 July 2023 meeting as being reasonable notice of the referral to a vote of the (subsequent to June 2023 Notice) disagreement.
If I am wrong about that and the correspondence which passed between the parties' solicitors after the June 2023 Notice and prior to the July 2023 Meeting was sufficient, then, in my view, the resolutions passed at the July 2023 meeting would be valid.
In light of the above Reasons, I would grant a declaration to the effect of order 2 sought by the plaintiff's originating summons, that is: that the resolutions passed by the first and second defendants at the meeting on 6 July 2023 and annexed at page 308 of the affidavit of the plaintiff made 12 July 2023 were not in accordance with the Trust Deed of the Gandy Family Trust annexed as KNG‑1 to the affidavit of the plaintiff made 12 July 2023.

The affidavit material

The plaintiff filed two affidavits, being:
1.an affidavit made 12 July 2023 running to 308 pages; and
2.a 'responsive' affidavit made 27 October 2023 running to 499 pages.
The two defendants filed an affidavit of the first defendant made 14 September 2023 which runs to 420 pages. For the defendants' argument, the first defendant's affidavit would have required only part of one annexure[9] if the first defendant did not duplicate annexures already before the Court by the plaintiff's first affidavit.
[9] Pages 345 and 346 of Annexure GTG‑46 to the first defendant's affidavit (and arguably that was not required).
From the plaintiff's first affidavit only pars 1 - 10, 34, 37, 45 and the few annexures adduced by them appear relevant.
There was no attempt to read the 'responsive' affidavit of the plaintiff made 27 October 2023 and so the whole of it may be taken to be irrelevant.
Of the first defendant's affidavit, only the following paragraphs might be considered to be relevant: 1 - 10, 137 - 140, 143.1 and only part of the one annexure adduced by those paragraphs which was not already in evidence by the plaintiff's affidavit.
In my view, a completely different approach ought to have been taken to the preparation of the affidavit material. Almost all of the affidavit material, as may be observed from the above, was irrelevant.

Orders

I will hear from the parties as to the form of the final orders, including as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

JC
Associate to the Honourable Justice Howard

22 NOVEMBER 2023