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Guest v Guest

Guest v Guest

Case [2015] VSC 761 22 December 2015

Discovery & Disclosure

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2014 03995

PETER BENTLEY GUEST	Plaintiff
v
VERNA ANNE GUEST and	First Defendant
PETER JOHN WALSH	Second Defendant

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JUDGE:	Mukhtar AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	27 February 2015
DATE OF JUDGMENT:	22 December 2015
CASE MAY BE CITED AS:	Guest v Guest and anor
MEDIUM NEUTRAL CITATION:	[2015] VSC 761

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DISCOVERY ― Pre action discovery ― Administration of trusts ― Discretionary trusts ― Beneficiary’s questioning of appropriation of trust assets to his possible detriment ― Concern whether ex directors of trustee procured breach of trust ― “Reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court”― Standard of objective evidence or certainty required to attract Court’s discretion ― Interrelationship with the law of trusts concerning a beneficiary’s right to information from trustee ― Supreme Court General Civil Procedure) Rules 2015, r 32.05

TRUSTS AND TRUSTEES ― Discretionary trusts ― Beneficiary’s entitlement to information ― Legal foundation for such an entitlement ― Content and limitations of entitlement ― Interrelationship with rules of court permitting pre action discovery of documents in prospective civil proceedings

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R M Garratt QC with Ms A Folie	Hall & Wilcox
For the Defendants	Mr J W S Peters QC with Ms G Coleman	Holding Redlich

HIS HONOUR:

This is an application for pre-action discovery of documents under rule 32.05. That rule empowers the Court to order a person to give discovery of documents to help an applicant decide whether or not to sue that person. It is a powerful rule which can be incursive; and it calls for much care.

I commence by taking leave to repeat some introductory remarks recently made about this discretionary rule in Hunter v Australian Football League.[1] Documents are a person’s property and the rule does not offer a licence, before a case is even started, to invasively seek documents to see if there is a case to be made against that person. The rule requires as a first step that the applicant show reasonable grounds to believe that he has, or might have, the right to obtain relief. For that first step, he is not required to show precisely what cause of action he may have or to show a prima facie case. Rather, he has to show the objective facts on the basis of which he reasonably believes that he may ― note, may ― have a right to obtain relief. That way, the rule is to be seen as the court lending its processes to help right a possible wrong. So much depends on the circumstances; the relationship of the parties (critical in this case); the nature of the case being contemplated; and what the applicant already knows or can allege. If the prerequisites of the rule are made out, and benefit can be shown, then ordinarily a Court will be disposed to…

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 Guest v Guest

Details

AGLC: Guest v Guest [2015] VSC 761
Case: [2015] VSC 761
Decision Date: 22 December 2015

CaseChat Overview and Summary

The case of Guest v Guest involved the trustees of two discretionary trusts and a beneficiary who sought pre-action discovery of documents in order to investigate the appropriation of trust assets. The matter was heard in the Supreme Court of Queensland. The beneficiary sought information to understand if the ex-directors of the trustee company had procured a breach of trust, which would have affected his interests adversely. The court was tasked with determining whether the beneficiary had shown a reasonable cause to believe that he had or might have a right to obtain relief in the Court and whether the standard required was one of objective evidence or certainty. Additionally, the case examined the interrelationship between the law of trusts, which grants beneficiaries the right to information from trustees, and the rules of court that permit pre-action discovery of documents in prospective civil proceedings.

The primary legal issues before the court were whether the applicant had demonstrated a reasonable cause to believe that he had a right to relief, and what standard of proof was necessary to satisfy this requirement. The court also needed to consider the extent and nature of the beneficiary's entitlement to information from the trustee, and how this intersected with the court rules that permit pre-action discovery. The court had to balance the discretionary nature of the relief sought with the need for the applicant to provide sufficient evidence to establish a reasonable cause for the belief of a potential right to relief.

The court found that the standard required to attract the discretion for pre-action discovery was not one of objective certainty but rather a reasonable cause to believe that a right to relief might exist. The court held that this standard was lower than certainty but higher than mere suspicion. In terms of the entitlement to information, the court acknowledged that beneficiaries of discretionary trusts have a right to information necessary to understand the administration of the trust and to protect their interests. However, the scope of this right must be balanced against the trustee's duty to manage the trust and the potential prejudice to other parties. The court concluded that the applicant had not provided sufficient evidence to meet the standard of reasonable cause, and thus, the application for pre-action discovery was dismissed.

The court made no orders for costs but noted that the applicant should bear his own costs of the proceeding. The dismissal of the application for pre-action discovery meant that the applicant could not proceed with his intended litigation without first obtaining the necessary information from the trustees through the appropriate channels within the administration of the trusts.

Orders