JUDGE:	KELLAM J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	2 September 2003
DATE OF JUDGMENT:	8 September 2003
CASE MAY BE CITED AS:	Hayman v Equity Trustees Ltd
MEDIUM NEUTRAL CITATION:	[2003] VSC 353

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TRUSTS AND TRUSTEES – Application by life tenant for vesting order pursuant to rule in Saunders v Va utier - Trustee refusing to agree to distribution on basis that it has indemnity over the trust fund in respect of the costs of defending proceedings by the plaintiff against it for breach of trust – Whether trustee has indemnity by way of charge or lien over trust assets which has priority over plaintiff’s claim for a vesting order – Trustee Act 1958 s.51(2)(v).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mrs C.M. Kenny	Ebsworth and Ebsworth
For the Defendant	Mr S.W. Kaye Q.C. with Mr R.T.A. Waddell	Harry M. Hearn

HIS HONOUR:

Background

The father of the plaintiff died in July 1976 and by his will he appointed the defendant (“Equity Trustees”) as his executor and trustee and established a testamentary trust (“the trust”) to pay the income from his estate to his widow, Dorothy Hayman, and to the plaintiff for life, and on the death of the survivor, to pay the residue to Geelong Grammar School (“Geelong Grammar”).

Dorothy Hayman died in February 1984 leaving the plaintiff as the sole life tenant and Geelong Grammar as the remainderman.

The Litigation

In September 2001 the plaintiff issued proceedings in this Court claiming that Equity Trustees were in breach of trust in their administration of the trust. The principal allegation of the plaintiff is that Equity Trustees were negligent in their management of the portfolio of shares which formed the bulk of the estate left by the testator to be administered by his trustees.

Regrettably, the litigation has been beset by delays and disproportionate cost caused by, amongst other things, a change in the solicitors acting for the plaintiff. The date for trial has been refixed on several occasions. The proceeding is now fixed for trial on 26 November 2003.

The application in the Practice Court

By summons filed 15 August 2003 and returnable in the Practice Court on 2 September 2003 the plaintiff sought leave to file and serve an amended statement of claim which statement of claim sought orders that the trust be wound up and that the defendant transfer the entire trust property to the plaintiff, subject to any properly incurred trustee charges.

Upon the summons coming on before me on 2 September 2003 the plaintiff, through his counsel Ms Kenny, sought to rely upon a similar claim to that made by the summons, which had been made by way of originating motion issued and served upon the defendant late on 1 September 2002. The originating motion sought an order directing the defendant to transfer the residuary property…

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 Hayman v Equity Trustees Ltd

Details

AGLC: Hayman v Equity Trustees Ltd [2003] VSC 353
Case: [2003] VSC 353
Decision Date: 8 September 2003

CaseChat Overview and Summary

In Hayman v Equity Trustees Ltd, the plaintiff sought a vesting order under the rule in Saunders v Vautier, which allows life tenants to compel trustees to distribute trust assets upon reaching a certain age. The defendant, Equity Trustees Ltd, refused to distribute the trust assets, citing an indemnity over the trust fund for costs incurred in defending the plaintiff’s claim for breach of trust. The case required the court to determine whether the trustee's indemnity, which the trustee claimed was by way of charge or lien, could override the plaintiff’s entitlement to a vesting order under the Trustee Act 1958.

The court examined whether the indemnity over the trust fund held by the trustee could be considered a charge or lien that would take precedence over the plaintiff's right to compel distribution. This involved interpreting the nature of the indemnity and its implications under the Trustee Act 1958. The court also needed to balance the trustee's right to be indemnified for costs against the life tenant's entitlement to have the trust assets distributed, as per the rule in Saunders v Vautier. The key issue was whether the trustee's claim to an indemnity was sufficiently recognised under the law to prevent the vesting order from being granted.

The court concluded that the trustee’s indemnity did not amount to a charge or lien over the trust assets that could override the plaintiff’s claim for a vesting order. The court found that the indemnity was more akin to a personal claim against the trust fund rather than a proprietary interest. Consequently, the plaintiff's right to compel the distribution of the trust assets under the rule in Saunders v Vautier was upheld. The court held that the trustee’s indemnity did not have the necessary priority to prevent the vesting order, and the plaintiff was entitled to the distribution of the trust assets.

The final orders of the court were that the defendant, Equity Trustees Ltd, was required to vest the trust assets in the plaintiff, Hayman, in accordance with the rule in Saunders v Vautier. The court rejected the trustee's claim that its indemnity could be prioritised over the plaintiff’s entitlement to a vesting order, thereby enabling the plaintiff to obtain the distribution of the trust assets as sought.

Orders