Hitchcock v Pratt Group Holdings Pty Ltd as trustee for the Pratt Family Holdings Trust

[2024] NSWSC 1292

Supreme Court

New South Wales

Medium Neutral Citation:

Hitchcock v Pratt Group Holdings Pty Ltd as trustee for the Pratt Family Holdings Trust [2024] NSWSC 1292

Hearing dates:

16 February, 26 June 2024

Date of orders:

16 October 2024

Decision date:

16 October 2024

Jurisdiction:

Equity

Before:

Meek J

Decision:

Leave to amend the Plaintiff’s amended statement of claim given in part, with limited leave also given to re-plead certain aspects of the claim in the ways specified by the Court. Leave to amend reply refused and part of existing reply struck out.

Catchwords:

CIVIL PROCEDURE — Pleadings — Competing applications for amendment and strike out of parts of amended statement of claim and reply — Plaintiff alleges that she is a discretionary object of the family trust, despite the fact that the Trustee executed a deed of exclusion by which it purported to exercise its power of exclusion under the trust deed to exclude her as a general beneficiary, and that she has suffered loss by reason of the Trustee failing to appoint income to her over a number of years since her purported exclusion — By her proposed pleadings, the Plaintiff seeks to impugn the validity of the purported exclusion by alleging that, in purporting to exclude her, the Trustee (a) acted under the dictation of the remaining beneficiaries (the “Siblings”), (b) failed to consider whether the purported exclusion was a reasonable and proper exercise of its power, or (c) exercised its power for an improper purpose — Alternatively, the Plaintiff seeks to allege that she is still a discretionary object because, by reason of certain payments made to her by the Trustee after her purported exclusion, (a) the Trustee had determined that the purported exclusion was of no effect or the power of exclusion had not been exercised, or (b) the Trustee acknowledged and affirmed the Plaintiff’s status as a general beneficiary and/or waived its right to rely upon the purported exclusion — Leave to amend given in part, with limited leave also given to re-plead certain aspects of the claim in the ways specified — Leave to plead certain claims refused

CIVIL PROCEDURE — Pleadings — Amendment — Discussion of principles of pleading, particulars and amendment

CIVIL PROCEDURE — Pleadings — Primary facts and inferences — Discussion of requirements for pleading facts based on inferences from primary facts — Approach adopted similar to that which is taken in cases of conspiracy, as in this case the Plaintiff’s pleading is advanced on the basis she has limited knowledge of the events the subject of her claim

CIVIL PROCEDURE — Pleadings — Striking out — Uniform Civil Procedure Rules 2005 (NSW), r 14.28 — Discussion of principles of striking out — Discussion of meaning of “no reasonable cause of action” threshold and impact of overriding purpose in s 56 Civil Procedure Act 2005 (NSW) — Doubt expressed that s 56 has made the test under r 14.28 less strict than previously, in the sense of reducing the conditions for the engagement of the power, as opposed to limiting the circumstances in which the Court, satisfied that the power is available, might be inclined to refuse relief on discretionary grounds

CIVIL PROCEDURE — Pleadings — Fraud or dishonesty — Trustee raises by way of defence an exemption clause which precludes its responsibility for (inter alia) any breach of duty or trust unless it was committed in “personal conscious and fraudulent bad faith” by the Trustee, as well as a limitation defence, in response to the allegations that it failed to appoint income to the Plaintiff — Discussion of meaning of “personal conscious and fraudulent bad faith” for the purposes of an exemption clause and “fraudulent breach of trust” for the purposes of limitation provisions — Held that both notions involve dishonesty (although for the latter it may be sufficient that there is at least some knowledge of the impropriety of the conduct involved)

CIVIL PROCEDURE — Pleadings — Fraud or dishonesty — Plaintiff by her proposed amended reply seeks to allege that the conduct and alleged breaches by the Trustee in failing to appoint income set out in her proposed further amended statement of claim were committed in personal conscious and fraudulent bad faith and are claims in respect of a fraudulent breach of trust for limitation purposes — Discussion of requirements for pleading dishonesty — Discussion of whether it is necessary to plead facts which tilt the balance to support an inference of dishonesty — Considered that, if the facts, circumstances and relevant context as pleaded might, if established by the evidence, rise to the level of dishonesty, the pleading is sufficient — Held that, while the Trustee’s conduct in relation to the purported exclusion might rise to the level of dishonesty, its alleged subsequent breaches in failing to appoint income to the Plaintiff did not — Held that the allegations made in the reply relating to fraud ought to be struck out

CIVIL PROCEDURE — Pleadings — Allegations of knowledge — Whether particulars of knowledge necessary when actual knowledge is alleged — On the basis that the Plaintiff’s case is expressly stated to be one of actual knowledge, and that such knowledge was held by the directors identified, held that the pleaded allegations of knowledge are sufficient

PROPER PURPOSE RULE — Discussion of powers generally and the scope of the proper purpose rule — Purpose and motive distinguished — Good faith and proper purpose distinguished — Discussion of possible purposes of a power of exclusion in a trust deed — Whether the Plaintiff is required to plead a proper purpose(s) for the exercise of the Trustee’s power of exclusion — Held that the Plaintiff’s omission of a pleading which states for what purpose or purposes the power of exclusion may properly be exercised does not mean that no complete cause of action is pleaded or that the pleading of the improper purpose is otherwise defective

EQUITY — Trusts and trustees — Construction of trust deed — Whether the Plaintiff’s new construction claim that she is a specified beneficiary, having regard to the definition in the trust deed, is arguable — Discussion of meaning of “child” and “parent” in trust deed — Held that proposed construction claim is arguable and leave given to plead it

EQUITY — Trusts and trustees — Breaches of trust — Failure to exercise discretion upon real and genuine consideration — Whether the Trustee’s failure to consider results in the exercise of power being void or voidable at the instance of the beneficiary who is adversely affected — Leave given to re-plead the exercise (failure to consider) case such that the purported exclusion is voidable and should be set aside

EQUITY — Trusts and trustees — Acknowledgement, affirmation and waiver — Whether the Plaintiff’s alternative case based upon acknowledgement, affirmation and/or waiver by the Trustee is arguable — Leave to plead alternative case refused

EQUITY — Trusts and trustees — Breaches of trust — Remedies — Whether the Plaintiff’s claim for equitable compensation as a result of “loss” from the Trustee’s failure to appoint income to her over numerous years is arguable — Held that on the Plaintiff’s proposed pleadings, having regard to the discretionary nature of the Trust and the Trustee’s power to appoint income, the claim is not arguable — Leave to plead equitable compensation claim refused

Legislation Cited:

Choice of Law (Limitation Periods) Act 1993 (NSW)

Civil Procedure Act 2005 (NSW)

Federal Court of Australia Act 1976 (Cth)

Limitation Act 1969 (NSW)

Limitation of Actions Act 1958 (Vic)

Rules of the Supreme Court 1883 (UK)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

AA as Executor of the Estate of BB v XX (No 2) [2024] WASC 39

Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41

Ag-Exports (Australia) Pty Ltd v Export Finance and Insurance Group [2006] NSWSC 467

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57

Allianz Australia Insurance Ltd v Delor Vue Apartments CTS 39788 (2022) 277 CLR 445; [2022] HCA 38

Alpert v Commonwealth (Department of Defence) [2024] FCA 447

Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43

Andrianakis v Uber Technologies (Ruling No 1) [2019] VSC 850

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27

Armitage v Nurse [1998] Ch 241

Arthur Yates & Co Pty Ltd v Vegetable Seeds Committee (1945) 72 CLR 37; [1945] HCA 55

Australian Metropolitan Life Assurance Company Ltd v Ure (1923) 33 CLR 199; [1923] HCA 29

Baba v Sheehan [2021] NSWCA 58; (2021) 151 ACSR 462

Banks v Alphatise Pty Ltd [2014] NSWSC 1437

Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11

Bott v Carter [2012] NSWCA 89

Brambles Holdings Ltd v Carey (1976) 15 SASR 270

British American Tobacco Australia Ltd v Gordon (No 3) [2009] VSC 618

Brougham v Edwards [2024] SASCA 59

Bruce v Odhams Press Ltd [1936] 1 KB 697

Burgess v Beethoven Electric Equipment Ltd [1943] KB 96

Campbell v T. L. Clacher No. 2 Pty Ltd [2019] QSC 218

Cardaci v Cardaci [2023] WASCA 158

Carr v Baker (1936) 36 SR (NSW) 301

Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; [2000] HCA 47

Colombini v De Berigny [2021] NSWSC 374

Commonwealth Bank of Australia v ZYX Learning Centres Ltd [2014] NSWSC 1676; (2014) 103 ACSR 476

Commonwealth of Australia v Griffiths [2007] NSWCA 370

Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39

Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2017] FCAFC 50

Cooper v The Owners — Strata Plan No 58068 (2020) 103 NSWLR 160; [2020] NSWCA 250

Cowan v Scargill [1985] Ch 270

Croc’s Franchising Pty Ltd v Alamdo Holdings Pty Ltd [2023] NSWCA 256

Curwen v Vanbreck Pty Ltd [2008] VSC 338

Curwen v VanbreckPty Ltd (as trustee for W S and N R Harvey Family Trust) (2009) 26 VR 335; [2009] VSCA 284

Davis v Halliday Financial Management Pty Ltd [2014] NSWSC 1371

De Lorenzo v De Lorenzo (2020) 104 NSWLR 155; [2020] NSWCA 351

Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1

Di Liristi v Matautia Developments Pty Ltd (No 2) [2020] NSWSC 862

Drake v Wood Marshall Williams Solicitors [2015] NSWSC 1091

Duke of Portland v Topham (1864) 11 HLC 32

Eclairs Group Ltd v JKX Oil & Gas plc [2015] UKSC 71

Empire Shipping Co Inc v Owners of the Ship “Shin Kobe Maru” (1991) 32 FCR 78; [1991] FCA 641

Ex Parte Brown, In Re Smith (1886) 17 QBD 488

Fattal v Walbrook Trustees (Jersey) Ltd [2010] EWHC 2767 (Ch)

Feeney v Rix [1968] Ch 693

Finance & Guarantee Company Pty Ltd v Auswild (No 2) [2016] VSC 559

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566

Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2002] FCAFC 285

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69

Goldsmith v Sandilands [2002] HCA 31; (2002) 190 ALR 370

Grand View Private Trust Co Ltd v Wong [2022] UKPC 47

Haigh v Haddad [2024] NSWSC 904

Hancock v Rinehart [2015] NSWSC 646; (2015) 13 ASTLR 1

Harris v Ashdown (1985) 3 NSWLR 193

Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266

Hookey v Manthey (2020) 4 QR 371; [2020] QSC 125

Horton v Jones (No 2) (1939) 39 SR (NSW) 305

Hoxton Park Residents Action Group Inc v LiverpoolCity Council [2012] NSWSC 1026

HSBC International Trustee Ltd v Poon (No 2) [2014] JRC 254A; 18 ITELR 355

Human Appeal International Australia v Beyond Bank Australia Ltd [2023] NSWSC 382

Hunt v National & General Insurance Co Ltd [1974] Qd R 157

I Cook Foods Pty Ltd v State of Victoria [2022] VSC 649

Idoport Pty Ltd v National Australia Bank Ltd [2000] NSWSC 599

In de Braekt v Powell (2007) 33 WAR 389; [2007] WASCA 55

Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206

JSC Bank of Moscow v Kekhman (No 2) [2015] EWHC 3073 (Comm)

Karger v Paul [1984] VR 161

Katsoulas v Kritikakis; Katsoulas v Apostolatos [2024] NSWSC 67

Kosmas as Administrator of the Estate of George v Cherote (Supreme Court (NSW), Simos J, 14 March 1996, unrep)

Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68

KTC v David [2022] FCAFC 60

Lock v Australian Securities and Investments Commission (2016) 248 FCR 547; [2016] FCA 31

Lyons v Kern Konstructions (Townsville) Pty Ltd (1983) 70 FLR 135

Mandie v Memart Nominees Pty Ltd [2018] VSC 719

Mandie v Memart Nominees Pty Ltd (2020) 62 VR 528; [2020] VSCA 281

Maybury v Plowman (1913) 16 CLR 468; [1913] HCA 43

McDonald v Grech; Bank of Western Australia Ltd v McDonald [2012] NSWSC 717

Meckiff v Simpson [1968] VR 62

Mercanti v Mercanti [2017] HCA 1; (2017) 340 ALR 225

Mercanti v Mercanti (2016) 50 WAR 495; [2016] WASCA 206

National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority [2018] NSWSC 157

New South Wales v Williams [2014] NSWCA 177

O’Shanassy v AIA Australia Limited (previously The Colonial Mutual Life Assurance Society Limited t/as CommInsure) [2022] NSWSC 677

O’Sullivan v Schubert [1963] VR 143

Owies v JJE Nominees Pty Ltd (in its capacity as the trustee for the Owies Family Trust) [2022] VSCA 142

Pamplin v Irwin [2024] NSWCA 213

Perera v Genworth Financial Mortgage Insurance Pty Ltd (2017) 94 NSWLR 83; [2017] NSWCA 19

Persons Identified in Schedule 1 v Standard Chartered plc [2024] EWCA Civ 674

Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 3) [2010] FCA 361; (2010) 267 ALR 494

Pinson v Lloyds and National Provincial Foreign Bank Ltd [1941] 2 KB 72

Pitt v Holt [2013] 2 AC 108

Plaintiff M83 v Morrison (No 2) [2020] FCA 1198

Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No 4) (2011) 203 FCR 293; [2011] FCA 1126

R v Associated Northern Collieries (1910) 11 CLR 738; [1910] HCA 61

Re Owies Family Trust (No 3) [2021] VSC 114

Re the C Trust [2012] JRC 086B

Remmington v Scoles [1897] 2 Ch 1

Roadchef (Employee Benefits Trustees) Ltd v Hill [2014] EWHC 109 (Ch)

Roseland Capital Pty Ltd v Neometals Ltd [2022] WASC 132

Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260

Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29

Shaw v New South Wales [2012] NSWCA 102

Simmons v Henwood [2013] NSWCA 184

Simmons v New South Wales Trustee and Guardian [2014] NSWCA 405

Simmons v NSW Trustee and Guardian [2013] NSWSC 1688

Simmons v Protective Commissioner of NSW [2012] NSWSC 455

Simmons v Ross [2018] VSC 306

Sir Ralph Bovey’s Case (1672) 1 Vent 217; 86 ER 146

Sofer v Swissindependent Trustees SA [2020] EWCA Civ 699

Sondakh v Herliman [2021] NSWSC 1144

Soulos v Pagones [2023] NSWCA 243

Spencer v Commonwealth of Australia (2010) 241 CLR 118; [2010] HCA 28

Spencer v Spencer [2014] 2 NZLR 190

Spiliotopoulos v National Australia Bank Limited [2017] NSWSC 971

Streeter v Western Areas Exploration Pty Ltd (No 2) [2011] WASCA 17; (2011) 278 ALR 291

Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1

Turner v Turner [1984] Ch 100

Uber Australia Pty Ltd v Andrianakis (2020) 61 VR 580; [2020] VSCA 186

Vatcher v Paull [1915] AC 372

Walker v Stones [2001] QB 902

Wilden Pty Ltd v Green (2009) 38 WAR 429; [2009] WASCA 38

Willcocks v Croft [2021] NSWSC 1610

Texts Cited:

Carter, J W, Contract Law in Australia (7th ed, 2018, LexisNexis Butterworths)

Casson, D B, and I H Dennis, Odgers’ Principles of Pleading and Practice in Civil Actions in the High Court of Justice (22nd ed, 1981, Stevens & Sons)

Chapman, Chris, “Pleading allegations of dishonesty” (2006) 1 NZLJ 13

Dal Pont, G E, Law of Limitation (2nd ed, 2021, LexisNexis)

Encyclopaedic Australian Legal Dictionary, online ed

Halsbury’s Laws of Australia

Heydon, J D, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths)

Hudson, Jessica, “The Proper Purpose Rule: Preventing Law’s Intentional Abuse” (Paper), Supreme Court of NSW Annual Conference, 2024

Macquarie Dictionary, online ed

Mitchell, Charles et al, Underhill and Hayton: Law of Trusts and Trustees (20th ed, 2022, LexisNexis)

Ritchie’s Uniform Civil Procedure NSW

Thomas, Geraint, Thomas on Powers (2nd ed, 2012, Oxford University Press)

Tucker, Lynton, Nicholas Le Poidevin and James Brightwell, Lewin on Trusts (20th ed, 2020, Sweet & Maxwell)

Category:

Procedural rulings

Parties:

Paula Sarah Hitchcock (Plaintiff / Applicant on Amendment Application)
Pratt Group Holdings Pty Ltd (First Defendant / Applicant on Strike Out Application)
Anthony Joseph Pratt (Second Defendant)
Heloise Waislitz (Third Defendant)
Fiona Geminder (Fourth Defendant)

Representation:

Counsel:
C H Withers SC with S Puttick and (on 16 February 2024) K Lindeman (Plaintiff / Applicant on Amendment Application)
A J Myers KC with J Carney (First Defendant / Applicant on Strike Out Application)
J Sheahan KC with A Smith (Second to Fourth Defendants)

Solicitors:
YPOL Lawyers (Plaintiff / Applicant on Amendment Application)
Kalus Kenny Intelex (First Defendant / Applicant on Strike Out Application)
MinterEllison (Second to Fourth Defendants)

File Number(s):

2022/115750

TABLE OF CONTENTS

Introduction

Relevant procedural history

The applications and evidence

The Trust and Trust Deed

Establishment of the Trust

Trust Deed – Specific definitional provisions

Other Trust Deed provisions

The CDE

Overview of the Claim, defences and Reply

Plaintiff’s Claim

Defences

Reply

Contentious paragraphs of the Claim and Reply

Issues

The main issues

Primary facts and inferences

Pleading and amendment principles

Pleading material facts

Particulars

Amendment

Strike out principles

On what basis may a pleading be struck out?

What does the “no reasonable cause of action” threshold mean?

Are any matters which raise factual contests matters for trial?

Pleading fraud and dishonesty

References to “personal conscious and fraudulent bad faith” and “fraudulent breach of trust” involve dishonesty

Requirements for pleading dishonesty

When alleging fraud or dishonesty, is it sufficient to plead facts consistent with honesty and must there be facts pleaded which tilt the balance towards dishonesty?

Submissions

Determination

The proper purpose rule and the power of exclusion

Powers generally

Proper purpose – nomenclature

What is the proper purpose rule

Purpose and motive distinguished

Good faith and proper purpose distinguished

The purpose of a power of exclusion

Issue 1 – Has the legislative “overriding purpose” mandate in s 56 of the CPA created a new test for pleading disputes about the existence of a reasonable cause of action?

Submissions

Determination

Issue 2 – Is the Plaintiff’s construction claim that she is a “child” of Mrs Pratt arguable?: Claim [5]-[6], [12]

Submissions

Determination

Issue 3 – Has the Plaintiff sufficiently particularised allegations of knowledge in the Claim?: Claim [35], [41], [43], [45] and [47]

Submissions

Determination

Other matters

Issue 4 – Should the Plaintiff be given leave to amend to allege the Guardian’s reason for consenting to the waiver of its entitlement to notice of the exercise of the reserved power?: Claim [39(c)]

Submissions

Determination

Issue 5 – Are the demand allegation, no exercise (ceding) case and exercise (failure to consider) case sufficiently particularised or otherwise able to be inferred by the facts pleaded?: Claim [40], [42], [44]

Submissions

Determination

Demand allegation

Alleged inconsistency

No exercise (ceding) case

Exercise (failing to consider) case

Defence of the proceedings

Issue 6 – Would the relief sought in respect of the exercise (failure to consider) case be available to the Plaintiff?: Claim [51], [54], [78]

Issue 7 – Is the Plaintiff required to identify the permissible purposes of the reserved power and permitted to plead that the Trustee had no purpose other than an improper one in exercising that power?: Claim [34]-[35], [46]-[49]

Submissions

Determination

Other matters

Issue 8 – Has the Plaintiff otherwise adequately pleaded her exercise (improper purpose) case against the Trustee?: Claim [46]-[49], [52]

Submissions

Determination

Issue 9 – Is the Plaintiff’s alternative case that the Trustee by its conduct has acknowledged or affirmed the Plaintiff’s status as a General Beneficiary, or waived its right to rely upon the purported exclusion, arguable?: Claim [59]-[70]

Submissions

Determination

Issue 10 – Is the Plaintiff’s equitable compensation claim arguable?: Claim [58], [74] and [79]

Issue 11 – Has the Plaintiff adequately pleaded a reply case that the Trustee’s conduct was dishonest?: Reply [2(c)], [2(e)]

Allegations of dishonesty in the Reply

Does the conduct pleaded at [15]-[54] of the Claim involve dishonesty?

Do the breaches pleaded at [55]-[58] and [71]-[74] of the Claim involve dishonesty?

Conclusion for the Plaintiff’s Reply

Issue 12 – Is the Plaintiff’s reply regarding the opinion of the Trustee as to whether she is a “child” within the meaning of cl 1(21) arguable?: Reply [1(c)]

Submissions

Determination

Would the Plaintiff’s claim in respect of the purported exclusion be maintainable if the exemption clause and limitation defence were raised against it?

Amended statement of claim

Summary of my findings

Costs

Orders

JUDGMENT

Introduction

1. HIS HONOUR: The Plaintiff, ^[1]  aged 27, is a child of the late Richard Pratt (Mr Pratt), who died on 28 April 2009, and Shari-Lea Hitchcock. The first defendant is the trustee (Trustee) of the Pratt Family Holdings Trust (Trust). The second, third and fourth defendants (respectively, Anthony Pratt, Heloise Waislitz and Fiona Geminder) are the children of Mr Pratt and Jeanne Pratt (Mrs Pratt). They are, in ordinary parlance, half-siblings of the Plaintiff. In the pleadings referred to below they are described as the “Siblings” and, for the purposes of these reasons for judgment, I will describe them as such.

   1. In the forms of the affidavits verifying the proposed further amended statement of claim, the Plaintiff uses the name Paula Sarah Thoumi (CB 77, 490), and in the reply filed on 12 May 2023 (CB 51) and the proposed amended reply (CB 84, 129, 497) states she is Paula Sarah Thoumi and was formerly known as Paula Sarah Hitchcock: CB 51. The proceedings were commenced by the Plaintiff using the surname Hitchcock and no request or application has been made to describe the Plaintiff otherwise. Accordingly, with no intended disrespect, I have retained use of the surname Hitchcock in the judgment.

2. The Plaintiff claims that she is a discretionary object of the Trust. That is despite the fact that, over two decades ago, the Trustee purported to enter into a deed by which it exercised a power to exclude the Plaintiff as a General Beneficiary of the Trust (contested deed of exclusion or CDE). ^[2]

   2. There is a contest over whether the deed of exclusion is valid. On the one hand, the Plaintiff describes it as a “purported deed of exclusion” while, on the other hand, the defendants describe it as a “deed of exclusion”. Recognising that dispute, but not determining it, I will simply describe the deed as the “contested deed of exclusion”.

3. In her amended statement of claim, the Plaintiff seeks the following by way of final relief:

1. declarations that she is a discretionary object of the Trust and that the CDE is void;

2. an order that the Trustee provide to her copies of certain trust documents, including the trust deed(s), financial reports and general ledgers of the Trust, bank statements of the Trustee and documents recording distributions from the Trust, or, alternatively, an account in common form be taken and rendered to the Plaintiff; and

3. equitable compensation (arising from alleged losses of potential distributions from the Trust).

4. There are three applications before the Court, the nature of which I describe in more detail below. Two of the applications relate to what is colloquially known as a “pleading dispute”, in which the Plaintiff seeks leave to file a proposed further amended statement of claim and proposed amended reply, while the Trustee (with the Siblings’ encouragement) seeks to have parts of the Plaintiff’s amended statement of claim and reply struck out. I have heard those two applications. By agreement, the third application has not yet been dealt with by me, as it is dependent upon the outcome of the pleading dispute.

5. On the hearings, Mr Withers SC appeared for the Plaintiff with Mr Puttick and, on 16 February 2024, also with Ms Lindeman. Mr Myers KC appeared with Mr Carney for the Trustee, and Mr Sheahan KC appeared with Ms Smith for the Siblings. Counsel provided various written outlines of submissions prior to the hearings and made oral submissions on the two hearing dates of the applications.

6. I will cite the evidence in the applications by reference to the Court Book (CB) and exhibit numbers, and cite the submissions by reference to transcript pages (TD1 for 16 February 2024 and TD2 for 26 June 2024) and as follows:

1. the Plaintiff’s written submissions dated 22 September 2023: CB 313-315 (PWS1); the Plaintiff’s written submissions dated 28 November 2023: CB 378-394 (PWS2); the Plaintiff’s written supplementary submissions dated 12 February 2024: CB 819-834 (PWS3); and the Plaintiff’s written supplementary submissions dated 7 June 2024: CB 927-954 (PWS4);

2. the Trustee’s written submissions dated 14 November 2023: CB 316-369 (TWS1); the Trustee’s written reply submissions dated 5 December 2023: CB 395-401 (TWS2); the Trustee’s written supplementary submissions dated 5 February 2024: CB 719-742 (TWS3); the Trustee’s written submissions dated 26 April 2024: CB 875-912 (TWS4); and the Trustee’s written reply submissions dated 20 June 2024: CB 955-975 (TWS5); and

3. the Siblings’ written submissions dated 13 November 2023: CB 370-377 (SWS1); the Siblings’ written reply submissions dated 4 December 2023: CB 402-406 (SWS2); the Siblings’ written supplementary submissions dated 5 February 2024: CB 813-818 (SWS3); the Siblings’ written submissions dated 24 April 2024: CB 913-926 (SWS4); and the Siblings’ written reply submissions dated 20 June 2024: CB 976-982 (SWS5).

7. The applications are being considered in a context in which a central part of the Plaintiff’s claim relates to the conduct of the Trustee and the Siblings in events which occurred in or around June 2001, over 23 years ago. The Plaintiff’s solicitor (Mr Price) has observed that the events occurred when she was a minor and, accordingly, she has limited knowledge of the events which are the subject of her claim: CB 453[6]. This, it seems, has given rise to perceived difficulties in the Plaintiff being able to plead material facts and give particulars in respect of those facts.

8. The latest round of proposed amended pleadings which the Plaintiff seeks leave to file constitutes her sixth attempt at formulating her claim. ^[3]

   3. The attempts being: (1) the statement of claim filed on 22 April 2022; (2) the amended statement of claim filed on 15 December 2022 and reply filed on 12 May 2023: CB 1, 46; (3) the proposed further amended statement of claim and proposed amended reply served on 27 July 2023: CB 58[4]; (4) a further version of the proposed further amended statement of claim and proposed amended reply served on 8 September 2023: CB 58[9]; (5) the penultimate proposed further amended statement of claim served on 20 December 2023: CB 589-615; and (6) the current proposed further amended statement of claim served on 7 March 2024 and proposed amended reply served on 1 March 2024: CB 838-871.

9. The hearing of the applications has been vigorously contested over two non-consecutive hearing days, with a significant volume of documents and written submissions being placed before the Court.

10. To the casual observer, the hearing of the applications has involved a volume of documentation and an amount of court time which is more akin to what would be provided for, and complete, a final hearing of many court proceedings. However, to be clear, the hearing of the pleading dispute is an interlocutory hearing and not a final hearing giving rise to a determination on the merits of the dispute between the parties.

11. Ultimately, I have decided that leave to amend the Plaintiff’s amended statement of claim should be given in part, with limited leave also given to re-plead certain aspects of the claim in the ways that I specify below. I have also decided that leave to amend the Plaintiff’s reply should be refused and that part of the existing reply, including that alleging fraud or dishonesty, should be struck out. That is partly a consequence of my finding that the Plaintiff’s equitable compensation claim is not arguable and partly a consequence of my finding that the alleged breaches to which the allegations relate cannot give rise to an inference of fraud or dishonesty. Despite the Plaintiff’s allegations that the Trustee engaged in dishonest conduct, significantly, the Plaintiff has not sought relief that would have the effect of either requiring the Trustee to re-exercise its discretion in respect of the relevant years, or an order to have the Trustee removed and a new trustee re-exercise that discretion.

12. I ought to note that, whilst I have decided that the “substantial” relief sought by the Plaintiff through equitable compensation cannot be pursued, the remaining declaratory and other relief sought would still provide some forensic utility to her going forward.

Relevant procedural history

13. The proceedings were commenced by statement of claim filed on 22 April 2022. At that stage, the Plaintiff sought a declaration that she was a discretionary object of the Trust, provision by the Trustee of the documentation referred to above and an account in common form be taken and rendered to her.

14. On 25 November 2022, the Siblings were joined as defendants to the proceedings pursuant to r 6.24 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).

15. On 15 December 2022, the Plaintiff filed her amended statement of claim, which added the claims seeking a declaration that the CDE is void and equitable compensation as part of the final relief sought.

16. The Trustee and the Siblings filed defences to the amended statement of claim on 9 February 2023 and 14 February 2023, respectively. On 12 May 2023, the Plaintiff filed her reply to those defences.

17. Despite the passing of approximately 30 months since commencement, the proceedings have not progressed beyond the stage of pleadings. As I set out in more detail below, that is because the proceedings have been mired by the pleading dispute.

18. The Plaintiff’s claims are complex and it should not be thought that the parties have been desultory in facilitating the overriding purpose in civil proceedings for the just, quick and cheap resolution of the real issues in the proceedings: s 56 Civil Procedure Act 2005 (NSW) (CPA). Nonetheless, there is some imperative in the proceedings being progressed beyond the stage of pleadings toward a final hearing.

The applications and evidence

19. The three applications before the Court consist of the following:

1. the Trustee’s notice of motion filed on 26 June 2023, which seeks a separate determination of questions regarding the proper construction of the trust deed of the Trust dated 9 May 1983 (Trust Deed) (separate determination application);

2. the Plaintiff’s notice of motion filed on 8 September 2023, which sought leave to file a proposed further amended statement of claim and a proposed amended reply. An amended form of notice of motion dated 30 January 2024 was provided by the Plaintiff, in which she sought leave to file a later version of the proposed further amended statement of claim served on 20 December 2023, as well as the proposed amended reply served on 8 September 2023. Those documents were the subject of the initial hearing before me on 16 February 2024. However, they were superseded by a further amended notice of motion dated 7 June 2024 (amendment application), which seeks leave to file the latest proposed further amended statement of claim served on 7 March 2024 (Claim) and the latest proposed amended reply served on 1 March 2024 (Reply); and

3. the Trustee’s notice of motion filed on 21 September 2023, which seeks to have certain paragraphs of the Plaintiff’s amended statement of claim and reply struck out (strike out application).

20. Orders made on 8 December 2023 contemplated that the amendment application and the strike out application would be heard before the separate determination application.

21. That is a sensible course because, until the final version of the amended pleadings upon which the Plaintiff seeks (or is permitted) to rely is known, the question of whether there is any utility in dealing with separate questions of construction of the Trust Deed will not be susceptible to a clear answer.

22. Further, although they are technically separate applications, there are common aspects to the amendment application and the strike out application such that the determination of aspects of one will practically resolve most (or possibly all) of the aspects of the other.

23. On the hearing of the applications, the following affidavit evidence was read and exhibits tendered:

1. on the separate determination application:

1. the affidavit of Pietro Antonio Lettieri sworn 26 June 2023 and exhibit PL-1: CB 411-451; TD1 5.6-.8; and

2. the affidavit of Timothy Randolph Price sworn 28 July 2023 and exhibit TRP-1: CB 452-588; TD1 2.43-.46;

2. on the amendment application:

1. the affidavit of Timothy Randolph Price sworn 8 September 2023 and exhibit TRP-2: CB 57-129; TD1 2.50-3.3;

2. the affidavit of Timothy Randolph Price sworn 28 November 2023 and exhibit TRP-3: ^[4]  CB 256-312; TD1 3.7-.10; and

   4. This affidavit was also relied upon in opposition to the strike out application: CB 258[2].

3. the affidavit of Timothy Randolph Price sworn 20 December 2023 and exhibit TRP-4: CB 658-718; TD1 3.14-.17;

3. on the strike out application:

1. the affidavit of Michael Jonathan Kenny sworn 14 November 2023 and exhibit MJK-1: CB 134-255; TD1 4.47-5.1; and

2. the affidavit of Michael Jonathan Kenny sworn 5 February 2024 and exhibit MJK-2: CB 743-812; TD1 5.5-5.10. ^[5]

   5. These two affidavits were also relied upon in opposition to the amendment application.

24. The Plaintiff also tendered the annual return of Deansworth Pty Ltd (Deansworth) for the financial year ended 30 June 2001, which was marked as Exhibit P1: TD1 3.40.

The Trust and Trust Deed

Establishment of the Trust

25. The Trust was settled by the Trust Deed on 9 May 1983 between the Trustee (then known as Rushmoor Pty Ltd) and Phillip Bornstein as settlor. In the Schedule to the Trust Deed, Deansworth was nominated as the “Guardian” and “Appointor”. The Trust Deed was subsequently varied by a deed dated 7 February 1984 between Deansworth and the Trustee.

26. At the time that the Trust was settled, Mark Liebler (Mr Liebler), Michael Naphtali (Mr Naphtali) and John Fast (Mr Fast) were the directors of the Trustee. Mr Fast resigned as a director of the Trustee on that day, and it is not known whether his resignation took effect prior to or after the execution of the Trust Deed.

27. Deansworth was the Guardian until 16 May 2018, after which Deansworth Two Pty Ltd has been the Guardian of the Trust. Given that most of the significant events which concern these proceedings occurred prior to 16 May 2018, I will refer to Deansworth simply as the “Guardian” hereafter unless indicated otherwise.

28. On 4 June 2001, the Trustee and the Guardian purported to enter into the CDE. At that time, the directors of the Trustee were Mr Leibler and Mr Naphtali. The directors of the Guardian were Mr Liebler, Mr Naphtali, Robert Kaye (Mr Kaye) and the Siblings.

29. Since 1 July 2013, the directors of the Trustee have been the Siblings, Mrs Pratt and Mr Kaye.

30. Understanding the Plaintiff’s claim that she is a discretionary object of the Trust requires an appreciation of the defined terms in the Trust Deed which identify the class of discretionary objects. I will set out the necessary definitions and provisions below.

Trust Deed – Specific definitional provisions

31. Clause 1 of the Trust Deed contains various definitions. The terms “Specified Beneficiary” and “Specified Beneficiaries” are defined in cl 1(1) as follows:

(1) “Specified Beneficiary” and “Specified Beneficiaries” shall mean the person or persons named described or defined as such in the Schedule to this Deed (hereinafter called “the Schedule”);

32. The persons identified as Special Beneficiaries in the Schedule to the Trust Deed are:

The children of RICHARD PRATT Company Director and JEANNE PRATT Company Director both of [X] Eamon Court, Kew

33. Significantly, the word “child” is defined in cl 1(21) as follows:

“child” includes legally adopted child stepchild and an illegitimate child who in the opinion of the Trustees has been or is acknowledged by one of the child’s parents as a member of that parent’s family;

34. For the purposes of the Trust Deed, cl 1(26) states that “the singular shall mean and include the plural and vice versa and any gender shall mean and include all other genders”.

35. The term “General Beneficiaries” is defined in cl 1(2), which relevantly provides:

(2) “General Beneficiaries” shall mean and include –

(a) the Specified Beneficiary or the Specified Beneficiaries (as the case may be);

(b) the grandparents uncles aunts brothers sisters spouses widows widowers children and grandchildren of the Specified Beneficiary or Specified Beneficiaries and the spouses widows widowers children and grandchildren of such brothers sisters spouses children and grandchildren and the parents and grand-parents of any spouses uncles and aunts aforesaid;

...

(d) any relative by blood or marriage of any Specified Beneficiary whom the Trustees may nominate as a General Beneficiary;

…

PROVIDED HOWEVER that every member of the excluded class shall be excluded from the class of General Beneficiaries notwithstanding that he may otherwise be or be qualified to be included in the class of General Beneficiaries;

AND PROVIDED that subject to clause 10 hereof the Trustees may at any time and from time to time declare in writing that any person shall be excluded from the class of General Beneficiaries notwithstanding that but for such exclusion he is or would by reason of one or more of the matters or circumstances hereinbefore referred to have been a General Beneficiary and the class of General Beneficiaries shall as from the date of the making of any such declaration be modified accordingly but so that this power shall not be capable of being exercised so as to derogate from any interest to which such General Beneficiary has previously become indefeasibly entitled whether in possession or in reversion or otherwise;

AND PROVIDED FURTHER that if by reason of the inclusion or manner of description of any beneficiary or class of beneficiaries the trusts of this Deed would but for this proviso fail for uncertainty this Deed shall be construed as if such beneficiary or class of beneficiaries were not included as a beneficiary under this Deed.

36. The term “the excluded class” is defined in cl 1(3), which relevantly provides:

(3) “the excluded class” shall mean and include each of the following persons, namely –

(a) the Settlor;

(b) any notional Settlor;

(c) every person claiming under or in right of the Settlor or of any notional Settlor;

(d) the Trustees (save and except the Trustees acting solely in a fiduciary capacity as trustees of an eligible trust);

(e) every corporation and the trustees of every trust or settlement in or under which and any other person in which any other member of the excluded class has any interest so long as such interest continues;

(f) such other persons and corporations (if any) as may be named described or defined in the Schedule as additional members of the excluded class;

PROVIDED HOWEVER that a person shall not be a member of the excluded class if his name is expressly included in the Schedule as an additional member of the class of General Beneficiaries;

AND PROVIDED FURTHER that subject to clause 10 hereof the Trustees may at any time and from time to time declare in writing that any person shall be a member of the excluded class notwithstanding that he is or might but for such declaration become a beneficiary and the class shall as from the date of making any such declaration be modified accordingly but so that this power shall not be capable of being exercised so as to derogate from any interest to which such beneficiary has previously become indefeasibly entitled whether in possession or in reversion or otherwise;

37. The word “beneficiary” is defined in cl 1(7) as meaning “any of the General Beneficiaries”.

38. Further content is given to the terms “Specified Beneficiaries” and “General Beneficiaries” by cl 1(8), which provides:

(8) the expressions “Specified Beneficiaries” and “General Beneficiaries” shall include persons who at any time or from time to time until the Vesting Day fall within any of the foregoing definitions or within any description in the Schedule notwithstanding that such persons may not at the date of this Deed be in existence or fall within that definition or description and (in the case of trustees) notwithstanding that at the date of this Deed the trusts or settlements of which they are trustees have not been established or do not fall within that definition or description;

Other Trust Deed provisions

39. Certain other provisions of the Trust Deed are relevant to the issues in the proceedings. Non-exhaustively, they include the following.

40. By cl 3(1), the Trustee is empowered to, inter alia, pay, apply or set aside all or any part(s) of the net income of the Trust Fund to or for any one or more of the General Beneficiaries living or in existence at the time of the determination. Relevantly, cl 3(2)(e) provides that, with respect to any determination made pursuant to cl 3(1), “the Trustees shall have an absolute discretion in the making of any determination and shall not be required to assign any reason therefor”.

41. Clause 9 (the exemption clause) provides that (my italicised emphasis below):

9. NO Trustee shall be responsible for –

(a) any loss or damage occasioned to the Trust Fund or any part thereof or to any person by the exercise of any discretion or power hereby or by law conferred on the Trustees or by any alleged failure to exercise any such discretion or power; or

(b) any breach of duty or trust whatsoever –

unless the same shall be proved to have been committed made or omitted in personal conscious and fraudulent bad faith by the Trustee charged to be so liable. All persons claiming any interest in the income or capital of the Trust Fund shall be deemed to take with notice of and subject to the protection hereby conferred on the Trustees.

42. Clause 10 relevantly provides that:

10. SUBJECT always to any express provision to the contrary herein contained every discretion vested in the Trustees shall be absolute and uncontrolled and every power vested in them shall be exercisable at their absolute and uncontrolled discretion and the Trustees shall have the like discretion in deciding whether or not to exercise any such power PROVIDED notwithstanding anything contained in this Deed –

(1) the Trustees may before exercising any discretion or power vested in them or making any determination hereunder consult the wishes of the Guardian (if any) but without any obligation being imposed on the Trustees to follow or give effect to any wishes expressed by the Guardian;

…

(3) subject to sub-clause (5) of this clause the Trustees shall not when there is a Guardian exercise the reserved powers or the restricted powers (as hereinafter defined) except after having given notice to the Guardian in accordance with Clause 21 hereof;

…

(6) notwithstanding anything contained in sub-clause (3) of this clause or clause 21(5) hereof the Guardian may in respect of any exercise by the Trustees of any reserved or restricted power waive the giving of notice as provided therein.

(7) in this clause –

(a) “reserved powers” means –

(i) the power to make declarations pursuant to the second provisos to Clause 1(2) and (3) hereof;

…

(c) “power” includes authority and discretion.

43. In the Plaintiff’s Claim, the term “reserved power” was used to reference the Trustee’s power to exclude a General Beneficiary found in the second proviso to cl 1(2) of the Trust Deed. I shall adopt that term henceforth to refer to that power.

44. Clause 18 addresses the Trustee’s obligation to keep accounts.

45. Clause 19 addresses the topic of disclosure of documents. In terms, it indicates that the Trustee is not bound to disclose any documents which reflect deliberations and reasons of the Trustee regarding the exercise (or non-exercise) of powers or discretions. It is as follows:

19. WITHOUT prejudice to any right of the Trustees under the general law to refuse disclosure of any document it is hereby declared that the Trustees shall not be bound to disclose to any person any of the following documents that is to say –

(1) any document disclosing any deliberations of the Trustees (or any of them) as to the manner in which the Trustees should exercise any power or any discretion conferred upon the Trustees by this Deed or disclosing the reasons for any particular exercise or non-exercise of any such power or any such discretion or the material upon which such reasons shall be or might have been based;

(2) any other document relating to the exercise or proposed exercise of any power or any discretion conferred on the Trustees by this Deed (not being legal advice obtained by the Trustees at the cost of the Trust Fund).

The CDE

46. The CDE was executed on 4 June 2001 by Mr Liebler and Mr Naphtali as directors of the Trustee and by the fourth defendant, Ms Geminder, as director and Mr Kaye as secretary of the Guardian.

47. Aside from restating the effect of certain provisions of the Trust Deed set out above, the recitals of the CDE relevantly stated:

E. Paula Sarah Hitchcock was born on [XX] September 1997 and it has been alleged that she is the daughter of Richard Pratt.

F. If Paula Sarah Hitchcock is the daughter of Richard Pratt, Paula Sarah Hitchcock and certain of her relatives may be beneficiaries of the Trust.

…

K. The Guardian has agreed to waive its entitlement to receive notice in respect of the exercise by the Trustee of the power of exclusion contained in the second proviso to Clause 1(2) of the Principal Deed.

L. The Trustee has determined to exercise the power of exclusion contained in the second proviso to Clause 1(2) of the Principal Deed in the manner set out in this Deed.

48. By cl 2 of the CDE, the Trustee purported to exclude the Plaintiff by exercising the reserved power:

2. Exclusion of Beneficiary

The Trustee pursuant to the powers available to and conferred on it by the second proviso to Clause 1(2) of the Principal Deed and pursuant to all other powers whatsoever (whether contained in the Principal Deed or not) lawfully enabling it to do so, and with the consent of the Guardian to the waiver of its entitlement to receive notice in respect of the exercise by the Trustee of the power contained in the second proviso to Clause 1 (2) of the Principal Deed as witnessed by its execution of this Deed DECLARES that, as from the date of this Deed, each of the persons or class of persons specified or described in the Schedule to this Deed as Excluded Persons shall be excluded from the class of General Beneficiaries notwithstanding that but for such exclusion any one or more of the Excluded Persons are or would by reason of one or more of the matters or circumstances referred to in the Principal Deed and the Schedule to the Principal Deed have been General Beneficiaries and the class of General Beneficiaries of the Trust shall as and from the date of this Deed be modified accordingly.

49. By cl 3 of the CDE, the Guardian purported to waive its entitlement to notice of the exercise by the Trustee of the reserved power.

50. The Schedule to the CDE provides that:

To the extent any of the following would otherwise have been beneficiaries of the Trust, the following persons or class of persons are Excluded Persons –

(a) PAULA SARAH HITCHCOCK of [XX] Martin Road, Centennial Park, Sydney.

(b) Any person or persons who is or may be related in any way by blood or marriage to the mother of Paula Sarah Hitchcock (whether presently in existence or not) and the remoter issue of any of them.

Overview of the Claim, defences and Reply

51. The Plaintiff’s Claim is elaborate, spanning 80 paragraphs with many sub-paragraphs and particulars. The Trustee’s defence, the Siblings’ defence and the Plaintiff’s Reply are similarly intricate.

52. At the risk of oversimplification, I will summarise the Plaintiff’s Claim, the existing defences of the defendants and the Plaintiff’s Reply.

Plaintiff’s Claim

53. In essence, the Plaintiff claims that:

1. by various means, she is and has always been a discretionary object of the Trust, because she is: (a) a “child” of Mr Pratt and thus a Specified Beneficiary; (b) a “sister” of the other Specified Beneficiaries, being the Siblings, and thus a General Beneficiary; or alternatively (c) a “child” of Mr Pratt and Mrs Pratt because she is an “illegitimate child” of Mr Pratt who was acknowledged by either or both of Mr Pratt and Mrs Pratt as a member of their family and the Trustee had formed the opinion that she had been so acknowledged, and thus is a Specified Beneficiary (and hence General Beneficiary);

2. the Trustee’s execution of the CDE and/or purported exercise of the reserved power (which, for convenience, I will refer to collectively as the purported exclusion) is:

1. of no effect, as the Trustee did not exercise the reserved power in circumstances where it had acted under the dictation of the Siblings so as to have ceded its discretionary power (no exercise (ceding) case); or

2. void ab initio as a fraud on its power because, in doing so:

1. the Trustee acted at the “demand, direction, instigation, and/or request” ^[6]  of one or more of the Siblings and thus “had failed to or determined that it should not turn its mind and/or give fair and proper consideration as to whether [the purported exclusion] was a reasonable and proper exercise of its power” (exercise (failure to consider) case); or

   6. For simplicity’s sake, I will simply use the word “demand” to cover all of those like terms. Mr Withers SC confirmed that the intent of the pleading is that each of those terms are used to convey the same intent as the above reference to “dictation”, being a conscious direction. While that may be so, there is some distinction to the no exercise (ceding) case as, in this context, the demand still leads to the Trustee having purported to exercise the power, as opposed to having ceded it.

2. the Trustee “purported to exercise the ‘reserved power’… for an ulterior and illegitimate object and for an improper purpose” (exercise (improper purpose) case), namely:

1. to seek to exclude the Plaintiff from the class of General Beneficiaries prior to it being determined through paternity testing that the Plaintiff was a child of Mr Pratt and while the Plaintiff’s interests were not represented; and

2. to advance one or more of the Siblings’ financial interests;

3. alternatively, notwithstanding the CDE, the Trustee had made certain distributions to the Plaintiff after 2001 the effect of which was that:

1. the Trustee had determined that the purported exclusion was of no effect, or it had not in fact exercised the reserved power; or

2. the Trustee had otherwise waived its right to rely upon the purported exclusion, and/or had acknowledged and affirmed the Plaintiff’s status as a General Beneficiary;

4. the Trustee has failed to give real and genuine consideration to exercising its power to pay, apply or set aside net income of the Trust to or for the benefit of the Plaintiff in circumstances where, by reason of the above, she is and has always been a General Beneficiary of the Trust, from which breach of duty the Plaintiff has suffered loss (failure to appoint income allegations); and

5. the Trustee has failed to provide trust documents and information to the Plaintiff, to which she says that she is entitled as a discretionary object of the Trust, after she had requested access to them in April 2022.

Defences

54. In their defences to the amended statement of claim, the Trustee and the Siblings variously:

1. take issue with the claim that the Plaintiff is a Specified Beneficiary or otherwise a General Beneficiary as those terms are defined in the Trust Deed;

2. claim that, in executing the CDE, the Trustee exercised its reserved power to exclude the Plaintiff from the class of General Beneficiaries;

3. deny that the CDE was entered into by the Trustee for the purpose of seeking to exclude the Plaintiff prior to her paternity being determined, or at the demand of one or more of the Siblings, and thus deny that the Trustee’s execution of the CDE is void as a fraud on its power;

4. by reason of the above, deny that the Trustee has failed to give real and genuine consideration to exercising its power to pay, apply or set aside net income of the Trust to or for the benefit of the Plaintiff, or that the Trustee has breached any duty in that regard;

5. claim that, in any case, the exemption clause operates to absolve the Trustee of any responsibility in respect of the failure to appoint income allegations;

6. rely on a limitation defence in respect of any breach of trust, by reference to s 21(2) of the Limitation of Actions Act 1958 (Vic) (LAA), as applied by s 5 of the Choice of Law (Limitation Periods) Act 1993 (NSW), in respect of the failure to appoint income allegations; and

7. say that the Trustee is not bound to provide the documents requested by the Plaintiff and she has no entitlement to said documents, although she has been provided with copies of the original Trust Deed, the deed of variation of 7 February 1984 and the CDE.

Reply

55. In her Reply, the Plaintiff pleads, inter alia, various matters of which she asserts the Trustee was aware or had taken the view of at the time of entering into the CDE, such that the alleged breaches of duty in the failure to appoint income allegations were committed as a consequence of conduct (consisting of the purported exclusion), which conduct was committed in “personal conscious and fraudulent bad faith” by the Trustee and constituted a “fraudulent breach of trust” within the meaning of s 21(1)(a) of the LAA. In those circumstances, the Plaintiff denies that the exemption clause operates to relieve the Trustee of responsibility for the claims of loss or that her claims for breach of trust are statute-barred.

Contentious paragraphs of the Claim and Reply

56. It is helpful at this point to set out the relevant paragraphs of the Claim and Reply which are particularly contentious. They are as follows (accounting for underlining and strike-through).

57. Claim [3]-[6]:

Mr Pratt

3. The plaintiff was acknowledged by Mr Pratt as a member of his family at all times after the plaintiff’s birth, until Mr Pratt passed away, including by Mr Pratt:

(a) consenting to being identified as the plaintiff’s father on the plaintiff’s birth certificate soon after her birth;

(b) expressly acknowledging the plaintiff as his daughter in conversations with the plaintiff;

(c) providing a bedroom for the plaintiff to stay at Mr Pratt and Mrs Pratt’s home ‘Raheen’ where the plaintiff regularly stayed;

(d) providing a bedroom for the plaintiff to stay at Mr Pratt’s apartment in Sydney where the plaintiff regularly stayed;

(e) inviting the plaintiff to family events including at Raheen, such as weekly family Shabbat which the plaintiff regularly attended;

(f) taking the plaintiff on holidays;

(g) providing for the plaintiff’s living expenses;

(h) providing care and support for the plaintiff; and/or

(i) making provision for the plaintiff in his final will and testament.

4. In the premises of the preceding paragraph and paragraph 1(c) above, Mr Pratt is/was a “parent” of the plaintiff within the meaning of clause 1(21) of the Trust Deed (as defined in paragraph 7 below).

Mrs Pratt

5. The plaintiff was acknowledged by Mrs Pratt as a member of her family at all times since about 27 June 2007 but likely earlier, including by Mrs Pratt:

(a) providing a bedroom for the plaintiff to stay at Mr Pratt and Mrs Pratt’s home ‘Raheen’ where the plaintiff regularly stayed;

(b) inviting the plaintiff to family events including at Raheen, such as weekly family Shabbat which the plaintiff regularly attended;

(c) nominating the plaintiff as a “financial dependent” of each of Mr and Mrs Pratt and as a 100% reversionary beneficiary in a member request submitted by Mrs Pratt (and Mr Pratt) to RJ Custodians Pty Ltd on 27 June 2007;

(d) causing the plaintiff to be identified as a “child” of Mr Pratt on Mr Pratt’s death certificate (and, therefore, a member of her family);

(e) acknowledging the plaintiff’s status as Mr Pratt’s “child” in the context of Supreme Court of New South Wales proceedings 2010/103339, and Victorian Supreme Court proceedings S CI 2010 02640 (and, therefore, a member of her family);

(f) providing care and support for the plaintiff, including personally providing food and clothing for the plaintiff, including during her stays at Raheen, and/or ensuring that food and clothing was provided for the plaintiff and looking after the plaintiff’s care and welfare generally; and/or

(g) regularly supervising and caring for the plaintiff and organising to spend regular time with the plaintiff including during weekly family Shabbat and on family holidays.

6. In the premises of the preceding paragraph, Mrs Pratt is a “parent” of the plaintiff within the meaning of clause 1(21) of the Trust Deed (as defined in paragraph 7 below).

58. Claim [12]:

12. Further or in the alternative to paragraph 11 above, the plaintiff is, and at all times since her birth has been, a “specified beneficiary” of the Trust and therefore a “general beneficiary” of the Trust, as:

(a) the plaintiff is a “child” of Mr Pratt and Mrs Pratt, because:

(i) the plaintiff is an “illegitimate child” of Mr Pratt (as defined in cl1(21) of the Trust Deed) who was acknowledged by:

a. Mr Pratt as a member of his family, in circumstances where Mr Pratt was a “parent” of the plaintiff, as pleaded in paragraph 4 above; and/or;

Particulars

Paragraphs 3 and 4 above are repeated.

Further particulars may be provided following the service of evidence.

b. Mrs Pratt as a member of her family, in circumstances where Mrs Pratt was a “parent” of the plaintiff, as pleaded in paragraph 6 above; and

Particulars

Paragraphs 5 and 6 above are repeated.

Further particulars may be provided following the service of evidence.

(ii) on a date prior to 19 April 2022, the Trustee formed the opinion that the plaintiff has been or is acknowledged by either or both of Mr Pratt and Mrs Pratt to be a member of the Pratt family;

Particulars

Clause 1(21) of the Trust Deed.

[The Plaintiff then gives various particulars as to when it may be inferred that the Trustee formed the opinion, although she admits that she does not know the date upon which it first formed the opinion.]

Further particulars may be provided following discovery and evidence.

(b) the Purported Deed of Exclusion (as defined in paragraph 18 below) and/or the Trustee’s purported exercise of the “reserved power” (as pleaded in paragraph 19 below) did not have the effect of excluding the plaintiff from the class of “specified beneficiaries” under the Trust.

Particulars

The particulars to paragraph 11 above are repeated.

59. Claim [18]-[54]:

18. On or around 4 June 2001, the Trustee and the Guardian purported to enter into a deed titled “Deed of Exclusion” (the Purported Deed of Exclusion).

19. By purporting to enter into the Purported Deed of Exclusion pleaded in the preceding paragraph, the Trustee purported to exercise the “reserved power” to exclude the plaintiff as a “general beneficiary” of the Trust.

20. As at the date on which the Trustee and Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above):

(a) the directors of the Guardian were the Siblings, Mr Kaye, Mr Leibler and Mr Naphtali;

(b) the directors of the Trustee were Mr Leibler and Mr Naphtali;

(c) the Siblings were the shareholders of the Guardian.

21. In the premises of sub-paragraphs (b) and/or (c) to paragraph 20 above, as at the date on which the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above), the Siblings controlled the Guardian.

Particulars

Paragraph 20 is repeated.

Clause 81(b) of the Articles of the Guardian provided that the Siblings, as shareholders of the Guardian, had the power to remove Mr Kaye, Mr Naphtali and Mr Leibler as directors.

Further, Clause 121(1) of the Articles of the Guardian provided that where there was an equality of votes for and against any resolution proposed or submitted at any meeting of directors, such resolution shall be put to a meeting of the Company (i.e. the Siblings) convened for the purpose of voting on the resolution proposed or submitted.

22. The Purported Deed of Exclusion was executed by each of:

(a) Mr Leibler and Mr Naphtali as directors of the Trustee;

(b) Fiona Geminder, the fourth defendant, as a director of the Guardian; and

(c) Robert Andrew Kaye as the secretary of the Guardian.

23. At the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above), the plaintiff:

(a) was a “general beneficiary” of the Trust;

Particulars

Paragraph 13 above is repeated.

(b) was three and a half years old and, therefore, a minor; and

(c) notwithstanding the matters pleaded in sub-paragraphs (a) and (b), had no independent representative appointed to protect her interests with respect to the Trustee’s and Guardian’s purported entry into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported exercise of the “reserved power” (as pleaded in paragraph 19 above).

24. At the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above), the effective removal of any entitlement the plaintiff had or may have had to receive distributions as a “general beneficiary” of the Trust would mean that the Trustee would no longer have to consider making distributions to the plaintiff, thereby increasing or potentially increasing the Siblings’ future distributions.

25. The Trustee was aware of the fact pleaded in paragraph 24 at the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above).

[Substantially identical allegations of knowledge are then pleaded in respect of each of the Siblings at Claim [26]-[28].]

…

29. At the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above), and in the premises of paragraph 24 above, the Siblings had a financial interest in excluding the plaintiff as a “general beneficiary” of the Trust.

30. The Trustee was aware of the fact pleaded in paragraph 29 above at the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above).

[Substantially identical allegations of knowledge are then pleaded in respect of each of the Siblings at Claim [31]-[33].]

…

34. At the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above), the Trustee had no reason to exclude the plaintiff as a “general beneficiary” of the Trust prior to her paternity being determined, other than to seek to protect and further the financial interests of the Siblings.

35. The Trustee was aware of the fact pleaded in paragraph 34 above at the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above).

[Substantially identical allegations of knowledge are then pleaded in respect of each of the Siblings at Claim [36]-[38].]

…

39. At the time the Trustee and the Guardian purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above), the Guardian, whose directors included the Siblings:

(a) had an entitlement to notice of the proposed exercise of the “reserved power” to exclude the plaintiff as a “general beneficiary”;

(b) had the ability to prohibit the exercise of that power by the Trustee; and

(c) consented to the waiver of its entitlement to notice in relation to the exclusion of the plaintiff as a “general beneficiary” because it was in their financial interests to do so, thereby consenting to the exercise of the power to exclude the plaintiff as a “general beneficiary” of the Trust.

Particulars

Trust Deed clauses 10(3), 10(5)(b), 10(7)(a)(i) and 21(5)–(9).

Purported Deed of Exclusion clauses 2 and 3.

40. The Trustee’s purported entry into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported exercise of the “reserved power” (as pleaded in paragraph 19 above) was at the demand, direction, instigation, and/or request of one or more of the Siblings.

Particulars

This may be inferred from the matters pleaded in paragraphs 20 to 40 above.

Purported Deed of Exclusion recitals F, G, and K.

It may be inferred from the Siblings’ defence of these proceedings in which they oppose the relief sought by the plaintiff that the Siblings consider it to be to their financial advantage if the plaintiff is so excluded and it may be inferred that the Siblings held this view prior to and at the time of the Purported Deed of Exclusion.

Further particulars may be provided following discovery and evidence.

41. The Trustee was aware of the fact pleaded in paragraph 40 at the time the Trustee purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above).

42. In purporting to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purporting to exercise the “reserved power” (as pleaded in paragraph 19 above), the Trustee acted under the dictation of one or more of the Siblings so as to have ceded its discretionary power to exercise the “reserved power” conferred by the second proviso to clause 1(2) of the Trust Deed to the Siblings.

Particulars

Paragraphs 21 to 22, 34, and 39 to 40 above are repeated.

Further particulars may be provided following discovery and evidence.

43. The Trustee was aware of the fact pleaded in paragraph 41 ^[7]  at the time the Trustee purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above).

7. It is apparent that this reference should be to paragraph 42.

44. In the alternative to paragraph 42, in purporting to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purporting to exercise the “reserved power” (as pleaded in paragraph 19 above), the Trustee:

(a) acted at the demand, direction, instigation, and/or request of one or more of the Siblings; and

(b) in so doing, had failed to or determined that it should not turn its mind and/or give fair and proper consideration as to whether its entry into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or its purported exercise of the “reserved power” (as pleaded in paragraph 19 above) was a reasonable and proper exercise of its power.

Particulars

Paragraphs 21 to 22, 34, and 39 to 40 above are repeated.

Further particulars may be provided following discovery and evidence.

45. The Trustee was aware of the facts pleaded in paragraph 44 at the time the Trustee purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above).

46. Further or in the alternative to paragraphs 42 and/or 44, the purpose of the Trustee in purporting to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purporting to exercise the “reserved power” (as pleaded in paragraph 19 above) was to:

(a) seek to exclude the plaintiff from the class of “general beneficiaries” under the Trust Deed prior to it being determined through paternity testing and while the plaintiff’s interests were not represented that the plaintiff was a child of Mr Pratt; and

(b) advance one or more of the Siblings’ financial interests given their status as general beneficiaries of the Trust notwithstanding the plaintiff’s status, equivalent to that of the Siblings, as a general beneficiary of the Trust.

Particulars

Paragraphs 21 to 22, 34, and 39 to 40 above are repeated.

Recitals E and F of the Purported Deed of Exclusion.

Further particulars may be provided following discovery and evidence.

47. The Trustee was aware of the facts pleaded in paragraph 46 at the time the Trustee purported to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported to exercise the “reserved power” (as pleaded in paragraph 19 above).

48. The “reserved power” conferred by the second proviso to clause 1(2) of the Trust Deed does not empower the Trustee to exclude a person as a general beneficiary of the Trust for the purposes pleaded in paragraph 46 above.

49. In the premises of paragraphs 46 and 48 above, in purporting to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purporting to exercise the “reserved power” (as pleaded in paragraph 19 above) for the purpose pleaded in paragraph 46 above and in the circumstances pleaded in paragraphs 48 above, the Trustee purported to exercise the “reserved power” conferred by the second proviso to clause 1(2) of the Trust Deed for an ulterior and illegitimate object and for an improper purpose.

50. In the premises of paragraph 42 above, the Trustee did not exercise the “reserved power” conferred by the second proviso to clause 1(2) of the Trust Deed to exclude the plaintiff as a “general beneficiary” of the Trust Deed.

51. Alternatively to paragraph 50, in the premises of paragraph 44 above, the Trustee’s execution of the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported exercise of the “reserved power” (as pleaded in paragraph 19 above) is void as a fraud on its power as trustee of the Trust.

52. Further and/or alternatively to paragraph 51 above, in the premises of paragraph 49 above, the Trustee’s execution of the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported exercise of the “reserved power” (as pleaded in paragraph 19 above) is void as a fraud on its power as trustee of the Trust.

53. In the premises of paragraph 50 above, the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or the Trustee’s purported exercise of the “reserved power” (as pleaded in paragraph 19 above) is of no effect.

54. Further and/or alternatively to paragraph 53 above, in the premises of paragraph 51 and/or 52, the Purported Deed of Exclusion is void ab initio.

60. Claim [55]-[58]:

Breach of Trustee’s duties – 2001 to the present

55. The Trustee owes, and at all times since the Trust was settled has owed, a duty to each “general beneficiary” of the Trust to give real and genuine consideration to exercising its power under clause 3(1) of the Trust Deed to pay, apply or set aside all or any part or parts of the net income of the Trust to any one or more of the “general beneficiaries” of the Trust.

56. The Trustee has not, since purporting to enter into the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or purported exercise of the “reserved power” (as pleaded in paragraph 19 above), given real and genuine consideration to exercising its power under clause 3(1) of the Trust Deed to pay, apply or set aside all or any part or parts of the net income of the Trust to or for the benefit of the plaintiff.

Particulars

The Trustee’s failure to give real and genuine consideration to exercising its power under clause 3(1) of the Trust Deed to pay, apply or set aside all or any part or parts of the net income of the Trust to or for the benefit of the plaintiff may be inferred from (a) the Trustee’s failure to pay, apply or set aside all or any part or parts of the net income of the Trust for the benefit of the plaintiff, (b) the Trustee’s failure to make distributions for the benefit of the plaintiff, (c) the Trustee’s entry into the Purported Deed of Exclusion and the Trustee’s denial that the plaintiff is a “general beneficiary” of the Trust in paragraph 6(b) of its Defence in these proceedings (d) the correspondence pleaded at paragraphs 75 to 76 below; and (e) the fact that the Siblings have controlled the Board of the Trustee since 1 July 2013.

Letter from Kalus Kenny Intelex Lawyers to YPOL Lawyers dated 15 December 2023.

57. In circumstances where the plaintiff is, and at all times since her birth has been, a “general beneficiary” of the Trust as pleaded in paragraph 13 above, in the premises of paragraphs 55 to 56 above, the Trustee has breached its duty to the plaintiff to give real and genuine consideration to exercising its power under clause 3(1) of the Trust Deed to pay, apply or set aside all or any part or parts of the net income of the Trust to or for the benefit of the plaintiff.

58. In the premises of paragraph 40 ^[8]  above, the plaintiff has suffered loss in the form of a loss of distributions from the Trust paid to the plaintiff in equal amounts to the share of distributions received by each Sibling or in the alternative the distributions that would have been made to the plaintiff had real and genuine consideration been given by the Trustee to the position of the plaintiff as a beneficiary of the Trust and potential recipient of all or any part or parts of the net income of the Trust since 4 June 2001 to present.

8. It is apparent that this reference should be to paragraph 57.

61. Claim [59], [64]-[70]:

Trustee’s non-exclusion, affirmation and waiver

59. In the alternative to the allegations pleaded at 55 to 58 above, for the period between the date of execution of the Purported Deed of Exclusion in June 2001 (as pleaded in paragraph 18 above) and/or purported exercise of the “reserved power” (as pleaded in paragraph 19 above) and the date of Mr Pratt’s death on 28 April 2009, the Trustee caused trust distributions to be made to or for the benefit of the plaintiff (the Trust Distributions) as a general beneficiary of the Trust.

Particulars

(a) Payment from the Trustee to Budapest Riding School on or around 24 August 2004 in the amount of $910.00;

(b) Payment from the Trustee to the Paula Hitchcock Property Trust on or around 5 December 2007 in the amount of $35,376.28; and

(c) Payment from the Trustee to the Trustees of the Mosman Trust on or around 2 June 2008 in the amount of $8,333.00.

Further particulars may be provided following discovery and evidence.

…

64. As pleaded in paragraphs 18 to 41 above, the Trust Distributions were made after the Purported Deed of Exclusion had been executed.

65. As at the dates on which each of the Trust Distributions were made, it is to be inferred that the Trustee was of the view that the plaintiff was a “general beneficiary” of the Trust.

Particulars

By clause 3(1) of the Trust Deed, only a General Beneficiary is entitled to distributions.

66. In premises of paragraphs 64 and 65, it is to be inferred that as at the dates on which the Trust Distributions were made:

(a) the Trustee had determined that the Purported Deed of Exclusion (as pleaded in paragraph 18 above) and/or its purported exercise of the “reserved power” (as pleaded in paragraph 19 above) was and is of no effect; and/or

(b) further or in the alternative, that it had in fact not exercised the “reserved power” conferred by the second proviso to clause 1(2).

67. Further or in the alternative, at the time each of the Trust Distributions were made, the Trustee was in the position in which it had to elect whether to seek to rely upon the Purported Deed of Exclusion and/or its purported exercise of the “reserved power” (assuming it/they otherwise be valid, which is denied for the reasons pleaded in paragraphs 53 and 54 above) or to continue to recognise the plaintiff as a “general beneficiary”.

68. In the premises, in making the Trust Distributions, and thereby acknowledging the plaintiff as so entitled to them, the Trustee:

(a) acknowledged and affirmed the plaintiff’s status as a “general beneficiary”; and/or

(b) further or in the alternative, waived any right it had (which right is denied for the reasons pleaded above at paragraphs 53 and 54 above) to rely on the Purported Deed of Exclusion and/or its purported exercise of the “reserved power” so as to deny the plaintiff’s status as a “general beneficiary” and/or to justify its failure to give real and genuine consideration to exercising its power under clause 3(1) of the Trust Deed to pay, apply or set aside all or any part or parts of the net income of the Trust to or for the benefit of the plaintiff from 28 April 2009.

69. Since the making of the Trust Distributions, the Trustee has not otherwise purported to exercise the “reserved power” conferred by the second proviso to clause 1(2) so as to exclude the plaintiff.

70. In the premises, the plaintiff is and has always been a “general beneficiary”.

Particulars

Letter from Kalus Kenny Intelex Lawyers to YPOL Lawyers dated 15 December 2023.

62. Claim [71]-[74]:

Breach of Trustee’s duties – 2009 to the present

71. Paragraph 55 is repeated.

72. The Trustee has not, since Mr Pratt died, given real and genuine consideration to exercising its power under clause 3(1) of the Trust Deed to pay, apply or set aside all or any part or parts of the net income of the Trust to or for the benefit of the plaintiff.

Particulars

The particulars to paragraph 56 are repeated.

73. In circumstances where the plaintiff is, and at all times since her birth has been, a “general beneficiary” of the Trust as pleaded in paragraph 13 above, in the premises of paragraph 72 above, the Trustee has breached its duty to the plaintiff to give real and genuine consideration to exercising its power under clause 3(1) of the Trust Deed to pay, apply or set aside all or any part or parts of the net income of the Trust to or for the benefit of the plaintiff.

74. In the premises of paragraph 73 above, the plaintiff has suffered loss in the form of a loss of distributions from the Trust paid to the plaintiff in equal amounts to the share of distributions received by each Sibling or in the alternative the distributions that would have been made to the plaintiff had real and genuine consideration been given by the Trustee to the position of the plaintiff as a beneficiary of the Trust and potential recipient of all or any part or parts of the net income of the Trust since 28 April 2009 to present.

63. Reply [2(a)-(f)]:

2 As to paragraph 79 of the Trustee’s Defence, the Plaintiff:

a. says that in the premises of paragraphs 15 to 57 of the Further Amended Statement of Claim, the Court should infer that the Trustee was aware, at the time of the Trustee’s entry into the Purported Deed of Exclusion, that:

i. the exclusion of the Plaintiff as a general beneficiary of the Trust and thereby her exclusion from the class of potential recipients of Trust distributions under cl 3 of the Trust Deed would be to her significant financial detriment and to the significant financial advantage of the Siblings;

ii. for that reason, one or more of the Siblings had sought to have the Trustee exclude the Plaintiff as a general beneficiary of the Trust;

iii. the Plaintiff was an infant;

iv. the Plaintiff had an interest in remaining a general beneficiary of the Trust and her interests were unrepresented;

v. the Guardian had not sought to ensure that the interests of the Plaintiff, as a general beneficiary of the Trust, were protected, and consented to the exercise of the power to exclude the Plaintiff as a general beneficiary of the Trust prior to her paternity being determined;

326. The notion of a trustee exercising a discretion whether or not to distribute income is not an election between inconsistent rights. It is simply the exercise of a discretion one way or the other. However, the niceties of that notion need not be explored.

327. The position that arises here is very different. Even if one assumes for the moment that a trustee has made a payment to a person who has been excluded as a discretionary object under a deed of exclusion, the case is not one of election between inconsistent rights or waiver of a right. That is because once the discretionary object is excluded, there is no power to make a distribution for their benefit. There are no competing rights. If the discretionary object has been excluded, the payment by the trustee is simply a payment to a non-object, which prima facie (and indeed even on the Plaintiff’s pleadings) would constitute a breach of trust.

328. I consider the same is true even if a broader view of election were to be considered and one was talking of inconsistent courses of action.

329. I consider that this aspect of the Plaintiff’s proposed claim is not arguable and leave should not be given to plead it.

Issue 10 – Is the Plaintiff’s equitable compensation claim arguable?: Claim [58], [74] and [79]

332. In [58] of the Claim, the Plaintiff pleads as follows:

58. In the premises of paragraph 40 ^[10]  above, the plaintiff has suffered loss in the form of a loss of distributions from the Trust paid to the plaintiff in equal amounts to the share of distributions received by each Sibling or in the alternative the distributions that would have been made to the plaintiff had real and genuine consideration been given by the Trustee to the position of the plaintiff as a beneficiary of the Trust and potential recipient of all or any part or parts of the net income of the Trust since 4 June 2001 to present.

10. This appears to be a typographical error and the paragraph reference ought to be to [57] of the Claim.

333. A similar allegation is made at [74], albeit that the loss is said to have occurred from 28 April 2009 to the present.

334. At [79] of the Claim, the Plaintiff pleads that, by reason of the matters pleaded in [58], or in the alternative [74], she is entitled to equitable compensation. She states that particulars of the quantum of equitable compensation to which she is entitled will be provided following discovery and evidence.

335. The Trustee submits that, if the paragraphs of the Claim and Reply with which it takes issue are struck out, the consequence is that the Plaintiff’s claim for equitable compensation should be dismissed: TWS4 [2]. Whilst I accept that that may be a consequence of taking that course, I nonetheless consider that the claim for equitable compensation is unarguable even on the proposed pleadings, having regard to the discretionary nature of the Trust and the power to appoint income in cl 3(1) of the Trust Deed.

336. Even if the Plaintiff is able to prove that the Trustee acted in breach of duty by failing to give real and genuine consideration to appointing income to her over a number of years, that does not necessarily mean that she has suffered any quantifiable “loss”. The purpose of an order for equitable compensation for breach of trust is generally to make good any deficit in the trust fund which may have been quantified through an order for an account: see generally J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies (5th ed, 2015, LexisNexis Butterworths) at [23-030]-[23-035]. On the Plaintiff’s proposed pleadings, there has been no deficit in the trust fund which the remedy of equitable compensation would make good.

337. No case was cited in the submissions by which an excluded discretionary object (or indeed a person who is unquestionably a discretionary object) has succeeded in obtaining an order for equitable compensation in circumstances such as are pleaded here. Further, the Plaintiff does not, for example, plead a claim to set aside any of the Trustee’s resolutions by which it made income distributions to the other discretionary objects (i.e. the Siblings), such as that sought by the plaintiffs in Re Owies Family Trust (No 3) [2021] VSC 114. (Given that would involve asking the Court to set aside up to 23 years’ worth of resolutions, and the availability of equitable defences and the discretionary nature of such relief, one might query whether such a claim could be properly made in any event.) Nor, as I have observed above, does she seek an order that the Trustee re-exercise its discretion in respect of the relevant years, or an order to have the Trustee removed and a new trustee re-exercise that discretion.

338. In the circumstances, I consider that [58], [74] and [79], as well as prayer 3A, of the Claim are liable to be struck out.

Issue 11 – Has the Plaintiff adequately pleaded a reply case that the Trustee’s conduct was dishonest?: Reply [2(c)], [2(e)]

Allegations of dishonesty in the Reply

339. Given that the allegations made in [2] of the Reply (as in [2] of the existing reply) are in response to the defences raised by the Trustee in respect of the Plaintiff’s equitable compensation claim (in [79] of the Claim or alternatively [10B] of the amended statement of claim), and I have found that such claim is liable to be struck out, the necessary consequence is that leave to plead [2] of the Reply must be refused and [2] of the Plaintiff’s existing reply ought to be struck out. Notwithstanding that, given the amount of time taken on the hearing of the application to address the allegations in that paragraph, I propose to make some observations on the claims of dishonesty raised by the Plaintiff in reply and consider whether they could be made out.

340. In [2(a)] of her Reply, the Plaintiff (in summary) seeks to draw the following inferences from the alleged facts pleaded at [15]-[57] of the Claim:

1. her exclusion as a General Beneficiary would be to her significant financial detriment and to the significant financial advantage of the Siblings and, for that reason, one or more of the Siblings sought to have the Trustee exclude the Plaintiff;

2. the Plaintiff was an infant;

3. the Plaintiff had an interest in remaining a General Beneficiary and her interests were unrepresented;

4. the Guardian had not sought to ensure that the Plaintiff’s interests, as a General Beneficiary, were protected, and consented to the exercise of the power to exclude the Plaintiff prior to her paternity being determined;

5. there was no reason to exclude the Plaintiff other than to benefit the other General Beneficiaries, in circumstances where the Plaintiff otherwise stood “in the same position” as a General Beneficiary as the Siblings; and

6. therefore, the reason for the Trustee’s entry into the CDE was to benefit the General Beneficiaries other than the Plaintiff.

341. By [2(b)] of the Reply, the Plaintiff pleads that, at the time of the Trustee’s entry into the CDE, it took the view and/or one or more of the Siblings took the view that the Plaintiff needed to be excluded prior to her paternity being determined. That is said to be inferred from recitals E and F of the CDE.

342. The allegation of personal conscious and fraudulent bad faith by the Trustee is then made at [2(c)]. It is worth setting out that allegation again as it appears in the Reply:

… in the premises pleaded in paragraphs 15 to 57 of the Further Amended Statement of Claim and in paragraphs 2(a) and (b) above, the breaches of duty on the part of the Trustee pleaded in paragraphs 55 to 58, 71 to 74 and 79 of the Further Amended Statement of Claim were breaches of duty committed as a consequence of the conduct pleaded in paragraphs 15 to 57 of the Further Amended Statement of Claim, which conduct was committed in personal conscious and fraudulent bad faith by the Trustee;

Particulars

In the premises pleaded in paragraphs 15 to 57 of the Further Amended Statement of Claim and in paragraph 2(a) and (b) above, the Court should infer that the Trustee was aware that the exclusion of the Plaintiff as a general beneficiary of the Trust was or may be for an ulterior or illegitimate object and for an improper purpose, and involved the taking advantage of the fact that the Plaintiff was an infant, suspected of being a child of Richard Pratt but whose paternity had not yet been determined, and where the Trustee knew that if and when Richard Pratt was determined to be the Plaintiff’s father, that she would have the same interests as a general beneficiary of the Trust as the Siblings, which the Trustee sought to eliminate at the request of one or more of the Siblings, by excluding the Plaintiff as a general beneficiary of the Trust prior to her paternity being determined and where her interests were unrepresented.

343. The allegation of fraudulent breach of trust, in response to the limitation defence, is then pleaded at [2(e)] of the Reply as follows:

… the Plaintiff’s claims in paragraphs 55 to 58, 71 to 74 and 79 of the Further Amended Statement of Claim are claims by a beneficiary under a trust in respect of a fraudulent breach of trust to which the Trustee was a party or privy within the meaning of s 21(1)(a) of the Limitation of Actions Act 1958 (Vic), as applied by s 5 of the Choice of Law (Limitation Periods) Act 1993 (NSW);

Particulars

Paragraphs 15 to 57 of the Further Amended Statement of Claim and paragraph 2(a) and (b) above are repeated.

344. At the outset, four observations should be made about the way in which [2(c)] and [2(e)] of the Reply are pleaded.

345. First, it is unclear why the Plaintiff has chosen to group together [15]-[57] of the Claim for the purposes of these allegations. The previous iteration of her reply refers to what is now (broadly speaking and allowing for the additional paragraphs) [15]-[54] of the Claim. That grouping of conduct would make more sense when reading [2(c)] of the Reply, avoiding what would otherwise be an overlap between the conduct pleaded in [15]-[57] and the breaches pleaded at [55]-[58] of the Claim, which are separately referred to.

346. Second, the last clause in [2(c)] of the Reply is worded in such a way that, on the face of the pleading, it is only the conduct pleaded at [15]-[57] of the Claim which is alleged to have been committed in personal conscious and fraudulent bad faith by the Trustee. Indeed, this is the way in which the Trustee says that it has understood the allegation in [2(c)]: see TWS4 [103]. However, the Plaintiff contends (and it is clearly her intention) that the pleading of fraud in the Reply picks up the totality of the Trustee’s conduct, including the breaches alleged in [55]-[57] and [71]-[73] of the Claim: PWS4 [76]. That intention could be made clearer in the drafting of [2(c)] of the Reply.

347. Third, the particulars to [2(c)] of the Reply invite the Court to infer that the Trustee was aware that the exclusion of the Plaintiff as a General Beneficiary was or may be for an ulterior or illegitimate object and for an improper purpose, as well as other matters which largely repeat those in [2(a)]. I must admit that I find this somewhat confusing, as it is unclear whether the improper purpose being alleged was that of the Trustee, someone else or both. If the purpose was simply that of the Trustee, the no exercise (ceding) case and the exercise (failure to consider) case would seem to be ruled out of the allegation made in [2(c)]. Otherwise, it is left unclear as to whose purpose it was, although one might imagine that the Plaintiff has the Siblings in mind. In any case, the Plaintiff’s inclusion of the words “or may be” invite a degree of equivocality which is inconsistent with the allegation being made in [2(c)]. I cannot see what the particulars to [2(c)] add to particularise the allegation of dishonesty beyond the reference to what is pleaded in the Claim and [2(a)]-[2(b)] of the Reply.

348. Fourth, subject to what I have just said, the allegations made in [2(c)] and [2(e)] otherwise constitute a clear and unequivocal allegation of fraud or dishonesty. As the Siblings accept, that appears to satisfy the first requirement described by Lord Millett in Three Rivers at [185]: SWS5 [7]. To the extent that the Trustee submits otherwise (e.g. TWS4 [105]), I would not accept such a submission. Thus, the substance of the dispute between the parties is whether that allegation of fraud or dishonesty is sufficiently particularised in the manner in which I have discussed earlier by reference to the authorities. The Trustee and the Siblings submit that the facts pleaded are consistent with honesty and there is no fact which tilts the balance and justifies an inference of dishonesty: TWS4 [109]; SWS5 [5]. The Plaintiff, meanwhile, submits that an inference of dishonesty is more likely on the facts pleaded and proposed to be pleaded than one of innocence: PWS4 [23].

349. With those observations in mind, I propose to first consider whether dishonesty on the part of the Trustee could be inferred from the conduct pleaded at [15]-[54] of the Claim, and then consider the same question for the breaches alleged at [55]-[58] and [71]-[74].

Does the conduct pleaded at [15]-[54] of the Claim involve dishonesty?

350. After the demand allegation in [40] of the Claim, the conduct of the Trustee pleaded by the Plaintiff splits between three alternative routes, consisting of the no exercise (ceding) case, the exercise (failure to consider) case and the exercise (improper purpose) case. Thus, for the allegation of dishonesty in the Reply to be made out, given that it is made globally in respect of [15]-[54] of the Claim, the inference would need to be available in each of the alternative routes.

351. The Trustee submits that a trustee found to have improperly acted under dictation may have done so either honestly or dishonestly: TWS4 [62]. It cites as an example of the former Ex Parte Brown, In Re Smith (1886) 17 QBD 488, in particular at 492 per Lord Esher MR. The Trustee says that, if fraud were in fact alleged in respect of the conduct pleaded at [42] of the Claim, its seriousness should be noted, as it would involve the allegation that the Trustee’s directors at the time executed the CDE “knowing it to falsely state that the Trustee had determined to exercise the [reserved] power” (as stated in recital L of the CDE): TWS5 [39]. The Siblings submit that the facts pleaded in support of the no exercise (ceding) case are entirely consistent with innocence: e.g. SWS5 [5].

352. A claim of dishonesty in respect of a trustee’s purported exercise of a power of exclusion which is alleged to have been intended to further the interests of the remaining objects and adversely affect the interests of the excluded object is conceptually a difficult claim to allege and make out. There are various reasons for that. Most fundamentally, whilst many (or even most) powers must be exercised in the interests of the objects of the power, generally (leaving aside exclusion for tax advantages) the exercise of a power to exclude is likely not to be for the benefit of the person to be excluded, but instead be for the benefit of the remaining beneficiaries: see Poon at [40]. It may also be attended by practical difficulty if the trust deed (as is the case here) contains a provision which provides that the trustee is not bound to disclose any documents which reflect deliberations and reasons of the trustee regarding the exercise (or non-exercise) of powers or discretions.

353. The conceptual difficulty is evidenced by the fact that there appear to be no Australian cases in which such a claim has successfully been made out. Internationally, there seem to be few cases. One example where the instrument effecting the exclusion was set aside (although not being a case where dishonesty appeared to be alleged) is that referred to above, namely C Trust, where a decision to exclude grandchildren was struck down on the basis that there was not a reasonable exercise of discretion in the circumstances, as no proper account had been taken of the financial position of the grandchildren, their likely need for distributions from the trust and other related matters.

354. Having acknowledged all of the above, each case will turn on its own facts.

355. I accept that the facts pleaded by the Plaintiff in support of the no exercise (ceding) case may be consistent with innocent conduct on the part of the Trustee. However, I consider that they might also support an inference of dishonesty, if the Plaintiff is able to prove that the Trustee was aware that it was acting under the dictation of one or more of the Siblings so as to have ceded its discretionary power (as alleged in [42]-[43]), and in that sense sufficiently tilt the balance and justify the allegation of dishonesty.

356. Similarly, I consider that the facts pleaded in support of the exercise (failure to consider) case might also support an inference of dishonesty, if the Plaintiff is able to prove that the Trustee was aware that it had failed to give fair and proper consideration as to whether the purported exclusion was a reasonable and proper exercise of the reserved power (as alleged in [44]-[45]). Such facts appear to tilt the balance and justify the allegation of dishonesty.

357. The defendants spilled much ink in setting out their complaints about the allegation of dishonesty in the context of the Plaintiff’s exercise (improper purpose) case. At their core, most of those submissions essentially argued that no inference of dishonesty is available because the Trustee did not act for an improper purpose: see e.g. TWS4 [110]; SWS4 [40]; SWS5 [6]-[7]. As I have explained above, if the defendants wish to contend that the Trustee acted for a proper purpose, that can be pleaded in their defences. The question of any dishonesty on the part of the Trustee arises, on this alternative, once it is established that its purpose was improper.

358. Assuming that is established, the Trustee submits that the pleadings do not identify the facts from which it could be inferred that the Trustee knew that the exercise of the reserved power was for an improper purpose: TWS5 [49]-[50]. The Trustee identifies that, because the proper purpose rule is only concerned with subjective purpose, [47] of the Claim (alleging that the Trustee was aware of the purpose for the purported exclusion) adds nothing to what is already pleaded at [46] of the Claim: TWS4 [76]. I am inclined to agree with that submission.

359. While the Plaintiff pleads at [48] of the Claim that the purpose stated in [46] is an improper purpose for an exercise of the reserved power, she does not plead that the Trustee knew that the purpose was improper. It is difficult to see how the Plaintiff would be able to infer any dishonesty on the part of the Trustee under the exercise (improper purpose) case without pleading that fact.

360. In those circumstances, I would not allow the Plaintiff to plead [47] of the Claim. However, I will grant leave to re-plead after [48] of the Claim (i.e. in a new paragraph) words to the effect that the Trustee was aware at the time of the purported exclusion that the purpose set out in [46] was improper. With that amendment, it would seem that the facts pleaded to support the allegation of dishonesty for the exercise (improper purpose) case tilt the balance and justify an inference of dishonesty.

Do the breaches pleaded at [55]-[58] and [71]-[74] of the Claim involve dishonesty?

361. In [55] of the Claim, the Plaintiff pleads that the Trustee owes a duty to each General Beneficiary to give real and genuine consideration to exercising its power under cl 3(1) of the Trust Deed to pay, apply or set aside all or any part of the net income of the Trust to any one or more of the General Beneficiaries. At [56]-[57], the Plaintiff pleads that the Trustee has breached that duty which she says is owed to her as a General Beneficiary of the Trust (presumably in every year since the purported exclusion).

362. Essentially the same formulation of allegations is made at [71]-[73] of the Claim, except that the alleged breaches are said to have begun after Mr Pratt’s death in 2009.

361. Without more, I do not consider that, from those pleaded facts, an inference of dishonesty on the part of the Trustee might be made in respect of those alleged breaches of duty. There is no fact which tilts the balance. In contrast to the allegations made in [15]-[54] of the Claim, there is no pleading of the Trustee’s relevant state of knowledge, from which an inference of dishonesty might be inferred. There are further difficulties with an inference of dishonesty being made. For example, as the Trustee notes (TWS5 [44]), on at least one outcome of the allegations made in [15]-[54], the purported exclusion may be voidable rather than void. No attempt is made to discern how the Trustee could have dishonestly failed to appoint income to the Plaintiff in such circumstances. More generally, the allegation implicitly relies on an argument that any dishonest conduct in respect of the purported exclusion necessarily infects the subsequent failure to appoint income allegations with dishonesty. As a matter of pleading, I do not consider that that reasoning is sufficient.

362. Further, in respect of the alleged breaches in [71]-[73], the Trustee correctly observes that those breaches are based on an assumption that the purported exclusion was valid: TWS5 [54]. In those circumstances, an inference of dishonesty could not be made from the pleadings in [71]-[73] of the Claim. In any case, I refuse to give leave for the Plaintiff to plead [71]-[74] of the Claim as a consequence of finding that her alternative case is unarguable (see Issue 9).

Conclusion for the Plaintiff’s Reply

365. As a consequence of what has been stated above, the allegations made in [2(c)]-[2(f)] of the Reply cannot be made out. While I consider that, taken as a whole, the conduct pleaded at [15]-[54] of the Claim might support an inference of dishonesty, the same cannot be said for [55]-[58], [71]-[74] and [79] of the Claim, which set out the failure to appoint income allegations and the equitable compensation claim. As it is only in respect of those allegations and claim that the Trustee raises the exemption clause and limitation defence (because it is responding to the Plaintiff’s equitable compensation claim), there would be no utility in giving the Plaintiff an opportunity to re-plead those parts of its Reply to which those matters relate.

Issue 12 – Is the Plaintiff’s reply regarding the opinion of the Trustee as to whether she is a “child” within the meaning of cl 1(21) arguable?: Reply [1(c)]

366. In [1(c)] of the Reply, the Plaintiff claims that by at least 19 April 2022, the Trustee: (a) had been called upon by her to form an opinion as to whether she is a “child” within the meaning of cl 1(21); and (b) had formed the opinion she was not a “child” within the meaning of cl 1(21), which opinion was unreasonably and/or improperly held. The particulars reference a letter from Arnold Bloch Liebler dated 19 April 2022 sent on behalf of the Trustee and state that the opinion was unreasonably and/or improperly held by reason of the matters in [12(a)(i)] of the Claim.

Submissions

367. The Trustee submits that it cannot be properly alleged to have been called upon by the Plaintiff to form an opinion for the purposes of cl 1(21) and to have then, on the basis of the letter from its then solicitors dated 19 April 2022, unreasonably and improperly formed an opinion that the Plaintiff was not a “child” under that clause: TWS1 [18(1)(d)], [159], [162]. It says that the 19 April 2022 letter, in which it was stated that the Plaintiff is not a beneficiary of the Trust, was in response to the Plaintiff’s request for documents. It is noted that the request did not refer to cl 1(21) and cannot objectively be considered to be a request that the Trustee consider the application of cl 1(21) to the Plaintiff or provide a basis that a determination had in fact been made, and that it was unreasonably and improperly formed.

368. The Plaintiff says that the Trustee’s focus upon her request for documents, to which the 19 April 2022 letter was responding, is misdirected as she pleads at [1(c)] of the Reply simply that by at least 19 April 2022, the Trustee had been called upon to form the opinion: PWS2 [41]. Mr Withers SC acknowledged that the Plaintiff does not know how or when the opinion was formed: TD1 21.4-.5. The Plaintiff submits further that the allegation that the Trustee’s opinion that she was not a “child” within the meaning of cl 1(21) was unreasonably and/or improperly held is consistent with the Plaintiff’s allegations that she is a “child” of Mr Pratt and Mrs Pratt; if that allegation is found to be open, it necessarily follows that it is reasonably arguable that forming the contrary opinion is an opinion “unreasonably and/or improperly held”: PWS2 [42]-[44].

Determination

369. Precisely why the Trustee has raised in its defence that it has not been called upon by the Plaintiff to form an opinion as to whether she is a “child”, and that it has formed no opinion on that matter, is unclear. The definition of “child” in cl 1(21) requires the Trustee to form an opinion as to whether the subject child “has been or is acknowledged by one of that child’s parents as a member of that parent’s family”. The requisite opinion is as to whether there has been an acknowledgement, not whether the definition of “child” is satisfied. The opinion with which the Trustee is concerned in its defence is misconceived. Rather than identifying this, the Plaintiff in her Reply pleads that that opinion was unreasonably and/or improperly held.

370. In any case, it is far from obvious how the matters pleaded at [1(c)] of the Reply advance the Plaintiff’s claims for relief beyond what is already pleaded in [12(a)] of the Claim. The matters pleaded in [1(c)] of the Reply are unnecessary. I consider that leave should be refused to amend [1(c)] and that subparagraph also ought to be struck out of the Plaintiff’s existing reply.

Would the Plaintiff’s claim in respect of the purported exclusion be maintainable if the exemption clause and limitation defence were raised against it?

371. While the Trustee has not raised the exemption clause or limitation defence in its defence to the amended statement of claim in respect of the purported exclusion per se, it is worth understanding whether the Plaintiff’s claim in relation to the purported exclusion (i.e. excluding the failure to appoint income allegations) would be maintainable if such matters were raised in the Trustee’s defence. In doing so, I emphasise that I am not making any findings on this question, but rather demonstrating that my observations above have some conceivable relevance if the matter progresses beyond this pleading dispute.

372. The exemption clause is worded such that it exempts the Trustee from liability in respect of (inter alia) a breach of trust. That is, it does not render what would otherwise be a breach of trust not a breach of trust (in contrast to, for example, clauses in a trust deed which enlarge certain powers or abridge certain duties). As the Plaintiff does not claim any loss or damage as a result of the purported exclusion per se, the exemption clause would be no response.

373. However, there may be a limitation issue in relation to the purported exclusion, given that it took place in 2001. In general, causes of action based upon a breach of trust first accrue on the date of commission: In de Braekt v Powell (2007) 33 WAR 389; [2007] WASCA 55 at [17] per Buss JA; Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 at [107] per Harrison J.

374. Absent any fraud or fraudulent breach of trust, the limitation period imposed by s 21(2) of the LAA is six years from the date on which the right of action accrued. However, given that the Plaintiff was a minor until her eighteenth birthday in September 2015, it was at that time from which a six-year limitation period effectively commenced: ss 3(2), 23(1) LAA. That period expired in September 2021. As these proceedings were commenced on 22 April 2022, the Plaintiff would appear to be out of time if she could not rely upon s 21(1)(a) of the LAA. As I consider that, with the amendments that I have indicated, the conduct pleaded at [15]-[54] of the Claim which relates to the purported exclusion might give rise to an inference of dishonesty, it seems that the Plaintiff’s claim in relation to the purported exclusion could be maintainable if the limitation defence were raised by the Trustee in its defence.

Amended statement of claim

375. The arguments on both applications were focused upon and applied to the Plaintiff’s latest round of proposed amended pleadings. Where I have granted leave to amend to the Plaintiff in respect of her Claim, it is generally because the necessary or critical elements formed part of the proposed amendments.

376. Since, by its strike out application, the Trustee seeks to have [7F]-[7J], [7L]-[7N], [10A] and [10B] of the amended statement of claim struck out, it is necessary for me to record findings on those paragraphs, albeit given the way in which the applications were run I can do so shortly.

377. By [7F]-[7J] of her amended statement of claim, the Plaintiff in essence pleads that: the purpose of the Trustee in entering into the CDE was to seek to exclude her from the class of General Beneficiaries prior to it being determined through paternity testing that she was a child of Mr Pratt; the Trustee’s entry into the CDE for that purpose was at the “request or direction” of one or more of the Siblings; in those circumstances, in entering into the CDE, the Trustee purported to exercise the reserved power for an improper purpose and as such the CDE is void as a fraud on power. Without more, those paragraphs would be liable to be struck out for not disclosing a reasonable cause of action. [10A] relies on those paragraphs in seeking a declaration that the CDE is void, and would also be struck out as a consequence.

378. By [7L]-[7N], the Plaintiff pleads the failure to appoint income allegations in essentially the same way as that pleaded in [55]-[58] of the Claim. As those allegations rely upon [7F]-[7J], they would be liable to be struck out as a consequence. In any case, [7N] should be struck out for the same reason that [58] of the Claim would be, as it forms part of the equitable compensation claim. [10B], which states that the Plaintiff is entitled to equitable compensation, would also be struck out as a consequence.

Summary of my findings

379. In summary, my findings are as follows:

1. I refuse leave to add the words “because it was in their financial interests to do so” in [39(c)] of the Claim;

2. I refuse leave to add the particulars in [40] of the Claim which relate to the Siblings’ defence of these proceedings;

3. I refuse leave to plead [47] of the Claim, but give leave to re-plead in a new paragraph below [48] of the Claim words to the effect that the Trustee was aware at the time of the purported exclusion that the purpose set out in [46] was improper;

4. I refuse leave to plead [51] as it appears in the Claim, as well as its reference in [54], but will grant the Plaintiff leave to re-plead [51] by replacing the words “void as a fraud on its power as trustee of the Trust” with the words “voidable and ought to be set aside”;

5. I grant leave to include a new paragraph after [78] of the Claim with words to the effect that, by reason of the matters pleaded at [51] (as amended), the Plaintiff is entitled to an order that the purported exclusion is set aside, with a new prayer for relief which seeks that order;

6. I refuse leave to plead [59]-[74] of the Claim (i.e. the alternative case based upon acknowledgement, affirmation and waiver);

7. I refuse leave to plead [58], [79] and prayer 3A of the Claim (i.e. the equitable compensation claim);

8. I refuse leave to plead [1(c)] and [2] of the Reply (the latter of which replies to the Trustee’s reliance upon the exemption clause and limitation defence as answers to the equitable compensation claim) and strike out [1(c)] and [2] of the existing reply; and

9. I otherwise grant leave to the Plaintiff to make the amendments in the Claim.

380. If the Plaintiff chooses not to avail herself of the leave that has been granted, [7F]-[7J], [7L]-[7N], [10A] and [10B] of the amended statement of claim ought to be struck out.

381. In taking this approach, I am mindful that the discretion to refuse an amendment on the basis that it would, if allowed, be liable to be struck out, should not be exercised simply on the basis that the applicant’s case appears to be weak, or on the basis of minor, stylistic or technical deficiencies that could be readily cured (indeed, I have expressly indicated where those exist and how they might be cured): see KTC v David [2022] FCAFC 60 at [228] per Wigney J. Where the Plaintiff’s pleadings are clearly liable to be struck out, and could not be saved by a further opportunity to re-plead, I have refused leave to plead them and/or struck them out.

382. While the positions of the Plaintiff and the Trustee encouraged a binary choice between their respective applications (e.g. PWS4 [97]; TWS4 [115]-[116]), the Court’s discretion allows some latitude as to the choice of the decision to be made: Aon at [89] per Gummow, Hayne, Crennan, Kiefel and Bell JJ, quoting Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; [2000] HCA 47 at [19] per Gleeson CJ, Gaudron and Hayne JJ. I consider that the approach I have taken appropriately falls within that latitude and accords with the overriding purpose in s 56 of the CPA.

Costs

383. In the event that her amendment application was successful and the strike out application was dismissed, the Plaintiff submits that costs should follow the event: PWS4 [97]. However, she accepts that she ought to pay any costs thrown away by reason of her proposed amendments: PWS3 [49]. In the event that the amendment application was dismissed and the strike out application was successful, the Trustee seeks to have its costs of the applications, as agreed or assessed, paid by the Plaintiff forthwith: TD2 36; MFI-1.

384. Costs are in the discretion of the Court: s 98(1)(a) CPA. It is generally the case that costs follow the event: r 42.1 UCPR. Unless the Court orders otherwise, the costs of an interlocutory application are to be paid and otherwise dealt with in the same way as the general costs of the proceedings: r 42.7 UCPR.

385. There is a line of authority to the effect that a party who seeks and obtains an indulgence from the Court, such as in an application for leave to amend, should pay the costs of the application and the costs thrown away by the amendments, even if the party applying for leave is successful: see e.g. O’Shanassy v AIA Australia Limited (previously The Colonial Mutual Life Assurance Society Limited t/as CommInsure) [2022] NSWSC 677 at [149] per Henry J and the authorities cited therein.

386. However, as is evident from the summary of my findings above, arguably neither of the outcomes contemplated by the Plaintiff and the Trustee have eventuated. To some degree, they have both enjoyed a measure of success. In those circumstances, it is appropriate that I hear the parties on the question of costs.

Orders

387. I direct the parties to bring in short minutes of order to give effect to these reasons for judgment. Those short minutes of order should: (a) include an order that [1(c)] and [2] of the Plaintiff’s reply be struck out; (b) provide that the Plaintiff has leave to file and serve a further amended statement of claim in accordance with my findings within a specified time, with a subsequent timetable (should the Plaintiff avail herself of that leave) for the defendants to file and serve a defence to the further amended statement of claim and the Plaintiff to file and serve a reply to those defences; and (c) address the question of costs – if costs cannot be agreed, there will need to be a timetable for submissions on the costs of the applications.

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Endnotes

Decision last updated: 16 October 2024