In the matter of JR Enterprises Pty Ltd as trustee for the JR Enterprises Unit Trust (No 2) - [2025] NSWSC 491

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of JR Enterprises Pty Ltd as trustee for the JR Enterprises Unit Trust (No 2); Application by John Anthony Musca and Andrew Jolliffe [2025] NSWSC 491
Hearing dates: 30 April, 6 May 2025
Date of orders: 19 May 2025
Decision date: 19 May 2025
Jurisdiction: Equity - Corporations List
Before: Nixon J
Decision:
See [218]-[219]

Catchwords:
CORPORATIONS – action for enforcement of judgment debt owed to a corporate trustee by a director of the company and by the unitholder which he controls – whether liability has been discharged by reason of entries which were alleged to have been made to the unitholder’s loan account of the company as at 30 June 2022 following instructions given by the director in February 2025
EQUITY – trusts and trustees – court-appointed trustees for sale sought advice and directions regarding the retention of sums from net proceeds of sale – whether trustees are justified in retaining sums proposed by them in respect of various contingent liabilities

Legislation Cited:
Civil Procedure Act 2005 (NSW) s 101
Conveyancing Act 1919 (NSW) s 66G
Court Suppression and Non-publication Orders Act 2010 (NSW) ss 7, 10
Trustee Act 1925 (NSW) ss 14-14DB, 70, 71, 79, 85, 100A

Cases Cited:
BostikAustralia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304
Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4
Equititrust Ltd (in liq) (rec apptd) (recs and mgrsapptd) v Equititrust Ltd (in liq) (rec apptd) (recs and mgrsapptd) (No 4) [2017] FCA 1133
Hardoon v Belilios [1901] AC 118
In the matter of Double Bay Property Management Pty Ltd (in liq) [2021] NSWSC 996
In the matter of Fellman Pty Ltd (in liq) [2022] NSWSC 1038
In the matter of JR Enterprises Pty Ltd atf the JR Enterprises Unit Trust [2024] NSWSC 1671
Macedonian Orthodox Community Church St Petka Inc above; Re Estate Late Chow Cho-Poon; Applifcation for judicial advice [2013] NSWSC 844
Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42
Morelli (liquidator), in the matter of FW Projects Pty Limited (in liq) v White Hills Pty Limited (No 2) [2024] FCA 955
Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816
Spitfire Corporation Limited (in liquidation) and Aspirio Pty Ltd (in liquidation) [2022] NSWSC 579

Category: Principal judgment
Parties:
Proceeding 2020/00304314
Joy Rosalind Wylie (First Plaintiff)
Wylie’s Securities Pty Ltd (Second Plaintiff)

Jeffrey Ronald Williams (First Defendant)
JR Enterprises Pty Ltd atf the JR Enterprises Unit Trust (Second Defendant)
Jada Investments Pty Ltd (Third Defendant)
Proceeding 2025/00136362
John Anthony Musca (First Plaintiff)
Andrew Jolliffe (Second Plaintiff)
Representation:
Counsel:
Proceeding 2020/00304314
S J Philips / J Charlton (Plaintiffs)
D E Grieve KC (Defendants)

Proceeding 2025/00136362
H Mann (Plaintiffs)

Solicitors:
Proceeding 2020/00304314
Denina Legal (Plaintiffs)
RBHM Commercial Lawyers (Defendants)
Proceeding 2025/00136362
Bartier Perry Lawyers (Plaintiffs)

File Number(s): 2020/00304314
2025/00136362
Publication restriction: Nil

JUDGMENT

These two related proceedings arise from the breakdown of a business relationship between Mrs Joy Wylie and Mr Jeffrey Williams. Mr Williams is the former son-in-law of Mrs Wylie.
Mrs Wylie and Mr Williams are the directors of JR Enterprises Pty Ltd, which is the trustee for the JR Enterprises Unit Trust (the Trust).
JR Enterprises, in its capacity as trustee of the Trust, operated a hotel business known as the Crocodile Farm Hotel (the Business), on premises located at 262 Liverpool Road, Ashfield, New South Wales (the Land).
The units in the Trust have at all times been held:

as to 50%, by Wylie’s Securities Pty Ltd, a company of which Mrs Wylie is a director and shareholder; and

as to 50%, by Jada Investments Pty Ltd, a company of which Mr Williams is the sole director and shareholder.

In addition, Wylie’s Securities and Jada:

each held 50% of the shares in JR Enterprises; and

owned the Land in equal shares.

In 2020, Mrs Wylie and Wylie’s Securities commenced proceeding 2020/304314 against Mr Williams, Jada and JR Enterprises (the Wylie Proceeding).
On 9 May 2022, orders were made in the Wylie Proceeding appointing Mr John Musca of Jones Lang LaSalle’s Hotels and Hospitality Group and Mr Andrew Jolliffe of HTL Property as trustees for the sale of the Land and the Business (the Trustees).
On 14 June 2022, orders were made in the Wylie Proceeding, by consent, that Mr Williams and Jada pay compensation to JR Enterprises in the amount of $1.5m (the Judgment Debt), as well as orders that Mr Williams and Jada pay the Plaintiffs’ costs and that the proceeding be dismissed.
On 31 January 2023, the Trustees completed the sale of the Land and the Business. The net sale proceeds were around $34.4m. Interim distributions totalling around $27.8m have been paid from those proceeds to Jada, Wylie’s Securities and JR Enterprises. The Trustees’ solicitors continue to retain an amount of around $6.6m.
By an Amended Interlocutory Process filed in the Wylie Proceeding on 18 November 2024, Mrs Wylie and Wylie’s Securities (the Wylie Parties) sought leave to bring a derivative action on behalf of JR Enterprises against Mr Williams and Jada (the Williams Parties) for the enforcement of the Judgment Debt (the Derivative Action).
Following the filing of this application, the Williams Parties demanded that the Trustees distribute to Jada one half of the funds which they retained.
On 20 December 2024, I granted the Wylie Parties leave to bring the Derivative Action in respect of the Judgment Debt: In the matter of JR Enterprises Pty Ltd atf the JR Enterprises Unit Trust [2024] NSWSC 1671.
On 2 April 2025, the Trustees commenced proceeding 2025/136362, seeking judicial advice as to whether they are justified in retaining the sum of around $6.6m on account of potential third party or beneficiary claims against the Trustees and potential future tax and capital gains liabilities arising out of the sale of the Business (the Judicial Advice Application).
The Derivative Action was heard together with the Judicial Advice Application.
Because there is an issue in the Derivative Action as to the likelihood, timing and quantum of any further distribution by the Trustees from the funds retained by them, it is convenient to deal with the Judicial Advice Application before dealing with the Derivative Action.

judicial advice application

Relevant Facts

The following summary of the factual background to the Judicial Advice Application is uncontroversial and is largely drawn from the Trustees’ Statement of Facts and the documents annexed thereto.

Appointment of Trustees

On 14 April 2022, Mr Williams filed an interlocutory process in the Wylie Proceeding seeking, among other things, orders for the sale of the Land and the Business at the best price that was reasonably obtainable, and the appointment of Mr Musca as agent to decide the method and manner of undertaking the sale of the Land and the Business.
On 9 May 2022, the Court made orders appointing the Trustees (the Appointment Orders), as follows:

“1. Order that John Anthony Musca of Level 25, 420 George Street Sydney Real Estate Agent and Andrew Jolliffe of HTL Property of Level 3, 319 George Street, Sydney, Hotel Broker (‘the trustees’) be appointed trustees of the land situate[d] at and known as 262 Liverpool Road Ashfield New South Wales, being the whole of the land described in certificate of title folio identifier 2/519591 (‘the land’) and of the business undertaking of the hotel known as the Crocodile Farm Hotel (including all assets tangible and intangible in connection therewith) (‘the business undertaking’) conducted upon the land by JR Enterprises Pty Ltd.
2. Order that the land and the business undertaking vest in the trustees subject to any encumbrances affecting the entirety thereof and free from any encumbrances affecting any undivided shares therein upon the statutory trust for sale created pursuant to section 66G of the Conveyancing Act 1919 and section 79 of the Trustee Act 1925.
…
5. Upon completion of the sale of the land and the business undertaking the trustees shall deduct from the proceeds of such sale, their commission and other expenses and the legal costs incurred by them in respect of the sale and of transferring the land and the business undertaking to the purchaser and shall deposit the sum of $1,000,000 ($1 million) into a joint trust account established by and in the name of the solicitors for [Wylie’s Securities] and [Jada] to be held by those solicitors pending the final determination of these proceedings and shall pay the balance then remaining to the [Wylie’s Securities] and the [Jada] in equal shares.”

The Trustees were not parties to the Wylie Proceeding and were not represented in relation to the making of the Appointment Orders.
On 17 August 2022, the Trustees filed an interlocutory process in the Wylie Proceeding, seeking to vary the Appointment Orders. On the same day, the Court made the following orders:

“1. Order 5 made on 9 May 2022 be varied so that it reads:
5. Upon completion of the sale of the land and the business undertaking, the trustees shall deduct from the proceeds of such sale their commission and other expenses and liabilities (including legal costs) incurred by them in respect of their ownership of the land and the business undertaking and the sale and transfer of the land and business undertaking to the purchaser and shall pay the balance then remaining to [JR Enterprises] in such sum as represents the net proceeds of the sale of the business undertaking and otherwise to [Wylie’s Securities] and [Jada] in equal shares.

2. Insert order 5A as follows:
5A. Nothing in order 5 shall prejudice the trustees’ rights to obtain an indemnity (including enforcing the right of exoneration) and their right to exercise any lien, and the trustees may retain such sum as may be agreed upon by [Wylie’s Securities] and [Jada], and failing agreement, such sum as they may determine, having regard to any advice obtained pursuant to the Trustee Act, s63 and use such sum to discharge any liability on their part and otherwise pending the determination of the extent of their indemnity otherwise, by a Court of competent jurisdiction.

3. Insert order 5B as follows:
5B. Upon the determination referred to in paragraph 5A, or the parties’ agreement, the trustees shall pay any balance remaining (if any):
(a) to [JR Enterprises] in such sum as represents the net proceeds of the sale of the business undertaking; and
(b) otherwise to [Wylie’s Securities] and [Jada] in equal shares

4. Order 2 made on 9 May 2022 be varied so that the words ‘Section 79’ are deleted and replaced with the words ‘Section 70 and 71’.”

I will refer to the Appointment Orders of 9 May 2022, as varied by the orders of 17 August 2022, as the Varied Appointment Orders.

Sale of Land and Business and distribution of funds

On 31 January 2023, the Trustees completed the sale of the Land and the Business. The relevant contracts specified a price of $11m for the Business and $40.25m for the Land (with $13m apportioned to the property and $27.25m apportioned to the liquor licence, including the gaming entitlements).
Following settlement, the solicitors for the Trustees held net sale proceeds totalling $34,397,117.60.
On 9 March 2023, an “at call” controlled monies account was established in the name of the Trustees by their solicitors (the “At Call” Account), and the net sale proceeds were deposited into that account.

Interim distributions

On 6 April 2023, the Trustees distributed an amount of $5,905,106.05 to JR Enterprises, and an amount of $10,873,839.74 to Jada.
On 30 June 2023, the Trustees distributed an amount of $10,873,839.74 to Wylie’s Securities.
There was a delay in the distribution to Wylie’s Securities because there was a delay in the provision of bank details by Wylie’s Securities (which were provided to the Trustees’ solicitors on 28 June 2023).
On 5 July 2023, an additional amount of $121,262.90 was paid to Wylie’s Securities in respect of interest for the period from 1 April 2023 to 30 June 2023. The relevant calculation was based on the wrong interest rate, resulting in an overpayment to Wylie’s Securities of $87,504.61. The Trustees requested, on 19 July 2023, that the amount of this overpayment be repaid by Wylie’s Securities into the “At Call” Account. Wylie’s Securities did not comply with this request. On 4 September 2023, the solicitors for the Trustees paid the amount of $87,653.31 into the “At Call” Account (representing the amount of the overpayment to Wylie’s Securities plus interest). The Trustees intend to deduct the sum of $87,653.31 from future distributions to Wylie’s Securities, and to repay this sum to the Trustees’ solicitors at that time.
From May 2022 to April 2025, amounts totalling $337,162.72 were paid in respect of the fees of the Trustees’ solicitors and accountants. Those monies were either paid, or reimbursed, from the trust assets after advance written notification was given to the beneficiaries and without receiving any objection from them.
The Trustees continue to retain funds in the amount of $6,606,269.91 (the Retained Funds).

Deed of Indemnity

On 9 June 2022, Mr Jolliffe, on behalf of the Trustees, wrote to the parties in the Wylie Proceeding, seeking agreement to a proposed deed of indemnity and an agency agreement in respect of the Trustees’ appointment.
The Williams Parties did not object to the proposed deed of indemnity and Jada subsequently executed a copy of this document on 13 September 2022 (the Deed of Indemnity).
The Deed of Indemnity relevantly provides as follows:

“4   Release
On and from the date of this deed, to the fullest extent permitted by law, [Jada] immediately and forever releases the Trustees and their agents from all claims, actions, suits, causes of action, proceedings, accounts, demands, costs and expenses (including legal costs and expenses) of any nature connected with or incidental to:
(a)   the due exercise or purported exercise of any rights, powers, discretions or authorities vested or purported to be vested in the Trustees by virtue of the Appointment Order; and
(b)   conducting the sale of the Business Undertaking and Property as a going concern.
5   Indemnity of Trustees
[Jada] shall, subject to the provisions of clause 6 of this Deed, indemnify the Trustees against liabilities for or arising out of all actions, proceedings, claims, suits and demands, and all payments, costs and expenses (all included in the word Liabilities) incurred by the Trustees in or arising out of the due exercise or purported exercise of any of the rights, powers, discretions or authorities vested or purported to be vested in the Trustees by virtue of the Appointment order or otherwise incurred or to be incurred in the due course of their conduct as Trustees, including specifically:
(a)   all Liabilities consequent upon any bona fide mistake, omission, oversight, error of judgement or want of prudence on the part of the Trustees;
(b)   all Liabilities incurred or threatened in respect of any matter or thing done or omitted to be done by the Trustees in exercise or purported exercise of the Trustees’ rights, powers, discretions or authorities in the Trustees; and
(c)   all Liabilities and obligations of any nature incurred by the Trustees in the course of or directly or indirectly resulting from their appointment as Trustees.
6   Exclusions from Indemnity of Trustees
The indemnity in the preceding clause shall not extend to:
(a)   any liability arising out of the wilful default, dishonesty or gross negligence of the Trustees or any of the Trustees’ agents or employees in the performance or exercise or purported performance or exercise of the Trustees’ rights, powers, discretions or authorities or as a result of the Trustees or the Trustees’ agents or employees knowingly exceeding the scope of their rights, powers, discretions and authorities; and
(b)   any liability admitted by the Trustees without the prior written consent of [Jada], other than any liability incurred by the Trustees in the ordinary course of the business of the Trustee.
7   Deed binding [Jada]
This deed is binding on [Jada] regardless of whether or not Wylie’s Securities Pty Ltd provides any other indemnity to the Trustees.”

The Wylie Parties raised a number of objections to the terms of the proposed indemnity, alleging potential conflicts and asserting issues regarding the remuneration sought by the Trustees. Despite in-person meetings and correspondence between the Wylie Parties and the Trustees, no deed of indemnity has been executed by Wylie’s Securities to date.

Retention of Funds for tax liabilities and other claims

On 29 March 2023, shortly prior to making the interim distribution referred to in paragraph [25] above, the Trustees wrote to the solicitors for, respectively, Jada and Wylie’s Securities. The Trustees referred to order 5A of the Varied Appointment Orders (see paragraph [20] above), and stated that the purpose of their letter was to set out their proposal as to the amounts to be retained by them pursuant to order 5A and to seek the agreement of Jada and Wylie’s Securities to the retention of those amounts by the Trustees.
In particular, the Trustees stated that they proposed to retain an amount of around $5.589m on account of their potential liability to pay tax and an amount of $1m on account of their potential exposure for legal costs to defend claims that may be brought against them. In respect of such claims, the Trustees noted that Wylie’s Securities had declined to provide any release or indemnity and that the solicitor for Wylie’s Securities had “advocated in respect of a number of legal issues associated with the trustees’ sale process and the continued trading of the business undertaking by [JR Enterprises] (in particular, certain payments made by [JR Enterprises])”. The Trustees stated that they intended to hold the amount of $1m on account of the legal costs of any claims brought against them until the earlier of Wylie’s Securities providing a release or six years from the date of their letter.
On 4 April 2023, the Trustees sent a further letter to the solicitors for, respectively, Jada and Wylie’s Securities. In this letter, the Trustees made a slight revision to the calculation of the amount to be retained from the proceeds of the sale of the Land; provided their calculation of the amounts to be distributed to the beneficiaries; and stated that, following such distributions, the Trustees would retain (a) an amount of around $3.307m “as to the trust for the sale of the land”; and (b) an amount of around $3.523m “as to the trust for the sale of the business undertaking”.
As outlined below, the Trustees’ solicitors subsequently engaged in communications with the Australian Taxation Office (ATO), in which they sought a private binding ruling in respect of tax liabilities arising from the sale of the Land and the sale of the Business. Such a ruling was provided by the ATO in respect of the Land, but not in respect of the Business.
On 30 October 2023, the Trustees informed Jada and Wylie’s Securities that, in the absence of a private binding ruling in respect of the sale of the Business, they intended to lodge tax returns in respect of the Business and to retain a sum equal to their maximum potential tax liability for the Business for a period of four years from the date of initial assessment (being the period within which any reassessment may occur).
Tax returns were subsequently prepared and lodged for the Trust for the financial years ending 30 June 2022 (FY22) and 30 June 2023 (FY23). If the Commissioner accepts the FY22 and FY23 returns as lodged, the amount for which the Trustees may be personally liable is nil.

Events leading to bringing of the Judicial Advice Application

From April 2023 to October 2024, neither Jada nor Wylie’s Securities raised any objection to the retention of funds by the Trustees.
On 25 October 2024, the Wylie Parties filed their application for leave to bring the Derivative Action against the Williams Parties for enforcement of the Judgment Debt.
On 19 November 2024, the solicitor for the Williams Parties forwarded a copy of the Wylie Parties’ application to the Trustees’ solicitors, and requested that the Trustees distribute one half of the balance of the Retained Funds to Jada, on the basis that Jada has executed the Deed of Indemnity.
On 26 November 2024, the Trustees’ solicitors replied, copying the solicitor for the Wylie Parties, and stating that the Trustees were unable to distribute any share of the Retained Funds to Jada “until crystallisation of any future liabilities (for example, legal and tax amounts)”.
On 20 February 2025, the solicitor for the Williams Parties stated that it was “difficult to imagine on what basis there is any real risk” that the Trustees could be assessed for any tax liability, and requested that Jada’s share of the Retained Funds be immediately distributed by the Trustees, threatening legal proceedings in the event that such payment was not made.
On 3 March 2025, the Trustees’ solicitors wrote to the solicitors for, respectively, the Wylie Parties and the Williams Parties, stating that the Trustees’ accountants were still calculating the amounts to be retained in order to cover potential liabilities, but expected that those amounts would total not less than $4m. The Trustees’ solicitors further stated that if no agreement was reached in relation to the amount of the funds to be retained by the Trustees, they intended to approach the Court for judicial advice and directions.
On 10 March 2025, the solicitors for the Wylie Parties:

confirmed that their clients did not intend to provide an indemnity to the Trustees;

noted that the Trustees were entitled to an indemnity from the Trust assets; and

stated that the Wylie Parties did not object to the Trustees retaining the Retained Funds “for a significant period of time for potential exposure to any claims”.

On 14 March 2025, Jada filed an application in the Wylie Proceeding, seeking leave to bring a cross claim against the Trustees (Proposed Cross Claim). The relief sought in the Proposed Cross Claim included an order that the Trustees pay Jada an amount of $3m.
On 2 April 2025, the Trustees commenced the Judicial Advice Application. On the same date, orders were made for the Judicial Advice Application to be listed for hearing together with the Derivative Action, and for Jada’s application for leave to bring the Proposed Cross Claim to be listed for directions at the same time.
On 10 April 2025, the Trustees obtained an advice from Ms Lisa To of Bartier Perry on their potential tax liabilities (Ms To’s Advice). A copy of Ms To’s Advice was subsequently provided to Wylie’s Securities and Jada on 23 April 2025, on the basis that it was arguable that such material was subject to a joint interest privilege of the Trustees and the beneficiaries.
In their letter of 23 April 2025 providing Ms To’s Advice, the solicitors for the Trustees noted that:

Wylie’s Securities “has never offered any form of indemnity or release that would be acceptable to it, as an alternative to retention”; and

although Jada had executed the Deed of Indemnity, the Trustees “have serious doubt surrounding the value or enforceability of any indemnity provided by Jada”, particularly because, in the Derivative Action, an order is sought for the winding up of Jada.

The Trustees’ solicitors stated as follows:

“Nevertheless, as previously consistently communicated on several historical occasions, the trustees are prepared to consider any reasonable proposal from the beneficiaries to release and indemnify them that would avoid the need for retention.
In light of the recent developments, such proposal must be supported by a proposal for the beneficiaries (or the individuals controlling them) to provide a form of security for the indemnities offered.
If your clients are prepared to offer any form of such indemnity (and full releases as to the trustees’ management of the sale and proceeds) please urgently provide it, so that it can be considered by the trustees prior to the hearing of the judicial advice application on 30 April 2025.”

No such offer has subsequently been made by Jada or Wylie’s Securities.

Relevant Principles

The Varied Appointment Orders provided that the Trustees may retain, in respect of any liability on their part, such sum from the sale proceeds as may be agreed upon by Jada and Wylie’s Securities or, failing such agreement, as the Trustees “may determine, having regard to any advice obtained pursuant to the Trustee Act, s 63”.
The Trustees sought, and were unable to obtain, the agreement of Jada and Wylie’s Securities as to the sum to be retained by the Trustees from the sale proceeds, and have therefore brought the Judicial Advice Application pursuant to section 63 of the Trustee Act 1925 (NSW).
Section 63(1) provides as follows:

A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.

In Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 at [58], Gummow ACJ, Kirby, Hayne and Heydon JJ observed that the only limit on the jurisdiction afforded under s 63 of the Trustee Act is that “the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument”. Their Honours also stated (at [64]) that the procedure operates as “an exception to the Court’s ordinary function of deciding disputes between competing litigants” and affords a facility for providing “private advice” to trustees although the Court is not bound to give such advice.
The function of the Court in a judicial advice application is to determine what should be done in the best interests of the trust: Macedonian Orthodox Community Church St Petka Inc above; Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 at [45] (per Lindsay J).
In Equititrust Ltd (in liq) (rec apptd) (recs and mgrs apptd) v Equititrust Ltd (in liq) (rec apptd) (recs and mgrs apptd) (No 4) [2017] FCA 1133 at [7], Jagot J observed that: (1) the jurisdiction or power to give judicial advice is not constrained by any implications or limitations not found in the express words of the section; (2) the Court’s discretion is confined only by the subject matter, scope and purpose of the legislation, and there are no implied limitations on the discretionary factors that may arise or rules governing the relative importance of such factors; (3) the judicial advice procedure is intended to be summary in character; (4) a judicial advice application is in the nature of “private advice” and a departure from usual Court proceedings in which there are multiple, adversarial parties and a person served with documents in respect of a judicial advice application is not thereby a “party” to the application; (5) the right to obtain judicial advice protects the trustee, but it thereby also protects the interests of the trust, by enabling the trustee to act in the interests of the trust without fear of being personally liable for costs; (6) the function of the Court in a judicial advice application is to determine what should be done in the best interests of the trust; and (7) the usual form of order is that the trustee “would be justified” in taking the relevant course of action.
I am satisfied that, in the circumstances of the present case, it is appropriate for the Court to exercise the power to give advice to the Trustees in respect of the issue which has arisen in the administration of the Trust regarding the retention of funds by them. That is particularly so in circumstances where:

the Varied Appointment Orders contemplated that the Trustees would bring such an application in the event that they could not reach agreement with Jada and Wylie’s Securities regarding the retention of funds from the sale proceeds in order to discharge any liability on the part of the Trustees;

the Trustees have sought and failed to obtain such agreement;

there is a dispute between Jada and Wylie’s Securities regarding whether funds should be distributed or retained; and

the question as to whether funds should be retained and, if so, in what amount depends on an assessment of the risk of various contingent liabilities arising which, as outlined below, is not a straightforward matter.

In Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4 at [47]-[51], the High Court observed that:

where a trustee acting within power in the course of the administration of the trust incurs a liability, then the trustee is entitled to exoneration (that is, to apply the trust property in discharging the liability) or to reimbursement (in the event that this liability has been discharged out of the trustee’s own property);

“[i]n aid of this right to reimbursement or exoneration for liabilities properly incurred in the administration of the trust, the trustee cannot be compelled to surrender the trust property to the beneficiaries until the claim has been satisfied”;

“[u]ntil the right to reimbursement or exoneration has been satisfied, ‘it is impossible to say what the trust fund is’”; and

the trustee’s right of reimbursement or exoneration “takes priority over” the rights of the beneficiaries in the trust assets. That is, “the trustee has a beneficial interest in the trust assets to the extent of its right to be indemnified out of those assets against personal liabilities incurred in the performance of the trust and that interest will be preferred to the beneficial interests of the cestuis que trust”.

Where a receiver has been appointed by the Court to the assets of a trust for the purposes of sale, and the object of the appointment has been achieved, the Court has power to release the receiver “from any liability whatsoever and however arising out of or in connection with their appointment as receiver”: see, for example, In the matter of Double Bay Property Management Pty Ltd (in liq) [2021] NSWSC 996 at [36]-[42] (Ward CJ in Eq) and In the matter of Fellman Pty Ltd (in liq) [2022] NSWSC 1038 at [45]-[48] (Williams J). The Trustees submitted (and the other parties did not dispute) that there is, however, no power to grant a similarly broad release to a trustee, noting that s 85 of the Trustee Act gives the Court power to grant a release in relation to a specific breach of trust.
The Trustees also noted, in their submissions, that in the context of deceased estates, the Court has advised against the retention of assets on the basis of a remote risk of contingent liabilities. However, as the Trustees observed, in that context, the Court is able, via judicial advice, to protect the executors from personal liability in the event that such a (remote) claim arose after the estate assets had been distributed.
Section 100A of the Trustee Act abolished the rule in Hardoon v Belilios [1901] AC 118, such that a beneficiary is not (absent written agreement) liable to indemnify the trustee or make any other payment to the trustee or any other person for any act, default, obligation or liability of the trustee. As noted above, the Trustees have offered to distribute the Retained Funds in the event that Wylie’s Securities and Jada provide a secured indemnity in respect of any liabilities of the Trustees, but no such indemnity has been provided.
Accordingly, and consistently with the terms of the Varied Appointment Orders, the Trustees seek advice as to whether they would be justified in retaining those funds. As outlined below, the advice sought by the Trustees includes advice regarding the amounts which they would be justified in retaining in respect of various contingent liabilities, the periods for which they would be justified in retaining such amounts, and the investment of the funds retained by the Trustees.

Advice sought by Trustees

The Trustees seek the opinion, advice or direction of the Court as to:

whether they are justified in retaining from distribution to the beneficiaries:

the sum of $1m on account of potential litigation defence costs in respect of any claims by the beneficiaries or third parties in respect of the sale of the Business and the Land, until 31 January 2029 (being six years from the date of completion of the sale);

the sums of:

$2,585,000 on account of the potential capital gains tax in respect of the sale of the Business; and

$2,967,944.70 in respect of potential income tax in respect of the Business for the period from the appointment of the Trustees to the sale of the Business;

until 19 May 2028 (being four years from the date on which tax returns were lodged for the Trust and for the Trustees); and

the following sums in respect of estimated costs (including GST), until such time as those costs are paid:

$80,999.60 for the estimated costs of the Judicial Advice Application; and

$37,906.00 for the estimated future legal and accounting costs of the administration of the trust;

whether the Trustees are justified in depositing some or all of such funds as are retained in respect of the matters in paragraph (1)(a)-(c) above into, at their discretion, an interest-bearing three to six month term deposit and/or savings account.

These issues for advice arise in circumstances where:

the Trustees are neither professional trustees nor insolvency practitioners;

the Trustees are acting without any ongoing remuneration (noting that on settlement of the sale of the Land and the Business, commissions of $422,812.50 were paid to each of their respective employers);

the Trustees accept, as outlined below, that the risk of various contingent liabilities is low, but are concerned that the extent of such personal liability, in the event that this risk is realised, is very substantial; and

the Trustees have requested secured indemnities from the beneficiaries as an alternative to retaining funds, but no such secured indemnity has been provided to date.

Amount to be retained on account of potential litigation defence costs

The Trustees propose to retain $1m in respect of potential litigation defence costs in the event that any claim is made against them by beneficiaries or third parties. The Trustees do not propose to retain any sum in respect of any liability on their part if such a claim is established. The position was put as follows in the Trustees’ letter of 29 March 2023:

“For the avoidance of doubt, we do not propose to retain any amount on account of any compensation or other orders that a court may find the trustees liable to pay. Rather, we seek to protect our position in respect of defence costs that we would unavoidably incur if any (misconceived) claim is commenced.”

No claim has been brought against the Trustees by any beneficiary or third party. Nor is there any evidence that, in the period of more than two years since the Land and Business were sold, any beneficiary or third party has threatened to bring a claim against the Trustees (other than the Proposed Cross Claim, to which I refer below).
The Trustees submitted that they “are concerned that the Wylie’s parties or the Williams parties may, in the future, bring proceedings against them in relation to their conduct in performance of their role”. They submitted that the possibility of claims by the beneficiaries is not merely theoretical, given that:

the Wylie Parties have refused to provide the Trustees with a release; and

the release given by the Williams Parties may be read as relating only to past conduct of the Trustees (and Jada has, in its Proposed Cross Claim, raised issues regarding the management of the trust assets by the Trustees in the period since that indemnity was given).

As regards the latter point, the Proposed Cross Claim includes an allegation that the Trustees should have deposited the Retained Funds into an account bearing an interest rate of 4% per annum (rather than leaving them in the “At Call” Account) and that, if they had done so, they would have earned interest totalling around $272,733 per annum, which would have been able to meet expenses of the administration of the trust and which should otherwise have been distributed to the beneficiaries of the trust. However, no relief is sought in the Proposed Cross Claim in respect of any such allegation.
There is no evidence of any issue having been raised by a third party about any aspect of the Trustees’ conduct. The Trustees tendered an advice from Allens dated 22 December 2022, in respect of which a claim for privilege was made. It is sufficient for present purposes to note that this advice did not address any potential exposure of the Trustees to a claim by any particular third party, but rather was to the effect that [redacted].
The solicitor for the Trustees, Mr Stuart, acknowledged in his affidavit that it was not possible for him to give an accurate prediction of the nature or quantum of any claim that has not been made. However, he deposed that, given the sale prices for the Land and Business, any damages claims in respect of the sale could be significant and could justify proceedings in this Court. He stated as follows:

“Further, I believe based on my professional experience acting for both plaintiffs and defendants in Supreme Court of NSW proceedings relating to the sale and purchase of real property and businesses, as well as equity and breach of trust claims, that the costs of defending such claims up to a final hearing would be at least $250,000 (including GST) for each defendant and increasing up to $500,000 (including GST) or more depending on:
(a) the number of days required for final hearing;
(b) the legal team (including barristers) briefed by the defendant;
(c) the nature, extent and complexity of the evidence prepared by the defendant;
(d) any additional interlocutory processes in the litigation such as discovery or pleadings disputes.

Given the uncertainty of the nature or quantum of any future potential claims against the Trustees, the amount of $500,000 (including GST) for each Trustee (in the total amount of $1 million including GST) is currently retained from the net sale proceeds of the sale of the Land and Business for defence costs arising from any claims against the Trustees by either the Beneficiaries or third parties.”

Jada submitted that Mr Stuart’s “figure of $1,000,000 is, in reality, no more than a ‘stab in the dark’”. Counsel for the Trustees conceded, in oral address, that “no-one shies away from the fact there are many unknowns” and that the figure of $1m for potential defence costs “is in a sense a guesstimate, not an estimate”.
Having regard to the matters set out above, I am not satisfied that the Trustees would be justified in retaining the sum of $1m in respect of potential litigation defence costs for almost four more years (until 31 January 2029).
In circumstances where:

no claims against the Trustees have been threatened by the beneficiaries, other than (perhaps) a claim by Jada regarding the investment of the Retained Funds;

no claim against the Trustees has been threatened by any third party;

it is now well over two years since the Trustees completed the sale of the Land and of the Business for which they were appointed; and

the Trustees have not identified any factual matters which might potentially give rise to claim by either a third party or a beneficiary;

the “guesstimate” by the Trustees’ solicitor of the potential litigation costs in the event that a claim is made at some time in the future has no adequate basis and is likely to be significantly overstated.

Based on the rates set out in the affidavit of the Trustees’ solicitor, Mr Stuart, his estimate of potential defence costs is equivalent to more than 2,000 hours, or more than 200 days, of time by a legal practitioner at the level of senior associate or junior counsel. I am not satisfied that there is a basis, on the evidence before the Court, to conclude that there is a real (as opposed to theoretical) risk of litigation of that scale, even if some claim were to emerge regarding the Trustees’ management of the trust assets or regarding, for example, any representations made by the Trustees prior to the sale of the Land and the Business.
Given the matters outlined above, I have determined that the Trustees would be justified in retaining a much lower sum, in the amount of $150,000, in respect of the risk of litigation defence costs being incurred in dealing with any claim by Jada or Wylie’s Securities. The Trustees would be justified in retaining this sum until the earlier of:

31 January 2029 (being six years from the date of the sale of the Land and the Business); or

the provision of releases by each of Jada and Wylie’s Securities in respect of any acts or omissions of the Trustees to date.

In the event that such releases are given, the Trustees will be protected against the risk of claims from the beneficiaries. I do not consider that there would then remain a basis for retaining sums for defence costs against the theoretical possibility that a third party may make a claim against the Trustees (in circumstances where no issue has been raised by any third party regarding their conduct of the sale of the Land and the Business and where the Trustees have the benefit of the Deed of Indemnity from Jada in respect of any such defence costs).
Otherwise, the balance of the funds which were proposed to be retained by the Trustees for potential litigation defence costs (that is, the amount of $850,000) should be distributed.

CGT liability

On 17 April 2023, the Trustees’ solicitors applied for a private binding ruling from the ATO in relation to specific tax issues arising from, respectively, the sale of the Land and the sale of the Business.
The ATO subsequently issued a private ruling in relation to the sale of the Land. As a result, there is no outstanding issue in respect of the Trustees’ potential tax liability in relation to the sale of the Land, and therefore the Trustees do not propose to retain any funds in respect of any such liability.
However, the application for a private binding ruling in relation to the sale of the Business was ultimately withdrawn by the Trustees, as a result of the ATO expressing uncertainty as to whether the effect of the Varied Appointment Orders was that the Trustees were appointed as additional trustees of the Trust, or that a separate, new trust was created upon their appointment (as was the case with the Land). The relevant communications are summarised below.
On 25 July 2023, an officer of the ATO sent an email to the Trustees’ solicitors, referring to order 2 of the Varied Appointment Orders (which provided that the Land and the Business vest in the Trustees “upon a statutory trust for sale created pursuant to section 66G of the Conveyancing Act 1919 and sections 70 and 71 of the Trustee Act 1925”). The email continued as follows:

“… we are unable to reconcile the creation of the statutory trust for sale within section 66G of the Conveyancing Act and sections 70 and 71 of the Trustee Act because:
• a trustee can be appointed under section 66G of the Conveyancing Act to hold a property (other than chattels) held in co-ownership on the statutory trust for sale. This does not apply to the business undertaking as it is solely owned,
• sections [sic] 70 of the Trustee Act provides authority to the court to appoint a new trustee to an existing trust. This does not apply to the land and cannot be aid to be the appointment of the trustees to the Unit Trust.”

The email further noted that order 5 of the Varied Appointment Orders, required the Trustees to pay the net sale proceeds of the sale of the Business to JR Enterprises.
On 2 August 2023, the Trustees’ solicitors sent a memorandum to the ATO regarding the interpretation of the Varied Appointment Orders. They contended that whereas the Trustees were appointed as statutory trustees over the Land pursuant to s 66G of the Conveyancing Act 1919 (NSW) (thereby creating a new trust), the Trustees were appointed as additional trustees of the existing Trust, which held the Business, pursuant to ss 70 and 71 of the Trustee Act. The Trustees’ solicitors stated as follows:

“The effect of Order 2 [of the Varied Appointment Orders] (as clarified by the Transcript) is that only one statutory trust for sale has been created in respect of the Land pursuant to section 66G of the Conveyancing Act.
As no statutory trust has been created in respect of the Business Undertaking:
(a) CGT event A1 did not occur in relation to the Business assets on the granting of the Orders on 9 May 2022, as there was no change in the beneficial owner of the assets pursuant to section 104-10(2) of the Income Tax Assessment Act 1997 (Cth);
(b) The income derived by the Unit Trust in the 2022 and 2023 income years, is not within the scope of the Orders and is to be distributed in accordance with the Trust Deed.”

The ATO does not appear to have been persuaded by the views expressed by the Trustees’ solicitors. On 26 September 2023, the ATO issued a private ruling in relation to the sale of the Land, but indicated that it was unable to provide a private ruling in relation to the sale of the Business, stating as follows:

“At the meeting on 25 July 2023 we raised our concerns with you about the wording of the Court Orders with respect to the business taking and advised you that it was not clear that the Court Orders appointed Messrs Musca and Jolliffe as trustees jointly within the trustee of the Unit Trust.
At the meeting on 16 August 2023 we advised that our concerns remained despite the additional information you provided in your email dated 2 August 2023.
Accordingly, we are unable to provide you with a ruling on the basis that the business undertaking is held jointly with the trustee of the Unit Trust.”

After withdrawing the application for a private ruling in relation to the Business, the Trustees engaged accountants to prepare an amended tax return for FY22 and a tax return for FY23 with respect to the Trust. The Trustees stated as follows in an email to the beneficiaries on 30 October 2023:

“the Trustees propose to retain a sum equal to their maximum potential tax liability for the Business Undertaking for a period of four years from the date of initial assessment. This is necessary (along with other retention amounts) due to Wylie’s Securities Pty Ltd declining to reasonably indemnify the Trustees.”

These tax returns were lodged in May 2024. If the Commissioner accepts the returns for FY22 and FY23 as lodged, the amount for which the Trustees may be personally liable is nil.
The Trustees propose to retain, for a period ending four years after the date of the lodgement of those tax returns, the sum of $2.585m in respect of their potential liability for capital gains tax (CGT) in respect of the sale of the Business. In support of this proposal, the Trustees tendered Ms To’s Advice of 10 April 2025. Ms To was responsible for dealing with the ATO on behalf of the Trustees in relation to the tax issues referred to above.
Given the claim of privilege in relation to Ms To’s Advice (see paragraph [50] above), it is sufficient for present purposes to note the following matters:

Ms To’s advice addresses two possible scenarios which arise from the correspondence with the ATO summarised above, namely:

Scenario 1: the ATO determines that a new trust was established when the Trustees were appointed and ownership of the Business passed from JR Enterprises as trustee for the Trust to the Trustees at that time; or

Scenario 2: the ATO accepts the position adopted in the current tax returns, namely, that the Trustees were appointed as trustees together with JR Enterprises as trustee for the Trust, such that the Business continued to be beneficially owned by the existing Trust.

Ms To expresses the view that, in Scenario 1, [redacted]. The worst case scenario would be if the ATO determined that the cost base was nil, meaning that the capital gain was equal to the sale price ($11m), resulting in a CGT liability of $2.585m.

Ms To expresses the view that, in Scenario 2, [redacted]. If the ATO were to adopt that view, and reassessed tax on that basis, then on a worst case scenario (which would arise only if the ATO determined that the cost base was nil) the Trustees might be personally liable for $2.585m.

Neither Jada nor Wylie’s Securities tendered a tax opinion from any other practitioner on the matters referred to in Ms To’s Advice. Jada led evidence from Mr Jaimie Ryan, who is a partner and director of VJ Ryan & Co Services Pty Ltd, the external accountants who were engaged by JR Enterprises. Mr Ryan expressed the view that there was a “relatively low risk that there may have been some error when accounting for certain expenses which had been taken into account in determining the relevant capital gain”. The Wylie Parties called Mr Brian Silvia as an accounting expert, who was asked a number of questions in cross-examination regarding the taxation issues arising in the Judicial Advice Application, but he responded that he “had not analysed” the relevant information and that he was not, and did not profess to be, “a tax expert”.
The issue which arises on the present application is whether the Trustees are justified, in circumstances where they have an (unsecured) indemnity from Jada and do not have any indemnity from Wylie’s Securities, in retaining $2.585m of funds against the [redacted] risk that they may be subject to a personal CGT liability, which could (on a worst case scenario, assuming a nil cost basis) be as high as $2.585m.
In its written submissions, Jada stated that the proposed retention was "predicated upon the correctness of Ms To’s views on questions of taxation law which, at least on the face of it, are by no means straightforward”. They submitted that there “is in fact no likelihood” that the ATO could assert that the Trustees acquired, by the Varied Appointment Orders, the Business for no cost. [redacted] However, the concern which she identifies is that [redacted] and that, in such a scenario, the ATO might raise an issue about the calculation of the cost base. In that regard, as noted above, Mr Ryan accepts that there is a low risk of a challenge to the manner in which the cost base has been calculated. Ms To does not express any view as to the amount by which the cost base would be adjusted in such a scenario but instead calculates that, as a matter of arithmetic, the highest possible CGT exposure would be an amount of $2.585m (if the cost base were revised down to nil).
It should be noted that, if (in Scenario 2) the cost base in the FY22 and FY23 tax returns as lodged was accepted without adjustment, but the Trustees were determined to be personally liable for CGT on the sale of the Business, the amount of such liability would be around $1.965m (on Ms To’s calculations). Accordingly, the effect of the cost base being decreased, by an unknown amount, would be (in Scenario 2) to increase the amount of such liability from $1.965m to an unknown figure which could be no higher than $2.585m.
Further, as the Trustees noted, in the event that the ATO asserted that any CGT was payable, the Trustees would likely incur additional expenses in dealing with any such issue. In that regard, Jada submitted that, in the event that the ATO issued an assessment to the Trustees for CGT, the Trustees “would be bound, as trustees, to object to the assessment and prosecute an appeal”.
I accept the Trustees’ submissions that there is uncertainty as to the ATO’s position in respect of the sale of the Business, given the statements previously made by the ATO regarding the proper interpretation of the Varied Appointment Orders, and in particular, given the issue raised by the ATO as to whether the appointment in respect of the sale of the Business involved an appointment as statutory trustees pursuant to s 66G of the Conveyancing Act (as was the case with the Land), or instead involved the appointment of additional trustees to the existing Trust pursuant to ss 70 and 71 of the Trustee Act.
I am also satisfied, on the basis of Ms To’s Advice, that there exists a low (but real as opposed to theoretical) risk that the ATO might adopt an interpretation of the Varied Appointment Orders which results in a personal liability of the Trustees for CGT (which, depending on any revision to the cost base, could not be higher than $2.585m).
Although I concluded that the Deed of Indemnity which has been executed by Jada provides sufficient protection for the Trustees in respect of any risk of costs being incurred in defending a claim being brought by a third party against the Trustees (in circumstances where no such claim has ever been threatened), I accept the Trustees’ submission that this indemnity, which is unsecured, does not provide sufficient protection to the Trustees in respect of any CGT liability, given the potential quantum of such liability.
In those circumstances, I have determined that the Trustees would be justified in retaining the amount of $2.585m in respect of any such liability. Although this is the amount of liability on a worst case scenario, which is unlikely to eventuate, I am satisfied that this is an appropriate amount to retain in circumstances where the Trustees could be exposed to penalties, interest and the costs of dealing with any such reassessment (which are matters in respect of which no additional sum is sought).
The Trustees would be justified in retaining this amount until the earlier of:

19 May 2028 (being four years from the date of lodgement of the FY22 and FY23 tax returns); or

the provision of a secured indemnity from the beneficiaries in respect of any such CGT liability.

Income tax liability

The Trustees propose to retain an amount of $2,967,944.70 in respect of a potential liability for income tax in relation to the Business.
This proposed retention was not referred to in the Summons filed on 2 April 2025, or in the Trustees’ written submissions in chief dated 23 April 2025. It also does not appear to have been referred to in correspondence sent to the beneficiaries’ respective solicitors shortly prior to the commencement of this proceeding, in which the Trustees’ solicitors stated that the Trustees expected “the total amount of retention funds will be not less than $4,000,000”. As set out in that correspondence, the proposed retention amount of $4m represented the aggregate of the proposed retentions in respect of potential litigation costs and CGT liability, together with the proposed retention for legal and accounting costs (which is addressed below). There was no reference to the retention of a further amount of over $2.9m in respect of potential income tax liabilities.
This additional proposed retention for any income tax liability in respect of the Business has been sought on the basis of Ms To’s Advice, which was provided to the Trustees after the commencement of the Judicial Advice Application. In particular, Ms To states that:

for the period from the Trustees’ appointment to the sale of the Business, the total gross income of the business was $6,314,775.90 (that is, ignoring the cost of sales and expenses);

the deductibility of expenses and costs of goods is ignored because the Trust’s external accountant has not verified those figures; and

based on the gross income, there is a potential tax liability of $2,967,994.70 (being 47% of the gross income).

Ms To expresses the view that, if Scenario 1 eventuates [redacted].
I am not satisfied that the Trustees would be justified in retaining $2,967,994.70 in respect of this potential income tax liability in Scenario 1. In particular, there is no evidentiary basis to conclude that there is a real (as opposed to theoretical) risk that expenses and costs of goods are overstated by any material amount in the tax returns which have been lodged. Further, to the extent that there is a (theoretical) risk that expenses and costs of goods are overstated by a material amount, there is also a (theoretical) risk that gross income is overstated. It is difficult to see that there is any sound basis for calculating the extent of any potential tax liability of the Trustees on the basis that income is accurate, but expenses and costs of goods (for a hotel business) are reduced to nil.
On the basis of the profit & loss statements attached to Ms To’s Advice, the total operating profit for the Business was (after expenses and costs of sales) $285,825 for the period from the Trustees’ appointment to 30 June 2022, and $545,012 for the period from 1 July 2022 to the sale of the Business. On the basis of a tax rate of 47%, the personal liability of the Trustees, in the event that Scenario 1 eventuates, would be some $390,493.
Given that there is a risk of Scenario 1 eventuating (which has been addressed above), I am satisfied that the Trustees would be justified in retaining this amount of $390,493 until the earlier of:

19 May 2028 (being four years from the date of lodgement of the FY22 and FY23 tax returns); or

the provision of a secured indemnity from the beneficiaries in respect of any such income tax liability.

Otherwise, the balance of the funds which were proposed to be retained for income tax liability should be distributed.

Legal and Accounting Costs of the Trustees

The Trustees propose to retain funds to cover their estimated costs of the Judicial Advice Application, and to cover their estimated future legal and accounting costs through to the end of the administration of the trust funds.
I deal separately below with the costs of the Judicial Advice Application.
So far as concerns the future legal costs of the administration of the trust, the solicitor for the Trustees, Mr Stuart, has sworn two affidavits in which he sets out the legal work which will need to be undertaken, his estimate of the time that will be spent on such tasks, and the applicable rates. He was not cross-examined on any aspect of his estimates. The total amount estimated to be required for future legal costs of the Trustees is $31,306 including GST.
So far as concerns the future accounting costs, the Trustees’ accountants, ESV, have estimated an additional amount of approximately $6,600 (including GST) for annual compliance fees.
The only submission advanced by Jada in relation to the retention of funds to cover such costs was as follows:

“As to paragraph 1(a)(ii)(3) of the summons the trustees provide no reason why they may incur any legal and accounting fees relating to the administration of the trust until 31 January 2029 when it is plain that, at least so far as Jada is concerned, its immediate entitlement as a beneficiary of that fund (being the holder of one half of the units in JR Enterprises Unit Trust and the former co-owner of the property which has been sold) to be paid its one half share is beyond legitimate contention.”

However, as set out above, I have determined that the Trustees are entitled to retain funds in excess of $3m in respect of potential litigation defence costs and potential tax liabilities. I am satisfied that it will be necessary to incur further legal and accounting costs in the administration of the trust, in circumstances where the Trustees will be retaining those funds. There is no reason to doubt the estimates of such costs which have been provided by the Trustees.

Accordingly, I am satisfied that the Trustees are justified in retaining an amount of $37,906 in respect of future legal and accounting expenses (including GST) until those expenses are paid (or otherwise until all of the retained funds have been distributed).

Investment of retained funds

The Trustees propose to deposit some or all of the retained funds into a term deposit account which will earn a higher rate of interest than the “At Call” Account in which such funds are currently held. The amount of funds transferred into a term deposit account will depend on the timing and amount of any funds required to be accessed by the Trustees (such as, for example, any requirement to access funds for defence costs in the event that a claim is brought against the Trustees).
According to the Trustees’ Statement of Facts, the current interest rates for term deposits at the National Australia Bank (being the bank at which the “At Call” Account is held) for an amount of $6.6m are in the range of 4.5%-4.65% per annum, depending on the length of the term.
In their submissions, the Trustees recognised that they have a duty to obtain income from the trust assets, and referred to ss 14 to 14DB of the Trustee Act (and, in particular, to s 14C which sets out various matters which a trustee must take into account in exercising a power of investment). Further, the Trustees stated that they were “prepared to consider any alternative proposal put forward by the Beneficiaries … as long as appropriate provisions are made for practical management and cost of such alternative investments”.
None of the beneficiaries advanced, in submissions, any criticism of the course of conduct proposed by the Trustees, or any alternative investment approach.
Instead, the only submissions advanced by Jada in respect of this aspect of the application were, first, that there was no justification for the Trustees to retain any trust funds (which I have addressed above); and, secondly, that it was a matter of concern that the Retained Funds are currently held in the “At Call” Account at an interest rate of 1.2% per annum (which is a matter that supports the Trustees’ proposal to transfer any retained funds into a term deposit account earning a higher rate of interest).
Accordingly, I am satisfied that the Trustees are justified in depositing some or all of such funds as are retained by them into, at their discretion, an interest-bearing three to six month term deposit and/or savings account.

Costs of the Judicial Advice Application

The Trustees sought an order that their costs of the Judicial Advice Application be paid out of the assets of the trust on an indemnity basis. They proposed to retain an amount of $80,999.60 including GST to cover those costs, until such time as those costs are paid. There was unchallenged evidence from Mr Stuart, solicitor for the Trustees, as to the time spent on the application and the calculation of this estimate of the total costs.
Jada submitted that no order for costs should be made in the Trustees’ favour “in view of the inutility” of the Judicial Advice Application. In that regard, Jada submitted as follows:

“As Jada’s notice of motion for leave to file its cross-claim was filed and served on 13 March 2025 (19 days before the trustees’ summons was filed) and as the cross-claim succinctly expresses the essential issues, it would have been more expedient, and far less expensive, for the trustees simply to have claimed advice as to whether or not they are justified in defending that cross-claim. Their solicitors have been requested to provide a draft defence to the cross-claim but have declined to do so. So far as can be understood, the trustees have no defence.

As noted at paragraph [48] above, the Proposed Cross Claim seeks an order that the Trustees pay $3m to Jada (being around one half of the Retained Funds).
If the Trustees had adopted the course proposed by Jada, the Trustees would have had to incur costs in seeking judicial advice as to whether they were justified in defending the Proposed Cross Claim. In seeking that advice, the Trustees would likely have raised the same issues regarding the need to retain funds for various contingent liabilities as have been raised in the present application. Accordingly, there is no basis for concluding that the costs of seeking such advice in relation to the Proposed Cross Claim would have been materially less than the costs which have been incurred in the present application.
Further, it follows from the conclusions which I have reached in respect of the present application that, if the Trustees had sought judicial advice as to whether they were justified in defending the Proposed Cross Claim, I would not have advised that there was “no defence”, but would instead have advised that the Trustees were justified in defending that claim. In such a scenario, the Trustees would have not only incurred the costs of an application for judicial advice in respect of the defence, but also would then have incurred costs of that defence. Instead, by adopting the course which the Trustees have taken, they have addressed the distribution question raised by the Proposed Cross Claim and have therefore likely saved, rather than wasted, costs.
Jada submitted that if the Trustees were awarded their costs, any such costs should be paid by Wylie’s Securities, on the basis that “but for that company’s adamant and unwarranted refusal to provide an indemnity as requested by the [Trustees] (or even to endeavour to negotiate the terms of the indemnity), [the Trustees] would have had no occasion to retain any funds following the completion of the sale on 31 January 2023 nor any reason to apply for judicial advice”.
Jada did not cross-examine either Mrs Wylie or her solicitor, and therefore did not put to them any proposition that their refusal to grant an indemnity was unreasonable. I am not satisfied that it is, as a general matter, unreasonable for a beneficiary to decline to give an indemnity which is unlimited in amount in respect of any liability incurred by a trustee, in return for the distribution of trust funds, on the basis that the trustee has a right of indemnity from those funds and the beneficiary is content for the trustee to continue to retain those funds in respect of any such liability. Jada did not refer to any particular matters, in the circumstances of this case, which made such a choice on the part of Wylie’s Securities unreasonable.
For those reasons, I am not satisfied that any basis has been established for an order that Wylie’s Securities pay the Trustees’ costs of the Judicial Advice Application.
Wylie’s Securities submitted that Jada should bear the Trustees’ costs of the Judicial Advice Application, on the basis that “it is the conduct of [Mr] Williams and Jada … which has precipitated the application” and, in particular:

“It is only since a demand was made by [Mr] Williams in November 2024 for all funds retained by the Trustees to be distributed, and the filing of the [notice of motion seeking leave to bring a] Cross Claim by [Mr] Williams and Jada, that the Trustees considered it prudent to approach the Court seeking judicial advice with respect to the retention of funds.”

In Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816, Colvin J reviewed the authorities concerning the award of costs in respect of applications for judicial advice or directions. Colvin J observed as follows (at [20]-[22]):

“… if a party’s participation is adversarial in the sense that it goes beyond that which is necessary in order to present the facts and address the issues so as to enable the court to provide advice for the purposes of the administration being conducted … then the approach to costs that applies to adversarial litigation should be applied. This is all the more so where the intervener participates to agitate a claim or position that has arisen from steps taken by the intervener.
On the other hand, if a party participates as a proper contradictor solely for the purpose of assisting the court in addressing the issues necessary to provide proper and appropriate judicial advice to the party seeking directions, then the approach to costs on applications concerning the administration of a trust, estate or fund should be applied. In such cases it is usual for all parties properly participating to be entitled to their costs on an indemnity basis paid out of the trust, estate or fund on the basis that they are costs of due administration.
Further, having regard to the views expressed by the Court of Appeal in BE Australia WD Pty Ltd v Sutton, the proper approach does not depend upon whether the issue raised is a complex one. Costs on an application for directions that raise complex matters that are dealt with in an adversarial way should be dealt with according to the principle that generally the discretion as to costs is to be exercised in favour of the successful party.”

This statement of principles has been applied in a number of subsequent decisions, including In the matter of Spitfire Corporation Limited (in liquidation) and Aspirio Pty Ltd (in liquidation) [2022] NSWSC 579 at [6] (Black J); and Morelli (liquidator), in the matter of FW Projects Pty Limited (in liq) v White Hills Pty Limited (No 2) [2024] FCA 955 at [15] (Halley J).
In the present case, the participation of Jada in the Judicial Advice Application was adversarial in nature. Unlike Wylie’s Securities, Jada advanced oral and written submissions in relation to each aspect of the advice sought by the Trustees and contended, in respect of each element of the application, that the Court should refuse to give the advice sought by the Trustees.
However, I do not consider that Jada should be ordered to pay the Trustees’ costs of the Judicial Advice Application. That is because I have accepted a number of the issues raised by Jada regarding the proposed retention of funds by the Trustees, while rejecting others. For example, I have accepted Jada’s submission that no basis had been established for retaining a sum of $1m in respect of potential litigation defence costs and a sum of around $2.9m in respect of a potential income tax liability, and have determined that the Trustees are entitled to retain much lower sums of, respectively, $150,000 and $390,493 in respect of such potential liabilities.
Where there is a mixed outcome in a proceeding, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends on matters of impression and evaluation: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA).
Having regard to the outcome in respect of the Judicial Advice Application, and the time devoted to each issue raised on that application, the appropriate orders are that the Trustees’ costs of the application be paid from the trust assets on an indemnity basis, and otherwise that there should be no order as to costs, with the intent that each of Jada and Wylie’s Securities bear their own costs of the Judicial Advice Application.
I am also satisfied that the Trustees are justified in retaining funds of $80,999.60 in respect of the costs of the Judicial Advice Application (including GST), until such time as those costs are paid.

Distribution of surplus retained funds

I have determined that the Trustees are justified in retaining total funds of $3,244,398.60, comprising:

$150,000 for any potential litigation defence costs;

$2,585,000 for any potential CGT liability in respect of the sale of the Business;

$390,493 for any potential income tax liability in respect of the Business;

$37,906 for future legal and accounting expenses (including GST) in respect of the administration of the Trust; and

$80,999.60 for the costs of the Judicial Advice Application.

It follows that the balance of the Retained Funds (namely, $3,361,871.31) should not be retained, but should be distributed by the Trustees.
I raised, at the end of the hearing, the question as to how any such distribution should be effected. Counsel for the Trustees indicated that this would not be a simple question, given that the Retained Funds represent funds from both the sale of the Land and the sale of the Business, and the Varied Appointment Orders provide for the funds from each sale to be distributed to different persons. In particular, Order 5B of the Varied Appointment Orders provides that following the determination (in accordance with Order 5A) of the amount to be retained by the Trustees:

“the trustees shall pay any balance remaining (if any):
(a) to [JR Enterprises] in such sum as represents the net proceeds of the sale of the business undertaking; and
(b) otherwise to [Wylie’s Securities] and [Jada] in equal shares.”

As noted at paragraphs [25] to [30] above, interim distributions have previously been made to JR Enterprises, Jada and Wylie’s Securities from the net proceeds of the sale of the Land and the Business. On 4 April 2023, the Trustees informed the solicitors for those parties that, following those interim distributions:

“the amounts that will continue to be retained by the trustees in respect of each trust is:
(a) as to the trust for the sale of the land, $3,307,844.56; and
(b) as to the trust for the sale of the business undertaking, $3,523,483.18.”

The majority of the sum which I have determined the Trustees would be justified in retaining relates to potential tax liabilities in respect of the Business (such liabilities accounting for some $2,975,493 of the total retained amount of $3,244,398.60).
The Trustees should confer with the Wylie’s Parties and Williams Parties and endeavour to reach agreement as to how the funds which are not retained (totalling around $3.362m) are to be distributed as between JR Enterprises, Jada and Wylie’s Securities, having regard to the terms of the Varied Appointment Orders. In the event that there is any dispute about these matters, I will give the Trustees leave to seek further advice in this proceeding regarding any such issue, and Jada and Wylie’s Securities will have an opportunity to be heard in respect of any such application.
Further, given that these reasons for judgment refer to material which is the subject of a claim for privilege by the Trustees, I will make an interim non-publication order in respect of these reasons for judgment, and will give the Trustees a short period in which to make an application for an order under the Court Suppression and Non-publication Orders Act 2010 (NSW) in respect of any such material.

Derivative Action

Relevant Facts

On 14 June 2022, the Court made the following orders, by consent, in the Wylie Proceeding (the June 2022 Orders):

Mr Williams and Jada pay compensation to JR Enterprises in the amount of $1,500,000;

Mr Williams and Jada pay the costs of Mrs Wylie and Wylie’s Securities, agreed to be $500,000; and

the proceedings be dismissed.

The June 2022 Orders were made around one month after the orders appointing the Trustees to sell the Land and the Business. However, the order that Jada and Mr Williams pay $1.5m in compensation to JR Enterprises was not expressed to be, and was not, conditional on the receipt by Jada of any part of the net proceeds from any such sale.
On 19 July 2023, Jada and Mr Williams paid the amount of $500,000 to the Wylie Parties in respect of their costs, pursuant to the June 2022 Orders. Mr Williams subsequently paid a further amount of $41,425 to the Wylie Parties, representing interest on the sum of $500,000 from the date of the June 2022 Orders until the date of payment of that sum.
In May 2024, VJ Ryan & Co prepared the following documents for JR Enterprises:

an amended tax return and amended financial statements for FY22; and

a tax return and financial statements for FY23.

These documents did not take account of the Judgment Debt (of which Mr Ryan was unaware at this time). According to these financial statements:

as at 30 June 2022:

Jada owed $2,332,332 to JR Enterprises;

Wylie’s Securities owed $2,129,596 to JR Enterprises; and

JR Enterprises owed $5,401,661 to the Crocodile Farm Property Partnership (in respect of which Jada and Wylie’s Securities were equal partners); and

as at 30 June 2023, the debit balances of Jada and Wylie’s Securities referred to in paragraph (1)(a)-(b) above had been reduced to nil, and JR Enterprises owed:

$1,607,415 to Jada;

$1,789,821 to Wylie’s Securities; and

$5,476,185 to the Crocodile Farm Property Partnership.

On 23 August 2024, the Wylie Parties’ solicitor sent a letter of demand to the solicitor for the Williams Parties. This letter referred to the June 2022 Orders and noted that Jada and Mr Williams had not complied with order 1 and that interest on the unpaid Judgment Debt was $295,838 as at 30 August 2024 and was continuing to accrue daily. The letter demanded payment of the amount of the Judgment Debt, together with the accrued interest, by 30 August 2024, failing which proceedings would be commenced seeking enforcement.
On 25 October 2024, the Wylie Parties filed their application for leave to bring the Derivative Action against the Williams Parties for enforcement of the Judgment Debt.
On 12 November 2024, Mr Ryan sent an email to the solicitors for, respectively, the Wylie Parties and the Williams Parties. Mr Ryan noted that the Further Points of Claim filed by the Wylie Parties in respect of the Derivative Action had been served on JR Enterprises. (Mr Ryan confirmed in cross-examination that it was not until around this time that he first learned of the June 2022 Orders and, in particular, the Judgment Debt.) In this email, Mr Ryan expressed the view that the matter could “be dealt with quite simply by providing instructions to [Mr Ryan’s firm] rather than through the court”. He stated as follows:

“The [Judgment Debt] could at anytime be satisfied by instructions to increase the amount owed to Wylie by $750,000 and to decrease the amount owed to Jada by $750,000. This would have an identical economic result of Jada putting $1,500,000 into [JR Enterprises] and then both Jada and [Wylie] taking $750,000 out of [JR Enterprises].
No instructions have ever been received to make such an adjustment to the respective loan accounts.
If such instructions are received a journal could be entered to reflect the adjustment to the loan accounts and upon the next payment from the trust account, the [Judgment Debt] could be satisfied by adjusting the amount paid.
Would you both be in agreement with this approach? If yes – could you please jointly provide instructions to that effect.”

The Wylie Parties’ solicitor, Mr Denina, responded on 15 November 2024 that his clients did not agree with the proposal outlined by Mr Ryan. Mr Denina noted that the debit balances of the loan accounts of Jada and Wylie Securities had been reduced to nil as part of the Trustees’ accounting for payments to JR Enterprises, and stated that:

“our client does not consent to any new loan accounts being created or for any of the funds held back by the trustees to be used for a payment to JR Enterprises at an indefinite time in the future in circumstances where the funds that have been retained by the trustees are intended to remain in situ for at least another four years and are at the trustees discretion as to payment given they have control over any remaining funds as the trustees.”

In cross-examination, Mr Ryan acknowledged that, from the time of receipt of Mr Denina’s email, he was aware that the Wylie Parties did not consent to the Judgment Debt being satisfied by the book entries which he had proposed.
On 20 December 2024, I granted leave to the Wylie Parties to bring the Derivative Action.
On 5 February 2025, the solicitor for the Williams Parties, Mr Horton, sent an email to Mr Ryan. In this email, Mr Horton referred to the Judgment Debt and made the following request:

Were Mr Ryan’s adjustments made with the consent of JR Enterprises?

Mr Ryan recognised in his email of 12 November 2024 that, in order for the Judgment Debt to be “satisfied” by the making of such entries in the FY22 accounts of JR Enterprises, he required “instructions” to this effect. He also noted that “[n]o instructions have ever been received to make such an adjustment” and asked the solicitors for the Wylie Parties and the solicitors for the Williams Parties whether they were “both … in agreement with this approach” and requested that, if so, they “jointly provide instructions to that effect” (see paragraph [153] above).
Mr Ryan did not receive any such joint instructions. Instead, the solicitor for the Wylie Parties told Mr Ryan that there was no agreement to any such adjustment being made. However, Mr Ryan was subsequently instructed by the solicitor for the Williams Parties to make the adjustments and proceeded on this basis.
The Wylie Parties disputed that Mr Williams had any authority to give such instructions on behalf of JR Enterprises, in circumstances where there was a deadlock between the two directors of JR Enterprises (Mrs Wylie and Mr Williams) and between the two entities which were equal shareholders in JR Enterprises and equal unitholders in the Trust (Wylie’s Securities and Jada), and where the Wylie Parties had expressly stated that they did not agree with any such adjustment to the accounts of JR Enterprises.
Senior Counsel for the Williams Parties submitted, in closing address, that there was “tacit” agreement to the entries made by Mr Ryan:

“[SENIOR COUNSEL FOR WILLIAMS PARTIES]: Now, I've recorded the passages in Mr Silvia's report where he acknowledges that the journal entries could have been made and so forth.
HIS HONOUR: When he says they could have been made, he said they could have been made with [the consent or] agreement [of] JR.
[SENIOR COUNSEL FOR WILLIAMS PARTIES]:: Yes, indeed.
HIS HONOUR: How was that agreement given?
[SENIOR COUNSEL FOR WILLIAMS PARTIES]: The agreement was a tacit [agreement] that was given at the outset of the trust and subsisted throughout it.
HIS HONOUR: No. He says that you could in effect accept payment of a debt due from Jada and Mr Williams jointly and severally by substituting it for an increased debt due from Jada but he says that would require the agreement of the creditor.
[SENIOR COUNSEL FOR WILLIAMS PARTIES]: Well, from the creditor's viewpoint it doesn't really matter which debtor pays it. If the debt's paid the debt's paid. If one of the debtors’ volunteers to pay it in full and the creditor accepts that, that's the end of the matter with respect.
So I need say no more about that.”

In contending for the existence of this “tacit agreement” in closing written submissions, the Williams Parties referred to evidence of Mr Ryan in his March 2025 affidavit to the effect that since the commencement of his involvement with JR Enterprises, “unitholders have regularly received (in a variety of different forms) amounts of cash or other financial benefit which amounts have been debited to its unitholder’s account” and “the balance of monies owing from time to time to [JR Enterprises] by any unitholder has unevenly increased and has always been reduced on an annual basis by that unitholder’s share of distributable income of the Trust”.
I do not accept the Williams Parties’ submission that any such practice in the period up to June 2022 supports a conclusion that there was some “tacit agreement” supporting the adjustment made by Mr Ryan to the balance of Jada’s loan account as at 30 June 2022, for the following reasons:

First, whereas any amount debited to Jada’s loan account over the years of the operation of the Business represented an amount which Jada alone was liable to repay and which was interest-free, the Judgment Debt was an amount which both Jada and Mr Williams were liable to repay, and was a liability in respect of which interest was accruing pursuant to the Civil Procedure Act.

Secondly, I am not satisfied that any such “tacit” agreement subsisted as at June 2022, in circumstances where:

the relationship between the directors of the Trust (and between the two unitholders in the Trust) had irretrievably broken down;

the Wylie Parties had brought proceedings against the Williams Parties alleging, inter alia, that Mr Williams had misappropriated funds from the Trust and had improperly “sought to cause [Mr Ryan’s firm] to record some of such funds as shareholder/unitholder loans”; and

the Trustees had been appointed in May 2022 to sell the Trust’s business and distribute the net proceeds.

Thirdly, whatever the position as at June 2022, there was, as at February 2025, plainly no “tacit agreement” on the part of the Wylie Parties to the Judgment Debt being debited to Jada’s loan account, given that, according to Mr Ryan, the Wylie Parties’ solicitor had “specifically stated to [Mr Ryan] that [the Wylie Parties] ‘do not authorise any adjustments to be made to the accounts of the company’ to give effect to the order”.

As noted above, Mr Woods expressed the view in his report, based on an affidavit of Mr Williams of 9 April 2025, that Mr Williams had authority to give instructions on behalf of JR Enterprises to make the adjustments which were made by Mr Ryan. In particular, Mr Williams deposed as follows:

“2   I refer to paragraph 86 of the [Silvia] Report, which states that Mr [Silvia] has not been provided with documents evidencing any delegation of authority to me permitting me to act on behalf of JR Enterprises Unit Trust without the concurrence of Joy Wylie.
3.   I have, since the establishment of the trust in or about 1995, at all material times, been the sole executive director of [JR Enterprises]. In that capacity I have acted continuously in the concurrent roles of General Manager, Licensee, and Managing Director of [JR Enterprises].
4.   In performing such roles I have done all acts and things on behalf of the board, [JR Enterprises] and the hotel business of [JR Enterprises], which were necessary from time to time to conduct and manage the direction and business of the board and [JR Enterprises].
5.   In that capacity I executed almost all documents and agreements on behalf of [JR Enterprises], attended to all requirements of directors or requests for payment to them or to their unitholders, attended to all payments to any third party, including but not limited to, the payment of gaming tax, execution of BAS statements and payment of GST and managed the relationship between [JR Enterprises] and all third parties, including, all suppliers, all contractors, all employees, [JR Enterprises] bankers, the Australian Hotels Association, the gaming authorities, Council, any relevant government department, solicitors and other legal advisers to [JR Enterprises] and [JR Enterprises’] accountants including all instructions to any of those third parties on behalf of the board or [JR Enterprises].
…
8.   By necessity, I continued in this role up to and after the completion of the sale of the business of [JR Enterprises] on 31 January 2023.
…
11.   Joy Wylie has refused to attend any meeting of the board of [JR Enterprises] since Friday 5 March 2021, therefore since that time I have continued in my role, to do the things which were required to be done on behalf of [JR Enterprises].”

Although Mr Williams stated that he was “sole executive director” of JR Enterprises, there were, at all relevant times, two directors of that company (Mrs Wylie and Mr Williams). Whatever may have been the position regarding the operation of the Business in the period up until its sale on 31 January 2023, Mr Williams has not identified any basis on which he had, after that date, any authority to give instructions on behalf of JR Enterprises to make adjustments to its accounts, particularly in circumstances where there was a irretrievable breakdown in his relationship with Mrs Wylie and he knew that Mrs Wylie did not, as a matter of fact, agree with or authorise such adjustments.
Further, it is difficult to see how Mr Williams could, in February 2025, exercise any power which he had as a director of a corporate trustee to make an adjustment to its books and records, which purportedly had the effect of:

discharging, as at 30 June 2022, an interest-bearing liability owed by himself and Jada to the Trust (in respect of which interest of more than $350,000 had accrued as at February 2025); and

replacing it with an interest-free liability owed solely by Jada.

Any such adjustment was one in respect of which Mr Williams plainly had a conflict, given that Mr Williams himself contends that the making of this adjustment would have resulted in the discharge of any obligation which had (or would have) otherwise accrued in respect of interest on the Judgment Debt from 30 June 2022 onwards. Such a result would have been to the financial advantage of Mr Williams and to the detriment of the Trust and of its 50% unitholder, Wylie’s Securities.
For those reasons, I am not satisfied that the adjustments which Mr Ryan purported to make in February 2025 to JR Enterprises’ books and records as at 30 June 2022 (and, in particular, the debiting of the Judgment Debt to the balance of Jada’s loan account as at 30 June 2022) were in fact made on the instructions of, or with the consent of, JR Enterprises.

Are Mr Ryan’s adjustments ones which “should have been made”?

Having regard to the expert accounting evidence, I am satisfied that two of the adjustments which Mr Ryan purported to make to the accounts of JR Enterprises should have been made as at 30 June 2022, namely:

the recognition of additional income of $1.5m in the FY22 accounts, by reason that the liability to pay the Judgment Debt to JR Enterprises arose before 30 June 2022; and

the distribution of this additional income equally to Jada and Wylie’s Securities in FY22.

However, although those entries should have been made on the “credit” side, I do not accept Jada’s contention that the appropriate entry on the “debit” side was to add the amount of $1.5m to the debit balance of Jada’s loan account. As I have addressed above, such an entry would have been to the detriment of the Trust, and to the prejudice of Wylie’s Securities, since it would have involved the substitution of an interest-bearing liability of both Jada and Mr Williams with an interest-free liability of Jada alone. Accordingly, such an entry could only be made with the agreement of JR Enterprises and Wylie’s Securities, which was not given.
Instead, I accept Mr Silvia’s evidence that the appropriate entry on the “debit” side was “Receivable due from Willaims and Jada Investments” in the amount of $1.5m, which should have been recognised as a current asset in the FY22 accounts.
Senior Counsel for the Williams Parties suggested that Mr Silvia “went away from that [position] in cross-examination”. However, none of the passages of cross-examination to which reference was made in closing address supported that submission. In particular, reference was made to a passage of transcript in which Mr Silvia acknowledged that clause 9.1.3 of the Trust Deed had “no operation” in relation to the issue before the Court. The Williams Parties submitted that: “there’s no evidence … that the trustee by its directors resolved to establish a separate loan account under clause 9.1.3 so that issue can be put to one side”.
However, clause 9.1.3 does not contain any provision to the effect that an amount owing to the Trust from two persons cannot be recognised as such in the accounts of JR Enterprises unless its directors resolve to establish “a separate loan account” in respect of that liability. Instead, clause 9.1.3 provides as follows:

“The Trustees may determine to use the moneys or assets in a separate trust fund in any business or partnership or joint venture of the Trustees or in the acquisition of any asset of the Trust Fund or in the reduction of any liability of the Trustees in respect of the Trust Fund incurred by the Trustees as trustee of this Trust. In that event the moneys or assets shall be treated as if they were an unsecured loan (repayable on demand without interest) from the separate trust fund to the Trustees of this Trust upon terms that the Trustees are only liable to repay the same out of assets of the Trust Fund in their possession or control.”

Conclusion

For the reasons given above, I am not satisfied either that Mr Ryan had authority to make the entries in JR Enterprises’ accounts which he has purported to make, or that those entries (and in particular, the entry made on the “debit” side) should have been made, since this would have involved retrospectively discharging a liability in respect of which substantial interest had accrued as at February 2025, and replacing it with an interest-free liability as at 30 June 2022.
Accordingly, I have determined that:

Jada and Mr Williams have not discharged their obligation to pay the Judgment Debt or to pay any interest thereon by reason of the accounting entries pleaded in their Amended Defence; and

Jada and Mr Williams continue to remain liable to pay the Judgment Debt to JR Enterprises, together with interest thereon from 14 June 2022 to the date of payment.

Derivative Action: next steps

The Plaintiffs have been wholly successful in the Derivative Action. There is no reason why costs should not follow the event. If there is any dispute as to the form of the costs order, I will give the parties an opportunity to make submissions on that issue.
The Plaintiffs are entitled to an order that Jada and Mr Williams pay interest to JR Enterprises on the Judgment Debt pursuant to s 101 of the Civil Procedure Act from 14 June 2022 to the date of payment. The quantum of such interest will need to be calculated.
The Plaintiffs are also entitled to orders for enforcement of the Judgment Debt.
The Plaintiffs seek, in the Summons, leave to issue a writ of possession against a property registered in the name of Mr Williams (which I understand to be his family home) and also an order for the winding-up of Jada. The total amount owing to the Plaintiffs, as at the date of the Summons, is claimed to be around $1.872m.
In circumstances where I have determined that the Trustees should distribute around $3.362m of the Retained Funds, I will give the parties an opportunity to make submissions on the form of orders which should be made in respect of the Derivative Action regarding the enforcement of the Judgment Debt and interest thereon, including whether such orders should be stayed until some period after the distribution of any such funds by the Trustees. In that regard, I note that Mr Williams deposed in his affidavit of 29 November 2024, that on the distribution of those monies which have been retained by the Trustees he “will immediately pay any balance due by Jada to [JR Enterprises]”.
Finally, in light of the findings made in respect of the Judicial Advice Application, there is no remaining utility in Jada’s application for leave to bring the Proposed Cross Claim in the Wylie Proceeding, and this application should be dismissed. For reasons given above when dealing with the costs of the Judicial Advice Application, there should likewise be no order as to the costs of this application.

ORDERS

For the reasons set out above, I make the following orders.
In proceeding 2025/136362, the Court:

Orders pursuant to s 63 of the Trustee Act 1925 (NSW) that the Plaintiffs would be justified in retaining from distribution to the beneficiaries:

the sum of $150,000 on account of potential litigation defence costs in respect of claims against the Plaintiffs in relation to the sale of the land described in certificate of title folio identifier 2/519591 (Land), or the sale of the business undertaking of the hotel known as the Crocodile Farm Hotel (including all assets tangible and intangible in connection therewith) conducted upon the land by JR Enterprises Pty Ltd (Business), or the administration of the trust assets, until the earlier of:

31 January 2029; or

the provision of a release by each of Jada Investments Pty Ltd and Wylie’s Securities Pty Ltd in respect of such claims against the Plaintiffs;

the sum of $2,585,000 in respect of any potential capital gains tax liability of the Plaintiffs in relation to the sale of the Business, until the earlier of:

19 May 2028; or

the provision of a secured indemnity from the beneficiaries in respect of any such liability;

the sum of $390,493 in respect of any potential income tax liability of the Plaintiffs in relation to the Business, until the earlier of:

19 May 2028; or

the provision of a secured indemnity from the beneficiaries in respect of any such liability;

the sum of $37,906 in respect of future legal and accounting expenses (including GST) in relation to the administration of the Trust, until such expenses have been paid (or otherwise until all of the funds presently retained by the Plaintiffs have been distributed);

$80,999.60 in respect of the Plaintiffs’ costs (including GST) of this proceeding, until the payment of such costs.

Orders pursuant to s 63 of the Trustee Act 1925 (NSW) that the Plaintiffs would be justified, during the period that funds are retained by them in accordance with Order 1(a)-(e) above, in depositing some or all of the retained funds, at their discretion, into an interest-bearing three to six month term deposit and/or savings account.

Orders that the Plaintiffs’ costs of this proceeding be paid out of the assets of the trust on an indemnity basis, and that there otherwise be no order as to costs, with the intent that each of Jada Investments Pty Ltd and Wylie’s Securities Pty Ltd bear their own costs of the Plaintiffs’ application.

Orders, pursuant to s 10 of the Court Suppression and Non-publication Orders Act 2010 (NSW), that these reasons for judgment not be published to any persons other than the Plaintiffs, Jada Investments Pty Ltd, Wylie’s Securities Pty Ltd and their respective solicitors, until 5.00pm on 22 May 2025.

Directs that the Plaintiffs file any application for a non-publication order pursuant to s 7 of the Court Suppression and Non-publication Orders Act 2010 (NSW) in respect of any part of these reasons for judgment before 5.00pm on 22 May 2025, identifying the specific paragraphs (or parts thereof) in respect of which such an order is sought, together with a submission limited to three pages, such application to be determined on the papers.

Directs that the Plaintiffs confer with Jada Investments Pty Ltd and Wylie’s Securities regarding the timing and manner of the distribution of the balance of the funds totalling $3,361,871.31 which are presently retained by the Plaintiffs and, in the event that there is a dispute about those matters:

the Plaintiffs file any Interlocutory Process seeking advice in relation to those matters by 2 June 2025, together with any supporting evidence; and

the matter be listed for directions before Nixon J on 6 June 2025 at 9.15am.

In proceeding 2020/00304314, the Court:

Directs that the parties provide to the Associate to Nixon J by 5:00pm on 2 June 2025, proposed orders to give effect to these reasons for judgment, including dealing with interest and costs.

Directs that, in the event that the parties are unable to agree on proposed orders to give effect to these reasons for judgment, including in respect of interest or costs, the parties exchange, and provide to the Associate to Nixon J by 5:00pm on 2 June 2025, the orders which each party proposes, together with submissions (limited to 5 pages) on those orders, indicating whether, and if so why, an oral hearing is requested to deal with any matters in dispute.

**********

ADDENDUM

Following delivery of the judgment on 19 May 2025, an application was made pursuant to Order (5) in the 2025/136362 Proceeding which is set out above. On 22 May 2025, an order was made pursuant to s 7 of the Court Suppression and Non-publication Orders Act 2010 (NSW), on the ground that such order is necessary to prevent prejudice to the proper administration of justice, that the parts of the reasons for judgment which are marked as “[redacted]” above (which disclose the substance of legal advice provided to the Trustees) are not to be published or disclosed to any persons, other than the parties, their legal representatives or the Court, until 31 January 2029 or further order of the Court.

Decision last updated: 22 May 2025

Medium Neutral Citation:	In the matter of JR Enterprises Pty Ltd as trustee for the JR Enterprises Unit Trust (No 2); Application by John Anthony Musca and Andrew Jolliffe [2025] NSWSC 491
Hearing dates:	30 April, 6 May 2025
Date of orders:	19 May 2025
Decision date:	19 May 2025
Jurisdiction:	Equity - Corporations List
Before:	Nixon J
Decision:	See [218]-[219]
Catchwords:	CORPORATIONS – action for enforcement of judgment debt owed to a corporate trustee by a director of the company and by the unitholder which he controls – whether liability has been discharged by reason of entries which were alleged to have been made to the unitholder’s loan account of the company as at 30 June 2022 following instructions given by the director in February 2025 EQUITY – trusts and trustees – court-appointed trustees for sale sought advice and directions regarding the retention of sums from net proceeds of sale – whether trustees are justified in retaining sums proposed by them in respect of various contingent liabilities
Legislation Cited:	Civil Procedure Act 2005 (NSW) s 101 Conveyancing Act 1919 (NSW) s 66G Court Suppression and Non-publication Orders Act 2010 (NSW) ss 7, 10 Trustee Act 1925 (NSW) ss 14-14DB, 70, 71, 79, 85, 100A
Cases Cited:	BostikAustralia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4 Equititrust Ltd (in liq) (rec apptd) (recs and mgrsapptd) v Equititrust Ltd (in liq) (rec apptd) (recs and mgrsapptd) (No 4) [2017] FCA 1133 Hardoon v Belilios [1901] AC 118 In the matter of Double Bay Property Management Pty Ltd (in liq) [2021] NSWSC 996 In the matter of Fellman Pty Ltd (in liq) [2022] NSWSC 1038 In the matter of JR Enterprises Pty Ltd atf the JR Enterprises Unit Trust [2024] NSWSC 1671 Macedonian Orthodox Community Church St Petka Inc above; Re Estate Late Chow Cho-Poon; Applifcation for judicial advice [2013] NSWSC 844 Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 Morelli (liquidator), in the matter of FW Projects Pty Limited (in liq) v White Hills Pty Limited (No 2) [2024] FCA 955 Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816 Spitfire Corporation Limited (in liquidation) and Aspirio Pty Ltd (in liquidation) [2022] NSWSC 579
Category:	Principal judgment
Parties:	Proceeding 2020/00304314 Joy Rosalind Wylie (First Plaintiff) Wylie’s Securities Pty Ltd (Second Plaintiff) Jeffrey Ronald Williams (First Defendant) JR Enterprises Pty Ltd atf the JR Enterprises Unit Trust (Second Defendant) Jada Investments Pty Ltd (Third Defendant) Proceeding 2025/00136362 John Anthony Musca (First Plaintiff) Andrew Jolliffe (Second Plaintiff)
Representation:	Counsel: Proceeding 2020/00304314 S J Philips / J Charlton (Plaintiffs) D E Grieve KC (Defendants) Proceeding 2025/00136362 H Mann (Plaintiffs) Solicitors: Proceeding 2020/00304314 Denina Legal (Plaintiffs) RBHM Commercial Lawyers (Defendants) Proceeding 2025/00136362 Bartier Perry Lawyers (Plaintiffs)
File Number(s):	2020/00304314 2025/00136362
Publication restriction:	Nil