In the matter of the Daquino Family Trust

[2009] NSWSC 846

CITATION:	Lenyco Pty Ltd; In the matter of the Daquino Family Trust [2009] NSWSC 846
HEARING DATE(S):	30 July 2009
JURISDICTION:	Equity Division Duty Judge List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	30 July 2009
DECISION:	Order that the applicant would be justified in doing all things necessary or reasonably incidental to conduct the defence of proceedings 2090/09.
CATCHWORDS:	TRUSTS AND TRUSTEES – Judicial Advice – Application by trustee for judicial advice as to whether it would be justified in defending proceedings – where counsel’s advice on prospects of success tendered – where draft defence to amended Statement of Claim tendered – Where plaintiff in substantive proceeding seeks direction that applicant provide all documentation supplied to Court in support of application – making an order for discovery of such material not an appropriate condition for grant of judicial advice – Held: Applicant would be justified in doing all things necessary or reasonably incidental to conduct the defence of proceedings in relation to all defences raised by it set out in the draft defence to be filed in those proceedings and on such other basis as it may be advised from time to time up to and including the setting down of the substantive proceedings for hearing
LEGISLATION CITED:	(NSW) Trustee Act 1925 s 63
CATEGORY:	Consequential orders
PARTIES:	Lenyco Pty Ltd (applicant)
FILE NUMBER(S):	SC 2322/09
COUNSEL:	Ms T L Wong (applicant) Mr C P Locke (plaintiff in 2090/09)
SOLICITORS:	Thomson Playford Cutlers (applicant) Argyle Lawyers (plaintiffs in 2090/09)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Thursday 30 July 2009

2322/09 Lenyco Pty Ltd; In the matter of the Daquino Family Trust

JUDGMENT (ex tempore)

1 HIS HONOUR: On 28 April 2009, I made an order that the plaintiff Lenyco Pty Ltd would be justified in doing all things necessary or reasonably incidental to conduct the defence of the substantive proceedings 2090/09, in which it is the first defendant, on certain bases outlined in a letter from its solicitors Argyle Lawyers dated 3 April 2009, and on such other bases as it may be advised from time to time. I adjourned the proceedings for further hearing on 12 June 2009. I expressed the view that Lenyco would not be justified in funding the defence of the other defendants out of the trust assets, though to the extent that the other defendants were beneficiaries of the trust, it was a matter for them as to how they might apply the proceeds of any distributions made to them from the trust.

2 On 12 June 2009, by consent of Lenyco as applicant, the plaintiffs in the substantive proceedings and the fourth defendant in the substantive proceedings, I adjourned the present proceedings, being Lenyco’s application for judicial advice, to today, for further consideration. When the preliminary advice was given pursuant to (NSW) Trustee Act 1925, s 63, on 28 April 2009, the substantive proceedings were, as the judgment of that day records, in an incipient state. There was not yet even a draft defence, and there was no advice of counsel as to Lenyco’s prospects of successfully defending the proceedings – although, in the letter to which I have referred, Lenyco’s solicitors had outlined proposed defences, which at that stage did not appear unarguable. Since then, the plaintiffs in the substantive proceedings have amended their Statement of Claim to claim additional relief, and a draft defence to that Amended Statement of Claim has been prepared and is Exhibit PX03 on this application.

3 Comprehensive advices have been obtained by Lenyco from Mr Justin Gleeson SC and Ms Wong of Counsel. The first of those advices, which was furnished before the amendment of the Statement of Claim in the substantive proceedings, concluded that Lenyco had good prospects of resisting each of the plaintiff’s claims based on instructions received to date, but without the benefit of access to discovered documents or affidavit evidence, which it was acknowledged may make it necessary for the prospects to be reconsidered once the matter was ready for final hearing. The Supplementary Memorandum of Advice addresses the additional claims raised by the Amended Statement of Claim. In it, Counsel express the opinion that Lenyco continues to have good prospects of resisting the allegations in the Amended Statement of Claim, but again add that it may be necessary for the prospects to be reconsidered once the matter is ready for final hearing.

4 Lenyco now seeks an order, by way of advice pursuant to Trustee Act, s 63, that it would be justified in doing all things necessary or reasonably incidental to conduct the defence of the substantive proceedings in relation to all questions raised by it set out in the defence filed in the substantive proceedings and on such other bases as it may be advised from time to time.

5 As no defence has yet been filed in the substantive proceedings, I would, in any event, amend the draft order by inserting before the word “defence” in the third line, the word “draft”; after the word “defence”, the words “to be”; and after “the proceedings” in the fourth line, the matter “a copy of which is PX03 herein,”.

6 Section 63 makes clear that it is not necessary – unless the Court otherwise orders, or the Rules otherwise provide – that notice of an application for judicial advice be given to any person other than the trustee. Nonetheless, the plaintiffs in the substantive proceedings, who are some but not all of the potential beneficiaries of the trust of which Lenyco is the trustee, have been notified of the application.

7 The substantive plaintiffs submit that no advice should authorise Lenyco to apply trust property towards the conduct of the defence of the substantive proceedings on behalf of the parties to the proceedings other than itself in its capacity as trustee. I indicated, in the judgment of 28 April 2009, that at that stage I was inclined to accede to that view. I see no reason to depart from it, and it has not been suggested on behalf of Lenyco that I should do so now.

8 The substantive plaintiffs also seek a direction that Lenyco provide to them all documentation supplied to the Court in support of the s 63 application – including the advice of counsel to which I have referred, and various draft statements and summaries of evidence which are referred to in a letter of 10 June 2009 from Argyle Lawyers to Thomas Clayton Cutler. Essentially, this is an endeavour to discover the case which the trustee will put forward in the substantive proceedings, and the evidence which it will adduce, not by application for discovery or similar process in the substantive proceedings, but by seeking to attach it as a condition to the grant of judicial advice. Prima facie, those documents are privileged. It is not the function of an application for judicial advice, particularly one where a trustee who is sued in other proceedings seeks advice as to whether it would be justified in defending those proceedings – to give the trustee’s opponents in the substantive proceedings an opportunity to have a preliminary view and form a preliminary assessment of the trustee’s case in defending them, let alone to access the trustee’s privileged documents. If the substantive plaintiffs are entitled to discover the trustee’s documents, they can make such an application in the substantive proceedings. I do not consider that making discovery of such material a condition of the grant of judicial advice is an appropriate course.

9 Even more so, it would be inappropriate to attach as a condition to the grant of judicial advice, as the substantive plaintiffs proposed, a requirement for discovery of dealings between the trustee and Mr Thurecht, a former director and shareholder of the trustee, which have no apparent connection with the case put forward by the plaintiffs in the substantive proceedings or the matters the subject of the application for judicial advice.

10 Accordingly I will not impose any of the conditions proposed by the substantive plaintiffs. However, having regard to the qualification attached by counsel to their advices, the appropriate course is to give the advice sought, but to limit it to the setting down of the principal proceedings for hearing, with a view to the matter being reviewed, as counsel suggested might be necessary, at that time, before undertaking the costs of final preparation for the hearing and embarking on the hearing itself.

11 Pursuant to Trustee Act, s 63, I order that the plaintiff Lenyco Pty Limited would be justified in doing all things necessary or reasonably incidental to conduct the defence of proceedings 2090/09 in which it is the first defendant in relation to all defences raised by it set out in the draft defence to be filed in those proceedings, a copy of which is PX03 herein, and on such other bases as it may be advised from time to time, up to and including the setting down of the substantive proceedings for hearing. I reserve liberty to apply on three days notice.

**********