In the matter of the George Hardi Family Trust
[2021] NSWSC 1584
•26 November 2021
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of the George Hardi Family Trust [2021] NSWSC 1584 Hearing dates: 26 November 2021 Date of orders: 26 November 2021 Decision date: 26 November 2021 Jurisdiction: Equity - Expedition List Before: Sackar J Decision: See [29]-[30]
Catchwords: EQUITY — Trusts and trustees — Judicial advice — Rectification of trust deed — subjective intention of the party to the document and the person or persons behind it
Legislation Cited: Perpetuities Act 1984 (NSW)
Cases Cited: Colquhoun v Dronpane Pty Ltd & Ors [2011] NSWSC 1500
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 14 NSWLR 329
Kent v Brown (1942) 43 SR (NSW) 124
Kirkham as Trustee of the Kirkham Family Trust [2010] WASC 106
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
Public Trustee v Smith [2008] NSWSC 397; (2008) 1 ASTLR 488
Re Butlin’s Settlement Trusts [1976] Ch 251
Sanwick Pty Limited v Kalyk [2016] NSWSC 100
Texts Cited: Heydon DJ, Leeming MJ and Turner PG, Meagher, Gummow and Lehane’s Equity – Doctrines & Remedies, 5th ed., LexisNexis, 2015
Category: Principal judgment Parties: Budumu Pty Ltd (A.C.N. 001 216 397) (plaintiff) Representation: Counsel:
Solicitors:
D Barlin
Stacks Champion
File Number(s): 2020/353678 Publication restriction: n/a
Judgment
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Budumu Pty Ltd (“Budumu”) holds the position of trustee of the George Hardi Family Trust (“the Trust Estate”). The terms of the trust are contained in a trust deed dated 11 April 1974 and made between Leo Hardi (as settlor) and the Trustee as trustee.
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The Plaintiff filed a summons on 14 December 2020 seeking five prayers for relief. Four of these have been dealt with (see Budumu Pty Ltd (ACN 001 216 397) [2021] NSWSC 522) leaving the fifth which seeks to have the Trust Deed rectified. In particular there is sought a rectification of the “vesting day” as contained in paragraph 1(c) of the Trust Deed by deleting the words “…the period of fifty years after the execution of this settlement or…”, as well as the words “…whichever shall be shorter…”
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If provided, the effect of the order rectifying the Trust Deed would be to have the Royal lineage provision apply. It is unclear on the evidence why the 50 year period was chosen, along with the Royal lineage provision.
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The Trust Estate was established on 11 April 1974 which date was prior to the application of the Perpetuities Act 1984 (NSW) which applied from 31 October 1984. As a result the 80 year perpetuities period does not apply to the Trust Estate and the Trust Estate is subject to the general law perpetuities period of a life in being plus 21 years which is satisfied by the Royal lineage position.
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The Trustee relies upon two affidavits. One of Tobor Louis Varnay (19 October 2020) together with exhibits and that of Geoffrey Mark Robertson (13 August 2021).
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There is no Contradictor to the relief sought.
The Legal Principles:
Rectification of the Deed – the relevant test
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The Court may rectify a document in which the party (or parties) have mistakenly expressed their intention. It is the rectification of a document, and not the reformulation of an agreement that is expressed in a document (Heydon DJ, Leeming MJ and Turner PG, Meagher, Gummow and Lehane’s Equity – Doctrines & Remedies, 5th ed., LexisNexis, 2015) (“Meagher, Gummow and Lehane”) at [27-010].
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The Trust Deed is a deed. Rectification may be obtained in relation to a deed (including a deed poll) (Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 14 NSWLR 329 (per Mahoney AP, Sheller JA and McLelland AJA) (“Carlenka”).
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Maloney AP in Carlenka at 331A considered that rectification requires the Court being satisfied of two things, being that:
The party (for a unilateral transaction) or parties (in the case of transactions between parties) had at all relevant times an intention which was to be given effect by the document to be rectified; and
That document does not give effect to that intention.
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McLelland AJA at 345B-C in Carlenka considered that rectification of an instrument is available where clear and convincing evidence establishes that at the time of the execution of the instrument, the parties had an actual intention as to the effect of the instrument. However, the intended effect does not include the legal or factual consequences of the operation of the instrument which is more remote, or collateral (being an effect to which the party had not necessarily turned its mind).
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In Sanwick Pty Limited v Kalyk [2016] NSWSC 100 (“Sanwick”) Justice Stevenson rectified an inter vivos voluntary inter-party trust deed, where the evidence indicated that the intent of the “real” settlor (and not the nominal settlor) differed from the express terms of the trust deed.
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Mason J in Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350 observes of the test in relation to rectification:
What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a first insistence on the requirement that the mistake as to the writing must be common to the parties and not merely unilateral, except in cases of a special class.
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Stevenson J at [16] in Sanwick observed of the “special class” referred to by Mason J as follows:
An example of the “special class” to which Mason J referred is a voluntary settlement creating a trust where the settlor has no independent intention as to how the trust is to operate and who acts on the instruction of, or at the request of the proposed trustee; or, as here, the person who in substance stands behind the trustee.
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White J (as his Honour then was) in Public Trustee v Smith [2008] NSWSC 397:
… For the trust deed to be rectified there must be clear and convincing evidence that at the time the trust deed was executed the trustee and the settlor had an actual intention as to the effect which the deed was intended to create which was different from the effect which the instrument did have in a clearly identified way (Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345). It must be demonstrated with clarity that the parties had a sufficiently precise intention that the court can determine both the substance and the detail of the precise variation to be made to the wording of the instrument (Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 at 407; Muriti v Prendergast [2005] NSWSC 281 at [137]).
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The plaintiff submitted it is the subjective intent of Hardi that is relevant. Furthermore, it is contended that the subjective intent is the same as that of the Trustee.
Rectification of deeds that evidence a voluntary settlement – intent of the person providing the instructions
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The Trust Deed evidences a voluntary settlement.
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4.2 Equity may rectify deeds (see for example Carlenka), including those which evidence a voluntary settlement (Brightman J in Re Butlin’s Settlement Trusts [1976] Ch 251 (“Butlin’s Settlement”), Roper J in Kent v Brown (1942) 43 SR (NSW) 124 (“Kent v Brown”), Sanwick, Public Trustee v Smith and Meagher, Gummow & Lehane at [27-145].
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As discussed above, rectification requires an assessment of the subjective (i.e. actual) intention of the party (or parties) to the document, and the person behind the arrangement (i.e. Hardi and possibly Stephen, who would have caused the instructions for the drafting of the Trust Deed to have been provided to any solicitor).
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In the case of a voluntary settlement, which has been established without any active bargain, the question as to whose intention is relevant as to rectification depends on the circumstances and the substance of the matter.
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Where the settlor has the active and operative intention as a matter of fact, as to the terms of the trust which is declared, then the question is one of the settlor’s intention (see Brightman J in Butlin’s Settlement at 262F – 263B and Roper J in Kent v Brown at 128).
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In other cases, it may be the trustee whose intention is relevant to the terms of the trust (Sheller JA in Carlenka at 344-5).
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However, there is a further category of case, to which the present case includes, where there is another party (apart from the trustee), and whom the trustee (initially at least) instructs. In such circumstances, it is the intention of the Trustee (via Hardi) that is relevant (see for example White J in Public Trustee v Smith [2008] NSWSC 397; (2008) 1 ASTLR 488 at [13] and [71] to [73], Martin CJ in Kirkham as Trustee of the Kirkham Family Trust [2010] WASC 106 at [8] to [10] and White J in Colquhoun v Dronpane Pty Ltd & Ors [2011] NSWSC 1500 at [15]).
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The evidence outlined indicates that the words “…the period of fifty years after the execution of this settlement or…” should not have been included in the definition of “the vesting day” contained in paragraph 1(c) of the Trust Deed.
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That is, the subjective intent has not been properly reflected in paragraph 1(c) of the Trust Deed, and in particular the inclusion of the words “… the period of fifty years after the execution of this settlement or …” in the definition of “the vesting day”. Those words therefore ought to be deleted via an order rectifying the Trust Deed.
Consideration:
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In my view on the available evidence there is ample support for the proposition that on Hardi’s understanding the Trust Estate would last forever.
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The Varnay affidavit deposes to the standard practice of the firm and that in his experience the trust deeds routinely drafted within the practice contained the Royal lineage clause which provided that the trust would last as long as there were descendants of King George V are alive.
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Varnay also deposes to a discussion with Hardi not long after Varnay took over Hardi’s accountancy work where the structure was discussed. In those conversations the question of keeping the assets in the family forever was referenced. I find that evidence entirely plausible and the very type of conversation a professional would have.
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Further support for that evidence is I am satisfied to be found in Hardi’s will, in particular clause 14.
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On the basis of the evidence which I am satisfied is the best evidence available I am of the view that the requisite subjective intent has been made out.
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Having carefully read the materials beforehand I made the orders on 29 November. These reasons confirm the orders made.
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Decision last updated: 14 December 2021
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