John Campbell Nominees Pty Ltd ACN 646 545 262

[2021] NSWSC 233

Supreme Court

New South Wales

Medium Neutral Citation:

John Campbell Nominees Pty Ltd ACN 646 545 262 [2021] NSWSC 233

Hearing dates:

12 March 2021

Date of orders:

12 March 2021

Decision date:

12 March 2021

Jurisdiction:

Equity

Before:

Kunc J

Decision:

Judicial advice given

Catchwords:

EQUITY – Trusts and trustees – Judicial advice – Whether trustee justified in defending proceedings and filing cross-claim where it will not be the only contradictor

Legislation Cited:

Trustee Act 1925 (NSW)

Cases Cited:

Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42

Category:

Principal judgment

Parties:

John Campbell Nominees Pty Ltd ACN 646 545 262 (Plaintiff)

Representation:

Counsel:

J Burnett (Plaintiff)
C Birtles (C L Campbell and B F Campbell)
J Townsend (Solicitor) (A I Tonking SC)

Solicitors:

Resolve Litigation Lawyers (Plaintiff)
Bridges Lawyers (C L Campbell and B F Campbell)
J Townsend (A I Tonking SC)

File Number(s):

2021/053066

Publication restriction:

No

EX TEMPORE Judgment (REVISED)

Summary

1. Nearly 46 years ago, a series of transactions was entered into concerning a farming property near Warren (the Property). In a few days' time, on 22 March 2021, Slattery J of this Division will hear three sets of proceedings in which the beneficial ownership of the Property will be an important question.

2. The application before the Court today is brought by one of the parties to one of those three proceedings, John Campbell Nominees Pty Ltd (JCN), for judicial advice under the Trustee Act 1925 (NSW). JCN is a trustee of the Campbell Family Trust (the Trust). The Trust was established as part of the transactions entered into 46 years ago. The question relevantly to be determined by Slattery J is who is beneficially entitled to the Property? JCN will contend that the Property is part of and held upon the terms of the Trust. Others, in circumstances I will shortly describe, will contend otherwise.

3. JCN seeks this advice:

“Question 1:   Whether it is justified, as trustee of the Discretionary Trust, in:

a.   Defending the claims and relief sought in New South Wales Supreme Court proceedings 374756 of 2019 (Equity Proceeding) insofar as they concern the land held by BCN (Trust Property);

b.   Advancing a cross-claim in the Equity Proceeding in the event the plaintiffs do not succeed in obtaining the relief they seek concerning the Trust Property.

Question 2:   Whether it is entitled to pay costs incurred in so defending those claims and relief sought and advancing a cross-claim, from the trust fund.”

4. For the reasons which follow, the Court will provide that advice, but subject to a qualification in relation to JCN's entitlement to pay its costs from the Trust’s property.

Facts

5. I will next set out the the background facts, which I gratefully adopt from JCN’s Statement of Facts. Without disrespect, I shall refer to the various family members involved in these proceedings by their given names.

6. The Property was previously owned by Bruce Campbell, who operated a farming partnership near Warren with his wife Julian. Bruce and Julian had four children: John, Carolyn, Beth and Richard. In late 1973 or early 1974, Bruce was diagnosed with a terminal illness. As a result, during 1975 Bruce or Julian or both of them engaged a solicitor to provide advice about Bruce's estate planning.

7. On 24 November 1975, a series of corporate meetings and transactions took place at the solicitor's office. It is not necessary for me to set out in any detail what those transactions were. It is sufficient for present purposes to record that one of those transactions was to settle the Trust with a trustee which is now known as Bruce Campbell Nominees Pty Ltd (BCN).

8. The question that has arisen about the ownership of the Property has come about because, putting the matter neutrally, there is arguably an ambiguity in the effect of some of the transactions that were entered into in November 1975. On one view of the matter, there was an agreement to convey the Property into the Trust. On another view of the matter, there was a trust deed entered into which suggested that BCN would hold the Property as bare trustee for Bruce, his administrators and assigns absolutely. That ambiguity is the genesis of the dispute that will be determined by Slattery J.

9. Bruce died on 20 February 1976.

10. On 15 November 1976, probate of Bruce’s will was granted and Julian received the whole of Bruce's estate. The Property did not form part of Bruce's estate.

11. On or about 3 July 1981, the legal title to the Property was transferred to BCN.

12. On 26 August 1984 and 1 May 1986, the Property was mortgaged by BCN purportedly expressly in its capacity as trustee of the Trust.

13. On 16 June 1993, Richard was appointed as a director of BCN. Julian remained a director of BCN until her death on 19 June 2017.

14. On 14 June 2018, Richard commenced proceedings against Beth and Carolyn, who are the executors of Julian's estate, for a family provision order from the estate or notional estate of Julian.

15. On 18 June 2018, John commenced proceedings against Beth and Carolyn for a family provision order out of the estate or notional estate of Julian.

16. On 28 November 2019, Beth and Carolyn commenced proceedings in this Division against John, BCN, Richard and A I Tonking SC, now retired (the Equity Proceeding). Mr Tonking is the surviving representative of Bruce's estate.

17. On 3 January 2020, probate of Julian's will was granted to Beth and Carolyn.

18. According to Julian's will, Richard is to receive the residue of the estate subject to him paying certain legacies and just debts, funeral and testamentary expenses. The inventory of property for Julian’s estate does not include the Property.

19. On 16 January 2020, Carolyn was appointed as a director of BCN.

20. On 27 February 2020, Beth and Carolyn filed the statement of claim in the Equity Proceeding in which the relief they seek includes:

1. Declarations that BCN holds the Property on bare trust for the estate of Bruce, or alternatively on bare trust for the estate of Julian; and

2. Orders that BCN transfer the Property to Mr Tonking to be administered in accordance with the will of Bruce, or alternatively to Beth and Carolyn as legal personal representatives of Julian's estate.

21. The various defences and cross-claims that have been filed put in issue the question of the ownership of the Property. In particular, Mr Tonking's defence and John's defence and cross-claim assert that the Property is part of the assets of the Trust.

22. Richard agrees with the claims made by Beth and Carolyn in relation to ownership of the Property. John does not.

23. On 1 July 2020, BCN (whose directors are Richard and Carolyn) filed a submitting appearance in the Equity Proceeding.

24. On 11 December 2020, JCN was incorporated with John as its sole director, secretary and shareholder. Exercising his powers under the Trust’s deed as the surviving executor of Bruce's estate, Mr Tonking appointed JCN as an additional trustee of the Trust.

25. On 17 December 2020, the Court ordered by consent (among other things) that JCN be joined as a party to the Equity Proceeding and to Richard's proceeding for family provision.

26. On 8 January 2021, Richard by his legal representatives and in his capacity as a director of BCN consented to JCN defending the proceedings currently on foot to the extent that they related to the Property. On 25 January 2021, Carolyn by her legal representatives provided her consent to the same effect in her capacity as a director of BCN.

27. JCN’s defence and cross-claim in the Equity Proceeding, like John and Mr Tonking, also assert that the Property is part of the Trust. JCN and John have retained common legal representation. At the hearing before Slattery J (and indeed to the extent relevant before me today) they have had the same solicitor and will be represented by the same counsel.

Consideration

28. Mr J Burnett of Counsel appeared today for JCN. Over Mr Burnett's objection, I granted leave to Beth and Carolyn to appear and make submissions. They were represented by Mr C P Birtles of Counsel. Mr J Townsend, solicitor, was also granted leave to appear on a watching brief for Mr Tonking, but ultimately did not find it necessary to make any additional submissions to the Court.

29. There was no dispute that this was a matter in which the Court's jurisdiction to give judicial advice had been enlivened. The question was whether it should be given. Mr Birtles submitted that it should not.

30. Without disrespect or intending to do any injustice to the careful way in which Mr Birtles' submissions were put, his essential submission was that whether it was proper for JCN to defend the Equity Proceeding and to advance its cross-claim and the costs consequences of that were all matters that should properly be determined at the conclusion of the hearing before Slattery J. The reason in support of that submission was that there were contradictors other than JCN who were already engaged in the proceedings who were going to advance the proposition that the Property fell into the Trust. I shall return momentarily to the question of overlap of the positions the various contradictors will take.

31. For his part, Mr Burnett submitted that it was entirely appropriate for the advice to be given to JCN now in circumstances where JCN was a trustee of the Trust and was therefore the proper party to take an active role in the Equity Proceeding to defend the Trust’s property, including the question of whether the Property formed part of that property. In that respect, Mr Burnett relied on what was said by the High Court in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (Macedonian Orthodox) (emphasis added):

“73.   The fact that one of the purposes of proceedings for judicial advice is to protect the interests of the trust has particular importance where, as in this case, the trust concerned is a charitable purpose trust. In litigation brought by private persons having a particular view about the terms of a trust, the trustee will ordinarily be joined as a necessary and proper party to the proceedings. Unless some other party will act as contradictor, the burden of defending the suit will fall upon the trustee. If, as will often be the case with a charitable purpose trust, there is no other party that will act as contradictor, the claims made about the terms of the trust will go unanswered unless the trustee can properly resort to the trust funds to meet the costs of defending the litigation. And even if there is another party that will act as contradictor, it is almost always desirable, even necessary, for the trustee to take an active part in the proceedings so that issues are properly ventilated and argued.”

32. In addition to the Statement of Facts to which I have already referred, JCN's application was accompanied by an opinion (which became the subject of a confidentiality order) provided by Mr Burnett and Mr D Farinha of Counsel to JCN in relation to whether it was appropriate for JCN to defend the Equity Proceedings, advance its cross-claim and recover JCN's costs from the Trust’s property. In my respectful view, that opinion is careful and thorough and provides a proper basis to conclude (as the Court does) that JCN is justified in its intention to defend those proceedings, bring the cross-claim and, subject to matters to which I will shortly refer, be entitled to recover its costs of so doing from the Trust’s property.

33. The Court accepts Mr Burnett's submission by reference to what was said in Macedonian Orthodox that notwithstanding the presence of other contradictors, it is proper for JCN (as the trustee that has been brought into existence to act in effect as an independent trustee in circumstances where BCN has chosen to file a submitting appearance) to defend the proceedings in the interests of the Trust and to bring the cross-claim. To accept Mr Birtles’ submission would not be consistent with the generally beneficial and protective approach that the Court adopts towards trustees who seek judicial advice and would leave JCN in an unfair and unsatisfactory position.

34. It will be apparent that the natural persons standing behind BCN and JCN reflect the two sides of the underlying dispute as to the ownership of the Property. Given that BCN has resolved to enter a submitting appearance, the decision of the directors of BCN to allow JCN to defend the proceedings (in circumstances where otherwise the trustees of the Trust are required to act unanimously) is, in my respectful view, entirely appropriate. The fact that they have done so is another reason in favour of giving JCN the advice it seeks now rather than later.

35. The Court is therefore satisfied that, in the exercise of the its discretion, JCN should be given the first piece of judicial advice it seeks set out in [3] above.

36. However, in the unusual circumstances of this case, being the presence of other contradictors and the potential overlap at least in some respects of the matters which those other contradictors will raise with matters to be raised by JCN, the Court is not prepared to give the unqualified advice sought in question 2 set out in [3] above. Mr Tonking's defence raises a number of matters which are also raised in John's defence and cross-claim and JCN's defence and cross-claim, all directed to establishing that the Property falls into the Trust. However, there are also allegations in relation to standing, limitation period, laches, acquiescence and estoppel that are unique to the claim which JCN wishes to bring in the Equity Proceeding.

37. It is also to be recalled that JCN and John, again quite properly, have retained common solicitors and counsel. So the position will be that they will be commonly represented, that there will be some matters unique to JCN's claim and other matters which JCN will be prosecuting in concert with John and Mr Tonking's defence in the Equity Proceeding.

38. I have given consideration to whether these unusual circumstances would be best dealt with by the Court in the exercise of its discretion declining to give the judicial advice sought in question 2 set out above. However, on reflection I have concluded that would not be the appropriate course. It seems to me clear that, on any view, JCN is entitled to at least some and may ultimately be entitled to indemnity for all of its costs from the Trust property. The difficulty is that as a matter of practical reality, how the landscape which may impact upon that question may appear will only be known as a result of how the three proceedings unfold before Slattery J.

39. The Court is therefore unable, in the exercise of its discretion, to give unqualified advice of the kind sought by JCN in question 2, but is of the view that, at least in the first instance, JCN will be entitled to indemnity from the Trust’s assets, but subject to the possibility that interested parties may later wish to assert that the indemnity be in some way qualified by reason of the overlapping of the issues and how they were ultimately presented at the hearing before Slattery J. For these reasons I propose to qualify the Court’s advice given in relation to question 2.

40. In relation to the costs of this application, while Mr Townsend made no application for his client’s costs, Mr Birtles did. He submitted that his clients should have their costs out of Julian’s estate on the indemnity basis as executors. Mr Burnett, accepting he did not act for the estate, opposed Mr Birtles client’s application on any basis.

41. I was not prepared to make an order in relation to costs from Julian’s estate when the estate was not before me. Furthermore, Mr Birtles’ clients had applied to be heard in their dual capacity as executors and as discretionary objects of the Trust. I did not accept they were entitled to be heard in the former capacity but was satisfied that they should be heard in the latter. The submissions put on their behalf had highlighted issues which were proper to be raised, did not duplicate submissions made on behalf of JCN, and had been of assistance to the Court. I therefore determined that they should have their costs of the application out of the Trust property on the indemnity basis.

Conclusion

42. The orders of the Court are as follows:

1. Advise the plaintiff that it is justified as trustee of the discretionary trust established by deed dated 24 November 1975 in:

1. Defending the claims and relief sought in the New South Wales Supreme Court proceedings 374756 of 2019, (Equity Proceeding) insofar as they concern the land held by Bruce Campbell Nominees Pty Ltd (Trust Property); and

2. Advancing a cross-claim in the Equity Proceeding in the event that the plaintiffs do not succeed in obtaining the relief they seek concerning the Trust Property.

2. Advise the plaintiff that it is entitled to pay costs incurred in so defending those claims and relief sought and advancing a cross-claim in the first instance from the trust fund but subject to the right of any interested party to contend that in the light of the conduct of the Equity Proceeding the plaintiff is not entitled to a complete indemnity in respect of its costs of the Equity Proceeding.

3. The plaintiff's costs of the summons be paid out of the trust assets on the indemnity basis.

4. The costs of Beth Frances Campbell and Carolyn Louise Campbell of the application be paid out of the trust assets on the indemnity basis.

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Decision last updated: 15 March 2021