Jowill Nominees Pty Ltd v Cooper

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
JOWILL NOMINEES PTY LTD v COOPER
[2021] SASC 76
Judgment of the Honourable Justice Blue

EQUITY - TRUSTS AND TRUSTEES - FOLLOWING TRUST PROPERTY - GENERALLY
Application by Trustee for an order under section 59C of the Trustee Act 1936 (SA) revoking the Jowill Trust and ordering the distribution of the trust property or in the alternative substituting new provisions of the trust deed for those contained in the original trust deed.
In February 1976 the Trust was created as a discretionary trust by execution of a deed of trust. Neither the original nor a copy of the Trust Deed can now be found despite diligent searches and inquiries by the Trustee.
The content of the Trust Deed cannot now be ascertained definitively. Based on various secondary evidence, much of the content can be inferred with a reasonable level of confidence.
All of the persons falling within the class of inferred potential beneficiaries have consented to a winding up of the Trust.
Held:
1.The Court has jurisdiction to entertain the application because the three prerequisites to jurisdiction are satisfied (at [31]-[33]).
2.The Court has power to vary the Trust in the manner proposed because the six prerequisites to power are satisfied (at [49]-[52]).
3.It is appropriate to exercise the discretion to vary the terms of the Trust, rather than revoke it (at [53]-[54]).
4.Order made varying the Trust (at [55]).

Trustee Act 1936 (SA) s 59C; Income Tax Assessment Act 1936 (Cth) Div 7A, referred to.

JOWILL NOMINEES PTY LTD v COOPER
[2021] SASC 76

BLUE J: The applicant, Jowill Nominees Pty Ltd (the Trustee), seeks an order under section 59C of the Trustee Act 1936 (SA) (the Act) revoking the Jowill Trust (the Trust) and ordering the distribution of the trust property or in the alternative substituting new provisions of the trust deed for those contained in the original trust deed (which cannot now be located).
The defendant, Louise Cooper was joined as a respondent to represent the interests of all actual and potential beneficiaries of the Trust.
Background
William Cooper (Bill) and Josephine Cooper (Jo) had four children: Timothy, Verity, Melanie and Matthew.
Upper Kensington Investments Pty Ltd (UKI) was incorporated in 1968. Bill and Jo were its directors and original ordinary shareholders (holding one share each). UKI also issued 100 preference shares ($1 each), of which 50 were held by each of Bill and Jo. Each preference share carries the right to a dividend of five cents per annum and the right to repayment of $1 on liquidation.
UKI acquired shares in Coopers Brewery Limited (Coopers Brewery). Bill and Jo each also personally held shares in Coopers Brewery. UKI also acquired shares in various public companies.
The Trustee was incorporated on 18 December 1975. Bill and Jo were its directors and shareholders (holding one share each).
On 10 February 1976 the Trust was created by execution of a deed of trust (the Original Trust Deed). Neither the original nor a copy of the Original Trust Deed can now be found despite diligent searches and inquiries by the Trustee. It appears that the Original Trust Deed has never been amended.
By December 1976 Bill and Jo had transferred their ordinary shares in UKI to the Trust (and they were probably transferred on creating of the Trust). The UKI shares have always comprised the principal asset of the Trust, although it later acquired some public company shares.
The Coopers’ solicitor in 1976 was Bob Piper of Piper Bakewell & Piper. Mr Piper is now deceased. Mark Gordon joined that firm in 1975 and in 1990 took over from Mr Piper as the Coopers’ solicitor.
The Coopers’ accountant in 1976 was Arthur Young & Co. Peter Fowler had responsibility for the Coopers’ matters. He left that firm in about 1986 and formed his own firm, which took over from Arthur Young & Co as the Coopers’ accountant and continued in that role until 2009. Ernst & Young, the successor firm to Arthur Young & Co, no longer has any records relating to the Coopers. Mr Fowler is deceased. Mr Fowler’s records relating to the Coopers cannot be located.
In 2007 Mr Fowler asked Richard Liebmann of Norton Smith & Co to provide advice to Bill and Jo about, amongst other things, the Trustee’s and UKI’s constitutions and the Trust Deed. Mr Liebmann met with Bill and Jo. He was also provided with various documents including a copy of the Original Trust Deed (which his firm no longer has).
On 27 April 2007 Mr Liebmann wrote a letter to Bill and Jo providing advice. He said that he had reviewed the Original Trust Deed and, while it could be modernised, he did not recommend it due to the risk that it might be characterised as a resettlement. He referred to the Trust having an extended lifetime of up to 80 years. He referred to the power of appointment of a new trustee being vested in the existing trustee. He referred to trustee powers contained in clause 6(b) and expressed the opinion that, if the Trustee was going to limit its investments to stocks and shares and real estate, it was probably adequate.
In relation to beneficiaries, Mr Liebmann said:
The Trust Deed currently provides as its potential beneficiaries not only yourselves but also your children and your remoter issue as well as their spouses and their remoter issue. There is a further group of potential beneficiaries being other persons related to yourselves who appear to the Trustee to have been dependant at any time on either of yourselves.
Anastasia Bolkus of Anna Bolkus & Associates took over from Mr Fowler in 2009 as the Coopers’ accountant. Ms Bolkus has searched her records and has been unable to locate a copy of the Original Trust Deed.
In December 2014 Matthew died. His widow was Stefany. They had two children: Victoria and Ursula. Ursula is under 18 years old.
In November 2015 Bill died. His 50 preference shares in UKI passed to the Trustee. His ordinary share in the Trustee passed to Jo. In 2018 Jo transferred that share to Timothy, Verity and Melanie jointly.
In October 2018 Timothy, Verity and Melanie were appointed directors of the Trustee in addition to Jo, who continued as a director.
In September 2019 UKI sold a quarter of its assets (shares in Coopers Brewery and other public companies) to:
·a trust associated with Timothy;
·a trust associated with Verity;
·a trust associated with Melanie; and
·as to half of the balance (one eighth of its assets) to a trust associated with Victoria and as to half of the balance (one eighth of its assets) to Stefany as trustee for Ursula.
UKI provided vendor finance to each of the purchasers for a term, at interest and involving instalment repayments fixed by reference to Part III Division 7A of the Income Tax Assessment Act 1936 (Cth). This entails that the loans are repayable within seven years and from 1 July 2020 that the interest rate payable is the “benchmark interest rate” (4.52 per cent per annum in 2020/2021). As a result, UKI’s sole assets now comprise amounts receivable from the purchasers and ultimately will comprise cash (unless the Trustee invests the loan proceeds).
Evidence
I received two affidavits sworn by Jo. She deposed to the fact that she does not have, has never seen, and is not aware of the contents of, the Original Trust Deed. She consents to orders in terms of the primary application by the Trustee, namely an order revoking the Trust and for distribution of the trust property as to one quarter each between Timothy, Verity and Melanie and as to one eighth each between Victoria and Stefany as trustee for Ursula.
I received an affidavit by Mr Liebmann deposing to the advice he provided to Bill and Jo in 2007 and that he has been unable to locate his file in respect of that advice. He testified that he is certain that the Trust was a discretionary family trust and was an old-fashioned style of trust. He has no independent recollection of the vesting date of the Trust. However, he is certain that it would have referred to the descendants of a British monarch plus 21 years, which was the formula used in trust deeds at that time. He explained that his reference in his letter to a period of up to 80 years was not a reference to the text of the trust deed but a generic reference to the typical maximum life of a family trust under the lineal descendants formula. He does not have an independent recollection whether the trust deed permitted capital distributions prior to vesting but believes that, if it did not, he would have mentioned it in his letter and suggested an amendment to that effect. He does not recall any trust deed that he has ever seen in his 45 years in practice that did not contain such a provision.
I received an affidavit by Ms Bolkus deposing to her acting as the accountant for the Trust since 2009 and that she has been unable to locate any copy of the Original Trust Deed.
I received an affidavit by Mr Gordon deposing to Mr Piper formerly acting for the Cooper family, Mr Gordon taking over in about 1990 and his having arranged extensive searches in the records of Piper Alderman and having been unable to locate the original or a copy of the Original Trust Deed. He said that in December 1978 he prepared a trust deed for his own discretionary family trust and used the precedent trust deed of Piper Bakewell & Piper at the time. He exhibited that trust deed with personal information redacted.
I received an affidavit sworn jointly by Timothy, Verity and Melanie in their capacity as directors and shareholders of the Trustee deposing to being unable to locate the Original Trust Deed, to the Trustee’s wish to distribute the assets of the Trust in the manner identified above and deposing to the identity of the descendants and spouses of the descendants of Bill and Jo. This was supplemented in the last respect by oral evidence given by Timothy.
I received affidavits sworn by Timothy, Verity, Melanie and Victoria attaching consents by each of them and their spouse and children (where applicable) to distribution of the assets of the Trust in the manner identified above.
I also received various exhibits including ASIC searches, constitutions and financial statements of the Trust and UKI.
Section 59C
Section 59C of the Act provides:
59C—Power of Court to authorise variations of trust
(1)The Supreme Court may, on the application of a trustee, or of any person who has a vested, future, or contingent interest in property held on trust—
(a)     vary or revoke all or any of the trusts; or
(b)     where trusts are revoked—
(i)distribute the trust property in such manner as the Court considers just; or
(ii)resettle the trust property upon such trusts as the Court thinks fit; or
(c)     enlarge or otherwise vary the powers of the trustees to manage or administer the trust property.
(2)In any proceedings under this section the interests of all actual and potential beneficiaries of the trust must be represented, and the Court may appoint counsel to represent the interests of any class of beneficiaries who are at the date of the proceedings unborn or unascertained.
(3)Before the Court exercises its powers under this section, the Court must be satisfied—
(a)     that the application to the court is not substantially motivated by a desire to avoid, or reduce the incidence of tax; and
(b)     that the proposed exercise of powers would be in the interests of beneficiaries of the trust and would not result in one class of beneficiaries being unfairly advantaged to the prejudice of some other class; and
(c)     that the proposed exercise of powers would not disturb the trusts beyond what is necessary to give effect to the reasons justifying the exercise of the powers; and
(d)     that the proposed exercise of powers accords as far as reasonably practicable with the spirit of the trust.
(4)An order made by the Supreme Court in the exercise of powers conferred by this section is binding upon all present and future trustees and beneficiaries of the trust.
(5)     This section does not apply to—
(a)     a trust affecting property settled by an Act; or
(b)     a charitable trust.
(6)This section does not derogate from any other power of the Supreme Court to vary or revoke a trust, or to enlarge or otherwise vary the powers of trustees.
This Court’s jurisdiction to entertain an application to revoke or vary a trust is conditioned on satisfaction of three[1] prerequisites:
1.the existence of a trust;
2.an application by a trustee of the trust or person with an interest in property held on trust;[2] and
3.the interests of all actual and potential beneficiaries being represented in the proceeding.[3]
[1] There is also a negative requirement imposed by section 59C(5) that the trust not be a charitable trust or a trust affecting property settled by an Act but there is no suggestion that this applies in the present case and it can be ignored.
[2] Trustee Act 1936 (SA) section 59C(1).
[3] Trustee Act 1936 (SA) section 59C(2).
This Court’s power to revoke or vary a trust is conditioned on satisfaction of six prerequisites:
1.there is good reason to make the proposed exercise of powers;[4]
2.the proposed exercise of powers is in the interests of beneficiaries;[5]
3.the proposed exercise of powers will not result in one class of beneficiaries being unfairly advantaged to the prejudice of another class;[6]
4.the proposed exercise of powers accords as far as reasonably practicable with the spirit of the trust;[7]
5.the proposed exercise of powers will not disturb the trust beyond what is necessary to give effect to the reasons for the revocation or variation;[8] and
6.the application is not substantially motivated by a desire to avoid or reduce the incidence of tax.[9]
[4]    This requirement is implicit in the requirement that the proposed exercise of powers would not disturb the trusts beyond what is “necessary to give effect to the reasons justifying the exercise of the powers” and would be “in the interests of beneficiaries”.
[5]    Trustee Act 1936 (SA) section 59C(3)(b).
[6]    Trustee Act 1936 (SA) section 59C(3)(b).
[7]    Trustee Act 1936 (SA) section 59C(3)(d).
[8]    Trustee Act 1936 (SA) section 59C(3)(c).
[9]    Trustee Act 1936 (SA) section 59C(3)(a).
If these prerequisites are satisfied, the Court has a discretion whether to exercise the power conferred by the section.
The prerequisites to jurisdiction
The Court’s jurisdiction to revoke or vary the terms of a trust is necessarily dependent on the existence of a trust in the first place. Although the Trust Deed cannot be located, I am satisfied based on Mr Liebmann’s evidence and the financial statements for the Trust that the Trust exists as a discretionary family trust.
The second prerequisite to jurisdiction is satisfied because the application is made by the Trustee. I am satisfied based on Mr Liebmann’s evidence and the financial statements for the Trust that the Trustee is the trustee of the Trust.
The third prerequisite to jurisdiction is satisfied because, pursuant to an order made on 11 February 2021, Louise Cooper represents the interests of all actual and potential beneficiaries of the Trust.
Variation
Although the Trustee’s primary application is for an order revoking the Trust and for distribution of its assets, I first address its alternative application for an order varying the terms of the Trust.
I accept that, despite the exercise of reasonable endeavours, the original or a copy of the Original Trust Deed cannot be located. This gives rise to obvious difficulties for the Trustee. In the absence of a trust deed, the Trustee cannot be certain about its powers or obligations. This renders it difficult for the Trustee to continue to act as trustee of the Trust. The power conferred by section 59C of the Act to order a variation of the terms of the Trust is apt to deal with such a situation.
For the purposes of the application, the Trustee produced a draft proposed Terms of Trust (the Proposed Terms of Trust). The Proposed Terms of Trust contains the wording from the Piper Bakewell & Piper precedent as at 1978 insofar as its wording can be inferred from the content of Mr Gordon’s family trust deed, inserts certain variables into that wording and makes certain omissions.
The variables are:
·name of trust: Jowill Trust;
·name of trustee: Jowill Nominees Pty Ltd;
·settlement sum: $100;
·trust premises: shares in UKI, shares in any publicly listed company, bank accounts and all other monies and property paid or transferred to the Trustee;
·specified beneficiaries: children and remoter issue of Bill and Jo and their spouses and their remoter issue; any persons related to Bill or Jo who appear to the trustee to be dependent on them; any corporation in which a share or capital is beneficially owned by such a beneficiary; and any charitable institution as the trustee considers worthy of receipt of funds for charitable or related purposes; and
·default beneficiary: Jo.
In relation to the settlement sum, balance sheets of the Trust show trust capital by way of settlement of $100 and I am satisfied that this was the amount of the settlement sum.
In relation to the trust premises, the evidence establishes that the shares in UKI and publicly listed company shares have always been the significant assets of the Trust and the balance of the description is taken from Mr Gordon’s trust deed.
In relation to the specified beneficiaries, Mr Liebmann said in his letter dated 27 April 2007:
The Trust Deed currently provides as its potential beneficiaries not only yourselves but also your children and your remoter issue as well as their spouses and their remoter issue. There is a further group of potential beneficiaries being other persons related to yourselves who appear to the Trustee to have been dependant at any time on either of yourselves.
Mr Gordon’s trust deed also includes companies in which a specified beneficiary hold shares or capital and charitable institutions, which were relatively common inclusions in the identification of potential beneficiaries of family discretionary trusts and are likely to have been included in the Original Trust Deed.
In relation to default beneficiaries, the financial statements of the Trust show distributions of income to Jo. It is likely that the default beneficiaries shown in the Trust Deed were Bill and Jo and hence since Bill’s death Jo has been the default beneficiary.
The omissions are:
·the name of the settlor;
·the power of appointing a new or additional trustee; and
·the provision entitling an accountant or solicitor who is a trustee to charge professional costs.
In relation to the name of the settlor, it is not known and cannot reasonably be known who was the settlor and this requires omission of the name of the settlor in any substituted trust deed.
In relation to the power of appointing a new or additional trustee, Mr Liebmann noted in his letter that the power of appointment of a new trustee was vested in the Trustee. If an order of variation is made, the Trustee intends to wind up the Trust. There is no need for the Trust Deed to contain a power of appointment of a new trustee vested in the existing trustee. If some unforeseen circumstance should require the appointment of a new trustee, this Court has ample power to do so under section 36 of the Act.

In relation to the provision entitling an accountant or solicitor who is a trustee to charge professional costs, the Trustee is not an accountant or solicitor and there is no reasonable prospect that the trustee of the Trust will ever be an accountant or solicitor. There is no need for this provision.
The Proposed Terms of Trust contains a clause in the same terms as Mr Gordon’s trust deed concerning the winding up of the Trust 21 years after the death of the last survivor of the issue living on the date of creation of the trust of King George VI. I am satisfied based on the evidence of Mr Gordon and Mr Liebmann that a clause in such terms was contained in the Original Trust Deed.
The Proposed Trust Deed contains a clause in the same terms as Mr Gordon’s trust deed empowering the trustee in its discretion to pay or apply the whole or part of the capital of the trust to or for the benefit of one or more specified beneficiaries. I am satisfied based on the evidence of Mr Gordon and Mr Liebmann that a clause in such terms was contained in the Original Trust Deed. This clause would permit the Trustee to wind up the Trust if it so wishes.
Criteria for exercise of powers
The first prerequisite to the exercise of the power to order a variation is that there is good reason to make the proposed exercise of powers. This is satisfied because the uncertainty engendered by not having available the wording of the trust deed of the Trust places the Trustee in the intolerable situation of not knowing with certainty how to exercise powers, including the making of annual distributions of income. The terms of the Proposed Terms of Trust replicate, so far as is possible and practicable, what are believed to be the terms of the Original Trust Deed.
The second and third prerequisites both concern interests of beneficiaries, namely that the proposed exercise of powers is in the interests of beneficiaries and will not result in one class of beneficiaries being unfairly advantaged to the prejudice of another class. The second prerequisite is satisfied for the same reason as the first and in addition because it is also in the interests of the beneficiaries that there be certainty as to the terms of the trust deed of the Trust. The third prerequisite is satisfied because, so far as is possible and practicable, the terms of the Proposed Terms of Trust replicate what are believed to be the terms of the Original Trust Deed.
The fourth and fifth prerequisites both concern the spirit and purpose of the Trust, namely that the proposed exercise of powers accords as far as reasonably practicable with the spirit of the trust and will not disturb the trust beyond what is necessary to give effect to the reasons for the revocation or variation. Again, they are satisfied because, so far as is possible and practicable, the terms of the Proposed Terms of Trust replicate what are believed to be the terms of the Original Trust Deed. I note the intention of the Trustee to wind up the Trust. This is consistent with the spirit and purpose of the Trust. First, the principal purpose of the Trust was to hold indirectly, via UKI, shares in Coopers Brewery and it no longer has any such indirect interest in Coopers Brewery shares by reason of the 2019 transactions under which UKI sold its shares. Secondly, I am satisfied that the terms of the Original Trust Deed contained a power to wholly distribute the capital of the Trust (and thereby to wind up the Trust).
The final prerequisite is that the application is not substantially motivated by a desire to avoid or reduce the incidence of tax. I am satisfied that this is satisfied.
Exercise of discretion
I am satisfied that, subject to addressing the question whether it is preferable to make an order revoking the Trust, it is appropriate to exercise the discretion to make an order varying the terms of the Trust so that they are those contained in the Proposed Terms of Trust. Otherwise both the Trustee and the beneficiaries will be in a state of uncertainty which is not satisfactory for either the Trustee or the beneficiaries.
Revocation
The Trustee’s primary application is for an order revoking the Trust and for distribution of its assets. If there were no viable alternative, it may have been appropriate to make such an order to avoid the uncertainty associated with the absence of a trust deed, which for the reasons given above is unsatisfactory. However, an order revoking the Trust obviously disturbs the Trust in an absolute sense. It is preferable to adopt the alternative of varying the Trust which entails less disturbance. It will then be a matter for the Trustee to exercise its discretion, if it wishes, to make a capital distribution of the assets of the Trust in the manner it proposes.
Conclusion
I will make an order that, with effect from the date of the order, the Terms of Trust be substituted in place of the deed of trust dated 10 February 1976 as the terms of the trust known as the Jowill Trust. I will hear the parties concerning the precise terms of the order and in relation to any other matters (including costs).

[2021] SASC 76

24 June 2021