Kepkey v Edwards - [2017] NSWSC 925

No judgment structure available for this case.

Supreme Court

New South Wales

Medium Neutral Citation: Kepkey v Edwards [2017] NSWSC 925
Hearing dates: 5 July 2017
Date of orders: 05 July 2017
Decision date: 05 July 2017
Jurisdiction: Equity
Before: Emmett AJA
Decision:
1. Order, pursuant to s 93(3) of the Trustee Act 1925 (NSW), that the Defendant’s costs of and incidental to these proceedings be paid from the trust funds (the trust) held by the Defendant pursuant to Clause 4 of the Will of the late Gwenneth Holmes Edwards (the “deceased”) on the indemnity basis.

2.   Make no order as to the Plaintiff’s costs, to the intent that she will bear her own costs of the proceedings.

3.   Note the agreement of the parties that the Defendant will exercise his absolute discretion pursuant to Clause 4.1 of the Will of the deceased, to apply the capital and income of the trust fund for the maintenance, education, support, advancement and benefit of the Plaintiff in, and only in, the following manner:

(a)   By payment to the Plaintiff of the lump sum of $60,000 within 28 days of the date of these orders;

(b)   By payment to the Plaintiff, on the anniversary of the payment referred to in 3(a) above, of one half of the trust funds then remaining; and,

(c)   By payment to the Plaintiff, on the anniversary of the payment referred to in 3(b) above, of the whole of the trust funds then remaining.

4.   Note the agreement of the parties that:

(a)   The Plaintiff will desist from contacting the Defendant, or causing letters to be sent to his solicitors, in relation to the trust held pursuant to Clause 4 of the Will of the deceased or the administration of the trust except, and only in the circumstance, that any of the payments referred to in Paragraph 3 above are outstanding for more than 7 days from the due date; and

(b)   The Defendant will make copies of all bank statements relating to the administration of the trust available to the Plaintiff by forwarding them directly to her.

5.   Order that the Statement of Claim and the Cross-Claim filed herein are otherwise dismissed.
6. On the Notice of Motion filed on 5 July 2017, direct pursuant to s 63 of the Trustee Act 1925 (NSW) that the Defendant, as trustee of the trust, would be justified in consenting to the orders and entering into the agreements referred to above.
Catchwords: EQUITY – Trusts and trustees – Beneficiaries – Rights of beneficiaries of discretionary trust
Legislation Cited: Trustee Act 1925 (NSW), ss 93, 95
Category: Principal judgment
Parties: Lynette Beverley Kepkey (Plaintiff)
Mark Andrew Edwards (Defendant)
Representation:
Counsel:
Luke Fermanis (Plaintiff)
Greg J Smith (Defendant)
Solicitors:
Malouf Solicitors (Plaintiff)
Stuart Garrett Lawyers (Defendant)

File Number(s): 2017/26775

Judgment

The plaintiff, Mrs Lynette Kepkey (Lynette), was a beneficiary under the last will of her late mother, Mrs Gwenneth Edwards (the Testatrix), who died on 31 May 2014. Probate of that will, which is dated 2 June 2005 (the Will), was granted to her son, Mark Edwards (the Trustee), on 27 October 2014.
The Testatrix was survived by her three children, Catherine Edwards (Catherine), the Trustee and Lynette. At the death of the Testatrix, three children of Lynette were living, namely, Sarah Areada (Sarah), William Borg (William) and Shannon Smith (Shannon). Although Catherine survived the Testatrix, she has since died. The Trustee is her legal personal representative. The beneficiaries of Catherine’s estate are several charitable organisations.
By the Will, the Testatrix gave her car, household contents and personal effects to Catherine. She gave the rest of her estate to those of her three children who survived her and, if more than one, in equal shares as tenants-in-common. That gift, however, was subject to cl 4 of the Will, which established a trust for Lynette. By cl 4, the Trustee was to hold the share of the estate of the Testatrix given to Lynette on trust to invest that sum (the Trust Fund) and, during the life of Lynette, to apply the capital and income of the Trust Fund, as the Trustee may, in his absolute discretion, deem fit:

“… for any, or any combination, of the following objects, namely, the maintenance, education, support, advancement and benefit of Lynette …”.

Clause 4.1.1 then provided that, should the Trustee at any time and from time to time determine that, during any year ending 30 June, part of the income that has arisen or may arise from the Trust Fund is not required for the maintenance, education, support, advancement or benefit of Lynette, the Trustee may, in his absolute discretion, pay that income not required to:

“… any one or more of the children of Lynette … living at the date of [the death of the Testatrix] for their own use and benefit absolutely in a manner and in proportions as [the Trustee in his absolute discretion determines].”

Clause 4.2 provided that, on the death of Lynette, the Trustee was to divide that part of the Trust Fund as shall then remain in his hands:

“… equally between those of the children of Lynette … then living for their own use and benefit absolutely.”

For somewhat different reasons, the Trustee and Lynette are both desirous of bringing to an end the trust established by cl 4 of the Will. Lynette desires to have control of the Trust Fund whereas the Trustee, while concerned at passing control to Lynette, is desirous of being relieved of the burden of continued applications by Lynette for advances from the Trust Fund. The termination of the trust could not be achieved without the agreement of all persons who have an actual or contingent interest in the Trust Fund. However, in that regard, a question arises as to the construction of cl 4.2 of the Will.
Clause 4.1 relevantly confers on the Trustee a power of appointment in respect of income of the Trust Fund. While each of Lynette, Sarah, William and Shannon is a potential appointee in respect of income, if none is appointed in respect of the income for a year, that income would become part of the corpus of the Trust Fund that, pursuant to cl 4.2, would be divided equally on the death of Lynette between those of the children of Lynette then living. A question arises from the disconformity between the language of cl 4.1 and the language of cl 4.2, in referring to the children of Lynette. Whereas under cl 4.1 only those children of Lynette living at the date of the death of the Testatrix are potential appointees, under cl 4.2, any child of Lynette born after the death of the Testatrix might be entitled to share in the Trust Fund on the death of Lynette.
At the time when the Testatrix made the Will, Lynette was aged 40, had three children, namely, Sarah, William and Shannon, was divorced and was then unlikely to have any more children. Those facts must be taken to have been known to the Testatrix. It would be a curious gift on the part of the Testatrix to intend that children of Lynette born after her death could receive an interest in the corpus of the Trust Fund but no entitlement to the distribution of income. It is clear that the Will was drafted in the expectation that Lynette would have no more children and that it was those of Lynette’s children who survived the Testatrix who would benefit under cl 4.1 or cl 4.2. It follows that the only persons who have an interest under the Will in the one-third share given to Lynette under cl 3.2 are Lynette, her three children, the Trustee in his own right and the Trustee in his right as Catherine’s legal personal representative.
The financial position of Lynette is not strong. Lynette is a disability support pensioner who receives a fortnightly payment from Centrelink. That is her only source of income apart from advances made regularly by the Trustee from the Trust Fund. She has continuing expenses for gas, electricity and telephone as well as for food, rent, clothing and entertainment. She has a debt to Centrelink of approximately $1200. Her fortnightly expenses amount to about $950. Lynette’s only assets consist of a computer, a television receiver and second hand furniture. Lynette would like to paint and freshen up the apartment where she lives and install an air conditioner for summer.
As at March 2016, the Trust Fund consisted of a cash investment of $200,000 with Newcastle Permanent. Between 22 May 2015 and 2 February 2016, the Trustee made advances from the Trust Fund to Lynette totalling $10,482.27. In addition, the Trustee has paid Lynette’s gas, electricity and telephone expenses from the Trust Fund. As at 13 June 2017, the total amount of the Trust Fund amounted to $184,139.60.
The Trustee has now formed the view that, having regard to the financial circumstances of Lynette, it would be appropriate to exercise the discretion conferred by cl 4 of the Will by applying the corpus of the Trust Fund for the maintenance, support, advancement and benefit of Lynette in the following manner:

(a)   by payment to Lynette of the lump sum of $60,000 within 28 days;

(b)   by payment to Lynette, on the anniversary of the payment referred to in (a) above, of one half of the Trust Fund then remaining; and

(c)   by payment to Lynette, on the anniversary of the payment referred to in (b) above, of the whole of the Trust Fund then remaining.

Lynette and the Trustee have also agreed as follows:

(a) Lynette will desist from contacting the Trustee, or causing letters to be sent to his solicitors, in relation to the trust established by cl 4 of the Will or the administration of the trust except, and only in the circumstance, that any of the payments referred to above are outstanding for more than seven days from the due date; and

(b) the Trustee will make copies of all bank statements relating to the administration of the Trust Fund available to Lynette by forwarding them directly to her.

Those arrangements represent a compromise of the proceedings as presently constituted. By her statement of claim, Lynette sought a declaration that, by a letter to the Trustee dated 28 September 2016, she had terminated the trust established by cl 4 of the Will. There is very significant doubt as to whether that letter was effective to terminate that trust, having regard to the provisions of cl 4. That is to say, having regard to the possible contingency that Lynette’s three children might not survive her, the Trustee and Catherine were contingently entitled to the corpus of the Trust Fund. While Lynette’s three children have purported to disclaim their interest, such a disclaimer would not necessarily have had the effect of assigning their respective interests to Lynette.
By cross-claim, the Trustee sought an order that, if the trust established by cll 3 and 4 of the Will has not been brought to an end, he be authorised to pay the Trust Fund into Court under s 95 of the Trustee Act 1925 (NSW). That course may relieve the Trustee of any further obligations. However, it would still leave open the question of entitlement to the Trust Fund after it was paid into Court.
The proposed compromise obviates the need to consider the questions that would have been thrown up by the pleadings and the Trustee has now made an application under s 63 of the Trustee Act for judicial advice as to whether he would be justified in entering into the compromise. I consider that the Trustee would be justified in making the advances described above, entering into the agreement outlined above and consenting to orders as follows:

1. Pursuant to s 93(3) of the Trustee Act 1925 (NSW), the Trustee’s costs of and incidental to these proceedings be paid from the Trust Fund on the indemnity basis.

2. Lynette bear her own costs of the proceedings.

3. The Statement of Claim and the Cross-Claim be otherwise dismissed.

Accordingly, I propose, by consent of the parties, to make orders and note the agreements of the parties in accordance with the short minutes set out in the appendix to these reasons.

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APPENDIX

short minutes of order

Kepkey v Edwards

Proceedings No 2017/26775

1. Order, pursuant to s 93(3) of the Trustee Act 1925 (NSW), that the Defendant’s costs of and incidental to these proceedings be paid from the trust funds (“the trust”) held by the Defendant pursuant to Clause 4 of the Will of the late Gwenneth Holmes Edwards (the “deceased”) on the indemnity basis.

2. Make no order as to the Plaintiff’s costs, to the intent that she will bear her own costs of the proceedings.

3. Note the agreement of the parties that the Defendant trustee will exercise his absolute discretion pursuant to Clause 4.1 of the Will of the deceased, to apply the capital and income of the trust fund for the maintenance, education, support, advancement and benefit of the Plaintiff in, and only in, the following manner:

(a)   By payment to the Plaintiff of the lump sum of $60,000 within 28 days of the date of these orders;
(b)   By payment to the Plaintiff, on the anniversary of the payment referred to in 3(a) above, of one half of the trust funds then remaining; and,
(c)   By payment to the Plaintiff, on the anniversary of the payment referred to in 3(b) above, of the whole of the trust funds then remaining.

4. Note the agreement of the parties that:

(a) The Plaintiff will desist from contacting the Defendant, or causing letters to be sent to his solicitors, in relation to the trust held pursuant to Clause 4 of the Will of the deceased or the administration of the trust except, and only in the circumstance, that any of the payments referred to in Paragraph 3 above are outstanding for more than 7 days from the due date; and
(b) The Defendant will make copies of all bank statements relating to the administration of the trust available to the Plaintiff by forwarding them directly to her.

5. Order that the Statement of Claim and the Cross-Claim filed herein are otherwise dismissed.

Decision last updated: 12 July 2017

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Kepkey v Edwards [2017] NSWSC 925

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Medium Neutral Citation:	Kepkey v Edwards [2017] NSWSC 925
Hearing dates:	5 July 2017
Date of orders:	05 July 2017
Decision date:	05 July 2017
Jurisdiction:	Equity
Before:	Emmett AJA
Decision:	1. Order, pursuant to s 93(3) of the Trustee Act 1925 (NSW), that the Defendant’s costs of and incidental to these proceedings be paid from the trust funds (the trust) held by the Defendant pursuant to Clause 4 of the Will of the late Gwenneth Holmes Edwards (the “deceased”) on the indemnity basis. 2. Make no order as to the Plaintiff’s costs, to the intent that she will bear her own costs of the proceedings. 3. Note the agreement of the parties that the Defendant will exercise his absolute discretion pursuant to Clause 4.1 of the Will of the deceased, to apply the capital and income of the trust fund for the maintenance, education, support, advancement and benefit of the Plaintiff in, and only in, the following manner: (a) By payment to the Plaintiff of the lump sum of $60,000 within 28 days of the date of these orders; (b) By payment to the Plaintiff, on the anniversary of the payment referred to in 3(a) above, of one half of the trust funds then remaining; and, (c) By payment to the Plaintiff, on the anniversary of the payment referred to in 3(b) above, of the whole of the trust funds then remaining. 4. Note the agreement of the parties that: (a) The Plaintiff will desist from contacting the Defendant, or causing letters to be sent to his solicitors, in relation to the trust held pursuant to Clause 4 of the Will of the deceased or the administration of the trust except, and only in the circumstance, that any of the payments referred to in Paragraph 3 above are outstanding for more than 7 days from the due date; and (b) The Defendant will make copies of all bank statements relating to the administration of the trust available to the Plaintiff by forwarding them directly to her. 5. Order that the Statement of Claim and the Cross-Claim filed herein are otherwise dismissed. 6. On the Notice of Motion filed on 5 July 2017, direct pursuant to s 63 of the Trustee Act 1925 (NSW) that the Defendant, as trustee of the trust, would be justified in consenting to the orders and entering into the agreements referred to above.
Catchwords:	EQUITY – Trusts and trustees – Beneficiaries – Rights of beneficiaries of discretionary trust
Legislation Cited:	Trustee Act 1925 (NSW), ss 93, 95
Category:	Principal judgment
Parties:	Lynette Beverley Kepkey (Plaintiff) Mark Andrew Edwards (Defendant)
Representation:	Counsel: Luke Fermanis (Plaintiff) Greg J Smith (Defendant) Solicitors: Malouf Solicitors (Plaintiff) Stuart Garrett Lawyers (Defendant)
File Number(s):	2017/26775