Koompahtoo Local Aboriginal Land Council v K.L.A.L.C. Property and Investment Pty Ltd

[2009] NSWSC 502

CITATION:	Koompahtoo Local Aboriginal Land Council v K.L.A.L.C. Property & Investment Pty Ltd [2009] NSWSC 502
HEARING DATE(S):	22 May 2009, 3 and 5 June 2009
JUDGMENT DATE :	22 June 2009
JURISDICTION:	Equity
JUDGMENT OF:	Debelle AJ
LEGISLATION CITED:	Aboriginal Land Rights Act 1983 (NSW)
CATEGORY:	Principal judgment
CASES CITED:	Aust-Wide Management Ltd v Chief Commissioner of Stamp Duties (1992) 24 ATR 148 CTP Custodian Pty Ltd v Commissioner of State Revenue for the State of Victoria (2005) 224 CLR 98 Re AEG Unit Trust (Managers) Ltd's Deed [1957] Saunders v Vautier (1841) 4 Beav 115; 49 ER 282
TEXTS CITED:	Thomas on Powers (1998)
PARTIES:	Koomopahtoo Local Aboriginal Land Council ( Plaintiff K.L.A.L.C. Property & Investment Pty Ltd (First Defendant) Shane Newlin (Second Defendant)
FILE NUMBER(S):	SC 3548/2008
COUNSEL:	P Brereton (Plaintiff) D Durston (Defendant) M J Stevens (for Class A unitholders)
SOLICITORS:	Watson Mangioni Lawyers (Plaintiff) H A Miedzinski Lawyers (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ACTING JUSTICE DEBELLE

MONDAY, 22 JUNE 2009

COUNCIL v K.L.A.L.C. PROPERTY & INVESTMENT PTY LTD & ANOR

JUDGMENT

1 HIS HONOUR: The plaintiff is a body corporate established pursuant Part 5 of the Aboriginal Land Rights Act 1983 (NSW) (“the Act”). Pursuant to s 222 of the Act, the Minister for Aboriginal Affairs appointed Mr Terence Lawler administrator of the plaintiff on 25 February 2003. I will refer to him as “the Administrator”. His appointment has been renewed on a number of occasions. It is common ground that it was last renewed on 14 September 2008 and will expire on 13 June 2009, unless it is again renewed. For convenience, I will refer to the plaintiff as “the Land Council”.

2 At all material times since 30 March 2001 the defendant has been the Trustee of a unit trust known as the Koompahtoo Property and Investment Trust. For convenience I will refer to the defendant as “the Trustee” and the unit trust as “the Trust”. The Trust was established by a trust deed dated 30 March 2001.

3 On 30 March 2001, the Land Council transferred to the Trustee a parcel of land at Morisset being the land described as Lot 556 in Deposited Plan 729949 (the “Morisset land”). The Trustee holds the Morisset land as Trustee for the Trust.

4 By letter to the first defendant dated 8 April 2008, the Land Council purported to terminate the Trust. The letter is in these terms:

“I am the administrator of the Koompahtoo Local Aboriginal Land Council (KLALC), pursuant to the provisions of the Aboriginal Land Rights Act 1983 (NSW). I enclose a copy of the documents relating to my appointment as administrator.
I note:
1. K.L.A.L.C. Property & Investment Pty Limited (Trustee) is Trustee of the Koompahtoo Property & Investment Trust (Trust), pursuant to the trust deed stamped by the Office of State Revenue on 30 March 2001 (Trust Deed).
2. The property at Lot 556 of Deposited Plan 729949 (Land) is registered in the name of the Trustee and is subject to the Trust.
3. KLALC is the sole beneficiary of the property subject to the Trust, pursuant to its Class B and Class C Unitholdings, and is therefore entitled to terminate the trust and require transfer of the property subject to the Trust to it: Saunders v Vautier (1841) 4 Beav 115, 49 ER 282.
You are instructed to:
(a) take all steps necessary to wind up the Trust and transfer any other property to KLALC; and, in particular,
(b) transfer the Land to KLALC by executing and returning the enclosed transfer to me within 14 days from the date of this letter.
Please identify any claims outstanding against the property of the Trust as at the date of this letter. The New South Wales Aboriginal Land Council (NSWALC) will not pursue any claim against the Trust prior to the distribution of the Trust property or against the Trustee after the distribution of the Trust property, and that it will consent to the transfer of the Land to KLALC (subject to its mortgage remaining registered). A copy of a letter from NSWALC confirming this is enclosed.
If you do not return the executed transfers within 14 days, I will assume that you do not intend to comply with this instruction and KLALC will apply to the Supreme Court of New South Wales requiring you to do so.
My solicitors, Watson Magioni, have previously written to you requesting undertakings in relation to the Land. No response has been received to that request. I repeat that request.
I urge you to comply with this instruction so that the costs of litigation can be avoided. KLALC will seek the costs of the litigation from the directors of the Trustee personally. KLALC will oppose any attempt by the trustee to use any Trust property or funds in order to defend any such litigation.”

The Trustee received the letter but has not replied to it. It has denied that it constitutes a termination of the Trust or that it is bound to terminate the Trust. The letter was also sent to the directors of the Trustee and they have not replied to it.

5 On 2 July 2008, the Land Council instituted these proceedings. It seeks the following relief:

1. An order pursuant to rule 7.6 of the Uniform Civil Procedure Rules 2005 that Shane Newlin be appointed to represent the Class “A” Unitholders identified in the First Schedule to the Trust Deed dated 30 March 2001 constituting the Koompahtoo Property and Investment Trust.
2. An order that the Trustee take all steps that are necessary to transfer Lot 556 in Deposited Plan 729949 to the Land Council within 28 days.
3. An order that the Trustee take all steps that are necessary to transfer any other property of the Koompahtoo Property and Investment Trust to the Land Council within 28 days.
4. In the event that the Trustee fails to take all the steps referred to in Order 3 within 28 days, an order that the Registrar of the Supreme Court of New South Wales execute a transfer to the Land Council of Lot 556 in Deposited Plan 729949 as soon as reasonably practicable thereafter.

In the alternative to the relief in paragraphs 2 to 4, the Land Council seeks

5. An order pursuant to section 70 of the Trustee Act 1925 (NSW) that the Public Trustee be appointed Trustee of the Koompahtoo Property & Investment Trust in substitution for the Trustee.

6 By Notice of Motion filed on 2 July 2008, the Land Council applied for an order that the issues in paragraphs 1 to 9 and 26 of the statement of claim and the relief sought in paragraphs 2 to 4 of the prayers of relief be determined prior to and separate from the other issues in these proceedings. The issues in paragraphs 1 to 9 of the statement of claim concern the question whether the Land Council has lawfully terminated the Trust.

7 On 21 November 2008, Hammerschlag J ordered that the following question be determined separately from all other questions in the proceedings:

“Whether the Koompahtoo Local Aboriginal Land Council is entitled to have transferred to it the property the subject of Koompahtoo Property and Investment Trust as a consequence of having terminated the trust by its letter dated 8 April 2008 to KLALC Property & Investment Pty Ltd.”

That question is the question posed by paragraphs 1 to 9 of the statement of claim.

Four classes of units

8 The Trust is a unit trust. There are four classes of units in the Trust, Classes A, B, C and D. They are prescribed in the First Schedule of the trust deed pursuant to the provisions of clause 2.2(6) of the trust deed.

9 The First Schedule also names the persons who are the holders of units in each class and prescribes the number of units in each class. They are as follows.

Class A - The amount of $30 has been prescribed for Class A units being 30 units each of $1. There are 30 unitholders who are listed by name. Two of those unitholders have died.

Class B - The amount of $1000 has been prescribed for Class B units. 1000 units have been issued and are all held by the Land Council.

Class C – Only one unit $1 has been prescribed for Class C units and that is held by the Land Council.

Class D – There is no evidence that any Class D units have been issued. On or about 9 December 2008, the Land Council served the Trustee with a notice to produce documents for inspection. Among other documents, the notice sought any documents referring to or recording details of Class D unitholders of the Trust. The Trustee produced no documents. No register of unitholders has been produced. The inference is strong and I find that no Class D units have been issued.

10 The First Schedule also prescribes the rights attaching to each class of units. The relevant provisions are set out below in the form in which they appear in the First Schedule.

Classes of Units

Class”A” - Management Units
Class “B” - Profit Distribution Units
Class”C” - Capital Distribution Units
Class”D” - Affiliated Persons Units

Special Rights, Privileges, Obligations and Liabilities attaching to Units

Class “A”

Class “B”

Class “C”

Class “D”a. Total and exclusive rights to vote on appointment/removal of Trustee, and issue of Class “D” Units
b. Limitations and restrictions on holdings as per Schedule “A” attached hereto

a. Sole rights to distribution of Trust Income/Profit
b. Limitations and restrictions on holdings as per Schedule “A” attached hereto

a. Sole rights to distribution of Trust Capital in all circumstances
b. Limitation and restrictions on holdings as per Schedule “A” attached hereto

a. Limitations and restrictions on holdings as per Schedule “A” attached hereto

11 The above table refers to limitations and restrictions on each class of unitholders “as per Schedule A attached hereto”. The relevant provisions of Schedule A are as follows:

“Class “A”
1. The maximum number of Class “A” Units which may be issued and remain currently on issue shall be restricted to Thirty (30).
2. No Class “A” Unit may be transferred from its current registered holder to any other person or entity. And in the event that any current holder dies or ceases, for any reason to be entitled to continue to remain as registered holder of any such Unit, then such Unit shall be cancelled and forfeited forthwith.
3. All current holders of units of this class shall be current registered members of Koompahtoo Local Aboriginal Land Council.
4. Should any Unit Holder currently holding Class “A” Units cease to be a member of Koompahtoo Local Aboriginal Land Council at any time for any reason then that Unit Holder shall continue to hold any such Class “A” Unit and shall surrender any such Class “A” Unit for cancellation forthwith.
Classes “B” The holding of Class “B” and Class “C” Units is
and “C” reserved unto KOOMPAHTOO LOCAL ABORIGINAL LAND COUNCIL Incorporated.
Class “D” The holding of Class “D” Units is restricted to ordinary current registered members of Koompahtoo Local Aboriginal Land Council and the granting of consent to the issue of any Class “D” Units shall always remain at the absolute discretion of the holders for the time being of Class “A” Units.”

It will have been noticed that by virtue of those provisions the Land Council is at present the sole and exclusive beneficiary of the Trust. It is the person solely entitled to both the capital and income of the Trust. The rights of holders of Class A units are limited to voting on the appointment and removal of the Trustee and the issue of Class D units. The trust deed does not provide for any entitlement to the capital or income of the trust for the holders of either Class A or Class D units.

Representation of Class A unitholders

12 The Land Council is the plaintiff and it holds Class B and Class C units. The Trustee is the defendant. The second defendant Mr Newlin has not been served. Although the plaintiff had applied for an order that Mr Newlin be appointed to represent Class A unitholders, no such order has been made. It appears that Mr Newlin was unwilling to act in that capacity. There are no Class D units. The holders of Class A units are not parties to these proceedings.

13 On 4 February 2009, White J directed that on or before 13 February 2009, the Trustee send letters to the last known address of the Class A unitholders and to any other unitholder of which it becomes aware other than the plaintiff giving notice of the nature of these proceedings and the plaintiff’s claim and advising such persons that, if they wish to be heard in relation to the plaintiff’s claim, they may make an application to do so on notice to the parties and to his Associate.

14 The Trustee complied with that direction, albeit 12 days later than the date ordered, by causing its solicitors H A Miedzinski Lawyers to send a letter dated 25 February 2009 to holders of Class A units. The letter was in these terms

“ RE: KOOMPAHTOO LOCAL ABORIGINAL LAND COUNCIL V K.L.A.L.C PROPERTY AND INVESTMENT PTY LTD
This is an important letter. If there is anything you do not understand, please contact us immediately.
We act for K.L.A.L.C Property & Investment Pty Ltd which is the Trustee of Koompahtoo Property and Investment Trust in which you are an A Class Unit holder.
As you are probably aware an Administrator has been appointed to the Koompahtoo Aboriginal Land Council.
The Administrator, on behalf of the Koompahtoo Local Aboriginal Land Council, has commenced proceedings against our client seeking a Court Order, in general terms, to terminate the Trust and/or appoint a new Trustee.
You may have rights that would be adversely affected by such an order or you may wish such an order to be made.
The Court has directed us to write to you to advise you of the proceedings to give you an opportunity to become a party to the proceedings.
If you wish to be joined you may apply in writing to:
The Associate to Justice White
Supreme Court
Queens Square
SYDNEY NSW 2000
Or Fax [phone]
If you have any question or require any additional information, please contact us.
Our contact details are:
H A Miedzinski Lawyers
7/266 Princes Highway
SYLVANIA NSW 2224
Tel: [phone]
Fax: [phone]
Contact details for the Aboriginal Legal Aid are:
Post Office Box 197
PARRAMATTA 2124
Telephone: [phone]
Contact name: Elizabeth Luland”

No application was made to either the Associate to Justice White or to Ms Luland at H A Miedzinski Lawyers.

15 The hearing of these proceedings commenced at 10.00 am on 22 May 2009. At about 11.30 am a short adjournment was ordered. During that adjournment, a small group of persons who had been sitting in the court informed counsel for both the plaintiff and defendant that they were the holders of some of the Class A units. They said that they wished to be heard. They said that they had not understood the effect of the letter they had received from the solicitor for the Trustee. On resuming the hearing and being informed about these facts, I heard those persons and made directions giving them an opportunity to obtain legal advice and to present argument. I appointed 3 June 2009 as a return date on which these Class A unitholders would inform the court if they wished to be heard. I also fixed 5 June as the date on which these persons could be heard. I directed that, in the meantime, the plaintiff and defendant both proceed to present their respective arguments. I directed that a copy of the transcript of that argument be delivered to one of the Class A unitholders present in court who had consented to receive documents on behalf of those other persons present in court.

16 On 3 June, Mr Stevens appeared for a number of the Class A unitholders. After hearing evidence from Ms Carol Smith, one of the Class unitholders, I ordered that she be joined as a defendant on behalf of herself and 18 other persons who claim to be Class A unitholders. The evidence is that two of the 30 holders of Class A units have died. There are now 28 Class A unitholders. When the hearing resumed on 5 June, Mr Stevens tendered by consent evidence that another Class A unitholder, Mr Neville Cutmore, had consented to being represented by Ms Smith. There are real doubts whether two of the persons represented by Ms Smith are holders of Class A units. It is clear, however, that the rest of the persons represented by Ms Smith do hold Class A units. Ms Smith, therefore, represents a majority of the holders of Class A units. Those Class A unitholders represented by Ms Smith oppose the Land Council’s application. In all the circumstances, I am satisfied that the interests of Class A unitholders are adequately represented in these proceedings.

The issue

17 The Land Council has by its letter dated 8 April 2008 called upon the Trustee to wind up the Trust and to transfer all trust property to it. The Land Council calls in aid the so-called rule in Saunders v Vautier (1841) 4 Beav 115; 49 ER 282. While, the High Court noted in CTP Custodian Pty Ltd v Commissioner of State Revenue for the State of Victoria (2005) 224 CLR 98 at [47], that the rule might not have been formulated in Saunders v Vautier, the court approved two modern formulations of the rule in Goulding v James [1997] 2 All ER 239 at 247 and in Thomas on Powers (1998) p 176. The rule as formulated in Thomas on Powers is in these terms:

“Under the rule in Saunders v Vautier , an adult beneficiary (or a number of adult beneficiaries acting together) who has (or between them have) an absolute, vested and indefeasible interest in the capital and income of property may at any time require the transfer of the property to him (or them) and may terminate any accumulation.”

The rule applies notwithstanding that the trust deed may contain express provisions for determination of the Trust: Re AEG Unit Trust (Managers) Ltd’s Deed [1957] Ch 145. The rule also applies to unit trusts: Aust-Wide Management Ltd v Chief Commissioner of Stamp Duties (1992) 24 ATR 148 at 171. The Land Council is sui juris and is at present the sole beneficiary. It has a vested interest. The question is whether it has an absolute and indefeasible interest in the trust fund. Mr Brereton for the Land Council contended that it has, pointing to several provisions in the trust deed. Mr Durston for the Trustee pointed to the same provisions in the trust deed and contended that the class of beneficiaries is not closed so that the rule in Saunders v Vautier could not operate. Mr Stevens on behalf of the Class A unitholders adopted the submissions of Mr Durston and, as well, contended that, given the objects of the Trust, it was not appropriate to apply the rule in Saunders v Vautier . In order to deal with these contentions it is necessary to note a number of provisions in the trust deed.

The trust deed

18 There is no settlor of this trust. The trust deed is made between the Trustee and the persons named in the First Schedule as unitholders. They are the persons set out in the table in the First Schedule which has been quoted already. They are the holders of Class A, Class B and Class C units.

19 The trust deed begins with six paragraphs A to G. Those paragraphs and, particular, paragraph G provide a broad overview of the intent of the Trust and the statement of its objects. It is helpful to recite them.

A. The Trust Fund shall be divided into the number of initial units as specified in the First Schedule.
B. The classes of units shall be as specified in the First Schedule.
C. Any special rights, privileges, obligations and liabilities attaching to any class of units shall be as specified in the First Schedule.
D. Any additional Trustee powers exercised in accordance with Clause 6 shall be as specified in the First Schedule.
E. The applicability or otherwise of the Third and Fourth Schedule shall be as set forth in the First Schedule.

F. The Trustee has received applications for the issue of the initial units and the application moneys from the initial Unitholders in respect thereof.
G. The specific stated objects of the Trust constituted by this Deed shall be to facilitate and assist Koompahtoo Local Aboriginal Land Council to:
(i) improve, protect and foster the best interests of the Council
(ii) acquire land
(iii) obtain or construct housing for its members within that Council’s area and to repair and maintain that housing
(iv) purchase, commence and engage in any business enterprises, including those which promote employment and employment training, as a means of obtaining self-sufficiency for members of the Council
(v) obtain financial assistance from the New South Wales Aboriginal Land Council
(vi) obtain financial assistance from any other source for the provision of facilities for the Council and its projects
(vii) commence, support and carry out proposals designed to protect and preserve the sites and culture of the traditional peoples of the Council’s area
(viii) ensure that no part of the income or property of the Council is transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit to members of the Council
(ix) do all things permitted by the Aboriginal Land Rights Act 1983
(x) promote, nurture and encourage, commence, support and carry out proposals designed to protect and preserve Aboriginal culture and heritage, and to encourage and promote all aspects of improvements to health, education sport and physical fitness, nutrition and the interest and well-being of the elderly in general and that pertaining specially within the area of the Koompahtoo Local Aboriginal Land Council in particular.

It is apparent from the objects as stated in paragraph G and the table in the First Schedule that the intent is to improve, protect and foster the best interests of the Land Council and the members of the Land Council.

20 The Trustee holds the trust fund and the income earned by that fund for the Unitholders upon the trusts and subject to the powers and provisions expressed in the trust deed concerning that fund: cl 2.1. The following is a note of the provisions relevant to the determination of the question whether there is a closed class of beneficiaries.

21 Clause 2.2 provides for the issue of units and the interests attaching to such units. It is necessary to note clauses 2.2(a), (b), (c), (d) and (f). Those clauses provide:

“2.2 Issue of Units and Rights Attaching
(a) The beneficial interest in the Trust Fund as originally constituted and as existing from time to time shall be held by the Unitholders for the time being subject to the special rights privileges or powers (if any) attaching to any class or classes or units in proportion to the units registered in their respective names and all units shall subject to any special rights privileges or powers existing from time to time be of equal value. If there be no Unitholders the Trust Fund shall be held for charitable purposes determined by the Trustee. Each unit shall subject to the special rights privileges or powers (if any) attaching to any class or classes of units entitle the registered holder thereof equally with the registered holders of all other units to the beneficial interest in the Trust Fund as an entity but subject thereto shall not entitle the Unitholder to any particular security or investment comprised in the Trust Fund or any part thereof and (save as provided in Clause 4) no Unitholder shall be entitled to the transfer to him of any property comprised in the Trust Fund.
(c) The Trust Fund as originally constituted by the Initial Sum shall be divided into the number of units set forth in the First Schedule and into the classes (if any) set forth in the First Schedule. The initial Unitholders named in the First Schedule shall be entitled to and be issued the number of Units set opposite their respective names in the First Schedule and each of those persons shall be deemed to be recorded in the Registrar of Unitholders in relation to those Units set opposite its name;
(d) Each Unitholder shall pay to the Trustee such sum (if any) as such Unitholders agrees to pay in applying for the issue to him of such unit; …
(f) The Trustee with the consent in writing of the Unitholders (if any) may issue additional units from time to time with power to classify or designate the same with or without special rights privileges powers liabilities or obligations or to reclassify units which are already issued and in respect thereof to create amend or revoke any special rights privileges powers liabilities or obligations in such manner as the Trustee thinks fit provided that unless Unitholders waive the operation of this provision in an particular case:
(i) all new issues of units of the classes set forth in the First Schedule shall comprise the same proportion of units of those classes as are set forth in the First Schedule and shall before their issue be offered in the first instance to existing Unitholders holding units of that class pro rata as nearly as may be to their existing holdings and without involving fractions;
(ii) all new issues of units of classes not previously issued shall be offered in the first instance to Unitholders (of whatever class) pro rata to their existing holdings;
(iii) offers of new issues of units shall be made by notice specifying the number and class of units offered and limiting a time within which the offer, if not accepted, will be deemed to be declined, and after the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the units offered, the Trustee may dispose of those units in such manner as it thinks most beneficial to the Trust Fund. The Trustee may likewise so dispose of any new units which (by reason of the ration (sic) which the new units bear to units held by persons entitled to an offer of new units) cannot, in the opinion of the Trustee, be conveniently offered under this proviso;
(iv) no units shall be issued subject to any special rights privileges powers liabilities or obligations and in respect of existing units no rights privileges powers liabilities or obligations shall be created amended or revoked.”

The Trustee points to clause 2.2(f) which, it contends, has the consequence that the class of beneficiaries under the Trust is not closed. I will return to that submission.

22 Clause 3 provides for the redemption, transfer and transmission of units. It contains no provisions which need now be noted.

23 Clause 4 prescribes the obligations of the Trustee upon the termination of the Trust. The vesting day is defined to mean

“Vesting Day” means whichever shall first occur of the following days:
(a) the day upon which shall expire the period of 80 calendar years commencing on the date of the making of this Deed;
(b) the day upon which shall expire 18 calendar years after the date of the death of the last surviving of the descendants now living of His Majesty King George V;
(c) the day which the Trustee may at any time in the absolute discretion of the Trustee determine to be the vesting day,”

The Trust will, therefore, continue for a minimum period of 80 years unless there is some prior determination by the Trustee. The trust deed does not provide any express power in the Trustee to determine the Trust.

24 Clause 5 provides for the distribution of income. In clause 5.1(c) the trust deed provides that, if the unitholders so direct, the Trustee may distribute part or all of the income to all or one or more of the unitholders. That provision is, on its face, inconsistent with the terms of the First Schedule. In any event, the Trustee may only make such a distribution if the unitholders so direct. I will return to this provision.

25 Clause 6 is a long provision that sets out the powers and duties of the Trustee. The powers are extensive. It is sufficient for present purposes to note only clause 6.1(b)(xxiv). It is in these terms:

“with the consent of each class of Unitholders at any time or times before the vesting day by any irrevocable deed or deeds (without infringing any rule against perpetuities to this deed) to appoint that the whole or any part of the Trust Fund shall henceforth be held upon the trusts and with and subject to the powers and provisions of any other trust (not infringing the rule against perpetuities applicable to this Deed) and approved by the Trustee in favour or for the benefit of all or one or more exclusively of the others or other of the Unitholders registered at the time of such appointment and upon any such appointment being made the Trustee may transfer to the trustees or trustee for the time being of the said other trust property comprised in the said appointment and thereupon the trusts herein declared concerning such property shall cease and determine and the said property shall for all purposes be subject to the trusts powers and provisions contained in the said other trust and be subject to and governed by the proper law of the said other trust whether or not such proper law shall be proper law of this trust.”

The Trustee points to this as another provision that prevents the closing of the class of beneficiaries. I will deal later with this submission.

26 Clause 7.1 provides for variation of the Trust. It is in these terms:

“ Variation of Trust
With the special consent of the Unitholders the Trustee may at any time and from time to time by supplemental deed revoke add to or vary all or any of the provisions of this Deed or any of the trusts hereinbefore limited or the trusts limited by any variation or alteration or addition made previously and may by the same or any other deed or deeds declare any new or other trusts or powers concerning the Trust Fund or any part or parts thereof the trusts whereof shall have been so revoked added to or varied but so that any law against perpetuities is not thereby infringed and so that such new or other trusts powers discretions alterations or variations:
(a) may relate to the management or control of the Trust Fund or the Trustee’s powers or discretions; and
(b) shall not affect the beneficial entitlement to any amount set aside for any Unitholder prior to the date of the variation alteration or addition.”

The Trustee relies on clause 7.1 as another provision preventing the closing of the class of beneficiaries. I come to that contention later. The balance of clause 7 deals with the obligations of the Trustee to report, keep accounts, the holding of meetings, and the giving of notices. Those provisions need not be noted save for clause 7.4 which will be considered in a moment.

Can the class of beneficiaries be closed?

27 Mr Durston, for the Trustee, contended that the class of beneficiaries has not closed because the trust deed permits the Trustee to create additional unitholders and to confer rights and interests upon those unitholders which may include an interest in the capital or income of the trust fund. Mr Durston pointed to the powers of the Trustee as provided in clauses 2.2(f), 6.1(b)(xxiv) and 7.1. I turn to examine each of those provisions.

28 The power of the Trustee to issue additional units as provided in clause 2.2(f) may be exercised only if the unitholders consent in writing. The trust deed defines expressions such as “consent” and “special consent” in clause 1.1. by reference to the terms of clause 7.4. Clause 1.1 is in these terms:

“The expression the “consent of the Unitholders”, the “special consent of the Unitholders”, the “consent of a class of Unitholders”, the “special consent of a clause of Unitholders”, the “direction of the Unitholders”, the “special direction of the Unitholders”, the “direction of a class of Unitholders”, and the “special direction of a class of Unitholders” mean respectively consent or direction given in accordance with clause 7.4 if there are any Unitholders and if not the consent of the Trustee.”

Clause 7.4 provides:

“ Unitholders Consents
For the purposes of this Deed the consent of the Unitholders or any class thereof to any act or thing or the direction of the Unitholders or any class thereof in relation to any act or thing shall conclusively be deemed to have been given on production of:
(a) a consent in writing executed by or on behalf of all Unitholders or the class thereof as the case may be; or
(b) a minute signed by the chairman of the meeting of the Unitholders or a class thereof at a duly convened meeting of the Unitholders or a class thereof a resolution was passed in favour of such consent or direction by a majority of (or in the case of special consent or special direction a majority of not less than 75 per cent) of the votes of those present in person or by proxy at the meeting or on a poll if the same be demanded.”

This is an unsatisfactory definition. It allows for alternative methods of proof of consent. Paragraph (a) clearly states that, where consent in writing is required, all unitholders must consent. However, it is not entirely clear whether the expression “consent in writing” requires the consent in writing of each class of unitholders or whether it requires the consent of the majority of unitholders. Moreover, the trust deed does not require that every consent must be in writing. Where not required in writing, the consent could be evidenced in either of the methods provided in paragraphs (a) and (b). However in whatever way the consent may be given, the Land Council, while managed by an Administrator, is in a position to prevent any exercise of that power by the Trustee. The discussion that follows proceeds on the footing that the Land Council is being administered by the Administrator.

29 If the effect of clause 2.2(f) is to require the Trustee to have the consent of each class of unitholders, the Land Council as holder all of the Class B and Class C unit will be able to veto any exercise of that power. If the effect of clause 2.2(f) is to require the Trustee to have the consent of a majority of unitholders, the Land Council holds an overwhelming majority of the votes and so is able to control the vote at any meeting. The total number of votes is 1031 of which the Land Council has 1000.

30 If the intent of the trust deed is that the expression “consent in writing” in clause 2.2(f) is to have the meaning in clause 7.4(a), the consent will have to be executed by or on behalf of all unitholders. The Land Council has only to refuse to execute or abstain from executing a valid consent in order to prevent the required consent in writing being obtained. Thus, whatever may be required to constitute a valid consent in writing for the purposes of clause 2.2(f), the Land Council is able to prevent the requisite consent being given as required by that clause.

31 Clause 6.1(b)(xxiv) provides that the Trustee will only be able to exercise the power to create additional unitholders if it has the consent of each class of unitholders. As the holders of units in both Class B and Class C, the Land Council is able to veto any exercise of that power by simply refusing to grant its consent. In other words, the Trustee is able to exercise that power only if the Land Council consents.

32 The power of the Trustee to vary the trust as provided in clause 7.1 is subject to the same hurdles. The Land Council is able to prevent the exercise of the power in the same way as it may prevent the exercise of the powers in clause 2.2(f).

33 The question whether the unitholders have given a direction will mutatis mutandis will be subject to the same considerations as determine whether the unitholders have granted consent pursuant to either clause 2.2(f) or clause 7.1. The Land Council is, therefore, in a position to prevent a distribution of income pursuant to clause 5 to any person other than itself.

34 Although, on the face of the trust deed there is a contingency in the sense that the Trustee has the capacity to create future interests, in fact the Trustee’s capacity to do so can only be exercised with the consent of the Land Council. As this analysis demonstrates, the Land Council is able to prevent the Trustee from creating any additional unitholders or from varying the Trust in any way that might defeat or circumscribe the interests of the Land Council as the holder of Class B and Class C units. In other words, the Land Council remains able to prevent any additional class of unitholders from being created as additional beneficiaries of the trust. In short, it has an effective veto to prevent the creation of any additional unitholders or variation of the rights of existing unitholders. It can, therefore, ensure that the class of beneficiaries remains closed and that it remains the only beneficiary under the Trust. If the Land Council under the Administrator is able to act in this way, the Land Council as the holder of Class B and Class C units has a vested, absolute and indefeasible interest in the capital and income of the trust fund. It, therefore, has the capacity to call upon the Trustee to terminate the Trust and to transfer the trust fund to it.

Can the rule in Saunders v Vautier operate?

35 Mr Stevens submitted that the rule in Saunders v Vautier did not apply in the particular circumstances of this Trust. He contended that, when regard is had to the powers of the Trustee to create additional classes of unitholders and to vary the rights and privileges of existing unitholders, the Administrator is precluded from being able to invoke the rule in Saunders v Vautier. He pointed to the objects of the Trust especially those in paragraph G of the trust deed and submitted that the Trust was intended to engage in different kinds of development for the future benefit of the Koompahtoo people. There was, he said, a clear connection between the objects of the Trust, the welfare of the Koompahtoo people and the land occupied by the Koompahtoo people. The intention of the Trust was to provide for future generations of the Koompahtoo people and for their social, cultural and economic needs. He also relied on the power of the Class A unitholders to remove the Trustee and appoint a new Trustee. That power, he submitted, was intended to give the Class A unitholders the power to direct the mind of the Trustee. The Trust was, he said, designed to evolve with the needs of the Koompahtoo people. The Administrator was, he contended, holding office only for the time being. He could not put an end to this trust intended, as it is, to provide for the future benefit of the Koompahtoo people. His argument is attractive but must fail.

36 The first ground of his argument fails in that the rule in Saunders v Vautier operates even where the termination of the Trust will defeat the intention of the Trust, even in the case of a protective trust: Re Smith (1928) Ch 915; Re Coppel (1950) VLR 328. See also Trustees of Estate Mortgage Fighting Fund Trust v Federal Commissioner of Taxation (2000) 175 ALR 482 at 497. As already demonstrated, the Land Council, whilst being administrated by the Administrator, has an absolute and indefeasible interest in the trust property and, therefore, has the capacity to terminate the Trust.

37 The powers of the Administrator provide a second ground on which the argument of Mr Stevens must fail. The Administrator was initially appointed by the Minister for Aboriginal Affairs on 25 February 2003 pursuant to s 222 of the Aboriginal Lands Rights Act. The initial term of the appointment was for a period of 12 months, the Minister having power pursuant to s 231 of the Act to review the performance of the Administrator and to extend the term of his appointment. As already noted, the Minister has extended the term on several occasions so that the Administrator has remained in office from 25 February 2003.

38 Section 224 of the Act authorises the Minister to specify in the instrument of appointment the functions and duties of the Administrator. The letter of appointment enclosed the terms of the appointment of the Administrator. Clause 5 of the Terms of Appointment prescribe the duties of the Administrator. They are expressed in wide terms. For present purposes, it is sufficient to note the terms of clauses 5.1, 5.2, 5.2.1, 5.2.8 and 8.1.

“5.1 The Administrator must discharge all the functions of KLALC and take such action and exercise his powers as he determines necessary in the best interest of KLALC and in the exercise of his sole discretion consistent with the ALRA, the ALRR and relevant law.
5.2 Without limiting the generality of the Administrator’s authority under these terms of appointment (including the immediately preceding clause 5.1), the Administrator may take such action as he determines necessary in the exercise of his sole discretion arising out of or because of, directly indirectly, the Investigator’s Report into KLALC prepared for the Minister and NSWALC, including findings, issues and all other matters including:
5.2.1 the transfer of the land contained in Lot 556 in Deposited Plan 729949 (“the Morisset land”) to KLALC Property & Investment Pty Limited
5.2.8 the KLALC Property and Investment Pty Limited and Koompahtoo property and Investment Trust”

Clause 8.1 of the Terms of Appointment provides:

“8.1 The Administrator is to undertake all of the functions of KLALC as prescribed in the ALRA , the ALRR and relevant laws.”

It is apparent from these provisions that the Administrator may take whatever action he determines to be necessary in the interests of the Land Council. His powers are extensive and include whatever action is necessary in relation to the transfer of the Morisset land and in relation to both the Trust and the Trustee. The powers of the Administrator are similar to those of the administrator of a company. Like an Administrator appointed under Part 5.3A of the Corporations Act 2001 (Cth) he may act without having to seek the approval of the members of the Land Council: s 222(3) and (4) of the Act. See also Brash Holdings Ltd v Shafir (1994) 14 ACSR 192; Re Smith as Administrator of Berowra RSL Bowling Club (2006) NSWSC 780. The Court will not examine the merits of that decision: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 37-38. Although his powers are not spelt out in terms as detailed as the terms of s 437A of the Corporations Act , it is apparent from the terms of the clauses 5.1, 5.2 and 8.1 that the Administrator is to undertake all the functions of the Land Council and may take in the exercise of his sole discretion whatever action and may exercise whatever powers he considers necessary. If he thinks it necessary, the Administrator has powers wide enough to determine the Trusts provided he acts consistently with the Act and the Regulations made thereunder. There is no provision in the Act that bears upon the present question. Further, while the Trust may come to an end, the assets of the Trust will be in the hands of the Land Council. The action of determining the Trust is no more than the transfer of assets from the Trust to the Land Council and the Land Council has, like the Trust, the capacity to promote the interests of the Koompahtoo people. Given that the Administrator will be able to have the Morisset land transferred to the Land Council, it is relevant to that note s 230 of the Act prevents the Administrator from disposing of the land or otherwise dealing with it without the consent of the Land Council and to note also that any sale of the land must be subject to the approval of the New South Wales Aboriginal Land Council under s 40D of the Act. In short, the Administrator has been appointed to administer the affairs of the Land Council in whatever way he deems necessary. If he considers it to be in the best interests of the Land Council to determine the Trust he can do so. The thrust of the submission of Mr Stevens was that nothing should be done that might adversely affect the interests of the Koompahtoo people and its Land Council. Those interests will not be disadvantaged by a transfer of the Trust’s assets to the Land Council.

39 While the Administrator has in one sense a temporary authority to administer the Land Council, he is able to exercise plenary power and his actions bind the Land Council. The temporary nature of his duties is not a bar to the exercise of the Land Council’s entitlement to terminate the Trust.

40 The fact that the Class A unitholders are in a position to appoint and remove trustees does not qualify the power of the Land Council or its Administrator to terminate the Trust as the Land Council is the beneficiary with an absolute, vested and indefeasible interest in the trust fund to determine the Trust. That power may be exercised whoever the Trustee might be.

41 For all of these reasons, the Administrator has the capacity to call upon the Trustee to terminate the Trust and transfer the trust fund to the Land Council.

The Trustee’s rights to an indemnity

42 Although counsel for the parties did not refer to them, it is necessary to note those provisions in the trust deed which concern the Trustee’s right to an indemnity. They are clause 6.1(b)(viii) and clause 6.2(a). Clause 6.11(b)(viii) authorises the trustee to pay out of the trust fund or the income thereof all costs and expenses incidental to the management of the trust fund. Clause 6.2(a) is in these terms:

“(a) The Trustee shall be indemnified out of the Trust Fund from and against any expense and liability that may be incurred in prosecuting, defending or intervening in any action or suit in respect of the provisions of this Deed, except where the action or suit arises out of any act of deceit, neglect or default or breach of trust buy the Trustee;”

A trustee is entitled to be reimbursed for liabilities properly incurred in the administration of the trust and the trustee cannot be compelled to surrender the trust property to the beneficiaries until the claim has been satisfied: Commissioner of Stamp Duties(NSW) v Buckle (1998) 192 CLR 226 at [47], where that entitlement of the trustee was called the trustee’s “entitlement to reimbursement or exoneration”. The trustee’s entitlement to reimbursement or exoneration takes priority over the rights of the beneficiaries: Buckle at [50]. The entitlement of the trustee for reimbursement or exoneration might in certain circumstances have the consequence that the beneficial interest of the cestui que trust has no value: see, for example, Buckle and CPT Custodian . However, I do not understand the decision in either Buckle or CPT Custodian to prevent a beneficiary who is sui juris and who has an absolute, vested and indefeasible interest in the capital and income of trust property from being able to require the termination of the trust and the transfer of the trust property to that beneficiary where a trustee has right to reimbursement and exoneration. For these reasons, neither clause 6.1(b)(viii) and clause 6.2(a) stands in the path of the ability of the Land Council to terminate this trust. Their effect is that the trustee is entitled to be indemnified for those expenses that have been properly incurred.

43 In his letter dated 8 April 2008, the Administrator has recognised the Trustee’s entitlement for reimbursement by asking the Trustee to identify any claims outstanding against the property of the Trust. Any order should therefore recognise the Trustee’s right to be reimbursed for expenses properly incurred in the administration of the Trust.

44 The Morisset land is subject to a mortgage to the New South Wales Aboriginal Land Council (“the mortgagee”). The mortgagee has by deed dated 12 February 2009 consented to transfer to the plaintiff Land Council the Morisset land on the terms set out in that deed. Upon the land being transferred to the plaintiff Land Council, the plaintiff Land Council will assume all of liabilities of the Trustee to the mortgagee as well as the other obligations set forth in the deed dated 12 February 2009. It is unnecessary to examine the content of those obligations. It is sufficient to note that the existence of the mortgage is no bar to the transfer.

Conclusion

45 For these reasons, the answer to the preliminary question as ordered by Hammerschlag J on 21 November 2008 is

“The Koompahtoo Local Aboriginal Land Council is entitled to have transferred to it the property the subject of the Koompahtoo Property and Investment Trust as a consequence of having terminated the trust by its letter dated 8 April 2008 to KLALC Property and Investment Pty Ltd subject to it indemnifying Koompahtoo Property & Investment Pty Ltd for those expenses properly incurred in the administration of the trust.”

It is appropriate also that there be an order that the Trustee transfer the Morisset land, that is to say, the land described as lot 556 in Deposited Plan 729949 to the Land Council and for such other ancillary orders as are necessary.
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