Land v Prideland Equity Pty Ltd
[2024] VSC 557
•11 September 2024
| IN THE SUPREME COURT OF VICTORIA | Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2024 00353
BETWEEN:
| SALLY-ANN LAND | Plaintiff |
| v | |
| PRIDELAND EQUITY PTY LTD (ACN 005 267 667) as Trustee of the PRIDELAND TRUST | Defendant |
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JUDGE: | Barrett AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 August 2024 |
DATE OF RULING: | 11 September 2024 |
CASE MAY BE CITED AS: | Land v Prideland Equity Pty Ltd |
MEDIUM NEUTRAL CITATION | [2024] VSC 557 |
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EQUITY – Trusts – Application by object of discretionary trust for production of trust documents – Whether plaintiff, as guardian, is entitled to production of trust documents pursuant to the terms of the trust – Whether ‘proprietary approach’ or ‘discretionary approach’ to production otherwise applies: O’ Rourke v Darbishire [1920] AC 581, Deutsch v Trumble (2016) 52 VR 108, Chan v Valmorbida Custodians Pty Ltd [2020] VSC 590; Smorgon v ES Group Operations Pty Ltd (2021) 64 VR 146: Schmidt v Rosewood Trust Ltd [2003] 2 AC 709, Dura (Australia) Constructions Pty Ltd & Anor v SC Land Richmond Pty Ltd [2007] VSC 272, Erceg v Erceg (2017) 1 NZLR 320 considered – Held: Application granted – Plaintiff entitled to production of trust documents pursuant to terms of the trust – Plaintiff also entitled to production of trust documents pursuant to the proprietary approach and, if that does not apply, pursuant to the discretionary approach.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Hoyne of counsel | BlueRock Law |
| For the Defendant | No appearance for the defendant |
TABLE OF CONTENTS
Background
Service
Is the plaintiff entitled to trust documents pursuant to the terms of the trust deed?
Is the plaintiff entitled to trust documents pursuant to the ‘proprietary approach’ or the ‘discretionary approach’?
Conclusion
HIS HONOUR:
This in an application by the plaintiff, by Originating Motion filed 30 January 2024, seeking orders that the defendant produce trust accounts and documents of the Prideland Trust. The defendant has not appeared.
The plaintiff relies on the:
(a)affidavit of Sally-Ann Land sworn 29 January 2024;
(b)affidavits of Ms Kathryn Margaret Finemore (‘Ms Finemore’) sworn 6 March 2024, 6 May 2024 and 30 July 2024;
(c)affidavit of Ameera Shah affirmed 30 July 2024; and
(d)written submissions filed 16 May 2024.
Background
The Prideland Trust was established by Deed on 27 March 1997. The defendant is the trustee of the Prideland Trust. The plaintiff's ex-husband, Mr David Land (‘Mr Land’) is the sole shareholder and director of the defendant. The plaintiff and Mr Land are beneficiaries of the trust and are joint Guardians and Appointors. Other family members and associated entities are also named as beneficiaries. The trust property includes several properties including a number of rural properties that are used for farming.
On 1 February 2013, the plaintiff and Mr Land entered into a Binding Financial Agreement (‘BFA’) setting out the terms of their separation. The BFA does provide for a degree of separation but also contains a number of provisions that make it clear the Prideland Trust was to continue and the plaintiff was to remain a beneficiary. In particular:
(a)clause 15 provides that if the plaintiff sells the property located at 345 Officer South Road property which she inherited from her father, she is to pay an amount equivalent to 25% of the net sale proceeds to the defendant as trustee of the trust ‘to be used as an investment vehicle for the benefit of the [plaintiff] and [Mr Land] and their children Jackson and Daniel exclusively and evenly.’;
(b)clause 16 provides that Mr Land was to contribute 25% of any inheritance he receives from his mother’s estate to the defendant as trustee of the trust ‘to be used as an investment vehicle for the benefit of the [plaintiff] and [Mr Land] and their children Jackson and Daniel.’
(c)clause 17 provides that the plaintiff ‘agrees [Mr Land] shall have full unrestricted right and liberty to make all decisions binding on the Trustee of the Trust …’; and
(d)clause 18 provided that the parties would do all things necessary to ‘restrict the beneficiaries of the Trust to [Mr Land], [the plaintiff] and their direct descendants.’
The plaintiff deposes that in July 2023, she instructed her lawyers to write to the trustee seeking trust accounts and documents, in particular:
(a)‘The profit and loss account for each accounting period 2011 to 2023;
(b)The balance sheet for each accounting period 2011 to 2023;
(c)The list of assets held by the Trust for each accounting period from 2011 to 2023;
(d)All other accounting records including financial statements, annual trial balances, general ledger, tax returns for each FYE from 2013 to the year ending 30 June 2023 and such documents as exist for the current financial year;
(e)Any minutes of meetings of the Trust;
(f)Any variations the Trust Deed.’
The plaintiff says that Mr Land responded by email on 2 August 2023 directly to her and their two sons in which he does not say he will provide documents but prevails upon the plaintiff not to press the demands. On about 15 August 2023, the plaintiff instructed her lawyers to send another letter to the trustee seeking the trust accounts and documents. Mr Land did not provide the documents.
The plaintiff says that the last contact she received from Mr Land was a text message exchange on 18 November 2023 in which he suggested they meet to ‘sort out any differences we have going forward.’ The plaintiff responded that she agreed to meet but ‘In the interim could you please send copies of the documents pertaining to Prideland Trust that I’ve requested? Via email is fine. Sal.’ Mr Land responded ‘Sal thanks anyway’, and there was no further contact.
By Originating Motion filed on 30 January 2024, the plaintiff seeks orders for production of trust accounts and documents in relation to the Prideland Trust for the period 2011 to 2023. In her affidavit in support sworn on 29 January 2024, the plaintiff states: ‘to the best of her recollection she has not received financials for the trust since after May 2013.’
Service
On 31 January 2024, the plaintiff served the Originating Motion and affidavit in support sworn by the plaintiff on 29 January 2024 on the defendant by post to its registered office in accordance with s 109X of the Corporations Act 2001 (Cth) (‘Corporations Act’).
On 19 March 2024, the plaintiff served on the defendant by post to its registered office, again in accordance with s 109X of the Corporations Act:
(a)the summons filed 8 March 2024; and
(b)a further affidavit sworn on 6 March 2024 by Ms Finemore, solicitor acting for the plaintiff.
Ms Finemore also caused the documents to be emailed to Mr Land’s email address at [email protected].
To date the defendant has not filed an Appearance.
On 10 May 2024, JR Englefield ordered that:
(a)by 14 June 2024, Mr Land be personally served with the Originating Motion, affidavit in support and a copy of the order; and
(b)by 21 June 2024, an affidavit of personal service be filed.
It appears that personal service was ordered, at least in part, because as sole director and shareholder of the defendant, Mr Land is its alter-ego, and also because the property is a rural property so there may have been questions about whether the documents were received. The necessity for an order for substituted service was foreshadowed in the event personal service could not be effected.
On 30 July 2024, Ms Finemore swore an affidavit setting out numerous unsuccessful attempts at personal service on Mr Land, and providing details of Mr Land's email address and telephone number. It is apparent that process servers unsuccessfully attempted to serve Mr Land at various of his addresses on 3, 4, 5, 7, 9, 11 and 13 June 2024.
Ms Finemore also exhibits various communications between the plaintiff and Mr Land to her affidavit sworn 30 June 2024 in which Mr Land confirms his email address is [email protected]. Ms Finemore says that on 29 July 2024 she sent Mr Land an email enclosing copies of the order made on 10 May 2024 and confirming that the hearing was listed for 1 August at 10:30am.
It is apparent from Ms Finemore’s affidavit that despite reasonable and extensive efforts, the plaintiff has been unable to serve Mr Land personally. In those circumstances it is appropriate to vacate orders 1 and 2 of JR Englefield’s order made on 10 May 2024.
I am satisfied that all of the relevant documents have been served on the defendant in accordance with s 109X of the Corporations Act.
Is the plaintiff entitled to trust documents pursuant to the terms of the trust deed?
The plaintiff submits that she is entitled to trust documents as guardian pursuant to clause 8.3 of the trust deed, and also as beneficiary in accordance with general principles.
As noted above, the plaintiff is a guardian under the trust deed. Clause 8.3 provides that:
Copies of the profit and loss account, balance sheet and a list of the assets held by the trustee as at the close of the accounting period shall be furnished upon request to the Guardian.
In my view, clause 8.3 imposes an obligation on the trustee to produce the described documents on request, and a correlative right on the part of the plaintiff as guardian to obtain them. I am satisfied that such documents have been requested but have not been provided by the trustee. Accordingly on this basis it is appropriate to order such documents to be produced by the trustee to the plaintiff.
Is the plaintiff entitled to trust documents pursuant to the ‘proprietary approach’ or the ‘discretionary approach’?
The plaintiff further submits that as a beneficiary she is entitled to the trust documents pursuant to the ‘proprietary approach,’[1] or, if that is not applicable, then pursuant to the ‘discretionary approach’[2] to production.
[1]See O’Rourke v Darbishire [1920] AC 581 (‘O’Rourke’).
[2]See Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 (‘Schmidt’).
The phrase ‘proprietary approach’ is, broadly speaking, a description of an entitlement to trust documents as of right, subject to exceptions, most notably in relation to documents evidencing the trustee’s exercise of discretion[3], and having regard to considerations of confidentiality.[4] Under the ‘discretionary approach,’ the court may order production of trust documents to a beneficiary as ‘one aspect of the court’s inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts.’ The advice of the Privy Council in Schmidt v Rosewood Trust Ltd[5] (‘Schmidt’) has entrenched the discretionary approach in England, but for reasons that follow, I consider I am bound by authority to apply the proprietary approach in this case.
[3]Deutsch v Trumble (2016) 52 VR 108, 122 [52] (Hargrave J)(‘Deutsch’).
[4]Ibid 124 [58]-[59], 126-127 [73].
[5]Schmidt (n 2).
The frequently cited source of the ‘proprietary approach’ is the decision of Lord Wenbury in O’Rourke v Darbishire[6]¸ as follows:
If the plaintiff is right in saying that he is a beneficiary, and if the documents are documents belonging to the executors as executors, he has a right to access to the documents which he desires to inspect upon what has been called in the judgments in this case a proprietary right. The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in this sense his own. Action or no action, he is entitled to access them.[7]
[6]O’Rourke (n 1).
[7]Ibid 526-627 [38] quoted in Deutsch (n 3) 121-122 [49].
In Deutsch v Trumble (‘Deutsch’),[8] Hargrave J surveyed the authorities, including O’Rourke, and defined the ‘proprietary approach’ as applying to beneficiaries of fixed trusts as well as objects of discretionary trusts. That much is clear from the following passage:
Mr Deutsch contends that the general rule is that a beneficiary — be it a beneficiary with a vested or contingent interest under a fixed trust, or an object of a discretionary trust — has a prima facie entitlement to inspect and copy all “trust documents”. He relies principally on the decision of the House of Lords in O’Rourke v Darbishire to support this contention. I will refer to this as the ‘proprietary approach’. [9]
[8]Deutsch (n 3) 121-126 [46]-[73] (Hargrave J).
[9]Ibid 121 [46] (emphasis added) (citations omitted).
Hargrave J ultimately held that the proprietary approach, rather than the discretionary approach applied in Australia, and that he was bound to apply it. This is consistent with the meaning of ‘proprietary approach’ adopted in Chan v Valmorbida Custodians Pty Ltd (‘Chan’)[10] where Delany J observed:
On one view of the law, as held by the House of Lords in O’Rourke v Darbishire, a beneficiary with a vested or contingent interest under a fixed trust, or an object of a discretionary trust has a prima facie entitlement to inspect and copy all ‘trust documents’ (the proprietary approach).[11]
[10][2020] VSC 590 [71]-[72] (Delaney J) (‘Chan’).
[11]Ibid [66] (emphasis added) (citations omitted). Delany J went on to contrast this approach with the ‘discretionary approach’ in Schmidt (n 2), but did not explicitly state that the proprietary approach in O’Rourke (n 1) did not apply to objects of discretionary trusts.
Identifying this approach as the ‘proprietary approach’ may be misleading in the sense that an object of a discretionary trust does not have an interest in trust documents or the corpus of a trust in a narrow sense.[12] Neither are trust documents held by a trustee of a fixed trust the property of the beneficiary in an absolute sense.[13] But the existence of a beneficiary’s right to trust documents notwithstanding the absence of any interest in them, is consistent with the observations of Gummow J in Re Simersall; Blackwell v Bray[14] that the trustee’s obligation to keep and produce for inspection proper accounts is ‘a necessary incident’ of ‘the control of the trust property by the trustee.’[15] It is also consistent with the observations of Dodds-Streeton J in Dura[16] where her Honour held that the description of a ‘proprietary’ approach is an oversimplification and observed:
…the prima facie obligation of the trustee to provide the access is currently seen as an emanation of the general doctrine that trustees are fiduciaries with a peculiarly high obligation to account and to provide information.[17]
[12]See Lynton Tucker, Nicholas Le Poidevin, James Brightwell, Lewin on Trusts (Lewin on Trusts, (Thomson Reuters, 20th ed, 2023) [41-073], save perhaps to the extent the objects could invoke the rule in Saunders v Vautier [1835-42] All ER Rep 58: see discussion in J D Heydon and M J Leeming, Jacobs’ law of trust in Australia, (LexisNexis, 8th ed, 2016) [23-15].
[13]Re Simersall; Blackwell v Bray (1992) 35 FCR 584, 589-590 (Gummow J).
[14]Ibid 587-590, cited by Delany J in Chan (n 10) [50].
[15]Ibid 589.
[16]Dura (Australia) Constructions Pty Ltd & Anor v SC Land Richmond Pty Ltd [2007] VSC 272, [10] (Dodds-Streeton J).
[17]See also Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 [91] (Doyle J).
The obligations upon which Gummow J and Dodds-Streeton J base their decisions do not depend upon the existence of any enforceable property right to the documents themselves. The obligations of disclosure arise, as Lord Wenbury said, ‘because they are trust documents and because he is a beneficiary.’ That is not dissimilar to the theoretical basis for the availability of the proprietary remedy of equitable tracing discussed by the authors of Meagher Gummow and Lehane’s Equity Doctrines and Remedies. There the authors observed:
It was in Livingstone’s case that Viscount Radcliffe said that while a beneficiary of an unadministered estate has no ‘interest in’ the assets of the estate so as to allow the beneficiary to call for any asset out of the estate, the beneficiary may nevertheless trace in equity when the executor wrongfully disposes of an asset of the estate. Such a beneficiary has ‘property’ only in the quite distinct sense that the beneficiary has a transmissible right to the due administration of the estate. It is that right which entitles the beneficiary as plaintiff to trace when assets of the estate are wrongfully dealt with, but it is ‘no proprietary base’: it gives to the beneficiary neither a retained nor an obtained ‘property in the res.’[18]
[18]J D Heydon, M J Leeming, P G Turner, Meagher Gummow and Lehane’s Equity Doctrines and Remedies (LexisNexis, 5th Ed, 2015), 118 [4-110].
Notwithstanding the difficulties around the use of the word ‘proprietary’, the definition of ‘proprietary approach’ adopted by Hargrave J in Deutsch is not limited to beneficiaries of fixed trusts, but expressly extends to ‘objects of a discretionary trust’, and therefore its application does not depend in its terms upon the existence of a proprietary right in the narrow sense.
In Deutsch, Hargrave J acknowledged a lack of consistency in the application of the proprietary and discretionary approaches,[19] but considered that he was bound to follow the proprietary approach[20], and Delany J ultimately concluded that he ‘should follow the decision in Deutsch[21] because ‘[n]ot only is it not ‘obviously wrong’, it is a decision arrived at after a careful and detailed consideration of the competing authorities.’[22] I am of the same opinion. That is, I consider that I am bound to apply the principle as expressed by Hargrave J in Deutsch that ‘an object of a discretionary trust has a prima facie entitlement to inspect and copy all trust documents,’ subject to considerations of confidentiality and accepted limitations on the right to documents evidencing the exercise of discretion.
[19]Deutsch (n 3) 126 [71].
[20]Ibid 125 [66].
[21]Ibid 126 [70] noting that the proprietary approach had been followed by the Queensland Full Court in Tierney v King [1983] 2 Qd R 580.
[22]Although ultimately in Chan (n 10), Delany J held that the proprietary approach did not apply because ‘the trusts are discretionary trusts’ and ‘none of the … parties is the holder of a proprietary right.’ Similarly in Smorgon v ES Group Operations Pty Ltd (2021) 64 VR 146 (‘Smorgon’), the Court appears to have proceeded on the basis that the proprietary approach did not apply because the beneficiary ‘does not have a vested proprietary interest in the trust fund, and that as a consequence she cannot rely upon the proprietary approach in her application.’ It is difficult to reconcile these cases with the definition of ‘proprietary approach’ in Deutsch (n 3) which explicitly includes discretionary objects.
On that basis, I consider that orders should be made for production of the trust accounts and documents sought subject to the limitation that no documents evidencing the decision making process in relation to the exercise of any powers of distribution need not be produced. In case there are any concerns about confidentiality, I will reserve liberty to apply.
In case I am wrong and the ‘proprietary approach’ does not apply, I will consider the application of the discretionary approach.
The discretionary approach was described by Lord Walker in Schmidt[23] as follows:
Their Lordships consider that the more principled and correct approach is to regard the right to seek disclosure of trust documents as one aspect of the Court’s inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts. The right to seek the Court’s intervention does not depend on entitlement to a fixed and transmissible beneficial interest. The object of a discretion (including a mere power) may also be entitled to protection from the court of equity, although the circumstances in which he may seek protection, and the nature of the protection he may expect to obtain, will depend in the Court’s discretion.[24]
[23]Schmidt (n 2) 729 [51], discussed in Deutsch (n 3) 124-125 [62]-[66].
[24]Ibid [51] (citations omitted), quoted in Smorgon (n 22) 169-170 [69].
In Chan, Delany J noted that:
The exercise of the discretion in each case, with a view to providing beneficiaries with accurate information concerning the administration of the trust and to permit examination of documents that relate to the trust and its administration, is a product of the specific facts and circumstances in the particular case. Nevertheless, the list in Erceg is helpful and a number of the factors listed are relevant to the exercise of the discretion in the present case.[25]
[25]Chan (n 10) [86].
Delany J’s reference to the list in Erceg[26] is the list of discretionary factors considered in that case which are as follows:
[26]Erceg v Erceg [2017] 1 NZLR 320, 338-9 [56].
(a)the documents that are sought. Where a number of documents are sought, each document (or class of document) may need to be evaluated separately, given that different considerations may apply to basic documents such as the trust deed and more remote documents such as the settlor’s memorandum of wishes;
(b)the context for the request and the objective of the beneficiary in making the request. The case for disclosure will be compelling if meaningful monitoring of the trustee’s compliance with the trust deed in the administration of the trust could not otherwise occur. In this regard, it may be relevant that disclosure has been made to other beneficiaries. However, assuming no improper motive on the part of the beneficiary seeking information, the fact that disclosure has previously been made to other beneficiaries will rarely be a decisive factor against disclosure;
(c)the nature of the interests held by the beneficiary seeking access. The degree of proximity of the beneficiary to the trust (or likelihood of the requesting beneficiary or others in the same class of beneficiaries benefitting from the trust) will also be a relevant factor;
(d)whether there are issues of personal or commercial confidentiality. Recognition should be given to the need to protect confidential matters of a personal or commercial nature. The Court should also take into account any indications in the trust deed itself about the need for confidentiality in relation to commercial dealings or private matters in relation to particular beneficiaries;
(e)whether there is any practical difficulty in providing the information. If the information sought by the person requesting the information would be difficult or expensive to generate or collate, that may be a factor against requiring its disclosure;
(f)whether the documents sought disclose the trustees’ reasons for decisions made by the trustees. It would not normally be appropriate to require disclosure of the trustees’ reasons for particular decisions;
(g)the likely impact on the trustee and the other beneficiaries if disclosure is made. In particular, would disclosure have an adverse impact of the beneficiaries as a whole that would outweigh the benefit of disclosure to the requesting beneficiary? In the case of a family trust, this may include the possibility that disclosure would embitter family feelings and the relationship between the trustees and beneficiaries to the detriment of the beneficiaries as a whole. However, on the other hand, non-disclosure may have a similar effect;
(h)the likely impact on the settlor and third parties if disclosure is made. The impact that disclosure will have on the settlor and/or on third parties will need to be considered;
(i)whether disclosure can be made while still protecting confidentiality. This may require that copies of documents supplied to a beneficiary are redacted to ensure non-disclosure of confidential information; and
(j)whether safeguards can be imposed on the use of the trust documentation. Examples would include undertakings and inspection by professional advisers only and other safeguards to ensure the documentation is used only for the purpose for which it was disclosed.[27]
[27]Ibid 338-339 [56] cited in Chan (n 10) [85] (Delany J).
Taking those factors into account, I am satisfied that the documents sought should be disclosed in this case.
The plaintiff is named as a primary beneficiary in the trust deed, and is joint guardian and appointor. The BFA entered into in 2013 acknowledged that the plaintiff was to continue being a beneficiary. The BFA also contains terms as to the benefit the plaintiff was to receive from investment in the trust, and includes a term as to the sharing of the Hume Park Property at 973 King Parrott Road, Strath Creek, which is a trust asset. Those facts suggest the plaintiff is a ‘close beneficiary’ as that term was discussed in Smorgon.[28] In one sense, there may be doubts as to whether the trustee, being controlled by Mr Land, will make distributions to the plaintiff, but there are terms of the BFA that acknowledge the plaintiff’s ongoing status as beneficiary, and the plaintiff’s children are beneficiaries under the trust. In addition to that the plaintiff remains guardian and appointor. For those reasons I consider that the plaintiff is a close beneficiary.
[28]Smorgon (n 22) 186-187 [140]-[142].
The plaintiff says she has not been provided with any documents since May 2013. It is unclear precisely why the trustee has not provided copies of documents as requested. Nor is it clear why Mr Land, as the alter ego of the trustee, is reluctant to participate in the process of access to documents, or apparently even to discuss it. In those circumstances it is very difficult to make any assessment of the impediments there may be to production. It is likely there will be many documents to be produced, but it is unclear what if any difficulties there will be in doing so. In the absence of any evidence as to any difficulties, I will proceed on the basis that there will be no significant impediments. I am fortified in that position by the fact that a trustee is obligated to keep and maintain adequate records.[29] If the records sought have been kept and maintained in an orderly fashion, they should be able to be produced. Obviously the trustee can only produce records that have been kept.
[29]See summary of principles in this regard in Chan (n 10) [87].
There is no obvious confidentiality issue. But it is clear on the authorities that a beneficiary is not entitled to documents relating to the decision making process in the exercise of the trustees power of distribution[30], and it is not proposed by these reasons to suggest any such documents must be produced.
[30]O’Rourke (n 1) cited in Deutsch (n 3) 123 [53].
Conclusion
Orders will be made that the defendant produce to the plaintiff:
(a)the profit and loss account for each accounting period 2011 to 2023;
(b)the balance sheet for each accounting period 2011 to 2023;
(c)the list of assets held by the trust for each accounting period from 2011 to 2023;
(d)all other accounting records including financial statements, annual trial balances, general ledger, tax returns for each FYE from 2013 to the year ending 30 June 2024 and such documents as exist for the current financial year;
(e)any minutes of meetings of the trust (but not to the extent they include any evidence of the decision making process in the exercise of the trustee’s power to distribution); and
(f)any variations to the trust deed and any amendments to that deed.
As the trustee did not appear at the hearing I will also order a copy of this order be served on it:
(a)at its registered office pursuant to s 109X of the Corporations Act; and
(b)by email to Mr Land at [email protected].
I will reserve liberty to apply.
I direct the plaintiff to provide draft orders including as to proposed timeframes for production and any other matters including costs.
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