Ludwig v Jeffrey (No 4)

Case [2021] NSWCA 256

Court of Appeal


Supreme Court


New South Wales

  • Summary available
Medium Neutral Citation: Ludwig v Jeffrey (No 4) [2021] NSWCA 256
Hearing dates: 20 September 2021
Date of orders: 26 October 2021
Decision date: 26 October 2021
Before: Meagher JA at [1];
Brereton JA [2];
Emmett AJA at [3]
Decision:

The Court orders:

1) Leave to appeal in relation to grounds 1,2,3,5 and 10 is granted.

2) Appeal in relation to grounds 1,2,3,5 and 10 is dismissed.

3) Leave to appeal in relation to 4,6,7,8 and 9 grounds is refused.

4) The Beneficiaries to pay the Trustee’s costs of the appeal.

5) The Trustee is entitled to be indemnified in respect of his costs of the appeal from the funds remaining with the Independent Solicitor.

Catchwords:

EQUITY — trusts and trustees — powers, duties, rights and liabilities — indemnity of trustee — whether trustee is entitled to be indemnified — where parties are joint tenants of a property — rights of trustees to be indemnified for defending proceedings brought against the trust — trustee entitlements to security for contingent liabilities

EQUITY — trusts and trustees — judicial advice — disagreement between trustee and beneficiaries regarding management of property — whether judicial advice should have been sought by the trustee pursuant to Trustee Act 1925 (NSW), s 63 before defending the proceedings — consequences of a failure to seek judicial advice — if judicial advice had been sought, the trustee would have been advised that defending the proceedings was appropriate — that a trustee “should” seek legal advice does not give rise to a legal obligation to do so

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Conveyancing Act 1919 (NSW), Pt 4 Div 6

Evidence Act1995 (NSW)

Income Tax Assessment Act 1997 (Cth), Pt 3-1, ss 104-75, 106-50, Pt 3-3

Supreme Court Act 1970 (NSW), s 75A

Trustee Act 1925 (NSW), ss 59, 63

Uniform Civil Procedure Rules 2005 (NSW), r 42.25

Cases Cited:

Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4

Gatsios Holdings Pty Ltd v Kritharas Holdings Pty Ltd (in liq) [2002] NSWCA 29; ATPR 41-864

In Re Beddoe [1893] 1 Ch 547

Ludwig v Jeffrey [2019] NSWSC 1550

Ludwig v Jeffrey (No 2) [2020] NSWSC 1677

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

Northey v Juul [2014] NSWSC 464

Segal v Osborne(No 2) [2016] NSWSC 1328

Category:Principal judgment
Parties: Joanne Elizabeth Ludwig (First Applicant)
Robert Walter Ludwig (Second Applicant)
Lynton Barrett Jeffrey (Respondent)
Representation:

Counsel:
J E F Brown with N Condylis (Applicants)
R D Wilson SC (Respondent)

Solicitors:
Shad Partners (Applicants)
Whitfields Solicitors (Respondent)
File Number(s): 2020/355238
Publication restriction: No
 Decision under appeal 
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity
Citation:

[2020] NSWSC 1677

[2021] NSWSC 23

Date of Decision:
30 November 2020
27 January…

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AGLC
Ludwig v Jeffrey (No 4) [2021] NSWCA 256
Case
[2021] NSWCA 256
Decision Date

CaseChat Overview and Summary

The New South Wales Court of Appeal considered an appeal by beneficiaries against a trustee concerning the management of a property held on trust. The dispute arose from the trustee's decision to defend legal proceedings brought against the trust, which the beneficiaries contended was an inappropriate use of trust funds. The beneficiaries sought to challenge the trustee's entitlement to an indemnity for the costs incurred in defending these proceedings.

The primary legal issues before the Court of Appeal were whether the trustee was entitled to be indemnified for the costs of defending the proceedings, and whether the trustee ought to have sought judicial advice pursuant to section 63 of the *Trustee Act 1925* (NSW) before undertaking that defence. The beneficiaries argued that the trustee's failure to seek such advice constituted a breach of duty, disentitling him to an indemnity.

The Court of Appeal reasoned that while a trustee "should" seek legal advice in certain circumstances, this does not impose a strict legal obligation that would automatically disentitle them to an indemnity if not followed. The Court found that if judicial advice had been sought, the trustee would likely have been advised that defending the proceedings was appropriate. Consequently, the trustee was entitled to be indemnified for his costs of the appeal, and the beneficiaries were ordered to pay those costs. The trustee was also entitled to be indemnified from the funds held by the Independent Solicitor in respect of these costs.

Orders

Orders of the court

The Court orders:

1) Leave to appeal in relation to grounds 1,2,3,5 and 10 is granted.

2) Appeal in relation to grounds 1,2,3,5 and 10 is dismissed.

3) Leave to appeal in relation to 4,6,7,8 and 9 grounds is refused.

4) The Beneficiaries to pay the Trustee’s costs of the appeal.

5) The Trustee is entitled to be indemnified in respect of his costs of the appeal from the funds remaining with the Independent Solicitor.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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