Monaghan v Monaghan; Monaghan v Monaghan

[2016] NSWSC 1316

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Monaghan v Monaghan; Monaghan v Monaghan [2016] NSWSC 1316

Hearing dates:

16 August 2016; 13 September 2016

Date of orders:

19 September 2016

Decision date:

19 September 2016

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Under Succession Act, s 95 the Court approves the releases granted by the deceased’s former wife and his wife at the time of his death. Judicial advice given that the trustee of the deceased’s family trust would be justified in vesting the trust property and distributing trust assets in accordance with the deceased’s memorandum of wishes.

Catchwords:

SUCCESSION – family provision – applications for approval of releases under Succession Act 2006, s 95 - no matrimonial property settlement for deceased’s former wife – advances made during her lifetime to the deceased’s wife at the time of his death – whether releases given by each of the former wife and the wife at the time of death should be approved.

TRUSTS – application for judicial advice under Trustee Act 1925, s 63 – settlement of family provision proceedings requires vesting of trust – whether trustee would be justified in exercising power to vest the trust and distribute the trust assets in accordance with the settlement - the deceased’s memorandum of wishes expresses intention that trust assets should be distributed to particular beneficiaries and in a manner consistent with the settlement ultimately reached between the parties – whether the memorandum of wishes can be taken into account.

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 76
Corporations Act 2001 (Cth), s 201F(2)
Family Law Act 1975 (Cth)
Minors (Property and Contracts) Act 1970 (NSW)
Succession Act 2006 (NSW), Chapter 3, s 95
Trustee Act 1925 (NSW), s 63

Cases Cited:

Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405
Karger v Paul [1984] VR 161
Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601
Scott v National Trust [1998] 2 All ER 705

Texts Cited:

JC Campbell “Exercise by Superannuation Trustees of Discretionary Powers” [2009] 83 ALJ 159

Category:

Principal judgment

Parties:

(2014/151762)
Plaintiff: Madeline Jarligo Monaghan
Defendant: Peter Alexander Monaghan

(2014/169661)
Plaintiff: Gerlie Obsuna Monaghan
Defendant: Peter Alexander Monaghan

Representation:

Counsel

 

Plaintiff: Ms Goodchild (for Madeline Monaghan)
Mr M.W. Sneddon (for estate and for s 63 advice application)

 

Solicitor

  Plaintiff: G. Leather, Omniwealth Legal Pty Ltd (for Trustee of the discretionary trust)

File Number(s):

2014/151762; 2014/169661

Publication restriction:

No

Judgment

1. Peter Michael Monaghan died on 6 June 2013. The deceased was survived by his former wife, Madeline Jarligo Monaghan (“Madeline”) to whom he was married between 1992 and 2012 and by his wife Gerlie Obsuna Monaghan (“Gerlie”), who he married in May 2013. Gerlie and the deceased had one child together, Justin Ryan Monaghan.

2. At the time of his death the deceased had not completed a property settlement under Family Law Act 1975 with Madeline but was living with and supporting Gerlie and Justin. The deceased also had an adult son Peter Alexander Monaghan and an adult daughter Kerry Anne Rose, both living in Australia, and another child living in the Philippines, Jessie, who the evidence suggests is now about 12 years of age.

3. The deceased created a family trust during his lifetime, the Monaghan Discretionary Trust (“the Trust”). At the time of his death the deceased was the sole director and shareholder of the corporate trustee of the Trust, Peter M. Monaghan Pty Ltd (“the Trustee”).

4. The deceased left a will dated 28 May 2013. Madeline and Gerlie each brought proceedings under Succession Act 2006, Chapter 3 for family provision out of the deceased’s estate. Peter Alexander Monaghan (“Peter”), the executor of the deceased’s will, and the defendant in each of those proceedings, compromised each proceeding in a Deed of Settlement dated 23 March 2016 (“the March 2016 Deed”). Each of the plaintiffs, Madeline and Gerlie, now seek the Court’s approval under Succession Act, s 95 for releases of their rights under Succession Act, Chapter 3 pursuant to their respective settlements.

5. The terms upon which these family provision proceedings have been settled involve the vesting of Trust property and the distribution of Trust assets. By motion in Madeline’s proceedings the Trustee also now seeks judicial advice under Trustee Act 1925, s 63 as to whether it would be justified in agreeing to give effect to the terms of settlement in this way. This judgment also gives the Court’s reasons for the advice it gives the Trustee on this issue.

6. Madeline and Gerlie’s respective applications for provision out of the deceased’s estate have run together since their commencement: Madeline’s proceedings being numbered 2014/151762 and Gerlie’s proceedings being numbered 2014/169661.

7. Ms Goodchild of counsel appears for the plaintiffs Madeline and Gerlie in each proceeding. Mr Sneddon of counsel appears for the executor of the deceased’s will, and Mr G. Leather, solicitor appears for the Trustee seeking judicial advice.

8. The Court has decided to give the advice sought and to approve the releases of Succession Act, Chapter 3 rights contained in the March 2016 Deed. But the process of getting to this point has involved an adjournment, so the Court could be satisfied both in relation to the s 95 approvals and the Trustee Act, s 63 advice.

The Course of these Proceedings

9. These proceedings first came before the Court in the Equity duty list on 29 March 2015. The Court commenced the hearing and indicated a general inclination to grant approval under Succession Act, s 95 to the releases by each of Madeline and Gerlie in the March 2016 Deed, subject to further evidence being filed. But the Court noted that the parties would be in the best position to reduce future potential disputes if the Trustee were also to bring proceedings for judicial advice under Trustee Act, s 63 about the vesting of the Trust and the distribution of its assets and to have the benefit of that judicial advice before the Court made orders for the approval of binding releases.

10. The proceedings were adjourned to a date to be fixed for that purpose. Subject to the Court reading all the materials and hearing from the Trustee Ms Goodchild of counsel was excused from attending on future occasions if she chose not to be present. On 29 March the Trustee was directed to give notice of this application for advice under Trustee Act, s 63 to all parties to the proceedings.

11. But by 7 June 2016 uncertainty had emerged about the value of one of the assets of the Trust, a debt in the sum of $101,239.33 that CQ Truck and Rentals Pty Ltd owed to it. CQ Truck and Rentals Pty Ltd (“CQ Truck and Rentals”) went into liquidation on 16 May 2016.

12. The liquidation had a consequential financial effect on the settlement. The March 2016 Deed had been constructed upon the assumption that the Trust would collect the CQ Truck and Rentals debt. On 7 June 2016 the Court directed the executor of the estate and the Trustee to inform the parties of the liquidation and see whether, despite this change, they still wished to proceed with the settlement and the applications for approval of their releases.

13. The matter came back before the Court the following day, 8 June 2016, when the Trustee’s application for judicial advice under Trustee Act, s 63 application was returnable. That motion was then adjourned for hearing to 16 August 2016. Madeline and Gerlie indicated to the Court that they each wished to proceed with the settlement despite the problem with the collection of the CQ Truck and Rentals debt. As a result, there is no need for these reasons to examine any further the issue of the collection of that debt. Madeline and Gerlie were given leave to make their motions for approval under Succession Act, s 95 returnable at the same time.

14. The proceedings were heard on 16 August 2016. They were adjourned to 13 September 2016 for supplementary submissions to be filed on behalf of the executor and Trustee and for the Court to consider matters that had been raised during argument on 16 August.

The Will and the Estate

15. The deceased’s last will made on 28 May 2013 made provision for his children and grandchildren in the following way:

“1.   I revoke all my former testamentary dispositions.

2.   I APPOINT my son PETER ALEXANDER MONAGHAN and my accountant DENNIS BANKS to be the executor and trustee of this my Will.

3.   I DECLARE that in this Will the expression "my executor" includes the executor and trustee for the time being of this Will

4.   I GIVE to my son PETER ALEXANDER MONAGHAN his grandfather’s chair and the sum of two hundred and fifty thousand dollars ($250,000.00) but if he dies before me THEN these gifts shall form part of the residue of my Estate.

5.   I GIVE to my executor on trust for my son JUSTIN RYAN MONAGHAN the sum of one hundred thousand dollars; ($100,000) to be held in trust by my executor until my said son attains the age of twenty-one years (21).

6.   I GIVE to my executor on trust for my sons PETER ALEXANDER MONAGHAN and JUSTIN RYAN MONAGHAN my gold jewellery and my map of Australia in equal shares to be held in trust by my executor until my said sons attain the age of twenty one (21) years.

7.   I GIVE to my daughter KERRY ANNE ROSE the sum of ten thousand dollars ($10,000.00) but if she dies before me or before attaining a vested interest in my estate leaving a child or children or who survive me then those children shall on attaining the age of twenty-one years (21) take equally the share which their parent would otherwise have taken.

8.   I GIVE the sum of fifty thousand dollars ($50,000.00) to my wife GERLIE FACISTOL MONAGHAN PROVIDED THAT she survives me BUT should she fail to survive then that sum shall form part of the residue of my Estate.

9.   I GIVE to my executor on trust for my son JESSIE JOHN MONAGHAN, care of Marsino Family San Isidro Allen Samar Philippines, the sum of fifty thousand dollars ($50,000.00); to be held in trust by executor until my said son attains the age of twenty one (21) years.

10.   I GIVE the sum of fifty thousand dollars ($50,000.00); to my former wife MADELINE MONAGHAN PROVIDED THAT she survives me BUT should she fail to survive then that sum shall form part of the residue of my Estate.

11.   I GIVE the residue of my estate to my executor upon trust to pay thereout all my debts, funeral and testamentary expenses and any duties and taxes for which my estate is liable AND I DIVIDE what then remains equally among such of my sons PETER ALEXANDER MONAGHAN and JUSTIN RYAN MONAGHAN as survive me and attain the age of twenty one (21) years.

12.   IF the value of my estate after realisation of assets and payment of expenses is insufficient to pay the legacies in this will then I DIRECT my executors to distribute the available funds to the legatees on a pro rata basis.

13.   IT IS MY WISH that my executors in their role as directors of PETER MONAGHAN PTY LIMITED exercise their discretion to divide the Assets held on Trust in the Monaghan Discretionary Trust equally among my sons PETER ALEXANDER MONAGHAN and JUSTIN RYAN MONAGHAN.

14.   I EMPOWER my executor in the executor's absolute discretion:

(a)   to sell, call in and convert into money the whole or such part as my executor thinks fit of my residuary real and personal) estate at such time or times, in such manner, at such price and upon such terms as my executor thinks appropriate:

(b)   to postpone the sale, calling in and conversion of that estate or any part of it for so long as my executor, without being liable to account, thinks proper:

(c)   to exercise all such statutory and other powers in regard to that estate as would be exercisable by my executor that were devised and bequeathed to my executor upon trust for sale, and

(d)   to raise advance pay and or apply at any time the whole or any part of the income or capital of the expectant presumptive or vested share of any person (whether under the age of eighteen (18) years or not) in my estate and to pay or apply the same for or towards the maintenance education advancement or benefit of such person without being responsible for the application thereof and without being accountable if such share shall never vest.

15.   Any payments made by my executor to an infant beneficiary pursuant to my Will may, in the absolute discretion of my executor, be made either:

(a)   to the guardian or guardians for the time being of such infant beneficiary. The receipt of such guardian or guardians shall be sufficient evidence of payment in accordance with the terms of this my Will without my executor being bound to see to the application thereof; and

(b)   directly to such infant beneficiary, without my executor being liable in any circumstances whatsoever to prove receipt of such payment by the said infant beneficiary.”

16. Probate of the deceased’s estate was granted to Peter as sole executor on 24 March 2014. Since then his administration of the estate has been largely preoccupied with the management, in his role as defendant, of Madeline and Gerlie’s proceedings.

17. The real and personal property solely owned by the deceased at the time of his death was made the subject of an inventory prepared for the purposes of these proceedings. The inventory was then re-valued as at 23 March 2016, and prior to the issue arising about the Trust’s recovery of the debt due from CQ Truck and Rentals, as follows:

Property owned solely by the deceased

Description

Estimated or known value

Real Property

49 Brunderee Road, Flinders NSW 2541

$700,000.00

Proceeds from sale of shares

Remaining balance of proceeds from sale of

shares in:

a) Insurance Australia Group Limited ordinary shares (2,021 shares @ $5.05 per share) (less brokerage of $112.38); and

b) NIB Holdings Limited ordinary shares (3,600 shares @ $3.24 per share) (less brokerage of $128.30)

$18,301.01

Peter M. Monaghan Pty Limited (80 A-class

shares, 80 B-class shares, 80 C-class shares, 80 D-class shares and 20,000 ordinary shares)

$625,607.31

Motor Vehicles

Lexus 4WD (2003 model)

$12,000.00

Miscellaneous

Including father's chair, gold jewellery and map

$1,000.00

Unpaid distributions

Unpaid distribution from the Monaghan Discretionary Trust (to be paid on winding-up of trust)

$125,784.55

TOTAL

$1,481,692.87

18. These assets were dealt with under the March 2016 Deed.

19. Settling Madeline’s and Gerlie’s proceedings and their Releases

20. The March 2016 Deed is the ultimate agreed outcome of a mediation of the proceedings held in Sydney on 3 July 2015 between Madeline, Gerlie and the estate. Gerlie says that it was not until the mediation that she was fully aware of the size or the nature of the estate. Nor was she aware until then that there had never been a family law property settlement between the deceased and Madeline.

21. A settlement of the proceedings reached by the parties at the mediation was at first not approved by the Court. So further negotiations took place, resulting in the making of the March 2016 Deed containing the final terms of the settlement between Gerlie and the estate and Madeline and the estate.

22. The March 2016 Deed recited the relationship of each of the parties with the deceased, the Trustee’s position, and the bringing of Madeline’s proceedings and Gerlie’s proceedings together with Peter’s role as executor of the estate. Then in its operative parts the Deed provided, as follows:

“1.   In complete satisfaction of any and all claims the parties have, or may have, against either the Deceased's estate or the Trust, the parties agree:

(a)   the Trust be dissolved and wound-up (subject to the payment of any and all liabilities in respect of the Trust, including the loan from the Company to the Trust and any taxation obligations) and distributed equally between Madeline, Gerlie and the Executor in his personal capacity.

(b)   to the Court making orders:

i.   in the Madeline Monaghan Proceedings in the form of the consent orders annexed to this Deed and marked with the letter "A"; and

ii.   in the Gerlie Monaghan Proceedings in the form of the consent

orders annexed to this Deed and marked with the letter "B".

2.   The parties hereto, and Gerlie on behalf of Justin, disclaim any and all rights, title, claims and interest in the Trust.

3.   The parties hereto indemnify the Executor and the Trustee in respect of any and all claims, suits, demands, costs or expenses, brought by any object or beneficiary of the Trust, not privy to the terms of this Deed.

4.   This Deed may be executed in any number of counterparts and by the parties on separate counterparts. Each counterpart constitutes the agreement of each other party who has executed and delivered the counterpart.”

23. The March 2016 Deed also attached Short Minutes of Order designed to bring each of Madeline and Gerlie’s proceedings to an end. Those Short Minutes were in almost identical terms in Madeline and Gerlie’s proceedings and relevantly provide (in Gerlie’s proceedings) as follows:

“By consent:

In lieu of the provisions made in the will of the Deceased dated 28 May, 2013, the property, assets and liabilities of the Deceased's estate be distributed in the following order:

the Executor's legal costs in respect of these proceedings and associated proceedings 2014/169661 (the "Gerlie Monaghan Proceedings") in the sum of $112,000 be paid from the Deceased's estate on the indemnity basis, followed by the costs of the Trustee in respect of these proceedings and the Gerlie Monaghan Proceedings in the sum of $14,500.

Within 21 days of the date of these orders Lot 7055 in Deposited Plan 882823 known as 49 Brunderee Road, Flinders NSW to be transferred to the plaintiff.

The specific gifts in Clauses 4, 5, 6, 7 and 9 of the Deceased's will dated 28 May, 2013 be paid.

The remaining funds in the Deceased's estate - the residue - to be distributed to the defendant and Justin Ryan Monaghan in equal shares.

The legacies to be received by Justin Ryan Monaghan under sub-clauses 1(d) and 1(e) above, to be held by the NSW Trustee and Guardian on trust for Justin Ryan Monaghan, or such other trustee as the Court deems fit, until Justin Ryan Monaghan attains the age of 18 years.

Pursuant to section 95 of the Succession Act 2006, the Court approves of the release in respect of the plaintiff in respect to her right to apply for an order for family provision.

3.   The Court notes the parties to these proceedings and the plaintiff (on behalf of her son, Justin Ryan Monaghan) have entered into a Deed:

a.   providing for:

i.   the dissolution and winding-up of the Monaghan Discretionary Trust (the "Trust"); and

ii.   the subsequent distribution of the Trust assets between the plaintiff, Madeline Jarligo Monaghan and the defendant in equal shares;

b.   whereby Madeline Monaghan and the plaintiff (in her own capacity and on behalf of her son, Justin Ryan Monaghan) have disclaimed any and all rights, title and interest in the Trust.

4.   The Court notes:

a.   The application was made within time.

b.   The plaintiff is an eligible person.

c.   The plaintiff has served a notice identifying all eligible persons on the defendant at the time of service of the summons.

d. The defendant has filed with these orders an affidavit as required by section 12.1A of the Supreme Court Rules 1970.

e.   The defendant has served notices of the plaintiffs claim on any person who, in the defendant's opinion, may be an eligible person.

f.   The defendant has filed an appearance.

5.   These proceedings otherwise be dismissed.”

24. The only differences between the Short Minutes of Order in Gerlie’s proceedings and Madeline’s proceedings is that in Madeline’s proceedings Orders 1(b) and 3 use slightly different language to describe the plaintiff in each case, and this slight difference is reflected in the Orders made at the conclusion of these reasons.

24. The March 2016 Deed was amended in a minor way in June 2016. Subsequent to the March 2016 Deed the parties accepted that because of his continuing duties the executor’s legal costs and disbursements had increased from $112,000 to $141,101.10. The March 2016 Deed was amended on 6 June 2016 to effect this alteration. It was otherwise unchanged. Because the amendment was so minor, for the purposes of these reasons the Deed in question will continue to be referred to as either “the Deed” or the “March 2016 Deed”.

25. Each of Madeline and Gerlie advance their different circumstances in support of their respective relief applications.

The Succession Act, s 95 Approvals

27. The release by a person of his or her rights to apply for a family provision order under Succession Act only has effect if it has been approved by the Court and such approval has not been revoked: Succession Act, s 95(1). The Court is empowered to approve a release in respect of the whole or part of the estate of a deceased person and the approval can take place either before or after the date of death of the person whose estate may be the subject of the order: Succession Act, s 95(2) and (3).

28. In determining the application for approval the Succession Act requires the Court to take into account all the circumstances of the case, but the circumstances include the matters which are individually identified as follows (Succession Act, s 95(4)):

“(4)   In determining an application for approval of a release, the Court is to take into account all the circumstances of the case, including whether:

(a)   it is or was, at the time any agreement to make the release was made, to the advantage, financially or otherwise, of the releasing party to make the release, and

(b)   it is or was, at that time, prudent for the releasing party to make the release, and

(c)   the provisions of any agreement to make the release are or were, at that time, fair and reasonable, and

(d)   the releasing party has taken independent advice in relation to the release and, if so, has given due consideration to that advice.”

29. The parties have put before the Court sufficient material for the Court to consider all the circumstances of the case in respect of each of Madeline and Gerlie. This has been set out in their respective affidavits in support of their applications and is discussed below.

30. Madeline’s Release. Before signing the March 2016 Deed Madeline received independent advice from her solicitor Mr Neil McCarthy of Creswick McCarthy Solicitors & Barristers in Queensland. She has also previously been advised by her counsel, Ms Goodchild during the mediation held in August 2014 and July 2015 as to her prospects in the litigation and the likely net financial outcome for her if the litigation were to proceed to a final hearing.

31. Madeline says in her evidence, and I accept, that she has given due consideration to this advice. She explains in her 23 March 2016 affidavit that she is, and was at the time of entering into the Deed, satisfied that it is to her financial advantage and that otherwise she should give the release of her rights under Succession Act, Chapter 3 as part of the compromise effected by the settlement. She says that based upon the advice given to her, she thinks that the settlement is fair and reasonable and that it is prudent for her to give her release. Madeline advances the following main reasons for this view on her part:

1. The release provides her with certainty and ends the uncertainty of the current litigation;

2. The release gives her security about where she will live and gives her flexibility to move into alternative accommodation so that she can stay in the property as long as she wants to, or alternatively she can sell it;

3. The release takes proper account of the fact that the deceased and she lived together for 20 years and although they were separated under the one roof for the last few years of his life she still provided care for him, including when he was unwell;

4. She did not have a property settlement when her and the deceased’s marriage ended, and this present settlement will in substance effect a matrimonial property settlement for her; and

5. She financially contributed to the deceased’s estate throughout their marriage and this settlement will recognise that contribution.

32. She seeks the Court’s approval of the Succession Act, Chapter 3 release in the March 2016 Deed. In my view, Madeline’s release should be approved. The settlement of which the release is a part is to Madeline’s advantage and is fair and reasonable in the circumstances and it is prudent for her to give the release. In addition Madeline has taken independent advice and I am satisfied has given due consideration to that advice, as her affidavit indicates.

33. Madeline will receive the security of a house in which she can live in circumstances where it is not evident that she could have done much better by further litigating in these proceedings, given the other competing demands upon the deceased’s testamentary bounty. The settlement gives her some measure of what she would have obtained had she received the benefit of a matrimonial property settlement at the time of her divorce from the deceased.

34. Gerlie’s Release. Gerlie’s position is somewhat similar to Madeline’s, although she received nothing in addition to what she would have received under the will, namely the $50,000 under clause 8 of the will. She says in her affidavit of 29 March 2016 she received independent legal advice before signing the Deed from her solicitor, Ruth Ferguson of McNamara and Associates in Nowra, New South Wales. Gerlie says she was advised of her prospects of success in the litigation and the effect of the settlement on her personal circumstances.

35. Gerlie clearly understands that under the settlement she will not receive further provision from the estate of her late husband other than that provided under the terms of his will. She says that she agrees to the settlement, for the following reasons:

1. Before he died the deceased placed $300,000 into a trust account for her to buy a property for her and their son Justin to live and she used these funds and as a result she now owns a unit in her sole name, purchased with monies from the trust fund;

2. She was only married to the deceased for a short period of time;

3. The will provides her with an immediate gift of $50,000;

4. Her son Justin will have a trust account set up with the monies he receives from the winding up of the Trust, his specific gift and half the residue of the estate;

5. Gerlie says she should be able to provide for her son Justin with her current resources and if necessary she can apply for funds from his trust account to defray expenses involved with his maintenance and advancement in life;

6. Gerlie found the proceedings very stressful and is keen to seek closure to this litigation with a definite and known outcome.

36. Gerlie further says in relation to the settlement in her affidavit: that she has no intention of bringing another claim against the deceased’s estate; and, that despite the fact the settlement leaves her no better off financially she asks for approval of the release under Succession Act, s 95, because she and her son Justin have been provided for and she does not wish to incur further legal fees in case her claim may be unsuccessful in the future.

37. Gerlie seeks approval of the release of her rights under Succession Act, Chapter 3. In my view, Gerlie’s release should be approved. The settlement of which the release is a part is to Gerlie’s advantage and is fair and reasonable in the circumstances and it is prudent for her to make the release. In addition Gerlie has taken independent advice and I am satisfied that she has given due consideration to that advice, as her affidavit indicates.

38. Gerlie’s position is somewhat different from Madeline’s but the settlement is still clearly prudent for her. She receives a substantial sum that the deceased advanced to her for her long term security before his death. In addition to that sum her parenting obligations to Justin can partly be satisfied by the gift of $100,000 to him in the deceased’s will, which is preserved in the settlement. Given the other competing demands on the deceased’s testamentary bounty, especially from Madeline, there was clearly some risk associated with prosecuting Gerlie’s case. And the settlement can therefore be seen as a prudent one, confirmed as it is by the legal advice she has received.

39. Justin and Jessie’s Positions. The position of the deceased’s son, Justin, in Australia and his older son, Jessie, in the Philippines should be mentioned. Under the deceased’s will Justin receives a legacy of $100,000 (clause 5) and Jessie a legacy of $50,000 (clause 9). The Short Minutes of Order attached to the Deed preserve both these legacies as part of the wider settlement.

40. The rights of these two children of the deceased under Succession Act, Chapter 3 survive this settlement. The approval that the Court gives to Madeline and Gerlie’s releases does not impair Justin or Jessie’s Succession Act rights. That being said, both Justin and Jessie receive substantial benefits under the deceased’s will and in a practical sense their Succession Act rights may be limited. Neither the March 2016 Deed nor the Short Minutes of Order purport to effect any release against the estate of either Justin or Jessie’s rights under Succession Act, Chapter 3. Nor could they effect release on the proceedings as presently constituted. Whilst both Justin and Jessie appear to have been served with notice of both proceedings by Peter as executor, neither of them has become a plaintiff in the proceedings.

41. Had either Jessie or Justin sought to become a plaintiff, because they do not have legal capacity they would have had to appear by a tutor. Were that to have occurred the Court might have been able to approve a release of their rights under Succession Act, s 95 and Civil Procedure Act 2005, s 76. But the Court would only ordinarily approve a release of Jessie or Justin’s rights where there was evidence that each of them had been independently advised, had their own solicitor and that after that advice had been given their respective tutors were asking the Court to approve the settlement of the proceedings, including the approving of a release of Succession Act rights on behalf of each of them. But none of that procedural apparatus is present in this case. The parties intent through the March 2016 Deed is to preserve the Succession Act rights of Justin and Jessie, such as they may be.

42. The March 2016 Deed makes indirect reference to Justin. Gerlie’s signature on the Deed is said to be “in her capacity as plaintiff, as an object of the Trust and as parent and guardian of Justin Ryan Monaghan, who also disclaims all rights, claims and interests in the Trust”. And has been seen earlier in these reasons, the operative provisions of the March 2016 Deed also declare that “Gerlie on behalf of Justin disclaims any right, title, claim or interest in the Trust”.

43. Thus the March 2016 Deed purportedly disclaims any further interest in the Trust on Justin’s part. It is not necessary in these reasons to examine closely whether the March 2016 Deed is in fact binding on Justin in disclaiming such an interest in the Trust, given the way that it was signed, except to observe in passing that it is of doubtful legal effect. But for reasons which will be explained below in relation to the Trust, in my view, the vesting of the Trust can proceed without the Court first deciding that Justin’s disclaimer is legally effective.

44. The Judicial Advice

45. By motion dated 2 June 2016 in Madeline’s proceedings the Trustee seeks judicial advice in response to the following question: whether the Trustee is entitled to follow the advice of counsel dated 29 April 2016. The form of this question is somewhat inapt: for example, it does not identify the substance of the advice of counsel that the Trustee seeks to act upon. After the Court heard submissions, these reasons formulate a slightly different question, upon which judicial advice is then given.

46. The Trustee contemplates determining the Trust in order to effect the settlement of Madeline’s and Gerlie’s Succession Act proceedings in accordance with the March 2016 Deed. As the inventory of Estate and Trust assets set out above shows, the Trust assets represent a significant part of the assets controlled by the settlement envisaged in the March 2016 Deed.

47. The Trust is constituted by a Trust Deed dated 27 February 2003 (“the Trust Deed”) and is a discretionary trust. The Trust Deed contains unremarkable terms commonly found in discretionary trusts holding family assets. The deceased was the sole director and shareholder of the corporate Trustee. He was also the Principal under the Trust Deed, who could remove, replace and appoint a new Trustee. Following the death of the deceased on 6 June 2013, Peter became the sole director of the Trustee pursuant to Corporations Act 2001 (Cth), s 201F(2).

48. The deceased issued a memorandum of wishes in relation to the Trust on 4 June 2007 to declare his wishes as to Trust assets in the event of his death, namely that they should be applied as though they notionally formed part of his estate. It provides as follows:

“This Memorandum of Wishes has been prepared by me in connection with Monaghan Discretionary TRUST, being a Trust established by Deed of Settlement dated 27.02.03 between ACIS Settlements Pty Ltd as Settlor and Peter M. Monaghan Pty Ltd as Trustee as amended from time to time ('the Trust') to convey to the Trustee of the Trust my wishes in respect of the distribution of the capital and income of the Trust following my death.

It is my wish that following my death the capital and income of the Trust should be applied by the Trustee as if that capital and income formed part of my estate and accordingly was subject to distribution in accordance with my Will, to the intent that, the Trustee of the Trust should notionally add the capital and income of the Trust to the assets of my estate and deal with the capital and income of the Trust as if the capital and income of the Trust formed part of my estate for distribution along with the assets of my estate in accordance with my Will.

I declare that the contents of this direction are provided to the Trustee on a confidential basis and the terms are not to be communicated to any potential beneficiary.”

49. The Trustee is entitled to take into account this memorandum of wishes in exercising its discretions conferred under the Trust Deed, just as the Trustee is entitled to take into account the views of beneficiaries: Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 (“Hartigan”), at 431B-C. The Trustee is now contemplating giving effect to the memorandum of wishes to distribute all the Trust assets as though they were part of the estate and so they can be dealt with in accordance with the March 2016 Deed. In my view, it would be justified in so doing.

50. A number of provisions of the Trust Deed are relevant. The settlor, a company apparently unconnected with the deceased, settled a sum to establish the Trust and declared that no part of the Trust funds so constituted would revert to the settlor but that a beneficiary should take it in any event (clause 2.1). The Trust Deed provided a procedure for the Trustee to determine in its absolute discretion the distribution of income or capital account (clause 3).

51. The Trust Deed provided that “the Trust shall terminate and the Trust fund shall vest absolutely on the perpetuity date” (clause 4.1). Upon such termination and vesting the Trustee, under clause 4.1, had a discretion to pay the Trust fund to Tertiary Beneficiaries but had an obligation otherwise to pay the Trust fund to Primary and Secondary Beneficiaries then living “in such proportions between the described classes of beneficiaries and in such amounts to the members of those respective classes as the Trustee shall in its absolute discretion think fit” (clause 4.1). The proposal now is for that discretion to be exercised in favour of the selected Primary and Secondary Beneficiaries, Madeline, Gerlie and Peter, once the Trust fund vests on a new Perpetuity Date determined by the Trustee. Determining that amended date for termination of the Trust is governed by the provisions of clause 8.1.

52. The deceased was the Principal under the Trust Deed. The Principal has the power to replace the Trustee: clause 14. After the deceased’s death, as the deceased’s executor Peter can exercise the Principal’s powers: clause 15.

53. Schedule 1 of the Trust Deed identifies six "Primary Beneficiaries" including the deceased himself, his first wife Madeline and his son Peter. Specifically the named Primary Beneficiaries are: Peter Michael Monaghan, Madeline Monaghan, Peter Alexander Monaghan, Nicole Sarah Monaghan, Aaron Peter Monaghan and Paris Monaghan. The deceased’s wife Gerlie is not named as a Primary Beneficiary. The Deed was made in 2003 and does not appear to have been updated at the time of the deceased’s 2013 marriage to Gerlie. Although Gerlie is not a Primary Beneficiary, as a spouse of a Primary Beneficiary, she qualifies as Secondary Beneficiary.

54. Schedule 1 of the Trust Deed also relevantly defines various objects of the trust as "Secondary Beneficiaries". The class is as follows:

"Any person who shall at any time be or have been:-

(a)   A spouse of the Primary Beneficiary and the children, step-children, grand-children, nieces, nephews, parents, brothers and sisters, spouses of the children or grandchildren, parents, brothers and sisters of the Primary Beneficiary;

(b)   Any spouse of any child or grandchild or remote issue of the Primary Beneficiary."

55. The Deed also defines a group of Tertiary Beneficiaries, who are such persons as may be appointed from time to time by the Principal (the deceased). But the main purpose of the class of Tertiary Beneficiaries is to permit the payment of Trust funds to corporations or trusts, of which Primary or Secondary Beneficiaries are shareholders or beneficiaries. This class is not of immediate relevance.

56. The "Default Beneficiaries" are identified in Schedule 1, as the same six beneficiaries as the "Primary Beneficiaries".

57. On 29 April 2016 the Trustee wrote to each of the surviving Primary Beneficiaries, notifying each of them of the Trustee’s intention to distribute the Trust pursuant to the Deed of Settlement. The Statement of Facts before the Court in support of the application for judicial advice indicates that no response has been received to any of those letters. Some of the Primary Beneficiaries have also received notice of Madeline’s and Gerlie’s Succession Act proceedings.

58. The Trustee proposes to exercise its power under Trust Deed, clause 8.1 to appoint a date in the near future earlier than the last day of the Perpetuity Period to terminate the Trust and to have the Trust property vest absolutely to give effect to the settlement by distribution under Trust Deed, clause 4.1. Clause 8.1 of the Trust Deed, provides:

"8.1 Earlier Date

The Trustee may at any time in its absolute discretion appoint a date earlier than the last day of the Perpetuity Period to be the Perpetuity Date for the purpose of this Deed and in which case the Trust Fund and the Trust shall terminate and vest absolutely on that earlier date."

59. The Trust Deed, clause 1.1 defines relevant terms used in clause 8.1 of the Trust Deed. The "Perpetuity Period" is relevantly defined in clause 1.1 to mean:

"(d) such other date as the Trustee may appoint, provided always that notwithstanding any contained in this Deed to the contrary all powers and dispositions made by or pursuant to or contained in this Deed which but for this provision would or might vest take effect or be exercisable after the expiration of the Perpetuity Period shall vest on and take effect on and be exercisable only until the last day of the Perpetuity Period."

60. The "Perpetuity Date" is defined in Trust Deed, clause 1.1 to mean "the last day of the Perpetuity Period or such earlier date as the Trustee shall appoint pursuant to clause 8”.

61. Clause 11.1 of the Trust Deed defines the width of the discretionary powers of the Trustee as follows:

"11.1 Exercise

The exercise of any power or discretion conferred on the Trustee shall be:

(a) exercisable by the Trustee in its absolute and unfettered discretion and no Trustee shall be held liable for any loss or damage occurring as a result of its exercising or refusing or failing to exercise any such discretion or power;

(b) no Trustee shall be liable for any breach of Trust except to the extent (if any) that such breach results from its own wilful default or neglect;

(c) ...”,

62. Adequate notice has been given to Primary Beneficiaries of the Trustee’s intention to resolve to terminate the Trust under Trust Deed, clause 1. Wider notice to the Secondary Beneficiaries or the Tertiary Beneficiaries need not be given. Indeed it is not clear that there are any Tertiary Beneficiaries. Applying certain dicta of Robert Walker J in Scott v National Trust [1998] 2 All ER 705, at 718, Young J has suggested that principles of procedural fairness should have some part to play in the administration of trust law as well as in judicial review cases in administrative law: Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601. But as Campbell JA said speaking extra-judicially, established principles of trust law would appear not to require the application of rules of natural justice to the decisions of discretionary trustees: see JC Campbell “Exercise by Superannuation Trustees of Discretionary Powers” [2009] 83 ALJ 159, at 175. As Campbell JA said, the private law context in which trustees make their decisions usually does not give rise to an obligation to adhere to the rules of natural justice but this is really as a matter of construction of the constitutive documents of the trust. But his Honour also pointed out that the well-known obligation of trustees to give “genuine consideration” to the exercise of a discretion will sometimes mean the trustee will be required to gather information the trustee does not then hold and that such a procedure, though not identical to affording rights of natural justice or procedural fairness, covers at least some of the same ground. But Campbell JA also observed in the common case of a family discretionary trust the trustee will frequently already know enough about the circumstances in life of the various potential objects of the power of appointment to be able to make an appointment without gathering extra information.

63. In the present case the Court has not been given information about the Trustee’s consideration of other potential objects of appointment, either in the Statement of Facts or in Mr Sneddon’s opinion. But the Trustee’s obligations in this area are well established: Karger v Paul [1984] VR 161 at 164, 166 and 178. It can be assumed that the Trustee will follow established law in respect of the degree of inquiries the Trustee has to make in order to give “genuine consideration” to the exercise of its discretion to reach the decision that the Trustee contemplates, to appoint (under clause 8.1) an earlier date to be the Perpetuity Date and to make the proposed distribution on termination (under clause 4.1).

64. In my view, therefore, there is no special requirement for any further notice to be given to Primary, Secondary or Tertiary Beneficiaries beyond the notice already given, as is recorded in the Statement of Facts. Also there is no special requirement for the Court to consider the Trust’s solvency at the time of any distribution. That too is a matter for the Trustee’s administration of the Trust.

65. Peter takes under the terms of settlement and the Short Minutes of Order. A question arises as to whether there is any impediment to him as the controlling shareholder and sole director of the Trustee from exercising the power under clauses 8.1 and 4.1 to terminate the Trust and distribute its assets in a way which will not only benefit in particular Madeline, but indirectly himself.

66. I see no impediment in the terms of the Trust of Peter being involved in the decision making in this way. The structure of the Trust as originally constituted clearly contemplated that the deceased could, as the controlling shareholder of the Trustee or as Principal, control the exercise of the Trustee’s discretionary power to benefit himself directly as a Primary Beneficiary. The terms of the Trust Deed clearly displace the usual equitable prohibitions against the Trustee benefiting itself, or its directors or shareholders in the exercise of its fiduciary discretions.

67. For the reasons given above the Court would reformulate the question to accord more closely with the intent expressed in clause 1(a) of the Deed, which is reflected in counsel’s opinion of 29 April 2016. In the Court’s opinion the Trustee would be justified in proceeding in accordance with the advice of counsel dated 29 April 2016 by exercising the Trustee’s power under clauses 8.1 and 4.1 of the Trust Deed to advance the Perpetuity Date and then under clause 4.1 to distribute the Trust property in accordance with the Deed equally to Madeline, Gerlie and Peter in his personal capacity.

Conclusions and Orders

68. For the reasons given the Court will give the following judicial advice and will approve the settlements of Madeline’s and Gerlie’s proceedings under Succession Act, s 95.

69. Judicial Advice in Madeline’s Proceedings. Therefore the Court provides the judicial advice sought in Madeline’s proceedings (numbered 2014/151762) in the following terms: that the Trustee would be justified in proceeding in accordance with the advice of counsel dated 29 April 2016 by exercising the Trustee’s power under clauses 8.1 and 4.1 of the Trust Deed to advance the Perpetuity Date and then under clause 4.1 to distribute the Trust property in accordance with the Deed equally to Madeline, Gerlie and Peter in his personal capacity.

70. Orders in Madeline’s Proceedings. Accordingly, the Court makes the following orders and directions in Madeline’s proceedings (numbered 2014/151762) as follows:

By consent:

1. In lieu of the provisions made in the will of the deceased dated 28 May, 2013, the property, assets and liabilities of the deceased's estate be distributed in the following order:

1. the executor's legal costs in respect of these proceedings and associated proceedings 2014/169661 (the "Gerlie Monaghan Proceedings") in the sum of $141,101.10 be paid from the deceased's estate on the indemnity basis, followed by the costs of the Trustee in respect of these proceedings and the Gerlie Monaghan Proceedings in the sum of $14,500.

2. Within 21 days of the date of these orders Lot 7055 in Deposited Plan 882823 known as [address not published] Flinders NSW to be transferred to the plaintiff.

3. The specific gifts in Clauses 4, 5, 6, 7 and 9 of the deceased's will dated 28 May, 2013 be paid.

4. The remaining funds in the deceased's estate - the residue - to be distributed to the defendant and Justin Ryan Monaghan in equal shares.

5. The legacies to be received by Justin Ryan Monaghan under sub-clauses 1(c) and 1(d) above, to be held by the NSW Trustee and Guardian on trust for Justin Ryan Monaghan, or such other trustee as the Court deems fit, until Justin Ryan Monaghan attains the age of 18 years.

2. Pursuant to Succession Act 2006, s 95, the Court approves of the release in respect of the plaintiff in respect to her right to apply for an order for family provision.

3. The Court notes the parties to these proceedings and Gerlie Obsuna Monaghan (in her own capacity and on behalf of her son, Justin Ryan Monaghan) have entered into a Deed:

1. providing for:

1. the dissolution and winding-up of the Monaghan Discretionary Trust (the "Trust"); and

2. (ii)    the subsequent distribution of the Trust assets between the plaintiff, Gerlie Obsuna Monaghan and the defendant in equal shares;

2. whereby the plaintiff and Gerlie Obsuna Monaghan (in her own capacity and on behalf of her son, Justin Ryan Monaghan) have disclaimed any and all rights, title and interest in the Trust.

4. The Court notes:

1. The application was made within time.

2. The plaintiff is an eligible person.

3. The plaintiff has served a notice identifying all eligible persons on the defendant at the time of service of the summons.

4. The defendant has filed with these orders an affidavit as required by section 12.1A of the Supreme Court Rules 1970.

5. The defendant has served notices of the plaintiff's claim on any person who, in the defendant's opinion, may be an eligible person.

6. The defendant has filed an appearance.

5. These proceedings otherwise be dismissed.

71. Orders in Gerlie’s Proceedings. Further, the Court makes the following orders and directions in Gerlie’s proceedings (numbered 2014/169661) as follows:

By consent:

1. In lieu of the provisions made in the will of the deceased dated 28 May, 2013, the property, assets and liabilities of the deceased's estate be distributed in the following order:

1. the executor's legal costs in respect of these proceedings and associated proceedings 2014/151762 (the "Madeline Monaghan Proceedings") in the sum of $141,101.10 be paid from the deceased's estate on the indemnity basis, followed by the costs of the Trustee in respect of these proceedings and the Gerlie Monaghan Proceedings in the sum of $14,500.

2. Within 21 days of the date of these orders Lot 7055 in Deposited Plan 882823 known as [address not published] Flinders NSW to be transferred to the Madeline Monaghan.

3. The specific gifts in Clauses 4, 5, 6, 7 and 9 of the deceased's will dated 28 May, 2013 be paid.

4. The remaining funds in the deceased's estate - the residue - to be distributed to the defendant and Justin Ryan Monaghan in equal shares.

5. The legacies to be received by Justin Ryan Monaghan under sub-clauses 1 (c) and 1 (d) above, to be held by the NSW Trustee and Guardian on trust for Justin Ryan Monaghan, or such other trustee as the Court deems fit, until Justin Ryan Monaghan attains the age of 18 years.

2. Pursuant to Succession Act 2006, s 95, the Court approves of the release in respect of the plaintiff in respect to her right to apply for an order for family provision.

3. The Court notes the parties to these proceedings and the plaintiff (on behalf of her son, Justin Ryan Monaghan) have entered into a Deed:

1. providing for:

1. the dissolution and winding-up of the Monaghan Discretionary Trust (the "Trust"); and

2. the subsequent distribution of the Trust assets between the plaintiff, Madeline Jarligo Monaghan and the defendant in equal shares;

2. whereby Madeline Monaghan and the plaintiff (in her own capacity and on behalf of her son, Justin Ryan Monaghan) have disclaimed any and all rights, title and interest in the Trust.

4. The Court notes:

1. The application was made within time.

2. The plaintiff is an eligible person.

3. The plaintiff has served a notice identifying all eligible persons on the defendant at the time of service of the summons.

4. The defendant has filed with these orders an affidavit as required by section 12.1A of the Supreme Court Rules 1970.

5. The defendant has served notices of the plaintiffs claim on any person who, in the defendant's opinion, may be an eligible person.

6. The defendant has filed an appearance.

5. These proceedings otherwise be dismissed.

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Amendments

23 September 2016 - In orders: sub-clause 1(e) amended to refer to sub-clauses 1(c) and 1(d), not 1(d) and 1(e).

Decision last updated: 23 September 2016