Natale v Terasse Brown as trustee of the Natale Investment Trust - [2022] WASC 88

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   NATALE -v- TERASSE BROWN as trustee of the NATALE INVESTMENT TRUST [2022] WASC 88
CORAM:   MASTER SANDERSON
HEARD:   7 DECEMBER 2021
DELIVERED          :   14 MARCH 2022
PUBLISHED           :   14 MARCH 2022
FILE NO/S:   CIV 1413 of 2021
BETWEEN:   MARISSA JAYDE NATALE
Plaintiff
AND
TERASSE BROWN as trustee of the NATALE INVESTMENT TRUST
First Defendant
ASSOCIATED SECURITY SERVICES PTY LTD
Second Defendant
NATALE GROUP AUSTRALIA PTY LTD
Third Defendant

Catchwords:

Practice and procedure - Application for pre-action discovery - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA)
Trustees Act 1962 (WA)

Result:

Application is dismissed

Category: B

Representation:

Counsel:

Plaintiff	:	RAS Rowick
First Defendant	:	M Curwood SC & B Dalitz
Second Defendant	:	M Curwood SC & B Dalitz
Third Defendant	:	M Curwood SC & B Dalitz

Solicitors:

Plaintiff	:	Rowick & Bucolo Lawyers
First Defendant	:	Main Legal Studio Pty Ltd
Second Defendant	:	Main Legal Studio Pty Ltd
Third Defendant	:	Main Legal Studio Pty Ltd

Case(s) referred to in decision(s):

BWS v ARV [No 2] [2021] WASCA 62

MASTER SANDERSON:

By originating summons filed 20 May 2021 the plaintiff sought the following orders:
1.Within 14 days the first defendant provide to the plaintiff a written account of the disposal of the business known as Natale Security Services (Business) from the second defendant to the third defendant.
2.Within 14 days each of the second and third defendants do make file and serve on the plaintiff a list of the documents from the classes of documents specified in the Schedule that are now or have been in the possession custody control or power of the first second and third defendants and that each defendant do within the same period make and file an affidavit verifying that list and serve a copy thereof on the plaintiff;
3.The defendants do permit the plaintiff to inspect and copy the documents in the list of documents filed by each defendant; and
4.The defendants pay the plaintiff's costs of this application to be taxed.
SCHEDULE
1.Documents relating to the sale of the Business to the third defendant (including the Contract of sale) and if there was no sale, documents that would cast light on why the third defendant commenced operating the Business.
2.Documents relating to the sale of the Business from the second defendant as trustee of the Jet Trading Trust to the third defendant (including the Contract of sale) and if there was no sale, documents that would cast light on why the second defendant ceased to operate the Business.
3.Client list of the second defendant as at the date of sale of the Business or when it started to cease trading;
4.Contracts between the second defendant and its clients in the period 2010 to 2016;
5.Accounting advice to the second defendant in relation to the sale or shutting down of the Business operated by the Trading Trust;
6.All correspondence to past clients of the second defendant;
7.All contracts with former clients of the second defendant;
8.Invoices to former clients of the second defendant;
9.Financial statements of the first to third defendants from 2015 to 2020;
The application is in two parts. First, the plaintiff relies on s 77, s 92 and s 94 of the Trustees Act 1962 (WA) (Trustees Act) and O 58 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC). Second, reliance is placed on O 26A r 4 RSC. It is convenient to deal first with the statutory framework and the way in which the plaintiff says she is entitled to relief.
It is difficult to see how s 77 of the Trustees Act is relevant. That section allows the court to appoint a new trustee when it is 'inexpedient, difficult or impractical to do so without the assistance of the court'.[1] Subsection (2), while not limiting the generality of subsection (1), gives particular instances when the court may appoint a new trustee. The only one that might possibly be relevant is subsection (2)(b). To engage that subsection the plaintiff would have to establish the present trustee has misconducted herself in the administration of the trust. Whatever may be the extent of the power in the section, it is difficult to see that a refusal to handover documents when requested to do so could amount to misconduct requiring the trustee's removal. For present purposes s 77 can be put to one side.
[1] Trustees Act 1962 (WA), s 77(1).
Section 92(1) of the Trustees Act is in the following terms:
92. Directions, trustee may ask Court for
(1)Any trustee may apply to the Court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.
This section allows a trustee to apply for directions. This is not a case where the plaintiff is a trustee in any relevant sense. It is the first defendant who is a trustee. She would be entitled to apply to the court for directions. But that is not this case. So s 92 can be put to one side.
Section 94(1) of the Trustees Act is in the following terms:
94. Review of trustee's acts by Court etc.
(1)Any person who has, directly or indirectly, an interest, whether vested or contingent, in any trust property, and who is aggrieved by any act, omission or decision of a trustee in the exercise of any power conferred by this Act, or who has reasonable grounds to apprehend any such act, omission or decision of a trustee by which he will be aggrieved, may apply to the Court to review the act, omission or decision, or to give directions in respect of the apprehended act, omission or decision; and the Court may require the trustee to appear before it, and to substantiate and uphold the grounds of the act, omission or decision that is being reviewed, and may make such order in the premises as the circumstances of the case may require.
If the plaintiff is to obtain relief it must be under this section. The first defendant has declined to provide the plaintiff with the documents referred to in the schedule to the originating summons. There is no doubt that is a 'decision' within the meaning of the subsection. There is also no doubt that the plaintiff has at least a contingent interest in the property of the trust of which the first defendant is the trustee. Therefore, she has standing to bring this application.
Order 26A r 4 RSC is in the following terms:
4. Discovery from potential party
(1)This rule applies if a person who may have a cause of action against a person whose description has been ascertained (the potential party) wants -
(a)to commence proceedings against the potential party; or
(b)to take proceedings against the potential party in the course of an action to which the person is a party,
but the person, after reasonable enquiries, has not been able to obtain sufficient information to enable a decision to be made as to whether to commence or take the proceedings.
The real contest between the parties in relation to this rule is whether or not the plaintiff may have a cause of action. Although the defendants did not concede the plaintiff had satisfied the other requirements of O 26A r 4, no real argument to the contrary was presented. It was also implicit in the defendants' argument (although not made express either in the written or oral submissions) that if the plaintiff established she 'may have a cause of action' the court should in the exercise of its discretion decline to make the order sought. It was the defendants' position that the plaintiff's claim was so weak no utility would be served by making the discovery order sought.
The relevant background facts can be summarised as follows. The plaintiff is the only child of Edward Natale (the deceased) and his former wife. Terasse Brown was the deceased's de facto partner at the time of his death. Ms Brown has two children from a former marriage, Elise and Ryan Brown. Ms Brown and the deceased had one child, Justin Natale.
In or about 2003 the deceased started a security business. Associated Security Pty Ltd as trustee for the Jet Trading Trust (a unit trust) owned the business. The sole beneficiary of the Jet Trading Trust is Ms Brown in her capacity as trustee for the Natale Investment Trust. The Natale Investment Trust is a discretionary trust.
The beneficiaries of the Natale Investment Trust are first Ms Brown's children and the deceased's children. They are the 'specified beneficiaries'. There are other beneficiaries who are associated with the specified beneficiaries. By way of example, relatives of the specified beneficiaries and the personal representatives of any specified beneficiaries are beneficiaries. For present purposes it is the specified beneficiaries who are important. Ms Brown and the deceased were 'general beneficiaries'. Ms Brown has not exercised a discretion or declared a benefit in the plaintiff's favour as a beneficiary.
Prior to the death of the deceased, he and Ms Brown were the directors and secretaries of Associated Security. After the deceased's death Ms Brown was the sole shareholder and secretary. Ms Brown says after the deceased died on 28 August 2018 Associated Security ceased carrying on the business. The plaintiff alleges this was because Associated Security transferred the business to the Natale Group for no consideration. Ms Brown denies this allegation.
It is Ms Brown's position that Associated Security ceased carrying on the business after the death of the deceased because he was the only holder of the necessary licence and he generated overwhelmingly the work for the business. Further, Ms Brown alleges that the Natale Group did not commence operating the business after the death of the deceased. Rather she says since 2015 the Natale Group has carried on a separate security business. On 12 December 2018, Ms Brown replaced Justin as the sole director and secretary of the Natale Group. Justin is the sole shareholder of that group. On 16 July 2021, Ms Brown provided the plaintiff with the financial statements for the Natale Investment Trust, Associated Security and the Jet Trading Trust for the financial years 2015 to 2020.
Both parties accept that as a statement of general principle a trustee must keep and furnish proper accounts and give full information about the amount of trust property and investments to a beneficiary. This duty is not absolute; it might not extend to documents that are confidential or disclose the trustee's reason for decision. That is not an argument relied upon by the defendants in this case. Essentially, the first defendant says that in providing the financial statements referred to above the trustee's duties have been discharged.
The position of Ms Brown goes somewhat further. She says she cannot give a written account of the alleged disposal of the business because that disposal did not occur. Rather, Associated Security ceased carrying on the business when the deceased died. Beyond that Ms Brown says the proposed order seeks, in effect, a written explanation of the alleged disposal. It is the position of Ms Brown that this requirement is beyond the scope of the trustee's duty.
As to the application under O 26A r 4 RSC, Ms Brown says the plaintiff has not established she 'may have a cause of action'. Reference was made to the recent Court of Appeal decision in BWS v ARV [No 2].[2] Ms Brown says that the application for pre‑action discovery is premised on a disposal of the business to the Natale Group for no consideration. As no such disposal occurred there is simply no cause of action which could accrue on even the most generous reading of the facts.
[2] BWS v ARV [No 2] [2021] WASCA 62.
The plaintiff's position is that the cessation of the Associate Security's business strongly suggests the business has been transferred to the third defendant without any or any adequate consideration. In other words, there has been a breach of trust by Ms Brown. It is somewhat difficult to see why it is the plaintiff does not accept Ms Brown's explanation of events. As much as anything it appears to be based on assurances offered by the deceased during his lifetime that the plaintiff would benefit from the Natale Investment Trust. But really beyond the suspicion she has, the plaintiff cannot offer anything to support her position. During the course of his submissions, counsel for the plaintiff spent some time analysing the financial position of the Natale Investment Trust. A similar more detailed analysis is found in par 23 of his written submissions. In my view there is nothing in these accounts which supports the plaintiff's position. At best they are neutral. They certainly reflect a cessation of business benefitting the Natale Investment Trust. But in the face of the explanation offered by Ms Brown that is to be expected. There is nothing in the accounts which would lead to the conclusion there has been a breach of trust by Ms Brown.
In all the circumstances I am not satisfied the plaintiff has made good her application either under the Trustees Act or under O 26A r 4 RSC. The application will be dismissed. The plaintiff ought pay the defendants' costs of the application, including reserve costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AH
Associate to Master Sanderson
14 MARCH 2022