Nediva Pty Ltd as Trustee for the 31 Torrens Street Unit Trust
[2023] ACTSC 130
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
| Case Title: | Nediva Pty Ltd as Trustee for the 31 Torrens Street Unit Trust |
| Citation: | [2023] ACTSC 130 |
| Hearing Date: | 8 May 2023 |
| Decision Date: | 30 May 2023 |
| Before: | Curtin AJ |
| Decision: | See [97] |
Catchwords: | JUDICIAL ADVICE – Unit Trust – application to the Supreme Court for advice under the Trustee Act – whether trustee is |
| justified in defending ongoing proceedings in the Magistrates | |
| Court – whether costs of defending proceedings are within trustee’s indemnity – whether trustee is justified in transferring the | |
| ongoing proceedings to the Supreme Court | |
| Corporations Act 2001 (Cth) ss 601AD, 601AF, 601AH | |
| Legislation Cited: | |
| Court Procedures Act 2004 (ACT) s 5A Court Procedure Rules 2006 (ACT) r 1401 Trustee Act 1925 (ACT) ss 6, 9, 59, 63, 71, 78 Trustee Act 1925 (NSW) ss 6, 9, 63, 71, 78, 85 | |
| Cases Cited: | Distinctive FX9 Pty Limited v Statewide Developments Pty |
| Limited [2013] NSWCA 110 Hillig v Darkinjung Local Aboriginal Land Council [2006] NSWSC 1371 Ronori v ACN 101 071 998 [2008] NSWSC 246 In re Beddoe; Downes v Cottam [1893] 1 Ch 547 | |
| Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd | |
| [2008] NSWSC 1344; 74 NSWLR 550 Lewis v Condon [2013] NSWCA 204; 85 NSWLR 99 | |
| Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of the Macedonian | |
| Orthodox Diocese of Australia and New Zealand [2008] HCA 42; 237 CLR 66 | |
| Statewide Developments Pty Ltd (in liquidation) (receivers and managers appointed) v Azure Property Group (Holdings) Pty Ltd | |
| [2012] NSWSC 616; 84 NSWLR 133 | |
| Texts Cited: | J D Heydon and M J Leeming Jacobs’ Law of Trusts (LexisNexis |
| Butterworths, 8th ed, 2016) | |
| Parties: | Nediva Pty Ltd as Trustee for the 31 Torrens Street Unit Trust (Applicant) |
| Allan Reginald Nelson (Intervenor) | |
| Representation: | Counsel |
| N Kirby (Applicant) | |
| T Crispin (Intervenor) | |
| Solicitors | |
| Thomson Geer (Applicant) | |
| Nelson & Hill Solicitors (Intervenor) | |
| File Number: | SC 10 of 2023 |
| CURTIN AJ: | |
| Introduction |
1. This is an application by a trustee for judicial advice under s 63 of the Trustee Act 1925
(ACT).
2. Nediva Pty Ltd seeks advice on the following questions:
(1) Is Nediva justified in defending the proceedings known as Allan Reginald Nelson as trustee for the Colquhoun Family Trust v Nediva Pty Ltd as trustee for the 31 Torrens Street Unit Trust and Karen Narelle Fogarty CS 112 of 2022 in the Magistrates Court of the Australian Capital Territory (the Proceedings)? (2) If the answer to the above question is yes, are Nediva’s costs and expenses of defending the Proceedings properly within the trustee's indemnity? (3) Is Nediva justified in making an application to transfer the Proceedings to the Supreme Court of the Australian Capital Territory? 3. For the reasons set out below, each of those three questions should be answered in the
affirmative.
Background
4. Nediva is the trustee of a unit trust named the 31 Torrens Street Unit Trust.
5. The 31 Torrens Street Unit Trust was settled on 14 May 1992 by deed, with Nediva
appointed as trustee. The Trust Deed establishing the trust was varied in presently non-
material ways by a Deed of Variation dated 9 July 1992.
6. The terms of the Trust Deed establishing the 31 Torrens Street Unit Trust which are
relevant to this advice concern the definition of “registered unit holder”, certain rights and
obligations of registered unit holders and certain rights and obligations of the Trustee
including certain obligations in relation to record keeping.
7. Those relevant terms were:
1 …
(v) “Registered Unit Holder” means the person for the time being registered in the Register as the holder of a unit and includes persons jointly so registered but where two or more persons hold one or more units jointly they shall be treated as a single person for the purposes of this Deed except where the contrary intention appears
(emphasis in original)
…
3 Each person who becomes registered as a registered unit holder shall be deemed to have agreed to become a party to this Deed and any supplemental deed and shall be
entitled to the benefit of and shall be bound by the terms and conditions of this Deed
and of any supplemental deed.
…
13 A registered unit holder shall not be personally liable whether by way of indemnity or otherwise to the Trustee in respect of any loss damage outgoing or liability arising out of any transaction dealing or investment entered into done or made by the Trustee in administration of the Trust Fund.
14 A registered unit holder is not entitled to interfere with or question the exercise or non- exercise by the Trustee of any of the powers, authorities and discretions conferred on the Trustee by this Deed in respect of businesses permitted to be carried on and investments permitted to be made.
15 A registered unit holder is not entitled to require the transfer to him of any of the property comprised in the Trust Fund.
16 All registered unit holders from time to time shall be entitled to the benefit of and shall be bound by the terms and conditions of this Deed and any alterations or additions thereto.
21 The Trustee shall have the following absolute powers and discretions which it may exercise itself or jointly with any other person or persons in addition to the powers vested in it by law:
…
(x)
To take and act upon the opinion of Counsel practising in any country where the Trust Fund or any part thereof may for the time being be invested in relationg [sic] to the interpretation or effect of these presents or any other document or statute or as to the administration of the Trust without being liable to any registered unit holder in respect of any act done by the Trustee in accordance with such opinion but nothing in the provision shall prohibit or impede the Trustee from applying to any Court if it shall think fit or prohibit any of the registered unit holder so doing and nothing herein shall oblige the Trustee to act in accordance with any opinion.
(y)
To institute and defend legal proceedings of any kind whatsoever in any Court or tribunal and to proceed to the final end and determination thereof or compromise the same as the Trustee shall consider advisable.
25 (a) The Trustee shall keep and maintain a Register of Registered unit holders and
shall enter into the Register the following particulars:
(i) the names and addresses of the registered unit holders;
(ii) the number of units in respect of which they are registered and the
distinctive numbers or letters of the Certificates held by them
respectively;
(iii) the date at which the name of every registered unit holder was entered in the Register in respect of units standing in his name, and
(iv) any other details considered necessary by the Trustee.
(b)
Any change of address on the part of any registered unit holder shall be notified by him to the Trustee which shall alter the Register accordingly.
(c)
No notice of any trust express implied or constructive shall be entered in the Register and the person from time to time entered in the Register as the registered unit holder shall be the only person recognised by the Trustee as entitled to the units registered in his name or to exercise the rights and privileges of the registered unit holder thereof pursuant to this Deed. No person shall be recognised by the Trustee as holding any unit upon any Trust and the Trustee shall not be bound or compelled in any way to recognise (even when having notice thereof any equitable contingent future or partial interest in any unit or any interest therein or (except only as by the provisions of this Deed otherwise provided) any other rights in respect of any units except an absolute right in the entirety thereof in the registered unit holder.
… 27 Every registered unit holder shall be entitled to transfer the units or any of the units for the time being held by him by an instrument in writing in the form set out in the Sixth Schedule hereto subject to the following provisions:
(a)
Every such instrument must be signed by both the transferor and the transferee and the transferor shall be deemed to remain the holder of the units comprised therein until the name of the transferee is registered in the Register as the holder of such units.
(b)
Every instrument of transfer where so required must be duly stamped and left with the Trustee and must be accompanied by the Certificate.
(c)
Notwithstanding anything hereinbefore contained a unit may be transferred by a registered unit holder to any other registered unit holder or to a person within the class prescribed in clause (j) hereof but no unit shall be transferred to a person who is not a registered unit holder or a person within the class prescribed in clause (j) hereof (unless the registered unit holders by unanimous
resolution otherwise resolve) until the units proposed to be transferred shall first
have been offered to the registered unit holders in accordance with clause (j)
hereof.
(d) Except where the proposed transfer is to a registered unit holder or is made pursuant to clauses (f) and (j) hereof, or where the registered unit holders by unanimous resolution otherwise resolve, the person proposing to transfer any unit or units shall give notice in writing (hereinafter called a "Transfer Notice") to the Trustee stating that he desires to transfer the same. Such notice shall specify the person to whom the units are proposed to be transferred, the price per unit at which it is proposed that the units shall be sold and the number of units proposed to be sold. Such notice shall constitute the Trustee agent for the sale of the units to the other registered unit holders at the value fixed as the fair value in accordance with clause (e) hereof. A Transfer Notice shall not be revoked except with the sanction of the Trustee. …
(k)
If any registered unit holder without the consent of the Trustee executes a disposition of units in favour of any person other than a person who is a permitted transferee pursuant to Clause (j) hereof that registered unit holder shall be deemed to have served a Transfer Notice in respect of those units on the date on which the Trustee becomes aware of such disposition.
…
37 The Trustee shall not in any circumstances be entitled to indemnity reimbursement or recompense from the registered unit holders or any of them but if acting in good faith shall be entitled to be indemnified out of the Trust Fund in respect of all liabilities incurred by it relating to the execution of any powers duties authorities or discretions vested in it under the provisions of this Deed and in respect of all actions proceedings costs claims and demands relating to any matter or thing done or omitted to be done concerning the Trust Fund.
8. Initially there were four beneficiaries of the 31 Torrens Street Unit Trust, but that number
reduced to three beneficiaries in about 2018. From that time onwards the three remaining
beneficiaries each held one-third of the issued units.
9. The three beneficiaries were each a corporation, and each was, in turn, a trustee of a
family trust.
10. One of the three corporate beneficiaries was Scarborough Stud Pty Ltd. It held its units
in the 31 Torrens Street Unit Trust on trust for the Colquhoun Family Trust.
11. By a Deed Poll dated 28 March 2017 Scarborough was removed as trustee of the
Colquhoun Family Trust and Mr Allan Reginald Nelson was appointed trustee in its stead.
12. Section 6(1) of the Trustee Act provides that a new trustee may be appointed by way of
a registered deed. That section says:
6 Appointment of new trustees
(1) A new trustee may by registered deed be appointed in place of a trustee, either original or substituted, and whether appointed by the Supreme Court or otherwise.
13. The Deed Poll was not and has not been registered pursuant to the provisions of the
Registration of Deeds Act 1957 (ACT) and therefore, prima facie, does not fall within s
6(1).
14. Section 9 of the Trustee Act relevantly provides:
9 Vesting on appointment and retirement
(1) Where a new trustee is appointed, the execution and registration of the deed of appointment shall without any conveyance, except as otherwise provided in this section, vest in the persons who become and are the trustees for performing the trust, as joint tenants and for the purposes of the trust, the trust property for which the new trustee is appointed. (2) Where a trustee retires, the execution and registration of the deed or deeds of consent and retirement shall without any conveyance, except as otherwise provided in this section, vest in the continuing trustees alone as joint tenants and for the purposes of the trust, all the trust property which is jointly vested in the continuing trustees and the retiring trustee.
…
(6) Property that is only transferable— (a) in books kept by a corporation, company or other body; or
(b)
in the manner directed by or under a law in force in the place where the property is located;
does not, under this section, vest until it is duly transferred. … (9)
If any property does not vest under this section until transfer or registration, the execution and registration of the deed of appointment, or of the deed or deeds of consent and retirement, as the case may be, shall nevertheless vest the right to call for a transfer of the property, and to sue for or recover the property.
(10) This section extends to an appointment by deed, or a retirement by deed, under the provisions of the trust instrument.
15. On 29 March 2017, Mr Nelson notified Nediva by email that he had replaced
Scarborough as trustee of the Colquhoun Family Trust.
16. In the correspondence tendered on the application there was a contest as to when Mr
Nelson’s Notice of Appointment (as trustee of the Colquhoun Family Trust) was provided
to Nevida. Mr Nelson asserted it was provided in 2017 but Nevida says that it was not
provided until 10 December 2021. There is no need to make a finding on this application
as to which assertion is more probably correct.
17. Neither Nediva nor Mr Nelson has any difficulty with the change of identity from
Scarborough to Mr Nelson, but the dispute essentially boils down to how that change of
identity is to be effected. The complicating factor giving rise to this dispute is that
Scarborough was de-registered on 12 April 2019.
18. Nediva is of the opinion that the change in identity has to be by way of execution of
certain documents referred to in the Trust Deed (see clause 27 of the Trust Deed quoted
above at [7] above). That cannot presently be done because Scarborough has been de-
registered and cannot presently execute any document.
19. Mr Nelson, who was an intervenor in this application, says that the change of identity
was effected by operation of law upon his appointment as trustee of the Colquhoun
Family Trust (in lieu of the former trustee) which, he contends, automatically made him
the relevant beneficiary under the 31 Torrens Street Unit Trust. Mr Nelson contends that
by the application of the provisions of the Trustee Act set out above, namely ss 6 and 9,
the change of identity of the trustee of the Colquhoun Family Trust occurred on 28 March
2017 when he replaced the former trustee (and before the former trustee was de-
registered). He submitted that it then followed that the identity of the relevant beneficiary
under the 31 Torrens Street Unit Trust changed from Scarborough to himself at the same
time and that there is no need for the execution of any documents for that fact to be recognised by Nediva and for Nediva to treat him as a beneficiary under the 31 Torrens
Street Unit Trust.
20. In correspondence between the parties in 2017 and 2018 other disputes were ventilated.
Those disputes need not be described here other than to say that they involve various
allegations as to the administration of the 31 Torrens Street Unit Trust.
Silence then ensued until late 2021 when Mr Nelson’s solicitors re-engaged with Nediva
on issues of concern to Mr Nelson. Legal proceedings against Nediva in the Federal
Court of Australia were indicated as being imminent and many allegations were made.
Indisputably, on 10 December 2021, a copy of Mr Nelson’s appointment as trustee of the
Colquhoun Family Trust was provided to Nediva.
23. The issue of the relevant beneficiary for the purposes of the 31 Torrens Street Unit Trust
arose again. Certain distributions had been made in the not too distant past although the
distributions payable to Scarborough (on the applicant’s case) were held by Nediva
(because Scarborough had been de-registered) in a sperate interest bearing account
until such time as Scarborough’s units were transferred (I use that term neutrally) to Mr
Nelson.
24. Suffice to say that Nediva did not accept that Mr Nelson became the registered unit
holder of Scarborough’s units in the 31 Torrens Street Unit Trust merely because he had
been appointed trustee of the Colquhoun Family Trust. Nediva’s position was that the
terms of the 31 Torrens Street Unit Trust Deed required certain steps to be taken before
Mr Nelson could be so recognised.
25. On 9 May 2022, Nediva suggested to Mr Nelson that he could achieve that objective if
he arranged:
…for ASIC to execute a transfer in the form provided for by the Deed, stating that it does so
as the statutory holder of the rights of Scarborough Stud Pty Ltd. The proposed new proprietor will obviously need to sign, and to acknowledge that it agrees to be bound by the Deed. The Deed makes detailed provision for what is to occur when such a transfer is presented to the Trustee.
26. That suggestion was not taken up.
27. Rather, on 23 May 2022, Mr Nelson argued that, based on the provisions of the 31
Torrens Street Unit Trust Deed:
It follows that the trustee must take notice of a change of trustee in respect of the units held by that trustee in the trust fund. The trustee of the family trust or any change thereof must be
noted in the register and any certificate issued in respect of the units held by the new trustee.
…
The trustee having recognised the four family trusts which subscribed for the original units which subscription formed the Initial Sum, it must accept the notice of change of trustee was valid and correct the register accordingly. It may be that the exception to clause 25(c) permitted the recognition of the trusts.
As the trustee was changed before Scarborough Stud was deregistered, please confirm that
Nediva accepts that all units formerly held by it are now held by Allan Reginald Nelson, the trustee of the Colquhoun Family Trust. So that the register reads Allan Reginald Nelson as trustee for the Colquhoun Family Trust.
28. On 2 August 2022, Mr Nelson commenced the Proceedings against Nediva in the
Magistrates Court by way of an originating claim.
29. On 8 November 2022 an amended originating claim was filed pursuant to a consent
order of 19 October 2022. In that claim Mr Nelson is the plaintiff, Colquhoun Murphy Pty
Ltd is the first defendant, Nediva the second defendant and Karen Fogarty the third
defendant.
30. In essence the Proceedings allege that Nediva breached its duties as trustee in failing to
make various distributions to Mr Nelson, he being (on his case) the replacement for
Scarborough as beneficiary under the 31 Torrens Street Unit Trust because he had
replaced Scarborough as trustee of the Colquhoun Family Trust.
31. The amended statement of claim is defective in a number of respects. I will refer to only
two.
32. First, although there are three named defendants there appear to be no causes of action
pleased against the first and third defendants.
33. Second, the pleading asserts that since the establishment of the 31 Torrens Street Unit
Trust the “Colquhoun Family Trust has all ways [sic] been a unit holder of the” 31 Torrens
Street Unit Trust. That is legally incorrect. The Colquhoun Family Trust is not a legal
entity and could not be a unit holder. Scarborough (a legal entity) was the initial unit
holder and (on his case) Mr Nelson became so when he replaced Scarborough as trustee
of the Colquhoun Family Trust.
34. Be that as it may, the short point is that the Magistrates Court Proceedings are essentially
being used as a vehicle to resolve the dispute between Nediva and Mr Nelson as to
whom Nediva should treat as the relevant beneficiary.
35. In those circumstances Nediva has approached this Court for judicial advice pursuant to
s 63 of the Trustee Act.
36. Section 63(1) and (2) of the Trustee Act provide:
63 Advice
(1)
A trustee may apply to the Supreme Court for an opinion, advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.
(2)
If the trustee acts in accordance with the opinion, advice or direction, he or she shall be deemed, so far as regards his or her own responsibility, to have discharged his or her duty as trustee in the subject matter of the application, provided that he or she has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion, advice or direction.
37. Mr Nelson has intervened and opposes the giving of advice.
It must be said that Mr Nelson’s approach to the resolution of the main issue in dispute
is unfortunate. The issue could possibly have been resolved more easily in three other
non-contentious and practical ways, each of which would appear to involve less cost
than engaging in contested litigation and each of which would achieve Mr Nelson’s
ultimate objective. I appreciate Mr Nelson’s contention (explained further below) about
the units vesting in him, but I am not convinced that would have prevented any of these
practical solutions being effected in circumstances where Mr Nelson’s contention is
debateable (about which I say more below).
39. The first is by taking up the suggestion made by Nediva (see [25] above) to approach
the Commonwealth and have the Commonwealth execute the necessary documents
pursuant to s 601AF of the Corporations Act 2001 (Cth) to effect the transfer of units
from Scarborough to Mr Nelson, those units having vested in the Commonwealth (if they
did not vest in Mr Nelson) on Scarborough’s de-registration pursuant to s 601AD(1A) of
the Corporations Act.
40. The second would be to have sought the reinstatement of the registration of Scarborough
under s 601AH for the purpose of then having Scarborough execute the relevant transfer
documents for the units, the units being re-vested in Scarborough (assuming they had
not vested in Mr Nelson) on its reinstatement pursuant to s 601AH(5).
41. The third would have been to make an application to this Court for a vesting Order
pursuant to s 71(2)(h) of the Trustee Act. That section provides that a vesting Order may
be made where a trustee, being a corporation, is dissolved. When such an order is made
s 78(1) provides that the vesting Order shall have the same effect as if the persons who
before the appointment or retirement were the trustees had duly executed all proper
conveyances of the property for such estate or interest as the Court directs.
42. Justice Brereton described the operation of the NSW equivalents of s 71(2)(h) and 78 in
Re Inavas Pty Ltd [2017] NSWSC 1312. His Honour said at [30] and [31] (footnote
omitted):
30. The Court may, in its jurisdiction under the Trustee Act, make a vesting order where a corporate trustee has been dissolved. Any doubt in this respect was removed by (NSW)
Trustee Act 1925, s 71(2)(h), which provides that the Court may make a vesting order “where a trustee being a corporation is dissolved”. The effect of a vesting order is stated in Trustee
Act, s 78, which relevantly provides:
…
31. …Essentially, the function of a vesting order is to give effect to the rights and obligations of beneficiaries and trustees, in circumstances where a trustee’s non-existence, incapacity
or recalcitrance frustrates them. Typically, but not invariably, this will involve vesting in a new trustee, or in a beneficiary who is absolutely entitled, where the trustee or former trustee has ceased to exist, is incapable, or has been removed.
43. Perhaps there may have been or are impediments to pursuing any of those three
alternative courses of action, but no insuperable impediment appears on the information
before me. Assuming there are no impediments, it appears probable that the cost,
difficulty and expense of undertaking any of those alternative courses would be less than
embarking on contested litigation in the Magistrates Court and now here in the Supreme
Court.
44. Accordingly, I will order that Mr Nelson obtain costs estimates from his legal advisors in
relation to the three alternative courses of action, as well as the estimated costs of the
existing Proceedings, so that he may make an informed decision as to the most cost-
effective course of action open to him to achieve his objective.
The Issues
45. There are two interrelated issues in the application. One is whether the discretion to
provide judicial advice should be exercised and advice given, and the second is the
content of that advice. I shall address them in that order although they overlap to a
reasonable degree.
The Discretion
In relation to the provision of advice under s 63 it is sufficient to refer to the High Court’s
decision in Macedonian Orthodox Community Church St Petka Incorporated v His
Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia
and New Zealand [2008] HCA 42; 237 CLR 66.
47. That case concerned s 63 of the Trustee Act 1925 (NSW), a provision the parties agreed
was in relevantly similar terms to s 63 of the ACT Act.
48. The majority (Gummow ACJ, Kirby, Hayne and Heydon JJ) said at 83; [36] that it was
desirable that trustees in doubt as to a course of action should not proceed with that
course of action and then seek relief under s 85 afterwards (s 85 may excuse a trustee’s
breach of trust after the fact), but rather seek s 63 advice first. That is because, their
Honours said, one of the things which a trustee invoking s 85 requires to be excused
from is failure to seek s 63 advice.
49. The majority cited with approval (at 86–87; [47]) a passage from the judgment of Lindley
LJ in In re Beddoe; Downes v Cottam [1893] 1 Ch 547 in which it was said:
[A] trustee who, without the sanction of the Court … defends an action unsuccessfully, does
so at his own risk as regards the costs, even if he acts on counsel’s opinion …
50. Their Honours said, at 89; [58], that there was only one jurisdictional bar to s 63, namely
that the applicant must point to the existence of a question respecting the management
or administration of the trust property or a question respecting the interpretation of the
trust instrument.
51. That jurisdictional bar is met in this case, a matter properly conceded by Mr Nelson.
52. In exercising the discretion whether to give advice their Honours said that there are no
discretionary factors which are of any greater importance than others. Their Honours
said at 90; [59]:
Thirdly, there are no express words in s 63, and no implications from the express words
which are used in s 63, making some discretionary factors always more significant or
controlling than others. In particular, s 63 does not provide that the adversarial nature of the proceedings about which the advice is sought, the tendency of the advice to foreclose an issue in those proceedings, or the fact that the trustees seeking the advice are being sued
for breach of trust are of special significance.
53. Their Honours said, at 93; [70] that circumstances where a trustee is sued for breach of
trust:
… should be seen as a standard instance to which s 63 can in appropriate circumstances
apply.
54. Their Honours went on to say at 93–94; [71]:
In short, provision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and
expenses properly incurred in performance of the trustee’s duties. Obtaining judicial advice
resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be
subordinated to the trustee’s fear of personal liability for costs.
(emphasis in original)
55. It is important to make clear what advice is given. If the discretion is exercised to give
advice, then the advice given is not by way of deciding the issues agitated in the
Magistrates Court Proceedings on a final basis. Rather, the only advice given is whether, on the material made available, it would be proper for Nediva to defend the Proceedings:
Macedonian at 94; [74].
Sometimes that advice is expressed in terms that a trustee “would be justified” in
defending certain proceedings. Perhaps other expressions such as “having a reasonable
basis to defend” or having a “reasonable prospect of successfully defending” might be
used to give flavour to the High Court’s expression that “it would be proper” for the trustee
to defend the Proceedings. The sense is the same.
The Advice
The parties’ respective positions are easily stated.
58. Nediva says that the terms of the Deed require a transfer to be signed.
“Registered Unit Holder” is defined in the Deed to mean the person “registered in the
Register as the holder of a unit”. At this moment, putting aside its de-registration, that is
Scarborough.
60. Registration in the Register is important because clause 3 says that each person who
becomes registered shall be deemed to become a party to the Deed and thus bound by
its provisions.
61. Clause 25(c) says that the person entered in the Register as the registered unit holder
shall be the only person recognised by the Trustee as entitled to the units registered in
his, her or its name.
62. Clause 27 says that every “registered unit holder” is entitled to transfer his, her or its
units by an instrument in writing in the form set out in the Sixth Schedule provided that
every such instrument must be signed by both the transferor and the transferee, and the
transferor shall be deemed to remain the holder of the units until the name of the
transferee is registered in the Register. It also provides that the transfer must be
stamped.
63. Nediva says that although in correspondence Mr Nelson described his claim as a
liquidated claim for breach of trust, the underlying issue is as I have described earlier in
this judgment. Nediva points to the fact that in the Magistrates Court amended statement
of claim, Mr Nelson seeks a declaration that he is a unitholder of the 31 Torrens Street
Unit Trust. To make that declaration, a Court would need to decide the parties’ competing
positions as I have described them.
64. Mr Nelson says that he became the trustee of the Colquhoun Family Trust on his
appointment (which was before the de-registration of Scarborough). He says that by operation of ss 6 and 9 of the Trustee Act he therefore became the relevant beneficiary
under the 31 Torrens Street Unit Trust Deed and Nediva should simply recognise that
fact.
65. Mr Nelson cited Statewide Developments Pty Ltd (in liquidation) (receivers and
managers appointed) v Azure Property Group (Holdings) Pty Ltd [2012] NSWSC 616; 84
NSWLR 133 and particularly at 139; [24] in support of his submission.
66. In that case Pemboke J was concerned with s 9(1) of the Trustee Act 1925 (NSW) which
was in identical terms to s 9(1) of the ACT Act. At 139; [24] in that case his Honour said:
It seems clear that s 9(1) of the Trustee Act, like s 6(1), is facultative. Neither provision is intended to constitute an exclusive mandatory code, whether considered separately or together. If a deed of appointment of a new trustee is registered, the parties may derive certain benefits from having done so. But a choice not to register the deed of appointment, or not to do so immediately, has no effect by itself on the validity of the appointment, or the
vesting of the trust property — so long as the relevant provisions of the trust instrument are
followed and a transfer or assignment of the trust property is duly executed.
67. What Pembroke J said about the appointment of a new trustee assists Mr Nelson to
some degree, although his Honour’s holding may be open to doubt given that when the
matter went on appeal, the Court of Appeal said that the question of whether or not s 6 of
the Trustee Act required the registration of a deed to effect a valid change of trustee and
transfer of trust property was a nice one: Distinctive FX9 Pty Limited v Statewide
Developments Pty Limited [2013] NSWCA 110 at [17] per Emmett JA, with whom Barrett
and Ward JJA agreed. Leave to appeal in that case was refused, and so the point was
not determined, but the comment could not be regarded as an endorsement of Pembroke
J’s view.
68. In any event, s 9 contains two other highly relevant sub-sections, being subsections (5)
and (7), both of which concern the vesting and transfer of certain types of trust property.
69. Section 9 contains various exceptions to the automatic vesting of property referred to in
s 9(1). For example, s 9(3) says that land under the Land Titles Act 1925 (ACT) does not
vest until an appropriate transfer is registered or an entry of the vesting is made in the
register kept under that Act. Section 9(5) carves out an exception for a mortgage securing
money, and s 9(7) carves out an exception for certain leases. In this case I am concerned
with the exception set out in s 9(6), and the consequential provision s 9(9).
70. Those subsections say:
(6) Property that is only transferable—
(a) in books kept by a corporation, company or other body; or
(b)
in the manner directed by or under a law in force in the place where the property is located;
does not, under this section, vest until it is duly transferred.
…
(9) If any property does not vest under this section until transfer or registration, the execution and registration of the deed of appointment, or of the deed or deeds of consent and retirement, as the case may be, shall nevertheless vest the right to call for a transfer of the property, and to sue for or recover the property.
71. The equivalent provisions in the NSW Act, s 9(5) and (7), are said by the learned authors
in J D Heydon and M J Leeming, Jacobs’ Law of Trusts, LexisNexis Butterworths, 8th ed
at [2502] to be (together with the other provisions of s 9) self-explanatory and requiring
little exposition.
72. In Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344;
74 NSWLR 550 Brereton J said at [53]:
The effect of s 9 is that trust assets, other than those specifically exempted, vest upon execution and registration of the Deed of Appointment without need for any conveyance. The Deed of Appointment was registered on 4 November 2008. Accordingly, that was effective to vest all assets other than those specifically excluded by s 9 in the new trustee, without any necessity for a vesting order. In respect of the remaining assets, including interests in Real Property Act 1900 land, sub-section 7 gives the new trustee the right to call for a transfer, and to sue for or recover the property. A vesting order is an extraordinary remedy, not intended to replace ordinary conveyancing or transfer mechanisms: Hillig v Darkinjung Local Aboriginal Land Council (at [16]); see also the course adopted by Barrett J in Ronori v ACN 101 071 998.
(emphasis mine)
73. That passage was approved in Lewis v Condon [2013] NSWCA 204; 85 NSWLR 99 by
Leeming JA, with whom McColl JA and Sackville AJA agreed.
74. It seems to me at least arguable that the units in the 31 Torrens Street Unit Trust are
only transferrable in the books of Nediva within the meaning of s 9(6). That is because
of the definition of “registered unit holder” (the person registered in the Register as the
holder of a unit), the provisions of clause 25(c) (the registered unit holder is the only
person recognised by the Trustee as entitled to the units registered in his name or to
exercise the rights of the registered unit holder pursuant to this Deed) and because under
clause 27 there must be an instrument of transfer signed by both transferor and
transferee.
75. Mr Nelson sough comfort from clause 27(k) of the 31 Torrens Street Unit Trust which
provided, in his submission, for a deemed transfer in Mr Nelson’s favour. That clause
says:
If any registered unit holder without the consent of the Trustee executes a disposition of units in favour of any person other than a person who is a permitted transferee pursuant to Clause (j) hereof that registered unit holder shall be deemed to have served a Transfer Notice in respect of those units on the date on which the Trustee becomes aware of such disposition.
However, there was no “disposition” of the units in the sense of an executed transfer or
other like document. Mr Nelson submitted that “disposition” could refer to his Notice of
Appointment. I need not decide that issue in an application of this sort, but Nediva’s
position that the clause did not deem there to have been a transfer is reasonably
arguable in my view. The word “disposition” seems to be an inapt word to describe a
Notice of Appointment.
77. Mr Nelson submitted that I should refuse to give the advice sought because Nediva
should simply file a submitting appearance in the Magistrates Court if, as Nediva said, it
was happy to comply with whatever obligation flowed from a decision determining the
parties’ respective legal arguments. I do not accept that submission.
78. That would leave Nediva defenceless to a claim for breach of trust and would leave
whichever Court heard the issues without a contradictor, a position not to be encouraged.
Mr Nelson submitted that Nediva’s defence of the claim which Mr Nelson brought could
cause a great deal of cost to the trust. That may well be the case, but that situation was
created by Mr Nelson, and created by him notwithstanding what appear to be lower cost
non-contentious alternative paths to achieving his ultimate objective.
80. Mr Nelson places particular weight on 94; [67] in Macedonian in which the majority said:
Role of context in applying s 63. Sixthly, the application of s 63 will tend to vary with the type
of trust involved. Where there is a non-charitable private trust involving a conflict between beneficiaries, or between beneficiaries alleging a breach of trust out of which a trustee has
profited and that trustee, and where the defendants in those proceedings have a personal
capacity to fund the defence, it might not be correct to give the trustee an opinion, advice or direction. The position is not necessarily the same where the trust is for a charitable purpose,
where the public interest is involved since ex hypothesi the trust is beneficial to the public,
where none of the contestants in the litigation about the trust is suing or defending in order to augment, defend or seek the restoration of personal assets, and where a crucial question is the precise terms of the purpose for which the trust exists.
(emphasis in original)
81. Mr Nelson submits that the 31 Torrens Street Unit Trust is a non-charitable private trust
involved in a case involving allegations of breach of trust (albeit, if there was a breach,
the trustee has not profited) in circumstances where the trustee has a personal capacity
to fund its defence of the Proceedings.
82. Here there is no evidence Nediva has its own funds (as distinct from trust funds) sufficient
to defend the Proceedings in the Magistrates Court, and there is no allegation that Nediva
has profited from the alleged breaches of trust. As to that last matter, Nediva has
maintained the distributions otherwise due to Scarborough in a separate interest bearing
account and will pay them to Mr Nelson when he becomes the registered unit holder.
83. Mr Nelson submitted that Nediva bore the onus of proving that it has no funds to defend
itself. I disagree. The general rule is that he who asserts must prove, and if Mr Nelson
wishes to rely on a fact that I should consider in the exercise of my discretion, and
consider it favourably to Mr Nelson’s position, then it was incumbent on him to prove that
fact.
84. Mr Nelson also submitted that Nediva was (allegedly) guilty of other identified improper
conduct which was indicative of a cavalier attitude adopted by Nediva and which was
therefore either negligent or in breach of fiduciary duty. He then submitted that a trustee
guilty of such conduct should not have the benefit of judicial advice.
85. I do not accept that submission for three reasons.
86. First, sinners are just as entitled as saints to approach the Court to seek to vindicate their
legal rights. If their sins (or saintliness for that matter) are relevant to the issues in
dispute, then they shall be considered. Otherwise, if they are irrelevant, they shall be
ignored.
87. Second, to accept the submission would require those allegations of fact and impropriety
to be decided on a final basis within this application to determine whether they contained
any merit. Mr Nelson eschewed such a position, but it is, with respect, inevitable. How
could I, speaking rhetorically, give any weight to untested allegations when, if they were
determined on a final basis, they may turn out to be baseless?
88. Third, no authority was cited in support of such a far-reaching submission, and none are
known to me. It does not seem to me that the matters alleged, even if made out, would
be a relevant matter to consider in the exercise of a judicial discretion whether to give
advice under s 63.
89. Against all of those circumstances, it seems to me that Nediva is justified in defending
the Magistrates Court Proceedings. Nediva’s construction of the terms of the trust is
arguable, as is the application of ss 9(6) and (9). Mr Nelson’s competing contentions are
debateable.
90. The next question is whether the costs of defending those Proceedings are within the
trustee’s indemnity. The Trust Deed indemnity is contained in clause 37 of the Trust
Deed. Clause 37 says:
The Trustee shall not in any circumstances be entitled to indemnity reimbursement or recompense from the registered unit holders or any of them but if acting in good faith shall be entitled to be indemnified out of the Trust Fund in respect of all liabilities incurred by it relating to the execution of any powers duties authorities or discretions vested in it under the provisions of this Deed and in respect of all actions proceedings costs claims and demands relating to any matter or thing done or omitted to be done concerning the Trust Fund.
It is apparent from that clause that the touchstone is “good faith”.
92. A trustee may also be entitled to an indemnity under s 59(4) of the Trustee Act.
93. It seems to me that the trustee has acted appropriately in these proceedings and is
justified in defending the Magistrates Court Proceedings. It follows, from the
considerations I have set out above in relation to the advice on the first question, that it
would only be practical and fair for the applicant to be reimbursed out of trust funds for
the costs incurred in defending the Magistrates Court Proceedings brought by Mr Nelson
alleging breaches of trust.
94. The real issue in dispute is one of law, (or mixed fact and law) where the facts are not
really in dispute. It involves the proper construction of the terms of the Trust Deed to
which I have referred and the operation of ss 6 and 9 of the Trustee Act. The parties
have different positions on those issues, and the applicant should otherwise be entitled
to be indemnified from the trust’s funds. Of course, should it turn out that the applicant
has been guilty of fraud, wilful concealment or misrepresentations, such an order would
not protect the applicant: Macedonian at 101; [102], 120; [166].
95. Given the issues involved, the declaration sought by Mr Nelson in the Magistrates Court
Proceedings and what I have said above, it follows that the applicant would be justified
in seeking a transfer of those Proceedings to the Supreme Court.
96. The applicant has succeeded in obtaining the advice it seeks. The bringing of the
application was proper and therefore Nediva’s costs ought be recoverable from the trust
assets. Mr Nelson has been an active contradictor in this application in opposing the
Orders sought by Nediva but has failed. He should bear his own costs.
Orders
97. I make the following orders:
(1) Nediva is justified in defending the proceedings known as Allan Reginald Nelson as trustee for the Colquhoun Family Trust v Nediva Pty Ltd as trustee for the 31 Torrens Street Unit Trust and Karen Narelle Fogarty CS 112 of 2022 in the Magistrates Court of the Australian Capital Territory (the Proceedings). (2) The applicant be entitled to be reimbursed out of the assets of the 31 Torrens Street Unit Trust for its costs, charges and expenses incurred in defending the Proceedings. (3) The applicant be entitled to be reimbursed out of the assets of the 31 Torrens Street Unit Trust for its costs, charges and expenses incurred in conducting the proceedings in this Court. (4) Nediva is justified in making an application to transfer the Proceedings to the Supreme Court of the Australian Capital Territory. (5) The Intervenor is to pay his own costs of the proceedings in this Court. (6) Pursuant to s 5A of the Court Procedures Act 2004 (ACT) and r 1401 of the Court Procedure Rules 2006 (ACT) I direct Mr Nelson to obtain from his solicitors a cost estimate of the past and future (where appropriate) anticipated legal costs which would be incurred in:
(a) seeking the reinstatement of the registration of Scarborough Stud Pty Ltd and the subsequent execution of the transfer documents referred to in the
31 Torrens Street Unit Trust Deed;
(b) having the Commonwealth (or other proper body) execute the necessary documents to effect the transfer of units to Mr Nelson;
(c) making an application to the Supreme Court for a vesting Order pursuant to s 71(2)(h) of the Trustee Act 1925 (ACT); and
(d) the prosecution of the Magistrates Court Proceedings.
I certify that the preceding ninety-seven [97] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Curtin.
Associate:
Date:
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