Petsus Nominees v Bauer

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST

Not Restricted

S CI 2016 0295

PETSUS NOMINEES PTY LTD (ACN 005 031 390)

(as Trustee of the Franz Bauer Family Trust)

Plaintiff

PETER BAUER

Defendant

---

JUDGE:	Digby J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 September 2019
DATE OF JUDGMENT:	27 July 2020
CASE MAY BE CITED AS:	Petsus Nominees v Bauer
MEDIUM NEUTRAL CITATION:	[2020] VSC 443 (First Revision 31 July 2020)

---

TRUST AND TRUSTEES – Judicial advice – Originating Motion – Interpretation of Trust Deed – Determination of questions concerning powers of a Trustee under Trust Deed - Supreme Court (General Civil Procedure) Rules 2015, r 54.02(2)(a).

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Sanders	KCL Law
For the Defendant	Mr C Mӧller	Pro Bono direct briefing

HIS HONOUR:

The Application

The plaintiff, Petsus Nominees Pty Ltd as Trustee of the Franz Bauer Family Trust (Trustee), seeks assistance from the Court with respect to the administration of the Franz Bauer Family Trust (Trust).

By its Second Further Amended Originating Motion dated 8 February 2019,[1] the Trustee sets out the questions which it seeks to have determined pursuant to r 54.02(2)(a) of the Supreme Court (General Civil Procedure) Rules 2015 (Rules of Court) arising out of the administration of, or in execution of, the Trust (Application).
[1]CB1-3.

Material relied upon

In the Application, the parties relied upon the following material:

Trustee’s material:

(a) Affidavits of Daniel Lustig affirmed:

(i) 22 January 2016 (First Lustig Affidavit);[2]
[2]CB7-99.

(ii) 19 April 2016 (Second Lustig Affidavit);[3] and
[3]CB100-125.

(iii) 11 September 2018 (Third Lustig Affidavit) (filed in the Victorian Civil and Administrative Tribunal);[4]
[4]CB157-198.

(b) Affidavits of Paul Beasant sworn:

(i) 27 July 2017 (First Beasant Affidavit);[5] and
[5]CB126-156.

(ii) 5 February 2019 (Second Beasant Affidavit);[6]
[6]CB220-250.

(c) Submissions dated 22 July 2019 (Trustee Submissions);

(d) Submissions in Reply dated 5 September 2019 (Trustee Reply Submissions).

Defendant’s material:

(e) Affidavits of Peter Bauer sworn:

(i) 27 March 2017 (First Bauer Affidavit);[7]
[7]CB199-219.

(ii) 5 March 2019 (Second Bauer Affidavit);[8] and
[8]CB251-253.

(iii) 28 August 2019 (Third Bauer Affidavit).

(f) Defendant’s Submissions dated 29 August 2019 (Defendant Submissions).

General Background

The last surviving beneficiary of the Trust, Mr Peter Bauer (defendant) disputes the Trustee’s interpretation of the Trust and raises issues of construction in relation to the Trust and its proper administration and execution. The defendant also earlier foreshadowed cross-claims against the Trustee in respect of its administration and execution of the Trust, however these matters were not pressed.

The Trustee was incorporated in 1974 as the corporate Trustee for the Trust. Mr Daniel Lustig (Lustig) and Mr Kevin Courtney are the current directors of the Trustee, and Lustig has responsibility for the day to day running of the Trust. The Trustee is also the registered proprietor of a property at Flat 1, 731 Punt Road, South Yarra in the State of Victoria (the Property), which forms part of the Trust property.

The defendant is 66 years of age, and is the surviving beneficiary of the Trust. The defendant currently resides in the Property and has resided at the Property since on or around 15 August 1986.[9]
[9]Trustee Submissions, [9].

The defendant suffers from trigeminal neuralgia, a condition which affects sensation to the face, including the cheeks and the jaw. The defendant says this condition initially presented in or about 1980 and has at times substantially impacted how he functions and has limited his employment opportunities. The condition is ongoing and the defendant continues to require medication in that regard.[10]
[10]Third Bauer Affidavit, [17]–[26].

The Trust was established by Deed of Settlement on 16 January 1974 principally for the benefit of the late Dr Franz Bauer, his late wife Mrs Elise Bauer, and his children from a previous marriage, the late Susan Bauer and the defendant.[11]
[11]Trustee Submissions, [2]; CB19,26-44.

The defendant’s father Franz Bauer died in 1992. Franz Bauer and Elise Bauer established the subject Trust in 1974. The defendant’s stepmother, Elise Bauer, died in 2002. The defendant’s sister, Susan, died in April 1986. Franz, Elise, Peter and Susan were all respectively, from the establishment of the Trust Deed until their deaths, nominated beneficiaries under the Trust Deed.

By way of Supplemental Deed dated 20 November 1987 (First Variation), the Trust was varied to include Clause 4A providing a formula for the distribution of income between Elise Bauer and the defendant to take effect from the death of Franz Bauer, and to provide for the accommodation of the defendant at the Property.[12] The First Variation also added a discretion to allow the Trustee to make payments in respect of the ‘comfort, well-being, medical, hospital and nursing needs’ of the beneficiaries of the Trust. The First Variation also required the Trustee to allow the defendant to reside at the Property rent-free and to pay all reasonable outgoings in respect of the Property, including insurance premiums, the cost of internal repairs, electricity and gas charges and telephone rental and calls.[13]
[12]Trustee Submissions, [2]; CB46-51.
[13]Defendant Submissions, [4]; CB46-51.

By Supplemental Deed dated 30 November 1989 (Second Variation), the terms of the Trust were again varied by amending Clause 4A thereof to provide that the income of the Trust be distributed to Elise Bauer and the defendant from the death of Franz Bauer pursuant to a formula the integers of which include an indexed amount, referenced to the Commonwealth single aged pension, and providing for any surplus to the F&E Bauer Foundation (Foundation), subject to the discretion of the Trustee to distribute further income to Elise Bauer and the defendant.[14]
[14]Trustee Submissions, [2]; CB53-56.

The Second Variation also repeated the substance of the First Variation in respect of the Property, including by directing that the Trustee permit the defendant to reside at the Property rent-free during his life, together with various additional associated rights granted to the defendant and associated obligations attaching to the Trustee.[15]
[15]Trustee Submissions, [4(d)].

The Deed of Settlement, First Variation and Second Variation are hereinafter referred to as the ’Trust Deed’.

Upon the death of Elise Bauer, the defendant continued to receive an indexed income with any surplus paid to the Foundation, subject to a discretion in the Trustee to distribute further income to the defendant.

At the time this proceeding commenced in early 2016, the Trust held a number of investment properties and a share portfolio with a total value of approximately $5,000,000,[16] including the value of the Property in which the defendant resides.
[16]Trustee Submissions, [5].

Background to the proceeding

While this Application substantially concerns the construction of the Trust Deed, the relevant circumstances of the matter are helpful to appreciate the issues in this proceeding.

Suffice also to observe that this proceeding has a long and involved history, much of which is in dispute. It is sufficient for present purposes to note these matters and that a difficult relationship has for many years existed, and exists between the parties. In this regard the determinations sought by the parties in relation to the Trustee’s Further Amended Originating Motion and the defendant’s proposed cross-application[17] do not require any findings of fact to be made in this proceeding,[18] and none are made, although I consider it necessary and appropriate to take into account certain identified matters.
[17]Third Bauer Affidavit, Exhibit ‘PJB-20’.
[18]T6.24-T7.4; T23.3-8.

Further, the defendant has lived in the Property since 15 August 1986 and has expressed his wish to remain in the Property.[19]
[19]Third Bauer Affidavit, [111].

On 21 September 2015, the City of Melbourne contacted the Trustee and asked it to inspect the Property. This inspection took place on 29 September 2015, and the Trustee reports that the Property was littered with rubbish, the water taps and sanitary facilities did not work, and the electricity, gas and telephone were not working.[20] The defendant agrees that certain facilities in the Property had not been working for some time, and the Property was generally in a poor state.[21]
[20]CB9-10, [9].
[21]CB13-14, [20].

On 29 September 2015, the City of Melbourne issued an Emergency Order BUI-2015-272 pursuant to the Building Act 1993, in respect of the Property, because it was ‘of the opinion that the Emergency Order is necessary because of a danger to the life health and safety to the occupant and surrounding properties arising out of the condition of the Property’.[22] The Emergency Order required among other things that:
[22]CB10, [10]; CB64-68.

(a) the Property be vacated;

(b) the rubbish that posed a fire hazard be removed; and

(c) a registered engineer be engaged to assess damage and report.

Moreover, occupation of the Property was prohibited until ‘the rubbish/fire load has been removed and that all services … have been reinstated to current standards, … to the satisfaction of the Municipal Building Surveyor’.[23]
[23]CB10, [10]; CB64-68.

The Trustee organised for the removal of rubbish and reconnection of services including the reconnection of the smoke alarm, and on or about 28 October 2015 the Emergency Order in respect of the Property was cancelled.[24]
[24]CB10, [11]; CB69-70.

During those remediation works, the Trustee says it formed the view that to best maintain the value of the Property, building works were required, including some renovations. Accordingly, on 19 October 2015, Mr Robert Rechtman (the builder) provided a quote for $126,000, plus GST for the renovation work. The Trustee thereafter retained the builder to undertake these renovations and on 14 October 2015 the Trustee arranged a serviced apartment at ‘The Lyall Residences’ (Lyall serviced apartment) for the defendant to reside in during the renovations and entered into a lease agreement in respect of the Lyall serviced apartment.[25] The defendant commenced to occupy the Lyall serviced apartment on 18 November 2015.[26]
[25]CB11, [14].
[26]CB208, [31]; The defendant says that he moved into the Lyall serviced apartment on 18 November 2015 (CB1208, [31]), however in his third affidavit the defendant states that he moved into the Lyall serviced apartment on 18 October 2015 (Third Bauer Affidavit, [95]).

The Trustee deposes that in late November 2015, the builder and others attended the Property to commence the works but the defendant refused to allow entry to the Property, made various threats and demanded that the scope of works be at his direction. The builder thereafter informed the Trustee that he would not attend the Property until disputation with the defendant was resolved.[27]
[27]CB13, [19].

On 29 January 2016 the Trustee commenced this proceeding, seeking advice as to how to resolve the following impasse and other matters, by way Originating Motion in circumstances where the Trustee states the Trust was paying for alternative accommodation for the defendant at the Lyall serviced apartment but the defendant remained at the Property, and the defendant was refusing to provide keys to the Trustee and was obstructing access to the builder and the Trustee.[28]
[28]Trustee Submissions, [17]; see defendant’s assertions at footnote 26.

On 22 February 2016, the Originating Motion was listed for hearing. At the hearing the Court directed that a judicial mediation occur that day. At the mediation terms of settlement were agreed and signed by the Trustee and by the defendant as beneficiary of the Trust. Following mediation, handwritten consent orders, signed by the Trustee and the defendant as an interested party, were forwarded to the Court. Orders were made on the papers adjourning the proceeding to 26 August 2016.[29]
[29]CB100-101, and CB106-110; Second Lustig Affidavit, [2]-[5] and Exhibit ‘DL-15’.

At the February 2016 hearing, Peter Bauer was not a party to the proceeding.

The Trustee alleges that the defendant continued to obfuscate the said renovation works and on 6 April 2016 the Trustee wrote to the defendant’s solicitors purporting to accept the defendant’s repudiation of the earlier agreed terms of settlement.[30]
[30]CB101-102, [6]-[11]; CB111-118.

By 19 April 2016, the Trustee had formed the view that it could no longer safely attend at the Property when the defendant was present and the defendant had at that time not delivered the keys to the Property to the Trustee.[31]
[31]Trustee Submissions, [21].

On 6 May 2016 the Trustee issued a Summons seeking orders to:

(a) join Peter Bauer as a defendant to the proceeding;

(b) require the defendant to remove his personal belongings from the Property;

(c) require the defendant to deliver up the keys to the Property; and

(d) restrain the defendant from attending the Property, or interfering with any persons or works at the Property.

On 13 May 2016, the Court made the following orders[32] as sought by the Trustee in its Summons, and otherwise adjourned the Originating Motion:
[32]CB255-256.

1.Peter Bauer is added as the defendant to this proceeding.
2.The title of the Originating Motion is to be amended accordingly.
3.The plaintiff serve the amended originating motion on the defendant on or before 4pm 20 May 2016, on the defendant.
4.On or before 4pm 27 May 2016 the defendant filed an appearance.
5.Unless the defendant has on or before 4pm 10 June 2016 removed all of his personal property from the property known as, Flat 1, 731 Punt Road, South Yarra, Victoria (the Property) and delivered up the keys to the Property to the plaintiff, the plaintiff may for the purpose of the maintenance and renovation of the property, enter the property and remove and store such items as remain on the Property, and thereafter have possession of the Property for the purpose of such renovation and maintenance works.
6. From 4pm 10 June 2016, until further order of the court or authorisation in writing from the plaintiff, the defendant and his agents are restrained from:
(a)attending within 20 metres of the Property;
(b)interfering with any person associated with any works at the Property; and
(c)interfering with any works at the Property.

7.Costs of the plaintiff on a trustee basis and the reasonable costs of the defendant are paid from the Franz Bauer Trust.
8.Liberty to apply.
9.The summons dated 6 May 2016 is otherwise dismissed.
10.The originating motion is adjourned until 23 September 2016.

On 27 May 2016 a Notice of Appearance was filed on behalf of the defendant by O'Donnell Salzano Lawyers.

For his part, the defendant denies that he repeatedly interfered with the repairs and renovations and says that at its highest he objected to the proposed works, and the builder performing them, and concedes that he failed to surrender the keys of the Property to the Trustee.[33]
[33]Defendant Submissions, [54].

The building works, in the nature of renovations at the Property, were completed in September 2016.

The injunction referred to above, restraining the defendant from attending the Property and interfering with the works, was discharged on 20 October 2016,[34] and thereafter the defendant took possession of the keys of, and re-occupied, the Property.
[34]Pursuant to the Orders of Judd J made 13 May 2016; CB255-256.

On 28 July 2017, the proceeding was adjourned at the Trustee’s request to a date to be fixed[35] in order to allow the Trustee to make an application to the Victorian Civil and Administrative Tribunal (VCAT) for the appointment of a guardian and administrator to the defendant.
[35]Orders of McMillan J made 28 July 2017; CB265-266.

On 20 September 2017, the Trustee made applications in VCAT under ss 19 and 43 of the Guardianship and Administration Act 1986 for the appointment of a guardian and administrator to the defendant and his estate. Without the co-operation of the defendant, the Trustee was unable to obtain a direct neuropsychological assessment and the VCAT proceeding was struck out.[36]
[36]Trustee Submissions, [41].

After about the end of October 2016, the defendant was again living in the Property, however, the Trustee continued to experience difficulties in its dealings with the defendant. The Trustee also refers to its past concerns regarding the state of the Property and that the relevant Owners Corporation having written to the Trustee requesting that it remove newspaper fastened to the windows of the Property from the inside. On 3 September 2018, the Trustee wrote to the defendant requesting the newspaper be removed immediately and notifying him an inspection would be made on 7 September 2018. On 7 September 2018, Lustig attempted to inspect the Property. Lustig records that he entered the Property after there was no response from knocking on the door; he states that the defendant then appeared and demanded that he leave.[37]
[37]Trustee Submissions, [42]-[43].

The defendant responded to the matters referred to in the last preceding paragraph generally contesting that he had created the difficulties referred to and stating in relation to the September 2018 inspection that he had received no notice of the inspection and that he did not hear Lustig knock before he entered the Property.[38]
[38]Defendant Submissions, [43].

The Trustee also recognises that the defendant alleged that there were various ‘defects’ in the renovation work to the Property. However the Trustee explains that no inspection or practical steps to remedy such defects are plausible without the defendant’s co-operation or a court order.

On 8 February 2019, the Court granted leave for the Trustee to file and serve a Second Further Amended Originating Motion. These amendments further narrowed and updated the Trustee’s questions for determination.

The defendant is generally critical of the Trustee’s conduct and says it has derogated from its duties as Trustee. The defendant further objects to the manner in which the Trustee and Lustig have conducted themselves, describing their conduct as ‘heavy-handed’. The defendant also disagrees with the Trustee’s assertion that another director or Trustee would suffer the same difficulties.[39] The defendant also denies the Trustee’s assertion that this Application has been ‘brought about by his conduct’ and that the defendant is ‘unable to act in his own interests, whether in relation to his living arrangements or otherwise’.
[39]Defendant Submissions, [49].

More specifically the defendant:

(a) Denies that this application has been ‘brought about by his conduct’. He denies also that he is ‘unable to act in his own interests whether in relation to his living arrangements or otherwise’;

(b) Asserts that the Trustee did not inspect the Property for over 29 years between 1986 and 2007. And it is common ground that the Trustee has not inspected the Property since Lustig was appointed a director of the Trustee;

(c) Submits that the Trustee’s submissions record what the defendant has said about the defects in the Property, which dated back to 1986 as follows:

There was no hot water in the [Property] from 1986, no lighting from 1995, no telephone from 2000 when the wires were torn out by a third party, no heating from about 2005 … // no properly functioning cistern for the toilet last repaired in 1986 … no operating basin in the bathroom from around the late 1990s …’

The Trustee’s submissions do not explain why the matters the defendant identified were not addressed. Nor do they explain why the Trustee did not respond to what the defendant describes (in the First Bauer Affidavit) as his ‘protests’ and ‘calls for help’.

(d) Submits that the Trustee’s failure concerning historical repairs and capital works is relevant not only to the Trustee’s past discharge of his duties but also explains the difficulties that arose between the Trustee and the defendant;

(e) Accepts that the Property fell into untidiness and disrepair but explains the reasons for that;[40]
[40]Defendant Submissions, [22].

(f) States, as to the ‘discussions’ regarding the renovations, his involvement in the conversations was limited;

(g) Submits that Lustig decided what work would be undertaken. The defendant has explained[41] that he did not like the ‘white box’ style of the proposed renovations, which were not consistent with the Art Deco style of the Property and he consistently objected to the proposed builder doing the work, which objections were ignored;
[41]Third Bauer Affidavit, [30].

(h) Asserts he moved into the Lyall serviced apartment on 18 October 2015;[42]
[42]Third Bauer Affidavit, [95].

(i) Denies that he ‘started actively interfering with the proposed building works’. The Trustee had insisted on the builder and gave the defendant no say in selecting a builder or the scope of the works;

(j) Denies that he ‘made various threats’ or demanded that the ‘scope of works be at his direction alone’;[43]
[43]Third Bauer Affidavit, [94].

(k) Denies that he ‘actively obstructed access to the builder or Lustig’.

(l) Submits that the Trustee did interfere with the defendant’s personal property and that much of the defendant’s personal property has been removed and not been returned, including his bed and mattress and his pots, pans and cutlery;[44]
[44]Third Bauer Affidavit, [76].

(m) Asserts he did not know about the ‘Other Matters’ recorded in the Court Orders made on 28 July 2017 which refers to the defendant’s draft cross application as ‘spent’. The defendant did not attend that hearing. He did not learn about the Orders or the ‘Other Matters’ until October 2017, when he attended the Prothonotary’s office to file his own document.[45] He did not regard the draft cross application as ‘spent’.
[45]Third Bauer Affidavit, [117].

(n) Denies that he refused to undergo a neuropsychological examination;

(o) Advised he did stay at the Lyall serviced apartments beyond the end of the lease period, at his eventual personal cost of $35,200. The defendant explains that this was in part because not all of the keys to the Property were returned and in part because he decided (after he had the keys) to stay longer since he was still upset and distressed about the flat and this proceeding, and felt that he needed a holiday;[46]
[46]Third Bauer Affidavit, [101].

(p) Denies that he engaged in threatening conduct towards Lustig;

(q) Does not dispute but explains that the Trustee not only failed to persuade VCAT that he suffers from a disability or mental impairment but was not able even to adduce evidence to support its application;

(r) Asserts that he received no notice that Lustig would make an inspection on 7 September 2018 and that Lustig failed to knock. The defendant denies that he made ‘various threats of legal action’ but agrees that he said there was an electrical fault that required fixing;

(s) Objects to the manner in which the Trustee, and Lustig, have conducted themselves, conduct which the defendant refers to as heavy-handed. The defendant also disagrees that another director or trustee would have difficulties dealing with the defendant. The defendant is confident that, with someone else in charge of the Trust, many of the difficulties would be alleviated.

Questions for the Court

The Trustee’s Second Further Amended Originating Motion dated 8 February 2019, seeks the determination of the following questions:

(a) Question 1

Does the Trustee have the power under the Trust Deed to determine that (a) repair, and (b) capital works, be made to the Property.

(b) Question 2

Does the Trustee have the power to prohibit the defendant from entry to the Property whilst repairs or capital works on the Property are in progress.

(c) Question 3

Does the Trustee have the power to determine to: (a) purchase, or (b) rent a substitute property for the Property.

(d) Question 4

Does the Trustee have the power to prohibit the defendant from entry to the Property, when alternative accommodation for the defendant and storage of his personal property has been provided, whilst the Property is prepared for sale and vacant possession has not been obtained for any substitute property.

(e) Question 5

Does the Trustee have the power to inspect the Property.

(f) Question 6
If the answer to question 5 is ‘yes’:

(iv) is it reasonable for the Trustee to inspect the Property biannually, and otherwise upon 14 days written notice to the defendant, and

(v) does the Trustee have the power to prohibit the defendant from entry to the Property whilst the Property is being inspected by the Trustee.

The defendant’s foreshadowed cross-claim

On 3 October 2017 the defendant filed, pursuant to r 54.02(2)(a) of the Rules of Court a document seeking determination of nine questions.[47]
[47]Third Bauer Affidavit, Exhibit ’PJB-20’.

At points in this proceeding there has been some confusion and lack of clarity in relation to the proposed subject matter of, and relief sought by, the defendant’s purported cross-claim put before the Court in draft form. On 28 July 2017 Counsel for the defendant informed the Court that he regarded the cross application as ‘spent’.[48] However the defendant, including by correspondence to the Court dated 4 October 2017, has advised among other things that he did not consider the cross-claim application spent, and sought to address the matters raised in the proposed cross application in particular by means of the First Bauer Affidavit.
[48]Orders of McMillan J, 28 July 2017, ‘Other Matters’, [A]; CB265.

At a hearing in this matter on 12 September 2019, the Trustee submitted that at no point had the defendant issued or formally notified a cross application in this proceeding and the Trustee objected to having to address the defendant’s purported cross-application, including because the Trustee was not in a position to respond to the defendant’s informal claims.

The history of the defendant’s cross-claim and the component of that cross-claim which is decided in this judgment are addressed below in these reasons.

Relevant provisions of the Trust Deed

Relevantly for these reasons, the Trust Deed provides:

4ANotwithstanding anything contained in the foregoing provisions hereof:-
(1)as and from the death of Franz Bauer (hereinafter named) the Trustee shall in each accounting period thereafter pay the net income of the Trust Fund as follows:
(a)as to one-third thereof or the sum of $700.00 per week whichever is the greater to ELISE BAUER (formerly Elise Royston, hereinafter named);
(b)as to the sum of $300.00 per week after tax (‘the said sum’) to PETER JOHN BAUER (hereinafter named) AND the said sum shall be varied on each anniversary of the death of the said Franz Bauer by an amount which bears the same relation to the said sum as the single age pension at the date of his death bears to the single age pension on each of the said anniversaries AND if the basis of computing the abovementioned pension is materially altered or for any reason it is not possible or not practical to apply the same the Trustee shall apply such other measure or criterion as is in the Trustee’s opinion substantially equivalent to that described above or otherwise make such annual variation to the amount of the said sum as the Trustee considers reasonable and proper in order to maintain the purchasing power of the said sum; and
(c)the residue to the trustee or trustees for the time being of a Deed of Settlement entitled ‘The F & E Bauer Foundation’ made the 18^th day of May 1976 between the said Franz Bauer as Settlor and the Trustee as trustee (hereinafter in this clause called ‘the Foundation).

(2)as and from the death of the said ELISE BAUER the Trustee shall in each accounting period thereafter pay the net income of the Trust Fund as follows:
(a)as to the sum of $300.00 per week after tax to the said PETER JOHN BAUER upon and subject to the same directions regarding the variation thereof as are contained in sub-clause 4A(1)(b) hereof; and
(b)the residue to the trustee or trustees for the time being of the Foundation.

PROVIDED HOWEVER that having regard to the comfort, wellbeing, medical, hospital, and nursing needs from time to time of the said ELISE BAUER and PETER JOHN BAUER respectively the Trustee in its absolute discretion may in the case of need apply further income to them or either of them in addition to the amounts hereinbefore stipulated AND FURTHER the Trustee is hereby directed to permit the said Peter John Bauer during his life to reside rent free in the property known as Flat 1, 731 Punt Road, South Yarra or any other dwelling purchased by the Trustee in substitution therefor, with the said Peter John Bauer having the right to lease such property to another party and retain the proceeds thereof AND the Trustee shall be responsible for the payment of all reasonable outgoings in respect thereof including insurance premiums, the cost of internal repairs, electricity and gas charges and telephone rental and calls except during such periods as the said Peter John Bauer shall not be in possession of the said property.
…
8.The Trustee shall in addition to the powers otherwise conferred upon Trustees by law have the following powers:

…
(5)to hold use purchase construct demolish maintain repair renovate reconstruct develop improve sell transfer convey surrender let lease exchange take and grant options or rights in alienate mortgage charge pledge reconvey release or discharge or otherwise deal with any real or personal property and in particular for shares debentures or securities of any company and with or without deferred restricted qualified or special rights relating thereto;

…
18.SUBJECT always to any express provision to the contrary herein contained every discretion vested in the Trustee shall be absolute and uncontrolled and every power vested in the Trustee shall be exercisable in its absolute and uncontrolled discretion and the Trustee shall have the like discretion in deciding whether or not to exercise any such power. The Trustee shall not be responsible for any loss or damage occasioned by the exercise of any discretion or power hereby or by law conferred on the Trustee or by failure to exercise any such discretion or power or for any loss or damage accruing as a result of concurring or refusing or failing to concur in any exercise of any power or discretion.

The clauses of the Trust Deed that are relevant to this dispute can be conveniently abbreviated and categorised as follows:

(a) $300 per week after tax to the defendant,[49] increased in proportion to the single aged pension on each anniversary of Franz Bauer’s death (Clause 4A(2)(a)/4A(1)(b)) (the Indexed Income Clause);[50]
[49]CB54.
[50]CB53-4.

(b) residue to the Foundation (Clause 4A(2)(b)/4A(1)(c)) (the Income Residue Clause);[51]

(c) the Trustee ‘PROVIDED HOWEVER that having regard to the comfort, wellbeing, medical, hospital and nursing needs from time to time [of the defendant] in its absolute discretion may in the case of need apply further income [to the defendant] in addition to the amounts hereinbefore stipulated’ (Clause 4A) (the Discretionary Income Clause);[52] and

(d) ‘FURTHER the Trustee is hereby directed to permit [the defendant] during his life to reside rent free in the property known as Flat 1, 731 Punt Road, South Yarra or any other dwelling purchased by the Trustee in substitution therefor, with [the defendant] having the right to lease such property to another party and retain the proceeds thereof, with [the defendant] having the right to lease such property to another party and retain the proceeds thereof AND the Trustee shall be responsible for the payment of all reasonable outgoings in respect thereof including insurance premiums, the cost of internal repairs, electricity and gas charges and telephone rental and calls except during such periods as [the defendant] is not in possession of the said property.’ (subjoined to Clause 4A) (the Property Clause).[53]

[51]CB54.

[52]CB54.

[53]CB54.

Approach to the construction of the Trust Deed

In Schreuders v Grandiflora[54] the Court of Appeal set out the principles governing construction of a trust deed as follows (citations omitted):
[54][2016] VSCA 93.

Relevant legal principles
[12] The principles governing the interpretation of contracts apply also to trust instruments. The High Court has ‘reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract.’ The meaning of the terms of a contract is to be determined by what a reasonable person would have understood those terms to mean.
[13]In Australian Broadcasting Commission v Australasian Performing Right Association Ltd, Gibbs J stated:
It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another.

[14] In the same case, Barwick CJ stated:
[I]f [a] result is produced by the application of the words in which the parties have expressed themselves, it is no part of the function of a court by some process of divination as distinct from construction of the language employed to attribute to parties an intention to do something for which their express words do not provide.

[15]When objectively assessing the meaning of a contractual provision, it is sometimes permissible for the court to have regard to the surrounding circumstances known to the parties at the time the contract was executed. However, if an expression in a contract is unambiguous or susceptible to only one meaning, evidence of surrounding circumstances cannot be adduced to contradict that meaning.
[16]Where an amending agreement amends a principal agreement by discrete amendments rather than by replacing the principal agreement with a new consolidated version which incorporates the amendments, the amending agreement must be read as part of, or in conjunction with, the principal agreement. The two documents must be construed together as this is the only way in which the nature and effect of the changes to the principal agreement made by the amending agreement can be identified.
…
[21]Consistently with the above principles, trust instruments are to be given their natural and ordinary meaning unless they have a special or technical meaning. The terms of an instrument must be construed in the context of the entire document and in such a way that renders them ‘all harmonious one with another’.
[22]The parties’ intention must be found in the wording of the trust instrument rather than in what was on their minds when they executed the instrument. Evidence of the actual intention of the parties will not be admissible except in an action for rectification and other limited circumstances. In Byrnes v Kendle, Gummow and Hayne JJ stated:
[T]he expressed intention of the parties is to be found in the answer to the question, ‘What is the meaning of what the parties have said?’, not to the question, ‘What did the parties mean to say?’

Questions for determination
Question 1: Does the Trustee have the power under the Trust Deed to determine that (a) repair and (b) capital works, be made to the Property
Trustee Submissions

The Trustee relies principally on the provisions of the Property Clause which permit the defendant to live rent free in the Property or rent it out and retain the income, and the Trustee has a duty to preserve the Property which is a trust asset.

The Trustee refers to Clause 8 of the Settlement Deed and observes that although Clause 8 provides for an express power to repair and renovate, Clause 8 is subject to the Property Clause which confers specific rights on the defendant. The Trustee observes that the Property Clause itself makes no provision for repair and renovation.

The Trustee in substance submits that its obligation to preserve the Property as part of the Trust’s assets and its obligation to maintain the Property in a habitable state so as to be able to permit the defendant to reside there, gives rise to an implied power in the Trustee to determine that repair or capital works be made to the Property.[55]
[55]Trustee Submissions, [52]-[59].

Defendant Submissions

The defendant accepts that the Trustee has the discretion to determine that repairs and capital works be made to the Property. Further, the Trustee in its reply submissions notes the defendant’s concession in relation to Question 1.[56]
[56]Defendant Submissions, [52]-[55]; T29.25-26; T31.24-T33.24; Trustee Reply Submissions, [7].

The defendant however also submits that it is unnecessary for the Court to answer Question 1 in the present circumstances where the Trustee has not established that it plans to undertake any repairs or capital works.

Considerations

The nature and extent of a Trustee’s power provided for by the Trust Deed is to be determined by the objective construction of the language of the Trust Deed and in particular the natural and ordinary meaning of that language, read in the context of the Trust Deed as a whole, bearing in mind the nature of the trust property and the purpose of the Trust. This encompasses, with a Trust Deed which has been varied by discrete variations, construing such variations together with the overall Trust Deed.

The subject Trust Deed imposes upon the Trustee both duties and responsibilities which in respect of the Property are management like in nature, including an express obligation to pay all reasonable outgoings in relation to the costs of internal repairs to the Property pursuant to Clause 4A(2) of the Trust Deed.

The Trustee is obliged to preserve the Property as part of the Trust’s assets, and is also obliged, and therefore necessarily empowered, to ensure the Property is habitable for the defendant’s accommodation.

A Trustee in this position has a duty and a power to ensure that the trust property is kept in a good state of repair.[57]
[57]Amos v Fraser (1906) 4 CLR 78 at 84; 61; The Court also has an inherent jurisdiction and power to authorise repairs and improvements to the trust property where to do so is in the interests of a beneficiary; Cousins v Cousins (1906) 3 CLR 1198 at 1201-2.

Further Clause 8(5) of the Trust Deed, provides that:[58]

The Trustee shall in addition to the powers otherwise conferred upon Trustee by law have the following powers:
…
(5)to hold use purchase construct demolish maintain repair renovate reconstruct develop improve sell transfer convey surrender let lease exchange take and grant options or rights in alienate mortgage charge pledge reconvey release or discharge or otherwise deal with any real or personal property and in particular for shares debentures or securities of any company and with or without deferred restricted qualified or special rights relating thereto;

[58]First Lustig Affidavit, Exhibit ‘DL-2’.

Accordingly, Clause 8 of the Trust Deed provides an express power to maintain, repair, renovate, reconstruct, develop and improve the Property which is, for the reasons outlined above, to be kept in a good state of repair for the benefit and protection of the defendant.

However, Clause 8 of the Trust Deed is to read subject to the Property Clause because the Property Clause effected a subsequent variation to the Trust Deed and it contains a number of specific provisions in relation to the Property and for the protection of the defendant, including in Clause 4A of the Property Clause.

The Property Clause is silent as to repair and capital works to the Property, save for imposing responsibility upon the Trustee for the payment of all reasonable outgoings in respect of the cost of internal repairs in respect of utility and telephone related charges. Neither Clause 8 of the Trust Deed, nor the Property Clause, provide for power in the defendant, or other beneficiaries, to effect repairs or capital works at the Property.

However, a central purpose of the Property Clause is to provide a rent free dwelling for the defendant during his lifetime at the Property or other dwelling purchased by the Trustee as a substitute for the Property and as observed above the Trustee of such a trust is obliged to preserve the Property and keep it in a good state of repair.

Accordingly, it can be readily implied from the express terms and purpose of the Property Clause and Clause 8, and at law,[59] that the Trustee is empowered to effect necessary and reasonable repairs and capital works to the Property. The implication of such a power is in my view reasonable and necessary for the Trustee to be able to fulfil its primary obligations, and so much so that the implied power referred to goes without saying. The implication of such a power is also consonant with the express terms of the Trust Deed.[60]
[59]Amos v Fraser (1906) 4 CLR 78 at 84; Halsbury’s Laws of Australia [430-4855] Power to repair at general law.
[60]Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.

Furthermore, a Trustee ordinarily has the power to effect repairs and improvements where it is in the beneficiaries’ interests to do so.[61]
[61]Halsbury’s Laws of Australia [430-4855].

Decision – Question 1

Although the parties’ position is that it is unnecessary for the Court to determine this question, I consider that it is appropriate and of utility to determine this issue.[62]
[62]T25.24-26 and T29.26, Trustee Submissions, [58]-[59]; Defendant Submissions, [52].

I reject the assertion that Question 1 should not be determined because it is theoretical or hypothetical. In my view there are adequate reasons here to decide this question because it appears there are likely to be works which require attention in the foreseeable future, including in relation to the rectification of defects in the recent renovation work affected by the Trustee, and also work necessitated by water ingress.

I also accept there subsists a risk that given the history of this matter, in relation to which no fault is ascribed to either the defendant or the Trustee, the parties may fall into dispute in relation to future works at the Property, including as to whether the Trustee has the power referred to in Question 1. Accordingly, the determination of Question 1 is in such circumstances of potential assistance to the parties in the future.

As a result of matters referred to in the last preceding paragraph, and given this issue is before the Court and has been argued, it is in my view just, efficient, timely, cost effective and convenient to determine the Trustee’s Question 1.[63]
[63]Civil Procedure Act 2010 (Vic), ss 7, 8 and 9.

Accordingly, I determine that the Trustee has the power to determine and effect necessary and reasonable repairs or capital works to the Property.

Question 2: Does the Trustee have the power to prohibit the defendant from entry to the Property whilst repairs or capital works on the Property are in progress?
Trustee Submissions

The Trustee contends that although there is no express power to that effect in the Trust Deed, when it has determined repair or capital works need be performed on the Property, it has the power to prohibit the defendant from entering the Property, absent co-operation from the defendant, in circumstances where the Trustee has put in place reasonable arrangements for alternative accommodation of the defendant whilst such repairs and renovations are in progress.[64]
[64]Trustee Submissions, [66].

The Trustee observes that the Trustee has the express power in clause 8(5) to ‘renovate’ the Property and the ‘Property Clause’ places an obligation on the Trustee to ensure the defendant has accommodation available to him at all times (whether the defendant occupies such accommodation or not).

The Trustee submits that it cannot be the case that the Trustee has a duty to maintain the Property, and a power to maintain and renovate the Property, yet the defendant can lawfully obstruct such works by refusing to temporarily vacate the Property. The Trustee submits that in these circumstances it ‘goes without saying’ that the Trustee has the power to request (and in the absence of co-operation, demand and obtain) that the defendant vacate the Property, in accordance with the principles relating to implication of a term adopted in Codelfa Construction Pty Ltd v State Rail Authority of NSW,[65] and that the implication of such a power is reasonable, equitable and consistent with the construction of the Trust Deed as a whole.
[65](1982) 149 CLR 337.

The Trustee submits that there are ‘signs of works being required’ at the Property, including to correct defects in recent renovations undertaken at the Property, and damage from water ingress from the unit above.[66]
[66]Trustee’s Submissions, 22 July 2019, [65].

The Trustee submits that the defendant’s past conduct is such that the Court can readily infer that the defendant will not co-operate with any such future works. The Trustee submits that in the circumstances and where this matter is before the Court, it is appropriate that the Court determine this question.

Defendant Submissions

The defendant’s primary position is that it is unnecessary for the Court to answer Question 2.

The defendant submits that it is unlikely, given the recent renovations, that repairs or capital works of any magnitude, other than certain remedial works, would be required during the defendant’s lifetime, and further future works, if necessary, would be undertaken with proper consultation with the defendant.[67]
[67]Defendant Submissions, [57].

The defendant further submits that for the Trustee to deny the defendant entry in every instance when capital works are in progress would contradict the defendant’s quiet enjoyment of the Property.[68] The defendant submits that he enjoys a right to exclusive possession of the Property.[69] Further, in such circumstances the Trustee is asking the Court to identify or predict from the ‘myriad of different situations which might arise’,[70] with no identification as to the parameters of the use of the power sought (such as in respect of what types of capital or remedial works) and when the defendant could be excluded from the Property and for how long. In such circumstances the defendant submits that the Court should decline to answer the question including because the question is hypothetical or theoretical.[71]
[68]Defendant Submissions, [58].
[69]T43.4; Lester v Lester [2018] VSC 611, Bothmann v White [2015] VSC 247 and Re Hoppe [1961] VR 381.
[70]In Fast v Rockman [2015] VSCA 61 although the Court of Appeal accepted that the advisory power under r 54.02 of the Rules of Court may extend to hypothetical situations, it nonetheless dismissed the appeal stating that the question ‘reverses the appropriate order and asks the court to identify or predict the circumstances about which its advice is sought. The judge appropriately referred to the ‘myriad of different situations which might arise’’, (at [59]).
[71]T43.9-17.

Further, the defendant submits that by Question 2 the Trustee is attempting to have a power of prohibition implied in relation to the Trust Deed, rather than, as would be less contradictory of the defendant’s right to exclusive possession, seeking an additional power such as one which might be ordered pursuant to s 63 of the Trustee Act 1958 (Vic).[72]
[72]T35.20-25.

The defendant submits that his express right to reside in, or to let, the Property pursuant to the Trust Deed, amounts to a proprietary interest in the Property and a beneficial entitlement to exclusive possession.[73] The defendant submits that these entitlements under the Trust Deed are inconsistent with the term the Trustee seeks to imply.
[73]See for example (T39) – Re Hoppe, deceased [1961] VR 381; Lester v Lester [2018] VSC 611; Re Dick [1954] VLR 546, 546; Bothmann v White [2015] VSC 247.

The defendant refutes the Trustee’s position that the power of the Trustee to ‘request, demand and obtain’ that the defendant vacate the Property is so obvious that it ‘goes without saying’. The defendant submits that the Trustee’s power, asserted in Question 2, is not necessary to give ‘business efficacy’ to the Trust Deed, and furthermore that power contradicts the express terms of the Trust entitling the defendant to reside at the Property rent free during his life, or to let the Property.

The defendant also questions the asserted ‘urgency’ of the foreshadowed remedial works and says the Trustee has been aware of the defects which the Trustee suggests may require rectification for a significant time and yet has sat silent and inactive.[74]
[74]Defendant Submissions, [61]; T43.18-44.8.

The defendant further refutes the Trustee’s assertion that the defendant’s past conduct suggests that he will not co-operate with necessary works to the Property in the future and says that if any inference is to be drawn from the past it is that the Trustee is not prepared to undertake work identified as required by the defendant, and that a positive determination of the Court in favour of the power sought by the Trustee will limit the defendant’s ability to engage in a meaningful bargaining process in relation to future issues concerning repair and renovation.[75]
[75]T38.25-39.6.

Trustee Reply Submissions

The Trustee submits in response that the jurisdiction of the Court, enlivened under r 54.02 of the Rules of Court, should be utilised to determine even hypothetical questions, where there are reasons to do so, and the Court should use its jurisdiction to answer this question.[76]
[76]Trustee Reply Submissions, [13] and CB13-14; CB98-99.

The Trustee submits that contrary to the defendant’s submissions, the power which the Trustee seeks to have confirmed by this Question is required to give the Trust Deed business efficacy and that, given in relation to Question 1 the defendant has conceded the Trustee’s power to repair and perform capital works, it must be that the Trustee also has the power to restrain the defendant from entering the Property for the purposes of such repairs or capital works.[77]
[77]Trustee Reply Submissions, [10]-[11].

The Trustee submits that the power referred to in Question 2 is not inconsistent with the defendant’s rights under the Property Clause as it is only available when required for repairs or capital works, and the Property Clause is silent on such matters. The Trustee also submits that the power it seeks to have determined is necessary as a matter of practicality.[78]
[78]Trustee Reply Submissions, [12].

The Trustee further submits that there is no dispute that the defendant has the right to use and occupy the Property, or lease the Property and receive the income, however those rights are subject to limitations and do not invalidate the Trustee’s powers.[79]
[79]T57.20-T59.5.

Considerations – Question 2

I consider that the Trust Deed empowers the Trustee to prohibit the defendant from entry to the Property whilst necessary and reasonable repairs or capital works to the Property are being undertaken. In my view it is clear, and goes without saying that the Trust Deed confers such a power on the Trustee in order that the Trustee, absent co-operation from the defendant, is able to fulfil its duties and obligations to preserve the Property and ensure that the Property is a habitable residence for the defendant.

Further it also follows in my view that the Trustee’s power to exclude, in appropriate circumstances, exists as a necessary concomitant to the Trustee’s power, determined in relation to Question 1. That power necessarily includes a power to prohibit the defendant from entering the Property while repairs or capital works to the Property are in progress unless the defendant agrees to co-operate with those works for the same reasons as supported the Trustee’s power to repair and carry out capital works.

Further, in my view, the power sought to be determined in Question 2 is to be exercised in circumstances where the power of prohibition, more appropriately described as a power of temporary exclusion, is necessitated by the nature or extent of necessary works and only to the extent and for the duration reasonably necessary.

Were such a concomitant power in respect of entry and performance of necessary and reasonable repairs and capital works not implied the beneficiary may well for example be endangered by such works or may render those works impractical of performance, including in a safe and efficient manner.

In Lester, Ierodiaconou AsJ was required to decide whether the plaintiff in that matter held a life tenancy in the estate’s share of a property.[80] The relevant clause in the subject Will gave the plaintiff the right to ‘use the [estate’s interest in the property] rent free during his lifetime […]’[81] (emphasis added). In deciding that the plaintiff held a life tenancy, Ierodiaconou AsJ stated that:

[…] In the absence of any clear expression of contrary intention in the Will, the word ‘use’ is consistent with a life tenancy, as described by Bell AJA in Royal Melbourne Hospital above. There is no clear expression of contrary intention in the Will.[82]

[80][2018] VSC 611, [2].

[81][2018] VSC 611, [6].

[82][2018] VSC 611, [27].

In Bothmann, Daly AsJ was required to decide whether the plaintiff in that matter was a life tenant, and therefore entitled to sell the relevant property subject to complying with the certain provisions of the Settled Land Act 1958 (Vic) (Settled Land Act).[83] The clause in issue in the Will gave the plaintiff ‘the use and occupation [of the property] and [the right] to receive the net income therefrom for her lifetime […]’.[84]
[83][2015] VSC 247, [16].
[84][2015] VSC 247, [1].

The Associate Justice found that these terms ‘[conferred] more than a mere right of residency upon the [plaintiff]’,[85] and that ‘[c]ritical to this conclusion is the conferring of the right upon [the plaintiff] to receive the net income from the property’.[86] Her Honour remarked that the right to income ‘necessarily contemplates [the plaintiff] not being in occupation or residence in the property, but still having all of the powers of the proprietor of the property during her lifetime’.[87] Ultimately Daly AsJ found that the plaintiff was empowered to sell the property in accordance with the relevant provisions of the Settled Land Act.[88]
[85][2015] VSC 247, [16].
[86]Ibid.
[87]Ibid.
[88][2015] VSC 247, [19].

In Hoppe, Herring CJ, Gavan Duffy, and Dean JJ found that a clause in a Will created a ‘right to use the premises as a residence’,[89] which existed ‘to the exclusion of everyone else’.[90]
[89][1961] VR 381, 401 [45].
[90][1961] VR 381, 402 [20].

In this matter, the Property Clause in the Trust Deed, extracted at paragraph [49] above, shares some general similarity to the clauses in Lester, Bothmann, and Hoppe. Given that general similarity, the defendant, relying on Hoppe, submits that the interest created in favour of the defendant by the Property Clause is a proprietary right over the Property which cannot be excluded by, for example, the Trustee’s power, or duty, to improve the Property.[91]
[91]T41.30.

Question 2 is however to be resolved upon the proper construction of the Trust Deed as outlined above. The decisions in Lester v Lester[92] (Lester), Bothmann v White[93] (Bothmann), and Re Hoppe[94] (Hoppe) cited by the defendant in support of the submissions summarised at [80]-[82] above examine the extent of a beneficiary’s interest in trust property.
[92][2018] VSC 611.
[93][2015] VSC 247.
[94][1961] VR 381.

In each of the three cases referred to, the application of the Settled Land Act was in question and each case also turned on its own facts. For these reasons I do not consider the defendant’s submissions relating to Lester or Bothmann or Hoppe to be of assistance in the interpretation of the Trust Deed, and in particular, Clause 4A of that Deed.

I also reject the submission that Question 2 should not be answered because it is hypothetical in nature in the present circumstances, and do so for the same reasons referred to on this aspect in relation to Question 1 above.[95]
[95]Refer Reasons for Judgment [68]-[72] above.

Decision – Question 2

The Trustee has the power under the Trust Deed to prohibit the defendant from entry to the property whilst necessary and reasonable repairs or capital works on the property are in progress, providing that the Trustee has put in place reasonable arrangements for the alternative accommodation of the defendant whilst such repairs or renovations are in progress.

Question 3: Does the Trustee have the power to determine to (a) purchase or (b) rent a substitute property?
Trustee Submissions

The Trustee submits that it has the absolute right to determine to purchase a suitable property in substitution of the Property, at any time under the Property Clause in accordance with the general protective nature of the Trust Deed, providing any such property is of a similar nature to the Property or different in a manner that is of benefit to the defendant. The Trustee submits that otherwise this power of the Trustee is ‘absolute and uncontrolled’.[96]
[96]Trustee Submissions, [67]-[68].

The Trustee also submits that if the Property Clause is read purposively, as the Court should do, it is clear that the objective intention of that clause is to provide accommodation for the defendant, and that can be achieved in ways which include by entering into of a lease, providing such a lease is not inconsistent with the defendant’s rights under the Property Clause, including the defendant’s right to lease the property provided by the Trustee and retain the income.[97] The Trustee submits that save as modified by the terms of the Property Clause, the Trustee’s discretion is absolute and uncontrolled.
[97]Trustee Submissions, [69].

The Trustee submits that on the express terms of Clause 4A of the Trust Deed the answer to the first limb of Question 3(a) should be that the Trustee has an absolute right to determine to purchase a suitable property in substitution for the Property at any time under the Property Clause.

In relation to the second limb of Question 3 the Trustee submits that the court should determine that the Trustee has an absolute right to lease another suitable property in substitution for the Property at any time under the Property Clause. The terms of any such lease must be consistent with the rights given to the defendant under the Property Clause.[98]
[98]Trustee Submissions, [74].

Defendant Submissions

The defendant concedes that given the express wording of Clause 4A(2) of the Trust Deed the Trustee has the power to purchase a substitute property for the defendant to reside in.[99] The defendant submits that it is therefore unnecessary for the Court to determine this first limb of Question 3.[100]
[99]Defendant Submissions, [67].
[100]T30.27-31.

The defendant submits that the Court should decline to determine the second limb of Question 3, in relation to whether the Trustee has the power to ‘rent’ a substitute property in the circumstances which exist, namely where there is nothing in the Trustee’s material to suggest that the Trustee is considering purchasing or renting a substitute property and the Trustee has committed to a different course of action by recently renovating the Property.

The defendant further highlights that a power in the Trustee to lease alternative accommodation for the defendant as his residence would not be consistent with the defendant’s express right to let the Property and retain such rental income pursuant to Clause 4A of the Trust Deed, including having regard to the prohibitions on sub-leasing contained in most residential tenancy agreements.

Trustee Reply Submissions

The Trustee submits that it is unnecessary, in this application concerning the construction of the terms of the Trust Deed, for it to identify and obtain approval of specific conduct, such as the Trustee’s future plans to lease a residence for the defendant as an alternative to the Property. The Trustee submits that it is appropriate in the circumstances for the Court to determine the question as drafted.

The Trustee submits that there is nothing before the Court to suggest that difficulties between the parties of the type a determination of the question would resolve, will not arise in future. Further, the Trustee points to what it says are various threats of non-cooperation and non-use of the Property made by the defendant, both to the Trustee and before the Court and VCAT.[101]
[101]Trustee Reply Submissions, [18].

The Trustee however concedes that it would not be within the Trustee’s power to provide a rental property that did not afford the same rights to the defendant as he has vis-à-vis the Property, however the Trustee submits that if it is possible for the Trustee to provide rental accommodation on such terms, there is no reason why it should not be permitted to do so.[102]
[102]T60.25-T62.7.

Considerations – Question 3

Only the second limb of Question 3, namely the Trustee has the power to determine to rent a substitute property, is in issue.

Further, in relation to the first limb of Question 3 which has been determined notwithstanding the parties submitting that in the circumstances they need not now be answered, I consider that the combination of the clear express power in Clause 4A of the Trust Deed to purchase a property as a substitute for the Property, and the parties’ unequivocal acceptance of that power in the Trustee, render it unnecessary to determine the first limb of Question 3. It is most unlikely that there can be any further dispute in relation to this power.

In relation to the second limb of Question 3, I consider for the following reasons that the terms of the Property Clause do not expressly or by implication empower the Trustee to lease a property so as to provide accommodation for the defendant as an alternative to the Property.

The starting point is that the Trust Deed does not expressly provide for or refer to a power in the Trustee to lease a property in substitution for the Property.

Moreover, the express terms of the Property Clause direct the Trustee ‘… to permit the said Peter John Bauer during his life to reside rent free in the Property known as Flat 1, 731 Punt Road, South Yarra or any other dwelling purchased by the Trustee in substitution therefor …’. These stipulations in my view reflect the intent of the settlor that the defendant is to be accommodated for his lifetime at the Property owned by the Trust unless the defendant elects otherwise, and decides to lease the Property and utilise the rental income produced. This readily identifiable intent precludes the Trustee fulfilling this purpose of the Trust Deed otherwise than by accommodating the defendant at the Property or another suitable dwelling purchased by the Trust in substitution therefor.

In the Second Variation, Clause 4A of the Trust Deed provided ‘FURTHER the Trustee is hereby directed to permit Peter John Bauer during his life to reside rent free in the property known as Flat 1, 731 Punt Road, South Yarra or any other dwelling purchased by the Trustee in substitution therefor ...’, read in context and together with the whole of the Trust Deed this express stipulation which is specifically concerned with assuring accommodation for the defendant during his lifetime, qualifies and renders servient the otherwise absolute and uncontrolled discretion vested in the Trustee by Clause 18 of the Trust Deed.

The express terms of the Trust Deed referred to above, in particular those directing the Trustee to permit the defendant during his lifetime to reside rent free at the Property or any other dwelling purchased by the Trustee in substitution, I consider conveys unambiguously on the natural and ordinary meaning of those terms that the dwelling to be provided by the Trustee under the Trust Deed is to be one acquired by ‘purchase’, that is, owned by the Trust. There is in my view no ambiguity or scope on the language of the Trust Deed referred to, which would justify a construction, or give rise to an implication, that the Property Clause also authorised the Trustee to provide leasehold accommodation to the defendant.

Further, the Property Clause also provides that the defendant has the right to lease the Property to another party and retain the proceeds of such lease. Because such a right may give rise to legal and practical complications, if the defendant was the occupant of a property leased by the Trustee and the Trustee was required to attempt to sub-let that property, it is also unlikely that such an arrangement is contemplated by Clause 4A of the Trust Deed.

I also reject the defendant’s submission that the Court should not answer the second limb of Question 3 because that question is hypothetical given that the Trustee has not endeavoured to establish that it is considering entering into a lease of property to provide accommodation and on the contrary has by recent actions, namely by renovating the Property, affirmed its intention to accommodate the defendant at the Property for the foreseeable future.

In my view, given the history of this matter and the lack of agreement between the Trustee and the defendant in relation to many aspects of the defendant’s accommodation pursuant to the Trust Deed, and what appears to be longstanding antipathy between the Trustee and the defendant, in my view the Court should, within the usual confines, endeavour to deal with this question for resolution in a way which is just, efficient, timely, cost effective, and likely to be of assistance to the parties, including in relation to their future dealings. I consider that in the circumstances it may be of assistance to the parties, and is likely to achieve these other desirable objectives, to determine the second limb of Question 3.

Decision – Question 3 (first limb)

The Trustee does have the power under the Trust Deed to determine to purchase a substitute property for the Property.

Decision – Question 3 (second limb)

The Trustee does not have the power under the Trust Deed to determine to rent a substitute property for the Property.

Question 4: Does the Trustee have the power to prohibit the defendant from entry to the Property when alternative accommodation for the defendant and storage of his personal property has been provided, whilst the Property is prepared for sale and vacant possession has not been obtained for any substitute property?
Trustee Submissions

The Trustee submits that it has the power to prohibit the defendant from entering the Property in circumstances where the settlement of the sale of the Property is required, so as to enable the Trustee to effect the settlement of the purchase of a substitute property.

The Trustee submits that if it did not have this power then the purchase of a substitute property might only be feasible through the sale of other assets of the Trust, which may impact upon future capital and income to beneficiaries, and further the Trustee’s power to determine to purchase a substitute property may as a consequence be frustrated.[103]
[103]Trustee Submissions, [75]-[76].

The Trustee submits that it would be unlikely that the Property could be brought into, and maintained in, ‘optimal condition for sale’, unless the Property was unoccupied and therefore if the Trustee is not empowered to require the defendant to temporarily vacate the Property this would also potentially frustrate the Trustee’s duty to preserve trust assets and the Trustee’s general power to effect prompt sale at the best price.[104]
[104]Trustee Submissions, [77].

The Trustee contends that in circumstances where it has determined to purchase a substitute property, it is obvious, and ‘goes without saying’, that the Trustee has the power to request (and in absence of co-operation, demand and obtain) that the defendant vacate the Property so as to facilitate the sale process if reasonably required to do so, subject to the Trustee arranging suitable alternative accommodation for the defendant.[105]
[105]Trustee Submissions, [81].

Accordingly, the Trustee submits that the answer to the Question 4 should be, ‘Yes, providing that the Trustee has put in place arrangements for the alternative accommodation of the defendant and storage of his personal property during the sale and purchase process’.[106]
[106]Trustee Submissions, [83].

Defendant Submissions

The defendant submits that this question is also hypothetical and premature in circumstances where there the Trustee has no plan to sell the Property. The defendant submits that this question contemplates a sophisticated ‘two-step’ process: firstly, moving the defendant into alternative accommodation whilst the Property is prepared for sale; and secondly moving him from that accommodation to a ‘subsidiary property’.[107]
[107]Defendant Submissions, [71].

The defendant submits that such a power would interfere with the defendant’s proprietary rights and submits that in any event there is nothing to suggest that the defendant will not co-operate with future proposals of the Trustee, including his relocation, and that in the circumstances, and for these reasons, the Court should decline to answer Question 4.[108]
[108]Defendant Submissions, [70]-[74].

Trustee Reply Submissions

The Trustee submits that the Court can readily infer from the defendant’s past conduct that he would not co-operate with any future sale process,[109] and that there is ample material upon which to conclude that the defendant’s conduct was not solely motivated by his recently claimed lack of involvement in the renovation process.[110]
[109]Trustee Submissions, [78]-[79].
[110]Trustee Reply Submissions, [20]-[21].

Considerations – Question 4

The Property Clause expressly provides that the defendant is to be permitted to reside rent free at the Property ‘… or any other dwelling purchased by the Trustee in substitution therefor …’. It is therefore clear that the Trust Deed empowers the Trustee to purchase a suitable substitute dwelling for the defendant. Further, in their submissions in relation to Question 3 both the Trustee and the defendant recognised the existence of the Trustee’s power to purchase a substitute property for the Property.

Given the existence of the Trustee’s clear express power to purchase a substitute property, I consider it to be readily implied by and in relation to that power that the Trustee may take such action in relation to the Property as is reasonably necessary to effectively market and sell the Property so as to enable the purchase of a suitable alternative Property for the defendant.

Further, in my view, it is an implied component of the power referred to in the last two preceding paragraphs that the Trustee may, absent reasonable co-operation by the defendant, require the defendant to take up suitable alternative accommodation provided by the Trustee, so as to enable the Property to be effectively marketed and sold. Such an implication is in my view necessary for the efficacy of the power to sell the Property and to purchase a substitute property, is reasonable, and does not contradict any other provision of the Trust Deed.

Were the powers referred to in the last preceding paragraph not implied and attendant upon the Trustee’s express power to purchase a substitute property, that express power might be rendered impractical to exercise, including by reason of it not being possible to sell the Property promptly and for fair market value. This in turn would potentially risk the future capital available to the Trust and also risk potential impairment of income to beneficiaries.

Further, for reasons referred to below, I reject that this question should not be answered on the basis that it is hypothetical and premature in the circumstances because, on the defendant’s submission, the Trustee has not established any present plan to sell the Property.

Although the parties’ position is that it is unnecessary for the Court to determine this question, I consider that it is appropriate and of utility to determine this issue.[111]
[111]T25.24-26 and T29.26, Trustee Submissions, [58]-[59]; Defendant Submissions, [52].

I reject the defendant’s submissions that Question 4 should not be determined because it is theoretical or hypothetical. As earlier mentioned I accept there subsists a risk that given the history of this matter the parties may fall into dispute in relation to arrangements in relation to the Property, including as to whether the Trustee has the power referred to in Question 4. Accordingly, the determination of Question 4 is in such circumstances of potential assistance to the parties in the future. Further, given this issue is before the Court and has been argued, it is in my view just, efficient, timely, cost effective and convenient to determine the Trustee’s Question 4.[112]
[112]Civil Procedure Act 2010 (Vic), ss 7, 8 and 9.

Decision – Question 4

Pursuant to the Trust Deed the Trustee has the power to prohibit the defendant from entering the Property when the Trustee has arranged suitable alternative accommodation for the defendant and arranged to store the defendant’s personal property, whilst the Property is prepared for sale and vacant possession has not been obtained of a substitute property for the defendant’s accommodation.

Question 5: Does the Trustee have the power to inspect the Property?
Question 6: If the answer to question 5 is 'yes' (a) is it reasonable for the Trustee to inspect the Property biannually, and otherwise upon 14 days written notice to the defendant, and (b) does the Trustee have the power to prohibit the defendant from entry to the Property whilst the Property is being inspected by the Trustee.
Trustee Submissions

The Trustee submits that a power to inspect the Property is ‘so obvious it goes without saying’, although the Trustee acknowledges that the Trust Deed does not provide any express power of inspection and also acknowledges that the defendant ‘should have something akin to a right of quiet enjoyment’.

The Trustee addressed Questions 5 and 6 together. In relation to Question 5, the Trustee notes that the defendant concedes a yearly right of inspection on 7 days’ notice. The Trustee presses Question 6 because there is no mechanism, but there is a need for bi-annual inspection and inspections on reasonable notice (14 days’ notice) to assist with likely future matters (such as further notices from authorities or the Owners Corporation) as well as existing matters (such as checking that remediation works have been performed correctly). The Trustee submits that the Court should determine that there is a power of inspection upon reasonable notice in such circumstances.[113]
[113]Trustee Submissions, [29].

Defendant Submissions

The defendant submits that Questions 5 and 6 should be dealt with together and further submits that it is unnecessary for the Court to determine Questions 5 and 6 in circumstances where the defendant had previously agreed to a right of inspection annually upon the Trustee providing at least 7 days’ notice, as reflected in the terms of settlement at Exhibit ‘DL-5’ of the Second Lustig Affidavit.[114]
[114]CB109.

The defendant does not object to the Trustee inspecting the Property, provided it is on reasonable notice.[115]
[115]Defendant Submissions proposed terms upon which inspections could be undertaken.

During the course of argument at trial, the defendant conceded that the Trustee has a reasonable right of inspection exercisable on the Trustee providing 14 days’ written notice to the defendant.[116] In response the Trustee conceded and agreed that it was unnecessary in the circumstances for the Court to determine Question 5.[117]
[116]On 12 September 2019 via email to the Court, counsel for the defendant advised that the defendant was prepared to agree that the Trustee have an additional reasonable right of inspection of the Property exercisable on 14 days’ written notice.
[117]T65.2-13.

Decision – Questions 5 and 6

The parties agree it is unnecessary for the Court to determine Question 5.

Notwithstanding the position of the parties referred to in the last preceding paragraph, I consider it to be of utility to record in relation to the above that in the course of the trial of this matter the defendant conceded that the Trustee has the right to inspect the Property on notice and further the Trustee and the defendant agreed that:

(a) the defendant did not object to the Trustee inspecting the Property, provided it is on reasonable notice, and further the defendant agreed that ‘the Trustee shall have a yearly right of inspect of the Property, upon giving at least 7 days’ notice to the Beneficiary’;[118] and

(b) the Trustee has an additional reasonable right of inspection of the Property, exercisable on 14 days’ written notice to the defendant.[119]

[118]Defendant Submissions, [76]; I note that this is a right of inspection that the parties agreed in the terms of settlement at ‘DL-5’ of the Second Lustig Affidavit.

[119]T65; and email from Counsel for the defendant, 12 September 2019, [3.05pm].

The defendant’s cross-claim

The defendant has since about early 2017 foreshadowed that he considers that certain questions and matters in addition to those formally raised by the Trustee’s Second Further Amended Originating Motion should be addressed by the Court in this proceeding.

Procedural history of the cross-claim

The procedural history of the defendant’s cross-claim is as follows:

(a) On 12 May 2016, O’Donnell Salzano Lawyers, communicated that they had instructions to appear on behalf of Peter Bauer.

(b) On 13 May 2016, Judd J ordered that Peter Bauer be added as a defendant to the proceeding.

(c) On 27 June 2016, O’Donnell Salzano Lawyers, filed a Notice of Appearance on behalf of Peter Bauer.

(d) On 17 February 2017, Judd J directed that the defendant file and serve a draft cross-claim under r 54.02 of the Rules of Court on or before 10 March 2017.

(e) On 30 March 2017, the Trustee’s solicitors emailed the Court [9.48am] stating ‘The Trustee was served with the defendant’s affidavit and draft cross-claim on 27 March 2017 and will need time to consider this material’.

(f) By consent, on 16 June 2017, McMillan J adjourned the proceeding to 28 July 2017. On 27 July 2017, the Trustee stated that ‘The defendant has raised various allegations about the conduct of the Trust and has proposed a form of cross-originating motion said to be to determine questions of construction of Trustee powers.’[120]

[120]CB127, First Beasant Affidavit, [4].

(g) In the orders made 28 July 2017, McMillan J recorded in Other Matters [A], that counsel for the defendant informed the Court that he regards the draft cross application as ‘spent’.

(h) On 3 October 2017, a draft cross-claim was filed by the defendant in person. The filed document sets out nine questions for determination pursuant to r 54.02(2)(a) of the Rules of Court.

By a letter of the same date to the Court, the defendant advised that his former solicitors ‘no longer represent me’ and also stated that ‘On 3 October 2017 I submitted a list of questions in relation to the construction of the Trust Deed to the Prothonotary. It was only today I became aware of the orders made on 16 June 2017. I was given no knowledge of the Proceedings. I do not consider the draft application spent.’

(i) On 20 October 2017, O’Donnell Salzano Lawyers filed a Notice of Ceasing to Act for the defendant.

The defendant, in its Submissions dated 29 August 2019, included submissions on matters beyond those raised in the Trustee’s Second Further Amended Originating Motion dated 8 February 2019, including the defendant’s nine questions dated 3 October 2019, and additional matters.[121]
[121]Defendant Submissions, [79]-[111].

In response the Trustee submitted in essence that the defendant seeks to put matters before the Court which are not part of the applications formally before the Court. The Trustee further submits that the additional questions and matters sought to be raised in the defendant’s submissions of 29 August 2019 were circulated in draft form with the leave of the Court on 17 February 2017 but then abandoned in light of the utility of the claims on 28 July 2017. Further, the Trustee protests that at no time has the defendant actually had a compliant properly served cross-claim on foot in this proceeding.[122]
[122]Trustee Reply Submissions, [1].

On 12 September 2019 the Trustee’s Second Further Amended Originating Motion was heard.

The defendant, in his Submissions dated 29 August 2019, purported to raise further questions in the nature of questions of construction of the Trust Deed as set out in Exhibit ‘PJB-20’ to the Third Bauer Affidavit and also purported to advance various money claims, including claims in relation to reimbursement. However the defendant’s own submissions foreshadow that the Trustee will require more information about certain of the defendant’s claims before it is able to address those claims. The defendant’s submissions also foreshadow that the defendant will endeavour to obtain the information he anticipates the Trustee will require in relation to these aspects of his claims.[123]
[123]Defendant Submissions, [99]-[101].

Further, in his written submissions of 29 August 2019, in addition to his money claims, the defendant also seeks to recover a portion of the costs, which he claims that he outlaid to stay in the Lyall serviced apartments between 16 May 2016 and 16 November 2016 when the Property was again available to be occupied by him, together with reimbursement or compensation for losses asserted to have arisen as a result of the defendant’s personal effects being removed from the Property at the time of the renovation works being undertaken and not returned and the cost of storage and transfer of the defendant’s property from the Property to enable it to be renovated. The defendant also seeks to have several remaining defects in the Property renovation works, including damage caused in 2018 as a result of water ingress, remediated by the Trustee.

Only some of the defendant’s claims for loss and damage, and for reimbursement or compensation, are in any way particularised. The majority of such claims are not presently articulated in a way which would enable the Trustee, or the Court, to address them.[124]
[124]Third Bauer Affidavit, Exhibits ’PJB-17’ and ‘PJB-19’.

On 12 September 2019, at the commencement of argument at trial, the parties made submissions and observations about the defendant’s purported cross-claim. The Trustee objected to being required to address the defendant’s purported cross-claim and asserted that the defendant’s ‘cross-claims’ had no foundation and lacked particularisation, and further that some aspects of the defendant’s claims had not crystallised and were not judicable disputes.

Further, the Trustee submitted that some of the defendant’s cross-claim was unlikely to be the subject of a proper basis certificate as required by s 42 the Civil Procedure Act 2010 (Vic).[125]
[125]T3.24-T4.21.

Ultimately, on 12 September 2019, the parties agreed that, save in relation to the Trustee’s questions relating to the defendant’s purported cross-claim in respect of the proper construction of Clause 4A of the Trust Deed namely, the defendant’s proposed cross-claim included the following as Question 2:

Is the defendant entitled to performance of Clause 4A(2)(a) of the Trust Deed in addition to Clause 4A(1)(b)?

the defendant’s said cross-claim, raising nine questions and the defendant’s additional matters[126] were not to be addressed and determined as part of the trial.[127]

[126]Third Bauer Affidavit, Exhibit ‘PJB-20’; Defendant Submissions, [79]-[111].

[127]T17.30-T.19.11.

The defendant’s question: Is the defendant entitled to performance of Clause 4A(1)(b) of the Trust Deed in addition to Clause 4A(2)(a)
Defendant Submissions

The defendant submits that Clause 4A of the Trust Deed contains two sub-clauses concerned with the distribution to him of Trust Fund income which operate cumulatively:

(a) 4A(1)(b) which operates from the death of his father Franz Bauer; and

(b) 4A(2)(a) which operates from the death of his stepmother, Elise Bauer.

The defendant submits that the sub-clauses in issue operate cumulatively, entitling the defendant to $300 per week (after tax), pursuant to Clause 4A(1)(b) following the death of his father Franz Bauer (as varied in accordance with the formula contained in that sub clause), and an additional $300 per week (after tax and the same said variation), pursuant to Clause 4A(2)(a) following the death of his stepmother Elise Bauer (also subject to the same directions as to variation).

The defendant submits that if the above construction were not correct there would be no need for Clause 4A(2), because the same contractual work done by Clause 4A(2) would already be done by Clause 4A(1), and following the death of Elise Bauer the income which would until that time have been distributed to her would simply flow to the Foundation as part of the residue.[128]
[128]T53.2-15.

In the result, the defendant submits that if his above construction of Clause 4A(1) and (2) is correct he has been underpaid by the Trustee since 2002, when Elise Bauer died, and he is entitled to be paid the shortfall.

Trustee Submissions

The Trustee rejects the construction contended for by the defendant, and observes that both Clauses 4A(1) and 4A(2) deal with the ‘net income’ of the Trust Fund, and deal with the whole of the Trust Fund income.[129]
[129]T23.12-31; T24.1-12.

The Trustee submits that on its own clear terms the Trust Deed does not make the payment to the defendant under Clause 4A(2)(a), cumulatively or in addition to the allowance of income to the defendant under Clause 4A(1)(b). Further the Trustee submits that its construction of Clause 4A in relation to the allocation of income to the defendant resolves the anomaly of Clause 4A including a repeated provision for the allocation of residue in Clause 4A(1)(c) and Clause 4A(2)(b), which would be the case if the defendant’s construction was correct.[130] This is because of the existence of a provision dealing with residue in Clause 4A(1)(c) and the combined effect of the sub-clauses under Clause 4A(1) which clearly deal with the whole of the net income.[131]
[130]T24.14-T25.4.
[131]T23.20-T24.12.

In these circumstances the Trustee submits that Clause 4A(1) and Clause 4A(2) operate alternatively, and that the only part of Clause 4A which operates after the death of Elise Bauer is Clause 4A(2) which provides for distribution of the net income of Trust after the date of her death.

Considerations

Read as a whole Clause 4A of the Trust Deed is broadly intended to provide for the payment of the net income of the Trust Fund to Elise Bauer and Peter John Bauer in the percentage or sum specified (and in relation to Peter John Bauer, varied annually to maintain the purchasing power of that sum), with the residue of the net income from the Trust Fund to be paid to the trustee(s) of ‘The F&E Bauer Foundation’.

The Trust Deed also provides that from Elise Bauer’s death, the Trustee is to pay the net income of the Trust Fund as to the sum of $300.00 per week (after tax) to Peter John Bauer (subject to the same annual variation), with the residue of the income of the Trust Fund to be paid to ‘The F&E Bauer Foundation’.

The language and intended effect of Clause 4A of the Trust Deed is clear. It provides for the payment of $300.00 per week (after tax) from the Trust Fund net income to the defendant (subject to any annual variation) until the time of Elise Bauer’s death. Thereafter the defendant’s entitlement to be paid from the net income of the Trust Fund remains the same, however the amount that would otherwise have been paid from the Trust Fund’s net income to Elise Bauer is to be paid to the Trustee(s) of the ‘The F&E Bauer Foundation’. The clear scheme and operation of Clause 4A is that Clause 4A(1) operates exclusively from the death of the defendant’s father, Franz Bauer while the defendant’s stepmother is alive, and Clause 4A(2) commences to operate from the death of the defendant’s stepmother and from that time Clause 4A(1) is rendered inoperative.

I do not consider there to be any express or implied basis upon which it can be concluded that Clauses 4A(1) or 4A(2), or the combined effect of those clauses, reflect the settlor’s intention to provide for a cumulative entitlement in Peter John Bauer pursuant to which his entitlement to $300.00 per week, as provided in Clause 4A(1) continued to accrue after the death of Elise Bauer and is to be supplemented by the payment of a further $300.00 per week (after tax and subject to variation) after the death of his stepmother.

On the contrary Clause 4A(1) defines the point in time from which the defendant’s entitlement to a portion of the Trust Fund income commences, namely from the death of Franz Bauer. Clause 4A(1) also clearly and specifically provides for the allocation of the whole of the Trust Fund income as between Elise Bauer, the defendant and the residual beneficiary, the Foundation. After Elise Bauer’s death, Clause 4A(2) deals with the allocation of the whole of all Trust Fund income. Read as a whole Clause 4A emits of no doubt as to the scheme and operation as outlined above.

Clauses 4A(1) and 4A(2) of the Trust Deed are most unlikely to be intended to operate concurrently, including because both clauses separately deal with the allocation of all Trust Fund income including, in the case of each Clause, the residue of the Trust Fund income after payment to other beneficiaries in the periods to which they relate. If Clauses 4A(1) and 4A(2) were to operate cumulatively, as the Trustee submits, the inclusion of two clauses dealing with the allocation of the residue of Trust Fund income operating cumulatively after the death of Elise Bauer, would be anomalous.

Further, I reject the defendant’s submissions that unless Clauses 4A(1) and 4A(2) operate cumulatively, there would be no work for Clause 4A(2) to do because Clause 4A(1)(b) already provided for $300.00 per week (after tax and subject to adjustment) for the defendant. In my view this contention fails to recognise the clear language and evident scheme of Clause 4A, including the express provision for a different allocation of the overall Trust Fund income in two different periods of time, the second commencing on the death of Elise Bauer.

Decision - the defendant’s question

The defendant is not entitled to a weekly payment under both Clause 4A(1)(b) and Clause 4A(2)(a) of the Trust Deed.

Decision - Summary

For the above reasons I find and determine:

(a) Question 1

The Trustee has the power under the Trust Deed to determine that (a) repair, and (b) capital works, be made to the Property.

(b) Question 2

The Trustee has the power under the Trust Deed to prohibit the defendant from entry to the property whilst repairs or capital works on the Property are in progress.

(c) Question 3

The Trustee does not have the power to determine to rent a substitute property for the Property.

(d) Question 4

The Trustee has the power to prohibit the defendant from entry to the Property, when suitable alternative accommodation for the defendant and storage of his personal property has been provided, whilst the Property is prepared for sale and vacant possession has not been obtained for any substitute property.

(e) Question 5

The Trustee has the power to inspect the property in accordance with the parties’ agreement in relation to inspection arrangements.[132]

(f) The defendant’s question:Is the defendant entitled to performance of Clause 4A(1)(b) of the Trust Deed in addition to Clause 4A(2)(a)

The defendant is not entitled to weekly payment under both Clause 4A(1)(b) and Clause 4A(2)(a) of the Trust Deed.

[132]Refer paragraphs [147]-[151] of these Reasons for Judgment; footnotes 113, 114 and 116 to 118.

Final Orders and Costs

Accordingly I order that:

1.The questions in the Second Further Amended Originating Motion dated 8 February 2019 be answered as follows:
Question 1:Does the Trustee have the power under the Trust Deed to determine that (a) repair, and (b) capital works, be made to the Property?
Answer:The Trustee has the power under the Trust Deed to determine that (a) repair, and (b) capital works, be made to the Property.

Question 2:Does the Trustee have the power to prohibit the defendant from entry to the Property whilst repairs or capital works on the Property are in progress?
Answer :The Trustee has the power under the Trust Deed to prohibit the defendant from entry to the Property whilst repairs or capital works on the Property are in progress.
Question 3:Does the Trustee have the power to determine to: (a) purchase, or (b) rent a substitute property for the Property?
Answer:The Trustee has the power under the Trust Deed to determine to purchase a substitute property for the Property. The Trustee does not have the power under the Trust Deed to determine to rent a substitute property for the Property.
Question 4:Does the Trustee have the power to prohibit the defendant from entry to the Property, when alternative accommodation for the defendant and storage of his personal property has been provided, whilst the Property is prepared for sale and vacant possession has not been obtained for any substitute property?
Answer:The Trustee has the power under the Trust Deed to prohibit the defendant from entry to the Property, when suitable alternative accommodation for the defendant and storage of his personal property has been provided, whilst the Property is prepared for sale and vacant possession has not been obtained for any substitute property.
Question 5:Does the Trustee have the power to inspect the property?
Question 6:If the answer to question 5 is 'yes':
(a)is it reasonable for the Trustee to inspect the Property biannually, and otherwise upon 14 days written notice to the defendant, and
(b)does the Trustee have the power to prohibit the defendant from entry to the Property whilst the Property is being inspected by the Trustee?

Answer:The Trustee has the power to inspect the property in accordance with the parties' agreement in relation to inspection arrangements, that is, the Trustee has the power under the Trust Deed to inspect the Property:
(a)yearly, upon giving at least 7 days’ notice to the defendant;
(b)at any other time, upon giving 14 days’ written notice to the defendant.

2.The defendant’s question about the construction of sub clause 4A(2)(a) of the Trust Deed be answered as follows:
Question:Is the defendant entitled to performance of Clause 4A(2)(b) of the Trust Deed in addition to Clause 4A(1)(b)?
Answer:The defendant is not entitled to weekly payment under both Clause 4A(1)(b) and Clause 4A(2)(a) of the Trust Deed.

3.The Trustee’s costs of and incidental to the proceeding be paid out of the assets of the trust on a trustee basis.
4.The defendant’s costs of and incidental to the proceeding, fixed in the amount of $16,500 (including GST), be paid out of the assets of the trust.
5.The proceeding is otherwise dismissed.

[2020] VSC 443

27 July 2020