Re Frosthollow Pty Ltd - [2015] VSC 512

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
IN THE PRACTICE COURT

S CI 2015 4363

IN THE MATTER of an Application by Frosthollow Pty Ltd (ACN 151 816 401) for Judicial Advice and Directions under Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2005.

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JUDGE:	McDONALD J
WHERE HELD:	Melbourne
DATES OF HEARING:	10 and 17 September 2015
DATE OF JUDGMENT:	25 September 2015
CASE MAY BE CITED AS:	Re Frosthollow Pty Ltd
MEDIUM NEUTRAL CITATION:	[2015] VSC 512

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TRUSTS AND TRUSTEES — Judicial advice — Trustee’s right to indemnification from trust assets — Plaintiffs and five defendants beneficiaries of trust — Trustee alleged to have breached duties as trustee — Sole shareholder and director of trustee is a defendant and is alleged to have procured the breach of trust — Counsel’s opinion in support of application for judicial advice based on instructions from director of trustee — No indication that trustee would advance arguments in addition to those to be advanced by other defendants — Advice of counsel supports conclusion that trustee has proper basis to defend proceeding — Not appropriate to fund defence out of assets of trust — Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 54.

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APPEARANCES:	Counsel	Solicitors
For the Applicant Frosthollow Pty Ltd	Mr C E Shaw	Norton Gledhill
For the Objectors	Mr M S Osborne QC and Mr P Creighton-Selvay	Strongman & Crouch

HIS HONOUR:

1 On 18 November 2011, Frosthollow Pty Ltd (‘Frosthollow’) was appointed as trustee of the Ying Mui Trust (‘YMT’). On 8 December 2011, Frosthollow was appointed as trustee of the Amore Trust (‘AT’). The sole director of Frosthollow is Lynn Hoh. The YMT is a discretionary trust with approximately 30 natural persons as beneficiaries, as well as a number of incorporated beneficiaries. Nine of the beneficiaries of the YMT are the four plaintiffs[1] and five of eight defendants[2] in proceedings in the Supreme Court of Victoria which are listed for hearing before Hargrave J in February 2016 (‘the principal proceeding’). Lynn Hoh is the third defendant and Frosthollow is the seventh defendant in the principal proceeding.

[1]Ying Mui Pty Ltd (ACN 002 992 449); Amore Corporation Pty Ltd (ACN 097 964 175); Kiang Po Hoh (also known as George Hoh) and Han Keyet Hoh.

[2]Frank Kiang Ngan Hoh, Pooi Yoke Lim Hoh, Lynn Yook Lien Hoh, Ian Han Lok Hoh, Lokit Investments Pty Ltd (ACN 006 855 741).

2 The amended statement of claim in the principal proceeding comprises some 437 paragraphs, including schedules of particulars. The pleading runs to some 160 pages.

3 It is unnecessary to recount in detail the raft of allegations which are made by the plaintiffs against the defendants and the defendants against the plaintiffs by way of counterclaim. Suffice to observe that underlying the litigation is a long standing dispute between members of the Hoh family, particularly George (the third plaintiff) and Frank and Lynn Hoh (the first…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] VSC 512
Decision Date: 25 September 2015

CaseChat Overview and Summary

The case of Re Frosthollow Pty Ltd involved the trustee, Frosthollow Pty Ltd, and five beneficiaries of a trust. The plaintiffs sought judicial advice from the court on whether the trustee was entitled to indemnification from trust assets to defend claims brought against it by the beneficiaries. The trustee, as the sole shareholder and director, was also a defendant, facing allegations of breaching its duties as trustee and being involved in procuring those breaches. The court was required to determine the scope of the trustee's rights to indemnification from trust assets, considering the specific circumstances of the case.

The court considered whether the trustee had a proper basis to defend the proceeding and whether it was appropriate to fund the defence from the assets of the trust. The plaintiffs argued that the trustee had breached its duties and sought to limit the trustee's access to trust assets for its defence. The court examined the circumstances in which a trustee may be indemnified from trust assets, as well as the specific provisions of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) O 54, which govern the provision of judicial advice in such matters. The court also took into account the fact that counsel's opinion in support of the application for judicial advice was based on instructions from the director of the trustee, and there was no indication that the trustee would advance arguments in addition to those to be advanced by the other defendants.

After considering the arguments and the relevant legal principles, the court concluded that the trustee had a proper basis to defend the proceeding. However, it was not appropriate to fund the defence out of assets of the trust. The court determined that the trustee's right to indemnification from trust assets was limited to situations where the trustee was acting in good faith and in the best interests of the beneficiaries. In this case, the court found that the trustee had not demonstrated that it was acting in good faith, and therefore, it was not appropriate to use trust assets to fund the defence. The court granted the application for judicial advice, providing guidance to the trustee on its rights and obligations in relation to the proceeding.

Orders